Insurance & Superannuation Commmissioner v Occidental Life Insurance Company of Australia

Re: INSURANCE AND SUPERANNUATION COMMISSIONER
And: OCCIDENTAL LIFE INSURANCE CO OF AUSTRALIA and REGAL LIFE INSURANCE
LIMITED
Nos. V G316 and G317 of 1990
FED No. 202
Insurance Law
101 ALR 511/28 FCR 437

COURT

IN THE FEDERAL COURT OF AUSTRALIA

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

CATCHWORDS

Insurance Law - Judicial Management - consideration of Divisions 8 and 9 of Part III of Life Insurance Act 1945 - s. 62(1) reports - whether s. 62(1) report precondition to Division 9 scheme - time within which s. 62(1) report must be lodged - can there be more than one s. 62 report - judicial manager's remuneration.

Life Insurance Act 1945: Divisions 8 and 9 of Part III.

HEARING

SYDNEY

#DATE 8:4:1991

Counsel for the judicial manager: A.R. Emmett QC and N.C. Hutley

Solicitors for the
judicial manager: Phillips Fox

Counsel for the Insurance
and Superannuation Commissioner: B.W. Rayment QC and S.J. Gageler

Solicitors for the Insurance
and Superannuation: Australian Government Solicitor

Counsel for Battery Group Limited: R.A. Finklestein QC and C.M. Scerri

Solicitors for Battery Group
Limited: Mallesons Stephen Jaques

Counsel for Trustees of the Regal
Life Australia Superannuation Fund: M. Oakes

Solicitors for Trustees of the Regal
Life Australia Superannuation Fund: Arthur Robinson and Hedderwicks

Counsel for Netherlands Reassurance
Group NV: M. Pembroke

Solicitors for Netherlands
Reassurance Group NV: Mallesons Stephen Jaques

ORDER

The judicial manager inform the Insurance and Superannuation Commissioner ("the Commissioner") of the present bases of remuneration payable to solicitors, actuaries, consultants and others retained by him and also inform the Commissioner of any change in the future in those bases of remuneration and of any future retainers of the same or other persons and of the proposed basis of their remuneration.

Any reports filed with the Court by the judicial manager also contain the information referred to in Order 1.

The judicial manager is at liberty to cause a scheme pursuant to Division 9 of the Life Insurance Act 1945 to be prepared to give effect to the agreement between the companies and Mercantile Mutual Insurance Company Limited and thereafter make application for its confirmation by the Court.

In matter No. 005799 of 1990 of the Equity Division of the Supreme Court of New South Wales, between the Battery Group Limited and the National Companies and Securities Commission, the papers which have been delivered to this Court be handed to the New South Wales Supreme Court until further order.

The usual order in relation to the judicial manager's costs, charges and expenses.

All other questions as to costs be reserved.

The matter may be restored to the list on seven days notice.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

There are before the Court 10 motions filed in the two matters of Occidental Life Insurance Company of Australia Limited ("Occidental") and Regal Life Insurance Limited, ("Regal"). The applicant in all but two of the motions is the judicial manager of Occidental and Regal, Mr R. J. Grellman. The applicant in the other two motions is the Battery Gro up Limited. The five motions in the Regal matter essentially mirror those in the Occidental matter so I shall, for convenience, deal with the motions in the Occidental matter, but basically the same considerations apply to the Regal matter.

