HIH Casualty & General Insurance Ltd & Ors [2005] NSWSC 536

CATCHWORDS : CORPORATIONS - winding up - liquidators in office in Australia - provisional liquidators in office in England - application by Australian liquidators for convening of meeting to consider creditors' scheme of arrangement - Australian liquidators seek adjournment with a view to application by provisional liquidators to English court for determination of matter of English law considered relevant to arrangement

LEGISLATION CITED : Corporations Act 2001 (Cth), s.562A

CASES CITED : Re HIH Casualty and General Insurance Ltd [2005] NSWSC 240

HIH Casualty & General Insurance Limited, FAI General Insurance Company Limited, CIC Insurance Limited, World Marine & General Insurances Pty Limited, FAI Traders Insurance Company Pty Limited, FAI Reinsurances Pty Limited, FAI Insurances Limited, HIH Underwriting and Insurance (Australia) Pty Limited - First Plaintiffs Anthony Gregory McGrath and Alexander Robert Mackay Macintosh - Second Plaintiffs PARTIES : Australian Securities and Investments Commission - Leave granted to appear by counsel as amicus curiae Amaca Pty Limited, Amaba Pty Limited, Hazelwood Power, Latrobe Power Partnership, Transfield Construction Pty Ltd, Obayashi Corporation, Transfield Pty Ltd, Transfield Philippines Inc and Perisher Blue Pty Limited - Entities granted leave under rule 2.13 of the Supreme Court (Corporations) Rules 1999 to be heard without becoming parties

Mr M.B. Oakes SC/Mr R.A. Dick - First and Second Plaintiffs Mr S.D. Rares SC/Mr T.D. Castle - Australian Securities and Investments Commission Mr J.T. Gleeson SC/Mr J.A.C. Potts - Amaca Pty Limited and Amaba Pty Limited COUNSEL : Mr I.M. Jackman SC/Mr R.D. Strong - Hazelwood Power, Latrobe Power Partnership, Transfield Construction Pty Ltd, Obayashi Corporation, Transfield Pty Ltd, Transfield Philippines Inc Mr R.P.L. Lancaster - Perisher Blue Pty Limited

Blake Dawson Waldron - First and Second Plaintiffs Kim Turner - Australian Securities and Investments Commission Eakin McCaffery Cox - Amaca Pty Limited and Amaba Pty Limited SOLICITORS : Mallesons Stephen Jaques - Hazelwood Power, Latrobe Power Partnership, Transfield Construction Pty Ltd, Obayashi Corporation, Transfield Pty Ltd, Transfield Philippines Inc Dibbs Barker Gosling - Perisher Blue Pty Limited

