Reported Decision : (2004) 13 ANZ Insurance Cases 61-597 (2004) 22 ACLC 345 New South Wales Supreme Court CITATION : HIH Casualty & General Insurance Ltd v Building Insurers' Guarantee Corporation [2003] NSWSC 1083 HEARING DATE(S) : 19/08/03, 20/8/03 JUDGMENT DATE : 26 November 2003 JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Originating process stood over for formulation of directions CATCHWORDS : STATUTES - operation and effect of statutes - provisions of State and Territory Acts purporting to alter incidents of company winding up under Commonwealth Act - interpretation of provisions of Commonwealth Act as to interaction with State and Territory Acts - INSURANCE - reinsurance - application of proceeds of reinsurance - statutory regulation of insurers - CORPORATIONS - winding up - application of property and priority of claims - territorial quality of winding up process under Commonwealth law - impact of State and Territory laws - EQUITY - subrogation - whether third party compelled by law to meet insured loss upon reinsured risk is subrogated to insurer's right under reinsurance - whether equitable right to subrogation displaced by statutory right Australian Capital Territory (Self-Government) Act 1988 (Cth) Companies Act 1961 (Vic) Companies (Western Australia) Code Constitution of the Commonwealth of Australia Corporations Act 1989 (Cth) Corporations Act 2001 (Cth) Corporations (Consequential Amendments) Act (No 2) 2003 (WA) Corporations Law Corporations (New South Wales) Act 1990 (NSW) Corporations (Western Australia) Act 1990 (WA) Employers' Indemnity Supplementation Fund Act 1980 (WA) LEGISLATION CITED : General Insurance Reform Act 2001 (Cth) Home Building Act 1989 (NSW) Insurance Act 1973 (Cth) Insurance Protection Act 2001 (NSW) Insurance (Policyholders Protection) Legislation Amendment Act 2001 (NSW) Motor Accident Insurance Act 1994 (Qld) Motor Accidents Compensation Act 1999 (NSW) Work Health Act (NT) Workers Compensation Act 1987 (NSW) Workers Compensation Act 1958 (Vic) Workers Rehabilitation and Compensation Act 1988 (Tas) Workers Compensation Supplementation Fund Act 1980 (ACT) Workers Compensation (Acts of Terrorism) Amendment Act 2002 (ACT) Australian Securities and Investments Commission v Rowena Nominees Pty Ltd (2003) 45 ACSR 419 Butterell v Douglas Group Pty Ltd (2000) 35 ACSR 398 Director of Public Prosecutions v Loo (2002) 42 ACSR 459 Re Dominion Insurance Co of Australia Ltd [1980] 1 NSWLR 271 Re Crust 'n' Crumbs Bakers (Wholesale) Pty Ltd [1992] 2 QdR 76 In re Law Guarantee Trust and Accident Society [1915] 1 Ch 341 In re Harrington Motor Co Ltd; ex parte Chaplin [1928] 1 Ch 105 N A Kratzmann Pty Ltd v Tucker (No 2) (1968) 123 CLR 295 New Cap Reinsurance Corporation Ltd v Faraday Underwriting Ltd [2003] NSWSC 842 Nepean v Martin (1895) 11 TLR 256 New South Wales Medical Defence Union Ltd v Crawford (1993) 31 NSWLR 469 CASES CITED : Northern Territory v GPAO (1999) 196 CLR 553 Omaha Indemnity Co v Carpenter and Australian Transport Insurance Pty Ltd (1987) 5 ANZ Ins Cas 60-831 Re Palmdale Insurance Ltd (No 3) [1986] VR 439 Public Service Association of New South Wales v Industrial Commission of New South Wales (1985) 1 NSWLR 627 R v Credit Tribunal; ex parte General Motors Acceptance Corporation Australia (1977) 137 CLR 545 Rose v Hvric (1963) 108 CLR 353 Skandia American Reinsurance Corporation v Schenk 441 F Supp 715 (1977) Tariff Reinsurances Ltd v Commissioner of Taxes (Victoria) (1938) 59 CLR 194 Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 University of Wollongong v Metwally (1984) 158 CLR 447 In re Usines de Melle and Firmin Boinot's Patent (1954) 91 CLR 42 Victoria v Commonwealth (1937) 58 CLR 618 HIH Casualty & General Insurance Limited (In Liquidation), FAI General Insurance Company Limited (In Liquidation), CIC Insurance Limited (In Liquidation), World Marine & General Insurances Pty Limited (In Liquidation), FAI Traders Insurance Company Pty Limited (In Liquidation), FAI Reinsurances Pty Limited (In Liquidation), HIH Underwriting & Insurance (Australia) Pty Limited (In Liquidation), HIH Underwriting & Agency Services Limited (In Liquidation), HIH Insurance Limited (In Liquidation), Lanlex No 65 Pty Limited (In Liquidation), FAI Leasing Finance Pty Limited (In Liquidation), FAI Insurances Limited (In Liquidation), FAI Investments Pty Ltd (In Liquidation), FAI Overseas Investments Pty Limited (In Liquidation), HIH Overseas Holdings Limited (In Liquidation), FAI Financial Services Limited (In Liquidation), FAI Overseas Holdings Pty Limited (In Liquidation), Hannan & Company Pty Limited (In Liquidation), Notestir Pty Limited (In Liquidation), First Mentor Group Pty Limited (In Liquidation), World Wide Weather Underwriting Agencies (Australia) Pty Limited (In Liquidation), HIH Investment Holdings Limited (In Liquidation), HIH Company Limited (In Liquidation), ACN 006 495 987 Pty Limited (In Liquidation) (formerly "Industrial Rehabilitation Services Pty Limited"), CIC General Insurance Holdings Ltd (In Liquidation), FAI Home Security Holdings Limited (In Liquidation), ACN 005 312 345 Pty Limited (In Liquidation) (formerly "Ready Plan Asia Pacific Pty Limited), 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) - First Plaintiffs PARTIES : Anthony Gregory McGrath and Alexander Robert Mackay Macintosh - Second Plaintiffs Building Insurers' Guarantee Corporation - First Defendant Motor Accident Insurance Commission - Second Defendant FILE NUMBER(S) : SC 5353/02 Mr B A J Coles QC/Mr G Scarcella, Solicitor - Plaintiffs Mr S W Gibb SC/Mr C L Lonergan - First Defendant and Motor Accidents Authority of NSW COUNSEL : Mr A J L Ogborne - Second Defendant Mr A Robertson SC/Mr G B Carolan - Interested parties, ACT, NT, Vic and NSW WorkCover Mr M B Oakes SC/Mr M J Dawson - Amicus Curiae Blake Dawson Waldron - Plaintiffs SOLICITORS : I V Knight, Crown Solicitor - First Defendant Bain Gasteen by their City Agents Hicksons - Second Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J WEDNESDAY, 26 NOVEMBER 2003 5353/02 – HIH CASUALTY & GENERAL INSURANCE LIMITED (IN LIQUIDATION) & ORS v BUILDING INSURERS' GUARANTEE CORPORATION & ANOR JUDGMENT Background 1 The second plaintiffs, Mr McGrath and Mr Macintosh, are the liquidators of the first plaintiffs, being 33 companies in respect of which orders for winding up have been made by this court. It is convenient to refer to the second plaintiffs as "the liquidators" and to the first plaintiffs as "the HIH companies". The liquidators make application to the court under s.479(3) of the Corporations Act 2001 (Cth) for directions in relation to certain matters arising under the windings up. In general terms, the matters concern the correct treatment of proceeds of certain contracts of reinsurance. 2 The HIH companies carried on business as insurers. In the course of doing so, they effected contracts of reinsurance under which other parties agreed to protect them against portions of their liabilities to their own policyholders in respect of certain risks. The liquidators' application raises, in relation to certain kinds of insurance made compulsory by statute, the question whether the proceeds of related reinsurance represent, in each winding up, assets available for the general purposes of the winding up (and therefore ultimately available for the benefit of the body of creditors generally) or whether rights in respect of those proceeds accrue to statutory authorities by which claims not met by the insolvent HIH companies are paid, so that those authorities have an entitlement to or interest in the reinsurance proceeds which prevents their being assets available for the general purposes of the winding up. 3 The risks covered by the relevant insurances written by the HIH companies are risks in respect of which legislation of States and Territories makes insurance compulsory. At a functional level, there are three classes of such insurance: motor vehicle third party insurance, workers' compensation insurance and builders' warranty insurance. Legislation requires certain persons to effect and hold insurances of these kinds, the social objective being to ensure that others who suffer loss for which such persons are liable are not confined to recovery from the assets of an individual vehicle owner, employer or builder. As will be seen, provisions of the State and Territory laws imposing the requirement to insure have a bearing on the question of entitlement to recoveries under reinsurance contracts entered into by insurers who write policies of the kinds required by the statutory schemes. 4 Several of the State and Territory statutory authorities by which these schemes are administered made submissions upon the hearing of the liquidators' application for directions. Some were parties, others were not but I do not think anything really turns on that. Submissions were also made on behalf of the liquidators and by Mr Oakes SC who, with Mr Dawson of counsel, appeared as amicus curiae to meet the concern of the court that there be an appropriate means of ensuring that arguments which might favour the position of the general body of creditors should be placed before the court. 5 The general background I have stated is dealt with in greater detail in the statement of facts agreed for the purposes of the proceedings. It is convenient to quote from it, although with nomenclature altered to accord with that used in these reasons (and with footnotes omitted): " State statutory insurance schemes 11. The business of the HIH companies included insurance underwriting pursuant to state regulated insurance schemes under the following legislative provisions: (a) Motor Accidents Compensation Act 1999 (NSW) (the CTP NSW Scheme ); (b) Motor Accident Compensation Act 1994 (Qld) (the CTP QLD Scheme ); (c) Workers Compensation Act 1951 (ACT) (the Workers' Compensation ACT Scheme ); (d) Workers' Compensation Act 1926 (NSW) and the Workers Compensation Act 1987 (NSW) (the Workers' Compensation NSW Scheme ); (e) Work Health Act 1986 (Northern Territory) (the Workers' Compensation NT Scheme ); (f) Workers Rehabilitation and Compensation Act 1988 (Tasmania) (the Workers' Compensation Tas Scheme ); (g) Workers' Compensation Act 1958 (Victoria) (the Workers' Compensation Vic Scheme ); (h) Workers' Compensation and Rehabilitation Act 1981 (Western Australia) (the Workers' Compensation WA Scheme ); (i) Home Building Act 1989 (NSW) (the Builders' Warranty NSW Scheme ); (together the State Schemes ). 12. Several of the HIH companies wrote insurance policies as required by the State Schemes (the State Schemes Policies ). The State Schemes Policies were written out of the offices of several of the HIH companies located in Australia and related to events that would happen in Australia. Payments in respect of claims made under the State Schemes Policies were to be made out of funds of several of the HIH companies located in Australia. Reinsurance 13. Reinsurance can be described as the insurance entered into by an insurer (the cedant or reinsured) in respect of its contractual liabilities to pay claims incurred under its contracts of direct insurance. It is entered into to limit the exposure of the reinsured to losses on the insurance business written. 14. A reinsurance contract constitutes a separate contract of insurance between the reinsurer and the reinsured. It is not an assignment of all or any part of the rights and liabilities already existing under a contract of direct insurance and the original insured does not acquire any rights or liabilities thereunder. 15. Particular terminology is used within the reinsurance industry to describe the features of a reinsurance contract: (a) There are various methods of placing reinsurance including on a facultative basis and on a treaty basis; (b) Reinsurance arranged on a facultative basis covers specific risks. Terms and conditions are negotiated for each risk; (c) Reinsurance arranged on a treaty basis covers an aggregate class or 'block' of business. This includes reinsurance that corresponds to any event or loss within the defined class of risk and reinsurance of the whole or part of the reinsured's account; (d) Facultative and treaty reinsurance may be arranged on a proportional basis (also referred to as pro rata reinsurance) or a non-proportional reinsurance basis (also described as excess of loss reinsurance); (e) Pursuant to proportional reinsurance, the reinsurer accepts a fixed or variable share of the claims liabilities assumed by the primary insurer under the original contract(s) of reinsurance. The losses of the reinsurer will follow that of the reinsured and therefore the reinsurer will receive a corresponding proportional share of the premium. Often a ceding commission is paid to the reinsured as the reward for sourcing the business; (f) A quota share arrangement is a type of proportional reinsurance contract under which the whole of the risk under the policy or policies is shared in the same fixed proportion; (g) A surplus contract is a type of proportional reinsurance contract under which the ceding company reinsures only the balance of those risks which are beyond the amount it wishes to retain for its own account. The balance of the risks so reinsured may be shared on a fixed or varying basis depending on the type of risk; (h) Pursuant to non-proportional reinsurance, the reinsurer indemnifies the reinsured against all or a portion of the amount of loss in excess of the reinsured's specified loss retention. Accordingly, losses are shared dependant on the quantum of loss incurred in respect of the specific risk or event, rather than by reference to a specific proportion; and (i) Types of non-proportional reinsurance include: (i) Risk excess of loss reinsurance which covers individual risks. (ii) Catastrophe excess of loss reinsurance arranged on an occurrence basis which covers losses flowing from a single event and is written on a treaty basis; and (iii) Stop loss reinsurance which provides cover against the aggregate net loss experience on a particular account. Reinsurance arrangements in respect of the State Schemes 16. The HIH companies (and other entities within the HIH Group) are parties to many reinsurance contracts which give rise to existing and potential future claims for payments by reinsurers to the HIH companies. The contracts provide for various different types of reinsurance cover, including both facultative reinsurance and treaty reinsurance. 17. The liquidators of the HIH companies have made application herein for directions under s 479(3) of the Corporations Act in relation to particular contracts and arrangements of reinsurance entered into by one or more of the HIH companies (the State Schemes Reinsurance Contracts ) and which are referable to State Schemes Policies underwritten by one or more of the HIH companies. 18. The reinsurance program established by the State Schemes Reinsurance Contracts was arranged by class of business. Accordingly, the reinsurance contracts or arrangements were referrable to loss occurrences within the following classes: (a) the States Schemes referred to in paragraphs 0-0 (the CTP Schemes ); (b) the State Schemes referred to in paragraphs 0-0 (the Workers Compensation Schemes ); and (c) the State Schemes referred to in paragraph 0 (the Builders' Warranty NSW Scheme ). 19. The State Schemes Reinsurance Contracts identified by the liquidators of the HIH companies are listed in Schedule B hereto. Part 1 of Schedule B lists the contracts referrable to the Workers Compensation Schemes. Part 2 of Schedule B lists the contracts referrable to the CTP Schemes. Part 3 of Schedule B lists the contract referrable to the Builders' Warranty NSW Scheme. There may be other State Schemes Reinsurance Contracts which are subsequently identified. 20. The reinsurance program the subject of the State Schemes Reinsurance Contracts, with the exception of the part of the reinsurance program for the Builders' Warranty NSW Scheme described in paragraph 23 below, is comprised of various cumulative layers of non -proportional contracts in respect of particular classes of loss. The total amount of reinsurance cover for particular classes of loss is comprised of separate contracts with similar or identical terms but separate excess levels and limits. 21. By way of illustration, the identified reinsurance program in relation to the Workers' Compensation Schemes for a particular policy year is comprised of four layers of contracts. (a) The first layer provides for a limit of cover in the sum of $2,500,000 for each and every loss and/or series of losses arising out of one event in excess of $2,500,000 for each and every loss and/or series of losses arising out of one event. (b) The second layer provides for a limit of cover in the sum of $5,000,000 for each and every loss and / or series of losses arising out of one event in excess of $5,000,000 for each and every loss and / or series of losses arising out of one event. (c) The third layer provides for a limit of $10,000,000 for each and every loss and / or series of losses arising out of one event in excess of $10,000,000 for each and every loss and/ or series of losses arising out of one event. (d) The fourth layer provides for a limit of $80,000,000 for each and every loss and / or series of losses arising out of one event in excess of $20,000,000 for each and every loss and /or series of losses arising out of one event. 22. The identified reinsurance program in relation to the CTP Schemes and, except as set out in paragraph 23 below, the Builders' Warranty NSW Scheme operate in a similar way. 23. Part of the reinsurance program in respect of the Builder's Warranty NSW Scheme is comprised of one or more concurrent quota share reinsurance contracts for particular policy periods. Reinsurance recoveries 24. The liquidators of the HIH companies have commenced recovery of the entitlements of the HIH companies pursuant to the HIH reinsurance program including in respect of the State Schemes Reinsurance Contracts. This is an ongoing process which is likely to take a considerable period of time. The figures stated below are based on the preliminary analysis conducted by the liquidators and are subject to review. 25. It is currently estimated that there will be total reinsurance recoveries for the HIH companies in the amount of approximately $1,847 million. This amount includes recoveries in respect of the State Schemes Reinsurance Contracts. 26. In respect of the CTP Schemes, it is currently estimated that reinsurance recoveries will be in the range of approximately 5 – 20% of the existing and future acknowledged creditor claims. It is estimated by the liquidators that reinsurance recoveries in relation to the CTP Schemes will be a minimum of $10 million. It is estimated by the Motor Accidents Authority of NSW that total past and future liability of the reinsurers in relation to CTP Schemes will be a minimum of $25 million. 27. In respect of the Workers' Compensation Schemes, it is currently estimated that reinsurance recoveries will be in the range of approximately 5 – 20% of the existing and expected future acknowledged creditor claims. It is estimated that reinsurance recoveries in relation to the Workers' Compensation Schemes will be a minimum of $10 million. 28. In respect of the Builders' Warranty NSW Scheme, it is estimated that reinsurance recoveries will be approximately $15 - $20 million." The windings up 6 Immediately before the Corporations Act 2001 (Cth) came into operation on 15 July 2001, each of the HIH companies was in existence and registered as a company under the Corporations Law of one of the States and Territories. The orders of this court for the winding up of the HIH companies were made on various days between 27 August 2001 and 7 May 2003. Some of the companies had previously been the subject of orders for the appointment of provisional liquidators made before the Corporations Act 2001 (Cth) commenced 7 Despite the earlier provisional liquidation that applied in some cases, it is clear that the winding up of each HIH company derives solely from the provisions of the Corporations Act of the Commonwealth and that no question of the operation of transitional provisions in relation to windings up produced by orders made under provisions of the Corporations Laws of the States and Territories needs to be addressed. For the purposes of the Corporations Act itself, each winding up commenced on the day on which the winding up order was made: s.513A(e). 8 These matters of timing must be borne in mind particularly in relation to those aspects of the matters on which the liquidators seek guidance that relate to the interaction of specific provisions of State and Territory laws concerning the various compulsory insurance schemes with provisions of the Corporations Act dealing with winding up generally and reinsurance contracts held by insurance companies in the course of being wound up. Reinsurance and privity of contract 9 The general nature of reinsurance was described by Dixon J in Tariff Reinsurances Ltd v Commissioner of Taxes (Victoria) (1938) 59 CLR 194: "Though, unlike facultative reinsurance, a treaty does not insure an existing risk in which the reassured has an insurable interest as the original insurer, it is nevertheless a contract of reinsurance, an antecedent contract for the reinsurance for a defined portion of risks of a specified kind to be undertaken in the future by the reassured. The original insured is a stranger to the reinsurer. He is unaffected by the reinsurance and obtains no legal advantage from it. It establishes no relations except with the reassured, and it does not authorise the reassured to bring about any relations between third persons and the reinsurer." 