Second plaintiff v TREVOR PAUL CREWE

Supreme Court of Victoria|2016-11-11|Before: ROBSON J

CORPORATIONS - A director (Mr Crewe) of the corporation in liquidation (Akron) was engaged to provide management consultant services to Akron - The director (Mr Crewe) was also the sole director of Crewe Sharp, a corporation that provided management consultancy services.

CORPORATIONS - Liquidators claim against Mr Crewe as director and against Crewe Sharp as alleged shadow director of Akron for failing to prevent the company from incurring debts whilst insolvent - s 588(2) of the (Cth) (Corporations Act).

CORPORATIONS - Whether Crewe Sharp was a shadow director of Akron - s 9 Corporations Act - Crewe Sharp (the alleged shadow director) being the employer of the director (Mr Crewe).

INSURANCE - Liquidators claim for a declaration that the insurer of Mr Crewe and of Crewe Sharp (the corporation that employed the director), was liable to indemnify the insureds for the claims by the liquidators against Mr Crewe and Crewe Sharp.

PRACTICE AND PROCEDURE - Whether the liquidators had standing to seek the declaration against the insurer of Mr Crewe - Consideration of s 117 Bankruptcy Act 1966 (Cth) - Whether purported assignment by Mr Crewe to the liquidators of Akron of whatever rights and entitlements Mr Crewe had under the policy of insurance he had with the insurer, was sufficient to give the liquidators standing.

INSURANCE - Whether the professional indemnity insurance policy issued by the insurer was engaged by the liquidators' claim against Mr Crewe and Crewe Sharp under s 588(2) of the Corporations Act.

INSURANCE - Whether the insurer was entitled to deny liability through non-disclosure or misrepresentations of the insureds - ss 21 and 26 Insurance Contracts Act 1984 (Cth).

1 Ross Blakeley, Michael Ryan and Quentin Olde, the liquidators of Akron Roads Pty Ltd (in liquidation), are the first plaintiffs. Akron Roads Pty Ltd (in liquidation) ('Akron') is the second plaintiff. The first, second and third defendants were each directors of Akron. Mr Crewe, the first defendant, was also a director of the fourth defendant, Crewe Sharp Pty Ltd ('Crewe Sharp'). CGU Insurance Limited ('CGU'), the fifth defendant, issued a professional indemnity policy of insurance to Crewe Sharp. Crewe Sharp carried on the business of management consultancy and provided such services to Akron. Crewe Sharp also provided the services of Mr Crewe to Akron, to act as a director of Akron. Whilst Mr Crewe was acting as a director of Akron, Akron incurred debts whilst insolvent.

2 The liquidators and Akron (the plaintiffs) claim:

(a) against Mr Crewe, the second defendant and third defendants (together, 'the Sills') and Crewe Sharp, as directors of Akron, damages, for failing to prevent Akron incurring debts whilst insolvent, under s 588M of the Corporations Act 2001 (Cth) (Corporations Act); and

(b) against CGU, a declaration that CGU is liable under the insurance policy, to indemnify Mr Crewe and Crewe Sharp in respect of their insolvent trading liability to the plaintiffs.

3 For convenience I shall refer to the plaintiffs as the liquidators.

4 The history of this matter is set out in the High Court decision in CGU v Blakeley.[1] On 9 April 2013, the liquidators commenced proceedings in this Court against Mr Crewe and two other directors of Akron, Robert and John Sill (the Sills). The liquidators also made a claim against Crewe Sharp. The liquidators allege that Crewe Sharp was a director of Akron within the extended meaning of 'director' in s 9 of the Corporations Act.

5 The liquidators' claim is made under s 588M(2) of the Corporations Act. The cause of action created by s 588M(2) is enlivened by a breach on the part of a company director of the duties imposed by s 588G of the Corporations Act to prevent the company incurring debts when it is insolvent, at that time, or where it would become insolvent by incurring debts and where there were reasonable grounds for suspecting that the company was or would become insolvent.

6 The liquidators allege that Mr Crewe, the Sills and Crewe Sharp breached that duty by failing to prevent Akron from incurring debts when it was insolvent. The liquidators have settled their claim against the Sills. The liquidators have settled their claim against Mr Crewe. Crewe Sharp is not defending the claim against it by the liquidators. Crewe Sharp is now itself in liquidation. The remaining claims before me are the claims by the liquidators against CGU, and the liquidators' claim against Crewe Sharp. The liquidators have court approval to proceed against Crewe Sharp even though it is in liquidation.[2]

7 On 4 December 2013, Crewe Sharp made a claim on a Professional Indemnity Policy with CGU (the CGU Policy) ('Policy'), for indemnity in relation to the claim brought against it by the liquidators. Mr Crewe, as director of Crewe Sharp, was also insured under that policy.

8 On 6 March 2014, CGU sent a letter to Crewe Sharp denying that the Policy covered the liability asserted by the liquidators. CGU said that the claims against Crewe Sharp and Mr Crewe were expressly formulated as arising from breaches of their duties as directors.

9 In denying liability, CGU relied on an exclusion in the Policy for the liability of directors or officers of an incorporated body 'arising from any act, error or omission of a director or officer of that incorporated body while acting in that capacity', as CGU does in the proceeding before me.

10 CGU also relied upon an exclusion of claims '[a]rising from a liability to pay trading debts, trade debts, or the repayment of any loan', as is also relied upon in the proceeding before me.

11 On 20 June 2014, Crewe Sharp entered into a creditors' voluntary liquidation and its liquidators informed Akron's liquidators that it was unlikely Crewe Sharp would defend the proceedings against it. As mentioned earlier, the claim by the liquidators of Akron against Crewe Sharp in this proceeding are not defended. There is no appearance for Crewe Sharp.

12 When the matter came before the High Court, as discussed below, the High Court said that as at July 2011, Mr Crewe's net assets were about $1 million. Mr Crewe was not a bankrupt but the undisputed evidence was that his limited assets would be insufficient to cover the claim brought against him by the Akron liquidators in this proceeding. As discussed below, Mr Crewe has now settled the claim against him by the liquidators; his maximum personal liability is $125,000. Mr Crewe has met that liability and there is no suggestion that he will face bankruptcy.

13 On 20 August 2014, Akron's liquidators filed an interlocutory process in the proceedings in this Court, seeking an order that CGU be joined as a defendant and for leave to file and serve amended points of claim seeking a declaration that CGU was liable to indemnify Mr Crewe and Crewe Sharp under the Policy in respect of any judgment and costs order obtained by the liquidators against Mr Crewe and Crewe Sharp.

