Director of Public Prosecutions (Cth) v Bart

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCR 2024 0147

COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS

PHILIP BART

AND

RONALD JOHNSON

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JUDGES:	McLEISH, ORR and KENNY JJA
WHERE HELD:	Melbourne
DATE OF HEARING:	29 May 2025
DATE OF JUDGMENT:	7 July 2025
MEDIUM NEUTRAL CITATION:	[2025] VSCA 161
JUDGMENT APPEALED FROM:	Case Stated, Judge Lyon, County Court of Victoria, 13 August 2024

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CRIMINAL LAW – Reserved questions of law – Charges of entering into agreement or transaction with intentions including preventing recovery of entitlements of employees in contravention of Corporations Act 2001 (Cth) s 596AB(1) as in force 10 July 2014 – Whether person entering into agreement can intend to prevent recovery of entitlements where person expects or believes employees will be paid pursuant to Fair Entitlements Guarantee Act 2012 (Cth) – Payment by Commonwealth of advance under Fair Entitlements Guarantee Act – Employees recover entitlements where liquidator pays from advance – No intention to prevent recovery where person expects or believes liquidator will pay employee entitlements using advance under Fair Entitlements Guarantee Act.

WORDS AND PHRASES – ‘recovery’ – ‘entitlements’.

Corporations Act 2001 (Cth) ss 556, 560, 596AA, 596AB; Fair Entitlements Guarantee Act 2012 (Cth) ss 28, 29; Criminal Procedure Act 2009, s 302.

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Counsel
Director:		Mr N Robinson KC with Mr P Botros
Mr Bart:		Dr O Bigos KC with Mr D Krochmalik
Mr Johnson:		Mr C Carr SC with Mr C Beshara
Solicitors
Director:	Mr M de Crespigny, Solicitor for Public Prosecutions (Cth)
Mr Bart:	William James Law
Mr Johnson:	O’Loughlin Westhoff Law

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MCLEISH JA
ORR JA
KENNY JA:

Introduction

Part 5.8A of the Corporations Act 2001 (Cth) (‘Corporations Act’) is entitled ‘Employee entitlements’. As at 10 July 2014,[1] its purpose was ‘to protect the entitlements of a company’s employees from agreements and transactions that are entered into with the intention of defeating the recovery of those entitlements’: s 596AA(1).[2]
[1]Being the date the alleged offending was said to have occurred.
[2]Further references to the Corporations Act are to the statute as in force on 10 July 2014, unless otherwise indicated.
Section 596AB(1) of the Corporations Act, which is in pt 5.8A, provided:
Entering into agreements or transactions to avoid employee entitlements
(1)A person must not enter into a relevant agreement or a transaction with the intention of, or with intentions that include the intention of:
(a)preventing the recovery of the entitlements of employees of a company; or
(b)significantly reducing the amount of the entitlements of employees of a company that can be recovered.
The word ‘entitlements’ was defined in s 596AA(2) as follows:
The entitlements of an employee of a company that are protected under this Part are:
(a)wages payable by the company for services rendered to the company by the employee; and
(b)superannuation contributions (that is, contributions by the company to a fund or scheme for the purposes of making provision for, or obtaining, superannuation benefits (including defined benefits) for the employee, or for dependants of the employee) payable by the company in respect of services rendered to the company by the employee; and
(c)amounts due in respect of injury compensation in relation to the employee; and
(d)amounts due under an industrial instrument in respect of the employee’s leave of absence; and
(e)retrenchment payments for the employee (that is, amounts payable by the company to the employee, under an industrial instrument, in respect of the termination of the employee’s employment by the company).
An entitlement of an employee need not be owed to the employee. It might, for example, be an amount owed to the employee’s dependants or a superannuation contribution payable to a fund in respect of services rendered by the employee.
The Commonwealth Director of Public Prosecutions (‘Director’) charged Philip James Bart (‘Bart’) and Ronald George Johnson (‘Johnson’), with entering into an agreement or transaction with intentions that included the intention of preventing the recovery of entitlements of employees of Bruck Textile Technologies Pty Ltd (‘BTT’), contrary to ss 596AB(1) and 1311(1) of the Corporations Act, on or about 10 July 2014.
It is alleged that, after a business sale agreement entered into between BTT and other entities controlled by Bart and Johnson, BTT was insolvent, with unpaid liabilities including $3,919,317 owed to 58 employees who were not offered ongoing employment after the transactions. It is alleged that the accused men entered into the agreement knowing that this would be the case, and also knowing that BTT or its liquidator may be able to make a claim under the Fair Entitlements Guarantee Act 2012 (Cth) (‘FEG Act’) to obtain advances from the Commonwealth to pay entitlements of the 58 employees.
Based on these facts, which were the crux of the prosecution case, a judge of the County Court reserved questions of law pursuant to s 302(2) of the Criminal Procedure Act 2009.
The questions of law may be paraphrased as:
(1)For the purpose of s 596AB(1) of the Corporations Act, can a person who enters an agreement intend to prevent the recovery of entitlements of employees of a company if the person expects or believes that those employees will be paid their entitlements through the FEG Act and not otherwise by the company?
(2)Does ‘intention’ for the purpose of the s 1311 offence committed by a contravention of s 596AB have the same meaning as in s 5.2 of the Criminal Code (Cth)?
For the reasons set out below, the questions should be answered:
(1)No.
(2)Not appropriate to answer.

