Re Anglican Insurance Ltd

[2008] NSWSC 41

CITATION:	Anglican Insurance Ltd [2008] NSWSC 41
HEARING DATE(S):	17/09/07 Written submissions: 12/11/07
JUDGMENT DATE :	6 February 2008
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Liquidator's application for determination of question under Corporations Act s 511 refused
CATCHWORDS:	CORPORATIONS - winding up - members voluntary winding up - application by liquidator for determination of question arising in the winding up - where insurance company entered into arrangements with another insurer for transfer of engagements - arrangements resting in contract only - liquidator seeks direction premised on effectiveness of arrangements to substitute second company as obligee under first company's insurance contracts - second company not a party and not before the court - direction refused.
LEGISLATION CITED:	Companies Act 1899 Corporations Act 2001 (Cth), Division 6 Part 10.1, ss 511, 479(3) Insurance Act 1973 (Cth), s 36 Insurance Amendment Act 1983 (Cth),
CATEGORY:	Principal judgment
CASES CITED:	Allianz Australia Insurance Ltd v General Cologne Re Australia Ltd (2003) 12 ANZ Insurance Cases 61-564 CSR Ltd v The New Zealand Insurance Co Ltd (1993) 7 ANZ Insurance Cases 61-193 Otis Elevator Co Pty Ltd v Guide Rails Pty Ltd (2004) 49 ASCR 531 Re G B Nathan & Co Pty Ltd (1991) 24 NSWLR 674 Re Security Provident Fund Ltd (1984) 9 ACLR 56 Re Southern Cross Airlines Holdings Ltd [2000] 1 Qd R 84
PARTIES:	Hugh Jenner Wily as liquidator of Anglican Insurance Limited
FILE NUMBER(S):	SC 3871/07
COUNSEL:	Mr T G R Parker SC - Applicant
SOLICITORS:	Allens Arthur Robinson - Applicant

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

BARRETT J

WEDNESDAY, 6 FEBRUARY 2008

3871/07 HUGH JENNER WILY AS LIQUIDATOR OF ANGLICAN INSURANCE LIMITED (IN LIQUIDATION)

JUDGMENT

Introduction

1 Anglican Insurance Limited (which I shall call “AIL”) was incorporated on 10 September 1930 under the Companies Act 1899 by the name “The Church of England Insurance Company of Australia Limited”. Over the next half century or so, AIL carried on the business of insurance and issued policies of insurance in respect of various classes of risk. The persons insured under these policies were persons associated with the Anglican Church in various parts of Australia – such as “Corporation of the Diocesan Synod of North Queensland”, “Church of England Property Trust for St Michael’s Children’s Home”, “The Churchwardens of St Alban’s Church of England, Largs Bay” and “St Paul’s Association of Change Ringers, Burwood”. The risks insured ranged from fire, burglary and theft to personal accident and public liability. In short, a general insurance business was conducted for a church-based clientele.

2 In 1984, the Insurance Commissioner appointed for the purposes of the Insurance Act 1973 (Cth) informed AIL of his decision not to approve AIL’s reinsurance arrangements. This prompted the board of AIL to decide to cease writing new business and to enter into an agreement with another authorised insurer with respect to outstanding engagements. The agreement is dated 4 December 1984. The parties are AIL and Phoenix Insurance Limited (“Phoenix”).

3 At AIL’s request, its authority to carry on insurance business was revoked by the Insurance Commissioner. The revocation was effected on 18 June 1985 pursuant to s 36(1) of the Insurance Act as it stood at that time.

4 AIL became subject to members voluntary winding up under the Corporations Law of New South Wales on 16 August 1999 by virtue of a special resolution of members. Mr Hugh Jenner Wily became liquidator and has continued in that office. Mr Wily gives in his affidavit an account of his administration as liquidator. It is sufficient, for the moment, to record Mr Wily’s view that, as a practical commercial matter, there is really nothing more that he can usefully do as liquidator. There is, however, some uncertainty about the effect of certain contracts affecting AIL’s engagements.

5 It is relevant to note, at this early stage, that, by virtue of Division 6 of Part 10.1 of the Corporations Act 2001 (Cth), the winding up continues under and is now governed by that Act.

