FEDERAL COURT OF AUSTRALIA
DATE OF ORDER:
THE COURT ORDERS THAT:
2. Before the Scheme is released for public inspection under Order 5 below, the applicant is to cause a copy of the summary of the Scheme approved by the Australian Prudential Regulation Authority (Approved Summary) to be sent (subject to Order 2(e)):
(a) by email to each of the policyholders identified in the Policyholder Register, as defined in the affidavit of Christopher Philip Owen sworn 11 April 2018 (Owen Affidavit), where an email address is recorded;
(b) by prepaid post to each of the policyholders identified in the Policyholder Register, where a postal address but no email address is recorded;
(c) by prepaid post to each of the policyholders identified in the Policyholder Register, where an email is sent pursuant to Order 2(a) above but a delivery failure message is received;
(d) where there is no postal or email address of a policyholder on the Policyholder Register, then:
(i) where the policyholder was introduced by a broker, by email to the relevant broker(s) listed in the broker register, as described in the Owen Affidavit. The applicant must request the broker to provide the Approved Summary to the relevant policyholder(s) and must provide to the broker details of where the scheme documents can be accessed online; and
(ii) where the policyholder is a co-insured under a policy not introduced by a broker, by email or prepaid post to the first named insured under the relevant policy. The applicant must request the first named insured provide to the relevant policyholder(s) details of where the scheme documents can be accessed online; and
(e) in respect of policyholders that are clients of Arthur J Gallagher Australasia Pty Ltd or its related companies (AJG), by email to AJG along with a request that AJG contact the relevant policyholders advising where the scheme documents (including the Approved Summary) can be accessed online and where a copy can be obtained; and
(f) by email or prepaid post to each of the policyholders under a policy where there is an unresolved claim, as detailed in the unresolved claims annexure (CPO-2) to the Owen Affidavit.
3. The applicant to cause a page to be created on a website in its control on which shall be a link to the following documents:
(a) the Notice of Intention to make the application, as required under APRA Prudential Standard GPS 410 Transfer and Amalgamation of Insurance Business for General Insurers (July 2002) (in the form approved by APRA) (Approved Notice);
(b) the Scheme, as defined in the Owen Affidavit;
(c) the Approved Summary; and
(d) the final version of the Actuarial Report, as defined in the Owen Affidavit,
(e) and a link to the page and a statement that an application has been made to the Court for the approval of the Scheme shall be placed on the websites of the Applicant and its related parties at:
with such page to be available to the public from before the Scheme is released for public inspection under Order 5 below until the conclusion of that public inspection.
4. Before the Scheme is released for public inspection under Order 5 below, the applicant is to cause a copy of the Approved Notice to be published in the following publications:
(a) the Government Gazette;
(b) The Australian, which circulates in every State and Territory in Australia; and
(c) the following metropolitan newspapers:
(i) The Sydney Morning Herald;
(ii) The Age;
(iii) The Canberra Times;
(iv) The Mercury;
(v) The Advertiser;
(vi) The Northern Territory News;
(vii) The West Australian; and
(viii) Courier Mail.
5. The applicant make a copy of the Scheme, Approved Summary and Actuarial Report available for public inspection from 9 am to 5 pm (local time) every day (except weekends and public holidays) for a period of at least 15 days (inclusive) at locations approved by APRA in each State and Territory in which an affected policyholder resides.
6. Upon request, the applicant provide a copy of the Scheme to any affected policyholder free of charge.
7. The applicant provide a copy of the Approved Summary to proposed policyholders or their broker, if relevant, with any offers for new business, or offers of renewal which are made from the date of compilation of the Policy Register until the transfer effective date (as defined in the Scheme).
8. The matter be listed for the hearing of the application for confirmation of the Scheme on a date to be fixed following consultation between the applicant and the Associate to Justice Lee.
