In the matter of New Cap Reinsurance Corporation Limited (in liquidation) (subject to a Scheme of Arrangement)
[2013] NSWSC 1170
•26 August 2013
Supreme Court
New South Wales
- Amendment notes
Medium Neutral Citation: In the matter of New Cap Reinsurance Corporation Limited (in liquidation) (subject to a Scheme of Arrangement) [2013] NSWSC 1170 Hearing dates: 24 June 2013; 3 July 2013 Decision date: 26 August 2013 Jurisdiction: Equity Division - Corporations List Before: Bergin CJ in Eq Decision: Plaintiff entitled to treat claim as invalid.
Catchwords: [CORPORATIONS] - [SCHEMES OF ARRANGEMENT] - Where question arising in winding up of a company - where claim in Scheme of Arrangement non-compliant with Scheme requirements - whether non compliance a procedural irregularity - whether Scheme Administrator entitled to treat claim as invalid Legislation Cited: Corporations Act 2001 (Cth)
Corporations Regulations 2001 (Cth)Cases Cited: Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd (2005) 194 FLR 322; 55 ACSR 185
Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 212
Gibbons as liquidator of New Cap Reinsurance Corporation Ltd [2008] NSWSC 385
Kempe v Ambassador Insurance Company (In liq) [1998] 1 WLR 271
Onefone Australia Pty Ltd v One.Tel Limited (2010) 80 ACSR 11
Owners of the Ship "Shin Kobe Maru" v Empire Shipping Co Inc (1994) 181 CLR 404
Re AGL Gas Networks Ltd (2001) 160 FLR 269; 37 ACSR 441
Re Golden Gate Petroleum Ltd (2010) 77 ACSR 17
Weinstock v Beck [2013] HCA 14; (2013) 87 ALJR 554
Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd (2001) 166 FLR 144; 40 ACSR 221Category: Principal judgment Parties: New Cap Reinsurance Corporation Limited (in liquidation) (subject to a Scheme of Arrangement) (First Plaintiff)
John Raymond Gibbons in his capacity as Liquidator of New Cap Reinsurance Corporation Limited (in liquidation) (subject to a Scheme of Arrangement (Second Plaintiff)
John Raymond Gibbons in his capacity as Scheme Administrator of the Scheme of Arrangement in respect of New Cap Reinsurance Corporation Limited (in liquidation) (subject to a Scheme of Arrangement)Representation: Counsel:
JL Chambers (Plaintiffs)
Solicitors:
Henry Davis York (Plaintiffs)
File Number(s): 2013/168577
Judgment
John Raymond Gibbons, the Liquidator and Scheme Administrator (as second and third plaintiff respectively) (the plaintiff) of the first plaintiff, New Cap Reinsurance Corporation Limited (in liquidation) (subject to a Scheme Arrangement) (the Company) is the applicant pursuant to s 511(1)(a) of the Corporations Act 2001 (Cth) (the Act) seeking the determination of a question arising in the winding up of the Company.
The question said to arise is whether the plaintiff is justified in treating documents received on 31 December 2012 from the insurance broker, JB Boda Reinsurance Brokers Pvt Ltd of Mumbai, India (JB Boda), as agent for United India Insurance Co Limited (United), as invalid Claims or invalid Scheme Claims for the purposes of the Company's Scheme of Arrangement (the Scheme). There is a consequential question as to whether the plaintiff is justified in not distributing any Interim Scheme Dividend or Final Scheme Dividend to United because the documents are invalid Claims for the purposes of the Scheme.
The Scheme
The Company carried on business as a reinsurer from the time of its incorporation in October 1996 until 21 April 1999, when the plaintiff was appointed as voluntary administrator by resolution of the Company's board of directors. On 16 September 1999 the Company's creditors resolved that the Company should be wound up and the plaintiff was appointed as Liquidator.
On 16 April 2008, the Company's creditors approved the Scheme. On 28 April 2008 this Court approved the Scheme and leave was granted for the appointment of the plaintiff and two others to administer the Scheme: Gibbons as liquidator of New Cap Reinsurance Corporation Ltd [2008] NSWSC 385. The Scheme became effective on 30 April 2008.
The purposes of the Scheme include the imposition of a Claims Bar Date, the employment of a valuation methodology to conclude the winding up efficiently and the tailoring of processes for the adjudication of claims to the circumstances of the winding up of a reinsurance company: [1.1]. The Scheme divided the remaining course of the liquidation into two phases: the "Initial Reserving Phase" and the "Cut-Off Phase": [2.1]. During the Initial Reserving Phase the Scheme Administrator is required to adjudicate "Due Claims" and pay Interim Scheme Dividends: [2.2].
At a meeting on 22 October 2012 the creditors resolved unanimously that the liquidation enter the Cut-Off Phase from the "Claims Bar Date" of 31 December 2012. The Claims Bar Date is the deadline by which all creditors must submit their claims to the Scheme Administrator in order to participate in any dividend distribution: [51.1]. The term of the Initial Reserving Phase ran from 30 April 2008 to 31 December 2012 and involved the calling for claims from all known creditors and the adjudication of such claims by the plaintiff: [37].
