HIGH COURT OF SOLOMON ISLANDS

IN THE MATTER OF SOLOMONS MUTUAL INSURANCE
AND IN THE MATTER OF THE COMPANIES ACT CAP 175
AND IN THE MATTER OF THE INSURANCE ACT CAP 82

High Court of Solomon Islands
(Brown, J.)

Civil Case No. 559 of 2005

Date of Hearing: 12th July 2006
Date of Ruling: 13th July 2006

Mr. Sullivan QC and Kingmele for the Proponents
Mr. Moshinsky QC and Rawcliffe Ziza for the Regulator

RULING

REASONS SUMMONS FOR ORDERS CONVENING MEETINGS OF MEMBERS AND CREDITORS OF THE COMPANY (IN PROVISIONAL LIQUIDATION) WITH A VIEW TO APPROVAL OF A SCHEME OF ARRANGEMENT UNDER S. 198 OF THE COMPANIES ACT CAP 175

Brown, J. The summons by the company (in provisional liquidation) and by a particular shareholder, the Solomon Islands National Provident Fund (which holds 375,000 of the 500,000 shares an issue) seeks a compromise with creditors and members envisaged by S.198. The terms of that "compromise" are set out in a Scheme of Arrangement incorporated in a Deed entered into by the provisional liquidator, Mr. Gregory John Thompson on the Companies part and the Solomon Islands National Provident Fund of the other part. The Deed provides for payout of policy holders by redemption or cancellation of policies issued by the company; to convert the insurer to a private company carrying on commercial operations and to ensure upon termination of the Scheme, the company is debt free, other than as to the guaranteed amount and the Solomon Islands National Provident Fund debt. (That guaranteed amount relates to a monetary sum by way of underwriting, not guarantee, not to exceed SI$5m to facilitate if necessary, all Scheme payments and shall be (if required) a debt owing by the company to the Solomon Islands National Provident Fund, the companies principal shareholder). Are the orders sought within the scope and limit set by S.198 of the Act? Or putting it another way, will the orders comply with the requirements of S.198 of the Companies Act?

Mr. Moshinsky QC for the Insurance Commissioner, the Regulator, says the purpose of the legislation while affording me discretion is directed to the protection, in this case, of the less sophisticated public who are policy holders and that, by allowing orders in the form sought, the protection which should guide the court may be diminished. That presupposes inherent failings in the proposal which I am not disposed to consider since it is not a relevant argument at this stage when it is the procedure to call meetings that needs to be addressed. He particularly is concerned to see a fund of money at this stage from which payments will be made to the policy holders and a time frame for such payment. Mr. Moshinsky deals with the issue of clarity perhaps in the proposed Scheme, but I cannot say from his comments there is criticism of the procedure which the proponents of the Scheme have brought before me by way of summons. For Mr. Moshinsky does say his client supports in principle the idea of a Scheme of Composition. For the summons before me is directed to the practice and procedure envisaged by the first part of s.198; (the calling of a meeting) the obligation on the court then, is to be satisfied of the right in the proponents to seek such meetings of stakeholders, judicially recognize that right if appropriate and make orders in such way as will enable the proponents asserting the right to enjoy it. (White v. White (1947) VLR 439-440).

For reasons which follow, the court accepts that it is appropriate to recognize the right in the proponents to seek orders and further that such orders sought will go some way to enabling the proponents to enjoy their rights. Particular proposals relate to the redemption of the policy holder policies or bonds issued by the company and other Scheme payments detailed in order of priority by the Deed.

The order of payments in para 8.1 of the Deed do not give rise to criticism per se although Mr. Moshinsky does take issue with the apparent failure to subject the professional fees following upon the need to seek and obtain this Court’s approval to the proposed meetings and its eventual sanction to the Scheme, to scrutiny. That is shortly answered for the costs need be taxed to give the liquidator authority to pay and proper receipt.

The other 2 issues raised by Mr. Moshinsky relate to matters which Mr. Sullivan says do not fall for consideration now, since the meetings proposed to put the Scheme for stakeholders approval are a necessary preliminary to the Courts sanctioning the Deed and the risk if you like, of the court’s refusal to sanction, must lie on the proponents to the Deed of Arrangement and the Scheme.

Mr. Sullivan says the Court, if satisfied that the scheme might be amenable to sanction, should order the meetings since Mr. Moshinsky’s concerns are not for the Court at this juncture. They go to the question of sanction. Mr. Moshinsky’s concerns may shortly be put; where will the money for the redemption of policies come from and when will the moneys be paid. Those questions are addressed in the Deed, Mr. Sullivan says for the guaranteed amount of money appears from the proposals to cover the provision necessary to redeem the policies (for that the assets of the company exceed its debts currently known to the liquidator) and scheme payment shall be made within 4 months of the commencement of the scheme; that is, upon sanction by this Court.

It seems then that no substantial injustice would be done to any stakeholder if orders in terms of the summons were made.

I so order.

THE COURT