Chelsea and Waltham Green Building Society v Armstrong [2009] NSWSC 696 | Case summary

3871/07 HUGH JENNER WILY AS LIQUIDATOR OF ANGLICAN INSURANCE LIMITED (IN LIQUIDATION) JUDGMENT 1 By a further amended interlocutory process filed in court on 22 April 2009, the liquidator of Anglican Insurance Limited ("AIL") renews, in amended form, his application for determination of questions arising in AIL's winding up. The earlier application was the subject of my judgment of 6 February 2008: Re Anglican Insurance Ltd [2008] NSWSC 41; (2008) 26 ACLC 147. 2 The winding up of AIL is a members' voluntary winding up. It commenced in 1999. The liquidator's concern, in practical terms, is to know whether he needs to continue his administration or may regard the affairs of AIL as "fully wound up" for the purposes of s 509 of the Corporations Act 2001 (Cth) so that the process directed towards dissolution may be commenced. The central issue concerns liabilities under general insurance policies written by AIL before it ceased to carry on insurance business in 1984. 3 The background is stated in the judgment of 6 February 2008. I need not repeat it. Nor do I pause to set out again the content and effect of the several documents discussed at paragraphs [10] to [24] of that judgment and summarised at paragraph [25]. The purpose of the documents was to cause Vero Insurance Limited ("Vero") to become subject to the liabilities of AIL under insurance policies written by AIL before it discontinued insurance business some 25 years ago. 4 Since the matter was last before the court, two further documents of relevance have come into existence. They supplement those referred to in the earlier judgment. The two further documents are a deed between AIL and Vero dated 19 November 2008 and a deed poll made by Vero on 19 November 2008. 5 The first of the deeds of 19 November 2008 amended the deed of 19 January 2004 referred to at paragraphs [20] and following of the judgment of 6 February 2008. In particular, clause 3(c) (see paragraph [22] of the earlier judgment) was varied by omitting "subject to clause 7.5"; clause 3(c)(I) was altered to read "the obligations of Anglican (and its liquidator) under clause 4 of this deed terminate"; and, in clause 7.5, the cross-reference to other clauses is expanded to include clause 2. 6 The deed poll of 19 November 2008 executed by Vero is expressed to be for the benefit of every person who is a party to a policy of general insurance entered into by AIL as insurer. Vero states in the deed poll that every such person may rely on the deed and enforce it even though not a party to the deed and even though the person's claim for indemnity may not be in existence at the date of the deed. Vero also states that the deed is irrevocable and is to remain in force until Vero has fully performed the obligations under the assignment deed of 1999 referred to at paragraph [18] of the earlier judgment. The operative part of the deed poll then follows in these terms: "Vero Insurance covenants in favour of each Insured Person to perform its obligations under the Assignment Deed and on the basis that its obligations will not be affected by the liquidation or deregistration of Anglican." 7 The advent of the deed poll is significant. It provides, for the first time, a direct link between Vero and the persons insured under policies of insurance written by AIL. The deed poll can be sued on "by any person with whom the covenant was made": Chelsea and Waltham Green Building Society v Armstrong [1951] Ch 853 per Vaisey J quoting the second edition (1928) of "Norton on Deeds" at 29. Classes of non-parties who typically derive rights under deeds poll are beneficiaries under a declaration of trust created by deed (see, for example, Oakes v Commissioner of Stamp Duties (NSW) [1954] AC 57) and creditors to whom a guarantee is extended by deed poll (an example is found in Re A&K Holdings Pty Ltd [1964] VR 257). An entitlement may be claimed under a deed poll by a person within the relevant class only upon satisfaction of any condition that the deed attaches to the entitlement: Macdonald v Law Union Fire & Life Insurance Co (1874) LR 9 QB 328. A recent case in which an order for specific performance was made in respect of a covenant in a deed poll created in favour of a company's members in the context of a Part 5.1 scheme of arrangement is Toal v Aquarius Platinum Ltd [2004] FCA 550. 8 I am satisfied that, because of the deed poll, insured persons have a right as against Vero to performance by Vero of the obligations of AIL as insurer. And as between Vero and AIL, the effect of the other documents is that Vero, having performed its covenant in favour of an insured person in a particular case, has no recourse against AIL. 9 Despite the creation of the rights arising from the deed poll, I am still not persuaded that it is appropriate to make a determination or declaration that the documents, taken as a whole, "were effective to transfer Anglican Insurance Limited's liability for present and future claims to Vero Insurance Limited" (these being the words used in the further amended originating process). In relation to the concept of "transfer" of "liabilities", the issues discussed at paragraphs [27] to [33] of the judgment of 6 February 2008 remain. 