Foundation Life (NZ) Ltd

[2025] NZHC 1786

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2025-485-142

[2025] NZHC 1786

IN THE MATTER

of a scheme of arrangement under pt 15 of the Companies Act 1993

RE

FOUNDATION LIFE (NZ) LIMITED

Applicant

Hearing:	25 June 2025
Appearances:	M Arthur and N Whittle for Applicant A Ross KC as Amicus Curiae
Judgment:	2 July 2025

JUDGMENT OF ASSOCIATE JUDGE SKELTON

[Approval of Scheme of Arrangement]

Introduction

[1]                 Before me is an application for final orders for approval of a scheme of arrangement (the Scheme) under pt 15 of the Companies Act 1993. If approved, the Scheme will rearrange the rights of approximately 27,588 life insurance policyholders who hold one or more of the participating policies issued by Foundation Life (NZ) Ltd (Foundation Life), the applicant.1

[2]Foundation Life, in short, seeks approval of the Scheme to:

(a)convert  the  policy  of  each  eligible  policyholder   resident   in   New Zealand into replacement cover provided by Chubb Life Insurance New Zealand Limited, cash, or a combination; and

1      This figure is an approximation as at 31 December 2024.

FOUNDATION LIFE (NZ) LIMITED [2025] NZHC 1786 [2 July 2025]

(b)provide eligible policyholders based overseas with the cash payment option automatically or, if selected within a certain period, the option to transfer ownership of their current policy.

[3]The application is unopposed.

Background

[4]                 Foundation Life is an insurance company that was previously known as Tower Life (N.Z.) Limited. Before its insurance policies were closed to new business and entered run-off in November 2000, its business focussed on the sale and management of life insurance policies. The relevant policies for the purpose of this proceeding (the Whole of Life and Endowment policies) provide both life insurance and an investment. Approximately 27,588 life insurance policyholders participate in Foundation Life’s insurance business profits, although not all will be eligible for the Scheme discussed below.

The Scheme

[5]                 The Scheme proposes to convert the current policy of each eligible policyholder resident in New Zealand into one of the following, at their choice:

(a)replacement cover provided by Chubb Life Insurance New Zealand Limited (with a guaranteed amount of life cover that will, at the relevant date, be five per cent higher than the current policy’s death benefit, for which no further premiums need to be paid);

(b)a cash payment that will, at the relevant date, be a minimum of five per cent higher than the current policy’s surrender value (capped at the current policy’s death benefit); or

(c)a combination of life cover and cash, in a one third to two thirds ratio either way (at the policyholder’s choice).

[6]                 Eligible policyholders based overseas will receive the cash payment option by default or can transfer ownership of the policy to a New Zealand resident before an allocated time, so the new policyholder can access the other options.

[7]                 I understand that the last date for policyholders to make their choice is currently estimated to be around 14 August 2025, assuming the Scheme is approved.

Procedural history

[8]                 On 27 February 2025, Foundation Life filed the originating application before me, seeking approval of the Scheme and an order that it is binding upon Foundation Life and Foundation Life’s eligible policyholders, as prescribed by the Scheme. The rationale for the proposed changes is primarily that diseconomies of scale have arisen due to the diminishing number of policies managed by Foundation Life. These challenges have raised the likelihood of higher administration costs in future, alongside other pressures.

[9]                 Foundation Life concurrently filed an interlocutory application without notice for directions as to service and initial orders under s 236 of the Companies Act. On  6 March 2025, Grice J made directions to facilitate the appointment of counsel to assist and that a first hearing on the initial orders application be set down.2 Mr Ross KC was accordingly appointed.3 Having reviewed Mr Ross’ report on the initial issues relating to the interlocutory application, jurisdiction, and procedure proposed (alongside the other materials before me), I made the initial orders sought by counsel with minor amendments on 24 March 2025 (the Initial Orders).4 The Initial Orders provided for service and Foundation Life to hold a scheme meeting amongst eligible policyholders to seek approval of the Scheme. Additionally, they set out terms for provision and receipt of the relevant materials and notice before that meeting, and eligible policyholders’ rights of opposition, among other procedural matters.

2      Re Foundation Life (NZ) Ltd HC Wellington CIV-2025-485-142, 6 March 2025 at [5](a)–(b).

3      Re Foundation Life (NZ) Ltd  HC Wellington CIV-2025-485-142, 24 March 2025 [Minute of   24 March 2025] at [2].

4      At [3]–[5].

[10]             Subsequently,   an   affidavit   from   Grant   Piercy,   Foundation   Life’s Chief Executive Officer, dated 16 June 2025, was filed by counsel for Foundation Life, detailing the steps taken to comply with the Initial Orders. Mr Ross also filed a further report dated 16 June 2025 confirming that he had attended the meeting of the policyholders and that the outcome of the voting indicated “overwhelming support for the scheme”.

