Sturesteps v A G McGrath & ors [2010] NSWSC 896

Sturesteps v A G McGrath & ors [2010] NSWSC 896

The period as employee/director of a related or predecessor company did not count as non priority days for the purposes of priority payments under s 556 of the Corporations Act. Mr Sturesteps’ retrenchment pay was not attributable to non priority days, as the entitlement accrued upon termination after he ceased to be a director; therefore, it is entitled to full priority under s 556(1)(h). Interest is not payable as there is no inquiry as to the liquidators’ conduct and s 563B does not permit it where not all creditors paid. Mandatory direction for payment within a timeframe is inappropriate on this type of appeal. Costs should be paid by the third defendant (company in liquidation), but...

Parties
Plaintiff: George Osvald Sturesteps; First Defendant: Anthony Gregory McGrath; Second Defendant: Christopher John Honey; Third Defendant: HIH Casualty & General Insurance Ltd (in Liq)
Jurisdiction
Australia
Judgment Date
27 May 2010
Procedural Posture
Appeal From Liquidator's (deemed) Rejection of Proof of Debt / Post Judgment (ex Tempore Judgment Addressing Consequential Issues)
Outcome
Plaintiff's proof of debt for retrenchment pay entitled to priority; interest not awarded; declaratory and mandatory payment orders refused; defendants to pay plaintiff's costs, not on an indemnity basis.
Legal Topics
Winding Up in Insolvency, Employee Entitlements, Excluded Employee, Priority of Debts, Retrenchment Payments, Liquidators’ Powers and Directions, Costs Orders, Declaratory Relief
Corporations Law Insolvency Law Winding Up in Insolvency Employee Entitlements Excluded Employee Priority of Debts Retrenchment Payments Liquidators’ Powers and Directions +2 more

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Parties

George Osvald Sturesteps

Plaintiff

Anthony Gregory McGrath

First Defendant

Christopher John Honey

Second Defendant

HIH Casualty & General Insurance Ltd (in Liq)

Third Defendant

Procedural Posture

Appeal From Liquidator's (deemed) Rejection of Proof of Debt / Post Judgment (ex Tempore Judgment Addressing Consequential Issues)

Legal Issues

  1. 1 Whether the period during which plaintiff was a director as well as an employee counts as non priority days under Corporations Act s 556
  2. 2 Whether plaintiff's retrenchment payment is attributable to non priority days
  3. 3 Whether plaintiff is entitled to interest on amounts awarded

Ratio Decidendi

The period as employee/director of a related or predecessor company did not count as non priority days for the purposes of priority payments under s 556 of the Corporations Act. Mr Sturesteps’ retrenchment pay was not attributable to non priority days, as the entitlement accrued upon termination after he ceased to be a director; therefore, it is entitled to full priority under s 556(1)(h). Interest is not payable as there is no inquiry as to the liquidators’ conduct and s 563B does not permit it where not all creditors paid. Mandatory direction for payment within a timeframe is inappropriate on this type of appeal. Costs should be paid by the third defendant (company in liquidation), but...

Court Disposition

Plaintiff's proof of debt for retrenchment pay entitled to priority; interest not awarded; declaratory and mandatory payment orders refused; defendants to pay plaintiff's costs, not on an indemnity basis.

Orders

  • None of the retrenchment payment is attributable to non priority days; therefore the whole is entitled to priority under s 556(1)(h).
  • No interest awarded to plaintiff.