Counsel for the judicial manager, with the assistance of counsel for the other parties, have formulated a number of questions which encapsulate the various issues that arise in these motions. There are some 13 agreed questions. The agreement was reached after the Court heard argument last week on some preliminary questions of substance in the matter and it is convenient that they be dealt with first before turning to the 13 agreed questions.
Preliminary Questions
The other parties involved in the motion are the Insurance and Superannuation Commissioner ("the Commissioner"), the Trustees of the Regal Life Australia Superannuation Fund, a Dutch re-insurer known as Netherlands Reassurance Group NV and Battery Group Limited. The preliminary questions concern matters of principle and arise out of the reports filed with the Court by the judicial manager (one report in each matter) relating to the conduct of the judicial management of each company. The answer to the preliminary questions turns on the proper construction and application of Divisions 8 and 9 of the Life Insurance Act 1945 ("the Act").
First, it is convenient to go to the relevant statutory provisions. Division 8 of Part III of the Act relates to the judicial management and winding up of a life insurance company. Once a company or part of its business has been placed under judicial management all proceedings against it are stayed by virtue of s.59(5) and may not be proceeded with without the leave of the Court or unless the Court otherwise directs. The judicial manager is an officer of the Court and is entitled to receive such remuneration as the Court directs (s. 60(2) and the Court may at any time cancel the appointment and appoint some other person as judicial manager (s.60(2)).
The management of the company, or such part of the business of the company as the order of the Court directs, vests in the judicial manager and the previous management of the company is thereupon divested of that management - s.60(4),(5). Section 60(6) empowers the Court to:

"issue such directions to the judicial manager as to his powers and duties as it deems desirable in the circumstances of the case."

Section 60(7) requires the judicial manager to act under the Court's control and empowers him to apply to the Court at any time for "instructions" as to the manner in which he shall conduct the judicial management or in relation to any matter arising in the course of the judicial management.
Under s.61 the Court may, at any time, cancel the order for judicial management if it appears that the purpose of the order has been fulfilled, or that for any reason it is undesirable that the order should remain in force.
Section 62 is important for present purposes and it provides as follows:

"62(1) The judicial manager shall conduct the management with the greatest economy compatible with efficiency, and shall, as soon as possible, file with the Court a report stating which of the following courses is in the circumstances, in his opinion, most advantageous to the general interests of the owners of the policies of the company:

(a) the transfer of the business of the company to some other company, in pursuance of a scheme to be prepared in accordance with Division 9 (whether the policies of the business continue for the original sums insured, with the addition of bonuses that attach to the policies, or for reduced amounts);

(b) the carrying on of its business by the company (whether the policies of the business continue for the original sums insured, with the addition of bonuses that attach to the policies, or for reduced amounts);

(c) the winding-up of the company or of any part of the business of the company;

(d) the dealing with part of the business of the company in one way, and with part of that business in another say; or

(e) such other course as he deems advisable.

(2) The judicial manager shall forthwith after filing the report furnish a copy of the report to the Commissioner and make an application in writing to the Court for an order to give effect to the course stated in the report.

(3) The report or a copy of the report shall be open for inspection by any person during official hours, at the Registry of the Court in which the report is filed or at such place as the Commissioner determines."

On the hearing of an application made under s. 62(2), the Court shall (after hearing the Commissioner, the judicial manager and any other person who, in the opinion of the Court is entitled to be heard, and after considering the judicial manager's report) make an order giving effect to the course which it considers in the circumstances to be most advantageous to the general interests of the owners of the policies of the company (s. 64(1)). The order of the Court is binding on all persons and has effect notwithstanding anything in the instruments constituting the company or in its articles of association or other rules (s.64(2)).
Section 65 provides:

"Where an order is made by the Court for the transfer of the business of a company to some other company the judicial manager shall prepare a scheme for the transfer in accordance with Division 9 and until the scheme is confirmed by the Court under that Division the management of the company shall continue to be vested in the judicial manager."

