HIH OVERSEAS HOLDINGS LIMITED (IN LIQUIDATION) V HIH CASUALTY AND GENERAL INSURANCE LIMITED (IN LIQUIDATION) HC AK CIV 2001-404-004096

HIH OVERSEAS HOLDINGS LIMITED (IN LIQUIDATION) V HIH CASUALTY AND GENERAL INSURANCE LIMITED (IN LIQUIDATION) HC AK CIV 2001-404-004096 25 March 2009IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2001-404-004096UNDER the Companies Act 1993 IN THE MATTER OF An application for remuneration of liquidators BETWEEN HIH OVERSEAS HOLDINGS LIMITED (IN LIQUIDATION) Plaintiff AND CIV 2001-404-004097AND HIH CASUALTY AND GENERAL INSURANCE LIMITED (IN LIQUIDATION) Defendant Hearing: 25 March 2009 Appearances: M V Robinson for Liquidators Judgment: 25 March 2009ORAL JUDGMENT OF ASSOCIATION JUDGE ROBINSONSolicitors: Simpson Grierson, Private Bag 92518, Auckland[1] Kieran Mark Downey and William Guy Black are the liquidators of HIH Holdings (NZ) Ltd and HIH Casualty and General Insurance (NZ) Ltd. Through HIH Insurance Holdings (NZ) Ltd, the holdings company has all the shares in the casualty and general insurance company. Both companies were put into liquidation in July 2001. At that time it appears that the casualty and general insurance company was trading satisfactorily. The financial collapse of the HIH Group in Australia caused the liquidation. [2] The liquidation of the casualty and general insurance company can be described as successful. According to the liquidators latest reports, that company at present has a cash surplus of $82,705,669. That sum is likely to increase and eventually through the holdings company will be available for distribution amongst the Australian creditors. [3] From time to time, in accordance with the procedure referred to in Re Medforce Healthcare Services Ltd (In Liquidation) [2001] 3 NZLR 145 the liquidators have obtained Court approval for remuneration at a level reasonable in the circumstances but in excess of the rate specified under the Liquidation Regulations 1994. [4] They now apply for approval of the following remuneration: a) In respect of HIH Casualty and General Insurance (NZ) Ltd (In Liquidation) the sum of $816,378.50 plus GST for the period 1 April 2007 to 31 March 2008. b) In respect of HIH Overseas Holdings Ltd (In Liquidation) the sum of $82,171.50 for the period 1 April 2007 to 31 March 2008. [5] In support of the applications they have provided detailed evidence of the work performed during the period concerned together with a summary of staff engaged and hours worked in respect of the invoices they have supplied. According to their evidence which I accept, their fees have been calculated on a time and attendance basis, the rates reflecting those rates approved by the Court on 21 June2007. The recording of time and description of tasks completed for the liquidation includes: i) Individual Staff electronically recording to a time and cost system on a daily basis, the time worked on a liquidation and a description of the tasks completed. The time and costs system includes the appropriate Court approved hourly rate for staff working on the liquidation. ii) Monthly collation and review by the liquidators of a printed analysis of the recorded information. iii) Preparation of a summary invoice on a monthly basis. [6] They also say, and I accept, that wherever possible the work was performed by persons at the most appropriate level to ensure the work was completed in a competent and cost effective manner, the interests of the creditors being paramount. [7] I accept their evidence that Casualty and General's liquidation is ongoing because of the possibility of claims being made for some time to come pursuant to longtail type insurance policies. The liquidators are in the process of preparing material to support an application to the Court for directions to approve a liquidation scheme to complete the liquidation. They say that there are still a number of uncertainties to resolve but they expect to file the application within the next six months. [8] According to their report during the period in question with regard to the casualty and general insurance company work they have done includes the following: a) Negotiated reinsurance recoveries of $6.9 million with Mitsubishi. Casualty and General held a trade credit claim filed by Mitsubishi of $11,601,486 being ninety per cent of Mitsubishi's loss from theircustomer Asia Pulp and Paper. This claim was sixty per cent re- insured subject to a quota share treaty. b) Instructed a UK Agent to act on the liquidator's behalf to recover amounts due from the UK insurers. c) Various follow-up communications to resolve questions raised by Asset Guarantee Insurance Australia. d) Arrange recoveries from a number of insurers amounting to $1,218,154. e) Liased with re-insurance brokers and Australian liquidators concerning potential claims. [9] The above is an example of a considerable amount of work undertaken by the liquidators during the period in question. [10] Evidence of their success is shown by comparing the six monthly reports they have prepared of receipts and payments. For the six months ending 19 January 2008 the balance of funds on hand at that time was $58,881,420.03. this had increased to $82,705, 669.94 as at 19 July 2008. [11] According to the liquidator's evidence they have performed the following work for HIH Holdings (NZ) Ltd from 1 April 2007 to 31 March 2208: a) Instructed counsel with regard to proceedings issued by Perpetual as to whether holders of convertible notes were creditors or shareholders in HIH Overseas Holdings Ltd (In Liquidation). b) Preparing annual accounts for tax purposes and all matters arising there from including conferring with tax consultants.c) Investigate proposed G9A adjustments (revaluation of foreign currency assets and liabilities): meeting to discuss proposed treatment: arranging for correction to be made to proposed adjustments. d) Managing bank accounts and investment funds. e) Maintaining records for all transactions on solution six computer system. f) Preparing schedules of transactions for inclusion on GST group tax returns. [12] As HIH Overseas Holdings Ltd (In Liquidation) through HIH Insurance Holdings (NZ) Ltd owns all the shares in the Casualty and General Insurance Company, the surplus available from the liquidation of the Casualty and General Insurance Company at this stage amounting to just over $82 million will be available for distribution to HIH Overseas Holdings Ltd and eventually through that company paid to the Australian group. The liquidation of both companies has been delayed for a number of reasons including the fact that proceedings have only just been resolved in Australia to determine the shareholders of the holding company. The liquidation of the Casualty and General Company has also been delayed because of the claims being made pursuant to existing insurance policies. [13] In the unusual circumstances relating to these companies, and the complexities in the administration of the liquidation of these companies, I conclude that the liquidators claims for remuneration are entirely appropriate and that there are very good reasons for the liquidation continuing for such a long time. Consequently, for the reasons I have given, the application for approval of the remuneration will be granted. However, in each case there will be a direction that such approval is subject to the power of the Court to review the overall remuneration of the liquidators unders 218(1)(c) of the Companies Act 1993 and to order a refund of the remuneration as required by the procedure set forth in Re Medforce Healthcare Services Ltd (In Liquidation)._______________________Associate Judge Robinson