In the matter of HIH Insurance Limited (in liquidation) ACN 008 636 575; In the matter of FAI General Insurance Company Ltd (in liquidation and subject to a scheme of arrangement) ACN 000 327 855

The liquidators of HIH Insurance Limited and FAI General Insurance Company Ltd applied to the court for directions and judicial advice in relation to their management of the companies' liquidation processes. The primary concern was the handling of potential shareholder damages claims that had not been proven prior to the companies' deregistration. The liquidators sought guidance on whether they should admit these claims, distribute assets without making provision for potential shareholder liabilities, and determine the vesting of claims and rights to dividends post-deregistration.

The court examined whether the liquidators' application, made post-1 September 2017, should be governed by the Insolvency Practice Schedule (IPS) or the "old Act." It concluded that the "old Act" applied due to the timing of the proceedings. Regarding the shareholder claims, the court found that the liquidators should admit these claims, especially given their relatively small size and the liquidators' superior ability to identify and quantify them. The court also determined that the liquidators would be justified in distributing assets without making provision for liabilities of shareholders who did not object to the distribution within the stipulated time, as the schemes did not allow for discretionary extensions for claims by scheme administrators.

Furthermore, the court addressed the issue of the vesting of claims and dividends post-deregistration. It held that claims for damages under the Trade Practices Act s 82 did not vest in the Australian Securities and Investments Commission (ASIC) or the Commonwealth under the Corporations Act s 601AD. Similarly, rights to dividends in respect of lodged claims did not vest in ASIC or the Commonwealth if the claims were not admitted prior to deregistration. These rulings provide clarity for liquidators managing similar cases and the potential implications for stakeholders.