Pitman v Pantzer

THE INTERVENING CREDITORS' CROSS-CLAIM 5 The cross-claim is pleaded in the statement of cross-claim dated 8 November 2001 (and as amended on 21 November 2001 and by leave granted on 11 December 2001). The preliminary allegations (which are not contentious) there pleaded are as follows: · Abigroup agreed to indemnify Sandtara against all costs and expenses which Sandtana suffered out of any non-observance by Cenrin of its lease to Sandtara ("the Abigroup Indemnity"). (Mr Pitman admits this.) · Abigroup was indemnified by Genallco Pty Limited ("Genallco") and Mr Abignano ("Abignano") against liability under the Abigroup Indemnity ("the Abignano/Genallco Indemnity"). (Mr Pitman admits this.) · By the Comserv Deed, Mr Pitman and other parties indemnified Abignano and Genallco against their liability under the Abignano/Genallco Indemnity ("the Pitman Indemnity"). (Mr Pitman admits this.) · Dr Wenkart assured Mr Pitman that he would stand behind Mr Pitman in relation to the obligations to be entered into by Mr Pitman under the Comserv Deed ("the Wenkart Indemnity"). (Mr Pitman admits this.) 6 The contentions next made in the statement of cross-claim in support of the cross-claim are, so far as Mr Pitman (at least) is concerned, contentious. I will consider, and deal with, each contention and Mr Pitman's response, in turn as follows.

Contention (1): 7 The intervening creditors claim that Mr Pitman "contends that Wenkart is liable to indemnify him pursuant to the Wenkart Indemnity" (par 5). 8 Mr Pitman denies this claim, and pleads that his contention here is that as at the date of bankruptcy of Dr Wenkart (28 October 1999), Dr Wenkart was, pursuant to the Wenkart Indemnity, liable to indemnify Mr Pitman in respect of the debts claimed in the proof of debt but that, on the making of the sequestration order, this right which Mr Pitman had to an indemnity from Dr Wenkart, merged, in an equitable execution, into a right to prove against Dr Wenkart's estate.

Conclusions on contention (1): 9 In my opinion, so far as it goes (see below), Mr Pitman's plea is valid. 10 The position on the making of a sequestration order was considered by Gibbs CJ, Murphy, Brennan and Dawson JJ in Clyne v Deputy Commissioner of Taxation (1988) 154 CLR 589 at 594 - 595. Upon a debtor becoming bankrupt, the remedies against the debtor's person and property formerly available to a creditor are taken away and there is substituted a right to prove against the estate. From that time, a creditor is not a mere creditor, but a creditor whose claim is in proof. The claim is no longer a mere right of action for a debt. An action as for a debt could no longer be maintained. The debt had been, at any rate provisionally, merged in an equitable execution. Amounts which were owed by a debtor at the date of the bankruptcy may, notwithstanding the bankruptcy, still be described as debts, and, in a number of provisions, the Act refers to them as such. They are "debts" from which the bankrupt is not released until he is discharged from bankruptcy. However, they are not "still owing", since the effect of bankruptcy is that the debtor is no longer obliged to pay creditors, but is disabled from doing so. If the bankrupt offered payment, creditors could not safely accept it, since their right is a right of proof against the estate. 11 However, whilst this process of transmogrification is an essential element in the context in which the cross-claim is considered, the process itself is not decisive of the substantive outcome of the cross-claim, one way or the other. As will be seen, the fact of this merger does not mean that a creditor's new rights cannot be dealt with appropriately.

