Sovereign Life Assurance Company v Dodd

"A" CORPORATIONS ACT 2001 OF AUSTRALIA NOTICE OF MEETING MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LIMITED (ABN 35 000 456 799) Notice is hereby given that by order made on 17 October 2002, the Federal Court of Australia has directed that a meeting of the Scheme Creditors (as defined in the scheme of arrangement referred to below) of the Company be held on 11 December 2002, commencing at 11.00 am (London Time). The Scheme Creditors are defined in the Scheme as being creditors of the Company in respect of certain discontinued international reinsurance business written by the Company on or before 1 January 1985 or written by certain predecessor companies and transferred to the Company on or before 30 September 1998. All Scheme Creditors are requested to attend at such place and time either in person or by proxy. The purpose of the meeting is to consider, and if thought fit, agree to a scheme of arrangement (with or without modification) proposed between the Company and the Scheme Creditors. Scheme Creditors may vote in person at the meeting or may appoint another person, whether a Scheme Creditor or not, as their proxy to attend and vote in their place. Any Scheme Creditor may obtain a copy of the proposed scheme of arrangement, the Explanatory Statement required to be furnished pursuant to the Corporations Act and the voting form and form of proxy, by collecting the same personally at the Company's offices at Level 13, 347 Kent Street, Sydney in the State of New South Wales, 2000 between the hours of 9.00 am and 5.00 pm on each weekday excluding public holidays until and including 11 December 2002 (Australian Eastern Summer time), or they may be obtained from Mark Jones, PricewaterhouseCoopers, Plumtree Court, London, EC4A 4HT, United Kingdom during normal business hours before 11 December 2002 (London time). Date: October 2002 MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LIMITED S.S. ROUVRAY Company Secretary

IN THE MATTER OF MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LIMITED

BETWEEN: MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LIMITED ACN 35 000 456 799

Outline of the scheme of arrangement and of steps taken for its approval and implementation 1 The applicant ("MMIA"), a well known insurance company incorporated in Australia, has made application to this Court under subs 411(1) of the Corporations Act 2001 (Cth) ("the Australian Act") for an order for the convening of a meeting in London of a class of creditors of MMIA, being claimants for indemnity stemming from MMIA's discontinued reinsurance business, to consider and if thought fit to approve a scheme of arrangement ("the Scheme") between MMIA and those creditors. In addition an order is sought, also pursuant to subs 411(1), that the Court approve the explanatory statement of MMIA required by para 412(1)(a) of the Australian Act. The Scheme has no application to creditors in relation to MMIA's general insurance business. No order is sought for the convening of any such meeting in Australia partly for the reason that most of the reinsurance claimants are located in London and otherwise for reasons which will shortly emerge. 2 The Scheme appears to be unprecedented in Australia in structure and purpose. It is referred to amongst practitioners as a "valuation" or "cut off" scheme. It is a solvent creditors' scheme involving a process for MMIA to accelerate the payment of liabilities for reinsurance claims pending against MMIA, and also against certain overseas companies related to MMIA, which have not yet crystallised in quantification, and which will be unlikely in the normal course to do so. MMIA has now discontinued the writing of reinsurance business, but in the normal course, the resolution of most outstanding reinsurance claims presently notified would extend over a lengthy period of time. MMIA wishes to have all such pending claims, whether or not as yet foreshadowed to MMIA, resolved and removed from its financial statements, consistently with its discontinuance with underwriting reinsurance. The Scheme is proposed for contemporaneous implementation by MMIA in England, in combination with schemes of arrangement in relation to four other insurance companies which, as in the case of MMIA, are members of the international ING group of companies, but unlike MMIA, are incorporated in the Netherlands ("the Dutch Companies"). Implementation in England of all five schemes of arrangements is proposed to take place at least primarily in London, pursuant to orders intended to be sought from the High Court of Justice in England, as well as in the case of MMIA alone, pursuant additionally to similar orders of this Court. The ING international group has been extensively involved in the business of reinsurance internationally, as well as in general insurance. All five schemes in combination are embodied within one comprehensive instrument headed "Schemes of Arrangement", and are foreshadowed to be made "pursuant to Section 425 of the Companies Act 1985 of Great Britain and Section 411 of the Corporations Act 2001 of Australia". The reason why the plural "Schemes" appears on the face of the document is because each of the five ING insurance companies involved is intended to be subjected to the same Scheme provisions individually, yet pursuant to a common administration. It is therefore convenient to refer to the participation of MMIA by way of a "Scheme" in the singular number, albeit as identical Scheme in form and context applicable to each of the four other participating insurance companies, unless inconsistent with the context. I should add for completeness in that regard that some claimants for reinsurance against these ING companies, in many instances, relate to more than one of the five ING insurers intended to be involved in their respective Schemes. 3 Approval to the Scheme will be sought in the first instance by MMIA, along with the other four participating insurance companies, from the High Court of Justice in England, but thereafter similar scheme implementation orders will be sought by MMIA from this Court, so that any reinsurers can be relevantly and effectively bound in relation to reinsurance claims which have been or will be made in Australia against MMIA. The process of Court approval in favour of MMIA in England, and subsequently in Australia, will thus be analogous to the course previously undertaken in Australia of obtaining the approval of the Supreme Courts of more than one State to schemes involving companies which had been carrying on business in more than one State prior to insolvency, though as I have indicated, I am here concerned with a solvency arrangement albeit involving the resolution of and release from all existing claims of a particular kind. 4 The identity of the four Dutch Companies, and their respective abbreviations in the proposed combined Schemes of Arrangement, intended to be implemented in England after obtaining the approval of the High Court of Justice in England, are as follows: Assurantiemaatschappij "De Zeven Provinciën" NV (also known as "The Seven Provinces" Insurance Company Limited) ("The Seven Provinces"); "Transatlantica" Herverzekering Maatschappij NV ("Transatlantica"); Nationale-Nederlanden Schadeverzekering Maatschappij NV ("NNS"); and Nationale-Nederlanden Internationale Schadeverzekering NV (also known as NV The Netherlands Insurance Company Est. 1845 Limited ("NNIS")). 5 As already foreshadowed, the purpose of MMIA of participation in the Scheme may be broadly described as to bring to finality the already discontinued reinsurance business, and to do so in tandem with implementation of identical schemes for the Dutch companies, as an alternative to allowing their respective reinsurance claims, whether already notified or otherwise, to merely "run-off" in the normal lengthy course of events involving the settlement of reinsurance claims. The business of MMIA the subject of the MMIA Scheme relates mainly to two books of MMIA reinsurance business, as follows: (i) discontinued non-Australian international reinsurance business emanating mainly from the London market; (ii) discontinued international inward insurance business transferred to MMIA on or before 30 September 1998. If implemented, the MMIA Scheme would result in the MMIA Scheme creditors having their Scheme Liabilities (as defined) agreed or otherwise determined, and thus receiving payment in full at an earlier point in time, albeit without deduction for the time advantage thereby achieved, than if MMIA was to allow MMIA's reinsurance business to continue in relation to run-off over a number of years in the otherwise normal course of events. 