FEDERAL COURT OF AUSTRALIA

King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) [2003] FCA 980

PRACTICE & PROCEDURE – representative proceeding – settlement agreement – approval of settlement by Court – considerations in approval of settlement – whether settlement is appropriate and fair under the circumstances – where mechanism for resolving potential disputes included in settlement scheme.

SHANE ROBERT KING v AG AUSTRALIA HOLDINGS LIMITED (formerly GIO AUSTRALIA HOLDINGS LTD) (ACN 054 573 401), GRANT SAMUEL & ASSOCIATES PTY LTD (ACN 050 036 372), DAVID MORTIMER, BRUCE HOGAN, STEWART STEFFEY, RONALD ASHTON, MARINA DARLING, ANDREW KALDOR, LLOYD LANGE, DAVID O’HALLORAN & IAN POLLARD

N 955 OF 1999

MOORE J

17 SEPTEMBER 2003

SYDNEY

REASONS FOR APPROVING SETTLEMENT

1                     On 26 August 2003 I made an order approving a settlement between Mr King (“the applicant”) and the first respondent, AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) (“GIO”).  The settlement was of the representative proceeding the applicant had commenced on 31 August 1999 against GIO, an adviser to that company and its directors.  On 8 September 2003 I made orders effectively disposing of the proceeding concerning other respondents and also orders dealing with cross-claims involving both the original respondents and third parties.  All the orders have been made by consent though it is desirable to set out my reasons for making them and to record the context in which they were made.

2                     The applicant alleged that he and the members of the representative group were shareholders in GIO when it was the subject of a hostile takeover bid by AMP Insurance Investment Holdings Pty Ltd (“AMP”).  They did not sell their shares and the gist of the case maintained by the applicant was that by retaining the shares, he and the other members of the group suffered loss.  That loss was caused by the misleading and deceptive conduct of the respondents (while that simplifies the allegations, it is an adequate description for present purposes).  A significant element in the impugned conduct was a Part B statement issued in late 1998.  A summary of the applicant’s case (as then formulated) can be found in King v GIO Australia Ltd (2000) 100 FCR 209 at 215.  Much of that case (but by no means all) is based on allegations that the respondents, including GIO, engaged in conduct in contravention of Part V of the Trade Practices Act 1974 (Cth).  In December 1999, AMP compulsorily acquired all remaining shares in GIO at a price which was only a little more than half the price offered a year earlier.

3                     For the applicant to have succeeded both on his behalf and on behalf of all the group members, it would have been necessary for him to have established that the conduct complained of was unlawful.  The determination of that question (though the issues were, in fact, more complex) was fixed for hearing in May 2004 and, in all probability, the hearing would have taken several months.  If the applicant had been successful then attention would have turned to the position of individual group members. In order for any individual group member to have established an entitlement to damages, it would have been necessary to demonstrate they did not sell their shares because of the conduct of the respondents.  This description represents a gloss on the issues and the path the proceeding was likely to take.  However, it serves to illustrate that the potential liability of the respondents to the claims made by the applicant (on his and the group members’ behalf) and the correlative prospects of success for group members, depended substantially on the question of whether an individual group member relied on the content of the Part B statement.  One of the criteria for group membership was that the shareholder did not accept the takeover offer by reason of the representations and conduct of the respondents.

4                     When the proceeding commenced there were 67,000 shareholders (this and most other figures in these reasons (unless the context indicates otherwise) are rounded out) who, potentially, might have a compensable claim, assuming the matters referred to in the preceding paragraph were established.  These 67,000 were the shareholders who owned and retained shares during the period of the hostile takeover bid.  Of these shareholders, 22,000 retained Maurice Blackburn Cashman (“MBC”) to act on their behalf.  In early 2001, 18,000 potential group members opted out of the proceeding.  This left 50,000 shareholders who may have had a compensable claim against the respondents.  Some people may not have opted out because they believed they were never in the representative group.  Some may have known that they retained shares during the hostile takeover bid for reasons unrelated to the conduct of the respondents.