Factual background

The two accused men were charged with entering into an agreement with intentions including the intention of preventing the recovery of entitlements by employees of BTT, a company of which they were the sole directors. The Director will seek to prove that Bart and Johnson agreed on about 10 July 2014 that BTT would sell its business for a nominal sum to a newly-formed group company of which they were the directors, Australian Textile Mills Pty Ltd (‘ATM’), and that ATM would offer employment to only 120 or so of BTT’s employees, and assume liability for salary, wages and other entitlements of those employees only. The obligation to pay entitlements to the remaining 58 employees of BTT would remain with BTT.
Bart and Johnson are further said to have agreed to place BTT in voluntary liquidation. It will be sought to prove that they executed an agreement between BTT and ATM to the effect alleged on 10 July 2014. By the agreement, it will be said, ATM purchased assets of BTT with an attributed value of $9,065,001 and assumed liabilities of BTT with an attributed value of $20,312,000, for consideration of $1.
As mentioned above, it will be alleged that the entitlements of the 58 employees who were not offered employment with ATM totalled $3,919,317, and that BTT was insolvent after the agreement was entered into. On 11 July 2014, liquidators were appointed to BTT and they subsequently terminated the employment of the 58 employees.
As mentioned earlier, the Director will seek to prove that Bart and Johnson caused BTT to enter into the agreement knowing that BTT did not have sufficient assets to pay the entitlements of the 58 employees, and also knowing that BTT or its liquidators may be able to make a claim under the FEG Act to obtain advances from the Commonwealth to pay entitlements of those employees. The Director will allege that the accused knew that eligibility for, and the quantum of, any such advances would be at the discretion of the Secretary of the Department of Employment and Workplace Relations, and that the Secretary may decline to make payments if he formed the view that the employment of the 58 employees ended due to a business restructure.
Between 11 July 2014 and 22 September 2014, the Commonwealth paid advances of $3,485,030.83 to BTT or its liquidators pursuant to s 28(1)(b) of the FEG Act, which the liquidators then paid to the 58 employees in respect of their outstanding entitlements.

Questions of law

The questions of law originally reserved for determination by this Court were:
Assuming the facts outlined … :
1.For the purposes of proving a contravention of s 596AB(1) Corporations Act 2001 (Cth), can a person who enters an agreement intend to prevent the recovery of entitlements of employees of a company if the person intends or knows:
(a)that the employees will be paid through the mechanism of the Fair Entitlements Guarantee Act 2012 (Cth); and
(b)the entitlements will not be paid from the company (other than to any extent that the payment in (a) is considered to be from the company)?
2.Does ‘intention’, for the purposes of the offence under s 1311 Corporations Act committed by a contravention of s 596AB Corporations Act have the meaning in s 5.2 Criminal Code?
The Court raised with the parties a difficulty with the framing of the first of these questions. As noted above, the facts upon which the question is asked include the fact, which the Director will seek to prove at trial, that advances for the purpose of employees’ entitlements under the FEG Act are at the discretion of the Secretary.[3] That suggests that it would not be possible for a person who enters into an agreement which has the effect of leaving employees with unmet entitlements to ‘know’ that those employees ‘will be paid’ through the mechanism of the FEG Act. On the face of the facts outlined, therefore, the question regarding what the relevant person ‘knows’ appeared not to arise.
[3]This is not strictly accurate. Advances must be paid if the Secretary is satisfied of specified conditions for eligibility: see ss 10(1), 28(1); [19]–[21] below. Nothing turns on the point, however, because the question of law that is asked posits an expectation or belief on the part of the persons entering into the agreement that an advance will be paid, in any event.
It seemed also that the word ‘intends’ in the first question did not accurately capture the issue raised by the facts, and that the words ‘expects or believes’ might be more apt. In addition, ‘intends’, in the context, might give rise to confusion as to its precise meaning.
On the basis that the real issue which the parties sought to ventilate was whether a person can intend to prevent the recovery of entitlements if they believe or expect that the employees will be paid through the mechanism of the FEG Act, the Court proposed that the stated case should be returned to the County Court for amendment to that effect, pursuant to s 305(3) of the Criminal Procedure Act. The parties raising no objection, this course was taken and the stated case was duly amended by removal of the words ‘intends or knows’ and their replacement by the words ‘expects or believes’.
At the risk of repetition, the first question before the Court, as amended, is therefore:
1.For the purposes of proving a contravention of s 596AB(1) Corporations Act 2001 (Cth), can a person who enters an agreement intend to prevent the recovery of entitlements of employees of a company if the person expects or believes:
(a)that the employees will be paid through the mechanism of the Fair Entitlements Guarantee Act 2012 (Cth); and
(b)the entitlements will not be paid from the company (other than to any extent that the payment in (a) is considered to be from the company)?

