FEDERAL COURT OF AUSTRALIA Insurance Australia Limited [2004] FCA 524 CORPORATIONS – application for Court's confirmation of scheme by which part of insurance business of a general insurance company is transferred to another general insurance company – transfer of compulsory third party motor accident part of insurer's business to that insurer's parent – requirement of s 17C(2) of Insurance Act 1973 (Cth) that application for confirmation may not be 'made' unless conditions set out in that subsection have been satisfied – requirement of s 17E(2) of Act that application for confirmation must be 'made' in accordance with prudential standards of Australian Prudential Regulation Authority – whether word 'made' refers to filing of form of application in Court Registry or to hearing of application – whether expression 'affected policyholder' in s 17C extends to include (a) holders of other policies issued by 'transferor insurer' which are not being transferred under the scheme, and (b) existing holders of policies issued by 'transferee insurer' – whether non-compliance with s 17C goes to Court's jurisdiction – discretionary considerations – whether order should be made under s 190(1) of Evidence Act 1995 (Cth) permitting hearsay evidence to be adduced on final hearing. INSURANCE – application for Court's confirmation of scheme by which part of insurance business of a general insurance company is transferred to another general insurance company – transfer of compulsory third party motor accident part of insurer's business to that insurer's parent – requirement of s 17C(2) of Insurance Act 1973 (Cth) that application for confirmation may not be 'made' unless conditions set out in that subsection have been satisfied – requirement of s 17E(2) of Act that application for confirmation must be 'made' in accordance with prudential standards of Australian Prudential Regulation Authority – whether word 'made' refers to filing of form of application in Court Registry or to hearing of application – whether expression 'affected policyholder' in s 17C extends to include (a) holders of other policies issued by 'transferor insurer' which are not being transferred under the scheme, and (b) existing holders of policies issued by 'transferee insurer' – whether non-compliance with s 17C goes to Court's jurisdiction – discretionary considerations – whether order should be made under s 190(1) of Evidence Act 1995 (Cth) permitting hearsay evidence to be adduced on final hearing. WORDS AND PHRASES – 'affected policyholder' – 'made' Insurance Act 1973 (Cth) ss 17C, 17E Evidence Act 1995 (Cth) s 190 Re Armstrong Jones Life Assurance Ltd (1997) 74 FCR 160 followed Re Royal & Sun Alliance Life Assurance Ltd (2000) 104 FCR 37 followed Martin v Greig [1912] VLR 254 cited Ampol Ltd v Caltex Oil (Australia) Pty Ltd [1984] 2 NSWLR 678 cited Roberts v Repatriation Commission (1992) 39 FCR 420 cited Tallon (1993) 67 A CrimR 40 cited In re Reynolds [1967] Tas SR (NC) N4 cited IN THE APPLICATION OF INSURANCE AUSTRALIA LIMITED AND SGIO INSURANCE LIMITED N 2254 of 2003 LINDGREN J 7 MAY 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 2254 OF 2003 IN THE APPLICATION OF: INSURANCE AUSTRALIA LIMITED (ABN 11 000 016 722) FIRST APPLICANT SGIO INSURANCE LIMITED (ABN 30 058 277 866) SECOND APPLICANT JUDGE: LINDGREN J DATE OF ORDER: 20 APRIL 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to s 17F(1) of the Insurance Act 1973 ('the Act') the Scheme, a copy of which is annexed to this order and marked 'A', in relation to a proposed transfer of the New South Wales Compulsory Third Party ('CTP') insurance business of the Second Applicant to the First Applicant, be confirmed. [note: Annexure A appears at the end of the reasons for judgment] 2. Pursuant to section 17F(2) of the Act, and despite anything to the contrary in any reinsurance treaties or arrangements to which the Second Applicant is a party, that: (a) On and from the day after this order is made, all reinsurance treaties and arrangements: (i) relating to all CTP policies of insurance under the Motor Accidents Act 1988 (NSW) and the Motor Accidents Compensation Act 1999 (NSW) entered into by the Second Applicant as insurer; and (ii) to which the Second Applicant is a party (as reinsured), are valid, effective and continuing agreements between the First Applicant (in place of the Second Applicant) and the parties other than the Second Applicant to those reinsurance treaties and arrangements. (b) On and from the day after this order is made, the First Applicant will: (i) be bound by; (ii) perform the obligations, which prior to that date were the obligations of the Second Applicant, under; (iii) be entitled to the benefits of and to take action under; and (iv) assume any obligations and liabilities in respect of and relating to any matter arising out of, the reinsurance treaties and arrangements referred to in paragraph 2(a) of this order, as if it were a party, and at all times had been a party, to such reinsurance treaties and arrangements, in place of the Second Applicant. (c) On and from the day after this order is made, the Second Applicant will be released from all obligations and liabilities under the reinsurance treaties and arrangements referred to in paragraph 2(a) of this order. 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 N 2254 OF 2003 IN THE APPLICATION OF: INSURANCE AUSTRALIA LIMITED (ABN 11 000 016 722) FIRST APPLICANT SGIO INSURANCE LIMITED (ABN 30 058 277 866) SECOND APPLICANT JUDGE: LINDGREN J DATE: 7 MAY 2004 PLACE: SYDNEY REASONS FOR JUDGMENT Introduction 1 Since 1 November 1998, the second applicant, SGIO Insurance Limited ('SGIO') has been a subsidiary of the first applicant, Insurance Australia Limited ('IAL' – until 25 July 2003, IAL was called 'NRMA Insurance Ltd'). The applicants apply under Div 3A of Pt III of the Insurance Act 1973 (Cth) ('the Act') for the Court's confirmation of a scheme by which a part of SGIO's general insurance business is to be transferred to IAL. 2 On 20 April 2004 I ordered that the scheme be confirmed. These reasons are my reasons for making that order. As well, these reasons are my reasons for having made earlier orders on 23 December 2003 of a procedural nature. Background facts 3 The general nature of compulsory third party ('CTP') motor accident insurance is well known and does not call for discussion. In New South Wales ('NSW') the scheme of CTP insurance and payment of compensation relating to the death of, or injury to, persons as a consequence of motor accidents was provided for in the Motor Accidents Act 1988 (NSW) and is now provided for in the Motor Accidents Compensation Act 1999 (NSW) (together, 'the New South Wales Acts'). The Motor Accidents Authority of New South Wales ('the MAA') is constituted by s 198 of the latter Act, with various functions specified in s 206 of that Act. 4 On 1 November 1998, IAL (then called 'NRMA Insurance Ltd' – for convenience, I will henceforth refer to it as 'IAL' without qualification) acquired SGIO through a subsidiary of IAL, NRMA (Western Australia) Pty Ltd. At that time, both IAL and SGIO were licensed by the MAA to provide CTP motor vehicle insurance in NSW. SGIO was so licensed as from 1 March 1998. 