In the matter of HIH Insurance Limited (in liquidation) ACN 008 636 575; In the matter of FAI General Insurance Company Ltd (in liquidation and subject to a scheme of arrangement) ACN 000 327 855; In the matter of HIH Casualty and General Insurance Limited (in liquidation and subject to schemes of arrangement) ACN 008 482 291 [2018] NSWSC 1886

(58774 of 2001) (HIH Insurance); Anthony Gregory McGrath and Jason Preston in their capacity as Liquidators and Scheme Administrators of FAI General Insurance Company Ltd (In Liquidation and subject to a Scheme of Arrangement) (Applicants)

(58776 of 2001) Anthony Gregory McGrath and Jason Preston in their capacity as Liquidators and Scheme Administrators of HIH Casualty and General Insurance Limited (In Liquidation and subject to Schemes of Arrangement) (Applicants) Representation: Counsel: JRJ Lockhart SC w C McMeniman (Applicants) GD McDonald (Interveners)

Solicitors: Ashurst (Applicants) Thomas Booler & Co (Interveners) File Number(s): 2001/58663; 2001/58774; 2001/58776

Judgment

1. By three Interlocutory Processes filed on 15 November 2017, the applicants Anthony Gregory McGrath and Jason Preston seek the Court's advice and direction, respectively in their capacities as liquidators of HIH Insurance Limited (in liquidation) ("HIH"), as liquidators and scheme administrators of FAI General Insurance Company Ltd (in liquidation and subject to a scheme of arrangement) ("FAI"), and liquidators and scheme administrators of HIH Casualty and General Insurance Limited (in liquidation and subject to schemes of arrangement) ("C&G").
2. In proceedings by way of appeal from the applicants' deemed rejection of claims made by certain HIH shareholders, for whom Thomas Booler & Co Solicitors ("Thomas Booler & Co") acted on the instructions of a litigation funder Bookarelli Pty Limited ("Bookarelli"), it was concluded that plaintiffs who had purchased ordinary shares in HIH on or after 25 August 1999 and prior to the appointment of provisional liquidators to HIH on 15 March 2001 ("the Relevant Period") were entitled to recover damages from HIH, FAI and C&G in respect of loss suffered as a result of acquiring those shares at a price which had been inflated by reason of misleading or deceptive conduct ("the Principal Shareholder Proceedings"). [1] In accordance with orders made in those proceedings on 28 April 2017, each plaintiff in the Principal Shareholder Proceedings whose appeal was not dismissed ("the Successful Plaintiff Shareholders") has been admitted to prove in the liquidation of HIH, and has had the liability to them determined to be an Acknowledged Creditor Claim within the meaning of the FAI and C&G schemes. By their present applications, the applicants seek directions with respect to how they propose to deal with the potential claims of HIH shareholders who purchased ordinary shares in HIH during the Relevant Period but were not Successful Plaintiff Shareholders. Broadly, the issues which arise are: 1. Whether the potential claims of HIH shareholders who purchased ordinary shares during the Relevant Period but who were - for various reasons which will appear - not Successful Plaintiff Shareholders, should be admitted in the liquidation of HIH; 2. Whether, having regard to the terms of the FAI and C&G schemes, such potential claims should not be admitted in those schemes, absent any extension of time under (CTH) Corporations Act 2001 ("Corporations Act"), s 1322; 3. Whether the potential claims of corporate shareholders which have been deregistered should be admitted, and any corresponding dividend paid to the Australian Securities and Investment Commission ("ASIC") (or, where the shareholder was a trustee, to the Commonwealth); and 4. Whether the applicants would be justified in not requiring potential claimants formally to prove their claims, but rather notifying them of their prima facie entitlement and distributing dividends accordingly in the absence of objection.
3. Notice of these applications has been given to ASIC, to Bookarelli and to Thomas Booler & Co. Mr McDonald of counsel appeared at the hearing, instructed by Thomas Booler & Co, for the Bookarelli clients. ASIC did not appear.

JURISDICTIONAL BASIS

1. The applicants brought the present proceedings invoking Corporations Act, Schedule 2 (the Insolvency Practice Schedule - Corporations), ss 90-15 and 90-20. Such applications for directions were formerly brought under Corporations Act, s 479(3) (in the case of a court-ordered winding up) or s 511 (in the case of a voluntary winding up). Those sections were repealed, with effect from 1 September 2017, by (CTH) Insolvency Law Reform Act 2016 ("Insolvency Law Reform Act"). Although they are in rather different terms, and s 90-15 is wider than the repealed provisions, it has been considered that the powers it confers include a power to give judicial advice and directions of the kind that were formerly given under ss 479 and 511. [2]
2. Indeed, in my view, s 90-15 of the Insolvency Practice Schedule ("IPS") provides a plenary power by which "the Court may make such orders as it thinks fit in relation to the external administration of a company". Such orders can be made on application under s 90-20, which provides that those who may apply for such an order include "an officer of the company", which encompasses a liquidator of the company. While examples of types of orders that can be made are described in ss 90-15(3), those examples are without limitation. Although the section appears in Division 90 as a "Review of the external administration of a company", and in Subdivision B as "Court powers to inquire and make orders", it is not confined to orders that can be made consequential on an inquiry under s 90-5 or 90-10. That that must be so necessarily follows from the circumstance that standing to apply for an inquiry under s 90-10 is conferred on the persons referred to in s 90-10(2), the list in which is not identical, though it is similar, to that in s 90-20(1). Moreover, there is nothing - in the Explanatory Memorandum or the Second Reading Speech, or in the legislation itself - to indicate that the Insolvency Law Reform Act and the enactment of the IPS was intended to deprive the Court of any beneficial power that it had had under the preceding legislation. Rather, where those powers have not been directly replicated, the view appears to have been taken that the general supervisory power given by s 90-15 was ample, and further specification was not required. I am satisfied, therefore, that what previously has been done under s 479(3) and s 511 (and for that matter, in connection with a voluntary administration, under s 447D) can now be done under IPS s 90-15, which does not differentiate between, but applies equally to all, the different forms of external administration. That has the desirable consequence - which was part of the rationale for the IPS in the first place - of, so far as practicable, unifying, simplifying and consolidating the law in its application to different forms of administration. [3]
3. While s 90-15 is expressed in different terms, and introduces a list of permissible relevant considerations, there is no apparent reason why, at least in the present context, the Court's approach to applications for directions and advice would differ from that which has been conventional under s 479(3). [4]
4. However, while Division 90 of the IPS generally applies in relation to an ongoing external administration, and does so whether or not the matter to be reviewed occurred before, on or after the commencement day, [5] "the old Act" continues to apply in relation to ongoing proceedings before a court as at that date. [6] While the present interlocutory applications were commenced after 1 September 2017, the substantive proceedings in which they were brought were commenced long before that date, in 2001. The reference to "proceedings" in Corporations Act, s 1617(3), has been construed as being to the underlying proceedings, rather than to each interlocutory application brought in them, with the result that "the old Act" continues to apply where the underlying proceedings were commenced prior to 1 September 2017, even if the relevant interlocutory process was filed after that date. [7] On that basis, the applications ought to have been brought under the former s 479.
5. However, the jurisdictional debate is somewhat arid, as the requisite power is to be found in one source, if not in the other.