14 On 2 October 2014, Mr Crewe's solicitors informed the liquidators that he consented to the joinder of CGU and that he disagreed with CGU's decision to deny indemnity to Crewe Sharp (and himself). The liquidators of Crewe Sharp informed the liquidators (of Akron) that Crewe Sharp was unfunded, was not in a position to investigate CGU's denial of indemnity, and took no position in relation to the joinder application. The other defendant directors (the Sills) did not participate in the application.

15 On 13 February 2015, Judd J made the orders sought by the Akron liquidators.[3] CGU made an application for leave to appeal against those orders. That application was heard by the Court of Appeal on 15 and 19 June 2015. The Court ordered that the application for leave to appeal be granted but that the appeal be dismissed.[4]

16 On 11 September 2015, the High Court granted CGU special leave to appeal against the judgment and order of the Court of Appeal on the grounds that the Supreme Court lacked jurisdiction to entertain the claim by the Akron liquidators for declaratory relief against CGU.[5] The High Court held that the Supreme Court had federal jurisdiction which authorised it to entertain the claim and had the power to grant the relief sought.

17 I intend to address below in more detail, the High Court decision in CGU v Blakeley, after considering the respective submissions of the plaintiffs and CGU on the standing of the plaintiffs to seek declarations against CGU in respect of its liability to Mr Crewe, if any.

18 When the matter came on before me on 18 April 2016, CGU raised the issue of the liquidators' standing to seek declarations in relation to the liability of CGU in respect of its liability to Mr Crewe arising from the claims of the liquidators against Mr Crewe under s 588M of the Corporations Act. There was no challenge to the liquidators standing under s 562 of the Corporations Act to seek declarations in relation to the liability of CGU to indemnify Crewe Sharp for the claims against Crewe Sharp by the liquidators.

19 Counsel for the liquidators expressed surprise that the standing of the liquidators to seek declarations in relation to the liability of CGU to Mr Crewe was challenged. Counsel said they considered that those issues had been resolved by the High Court in CGU v Blakeley. Counsel for the liquidators also submitted that it was not necessary for them to plead facts giving rise to their standing to bring the claim against CGU in relation to CGU's liability to Mr Crewe for claims made against him by the liquidators.

20 On 23 March 2016, orders were made by consent between the liquidators and the Sills that the claims by the plaintiffs against the Sills were discontinued with a right of reinstatement.

21 In March 2016, the liquidators of Akron, Mr Crewe and Crewe Sharp entered into a Deed of Settlement ('settlement deed'). Under the settlement deed, Mr Crewe consented to judgment being entered against him for $12,992,880.05 in favour of the liquidators.

22 On 4 April 2016, orders were made by consent between the liquidators and Mr Crewe that Mr Crewe pay the plaintiffs as a debt due to Akron the amount of $12,992,880.05.

23 On 19 April 2016, I gave leave to the liquidators to file and serve a fourth further amended points of claim ('FFAPC').

24 Under the FFAPC, the liquidators seek the following orders against Mr Crewe and Crewe Sharp:

(a) an order under s 588M(2) of the Corporations Act that the defendants pay to the liquidators, as a debt due to Akron, an amount equal to the amount of the loss or damage suffered by the creditors (the details of which are set out in the particulars subjoined to paragraph 6 of the FFAPC) in relation to the debts owed to them by Akron, because of the insolvency of Akron;

(e) any other orders or relief as this Honourable Court thinks fit.

25 Under the FFAPC, the liquidators also seek the following relief against Mr Crewe, Crewe Sharp and CGU.

26 They seek a declaration that CGU is liable to indemnify Mr Crewe and Crewe Sharp in respect of any judgment herein obtained by the liquidators against Mr Crewe and Crewe Sharp and in respect of any sums (including legal costs) which the Court may order Mr Crewe and Crewe Sharp to pay the liquidators, and that Mr Crewe and Crewe Sharp are bound by the declaration.

27 As mentioned, Akron and the liquidators have settled their claims against the Sills and Mr Crewe. That leaves for determination only the claims against Crewe Sharp and CGU. CGU is defending the claim. As mentioned already, Crewe Sharp, having itself gone into liquidation in 2014, is not defending the claims against it, and Akron and the liquidators wish to proceed to judgment against it.

28 There are eight matters in issue. For the reasons that follow, I set out the answer to each issue.

29 First, do Akron and its liquidators have standing to seek a declaration, as against CGU, regarding the responsiveness of the Policy to the liability of Mr Crewe (if any) under the judgment entered on 4 April 2016? Answer: yes.

30 Secondly, was Crewe Sharp a 'director' (de facto or shadow) of Akron during the relevant times? Answer: no.

31 Thirdly, is Crewe Sharp liable for 'insolvent trading' as alleged by the liquidators? Answer: no.

32 Fourthly, does the Policy respond to Mr Crewe's liability under the judgement of 4 April 2016 and in view of the settlement deed? Answer: yes.

33 Fifthly, would the Policy respond to Crewe Sharp's liability (if it is a 'shadow' director) for 'insolvent trading'? Answer: yes.

34 Sixthly, does the trading debts exclusion in clause 6.5(d) (Trading Debts Exclusion) in the Policy apply? Answer: no.

35 Seventhly, does the director exclusion clause 6.9(c) (Directorship Exclusion) in the Policy apply? Answer: no.

36 Eighthly, can CGU avoid liability to indemnify Crewe Sharp (if it is a 'shadow' director) and/or Mr Crewe on the basis of non-disclosure or misrepresentation? Answer: yes.

37 It is useful to set out the relevant events before descending to the detail required to decide the matters in issue.

38 Over the course of his 40plusyears' career Mr Crewe held several senior management positions in large publicly listed and private companies in Australia.

39 In 1991, Mr Crewe met Ken Sharp and together they started the Crewe Sharp management consulting practice in Perth. A Victorian office was later opened. Mr Crewe met Ken Sharp while working at Bell Transport, where Mr Sharp was the chief financial officer. The business operated through Crewe Sharp (Vic) Pty Limited, which traded under the name 'Crewe Sharp Management Services.' In 2004, the company name was changed to 'Crewe Sharp Pty Limited.'

40 From 1991, Mr Crewe acted as the managing director of Crewe Sharp, conducting a management consultancy business. Mr Crewe was formally appointed as the director and secretary of Crewe Sharp on 14 October 1996. On 6 February 2001, Mr Sharp resigned as a director and retired from Crewe Sharp.

41 There were other entities within the Crewe Sharp group which had specific functions. For example, information technology, training and recruitment services.

