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Clayton Utz Special Issue International Corporate Rescue Clayton Utz Special Issue 1 Long Tail Personal Injury Liabilities: The Australian Response Karen O’Flynn 5 Solvent Schemes of Arrangement in the Australian Reinsurance Industry Nicholas Mavrakis and Peter Mann 10 High Court of Australia Holds Failed Airline Accountable to Global Airline Clearing House Paul James and Polat Siva 14 Litigation Funding in Australia Karen O’Flynn 22 Creditors’ Claims against Third Parties Karen O’Flynn 26 Biting the Hand that Feeds You Karen O’Flynn 31 Creditors versus Shareholders: Primus Inter Pares? David Cowling 38 Insolvent Unit Trusts in Australia Jennifer Ball 42 An Administrator’s Power to Compulsorily Transfer Shares Cameron Belyea Editor-in-Chief Publishers Mark Fennessy, Orrick, Herrington & Sutcliffe (Europe) LLP, Chase Cambria Company (Publishing) Ltd London 4 Winifred Close Publisher Barnet, Arkley Hertfordshire EN5 3LR Sasha Radoja, Herbert Smith, London United Kingdom Editorial Board Annual Subscriptions Professor John Armour, Oxford University, Oxford Scott Atkins, Henry Davies York, Sydney A hardcopy subscription is EUR 695 / USD 845 / GBP 495; Samantha Bewick, KPMG, London online: EUR 695 / USD 845 / GBP 495; and hardcopy + Geoff Carton-Kelly, Baker Tilly, London online: EUR 799 / USD 995 / GBP 595. Rates per additional Sandie Corbett, Walkers, British Virgin Islands hardcopy or online user are: EUR 110 / USD 165 / GBP 90. Stephen Cork, Cork Gully, London VAT is charged on online and hardcopy + online David Dhanoo, Qatar Financial Centre Regulatory subscriptions. 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Please apply to: William Trower Q.C., 3-4 South Square, London E-mail: [email protected] Professor Edward Tyler, Department of Justice, Hong Kong Website: www.chasecambria.com Special Administrative Region Government, Hong Kong Robert van Galen, NautaDutilh, Amsterdam Disclaimer Miguel Virgós, Uría & Menéndez, Madrid Dr Haizheng Zhang, Beijing Foreign Studies University, The information and opinions provided on the contents of Beijing the journal was prepared by the author/s and not necessarily represent those of the members of the Editorial Board or US Corner of Chase Cambria Company (Publishing) Ltd. Any error or Editor: Ronald DeKoven, 3-4 South Square, London omission is exclusively attributable to the author/s. The content provided is for general purposes only and should neither be Economists’ Outlook considered legal, financial and/or economic advice or opinion nor an offer to sell, or a solicitation of an offer to buy the Editors: Simon Davies, The Blackstone Group, London securities or instruments mentioned or described herein. Neither Mahesh Uttamchandani, The World Bank, Washington, DC the Editorial Board nor Chase Cambria Company (Publishing) Ltd are responsible for investment decisions made on the basis of Case Review Section any such published information. The Editorial Board and Chase Editors: Professor John Lowry, UCL, London Cambria Company (Publishing) Ltd specifically disclaims any Dr Arad Reisberg, UCL, London liability as to information contained in the journal. ARTICLE Long Tail Personal Injury Liabilities: The Australian Response Karen O’Flynn, Partner, Litigation & Dispute Resolution, Clayton Utz, Sydney, Australia Asbestos and other dust diseases are not a new issue. 60 The distinction is vital because whilst contingent Nevertheless, events over the last few years have cata- or prospective creditors are taken into account in pulted them to the forefront of community and political assessing solvency, possible future claims that might debate in Australia. crystallise are not. The great probabilities are that if Interestingly, a combination of factors has resulted [the group companies] were to go into provisional in this personal injury issue being increasingly viewed liquidation now, then the only claims that would be through the prism of company law. This has resulted in paid by the liquidator would be those which have some radical company law reform proposals. crystallised and, after paying the doubtless heavy ex- penses of liquidation, there would be a distribution of surplus funds to the shareholder MRCF which would 1. Background be used for the purpose of the alleged charitable fund. The future creditors would get nothing and this may The James Hardie group was an Australian-domiciled very well be the case even if the claim matured the manufacturer of asbestos products. In 2001, long day after the liquidation commenced.’1 after it had ceased to manufacture asbestos products, it relocated to Holland (for tax reasons). It left behind Australia has a federal system of government. Respon- in Australia the group companies which had been sibility for workplace health and safety rests with State the manufacturers of asbestos products; those group legislatures, while the Federal legislature has authority companies were hived off from the rest of the group over corporate law (including corporate insolvency). and placed under the control of a standalone company The New South Wales State Government commis- under the terms of a trust. The purpose of this trust ar- sioned an inquiry into the James Hardie situation. That rangement was to use the assets of the former group committee released its report in September 2004. The companies to provide for the payment of claims for report recognised the legal position identified by the asbestos-related illnesses from Australians. Supreme Court and commented that: ‘unless some It subsequently emerged that the quantum of claims general reform is enacted that permits [corporate insol- would outweigh the funds available. The trustee ap- vency law] to deal with long tail liabilities, future cases plied to the NSW Supreme Court for directions as to the will arise that will have to be the subject of ad hoc leg- 2 appropriate course of action. In the course of dealing islative solution, if serious injustice is to be avoided’. with that application, the Court held that many persons injured through exposure to James Hardie’s asbestos products would have no standing as creditors should 2. The mass future claim proposal the former group companies be placed in liquidation: In October 2005, the Federal Government announced ‘58 On current authority, persons injured through its response to the issues identified by the NSW Supreme exposure to asbestos manufactured or supplied by Court and the inquiry report. It asked the Corporations [the group companies] do not have a completed and Markets Advisory Committee (CAMAC) to con- cause of action until damage is suffered and that sider and report on a detailed legislative proposal that usually involves manifestation of the disease … . the Government had prepared. Under that proposal, 59 This type of liability must be distinguished from companies, liquidators and voluntary administrators the case of a contingent creditor [or] a prospective would be required to take account of (and make provi- creditor … . sion for) long tail personal injury liabilities even where Notes 1 Edwards & Ors v Attorney General & Anor [2004] NSWCA 272. 2 Report of the Special Commission of Inquiry into the Medical Research and Compensation Foundation, September 2004: <www.cabinet.nsw. gov.au/publications/tco_branches>. 1 Karen O’Flynn the individual claimants were not identifiable.
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