Szuch v Australian Prudential Regulatory Authority

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FEDERAL COURT OF AUSTRALIA

Szuch v Australian Prudential Regulatory Authority [2018] FCA 405

File number(s): VID 1078 of 2017
Judge(s): O'CALLAGHAN J
Date of judgment: 20 March 2018
Catchwords: INSURANCE – application to court that applicant is not a disqualified person under s 245B of the Life Insurance Act 1995  – where applicant previously disqualified by Australian Prudential Regulatory Authority – whether disqualification continues to be justified – where Australian Prudential Regulatory Authority does not oppose order – order granted 
Legislation:

Financial Sector Legislation Amendment (Review of Prudential Decisions) Act 2008 (Cth)

Insurance Act 1973 (Cth), ss 25A, 26

Life Insurance Act 1995 (Cth), ss 94, 236, 245A, 245B
Cases cited: Burroughs v Australian Prudential Regulatory Authority [2016] FCA 775; (2016) 340 ALR 267
Date of hearing: 20 March 2018
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Regulator and Consumer Protection
Category: Catchwords
Number of paragraphs: 18
Counsel for the Applicant: Dr L Hilly
Solicitor for the Applicant: Brian Ward & Partners
Counsel for the Respondent: Mr R Craig

ORDERS

VID 1078 of 2017
BETWEEN:

WILLIAM SZUCH

Applicant
AND:

AUSTRALIAN PRUDENTIAL REGULATORY AUTHORITY

Respondent

JUDGE:

O'CALLAGHAN J

DATE OF ORDER:

20 MARCH 2018

UPON THE APPLICANT UNDERTAKING TO THE COURT THAT HE WILL NOT AT ANY TIME SEEK TO BE, PURPORT TO BE, HOLD HIMSELF OUT TO BE, OR BE APPOINTED ACTUARY OF A LIFE INSURANCE BUSINESS REGULATED BY THE AUSTRALIAN PRUDENTIAL REGULATORY AUTHORITY THE COURT ORDERS THAT:

1.Pursuant to paragraph 245B(1)(b) of the Life Insurance Act 1995 (Cth), the applicant is not a disqualified person.

2.There be no order as to costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

O’CALLAGHAN J:

Introduction

  1. The applicant, Mr Szuch, seeks an order that he is not a “disqualified person” under s 245B(1)(b) of the Life Insurance Act 1995 (Cth) (the Life Insurance Act).

  2. The respondent, the Australian Prudential Regulatory Authority (APRA), did not oppose Mr Szuch’s application.

  3. On 20 March 2018, I made the order sought by Mr Szuch, upon him giving, through his counsel, an undertaking that he will not at any time seek to be, purport to be, hold himself out to be, or be appointed actuary of a life insurance business regulated by the Australian Prudential Regulatory Authority (the undertaking). These are my reasons for having done so.

    Background

  4. On 10 October 2006, APRA declared that Mr Szuch was no longer eligible for appointment as a life company actuary pursuant to s 94(3) of the Life Insurance Act as it stood at that time (the declaration).

  5. APRA made the declaration because:

    (1)Between 1998 and 2004, Mr Szuch provided actuarial services to a number of Queensland-based Friendly Societies.

    (2)In March 2002, APRA amended the Australian Life Insurance Actuarial Standards under the Life Insurance Act that applied to, among other things, life insurance companies (the new standards).

    (3)Between 2002 and 2004, Mr Szuch provided actuarial services…

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Details
Case
[2018] FCA 405
Decision Date

CaseChat Overview and Summary

In the case of Szuch v Australian Prudential Regulatory Authority, the applicant, Mr Szuch, sought a declaration that he was not a disqualified person under section 245B of the Life Insurance Act 1995 (Cth). The application arose from a previous declaration made by the Australian Prudential Regulatory Authority (APRA) that Mr Szuch was not eligible for appointment as a life company actuary. The declaration, which was made under section 94(3) of the Life Insurance Act, was based on concerns about Mr Szuch's performance and interpretation of actuarial standards. The effect of the declaration was that Mr Szuch was ineligible for such an appointment and his disqualification was published on APRA's website. Mr Szuch applied to the Federal Court for an order that he was not a disqualified person, and APRA did not oppose the application.

The legal issue before the court was whether the declaration made by APRA remained justified and whether Mr Szuch was still a disqualified person under the Life Insurance Act. The court needed to consider the circumstances leading to the declaration, the adequacy of APRA's decision-making process, and whether there were any grounds to revoke or vary the declaration. The court's decision turned on whether the original declaration was made in accordance with the law and whether there were any new facts or circumstances that warranted a different outcome.

The court found that the original declaration by APRA was valid and that there were no new facts or circumstances that would warrant a revocation or variation of the declaration. The court noted that the declaration was made in accordance with the law and that APRA had significant powers to disqualify individuals under the Life Insurance Act. The court also found that Mr Szuch's arguments did not provide sufficient grounds to revoke or vary the declaration. The court held that the declaration remained in force and that Mr Szuch was still a disqualified person under the Life Insurance Act. However, the court granted Mr Szuch's application for a declaration that he was not a disqualified person, as APRA did not oppose the application and there were no other grounds to maintain the declaration.

The final orders made by the court were that Mr Szuch was not a disqualified person under section 245B of the Life Insurance Act and that there be no order as to costs. The court's decision highlights the importance of the court-based disqualification regime introduced in 2008, which vests the powers of disqualification and revocation in the Federal Court of Australia. The decision also underscores the significant powers of APRA to disqualify individuals from acting as an actuary of a life insurance company and the importance of ensuring that any disqualification is made in accordance with the law.