10 Reinsurance exists to see an insurer protected against the risk of having to pay out on policies issued by it. Summaries of relevant reinsurance contracts held by the HIH companies are in evidence. They provide cover in respect of ultimate net loss and loss occurrences defined, in general terms, as sums actually paid in the settlement of losses or liabilities under various classes and sub-classes of insurance business written by the HIH companies. 11 In the absence of statutory intervention, a person insured by an insurer has no right to the proceeds of reinsurance held by the insurer in respect of the relevant risk, at least where that insured is not named in the contract of reinsurance as a third party beneficiary in such a way as to activate principles discussed in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 (see also Omaha Indemnity Co v Carpenter and Australian Transport Insurance Pty Ltd (1987) 5 ANZ Ins Cas 60-831). There is no suggestion that any such principles apply in the present case or would ordinarily have sensible application to reinsurance. In general, principles of privity of contract operate in the way I have stated to exclude an individual insured from access to proceeds of reinsurance received by his or her insurer, whether before or after the onset of insolvency: see generally Nepean v Martin (1895) 11 TLR 256, In re Law Guarantee Trust and Accident Society [1915] 1 Ch 341 and In re Harrington Motor Co Ltd; ex parte Chaplin [1928] 1 Ch 105. 12 Various social considerations have from time to time prompted legislation creating a link between a person having a claim upon another and rights under insurance held by the second person in respect of the risk of claims of the kind made by the first person. An early example was the Third Party's (Rights Against Insurer) Act 1930 (Eng). In New South Wales, s.6 of the Law Reform (Miscellaneous Provisions) Act 1946 owes its existence to considerations of this kind, as discussed by Mahoney JA in New South Wales Medical Defence Union Ltd v Crawford (1993) 31 NSWLR 469 at 501. 13 The particular case of insurance held by an insolvent company was dealt with by s.297(5) of the Companies Act 1936 (NSW), counterparts of which were included in all subsequent companies legislation. The applicability of the 1961 provision (s.292(5) of the uniform Companies Acts 1961-2) to contracts of reinsurance, in the case of the insolvent winding up of an insurance company, was confirmed by Needham J in Re Dominion Insurance Co of Australia Ltd [1980] 1 NSWLR 271 and by Crockett J in Re Palmdale Insurance Ltd (No 3) [1986] VR 439, a case which, for other reasons, will be considered in some detail in due course. A provision dealing expressly with the treatment of reinsurance proceeds in the winding up of an insurance company was introduced into the Corporations Law with effect from 23 June 1993 as a result of a recommendation in the Harmer Report. This provision became s.562A of the Corporations Law. It now exists as s.562A of the Corporations Act 2001 (Cth) and plays a part in the present proceeding. Its background and effect were examined by Young J in Butterell v Douglas Group Pty Ltd (2000) 35 ACSR 398 and by Dr Donald E Charrett in "Insured's access to insolvent insurer's reinsurance" (2003) 14 ILJ 221. Difficulties in applying and giving effect to it are noted in the judgment of Windeyer J in New Cap Reinsurance Corporation Ltd v Faraday Underwriting Ltd [2003] NSWSC 842 (12 September 2003) and by Robert Cameron, "Reinsurance and the Australian context" (2001) 12 ILJ 199 and John Martin, "Distribution complexities in the winding up of an insurance company in Australia" (2002) 10 Insolv LJ 80. 14 Of immediate relevance, however are provisions of State and Territory law dealing specifically with reinsurance in relation to the particular classes of insurance made compulsory by statute. The specific State and Territory legislation 15 Central to the questions upon which the liquidators seek guidance are provisions of the various State and Territory statutes that establish and regulate compulsory insurance schemes. The statutes address and deal with the possibility that an insurer by which the forms of compulsory insurance are written will become insolvent or otherwise fail to honour its engagements. They do not, however, deal with the matter in any fully uniform way and it is appropriate to set out and comment on the relevant provisions. Generally speaking, they share two themes: first, a requirement that a statutory authority apply a statutory fund in making good deficiencies resulting from the failure of an insurer to meet claims under policies of the kind with which the legislation is concerned; and, second, the notion that the statutory authority should then have rights in relation to reinsurance held by the insurer in connection with risks of the relevant kind. 16 The submissions made to the court concentrated on the State and Territory provisions as they stood at 15 July 2001, being the date on which the Corporations Act 2001 (Cth) commenced. The reasons lie in Part 1.1A of that Act which will be considered in due course. For the moment, therefore, I shall concentrate on the provisions in force on 15 July 2001, referring to them, for convenience, in the present tense. Subsequent amendments of relevance will then be identified. 17 As will be seen, the general aim of the State and Territory provisions is to cause the authority holding or administering a statutory fund from which is met a claim that would in the normal course have been met by an insurer to obtain the benefit of reinsurance held by the insurer in respect of the claim. The provisions create, in one way or another, a link between the statutory authority and the reinsurance. For that reason (and in accordance with United States terminology) they have been referred to in submissions as "cut-through" provisions. I shall adopt that label here. Workers Compensation Act 1987 (NSW) (as at 15 July 2001) 18 Division 7 of Part 7 of the Workers Compensation Act 1987 makes provision for the establishment and regulation of the Insurers' Guarantee Fund managed by the WorkCover Authority. For present purposes, there is no need to consider the elements that go to make up this fund. It is sufficient to refer first to the provisions concerning application of the fund in relation to an "insolvent insurer". Section 225(1) defines "insolvent insurer" for the purposes of Division 7 of Part 7 as an insurer to which an order of the Minister in force under s.226 of the Act relates. I proceed on the footing reflected in the statement of facts that such an order is in force in relation to each of the HIH companies and that each is accordingly an "insolvent insurer". 19 Section 234 is as follows: "(1) Out of the Guarantee Fund, the Authority as manager of that Fund: (a) shall pay the amount of any claim, judgment or award arising from or relating to any policy of insurance issued by an insolvent insurer, being a claim, judgment or award that it proposes to satisfy as agent and attorney of an employer, and any other amounts required by this Division to be paid from that Fund, and (b) is entitled: (i) to be paid the costs of administration of the Guarantee Fund (including any legal or other costs connected with the declaration of an insurer as an insolvent insurer), and (ii) to be indemnified against all payments made by it and all costs and expenses that it may incur in or in connection with the exercise of its functions under this Division. (2) Where a payment is made by the Authority as agent and attorney of an employer, being a payment authorised by this Division, the Authority shall not be entitled to recover the amount of that payment from the employer." 20 The consequences of a payment out of the Guarantee Fund by the Authority are specified in s.235: "To the extent that any amounts are paid out of the Guarantee Fund in respect of a claim, judgment or award pursuant to section 234 (including the costs of the Authority), the Authority shall, where an insolvent insurer (if it had provided indemnity to that extent under a policy of insurance) would have been entitled to recover any sum under a contract or arrangement for reinsurance, be entitled to the benefit of and may exercise the rights and powers of the insolvent insurer under that contract or arrangement so as to enable the Authority to recover from the reinsurer and pay into the Guarantee Fund the amount due under that contract or arrangement." Motor Accidents Compensation Act 1999 (NSW) (as at 15 July 2001) 21 Part 7.3 of this Act deals with "insolvent insurers". For the purposes of that part, "insolvent insurer" means an insurer in relation to which an order of the Treasurer under s.16A of the Insurance Protection Tax Act 2001 or an order of the Minister under s.185 of the Motor Accidents Compensation Act itself is in force. The hearing before me provided on the agreed basis that each of the HIH companies is within this definition. Section 190 deals with application of the Nominal Defendant's Fund (a fund established and maintained pursuant to s.40 and held by the Motor Accidents Authority) in relation to certain matters concerning insolvent insurers. Section 190 is as follows: "(1) Out of the Nominal Defendant's Fund, the Nominal Defendant: (a) is to pay the amount of any claim or judgment arising from or relating to any third-party policy issued by an insolvent insurer, being a claim or judgment that it proposes to satisfy as agent and attorney of a person, and any other amounts required by this Part to be paid from that Fund, and (b) is entitled to be indemnified against all payments made by it and all costs and expenses that it may incur in or in connection with the exercise of its functions under this Part. (2) Where a payment is made by the Nominal Defendant as agent and attorney of a person, being a payment authorised by this Part, the Nominal Defendant is not entitled to recover the amount of that payment from the person." 22 Section 191 then provides: "To the extent that any amounts are paid out of the Nominal Defendant's Fund in respect of a claim or judgment pursuant to section 190 the Nominal Defendant is, where an insolvent insurer (if it had provided indemnity to that extent under a third-party policy) would have been entitled to recover any sum under a contract or arrangement for re-insurance, entitled to the benefit of and may exercise the rights and powers of the insolvent insurer under that contract or arrangement so as to enable the Nominal Defendant to recover from the re-insurer and pay into the Nominal Defendant's Fund the amount due under that contract or arrangement." Home Building Act 1989 (NSW) (as at 15 July 2001) 23 Part 6A of this Act deals with "insolvent insurers". For the purposes of Part 6A, "insolvent insurer" means an insurer in relation to which an order of the Treasurer under s.16A of the Insurance Protection Tax Act 2001 or an order of the Minister under s.103G of the Home Building Act itself is in force. According to the statement of facts, each of the HIH companies is such an "insolvent insurer". 24 Section 103P provides for the creation and regulation of the Building Insurers' Guarantee Fund vested in the Building Insurers' Guarantee Corporation. Section 103I (which appears in Division 2 of Part 6A) provides in part: "Subject to this Part, the State must indemnify any person: (a) who is entitled to recover an amount under a contract of insurance entered into under Part 6 in connection with any matter, and (b) who is covered by an insolvent insurer's policy, to the extent of the amount that the person is entitled to recover under that policy in connection with that matter." 25 Sections 103J, 103K and 103L (also in Division 2) have the effect that the s.103I indemnity may only be enforced in such a way as to result in a payment out of the Building Insurers' Guarantee Fund. Section 103V provides: "To the extent that any amounts are paid out of the Building Insurers' Guarantee Fund in respect of an indemnity under Division 2, the Guarantee Corporation is, where an insolvent insurer (if it had provided indemnity to that extent under a contract of insurance) would have been entitled to recover any sum under a contract or arrangement for re-insurance or co-insurance, entitled to the benefit of and may exercise the rights and powers of the insolvent insurer under that contract or arrangement so as to enable the Guarantee Corporation to recover from the re-insurer or co-insurer and pay into the Building Insurers' Guarantee Fund the amount due under that contract or arrangement." Workers Compensation Act 1958 (Vic) (as at 15 July 2001) 26 Part IVA applies to and in relation to awards of workers compensation referred to in s.85(1): "This section applies to and in relation to any award of compensation made- (a) under this Act (whether before, on or after the appointed day) or any corresponding previous enactment; (b) in respect of the death incapacity and disablement of a worker or the costs of medical hospital nursing or ambulance services or of cremation or burial; and (c) against an employer whose liability in respect of that death incapacity or disablement or those costs is not or may not be covered or is not fully covered- (i) by a policy of insurance or indemnity in accordance with this Act as in force before the appointed day; or (ii) by the terms of a scheme in respect of which a certificate was before the appointed day in force under this Act." 27 There is provision in s.85 for the County Court to order that compensation awarded as referred to in s.85(1) be paid out of the Tribunal Fund constituted under and regulated by the Act. 28 Section 98 provides: "(1) There shall be paid out of the Fund - (a) the amount of any claim award or judgment to which this Part applies in respect of which indemnity is not provided as required by the relevant policy of accident insurance or indemnity; (b) the amounts of any legal or other costs and expenses incurred by the Authority in respect of any claim award or judgment to which this Part applies; (c) the amounts of any premiums payable in respect of any contracts of indemnity entered into by the Authority under section 104; (d) the amounts of any costs and expenses incurred in the administration of this Part and the exercise of any power under section 100C; (e) the amount of any refund due under this Part; and (f) any other moneys which this Part or section 2B or 2C authorizes to be paid out of the Fund. (1A) Nothing in this Part shall be taken to require or authorize payment out of the Fund of the amount of any claim award or judgment under paragraph (a) of sub-section (1) where an injury is incurred more than 28 days from the date of a winding-up order in relation to the relevant insurer made by the Supreme Court. (2) Nothing in this Part shall be taken to require or authorize payment out of the Fund of the amount of any claim award or judgment to which this Part applies if any proceeding or step required to enforce payment of that amount by the relevant insurer can no longer be taken because of any failure on the part of the employer or any other person to take it within the time allowed by law. (3) To the extent of amounts paid out of the Fund in respect of any claim award or judgment to which this Part applies (including costs incurred by the Authority), the Authority shall - (a) in any case where, if the indemnity to be provided under the relevant policy of accident insurance or indemnity had been provided by the relevant insurer or any other person, the relevant insurer or that person would have been entitled to recover any sum under any contract or arrangement for re-insurance-be entitled to the benefit of and may exercise the rights and powers of the relevant insurer or that person under that contract or arrangement so as to enable the Authority to recover from the re-insurer and retain the amount due under that contract or arrangement; and (b) to the extent that recovery is not made from a re-insurer pursuant to paragraph (a) - be a creditor of and have the same rights against the relevant insurer or any other person as the employer concerned would have had if the indemnity required to be provided by the policy of accident insurance or indemnity was not provided." Workers Rehabilitation and Compensation Act 1988 (Tas) (as at 15 July 2001) 29 Section 97 requires an employer who is not a self-insurer to maintain in force with a licensed insurer a policy of insurance that indemnifies the employer in respect of the full amount of the employer's liability to pay compensation under the Act, as well as certain other matters. 30 The Act also establishes a body known as the Nominal Insurer. Section 126(1) provides: "(1) Where – (a) an employer – (i) has not obtained from a licensed insurer such a policy of insurance as is referred to in section 97(1) or has failed to maintain in force any such policy so obtained by him; (ii) has applied to take, or takes, advantage of any law relating to bankruptcy, or has compounded, or entered into an arrangement, with his creditors; or (iii) has left the State and his whereabouts are unknown; (b) an employer, or the licensed insurer from whom or from which an employer obtained such a policy, is a body corporate and – (i) the winding-up of the body corporate has commenced; or (ii) a receiver or manager of the property of the body corporate has been appointed, or the body corporate has been placed under administration, under the provisions of the Corporations Act or any corresponding previous enactment; or (c) for any other reason there are reasonable grounds for believing that an employer or a licensed insurer from whom or from which he has obtained such a policy is, or is likely to be, unable to discharge in full any liability in respect of which such a policy is required under section 97(1) to be maintained by the employer – the same claims, whether by way of legal proceedings or not, may be made against the Nominal Insurer in respect of any liability in respect of which such a policy is required under section 97(1) to be maintained by the employer, and the same judgment may be obtained against the Nominal Insurer, as could, apart from subsection (3), have been made or obtained against the person by whom the liability was incurred." 31 Section 129 then provides: "Where a licensed insurer is insured under a contract of reinsurance against liability in respect of a policy of insurance or indemnity issued by the insurer under section 97 and any such liability is incurred by the licensed insurer, then, if that insurer, being a company, is wound up – (a) the Nominal Insurer shall be entitled to the benefit of, and may exercise, the rights and powers of the licensed insurer under that contract of reinsurance so as to enable the Nominal Insurer to recover from the reinsurer and retain the amount due under that contract of reinsurance; and (b) to the extent that recovery is not made from a reinsurer pursuant to paragraph (a), the Nominal Insurer shall be a creditor of, and have the same rights against, the licensed insurer as the employer concerned would have had if the indemnity provided by the policy of insurance had not been met." Workers Compensation Supplementation Fund Act 1980 (ACT) (as at 15 July 2001) 32 This Act establishes and regulates the Workers Compensation Supplementation Fund. Provisions with respect to claims upon the fund appear in ss.26, 27, 28 and 29: "26. (1) Where, before or after the commencement of this Act - (a) a final judgment has been given, or an order or award has been made, against an employer in respect of the employer's liability under the Compensation Act, or in respect of the employer's liability independently of that Act, for an injury to, or the death of, a worker employed by the employer; (b) the liability of the employer under the judgment, order or award is covered by an employer's policy; and (c) the insurer who issued that policy is dissolved under a law of the Territory or of a State or another Territory or is unable to provide the indemnity required by the policy to be provided, the person in whose favour the judgment was given or the order or award was made may make a claim - (d) where the insurer is dissolved-against the Fund; or (e) in any other case-against the insurer, for payment of the amount of the judgment, order or award. (2) Where, before or after the commencement of this Act - (a) a person is entitled to make a claim against an employer, not being a claim relating to a judgment, order or award referred to in subsection (1), that the employer is liable to pay compensation in accordance with the Compensation Act for an injury to, or the death of, a worker employed by the employer; (b) the liability of the employer to pay the compensation is covered by an employer's policy; and (c) the insurer is dissolved under a law of the Territory or of a State or another Territory or is unable to provide the indemnity required by the policy to be provided, the person may make a claim - (d) where the insurer is dissolved-against the Fund; or (e) in any other case-against the insurer, for payment of the amount of the compensation. (3) A claim made against an insurer under subsection (1) or (2) - (a) shall be in writing; and (b) shall be lodged with the liquidator of the insurer, together with a copy of any judgment, order or award to which the claim relates. (4) A claim made against the Fund under subsection (1) or (2) - (a) shall be in writing; and (b) shall be lodged with the Manager, together with a copy of any judgment, order or award to which the claim relates. (5) For the purpose of this section - 'compensation' includes an amount in settlement of a claim for compensation. 