PrefSure Life Limited & Tower Australia Limited [2007] FCA 88 (7 February 2007)

Life Insurance Act 1995 (Cth) s 191

PrefSure Life Limited & Tower Australia Limited
NSD2436 of 2006

STONE J
7 FEBRUARY 2007
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD2436 OF 2006

	PREFSURE LIFE LIMITED First Applicant TOWER AUSTRALIA LIMITED Second Applicant

JUDGE:	STONE J
DATE OF ORDER:	7 FEBRUARY 2007
WHERE MADE:	SYDNEY

(3) The applicants pay the costs today of the Australian Prudential Regulation Authority.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD2436 OF 2006

	PREFSURE LIFE LIMITED First Applicant TOWER AUSTRALIA LIMITED Second Applicant

JUDGE:	STONE J
DATE:	7 FEBRUARY 2007
PLACE:	SYDNEY

1 This is an application for approval of a scheme for the transfer of the life insurance business (including all assets and liabilities) of PrefSure Life Limited to Tower Australia Limited. The scheme is contingent on the Court’s approval however that is an issue for another day. Today the applicants seek certain interim orders relating to a dispensation of compliance with s 191(2)(c) of the Life Insurance Act 1995 (Cth). That section requires that an approved summary of the scheme be given to each "affected policy owner" however s 191(5) permits the Court to dispense with this requirement if it is satisfied that "the nature of the scheme or the circumstances attending its preparation" make it unnecessary.

2 The background to the scheme has been explained to me both by Mr Hollo in submissions and through the reports of the appointed actuary, Ms Megan Beer, and the independent actuary, Mr David Goodsall. It is not necessary to go into those reports at the present time. They will require further consideration when the application for approval of the scheme is considered.

3 For present purposes, the issue is, in relation to policy holders with Tower Australia Limited, whether the applicants can dispense with the requirement to spend in excess of $500,000 providing them with the statutory summary or whether, in accordance with s 191(5) of the Act, the Court can be satisfied that because of the nature of the scheme or all of the circumstances attending its preparation it is not necessary to comply with that requirement. There is no doubt, as Sackville J commented in The Application of Commonwealth Life Ltd [2003] FCA 501 at [8], care needs to be taken before making such an order. Mr Hollo has taken me to a number of previous decisions dealing with similar applications, including several in which Gyles J has expressed some concern that the giving of dispensation from the requirements of s 191(2)(c) appears to have become pro forma.

4 For myself, I am not concerned about this. I do not see this as an indication that the Court is invited merely to rubber stamp such applications. It seems to me more likely that the need to seek the Court's approval results in processes being tailored to anticipate concerns the Court might have and meeting those concerns before an application for dispensation is made. In any event, I am satisfied for the reasons Mr Hollo has advanced that it is not necessary for each policy holder of Tower to be notified.

5 At the hearing today the Australian Prudential Regulation Authority was represented and, I understand, has been provided with the proposed Transfer Agreement, the proposed scheme, both actuarial reports and the proposed Notices of Intention and the scheme summary. I also have before me a letter from APRA dated 6 February 2007 in which APRA notes that it is aware of the applicants’ intention to seek the present dispensation and that it has no objection to the making of this application. For obvious reasons APRA’s attitude is an important factor in my decision to make the orders sought although it cannot substitute for the Court’s satisfaction as to the matters in s 191(5) reached on the evidence presented.

6 Factors contributing to that satisfaction include the fact, accepted by both actuaries , that the terms and conditions of the policies presently held with Tower will not be changed by this scheme. The two actuaries also agree that the scheme provides proper security for policy holders and that the statutory funds of Tower will be in a sound financial position following the transfer. Both actuaries are of the opinion that there will be no materially adverse effect of the scheme.

7 In relation to the circumstances attending the preparation of the scheme, the affidavit evidence of Ms Catherine Duloy, General Counsel of Tower Australia, gives details of the advertising program that is to be carried out in accordance with the Act and Regulations and notes that the APRA has approved this program. Details of the scheme will also be placed on the Tower website and the scheme will be available for inspection in all capital cities. A copy of the summary will be sent free of charge on request by a policy owner.

8 I am also satisfied that the further order that is sought, which is to dispense with the obligation to give an approved summary of the scheme to policy owners of PrefSure who become either "affected policy owners" less than 15 business days prior to the hearing of the application or become affected policy owners of policies issued by PrefSure after the effective date, should be made. In the case of those policy holders, it is not primarily the cost of providing the summary that is in issue, but the impracticality of complying with the notification procedures without suspending the business of PrefSure during what I might call the transition period.

9 The amount of new business that might be lost should that occur was attested by Ms Duloy, who, in her affidavit sworn on 6 February 2007, states that on her information PrefSure's monthly gross revenue from new business sales currently ranges from $750,000 to $1 million. Ms Duloy also refers to the "highly competitive life insurance market" and the effect that closing PrefSure to new business for the relevant period would be likely to have on future sales. In her opinion, "independent advisers would be likely to move business to other life insurance suppliers" should they be unable to transact business with PrefSure during that period.

10 Crucial to my conclusion in this case is the assurance contained in Ms Duloy's affidavit in paragraph 24 that "PrefSure will not accept new business unless it is satisfied that the relevant customer has received the Supplementary PDS" which in simple terms will adequately inform them as to the details of the proposed scheme and its ramifications. That Supplementary PDS will also ensure that all prospective customers on and from 14 February 2007 until midnight on 1 April 2007 will be provided with a summary of the scheme prior to becoming an affected policy owner and each new policy owner will have a 28-day cooling-off period in which they may elect to terminate the policy they have entered into.

11 Clearly, indication that that intention has been carried out will be a relevant issue in approval of the scheme when that matter comes to be considered. I also have before me a letter from APRA dated 6 February 2007 in which APRA notes that it is aware of the first applicant's intention to seek the present dispensation and that it has no objection to the making of this application. In all those circumstances, I am satisfied that the orders sought should be made.

I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice STONE .

Counsel for the Applicant:	R Hollo

Solicitor for the Applicant:	Minter Ellison

Solicitor for APRA:	Australian Government Solicitor

Date of Hearing:	7 February 2007

Date of Judgment:	7 February 2007

Federal Court of Australia

PrefSure Life Limited & Tower Australia Limited [2007] FCA 88 (7 February 2007)