//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2008] FCA 2003
Federal Court of Australia
2008-12-10
Emmett J
Original judgment source is linked above.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
Between Name Australian Health Management Group Limited (ACN 003 683 298) registered in New South Wales of 77 Market Street, Wollongong, NSW 2500 (ahm)
These Allocation Rules set out the basis for determining the Initial Entitlements and Residual Entitlements to be distributed in accordance with the provisions of the Scheme and how Review Committee determinations are to be dealt with. 2. DEFINITIONS
Capitalised terms used but not defined in these Allocation Rules have the same meaning as in the Glossary to the Information Memorandum. In addition: Ambulance Only Policy a Policy covering the provision of specified ambulance services only as per the Fund Rules
Base Allocation as defined in rule 7.1.
Druids' Health Fund the health benefits fund which was conducted by Acorn Prudential Limited (ACN 087 648 708) (formerly United Ancient Order of Druids Friendly Society N.S.W. Ltd) in its capacity as a registered health benefits organisation under the National Health Act 1953 (Cth) (as it was).
Druids' Transfer Date in relation to a Member who was a former member of the Druids' Health Fund, the date on which they were issued a private health insurance policy by ahm in substitution for the private health insurance policy they held with the Druids' Health Fund.
Duration Allocation as defined in rule 7.2.
Extras Only Policy a Policy held by a Member who is only covered under one of the following ahm products.
For Members who are suspended at the Cut-Off Date and prior to suspension had a product that is now not part of ahm's product suite, then they will be deemed to be covered by the current equivalent product.
Final Residual Amount as defined in rule 6.
Hospital and Extras Policy a Policy held by a Member who is only covered under one of the following ahm product combinations:
Hospital Only Policy a Policy held by a Member who is only covered under one of the following ahm products:
For Members who are suspended at the Cut-Off Date and prior to suspension had a product that is now not part of ahm's product suite, then they will be deemed to be covered by the current equivalent product.
Illawarra Health Fund the Illawarra Health Fund, being a fund conducted under the National Health Act 1953 (Cth) (as it was).
Illawarra Transfer Date in respect of a Member who was a former member of the Illawarra Health Fund, the date on which they were issued a private health insurance policy by ahm in substitution for the private health insurance policy they held with the Illawarra Health Fund pursuant to the acquisition of the Illawarra Health Fund by ahm.
Joining Date as defined in rule 4.
Non-Single Policy a Policy other than a Single Policy.
Policy Type this refers to the type of Policy or Policies held, as grouped for allocation purposes; that is Ambulance Only Policy, Hospital Only or Extras Only Policy, or Hospital and Extras Policy
Residual Amount a dollar amount equivalent to $5 million plus the aggregate amount of Initial Entitlements allocated but not paid to persons who cease to be Members before the Record Time plus the amount arising from the rounding down of the Unit Value to the nearest whole cent.
Residual Entitlement the amount to be paid to a Participating Member in accordance with rule 6.
Residual Unit Value as defined in rule 6.
Single Policy a Policy with only one person covered.
Unit the measure used to allocate the Merger Consideration in accordance with these Allocation Rules.
Unit Value as defined in rule 5.
Years of Non-Single Membership as determined in accordance with rule 8.
Years of Single Membership as determined in accordance with rule 8.
All Members will be allocated an Initial Entitlement but will only receive that Entitlement if they are also a Participating Member. A Participating Member is a person who: (a) was a Member on 13 July 2008 (the 'Cut-Off Date'); or (b) is a Prescribed Member, and remains a Member at 10.30am (AEDT) on 6 December 2008 (the 'Record Time'). 4. JOINING DATE
(a) if a Member is a former member of the Druids' Health Fund, the later of the date from which the Member joined the Druids' Health Fund and 3 October 1976, provided that the Member held a private health insurance policy issued by the Druids' Health Fund up to the Druids' Transfer Date and has had continuous private health insurance under a policy issued by ahm since the Druids' Transfer Date; (b) if a Member is a former member of the Illawarra Health Fund, the later of the date from which the Member joined the Illawarra Health Fund and 3 October 1976, provided that the Member held a private health insurance policy issued by the Illawarra Health Fund up to the Illawarra Transfer Date and has had continuous private health insurance under a policy issued by ahm since the Illawarra Transfer Date; or (c) for all other Members, the date from which the Member became an insured under a private health insurance policy issued by ahm and since that date has continuously remained insured, provided that if that date is before 3 October 1976, it shall be deemed to be 3 October 1976 5. CALCULATION OF INITIAL ENTITLEMENT
The Initial Entitlement allocated to a Member is calculated as follows:
a. Base Allocation allocated to a Member in accordance with sub-rule 7.1; and
b. Duration Allocation allocated to a Member in accordance with sub-rule 7.2.
