Oceanic Life Ltd & Anor v Insurance & Superannuation Commissioner The Life Insurance Company of Australia Ltd & Anor v Insurance & Superannuation Commissioner

[1997] FCA 1447

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG 751 of 1997

BETWEEN:	OCEANIC LIFE LIMITED APPLICANT
AND:	TYNDALL LIFE INSURANCE COMPANY LIMITED APPLICANT
AND:	INSURANCE & SUPERANNUATION COMMISSIONER RESPONDENT

NG 752 of 1997

BETWEEN:	THE LIFE INSURANCE COMPANY OF AUSTRALIA LIMITED APPLICANT
AND:	TYNDALL LIFE INSURANCE COMPANY LIMITED APPLICANT
AND:	INSURANCE & SUPERANNUATION COMMISSIONER RESPONDENT

JUDGE:	HILL J
DATE:	8 DECEMBER 1997
PLACE:	SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

Before the Court are two applications brought under Part 9 of the Life Insurance Act 1995 (Cth) (“the Act”). The first concerns Oceanic Life Limited and the second The Life Insurance Company of Australia Limited. In each case application is made to confirm a scheme pursuant to which the life insurance business of the relevant company is to be transferred to or amalgamated with the business of Tyndall Life Insurance Company Limited. Subject to the two matters to which reference will shortly be made, each application has been shown to comply with the provisions of Part 9 and the various procedural steps required by that Part have been shown to be satisfied.

The first of the two matters, and by far the more important of them, is the question whether the agreement to which s 189 of the Act refers must be in writing or whether it can be proved by proving an oral offer and an oral, communicated acceptance. The papers, as initially filed, take the latter course. So, through affidavit evidence there is proved a meeting of directors authorising the making of an offer and a meeting of directors authorising its acceptance together with other evidence showing communication.

The second matter concerns the provisions of s 193 of the Act. It may shortly be stated to be whether the terms of the agreement have been set out in the scheme as the section requires. The question arises because the agreement is an agreement that the business of the respective insurer be transferred on the terms of the scheme and the scheme itself merely sets out its own terms without specifically stating what the terms of the actual agreement are.

It was submitted by counsel for the parties, and I should say that the Commission which appeared does not take any point in opposition, but rather supports the applicants that the word “agreement”, as used in s 189 of the Act, refers merely to the consensual act of agreement, presumably with consideration, the word having its ordinary technical meaning.

The alternative construction is that the word "agreement" as used in the section refers to a written document rather than a consensual act.

It is self evident that the meaning of a word must depend upon its context: Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) (1981) 147 CLR 297. That context includes not merely the language of surrounding sections, but also the historical background or setting. The history of s 189 and surrounding sections of the Act have thus been fully canvassed in argument.

The starting point is to be found in the Assurance Companies Act 1909 9 Edw 7, Ch 49, that being an Imperial Act dealing with the consolidation of companies carrying on assurance or insurance business. Section 13 of that Act provided for the sanction by the Court of a “proposed arrangement” for amalgamation of assurance companies or for the transfer of business of such companies.  It was provided that the agreement or deed under which the amalgamation or transfer was affected should be open for inspection.  It is clear in that context that the words "agreement or deed" referred to instruments and that the word "agreement" could not be interpreted as the consensual act which is embodied in an instrument.

In Australia there were State Acts dealing with life assurance companies and the amalgamations of such companies.  An example of these is the Life Assurance Company Act 1936 (SA) which dealt with amalgamations or transfers of life assurance business.  It provided for the Court to grant approval and, by s 30(4) of that Act, that the agreement or deed governing the transaction was to be open for inspection.  Again the words referred to “instruments” not acts.

In due course the Federal Parliament introduced the Life Insurance Act 1945 the immediate predecessor of the present legislation. Section 73 of that Act dealt with the need for an application to the Court to be made. It dealt also in s 74 with the preparation of a scheme which would set out the terms of "the agreement or deed under which it is proposed to affect the transfer or amalgamation".  It was provided by s 76 that certified copies of the scheme and the agreement or deed under which the transfer amalgamation was effected were to be lodged one month after the completion of the transfer amalgamation with the insurance commissioner.  Again, the agreement or deed to which reference is made is to be in writing and the word "agreement" does not relate to a consensual act.

