Supreme Court New South Wales Medium Neutral Citation: Amaca Pty Limited (under NSW administered winding up) & Ors v Messrs A G McGrath & C J Honey (as liquidators of the HIH Group of Companies) & Anor [2012] NSWSC 1523 Hearing dates: 6 and 22 November 2012 Decision date: 11 December 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Orders made under Corporations Act 2001 (Cth) s 562A(4). Catchwords: CORPORATIONS - Winding up - Insolvency - Proceeds of contract of reinsurance - Application for orders under Corporations Act 2001 (Cth) s 562A(4) - Whether "just and equitable" to make orders sought by the Plaintiffs. Legislation Cited: - Corporations Act 2001 (Cth) Pt 5.6 Div 1A, ss 555, 556, 562A, 562A(1), 562A(1)(a), 562A(1)(b), 562A(2), 562A(2)-(3), 562A(3), 562A(4), 562A(5), 562A(5)(a), 562A(5)(d) Cases Cited: - Amaca Pty Ltd v McGrath [2012] NSWSC 176; (2012) 87 ACSR 625 - Amaca Pty Ltd v McGrath (as liquidators of HIH Underwriting & Insurance (Australia) Pty Ltd & Anor [2011] NSWSC 90; (2011) 82 ACSR 281 - AssetInsure Pty Ltd v New Cap Reinsurance Corporation Ltd (in liq) [2006] HCA 13; (2006) 225 CLR 331 - Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273 - HIH Casualty & General Insurance Ltd v Building Insurers' Guarantee Corporation [2003] NSWSC 1083; (2003) 202 ALR 610 - Re HIH Casualty & General Insurance Ltd [2005] NSWSC 240 - McGrath & Anor; Re HIH Insurance Ltd [2008] NSWSC 9 - New Cap Reinsurance Corporation Ltd v Faraday Underwriting Ltd [2003] NSWSC 842 - New South Wales v Bujdoso [2007] NSWCA 44; (2007) 69 NSWLR 302 - Smith v Federal Commissioner of Taxation [1987] HCA 48; (1987) 164 CLR 513 - Technical Products Pty Ltd v State Government Insurance Office (Qld) [1989] HCA 24; (1989) 167 CLR 45 Category: Principal judgment Parties: Amaca Pty Limited (under NSW administered winding up) (First Plaintiff) Amaba Pty Limited (under NSW administered winding up) (Second Plaintiff) ABN 60 Pty Limited (under NSW administered winding up) (Third Plaintiff) Messrs A G McGrath & C J Honey (as liquidators of the HIH Group of companies) (First Defendant) HIH Casualty & General Insurance Limited (in liquidation and subject to scheme of arrangement) (Second Defendant) Representation: Counsel: K. Rees SC (Plaintiffs) R. M. Foreman (Defendants) Solicitors: Henry Davis York (Plaintiffs) Ashurst (Defendants) File Number(s): 12/277122 Judgment 1The Plaintiffs in these proceedings are Amaca Pty Limited (under NSW administered winding up) ("Amaca"), Amaba Pty Limited (under NSW administered winding up) ("Amaba") and ABN 60 Pty Limited (under NSW administered winding up) ("James Hardie"). Two of the Plaintiffs, Amaca and Amaba, were involved in the manufacture and distribution of a variety of products containing asbestos until 1987. The Defendants are Messrs A G McGrath and C J Honey ("Liquidators") as liquidators of HIH Casualty & General Insurance Limited (in liquidation and subject to scheme of arrangement) ("HIH C&G"). 2The Plaintiffs seek orders under s 562A(4) of the Corporations Act 2001 (Cth) that ss 562A(2)-(3) of the Corporations Act do not apply to the receipt of specified monies in respect of policy years commencing 31 March 1993, 31 March 1994, 31 March 1995 and 31 March 1996 (which have been referred to in these proceedings as the "End-Clator" years) and that those monies should be paid by the Defendants to the Plaintiffs. This application is made in circumstances that the Plaintiffs and HIH C&G have reached a settlement of their claims in respect of the End-Clator years and HIH C&G has claimed on its reinsurers and received monies from several reinsurers in the manner noted below. A Deed of Commutation and Settlement dated 5 July 2012 provided for HIH C&G to accept a proof of debt by Amaca for $20 million in respect of its claim. The Liquidators have now received approximately $7.8m from reinsurers on the End-Clator policies. A distribution of $6.2m has been paid to the Plaintiffs, out of HIH C&G's general funds, in accordance with the terms of the deed. That payment would be deducted from the amounts that the Plaintiffs seek to have paid to them in accordance with an order under s 562A(4) of the Corporations Act. Further monies may be received from two further reinsurers. 