CGU Insurance Limited v One.Tel Limited (in Liquidation)

[2010] HCATrans 123

[2010] HCATrans 123

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S78 of 2010

B e t w e e n -

CGU INSURANCE LIMITED ACN 004 478 371

Applicant

and

ONE.TEL LIMITED (IN LIQUIDATION) (ACN 068 193 153)

First Respondent

CHRISTINE WATSON AS REPRESENTATIVE OF THE ESTATE OF THE LATE DAVID PATRICK WATSON

Second Respondent

JOHN HUYSHE GREAVES

Third Respondent

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Fourth Respondent

FRENCH CJ
HEYDON J
CRENNAN J
KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 20 MAY 2010, AT 10.16 AM

Copyright in the High Court of Australia

__________________

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friends, MR A.W. STREET, SC, MR E.G. ROMANIUK and MR W.A.D. EDWARDS, for the appellant.  (instructed by Colin Biggers & Paisley Solicitors)

MR B.A.J. COLES, QC:   May it please the Court, I appear with my learned friend, MR P. KULEVSKI, for the first respondent.  (instructed by Clayton Utz Lawyers)

FRENCH CJ:   I note that submitting appearances have been filed for the second and fourth respondents and an affidavit of service on the third.  Yes, Mr Jackson.

MR JACKSON:   Your Honours, may I just say something about the case generally, very briefly, initially.  As the Court will have seen, this is a case where a deed of arrangement under the Bankruptcy Act 1966 was terminated by effluxion of time and because neither the trustee nor the creditors convened within time a meeting to extend this period of operation. The trustee under the deed before its termination had instituted proceedings against us claiming an indemnity under a directors’ and officers’ insurance policy which we had issued. The right to do so was assigned – there is some issue about the effect of the assignment – by the debtor to the trustee under the deed on the trusts in the deed.

Your Honours, after the termination of the deed the trustee amended the proceedings to the form of the amended summons - if I could take your Honours to it for just a moment at page 26 in the appeal book.  Your Honours, may I just say one does see a hint, in a sense, in the judgments in the Court of Appeal that these are issues which we raised in the first place, but may I say they are issues that were raised by the trustee in the proceedings in their amended form after the termination of the deed.  By that I mean, your Honours, if one looks at page 26 about line 22 one sees the amended form in which the trustee became a plaintiff, and one sees the declarations that were sought on page 27 in paragraphs 1A and 1B.  I will not read them out, but your Honours will see the essence of them relates to two things – could the trustee maintain the proceeding, continue the proceedings, and secondly, on whose behalf did he hold the rights in relation to the policy?

Your Honours will see also the trustee’s amended commercial list statement at page 33.  That commences at page 33 and your Honours will see in that on page 34, paragraphs 8 and 9, which are to the same effect, and then, your Honours, at page 37 your Honours will see paragraphs 32 and 33 commencing at the bottom of page 37, again to similar effect.  Your Honours, those issues gave rise to a set of agreed facts and agreed issues for the termination which were decided relevantly in our favour by the primary judge and relevantly against us in the Court of Appeal.  Your Honours, in the appeal in this Court the issues, in our submission, fall into these categories.

If I could describe them and then indicate that subject to the Court, of course, that is the order in which I propose to deal with them.  The first issue, your Honours, in our submission, is whether the terms of the Bankruptcy Act or the deed of arrangement entitled the trustee to continue the proceedings following the termination of the deed. The second is whether the trustee was entitled to do so in any event because of the operation of section 12 of the Conveyancing Act 1919 (NSW), that is the absolute assignment provision. The third question is whether the assignment was an absolute assignment in terms of section 12.

FRENCH CJ:   What is the difference between the second and third?

MR JACKSON:   Your Honour, I am assuming in relation to the second one that there was an absolute assignment. 

FRENCH CJ:   I see, yes.

MR JACKSON:   The third issue is whether that assumption is correct.  The fourth, your Honours, is if the assignment was equitable, does that make any difference to the result?

HEYDON J:   Do you concede it was equitable at least?

MR JACKSON:   Yes, your Honour.  Your Honours, the last of those, the last issue is whether there was any loss for which the trust “loss” – I put the word in inverted comas – in terms of the policy for which the trustee can sue.  Your Honour, might I just say in response to the question that was put to me by your Honour Justice Heydon that we would be saying whether the assignment was equitable or whether it was absolute or at law, I should say, that it was, in any event, upon the terms provided for by the deed and on trust.  I need to elaborate upon that, of course.  Your Honours, could I come then to the first issue ‑ ‑ ‑

HEYDON J:   In that event it does not much matter whether it was assigned, absolute or equitable.

MR JACKSON:   No, it does not matter, your Honour.

HEYDON J:   So issue 3 can have a line drawn through it perhaps.

MR JACKSON:   Your Honour, that is what we will be saying, that it can, but it is an issue that has been raised in the proceedings.  Your Honours, could I come to the first of those issues, and that is whether the terms of the Bankruptcy Act or the deed of arrangement entitled the trustee to continue the proceedings following the termination of the deed.  Your Honours, that involves a consideration of the provisions of the Act and of the deed.  Your Honours, may I take your Honours first to the deed of arrangement.  It is at page 129.  Could I pause to say that your Honours will find some amendments to the document that have been written in handwriting.

FRENCH CJ:   They were the subject of the later variation.

MR JACKSON:    Yes, they were, your Honour, and the later variation appears at page 139.  If I could go to page 129, your Honours will see that it refers in the heading of the document, about line 6 on the page, second line on the page really, to the provisions of Part X of the Bankruptcy Act.  That part, if I could take your Honours just to it for a moment, it is in the first of the volumes, that should be the yellow volumes, I think.  It commences at page 341 and it commences with section 187.  Your Honours will see two definitions on that page.  One is “deed of arrangement” and your Honours will see that it means:

a deed (not being –

one of the things in brackets –

providing for the arrangement of the affairs of a debtor with a view to the payment, in whole or in part, of his or her debts.

Your Honours will see then immediately below it the definition of “deed of assignment” which is:

a deed by which a debtor assigns all his or her divisible property for the benefit of his or her the creditors.

FRENCH CJ:   The concept of a deed of arrangement really is broader than that of a deed of assignment, is it not?

MR JACKSON:   Quite, your Honour, yes.  To put it very shortly, your Honours, and I will come to in more detail in a moment, it allows the creditors and the debtor to agree on the way in which the property should be dealt with.  Of course there are particular provisions of the Act that deal with it and I will come to those shortly, but it does not necessarily involve an assignment of property.  It does not mandate that there be, as there is in the case of bankruptcy, a vesting in the trustee in bankruptcy of the property.  There may be, there need not be, but it is subject to regulation by the Act.

Your Honours will see, if I could invite your Honours, in effect, to keep that part of the Act handy as it were, but if I could go back to the terms of the deed.  At page 129 in the recitals your Honours will see a reference to, in recital A, a meeting of creditors, and also to section 188 and to section 194 in recital B.  Section 188(1) which your Honours will see at page 343 of the yellow book, is the provision that allows:

A debtor who desires that his or her affairs be dealt with under this Part without –

sequestration to sign an authority naming a registered trustee to call a meeting, et cetera, and sections 194 and 195 are the provisions, and your Honours will see those at page 351, which deal with the calling of the meetings and then one goes then to page 352 of that volume which sets out section 204.  Section 204 allows – and I refer particularly to 204(1)(b) and 204(2) – that allows the passing of a “special resolution” to require the execution of a “deed of arrangement”.

I mentioned in passing, in answer to your Honour the Chief Justice a few moments ago, that there are differences between a deed of assignment and a deed of arrangement.  Some of those are referred to in a passage from a judgment of Justice Gibbs when he was judge in bankruptcy cited by the Court of Appeal at page 237 in the appeal book in paragraph 75 and could I just say if one looks at that passage, you will see, for example, about six or seven lines into it where he says:

the execution of a deed of arrangement does not bring about any automatic vesting . . . a deed of arrangement does not operate as a release unless the deed itself so provides.

There are other matters there referred to.

FRENCH CJ:   Except that a deed may effect the assignment of property.

MR JACKSON:   Yes, a deed of arrangement may do so.  Your Honours, could we say that in Part X there are separate divisions which deal with the two types of deed.  They are Division 4 which commences at section 228, page 379, dealing with deeds of assignment, and then Division 5 commencing at section 233 at page 384 which deals with deeds of arrangement.  Your Honours will see, if I could just refer to section 237(2) at page 388 for a moment, that it picks up various earlier provisions of the Act.  Your Honours, we have given the Court this morning a document which endeavours to put in summary form what those provisions are so your Honours will not have to go to them.

FRENCH CJ:   Very helpful, thank you.

MR JACKSON:   Now, your Honours, I do not intend to take your Honours to that document but it summarises what those provisions are.  Your Honours, could I just say that the provision which effects a vesting of a debtor’s property on execution of the deed in the case of a deed of assignment is section 229, which is at page 380.  There is not an equivalent provision for deeds of arrangement and a deed of arrangement, however, is binding on the debtor’s creditors.  Your Honours will see that in section 233(1) at page 384.  Except to the extent that it so provides, it does not release the debtor from the debtor’s debts.  You will see that in section 234(1).

Your Honours, the Act recognises that a deed of arrangement may terminate by effluxion of time or by other events provided for in it.  Your Honours will see, if I could go to section 235 at page 387 that it says that:

A deed of arrangement is terminated by:

and then amongst other things, your Honours will see in paragraph:

(d)the occurrence of any circumstances or event on the occurrence of which the deed provides that it is to terminate.

Now, your Honours, the Act provides some protection for events which have taken place prior to termination of the deed and your Honours will see that in section 224 which is at page 376.  Your Honours will see, if I could just go to section 224 for a moment, it provides that where - and I am going to paragraph (a):

a deed of assignment, a deed of arrangement or a composition is declared by the Court to be void . . . 

(b)a deed of arrangement –

Your Honours will see no reference to deed of assignment there.  That is because there is not an equivalent provision for termination of deeds of assignment by events which are referred to in the deed of arrangement –

is terminated by an occurrent specified in paragraph 235(b) or (d) . . . 

all payments made, acts and things done and transactions entered into in good faith under, or for the purposes of, the deed or composition by the trustee or any other person before he or she had notice of the order of the Court or of the termination of the deed or composition, as the case may be, are valid and effectual and are not liable to be set aside by the trustee of a subsequent deed of assignment or deed of arrangement or in a subsequent bankruptcy.

Could we invite your Honours to note two further things about that provision?  One is that it applies to things that took place before notice of the termination of the deeds.  It is some protection, your Honours, for, in effect, pre-termination, to put it shortly, events but it does not say anything about events after that.  The other thing is that a notice of termination has to be given to the Official Receiver.  You will see that in section 224A.  I think I have overstated 224A.  Section 224A refers to the occurrence of the court making an order. 

Your Honours, I have referred to the notice of termination of the deed in section 224.  That concept is reflected also in section 276, which your Honours will see at page 448.  Could I just say the notice actually given in this case was one that your Honours will see at page 144 of the appeal book.

Could I take your Honours to section 276.  It makes it an offence to act as a trustee under a deed of arrangement that, to the knowledge of the trustee, has been terminated and it is an offence, your Honours will see, with a penalty per day.  Now, could I just say the deeds of arrangement, your Honours will see the wording again at 276(1), it reflects the fact that it is only deeds of arrangement that can be terminated.

Could we just say that some of the Court of Appeal’s reasoning does sit rather oddly, with respect, with the terms of section 276(1).  If I could just give an example, your Honours.  Page 243 in the appeal book, if one goes to the last sentence of paragraph 89, which commences about line 12 or 13, it is dealing with clause 11 of the deed - I will come to it later - but it says:

Construing cl 11 as permitting the stay to continue beyond the date of termination of the Deed . . . implies that cl 9 –

and again I will come to that, your Honours –

should be read so as to authorise the execution of a Trustee’s certificate after the date of termination of the Deed.

