AFG Insurances Ltd [2002] NSWSC 844

1 Before the court is an application by AFG Insurances Limited and its administrators, Mr Hutchison and Mr Gibbons, who were appointed under Pt. 5.3A of the Corporations Act 2001 (Cth) on 14 August 2002. They seek the issue of a letter of request directed to the High Court of Justice in England. The application is made under s. 581(4) of the Corporations Act. 2 An application for similar relief was refused on 20 August 2002: [2002] NSWSC 735. There were essentially two reasons for that result in relation to the earlier application: first, it was not sufficiently shown that there was a situation of "insolvency" (see paragraph (c) of the definition of "external administration matter" in s. 580) and, second, the orders that the English court would have been asked by the letter of request to make could not, as I saw matters, be regarded as orders in the making of which that court would "act in aid of, and be auxiliary to" this court in relation to an "external administration matter". I shall not repeat here the terms of the relevant statutory provisions or the detail of the reservations that caused me to decline the relief sought on the previous occasion. 3 As to the existence of an "external administration matter", there is now before the court much more comprehensive evidence about the financial position of AFG. There is, in particular, an assessment of the position by one of the administrators, Mr Gibbons, which contains significantly more information than it was possible to put before the court on 19 and 20 August which was less than a week after the administrators were appointed. They have now had an opportunity to take further steps to assess the situation, including by obtaining a report (which is dated 6 September 2002) from Ernst & Young Actuarial Services as to the matter of claims provisioning which, for a company engaged in insurance and reinsurance activities, as is AFG, is a matter of crucial importance to the solvency position. That report concludes that the outstanding claims provision as at 30 September 2001 "could be understated by between $5m and $20m, possibly more". Mr Gibbons' opinion, as stated in his affidavit sworn on 9 September 2002, is that liabilities exceed assets and that AFG is not in a position to discharge all of its liabilities as and when they fall due for payment. 4 This seems to me to be a much firmer foundation than was available to the court on 20 August on which to find that there exists a situation of insolvency giving rise to matters within paragraph (c) of the definition of "external administration matter" in s.580. The first obstacle encountered on 20 August in the attempt to invoke the s. 581(4) jurisdiction is therefore not present now. 5 The letter of request that it is now sought to have this court direct to the English court differs significantly from the one I considered previously. A letter in the form now proposed will be founded on declarations, which this court is asked to make, that AFG became subject to voluntary administration under the Act on 14 August 2002 and that Mr Hutchison and Mr Gibbons became administrators accordingly on that day. Those declarations are justified by the evidence and, once made, will constitute orders of this court attracting, in the particular circumstances of this case (where AFG's assets, liabilities and activities are concentrated largely on the London market and it is a party to significant legal proceedings in England), a need for the English court to act in its jurisdiction in aid of and to be auxiliary to this court in recognising and giving effect to those orders. 6 The new form of letter of request also differs from the earlier version in that it asks the English court to make such orders as it would be open to this court to make within this court's jurisdiction applying and giving effect to certain provisions of the Corporations Act about voluntary administration (or, in the alternative, applying and giving effect to comparable United Kingdom statutory provisions), as well as such orders as it would be open to this court to make within its jurisdiction to assist the administrators in the exercise of their powers and the discharge of their functions under the Corporations Act. 7 My concern on the last occasion that there was no identifiable "matter" in relation to which the English court was asked to act in aid of or as auxiliary to this Court - in the sense of a proceeding or order here in relation to which some step needed to be taken there - is, I think, resolved by this new approach. As I have said, there will be declarations of this court as to the status of the company in administration and of the administrators and those orders of this court will be a subject of the first part of the request. 