Advance Housing Pty Ltd v Newcastle Classic Development Pty Ltd

CATCHWORDS : CORPORATIONS - winding up - winding up by the court - current liquidators of prospective plaintiff companies contemplate litigation in which related companies of which they are also liquidators may become subject to cross claims - need for additional liquidator of those related companies with powers confined to such matters

LEGISLATION CITED : Corporations Act 2001 (Cth), ss.472(1), 473(8)

Advance Housing Pty Ltd v Newcastle Classic Development Pty Ltd (1994) 14 ACSR 230 Onefone Australia Pty Ltd v One.Tel Ltd (2003) 48 ACSR 562 CASES CITED : Onefone Australia Pty Ltd v One.Tel Ltd [2006] NSWSC 349 Re Obie Pty Ltd (No.4) (1984) 8 ACLR 967 Re Pasminco Ltd (No 2) (2004) 49 ACSR 470 Re Spedley Securities Ltd (1991) 4 ACSR 555

PARTIES : Anthony Gregory McGrath and Christopher John Honey in their capacity as liquidators of HIH Insurance Ltd & Ors - Plaintiffs

FILE NUMBER(S) : SC 1799/01; 1805/01; 1808/01; 1810/01 ; 3753/02; 1798/01; 1800/01; 1801/01; 1803/01; 1804/01; 1806/01; 1807/01; 1809/01; 1811/01; 1812/01; 1813/01; 1814/01; 1815/01; 2650/01; 4727/01; 4913/01; 2601/02; 4096/02; 4098/02; 4472/02; 1348/03; 2419/03; 2421/03; 2422/03; 2423/03; 2424/03; 2425/03; 2426/03; 4227/03; 4229/03; 4231/03; 4232/03; 4233/03; 4235/03; 4236/03; 4237/03; 6377/04

COUNSEL : Mr M.B. Oakes SC/Mr J. Scarcella, Solicitor - Plaintiffs

SOLICITORS : Blake Dawson Waldron - Plaintiffs

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

1799/01 - ANTHONY GREGORY MCGRATH - IN THEIR CAPACITY AS PROVISIONAL LIQUIDATORS OF HIH INSURANCE LTD (IN PROVISIONAL LIQUIDATION) & ANOR 1805/01 - FAI INSURANCES LTD 1808/01 - FAI GENERAL INSURANCE COMPANY LTD 1810/01 - ALEXANDER ROBERT MACKAY MACINTOSH - IN THEIR CAPACITY AS PROVISIONAL LIQUIDATORS OF HIH CASUALTY & GENERAL INSURANCE LTD (PROVISIONAL LIQUIDATOR APPOINTED) & ANOR 3753/02 - HIH INSURANCE LTD (IN LIQ) v HIH INVESTMENT HOLDINGS LTD 1798/01 - FAI TRADERS INSURANCE CO PTY LTD 1800/01 - WORLD MARINE & GENERAL INSURANCES PTY LTD 1801/01 - HIH UNDERWRITING & INSURANCE (AUSTRALIA) PTY LTD 1803/01 - LANLEX NO. 65 PTY LTD 1804/01 - FAI LEASING FINANCE PTY LTD 1806/01 - CIC INSURANCE LTD 1807/01 - FAI INVESTMENTS PTY LTD 1809/01 - FAI OVERSEAS INVESTMENTS PTY LTD 1811/01 - HIH OVERSEAS HOLDINGS LTD 1812/01 - FAI FINANCIAL SERVICES LTD 1813/01 - FAI OVERSEAS HOLDINGS PTY LTD 1814/01 - FAI REINSURANCES PTY LTD 1815/01 - HIH UNDERWRITING & AGENCY SERVICES LTD 2650/01 - CIC INSURANCE LTD (PROV LIQ APPOINTED) v HANNAN & CO PTY LTD 4727/01 - FAI GENERAL INSURANCE COMPANY LTD (IN LIQ) v NOTESTIR PTY LTD 4913/01 - FAI INSURANCES LTD (IN LIQ) v FIRST MENTOR GROUP PTY LTD 2601/02 - HIH UNDERWRITING & AGENCY SERVICES LTD (IN LIQ) v WORLDWIDE WEATHER UNDERWRITING AGENCIES (AUS) PTY LTD 4096/02 - HIH CASUALTY & GENERAL INSURANCE LTD (IN LIQ) v HIH COMPANY LTD 4098/02 - HIH UNDERWRITING & AGENCY SERVICES LTD (IN LIQ) v ACN 006 495 987 PTY LTD (FORMERLY "INDUSTRIAL REHABILITATION SERVICES PTY LTD") 4472/02 - CIC INSURANCE LTD (IN LIQ) v CIC GENERAL INSURANCE HOLDINGS LTD 1348/03 - FAI INSURANCES LTD (IN LIQ) v FAI HOME SECURITY HOLDING PTY LTD 2419/03 - HIH UNDERWRITING & AGENCY SERVICES LTD (IN LIQ) v ACN 005 312 345 PTY LTD (FORMERLY READY PLAN ASIA PACIFIC PTY LTD) 2421/03 - HIH CASUALTY & GENERAL INSURANCE LTD (IN LIQ) v FAI FILM DISTRIBUTION PTY LTD 2422/03 - FAI GENERAL INSURANCE COMPANY LTD (LIQUIDATION) v FAI WORKERS' COMPENSATION (VIC) PTY LTD 2423/03 - HIH CASUALTY & GENERAL INSURANCE LTD (IN LIQ) v HIH (REAL ESTATE) PTY LTD 2424/03 - HIH CASUALTY & GENERAL INSURANCE LTD (IN LIQ) v INTEGRATED COMMERCIAL FINANCE PTY LTD 2425/03 - HIH CASUALTY & GENERAL INSURANCE LTD (IN LIQ) v INNES OWENS PTY LTD 2426/03 - HIH CASUALTY & GENERAL INSURANCE LTD (IN LIQ) v RISKCORP AUSTRALIA PTY LTD 4227/03 - HIH TRAVEL (AUSTRALIA) PTY LTD v ACN 006 584 103 LTD (FORMERLY READY PLAN GROUP LTD) 4229/03 - HIH CASUALTY & GENERAL INSURANCE LTD (IN LIQ) ACN 008 482 291 v MARINE AND AVIATION MANAGEMENT SERVICES LTD ACN 006 385 584 4231/03 - HIH CASUALTY & GENERAL INSURANCE LTD (IN LIQ) ACN 008 482 291 v CIC WORKERS' COMPENSATION (NSW) LTD 4232/03 - ACN 005 312 345 PTY LTD (IN LIQ) v CIC INVESTMENTS LTD ACN 004 766 081 4233/03 - FAI INSURANCES LTD (IN LIQ) ACN 004 304 545 v PEMBROKE SECURITIES LTD ACN 002 799 546 4235/03 - HIH CASUALTY & GENERAL INSURANCE LTD (IN LIQ) ACN 008 482 291 v LAKE CRACKENBACK RESORT PTY LTD ACN 003 379 708 4236/03 - HIH CASUALTY & GENERAL INSURANCE LTD (IN LIQ) ACN 008 482 291 v 422 COLLINS STREET PTY LTD ACN 005 807 036 4237/03 - HIH CASUALTY & GENERAL INSURANCE LTD (IN LIQ) ACN 008 482 291 v FAI FINANCE CORPORATION PTY LTD ACN 053 262 561 6377/04 - HIH INSURANCE LTD (IN LIQ) v HIH HOLDINGS PTY LTD

