Supreme Court New South Wales Medium Neutral Citation: In the matter of FAI Investments Pty Ltd (in liq); In the matter of Valusi Pty Ltd (in liq) [2014] NSWSC 1300 Hearing dates: Friday, 7 March 2014 Decision date: 07 March 2014 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Distribution of assets in specie allowed Catchwords: CORPORATIONS - winding up - liquidators - final distribution of assets - liquidator's remuneration - whether in specie distribution can be made Legislation Cited: (Cth) Corporations Act 2001, s 479(3) (NZ) Companies Act 1993 s 248(1)(d) Cases Cited: FAI Car Owners Mutual Insurance Company Proprietary Limited [2009] NSWSC 1350 (2009); 262 ALR 552 FAI Car Owners Mutual Insurance Co Proprietary Limited [2009] NSWSC 1417 Re HIH Services Proprietary Limited (In Liq) [2012] NSWSC 1188 Pacific Brands Sport and Leisure Proprietary Limited v Underworks Proprietary Limited [2006] FCAFC; (2006) 149 FCR 395; (2006) 230 ALR 56 Texts Cited: Marcus Smith QC and Nico Leslie, The Law of Assignment, (2nd ed 2013, Oxford University Press) G J Tolhurst, and Elizabeth Peden, Commercial Issues in Contract Law: Papers from the Commercial Law Quarterly 20th Anniversary Conference, (2008) chapter 4 Category: Principal judgment Parties: Anthony Gregory McGrath and Christopher John Honey in their capacity as liquidators of FAI Investments Pty Ltd (In Liquidation) ACN 001 133 099 (applicants) Representation: Counsel: J Scarcella (solicitor) (applicants) Solicitors: Ashurst Australia (applicants) File Number(s): 2001/58773 2003/85453 Judgment (ex tempore) 1By interlocutory process filed 4 March 2014, in proceedings 2003/85453 in respect of Valusi Proprietary Limited (in liquidation), and in proceedings 2001/58773 in respect of FAI Investments Proprietary Limited (in liquidation), the liquidators of the HIH Group seek orders concerning the final distribution of assets in the respective liquidations and approval of their remuneration, with a view to the ultimate deregistration of each company, and the release of the liquidators after the final winding up steps are taken. 2This application is the seventh in a series of similar applications regarding companies in the HIH Group which have previously considered by Barrett J, as his Honour then was, in FAI Car Owners Mutual Insurance Company Proprietary Limited [2009] NSWSC 1350; (2009) 262 ALR 552, and FAI Car Owners Mutual Insurance Co Proprietary Limited [2009] NSWSC 1417, and subsequently by me in Re HIH Services Proprietary Limited (In Liq) [2012] NSWSC 1188, and later decisions. Two issues arise in the present application that have not been addressed and considered in the judgments given at earlier stages, on which I shall comment in due course. 3In respect of Valusi, the liquidators seek a direction pursuant to (Cth) Corporations Act 2001, s 479(3), that they are justified in making an in specie distribution and assignment of the right of the company to prove in the liquidation of United Body Works Queensland Proprietary Limited in the sum of $1,500,000 to three creditors of the company, by entering into a deed of assignment in a form that is in evidence. Valusi's only asset of significance is its right to prove in the liquidation of United Body Works. It has two creditors, HIH Casualty and General Insurance and FAI General Insurance Company, both of which are in liquidation, subject to schemes of arrangement, and are also companies in the HIH Group. The applicant liquidators are also their liquidators. In other words, what is proposed is, instead of awaiting the realisation and liquidation of United Body Works, the right to prove in that liquidation is to be transferred to the creditors jointly. 4One novel issue that arises is that what is proposed is the transfer of a debt due to the company to multiple creditors. As is pointed out in Marcus Smith QC and Nico Leslie, The Law of Assignment, (2nd ed 2013, Oxford University Press) at 49, generally it is not possible to divide up a single right and then separately assign the parts. This is because a debt is regarded as indivisible, so that an assignment by way of division is not possible as to do so would create multiple debts which would increase the legal burden of the debtor. See also G J Tolhurst, and Elizabeth Peden, Commercial Issues in Contract Law: Papers from the Commercial Law Quarterly 20th Anniversary Conference, (2008) chapter 4. 5If the debt were to be divided pro rata to the claims of the two creditors, and assigned in two parts in that way, that principle would be offended. In order to avoid that consequence, what is proposed is that the debt be assigned to the two creditors jointly, who have as between them agreed to lodge a single proof of debt in the liquidation, but upon receipt of a dividend to direct payment pro rata according to their various entitlements. This it seems to me an entirely acceptable way of addressing the situation. 