FEDERAL COURT OF AUSTRALIA
DATE OF ORDER:
1. The parties are to provide a minute of the direction sought to give effect to these reasons within 7 days.
2. Subject to further order, the parties are to confer as to any further proposed orders and seek a listing on a date to be fixed as required.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1 This application concerns the operation of s 561 of the Corporations Act 2011 (Cth) (Act), which provides for priority payment of employees' claims over the claims of a secured creditor.
2 Section 561 has been the subject of a number of informative decisions: in particular, McEvoy v Incat Tasmania Pty Ltd  FCA 810; (2003) 130 FCR 503; Cook (Liquidator), in the matter of Italiano Family Fruit Company Pty Ltd (in liq) v Italiano Family Fruit Company Pty Ltd (in liq)  FCA 1355; (2010) 190 FCR 474 (Cook); Re Great Southern Ltd (recs and mgrs apptd) (in liq); Ex parte Thackray  WASC 59; (2012) 260 FLR 362 (Great Southern (Thackray)); and Saker, in the Matter of Great Southern Ltd  FCA 771 (Great Southern (Saker)).
3 However, despite that body of case law, the parties have raised a discrete point that they say has not been addressed directly. It has been addressed at least indirectly in Great Southern (Thackray). The point is whether, in circumstances where the identity of the payer of payments under s 561 is not prescribed by the legislation, and in a scenario where there are both liquidators and receivers appointed to a company, the payments under the provision must be made by a liquidator rather than a receiver.
4 The receivers seek a direction from the Court under s 424 of the Act as to whether they are justified in making certain payments under s 561. The liquidators promote a conflicting case.
Summary of issues between the parties
5 R.W.E. Robinson & Sons Pty Ltd (Company) is in liquidation. Mr David Hurt and Mr Christopher Williamson are its liquidators (Liquidators). Its secured creditor (ANZ) has appointed the plaintiffs, Mr Robert Kirman and Mr Matthew Caddy, as receivers and managers (Receivers).
6 The Commonwealth of Australia (Commonwealth) made certain payments totalling $1,068,091 to the Liquidators for the purpose of making priority payments to the employees of the Company. The Commonwealth now claims an entitlement to priority payment of that amount by statutory subrogation, and was added as a defendant in these proceedings.
7 The Receivers are holding funds obtained from their asset realisation process (Fund). It is not in issue that those assets were subject to a circulating security interest in favour of ANZ. There are two potential ways in which the Fund could be distributed. First, the Receivers could distribute the Fund directly to the Commonwealth (and any other priority creditors). Second, the Receivers could pay the Fund to the Liquidators and the Liquidators could then distribute the Fund.
8 At first blush this might appear to be a heated contest as to which party undertakes the mechanical steps of reviewing claims and paying the prescribed priority creditors, a matter that one would expect would be resolved without the involvement of the Court.
9 However, an underlying practical ramification originally drove this application, and that is the question of access to the Fund for payment of the Liquidators' remuneration and expenses. The Liquidators were initially somewhat coy as to their position on costs. As a result, counsel for the Receivers noted at the first hearing that there was a prospect that the Liquidators were proceeding on the basis that if the Fund were paid to them (albeit that the security subsisted over the Fund), the Liquidators would deduct an amount to meet payment of their costs and expenses, an amount said at that time to be about $466,000. The Liquidators then urged that the question of their costs was not relevant to the construction of s 561 to be addressed by the application, and that the question only arose if the Court preferred the Liquidators' argument that the Fund should be paid to them rather than distributed by the Receivers.
10 I considered it appropriate that the Liquidators disclose their position as to costs, having regard to the nature of the relief sought by the Receivers and the question of the scope of a receiver's obligations under s 561 that was raised in Great Southern (Saker) (although in that case, funds were paid to the liquidator after the debt to the secured creditor had been satisfied).
11 During the course of the second hearing in these proceedings, senior counsel for the Commonwealth also suggested that to the extent the Liquidators were asserting a right to payment by way of an equitable lien, such right might be subordinated in any event to the payments to the priority creditors under s 561 on a strict reading of its terms.
12 The questions as to the scope of the Liquidators' costs and expenses that might be the subject of a lien and the priority of any such lien were addressed by all parties by supplementary written submissions, which revealed a significant narrowing of the issues between the parties.