5 On 13 August 1999, with the MAA's approval, IAL and SGIO entered into a Claims Management Contract by which IAL agreed to manage, as from 1 July 1999, claims made under NSW CTP policies issued by SGIO. 6 At SGIO's request, by letter dated 22 September 2000, MAA imposed conditions on SGIO's CTP licence, as a result of which no new NSW CTP policies were issued by SGIO after 4 October 2000, and no more can now be issued. SGIO's NSW CTP policies were issued over the period from 1 March 1998 to 4 October 2000. The period of the last policy issued by SGIO expired on 4 October 2001. 7 On 24 June 2003, the boards of directors of IAL and SGIO approved of a transfer of SGIO's NSW CTP runoff portfolio to IAL, and resolved that a Portfolio Transfer Deed be executed accordingly. 8 As a result of the Claims Management Contract referred to at [5] above, SGIO no longer has any independent infrastructure or personnel in relation to the administration of its NSW CTP policies. Under the scheme of which the Court's confirmation is sought, IAL will become the insurer in place of SGIO under SGIO's NSW CTP policies, and so the insuring obligation will be aligned with the present responsibility for administration by IAL of those policies. 9 Each policy is in respect of a motor vehicle registered in New South Wales. Where registered ownership of a motor vehicle changes, the benefit of the policy is transferred by the operation of statute to the new registered owner. Therefore, the identity of the persons having the benefit of NSW CTP policies issued by SGIO may differ from the identity of the persons to whom the policies were issued. The evidence shows that claims are made by the claimant's contacting SGIO/IAL directly, after which the claim is administered by correspondence between SGIO/IAL and the claimant. For the above reasons, SGIO/IAL does not maintain a database of the names and addresses of the persons to whom SGIO issued NSW CTP policies, and IAL/SGIO's records do not accurately disclose the number of persons presently having the benefit of SGIO's NSW CTP policies. However, there is affidavit evidence of an estimate that there are approximately 72,500 such persons. Affidavit evidence also reveals that there are approximately 130 claims against SGIO's NSW CTP insurance policy holders outstanding and unresolved. Relevant legislation and Prudential Standard GPS 410 10 The following are the relevant provisions of the Act. 'Division 3A – Transfer and amalgamation of insurance business 17A Interpretation A reference in this Division to a body corporate affected by a scheme is a reference to a body corporate that is a party or proposed party to an agreement or deed by which the transfer or amalgamation provided for by the scheme is, or is to be, carried out. 17B Transfer or amalgamation of insurance business (1) No part of the insurance business of a general insurer may be: (a) transferred to another general insurer; or (b) amalgamated with the business of another general insurer; except under a scheme confirmed by the Federal Court. Note: A transfer or amalgamation of an insurance business may also require approval under the Insurance Acquisitions and Takeovers Act 1991. (2) The reference in paragraph (1)(a) to a general insurer includes a reference to a body corporate that is authorised under this Act but has not begun to carry on insurance business in Australia. (3) A scheme must set out: (a) the terms of the agreement or deed under which the proposed transfer or amalgamation is carried out; and (b) particulars of any other arrangements necessary to give effect to the scheme. (4) … 17C Steps to be taken before application for confirmation (1) In this section: affected policyholder means the holder of a policy affected by a scheme. approved summary means a summary approved by APRA [the Australian Prudential Regulation Authority]. (2) An application for confirmation of a scheme may not be made unless: (a) a copy of the scheme and any actuarial report on which the scheme is based have been given to APRA in accordance with the prudential standards; and (b) notice of intention to make the application has been published by the applicant in accordance with the prudential standards; and (c) an approved summary of the scheme has been given to every affected policyholder. (3) Without limiting the provision that may be made by the prudential standards for the purposes of paragraph (2)(b), the notice referred to in that paragraph must include, in relation to each body corporate affected by the scheme, details of the place and time at which an affected policyholder may obtain a copy of the scheme. (4) An affected policyholder is entitled, on the person's request, to be provided by the company with one copy of the scheme free of charge. (5) The Federal Court may dispense with the need for compliance with paragraph (2)(c) in relation to a particular scheme if it 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. 17D … 17E Application to Court (1) Any of the bodies corporate affected by a scheme may apply to the Federal Court for confirmation of the scheme. (2) An application for confirmation must be made in accordance with the prudential standards. (3) APRA is entitled to be heard on an application. 17F Confirmation of scheme (1) The Federal Court may: (a) confirm a scheme without modification; or (b) confirm the scheme subject to such modifications as it thinks appropriate; or (c) refuse to confirm the scheme. (2) The Federal Court may make such orders as it thinks fit in relation to reinsurance. 17G Effect of confirmation etc. When a scheme is confirmed: (a) it becomes binding on all persons; and (b) it has effect in spite of anything in the constitution of any body corporate affected by the scheme; and (c) the body corporate on whose application the scheme was confirmed must cause a copy of the scheme to be lodged at an office of ASIC in every State and Territory in which a company affected by the scheme carried on business.' 11 It will be noted that s 17C refers to 'prudential standards'. Section 32 of the Act provides that APRA may determine (in writing) standards called 'prudential standards' relating to 'prudential matters' that must be complied with by, relevantly, all general insurers or a specified class of general insurers. The expression 'prudential matters' is defined in s 3 of the Act to mean, relevantly, '… matters relating to: (a) the conduct by the insurer, … of any of its affairs in such a way as: (i) to keep itself in a sound financial position; or (ii) not to cause or promote instability in the Australian financial system; or (b) the conduct by the insurer … of any of its affairs with integrity, prudence and professional skill. 