JAGOT J:
1 The substantive application in this matter is for an order to confirm the transfer of the life insurance business of OnePath Life Limited, the first applicant, referred to as OPL, to Zurich Australia Limited, the second applicant, referred to as ZAL, under Pt 9 of the Life Insurance Act 1995 (Cth). The hearing today concerns an interlocutory application for the making of orders under s 191(5) of the Life Insurance Act dispensing with the need for compliance with the requirements of s 191(2)(c) of that Act. Section 191(2)(c) requires that a summary of the scheme approved by the Australian Prudential Regulation Authority (APRA) be given to each owner of a policy issued by OPL and by ZAL. Dispensation is sought on the basis that the applicants will comply with the requirements proposed in order 2. Order 2 specifies a range of steps and processes by which I can be satisfied that the proposed scheme should come to the attention of those policy owners or a sufficient number of them to ensure that an adequate opportunity to be heard about the scheme has been provided to policy holders.
2 I have been assisted in this matter by a comprehensive set of written submissions prepared by the legal representatives for the applicants and the oral submissions made on behalf of the applicants and APRA today. The effect of the orders sought, as noted, is to dispense with the need for the summary of the scheme to be given to the affected policy owners, provided that a detailed series of steps and processes are satisfied. Those steps and processes have been formulated following extensive consultation between the applicants and APRA.
3 The relevant facts may be summarised in a brief compass. OPL and ZAL are authorised under the Life Insurance Act to conduct life insurance businesses and do so through their various statutory funds, as prescribed under that Act. The proposed scheme involves an intra-group transfer of the life insurance business of OPL within the operation of the Zurich Group in Australia. Zurich Financial Services Australia Limited (ZFSA) is the ultimate parent company of both OPL and ZAL. OPL became part of the Zurich Group on 31 May 2019 as a result of ZFSA's acquisition of the entire issued capital of OnePath Life Australia Holdings Pty Limited. Since that time, both OPL and ZAL have been conducting their life insurance businesses as separate life insurance companies, under the umbrella of the Zurich Group.
4 Since the acquisition, there has been a detailed program undertaken to facilitate the integration into the Zurich Group's Australian operations of personnel who serviced the OPL business, OPL's business functions, records and processes, and OPL's policy data. It is expected that this program of integration will be finalised in April 2022. As a consequence, many policies, processes and systems are already shared as between OPL and ZAL. There is evidence from the actuaries for both OPL and ZAL and an independent actuary that the proposed scheme will result in the rationalisation of the Zurich Group's Australian life insurance business into a single life insurance entity with a single statutory fund structure, which is expected to benefit policy owners of OPL and ZAL.
5 The scheme is intended to effect the transfer of the entire life insurance business of OPL to ZAL, pursuant to a transfer agreement dated 24 March 2022. It is not necessary for me to discuss the details of the scheme at this stage, given that what is sought presently is interlocutory relief which will enable effective consideration of the scheme by those affected by it and, if they wish to do so, the opportunity for any of those persons to appear and be heard at the confirmation hearing fixed before me on 6 July 2022 at 10.15 am.
6 I should note, however, that the detailed orders proposed, and the approved summary of the scheme, will be given to all OPL policy owners other than those for whom there is no record of a current address (albeit subject to the proposed steps and processes intended to ensure that, to the extent reasonably possible, the approved summary of the scheme comes to the attention of OPL policy holders). There are approximately 418,778 OPL policy owners. OPL does not have a record of a current postal address for about two per cent of the total. Further, it is not proposed to give the approved summary of the scheme to the ZAL policy owners (whose policies will remain with ZAL). Again, however, the proposed steps and processes are intended to ensure that, to the extent reasonably possible, the approved summary of the scheme comes to the attention of ZAL policy holders.
7 Section 191(2)(c) of the Life Insurance Act requires that an approved summary of the scheme be given to every "affected policy owner", which is defined in s 191(1) to mean:
…the owner of a policy that is referrable to a statutory fund affected by a scheme.