After the Claims Bar Date, the Scheme Administrator is required to adjudicate all pending claims: [52]. Once all outstanding claims have been adjudicated, the Liquidator is required to distribute all of the Company's realised assets by paying equalising dividends and a final Scheme Dividend to all creditors in accordance with the directions of the Scheme Administrator: [53]-[55]. Within three months of the payment to creditors of the Final Scheme Dividend, the Scheme is to terminate: [57.1]. Following the termination of the Scheme, the liquidator is to apply for deregistration of the Company: [57.3].
The Scheme includes the following relevant provisions:
4 Application of the Scheme
4.1 With effect from the Commencement Date:
(a) the Liquidator is bound by the Scheme; and
(b) all rights and entitlements of Creditors to be paid a dividend in the Liquidation shall be fully and finally satisfied by an entitlement, in accordance with the terms of this Scheme, to be paid Scheme Dividends in respect of Accepted Scheme Claims.
5 Interrelationship between the Scheme and the Company's Liquidation
5.1 The Liquidation shall continue in the ordinary course except to the extent that the terms of this Scheme modify the rights, liabilities, obligations and procedures that would otherwise apply in the Liquidation.
5.2 The changes effected by this Scheme to the liquidation regime that would otherwise apply to the Liquidation include the following:
...
(b) the imposition of a Claims Bar Date, and implementation of the "cut-off" of the liquidation following the Claims Bar Date;
(c) changes to the processes for the adjudication of Claims, including:
(i) the conferral of responsibility for adjudicating Claims on the Scheme Administrator;
...
(v) the imposition of information requirements when Claims are submitted.
...
PART C - DETERMINATION OF ACCEPTED SCHEME CLAIMS AND MECHANICS OF PAYMENT
17 General Structure of Scheme - Formal Steps and Processes involved in adjudicating Scheme Claims
17.1 Any Creditor wishing to receive Scheme Dividends must submit its Claim to adjudication and have it accepted as an Accepted Scheme Claim in accordance with the terms of this Scheme. ...
17.2 Except to the extent otherwise provided in this Scheme, the Corporations Act and Corporations Regulations provisions that would be applicable in the Liquidation have application to the adjudication of Scheme Claims under this Scheme.
18 Process for Submission of Scheme Claims
18.1 Subject to paragraph 18.2, each Creditor shall lodge with the Scheme Administrator (or its nominated agent specified on the Claim Form) details of its Claim using a Claim Form. In submitting a Claim to the Scheme Administrator, the Creditor must adhere to the following process and requirements and (unless inapplicable to the circumstances of the Claim) must provide the following confirmations, supporting information and documentation:
(a) the Claim Form must state the name of the Creditor as at the date of submission of the Claim Form and must provide evidence of any changes of name of the Creditor between the Claims Date and the date of submission of the Claim Form;
(b) the full contact details of the Creditor, including postal address, phone number, facsimile number, contact name and email address, together with an indication of the means by which the Creditor wishes to receive communications in respect of the Scheme;
(c) where the Claim has been assigned to the Creditor, notice of the assignment and any other evidence or particulars of the assignment reasonably requested by the Scheme Administrator;
(d) where the Claim relates, whether in whole or in part, to one or more Insurance Contracts, a schedule listing the Insurance Contracts, including for each contract, a contract reference number, inception date, broker reference, claims history, claims dates, amount of Due Claims, and an estimate of any Outstanding Claims and IBNR Claims, together with such other information as the Scheme Administrator may request in his discretion;
(e) details of any Security held or claimed to be held by the Creditor for all or part of the Claim;
(f) details of any Claims by the Company against the Creditor of which the Creditor is aware;
(g) in relation to Insurance Claims, confirmation that there is no other reinsurance of the Claim available to the Creditor which has already reduced or extinguished, or might in the future reduce or extinguish, the loss relating to the Claim, or if there is such reinsurance, full particulars of that reinsurance together with an explanation of the effect (if any) of the reinsurance on the value of the Claim;
(h) to the extent the Claims are constituted by "paid" claims under an Insurance Contract, a confirmation that they have been settled in full by the Creditor, or if they have not, full particulars of the unsettled balances together with an explanation of why they have not been settled in full and the effect (if any) of the fact of, and reasons for, nonpayment on the validity and value of the Claim;
(i) to the extent the Claims are constituted by Outstanding Claims and IBNR Claims, details of the methods and assumptions used for the estimated claim value, data triangles, and supporting reports held by the Scheme Creditor such as legal, actuarial and underwriters' reports;
(j) Payment Directions to enable the payment of Scheme Dividends to be made to the Scheme Creditors;
and each Creditor must certify that all factual details submitted on the Claim Form in respect of its Claim are correct as at the date of submission of the Claim Form.
18.2 The Scheme Administrator may, in his discretion, dispense with any requirement for any Creditor to provide any of the information referred to in paragraph 18.1, including in circumstances where the information is otherwise available to the Scheme Administrator or was provided by the Creditor prior to the Commencement Date.
18.3 Creditors shall promptly update the Scheme Administrator if any detail or details in their Claim Form changes subsequent to lodgement of the document in accordance with paragraph 18.1.
...
51 Effect of Claims Bar Date
51.1 The Claims Bar Date is the deadline by which all Claims must be submitted to the Scheme Administrator in order to participate in any dividend distribution.