The certificate is something that ‑ ‑ ‑

FRENCH CJ:   This is a clause 10 certificate?

MR JACKSON:   Yes, your Honour.  Your Honour, what I am seeking to say about it is that if it is, by the Act, an offence to one’s knowledge to act as a trustee under a deed for arrangement which would involve exercising a power under that document and it is an offence to do so it does seem odd to suggest that the trustee would be able to do so following the termination of the deed.  I will come back to that, your Honours, but ‑ ‑ ‑

FRENCH CJ:   What other provisions relevant to the effects of termination are there that we should be concerned about apart from 224 and 276?

MR JACKSON:   There is the provision recognising the fact that they will terminate.  Your Honour, I do not think there are ones that deal with ‑ ‑ ‑

FRENCH CJ:   There is no real definition of the effect of termination.

MR JACKSON:   No.  Your Honours, could I go then to the terms of the deed of arrangement which are at page 130.  Your Honours will see at page 130 in paragraph 1(e) commencing about line 25 that the deed is to be “construed subject to the provisions of the Act” and insofar as the deed does not comply with the Act, then that provision is “void and of no effect”.  One sees then clause 2 and your Honours will see that by clause 2:

The Debtor covenants to convey, transfer . . . to the Trustee, all the property more particularly described in Schedule A –

and the conveyance or assignment, whatever, is to be –

on trust to be dealt with by the Trustee in accordance with this Deed of Arrangement. 

So that is the first thing, your Honours.  Clause 3 then says that:

The Trustee accepts appointment as Trustee of this Deed and the conveyance and assignment of the said property upon the trusts hereinafter set out. 

So it is clear that both the appointment as trustee and the acquisition of the property is as trustee and upon the terms of the trusts.  Your Honours, could I then go to the property.  Your Honours will see Schedule A at page 134 and one sees that it involves the payment to a trustee of a sum of $600,000, shares in companies, that is roman (ii), (iii) and (iv), and then the rights in relation to our policy and in relation to an excess policy.  Your Honours, as I understand the position, the litigation has not concerned the excess policy that is referred to there and it is not involved in the proceedings.

Your Honours, one sees then that the course to be adopted by the trustee in relation to the property is set out in clause 4 at page 130, namely, that the trustee is to get in and realise those assets as soon as reasonably practicable and the deed in clause 7, if I could go to that for a moment, entitles the debtor, if he has complied with his obligations under the deed, to a certificate from the trustee to that effect and one sees then that if that happens on receipt of the certificate – and if I can just interpolate, that certificate is at page 142 – then the debtor is discharged from all his debts except for the compensation order and the cost orders, and that appears from clause 8.

CRENNAN J:   Do not clauses 2 to 5, read together, indicate that the assignment contemplated is an unconditional assignment, that is to say that the assignee is not subject to any conditions in relation to the subject matter?

MR JACKSON:   If one paused at that point, your Honour, that may be so, but the assignment, as one sees from clause 3, is an assignment “upon the trusts hereinafter set out”, and those trusts include, for example, clause 17 which provides for termination and that is the matter that lies at the heart of that argument.  Your Honour, may I come back to that in due course, but I accept the broad proposition your Honour was putting to me. 

Your Honours, could I just say then that one sees clause 9 dealing specifically with claims against us and in respect of those claims the trustee might adopt one of the courses referred to there.  Could we just say, your Honours, that the courses were to complete or settle any – this is clause 9I:

claim for the realisation of assets . . . including the pursuit to judgment or settlement of any claim . . . 

II.makes a decision not to pursue a claim –

against us.  Your Honours, in whichever of those events occurred, and then one sees in the last three lines on page 131, the trustee was to issue a certificate to the effect that he had completed the realisation of assets, or that he does not intend to pursue the claim.

FRENCH CJ:   Does that provision codify the options open to the trustee?  I mean, would it have been possible for the trustee to assign the benefit of the policy to a friendly litigation funder, or some third party?

MR JACKSON:   Could I answer your Honour directly first of all and say, yes, it does in our submission, but what your Honour is putting to me may be within the concept of realisation of assets that is referred to in 9I because you will see that 9I opens in relatively broad terms and it uses - the expression “realisation of assets” is one that is used also in clause 4.

FRENCH CJ:   So if there were effective disposal to a third party the termination of the deed would not affect the third party’s rights?

MR JACKSON:   Probably not, your Honour.  But, your Honour, that does involve an assumption as to the ambit of the provisions, or it involves really two assumptions, if I can put it, with respect.  One is that that does fall within 9I, or the other assumption being that the terms of clause 9 are not exhaustive.  Our submission on that is that the terms are exhaustive.  It may be a debatable question whether one could do it so far as the other aspect is concerned in terms of clause 9I.

Your Honours, could I just say then that on the issue of the certificate contemplated by clause 9, clause 10 provides that the trustee is then absolutely discharged from liability in respect of those proceedings.  Then clause 11 says that prior to the execution of the certificate those orders could not be enforced.  If I could pause there, your Honours will see that there is a very long clause 12, but what it provides for relevantly is that the trustee had power to “call a meeting of creditors” of his own motion, or could do so at the request of creditors, having a value of “one‑fourth of the total value” of the debtor’s debts, and that appears in the first four lines of the provision.  That reflects the terms of section 223.  I do not think I need to take your Honours to it, but your Honours will see it at page 375 of the Act.

Now, the ability of creditors or the trustee to call a meeting was a matter of significance because of the provisions for termination of the deed and those provisions can be found in clause 17 which commences at the bottom of page 133.  It provides that the deed terminates on the earliest of the three dates set out in the subclauses which follow.  Clause 17(a) takes one back to those provisions of the Act, including 235(d) which says that a deed terminates when an event provided for in it relating to termination occurs. 

The second is the issue of a certificate under clause 9 and compliance by the trustee with his obligations in clause 5.  Clause 9 is the provision which contemplates resolution of the claim under the policies in one of the methods provided for by clause 9.  Clause 5 at page 130 is the provision for payment of moneys of amounts received under those policies to One.Tel and ASIC. 

The third termination event provided for is that referred to in clause 17(c), and that is that the deed will terminate “three years from the date of execution” unless there has been resolution of the creditors, having the nature and purpose referred to in the clause.  Insofar as purpose is concerned, clause 17(c) contemplates that the purpose is to allow the trustee to finalise “any claim for the realisation of rights under the” policy and that seems to be a reference back to clause 9I and your Honours will see the words in the latter provision, “for the realisation of assets being rights under the” policies.

Your Honours, inherent in and, in our submission, plainly enough inherent in, with respect, the concept of clause 17(c) supported statutorily by section 235(d) – that is the provision at page 387 – is the notion that in the absence of a resolution by the creditors giving an extension of time, extension of the operation of the deed, for the purposes of finalising the claim, the trustee’s part to pursue such a claim is at an end.  Now, your Honours, the trustee – if I could just say in terms of the actual times here – is given three years prima facie, the deed was dated 30 November 2004, the proceedings were not instituted until the 18 October 2006 and notwithstanding, one might say, the march of time, no meeting was convened to extend the time pursuant to clause 17(c). 

So that, we would submit, your Honours, one has a situation where the trustee derived his authority to pursue the proceedings from the deed, the deed has terminated, so, in our submission, have his powers and section 224 – that is at page 376 – makes his institution and maintenance of the proceedings to that point valid and effectual but it does not validate anything thereafter.

FRENCH CJ:   Underlying this, is there a general proposition that if there be any asset, let us say there be a bundle of shares, for example, unrealised at the time of termination, effluxion of time and unless the creditors have taken some step to extend the operation of the deed, those assets effectively revert to the debtor?

MR JACKSON:   The answer is, yes, your Honour, but could we just say two things about that.  The first is this, that if you have a deed of this nature, deeds may vary, but if you have a deed of this nature where there was, let us say, an assignment of shares to the trustee and the deed provides for its extension by resolution and there is no resolution, well, at that point, once the deed terminates, then the situation which you have is that the trustee has no further powers in relation to the matter.  Section 276 suggests that he would be committing an offence if he were to do anything more with them.

CRENNAN J:   You would speak about a failure of the trusts, I suppose.

MR JACKSON:   I am sorry what was that?

CRENNAN J:   You would speak in that context of a failure of the trusts.

MR JACKSON:   Of cessation, if I could put it that way.  It is a trust which has inherent within it a temporal limitation and the temporal limitation is one fixed by the deed and then the statute says from that point.

KIEFEL J:   Do you have to deal with the point that the temporal limitation is contrary to the purposes otherwise of the trust, do you not?

MR JACKSON:   Well, not really, with respect, your Honour.  If one looks at a trust of the present kind, what you have is one that says in respect of what obviously might think is the largest of the assets that is involved, one has a situation where the trustee is given prima facie three years to realise it.  Now, if he is not able to do that in that time, the trustee is in a position where the trustee can call a meeting of creditors within that time to say extend the time so that – and the actual purpose of the extension is in section 237.

KIEFEL J:   That is putting all the focus upon the time limitation, but the purpose of the trust is get in the assets for the benefit of the creditors with the arrangement of the contract with the debtor for release.  It might have been contemplated that if the three years was not enough there would be a meeting and it would simply be extended, but it is not right, is it, to say that contained within the purpose of the trust is this self‑executing trust that it immediately finishes.  You have to look at what the underlying intention of 17(c) was about the need for affirmation of the continuation of the deed.

MR JACKSON:   Yes, your Honour, could I say this?  It may be just simply a question of what one is describing something as, and what I mean by that is that if one is saying what the purpose of the trust is, one would say the purpose of the trust is really to be derived from the deed of arrangement and the provisions of the Act that may have some bearing upon it. 

If one is looking to see how the temporal aspects are brought in, one might say the terms of the trust are that the purpose to be derived from it is one that is to be achieved within three years, or any extension of it, in the manner provided for by clause 17(c), but however one does it, your Honour, one cannot leave out of account that the central provisions of it - and if one looks at, say, clause 234, then 234, 9 and 17 itself relate to realising the claim against us.  Whether one speaks of purpose, whether one speaks of the terms of the trust, whether one speaks of the relationship of the parties, it is a relationship that has the temporal limitation imposed on it.

KIEFEL J:   I am probably eliding two concepts there.  Of course it is the deed of arrangement which terminates, but the trust arises under clause 2, does it not?

MR JACKSON:   Yes, your Honour.

KIEFEL J:   So does one need to look at how one interprets clause 2 and the trust arising.  I mean we could say that is impressed with the terms of the deed of arrangement, but one might need to give closer attention to what is intended by clause 2.  So where it says

on trust to be dealt with by the Trustee in accordance with –

you would add “the terms of this deed of arrangement” perhaps “so far as is necessary to the assignment and its purposes”.  Is that the starting point and then you read clause 17(c) in light of that?

MR JACKSON:   Your Honour, we would seek to put it this way, if I may, that what you have is a deed of arrangement.  You cannot have a deed of arrangement unless you have a trustee of section 213.  The powers of the trustee derive from the terms of the deed of arrangement and they are powers which are ones that affect, of course, the debtor, they affect the creditors and they affect the trustee in his exercise.

KIEFEL J:   But there is not just one trust that we are talking about.  There is a trust for the purposes of the deed of arrangement and then there is another trust arising on the assignment, is there not, in relation to the individual items of property to be dealt with, although impressed with the terms of the deed of arrangement.  Is that not a correct approach to how one views the operation of the trust in the context of a deed of arrangement?