Section 67 relates to the winding up of a company made after the hearing of an application under s.59 or made in pursuance of s. 64.
Division 9 of the Act deals with the transfer of the life insurance business of a company to another company, and the amalgamation of a company's life insurance business with the life insurance business of another company. That division contains a series of provisions (s. 73 to s.76) concerned with the preparation of a scheme setting out the terms of the agreement or deed under which it is proposed to effect the transfer or amalgamation and other provisions necessary to give effect to the scheme (s.74). Before application is made for confirmation of the scheme by the Court, a copy of the scheme must be lodged with the Commissioner; notice of the intention to make the application must be lodged with the Commissioner; and notice of the intention to make the application must be published in the Gazette and certain newspapers within stipulated periods of time ((s.75(1)(a), (b)).
Any person who in the Court's opinion is likely to be affected is entitled to be heard on any application for confirmation made to the Court (s.75(3)). The Court may confirm the scheme with or without modification or refuse to confirm it (s.75(4)). The scheme, when confirmed by the Court, binds all persons and has effect notwithstanding anything in the instruments constituting the company, or in its articles of association or other rules (s. 75(5)).
The Act is modelled on the Insurance Act 1943 of the Republic of South Africa, in particular, chapter 2, which in turn appears to have been taken in substance from the Companies Act 1961 - 1973 of the Republic of South Africa.
It is now necessary to turn to the report of the judicial manager in the Occidental matter and to determine whether it answers the description of a report under s. 62 of the Act. The report is dated 21 January 1991.
On its face the report states that it is a "report of the judicial manager, Mr Richard J. Grellman, under section 62 of the Life Insurance Act 1945". The report contains some 42 numbered pages plus many pages of appendices. In the introduction to the report, it states on page 1, that: "This report is prepared pursuant to section 62 of the Life Insurance Act 1945".
It is also stated on page 1 that:-

"The principal duties of the Judicial Manager are set out in Section 62 of the Act which requires the Judicial Manager to conduct the management of the company with the greatest economy compatible with efficiency and as soon as possible to file with the Court a report stating which of a number of courses set out in that provision is, in the Judicial Manager's opinion, the most advantageous to the general interest of the policyholders."

The report then proceeds to set out the provisions of paragraphs (a) to (e) inclusive of s. 62(1) and then continues on page 1:-

"At this point in time it is premature to recommend any definitive course of action as envisaged by Section 62 of the Act. Accordingly , this report is in the nature of an interim report to inform the Court, policyholders and all interested parties of my findings to date."

On pages 26 to 35, the judicial manager states various options which he perceives as being available "to best protect the interests of the policy holders". They include the sale of the company or the transfer of its business to another life insurance company or financial institution; the sale or reinsurance of segments of the company's business; seeking the Court's approval to recommence the writing of new business; the operating of the company on a care and maintenance basis; remaining closed to new business; promoting a scheme of arrangement; winding up the company or seeking a government life insurance industry levy.
At pages 40 and 41, the judicial manager makes recommendations which includes recommendations as follows:-

"i. that because establishing the solvency status of the company could take considerable time to clarify, the company remain under Judicial Management for the time being; ii. that the company remain closed to new business until it is able to demonstrate statutory solvency after providing reasonable market-based bonus and crediting rates to policyholders for the period since 1 October 1989; iii. that the Judicial Manager pursue as a matter of priority the sale or reinsurance of the company's risk insurance business and make recommendations to the Court as to the most appropriate course of action."

Page 42 contains the judicial manager's conclusion which states in part as follows:-

"The affairs of this company are complex. Whilst there is a large quantity of information in this report and the appendices, the company's major difficulty revolves around a few larger assets the recoverability of which is uncertain. Whilst this uncertainty persists, the position of policy holders cannot be established with accuracy".