51.2 Where any Scheme Creditor wishes to vary any Accepted Scheme Claim in accordance with paragraph 20.1, a Notice seeking variation must be submitted by the Claims Bar Date.
51.3 If a Creditor does not submit a Claim by the Claims Bar Date:
(a) the right of the Creditor to submit a Claim under the Scheme is forever waived, and its Claim must not be adjudicated or admitted as an Accepted Scheme Claim by the Scheme Administrator; and
(b) the Claim shall not participate in any dividend distribution.
"Accepted Scheme Claim" is defined as a "Scheme Claim to the extent that it has been accepted and valued as part of the adjudication process or Appeal Process": [72.2]. A "Scheme Claim" is defined as a "Claim notified to the Scheme Administrator by a Creditor pursuant to the Scheme".
The Scheme Claim Form
The Scheme also included the "Formal Proof of Claim" (the Scheme Form) directed to the Scheme Administrator of the Company: [Sch 4]. It included the statement that the Company was on 21 April 1999, and still is, justly and truly indebted to the creditor, and required the provision of the name and the contact details for the Creditor: [1]-[3]. These requirements reflected paragraphs 18.1(a) and 18.1(b) of the Scheme. The Scheme Form also included the following (those parts in bold italics in square brackets are my observations):
4. Ownership/Assignment of Claim
[Reflecting the requirements of paragraph 18.1(c) of the Scheme]
The Claim [has always belonged to the Creditor]/[was assigned to the Creditor on [date] and notice of the assignment (or other sufficient evidence) is attached] [delete as appropriate].
5. Particulars of the Claim
[Reflecting the requirements of paragraph 18.1(d) of the Scheme]
If the Claim relates to an Insurance Contract (as defined in the Scheme), particulars of the Claim are set out in the attached Annexure A. The information contained in Annexure A forms part of this formal proof of claim.
If the Claim does not relate to Insurance Contracts, particulars of the Claim are as set out below:
Date
Consideration
(state how the debt arose)
Amount
(specify currency)
$ c
Remarks
(include details substantiating payment)
6. Security
[Reflecting the requirements of paragraph 18.1(e) of the Scheme]
To the best of my knowledge and belief the Creditor [does/does not] [delete as appropriate] hold any security (including, for the avoidance of doubt, any letters of credit) in relation to the Claim.
[Insert details of security, if held]
7. Set-Off
[Reflecting the requirements of paragraph 18.1(f) of the Scheme]
To the best of my knowledge and belief, the Company [does/does not] [delete as appropriate] have any claims against the Creditor.
[insert details of any claims]
8. Paid Claims (for insurance/reinsurance creditors only)
[Reflecting the requirements of paragraph 18.1(h) of the Scheme]
To the best of my knowledge and belief, all "paid" claims included in Schedule 1:
(a) have been settled in full by the Creditor.
OR
(b) have not all been settled in full by the Creditor, and full particulars of the unsettled balances have been provided in the Schedule, together with an explanation of what the Creditor contends is the financial and legal effect (if any) of this fact on the validity and value of the Claim, and whether it is currently due and owing by the Company.
[delete whichever of (a) or (b) is inapplicable]
9. Outstanding Claims and IBNR Claims (for insurance/reinsurance creditors only)
[Reflecting the requirements of paragraph 18.1(i) of the Scheme]
To the best of my knowledge and belief, where Outstanding Claims and IBNR Claims are included in Annexure A, details of the methods and assumptions used for the estimated claim value are identified, and relevant data triangles and supporting reports held by the Creditor (such as legal, actuarial and underwriters reports) are attached.
10. Other Reinsurance (for insurance/reinsurance creditors only)
[Reflecting the requirements of paragraph 18.1(g) of the Scheme]
To the best of my knowledge and belief, there is no other reinsurance of the Claim available to the Creditor which has already reduced or extinguished, or might in the future reduce or extinguish, the loss relating to the Claim.
To the extent that there is such reinsurance, full particulars of that reinsurance are set out in the Schedule or on a separate page together with an explanation of what the Creditor contends is the financial and legal effect (if any) of the reinsurance on the value of the Claim.
The Scheme Form also included an acknowledgment by the creditor that it would promptly advise the Scheme Administrator of any changes in the detail of the Claim (reflecting the requirements of paragraph 18.3 of the Scheme). Finally, it required the Creditor to choose the method by which dividends could be paid and the option pursuant to which the claim was to be certified (reflecting the requirements of paragraph 18.1(j) of the Scheme).
Background
In October 2007 Mr Pangilinan, the Senior Claims Adjuster with Qualita Management Pty Ltd (the run off manager of the balance of the Company's reinsurance contracts and agent for the Liquidator) wrote to United advising that the Liquidator was in the process of settling a Scheme of Arrangement. Mr Pangilinan enclosed a Facultative Reinsurance Slip for the Indian Railways Group Personal Account Loan and a Summary of Unsettled Balances (the List). He requested that United review the List and advise of any changes. Between October 2007 and March 2008 Mr Pangilinan sent numerous emails requesting a response from United. It was not until 4 March 2008 that United responded attaching recoveries due to United in relation to its operations in Hong Kong.
