NIB Health Funds Limited ACN 000 124 381 No 3
[2007] FCA 1312
•23 July 2007
FEDERAL COURT OF AUSTRALIA
NIB Health Funds Limited ACN 000 124 381 No 3 [2007] FCA 1312
NIB HEALTH FUNDS LIMITED ACN 000 124 381, IN THE MATTER OF NIB HEALTH FUNDS LIMITED ACN 000 124 381
NSD859 OF 2007
EMMETT J
23 JULY 2007
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD859 OF 2007
IN THE MATTER OF NIB HEALTH FUNDS LIMITED ACN 000 124 381
NIB HEALTH FUNDS LIMITED
PlaintiffJUDGE:
EMMETT J
DATE OF ORDER:
23 JULY 2007
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The scheme of arrangement between the plaintiff and its members which is annexed hereto and marked “A” be and is hereby approved.
2.The scheme of arrangement between the plaintiff and a class of creditors, referred to as its Eligible Policyholders, which is annexed hereto and marked “B” be and is hereby approved.
3.The plaintiff be exempt from compliance with s 411(11) of the Corporations Act 2001 (Cth) (“the Act”) in respect of the schemes of arrangement referred to in Order 1 and Order 2.
4.The persons nominated pursuant to clause 9.1 of the scheme of arrangement referred to in Order 2 above, being those persons identified in paragraph 15(c) of the affidavit of Keith Stanton Lynch sworn 31 May 2007 in this proceeding, namely Mr David Lethbridge, Mr Mark Bishop and Mr Andrew Best, be granted leave for the purposes of ss 411(7) of the Act:
(a) to be appointed to administer; and
(b) to administer,
that scheme of arrangement.
5.The Plaintiff have liberty to apply for further orders for the purposes of subsection 411(7) of the Act in relation to the appointment of any scheme administrator.
6.These orders be entered forthwith.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
NIB Health Funds Limited - Company Members’ Scheme
Scheme of arrangement pursuant to section 411 of the Corporations Act 2001 (Cth) between:
NIB Health Funds Limited (ACN 000 124 381) (“NIB Health Funds”)
and Company Members of NIB Health Funds Limited
Recitals A NIB Health Funds is a company limited by guarantee incorporated in New South Wales.
B NIB Holdings Limited (ACN 125 633 856) (“NIB Holdings”) is a company limited by shares incorporated in Victoria. There are two NIB Holdings Shares on issue, one of which is held by Keith Lynch and one of which is held by Mark Fitzgibbon.
C The Board considers that:
(a) the Company Members’ Scheme is in the best interests of NIB Health Funds and the Company Members as a whole; and
(b) the Company Members’ Scheme does not adversely affect any creditors of NIB Health Funds.
D NIB Holdings has entered into the NIB Holdings Deed Poll under which it has agreed to observe all the provisions of the Company Members’ Scheme which relate to it and to do everything within its power that is necessary to give full effect to the Company Members’ Scheme. General terms
1 Definitions and interpretation
1.1 Definitions
In this Company Members’ Scheme, the following words have these meanings, except where the context otherwise requires:
ASIC means the Australian Securities and Investments Commission.
Board means the board of directors of NIB Health Funds from time to time.
Capital Reduction Meeting means the extraordinary general meeting of NIB Health Funds to consider the Capital Reduction Resolution.
Capital Reduction Resolution means the resolution of NIB Health Funds to selectively reduce its capital as set out in schedule 6 of the Demutualisation Implementation Deed.
Company Member means a member of NIB Health Funds.
Company Members’ General Meeting means the general meeting of NIB Health Funds to consider the resolution to convert to a company limited by shares and to adopt a new constitution.
Company Members’ Scheme means this proposed scheme of arrangement between NIB Health Funds and the Company Members, subject to any alterations or conditions made or required by the Court pursuant to section 411(6) of the Corporations Act.
Company Members’ Scheme Meeting means the meeting of Company Members to approve the Company Members’ Scheme.
Conditions Precedent mean the conditions precedent set out in clause 0.
Conversion Date means the date NIB Health Fund changes type from a company limited by guarantee to a company limited by shares in accordance with section 164(5) of the Corporations Act.
Corporations Act means the Corporations Act 2001 (Cth).
Court means the Federal Court of Australia.
Demutualisation Date means 1 October 2007 or such later date as determined by the Board that is at least 14 days after the Capital Reduction Resolution has been passed.
Demutualisation Implementation Deed means the demutualisation implementation deed dated 31 May 2007 between NIB Health Funds, NIB Holdings, Keith Lynch, Philip Gardner and Mark Fitzgibbon.
Demutualisation Meetings means:
(a) the Eligible Policyholders’ Scheme Meeting;
(b) the Company Members’ Scheme Meeting;
(c) the Company Members’ General Meeting; and
(d) the Capital Reduction Meeting.
Demutualisation Schemes means the Eligible Policyholders’ Scheme and the Company Members’ Scheme.
Eligible Policyholder means:
(a)a person who was a Policyholder on 20 March 2007 and remains a Policyholder on the date of the Eligible Policyholders’ Scheme Meeting; or
(b)a person who became a Policyholder in respect of an existing Policy, in substitution for the previous Policyholder, between 20 March 2007 and the date of the Eligible Policyholders’ Scheme Meeting, if:
(i) the previous Policyholder was a Policyholder on 20 March 2007; and
(ii)the new Policyholder remains a Policyholder on the date of the Eligible Policyholders’ Scheme Meeting.
Eligible Policyholders’ Scheme means the proposed scheme of arrangement between NIB Health Funds and the Eligible Policyholders, subject to any alterations or conditions made or required by the Court pursuant to section 411(6) of the Corporations Act.
Eligible Policyholders’ Scheme Meeting means the meeting of Eligible Policyholders to consider, and if thought fit, approve the Eligible Policyholders’ Scheme.
End Date means 1 December 2007 or such later date as is determined by the Board prior to 1 December 2007.
Government Agency means any government or governmental, semi-governmental, administrative or judicial entity or authority; it also includes any self-regulatory organisation established under statute.
Membership Rights means the rights of the Company Member under the constitution of NIB Health Funds.
NIB Health Funds Shares means fully paid ordinary shares in the capital of NIB Health Funds.
NIB Holdings Deed Poll means the deed poll dated 31 May 2007 entered into by NIB Holdings in favour of NIB Health Fund; the Company Members and the Eligible Policyholders with respect to the Demutualisation Schemes.
NIB Holdings Shares means fully paid ordinary shares in the capital of NIB Holdings.
Policy means a policy of health insurance issued by NIB Health Funds.
Policyholder means a person who is insured under a Policy and is recorded by NIB Health Funds as the person in whose name the Policy is held.
PHIAC means the Private Health Insurance Administration Council.
Private Health Insurance Act means the Private Health Insurance Act 2007 (Cth).
Regulatory Approvals means such consents, approvals or other acts by a Government Agency necessary or desirable to implement the Company Members’ Scheme.
Share Allocation Rules means the allocation rules in respect of NIB Health Funds Shares and NIB Holdings Shares set out in schedule 1 to the Eligible Policyholders’ Scheme.
1.2 Interpretation
Headings are for convenience only and do not affect interpretation in the Company Members’ Scheme.
Unless the context requires otherwise:
(a)where relevant, words and phrases have the same meaning as in the Corporations Act;
(b) the singular includes the plural and conversely;
(c) a gender includes all genders;
(d)if a word or phrase is defined, its other grammatical forms have a corresponding meaning;
(e)a reference to a person, corporation, trust, partnership, unincorporated body or other entity includes any of them;
(f)a reference to a clause/recital is a reference to a clause or recital of the Company Members’ Scheme;
(g)a reference to an agreement or document is to the agreement or document as amended, varied, supplemented, novated or replaced, except to the extent prohibited by the Company Members’ Scheme or that other agreement or document;
(h)a reference to a party to the Company Members’ Scheme or another agreement or document includes the party’s successors, permitted substitutes and permitted assigns (and, where applicable, the party’s legal personal representatives);
(i)a reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it; and
(j)the meaning of general words is not limited by specific examples introduced by including, or for example, or similar expressions.