FEG Act

The FEG Act[4] provides for the making of ‘advances’, defined to mean ‘financial assistance … on account of employment entitlements’: s 5. The entitlements in question are defined in ss 5 and 6, and include annual leave entitlements, long service leave entitlements, payments in lieu of notice, redundancy payments, and wages (defined in turn in s 7). Eligibility for the making of an advance is defined by s 10, sub-s (1) of which is in the following terms:
[4]References to the FEG Act are references to the statute as in force on 10 July 2014.
Conditions of eligibility for advance
General conditions
(1)A person is eligible for an advance if the Secretary is satisfied of all of the following:
(a)the person’s employment by a particular employer has ended;
(b)after the commencement of this section, an insolvency event happened to the employer;
(c)the end of the employment:
(i) was due to the insolvency of the employer; or
(ii) occurred less than 6 months before the appointment of an insolvency practitioner for the employer; or
(iii) occurred on or after the appointment of an insolvency practitioner for the employer;
(d)the person is (or would, apart from the discharge of the bankruptcy of the employer, be) owed one or more debts wholly or partly attributable to all or part of one or more employment entitlements;
(e)the person has taken steps, so far as reasonable, to prove those debts in the winding up or bankruptcy of the employer;
(f)if the person was owed any of those debts before the insolvency event happened, the person took reasonable steps before that event to be paid those debts;
(g)when the employment ended, the person was an Australian citizen or, under the Migration Act 1958, the holder of a permanent visa or a special category visa;
(h)an effective claim (see section 14) that the person is eligible for the advance has been made to the Secretary by or on behalf of the person.
Section 15 provides for the Secretary to decide whether a person is eligible for an advance. If so, the Secretary must decide the amount of the advance under s 16 and related provisions.
Payment of an advance is governed by s 28, sub-s (1) of which is in the following terms:
Payment to eligible person or intermediary
(1)On behalf of the Commonwealth, the Secretary must pay an advance a person is eligible for in relation to his or her employment by an employer:
(a)to the person; or
(b)to the liquidator or bankruptcy trustee of the employer, for the liquidator or trustee to pass on to the person, subject to the liquidator or trustee withholding or deducting an amount as required by law; or
(c)to another person (the payee) for the payee to pass on to the person in accordance with a contract between the payee and the Commonwealth, subject to the payee withholding or deducting an amount as required by law.
Part 5 of the FEG Act then addresses the question of recovery by the Commonwealth of the amount paid by way of advance. Section 29 provides for the recovery of an advance paid to a liquidator. It reads:
Recovery of advance paid to liquidator
For the purposes of section 560 of the Corporations Act 2001, a payment of an advance for a person’s employment by an employer that is made to the liquidator of the employer under section 28 of this Act is to be treated as follows:
(a)so much of the advance as is for the person’s wages entitlement is taken to be an advance (within the meaning of section 560 of the Corporations Act 2001) of money by the Commonwealth for the purpose of making a payment on account of wages;
(b)so much of the advance as is for the person’s annual leave entitlement or long service leave entitlement is taken to be an advance (within the meaning of that section) of money by the Commonwealth for the purpose of making a payment in respect of leave of absence;
(c)so much of the advance as is for the person’s payment in lieu of notice entitlement or redundancy pay entitlement is taken to be an advance (within the meaning of that section) of money by the Commonwealth for the purpose of making a payment in respect of termination of employment.
Section 30 provides similarly in respect of a trustee in bankruptcy. In other cases, s 34 provides for recovery from a person who receives an advance for another person’s employment.
Section 556(1) of the Corporations Act provides for priority in a winding up for various kinds of obligation, including wages, superannuation contributions, amounts due in respect of injury compensation, amounts due in respect of leave of absence and retrenchment payments: s 556(1)(e)–(h). These are the same payments as are listed in the definition of ‘entitlements’ in s 596AA(2). The FEG Act is narrower in scope: superannuation contributions and injury compensation payments are outside its ambit.
Section 560 of the Corporations Act provides for priority for advances made to fund a company’s payments on account of wages, superannuation contributions, leave of absence and termination of employment. Section 29 of the FEG Act effectively gives the Commonwealth the same rights in the winding up as the person who receives an amount on account of wages, leave of absence or termination because of the advance, as the person would have had if they had not received the amount.[5]
[5]Note 1 to s 29.

