Insurance and Superannuation Commission v Occidental Life and Regal Life

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JUDGMENT No. .20! .... 1 . 2 . ~ ~ . .
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NOT FOR DISTRIBUTION

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IN THE FEDERAL COURT OF AUSTRALIA	)	!
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NEW SOUTH WALES DISTRICT REGISTRY

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No. VG 316

of 1990

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1 VG 317 of 1990 . .

GENERAL DIVISION

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BETWEEN: INSURANCE AND SUPERANNUATION
COMMISSION

Applicant 1

AND: OCCIDENTAL LIFE and REGAL
LIFE
Respondent

21 November 1990

REASONS FOR JUDGMENT

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LOCKHART J.

These are two motions being heard together by consent. The

applicant being Richard John Grellman who was appointed by this

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Court on 7 November 1990 as the judicial manager of Occidental

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Life Insurance Company of Australia Limited and Regal Life

Insurance Limited.

The appointment of a judicial manager of a life insurance company is, so far as the researches of counsel have indicated, novel in this country, at least to date. So one is to some extent dealing with unchartered territory.

Division 8 of part 111 of the Life Insurance Act 1945 ("the Act") is concerned with judicial management of companies carrying

on life insurance business in Australia. It is plain that Mr

Grellman, as the judicial manager of each company is charged with their management and with the task of preparing a report to the Court under S. 62 of the Act.

I am informed by counsel for Mr Grellman that as at present advised he is of the view that the report should be filed with the Court in approximately three weeks time. Whether it is in fact three weeks time, less or more, will of course will remain to be seen and will depend upon Mr Grellman himself.

The problem that has brought Mr Grellman to make these applications for directions under S. 60(7) is that there is on foot in the Supreme Court of Victoria and the Supreme Court of New South Wales certain litigation between various corporations. In addition various companies are in receivership or liquidation.

It is suggested by Battery Group Limited, for whom counsel appears this morning, that there is now and will continue to be conflicts of interest with Mr Grellman continuing in his office as judicial manager and that problems of confidentiality will

accountants KPMG Peat Marwick, two other partners of whom are arise from his being a member of the firm of chartered

involved as receivers and managers or liquidators as the case may

be of two other companies, Linter Group Limited and Spersea Pty
Limited.

I need not deal with all the possible interlocking relationships of the proceedings to which I have referred and the insolvency administration to which I have referred.

Counsel for M r Grellman denies that there is at this stage any conflict of interest which would place an impediment in the path of Mr Grellman continuing to act as judicial manager and he says that if any problem should arise in the future which would give rise to such a conflict of interest then he will, of course, bring the matter back to the Court, unless he solves it himself otherwise.

There is no doubt that persons who hold the office of judicial managers of life insurance companies must not place themselves in a position where duty and interests conflict or where they have a conflict of interests. This is not only right in itself but it also is important that the public perceive things to be in order in administrations such as this.

The essential difficulties that surround the attitude taken by Battery in this case arises from the fact that Mr Grellman's firm is a very large firm of chartered accountants in Australia,

Australia. It is well known that potential problems of conflict

to act in the matter are also a large firm of solicitors in indeed internationally, and the solicitors whom he has instructed

of interest arise today in this country and indeed throughout the western world, where large firms of solicitors and accountants are involved and the members of whom and the staff of whom may have potential conflicts of interest or conflicts of interest and duty. Without laying down in any way this morning in a directions application any definitive rules it is not, as present advised, my view that there can be any rigid black and white views taken of these matters. The fact of life is that they are very large firms and that they may be faced with problems within themselves of conflicting duties and interest or conflicting interests. The problems must be addressed, sometimes by the firms continuing to act for only one party to proceedings or indeed acting for nobody who is involved in the proceedings in view of information that may have been gained.

I have no doubt that the persons who constitute these firms are well aware of these problems and in the main would act responsibly with respect to them.

As I see the position at the moment Mr Grellman, who has sworn an affidavit in the matter, is plainly aware of his duties and of the need to avoid conflict between duty and interest or conflicts of interests. And he has expressed in his affidavit in plain terms the view he takes with respect to the matter and

respect to them.

if problems arise in the future the view he will take with

It has been suggested by counsel for Battery that there should be formal undertakings given to the Court by M r Grellman and indeed by his partners and by the partners of the firm of solicitors who have been instructed by Mr Grellman in this matter. It is said that these formal undertakings should be given because if adhered to they will do what is reasonably possible to prevent conflicts of duty and interests and conflicts of interests arising in these matters and will be therefore, in the public perception, following the right path.

I do not trouble with the detail of the proposed undertakings because discussion with counsel has indicated that they would in any event need a considerable degree of amendment. But in my view it is important to note that Mr Grellman is in his office as judicial manager on a temporary footing by the very nature of judicial management. It is true he is administering the companies and that his task is to prepare in due course a report to the Court pursuant to the act.

It is also true that conflicts may arise in the course of his administration, conflicts of duty and interests or of interests themselves. But I think it would be unwise and unnecessary to fetter him at this stage with any formal undertakings to the Court or to require them to be given by his

partners or by the members of the firm of solicitors that he has

instructed. To required that could, I think, be

counterproductive and impair him in his proper administration of
the affairs of these two companies.

If a conflict should arise he must, of course, act on whatever advice he is given and if necessary bring the matter back to the Court where it can be then examined carefully.

I note that the insurance and Superannuation Commissioner has appeared this morning through counsel and in substance supports the stand taken by Mr Grellman. It is perhaps open to some argument as to whether Battery has any entitlement to appear on an application for directions pursuant to S. 60(7) of the Act. I have no definitive view on the matter as Battery's application to appear and make submissions and lead evidence was not opposed. I would only say that since these are administrative matters if persons could be affected by the form of directions given by the Court then I see no bar, myself, to their being a party to the applications for directions. And it seems to me that Battery's intervention in today's proceedings was perfectly proper.

Accordingly, I propose to give no specific directions this morning as none are sought by Mr Grellman or the Commissioner and I decline to require the giving of undertakings in the form sought by Battery or in substantially the same form.

Grellman of and incident to this application shall be treated as The Court also orders that the costs and expenses of Mr

expenses of the judicial manager within the meaning of order 1

made by Mr Justice Sheppard in these matters on 16 November 1990.

The Court orders that exhibit RJGl to the affidavit of Richard John Grellman of 19 November 1990 shall until further order remain confidential to the following persons: The Insurance and Superannuation Commissioner; Robert George Glading, Deputy Commissioner; the judicial manager; counsel and solicitors for the Commissioner, Mr Glading and the judicial manager; and counsel, solicitors, directors and the secretary of Battery Group Limited. The Court further orders that the contents of that document shall not be disclosed to any other persons, that no copies thereof shall be made except by leave of the judicial manager, and that any copies so made shall be returned on demand to the judicial manager.

I certify that this and the preceding six (6) pages are a true copy of the reasons for judgment herein of the Honourable Mr. Justice Lockhart.

Associate G(%&- YY
Dated: 21 November 1990

Counsel for the Judicial Manager	:	G Palmer Q.C. and N. Hutley
Solicitors for the Judicial Manager:
Counsel for the Insurance and	Phillips Fox

Superannuation Commissioner	S. Robb
Solicitors for the Insurance and	Australian
Superannuation Commissioner	Government Solicitor
Date of Hearing	21 November 1990
Date of Judgment	21 November 1990

[1990] FCA 701

21 Nov 1990