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Judgment 1By Amended Originating Process filed on 24 February 2014, the Plaintiffs, Amaca Pty Ltd (under NSW administered winding up) ("Amaca"), Amaba Pty Ltd (under NSW administered winding up) ("Amaba") and ABN 60 Pty Ltd (under NSW administered winding up) ("ABN 60") seek orders under s 562A(4) of the Corporations Act 2001 (Cth) as to the application of the proceeds of certain contracts of reinsurance. The Plaintiffs are each regulated by the James Hardie Former Subsidiaries (Winding Up and Administration) Act 2005 (NSW). Two of the Plaintiffs, Amaca and Amaba, were involved in the manufacture and distribution of a variety of products containing asbestos until 1987. 2The broad structure of the application reflects similar applications which have previously been made by the Plaintiffs, including those considered by Barrett J (as his Honour then was) in Amaca Pty Ltd v McGrath as liquidators of HIH Underwriting & Insurance (Australia) Pty Ltd [2011] NSWSC 90; (2011) 82 ACSR 281 ("Amaca 1") which related to the policy years 1981/82 to 1982/83; by me in Amaca Pty Ltd (under NSW administered winding up) v McGrath & Honey (as liquidators of the HIH Group of Companies) [2012] NSWSC 176; (2012) 87 ACSR 625 ("Amaca 2") which related to the policy years 1989/90 to 1992/93; and by me in Amaca Pty Ltd (under NSW administered winding up) v McGrath & Honey (as liquidators of HIH Group of Companies) [2012] NSWSC 1523; (2012) 92 ACSR 105 ("Amaca 3") which related to the policy years 1993/94 to 1995/96. 3The application concerns ten amounts received by HIH Underwriting & Insurance (Australia) Pty Ltd (in liquidation and subject to a scheme of arrangement) ("HIHUI") from reinsurers, two of which relate to receipts in respect of policy claims and eight of which relate to commutations of policies. These amounts relate to the policy year 1980/81, which has not previously been considered by the Court, 1981/82 and 1982/83 which were dealt with in Amaca 1, and 1985/86 which also has not previously been considered by the Court. The Plaintiffs seek orders that ss 562A(2) and 562A(3) of the Corporations Act should not apply to those amounts, which should instead be paid to Amaca, after deducting expenses of and incidental to getting in the receipts agreed as 2.5% of the receipts, and deducting any dividends paid in respect of the receipts. In substance, the orders sought would have the result that reinsurance monies totalling $13,968,228 received by the liquidators of HIHUI would be paid directly to Amaca rather than distributed among all insurance creditors of HIHUI. 1980/81 policy year 4The Plaintiffs provided a helpful summary of the history of the other applications in respect of other policy years. An application in respect of the 1979/1980 policy year was brought but discontinued, since it ultimately was not necessary for the Plaintiffs to obtain an order under s 562A of the Corporations Act in respect of that year. Nonetheless, the Plaintiffs read an affidavit of Ms Narreda Grimley dated 28 June 2011 filed in that application. Ms Grimley has, from 2005 to date, been successively the General Manager of Amaca Claim Services, the Chief Operating Officer and subsequently the General Manager of the Asbestos Injuries Compensation Fund. That affidavit provides background to the dealings between James Hardie and HIHUI in the next year, 1980/81, which is in issue in this application. The position changed in one respect between 1979/80, when CE Heath Underwriting Agencies (Australia) Pty Ltd was the named insuring entity, and 1980/81 onwards, when HIHUI was the named insuring entity, subject to the reinsurance arrangements which I will address below. 5The Plaintiffs also rely on the affidavits of Ms Grimley dated 17 December 2013 and Mr Dennis Langlands dated 13 February 2014 in respect of their application concerning the 1980/81 policy year. I have referred to Ms Grimley's role above. Mr Langlands was involved as a broker for the James Hardie Group in obtaining insurance cover in the 1980/81 policy year and has previously given evidence in earlier proceedings in respect of the Plaintiffs' claims upon the HIH Group. 6Ms Grimley's affidavit refers to earlier affidavits including that of Mr Dallas Booth sworn on 22 July 2010 in earlier proceedings, which deals with the history of the Plaintiffs and the circumstances in which the Asbestos Injuries Compensation Fund was established and funded. She also exhibits three folders of documents relating to the placement of insurance by the Plaintiffs, reinsurance of those policies and related correspondence in the policy years commencing 31 March 1980 and 31 March 1985. The chronology of events in relation to the 1980/81 policy year that emerges from Ms Grimley's affidavit and the exhibited correspondence indicate that CE Heath Underwriting Agencies (Australia) Pty Limited approached CE Health London in respect of cover for the Plaintiffs in March 1980, at a time that the Plaintiffs were not then committed to placing cover with the CE Heath Group (the predecessor to the HIH Group). Instructions were given to proceed with placement of cover on 31 March 1980 and CE Heath London sought commitments from the London market from at least that date and through April 1980, some of which were given as direct insurance and some as reinsurance cover. The cover was placed by late April 1980, with 74.75% placed as direct insurance and 25.25% as reinsurance. 