On 7 March 2008 the plaintiff wrote to all the creditors of the Company advising that he intended to propose the Scheme. The letter enclosed various documents including the Draft Scheme Document and a "Proof of Debt or Claim form". The letter included advice to the creditors that the Proof of Debt or Claim form "must be sent" to Ernst & Young in Sydney.
On 10 March 2008 Mr Pangilinan wrote again to United advising that the Company held records in relation to its participation through United in Hong Kong but also in relation to Indian Railways, via JB Boda. Mr Pangilinan enclosed the Summary of the matters and requested United to reply as soon as possible so that he could reconcile United's outward accounts to the Company in preparation for the Scheme.
On 10 April 2008 United wrote directly to the plaintiff in the following terms:
Re: New Cap Reinsurance Corporation Limited (In Liquidation)-
ACN: 075 962 551 ("Company")
With reference to your above scheme dated 7th March 2008 we are enclosing our claim form in respect of our reinsurance arrangement with the captioned company. We are attaching three annexure as listed below:
1) Annexure I - Participation through India International on our Hong Kong operations - Hong Kong $ 1442097.94 due to us.
2) Annexure II - Participation through Willis on our Hong Kong operations - Hong Kong $ 1545543.85 due to us.
3) Annexure III - Participation through J.B. Boda on our Indian Railways Facultative placements - Rs.45000000 due to us.
Please acknowledge the receipt of the same.
The Claim Form with the letter was on a Form 535, Formal Proof of Debt or Claim (General Form) (as prescribed in Schedule 2 to the Corporations Regulations 2001 (Cth)). It included the following:
To the Liquidator of New Cap Reinsurance Corporation Limited (In Liquidation)
1.
This is to state that the Company was on (1) 21st day of April 1999 and still is, justly and truly indebted to (2) UNITED INDIA INSURANCE COMPANY LIMITED
Of Registered & Head Office, 24, Whites Road, CHENNAI 600 014 - INDIA
For HK Dollar 2,987,641.79 and INR 45,000,000/-
Particulars of the debt are:
Date
(3) Consideration
Amount
(4) Remarks
Balances Outstanding As on 31.03.2008
UW Year 1997-1998
HK$ 1,442,097.94
Participation in our Hong Kong Agency Operations through India International (Details as per Annexure - I)
Balances Outstanding As on 31.03.2008
UW Year 1998-1999
HK$ 1,545,543.85
Participation in our Hong Kong Agency Operations through Willis. (Details as per Annexure - II)
Balances Outstanding As on 31.03.2008
UW Year 1998-1999
INR 45,000,000/-
Participation in our Indian Railway
Facultative Placements through J.B. Boda (Details as per Annexure - III)
2.
To my knowledge or belief the Creditor has not, nor has any person by the Creditor's order had or received any satisfaction or security for the sum or any part of it except for the following (5).
NIL
This Form was signed by Mr BN Narasimhan, the Chief Manager of United. Annexure III was a table headed "INDIA RAILWAYS GPA CLAIMS RECOVERIES DUE AS AT 31-3-2008 FROM NEW CAP RE- PARTICIPATION THROUGH J B BODA". At the base of the table the following was recorded:
NEW CAP RE DATE
1998-1999
100%
SHARE
7.50%
Rounding Off
TOTAL PAID UPTO
31/12/2007
390683921
29301294.00
OUTSTADING (sic) LOSS AS AT
31-03-2008
209316079
15698706.00
TOTAL PAID/OS UPTO
31/03/2008
600000000
45000000.00
NET DUE TO UNITED INDIA
31.03.2008
45000000.00
On 9 June 2009, Mr Pangilinan wrote to United in the following terms:
A review of our records show that Ernst and Young, the liquidator for New Cap Re Australia, has not yet received your Formal Proof of Claim.
Please note that as per the Scheme of Arrangement, a formal proof for settlement has to be submitted separate to the proof submitted for voting purposes earlier last year (April, 2008).
Please advise when you expect to be able to lodge your Proof of Claim Form, or let us know if you have any query.
Mr Pangilinan wrote again on 17 August 2009 seeking United's "urgent reply" to the email of 9 June 2009. Mr Pangilinan advised that Initial Dividends had already been paid to creditors whose "proofs had already been received and adjudicated". The email included the internet address for accessing the "Scheme of Arrangement" documents, including the Scheme Form with details of the password.
On 20 August 2009 Mr Narasimhan wrote to Mr Pangilinan enclosing a copy of United's letter of 10 April 2008 and in terms that included the following:
We refer to your email dtd 17th August 2009.In this connection we would like to point out that we have already filed the Proof of Claim on 10th April 2008 with Ernst & Young Sydney marked to the attention of Mr.John Gibbons. We are once agin (sic) forwarding the same by attachment for further action.Kindly send us the remittance at the earliest for our share of the declared Dividend.
We are not able to view the details at the site listed down in your email.
On 21 August 2009 Mr Pangilinan wrote to Mr Narasimhan in terms that included the following:
I acknowledge that you have submitted a proof in April, 2008. However, as stated in my email on the 9th of June, 2009, you will need to submit a Formal Proof of Claim for settlement under the Scheme of Arrangement, separate to the proof which you submitted in April 2008 which was for voting purposes only.