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

6708/04 - RE HIH CASUALTY AND GENERAL INSURANCE LTD & ORS

1 Any creditors' scheme of arrangement of the kind the liquidators have it in mind to propound must be consistent with s.562A of the Corporations Act 2001 (Cth) and must give effect to that section. The court has no discretion to operate on any other basis: see my judgment of 29 March 2005 Re HIH Casualty and General Insurance Ltd [2005] NSWSC 240. 2 Section 562A contains no territorial qualification or limitation. An important issue thrown up by the liquidators' current approach is whether proceeds of reinsurance of the kind dealt with by s.562A will come within the disposition of the liquidators in the Australian winding up where those proceeds first come, in an immediate sense, into the hands of the provisional liquidators appointed by the English court. The scheme the liquidators are seeking to propound is based upon certain assumptions (which the liquidators have attempted to make well-informed assumptions) about that matter. 3 Section 562A(1)(b) makes it clear that the activating circumstance is receipt of reinsurance proceeds by either the company or the liquidator, that is the liquidator under the Corporations Act of the Commonwealth. If a relevant amount were, in the first instance, received by the English provisional liquidators, there would be a question, for the purposes of our law, whether that represented receipt of the amount by the company. That would be entirely an Australian law question. There would also be a second question, that is, whether, having regard to the way in which English law would operate in such a case, the amount in question would ever become an amount received by the liquidators in the Australian winding up. That too would be a question of Australian law, but its answer might very well turn on questions of English law as to the powers and responsibilities of the provisional liquidators appointed by the English court, as regards remittances to the liquidators in the jurisdiction of incorporation. 4 I do not think that there is, in substance, any view among the entities by which submissions have been made this morning through Mr Gleeson, Mr Jackman and Mr Lancaster that the way in which the English provisional liquidators would act in such a case is not an important consideration. The differences of opinion are as to the most appropriate way of bringing that matter to a head. The attitude of the entities represented by Mr Gleeson, Mr Jackman and Mr Lancaster is that the appropriate English forum for airing of the relevant issues is a hearing, under the English Act, upon an application for orders for the convening of a meeting to consider the scheme itself. In accordance with the approach the liquidators are taking, there would be a combined meeting, as it were, convened in accordance with what might be described as complementary orders of this court and the English court. 5 The liquidators have a different view about how the matter in question might best be explored and brought to some form of definition. They have it in mind to suggest to the provisional liquidators in England that a direction or some other form of judicial statement be sought by the provisional liquidators from the English court on the matter, although that, I must say, is a proposal or possible course of action that has surfaced only after several months of indications that the liquidators would seek to deal with the issue in the present proceedings solely by means of expert evidence on foreign law. 6 The entities to which leave to be heard was granted under rule 2.13 say, in effect, that the liquidators should pursue the matter according to the originally indicated procedure or see their application dismissed. The liquidators say that there should be an adjournment to allow time for any application by the English provisional liquidators to the English court. 7 As I see matters at this stage, the liquidators' proposal being pursued by reference to the foreshadowed creditors' scheme s.411 might well, in concept, commend itself to creditors generally and produce benefits for them, although I hasten to say that that is a decision for creditors in the first instance. 8 The situation is a complex one, involving special aspects of the law of winding up of insurance companies under the Corporations Act which have rarely been considered by Australian courts, plus significant cross-border insolvency issues. Either upon this application or some future application of a similar kind brought by the liquidators, the questions concerning the interaction of s.562A and the powers and responsibilities of the English provisional liquidators are going to have to be addressed. If it is possible and practicable for some authoritative statement on the relevant matters of English law to be obtained from the English court, that may be of assistance to this court if and when the liquidators pursue such an application. Whether it is possible and practicable to obtain anything sufficiently definitive and useful is a question that the liquidators will have to explore. 9 I propose to grant an adjournment of the liquidators' application, noting that ASIC has this morning expressed a preference for that course of action from the perspective of the public interest that it represents. In granting an adjournment, I am aware of, but do not expressly address, the question of the extent to which the Australian liquidators may be duty-bound to seek to oppose or, at least, to make submissions upon any application to the English court by the English provisional liquidators seeking to establish whether those provisional liquidators are entitled or bound to remit funds to Australia. It is not necessarily clear that the Australian liquidators would properly support or submit to the proposition that such funds as come into the hands of the English provisional liquidators need not be remitted to the Australian liquidators. Nor, I might say, do I comment on the particular formulation of question or questions that the liquidators have indicated may be submitted by the English provisional liquidators to the English court.

[Submissions on costs] 10 The entities represented by Mr Gleeson, Mr Jackman and Mr Lancaster say, with justification, that the course the liquidators now propose taking has come up at a very late stage. That is quite true, having regard to the course of these proceedings since not only their commencement in December 2004, but also my judgment of 29 March. 11 If the clients of Mr Gleeson, Mr Jackman and Mr Lancaster were parties, I would order that their costs thrown away by reason of the adjournment and the new method of proceeding preferred by the liquidators be paid by the liquidators. But there is something of a complication arising from the fact that they are not parties, with the result that the question of entitlement to costs that would be awarded to a party arises for debate. 12 In those circumstances, the best course is that the question of costs flowing from the adjournment be reserved, but with a note made of what I have said would be the appropriate costs order if the rule 2.13 entities were parties. I order that costs be reserved accordingly, with that note. 13 The liquidators' application is stood over to 9.30 am on Friday 26 August 2005 before me for directions, with liberty to the liquidators to restore the matter to the list on 7 days notice. **********

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