9. The applicant file and serve any evidence in support of the application and submissions by no later than seven days prior to the date the application for confirmation of the Scheme is listed for hearing.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
(Revised from the transcript)
1 Pursuant to s 17C(5) of the Insurance Act 1973 (Cth) (Act), the applicant, Sunderland Marine Insurance Company Limited (Sunderland), sought an order for dispensation with the need to comply with s 17C(2)(c) of the Act in connexion with a proposed scheme for the transfer of all the insurance business of the Australian branch of Sunderland to the Australian branch of The North of England Protecting and Indemnity Association Ltd (North).
2 Sunderland is an English company limited by guarantee, which is registered as a foreign company in Australia and is authorised by the Australian Prudential Regulation Authority (APRA) to carry on business in Australia through a local branch. It is a wholly-owned subsidiary of North. The proposed scheme is part of what is described as an intra-group, cross-border reorganisation of The North Group (North having applied for authorisation under the Act to carry on business in Australia as a local branch). As part of the proposed scheme, all underwriting processes of Sunderland and North will be merged into a single licensed entity. This step is being taken concurrently with other transfer processes underway elsewhere in the world.
3 Sunderland provides insurance products for fishing and marine craft, and aquaculture businesses. In Australia, its products include insurance contracts written over a number of different classes of general insurance. It has both a direct and intermediated business. The direct business comprises policies written under Sunderland’s own name or under the registered trading name “Douglas Fishing Insurance”, and also policies written by a wholly owned authorised representative, Marine Insurance Australia Pty Ltd. The intermediated business comprises business introduced by brokers.
4 The information technology system used by Sunderland since 1993 captures a range of information relevant to the business, including details of the policies written, the names and addresses of policyholders (including email addresses where provided), the names of brokers and associated details, commencement and expiry dates for the policies and claims made.
5 The evidence discloses that Mr Christopher Owen, General Corporate Counsel of North, is responsible for compiling a list of policyholders for the purposes of the proposed scheme and has caused to be prepared identifying material as to each policyholder across both the direct and intermediated business. This information is extracted from the retained policyholder records held by Sunderland and is organised according to policyholder names and contains details of policyholders who either hold a current policy, or no longer hold a policy, but did hold a policy with an inception date on or after 1 January 2015. As at 3 April 2018, there were 2,482 such policyholders.
6 As to the direct business, there are 58 policyholders for whom Sunderland does not have address details. This is because in circumstances where there is more than one insured under a policy, a communication in respect of that policy is directed to the first-named policyholder and an address is not necessarily held for the co-insureds. Insofar as the intermediated business is concerned, there are 519 policy holders for whom Sunderland does not have address details. The evidence discloses that the reason for this is that in the intermediated business it is usual for communications with policy holders to take place via the broker and, as is commonly the case, the broker may provide its own address for the purposes of contacting policyholders.
7 Sunderland has contacted all of the brokers who introduced business since 1 January 2015 in order to ascertain, as best it can, current address information for policyholders in this aspect of the business. Responses were received from a little over half of the brokers (with some declining to provide information on the basis that they did not believe they had an obligation to do so or that they needed policyholder consent). This is not unique in intermediated business: see W.R. Berkley Insurance (Europe) Limited, in the matter of Division 3A of Part III of the Insurance Act (1973)  FCA 374 at - per Allsop CJ.
8 As would already be evident, Sunderland has adopted a cut-off date for notification purposes for holders of policies incepted on or after 1 January 2015, based on claims experience and the nature of the insurance written.
9 The evidence discloses that the nature of business written is such that claims are unlikely to have been made at a period earlier than this date. The reasons for this are set out in the affidavit sworn by Mr Owen. Again, adopting such a cut-off date is consistent with existing practice: see, for example, American Home Assurance Company, in the matter of American Home Assurance Company  FCA 1499 at  per Emmett J.