The liquidator’s application

6 It is against that background that Mr Wily has approached the court with a view to its exercising the jurisdiction conferred by s 511 of the Corporations Act, a provision applying to both members voluntary winding up and creditors voluntary winding up. Section 511(1) says:

“The liquidator … may apply to the Court:
(a) to determine any question arising in the winding up of a company;
…”.

7 Section 511(2) then provides:

“The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficial, may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just.”

8 The principal question Mr Wily wishes to have the court determine is whether the agreement of 4 December 1984 between AIL and Phoenix (together with three other instruments to be mentioned presently) “were effective to transfer Anglican Insurance Limited’s liability for present and future claims to Vero Insurance Limited”. Depending on the answer to that question, there is a subsidiary question about what needs to be done to bring the winding up to a conclusion.

9 There is a threshold issue whether the matter Mr Wily raises is apt to be dealt with upon an ex parte application under s 511. Consideration of that question is best deferred until the subject matter has been further explored.

The contractual arrangements for transfer of business

10 In approaching the question the liquidator has raised, it is necessary to begin with the documents.

11 The agreement of 4 December 1984 between AIL and Phoenix recites that each party is an authorised insurer under the Insurance Act 1973 (Cth) and that AIL “ceased undertaking the business of insurer on the 1st day of October 1984”. The agreement then embodies a promise (in clause 2) given by AIL to Phoenix that AIL “will not undertake its business of insurance after the termination date” (being 1 October 1984) and a promise (in clause 3) given by Phoenix to AIL in these terms:

“3. In consideration of the covenant of AIL and of the payment to be made by AIL to Phoenix hereunder, Phoenix covenants with AIL that Phoenix shall meet and discharge and indemnify and keep indemnified AIL in respect of all claims which:-
(a) became or become payable by AIL after the termination date under or by virtue of any insurance policy; or
(b) were made on or prior to the termination date under or by virtue of any insurance policy and had not been wholly met, discharged or released on or prior to the termination date; or
(c) could have been made on or prior to the termination date but had not been made on or prior to that date – irrespective of whether or not AIL was aware of or had notice that any such claim might be made after the termination date
except to the extent (if at all) that AIL may be entitled to be re-imbursed or indemnified in respect of that claim by a re-insurer under any of the re-insurance policies. Nothing contained in this clause shall render Phoenix liable to pay any moneys to AIL if any re-insurer under a re-insurance policy fails or is unable to pay any moneys which are properly payable to AIL under that re-insurance policy.”

12 There follows in clause 4 a promise by AIL to make a particular payment to Phoenix and the following promise:

“AIL covenants with Phoenix that AIL shall:-
(a) not vary or agree to vary after the date hereof the terms and conditions of any insurance policy or re-insurance policy without the prior written consent thereof of Phoenix;
(b) promptly give notice to Phoenix of all claims made or notices of claim made against AIL after the termination date under or by virtue of any insurance policy;
(c) not admit or settle or pay (on behalf of Phoenix) any such claim without the prior written consent thereto of Phoenix.”

13 The payment to be made by AIL under clause 4 consists of two elements, one of which is described as “re-insurance premium”.

14 There is a definition of “insurance policies” as follows:

“’insurance policies’ means all policies of insurance entered into by AIL as insurer prior to the termination date and ‘insurance policy’ means any of such policies.”

15 Clause 5 of the agreement allowed AIL to settle claims under reinsurance policies without reference to Phoenix.

16 By a further agreement made between AIL and Phoenix on 31 January 1985, the parties agreed to adopt revised versions of clauses 3 and 5 and otherwise confirmed and ratified the agreement of 4 December 1984. The revised clause 3 was in these terms:

“In consideration of a covenant of AIL and of the payment to be made by AIL to Phoenix hereunder, Phoenix covenants with AIL that Phoenix shall meet and discharge and indemnify and keep indemnified AIL in respect of all claims which:
a) became or become payable by AIL after the termination date under or by virtue of any insurance policy; or
b) were made on or prior to the termination date under or by virtue of any insurance policy and had not been wholly met, discharged or released on or prior to the termination date; or
c) could have been on or prior to the termination date but had not been made on or prior to that date irrespective of whether or not AIL was aware of or had notice that any such claim might be made after the termination date.”