1 I have today made, upon the application of the liquidators (Mr McGrath and Mr Honey), certain orders in each of 42 winding up proceedings involving HIH Insurance Ltd and its related companies. Among the orders I have made are orders appointing an additional liquidator of each of FAI Insurances Ltd and FAI General Insurance Company Ltd and dealing with matters ancillary to such appointment. I shall refer to those two companies as the "FAI companies".

2 The existing liquidators have seen a need for certain fairly confined aspects of the winding up of each of the FAI companies to be placed in the hands of a liquidator who is independent of the remainder of the companies in the HIH group. That need has arisen in the context of certain litigation which the existing liquidators propose to pursue on behalf of certain companies in the HIH group other than the FAI companies.

3 It is unnecessary to go into the details of the proposed litigation. It is sufficient to say that the prospective plaintiff companies assert causes of action against other persons in circumstances where those other persons might, at some point in the course of the litigation, seek to propound cross-claims against one or both of the FAI companies.

4 The existing liquidators also foresee a possibility that, in the same context and depending in part on the outcome of any such litigation, the HIH companies I have described as prospective plaintiffs may need to prove in the winding-up of either or both of the FAI companies.

5 It is obvious that the existing liquidators could not deal with the possible cross-claims against the FAI companies in proceedings initiated by the prospective plaintiff HIH companies or any proofs of debt that those prospective plaintiff companies might lodge in the windings up of the FAI companies. Those aspects of the insolvent administrations of the FAI companies therefore require separate and independent attention.

6 Against that background, the existing liquidators sought an order for the appointment of the additional liquidator of each of the FAI companies on the basis that he would have defined and limited functions related to the matters that I have described. The appointment was, of course, on the basis that the additional liquidator would exercise the relevant functions to the exclusion of the existing liquidators.

7 The person who was proposed and has now been appointed by the court is Mr Stephen James Parbery, whose consent to act as an additional liquidator in each case has been filed.

8 Mr Parbery drew attention to two matters relevant to any proposal that he be appointed. Neither of them raised any cause for concern that he would not bring an independent and unbiased mind to his tasks as the additional liquidator of each of the FAI companies. Each such matter involved a confidential advisory assignment having relevance to the insolvent administrations of the companies in the HIH group. Having been given sufficient information about what Mr Parbery did in those matters to enable me to make an informed decision, I am satisfied that neither represents any obstacle. There is also an opinion of separately and independently briefed senior counsel, addressed to the current liquidators' solicitors, that those previous roles do not make Mr Parbery unsuitable for appointment.