12 APRA has determined Prudential Standard GPS 410 headed 'Transfer and Amalgamation of Insurance Business for General Insurers'. Paragraphs 4 and 5 of Prudential Standard GPS 410 are as follows: '4. An application to the Court for confirmation of a scheme cannot be made unless, amongst other things, an insurer provides a copy of the scheme and any actuarial reports on which the scheme is based to APRA. 5. These documents must be provided to APRA before: (a) the relevant notice of intention to apply to the Court for confirmation of the scheme is published; and (b) the summary of the scheme (approved by APRA) has been given to each affected policyholder.' 13 As will appear later, the applicants failed to provide a copy of the actuarial reports on which the scheme was based before the times of the events referred to in subpars (a) and (b) of par 5. 14 Paragraphs 7, 8, 9 and 11 of Prudential Standard GPS 410 are as follows: '7. An application to the Court for confirmation of a scheme cannot be made unless, amongst other things, a notice of intention to make the application has been published by the insurer. 8. Before publishing a notice of intention an insurer must first secure APRA's approval of the summary of the scheme. 9. The insurer must publish the notice of intention in a form approved by APRA: (a) in the Government Gazette; and (b) in one or more newspapers, approved by APRA, circulating in each State and Territory in which an affected policyholder resides. 10. … 11. The notice must be published before the scheme is released for public inspection …' 15 Paragraph 14 of Prudential Standard GPS 410 states, relevantly: 'The format and content of the approved summary will depend on the circumstances of the transfer, however, the insurer should, at a minimum, advise affected policyholders: (a) that the insurer proposes to transfer the policyholder's policy or policies to another insurer, on or after a specified dated; …' The applicants' motion – 'affected policyholder' 16 The applicants wished to avoid the obligation imposed on them by s 17C(2)(c) of the Act to give an approved summary of the scheme to the approximately 72,500 holders of NSW CTP policies which were issued by SGIO between 1 March 1998 and 4 October 2000. Pursuant to an amended notice of motion filed on 19 December 2003, they moved, pursuant to s 17C(5) of the Act, for a dispensation with the need for compliance with s 17C(2)(c), provided an approved summary of the scheme was given to the holders of such policies under which claims had been made and were still outstanding (some 130 persons). They also moved for an order permitting hearsay evidence to be led on the final hearing in certain respects. 17 On the applicants' motion, I made the following orders on 23 December 2003: '1. That, pursuant to section 190 of the Evidence Act 1995, evidence as to compliance by the applicants with section 17C(2)(b) and (c) of the Insurance Act 1973 ("Act") and Prudential Standard GPS 410 may be given at the hearing of the application by one or more affidavits made upon information and belief. 2. That, pursuant to section 17C(5) of the Insurance Act 1973 ("Act"), the need for compliance by the Second Applicant with section 17C(2)(c) of the Act is dispensed with provided that the Second Applicant complies with Order 3 below. 3. That: (a) the Second Applicant cause a copy of the scheme summary to be sent to each person who, at the date the mailing procedure is to be commenced ("mail out date"), is the holder of a NSW Compulsory Third Party policy issued by the Second Applicant between 1 March 1998 and 4 October 2000 in respect of which there is a notified claim that is unsettled or otherwise outstanding; and (b) in the event that any copy of the scheme summary sent by the Second Applicant is returned to it within two weeks of the mail out date marked "Return to sender" (or words to that effect), to obtain from the electoral roll the current mailing address of the person to whom the scheme summary was sent and to send a copy of the scheme summary to that address.' 18 An initial question which arose on the hearing of the motion was whether the expression 'affected policyholder' in s 17C included: * those persons who would, after implementation of the scheme, continue to hold policies (not NSW CTP policies) issued by SGIO; and * those persons who held policies issued by IAL. Under the scheme, SGIO is to be relieved of its liability as insurer in respect of its NSW CTP policies, while IAL is to assume that liability, and certain funds of SGIO are to be transferred by SGIO to IAL to cover that liability. It can be said that the remaining holders of other classes of policies issued by SGIO and the existing holders of policies issued by IAL are 'affected' by the scheme because the capacity of their insurer to discharge its insurance obligations to them under those policies may be affected. 19 In my opinion, the definition in s 17C(1) of 'affected policyholder' as 'the holder of a policy affected by a scheme' signifies that the expression refers only to a holder of a policy being transferred under the scheme. It is true that the expression 'the holder of a policy affected by a scheme', taken in isolation, can be read as meaning either '[the holder of a policy] affected by a scheme' or 'the holder of [a policy affected by a scheme]'. In my view, however, the latter meaning is the one which was intended. If the legislature had intended the former meaning, it would have defined 'affected policyholder' to mean 'a policyholder affected by a scheme'. The legislature used the word 'policyholder' in several places in s 17C. The word 'policyholder' itself did not need to be defined and was not defined. Obviously, it means 'holder of a policy'. The only purpose of the definition of 'affected policyholder' was to indicate that it is a policy held which is to be affected by a scheme, not the holder of a policy. SGIO policies that are not to be transferred by SGIO to IAL under the scheme, and policies already issued by IAL, are not affected by the scheme. Policies that are to be transferred by SGIO to IAL under the scheme are affected by it because the identity of the insurer is to be changed. 