FEDERAL COURT OF AUSTRALIA

Municipal Mutual Insurance Limited, in the matter of Municipal Mutual Insurance Limited [2008] FCA 2011

MUNICIPAL MUTUAL INSURANCE LIMITED, IN THE MATTER OF MUNICIPAL MUTUAL INSURANCE LIMITED

NSD 1874 of 2008

EMMETT J

12 DECEMBER 2008

SYDNEY

IN THE MATTER OF MUNICIPAL MUTUAL INSURANCE LIMITED,

THE COURT ORDERS THAT:

1.                  Pursuant to section 17C(5) of the Insurance Act 1973 (the Act), the need for the applicant to comply with section 17C(2)(c) of the Act is dispensed with provided that the Applicant complies with Orders 2, 3 and 4 below.  

2.                  The Applicant, before the scheme for the transfer of insurance business from the Applicant to Gordian Runoff Limited (the Scheme) is released for public inspection under order 4 below, cause a copy of a summary of the Scheme approved by the Australian Prudential Regulation Authority (APRA) to be sent by pre-paid post to:

(a)                all policyholders of the Applicant’s Australian branch that the Applicant has identified from its records and from the publicly available sources consulted by it, as described in the affidavits of Robert Conry Brauer sworn on 3 December 2008 and Kerry Newcombe sworn on 4 December 2008, for which the Applicant has an address; and

(b)                each broker known by the Applicant to have placed or administered any Transferring Policy (as defined in the Scheme) at its registered address or last known address maintained upon the records of the Applicant along with a covering letter from the Applicant requesting that such brokers pass on a copy of the approved summary of the Scheme to any policyholder who may, according to the broker’s records, be the holder of a Transferring Policy.

3.                  The Applicant cause an advertisement providing notification of the proposed Scheme (in a form approved by APRA) to be placed in the Gazette and newspapers, approved by APRA, circulating in each State and Territory of Australia before the Scheme is released for public inspection under order 4 below.

4.                  The Applicant make a copy of the Scheme and any actuarial report upon which it is based available for inspection for a period of at least 15 business days (between the hours of 9.00 am and 5.00 pm Monday to Friday), prior to the date on which the Scheme is to be confirmed by the Court, at locations approved by APRA under Prudential Standard GPS 410 in each State and Territory in which an affected policyholder resides. 

5.                  The proceeding be adjourned for hearing on 27 February 2009.

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

IN THE MATTER OF MUNICIPAL MUTUAL INSURANCE LIMITED,

REASONS FOR JUDGMENT

1                                             The applicant, Municipal Mutual Insurance Limited (the Company), is incorporated in England and Wales.  It is a company limited by guarantee without any share capital.  Between January 1989 and March 1992, the Company was authorised to carry on a general insurance business in Australia.  That business consisted primarily of providing liability insurance for local authorities and schools.  In March 1992, the Australian branch of the Company was placed in runoff and ceased to underwrite any new insurance business.  The Australian branch is currently authorised under the Insurance Act 1973 (Cth) (the Act) to carry on general insurance runoff business in Australia.  The Company proposes to transfer the business of the Australian branch to Gordian Runoff Limited (Gordian).  Gordian is authorised under the Act to carry on general insurance runoff business in Australia.  It has been carrying on that business since September 1999. 

2                                             Section 17B of the Act provides that no part of the insurance business of a general insurer may be transferred to another general insurer, or amalgamated with the business of another general insurer, except under a scheme confirmed by the Court.  Section 17C(2) relevantly provides that an application for confirmation of a scheme may not be made unless a copy of the scheme and any actuarial report on which the scheme is based have been given to the Australian Prudential Regulation Authority (APRA), notice of intention to make the application has been published and an approved summary of the scheme has been given to every affected policyholder.  An approved summary is a summary approved by APRA.  An affected policyholder is the holder of a policy affected by the scheme.  That means a policy that is the subject of the transfer.  It does not include a policy of the transferee, although the effect of a transfer on the policies of the transferee may be a matter to be taken into account by the Court in the exercise of its discretion (see Re Insurance Australia Limited (2004) 139 FCR 450, at [18] to [25]).  Section 17C(5) provides that the Court may dispense with the need for compliance with section 17C(2)(c), if the Court is satisfied that, because of the nature of the scheme or the circumstances attending its preparation, it is not necessary that the paragraph be complied with. 

3                                             Having regard to the time since new business was written by the Company, there may be some difficulty in establishing the identity of all holders of affected policies.  The Company has caused a list of affected policyholders to be prepared.  The list discloses some 1,245 policyholders and contains the names of all known policyholders of the Australian branch of the Company.  The Company, however, has experienced difficulty in identifying the addresses of all of those policyholders. 

4                                             I have had regard to the affidavits of Ian Albert Willett of 4 December 2008, Kerry Ann Newcombe of 4 December 2008 and Robert Conry Brauer of 3 December 2008, indicating the steps that have been taken to identify the addresses of those policyholders.  Addresses have been located in respect of 1,185 policy holders, leaving some 60 policy holders whose addresses were not initially ascertainable.  Some further addresses have been ascertained, but there are still a number of policy holders whose addresses are not capable of being identified.  The Company has also communicated with brokers who may have placed policies with a view to ascertaining further information from the brokers.  In the circumstances disclosed in those affidavits, it is possible that the Company will not comply with the requirement of s 17C(2)(c) that an approved summary of the proposed scheme be given to every affected policyholder. 

5                                             Accordingly, the Company has applied for dispensation pursuant to s 17C(5).  The Company proposes that a copy of the approved summary be sent to all policyholders of the Australian branch that it has identified from its records, and from publicly available sources consulted by it, as described in the affidavits to which I have referred.  It also proposes that a copy of the approved summary be sent by pre-paid post to each broker known to the Company to have placed, or administered, the transferring policy, at those brokers’ registered addresses or last known addresses maintained in the records of the Company.  The summary will be accompanied with a covering letter from the Company, requesting that each broker pass on a copy of the approved summary to any policyholder who may, according to the broker’s records, be the holder of a transferring policy. 

6                                             The Company will also place an advertisement notifying the proposed scheme, in a form to be approved by APRA, in the Australian Government Gazette and in newspapers approved by APRA circulating in each state and territory in Australia.  The Company will also make a copy of the scheme, and any actuarial report upon which it is based, available for inspection for a period of at least 15 days, at locations approved by APRA. 

7                                             APRA by a letter of 11 December 2008 has confirmed that it is satisfied with the method adopted hitherto by the Company to identify policies to be transferred to Gordian.  APRA is also satisfied that the Company has made all reasonable steps to identify policy holders whose policies are proposed to be transferred.  APRA has indicated that it supports the Company’s application to the Court for dispensation from strict compliance with s 17C(2)(c), on the basis that the Company takes the steps to which I have just referred. 

8                                             In all of the circumstances I consider that it is appropriate to accede to the Company’s application for dispensation, pursuant to s 17C(5). 

Associate:

Dated:         27 January 2009