7Ms Grimley's evidence is that James Hardie Industries Ltd (now known as ABN 60, the Third Plaintiff) ("James Hardie") held $50 million liability insurance cover for the policy year from 31 March 1980 to 31 March 1981, made up of a primary layer and two excess layers. The second excess layer of $30 million in excess of $20 million was insured, to a total of 74.75%, directly by a number of international insurers and is not in issue in this application. The remaining 25.25% of the second excess layer was placed with HIHUI and the whole of that layer was reinsured with several reinsurers. Receipts from three of those reinsurers, Gerling Globale General & Reinsurance Co Ltd, Imperio Companhia De Seguros and Union Atlantique de Reassurances SA, are in issue in this application. Several other insurers, including AMP Fire & General Insurance Co Ltd ("AMP") and AFIA (World Wide) Insurance ("AFIA"), each held shares of that layer and receipts from AMP and AFIA are also in issue in this application. Ms Grimley's affidavit exhibits contracts of reinsurance for the relevant year and correspondence relating to that year. 8Mr Langlands gives evidence as to his contact with the HIH group in 1980 in respect of cover for the 1980/81 policy year and that his understanding was that the Australian market did not have the capacity to write the higher layers of cover and that the HIH group would obtain that cover from the London market. Mr Langlands also gives evidence of his understanding, consistent with that he held in respect of other policy years, that the HIH group did not have significant capacity to write that cover itself; that he did not expect that the HIH Group would itself be able to write any of the $30 million in excess of $20 million layer for the 1980/81 policy year; and that he understood that the entire premium paid by James Hardie would be forwarded by the HIH Group to the London market, less a commission. It does not seem to be entirely clear, but it is also not material for present purposes, whether the commission was dealt with by deduction from the amount paid by James Hardie and remitted to the reinsurers, or was an amount rebated by the reinsurers when they were given the reinsurance business. In either case, the commission was sourced from the premiums received by the London market participants. 9The Plaintiffs also rely on the affidavit of Mr Rod Waites dated 20 August 2010, which was read in Amaca 1 and again read in these proceedings, in respect of the 1980/81 policy year. Mr Waites' evidence was that during the 1980s, the James Hardie Group's then insurance manager travelled regularly with its insurance broker to meet with Mr Waites in Melbourne and underwriters in London in respect of the relevant insurance cover. Mr Waites also referred to the practice by which, when CE Heath London was unable to place insurance directly, it placed it as facultative reinsurance in order to secure a 100% placement, and by which HIHUI "fronted" for any portion of insurance which was facultatively reinsured and did not charge a premium but obtained a commission on the placement of the risk. The term "fronted" or "fronting" is used in this context without any pejorative meaning. 10Several features of the arrangements in this year provide a factual basis for an order under s 562A(4) of the Corporations Act. The relevant reinsurance contracts were obtained by HIHUI solely in respect of the cover obtained by the Plaintiffs. In this year, as in the years considered in Amaca 1, Amaca 2 and Amaca 3, the insurance contracts under which HIHUI provided cover to the Plaintiffs can readily be matched with the reinsurance contracts in favour of HIHUI. HIHUI entered into those reinsurance contracts for the purpose of providing cover for the Plaintiffs that HIHUI would not have been able to provide without that reinsurance and where several of the reinsurers could not have insured the Plaintiffs directly. The insurance provided by HIHUI was plainly dependent on the provision of reinsurance cover, since it was plainly understood that HIHUI did not itself have the capacity to provide that cover other than with back-to-back reinsurance arrangements. The premiums paid by the Plaintiffs to HIHUI were identical to the premiums paid by HIHUI to the reinsurers, apart from HIHUI's commission to which I referred above. The James Hardie Group was also aware, through its broker, of the arrangements by which the risk nominally undertaken by HIHUI had in fact been placed in the London market by facultative reinsurance contracts obtained for that purpose. 