Gibbons as liquidator of Newcap Reinsurance Corporation Ltd

[2008] NSWSC 385

CITATION:	Gibbons as liquidator of Newcap Reinsurance Corporation Ltd [2008] NSWSC 385
HEARING DATE(S):	28/04/08
JUDGMENT DATE :	28 April 2008
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	28 April 2008
DECISION:	Orders approving scheme of arrangement and granting leave under s 411(7)
CATCHWORDS:	CORPORATIONS - compromises and arrangements - scheme of arrangement between company and its creditors - application for approval of court - where creditors voted overwhelmingly in favour by number and by value - no opposition to approval - application for leave for certain persons to "administer" scheme - rationale for requirement for leave - case for grant of leave made out in each case
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss 9, 411(4)(a)(i), 411(4)(b), 411(7)(d), 411(7)(f)
CATEGORY:	Principal judgment
CASES CITED:	Re HIH Casualty and General Insurance Ltd [2005] NSWSC 1180; (2005) 56 ACSR 295
PARTIES:	John Raymond Gibbons as Liquidator of New Cap Reinsurance Corporation Limited (in liquidation) - First Plaintiff New Cap Reinsurance Corporation Limited (in liquidation) - Second Plaintiff
FILE NUMBER(S):	SC 1321/08
COUNSEL:	Mr B A J Coles QC/Dr S R Derham - Plaintiffs
SOLICITORS:	Henry Davis York - Plaintiffs

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

BARRETT J

MONDAY 28 APRIL 2008

1321/08 JOHN RAYMOND GIBBONS AS LIQUIDATOR OF NEWCAP REINSURANCE CORPORATION LTD & ANOR

JUDGMENT

1 Before the court is an application under s 411(4)(b) of the Corporations Act 2001 (Cth) for an order approving a scheme of arrangement between the second plaintiff, Newcap Reinsurance Corporation Limited (a company in liquidation), and its creditors.

2 The scheme is described as a “hybrid scheme”, with two phases: an “initial reserving” phase and a “cut-off” phase. In the first phase, scheme administrators will value claims and the liquidator will pay interim dividends on them. In the second phase, a “claims bar date” will be set and, once all remaining claims have been valued in accordance with the scheme, a final dividend will be paid.

3 Orders were made on 28 February 2008 for the convening of a meeting of the creditors to be held on 16 April 2008 at an address in London. Directions concerning the conduct of the meeting and the advertising of it were made, together with directions about the materials to be despatched to creditors in advance of the meeting.

4 The evidence that has been adduced today satisfies me that the meeting of creditors was convened and held in London in accordance with the orders of the court, with documents being prepared and despatched as required by those orders, although with some slight delay in despatch to some creditors; however those delayed documents would still have been received by the creditors concerned in sufficient time to allow a reasonable opportunity for consideration of the contents.

5 The advertising requirements with respect to the meeting were also satisfied, although slightly late in the case of one of the five specified newspapers. This is not something that is of concern.

6 Creditors were made aware that the application for the court's approval of the scheme would be before the court today. No creditor has sought to appear. The matter was called outside the court and no creditor or other interested person was in attendance.

7 The voting at the meeting was very substantially in favour of the adoption of the scheme. Of the 57 creditors who were present and voted in person or by proxy at the meeting, 55 (or 96.5%) cast positive votes. The remaining two creditors (3.5%) voted against. The approving majority accounted for 99 percent of the total amount of the debts and claims of the creditors present and voting in person or by proxy and the creditors voting against accounted for only 1 percent. The majorities contemplated by s 411(4)(a)(i) were thus very comfortably achieved.

8 That being so, the order approving the scheme will be made, there being no matter that has been brought to the attention of the court which would warrant its acting otherwise than to give effect to the expressed wishes of the creditors.

