//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2008] FCA 490
Federal Court of Australia
2008-04-03
Emmett J
Original judgment source is linked above.
(c) be entitled to the benefits of and to take action under; and
(d) assume all the obligations and liabilities in respect of and relating to any matters arising out of, the insurance contracts referred to in Order 2 as if it were a party and at all times had been a party, to such insurance contracts in the place of the First Applicant. 4. Pursuant to s 17F(1) of the Insurance Act 1973 (Cth) the First Applicant will be released from all obligations and liabilities under the insurance contracts referred to in Order 2 above. 5. Pursuant to s 17F(2) of the Insurance Act 1973 (Cth), all reinsurance treaties and agreements entered into by the First Applicant as reinsured, are assigned to the Second Applicant in place of the First Applicant and the parties (other than the First Applicant) to the reinsurance treaties and agreements. 6. Pursuant to s 17F(2) of the Insurance Act 1973 (Cth) the Second Applicant: (a) be bound by; (b) perform the obligations under; (c) be entitled to the benefits of and to take action under; and (d) assume all the obligations and liabilities in respect of and relating to any matters arising out of, the reinsurance treaties and agreements referred to in Order 5 as if it were a party and at all times had been a party, to such reinsurance treaties and agreements in the place of the First Applicant. 7. Pursuant to s 17F(2) of the Insurance Act 1973 (Cth) the First Applicant is released from all obligations and liabilities under the reinsurance treaties and agreements referred to in Order 5 above. 8. Pursuant to s 17F(1) of the Insurance Act 1973 (Cth) any proceedings pending or brought on or after 3 April 2008 in any court or tribunal in respect of an insurance contract between the First Applicant and its policyholders be continued by or against the Second Applicant and any judgment or determination for or against the First Applicant in any such proceedings have effect as if such judgment or determination had been made for or against the Second Applicant. 9. Access to the evidence contained in Exhibits 'DRH1' and 'DRH2' to the Affidavit of Derek Raymond Hilliard sworn 31 March 2008 be restricted to the Applicants and their legal advisors and the Australian Prudential Regulation Authority and its legal advisors. 10. Documents containing the evidence identified in Order 9 be placed in an envelope and marked 'Confidential: not to be opened without the order of a Judge of this Court'. 11. Liberty be reserved to the Applicants and each of them to apply for any consequential orders as may be considered necessary or desirable under Part III, Division 3A of the Insurance Act 1973 (Cth). 12. Grant leave to the Applicants to enter these orders forthwith. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. 'A' SCHEME INSURANCE ACT 1973 (PART III DIVISION 3A) SCHEME FOR THE TRANSFER OF THE AUSTRALIAN INSURANCE BUSINESS OF MDU AUSTRALIA INSURANCE COMPANY LIMITED TO avant INSURANCE LIMITED Background A. MDU Australia Insurance Company Limited (ABN 46 070 399 950) ('MDUAIL'), a company incorporated in New South Wales and Avant Insurance Limited (ABN 82 003 707 471) ('Avant Insurance'), a company registered in New South Wales, are each authorised to carry on Insurance Business in Australia under the Insurance Act. B. This Scheme has been prepared under Part III Division 3A of the Insurance Act to give effect to the terms of an agreement by which MDUAIL and Avant Insurance have agreed that MDUAIL's Insurance Business and Insurance Contracts be transferred to Avant Insurance, subject to confirmation by the Federal Court. C. This Scheme is based upon the Actuarial Report.