1981/82 and 1982/83 policy years 11The Plaintiffs also rely in this application on evidence read in previous proceedings concerning the 1981/82 and 1982/83 policy years, since several of the commutations in issue extend to those policy years. The position in these years was considered in detail by Barrett J in Amaca 1 and the Court has subsequently made several further orders in respect of distributions relating to those years on a basis consistent with his Honour's judgment. Ms Grimley's affidavit refers to evidence read in Amaca 1 including the affidavits of Mr Booth sworn 3 August 2010 relating to the 1981/82 policy year; the affidavit of Mr Waites sworn 20 August 2010 relating to the 1981/82 policy year; the affidavit of Mr Booth sworn 3 August 2010 relating to the 1982/83 policy year; a second affidavit of Mr Waites also sworn 20 August 2010 relating to the 1982/83 policy year; and the affidavit of Mr Langlands sworn 3 December 2010 relating to the 1981/82 and 1982/83 policy years. 12Mr Waites' evidence indicated that many reinsurers who participated in insuring James Hardie in the 1981/82 policy year were not permitted to write direct insurance, but only to cover risk as facultative reinsurance and HIHUI's role in "fronting" the insurance was necessary to their providing the relevant cover. He refers to correspondence, in March 1981, concerning the ability to use facultative reinsurance behind HIHUI if necessary to place the cover and notes that he had authority to agree to the use of the facultative reinsurance market on behalf of HIHUI and that: "Use of the facultative reinsurance market involved [HIHUI] fronting the risk without carrying any of the insurance risk itself." He also notes that another HIH entity would obtain a commission on the placement of the risk. In the 1981/82 policy year, HIHUI's records confirmed that it had remitted the premiums paid by Minet, as James Hardie's broker, to CE Heath London, less a 7.5% commission that it retained for acting as an intermediary between James Hardie and the London-based insurers and reinsurers. 13Mr Langlands evidence, in his affidavit sworn 3 December 2010 in respect of the 1981/82 policy years, is that he expected all of the insurers to be London or overseas-based insurers arranged by CE Heath London, and did not expect any Australian insurer in the HIH Group to be an insurer on any part of the policy, although he indicates that he was aware that it was common for companies within the HIH Group to front for another insurer such as a London insurer and he would have assumed, had he seen a reference to HIH on a policy slip, that it was "solely acting as a fronting source for London insurers/overseas insurers". 14Mr Waites' evidence is also that, although he did not discuss with CE Heath London whether the James Hardie Group's insurance for the 1982/83 year should be placed as direct insurance or as facultative reinsurance, and he understood that that was subject to market capacity, his understanding was also that: "Where a direct insurance placement was not possible due to a lack of capacity in the market, CE Heath London placed the remaining portions of the James Hardie Group's insurance account as facultative reinsurance of [HIHUI] in the 1982/83 year of account, just as it had done in the 1981/82 policy year." He refers to documentation recording that parts of several layers were signed by a "domestic", which he notes was a reference to cover "fronted" by HIHUI. 15In Amaca 1, Barrett J summarised the matters which he considered had the result that there was no difficulty, in the 1981/82 and 1982/83 years, in matching the insurance contracts under which HIHUI granted cover to the Plaintiffs with the reinsurance contracts written in its favour and supported findings that HIHUI entered into those contracts to provide cover which it could not itself provide and which the reinsurers could not directly provide and a conclusion (at [78]-[79]) that: "The reinsurance was the means by which the reinsurers provided, through [HIHUI] the insurance the plaintiffs required. The reinsurance was obtained for the express purpose of fulfilling the plaintiffs' needs. On that basis, the reinsurance proceeds derived by [HIHUI] ought properly be regarded as part of what [HIHUI], as insurer, was committed to provide to the plaintiffs upon and by reason of their sustaining the relevant loss." 16I have had regard to the evidence read as to those years in this application and I gratefully adopt Barrett J's description of the process adopted in those years, which was consistent with that evidence. That evidence supports the view that the dealings between James Hardie, HIHUI and the London reinsurers in those years had the features noted above in respect of the previous year which in turn provide the factual basis for the making of a further order under s 562A(4) of the Corporations Act in respect of those years, consistent with the orders previously made by the Court in respect of those years. 