High Court Denies Special Leave to the Commonwealth on Behalf of Employees

Various laws determine the manner in which a company’s assets are distributed to employees and creditors in the event of an insolvency event.

In a decision handed down by the New South Wales Supreme Court in 2022,  the order of priority of payments in a winding up where employee debts and secured creditor claims exist was considered.

The matter was Spitfire Corporation Limited (in liquidation) and Aspirio Pty Ltd (in liquidation) [2022] NSWSC 340.

The court considered whether Refundable R&D Tax Offsets should be applied first to the priority employee claims, and relevant to determining this was whether the R&D Tax Offsets were ‘circulating assets’ under the PPSA laws.

It was ultimately found by the court that the R&D Refunds were circulating assets within the meaning of the PPSA, and that as a result they were available to be applied in payment of the outstanding priority employee claims.

More detailed commentary on this matter is available from various Australian law firm websites.

The Commonwealth of Australia represented by the Department of Employment and Workplace Relations applied to the High Court for special leave to appeal the matter of whether a company’s right to receive a tax refund is a circulating asset so as to be available to meet the priority claims of employees in an insolvency.

On 22 November 2023,  The high court found there was insufficient reason to doubt the correctness of the decision of the Court of Appeal of the Supreme Court of New South Wales to warrant the grant of special leave. Special leave to appeal was refused.

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