The report of the judicial manager in the Regal matter is also dated 21 January 1991 and is for all presently relevant purposes substantially the same as is the report in the Occidental matter.
It is plain from the text of Division 8 itself that judicial management "is intended to be only a temporary phase to protect the interests of the policy owners": see the second reading speech of the then Prime Minister, Mr Chifley, when presenting the Life Insurance Bill 1945, to the House of Representatives on 25 May 1945, Hansard page 2147. What in practice will be a temporary phase, especially bearing in mind the complexity of modern life insurance businesses, is a matter of fact to be determined in each case. Doubtless a report under s.62 of the Act will generally be contained in one document, but it need not be so contained. Whether it appears from one document or a plurality of documents, there must be something that answers the description of a report which is filed with the Court and a copy of which is furnished to the Commissioner and is open for inspection by the public (s.62(1),(2) and (3)).
The report in each matter in the present case is plainly a report and is a self-contained document, but it does not do what s.62 (1) requires of it, namely, that it be a report "stating which of the following courses is in the circumstances" in the opinion of the judicial manager "most advantageous to the general interests of the owners of the policies of the company"; those courses being the five courses mentioned in paragraphs (a) to (e) of s.62(1). The report does not state which of the courses mentioned in paragraphs (a) to (e) is, in the judicial manager's opinion, most advantageous to the general interests of the owners of the policies of the company. Indeed, it expressly states that at the time it was prepared on 21 January this year, it was "premature to recommend any definitive course of action as envisaged by s.62 of the Act". The report is, as it states on page one, in the nature of an interim report to inform the Court, policy holders and all interested parties of the judicial manager's findings to date. Although s.62(1)(e) is cast in wide terms, such that the judicial manager may in his report recommend some course other than one mentioned in paragraphs (a) to (d), which he deems to be advisable, it is not correct to construe the present reports as falling within paragraph (e), because the essence of a report under s.62 is, speaking generally, that the judicial manager states what in his opinion should in effect be the fate of the company after it has ceased to be under judicial management.
The question arose in argument whether it is possible for a judicial manager to file more than one report pursuant to s.62 or whether it is confined to the making of one report and one only. Although at first glance the language of s 62 lends support to the view that only one such report may be filed with the Court during the life of the judicial management of the company concerned, I have come to the conclusion that this is an unduly restrictive interpretation of the section. There may be cases where more then one s.62 report can be filed, dealing with various aspects of a company's business or affairs. One s.62 report may be completed and the company still remain under judicial management, but that would be an exceptional case.
Judicial management like other forms of administration of companies, notably winding up, receivership and official management, are mechanisms for administering the affairs of companies by agencies outside the control of the board of directors of the company and its shareholders. Judicial management of life insurance companies would vary considerably from case to case; some would be comparatively simple and take only a short time; whereas others, like those with which the court is concerned here, are very complex and may take a substantial length of time before they are completed. In some cases it may be clear that the business of the company should be transfered to another company; but in other cases it may be appropriate that at one time the business of the company should be dealt with in a particular way, or part of the business of the company wound up, and at some later time another part of the business be dealt with in a different way.
It seems to me that s.62 is simply the mechanism adopted by the legislature for ensuring that as soon as possible the Court may make orders which it considers to be most advantageous to the general interests of the owners of policies of the company with respect to the affairs of the company in the longer term. At one time the judicial manager may take the view, for example, that part of the business of the company should be dealt with in a particular way and file a s.62 report accordingly. The Court may then hear the application of the judicial manager for an order to give effect to the course stated in his report and thus bring into play the relevant provisions of Division 8 including s.64. Some time later it may be appropriate that the balance of the business of the company be dealt with in a particular way and a further s.62 report can be filed with respect to that matter and again enlivening the provisions of Division 8 including s.64.
The next question that arises is whether, on the assumption that the reports in the present case are not reports within the meaning of s. 62, the judicial manager has power to prepare a scheme for the transfer of part of the company's risk insurance business, to another company. It was argued on behalf of the Battery Group Limited that there was no such power and reliance was placed upon s.62(1)(a) which states as one of the courses which may be recommended by the judicial manager in his report, the transfer of the company's business in pursuance of a Division 9 scheme. Reference was also made to other sections of the Act, notably s.65, and to the Court's powers under section 64.

