Asteron Life & Superannuation Limited, in the matter of Asteron Life & Superannuation Limited (No 3) [2021] FCA 1148

Asteron Life & Superannuation Limited, in the matter of Asteron Life & Superannuation Limited (No 3) [2021] FCA 1148 - FCA 2021 case summary — Zoe

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ALLSOP CJ: 1 In this proceeding, the first applicant (Asteron) and the second applicant (TAL Life) apply under s 193 in Part 9 of the Life Insurance Act 1995 (Cth) (Act) for an order of the Court pursuant to s 194 confirming a proposed Scheme for the transfer of the life insurance business of Asteron to TAL Life. By s 190(1) of the Act, no part of a life insurance business of a life company may be transferred to another life company except under a scheme confirmed by the Court. The proposed Scheme consists of an intra-group transfer of life insurance business within the TAL Group. 2 The applicants sought interlocutory orders dispensing with the need to comply with s 191(2)(c) of the Act, which requires that every affected policy owner is to be provided with information about the proposed Scheme. At the conclusion of the dispensation hearing on 25 June 2021, I made the orders sought by the applicants and gave brief reasons for doing so: Asteron Life & Superannuation Limited, in the matter of Asteron Life & Superannuation Limited [2021] FCA 708. In those reasons I made reference to issues of principle in relation to the granting of dispensation under s 191 of the Act, which were to be dealt with, alongside more detailed reasons for dispensation, in the Court's reasons following the confirmation hearing. I will address these issues of principle, and my reasons for dispensing with the need to comply with s 191(2)(c), in due course. 3 On 29 July 2021, I made orders varying the orders of 25 June 2021 nunc pro tunc to create an exception to those orders, or any part thereof, that were rendered impracticable by the operation of any COVID-19 public health order which restricted the movement of persons and their ability to attend their place of work. Provision was made in the orders of 29 July 2021 for the inspection of electronic scheme documents, available online. Those orders, and my brief reasons for the making of those orders, can be found in Asteron Life & Superannuation Limited, in the matter of Asteron Life & Superannuation Limited (No 2) [2021] FCA 880. 4 On 10 September 2021, the parties sought orders confirming the Scheme. For the reasons that follow, I am satisfied that the Scheme ought to be confirmed without variation.

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The business of Asteron and TAL Life 5 Both Asteron and TAL Life are registered life companies under s 21 of the Act. As a result, both companies are authorised to carry on life insurance business in Australia and do so through their various statutory funds prescribed under the Act. 6 Asteron carries on various categories of life insurance business: life risk insurance business (death and terminal illness cover, total and permanent disablement cover, critical illness or trauma cover, income protection benefits resulting from sickness or accidents, and insurance riders on investment-linked business), participating and non-participating traditional (whole of life and endowment cover) business, investment management business, consumer credit insurance, lifetime deferred, allocated and immediate, annuity business, and ordinary and superannuation investment-linked business. 7 Asteron maintains two Statutory Funds and a Shareholders' Fund within the meaning of the Act. The Asteron Statutory Fund No. 1 contains business for individual and group risk policies, participating traditional and investment account policies, lifetime immediate annuities and deferred variable income streams. The Asteron Statutory Fund No. 2 contains investment-linked superannuation and investment-linked ordinary life business. 8 TAL Life also carries on various categories of life insurance business: life risk insurance business (death and terminal illness cover, total and permanent disablement cover, critical illness or trauma cover, and income protection benefits resulting from sickness or accident); participating and non-participating traditional (whole of life and endowment cover) business; ordinary and superannuation investment-linked business; and lifetime and deferred allocated and immediate annuity business. 9 TAL Life has three statutory funds within the meaning of the Act. The TAL Statutory Fund No. 1 contains business for individual and group risk policies, participating traditional and investment account policies, non-participating traditional and investment account policies and immediate annuities. The TAL Statutory Fund No. 2 contains ordinary investment-linked policies and the TAL Statutory Fund No. 3 contains allocated annuity and allocated pension investment-linked policies. TAL Life's business comprises of Retail, Group, Direct and Investment business units. 10 Asteron and TAL Life are both companies within the TAL Group. They share an ultimate holding company, being Dai-ichi Life Holdings, Inc, which is listed on the Tokyo Stock Exchange. The sole shareholder of Asteron is TAL Dai-ichi Life Australia Pty Limited (TDA). The sole shareholder of TAL Life is TAL Dai-ichi Life Group Pty Ltd. 11 Asteron Life was acquired by TDA from Suncorp Life Holdings Limited (Suncorp Holdings) under a share sale deed in September 2018, with the sale being completed in February 2019. Prior to the acquisition, Asteron Life was known as Suncorp Life and Superannuation Limited. 12 Since February 2019, Asteron has operated as a business unit within the TAL Group and a process of integration has taken place, which was described at [9] of the applicants' written submissions on the dispensation hearing as follows: a) Asteron Life employees have been transferred from Asteron to TAL Services; b) support functions provided by TAL Group have been progressively introduced to support Asteron Life's life insurance business; c) three systems which held policy owner information for policies issued by Asteron Life have been migrated to systems operated by TAL Life; and d) Asteron Life is now governed by several of the same TAL Group frameworks which apply to TAL Life including its Risk Management Framework, Risk Appetite Statement and Reinsurance Management Policy. 13 After the acquisition by TDA in 2019, Asteron closed its broker and adviser distribution channels and took a phased approach to closing its direct sales channels. It has been closed to new business since 31 August 2020. In his affidavit, Mr Lees, Chief Financial Officer of TAL Services Limited, deposed that since its acquisition in February 2019, Asteron has operated its life insurance business as a functional business unit within the TAL Group.

