Objections to the Scheme
87 Two policy owners have expressed an objection to the Scheme by way of emails to the applicants. Neither appeared at the confirmation hearing. The applicants accept that these objections reflect genuine concerns and have addressed them in correspondence with each policy owner.
88 The first policy owner, who is currently under claim on the basis of serious health issues, has objected to the proposed Scheme on the basis that they did not want "TAL" to be their insurer, as this may result in changes to their policy terms or to the quality of customer service.
89 The second policy owner stated that they did not want their life insurance policy to be transferred to a foreign entity or parent organisation entity; that they did not want to contract with a foreign entity; that their trust and arrangement was made with Westpac in 1999; that they did not wish to contract with TAL Life; and that they did not know what legal jurisdiction TAL Life falls under. This policy owner considered the transfer to be a security issue under the Constitution and questioned how a foreign owned entity could be trusted to ensure it was investing in Australian organisations and keeping its funds' money in Australia and securely. The policy owner appears to have requested HSF to convey these objections to the Court.
90 It is convenient to address these objections and some of the concerns expressed by other policy owners together.
91 First, the general objection that the policy owners do not want their insurer changed is not a valid objection to the Scheme because that consequence is inherent in the very nature of a Scheme under Pt 9 of the Life Act. As Rimer J said in Re Hill Samuel Life Assurance Limited [1998] 3 All ER 176,179 [d]-[e] in dealing with objections to the sanction of a Scheme under Sch 2C to the Insurance Companies Act 1982 (UK):
There are in evidence a number of representations from various policyholders who have expressed concern and some element of dissatisfaction about the proposed schemes, for a number of different reasons. I do not think it is necessary to go through their objections in any close detail. Certain of them express, perhaps understandably, the complaint that having, for example, taken out a Hill Samuel policy, and having chosen not to take an Abbey Life policy, they feel a degree of dissatisfaction in finding themselves locked into Abbey Life. I have some sympathy with that, but it seems to me that that is inherent in the very nature of the scheme involving the transfer of life business from one company to another.
92 A similar view was expressed by Stone J in National Mutual Life Association of Australasia Limited v Challenger Life No 2 Ltd [2009] FCA 1 at [22]-[23]:
It is entirely understandable that people who had invested in one company should be concerned and even resentful when, without their consent, their investment is transferred to another company. It is also understandable that these concerns should be exacerbated in the current climate of severe financial instability. Nevertheless, Parliament in providing in the Life Insurance Act for such transfers clearly regarded them as consistent with the principal object of the Act…
… Consistent with the principal object of the Act, however, the Court is not directed to consider only the interests of policyholders or to consider [their] interests as paramount. Their interests must be considered in the context identified in s 3(1). Moreover, it should be assumed that the interests of policyholders are necessarily identical with their preferences.
See also the acknowledgement by Allsop CJ in Asteron Life No 3 at [121] and [129] that such "somatic considerations…fall outside the somewhat clinical terms of Part 9 of the Act".
93 Second, the concern expressed that the Scheme may result in a change to the policy terms or the quality of service is not persuasive in respect of the proposed Scheme. Save for the identity of the insurer and relevant statutory fund, the terms and conditions of transferring policies will not change under the Scheme: see cll 3.2(b), 3.7, 3.8, 3.9 and 3.13 of the Scheme. Further, the actuarial evidence is to the effect that the quality of customer service, as manifested by claims handling practices, policy administration, underwriting and product improvements, are not expected to be adversely impacted by the Scheme. Mr Merten found that there would be no material changes to customer service levels. Rather, policy owners can expect to experience benefits from the Scheme through scale, operational risk and benefit security as explained above.