[11]             On 23 June 2025, Mr Arthur on behalf of Foundation Life confirmed that the last of the relevant conditions had been fulfilled. In particular, the requisite documents had been provided to the Reserve Bank of New Zealand, as required, and all regulatory approvals, consents, and other acts necessary to implement the Scheme had been obtained.

Legal principles

[12]Section 236 of the Companies Act relevantly provides:

236     Approval of arrangements, amalgamations, and compromises

(1)Notwithstanding the provisions of this Act or the constitution of a company, the court may, on the application of a company or any shareholder or creditor of a company, order that an arrangement or amalgamation or compromise shall be binding on the company and on such other persons or classes of persons as the court may specify and any such order may be made on such terms and conditions as the court thinks fit.

…

[13]             The Court has a broad discretion under pt 15 of the Companies Act.5 The key considerations are:6

(a)whether there has been compliance with the applicable statutory provisions in the course of the process;

5      Weatherston v Waltus Property Investments Limited [2001] 2 NZLR 103 (CA) at [31].

6      At [32] and [35]–[36] and Re Lifetime Income Ltd [2022] NZHC 810 at [37]–[38].

(b)whether the Scheme has been fairly put before the class concerned, and whether sufficient information was provided to those affected to judge and vote upon the arrangement;

(c)whether the Scheme is capable of being accepted; that is, the Scheme is such that an intelligent and honest businessperson (being a member of the class concerned and acting in respect of that interest) might reasonably approve it; and

(d)whether the proposed compromise is fair and equitable.

[14]             In addition to the power under s 236(1), this Court may also make additional orders required to give effect to the Scheme.7

Submissions

[15]             Mr Arthur submits that the Scheme has the support of Foundation Life’s board, the appointed actuary, the independent actuary and policyholders and therefore is capable of being accepted. The Scheme was fairly put to policyholders, who voted in favour of it, and is a “fair and equitable” proposal. He has provided a detailed account through the evidence filed and his written and oral submissions of the steps taken to comply with the relevant procedural requirements.

[16]             Mr Ross, counsel to assist, reports that, aside from two minor procedural issues,8 the information that was due to go to policyholders was delivered and advertised as contemplated by the Initial Orders. Accordingly, the policyholders have received and had the opportunity to consider the materials that were approved by this Court at the initial order stage. At the policy holder meeting held on 9 June 2025,  Mr Ross submits that he did not identify any valid complaint relating to a material failure on Foundation Life’s part to put the proposal to policyholders adequately,

7      Companies Act 1993, s 237(1).

8      One error related to the bulk mail out: 2000 eligible policyholders did not initially receive the explanatory statement, or the freepost return envelope in the first delivery of materials to them. The second issue was the contact number included in a one-page introductory note, which transpired to be the Insurance & Financial Services Ombudsman Scheme, rather than Chubb. In both cases, I am satisfied that appropriate corrective measures were taken in accordance with clause [3.11] of the Initial Orders.

despite the dissatisfaction expressed by some policyholders present. Of the approximately 25 per cent of policyholders who participated in the voting, overwhelming support was demonstrated. Nothing has changed, Mr Ross submits, causing him to believe that the Scheme is no longer one that an intelligent and honest businessperson might reasonably approve.

Analysis

[17]             I consider it appropriate to make orders approving the Scheme and directing that it is binding on Foundation Life and its eligible policyholders for the reasons that follow.

Has there been compliance with the applicable provisions?

[18]I accept that this requirement has been met.

[19]             The Initial Orders have, both in Mr Arthur and Mr Ross’ submission, been adequately complied with. The explanatory statement and Scheme terms are substantially the same as the drafts originally put before the Court,9 and the relevant materials were distributed in accordance with the Initial Orders. Further, the Scheme meeting was advertised as required and convened on 9 June 2025. In respect of the voting process, 96.47 per cent in number of policyholders who voted and 96.85 per cent by value voted in favour of the Scheme.10

