NRMA Limited (Application of); NRMA Insurance Limited (Application of) [2000] NSWSC 82

Reported Decision : (2000) 156 FLR 349 (2000) 33 ACSR 595

New South Wales Supreme Court

CITATION : NRMA Limited (Application of); NRMA Insurance Limited (Application of) [2000] NSWSC 82 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 5131/99; 5132/99 HEARING DATE(S) : 31/01/00, 01/02/00, 07/02/00, 08/02/00, 11/02/00, 14/02/00 JUDGMENT DATE : 24 February 2000

PARTIES : NRMA Limited (ACN 000 010 506) (Plaintiff) NRMA Insurance Limited (ACN 000 016 722) (Plaintiff) JUDGMENT OF : Santow J

A Archibald, QC/N O'Bryan/A G Bell (NRMA Limited) J R Sackar, QC/P M Wood/L McCallum (NRMA Insurance Ltd) T D Castle (ASIC) COUNSEL : B J Camilleri (for Richard Talbot) David Lewis Parker (in person) Earle Robinson (in person) Tony Allen (in person) Corrs Chambers Westgarth (NRMA Limited) SOLICITORS : Freehill Hollingdale & Page (NRMA Insurance Limited) Mallesons Stephen Jaques (the Proposal) Ms Kathy Cuneo (ASIC) CATCHWORDS : CORPORATIONS — Members' scheme of arrangement in relation to NRMA Limited ("Association") and NRMA Insurance Limited ("Insurance") associated with the demutualisation only of Insurance and with various structural changes between Association and Insurance — Court's function in convening scheme meetings and approving information memorandum in relation to complex proposals involving 1.8 million members of Insurance and 1.2 million members of Association — Responsibilities of board and senior management to let documents speak for themselves — Disclosure obligations in relation to company not limited by shares — Role of ASIC — Degree to which Court looks at ultimate fairness of scheme at meeting convening stage and later scheme approval stage — role of objectors — Cost orders for and against objectors only made after they have been heard — Other potential legal impediments — Scope of "arrangement" — What is approved by court when arrangements embrace associated steps for demutualising and implication of Gambotto principles concerning expropriation of membership rights — Effect of conditions subsequent — Legitimacy of scheme proxy to enable passing of later demutualisation resolutions — Relevant considerations when time gap between scheme resolutions and later demutualisation resolutions — Is former surrogate for later — Identification of classes of members — No equitable constraint based on supposed common understanding of members that should remain forever a mutual — No trust of Insurance's assets such as to preclude demutualisation — Qualified duty of directors to do only what was lawful in carrying out obligation to implement demutualisation steps — Cut-off of membership involves no legal contravention — When should draft information memorandum be released to media where subject to change or potentially defamatory — Legal capacity of Insurance and its parent NIGL to pay dividends out of unrealised gains combined with realised gains and earned profits without contravening s254T of the Corporations Law — Accounting standard AASB 1023 mandatory on Insurance — No foundation for submission that Insurance's proposed new parent could not be listed on supposition that it could not pay dividends when that supposition not made out — s411 procedure not a privilege or requiring clean hands beyond its statutory preconditions including proper disclosure — This an "arrangement within s411" — No basis to preclude demutualisation if members so decide in what comprehended in "mutuality principles" or by reason of past accumulation of profits rather than "mutual pricing" or premium rebates — Relevance of trend overseas to demutualise — No basis for treating demutualisation as inevitable when this a matter for members' decision — Shares issued by NIGL are fully paid — Par value now abolished — Position at court approval stage where court's discretion remains. ASIC Act 1989 (Cth) s12DA Corporations Law s9, s112, s136, s162, s163, ss164-166, s250A and B, s254A, s254T, s254X, s295, s296, s297, s303, s305, s411, s412, s485, s501, s995, Pt 2B, Pt 2E LEGISLATION CITED : Corporations Regulation Regulation 8301 Fair Trading Act 1987 (NSW) s42, s67 Income Tax Assessment Act (Cth) Division 9AA Re A & C Constructions Pty Ltd [1970] SASR 565 Re ACM Gold Limited Re Mt Leyshon Mines Limited (1992) 7 ACSR 231 Re Advance Bank Australia Ltd (1997) 22 ACSR 513; 22 ACSR 476 Re AGL Sydney Ltd (1994) 13 ACSR 597 Re Ampol (1989) 14 ACLR 772 ANZ Executors & Trustee Company Ltd v. Qintex Australia Ltd (1990) 2 ACSR 676 Re Archaean Gold NL (1997) 23 ACSR 143 Re Arrowfield Group Limited (1995) 17 ACSR 649 Re Australian Consolidated Press Ltd (1994) 14 ACLR 639 Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 Re the Bank of Adelaide (1979) 22 SASR 