Submissions

The parties were in agreement that, if the first question were to be answered ‘no’, it would not be necessary for the Court to answer the second question. Further, there was agreement that it was not necessary, in order to answer the first question, for the second question already to have been answered. In other words, the parties accepted that the first question could be answered without determining what was meant by the word ‘intend’ in the chapeau to the first question. It is therefore convenient to turn directly to the first question.
Question 1 may be divided into two elements. The first concerns the meaning of the word ‘recovery’ (and ‘recovered’) in s 596AB(1) of the Corporations Act. As part of that question, it is necessary to form a view as to the meaning of the word ‘entitlements’ which is used in conjunction with ‘recover’ and is defined in s 596AA(2).
The second issue is whether the receipt by an employee (whether directly or through a liquidator) of payment under the FEG Act constitutes the recovery of an entitlement within the meaning of the section.
The Director submitted that the natural meaning of ‘entitlements’ as used in s 596AB(1) was ‘entitlements due from the company’. This was said to be supported by the defined meaning of ‘entitlements’, the context in which the word was used and the purpose of pt 5.8A as expressed in s 596AA(1).
It was submitted that the mischief with which s 596AB(1) is concerned is an intention to prevent or reduce recovery of employee entitlements. It was submitted that the use of the verb ‘recover’ with respect to employee entitlements connotes the actual recoupment of entitlements from the party ultimately having the obligation to pay them, rather than a payment by a third party into the hands of the holders of the entitlements. Emphasis was placed on the fact that s 596AB is found in pt 5.8A, headed ‘Employee entitlements’, which itself sits in ch 5 of the Corporations Act, entitled ‘External administration’. That was said to indicate that Parliament was concerned with recovery of entitlements from the relevant employer company.
The Director relied on the object of pt 5.8A as identified in s 596AA(1), namely the protection of entitlements of employees from agreements and transactions entered into with the intention of ‘defeating the recovery of those entitlements’. It was submitted that this was consistent with the object being to prevent agreements and transactions which preclude recovery from the person who would otherwise be obliged to pay the entitlements, namely the employer. The focus on the entitlements of the employees and their right to recover them from their employer was said to be evident also from the explanatory memorandum and the Second Reading Speech for the introduction of pt 5.8A into the former Corporations Law.[6]
[6]The Corporations Law was set out in s 82 of the Corporations Act 1989 (Cth).