[20]             As mentioned, Mr Arthur also confirmed by memorandum dated 23 June 2025 that the regulatory approvals condition had been satisfied and that the Reserve Bank had been kept up to date on the Scheme and provided with relevant documents. Once approved by the Court, Mr Arthur also emphasises that the Scheme will remain conditional on the finite pool of participating assets being sufficient, in Foundation Life’s reasonable opinion, to pay Chubb Life’s premium, policyholders’ payments, the shareholder’s entitlement ($16.05 million), and other liabilities. If, as a result of the

9      Excluding a technical cross-referencing change and presentational amendments to the explanatory statement.

10 This was consistent with the Initial Orders and, I accept, with the scheme of the Companies Act: whilst pt 15 does not contain required voting thresholds, a “majority in number representing 75% in value” is adopted elsewhere: see Companies Act 1993, s 239AK(2) and sch 5, cl 5(2).

elections made by policyholders, there are insufficient assets to pay the shareholder’s entitlement after paying the cash payments and Chubb Life premiums, then the Scheme will not proceed. However, the shareholder may decide not to enforce that condition by agreeing to accept a lesser sum by way of shareholder entitlement. Foundation Life expects the condition to be satisfied based on actuarial analysis. The Insurance Prudential Supervision Regulations 2010 (IPSA Regulations) limit the amounts a shareholder of a licensed insurer can receive from a participating fund. I accept that the limit cannot be exceeded in this case as the payment is available under the Scheme Terms only “to the extent permitted by law”.

Has the Scheme has been fairly put before the class concerned, and sufficient information provided?

[21]             The Scheme was fairly put to policyholders. The explanatory statement described the advantages and potential disadvantages of the Scheme. Mr Ross describes it as “comprehensive and well set out”, and I consider that there was sufficient information provided for those affected to judge and vote upon the Scheme. Inquiries from policyholders were appropriately responded to and at the Scheme meeting, policyholders online and in person were able to ask questions. Further, no fresh issues have arisen relating to class composition since I ordered that eligible policyholders could be considered as a single class.11

Is the Scheme such that an intelligent and honest businessperson (being a member of the class concerned and acting in respect of that interest) might reasonably approve it?

[22]             Mr Arthur submits, and I accept, that the Scheme is capable of acceptance. This is apparent from the proportion of policyholders who voted in favour. The information before me is that the current policies may no longer be in policyholders’ best interests. If the current policies are to continue, they will require ongoing premium payments, and the death benefit will continue to change for all policyholders, either reducing for some, or with low increases. The actuarial information before me suggests that policyholders would receive 69 per cent of the current total assets under

11     Minute of 24 March 2025, above n 3, and Initial Orders at [3.5(d)].

current settings, compared with 95 per cent under the Scheme. In essence, as the independent actuary put it:

… the Scheme is about dividing an amount of money available today which would otherwise be distributed between policy owners, the shareholder and expenses over time. … The Scheme is a proposal to divide that money now… thereby avoiding some of the costs of running a decreasing fund with increasing diseconomies of scale.

[23]             The cash payment available under the Scheme will be at least 5 per cent higher than the surrender value of the current policies. The sum insured under the Chubb Life policies will also be at least 5 per cent higher than the current death benefits.

Is the Scheme fair and equitable?

[24]             On the information before me, I also accept that the Scheme is fair and equitable. The actuary appointed by Foundation Life developed 10 principles for considering whether the Scheme was in the policyholders’ best interests, against which he was satisfied that the Scheme is in the individual and collective best interests of policyholders. The independent actuary also concluded that the Scheme is fair and equitable for eligible policyholders. In particular, the independent actuary noted that the Scheme gives policyholders at least 80 per cent of the profits, the division between policyholders is equitable, policyholders can decide whether they prefer cash or insurance, and policyholders benefit from the funds being divided up now.

Conclusion and orders

[25]             For the reasons I have given, I consider the criteria relevant to the Court’s discretion to approve the Scheme are met here.

[26]             I am satisfied that the Scheme should be approved on the terms set out in the Scheme Terms annexed to the draft final orders filed by counsel for the applicant, and that an order should be made that the Scheme is binding on:

(a)Foundation Life (NZ) Ltd; and

(b)Foundation Life’s Eligible Policyholders (as defined in the Scheme Terms).

[27]             I am satisfied that final orders should be made in terms of the draft final orders filed by counsel for the applicant, and orders are made accordingly with the following amendments:

(a)regarding [1] of the final orders, “Associate Judge Skelton” and “2 July 2025” should be inserted; and

(b)regarding [3.6] of the final orders, “16 June 2025” should be inserted.

Associate Judge Skelton

Solicitors:
Chapman Tripp, Wellington for Applicant