Contention (2): 12 The intervening creditors next plead several contentions as follows: "6. By deed dated 22 December 2000 (Throvena Deed) Abignano and Genallco agreed to sell to the Cross Applicant Throvena Pty Ltd (Throvena) and Throvena agreed to purchase from Abignano certain property referred to in the Throvena Deed as 'the Assigned Debts' for the sum of $2,047,500.00 (Price). 7. It was a term and condition of the Throvena Deed that Abignano and Genallco must on the completion of the sale and purchase of the Assigned Debts being the date when payment of the Price is made in full (Completion Date) release [Mr Pitman] from all claims and liabilities that Abignano and/or Genallco has or may have against [Mr Pitman] which give rise to or would give rise to a liability of Wenkart to [Mr Pitman] or would cause Wenkart to become liable to [Mr Pitman] and without limiting the generality thereof any liability arising out of or with respect to any of the matters referred to in the matters and proceedings referred to in the recitals to the Throvena Deed and the Schedule to the Throvena Deed. 8. The Price was paid in full by Throvena to Abignano and Genallco and the Completion Date was on 8 October 2001. 9. Pursuant to a deed dated 8 October 2001 (Settlement Deed) Abignano and Genallco conveyed to Throvena absolutely the legal and beneficial title to the Assigned Debts free of any and all mortgages, charges, liens and any other encumbrances. 10. … 11. Pursuant to their obligations under the Throvena Deed, by letter dated 5 October 2001, Abignano and Genallco released [Mr Pitman] from all claims and liabilities that Abignano and/or Genallco has or may have against [Mr Pitman] which give rise to or would give rise to a liability of Wenkart to [Mr Pitman] or would cause Wenkart to become liable to [Mr Pitman] and without limiting the generality thereof any liability arising out of or with respect to any of the matters referred to in the matters and proceedings referred to in the recitals to the Throvena Deed and the Schedule to the Throvena Deed. 12. By virtue of the release referred to in clause 11 above, [Mr Pitman] has no liability to Abignano and Genallco under the Pitman Indemnity and the Pitman Indemnity is not operative or enforceable against the [Trustees]. 13. By virtue of the aforesaid, [Mr Pitman] has no claim against Wenkart or his bankrupt estate under the Wenkart Indemnity. 14. By virtue of the aforesaid Wenkart is not justly or truly indebted to [Mr Pitman] and therefore [Mr Pitman] is not entitled to recover any monies in or be paid any monies out of or prove for payment of any debt or liability in the bankrupt estate of Wenkart. 15. By virtue of the aforesaid there is no debt or liability in existence which may be proved in the bankrupt estate of Wenkart by [Mr Pitman]." 13 On the facts, Mr Pitman admits that the provisions of the Throvena Deed are fairly summarised above in pars 6 and 7 of the statement of cross-claim and that the transaction pleaded in par 9 was entered into, and that the payment pleaded in par 8 was made. However, on the law, he raises several special defences. He says that any release was not given by deed, but was given without consideration and was otherwise ineffective to operate to release Mr Pitman. He relies here also upon the "merger" of the debt upon bankruptcy, as previously mentioned, so that, he says, the supervening events relied upon by the intervening creditors should be disregarded. He further pleads that by reason of the holding on 13 July 2001 that the Throvena Deed did not operate so as to deprive Mr Pitman of his right to prove, the intervening creditors are estopped from alleging that Mr Pitman cannot prove.