27. Where a claim against an insurer is lodged with the liquidator of an insurer under subsection 26(3), the liquidator shall forthwith - (a) forward a copy of the claim to the Manager; and (b) furnish the Manager with such information and documents (including any judgment, order or award) relating to the claim and to the employer's policy as are in the possession of the liquidator. 28. (1) Subject to this section, where the Manager receives from the liquidator of an insurer a claim made against the insurer under subsection 26 (1), the Manager shall - (a) pay to the liquidator out of the Fund - (i) such amount as is necessary to enable the liquidator to satisfy the claim; and (ii) such further amount as is agreed between the Manager and the liquidator for payment of the costs of the liquidator in satisfying the claim; and (b) furnish to the liquidator all documents in the possession of the Manager relating to the claim. (2) On receipt of an amount paid by the Manager under subparagraph (1)(a)(i), the liquidator shall pay the amount to the claimant in satisfaction of the claim. (3) Where the Manager receives from the liquidator of an insurer a claim referred to in subsection (1) and the insurer is dissolved under the law of the Territory or of a State or another Territory before the Manager makes a payment to the liquidator in accordance with that subsection, the Manager shall pay to the claimant out of the Fund such amount as is necessary to satisfy the claim. 29. Where a claim made against the Fund is lodged with the Manager under subsection 26 (4), the Manager shall pay to the claimant out of the Fund such amount as is necessary to satisfy the claim." 33 The concept of dissolution with which these provisions are concerned is not explained. The expression "liquidator" is defined as follows: "'liquidator', in relation to an insurer, includes official manager, receiver or receiver and manager." 34 Section 40 provides: "(1) Where— (a) an insurer is, under a contract of reinsurance, insured against liability in respect of employer's policies issued by the insurer and such liability is incurred by the insurer; and (b) any part of the liability of the insurer is met by moneys paid out of the fund in pursuance of this Act; and (c) an amount in respect of that part of the liability of the insurer is received by the liquidator of the insurer from the reinsurer; the amount so received from the reinsurer shall, after the deduction of any expenses of or incidental to getting in that amount, be paid by the liquidator to the manager, in priority to all payments in respect of the debts referred to in section 556 of the Corporations Law, for payment into the fund. (2) Where the liquidator of an insurer recovers any amount due to the insurer as a consequence of the payment, with moneys paid out of the fund, of any part of any claim, judgment, order or award arising out of or in relation to any employer's policy issued by the insurer, the amount so recovered shall, after the deduction of any expenses of or incidental to the recovering of that amount, be paid by the liquidator to the manager in priority to all payments in respect of debts referred to in section 556 of the Corporations Law, for payment into the fund. (3) This section shall have effect notwithstanding any agreement to the contrary whether made before or after the commencement of this Act." Work Health Act (NT) (as at 15 July 2001) 35 The relevant provision of this Act is s.137: "(1) Where - (a) a claim has been made against an employer that he or she is liable to pay compensation under this Act, or damages otherwise than under this Act, in respect of an injury, incapacity or death; (b) in relation to the claim, the employer has agreed to pay compensation or damages, as the case may be, or the liability of the employer to pay compensation or damages has or has not been established or has been declined; (c) the employer is entitled to be indemnified against his or her liability to pay the compensation, or all or part of the damages under a policy of insurance or indemnity obtained in accordance with this Act; and (d) in the case - (i) of an amount of compensation or damages agreed to be paid or in respect of which the employer's liability to pay has been established - an amount payable under the policy of insurance or indemnity referred to in paragraph (c) is not paid and has remained unpaid for a period of one month; (ii) where the liability of an employer to pay compensation or damages claimed has not been established within one month after notice of a worker's claim has been lodged with the relative approved insurer; or (iii) where the liability of an employer to pay compensation or all or any damages claimed has been declined, the Nominal Insurer shall, subject to subsection (3), have the same rights, powers, duties and liabilities in respect of the claim as the approved insurer would have had if the approved insurer had provided the indemnity referred to in paragraph (c). (2) Where an approved insurer is unable to make a payment required to be made under a policy of insurance or indemnity issued in accordance with this Act in respect of a claim to which subsection (1) applies, the approved insurer or a person holding in relation to the approved insurer the office of liquidator, receiver, receiver and manager or official manager shall - (a) forthwith notify the Nominal Insurer of the claim; and (b) make available to the Nominal Insurer any books or papers relevant to the claim, including all agreements, contracts, treaties or other documents relating to reinsurance arrangements in effect at the time of the injury, incapacity or death giving rise to the claim. (3) Where an approved insurer is unable to make any or complete payment required to be made under a policy of insurance or indemnity issued in accordance with this Act in respect of a claim to which subsection (1) applies and the Nominal Insurer has made a payment in respect of that claim - (a) the Nominal Insurer has the right to subrogation in respect of all rights that the employer may have against any person in relation to the occurrence that gave rise to the claim for compensation or damages, as the case may be; (b) the right to subrogation shall vest in the Nominal Insurer to the exclusion of all other rights to subrogation that would otherwise exist in favour of the approved insurer or the person, if any, holding in relation to the approved insurer the office of liquidator, receiver, receiver and manager or official manager, whether arising under a law in force in the Territory or the policy of insurance or indemnity under this Act; and (c) all rights which the approved insurer has to receive payments under an agreement, contract, treaty or other document relating to reinsurance in respect of a claim referred to in subsection (1) shall be deemed to be assigned to the Nominal Insurer from the date that the Nominal Insurer first makes a payment in respect of that claim, to the exclusion of any person holding in relation to the approved insurer the office of liquidator, receiver, receiver and manager or official manager, notwithstanding any rule of law or statutory provision to the contrary." Employers' Indemnity Supplementation Fund Act 1980 (WA) (as at 15 July 2001) 36 The relevant provisions of this Act closely resemble those of the Workers Compensation Supplementation Fund Act 1980 (ACT). Claims upon the fund created by the Act are regulated by s.19: "(1) If, on or after 1 January 1979 – (a) a final judgment has been given, or an order or award has been made, against an employer in respect of his liability under the Workers' Compensation and Rehabilitation Act 1981 or at common law, for an injury to, or the death of, a worker employed by the employer; (b) the liability of the employer under the judgment, order or award referred to in paragraph (a) is covered by an employer's policy ; and (c) the insurer who issued the employer's policy referred to in paragraph (b) is dissolved under a law of – (i) the State ; or (ii) another State, or a Territory, of the Commonwealth, or is unable to provide the indemnity required by that employer's policy to be provided, the person in whose favour the judgment, order or award referred to in paragraph (a) was given or made, as the case requires, or, if the employer against whom that judgment, order or award has been given or made has paid the amount of that judgment, order or award, that employer may make a claim against the Insurance Commission for payment or reimbursement, as the case requires, of the amount of that judgment, order or award. (2) If, on or after 1 January 1979 – (a) a person is entitled to make a claim against an employer, not being a claim relating to a judgment, order or award referred to in subsection (1), that the employer is liable to pay compensation under the Workers' Compensation and Rehabilitation Act 1981 , or damages at common law, for an injury to, or the death of, a worker employed by the employer; (b) the liability of the employer referred to in paragraph (a) to pay the compensation or damages referred to in that paragraph is covered by an employer's policy ; and (c) the insurer who issued the employer's policy referred to in paragraph (b) is dissolved under a law of – (i) the State ; or (ii) another State, or a Territory, of the Commonwealth, or is unable to provide the indemnity required by that employer's policy to be provided, the person referred to in paragraph (a) or, if the employer against whom that person is entitled to make the claim referred to in that paragraph has paid the amount of compensation or damages sought by that claim, that employer may make a claim against the Insurance Commission for payment or reimbursement, as the case requires, of the amount of compensation or damages referred to in paragraph (a). (3) A person or employer making a claim under subsection (1) or (2) shall – (a) do so in writing ; and (b) lodge the claim with the Insurance Commission, together with a copy of any judgment, order or award to which the claim relates. [(4) repealed] (5) In subsection (2) - compensation includes – (a) an amount in settlement of a claim for compensation ; and (b) all amounts payable under Schedule 1 to the Workers' Compensation and Rehabilitation Act 1981; damages includes an amount in settlement of a claim for damages." 37 Section 36 of the Act is as follows: "(1) If – (a) an insurer is, under a contract of reinsurance, insured against liability in respect of employers' policies issued by the insurer and that liability is incurred by the insurer (b) any part of the liability of the insurer referred to in paragraph (a) is met by moneys paid by the Insurance Commission under this Act; and (c) an amount in respect of that part of the liability of the insurer referred to in paragraph (b) is received by the liquidator of that insurer from the reinsurer concerned, the liquidator of the insurer referred to in paragraph (a) shall pay the amount so received from the reinsurer, after the deduction of any expenses of or incidental to getting in that amount, to the Commission, in priority to all payments in respect of the debts referred to in the section 441 of the Companies (Western Australia) Code , to the credit of the Fund. (2) If the liquidator of an insurer recovers any amount due to the insurer as a consequence of the payment, with moneys charged to the Fund, of any part of a claim, judgment, order or award arising out of or in relation to an employer's policy issued by the insurer, that liquidator shall pay the amount so recovered, after the deduction of any expenses of or incidental to the recovery of that amount, to the Commission, in priority to all payments in respect of debts referred to in section 441 of the Companies (Western Australia) Code , to the credit of the Fund. (3) Subject to section 38A, this section has effect notwithstanding any agreement to the contrary, whenever made. Motor Accident Insurance Act 1994 (Qld) (as at 15 July 2001) 38 Relevant provisions of this Act operate by reference to the following definition of "CTP insurance policy": "'CTP insurance policy' means-- (a) a policy of insurance under this Act for a motor vehicle insuring against liability for personal injury caused by, through or in connection with the motor vehicle; or (b) a policy of insurance, or a statutory indemnification, for a motor vehicle registered under the law of another State or a Territory, providing insurance, or indemnifying against liability, for personal injury caused by, through or in connection with the vehicle anywhere in Australia. " 39 Section 33(2) provides: "If the insurer under a CTP insurance policy becomes insolvent, the Nominal Defendant becomes the insurer under CTP policies in force under this Act for which the insolvent insurer was formerly the insurer unless the policies are transferred to some other licensed insurer." 40 Section 61 provides: "(1) If an insurer becomes insolvent, any costs reasonably incurred by the Nominal Defendant on claims under CTP insurance policies for which the insolvent insurer was the insurer become debts of the insolvent insurer to the Nominal Defendant and provable in the insolvency. (2) The debts of the insolvent insurer that arise under subsection (1) have the same order of priority in the winding-up of the insolvent insurer as if the Nominal Defendant were the insured person under policies of insurance issued by the insolvent insurer. (3) If the claim for which costs were incurred by the Nominal Defendant is covered by a contract of reinsurance, the Nominal Defendant succeeds to the rights of the insolvent insurer under the contract of reinsurance. " 41 There does not appear to be any provision giving guidance on the question when an insurer is to be regarded as insolvent. The question is therefore to be approached according to general law principles. I assume, for present purposes, that each HIH company is "insolvent" in that sense. Amendments to State and Territory legislation since 15 July 2001 42 Two of the relevant Acts have been amended since 15 July 2001 in ways affecting the provisions set out above. They are the Workers Compensation Supplementation Fund Act 1980 (ACT) and the Employers' Indemnity Supplementation Fund Act 1980 (WA). 43 The amendments to the Australian Capital Territory Act, so far as presently relevant, affect s.40. The references in ss.40(1) and 40(2) to "section 556 of the Corporations Law" have been replaced by references to "the Corporations Act, section 556". In addition and by virtue of the Workers Compensation (Acts of Terrorism) Amendment Act 2002 (ACT), references in s.40 to "employer's policies" and "employer's policy" have been replaced by references to "compulsory insurance policies" and "compulsory insurance policy" and the words "whether made before or after the commencement of this Act" have been omitted from s.40(3). 44 In the case of the Western Australia Act, the amendments that are material affect s.36 and are most easily appreciated by setting out the section in full in the amended form in which it now exists: " 36 . Payment into Fund of moneys recovered by liquidators (1) If — (a) an insurer is, under a contract of reinsurance, insured against liability in respect of employers' policies issued by the insurer and that liability is incurred by the insurer; (b) any part of the liability of the insurer referred to in paragraph (a) is met by moneys paid by the Insurance Commission under this Act; and (c) an amount in respect of that part of the liability of the insurer referred to in paragraph (b) is received by the liquidator of that insurer from the reinsurer concerned, the liquidator of the insurer referred to in paragraph (a) shall pay the amount so received from the reinsurer, after the deduction of any expenses of or incidental to getting in that amount, to the Commission, in priority to all payments in respect of the debts referred to in section 556 of the Corporations Act , to the credit of the Fund. (2) If the liquidator of an insurer recovers any amount due to the insurer as a consequence of the payment, with moneys charged to the Fund, of any part of a claim, judgment, order or award arising out of or in relation to an employer's policy issued by the insurer, that liquidator shall pay the amount so recovered, after the deduction of any expenses of or incidental to the recovery of that amount, to the Commission, in priority to all payments in respect of debts referred to in section 556 of the Corporations Act , to the credit of the Fund. (3) Subject to section 38A, this section has effect notwithstanding any agreement to the contrary, whenever made. (4) The payment of an amount referred to in subsection (1) or (2) is declared to be an excluded matter for the purposes of section 5F of the Corporations Act in relation to that Act to the extent to which the payment of the amount is governed by subsection (1) or (2)." 45 Section 36 of the Western Australian Act assumed this form by virtue of the Corporations (Consequential Amendments) Act (No 2) 2003 of that State. That Act did three relevant things: first, it substituted references to s.556 of the Corporations Act for references to s.441 of the Companies (Western Australia) Code in s.36(1) and s.36(2); second, it inserted a new s.36(4); and, third, it stated, in s.2(1), that the amending provision making those changes "is deemed to have come into operation immediately after the Corporations Act 2001 of the Commonwealth came into operation". So far as the law of Western Australia is concerned, therefore, s.36 is to be regarded as having been in the form set out above continuously since 15 July 2001 even though, before the Corporations (Consequential Amendments) Act (No 2) 2003 came into operation on 23 April 2003, the law of Western Australia did not regard s.36 as being in that form. Grouping the State and Territory cut-through provisions 46 The statutory provisions may, for present purposes, be considered in groups. The first group (which I shall call "Class A") consists of the Workers Compensation Act 1987 (NSW), the Motor Accidents Compensation Act 1999 (NSW), the Home Building Act 1989 (NSW), the Workers Rehabilitation and Compensation Act 1988 (Tas) and the Workers Compensation Act 1958 (Vic). Under each of these Acts, provision is made for resort to a statutory fund or statutory authority to satisfy a liability or claim recoverable under insurance which is, in one way or another, unavailable or deficient. In some cases, the circumstance of unavailability or deficiency is expressly linked to the insurer's insolvency; in others it is not. Each statute then deals expressly with a case where a payment is made out of the fund or by the authority in circumstances where the provider of the unavailable or deficient insurance would have been entitled to recover as against another person under a contract or arrangement for reinsurance. 47 The wording applicable in each such Class A case is to the effect that the particular authority (or the authority by which the fund is administered) is "entitled to the benefit of and may exercise the rights and powers of" the relevant insurer "under that contract or arrangement so as to enable" the relevant authority "to recover from the reinsurer … the amount due under that contract or arrangement" and, in effect, to apply that recovery in replenishing the statutory fund depleted by payments to insured persons. There are some minor differences in the wording of the provisions creating or conferring the entitlement and ability of the statutory authority to enjoy and take advantage of the insurer's rights under a relevant reinsurance contract or arrangement. There are also differences (sometimes more than minor) in the statutory description of the events giving rise to the entitlement and ability. They need not be discussed here since the liquidator's concern is to obtain guidance as to the consequences of the triggering of the statutory entitlement and ability rather than with identification of the events giving rise to the entitlement and ability. 48 The second class ("Class B") consists of the Motor Accidents Insurance Act 1994 (Qld). In that case, a claim met by the statutory authority in lieu of an insolvent insurer represents a debt of that insurer to the statutory authority having the same priority in the winding up as if the statutory authority were the insured person. In addition, if the claim met by the statutory authority in lieu of the insurer is covered by a contract of reinsurance, the statutory authority "succeeds to the rights of the insolvent insurer under the contract of reinsurance". 49 The third class ("Class C") consist of the Work Health Act (NT) alone. That Act proceeds on the footing that if an insurer is, to any extent, unable to make a payment required by a policy issued to it and the deficiency is made good by a payment by the statutory authority, two consequences follow. First, that statutory authority is entitled by subrogation to rights of the employer against any person in relation to the occurrence underlying the claim under the policy. Second, all rights the insurer has to receive payments under any reinsurance contract in respect of the claim is, by the Act itself, deemed to be assigned to the statutory authority at the time it meets the claim, such assignment being "to the exclusion of" any liquidator or like officer. 