1985/86 policy year 17The position in respect of the 1985/86 policy year has not previously been considered by the Court and is at issue in this application. Ms Grimley's affidavit also deals with insurance cover held by James Hardie for the 1985/86 policy year, for the period from 31 March 1985 to 31 March 1986 which was subsequently extended to 31 May 1986, and was comprised of $75 million of liability insurance made up of a primary layer and five excess layers, of which only the first $50 million of cover extended to asbestos cover. An amount of 4.65% of the third excess layer was subscribed by HIHUI and wholly reinsured by Transatlantic Reinsurance Company Ltd ("Transatlantic") and an amount of 5.30% of the fourth excess layer of $25 million in excess of $25 million was subscribed by HIH, part of which was reinsured by Transatlantic. 18Ms Grimley's affidavit exhibits contracts of reinsurance for the relevant year and correspondence relating to that year. It is plain from that correspondence that there were significant difficulties in obtaining reinsurance cover in that year and James Hardie was closely involved in addressing those issues. Attempts were made in that year, given the difficulties of obtaining cover, to generate capacity in the Australian market, but HIHUI again did not accept any economic exposure in respect of the cover and, by July 1985, HIHUI had confirmed that it was willing to "front" for a further reinsurer but that there was no Australian support in respect of the highest layer of the cover then sought. 19The Plaintiffs also rely on the affidavit of Mr Langlands dated 13 February 2014 in respect of this policy year. Mr Langlands' evidence is that the same general procedure was involved in organising James Hardie's cover for the policy year commencing 31 March 1985 as in earlier years. He gives evidence, consistent with the correspondence that is also in evidence, of the difficulty in obtaining cover in that year due to a lack of capacity in the London and overseas markets generally and specifically in relation to asbestos cover. He also refers to a direct meeting between the lead London underwriter and James Hardie's Managing Director and a representative of James Hardie's insurance broker, Minet Australia, in respect of issues in obtaining cover in that year. Mr Langlands' evidence is that in that year, his understanding was that the premium paid by James Hardie would again be directed to the London market, with HIHUI again taking a commission. Mr Langlands also refers to a request made by CE Heath London that the brokers seek to generate some capacity in the Australian market, and he notes that he could not find anyone in the Australian market willing to write the relevant cover. Mr Langlands notes his understanding in 1985 that London or overseas markets would be the only markets that would be prepared to insure James Hardie given its connection with asbestos and that he did not expect that an HIH entity would retain any of the risk for the 1985 policy year, and he also notes that he was aware in that year that an HIH entity would be "fronting" a portion of the 1985/86 policy. 20Again, several features of the arrangements in this year provide a factual basis for an order under s 562A(4) of the Corporations Act. Again, the relevant reinsurance contracts were obtained by HIHUI solely in respect of the cover obtained by the Plaintiffs and the insurance contracts under which HIHUI provided cover to the Plaintiffs can readily be matched with the reinsurance contracts in favour of HIHUI. Again, HIHUI entered into those reinsurance contracts for the purpose of providing cover for the Plaintiffs that HIHUI would not have been able to provide without that reinsurance and where several of the reinsurers could not have insured the Plaintiffs directly. Again, the insurance provided by HIHUI was plainly dependent on the provision of reinsurance cover, since it was understood that HIHUI did not itself have the capacity to provide that cover other than with back-to-back reinsurance arrangements, and that position was emphasised by the difficulty in obtaining cover in that year. The premiums paid by the Plaintiffs to HIHUI were identical to the premiums paid by HIHUI to the reinsurers, apart from HIHUI's commission to which I referred above. The James Hardie Group was again aware, through its broker, of the arrangements by which the risk nominally undertaken by HIHUI had in fact been placed in the London market by facultative reinsurance contracts obtained for that purpose. Scope of s 562A of the Corporations Act 21Section 562A(1) of the Corporations Act provides that the section applies where: "(a) a company is insured, under a contract of reinsurance entered into before the relevant date, against liability to pay amounts in respect of a relevant contract of insurance or relevant contracts of insurance; and (b) an amount in respect of that liability has been or is received by the company or the liquidator under the contract of reinsurance." The term "relevant contract of insurance" is defined as "a contract of insurance entered into by the company, as insurer, before the relevant date" and that term can include contracts of reinsurance: AssetInsure Pty Ltd v New Cap Reinsurance Corporation Ltd (in liq) [2006] HCA 13; (2006) 225 CLR 331 at [86]-[87]. The requirements of s 562A(1)(a) of the Corporations Act are satisfied in this case since HIHUI was insured under contracts of reinsurance entered into before the relevant date in respect of its liability to pay amounts in respect of contracts of insurance that it had entered in favour of the Plaintiffs. 