THE HIH APPLICATION

1. As has been indicated, in accordance with the orders made in the Principal Shareholder Proceedings on 28 April 2017, each Successful Plaintiff Shareholder has been admitted to prove in the liquidation of HIH and has had the liability to them determined to be an Acknowledged Creditor Claim under the FAI and C&G schemes. The claims of 1,114 Successful Plaintiff Shareholders have been admitted, amounting to $1,938,714. Moreover, because the current interim dividend rate in the liquidation of HIH, when accumulated with the current Payment Percentage in the FAI and C&G schemes, provides a recovery of 100 cents in the dollar on claims which are admitted in all three estates, each of the Successful Plaintiff Shareholders has received 100 cents in the dollar on their admitted claims.
2. However, not all HIH shareholders who purchased shares during the Relevant Period were Successful Plaintiffs. The applicants take the view that they should not ignore the potential claims of those other shareholders who purchased shares during the Relevant Period, notwithstanding that they have not been proved, or have in some cases been dismissed. The applicants have identified 23,933 such shareholders, whose potential claims total $18,037,519. The total value of all claims so far admitted in the liquidation of HIH is approximately $590 million (excluding $127 million of subordinated debt, which is not taken into account for dividend purposes). On the information presently available, the liquidators estimate that - assuming these potential claims are also admitted - the final dividend rate will be approximately 25.5 cents in the dollar; interim dividends declared to date total 5 cents in the dollar.

Should the claims of the other shareholders be considered?

1. There are four categories of HIH shareholders who purchased ordinary shares during the Relevant Period, but were not Successful Plaintiff Shareholders, namely: 1. "Dismissed Plaintiff Shareholders" - being shareholders who submitted proofs and/or scheme claims, and were originally plaintiffs in the Principal Shareholder Proceedings, but had their appeals from the liquidators' rejection of their proofs dismissed, essentially because it was not established that they had authorised the bringing of the proceedings on their behalf. The applicants propose now to admit their claims, on the basis that their dismissal did not represent a judicial determination on the merits that they had no claim, but only that they had not authorised the proceedings, and that otherwise they would have succeeded. 2. "Claimant Shareholders" - being shareholders who submitted proofs and/or scheme claims, but were not plaintiffs in the Principal Shareholder Proceedings and have not sought to appeal the decision of the applicants to reject their proofs or scheme claims. Again, the applicants propose to admit their claims, on the basis that the outcome of the Principal Shareholder Proceedings establishes that they have a valid claim. 3. "Potential Claimant Shareholders" - being shareholders who did not submit a proof or a scheme claim. Again, the applicants propose to admit their claims, on the basis that the outcome of the Principal Shareholder Proceedings establishes that they have a valid claim, though they have not hitherto propounded one. 4. "Unsuccessful Shareholders" - being shareholders whose claims have been finally judicially determined against them on the merits. The applicants propose not to admit their claims, because there has been a final judicial determination that they have no claim.
2. It is clear that, upon the rationale of the judgments in the Principal Shareholder Proceedings ("the Reasons"), [8] all four categories would have a valid claim for damages, on the same footing as the Successful Plaintiff Shareholders. In those circumstances, the questions of principle are: 1. whether their claims should be admitted, notwithstanding that they have variously not been lodged or their (deemed) rejection appealed, or their appeals have been dismissed; and 2. if so, whether the Unsuccessful Shareholders - whose appeals have been dismissed on the merits - are in a different category.
3. As to whether valid claims should be admitted, notwithstanding that they may not have been lodged or their (deemed) rejection appealed, Corporations Act, s 553(1), provides that: "… all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company". It is well-established that liquidators should not ignore claims or potential claims of which they are aware, notwithstanding that they have not been proved, but should consider whether there are valid claims against the company. In Austin Securities Ltd v Northgate & English Stores Ltd, [9] Lord Denning said: It is the duty of a liquidator to inquire into all claims, to see whether they are well founded or not, to pay the good claims, to reject the bad, to settle the doubtful, or, if need be, to contest them. It is only in this way that a liquidator can fulfil his duty … of seeing that the property of the company is applied in satisfaction of its liabilities pari passu.
4. In ascertaining the extent of the liabilities of a company in liquidation, liquidators have a duty to act impartially, and a duty to discover who are the creditors of the company. [10] A liquidator should not proceed to finalise an estate and dissolve the company if he or she is aware of claims which have not been brought into account in the liquidation. [11] Thus, a liquidator is "not entitled to shut his or her eyes to known liabilities", and must take steps to discover whether a claim will be pressed in the winding up. [12] In carrying out such steps, where a liquidator knows of creditors who have not proven their claims, it may not suffice for the liquidator to invite claims by advertisement; the liquidator may be required, if necessary, personally to communicate with creditors who have failed to prove their debts, as was explained by Campbell J (as he then was) in Re Jay-O-Bees Pty Ltd (in liq); Rosseau Pty Ltd (in liq) v Jay-O-Bees Pty Ltd (in liq): [13] A liquidator also has a statutory obligation to apply the assets of the company in discharge of the company's liabilities before any distribution amongst the shareholders. That duty provides a separate basis for concluding that he is required to take all steps reasonably open to him on the information in his possession to ascertain whether someone who that information suggests might possibly be a creditor makes a claim to be such: Re Armstrong Whitworth Securities Co Ltd [1947] Ch 673 at 691-2; [1947] 2 All ER 479. The duty of a liquidator is ' ... not merely to advertise for creditors, but to write to the creditors of whose existence he knows, and who do not send in claims, and ask them if they have any claim': Pulsford v Devenish [1903] 2 Ch 625 at 631 per Farwell J; Harry Goudias Pty Ltd v Port Adelaide Freezers Pty Ltd (1992) 7 ACSR 303 at 306-7 (Mullighan J).
5. Based on their involvement in and knowledge of the outcome of the Principal Shareholder Proceedings, the applicants are on notice of the claims that may be made by shareholders. It is therefore entirely appropriate that the applicants should give consideration to the potential claims of shareholders who, though they were not Successful Plaintiff Shareholders, would potentially be entitled to recover damages from HIH, FAI and C&G according to the rationale of the Reasons. This is so notwithstanding that admitting the claims of shareholders other than Successful Plaintiff Shareholders might to some extent disadvantage the Successful Plaintiff Shareholders, by conferring the benefit of their success on others who had not shared the risks of the litigation, and by requiring the divisible assets to be shared amongst a wider class of claimants. However, that is an inevitable consequence of the obligation of liquidators to consider known claims, even if they have not been proved. Indeed Mr McDonald, who appeared in the interests of the Successful Plaintiff Shareholders, did not oppose this approach.
6. Mr McDonald did, however, contend that, contrary to the liquidators' proposal, those benefits should be extended to the Unsuccessful Shareholders, whose claims have been judicially determined against them, as in the De Bortoli Wines proceedings, but, in my judgment, the applicants' approach is correct. Although, had they adopted the "indirect causation" argument which I embraced in the Principal Shareholder Proceedings, those shareholders might have succeeded, they did not rely on it in their proceedings, which were determined adversely to them for failure to establish causation. That amounts to a final judicial determination on the merits that they did not suffer loss as a result of the relevant conduct of HIH, and it necessarily follows that they do not have a provable claim in the liquidation. [14] The position of the Dismissed Plaintiff Shareholders is different: their claims were not dismissed on the merits, but only because it was not established that the solicitors who purported to act for them had the requisite authority to do so.
7. Accordingly, in principle, the applicants would be justified in admitting the valid claims of the Dismissed Plaintiff Shareholders, the Claimant Shareholders and the Potential Claimant Shareholders, but not those of the Unsuccessful Shareholders, the rejection of whose claims have been upheld by final judicial determination on the merits.