8 The Court may dispense with the need for compliance with this provision under s 191(5). The relevant principles have been conveniently addressed in the written submissions provided by the applicants. In particular:
(1) the object of the Life Insurance Act is to protect policy owners, prospective and current, in a manner which is consistent with the development of a competitive and innovative life insurance industry, as set out in s 3(1) of that Act;
(2) it is the purpose of s 191(2)(c) to give every affected policy owner, if they so wish, an opportunity to make submissions to the Court in respect of any application for confirmation of a scheme; and
(3) the granting of dispensation is a matter of importance and care must be taken for the requirements of the provision to be dispensed with: see QBE Insurance Australia Limited, in the matter of QBE Insurance Australia Limited [2012] FCA 1127 at [16], and Asteron Life & Superannuation Limited, in the matter of Asteron Life & Superannuation Limited (No 3) [2021] FCA 1148 at [82] and [87].
9 In Macquarie Life Limited, in the matter of Macquarie Life Limited [2016] FCA 973 at [26] Allsop CJ 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 benefits or entitlements and security of policy owners in respect of whom dispensation is sought; evidence by qualified actuaries as to whether policy owners in respect of whom dispensation is sought will be detrimentally affected by the scheme; the practical difficulties and the costs involved in providing approved summaries of the scheme to policy owners in respect of whom dispensation is sought; the extent to which the proposed scheme may be brought to the notice of policy owners by means other than the scheme summary being sent to each individually; and the involvement and attitude of APRA to the application.
10 There are six considerations to which I should refer, as identified in the written submissions for the applicants.
11 First, the proposed scheme will involve a transfer of business within the Zurich Group that will not result in any change to the terms and conditions of the life policies for any of the policy owners.
12 Second, ZAL and OPL already adopt a common governance framework and share a common board-based approved risk management strategy document and internal capital adequacy assessment process for the management of capital. Following the transfer, claims management and underwriting processes will be aligned, subject to the extent that particular processes are required by the terms of particular policies or underlying reinsurance arrangements.
13 Third, the scheme is based on the report of the actuaries to the effect that no policy owners, be it of OPL or of ZAL, will be adversely affected by the implementation of the scheme. The actuaries for OPL and ZAL have both expressed the view that the simplification, efficiency, and risk benefits resulting from the scheme will benefit both OPL and ZAL policy owners.
14 Fourth, the actuaries' reports disclose the expected impact of the scheme on the capital of OPL and ZAL to the effect that: (a) the minimal capital required by regulatory capital standards would continue to be met, (b) he amount of surplus above the minimum capital required in dollar terms would be greater than before the scheme, and (c) the minimum capital required coverage ratio would be within the normal operating range as set out in the ZAL internal capital adequacy assessment process for the management of capital.
15 Fifth, although a scheme summary will not be sent to each ZAL policy holder, I accept that the detailed steps and processes set out in the proposed orders are aimed at and should be effective in notifying those policy owners of the scheme. It is submitted, and I accept, that the proposed notification is such that a sufficiently large number of affected policy owners, including ZAL policy owners, will be provided with the required meaningful opportunity to bring forward any viable objection to the confirmation of the scheme.
16 Sixth, on 24 March 2022, APRA indicated that it had reviewed the documents, including the scheme summary and notice of intention, and was satisfied no changes were required to the contents of those documents. APRA has approved the scheme summary, the form of the notice of intention, the publication of the notice of intention being the newspapers, and the locations for persons to carry out an in person inspection of the scheme. On 25 March 2022, APRA also indicated that it had reviewed the final draft versions of all of these documents with which it had been provided and was satisfied that no further changes were required.
17 Those six matters, in combination, lead me to the view that I should make the orders sought.
18 There are only two other aspects of the orders which require comment.
19 The first is that the proposed orders provide for relief from the requirement to enable public inspection of the approved scheme in the event of any public health order which restricts the movement of persons, thereby affecting the capacity of members of the public to physically inspect the documents (but provided the documents are published on webpages and information is otherwise available as to how policy owners can obtain access to them). I am satisfied that an order to this effect should be made, even though there is not currently in place any such public health orders. I note that in Asteron Life at [105], similar orders were made but after public health orders had been promulgated.
20 The second is that the proposed orders provide that APRA's cost of the proceedings are to be paid by ZFSA as agreed, or if agreement cannot be reached, as assessed. ZFSA is not a party to the proceedings. In Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) [2012] FCAFC 50; 200 FCR 154 at [73]-[90], the Full Court explained the power and discretion of the Court to make an order for the payment of costs by a non-party. In this matter, there can be no doubt that ZFSA is aware of the proposed order and has a sufficient connection to the proceedings to be the subject of an order as proposed.
21 Orders will be made as sought.
I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jagot.