IN THE MATTER OF MDU AUSTRALIA INSURANCE COMPANY PTY LIMITED MDU AUSTRALIA INSURANCE COMPANY PTY LIMITED
REASONS FOR JUDGMENT 1 Before me is an application under the Insurance Act 1973 (Cth) (the Act) for confirmation of a scheme involving the transfer of the insurance business of the first applicant, MDU Australia Insurance Company Pty Limited (MDU), to the second applicant Avant Insurance Limited (Avant). Some of the background to the proposal was outlined in my reasons, of 14 February 2008, for dispensing with the need for compliance with the provisions of s 17C(2)(c) of the Act (see MDU Australia Insurance Company Pty Ltd, in the matter of MDU Australia Insurance Company Pty Limited [2008] FCA 342). THE SCHEME 2 The pivotal provision of the proposed scheme is to be found in clause 2.1, whereby MDU transfers and assigns the Portfolio Assets, as defined, to Avant and Avant assumes the Assumed Liabilities, as defined. Portfolio Assets are, in essence, all assets of MDU. Assumed Liabilities are, in effect, all liabilities and obligations of MDU. There are other supporting provisions of the scheme to ensure an effective transfer of the business of MDU to Avant. 3 The procedural steps required by the Act are extensive. I am satisfied from the evidence that has been read that the steps have been satisfied, as set out in the annexure to the affidavit of Derek Raymond Hilliard, sworn 31 March 2008. 4 However, there are two matters to which the Court's attention has been drawn in relation to the procedural requirements. The first is that the scheme that was before the Court on 14 February 2008 has been amended in several immaterial respect; I do not consider that those changes have any bearing on the exercise of the Court's discretion. 5 The other matter is slightly more substantive. It is a requirement of s 17C(2)(b) of the Act that a notice of intention to make an application for confirmation of a scheme be published by the applicant in accordance with Prudential Standards prescribed by Australian Prudential Regulatory Authority (APRA). One of those requirements, contained in Prudential Standard GPS 410, is that the applicant must publish notice of its intention to make an application, in a form approved by APRA, in the Government Gazette and in one or more newspapers approved by APRA. Paragraph 16 of Prudential Standard 410 requires that the notice be published before the scheme is released for public inspection and that a copy of the scheme be open for public inspection during specified hours every day for a period of at least 15 days. 6 While notice of MDUs intention to apply was published on 4 March 2008 in newspapers approved by APRA, notice of its intention was not published in the Government Gazette until 11 March 2008, notwithstanding that the scheme was open for public inspection from 4 March 2008. The reason for the non-compliance was that the timetable that was adopted was too tight to enable the notice to be published in an appropriate edition of the Government Gazette. 7 I am satisfied that the failure to comply strictly with the requirement of Prudential Standard 410 should not adversely affect the exercise of the Court's discretion. In exercising the discretion under the Act to confirm a scheme, the Court has a general discretion. The Act does not specify any criteria to be satisfied. The critical consideration is whether affected policy-holders will be detrimentally affected by the implementation of the scheme. As I indicated in my earlier reasons, MDU and Avant are wholly-owned subsidiaries of Avant Mutual. The purpose of the scheme is to merge the captive insurers of Avant Mutual and so gain the economies of a merged entity. Clearly enough, one effect of the scheme will be to avoid significant duplication of compliance and prudential requirements. 8 The interests of affected policy-holders of MDU must be the subject of critical consideration. The evidence of Mr Adrian Gould, the approved actuary of Avant, is that there is potentially an erosion of the security of the MDU policy-holders. The level of such security is judged by the ratio of the APRA approved capital base of an insurer to APRAs minimum capital requirement for that insurer. That ratio for MDU's policyholders will drop from 378% to 321%. Nevertheless, that ratio is comfortably in excess of the ratio that APRA regards as an appropriate ratio, namely, 150%. 9 The interests of the transferee policyholders must also be considered. The evidence of Mr Gould suggests that the position of Avant policyholders will be marginally improved in that the relevant ratio will increase from 319% to 321%. 10 Avant already manages the business of MDU and the policy conditions will be unchanged. The proposed transfer of business will be seamless. MDU has, in fact, been in run off since 1999 and the affected policyholders are nine policyholders with open files who have given notification of possible claims. None of those notifications has yet resulted in a claim. None of the prospective claims has been active since 1998. All of MDU's reinsurers have intimated that they have no objection to the proposed scheme. 11 APRA was represented at the hearing today and does not oppose the scheme. APRA approved the relevant summary that was required to be given to policyholders. Further, APRA did not consider that it was necessary to arrange for the appointment of an independent actuary. Affected policyholders have been notified in accordance with the requirements of the Act and Prudential Standard 410. There have been no objections by affected policyholders. 12 In all of the circumstances, I am satisfied that there is unlikely to be any materially adverse effect on the MDU policyholders. Accordingly, I propose to confirm the scheme pursuant to s 17F of the Act. 13 Amongst the evidence that has been tendered are schedules of the policyholders of MDU who still have outstanding notifications. MDU has asked that access to that evidence be limited to the applicants and their lawyers, and to APRA and its lawyers. It is appropriate in the circumstances to make an order to that effect. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.