With respect to access to the New Cap website, as per my earlier email you need to enter "reinsurance" as the password but will have to register your details by entering your name, email address, a user name and password to be able to access information in the site as well as the Scheme documents.
For your convenience, however, I have attached a pdf version of the Formal Proof of Claim required to be completed and submitted to Ernst & Young to enable United India to participate in dividend distributions.
I look forward to your reply, but please do not hesitate to let me know if you have any further query.
From 21 August 2009 to 31 December 2012 numerous further requests were made of United to lodge a Scheme Form. A further copy of the Scheme Form was sent by Qualita on numerous further occasions between August 2009 and 31 December 2012. No Scheme Form was lodged.
It appears that prior to 31 January 2012 Qualita received some "proofs" from United. In an email to Rodney Ong of the Hong Kong office of United, Qualita advised that it had reviewed "both proofs". It appears from that email that the proofs may have been limited to the participation in the Hong Kong agency operations through India International and Willis. Qualita advised that there were difficulties with the proofs as lodged. One complaint was that they had been retyped and certain sections ([5] and [12]) needed amendment. The email included the following:
Could you also confirm whether you will be submitting a proof of claim on behalf of United India's head office in Chennai. For some time, my colleague, Jo Drummond, has been attempting to contact Mr B.N. Narasimham (sic) and Mrs Radhika Narayanan to ascertain whether United India in Chennai will be submitting a proof of claim, but she has not yet received a reply.
Further emails were sent to Mr Ong seeking a response to the email of 31 January 2012. On 7 May 2012 Mr Ong responded to these emails and advised that he was only authorised to act for United India Insurance Co Ltd (HK) and not the Head Office in Chennai. Mr Ong enclosed the Scheme Forms and supporting documents pertaining to India International Insurance Pte Ltd and United India Insurance Co Ltd - Hong Kong.
On 8 May 2012 Qualita wrote again to Mr Ong advising that it had been attempting to contact United's Head Office in Chennai for some time in relation to the Scheme Form but had received no response. Qualita asked whether any member of the United India Hong Kong office had an email address for someone at the Head Office in India. There was no response to that email nor to the follow up emails in August and November 2012.
On 26 November 2012 the plaintiff wrote to all creditors of the Company advising of the Scheme meeting on 22 October 2012 when the unanimous resolution was passed to enter into the Cut-Off Phase with a Claims Bar Date of 31 December 2012. That notification included the following:
It is important to note from the attached Notice, the Claims Bar Date is 31 December 2012. No new claims or variations of claims will be accepted after this date.
...
If you have not submitted a Proof under the Scheme you must do so before the Claims Bar Date. Proofs received after the claims bar date will not be accepted.
On 31 December 2012 JB Boda wrote to the plaintiff by email at 6.53pm. That email was entitled "A/c Indian Railways - Fac Re - Group Personnel Accident Policy - Cedant: United India Insurance Co. Ltd Chennai - Period: 1.8.1998 to 31.7.1999 - Settlement of Claim". The document attached to the email included the following:
Claims Submission
We refer to your email dated 26th November, 2011 sent to New Cap Re and earlier emails regarding claims submissions.
We are attaching herewith further statement of claims paid up to September 2012 (Up to 2nd Quarter 2012/2013). Total claims lodged hereby are as below:-
Currency: Indian Rupees
1.
New Cap Re's share of claims paid up to June 2011: (Ref. Our email dated 7th May, 2012)
32,821,751
2.
New Cap Re's share of claims paid up to September 2012 as per statement attached.
: 606,000
3.
Outstanding reserve/IBNR as on date
:18,263,000
Total claims
:51,690,751
On 31 December 2012 JB Boda sent a further email to the plaintiff at 10.45pm enclosing a "Corrected Copy" of the Claims Submission sent earlier that evening. It appears that the only correction was to the first paragraph to amend the date from "26th November 2011" to "26th November 2012".
Proceedings
The plaintiff filed the Originating Process on 31 May 2013. The return date for the matter was 12 June 2013. On 4 June 2013 the plaintiff's solicitors forwarded to United and to JB Boda by courier and by email, a sealed copy of the Originating Process and the affidavit of the plaintiff. On 19 June 2013 United responded referring to the emails of 4 June 2013 and 12 June 2013. That email included the following:
In this regard we would like to point out we have already lodged a formal proof of claim on 10.04.2008 along with the annexures and required details. This has also been acknowledged by you. We had claimed the following amounts through our claim form lodged on 10.04.2008
1. New Cap Re's participation in Indian Railways through J B Boda - INR 4,50,00,000 (sic)
2. New Cap Re's participation in our Hong Kong Operations through Willis - HK $ 1545543.85
3. New Cap Re's participation in our Hong Kong Operations through India International - HK $ 1442097.95
The liability of New Cap Re is final and has been clearly advised thrugh (sic) our formal proof of claim lodged on 10.04.2008. We also observe that there is very little difference in the substance between the proof of claim lodged by us on 10.04.2008 and the final format advised by you. We are firmly of the view that the claim lodged by United India on 10.04.2008 shall be treated as final and honoured.
We request you to treat the claim lodged by us as final.