Turning to the text of the provisions, the Director submitted that s 596AA(2) contained an exhaustive definition of entitlements, indicated by the use of the word ‘are’ to introduce the five types of entitlement to which it referred. It was submitted that each of the five kinds of entitlement arose as an obligation upon the company as a result of services having been rendered to it by an employee. Each paragraph in the definition was said to be directed at the company providing the amount due. The meaning was then expanded by the concluding words of s 596AA(2), to make it clear that the entitlement ‘need not be owed to the employee’. It was said to follow that the legislation was concerned with the obligations of the company, rather than the payment of the amounts in question to the person entitled to them. Accordingly, it was said, s 596AB(1) is directed at prohibiting agreements intended to prevent the recovery of entitlements from the company or to significantly reduce the amount of those entitlements that can be so recovered.
In that context, reference was made by the Director to dictionary definitions said to show that ‘recover’ means to ‘get back into one’s hands or possession’ or ‘to get again, or regain (something lost or taken away)’, in which receipt from a party was an essential element.[7]
[7]Shorter Oxford English Dictionary (6^th ed, 2007) ‘recover’ (def 4); Macquarie Dictionary (6^th ed, 2013) ‘recover’ (def 1).
Turning to the operation of the FEG Act, the Director submitted that the scheme provided for the payment by the Commonwealth of advances on account of ‘unpaid employment entitlements’ (s 3). The legislation provided for the Commonwealth to recover the advance in question through the winding up of the employer company. The Commonwealth was substituted by the statute for the employee eligible for the advance as a creditor in the winding up of the employer.
The Director submitted that it followed that a payment made by the Commonwealth under the FEG Act was not the payment of an entitlement, but rather the making of an advance in the form of financial assistance to the employer company or its liquidator. It was submitted that, as such, there was no ‘recovery’ of the employee entitlement when an advance was paid to the company (or its liquidator) under the FEG Act. Rather, the obligation to pay the entitlement continued to bind the company in liquidation, even after the advance was paid. The employee entitlement was no longer owed to the employee but was, by statute, owed to the Commonwealth. Its recovery depended on the Commonwealth’s priority in the winding up. In the meantime, it remained a defined ‘employee entitlement’ and was unrecovered.
The Director submitted that, if there was no breach of s 596AB(1) in circumstances where a person intended that employee entitlements would not be recovered from the company but expected or believed that the employee would be paid through a government scheme such as that under the FEG Act, this would render pt 5.8A ‘empty’. That construction would affect not only s 596AB(1), but also s 596AC, which imposed liability for compensation on a person who contravened s 596AB(1). The result would be that the Commonwealth would be unable to rely on pt 5.8A to recover the amount of its advance under the FEG Act notwithstanding that the FEG Act placed it in the position of the originally entitled employee. It was submitted that this construction resulted in an absurdity and would render the FEG scheme for recovery similarly ‘empty’.
In response to a submission made by Bart, the Director submitted that amendments that were subsequently made to pt 5.8A were of no assistance in identifying the correct meaning of the provisions before the legislation was enacted.
In his submissions, Bart observed that pt 5.8A commenced, as part of the former Corporations Law, on 30 June 2000. It preceded the introduction of an administrative arrangement, known as the General Employment Entitlements and Redundancy Scheme (‘GEERS’) that commenced on 20 September 2001, which in turn preceded the FEG Act which commenced in 2012. Part 5.8A was not amended at the time of introduction of either GEERS or the FEG Act.
Bart submitted that amendments to pt 5.8A in 2019 by the Corporations Amendment (Strengthening Protections for Employee Entitlements) Act 2019 (Cth) suggested that pt 5.8A did not previously have the meaning for which the amendments provided.[8] The amending legislation replaced s 596AB and also amended s 596AA. In particular, a new subsection 596AA(2A) was added, paragraphs (c) and (d) of which were new:[9]
For the purposes of subsection (2), an entitlement of an employee need not be owed to the employee. It might, for example, be:
(a)an amount owed to the employee’s dependants; or
(b)a superannuation contribution payable to a fund in respect of services rendered by the employee; or
(c)a right in relation to an entitlement that becomes a right of the Commonwealth under paragraph 31(1)(b) of the [FEG Act]; or
(d)an entitlement in relation to which an entity other than the employee has a right of subrogation.
[8]Grain Elevators Board (Vic) v Dunmunkle Corporation (1946) 73 CLR 70, 86 (Dixon J); [1946] HCA 13 (‘Dunmunkle Corporation’).
[9]Paragraphs (a) and (b) previously formed part of subsection (2): see above at [3].
It was submitted that paragraph (d) referenced the Commonwealth’s statutory right of subrogation under s 560. These amendments were said to have expanded the operation of s 596AB(1) by providing that an employee entitlement remained extant notwithstanding that the employee had been paid under the FEG Act and the Commonwealth had a right of subrogation. Relying on Dunmunkle Corporation, Bart submitted that it could be inferred that the provision had not previously had that operation.
Bart submitted that the focus of the text of s 596AB(1) was on the recovery of entitlements, rather than the source from which entitlements may be recovered. This was said to be apparent from the ‘objects’ provision in s 596AA(1), which was focused on the protection of the entitlements of a company’s employees. The section was not concerned with the protection of an employer’s assets to meet such liabilities. Section 596AB did not refer to the recovery of entitlements from an employer, or payment of entitlements by an employer. Elsewhere, when using the term ‘recover’, the Corporations Act identified a source of recovery.[10] This was said to support the submission that the provision was indifferent as to the source of recovery. Further, the ordinary meaning of ‘recover’ was said not to incorporate any concept of the source from which a thing is received. No such concept should be implied, it was submitted, especially in an offence provision to which a serious penalty was attached.
[10]Reference was made to ss 564, 567, 588FH, 588M, 588W, 670B, 729, 925H and 1041P.