5                     By the middle of 2002, it was clear that GIO wanted to take steps to ascertain, as best it could, the number of shareholders who really had and would wish to pursue a claim of the type identified by the applicant in the pleadings.  Plainly enough (and this was made clear by counsel appearing for GIO in submissions they made) GIO wanted to have some understanding of its potential liability in the proceeding.  Its potential liability would be relevant to any discussions directed towards settling the matter.  In a judgment I gave on 11 July 2002 ((2002) 121 FCR 480), I made orders (which were opposed by the applicant) designed to facilitate communications between GIO and shareholders for the purpose just discussed.  In a later judgment given on 16 December 2002 ([2002] FCA 1560) I effectively authorised (over the opposition of the applicant) GIO to send out a questionnaire to ascertain which shareholders viewed themselves as not being a group member and which shareholders did not want to participate in the proceeding (whether or not they were a group member).  The questionnaire was also intended to elicit some basic information about the nature of any claim from those shareholders who did not take either of those positions, including information concerning reliance. 

6                     Of those who were sent the questionnaire, 5,000 responded by indicating they either did not consider themselves to be a group member or they did not wish to participate in the proceeding.  This left 22,000 shareholders represented by MBC and 23,000 shareholders who were not represented by that firm but who had neither opted out nor taken a step to indicate they did not wish to be involved in the proceeding.  By reference in June 2003 to information that was more up to date, the number in this latter group was 25,000.  In addition, only 1688 of those who were sent the questionnaire replied providing the basic information sought including information concerning reliance. 

7                     In June 2003, the applicant (supported by GIO) applied for orders intended to crystallise the number of shareholders who wished to continue to participate in the proceeding by asserting a claim of the type alleged by the applicant (on behalf of each member of the representative group) at the commencement of the proceeding and to whom GIO (and other respondents) might be liable.  The orders had the effect of redefining the representative group.  I made those orders on 19 June 2003.  I did so because a point had been reached where, in my opinion, it was appropriate and fair to attempt to identify with precision the shareholders (and their identity) on whose behalf the proceeding was being maintained in substance and not merely in form.  The central order redefining the class was in the following terms:

On 7 August 2003 the Fifth Application and the Seventh Further Amended Statement of Claim be amended to provide that the group members to whom the proceeding relates within the meaning of s 33H of the Act be the identified group members [in effect the shareholders who completed and returned a form they were sent] provided that the addition or deletion of persons to or from the said list may be effected at any time by the Court if it is satisfied that the omission or inclusion of the person on the said list was the result of an error by any party, its representative or the Court or otherwise.

The words “or otherwise” were added by me to the draft proposed by the parties to allow the Court to deal with any unforseen consequences of the course that was then being chartered for the proceeding.

8                     As a result of the orders, all shareholders who had not opted out (other than clients of MBC and the 5,000 shareholders referred to in [6] above) were sent a letter to an address in a database maintained by GIO.  The letter was headed “IF YOU WISH TO PARTICIPATE IN THIS REPRESENTATIVE ACTION FOR COMPENSATION YOU MUST COMPLY WITH THIS NOTICE.  IF YOU DO NOT DO SO YOUR RIGHTS MAY BE LOST”.  The letter was ultimately sent to 25,806 people.

9                     The letter contained a form called ‘Form C’, which the recipient was told had to be filled out and returned by 24 July 2003 (in a reply paid envelope included with the letter) for the recipient to continue as a group member.  The letter contained a lengthy explanation about what had to be done and what was occurring.  One of the orders made on 19 June 2003 (set out in [7] above) was that the members of the group would be redefined by reference to a list of people who completed and returned Form C.  The letter sent with Form C correctly stated the position concerning the effect of not returning the form by 24 July 2003.  In addition to the letter, advertisements were placed in both the Australian newspaper and a major metropolitan daily newspaper in each capital city advising that these steps had to be taken to remain a member of the representative group.  Of those who were sent the letter, 1957 returned Form C within the specified time (what occurred is a little more complex but this description is sufficient for present purposes).  They became members of the representative group redefined by the orders made on 19 June 2003 (and later varied in minor respects which need not be detailed).  On behalf of its clients, MBC completed Form Cs with the result that a further 21,142 people became members of the representative group, redefined by the orders made on 19 June 2003.  By this process the representative group totalled 23,099.  This was apparent by early August 2003.