On 20 June 2013 JB Boda wrote by email to the plaintiff's solicitor advising as follows:
We have noted your confirmation that you have adjourned the application to Monday 24.6.2013 when you intend to have the matter heard by a Judge of the NSW Supreme Court.
We are enclosing the following documents:-
1. Proof of claim as per the format sent by you.
2. Supporting documents for the above claim.
3. Please lodge our claims for I.Rs.51,690.751/- which is forwarded to you on behalf of United India Insurance Co. Ltd., Chennai, India.
Enclosed with the email was the Scheme Form signed by JB Boda as United's agent and dated 20 June 2013. Also enclosed with the email was a copy of the Claims Submission dated 31 December 2012.
Hearing 24 June 2013
On 24 June 2013, there was no appearance by or for United. The matter proceeded ex parte. Ms JL Chambers, of counsel, appeared for the plaintiff. The evidence relied upon was the affidavit of the plaintiff sworn on 30 May 2013 and the affidavit of Rodney James Bretag, the plaintiff's solicitor, affirmed on 24 June 2013. That affidavit evidence included the material communications between the plaintiff, Qualita and United and JB Boda referred to earlier in this judgment as well as the communications with JB Boda and United in respect of these proceedings.
The plaintiff's evidence was that although the Claims Submission of 31 December 2012 referred to as the "INR Claim", was received by him prior to the expiry of the Claims Bar Date, it was not in accordance with the requirements of paragraph 18.1 and Schedule 4 of the Scheme. The plaintiff expressed the view that the INR Claim failed to comply with the Scheme in other respects including that: (1) it did not indicate the means by which United wished to receive communications in relation to the Scheme, as required by paragraph 18.1(b) of the Scheme; (2) it did not certify that there was no other reinsurance of any claim included in the INR Claim available to United, as required by paragraph 18.1(g) of the Scheme; (3) it failed to certify that "paid" claims had been settled, or if they had not, to provide particulars as required by paragraph 18.1(h) of the Scheme; (4) it failed to provide details of any "outstanding" or "IBNR" claims and other materials as required by paragraph 18.1(i) of the Scheme; and (5) it failed to provide the details necessary for the plaintiff to pay any dividend to which United might be entitled, as required by paragraph 18.1(j) of the Scheme.
The plaintiff also gave evidence that he was "concerned" that the deficiencies in the INR Claim might be considered to be procedural irregularities within the meaning of s 1322(2) of the Act and offered the opinion that if he adjudicated the INR Claim, it could not be said to cause substantial injustice to any other creditor, even if the INR Claim were admitted.
Hearing 3 July 2013
On 3 July 2013 leave was granted to the plaintiff to re-open the case in accordance with an Interlocutory Process filed that day.
On that occasion the evidence included a further affidavit from the plaintiff sworn on 2 July 2013 and an affidavit of Mr Bretag affirmed on 2 July 2013. Part of this evidence was in response to an exchange with counsel during the hearing on 24 June 2013 in relation to the email dated 7 May 2012 referred to in paragraph 1 of the INR Claim, the largest portion of the INR Claim, being 32,821,751 Rupees. The plaintiff annexed a copy of that email from JB Boda to Mr Pangilinan to his affidavit. It referred to the "exchange of correspondence" in which JB Boda had forwarded Recovery Advice for claims paid during previous Quarters in respect of Indian National Railways. The email included "further Recovery Advices" and "details for the period 4th Quarter 2010-2011 and 1st Quarter 2011-2012." These were explained in the email as "Claims Paid during January 2011 to March 2011 and April 2011 to June 2011 received from United India Insurance Co. Ltd.". The email included the following:
With the above payments the total recovery from New Cap Re as on date works out to Rs.32,821,751/- (Rs.32,112,251 + Rs.709,500).
Kindly register the above and let us have your remittance advices at the earliest.
The email included two schedules relating to the claims paid, identifying the claim number, the claim or place of accident, the date of loss, the nature of the claim (injury or death), the date of payment and the amount.
The plaintiff's affidavit of 2 July 2013 included evidence that on 26 June 2013 he had a further conversation with Mr Burdis (of Qualita). The plaintiff's evidence was that the materials that Mr Burdis had provided to him to annex to his affidavit of 30 May 2013 (read at the hearing on 24 June 2013) were "limited" to matters concerning the Scheme Form that was to be lodged by United relating to Indian Railways.
The plaintiff gave evidence that after his conversation with Mr Burdis on 26 June 2013 he believed that in addition to those communications, Qualita had received "quarterly updates from JB Boda in the period from August 1999 to 7 May 2012 in relation to claims asserted to be "paid" claims (which may or may not have been settled by United India)". The plaintiff's evidence was that the email from JB Boda on 7 May 2012 was the last such quarterly update received by Qualita from JB Boda. His evidence continued:
6. The penultimate paragraph of the 7 May Email identifies the figure which appears in the paragraph numbered 1 of the INR Claim (page 114 of my First Affidavit). Mr Burdis informs me, and I believe, that he and his staff have reviewed the 7 May Email, together with each of the quarterly updates which were previously received from JB Boda and, subject to relatively minor arithmetic differences, are of the view that those documents when taken together provide sufficient particulars of the paragraph numbered 1 in the INR Claim to allow a limited adjudication of that aspect of the document.