20 Another consideration perhaps pointing in the same direction is that s 17C assumes that under any scheme with which the section is concerned, there will always be affected policyholders. That is to say, the expression 'affected policyholder' may be taken to refer to a phenomenon which characterises every scheme addressed by the section. But it cannot be assumed that any general insurer that is a party to a scheme will have issued other policies. It cannot be assumed that the 'transferor general insurer' will have any insurance policies on issue remaining after implementation of the scheme, and it cannot be assumed that the 'transferee general insurer' will have issued other insurance policies (as to the latter, s 17B(2) of the Act (set out at [10] above) expressly acknowledges that it may not have done so). 21 APRA, which is entitled to be heard on an application for confirmation (see s 17E(3) of the Act set out at [10] above), submitted that the expression 'affected policyholder' included a continuing holder of a policy issued by SGIO and an existing holder of a policy issued by IAL. APRA submitted that the expression 'affected policyholder' should be given a liberal construction and that it should be left to the Court's discretion under s 17C(5) whether to dispense with the giving of an approved summary of the scheme to those other policyholders. (APRA did not oppose the making of such an order on the facts of this case.) 22 In support of its submission, APRA refers to the 'main object of [the] Act' as stated in s 2A(1) as being: 'to protect the interests of policyholders and prospective policyholders under insurance policies (issued by general insurers and Lloyd's underwriters) in ways that are consistent with the continued development of a viable, competitive and innovative insurance industry.' APRA also refers to cases decided on applications for confirmation of schemes under Pt 9 of the Life Insurance Act 1995 (Cth), but s 191 of that Act defines the expression 'affected policy owner' to mean 'the owner of a policy that is referable to a statutory fund affected by a scheme'. (Subsection 35(1) of the Life Insurance Act 1995 requires that a life insurance policy specify the statutory fund to which it is referable.) That definition, unlike the definition of 'affected policyholder' in s 17C(1) of the Act, does not require that a policy be affected by a scheme. 23 I do not think the general terms in which the main object of the Act is expressed overcome the requirement present in s 17C(1)'s definition of 'affected policyholder' that a policy be affected by a scheme. I note, in passing, that APRA apparently considered that the expression 'affected policyholder' referred only to the holder of a policy to be transferred under a scheme, when it formulated subpar 14(a) of Prudential Standard GPS 410 (set out at [15] above). 24 In the result, it is 'only' the some 72,500 holders of NSW CTP policies issued by SGIO from 1 March 1998 to 4 October 2000 that are 'affected policyholders'. 25 My holding that the expression 'affected policyholder' has the limited meaning mentioned does not signify that the effect of a scheme on other policyholders is necessarily irrelevant to the exercise of the Court's discretion whether to confirm a scheme (see [70], [75] and [76] below). 26 I was satisfied, because of the nature of the scheme and the circumstances, that such an order should be made. The period of insurance which last expired, expired on 4 October 2001. In order for a NSW CTP policy to answer to a claim, the motor accident would have to have occurred by that date. While it is possible, it is unlikely that many claims will yet be made arising out of such motor accidents. It would be excessive to require the approved summary of the scheme to be given to some 72,500 policyholders in order to protect any beyond the approximately 130 referred to, against whose policies claims may yet be made. The MAA, which appeared with leave on the hearing, also did not object to the making of a dispensing order under s 17C(5). 27 For the above reasons I made orders 2 and 3 of 23 December 2003 (set out at [17] above). 28 I turn now to s 190(1) of the Evidence Act 1995 (Cth). That subsection provides that the Court may, if the parties consent, by order dispense with the application of the provisions referred to in that subsection in relation to particular evidence or generally. Subsection 190(1) refers, inter alia, to the provisions of Pt 3.2 of the Evidence Act 1995 dealing with 'hearsay'. Subsection 190(3) provides that in a civil proceeding, the Court may order that any one or more of the provisions mentioned in s 190(1) do not apply in relation to evidence, if the matter to which the evidence relates is not genuinely in dispute or the application of those provisions would cause or involve unnecessary expense or delay. 29 The applicants read in support of this aspect of their motion an affidavit of Karen Coleman sworn 18 December 2003, to which were annexed three draft affidavits of Karen Coleman herself, David Piper and Graeme Loaney. The applicants intended to have affidavits in the form of the drafts sworn and to read the affidavits on the final hearing. The draft affidavits included some evidence on information and belief. I do not think it necessary to identify the parts which did so. They went to formal matters. I thought it would involve unnecessary expense and delay to avoid the application of the hearsay rule. Moreover, the matters to which the hearsay evidence was related could not be genuinely in dispute. Although not parties, neither APRA nor MAA opposed the making of the order sought. I thought it appropriate to make an order under s 190(1) of the Evidence Act 1995 (Cth), and I made order 1 of 23 December 2003 (see [17] above) accordingly. Final hearing 'Made' 30 Subsection 17C(2) of the Act provides that an application for confirmation of a scheme may not be 'made' unless the conditions referred to in pars (a), (b) and (c) of that subsection are satisfied (s 17C was set out at [10] above). Subsection 17E(2) provides that an application for confirmation must be 'made' in accordance with the prudential standards. Does the word 'made' in these subsections refer to the filing of the form of application for confirmation in the Registry of the Court, or to the later hearing of the application? The difference could be important because the statutory conditions and the requirements of the prudential standards may not have been satisfied by the time of the commencement of the proceeding (4 December 2003, in the present case) but may have been satisfied by the time of the hearing (the hearing commenced and was concluded on 20 April 2004 in the present case). 