Ascertaining and quantifying the claims

1. The resolution of these potential claims is the final major matter to be dealt with by the applicants in respect of HIH, C&G and FAI. After final distributions have been made under the schemes in respect of C&G and FAI (which will allow intercompany indebtedness between the HIH Companies to be finalised), the applicants will be able to proceed towards declaring and paying a final dividend to admitted creditors in the liquidation of HIH.
2. It is likely that a very significant portion of relevant shareholders will have insufficient, if any, familiarity with the Reasons such as to allow them efficiently to calculate their claims. They may well not have retained sufficient records of their shareholdings (from approximately 17 years ago) - particularly records of the specific dates on which they acquired and sold shares, and the relevant price paid or received - to allow them to make the necessary calculations. In the applicants' experience - which accords with human experience - when requesting further particulars and evidence in support of claims from persons who lodge proofs of debt in liquidations, the older the documentation requested, the less likely is a person to still have access to it (or copies of relevant documentation).
3. It may, therefore, be difficult for many of the relevant shareholders properly to quantify their claim (including to account for any subsequent sale of shares on a "LIFO" (last in first out) basis). Indeed, the experience of the applicants' staff in dealing with proofs lodged by shareholders in the liquidation to date has been that the vast majority did not include a calculation or a breakdown of the amount for their claim; and did not provide supporting documentation. For this reason, the applicants' staff ultimately undertook the initial calculations of the claims of Successful Plaintiff Shareholders to be admitted, and then provided those calculations to the solicitors for those plaintiffs for their comment. If shareholders were invited to lodge and calculate their own proofs of debt, a significant amount of time may need to be spent verifying the shareholders' calculations against the calculation performed by the liquidators' staff; and liaising with and dealing with queries from shareholders, which could include proving, for each shareholder, numerous telephone and email enquiries and requests for assistance from those shareholders to the applicants. And in the applicants' experience - which reflects human nature - claimants in external administrations are much slower to respond to correspondence, such as invitations to lodge proofs of debt or requests which require positive action on their part, and the more complex that active step is, the slower they are to respond.
4. In that context, the applicants are of the view that inviting shareholders as a whole to lodge proofs would result in the incurring of a significant amount of time and resources by the applicants, their staff and their legal advisors in dealing with a very large volume of potential claims, claimants and their representatives. In this regard, it is noteworthy that most shareholders have relatively small claims, the majority being for less than $1,500. For those reasons, the applicants propose to admit the potential claims of Dismissed Plaintiff Shareholders, Claimant Shareholders and Potential Claimant Shareholders who the applicants have identified [15] as having a claim ('"Identified Claims"), for the amount of their Identified Claim, unless, in any particular case, notice of an objection to the proposed admission of such Identified Claims is received by the applicants from the relevant person before the expiration of 30 days after the date on which certain advertisements are published ("the Publication date"), which is to be not less than 14 days after distribution of circulars to shareholders which inform them of their Identified Claim and the right to object.
5. Unlike the shareholders, the applicants' staff have access to the Register (and associated transaction records), and so they are able readily enough to identify those shareholders who purchased HIH shares during the Relevant Period and suffered loss. They can then efficiently undertake a calculation of the quantum of Identified Claims, using the Methodology Memorandum. This procedure is likely to be more efficient, expeditious and cost effective than inviting shareholders to lodge proofs and then adjudicating them. Additionally, the proposed approach has an advantage over inviting proofs of debt in that, even if some shareholders with Identified Claims do not receive a circular: 1. their Identified Claims would still be admitted in the liquidation of HIH; and 2. if a dividend cheque sent to them is not banked, then - if the moneys remain unclaimed - the relevant amount would, in due course, be remitted to ASIC under Corporations Act, s 544.
6. Because the Share Register Data does not include the date on which the share transactions were executed (as distinct from settled), or the particular price paid or received in respect of the share transactions, the Identified Claims have been calculated based on the available information, being the number of shares acquired or disposed of in each transaction, and the settlement date of each share transaction, adopting the daily low price per share traded on-market on the date of that settlement. Although imperfect, this is the best information available to the applicants to quantify the potential claims (at least without incurring significant expense), and (as explained later) the letters that the applicants propose be sent to shareholders will afford an opportunity for them to object to the applicants' calculation of their potential claim by, for example, providing better evidence (such as contract notes) if they are able to do so.

Conclusion

1. The applicants would therefore be justified in admitting claims in respect of shareholders (1) who have a potential claim, as identified by the applicants ("Qualifying Shareholders"); (2) for the amount that the applicants have calculated, in accordance with the Methodology Memorandum (subject to dealing with any objection made by the shareholder); (3) who have not had their claim finally judicially determined against them; and (4) who are not currently deregistered corporate entities. [16]

THE FAI AND C&G APPLICATIONS [17]

1. The terms of the FAI and C&G Schemes do not provide the Scheme Administrators with any discretion to consider a Final Claim Form for Estimation (or refer it to a Scheme Adjudicator) if it is received after the Cut-Off Date, absent any extension of time granted under s 1322 of the Act. As Black J concluded in In the matter of CIC Insurance Limited (in liquidation and subject to a scheme of company arrangement) and FAI General Insurance Company Limited (in liquidation and subject to a scheme of company arrangement): [18] Accordingly, it seems to me that the scheme administrators were correct that they did not have a discretion to admit a claim after the cut-off date, absent the extension of time for admission of the claim which the Court will grant under s 1322 of the Act for the reasons noted above. Accordingly, their decision, absent the extension of time by the Court, not to accept SIRA's further claim was correct and should not be overturned under s 1321 of the Corporations Act.
2. It follows that, in their capacity as Scheme Administrators of the FAI and C&G Schemes, the applicants have no discretion to consider (or refer to a Scheme Adjudicator) any Final Claim Form for Estimation received after the Cut-Off Date (being midnight, British Summer Time, on 2 September 2013), absent any extension of time granted under Corporations Act, s 1322. It is therefore appropriate that, as they propose, they finalise the schemes without making provision for any further potential claims by shareholders, save for such shareholders that file, within 30 days of publishing the public notices referred to below, an application for an extension of time to lodge a Final Claim Form, or an appeal from the applicants' decision to not determine that such a shareholder has an Acknowledged Creditor Claim in respect of a Final Claim Form they lodged within time. That approach would accord with the provisions of the schemes, while affording an opportunity for shareholders to seek an extension of time.