22The operation of this section was considered in detail by Barrett J in his decision in Re HIH Casualty & General Insurance Ltd [2005] NSWSC 240; (2005) 190 FLR 398 ("Re HIH - First Scheme Hearing") and that analysis has been followed in subsequent cases including in my decisions in Amaca 2 and Amaca 3. His Honour there noted that s 562A is an exception to the general rule laid down in s 555 of the Corporations Act that all debts and claims proved in a winding up rank equally and, if the company's property is insufficient to meet them in full, they must be paid proportionately. Section 556 in turn overrides s 555 of the Corporations Act in the specified circumstances and s 562A overrides ss 555 - 556 by directing that the specified assets be applied towards the claims with which it is concerned. 23Turning now to the specific requirements of the section, s 562A(1)(b) of the Corporations Act requires that, first, an amount in respect of the relevant liability is received by the insurer. The claims made by the Plaintiffs amount, in large part, to liabilities that had been incurred but not reported. The liquidators contend that such contingent liabilities fall within s 562A(1)(b). In Amaca 2 at [6]-[7], I held that the phrase "that liability" in s 562A(1)(b) extends to a contingent liability of the insurer which has the benefit of contracts of reinsurance to pay amounts in respect of a relevant contract of insurance, and not only an established or admitted liability. Ms Rees submit that that approach is consistent with the approach adopted by the Privy Council in Cleaver v Delta American Reinsurance Co (in liq) [2001] UKPC 6; [2001] 2 AC 328 at [42], where their Lordships recognised the importance of recognition of incurred but not reported claims in an insurance company's accounts, with the figure being actuarially calculated and based upon past claims experience, reflecting "an estimate of a liability that statistics and experience show to exist in respect of claims not yet put forward". 24Section 562A(1)(b) of the Corporations Act also requires that an amount is received by the insurer under the contract of reinsurance. In Amaca 2, I also held (at [10]) that a payment is made under a contract of reinsurance where the amount represents a discharge of payment obligations created by the agreement, including by a commutation of rights under that agreement. I continue to take this view. Ms Rees points out that the commutations in this case relate to insurance policies written on an occurrence basis as distinct from a "claims made" basis, whereas I had considered the position in respect of commutations of policies had been written on a "claims made" basis in Amaca 2. Neither party identified any potential difference in the application of s 562A of the Corporations Act arising from that matter and it is not apparent to me that any such difference arises. The requirements of s 562A(1)(b) are satisfied in respect of the two claim payments by reinsurers and eight commutations in this case. Whether amounts are payable under a relevant contract of insurance 25The usual position is that a liquidator must distribute reinsurance proceeds among the insured creditors in the manner specified in s 562A(2)-(3) of the Corporations Act. Section 562A(3), which would be applicable in the present circumstances absent an order under s 562A(4), relevantly provides for the liquidator to provide each insured a proportion of their claim calculated in the specified manner. The Court may make an order providing for a different allocation of reinsurance proceeds under s 562A(4) which relevantly provides that: "(4) The Court may, on application by a person to whom an amount is payable under a relevant contract of insurance, make an order to the effect that subsections (2) and (3) do not apply to the amount received under the contract of reinsurance and that that amount must, instead, be applied by the liquidator in the manner specified in the order, being a manner that the Court considers just and equitable in the circumstances." 26Subsection 562A(4) applies on application by a person to whom an amount is "payable under" a relevant contract of insurance. A question arose in the course of submissions before me on 18 March 2014 as to whether the fact that the Plaintiffs had made their claim under a scheme of arrangement in respect of HIHUI affected the characterisation of that claim as being a claim under the relevant contract of insurance, so as to amount to a surrender of the rights of the Plaintiffs under the relevant contracts of insurance in substitution for rights under the scheme, such that the amounts claimed by the Plaintiffs were now not payable to them under the relevant contracts of insurance. 