31 In Re Armstrong Jones Life Assurance Ltd (1997) 74 FCR 160 ('Armstrong Jones'), Emmett J had to consider a similar question in relation to an application for confirmation of a scheme under which a life insurance business was to be transferred by one life insurance company to another. Provisions generally similar to those found in Div 3A of Pt III of the Act are found in Pt 9 of the Life Insurance Act 1995. A difference is that whereas Div 3A of Pt III of the Act refers in many places to 'the prudential standards', Pt 9 of the Life Insurance Act 1995 refers to 'the regulations'. Accordingly, whereas s 17E(2) of the Act provides that an application for confirmation must be made in accordance with the prudential standards, s 193(2) of the Life Insurance Act 1995 provides that an application for confirmation must be made in accordance with the regulations. In Armstrong Jones, reg 9.03(1) of the Life Insurance Regulations provided that, for the purposes of s 193(2), an application for confirmation was to be made no earlier than the expiry of a specified period. That period had not expired at the time when the form of application for confirmation was filed in the Registry of the Court, but it had expired by the time of the hearing. Emmett J held that, on the proper construction of reg 9.03, the application for confirmation of a scheme is 'made' at 'the time at which the Court is moved for an order of confirmation of the scheme and not … the time when the form of application prescribed by the [Federal Court] Rules is filed with the registry' (at 163). 32 In Re Royal & Sun Alliance Life Assurance Ltd (2000) 104 FCR 37 ('Royal & Sun Alliance'), Katz J followed Emmett J because he was 'by no means satisfied' that Emmett J's construction was 'plainly wrong' (at 39). 33 I am of the same mind as Katz J. 34 The meaning of 'make' and its derivatives in contexts having some affinity with that with which I am concerned, depends on the purpose of the provision. Ordinarily, a requirement that an application of a certain kind be made by a certain date or within a certain period, will be construed to refer to the time of lodgment with, or filing in, the relevant court or tribunal, because, ordinarily, that is the only act of a 'making' kind over which the applicant has control (in particular, the applicant does not fix the hearing date): cf Martin v Greig [1912] VLR 254; Ampol Ltd v Caltex Oil (Australia) Pty Ltd [1984] 2 NSWLR 678; Roberts v Repatriation Commission (1992) 39 FCR 420; Tallon (1993) 67 A CrimR 40. But where the provision was that an applicant for admission as a legal practitioner must give certain notices within certain specified times 'before the application [was] made', the application was held to be made when the motion was moved in court, not when the notice of the motion was filed: In re Reynolds [1967] Tas SR(NC) N4 (at 263). The Court was influenced by what it perceived to be the purpose of the provision, with which 'stale' notices would be inconsistent. 35 In the present case, ss 17C(2) and 17E(2) do not illuminate the meaning of 'made' as used in them. It is necessary to refer to the relevant prudential standards. The relevant provisions of Prudential Standard GPS 410 were set out at [12]–[15] above. They do not suggest a purpose which can be achieved only if the provisions are complied with by the time of the filing of the application for confirmation in this Court. 36 In my opinion, the word 'made' in ss 17C(2) and 17E(2) is used in a sense wide enough to embrace both the time of filing and the time of hearing, so that APRA is empowered to determine a prudential standard, otherwise valid, by reference to either of these dates. Further, in my opinion, the requirements of pars 4, 5, 7, 8, 9 and 11 of the Prudential Standard GPS 410 (set out at [12] and [14] above) are referable to the date of hearing. This does not mean, of course, that the Court might not, as an aspect of case management, require that certain steps be taken by a certain time prior to the hearing, or that it might, in the exercise of its discretion, decline to confirm a scheme where it considered that prudential standards were complied with too late (albeit prior to the hearing) to give affected policyholders a reasonable time in which to consider their position. 37 Finally, I note that APRA supported the applicants' submission that the word 'made' referred to the time when the Court is moved to make the order of confirmation, stating that the alternative construction would give rise to practical administrative difficulties. The scheme 38 A copy of the scheme was annexed to the originating application and a copy of it is annexed to these reasons. Its terms are reflected in a Portfolio Transfer Deed dated 14 April 2004 executed by SGIO, IAL and on behalf of the MAA. 39 The scheme is expressed to be subject to confirmation by the Court. The 'Transfer Date' referred to in the scheme is the date which is one business day after the date on which the scheme is confirmed by the Court. On the Transfer Date, SGIO is to transfer all CTP insurance policies under the New South Wales Acts of 1988 and 1989 referred to at [3] above, so that SGIO's rights and liabilities under them will be transferred to IAL, and either the 'Technical Reserves' of SGIO in respect of the policies will be paid to IAL, or SGIO will transfer to IAL 'Equivalent Assets', being readily realizable securities, or a combination of cash and such securities, agreed by IAL and SGIO, which have a market value on the Transfer Date equal to the amount of SGIO's Technical Reserves. There was expert evidence before me, referred to below, directed to establishing the appropriateness of the amount of the Technical Reserves to cover an insurer's potential liability under the policies to be transferred. On and from the Transfer Date, IAL is to indemnify and keep indemnified SGIO from and against all its obligations as insurer under the policies transferred, and SGIO is to be released and discharged from its obligations (actual or contingent) under those policies. IAL is to be substituted for SGIO as if IAL was, and at all times had been, a party to the policies. 40 All SGIO's reinsurance treaties and arrangements relating to the policies to be transferred are to be assigned to IAL as valid, effective and continuing agreements between IAL and the parties to those treaties and arrangements other than SGIO. 41 The Claims Management Contract between SGIO and IAL is to terminate with effect on and from the Transfer Date. As soon as practicable after the Transfer Date SGIO is to apply to the MAA for cancellation of its licence under the Motor Accidents Compensation Act 1999 (NSW). The evidence 42 The affidavit evidence establishes as follows. 43 Paragraph 3 of Prudential Standard GPS 410 provides, relevantly, that any transfer of insurance business is subject to the Insurance Acquisitions and Takeovers Act 1991 (Cth). It suffices to say that on 23 September 2003, APRA made an 'unconditional go ahead decision' under that Act. 44 On 20 January 2004 the applicants' solicitors, Mallesons Stephen Jaques ('Mallesons'), sent to APRA a summary of the scheme, a proposed form of notice of the intention to apply for Court confirmation, and a draft report by Anthony Coleman, Actuary, dated 9 December 2003. On 29 January 2004 APRA approved the summary and notice of intention. On 4 February 2004, Mallesons sent to APRA a final copy of the scheme and a slightly amended final version of the scheme summary. 