Wabbits Pty Limited v Godfrey

Wabbits Pty Limited, a creditor of the insolvent company Godfrey, sought to challenge the rejection of its proof of debt by the Deed of Company Administrator (DCA). The proof of debt included claims for damages from a breach of a building contract, under the authority of Bellgrove v Eldridge, and for a sum owing pursuant to a Local Court judgment. The Federal Court was tasked with determining whether the DCA was correct in rejecting the proof of debt and, if not, whether the rejection was due to an error in adjudicating the building contract damages claim or the Local Court judgment claim.

The court examined whether the DCA had erred in rejecting the proof of debt, specifically considering the claims for damages from the building contract and the sum owed under the Local Court judgment. The court had to decide if the DCA's rejection of the debt proof was justified or if it resulted from an error in the assessment of either claim. Additionally, the court considered the insurer's subrogation rights, assessing whether the insurer was entitled to those rights even if the insured had not fulfilled the conditions of the policy, as per the precedent set in King v Victoria Insurance Co Limited.

The Federal Court found that the DCA had erred in rejecting the proof of debt. The court held that while the DCA was correct in rejecting the claim for damages under the building contract, the rejection of the claim for the sum owed under the Local Court judgment was erroneous. Furthermore, the court ruled that the insurer was subrogated to the insured's rights, applying the principle from King v Victoria Insurance Co Limited, regardless of whether the insured had strictly complied with the conditions of the policy. The court ordered that the proof of debt be admitted in part, reflecting the court's findings.