S160 If at any time there is no registered trustee who is the trustee of the estate of a bankrupt, the Official Trustee shall, by force of this section, be the trustee of the estate.
27 In my view, the reference to a "period when that position [of trustee] would otherwise be vacant" necessarily refers to a period when there is a deed of arrangement that is in force and when, for other reasons, there is no trustee of that deed. Once the deed has terminated, the trustee may remain as trustee, but cannot be described as a trustee under Pt X.
28 Thus, I think, on its proper construction, s 160 is intended to operate only during the currency of a deed of arrangement, and has no operation once such a deed has been terminated.
29 It follows that if Mr Watson holds, as property assigned to him pursuant to the deed, Mr Greaves' rights under the policy, then in the events that have happened he holds those rights on trust for Mr Greaves.
30 There is nothing irrational or absurd in this. The parties used the mechanism of a deed of arrangement, not that of a deed of assignment. The creditors - specifically, ASIC and One.Tel (between them creditors for $20,350,000) - did not extend the operation of the deed as permitted by clause 17(c)). Why should Mr Watson be able to hold on to the residue (if any) of the property assigned following termination of the deed? I see no reason why he should.
31 Mr Street submitted that, on termination of the deed, any vesting of the property in Mr Watson pursuant to clause 2 of the deed likewise terminated. He referred to clause 1(e) of the deed and s 213 of the Bankruptcy Act.
32 Any vesting that has occurred, occurred by reason of the making of the deed. This is so whether property vested at law or in equity (subject, in the case of assignment at law, to the giving of notice to perfect the assignment; in this case such a notice was given). Vesting was not a continuous process. Termination of the deed did not operate to divest Mr Watson of the property that had vested in him. At most, termination of the deed is relevant to the identification of those for whom, thereafter, he holds any remaining property on trust.
33 Question 4 should be answered: "For Mr Greaves beneficially".
Fifth question
34 This question turns on the construction of clauses 10 and 11 of the deed (in context) and on their operation in the events that have occurred.
35 The release for which clause 10 provides is conditional upon the execution by Mr Watson of a certificate under clause 9. He has not executed any such certificate; nor (given the termination of the deed) will he do so. Thus, at no time before the termination of the deed was the condition of the release satisfied.
36 It follows that question 5(a) should be answered "no".
37 It is clear that the parties to the deed intended that the possibilities set out in clause 9 (pursuit of the litigation against CGU to finality, or alternatively the making of a decision not to pursue it) between them constituted the entire universe of available possibilities. To put it another way, it is clear that the parties contemplated that one or other of those courses would be taken: supplemented if necessary (for the first course) by an extension of time under clause 17(c).
38 The clear purpose of clause 11 was to protect Mr Greaves from enforcement action (subject to the qualification introduced by the concluding words "other than to seek recovery pursuant to the arrangement constituted by this Deed") pending the grant of a release under clause 10. As I have said, the parties contemplated that one or other of the conditions for the execution of a clause 9 certificate, and thus the condition for the operation of the clause 10 release, would occur either within the three year period following the execution of the deed or within an extension thereafter to finalise the proceedings against CGU.
39 On the proper construction of clause 11, the "stay" (a convenient although not entirely accurate word) for which it provides must inure until, through the execution of a clause 9 certificate, the release granted by clause 10 becomes operative.
40 Ms C E Adamson, SC, who appeared with Mr R C Scruby and Mr A R Lang of counsel, for Mr Watson, submitted that clause 11 was not intended to survive termination of the deed. I do not agree. The effect of that construction would be to deprive Mr Greaves of the protection which, clearly enough, was the consideration for his entry into the deed and his promises contained in it. If clause 11 were so limited, it would have been open to Mr Watson, at the direction of ASIC and One.Tel, by inaction to deprive Mr Greaves of that protection.
41 Clearly, the clause 10 release was intended to survive termination. The clause 11 stay was intended to provide protection to Mr Greaves until the clause 10 release became effective. Why should the clause 11 stay be limited to the lifetime of the deed? I do not think that it should, particularly in circumstances where it was open to Mr Watson, supported by ASIC and One.Tel, to seek to extend the operation of the deed to enable him to finalise recovery action.