9 The power to appoint an additional liquidator or, as it is sometimes termed, a special purpose liquidator is now clearly recognised as conferred by s.472(1) of the Corporations Act 2001 (Cth) in a court-ordered winding up. The judgment of Thomas J in Re Obie Pty Ltd (No.4) (1984) 8 ACLR 967 is now seen as containing the authoritative statement of the relevant principle: "It was submitted for the Lewises that the court has no power to give a limited function to a particular liquidator; that an additional liquidator can only be appointed on a winding up, resignation, removal or occurrence of a vacancy; and that in any event the transference of this issue to an independent liquidator ought to be postponed until the removal proceedings are completed.

It has long been held that the court has jurisdiction to give the conduct of any particular matter arising in the course of the liquidation to one of several liquidators: Re Midland Land and Investment Corporation [1887] WN 58. In my own experience courts have made such orders when there is a matter to be dealt with in a liquidation which it would be embarrassing for the liquidators to handle. In such circumstances an additional liquidator is appointed to handle that matter, and the great expense and loss of efficiency involved in resignation and replacement in a partially completed administration is avoided."

10 Mr Oakes SC, who appeared on the application, drew my attention to a number of instances in which additional (or special purpose) liquidators have been appointed, including Re Spedley Securities Ltd (1991) 4 ACSR 555 and Advance Housing Pty Ltd v Newcastle Classic Development Pty Ltd (1994) 14 ACSR 230. He referred also to Re Pasminco Ltd (No 2) (2004) 49 ACSR 470 where an analogous appointment was made in a Part 5.3A administration.

11 As is shown by those and other cases (for example, Onefone Australia Pty Ltd v One.Tel Ltd (2003) 48 ACSR 562), the efficient conduct of a complex winding up can often be assisted by such an appointment, particularly where situations of conflict arise. One possibility, of course, is that the existing liquidators, upon encountering such a situation of conflict, should vacate the field. But that would be highly counterproductive in a case such as the present where application and experience over a period of more than five years has put the existing liquidators in a position of special knowledge that it would be very expensive indeed to replicate in the mind of some new liquidator, assuming that replication were possible at all. The much preferable course is that there be an additional liquidator who can take charge of and administer the separate aspect of the winding up giving rise to the conflict difficulty.

12 The matter of conferring special and limited powers upon a special purpose liquidator has also been dealt with in the case law. It is clear that the provision which is now s.473(8) enables the court to confer limited and special functions and powers on the specially appointed liquidator. And as has been confirmed very recently in Onefone Australia Pty Ltd v One.Tel Ltd [2006] NSWSC 349, the court's jurisdiction under that section is of a continuing nature, so as to enable it to supplement and vary the initially confirmed powers should a need to do so arise.

13 Having regard to all these matters, I have today made the following orders in relation to each of the FAI companies: "4. Pursuant to section 472(1) of the Act, an order that Stephen James Parbery, an Official Liquidator, be appointed as an additional liquidator of the Company solely for the purposes specified in order 5. 5. Pursuant to section 473(8) of the Act, a declaration that the following matters may be done only by Stephen James Parbery, as an additional liquidator of the Company, on behalf of the Company: (a) dealing with any claims or cross claims made against, or which might be made by, the Company arising from the claims that relate to losses said to have been incurred by HIH Insurance Limited (In Liquidation) ACN 008 636 575 and HIH Investment Holdings Limited (In Liquidation) ACN 008 664 293 as a result of their takeover of FAI Insurances Limited and its subsidiaries in 1998 ( Takeover Loss Claim), including defending, prosecuting or settling any such claims or cross claims; (b) assessing and administering any proofs of debt lodged by HIH Insurance Limited (In Liquidation) ACN 008 636 575 or HIH Investment Holdings Limited (In Liquidation) ACN 008 664 293 against the Company arising from the Takeover Loss Claim; and (c) performing the role as liquidator of the Company in respect of the Takeover Loss Claim for the purposes of the Settlement Proceeds Deed dated 2 November 2005 (as may be amended from time to time), to which the Company is a party, including any application for Court approval of a settlement. 6. Pursuant to section 473(8) of the Act, a declaration that Stephen James Parbery, as an additional liquidator of the Company, be entitled to exercise, solely for the purposes specified in order 5 above: (a) subject to paragraph (b), all of the powers conferred on a liquidator by section 477 of the Act, other than the powers contained in section 477(1)(a) and (b) and section 477(2)(c), (ca), (f), (g); and (b) the power conferred on a liquidator by section 477(2)(m) of the Act, other than the power to distribute property of the Company. 7. Pursuant to section 473(8) of the Act, a declaration that, save for the matters specified in order 5, Anthony Gregory McGrath and Christopher John Honey, do all matters required or authorised by the Act as liquidators of the Company. 8. An order for leave to apply in these proceedings to extend or modify the purposes for which the additional liquidator is appointed, and generally."

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