MR JACKSON:   Your Honour, that view, with respect, that there are two trusts, I say two things about it.  The first is that it is difficult, we would submit with respect, to say that there are two trusts because the terms of clause 2 at page 130 and, of course, of clause 3, in our submission, indicate that the acceptance of the property by the trustee is in accordance with “this Deed of Arrangement” – that is the actual wording of it.  If one is looking to say that there is a second trust, perhaps there may be, but that trust itself must be on the terms of the ‑ ‑ ‑

KIEFEL J:   I have no difficulty with that, but I suppose what it does is, if you start from the point that there is a trust created by clause 2 to hold the property, it puts the focus upon the purposes and once you have the purposes of the trust as being to get in the property and realise it for the benefit of the creditors, the termination of the deed of arrangement as such under 17(c) assumes a different complexion.  It would have to be read in light of the purposes.

MR JACKSON:   Your Honour, may I say this, with respect, that if one is defining the purpose of the trust, that is to define the purpose but to put to one side provisions that are critical to the purpose and which qualify.  What I mean by that is that it is not a trust that says just get in the money, realise the assets and pay them in the manner provided for by those early clauses. It is a provision that says you are to do that within a specified time and the specified time is three years plus an extension that we give you, if any.

KIEFEL J:   There is almost an inconsistency with the purpose then.

MR JACKSON:    No, there is not, your Honour, because it says you have to get on your bike, as it were, and do it and do it in three years or else seek an extension of time or the debtors can give you an extension of time.

KIEFEL J:   The deed of arrangement contract between the debtors and the creditors is there is this time limit for it to operate.

MR JACKSON:   Yes, and your Honour, could I just say this.  The property of the debtor is, in effect, taken away from him.  It is taken away from him for a certain period and we would say the debtor is entitled to have a period certain, so too are the creditors.

KIEFEL J:   But if that is so, you are not just talking about a termination of a deed of arrangement.  You are really talking about the failure of a trust, are you not?

MR JACKSON:   Well, yes, your Honour, because ‑ ‑ ‑

KIEFEL J:   The purpose has failed when the time is up.

MR JACKSON:   Well, the purpose has come to an end.  Your Honour, to say “failed” gives it a pejorative ‑ ‑ ‑

KIEFEL J:   I just cannot think of an example where there is a time limit on a trust where the purpose requires not a particular period of time.  It is just a rather odd concept.

MR JACKSON:   Well, your Honour, it is ‑ ‑ ‑

KIEFEL J:   Anyone would know that litigation may take, or the settling of claims, may take longer.

MR JACKSON:   Well, your Honour, and that is, one thinks, why there is a provision like clause 17(c) allowing the creditors to decide whether the time should or should not be extended.

FRENCH CJ:   In a sense the words “on trust” in clause 2 are superfluous, I suppose.  Property transferred to the trustee to be dealt with in accordance with the deed of arrangement, well, that has its own terms, and then there is a statutory framework in which it sits, and it might be that there is a ‑ ‑ ‑

MR JACKSON:   Well, your Honour, could then one ‑ ‑ ‑

FRENCH CJ:   I do not think that is adverse to you in any way, it is just a question of whether ‑ ‑ ‑

MR JACKSON:   No.  Your Honour, could I just add that if one – could I go back, your Honours, to section 276 for a moment?  Could I just add to what I just said to your Honour Justice Kiefel a moment ago, that if one is looking at purposes, one of the purposes is to protect the debtor too, one might think.  If I could just go back to section 276, page 448, for a moment?  Your Honours, it carries with it, in our submission, the underlying concept that if a deed of arrangement has been terminated then the person who acts as trustee under it – and the person’s appointment if it be the person who was previously the trustee – that appointment has come to an end by the termination, and it is saying once you know that the time is up you cannot do it.

CRENNAN J:   It looks as though there is still the ability for the trustee to take steps that are necessary for the protection of the property.

MR JACKSON:   For protection of the property, your Honour.  Yes, it is a limited defence given by subsection (2) and also a carve out in effect of subsection (1), but that is for – this is a little more than protection of the property we are talking about here, and protection of the property of the debtor, as it were.  Your Honours, could I go back then to clause 17(c) and what I was going to say is this, that if one goes to what was said by Justice Sackville in the Court of Appeal at page 240 in paragraph 83, his Honour says in the last few lines that:

Clause 17(c) therefore does not address in terms the consequences of termination of the Deed of Arrangement for the enforcement of the rights assigned by the Debtor to the Trustee.

Your Honours, we would submit that that is a rather narrow operation to attribute to the terms of clause 17(c).  The provision in terms is concerned with the finalisation by the trustee of claims for the realisation of the rights.  Clauses 4, 5 and 9I of the deed are concerned with such claims and we would submit that the inference is clear from the terms of clause 17(c) that absent a resolution of creditors extending the deed, the trustee’s powers to pursue litigation are gone.  Your Honours, could I then move to the second issue which I mentioned earlier and that is whether the trustee was entitled to do so in any event.

FRENCH CJ:   Just before you leave 17(c), the creditors would by resolution varying the deed, of course, have power to extend its term for any purpose, would they not?

MR JACKSON:   Your Honour, may I just go back to the provision for a moment.  I think what your Honour puts to me is correct.  I am sorry, your Honour, if one looks at the terms of page 134, the creditors’ resolution has to be for the purposes of the trustee finalising the claim to which you are ‑ ‑ ‑

FRENCH CJ:   That is what I am saying.  All I am talking about, the general provision of the Act provided for variation of ‑ ‑ ‑

MR JACKSON:   Yes, I am sorry, your Honour, I misunderstood.

FRENCH CJ:   In a sense, you almost do not need that.  You could say they would be covered by the variation power in any event.

MR JACKSON:   Yes, but, your Honour, whether it be ‑ ‑ ‑

FRENCH CJ:   You say it would assist you in a constructional sense, I suppose?

MR JACKSON:   Yes.  There is also section 234A, page 385, which allows the variation of the deed by “special resolution at a meeting called for the purpose”; you need the debtor’s consent.  Your Honours, could I just say that whether it be by statute or by clause 12, which is the provision about meetings, it just did not happen in the present case.

Your Honours, could I go then to the second issue, and that is the operation of section 12 of the Conveyancing Act. Your Honours will see that in the second volume of legislative materials at page 983. If your Honours were to look at page 983 at section 12, you will see the words “Any absolute assignment by writing”, et cetera. Now, the view advanced by One.Tel in the Court of Appeal, and accepted by the Court of Appeal, was that the assignment to the trustee of the right of action was absolute in terms of section 12 and that therefore the former trustee was able to pursue it even though the deed had terminated.

Your Honours, could we, for the moment, make the assumption on which that view is based, namely that there was an absolute assignment to the trustee and we would submit that the consequences relied on by the respondent do not follow.  In the first place, your Honours, the provisions of clauses 2 and 3 at page 130, and I have taken your Honours to them already, make it apparent, we would submit, that the assignment was on trust, and it was an assignment on the trusts contained in the deed.  Your Honours will see that in clauses 2 and 3.  The trusts were of limited duration, clauses 4, 9 and 17(c), and the entitlement conferred on ASIC and One.Tel from clause 5, which is at page 130, which I do not think I have taken your Honours to in any detail before, was an entitlement which derived entirely from the deed, but the deed was at an end.

The second point, your Honours, we would submit is that there is not, as our learned friends’ written submissions in paragraphs 10 and 11 would suggest, a relevant analogy with the position in bankruptcy.  In bankruptcy there is a vesting of all the debtor’s property by the operation of the statute.  Your Honours will see that from section 58, page 104 of the yellow volume, and one sees also – I should say, your Honours, the only part of section 58 that is picked up in relation to deeds of arrangement is subsection (4).  That is by 237(2), the rest of it is not.  I should mention also section 117 at page 189 which deals specifically with liability insurance the debtor has, and that is a provision that also is not picked up in relation to deeds of arrangement.  In the present case, in our submission, what one has is an assignment to a person on trust for specific and temporarily limited purposes. 

The third point, your Honours, is this. We would submit that the respondent’s case assumes that one is working only in a milieu of State law. One accepts that section 12 has the effect that the right to bring the action is transferred to the assignee and on the assumption that one is making for the purposes of this argument, one could not complain about that as such, but the assignment is one which takes place under a deed which depends for its efficacy on Commonwealth law, that is section 213(1) at page 368. Your Honours, if one goes to section 218(1) of the Act at page 370, one sees that the deed of arrangement is a public document. It has to be filed in the office of the Official Receiver.

Documents that are filed there are documents which any persons are entitled to inspect and copy.  You will see that at section 226(4). pages 377 to 378.  The earlier subsections of that provision allow particular people to get copies for nothing.  Section 226(4) is applicable.  What I was going to say about that was this, that where a debtor has been given notice of an assignment to a trustee under a deed of arrangement, the debtor will be able to know that this assignee trustee’s powers are those provided for by the deed and the Bankruptcy Act.  The debtor is entitled to say in a case such as this, “Your entitlement to sue me has come to an end.  You obtained it pursuant to the deed.  The deed is at an end”, and the concept that our learned friends suggest in their written submissions in paragraph 9 – let us go to those for a moment – where it said:

The trusts in favour of ASIC and One.Tel constituted by the Deed survive the termination of the Deed and the Trustee holds the legal title for the benefit of ASIC and One.Tel.

Your Honours, that does not seem to sit too well with the notion that under section 276(1) the trustee is not able to act as trustee without being liable potentially for criminal events.  Your Honours, it would seem, inevitably, that the trustee, if doing what our learned friends suggest the trustee is doing, is exercising rights which purport to derive from the deed and ones which would attract the operation of 276(1).

HEYDON J:   What does Commonwealth law have to do with it precisely?  It would not matter if the Bankruptcy Act had never been enacted or the relevant parts of it.  We still have a deed, a valid deed.

MR JACKSON:   Yes, your Honour, yes, there is.  If one is speaking about circumstances otherwise it would be bankruptcy, and the point I am making about the Commonwealth Act is that it does provide for some matters in relation to deeds of this kind.

HAYNE J:   It does.

MR JACKSON: Your Honour will see too that by clause 1(e) of this deed it was to be construed in accordance with the Bankruptcy Act.  The provisions of the ‑ ‑ ‑

HEYDON J:   My question, perhaps, should be put another way.  It would not matter whether it was a State Act or a Commonwealth Act.

MR JACKSON:   No, I think not.  Your Honour, I am sorry, there is no underlying constitutional issue or section 109.  I am not suggesting that at all, your Honour.  What I am saying though is that the Bankruptcy Act provides that deeds terminate and the deeds that they are talking about are deeds that are ones that provide for trustees and they have to be registered trustees under the Act.  It provides that they terminate and it says that a person cannot, after knowledge of the termination, then proceed to act as a trustee of such a deed. 

The point I am seeking to make is that if the argument of the respondent does seem to involve the contention that notwithstanding the termination of the deed, the trust provided for by it and the powers of the trustee provided for by it do continue after that.  That seems to be inconsistent with the notion conveyed in section 276.  It is also inconsistent with the notion of the deed itself terminating.

FRENCH CJ:   Is that question dealt with anywhere in the judgment of the Court of Appeal?

MR JACKSON:   No, your Honour, I think it right to say, and to the extent necessary, confess, that you will not find a reference to section 276 in any of the written submissions, and it is a provision that has come, I must say, to my own notice in very recent times and we conveyed, of course, to our learned ‑ ‑ ‑

FRENCH CJ:   Is there any authority, particularly on the construction of the words “acting under a deed of arrangement”?

MR JACKSON:   Your Honour, I think the answer is no, but I will check that, your Honour, and perhaps a little later in the day we could confirm that.  Your Honours, if I could just go to section 213 for a moment at page 368.  Your Honours will see in subsection (2) that:

An instrument not under seal . . . which, if it had been under seal, would have been a deed of assignment or a deed of arrangement is void.