3The differing interests at stake in this case are essentially those of the Plaintiffs and other insurance creditors of HIH C&G. Although no representative of those other creditors is a party, I am satisfied that the Liquidators have adequately identified the arguments against the making of the orders that the Plaintiffs seek. 4The Plaintiffs have previously made two similar applications. The first concerned insurance and reinsurance arrangements for policy years 1981/82 and 1982/83 and was allowed in Amaca Pty Ltd v McGrath (as liquidators of HIH Underwriting & Insurance (Australia) Pty Ltd & Anor [2011] NSWSC 90; (2011) 82 ACSR 281 ("Amaca 1"). The second application, concerning policy years 1989/90 to 1992/93 ("mid-Clator" years) was allowed in Amaca Pty Ltd v McGrath [2012] NSWSC 176; (2012) 87 ACSR 625 ("Amaca 2"). Application of s 562A of the Corporations Act 5Section 562A(1) of the Corporations Act provides that the 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." The term "relevant contract of insurance" used in s 562A(1) means a "contract of insurance entered into by the company, as insurer, before the relevant date" and includes contracts of reinsurance: AssetInsure Pty Ltd v New Cap Reinsurance Corporation Ltd (in liq) [2006] HCA 13; (2006) 225 CLR 331 at [86]-[87]. This section overrides both s 555 and s 556 of the Corporations Act by directing that the specified assets be applied towards the claims with which it is concerned: HIH Casualty & General Insurance Ltd v Building Insurers' Guarantee Corporation [2003] NSWSC 1083; (2003) 202 ALR 610 at [70]; Amaca 1 at [9], [70]. The operation of this section was considered in detail by Barrett J in his decision in Amaca 1, where his Honour noted that the section is an exception to the general rule laid down in s 555 of the Corporations Act that all debts and claims proved in a winding up rank equally and, if the company's property is insufficient to meet them in full, they must be paid proportionately. 6The requirements of s 562A(1)(a) of the Corporations Act are satisfied in this case since HIH C&G was insured under contracts of reinsurance entered into before the relevant date (being the day on which the winding up of HIH C&G is taken to have begun under Pt 5.6 Div 1A of the Corporations Act, namely 27 August 2001) in respect of its liability to pay amounts in respect of contracts of insurance which it had entered in favour of the Plaintiffs. 7Section 562A(1)(b) of the Corporations Act in turn requires that, first, an amount "in respect of that liability" is received by the insurer. I held in Amaca 2 at [7] that the phrase "that liability" in s 562A(1)(b) extends to a contingent liability of the insurer which has the benefit of contracts of reinsurance to pay amounts in respect of a relevant contract of insurance, and not only an established or admitted liability, and I continue to take that view. That requirement is satisfied in this case, notwithstanding that HIH C&G disputed liability in respect of the Plaintiffs' claims under the relevant policies and entered into the Deed of Commutation and Settlement with the Plaintiffs without admission of liability, where HIH C&G sought indemnity from relevant reinsurers in respect of the claims and received reinsurance recoveries from them. 8Section 562A(1)(b) of the Corporations Act requires that, second, an amount is received by the insurer under the contract of reinsurance. In Amaca 2, I expressed the views that a payment is made under a contract of reinsurance where the amount represents a discharge of payment obligations created by that contract, including by a commutation of rights under that agreement. The liquidators point out that one feature noted in Amaca 2, namely express acknowledgements in agreements with reinsurers that the amounts were intended to be paid to HIH C&G under contracts of reinsurance is absent in this case. However, the Liquidators submit, and I accept, that such an acknowledgement is a matter that may assist in, but is not necessary to, the characterisation of a payment as within the scope of s 562A. The Liquidators submit, and I accept, that the payments in this case are made under contracts of reinsurance and in respect of HIH C&G's actual or contingent liabilities to the Plaintiffs, notwithstanding the fact that reinsurers did not admit liability under those policies. When operation of s 562A(2)-(3) can be varied 9Where s 562A(1) of the Corporations Act applies, the usual position is that a liquidator must distribute reinsurance proceeds among the insured creditors in the manner specified in s 562A(2)-(3) of the Corporations Act. Section 562A(3), which would be applicable in the present circumstances absent an order under s 562A(4), relevantly provides for the liquidator to provide each insured a proportion of their claim calculated in the manner specified. 10The Court may make an order providing for a different allocation of reinsurance proceeds under s 562A(4) which relevantly provides that: "(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." A person to whom an amount is payable under a relevant contract of insurance has standing to apply for an order under s 562A(4). The Liquidators submit, and I accept, that the Plaintiffs have standing to make such an application where they have the benefit of a compromise of disputed claims under their contracts of insurance, reflected in the admission of their claims in the schemes of arrangement in respect of HIH C&G in the amount of $20 million. 