The 1995 Act is clearly substantially influenced by the 1945 Act, although a number of sections have been rearranged and re-written. I have already referred to s 189. Section 197 provides for documents to be lodged with the insurance commissioner but does not stipulate the documents specifically, requiring merely that the requirement relate to such documents as the regulations might prescribe. The regulations have prescribed, inter alia, the agreement or deed pursuant to which the transfer or amalgamation takes place.

It is, of course, true that there is a danger in seeking to define legislation which parliament has passed by reference to regulations which are the work of the executive.  However, there are many cases, and the present is one, where the scheme of a particular matter is to be found not only in the legislation, but also in the regulations.  A very early example of such a case was the sales tax legislation of 1930 which Sir Own Dixon said was intelligible only by reference to the regulations which were prescribed at the same time as the legislation itself was passed.

The present case is not, perhaps, quite so extreme as that, but having regard to the history, which I have already indicated, it seems to me that in 1995 the legislature merely took out of the Act the specificity of documents which were to be filed and left that as a matter for the regulations. Parliament did not, in my view, intend thereby to change the meaning of the word "agreement" which had appeared in legislation emanating from the imperial law on life insurance of 1909. In my view, in s 189 where the word "agreement" is used, it is used in the sense of written agreement rather than consensual act.

Counsel then indicated that each company was prepared to accept my view of the law in the circumstances and to now enter into a written agreement. Evidence has been put to me that that has now happened. That raises as a question whether the agreement to which s 189 refers has to be on foot at the time the scheme was formulated and details of it circulated or whether it is sufficient if the agreement was in writing at the time the matter comes before the Court for approval or confirmation under s 194.

The question is not as clear as one might like. For the future, those contemplating transfers or amalgamations of life insurance business should ensure that a written agreement is put into place before the scheme is committed to writing. However, s 189 refers, by way of definition, to the Part relating to a company that is a “proposed party” to an agreement and the question posed by s 189 is whether in those circumstances the definition section contemplates, as an extreme case, that there might be no agreement at all until the matter comes before the Court.

The first time that the part uses the words "company affected by a scheme", which are defined in s 189, is in s 191(3) which provides for notice of intention to be published including certain details in relation to each company affected by the scheme.

The next occasion in which the words are used is in s 193 which provides that any company affected by a scheme may apply to the Court for confirmation. It is clear that the moment of confirmation has the effect under s 195(a) of making the scheme binding on all persons. At that moment of time clearly there must be the necessary agreement which s 195 gives statutory effect. Prior to that time there may be an agreement, but it could not have statutory effect until confirmation. As I say, the matter is far from easy. Reference to the history, and particularly the 1945 Act, gives little assistance. The legislation has long referred to "proposed party", but there is an ambiguity in that expression in s 189 and comparable sections.

Not without some doubt, I have concluded that it suffices that the agreement in question be in place at the time of confirmation or, that is to say, prior to confirmation, but at the time the application is before the Court.  So, too, it is necessary that at that time the scheme set out the terms of the agreement.  It is proposed to amend the scheme in a form which makes it now clear that the terms of the agreement are set out in it and I am requested to approve the scheme subject to that amendment being made.  I propose so to do.

As all requirements of Part 9 are now satisfied, I would in accordance with s 194 of the Act make orders in each case confirming each scheme, but subject to the modification which has been agreed with counsel concerning the terms of the scheme.

There is a further modification in the case of the application of Oceanic Life Limited, namely that appendix 1 of the scheme be amended by deleting the word "wholesale" in each place it appears in sub-pars  1 and 3 in Part 3.1 and sub-pars  1, 3 and 5 in Part 4.1 and that there be inserted in its place the word "quantum".

I would make in addition orders that the costs of the Insurance and Superannuation Commissioner in these proceedings be assessed or if assessment cannot be agreed upon that those costs be taxed and when so taxed paid by the applicants to the Insurance and Superannuation Commissioner or to his solicitor and I direct that the need for compliance with par 2(c) of s 191 of the Act (insofar as it requires an approved summary of the scheme be given to those policy owners for when Oceanic does not have a current address identified in pars 4 of the Affidavit of Martin Gilchrist Alexander, sworn 1 December 1997 and filed herein) is dispensed with.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill.

Associate:

Dated:             16 December 1997

Counsel for the Applicants:	N C Hutley SC
Solicitors for the Applicants:	Abbott Tout
Counsel for the Respondent:	J Noonan
Solicitors for the Respondent	Australian Government Solicitor
Date of Hearing:	8 December 1997
Date of Judgment	8 December 1997