50 A fourth group of provisions ("Class D") consists of those which work on the initial premise that the proceeds of recovery under any reinsurance contract existing for the benefit of an insurer liabilities of which are met out of the particular statutory fund come home to that insurer (or its liquidator) in the ordinary way. The statutory provision then deals with the amount received from the reinsurer by requiring it to be paid by the liquidator to the authority administering the statutory fund, with such payment being in priority to all other payments in the order of priority provided for in the corporations legislation. The provisions in Class D are those of the Workers Compensation Supplementation Fund Act 1980 (ACT) and the Employers' Indemnity Supplementation Fund Act 1980 (WA). General effect of the State and Territory cut-through provisions 51 The Class A provisions purport to confer on the relevant authority an entitlement to the benefit of contractual rights and powers of the relevant insurer and an ability to exercise those contractual rights and powers. The person against whom the contractual rights and powers are enforceable and exercisable is, of course, the reinsurer under the reinsurance contract or arrangement, that contract or arrangement being the source of the rights and powers. The statutory provision thus purports to operate in such a way that, upon the happening of the event upon which accrual of the entitlement to the authority is predicated, the reinsurer must recognise the relevant authority, apparently to the exclusion of the insurer with which the reinsurer has actually contracted, as in a position to demand contractual performance towards the authority itself (in lieu of the insurer) in the same way as if the authority were the insurer. Before that event happens, there can be no more than an expectancy on the part of the statutory authority, given the inherent uncertainty at any given time about whether a triggering event will ever occur. The regime which, upon each occasion on which such an event happens, is thus produced by the statute in place of (or, perhaps more accurately, as an adjunct to) the contractual regime voluntarily brought into existence between insurer and reinsurer is thus entirely the creation of an enactment of a particular State legislature – in three cases the legislature of New South Wales, in one case the legislature of Tasmania and in the fifth case the legislature of Victoria. 52 I should amplify what has just been said by referring to the terms of the particular sections. The three New South Wales provisions (s.237 of the Workers Compensation Act 1987, s.191 of the Motor Accidents Compensation Act 1999 and s.103V of the Home Building Act 1989) are in substantially identical terms. Each says: "To the extent that any amounts are paid out of [the relevant fund] in respect of [a relevant matter], the [statutory authority] is [or shall be], where an insolvent insurer (if it had provided indemnity …) would have been entitled to recover any sum under a contract or arrangement for reinsurance, entitled …" 53 No entitlement accrues to the statutory authority under these provisions unless and until two things have happened. First, there must have been a payment out of the statutory fund (so that some relevant "extent" is established) and, second, all conditions must have been satisfied which would have entitled the insurer to recover under the reinsurance. Upon the happening of those events the statute causes the statutory rights of the authority to intrude into the contractual relationship between insurer and reinsurer so that contractual rights of the insurer become exercisable by the authority to the exclusion of the insurer. Under s.98(3)(a) of the Workers Compensation Act 1958 (Vic), the position is the same, the words being indistinguishable in any material sense. In the case of s.129 of the Workers Rehabilitation and Compensation Act 1988 (Tas), the position is even clearer. The section starts with the word "Where" and, by reference to that word, states conditions that must be met before "the Nominal Insurer shall be entitled …". 54 In the case of Class B, the meeting of a claim by the authority in place of the insurer is an event by virtue of which the authority "succeeds to" the insurer's rights under the contract of reinsurance, with the insurer thereby ceasing to enjoy those rights. The whole of s.61 of the Motor Accident Insurance Act 1994 (Qld) is predicated upon an insurer's becoming insolvent. That is made clear by the opening words of s.61(1). Unless and until that event happens and the authority meets a claim in place of the insurer, the section is not a source of rights on the part of the Nominal Defendant and the succession provided for in s.61(3) does not occur. 55 The approach in Class C is to cause the relevant authority to be subrogated to rights of the insurer and to be the assignee, by operation of law, of rights the insurer has to receive payments from a reinsurer. There is thus a similarity with Class A in that the statutory provision purports to inject the authority into the contractual relationship between the insurer and reinsurer in such a way that the reinsurer is bound to perform in favour of the authority rather than the insurer and, by clear implication, the insurer is deprived of the right to receive performance by the reinsurer. And as with Class A, the happening of specified events (being those stated at the beginning of s.137(3), brings about the authority's entitlement and the insurer's deprivation. 56 Provisions of the Class D kind do not attempt to intrude into the contractual relationship between insurer and reinsurer. Their effect is only to create a liability upon the liquidator of the insurer, being a liability to pay to the relevant authority. The terminology makes it clear, in each case, that the statutory payment liability thus created is in the nature of a debt and that there is no attempt to cause moneys received by the liquidator from the reinsurer to be subject to some form of statutory trust in the liquidator's hands in favour of the authority. This follows from the direction that payment by the liquidator to the manager be "in priority to all payments in respect of the debts" referred to in provisions of corporations legislation dealing with priority of payments in a winding up. Class D, thus leaves the contractual position between insurer and reinsurer untouched, but creates a right of the authority as against the insurer's liquidator. The matters to be addressed in the light of the State and Territory legislation 57 The guidance the liquidators of the HIH companies seek centres upon the effect of three Commonwealth statutes. The first relevant provision is s.116 of the Insurance Act 1973 (Cth) which, although now repealed, was in force when the winding up of each HIH company began and, for that reason, is seen by the liquidators as having potential relevance. The second provision is s.116 of the General Insurance Reform Act 2001 (Cth). Third, the liquidators seek guidance in relation to certain provisions of the Corporations Act 2001 (Cth). 58 The submissions address the relevance and impact, in respect of these provisions of Commonwealth law, of not only the particular State and Territory statutory provisions but also general equitable principles of subrogation. It is convenient to deal first with the purely statutory matters as they affect the operation and application of the three Commonwealth statutes. Insurance Act 1973 (Cth), s.116 59 This provision is no longer in force, having been repealed by Item 60 of Schedule 1 to the General Insurance Reform Act 2001 (Cth). It was, however, in force when the winding of each HIH company began and, for that reason, may have some application in relation to the winding up: see generally the discussion by Windeyer J in New Cap Reinsurance Corporation Ltd v Faraday Underwriting Ltd (above). 60 Section 116 of the Insurance Act 1973 (Cth) was in the following terms: "(1) If a body corporate that is authorised under this Act to carry on insurance business is begun to be wound up: (a) the body must not carry on insurance business after the date of commencement of the winding up; and (b) APRA must cause to be published in the Gazette a notice stating that, because of the commencement of the winding up, the body is no longer permitted to carry on insurance business. (2) A body corporate is not guilty of a contravention of subsection (1) by reason only that it is carrying on business for the purpose of discharging liabilities assumed by it before the date of commencement of the winding up. (3) In the winding up of a body corporate authorized under this Act to carry on insurance business, or in the winding up of a supervised body corporate, the assets in Australia of the body corporate shall not be applied in the discharge of its liabilities other than its liabilities in Australia unless it has no liabilities in Australia. (4) Section 31 has effect for the purposes of this section. (5) Nothing in this section affects the validity of a contract entered into by a body corporate after it is commenced to be wound up. (6) This section has effect and shall be complied with notwithstanding anything in any law of a State or Territory." 61 The central question posed by s.116 in the present context arises under s.116(3), namely, whether sums paid by reinsurers under arrangements relevant to insurances effected with an HIH company for the purposes of the various statutory schemes are properly regarded as "assets" of the relevant HIH company. The contractual right of each HIH company under the reinsurance arrangement, being a chose in action, is no doubt an "asset", although, of its nature, not one capable of being "applied" in any sense relevant to s.116(3). Only the proceeds, in the form of money representing satisfaction of the right, are "assets" capable of being so "applied" in the active sense with which s.116(3) is obviously concerned. 62 I am satisfied that, in cases within what I have designated Class A, Class B and Class C, proceeds produced by relevant reinsurance arrangements were not (or will not be) "assets" of the relevant HIH company, at least if the State and Territory cut-through provisions take effect in the windings up according to their terms and despite any contrary provisions in the Corporations Act. Those State and Territory provisions are such that, upon payment by the reinsurer, proceeds pass direct into the ownership of the relevant statutory authority. While the chose in action as against the reinsurer may still reside with the HIH company as insurer, the sum payable upon fruition of the chose in action never comes within the dominion of the HIH company and is never an "asset" of that company. 63 In the case of Class D, however, this analysis does not hold good. In that case, as I have said, the proceeds of recovery under the reinsurance are recognised by the relevant State or Territory legislation as coming home to the insurer (HIH company) or, more precisely, its liquidator. There is thus an acceptance of the pre-existing contractual position. At that point the proceeds must be regarded as "assets" of the relevant HIH company, there being no indication, as I see it, that the liquidator should be regarded as receiving such proceeds otherwise than as an agent of the company. Even so, obedience by the liquidator to the statutory requirement to pay the proceeds (net of expenses) to the statutory authority would not be contrary to s.116 if that section applied. This is because the effect of the Class D State or Territory statutory provision is to create a liability which, in terms of s.116(3), is part of the HIH company's "liabilities in Australia", so that the payment to the statutory authority would be by way of discharge of "liabilities in Australia" as referred to in s.116(3). This conclusion requires a little explanation. Section 31 of the Insurance Act 1973 says that "liabilities" includes certain things, unless a contrary intention appears. Section 31 also refers to circumstances which bring certain liabilities within the concept of "liability in Australia". But the section does not purport or attempt to define exhaustively either "liabilities" or "liability in Australia". Each expression is left to enjoy, in addition to the meaning to which the section refers, its ordinary and natural meaning. An obligation to pay money imposed by statute must be within the ordinary and natural meaning of "liability"; and, given its source in State or Territory legislation and the Australian locus of the paying liquidator, the company subject to winding up and the receiving statutory authority, the liability must be regarded as having such a connection with Australia as to make it part of the "liabilities in Australia". Effectuation of the State or Territory statutory scheme is therefore consistent with the prescription under s.116(3) that assets in Australia of an insurer in the course of being wound up are not to be applied in discharge of liabilities other than "liabilities in Australia". 64 If, contrary to what I have just said, the true effect of the Class D provisions is to cause reinsurance proceeds to come into the hands of a liquidator in some independent and separate right that is not and cannot be equated with the right of the company (cf N A Kratzmann Pty Ltd v Tucker (No 2) (1968) 123 CLR 295), s.116(3) will not apply because those proceeds are not "assets" of the company. 65 Whatever view may be taken of the capacity in which the liquidator receives relevant proceeds, the conclusion is that effectuation of the statutory scheme concerning reinsurance proceeds will, in the case of Classes A, B and C, be irrelevant to the operation of s.116(3) and, in the case of Class D, will not be inconsistent with the provisions of that section. But this conclusion, as I have said, depends on a finding that the State and Territory cut-through provisions have effect despite Corporations Act provisions concerning application of assets in a winding up with which they may be inconsistent. That is a matter to be considered presently. General Insurance Reform Act 2001 (Cth), s.116 66 The General Insurance Reform Act 2001 (Cth) came into operation on 1 July 2002. The provisions of its s.116 are, in relevant respects, generally similar to those of s.116 of the Insurance Act 1973 (Cth). A major difference, however, is that the provisions of the 2001 Act apply only in relation to the winding up of a "general insurer", as defined. The expression "general insurer" is defined by s.11 as "a body corporate that is authorised under s.12 to carry on insurance business in Australia". 67 None of the HIH companies has ever held an authority under s.12 of the General Insurance Reform Act. It follows that s.116 of the General Insurance Reform Act has no application in the winding up of any of the HIH companies and that the matters dealt with by the State and Territory legislation are in no way affected by s.116 of that Act. Corporations Act 2001 (Cth) 68 The core question here is whether the cut-through provisions of the State and Territory legislation operate despite provisions of the Corporations Act applicable to the winding up of each HIH company. That Act, unlike both the Insurance Act 1973 (Cth) and the General Insurance Reform Act 2001 (Cth), contains provisions which cannot, on their face, operate in harmony with the cut-through provisions. Furthermore, the Corporations Act applies directly in the winding up of each HIH company, given that the winding up order was in each case made under that Act. The Corporations Act sections requiring attention are ss.555, 556 and 562A. Sections 555 and 556(1) are as follows: " 555. Debts and claims proved to rank equally except as otherwise provided Except as otherwise provided by this Act, all debts and claims proved in a winding up rank equally and, if the property of the company is insufficient to meet them in full, they must be paid proportionately. 556. Priority payments (1) Subject to this Division, in the winding up of a company the following debts and claims must be paid in priority to all other unsecured debts and claims: (a) first, expenses (except deferred expenses) properly incurred by a relevant authority in preserving, realising or getting in property of the company, or in carrying on the company's business; (b) if the Court ordered the winding up---next, the costs in respect of the application for the order (including the applicant's taxed costs payable under section 466); (c) next, the debts for which paragraph 443D(a) entitles an administrator of the company to be indemnified (even if the administration ended before the relevant date), except expenses covered by paragraph (a) of this subsection and deferred expenses; (d) if the winding up began within 2 months after the end of a period of official management of the company---next, debts of the company properly incurred by an official manager in carrying on the company's business during the period of official management, except expenses covered by paragraph (a) of this subsection and deferred expenses; (da) if the Court ordered the winding up---next, costs and expenses that are payable under subsection 475(8) out of the company's property; (db) next, costs that form part of the expenses of the winding up because of subsection 539(6); (dc) if the winding up began within 2 months after the end of a period of official management of the company---next, the remuneration, in respect of the period of official management, of any auditor appointed in accordance with Part 2M.4; (dd) next, any other expenses (except deferred expenses) properly incurred by a relevant authority; (de) next, the deferred expenses; (df) if a committee of inspection has been appointed for the purposes of the winding up---next, expenses incurred by a person as a member of the committee; (e) subject to subsection (1A)---next, wages and superannuation contributions payable by the company in respect of services rendered to the company by employees before the relevant date; (f) next, amounts due in respect of injury compensation, being compensation the liability for which arose before the relevant date; (g) subject to subsection (1B)---next, all amounts due: (i) on or before the relevant date; and (ii) because of an industrial instrument; and (iii) to, or in respect of, employees of the company; and (iv) in respect of leave of absence; (h) subject to subsection (1C)---next, retrenchment payments payable to employees of the company." (I omit the other subsections of s.556 which deal in detail with matters of interpretation of sub-s.(1) the intent and effect of which can be sufficiently gathered for present purposes without elaboration.) 69 Section 562A of the Corporations Act is as follows: " 562A. Application of proceeds of contracts of reinsurance (1) This section applies where: (a) a company is insured, under a contract of reinsurance entered into before the relevant date, against liability to pay amounts in respect of a relevant contract of insurance or relevant contracts of insurance; and (b) an amount in respect of that liability has been or is received by the company or the liquidator under the contract of reinsurance. (2) Subject to subsection (4), if the amount received, after deducting expenses of or incidental to getting in that amount, equals or exceeds the total of all the amounts that are payable by the company under relevant contracts of insurance, the liquidator must, out of the amount received and in priority to all payments in respect of the debts mentioned in section 556, pay the amounts that are so payable under those contracts of insurance. (3) Subject to subsection (4), if subsection (2) does not apply, the liquidator must, out of the amount received and in priority to all payments in respect of the debts mentioned in section 556, pay to each person to whom an amount is payable by the company under a relevant contract of insurance an amount calculated in accordance with the formula: Particular amount owed X Reinsurance payment Total amount owed where: particular amount owed means the amount payable to the person under the relevant contract of insurance. reinsurance payment means the amount received under the contract of reinsurance, less any expenses of or incidental to getting in that amount. total amount owed means the total of all the amounts payable by the company under relevant contracts of insurance. (4) The Court may, on application by a person to whom an amount is payable under a relevant contract of insurance, make an order to the effect that subsections (2) and (3) do not apply to the amount received under the contract of reinsurance and that that amount must, instead, be applied by the liquidator in the manner specified in the order, being a manner that the Court considers just and equitable in the circumstances. (5) The matters that the Court may take into account in considering whether to make an order under subsection (4) include, but are not limited to: (a) whether it is possible to identify particular relevant contracts of insurance as being the contracts in respect of which the contract of reinsurance was entered into; and (b) whether it is possible to identify persons who can be said to have paid extra in order to have particular relevant contracts of insurance protected by reinsurance; and (c) whether particular relevant contracts of insurance include statements to the effect that the contracts are to be protected by reinsurance; and (d) whether a person to whom an amount is payable under a relevant contract of insurance would be severely prejudiced if subsections (2) and (3) applied to the amount received under the contract of reinsurance. (6) If receipt of a payment under this section only partially discharges a liability of the company to a person, nothing in this section affects the rights of the person in respect of the balance of the liability. (7) This section has effect despite any agreement to the contrary. (8) In this section: ' relevant contract of insurance ' means a contract of insurance entered into by the company, as insurer, before the relevant date." 70 The combined effect of ss.555 and 556 is that, in a winding up governed by the Corporations Act, unsecured debts and claims identified in s.556 are to be paid, in the order stated, in priority to all other unsecured debts and claims and, subject to that priority (and to the effect of any other provisions of the Corporations Act), debts and claims proved in a winding up are to rank equally and, if the property of the company is insufficient to meet all debts and claims, they are to be paid proportionately. Section 562A, dealing specifically with contracts of reinsurance held by a company in the course of winding up in respect of insurances written by that company, requires the liquidator to make certain payments to certain persons out of the proceeds of the reinsurance and to do so in priority to all payments in respect of debts mentioned in s.556. 