Conclusion on contention (2) 14 In order to consider these contentions, some further background should first be explained. 15 It will be recalled from my reasons dated 13 July 2001 that under the Throvena Deed, which was entered into after Dr Wenkart's bankruptcy, the "Assigned Debts" then agreed to be sold were defined (cl 1.1) substantially as follows: (a) "the Judgment Debt" (i.e. Hunter J's orders dated 29 September 1997 made on Mr Pitman's claim against Dr Wenkart) "whether as a debt or a right to prove …"; (b) "the Abignano Claimed Amount" (the amount (more than $5 m) claimed by Abignano and Genallco in their joint proof ("the Abignano Proof") dated 20 January 2000): (c) all rights and claims that Abignano and/or Genallco "has or may in the future have against Wenkart arising out of or with respect to any matters or things referred to in the Abignano Proof"; (d) all amounts for which Wenkart may be or become liable to pay Abignano and/or Genallco arising out of or with respect to any act matter or thing occurring prior to the Deed; (e) all claims and rights that Abignano and Genallco may have against Wenkart with respect to, arising out of, or as a consequence of "the Proceedings" (defined as all proceedings involving Cenrin, Wenkart or his creditors in connection with "the Hurstville Property" leased by Cenrin - the thirteen sets of proceedings between the parties, trial and appellate, in the Supreme Court, this Court and the High Court are specified); and (f) all rights and claims of Abignano and Genallco in the affairs of the bankrupt estate of Wenkart and in the affairs of Cenrin. 16 The letter dated 5 October 2001 pleaded in par 11 of the statement of cross-claim is addressed to Mr Pitman care of his solicitors, and was signed by Mr Abignano, for himself, and on behalf of Genallco. The letter stated that they had entered into an arrangement "with Throvena Pty Ltd and others" which satisfies their obligations insofar as they had a right to prove in Dr Wenkart's estate; and that the arrangement also required them to provide a form of release to Mr Pitman. 17 The letter went on to state that Genallco and Abignano "hereby release you from all claims and liabilities that [we have] or may have against you which give rise to or would give rise to a liability of Dr Wenkart to you or would cause Dr Wenkart to become liable to you and without limiting the generality of this Release releasing you from any liability to me or Genallco Pty Ltd pursuant to the following legal proceedings": (the thirteen sets of proceedings, being "the Proceedings" described in the Throvena Deed are then specified). 18 The Settlement Deed dated 8 October 2001, pleaded in par 9 of the statement of cross-claim, amended the Throvena Deed in several respects. That Deed provided for the "Price" to be paid by instalments. Under the Settlement Deed, provision was made for Throvena to pay Abignano and Genallco "the Compromised Sum" (of $929,583.31) in full and final satisfaction. The "Completion Date" was then stipulated to the date that payment of the Compromised Sum is received. (As noted, the pleading in par 8 that this payment was made on 8 October 2001, is admitted.) Again as noted, as pleaded in par 9 and admitted, the Settlement Deed provided that Abignano and Genallco thereby conveyed to Throvena absolutely the legal and beneficial title to the Assigned Debts free of any encumbrance. 19 The initial question, one of law, is whether dealings of these kinds, entered upon after the bankruptcy, are capable of operating to their tenure. As mentioned, Mr Pitman relies upon the application of the doctrine of merger explained in Clyne, contending that it followed that since, in truth, upon bankruptcy a debt no longer existed, no assignment of such a cause of action was possible. 20 In response, the intervening creditors submit that Clyne did not involve any assignment. They also rely upon In re Frost; Ex parte Official Receiver [1899] 2 QB 50. 21 Although not cited in argument here, there is a line of authority in this area, commencing with Frost. 22 In Frost, some of a bankrupt's creditors, whose proofs had been allowed, purported, after the bankruptcy, to assign their debts to the wife. She applied to the court of bankruptcy for an order that the trustee should pay her the dividend payable in respect of the debts so assigned. It was held that there was no jurisdiction, in those circumstances to order the trustee to do this. 23 Wright J said (at 52): "There is no doubt that Mrs. Frost is entitled to this dividend; the only question is how she ought to get it. Now by the rules, and, I should think, quite apart from the rules, on legal principles no action would lie for this dividend against the trustee, and payment of it therefore can only be enforced in the way provided by the statute, and the only section under which it is suggested that it can be enforced is that which says that the Court may order the trustee to pay. But the Court in making an order under that section ought to look at the framework and the intention of the Act; and it seems to me that the whole framework and intention of the Act and rules is that payment of dividends in the bankruptcy shall be made to the persons ascertained to be creditors in and by the bankruptcy proceedings, and that it is intentionally provided by the rules and forms that the Board of Trade is not to be called upon to recognise any persons except those who are so ascertained. It is obvious that if the trustee is to be required to recognise the rights of assignees the administration of bankrupts' estates might be incumbered with inquiries of a most embarrassing character, which it can never have been intended by the Legislature should be undertaken. The true view seems to me to be that the assignee in a case like the present should be allowed to prove and to have his proof substituted for that of his assignor. In such a case the assignee has, of course, to go to expense and trouble in getting his proof admitted and substituted for the existing proof; but I think it lies upon him to take that step unless he can get the assignor to sign an authority to the trustee to pay." 24 Bigham J, held (at 53) that the case was "entirely governed by" the precursor of s 140(1) of the Act, viz. s 58(1) of the English Act of 1883, "which points out how dividends are to be distributed, namely, amongst the creditors who have proved their debts", and said (at 53) - "The respondent [Mrs Frost] … has proved no debt at all; therefore, in my opinion, she does not come within the category of persons who are entitled to receive dividends from the trustee. She has no doubt a right to require the creditors who have assigned their debts to her to hand over to her the cheques which they may receive from the trustee, or the proceeds of those cheques. And she has probably, as my brother Wright has suggested, a right to put upon the file a proof to stand in the place of the proofs made by her assignors. If she does that she will become a creditor who has proved her debt within the meaning of s. 58, sub-s. 1, and will then, though not till then, be entitled to receive from the trustee the money which he has to distribute in respect of the debts assigned."