Unit Value is calculated by dividing the Initial Amount by the total number of Units allocated to all Members as at 15 September 2008, rounded down to the nearest whole cent.
The Residual Amount will be used to distribute amounts to Participating Members pursuant to the determinations of the Review Committee in accordance with the Review Committee Charter. As required by the Review Committee Charter, these determinations must be made by the Residual Entitlement Date.
The balance of the Residual Amount at 30 June 2009 is the "Final Residual Amount". The Final Residual Amount, if any, will be used to distribute Residual Entitlements to Participating Members by 14 July 2009. The Residual Entitlement of a Participating Member is calculated at the Residual Entitlement Date as follows:
Residual Entitlement = Final Number of Units x Residual Unit Value
Final Number of Units is the Number of Units as determined in accordance with rule 5 or (if applicable) as subsequently amended by the Review Committee in accordance with the Review Committee Charter; and
Residual Unit Value means the Final Residual Amount divided by the sum of the Final Number of Units allocated to all Participating Members.
The Base Allocation is the number of Units set out in Table 1 in respect of a Policy held by a Member at the Cut-Off Date.
Policy Type (at the Cut-Off Date) Base Allocation (Units)
Single Policy Non-Single Policy Ambulance Only 20 40 Hospital Only or Extras Only 200 400 Hospital and Extras 400 800
The Duration Allocation in respect of a Policy is the number of Single Membership Units set out in Table 2 multiplied by the Years of Single Membership plus the number of Non-Single Membership Units set out in Table 2 multiplied by the Years of Non-Single Membership, in each case by reference to the Policy Type held at the Cut-Off Date.
Policy Type (at the Cut-Off Date) Duration Allocation (Units) per year of membership Single Membership Non-Single Membership Ambulance Only 6.5 13 Hospital Only or Extras Only 65 130 Hospital and Extras 130 260
The Years of Single Membership and Years of Non-Single Membership used in determining the Duration Allocation for each Member are calculated as follows:
a. Total Years of Membership is the years and days between the Joining Date and Cut-Off Date, less any periods of valid suspension, rounded up to the nearest whole year.
b. Total Years of Non-Single Membership is the years and days between the Joining Date and Cut-Off Date for which the Member held a Non-Single Policy, less any periods of valid suspension the Member was deemed to hold a Non-Single Policy, rounded up to the nearest whole year.
c. Years of Single Membership is the Total Years of Membership less the Years of Non-Single Membership.
d. When calculating the Duration Allocation of a Participating Member to which rule 4(a) or 4 (b) applies, any health insurance policy or policies held by that Participating Member with the Druids' Health Fund or the Illawarra Health Fund (as the case may be) from the Joining Date will be treated as a Policy.
Where a Member held more than one Policy of the same Policy Type at the Cut-Off Date, Units will be allocated in respect of the Policy which resulted in that Member receiving the highest Duration Allocation.
Where a Member held more than one Policy of different Policy Types at the Cut-Off Date, Units will be allocated in respect of each Policy of unique Policy Type.
a. If, prior to the Record Time, the Review Committee determines that a person should be treated as a Participating Member, then they shall be allocated an Initial Entitlement in accordance with rule 5.
b. If the Review Committee determines the Number of Units should be increased, then the increased Number of Units shall be allocated to the Member.
The aggregate of all Initial Entitlements and Residual Entitlements paid under these Allocation Rules is capped at and cannot exceed the Merger Consideration of $367 million.
Deed Poll by Name Medibank Private Limited ACN080 890 259 of Level 17, 700 Collins Street, Docklands, VIC 3008 (Medibank)
Background A On 14 July 2008, Medibank and ahm entered into the Merger Implementation Deed which was amended and restated on 15 September 2008. B Under the Merger Implementation Deed, Medibank has agreed, subject to the satisfaction or waiver of certain conditions, to execute this Deed Poll. C Medibank is entering into this Deed Poll to covenant in favour of the Scheme Members to perform its obligations under the Merger Implementation Deed and the Scheme, including the provision of the Scheme Consideration.
