Federal Court of Australia Gordian RunOff Limited, in the Matter of Gordian RunOff Limited [2021] FCA 1386 File number(s): NSD 1051 of 2021 Judgment of: ALLSOP CJ Date of judgment: 8 November 2021 Catchwords: INSURANCE – application for transfer of insurance business – application for dispensation pursuant to s 17C(5) of the Insurance Act 1973 (Cth) with the requirement for distribution of approved summary of scheme pursuant to s 17C(2)(c) of the Act – dispensation orders made Legislation: Insurance Act 1973 (Cth) s 17C Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance – Insurance List Number of paragraphs: 12 Date of hearing: 8 November 2021 Counsel for the Applicant Mr M Izzo SC with Ms S Tame Solicitor for the Applicant Norton Rose Fulbright Australia Counsel for North Insurances Pty Ltd: Mr M Newton Solicitor for North Insurances Pty Ltd: Corrs Chambers Westgarth Counsel for the Australian Prudential Regulation Authority Ms N Laing ORDERS NSD 1051 of 2021 IN THE MATTER OF GORDIAN RUNOFF LIMITED BETWEEN: GORDIAN RUNOFF LIMITED Applicant AND: NORTH INSURANCES PTY LTD Interested Person order made by: ALLSOP CJ DATE OF ORDER: 8 NOVEMBER 2021 THE COURT ORDERS THAT: Dispensation Orders 1. The need for the applicant to comply with section 17C(2)(c) of the Insurance Act 1973 (Cth) (Insurance Act) is dispensed with provided that the applicant complies with Orders 2 through 5 below. 2. The applicant is to cause a copy of the summary of the Scheme approved by the Australian Prudential Regulation Authority (APRA) (Approved Summary), a copy of which is at Annexure SO-10 to the affidavit of Sandra O'Sullivan sworn 5 November 2021, to be sent by pre-paid post or email to each of the following prior to the date the Scheme is released for public inspection under Order 4: (a) North Limited (ACN 005 233 689); (b) each of the Australian registered entities identified in Annexure A to these orders, being the entities referred to at paragraph 63(b) and (d)-(f) of the affidavit of Michele John Martino filed in the proceedings on 4 November 2021 (Martino Affidavit); (c) the 7 overseas companies listed in Annexure A to these orders, being the entities referred to in the Subsidiary List at Annexure MM-8 of the Martino Affidavit which are presently companies within the Rio Tinto Group; (d) the Australian Securities and Investments Commission, in respect of the 57 former or deregistered Australian companies listed in Annexure B to these orders, being the entities referred to at paragraph 63(g) of the Martino affidavit; (e) WHS/Workers Compensation, Unions NSW (email address – nflores@unionsnsw.org.au); and (f) WHS/Workers Compensation Officer, Australian Manufacturing Workers Union (AMWU) (email address – David.Henry@amwu.org.au). 3. The applicant is to cause a copy of 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 (in the form approved by APRA) (Notice of Intention), as described in the affidavit of Sandra O'Sullivan sworn 5 November 2021, to be published in the following publications prior to the date the Scheme is released for public inspection under Order 4: (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; and (v) The West Australian. 4. The applicant is to cause copies of the following documents to be made available for inspection at www.northinsurances.com from 15 November 2021 until a decision on the application is made by the Court: (a) the Scheme, as described in the affidavit of Sandra O'Sullivan filed in these proceedings on 3 November 2021; (b) the Approved Summary; (c) the Notice of Intention; (d) the Actuarial Report dated 12 October 2021, a copy of which is annexure "WEG-1" to the affidavit of Warrick Evan Gard sworn 3 November 2021; and (e) a list of the 58 overseas companies listed in Annexure C to these orders, being the entities referred to in the Subsidiary List at Annexure MM-8 of the Martino Affidavit which are international companies that are not within the Rio Tinto Group, with a note that these companies were insured under policies of insurance issued by North Insurances. 