SGIC Insurance Limited v Insurance Australia Limited

REASONS FOR JUDGMENT 1 This is an application under s 411(1) of the Corporations Act 2001 (Cth) ("the Act") to convene meetings for the purpose of approving schemes of arrangement proposed to be made between each of the plaintiffs and its members. I am satisfied that I should make orders in terms of the short minutes of order handed to me by Mr Oakes SC, who appears for the plaintiffs. 2 A number of issues arose on the application and I will deal with them briefly. Under the terms of the schemes it is proposed that certain of the assets and liabilities of each scheme company be transferred and vested in Insurance Australia Limited ("IAL") after a number of intermediate steps have been completed. The other assets and liabilities, which relate only to SGIC General Insurance Limited and SGIO Insurance Limited, are to be dealt with under schemes proposed under the Insurance Act 1973 (Cth). 3 The effect of the schemes will be that IAL will carry on all of the businesses currently carried on by each of the scheme companies, that business being the conduct of insurance and underwriting insurance and associated undertakings. 4 The companies are, directly or indirectly, subsidiaries of IAL, the corporate structure being set out in a chart which is Annexure A to the proposed schemes. The effect of what is proposed is that there will be an internal reconstruction through which the surplus of assets and liabilities in the scheme companies will be consolidated in IAL. The vesting of the assets and liabilities will be effected under s 413 of the Act. 5 The schemes provide for each scheme company to be deregistered without a winding up order being made. There is one exception to this, namely SGIC General Insurance Limited, the assets and liabilities of which will be transferred in accordance with the scheme but the company will remain in existence in order to give effect to undertakings in accordance with a claims management agreement to which it is a party. 6 IAL is a defendant in the proceedings. That course has been taken in accordance with the approach adopted by Finkelstein J in Royal Victorian Institute for the Blind Ltd v RBS.RVIB.VAF Ltd (2004) 206 ALR 581, especially at [17]. 7 An issue arises as to whether the schemes need to be creditors schemes. This is because the transfer of the assets and liabilities of the scheme companies to IAL may be thought, at least on one view, to affect creditors. 8 The same issue arose in the Re Clydesdale Bank Ltd [1950] SC 30 ("Re Clydesdale"). That was a Scottish decision in which the reporter appointed in accordance with Scottish practice took the view that the scheme of arrangement affected the creditors. 9 In Re Clydesdale at 38, Lord Keith said that the decision of the court was that an arrangement of the kind proposed in the application was not an arrangement between the company and its creditors. His Lordship said that it was unnecessary for there to be meetings of creditors. 10 Re Clydesdale was followed by Young J in Re AGL Sydney Ltd (1994) 13 ACSR 597 ("Re AGL Sydney"). His Honour was of the view that a scheme such as the schemes proposed in the present application, which are schemes of reconstruction, should be dealt with as members schemes. His Honour pointed out that the appropriate protection for creditors is that they have the right to appear at the second court hearing in the event that they wish to express concerns as to the appropriate protection for creditors in the light of the transfer of obligations arising from the reconstruction. 11 Mr Oakes submitted that the issue is a fairness issue rather than an issue of jurisdiction. I accept that submission, which is in accordance with the approach taken by Young J in Re AGL Sydney. 12 Each of the scheme companies has only one member. A question may arise as to whether it is possible to have a meeting of the company with only one member. The short answer is that it is possible. Kearney J dealt with the issue in relation to a class meeting in the matter of Re Hastings Deering Pty Ltd (1985) 3 ACLC 474. His Honour convened meetings constituted by a single member notwithstanding the general rule that a plurality of persons is required to constitute a meeting. 13 It may have been possible for the companies to follow the procedure laid down by s 249B of the Act. This is imported by regulation 3.3(2) of the Federal Court (Corporations) Rules 2000 (Cth) which permits scheme meetings of members to be conducted in accordance with Part 2G.2 s 249B of the Act, and enables the resolution to be passed by a written resolution. 14 Nevertheless, in the present case, the plaintiffs have decided that the appropriate course is to hold a meeting rather than to have written resolutions. The meeting was seen to be necessary to enliven the jurisdiction of the court; see ss 411(1) and 411(4)(a) of the Act. It seems to me to follow from what I have said above, that it is plain that the meetings can be held notwithstanding that each company has only one member. 15 The last issue which arises is whether it is appropriate to have a shortened period of notice for the scheme meeting. It is proposed that the meetings be held on Monday, 15 November 2004. 16 Mr Oakes has referred me to orders made by Santow J in proceedings in the Supreme Court of New South Wales in the matter of Green and Gold Foods Pty Limited and Ors (No 2662 of 1998). In that case, his Honour made orders on 9 June 1998 convening meetings to be held the following day. No written reasons were given, but it appears that the schemes were similar to the schemes in the present case, which involve internal reconstruction of the group and, in my view, it is appropriate to follow the same course as was followed by Santow J. I am therefore satisfied that I ought to shorten the period of notice as requested by the plaintiffs. 17 Accordingly, I will make orders in terms of [1] to [9] of the short minutes of order dated today, which I will sign and place with the papers. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.