Agreed terms
Schedule 3 - Review Committee Charter
This document is the Review Committee Charter referred to in the Scheme and the Information Memorandum issued by ahm. This Review Committee Charter sets out the role and powers of the Review Committee, the body of persons who together constitute the Review Committee, the procedure for seeking a Request for a review and the procedure for considering such a Request.
Capitalised terms used but not defined in this Review Committee Charter have the same meaning as those terms have in the Information Memorandum and:
Allocation Review Request Form means the form attached to this Review Committee Charter or such other form as ahm approves in writing.
Alternate means the alternate of a Review Committee Member.
(a) a Member on the Cut-Off Date or a Member who falls within one of the categories of person in paragraphs (a) to (c) of the definition of Prescribed Member; or (b) in relation to a Request under clause 2.2(b), the Principal Policy Holder of the Policy to which the Request relates. Board Chairman means the chairman of the Board of ahm.
Chairmanmeans the chairman of the Review Committee.
Company Secretary means the company secretary of ahm.
Request means a request for review made by an Applicant in accordance with this Review Committee Charter.
Review Committee Member means a member of the Review Committee appointed under clause 4.1.
Review Committee Secretary means the person appointed as secretary to the Review Committee under clause 4.3.
Reviewer means the Board Chairman, or in his or her absence or if conflicted under clause 8, an alternate agreed between ahm and Medibank, or such other person as ahm and Medibank agree to appoint as a Reviewer.
The Review Committee may only consider and determine a Request where the Request relates to:
(a) the number of Units to be allocated to the Applicant in respect of his or her Entitlement (that is, whether the Allocation Rules have been correctly applied in calculating the number of Units to be allocated to the Applicant); or (b) whether the Applicant should have been treated as a Participating Member (and is therefore eligible to receive an Entitlement). 1.4 Requests for review determined before the Implementation Date
Before the Implementation Date, the Review Committee may only consider and determine a Request received by the Company Secretary no later than 5.00pm (AEDT) on 15 November 2008.
1.5 Requests for review determined after the Implementation Date
After the Implementation Date, the Review Committee may only consider and determine a Request received by the Company Secretary after 5.00pm (AEDT) on 15 November 2008 and on or before 5.00pm (AEST) on 31 May 2009, and only if the Request relates to clause 2.2(a).
ahm and Medibank will comply with the Privacy Actin relation to this Review Committee Charter. ahm may provide personal information of an Applicant (including personal information of any other person supplied to ahm by the Applicant) to Medibank and to the Review Committee Members and Alternates or to the Reviewer or any experts appointed to assist the Review Committee.
By providing information contained in the Review Request Form or providing any additional information sought in respect of a Request, an Applicant (or that other person in respect of whom the Applicant provides information to ahm) consents to the use and disclosure of his or her personal information for the purpose of considering and making a decision in respect of the relevant Request. An Applicant (or that other person) can generally access personal information that ahm holds about the Applicant (or that other person). Sometimes there will be a reason why full access to that information is not possible, in which case ahm will explain why such access is not possible. To make a request for access to personal information, an Applicant must contact the Company Secretary.
A Request must be made in writing by the Applicant in person by completing an Allocation Review Request Form, as described in clause 3.
The Review Committee may accept a Request made on behalf of an Applicant if the Request cannot be made by the Applicant in person (for example, where the Applicant has died, lacks mental capacity or where there is some other good reason why the Applicant is unable to make the Request personally).
ahm may of its own volition also make a Request on behalf of an Applicant or group of Applicants if ahm in its sole discretion considers it appropriate to do so.
In considering a Request, the Review Committee (and where relevant, the Reviewer) must only have regard to this Review Committee Charter, the Allocation Rules, the information provided by the Applicant in the Allocation Review Request Form and the records of ahm (including without limitation ahm's policies).
In considering a Request, the Review Committee (and where relevant, the Reviewer) must only consider:
(a) whether the number of Units allocated to the Applicant under the Allocation Rules is correct; or (b) in the case of a Request that the Applicant be considered to be a Participating Member, whether the Applicant should be so considered and if so, the number of Units to be allocated to the Applicant. For the avoidance of doubt, the Review Committee shall not have the power to alter the Allocation Rules.
The Review Committee is not required to give reasons to an Applicant for its decision in respect of any Request.