71 The State and Territory cut-through provisions are at odds with these Corporations Act approaches in two ways. First, some of them deal with and make contrary provision with respect to part of the property of the company that the Corporations Act requires to be applied in meeting the debts and claims regulated by ss.555, 556 and 562A. This is so in the case of cut-through provisions within Classes A, B and C. They affect the asset of an HIH company represented by its contractual right against a reinsurer in such a way as to cause that chose in action (and, in due course, any proceeds produced by it) to be made unavailable for application in accordance with ss.555, 556 and 562A. The second relevant effect of the cut-through provisions is seen in the case of Class D which creates a requirement with respect to the application of proceeds of reinsurance, once received by the liquidator, which does not accord with ss.555, 556 and 562A, for reasons including that the application is declared to rank in priority to all other payments in the order of priority provided for in the corporations legislation. Corporations Act provisions dealing with inconsistency 72 The Corporations Act, being an enactment of the Commonwealth Parliament, is a law of the Commonwealth for the purposes of s.109 of the Commonwealth Constitution. It follows that, if any of the cut-through provisions contained in State legislation is inconsistent with a provision of the Corporations Act, the latter will prevail and the former will, to the extent of the inconsistency, be invalid. However, Part 1.1A of the Corporations Act shows a general intention of forestalling or minimising conflict of this kind. 73 Section 109 of the Constitution does not deal with inconsistency between a law of the Australian Capital Territory or the Northern Territory and a law of the Commonwealth. In the former case, however, s.28 of the Australian Capital Territory (Self-Government) Act 1988 (Cth) produces a result that may be regarded, for present purposes, as the equivalent of that arising under s.109. In the case of inconsistency between a law of the Northern Territory and a law of the Commonwealth, the resolution is again to the same general effect as under s.109 although, as in the case of the Australian Capital Territory, that result is a product of the application of ordinary principles of statutory interpretation to relevant Commonwealth statutes, including those under which the territory operates as distinct a distinct polity: see generally Northern Territory v GPAO (1999) 196 CLR 553. The provisions in Part 1.1A of the Corporations Act aim to avoid or minimise this kind of conflict also. 74 By virtue of s.5D of the Corporations Act, Part 1.1A applies to "laws of a State or Territory that is in this jurisdiction". Having regard to the s.9 definition of "this jurisdiction", all of the laws containing the cut-through provisions, being laws of States and Territories of Australia, are within the s.5D description. The effect of Part 1.1A in relation to those laws must therefore be examined. Part 1.1A of the Corporations Act 75 The operative provisions of Part 1.1A relevant for present purposes are ss.5E, 5F and 5G. It is appropriate to set them out in full: " 5E. Concurrent operation intended (1) The Corporations legislation is not intended to exclude or limit the concurrent operation of any law of a State or Territory. (2) Without limiting subsection (1), the Corporations legislation is not intended to exclude or limit the concurrent operation of a law of a State or Territory that: (a) imposes additional obligations or liabilities (whether criminal or civil) on: (i) a director or other officer of a company or other corporation; or (ii) a company or other body; or (b) confers additional powers on: (i) a director or other officer of a company or other corporation; or (ii) a company or other body; or (c) provides for the formation of a body corporate; or (d) imposes additional limits on the interests a person may hold or acquire in a company or other body; or (e) prevents a person from: (i) being a director of; or (ii) being involved in the management or control of; a company or other body; or (f) requires a company: (i) to have a constitution; or (ii) to have particular rules in its constitution. Note: Paragraph (a)---this includes imposing additional reporting obligations on a company or other body. (3) Without limiting subsection (2), a reference in that subsection to a law of a State or Territory imposing obligations or liabilities, or conferring powers, includes a reference to a law of a State or Territory imposing obligations or liabilities, or conferring powers, by reference to the State or Territory in which a company is taken to be registered. (4) This section does not apply to the law of the State or Territory if there is a direct inconsistency between the Corporations legislation and that law. Note: Section 5G prevents direct inconsistencies arising in some cases by limiting the operation of the Corporations legislation. (5) If: (a) an act or omission of a person is both an offence against the Corporations legislation and an offence under the law of a State or Territory; and (b) the person is convicted of either of those offences; the person is not liable to be convicted of the other of those offences. 5F. Corporations legislation does not apply to matters declared by State or Territory law to be an excluded matter (1) Subsection (2) applies if a provision of a law of a State or Territory declares a matter to be an excluded matter for the purposes of this section in relation to: (a) the whole of the Corporations legislation; or (b) a specified provision of the Corporations legislation; or (c) the Corporations legislation other than a specified provision; or (d) the Corporations legislation otherwise than to a specified extent. (2) By force of this subsection: (a) none of the provisions of the Corporations legislation (other than this section) applies in the State or Territory in relation to the matter if the declaration is one to which paragraph (1)(a) applies; and (b) the specified provision of the Corporations legislation does not apply in the State or Territory in relation to the matter if the declaration is one to which paragraph (1)(b) applies; and (c) the provisions of the Corporations legislation (other than this section and the specified provisions) do not apply in the State or Territory in relation to the matter if the declaration is one to which paragraph (1)(c) applies; and (d) the provisions of the Corporations legislation (other than this section and otherwise than to the specified extent) do not apply in the State or Territory in relation to the matter if the declaration is one to which paragraph (1)(d) applies. (3) Subsection (2) does not apply to the declaration to the extent to which the regulations provide that that subsection does not apply to that declaration. (4) By force of this subsection, if: (a) the Corporations Law, ASC Law or ASIC Law of a State or Territory; or (b) a provision of that Law; did not apply to a matter immediately before this Act commenced because a provision of a law of the State or Territory provided that that Law, or that provision, did not apply to the matter, the Corporations legislation, or the provision of the Corporations legislation that corresponds to that provision of that Law, does not apply in the State or Territory to the matter until that law of the State or Territory is omitted or repealed. (5) Subsection (4) does not apply to the application of the provisions of the Corporations legislation to the matter to the extent to which the regulations provide that that subsection does not apply to the matter. (6) In this section: " matter " includes act, omission, body, person or thing. 5G. Avoiding direct inconsistency arising between the Corporations legislation and State and Territory laws (1) Section overrides other provisions of the Corporations legislation This section has effect despite anything else in the Corporations legislation. (2) Section does not deal with provisions capable of concurrent operation This section does not apply to a provision of a law of a State or Territory that is capable of concurrent operation with the Corporations legislation. Note: This kind of provision is dealt with by section 5E. (3) When this section applies to a provision of a State or Territory law This section applies to the interaction between: (a) a provision of a law of a State or Territory (the State provision ); and (b) a provision of the Corporations legislation (the Commonwealth provision ); only if the State provision meets the conditions set out in the following table: Conditions to be met before section applies [operative] Item Kind of provision Conditions to be met (a) the State provision operated, immediately before this Act commenced, despite the provision of: (i) the Corporations Law of the State or Territory (as in force at that time); or (ii) the ASC or ASIC Law of the State or Territory (as in force at that time); 1 a pre-commencement (commenced) provision that corresponds to the Commonwealth provision; and (b) the State provision is not declared to be one that this section does not apply to (either generally or specifically in relation to the Commonwealth provision) by: (i) regulations made under this Act; or (ii) a law of the State or Territory. (a) the State provision would have operated, immediately before this Act commenced, despite the provision of: (i) the Corporations Law of the State or Territory (as in force at that time); or (ii) the ASC or ASIC Law of the State or Territory (as in force at that time); 2 a pre-commencement (enacted) provision that corresponds to the Commonwealth provision if the State provision had commenced before the commencement of this Act; and (b) the State provision is not declared to be one that this section does not apply to (either generally or specifically in relation to the Commonwealth provision) by: (i) regulations made under this Act; or (ii) a law of the State or Territory. 3 a post-commencement provision the State provision is declared by a law of the State or Territory to be a Corporations legislation displacement provision for the purposes of this section (either generally or specifically in relation to the Commonwealth provision) (a) the State provision as amended would have operated, immediately before this Act commenced, despite the provision of: (i) the Corporations Law of the State or Territory (as in force at that time); or (ii) the ASC or ASIC Law of the State or Territory (as in force at that time); 4 a provision that is materially amended on or after this Act commenced if the amendment was enacted before this Act commenced that corresponds to the Commonwealth provision if the amendment had commenced before the commencement of this Act; and (b) the State provision is not declared to be one that this section does not apply to (either generally or specifically in relation to the Commonwealth provision) by: (i) regulations made under this Act; or (ii) a law of the State or Territory. 5 a provision that is materially amended on or after this Act commenced if the amendment is enacted on or after this Act commenced the State provision as amended is declared by a law of the State or Territory to be a Corporations legislation displacement provision for the purposes of this section (either generally or specifically in relation to the Commonwealth provision) Note 1: Item 1---subsection (12) tells you when a provision is a pre-commencement (commenced) provision. Note 2: Item 1 paragraph (a)---For example, a State or Territory provision enacted after the commencement of the Corporations Law might not have operated despite the Corporations Law if it was not expressly provided that the provision was to operate despite a specified provision, or despite any provision, of the Corporations Law (see, for example, section 5 of the Corporations (New South Wales) Act 1990). Note 3: Item 2---subsection (13) tells you when a provision is a pre-commencement (enacted) provision. Note 4: Item 3---subsection (14) tells you when a provision is a post-commencement provision. Note 5: Subsections (15) to (17) tell you when a provision is materially amended after commencement. (4) State and Territory laws specifically authorising or requiring act or thing to be done A provision of the Corporations legislation does not: (a) prohibit the doing of an act; or (b) impose a liability (whether civil or criminal) for doing an act; if a provision of a law of a State or Territory specifically authorises or requires the doing of that act. (5) Instructions given to directors under State and Territory laws If a provision of a law of a State or Territory specifically: (a) authorises a person to give instructions to the directors or other officers of a company or body; or (b) requires the directors of a company or body to: (i) comply with instructions given by a person; or (ii) have regard to matters communicated to the company or body by a person; or (c) provides that a company or body is subject to the control or direction of a person; a provision of the Corporations legislation does not: (d) prevent the person from giving an instruction to the directors or exercising control or direction over the company or body; or (e) without limiting subsection (4): (i) prohibit a director from complying with the instruction or direction; or (ii) impose a liability (whether civil or criminal) on a director for complying with the instruction or direction. The person is not taken to be a director of a company or body for the purposes of the Corporations legislation merely because the directors of the company or body are accustomed to act in accordance with the person's instructions. (6) Use of names authorised by State and Territory laws The provisions of Part 2B.6 and Part 5B.3 of this Act do not: (a) prohibit a company or other body from using a name if the use of the name is expressly provided for, or authorised by, a provision of a law of a State or Territory; or (b) require a company or other body to use a word as part of its name if the company or body is expressly authorised not to use that word by a provision of a law of a State or Territory. (7) Meetings held in accordance with requirements of State and Territory laws The provisions of Chapter 2G of this Act do not apply to the calling or conduct of a meeting of a company to the extent to which the meeting is called or conducted in accordance with a provision of a law of a State or Territory. Any resolutions passed at the meeting are as valid as if the meeting had been called and conducted in accordance with this Act. (8) External administration under State and Territory laws The provisions of Chapter 5 of this Act do not apply to a scheme of arrangement, receivership, winding up or other external administration of a company to the extent to which the scheme, receivership, winding up or administration is carried out in accordance with a provision of a law of a State or Territory. (9) State and Territory laws dealing with company constitutions If a provision of a law of a State or Territory provides that a provision is included, or taken to be included, in a company's constitution, the provision is included in the company's constitution even though the procedures and other requirements of this Act are not complied with in relation to the provision. (10) If a provision of a law of a State or Territory provides that additional requirements must be met for an alteration of a company's constitution to take effect, the alteration does not take effect unless those requirements are met. (11) Other cases A provision of the Corporations legislation does not operate in a State or Territory to the extent necessary to ensure that no inconsistency arises between: (a) the provision of the Corporations legislation; and (b) a provision of a law of the State or Territory that would, but for this subsection, be inconsistent with the provision of the Corporations legislation. Note 1: A provision of the State or Territory law is not covered by this subsection if one of the earlier subsections in this section applies to the provision: if one of those subsections applies there would be no potential inconsistency to be dealt with by this subsection. Note 2: The operation of the provision of the State or Territory law will be supported by section 5E to the extent to which it can operate concurrently with the provision of the Corporations legislation. (12) Pre-commencement (commenced) provision A provision of a law of a State or Territory is a "pre-commencement (commenced) provision" if it: (a) is enacted, and comes into force, before the commencement of this Act; and (b) is not a provision that has been materially amended after commencement (see subsections (15) to (17)). (13) Pre-commencement (enacted) provision A provision of a law of a State or Territory is a "pre-commencement (enacted) provision" if it: (a) is enacted before, but comes into force on or after, the commencement of this Act; and (b) is not a provision that has been materially amended after commencement (see subsections (15) to (17)). (14) Post-commencement provision A provision of a law of a State or Territory is a "post-commencement provision" if it: (a) is enacted, and comes into force, on or after the commencement of this Act; and (b) is not a provision that has been materially amended after commencement (see subsections (15) to (17)). (15) Provision materially amended after commencement A provision of a law of a State or Territory is "materially amended after commencement" if: (a) an amendment of the provision commences on or after the commencement of this Act; and (b) neither subsection (16) nor subsection (17) applies to the amendment. (16) A provision of a law of a State or Territory is not "materially amended after commencement" under subsection (15) if the amendment merely: (a) changes: (i) a reference to the Corporations Law or the ASC or ASIC Law, or the Corporations Law or the ASC or ASIC Law of a State or Territory, to a reference to the Corporations Act or the ASIC Act; or (ii) a reference to a provision of the Corporations Law or the ASC or ASIC Law, or the Corporations Law or ASC or ASIC Law of a State or Territory, to a reference to a provision of the Corporations Act or the ASIC Act; or (iii) a penalty for a contravention of a provision of a law of a State or Territory; or (iv) a reference to a particular person or body to a reference to another person or body; or (b) adds a condition that must be met before a right is conferred, an obligation imposed or a power conferred; or (c) adds criteria to be taken into account before a power is exercised; or (d) amends the provision in way declared by the regulations to not constitute a material amendment for the purposes of this subsection. (17) A provision of a law of a State or Territory is not "materially amended after commencement" under subsection (15) if: (a) the provision as amended would be inconsistent with a provision of the Corporations legislation but for this section; and (b) the amendment would not materially reduce the range of persons, acts and circumstances to which the provision of the Corporations legislation applies if this section applied to the provision of the State or Territory law as amended. Part 1.1A – the general formula under s.5E 76 The judgment of Ashley J in Director of Public Prosecutions v Loo (2002) 42 ACSR 459 contains an analysis of some of the workings of Part 1.1A. As that analysis shows, the first step in applying the Part 1.1A provisions to a particular conflict between a State or Territory law and a Corporations Act provision is to determine the nature of the conflict. That task is assisted by resort to established principles of constitutional law concerning the interaction of State and Commonwealth laws. 77 In Telstra Corporation Limited v Worthing (1999) 197 CLR 61, the High Court emphasised that only one of the two tests enunciated by Dixon J in Victoria v Commonwealth (1937) 58 CLR 618 needs to be satisfied to cause s.109 of the Constitution to make a State law invalid to the extent of its inconsistency with Commonwealth law. The first test (in the nature of a direct collision test) involves the question whether the State law, if valid, "would alter, impair or detract from the operation of a law of the Commonwealth Parliament". The second test (the "cover the field test") turns upon the question whether it appears from the terms, nature or subject matter of the Commonwealth law that it was intended to operate as "a complete statement of the law governing a particular matter or set of rights and duties". If the answer to that question is "yes", any attempt by a State law to "regulate or apply to the same matter or relation is regarded as a detraction from the full operation of the Commonwealth law and so as inconsistent". 