11Subsection 562A(4) of the Corporations Act allows the Court to displace whichever of s 562A(2) or (3) applies in the circumstances and, by its order, substitute a method of application of the amount of reinsurance proceeds which is different from that which would otherwise have applied under the provision which is displaced: Amaca 1 at [10]. The "just and equitable" criterion adopted in s 562A(4) requires the court to proceed in a way to which Barrett J referred in Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273 at [45]-[47] in a passage which his Honour quoted in Amaca 1; his Honour also noted (at [67]) that s 562A(4) of the Corporations Act confers a discretion that, while wide, must be exercised judicially in the light of the whole of the circumstances surrounding the relevant subject matter. 12Certain matters which the Court may take into account in considering whether to make such an order are specified, in an inclusive manner, in s 562A(5), although those matters are not exhaustive: Re HIH Casualty & General Insurance Ltd [2005] NSWSC 240 at [90]. Those matters are as follows: "(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." 13The Plaintiffs led evidence in this application that was also led in Amaca 1 and Amaca 2 in order to establish the historical patterns of dealings between James Hardie, HIH C&G and London reinsurers. Evidence of a decision, or a finding of fact, in another Australian proceeding is not admissible in this proceeding to prove the existence of the fact that was in issue in that proceeding, by reason of s 91(1) of the Evidence Act 1995 (NSW). However, the factual matters established by uncontested evidence in the earlier proceedings, and noted in the judgments in Amaca 1 and Amaca 2, were again established in these proceedings. 14By way of a broad outline, C.E. Heath Underwriting Agencies Pty Limited ("CEHUA") commenced writing insurance cover for the James Hardie Group in 1979. In that year, CEHUA wrote a primary layer of $1 million and an excess layer of $3 million in excess of the primary layer under binder arrangements with London underwriters. The balance of cover was obtained through C.E. Heath plc as "facultative reinsurance", initially with CEHUA, and from 1980 with another entity within the CE Heath Group. In the earlier years considered by Barrett J in Amaca 1, entities within the CE Heath (and later HIH) Group facilitated insurance from the London reinsurance market for the James Hardie Group and it did not retain any significant part of the risk. During the 1980s, those entities "fronted" (a term which does not have any pejorative connotation in this context) for any portion of insurance for the James Hardie Group that was facultatively reinsured with the London market and did not charge a premium but obtained a commission on placing the risk. 15The arrangements for the Mid-Clator years, 1989/90 to 1992/93, were essentially the same as those undertaken in the 1981/82 and 1982/83 years, although the insurance was placed with HIH C&G and Minet London was involved in place of C.E. Heath London, as established by the evidence led before me in Amaca 2 and again in these proceedings. In the Mid-Clator years, the policies written by HIH C&G were reinsured through the London market, except for, in some years, a small percentage of the primary layer or an excess layer retained by HIH C&G. In those years, HIH C&G wrote insurance for the James Hardie Group on the basis that reinsurance was arranged by Minet London for the risk to be assumed by HIH C&G in advance of and as a precondition to, HIH C&G's agreement to accept the risk. There were direct dealings between the James Hardie Group and the reinsurers including briefings of the reinsurers in each year to assist in placing the reinsurance cover; agreement was reached between James Hardie Group's insurance brokers and the two leading London reinsurers as to the policy wording which was then adopted by HIH C&G; the premium payable was negotiated by the London brokers with the London reinsurers; and the premium paid by the James Hardie Group to HIH C&G and the premium paid by HIH C&G to the reinsurers were the same, with the exception of a $10,000 difference in one year. There was evidence that it was necessary for such reinsurance to be effected due to HIH C&G's limited capacity to write such risks of the magnitude involved in the James Hardie Group's cover. 