42 These other companies in the Crewe Sharp group did not perform management consultant services. With the exception of a short engagement by Crewe Sharp Career Bridge Pty Limited, none of the other entities were engaged by Akron at any time.

43 The clients of Crewe Sharp were privately owned companies and family businesses from various industry sectors with annual turnover ranging from $10 million to $300 million. The type of issues experienced by these clients were underperformance, ineffective or suboptimal management and governance structures or conflicts between management and staff.

44 Crewe Sharp focused on providing practical, 'hands-on' experience to improve clients' business performance and profitability. Crewe Sharp provided management consulting services to clients by:

(a) preparing a Business Performance Evaluation, which involved diagnosis of company performance through analysis of a company's revenue, costs and profits, structure, its operations and interactions with its clients and customers; and

(b) implementing the recommendations made in the evaluation reports.

45 Mr Crewe said that he saw it as Crewe Sharp's point of difference with other management consultants that Crewe Sharp and he actively participated in the implementation of their recommendations. Mr Crewe said that depending on the nature of the engagement, this involved the direct placement of a director or staff within the company. Mr Crewe said, however, that Akron was the only company to which he was formally appointed as a director.[7]

46 Mr Crewe said that for the companies to which he was not formally appointed as a director, he worked closely with their directors in guiding and steering them and their companies towards better profitability, gave instructions that were adhered to by the company and frequently acted as chairman.

47 Mr Crewe personally provided management consulting services to numerous companies.

48 The terms of Crewe Sharp's engagement with an entity were normally documented in a mandate letter.

49 By 2009, Crewe Sharp had 12 employees available to work as consultants at a company by whom Crewe Sharp was engaged. Depending on the scope of engagement, this may have involved the employee working from the company's offices on either a part-time or full-time basis, or performing the engagement from Crewe Sharp's offices and attending the company's premises as required. Crewe Sharp normally charged an agreed hourly fee for the time spent by the employees on the engagement.

50 Turning to the Akron engagement, in late-2000, Mr Crewe became aware of a company called Standard Roads Pty Ltd ('Standard Roads'). The chairman and majority shareholder of Standard Roads was Ron Rado. At that time Standard Roads owned 51 per cent of the shares in Akron. Ron Rado passed away suddenly in 2001.

51 At about that time, Mr Crewe was introduced to Ron's son-in-law, Gerard Keeghan, who was the chief executive officer of Standard Roads.

52 On 5 June 2001, Gerard Keeghan the Chief Executive of Standard Roads wrote to Mr Crewe as the managing director of Crewe Sharp thanking him for meeting with him the day before to discuss how Mr Crewe may be able to assist Mr Keeghan as a director/chairman of their joint venture companies Astec Pty Ltd and subsidiaries Akron Roads Pty Ltd.

53 Akron provided civil construction and engineering services to a broad variety of public and private sector clients. It focused principally on the construction of arterial roads, residential and industrial subdivisions and other infrastructure projects such as racetracks, wharves and footpaths. By 2010, Akron employed approximately 190 permanent staff and more than 250 contractors. As at the date it was placed into administration by its directors (1 February 2010), Akron had 138 current contracts, on behalf of 52 principals, at various stages of completion.

54 Mr Keeghan informed Mr Crewe that the directors of Akron were himself (representing the Standard Roads Group (SRG)), Robert Sill as chief executive (with a 37 per cent shareholding in Akron) and John Sill as executive engineer (with a 12 per cent interest in Akron). The company secretary was Ian Shields, an appointee of the SRG.

55 On 13 June 2001, Mr Crewe as managing director of Crewe Sharp wrote on Crewe Sharp letterhead to Mr Keeghan proposing that Crewe Sharp be engaged by the SRG to provide advice and to act in the capacity as either chairman/director of nominated operating companies within the SRG.

56 The letter is headed, 'Appointment of Crewe Sharp (Vic) Pty Ltd, Mandate No: J130601/2.' The letter stated as follows:

It is with pleasure we submit to you for your consideration our Mandate Agreement following on from our recent meeting and discussions. The purpose of this Mandate Agreement is to confirm our appointment and the conditions that relate to this appointment so that you may peruse them and determine that they meet with your requirements and will satisfy the outcomes of the discussions that we had.

1. Terms of Reference

Crewe Sharp (Vic) Pty Ltd (herein referred to as CSVPL) is engaged by Standard Roads Group (herein referred to as SRG) to provide advice and to act in a capacity as either Chairman/Director of nominated operating companies within SRG.

The services of CSVPL will be charged at the rate of $350 per hour.

CSVPL will invoice its fees on a weekly basis for which Payment would be due and payable on a strictly net seven (7) days basis.

Either party may terminate this appointment on seven (7) days written notice, at which point in time, SRG must pay all outstanding accrued fees and costs as at the date of termination of contract.

While CSVPL will take all due care, caution and procedure to protect the confidentiality of all matters relating to this appointment, they will not under any circumstances whatsoever, be liable to SRG or any other party for any loss or damage resulting from any misuse of confidential information by any third party.

The directors of SRG warrant to CSVPL that at the date of signing this letter of appointment, they are not, to the best of their knowledge in breach of any statutory or other obligation that is or might affect this appointment or, any services to be provided under it. If they should become aware of any such breach or any breach may come into existence during the term of this appointment they agree to inform us immediately in writing of that breach.

In closing, I would like to thank you for allowing us the opportunity to be of service to you. We look forward to working with you and to developing a rewarding and lasting relationship.

Could you please sign both copies of the Mandate Agreement to confirm the arrangements, however if there is any aspect of the Mandate Agreement that you are not happy with or wish to discuss further, please do not hesitate to contact me.

57 The letter was signed by Trevor Crewe, as managing director of Crewe Sharp. It was signed for and on behalf of the Standard Roads Group and dated 18 July 2001. Under this arrangement Mr Crewe was not paid personally for acting as a director, instead his time was billed by Crewe Sharp for the management consultancy services he rendered on its behalf to Akron at the rate of $350 per hour.

58 Mr Crewe's services were limited to Akron. On 19 July 2001, the board of Akron met at Dana Court Dandenong. In attendance were the Sills, Mr Keeghan and Mr Crewe.[8] Also in attendance were Mr L Crinch and Mr J Shields.

59 The board noted with regret the sudden passing of Ron Rado, the former chairman of the board of Akron. Mr Keeghan introduced Mr Crewe who had been nominated to replace Mr Rado as an independent director. The minutes noted that Mr Keeghan outlined Mr Crewe's background, which he said should assist the company in making a more professional approach and to provide discipline to their meetings in order to fulfil the responsibilities of being a company director. The meeting resolved to appoint Mr Crewe the chairman.

