St Andrew's Financial Services Limited and St Andrew's Life Insurance Pty Limited [2005] FCA 1849

REASONS FOR JUDGMENT 1 On 8 December 2005 I ordered that, pursuant to s 194 of the Life Insurance Act 1995 (Cth) ('the Act'), a scheme for the transfer of the life insurance business of St Andrew's Financial Services Limited ('SAFS') to St Andrew's Life Insurance Pty Limited ('SAL') be approved without modification. These are my reasons for making the above order. 2 Section 190 of the Act provides that no part of the life assurance business of a life company may be transferred to another life company, or amalgamated with the business of another life company, except under a scheme confirmed by the Court. Section 194 of the Act gives the Court three options when determining an application for the confirmation of such a scheme: it may confirm the scheme without modification, confirm it subject to such modifications as it thinks fit or refuse to confirm the scheme. 3 The Australian Prudential Regulation Authority ('APRA') exercised its entitlement to be heard on the application (see subs 193(3)). I express my gratitude for the assistance thereby provided to the Court. 4 As Katz J observed in Re Royal & Sun Alliance Life Assurance Ltd (2000) 104 FCR 37; [2000] FCA 1259 at [3]: 'The Court's choice of which of the three powers conferred by s 194 of the Act to exercise must be made in light of the object of the Act, which, as expressed in s 3(1) of the Act, is: "… to protect the interests of the owners and prospective owners of life insurance policies in a manner consistent with the continued development of a viable, competitive and innovative life insurance industry." Indeed, that the Court's choice under s 194 of the Act must be made in light of that object is emphasised by s 3(2)(f) of the Act, which identifies, as one of the principal means adopted for the object's achievement, "providing for the supervision of transfers … of life insurance business by the Court". The provision being referred to in s 3(2)(f) of the Act is obviously that made by Pt 9 of the Act, in which Part of the Act s 194, among other sections, is to be found.' 5 Detailed affidavit evidence was placed before the Court concerning whether the application for confirmation was made in accordance with the requirements of the Act and the Life Insurance Regulations 1995 ('the Regulations'). APRA did not suggest any deficiencies of compliance. I was satisfied that the application for confirmation was made in accordance with the Act and the Regulations. 6 In considering whether the scheme protected the interests of owners and prospective owners of life insurance policies I placed considerable weight on the actuarial report on the scheme prepared by David Millington Goodsall and in particular on a certificate given by him in the following terms: 'I hereby certify that, in my opinion, if the proposals contained in this report [ie the proposed transfer pursuant to the scheme] are adopted: i) The security of benefits of Scheme Policies will be maintained. ii) SAFS and SAL policyowners are indirectly benefited by the scheme because overheads are spread over a larger base of policies resulting in reduced capital requirements. iii) The security of benefits of SAL Policy owners will be maintained. iv) Each Statutory Fund of SAL will continue to meet the capital requirements of the Life Insurance Act, 1995.' 7 I also placed considerable weight on an independent report on the scheme prepared by Robert George Glading ('Mr Glading'), an actuary of over 45 years experience in the financial services industry. Mr Glading's report contains the following expression of opinion: 'It is my opinion, based on the documents received and the data and estimates in the actuarial report from the appointed actuary that the Scheme as proposed: < properly and adequately maintains and safeguards the contractual benefits and other rights of the policy owners of the statutory funds of SAFS and SAL; < safeguards the capital adequacy of the separate Funds in SAFS following implementation of the Scheme; < does not adversely affect the reasonable expectations of the policy owners of SAFS and SAL < deals equitably with the interests of the policy owners of all the life business.' 8 I additionally placed weight on the affidavit evidence of David Vallery, the Chief Financial Officer of St Andrew's Australia Pty Limited, concerning the respective financial positions of SAFS and SAL. 9 Significantly APRA expressed no opposition to the Court approving the scheme without modification. I note further that the relevant reinsurers have expressed no opposition to the implementation of the scheme. 10 For the above reasons on 8 December 2005 I made the following orders: '1. Pursuant to section 194 of the Life Insurance Act 1995 the scheme in the form of the document annexed hereto and marked "A" (comprising the document titled "Scheme Life Insurance Act 1995 Part 9" and attached executed Transfer Agreement dated 25 November 2005) be confirmed without modification. 2. The applicants pay the costs of the Australian Prudential Regulation Authority of and incidental to the application.' I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson.