Insurance & Superannuation Commissioner v Occidental Life Insurance Company of Australia Ltd

[1991] FCA 856

Re: INSURANCE AND SUPERANNUATION COMMISSIONER
And: OCCIDENTAL LIFE INSURANCE COMPANY OF AUSTRALIA LIMITED and REGAL LIFE
INSURANCE LIMITED
Nos. V G316 and 317 of 1990
FED No. 856
Insurance
(1991) 105 ALR 355
(1991) 33 FCR 41

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)

CATCHWORDS

Insurance - Judicial management - instruction sought under s. 60(7) Life Insurance Act 1945 - whether standing to be heard on motion - whether indemnity for legal costs of policy holder in bringing a representative action was a liability or expense referrable to a particular class or classes of life insurance business.

Life Insurance Act 1945: s. 38, 60(7)

HEARING

SYDNEY

#DATE 5:12:1991

Counsel for the Judicial Manager : N.C. Hutely

Solicitors for Judicial Manager : Phillips Fox

Solicitor appearing for Insurance : M. Bezzi
and Superannuation Commissioner

Solicitors for Insurance : Australian Government Solicitor
and Superannuation Commissioner

Counsel for Battery Group Limited : B.W. Rayment QC, R.J.H. Darke

Solicitors for Battery Group : Mallesons Stephen Jaques
Limited

ORDER

In each matter, the Court gives an instruction that pursuant to s. 60(7) of the Life Insurance Act 1945 the Judicial Manager of Occidental Life Insurance Company of Australia Limited ("Occidental") and Regal Life Insurance Limited ("Regal") is at liberty to grant an indemnity for any charges expenses or legal costs incurred or ordered to be paid by or on behalf of any policyowners who are appointed as representatives of policyholders of Regal or Occidental in respect of the claims made in action number 2496 in the Supreme Court of Victoria pursuant to s. 38(8) of the Life Insurance Act or in any appeal or other proceedings in connection with that action.

Any moneys paid pursuant to any indemnity granted by the Judicial Manager shall constitute an expense within the meaning of Order 2 made by His Honour Mr Justice Sheppard on 16 November 1990.

The usual order for costs be made.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

There are before the Court today two motions being heard together by consent, one in the judicial management of Occidental Life Insurance Company of Australia Limited ("Occidental") and the other in the judicial management of Regal Life Insurance Limited ("Regal"). The moving party in each case is the judicial manager, Mr Grellman who is represented by counsel. The Insurance and Superannuation Commissioner ("the Commissioner") has been represented before the Court today on the motions and he has indicated that the Commissioner supports the motions.

1. Battery Group Limited ("Battery") has also sought to appear today to oppose the motions and have done so by counsel. I have heard evidence and argument both on the question of the right or standing of Battery to appear on the motions together with the substance of its objection to the motions themselves. That seemed to me to be the convenient course to take in all the circumstances.

2. The motions seek instructions pursuant to s. 60(7) of the Life Insurance Act 1945 ("the Act") that Mr Grellman be at liberty to grant an indemnity for any charges, expenses or legal costs incurred or ordered to be paid by or on behalf of any policy owners who are appointed as representatives of policy holders of each of the life companies in respect of the claims made in certain proceedings in the Supreme Court of Victoria, action number 2496, ("the Victorian proceedings") the claims being made pursuant to s. 38(8) of the Act. Certain other orders are sought by the judicial manager.

3. I have dealt on earlier occasions with the complex facts and background that surround these matters and I do not propose to traverse them again today but I shall deal with the questions that arise today in the light of the Court's knowledge of the earlier matters. The first question I will determine is the right or standing of Battery to be heard on these motions. It appears from what I have been told from the Bar Table that Battery was not invited to appear in response to the motions but was given notice of today's proceedings at its request. Battery has appeared on more than one occasion in the past on the hearing of motions by the judicial manager for instructions pursuant to s. 60(7) of the Act and I have at least on one earlier occasion expressed a view that supported the right of Battery to appear then. But the issues then were very different from the issues today and I do not feel that anything that has been said by the Court hitherto bears upon the question of Battery's standing in the matter before the Court today. So I shall approach this question as if afresh.

4. The substantive question that is involved in the proceeding today centres on the construction of s. 38(2)(a) of the Act and I shall come to that in a moment. Battery's interest, if any, in the matter is as equitable mortgagee or chargee of shares in the issued and paid up capital of the two life companies. Assuming that to be the case, I do not myself see how, for the purposes of the motions before the Court today, Battery has any interest at all in the matter. But even if I were wrong in that, as a practical matter, I do not see how the results of the Victorian litigation, so far as one can gauge them, even assuming the best and the worst results that could be obtained, could alter the fact that Battery has, in my view, no locus in the present motions.