There are some provisions in sections 213 and 214 that deal with deeds of arrangement and deeds of assignment. You will see in section 214(1)(b) that there has to be a trustee of the deed and a deed of arrangement has to be a deed which is one which complies with the statute. Now, your Honours, could I come then to what we say is the third issue and that is whether the third issue, which may or may not in reality arise, was, namely, whether the assignment was an absolute assignment in terms of section 12. The leading decision on that is the decision in this Court in Clyne v Deputy Commissioner of Taxation (1981) 150 0CLR 1 and the reasons for judgment of Justice Mason at pages 19 and 20. Your Honours will see from page 23 that Justices Aiken and Wilson agreed. The central passage of it is a passage in the first new paragraph on page 20:

None the less, within the context of s 12 the assignment was “absolute”. An “absolute assignment” in the section signifies one which is unconditional.

Your Honours will see the remainder of that paragraph.  Could we just say, your Honours, in relation to it, we question whether ‑ ‑ ‑

FRENCH CJ:   It is consistent with the existence of a condition subsequent, is it not?

MR JACKSON:   Well, it may be, your Honour.

FRENCH CJ:   I am looking at the second paragraph on page 20 of Justice Mason:

notwithstanding that the document effecting the assignment provides or implies the need for a re‑assignment –

et cetera.

MR JACKSON:   Your Honour, certainly.  The view might have been taken that an old system mortgage was something that was not an absolute assignment because of the provision for redemption, but that is the view that has been taken.  So the question is whether it is conditional, but your Honours, it does not really go so far, in our submission, as to say that whenever there is a condition subsequent that the assignment is necessarily one which is unconditional.

FRENCH CJ:   That was not the proposition I was putting.  An absolute assignment can be consistent with the existence of a condition subsequent, would you accept that?

MR JACKSON:   Yes, it can be, your Honour.  One must in the end, I think, look at the particular provisions of the document or transaction that gives rise to the assignment.

CRENNAN J:   It all comes down to what the assignee is able to do, I think, with the subject matter.

MR JACKSON:   Yes, your Honour.

CRENNAN J:   That is the point of the conditions, whether there are any conditions operating to fetter the assignee.

MR JACKSON:   Yes, your Honour.  If I could put it this way, the second version of what your Honour put to me is one that is closer, with respect, to what we would say.  The conditional aspect is not one that affects what the assignee can do but it is something that overall affects the assignee’s powers.  The qualification I was seeking to make in response to your Honour was this.  The central question here is one that relates to the temporal limitation on the trustee’s powers.  Where you have a situation where the trustee’s powers can only be exercised within a particular time, what we would say is that it is not an assignment which is unconditional.

Could I just say briefly, your Honours, why we would submit it is conditional.  We do so, your Honours, for these reasons.  The first thing is that the assignment is an assignment on the trust of the deed – that is clauses 2 and 3, of course.  The second is that the assignment would cease to have effect in the circumstances referred to in clause 9II.  The third, your Honours, is that if one goes to clause 14 to which I have not taken your Honours so far, at page 133 - I will come to it in just a moment - it does not suggest that an absolute assignment has automatically, in effect, taken place.  Could I just go to clause 14 for a moment, your Honours.  Your Honours will see that it says:

For the purpose of exercising his powers under this Deed the Trustee may act in the name of the Debtor as his lawful attorney to exercise those powers –

and, your Honours, that is elaborated upon a little and your Honours will see in the last few lines:

taking of legal proceedings which he shall in his absolute discretion require for perfecting his title to the goods and/or choses in action to which he is entitled or which are assigned to him or which come under his control or for gaining possession -

and so on.  Your Honours, I would accept, of course, that some of the last words in the last three lines suggest that there may be assignments effected in one way or another but the terms of clause 14 do not overall suggest that there are absolute assignments in circumstances where one sees clause 14 suggesting that for the purpose of exercising the powers under the deed, the name of the debtor may be used.  The fourth provision, your Honours, and one to which I have gone on a number of occasions, which goes to the conditionality, is clause 17(c) itself.

HEYDON J:   Justice Mason said that you can have an assignment even though the document effecting the assignment implies the need for a reassignment on the happening of a future event.  Would it not be open to the debtor to say, “I assigned you the benefits of my chose in action against CGU, and you had three years, or the balance of the three years to do something about it.  Fortunately or unfortunately you have not.  Let us go back to square one.  Kindly reassign to me my property”.  That would leave us with an absolute assignment, would it not, according to Justice Mason?

MR JACKSON:   Well, your Honour, I am not certain that his Honour was talking about something of this kind.  He is speaking in very general terms, but we would say that if one is endeavouring to apply concepts of the kind to which he referred in Clyne to a case such as the present, the better conclusion is that the obligation to a combination of a number of obligations, including the fact that one is speaking, in a sense, about the root of title, if I could use that expression for the moment, the root of title derives from the document, it is given for a certain time, it is given to enable the liquidation of that asset.  If it can be done in that time, and in those circumstances where there is an obligation to reassign at the end of the period, one, in our submission, would not take the view that that is something which can be categorised as unconditional.  Close may be, but in our submission, not.

FRENCH CJ:   Mr Jackson, I asked you before, I think, about the significance of the words “on trust” in clause 2.  The term “trustee” is, in the context of the Bankruptcy Act, a statutory term to which is attached a variety of functions and duties and so forth.

MR JACKSON:   Registered trustees, your Honour.

FRENCH CJ:   Yes, indeed, and the trustee of the deed is somebody who is designated as a person having certain functions and to whom the property is transferred and so forth.  I am just wondering, relevant to your submissions, what more do the words “on trust” tell us about the nature of the transfer to the trustee that a provision for transfer to be dealt with by the trustee in accordance with the deed of arrangement does not tell us, having regard to the statutory context in which the trustee operates?

MR JACKSON:   Your Honour, it may be, in one sense, an emphatic.

FRENCH CJ:   There may be a trust arising out of all of that, but I am just looking at what these words are trying to tell us.

MR JACKSON:   Your Honour, if one left out from clause 2 the words following the words “on trust”, it would be a question of construction of what the nature of the trust was.

FRENCH CJ:   I am talking about leaving out the words “on trust”.

MR JACKSON:    I am sorry.  Your Honour, perhaps those words, as such, are not more than emphatic on one view, but, in our submission, they do add something because if one looks at the whole of clause 2, one sees it is a covenant to deal with property in a particular way.  It is a property identified in Schedule A.  In relation to that it says this is conveyance on trust and the nature of the trust is as set out in the rest of the document.  If it said conveyance to be dealt with in accordance with the deed of arrangement and if one did not alter clause 3 – if one looked then at clause 3, one would have a situation where there was an appointment as trustee of the deed, one would still have an assignment of the property on the trust set out there and what it makes clear is, amongst other things, that the trustee has no beneficial ownership.  The trustee holds it in the capacity as trustee.  The terms of the trust are set out in the rest of the ‑ ‑ ‑

FRENCH CJ:   He has statutory duties in any event, does he not?

MR JACKSON:   Quite, your Honour, yes.  I perhaps answered that a little too quickly, your Honour, because what I should have said is that whilst he has statutory duties and powers and limitations on power, in the case of a deed of arrangement the actual powers come principally from what the parties have agreed are to be in the document.

CRENNAN J:   The other way of looking at it, I suppose, is to just say that those words emphasise that what the trustee is getting is the legal interest for the purposes identified.

MR JACKSON:    Your Honour, if one took that view, that would be so.  So the trustee would get a legal interest but the trustee’s entitlement to deal with the legal interest is one that is temporarily limited in the way that I submitted earlier.

KIEFEL J:   In relation to clause 17(c), is the time limit contained in it to be read in light of the fact that on termination the creditors could, in any event, sequestrate the estate of the debtor and then obtain the chose in action held by the trustee under the deed of arrangement for themselves and the creditors move on the chose in that way?

MR JACKSON:    Yes, your Honour, subject, of course, to the operation of clause 11 perhaps.

KIEFEL J:   There may be other questions arising about that, but the construction of clause 17(c) in that light might have other implications for the interpretation of other clauses.  I accept that.  But that explains why the time limit might not have been thought by the creditors to be such a difficulty.  Their original view might have been simply to switch over to a sequestration.

MR JACKSON:   Your Honour, this is, one might say, in a sense, a relatively simple deed of arrangement.  It is relatively simply because one could imagine deeds of arrangement that could operate for a considerable time, involve a continuation of operations of a business and money being paid over a number of years, but this is one that simply says, in effect, you have got some defined assets of 600,000, the shares and you have got three years to get it.

KIEFEL J:   Or from the creditor’s perspective, we will give it three years and otherwise we will sequestrate and all bets are off, speaking colloquially.  That might have implications for, as I say, other clauses in the deed.

MR JACKSON:   It may, your Honour, yes.  Your Honours, could I just come then to what we would submit was the fourth issue, namely, if the assignment is equitable, does it make any difference?  Your Honours, there seem to be two aspects involved in the equitable assignment notion.  The first concerns the question whether the fact that it is equitable makes any difference.  In our submission, it does not.  The trustee, following termination of the deed, would hold the property on the same trusts whether the assignment be equitable or whether it be absolute. 

Your Honours, the second matter is a suggestion that one seems to see floated, as it were, in the judgment of the Court of Appeal and perhaps floating in our learned friend’s submissions, and that is that the action should still proceed because all necessary parties were present.  In this case the primary judge had answered the separate questions, and if one goes to page 180 you will see under the heading “Orders” about line 39, he asked for short minutes in paragraph (2) and in paragraph (3) said he would:

deal with any dispute as to the orders to be made (including as to the fate of these proceedings –

That took place of 19 November 2008 and he made the final orders the next month, on 15 December.  They are at page 183.  Your Honours will see, if one goes to page 184, that what he ordered was, paragraph C, that there be a judgment for us in the proceedings.  Now, he had found in his reasons that there was an equitable assignment.  You will see that page 179 in paragraphs 58 and 59.

An order keeping the action alive was not sought, no one sought to be a new plaintiff and the notice of appeal to the Court of Appeal did not appear to challenge the making of the actual order that he had made.  Your Honours will see that in the amended notice of appeal at page 188, and the grounds at page 189, and the orders sought are at page 190.  It may be implicit in the order sought as order 4 on page 191 that his judgment dealing with the whole of the matter was sought to be set aside, although it is not very clear.  Your Honours, the Court of Appeal are only mentioned and did not deal with this issue.  You will see it in the Court of Appeal’s reasons at paragraphs 111 and 112, which are at page 251, and at the top of 252 no final view is expressed about it.  The orders made by the Court of Appeal are at page 267 and they reflect the terms of the notice of appeal.

Now, the point that we would seek to make, your Honours, is that this is not a case in which any party has sought to say, we as – I am sorry, I will start again, your Honours.  If one makes the assumption that the trustee, former trustee, or the trustee’s representative, is not entitled to pursue the proceedings, which is the assumption on which the issue really arises, then no other party has sought in effect to make themselves a plaintiff in the proceedings.  Your Honours, maybe they could bring some other proceeding, who knows, but ‑ ‑ ‑

HEYDON J:   This trustee still holds the property on trust for Mr Greaves.

MR JACKSON:   Yes, your Honour.

HEYDON J:   I understand what you have been putting about silence before Justice McDougall and so on, but cannot Mr Greaves say to a trustee’s executor/executrix, “Proceed with the action, I want my 20 million to pay to ASIC and the people who lost the money”?