10                  I was then acting on the basis that the combined effect of ss 33ZB and 33ZE of Part IVA was as follows.  Any judgment ultimately given would not bind people who may have initially been members of the representative group but were not one of the 23,099 who had completed Form C and became, in aggregate, the representative group by the orders made on 19 June 2003.  Those who did not become part of the redefined representative group had the benefit of a temporary suspension of limitation periods at least until 7 August 2003.  At the hearing on 19 June 2003, no party demurred from these propositions (and in particular the effect of the orders on any limitation periods) when they were discussed. 

11                  A few days before 8 August 2003, I was asked to list the matter on very short notice.  I did so and I was then informed that the matter had settled, at least as between the applicant and GIO, though the settlement was subject to Court approval.  I was told by senior counsel appearing for GIO that there were some commercial imperatives of fundamental importance which required the parties to seek and obtain Court approval for the settlement by the end of August.  I accepted this was so and acted on that basis.  I then made orders fixing a hearing to consider the settlement for 26 August 2003 and authorising a letter to be sent by MBC informing those who were (by this time) all the members of the representative group of the terms of the proposed settlement which included informing them of the proposed payment to MBC of approximately $15 million for professional costs and disbursements.  The letter indicated, as a range, the amount (per share) payable under the settlement if the shares had been compulsorily acquired in December 1999 (the range was $1.16 to $1.32) and also indicated, as a range, the percentage of the nett loss payable under the settlement if the shares had been sold on the stock market before December 1999 (the range was approximately 55% to 63%).  The letter also contained an invitation to any person who objected to the settlement to either appear (personally or through a solicitor) at the hearing on 26 August 2003 or send a letter setting out their reasons for objecting to a nominated post office box by 22 August 2003.  Ultimately, no written objections were received and no one appeared at the hearing to object.

12                  The final settlement is reflected in two documents.  The first is an agreement between the applicant and GIO.  The second is a scheme of settlement.  The latter is annexed to these reasons (as Annexure A) and I will not repeat matters of detail contained in it.  Prior to the hearing on 26 August 2003 I was furnished with an opinion from MBC and an opinion from senior and junior counsel for the applicant dealing with the question of whether the settlement was fair, proper and appropriate.  Their opinions supported the settlement and, for my part, I had little difficulty in accepting that the amounts for which the case was being settled were appropriate in all the circumstances.  One line of defence in the proceeding, referred to by senior counsel for GIO on 26 August 2003 (viewed as a defence of substance) was that had the respondents not conducted themselves as they did, the true and parlous financial position of GIO in late 1998 and early 1999 would have been revealed and the takeover by AMP would not have proceeded.  No damage would have been suffered.

13                  The gist of the settlement was this.  During the hostile takeover bid, AMP offered to purchase GIO shares at $5.35 each during a period concluding 4 January 1999.  By May 1999 GIO shares were trading on the stock exchange for $3.90, by August 1999 for $2.64 and by December 1999 for $2.30.  AMP compulsorily acquired any GIO shares not acquired during the takeover for $2.75 in December 1999.  In February 1999 shareholders were paid a total of 50 cents by way of capital return and interim dividend.  The difference between the takeover offer price and the compulsory acquisition price was $2.60 though an adjustment had to be made for the 50 cents paid in the interim.  Thus the total theoretical loss suffered crystallised in December 1999 at $2.10 for those shares compulsorily acquired.  For those sold on the market between January and December 1999 the amount of the total theoretical loss suffered would depend on the sale price of the shares and whether the 50 cents had been received.

14                  As part of the settlement, GIO will pay $97 million into a fund.  That will be paid rateably to group members depending on the number of shares held, whether the shares were sold on market or compulsorily acquired and whether they were paid the 50 cents in February 1999.  The best present estimate of the total theoretical loss of all group members is approximately $151 million.  If that broadly remains the position (and the import of the submissions and evidence of the applicant was that it was likely to be) when all issues of shareholding and final group membership are resolved then an individual group member will receive approximately 60 percent of the total theoretical loss they suffered, though this will vary for group members who sold shares on the sharemarket between January and December 1999 for the reasons given in the preceding paragraph.