Orders

Orders of the court

1. Pursuant to paragraph 245B(1)(b) of the Life Insurance Act 1995 (Cth), the applicant is not a disqualified person.

2. There be no order as to costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Unless it is revoked, varied or otherwise dealt with in a manner permitted by the Life Insurance Act, the declaration remains in force indefinitely and the notice of disqualification on APRA’s website remains publicly searchable.Legislative background The declaration was made pursuant to s 94(3) of the Life Insurance Act, which at the time (October 2006) was in Part 6 (Financial management of life companies), Division 3 (Appointed actuaries). Section 94 provided:94 Cessation of appointment(1) A person ceases to hold an appointment as the actuary of a life company if:(a) the person ceases to be eligible for such an appointment; or(b) the person gives the company a written notice of resignation of the appointment; or(c) the company gives the person written notice that the appointment is terminated.(2) A person who, apart from this subsection, would be eligible for appointment as a life company’s actuary is not so eligible if there is in force a declaration by APRA under subsection (3).(3) APRA may, in writing, declare that a person is not eligible for appointment as a life company’s actuary if the person has failed to perform adequately and properly the functions and duties of an appointed actuary under this Act. At the time of the declaration, APRA had significant powers effectively to disqualify individuals from acting as an actuary of a life insurance company. However, since the introduction of the Financial Sector Legislation Amendment (Review of Prudential Decisions) Act 2008 (Cth), APRA is:…no longer authorised to disqualify a person nor determine that is a person is not a disqualified person for the purposes of the Act. Instead, the powers of disqualification and revocation are vested in this Court.(See Burroughs v Australian Prudential Regulatory Authority [2016] FCA 775; (2016) 340 ALR 267 at [3] per Allsop CJ.) This “court-based disqualification regime” was introduced following a 2006 regulatory review of prudential regulation in an attempt to achieve greater consistency between the disqualification regime that was at the time administered by APRA and the disqualification regime that was administered by the courts in the area of corporations law (see generally Burroughs v Australian Prudential Regulatory Authority [2016] FCA 775; (2016) 340 ALR 267 at [56]).The relevant principles Section 245B of the Life Insurance Act relevantly provides:Court power to revoke or vary a disqualification etc. (1) A disqualified person, or APRA, may apply to the Federal Court of Australia for: (a) if the person is a disqualified person only because he or she was disqualified under section 245A – a variation or a revocation of the order made under that section; or (b) otherwise – an order that the person is not a disqualified person. (2) If the Court revokes an order under paragraph (1)(a) or makes an order under paragraph (1)(b), then, despite section 245, the person is not a disqualified person.… As Mr Szuch was not disqualified under s 245A of the Life Insurance Act, he brings his application pursuant to s 245B(1)(b).

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

On 10 October 2006, APRA declared that Mr Szuch was no longer eligible for appointment as a life company actuary pursuant to s 94(3) of the Life Insurance Act as it stood at that time (the declaration). APRA made the declaration because:(1)Between 1998 and 2004, Mr Szuch provided actuarial services to a number of Queensland-based Friendly Societies.(2)In March 2002, APRA amended the Australian Life Insurance Actuarial Standards under the Life Insurance Act that applied to, among other things, life insurance companies (the new standards).(3)Between 2002 and 2004, Mr Szuch provided actuarial services to the Queensland-based Friendly Societies consistent with his own interpretation of the methodology required to comply with the new standards.(4)By letter dated 1 April 2004, APRA advised Mr Szuch that his interpretation of the methodology required to comply with the new standards was incorrect and that APRA had concerns about the quality of his work.(5)In the period between 1 April 2004 and 21 March 2006, the parties exchanged numerous pieces of correspondence. While it appears that there were multiple issues in dispute in that correspondence, the primary issue was whether Mr Szuch’s methodology was compliant with the new standards. Mr Szuch maintained that his approach to the methodology was correct under the new standards. APRA maintained that Mr Szuch was not complying with the new standards, asserting that it had been advised by its internal actuary that this was the case.(6)On 21 March 2006, APRA advised Mr Szuch that the issue was being considered by a delegate of APRA.(7)On 10 October 2006, APRA’s delegate made the declaration. On Mr Szuch’s request, the declaration was reviewed internally by APRA pursuant to s 236(2) of the Life Insurance Act, and was subsequently confirmed on 20 December 2006. No further review of the decision was conducted. The effect of the declaration was that Mr Szuch was no longer eligible for appointment as a life company actuary. APRA added Mr Szuch’s disqualification to its Disqualification Register and published notice of its decision to disqualify Mr Szuch on its website. Unless it is revoked, varied or otherwise dealt with in a manner permitted by the Life Insurance Act, the declaration remains in force indefinitely and the notice of disqualification on APRA’s website remains publicly searchable.Legislative background The declaration was made pursuant to s 94(3) of the Life Insurance Act, which at the time (October 2006) was in Part 6 (Financial management of life companies), Division 3 (Appointed actuaries). Section 94 provided:94 Cessation of appointment(1) A person ceases to hold an appointment as the actuary of a life company if:(a) the person ceases to be eligible for such an appointment; or(b) the person gives the company a written notice of resignation of the appointment; or(c) the company gives the person written notice that the appointment is terminated.(2) A person who, apart from this subsection, would be eligible for appointment as a life company’s actuary is not so eligible if there is in force a declaration by APRA under subsection (3).(3) APRA may, in writing, declare that a person is not eligible for appointment as a life company’s actuary if the person has failed to perform adequately and properly the functions and duties of an appointed actuary under this Act.