94 Third, an objection to the Scheme on the basis that the policies or business of TLISL will be transferred to a non-Australian insurer or parent entity do not constitute a proper basis for not confirming the Scheme. Similar objections were addressed and rejected by Allsop CJ in Asteron Life No 3 at [120][124] involving the same transferee under analogous circumstances. While it may be a frustrating and disappointing experience for policy owners to have their insurer changed (without their consent), the discretion to confirm the Scheme is to be exercised having regard to the interests of policy owners, which are not necessarily synonymous or identical with the preferences of each and every one of them. Nevertheless, the actuarial evidence shows that the Scheme will not be prejudicial to these interests, and indeed will be beneficial to them.
95 In the United Kingdom, similar objections have been characterised as "subjective" and rejected as irrelevant to the exercise of the discretion to "sanction" a Scheme under Pt VII and s 111 of the Financial Services and Markets Act 2000 (UK) (FSMA): Re Prudential Assurance Company Limited and Rothesay Life plc [2020] EWCA Civ 1626; [2021] Lloyd's Law Reports 623 (Re Prudential Assurance) at [111]-[121]. In Re Prudential Assurance the English Court of Appeal at [117] agreed with what Warren J said in Re Scottish Equitable plc and Rothesay Life plc [2017] EWHC 1439 (Ch) as follows:
63. [fairness] is not the subjective view of a policyholder or even of the judge. An objective view must be formed, a view reached against the objective standards and the factors appropriate to take into account. To take an extreme example, a scheme would not be unfair because it transferred business from a Scottish company to an English company even though a particular policyholder selected the company in the first place precisely because it was Scottish rather than English. …
114. … Miss Hutchins emphasises the unfairness, as she sees it, of compelling her elderly father to transfer to a new company from the venerable SE which he deliberately chose. He wants to be given a choice, in particular to transfer to LGAS rather than to RL.
115. There are two points to make. Firstly, the venerable position of SE is not, I am afraid, of itself a relevant factor. Even venerable institutions can fail as those who work in this area of the law are well aware. …
116. Secondly, a newish body, that is to say, RL, is not to be regarded as an unsuitable provider simply because it is new otherwise we could never have new entrants into the market for transfers. The question is not its age but its financial strength, record and expectations. (emphasis added)
96 In Re Prudential Assurance, the Court found that subjective factors relied on by objecting policy owners on the basis of the transferor's age, venerability and established reputation, and their assumption that the transferor would provide their annuity throughout its lengthy term, were not relevant to be taken into account in the exercise of the Court's discretion: Re Prudential Assurance at [119].
97 There are other underlying difficulties with the objection and concerns that the business is to be transferred to a foreign entity. The transfer of the business to be effected has been the subject of Government approval. The substance of the "go-ahead" decision made by APRA as a delegate of the Minister (referred to above) under s 41(1) of the IATA is that the Commonwealth Government has no objection to, and it would not be contrary to the public interest for, TAL Life to acquire the life business of TLISL by means of a scheme under Pt 9 of the Life Act. Further, the transaction received two approvals from the Treasurer as being in the national interest, namely pursuant to the Foreign Acquisitions and Takeovers Act 1975 (Cth) and the Financial Sector Shareholdings Act 1998 (Cth).
98 Moreover, insofar as there are concerns about the security of assets and funds in TAL Life post-transfer, the distribution of retained profits of the statutory fund and of shareholders' capital in relation to a statutory fund, is governed by the provisions in Pt 4, Div 6 of the Life Act. These provisions limit distributions which would have the result of capital adequacy or solvency standards not being satisfied in relation to the fund. The general requirements regarding the establishment and operation of the statutory funds of TAL Life under Pt 4, Div 1 of the Life Act and the actuarial evidence of the capital position of TAL Life, if the proposed Scheme is confirmed, also address concerns about the security of the benefits of transferring policy owners post-Scheme.
99 Finally, because of the sale of the shares of TLISL to TDA, since August 2022 TLISL's ultimate holding company has been domiciled in Japan and would continue to be even if the Scheme were not confirmed.
100 Mr Hollo SC submits, and I accept, that the admittedly genuine objections and concerns expressed by policy owners do not form a basis for not confirming the Scheme.