13 In the end, all parties seemed to agree that the Receivers would be entitled to an equitable lien over the Fund to the extent work was undertaken for the purpose of the preservation and realisation of the Fund, that is, a 'salvage' lien of the nature recognised in Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171. For completion, I note that the Receivers acknowledged that, hypothetically, if the Liquidators conducted such work in this case, they may also have had an entitlement to an equitable lien. The Receivers also have contractual rights to payment under the terms of their appointment.
14 However, the Receivers and the Commonwealth on the one hand and the Liquidators on the other hand remained at odds as to whether s 561 had the effect of requiring the Receivers to pay the Fund to the Liquidators so that the Liquidators could undertake all steps necessary for its distribution.
15 The Receivers seek (relevantly) the following direction:
1. Pursuant to section 424(1) of the [Act], the Court directs that the Plaintiffs are justified in proceeding with the receivership of the [Company] on the basis that:
(a) the proceeds of realisation of the assets of the RWE Robinson Unit Trust (Trust) be applied by the Plaintiffs in accordance with the priority regime established by sections 555, 556 and 561 of the Act; and
(b) insofar as section 561 of the Act has application in relation to the [Company] and to the extent that the Plaintiffs hold the proceeds of realisation of the circulating assets of the Trust and/or circulating assets of the [Company], after providing for the Plaintiffs' remuneration and expenses incurred in relation to the realisation, preservation and administration of those assets (Combined Net Circulating Proceeds), the Plaintiffs are:
(i) entitled to make payment of priority entitlements directly to the entitled claimants pursuant to section 561 of the Act out of the Combined Net Circulating Proceeds; and
(ii) not required to pay the Combined Net Circulating Proceeds to the Liquidators so that they may make the distributions required by section 561 of the Act.
16 There is now no controversy between the parties with respect to proposed direction 1(a). Where circulating assets are owned by an insolvent company as the trustee for a trust, the statutory priorities set out in s 556 and s 561 of the Act apply to those assets in respect of liabilities incurred by the company as trustee rather than in its own right: Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq)  FCAFC 40; Commonwealth v Byrnes (in their capacity as joint and several Recs and Mgrs of Amerind Pty Ltd (recs and mgrs apptd) (in liq))  VSCA 41; (2018) 54 VR 230 (as to which special leave to appeal to the High Court has been granted: Re Amerind, Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth of Australia  HCATrans 156).
17 More generally, the question arises as to whether this is an appropriate case for directions under s 424. The parties accepted as much. The Liquidators have raised questions as to the construction and operation of s 561 and challenged the course proposed by the Receivers. Further, there is a question as to whether the Receivers are subject to a duty or obligation to make the payments, as discussed in both Westminster Corporation v Haste  Ch 442 at 447 and Great Southern (Saker) at . Taking into account those matters, it is appropriate that the Receivers seek directions from the Court.
18 From April 2000, the Company carried on a business known as 'Robinson Buildtech' which provided building and construction services to its customers across metropolitan Perth, Albany and Kalgoorlie.
19 The Company carried on the business, and held its assets, as the trustee of the RWE Robinson Unit Trust (Trust).
Appointment of Liquidators and Receivers
20 ANZ is the principal financier, and secured creditor, of the Company. It holds various securities registered on the Personal Property Securities Register (Securities) over the assets of the Trust to secure its debt facilities, including a general security agreement over all present and after acquired property of both the Company and the Trust. The Securities were granted by the Company in its own capacity and as trustee of the Trust.
21 On 11 March 2015, the members of the Company by special resolution appointed the Liquidators as joint and several liquidators of the Company.
22 The appointment of the Liquidators constituted an event of default under the Securities, and prevented the Company from continuing to act as trustee of the Trust.
23 On 27 March 2015, ANZ made demand on the Company for the total amount then owing under its debt facilities (being $1,462,001.00).
24 On 30 March 2015, ANZ appointed the Receivers by deed to be the receivers and managers of the secured property of the Company, in its own capacity and as trustee of the Trust, including the Trust assets.
25 Upon their appointment, the Receivers took possession and control of the business from the Liquidators and began to collect and realise the assets of the Trust.
26 The debt to ANZ has not been repaid in full, and ANZ has not been repaid in full its enforcement expenses (including the Receivers' costs in getting in, preserving, administering and realising the circulating assets). The receivership has not been terminated.
27 On 31 March 2015, by an order of the Supreme Court of Western Australia, the Liquidators were appointed, without security, as the receivers and managers of the property of the Trust pursuant to O 51, r 1 of the Rules of the Supreme Court 1971 (WA). This occurred after the appointment of the Receivers to the Trust property. The court orders were later amended to reflect that the court appointment was without prejudice to ANZ's position or that of the Receivers with respect to the Trust property.