8 As to the second aspect of the request, it was submitted that a future matter in which the jurisdiction of this court might be invoked in relation to an administration over which this court is clearly able to exercise jurisdiction is properly regarded as a matter within the purview of s.581(4); and that the section will support a request that the foreign court, as it were, act within its territory in ways in which this court could and would act here upon application made to it. This involves a somewhat broader view of "act in aid of, and be auxiliary to" than I was inclined to think available when the earlier application was before me. But having considered the further submission, I accept that broader view as warranted by the general approach in ss.580 and 581. The relevant concept of acting in aid of and being auxiliary to this court is not, I think, confined to recognizing or giving effect to an order of this court, although the concept certainly has that aspect. An additional aspect, I am persuaded, involves the making by the foreign court, within and for the purposes of its jurisdiction, of orders that this court could have made in relation to the relevant subject matter had this court's jurisdiction, in the territorially limited sense, extended that far. 9 This court is invested with jurisdiction by the Corporations Act 2001 (Cth) in relation civil matters arising under the Corporations legislation of the Commonwealth. That jurisdiction is comprehensive and without territorial limit and, in referring to matter to which this court's jurisdiction does not extend, I do not suggest that the jurisdiction with respect to matters presently relevant is in any way restricted. It is unrestricted from the perspective of our law. I merely intend to say that effective exercise of this jurisdiction in foreign places may be hampered by lack of recognition in those places. It is the resolution of that difficulty at which s. 581 is directed. 10 I should refer finally to another aspect of the further evidence that is now before the court, being an affidavit of Mr French, an English solicitor who is a partner with the firm Lovells in London and a specialist in insolvency law with considerable experience of multi-jurisdictional insolvencies involving what he describes as "co-operation between the courts in relevant countries". Mr French gives evidence of the relevant English law, including provisions of the Insolvency Act 1986 (UK). He expresses an opinion that the administrators are likely to receive sufficient aid in relation to assets and legal proceedings in England if the English court is asked to assist in the ways contemplated by the form of letter of request now proposed. He also expresses an opinion that he is unlikely to come to advise or recommend that the administrators commence an English insolvency proceeding. 11 I consider that the administrators have made out a case for the grant of the relief they seek. 12 There is a need for an amended originating process. Upon that being filed by delivery to my Associate this afternoon with the appropriate form of order, I shall make in chambers the following declarations: 1. Declare that on 14 August 2002 the first plaintiff (the "Company") commenced under administration pursuant to Part 5.3A of the Corporations Act 2001 (Cth) (the "Act"). 2. Declare that on 14 August 2002 Keiran Hutchison and John Raymond Gibbons were appointed voluntary administrators of the Company pursuant to Part 5.3A of the Act with such powers and functions as are conferred on them by Part 5.3A of the Act. 13 I shall also make an order that the Registrar sign, seal and dispatch to the proper officer of the High Court of Justice, Chancery Division, Companies Court a letter of request in the following terms: The Supreme Court of New South Wales hereby requests the High Court of Justice in England, pursuant to the provisions of the Insolvency Act 1986 (UK), to assist this court by making orders, to the extent the High Court of Justice has jurisdiction so to order, as follows: 1. orders recognising and giving effect to the declarations made by the Supreme Court of New South Wales on 11 September 2002 as follows: (a) A declaration that on 14 August 2002 the first plaintiff (the "Company") commenced under administration pursuant to Part 5.3A of the Corporations Act 2001 (Cth) (the "Act"). (b) A declaration that on 14 August 2002 Keiran Hutchison and John Raymond Gibbons were appointed voluntary administrators of the Company pursuant to Part 5.3A of the Act with such powers and functions as are conferred on them by Part 5.3A of the Act; 2. such orders as it would be open to the Supreme Court of New South Wales to make within its jurisdiction applying and giving effect to: (a) the statutory protections set out in section 440D and section 440F of the Corporations Act 2001 (Cth); (b) the Administrators' statutory entitlements to the books of the Company set out in section 438C of the Corporations Act 2001 (Cth); (c) the operation of section 437D of the Corporations Act 2001 (Cth) to transactions or dealings affecting property of the Company; or orders applying and giving effect to such comparable English statutory provisions in respect of such protections, entitlements transactions or dealings as would have had application to the Company had it been made subject to an Administration order under section 8 of the Insolvency Act ; 3. such orders as it would be open to the Supreme Court of New South Wales to make within its jurisdiction to assist the Administrators in the exercise of their powers and the discharge of their functions as administrators appointed pursuant to Part 5.3A of the Corporations Act 2001 (Cth); and 4. such further and other orders as the High Court of Justice may consider just.

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