5. The applicant is to cause the establishment of a dedicated phone line (+61 7 3625 4352) to be monitored from 9:00am to 7:00pm AEST Monday to Friday during the period from 15 November 2021 to 10 December 2021, along with a monitored message bank for this phone line, for the purpose of allowing policyholders to request copies of the documents itemised at Order 4 above. 6. The applicant pay the cost of the proceedings of APRA to date, as agreed or assessed. Case Management Orders 7. Confidential Annexure MM-1 to the affidavit of Michele John Martino, affirmed 4 November 2021, not be produced to anyone not party to the proceedings without leave of a judge of the Court, it not having been placed into evidence nor relied on. 8. On or before 10 December 2021, the applicant file and serve any evidence in support of the application for confirmation of the Scheme. 9. On or before 10 December 2021, the applicant file and serve written submissions in support of the application for confirmation of the Scheme. 10. The matter be listed for confirmation hearing on 15 December 2021 at 10.15am AEDT. 11. Liberty to restore on two days' notice. 12. These orders be entered forthwith. Annexure A – additional entities to be notified Australian entities that are not part of the Rio Tinto Group Entity Name ACN 1 Associated Forest Holdings Proprietary Limited 004 352 078 2 BHP Yakabindie Nickel Pty Ltd (formerly Yakabindie Nickel Limited) 002 940 589 3 Gunns Forest Products Pty Limited (formerly North Forest Products Limited, North Broken Hill Limited) 004 208 904 4 Sorisdale Pty Ltd 054 548 971 5 Tasmanian Pulp & Forest Holdings Limited 009 488 733 6 TBVIC Pty Ltd 004 161 782 7 Warman Pumps Ltd (formerly Warman Equipment (International) Limited) 008 676 622 8 Weir Minerals Australia Ltd (formerly Warman International Ltd) 009 701 802 9 Wesley Vale Engineering Pty Ltd 006 955 568 Australian registered entities that are part of the Rio Tinto Group Entity Name ACN 10 Energy Resources of Australia Ltd 008 550 865 11 NBH Pty Ltd (formerly NBH Ltd) 004 066 522 12 Norgold Pty Limited (formerly Norgold Limited) 004 306 245 13 North Gold (WA) Pty Ltd (formerly North Gold (WA) Ltd, Peko Gold Ltd) 004 258 879 14 North IOC Holdings Pty Ltd 077 554 986 15 North Mining Limited (formerly Peko-Wallsend Operations Ltd, Peko Mines Ltd) 000 081 434 16 Peko Exploration Pty Ltd (formerly Peko Exploration Ltd) 000 362 550 17 Peko-Wallsend Pty Ltd (formerly Peko-Wallsend Ltd) 000 245 054 18 PSZ Pty Limited (formerly PSZ Limited) 000 057 616 19 Rio Tinto Advisory Services Pty Limited (formerly North Share Plans Pty Ltd) 088 595 304 20 Robe River Limited 008 478 493 21 Robe River Mining Co Pty Ltd 008 694 246 22 Robe River Ore Sales Pty Ltd 053 296 254 23 Yalleen Pastoral Co Pty Ltd 050 493 948 Entities listed at 63(d)-(f) of Martino affidavit Entity Name ACN 1 Mitsui Iron Ore Development Pty Ltd 008 734 361 2 Nippon Steel Australia Pty Limited 001 445 049 3 Nippon Steel Raw Materials Australia Pty Limited 001 444 604 International entities that are part of the Rio Tinto Group Entity Name Country 1 Carol Lake Company Ltd. Canada 2 Gulf Power Company / La Compagnie Gulf Power Canada 3 Iron Ore Company of Canada United States of America 4 North IOC (Bermuda) Holdings Limited Bermuda 5 North IOC (Bermuda) Limited Bermuda 6 Northern Land Company Ltd Canada 7 Quebec North Shore and Labrador Railway Company / Company de Chemin de Fer du Littoral Nord de Quebec et du Labrador Inc. Canada Annexure B - Deregistered Australian entities Deregistered entities listed in the Subsidiary List annexed to the Martino Affidavit No. Entity Name ACN 1 A F Toll Transport Ltd 000 025 954 2 ATWZ Pty Ltd 004 705 980 3 Ballarat Paper Mills Proprietary Limited 004 266 399 4 Cape Lambert Services Pty Ltd 009 303 431 5 Celpac Products Pty Limited 010 414 338 6 Celpac Products Pty Ltd 004 673 787 7 DRKZ Pty Ltd 000 579 340 8 ERA (Canberra) Limited 008 553 446 9 EWL Sciences Pty Ltd (formerly ERA Environmental Services Pty Ltd, Ranger Export Development Co Pty Ltd) 000 955 171 10 GAB Transport Pty Ltd 004 963 400 11 Hazleton Pumps (Aust) Pty Ltd 009 117 515 12 Integrated Graphics Pty Ltd 000 252 540 13 International