2 Conditions Precedent
2.1 Conditions Precedent
The Company Members’ Scheme is conditional upon the satisfaction of the following Conditions Precedent:
(a)the Company Members approving all resolutions at the Company Members’ General Meeting;
(b)the Court approving the Eligible Policyholders’ Scheme under section 411(4)(b) of the Corporations Act;
(c)the Court approving the Company Members’ Scheme under section 411(4)(b) of the Corporations Act;
(d)approval by PHIAC of the conversion of NIB Health Funds to a “for profit” company pursuant to section 126-42 of the Private Health Insurance Act;
(e)all necessary Regulatory Approvals being obtained;
(f)the lodgement with ASIC of an office copy of the Court order approving the Company Members’ Scheme under section 411(10) of the Corporations Act; and
(g)the lodgement with ASIC of an office copy of the Court order approving the Eligible Policyholders’ Scheme under section 411(10) of the Corporations Act.
2.2 Regulatory Approval
For the purposes of clauses 2.1(d) and 0 (“Conditions Precedent”), a Regulatory Approval will be regarded as having been obtained even though a condition has been attached to that Regulatory Approval, if the Board reasonably consider the condition acceptable and determine to treat the approval as having been obtained.
2.3 End Date
The Company Members’ Scheme will lapse and be of no further force or effect if the Conditions Precedent set out in clause 0 (“Conditions Precedent”) have not been fulfilled on or before the End Date.
3 Demutualisation
3.1 Implementation steps - Conversion Date
On the Conversion Date, subject to the satisfaction of the Conditions Precedent, the following will occur with effect in the following order:
(a)NIB Health Funds will issue NIB Health Funds Shares to Eligible Policyholders in accordance with the Share Allocation Rules and enter the Eligible Policyholders in the NIB Health Funds register; and
(b)NIB Holdings will subscribe for and NIB Health Funds will issue to NIB Holdings five NIB Health Funds Shares for an aggregate price of $5.00.
3.2 Implementation steps - Demutualisation Date
On the Demutualisation Date, subject to the satisfaction of the Conditions Precedent, the occurrence of the steps set out in clause 3.1 (“Implementation steps - Conversion Date”) and the approval of the Capital Reduction Resolution at the Capital Reduction Meeting, the following will occur with effect in the following order:
(a)NIB Health Funds reduces its capital in accordance with the Capital Reduction Resolution; and
(b)NIB Health Funds will procure that NIB Holdings issues the same number of NIB Holdings Shares to each Eligible Policyholder as the number of NIB Health Funds Shares of the Eligible Policyholder cancelled pursuant to the Capital Reduction Resolution.
3.3 Cancellation of Membership Rights
On the Conversion Date:
(a)the Membership Rights of that Company Member are cancelled;
(b)the liability of each Company Member as a guarantor on winding up of NIB Health Funds is extinguished;
(c)except as contemplated in clause 3.1(a), the Company Member ceases to be a member of the Company; and
(d)the Company Member will be issued NIB Health Funds Shares as contemplated by clause 3.1(a), such allocation being in their capacity as an Eligible Policyholder and not in their capacity as a Company Member.
4 Indemnity of directors, officers and agents
To the maximum extent permitted by the Corporations Act or any other law, NIB Health Funds shall indemnify each director, officer or agent of NIB Health Funds or NIB Holdings against any liability incurred as such a director, officer or agent to any other person (other than NIB Health Funds or NIB Holdings or a related body corporate) arising from anything done or omitted to be done in performance or purported performance of this Company Members’ Scheme, unless the liability arises out of conduct involving a lack of good faith.
5 General
5.1 Costs
NIB Health Funds will pay the costs (including any stamp duty necessarily incurred in implementing) of the Company Members’ Scheme.
5.2 Appointment of agent
Each Company Member, without the need for any further act, irrevocably appoints NIB Health Funds as its agent for the purpose of executing any document or doing any other act necessary to give effect to the terms of the Company Members’ Scheme.
NIB Health Funds, as agent of each Company Member, may sub-delegate its functions under this clause 0 (“Appointment of agent”) to all of its directors and secretaries (jointly and severally).
5.3 Consent
Each Company Member consents to NIB Health Funds doing all things necessary, incidental or expedient to the implementation and performance of the Company Members’ Scheme and acknowledge that the Company Members’ Scheme binds NIB Health Funds and all of the Company Members from time to time (including those who do not attend the Demutualisation Meetings, do not vote at those meetings or vote against the Company Members’ Scheme).
5.4 Court amendments to the Company Members’ Scheme
If the Court proposes to approve the Company Members’ Scheme subject to any alterations or conditions, NIB Health Funds may, by its counsel, consent to those alterations of conditions on behalf of all persons concerned (including a Company Member).
5.5 Company Members’ Scheme binding
The Company Members’ Scheme will bind NIB Health Funds and all Company Members and overrides the constitution of NIB Health Funds.
5.6 Further assurances
NIB Health Funds will do all such things and execute all such documents as may be necessary or desirable to give full effect to the provisions of the Company Members’ Scheme and the transaction contemplated by it.
5.7 Governing law
The Company Members’ Scheme is governed by the law of New South Wales. The parties submit to the non-exclusive jurisdiction of the courts of New South Wales.
ANNEXURE A
NIB Health Funds Limited - Eligible Policyholders’ Scheme
Scheme of arrangement pursuant to section 411 of the Corporations Act 2001 (Cth) between:
NIB Health Funds Limited (ACN 000 124 381) (“NIB Health Funds”)
and Eligible Policyholders of NIB Health Funds Limited
Recitals A NIB Health Funds is a company limited by guarantee incorporated in New South Wales.
B NIB Holdings Limited (ACN 125 633 856) (“NIB Holdings”) is a company limited by shares incorporated in Victoria. There are two NIB Holdings Shares on issue, one of which is held by Keith Lynch and one of which is held by Mark Fitzgibbon.
C The Board considers that:
(a) the Eligible Policyholders’ Scheme is in the best interests of NIB Health Funds and the Policyholders as a whole;
(b) the Eligible Policyholders’ Scheme does not adversely affect any creditors of NIB Health Funds; and
(c) the Share Allocation Rules provide a fair and reasonable basis for allocating NIB Health Funds Shares and NIB Holdings Shares to Eligible Policyholders.
D NIB Holdings has entered into the NIB Holdings Deed Poll under which it has agreed to observe all the provisions of the Eligible Policyholders’ Scheme which relate to it and to do everything within its power that is necessary to give full effect to the Eligible Policyholders’ Scheme. General terms
1 Definitions and interpretation
1.1 Definitions
In this Eligible Policyholders’ Scheme, the following words have these meanings, except where the context otherwise requires:
Appointed Actuary means Mr Mark Bishop.
ASIC means the Australian Securities and Investments Commission.
ASX means Australian Securities Exchange Limited.
Board means the board of directors of NIB Health Funds from time to time.
Business Day means a weekday on which banks are open in Newcastle, Australia.
Capital Reduction Meeting means the extraordinary general meeting of NIB Health Funds to consider the Capital Reduction Resolution.
Capital Reduction Resolution means the resolution of NIB Health Funds to selectively reduce its capital as set out in schedule 7 of the Demutualisation Implementation Deed.
Committee means the dispute resolution committee established under clause 9.1 of this deed.
Committee Member means a member of the Committee.
Company Member means a member of NIB Health Funds.
Company Members’ General Meeting means the general meeting of NIB Health Funds to consider the resolution to convert to a company limited by shares and to adopt a new constitution.
Company Members’ Scheme means the proposed scheme of arrangement between NIB Health Funds and the Company Members, subject to any alterations or conditions made or required by the Federal Court of Australia pursuant to s 411(6) of the Corporations Act.
Company Members’ Scheme Meeting means the meeting of Company Members to approve the Company Members’ Scheme.
Conditions Precedent mean the conditions precedent set out in clause 2.1.
Conversion Date means the date NIB Health Funds changes type from a company limited by guarantee to a company limited by shares in accordance with section 164(5) of the Corporations Act.
Corporations Act means the Corporations Act 2001 (Cth).
Court means the Federal Court of Australia.
