In the matter of HIH Holdings Pty Ltd (in liq)

[2022] NSWSC 1355

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of HIH Holdings Pty Ltd (in liq) [2022] NSWSC 1355

Hearing dates:

14 September 2022

Date of orders:

14 September 2022

Decision date:

14 September 2022

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Orders made in accordance with the short minutes of order initialled and placed in the file approving the distribution of the surplus and payment of the liquidators’ remuneration

Catchwords:

CORPORATIONS — Winding up — Liquidators — Remuneration — Where liquidators seek orders relating to the distribution of a surplus in respect of the liquidation and the payment of their remuneration

Legislation Cited:

Corporations Act 2001 (Cth), s 488(2), s 1322(4)

Cases Cited:

- Re DS Millard & Son Pty Ltd (1997) 24 ACSR 71

- Re Dave Lahood Pty Ltd (in liq) [2015] NSWSC 1214

- Re FAI Car Owners Mutual Insurance Company Pty Ltd (2009) 76 ACSR 164

- Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr (2017) 93 NSWLR 459; [2017] NSWCA 38

Category:

Procedural rulings

Parties:

Jason Preston and Katherine Sozou in their capacity as liquidators of HIH Holdings Pty Ltd (in liq)

Representation:

Counsel:
J McMeniman (Plaintiff)

Solicitors:
Ashurst Australia (Plaintiff)

File Number(s):

2004/182176 (006)

Judgment – ex tempore (Revised 20 September 2022) – special leave to distribute surplus assets and past and future remuneration of liquidators

Background

1. By Interlocutory Process filed on 15 August 2022, Mr Preston and Ms Sozou (“the liquidators”) in their capacity of liquidators of HIH Holdings Pty Ltd (in liq) (“Holdings”) apply for orders relating to the distribution of surplus in respect of the liquidation of Holdings and their past and future remuneration. The amounts involved are not large, but nonetheless the application is properly made, because there are statutory requirements in respect of both the approval of distribution of the surplus and the payment of the liquidators’ remuneration in the relevant circumstances, which require that the relevant application be made to the Court. The application is made, in respect of Holdings, prior to a foreshadowed application to deregister the last of the HIH companies, which will be a significant development in a long running liquidation. Ancillary relief is also sought under s 1322(4) of the Corporations Act 2001 (Cth) (“Act”) in respect of aspects of the application.

Affidavit evidence

2. The application is supported by Mr Preston’s affidavit dated 11 August 2022, and Mr McMeniman, who appears for the liquidators, has drawn attention to significant aspects of that affidavit in submissions. Mr Preston points out that the sole contributory of Holdings is HIH Insurance Ltd (in liq) (“HIH Insurance”) and that it had only one external creditor, namely the Australian Taxation Office, in the amount of $400 which was paid in full, together with interest, in May 2010, over 12 years ago. That has, not surprisingly, impacted upon the ability to form, for example, a creditor’s committee in the liquidation.

3. The remaining assets of Holdings are an amount of approximately $170,000, and there will be an amount, by way of surplus assets, of approximately $108,662, if the liquidators’ claim for remuneration is successful and after expenses are paid, which would be distributed, subject to the Court’s approval, to HIH Insurance as Holdings’ sole contributory.

4. Mr Preston in turn sets out the amount of remuneration that is sought, being $25,511.50 (exclusive of GST) for past remuneration and $9,713 (exclusive of GST) for registration up to the point of deregistration of the company. He notes that there has been no meeting of Holdings’ creditors to approve that remuneration. That is not surprising where, as I noted above, the last creditor, the Australian Tax Office, was paid out 12 years ago. Mr Preston also refers to the work which has been performed for which remuneration is claimed, and to the basis on which that remuneration has been calculated, being a time costing basis, and that evidence is in turn supported by a detailed review of the work done, the charge out rates and the distribution of work between staff, supported by schedules to the affidavit, in respect of both the work done to date and the anticipated steps to be taken in respect of Holdings prior to its impending deregistration. Mr Preston also notes that HIH Insurance, of which he is also liquidator with Ms Sozou, neither consents to nor opposes the remuneration sought.

5. A further affidavit dated 5 September 2022 of Ms San, a manager employed by the liquidators’ firm, proves publication of a notice of the application to distribute the surplus in a national newspaper.