Mineral Sands Limited 009 390 416 14 King Island Scheelite Pty Limited 004 534 552 15 MDRKZ Pty Ltd 000 807 054 16 Napier Holdings Pty Ltd 010 312 526 17 MENSW Pty Ltd 000 031 014 18 Napier Holdings Pty Ltd 010 312 526 19 National Mineral Sands Pty Ltd 009 560 409 20 National Mineral Sands (SA) NL 050 125 525 21 National Minerals Holdings Ltd 000 170 678 22 NBH Staff Provident Fund Pty Ltd 005 617 765 23 North Aviation Pty Ltd 075 871 564 24 North Broken Hill Investments Pty Ltd 006 868 122 25 North Exploration (Overseas) Pty Ltd 082 275 634 26 North Finance Ltd (formerly North Broken Hill Finance Ltd) 008 581 217 27 North Group Superannuation Pty Ltd 071 502 602 28 North Mining Nusa Tenggara Pty Ltd 073 887 546 29 North Mining Sulawesi Pty Ltd 073 887 555 30 North Pine (NSW) Pty Ltd (formerly Tasfibre Pty Ltd) 009 567 926 31 North Prospecting Pty Ltd 004 649 843 32 North Superannuation Pty Ltd 005 617 667 33 North Zinc Holdings Pty Ltd 070 360 262 34 Northcel Pty Ltd (formerly Celpac Pty Ltd) 000 350 890 35 Peko Australia Pty Limited (formerly Peko Australia Limited, Warman Services Limited, Warman International Ltd, King Island Scheelite Ltd) 004 255 921 36 Peko Mines Pty Ltd 002 921 780 37 Peko Pastoral Company Pty Limited 007 577 264 38 Peko Services Ltd 000 267 210 39 Peko-Wallsend (Canberra) Ltd 008 544 778 40 Ranger Uranium Mines Pty Ltd 000 914 821 41 Robe Trade Finance Pty Ltd 009 072 995 42 Sel-Grip Pty Limited 001 745 544 43 Sims Ventures Pty Ltd 000 112 023 44 SPRZ Pty Ltd 004 780 303 45 STWZ Pty Ltd 000 115 551 46 Swan Reach NL 050 125 507 47 Tomasetti Copy Paper Pty Ltd 005 852 442 48 Tomasetti Finance Pty Limited 004 248 033 49 Tomasetti Paper Pty Ltd 000 098 331 50 VDRKZ Pty Ltd 000 860 524 51 Vinfarmer Pty Ltd 069 959 799 52 VRG Interpapier Pty Ltd 003 072 820 53 Warman Holdings Pty Limited 008 404 153 Other former or deregistered Australian entities identified in the Martino Affidavit No. Entity Name ACN 54 APPM Employees/ACTU Superannuation Fund Pty Ltd 005 752 705 55 APPM Staff Funds Pty Ltd 004 423 796 56 EZ Staff Funds Pty Ltd 004 390 578 57 Robe River Provident Fund Pty Ltd 008 837 090 Annexure C - International entities that are not part of the Rio Tinto Group No Entity Name Country 1 Amhara Farms Limited New Zealand 2 Ammeberg Mining AB Sweden 3 Austral Development Limited United Kingdom 4 Bombas Hazelton Do Brazil Ltda Brazil 5 Canadian Jabiru Holdings Ltd Canada 6 CSJ Corporation United States of America 7 Girdlestone Pumps Limited United Kingdom 8 Haylands Limited Bermuda 9 Hazleton Pumps Inc (formerly BH Acquisition Corp) United States of America 10 Inversiones North (Chile) Limitada Chile 11 IOC Sales Holding Company United States of America 12 Judson Steel Corporation United States of America 13 Medina Ltd Bermuda 14 Minera North S de R L de CV Mexico 15 New Zealand Titania (Holdings) Limited New Zealand 16 New Zealand Titania Limited New Zealand 17 North (Mining) Exploration Sweden AB Sweden 18 North Argentina (Operations) SRL Argentina 19 North Argentina Compania Minera SA Argentina 20 North Broken Hill NZ Limited New Zealand 21 North Compania Minera SA Peru 22 North Exploration (Burkina Faso) BV Netherlands 23 North Exploration (Cote d'Ivoire) SA Cote d'Ivoire 24 North Exploration Sweden AB Sweden 25 North Finance (Bermuda) Limited Bermuda 26 North Group (USA) Inc United States of America 27 North Holdings SA de CV Mexico 28 North Mining (Fire Creek) Inc United States of America 29 North Mining Europe BV Netherlands 30 North Mining Inc United States of America 31 North Mining Svenska AB Sweden 32 North Servicios SA de CV Mexico 33 Paper House Limited New Zealand 34 Peko Pte Ltd Singapore 35 Peko-Wallsend NV Netherlands Antilles 36 PT North Mining Alor Indonesia 37 PT North Mining Indonesia Indonesia 38 PT North Mining Toraja Indonesia 39 Retty Metals Limited Canada 40 Robe River Ore AG Switzerland 41 Shefferville Power Company Canada 42 Titanium Technology BV Netherlands 43 Warman (UK) Limited United Kingdom 44 Warman Hero Equipamentos Ltda (formerly Hero Equipamentos Industrials Ltda) Brazil 45 Warman International (Chile) SA