17 The revised clause 5 was:

“Notwithstanding anything to the contrary Phoenix shall settle without reference to AIL all claims which AIL may be entitled to make or maintain under any re-insurance policy and AIL shall at any time and from time to time sign, seal, executed and do all such deeds, documents, acts, matters and things as may be reasonably required by Phoenix to more properly effectuate the terms of this Agreement.”

18 Phoenix thereafter changed its name to Royal & Sun Alliance Insurance Australia Holdings Limited. It is convenient, nevertheless, to continue to refer to it as “Phoenix”. On 26 July 1999 a deed was made among AIL, Phoenix (called “RSA Holdings”) and Royal & Sun Alliance Insurance Australia Ltd (“RSA Insurance”). The last-mentioned company’s name is now “Vero Insurance Limited” and it will be convenient to refer to it as “Vero”. One of the recitals stated that the shareholders of Phoenix wished to see the benefit of the 4 December 1984 agreement (as varied by the 31 January 1985 agreement) – referred to as “the Agreement” – assigned by Phoenix to Vero. The main operative provisions of the deed were:

“ 2. ASSIGNMENT
2.1. Agreement
(a) RSA Holdings, with the consent of AIL, assigns to RSA Insurance [Vero] and RSA Insurance [Vero] accepts all RSA Holdings’ rights, benefits, liabilities, and obligations under the Agreement.
(b) Subject to clause 2.2, RSA Insurance [Vero] and AIL agree that RSA Insurance [Vero] will be bound by and may enforce the Agreement after the date of this Deed to the same extent that RSA Holdings, but for this Deed and/or its liquidation, was bound by and could have enforced the same.
2.2. Limitation
Nothing in this clause affects any limitation which, but for this Deed, would have applied to the Agreement.”

19 Some three weeks after the execution of this deed, the voluntary winding up of AIL commenced.

20 AIL and Vero became parties to a further deed dated 19 January 2004 the purpose of which was stated in its recital F:

“The parties wish to record and confirm their intention that all of the rights, benefits and interests of Anglican [ie, AIL] under and in respect of Reinsurance Policies are assigned to and held for the benefit of Vero Insurance and to give further effect to such assignment as provided for in this deed.”

21 Clauses 2.1 and 2.2 of the deed provided (by reference to a definition of “Reinsurance Policies” referring to all contracts of reinsurance entered into by AIL in relation to contracts of general insurance entered into by it as insurer):

“ 2.1 Assignment
By way of confirmation Anglican [ie, AIL] assigns absolutely to Vero Insurance all and any rights, benefits and interests of or held by Anglican [ie, AIL] under and pursuant to all Reinsurance Policies.
2.2. Notices of Assignment
Anglican [ie, AIL] will, on request by Vero Insurance, execute and deliver to Vero Insurance a notice of assignment to each of the Reinsurers in the form of, or substantially in the form of, the notice in Schedule 1 and Anglican [ie, AIL] authorises Vero Insurance to deliver such executed notices of assignment to the relevant Reinsurers.”

22 Clause 3 of the deed of 19 January 2004 was in these terms:

“ Deregistration of Anglican [ie, AIL]
(a) Anglican (ie, AIL] (and its liquidator) agrees with Vero Insurance that it will not take any action, steps or proceedings to apply for or bring about the deregistration under the Corporations Act of Anglican [ie, AIL] at any time before the third anniversary of the date of this deed.
(b) Vero Insurance agrees with Anglican [ie, AIL] that it will, if requested by Anglican [ie, AIL], after the third anniversary of the date of this deed, deliver to Anglican [ie, AIL] (or its liquidator) a written consent by Vero Insurance to the deregistration of Anglican [ie, AIL] under the Corporations Act .
(c) In the event of, and immediately upon, the deregistration of Anglican [ie, AIL], subject to clause 7.5:
(i) this deed terminates; and
(ii) clause 5 of the Amended Agreement is amended by omitting the words:
‘and AIL shall at any time and from time to time sign, seal, execute and do all such deeds, documents, acts matters and things as may be reasonably required by Phoenix to more properly effectuate the terms of this Agreement’.”