16The Plaintiffs also relied in this application on the affidavit of Ms Narreda Grimley dated 15 August 2012 and 16 October 2012 and the affidavit of Mr David Royle dated 18 August 2012 dealing with arrangements in the End-Clator years. Ms Grimley is the General Manager of the Asbestos Injuries Compensation Fund Limited ("AICF"). Her affidavit exhibits documents relating to insurance placed by the Plaintiffs with HIH C&G in the End-Clator years. In summary: (a) The James Hardie Group held $100 million in insurance cover for the year commencing 31 March 1993, the first $40 million of which included asbestos cover. The $40 million asbestos cover was reinsured through the London market by way of two primary and excess layers. Meetings took place between James Hardie personnel, their London insurance broker, Minet London, and London underwriters in January 1993, correspondence followed and further information was provided up to May 1993. (b) The James Hardie Group held $100 million in insurance cover for the year commencing 31 March 1994, with a limit for asbestos claims of $45 million, of which $40 million is part of the "End-Clator" claim. Cover was issued by HIH C&G and the $40m referrable to asbestos cover was reinsured through the London market by one primary and two excess layers. Correspondence and dealings between the James Hardie Group, Minet London and London underwriters are in evidence as in the previous year. (c) The James Hardie Group held $100 million insurance cover for the year commencing 31 March 1995, with a limit for asbestos claims of $45 million, of which $40 million is part of the "End-Clator" claim. Cover was again issued by HIH C&G and $40 million was reinsured through the London market by a primary and two excess lawyers. Again, correspondence and dealings between the James Hardie Group, Minet London and London underwriters are in evidence. (d) The James Hardie Group held $100 million insurance cover for the year commencing 31 March 1996, with a limit for asbestos claims for $45 million, of which $40 million is part of the "End-Clator" claim. Cover was again issued by HIH C&G and $40 million was again reinsured through the London market by a primary and two excess layers. Correspondence between the James Hardie Group, Minet London and London underwriters is again in evidence. 17The Plaintiffs point to several features of the reinsurance arrangements which, they contend, mean that it is just and equitable to make an order under s 562A(4) of the Corporations Act. The Liquidators also submit, by reference largely to the same factors, that s 562A(5)(a) is satisfied in that it is possible to identify particular relevant contracts of insurance as those in respect of which the contracts of reinsurance were entered into. There is evidence that the relevant reinsurance contracts were obtained by HIH C&G in respect of the cover sought by the James Hardie Group and the Plaintiffs. In this case, as in Amaca 1 and Amaca 2, the insurance contracts under which HIH C&G provided cover to the Plaintiffs can readily be matched with the reinsurance contracts in favour of HIH C&G. HIH C&G entered into those reinsurance contracts for the purpose of providing cover for the Plaintiffs which HIH C&G would not have been able to provide without that reinsurance and in circumstances where the reinsurers could not insure the Plaintiffs directly. The fact that the insurance provided by HIH C&G was dependent on the provision of reinsurance cover was emphasised in the 1993/94 year and again in September 1995, when a suggestion arose that reinsurers would be liable severally but not jointly and a representative of HIH C&G emphasised that it could not be responsible for the failure of the reinsurers to fulfil their obligations and would not carry a $40 million claim. That position is, of course, wholly inconsistent with HIH C&G accepting primary liability on the policy. The premiums paid by the Plaintiffs to HIH C&G were substantially identical to the premiums paid by HIH C&G to the reinsurers. 18The James Hardie Group and its broker were active in assisting HIH C&G to obtain the reinsurance cover in the London market and were aware, through their broker, that substantially the whole of the risk nominally undertaken by HIH C&G had in fact been placed in the London market by facultative reinsurance contracts obtained for that purpose. In particular, the James Hardie Group, through Minet Australia, gave directions to HIH C&G as to the manner in which the reinsurance would be arranged; the James Hardie Group, through Minet Australia, communicated directly with Minet London as the reinsurance broker and the reinsurers and dealt directly with Minet London and the reinsurers in presenting renewal information at face to face meetings in London. 