Chile 46 Warman International Corporation Canada 47 Warman International GmbH Germany 48 Warman International Hungary KFT Hungary 49 Warman International Inc United States of America 50 Warman International Italiana SRL Italy 51 Warman International Limited United Kingdom 52 Warman International SA France 53 Warman International Scandinavia OY Finland 54 Weeks Indonesia Limited Bermuda 55 Weeks International Limited Bermuda 56 Weeks Petroleum (Ras Al-Khaima) Limited Bermuda 57 Westland Ilmenite Limited New Zealand 58 Zinkgruvan Mining AB (formerly Ammeberg Mining AB) Sweden Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (Revised from Transcript) ALLSOP CJ: 1 In these proceedings, the applicant, Gordian RunOff Limited (Gordian) applies for confirmation pursuant to Division 3A of Part 3 of the Insurance Act 1973 (Cth) of a proposed scheme of transfer of all the insurance business of North Insurances Pty Ltd (North), to Gordian (Scheme). I will deal with the transfer in a moment. The application before the Court today is an interlocutory application under s 17C(5) of the Act for dispensation from the requirements under s 17C(2)(c) for the notification and provision of a summary of the Scheme to every affected policyholder. The business of North was as a captive insurer for North Broken Hill Peko Limited – later called North Limited – until that business was acquired by the Rio Tinto Group in 2000. 2 The captive insurer carried on, broadly speaking, three classes of business. The first two classes, which were carried on by the captive insurer until 2000, were not very accurately named public liability cover, to which I will refer in a moment, and property damage and business interruption cover or Industrial Special Risk policies for companies in the group and also wider classes of Insureds referred to in the policies issued over the period between 1991 or thereabouts to 1999/2000. The third class of business was workers' compensation, which business was written until 2003. The complexity of the types of cover issued under the so-called public liability policies are dealt with in the affidavit of Mr Michele John Martino, affirmed 4 November 2021. It is unnecessary for the purposes of this interlocutory hearing to descend into the detailed complexities of those different types of cover and ranges of potential Insureds or parties who may be s 48 parties for the purposes of the Insurance Contracts Act 1984 (Cth). 3 It suffices to say that liability extended to excess aviation liability, hull, pilots, a company reimbursement policy, and excess aviation liability cover for charterers. All these are set out in the policies and the endorsements as an addendum to Mr Martino's affidavit in Annexure MM-4. Importantly, for present purposes, in both the forms of policy issued over the approximate decade to 2000, there were workers' compensation and asbestos exclusions and the insurance can broadly be identified and characterised as short tail business. 4 The claims under those first two lines of business have been identified: All are closed and have been closed since approximately 2007. Those claims were small in number (eight for the so-called public liability cover and nine for the business interruption cover) and broadly low in value: approximately $1.2 million and $1.7 million in total, respectively. The closed claims were thus, in total, in the order of $3 million. 5 The dispensation hearing largely concerns those two lines of business. Mr Martino in his affidavit from paragraphs 36 and following sets out the history of the subsidiaries, joint venturers, and other parties who might potentially be interested in cover. 6 The summary of those matters is contained in paragraph 63 and following of Mr Martino's affidavit, and the parties interested are identified in the draft short minutes of order that have been supplied, and which I propose to make. I will come to the different groups of parties in a moment. It should be noted that, as the helpful written submissions of both Mr Newton and Mr Izzo make clear, there is an issue as to the meaning of the term policyholder, for the purposes of s 17C(2)(c) of the Act. Many of these entities, on any view, would not be policyholders. 