6 The most recent estimate of the Scheme Liabilities of MMIA amounts to $17.37 million. Of the 29 identified MMIA Scheme creditors, including one pool based in Singapore, 14 are resident in England. Those figures may be usefully compared with other figures disclosed in MMIA's audited financial statements as at 31 December 2001, which refer to gross claims incurred and related expenses undiscounted of $226,380,671, gross insurance provisions of $322,544,472, and unearned premiums of $207,064,673. In short, MMIA's business is significant in size, and will continue to be so after completion of the Scheme. 7 As earlier indicated, it is intended by MMIA to submit the Scheme for approval to a meeting of reinsurance creditors of MMIA in London, as one of a series of five consecutive scheme meetings of affected reinsurance creditors of the subject five ING group companies including MMIA, to be held in London in mid November 2002, pursuant to orders to be sought from the High Court of Justice in England. The following procedure in summary is proposed for resolving any disputes as to the value of claims for the purpose of voting at the Scheme meeting in London for MMIA, as well as at the contemporaneous meetings of the Dutch Companies: (a) the value to be attributed to the Scheme Liability (as defined), for the purpose of voting at the Scheme Meeting, will be the lower of the values attributed by the Scheme Creditor (as defined) and MMIA; (b) the Chairman of the MMIA meeting will have the power to reject a Scheme Liability (as defined) for voting purposes, in whole or in part, if he considers that it is not fair and reasonable, or wholly so, or else to attribute a nominal value thereto of one US dollar thereto; (c) in the event of dispute, the Chairman's decision will be final and binding, subject to any right of appeal available according to law and, where possible, the Chairman will notify the decision on valuation for voting purposes to the claimant before the applicable Scheme Meeting. 8 The Scheme has already been referred by MMIA to the Australian Securities and Investments Commission and also to the Australian Prudential Regulation Authority. Each has indicated that it raises no objection in principle to the Scheme. 9 The intended Chairman of the Scheme meetings to take place in London will be Mr Schwarzmann of PricewaterhouseCoopers, who has been engaged in the formulation of the scheme proposal for presentation to creditors, and in the provision of assistance in relation to the proceedings which have been already commenced in the High Court of Justice in England. Mr Schwarzmann has had no previous relationship or dealing with MMIA, and has no interest or obligation that may give rise to a conflict of interest or duty in acting as chairman of the scheme meeting, save that he and/or his professional partners may be administrators, scheme administrators or provisional liquidators of a number of insurance companies which may be creditors of MMIA (inter alia), and which he has identified. If any dispute might arise between any such other insurance company and MMIA, for example, as to the value to be attributed, for the purpose of voting at the Scheme meeting, to any creditor's vote, Mr Schwarzmann has declared that he would not seek to adjudicate upon the matter himself, but would look to the solicitors appointed to advise MMIA (in that example) upon any such disputes, and would follow their advice. In the event that Mr Schwarzmann is unable to act as chairman of the intended meeting in London, another chartered accountant and London partner of PricewaterhouseCoopers, Mr Batten, would act as chairman of the meeting. Mr Batten has given a similar undertaking on affidavit in the event that he might encounter a conflict of interest. 10 Given that the required approvals of the Scheme for MMIA are duly obtained, it is foreshadowed that the subsequent "approval" court hearings would take place in Australia in mid December 2002, so as to ensure that the Scheme has full force and effect in Australia. Provided that the English and Australian court hearings result in sanction of the Scheme for MMIA, MMIA (doubtless in tandem with the other four Scheme companies) will apply for permanent injunctive relief from the United States Bankruptcy Court under s 304 of the United States Bankruptcy Code, in order to ensure that the Schemes will additionally become effective and enforceable in the United States against any Scheme creditors.

