New South Wales Supreme Court CITATION : HIH Insurance Limited (In Liquidation) & Ors [2004] NSWSC 454 HEARING DATE(S) : 21/05/04 JUDGMENT DATE : 21 May 2004 JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Examination summons issued. Letter of request issued. CATCHWORDS : CORPORATIONS - winding up - examination under s.596B - whether examination summons should be issued - whether court should issue letter of request seeking assistance of foreign court in conducting examination - conditions to be met before letter of request is ordered LEGISLATION CITED : Corporations Act 2001 (Cth) - ss.580, 581, 596B, 596C Supreme Court (Corporations) Rules 1999, rule 11.3 England v Smith [2001] Ch 419 CASES CITED : Joye v Beach Petroleum NL (1996) 20 ACSR 525 Re Finlen's Contract Build Pty Ltd (2000) 34 ACSR 499 Re Hugh J Roberts Pty Ltd [1970] 2 NSWR 582 In the matter of: HIH Insurance Limited (In Liquidation) FAI Traders Insurance Company Pty Limited (In Liquidation) World Marine & General Insurances Pty Limited (In Liquidation) HIH Underwriting & Insurance (Australia) Pty Limited (In Liquidation) Lanlex No 65 Pty Limited (In Liquidation) FAI Leasing Finance Pty Limited (In Liquidation) FAI Insurances Limited (In Liquidation) CIC Insurance Limited (In Liquidation) FAI Investments Pty Ltd (In Liquidation) FAI General Insurance Company Limited (In Liquidation) FAI Overseas Investments Pty Ltd (In Liquidation) HIH Casualty & General Insurance Limited (In Liquidation) HIH Overseas Holdings Limited (In Liquidation) FAI Financial Services Limited (In Liquidation) FAI Overseas Holdings Pty Limited (In Liquidation) FAI Reinsurances Pty Limited (In Liquidation) HIH Underwriting and Agency Services Limited (In Liquidation) PARTIES : Notestir Pty Limited (In Liquidation) First Mentor Group Pty Limited (In Liquidation) Hannan & Company Pty Limited (In Liquidation) HIH Investment Holdings Limited (In Liquidation) Worldwide Weather Underwriting Agencies (Australia Pty Limited (In Liquidation) HIH Company Limited (In Liquidation) ACN 006 495 9887 Pty Limited (In Liquidation) CIC General Insurance Holdings Pty Limited (In Liquidation) FAI Home Security Holdings Pty Limited (In Liquidation) ACN 005 312 345 Pty Limited (In Liquidation) FAI Film Distribution Pty Limited (In Liquidation) FAI Workers Compensation (Vic) Pty Limited (In Liquidation) HIH (Real Estate) Pty Limited (In Liquidation) Integrated Commercial Finance Pty Limited (In Liquidation) Innes Owens Pty Limited (In Liquidation) Riskcorp Australia Pty Limited (In Liquidation) (together called the HIH Companies) Anthony Gregory McGrath and Alexander Robert Mackay Macintosh as liquidators of the HIH Companies - Applicants FILE NUMBER(S) : SC 3038/04 COUNSEL : Mr R T Beech-Jones - Plaintiffs SOLICITORS : Blake Dawson Waldron - Plaintiffs IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J FRIDAY 21 MAY 2004 3038/04 - HIH INSURANCE LIMITED (IN LIQUIDATION) & ORS JUDGMENT 1 By their originating process filed in court today, Mr McGrath and Mr Macintosh, the liquidators of each of the thirty companies therein designated "HIH companies", seek, first, the issue of a summons under s.596B of the Corporations Act 2001 (Cth) requiring a named person apparently resident in the United Kingdom to appear for public examination, and, second, orders directed towards the issue by the court of a letter of request seeking the assistance of the High Court of Justice of England and Wales in connection with the conduct of the examination of that person in London or elsewhere in England and Wales. 2 An account of matters which have prompted the liquidators to seek the first order appears in an affidavit sworn by Mr McGrath on 20 May 2004. I am satisfied that the affidavit meets the requirements referred to in s.596C, including those laid down by rule 11.3 of the Supreme Court (Corporations) Rules 1999. In accordance with rule 11.3(4), the originating process and Mr McGrath's affidavit must be filed in a sealed envelope marked "Application and supporting affidavit for issue of summons for examination under s.596B of the Corporations Act 2001". In accordance with rule 11.3(7), the affidavit is not available for inspection by any person unless the court otherwise orders. In the circumstances of this case where service is to be effected overseas, the liquidators submit and I agree that it is appropriate to order, in addition, that the whole of the content of the court file not be available for inspection by any person during the period of 14 days from today unless the court otherwise orders. 