7 There may be an issue about whether the companies in the group – which are identified in the definitions of the Insured in the various policies – are, in fact, policyholders. Mr Newton indicates that the premium paid to North by North Broken Hill Peko was apportioned amongst the companies in the group. But the problem with the identification of who the persons interested in the insurance are does not lie with the companies in the group. As for the workers' compensation cover, there is no issue about the identification of the policyholders. Only the workers' compensation business is the subject of provisioning. 8 The actuary's report, being that of Mr Warrick Evan Gard of Ernst & Young, has clearly dealt with the provisioning and the coverage ratio over Prescribed Capital and Target Capital. This will be dealt with in greater detail at the confirmation hearing, but it suffices to say, for present purposes, that the tolerably small nature of the provisioning necessary for this workers' compensation cover – which, I would add, includes the potential for long-tail asbestos liability – is adequately provisioned, it would appear. Thus, the claim is for the transfer of a reasonably small amount of insurance business that is completely in run-off, and has been in run-off since the early 2000s. 9 Two of the three lines of business appear to be entirely closed and appear to be short tail business; the closed nature of the claims reveals only a small amount in claims, in any event, historically, and the outstanding claims provisioning for the workers' compensation is appropriately covered by the assets transferred, being premium of nearly $5 million. In those circumstances, there does not appear to be any likely prejudice to any of the foreign entities who cannot be, at the moment, easily identified: the cost of so identifying them, even assuming them to be – which is doubtful – policyholders for the purposes of 17C(2)(c) of the Act, is not justified. 10 The Australian Prudential Regulation Authority (APRA) has been involved in the matter to date, has made suggestions to the applicant for amendments to the disclosure and notification regime, has no opposition to the dispensation orders sought, and has formed the view that those foreign entities who may not be directly contacted by way of notification would not be materially disadvantaged by that. If I may respectfully say so, on the material before the Court, that view is well justified. It is broadly for those reasons – and accepting the helpful submissions of both Mr Newton and Mr Izzo, which will remain on the file – that the Court is satisfied that because of the nature of this Scheme and the circumstances attending its preparation, it is not necessary that s 17C(2)(c) of the Act be fully complied with. 11 In those circumstances, I make orders in accordance with the draft minute of proposed orders for notification and publication. The Annexures to the draft orders – which will be Annexures to the final orders – identify by various categories the additional entities to be notified. The entities that will not be directly notified and, really, which are the subject of the dispensation, are contained in Annexure C. They are contained in Annexure C pursuant to suggestion of APRA to the applicant that the 58 overseas companies listed in Annexure C, being the entities referred to in the subsidiary list in Mr Martino's affidavit, which are the international companies that are not within the Rio Tinto Group, and whose identity and addressees will be of some significant cost to identify and notify, will be listed on the website of North from 15 November 2021, thereby making known to parties interested in the transfer the identity of the receiving entity. 12 For those reasons, I make orders in accordance with the draft minute of proposed orders provided to the Court, with the amendment of having the words "draft" removed. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Chief Justice Allsop. Associate: Dated: 8 November 2021