25 Frost was followed in In re Iliff [1902] 51 WR 80, where the need for an assignee to obtain the court's leave to prove was considered. Wright J (Darling J concurring) said (at 80):

"In future cases of this kind, after the official receiver or trustee has examined into the assignment, and satisfied himself as to its genuineness, the assignee should apply to the court to give leave to the official receiver to place a proof by him (the assignee) on the file in place of the proof of the assignor." 26 The assignment in Iliff was a legal assignment. In Re Hills; Ex parte Lang (1912) 107 LT 95, an equitable assignee sought the court's leave to substitute a proof for that of the assignor. Lang, a sole debenture-holder, obtained an order for the appointment of a receiver of the assets charged. Book debts of the company were comprised in the debenture security. Those debts included a judgment debt owed by a bankrupt (Hills) to the company, which debt was unpaid; and for which the company had been admitted to proof. Lang applied, as equitable assignee of the judgment debt, to be allowed to substitute, in Hill's bankruptcy, a proof for that of the company. Phillimore J granted leave to substitute. 27 Iliff and Hills were cited to the High Court of Australia in Howden v Cock (1915) 20 CLR 201. In that case, a debtor, who held a life interest in a deceased estate, entered into a deed of assignment of his property, including his life interest, for the benefit of his creditors, subject to a proviso that the life interests should not be disposed of by the trustee except at the direction of a three-fourths majority in value and number of the creditors and with the debtor's consent, and failing such consent with the approval of the court. Several of the creditors, sufficient in number to render it impossible without some of them to obtain a three-fourths majority, assigned their debts and proofs to the debtor's mother (being also a creditor herself). The assignments were procured by the debtor with the object of benefiting himself, and of hindering as far as possible the sale of his life interest, and his mother intended to use any power which she might obtain by reason of the assignments, to further that object. The trustee applied to the Insolvency Court for orders that the assigning creditors' proofs be expunged, and that the debtor and his mother be restrained from using the proofs and the assignments and from voting thereon, and from hindering the realisation of the debtor's estate. The application was refused and appeals to the Supreme Court and then to the High Court were dismissed. 28 Griffith CJ, Gavan Duffy and Rich JJ said (at 207 - 208): The effect of this deed was that upon its execution and registration the defendant became a free man so far as regards his debts owing to the creditors who executed it. On the other hand, the rights of the creditors in respect of their debts were converted into a right to receive dividends out of the proceeds of the property until satisfaction of the debts. This right to dividends was in the nature of property, which was assignable, in the mode appropriate to the assignment of such property, to any person qualified to acquire it. We entertain no doubt that the debtor himself was such a person." 29 After holding (at 209) that the jurisdiction of the Insolvency Court - "… extends to deciding any question that it becomes necessary to decide for making a complete distribution of the estate, that is to say, all such questions as a Court charged with the administration of an estate, as was the Supreme Court in what used to be called its equity jurisdiction, could decide …" 30 Griffith CJ, Gavan Duffy and Rich JJ said (at 210): "The appellant [the trustee] first contended that a purchase by the debtor of the interest of a creditor in the dividends payable in respect of his proof would operate as an extinction of the debt. In our opinion such a purchase cannot be distinguished in principle from a purchase of a similar interest made by an insolvent after obtaining his discharge. Such a purchase would clearly operate as a transfer to him of the right to receive the dividends." 31 Frost and Iliff were considered by Moule J and applied in Re Barry (1930) 2 ABC 85 (at 86) upon an application - "… for an order that the Official Receiver pay to them all dividends payable in respect of the proof of debt of Mary Frances Barry sworn and filed herein on the ground that the same were by agreement assigned to them by the said Mary Frances Barry." 32 After referring to Iliff, Moule J said (at 88): "That is, the assignee of the debt must so apply. When leave has been given by the Court then the proof of debt by the assignee of such debt becomes a debt owing by the estate and such assignee becomes a creditor of the estate and the Official Receiver or trustee can safely pay him the dividend." 33 Then, citing Wright J in Frost, Moule J said (at 88): "So that I think in cases where the assignee of a debt applies to the Official Receiver or a trustee to have his proof of debt substituted for that of the assignor, the Official Receiver or trustee should then give notice that he is prepared to substitute such proof by the new creditor and after allowing the old creditor time within which to appeal to the Court to expunge such proof, the assignee of the debt should then apply to the Court to give leave to the Official Receiver or trustee to place a proof by the assignee on the file in substitution for the proof of the assignor. Upon such application the Official Receiver should report to the Court the facts upon which he has based his decision and the assignee must set out all the facts on affidavit so that the Court may be in a position to say whether or not leave should be given for such proof to be filed. If the Official Receiver or trustee is satisfied that upon the preliminary application to him the debt should not be admitted he should give notice to that effect to the assignee of the debt and such assignee may if he be so advised appeal to the Court to admit such proof and at the same time ask for an order giving leave to file the said proof or such part of it as the Court may admit. It is for the assignee of the debt to make the application …." 34 Moule J went on to say (at 89): "… I cannot help thinking that some distinction must be drawn between the assignment of a dividend out of the estate and the assignment of the original debt owing by the estate. The dividend is payable upon the original debt owing by the estate and to make a person a 'creditor' within the meaning of the Statute the estate must owe the debt. The dividend is something payable on the original debt. This motion recites that the 'dividends' were assigned and not the 'debt'."