27The terms of the relevant scheme indicate that distributions to the Plaintiffs under the scheme are in substitution for dividends in a winding up. Clause 6.2 of the scheme provides that scheme creditors accept their rights under the scheme in lieu of their entitlements to proving in and receiving a dividend from the winding up. Clause 9 of the scheme in turn recognises the possibility that applications may be brought under s 562A(4) of the Corporations Act. Under cl 12 of the scheme, once an amount is admitted as an "Acknowledged Creditor Claim" (as provided by cl 11 of the scheme), the scheme creditor is paid the relevant payment percentage (or dividend) based on the value for which its claim is accepted as an "Established Scheme Claim" (as defined), and that payment constitutes a discharge of the payment obligation owed by the scheme company to the scheme creditor. 28The parties jointly submit, and I accept, that the fact that the amounts claimed by the Plaintiffs are now payable as a claim under the scheme of arrangement does not deprive them of their original character as amounts payable under a relevant contract of insurance. As the parties point out, s 562A(4) operates in the context of the winding up of an insurer, when creditors' right to sue for their debts is in the ordinary course transformed to a right to participate in a distribution in the winding up: Re HIH - First Scheme Hearing at [119]. The parties submit, and I accept, that the fact that a person's claim is to a distribution in the winding up cannot deprive it of its character as a claim to an amount payable under a relevant contract of insurance, because that would deprive s 562A of sensible operation, and a similar analysis should be applied where an insured has the right to prove in a scheme of arrangement. It seems to me that the amount is "payable under" a relevant contract of insurance, in the sense that the relevant contract of insurance gives rise to the right to payment, notwithstanding that payment will be effected as a distribution in the winding up or a payment under the scheme of arrangement. To put it another way, the insured continues to have a right to an amount "payable under" the relevant contract of insurance, notwithstanding that it may not now sue the insurer for indemnity under the policy of insurance, and instead participates in the relevant scheme. As the parties contend, and I accept, an amount is also "payable" under the contract of insurance because that payment will constitute a satisfaction of the right of the insured to payment by the insurer under that contract. 29The case law also seems to me to support the view that claims made by the Plaintiffs under the scheme of arrangement are nonetheless properly characterised as claims to amounts payable under a relevant contract of insurance for the purposes of s 562A of the Corporations Act. In Re HIH - First Scheme Hearing, in considering the interaction between s 411 (which deals with schemes of arrangement) and s 562A(7) (which provides that s 562A has effect despite any agreement to the contrary), Barrett J proceeded on the basis that s 562A could have application in respect of claims dealt with by a scheme of arrangement, and did not order that meetings of creditors be convened to consider the particular scheme proposal which purported to require assets to be applied other than in the manner provided under the section. In Re HIH Casualty & General Insurance [2005] NSWSC 1180; 56 ACSR 295 ("Re HIH - First Scheme Hearing No 2"), Barrett J subsequently made orders under s 411 of the Corporations Act convening meetings of creditors to consider a revised scheme proposal, where the proposed scheme had been modified so as to preserve the rights of insured to whom s 562A applied and, in particular, to accommodate the operation of s 562A(4). It seems to me that the necessary consequence of his Honour's reasoning was that s 562A was capable of continuing to apply in respect of rights dealt with under a scheme of arrangement, and that the revised scheme would not impede an insured's ability to apply for an order under s 562A(4). This approach is consistent with the approach adopted by Barrett J in Amaca 1 at [60] - [62] and by me in Amaca 3 at [10]. When operation of s 562A(2)-(3) can be varied 30Where s 562A(4) applies, it allows the Court to displace whichever of s 562A(2) or (3) applies in the circumstances and, by its order, substitute a method of application of the amount of reinsurance proceeds which is different from that which would otherwise have applied under the provision which is displaced: Amaca 1 at [10]. The "just and equitable" criterion adopted in this subsection confers a discretion on the Court that, while wide, can only be exercised judicially in the light of the whole of the circumstances surrounding the relevant subject matter and requires the Court to proceed in a way to which Barrett J referred in Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273 at [45]-[47], quoted by Barrett J in Amaca 1 and followed in Amaca 2. 