The employee entitlements
28 As at the date of the appointment of the Receivers, the business had previously employed a total of 71 persons as its full time, part time and casual employees. They were entitled to lodge claims with the Commonwealth for payments under the Fair Entitlements Guarantee Act 2012 (Cth) (FEG Act). All of these employees had been made redundant or resigned by 30 March 2015.
29 Under the FEG Act, a scheme was created whereby funds are available from the Commonwealth to meet employee entitlements which remain outstanding due to the collapse of insolvent entities.
30 Former employees of the Company lodged claims with the Commonwealth under the FEG Act for statutory payments to be made to them in respect of their unpaid employee entitlements. Between 7 July 2015 and 3 December 2015, the Commonwealth advanced the total sum of $1,068,091.34 to the Liquidators in order to allow them to make payments to these employees in accordance with the FEG Act.
31 The Liquidators' Annual Report dated 26 April 2016 describes the amount advanced for employee entitlements as comprised of holiday pay ($255,221) and retrenchment entitlements ($812,870).
32 The Liquidators' statements of receipts and payments in the period from 11 March 2013 to 8 June 2017 records a receipt of $1,068,091.34 for 'FEG Advance' and a payment of $893,140.34 for 'FEG distribution (net)'.
33 The Commonwealth has submitted a proof of debt in the winding up for the amount of $1,068,091.34.
Realisation of assets by Receivers and insufficiency
34 The realisation of the assets of the Trust by the Receivers was authorised by the Securities, which had been signed by the Company in its capacity as trustee of the Trust.
35 The Liquidators' Annual Report dated 9 June 2017 does not identify any assets available for the payment of priority creditors other than the assets realised by the Receivers. The Liquidators' Annual Report dated 26 April 2016 indicated that the Liquidators had not identified any prima facie unfair preference payments or voidable transactions and there was no expectation of a return to ordinary unsecured creditors.
36 Mr Kirman deposed to having realised some $485,754 from non-circulating assets and some $1,462,598 from circulating assets (including debtors, retentions and stock). An amount of $150,000 was paid to ANZ in reduction of the secured debt from the net proceeds of the non-circulating assets.
37 It is clear that but for s 561, the assets of the Company are insufficient to meet the payment of the unsecured priority creditors.
38 Mr Kirman's evidence was that as at May 2018, having regard to the remuneration, costs and expenses incurred and to be incurred by the Receivers and their lawyers during the course of the receivership, he considered that:
(a) the net non-circulating assets available for distribution to ANZ once the application is determined will be between $10,000 and $15,000; and
(b) the net circulating assets available for distribution, assuming the Court directed that he is able to make such distribution, will likely range between $950,000 and $1,025,000.
39 In an affidavit filed in October 2018 that updated the position, Mr Tristan Cromarty on behalf of the Receivers said that he considers the proceeds available for distributions from the Fund to the priority creditors will be between $1,015,513 and $1,044,013. Mr Cromarty said that the Australian Taxation Office has an entitlement to submit a proof of debt for $70,868.75 in relation to outstanding superannuation. This priority debt combined with the Commonwealth's claim ($1,068,091.34) means that the Fund will be insufficient to pay the Receivers' costs and remuneration relating to those circulating assets and the priority claims under s 561, and there will be a shortfall in that regard.
The legislative regime
40 Employees of companies that become insolvent have always enjoyed special priority for their unpaid entitlements, primarily in recognition that their contribution to a company may enhance the value of assets the subject of a creditor's security: Stein v Saywell  HCA 66; (1969) 121 CLR 529 at 544, 550; Jones v Matrix Partners at -; Great Southern (Saker) at -.
41 Part 5.6 of the Act is headed 'Winding up generally'. Subdivision D of Division 6 of Part 5.6 deals with priorities of claims in a winding up, and is headed 'Priorities'. Both s 556 and s 561 fall within this subdivision.