60 At that meeting, the minutes record that Mr Crewe queried budget projections for the 2001-2002 budget, and stressed the need to ensure that adequate controls were in place to monitor costs because of low yields on jobs.

61 The minutes record that Mr Crewe reiterated that the responsibilities of all directors were onerous and that he took his role seriously in terms of the responsibilities it carried.

62 In around 2001, Standard Roads sold its interests in Akron to the Robert and John Sill. Mr Crewe negotiated the buy-out price. After agreement was reached on price, the Sills brought in other professionals from Deloitte Australia (accountants) and Mason Sier Turnbull (lawyers) to carry out the transaction.

63 The following year, on 20 September 2002, Crewe Sharp wrote to Mr Robert Sill as the CEO of Akron, submitting a 'mandate agreement' to confirm 'our' appointment and the conditions that related to the appointment whereby Crewe Sharp was engaged by Akron to prepare information for presentation to potential purchasers and to supply additional information to potential purchasers as requested. The letter was signed by the Sills, on behalf of Akron, on 26 September 2002.

64 After the buy-out, Mr Crewe remained a non-executive director and chairman of the board. Robert Sill became the managing director.

65 In 2004, Robert Sill was appointed chairman in lieu of Mr Crewe and remained chairman until external administrators were appointed on 1 February 2010. Mr Crewe remained a director of Akron from 2004, although his role as director practically ceased upon the appointment of an administrator to Akron on 1 February 2010. Also in 2004, Stephen Pollock who had been the financial controller of Akron since 2001, was appointed managing director of Akron in lieu of Robert Sill. Robert Sill ceased to act as the CEO and as mentioned became chairman of Akron.

66 Around 2004, the Sills told Mr Crewe that they wanted to move towards semi-retirement.

67 On 5 March 2009, Mr Crewe, the Sills, Mr S Pollock, Mr R Cooper and Mr O Luznik met at Akron to consider a financial strategy review of Akron. The minutes of the meeting recorded, amongst other matters, that Jason Turner of Crewe Sharp was to undertake a forensic review of creditor payments to ensure that duplicated payments had not occurred over the past four years.

68 On 12 March 2009, Mr Crewe sent an email to the Sills expressing his desire that the board meet to discuss the future operations of Akron required for 'corrective implementation and execution to occur.'[9]

69 On 28 April 2009, Herbert Fischbacher of Mason Sier Turnbull (lawyers) sent an email to Mr Crewe about terminating the employment of Mr Stephen Pollock the then CEO, and Mr Otto Luznik.[10]

70 On 29 April 2009, a confidential meeting was held attended by Mr Crewe to discuss removal of Mr Pollock and other staff.

71 In April 2009, Mr Crewe was appointed an interim chief executive officer of Akron when Mr Pollock was stood down from that position. Mr Crewe also remained a director.

72 From approximately 2009 onwards, Crewe Sharp placed Mr Sofronas (an employee of Crewe Sharp) in Akron to provide financial services.[11] Mr Sofronas had an office at Akron and worked there full-time.[12]

73 In relation to Crewe Sharp's role at Akron, from 2001 until 2009, Crewe Sharp performed two main streams of work with Akron:

(a) an ad-hoc role that was specific to Akron's needs at that time. Mr Crewe said that, for example, Akron may have requested Crewe Sharp's involvement with interviewing people to fill various roles in Akron; and

(b) Mr Crewe's involvement with the preparing for and attending monthly Akron board meetings.

74 Mr Crewe said that some of Crewe Sharp's engagements at Akron were formalised by way of the issuing of a mandate letter, substantially in the form of the Crewe Sharp retainer referred to earlier.

75 A further mandate dated 10 December 2009, was given to Crewe Sharp for its assistance in identifying an interested party for the purchase of up to 80 per cent of Akron's equity. The letter was written by Crewe Sharp Management Services to the directors of Akron and said that Crewe Sharp was to undertake certain defined tasks, including identifying an interested party and undertaking discussion and negotiations for the purchase of an equity in Akron of up to 80 per cent. An hourly fee was set. The letter was signed on behalf of Crewe Sharp by Mr Crewe, and it was accepted by Akron by being signed by the Sills. Mr Crewe said that the terms of other engagements performed by Crewe Sharp were agreed orally between himself and the Sills at the time.

76 As to the board papers, Mr Crewe received board papers or board reports (Board Pack) once every month in advance of Akron's board meetings. The Board Pack was prepared by the financial controller or CFO of the company. The composition and content of the Board Pack was developed and refined, with Mr Crewe's input, through making requests at the board meetings. Mr Crewe attended Akron's monthly board meetings, with the other attendees being the Sills, the CEO and the CFO. From time to time, other members of the management team also attended meetings, including, for example, the chief operations officer or the construction manager.

77 Mr Crewe said his role also involved mentoring and acting as an advisor for the directors and management team from time to time, and this role included giving advice about the running of the company.

78 As to Mr Crewe's role at Akron between 2009 when Mr Crewe assumed the role of CEO and 1 February 2010 (when the administrators were appointed), Mr Crewe performed various specific engagements relating to top level management functions, including:

79 At that time Mr Crewe was provided a desk at Akron's head office in Seaford and he usually worked from there.

80 Mr Crewe actively participated in strategic decision-making processes of Akron. An employee from Crewe Sharp Career Bridge Pty Limited, was brought in to speak with a member of the executive team who indicated that he wanted to resign. This individual's role was to determine the reasons for the executive's decision and whether this could be prevented. Another person was brought in from Crewe Sharp to re-process creditors and debtors in order to identify accounts that had been paid twice or otherwise repaid.

81 Between 2009 and 1 February 2010, Crewe Sharp provided full-time finance and administration assistance to Akron through the services of Mr Evan Sofronas, an employee of Crewe Sharp. Crewe Sharp invoiced Akron for Mr Sofronas' work as treasurer and commercial services manager of Akron, and those invoices were paid by Akron.

82 Between at least 30 November 2009 and 1 February 2010, Crewe Sharp assisted Akron:

(a) with obtaining financing by way of his attendance at meetings with the ANZ bank, together with John and Robert Sill, Otto Luznik and other representatives of Akron;

(b) in relation to finance-related matters through -

(i) his attendance at informal meetings and his participation in regular discussions with the Sills, almost on a daily basis, throughout this period at which they discussed the financial position of Akron;

(ii) while there were no formal board meetings held between 30 November 2009 and 1 February 2010, maintaining constant communication between himself and the Sills as they tried to address Akron's financial position at that time.