23 The reference here to the “Amended Agreement” is a reference to the agreement of 4 December 1984 as amended by the agreement of 31 January 1985. Clause 5 of the Amended Agreement, referred to in the foregoing clause 3(c), is set out at [17] above.

24 The deed of 19 January 2004 also provided:

“ 4. Records and co-operation
(a) Anglican [ie, AIL] (and its liquidator) agrees to retain, and at the request of Vero Insurance provide, copies of all policy documents, schedules, proposals, claim details, correspondence and any other documents in the possession or control relevant to the existence or validity of or liability under any Insurance Policy or claim or notification under any Insurance Policy and all documentation held by Anglican [ie, AIL] (and its liquidator) in relation to any Reinsurance Policy.
(b) Anglican [ie, AIL] (and its liquidator) will co-operate with any reasonable request from Vero Insurance to facilitate the expeditious and proper management of claims and notifications under Insurance Policies and Reinsurance Policies.
(c) Upon receipt of a claim or notification of a claim under an Insurance Policy Anglican [ie, AIL] will:
(i) promptly give notice to Vero Insurance of the claim or notification and any documents provided by the claimant in connection with the claim or notification;
(ii) provide to the claimant or party notifying the claim a copy of the notice referred to in (i); and
(iii) thereafter take no further steps in responding to and make no admission in relation to the claim or notification other than at the reasonable request of Vero Insurance in accordance with (b) above.

In consideration of the agreements on the part of Anglican [ie, AIL] under this deed, Vero Insurance:
(a) confirms by virtue of the Assignment Deed Vero Insurance assumed the liability of Anglican [ie, AIL] as insurer under Insurance Policies subject to and in accordance with the provisions of the Amended Agreement and indemnifies Anglican [ie, AIL] in respect of such liabilities accordingly; and
(b) agrees to reimburse Anglican [ie, AIL] any reasonable costs and expenses incurred by it by reason of it complying with any reasonable requests by Vero Insurance to defend, institute proceedings, make claims or take any other action on behalf of Vero Insurance under or in respect of any Insurance Policies or Reinsurance Policies.”

The arrangements in summary

25 The picture emerging from the four documents may be summarised as follows:

1. All the documents took as their starting point the reality that AIL was bound by pre-existing contracts of insurance to indemnify insured persons and that continuing contractual obligations were owed by AIL to such persons.
2. By the agreement of 4 December 1984, Phoenix undertook to AIL that Phoenix would meet and discharge (and indemnify AIL against) claims made against AIL after 1 October 1984, claims made against AIL on or before that date which were then not fully settled and claims that could have been made on or before that date but had not been made – but with an exception causing Phoenix’s undertaking to extend only insofar as claims were not covered by an entitlement of AIL to reimbursement or indemnity by a reinsurer.
3. By the agreement of 4 December 1984, AIL was entitled, as against Phoenix, to settle without reference to Phoenix claims carrying the benefit of reinsurance but otherwise undertook to Phoenix not to admit or settle, without the consent of Phoenix, claims made or notified after 1 October 1989.
4. By the agreement of 31 January 1985, the agreement of 4 December 1984 was varied by removing the exception to Phoenix’s undertaking referred to at item 2 above and by placing the function of settling claims against reinsurers in Phoenix’s hands rather than those of AIL. Phoenix became liable to indemnify AIL against all relevant claims (without exception) and entitled to receive and retain the benefit of any reinsurance held by AIL.
5. By the deed of 26 July 1999, there was a novation which had the effect that the rights of AIL against Phoenix under the earlier agreements were replaced by corresponding rights of AIL against Vero. Vero incurred concomitant obligations to AIL. The rights of Phoenix against AIL under the earlier agreements were replaced by corresponding rights of Vero against AIL. AIL incurred concomitant obligations to Vero.
6. By the deed of 19 January 2004, AIL purported to assign to Vero all its rights under all contracts of reinsurance entered into by AIL as reinsured in respect of contracts of insurance entered into by AIL as insurer before 1 October 1984.
7. By the deed of 19 January 2004, AIL undertook to Vero to retain relevant records and documents, to co-operate with Vero in relation to the management of claims and to notify Vero of (and take other actions in relation to) claims or notifications of claims received – being, of necessity, claims or notifications received after 19 January 2004.
8. By the deed of 19 January 2004, Vero confirmed its assumption, by the deed of 26 July 1999, of the liability of AIL as insurer under the contracts of insurance entered into by AIL as insurer before 1 October 1984 and agreed to reimburse AIL for costs and expenses incurred by AIL in meeting reasonable requests of Vero in relation to claims and proceedings.