The foreshadowed s 1322 applications

1. Section 1322 relevantly provides as follows: (4) [Court may make orders] Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes: (a) an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation; (b) an order directing the rectification of any register kept by ASIC under this Act; (c) an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a); (d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding; and may make such consequential or ancillary orders as the Court thinks fit. … (6) [Conditions for making orders] The Court must not make an order under this section unless it is satisfied: … (c) in every case - that no substantial injustice has been or is likely to be caused to any person.
2. A question arises as to how any such applications for an extension of time should efficiently be managed. Potentially there are 23,933 such applications, most of which would be in relation to small claims of less than $1,500. Thomas Booler & Co, acting for the Bookarelli clients, have, since the hearing, proffered an undertaking to file in the current proceedings applications for extensions of time under s 1322 on behalf of two representative clients, one being a shareholder who lodged a proof of debt claim before the Cut-off Date and had the claim rejected, in respect of which an appeal was filed but dismissed for want of authority (who would represent those who had lodged a claim before the Cut-off Date which was not accepted, and require an extension of time to appeal); and the other being a shareholder who did not lodge a claim until after the Cut-off Date, which has not been assessed (and would represent those who did not lodge a claim before the Cut-off Date and require an extension of time in which to do so). They have suggested that the circular letter to shareholders could include the following: An application has been filed in the Court for orders under Corporations Act s 1322 granting an extension of time (to a date to be fixed by the Court) for lodging claims in the schemes, or to appeal to the Court from the rejection of claims lodged within time, and that such application proceed as a representative proceeding. Should you wish to obtain information concerning that application, you may contact the solicitors for the applicants, Thomas Booler & Co, Level 2, 1-5 Harrow Road, Auburn, NSW, 2144. T 02 9001 5800; F 02 9643 2737; DX 28811 AUBURN; E sunni@tbclawyers.com.au; W www.thomasboolerlawyers.com.au.
3. The applicants acknowledge that if the Court considers that the proposed relief under s 1322 can be granted based only on evidence of facts that are common to the class, representative proceedings may provide an efficient, means of resolving the issue of whether extensions of time should be granted. But they also point out that if the relief sought, although common to the class, would be predicated on establishing, by evidence, matters that are not common to the class (namely, evidence in relation to the circumstances of each shareholder), there may be limited or no utility in a representative proceeding. They do not consider it appropriate for them to include any information in the circulars they send to shareholders about putative applications that may be made by clients of Thomas Booler & Co, because they consider that to do so may not be consistent with their role as Scheme Administrators and, in particular, that including such information in the circulars may be interpreted as endorsing the extension of time applications that may be made or the law firm who may be making them.
4. On an application under s 1322(4)(d), the Court first considers whether, having regard to the circumstances of the case and the general objects of the Corporations Act, it is appropriate to make an order extending (or abridging) a relevant period, in respect of which relevant considerations include the reasons why an extension is necessary; secondly, the Court considers whether, under s 1322(6)(c), any substantial injustice has been or is likely to be caused to any person by the making of such an order. [19]
5. In the context of insolvency administrations, in which the focus should be on maximising distributions to those entitled and minimising costs to the estate, it is highly undesirable that the Court should be required to consider hundreds, let alone thousands, of individual applications under s 1322. The applicants have foreshadowed that they are likely to take a relatively neutral attitude to such applications. While in many cases of applications under s 1322(4)(d) the circumstances of an individual applicant may well be relevant, an examination of individual circumstances in the context of this case is neither practicable, economical or desirable. For very many potential claimants, making such an application individually would be uneconomical; yet the validity of their claim against the schemes has, subject to the Cut-off Date question, been established. The applicants properly recognise that, in the HIH liquidation, it is just to recognise the claims of those who have not lodged a proof but are now established to have a legitimate claim, and for the same reasons it is just to recognise the corresponding claims in the FAI and C&G Schemes. As there has been no final distribution under the schemes, it seems unlikely that injustice would be occasioned to anyone by extending time.
6. I am conscious that this question has not been argued - though the submissions make some preliminary observations about it - and the application for directions presently before the Court merely tenders it as a future prospect. But it seems to me highly desirable that it be resolved expeditiously, and that this can be done by permitting the proposed representative applications to be filed and made returnable when short minutes are brought in, in the expectation that it may, in the absence of significant contention, be disposed of then. If so, an order could then be made extending time for lodging claims under the schemes and the shareholder circulars could give notice of the extended date.
7. As to claims which were made before the Cut-off Date in respect of which no appeal was brought, it may be that the Scheme Administrators could revoke their previous non-admission of the claim and in substitution admit it, without requiring the claimant to go through the process of an appeal to the Court. Alternatively, however, subject to the requisite extension of time being granted, such appeals would, on the basis of the Reasons, be bound to succeed. It seems to me that the proposed representative proceedings could include a claim for an order (subject to the requisite extension of time being granted) allowing the appeals, and that they could also be disposed of practically instanter.
8. If so, there could then be a direction that the applicants would be justified in setting any further Payment Percentage (as that term is defined in the scheme), and making any further Payment Percentage payments under the scheme, without making provision for any Liability (as that term is defined in the scheme) in respect of the shareholding of any current or former shareholder who does not have an Acknowledged Creditor Claim (as that term is defined in the scheme), save for such shareholders that have, by the extended date, lodged a Final Claim Form (as that term is defined in the Scheme).
9. I will therefore grant leave to file the proposed representative applications, subject to amendment to include an order allowing the proposed appeals, which will be made returnable on the date on which short minutes to give effect to this judgment are to be brought in. Whether they can be disposed of will inform the final form of the directions to be made in this respect.

DEREGISTERED SHAREHOLDERS

1. Amongst the Potential Claimant Shareholders there are a substantial number of corporate shareholders which bought shares during the Relevant Period and have subsequently been deregistered as a corporate entity and not reinstated ("Deregistered Shareholders"). The applicants have identified 1,154 Deregistered Shareholders, whose potential claims would total $1,297,962. Questions arise as to whether: 1. the potential claims - being claims for damages under (CTH) Trade Practices Act ("TPA"), s 82 - of Deregistered Shareholders which had not lodged a proof before deregistration can now be admitted, where the person who suffered the relevant loss no longer exists. This requires consideration, both in respect of corporate shareholders which held beneficially, and corporate shareholders which held in a trustee capacity; and 2. in respect of corporate shareholders which lodged a proof (but had not been admitted) prior to being deregistered, the right to receive dividends has vested in ASIC (or, in the case of a shareholder which held in a trustee capacity, in the Commonwealth).
2. There are four relevant categories of Deregistered Shareholders: 1. "Deregistered Claimant Non-Trustee Shareholders" - being deregistered corporate shareholders which acquired shares in a non-trustee capacity, and which lodged a proof of debt in the liquidation of HIH prior to their deregistration; 2. "Deregistered Claimant Trustee Shareholders" - being deregistered corporate shareholders which acquired shares in a trustee capacity, and which lodged a proof of debt prior to their deregistration; 3. "Deregistered Non-Trustee Shareholders" - being deregistered shareholders which acquired shares in a non-trustee capacity, and which did not lodge a proof of debt prior to their deregistration; 4. Deregistered Trustee Shareholders - being deregistered shareholders which acquired shares in a trustee capacity, and which did not lodge a proof of debt prior to their deregistration.
3. As will appear, issues both of principle and of practicality arise.

Vesting of property under the Corporations Act

1. Pursuant to Corporations Act, s 601AD, upon deregistration, a company ceases to exist, and all property that the company held on trust immediately before deregistration vests in the Commonwealth, while all the company's property other than any property held by the company on trust vests in ASIC. The Commonwealth has, subject to its obligations as trustee of the trust, all the powers of an owner over property vested in it; and ASIC has all the powers of an owner over property vested in it. For these purposes, "property" means "any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action". [20]
2. The potential claims of shareholders are predicated on the recovery of damages under TPA, s 82. A cause of action for damages under s 82 is not assignable, because s 82 authorises an award of damages only to a party to the proceeding who personally suffers loss or damage by the contravening conduct. [21] This has the consequence that such a cause of action does not vest in, and is not maintainable by, the deceased estate of the person who suffers loss as a result of contravening conduct. [22]

Entitlement to lodge proofs after deregistration

1. It is convenient first to consider the position where no proof was lodged by the relevant corporate shareholder before it was deregistered. Potentially, the position differs according to whether the shareholder held beneficially or as a trustee.

Non-Trustee Companies

1. At least in respect of deregistered corporate shareholders who did not hold shares in a trustee capacity, the direct application of the principle that a claim for damages under TPA, s 82 is not assignable and does not devolve - because an assignee is not the person who suffered the loss or damage - is that ASIC would not have the right to lodge proofs in respect of those shareholders, because their potential claims are predicated on the statutory right to damages under TPA, s 82, and ASIC is not the person who suffered the loss or damage caused by the contravening conduct.

Trustee Companies: does the cause of action vest in the Commonwealth?