15                  I should refer to two other aspects of the settlement.  The first is the amount GIO agreed to pay to MBC by way of professional costs and disbursements.  Counsel for the applicant relied on an affidavit of Mr Joseph Mazzeo who is a barrister and solicitor of the Supreme Court of Victoria and who has practiced exclusively in the area of legal costs consultancy since 1992.  He reviewed the files of MBC (engaging a senior costing clerk to assist him) and also scrutinised a bill of costs prepared by MBC and presented to GIO totalling $14,999,168.86.  He expressed the opinion that the account was fair and reasonable and accurately reflected and applied the method of calculating costs and disbursements specified in the fee and retainer agreement between MBC and the applicant.  Mr Mazzeo also constructed a notional bill using the scale of costs applied in the Federal Court and reached the conclusion that the total costs and disbursements would, on that basis, be $17,513.347.09.

16                  At the hearing on 26 August 2003 senior counsel for GIO indicated that his client accepted the amount it had agreed to pay as costs was a fair and reasonable amount.  No complaint was made by any group member about the agreed sum.  While the amount is considerable, and includes an uplift fee of 25%, I did not form the view that this aspect of the agreement between the applicant and GIO (requiring as it did that the proposed settlement, so far as it relates to costs, be approved by the Court) should lead to the settlement not being approved. 

17                  The second matter I should refer to is the process to finally identify group members who will participate in the settlement and the amount they will be paid.  As earlier noted the group now comprises 23,099 shareholders.  A process will be followed to identify precisely the number of shares held by each group member and to confirm they were held in the relevant period.  MBC will initially be the arbiter on these questions.  That may lead to a division of opinion about an entitlement of a particular shareholder presently in the representative group to participate in the settlement, or about the number of shares to be used to calculate the payment due under the settlement.  There is a mechanism in the settlement scheme for such disputes to be addressed by the Court. 

Associate:

Dated:              17 September 2003

ANNEXURE A

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

                                                                                                                 No. N 955 of 1999

B E T W E E N :

SHANE ROBERT KING                                         Applicant

‑ and ‑

AG AUSTRALIA HOLDINGS LIMITED (formerly   First Respondent

known as GIO AUSTRALIA HOLDINGS LTD)       Cross‑Claimant to cross‑claims

(ACN 054 573 401)                                               1A, 1B & 1C

                                                                           Cross‑Respondent to cross‑claims

                                                                           2A, 3A, 4A, 5A, 6A & 7A

GRANT SAMUEL & ASSOCIATES PTY LTD         Second Respondent

(ACN 050 036 372)                                               Cross‑Claimant to cross‑claims 2A, 2B & 2C Cross‑Respondent to cross‑claims

                                                                           1B, 3A, 4B, 5B, 6B & 7B

DAVID MORTIMER                                              Third Respondent

Cross-Claimant to cross‑claims 4A & 4B Cross‑Respondent to cross‑claims 2B & 7D

BRUCE HOGAN                                                   Fourth Respondent

Cross‑Claimant to cross‑claims 5A & 5B Cross‑Respondent to cross‑claims 2B & 7D

STEWART STEFFEY                                            Fifth Respondent

Cross‑Claimant to cross‑claim 3A Cross‑Respondent to cross‑claims 2B & 7D

RONALD ASHTON                                               Sixth Respondent

Cross‑Claimant to cross‑claims 4A & 4B Cross‑Respondent to cross‑claims 2B & 7D

MARINA DARLING                                               Seventh Respondent

Cross‑Claimant to cross‑claims 5A & 5B Cross‑Respondent to cross‑claims 2B & 7D

ANDREW KALDOR                                              Eighth Respondent

Cross‑Claimant to cross‑claims 4A & 4B Cross‑Respondent to cross‑claims 2B & 7D

LLOYD LANGE                                                    Ninth Respondent

Cross‑Claimant to cross‑claims 4A & 4B Cross‑Respondent to cross‑claims 2B & 7D

DAVID O'HALLORAN                                           Tenth Respondent

Cross‑Claimant to cross‑claims 4A & 4B Cross‑Respondent to cross‑claims 2B & 7D

IAN POLLARD                                                     Eleventh Respondent

