In the matter of FAI Overseas Investments Pty Ltd, HIH Management Pty Limited and HIH Overseas Holdings Limited [2013] NSWSC 1742

Supreme Court New South Wales

Medium Neutral Citation: In the matter of FAI Overseas Investments Pty Ltd, HIH Management Pty Limited and HIH Overseas Holdings Limited [2013] NSWSC 1742 Hearing dates: 23 September 2013 Decision date: 23 September 2013 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Orders approving distribution in specie of assets to creditor, releasing right of proof in related company, and approving remuneration. Catchwords: CORPORATIONS - LIQUIDATION - Distribution of assets in matters 2011/58775 and 2004/182152 pursuant to (Cth) Corporations Act 2001 s 479(3) and approval of liquidators' remuneration in matters 2011/58775, 2004/182152 and 2001/58777 pursuant to s 1322(4). Legislation Cited: (Cth) Corporations Act 2001 s 479(3), s 1322(4) Category: Interlocutory applications Parties: Anthony Gregory McGrath &Christopher John Honey as liquidators of FAI Overseas Investments Pty Limited, HIH Management Pty Limited and HIH Overseas Holdings Limited (applicants) Representation: Counsel: J Scarcella (solicitor) (applicants) Solicitors: Ashurst Australia (applicants) File Number(s): 2001/58775, 2004/182152, 2001/58777

Judgment (EX TEMPORE) 1HIS HONOUR: By interlocutory processes filed 19 September 2013 in proceedings 2011/58775 in respect of FAI Overseas Investments Proprietary Limited in liquidation, and in proceedings 2004/182152 in respect of HIH Management Proprietary Limited, the liquidators of the HIH Group seek orders concerning the final distribution of assets in the liquidation and approval of their remuneration, with a view to the ultimate deregistration of the company and release of the liquidators after the final winding up steps are taken. 2The application in respect of these companies is the sixth in a series of similar applications regarding companies in the HIH Group which have previously been considered by Barrett J (as his Honour then was) and more recently by me. It does not appear that any particular issues arise in the present application that have not been addressed and considered in the judgments given at earlier stages. Accordingly, I will limit myself to brief comments in respect of each of the issues that fall for consideration. 3In respect of FAI Overseas Investments Proprietary Limited, the liquidators seek a direction pursuant to (Cth) Corporations Act 2001, s 479(3), that they are justified in distributing in specie the remaining assets of the company - being its right to prove in liquidations of other HIH Group companies - by assignment to the sole creditor of the company, which is another HIH Group company. 4The direction is sought, as it has been previously, essentially because the Act does not contain an express power to transfer assets in specie to a creditor in lieu of a dividend. This question has been addressed in the earlier judgments, and in circumstances where the debt is entirely internal to the group and the assignment is internal to the group, there is, for reasons given in the previous judgments, good reason to give the direction sought. 5In respect of HIH Management, a direction is sought that the liquidators would be justified in releasing their right to prove in the liquidation of HIH Underwriting and Insurance Australia Proprietary Limited for a sum of $16,562. The net anticipated recovery from such claim, after providing for the likely cost of recovery, is in the order of $2,500, which the liquidators have concluded exceeds the administrative costs of keeping the company on foot to pursue the claim. That appears to be a reasonable commercial judgment, which the court ought not second-guess. 6In respect of remuneration, the liquidators seek approval of the sum of $26,485.50 plus GST for the period 28 December 2002 to 28 June 2013, and $9,710 plus GST from 29 June 2013 until deregistration in the case of FAI Overseas Investments Proprietary Limited; and in the case of HIH Management Proprietary Limited, the sum of $17,408.50 plus GST for the period 10 December 2004 to 28 June 2013. However, in the latter case, the liquidators have undertaken to claim only as much as remains in the administration, which is likely to be in the order of $701.10 being the cash in the administration of that company. 7An application for the court's approval is made without having previously approached any creditors' meeting, in circumstances where the only creditors are companies in the HIH Group, and for reasons given on the earlier applications that is an appropriate course. To the extent that they are liquidators of contributories and creditors, the liquidators consent to the claim. The amount claimed is supported by comprehensive reports from the liquidators setting out the work done in each case. For those reasons it is also appropriate to make an order pursuant to s 1322(4) that the proposed declaration of a final dividend to creditors and the approval of remuneration is not invalidated by the non compliances referred to in the orders to be made. 8In the case of HIH Overseas Holdings Limited, proceedings 2001/58777, application is made only for approval of remuneration and associated s 1322 relief. In that context, the remuneration claimed is relatively large, being $239,796.65 plus GST. Again, the claim is substantiated by a comprehensive report of the liquidators. It is for present purposes I think sufficient to observe that the liquidators have realised investments of in excess of $12 million and have recovered $1.1 million from external loans, one of which from Beryl Sturesteps, was the subject of contested litigation in this court. 9In those circumstances, it seems to me that, given the substantial justification of the work done contained in the liquidators' report, and the prima facie size of the recoveries and difficulties of the work involved, there is nothing apparently unreasonable about the amount claimed. 10In proceedings 2001/58775 I make directions and orders in accordance with the document entitled Draft Orders initialled by me, dated this day, and placed with the papers. The proceedings are adjourned to 24 September 2013 in chambers, and I direct that these orders be entered forthwith. 11In proceedings 2004/182152 I make directions and orders in accordance with the document entitled Draft Orders initialled by me, dated this day, and placed with the papers. The proceedings are adjourned to 24 September 2013 in chambers for further orders. I direct that these orders be entered forthwith. 12In proceedings 2001/58777 I make orders in accordance with the document entitled Draft Orders initialled by me, dated this day, and placed with the papers.