1. There is an argument that the Park v Allied principle [23] may not apply to deny a replacement trustee a cause of action in respect of damage to the trust property incurred when its predecessor was in office. Damage occasioned as a result of a trustee being misled will ordinarily be incurred by trust property, rather than by the trustee personally. However, as against third parties (as distinct from the beneficiaries), it is ordinarily the trustee who has standing to bring a claim to recover compensation for such loss or damage, although that cause of action will be held on trust, even if it is unassignable. As has been said by Ford and Lee: [24] Trustees of an existing trust may acquire some additional item by reason of their position as trustees which it would be unconscionable for them to hold otherwise than for the beneficiary with the result that the item should be added to the subject matter of the trust. It is submitted that that should follow regardless of whether the item is transferable. In some cases the item can be seen to arise out of the existing subject matter, as where the trustee in the administration of the trust acquires a right of action to sue a third person in negligence for loss caused to the trust estate. The trustee will hold that chose in action on trust even though that kind of chose in action as a bare right of action is not ordinarily assignable. Even if the non-transferable thing acquired by the trustee does not arise out of the subject matter of the trust, it is submitted that it should still be held for the beneficiary where it is acquired by reason of improper use of the trustee's position.
2. There are judicial observations to the effect that a cause of action for damages under TPA, s 82 does not vest in a new or replacement trustee (where the relevant loss has been incurred by a former trustee), because it is the old and not the new trustee who suffered the relevant loss or damage. [25] However, the observation to that effect in Rosebridge Nominees was obiter, [26] and the basis of the holding in Lanai Unit Holdings Pty Limited v Mallesons Stephen Jaques (No 2) was that the proviso in (QLD) Trusts Act 1915, s 15(1), that the vesting of property by automatic transfer under that section was "subject to the provisions of any Act" had the effect that the right of a trustee to recover damages under TPA, s 82(1) could not vest in a new trustee, because s 82(1) provides that only the person who suffers the loss or damage may recover it by action - which is not completely analogous to the vesting of property in the Commonwealth under Corporations Act, s 601AD, because s 601AD does not contain any equivalent express proviso. Nor are the additional comments of Jackson J that to the extent that Trusts Act s 15(1) would "vest" the TPA claim in a new trustee, it would confer a right to recover any loss or damage under s 82 upon a person who is not the person who suffered the loss or damage, and as that would be a clear alteration, impairment or detraction from the operation of s 82, it would, to that extent, be invalid under s 109 of the Australian Constitution ("the Constitution") directly apposite; because the relevant vesting of property in the Commonwealth is under the Corporations Act, a law of the Commonwealth, so there is no question of inconsistency between state and federal legislation that would require resort to s 109 of the Constitution.
3. But while those cases may be distinguishable, that still leaves the question of whether a cause of action to recover loss or damage under TPA, s 82 is capable of vesting under Corporations Act, s 601AD, in the Commonwealth (or in a successor trustee). That, it seems to me, must turn on whether the cause of action is "property" amenable to assignment or devolution; and whether it is held on trust does not seem to me to be capable of changing the answer, which - according to Park v Allied and the authorities which apply it - is that it is not.
4. The applicants raised for consideration the theory that the decisions in Rosebridge and Lanai proceeded on the assumption that the relevant loss is suffered by the trustee personally, and did not consider, at least expressly, the principles relevant to the standing of trustees and beneficiaries to bring claims for such loss and damage - and in particular that, although proceedings to recover compensation for loss or damage suffered by a trust are ordinarily required to be brought by the trustee, in some circumstances the beneficiaries may themselves bring such a claim on behalf of the trust, if the trustee is unwilling or unable to do so. It is, of course, correct that in "special circumstances", the beneficiary may bring a proceeding to recover for the benefit of the trust. However, that is so only where the trustee is unwilling or unable to do so, and in such a case the beneficiary must join the trustee and the third party as defendants. [27] This is because such proceedings are, in substance, brought by the beneficiary to enforce the beneficiary's right to have the trustee sue where it will not itself do so, rather than directly by the beneficiary to recover in respect of the beneficiary's own loss. Accordingly, this does not affect the issue whether the former trustee's cause of action is capable of vesting in the Commonwealth under s 601AD.
5. Accordingly, I am of the view that a cause of action under TPA, s 82 for damages incurred by a corporation in a trustee capacity is not capable of vesting under s 601AD in the Commonwealth (or in a replacement trustee). It may be that in circumstances where the beneficiary of a trust has suffered loss or damage as a consequence of misleading or deceptive conduct towards the trustee, the beneficiary itself has a cause of action under s 82, in respect of loss suffered by the beneficiary. [28] But even if that is so, that would be the cause of action of the beneficiary - being the person who incurred the relevant loss - and in those circumstances the beneficiary, and not the trustee, would have standing to bring an action for damages under TPA, s 82.
6. It follows that Deregistered Shareholders who purchased shares in a trustee capacity are in no different position to those who purchased beneficially, and because the Commonwealth is not the person who suffered loss as a result of the contravening conduct, the cause of action of such a Deregistered Shareholder does not vest in it.

Trustee Companies: should the liquidators be required to go behind the register?

1. There are further complications in relation to Deregistered Shareholders who held as trustees, in that companies (and their liquidators) are not ordinarily required to go behind the register and inquire into whether a shareholder holds shares on trust, and in this case there are significant practical difficulties in doing so.
2. Corporations Law, s 1091C, which generally applied to both listed and unlisted companies at the relevant time, relevantly provided: [29] (9) Shares in a corporation registered in a register and held by a trustee in respect of a particular trust may, with the consent of the corporation, be marked in the register in such a way as to identify them as being held in respect of the trust. (10) Except as provided in this section and section 216B: (a) no notice of a trust, whether express, implied or constructive, shall be entered on a register kept in this jurisdiction or be receivable by ASIC; and (b) no liabilities are affected by anything done under a preceding subsection of this section or under section 169; and (c) nothing so done affects the body corporate concerned with notice of a trust.
3. In response to inquiries from the applicants as to whether, in circumstances where a shareholder purchased shares as a trustee, that purchase by a trustee is always identified and recorded in the register and, if so, how such a purchase by a trustee is identified and recorded, Boardroom Pty Limited ("Boardroom") (which maintains the Register) has responded: Under the ASX guidelines shares held in trust for another party should have an account designation. This is identified as a line of the registration enclosed in angled brackets . For example, a holding in the name John Smith could be held on behalf of a minor; or James Smith could be on behalf of a family trust or super fund.
4. The CHESS Procedure Guidelines (Version 2.0, September 2000), [30] contain the following: 5.2.4.3 Holdings must not be registered in the name of a firm or business name, an estate or deceased person, a minor, a fund or a trust. 5.2.4.8 Where a designation is required to be recorded after the holding name or names (e.g. NO 2 ACCOUNT or SUPERANNUATION ACCOUNT), the designation must be contained within the less than () symbols, and must be followed by the word ACCOUNT (preferred, alternatively A/C if space restrictions apply). … Designations should not give notice of a trust, whether express, implied or constructive, on the register. Equally the abbreviation ATF (As Trustee For) should not be used. [emphasis added]
5. The equivalent provisions in the current iteration of the ASX guidelines are similar, but now contain further detail; section 5.2.4.3 of the current guidelines provides as follows: In the case of holdings for a trust, the holdings should be registered in the name of the trustee or trustees of the trust rather than in the name of the trust.
6. The last paragraph of section 5.2.4.8 extracted above is now section 5.2.4.12 and provides: Designations should not give notice of a trust (including any testamentary trust or custodial arrangement), whether express, implied or constructive, on the register (refer to section 1072E(10) of the Corporations Act). Hence the phrases "AS TRUSTEE FOR" or "AS CUSTODIAN FOR", the words "TRUST" or "TESTAMENTARY", the abbreviations "ATF", "ACF" or "TEST", or other similar contractions, should not be used in any designation. Where used, they will generally be rejected by CHESS. It is acceptable to use the "ACCOUNT" or "A/C" designation to differentiate between personal holdings and holdings held as trustee or custodian, provided the designation does not include any of the words, phrases or abbreviations mentioned in the preceding paragraph."
7. Accordingly, the CHESS Procedure Guidelines in force in September 2000 and its successor guidelines appear to contemplate shareholders being able to designate or distinguish between particular shareholdings, as a matter of administrative convenience, whilst having regard to the limitations imposed by the Corporations Law and the Corporations Act. However, these "angle bracket" designations permissible under sections 5.2.4.3 and 5.2.4.8 (now section 5.2.4.12) are not compulsory, nor is their use confined to trustee or non-beneficial shareholdings: thus, a shareholder could use angle brackets to distinguish between "Account No 1" and "Account No 2", with each parcel of shareholdings being held beneficially and without either of those designations intending to record otherwise.
8. In this regard, the "angle bracket" information is set out in the "Name2" column of the Register. A sample of the entries in the "Name2" column of the extract of the Register for Deregistered Shareholders includes "Ad & JM Cahill Inv A/C", "Share Trading A/C", "Petersen Westbrook Sup A/C", "Irwin & Hartshorn S/F A/C", "Barling Family Account", "Colonial A/C", "Advance A/C", "Settlement A/C", "Accumulation A/C", "Ellis Family A/C", "Lis A/C", and "Amylee Pty Ltd S/Fund A/C".
9. Even if HIH gave a consent as referred to in s 1091C(9) of the Corporations Law - and although the applicants have found no evidence of any such consent, its existence might be inferred from the circumstance that the "angle bracket" system was in fact used - there is only one instance in which the Register specifically refers to a trust, although there are others in which the existence of a trust may be inferred from use of words, such as "Superannuation Fund", "S/Fund", "S/F", "R/Fund", "Pension Fund", "Retirement Fund", "Provident Fund" or "S/Fund A/C". Thus, the "angle bracket" designations provide an unsatisfactory basis for determining whether or not shares are held on trust, at least except in the case of superannuation funds.
10. For those reasons, the applicants have concluded that, on the information presently available to them, it is not possible to make a reliable determination as to which of the Deregistered Shareholders acquired shares in a trustee capacity, and which of them acquired shares beneficially in their own right. Because they are unable to identify Deregistered Trustee Shareholders from the information available to them, they no longer propose to pay any money to ASIC in respect of any Deregistered Trustee Shareholders, and they propose to amend the proposed letter to ASIC (set out at pages 447 to 453 of Exhibit JP-1) to embrace this approach.
11. In my view, the circumstance that, pursuant to s 109(10)(c) of the Corporations Law, nothing entered in the Register by way of "angle brackets" affects the corporation with notice of a trust, is sufficient basis for concluding that the liquidators are not obliged to inquire into and ascertain whether a shareholding is held on trust. The practical difficulties in doing so provide further reason for that conclusion. And this provides an additional basis for concluding that Deregistered Shareholders who held as trustees are in no different position, vis-à-vis the liquidators, than those who held beneficially.

