In the matter of FAI Leasing Finance Pty Limited (in liquidation); In the matter of FAI Home Security Holdings Pty Limited (in liquidation)
[2015] NSWSC 2150
•22 October 2015
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of FAI Leasing Finance Pty Limited (in liquidation); In the matter of FAI Home Security Holdings Pty Limited (in liquidation) [2015] NSWSC 2150 Hearing dates: 22 October 2015 Date of orders: 22 October 2015 Decision date: 22 October 2015 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Orders made approving liquidators’ remuneration and for the destruction of the companies’ books and records.
Catchwords: CORPORATIONS – winding up – liquidators – approval of liquidators’ remuneration – whether remuneration sought is reasonable – court-ordered winding up – requirement that remuneration is approved by creditors at creditors’ meeting – where no external creditors – (CTH) Corporations Act 2001, s 1322 – declaration that failure to hold meeting does not invalidate remuneration – destruction of books and records – where ASIC does not oppose destruction. Legislation Cited: (CTH) Corporations Act 2001, s 473, s 533, s 1322
(NSW) Supreme Court (Corporations) Rules 1999, r 7.5(6)Category: Principal judgment Parties: In proceedings 2001/58783:
In proceedings 2003/82574:
Anthony Gregory McGrath and Christopher John Honey in their capacity as liquidators of FAI Leasing Finance Pty Limited (in liquidation) ACN 002 027 214 (applicants)
Anthony Gregory McGrath and Christopher John Honey in their capacity as liquidators of FAI Home Security Holdings Pty Limited (in liquidation) ACN 003 125 264 (applicants)Representation: Counsel:
Solicitors:
J Scarcella (solicitor) (applicants)
Ashurst Australia (applicants)
File Number(s): 2001/58783; 2003/82574
Judgment (ex tempore)
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HIS HONOUR: The liquidators of FAI Leasing Finance Pty Limited and of FAI Home Security Holdings Pty Limited apply for orders for the approval of their remuneration and their release as such liquidators and consequent deregistration of each company and permission to destroy their books and records. This is the tenth in a series of applications by those liquidators in the progressive finalisation of the liquidation of the HIH Group of companies.
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The evidence establishes that proofs of debt have been called for, received and adjudicated, and a final dividend will be paid as part of the winding up steps before the final orders are made. The financial position of the companies, the claims of creditors and potential claims and causes of action have been investigated.
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The liquidators have lodged reports with ASIC pursuant to (CTH) Corporations Act 2001, s 533, and have realised all the realisable assets (other than inter-company debts) that they consider to be realisable. The rights of the contributories of the companies have been investigated and considered. The only creditors to whom dividends will be paid are other HIH Group companies of which the present liquidators are also liquidators.
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The two companies in question are subject to a deed of cross-guarantee which binds a number of HIH Group companies, the effect of which appears to be to make each company jointly and severally liable for the external, but not internal, debts of all those companies, and presumably to give each company a right of contribution against each other group company to the extent that it bears or contributes to the external debt of another group company.
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The liquidators have explained, through Mr Honey's affidavit, that in order properly to effect a distribution to creditors of companies the subject of the deed of cross-guarantee, they have treated the assets of all those companies as one pool and applied them to all the liabilities of the companies the subject of the deed of cross-guarantee (after excluding internal claims and debts of those companies) to arrive at a model for distribution for ordinary unsecured creditors. As a result of that process, they have in this case derived a proper rate of distribution to unsecured creditors of 14.44 percent after deduction of remuneration and expenses.
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In Home Security Holdings, there were total recoveries of $102 million (of which, however, almost all was derived from the pooled assets of the cross-guarantee group). That company has liabilities of $708 million approximately and its unsecured creditors (being, as I have said, other HIH Group companies) will receive 14.44 cents in the dollar.
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In Leasing Finance, total assets and recoveries were $103 million, of which $72 million were from the pooled assets of the cross-guarantee group, and the balance from other sources (including inter-company receiveables, property sales and loan recoveries, interest and other receipts). That company's liabilities, including to the cross-guarantee group, are $708 million, and its unsecured creditors too will receive 14.44 cents in the dollar on the pooled basis to which I have referred.
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As both companies are insolvent, this is not a case in which it is necessary to consider any question of distribution of surplus.
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The liquidators seek approval of their remuneration, in the case of Home Security Holdings, of $21,360 plus GST from 10 February 2003 to 31 July 2015, and $9,710 for the period from 1 August 2015 plus GST until deregistration. In the case of Leasing Finance, there has already been a previous approval of remuneration, and the liquidators seek approval of $6,608.50 plus GST for the period from 29 September 2012 to 31 July 2015, and $9,710 for the period from 1 August 2015 until deregistration. I am satisfied that, having regard to the recoveries, the complexities of the administrations and the time that these liquidations have been on foot, that those amounts are plainly reasonable.
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As these windings up are Court ordered windings up, the liquidators' remuneration is governed by Corporations Act, s 473, under which the liquidators are required to seek approval from creditors before approaching the Court. However, there are no external creditors, and the contributories and creditors are all HIH Group companies of which these liquidators are also liquidators. In those circumstances, and in order to avoid the farce of convening meetings at which they would be the only persons entitled to vote on their own remuneration, the liquidators seek orders pursuant to s 1322 to the effect that the failure to convene such a meeting does not invalidate the approval of their remuneration. Given that the holding of a creditors’ meeting is, at least in this context, an essentially procedural matter, that the liquidators have acted honestly and indeed that it would be inappropriate for them to vote on their own remuneration, and that it is just and equitable to make the order sought, I am satisfied that it is appropriate to exercise the power under s 1322.
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As all the creditors are companies within the HIH Group of whom these liquidators are liquidators, it is also appropriate to dispense with the requirement of (NSW) Supreme Court (Corporations) Rules 1999, r 7.5(6), that a copy of the application for a release be served on each creditor and each contributory.
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The liquidators hold a tax clearance certificate in respect of both companies. ASIC has indicated that it does not oppose an order permitting destruction of the companies' books 90 days after the deregistration of the ultimate holding company HIH Insurance Limited, which is likely to be the last of the HIH Group companies to be deregistered.
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In each matter, I therefore make the orders set out in the document entitled "Order" which I will sign, seal and date today.
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Decision last updated: 22 September 2017
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