Division 9 deals with the transfer of the life insurance business from one company to another or the amalgamation of their respective life insurance businesses. It has its own safeguards for policy holders and other interested persons. A copy of the scheme must be lodged with the Commissioner together with relevant documents including actuary reports, and I have already referred to the necessity for publication of notices pursuant to s.75(1)(b).
It is for the Court to confirm the scheme with or without modification or to refuse to confirm it under s.75(4). It would, I think, be a curious result if Division 9, which specifically deals with the transfer and amalgamation of life insurance businesses, could only be invoked by the judicial manager if he had filed a s.62 report. I do not think it is the correct interpretation to be given to the relevant provisions of the Act. The Act requires the judicial manager to file a s.62 report and one of the courses which he may recommend is the transfer of the company's business to another company pursuant to a scheme under Division 9. The Court may, pursuant to its powers under s. 64, make an order adopting that recommendation, which is the state of affairs recognised, though in curious language, by s.65; and the judicial manager is then required to prepare a scheme for the transfer in accordance with Division 9 (s.65). It is Division 9 that is the enlivening division with respect to the submission and confirmation of the scheme of transfer or amalgamation of life insurance businesses.
In my opinion the judicial manager may seek directions from the Court and the Court may give directions to him with respect to the preparation of Division 9 schemes and related matters. It is a not a condition precedent to that course that the judicial manager first file a report under s.62.
In the present case it is clear that the reason for the judicial manager not filing a s.62 report and stating that he favours the transfer of the risk business of Occidental and Regal to Mercantile Mutual Insurance Company Limited ("Mercantile Mutual"), is that the events that related to that proposal, did not reach fruition until after the filing of his reports in January this year. It would, of course, be open to the judicial manager to now file a section 62 report recommending in effect that the risk business of the two companies should be transfered to Mercantile Mutual, but it is not in my opinion a prerequisite to the judicial manager taking the necessary steps for the preparation of a scheme in accordance with Division 9.
The Agreed Questions
I have discussed the initial questions of principle which concern the judicial management of these two companies and their respective businesses. I now turn to the agreed questions.
The first specific question that it is agreed between the parties should be dealt with is this: What scale of fees should apply to work undertaken for the purposes of the judicial management by: (l) Mr Grellman, the judicial manager, (2) his partners, (3) the staff employed by him?
Counsel for the judicial manager seeks an order that the appropriate basis of remuneration to be awarded to all three categories of persons just mentioned is the basis that presently applies in the judicial management, namely, the rates of charges ordinarily applied by the firm of chartered accountants of which Mr Grellman is a member. Counsel recognises that there may be some difference between the appropriate rates chargeable by the judicial manager himself, those of his partners, and those of his staff. The Commissioner, through his counsel, supports the argument advanced on behalf of the judicial manager. The argument rests on these premises:

(a) that the judicial management of the companies is a very complex one;

(b) that there is a very substantial portion of his own time spent by Mr Grellman in the conduct of these judicial managements; and

(c) that judicial management is a unique creature in Australia, or at least was until the commencement of these proceedings.