31Certain matters which the Court may take into account in considering whether to make such an order are specified, in an inclusive manner, in s 562A(5) as follows: "(5) The matters that the Court may take into account in considering whether to make an order under subsection (4) include, but are not limited to: (a) whether it is possible to identify particular relevant contracts of insurance as being the contracts in respect of which the contract of reinsurance was entered into; and (b) whether it is possible to identify persons who can be said to have paid extra in order to have particular relevant contracts of insurance protected by reinsurance; and (c) whether particular relevant contracts of insurance include statements to the effect that the contracts are to be protected by reinsurance; and (d) whether a person to whom an amount is payable under a relevant contract of insurance would be severely prejudiced if subsections (2) and (3) applied to the amount received under the contract of reinsurance." In my view, the factor specified in s 562A(5)(a) of the Corporations Act is established in this case in that it is possible, in each of the relevant policy years to which I have referred above, to identify particular relevant contracts of insurance as being the contracts in respect of which the contract of reinsurance was entered into. 32The question whether the Plaintiffs would be "severely prejudiced" if ss 562A(2)-(3) applied in this case, for the purposes of s 562A(5)(d) of the Corporations Act, raises issues which correspond to those considered by Barrett J in Amaca 1 and by me in Amaca 2 and Amaca 3. These decisions indicate that the prejudice to which s 562A(5)(d) is directed is the prejudice flowing from the operation of s 562A(2)-(3), if left unaltered by the Court, rather than any prejudice flowing from the alteration of that section pursuant to s 562A(4). That paragraph directs attention to the prejudice to the person seeking the alteration of the order of distribution under s 562A(2)-(3) if that order is declined, rather than the prejudice to other parties if that order is made: Amaca 1 at [73]. The concept of "severely prejudiced" contemplates prejudice or disadvantage that is severe, in the sense of being harsh or unpleasantly extreme: Amaca 1 at [74]. A finding of "severe prejudice" is relevant, but not necessary, to an exercise of the discretion under s 562A(4) of the Corporations Act. 33In this case, as in the earlier cases dealing with other policy years raising similar issues, the Plaintiffs would be prejudiced if they did not receive the direct benefit of the reinsurance monies for which they had bargained, where they plainly would not have contracted for cover from HIHUI, and indeed HIHUI would not have offered the relevant cover, without the reinsurance that was in place. As Barrett J noted in Amaca 1, the real and significant prejudice that the Plaintiffs would suffer by being deprived of the reinsurance proceeds is a matter that supports the making of an order under s 562A(4) in their favour, even if it were properly characterised as substantial rather than "severe" prejudice. 34In this case, as in the earlier cases, further factors that make it just and equitable to make the order sought by the Plaintiffs seem to me to include the limited role played by HIHUI in insuring the risk; the unusually direct relationship between the Plaintiffs and the reinsurers; and the fact that the Plaintiffs, in a substantive sense, paid their premiums to HIHUI for cover to be afforded by the reinsurers rather than HIHUI. 35Ms Rees, who appears with Mr Hollo for the Plaintiffs, properly draws attention to the decision of Nicholas J in Re HIH Casualty & General Insurance Ltd (in liq and subject to schemes of arrangement) [2013] NSWSC 741; (2013) 95 ACSR 1 ("Sydney Water Corporation"), where his Honour declined to make an order under s 562A(4) of the Corporations Act in respect of reinsurance proceeds received by HIH on the application of Sydney Water Corporation. Judgment in an appeal from the decision of Nicholas J in Sydney Water Corporation is presently reserved by the Court of Appeal. 36I do not understand the analysis adopted by Nicholas J in Sydney Water Corporation to be in any way inconsistent with the analysis previously adopted by the Court in Amaca 1, Amaca 2 and Amaca 3, although his Honour exercised his discretion differently in different factual circumstances. His Honour there (at [73]) adopted the description of the operation of ss 562A(2)-(3) of the Corporations Act given in Amaca 3 at [9]-[12] and [19], where I had in turn adopted the same analysis as Barrett J had adopted in Amaca 1 and I had adopted in Amaca 2. His Honour also referred to Amaca 1 in recognising that the discretion conferred under s 562A(4), while wide, can only be exercised judicially in light of the whole of the circumstances surrounding the relevant subject matter: Sydney Water Corporation at [78]. His Honour emphasised that the question for the Court, in exercising the discretion conferred by s 562A(4), was whether an applicant had demonstrated on the evidence a reason or an appropriate case to warrant the exercise of discretion in its favour, so that it should be treated differently to other insured creditors, and cited Amaca 1 at [85] in observing that (at [106]): "In the end, the Court must be satisfied that the circumstances are such as to make it just and equitable that the ordinary course envisaged by sub s (2) and (3) be departed from in respect of the manner of application of the amounts received under a contract of reinsurance ... and in this exercise it may take into account the matters included in sub s (5)." 