Cross‑Claimant to cross‑claims 4A & 4B Cross‑Respondent to cross‑claims 2B & 7D

PRICEWATERHOUSECOOPERS                          Cross-Claimant to cross claims

SECURITIES LIMITED (ACN 003 311 617)             7A, 7B, 7C & 7D

                                                                           Cross-Respondent to cross‑claims

                                                                           1A, 2C & 6C

TRELSS RICHARD ADAM & ORS                         Cross-Claimant to cross claims

[PRICEWATERHOUSECOOPERS]                        7A, 7B, 7C & 7D

                                                                           Cross-Respondent to cross‑claims

                                                                           1A, 2C & 6C

PRICEWATERHOUSECOOPERS                          Cross-Claimant to cross claims

ACTUARIAL PTY LTD (ACN 003 562 696)             7A, 7B, 7C & 7D

                                                                           Cross-Respondent to cross‑claims

                                                                           2C & 6C

MACQUARIE BANK LIMITED                               Cross-Claimant to cross claims

(ACN 008 583 542)                                               6A, 6B & 6C

                                                                           Cross-Respondent to cross‑claims

                                                                           1C & 7C

GORDIAN RUNOFF LIMITED (formerly               Cross-Respondent to cross‑claims

known as GIO INSURANCE LTD)                        2A & 7A

(ACN 052 179 647)

SETTLEMENT SCHEME

1.                  OVERVIEW

1.1              The scheme set out herein (‘the Settlement Scheme’) establishes the procedure for determining the group members entitled to receive payment as a result of the settlement of this proceeding (‘the Settlement’), locating those persons, calculating their entitlement, dealing with any disputes and forwarding payment to them.

1.2              The Settlement Scheme will involve the following major steps:

(a)                                      MBC will construct a database containing the information necessary to calculate group members’ entitlements under the Settlement;

(b)                                      Following approval of the database by the Court, MBC will write to each group member detailing the calculation of that group member’s eligible shareholding under the Settlement;

(c)                                      On 30 November 2003 (or such later time as the Court may direct) 50% of each undisputed calculation shall be made to each group member (the ‘first tranche payment’);

(d)                                      After the resolution of any outstanding disputes as to any group member’s eligible shareholding and the deduction of the costs of administering the Settlement Scheme, the remaining settlement funds shall be paid to group members in full satisfaction of their entitlements under the settlement (the ‘second tranche payment’), save as provided in Section 4 below.

2.                  DEFINITIONS

2.1              In this Settlement Scheme, the following terms have the meanings defined:

Account                             means the Account of costs and disbursements of the Applicant

on a solicitor and own client basis prepared by Joseph Mazzeo and made available to the First Respondent on 8 August 2003.

AMP                                   means AMP Insurance Investment Holdings Ltd.

Directors                             means the Third to Eleventh Respondents inclusive.

eligible share                    means a GIO share of which the person continuously registered as the owner throughout the relevant period was an Identified Group Member.

FLIGM                                means the Final List of Identified Group Members as described in

                                          section 3 below.

GIO                                    means the First Respondent

Grant Samuel                    means the Second Respondent

Heads of Agreement          means the document of that title executed for the Applicant and the First Respondent by their solicitors on 8 August 2003.

Identified Group Member means a person identified in the settlement database.

MBC                                   means Maurice Blackburn Cashman, Solicitors for the Applicant and

                                          some of the Identified Group Members.

MBC Client database         means the DB Text database described in the Affidavit of Stephen

                                          Patrick Walsh made 5 August 2003.

objective data                    for a particular former GIO shareholdermeans the:

(a)  full name;

(b)  address; and

(c)     number of eligible shares held during the relevant period;

           of the shareholder.

relevant period                  means 25 August 1998 to 4 January 1999 inclusive.

Schedule of Group

Members (“SIGM”)             means the SIGM referred to in the Affidavit of Stephen Patrick

                                          Walsh made 5 August 2003 consisting of two parts:

(a)     the MBC Client Database; and

(b)     the 1957 additional Identified Group Members who completed and returned Form C within the prescribed time and who were included in the SIGM pursuant to the Orders made 19 June and 31 July 2003.

settlement database          means the database constructed by MBC as described in the Affidavit of Stuart Martin McCormack made 21 August 2003 (“McCormack’s Affidavit”).

Settlement Fund                means the funds held on trust for group members by MBC with the Commonwealth Bank of Australia as deposed to in the Affidavit of Bernard Michael Murphy made 21 August 2003.

Settlement Sum                 means the sum of $97,000,000.00 to be paid by the First Respondent referred to in the Heads of Agreement.