Demutualisation Date means 1 October 2007 or such later date as determined by the Board that is at least 14 days after the Capital Reduction Resolution has been passed.
Demutualisation Implementation Deed means the demutualisation implementation deed dated 31 May 2007 between NIB Health Funds, NIB Holdings, Keith Lynch, Philip Gardner and Mark Fitzgibbon.
Demutualisation Meetings means:
(a) the Eligible Policyholders’ Scheme Meeting;
(b) the Company Members’ Scheme Meeting;
(c) the Company Members’ General Meeting; and
(d) the Capital Reduction Meeting.Demutualisation Schemes means the Eligible Policyholders’ Scheme and the Company Members’ Scheme.
Dispute Resolution Mechanism means the mechanism provided for in clause 9 to be used to resolve any disputes in respect of an Eligible Policyholder’s Allocation.
Dividend means a dividend declared or paid in respect of NIB Holdings Shares held by the Trustee in the Trust and any amount distributed in respect of those NIB Holdings Shares pursuant to a reduction of capital by NIB Holdings.
Eligible Policyholder means:
(a)a person who was a Policyholder on 20 March 2007 and remains a Policyholder on the date of the Eligible Policyholders’ Scheme Meeting; or
(b)a person who became a Policyholder in respect of an existing Policy, in substitution for the previous Policyholder, between 20 March 2007 and the date of the Eligible Policyholders’ Scheme Meeting, if:
(i) the previous Policyholder was a Policyholder on 20 March 2007; and
(ii)the new Policyholder remains a Policyholder on the date of the Eligible Policyholders’ Scheme Meeting.
Eligible Policyholder’s Allocation means the number of NIB Health Funds Shares, or as the case requires, NIB Holdings Shares, which are to be issued to an Eligible Policyholder pursuant to the Share Allocation Rules.
Eligible Policyholders’ Scheme means this proposed scheme of arrangement between NIB Health Funds and the Eligible Policyholders, subject to any alterations or conditions made or required by the Court pursuant to section 411(6) of the Corporations Act.
Eligible Policyholders’ Scheme Meeting means the meeting of Eligible Policyholders to consider, and if thought fit, approve the Eligible Policyholders’ Scheme.
End Date means 1 December 2007 or such later date as is determined by the Board prior to 1 December 2007.
Explanatory Statement means the booklet of materials to be sent to Eligible Policyholders and the Company Members in relation to the Demutualisation Schemes which accompanies the notices convening the Eligible Policyholders’ Scheme Meeting, the Company Members’ Scheme Meeting and the Company Members’ General Meeting.
Final Constitution means the constitution of NIB Holdings attached as schedule 5 to the Demutualisation Implementation Deed.
Government Agency means any government or governmental, semi-governmental, administrative or judicial entity or authority; it also includes any self-regulatory organisation established under statute.
Interim Constitution means the constitution of NIB Holdings attached as schedule 4 to the Demutualisation Implementation Deed.
Listing means the process of NIB Holdings being included on the official list of the ASX and having NIB Holdings Shares granted official quotation by the ASX and Lists has a corresponding meaning.
Listing Date means the date on which Listing occurs.
Listing Rules means the listing rules of the ASX.
NIB Health Funds Secretary means the company secretary of NIB Health Funds from time to time.
NIB Health Funds Shares means fully paid ordinary shares in the capital of NIB Health Funds.
NIB Health Interim Constitution means the constitution of NIB Health Funds attached as schedule 3 to the Demutualisation Implementation Deed.
NIB Holdings Deed Poll means the deed poll dated 31 May 2007 entered into by NIB Holdings in favour of NIB Health Funds, the Company Members and the Eligible Policyholders with respect to the Demutualisation Schemes.
NIB Holdings Shares means fully paid ordinary shares in the capital of NIB Holdings.
Overseas Policyholder means an Eligible Policyholder, not being an Unverified Policyholder, whose Registered Address is outside Australia.
PHIAC means the Private Health Insurance Administration Council.
Private Health Insurance Act means the Private Health Insurance Act 2007 (Cth).
Policy means a policy of health insurance issued by NIB Health Funds.
Policy Details means the details of the Policy held by the Policyholder with NIB Health Funds which are required to determine the Eligible Policyholder’s Allocation.
Policyholder means a person who is insured under a Policy and is recorded by NIB Health Funds as the person in whose name the Policy is held.
Registered Address, in relation to an Eligible Policyholder, means the address recorded on the register of Policyholders for the Eligible Policyholder as at 10:00am (Sydney time) fourteen days prior to the Demutualisation Date or, if the Eligible Policyholder ceased to be a Policyholder before the Demutualisation Date, the last address entered on the register of Policyholders for that Eligible Policyholder.
Regulatory Approvals means such consents, approvals or other acts by a Government Agency necessary or desirable to implement the Eligible Policyholders’ Scheme.
Scheme Effective Date means the date on which the Conditions Precedent in clause 2.1(d) and 2.1(g) (“Conditions Precedent”) are satisfied.
Share Allocation Form means the form so entitled to be provided to Eligible Policyholders with the Explanatory Statement.
Share Allocation Rules means the allocation rules in respect of NIB Health Funds Shares and NIB Holdings Shares set out in schedule 1.
Trust means the trust to be established in respect of Overseas Policyholders and Unverified Policyholders and governed by the Trust Deed, the terms of which are summarised in the Explanatory Statement.
Trust Deed means the Overseas Policyholders and Unverified Policyholders Trust Deed to be entered into by NIB Health Funds, NIB Holdings and the initial Trustee.
Trustee means the person acting as trustee of the Trust.
Unverified Policyholder means an Eligible Policyholder whose name, Registered Address or Policy Details have not been verified.
Verification of Details Form means the form so entitled accompanying the Explanatory Statement which Eligible Policyholders may use to confirm their name and address so as not to be an Unverified Policyholder.
1.2 Interpretation
Headings are for convenience only and do not affect interpretation in the Eligible Policyholders’ Scheme.
Unless the context otherwise requires:
(a)where relevant, words and phrases have the same meaning as in the Corporations Act;
(b)the singular includes the plural and conversely;
(c)a gender includes all genders;
(d)if a word or phrase is defined, its other grammatical forms have a corresponding meaning;
(e)a reference to a person, corporation, trust, partnership, unincorporated body or other entity includes any of them;
(f)a reference to a clause/recital/schedule is a reference to a clause or recital of, or a schedule to, the Eligible Policyholders’ Scheme;
(g)a reference to an agreement or document is to the agreement or document as amended, varied, supplemented, novated or replaced, except to the extent prohibited by the Eligible Policyholders’ Scheme or that other agreement or document;
(h)a reference to a party to the Eligible Policyholders’ Scheme or another agreement or document includes the party’s successors, permitted substitutes and permitted assigns (and, where applicable, the party’s legal personal representatives);
(i)a reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it; and
(j)the meaning of general words is not limited by specific examples introduced by including, or for example, or similar expressions.
2 Conditions Precedent
2.1 Conditions Precedent
The Eligible Policyholders’ Scheme is conditional upon the satisfaction of the following Conditions Precedent:
(a)the Company Members approving all resolutions at the Company Members’ General Meeting;
(b)the Court approving the Eligible Policyholders’ Scheme under section 411(4)(b) of the Corporations Act;
(c)the Court approving the Company Members’ Scheme under section 411(4)(b) of the Corporations Act;
(d)approval by PHIAC of the conversion of NIB Health Funds to a “for profit” company pursuant to section 126-42 of the Private Health Insurance Act;
(e)all necessary Regulatory Approvals being obtained;
(f)the lodgement with ASIC of an office copy of the Court order approving the Company Members’ Scheme under section 411(10) of the Corporations Act; and
(g)the lodgement with ASIC of an office copy of the Court order approving the Eligible Policyholders’ Scheme under section 411(10) of the Corporations Act.
2.2 Regulatory Approval
For the purposes of clauses 2.1(d) and 2.1(e) (“Conditions Precedent”), a Regulatory Approval will be regarded as having been obtained even though a condition has been attached to that Regulatory Approval, if the Board reasonably consider the condition acceptable and determine to treat the approval as having been obtained.