MR JACKSON:   Well, your Honour, if Mr Greaves had sought to do that, that issue might well arise, but ‑ ‑ ‑

HEYDON J:   But apart from costs, what does it matter?  It is nothing to you who the beneficiary behind a legal title is.  It is the person who owns the property at law who is entitled to sue you.

MR JACKSON:   Well, your Honour, could I just say two things in response to that.  The first is that, in our submission, the person holding the legal title is not entitled to sue because the entitlement derives from a deed that has come to an end.

HEYDON J:   He is a trustee and on your case a constructive trustee presumably?

MR JACKSON:   Yes.

HEYDON J:   Why can he not obey the instructions of the beneficiaries for whose benefit the constructive trust exists?

MR JACKSON:   Well, your Honour, one difficulty would be section 276 because any entitlement derives from the deed.

FRENCH CJ:   If he were acting on the instructions of Mr Greaves, he would not be acting under the deed, would he?

MR JACKSON:   Well, your Honour, because the relationship between him and Mr Greaves comes from the deed.

HEYDON J:   No, his current relationship with Mr Greaves on your case comes from the fact that the deed has collapsed.  It is over.  The music stopped and he is opposite a chair.

MR JACKSON:   Your Honour, leaving him wherever he chooses place himself, we would submit that that situation that obtains is that he is a person whose entitlements were ones that derived from the role of trustee under the deed of arrangement.  I should say one assumes in terms of section 276 that the deed of arrangement has terminated.  Now, section 276 must involve the conception that the person who is acting or purporting to act as trustee is purporting to act as trustee of a deed which is terminated.  So that one cannot just, your Honour, say this is all over, we would submit, because there is an underlying prohibition on acting in that way.

HEYDON J:   If Mrs Watson gave the policy back to Mr Greaves, could Mr Greaves start a new action without being statute barred?

MR JACKSON:   Yes, your Honour, except for the provisions of, I think, clause 11.

FRENCH CJ:   That is your fifth proposition.

MR JACKSON:   Sorry?

FRENCH CJ:   Your fifth proposition, the loss question.

MR JACKSON:   Yes, to which I am about to come obviously.

HEYDON J:   I may be wrong, but I do not see what clause 11 has in relation to what I was putting.  The question is, can Mr Greaves sue CGU, not can anyone sue Mr Greaves.  I see what you mean.  They cannot, therefore there is no loss.  The policy just does not answer.  There is nothing for the policy to answer to.

MR JACKSON:   Yes.  So, your Honours, could I come then to the fifth issue, was there a loss for which the trustee could sue?

KIEFEL J:   This is where we have the deed of arrangement continuing in this one minor aspect.

MR JACKSON:   Your Honour, the answer is, yes.  Some things do continue.  If I could just say, your Honours, if one were ‑ ‑ ‑

KIEFEL J:   Relying on rights accrued under contractual provisions, that is how you see it?

MR JACKSON:   That is one analogy, your Honour, McDonald v Dennys Lascelles, yes.  If you took for example, clause 8, page 131, it would seem very odd if the liabilities dealt with, other than the two liabilities in question here, were ones that were to come alive again just because the deed expired.

KIEFEL J:   But it is inextricably linked, is it not, to the realisation of the assets and the release.  You cannot have the permanent stay under clause 11 without the other components which are the realisation of assets which gives rise to the certificate under clause 9.

MR JACKSON:   Your Honour, may I come to that in just a moment.

KIEFEL J:   Yes, I am sorry, I am taking you out of course.

MR JACKSON:   This issue involves the fifth and seventh questions that were raised, and may I take your Honours to the primary judge’s reasons in relation to this matter, first of all at page 178, and your Honours will see there, in paragraphs 51 and following, the judge was dealing with the seventh question.  He said in paragraph 52 that:

the orders for compensation and for costs . . . are each capable of being a “loss” as defined.

The provision dealing with what is a “loss” is set out at page 169.  You will see that the term “loss”, your Honours, is between lines 30 and 60.  There may be, perhaps, a question which arises about whether the exclusion part, that is the last five lines on that page, could be applicable to some perhaps of the claim, but leaving that aside, your Honours will see on page 169, about line 18 that:

The insurer will pay on behalf of the Directors and Officers any Loss for which the Directors and Officers may not be legally indemnified by the Corporation arising out of any Claim –

“loss” being defined, as your Honours will see, and it is:

the amount payable in respect of a Claim made against the Directors and Officers for a Wrongful Act -

Your Honours, if one returns to page 178, paragraph 52, we would submit that the judge was correct in observing that the policy was “one of indemnity”.  Your Honours have seen the words “amount payable” in respect of a claim, and the question then was what amount was payable in respect of the claims.  Your Honours, if – as again going to paragraph 52 on page 178 – the orders were not enforceable against Mr Greaves, there was not anything in respect of which he was entitled to be indemnified and, your Honours, that turned on clauses 10 and 11 of the deed and that was a matter dealt with in relation to the fifth question and your Honours will see that on page 175, paragraphs 34 to 44.

Now, your Honours, the structure of the deed, of course, was that by clause 8 at page 131, to which I referred a moment ago, Mr Greaves was released from all debts and claims in respect of them except those presently in question.  Clause 9 of the deed at page 131, in our submission, required the trustee to adopt one of the courses set out in clause 9I or clause 9II.  We would submit that the primary judge was correct in saying, as he did in paragraph 37 on page 175:

that the parties to the deed intended that the possibilities set out in clause 9 (pursuit of the litigation . . . to finality, or . . . making of a decision not to pursue it) between them constituted the entire universe of available possibilities -

or, put more simply, as he said, it was clear - at the bottom of page 175:

the parties contemplated that one or other of those courses would be taken:  supplemented if necessary . . . by an extension of time under clause 17(c).

Your Honours, could we refer also to the second sentence commencing about line 29 on page 176 of paragraph 38?  Now, we would submit the judge was correct in taking the view that one or other of the conditions, the operation of execution of the certificate under clause 9 would occur within a three year or an extended period.

Your Honours, we would submit that the certificate contemplated by clause 10, if I could go to page 132, was one which would operate following the termination of the deed and that is a certificate which related to one or other of the consequences set out in clause 9, and there is no reason, in our submission, why, if such a certificate were given it was a certificate which would not operate after the termination of the deed because it is one of the things that would be effective.  Your Honours, when one comes to clause 11, what we would submit is that the position obtaining in relation to it was the same:

Prior to the execution of the certificate referred to in clause 9, neither the Trustee nor any creditor will take any steps to enforce against the Debtor the compensation order –

et cetera.

FRENCH CJ:   What other creditor was involved apart from ASIC?

MR JACKSON:   One.Tel.  One.Tel had the claim for 20 million and ASIC, I think, for $350,000.

FRENCH CJ:   That is right.  The compensation order is for the benefit of One.Tel.

MR JACKSON:   Yes.

FRENCH CJ:   So that the way it was operating under clause 5, recovery of the proceeds under the policy would be applied in a focused way, that is, directly to One.Tel and ASIC.

MR JACKSON:   Yes.

FRENCH CJ:   If the trustee decided it again was not worth a candle and decided not to proceed, then there would be a release from those liabilities in any event?

MR JACKSON:   Yes.

KIEFEL J:   But as I understand it you say that because a certificate under clause 9 cannot be given the stay or prohibition under clause 11 becomes permanent?

MR JACKSON:   Yes.  Your Honour, there has been no execution of the certificate.

KIEFEL J:   But clause 11 proceeds upon an assumption that the certificate can be signed, does it not?  I mean it must, otherwise the consideration for the stay and the release - I am sorry, the consideration for the release under the certificate is that assets are realised or they decide not to pursue.  One of those things has to occur.

MR JACKSON:   Well, we would add, your Honour, add or qualify that by saying that the terms of clauses 9 and 10 are ones that one would expect the events taking place to have occurred in the three‑year period or in the extended three‑year period but the terms of clause 11 are ones that speak about an event prior to the execution of the certificate.  The certificate, in fact, has not been executed and it cannot be executed and in those circumstances clause 11 continues to operate.

Your Honour, this is a provision which is not just for the benefit of the two debtors.  It is a provision which operated in relation to the obligations of Mr Greaves himself.  I am sorry, I said debtors.  I meant creditors.  Your Honours, we would submit, if I could just go back to Justice McDougall for a moment at page 176, if one goes to paragraph 38 it is met in the first sentence of paragraph 38.  What he said was correct:

The clear purpose of clause 11 was to protect Mr Greaves from enforcement action . . . pending the grant of a release under clause 10.

Then paragraph 39 on the same page, the stay which he refers to:

must inure until, through the execution of a clause 9 certificate, the release granted by clause 10 becomes operative.

Then paragraphs 40 to 42, your Honours, where he said in paragraph 40 he did not agree:

that clause 11 was not intended to survive termination -

Your Honours will see the reasons that he sets out in the remainder of paragraph 40 of his reasons which we have submitted correct and your Honours in paragraph 41:

Clearly, the clause 10 release was intended to survive termination.  The clause 11 stay was intended to provide protection to Mr Greaves until the clause 10 release became effective.  Why should the clause 11 stay be limited to the lifetime of the deed?

Your Honours will see that elaborated upon in also paragraph 42 where his Honour, correctly we would submit, said there was not any commercial absurdity that was involved in that.

Your Honours, if I could go to what was said about this issue in the Court of Appeal.  At page 204 in the reasons for judgment of Justice Hodgson, paragraph 4, if I may say so, with great respect, is a touch elusive in his Honour’s reasons and he appears to have taken the view that - in the last three lines of paragraph 4 - he saw no good reason why the prospect of release should be lost once the deed terminated by effluxion of time.  Your Honours, I think his Honour is saying that you could grant the certificate after the effluxion of time.

Your Honours, if one goes to Justice Sackville’s reasons – page 242, paragraphs 88 to 90 – he takes the view that clauses 9, 10 and 11 have survived.  He appears to take the view that it would follow that the money could be paid under clause 5.  I say he appears to take the view because your Honours will see in paragraph 89 at the top of page 243 he said:

If the Trustee were unable to maintain proceedings against CGU after termination of the Deed of Arrangement, it would presumably not be possible for him to execute a certificate –

and your Honours will see what he says in paragraph 90:

Once the proceedings are resolved, the Trustee is obliged to issue the cl 9 certificate -

Now, resolving the proceedings, of course, involves paying the money under clause 5 but, your Honours, if one notes that it does rather seem to give no effect really to clause 17(c).  It seems to require the trustee to continue acting as trustee following the termination of the deed which, as I submitted earlier, does not seem to sit well with section 276.

Your Honours, I mentioned earlier some of the provisions of the Act dealing with publicity given to deeds of arrangement and the ability to obtain information about them.  Your Honours, we have put together a document which just has a note as to the provisions of the Act and the secondary materials that your Honours have that deal with publicity.  Could I give your Honours that.

FRENCH CJ:   I am sorry, the proposition to which that is relevant being?

MR JACKSON:   I am sorry, your Honour, I am putting it not very clearly.  What I am seeking to say was that I mentioned earlier some provisions of the Act which deal with publicity in the sense of being able to look at and obtain copies of things like deeds of arrangement and so on.  I would just like to give your Honours a reference to where one sees those provisions.

BELL J:   That submission, in part, was directed to the contention that an original debtor such as CGU having received notice of assignment might, nonetheless, be aware, having regard to the scheme of publicity of arrangements for deeds of arrangement, of the terms of this trust and the limitation contained in clause 17(c). 

MR JACKSON:   Yes, your Honour.

BELL J:   I simply do not know, but with respect to section 64ZBA dealing with a creditor’s resolution in the absence of a meeting, is there some requirement that the results of that resolution of creditors be notified and be the subject of publicity of the character that you were speaking of?

MR JACKSON:   Your Honour, I do not think that 64ZBA applies to deeds of arrangement.

