Mcgrath v. Riddell [

2008] UKHL 21

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Nature of the Case

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Facts

The HIH (P) group of Australian insurance companies presented winding-up petitions to the Supreme Court of New South Wales. Some of their assets, reinsurance claims on policies taken out in London, were situated in England. Provisional liquidator, Riddell, was appointed in England. The Australian judge sent a letter of request to the High Court in London, asking that the provisional liquidators be directed, after payment of their expenses, to remit the assets to the Australian liquidators in Australia, McGrath, for distribution. The judge’s request was based on Section 426(4) and (5) of the United Kingdom’s Insolvency Act of 1986. Section 116(3) of the Australian Insurance Act 1973 provides that in the winding-up of a company authorized under the Act to carry on insurance business “… the assets in Australia of the [company] shall not be applied in the discharge of its liabilities other than its liabilities in Australia unless it has no liabilities in Australia.” The High Court held that it did not have jurisdiction to direct the assets to be remitted to the Australian liquidators because Australia’s distribution rules would treat P’s creditors differently from how they would be treated under UK law. The appeals court held that the High Court could have exercised jurisdiction if the distribution would have advantaged the nonpreferred creditors in a way that counteracted the prejudice they suffered but that there were no such advantages to the nonpreferred creditors in this case. McGrath appealed to the House of Lords.