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The proposed Scheme 17 The Scheme, which can be found at Annexure A of the orders of the Court, is based on the actuarial reports prepared by the Appointed Actuary of Asteron and TAL Life, Mr Corrigan, and the independent actuary engaged by the applicants, Mr Nicholls. Since the preparation of the two Corrigan Reports and the Nicholls Report, both actuaries have examined more recent financial information (as at June 2021) and reaffirmed the conclusions in those earlier reports. 18 The Scheme gives effect to a transfer deed under which Asteron has agreed to transfer all of its Life Business to TAL Life, subject to confirmation by the Court of the Scheme and satisfaction of certain other conditions. While both Asteron and TAL Life are managed within the same group, and thus share many processes, management of the two distinct entities within the same group increases complexity, costs, and capital for the insurance operations. The Scheme proposes to rationalise and simplify TDA's life insurance entity structure by transferring all of Asteron's life business to TAL Life. 19 The Scheme is to take effect on 1 October 2021 (Effective Date). The evidence discloses that by simplifying TDA's life entity structure, costs, operational complexity, risk and capital will thereby be reduced. As a result of the foregoing, the Scheme is anticipated to provide an improved customer experience, through a greater scale, a higher level of benefit security, and improvements in reporting processes and requirements. 20 Under the proposed Scheme, the assets and liabilities of the Asteron Life Statutory Fund No. 1 become assets and liabilities of the TAL Life Statutory Fund No. 1. The assets and liabilities of the Asteron Life Statutory Fund No. 2 become assets and liabilities of the TAL Life Statutory Fund No. 2. 21 The following aspects of the Scheme are of note: (a) All of the life policies issued by Asteron referable to its Statutory Fund No. 1 and No. 2 immediately prior to the Effective Date will become life policies of TAL Life referable respectively to TAL Life's Statutory Fund No.1 and No. 2 (cll 2.2 and 4.1); (b) The assets and liabilities of Asteron Statutory Fund No. 1 and No. 2 will be transferred to TAL Life Statutory Fund No. 1 (cl 4.2(c)); (c) TAL Life will become the issuer of Asteron policies (cl 3.1); (d) The rights and liabilities of Asteron policy owners will be the same as they would have been if the applications on which their policies are based had been accepted by TAL Life instead of Asteron (cl 3.2); (e) TAL Life will assume all liabilities and obligations of Asteron under, or in respect of, Asteron life policies (cl 3.3); (f) Any person having a claim or obligation to Asteron under or in respect of an Asteron policy will have the same claim on or obligation to TAL Life, irrespective of when that claim or obligation arose (cl 3.7); (g) Proceedings pending in connection with an Asteron policy must be continued by or against TAL Life (cl 3.8); (h) TAL Life will acquire Asteron's rights and assume its liabilities and obligations in respect of contracts in relation to its life business and reinsurance treaties entered into by Asteron as cedant (cl 3.11); (i) All costs associated with the Scheme will be paid by TDA and not Asteron or TAL Life policy owners (cl 6). 22 Neither the terms nor the conditions of either Asteron life policies, or TAL Life policies, will change as a result of the Scheme: cll 3.12(d) and 3.13. References to Asteron (and its statutory funds) will be replaced with references to TAL Life (and its statutory funds): cl 3.12(a). 23 By cl 5 of the Scheme, TAL Life is to maintain such policies and practices as are required to enable it to conduct the Life Business in a manner which is consistent with its legal and regulatory obligations and which satisfies the contractual rights and benefits of the Asteron Life Policy Owners. "Policies and practices" is defined by cl 5(b) to mean: the method of determining premium rates and charges; underwriting and claims management; each insurer's capital management framework; each insurer's risk management framework; and each insurer's remediation programs. 24 Under the Scheme, there will be no assets or liabilities transferred to the TAL Life Statutory Fund No. 3. However, independently of the proposed Scheme and subject to the approval of the Australian Prudential Regulation Authority (APRA), TAL Life intends to transfer all assets and liabilities from the TAL Life Statutory Fund No. 3 to the TAL Life Statutory Fund No. 2 pursuant to s 52 of the Act and APRA Prudential Standard LPS 600 Statutory Funds (LPS 600). This transfer is intended to take effect on 30 September 2021, prior to the Effective Date of the proposed Scheme. TAL Life intends to terminate the TAL Life Statutory Fund No. 3 after the restructure. Much like the Scheme, the rationale for transfer is the simplification of the business structure, and the anticipated consequential reduction of costs and operational risk. 25 By a letter dated 24 June 2021, and marked Exhibit A at the dispensation hearing, APRA gave its approval under s 52 of the Act and LPS 600 to the statutory fund restructure. The actuarial evidence, to which I will turn in due course, was prepared on the assumption that APRA's approval would be obtained, and on the basis that the restructure has occurred.

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Evidence 26 In support of the interlocutory orders sought at the dispensation hearing, the applicants relied upon the following affidavits and reports: (a) Affidavit of David Lees, Chief Financial Officer of TAL Services Limited, sworn on 15 June 2021; (b) Affidavit of Anne Clarke, Chief General Counsel of the TAL Group, sworn on 23 June 2021 (First Clarke Affidavit); (c) Affidavit of Joshua Corrigan, appointed actuary of the applicants, affirmed on 24 June 2021 (First Corrigan Affidavit); (d) Report of Joshua Corrigan in his capacity as appointed actuary of TAL Life, dated 9 June 2021, as amended on 24 June 2021 (annexure JC-1 to the affidavit of Joshua Corrigan) (Corrigan TAL Report); (e) Report of Joshua Corrigan in his capacity as appointed actuary of Asteron, dated 9 June 2021, as amended on 24 June 2021 (annexure JC-2 to the affidavit of Joshua Corrigan) (Corrigan Asteron Report); and (f) Report of John Nicholls, independent actuary, dated 11 June 2021 (annexure DL-10 to the affidavit of David Lees). 27 In support of the application made to vary the orders of 25 June 2021 nunc pro tunc, in light of prevailing COVID-19 public health orders which hindered the applicants' ability to make documents available for public inspection at certain locations, the applicants tendered an unsworn affidavit of Shan-Verne Liew on 28 July 2021 (First Liew Affidavit). 28 At the confirmation hearing, the applicants tendered and read the following further evidence: (a) Affidavit of Anne Clarke sworn on 3 September 2021 (Second Clarke Affidavit); (b) Affidavit of Shan-Verne Liew, solicitor for the applicants, affirmed on 3 September 2021 (Second Liew Affidavit); (c) Affidavit of Andrew Sharp, Senior Program Manager of TAL Services Limited, sworn 3 September 2021 (First Sharp Affidavit); (d) Affidavit of Tamanna Islam, solicitor for the applicants, sworn 3 September 2021; (e) Affidavit of Joshua Corrigan affirmed 3 September 2021 (Second Corrigan Affidavit); (f) Affidavit of John Nicholls affirmed 3 September 2021; (g) Affidavit of Michael Vrisakis, partner of Herbert Smith Freehills and solicitor for the applicants, sworn 9 September 2021; (h) Affidavit of Andrew Sharp, sworn 9 September 2021 (Second Sharpe Affidavit). 29 Mr Lees, as the Chief Financial Officer of TAL Services Limited, has overall responsibility for both of the applicants in relation to the supervision, management and implementation of the proposed Scheme. He is the chair of a steering committee to which a working group tasked with the management of the Scheme reports and, as such, he oversees the planning and implementation of that proposed Scheme. The affidavit of Mr Lees summarised the business of Asteron Life, and the business of the receiving entity, TAL Life. Mr Lees furthermore sets out the proposed Scheme, and the regime for notification of the same to affected policy owners. 30 The first affidavit Ms Clarke, the Chief General Counsel of the TAL Group, sworn on 23 June 2021, exhibited the Scheme Document, Scheme Summary and Notice of Intention. The First Clarke Affidavit also addressed the outcome of discussions with the APRA, including an expanded notification programme to affected policy owners and updated Scheme documents. Ms Clarke's second affidavit of 3 September 2021 addressed the status of the remediation programs conducted by Asteron and TAL Life, a class action against AAI Limited and Asteron Life in relation to the sale of consumer credit insurance products, the issue identified by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) concerning TAL Life, and authorisations and regulatory approvals obtained by TAL in preparation for the proposed Scheme. 31 The first affidavit of Mr Corrigan, the appointed actuary of Asteron Life & Superannuation Limited and Tal Life Limited, affirmed on 24 June 2021, explained the nature of the clarifications and corrections made to the actuarial reports of 9 June 2021 in support of the Scheme with respect to both Asteron and TAL Life. Mr Corrigan's second affidavit of 3 September 2021 updated the conclusions he reached in those reports of 9 June 2021 based on a review of the financial position of each entity as at 30 June 2021. In the Second Corrigan Affidavit, the Appointed Actuary in effect made annotations to his reports regarding Asteron and TAL Life to reflect whether his conclusions remained apposite in light of more recent unaudited quarterly returns submitted to APRA. 32 Mr Liew is employed by the applicants' solicitors, Herbert Smith Freehills, and is assisting the applicants with proceedings in respect of the Scheme. Mr Liew is responsible for arranging the process by which certain documents were made available for public inspection. Mr Liew's first affidavit supported the application to vary the orders of 25 June 2021 as a consequence of the outbreak of the Delta variant of COVID-19. Mr Liew's second affidavit addressed the extent to which the applicants were able to make copies of the Scheme Documents available at the locations referred to in Annexure B to the orders of 25 June 2021 in light of the COVID-19 pandemic. 33 Mr Sharp is the Senior Program Manager of TAL Services Limited. TAL Services, like TAL Life and Asteron Life, is a wholly-owned subsidiary of TAL Dai-ichi Life Australia Pty Limited. Mr Sharp was tasked with the project management of the working group overseeing the proposed Scheme. The First Sharp Affidavit addressed the applicants' compliance with the dispensation orders. The Second Sharp Affidavit addressed the further actions that the applicants undertook to continue to comply with the orders of 25 June 2021 in the intervening period between the First Sharp Affidavit and the date of the confirmation hearing. 34 Ms Islam is employed by the applicants' solicitors, Herbert Smith Freehills, and has primary carriage of the proceedings. Ms Islam's affidavit explained the processes undertaken by the applicants' solicitors to provide policy owners with the relevant Scheme Documents and information regarding the confirmation hearing. 35 Mr Nicholls is an actuary and Senior Consultant at Towers Watson Australia. Mr Nicholls prepared an actuarial report dated 11 June 2021, which considered the security of policy owners' benefits as at 31 March 2021. Mr Nicholls' affidavit addressed the financial position of TAL Life and Asteron after 31 March 2021, following his acquisition of updated financial documents and information. 36 Mr Vrisakis is a Partner at Herbert Smith Freehills. He and his team were engaged by the applicants to act as external legal advisers in relation to the proposed Scheme. Mr Vrisakis' affidavit addressed further developments relating to the class action in relation to the sale of consumer credit insurance products, confirming that the plaintiff in the class action proceedings would not seek to be heard at the confirmation hearing. Mr Vrisakis' affidavit further addressed concerns raised by an additional policy owner and former employee of TAL Services Limited, and further correspondence with affected policy owners. 37 The nature and substance of this evidence will be examined more closely in due course.