Where proofs lodged before deregistration

1. Where a creditor who has proved in a winding up dies (and, therefore, ceases to exist) before a final dividend is paid by the liquidator, the liquidator must pay the dividend to the creditor's executor upon production of the grant of probate; the right to the dividend devolves according to the law of succession, and the liquidator, upon production of appropriate proof, is bound to recognise that. [31] By analogy, where a corporate creditor who has proved in a winding up is deregistered (and, thus, ceases to exist), the liquidator of the debtor company is bound to recognise the entitlement of ASIC to dividends in respect of the proved debt; and if the creditor was a trustee, and a new trustee of the relevant trust were appointed and a vesting order made under (NSW) Trustee Act, s 71(2)(h), the liquidator would be both bound and entitled to pay dividends to the new trustee. [32]
2. Accordingly, in respect of deregistered corporate shareholders who had, in the relevant sense, "proved" their claims prior to their deregistration, the right to receive dividends vested in ASIC (or in the Commonwealth, in respect of shareholders who were trustees). This is unaffected by the principle that only the person who suffers loss or damage can make a claim under TPA, s 82, because there is a well-established distinction between assigning a bare right of action, and assigning the fruits of an action, which is permissible even though the bare right of action may not itself be assigned. [33]
3. However, there is a question as to whether, for these purposes, a proof which has been lodged, but not admitted prior to deregistration, has been "proved". While a creditor who has proved in a bankruptcy is entitled to assign its debt and its right to receive dividends, the trustee in bankruptcy is authorised to pay a dividend only to a creditor who has proved (or to somebody else who has the written direction of that creditor to receive the dividends), and if the assignor has not proved, then the assignee ought to lodge a new proof in substitution for the original proof by the assignor (by written authority from the assignor or by an order from the court). [34] It is implicit in this that "proof" involves not merely lodgement of a proof, but admission to proof. This accords with the position that mere lodgement of a proof does not give rise to any right to dividend; the right depends on admission to proof. Mere lodgement of a proof does not convert an unassignable claim for unliquidated damages into a proprietary right, any more than mere filing of a statement of claim in a court would do so.
4. It follows that Deregistered Shareholders who lodged proofs, but had not yet been admitted to proof, before they were deregistered, have not yet "proved" in the relevant sense in the liquidation of HIH, and have not acquired a right to receive dividends which are capable of vesting, upon deregistration, in ASIC (or in the Commonwealth). As those Deregistered Shareholders will no longer exist at the time when the liquidators may decide to revoke their previous rejections and to admit any such proofs, they will not be able to maintain a claim.

Conclusion

1. As none of the Deregistered Shareholders had been admitted to proof before their deregistration, the applicants would be justified in not admitting to prove in the liquidation of HIH any claims of Deregistered Shareholders, regardless of whether or not they had lodged a proof (but not been admitted to proof) before being deregistered, and regardless of whether or not they acquired and held shares in HIH in a trustee capacity.

NOTIFICATION TO SHAREHOLDERS, ASIC AND THE PUBLIC

1. The applicants seek directions that they are justified in notifying shareholders, ASIC and the public of how they propose to deal with shareholder claims by: 1. sending letters to shareholders who, based on the applicants' calculations, have suffered loss, informing them that the applicants propose to admit them as creditors in HIH based on the applicants' calculation of their claim, and giving them an opportunity to object; 2. sending letters to shareholders who, based on the applicants' calculations, have not suffered any loss, informing them that the applicants do not propose to admit them as creditors of HIH and giving them an opportunity to object; 3. in each of the above letters to shareholders, setting out how the applicants propose to deal with the FAI and C&G Schemes (as already described); 4. sending a letter to ASIC in relation to the potential claims of Deregistered Shareholders; and 5. publishing a notice on the HIH website setting out how the applicants propose to deal with shareholder claims, and in The Australian and the Australian Financial Review notifying shareholders who purchased shares during the Relevant Period but who have not received correspondence from the applicants, to make contact), on or after the expiration of 14 days after the above letters have been sent to shareholders.

Shareholder notification

1. The applicants propose to send letters ("the Shareholder Circulars"), to: 1. "Qualifying Shareholders", in the form set out at pages 385 to 405 of Exhibit JP-1 - which, in summary, inform the Qualifying Shareholders that the applicants propose to admit their Identified Claim unless notice of an objection to the proposed admission of their Identified Claims (in the form attached to the letter) is received within 30 days of the Publication Date; 2. "Nil Claim Shareholders", in the form set out at pages 406 to 414 of Exhibit JP-1 - which, in summary, inform the Nil Claim Shareholders that based on the applicant's calculations, they do not have an Identified Claim, but providing them an opportunity to object to that calculation within 30 days after the Publication Date.
2. Because each Potential Claimant Shareholder in the HIH liquidation is also a potential claimant in respect of FAI and C&G, the applicants also propose to set out in the Shareholder Circulars information about how the applicants, in their capacity as Scheme Administrators, intend to deal with the FAI and C&G Schemes, being, by way of summary, that: 1. the Scheme Administrators do not have any discretion under the FAI and C&G Schemes to now consider or admit claims against C&G or FAI which have not been notified to them before the Cut-Off Date, absent the claimant obtaining from the Court an extension of time for making its claim (or for appealing from rejection of a claim lodged within time); and 2. the Court has directed that the Scheme Administrators are justified in making further distributions under the FAI and C&G Schemes in respect of eligible Acknowledged Creditor Claims without making provision for any claimant who has not filed an application to Court within 30 days after the Publication Date seeking an extension of time to lodge its claim in the FAI and C&G Schemes (or to appeal from rejection of a claim lodged within time).
3. In the light of the view I have taken about the foreshadowed applications under Corporations Act, s 1322, the Shareholder Circulars will require amendment in this respect. If, as I anticipate may be possible, a general extension can be granted, then the circulars should inform shareholders who did not make a timely claim of the extended date, and include a draft claim form completed with the claim details calculated by the Scheme Administrators using the Share Register Data, the Reasons, and the methodology set out in the Methodology Memorandum.