3 On the aspect of the application concerning the issue of a summons for examination under s.596B, it is sufficient to say that, having regard to what is said in Mr McGrath's affidavit, I am satisfied that the proposed examinee may be able to give information about examinable affairs of each of the thirty companies designated the "HIH companies". In stating that conclusion, I should add that the conclusion pays attention to the definitions of "examinable affairs" and "connected entity" in s.9. While the events in relation to which the person in question may be able to give information relate, in a direct sense, to the affairs of some only of the thirty companies, the "connected entity" component of the definition of "examinable affairs" means that the conclusion I have expressed holds good for all thirty. 4 The particular aspect of examinable affairs referred to in Mr McGrath's affidavit is concerned with possible proceedings to be instituted by the liquidators with a view to recoveries that, if forthcoming, will add to the assets of one or more of the thirty companies or otherwise benefit creditors. Case law leaves no doubt that it is legitimate for examination under compulsion of the kind sought to be imposed here to be used to obtain information which may assist in deciding whether such proceedings may be brought. Re Hugh J Roberts Pty Ltd [1970] 2 NSWR 582 is probably the most often cited authority. There is relatively recent reference to the authorities in re Re Finlen's Contract Build Pty Ltd (2000) 34 ACSR 499. The examination summons sought under s.596B will be issued. 5 I turn then to the application for the issue of a letter of request. The jurisdiction sought to be invoked here is that conferred by s.581(4) of the Corporations Act: "The Court may request a court of an external Territory, or of a country other than Australia, that has jurisdiction in external administration matters to act in aid of, and be auxiliary to, it in an external administration matter." The term "external administration matter" is defined in s.580 as follows: " 'external administration matter' means a matter relating to: (a) winding up, under this Chapter, a company or a Part 5.7 body; or (b) winding up, outside Australia, a body corporate or a Part 5.7 body; or (c) the insolvency of a body corporate or of a Part 5.7 body." 6 Each of the HIH companies is a "company" as defined by s.9. In each case the order for winding up was made by this court and the winding up is being conducted under Chapter 5 of the Corporations Act. I am of the opinion that the matter of examination under s.596B in the winding up of each company is therefore within paragraph (a) of the definition of "external administration matter". That conclusion accords with the approach taken by the Full Federal Court in Joye v Beach Petroleum NL (1996) 20ACSR 525 where it was said (at 536) that: "… any step taken by a liquidator in getting in the assets of the corporation is a step taken in the winding up; and this is so whether or not the step involves litigation aimed at recovery of the assets. If litigation is necessary, the conduct of that litigation is in our view a 'matter' that 'relates to' the 'winding up'". On this basis, the jurisdiction created by s.581(4) is available in relation to a s.596B examination. 7 Where application is made under s.581(4) and an "external administration matter" is seen to be involved, it seems to me that two conditions must be satisfied if the application is to be granted. The first is that there is some good substantive reason for the s.581(4) request. As to that, my conclusion in favour of the issue of the examination summons so that the person concerned may be questioned about the examinable affairs of the HIH companies, coupled with the fact that the person concerned is outside the jurisdiction and therefore not directly compellable in any immediate way by Commonwealth law or by order of this court, is sufficient to cause the condition to be met. 8 The second condition, as I see it, is that there is utility in the request in the sense that the foreign court is likely to accept and act upon the request if it is made. In relation to that, the liquidators have placed before me as an annexure to Mr McGrath's affidavit a letter from Messrs Linklaters to Messrs Blake Dawson Waldron dated 18 May 2004, addressing the question whether the High Court of Justice of England and Wales has jurisdiction to receive and is likely to respond to a letter of request of the kind the liquidators ask this court to issue. The letter from Linklaters answers the first part of that question in a summary fashion as follows: "The English High Court has the power pursuant to section 426 of the Insolvency Act 1986 (UK) (the 'Insolvency Act') to grant an order for an examination of, or the production of documents by, an individual present in England and Wales when so requested by an Australian Court under the provisions of the Australian Corporations Act 2001 (Cth) which contains in section 596B provisions similar though not identical to section 236 of the Insolvency Act". 