BELL J:   I see.  I thought that deeds of arrangement picked up the provisions with respect to meetings of creditors, but that is not so?

MR JACKSON:   The provisions picked up are at page 338 and section 237(2).

BELL J:   Yes, I see.

MR JACKSON:   I do not think that provision is picked up, your Honour.

BELL J:   Let me put it to you this way.  What provision requires publicity with respect to a resolution of the creditors contemplated by clause 17(c)?

MR JACKSON:   I cannot give your Honour an answer to that.  May I give your Honour a reference a little later in the day?

BELL J:   Yes.

MR JACKSON:   May I have just a moment, your Honours?  Your Honours, we rely, of course, on our written submissions and subject to that, those are our submissions.

FRENCH CJ:   Thank you, Mr Jackson.  Yes, Mr Coles.

MR COLES:   May it please your Honours.  It seems to us, with respect, to be uncontroversial that a present assignment in favour of the named trustee, Mr Watson, occurred of the chose in action to which the debtor was entitled and it may not matter for present purposes whether that assignment was legal or equitable, though I think there was put in evidence and it is an agreed fact that notice of the assignment was given to CGU.  It could, for that matter, not reasonably be said, of course, that the assignment was one by way of charge or was part only of a debt.  The only question then, whether it was subject to any condition. 

We would emphasise, if your Honours please, that an assignment to a person to hold the subject matter of the assignment on trust is nonetheless an absolute assignment and there can be, in our respectful submission, no acceptance of the view that merely because the assignee is to hold as a trustee, he or she would not do so otherwise than as the absolute owner of the chose in action, albeit there might be obligations to others. 

Likewise, in our respectful submission, the only suggested basis, as we would understand it, whereby the assignment might come to an end with a consequence that there would be arguably a need for a reassignment to the debtor, that is, in the event contemplated by clause 9II of the deed whereby the trustee makes a determination not to proceed and, in effect, reassigns the chose in action to Mr Greaves, would of itself not be a circumstance which would cause the assignment in any sense to be conditional because, in our respectful submission – I think this was discussed between your Honours and my learned friend – an assignment which has built into it a condition for reassignment in certain events is, of course, still an absolute assignment.

That, with respect, is made very clear in not only the observation to which attention has been drawn in the judgment of Justice Mason, but in the four cases to which he refers at the end of that particular paragraph.  We have given your Honours references to those cases but, in our respectful submission, they abundantly support the proposition.

The view, in our respectful submission, that should be taken or could well be taken, in our respectful submission, should be so taken, is that the case was one of an absolute assignment effected by notice which had the effect that section 12 in New South Wales Conveyancing Act applies, that is to say, it was effectual in law to pass and transfer the legal right to the chose in action and, importantly, all legal and other remedies. That is the text of the section. The effect of the section, albeit procedural, in the sense that it dispensed with the necessity to join the assignor to the proceeding, it did so on terms that the assignee became the only person interested in the utilisation or effectuation of the rights confirmed by the chose in action including, importantly for present purposes, the right to pursue without the intervention or joinder of necessarily any other party, or at least the assignor, the legal and other remedies incident to the chose in action which was so assigned.

The important question therefore is, in our respectful submission, if the appeal is to be allowed, must be what caused that legal title to abate or, indeed, on one view, vanish in the course of the proceedings which the assignee had instituted against CGU for the purposes of effectuating the legal remedy to which as assignee he was entitled?  It is relevant to bear in mind, in our respectful submission, that allowing, as it does, the inclusion in deeds of arrangement forms of assignment if that is the program of dealing between the debtor and the creditors, allowing that may take within the limitations of the Act such form as those parties agree, it is important, in our respectful submission, to bear in mind that there is no prescribed form or scheduled type of content for a deed of arrangement.

In short, and this is really the important point, the federal Act leaves to the ordinary law of property, including the State laws of property which relate to the disposition or devolution of any property, it leaves to that general body of law the consequences which will be resorted to if part of the arrangement is to involve some assignment or transfer of property and it leaves that body of law seemingly untouched and it assumes, indeed, its effective and continuing existence for the purposes of the federal Act itself, but does not impinge upon the efficacy of the assignment if it is otherwise effective in accordance with the law which has brought it about.

The consequence must be, in our respectful submission, that if one accepts the assignment remains effective, then one must be able to point to something and, in our respectful submission, it will be necessary to point to it within the federal law, the Bankruptcy Act itself, which has by necessary intendment and, we would say, text brought about a defeasance or extinguishment of that which has become operative and effectual according to the processes which that law itself envisages will be invoked and put into operation for the purposes of recording and, indeed, giving effect to the formal requirements of the Act, that is to say, amongst other things, to be an effective deed of arrangement it must, of course, be in writing and have the other qualities to which I think section 213 refers.

In our respectful submission, the quest for the appellant must be to find what it is that extinguishes or negates an assignment – and this is so, I would respectfully put, whether it is legal or equitable – which has already taken effect and which took effect during the currency of the deed itself.  We have drawn attention to some provisions of the Act.  The Act, in our respectful submission, does not deal with the question other than to provide that – I think we have given your Honours this reference – if a deed is terminated – here I need to look at – I am sorry, your Honours, can I come back to that point, your Honours. 

The provisions of the Act entail express provision dealing with the situation where a deed of arrangement is terminated, expressly leaving those acts which are undertaken in good faith by the debtor, the trustee or any other person, to – yes.  In fact, 224 is the provision I had in mind where the deed of arrangement is terminated including where it is terminated by an event specified in 235(b) or (d) which includes, as you have been shown, a provision in the deed which provides for its own termination, then payments made, acts and things done and transactions entered into by the trustee or any other person, which we would think included the debtor, before the termination of the deed are valid and effectual and not liable to be set aside.

But so far from encouraging a view that the termination of a deed would operate in some way to annihilate or extinguish those matters which, according to the ordinary processes of disposition of property have taken effect, it is our respectful submission that 224 encourages the opposite view and would not, in our respectful submission, be consistent with the notion that one would recognise by other means some process of terminating the deed’s operation.

The next point we would wish to put is that the provisions of the deed themselves do not, in our respectful submission, make any provision either for what happens upon the termination of the deed, including termination in the type of event which section 17(c) contemplates as to what will happen or what will be the effect on the property which has been vested – as the deed plainly contemplates a variety of classes of property will vest, and they will be destined to be treated differently by the trustee upon their so vesting.

But the deed itself manifests no intention that its continuance as a deed is essential to the continued efficacy of a completed assignment.  We have respectfully suggested that an assignment is, generally speaking, a once and for all act.  It is not something that is a progressive or evolving process.  It is an event, not a process, and there is nothing, in our respectful submission, in the deed itself which indicates that its continuance as such is essential to the efficacy of an assignment which has already been completed in accordance with the provisions of the deed.

FRENCH CJ:   The deed, when terminated, I suppose ceases to be in force within the meaning, for example, of section 233 which provides the interim protections, but you would accept that accrued rights obviously continue otherwise there is no point in that.  The promises and the releases ‑ ‑ ‑

MR COLES:   Indeed, otherwise the deed would terminate and the debtor would be back where he started, which would be not the way to go, in our respectful submission.  In our respectful submission the deed itself, textually may contemplate – it is not a strong circumstance – the continued existence so far from denying it.  After all, clause 11, to which much reference has been made, itself proposes or imposes a barrier on enforcement of the deed, but it is not an absolute one.  It is one which contemplates, in our respectful submission, the continuing recovery pursuant to the arrangements which are constituted by the deed itself, so that if, to put it perhaps paradoxically, our learned friend is right and clause 11 goes on forever, then presumably so do the continued arrangements constituted by the deed itself.

We think that unlikely, we should add, because of the difficulties encountered in the view that clause 11 survives the operation of the deed, although in deference to the learned judges of the Court of Appeal we have countenanced that possibility which could – let me refer to it now – would depend, in our respectful submission, on the possibility that the – I will just take your Honours to the provision – that under section 233(1), that in effect, the deed which provides the deed is to be binding on all creditors, I suppose if one were to need to justify the conclusion the Court of Appeal came to about clause 11, one would have to read 233(1) as making the deed binding on all creditors including on all creditors after the termination of the deed itself, which is possible but, in our respectful submission, just to complete the point about clause 11, one needs to bear in mind section 233(2) which provides that where a:‑

deed of arrangement has become binding . . . so long as the deed remains in force –

in our respectful submission not otherwise, it is not competent for a creditor “to present a creditors petition”, or importantly (b):

except with the leave of the Court . . . 

(i)to enforce any remedy against the property or person of the debtor . . . or . . . 

(ii)to commence any legal proceeding -

That notion of the stay or the moratorium, as it has been described, as surviving the termination of the deed is not immediately, at least textually, very compatible with the text and apparent purpose of what appears in 233(2) and, in any event, as a matter of construction one would be inclined ‑ ‑ ‑

FRENCH CJ:   That would be a matter of construction really.  You could have an intended release of that kind, I suppose.

MR COLES:   Yes.  The present deed does not, in our respectful submission, support that because it predicates the stay in clause 11 as, in effect, an outcome dependent upon the determination or the event under clause 9 and if that can never happen, then there would be no sensible or useful purpose in saying that because it cannot happen – and clause 8, I should point out – there will be no, in our respectful submission, reasonable basis for saying that the deed or the stay inured. 

Now, I have taken that clause 11 proposition slightly out of turn, but what I am suggesting to your Honour or respectfully submitting is that the deed itself lends no real support to any suggestion that upon its termination according to its terms that which has already vested pursuant to its terms and that vesting which the Act seemingly saves and whether it does so or not may be put to one side, the deed elsewhere lends no support to the defeasance or extinguishment of that which has vested.  Clause 17(c), in our respectful submission, may be ‑ ‑ ‑

CRENNAN J:   I suppose part of that argument involves the continuation of the trust, that is to say, the trusts do not come to an end through the effluxion of time when the deed terminates.

MR COLES:   No.  Well, of course, important to CGU’s argument seemingly is the need to show that on some basis the trust came to an end, but our respectful submission is that that will not help them.  What they have got to show is that the assignment and vesting of the legal title to the chosen action and the consequent right to maintain the proceedings came to an end, because when one pauses to reflect for a moment, CGU has no interest at all in the trust.  That is truly res inter alios acta, in our respectful submission, than of a beneficiary.  They have no right to see to is due administration. 

If Mr Greaves and One.Tel and everybody else are perfectly happy with the way things are going, they can discuss amongst themselves after the case is over what happens to the verdict moneys or the judgment sum, if any, that may be attained against CGU.  It is, with respect, rather difficult to see why CGU is entitled to erect an argument the ultimate consequence of which is, in effect, to try and pick their own plaintiff in the proceedings.  One can understand how, as a matter of construction, CGU needs to invoke reference to the trust in aid of an argument of construction that the transaction comes to end or the title of the trustee ceases, but, of course, the point is the title of trustee to sue does not depend on his giving any particular, or exercising any function, in aid of executing a trust.  It depends simply on the capacity available to that person as the legal owner to ‑ ‑ ‑

KIEFEL J:   I am getting a little confused about whether you are talking about standing.

MR COLES:   That is at the heart of CGU’s argument.

KIEFEL J:   But the issue is more than standing.  The appellant’s argument is that the trustee is not a trustee.  He might be a legal owner but he only holds upon trust.  So if the trust goes, what is he executing?

MR COLES:   The defeasance of the trust will not, in our respectful submission, of itself destroy the legal ownership.  It will merely mean that one must do something with that which is legally owned to give effect to the fact that the trust has come to an end - in other words, find out who else it is.

KIEFEL J:   Is there a discrete question as to whether or not the trust has come to an end, given the terms within which it arises under clause 2 and the purposes for which it is given?