ASIC notification

1. Originally, the applicants had sought directions that they were justified in sending letters by ordinary pre-paid post to ASIC, in the form set out at pages 447 to 453 of Exhibit JP-1, within 30 days of the Publication Date. However, because the applicants subsequently came to the view that it was not possible to identify those shareholders who held in a trustee capacity, that draft letter required modification. As I have now concluded, not only that the claim of any Deregistered Trustee Shareholder does not vest in the Commonwealth, and that the Liquidators are not obliged to investigate whether any shareholder is a trustee, but also that because claims lodged but not admitted before deregistration do not vest in ASIC, the notification to ASIC should simply explain that, for those reasons, it is not proposed to make any distribution to any Deregistered Shareholder.

Public notification

1. The addresses for shareholders to which the applicants have access are sourced in the Share Register Data, which Boardroom has informed the applicants is only updated at the request of the shareholder, or if a shareholder advises Boardroom of a change of its address for shares it holds in another company for which Boardroom maintains the register. In those circumstances, the applicants propose to give public notice of how they propose to deal with the shareholder claims by publishing notices (in the forms set out at pages 415 to 419 of Exhibit JP-1), on or after the expiration of 14 days after the Shareholder Circulars have been sent to shareholders, on the applicants' website, in The Australian and in the Australian Financial Review.

CONCLUSION

1. My conclusions may be summarised as follows: 1. In respect of the HIH liquidation, the applicants, in their capacity as liquidators, would be justified in admitting claims in respect of shareholders (1) who have a potential claim, as identified by the applicants (i.e., Qualifying Shareholders); (2) for the amount that the applicants have calculated, in accordance with the Methodology Memorandum (subject to dealing with any objection made by the shareholder); (3) who have not had their claim finally judicially determined against them; and (4) who are not currently deregistered corporate entities (i.e., Deregistered Shareholders). 2. In respect of the FAI and C&G Schemes, leave should be granted to file the proposed representative applications for extensions of time under Corporations Act, s 1322, amended to include an appeal (subject to such extension being granted) from the applicants' decision to not determine that a shareholder has an Acknowledged Creditor Claim in respect of a Final Claim Form lodged before midnight on 2 September 2013 (British Summer Time) or any extension to that deadline previously granted by order of the Court, such applications to be returnable on the date when short minutes are to be brought in. If, as I anticipate, it is possible to dispose of those applications and appeals on that occasion, by extending time for shareholders generically to lodge Final Claim Forms in respect of relevant claims to a specified date, and (unless the decisions not to admit timely claims can be revoked and an admission substituted) allowing the appeals of those whose timely claims have been not admitted then a direction could be made that the applicants in their capacity as scheme administrators would be justified in setting any further Payment Percentage (as that term is defined in the Scheme); and making any further Payment Percentage payments under the Scheme, without making provision for any Liability (as that term is defined in the Scheme) in respect of the shareholding of any current or former Shareholder who does not have an Acknowledged Creditor Claim (as that term is defined in the Scheme), save for such Shareholders that have, by the extended date, lodged a Final Claim Form. 3. As none of the Deregistered Shareholders had been admitted to proof before their deregistration, the applicants would be justified in not admitting to prove in the liquidation of HIH any claim of any Deregistered Shareholder, regardless of whether or not they had lodged a proof (but not been admitted to proof) before being deregistered, and regardless of whether or not they acquired and held shares in HIH in a trustee capacity. 4. The proposed Shareholder Circulars and Public Notices should be modified to conform with these reasons, and in particular, in respect of the FAI and C&G Schemes (if a general extension of time is granted) to include a statement of the extended date, and a draft Claim Form completed with the claim details calculated by the Scheme Administrators using the Share Register Data, the Reasons, and the methodology set out in the Methodology Memorandum. 5. The proposed notification to ASIC in respect of Deregistered Shareholders should be modified so as to convey that, for the reasons explained above, it is not considered that the potential claim of any Deregistered Shareholder vests in ASIC or the Commonwealth, and so it is not proposed to make any distribution in respect of any Deregistered Shareholders. 6. Subject to those modifications, the applicants would be justified in: 1. causing the Shareholder Circulars to be sent to Qualifying Shareholders and Nil Claim Shareholders; and 2. publishing the proposed Public Notices: 1. on the website maintained by the applicants in respect of HIH and other companies in the HIH Group at http://hih.com.au/; and 2. in the Australian and The Australian Financial Review newspapers, on or after the date which is 14 days after the date on which all Shareholder Circulars have been posted.
2. At this stage, the orders of the Court are that: 1. The applicants bring in short minutes on a date to be fixed to give effect to these reasons. 2. Upon the undertaking of Lara Alfan, solicitor, to pay the appropriate filing fees, leave be granted to Douglas Seporavic and Gene Raymond Burr to file, in each of proceedings 58774 of 2001 and 58776 of 2001, an interlocutory process in the form of that provided to the Court on 12 December 2017, subject to the amendment thereof by inserting as claim 6A "An order allowing the appeals referred to in paragraph 6 and substituting a decision to admit the said claim". 3. The said interlocutory processes to be filed and served by Monday 10 December 2018 and to be returnable on Friday 14 December 2018 before me, and time for service be abridged accordingly. 4. There be liberty to apply by arrangement with my associate in the event of any clarification being desired.