2.3 End Date
The Eligible Policyholders’ Scheme will lapse and be of no further force or effect if the Conditions Precedent set out in clause 2.1 (“Conditions Precedent”) have not been fulfilled on or before the End Date.
3 Demutualisation
3.1 Implementation steps - Conversion Date
On the Conversion Date, subject to the satisfaction of the Conditions Precedent, the following will occur with effect in the following order:
(a)NIB Health Funds will issue NIB Health Funds Shares to Eligible Policyholders in accordance with the Share Allocation Rules and clause 3.2; and
(b)NIB Holdings will subscribe for, and NIB Health Funds will issue to NIB Holdings, five NIB Health Funds Shares for an aggregate price of $5.00.
3.2 Discharge of obligation to issue NIB Health Shares on Conversion Date
The obligation of NIB Health to issue NIB Health Funds Shares will be discharged by NIB Health:
(a) in respect of each Overseas Policyholder:
(i)issuing the NIB Health Shares to which the Overseas Policyholder is entitled to the Trustee to be held on trust for the Overseas Policyholder in accordance with the Trust Deed; and
(ii)as soon as practicable after the Conversion Date, procuring the entry of the Trustee’s name in the NIB Health register;
(b) in respect of each Unverified Policyholder:
(i)issuing the NIB Health Shares to which the Unverified Policyholder is entitled to the Trustee to be held on trust for the Unverified Policyholder in accordance with the Trust Deed; and
(ii)as soon as practicable after the Conversion Date, procuring the entry of the Trustee’s name in the NIB Health register; and
(c) in respect of each other Eligible Policyholder:
(i)issuing the NIB Health Shares to which the Eligible Policyholder is entitled to that Eligible Policyholder; and
(ii)as soon as practicable after the Conversion Date, procuring the entry of the Eligible Policyholder’s name in the NIB Health register.
3.3 Implementation steps – Demutualisation Date
On the Demutualisation Date, subject to the satisfaction of the Conditions Precedent, the occurrence of the steps set out in clause 3.1 (“Implementation steps – Conversion Date”) and the approval of the Capital Reduction Resolution at the Capital Reduction Meeting, the following will occur with effect in the following order:
(a)NIB Health Funds will reduce its capital in accordance with the Capital Reduction Resolution; and
(b)NIB Health Funds will procure that NIB Holdings, in accordance with 0, issues the same number of NIB Holdings Shares to each Eligible Policyholder as the number of NIB Health Funds Shares of the Eligible Policyholder cancelled pursuant to the Capital Reduction Resolution.
3.4 Discharge of obligation to issue NIB Holdings Shares
The obligation of NIB Health Funds to procure NIB Holdings to issue the relevant NIB Holdings Shares will be discharged by NIB Holdings:
(a) in respect of each Overseas Policyholder:
(i)issuing the NIB Holdings Shares to which the Overseas Policyholder is entitled to the Trustee to be held on trust for the Overseas Policyholder in accordance with the Trust Deed; and
(ii)as soon as practicable after the Demutualisation Date, procuring the entry of the Trustee’s name in the NIB Holdings register and the dispatch of an uncertificated holding statement to the Trustee, with respect to the shareholding of the Overseas Policyholder;
(b) in respect of each Unverified Policyholder:
(i)issuing the NIB Holdings Shares to which the Unverified Policyholder is entitled to the Trustee to be held on trust for the Unverified Policyholder in accordance with the Trust Deed; and
(ii)as soon as practicable after the Demutualisation Date, procuring the entry of the Trustee’s name in the NIB Holdings register and the dispatch of an uncertificated holding statement to the Trustee, with respect to the Unverified Policyholder; and
(c) in respect of each other Eligible Policyholder:
(i)issuing the NIB Holdings Shares to which the Eligible Policyholder is entitled to that Eligible Policyholder; and
(ii)as soon as practicable after the Demutualisation Date, procuring the entry of the Eligible Policyholder’s name in the NIB Holdings register and the dispatch of an uncertificated holding statement to the Eligible Policyholder, with respect to that shareholding.
3.5 Eligible Policyholders’ shareholdings
Subject to clauses 3.2 and 3.4, each Eligible Policyholder:
(a)accepts the issue of NIB Health Funds Shares and NIB Holdings Shares to the Eligible Policyholder under clauses 3.1(a) (“Implementation steps - Conversion Date”), 3.2 (“Discharge of obligation to issue NIB Health Shares on Conversion Date”), 3.3(b) (“Implementation steps - Demutualisation Date”) and 3.4 (“Discharge of obligation to issue NIB Holdings Shares”) respectively; and
(b)consents for purposes of section 163(3) of the Corporations Act to the inclusion of the details required by section 163(3) of the Eligible Policyholder (or the Trustee, as the case may be) in the application to be made pursuant to section 163(1) of the Corporations Act, including:
(i) name and address; and
(ii)the number and class of shares the Eligible Policyholder will take up under clause 3.1(a) (“Implementation steps - Conversion Date”);
(c)agrees to become a member (or that the Trustee will become a member, as the case may be) of NIB Health Funds for the purpose of section 231 of the Corporations Act and to be bound by the constitution of NIB Health Funds; and
(d)agrees to become a member (or that the Trustee will become a member, as the case may be) of NIB Holdings for the purpose of section 231 of the Corporations Act and to be bound by the constitution of NIB Holdings.
3.6 Correction of allocation of Eligible Policyholder
Each Eligible Policyholder agrees that the indicative share allocation on the Share Allocation Form sent to them is not binding on NIB Health Funds or NIB Holdings and acknowledges that NIB Health Funds and NIB Holdings have the right to correct that indicative share allocation in determining the Eligible Policyholder’s Allocation, subject only to the Dispute Resolution Mechanism.
3.7 Transfer of NIB Health Funds Shares
Each Eligible Policyholder agrees that the Eligible Policyholder will not execute a transfer of any of the NIB Health Funds Shares issued pursuant to clause 3.1(a) (“Implementation steps - Conversion Date”).
3.8 Transfer of NIB Holdings Shares
Each Eligible Policyholder agrees that, prior to the Listing Date and subject to the provisions of the Eligible Policyholders’ Scheme:
(a)the Eligible Policyholder will not execute a transfer of any of the Eligible Policyholder’s NIB Health Funds Shares or NIB Holdings Shares; and
(b)any such transfer is void and of no effect.
3.9 Constitutions
Each Eligible Policyholder agrees that:
(a)prior to the Demutualisation Date, its rights and obligations as a holder of NIB Health Funds Shares will be governed by the NIB Health Interim Constitution;
(b)from the Demutualisation Date and prior to the Listing Date, its rights and obligations as a holder of NIB Holdings Shares will be governed by the Interim Constitution; and
(c)on and from the Listing Date, its rights and obligations as a holder of NIB Holdings Shares will be governed by the Final Constitution.
3.10 Joint share holdings
Notwithstanding the provisions of this clause 3, if before the date of issue of NIB Health Funds Shares under this clause 3, the Board determines that it is necessary to do so to obtain the approval of PHIAC contemplated by clause 2.1(d), the Board may determine that where there is more than one person insured under a Policy the persons in whose names the NIB Health Funds Shares (and subsequently the NIB Holdings Shares) are issued are the Eligible Policyholder and other persons specified by the Board who are a “holder” of the Policy within the meaning of the PHI Act, as joint holders. If it makes such a determination the Board may adopt guidelines as to how those arrangements would be implemented.
4 Agency and proxy arrangements
4.1 Authority
On and from the Scheme Effective Date and without the need for any further act, each Eligible Policyholder appoints NIB Health Funds and its directors and secretaries as its attorney and agent to do each of the following things on behalf of the Eligible Policyholder:
(a)give a consent in writing for purposes of section 163(3) of the Corporations Act as provided for in clause 3.5(b) (“Eligible Policyholders’ shareholdings”);
(b)nominate for the purposes of section 249J(3)(b) of the Corporations Act the address of NIB Health Funds as the alternative address of the Eligible Policyholder for receipt of notice of the Capital Reduction Meeting;
(c)for the purpose of section 249H(2) of the Corporations Act, consent to short notice of the Capital Reduction Meeting so that the Capital Reduction Meeting is held on the day following the Conversion Date;
(d)empower the NIB Health Funds Secretary to receive the Eligible Policyholder’s notice of the Capital Reduction Meeting with no obligation to pass on that notice to the Eligible Policyholder; and
(e)appoint the NIB Health Funds Secretary as the proxy of the Eligible Policyholder to attend and vote on behalf of the Eligible Policyholder in favour of the Capital Reduction Resolutions at the Capital Reduction Meeting in respect of all the NIB Health Funds’ Shares held by that Eligible Policyholder.
