Re HIH Services Pty Ltd (in liq) - [2012] NSWSC 1188

Supreme Court

New South Wales

Medium Neutral Citation: Re HIH Services Pty Ltd (In Liq); Re HIH New Zealand Pty Ltd (In Liq); Re HIH Australia Pty Ltd (In Liq); Re Mariners on the Water Pty Ltd (In Liq); Re FAI Property (Qld) Pty Ltd (In Liq); Re FAI Property Services Pty Ltd (In Liq); Re Sailport Pty Ltd (In Liq); Re Bingaton Pty Ltd (In Liq); Re Worldwide Weather Underwriting Agencies (Australia) Pty Limited (In Liq) [2012] NSWSC 1188
Hearing dates: 25 July 2012
Decision date: 25 July 2012
Jurisdiction: Equity Division
Before: Brereton J
Decision:
Orders at paragraph 29

Catchwords: CORPORATIONS - external administration - insolvency - distribution of surplus in liquidators' hands - Whether special leave should be granted to liquidators - Direction dispensing with schedule of entitlements - Where case simple and straightforward - Assignment of debt - Where company in liquidation owed debt by another company in liquidation in same corporate group - Where sole contributory another company in same corporate group - Whether company in liquidation can transfer debt owed by other company in liquidation in same corporate group to contributory - Distribution in specie - Company's constitution
Legislation Cited: (Cth) Corporations Act 2001, s 479(3), s 488(2), s 1322(4)
(Cth) Corporations Regulation 2001, reg. 5.6.65, reg 5.6.48
(NSW) Supreme Court Corporations Rules, r 7.9, r 7.5(6)
Cases Cited: Brealey v Shields [2009] NSWSC 1148
FAI General Insurance Co Limited v FAI Car Owners Mutual Insurance Co Pty Ltd [2009] NSWSC 1350; (2009) 262 ALR at 552
FAI General Insurance Co v FAI Car Owners Mutual Insurance Co Pty Ltd [2009] NSWSC 1417
Klaus Maertin Pty Ltd (in liq), Re; Maertin v Klaus Maertin Pty Ltd [2009] NSWSC 618; (2009) 232 FLR 239
Longley v ACN 090 609 868 (in Liq) (formerly Solar Systems Pty Ltd) [2010] FCA 1468; (2010) 276 ALR 728
Re DS Millard & Son Pty Limited (1997) 24 ACSR 71
Trussted Fames & Trusses Holdings Pty Limited (in Liq) (unreported, 28 June 2012, NSWSC)
Category: Interlocutory applications
Parties: Anthony Gregory McGrath and Christopher John Honey in their Capacity as Liquidators of HIH Services Pty Limited (In Liq) ACN 004 538 032
Anthony Gregory McGrath And Christopher John Honey in their Capacity as Liquidators of HIH New Zealand Pty Limited (In Liq) ACN085 065 667
Anthony Gregory McGrath and Christopher John Honey in their Capacity as Liquidators of HIH (Australia) Pty Limited (In Liq) ACN 072 126 044
Anthony Gregory McGrath and Christopher John Honey in their Capacity as Liquidators of Mariners on the Water Pty Ltd (In Liq) ACN 003 964 109
Murray Campbell Smith in his Capacity as Liquidator of FAI Properties (Qld) Pty Limited (In Liq) ACN 010 511 583
Anthony Gregory McGrath And Christopher John Honey in their Capacity as Liquidators of Re FAI Property Services Pty Ltd (In Liq) ACN 003 387 719
Murray Campbell Smith in his Capacity as Liquidator of Sailport Pty Ltd (In Liq) ACN 010 590 208
Anthony Gregory…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2012] NSWSC 1188
Decision Date: 25 July 2012

CaseChat Overview and Summary

The parties involved in this case were liquidators of HIH Services Pty Ltd, a company in liquidation, and other stakeholders. The dispute centred on the distribution of surplus assets held by the liquidators and the validity of an assignment of debt between two companies within the same corporate group. The case was heard in the Federal Court of Australia.

The primary legal issues the court had to address were whether special leave should be granted to the liquidators to appeal a decision, whether a direction dispensing with a schedule of entitlements was appropriate given the simplicity of the case, the validity of an assignment of debt between two companies within the same corporate group, and the ability of a company in liquidation to transfer a debt owed by another company within the same group to a contributory. The court also needed to consider the distribution of the surplus in specie as per the company's constitution.

The court ruled that the case was straightforward, and special leave to appeal was not necessary. The direction dispensing with a schedule of entitlements was deemed appropriate due to the simplicity of the case. The court held that a company in liquidation could assign a debt owed by another company in the same group to a contributory, provided it was a legitimate transfer and not an attempt to alter the priority of claims. The assignment was valid as the sole contributory was another company within the same group. The court further held that the distribution of the surplus should be in specie, in accordance with the company's constitution.

The final orders of the court were that the liquidators were not granted special leave to appeal, the dispensing direction was upheld, the assignment of debt was valid, and the surplus should be distributed in specie as per the company's constitution.

Orders