42 As is apparent from its terms, s 556(1) is concerned with the priority of the payment of debts (including employee entitlements) but does not identify the assets that might be available to meet such payments. Section 556(1) relevantly provides as follows:
(1) Subject to this Division, in the winding up of a company the following debts and claims must be paid in priority to all other unsecured debts and claims:
(a) first, expenses (except deferred expenses) properly incurred by a relevant authority in preserving, realising or getting in property of the company, or in carrying on the company's business;
(b) if the Court ordered the winding up - next, the costs in respect of the application for the order (including the applicant's taxed costs payable under section 466);
(i) during the period of 12 months ending when the winding up commenced, an application (the first application) was made under section 459P for the company to be wound up in insolvency; and
(ii) when the first application was made, the company was not under administration; and
(iii) the company began to be under administration at a time after the first application was made; and
(iv) the first application was not withdrawn or dismissed before the administration began; and
(v) the Court did not, in response to the first application, make an order under section 459A that the company be wound up in insolvency;
next, the costs in respect of the first application;
(c) next, the debts for which paragraph 443D(a) or (aa) entitles an administrator of the company to be indemnified (even if the administration ended before the relevant date), except expenses covered by paragraph (a) of this subsection and deferred expenses;
(da) if the Court ordered the winding up - next, costs and expenses that are payable under subsection 475(8) out of the company's property;
(daa) if the company resolved by special resolution that it be wound up voluntarily - next, costs and expenses that are payable under subsection 446C(8) out of the company's property;
(db) next, costs that form part of the expenses of the winding up because of subsection 539(6), or subsection 70-15(5) (audit of administration books by ASIC) or section 90-27 (review by another registered liquidator) of Schedule 2;
(dd) next, any other expenses (except deferred expenses) properly incurred by a relevant authority;
(de) next, the deferred expenses;
(df) if a committee of inspection has been appointed for the purposes of the winding up - next, expenses incurred by a person as a member of the committee;
(e) subject to subsection (1A) - next:
(i) wages, superannuation contributions and superannuation guarantee charge payable by the company in respect of services rendered to the company by employees before the relevant date; or
(ii) liabilities to pay the amounts of estimates under Division 268 in Schedule 1 to the Taxation Administration Act 1953 of superannuation guarantee charge mentioned in subparagraph (i);
(f) next, amounts due in respect of injury compensation, being compensation the liability for which arose before the relevant date;
(g) subject to subsection (1B) - next, all amounts due:
(i) on or before the relevant date; and
(ii) because of an industrial instrument; and
(iii) to, or in respect of, employees of the company; and
(iv) in respect of leave of absence;
(h) subject to subsection (1C) - next, retrenchment payments payable to employees of the company.
43 Other provisions in Subdivision D also address the position of employees. For example, s 560 provides a right of subrogation for a third party that advances a payment so that the company can make a payment on account of employee entitlements.
44 Section 561, the provision central to this application, provides as follows:
Priority of employees' claims over circulating security interests
So far as the property of a company available for payment of creditors other than secured creditors is insufficient to meet payment of:
(a) any debt referred to in paragraph 556(1)(e), (g) or (h); and
(b) any amount that pursuant to subsection 558(3) or (4) is a cost of the winding up, being an amount that, if it had been payable on or before the relevant date, would have been a debt referred to in paragraph 556(1)(e), (g) or (h); and
(c) any amount in respect of which a right of priority is given by section 560;
payment of that debt or amount must be made in priority over the claims of a secured party in relation to a circulating security interest created by the company and may be made accordingly out of any property comprised in or subject to the circulating security interest.
45 Ordinarily, unsecured creditors have no claim to assets otherwise the subject of a valid and undischarged security until the secured debt is extinguished. Where it applies, s 561 therefore elevates the claim of a priority creditor above the secured creditor so that the priority creditor's claim may be paid out of property the subject of a circulating security interest. Section 561 does not elevate all claims that are accorded priority under s 556(1): the elevation is limited to the claims listed in s 561(a) to (c). Those claims include, relevantly, employee claims.
46 There are also provisions in Part 5.2 of the Act ('Receivers, and other controllers, of property of corporations') that apply to receivers that expressly impose on a receiver the obligation to make similar priority payments to employees from proceeds in their hands before applying funds towards the secured creditor's debt. Relevantly, s 433 of the Act provides:
Property subject to circulating security interest - payment of certain debts to have priority
(2) This section applies where:
(a) a receiver is appointed on behalf of the holders of any debentures of a company or registered body that are secured by a circulating security interest, or possession is taken or control is assumed, by or on behalf of the holders of any debentures of a company or registered body, of any property comprised in or subject to a circulating security interest; and
(b) at the date of the appointment or of the taking of possession or assumption of control (in this section called the relevant date):
(i) the company or registered body has not commenced to be wound up voluntarily; and
(ii) the company or registered body has not been ordered to be wound up by the Court.