481 Birne v Public Service Mutual Casualty Company 77 NYS 2d 446) Re Bond Corporation Holdings Ltd (1991) 5 ACSR 304 Bray v Commissioner of Taxation (1968) 117 CLR 349 Re Calgary and Edmonton Land Co Ltd [1975] 1 All ER 1046 Re Castlereagh Securities Limited [1973] 1 NSWLR 624 Cleary v Australia Co-operative Foods Ltd and Ors (Nos. 2 and 3) (1999) 32 ACSR 701 Commissioner of Taxation v Slater Holdings Pty Ltd (1984) 156 CLR 447 Re Credit Reference Association of Australia Ltd (1998) 16 ACLC 491 Re Crusader Ltd (1995) 17 ACSR 336 Dimbula Valley (Ceylon) Tea Ltd v Laurie [1961] Ch 353 Re Dorman Long & Co Ltd [1934] Ch 635 Re ED White (1929) 29 SR (NSW) 389 English and Irish Church and University Assurance Society (No. 2) (1863) 1 H&M 85 Equitable Life Assurance Society v Alan David Hyman, (UK Chancery Division, 7 July 1999, unreported) Faulconbridge v National Employers Mutual General Insurance Association [1952] 1 Lloyd's List Law Reports 17 Federal Commissioner of Taxation v Slater Holdings Ltd (1984) 156 CLR 447 Fidelity & Casualty Co. v Metropolitan Life Insurance Company 42 Misc 2d 616, 248 NYS 2d 559 (NY Sup. Ct. 1963) Fraser v NRMA Holdings Limited (1995) 55 FCR 452 FT Eastment & sons Pty Ltd. v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 Gambotto v WCP Ltd (1995) 182 CLR 432 Re Garner's Motors Ltd [1937] Ch 594 Greeff v Equitable Life Assurance Society 54 NE 712 (N.Y 1899) Re Guardian Assurance Co. [1917] 1 Ch 431 Guinness Peat Group International Insurance Ltd v Tower Corporation [1999] 1 NZLR 153 H A Stephenson & Son Ltd (in liq) v Gillanders, Arbuthnot & Co (1931) 45 CLR 476 Re Hill Samuel Life Assurance Ltd [1998] 3 All ER 176 (Ch) Huber v Martin 105 NW 1031 (1906, Wisc) Re International Harvester Co of Australia Pty Ltd [1953] VLR 669 Isles v The Daily Mail Newspaper Limited (1912) 14 CLR 193 Re Jax Marine Pty Ltd and the Companies Act 1961 [1967] 1 NSWR 145 Kempe v Ambassador Insurance Co [1998] 1 WLR 271 CASES CITED : Re Leamon Consolidated (Vic) Pty Ltd (1985) 10 ACLR 263 Ex parte Liberty Life Association of Africa 1976 (1)SA 58 (W) The Lion Mutual Marine Insurance Association Limited v Tucker (1883) 12 QBD 176 Lipsman v Reich 16 N.Y.S 2d 892 (S.C, 1939) Re London Life Association Ltd; Re Australian Mutual Provident Society (UK Chancery Division, 21 February 1989, unreported) McRae v Coulton (1986) 7 NSWLR 644 Re Matine Limited (1998) 28 ACSR 268 Re MB Group Plc [1989] BCLC 672 Mercantile Investment & General Trust Company v International Company of Mexico [1893] 1 Ch 484 Motel Marine Pty Ltd v IAC (Finance) Pty Ltd (1964) 110 CLR 9 Municipal Mutual Insurance Ltd v Hills (Inspector of Taxes) [1932] All E.R. Rep. 979 Mygatt v New York Protection Insurance Company, 21 NY 52-66 Re National Bank Ltd [1966] 1 All ER 1006 National Chiropractic Insurance Co v United States, 494 F2d 332, 333 (1974), Court of Appeals, Eight Circuit Re Neman Pastoral Co (No 2) Pty Ltd (1981) 5 ACLR 510 New York Life Insurance Company v Styles (1889) 14 App. Cas. 381 Re NFU Development Trust Ltd [1973] 1 All ER 135 Nordic Bank Plc v International Harvester (Aust) Ltd (sub nom Re International Harvester (Australia) Limited (1983) 7 ACLR 796) Re Norfolk Island & Byron Bay Whaling Co Limited (1969) 90 WN (Pt 1) (NSW) 351 NRMA Limited v Ian Francis Yates ([1999] NSWSC 859, Santow J, 20 August 1999, unreported) Osborne v Steel Barrel Co Ltd [1942] 1 All ER 634 Pierce Insurance Co. v Maloney 269 P2d 57 (Cal.App., 1954) QBE Insurance Group Limited v ASC (1992) 38 FCR 270 Quatro v Argo Investments and Ors (1999) 32 ACSR 480 Re R M Eastmond Pty Ltd and the Companies Act (1972) 4 ACLR 801 Re RAC Motoring Services Ltd: re Royal Automobile Club Ltd (UK Chancery Division, Neuberger J, 8 July 1998 unreported) Re Savoy Hotel Ltd [1981] 3 All ER 646 Re Scottish and Australian Chartered Bank [1893] 3 Ch 385 Re SDR Apparel Pty Ltd and the Companies Act (1977) 3 ACLR 162 Sneath v Valley Gold Limited [1893] 1 Ch 477 The Social Credit Savings and Loan Society Limited v The Commissioner of Taxation of the Commonwealth of Australia (1971) 125 CLR 560 Re Sonodyne International Ltd (1994) 15 ACSR 494 Re The South African Mutual Life Assurance Society, unreported, per Comrie J, Capetown High Court, 29 March 1999) Sovereign Life Assurance Company v Dodd [1892] 2 QB 573 Re Spanish Prospecting Co. Ltd. [1911] 1 Ch. 92 Re Stockbridge Limited (1993) 9 ACSR 637 Sun Alliance Insurance Ltd v Inland Revenue Commissioners [1972] Ch 133 Re Telford Inns Pty Ltd (1985) 3 ACLC 660 Re Theatre Freeholds (1996) 14 ACLC 1,150 Thorby v. Goldberg (1964) 112 CLR 597 Re Tivoli Freeholds [1972] VR 445 Wunderlich Brothers v Northwestern Mutual Fire Association [1936] 1 WWR 297 Re Wondoflex Textiles Pty Ltd [1951] VLR 458 DECISION : Convening of meeting approved.