37As I read his Honour's decision, it involves the application of the same principles which have been applied in the earlier decisions of the Court, but reflects his factual findings (at [124]) that the correspondence on which Sydney Water Corporation relied did not disclose direct participation by it with the relevant insurance syndicate in negotiations for reinsurance and did not support a finding in that case that HIH was merely a front or conduit to facilitate direct negotiations between Sydney Water Corporation and the syndicate, by contrast with the position found in the Amaca cases. It will be noted that HIH had in that case in fact retained a significant portion of several layers of the insurance that it provided to Sydney Water Corporation, by contrast with the position in this case and the earlier Amaca cases where it appears to have been understood throughout the process that HIHUI did not have the capacity to and would not accept any economic exposure to the relevant risk. Prejudice to other creditors 38This case is, however, more difficult than earlier Amaca cases in one respect. In Amaca 2, I observed that (at [25]): "The conclusion that it is just and equitable to make the orders sought is also supported by the fact that, while the prejudice to the Plaintiffs of being deprived of the proceeds of the reinsurance for which they bargained is significant, the adverse impact of the orders sought on other insurance creditors of HIH C&G will be widely diversified and the detriment suffered by any particular creditors will be limited." I there observed that the fact that the reduction in the return to other relevant creditors from making the relevant orders was insubstantial was a factor that assisted in, but was not necessary to, a finding that it was just and equitable to make the relevant order. 39By contrast, the Plaintiffs' application in this case will have a more substantial financial impact on the return to other insurance creditors of HIHUI than earlier applications, in the sense that those other insurance creditors would receive a significantly higher return if the monies claimed by the Plaintiffs were made available to all insurance creditors of HIHUI rather than only to the Plaintiffs as a result of an order made under s 562A(4). The liquidators advised the solicitors for the Plaintiffs, on 13 March 2014, that the impact on other insurance creditors of HIH was expected to be approximately 14¢ in the dollar if the Plaintiffs were successful in obtaining the orders sought in this application. That position was confirmed by further submissions filed by the liquidator on 16 April 2014, which indicated that, if the Plaintiffs' application was successful, other insurance creditors of HIHUI will receive a distribution estimated at 20¢ to 30¢ in the dollar. On the other hand, if the Court did not make the orders sought by the Plaintiffs and all insurance creditors participated rateably in the reinsurance proceeds claimed by the Plaintiffs, the distribution received by insurance creditors of HIHUI would be 34¢ to 44¢ in the dollar. 40The liquidators acknowledge that the impact on other insurance creditors of an order made under s 562A(4) in this case is arguably of a different magnitude to the impact of such an order on other insurance creditors in Amaca 1 (where the difference resulting from an order under s 562A(4) was then estimated to be in the order of 5¢), Amaca 2 (where the return to other insurance creditors was reduced by less than 0.3¢) and Amaca 3 (where the return to other insurance creditors was reduced by less than 1¢ in the dollar). The liquidators submit, as I had noted in Amaca 2, that this was a matter that the Court may take into account in the exercise of its discretion under s 562A(4) but is not determinative. It does not seem to me that this matter ultimately provides a reason not to make the relevant order. The reduction in the return to other creditors seems to me to be in the nature of the loss of an advantage, if their return was subsidised by receipts from reinsurance arrangements in which HIHUI had no substantial economic interest, rather than a deprivation of a benefit that ought to flow to them in the factual circumstances which I have set out above. Orders 41Accordingly, I am satisfied that it is just and equitable to make an order under s 562A(4) of the Corporations Act in the relevant circumstances, in the form set out in the Amended Originating Process. The parties should bring in short minutes of order to give effect to this judgment within 7 days.