In the matter of FAI Reinsurances Pty Ltd; In the matter of World Marine & General Insurances Pty Ltd; In the matter of FAI Film Distribution Pty Ltd; In the matter of FAI Film Productions Pty Ltd; In the matter of...

[2015] NSWSC 2062

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of FAI Reinsurances Pty Ltd; In the matter of World Marine & General Insurances Pty Ltd; In the matter of FAI Film Distribution Pty Ltd; In the matter of FAI Film Productions Pty Ltd; In the matter of Fai Films Pty Ltd [2015] NSWSC 2062

Hearing dates:

1 June 2015

Date of orders:

01 June 2015

Decision date:

01 June 2015

Jurisdiction:

Equity - Corporations List

Before:

Brereton J

Decision:

Special leave to distribute surplus and judicial advice given.

Catchwords:

CORPORATIONS – winding up – application by liquidators for special leave to distribute surplus assets – publication requirements – impossibility of compliance – intent achieved – appropriateness of liquidators’ remuneration.

Legislation Cited:

(NSW) Supreme Court (Corporations) Rules 1999, r 2.11, r 7.9(3)(b)

Category:

Principal judgment

Parties:

In proceedings 2001/58767:
Anthony Gregory McGrath and Christopher John Honey in their capacity as liquidators of FAI Reinsurances Pty Limited (in liquidation) (subject to a scheme of arrangement) ACN 004 401 138 (applicants)

 

In proceedings 2001/58779:
Anthony Gregory McGrath and Christopher John Honey in their capacity as liquidators of World Marine & Insurances Pty Limited (in liquidation) (subject to schemes of arrangement) ACN 000 093 112 (applicants)

 

In proceedings 2003/83562:
Anthony Gregory McGrath and Christopher John Honey in their capacity as liquidators of FAI Film Distribution Pty Limited (in liquidation) ACN 003 843 963 (applicants)

 

In proceedings 2004/182170:
Anthony Gregory McGrath and Christopher John Honey in their capacity as liquidators of FAI Film Productions Pty Limited (in liquidation) ACN 003 843 918 (applicants)

  In proceedings 2004/182172:
Anthony Gregory McGrath and Christopher John Honey in their capacity as liquidators of FAI Films Pty Limited (in liquidation) ACN 003 638 337 (applicants)

Representation:

Counsel:
J Scarcella (solicitor) (applicants)

  Solicitors:
Ashurst Australia (applicants)

File Number(s):

2001/58767; 2001/58779; 2003/83562; 2004/182170; 2004/182172

Judgment (ex tempore)

1. HIS HONOUR: Before the Court is the ninth in a series of applications by the liquidators of the FAI Group for special leave to distribute surplus in the liquidation of companies in that group, for judicial advice that they would be justified in making a distribution in specie in the case of an insolvent company, and for the deregistration of the subject companies. The present application is made in respect of FAI Film Distribution Pty Ltd, FAI Film Productions Pty Ltd, World Marine and General Insurances Pty Ltd, FAI Reinsurances Pty Ltd and FAI Films Pty Ltd (for convenience, called “the Phase Nine companies”). Of the Phase Nine companies, all but FAI Films Pty Ltd is a solvent company. FAI Films is insolvent.

2. The considerations relevant to most aspects of this application have been dealt with in earlier judgments of Barrett J and myself, and there is no utility in revisiting them. A few peculiarities – in the sense of matters particular to the present application – warrant some short comment.

3. First, in connection with World Marine and General Insurances, it has an asset comprising potential entitlements to receive distributions from what are called the QBE Aviation pools. The evidence makes clear that that asset is of limited value. The assignability of the asset is not entirely clear, but it is clear that QBE makes payments on a pooled basis to the HIH Group in respect of claims against the QBE Aviation pools, and thus that even if the proposed assignment is not effective against or recognised by QBE, the liquidators – who are also the liquidators of the other companies in the HIH Group that might receive such a payment – will be in a position to ensure that the proposed assignee receives payment, and assure the Court that they will do so.

4. So far as FAI Films is concerned, it is the only insolvent company of the five presently under consideration. It is proposed that the giving of the judicial advice it seeks – to the effect that the liquidators would be justified in distributing in specie its right to prove in the liquidation of FAI General and HIH Casualty and General – be deferred and dealt with in chambers, after the distribution of the surplus in its subsidiaries has been given effect pursuant to the orders that I am about to make.

5. Attention has been drawn to the circumstance that the publication required by (NSW) Supreme Court (Corporations) Rules 1999, r 7.9(3)(b) (as amended), has not been possible due to apparent lack of the requisite information technology architecture on the insolvency website to do so. The liquidators have published notices in accordance with r 2.11 in its former form, and the intent of the requirement has plainly been satisfied.

6. The remuneration claimed by the liquidators in the present application is more substantial than it has been in the previous ones, at least those that I have considered. I have in the past not infrequently been critical of the amounts of remuneration claimed when compared to the value of the work done in terms of generating value for creditors or shareholders. In this case, the total remuneration claimed, past and future, over a period of about ten years work and including in some cases considerable commercial undertakings. including to endeavour to sell film rights, amounts to about $500,000. That is in the context of realisations for the benefit of creditors of some $26 million in cash and some $95 million in debtor rights. The remuneration represents about two per cent of the cash alone, and if one takes into account the debtor rights, about 0.4 per cent of the total, which is well within and indeed below the bottom end of the range that I have elsewhere suggested may be appropriate.

7. That is not to say by any means that it is insufficient or inadequate, because part of the work reflected in the generation of those sums will be reflected in remuneration for companies lower down the chain that has already been approved, but I think it right to mention, in a case where liquidators have generated substantial value and charged relatively modestly for it, that that is the case.

8. In matter number 2003/83562, FAI Film Distribution Pty Ltd, I make orders in accordance with the document entitled "Order" signed and sealed by me, dated this day and placed with the papers.

9. In matter number 2004/182170, FAI Film Productions Pty Ltd, I make orders in accordance with the document entitled "Order" signed and sealed by me, dated this day and placed with the papers.

10. In matter number 2001/58779, World Marine and General Insurances Pty Ltd, I make orders in accordance with the document entitled "Order" signed and sealed by me, dated this day and placed with the papers.

11. In matter number 2001/58767, FAI Reinsurances Pty Ltd, I make orders in accordance with the document entitled "Order" signed and sealed by me, dated this day and placed with the papers.

12. In matter number 2004/182172, FAI Films Pty Ltd, I make orders in accordance with the document entitled "Order" signed and sealed by me, dated this day and placed with the papers.

13. 15 June 2015 will be inserted as the adjourned date in each matter.

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Decision last updated: 11 March 2016