Examples were given of an employee recovering wages, not directly from the employer, but through a treasury company, and payments by a guarantor or an insurer. It was submitted that s 596AB(1) would not be breached if the person entering the transaction expected employees to be paid from any of these sources. Recovery under the FEG Act was said to be just another form of recovery, to which the same result applied.
Bart also submitted that pt 5.8A focused on entitlements that were ‘owed’, as was clear from the concluding words of s 596AA(2).[11] Once advances were made under the FEGAct to a liquidator, and then paid to the relevant employees or other persons, the entitlements were no longer owed: the employees had no right to participate in the winding up, and the Commonwealth had the right, in their place, to do so as a priority creditor with respect to its advances. The FEG Act did not simply substitute the Commonwealth as the holder of the rights formerly held by the employees, as the Director had urged. The fact that the Commonwealth could prove as a priority creditor in the winding up of the employer company did not mean that the entitlements remained owing to the employees. Instead, the liability with respect to the entitlements was satisfied by payment made by the company (through the liquidator) to the employees in accordance with the statutory scheme. The rights of the Commonwealth were of a wholly different character to the employer’s former liability to the employees. The entitlements were no longer ‘owed’ and were therefore not entitlements within the scope of s 596AB(1). They had been ‘recovered’.
[11]Bart’s written submissions described this part of the provision as the ‘chausette’ of the definition, in contradistinction to its ‘chapeau’, perhaps following the use of that term by Perram J in SMA Solar Technology AG v Beyond Building Systems Pty Ltd [No 5] [2012] FCA 1483 [79]; see also Jones v The Queen [2018] SASCFC 80 [117], [137] (Kelly, Blue and Lovell JJ); Weragoda v The Queen [2021] SASCA 123 [54], [71] (Doyle and David JJA and Stanley AJA); Gjona v The Queen [2021] SASCA 79 [9] (Doyle JA, Livesey and, Bleby JJA). The word ‘chaussette’ [sic] means ‘sock’. The words in question might also be called a ‘chaussure’ (or ‘shoe’): Viljoen v Hayes [2017] NSWSC 801 [26] (Parker J); O’Connor v O’Connor [2018] NSWCA 214 [89], [100] (Simpson AJA, McColl JA agreeing at [1], Macfarlan JA agreeing at [2]); Kwatra v Minister for Immigration, Citizenship and Multicultural Affairs [2022] FCAFC 194 [13] (Markovic, Cheeseman and Hespe JJ). See further Sam Hopper and Callum Dawlings, ‘On a Far More Serious Note’ Sam Hopper: Barrister (Blog Post, July 15 2024) < suggesting the use of ‘sabot’, which has the attraction of being a more readily understood term and one which rhymes with ‘chapeau’. However, it may be preferable to avoid such terms altogether since, in the absence of a received and generally accepted meaning in the relevant context, they do little to promote clarity of expression.
Alternatively, Bart submitted that, even if s 596AB(1) applied where there was an intention to prevent recovery of entitlements from a company’s own assets, in the present case there could have been no such intention. That was because under s 29 of the FEG Act, the liquidators, as agents of BTT, received funds to pay the entitlements of its employees. The advanced moneys were said to belong to BTT in the same way as funds advanced under a bank loan belong to the borrower. Therefore payment to employers through the FEG Act constituted payment from the company’s funds.[12]
[12]In the hearing, senior counsel for Bart did not press the need for this argument to be resolved, in light of the manner in which the questions of law were framed.
In his submissions, Johnson contended that the entitlements in s 596AA(2) extended beyond those payable by an employer, and beyond those payable to an employee. An entitlement under s 596AB(1), as defined, might be payable by an insurer or by the Commonwealth (for example, in respect of amounts of superannuation guarantee charge paid to the Commonwealth by an employer and then paid to a superannuation trustee for the benefit of the employee[13]). Section 596AA(5) confirmed that an entitlement might be payable to a person other than an employee. Moreover, in modern commerce, entitlements owed to a person may be ‘recovered’ by being paid by a third party, for example by a payroll company. It was therefore submitted that the intention referred to in s 596AB(1) may be established if it is intended to significantly reduce or prevent payments made by entities including, but not limited to, an employer company.
[13]See the description of the scheme in Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation (2011) 244 CLR 97, 114 [54], 115 [57] (Heydon J); [2011] HCA 35.
Johnson submitted that it followed that an assessment whether a person intended to prevent or significantly reduce recovery could not leave out of account the person’s state of mind with respect to payment by a third party. A person would not have an intention to prevent or significantly reduce recovery of entitlements payable by an employer if the person expected that those entitlements would be recovered by reason of payment by a third party. Section 596AB(1) was ‘agnostic’ as to the source from which entitlements might ultimately be paid. Its concern was with affecting the recovery of entitlements, not with affecting the source from which recovery may be achieved.
It was submitted by Johnson that the Director’s construction would prohibit agreements designed to salvage an insolvent company, under which a third party would pay entitlements otherwise payable by the company. That result was said to be incongruous, given the object of pt 5.8A was to protect employee entitlements.
In relation to the FEG Act, Johnson relied on the provision in s 560 of the Corporations Act for a person who advances money, which is used to pay outstanding employee entitlements, to take advantage of the priority that the employee would have enjoyed in the winding up if their entitlements had not been recovered. The premise of s 560 being that the entitlements have been recovered, Johnson submitted that, by picking up and applying s 560, s 29 of the FEG Act operates on the same premise in respect of payments of an advance made under that Act to a liquidator. It was said to follow that an entitlement that is paid to a liquidator under the FEG Act has been ‘recovered’. The liquidator is then empowered by ss 477(1)(b) and 556(1)(e)–(h) of the Corporations Act to pay employees who are creditors in respect of their entitlements.[14] That was said to constitute a payment by the company, and the source of the payment was irrelevant to that characterisation.
[14]Section 477(1)(b) empowers a liquidator to pay any class of creditors in full, subject to s 556.