19The question whether the Plaintiffs would be "severely prejudiced", for the purposes of s 562A(5)(d) of the Corporations Act, if s 562A(2)-(3) applied in this case, raises issues which correspond to those considered by Barrett J in Amaca 1. I adopted the same approach in Amaca 2. The prejudice to which s 562A(5)(d) is directed is the prejudice flowing from the operation of s 562A(2)-(3), if left unaltered by the Court, rather than any prejudice flowing from the alteration of that section pursuant to s 562A(4). That paragraph therefore directs attention to the prejudice to the person seeking the alteration of the order of distribution under s 562A(2)-(3) if that order is declined, rather than the prejudice to other parties if that order is made: Amaca 1 at [73]. The words "severely prejudiced" in s 562A(5)(d) mean that a person will suffer prejudice or disadvantage that is severe, in the sense of harsh or unpleasantly extreme: Amaca 1 at [74]. In my view, the Plaintiffs would here be prejudiced if they did not receive the direct benefit of the reinsurance monies for which they had bargained, where they would not have contracted for cover from HIH C&G without that reinsurance. As Barrett J noted in Amaca 1, a finding that the Plaintiffs are "severely prejudiced" is not essential to the exercise of the discretion conferred by s 562A(4) in their favour, and the real and significant prejudice which they would suffer by being deprived of the reinsurance proceeds is a matter which also supports the making of an order under s 562A(4) in their favour. 20The conclusion that it is just and equitable to make the orders sought is also supported by the fact that, while the prejudice to the Plaintiffs of being deprived of the proceeds of the reinsurance for which they bargained is significant, the adverse impact of the orders sought on other insurance creditors of HIH C&G will be widely diversified and the detriment suffered by any particular creditors will be limited. The Liquidators' evidence is that, if the orders sought by the Plaintiffs were not made under s 562A(4), then in excess of 7,000 insurance creditors of HIH C&G would be entitled to share in the relevant reinsurance proceeds by reason of s 562A(3) of the Corporations Act. The return to those creditors, applying the "broad pooling" approach referred to in New Cap Reinsurance Corporation Ltd v Faraday Underwriting Ltd [2003] NSWSC 842 and Re HIH Casualty & General Insurance Ltd above, would be reduced by less than 1 cent in the dollar by the outcome sought by the Plaintiffs in these proceedings, although I have had regard to the fact that such prejudice is cumulative, in that this is the third such application brought by the Plaintiffs. 21In my view, the Plaintiffs have therefore established that it would be just and equitable to make an order under s 562A(4) of the Corporations Act. A further issue 22A further issue arose when this matter was next listed before me on 22 November 2012 as to the treatment of a particular receipt ("UIC Receipt") in respect of a claim in relation to Universal Insurance Co (in liquidation) ("UIC"). 23The Liquidators served a further affidavit of Mr Christopher Honey sworn 12 November 2012 ("Mr Honey's supplementary affidavit") dealing with the circumstances in which amounts were received in respect of UIC. UIC reinsured 6.6% of the second excess layer, of $30 million in excess of $10 million, of cover provided by HIH C&G to the Plaintiffs in the 1993/94 policy year. 24Mr Honey's evidence indicated that payments were made to HIH C&G in connection with UIC under a scheme of arrangement rather than under a commutation agreement. Both the Plaintiffs and HIH C&G, by their respective Counsel, made careful submissions as to the terms of the UIC scheme, which were set out in an Explanatory Statement which was annexed to Mr Honey's supplementary affidavit. It is not necessary to outline the terms of that scheme at any length. In brief, provisional liquidators were appointed to UIC in August 1996; a settlement agreement was reached between the provisional liquidators and a major shareholder in UIC providing for it to make a payment to UIC, calculated in a specified manner, which was intended to allow scheme creditors' Net Established Claims (as defined) to be paid in full. The scheme provided that, if surplus funds were available after Net Established Claims (as defined) were paid in full, they would be distributed to scheme creditors. 25A claim (which Mr Honey characterised as a "proof of debt") was lodged by HIH C&G in the UIC scheme of arrangement in the amount of $286,032 in March 2007. It is clear that that proof of debt was in respect of the contract of reinsurance between HIH C&G and UIC in reinsurance of the 1993/94 policy between James Hardie Group and HIH C&G, since the policy number referred to in correspondence between the scheme administrator and HIH C&G corresponds to the policy number referable to UIC's participation in the reinsurance of the policy provided by HIH C&G to the James Hardie Group, and the Liquidators do not contend to the contrary. The amount of the claim was subsequently reduced to $171,238, with correspondence between the UIC scheme administrator and HIH C&G recording that reduction reflected additional information in respect of the James Hardie claim. 