Gordian RunOff Limited, in the Matter of Gordian RunOff Limited

[2021] FCA 1386

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 – [email protected]); and

(f)WHS/Workers Compensation Officer, Australian Manufacturing Workers Union (AMWU) (email address – [email protected]).

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 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 ([phone]) 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. 

1. 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. 

2. 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.

3. 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. 

4. 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