4.2 NIB Health Funds undertaking
Subject to clause 4.4 (“No exercise of power if notice received”), NIB Health Funds undertakes in favour of each Eligible Policyholder that it will appoint (or procure that as directors and secretaries appoint) the NIB Health Funds Secretary as the proxy of the each Eligible Policyholder to vote in favour of the Capital Reduction Resolutions, as contemplated by clause 4.1(e) (“Authority”) and to do the other things provided by clause 4.1 (“Authority”).
4.3 Revocation
The authority conferred upon NIB Health Funds and its directors and secretaries by an Eligible Policyholder pursuant to clause 4.1(e) (“Authority”) and the appointment of the NIB Health Funds Secretary as the proxy of the Eligible Policyholder may be withdrawn by that Eligible Policyholder by:
(a)attending the Capital Reduction Meeting and voting in person on the Capital Reduction Resolution; or
(b)appointing another person as the proxy of the Policyholder for the purposes of the Capital Reduction Meeting; or
(c)the Policyholder lodging a valid written revocation of the proxy prior to the date of the Capital Reduction Meeting.
Except as set out in this clause 4.3 (“Revocation”), the authority conferred upon NIB Health Funds and its directors and secretaries and the proxy granted to the NIB Health Secretary pursuant to a provision of clause 4.1 (“Authority”) cannot be withdrawn or revoked.
4.4 No exercise of power if notice received
NIB Health Funds must not (and must procure that its directors and secretaries do not) exercise the power vested in NIB Health Funds and its directors and secretaries under clause 4.1(e) (“Authority”) to appoint the NIB Health Funds Secretary in relation to an Eligible Policyholder where the Eligible Policyholder has notified NIB Health Funds in writing that it does not wish that power to be exercised in relation to it.
4.5 Enforcement
The undertaking by NIB Health Funds in favour of each Eligible Policyholder under clause 4.2 (“NIB Health Funds undertaking”) may be enforced by each Eligible Policyholder in respect of NIB Health Funds Shares held by that Eligible Policyholder but may not be enforced by that Eligible Policyholder in respect of any NIB Health Funds Shares held by any other Eligible Policyholder.
5 Transfer restrictions before Listing
5.1 Restrictions
Each Eligible Policyholder agrees to the restrictions and other requirements set out in this clause 5 (“Transfer restrictions before Listing”) until the Listing Date:
(a)in relation to the NIB Health Funds Shares issued to that Eligible Policyholder pursuant to clause 3.1(a); and
(b)in relation to the NIB Holdings Shares issued to that Eligible Policyholder pursuant to clause 3.3(b),
and from the Listing Date the restrictions and other requirements set out in this clause 5 (other than clause 5.7) will cease to apply.
5.2 Restrictions not to apply
The restrictions and other requirements set out in this clause 5 (other than clause 5.7):
(a)will not apply if the Board of NIB Health Funds (in the case of NIB Health Funds Shares) or the Board of NIB Holdings (in the case of NIB Holdings Shares) determine those restrictions shall cease to apply to Eligible Policyholders generally in relation to all shares on and from a date before the Listing Date, in its absolute and unfettered discretion; and
(b)will not prevent a transmission of shares to a personal representative following the death of a member in accordance with the constitution of the relevant company. Upon such a transmission, the personal representative will be bound by this section as if that person was an Eligible Policyholder.
5.3 No transfer
The Eligible Policyholder may not directly or indirectly transfer, sell, deal with or dispose of any legal or equitable interest in that share to any person other than as provided in the Eligible Policyholders’ Scheme.
5.4 No relevant interest or voting power
The Eligible Policyholder may not take any action or enter into any relevant agreement that has the effect that:
(a)any person other than the Eligible Policyholder acquires a relevant interest in those shares; or
(b)any person becomes an associate of the Eligible Policyholder in relation to those shares.
For the purposes of this clause “relevant interest”, “relevant agreement” and “acquire” have the meanings set out in the Corporations Act and “associate” has the meaning set out in sections 12 and 15 of the Corporations Act.
5.5 Notice to be given of contravention
A person must give notice in writing to NIB Health Funds (in the case of NIB Health Funds Shares) or NIB Holdings (in the case of NIB Holdings Shares) within 2 Business Days after becoming aware that the person has contravened the restrictions set out in clause 5.3 or clause 5.4.
5.6 Obligation to respond to request for information
NIB Health Funds (in the case of NIB Health Funds Shares) and NIB Holdings (in the case of NIB Holdings Shares) may by notice in writing (in such form as the Board may specify, which may require a statutory declaration) require a member within 5 Business Days after receiving the notice to furnish to NIB Health Funds (in the case of NIB Health Funds Shares) and NIB Holdings (in the case of NIB Holdings Shares) a statement in writing setting out, insofar as it lies within the Eligible Policyholder’s knowledge, full details of:
(a) whether or not there has been contravention of clause 5.3 or clause 5.4; and
(b)the identity of, and details required by, the Board of any person who has received a transfer, sale or disposal of shares or a relevant interest in shares or has become an associate in relation to shares or of any relevant agreement.
5.7 Contravention
(a) The provisions of this section shall be applicable where:
(i) a person has contravened clause 5.3 or clause 5.4;
(ii) a person has not fully complied with the requirements of clause 5.5; or
(iii) a person has not fully complied with the requirements of clause 5.6.
(b)Where the provisions of this clause are applicable, the Board (in the case of NIB Health Funds Shares) and the board of NIB Holdings (in the case of NIB Holdings Shares), in their absolute discretion, may procure the disposal of the shares held by the Eligible Policyholder on such terms as the Board considers fit, in its absolute discretion;
(c)The Board may appoint a person to execute any documents and implement any procedures as may be required to procure the transfer of the shares on behalf of the Eligible Policyholder and to receive and give a good discharge for the purchase price. The Eligible Policyholder hereby appoints that person as its attorney for that purpose;
(d)If that disposal is effected at or around the Listing Date, the Board may, in its absolute discretion, dispose of the shares pursuant to any bookbuild or share offering undertaken at that time;
(e)The net proceeds of any sale under this clause shall be paid to the Eligible Policyholder;
(f)Upon the name of the purchasers being entered in the register of members in exercise of the power of sale under this clause, the validity of the sale may not be challenged by any person; and
(g)The Board may refuse to register a transfer of Shares if the Board considers that transfer does not comply with the terms and conditions of this article 5.
6 Overseas Policyholders and Unverified Policyholders
6.1 Transfer to Unverified Policyholder
NIB Holdings will procure that if, within three years of the Demutualisation Date, the identity of an Unverified Policyholder is verified, either by a method of verification contemplated by the Explanatory Statement or another method approved by the Board, the Trustee will, as soon as reasonably practicable, transfer the NIB Holdings Shares to which that Unverified Policyholder is entitled, together with any Dividend referable to those NIB Holdings Shares, net of any applicable tax or expenses, pursuant to the Eligible Policyholders’ Scheme to the Unverified Policyholder, provided that the Trustee is under no obligation to transfer a NIB Holdings Share if to do so would contravene the Corporations Act, the Listing Rules or any other applicable law, and provided that the Unverified Policyholder is not, or does not, upon verification, become an Overseas Policyholder.
6.2 Overseas Policyholders
NIB Holdings will procure that the Trustee will sell all NIB Holdings Shares held on behalf of Overseas Policyholders at or about the Listing Date, at such price and in such manner as the Trustee may be directed by the Board. The net proceeds of sale together with any Dividends referable to those Shares (net of any applicable tax or expenses) will be distributed to the Overseas Policyholders no later than 6 weeks after the Listing Date.
