REASONS FOR JUDGMENT
1 The applicants seek confirmation under Part 9 of the Life Insurance Act 1995 (Cth) ("the Act") of a scheme for the transfer and amalgamation of part of the life insurance business of St Andrew's Life Insurance Pty Ltd ("SALI") with the life insurance business of the Colonial Mutual Life Assurance Society Ltd ("CMLA") ("the scheme").
2 I described the scheme in my reasons delivered on 17 May 2010 when I made dispensation orders pursuant to section 191(5) of the Act: see St Andrew's Life Insurance Pty Ltd, the application of St Andrew's Life Insurance Pty Ltd and The Colonial Mutual Life Assurance Society Limited [2010] FCA 488. I do not need to describe the scheme in any greater detail.
3 The principles which govern the exercise of the Court's discretion to confirm the scheme are well established. In Re Metlife Insurance Ltd (2007) 63 ACSR 492 at [28] Gyles J observed that the discretion to confirm the scheme pursuant to section 194 is at large and is only confined by the purposes to be served by it in the context of the Act as a whole and in Part 9 in particular. His Honour pointed out that the role of the Court is plainly not limited to supervising the various procedural steps to be taken, nor by any opinion that the Australian Prudential Regulation Authority ("APRA") expresses. However, an important indication of the proper approach is the first object of the Act stated in section 3(1).
4 His Honour referred to the remarks made by Katz J in Re Royal & Sun Alliance Life Assurance Ltd (2000) 104 FCR 37 at [3] in which Katz J set out the relevant provision of the Act and noted that the Court's discretion under section 194 of the Act is to be exercised in light of the objects stated in section 3(2) of the Act. Similar remarks have been expressed by other judges of the Court; see for example Prefsure Life Ltd & Tower Australia Limited [2007] FCA 480 at [2] per Stone J.
5 In Application of Commonwealth Insurance Holdings Ltd & Anor [2007] FCA 1012 at [13], Edmonds J pointed out that there are two aspects in respect of the protection of the interests of policyholders which arise on such an application. The first is the procedural aspects, and the second is a substantive aspect in which the Court is concerned to see that the scheme will not be prejudicial to the interests of policyholders, and that policyholders are properly safeguarded.
6 Edmonds J said at [14] that:
The question of whether policyholders would be adversely affected by the Scheme is largely actuarial and involves a comparison of their security and reasonable expectations without the Scheme with what they would have been if the Scheme were implemented.
7 I was taken on 17 May 2010 in some detail to the joint actuarial report of Mr Paul Nuttall who was the actuary appointed by SALI and Ms Jennifer Lang the actuary appointed by CMLA. I was also taken to the independent actuary's report from Mr Gregory Martin of KPMG Actuaries Pty Ltd. Both the joint actuarial report and the independent actuary's report are dated 8 April 2010.
8 Mr Jackman took me this morning to the affidavit evidence of Mr Nuttall and Ms Lang which updated their earlier report. Both of the appointed actuaries have confirmed that there has been no material change in the circumstances of SALI or CMLA since the date of the joint actuarial report that would adversely affect the solvency and capital adequacy positions of each of SALI and CMLA.
9 Mr Jackman also took me this morning, in some detail, through the procedural steps. I am satisfied that all of the procedural requirements have been satisfied. The details are set out in the outline of submissions for SALI and CMLA prepared by Mr Jackman and Ms McCarthy. I do not need to refer to those procedural matters in any detail, but they are sufficiently described in paragraphs 20 to 31 of the written submissions. I will mark the written submissions as MFI2.
10 What is significant in considering the evidence of the procedural steps is that there has been little interest expressed by affected policyholders. For example, no one attended the public inspection of the copies of the scheme, the scheme summary, the joint actuarial report and the independent actuarial report which were made available in the advertised locations throughout Australia.
11 Moreover, although 79 calls were received by SALI staff based in Melbourne at the customer service telephone number, none of the callers requested a copy of the scheme and none formally objected to the proposed scheme. Nor have the applicants received any formal complaints or objections in relation to the proposed scheme.
12 As the written submissions observe, it is a condition precedent to the scheme that a Commonwealth Government Treasury Minister makes a decision under section 41 of the Insurance Acquisitions and Takeovers Act 1991 (Cth) that the Commonwealth Government has no objection to the proposed amalgamation.
13 The confirmation was provided on 22 April 2010. A delegate of the Minister stated under s 41(1) of the Insurance Acquisitions and Takeovers Act 1991 (Cth) that the Commonwealth Government has no objection to the trigger proposals as defined in the Act, so long as CMLA complies with the conditions specified in the schedule. The only condition stated in the schedule is that the trigger proposals may only be carried out by way of a scheme confirmed by the Federal Court under Part 9 of the Life Insurance Act 1995 (Cth). The Minister's delegate has stated that, provided the conditions are carried out, the trigger proposals, which are, in effect, comprised in the scheme, will not be contrary to the public interest.
14 It is plain that the closest possible attention has been paid to all the necessary procedural requirements. Mr Jackman brought to my attention this morning a minor typographical error in the terms of the scheme deed. He has asked me to make an order confirming the deed with a modification which takes account of the typographical error. That of itself reveals the closest possible attention to detail, and I am satisfied that I ought to make an order in the terms sought.
15 One of the reasons I do so is, as I have said above, there has been little, or no, interest by affected policyholders, and the error in the scheme deed is of the most minor nature.
16 I am satisfied that I ought to confirm the scheme. In doing so I take account of the principles which govern the exercise of the discretion, as stated in the authorities to which I have referred.
17 First, for the reasons mentioned above, I am satisfied there has been compliance with all the procedural requirements under the Act and the Life Insurance Regulations 1995 (Cth).
18 Second, the objective of the scheme is to transfer part of the life insurance business of SALI to CMLA and upon the basis of the actuarial reports, it does so in a manner which will not adversely affect the reasonable benefit expectations of policyholders of either SALI or CMLA.
19 Third, the actuarial evidence satisfies me that the statutory funds of SALI and CMLA remain in a sound financial position. So too, the actuarial evidence indicates that the benefit security of all policyholders should remain adequate and in excess of APRA's capital adequacy requirements, and that there should be no adverse effect on the benefit security of policyholders of either company.
20 The final reason for the favourable exercise of my discretion is that APRA has independently considered the scheme and has no objection to the present application being made to the Court for confirmation. Mr Claxton appeared this morning for APRA and indicated that APRA has no objection to the orders which are sought.
21 The Court has long recognised the role of APRA as a significant participant in the process of confirming schemes, and the Court gives considerable weight to APRA's review of a proposed scheme and its assessment as to whether or not it should arrange for a report from an independent actuary, as well as its attitude to the application for an order seeking confirmation.
22 This factor was referred to in some detail by Katz J in Re Royal & Sun Alliance Life Assurance Ltd (2000) 104 FCR 37 at [24]ff. His Honour reviewed the authorities, including an unreported decision of Sheppard J in The Application of Advance Life Insurance Limited & Anor (unreported, Sheppard J, 18 February 1997). As I have said, this is a matter which I take into account, and to which I give significant weight, in exercising my discretion to confirm the scheme.
23 For these reasons, I will make orders in terms of paragraphs one, two, and three of the short minutes of order handed to me by Mr Jackman, which I will sign and date and place with the Court papers.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.