35 Re Barry was considered by Lukin J in Re Blake (1933) 6 ABC 85 who said (at 86-87):

"This is an application by a trustee for directions from the Court. A certain creditor, whose proof had been allowed, assigned his debt to third parties who claim that the trustee should pay them. The assignor has notified the trustee of the assignment and directed him to pay the dividend payable in respect of the debt so assigned to the assignees. The trustee has paid part of the dividend and holds the balance. His attention seems to have been called to the case of Re Barry ([1930] (2 A.B.C. 85) which indicated that he was not authorised to pay until the assignees themselves proved the debt payable to them and such proof had been admitted and filed by the leave of the Court. The judgments in the cases of In re Frost ([1899] 2 Q.B. 50), and In re Iliff ([1902] 18 T.L.R. 819) are quoted as authorities in support of the judgment given in Barry's Case. According to Frost's Case the steps prescribed as stated in Barry's Case have to be followed 'unless he (the assignee) can get the assignor to sign an authority to the trustee to pay.' (See end of Wright, J's judgment in that case on p. 52.) Here the direction to pay in the assignor's notice quoted above is such an authority, and the trustee not only can, but should, pay unless he is notified of any adverse claim to the dividend. The practice of 'getting an assignor to sign an authority to the trustee to pay' has obtained in England for some years. A form of 'Authority to trustee to pay dividends to another person' is contained in the Forms under the English Bankruptcy Act of 1914 (see Form 176, Williams on Bankruptcy, 14th Ed., p. 705) and was introduced on the 1st September, 1923. Form No. 121, now repealed under the Rules to our Act, was to the same effect. The form is obviously drawn to carry out the suggestion by Wright, J., in Frost's Case. The form seems to have been excised from the Rules under our Act because it was doubted whether it was not ultra vires. I think there is no foundation for such doubt. Its repeal does not affect the assignees' rights. They have just the same rights as a creditor had in 1899 under the English Statute when the judgment in Re Frost was given and when that form had not been prescribed. I am of opinion that the trustee was warranted in paying part of the assigned debt and will be warranted in paying the balance under the authority contained in the notice of the assignment referred to above. I direct accordingly." 36 Blake and the earlier cases were considered by Hale J in Re Gill; Ex parte Official Receiver (1964) 6 FLR 273, who said (at 275): "A creditor who has proved is entitled to assign his debt and his right to receive dividends. The trustee is authorised to pay a dividend only to a creditor who has proved or to somebody else on the written direction of that creditor. Mere production of an assignment does not entitle the assignee to receive payment. If the assignee has no written authority from the assignor he must obtain an order from the court permitting the substitution of a new proof by him in lieu of the original proof by his assignor." 37 As mentioned, the authorities post Frost were not referred to in argument. For this reason, on 7 December 2001 I re-listed the matter for further argument, and published the following reasons for the direction then given: "A procedural issue has now arisen as follows. Upon the final hearing of the cross-claim, a preliminary question has been argued as to the efficacy of a purported assignment of a debt owed by a bankrupt. On behalf of Mr Pitman it is submitted that by application of the reasoning in Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589, the debt is gone and it must follow that nothing is capable of assignment. In response, the Intervenors have relied upon the Frost case [1899] 2 QB 50 for the proposition that a creditor may assign its debts after bankruptcy. However, an examination of the Frost case whilst preparing my reasons for judgment suggests that that position is more complicated than the argument of either side would admit. The position, according to McDonald, Henry and Meek (at 82.1.50), is as follows: 'The assignee of a proved debt should obtain an order for leave to prove and to have the proof substituted for that of the assignor, unless he or she can get the assignor to sign an authority to the trustee to pay: Re Frost; Ex parte Official Receiver [1899] 2 QB 50 at 52; Re Iliff (1902) 51 WR 80; Re Blake; Ex parte Trustee (1933) 6 ABC 85; Howden v Cock (1915) 20 CLR 201; cf Re Barry (1930) 2 ABC 85. The position is the same with regard to an equitable assignee.' To the list of authorities cited, I would add also Re Gill; Ex parte Official Receiver (1964) 6 FLR 273. Although at this stage at least, no question arises of an assignee's entitlement to a dividend, it seems that implicit in Frost and the line of subsequent authority is a general requirement that, if an assignment is to be recognised by a court of bankruptcy, a fresh