Detail of the Scheme 11 The operation and effect of the Schemes in combination are comprehensively described in affidavits of Mr Peter Fidler, a consultant in the firm of Pinsent Curtis Biddle solicitors of London. The Scheme document comprises 33 pages in length, and the accompanying Explanatory Statement to the Schemes is some 52 pages in length. Mr Fidler's description is largely based upon information provided by Mr Rebisz, the Project Manager of the Schemes appointed by ING Corporate Reinsurance, being a unit of the Corporate Insurance Risk Management Division of ING Group NV. Mr Rebisz is responsible for run-off claims made against all companies in ING Group NV, including of course the Scheme Companies, and in that capacity, he has had responsibility for putting together the Schemes on behalf of the Scheme Companies. It is appropriate that I summarise contents of Mr Fidler's affidavit, insofar as the same bear upon the detail of the Schemes, in particular in relation to MMIA. 12 Each of the five Scheme companies, in the opinion of their respective directors or managing boards, is solvent, and has discontinued writing further reinsurance business, and in some cases (though not MMIA) direct insurance business as well. As earlier stated, the Scheme companies seek to terminate their exposure to reinsurance claims at an early point in time, rather than allow that form of insurance business to merely "run-off" over a number of years in the normal course with all of the accompanying disadvantages in the presentation of financial accounting. Two of the Scheme companies, being The Seven Provinces and Transatlantica, have no continuing business of significance, apart from addressing outstanding reinsurance claims, and the other three (including of course MMIA) have continuing businesses quite apart from the resolution of reinsurance claims which are not intended to, and do not form part of, the Scheme. 13 Although the five Schemes each have their own identity and status, and thus require separate approvals from meetings of reinsurance claimants to be convened in relation to each Scheme company, the same have been propounded by essentially a single scheme document for purposes of greater cost effectiveness for the ING Group NV in terms of management time, staff support and acquisition of external legal, actuarial and accountancy services required to address and effect the closure of the run-off of the discontinued business of each applicant company at the same time and in the same manner. Moreover, as already foreshadowed, many of the reinsurance creditors are claimants or potential claimants in relation to more than one of the five Scheme companies, or put another way, there are a number of "coverage" issues which are common to more than one Scheme. Provision for set-off to operate as if all the Scheme companies were effectively one unit would mean that a more liberal attitude is thought to be likely to be taken by the five Scheme companies to claims by Scheme creditors which under normal principles would be treated as time-barred. 14 Apart from avoiding the costs associated with a prolonged run-off of reinsurance claims, implementation of the Schemes would enable those two Scheme companies above referred to, which have only discontinued business remaining to be finalised, to be expeditiously wound-up, and would further enable the three continuing Scheme companies (including MMIA) to concentrate on their respective "live" businesses, free from the distractions and cost of the prolonged run-off of discontinued business. The nature of discontinued business in the form of run-off is said to be such that the majority, if not all, of the Scheme Creditors will, in the opinion of the Scheme administrators, welcome the opportunity to resolve as soon as possible all present and future claims relating to that business, including those claims which may not be easily evaluated, such as losses incurred but not as yet reported. A number of substantial creditors have informally signalled already to Mr Rebisz that they would support the adoption of the Schemes, and several have permitted their names to be mentioned in the combined Explanatory Statement. That is understandable, since it is the intention of the Scheme Companies to ensure that all Scheme creditors receive payment in full of their proven reinsurance claims as valued in accordance with the provisions of the Scheme, being valuations intended to involve any discount for the circumstances of liabilities not having matured in the ordinary course. 15 Apart from the circumstances of location of auditors, relevantly in the case of the Dutch companies in England, and of MMIA in Australia, a compelling case for the administration of the Schemes in London, instead of administration in Holland, is because it is not possible to enter into a solvent scheme of arrangement under Dutch law. Moreover, it is not merely the circumstance of the residence of most creditors which is said to provide significant criteria for establishing jurisdiction in England. A further factor relates to particular features of the London reinsurance market described in detail in Mr Fidler's statement.