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The actuarial evidence 38 The Corrigan Asteron Report reviewed the basis and terms of the proposed transfer in order to identify and provide comment on the effect of that transfer on the contractual benefits, rights, benefit security, and benefit expectations of existing Asteron policy owners. For the purposes of s 191(2)(a) of the Act, the Corrigan Asteron and TAL Life Reports were actuarial reports upon which the Scheme was based. 39 Mr Nicholls was engaged by TAL Dai-Ichi Life Australia Pty Ltd on behalf of TAL Life and Asteron to review the Scheme for the proposed transfer of all of life insurance business of Asteron to TAL Life under Part 9 of the Act. The Nicholls Report was limited to assessing, and providing opinions on, the impact of the Scheme on the entitlements and reasonable benefit expectations of the policy owners of Asteron and TAL Life, and on the security of their benefits. 40 In the Corrigan Asteron Report, the Appointed Actuary set out four high level benefits which were said to be engendered by the Scheme, the first being scale. The result of the proposed transfer was said to be the creation of the largest life insurance company in Australia. The second benefit was said to be an increase in security through the diversification of insurance and asset risks, and decreased volatility due to an increase in the size of the portfolio. The third benefit was said to be a reduction in operational risk through a harmonisation and streamlining of processes, including regulatory reporting requirements. The final benefit was said to be an increase in the scale of the legacy portfolio, which would in turn provide opportunity for legacy system upgrades and product simplification. 41 In that report, Mr Corrigan concluded: I, Joshua Corrigan, in my capacity as the Appointed Actuary of Asteron and a Fellow of the Institute of Actuaries of Australia, am of the opinion that the Proposed Transfer will not result in any unfairness to the owners of the policies referable to any of the statutory funds involved in the Proposed Transfer. Additionally, the proposed scheme will not materially prejudice the interests of owners of the policies of Asteron. Immediately after the Proposed Transfer, the transferring fund, Asteron will satisfy the prudential capital standards and remain in a sound financial position. Specifically, regarding Asteron's transferring policy owners: • the Proposed Transfer does not adversely impact the contractual benefits and rights of the transferring policy owners. • TAL Life's intended basis of determining and implementing the non-contractually specified and/or discretionary aspects of the transferring policies will continue to meet the overall reasonable benefit expectations of the transferring policy owners; and • TAL Life will remain in a sound financial position and the transferring policy owners' benefit security will remain adequate after the proposed transfer. Specifically, regarding any remediation programs: • The Proposed Transfer from Asteron to TAL Life will not in any way affect the remediation programs outlined in section 5.5.3, and the policy owner will not be disadvantaged or inequitably treated in any way as a result of the Proposed Transfer 42 In the Corrigan TAL Life Report, Mr Corrigan, as Appointed Actuary of TAL Life, concluded that the Scheme would not result in any unfairness to the owners of the policies referable to any of the funds involved in the proposed transfer, nor would it result in any material prejudice to the interests of owners of the policies of either TAL Life or Asteron. The reasoning supporting this conclusion was expressed as follows: In terms of the policy owners' contractual benefits and rights • there is no impact to the contractual benefit and rights of the existing policy owners of TAL Life as a result of the Proposed Transfer. In terms of the policy owners' reasonable benefit expectations • there is no impact to the reasonable benefit expectations of the existing policy owners of TAL Life as a result of the Proposed Transfer. In terms of the policy owners' benefit security • each of the statutory funds of TAL Life and TAL Life as a whole will remain in a sound financial position and the existing policy owners' benefit security will remain appropriate after the Proposed Transfer, and • there are no material disadvantages for the existing policy owners of TAL Life as a result of the Proposed Transfer. 43 In the Independent Actuarial Report, Mr Nicholls reached the following conclusions: In accordance with the scope of my review, I have considered whether the Scheme properly and adequately safeguards the contractual benefits and other rights of the policy owners of Asteron and TAL Life and whether their reasonable benefit expectations or the security of their policy benefits would be adversely affected if the Scheme were implemented. My opinions are as follows: (i) the Scheme will not adversely affect the contractual benefits or other rights of the policy owners of Asteron or TAL Life; (ii) the Scheme will not adversely affect the reasonable benefit expectations of Asteron policy owners in any material respect; (iii) the Scheme will not adversely affect the security of Asteron policy owners' benefits in any material respect; (iv) the Scheme will not adversely affect the reasonable benefit expectations of TAL Life policy owners in any material respect; and (v) the Scheme will not adversely affect the security of TAL Life policy owners' benefits in any material respect. 44 Messrs Corrigan and Nicholls reached those conclusions on the basis of the evidence that follows.

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Reasonable benefit expectations 59 The fundamental expectation of policy owners is that they will receive their contractual benefit entitlements when due. Additionally, there are a number of areas in both Asteron and TAL Life's life businesses which involve the exercise of a discretion by Asteron (historically) and by TAL Life (in future) which have the potential to impact policy owners' reasonable benefit expectations. The actuarial evidence addresses the operation of such discretions in the context of: participating businesses; premium rate charges; claims handling; policy administration' underwriting; and product improvements and investment strategy. 60 In the Corrigan Asteron Report, the Appointed Actuary considered: the consistency of policy terms and conditions prior to and following the transfer; the consistent philosophy adopted by both Asteron and TAL Life with respect to the setting of premium rates and the expectation that the policy owners' reasonable benefit expectations will be met with regards to premium rate changes; the consistent approach to claims handling as between Asteron and TAL Life and the expectation that the policy owners' reasonable benefit expectations will be met with respect to claims handling following the implementation of the Scheme; the expectation that Asteron policy holders will not be adversely affected by the migration of policy administration systems to TAL Life; the intended incorporation of Asteron's underwriting practices to adopt, in time, a consistent approach to underwriting for both Asteron and TAL Life customers which is anticipated to meet the reasonable benefit expectations of the Asteron policy owners; and the expectation that product improvements will not change as a result of the Scheme. On the basis of the foregoing, Mr Corrigan concluded that Asteron's intended basis of determining and implementing the non-contractually specified and discretionary aspects of the transferring policies will continue to meet the overall reasonable benefit expectations of the transferring policy owners. 61 The conclusions of Mr Nicholls, the Independent Actuary, largely mirrored those of Mr Corrigan in this respect. Mr Nicholls concluded that the Scheme would not adversely affect the reasonable benefit expectations of either Asteron's or TAL Life's participating policy owners in any material respect, on the basis that: (a) There were no changes proposed under the Scheme to: (i) The contract terms, benefit scales or premium rates of the participating business; (ii) The structure of participating sub-funds and pools; (iii) The investment strategy for the assets backing participating business; (iv) The principles of expense allocation amongst the different blocks of business; (v) The principles of profit allocation amongst the different blocks of business; (vi) The policy used for setting bonuses and interest credits for policies in each pool; (vii) The bases for determining discretionary entitlements; (viii) The relative profit entitlements of policy owners and shareholders; and (ix) Policy administration and system processes. (b) There were no changes proposed under the Scheme to the basis for exercising any other management discretions associated with the business; (c) The expenses attributable to the business were not expected to increase as a result of the Scheme; (d) The Scheme would not affect the ongoing remediation programs of Asteron and TAL Life nor disadvantage policy owners in any way; (e) All costs associated with the Scheme were to be met by TDA and therefore would not affect the policy owners' reasonable benefit expectations. 62 Largely for the same reasons, the Independent Actuary concluded that the Scheme would not adversely impact the reasonable benefit expectations of the policy owners of other lines of business in any material respect.