83 Between at least 30 November 2009 and 1 February 2010, Mr Sofronas reported to him in his capacity as acting CEO. Mr Sofronas discussed a financial spreadsheet with him at least once or twice each week, during which time Mr Luznik was often present. Mr Sofronas had an office at Akron's premises and was working there full-time and attended many of the informal meetings and discussions Mr Crewe regularly had with the Sills throughout this period.

84 On 10 July 2009, Akron Roads made a presentation to its bank, the ANZ bank.

85 On 10 December 2009, an engagement letter from Crewe Sharp to Akron, was signed by the Sills. The engagement of Crewe Sharp was to identify an interested party to acquire up to 80 per cent of Akron.[13]

86 On 10 December 2009, CGU issued an amended schedule for insurance, inter alia, of Crewe Sharp.[14]

87 On 15 December 2009, the ANZ bank sent an email to Mr Crewe and others, advising that the ANZ bank had allowed Akron's account with the bank to go into excess to facilitate payment of wages.[15]

88 On 14 January 2010, the ANZ bank sent an email to Mr Crewe and others referring to a meeting with the bank on 11 January 2010 wherein an update on developments at Akron relating to its trading and credit difficulties was provided.[16]

89 On 1 February 2010, Akron appointed voluntary administrators to Akron.[17]

90 On 9 March 2010, a meeting of Akron's creditors appointed Messrs Olde, Ryan and Blakeley joint and several liquidators of Akron.[18]

91 On 28 May 2010, the liquidators of Akron made demand on Crewe Sharp for refund to Akron of alleged preferential payments received by Akron in the six-month period prior to 1 February 2010 (the date of the appointment of the administrators by Akron) being the sum of $975,799.58.[19]

92 On 21 June 2010, Crewe Sharp notified CGU of a claim under the Policy in respect of the liquidators' claim for $975,799.58.

93 On 19 August 2010, CGU notified Crewe Sharp that it denied liability for the liquidators' claim against Crewe Sharp.[20]

94 On 9 April 2013, the liquidators issued an originating process commencing this proceeding.

95 The substance of Mr Crewe's evidence in chief is captured in the description of the relevant events above.

96 On the question of insurance and disclosure, Mr Crewe said that he had been informed by Mr Bill Lambros, senior associate from Frenkel Partners, his solicitors in this matter, that CGU alleged in its defence, that before the Policy was issued, Crewe Sharp did not disclose to CGU that management consulting services may include directorship services. Mr Crewe says he did not know at any time that that was a matter relevant to the decision of CGU to accept the risk and, if so, on what terms to issue the policy.

97 In cross-examination, it was put to Mr Crewe that the letter from Mr Keeghan of 5 June 2001 did not suggest that Crewe Sharp was to be a director or to provide director services to Akron Roads. Mr Crewe accepted that.[21]

98 Under cross-examination, Mr Crewe said that he would never have understood Crewe Sharp as an entity to be a director.

99 Under cross-examination, Mr Crewe said that he participated in Akron Road's board meetings between 2001 and 2009. He was asked how board meetings were conducted. Mr Crewe said there would be a Board Pack prepared, which would be circulated, sometimes a few days prior to the board meeting.[22] The board would then meet. He said he would chair the meeting, as you would expect the board meeting to be chaired.

100 Mr Crewe said that they would stick to the agenda. He said they (presumably the directors and other attendees) would discuss matters arising.

101 Mr Crewe said that the other participants were Rob Sill and John Sill. He said the other parties attending but who were not directors would have been the general manager or chief executive and the CFO. He said that going through the information deciphering it and making some direction or decisions or putting forward some recommendations would be driven by the analysis that he had done on the Board Pack.[23]

102 Mr Crewe said that Mr Luznik prepared the finance and accounting section of the board reports.[24] Mr Crewe said that in mid-2009 Ernst and Young (accountants) were retained.

103 Mr Crewe said that prior to the company going into administration, there were no formal board meetings held but rather informal discussions were held between Mr Crewe and the Sills.[25] As indicated above, this was during the period from end of November 2009 to 1 February 2010 (some two months).

104 Before the company went into liquidation, Mr Crewe was seeking finance from the bank. He had suggested to the Sills that they needed a standstill agreement with their creditors.

105 Mr Crewe said that the Sills' role was limited. He said they 'were largely led through this process because it was not one that they were familiar with, or not a circumstance that they had ever encountered before.' Mr Crewe said 'they were relying on his experience or his company's experience, whichever way you want to express it, to give them advice as to how they should proceed and the matters that needed to be considered.'[26]

106 Mr Crewe said that the appointment of the administrators came about as they, being Akron, had nowhere else to go. They had attempted to raise funds unsuccessfully.

107 Mr Crewe said that he had discussions with the Sills and put to them that Akron 'could only have one captain and one ship and they could not dabble and fiddle and meddle and cut across.' He told them 'that the forum for doing that was with him or at board meetings but in the day to day directions of the company it was not a good practice for them to be cutting across what was going on, which they accepted.'[27]

108 Evidence in relation to the issuing of the relevant insurance policy by CGU to Crewe Sharp was given by Greg Hansen, the insurance broker acting for Crewe Sharp, and Ivana Vuckova, the then underwriter at CGU that authorised the issuing of the policy.

109 Mr Hansen was a director of Austbrokers Countrywide, which provides insurance broking services. Prior to becoming a director of Austbrokers Countrywide, he was employed by CGU for about 10 years. Mr Hansen was an underwriter at CGU but also had managerial positions. Prior to Mr Hansen's employment with CGU, he was employed by FAI Insurance as an underwriter for about three years. Mr Hansen holds a Bachelor of Economics degree from Monash University.

110 Ms Vuckova was, at the time of the hearing, employed by Vero Insurance as a senior underwriter. Prior to commencing employment with Vero Insurance about three years ago, Ms Vuckova was employed by CGU. Ms Vuckova was employed by CGU for about nine and a half years. Ms Vuckova commenced with CGU in a role of administrative officer and was then appointed an underwriting technical officer. Ms Vuckova was later promoted to the positions of technical underwriter, underwriter, team leader and then senior underwriter. Ms Vuckova holds a Bachelor of Economics degree from the University of Western Australia.

111 During Ms Vuckova's employment with CGU, CGU maintained a hard copy underwriting file for every insured. Each file ordinarily contained the insured's proposal for insurance, correspondence, internal documents and the policy schedule. CGU also had an electronic database called 'IA 90' which contained information about every insured. Ms Vuckova reviewed a copy of the relevant underwriting file and a printout of the IA 90 notes for 2009 relating to Crewe Sharp for the purpose of preparing her evidence.