MR COLES:   There is such a question, we think, but we would seek to support the view that what clause 2 and the other clauses do is really indicate that as between the trustee and the creditors, the trustee – or the assignee – the trustee is not holding the property beneficially, and indeed what clause 2 perhaps does, it either does no more than say that the trustee is holding it on trust which is what it says, but it may also define or give content to the terms of the trust.

KIEFEL J:   “On trust” – holds it on trust on the terms of the deeds so far as they are referable to the realisation of the property.

MR COLES:   Yes.

KIEFEL J:   So then you need to determine which terms are referable to the trust, do you not?

MR COLES:   Yes.  But you would be able to, one would suppose as a matter of, I think, defying the content or terms of the trust, produce that identification exercise as between trustee and range of beneficiaries by looking at the instrument, whether the instrument was still a statutory instrument or whether it was just an historical piece of paper.  There is absolutely no reason why the terms of the trust could not be identified from the document creating it, even if the document had, for some reason, lost its statutory effect.

FRENCH CJ:   Would you be saying anything less in clause 2 if you left out the words “on trust”?

MR COLES:   In our respectful submission, it would not make any difference.  If it just said to hold it “on trust”, although it is obviously ‑ ‑ ‑

FRENCH CJ:   Have you left out those words “on trust”?

MR COLES:   For the reasons we have mentioned, it does not go to the absolute nature of the assignment.  It does not go to the title to maintain the proceedings.

KIEFEL J:   But the property would still be impressed with the trust.

MR COLES:   The property is still impressed with the trust.  If the trust fails, the only issue would be, since he could lay no claim to it beneficially himself, and the failure of the trust would not ordinarily lead to in effect the extinguishment of that with which the property was impressed – in other words, he could not turn around, one would not have thought, and assert that the trustee himself or herself was the absolute beneficial owner it would produce an inquiry as to whom ‑ ‑ ‑

CRENNAN J:   A resulting trust to Mr Greaves?

MR COLES:   Perhaps, in the clause 9II event, a resulting trust to Mr Greaves, nonetheless, absolute for the reasons we have mentioned, but again that is a matter, we would suggest, that does not bring about a defeasance - on the title to sue question does not bring about an end to the trustee’s right to maintain the cause of action.  He does so as legal owner and it is a matter in which CGU has no interest.  What he does with the proceeds of effectuation ‑ ‑ ‑

FRENCH CJ:   If it were the shares we were talking about instead of the policy, the position on your submissions would be exactly the same.

MR COLES:   Yes, absolutely, quite so.  Perhaps importantly so if the outcome of the termination of a deed is that creditors are entitled to take the matter back into their hands, the enforcement is gone and they may proceed to apply for sequestration then, of course, we will know very quickly the answer ‑ ‑ ‑

KIEFEL J:   I was going to ask you about that.  Why are we in all this litigation when they could have gone down that route and obtained the chose in action?

MR COLES:   I really cannot answer that as a matter of procedural history, if your Honour pleases.

KIEFEL J:   If we got tied up with a series of questions which then led to the loss question which has then created an impediment to sequestration.

MR COLES:   CGU activated the – I am not saying they did so incautiously or unhelpfully but it went the way of formulating the questions which were tendered for consideration as separate questions and that is the procedural course the litigation took.  In a sense, the question for whom does the trustee under the deed hold the legal or for that matter equitable chose in action, although it is likely to be a legal one, one would think, resolves itself very quickly if a sequestration order were made because obviously the immediate beneficiary would be the new trustee in bankruptcy who would then hold it for - well that is one solution.

It is unnecessary – it is at the foundation of our submissions.  It is really unnecessary for this Court - let me concede that by agreement the question was posed which led to the answer that was held for Mr Greaves.  I think all parties must have participated in the question‑forming process but ultimately, in our respectful submission, so far as we are now concerned, the question does not really matter.  It is a matter which sorts itself out as between those who are interested in the determination of that question and so long as a change in official ownership or a change in the destination or the identification of the manner in which the property is impressed as opposed to the legal or other ownership of the property itself is unchanged, then CGU has no cause for complaint that it is a defendant to proceedings instituted by that assignee, in our respectful submission.

The other matters I should just say briefly about clause 17(c), as they have been raised, the following points could shortly be noted.  The three‑year extension period seems to depend on the determination by the creditors to resolve to extend the operation of the deed for the purposes of the trustee finalising any claim for the realisation of rights.  There may, in short, be some circumstances where that will be necessary or appropriate or useful.  There may be other circumstances where it will not.  The clause does not, secondly, define the effect of termination under those circumstances and does not, as I have already put, ordain any disposition of the assigned interest to the trustee and it does not lend itself, in our respectful submission, to be construed as if it had any effect on the operation of any other provision.

The purpose of realisation, in short, may or may not require extension, even if other things under the deed do.  There is a point made in our learned friend’s submissions, I think, that clause 17(c) risks being branded as otiose in certain circumstances, but that is not necessarily so.  Some examples were given in the Court of Appeal, but to take an obvious one, you have been taken to section 237 which tells you which provisions – indeed, our learned friend has done a list of the expanded content of the provisions which section 237 of the Act engrafts upon or makes applicable to deeds of arrangement. 

One of them, of course, is section 81.  So, for example if for the realisation of this particular chose in action it was necessary Mr Greaves being – which, I emphasise, is no suggestion that he is – but if Mr Greaves was unco‑operative about assisting the trustee by way of giving witness statements and the like, then there would be available the useful purpose so long as the deed stayed on foot and the Bankruptcy Act applied.  The trustee would be entitled to examine him under section 81 and, in effect, take a statement of his evidence that way.  There may be other similar situations.  For so long as the deed subsisted, for example, there would be the alternative if the trustee had originally resorted to it, which he did not, of maintaining the proceedings in the official name which section 209 authorises.

There might be those procedural or practical matters which could support a useful purpose in prolonging the deed or within its terms extending its operation for the purposes of the trustee finalising any claim for the realisation of rights under the policy, but, we would respectfully suggest, that that is not necessarily compelled by the mere fact that the realisation has not yet been completed because it may be able to be completed because of the bare fact of the chose in action having vested in the assignee and all other things being available to the trustee to complete the forensic exercise as a result.

The proposition was put against us that absent any resolution to extend the trustee’s power to pursue a claim one should regard the whole process including, importantly, the assignment of the chose as at an end, but the emphasis of that submission, in our respectful submission, is on the question of the trustee’s power.  It is our respectful submission that clause 17(c) is not really concerned with the power to pursue the claim.  It may well assume it.  It is rather concerned with the practicalities or the processes of pursuing the claim, not the authority to do so, not the power to do so, but rather the practicality or functionality of doing so.

It is concerned, in other words, with realisation, which may entail the question of whether it is necessary to extend the deed for that purpose.  It is not, in our respectful submission, on its fair reading, to be understood as a power or as a requirement that there should be a resolution under the provision in order to confirm or extend the trustee’s authority to do that which has already unconditionally vested in him at that time.

FRENCH CJ:   You say that 9 and 10 fall away with termination, do you not?

MR COLES:   Yes.

FRENCH CJ:   So presumably one purpose of extension would be to keep those alive and their consequences.

MR COLES:   Yes, it would.  I have put already that one has regard to section 233 in terms of clause 11 and the likelihood that clause 11 would only remain while the deed remained.  The other, of course, aspect of what our learned friends put – coming to their, I suppose, indemnity point just for a moment and I will summarise our response to that very shortly – the other aspect, of course, is one takes into account section 234 which provides that except so far as the deed provides for the release of the debtor from his or her debts a deed of arrangement does not operate to release the debtor from any of his or her debts.

Importantly, of course, this deed does so provide in relation to a release for Mr Greaves in clause 8.  The scheme of the deed is that the trustee gets in the shares, the not inconsiderable sum which Mr Greaves is to pay, the various shares and the like as well as the assignment of the choses in action to which we are referring.  When Mr Greaves has done that, clause 7 says that immediately after the debtor has in all respects complied with his obligations, which are basically those contained in clause 2, then the trustee is to certify that fact and notice is then given and upon the execution of that certificate, that is the first of the two envisaged certificates, Mr Greaves is absolutely released from all provable debts owed by him. 

In other words, he has no more creditors from that moment, even though the deed is still continuing, except, importantly, the liability to pay compensation under the orders of Justice White on 6 September 2004 in the Supreme Court of New South Wales called the ASIC proceedings.       That is a plain illustration within this deed of there occurring a release absolutely in favour of Mr Greaves from all of his provable bits.  An instance of a provision which for the purposes of section 234 is a provision providing for the release of the debtor from his or her debts, a provision which would not release him from any of those debts unless otherwise applying. 

Our learned friend suggested construction of clause 11 accordingly encounters the need to show or to demonstrate or to make good the proposition that clause 11 is also a release, although it does not so provide, because one must compare if the matter is but one of construction of the deed.  Clause 11 says nothing about a release.  Clause 7 speaks obviously, in our respectful submission, by reference to the statutory contemplation contained in 233(2).  Clause 11 speaks of not taking steps to enforce the compensation order, but it nowhere speaks of a release. 

So that our learned friends are not able to elevate, particularly by contrast with the clause 8 provision, clause 11 to operate as a release of the debtor from his or her debts because the deed simply does not so provide.  The words “accept insofar as the deed provides” one may allow it may provide, I suppose, as a matter of construction, not necessarily as a matter of text pure and simple, but one is not driven to that construction of clause 11 at least by the conventional processes, particularly having regard to the express provision of clause 8.

FRENCH CJ:   I suppose if the stay is permanent, it is indistinguishable and practical, effectively, the money never becoming payable.

MR COLES:   Yes.  That is contended, but for other reasons we suggest that it does not mean the money it may not still be payable.  It will not be payable now because ‑ ‑ ‑

FRENCH CJ:   In a theoretical sense, yes.

MR COLES:   It may be payable for other reasons.  It may be payable but simply someone cannot enforce this payment.  I just should add that when creditors are, for the purposes of 17(c), for example, contemplating whether for the purposes of realisation they need to extend the deed, it may be they would also bear in mind that extending a deed is the extension of a statutory function.  It calls attention to various obligations under Part VIII which are also incorporated by section 237, which involve record keeping and the like.

So that the perpetuation of the deed, as such, carries with it extra expense and the like not necessarily useful or desirable.  As well, it of course carries with it the fact that Mr Greaves, the debtor, remains subject to a deed of arrangement and he may take the view, or others may take the view that if he has done everything he needs to do to ensure the trustee is armed with the means of realisation, then no useful purpose is to be served on that account either for extending the deed.  So it is not open to our learned friends, in our respectful submission, to say, in effect, that clause 17(c) is otiose unless they are right.

KIEFEL J:   But on the other hand, are you in a position to argue that you should approach the construction of the deed on the basis that the creditors are somehow left in limbo in this sense, that if there is a chose in action which can be pursued, clause 11 is construed in your favour and contrary to the appellant’s submissions, cannot the creditors still pursue sequestration and obtain the chose in action as I inquired earlier?

MR COLES:   As an alternative ‑ ‑ ‑

KIEFEL J:   It is still open now, is it not?

MR COLES:   It is still open.  The availability of an alternative does not deny the other alternative.

KIEFEL J:   No, but it might affect the construction you place upon the deed, might it not?  I mean, the construction that you are placing upon 17(c) really proceeds implicitly, I would have thought, from the notion that the purposes of the deed or the trust with which the properties impress in pursuance of the deed cannot be realised, except by this action, but this action ‑ ‑ ‑

MR COLES:   That is the available, that is ‑ ‑ ‑

KIEFEL J:   This action may be owned by various people and the creditors still remain the beneficiaries of it.

