HIH related matters [2002] NSWSC 1080

New South Wales Supreme Court

CITATION : HIH related matters [2002] NSWSC 1080 CURRENT JURISDICTION: Equity Division Corporations List FILE NUMBER(S) : SC (1) 1798/01; (2) 1800/01; (3) 1801/01 ; (4) 1805/01; (5) 1806/01; (6) 1808/01; (7) 1810/01; (8) 1814/01 HEARING DATE(S) : 13/11/02 JUDGMENT DATE : 13 November 2002

(1) FAI Traders Insurance Co Pty Ltd (2) World Marine & General Insurances Pty Ltd (3) HIH Underwriting & Insurance (Australia) Pty Ltd (4) FAI Insurances Ltd PARTIES : (5) CIC Insurance Ltd (6) FAI General Insurance Company Ltd (7) HIH Casualty & General Insurance Ltd (8) FAI Reinsurances Pty Ltd Anthony Gregory McGrath and Alexander Robert Mackay Macintosh - Applicants JUDGMENT OF : Barrett J

COUNSEL : Mr A P Ryan, Solicitor - Applicants SOLICITORS : Blake Dawson Waldron - Applicants CATCHWORDS : CORPORATIONS - winding up - liquidator - approval required to enter into agreement of greater than three months duration - agreement entered into before approval but with substantive operation suspended until approval given LEGISLATION CITED : Corporations Act 2001 (Cth) CASES CITED : Re HIH Casualty & General Insurance Co Ltd [2002] NSWSC 1036 DECISION : Approval granted

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

BARRETT J

WEDNESDAY, 13 NOVEMBER 2002

1798/01 – FAI TRADERS INSURANCE CO PTY LTD 1800/01 – WORLD MARINE & GENERAL INSURANCE PTY LTD 1801/01 – HIH UNDERWRITING & INSURANCE (AUSTRALIA) PTY LTD 1805/01 – FAI INSURANCES LTD 1806/01 – CIC INSURANCE LTD 1808/01 – FAI GENERAL INSURANCE COMPANY LTD 1810/01 – HIH CASUALTY & GENERAL INSURANCE LTD 1814/01 – FAI REINSURANCES PTY LTD JUDGMENT 1 In each of the eight proceedings, leave is given to the applicants to file in court the interlocutory process which I initial and date and the affidavit of Alexander Robert Mackay Macintosh sworn on 12 November 2002. Exhibits ARMM 1 to ARMM3 to the affidavit in 1810/01 tendered by the applicants will be marked Exhibit A. 2 I direct that Exhibit A and the accompanying executive summary document on Blake Dawson Waldron letterhead be retained in the court file in a sealed envelope marked "Not to be opened without the leave of a judge and on 48 hours' notice to the liquidators c/- Blake Dawson Waldron". 3 The liquidators seek the approval of the court under s.477(2B) of the Corporations Act 2001 (Cth) to enter into an outsourcing agreement involving the provision to each of the eight companies of services related to insurance claims management over a period which will expire in February 2007. 4 In the circumstances of this liquidation, which will be of considerable duration, the agreement is one that warrants grant of s.477(2B) approval, particularly in the light of the matters to which Mr McIntosh deposes as to the benefits it is expected to produce. 5 It should be noted that the agreement has already been executed by the parties and is dated 6 November 2002. It is, however, expressed to be subject to a condition that, with some exceptions, its provisions are of no legally binding force until the happening of certain events, including the grant of approval of the court. There is provision for waiver of the condition, but not insofar as it contemplates grant of the court's approval. It follows that, even though the document has been executed, its contractual force is limited, pending the grant of that approval, to the provisions excepted from the condition. Those excepted provisions, being the only presently operative parts, involve only obligations to be performed in the short term directed towards satisfaction of the condition. 6 In these circumstances, I consider the correct characterisation of matters for the purposes of s.477(2B) to be that, insofar as the document the parties have executed entails obligations not to be performed within the period to which the section refers, there is no agreement and will be no agreement unless and until the prerequisite of the court's approval (made indispensable by the parties) has been satisfied. An agreement subject to a suspensory regime of that kind does not give rise to concerns of the kind to which I referred in Re HIH Casualty & General Insurance Co Ltd [2002] NSWSC 1036 (6 November 2002). 7 In each of the eight proceedings, I make the order in the form of order which I initial and date. The orders may be taken out forthwith. **********