6I am satisfied that the remuneration claimed of $25,367 plus GST to 1 November 2013 and a further $9,710 until deregistration is reasonable. For reasons explained in previous judgments, non-compliance with the publication requirements of regulation 5.6.65 ought not invalidate the proposed declaration of a final dividend, since given the publication that has taken place to date and the notoriety of this liquidation, it is improbable in the extreme that any other creditor would now emerge. 7In respect of FAI Investments, a direction is sought that the liquidators are justified in distributing in specie 14,999,999 shares held by the company in FAI (NZ) General Insurance Company Limited, a New Zealand company, to its three creditors pro rata, and also in assigning to the three creditors pro rata, to their admitted liabilities, the rights of the company to prove in the liquidation of three other companies in the FAI Group. 8So far as the assignment of the rights to prove in the other liquidations is concerned, the observations I have made in respect of the assignment of a single debt to one or multiple creditors are equally applicable. 9So far as the shareholding in the New Zealand company is concerned, (NZ) Companies Act 1993, s 248(1)(d), provides that, with effect from the commencement of a liquidation of a company, unless a court orders otherwise, a share in the company must not be transferred. The liquidator of the New Zealand company has agreed in a document which I will admit as AX101, to apply to the New Zealand court for the transfer of the shares in question, and also that if any of the creditors to whom they are to be transferred are deregistered before the transfers are effected, then to transfer the respective number of shares at the direction of that creditor. 10While the transfer will not be able to take place until the New Zealand court has made the requisite order, it seems to me, on the basis of the New Zealand liquidators' agreement, that the liquidators will be justified in distributing the shares in that manner once the New Zealand order is obtained. 11In the case of FAI Investments, I am satisfied that the remuneration of $23,815.51 to 1 November 2013 plus GST and a further $9,710 until deregistration is reasonable. As in previous cases, an 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 is supported by comprehensive reports from the liquidators setting out the work done in each case. 12In proceedings 2001/58773 FAI Investments Proprietary Limited, the Court: (1)Directs that, pursuant to Corporations Act, s 479(3), the Applicants, on behalf of FAI Investments, are justified in distributing in specie 14,999,999 shares held in FAI (NZ) General Insurance Company Ltd (In Liquidation) New Zealand Company Number 330952 to: (a)FAI General Insurance Company Ltd (In Liquidation and Subject to Schemes of Arrangement) ACN 000 327 855; (b)United Body Works (Qld) Pty. Limited (In Liquidation) ACN 009 913 508; and (c)FAI Insurances Limited (In Liquidation and Subject to Schemes of Arrangement) ACN 004 304 545, the creditors of the Company, in proportion to their admitted liabilities, following the obtaining of an order of the Court in New Zealand, on the application of the liquidator of FAI(NZ). (2)Directs pursuant to Corporations Act, s 479(3), that the Liquidators of the Company, on behalf of the Company, are justified in distributing in specie and assigning the right of the Company: (a)to prove in the liquidation or scheme of arrangement of FAII in the sum of $6,346,296.62; (b)to prove in the liquidation of FAI Leasing Finance Pty Limited (In Liquidation) ACN 002 027 214 in the sum of $644,037.00; and (c)to prove in the liquidation of FAI Financial Services Limited (In Liquidation) ACN 002 995 851 in the sum of $2,938,317.00, to FAI General, UBW and FAII, the creditors of the Company, in proportion to their admitted liabilities, by entering into the Deed of Assignment in the form of, or substantially in the form of, the document at Tab 6 of CJH-1 to the affidavit of Christopher John Honey sworn on 3 March 2014. (3)Orders that, pursuant to Corporations Act, s 473(3)(b)(ii), of the Act, the Applicants' remuneration for the liquidation of the Company for the period: (a)27 August 2001 to 1 November 2013 (inclusive), is determined to be $23,815.51 plus GST in the amount of $2,381.55; and (b)1 November 2013 until and including the deregistration of the Company be fixed in the amount of $9,710.00 plus GST in the amount of $971.00. (4)Directs that pursuant to Corporations Act, s 1322(4), of the Act that the proposed declaration of a final dividend to the creditors of the Company is not invalidated by reason of non-compliance with (Cth) Corporations Regulations 2001, r 5.6.65. (5)Directs that pursuant to Corporations Act, s 1322(4), of the Act that the