MDU Australian Insurance Company Pty Limited, in the matter of MDU Australian Insurance Company Pty Limited [2008] FCA 490

FEDERAL COURT OF AUSTRALIA

MDU Australian Insurance Company Pty Limited, in the matter of MDU Australian Insurance Company Pty Limited [2008] FCA 490

IN THE MATTER OF MDU AUSTRALIA INSURANCE COMPANY PTY LIMITED, MDU AUSTRALIA INSURANCE COMPANY PTY LIMITED

NSD152 of 2008

EMMETT J

3 APRIL 2008

SYDNEY IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD152 of 2008

IN THE MATTER OF MDU AUSTRALIA INSURANCE COMPANY PTY LIMITED MDU AUSTRALIA INSURANCE COMPANY PTY LIMITED

First Applicant

AVANT INSURANCE LIMITED

Second Applicant

JUDGE: EMMETT J DATE OF ORDER: 3 APRIL 2008

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. Pursuant to s 17F(1) of the Insurance Act 1973 (Cth) the scheme (a copy of which is annexed and marked 'A') ('Scheme') in relation to the proposed transfer of the insurance business of the First Applicant to the Second Applicant, be confirmed. 2. Pursuant to s 17F(1) of the Insurance Act 1973 (Cth) all insurance contracts entered into by the First Applicant as insurer are assigned to the Second Applicant in place of the First Applicant and the insured parties. 3. Pursuant to s 17F(1) of the Insurance Act 1973 (Cth) the Second Applicant: (a) be bound by; (b) perform the obligations under;