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The statutory context 76 The objects of the Life Insurance Act 1995 (Cth) are set out in s 3, and are as follows: (1) The main objects of this Act are: (a) to protect the interests of the owners and prospective owners of life insurance policies in a manner consistent with the continued development of a viable, competitive and innovative life insurance industry; and (b) to promote financial system stability in Australia. (1A) An additional object of this Act is to protect the interests of persons entitled to other kinds of benefits provided in the course of carrying on life insurance business (including business that is declared to be life insurance business). (2) The principal means adopted for the achievement of these objects are the following: … (f) providing for the supervision of transfers and amalgamations of life insurance business by the Court. 77 Section 190 of the Act is in the following terms: (1) No part of the life insurance business of a life company may be: (a) transferred to another life company; or (b) amalgamated with the business of another life company; except under a scheme confirmed by the Court. … (3) A scheme must set out: (a) the terms of the agreement or deed under which the proposed transfer or amalgamation is to be carried out; and (b) particulars of any other arrangements necessary to give effect to the scheme. 78 Section 191 of the Act, which outlines the steps which must be taken prior to confirmation, is in the following terms: (1) In this section: affected policy owner means the owner of a policy that is referable to a statutory fund affected by a scheme. approved summary means a summary approved by APRA. (2) An application for confirmation of a scheme may not be made unless: (a) a copy of the scheme and any actuarial report on which the scheme is based have been given to APRA in accordance with the regulations; and (b) notice of intention to make the application has been published by the applicant in accordance with the regulations; and (c) an approved summary of the scheme has been given to every affected policy owner. (3) Without limiting the provision that may be made by the regulations for the purposes of paragraph (2)(b), the notice referred to in that paragraph must include, in relation to each company affected by the scheme, details of the place and time at which an affected policy owner may obtain a copy of the scheme. (4) An affected policy owner is entitled, on his or her request, to be provided by the company with one copy of the scheme free of charge. (5) The Court may dispense with the need for compliance with paragraph (2)(c) in relation to a particular scheme if it is satisfied that, because of the nature of the scheme or the circumstances attending its preparation, it is not necessary that the paragraph be complied with. 79 Section 193 of the Act, which provides for application to the Court for confirmation of a scheme, is in the following terms: (1) Any of the companies affected by a scheme may apply to the Court for confirmation of the scheme. (2) An application for confirmation must be made in accordance with the regulations. (3) APRA is entitled to be heard on an application. 80 Pursuant to s 194 of the Act, a Court may confirm a scheme without modification, confirm the scheme subject to such modifications as it thinks appropriate, or refuse to confirm the scheme. In so deciding, the Court must have regard to the interests of the policy owners affected by the scheme, any report filed with the Court pursuant to s 175 of the Act, if such a report exits, and any other matter the Court considers relevant. 81 Section 195 provides that where a scheme is confirmed, it is binding on all persons, and it has effect notwithstanding anything in the constitution of any company affected by the scheme. Where confirmation orders are made, the company must lodge a copy of the scheme at an office of ASIC in every State and Territory in which a company affected by the scheme carries or carried on business.

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Dispensation 82 The object of the Act is to protect policy owners both current and prospective in a manner which is consistent with the development of a competitive and innovative life insurance industry: s 3(1). The regime under Part 9 of the Act (which provides for the supervision of the transfer or consolidation of life insurance businesses by the Court) was adopted as a means of achieving this object: Re Royal & Sun Alliance Life Assurance Ltd [2000] FCA 1259; 104 FCR 37 at [3]. 83 Section 191(2)(c) provides that an application for confirmation of a scheme may not be made unless an "approved summary" of the scheme has been given to every "affected policy owner". An "approved summary" means a summary approved by the APRA and "affected policy owner" means the owner of the policy that is referable to a statutory fund affected by a scheme: s 191(1). 84 Pursuant to s 191(5), the Court may dispense with the need for compliance with s 191(2)(c) in relation to a particular scheme if it is satisfied that, because of the nature of the scheme or the circumstances attending its preparation, it is not necessary that the paragraph be complied with. 85 Both of Asteron's Statutory Funds are affected by the proposed Scheme. The applicants also accept that TAL Life's Statutory Funds No. 1 and No. 2 are affected by the proposed Scheme, since they are receiving policies under the Scheme: St George Life Limited, in the matter of St George Life Limited [2018] FCA 1206 at [32]. While the TAL Life Statutory Fund No. 3 is not receiving any policies under the proposed Scheme, it will be affected by the Scheme because, assuming APRA approves, the policies referable to that Statutory Fund will be transferred to the TAL Life Statutory Fund No. 2 prior to the Effective Date. 86 Thus, the affected policy owners are the owners of policies referable to all of Asteron's and TAL Life's Statutory Funds. A "policy owner" is a person to whom a relevant policy has been issued, or an assignee or transferee of the rights of that person: s 10 of the Act. A person who may have rights under the policy, but is not a person to whom a relevant policy has been issued, or an assignee or transferee of the rights of that person is not a "policy owner": The Colonial Mutual Life Assurance Society Limited, in the matter of The Colonial Mutual Life Assurance Society Limited [2020] FCA 1809 at [26]; Macquarie Life Limited, in the matter of Macquarie Life Limited [2016] FCA 973 at [22] and [27]; St George Life Limited [2018] FCA 1206 at [35]. 87 The purpose of s 191(2)(c) is to give every affected policy owner a summary of the Scheme and an opportunity, if he or she wishes, to make submissions to the Court in respect of the application for confirmation of the Scheme: The Application of Commonwealth Life Limited [2003] FCA 501; 12 ANZ Insurance Cases 90-117 at [8]. In light of the object of s 191(2)(c), the granting of dispensation is a matter of considerable importance: care must be taken before the requirements of the provision are dispensed with: QBE Insurance Australia Limited, in the matter of QBE Insurance Australia Limited [2012] FCA 1127 at [16]. Dispensation is not to be granted as a matter of course. 88 The discretion to make dispensation orders is a general one and the provision does not specify the criteria that the Court is to apply in determining whether the nature of the Scheme or the circumstances attending its preparation warrant the making of the proposed dispensation orders: National Mutual Life Association of Australasia Limited, the application of National Mutual Life Association of Australasia Limited and AMP Life Limited [2016] FCA 1219 at [35]. That being said, the considerations which have been taken into account in the exercise of the discretion to grant dispensation include: the nature of the Scheme and whether it involves changes to the contractual entitlements and security of policy owners; evidence by the appointed and independent actuaries as to whether policy owners in respect of whom dispensation is sought will be detrimentally affected by the Scheme; the practical difficulties and costs involved in providing approved summaries of the Scheme to policy owners; the extent to which the proposed Scheme may be brought to the attention of policy owners by means other than a Scheme summary being sent to individual policy owners; whether the Scheme occasions material changes to the policy terms and conditions; and the approach of APRA to the dispensation application: see Macquarie Life Limited [2016] FCA 973 at [26].