proof (by the assignee) be substituted with the leave of the Court. To this point although, as mentioned, the Intervenors rely upon Frost, they have not sought to substitute a proof, or to seek the leave of the Court in this connection. On the other hand, Mr Pitman has not, to this point, sought to contend that substitution was necessary, or that leave was required, or if required, that it ought to be refused. Rather, as noted, Mr Pitman relies upon the doctrine of merger so as to eliminate, he says, the debt itself. I am thus concerned to ensure that I have a correct understanding that the parties' respective positions are as follows: I take it to be implicit in the Intervenors' reliance upon Frost that they accept the need for the Court's leave to substitute their proof for that of their assignors. For his part, Mr Pitman relies solely upon the merger doctrine. As I followed his argument, although aware that Frost was relied upon, he took no point that the Intervenors had not formerly sought the leave of the Court to substitute their proof. In the circumstances, I will now hear any party if necessary, to correct my present understanding; and, if necessary, hear any application to amend any pleading. I give the following direction: Direct that any further submission by any party on the question raised in these reasons be made in writing filed and served by 5 pm on Monday, 10 December 2001. Stand the matter over to Tuesday, 11 December 2001 at 11.30 a.m." 38 On 11 December 2001, having heard further argument, leave was granted to the intervening creditors to amend their cross-application by seeking an additional order (prayer 3) that Throvena be permitted to substitute the original proof of debt of Abignano and Genallco dated 30 January 2000 with a new proof of debt of Throvena dated 10 December 2001 then lodged. 39 By this new proof, Throvena described its debt of $5,594,028.37 as "Assignment of the proof of debt of [ ] Abignano and Genallco [ ] dated 30/01/2000 … as per Deed dated 22/12/00 and completed as per … Deed dated 8 October 2001." 40 On 11 December 2001, leave was granted to Mr Pitman to amend his defence to answer new prayer 3, by pleading the following: that the purported assignment does not comply with the requirements of s 12 of the Conveyancing Act 1919 (NSW) or was otherwise not an effective assignment at law or in equity in that (a) neither Dr Wenkart nor his trustee was given notice of any assignment, as required by s 12; and (b) the assignment was not completed because the assignors did not provide the trustee with any direction to pay any dividend to any assignee or otherwise take any step to substitute a new proof. 41 To this special defence, the intervenors reply by contending that the assignment by the two deeds is effective under s 12 or otherwise for reasons particularised as follows: "Particulars (a) the assignment is effected by Deed and for valuable consideration; (b) sufficient notice of the assignment was given as required by Section 12 being Annexure "C" to the Affidavit of Geoffrey Albert Holden of 9 October 2001; (c) in the alternative, notice is not required to give effect to an equitable assignment of an equitable interest. The right to dividends is an equitable interest; (d) there is a clear expression of intention to make an assignment; (e) Frost's case does not require that there be contemporaneous notice of any direction to pay dividends, see re: Blake Ex Parte Trustee, 6(a), (b), (c) 85 and 86; (f) a purported assignment for value of legal property even if it fails in law or a contract for value to assign legal property effects an equitable assignment when consideration is paid or executed. Equity regards as done that which ought to be done." 42 Before considering whether leave to substitute a new proof ought to be granted, and whether there has been an effective release, I turn first to consider whether the two deeds effectively assigned a relevant chose in action. 43 The material provisions of the deeds should be recalled, as follows: 44 Under the Throvena Deed dated 22 December 2000, it was recited that Abignano and Genallco had lodged a proof for more than $5 m ("the Abignano claimed amount"), not yet admitted or rejected but in respect of which the trustee's preliminary opinion "is that he will admit it in the sum of $2,249,427.60". Abignano and Genallco agreed to sell, and Throvena agreed to purchase the "Assigned Debts" for "the Price" of $2,047,500, then payable by instalments over a period (cl 1.1, 1.3). 45 Under the Throvena Deed (cl 1.2), the sale of the Assigned Debts "shall not become effective and no property in the Assigned Debts shall pass to Throvena until the Completion Date" (defined in cl 1.12 to take place "upon payment of the Price in full"). However, by the amending ("settlement") deed dated 8 October 2001, the Price provided for under the Throvena Deed was amended to the amount which is the sum of the monies already paid by Throvena to Abignano and Genallco pursuant to the Throvena Deed as at the date of this deed and the "Compromised Sum" (cl.1(a)). The "Compromised Sum" is defined to mean the sum of $929,583.31 which, as noted above, has now been paid. 46 Clause 1.3(a) of the Settlement Deed provides: "(a) Abignano and Genallco hereby convey to Throvena absolutely the legal and beneficial title to the Assigned Debts free of any and all mortgages, charges, liens and any other encumbrances." 