In the matter of HIH Underwriting and Insurance (Australia) Pty Limited (in liquidation and subject to a scheme of arrangement)
[2013] NSWSC 2014
•20 December 2013
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of HIH Underwriting and Insurance (Australia) Pty Limited (in liquidation and subject to a scheme of arrangement) [2013] NSWSC 2014 Hearing dates: 20 December 2013 Decision date: 20 December 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Orders made under Corporations Act 2001 (Cth) s 562A(4).
Catchwords: CORPORATIONS - Winding up - Insolvency - Proceeds of contract of reinsurance - Application for orders under Corporations Act 2001 (Cth) s 562A(4) - Whether "just and equitable" to make orders sought. Legislation Cited: Corporations Act 2001 (Cth) s 562A(4) Cases Cited: - Re Amaca Pty Limited v McGrath and Anor as liquidators of HIH Underwriting and Insurance (Australia) Pty Limited [2011] NSWSC 90; (2011) 82 ACSR 281 Texts Cited: CORPORATIONS - Winding up - Insolvency - Proceeds of contract of reinsurance - Application for orders under Corporations Act 2001 (Cth) s 562A(4) - Whether "just and equitable" to make orders sought. Category: Interlocutory applications Parties: Amaca Pty Limited (under NSW administered winding up) (First Plaintiff)
Amaba Pty Limited (under NSW administered winding up) (Second Plaintiff)
ABN 60 Pty Limited (under NSW administered winding up) (Third Plaintiff)
Messrs A G McGrath & C J Honey as liquidators of the HIH Group of Companies (First Defendant)
HIH Underwriting and Insurance (Australia) Pty Limited (in liquidation and subject to scheme of arrangement) (Second Defendant)Representation: Counsel:
K. Rees (Plaintiffs)
J.L. Barlow (solicitor - Defendants)
Solicitors:
Henry Davis York (Plaintiffs)
Ashurst Australia (Defendants)
File Number(s): 2010/247943
Judgment - ex tempore
In proceedings 247943 of 2010 the Plaintiffs, Amaca Pty Limited, Amaba Pty Limited, and ABN 60 Pty Limited (under New South Wales administered winding up) seeks certain orders under s 462A(4) of the Corporations Act 2001 (Cth) in respect of amounts of reinsurance receipt of $38,882.28 in respect of contract of reinsurance between the HIH Group of companies and Union Atlantique de Reassurances SA ("UAR"). The liquidators of the HIH Group of companies are represented in respect of the application but do not seek to be heard. The Plaintiffs are represented by Ms Rees of counsel in respect of the application.
The application relates to the 1981/82 policy year in which the Plaintiffs, which were companies associated with the James Hardie Group of companies, had obtained cover with the HIH Group of companies, which in turn obtained reinsurance for that cover in the London market. The circumstances of dealings between the James Hardie Group of companies, the HIH Group and the relevant reinsurers are comprehensively reviewed in the judgment of Barrett J in Re Amaca Pty Limited v McGrath and Anor as liquidators of HIH Underwriting and Insurance (Australia) Pty Limited [2011] NSWSC 90; (2011) 82 ACSR 281. His Honour set out (at [32]ff) the dealings between a predecessor of the HIH Group, Heath Australia and the James Hardie Group. His Honour noted (at [45]) the amount of cover to be obtained and the various layers in which that cover was provided and dealt specifically with the position in respect of the three reinsurers from which recoveries had by that time been obtained by HIH. He noted (at [75]ff) several factors which allowed a precise matching of the insurance policies under which Heath had provided cover to the Plaintiffs with reinsurance contracts written in favour of Heath by the three specified reinsurers from which recoveries had then been obtained. He noted (at [78]ff) that the HIH Group must have been aware, through their broker, that the whole of the risk nominally taken by Heath was to be laid off to the London market by means of facultative reinsurance contracts specifically sought and obtained for the purpose, and contrasted that position with that if Heath had become subject to liability by reason of policies written for different insured with more general reinsurance arrangements in place. His Honour held (at [85]) that there was reason to depart from the ordinary course of allocation of reinsurance proceeds contemplated by s 562A(2)-(3) of the Corporations Act in respect of the 1981/82 policy year in respect of the reinsurance proceeds received from the three reinsurers, by reason of:
"the clear and strong link between the insurance cover made available by HeathUI and the specific reinsurance obtained by HeathUI, the financial arrangements regarding premium and the true nature of the arrangements as described [above in this judgment]."
Ms Rees submits, and I accept, that the reasoning of his Honour's judgment is directed to dealings between the James Hardie Group, the HIH Group and the reinsurers generally and not only to the three reinsurers from which recoveries had then been obtained. That conclusion can be reached on two bases. First, his Honour's conclusion depends primarily upon the manner in which the James Hardie Group and the HIH Group dealt, in structuring their reinsurance arrangements, and there is no suggestion that that structure operated differently in respect of particular reinsurers; in particular, there is no suggestion that the HIH Group at any time accepted any substantive risk in respect of the policy, which is a matter which is important to his Honour's reasoning. Secondly, as Ms Rees also pointed out, when his Honour made orders under s 562A(4) of the Corporations Act, on 19 April 2011, those orders specifically extended not only to the three reinsurers to which his Honour had referred in his judgment, but also to a receipt from UAR. The necessary consequence of that extension is that his Honour considered that the position in respect of UAR was the same as that in respect of the three other reinsurers, so as to warrant orders being made under s 562A(4) of the Corporations Act in that regard.
Ms Rees informs me, on instructions, and I accept, that the position in respect of UAR, like other reinsurers, is that recoveries are made by HIH from time to time as claims are submitted by the Plaintiffs and give rise to an entitlement to payment by the relevant reinsurers. The application now brought relates to a further payment in that category, which seems to me to fall within the same logic of the findings already made by Barrett J and further orders which have been made by Brereton J in respect of previous payments of a similar character.
In my view, the justification for making the order under s 562A(4) of the Corporations Act turns on the circumstances of which the relevant cover was obtained, considered by Barrett J in his judgment, and is not undermined by the present circumstances of the receipt of the fruit of these arrangements. For that reason, it seems to me that the reasoning of Barrett J and the findings that his Honour made are sufficient to support the treatment of the further receipt of $38,882.28 now received by HIH Underwriting and Insurance (Australia) Pty Limited (in liq and subject to a scheme of arrangement) from UAR in the same manner as previous receipts. I note that that position was reflected in consent orders which are agreed between the representatives of the Plaintiffs and the liquidators of the HIH Group.
So far as those orders require the exercise of the Court's discretion I am satisfied that that discretion should be exercised consistently with these orders. I make orders in accordance with the short minutes of order initialled by me and placed with the file.
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Decision last updated: 06 February 2014
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