Counsel for the Battery Group Limited argued that the appropriate rate of remuneration for the three categories of persons concerned and, in particular, the judicial manager himself, should be that rate which is approved by the Insolvency Practitioner's Association of Australia ("IPAA"). However, counsel has made it clear that his client does not seek to displace the arrangement presently approved, so far as remuneration is concerned, to date. He argues only in relation to future work that will be undertaken by Mr Grellman, his partners or his staff.
The question is not an easy one. It is, of course, for this Court to determine the appropriate rate of remuneration to be charged by a judicial manager and the Court is guided, as obviously it must be, by the rates of remuneration payable to persons who are qualified to engage in work of this kind. That rate is determined by market forces, though market forces are balanced to some extent by the rules of ethics and etiquettes that apply within the accounting profession and the views adopted on these questions by the relevant professional bodies.
The Court also has available to it the IPAA scale of charges which is a scale of charges that is endorsed in various fields of insolvency work such that the Supreme Courts of the States of Queensland, South Australia, Western Australia and, I believe, Tasmania and the Supreme Court of the Northern Territory, when assessing remuneration of liquidators apply it without reduction. The Supreme Courts of New South Wales and Victoria use the IPAA scale as one of the yardsticks to which they look, but the Courts conduct their own inquiries and the scales they approve are in varying degrees less than the scales adopted by the IPAA. I note with interest that the most recent IPAA scale has for the first time introduced differential rates of remuneration to partners of firms and others within the firm based on the capital city in which they primarily carry on their professions. No doubt those differential rates reflect the varying costs in the cities concerned, Sydney being, it would appear, the most expensive city in which to practice.
In these matters, the judicial management is of a complex and refined nature. There is abundant evidence before the Court as to the difficult issues that have confronted and that will confront the judicial manager in the course of his judicial management. They are issues that call for a high degree of understanding of problems of the kind with which life insurance companies are involved in general and these two companies in particular. They have, to date, and will at least in the near future, take a very great deal of the time of the judicial manager; certainly over fifty per cent of his available working time. Judicial management is, as I have said, something that is unique in this country and there is no scale of charges as yet approved by this Court in relation to the conduct of judicial management and, therefore, there is no directly relevant scale of charges applicable in courts in Australia to judicial management.
The Court adopted earlier in these matters the approach that it would be appropriate, at least for the time being, to allow remuneration to the judicial manager, his partners and his staff on the basis of the rates charged, from time to time, by the judicial manager's firm. In my opinion, this is a special case and it calls for the continuance for the time being of that basis of reward for the same three categories of persons that I have referred to and in particular, the judicial manager, as it is his time that is primarily occupied.
There may come a time when the character or nature of the work which will be undertaken by Mr Grellman and others within his firm becomes of a more routine nature. Once that event arises then the Court would need to be persuaded that the basis of remuneration that I have mentioned should continue and that it should not then shift to one more in keeping with the IPAA scale, be it more or less than that scale.
Accordingly, the order currently in force will remain for the time being, it being understood to remain so on the basis I have just mentioned. There is, I think, considerable force in the argument of counsel for the Battery Group Limited that, where one finds work essentially of a routine nature, then it ought to be prima facie rewarded on the basis of conventional scales that are adopted throughout this country.
There is in the circumstances therefore no need for any particular direction because the direction that has previously been given and is currently in force will continue to operate until further order.
I think it should be understood too that any interested person could put the matters back in the list at some time in the future if they seek a variation of that order. That would include, so far as is relevant for the present purposes, the Battery Group Limited as well as the Commissioner.
The Court answers question 1 as follows: The basis of remunertaion should be the one presently operating until further order.
Question 2: What procedures should be adopted by the judicial manager concerning the engagement and/or payment of third parties with professional or other expertise?
Counsel for the judicial manager has suggested that the question should be answered thus: that the judicial manager should inform the Commissioner of the present bases of remuneration of all solicitors, actuaries, consultants and others retained by him in these matters and that he should inform the Commissioner in the future of any change in those bases of remuneration and of any future retainers of the same or other persons and the proposed bases of their remuneration.
No objection is taken to that proposal, although counsel for the Commissioner has emphasised that the Commissioner does not perceive his role as being that of akin to a taxing officer of a court, that is, to investigate in fine detail the various bases of remuneration of which he may be given notice under this proposal if it is adopted. And nor, indeed, it is said will he necessarily be able to tell from within his resources as to whether every agreed basis of remuneration was one which it was proper to make. Otherwise he is content that he receive this information.
It is apparent from argument that, when the judicial manager does file reports with the Court, they will include, amongst other information, statements of receipts and expenses in the usual way and details of the information relating to remuneration of the kind which counsel for the judicial manager has outlined.
Accordingly, the Court answers Question 2 as follows
The judicial manager should inform the Insurance and Superannuation Commissioner of the present bases of remuneration payable to solicitors, actuaries, consultants and others retained by him. He should also inform the Commissioner in the future of any change in those bases of remuneration and of any future retainers of the same or other persons and of the proposed basis of their remuneration. Any reports filed with the Court by the judicial manager should also contain the same information.
I shall now turn to questions 3, 4 and 5 which are:
3. Should the judicial manager make application to the Court within a specified period for the purpose of finally recommending what course or courses in his opinion should be followed in respect of the companies?
4. If the answer to three is "yes", within what period?
5. If the answer to 3 is "no", should the judicial manager provide

reports to the Court as to the conduct of the judicial management and, if so, with what regularity?