MR COLES:   Yes.  Perhaps I have put more than I needed to about what may be a controversial view of the particular words in clause 17(c), but the basic point we were seeking to advance, if I can revert to a more minimalist approach for a moment, is that one does not attribute to clause 17(c) a clause dealing with the power or lack of it to maintain something that you are entitled to do as the assignee of a chose in action.  Rather, one deals with it on its terms as directed to questions of realisation.

The next and I think last matters to which we would want to draw attention concern the final point raised by our learned friends.  Your Honours have been taken to the definition of “loss” in the policy, which plainly is engaged when something is payable, and something is payable expressly under the terms of the loss definition clause to which your Honours were taken, amongst other considerations, where there is a judgment, as there plainly is here.  Accordingly, it would seem that to succeed on that basis, or that aspect of the appeal, CGU must establish really that clause 11 makes it not payable.

In our respectful submission, even if the clause 11 construction were right it would not deny on the true construction of the policy, because now one is looking at what is meant by “payable” under the policy, it would not deny payable, particularly where there is a judgment debt in terms.  It would not deny that there was something payable under the policy, even if by the terms of the deed the creditors could not enforce it.

The provision of clause 11, of course, does not prevent Mr Greaves from enforcing it, and the provision of clause 11 does not prevent Mr Greaves’ assignee enforcing it.  The fact that it may be enforced by one or other or any of those people for the benefit of people who cannot themselves enforce it because – against Mr Greaves – cannot afford the liability, that does not mean that the liability against CGU could not be enforced because it is a liability, or it is simply a matter of regarding the proper construction of the loss definition clause in terms whereby the expression “payable” extends to those liabilities which have been incurred, including explicitly a judgment of Justice White.

It cannot obviously be the case that the deed, even if clause 11 continues, has had some effect of extinguishing or setting aside the judgment.  That obviously has not happened.  There is no reason at all why a judgment of a superior court does not give rise to a liability which is payable within the proper construction of the policy terms merely because, by other arrangements its enforcement by those directly interested may be curbed.  We have, however, already put the proposition that one thing clause 11 does not do is release, so it would seem unusual if anything short of a release or a satisfaction or a setting aside could render a judgment debt no longer one that was payable.

In our respectful submission, our learned friends would need to show a number of other matters about clause 11.  It would need to be shown that it has survived the termination of the deed despite section 233(2) and it would need to be shown that it survived the termination of the deed as a matter of construction of the deed having regard to the fact that clause 11 is obviously dependent on clause 9, and it does not seem to be anybody’s case that clause 9 would necessarily survive the termination of the deed unless – I think that is certainly not the appellant’s case that clause 9 survives the termination of the deed.

So, in our respectful submission, one would need to find both clause 11 operating as a release – and of course it was not – this is the curiosity in our respectful submission – it is not simply the termination of the deed, but the entry into the deed that must have produced the outcome for which CGU contends because clause 11 operated from the moment of inception of the deed, yet, nevertheless, Mr Watson, the trustee, commenced the proceedings and they were not struck out or demurred to in some sense merely because clause 11 prevented enforcement against the debtor.

It is, in our respectful submission, difficult to see how that which was a barrier on this argument during the life of the deed becomes a more insuperable barrier just because the deed which imposed it comes to an end.  If it was a barrier, it was a barrier while the deed was operating, in our respectful submission.

FRENCH CJ:   Were you going to say something about section 276?

MR COLES:   The last matter is to say these short things about section 276.  Firstly, of course, it is a criminal provision, although one does not need to read it very strictly to produce the same outcome.  It is directed to the trustee of a deed acting as such after the deed is terminated.  A trustee who is, let us say, burdened by trust, the term of which is to be identified from the terminated deed, is nonetheless affected by that trust because, after all, it is his conscience that is bound as the legal owner but should he later give effect to the trust on the faith of which he has assumed the property, he would not, in our respectful submission, be doing more than giving effect as he must to the terms of the trust.  He would not, in our respectful submission, be acting as trustee under a deed of assignment. 

Secondly, and really the same point stated in another way is that when he proceeds to the process of realisation, that is to say, when he maintains the claim against the insurer CGU, he is, of course, able – in the eye of the law his ability and title to do so depends not on his acting as trustee but upon his being the repository of the legal title or the title to maintain the chose in action.

FRENCH CJ:   Impressed with a trust requiring him to act in a particular way.

MR COLES:   Yes, but if one were looking at the question, would a person who continued with that case was the offending section 276(1), the answer in our respectful submission would be simply no because it is open to him to draw attention to the fact that he is acting as the assignee of the chose in action and that if he succeeds he is giving effect to the commands on his conscience of equitable principle that requires a person who takes property on certain terms to give effect to those terms when distributing that property.  If that were a doubtful matter, in our respectful submission, the criminal character of the statutory provision emphasises that that would be the proper approach to its interpretation.  May it please the Court.

FRENCH CJ:   Thank you, Mr Coles.  Yes, Mr Jackson.

MR JACKSON:   Your Honours, there are a few matters with which I wish to deal.  May I turn first to section 224A, which your Honours will find at page 376.  I should have referred earlier to subsection ‑ ‑ ‑

HEYDON J:   This is not by way of reply.

MR JACKSON:   I am sorry, your Honour is ahead of me.  That is what I am about to say.  I think I said I should have referred to this earlier, and may I seek to do so now.  Your Honours, the particular matter, if I have leave to do so, is simply to say that it is a provision which requires that the trustee of the deed give notice in writing of the fact that a deed has been terminated and thus bringing into play section 226(4).

FRENCH CJ:   This is just another publicity provision, I take it, Mr ‑ ‑ ‑

MR JACKSON:   Yes, it is, your Honour.  All I wanted to say was that one can see by inspecting, that first of all a deed has been entered into, second that it has been terminated.  Your Honours, if I could come then to section 224 on which reliance is placed by our learned friends.  Your Honours, that deals of course with events prior to termination.  Accepting for the moment that the trustee was entitled to institute proceedings, the institution of those proceedings is something that is made or regarded as valid and effectual, notwithstanding the termination of the deed of arrangement, it will not be set aside.  But the question is really, in this case, is the trustee entitled to pursue those proceedings and, your Honours, that is something where, I think we have said, our trustee’s rights to deal with the property and the money due from it are ones that do derive from the deed but the deed is at an end.

Could I come then, your Honours, to section 233, to which our learned friends referred.  As our learned friends observed, section 233 is subject of course to what is said in section 234.  May I say a couple of things about those two provisions.  The first, your Honours, is that section 233(2) is something which prevents a creditor from pursuing, in effect, the debt while the deed remains in force.  It does not say that in every circumstance the creditor is entitled to sue for that debt or to take proceedings in respect of that debt as soon as the deed comes to an end.

If one goes to section 234, it recognises that deeds of arrangement may operate to release debtors from any of their debts.  If one goes to clause 11 in the particular case, it is a provision which prevents, assuming it remains in operation indefinitely, the debtor from being sued in respect of those debts.

FRENCH CJ:   So 233 has really nothing to do with it.  It is just a matter of the construction and context of clause 11.

MR JACKSON:   Yes.  He cannot be sued and effectively that, in our submission, would be something that releases him from that debt in terms, at least, of section 234.  Your Honours, if one goes from that back to the terms of clause 17(c) of the deed – if I could take your Honours to that for a moment - at page 134, in our submission, it should not be given whatever limited operation is sought to be given to it by our learned friends’ argument.  In that regard, one does need to bear in mind that the proceedings, or possible proceedings, to do something in relation to the chose in action is something that is, one might think, the principal part of the deed.  One sees that, in particular, in clauses 4, 5, 8 and 9 and then one comes, of course, to 10 and 11.  It seems to be the principal part of the deed giving a preference to those two creditors. 

If one is talking about clause 17(c) in circumstances where the provision of the deed is that it will terminate and one of the events on which it is to terminate is the expiration of the three years which is only to be extended for the particular purpose of further pursuing the litigation.  Your Honours, one, in our submission, would take from that the view that if the three years expires without extension, then the purpose specifically referred to there has gone and the trustee’s powers to pursue it no longer exist. 

Your Honours, in relation to that situation and in relation to termination, and our learned friends’ reference to section 276, if I could just go to that provision for a moment, which is at page 448.  Underlying it is the notion that the deed of arrangement has been terminated.  That is the situation which emerged.  One is then speaking about a person who acts a trustee under a deed of assignment that ex hypothesi no longer is in operation.  So it is assuming that situation.

Where you have a person who has been trustee of a deed of arrangement and where the deed of arrangement has come to an end, if the person who has been trustee is performing functions that were those of the trustee under the deed of arrangement and if the person – and in another situation, if the trustee’s ability or former trustee’s ability to do things is on the basis of trusts that are derived from the deed of arrangement then, in our submission, the situation would prima facie be that you have a trustee whose conduct is conduct falling within section 276(1) and it would only be if the other circumstances alleviating that that are referred to in – including the words of 276(1) and in 276(2) were – I am sorry, your Honour.

HEYDON J:   Let us say it is criminal.  Do you remember the Yango Pastoral Case – Justice Mason in this Court in relation to ‑ ‑ ‑

MR JACKSON:   I am sorry, your Honour.  I could not quite hear what your Honour said.

HEYDON J:   The Yango Pastoral Case or Mr Justice Devlin’s judgment in the St John Shipping Corporation Case?  You can have statutes that render conduct criminal but it is a question of construction whether the statute also actually invalidates, for civil purposes, the relevant conduct.

MR JACKSON:   Quite, your Honour.

HEYDON J:   Is it not possible that this trustee might be incurring this fine per day but nonetheless the conduct be unimpeachable from the point of view of the law of trusts?

MR JACKSON: Your Honour, could I just say that the presence of a provision like section 276 is germane to the interpretation of the deed. It is germane because, amongst other things, of clause 1(e), which is at page 130, to which I have referred earlier. That specifically says that the deed is to be construed subject to the provisions of the Act. One of the provisions of the Act which would be germane in relation to the operation of the provisions of the deed – I am sorry. One of the provisions of the Act which would be germane to the interpretation of the effect of the deed in circumstances where there has been a termination is section 276, we would submit.

We entirely accept, your Honours, that in the case to which your Honour referred and others in this Court there has been a distinction drawn between conduct which is criminal on the one hand and conduct which, albeit criminal, does not invalidate civil transactions in that way but, your Honours, this is a question of interpretation of the provision.  Your Honours, I do not recall whether I referred your Honours specifically before to section 213(2) on page 368.

FRENCH CJ:   Yes, I think that was mentioned.

MR JACKSON:   Your Honours, could I just say in relation to clause 11 that one does need to bear in mind that it is a provision which is to be a protection for the debtor having given valuable consideration to the court.  Your Honours, could we also say that our learned friend’s argument would, in a sense, we would submit, rather create a kind of private trust which does not seem to be the policy of the Act.  Could I refer to what was said by Justice McDougall in that regard at page 171, paragraph 15.  Your Honours, one does need to bear in mind that if there were to be sequestration, it does not automatically make the property distributable to One.Tel and to ASIC, but to unsecured creditors rather more generally.

Yes, your Honour, could I just say something.  Our learned friend’s submissions rather suggested that we were the ones who raised these points in the proceedings.  I think I have taken your Honours to the form of the proceedings.  Your Honours, those are our submissions.  There were two things I had to answer, your Honour, but maybe I can your Honours a piece of paper, and our learned friends, dealing with those ‑ ‑ ‑

FRENCH CJ:   Within seven days.

MR JACKSON:   Yes, your Honour.

FRENCH CJ:   All right.  Thank you.

The Court will reserve its decision.  The Court will adjourn until 10.00 am tomorrow.

AT 1.03 PM THE MATTER WAS ADJOURNED