If the Review Committee (or where relevant, the Reviewer) determines that the Allocation Rules have not been correctly applied to an Applicant such that their correct application in relation to a Request under clause 2.2(a) or clause 2.2(b) would result in a lesser number of Units being allocated to the Applicant, then the Review Committee (or the Reviewer) must dismiss that Request.
2.5 Factors for consideration - Request under clause 2.2(b)
In considering a Request under clause 2.2(b), the Review Committee may have regard to any one or more of the following factors:
· whether the Applicant was, or was entitled to be, a Member on the Cut-Off Date; · whether the Applicant falls within the categories of person described in paragraphs (a) to (c) of the definition of Prescribed Member; · whether the Applicant did not know and/or reasonably ought not to have known that the Policy was more than 2 months in arrears; · whether ahm failed to send a notice to the Applicant before the Policy was more than 2 months in arrears advising the Applicant that the Policy was in arrears; · whether the Policy was more than 2 months in arrears at the time it was cancelled; · whether the Applicant sought advice from ahm in relation to the cancellation or alteration of the Policy; · information from the records or personnel of ahm as to contacts made by the Applicant with ahm; and · such other matters as the Review Committee determines are relevant to considering the Request. 3. REQUEST BY APPLICANT
(a) be made by completing an Allocation Review Request Form; and (b) attach any relevant documents or information in support of the Request. The Review Committee has the discretion to reject a Request made other than by way of a correctly completed Allocation Review Request Form.
The Company Secretary may require that information supplied or to be supplied by an Applicant in relation to a Request be in the form of a statutory declaration.
Before the Implementation Date, the Review Committee will comprise four Review Committee Members or their Alternates, with two persons being nominated by ahm and two persons being nominated by Medibank.
An Alternate appointed by ahm or Medibank (as the case may be) may act as an Alternate for any Review Committee Member nominated by ahm or Medibank respectively.
If a Review Committee Member or an Alternate is unable or unwilling to continue as a member of the Review Committee, he or she must notify ahm or Medibank (as the case may be) and ahm or Medibank (as the case may be) may appoint another person to the Review Committee in their place.
Each of ahm and Medibank may remove and replace their respective nominees on the Review Committee.
ahm must ensure that the Review Committee Members appointed by ahm and the Reviewer act in accordance with this Review Committee Charter.
Medibank must ensure that the Review Committee Members appointed by Medibank act in accordance with this Review Committee Charter.
After the Implementation Date, the two persons who were nominated by ahm or their Alternates will resign and be replaced by two persons nominated by Medibank.
Before the Implementation Date, the Chairman of the Review Committee will be a Review Committee Member nominated by ahm under clause 4.1 or such other Review Committee Member appointed to the position of Chairman by ahm and Medibank. After the Implementation Date, the Chairman of the Review Committee will be a Review Committee Member nominated by Medibank.
Before the Implementation Date, the Review Committee will appoint a person nominated by ahm to act as the Review Committee Secretary who must:
(a) attend all meetings of the Review Committee and minute proceedings as directed by the Review Committee; (b) notify the Company Secretary of all decisions of the Review Committee as soon as possible and in any case within a period of time that will enable the Company Secretary to respond to Applicants in accordance with clause 8; and (c) maintain records including a register of all Requests received and considered by the Review Committee (or where relevant, the Reviewer), and the decisions made by the Review Committee (or where relevant, the Reviewer) in relation to those Requests. After the Implementation Date, the Review Committee will appoint a person nominated by Medibank to act as the Review Committee Secretary.
Before the Implementation Date, a quorum for a meeting of the Review Committee is three, one of whom must be a Review Committee Member or Alternate appointed by ahm and one of whom must be a Review Committee Member or Alternate appointed by Medibank. After the Implementation Date, a quorum for a meeting of the Review Committee is three.
The Review Committee will meet at such times, at such places or in such manner as the Chairman may decide and for this purpose the Review Committee Members may attend meetings by telephone, teleconference, videoconference or other means approved by the Chairman. Meetings will be scheduled and held with a view to dealing with all Requests consistently with the timetable specified in clause 4.13.
A circulating resolution signed by all Review Committee Members is a valid resolution of the Review Committee. A written resolution signed by the Reviewer, in relation to a Request referred to the Reviewer by the Review Committee, will be deemed to be a valid resolution of the Review Committee in relation to that Request.
The Review Committee Secretary will give notice of meetings of the Review Committee to the Review Committee Members as directed by the Chairman.
Each Review Committee Member has one vote. The Chairman does not have a casting vote.
