The ASIC Act s.12DI argument
37 The first application brokers argued in written submissions that, under s.12DI of the Australian Securities and Investments Commission Act 2001 (Cth), each of the insurance companies is precluded from accepting the premium moneys from the brokers where the liquidators cannot ensure payment on all or any claims that may be made under the relevant policy of insurance.
38 If the conditions for its operation are otherwise met, s.12DI prohibits the acceptance by a corporation of payment or other consideration for financial services (a term defined by s.12BA in such a way as to include the writing of an insurance contract) if, at the time of the acceptance, the corporation intends not to supply the services or to supply services "materially different from the services in respect of which the payment or other consideration is accepted" or there are reasonable grounds of which the corporation is or ought reasonably to be aware for believing that it will not be able to supply the services within the contracted period or, if there is none, within a reasonable period.
39 Section 14 of the Insurance (Agents and Brokers) Act, to which brief reference has already been made, is relevant here. The liability of each insured to the relevant insurance company in respect of premium was, by force of that section, discharged at the past point at which the insured paid moneys to the broker. It is therefore doubtful, to say the least, that subsequent payment by the broker to the insurance company in obedience to s.27 involves acceptance by the insurance company of payment or other consideration for the provision of the insurance contract. It is much more likely that the consideration for that service passed when s.14 deemed the liability to the insurance company to be discharged.
40 Even if, contrary to the foregoing, scope remains for the operation of s.12DI of the Australian Securities and Investments Commission Act, there is another obstacle. Because, by virtue of the definitions in s.12BA, the writing of an insurance contract amounts to the supply of financial services, the s.12DI prohibition would operate only if, when the insurance company accepted the premium from the broker, it intended not to write the policy or to write a "materially different" policy. Since, as already discussed, the existence of the policy as the means by which the insurer comes on risk is one of the conditions to be satisfied before payment by broker to insurer is required under s.27 of the Insurance (Agents and Brokers) Act, it may be expected that, in general, the creation of the insurance contract will have predated the receipt by the insurance company from the broker. That being so, there is not, to my mind, any clear basis on which the s.12DI would enter the picture as a barrier to acceptance by the insurer of money required to be paid to it by the broker. An insurance contract conferring a defined indemnity does not cease to be what it purports to be when the insurer loses the meaningful financial wherewithal to satisfy its promise to pay. The contract remains a contract nonetheless.