MMIA's submissions to the Court in relation to the MMIA Scheme 16 Senior Counsel for MMIA referred at the outset to authority for the proposition, fundamental to implementation of the Scheme in so far as MMIA is concerned, that this Court is empowered to order MMIA to convene in London the Scheme meeting involving MMIA creditors, pursuant to subs 411(1) of the Australian Act. In Re Sandhurst Mining NL (1991) 9 ACLC 62, the Supreme Court of Western Australia (Anderson J) exercised its jurisdiction under s 315 of the Companies (Western Australia) Code, a precursor to subs 411 of the Australian Act, to order a meeting of bondholders in Switzerland to consider a proposed scheme of arrangement concerning a Western Australian company. Jurisdiction is thus derived from corporate residence in Australia, but the Court's relief may be moulded to accommodate the realities of an Australian corporation's places of business associations, particularly where the corporation may be sued in courts exercising jurisdiction outside of Australia. Moreover there are advantages and benefits to MMIA in holding the MMIA Scheme meeting in London in combination with the Scheme meetings of the Dutch Companies, apart from the physical presence there of many, if not most, of the affected parties, and the positioning there of the London reinsurance market where decision-making occurs. The availability of the jurisdiction of the High Court of Justice in England to grant the requisite relief in respect of all five companies in combination, in circumstances where there exists in some cases two or more reinsurance claimants arising out of a particular reinsurance cover, is another factor. The law of the United Kingdom would apply to at least most of the reinsurance arrangements involving MMIA. 17 Another matter of potential controversy relates to the power and authority of the Chairman of the proposed MMIA London meeting concerning the determination of the value of the MMIA Scheme creditors' reinsurance claims for voting purposes, since quantification also is to be determined either in the ordinary course of proofing and otherwise pursuant to the terms of the Scheme. The procedure laid down for all of the Schemes, as stated in the Explanatory Memorandum, is somewhat complex. It involves the evaluation of information provided by claimants and of information in MMIA's possession, including known set-offs and counterclaims. For the Scheme meeting, it is proposed the chairman have a discretion to determine what he considers to be a fair and reasonable value to be attributed to a "Scheme Liability" (as defined) for the purposes of voting at the Scheme meeting. In my opinion, that process is in accordance with established principle. In Australia, a scheme chairman may be empowered, pursuant to s 1319 of the Australian Act concerning the conduct of a meeting, if ordered by the Court (which is here proposed), to reject in whole or in part a "Scheme Liability" (as defined) for voting purposes, if the chairman considers the same not to be fair and reasonable, consistently with the general law described by McLelland J (as he then was) in Re Triden Contractors Ltd (1993) 30 NSWLR 615 at 616 as follows: "In my opinion it is one of the functions of the chairman of a meeting of creditors convened to consider a scheme of arrangement to determine the value to be assigned to each creditor's debt or claim in order to declare the result of the voting at the meeting. In making such a determination the chairman must act in good faith, in accordance with any relevant law, and on reasonable grounds. If there is insufficient material available to him to enable him properly to make such a determination in a particular case he should not purport to do so." If any asserted Scheme creditor is aggrieved by the Chairman's ruling, that creditor would normally be entitled to make submissions at the second or subsequent court hearing upon the fairness of the Scheme process, whether in England or Australia. I would imagine that his Honour's dictum would similarly prevail in England. 18 The next potential issue arising is that the Schemes would operate equally in relation to all Scheme creditors, and do not involve division into different classes of creditors. The notion of different classes of creditors was described by Lord Esher MR in a life insurance context in Sovereign Life Assurance Company v Dodd [1892] 2 QB 573 at 580 as follows: "… if we find a different state of facts existing among different creditors which may differently affect their minds and their judgment, they must be divided into different classes." Bowen LJ at 583 described the notion of class in his judgment in the same case as follows: "It is obvious that these two sets of interests are inconsistent, and that those whose policies are still current are deeply interested in sacrificing the interests of those whose policies have matured. They are bound by no community of interest, and their claims are not capable of being ascertained by any common system of valuation". I have not been able to identify within the present Schemes of Arrangement any justifiable basis for the application adversely of the principles restated in the dicta above cited. 