(3) In the case of a company, the receiver or other person taking possession or assuming control of property of the company must pay, out of the property coming into his, her or its hands, the following debts or amounts in priority to any claim for principal or interest in respect of the debentures:
(a) first, any amount that in a winding up is payable in priority to unsecured debts pursuant to section 562;
(b) next, if an auditor of the company had applied to ASIC under subsection 329(6) for consent to his, her or its resignation as auditor and ASIC had refused that consent before the relevant date - the reasonable fees and expenses of the auditor incurred during the period beginning on the day of the refusal and ending on the relevant date;
(c) subject to subsections (6) and (7), next, any debt or amount that in a winding up is payable in priority to other unsecured debts pursuant to paragraph 556(1)(e), (g) or (h) or section 560.
47 The application of s 433 is limited to circumstances where the receiver is appointed prior to the commencement of a voluntary winding up or prior to any winding up order. It does not apply in the circumstances of the Company, because the Receivers were appointed after the commencement of the winding up. It is accepted by the parties that in this case s 433 has no application. However, the Liquidators refer to s 433 in support of their statutory construction argument.
Summary of respective contentions
48 Expressed concisely, the Liquidators submitted that the Court should prefer an argument that s 561 does not entitle the Receivers to distribute the Fund direct to priority creditors. They contended that s 561 is not intended to apply to receivers and said that their preferred construction is supported by the fact that liquidators have extensive powers to adjudicate on claims, gather information and participate in appeals from their decisions. They contended that liquidators can undertake such steps more efficiently than receivers. They submitted it therefore should be inferred that the provision assumes that liquidators are tasked with the distribution of such payments, and not receivers. They pointed to the express obligation in s 433 on a receiver to make payments, an obligation that is absent under s 561. The Liquidators contended that the Receivers must pay the Fund to them, so that they (the Liquidators) can proceed to undertake the claim assessment and distribution tasks under s 561 and under s 556(1).
49 The Receivers submitted that there is nothing in the drafting of s 561 that requires that it be read in a manner that confines its application to liquidators. They submitted that the words of s 561 on a plain reading require them to pay particular debts in priority to the claims of the secured creditor and out of any property comprised in or subject to the circulating security interest. The Receivers contended they are in fact bound to apply the proceeds in that manner.
50 The Commonwealth supported the position of the Receivers on these issues.
51 The starting point for ascertainment of the meaning of a statutory provision is the text of the provision considered in light of its context and purpose. The meaning of the provision must be determined by reference to the language of the instrument viewed as a whole: Project Blue Sky Inc v Australian Broadcasting Authority  HCA 28; (1998) 194 CLR 355 at 381 ; ALDI Foods Pty Limited v Shop, Distributive & Allied Employees Association  HCA 53 at . Context should be regarded at the first stage, not some later stage, and it should be regarded in its widest sense: SZTAL v Minister for Immigration and Border Protection  HCA 34 at . Where the text read in context permits more than one potential meaning, the choice between those meanings may ultimately turn on an evaluation of the relative coherence of each with the scheme of the statute and its identified objects or policies: Taylor v The Owners - Strata Plan No 11564  HCA 9; (2014) 253 CLR 531 at 557 ; SAS Trustee Corporation v Miles  HCA 55 at .
52 In the case of s 433 and s 561, the context includes that the provisions have the overarching objective of prioritising certain claims of employees; that in the case of a deficiency in 'free' assets, assets the subject of a circulating security interest may be applied to such claims; that a circulating security interest is commonly enforced by private appointment of a receiver; that it is not uncommon that there be concurrent appointments of receivers and liquidators or other controllers; and that the regime therefore anticipates the potential for the property of an insolvent company to be divided and under the control of between more than one insolvency practitioner and in different roles.
53 The proceeds of the realisation of circulating security assets (such as the Fund) are not ordinarily available to unsecured creditors. Section 433 and s 561 comprise statutory incursions into property otherwise available to the secured creditor.
54 However, these sections are not parallel provisions. They operate in different circumstances. It is for a receiver or liquidator (or other controller) to consider the particular circumstances and ascertain whether they are obliged to comply with the respective provisions.
55 In Great Southern (Thackray), Master Sanderson explained that both s 433 and s 561 may operate at the same time and highlighted the differences between the provisions as follows:
 Despite being complementary, there are some subtle differences between s 433 and s 561. First, s 433(3) expressly cast the payment obligation on the receiver or controller. Section 561 is silent as to who is to make the payment. Presumably the s 561 payment obligation is to be satisfied by the person holding the floating charge assets for the time being. No-one else can make the payment. The priority right is meaningless unless the person in control of the fund is under an obligation to effect the payment.
