In the matter of United Body Works (Qld) Pty Limited

[2014] NSWSC 956

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of United Body Works (Qld) Pty Limited [2014] NSWSC 956
Hearing dates:	18 July 2014
Date of orders:	18 July 2014
Decision date:	18 July 2014
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	Directions given that liquidators would be justified in distributing shares in specie
Catchwords:	CORPORATIONS – winding up – liquidators – distribution of assets amongst creditors – where creditors are companies in the same corporate group as the insolvent entity – where creditor company is also debtor to the insolvent entity
Legislation Cited:	(Cth) Corporations Act 2001, s 479(3), s 533
Category:	Procedural and other rulings
Parties:	Anthony Gregory McGrath and Christopher John Honey in their capacity as liquidators of United Body Works (Qld) Pty. Limited (in liquidation) AC 009 913 508 (applicants)
Representation:	Counsel: J Scarcella (solicitor) (applicants) Solicitors: Ashurst Australia (applicants)
File Number(s):	2004/184599

Judgment (ex tempore)

1. HIS HONOUR: United Body Works Queensland Proprietary Limited, a related entity of HIH Insurance Limited, was wound up by order of the court on 27 August 2004. The applicants are its present joint liquidators and apply, as the eighth phase in a series of applications by those liquidators, for orders authorising the distribution of its assets to other companies in the HIH Group, which are also its only remaining creditors, and to deregister the company, its winding up having otherwise been concluded.

2. Save for the steps to be taken pursuant to the orders sought on this application, the liquidation of the company is complete. Proofs of debt have been called for, received, and adjudicated, and the final dividend will be paid or distributed consequent upon the orders presently sought.

3. Investigations have been undertaken into the company's financial position, creditors' claims, and potential claims and causes of action available to the company. Reports have been lodged with ASIC pursuant to (Cth) Corporations Act 2001, s 533, and the realisable assets, other than intercompany debts and shareholdings in FAI New Zealand, have been realised and collected.

4. The assets of the company comprise cash of some $833,000; a debt due from a related company CIC Insurance Limited of approximately $180,000; a debt due from FAI Financial Services Limited of approximately $2.190 million; a debt due from FAI Insurance Limited of $28,598; and a debt due from FAI Leasing Finance Proprietary Limited of $2,902. In addition, the company holds approximately 68,000 shares in FAI New Zealand Limited.

5. In conformity with the approach which has been adopted in earlier applications of this kind in connection with this group, of endeavouring to consolidate the assets in the companies that sit at the top of the group in structural terms, in order to maximize available potential distributions to external creditors and reduce the costs of administration, what is proposed is that the cash be distributed to the remaining creditors; the debts to which I have referred be assigned to those creditors pro rata to their admitted liabilities; and the shares in FAI New Zealand, subject to the approval of the New Zealand High Court, similarly be distributed pro rata to the creditors.

6. The company is insolvent. It has three remaining creditors, the sole external debt of $400 to the Australian Taxation Office having been paid. Those remaining creditors are HIH Casualty and General for approximately $8.5 million; FAI Insurance for $24.8 million; and FAI Group for $95 million approximately.

7. As on previous occasions, an order pursuant to s 479(3) advising the liquidators that they would be justified in distributing in specie the shares and the right to prove in respect of the debts owed to the company is necessary, or at least appropriate, in circumstances where the Corporations Act does not contain an express power to make such a distribution, but also contains no prohibition. Additionally, the liquidators are the liquidators of both parties to the assignment, and thus are potentially in a position of conflict, so that it is appropriate for the protection of a direction from the court to be sought. This accords with the approach that has been adopted by Barrett J and by me in earlier applications of this kind.

8. One additional complication in the present matter is that FAI Insurance is, as well as being a creditor of the company to the extent of $24.8 million, also indebted to the company for $28,597, and that debt will be one of those dealt with by the proposed deed of assignment and thereby assigned to the three creditor companies. Ordinarily, the assignment of a debt to a creditor would operate as a release, and in the earlier applications such transactions have been dealt with by way of release rather than assignment. In this case, the indivisibility of the joint debt and the inappropriateness of dividing it so as to increase the burden on the debtor means that it is not feasible to deal with it by way of release, but it seems to me that that makes no real or practical difference. Effectively, whereas FAI Insurance presently owes the company $28,598, following the assignment, it will owe HIH C & G and FAI Group and itself jointly that sum. While the other two creditor companies may be able to claim it against FAI Insurance, it would make no sense for it to claim it against itself, and there would be for all practical purposes a release.