Endnotes

1. See In the matter of HIH Insurance Limited (In Liquidation) (ACN 008 636 575) and others; Smith and Others v Anthony Gregory McGrath (in his capacity as Liquidator of HIH Insurance Limited (in liquidation)) and Others; Baldock and Others v Anthony Gregory McGrath (in his capacity as Liquidator of HIH Insurance Limited (in liquidation)) and Others;; De Bortoli Wines (Superannuation) Pty Ltd and Others v Anthony Gregory McGrath (in his capacity as Liquidator of HIH Insurance Limited (in liquidation)) and Others; Cuong Ly and Others v Anthony Gregory McGrath (in his capacity as Liquidator of HIH Insurance Limited (in liquidation)) and Others [2016] NSWSC 482; see also In the Matter of HIH Insurance Limited (In Liquidation) (ACN 008 636 575) and Others; In the Matter of HIH Insurance Limited (In Liquidation) (ACN 008 636 575) and Others; In the Matter of HIH Insurance Limited (In Liquidation); Cuong Ly v HIH Insurance Limited (In Liquidation) [2017] NSWSC 380.
2. In the matter of Glengrant Civil Pty Ltd (in liq) [2017] NSWSC 843 at [11]; In the matter of Worthbrook Pty Limited [2017] NSWSC 1036 at [14]; In the matter of Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 at [5]; Walley, in the matter of Poles & Underground Pty Ltd (Administrators Appointed) [2017] FCA 486 at [41]; Cussen (Liq), in the matter of Zerren Pty Ltd (in liq) [2017] FCA 981 at [41]; Reidy, in the matter of eChoice Limited (Administrators Appointed) [2017] FCA 1582 at [27]; Kelly (liquidator), in the matter of Australian Institute of Professional Education Pty Limited (in liq) [2018] FCA 780 at [29].
3. Cf,in the context of applications to replace liquidators, In the matter of Columbia Private Holdings Pty Ltd and other companies [2017] NSWSC 1859 at [5]-[8].
4. Cf Walley, in the matter of Poles & Underground Pty Ltd (Administrators Appointed) [2017] FCA 486 and GDK Projects Pty Ltd, in the matter of Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541 at [33] (where Farrell J observed that the power conferred by s 90-15 was "unconstrained" but that "[i]t is difficult to envisage circumstances where the power would be exercised if the court could not be satisfied that it would be just and unless the applicant had demonstrated sufficient utility to the external administration"). The approach under s 479(3) was summarised by Black J in In the matter of Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 at [7]-[9].
5. (CTH) Corporations Act 2001, s 1615.
6. (CTH) Corporations Act 2001, s 1617.
7. In the matter of PrimeSpace Property Investment Limited (In liquidation) [2018] NSWSC 919 at [18] (Black J).
8. In the matter of HIH Insurance Limited [2016] NSWSC 482, delivered on 20 April 2016; and In the matter of HIH Insurance Limited [2017] NSWSC 380, delivered on 10 March 2017.
9. [1969] 2 All ER 753; cited with approval in Harry Goudias Pty Ltd v Port Adelaide Freezers Pty Ltd (1992) 7 ACSR 303 at [307] (Mullighan J).
10. Re Lord (as liq of Silverline Technologies Pty Ltd) (2005) 192 FLR 261 at [32]; Re Autolook Pty Ltd (1983) 8 ACLR 419.
11. Pulsford v Devenish [1903] 2 Ch 625.
12. Re Lord (as Liquidator of Silverline Technologies Pty Ltd) (2005) 192 FLR 261 at [32] (Barrett J).
13. (2004) 50 ACSR 565 at [86] (Campbell J).
14. In the matter of HIH Insurance Limited (in liquidation; De Bortoli Wines (Superannuation) Pty Ltd & anor v McGrath & ors [2014] NSWSC 774 at [23]-[24].
15. Using the information contained in the share register of HIH and records of transactions in respect of that register, as maintained by Boardroom Pty Limited ("the Share Register Data"), the Reasons, and the methodology set out in the Methodology Memorandum at pages 324 to 328 of Exhibit JP-1 ("Methodology Memorandum"). Not all shareholders who purchased shares in the Relevant Period have an Identified Claim because some ("Nil Claim Shareholders"), based on the applicants' calculations, (a) did not suffer any loss in respect of shares acquired by them during the Relevant Period, when subsequent sale of shares is taken into account, or (b) have a claim that does not exceed the "de minimis amount", being $25: see Corporations Act, s 553E; (CTH) Bankruptcy Act 1966, s 140(9); and (CTH) Bankruptcy Regulations 1996, reg 6.21; Re One.Tel Ltd; Walker & Sherman (as liqs) (2002) 43 ACSR 305 at [34]-[37] (Barrett J). Nil Claim Shareholders will have an opportunity to object, as explained below.
16. Additional issues arise concerning corporate shareholders which have been deregistered; these are addressed below.
17. Defined terms in this section which are not otherwise explained have the meaning given to them in the FAI and C&G Scheme documentation.
18. [2015] NSWSC 1518 at [50].
19. See, for example, Blaze Asset Pty Ltd v Target Energy Limited [2009] FCA 698; Re Lanka Graphite Limited (formerly Viculus Limited) [2015] FCA 798; In the matter of Strike Energy Ltd (ACN 078 012 745) [2012] FCA 725; Re Chalice Gold Mines Ltd [2009] FCA 1236; In the matter of RCR Tomlinson Ltd (ACN 008 898 486) [2009] FCA 1130; In the matter of Sylvania Resources Limited [2009] FCA 955; In the matter of Azure Minerals Ltd [2013] FCA 63; In the matter of CIC Insurance Limited (in liquidation and subject to a scheme of company arrangement) and FAI General Insurance Company Limited (in liquidation and subject to a scheme of company arrangement) [2015] NSWSC 1518.
20. Corporations Act, s 9.
21. This principle appears to have its origin in Park v Allied Mortgage Corporation Limited [1993] FCA 286 (Davies J), and has since been applied in cases which include Allstate Life Insurance Co v Australia & New Zealand Banking Group Limited [1994] FCA 814; National Mutual Property Services (Australia) Pty Ltd v CitiBank Savings Limited and ors (No1) [1995] FCA 1628; Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd [2006] FCA 1352; Tosich v Tasman Investment Management Ltd (2008) 250 ALR 274; [2008] FCA 377 at [37], Mijac Investments Pty Ltd v Graham (No 2) [2009] FCA 773; Aquatic Air Pty Limited v Siewert & anor [2015] NSWSC 928 at [87]; and No TasWind Farm Group Inc v Hydro-Electric Corporation (No 1) [2014] FCA 347 at [8].
22. Pritchard v Racecage Pty Ltd (1997) 72 FCR 203 at 218 (Branson J, with whom Spender and Olney JJ agreed).
23. See Park v Allied Mortgage Corporation Limited [1993] FCA 286 (Davies J).
24. Ford HAJ, Lee WA, Bryan M, Glover J, Fullerton I, The Law of Trusts, [4.4510].
25. Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia (No 6) [2014] WASC 203 at [22]-[24] (Le Miere J); Lanai Unit Holdings Pty Limited v Mallesons Stephen Jaques (No 2) [2016] QSC 242 at [31]-[51] (Jackson J).
26. Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia (No 6) [2014] WASC 203 at [11].
27. TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 at [54] (Leeming JA, with whom Beazley P and Emmett AJA agreed); Lidden v Composite Buyers Ltd (1996) 67 FCR 560 at 563-564 (Finn J); Ramage v Waclaw (1988) 12 NSWLR 84 at 91-93 (Powell J); Sharpe v San Paulo Railway Company (1873) LR 8 Ch App 597 at 609-610 (James LJ); Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd [2017] FCAFC 75 at [102]-[110] (Rares, Murphy and Davies JJ); see also Heydon JD and Leeming MJ, Jacobs' Law of Trusts in Australia, LexisNexis, 7th ed at [2303].
28. Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109; [2004] HCA 7 at [159] (Callinan J, with whom McHugh and Kirby JJ agreed); the majority (Gleeson CJ, Gummow and Hayne JJ) decided the point differently, at [65], by finding that if the trustee had replenished the trust property (to the extent it was diminished by the misleading or deceptive conduct) there would be no loss to the beneficiaries.
29. Corporations Act s 1072H(9) and (10) are the current equivalent provisions, and are materially identical: the word "shall" in Corporations Law s1091C(10)(a) has been replaced by "must" in s 1072H(10)(a) of the current Act.
30. These are the only ASX Settlement Procedure Guidelines that the applicants' solicitors have been able to obtain (including following enquiries with the ASX).
31. Re Commercial Bank Corporation of India and the East (1870) LR 5 Ch App 314; Danich Pty Ltd re Cenco Holdings Pty Ltd [2005] NSWSC 293 at [35].
32. Danich Pty Ltd re Cenco Holdings Pty Ltd [2005] NSWSC 293 at [36].
33. Glegg v Bromley [1912] 3 KB 474.
34. Pitman v Pantzer (Trustee of the Bankrupt Estate of Thomas Richard Wenkart) [2001] FCA 1743; (2001) 115 FCR 361 (Beaumont J). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 December 2018