26 At no point was there any attempt to novate the contracts of insurance under which AIL was insurer. This is not surprising, as there were many hundreds of contracts. It appears to have been accepted by AIL, Phoenix and Vero at all relevant times that a person insured under a contract of insurance issued by AIL would, as a matter of contract, look to AIL (and to AIL alone) if and when an event occurred so as to give rise to a claim under the contract. First Phoenix and later Vero (in substitution for Phoenix) gave to AIL contractual promises to protect AIL against the financial consequences of such claims – or, perhaps more accurately, the financial consequences, by way of payment obligation on AIL’s part, of the occurrence of events to which the insurance contracts written by AIL related. On the other side of the equation, AIL gave to Phoenix (and later to Vero) promises calculated to enable the protecting company to look after its own financial interests as they related to the obligations for which indirect liability was assumed by that protecting company.

Submissions made by AIL

27 Mr T.G.R. Parker SC, who appeared on the present application, submitted that s 36 of the Insurance Act, as in force following the commencement of the Insurance Amendment Act 1983 (Cth), had such an effect that the question raised by the liquidator must be answered “yes”.

28 Section 36, as in force at the relevant time, was as follows:

“(1) Where a body corporate requests, by notice in writing given to the Commissioner, that the authority to carry on insurance business granted to it under this part be revoked and the Commissioner is satisfied that the body corporate has no liabilities in respect of insurance business carried on by it in Australia, the Commissioner may, by notice in writing given to the body corporate, revoke the authority.

(2) Where the Commissioner believes that a body corporate has not commenced to carry on insurance business in Australia within the period of 12 months after it was granted an authority under this Part, he may give notice in writing to the body corporate that, unless it satisfies him, within 1 month after the notice is given, that it has commenced to carry on insurance business in Australia, the authority will be revoked.

(3) Where the Commissioner is satisfied that a body corporate authorized under this Part to carry on insurance business has not, during the preceding period of 12 months, carried on insurance business in Australia and has not had, during that period, liabilities in respect of insurance business carried on by it in Australia, he may give notice in writing to the body corporate that, unless it satisfies him, within 1 month after the notice is given, that, during that period, it has carried on such business or had such liabilities, the authority will be revoked.

(4) Where a body corporate to which a notice is given under subsection (2) or (3) does not, within the period of 1 month after the notice is given, satisfy the Commissioner with respect to the matters mentioned in the notice, he shall inform the Treasurer accordingly and the Treasurer may, after having considered the information, by notice in writing given to the body corporate, revoke the authority granted to it under this Part.

(5) The revocation of an authority takes effect from and including the day after the day on which the notice under subsection (1) or (4) is given to the body corporate.

(6) Where an authority is revoked under this section, the Commissioner shall cause notice of the revocation to be published in the Gazette.

(7) Part VI applies to:
(a) a refusal under subsection (1) to revoke an authority; or
(b) the revocation of an authority under subsection (4).

(8) A reference in this section to a body corporate having no liabilities in respect of insurance business carried on by it in Australia shall be read as including a reference to a body corporate that has assigned the whole of its interests under all contracts of insurance in respect of insurance business carried on by it in Australia to another body corporate authorized under this Act to carry on insurance business.

(9) In subsection (8):
‘assignment’ means an absolute assignment, but does not include an equitable assignment;
‘interests’ includes rights and benefits.”

29 Section 36(1), as in force at the relevant time, empowered the Commissioner to revoke a body corporate’s authority to carry on insurance business if two conditions were satisfied. The first was that the body corporate itself requested revocation. There is no question that that condition was satisfied in relation to AIL. The second condition was that the Commissioner be “satisfied that the body corporate has no liabilities in respect of insurance business carried on by it in Australia”. The meaning of the second condition was amplified by s.36(8). Having regard to s 36(8), the Commissioner was required to be satisfied on the matter central to the second condition, as it applied to AIL, if it was shown that AIL had “assigned the whole of its interests under all contracts of insurance in respect of insurance business carried on by it in Australia” to Phoenix – with “interests” here understood as including “rights and benefits”: see

s 36(9).