If a decision of the Review Committee in relation to a Request is not unanimous (or a quorum cannot be achieved to consider a Request due to the application of clause 8) then the Request must be referred to the Reviewer who will have the same powers and authorities as the Review Committee and whose decision in respect of that Request will be deemed to be the decision of the Review Committee.
The Review Committee Secretary must, subject to clause 2.1, provide the Reviewer with all the information requested by the Reviewer to assist the Reviewer to reach a decision in relation to a Request referred to the Reviewer by the Review Committee.
On receipt of a Request, the Review Committee Secretary must:
(a) obtain data from ahm's records in relation to the Applicant including the calculation of the Units allocated to the Applicant or any relevant Policy held by the Applicant; (b) seek any additional information from the Applicant that the Review Committee Secretary considers may be relevant to the consideration of the Request by the Review Committee; and (c) provide to the Review Committee the Request together with the information referred to in clauses 4.10(a) and 4.10(b) and may include a recommendation as to how the Request should be dealt with by the Review Committee. 4.11 Procedure - stage 2
On considering a Request, the Review Committee may:
(a) determine to reject the Request; (b) if the Request is in respect of whether the Applicant should have been treated as a Participating Member, determine that the Applicant is a Participating Member and determine the number of Units to be allocated to the Applicant; (c) if the Request relates to the number of Units allocated to the Applicant, determine to confirm or increase the number of Units allocated to the Applicant; (d) request that the Review Committee Secretary obtain further information in respect of the Request; (e) if the Applicant does not provide a correctly completed Allocation Review Request Form, either determine to reject the Request or request that the Applicant complete an Allocation Review Request Form and if such a form is not provided, determine to reject the Request; (f) if the Review Committee Secretary has requested further information in respect of the Request and the Applicant has failed to provide this information, or the Review Committee Secretary is unable to contact the Applicant to obtain the required further information, and the information before the Review Committee is insufficient to enable a decision to be made, determine to reject the Request; (g) request the attendance of relevant ahm employees or senior management at a meeting of the Review Committee to assist in consideration of the Request; (h) request the provision of expert advice; and (i) refer the Request to the Reviewer in accordance with clause 4.9. 4.12 Procedure generally
The Review Committee may determine its procedures subject to this Review Committee Charter and in particular may consider Requests in batches where it is reasonably satisfied that the Requests raise similar issues for decision that would allow the Requests to be considered together and a decision in relation to such a batch of Requests will be a decision in relation to each Request in that batch, subject to any contrary direction of the Review Committee. The Review Committee must act in a fair and equitable manner but is not required to interview any Applicant and may deal with all matters by correspondence.
If a Request is made under clause 2.2(b) on or before 15 November 2008, the Review Committee must ensure that a decision is made in respect of the Request by 25 November 2008. If a Request is made under clause 2.2(a) on or before 15 November 2008, the Review Committee must ensure that a decision is made in respect of the Request by the Implementation Date.
If a Request is made after 5.00pm (AEDT) on 15 November 2008 and on or before 5.00pm (AEST) on 31 May 2009, the Review Committee will deal with the Request after the Implementation Date.
By making a Request, the Applicant agrees that a decision of the Review Committee (or where relevant, the Reviewer) is final and binding.
ahm must provide secretarial and other services that are reasonably required by the Review Committee and the Reviewer for the performance of their respective functions under this Review Committee Charter.
ahm must provide information and data relevant to a Request as required by this Review Committee Charter, the Review Committee and the Reviewer and must at the request of the Review Committee (or where relevant, the Reviewer) make staff and senior management directly available to the Review Committee (or the Reviewer) to assist it in its (or him or her in his or her) deliberations.
If requested by the Review Committee (or where relevant, the Reviewer), ahm must arrange for the provision of expert advice to the Review Committee (or the Reviewer) to assist it in its (or him or her in his or her) deliberations.
ahm must perform its duties and functions having regard to the need for the Review Committee (or where relevant, the Reviewer) to make decisions within the timeframes set out in clause 4.13.