 Secondly, although not an absolute payment obligation, s 433 casts a positive obligation to pay the priority debts or claims out of the floating charge assets before paying the secured creditors' debt. The operation of s 561 is now to be understood in light of the observations of Finkelstein J in Cook v Italiano  - . Section 561 only mandates payment of priority claims out of floating charge assets when it is clear the liquidation will not realise free assets sufficient to meet those claims: see particularly .
 Thirdly, in a winding-up, s 558 will apply for the purposes of s 561. Section 558 effectively deems a termination of employment as at the commencement of the winding-up, thus avoiding a technical issue that leave payments may not be due and payable at the winding-up. However, the prevailing view is that s 558 does not apply for the purposes of s 433: see McEvoy v Incat Tasmania Pty Ltd (2003) 130 FCR 503 ; Vickers v Challenge Australian Dairy Pty Ltd (2011) 190 FCR 569  - . Neither of these two cases considered a concurrent receivership and winding-up. What is important is employees whose employment is brought to an end following the commencement of a receivership, do not, by s 433 obtain any priority for accrued leave entitlement.
 Fourthly, there is a difference between the two sections as to when payment to employees is to be made. Section 433 says it has to be paid and it has to be paid before any amount is paid to the secured creditor. Section 561 says that you wait and see whether or not the secured creditor is satisfied and then if the amount realised is not satisfied, there is not sufficient to pay both the secured creditor and the employees, the employees are to be paid out of the fund otherwise available to the secured creditor.
56 I am of the view that there is no obligation on the part of the Receivers to pay the Fund to the Liquidators. I consider the Receivers may distribute the Fund in accordance with s 561 and are under a statutory obligation to comply with its terms, as described in Great Southern (Thackray). I accept that, as was the case in Great Southern (Thackray), there may be circumstances where receivers or other controllers are relieved of such obligations, and others may effect such payments. However, in this case, the Receivers do not seek to be relieved of such obligations and in fact wish to make the payments. There is no reason why they should not do so. This outcome is consistent with the objectives of the provision (to protect the interests of employees) and is a coherent outcome. In applying the relevant principles and in forming this view, I have taken into account the following matters.
57 First, the capacity in which the payer under s 561 makes payment is left open by the use of passive voice drafting in the text. There is no express limitation of the application of s 561 to a liquidator. It has been assumed elsewhere that it is open to receivers (or others) to make distributions under s 561 (discussed below).
58 Second, the context does not require any limitation to be inferred. It is the receiver appointed by a secured creditor who receives and hold the proceeds of the realisation of property the subject of a circulating security interest. The receiver is in control of the funds and therefore in a position to make a payment from the funds. If it were intended that the section is not to apply to a receiver in the commonplace scenario of a concurrent liquidation and receivership, and that the receiver should instead transfer funds to a liquidator, one would have expected some indication to that effect in the text. In circumstances where a receiver appointed prior to a liquidation is obliged (under s 433) to make particular payments for the purpose of protecting the priority of employee entitlements, it is difficult to discern why a receiver appointed after the commencement of a winding up would not similarly be so obliged in order to protect the position of priority employees. Whilst it could be said that the protection in the latter scenario is secured by requiring the receiver to pay the proceeds to the liquidator so that the liquidator can make the direct payments, I am unable to identify any compelling reason why an intermediate step of payment over to a liquidator should be required.
59 Third, I do not accept the Liquidators' submissions that the protection of employee entitlements is enhanced by a requirement that the assessment of claims and distributions be undertaken by a liquidator rather than a receiver, or that such potential enhancement justifies a narrow reading of s 561. It is important to remember that where s 433 of the Act applies, a receiver is entrusted to pay the priority employee claims. Nor do I accept that it can be assumed that a liquidator will carry out such tasks more efficiently than a receiver. That is no more than speculation.
60 The Liquidators also referred to their statutory powers to obtain books and information as favouring a construction that they are to carry out the tasks under s 561, particularly as a receiver may need the assistance of a liquidator to access books and records. However, a receiver also has information gathering powers: for example, s 430 (power to compel officers including a liquidator to report as to the company's affairs); s 431 (receivers entitled to inspect books of the company); examinations under Part 5.9 of the Act (subject to ASIC approval); and access through its appointor as a creditor to information from a liquidator under cl 70-45 of the Insolvency Practice Schedule (Schedule 2 of the Act). As in this case, a privately appointed receiver may also have contractual rights under the security agreements to obtain information about the company's financial position and access to books and records. In appropriate circumstances a receiver can seek directions from the Court.