42 Ms Adamson submitted that to give clause 11 operation beyond termination of the deed might deprive creditors of the effective benefit of the assignment of the rights under the policy. But that situation arises only (if it does arise at all) because Mr Watson and the creditors did not extend the operation of the deed. At all times during the term of the deed, they had it in their power to do so, and thereby to preserve the benefit of the assignment. Thus, the possible loss of that benefit is not a commercial absurdity flowing from the construction of clause 11 that gives it continuing operation after termination of the deed. The parties (by which I mean Mr Watson, ASIC and One.Tel) had the power and the means to avoid that consequence.
43 I should note once more that the "stay" for which clause 11 provides is limited in its terms: "otherwise than to seek recovery pursuant to the arrangement constituted by this Deed". The answer that I propose to give to question 5(b) necessarily encompasses that limitation.
44 Clause 5(b) should be answered "yes".
Sixth question
45 I did not understand this question when first I read it, and my incomprehension has not been dispelled by the submissions put in support of it.
46 The deed confers no rights on CGU. CGU was not a party to the deed.
47 The variations effected on 13 April 2005 had the effect of making it clear that the releases granted to Mr Greaves by clauses 8 and 10 of the deed extended to costs orders made against Mr Greaves in favour of CGU in certain proceedings brought by Mr Greaves against CGU, and made other provisions in relation to those costs. They conferred no right on CGU.
48 The circumstances in which rights may accrue under a contract (whether or not under seal) in favour of strangers to the contract are limited. None of them was said to apply here.
49 The "right" identified was, I think, the "right" to be free of liability to Mr Greaves under the policy because, by reason of the execution of the deed, Mr Greaves had no liability to which the policy could respond.
50 It is unnecessary to pursue this interesting concept. I think the simplest and certainly the appropriate course, having regard to my answers to questions 4 and 5(b), is to answer question 6: "Does not arise".
Seventh question
51 This turns on the relevant terms of the policy, in light of my answers to questions 1-5.
52 Undoubtedly, the orders for compensation and for costs made against Mr Greaves are each capable of being a "loss" as defined. But the policy is one of indemnity. If and for so long as the orders are not enforceable against Mr Greaves, there is nothing in respect of which he has any entitlement to be indemnified.
53 Question 7 should be answered accordingly.
Eighth question
54 Mr Street submitted that clause 2 of the deed was not an effective assignment at law, because it was a future and not a present assignment.
55 Ms Adamson submitted to the contrary. She submitted further that if the assignment were ineffective at law, it was effective in equity because it was given for value.
56 Mr Street submitted that there was no valuable consideration, in particular for the assignment of rights under the policy, and hence no equitable assignment (or specifically enforceable agreement to assign). He submitted that the consideration was severable and that the consideration for the assignment of the rights under the policy was the clause 10 release.
57 It is unnecessary to resolve the question of whether clause 2 effects a present assignment. My tentative view is that it should be construed as effecting a present assignment of such of the property described in the schedule to the deed as was capable of assignment without any formality, and an agreement to assign (or equitable assignment), of the other property. On that tentative view, Mr Greaves' rights under the policy would have been assigned at law given, as I have said, that notice of the assignment has been given.
58 But if this were not so, clause 2 would be construed to effect an equitable assignment of the whole of the property in question. It is clear that the consideration for Mr Greaves' promise to assign (clause 2) was the releases (clauses 8 and 10) the stay (clause 11) and Mr Watson's promises as Trustee. That is all good, or valuable, consideration. Even if Mr Greaves does not obtain the benefit of the clause 10 release, still he received valuable consideration for his promise in clause 2. In this context, I see nothing in the construction of the deed to warrant the proposition that the various items of consideration should be apportioned to individual elements of the promise to assign.
59 Thus, there being no issue as to the identity of the subject property, the assignment of it by clause 2 would be effective in equity if for any reason it were not effective at law.
60 For that reason, question 8 should be answered "yes ".
Ninth question
61 This question raises the point referred to at [31] and [32] above in relation to the fourth question. For the reasons that I there gave (in relation to Mr Street's submission based on clause 1(e) of the deed and s 213 of the Bankruptcy Act) termination of the deed does not render void, or undo, any vesting of property that had occurred pursuant to clause 2 of the deed.
62 Question 9 should be answered "no".
Orders