9. The administrators seek approval of their remuneration for the period to date, or at least until recently, together with a fixed sum up to and including deregistration. The evidence explains in some detail the work done and the charges applied, and the amounts claimed do not appear inappropriate. To the extent that the liquidators are also the creditors, they unsurprisingly consent to the amount sought.

10. The liquidators also seek a number of formal directions, pursuant to s 1322(4), dispensing with rules 9.4(2)(b) in circumstances where advertising of the intention to declare a dividend occurred more than two months before the intended date, and where given the status of the liquidators as liquidators also of the creditors, it is not realistic - and if realistic, would be inappropriate - for them to approve their own remuneration at a creditors meeting.

11. As has been said on earlier occasions, the notoriety of the HIH liquidation and the extensive investigations that have taken place in many forums mean that it is improbable in the extreme that there would be any creditor or other interested party not known to the liquidators who has not yet emerged.

12. The Court orders that:

1. Pursuant to (Cth) Corporations Act 2001, s 479(3), the Applicants as liquidators of United Body Works (Qld) Pty. Limited (In Liquidation) ACN 009 913 508 (Company), would be justified in distributing in specie 67,594 shares held in FAI (NZ) General Insurance Company Ltd (In Liquidation) New Zealand Company Number 330952 (FAI (NZ)) to:

1. HIH Casualty and General Insurance Limited (In Liquidation and Subject to Schemes of Arrangement) ACN 008 482 291 (HIH C&G);

2. FAI Insurances Limited (In Liquidation and Subject to Schemes of Arrangement) ACN 004 304 545 (FAII); and

3. FAI General Insurance Company Ltd (In Liquidation and Subject to Schemes of Arrangement) ACN 000 327 855 (FAI General), the creditors of the Company, in proportion to their admitted liabilities, following the obtaining of an order of the Court in New Zealand, on the application of the liquidator of FAI (NZ).

2. Pursuant to Corporations Act , s 479(3), that the Liquidators would be justified in distributing in specie the right of the Company to prove in:

1. the liquidation or scheme of arrangement of CIC Insurance Limited (In Liquidation and Subject to a Scheme of Arrangement) ACN 004 078 880 in the sum of $179,192.96;

2. the liquidation of FAI Financial Services Ltd (In Liquidation) ACN 002 995 851 (FAIFS) in the sum of $2,177,474.00;

3. the liquidation of FAIFS in the sum of $13,240.77;

4. the liquidation of FAII in the sum of $28,597.96; and

5. the liquidation of FAI Leasing Finance Pty Ltd (In Liquidation) ACN 002 027 214 in the sum of $2,902.20, by assigning that right to HIH C&G, FAII and FAI General, the creditors of the Company, in proportion to their admitted liabilities, by entering into the Deed of Assignment in the form of, or substantially in the form of, the document at Tab 4 of Exhibit CJH-1 to the affidavit of Christopher John Honey sworn on 15 July 2014.

3. Pursuant to Corporations Act , 473(3)(b)(ii), the Applicants' remuneration for the liquidation of the Company for the period:

1. 27 August 2004 to 23 May 2014 (inclusive), is determined to be $51,816.50 plus GST in the amount of $5,181.65; and

2. 23 May 2014 until and including the deregistration of the Company be fixed in the amount of $9,710.00 plus GST in the amount of $971.00.

4. Pursuant to Corporations Act, s 1322(4), that the proposed declaration of a final dividend to the creditors of the Company is not invalidated by reason of non-compliance with (Cth) Corporations Regulations 2001, reg 5.6.65.

5. Pursuant to Corporations Act, 1322(4), that the order approving the Liquidators' remuneration for the liquidation of the Company for the period 27 August 2004 to 23 May 2014 (inclusive) in the amount of $51,816.50 plus GST in the amount of $5,181.65 is not invalidated by any non-compliance with section 473(3)(b)(i) of the Act by virtue of there being no resolution of creditors of the Company as the Company has no external creditors.

6. The requirements of (NSW) Supreme Court (Corporations) Rules 1999, rr 9.4(2)(b) and 9.4(3), be dispensed with.

7. Pursuant to Supreme Court (Corporations) Rules , r 7.5(6), the Applicants need not serve on each creditor who proved a debt in the course of the winding up of the Company, and on each contributory of the Company, a copy of:

1. the interlocutory process filed in these proceedings;

2. the Applicants' receipts and payments in the winding up of the Company; and

3. the statement of financial position of the Company at the date the interlocutory process was filed in these proceedings.

8. The proceedings be stood over generally pending the transfer of shares in FAI (NZ) in conformity with order 1 with liberty to apply on three days' notice.

9. These orders be entered forthwith.

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Decision last updated: 18 February 2015