19 I should add that after referring to those authoritative dicta in Sovereign Life, Barrett J in Hills Motorway [2002] NSWSC 897 at [12], in the context of a scheme of arrangement between a company and members holding shares in a company and units in a managed investment scheme or trust under a stapled arrangement, recently observed that "[t]he focus is not on the fact of differentiation but on its effects". A further recent observation of potential relevance was expressed by Chadwick LJ (Wright J concurring) in Re Hawk Insurance Co Ltd [2001] 2 BCLC 480 at 527, in the context of a scheme of arrangement where creditors of an insolvent insurance company were to be treated differently for distribution purposes by reason of different weightings to be accorded to different classes of claim: "Applying Bowen LJ's test from the Sovereign Life case, neither the rights released or varied, nor the new rights given under the scheme, are so dissimilar as to make it impossible for the persons entitled to those rights to consult together with a view to their common interest." Both judicial observations are favourably accommodated in my opinion by the terms and provisions of the Subject Schemes. 20 The features and mechanisms prescribed by the present Schemes, and specifically that relating to MMIA have been described by Senior Counsel for MMIA as follows: (i) the Scheme creditors would all receive payment sooner than if claims were allowed to mature in the ordinary course, and the run-off was to continue to its normally anticipated exhaustion; (ii) provision is made for adjudication in circumstances where MMIA and a Scheme creditor are unable to agree on a claim value; (iii) the notification period is sufficient to ensure that all Scheme creditors become informed of the Scheme of Arrangement and the essence of its provisions, and that sufficient opportunity is provided for submission of claims; (iv) claim forms will be sent to all known Scheme creditors and a circular will be sent to their known brokers, agents or other intermediaries, and advertisement will be placed in several newspapers in order to advertise the existence of the Scheme meeting to any other Scheme creditors to whom claim forms and circulars might not be sent; (v) the Scheme must be approved by the required majority of Scheme creditors, and thereafter by the Court in England and in Australia; (vi) once the Scheme creditors' claims have been agreed, determined or adjudicated in accordance with the Scheme, payment would be made in full of the claims so resolved, without deduction in respect of the accelerated timing factors involved. 21 Those observations are in my opinion correct. MMIA next referred to judicial precedent in Australia for approval being given to a creditor's scheme of arrangement which nevertheless proposed alteration to the rights of existing creditors, in the case being noteholders, in circumstances where the status and characteristics of the notes would be governed by the law of the State of New York, and where any legal action or proceedings would be governed by the law of that State. That was the decision of Heenan J in Re Bulong Nickel Pty Ltd [2002] WASC 226, where orders were made by the Supreme Court of Western Australia in relation to a scheme of arrangement propounded pursuant to s 411 of the Australian Act in an insolvency context. I agree with the submission that his Honour's decision bears authoritatively upon the circumstances of the present application of MMIA. 22 MMIA acknowledged that although a creditor would be entitled to challenge the s 411 process in an Australian court of competent jurisdiction, nevertheless once the MMIA Scheme would become effective by lodgement of the Court's order with Australian Securities and Investments Commission pursuant to subs 411(10) of the Australian Act, and the Court Order of the High Court of Justice would be lodged with the Registrar of Companies in England and Wales, clause 46 of the Scheme would thereafter operate to provide that the Scheme is to be governed by and construed in accordance with the laws of England, and that the English Courts should have exclusive jurisdiction to hear and determine any proceedings, and to settle any dispute which may arise out of the contents of the Explanatory Statement, or of any provision of the Scheme. MMIA has contended nevertheless that it is open under s 411 for a company and its creditors, or any class thereof, to consider a compromise or arrangement which would become subjected to English governing law and bring about submission to the jurisdiction of English Courts, for a number of reasons as follows: (i) The word "arrangement", as used in s 411 of the Australian Act, which is not exclusively defined by s 9 thereof, is of wide import, and not limited by the word "compromise" also appearing in s 411; in Re International Harvester Co of Australia Pty Limited [1953] VLR 669, Lowe ACJ said at 672 in the context of s 153 of the Companies Act 1938 (Vic) as follows: "The arrangement to do so has been unanimously approved by the holders of the whole of the issued shares of the company … It is now plain that the word 'arrangement' is not restricted in its meaning by its association with 'compromise' … The word has been given a liberal meaning and, generally speaking, unless the arrangement is ultra vires the company … or seeks to deal with a matter for which a special procedure is laid down … or to evade a restriction imposed by the Act … almost any arrangement otherwise legal which