order approving the Liquidators' remuneration for the liquidation of the Company for the period 27 August 2001 to 1 November 2013 (inclusive) in the amount of $23,815.51 plus GST in the amount of $2,381.55 is not invalidated by any non-compliance with section 473(3)(b)(i) of the Act by virtue of there being no resolution of creditors of the Company as the Company has no external creditors. (6)Dispenses with the requirements of (NSW) Supreme Court (Corporations) Rules 1999, rr 9.4(2)(b) and 9.4(3). (7)Orders that, pursuant to Supreme Court (Corporations) Rules, r 7.5(6), the Applicants need not serve on each creditor who proved a debt in the course of the winding up of the Company, and on each contributory of the Company, a copy of: (a)the interlocutory process filed in these proceedings; (b)the Applicants' receipts and payments in the winding up of the Company; and (c)the statement of financial position of the Company at the date the interlocutory process was filed in these proceedings. (8)Orders that the proceedings be stood over generally pending the transfer of shares in FAI (NZ) pursuant to order 1 with liberty to apply on three days' notice. (9)Orders that these orders and directions be entered forthwith 13In proceedings 2003/85453 Valusi Proprietary Limited, the Court: (1)Directs that, pursuant to Corporations Act, s 479(3), the Applicants, on behalf of FAI Investments Pty Ltd (In Liquidation) ACN 001 133 099, are justified in distributing in specie 14,999,999 shares held in FAI (NZ) General Insurance Company Ltd (In Liquidation) New Zealand Company Number 330952 to: (a)FAI General Insurance Company Ltd (In Liquidation and Subject to Schemes of Arrangement) ACN 000 327 855; (b)United Body Works (Qld) Pty. Limited (In Liquidation) ACN 009 913 508; and (c)FAI Insurances Limited (In Liquidation and Subject to Schemes of Arrangement) ACN 004 304 545, the creditors of the Company, in proportion to their admitted liabilities, following the obtaining of an order of the Court in New Zealand, on the application of the liquidator of FAI(NZ). (2)Directs pursuant to Corporations Act, s 479(3), on behalf of the Company, are justified in distributing in specie and assigning the right of the Company: (a)to prove in the liquidation or scheme of arrangement of FAII in the sum of $6,346,296.62; (b)to prove in the liquidation of FAI Leasing Finance Pty Limited (In Liquidation) ACN 002 027 214 in the sum of $644,037.00; and (c)to prove in the liquidation of FAI Financial Services Limited (In Liquidation) ACN 002 995 851 in the sum of $2,938,317.00, to FAI General, UBW and FAII, the creditors of the Company, in proportion to their admitted liabilities, by entering into the Deed of Assignment in the form of, or substantially in the form of, the document at Tab 6 of CJH-1 to the affidavit of Christopher John Honey sworn on 3 March 2014. (3)Orders that, pursuant to Corporations Act, 473(3)(b)(ii), of the Act, the Applicants' remuneration for the liquidation of the Company for the period: (a)27 August 2001 to 1 November 2013 (inclusive), is determined to be $23,815.51 plus GST in the amount of $2,381.55; and (b)1 November 2013 until and including the deregistration of the Company be fixed in the amount of $9,710.00 plus GST in the amount of $971.00. (4)Directs that pursuant to Corporations Act, s 1322(4), of the Act that the proposed declaration of a final dividend to the creditors of the Company is not invalidated by reason of non-compliance with Corporations Regulations, r 5.6.65. (5)Directs that pursuant to Corporations Act, s 1322(4) of the Act that the order approving the Liquidators' remuneration for the liquidation of the Company for the period 27 August 2001 to 1 November 2013 (inclusive) in the amount of $23,815.51 plus GST in the amount of $2,381.55 is not invalidated by any non-compliance with s 473(3)(b)(i) of the Act by virtue of there being no resolution of creditors of the Company as the Company has no external creditors. (6)Dispenses with the requirements of Supreme Court (Corporations) Rules, rr 9.4(2)(b) and 9.4(3). (7)Orders that, pursuant to Supreme Court (Corporations) Rules, r 7.5(6), the Applicants need not serve on each creditor who proved a debt in the course of the winding up of the Company, and on each contributory of the Company, a copy of: (a)the interlocutory process filed in these proceedings; (b)the Applicants' receipts and payments in the winding up of the Company; and (c)the statement of financial position of the Company at the date the interlocutory process was filed in these proceedings. (8)Orders that the proceedings be stood over generally pending the transfer of shares in FAI (NZ) pursuant to order 1 with liberty to apply on three days' notice. (9)Orders that these orders and directions be entered forthwith. ********** 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: 09 December 2014