As the argument proceeded on these questions it seemed to me that the area of dispute between the parties became considerably narrowed. It nevertheless leaves outstanding one question of principle and it is one of some importance.
It was argued on behalf of the Battery Group Limited that there is a fundamental misconception in the two reports of the judicial manager, namely, that, he on one view of the matter proposes to wait until all major variables that presently confront him have been resolved before he comes to the Court and makes the s.62 report with respect to the final destination of the company, its business and its affairs; a course which could involve him in two or more years of judicial management. For example, the ultimate fate of the company's finances and the interests of its policy holders and others may depend upon the recovery of certain loans including a loan known as the "Goldberg loan". It may depend in part upon the recovery of the moneys said to have been removed from the Occidental and Regal statutory funds when the purported sale of Occidental and Regal to Heath Holdings Pty Limited took place. It may also depend upon the extent of the policy liabilities and the value and recoverability of other assets.
Counsel for the Battery Group Limited said in essence that, whilst recognising that the problems of life insurance companies are these days complex and that a reasonable time must be allowed to a judicial manager before he files a s.62 report and recommends what should be done within the terms of that section, nevertheless a judicial management cannot be open ended. It cannot involve a judicial manager, so it was said, in effect administering the company to the point of winding it up, leaving only the formal administration of a winding-up to take place after he has ceased to perform his duties as judicial manager. It was said that this is really what the judicial manager is seeking to do in the present case because the outcome of certain of the litigation which is presently on foot, and to which I need not refer save that it is presently in at least two courts of this country, may well proceed through appellate or further appellate stages and involve the passing of two years or more. It was also said that, since the life insurance risk business of the companies is expected to be sold to Mercantile Mutual interests if the relevant scheme is approved (a result which should be known within a few months), that leaves only the less attractive business of the company remaining with it and that it would be wrong for that remaining business to remain in the hands of the judicial manager with attendant substantial liabilities being incurred. The proper course, it was said, was that, once the fate of the life insurance business is known, then there are certain clear options open to the judicial manager which he may elect to take. One could be to recommend the winding-up of the remaining business of the company and the other to appoint some external corporate manager of the remaining business of the company or possibly a mixture of the two.
The judicial manager through his counsel submitted on the other hand that he is aware of the fact that it is essentially an administration of a temporary nature, but the complexities of this administration which have been in his hands for some five months are such that he simply cannot recommend anything by way of a definitive or final course of action in relation to the whole or part of these companies' business at this stage.
I recognise that it is difficult for the judicial manager to state now a specific period of time within which a s.62 report may be filed, but it must be filed within the time stated in the section, namely, "as soon as possible". That no doubt means as soon as possible after the commencement of the judicial management; but as the prior words of section 62(1) themselves state:

"The judicial manager shall conduct the management with the greatest economy compatible with efficiency, ..."