45 On 5 February 2004, copies of the scheme summary were sent to the affected policyholders (in view of orders 2 and 3 made on 23 December 2003, I will refer henceforth to the approximately 130 policyholders referred to at [9] above as 'the affected policyholders'). 46 The notice of intention, in the form approved by APRA, was published in eleven newspapers, in all cases but one on 25 February 2004, and in the other case on 26 February 2004, and in the Commonwealth of Australia Government Gazette on 25 February 2004. 47 The notice of intention informed policyholders that they could obtain further details by contacting a telephone number specified in the notice. No policyholder telephoned that number. 48 On 26 February 2004, Mallesons purported to send to APRA an email attaching further documents. Those further documents were a slightly amended final version of Mr Coleman's report dated 25 February 2004, a further report by Mr Coleman dated 25 February 2004, a report by Conor O'Dowd of PricewaterhouseCoopers dated 5 May 2003, a further report by Mr O'Dowd dated 19 January 2004, and a letter from Mr O'Dowd to Nathan Rivett, an actuary who is supervised by Mr Coleman, dated 19 February 2004. Unbeknown to Mallesons, the email and documents were not transmitted to APRA because the email was wrongly addressed. The software the solicitors were using did not notify them that the email and accompanying documents had not reached the intended recipient. This mishap was not discovered until 25 March 2004. On the following day, 26 March 2004, Mallesons sent to APRA an email attaching the documents mentioned. 49 From 9.00 am to 5.00 pm every day (except weekends and Public Holidays) between 2 March and 26 March 2004 inclusive in New South Wales and Queensland, and between 3 March and 26 March 2004 inclusive in every other Australian State and Territory, copies of the scheme, the notice of intention to apply, the summary of the scheme, the Portfolio Transfer Deed, the report and the supplementary report of Mr Coleman, both dated 25 February 2004, the 5 May 2003 and 19 January 2004 reports and the letter dated 19 February 2004 of Mr O'Dowd, were available for public inspection in every State and Territory at the locations which were advertised in the notice of intention. No one attended to inspect any of the documents, except for one person who attended the Queensland address. 50 There are in evidence audited statements of the financial positions of IAL and SGIO as at 30 June 2003. IAL had net assets as at that date of $3,413,400,000, and IAL Group had assets of $4,069,600,000. As at the same date, SGIO had net assets of $158,547,000 and SGIO Insurance Group had assets of $167,244,000. A Standard & Poor's rating of IAL as at 25 July 2003 was recorded as 'AA/Stable'. 51 A standard form of letter addressed to each policyholder and a leaflet containing a summary of the scheme, for the benefit of policyholders, was posted to the registered owners (at the time of claim) of the vehicles involved in claims notified in respect of SGIO NSW CTP policies issued between 1 March 1998 and 4 October 2000, that had not been resolved (by payment by SGIO, by court order or in any other manner). None of these 'policyholder mail packs' was returned marked 'Return to Sender' or words to that effect. There was a similar mail out of a pro forma letter and summary of the scheme to claimants. Two of the claimant mail packs were returned marked 'Return to Sender' or words to that effect. Another address was found for one of these, and on 9 March 2004 a claimant mail pack was then sent to that address. In respect of the other returned claimant mail pack, an up to date address could not be found until 15 April 2004, when a Canadian address was found for the claimant. On that date a claimant mail pack was sent to that address. 52 I will summarise the evidence of Mr O'Dowd and Mr Coleman under 'Discretion' at [66] to [76] below. Procedural requirements 53 In relation to s 17C(2)(c), as noted above a scheme summary was sent to APRA for approval on 20 January 2004 and was approved by it on 29 January 2004. The form of the scheme summary which was dispatched on 5 February 2004 differed only to the extent that it added ABN numbers for SGIO and IAL. In fact, on 4 February 2004 Mallesons emailed APRA advising that the ABN numbers had been inserted and that the mail out would commence shortly. I regard order 3 made on 23 December 2003 as having been complied with. 54 I turn next to par 17C(2)(a) which requires that a copy of the scheme and of any actuarial report on which it is based have been given to APRA 'in accordance with prudential standards'. Paragraphs 4 and 5 of Prudential Standard GPS 410 were set out at [12] above. Paragraph 5 has given rise to a difficulty. Whereas par 4, in substance repeats the requirement of s 17C(2)(a), par 5 goes further. It requires that a copy of the scheme and any actuarial reports on which the scheme is based be provided to APRA before: '(a) the relevant notice of intention to apply to the Court for confirmation of the scheme is published; and (b) the summary of the scheme (approved by APRA) has been given to each affected policyholder.' 55 The scheme summary approved by APRA was sent to affected policyholders as early as 5 February 2004. A draft of Mr Coleman's main actuarial report was provided to APRA on 20 January 2004. That date preceded both the giving of the approved summary to affected policyholders on 5 February 2004 and the publication on 25 and 26 February 2004 of the notice of intention to apply. 56 Mr O'Dowd wrote to Mr Rivett, who is supervised by Mr Coleman, on 19 February 2004. On 26 February 2004 Mallesons attempted to email to APRA the final version of Mr Coleman's main report, Mr Coleman's supplementary report, the two reports by Mr O'Dowd and the letter from Mr O'Dowd to Mr Rivett dated 19 February 2004. Subparagraph 5(b) of Prudential Standard GPS 410 had the effect, however, that Mr Coleman's main and supplementary reports were required to be provided to APRA before 5 February 2004, the date when the approved summary of the scheme was given to each affected policyholder. As noted earlier, due to an email addressing error, the documents were not received by APRA until 26 March 2004. 57 The applicants point out that: * the draft dated 9 December 2003 of Mr Coleman's main report sent to APRA on 20 January 2004 was not materially different from the final version of that report dated 25 February 2004 provided to APRA on 26 March 2004 (see [68] below); * the non-provision of Mr Coleman's two reports to APRA by email on 26 February 2004 was inadvertent, not deliberate; * it is not suggested that either the scheme summary or the notice of intention approved by APRA on 29 January 2004 was rendered inappropriate by the documents which were finally provided to APRA on 26 March 2004 (see [59] – [60] below). 