[44]

Consideration 89 The applicants sought dispensation from the requirement to provide a Scheme summary to each individual owner of policies issued by Asteron, referable to its Statutory Funds No. 1 and No. 2, and each owner of policies issued by TAL Life, referable to its Statutory Funds No. 1, No. 2 and No. 3, provided that the steps set out in Order 2 of the orders of 25 June 2021 were complied with. The effect of the steps set out in order 2 was that an approved summary of the Scheme would be provided to all affected Asteron policy owners, other than those for whom Asteron does not hold a current mailing address. There were 4,197 such policy owners for whom the applicants did not have the current mailing address, representing 1.63% of all policy owners with policies referable to the statutory funds. The applicants thus intended to mail a copy of the Scheme summary to approximately 256,000 affected Asteron Life policy owners for whom the applicants had the current mailing address. 90 The applicants did not propose to give an approved Scheme summary to any TAL Life policy owners, instead relying on the indirect methods of notification and publication enumerated below. This was largely the result of the anticipated cost of providing summaries to the policy owners referable to the TAL Life statutory funds: the mailing and associated costs of providing each of the 848,000 policy owners with a Scheme summary was estimated to be $1,689,451. In light of these costs, and the actuarial evidence that TAL Life policy owners were not likely to be adversely affected by the proposed Scheme, the applicants sought dispensation of the requirement to provide those owners with the summary in question, citing earlier cases in which this had been done, including but not limited to: BT Life Limited, in the matter of BT Life Limited [2011] FCA 1100 at [18]; Colonial Mutual Life [2020] FCA 1809 at [34]. 91 The applicants' suggested course in relation to the TAL Life policy owners (being the policy owners referable to the receiving funds) has become commonplace among applicants seeking confirmation of schemes under Part 9. This is especially so where those policy owners experience no change in their relationship with the insurer, where the statutory funds to which their policies are referable remain intact, and the interests of those policy owners are not materially prejudiced by the Scheme. See, for example: Colonial Mutual Life [2020] FCA 1809 at [29] and [34]; St George Life [2018] FCA 1206 at [40]-[41]; National Mutual Life [2016] FCA 1219 at [37]-[42]; Commonwealth Life [2003] FCA 501 at [8]-[13]. The course should not be viewed as always appropriate.

[45]

The form of dispensation orders 92 The steps to be taken by the applicants under dispensation order 2 were as follows: (a) On or shortly after 8 July 2021, a Notice of Intention to make the application to the Court for confirmation of the Scheme, the form of which has been approved by APRA, was to be published in the Commonwealth Government Notices Gazette, The Sydney Morning Herald, The Daily Telegraph, The Courier Mail, The Advertiser, The Age, The Herald Sun, The West Australian, The Mercury, The Examiner, The Canberra Times, The Northern Territory News, The Australian Financial Review and The Australian. A number of these publications were inserted into the order at the Court's direction, in order to ensure that notification adequately reached a number of diverse demographics. (b) From or shortly after 9 July 2021, a copy of the Scheme, the Scheme Summary, the Notice of Intention and the actuarial reports of Messrs Corrigan and Nicholls (together, the Scheme Documents), were to be published for viewing and download. (c) From on or shortly after 9 July 2021, up to and including the Effective Time, links to the Scheme Documents were to be included on the following webpages on the "Asteron Life" and "TAL Life" branded websites of TAL Dai-ichi Life Australia Pty Limited: www.asteronlife.com.au/scheme-transfer (Asteron Life Website); and www.tal.com.au/scheme-transfer (TAL Life Website). (d) From 8 July 2021 until the date of the confirmation hearing of the Scheme, a dedicated email address was to be established to receive enquiries about the Scheme. (e) A copy of the approved Scheme Summary was to be mailed to the postal addresses of all affected Asteron policy owners whose contact information is held in Asteron's systems. (f) For mail which was returned undelivered, a returned mail procedure was to be followed. (g) Persons who became affected Asteron policy owners from 11 June 2021 up to the Effective Date were to be sent a copy of the Scheme Summary by regular post. (h) From 8 July 2021 up to the date of the confirmation hearing for the Scheme, a call centre was to be established to handle calls about the Scheme, with a dedicated toll free phone number (1800 316 355). (i) Call centre staff were to receive training on how to handle calls relating to the Scheme. (j) From 16 July 2021 up to the date of the confirmation hearing, the applicants were to provide a copy of the Scheme Documents upon request to affected Asteron and TAL Life policy owners free of charge. (k) A general overview of the Scheme and the Scheme Documents was to be provided to the trustees of registrable superannuation entities who are TAL Life policy owners. (l) A general overview of the Scheme and the Scheme Documents was to be provided to financial advisors, brokers and financial advice licensees on a distribution list maintained by Asteron and TAL Life. (m) From 9 July 2021, a short notification about the Scheme, including information about how affected policy owners can obtain further information, was to be published through social medial channels maintained by Asteron and TAL Life, including their respective Facebook pages, the TAL Life LinkedIn page and the TAL Life Twitter feed. (n) From 23 July 2021 to 20 August 2021, the Scheme Documents were to be available for public inspection from 9:00am to 5:00pm (excluding public holidays) at the offices of the applicants' solicitors in New South Wales, Queensland, Victoria and Western Australia, and the offices of King & Wood Mallesons in Canberra, DMAW Lawyers in South Australia, HWL Ebsworth in the Northern Territory and Dobson Mitchell Allport Lawyers in Tasmania except insofar as doing so would be rendered impracticable because any such location was situated in an area affected by a public health order made in response to the COVID-19 pandemic. (o) From 28 July 2021 until the date of the confirmation hearing, notification was to be published on the Asteron Life Website and the TAL Life Website, the social media channels referred to in (m) which provided that certain locations for public inspection of the Scheme Documents were closed by reason of a COVID-19 public health order, and that policy owners could contact the call centre, dedicated email address, or complete a webform available online in order to obtain a hard copy of the Scheme Documents.