ahm must, on being advised of a decision of the Review Committee, or (where relevant) the Reviewer:
(a) if the decision is made before 25 November 2008 that an Applicant should have been treated as a Participating Member: (i) where relevant, arrange for the Applicant to be provided with a Yellow Proxy Form before the Record Time; and (ii) determine the Entitlement of the Applicant based on the number of Units determined by the Review Committee to be allocated to the Applicant; (b) if the decision is made before the Implementation Date that an Applicant is entitled to be allocated additional Units, determine the increased Entitlement of the Applicant; (c) if the decision is made after the Implementation Date that an Applicant is entitled to be allocated additional Units, determine the increased Entitlement of the Applicant; and (d) otherwise ensure that the decisions of the Review Committee are notified to the Applicant and that they are implemented. 6. REPORTING
Before the Implementation Date, the Review Committee must report to the Board and Medibank on matters and decisions arising from its responsibilities as outlined in this Review Committee Charter. After the Implementation Date, the Review Committee must report to Medibank on such matters and decisions.
Reports under clause 6.1 will include information in relation to the decisions of the Review Committee including:
(a) a list of the Requests considered and decisions made by the Review Committee during the relevant period since the last report; (b) the outcome of any Request referred to the Reviewer; and (c) minutes of its meetings. 7. NOTIFICATION OF DECISIONS
The Company Secretary will promptly notify the Applicant in writing of the decision of the Review Committee or the Reviewer, as the case may be.
The Company Secretary may at any time and from time to time delegate the duty to notify the Applicant under this clause 7 to the Review Committee Secretary.
The Review Committee Secretary will not be required to provide to the Review Committee or the Reviewer the name of any Applicant for the purposes of any decision.
If a Review Committee Member becomes aware that a Request relates to a relative of the Review Committee Member or a person with whom that Review Committee Member has a personal relationship, that Review Committee Member must advise the Review Committee Secretary and must not participate in the consideration of that Request. If a Review Committee Member is unable to participate by reason of this clause 8.2 then an Alternate for that Review Committee Member may participate so long as this clause does not also apply to that person.
If the Reviewer becomes aware that a Request, which has been referred to the Reviewer by the Review Committee, relates to a relative of the Reviewer or a person with whom the Reviewer has a personal relationship, the Reviewer must advise the Review Committee Secretary and require that his or her alternate, or another disinterested person be appointed as a Reviewer to consider that Request.
NEW SOUTH WALES DISTRICT REGISTRY NSD 1534 of 2008
IN THE MATTER OF AUSTRALIAN HEALTH MANAGEMENT GROUP LIMITED AUSTRALIAN HEALTH MANAGEMENT GROUP LIMITED
REASONS FOR JUDGMENT 1 On 3 October 2008, the Court ordered, pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Act), that the plaintiff, Australian Health Management Group Limited (the Company), convene a meeting of participating members for the purpose of considering and, if thought fit, agreeing, with or without modification, to a scheme of arrangement to be made between the Company and its participating members. 2 As I indicated in my reasons of 3 October 2008, there were several steps involved in giving effect to the proposed scheme (see Australian Health Management Group Limited, in the matter of Australian Health Management Group Limited [2008] FCA 1868). The first step involved special resolutions to permit the Company to demutualise and to change the Company's type under Part 2B.7 of the Act, from a company limited by guarantee to a proprietary company limited by shares. The meetings and resolutions, to which I referred in my earlier reasons, have now been passed and the Company has applied to the Court for approval of the scheme. 3 When the matter was called on for hearing today, the Company was represented by senior counsel and leave was given for senior counsel to appear on behalf of Medibank Private Limited (Medibank). No other person has given notice of any intention to appear to oppose the approval of the scheme, and nobody else appeared when the matter was called. I am satisfied from the evidence that has been read today, subject to several matters to which I shall refer, that the meetings were convened in accordance with the orders made on 3 October 2008 and that the resolutions have been passed by the requisite majorities. 4 The postal ballot concerning demutualisation was conducted in accordance with procedures approved by the board. Of the 143,817 members of the Company eligible to vote, 83,956 votes were cast, representing 58.37% of the eligible voters, and 839 invalid votes were received. Of the total number of votes cast, 79,919 were for the resolution, representing 95.19%, and 4037 were against, constituting 4.81%. Thus, the postal ballot has been passed by more than 75% of at least 25% of the eligible voters. 5 The general meeting approving the change in the type of the Company was held on the same day as the scheme meeting. Of 158,440 members entitled to vote, 81,003 votes were cast in relation to the scheme meeting, representing 51.13% of the total votes that could be cast. Virtually the same numbers voted in relation to the general meeting. The numbers of votes cast in favour of the special resolutions at the general meeting and at the scheme meeting were sufficient to satisfy the requirements for valid resolutions, in accordance with the Company's constitution and s 411 of the Act respectively. 