10 Finally, by way of background, a further affidavit of Mr Owen sworn on 19 April 2018 discloses that there are presently 14 open claims in respect of policies incepted prior to 1 January 2015. Of those claims, there are five claims where the relevant policyholder holds a policy with an inception date after 1 January 2015, and therefore are already listed on the policyholder schedule. Of the remaining nine claims, two policies were held by the same policyholder, with the result that there are eight policy holders with open claims who would not otherwise receive the summary approved by APRA pursuant to s 17C of the Act (Approved Summary). Sunderland has adduced evidence as to its intention that those eight policyholders receive the Approved Summary.
B Legal Framework
11 It is unnecessary, for the purposes of these reasons, to set out the relevant legislative framework. This can be conveniently found in Insurance Australia Limited, in the application of Insurance Australia Limited  FCA 1387 at - per Gleeson J and in AXIS Specialty Europe SE (Australia Branch), in the matter of AXIS Specialty Europe SE (Australia Branch)  FCA 1594 at - per Allsop CJ. For the purposes of these reasons, I adopt the analysis of the legal framework as set out in those decisions.
C The Applicant’s Eight Contentions
12 Mr Izzo, who together with Ms O’Brien appeared on behalf of Sunderland, contended that in this proceeding dispensation was required for eight, partly interrelated, reasons:
(a) First, Sunderland had not been able to obtain complete address details for all but 575 relevant policyholders. It will email or post the Approved Summary to those persons, and orders enabling notification by email or prepaid post are now far from unique.
(b) Secondly, in respect of the 575 policyholders, Sunderland proposed to take the following steps:
(i) in the 58 cases where Sunderland did not have address details of co-insureds under policies which were written in the direct business – request the first-named insureds to provide to the co-insureds the details of where the documents regarding the proposed scheme can be accessed; and
(ii) in the cases where the business was introduced by a broker – send the Approved Summary to the broker and request the broker to provide the Approved Summary to the relevant policyholders.
(c) Thirdly, in respect of one broker, Arthur J Gallagher Australasia Pty Ltd (AJG) (Sunderland’s largest producing broker, having introduced over 400 policies), Sunderland would request it to contact all policyholders introduced by it and advise those policyholders where documents regarding the proposed scheme could be accessed. I interpolate to note the evidence discloses that AJG has undertaken to comply with this request.
(d) Fourthly, additional advertising and notification steps would be undertaken which should increase the likelihood that the proposed scheme would come to the attention of affected policyholders, including by:
(i) making a copy of the proposed scheme, the Approved Summary, the actuarial report and the notice of intention required by APRA Prudential Standard GPS 410 (which took effect from 16 April 2018) accessible on various websites;
(ii) placing the Approved Summary in various newspapers circulating throughout the Commonwealth; and
(iii) providing the Approved Summary to any new policyholders with their policy documentation or to their brokers to pass on to the policyholders for policies issued by Sunderland recently.
(e) Fifthly, the draft actuarial report in evidence indicates that the implementation of the proposed scheme will not have a materially adverse impact on the interests of policyholders. To the extent that it is relevant on this application, such an opinion does provide a measure of comfort that there is a diminished likelihood that a substantial objection will be made to the proposed scheme at the confirmation hearing: see Insurance Australia Limited at -.
(f) Sixthly, the transfer to be affected by the proposed scheme being internal to The North Group, it followed that policyholders would not be faced with a complete change of identity of the insurer.
(g) Seventhly, the making of a dispensation order under s 17C(5) of the Act would not in any way limit APRA’s role in assessing or scrutinising aspects of the proposed scheme, nor would it limit the exercise of the Court’s discretion at the confirmation hearing.
(h) Eighthly, APRA had been notified of the dispensation being sought and had no objection.
13 Based on my review of the evidence, I accept the submissions made by Sunderland. I am satisfied the proposed regime for notification is fashioned in such a way as to increase the likelihood of notification to the affected policyholders in a practical sense and will be sufficient to bring forth any objection which might be made in relation to the proposed scheme.
14 In those circumstances, and taking into particular account APRA’s approval of, or at least non-opposition to, the dispensation orders, I am satisfied that dispensation of the requirement for compliance with s 17C(2)(c) of the Act is appropriate. Orders will be made accordingly.