[47]

Conclusions on dispensation 96 In this case, the indicia which inform an exercise of the discretion to dispense with the requirements of s 191(2)(c), as I set them out in Macquarie Life Limited at [26], and as developed by Gleeson J in National Mutual Life Association of Australasia Limited [2016] FCA 1219 at [34]-[35], supported dispensation. Here, the proposed transfer of business is via an intragroup scheme that will not result in any changes to the terms and conditions of the life policies for any of the policy owners. The contractual benefits or entitlements of the policy owners are unchanged by the Scheme. The TAL Life Statutory Funds will remain intact. The actuarial evidence established that the policy owners in respect of whom dispensation was sought will not be adversely affected by the Scheme. And indeed, the Scheme was able to be brought to the notice of those policy owners by other means than sending the Scheme out to each individually. The notification regime was such that a sufficiently large number of affected policy owners would be provided with a meaningful opportunity to bring forward any viable objections to the Scheme. 97 In determining whether to make the dispensation orders sought pursuant to s 191(5), the position of APRA, as the relevant regulatory body, is a relevant and highly persuasive consideration: National Mutual Life [2016] FCA 1219 at [4]. In their written submissions at [66]-[69] the applicants set out the consultative process between Asteron and TAL Life, on the one hand, and APRA, on the other, throughout the preparation of the Scheme. APRA was provided with drafts of all of the relevant documentation, including the Actuarial Reports prepared by Messrs Corrigan and Nicholls. The applicants have further consulted with APRA regarding the approach to notifying the policy owners of the Scheme and the form of proposed orders for dispensation. At the dispensation hearing on 25 June 2021, APRA did not object to the orders sought and confirmed that the orders were developed happily in consultation with APRA, in which process of consultation additional provisions regarding consultation and notification were agreed between the applicants and APRA. 98 It was by virtue of the foregoing that I made orders dispensing with the requirements of s 191(2)(c) on 25 June 2021, varied nunc pro tunc on 29 July 2021: dispensation was not granted as a matter of course, but rather on the basis of my satisfaction that the object of s 191 was fulfilled in this case. The terms of Order 2 of the orders of 25 June 2021 were such that all affected policy owners were, in effect, given sufficient information regarding the nature of the Scheme and the opportunity to be heard, such that the opportunity in question was real and meaningful.

[50]

Publication of the Scheme Documents electronically 102 Pursuant to Order 2(a), (c) and (o) of the orders of 25 June 2021, the Scheme Documents were to be made available on the Asteron Life and TAL Life branded webpages for viewing and download. Those websites went live on 9 July 2021, wherein the Notice of Intention, Scheme document, Scheme Summary, Corrigan TAL Report, Corrigan Asteron Report, and the Nicholls Report were all available to view and download. As of 27 August 2021, the Scheme Websites had collectively been visited 521 times. 103 In compliance with Order 2(o), notification was published on the Scheme Websites and social media channels reflecting the closure of public inspection locations due to COVID-19 related restrictions. Order 2(o) further required that those channels refer to the alternative mechanisms for obtaining and inspecting a copy of the Scheme Documents, being: the call centre, the dedicated email address, or by completing a web form available on the webpages, in addition to downloading an electronic copy of the Scheme Documents via the Scheme Websites. The first affidavit of Mr Sharp identified one instance of non-compliance: following the lockdown imposed in the Northern Territory, the Scheme Websites were not updated due to an oversight in arranging for the change to be made prior to the conclusion of the public inspection period. I do not take the view that this non-compliance was in any way substantial, nor that it was of a kind that would affect the Court's exercise of discretion to confirm the Scheme. 104 Furthermore, in oral submissions, a further instance of technical non-compliance emerged, namely that the notification of COVID-19 related closure of public inspection sites neglected to mention the call centre, the dedicated email, or the web form as alternative mechanisms for obtaining the Scheme Documents. Rather (and in some circumstances as a result of the meagre word limit imposed by the social media channels) the notification published on those channels simply contained a link to the webpage. The webpage that was linked, which was provided to the Court in the form of a screenshot annexed to the First Sharp Affidavit, did make mention of the call centre, the dedicated email address and the web form. It was submitted on this basis that, notwithstanding the omissions in the social media notifications, Order 2(o) was substantially complied with insofar as the website to which the social media channels directed policy owners did make mention of the call centre, dedicated email and web form. I accept this submission: again, any non-compliance was a matter of form, rather than substance.

[60]