6 The Company is a private health insurer. Section 126-42 of the Private Health Insurance Act 2007 (Cth) (the Health Insurance Act)provides that a private health insurer may apply to the Private Health Insurance Administration Council (the Council) for approval to convert to being registered as a for-profit insurer. Such an application must be in the approved form, include a conversion scheme in the approved form and be given to the Council at least 90 days before the day specified in the application as the day on which the insurer proposes that it become registered as a for-profit insurer. Under s 126-42(5) of the Health Insurance Act, the Council must approve such an application if the insurer has complied with the requirements concerning an application. 7 The Council is satisfied that the conversion scheme would not result in a financial benefit to any person who is not a policyholder of, or another person insured through, a health benefits fund conducted by the insurer, and the council is satisfied that the conversion scheme would not result in financial benefits from the scheme being distributed inequitably between such policyholders and insured persons. By a letter of 4 December 2008, the Council confirmed that it has approved the Company's application of 20 August 2008, to convert from registration as a not-for-profit private health insurer, to being registered as a for-profit private health insurer. The Company will be taken, for the purposes of the Health Insurance Act, to be registered as a for-profit insurer, on the day following the implementation date, as outlined in the information memorandum sent to members, in connection with the scheme. 8 The special resolution passed at the general meeting approving the change of company type differed slightly from the resolution contained in the notice of meeting dispatched to members as part of the information memorandum. The amendment made was to add the words "and will be known as Australian Health Management Group Pty Limited," to the end of the resolution. That amendment was required by the Australian Securities and Investments Commission (the Commission) but was not notified to the Company, by the Commission, until 2 December 2008. 9 The only effect is to insert the word "Pty" into the Company's name. I am satisfied that the amendment was permissible. It was of a minor and a technical nature, and did not affect the substance of the proposed resolution to approve the Company's change of company type. To the extent that members did not have advance notice of the amended form of the resolution, I am satisfied that the omission is procedural. It is, therefore, a procedural irregularity which did not invalidate the resolution unless the Court is of the opinion that it has caused, or may cause, substantial injustice. I am satisfied that no injustice, of any nature, would be caused. 10 At the meeting, convened for the purpose of considering the scheme, a number of members present raised a question concerning the operation of the allocation rules. In particular, a query was raised as to why the years of membership are recognized by the allocation rules only as far back as 3 October 1976. In a supplementary affidavit, Mr Warwick Gard, the Company's actuary, referred to that question and indicated that the duration of a policy prior to that date had not been recognized because the Company's records prior to that date are not considered by the directors to be sufficiently complete and accurate for the purposes of verifying the date on which a policyholder joined the Company or its predecessor funds. 11 In addition, a number of members, who were formerly policyholders of Mercantile Mutual Health Limited (Mercantile Mutual Health), contacted the Company with concerns in relation to their treatment under the allocation rules. The Company acquired all of the shares and the capital of Mercantile Mutual Health in 1999 from Mercantile Mutual Holdings Limited (Mercantile Mutual Holdings), the owner of those shares. In consideration for the purchase, there was a cash payment made by the Company to Mercantile Mutual Holdings. The purchase price was in excess of the net assets of Mercantile Mutual Health. Mercantile Mutual Health was a public company limited by shares, and was not a company that could fairly be described as a mutual company. Accordingly, the former policyholders of Mercantile Mutual Health were only holders of policies issued by Mercantile Mutual Health; they were not members of a mutual organization and had no ownership interests in the assets of funds maintained by Mercantile Mutual Health. 12 Under the allocation rules, a participating member's entitlement is calculated by taking into account, amongst other things, the total years of membership of that member. In general terms, total years of membership is based on the years and days between a member's joining date and the cut off date, subject to relevant rounding. Rule 4 of the allocation rules stipulates that a member's joining date is the date from which he or she, as a member, became insured under a private health insurance policy issued by the Company, and since which date he or she has continuously remained insured. 13 In the case of former Mercantile Mutual Health policyholders, that date will not be before 1999, when the Company acquired Mercantile Mutual Health and those policy members became members of the Company. The effect of the allocation rules is that the period of time for which former policyholders of Mercantile Mutual Health were insured under policies issued by Mercantile Mutual Health is not relevant to determining their entitlement under the allocation rules. Mr Gard has expressed the opinion that the treatment under the allocation rules of former policyholders of Mercantile Mutual is appropriate. 