6.3 Voting
Each Eligible Policyholder who, as at the Demutualisation Date, is an Unverified Policyholder or an Overseas Policyholder directs the Trustee to exercise all votes attaching to the NIB Holdings Shares held by the Trustee pursuant to the Trust in accordance with the Trust Deed:
(a)in favour of any scheme of arrangement or corporate reconstruction which may involve the disposal of NIB Holdings Shares which the Trustee holds and which is endorsed by a resolution of the board of NIB Holdings;
(b)against any scheme of arrangement or corporate reconstruction, other than as permitted by clause 6.5(a);
(c)in favour of any resolution proposed by the board of NIB Holdings at any general meeting of NIB Holdings for the purpose of implementing the determinations of the board of NIB Holdings or the Trustee in relation to the distribution of the property of the Trust after the third anniversary of the Demutualisation Date or for any purpose ancillary to that purpose; and
(d) otherwise in the Trustee’s absolute discretion.
7 Limitation on liability
No Eligible Policyholder will be entitled to compensation of any kind from the Trustee, NIB Holdings, NIB Health Funds or any of their subsidiaries from time to time in relation to that Eligible Policyholder’s capacity as an Unverified Policyholder after the third anniversary of the Demutualisation Date.
8 Indemnity of directors, officers and agents
To the maximum extent permitted by the Corporations Act or any other law, NIB Health Funds shall indemnify each director, officer or agent of the Trustee, NIB Health Funds or NIB Holdings against any liability incurred as such a director, officer or agent to any other person (other than NIB Health Funds or NIB Holdings or a related body corporate) arising from anything done or omitted to be done in performance or purported performance of this Eligible Policyholders’ Scheme, unless the liability arises out of conduct involving a lack of good faith.
9 Dispute resolution
9.1 Establishment of the Committee
NIB Health Funds will establish the Committee to resolve disputes about an Eligible Policyholder’s Allocation.
The Committee will comprise:
(a)one representative from, and nominated by, JPMorgan Australia Limited;
(b)one representative from, and nominated by, NIB Health Funds; and
(c)the Appointed Actuary or such other actuary nominated by NIB Health Funds.
A Committee Member must, and NIB Health will procure that a Committee Member does, enter into a deed in the form of schedule 2.
9.2 Request for review by Eligible Policyholder
An Eligible Policyholder may, at any time but no later than two weeks prior to the Demutualisation Date, in respect of which time of the essence give written notice addressed to the company secretary of NIB Health Funds requesting a review of the Eligible Policyholder’s Allocation and detailing exhaustively the grounds for requesting a review and all information relevant to such review.
NIB Health Funds must forward the written notice from the Eligible Policyholder to the members of the Committee as soon as practicable.
9.3 Review of Eligible Policyholder’s Allocation
The Committee must meet within two weeks of receipt of a written notice from NIB Health Funds under clause 9.2 (“Request for review by Eligible Policyholder”) to consider a request for review.
Any member of the Committee may convene a meeting of the Committee on the giving of 3 Business Days notice at any other time.
The Committee must calculate the number of NIB Health Funds Shares which, in their opinion, should be or should have been issued in respect of the Eligible Policyholder in accordance with the Share Allocation Rules.
The Committee must act in a fair manner but is not required to interview any person and may deal with all matters by correspondence.
9.4 Committee to reach determination
The determination of the Committee will be passed by a decision of the majority of the members of the Committee.
If the number of NIB Health Funds Shares allocated to the Eligible Policyholder was determined by the Committee to be less than the number calculated pursuant to the Share Allocation Rules, the Committee must adjust the Eligible Policyholder’s Allocation to be in accordance with the Share Allocation Rules.
The Committee must notify the Board of their decision following their review of the Eligible Policyholder’s Allocation within two weeks of each Committee meeting.
The Committee must notify the Eligible Policyholder of its determination no later than 2 weeks after the determination is made.
9.5 Additional allocation of NIB Holdings Shares
In accordance with the Committee’s notice issued under paragraph 9.4 (“Committee to reach determination”), the Board must take all reasonable steps to either:
(a)arrange for any additional allocation of NIB Health Funds Shares, by way of issue or transfer, as soon as practicable after the Directors receive notice from the Committee; or
(b)in its absolute discretion, procure the issue or transfer of the corresponding number of NIB Holdings Shares to the Eligible Policyholder, in respect of the additional allocation.
9.6 Finality of Committee determination
Any determination made by the Committee in relation to the Eligible Policyholder under clause 9.4 (“Committee to reach determination”) is final and binding to the extent permitted by law.
9.7 Interpretation
For the purpose of clause 9.2 (“Request for review by Eligible Policyholder”), the Committee may, in their absolute discretion, agree to treat a written notice to NIB Health Funds from any other person as if it were a notice from an Eligible Policyholder in accordance with clause 9.2 (“Request for review by Eligible Policyholder”).
10 General
10.1 Costs
NIB Health Funds will pay the costs (including any stamp duty necessarily incurred in implementing) of the Eligible Policyholders’ Scheme.
10.2 Appointment of agent
Each Eligible Policyholder, without the need for any further act, irrevocably appoints NIB Health Funds as its agent for the purpose of executing any document or doing any other act necessary to give effect to the terms of the Eligible Policyholders’ Scheme other than as provided in clause 4 (“Agency and proxy arrangements”).
NIB Health Funds, as agent of each Eligible Policyholder, may sub-delegate its functions under this clause 10.2 (“Appointment of agent”) to all of its directors and secretaries (jointly and severally).
10.3 Consent
Each Eligible Policyholder consents to NIB Health Funds doing all things necessary, incidental or expedient to the implementation and performance of the Eligible Policyholders’ Scheme and acknowledges that the Eligible Policyholders’ Scheme binds NIB Health Funds and all of the Eligible Policyholders from time to time (including those who do not attend the Demutualisation Meetings, do not vote at those meetings or vote against the Eligible Policyholders’ Scheme).
10.4 Court amendments to the Eligible Policyholders’ Scheme
If the Court proposes to approve the Eligible Policyholders’ Scheme subject to any alterations or conditions, NIB Health Funds may, by its counsel, consent to those alterations of conditions on behalf of all persons concerned (including an Eligible Policyholder).
10.5 Eligible Policyholders’ Scheme binding
The Eligible Policyholders’ Scheme will bind NIB Health Funds and all Eligible Policyholders and overrides the Constitution of NIB Health Funds.
10.6 Further assurances
NIB Health Funds will do all such things and execute all such documents as may be necessary or desirable to give full effect to the provisions of the Eligible Policyholders’ Scheme and the transaction contemplated by it.
10.7 Governing law
The Eligible Policyholders’ Scheme is governed by the law of New South Wales. The parties submit to the non-exclusive jurisdiction of the courts of New South Wales.
Schedule 1 - Share Allocation Rules
1 Object
The object of these rules is to set out the basis on which NIB Health Funds Shares will be issued to Eligible Policyholders on the Conversion Date. On the Demutualisation Date, each Eligible Policyholder’s Allocation of NIB Health Funds Shares will be cancelled and the same number of NIB Holdings Shares will be issued to each Eligible Policyholder as that number of NIB Health Funds Shares cancelled.
2 Eligibility
The number of NIB Health Funds Shares to be allocated to each Eligible Policyholder pursuant to clause 0 of the Eligible Policyholders’ Scheme (“Implementation steps - Conversion Date”) will be calculated in the manner set out in rules 3 to 7.
3 Type of Policy held
NIB Health Funds Shares will be allocated to each Eligible Policyholder under rules 4 to 7 based on:
(a)in the case of a person who is an Eligible Policyholder under paragraph (a) of the definition of Eligible Policyholder, the type of Policy held by that Eligible Policyholder on the First Qualifying Date; and
(b)in the case of a person who is an Eligible Policyholder under paragraph (b) of the definition of Eligible Policyholder, the type of Policy held by the previous Policyholder on the First Qualifying Date.
4 Ambulance Only Policy
Each Eligible Policyholder with an Ambulance Only Policy will be allocated 10 NIB Health Funds Shares per Year of Membership, subject to a minimum allocation of 100 NIB Health Funds Shares and a maximum allocation of 300 NIB Health Funds Shares.