58 Even if, however, the email of 26 February 2004 and its attachments had been transmitted to the correct email address on that date, par 5 of Prudential Standard GPS 410 would not have been complied with. Most of the publishing of the notice of intention had occurred on 25 February 2004, but, more importantly, the summary of the scheme had been given to the affected policyholders on 5 February 2004. Both dates precede 26 February 2004. Nonetheless, I am satisfied that the non-compliance was due to oversight. 59 Importantly, the copy of the scheme had been provided to APRA on 4 February 2004, and a draft of Mr Coleman's main actuarial report had been provided to APRA on 20 January 2004, from which the final version and the supplementary report did not substantially differ (see [71] and [74] below). 60 Further, importantly, APRA submits that the non-compliance did not cause affected policyholders any prejudice, and did not prevent APRA from properly considering the effect of the scheme on policyholders' interests. APRA considered the final version of Mr Coleman's main report and his supplementary report, both of which it received on 26 March 2004, and was satisfied that they had no effect on its approval of the scheme summary or of the notice of intention. Moreover, they did not cause APRA to raise any objection to the Court's confirming the scheme. 61 Does the Court have power, in the circumstances outlined above, to confirm the scheme? 62 Section 17C(2)(a) was not complied with because a copy of any actuarial reports on which the scheme is based (namely, Mr Coleman's final main report and his supplementary report) were not given to APRA in accordance with the prudential standards. In Armstrong Jones, Emmett J considered that analogous provisions in the Life Insurance Act 1995 were not conditions precedent to the existence of jurisdiction in the Court to confirm a scheme. His Honour said: 'Section 191(2)(b) [the equivalent to s 17C(2)(b) of the Act] provides that an application for confirmation may not be made unless notice of intention has been published in accordance with the regulations and s 193(2) [the equivalent to s 17E(2) of the Act] provides that an application for confirmation must be made in accordance with the regulations. Nevertheless, I do not regard those provisions as being conditions precedent to the existence of jurisdiction for the court to confirm a scheme. Of course, failure to comply with the regulations may well be a very significant matter for the court in deciding whether or not to confirm a scheme in the exercise of any discretion which may arise under s 194 [the equivalent of s 17F(1) of the Act], but it would not be fatal.' (my emphasis) 63 In Royal & Sun Alliance, Katz J adopted the same approach (at [16] – [18]). I am not satisfied that that approach was plainly wrong and therefore, although with some doubt, I will adopt it. 64 I turn next to s 17C(2)(b), to which pars 7 to 11 of Prudential Standard GPS 410 relate. These paragraphs were complied with. The applicants secured APRA's approval of both the summary of the scheme and the form of the notice of intention on 29 January 2004. Publication of the notice of intention occurred on 25 and 26 February 2004. That was before the scheme was released for public inspection on 2 March 2004. 65 Senior counsel for the applicants took me to other paragraphs of Prudential Standard GPS 410 which I have not set out earlier. I am satisfied that they were also complied with. Discretion 66 Conor O'Dowd is a partner of PricewaterhouseCoopers and a fellow of the Institute of Actuaries of Australia and the Institute of Actuaries. Mr O'Dowd is retained by the applicants to provide quarterly reports in which he estimates the liability for outstanding CTP motor accident claims against each of the applicants. 67 In his report dated 5 May 2003, Mr O'Dowd gave a 'net central estimate of outstanding claims' under SGIO's NSW CTP policies as at 31 March 2003 of $21,657,000. This included an allowance for claims incurred but not reported ('IBNR' claims). Mr O'Dowd extrapolated from the previous history of reporting of claims, or, more precisely, of conversion from 'Accident Notification Form only claims' to 'reported claims', in order to make his estimate of IBNR claims. Mr O'Dowd explained in his report that a 'central estimate' of outstanding claims is an estimate which does not incorporate any element of overstatement or understatement to allow for uncertainty. A net central estimate does not include a prudential margin. 68 In his updated report dated 19 January 2004, Mr O'Dowd took into account developments between 31 March 2003 and 31 December 2003. His updated net central estimate of outstanding claims as at 31 December 2003 is $22,547,000. The difference between the net central estimate as at the two dates is $890,000. This was to some extent attributable to an adjustment for actual December 2003 discount rates. Without that adjustment, the figure as at 31 December 2003 would have been $22,368,000, an increase of $711,000 above the 31 March 2003 figure. Mr O'Dowd's report explains how the figure of $22,368,000 was arrived at. 69 By his letter dated 19 February 2004 to Mr Rivett, Mr O'Dowd advised that in both of his reports, he had underestimated the 'excess' payable by SGIO on its reinsurance in respect of large claims, or, to express the matter differently, had overstated the reinsurance recovery. The reason was that the amount of the excess in respect of large claims was to be adjusted for Average Weekly Earnings ('AWE') inflation since the date of the accident. In his first report (as at 31 March 2003) the overstatement of reinsurance recovery was $0.38 million, and in his updated report (as at 31 December 2003) the overstatement of reinsurance recovery was $0.75 million. 