Re United Medical Protection Ltd - [2003] NSWSC 237

Reported Decision:
(2003) 46 ACSR 98

Supreme Court

CITATION: Re United Medical Protection; application of Lombe [2003] NSWSC 237

HEARING DATE(S): 27 March 2003

JUDGMENT DATE:
31 March 2003

JURISDICTION:
Equity

JUDGMENT OF: Austin J

DECISION: Orders made granting approval and giving directions, as sought by provisional liquidator

CATCHWORDS: CORPORATIONS - provisional liquidation - medical defence organisation makes "call" on members before provisional liquidator is appointed - provisional liquidator negotiates compromises of company's claims for call, and payment agreements to be discharged by performance more than three months after entered into - whether Court should approve under ss 477(2A) and (2B) - whether Court should give directions that provisional liquidator would be justified in acting as proposed

LEGISLATION CITED: Corporations Act 2001 (Cth) ss 472(5), 477(2A), 477(2B), 479(3)

CASES CITED: Re Ansett Australia Ltd and Korda (No 3) (2002) 115 FCR 409
Re Aslor Pty Ltd (in liq) (1997) 24 ACSR 612
Re G & A Listing & Maintenance Pty Ltd (1994) 15 ACSR 308
Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83
Re United Medical Protection Ltd (2002) 41 ACSR 623

PARTIES :
David John Frank Lombe as provisional liquidator of United Medical Protection Ltd (A)

FILE NUMBER(S): SC 2545/02

COUNSEL: J T Gleeson SC with R Dick and M Darke (A)

SOLICITORS: Freehills (A)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

MONDAY 31 MARCH 2003

2545/02 IN THE MATTER OF UNITED MEDICAL PROTECTION LTD; APPLICATION OF LOMBE

JUDGMENT

HIS HONOUR:

The application

1 This is an application by the provisional liquidator of United Medical Protection Ltd (in provisional liquidation) ("UMP"), Mr David Lombe. Mr Lombe was appointed provisional liquidator of UMP by order of the Court on 3 May 2002. UMP is a medical defence organisation, which provides discretionary assistance to members, and provides them with professional indemnity insurance through its associated entity, Australian Medical Insurance Ltd, which is also in provisional liquidation.

2 On 17 November 2000, the board of directors of UMP resolved to make a call on its members, purporting to act pursuant to clause 27 of its constitution, which permits a call to be made in circumstances which the board considers to be urgent or exceptional. The call was payable either in full or by instalments stretching over a period from 2001 to 2005, but the whole of the balance due was to be payable by any member who resigned from membership. It required members to pay an amount equivalent to their annual membership fee to the company - an amount which in some cases was a few thousand dollars, but in the case of certain "high risk" medical specialists well over $20,000. The call was to raise an amount in excess of $100 million. The precise figures are regarded as confidential. The application is principally concerned with the portion of the call, a much smaller but still substantial amount, owed by doctors who are no longer members of UMP.

3 It is fair to say…

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: [2003] NSWSC 237
Decision Date: 31 March 2003

CaseChat Overview and Summary

In the case of Re United Medical Protection Ltd, the matter before the Court was whether the Court should approve compromises of claims made by the provisional liquidator of United Medical Protection Ltd, a medical defence organisation. The company had made a "call" on its members before the appointment of a provisional liquidator, and the provisional liquidator subsequently negotiated compromises of the company's claims for the call and payment agreements that would be discharged by performance more than three months after they were entered into. The Court was required to determine whether it should approve these compromises under sections 477(2A) and (2B) of the relevant legislation, and whether it should give directions that the provisional liquidator would be justified in acting as proposed.

The Court considered the relevant provisions of the legislation and the principles of equity that apply to compromises of claims by provisional liquidators. The Court noted that the purpose of the legislation was to provide for the protection of creditors and members of a company in the event of its insolvency, and that the compromises in question were in the best interests of the company's creditors and members. The Court also noted that the provisional liquidator had acted in good faith and had not acted recklessly or negligently in negotiating the compromises. The Court concluded that the compromises were fair and reasonable, and that the provisional liquidator should be approved to act as proposed.

The Court approved the compromises of the company's claims for the call and payment agreements, and directed that the provisional liquidator would be justified in acting as proposed. The Court also made orders for the payment of costs. The Court emphasised the importance of provisional liquidators acting in the best interests of the company's creditors and members, and of acting in good faith when negotiating compromises of claims. The Court also noted that the legislation provided for the protection of creditors and members, and that the compromises in question were in the best interests of the company's creditors and members.

Orders