In the matter of HIH Insurance Ltd (in liq); In the matter of HIH... [2021] NSWSC 1344 | Case summary

Affidavit evidence

The liquidators' application is supported by an affidavit dated 6 October 2021 of Mr Preston, one of the liquidators, who refers to the background to the liquidation of the HIH and FAI companies and the associated schemes of arrangement and identifies the current status of the liquidations and the remaining schemes. He points to the rationale for the application, which is intended to avoid wasted costs in the notification process, particularly referable to sending materials to creditors for whom reliable contact information is not held, and to reducing the volume of material which is to be sent to creditors and contributories in printed form, while at the same time improving the efficacy of notification by introducing the advertisement procedure to which I referred above.
Mr Preston in turn refers to the number of contributories of the remaining HIH companies, which is in excess of 36,000 persons including shareholder creditors as defined, and the other creditors of the HIH companies and under the several schemes. Mr Preston in turn addresses the difficulties with the mailing addresses of creditors and contributories, an issue which has also been noted in earlier applications before the Court, where further inquiries were made, with some success, to identify correct addresses for shareholders and contributories to allow distributions to them. Nonetheless, Mr Preston's evidence is that the liquidators do not have current addresses for about 1,500 creditors, over 3,100 shareholder creditors and nearly 500 contributories of the HIH companies. That in turn supports the application now made, to dispense with the requirement for notification to persons for whom contact addresses have proved to be unreliable, on the basis that that notification would involve the liquidators incurring costs for no useful additional benefit.
Mr Preston in turn refers to the mechanism which is to be adopted for the publication of notice of the application, on the HIH website which has been used in the course of the liquidation and the schemes of arrangement, and by the newspaper advertisements to which I have referred above. Mr Preston also addresses the costs involved in respect of the process of sending paper notifications to creditors and contributories. Although there would be a saving of costs in not sending notices to unreliable addresses, I also recognise that additional costs would be incurred in the publication of the proposed newspaper advertisements. However, publication of those advertisements is likely to be necessary in any event, given the number of shareholders and creditors for whom the liquidators do not have current reliable addresses. The liquidators also rely on two earlier affidavits of Mr Preston, dated 13 November 2017 and 3 October 2019 filed at earlier stages of the proceedings, by way of background to Mr Preston's more recent affidavit dated 6 October 2021.
By a further affidavit dated 13 October 2021, Mr Oya, who is a solicitor employed by the firm of solicitors acting for the liquidators, indicates that notice of this application has been given the Australian Securities and Investments Commission ("ASIC"), which has acknowledged that notice but has not indicated any position in respect of the application. It seems to me unlikely, as a practical matter, that ASIC would seek to oppose the application, given the nature of the relief sought, and it has had an opportunity to do so and has not in fact done so.

Submissions and determination

Turning now to the liquidators' submissions, Mr McMeniman, who appears for them in this application, draws attention to the nature of the relief which is sought, by way of modifications of rr 7.5 and 7.6 of the Corporations Rules, which I have addressed above. He recognises the significance of the requirements for service in those rules, as explained by McLelland J in Re Austral Family Homes Pty Ltd (in liq) (1992) 28 NSWLR 247; (1992) 8 ACSR 322; (1992) 10 ACLC 1125, and noted by Rees J in Re Australasian Barrister Chambers (No 2) [2020] NSWSC 308, namely that a release of a liquidator under s 480 of the Act will discharge the liquidator from liability for any act or default done in the liquidation, and it is important that creditors should have notice of such an application so that they have an opportunity to be heard and oppose that relief if so advised.
Nonetheless, as Mr McMeniman points out, there have been occasions on which the Courts have modified or dispensed with the notification requirements under rr 7.5 and 7.6 of the Corporations Rules. For example, in Re RR Impex Pty Ltd (in liq) [2018] NSWSC 1667, I dispensed with service of that notice on a creditor where the liquidator had been unable to serve that creditor at its last known address. That order has something in common with the relief that is sought here in respect of those creditors for whom the liquidator has no current reliable addresses. In Re One.Tel Ltd (in liq) [2014] NSWSC 1892, I ordered that notice of an application of this kind be given to the committee of inspection in the One.Tel liquidation, rather than to the numerous priority creditors and unsecured creditors in that liquidation, and that has something in common with the alternative form of notice for which the liquidator now contends.
In Re Australasian Barrister Chambers (No 2) above, Rees J in turn dispensed with a requirement for service by prepaid post where creditors and contributories had been notified of such an application by email. The order there made is consistent with the increased use of electronic means of service in applications before this Court, including communications with creditors in voluntary administrations and with shareholders and creditors in schemes of arrangement. That has something in common with the relief here sought by the liquidators to permit notification of the application by, inter alia, placing a notice on the website used in the liquidation and schemes of arrangement.
The question here is whether notification to creditors and contributories, in the manner provided in rr 7.5 and 7.6 of the Corporations Rules, or the alternative approach proposed by the liquidators will most effectively give notice to creditors for the application, so that they have an opportunity to be heard in it. I am satisfied that those rules, left unmodified, would not effectively achieve that result, and that the liquidators' proposed approach is preferable. First, notification in the manner specified in rr 7.5 and 7.6 of the Corporations Rules would involve wasted costs, so far as notification was given by post to addresses which the liquidators knew were unreliable, with no benefit from doing so. Where numerous creditors fall in that category, the alternative of notification on the liquidators' website and publication of an advertisement in national newspapers in Australia and New Zealand and in a newspaper circulating globally is more likely to bring the application to creditors' and contributories' attention. Second, given the number of creditors and the geographic spread of creditors, the variation of the notification times thought by the liquidator is desirable. Third, in an environment where creditors and shareholders are now likely to be familiar with the use of documents circulated by electronic means, including by accessing them on the internet, the provision of a notice by post, which draws attention to more detailed documents which may be downloaded from the liquidators' website, will provide an effective means of bringing those documents to creditors' and contributories' attention, in a way that is more environmentally friendly than the circulation of paper documents to a large number of creditors and contributories.
For these reasons, I am satisfied that I should make orders in accordance with each of the nine Interlocutory Processes, dealing with notification in respect of the nine companies that are in issue in this application. I note that those notices contemplate that notice will be given in the future, in the manner provided by these orders, and a date will then be inserted in the notices for the relevant hearing. It is not possible to identify that date now where, as I noted above, it is likely that the applications will not be brought until September 2022. There will be no difficulty in the liquidators' solicitors approaching the Court for allocation of a hearing date, prior to issuing the relevant notices. I direct the liquidators to send the form of orders necessary to give effect to this judgment to my Associate, and those orders will then be made in chambers.

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