FAI General Insurance Co Ltd (In Liq)
[2001] NSWSC 882
•26 September 2001
CITATION: FAI General Insurance Co Ltd (In Liq) [2001] NSWSC 882 CURRENT JURISDICTION: Equity FILE NUMBER(S): SC 1808/01 HEARING DATE(S): 26 September 2001 JUDGMENT DATE:
26 September 2001PARTIES :
FAI General Insurance Company Limited (P)JUDGMENT OF: Hamilton J
COUNSEL : B A J Coles QC (P) SOLICITORS: Blake Dawson Waldron (P) CATCHWORDS: CORPORATIONS [286] - Winding up - Liquidators - Rights and powers - In winding up by Court - Power to enter into agreement on company's behalf - Necessity for approval if performance of contract may extend beyond 3 months - Approval by Court - Basis on which discretion may be exercised - Relevant considerations. LEGISLATION CITED: Corporations Act 2001 (Cth) s 477(2B) CASES CITED: HIH Overseas Holdings [2001] NSWSC 426
In Re HIH Insurance Group Limited [2001] NSWSC 308DECISION: Entry into contracts approved.
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
HAMILTON J
WEDNESDAY, 26 SEPTEMBER 2001
1808/01 FAI GENERAL INSURANCE COMPANY LTD (IN LIQ)
JUDGMENT
1 HIS HONOUR: This is another matter that arises out of what is colloquially known as the collapse of the HIH Insurance Group (“the corporate collapse”). It is an application under s 477(2B) of the Corporations Act 2001 (Cth) ("the CA") for an order that the Court approve an agreement on the company's behalf, though the obligations under the agreement may be discharged by performance more than three months after the agreement is entered into. The applicants are the liquidators of FAI General Insurance Company Limited (“the company”) and also of its parent company. They were appointed as the provisional liquidators of the company in March 2001 and were appointed liquidators by order of this Court on 27 August 2001. A further company which is a party to the contract sought to be approved is United Body Works (Qld) Pty Ltd (Receivers and Managers Appointed) (“Body Works”). Body Works is a wholly owned subsidiary of the company and is therefore controlled by the liquidators by virtue of that shareholding. An application for the winding up of Body Works was also made in March 2001, but that application was not proceeded with and was dismissed, leaving Body Works under the effective control of the liquidators as I have stated.
2 Body Works is involved in an extensive staged development on the river in Perth, the parts of which are material to this application being the development of residential apartments. That development had been substantially completed by the time of the corporate collapse, but at least two of the buildings remained to be completed, although a considerable number of apartments in them had been presold off the plans. The corporate collapse brought an end to the work for the completion of those buildings. The finance for the development was being provided by the St George Bank Limited ("the Bank") and the Bank appointed receivers and managers of Body Works pursuant to their security documents. Those receivers and managers are still in office and the effective control of Body Works by the liquidators to which I have earlier adverted is at present subject to that receivership. The scheme that has been devised among all parties is as follows. The Bank will cause its receivers and managers to retire from Body Works subject to certain conditions precedent and subject to accountants appointed by the Bank having an ongoing monitoring role in respect of the development. On this basis, the Bank will provide the funds necessary to complete the development. That will take some 32 weeks, which of itself without any other consideration takes the contract proposed to be entered into outside the three month period stipulated in s 477(2B) of the CA. Upon the various sales of apartments being completed, the Bank will take the proceeds in the first instance and provision will also be made for funds to be put aside to back rental guarantees that have been given as part of the selling programme. However, the development having been successful other than being caught up in the corporate collapse, the situation is that a surplus of some $30 million should eventuate from the completion of the development and of the sales which have already been effected and not completed, as also from the sales of units which have not been sold at all.
3 The principles upon which the discretion under s 477(2B) of the CA should be approached have recently been discussed in two decisions in this Division of this Court, both arising out of the corporate collapse. They are my own decision In Re HIH Insurance Group Limited [2001] NSWSC 308 and the decision of Barrett J in HIH Overseas Holdings [2001] NSWSC 426. My approach was summarised in a passage in [7] of my judgment which was cited with approval in [8] of Barrett J's judgment.
4 Whilst there is perhaps not as great a public interest element in this case as in the case where the administration of very numerous insurance policies was needed to be assured, nonetheless, there is a public interest here in having an unfinished development in a prominent place in Perth completed in an orderly fashion and in having contracts under which numerous people have already entered into and paid deposits carried into completion in an orderly way. In addition to that, although the time limit is exceeded, there is obviously also a very considerable interest in some $30 million being brought into the coffers of this otherwise impecunious group of companies. The contract, which is laid before me, is obviously carefully drawn and well thought out. I have no hesitation in coming to the conclusion that the Court's approval ought be given to it pursuant to s 477(2B) of the CA.
5 I make the orders for approval and dealing with costs set out in the short minute which has been proffered to me by Mr Coles, of Queen's Counsel for the applicants.
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