47 In my opinion, the position of an assignee of a debt proved in a bankruptcy is, in accordance with the line of authority cited above, as stated by McDonald, Henry and Meek, Australian Bankruptcy Law and Practice,, at 82.1.50, relevantly that is - "The assignee … should obtain an order for leave to prove and to have the proof substituted for that of the assignor …. The position is the same with regard to an equitable assignee." 48 It will further be recalled that in Howden v Cook the High Court (by majority, Isaacs J dissenting) saw no public policy, or other, objection in principle where a debtor's family (as here) acquires the "debt" and the right to any dividend, and, consequentially, the right to vote at a meeting of creditors. 49 Further, I am satisfied that the assignment of the material chose in action was "genuine" in the sense mentioned in Iliff, above. 50 Was there an effective assignment here? An assignment is the immediate transfer of an existing proprietary right, vested or contingent, from one person, the assignor, to another, the assignee (see Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 per Windeyer J at 26). The elements of the transaction are, first, that it is a transfer: that is, that its subject matter ceases to be the property of the assignor and becomes that of the assignee. Secondly, that the effect of the transaction is immediate: the transaction itself effects the transfer; nothing further has to happen or be done. Thirdly, the subject matter of the transaction is property which exists (although it may be an existing contingent right) at the time the transaction is entered into. Finally, the subject matter of an assignment is a proprietary right, as distinct from an obligation (see The Laws of Australia, Contract, Ch 6, Assignments (J R F Lehane at [117]). In my opinion, each of these ingredients were present here. 51 Assignments may be legal (by virtue of s 12 of the Conveyancing Act) or equitable. It is not necessary, on the view I take, to consider whether, as Mr Pitman contends, the notice or other requirements of s 12 were complied with here. In my view, there was an effective equitable assignment to Throvena of the chose in action being Abignano's and Genallco's right to prove in the bankruptcy, including entitlement to any dividend and to vote at any meeting of creditors. 52 The principles governing equitable assignment are well established. An assignment, for consideration which is paid or executed, of a debt or other contractual right (e.g. a chose in action) is regarded by equity as effective and complete, even if the assignment is not effected in accordance with s 12, where there is (as under the Settlement Deed here) a clear expression of an intention to make an immediate disposition, where there is (as here) valuable consideration (that is, consideration sufficient to support a simple contract), and (as here) that consideration is paid or executed. Equity then considers as done that which ought to be done, and treats the intended assignment as complete. Notice to the debtor, albeit desirable for practical reasons (to preserve priority), is not required to complete the assignment (Lehane at [128]). In the case of a debt, contractual right or other chose in action, an assignment will be regarded as complete in equity when (as here) the assignor has signed a written assignment and given it to the assignee (Lehane at [131]). 53 Accordingly, in my view, the subject chose in action was effectively assigned at least in equity. Moreover, contrary to Mr Pitman's submission, there is no issue estoppel or res judicata arising from my judgment dated 13 July 2001 (at [54]). Completion had not then occurred (see O'Donel v Commissioner for Road Transport & Tramways (NSW) (1938) 59 CLR 744 per Latham CJ at 758; Spencer Bower Turner & Handley, The Doctrine of Res Judicata at 99, 214 - 215). 54 Since the assignment was absolute and unconditional, there is no reason why, in accordance with the settled practice in this area explained in Frost and the succeeding authorities, leave should not now be granted to Throvena to substitute its proof of debt for that lodged by Abignano and Genallco. I propose to so order. 55 The next question is whether the purported release of Mr Pitman was effective. 