5. I therefore propose to take the course of rejecting the two affidavits of David Bruce Moore that have been read before the Court and also now rejecting the tender of what became exhibit 1. However, I have read the two affidavits, as I had to deal with the question of standing before the Court, and any conclusion which I reach would be the same even if I took into account all the material contained in the affidavits. I should add, however, that the argument that has been put before the Court by counsel for Battery today has nevertheless been of considerable assistance in resolving the matters before the Court. But, as I say, I do not think that Battery Group Limited has any locus in the proceeding today.

6. I turn then to the motions themselves. The history of the Victorian proceeding has been referred to by me more than once and in particular in my reasons for judgment of 9 October 1991. I do not propose to repeat what I said there. Since I gave those reasons, however, an appeal, which was pending from a decision of O'Brien J of the Supreme Court of Victoria, has now been heard by the Full Court of the Supreme Court of Victoria and it bears upon so much of the Victoria proceedings as relates to s. 38(8) of the Act. There is more than one claim propounded by the plaintiffs in those proceedings and the primary claims do not appear to be those based upon s. 38(8) of the Act but they are real issues in the case.

7. The result of the Full Court's finding was to reverse O'Brien J.'s decision to the effect that Mr Grellman was properly made by his Honour a party for the purposes of the s. 38(8) claims in the Victorian proceedings to represent the interests of policy holders of the two life insurance companies. It appears from the leading judgment given in the Victorian Supreme Court of Brooking J. (the other two members of the Court, Fullagar J. and Tadgel J. agreeing with his Honour) that the proper party should be a person with a proprietary interest in the proceedings that are being brought under s. 38(8), namely a policy holder himself.

8. The decision of the Full Court has lead to the request for instructions by Mr Grellman contained in the motions today to, as it were, put his house in order in the Victoria proceedings so far as parties are concerned.

9. It seems from what has been said and from what I would have assumed to be the case from my prior knowledge of the matter in previous applications, that there will be little more than a nominal change in the Victorian proceedings with the making of a policy owner or policy owners as representative parties for the policy holders of the two companies. The same solicitors will continue to appear as will the same counsel. It is doubtful if there will be any substantial increase in costs by reason of the making of the orders sought on the motions. So on the practical level, it seems to me that the sensible course for this Court to take and the correct course to take is to accede to the motions provided, of course, that the Court has power to do so.

10. That leads me to s. 38 of the Act. The Act is an old Act, amended from time to time, but cast at a time when life insurance business was very different from what it is today. There are numerous examples of provisions that are hardly consonant with modern times. However, the courts must do the best they can with the Act in the form that it presently appears.

11. The history of s. 38 and related sections and its interaction with other sections of the Act, including s. 60, is one of interest. It seems to me however that s. 38 does fall to be construed according to its own terms but calling in aid from definitions in s. 4, where appropriate, such as, for example, the definition of "life insurance business" which in turn, of necessity, takes one to the definition of "life business".

12. The question is whether the granting by Mr Grellman of an indemnity for charges, expenses, or legal costs incurred or ordered to be paid by or on behalf of policy owners who are appointed as representatives of policy holders of either life company, with respect to the Victorian proceedings, answers the description of liabilities or expenses of the life companies referable to a particular class or particular classes of life insurance business, within the meaning of section 38(2)(a). That in turn has a subquestion subsumed in it which is whether proceedings brought against directors of life companies, within the authority of s. 38(8), are proceedings the costs of which could fairly fall within the description of liabilities or expenses permitted by s. 38(2)(a).

13. In my view, a life insurance company may in the course of its day to day activities necessarily become involved in litigation and, indeed, it may become involved in litigation occasioned by defaults of directors of the kind to which s. 38(8) is directed, and it would be odd if the costs incurred by the life companies in pursuit of those claims did not answer the description of liabilities or expenses of the kind to which s. 38(2)(a) is directed. In my opinion they do fall within that description. As these companies are now placed under judicial management, it seems to me that it makes no difference therefore, in principle, to the classification of the costs of the litigation which the company would otherwise have incurred, not under a judicial management, for the purposes of s. 38(2)(a).

14. In short, in my view, the proposed costs, charges and expenses to which these notices of motion are directed do answer the description of liabilities or expenses referable to the relevant class or classes of life insurance business within the meaning of s. 38(2)(a) and the Court so holds.

15. Accordingly, the Court makes orders 1, 2 and 3, as asked in each notice of motion.