112 During Ms Vuckova's employment with CGU, she had access to an underwriting manual for professional indemnity insurance. Ms Vuckova consulted the manual from time to time when underwriting professional indemnity policies. Ms Vuckova exhibited a copy of the relevant page of the manual to her witness statement. Ms Vuckova also had access to an underwriting manual for directors and officers liability insurance, and she exhibited the relevant pages to her witness statement.

113 In June 2009, in his role as a director of Austbrokers Countrywide, Mr Hansen met Matthew Crewe. Mr Crewe asked Mr Hansen to obtain a quotation for professional indemnity insurance ('P.I. policy') to cover four entities, including Crewe Sharp. Mr Hansen understood that the four entities already had a P.I. policy in place with another insurer but that Matthew Crewe wanted an alternative quotation.

114 Matthew Crewe provided Mr Hansen with the following documents:

(a) a professional indemnity insurance proposal for Crewe Sharp Career Bridge Pty Ltd, dated 28 May 2009;

(b) a recruitment services addendum for Crewe Sharp and two other entities, dated 29 May 2009; and

115 Each of these documents was a Pro Risk proposal form. Pro Risk is an underwriting agency. Mr Hansen understood that Matthew Crewe had provided those proposal forms to his current insurance broker for the purpose of obtaining a quotation and that he had provided them to Mr Hansen so that he could also use them to obtain a quotation.

116 On 10 June 2009, Mr Hansen sent an email to Ms Vuckova, then employed as an underwriter at CGU.[28] In his email Mr Hansen sought a quotation for one P.I. policy covering the four entities listed in his email, including Crewe Sharp. Attached to the email was a proposal by Crewe Sharp Career Bridge Pty Ltd addressed to Pro Risk. In his email Mr Hansen also described the professional services provided by each of the entities. As to Crewe Sharp, Mr Hansen said:

a Management Consultancy services company. None of the risks stuff you do not like (capital raising, bus valuations, M&a etc). It[']s all strategic management consulting centered around HR services. Annual fees last 12 months was $1m.

117 Ms Vuckova received the email from Mr Greg Hansen, who was the insurance broker for Crewe Sharp. Ms Vuckova said that his email described the professional services provided by each entity. Ms Vuckova said that his email stated that Crewe Sharp was a 'Management Consultancy services company.' Ms Vuckova said that Mr Hansen also stated Crewe Sharp was not involved in the 'risks stuff you do not like (capital raising, bus[iness] valuation, M&A etc).' Ms Vuckova said that Mr Hansen stated the services provided by Crewe Sharp were exclusively 'strategic management consulting centred around HR services.'

118 Ms Vuckova said that each of the documents forwarded to her was a Pro Risk proposal form. Ms Vuckova said that it is not uncommon to receive from a broker a proposal using another insurer's proposal form. Ms Vuckova said that she accepted such proposals as long as they contained all of the key information required by her to underwrite a policy.

119 Ms Vuckova said that after reviewing Mr Hansen's email and attachments, she took steps to ascertain whether the proposed insureds were existing clients of CGU and whether CGU had any information about them. She ascertained that the proposed insureds were new clients.

120 Ms Vuckova said that based on her review of Mr Hansen's email and the attachments, she then made a note in IA 90 notes for 2009[29] of her understanding of the professional services provided by Crewe Sharp and the other entities to be insured. Ms Vuckova's note records that the insureds provided the following services:[30]

Management consultancy, personnel consulting - white collar, admin[istration] and telemarketing, personnel consulting - nurses, training and development.

121 Ms Vuckova said there was nothing in Mr Hansen's email or the attachments that concerned her about offering to provide the P.I. policy requested by Mr Hansen. Ms Vuckova said it was the type of request that, at the time, she commonly received. Ms Vuckova said that CGU regularly offered professional indemnity insurance to people providing the types of professional services which he had described.

122 On 16 June 2009 Ms Vuckova sent an email to Mr Hansen attaching a quotation for the P.I. policy.[31] The quotation, at item 1, listed as proposed insureds Crewe Sharp Career Bridge Pty Ltd, listed twice; Crewe Sharp was not listed. CGU accepts that was a mistake. One of the references to Crewe Sharp Career Bridge Pty Ltd should have been a reference to Crewe Sharp.

123 Ms Vuckova said that on 19 June 2009 she received an email from Mr Hansen asking her to issue the P.I. policy. Mr Hansen also asked her to amend the description of the professional services covered by the P.I. policy (as contained in the quotation) to:[32]

Personnel and HR Consultancy, Management Consultancy, Business Coaching, Training and Development Consultancy and Debt Recovery Services.

Ms Vuckova said she responded by email to Mr Hansen confirming that the description would be changed.[33]

124 Ms Vuckova said that once the names of the insureds had been corrected to include Crewe Sharp and the description of the professional services amended, she sent an email to Mr Hansen attaching the policy schedule.[34] Mr Hansen said he received the same on 10 July 2009.

125 Mr Hansen said that he then prepared a tax invoice and a coverage summary and sent both by email to Ms Vuckova and Mr Crewe. He said the coverage summary set out, amongst other things, the insuring clause and the P.I. policy. He said he identified an error in the description insuring clause that referred to 'information technology services' when it should have referred to 'professional services.'

126 On 16 December 2009 the P.I. policy was amended to add another insured, Centric Management Services Pty Ltd.

127 Mr Hansen said that in June 2009 Matthew Crewe also instructed him to obtain a quotation for a directors and officers liability insurance policy (D&O policy) for Crewe Sharp and the other three entities covered by the P.I. policy. Mr Hansen said he understood that each of the four entities already had a D&O policy in place but that Mr Crewe wanted an alternative quotation. Mr Hansen said that on 18 June 2009 (two days after Ms Vuckova had provided the quote for the P.I. policy) he sent an email to Ms Vuckova requesting a further quotation for a 'C&ML' (Corporate and Management Liability) policy. He said that a C&ML policy is the same as a D&O policy, but it contains additional types of insurance cover.

128 Mr Hansen said he received an email from Ms Vuckova on 18 June 2009 in which she provided an indication of the premium for such a policy.[35]

129 Mr Hansen said Crewe Sharp and the other three entities did not take up the D&O/C&ML policy with CGU. Mr Hansen said that he arranged with Crewe Sharp and the other entities to take up such a policy with a different insurer, Chubb. Mr Hansen said that throughout his engagement with Crewe Sharp (including in the following periods when he arranged a renewal of the P.I. policy), he understood that Crewe Sharp was a management consultancy service company. That is, he understood it was an independent third party providing advice to clients on management issues.