30 The evidence shows that the Commissioner acted under s 36(1) to revoke AIL’s authority on 18 June 1985. It may therefore be inferred that the Commissioner was, at that point, satisfied that AIL had “assigned” to Phoenix the whole of its “interests” (in an undefined sense) – or the whole of its “rights” or the whole of its “benefits” or the whole of its “rights and benefits” – under all contracts of insurance in respect of insurance business carried on by it in Australia. It was submitted by Mr Parker that it should therefore be found that, at or before 18 June 1985, the liabilities of AIL in respect of insurance business carried on by it in Australia had, by operation of law, become instead liabilities of Phoenix.

31 Mr Parker drew attention to two decisions of this court in which s 36, in the form presently relevant, was considered. The first is the decision of Cohen J in CSR Ltd v The New Zealand Insurance Co Ltd (1993) 7 ANZ Insurance Cases 61-193; the second the decision of McClellan J in Allianz Australia Insurance Ltd v General Cologne Re Australia Ltd (2003) 12 ANZ Insurance Cases 61-564. Quite different approaches were taken in these two cases. It is clear that McClellan J was not referred to the earlier decision of Cohen J. In summary, Cohen J regarded s 36 as producing, as a matter of statutory effect, what really amounted to a vesting of one insurer’s policy liabilities and obligations in the other insurer, while McClellan J did not see the section as having any such operation.

32 In CSR Ltd v The New Zealand Insurance Co Ltd, Cohen J was of the opinion that there existed a second basis on which the assignee insurer could be sued in respect of insurance liabilities originally undertaken by the assignor to its policyholders. His Honour explained the matter thus (at p.78,196):

“There is a further basis upon which I consider that the plaintiffs have a right to join the second and third defendants. This is an assumption of a trust existing in favour of the insured persons under the various contracts of insurance. In my opinion United and South British, when entering into the agreements of 20 January 1984, did so as trustees for those persons.”

33 That conclusion was, of course, based on the precise terms of the agreements in question. It is fair to say that those agreements were not, in all respects, the same as those involving AIL, Phoenix and Vero.

The s 511 jurisdiction

34 Against this background, I return to the question whether it is appropriate to determine, upon the present application by AIL’s liquidator under s 511 of the Corporations Act, the question whether the insurance liabilities of AIL are now insurance liabilities of Vero.

35 The liquidator takes the view that the question posed should be answered in the affirmative – either because s 36 of Insurance Act, as previously in force, operated in the way stated by Cohen J (rather than in the way stated by McClellan J) or because a trust in favour of policyholders arose in accordance with the alternative approach of Cohen J. The question is by no means an easy one. In addition, of course, it is a question in which Vero has an obvious and close interest.

36 It is necessary to point out, at this stage, that there is evidence of some disagreement between AIL’s liquidator and Vero about a matter arising from the contractual relationship. After commencement of the winding up of AIL, Vero lodged a proof of debt. It was for “damages for anticipated breach of contract” more particularly described as follows:

“Contingent claim for loss of reinsurance recoveries the creditor is unable to obtain if the company breaches its obligations under an agreement with the creditor dated 14 [sic] December 1984 (as amended).”

37 AIL’s liquidator rejected this proof of debt by letter to Vero dated 15 November 2005. In the following period of more than two years, Vero has taken no steps to appeal against the rejection of the proof of debt. The proof of debt does tend to suggest, however, that, on Vero’s view of things, a breach of contract is threatened by reason of the winding up of AIL – or, perhaps, by reason of the dissolution that will follow on from completion of the winding up.