Policy owner objections 116 Mr Sharp gave evidence that the applicants had received 37 objections to the proposed Scheme at the date of his first affidavit. The nature of these objections may be summarised as follows: (a) Twelve policy owners objected on the basis that they did not want any change to the issuer of their life insurance policy; (b) Eight policy owners objected to the transfer of their life insurance policy to a non-Australian company, with three of those policy owners expressing concern that such a transfer would occasion changes to their policy terms, or with respect to the quality of the customer service; (c) Four policy owners objected to the transfer of their life insurance policy to a Japanese company; (d) Seven policy owners objected to TAL Life or Dai-ichi Life becoming their insurer. Three of these policy owners referred to negative prior experience with TAL Life; (e) Four policy owners objected on the basis that they did not want the terms of their life insurance policy, or the customer service under that policy, to change; and (f) Two policy owners stated that they had objections to the Scheme but omitted to give reasons for that objection. 117 Of these 37 policy owners, six requested that their policy be cancelled in light of the Scheme. 118 The Court was informed that two policy owners intended to be heard at the confirmation hearing. Neither of these two policy owners appeared. With respect to one of these policy owners, however, the nature of his objections were helpfully set out in the affidavit of Ms Islam. The policy owner in question sought a written guarantee that the terms of his policy would not change as a result of the Scheme. He expressed concerns that TAL Life would be in a position to unilaterally make changes to, or cancel, his policy upon confirmation of the Scheme. In anticipation of this objection, counsel for the applicants submitted in writing that, by cl 3.12(d) of the scheme, the terms and conditions of Asteron policies would not change as a result of the Scheme. Further, TAL Life's entitlement, if any, to cancel or alter the policy would be the same (and no greater than) that of Asteron in respect of the policy by the operation of cl 3.5 of the Scheme. These responses are valid and I accept these submissions. The nature of the objections of the second policy owner were not expressed to the solicitors for the applicants. 119 A further policy owner provided the Court with a written statement, which sought recognition that a particular document, being a Statement of Advice, was to be honoured by TAL Life. The Statement of Advice that was referred to contained financial advice designed to comply with the requirements of Division 3 Part 7.7 of the Corporations Act 2001 (Cth). The affidavit of Mr Vrisakis revealed, however, that Asteron did not issue the Statement of Advice to the policy owner in question, but rather, the Statement was issued by Suncorp Financial Services. Counsel for the applicants submitted orally at the confirmation hearing that such statements of advice do not form part of an insurer's policy documents. That being so, it was submitted that there was no warrant to expressly include the Statement of Advice in the Scheme Document. In light of the terms of the Scheme Document, which provide for the assumption by TAL Life of all of Asteron's liabilities in respect of statements of advice issued by third parties in connection with the policies it issued in carrying out its life insurance business, counsel for the applicants submitted that the concerns that generally emanated from that policy owner's statement were adequately protected by the Scheme. This was so notwithstanding the rejection of his requests specific to the Statement of Advice. I accept these submissions. 120 With respect to the objections concerning the transfer of the life insurance policies to a non-Australian company, or to a Japanese company, counsel for the applicants submitted that, in the circumstances, such objections do not constitute a proper basis for confirming the Scheme. This was so, it was submitted, for five reasons. 121 First, it was submitted that the discretion to confirm a scheme of this kind is to be exercised having regard to the interests of policy owners: those interests are not necessarily synonymous or identical with their preferences: National Mutual Life Association of Australasia Limited v Challenger Life No 2 Ltd [2009] FCA 1 at [23]. The actuarial evidence did not show that the Scheme will be prejudicial to those interests. However, it ought to be recognised that preferences such as these do underpin a policy owner's decision to procure a particular policy. It is not to be gainsaid that the transfer of a life insurance business to a company which operates in a manner inimical to those interests would be a frustrating and disappointing experience for policy owners who chose their erstwhile insurance providers based precisely on those preferences. Indeed, the frustration that may so understandably be felt by policy owners in these circumstances was eloquently outlined by Stone J in National Mutual Life [2009] FCA 1 at [22]. 122 Secondly, it was submitted that the transfer to be effected by the Scheme has been the subject of a number of government approvals. Approval was obtained from the Treasurer by TDA to acquire 100% of the shares in Asteron in accordance with the national interest test in s 14(1) of the Financial Sector (Shareholdings) Act 1998 (Cth). Furthermore, APRA, as a delegate of the Treasurer, gave approval under the Insurance Acquisitions and Takeovers Act 1991 (Cth), notably s 41(1) of that Act, which in effect confirmed that the Treasurer had no objection to the Scheme, nor considered that it would be contrary to the public interest for TAL Life to acquire the life assets of Asteron by means of the Scheme. 123 Thirdly, it was submitted that the TAL Group employs approximately 2,100 people as part of its Australian operations, and that fourthly, the distribution of profits of a statutory fund is governed by the provisions in Part 4, Division 6 of the Act. Fifthly, it was submitted that, since February 2019 and the completion of the sale of the shares of Asteron to TDA, Asteron's ultimate holding company has been domiciled in Japan, and would continue to be so domiciled irrespective of whether the Scheme is confirmed. 124 I accept these submissions.

[62]

Principles applicable to confirmation 126 Pursuant to s 194 of the Act, the Court has a genuine discretion to confirm the Scheme, with or without modification, or to refuse to confirm the Scheme. Like dispensation of the requirements under s 191(2)(c), confirmation under s 194 is not a matter of course, nor a mere formality: Colonial Mutual Life Assurance Society Limited, in the matter of the Colonial Mutual Life Assurance Society Limited [2021] FCA 394 at [27]; MLC Lifetime Company Limited and MLC Limited (No 2) [2006] FCA 1367 at [5]. 127 Of primary importance in exercising this discretion is the object of the Act: to safeguard the interests of policy owners: NULIFE Insurance Ltd v Norwich Union Life Australia Ltd [2005] FCA 1635 at [24]. 128 In exercising its discretion pursuant to s 194 of the Act, the Court is to have regard to the two dimensions of the protection of policy owners' interests, being the procedural dimension and the substantive dimension: Re Commonwealth Insurance Holdings Ltd [2007] FCA 1012 at [13]. Considerations relevant to the procedural dimension are the requirements of the Act and the Life Insurance Regulations 1995 (Cth) (Regulations), including any orders of the Court made pursuant to s 191(5) of the Act. Considerations relevant to the substantive dimension include prejudice to the interests of the policy owners; that those policy owners are property safeguarded and will not experience material detriment as a result of the Scheme: NULIFE [2005] FCA 1635 at [24]. 129 The question as to whether policy owners will be adversely affected by the Scheme is largely actuarial: it involves a comparison of the security of those policy owners' benefits, and their reasonable benefit expectations as they stood prior to the implementation of the Scheme, and as they would stand following the implementation of that Scheme: Re Commonwealth Insurance Holdings [2007] FCA 1012 at [14]. It ought to be noted, however, that actuarial evidence and projections are oftentimes ill-suited and awkward mechanisms for the expression and quantification of the frustration, and perhaps even resentment, that result from the non-consensual transfer of one's policy to an insurer for which one may feel no trust, nor affection, nor loyalty. These somatic considerations bear upon a consumer's decision to take out a life insurance policy with a particular provider, yet they fall outside of the somewhat clinical terms of Part 9 of the Act. It ought to be queried whether this should be so.

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