Taylor (liquidator), in the matter of Heading Contractors Pty Ltd (in liq) v Heading [2021] FCA 770

Taylor (liquidator), in the matter of Heading Contractors Pty Ltd (in liq) v Heading [2021] FCA 770

On proper construction of the policy extension clause 2(g), the policy applies to the bankrupt director's estate for any loss incurred due to a wrongful act for which he would have received cover under the policy but for bankruptcy. The estate, represented by the trustee, is entitled to indemnity from the insurer in respect of the liability provable in the bankruptcy (s 588M Corporations Act), even though the director is released from personal liability by discharge under s 153 Bankruptcy Act. Insurer's obligation arises via the estate under the extension clause, not via the bankrupt directly; this contractual route ensures the estate enjoys the same cover as the director would have had...

Jurisdiction
Australia
Judgment Date
08 July 2021
Procedural Posture
Corporations and Corporate Insolvency, Commercial / Separate Question Determination Following Partial Leave to Commence Proceedings and Pleadings
Outcome
Determination in favour of plaintiffs regarding construction of policy; insurer obliged to indemnify trustee for losses awarded against estate under s 588M Corporations Act, subject to further determination of other defences. Declaratory relief available as jurisdictional matter.
Legal Topics
["director's Liability" 'bankruptcy Discharge' 'provable Debt' 'indemnity Under Insurance Policy' 'policy Construction' 'section 117 Bankruptcy Act' 'section 588 M Corporations Act' 'policy Extensions, Cover for Estate']
['bankruptcy' 'corporations' 'insurance' 'civil Procedure'] ["director's Liability" 'bankruptcy Discharge' 'provable Debt' 'indemnity Under Insurance Policy' 'policy Construction' 'section 117 Bankruptcy Act' 'section 588 M Corporations Act' 'policy Extensions, Cover for Estate']

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Procedural Posture

Corporations and Corporate Insolvency, Commercial / Separate Question Determination Following Partial Leave to Commence Proceedings and Pleadings

Legal Issues

  1. 1 ["Whether the discharge from bankruptcy precludes indemnity under director's liability policy" 'Whether policy extension clause confers indemnity for estate of bankrupt director' 'Whether liability incurred under s 588M Corporations Act remains provable in bankruptcy estate for purposes of insurance' "Proper construction of indemnity and extension clauses for director's estate"]

Ratio Decidendi

On proper construction of the policy extension clause 2(g), the policy applies to the bankrupt director's estate for any loss incurred due to a wrongful act for which he would have received cover under the policy but for bankruptcy. The estate, represented by the trustee, is entitled to indemnity from the insurer in respect of the liability provable in the bankruptcy (s 588M Corporations Act), even though the director is released from personal liability by discharge under s 153 Bankruptcy Act. Insurer's obligation arises via the estate under the extension clause, not via the bankrupt directly; this contractual route ensures the estate enjoys the same cover as the director would have had...

Court Disposition

Determination in favour of plaintiffs regarding construction of policy; insurer obliged to indemnify trustee for losses awarded against estate under s 588M Corporations Act, subject to further determination of other defences. Declaratory relief available as jurisdictional matter.

Orders

  • ['On or before 15 July 2021 the parties are to propose such consequential orders (if any) as may be appropriate.' 'Further case management hearing at 9.45 am on 29 July 2021.']