MBF Australia Limited, in the matter of MBF Australia Limited and the Corporations Act (No 2) [2008] FCA 693

evidence before the court 4 There was evidence before the Court in the form of certificates by MBF and BUPA Australia to the effect that certain conditions precedent were satisfied: see the Earlier Reasons at [20]ff. 5 ASIC had confirmed by letter that it had no objection to the Scheme. 6 PHIAC had written to MBF indicating that it approved MBF's application to convert from being registered as a "not for profit" private health insurer to being a "for profit" private health insurer under s 126-42(5) of the PHI Act: see the Earlier Reasons at [21]-[23]. 7 In the Earlier Reasons, I referred (at [28]-[30]) to the MBF Contributors' Master Trust Deed which had been executed by MBF and the Trustee. On 26 March 2008, MBF caused a letter to be sent to the Trustee which listed in an attached DVD and annexure a total of 818,124 Eligible Contributors for whom company memberships in MBF were to be taken up. On 27 March 2008 the Trustee applied for a company membership on behalf of each of them and such memberships were "granted" by MBF to the Trustee on that day. 8 In the Earlier Reasons I referred (at [25]) to the role of the "Review Committee" in determining whether a policy is a "Qualifying Policy" in cases of dispute. Between 1 March and 2 May 2008, 24 persons were determined by the Review Committee to be persons who ought to have been included as Eligible Contributors. On 5 May 2008 MBF, informed the Trustee that MBF had determined to grant a company membership to the Trustee on behalf of each of these 24 persons, and directed the Trustee to apply for a company membership in respect of each of them. On 5 May 2008, the Trustee did so, and such memberships were granted by MBF to the Trustee on that day. 9 There was evidence before the Court as to the dispatch of the Explanatory Statement (that is, the Information Memorandum) and associated materials and of the advertising of the Scheme Meeting that was to be held on 12 May 2008. 10 There was also evidence of the holding of the Scheme Meeting on 12 May 2008 and of the voting at it to which I referred earlier. There was also evidence of the advertisement of the second court hearing that was to be held on 14 May 2008.

the allocation rules and the 30 year cap 11 It is necessary to say something about the "30 year allocation rule". As noted at [48] of the Earlier Reasons, Participating Contributors are to receive their cash entitlements calculated in accordance with the Allocation Rules. At [49] of the Earlier Reasons, I noted that I did not find it necessary to give a detailed account of the Allocation Rules which were set out in Sch 3 of the Information Memorandum. It is now necessary to describe a particular aspect of the Allocation Rules. 12 One of the integers that played a role in determining a person's cash entitlement was the length of time for which the person had held a policy. There was, however, a "cap" of 30 years. Accordingly, a person who had held a policy prior to 1 November 1978 had his or her cash entitlement calculated on the basis that he or she had held a policy for a maximum of 30 years. 13 The reason for that ceiling concerns a lack of reliable records going back prior to 1 November 1978. Apparently, MBF's first computer system was installed in late 1976. Previously, membership data had existed only in hard copy form. While some Participating Contributors who had held policies for longer than 30 years continued to hold documentary evidence showing this, others did not. The Board of MBF did not consider it fair or appropriate to treat those Participating Contributors who had documentary evidence differently from those who did not. 14 An independent actuary who had been engaged by MBF to consider the Scheme concluded that the then proposed Allocation Rules were fair and reasonable for Participating Contributors as a whole. The independent expert engaged by MBF, Ernst and Young, similarly thought the Scheme to be in the best interests of Participating Contributors. 15 The opinions of the independent actuary and the independent expert are not conclusive, and are arguably not relevant to the present issue, which is whether I should approve the Scheme, whether as it exists or subject to such alterations or conditions as I think just: see ss 411(4) and 411(6) of the Act. 16 It may be suggested said that individuals who had held a policy for more than 30 years suffered a disadvantage, although a more accurate way of describing the position is to say that the advantage they stood to obtain from the Scheme is no greater than that to be obtained by a person who had held a policy for "only" 30 years. 17 Some 36 to 38 Contributors did complain about the 30 year cap. However, the evidence shows that 58% of Participating Contributors who had held a policy for more than 30 years voted, and that of them 98.1% voted in favour of the resolution to agree to the Scheme. 18 I note that PHIAC's approval of the conversion scheme required that PHIAC be satisfied that the conversion scheme would not result in financial benefits from the Scheme being distributed inequitably between policy holders and insured persons: see s 126-42(5)(b) of the PHI Act. As noted at [6] above, PHIAC has approved the conversion scheme. 19 No persons sought leave to be heard against the approval of the Scheme. 20 Although it is, on one view, unfair that a person who had held a policy for, say, 50 years should be treated identically to a person who had held a policy for just 30 years, when one takes into account the fact that absent the Scheme, Contributors would not be entitled to anything other than their contractual rights to health insurance, and the further facts recounted above in relation to the lack of reliable records and its consequences, I did not think that the Court's approval should be withheld on this account. It was not as though the Participating Contributors who had held a policy for more than 30 years were being deprived of an existing right to payment. 21 Upon returning to chambers following the hearing on 14 May 2008, my Associate opened an email from a person who described himself as an "MBF contributor". The email had been sent to the New South Wales District Registry of the Court at 12.06 am on 14 May 2008. I conducted the second court hearing commencing at 9.15 am on that date. The email was forwarded to my chambers while the hearing was in progress. 22 Although I had made the orders approving the Scheme prior to the email being opened by my Associate, I note for the record that the email simply drew attention to the facts that the Review Committee procedure was "not independent", provided "no appeal mechanism", and required that a Contributor agree that the Review Committee's decision was binding. The email did not suggest that the Scheme should not be approved, and the author of it did not appear or ask to be heard further.

conclusion 23 For the reasons outlined above, and the Earlier Reasons, I approved the Scheme on 14 May 2008. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate: Dated: 19 May 2008 Counsel for the Plaintiff: Mr IM Jackman SC

Solicitor for the Plaintiff: Allens Arthur Robinson

Counsel for BUPA Australia Pty Ltd: Mr TF Bathurst QC