56 It will be recalled that under the Throvena Deed, Abignano and Genallco agreed that on the Completion Date (i.e. upon completion by payment of the Price in full (cl 1.12), which payment has now been made), they must release Mr Pitman from all claims and liabilities that they or either of them has or may have against him (cl 1.4). By their letter to Mr Pitman dated 5 October 2001, they thereby released Mr Pitman. The Settlement Deed provided that, upon the Completion Date, they must furnish to Throvena written evidence that they have carried out their obligations pursuant to cl 1.4 of the Throvena deed. 57 A release is the discharge or extinguishment of a right of action which a person has or claims to have against another by an unequivocal statement that the right of action no longer exists. If (as here) the release is not under seal, consideration moving from the party against whom the claim is made is necessary to achieve an accord and satisfaction. A release not under seal is ineffective both at law and in equity in the absence of consideration although, in some circumstances, the actions and statements of the parties may create an estoppel precluding reliance on the absence of consideration to defeat the release (see The Laws of Australia, Contract, Discharge (J L R Davis) at [25]). 58 Whilst Mr Pitman himself gave no consideration for the release of his liabilities, and whilst the letter dated 5 October 2001 was not itself a deed, the provision of the release expressed by the letter was a step taken by Abignano and Genallco pursuant to their obligations under the Throvena Deed, as amended the Settlement Deed, and consideration obviously moved between the parties under those deeds: For its part, Throvena agreed to pay, and did pay, the Price for the Assigned Debts; for their part, Abignano disposed of the debts to Throvena. It was a term of the Throvena Deed, as has been seen, that Abignano and Genallco would release Mr Pitman from his liabilities to them. What then is the legal effect of this promise, so far as concerns Mr Pitman? 59 Mr Pitman was not a party to either deed, so that by virtue of the doctrine of privity, he cannot sue on either of those contracts. There are, however, ways in which the privity doctrine is "evaded", by application of other rules of law that may give a cause of action to a third party, or which may have the effect of making the third party a party to the contract. For example, the third party may be able to sue the promisee, and through the promisee, the promisor, by showing that the promisee holds rights as promisee in trust for the third party. In such a case, the third party's action against the promisor is based on a trust, not a contract. (see Laws of Australia, Contract, Privity (P Kincaid) at [105]). 60 In order for a promisee (here Throvena) to be regarded as a trustee of the promise to release Mr Pitman, the promisee must have intended at the time (of entry into the two deeds) to hold its legal rights for the benefit of the third party (Kincaid at [106]). In Trident General Insurance Co Ltd v McNiece Bros. Pty Ltd (1988) 165 CLR 107, Deane J said (at 147): "[T]he requisite intention should be inferred if it clearly appears that it was the intention of the promisee that the third party should himself be entitled to insist upon performance of the promise and receipt of the benefit and if trust is, in the circumstances, the appropriate legal mechanism for giving effect to that intention. A fortiori, equity's requirement of an intention to create a trust will be at least [be] prima facie satisfied if the terms of the contract expressly or impliedly manifest that intention as the joint intention of both promisor and promisee." 61 In my opinion, the inference should be drawn, from both the terms of the deeds and the conduct of the promisors and promisee, that their joint intention was that, upon completion for the purchase of the Acquired Debts, the third party, Mr Pitman, should himself be entitled to insist upon performance of the promise to release him. This was clearly Throvena's intention, in order that, upon the acquisition of the debts being completed, Mr Pitman would stand released from his liabilities to Abignano and Genallco, so that the s 73 proposal could proceed. It must be presumed, in the circumstances, that Abignano and Genallco were aware of this and intended it to happen. 62 It follows, in my view, that Mr Pitman was able to enforce, specifically if need be (Kincaid at [115]), Abignano and Genallco's promise to release him. Accordingly, the release given on 5 October 2001 was effective. 63 Alternatively, in my opinion, Abignano and Genallco, by their conduct in leading Mr Pitman to believe that he was released, would be estopped from denying that the release was effective (see above).

OTHER CONTENTIONS 64 Both sides have pleaded several other matters, but they do not now appear to be material. I will, however, hear any party to the contrary on 16 January 2002. I certify that the preceding sixty four (64) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont.

Counsel for the Applicant: Mr A Ogborne

Solicitor for the Applicant: The Bruce & Stewart Commercial Practice

Counsel for the Intervening Creditors: Mr J K Chippindall

Solicitor for the Intervening Creditors: Hunt & Hunt

Dates of Hearing: 27 and 29 November 2001 11 December 2001

Date of Judgment: 21 December 2001