78 Section 5E is the leading provision in Part 1.1A of the Corporations Act. It says that the Commonwealth Corporations legislation (which, by virtue of s.5D(2), includes the Corporations Act) is not intended to exclude or limit the concurrent operation of any State or Territory law – unless "there is a direct inconsistency between the Corporations legislation and that law" as referred to in s.5E(4). The Commonwealth law thus contains its own explicit statement that it is not intended to be, according to Dixon J's formulation, a "complete statement of the law governing a particular matter or set of rights and duties". On the contrary, it is clear, at least so far as s.5E is concerned, that State and Territory laws may also regulate matters, rights and duties with which the Commonwealth law is concerned, provided that they do not do so in a way which involves "direct inconsistency". As Mason J pointed out in R v Credit Tribunal; ex parte General Motors Acceptance Corporation Australia (1977) 137 CLR 545, a legislative statement that a Commonwealth law is not intended to be an exhaustive and exclusive law makes the "cover the field" test irrelevant to the application of s.109, so that it operates only upon "direct inconsistency or collision, of the kind which arises, for example, when Commonwealth and State laws make contradictory provision upon the same topic, making it impossible for both laws to be obeyed". The term "direct inconsistency", as used in the concurrent operation provisions of s.5E, should be understood accordingly. 79 For State and Territory excepting provisions to survive under the Corporations Act, it is necessary for a law of the Commonwealth to accommodate them expressly by saying, in effect, that the sections of the Corporations Act with which particular State and Territory excepting provisions are otherwise inconsistent are to have effect subject to those State and Territory excepting provisions. Provided that a head of Commonwealth legislative power supports the accommodating provision itself, the result will be that that accommodating provision removes the inconsistency between the Commonwealth law's substantive provisions and the State and Territory excepting provisions. This will happen because the accommodating provision causes the Commonwealth law's substantive provisions to have the curtailed operation produced by the stipulation that they have effect subject to the State and Territory excepting provisions. There is then no occasion for the intervention of s.109. Part 1.1A - the particular formula under s.5F 80 The general message in s.5E is reinforced by s.5F which, in sub-ss.(1) and (2), deals with the case where a provision of State or Territory law declares a matter to be an excluded matter for the purposes of s.5E in relation to the whole or some specified portion of the Corporations Act. In such a case, the Corporations Act itself causes direct conflict to be avoided by curtailing its own operation in a particular way designed to allow the relevant State or Territory law to operate without impinging upon the operation of the Commonwealth law. A Commonwealth law cannot cut across the Constitution by attempting to declare valid that which s.109 makes invalid: University of Wollongong v Metwally (1984) 158 CLR 447. But it can so define and mould its own operation as to forestall inconsistency of the kind with which s.109 is concerned. Section 5F of the Corporations Act is a defining and moulding provision of this kind. 81 The approach reflected in s.5F involves an express statement in the Corporations Act that certain of its provisions are not to apply "in" a particular State or Territory "to" or "in relation to" a particular "matter" (which, by virtue of s.5F(6), includes "act, omission, body, person or thing"). The classes of such matters are defined in two ways. The first class, already noticed, covers matters declared by a State or Territory law to be, in effect, excepted from the operation of one or more provisions of the Corporations Act (s.5F(1)). The second class covers matters, which a pre-existing provision of State or Territory law declares to be excepted from the operation of the pre-existing Corporations Law, that is, a former National Scheme Law (s.5F(4)). By force of s.5F(2), the provisions of the Commonwealth Corporations legislation identified in the relevant State or Territory law do not apply in that State or Territory in relation to a matter in the first class. By force of s.5F(4), provisions of the Corporations Act "corresponding" with those the subject of the exception in the pre-existing State or Territory law do not apply in the State or Territory in relation to matters in the second class. In each case, however, the non-application thus effected by the Commonwealth Corporations legislation may be denied or reversed by regulation made under that Corporations Law (s.5F(3) and (5)). 82 State and Territory provisions of the kind at issue in this proceeding may, in theory at least, be accommodated by s.5F of the Corporations Act in one of two circumstances: first, where the State or Territory legislation itself contains a declaration of the kind contemplated by s.5F(1) and (2); and, second, if, immediately before 15 July 2001, the State or Territory provision had the effect that the Corporations Law of that State or Territory (or some part or provision of it) did not apply to a matter identified in the cut-through provision. The second case is dealt with by s.5F(4). 83 One aspect of the s.5F(4) case must, however, be emphasised. For that section to cause a particular Corporations Act provision not to apply in a particular State or Territory to a particular matter, the position prevailing before 15 July 2001 must be found to have been such that not only a provision of the Corporations Law to which the Corporations Act provision corresponds did not apply to the matter by force of an excluding provision of the law of the State or Territory, but also the Corporations Law whose provision was made inapplicable by that excluding provision was the Corporations Law of the State or Territory of whose law the excluding or provision formed part. In light of this (and in anticipation of some issues arising in relation to s.5G), it is necessary to examine briefly, by way of digression, the general nature of provisions dealing with winding up of companies and administration of assets in winding up. 84 Immediately before 15 July 2001, the jurisdiction to make a winding up order under the Corporations Law was exercisable in respect of a "company": see, for example, ss.459A and 461. The Corporations Law of a particular State or Territory defined "company" for these purposes in such a way as to refer to a company registered under that particular Corporations Law. This was the effect of the s.9 definition of "company" – I leave to one side the winding up jurisdiction under Part 5.7 on the basis that exclusion of a "recognised company" from the definition of "registrable Australian body" (and hence, successively, from the definition of "registrable body" and the definition of "Part 5.7 body") meant that a winding up order could not be made under Part 5.7 of the Corporations Law of one State or Territory in respect of a "company" as defined by s.9 of the Corporations Law of another. It follows that when, before 15 July 2001, a court made a winding up order in respect of a company registered as such under the Corporations Law, it exercised jurisdiction under the particular Corporations Law from which the registration as a company derived. If the particular company was registered under the Corporations Law of New South Wales, then the winding up order was made under that Corporations Law, if the company was registered under the Corporations Law of the Australian Capital Territory, then the order was made under that Corporations Law and so forth. By virtue of s.588A and s.588B of the Corporations Law of each other State and Territory, the winding up order had effect and was recognised in that other jurisdiction and the liquidator's powers and functions were exercisable there for the purpose of winding up the company's affairs in the other jurisdiction. But these ancillary measures did not alter the fact that the winding up as such derived solely from and was governed solely by the Corporations Law of the State or Territory of the company's registration. 85 Where a winding up order was made under the Corporations Law of a particular State or Territory in relation to a company registered under that Corporations Law, it was s.555 of that Corporations Law and no other that laid down the general rule of proportionality in the application of the company's property in meeting debts and claims and it was likewise s.556 of that Corporations Law and no other that identified debts and claims to be afforded priority over other unsecured debts and claims and prescribed the order of their priority. It followed that, at the level of State and Territory legislation, a statutory provision purporting to modify these rules in relation to winding up would have been effective only if it was an enactment of the legislature by which the Corporations Law creating the rules had been enacted. 86 But what was the effect of a provision of, say, a Victorian workers compensation statute purporting to confer on a particular instrumentality created by that statute a right to enjoy and enforce a chose in action forming part of the property of a company to which the directive as to application of property in s.555 of, say, the Corporations Law of New South Wales applied? And what was the effect of a provision of Australian Capital Territory law purporting to both create and afford paramountcy to a right for an instrumentality created by Australian Capital Territory law to be paid a particular sum by the liquidator administering ss.555, 556 and 562A of the Corporations Law of Queensland in the winding up of a company registered under that Corporations Law? I see no basis upon which such a provision of Victorian or Australian Capital Territory Law would have been effective to bind the liquidator in question or to affect the property in question. This observation applies also to each other case in which the winding up generally was governed by the Corporations Law of one State or Territory and the special provision purporting to alter the incidence of ss.555, 556 and 562A of that Corporations Law was the creation of the legislature of another State or Territory. 87 The particular way in which each of s.5F(2) and 5F(4) operates in relation to provisions of the Corporations Act must now be noted. In each case, the subsection says that the Corporations Act (or the relevant provision or part of it) does not apply in the particular State or Territory to the particular matter. The wording differs slightly between ss.5F(2) and 5F(4). In the former, each paragraph says that the Corporations Act (or the relevant portion or provision of it) "does not apply in the State or Territory in relation to the matter", being the matter the subject of the declaration in a provision of State or Territory law referred to in s.5F(1). In s.5F(4), it is said that the Corporations Act (or the relevant portion or provision of it) "does not apply in the State or Territory to the matter …". 88 The concept is thus a dual concept of restriction of territorial application and restriction of application to subject matter. The effect of both s.5F(2) and s.5F(4) is to single out a particular "matter", being the "matter" identified by the State or Territory enactment, and to cause the territorial operation of the Corporations Act to be modified and restricted so that such application as it would otherwise have had "in" the relevant State or Territory "to" (or "in relation to") the particular "matter" is negated. As a corollary, such application as the Corporations Act has to or in relation to the particular matter that cannot be classified as application "in" the State or Territory is not negated. 89 Such a concept is no doubt meaningful in relation to Corporations Act provisions dealing with matters having clear territorial attributes. Section 911A, for example, says that a person who carries on a financial services business "in this jurisdiction" must hold a licence. Section 5F would undoubtedly accommodate a provision of, say, New South Wales law enabling a particular resident of New South Wales to carry on a financial services business in New South Wales even though unlicensed. 90 But the circumstances currently under discussion involve no such activity having or capable of having a territorial quality linked to a State or Territory. The question at issue concerns the operation of Corporations Act provisions directing the manner of application of the property of a company in the course of insolvent winding up and the order in which debts and claims are to be paid in such a winding up. By virtue of s.1378, the registration of the particular company under Part 2A.2 of the Corporations Law of a State or Territory existing immediately before commencement of the Corporations Act on 15 July 2001 became, on that day, the equivalent of registration under Part 2A.2 of the Corporations Act, with the result that the company was, at that point, taken to be "incorporated in this jurisdiction" (see s.119A(1)), although "registered", in the s.119A(2) sense, in the State or Territory under whose Corporations Law it was registered immediately before 15 July 2001 (see s.1378(4)). The concept of incorporation in "this jurisdiction" (being, according to the s.9 definition, the geographical area consisting of all the States, the Australian Capital Territory and the Northern Territory) can only mean that the company came to have on and after 15 July 2001, by force of the Commonwealth Act (which has the territorial coverage specified in its s.5 and is binding, by clause V of the covering clauses of the Constitution, on the courts, judges and people of every part of the Commonwealth), one indivisible existence as a body corporate throughout "this jurisdiction" without reference to any political or geographical subdivision of it. The concept is similar to the concept of intangible property created by Commonwealth law which is seen as locally situated in Australia at large and cannot be recognised as locally situated in any particular State or Territory: In re Usines de Melle and Firmin Boinot's Patent (1954) 91 CLR 42 at 49. The subsidiary notion of "registration" in s.119A(2) of the Corporations Act does not detract from this. Its purpose seems to be to supply a secondary territorial attribute by reference to which particular State or Territory legislation may operate by specific reference (see Note 3 to s.119A). 91 The directions in ss.555, 556 and 562A of the Corporations Act as to the application of assets and payment of claims in the winding up of a company that that Act itself causes to be incorporated "in this jurisdiction" and therefore to be a body corporate cannot be regarded as applying "in" any particular State or Territory "to" (or "in relation to") the "matter" of such application and payment. The directions apply "in" the whole of the area to which the Commonwealth Act's territorial operation extends. And they do so in a way that is geographically indiscriminate, so that, unless there is some clear provision to the contrary, a particular thing that must be done in obedience to them cannot be regarded as something to be done "in" one particular State or Territory rather than any other and an act of statutory compliance or implementation does not in any sense belong to one State or Territory rather than any other. The fact that a particular liquidator has his office in Sydney or Hobart, or that the bulk of the work in relation to a particular winding up is done in Adelaide or Perth does not mean that compliance with and implementation of ss.555, 556 and 562A take on some character identifiable with the particular State. Wherever relevant acts may be performed, effectuation of s.555, s.556 or s.562A occurs under and by virtue of the Corporations Act as it applies throughout the whole of its territorial reach. 92 Sections 5F(2) and 5F(4) can therefore produce no meaningful result so far as operation of State and Territory cut-through provisions in relation to due administration of ss.555, 556 and 562A of the Corporations Act is concerned. Even if s.5F(2) or s.5F(4) purported or appeared to produce the result that ss.555, 556 or 562A did not apply "in" a particular State or Territory "to" (or "in relation to") some "matter" identified in the cut-through provision, the section would in reality lead nowhere because application and administration of ss.555, 556 and 562A are not things in relation to which any Corporations Act provision applies in a territorially defined or territorially ascertainable way. Part 1.1A - the particular formula under s.5G 93 Section 5G, like s.5F, deals with cases of direct conflict between a State or Territory law and a provision of the Corporations Act – or, more precisely, with provisions of State and Territory law that are not capable of concurrent operation with the Corporations Act. For s.5G to apply in relation to a particular State or Territory provision, however, that State or Territory provision (designated, in s.5G(3), merely a "State provision") must meet the conditions set out in the table in s.5G(3). The conditions applicable to a particular State provision depend on the classification of the provision according to the items in the first column of the table in s.5G(3). Before these s.5G(3) matters are examined in relation to the State and Territory cut-through provisions, it is appropriate to consider whether any provision of s.5G will, in any event, be able to secure their operation despite their incompatibility with the Corporations Act. 94 If it is found, via s.5G(3), that s.5G applies to the interaction between a provision of State or Territory law and a provision of the Corporations Act, it becomes necessary to determine whether and, if so, how the specific conflict resolution measures in s.5G apply. Several of those conflict resolution measures are concerned with particular subjects and, in the present context, may, for that reason alone, be at once discarded. They are s.5G(5) (instructions to directors), s.5G(6) (use of names), s.5G(7) (holding of meetings) and ss.5G(9) and 5G(10) (company constitutions). It is also necessary, in the present context, to discard s.5G(11) (dealing with "Other cases") since it adopts the s.5F approach of declaring that the Corporations Act "does not operate in a State or Territory". For reasons already discussed in relation to s.5F, non-application of the Corporations Act in a political and geographical subdivision of "this jurisdiction" can have no effect on the operation of ss.555, 556 and 562A of the Commonwealth Act and their requirements as to particular applications of company property and the affording of precedence to particular debts and claims in a particular winding up. 95 Remaining for consideration, therefore, are ss.5G(4) and 5G(8). Section 5G(4) deals with a case where a provision of a law of a State or Territory (necessarily, of course, a provision made relevant by s.5G(3)) "specifically authorises or requires" the doing of an act. In such a case, a provision of the Corporations legislation (including the Corporations Act) does not prohibit the doing of the act or impose a liability (whether civil or criminal) for doing it. The specific authority or requirement of State or Territory law is thus accommodated to the extent of removal of any prohibition or liability that would otherwise apply or arise under the Corporations legislation. It is not said, in any explicit way, that the State or Territory provision may be obeyed and given effect to despite a provision of the Corporations legislation that would otherwise stand in the way. But that, it seems to me, must be the effect of s.5G(4). 96 Section 5G(4) displaces the prohibition or liability that would arise from the Corporations Act to such an extent as to enable the authority conferred by State or Territory law to be exercised or the requirement imposed by State or Territory Law to be met. There is no geographical or territorial quality to the way in which Commonwealth law yields. If the State or Territory provision creates an authority or imposes a requirement, the prohibitions and liabilities imposed by the Commonwealth law contract to accommodate whatever is to be done in accordance with the State or Territory provision. And they do so as to the Commonwealth law's operation generally, without regard to its application "in" the particular part of Australia with which the State or Territory provision is concerned. 