I think it would be inappropriate for this Court to substitute some other description of the time within which the judicial manager should lodge his report under s.62. The words of the section speak for themselves and I prefer to leave them to do so.
These are complex judicial managements and the Court does not wish to place onerous burdens upon the judicial manager of reporting to the Court at any fixed periods of time. Essentially the Court puts its trust in the judicial manager and leaves it for him to decide when it is appropriate to report. But it must be remembered that the judicial management of these companies is a temporary administration akin to a provisional liquidation or receivership. It is not a full or comprehensive winding-up of the affairs of the companies or their respective businesses. The extent to which the judicial manager may continue in control of the business and affairs of the companies will depend on a variety of matters and it may mean that a long time passes before the judicial management concludes. I sympathise with the judicial manager's present position of being unable to specify for the purposes of s.62 the particular course of action as envisaged by paragraphs (a) to (d) inclusive set out in s.62(1). But as soon as the judicial manager is in a position to comply with the requirements of those paragraphs, or in the event of their not being applicable, paragraph (e), he should of course do so.
I say nothing about whether the time that elapses awaits the final recovery of the Goldberg loan or the other moneys to which I have referred, or the sale and disposition of assets of the company, except to say that it must be borne in mind at all times that these are temporary administrations.
As I read the relevant documents that have been placed before the Court by the judicial manager he is not suggesting that he has to await the recovery of the Goldberg loan, the fate of the other litigation and the final assessment of the value of all assets of the company before he makes a section 62 report. He is, as I read it, simply identifying the uncertainties and problems that confront him, and as soon as the correct moment arrives he will make a report under the section. That seems to me to be the correct course to take.
It has been suggested by counsel for the judicial manager that, in the state of uncertainty that presently exists, what the judicial manager should do is file a report as to his conduct of the judicial management by 30 June this year and a further report by 31 December this year on the assumption that the judicial management is still in existence. Those dates were selected because of the fact that the relevant financial year in these cases ends on 30 September, and a period of some two to three months thereafter should be allowed before the report must be filed. If there are to be six-monthly reports, the other report should be filed by 30 June.
I am reluctant to impose any temporal obligation on the judicial manager to make reports to the Court. It may involve him (and those whom he engages) in work and the expenditure of money; but I think in the circumstances it is prudent to express the view that the Court would expect to see during the course of the judicial management, if it subsists as late as the end of this year, as indeed it may, reports filed within the time suggested by counsel for the judicial manager. But I do not think it appropriate to give any specific direction to that effect.
Accordingly, I answer the questions as follows:
Question 3: Yes;
Question 4: The period specified in s.62(1), that is, as soon as possible; Question 5: Though this question does not strictly arise in view

of the answer to questions 3 and 4, nevertheless the judicial manager should provide reports to the Court as to the conduct of the judicial management in each case in conformity with the principles mentioned earlier by me.

I turn now to question 6 which reads:

"Is the judicial manager justified in causing a scheme pursuant to Division 9 of the Life Insurance Act 1945 to be prepared to give effect to the agreement between the companies and Mercantile Mutual Insurance Company Limited and thereafter making application for its confirmation by the Court?"

The Court answers this question:

The judicial manager is at liberty to take the action mentioned in the question.
Questions 7 to 11 of the Agreed Questions no longer arise as counsel have informed me that the process of consultation on those question has resulted in agreement being reached between the relevant parties.
Question 12 is: Should Mr Melzak be paid any amount and, if so, how much?
Question 13 is: Should the issue raised by question 12 be left to the determination of the judicial manager in the conduct of the management of Occidental?
These questions may be considered together. They arise because on the first day of the hearing a policyholder in Occidental, Mr Melzak, appeared representing himself, stating that he was entitled to a substantial sum of money and that he is in some distress financially because the money has not been paid to him.
It is obvious that the claims of Mr Melzak and those like him should be considered and dealt with as soon as it is possible to do so in the judicial management of Occidental and of Regal. But the extent to which they can be paid all, or any part, of the moneys that may be due to them is not a matter which it is appropriate for the Court to say anything about at this stage because so much depends on other relevant considerations relating to the finances of these companies and the fate of the various statutory funds.
Accordingly, the Court answers these questions as follows; It is not necessary to answer question 12.
Question 13: Yes.
Ancillary Matters
As to the cross-vested file, known as matter No. 005799 of 1990 of the Equity Division of the Supreme Court of New South Wales, between the Battery Group Limited and the National Companies and Securities Commission, the Court orders that the papers which have been remitted to this Court be handed to the New South Wales Supreme Court until further order.
As to costs of these matters, the judicial manager should have his costs in the usual way and accordingly the Court makes the usual order in relation to his costs, charges and expenses. As to the costs of the Commissioner and the other parties, I am not satisfied on the material presently before me and in the light of the present argument that the Court has power to make any effective order for costs or, if it has, that it should exercise it at least so far as section 60(3) is concerned. However, I do not wish to shut out any party from making any subsequent application for costs in the matter particularly as the submissions of all the parties have been of help in resolving the questions. Accordingly I reserve all other questions of costs. The matter may be restored to the list on 7 days notice.

[1991] FCA 202

08 APRIL 1991