5 Single Policy
Each Eligible Policyholder with a Single Policy will be allocated 100 NIB Health Funds Shares per Year of Membership, subject to a minimum allocation of 300 NIB Health Funds Shares and a maximum allocation of 3,000 NIB Health Funds Shares.
6 Family Policy
Each Eligible Policyholder with a Family Policy will be allocated 200 NIB Health Funds Shares per Year of Membership, subject to a minimum allocation of 600 NIB Health Funds Shares and a maximum allocation of 6,000 NIB Health Funds Shares.
7 Multiple Policies
If an Eligible Policyholder has more than one Policy, the Eligible Policyholder’s Allocation will be determined by reference only to the Policy which provides the highest number of NIB Health Funds Shares and all other Policies will be ignored.
Only one Eligible Policyholder’s Allocation will be made for each Eligible Policyholder, regardless of the number of Policies held.
8 Unverified Policyholders and Overseas Policyholders
These rules also apply to the calculation of the Eligible Policyholder Allocation of Overseas Policyholders and Unverified Policyholders. Notwithstanding rules 4 and 5, the issue of NIB Health Funds Shares to Unverified Policyholders and Overseas Policyholders is governed by clause 6 of this Scheme.
9 Definitions
9.1 Definitions
Ambulance Only Policy means a Policy that only provides ambulance cover.
Days Suspended means, in respect of an Eligible Policyholder, the number of days that a Policy has been suspended at the request of the Eligible Policyholder prior to the First Qualifying Date.
Ex-IOOF Member means a Policyholder who was a member of IOOF when the health business of IOOF was acquired by NIB Health Funds with effect on the IOOF Transfer Date.
Family Policy means a Policy that is not a Single Policy or an Ambulance Only Policy.
First Qualifying Date means 20 March 2007.
IOOF means IOOF Limited.
IOOF Transfer Date means 1 May 2003.
Joining Date means:
(a)in respect of an Eligible Policyholder who is an Ex-IOOF Member, the IOOF Transfer Date;
(b)in respect of a person who is an Eligible Policyholder under paragraph (b) of the definition of Eligible Policyholder:
(i)the most recent date on which the previous Policyholder became a contributor in relation to a Policy; or
(ii)if the previous Policyholder was an Ex-IOOF Member, the IOOF Transfer Date; and
(c)in respect of any other Eligible Policyholder, the most recent date of that Eligible Policyholder taking out a Policy,
(even if the type of Policy has changed since that date).
Single Policy means a Policy (other than an Ambulance Only Policy) where premiums are paid at the single rate.
Total Years and Days means, in respect of an Eligible Policyholder, the number of years and days from the Joining Date to the First Qualifying Date.
Years of Membership means Total Years and Days less Days Suspended rounded up the nearest whole year, and “Year of Membership” has the same meaning.
9.2 Scheme definitions apply
For the avoidance of doubt, except as set out in rule 9.1, words and phrases used in these rules have the meaning given in clause 1 of the Eligible Policyholders’ Scheme (“Definitions and interpretation”).
Schedule 2 - Dispute Resolution Committee
Members’ Deed PollDetails
Party [insert name of Committee Member] Committee Member
Name
[●]
Address [●]
Fax [●]
In favour of
NIB Health Funds Limited ACN 000 124 381
NIB Holdings Limited ACN 125 633 856
Each Eligible Policyholder
Recitals
A NIB Health and the Eligible Policyholders are bound by the Eligible Policyholders’ Scheme.
B Pursuant to clause 9.1 of the Eligible Policyholders’ Scheme, three persons are to be appointed to be responsible for the resolution of any disputes with respect to application of the Share Allocation Rules referred to under clause 9.3 and schedule 1 of the Eligible Policyholders’ Scheme.
C The appointment of a Committee Member is subject to the execution and delivery of this Deed.
Date of deed poll
See Signing page
General terms
1 Interpretation
Words defined in the Eligible Policyholders’ Scheme have the same meaning in this deed.
2 Consent to act as Committee Member
The Committee Member consents to act as a Committee Member pursuant to the terms and conditions of the Eligible Policyholders’ Scheme.
3 Acknowledgement of Committee Member
3.1 Responsibility for dispute resolution
The Committee Member acknowledges that the Committee will be responsible for the resolution of disputes about an Eligible Policyholders’ Allocation referred to it under clause 9.3 of the Eligible Policyholders’ Scheme.
3. Enforcement
The Committee Member acknowledges and agrees that the benefit of this deed can be enforced directly by any one or more of NIB Health, NIB Holdings and the Eligible Policyholders against the Committee Member.
4 Covenant by Committee Member
The Committee Member covenants in favour of NIB Health, NIB Holdings and each of the Eligible Policyholders that he or she will be bound to act in accordance with the terms of the Eligible Policyholders’ Scheme as if he or she were a party to the Eligible Policyholders’ Scheme.
5 General
5.1 Variation
A provision of this deed may not be varied unless the variation is approved by the Court.
5.2 Notices
Any notices to be given under this deed will be in accordance with the notice provisions of the Eligible Policyholders’ Scheme.
5.3 Governing law and jurisdiction
This deed is governed by the laws of New South Wales, Australia. The parties irrevocably submit to the non-exclusive jurisdiction of the courts of New South Wales, Australia.
5.4 Further steps
The Committee Member will do all such things and execute all such documents as may be necessary or desirable to give full effect to the provisions of the Eligible Policyholders’ Scheme and the transaction contemplated by it.
EXECUTED as a deed poll
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD859 OF 2007
IN THE MATTER OF NIB HEALTH FUNDS LIMITED ACN 000 124 381
NIB HEALTH FUNDS LIMITED
PlaintiffJUDGE:
EMMETT J
DATE:
6 JUNE 2007
PLACE:
SYDNEY
REASONS FOR JUDGMENT
On 6 June 2007 the Court made orders that NIB Health Funds Limited (NIB) convene a meeting of its eligible policyholders and a meeting of its members for the purpose of considering, and if thought fit, agreeing to proposed schemes of arrangement between NIB and its policyholders and NIB and its members respectively. Those meetings have been convened and were held on 19 July 2007. NIB has now applied to the Court for approval of the schemes pursuant to s 411 of the Corporations Act 2001 (Cth) (the Act).
A number of matters have been raised by NIB by way of disclosure to the Court of failures to comply strictly with the Court’s orders. In addition, NIB has drawn the Court’s attention to a written submission directed to the Court by a policyholder. That last matter is something about which I should say something.
The schemes are designed, as I indicated in my reasons of 6 June 2007, to achieve the demutualisation of NIB. Any demutualisation of the nature that is involved in the proposal must involve an element of arbitrary cut-off. In a sense, the fairest demutualisation designed to distribute stored-up profits in an organisation such as NIB would engage in an historical investigation to determine which policyholders of NIB, both present and former, have contributed to such profits and to what extent. Such observations have been made on many occasions in the past in relation to proposals designed to distribute the locked-up profits of mutual entities. However, from a practical point of view, such an inquiry is almost impossible. It is practicable only to distribute such benefits to the current generation, to the exclusion of past generations.
By a written submission addressed to the Court, Mr Raymond Jeffrey Shaw, a policyholder of NIB has complained about what he says are inequities and inequalities in the share allocation methodology that was described in my reasons of 6 June 2007. Mr Shaw refers specifically to what he says is an anomaly resulting from the fact that, for many years, some members of NIB were Family Members, but subsequently converted to being Single Members. Such Members receive an allocation on the basis of their current status rather than on their past status. Mr Shaw also complains about procedural unfairness. He says that there has been no opportunity for members to provide feedback to NIB. He also complains of what he says is inappropriate time-tabling for appeals. The last complaint appears to me to be either misconceived or simply another way of putting his first complaint. While there is a review process contemplated by the Scheme, that process is designed only to ensure that allocations are made in accordance with the Scheme. It is not designed to second guess the share allocation rules of the Scheme.