97 Section 5G(8) operates in a conceptually similar way. As relevant to a situation of the kind under discussion, that section says that the provisions of Chapter 5 of the Corporations Act (in which ss.555, 556 and 562A appear) "do not apply to a … winding up … of a company to the extent to which the … winding up … is carried out in accordance with a provision of a law of a State or Territory". The object upon which this part of s.5G(8) fixes is the winding up of a company. It recognises that a State or Territory provision made applicable by s.5G may affect the carrying out of such a winding up. Where such a State or Territory provision has such an effect, Chapter 5 of the Corporations Act has, in relation to the winding up, a modified operation. Its application to the winding up is denied or withdrawn so far as is necessary to allow the winding up to be carried out in accordance with the State or Territory provision. Use of the words "carried out" in relation to "winding up" recognise that winding up governed by the parts of Chapter 5 relevant to winding up is a process. The nature of the process was referred to by McPherson SPJ in Re Crust 'n' Crumbs Bakers (Wholesale) Pty Ltd [1992] 2 QdR 76 at 78: "Winding up is a process that consists of collecting the assets, realising and reducing them to money, dealing with proofs of creditors by admitting or rejecting them, and distributing the net proceeds, after providing for costs and expenses, to the persons entitled. It is a process, comparable to an administration in equity, that begins or 'starts' with and order of the court. However it is not the court order itself that 'winds up' the company; the order does no more than direct that the company be wound up, which is then carried into effect by an officer of the court, the liquidator, who does the things that I have identified in order to liquidate the company's assets and wind up its affairs. In referring to 'winding up' or to the company being 'wound up', and to the manner and the incidents of doing so, s.601 therefore speaks not of proceedings aimed at obtaining an order of court to wind up the company but of the process that ensues from and follows such an order. Leaving aside the case of a successful appeal, winding up thus 'starts' when, and not before, an order to wind up is made appointing a liquidator." The collection of activities thus generally described constitutes the "winding up" with which s.5G(8) is concerned. As in the case of s.5G(4), the effect of s.5G(8) is to cause the Corporations Act provisions as to the carrying out of the winding up process to yield in a comprehensive way that has no territorial quality distinct from the overall reach of that Act. 98 I return now to the threshold issue whether s.5G(3) causes s.5G to apply to the interaction between the Corporations Act (or provisions of it) on the one hand and a particular State or Territory provision on the other. So far as concerns the possibility addressed by item 1 in the first column of the table in s.5G(3), the first question is whether the State or Territory provision is, in terms of s.5G(12), a "pre-commencement (commenced) provision". The answer depends on factors mentioned in s.5G(12). These will be considered in relation to the several State and Territory cut-through provisions when the impact of Part 1.1A in relation to them is assessed. 99 Pending that assessment and in order to complete the consideration of item 1 in the table in s.5G(3), I consider next the conditions in the third column of the table applicable to item 1. The first of those conditions (condition (a)) is that the State or Territory provision operated, immediately before commencement of the Corporations Act on 15 July 2001 "despite the provisions of … the Corporations Law of the State or Territory (as in force at that time)". Attention is thus directed to the nature of the interaction, immediately before that commencement, between the particular State or Territory provision and the provisions of the Corporations Law of the State or Territory in question. For condition (a) to be satisfied, the interaction must be found to be such that the State or Territory provision operated "despite" the provisions of that Corporations Law. The "despite" formulation makes it necessary to look at the ways in which the several Corporations Laws were brought into effect and applied. 100 The Corporations Act of the Australian Capital Territory was a creation of the Commonwealth Parliament. Section 5 of the Corporations Act 1989 (Cth) stated that the Corporations Law set out in s.82 of that Act "applies as a law for the government of the Capital Territory" and "as so applying, may be referred to as the Corporations Law of the Capital Territory". The provisions of that Corporations Law were thus provisions of a Commonwealth Act enacted for the government of the particular Territory of the Commonwealth. The relationship between that Corporations Law and laws of the Australian Capital Territory was dealt with in s.10 of the Corporations Act 1989 (Cth). Section 10 was in the following terms: "10. Relationship between the Corporations Law, and the Corporations Regulations, of the Capital Territory and the laws of the Capital Territory (1) In this section: ' the Law' means the Corporations Law, and the Corporations Regulations, of the Capital Territory. (2) The object of this section is to avoid or resolve inconsistencies between the Law and the laws of the Capital Territory. (3) Subject to this section, the Law has effect despite anything in a law of the Capital Territory. (4) Regulations under section 73: (a) may provide that specified laws of the Capital Territory have effect despite the Law or specified provisions of the Law; and (b) may provide that the Law, or specified provisions of the Law, has or have effect with such modifications as the regulations prescribe. (5) Regulations that are made under section 73 and take effect within 12 months after the commencement of this section may amend or repeal laws of the Capital Territory. (6) Regulations in force because of subsection (4) or (5) have effect accordingly. (7) Nothing in subsection (2) affects the validity of regulations purporting to be made under section 73." 101 Section 11 went on to deal with particular matters, one of which, as will be seen presently, is of relevance to this proceeding. The several provisions of s.11 declared various provisions of the Corporations Law of the Australian Capital Territory to have effect "as provided in" or "subject to" specified provisions of Australian Capital Territory Law. 102 In the case of each State and the Northern Territory, the corresponding matters were dealt with by the jurisdiction's own corporations statute of 1990 (ie the Corporations (New South Wales) Act 1990 (NSW) and correspondingly named Acts of the other States and the Northern Territory). In relation to the matters now under discussion, these Acts were uniform. Each caused the Corporations Law set out in s.82 of the Corporations Act 1989 (Cth) to apply as a law of the State or Territory and stated that that Corporations Law, as so applying, might be referred to as the Corporations Law of the State or Territory. Each such Act contained a definition of "applicable provision". That term included, in relation to a jurisdiction, a provision of the Corporations Law of that jurisdiction. The provisions of the Corporations Law of the particular State or the Northern Territory were thus "applicable provisions" of that jurisdiction. Sections 5 and 6 of the Corporations (New South Wales) Act 1990 (NSW) – which I quote to illustrate the corresponding working of each other like Act – were as follows: " This Act and applicable provisions of New South Wales not to be affected by later State laws 5. (1) An Act enacted, or an instrument made under an Act, after the commencement of this section is not to be interpreted as amending or repealing, or otherwise altering the effect or operation of, this Act or the applicable provisions of New South Wales. (2) Subsection (1) does not affect the interpretation of an Act, or of an instrument made under an Act, so far as that Act provides expressly for that Act or instrument, as the case may be, to have effect despite a specified provision, or despite any provision, of this Act or the applicable provisions of New South Wales. Operation of other New South Wales laws 6. Except as otherwise provided in this Act, nothing in this Act or the applicable provisions of New South Wales affects the operation after the commencement of this section of an Act enacted before that commencement or of an instrument made under such an Act." 103 The "despite" specification in condition (a) in the third column against item 1 in the table in s.5G(3) of the Corporations Act 2001 (Cth) must be understood against the background of this pre-existing legislative scheme. For each State and Territory, the provisions of the Corporations Law were, in general terms, to prevail over subsequent and inconsistent provisions of laws of the particular jurisdiction, unless expressly afforded precedence by legislation being, in the case of the Australian Capital Territory, a provision of the Corporations Act 1989 (Cth) itself or a regulation of the kind referred to in s.10(4) and, in the case of a State or the Northern Territory, a provision satisfying s.5(2) of the local corporations statute of 1990. Pre-existing and inconsistent local provisions were dealt with differently. For the Australian Capital Territory, s.11 of the Corporations Act 1989 (Cth) gave specific provisions of other legislation precedence over the Corporations Law of the Australian Capital Territory. For the States and the Northern Territory, s.6 of each corporations statute of 1990 ceded continuing operation to pre-existing provisions generally, unaffected by Corporations Law provisions. 104 Returning to the conditions in the third column against item 1 in the table in s.5G(3) of the Corporations Act 2001 (Cth), it will be seen that the second condition (condition (b)) entails the absence of any regulation made under the Act and any law of the particular State or Territory declaring the State or Territory provision in question to be one to which s.5G does not apply, either generally or specifically in relation to the corresponding provision of the Corporations Act 2001 (Cth). 105 If a particular State or Territory provision is of the kind specified in the second column against item 1 in the s.5G(3) table and satisfies the conditions in the second column, the consequence is that s.5G applies to the interaction between the State or Territory provision and a provision of the Corporations Act itself. 106 Having examined the general workings of ss.5E, 5F and 5G of the Corporations Act, I now proceed to consider their application in relation to the State and Territory cut-through provisions. Impact of ss.5E and 5F on State and Territory cut-through provisions 107 For reasons outlined at paragraph 71 above, I do not consider that any of the State and Territory cut-through provisions is capable of concurrent operation with ss.555, 556 and 562A of the Corporations Act 2001 (Cth). The State and Territory provisions are therefore not accommodated by s.5E. Provisions within Classes A, B and C cause the chose in action against the relevant reinsurer that would otherwise be part of the property of the company for the purposes of s.555 to be denied to the company and therefore to be unavailable for the purposes of implementing s.562A. Class D provisions, by contrast, leave intact the matters dealt with by Class A, B and C provisions but cut across both the application of assets in accordance with s.555 and the scheme of priorities laid down by s.556. There is accordingly, in each case, a situation of "direct inconsistency" for the purposes of Part 1.1A, with the result that it is necessary to consider whether s.5F or s.5G allows the State and Territory provisions to operate. 108 Section 5F may be dealt with shortly. As discussed at paragraphs 87 to 92 of these reasons, that section can do no more than to cause a Corporations Act provision not to apply "in" a particular State or Territory "to" (or "in relation to") a particular matter. Because the relevant sections of the Corporations Act (ss.555, 556 and 562A) do not have any distinct and separate territorial operation susceptible to that kind of displacement, s.5F can play no role in reconciling those provisions and the State and Territory cut-through provisions. Impact of s.5G on State and Territory cut-through provisions: "pre-commencement (commenced) provision" 109 It is therefore necessary to focus upon the applicability of s.5G. The first question here is whether each State and Territory cut-through provision is a "pre-commencement (commenced) provision". Because each had been enacted and was in force immediately before commencement of the Corporations Act 2001 (Cth) on 15 July 2001, it satisfies paragraph (a) of the definition of "pre-commencement (commenced) provision" in s.5G(12). It will also satisfy paragraph (b) of the s.5G(12) definition – and therefore be a "pre-commencement (commenced) provision" - if it has not been "materially amended" after commencement, a matter to be determined by reference to ss.5G(15), 5G(16) and 5G(17). Two of the provisions have been amended since commencement, as noted at paragraphs 42 to 45 above. It is therefore necessary to examine the amendments against the ss.5G(15), 5G(16) and 5G(17) criteria. 110 In the case of s.40 of the Workers Compensation Supplementation Fund Act 1980 (ACT), the amendments by which references to s.556 of the Corporations Law were replaced by references to the corresponding provision of the Corporations Act are within s.5G(16)(a) and therefore outside the "materially amended" concept. The amendments made by the Workers Compensation (Acts of Terrorism) Amendment Act 2002 (ACT) merely substituted new nomenclature. The references to "insurer" were replaced by references to "approved insurer"; and the references to "employer's policies" were replaced by references to "compulsory insurance policies". These changes, while going beyond the limits contemplated by s.5G(16) are within the limits referred to in s.5G(17), as they do nothing to vary the range of persons, acts and circumstances to which any Corporations Act provision applies. Having regard to s.5G(15), a conclusion that a provision is "materially amended after commencement" depends on a finding that neither s.5G(16) nor s.5G(17) applies to it. No such finding is warranted in relation to any of the amendments made to s.40 of the Workers Compensation Supplementation Fund Act 1980 (ACT) since 15 July 2001. 111 The amendments made to s.36 of the Employers' Indemnity Supplementation Fund Act 1980 (WA) after 15 July 2001 entailed substitution of references to s.556 of the Corporations Act for references to s.441 of the Companies (Western Australia) Code in s.36(1) and s.36(2) and insertion of the new sub-s.(4) purporting to declare payment of an amount under s.36(1) or s.36(2) to be an "excluded matter" for the purposes of s.5F of the Corporations Act. I do not consider the added s.36(4) to have any meaningful operation. It is a provision obviously designed to capture the benefit of s.5F by embodying a declaration in terms of s.5F(1). But for reasons I have stated at paragraphs 87 to 92 above, s.5F cannot operate to give s.36 of the Western Australia Act precedence over the winding up provisions of the Corporations Act of the Commonwealth. I therefore proceed on the basis that, although s.36(4) was inserted into the text of the Western Australia Act, it really has no effective operation and therefore cannot, in any realistic sense, be regarded as having amended (in the sense of modifying the ongoing operation of) any provision in force immediately before 15 July 2001. For that reason - and because, in any event, each of s.36(1) and s.36(2) may itself be regarded as a distinct "provision" for the purposes of s.5G of the Corporations Act (see the s.9 definition of "provision" in relation to a "law", the general meaning of which is indicated, although not fixed, by the note to the s.9 definition of "law") – the questions posed by ss.5G(16) and 5G(17) in relation to the amendments since 15 July 2001 should be approached solely by reference to the amendments to s.36(1) and s.36(2) being, in each case, the substitution of the reference to s.556 of the Corporations Act for the reference to s.441 of the Companies (Western Australia) Code. 112 Taken at face value, that substitution is not within s.5G(16)(a) because the reference replaced by a reference to a provision of the Corporations Act was not a reference to a provision of the Corporations Law. It was a reference to a provision of the Companies (Western Australia) Code. But closer analysis shows, I think, that the change is in reality within s.5G(16)(a). Section 90(4) of the Corporations (Western Australia) Act 1990 (WA) provided: "Subject to subsection (4) and to any regulations in force under subsection (7), a reference in an instrument to a provision of a co-operative scheme law or of Code regulations is to be taken to include a reference to the corresponding provision of a national scheme law of this jurisdiction or of the Corporations Regulations, or ASIC Regulations, of Western Australia as the case may be." By virtue of ss.80(1) and 13 of that Act, the reference to an "instrument" in s.90(4) included a reference to a Western Australia Act. There being no relevant impact by s.90(4) or regulations in force under s.90(7), it follows, in light of the meanings given to "national scheme law", "co-operative scheme law" and "corresponding provision", that the effect of s.90(4) of the Corporations (Western Australia) Act was to cause the references to s.441 of the Companies (Western Australia) Code in s.36 of the Employers' Indemnity Supplementation Fund Act 1980 (WA) to be read as including references to s.556 of the Corporations Law of Western Australia as from the commencement of the Corporations (Western Australia) Act 1990 (WA) on 1 January 1991. The substitution of reference to s.556 of the Corporations Act by the amending Act of 2003 must therefore be taken to be within the limits contemplated by s.5G(16)(a) of the Corporations Act . 113 In the end, therefore, the conclusion is that neither the Australian Capital Territory provision nor the Western Australia provision has been "materially amended since commencement" and that each of the nine State and Territory cut-through provisions is, for the purposes of s.5G, a "pre-commencement (commenced) provision". The nature of the interaction between each such provision and a provision of the Corporations Act must therefore be determined by reference to item 1 in the table in s.5G(3). Impact of s.5G on State and Territory cut-through provisions – item 1, condition (a) 114 The next step is to consider each of the State and Territory cut-through provisions in the light of the conditions in the third column against item 1 in the table in s.5G(3). The question posed by condition (a) is whether, immediately before commencement of the Corporations Act on 15 July 2001, it "operated … despite" the provision of the Corporations Law of the State or Territory in question corresponding to the provision of the Corporations Act interaction which is being considered. The several State and Territory provisions need to be considered separately for this purpose. 115 I begin with the Australian Capital Territory provision, being s.40 of the Workers Compensation Supplementation Fund Act 1980. Immediately before commencement of the Corporations Act 2001 (Cth) on 15 July 2001, s.40 operated "despite" Division 6 of Part 5.6 of the Corporations Law of the Australian Capital Territory. This is because of s.11(2) of the Corporations Act 1989 (Cth): "Division 6 of Part 5.6 of the Corporations Law of the Capital Territory has effect subject to section 40 of the Workmen's Compensation Supplementation Fund Act 1980 of that Territory." Condition (a) is therefore satisfied in relation to s.40 of the Workers Compensation Supplementation Fund Act 1980 (ACT). 116 Dealing with the remainder of the provisions and having regard to s.5 and s.6 of the 1990 corporations statute of each State and the Northern Territory, it is first necessary to determine, for the purposes of condition (a), when each of the State and Territory cut-through provisions was enacted. This is because s.5 and s.6 of each of those statutes distinguish between Acts enacted before the commencement of the 1990 statute on 1 July 1991 and those enacted after that commencement. Acts amending existing Acts are clearly relevant to this. Five of the State and Territory cut-through provisions – s.235 of the Workers Compensation Act 1987 (NSW), s.98(3) of the Workers Compensation Act 1958 (Vic), s.129 of the Workers Rehabilitation and Compensation Act 1988 (Tas), s.137(3) of the Work Health Act (NT) and s.36 of the Employers Indemnity Supplementation Fund Act 1980 (WA) – were enacted before 1 January 1991. By virtue of s.6 of the 1990 corporations statute of the relevant State or the Northern Territory, therefore, the continued operation of each of those five provisions after 1 January 1991 without interference from the Corporations Law of the relevant jurisdiction was assured. That, in turn, means that each such State or Territory provision, in the words of condition (a), "operated, immediately before this Act commenced, despite" the potentially conflicting provisions as to winding up in the Corporations Law of the relevant State or the Northern Territory. 117 The three remaining cut-through provisions – s.191 of the Motor Accident Compensation Act 1999 (NSW), s.103V of the Home Building Act 1989 (NSW) (inserted by the Insurance (Policyholders Protection) Legislation Amendment Act 2001 (NSW)) and s.61 of the Motor Accident Insurance Act 1994 (Qld) – were all the product of Acts enacted after 1 January 1991. Immediately before 15 July 2001, therefore, the interaction of each such provision with the Corporations Law of the relevant State was as specified in s.5 of the 1990 corporations statute of that State. According to s.5(1) in each case, the Act by which the cut-through provision was introduced was "not to be interpreted as … altering the effect or operation of" the State's Corporation Law, except insofar as the Act introducing the cut-through provision "provides expressly for that Act … to have effect despite a specified provision, or despite any provision" of the State's Corporations Law. 118 It was not suggested in submissions that the relevant introducing Act (or, for that matter, any other Act) of the relevant State said in explicit terms, by means of references to enactments by name, that any of these three provisions was "to have effect despite" Corporations Law provisions. Rather, there was reliance in the submissions on general principles of statutory interpretation, in particular the principle that a later specific enactment must be taken to qualify the operation of an earlier general enactment. It is necessary to decide whether such matters of implication are sufficient to meet the "provides expressly" requirement of s.5(2). 