SGIC Insurance Limited v Insurance Australia Limited

Federal Court of Australia|2004-12-14|Before: Jacobson J

nt. 5. Pursuant to section 413(1) of the Act (using the definitions in the Scheme), as from the Effective Time, each of the following transactions will occur in the order set out below: (a) first, all of the Assets of the Third Plaintiff will be transferred to and become the Assets of the Defendant; (b) second, all of the Liabilities of the Third Plaintiff will be transferred to and become the Liabilities of the Defendant; and (c) third, the Third Plaintiff will be deregistered without winding up pursuant to section 413(1)(d) of the Act. 6. Pursuant to section 413(1) of the Act (using the definitions in the Scheme), as from the Effective Time, each of the following transactions will occur in the order set out below: (a) first, all of the Assets of the Fourth Plaintiff will be transferred to and become the Assets of the Defendant; (b) second, all of the Liabilities of the Fourth Plaintiff will be transferred to and become the Liabilities of the Defendant; and (c) third, the Fourth Plaintiff will be deregistered without winding up pursuant to section 413(1)(d) of the Act. 7. Pursuant to section 413(1) of the Act (using the definitions in the Scheme), as from the Effective Time, each of the following transactions will occur in the order set out below: (a) first, the Defendant will pay the Fifth Plaintiff the Transfer Amount in consideration for the transfer of the Licence Arrangement; (b) second, all of the Assets of the Fifth Plaintiff will be transferred to and become the Assets of the Defendant; (c) third, all of the Liabilities of the Fifth Plaintiff will be transferred to and become the Liabilities of the Defendant; and (d) fourth, the Fifth Plaintiff will be deregistered without winding up pursuant to section 413(1)(d) of the Act. 8. Pursuant to section 413(1) of the Act (using the definitions in the Scheme), as from the Effective Time, each of the following transactions will occur in the order set out below: (a) first, all of the Assets of the Sixth Plaintiff will be transferred to and become the Assets of the Defendant; (b) second, all of the Liabilities of the Sixth Plaintiff will be transferred to and become the Liabilities of the Defendant; and (c) third, the Sixth Plaintiff will be deregistered without winding up pursuant to section 413(1)(d) of the Act. 9. Pursuant to section 413(1)(c) of the Act, as from the Effective Time (as defined in the Scheme), any legal proceedings pending by or against each Plaintiff will be continued by or against the Defendant in respect of that Plaintiff. 10. Liberty be reserved to the Plaintiffs and each of them are able to apply for any consequential orders as may be considered necessary or desirable under section 413 of the Act. 11. These orders be entered forthwith.