9 There is a second application before the court which concerns three of the four persons who are to play in relation to the scheme roles which come (or may come) within the concept covered by the word "administer" in s 411(7). That section is as follows:

“Except with the leave of the Court, a person must not be appointed to administer, and must not administer, a compromise or arrangement approved under this Act between a body and its creditors or any class of them or between a body and its members or any class of them, whether by the terms of that compromise or arrangement or pursuant to a power given by the terms of a compromise or arrangement, if the person:
(a) is a mortgagee of any property of the body; or
(b) is an auditor of the body; or
(ba) is a director, secretary, senior manager or employee of the body; or
(c) is a director, secretary, senior manager or employee of a body corporate that is a mortgagee of property of the body; or
(d) is not a registered liquidator; or
(e) is a director, secretary, senior manager or employee of a body corporate related to the body; or
(f) unless ASIC directs in writing that this paragraph does not apply in relation to the person in relation to the body—has at any time within the last 12 months been an officer or promoter of the body or of a related body corporate.”

10 The first person to whom s 411(7) is relevant is Mr Gibbons who will be the scheme administrator carrying out functions of a kind usual to that position. Mr Gibbons cannot occupy and act in that position without the leave of the court because of s 411(7)(f). Being the liquidator of the company, he is an "officer" as defined by s 9.

11 In relation to the purpose of s 411(7)(f), I would venture to repeat what I said in Re HIH Casualty and General Insurance Ltd [2005] NSWSC 1180; (2005) 56 ACSR 295 at [22]:

“I have not been referred to any authority concerning leave under s 411(7). It seems to me, however, that the purpose of the section is the same as that underlying s 436B(2), which says that a liquidator may not appoint himself as Pt 5.3A administrator without the leave of the court. As is shown by Re Cobar Mines Pty Ltd (1998_ 30 ACSR 125 and the cases following ( Re Nardell Coal Corporation Pty Ltd (2003) 47 ACSR 122; [2003] NSWSC 860; Re Parkes Leagues Club Co-operative Ltd [2004] NSWSC 16 ; Re Taylor; Origin Internet Solutions Pty Ltd [2004] FCA 382; Hall v Arrernte Council of Central Australia Aboriginal Corporation (in liq) [2004] FCA 1738; Rupert Co Ltd v Chameleon Mining NL (in liq ) [2005] NSWSC 719), this section aims to bring to the surface, so that they may be examined, any situations of conflict of interest.”

12 I am satisfied that there is no difficulty in Mr Gibbons’ continuing to act as liquidator and also acting as scheme administrator. The roles are complementary and by no means incompatible.

13 The other two persons are Mr Guard, who is to be the scheme actuary, and Mr Hughes, who is to be the scheme adjudicator. The need for leave in relation to them arises from s 411(7)(d) because neither is a registered liquidator.

14 The purpose of s 411(7)(d) is, clearly enough, to ensure that only suitably qualified persons administer schemes. The underlying assumption is that registered liquidators are the appropriate persons.

15 Mr Guard is a partner of Ernst & Young in Sydney and an experienced actuary. His role under the scheme as scheme actuary is of a specialised kind and it is more pertinent to that role that he have actuarial experience and qualifications than it is that he be a registered liquidator. He is suited to the task he is intended to perform under the scheme and, to the extent that that task might cause him to “administer” the scheme, it is appropriate that the court facilitate his undertaking it, even though he is not a registered liquidator. No conflict of interest is evident.

16 Mr Hughes is the proposed scheme adjudicator. His function of making decisions about and adjudicating particular claims will be enhanced by the fact that he has long experience in the London market and has expertise in matters of insurance insolvency and can bring appropriate and necessary skills to bear. Again, it is more important that those attributes be available for the due administration of the scheme than that the particular person be a registered liquidator. Again, no conflict of interest is relevant.

17 In all three cases, therefore, a case for the grant of leave under s 411(7) has been made out. The circumstances in relation to them are very similar to those of officials performing similar functions in respect of whom leave was granted in Re HIH Casualty and General Insurance Ltd (above).

18 I make the orders in the short minutes of order which I initial and date.

19 The orders may be taken out forthwith.

**********