touches or concerns the rights and obligations of the company or its members or creditors may … [come] … under sec 153 …" (ii) The relationship between a company and its creditors is essentially one of contract, and the compromise or arrangement proposed by the Scheme, if approved, will be a statutory variation of that contract, by operation of the procedure in Part 5.1 of the Corporations Act 2001: that is to say, the procedure comprising the court convened meeting, the passing by the meeting of a resolution in favour by the requisite majority, and the court approval of the scheme. The court approval renders the "arrangement binding as between the creditors… on the one hand, and the company… on the other hand", per McLelland J in Re Glendale Land Development Ltd (In Liq) (1982) 7 ACLR 171 at 172. Crossman J in Re Garner Motors Ltd [1937] 1 All ER 671 at 675 described a scheme as "…something quite different… from a mere agreement signed by all the necessary parties. It has a statutory operation, and becomes a statutory scheme". But even if a scheme might best be described as a statutory creature sui generis, it can clearly operate to vary a contract, creating what Isaacs J described in Isles v Daily Mail Newspaper Ltd (1912) 14 CLR 193 at 205 as a "compulsory contractual relation". It is consistent with the procedure contemplated by the statute for the parties involved to elect which law is to govern the contractual arrangement; thus in Re Bulong Nickel Pty Ltd (2002) 42 ACSR 52 at [39], Heenan J observed as follows: "It is entirely open to the parties to a contract to select which system of law should apply to its interpretation." (iii) It has been customary for parties to contractual arrangements to state their mutual intention to submit to a certain jurisdiction which would apply to disputes concerning the subject matter of a contractual arrangement; any such submission may be expressed to be exclusive or non-exclusive, or the relevant contractual arrangement may be silent on the matter. (iv) The intended exclusive submission of the Schemes of Arrangement in relation to MMIA to the jurisdiction of the English Courts is an appropriate submission to jurisdiction, having regard to the circumstances here prevailing that: · the proper law of many of the contracts involving MMIA the subject of the Schemes is English law; · a substantial number of the Scheme's creditors (one of which is a reinsurance pool) are entities based in the United Kingdom and represent the largest percentage of the MMIA Scheme creditors; · the Schemes do not adversely affect "Australia Liabilities" (a defined expression appearing in the Schemes); · the submission to the exclusive jurisdiction in England would avoid forum shopping and so limit the scope of different jurisdictions conceivably producing conflicting decisions upon any issues which may be litigated, and thereby in turn reduce uncertainty for creditors; · the ready availability of the traditional experience of English Courts in dealing with solvent schemes of arrangement concerning insurance policy creditors, including solvent schemes of arrangement involving similar procedures. (v) Where parties submit to the exclusive jurisdiction of another country, an Australian Court has a discretion whether to grant a stay of proceedings commenced in an Australian jurisdiction. 23 Lastly, MMIA has submitted that an order should be made to the effect that regulations 5.6.12 to 5.6.36A of the Corporation's Regulations to the Australian Act apply to the Scheme, except for those regulations to be identified in the draft Short Minutes of Order produced by MMIA. Rule 2.15 of the Corporation Law Rules provides in that regard as follows: "Subject to the Law, these Rules and any direction of the Court to the contrary, regulations 5.6.12 to 5.6.36A of the Corporations Regulations apply to meetings ordered by the Court." Those exceptions so identified are sought for the reason that the Scheme creditors' meetings for all five companies are to be conducted in London in accordance with a common procedure, and that therefore there should be procedural consistency with the conduct of the MMIA Scheme meeting. The submission is clearly well conceived. Upon that basis, MMIA has further sought directions from the Court as set out in paragraph 12 of the Order. I see no good reason why the Court should not make an order in those terms pursuant to s 1319 of the Corporations Act 2001.

Conclusion 24 In my opinion, the contentions which have been advanced by Senior Counsel on behalf of MMIA are soundly conceived and should be upheld and carried into effect and that the Scheme of Arrangement, so far as it relates to MMIA, should proceed for consideration at the appropriate time for consideration by the Scheme creditors of MMIA. I therefore propose to make orders to the effect set out in the Draft Short Minutes submitted, and to publish these Reasons for Judgment at the same time, when formally requested by the legal representatives for MMIA. In proposing to make those orders, I have taken into account the principles enunciated by Santow J in Re NRMA Insurance Ltd (No. 1) (2000) 156 FLR 349 and Emmett J in Central Pacific Minerals NL [2002] FCA 239, which need not be restated. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti.

Associate: Dated: 17 October 2002 Counsel for the Applicant: M Oakes SC