61 Fourth, nothing in the authorities referred to by the parties is inconsistent with such construction.
62 In Great Southern (Thackray) Master Sanderson presumed (at ) that payments under s 561 would be satisfied by the person holding the floating charge assets for the time being (and there is no distinction in this context between floating charge assets under old-style charges and assets subject to a circulating security interest).
63 In Cook, Finkelstein J was concerned with the obligations under s 561 of a liquidator who had realised floating charge assets, but his Honour tellingly referred to the obligations of a 'controller', not simply a liquidator. His Honour said:
 Section 561 imposes a duty on a controller of floating charge assets to pay priority debts out of floating charge assets if the relevant conditions are satisfied. It necessarily follows that the controller is required to withhold funds from the secured creditor that are sufficient to pay priority creditors if it appears that the company's property is likely to be insufficient. In these respects, s 561 mandates an incursion into the proprietary rights of the secured creditor. But s 561 does not permit a controller to appropriate the floating charge assets to pay out priority claims until the relevant condition (ie the deficiency in the company's free assets) is satisfied.
 A liquidator who has realised floating charge assets and has him/herself retained the proceeds (necessarily in an account established pursuant to reg 5.6.06 of the Corporations Regulations 2001 (Cth) and s 538(1)(a)) of the Corporations Act) is a trustee of them for the purposes of s 561. The proceeds are to be held on trust until it is determined whether the company's free assets are insufficient to meet priority debts. The chargee is a beneficiary, or at least a contingent beneficiary, of the trust. Its rights, though, are subject to the claims of priority creditors. The priority creditors may also be contingent beneficiaries of the trust; the contingency being a deficiency in the company's free assets. If not beneficiaries, at least the priority creditors have a contingent statutory right against the fund.
64 The authors of Austin and Black's Annotations to the Corporations Act also assume a 'controller' can pay priority claims by appropriation of assets under a floating charge once satisfied that there is a relevant deficiency in free assets (at [5.561], referring to Cook).
65 Although s 561 does not include the word 'controller', the term is defined under the Act to include a receiver or receiver and manager of property, or anyone else who is in possession of property for the purpose of enforcing a charge. It can safely be assumed that both Finkelstein J in Cook and the authors of Annotations to the Corporations Act had a meaning in mind that accords with the definition.
66 In Bray v Dye  VSC 113, Judd J assumed that the obligation under s 561 to apply funds first in payment of specified debts is imposed on 'the party in receipt of proceeds from the realisation of property' (at ). The expression 'party' does not limit the identity of the payer to a liquidator.
67 Those various statements provide support for and are not inconsistent with the conclusion that the Receivers are entitled to make direct payments to the relevant priority creditors under s 561.
68 As already noted, the issues between the parties as to costs were significantly narrowed by the exchange of submissions.
69 The Liquidators accepted by way of supplementary written submissions that:
In considering the extent of any priority which a liquidator may have to be paid remuneration and expenses out of property comprising or subject to a circulating security interest to which s 561 of the Act is applicable, there are two classes of remuneration and expenses which ought to be differentiated:
(a) first, remuneration and expenses arising out of a liquidator caring for, preserving, realising and/or administering property comprised in or subject to the circulating security interest, and/or the fund thereby created; and
(b) second, remuneration and expenses for other work undertaken in the course of the liquidation not falling within the first class.
Insofar as the second class is concerned, the liquidators accept that there is no basis on which such remuneration and expenses can be paid out of property comprising or subject to a circulating security interest to which s 561 applies.
[citing, relevantly, IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (in liq)  FCAFC 9 at ; Bray v Dye  VSC 113 at ].
70 During the course of the second hearing the Liquidators also acknowledged that that they have not incurred costs that would fall within the ambit of category (a) above insofar as the Fund is concerned. They have already been paid separately for some initial work that might have fallen within that ambit. The Liquidators were not involved in caring for, preserving or realising or the property subject to the circulating interest or the Fund created by asset realisations. In light of those submissions, it is not necessary for the purposes of the directions that are sought to consider further the Liquidators' claim to an equitable lien.