130 Mr Hansen that he did not know that Crewe Sharp and its director, Mr Crewe, who was also insured under the P.I. policy, provided director and officer services to Akron Roads. Mr Hansen said that if he had known that Crewe Sharp and Mr Crewe provided director and officer services to Akron Roads, then he would have told Matthew Crewe that the P.I. policy did not cover such services and that he should make sure that Akron Roads had a D&O/C&ML policy in place to cover any claims made against its directors, including claims against Crewe Sharp and Mr Crewe.

131 Under cross-examination, Mr Hansen was taken to the CGU underwriting manual, which was marked as a confidential exhibit.[36] Mr Hansen was asked to turn to the description of the profession 'management consultant'. Mr Hansen agreed with Dr Bigos, junior counsel for the liquidators, that the management consultancy services were not defined as including an independent third party providing advice. Mr Hansen was asked did he agree there was no statement in the under writing manual that excluded directors or officers or director- or officer-type services from management consultancy. Mr Hansen agreed.

132 Mr Hansen also agreed that the manual said the consultancy activities can vary widely, and he accepted that proposition. Mr Hansen did accept that a management consultant may sometimes be performing director- or officer-type services.

133 Ms Vuckova said that at no stage did Crewe Sharp or Mr Hansen disclose to her that Crewe Sharp and its director, Mr Crewe (also an insured under the P.I. policy) provided director and officer services to Akron.

134 Ms Vuckova said that she had been asked to address in her witness statement whether her decision to offer the P.I. policy to Crewe Sharp would have changed assuming that at the time Crewe Sharp sought its P.I. policy it had disclosed to her that Crewe Sharp and/or Mr Crewe provided company director and officer services to Akron.

135 Ms Vuckova said that in those circumstances, she would have contacted Mr Hansen to obtain information about the company director and officer services. She said she would have asked Mr Hansen to tell her the percentage of income received by Crewe Sharp from the provision of company director and officer services compared to the percentage of income received from the provision of management consultancy services. Ms Vuckova said that if a large part of the income was from the provision of company director and officer services, she would have told Mr Hansen that it was not appropriate for her to offer the P.I. policy to Crewe Sharp because it would not provide any cover in respect of most of the services provided by it, namely the director and officer services.

136 Ms Vuckova said that if she had been told by Mr Hansen that only a small proportion of income received by Crewe Sharp related to the provision of director and officer services to Akron, then she would have been prepared to offer the P.I. policy to Crewe Sharp but only on the basis that it contained an endorsement to the following effect: 'This policy does not cover any claim or claims arising directly or indirectly from, out of, in connection with or in respect to, any service provided by, or on behalf of, the insured to Akron Roads Pty Ltd.'

137 Ms Vuckova said that on 18 June 2009 she also told Mr Hansen that a directors and officers liability policy would only be issued with an 'insolvency exclusion'. Ms Vuckova said she also informed Mr Hansen that she would require a completed CA-ML proposal before CGU would issue cover. Ms Vuckova said that Crewe Sharp did not take up a directors and officers liability policy with CGU.

138 A witness statement of Mr Blakeley was tendered.[37] Mr Blakeley was not cross-examined. Mr Blakeley gave evidence to support the insolvent trading proceeding, produced books and records of Akron, correspondence of Akron, minutes of meeting of directors of Akron and other meetings of executives, and generally gave evidence in support of the unfair preference proceeding, Mr Sharp's dealings with Akron, the likely return to creditors of zero to 15 cents in the dollar, and produced certain documents relating to insurance of Akron.

140 I have already discussed the events leading to the High Court's decision that the Supreme Court had federal jurisdiction which authorised it to entertain the claim made by the liquidators against CGU and had the powers to grant the relief sought by the liquidators.[38]

141 On the appeal to the High Court, the liquidators claimed its standing to seek the declaration against Crewe Sharp and CGU, was based on s 562 of the Corporations Act. Section 562 provides:

Application of proceeds of contracts of insurance

(1) Where a company is, under a contract of insurance (not being a contract of reinsurance) entered into before the relevant date, insured against liability to third parties, then, if such a liability is incurred by the company (whether before or after the relevant date) and an amount in respect of that liability has been or is received by the company or the liquidator from the insurer, the amount must, after deducting any expenses of or incidental to getting in that amount, be paid by the liquidator to the third party in respect of whom the liability was incurred to the extent necessary to discharge that liability, or any part of that liability remaining undischarged, in priority to all payments in respect of the debts mentioned in section 556.

(2) If the liability of the insurer to the company is less than the liability of the company to the third party, subsection (1) does not limit the rights of the third party in respect of the balance.

(3) This section has effect notwithstanding any agreement to the contrary.

142 Before the High Court, the liquidators claimed its standing to seek the declaration against Mr Crewe and CGU, was based on s 117 of the Bankruptcy Act 1984 (Bankruptcy Act). Section 117 provides:

(1) Where:

(a) a bankrupt is or was insured under a contract of insurance against liabilities to third parties; and

(b) a liability against which he or she is or was so insured has been incurred (whether before or after he or she became a bankrupt);

the right of the bankrupt to indemnity under the policy vests in the trustee and any amount received by the trustee from the insurer under the policy in respect of the liability shall, if the liability has not already been satisfied, be paid in full forthwith to the third party to whom it has been incurred.

(2) Subsection (1) does not limit the rights of the third party in respect of any balance due to him or her after the payment referred to in that subsection has been made.

(3) This section applies notwithstanding any agreement to the contrary, whether entered into before or after the commencement of this Act.

143 The High Court held in relation to both statutory provisions that they provided the liquidators with standing to seek the declaration sought as against CGU.[39]

144 On Monday 18 April 2016, the trial of this proceeding commenced before me. I heard opening submissions from both parties. The insurer, CGU, submitted in their opening that they assumed that the liquidators relied on s 117 of the Bankruptcy Act, as the basis of the liquidators' claims to be entitled to the moneys that CGU was obliged to indemnify Mr Crewe for under his policy with CGU. CGU submitted that s 117 was no longer apposite by reason of a deed of settlement (discussed below) that the liquidators and Mr Crewe had entered into, as Mr Crewe was now no longer threatened with bankruptcy.

145 On or around 23 March 2016, the liquidators and Mr Crewe entered into a deed of settlement resolving their claim against Mr Crewe. The deed of settlement provided as follows:

(a) Trevor Crewe and Crewe Sharp consent to judgment being entered against them in the Proceeding in the amount equal to the amount of the Debts without any orders as to interest or costs.

