One.Tel (in liq) v Watson

The appeal concerned a dispute between One.Tel (in liq) (the appellant) and CGU Insurance Ltd (the respondent insurer) regarding the appellant's entitlement to maintain proceedings against the insurer to enforce an indemnity under a directors' liability insurance policy. The appellant, as liquidator of One.Tel, had acquired rights under this policy through a deed of arrangement with a debtor. The central issue was whether the termination of this deed of arrangement affected the appellant's ability to pursue the claim against the insurer.

The court was required to determine whether the assignment of the debtor's rights under the directors' liability insurance policy to the trustee of the deed of arrangement was effective at law. Specifically, the court had to consider whether this assignment was "absolute" for the purposes of section 12 of the *Conveyancing Act 1919* (NSW), applying the test that an assignment must be unconditional to be considered absolute.

The court reasoned that the assignment, despite the subsequent termination of the deed of arrangement, remained effective. The termination of the deed did not retroactively invalidate the assignment of the chose in action. The legal principle applied was that an assignment of a chose in action, if otherwise valid, vests the right in the assignee at the time of assignment, and subsequent events related to the underlying agreement for the assignment do not extinguish that vested right unless the assignment itself was conditional or defeasible. The court found the assignment to be absolute and unconditional, thus satisfying the requirements of section 12 of the *Conveyancing Act 1919* (NSW).

The appeal was allowed. The court ordered that the appellant was entitled to maintain proceedings against the insurer. The appellant was directed to file short minutes of order giving effect to the reasons, with provisions for any dispute from the respondent insurer. The respondent insurer was ordered to pay the appellant's costs of the appeal and, if qualified, was to have a certificate under the *Suitors’ Fund Act 1951* (NSW).