Mr Shaw’s concerns are not unreasonable because they are concerns that tax the consideration of any organisation endeavouring to achieve an equitable distribution in circumstances such as these; indeed the view is held by many that mutual organisations should never be broken up in the way that it is presently contemplated. That, however, is a matter ultimately for the members and policyholders of NIB.
There are two matters to which NIB refers in response to Mr Shaw’s concerns. The first is the involvement of the Council and the second is a further report by the actuary consulted in relation to the schemes.
I have previously referred to the provisions of s 126-42 of the Private Health Insurance Act 2007 (Cth) (the PHI Act). Section 126-42(5)(c) of the PHI Act contemplates that the Council be satisfied that a conversion scheme would not result in financial benefits from the scheme being distributed inequitably between policyholders and insured persons. The Council instructed counsel to appear today to assist the Court in any matter that might arise under the PHI Act. Ms Allars, of counsel, has indicated that the Council regards part of its function in giving approval for the purpose of s 126-42, to consider whether there is an equitable distribution contemplated by the scheme. Specifically, Ms Allars informed the Court that the Council regarded it as part of its function to consider the equity of proposed cut-off dates, arbitrary though they may be, for the purposes of determining allocations.
One of the conditions of the scheme is that the Council give its approval pursuant to s 126-42. On 13 June 2007 the Council published advertisements inviting interested parties to make submissions and comments on the question of whether the scheme would result in financial benefits from the scheme being distributed inequitably between policyholders and insured persons. After considering whatever submissions have been made, and after engaging in considerable correspondence with NIB, the Council has given its approval pursuant to s 126-42.
Mr Shaw also wrote to the Commission outlining his concerns. While there has been no representation from the Commission, the Commission has, by letter of 20 July 2007 to NIB’s solicitors, advised that it has no objection to the schemes of arrangement and is satisfied that they have not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Act. It is, of course, not necessarily the function of the Commission to consider matters such as those raised by Mr Shaw.
In addition to the comfort one might obtain from the fact of the Council’s involvement and its consideration of these matters, NIB relies on a further report from the consulting actuary, Mr Goodsall. His initial report was referred to in my reasons of 6 June 2007. Mr Goodsall attended the meetings that were held on 19 July and paid attention to a number of speakers who commented on the proposal, including the appropriateness of the share allocation rules. Mr Goodsall considered the comments made during the meeting, both at the time they were made and subsequently. He considered that the main point raised related to the share allocation methodology in relation to conversion by some policyholders from Family Policy to a Single Policy prior to the relevant cut-off date of 20 March 2007.
None of the comments that were made at the meeting have caused Mr Goodsall to change the opinions that he expressed in his earlier report and to which I have already referred. He confirms his opinion that the share allocation rules, in selecting policy status on the cut-off date, are consistent with the approach adopted in several other demutualisations that have been approved in Australia in recent years, including AMP Life Limited, NRMA Insurance Limited and Hibernian Friendly Society Limited. Mr Goodsall observes that any share allocation basis will, to some extent, be subjective and, hence, may produce anomalies that may be contentious from the point of view of some members. He observes that it is generally not possible to take into account the historic personal circumstances of all individual participants in a demutualisation because the organisation will not have all of the necessary personal information to enable such an exercise to be undertaken. Mr Goodsall says that, on his understanding of the extent, quality and reliability of the records held by NIB, it would not be possible to allocate shares by taking into account changes in individual circumstances or policy type held over the 30 year period adopted by the share allocation rules.
Mr Goodsall, in his earlier reports, expressly considered whether the share allocation methodology, which used a factor taking into account the changing nature of each policy over time, was appropriate. His opinion was, and still is, that it is not possible to do so. He adverted to that as one of the disadvantages of the methodology adopted by NIB. In his original report he observed that the methodology does not allow for the actual contribution of each policy to the surplus and it does not allow for the changing nature of each policy over time. Nevertheless, weighing up all of the considerations that he referred to in his report, his opinion was, and remains, that the proposed share allocation methodology is fair and reasonable.
In the circumstances, while one might feel sympathetic to the position of a policyholder such as Mr Shaw, the complaints that he makes are not such as would stand in the way of the wishes of the majority of policyholders.
At the meetings convened pursuant to the Court’s orders, the proposed resolutions were passed by the requisite majorities. 84.74% of members present voted in favour of the members’ scheme. 94.73% of eligible policyholders voted in favour of the eligible policyholders’ scheme. That represented 46 of the 50 members and 106,457 of 316,227 eligible policyholders.
There were three matters to which the Court’s attention was drawn by NIB in relation to the voting on the policyholders’ scheme. The first is that some 6,000 scheme document packs sent to potential eligible policyholders did not include a proxy form. That omission was discovered by an audit carried out in relation to the meetings. The policyholders who did not receive a form of proxy were subsequently sent a proxy form, the latest of which being sent on 19 June 2007. Thus, it is likely that those eligible policyholders received a proxy form some four weeks before the meeting. Interestingly enough, the voting rate of the group was 35% compared with the voting rate of eligible policy holders of 33.6%. I do not consider that the omission was in any way material or should interfere with the approach that the Court should take to approval of the scheme.
Secondly, arrangements were made for proxies to be lodged electronically. However, the form of on-line electronic proxy forms contained old drafts of the resolutions, rather than resolutions in the form of the notices of meeting that were directed to be sent by the Court. While the circumstances that led to that discrepancy perhaps indicate a need for greater care in checking such matters, the discrepancy was clearly the result of an oversight. Some 10,000 eligible policyholders and 19 company members availed themselves of the electronic proxy process. Notwithstanding the discrepancy, those proxies, insofar as they were received in time, were counted. The numbers are such that, whether they were counted or not, they would not have made a difference to the result of the voting. I am satisfied that the publication of the incorrect form should be treated as a procedural irregularity within s 1322 of the Act such that the proceeding, namely the convening of the meetings, is not invalidated by reason of that procedural irregularity.
The third matter in relation to proxies is that there are, somewhat curiously, some 490 infant policyholders whose votes were apparently excluded. Those numbers are immaterial, although it is curious that an infant is regarded as capable of being a policyholder but is not regarded as capable of voting.
I am satisfied, from the evidence that has been read today, that the meetings have been convened substantially in accordance with the Court’s orders and that the resolutions have been passed by the requisite majorities. The schemes are expressed to be subject to certain conditions. I have evidence before me, in the form of certificates on behalf of NIB, to the affect that the conditions referred to in the schemes have been satisfied subject, of course, to the Court’s approval.
I have also seen the terms of the Trust Deed dated 19 July 2007 that has been entered into on behalf of overseas policyholders and unverified policyholders. The Trust Deed was entered into by Australian Executive Trustees Limited, whose fees will be paid by NIB. The Trust Deed provides for the receipt by the trustee of shares that would be issued to overseas policyholders and shares that would be issued to unverified policyholders, that is, policyholders who would be entitled to shares but who cannot be identified and. The Trust Deed accords with the draft that was before the Court on the previous occasion.
The policyholders scheme provides a dispute resolution committee, as I have already briefly mentioned. Section 411(7) of the Act 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 creditors, or any class of them, or between a body and its members or any class of them, relatively if the person is not a registered liquidator. For more abundant caution, NIB asks for the leave of the Court, pursuant to s 411(7)’, for members of the dispute resolution committee to be involved in the administration of the scheme, notwithstanding that none of them is a registered liquidator.
Each of the three members of the proposed committee has executed a deed poll undertaking to perform the obligations contemplated by the scheme. I am not totally certain that what they are involved in will be the administration of the scheme. Nevertheless, for more abundant caution, I would be prepared to make an order giving leave for them to be involved pursuant to s 411(7).
Apart from the submission from Mr Shaw, no other member or policyholder sought leave to appear before the Court in relation to this application for the approval of the schemes. In all of the circumstances, I am persuaded that the Court should approve both schemes.
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. Associate:
Dated: 22 August 2007
Counsel for the Plaintiff: Mr MB Oakes SC Solicitor for the Plaintiff: Mallesons Stephen Jaques Counsel for the Private Health Administration Council: Ms M Allars Solicitor for the Private Health Administration Council: DLA Phillips Fox Date of Hearing: 23 July 2007 Date of Judgment: 23 July 2007
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