7. However, as noted in paragraph 21(c) of my First Affidavit, the INR Claim does not include any confirmation that "paid" claims (which comprise the amounts claimed in paragraphs numbered 1 and 2 of the INR Claim) have been settled in full or, if they have not been settled in full, provide full particulars of the unsettled balances, together with an explanation of why the claims have not been settled in full and the effect (if any) of the fact of, and reasons for, non-payment on the validity and value of the claim (as required by paragraph 18.1(h) of the Scheme). Mr Burdis informs me, and I believe, that no such confirmation has been provided in any of the quarterly updates received from JB Boda referred to in subparagraph 5(b) above.
8. In relation to the claim asserted in the paragraph numbered 3 in the INR Claim, neither Qualita nor I have been provided with any of the particulars, information or documentation required by paragraph 18.1(i) of the Scheme so as to enable me to adjudicate that portion of the claim.
The Scheme Form forwarded to Mr Bretag on 20 June 2013 records that, to the best of United's knowledge and belief, all "paid" claims included in annexure A (the INR claim) had been settled in full by United "other than IBNR". That was the reference to the amount in paragraph 3 of the INR Claim, being 18,263,000.
Consideration
Section 511(1) of the Act provides relevantly:
(1) The liquidator, or any contributory or creditor, may apply to the Court:
(a) to determine any question arising in the winding up of a company; or
...
(2) The Court, if satisfied that the determination of the question... will be just and beneficial, may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just.
The "just and beneficial requirement" in section 511(2) will be satisfied where the making of any order under the section will be "of advantage in the liquidation". This is particularly so where a difficulty has arisen in the liquidation that the Court can solve in a cheap and efficient manner by an order under the section: Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 212E.
The plaintiff anticipates that all outstanding Scheme Claims will be adjudicated by early 2014. The intention is to pay the Final Dividend under the Scheme as soon as practicable after adjudication of the last of the Scheme Claims.
It is clear from the evidence that the question of the status of United's claim has taken inordinate time and a great deal of effort on the plaintiff's behalf and that of Qualita. I am satisfied that it would be just and beneficial for the question to be answered because it will assist the liquidator in advancing the winding up, including the distribution of Final Dividends and, ultimately, the deregistration of the Company.
There is no doubt that the INR Claim made by United was not in, or in accordance with, the Scheme Form. An issue for determination is whether the deficiencies in the INR Claim are "procedural irregularities" within the meaning of s 1322 of the Act which provides, inter alia:
1322 Irregularities
(1) In this section, unless the contrary intention appears:
(a) a reference to a proceeding under this Act is a reference to any proceeding whether a legal proceeding or not; and
(b) a reference to a procedural irregularity includes a reference to:
(i) the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors of a corporation, at a joint meeting of creditors and members of a corporation or at a meeting of members of a registered scheme; and
(ii) a defect, irregularity or deficiency of notice or time.
(2) A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by order of the Court and by order declares the proceeding to be invalid.
Any procedural irregularity in a proceeding under the Act is automatically validated, subject to an order of the Court to the contrary: Weinstock v Beck [2013] HCA 14; (2013) 87 ALJR 554 at 556 [7] per French CJ. As s 1322 is remedial in nature, it is to be given a liberal construction: Weinstock v Beck at 568 [60] per Gageler J; Re Golden Gate Petroleum Ltd (2010) 77 ACSR 17 at 28 [38].
A "proceeding" is defined non-exhaustively and is not limited to a legal proceeding. The expression should not be given a narrow interpretation: Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd (2001) 166 FLR 144 at 164; 40 ACSR 221 at 239 [65] per Giles JA, with whom Beazley JA (as her Honour then was) and Davies AJA agreed. The Scheme is a proceeding for the purposes of s 1322(2) of the Act: Re AGL Gas Networks Ltd (2001) 160 FLR 269 at 281; 37 ACSR 441 at 454 [55].
A "procedural irregularity" is defined non-exhaustively in s 1322(1). In Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd (2005) 194 FLR 322 at 346; 55 ACSR 185 at 205-206 [102]-[106], Palmer J analysed the distinction between procedural and substantive irregularities in the context of s 1322 of the Act. It is first necessary to determine what is "the thing to be done" that the procedure is to regulate. "[I]f there is an irregularity which changes the substance of "the thing to be done", the irregularity will be substantive; if the irregularity merely departs from the prescribed manner in which the thing is to be done, without changing the substance of the thing, the irregularity is procedural" (at FLR 346; ACSR 206 [103]).
In Onefone Australia Pty Ltd v One.Tel Limited (2010) 80 ACSR 11 Barrett J (as his Honour then was) observed at 14 [8] that there was an important distinction between doing the "thing to be done" in a way that departs from the prescribed way and doing something other than the "thing to be done". His Honour observed that the former involved procedural irregularity and the latter did not.
The terms of the Scheme were approved by the Court pursuant to s 411(4) of the Act and the submission of a Claim constitutes a procedure that must be undertaken if a creditor of the Company wishes to achieve certain legal consequences, that is, an entitlement to participate in any dividend distribution: [4.1(b)], [17.1] and [51.3] of the Scheme. I am satisfied that this procedure pursuant to paragraph 18 of the Scheme is a "proceeding" within the meaning of that expression in s 1322(1) of the Act.
