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In the matter of HIH Insurance Ltd (in liq); In the matter of HIH Underwriting & Agency Services Ltd (in liq); In the matter of CIC Insurance Ltd (in liq and subject to a scheme of arrangement); In the matter of FAI General Insurance Company Ltd (in liq and subject to a scheme of arrangement); In the matter of HIH Casualty and General Insurance Ltd (in liq and subject to a scheme of arrangement); In the matter of HIH Underwriting & Insurance (Australia) Pty Ltd (in liq); In the matter of FAI Insurances Ltd (in liq); In the matter of HIH Insurance Ltd (in liq); In the matter of HIH Holdings Pty Ltd (in liq) [2021] NSWSC 1344 - NSWSC 2021 case summary — Zoe
In the matter of HIH Insurance Ltd (in liq); In the matter of HIH Underwriting & Agency Services Ltd (in liq); In the matter of CIC Insurance Ltd (in liq and subject to a scheme of arrangement); In the matter of FAI General Insurance Company Ltd (in liq and subject to a scheme of arrangement); In the matter of HIH Casualty and General Insurance Ltd (in liq and subject to a scheme of arrangement); In the matter of HIH Underwriting & Insurance (Australia) Pty Ltd (in liq); In the matter of FAI Insurances Ltd (in liq); In the matter of HIH Insurance Ltd (in liq); In the matter of HIH Holdings Pty Ltd (in liq) [2021] NSWSC 1344
Solicitors:
All proceedings
Ashurst Australia (Applicants)
File Number(s): 2001/58663; 2001/58768; 2001/58772; 2001/58774; 2001/58776; 2001/58780; 2001/58784; 2002/63107; 2004/182176
[2]
Nature of the application
By nine Interlocutory Processes filed on 6 October 2021, Mr Preston and Ms Sozou in their capacity as liquidators of HIH Insurance Limited (in liq) and other companies within, broadly, the HIH and FAI groups, seek relief, by way of modification of the process of notification of creditors and contributories in respect of a proposed application under s 480 of the Corporations Act 2001 (Cth) for their release as liquidators of the several companies and the deregistration of those companies. This application is brought well in advance of the liquidators' proposed application under s 480 of the Act, which is not likely to be brought until September 2022, because of steps that remain to be completed in the liquidations and relevant schemes of arrangement. The application is brought at this early stage by reason of the complexities of the notification that will be involved, where numerous creditors and contributories will need to be notified, and those creditors and contributories are resident in several jurisdictions.
The application relates to nine companies, four of which are currently in liquidation, three of which are currently in liquidation and also subject to schemes of arrangement, and two of which are in liquidation and were previously subject to schemes of arrangement which have now terminated. The orders sought are in common form across the nine Interlocutory Processes, although they provide for notification to persons who have largely been admitted as creditors in the liquidation or to persons who have proved their debts in the relevant schemes of arrangement, as appropriate. In each case, the Interlocutory Process seeks dispensation from the requirements under r 7.5(6) of the Corporations Rules which specify the manner of giving notice to creditors and contributories in an application of this kind, and the substitution of an alternative notification process. The proposed orders also provide for an alteration in the timing requirements for such notice, under r 7.5(2) of the Corporations Rules, so as to extend the period of notice that would be given to creditors and contributories of the application and to allow such creditors or contributories to file a notice of objection closer to the date of the hearing. These changes are advantageous to creditors and contributories by extending the period of notice available to them.
An annexure to the Interlocutory Processes in turn specifies the modifications which are sought in respect of the notice requirement, which is to substitute a single page notice of the application, which would draw attention to creditors' and contributories' ability to download the Interlocutory Process for each of the companies, the Court's orders and a statement of the relevant company's financial position and a summary of the liquidators' receipts and payments from a specified website which has been used by the liquidators in the course of the liquidations and the schemes of arrangement. That process will reduce the length of the notification to creditors and contributories by allowing access to documents by electronic means. A modification is also sought so that the liquidators need not send that notice to creditors or contributories where they had previously identified that a creditor or contributory company has been deregistered, or, by reason of specified matters, it is now apparent that the address held for that creditor or contributory is unreliable and notification to that address would not bring it to that creditor's or contributory's attentions. It is not surprising that there are a number of creditors and contributories within that category where these liquidations and schemes of arrangement have now continued over many years.
That annexure also provides for an advertisement of the application to be published, not later than 60 days before it is listed for hearing, on the website maintained by the liquidators in respect of the relevant company, in a national newspaper in each of Australia and New Zealand, and in the Financial Times, published across all the global additions of that publication. That form of advertisement would go some way to addressing the position of creditors for which the liquidators do not now have current addresses, and would also allow global notification of the applications, where creditors are spread across several jurisdictions.
[3]
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.
[4]
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.
[5]
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: 22 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.
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.