REASONS FOR JUDGMENT 1 On 3 December 2004, I made orders under s 411(4)(b) of the Corporations Act 2001 (Cth) ("the Act") approving schemes of arrangement between the plaintiff companies and their members. I also made orders under s 413(1) for the transfer of assets and liabilities of each of the plaintiffs to Insurance Australia Ltd ("IAL"). In addition, I ordered that each of the plaintiffs (except for SGIC General Insurance Limited) be deregistered without winding up pursuant to s 413(1)(d) and I ordered that any legal proceedings pending by or against each plaintiff be continued by or against IAL. The last mentioned order was made under s 413(1)(c). 2 I was satisfied that I had power to make the orders because the schemes were proposed for the purposes of reconstruction or amalgamation and the other conditions required for the exercise of the jurisdiction under s 413(1) were established. The other conditions were that application be made for approval of a scheme under s 411(4)(b) and that the whole or part of the undertaking of a Part 5.1 body be transferred to a company. 3 I described the schemes in [2], [3] and [4] of my judgment given at the first court hearing, convening meetings under s 411(1); see [2004] FCA 1492. 4 It is unnecessary to analyse in any detail whether the schemes are for the purpose of "reconstruction" or "amalgamation". I am satisfied that they are either for the reconstruction or amalgamation of the scheme companies in accordance with well-established authority. 5 Each of the plaintiff companies is a subsidiary of IAL. SGIC Insurance Ltd and SGIC General Insurance Ltd each has as its member SGIC Holdings Ltd. SGIC Brand Pty Ltd and SGIC Holdings Ltd each has as its member SGIO Insurance Ltd. In turn, SGIO Insurance Ltd has as its member NRMA (Western Australia) Pty Ltd and NRMA (Western Australia) Pty Ltd has as its member IAL, which is the transferee company. 6 The seminal case on the meaning of the words "reconstruction" and "amalgamation" is In re South African Supply & Cold Storage Co (1904) 2 Ch 268 ("South African Supply"). There, Buckley J said at 286 that a reconstruction occurs where an undertaking is transferred to persons who are not outsiders so that substantially the same business is carried on by substantially the same persons who previously conducted it. In my opinion, that test is satisfied here because the undertaking of the plaintiffs is to be transferred to IAL which is their parent or ultimate parent. 7 However, Mr Oakes SC pointed out the effect of Buckley J's definition may be that there is a reconstruction where there is a "rebirthing" of the business through a new company with substantially the same shareholders, but not by way of its combination with another business. He noted that it is not readily apparent why this restriction should be placed on the meaning of the word but he observed that Buckley J's definition was adopted by Isaacs J in Webb v Federal Commissioner of Taxation (1922) 30 CLR 450 at 471-472. 8 Whether or not the schemes are by way of reconstruction, they are clearly for the purpose of amalgamation because they consolidate the constituent elements of the plaintiff companies into another company, IAL; see Citizens and Graziers Life Assurance Co Ltd v Commonwealth Life (Amalgamated) Assurances Ltd (1934) 51 CLR 422 ("Citizens and Graziers") at 457 (Dixon J) or because the six undertakings of the plaintiffs are to be "rolled" or "blended" into another company; see South African Supply at 287. 9 As Dixon J observed in Citizens and Graziers, a transaction may nevertheless be an amalgamation although the corporate existence of the consolidating companies is continued for some special and definite purpose. That is the case here so far as SGIC General Insurance Ltd is concerned because it will remain in existence to give effect to undertakings in accordance with a claims management agreement to which it is a party.

10 Other authorities to which I was referred also support the proposition that the schemes are for the purpose of reconstruction or amalgamation; see Re Buka Minerals NL (1983) 8 ACLR 507, where McLelland J at 507 treated the scheme as an amalgamation; Re Honey Pool of Western Australia (1986) 6 ACLC 208, in which Olney J at 209 proceeded on the basis that the scheme was for reconstruction; Re AGL Sydney Ltd (1994) 13 ACSR 597, in which Young J at 598 described the schemes as "schemes of reconstruction"; Royal Victorian Institute for the Blind Ltd v RBS.RVIB.VAF Ltd (2004) 206 ALR 581, in which Finkelstein J at [5] described the schemes as a reconstruction.

11 Reference may also be made to the useful analysis of the authorities on the meaning of "reconstruction" and "amalgamation" in Renard and Santamaria, Takeovers and Reconstruction in Australia (1990) Butterworths, Sydney at [1529]. 12 The only other issue which arose was that there were a number of minor errors and omissions, as follows:- · The scheme meetings for all but the first plaintiff were held ahead of the court appointed time. · The venue of the meetings was changed. · The explanatory statement was not registered before being served. 13 As to the first two items, the meetings were held and attended by all members who passed the necessary resolutions. 14 As to the third item, the explanatory statement was registered by ASIC, albeit late, and the explanatory statement as served matches the statement put before the Court at the first court hearing. 15 Each of these errors or omissions relates to a proceeding under the Act within s 1322(2). Each is a procedural irregularity which is not invalidated unless the Court is of the opinion that it has or may cause substantial injustice and declares the proceeding to be invalid. 16 Here, it is unnecessary for there to be a validating order because validation is brought about by s 1322(2). The plaintiffs have not sought an order under s 1322(4). As Mr Oakes SC submitted, such an approach would not have met with favour; see Australia Hydocarbons NL v Green (1985) 10 ACLR 72 at 84.

I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.

Corporations Act 2001(Cth)s 411(4)(b), 1322(2), 1322(4)

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