Consideration

It is convenient first to address the Director’s contention that ‘entitlements’ in s 596AB(1) of the Corporations Act means ‘entitlements due from the company’. By a related submission, the Director also contended that ‘recovery’ meant recovery ‘from the company’.
The word ‘recovery’ is capable of meaning ‘get back into one’s hands or possession’ or ‘to get again, or regain (something lost or taken away)’, as the Director submitted, such that receipt from the party who is obliged to the recipient might be seen as an essential element of the concept. But that is by no means the only definition. In the context of legal entitlements, the more obvious definition is ‘obtain possession or restoration of a thing by legal process’[15] or ‘obtain by judgment in a court of law, or by legal proceedings’.[16] Those meanings connote a person obtaining a thing, rather than receiving it from any particular source or person. These varying meanings of ‘recover’ illustrate the importance of considering the context of the language being construed in the first instance, and not settling on a meaning of the text before having regard to that context.[17]
[15]Shorter Oxford English Dictionary (6^th ed, 2007) ‘recover’ (def 13).
[16]Macquarie Dictionary (6^th ed, 2013) ‘recover’ (def 4).
[17]SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362, 368 [14] (Kiefel CJ, Nettle and Gordon JJ), 375 [38]–[40] (Gageler J); [2017] HCA 34.
In the present case, moreover, the text itself suggests that the Director’s contention is not correct. The definition of ‘entitlements’ makes it clear that an entitlement may not necessarily be due from the employer company. Paragraph (c) of the definition refers to ‘amounts due in respect of injury compensation in relation to the employee’. Apart from confirming a focus on the employee, rather than the employer, this limb of the definition unmistakably contemplates an entitlement being due from an insurer, rather than an employer. That is not altered by the fact, relied on by the Director, that payment by the insurer discharges a liability of the employer; the payment to the employee is not made by the employer. Paragraph (d) of the definition (‘amounts due under an industrial instrument in respect of the employee’s leave of absence’) also focuses on the employee, and does not require that the amounts be payable by the employer.[18]
[18]Johnson pointed out that this meant that the definition extended to a portable long service leave scheme which provides for payment by a trustee, such as that in the Construction Industry Long Service Leave Act 1997.
The fact that the kinds of payment all arise from obligations upon the employer company as a result of services having been rendered to it by an employee does not mean that the provision is focused upon the employer. Moreover, by addressing amounts due ‘in relation to’ or ‘in respect of’ the employee or the employee’s leave of absence, respectively, paragraphs (c) and (d) of the definition of ‘entitlements’ in s 596AA(2) of the Corporations Act employ words of very wide meaning. Those words would be cut down by a construction which confines recovery to the receiving of payment from the employer. The Director’s construction sits uncomfortably, at best, with that statutory language.
The explanatory memorandum and second reading speech in respect of pt 5.8A are of no assistance in resolving the constructional issue presented. The Director pointed to a statement in the explanatory memorandum to the effect that the object of s 598AB(1) is to ‘deter the misuse of company structures and of other schemes to avoid the payment of amounts to employees that they are entitled to prove for on liquidation of their employer’.[19] It was submitted that this statement was ‘express as to the company being the person from whom recovery is prevented’.
[19]Explanatory Memorandum, Corporations Law Amendment (Employee Entitlements) Bill 2000, 5 [18].
Similarly, the Minister said in the second reading speech that the entitlements that are protected by s 596AB(1) are ‘those that receive preferential payment on winding up under the Corporations Law — that is, wages, superannuation contributions, injury compensation, leave entitlements and retrenchment payments’.[20]
[20]Commonwealth, Parliamentary Debates, House of Representatives, 17 February 2000, 13723–4 (Joe Hockey, Minister for Financial Services and Regulation).
These materials suggest that the new offence in s 596AB(1) was intended to address those entitlements which an employer is entitled to prove for on a winding up. In a literal sense, that is plainly correct. Section 556 of the Corporations Act gives employees priority in respect of liabilities in respect of wages and superannuation (s 556(1)(e)), injury compensation (s 556(1)(f)), leave of absence (s 556(1)(g)) and retrenchment (s 556(1)(h)). This mirrors the arrangement of the definition of ‘entitlements’ in s 596AA(2). It does not follow, however, from that correspondence between the provisions, that s 596AB(1) is confined to entitlements in respect of liabilities of that description that are due from the employer. The extrinsic materials do no more than refer to the categories of entitlements collectively as those mentioned in s 556.
Rather, the statutory context and purpose tell against the Director’s construction. The object of pt 5.8A is to protect the entitlements of a company’s employees from the proscribed agreements and transactions. The Part is titled ‘Employee entitlements’. These provisions place the employee at the centre of the legislative exercise, and are agnostic as to the party who owes the entitlements, or from whom they may be recovered. The more remote title of the Chapter itself, ‘External administration’, is concerned with companies, as the Director submitted. But it is drawing too long a bow to conclude that these titles support reading down the more specific provisions of pt 5.8A. The statutory object of pt 5.8A is a surer guide as to its meaning and scope. The fact that employee entitlements (however arising or defined) might not be met when an employer company is under external administration suffices to explain the decision to locate pt 5.8A in ch 5, or indeed in the Corporations Act itself. If further explanation is required, it is provided by the correspondence in the kinds of payments subject to s 556(1)(e)–(h) and pt 5.8A, respectively.