(c) be entitled to the benefits of and to take action under; and

(d) assume all the obligations and liabilities in respect of and relating to any matters arising out of, the insurance contracts referred to in Order 2 as if it were a party and at all times had been a party, to such insurance contracts in the place of the First Applicant. 4. Pursuant to s 17F(1) of the Insurance Act 1973 (Cth) the First Applicant will be released from all obligations and liabilities under the insurance contracts referred to in Order 2 above. 5. Pursuant to s 17F(2) of the Insurance Act 1973 (Cth), all reinsurance treaties and agreements entered into by the First Applicant as reinsured, are assigned to the Second Applicant in place of the First Applicant and the parties (other than the First Applicant) to the reinsurance treaties and agreements. 6. Pursuant to s 17F(2) of the Insurance Act 1973 (Cth) the Second Applicant: (a) be bound by; (b) perform the obligations under; (c) be entitled to the benefits of and to take action under; and (d) assume all the obligations and liabilities in respect of and relating to any matters arising out of, the reinsurance treaties and agreements referred to in Order 5 as if it were a party and at all times had been a party, to such reinsurance treaties and agreements in the place of the First Applicant. 7. Pursuant to s 17F(2) of the Insurance Act 1973 (Cth) the First Applicant is released from all obligations and liabilities under the reinsurance treaties and agreements referred to in Order 5 above. 8. Pursuant to s 17F(1) of the Insurance Act 1973 (Cth) any proceedings pending or brought on or after 3 April 2008 in any court or tribunal in respect of an insurance contract between the First Applicant and its policyholders be continued by or against the Second Applicant and any judgment or determination for or against the First Applicant in any such proceedings have effect as if such judgment or determination had been made for or against the Second Applicant. 9. Access to the evidence contained in Exhibits 'DRH1' and 'DRH2' to the Affidavit of Derek Raymond Hilliard sworn 31 March 2008 be restricted to the Applicants and their legal advisors and the Australian Prudential Regulation Authority and its legal advisors. 10. Documents containing the evidence identified in Order 9 be placed in an envelope and marked 'Confidential: not to be opened without the order of a Judge of this Court'. 11. Liberty be reserved to the Applicants and each of them to apply for any consequential orders as may be considered necessary or desirable under Part III, Division 3A of the Insurance Act 1973 (Cth). 12. Grant leave to the Applicants to enter these orders forthwith. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. 'A' SCHEME INSURANCE ACT 1973 (PART III DIVISION 3A) SCHEME FOR THE TRANSFER OF THE AUSTRALIAN INSURANCE BUSINESS OF MDU AUSTRALIA INSURANCE COMPANY LIMITED TO avant INSURANCE LIMITED Background A. MDU Australia Insurance Company Limited (ABN 46 070 399 950) ('MDUAIL'), a company incorporated in New South Wales and Avant Insurance Limited (ABN 82 003 707 471) ('Avant Insurance'), a company registered in New South Wales, are each authorised to carry on Insurance Business in Australia under the Insurance Act. B. This Scheme has been prepared under Part III Division 3A of the Insurance Act to give effect to the terms of an agreement by which MDUAIL and Avant Insurance have agreed that MDUAIL's Insurance Business and Insurance Contracts be transferred to Avant Insurance, subject to confirmation by the Federal Court. C. This Scheme is based upon the Actuarial Report. 1. DEFINITIONS AND INTERPRETATION 1.1 Definitions In this Scheme, unless the context requires otherwise: 'Actuarial Report' means the report dated 13 February 2008 of Adrian Gould, upon which the Scheme is based; 'Approved Actuary' means Adrian Gould of Taylor Fry Consulting Actuaries, or such other actuary appointed by MDUAIL to supervise the Insurance Business whose appointment has been approved by APRA in accordance with section 40 of the Insurance Act; 'APRA' means the Australian Prudential Regulation Authority; 'Assumed Liabilities' means all liabilities of MDUAIL including but not limited to: (a) all Claims reported and outstanding; (b) all obligations and liabilities arising under the Insurance Contracts; (c) incurred but not reported Claims (IBNR); (d) premium liabilities; (e) claims handling expenses in relation to the above liabilities as relevant; (i) all liabilities in relation to eligible run off claims arising under the Medical Indemnity Act 2002 (Cth) in respect of the Run Off Cover Scheme, if any; and (f) all other liabilities and obligations of MDUAIL. 'Business Day' means a day that is not a Saturday, Sunday, public holiday or bank holiday in New South Wales; 'Claims' means any claim, whether actual or contingent, made by a Policyholder under an Insurance Contract which was issued by MDUAIL prior to the Effective Date and includes any existing or pending legal proceedings in relation thereto. 'Completion' means completion of the transactions provided for in this Scheme, which are to take place on, or as soon as reasonably practicable after, the Effective Date; 'Effective Date' means 3 April 2008 or such other day as is ordered by the Federal Court; 'Federal Court' means the Federal Court of Australia; 'Insurance Act' means the Insurance Act 1973 (Cth); 'Insurance Business' has the meaning given to that expression in the Insurance Act; 'Insurance Contracts' means all contracts for general insurance risks in Australia issued by MDUAIL; 'Owner', in relation to a Insurance Contract, means a person who for the time being is insured under an Insurance Contract; 'Policyholder' means the person identified as the insured under an Insurance Contract; 'Portfolio Assets' means: (a) cash and investments; (b) the benefits arising from the Reinsurance Contracts; (c) entitlements to any Commonwealth payments due under the Medical Indemnity Act 2002 (Cth) by way of indemnity or otherwise in respect of the High Cost Claim Scheme, Exceptional Claim Scheme and Run Off Cover Scheme, if any; (d) trade debtors; and (e) all other assets of MDUAIL; 'Portfolio Transfer Deed' means the Portfolio Transfer Deed dated 15 February 2008 between MDUAIL and Avant Insurance for the transfer of MDUAIL's Insurance Contracts to Avant Insurance. 'Reinsurance Contracts' means contracts in place between MDUAIL and reinsurers of MDUAIL's risks in Australia as at the Effective Date; 'Reinsurance Recoveries' means the moneys to be paid to MDUAIL pursuant to the Reinsurance Contracts; 'Scheme' means the scheme contemplated by this document; 1.2. Interpretation In this Scheme, except where the context otherwise requires: (a) the singular includes the plural and vice versa, and a gender includes other genders; (b) a reference to a clause, paragraph, schedule or annexure is to a clause or paragraph of, or schedule or annexure to, this Scheme, and a reference to this Scheme includes any schedule or annexure; (c) a reference to A$, $A, dollar or $ is to Australian currency; (d) a reference to a person includes a natural person, partnership, body corporate, association, governmental or local authority or agency or other entity; (e) a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re‑enactments or replacements of any of them; (f) a word or expression used in this Scheme which is defined in the Act has the meaning given to it in the Act; and (g) if a day on or by which an obligation must be performed or an event must occur is not a Business Day, the obligation must be performed or the event must occur on or by the next Business Day. 1.3. Headings Headings are for ease of reference only and do not affect interpretation. 2. THE SCHEME 2.1. Upon confirmation of this Scheme, on and with effect from and including the Effective Date: (a) MDUAIL transfers and assigns by statutory vesting the Portfolio Assets to Avant Insurance and Avant Insurance will accept such transfer and assignment by statutory vesting; (b) Avant Insurance assumes by statutory vesting the Assumed Liabilities and, by virtue of the order of the Court and without any further act or instrument, the Assumed Liabilities will become liabilities and obligations of Avant Insurance; (c) Avant Insurance indemnifies and will keep indemnified MDUAIL from and against all Assumed Liabilities and all actions, proceedings, claims, costs and demands in respect of Assumed Liabilities; and (d) Avant Insurance is substituted for MDUAIL under all Insurance Contracts by way of novation and MDUAIL is released and discharged from all Assumed Liabilities. 3. INSURANCE CONTRACTS 3.1. Despite anything to the contrary in the Insurance Contracts, on and from the Effective Date, all Insurance Contracts are assigned to Avant Insurance. 3.2. On and from the Effective Date, Avant Insurance: (a) is bound by; (b) must perform the obligations under (which prior to that date were obligations of MDUAIL); (c) is entitled to the benefits of and to take action under; and (d) assume any obligations and liabilities in respect of and relating to any matter arising out of, the Insurance Contracts as if it were a party, and at all times had been a party, in place of MDUAIL. 3.3. On and from the Effective Date, MDUAIL is released from all obligations and liabilities under the Insurance Contracts. 4. REINSURANCE CONTRACTS 4.1 On and from the Effective Date, all Reinsurance Contracts to which MDUAIL is or has been a party (as reinsured) relating to the Insurance Contracts are assigned to Avant Insurance. 4.2 On and from the Effective Date, Avant Insurance: (a) is bound by; (b) must perform the obligations under (which prior to that date were obligations of MDUAIL); (c) is entitled to the benefits of and to take action under; and (d) assume any obligations and liabilities in respect of and relating to any matter arising out of, the Reinsurance Contracts as if it were a party, and at all times had been a party, in place of MDUAIL. 5. PROCEEDINGS If any proceedings are pending or any proceedings are brought on or after the Effective Date by or against MDUAIL in any court or tribunal in respect of an Insurance Contract, such proceedings will be continued by or against Avant Insurance and any judgment or determination for or against MDUAIL in any such proceedings will have effect as if such judgment or determination had been made for or against Avant Insurance and Avant Insurance will indemnify and keep indemnified MDUAIL accordingly.