The distribution of this surplus

6. Mr McMeniman, in helpful submissions, draws attention to the principles which are applicable to a distribution of the surplus. A liquidator requires the Court’s “special leave” to distribute a surplus, under s 488(2) of the Act, and that requires that a special application be made to the Court, as has occurred here, rather than the matter being dealt with as part of some other administrative procedure: Re DS Millard & Son Pty Ltd (1997) 24 ACSR 71. In Re FAI Car Owners Mutual Insurance Company Pty Ltd (2009) 76 ACSR 164, a decision which has been applied on many subsequent occasions by this Court, Barrett J in turn noted that the purpose of the application was to, in effect, direct attention to the steps necessary to be taken by the liquidator to verify that a surplus in truth exists and that members’ entitlements have been ascertained. Plainly, that will sometimes be a complex matter, but it is less complex here where the last creditor of Holdings was owed a small debt, paid out long ago, and Holdings has only one contributory. Mr McMeniman points to the evidence that the liquidators have undertaken the necessary investigations to confirm that position, and confirm the consequential surplus, and that is sufficient to support the order that is sought in respect of the distribution of the surplus.

7. Mr Preston also seeks dispensation from preparing a schedule in accordance with Form 551. Such an order is regularly made, and I will make it in the manner recognised in, for example, Re Dave Lahood Pty Ltd (in liq) [2015] NSWSC 1214.

The liquidators’ claim for remuneration

8. Mr McMeniman in turn draws attention to the principles applicable to the determination of the liquidators’ remuneration, and to the slight complexity which arises from the fact that Mr Preston’s remuneration is to be determined under s 473 of the former Corporations Act, operating through transitional provisions to the Insolvency Law Reform Act 2016 (Cth), because he was appointed as liquidator of Holdings before 1 September 2017, whereas Ms Sozou’s remuneration is to be appointed under s 60-10 of the Insolvency Practice Schedule (Corporations) (“IPSC”). Nothing turns on that complexity, where the principles applicable are the same.

9. Mr McMeniman in turn refers to the relevant matters applicable under ss 473(3) and 473(10) of the former Corporations Act, and the corresponding matters applicable under s 60-10 of the IPSC, to determine the quantum of a liquidator’s remuneration. He refers to only one of the many authorities which have addressed that question, in this Court, being the important decision in Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr (2017) 93 NSWLR 459; [2017] NSWCA 38 , which has subsequently been applied in many decisions of the Court, and emphasises the need to have regard to proportionality in respect of a liquidator’s remuneration, and the fact that different approaches to the determination of the quantum of that remuneration may properly be applied.

10. Here, a time based approach has been applied, and there is nothing unreasonable in that approach where this is the liquidation of one company within a complex corporate group, and that approach has allowed the allocation of time costs to that particular company in respect of work done in relation to that company. I have referred above to Mr Preston’s evidence supporting the amount of remuneration claimed, both for past and future remuneration, and Mr McMeniman in turn refers to the degree of complexity involved in the liquidation of Holdings, reflecting its role within the HIH group, and the fact that it could not be deregistered until other matters relating to other associated companies within the HIH group were addressed.

11. I have noted above that an application for future remuneration is made, and the Court has readily made such orders, particularly in the period shortly before a company’s deregistration, where that will avoid the costs of a further application dealing with essentially the same matters. I am satisfied having regard to Mr Preston’s evidence and the matters addressed in submissions, that the order for his and Ms Sozou’s remuneration may properly be made.

Relief from procedural requirements

12. For completeness, I note that the liquidators seek relief under s 1322(4) of the Act from compliance with aspects of s 473(3) of the Act and s 60-10 of the IPSC, in respect of the absence of a meeting of Holdings’ creditors to approve the liquidator’s remuneration. It is not entirely clear that such relief is necessary but, to the extent that it is required, I am satisfied that it should be granted.

13. Relief is also sought under s 1322 of the Act from rr 9.4(2) and 9.4(3) of the Supreme Court (Corporations) Rules, as they previously existed, and if they had continuing application, in respect of the conduct of the application. Again, it is not clear that such relief is necessary, where there are no transitional provisions in respect of the rules, presumably because there are few companies to which the former rules would continue to have application. To the extent that dispensation is necessary, it would be made under s 14 of the Civil Procedure Act 2005 (Cth), which provides for dispensation with any requirement of rules of Court rather than under s 1322 of the Act. I would in any event dispense with the provision of the applicable rules, to the extent that it were necessary to do so.

Orders

14. I will amend paragraph 5 of the liquidators’ proposed orders to refer to s 14 of the Civil Procedure Act (2005) NSW, and I otherwise make orders in accordance with the short minutes of order initialled by me and placed in the file.

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Decision last updated: 13 October 2022