70 Anthony Maxwell Coleman was appointed the Approved Actuary for IAL and SGIO pursuant to s 39 of the Act in 2001. He provided an actuarial report on the effect of the scheme on the holders of policies affected by it, as well as the policyholders who would continue to hold policies issued by SGIO and the existing policyholders of IAL. Mr Coleman's main report dated 25 February 2004 stated the position as at 31 March 2003. In preparing his main report, Mr Coleman relied on financial information as at 31 March 2003 and considered the financial performance of SGIO and IAL for the six months ended 30 September 2003. Mr Coleman considered the scheme separately from the perspectives of the policyholders and claimants in respect of SGIO's NSW CTP portfolio, the remaining SGIO policyholders and claimants, and IAL policyholders and claimants. He concluded that the scheme had no material effect on the security of any of those parties. Mr Coleman stated (par 4.10): '… the Scheme has an immaterial effect on the security of policyholders of either SGIO or IAL. It is clear that the total assets available in each entity to support claims reduce the likelihood of either entity being unable to pay claims to a negligible level, and this is unaffected by the transfer.' Mr Coleman also said that the assets of both IAL and SGIO are expected to be sufficient to meet all claims with a very high probability of sufficiency, both before and after the proposed scheme. Paragraph 5.1 of Mr Coleman's main report was as follows: 'For the reasons set out in this report I am satisfied that no policyholder or claimant of either SGIO or IAL will be materially affected by the proposed transfer of the CTP portfolio from SGIO to IAL under the terms of the proposed Scheme. Claims paid will be unaffected by the transfer as there are no changes to contractual conditions and the claims management process has, since 1999, been the same as that of IAL. The level of security represented by the well capitalized position of each of SGIO and IAL is not materially altered by the transfer.' In his main report Mr Coleman noted that he intended to make a supplementary report based on updated financial information as at 31 December 2003. 71 As noted earlier, what had been provided to APRA on 20 January 2004 was a draft, dated 9 December 2003, of Mr Coleman's main report. Mr Coleman noted in his affidavit the differences between that draft and the final version of his main report. He says that the differences are immaterial and do not alter the opinions that he expressed or the conclusions that he drew in the draft. 72 Mr Coleman arrived at an amount of $28,210,000 for 'Technical Provisions' as at 31 March 2003, using as his starting point Mr O'Dowd's central estimate of outstanding liability as at that date of $21,657,000. He added to that figure $382,000 representing the effect of applying AWE indexation, reinsurance retention and $6,171,000 representing a 'risk margin at 28%' to arrive at the total Technical Provisions figure of $28,210,000. He summarised his reason for using a risk margin of 28 percent as follows: 'I expect an amount of 128% of the central estimate to be sufficient to meet claim payments as they fall due in 90% of probabilistic outcomes for those claim payments (90% probability of sufficiency). Investment returns at a risk-free rate are taken into account in making this assessment.' 73 Mr Coleman observed that management of SGIO claims will be unaffected by the scheme because claims management processes of the SGIO and IAL NSW portfolios were integrated in 1999 and are identical. As well, he observed that there will be no change to the contractual terms of the affected policyholders or to the positions of claimants. 74 Mr Coleman made his supplementary report, also dated 25 February 2004, having considered SGIO's and IAL's financial records up to 31 December 2003. He calculated an amount of 'Technical Reserves' as at 31 December 2003 of $25,625,000, based on the Technical Provisions as at 31 March 2003 with relevant adjustments, and a corresponding figure at 31 December 2003, relying on financial information as at 31 December 2003, of $29,819,000, $4,194,000 greater. The difference was due to the fact that claim payments in the last nine months of 2003 were higher than had been projected as at 31 March 2003. Mr Coleman stated that this was 'a normal occurrence for an insurance portfolio of this type'. 75 Notwithstanding the difference of $4,194,000, Mr Coleman states that the conclusions which he reached in his main report remain valid. He confirms that no policyholder of any class of, or any claimant against, either SGIO or IAL, will be materially affected by the proposed transfer of SGIO's NSW CTP portfolio to IAL, and that the level of security represented by the well-capitalised position of each of SGIO and IAL will not be materially altered by the transfer. 76 I am satisfied, on the basis of the expert testimony of Messrs O'Dowd and Coleman, that affected policyholders, remaining policyholders in SGIO and existing policyholders in IAL, will not be detrimentally affected by implementation of the scheme. Reinsurance 77 I raised with senior counsel for the applicants a question in relation to the giving of notice of the application to SGIO's reinsurers. The Act does not require that they be notified. This does not mean, of course, that the matter of notification to them and their response, if any, may not be relevant to discretion. 78 Affidavit evidence in this respect has now been filed and read. 79 There are nine reinsurers in respect of NSW CTP policies issued by SGIO. Four of these are the principal reinsurers, the exposure of the other five subsidiary reinsurers being quite minor. The four principal reinsurers bear 90 percent or more of the reinsurance exposure and were notified of the scheme on 13 April 2004. None expressed any objection or concern by the date of the hearing, 20 April 2004. As well, the placing broker was notified by telephone of the scheme on 13 April 2004 and was requested to inform the subsidiary reinsurers of the substance of the scheme. The placing broker was given a copy of a 'briefing pack' for the purpose. There is no suggestion that any of the subsidiary reinsurers have raised any objection or concern. 80 Subsection 17F(2) of the Act provides that the Court may make such orders as it thinks fit in relation to reinsurance. The scheme itself provides that IAL, in place of SGIO, will become the reinsured under existing reinsurance treaties and arrangements. Section 17G of the Act provides that when a scheme is confirmed it becomes binding 'on all persons'. Against the possibility, however, that this provision may not be effective to bind the reinsurers, the applicants seek a special order under s 17F(2) relating to reinsurance. In the circumstances I think it appropriate both to confirm the scheme generally and to make that order under s 17F(2). CONCLUSION 81 It is appropriate to confirm the scheme and to make an order under s 17F(2). I certify that the preceding eighty-one (81) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 7 May 2004 Counsel for the Applicants: Mr A J Meagher SC Solicitors for the Applicants: Mallesons Stephen Jaques Solicitor for Australian Prudential Regulation Mr M Murray, Australian Government Solicitor Authority: Solicitor for Motor Accidents Authority of New South Wales (appearing by leave): Mr R Dawson, Motor Accidents Authority of New South Wales Date of Hearing: 20 April 2004 Date of Orders: 20 April 2004 Date of publication of reasons: 7 May 2004