Weston secures right of subrogation ruling

Pitcher Partners' Paul Weston

HOT on the heels of the Federal Government's plan to pursue receivers and secured creditors that fail to pay employee entitlements comes yesterday's Federal Court decision awarding priority to a secured creditor whose interest was diminished by employee payments.

As liquidator of 7 Steel Distribution, Pitcher Partners' Paul Weston applied to the Federal Court after secured creditor HSBC lodged a proof of debt for $7.322 million on May 15, 2015.

HSBC's claim comprised two components. The bulk - $5.547 million - represented the shortfall following the realisation of its security by receivers Peter Marsden and David Kerr of RSM Bird Cameron. The bank claimed it as an unsecured debt in the winding up of 7 Steel.

An additional $1.785 million however represented the sum the receivers paid to employees of 7 Steel in accordance with their obligations to priority creditors under Section 433 of the Corporations Act. HSBC argued it was entitled to claim this sum as a priority debt in the liquidation. (You can read the judgement here).