9 Reasons for the conclusion so stated are then set out by Linklaters. The letter continues: "On the basis of the matters referred to above, in our opinion, if a letter of request were to be issued by the New South Wales Court to the English High Court, the English High Court would have jurisdiction to receive and respond to that letter of request". 10 Linklaters further say: "Of course, whether the English High Court would ultimately make an order for examination would be the subject of an exercise of discretion by the English High Court, but there are dicta in recent cases to suggest that the English High Court should be very slow not to assist the courts of any relevant jurisdiction". 11 The reasoning in the Linklaters letter draws heavily on the decision of the Court of Appeal of England and Wales in England v Smith [2001] Ch 419. The circumstances of that case were very similar - one might say virtually identical - to those now before me. The Court of Appeal decided that, in the absence of any compelling reason to the contrary in the particular case, the High Court of Justice should act upon a letter of request from the Supreme Court of South Australia seeking assistance by way of examination of a person in England under s.596B of the Corporations Law and that, in so doing, the English court would appropriately apply the law and procedure of the requesting court. That is the course the liquidators seek in the present case. 12 The decision of the Court of Appeal in England v Smith emphasises the effect of United Kingdom statute law and case law to the effect that, in the absence of some demonstrable reason to the contrary, the English Court will consider itself generally constrained to be of assistance to a requesting court. In the final analysis, however, the English Court will exercise a discretion. 13 Having regard to the matters in the letter from Linklaters and to the judgments in England v Smith, I regard the requirement of utility I have mentioned as satisfied in this case, subject to the terms of the letter of request being appropriate. It is to that matter that I now turn. 14 The draft letter of request proposed by the liquidators is framed on the basis, consistent with England v Smith, that the examination should be in accordance with Australian law and procedure which now, so far as its statutory form is concerned, is to be found in Division 1 of Part 5.9 of the Corporations Act 2001 (Cth). The liquidators seek to include in the letter of request certain guidance concerning Australian law and procedure. I consider that to be appropriate but only up to a point. The general approach, in my view, should be that if, as here, the request is that the English Court proceed in accordance with Australian law and practice, guidance should be given only to such an extent as is not to be found easily on the face of the statute and then, of course, in a form which is consistent with the statutory scheme. 15 In the course of submissions, I referred to certain aspects of the annexure LR2 to the draft letter of request which I considered to be in need of amendment to avoid the possibility of this court's apparent guidance being in conflict or potentially in conflict with the statutory scheme. This refers in particular to matters covered by ss.597(5)(a) and 597(16). In other respects, however, including in particular the role of legal representatives and agents of the liquidators and the preparation and signing of a record of examination and transmittal of that record by the English court to this court, I consider the specific guidance in the letter of request to be appropriate. 16 The orders of the court are as follows: 1. Pursuant to s.596B of the Corporations Act 2001 (Cth) (the Act), a summons for public examination is to be issued to the person whose name and address appear in prayer 1 of the Originating Process. 2. Pursuant to section 581(4) of the Act, this Court requests the High Court of Justice of England and Wales, the Strand, London, United Kingdom, to act in aid of, and be auxiliary to, this Court in relation to summoning for examination, and examining, the person referred to in Order 1, and any other matters incidental to that summoning and examinating, such request to be made by the issue of a letter of request in the form initialled on the court file for identification. 3. A letter of request in the terms initialled on the court file for identification be transmitted by the solicitors for the plaintiffs to the High Court of Justice of England and Wales. 4. The whole of the court file is not to be available for inspection by any person for a period of 14 days from today unless the court otherwise orders. ********** Last Modified: 05/27/2004 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.