14 The position of former policyholders of Mercantile Mutual Health is to be contrasted with the position in relation to the Illawarra Health Fund and United Ancient Order of Druids Friendly Society NSW Limited (the Druids' Health Fund), whose members became members of the Company. In the former case, the Company paid no consideration for the merger, in circumstances where those members of Illawarra Health Fund held a beneficial interest in their fund. In the latter case, the Company undertook a contractual obligation to recognize the prior membership of members of the Druids' Health Fund. 15 To provide an allocation to former Mercantile Mutual Health policyholders, based on their policy duration with Mercantile Mutual Health, would reduce the entitlement of the other members of the Company. Mr Gard is of the view that, if the entitlement of members of the Company, who were former policyholders of Mercantile Mutual Health, were to be determined taking into account the prior period of insurance with Mercantile Mutual Health, the rules would not be fair and equitable to other members of the Company. They would be inequitable because the other members have already paid, through payment of the purchase price to Mercantile Mutual Holdings, in excess of net assets for any contribution of the value of the Company arising out of the policy duration of the former Mercantile Mutual Health policyholders prior to 1999. I do not consider that there is any matter of concern arising out of the treatment of former Mercantile Mutual Health policyholders. 16 The allocation rules that form part of the scheme contained an error. A reference is made in a list of hospital and extras policies to "top extras" in three places where the reference should have been to "family extras". The error in the description of the policies did not have any impact on the calculation of the entitlements that members who hold relevant family extras product will receive if the scheme is approved or on the application of the allocation rules to them or of any other members who hold a health insurance policy issued by the Company. 17 The Company does not, in fact, offer policies with the name "top extras" and there is therefore no scope for confusion with other policies. The Company has posted a notice on its website, informing members of the error. The error was not drawn to the attention of participating members at the scheme meeting. Nevertheless, the scheme for which the Company now seeks approval has been amended to correct the error. It is clearly desirable that the error be corrected. There is clearly no injustice involved in making the amendment. Accordingly, to the extent that the Company's application for approval departs from the scheme that was agreed to by the participating members, the amendment should not stand in the way of approval. The matter is of no significance. 18 The proposed scheme is subject to a number of conditions. I have seen certificates signed on behalf of Medibank and the Company confirming that, as at 8.00 am today, each of the conditions precedent set out in the merger deed, other than Court approval, has been satisfied and that no conditions precedent that are for the benefit of either Medibank or the Company have been waived. The certificates also confirm that the merger deed has not been terminated by either Medibank or the Company. The Commission has also written to the Company confirming that it has no objection to the proposed scheme. 19 The scheme provides for a review committee to consider requests for review of the allocation of entitlements to members and whether a person should have been considered to be a participating member. It may be arguable that the members of the review committee will be involved in the administration of the scheme. However, none of the members is a registered liquidator, although, each of the members of the review committee has executed a deed poll undertaking to comply with the obligations imposed on the committee. Section 411(7) provides that, except with the leave of the Court, a person must not be appointed to administer and must not administer a compromise or arrangement approved under the Act between a body and its members if the person is not a registered liquidator. I consider that it is appropriate, to the extent that it is necessary, for the Court to give leave, pursuant to that provision, for the members of the committee to act in that capacity. 20 Medibank has executed a deed poll in favour of participating members by which it promises to comply with the obligations it has undertaken in the merger deed, particularly concerning payment of consideration. The bank account contemplated by the scheme for the payment of the scheme consideration has been established such that the mechanisms for satisfaction of Medibank's obligations are in place. 21 The Company has drawn to the Court's attention the fact that between approximately 60 and 70 prescribed members may not have been sent copies of the scheme documents. That circumstance arose because of the timing with which the relevant prescribed members became prescribed members. Prescribed members are those who became members in specified circumstances after the cut off date. I am satisfied that no injustice has been occasioned by the failure to send the scheme documents to those prescribed members and that the failure should not interfere with the approval of the scheme. 22 As I have said, I am satisfied that the scheme has been agreed to by the requisite majority. Notwithstanding the matters to which I have briefly referred, I am satisfied that it is appropriate to accede to the Company's application for approval of the scheme, amended in the manner to which I have referred. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.
Counsel for the Plaintiff: Mr F Gleeson SC with Mr J Williams
Counsel for Medibank Private Limited: Mr MB Oakes SC