71 It remains necessary to address briefly the position of an equitable lien and s 561, as regardless of any contractual rights of the Receivers relating to their remuneration and costs, proposed direction 1(b) incorporates a reference to an equitable lien.
Section 561 and the equitable lien
72 As noted above, in the end the parties agreed that s 561 did not, properly construed, exclude an equitable lien being claimed. I agree that is the case.
73 The equitable lien claimed is of the nature discussed in Re Universal Distributing Co Ltd. Such lien arises where a person conducts work or incurs expenditure for the benefit of a person with a legal right in circumstances where it would be unconscientious for that party to assert its strict legal rights. There is no general principle which covers the diversity of cases in which an equitable lien has been held to be created: Stewart v Atco Controls Pty Ltd (in liq)  HCA 15; (2014) 252 CLR 307 at 318 , approving Gibbs CJ in Hewett v Court  HCA 7; (1983) 149 CLR 639. It is clear that receivers and managers may have the benefit of an equitable lien: Coad v Wellness Pursuit Pty Ltd (in liq)  WASCA 68; (2009) 40 WAR 53 at .
74 There are many examples where a liquidator or receiver has been held to enjoy priority by way of equitable lien over a creditor entitled to the benefit of a fixed charge or circulating security interest: for example, as discussed in Coad v Wellness. There are examples in other contexts where a liquidator or receiver has been held to enjoy priority by way of equitable lien over a preferred creditor's entitlement to payment from a specific fund: for example, Morgan, in the matter of Brighton Hall Securities Pty Ltd (in liq)  FCA 970. In that case, McKerracher J found that:
(a) the preferential treatment of insurance proceeds provided by s 562 of the Act was not intended to disrupt the general law entitlement of a liquidator to receive remuneration for work done for the benefit of creditors. There, that work included determining the validity of claims in connection with the distribution of the insurance proceeds (including calling for and adjudicating on proofs of debts) and incurred in distributing the insurance proceeds to the rightful claimants;
(b) the liquidator was entitled to assert an equitable lien over the insurance proceeds (before paying those proceeds to the parties entitled) in order to give effect to that entitlement;
(c) a liquidator should be entitled to be remunerated for conferring a benefit on a company's creditors; and
(d) creditors seeking to take the benefit of the administration should not escape the burden of its proper cost, including the remuneration of the liquidator for his or her labour, in circumstances where such benefits were unlikely to be obtained without the liquidator's efforts.
75 There is nothing in the language of s 561 which indicates any intention that an equitable lien is excluded. Under s 561, a priority creditor's right to payment from the company's circulating assets under s 561 only operates against a secured party in relation to security interests of a specified kind, being a 'circulating security interests created by the company'. An equitable lien is not created by the company. That is sufficient, without more, to exclude it from the class of security interests anticipated by s 561. Further, on its face, an equitable lien would not fall within the scope of a 'circulating security interest' as defined by the Personal Property Securities Act 2009 (Cth) (PPSA). The Receivers point to, at minimum, the definition of 'security interest' in s 12 of the PPSA, and its requirement that such security is provided for by 'a transaction'; and s 8 of the PPSA that provides (relevantly) that the PPSA does not apply to certain interests, including a lien created by operation of general law. It is not necessary or appropriate to determine all such alternative questions bearing in mind the nature of a s 424 directions application and the fact that the alternative questions were not addressed by the Commonwealth (the Commonwealth accepted that an equitable lien was not 'created by the company').
76 In conclusion, for these reasons it is appropriate in the circumstances to make a direction substantially in accordance with proposed order 1(b), a direction that incorporates a claim based on an equitable lien.
77 However, the extent of any such equitable lien will depend upon the particular circumstances of the Receivers' conduct and the work that was undertaken: see generally White, in the matter of Mossgreen Pty Ltd (Administrators Appointed) v Robertson  FCAFC 63 at . It is not appropriate to make any specific determination as to the categories or scope of the lien on this directions application. If there are disputes about the extent of any such lien, the parties can approach the Court at a later time.
78 The Receivers and the Commonwealth provided revised minutes of proposed directions and orders following the hearings. The relief sought varied somewhat from the relief sought in the originating application and each minute has different but minor refinements. Both the Receivers and the Commonwealth also seek ancillary orders as to document production by the Liquidators to the Receivers. In the circumstances, although I consider it appropriate to make a direction substantially in accordance with proposed orders 1(a) and (b) as set out in the reasons above, I will hear the parties before finalising the terms of the direction and any further orders.