Director of War Service Homes v Law

The case involved an appeal by the Director of War Service Homes against a decision of the Federal Bankruptcy Court. The dispute concerned the entitlement to a property purchased by a debtor, Bird, under an agreement with the Director. Bird had executed a deed of arrangement for the benefit of his creditors, and the trustee under this deed, Law, claimed Bird's interest in the property. The Bankruptcy Court had made declarations in favour of the trustee.

The High Court was required to determine whether Bird's interest in the land and dwelling-house under the War Service Homes Act agreement passed to the trustee under the deed of arrangement. Specifically, the court had to consider the effect of section 33 of the War Service Homes Act, which prevents the divestment of a purchaser's interest under such a contract due to bankruptcy or insolvency, and section 35 of the same Act, which prohibits the transfer of such an interest without the Director's written consent. The court also had to interpret the operative words of the deed of arrangement and their scope in relation to the property described in its schedule.

The High Court found that the trustee's claim failed on two primary grounds. Firstly, the deed of arrangement was construed to only assign property that would have vested in the Official Receiver had a sequestration order been made. Section 33 of the War Service Homes Act explicitly removes the subject property from the scope of such a sequestration order, meaning it could not pass under the deed. Secondly, even if the deed had been sufficient to assign Bird's interest, section 35 of the War Service Homes Act would have prevented the assignment from having any force or effect, as the Director had not provided the requisite written consent. The court noted that Bird's contractual right to the property was an interest within the meaning of section 35.

Consequently, the High Court allowed the appeal, discharged the order of the Federal Bankruptcy Court, and dismissed the trustee's motion with costs.