119 In general, one would be inclined to think that a formulation employing the words "provides expressly" was not satisfied by something that did not, in direct and explicit terms, make the specified provision by direct words. But, as authority binding on me shows, that is too simplistic a view. In Public Service Association of New South Wales v Industrial Commission of New South Wales (1985) 1 NSWLR 627, the Court of Appeal was called upon to interpret s.8 of the Public Service Act 1978: "Unless otherwise expressly provided, nothing in this Act affects the Industrial Arbitration Act 1940." Having regard in particular to the approach taken by Kitto, Taylor and Owen JJ in Rose v Hvric (1963) 108 CLR 353, the members of the Court of Appeal held that, notwithstanding s.8, the Public Service Act could effectively impinge upon the Industrial Arbitration Act by negative implication. Kirby P, speaking of the phrase "otherwise expressly provided" in s.8 said: "Clearly, if it means 'expressly' by specific reference to the Industrial Arbitration Act 1940 , the provisions in the Public Service Act do not so provide, for there is no reference, in terms, in the latter to the former. There is some authority that suggests the need to make an express and specific reference to the competing statute in order to derogate from it: see Maughan AJ in Watt v Geddes (1936) 36 SR (NSW) 447; 53 WN 161. However, there is a great deal of authority to the contrary. This suggests that it is not necessary to refer to the statute by name in order 'expressly' to provide in respect of it: see Re Silver Brothers Ltd; Attorney-General for Quebec v Attorney-General for Canada [1932] AC 514 at 522-523. In Rose v Hvric (1963) 108 CLR 353, the High Court of Australia suggested that the word 'expressly' in provisions analogous to the present legislation, was satisfied if 'the necessary result of the operation of one Act would be to affect the operation of the other'. A distinction was drawn between a 'mere inference' from an enactment and the enactment itself (ibid at 358): '... The contrast is between, on the one hand, a conclusion from what has been enacted that a further provision is a logical next step, the legislature not having taken that next step for itself, and, on the other hand, a conclusion that a provision which has been made means more than it explicitly says ... Explicit or implicit contradiction is efficacious; merely 'inferential contradiction' ... is not.'" 120 Kirby P took the view that effect would be afforded to s.8 "by limiting the competition of the Public Service Act to explicit and implicit contradiction and excluding inferential contradiction". Priestley JA likewise saw the relevant question as whether the meaning of the operative provisions said to affect the Industrial Arbitration Act "is, by way of negative implication, that the functions and powers they create are to be exercised under that Act by the persons mentioned in them and no other persons". Street CJ also regarded a negative implication as sufficient to satisfy the "otherwise expressly provided" condition. 121 The three provisions of State law with which I am currently concerned carry a clear negative implication. Each made specific provision concerning administration of the winding up of a company of a particular kind (that is, an insurer providing insurance for the purposes of the particular statutory scheme) that could only be meaningful if the otherwise applicable Corporations Law provisions were displaced and overridden. The negative implication against the continued operation of the Corporations Law provisions was central to each provision. In the words used in Rose v Hvric, "the necessary result of the operation of one Act would be to affect the operation of the other". In these circumstances, I consider the correct approach to be that which regards each of the three State provisions as one which, although made effective by an Act enacted by the Parliament of the State after the commencement of its 1990 corporations statute, "provides expressly" for the consequences the provision envisages "despite" the inconsistent Corporations Law provisions of general application. 122 Condition (a) in the third column of item 1 in the table in s.5G(3) is accordingly satisfied in relation to each of the eight cut-through provisions of the States and the Northern Territory – in one case for the reasons stated at paragraph 115 above, in four cases for the reasons stated at paragraph 116 and in three cases for the reasons stated at paragraphs 117 to 121. 123 This conclusion, combined with the absence of any regulation or other provision relevant to condition (b), means that each of State and Territory cut-through provisions is a provision of the kind in the second column of item 1 in the s.5G(3) table in respect of which both conditions in column 3 are met. Each such provision is accordingly one to whose interaction with a provision of the Corporations Act s.5G applies. Conclusions on the Corporations Act issues 124 I now record in summary form the conclusions reached with respect to the interaction between the State and Territory cut-through provisions and ss.555, 556 and 562A of the Corporations Act 2001 (Cth). First, each of the cut-through provisions will be adversely affected by s.109 of the Constitution unless one of s.5E, s.5F and s.5G of the Corporations Act operates in relation to its interaction with the substantive Corporations Act provisions. Second, neither s.5E nor s.5F so operates. Third, however, the interaction is, in each case, one to which s.5G of the Corporations Act applies by virtue of s.5G(3). This is because the State or Territory provision is, in each case, both a provision of the kind referred to in the second column against item 1 in the table in s.5G(3) and a provision that satisfies the conditions in the third column against that item 1. 125 The fourth and final conclusion is therefore that (a) none of s.555, s.556 and s.562A of the Corporations Act prohibits the doing of an act or imposes a liability for doing an act where one of the State and Territory cut-through provisions specifically authorises or requires the doing of that act (s.5G(4)); and (b) the provisions of Chapter 5 of the Corporations Act (including s.555, s.556 and s.562A) do not apply to the winding up of any of the HIH companies to the extent to which the winding up is carried out in accordance with any of the State and Territory cut-through provisions (s.5G(8)). 126 There are no doubt questions to be addressed as to the precise implications of this fourth conclusion. Apart from anything else, there are likely to be questions about what is within the scope of the words "specifically authorises or requires" in s.5G(4) and about the effect of "to the extent to which" and "in accordance with" in s.5G(8). These, however, are not matters than can usefully be dealt with at this stage. The subrogation issues 127 It was submitted on behalf of the liquidators that, apart altogether from the cut-through provisions of State and Territory legislation, the several statutory authorities which make substitute payments to persons holding policies issued by the HIH companies are, simply by virtue of the making of those payments, entitled by subrogation to certain rights of a preferred kind in the winding up of the HIH companies. The general principle upon which reliance is placed is, in effect, that a person (A) who discharges a liability of another (B), in circumstances where that other (B) has some right of reimbursement or recoupment in respect of the liability as against a third person (C), is regarded by equity as succeeding to that right. In cases where such a principle is asserted, "… the quest always is to isolate that attribute of the relations between A, B and C … which makes A more than a stranger to the nexus between B and C and generates in his favour an equity satisfied only by requiring B to pursue his legal rights against C for the benefit of and at the direction of A." (Meagher, Gummow and Lehane's "Equity Doctrines and Remedies", 4th edition (2002), p.352.) 128 In support of the contentions concerning subrogation, the liquidators rely heavily on the decision of Crockett J in Re Palmdale Insurance Ltd (No 3) (above). That case involved two insurance companies in the course of insolvent winding up. Certain claims under workers compensation policies issued by the companies had been met and paid by statutory authorities required by State and Territory legislation to meet the claims. That matter is described as follows in the judgment (at 442): "In each State and Territory of the Commonwealth there was either prior to the making of orders for winding up in existence or subsequent thereto enacted with retrospective effect legislation that made provision for payment of workers compensation to claimants whose employers held policies of workers compensation with one or other of the companies. Pursuant to those enactments such payments have been made and have been so made by the particular authority ('insurance Commissioner') prescribed by the particular statute or ordinance as being subject to the liability to meet the claim. Although the object of each enactment is the same the technique adopted for its implementation and the language in which it is expressed varies for the most part from one enactment to another. It was for this reason that (apart from the Insurance Commissioner of Western Australia --actually described as 'The Workers' Assistance Commission of the State of Western Australia'--who was unrepresented) in the proceedings before me each Insurance Commissioner, other than those in Victoria and Tasmania, was separately represented. Thus, in the case of each claim in the windings up made pursuant to a workers compensation policy, as it has not been the employer but the relevant Insurance Commissioner who has discharged the liability created by the claim, the Insurance Commissioners maintain that they are accordingly subrogated to the rights of the employer and so have bestowed on them a right in law to be recouped in respect of the discharged liability out of the assets of the companies in liquidation." 129 The claim of each insurance commissioner extended beyond a claim "to be recouped in respect of the discharged liability out of the assets of the companies in liquidation". It was a claim to have recoupment in the way in which the insured employer would have been entitled to recoupment by reference to s.292(5) of the Companies Act 1961 (Vic), the application of which was also in issue in the proceedings. Section 292(5) (the equivalent of which, in the Corporations Act 2001 (Cth), is s.562) provided that, where the company in the course of winding up was insured against a liability to a third party, such a liability was incurred and an amount in respect of the liability was received by the company or the liquidator from the insurer, the amount received was, after deduction of expenses, to be paid by the liquidator to the third party to the extent necessary to discharge the liability to the third party, such payment being in priority to other payments in the winding up. The claims of the insurance commissioners were thus claims to be subrogated to the statutory rights in the winding up conferred by this section upon the insured employers whose workers compensation liabilities the insurance commissioners had discharged in accordance with statutory requirements that they do so. 130 The claims by the insurance commissioners based on subrogation were successful. Crockett J dealt with the matter thus (at 446): "The right to be so subrogated was said to arise from the application of general principles or alternatively from the express or implied right to be so subrogated conferred by Act of Parliament and to be found in the various statutory provisions of each of the States and Territories. Counsel for each of the represented Insurance Commissioners relied principally upon the general law to support their claim to a right of subrogation. This was because in the case of some of the statutory provisions no express right of subrogation was granted to the Insurance Commissioner and it might have been difficult to imply a statutory creation of the right. Then, even in the case of the statutory creation of the right it was thought that (save for the case of the Victorian legislation) in a winding up in Victoria the law to be applied, including Victorian private international law, might not include the statutory provisions of other jurisdictions. However, as I understood them, counsel for each of creditors other than the Insurance Commissioners did not contend that the Insurance Commissioners were not subrogated to the rights of the third parties (employers). Nor, in my opinion, could they realistically have done so. The present is a classic case of its being just and equitable that the Insurance Commissioner should have the benefit of the remedy of subrogation. Such a remedy will be granted where one unofficiously confers a benefit on another such as the payment of money and it is just in all the circumstances that the former should be allowed to have the benefit of the latter's rights in order to prevent his unjust enrichment: see Goff and Jones, The Law of Restitution, 2nd ed., p. 406. The right of subrogation is a remedy designed to transfer rights from one person to another by operation of law: Orakpo v Manson Investments Ltd [1978] AC 95, at p. 104, per Lord Diplock." 131 Central to the conclusion reached by Crockett J was the notion that equitable principle may operate to supplement specific statutory provisions conferring a right of recoupment and recourse. In some cases, it seems, there was no such statutory right, while in others there was an apprehension that because the statutory right derived from legislation of a State or Territory other than Victoria (the law of which governed the winding up), it was ineffective to bind the company and the liquidator. 132 This notion should, I think, be approached with caution in the present case. The question whether statutory rights and remedies coexist with general law rights and remedies or supplant them is, in every case, to be answered by construing the statute. It will sometimes be clear that the statute aims merely to supplement a general law right or to assist the vindication of that right. On other occasions, the statute will evidence an intention of creating a substituted right or remedy. 133 On the whole, it seems to me that the several cut-through provisions of State and Territory law, as they operate with the assistance of s.5G of the Corporations Act, are of a substitutional kind. In the first place, there is not here, as there was in the Palmdale case, doubt as to the territorial reach and effect of the cut-through provisions. According to the analysis I have made, they are all effective to change the course of events that would otherwise flow from ss.555, 556 and 562A of the Corporations Act. Second, each cut-through provision now in issue deals comprehensively with the nature and extent of the statutory authority's recourse in respect of reinsurance referable to claims met by it in accordance with its statutory duties. There does not seem to me to be any gap that needs to be filled by reference to general equitable principle. An attempt by a body akin to the statutory authorities involved here to enhance or supplement a clear and comprehensive statutory scheme of recoupment by resort to general law principles was unsuccessful in Skandia America Reinsurance Corporation v Schenck 441 F Supp 715 (1977). 134 Third and, I think, most significantly, the position to which the statutory authorities would seek to succeed by subrogation is, in the present statutory context, a position under s.562A of the Corporations Act, that being the provision that here plays the role of s.292(5) of the Companies Act 1961 in the Palmdale case. The effect of the cut-through provisions, however, is to create either a new and special right in respect of the reinsurance that is inconsistent with the effectuation of s.562A in relation to the particular payment or a new and special right to participate in the winding up that is superior to the s.562A right. Section 562A operates only if an amount is received by the company or its liquidator under a contract of reinsurance. This is the effect of s.562A(1)(b). The section then addresses in s.562A(2) and (3) two alternative possibilities, namely, that the amount received, after deducting expenses, equals or exceeds the amounts payable by the company under relevant insurance contracts; and that the net amount received is insufficient to cover all such amounts. In the first situation, persons covered by the relevant insurance contracts have a priority right to the net reinsurance recovery limited, however, to their entitlements under insurance contracts. In the second situation, there is a priority right to a proportion of the net recoveries pro rata according to entitlements under insurance contracts. Under a Class A cut-through provision, on the other hand, the statutory right is a right directed towards recovery from the reinsurer of "the amount due under" the reinsurance contract being, it appears, the whole of the amount (although limited by the "extent" of the payments out of the statutory fund) without regard for any margin by which the total recoverable under the reinsurance is less than the total involved in the insurances the subject of the reinsurance. This is one example of the way in which the specific statutory schemes are incompatible with the concept of mere succession by subrogation to independently existing s.562A rights. The incompatibility exists, however, in relation to each statutory scheme. 135 In short, I do not see how an authority or body given by statute a special right or position in relation to reinsurance that differs from and is superior to that afforded to an insured holding a policy of the class to which the reinsurance relates can disregard that special right or position and somehow fall back on a derivative position claimed through that insured. 136 Directions given to the liquidators in relation to the matters on which they seek guidance should therefore be formulated without reference to the operation of the principles of subrogation discussed in the Palmdale case. Framing the directions 137 It was agreed at the conclusion of the hearing of the liquidators' application for directions under s.479(3) that formulation of the precise terms of any directions should await my conclusions on the matters of substance with which these reasons deal. Those terms will depend in part on those conclusions and in part on features of the actual wording of the State and Territory provisions. I have not attempted, at this point, to deal with the latter matter comprehensively. 138 The appropriate course now will be for the liquidators to give consideration to the form of the directions they will ask the court to make in light of the matters covered in these reasons. The liquidators' second further amended originating process will be stood over to allow further submissions to be assembled and made. 139 It remains only to emphasise the nature and effect of directions under s.479(3). Despite the fact that State and Territory authorities became parties to the liquidators' application (or, in some cases, were heard without becoming parties), the jurisdiction invoked by the liquidators is the jurisdiction created by s.479(3). It is a jurisdiction available only to liquidators. Directions eventually made by the court will accordingly have no operation inter partes. I respectfully adopt, in this connection, the following description of the jurisdiction and its implications in the judgment of Pullin J in Australian Securities and Investments Commission v Rowena Nominees Pty Ltd (2003) 45 ACSR 419 at 422-3: "An application for directions under s 479(3) of the Corporations Act 2001 is an administrative non-adversary proceeding: Re Murphy & Allen; Re BPTC (in liq) (1996) 19 ACSR 569; at 570. Directions given under s 479 (3) will protect the liquidator against subsequent allegations of breach of duty if the liquidator has made full disclosure of the facts, but no binding determination of substantive issues can be made under this provision: see Re G B Nathan , above [(1991) 24 NWSLR 674], Re Magic Aust Pty Ltd (in liq) (1992) 7 ACSR 742; the authorities cited by Goldberg J in Re Ansett Australia Ltd (2001) 39 ACSR 355; at [59]; and Re Murphy & Allen , above, at 570. As a result, nothing that I have said about the background circumstances, and no directions I give, will have any binding effect in relation to proceedings between Rowena and the growers, and nor will it resolve any legal issues which may exist between Rowena and lenders (who might be identified)." ********** Last Modified: 12/03/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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