David Watson v CGU Insurance Limited - [2008] NSWSC 1409

CITATION: David Watson v CGU Insurance Limited [2008] NSWSC 1409
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 19 November 2008

JUDGMENT OF: McDougall J at 1

EX TEMPORE JUDGMENT DATE: 19 November 2008

DECISION: See para [62] of the judgment.

CATCHWORDS: BANKRUPTCY - termination of deed of arrangement - trustee unable after termination to exercise powers authorised by a deed of arrangement - whether upon termination of a deed of arrangement, trustee retains interest in asset comprising the trust property - who holds beneficial interest in trust property.

LEGISLATION CITED: Bankruptcy Act 1966
Bankruptcy Act 1989

PARTIES: David Watson (Plaintiff)
CGU Insurance Limited (First Defendant)
Australian Securities & Investment Commission (Second Defendant)
One Tel Ltd (In Liquidation) (Third Defendant)

FILE NUMBER(S): SC 50198/06

COUNSEL: C E Adamson SC / R C Scruby / A R Lang (Plaintiff)
A W Street SC / P Silver / W A D Edwards (First Defendant)
D L Cook (Second Defendant)
B A J Coles QC / S A Kerr (Third Defendant)

SOLICITORS: Kemp Strang (Plaintiff)
Colin Biggers & Paisley (First Defendant)
Self represented (Second Defendant)
Clayton Utz (Third Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McDOUGALL J

19 November 2008 ex tempore (revised 19 November 2008)

50198/06 DAVID PATRICK WATSON AS TRUSTEE FOR JOHN HUYSHE GREAVES v CGU INSURANCE LIMITED & 2 ORS

JUDGMENT

1 HIS HONOUR: The essential question for decision is whether the plaintiff (Mr Watson) can enforce a policy of insurance. That policy was underwritten by the first defendant (CGU). It afforded cover to, among others, the fourth defendant (Mr Greaves). The question arises against the following background.

Background

2 Mr Greaves was a director of the third defendant (One.Tel, which is now in liquidation) and the chairman of its board of directors. The second defendant (ASIC) obtained orders that Mr Greaves pay compensation of $20 million to One.Tel and ASIC's costs of the proceedings in which that order and others were made. Mr Greaves has claimed that CGU is bound to indemnify him under the policy for those liabilities.

3 On 30 November 2004, Mr Greaves made a deed of arrangement under Pt X of the Bankruptcy Act 1966. Mr Watson was the trustee of, and the other party to, that deed. The property assigned to Mr Watson as trustee included Mr Greaves’ rights under the policy. The deed terminated according to its terms on 30 November 2007.

4 Mr Watson says that he continues to hold, and is entitled to enforce, Mr Greaves' rights under the policy. CGU denies those propositions. It says, in any event, that it has rescinded the policy for non-disclosure. Further, CGU, says, the effect of the deed is that Mr Greaves has no ongoing liability to which the policy (if on foot) would respond.

The separate questions

5 The parties (not including Mr Greaves, who took no active party in the hearing before me) postulated…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2008] NSWSC 1409
Decision Date: 19 November 2008

CaseChat Overview and Summary

In the matter of David Watson, the bankrupt, and CGU Insurance Limited, the court was tasked with determining the rights and interests in an asset post-termination of a deed of arrangement. The central issue before the court was whether the trustee of the bankrupt's estate retained any interest in the asset that formed part of the trust property after the termination of the deed of arrangement and, if so, who held the beneficial interest in that asset. The dispute arose from the contention between the bankrupt and the insurance company regarding the ownership and control of a specific asset following the cessation of the arrangement.

The court examined the legal framework governing the termination of a deed of arrangement and the consequential effects on the trustee's powers. It considered the provisions of the Bankruptcy Act 1966 and relevant case law to ascertain the precise point at which the trustee's powers under the deed ceased and whether this cessation divested the trustee of any interest in the trust property. The court also evaluated the implications of these findings on the distribution of the bankrupt's assets and the rights of creditors.

Upon review, the court found that the termination of the deed of arrangement did not leave the trustee with any interest in the asset forming part of the trust property. Consequently, the beneficial interest in that asset reverted to the bankrupt or, if applicable, to other creditors as per the provisions of the Bankruptcy Act. The court concluded that upon termination, the trustee's authority under the deed was extinguished, and any interest held by the trustee in the asset ceased. This decision effectively resolved the dispute by clarifying the ownership and control of the asset in question post-termination.

The final orders of the court were that the beneficial interest in the asset reverted to the bankrupt or, if applicable, to the creditors in accordance with the provisions of the Bankruptcy Act. The court's decision provided clarity on the rights and interests of the parties involved post-termination of a deed of arrangement, ensuring that the legal framework was applied consistently with legislative intent.

Orders