For these reasons, the Director’s suggested construction of ‘entitlements’ cannot be accepted. The focus of s 596AB(1) is on the recovery of entitlements, from whatever source, by employees of the relevant company.
It is then necessary to examine the operation of the FEG Act in this context.
The Director submitted that, when the Commonwealth makes an advance under the FEG Act, the Commonwealth is substituted for the employee eligible for that advance as a creditor in the winding up of the employer. It was contended that the advance does not constitute the payment of an entitlement, which remains extant. As a result, the argument ran, there was no ‘recovery’ of an entitlement as defined, as a result of the advance under the FEG Act. Instead, the obligation of the company to pay the entitlements was said to subsist, notwithstanding the making of the advance. By operation of the FEG Act, the entitlement was said now to be owed to the Commonwealth.
The Director’s submission should not be accepted. The fact that the Commonwealth is deemed by s 29 of the FEG Act to stand as a priority creditor in a winding up pursuant to s 560 (with the same priority as an employee would have enjoyed under s 556(1)(e)–(h) of the Corporations Act if the entitlement had not been recovered) does not mean that the entitlements are owing to the Commonwealth. The Commonwealth is not standing in the shoes of the employees in the sense of enforcing their entitlements. It is exercising a statutory right to prove, with priority, in a winding up. That statutory right presupposes that a payment has been made by a company on account of wages or superannuation, or in respect of leave of absence, or termination of employment, as a result of an advance of money for that purpose. That payment has satisfied the relevant entitlement of the employee by utilising the advance of the Commonwealth. The entitlement therefore no longer exists.
It follows that, when a liquidator passes on to employees an advance made by the Commonwealth under the FEG Act in respect of employment entitlements as defined in that Act, those employees ‘recover’ their ‘entitlements’ for the purposes of s 596AB(1) of the Corporations Act to that extent.
As a result, if a person entering into an agreement or transaction expects or believes that employee entitlements will be paid by a liquidator after receiving an advance under the FEG Act in respect of those entitlements, the person cannot be said to intend to prevent the recovery of those entitlements.
We do not accept the Director’s submission that this conclusion renders both s 596AB(1) and the FEG scheme for recovery of payments by the Commonwealth ‘empty’. As already noted, the FEG Act does not provide for advances in respect of superannuation or injury compensation payments. Nor does it provide for advances in respect of employment which ends other than as a result of insolvency: s 10(1)(c). It also does not provide for advances in respect of employees other than Australian citizens, permanent residents or special category visa holders: s 10(1)(g). Section 596AB(1) therefore still has work to do on the construction we favour. If its operation is limited in cases where the FEG Act applies, that is not a reason for construing it more widely, especially given its status as a penal provision. In particular, pt 5.8A of the Corporations Act preceded the FEG Act. It would be strange to construe it by reference to legislation not yet in existence, and there is no suggestion that the FEG Act effected any implied repeal or amendment of s 596AB(1).
The fact that the FEG Act does not make provision for advances in respect of injury compensation or superannuation payments is otherwise not significant. The questions of law that have been referred to us do not require us to address such payments.
It remains to address the argument advanced by Bart that the making of amendments to pt 5.8A in 2019 indicated that s 596AB(1) as it stood at the relevant time in 2014 did not have the operation it had after the amendments. That argument relied on Dunmunkle Corporation.[21] The premise of the argument is that, after the amendments, s 596AB(1) was contravened even if the person entering into the agreement or transaction expected or believed that the entitlement would be met through an advance under the FEG Act.[22] Assuming the correctness of that premise, we do not accept its suggested consequence. There is no indication that the amendments were made in order to change the meaning of the provisions rather than to remove doubt by confirming that meaning.[23] In any event, there is, again, some incongruity in identifying the intention of Parliament in enacting the original provisions by reference to provisions enacted at a later time.[24]
[21](1946) 73 CLR 70, 86 (Dixon J); [1946] HCA 13.
[22]The new s 596AB(2A) might bear on this issue. It provides that s 596AB(1) applies even if the entitlements of the employees are recovered, despite the agreement or transaction in question.
[23]Doughty v Martino Developments Pty Ltd (2010) 27 VR 499, 511 [33] (Nettle JA, Mandie JA agreeing at 511 [35], Emerton AJA agreeing at 511 [37]); [2010] VSCA 121; Allina Pty Ltd v Federal Commissioner of Taxation (1991) 28 FCR 203, 212 (Lockhart, Burchett and Gummow JJ); [1991] FCA 87; Hepples v Federal Commissioner of Taxation (1991) 173 CLR 492, 539 (McHugh J); [1992] HCA 3.
[24]Interlego AG v Croner Trading Pty Ltd (1992) 38 FCR 348, 382 (Gummow J, Black CJ agreeing at 349, Lockhart J agreeing at 349); [1992] FCA 992.
For these reasons, the first question should be answered ‘No’.
In the circumstances, it is not appropriate to answer the second question. To do so would amount to an advisory opinion rather than an answer to a question of law that ‘arises’ in the proceeding.[25]
[25]Criminal Procedure Act 2009 s 302(2); Director of Public Prosecutions (Cth) v JM (2013) 250 CLR 135, 158 [41] (French CJ, Hayne, Crennan, Kiefel, Bell, Gageler and Keane JJ); [2013] HCA 30.
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[2025] VSCA 161

7 July 2025