26The amount of the claim by HIH C&G accepted under the UIC scheme in respect of its claim was then reduced, applying a formula under that scheme, to $100,129. While it appears that the estimation methodology adopted by the UIC scheme actuary to discount HIH C&G's claim from $171,238 to $100,129 was intended to reflect the time value of money, the methodology was complex, driven by an ascertainment date of 31 December 2005 which appears to relate to matters internal to the UIC scheme rather than matters relating to the Plaintiffs, and whether it in fact properly adjusted for the time value of money was not a matter established by evidence in these proceedings. That amount was received by HIH C&G on 4 February 2008, and subsequent amounts of $23,030 and $11,014 were received on 4 February 2008 and 13 November 2008. The Liquidators refer to these amounts as the "super dividend" - a definition that rather assumes that which the Liquidators seek to establish - and I will adopt the neutral term "further UIC receipts". 27The Liquidators do not consent to or oppose the Plaintiffs' application in respect of the amount for which the relevant claim was admitted in the UIC scheme, namely $100,129. However, the Liquidators contended that the further UIC receipts are not properly the subject of an order in favour of the Plaintiffs under s 562A(4) of the Corporations Act. 28The Liquidators contend that the further UIC receipts are not within s 562A of the Corporations Act because they were not received "in respect of" the liability of HIH C&G under its contract of insurance with the Plaintiffs within the meaning of s 562A(1)(b) of the Corporations Act. I do not accept that submission. The words "in respect of" have a wide meaning, and are "probably the widest of any expression intended to convey some connection between two related subject-matters": Smith v Federal Commissioner of Taxation [1987] HCA 48; (1987) 164 CLR 513; Technical Products Pty Ltd v State Government Insurance Office (Qld) [1989] HCA 24; (1989) 167 CLR 45 at 47; New South Wales v Bujdoso [2007] NSWCA 44; (2007) 69 NSWLR 302 at [60]. It seems to me that the surplus dividends have the requisite connection with HIH C&G's obligations to James Hardie under the 1993/94 contract of insurance, given that they originated in reinsurance of that contract and were calculated by reference to the amount of claims under that contract, albeit discounted under the terms of the UIC scheme in the manner noted above. In my view, that position is not altered by reason of the internal mechanics of the UIC scheme, involving first a discounting of the amount of the claim by a very complex formula, and then further payments increasing the amount paid to an amount that was still short of the initial claim. 29The Liquidators properly concede that the amount of $100,129 was received under the contract of reinsurance, adopting the analysis in Amaca 2 that I have applied in respect of the End-Clator years above. However, they contend that the further UIC receipts were not received "under the contract of reinsurance" for the purposes of s 562A(1)(b) of the Corporations Act. On the other hand, the Plaintiffs contend that the monies paid under the UIC scheme were received by HIH C&G or the Liquidators "under the contract of insurance", or at least under the compromise of their rights under that agreement, where there is no other reason for the relevant payment. 30In my view, the fact that the relevant payments, including the further UIC receipts, were made under a scheme of arrangement relating to UIC, which dealt with claims by reinsured parties upon UIC generally, rather than by a commutation agreement in respect of claims by the Plaintiffs specifically, does not have the result that the further UIC receipts were not received "under the contract of reinsurance" for the purposes of s 562A(1)(b) of the Corporations Act. The only reinsurance that was the subject of HIH C&G's claim upon UIC was facultative reinsurance obtained by HIH C&G from UIC in respect of the Plaintiffs. I also do not consider that any proper distinction can be drawn between the initial payment under the UIC scheme and the further UIC receipts in this regard. This is not, in my view, a case where the parties terminated one contract and entered another and the further UIC receipts were made under that new contract so as to be properly characterised, as the Liquidators contend, as new rights arising under a new contract of the kind referred to in McGrath & Anor, Re HIH Insurance Ltd [2008] NSWSC 9 at [20], where they are the product of the mechanism that UIC adopted in the UIC scheme to meet the claims of its existing reinsurance creditors. 