Lumley v Oceanfast Marine - [2000] NSWSC 1178

CITATION: Lumley v Oceanfast Marine [2000] NSWSC 1178

CURRENT JURISDICTION: Equity

FILE NUMBER(S): SC 4692/99

HEARING DATE(S): 29 August 2000

JUDGMENT DATE: 13 December 2000

PARTIES :

Lumley General Insurance Limited (P)
Oceanfast Marine Pty Limited (D1)
Oceanfast Limited (D2)
Ross Stuart Norgard (D3)
Bryan Kevin Hughes (D4)
Adsteam Marine Charters Pty Limited (D5)
Stirling Marine Constructions Pty Limited (D6)
Howard Smith Industries Pty Limited (D7)

JUDGMENT OF: Austin J

COUNSEL : B A Coles QC with M A Jones (P)
J Thomson (D1-D4)
G C Lindsay SC (D5-D7)

SOLICITORS: Baker & McKenzie (P)
Blake Dawson Waldron (D1-D4)
Freehill Hollingdale & Page (D5-D7)

CATCHWORDS: INSOLVENCY - proofs of debt in voluntary administration - rule against double proofs - whether creditor and surety can both claim in insolvent administration of debtor when surety has paid creditor under guarantee - whether rule for surety applies to payment in discharge of autonomous obligation - whether payer's proof has priority over creditor's proof, so that creditor may prove only for balance after payment - whether, if creditor may prove for full debt, payer can prove at all

CASES CITED: Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (1978) 141 CLR 335
Barclays Bank Ltd v TOSG Trust Fund [1984] 1 All ER 628
Brittain v Lloyd (1845) 14 M & W 762
Edward Owen Engineering v Barclays Bank International [1978] 1 QB 159
Ellis v Emmanuel (1876) 1 Ex D 157
Goodwin v Gray (1874) 22 WR 312
Gray v Seckham (1872) LR 7Ch App 680
Hobson v Bass (1871) LR 6 Ch App 792
Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545
IE Contractors Ltd v Lloyds Bank Plc [1990] 2 Lloyd’s LR 496
Loeskow v Avokah Irrigation Pty Ltd (Receiver and Manager Appointed) (Full Federal Court, 7 November 1995, unreported)
Moule v Garrett (1872) LR 7 Ex 101
Re a Debtor [1937] 1Ch 163
Re Oriental Commercial Bank, Ex parte European Bank (1871) LR 7 Ch App 99
Re Sass; ex parte National Provincial Bank of England Limited [1896] 2 QB 12
St Martin's Grosvenor Pty Ltd v American Home Assurance Company (NSW CA, 18 March 1977, unreported)
The Liverpool (No 2) [1963] P 64
Thornton v McEwan (1862) 1 H & M 525
Western Australia v Bond Corporation Holdings Ltd (No 2) (1992) 37 FCR 150
Westpac Banking Corp v Gollin & Co Limited [1988] VR 397
Wood Hall Ltd v The Pipeline Authority (1979) 141 CLR 443

DECISION: Separate question answered to effect that creditor may prove for whole debt and payer on performance bond may not prove until creditor is fully satisfied

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

WEDNESDAY 13 DECEMBER 2000

4692/99 LUMLEY GENERAL INSURANCE LIMITED V OCEANFAST MARINE PTY LIMITED & ORS

JUDGMENT

HIS HONOUR:
The proceedings

1 The plaintiff (‘Lumley’) is an insurance company which has issued performance bonds to support the builder's obligations under seven contracts. All of the contracts are for…

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.

Continue reading Lumley v Oceanfast Marine

Details

AGLC: Lumley v Oceanfast Marine [2000] NSWSC 1178
Case: [2000] NSWSC 1178
Decision Date: 13 December 2000

CaseChat Overview and Summary

Lumley v Oceanfast Marine involved a dispute between Lumley, a creditor of Oceanfast Marine, and Oceanfast Marine's voluntary administrator. The dispute centred on the rules governing proofs of debt in a voluntary administration and whether a surety who has paid the creditor can also claim in the insolvent administration of the debtor. The case was heard in the Supreme Court of New South Wales.

The court was required to decide whether the rule that prevents a surety from claiming in the insolvent administration of the debtor when they have paid the creditor under a guarantee applies when the payment is made in discharge of an autonomous obligation. The court also had to determine whether the surety's proof has priority over the creditor's proof, so that the creditor may prove only for the balance after payment. Additionally, the court needed to decide whether, if the creditor may prove for the full debt, the surety can prove at all.

The court held that the rule preventing a surety from claiming in the insolvent administration of the debtor when they have paid the creditor under a guarantee does not apply when the payment is made in discharge of an autonomous obligation. The court found that the surety's proof does not have priority over the creditor's proof, so the creditor may prove for the full debt. However, if the creditor may prove for the full debt, the surety cannot prove at all. The court's reasoning was based on the distinction between payments made under a guarantee and payments made in discharge of an autonomous obligation. The court held that the surety's payment was made in discharge of an autonomous obligation, and therefore, the rule against double proofs did not apply. However, the court also held that if the creditor may prove for the full debt, the surety cannot prove at all, as this would result in double recovery.

The court ordered that Lumley, as the creditor, could prove for the full debt, and that Oceanfast Marine's voluntary administrator could not accept the surety's proof of debt. The court's decision provides clarity on the rules governing proofs of debt in a voluntary administration and the circumstances in which a surety can claim in the insolvent administration of the debtor.

Orders