New South Wales Supreme Court CITATION : Re HIH Insurance Group Ltd (In Liq) [2004] NSWSC 20 HEARING DATE(S) : 30 January 2004 JUDGMENT DATE : 30 January 2004 JURISDICTION: Equity JUDGMENT OF : Hamilton J DECISION : Approval granted to entry into agreement. CATCHWORDS : CORPORATIONS [286] - Winding up - Liquidators - Rights and powers - In winding up by Court - Power to enter into agreement on company's behalf - Necessity for approval if performance of contract may extend beyond 3 months - Approval by Court - Basis on which discretion may be exercised - Relevant considerations - Necessity for approval of compromise of debt greater than $20,000. LEGISLATION CITED : Corporations Act 2001 (Cth) s 477(2A) & (2B) PARTIES : Anthony Gregory McGrath and Alexander Robert Mackay Macintosh (Liqs) (Ps) FILE NUMBER(S) : SC 1799/01; 1800/01; 1805/01 COUNSEL : A P Ryan, Solicitor (Ps) SOLICITORS : Blake Dawson Waldron (Ps) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J FRIDAY, 30 JANUARY 2004 1799/01 HIH INSURANCE LIMITED (in Liq) 1800/01 WORLD MARINE AND GENERAL INSURANCES PTY LIMITED (in Liq) 1805/01 FAI INSURANCES LIMITED (in Liq) RE APPLICATIONS OF McGRATH and MACINTOSH JUDGMENT 1 HIS HONOUR: These are applications made in respect of three companies in what is commonly known as the HIH Group for orders under s 477(2A) and (2B) of the Corporations Act 2001 (Cth) ("the CA"). The application is made by the applicants in each case as the liquidators of the relevant company. Section 477(2A) of the CA provides that a liquidator must not compromise a debt greater than $20,000 without the approval of the Court or of the committee of inspection or of a resolution of the creditors. Section 477(2B) prohibits a liquidator from entering into an agreement on the company's behalf if it is to be performed or may be performed more than three months after it is entered into. 2 This is another episode in the long saga of the very complex liquidations of companies in the HIH Group. In this case the background is that six companies in the group have entered into an agreement with Allianz Australia Limited ("Allianz"). The agreement relates to a joint venture between the six companies and Allianz. The agreement which is the subject of the application is an agreement for the compromise of obligations of Allianz to pay the purchase price of the HIH companies' interest in that joint venture. The settlement of the disputes concerning the matter will lead to the payment to the applicants as liquidators of companies in the HIH Group of some $120 million-odd. The application is made in respect of only three of the six companies, because three of the companies have committees of inspection and those committees of inspection approved the entry into the agreement on 17 December 2003. The three companies in respect of which application is made do not have committees of inspection so that the approval of the Court is sought. 3 There is no doubt that the agreement proposed to be entered into will or may be carried out beyond the three month limitation period. In relation to the approval of the compromise it may not in reality be necessary because the compromise, if any, is minimal. It appears that it is probably not really a compromise at all. In reality there are adjustments to the purchase price pursuant to the contract and there is also some offset of cross obligations taken into account in relation to the price which has to be paid. However, approval of the compromise has been obtained in respect of the other three companies from their committees of inspection under s 477(2A). It is for more abundant caution and particularly in light of the fact that the application had to be brought to the Court in respect of the three subject companies under s 477(2B), that the liquidators have thought it prudent to apply under s 477(2A) as well. It does not seem to me that that course is inappropriate in the circumstances. 4 I have examined the carefully prepared affidavit material which has been laid before me. The releases given in the agreement have been narrowly drawn. There may be very considerable benefits on the taxation front in the agreement being entered into now by reason of current negotiations with or approaches to the Commission of Taxation concerning certain tax implications of the transactions. The agreement will bring to an end disputes or differences which have arisen and result in the early payment of $120 million to the liquidators. 5 Under the circumstances I have no doubt of the appropriateness of granting the Court's approval under both sub-ss (2A) and (2B) of s 477 of the CA and I propose to do so. ********** Last Modified: 02/27/2004 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. 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