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Hiley v Peoples Prudential Assurance Co Ltd

Hiley v Peoples Prudential Assurance Co Ltd

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Case Copied 25 August 1938 67 min read

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60 CLR 468

THE PEOPLES PRUDENTIAL ASSURANCE

COMPANY LIMITED (IN LIQUIDATION

AND OTHERS

PLAINTIFF AND DEFENDANTS,

ON APPEAL FROM THE SUPREME COURT OF Company-Life-assurance policy-Mortgage by policy-holder to company-Mortgage

transferred by company to third party-Liquidation of company--Repradiation by company of obligations under the policy-Validity of transfer-Suit-Com. promise between third party and liquidator of company-Retransfer of mortgage April 12, 13

to company-Winding up-Company and policy-holder-" Mutual dealings" Aug. 25.

Set-off-Bankruptcy Act 1924-1933 (No. 37 of 1924-No. 66 of 1933), sec. 82* -Companies Act 1899 (N.S.W.) (No. 40 of 1899), sec. 264 (1).

The appellant, a policy-holder in a life-assurance company, borrowed money from the company in pursuance of a scheme enabling holders of such policies to purchase homes and as security for its repayment gave a mortgage over * Sec. 82 of the Bankruptcy Act 1924-

1899 (N.S.W.) provides that "in the 1933 provides that " where there have been mutual credits, mutual debts, or

either voluntarily or by or other mutual dealings between a bank-

under the supervision of the court, as rupt and any person proving or claim-

the case may be, the same rules shall ing to prove a debt in the bankruptey,

prevail and be observed as regards- (a) the respective rights of secured and due from the one party to the other in

unsecured creditors and (b) the respect of such mutual dealings, and

declaration and distribution of divi- the sum due from the one party shall

dends; and (c) the proof and allow- be set off against any sum due from

ance of debts or claims against the the other party, and the balance of the

assets of the company, as may be in account, and no more, shall be claimed

force for the time being under the laws or paid on either side respectively."

of bankruptcy with respect to the Sec. 264 (1) of the Companies Act

estates of bankrupts."

60 CLR 469

60 C.L.R.]

OF AUSTRALIA. certain land and deposited his policy. The mortgage, together with similar mortgages by other mortgagors, was transferred by the assurance company by way of security to another company and later, also by way of security and with such other mortgages, by that other company to a bank. Subsequently the assurance company was ordered to be wound up. The official liquidator gave notice to the appellant that the assurance company would not carry out its obligations under the policy. After the commencement of the liquidation the validity of the transfers of mortgage, including the transfers of the mort- gage given by the appellant, was challenged on the ground of ultra vires. A compromise of the matters in dispute was made between the assurance company, the transferee company and the bank, whereby the bank agreed to retransfer to the assurance company some of the mortgages, including the appellant's mortgage.

Held, by Rich, Starke and Dixon JJ. (Latham C.J. dissenting), that, as at the commencement of the winding up the assurance company was entitled to redeem the appellant's mortgage…

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: [1938] HCA 40
Decision Date: 25 August 1938

CaseChat Overview and Summary

The case of *Hiley v Peoples Prudential Assurance Co Ltd* concerned a policy-holder, Mr Hiley, who had borrowed money from the assurance company, Peoples Prudential Assurance Co Ltd, and provided a mortgage over land and his life policy as security. The company subsequently transferred this mortgage, along with others, by way of security to other entities, eventually ending up with a bank. The assurance company was then ordered to be wound up, and its liquidator repudiated the obligations under Mr Hiley's policy. A compromise was later reached between the assurance company, the transferee company, and the bank, resulting in the retransfer of Mr Hiley's mortgage back to the assurance company. Mr Hiley appealed to the High Court of Australia against a decision of the Supreme Court of New South Wales.

The central legal issue before the High Court was whether Mr Hiley was entitled to set off the damages he suffered due to the company's repudiation of its policy obligations against the mortgage debt owed to the company. This question hinged on the interpretation and application of section 82 of the *Bankruptcy Act 1924-1933*, which was incorporated into company liquidations by section 264(1) of the *Companies Act 1899* (NSW). This provision allows for the set-off of mutual credits, debts, or dealings between a bankrupt and a creditor.

The majority of the High Court, comprising Rich, Starke, and Dixon JJ, held that Mr Hiley was entitled to the set-off. Their reasoning was that at the commencement of the winding up, the assurance company retained an equitable right to redeem the mortgage it had transferred by way of security. By asserting this existing claim, and not through a new transaction, the company regained full beneficial interest in the mortgage. Consequently, there were mutual dealings between Mr Hiley and the company, allowing for the set-off of the damages from the policy repudiation against the mortgage debt, as provided by the relevant bankruptcy and companies legislation. Latham C.J. dissented.

Orders