10 I am, however, satisfied that the creation of the deed poll means that AIL will no longer be a necessary party to any action brought by a policyholder against Vero. There is now a direct covenant by Vero in favour of each policyholder upon which the policyholder may sue Vero. 11 It follows, in my view, that it is open to the liquidator to take the view that the possibility that further insurance claims may emerge will be no barrier to a conclusion that, in terms of s 509 of the Corporations Act, "the affairs of the company are fully wound up". The meaning of that expression was explained by James LJ in Re London and Caledonian Marine Insurance Co [1879] 11 ChD 140 at 144: "… when the liquidator has done all that he can to wind up the company, when he has disposed of the assets as far as he can realise them, got in the calls as far as he can enforce them, and paid the debts as far as he is aware of them, and has done all that he can do in winding up the affairs, so that he has completed his business so far as he can, and is functus officio ." 12 It may be that a liquidator acts inappropriately if, following transfer of the company's business to another company which undertakes to pay all debts and liabilities, the liquidator proceeds promptly to dissolution without any real effort to ascertain the company's creditors. That was the case in Pulsford v Devenish [1903] 2 Ch 625 where the liquidator was held liable to a creditor whose claim the purchasing company refused to recognise. 13 This case is quite different. The liquidator has not acted with haste. On the contrary, the liquidator has been in office for almost ten years. The possibility that liabilities under insurance policies might continue to crystallise has been directly and carefully addressed by the liquidator. He has put into place comprehensive arrangements with Vero. In particular, he has now achieved a situation in which persons who may in future come forward with insurance claims will have direct legal rights against Vero. 14 In these circumstances - and where, over a period of almost ten years, not one holder of an AIL policy has sought to prove in the winding up and Vero has in fact dealt with and met all such claims as have emerged - it is, in my view, open to the liquidator to regard his administration as having reached the point described by James LJ in the terms set out above, subject only to distribution of any surplus funds among contributories. 15 I should refer to a particular point of concern expressed in the earlier judgment, namely, that it would be more appropriate for the question of the effective assumption of AIL's insurance liabilities by Vero to be determined in proceedings to which both AIL and Vero were parties - particularly since Vero had foreshadowed a claim for breach of contract against AIL (see paragraph [40] of the earlier judgment). New evidence that has now been put before the court by AIL shows, first, that Vero no longer maintains any claim that AIL may have been guilty of a breach of contract and, second, that Vero indeed accepts that the various documents were effective to transfer to Vero AIL's insurance liabilities in respect of present and future claims, that "Vero accepts liability in respect of AIL claims" and that Vero intends to continue to pay claimants in respect of such claims who, in the absence of the various documents, would otherwise be entitled to recover against AIL. Furthermore, Vero accepts that this position will continue to apply under the documents after deregistration of AIL. 16 The liquidator's evidence makes it clear that he still has some funds in his hands. Because the present situation is such that there will be no future insurance claims that AIL must meet, those funds should be regarded as distributable among the contributories, subject only to their first being applied to discharge any remaining expenses incurred by the liquidator, including the expenses of this application. The requirement for "special leave" of the court before a surplus is distributed among members does not apply in the case of a voluntary winding up: Re Yanollee Pty Ltd [2006] NSWSC 705; (2006) 24 ACLC 1087 at [9]. Once the surplus is distributed the liquidator will be justified in regarding the affairs of AIL as "fully wound up" for the purposes of s 509 of the Corporations Act. 17 It is desirable that the liquidator submit for consideration a form of determination under s 511 to give effect to this conclusion, together with a form of order for the payment of the costs of this application, on a solicitor-client basis, out of the assets of AIL. **********

Chelsea and Waltham Green Building Society v Armstrong

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