(b) Without limitation of clause 2.1(a), Trevor Crewe and Crewe Sharp consent to Liquidators providing orders set out in the Schedule to this Deed to the Court within 5 days of this Deed taking effect pursuant to clause 4.8 below.

2.2. Enforcement of judgment

In consideration of the deposit of the Security Sum by Trevor Crewe in accordance with clause 2.2(c) below:

(a) Effective from the time of the provision the Security Sum is required by clause 2.2(c) below, the Liquidators agree to enforce the judgment in the Proceeding only as follows:

(i) first against any proceeds of the Policy, and

(ii) as against Trevor Crewe once the claim and the Policy has been exhausted, only against the Security Sum of $125,000.

(b) Trevor Crewe hereby assigns to the Liquidators any and all amounts recovered under the Policy in relation to the Claims and he will take all steps reasonably requested by the Liquidators in order to recover such amounts. To the extent that further proceedings are required in order to recover under the Policy, Trevor Crewe will conduct such proceedings with assistance from solicitors nominated by Liquidators and the Liquidators will indemnify Trevor Crewe in respect of liability to those services for legal costs and in respect of any disbursements and expenses reasonably incurred by him and in respect of any and all costs orders made against him in such proceedings, including costs and expenses that he is ordered to pay to any party in such proceedings.

(c) As security for his liable under clause 2.2(a)(ii) above, Trevor Crewe will deposit by 23 March 2016 the Security Sum into the Liquidators' solicitors' trust account.

146 The deed then provided details of how the moneys are to be paid.

147 CGU submitted in its opening that by reason of the deed of settlement, s 117 of the Bankruptcy Act was not available as a basis for the liquidators to seek a declaration against CGU. CGU said that s 117 might only be relevant if Mr Crewe was bankrupt or was likely to go bankrupt. CGU said that as Mr Crewe was only now obliged to pay $125,000 (which he had now done) there was no suggestion that Mr Crewe would be bankrupted and that s 117 would be enlivened. The liquidators did not dispute that Mr Crewe was not at risk of being bankrupted.

148 CGU submitted that therefore the liquidators had no standing to seek the declaration from CGU in respect of moneys payable to Mr Crewe, if any, under the Policy.

149 On 19 April 2016, the liquidators sought to amend their statement of claim by adding paragraph 26A as follows:

By reason of: (a) the operation of s 117 of the Bankruptcy Act 1966 (Cth) in any bankruptcy of Trevor Crewe; and further or alternatively (b) the Settlement Deed dated 23 March 2016 (the full terms of which are relied on, including clauses 2.2(b) pursuant to which Trevor Crewe assigned to the Liquidators any and all amounts recovered under the Policy in relation to the claims in paragraphs 6 to 17), any amount payable to Trevor Crewe pursuant to the policy from CGU in respect of the Plaintiffs' claims must be paid to the Plaintiffs.

150 Upon tendering the proposed amendment, the liquidators said that they no longer relied on point (a) in the amendment and merely relied on point (b).

151 CGU submitted that the deed of settlement did not give the liquidators standing to seek the declaration that they sought against CGU.

152 On 28 April 2016, I heard argument on the issue of the standing of the liquidators to seek the declaration in relation to CGU's obligation to indemnify Mr Crewe. The liquidators argued that I should defer the issue of standing until the conclusion of the trial. CGU submitted that I should resolve the issue before the matter proceeded any further. I decided to defer consideration of the issue of the liquidators' standing until the conclusion of the trial. I otherwise, granted leave to the liquidators to amend the points of claim as they had sought.[40]

153 On Monday, 2 May 2016, the trial continued. As indicated above, Crewe Sharp did not appear to oppose the claim against it that it was a director of Akron and that it is liable as a director under s 588 of the Corporations Act for $12,992,880.05 being the amount of the loss and damage suffered by the creditors of Akron in relation to debts owed to them by Akron, because of the insolvency of Akron.

154 I now turn to consider the issues raised in the trial.

Do the liquidators of Akron have standing to seek relief concerning CGU liability to Mr Crewe?

155 The liquidators submit that the settlement deed assigned to the liquidators any and all amounts recovered under the Policy and that that contractual right gave the liquidators standing to seek the declaration that they do against CGU as to CGU's liability under the policy to Trevor Crewe. The liquidators submit that the deed replicated the legal effect of s 117 of the Bankruptcy Act.

156 The liquidators contend that s 117 had been the basis for the liquidators' standing as regards Mr Crewe, and that all parties had understood this even though it was not pleaded.[41] The liquidators submit that s 117 relevantly provides that the right of a bankrupt insured to indemnity under an insurance policy vests in the trustee-in-bankruptcy, and any amount received by the trustee from the insurer under the policy in respect of a liability to a third party shall be paid to the third party.

157 The liquidators say that CGU denied indemnity to its insured, Mr Crewe and Crewe Sharp. Both were left to defend the litigation as prudent uninsured, without any indemnity even in respect of defence costs. The liquidators say that due to their impecuniosity, neither Mr Crewe nor Crewe Sharp actively challenged the denial of indemnity, although at least in respect of Mr Crewe, he stated that he did not agree with CGU's denial.[42]

158 The liquidators submit that when they sought to proceed against CGU directly for declaratory relief by joining it as a defendant to the proceeding, CGU argued, at first instance, and in two appellate courts, that s 117 did not give the liquidators standing in respect of Mr Crewe (and that the corresponding provision in the corporations legislation[43] did not give the liquidators standing in respect of Crewe Sharp).

159 The liquidators submit that the High Court held unanimously that s 117 enabled the injured party to sue the insurer directly for declaratory relief. Their Honours did not accept CGU's arguments that s 117 requires the trustee-in-bankruptcy to sue the insurer first, or that it was necessary for the liquidators to establish some cause of action against CGU in order to found jurisdiction for declaratory relief.

160 The liquidators submit that the Court agreed with the plaintiffs' contention that, because of the effect of s 117, the prospect of Mr Crewe becoming bankrupt as a result of the proceeding was sufficient to give the liquidators standing to seek a declaration that CGU was liable under the Policy to indemnify Mr Crewe.[44] The legal consequence created by s 117 would be the bringing into existence, in favour of the plaintiffs, of a right to the proceeds of the Policy payable to Mr Crewe in respect of his liability to Akron.[45]

161 The liquidators contend that the High Court agreed that the liquidators have a real interest in establishing that the insurer is liable to indemnify Mr Crewe.[46] The interest upon which the claim for declaratory relief is based and CGU's denial of liability under the Policy, are sufficient to constitute a justiciable controversy between the liquidators and CGU.[47]

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