38 An application under s 511 for determination by the court of a “question arising in the winding up” is not the occasion for the making of orders affecting the rights of outsiders. Indeed, a determination under s 511 cannot, of itself, bind anyone except the liquidator and the persons entitled to participate under the winding up. Its effect within that group is merely to sanction a course of conduct on the part of the liquidator so that he or she may adopt that course free from the risk of personal liability for breach of duty. Speaking of the closely analogous jurisdiction under what is now s 479(3) of the Corporations Act, McLelland J said in Re G B Nathan & Co Pty Ltd (1991) 24 NSWLR 674 at 679-680:

“Modern Australian authority confirms the view that s 479(3) ‘does not enable the court to make binding orders in the nature of judgments’ and that the function of a liquidator's application for directions ‘is to give him advice as to his proper course of action in the liquidation; it is not to determine the rights and liabilities arising from the company's transactions before the liquidation’: see Re Security Provident Fund Ltd (In Liq) (1984) 73 FLR 264 at 265; 9 ACLR 56 at 57; 2 ACLC 594 at 595; Murdoch v Crawford [1986] VR 97 at 99; Re Sportsman's Leisure & Hobby Warehouse Pty Ltd (In Liq) [1990] 2 Qd R 93 at 96 and Re Byron Moore Journeaux Ltd (In Liq) [1990] VR 683 at 684; see also Re TTC (SA) Pty Ltd (In Liq) (1983) 32 SASR 532 at 535 and, in relation to a receiver's application for directions, Re Odessa Promotions Pty Ltd (1979) ACLC ¶40-523 at 32,105-32,106 . Canadian authority is to similar effect. In Re Ward (1987) 66 CBR (NS) 165 at 171 , Dickson J of the Supreme Court of New Brunswick said in relation to the equivalent provision under the (Canadian) Bankruptcy Act :

‘It seems well settled in law that in an application under s 16 of the Act a court must confine itself, in giving directions, to matters concerning administration of the estate and has no authority to resolve substantive matters in dispute between a trustee and a third party.’ “

39 To the same effect are observations of Fitzgerald P (with whom McPherson JA and Thomas J agreed) in Re Southern Cross Airlines Holdings Ltd [2000] 1 Qd R 84 at 93:

“[T]he primary purpose of the Court’s directions to a liquidator, namely, the protection of the liquidator from allegations that he or she has acted improperly or unreasonably or has caused actionable loss, imports its own inevitable limitation. It is ordinarily inappropriate for a direction to be given which will adversely affect identifiable legal rights or interests of other persons or will entitle the liquidator to do so with impunity.”

Conclusion

40 I am not persuaded that it will be, in terms of s 511(2), “just and beneficial” for the court to determine the question whether the several instruments to which AIL became party were effective in such a way that insurance liabilities initially incurred by AIL have come to be liabilities of Vero to the exclusion of AIL. As I have said, Vero has already foreshadowed a claim for damages for breach of contract in consequence of the winding up of AIL. In addition, the result the liquidator seeks to achieve upon this application is a determination of the respective rights and obligations of AIL and Vero arising from the several existing contracts. A decision that the insurance liabilities are now liabilities of Vero to the exclusion of AIL – or that they remain liabilities of AIL to the exclusion of Vero – is something that directly affects Vero. It would, in my opinion, be inappropriate for the court to accede to the liquidator’s unilateral application by advising him on that question with a view to his proceeding with his administration accordingly, at the same time leaving entirely at large the possibility that properly constituted proceedings between AIL and Vero might later cause the respective rights and obligations to be determined in a binding way to some other effect.

41 Just as in Re Security Provident Fund Ltd (1984) 9 ACLR 56, Blackburn CJ declined, upon a liquidator’s ex parte application for directions, to determine the rights and liabilities of the parties to a mortgage granted to the company before winding up, so I should decline, upon the present ex parte application, to make what must of necessity be a determination of the respective rights and obligations of AIL and Vero derived from the several contracts entered into between 4 December 1984 and 19 January 2004.

42 The appropriate course will be for the liquidator of AIL to have an opportunity to consider the best way forward, perhaps by filing an amended originating process by which appropriate declaratory relief is sought and Vero is added as a party: see, for example, Otis Elevator Co Pty Ltd v Guide Rails Pty Ltd (2004) 49 ASCR 531 at [6].

43 I will arrange for the matter to be listed before me at an early date with a view to entertaining such further application as AIL’s liquidator wishes to make.

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