McGrath & Anor in their capacity as liquidators of HIH Insurance Ltd (in liq) [2005] NSWSC 506

Reported Decision : 54 ACSR 55

New South Wales Supreme Court

CITATION : McGrath & Anor in their capacity as liquidators of HIH Insurance Ltd (in liq) [2005] NSWSC 506

HEARING DATE(S) : 27/05/05

JUDGMENT DATE : 27 May 2005

Equity Division JURISDICTION : Corporations List

JUDGMENT OF : Barrett J

DECISION : Order for appointment of replacement liquidator

CATCHWORDS : CORPORATIONS - winding up - appointment of two liquidators by the court - one liquidator about to resign - procedure for installation of replacement liquidator by the court

Corporations Act 2001 (cth), ss.473, 503 LEGISLATION CITED : Supreme Court (Corporations) Rules 1999, r. 7.1

Re Aplin Brown & Co Ltd [1902] St R Qd 67 CASES CITED : Re Vouris (2004) 49 ACSR 543 Re Wily (2003) 49 ACSR 94

PARTIES : Anthony Gregory McGrath and Alexander Robert Mackay Macintosh - in their capacity as Liquidators of HIH Insurance Ltd (In Liquidation) - Applicants

FILE NUMBER(S) : SC 1799/01

COUNSEL : Mr A.P. Ryan, Solicitor - Applicants

SOLICITORS : Blake Dawson Waldron - Applicants

LOWER COURT JURISDICTION :

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

BARRETT J

FRIDAY 27 MAY 2005

1799/01 - ANTHONY GREGORY MCGRATH AND ALEXANDER ROBERT MACKAY MACINTOSH - IN THEIR CAPACITY AS LIQUIDATORS OF HIH INSURANCE LTD (IN LIQUIDATION)

JUDGMENT

1 The liquidators of HIH Insurance Ltd are Mr McGrath and Mr Macintosh. They were appointed to be liquidators together by order made by this court. 2 The application before me this morning arises from the circumstance that Mr Macintosh intends to resign as one of the liquidators on 1 July 2005. He says in his affidavit sworn on 19 April 2005 that this will be in consequence of his decision to reduce his overall workload and his commitments generally. The affidavit of the other liquidator, Mr McGrath, sworn on 21 April 2005 refers to Mr Macintosh's proposed resignation as liquidator and to the necessity Mr McGrath sees for two persons to continue as liquidators of not only HIH Insurance Ltd but also 42 other companies in respect of which corresponding applications are now before me. That necessity arises, in Mr McGrath's view, from the size and complexity of the winding up of the company itself and the windings up of the various other companies in the HIH group. The overall administration involves a significant number of entities and multiple jurisdictions and is expected to continue for at least another four years. 3 Mr McGrath and Mr Macintosh propose that Mr Honey, an official liquidator, who is a partner with them in the firm McGrath Nicol & Partners, should become joint liquidator with Mr McGrath, in consequence of Mr Macintosh's retirement. To that end, Mr McGrath and Mr Macintosh have filed an interlocutory process seeking appropriate orders of the Court. 4 Mr Ryan has this morning made submissions about the various possible procedural approaches that might be taken to this situation. He has referred to the decision in Re Vouris (2004) 49 ACSR 543, where an analogous situation arose but in the context of voluntary windings up. For reasons discussed at paragraphs [12] and following of that judgment, the situation in which one of two joint liquidators under a voluntary winding up was to resign and be replaced was dealt with by an order of the court removing both liquidators and appointing as liquidators both the pre-existing liquidator who was to continue and the incoming replacement for the liquidator who was to resign. That approach was taken because, in the case of voluntary winding up, s.503 is the only provision empowering the court to make an appointment and, in the circumstances of the particular windings up, considerations of cost and efficiency did not warrant the convening of meetings of members or creditors to make new appointments. The power under s.503 is a composite power both to remove and to appoint. There could thus be no appointment without a removal and it was in that context, and in view of the observations of Sir Samuel Griffith when Chief Justice of the Supreme Court of Queensland in Re Aplin Brown & Co Ltd [1902] St R Qd 67, that the matter was dealt with in the Vouris case by an order removing the two joint liquidators and re-appointing one of them together with the incoming appointee. 5 In this case, however, each winding up is a winding up by the court and the applicable provision is by s.473. In a case of that kind, s.473(1) enables a liquidator to resign and s.473(7) empowers the court – indeed, requires the court - to fill a vacancy in the office of a liquidator appointed by the court. Section 473(1) is in the following terms: "A liquidator appointed by the Court may resign or, on cause shown, be removed by the Court."