31That conclusion is also not altered, in my view, because the amount of the initial claim lodged of $171,238 was first discounted back by a mechanism internal to the UIC scheme and then supplementary payments were made under the terms of the UIC scheme, which were nonetheless referable to meeting the initial claim and had the result that the total amount received is still less than the initial amount claimed. To put it another way, the further UIC receipts which the Liquidators characterise as "surplus dividends" are only "surplus" by reference to the internal mechanics of the UIC scheme, rather than by reference to the claims made under the contracts of reinsurance or by the Plaintiffs against HIH C&G. 32The Liquidators also contend that if, contrary to their primary submissions, the further UIC receipts are within s 562A of the Corporations Act, the Court should not exercise its discretion under s 562A(4) of the Corporations Act in favour of the Plaintiffs, because the amount referable to claims made by the Plaintiffs against HIH C&G is $100,129 and the remainder is "super profit that arose because of the specific circumstances of the UIC scheme". This proposition seems to me to be another way of putting the same propositions on which the Liquidators relied to contend that the further UIC receipts were not within the scope of s 562A of the Corporations Act. I do not accept that submission, for the same reasons that I do not accept the submission that the further UIC receipts are not within the scope of s 562A of the Corporations Act. 33The Liquidators contend that, generally, a creditor in a liquidation cannot receive any more than the amount of its debt. However, the Plaintiffs have not received more than the amount claimed in respect of UIC, but less than it, notwithstanding that part of that receipt has, because of the internal workings of the UIC scheme, been made not as a first payment but as the further UIC receipts. The discounting arrangement under the UIC scheme does not, in particular, undermine the various factors to which I have referred above which make it just and equitable to make an order under s 562A(4) in respect of monies received from the UIC scheme, and I again do not see a rational basis to distinguish the initial payment and the further UIC receipts by reference only to the internal mechanics of the UIC scheme. 34The Plaintiffs anticipate further receipts from two reinsurers. I will, as the parties have requested, adopt the same course as adopted by Barrett J in Amaca 1, by standing the matter over for about 12 months with liberty to restore for orders to be made in chambers in respect of recoveries from those reinsurers. Orders 35Accordingly, I make the following orders, which (other than in respect of UIC) are in the form which the parties agreed was appropriate if I considered that it was just and equitable to make an order under s 562A(4) of the Corporations Act in the particular circumstances. In respect of UIC, they reflect my findings above which have the result that the order should be made in respect of the amount of $134,173 rather than $100,129 as the Liquidators contend. I order that: For policy years commencing 31 March 1993, 31 March 1994, 31 March 1995 and 31 March 1996: 1. Pursuant to section 562A(4) of the Corporations Act 2001 (Cth) (the Act), subsections 562A(2) and 562A(3) of the Act do not apply to: (a) $150,000 received from Aegon (the Aegon Receipt); (b) $635,374 received from the Chiyoda Fire and Marine Insurance Co (Ltd) (the Chiyoda Receipt); (c) $147,454 received from Swiss Re UK - Eaglestar/GE Frankona UK (the Swiss Re Receipt); (d) $2,588,248 received from Assicurazioni Generali SPA (UK Branch) (the Assicurazioni Receipt); (e) $4,086,040 from QBE Limited - Syndicate 683 (the Syndicate 683 Receipt); (f) $7,684 received from Scottish Lion Insurance Co Limited (the Scottish Lion Receipt); (g) $134,173 received from Universal Insurance Co (in liquidation) (the UIC Receipt); and (h) $104,587 received from Chevanstell (the Chevanstell Receipt). 2. The Aegon Receipt, the Chiyoda Receipt, the Swiss Re Receipt, the Assicurazioni Receipt, the Syndicate 683 Receipt, the Scottish Lion Receipt, the UIC Receipt and the Chevanstell Receipt must instead be applied by the Defendants by: (a) deducting expenses of and incidental to getting in the receipts, being 2.5% of the receipts; (b) further deducting any dividends paid by the Defendants in respect of those receipts; and (c) paying the balance of the receipts to the First Plaintiff. 3. No order as to costs. 4. The matter be stood over to 9.30am on 3 December 2013 before Black J. 5. Liberty to apply on 7 days' notice specifying the relief sought. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 December 2012