The issue is whether the deficiencies in the INR Claim are irregularities of a procedural or a substantive nature.
The plaintiff correctly conceded that some of the material information sought in the Scheme Form has been provided by United in the INR Claim and documents that it lodged with the plaintiff.
In applying the propositions in Cordiant Communications, "the thing to be done" pursuant to paragraph 18 of the Scheme is the provision of sufficient information in the Scheme Form in respect of the creditor's claim to enable the Scheme Administrator to adjudicate the claim pursuant to the Scheme. The plaintiff's evidence at the hearing on 3 July 2013 was that, although a limited adjudication of the claims in paragraphs 1 and 2 of the INR Claim could occur, it is still not possible to adjudicate United's claim without the required information.
United re-lodged its Claim Form of 10 April 2008 on 20 August 2009. Although not in the Scheme Form, it contained the information required in paragraphs 18.1(a), (b), (d) and (e) of the Scheme. Although it did not expressly state that the Company did not have any claims against it as required by paragraph 18.1(f) of the Scheme and paragraph 7 of the Scheme Form, it included a claim that it was entitled to the amounts in the Annexures to the Claim.
However United has persisted in failing to provide the information as required in paragraphs 18.1(g) and 18.1(h) of the Scheme, paragraphs 8 and 9 of the Scheme Form repeated here for convenience:
8. Paid Claims (for insurance/reinsurance creditors only)
[Reflecting the requirements of paragraph 18.1(h) of the Scheme]
To the best of my knowledge and belief, all "paid" claims included in Schedule 1:
(a) have been settled in full by the Creditor.
OR
(b) have not all been settled in full by the Creditor, and full particulars of the unsettled balances have been provided in the Schedule, together with an explanation of what the Creditor contends is the financial and legal effect (if any) of this fact on the validity and value of the Claim, and whether it is currently due and owing by the Company.
[delete whichever of (a) or (b) is inapplicable]
9. Outstanding Claims and IBNR Claims (for insurance/reinsurance creditors only)
[Reflecting the requirements of paragraph 18.1(i) of the Scheme]
To the best of my knowledge and belief, where Outstanding Claims and IBNR Claims are included in Annexure A, details of the methods and assumptions used for the estimated claim value are identified, and relevant data triangles and supporting reports held by the Creditor (such as legal, actuarial and underwriters reports) are attached.
Notwithstanding that JB Boda forwarded a Scheme Form to the plaintiff's solicitor on 20 June 2013, that even failed to include the full particulars of the unsettled balances or any explanation of what United contended the financial and legal effect of these unsettled balances, if any, may be on the validity and value of its claim. It simply stated that all claims "other than IBNR" had been settled in full.
At no stage has United provided details of the methods and assumptions used for the estimated claim value identified in respect of the IBNR claims, or indeed of any of the outstanding claims as required by paragraph 9 of the Scheme Form. No data triangles or supporting reports have ever been submitted to the Company. Although United submitted quarterly figures there is no evidence that at any stage it submitted the legal, actuarial or underwriter's reports referred to in paragraph 9 of the Scheme Form.
The Scheme permits the Scheme Administrators, in their discretion, to dispense with the requirement for any creditor to provide any of the information referred to in the Scheme and to request further information from a creditor in relation to the creditor's Scheme Claim: [18.1], [18.2] and [19.2]. However the plaintiff has requested further information from United on so many occasions without any proper response. It is most peculiar that neither United nor JB Boda provided the claim in the Scheme Form until the plaintiff commenced these proceedings, six months after the Claims Bar Date.
The Court cannot alter the substance of the Scheme and impose upon the creditors an arrangement to which they did not agree: Kempe v Ambassador Insurance Company (In liq) [1998] 1 WLR 271 at 276E. The plaintiff's efforts to obtain the proper information, consistent with Scheme requirements from United and JB Boda are to be applauded. The patience with which the plaintiff and Qualita dealt with JB Boda and United was exemplary. For some inexplicable reason, JB Boda and United have maintained a resistance to providing the information in proper form, or at all, until these proceedings were commenced and then in a seriously deficient fashion.
I am not satisfied that the failure to provide the information required by paragraphs 18.1(g) and 18.1(h) of the Scheme, paragraphs 8 and 9 of the Scheme Form, are procedural irregularities. The "thing to be done" was the provision of information. This was not done. This was a substantive irregularity.
I am satisfied that the plaintiff is entitled to regard United's INR Claim as invalid. I am also satisfied that the plaintiff is entitled to take such action as he sees fit in respect of that claim, including not paying a Final Dividend in respect of those parts of the claim that he cannot adjudicate. However I expect the plaintiff to waive the requirements of the Scheme in respect of those parts of the INR Claim (paragraphs 1 and 2 of the INR Claim) in respect of which he gave evidence in the affidavit of 2 July 2013 and to adjudicate these aspects of the claim.
The plaintiff's costs of these proceedings will be the plaintiff's costs in the liquidation.
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Amendments
27 August 2013 - formatting
Decision last updated: 27 August 2013
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