3.                  THE FINAL LIST OF IDENTIFIED GROUP MEMBERS (‘FLIGM’)

3.1              The settlement database defined above shall form the basis of the Final List of Identified Group Members according to the process described below.

Confirmation of group membership

3.2              When a person’s information is entered into the settlement database, MBC will write to the person.  The letter will:

(a)               inform the person of the number of eligible shares of which he, she or it is recorded in the settlement database as having been the registered owner during the relevant period (“the objective data”); and

(b)               require the person to notify MBC within 14 days of the date of the letter if the person is not a group member because the person is:

(i)                  Grant Samuel, or any body corporate related to GIO or Grant Samuel (within the meaning of s 50 of the Corporations Law);

(ii)                any related entity of GIO or Grant Samuel (within the meaning of s 9 of the Corporations Law);

(iii)               any proprietary company of which any of the Directors is a director or shareholder, or the beneficiary of any trust of which any such Director or corporation is the trustee; and

(iv)              AMP Ltd and any related body corporate of AMP Ltd (within the meaning of s.50 of the Corporations Law) or any director thereof; and

(c)               give the person an opportunity to contest the objective data and require the person to forward within 14 days of the date of the letter his, her or its written basis for contesting the objective data together with all supporting documentation on which he, she or it relies.

(d)               Where a person in the SIGM in MBC’s opinion should be removed, MBC will write to that person informing him, her or it of that view, and of the reason for it.  The letter will give the person an opportunity to contest the reason and require the person to forward within 14 days of the date of the letter, his, her or its written basis for contesting the reason, together with all supporting documentation on which he, she or it relies.

Unlocated Identified Group Members

3.3              If correspondence sent by MBC addressed to an Identified Group Member is returned by the post office as undeliverable, MBC will search for another address for the person in:

(a)               Telstra telephone number records; and

(b)               Electoral rolls.

3.4              If, despite the searches referred to above, any Identified Group Member is not able to be located (‘unlocated Identified Group Member’) then, prior to final disbursement of settlement moneys to Identified Group Members, MBC will publish a public notice nationally in relation to all such unlocated Identified Group Members making provision for them to contact MBC within a specified time.

3.5              After that specified time has elapsed any payments which would otherwise have been made to unlocated Identified Group Members under this Settlement Scheme will form part of the residue of the Settlement Fund and be dealt with in accordance with paragraph 4.11 below in full satisfaction of the unlocated Identified Group Members’ claims the subject of the proceeding.

Disputes

3.6              Any person who is not in the SIGM but asserts that he, she or it is a group member entitled to participate in this settlement must notify MBC in writing of that assertion within 2 months of the date on which the Court approves this settlement.  No person who asserts an entitlement to participate in this settlement after 2 months from the date of such approval will be added to the settlement database.

3.7              Where a person has given notice to MBC pursuant to paragraph 3.6 and MBC does not consider the person to be entitled to participate in this settlement, then MBC will within a reasonable time after it receives the person’s written notification write to the person informing him, her or it of MBC’s opinion and its basis and advise the person that he, she or it has 14 days from the date of MBC’s letter to give written notice to MBC that it wishes to have its assertion referred to the Court for resolution.

 The Final List of Identified Group Members

3.8              Once any material submitted by a person wishing to participate in this settlement has been considered by MBC the Applicant will move the Court to resolve any disputes and amend and approve the settlement database.  The settlement database as amended and approved by the Court will be the Final List of Identified Group Members and will form the basis of payments to group members under this settlement.  No payment will be made to any Identified Group Member until the FLIGM has been approved by the Court.

3.9              If the FLIGM has not been determined and approved by the Court in time for the first tranche of payments to be made as set out below then the Applicant will move the Court for orders adjusting the timetable for the payment regime as appropriate.

4.                  THE PAYMENT REGIME

4.1              The Settlement Sum is to be disbursed to group members in settlement of their claims the subject of this proceeding, less any amount by which the further legal costs and disbursements of processing the payments exceeds the interest accruing on that sum. 

4.2              The Settlement Sum is to be paid by the First Respondent into the Settlement Fund within 42 days of the date on which the Court approves this settlement. The signatories to that account are to be Bernard Michael Murphy and Stephen Patrick Walsh.  Interest accruing on the account is to be applied to the benefit of group members but available for the payment of additional legal costs and disbursements incurred by MBC in connection with administering this settlement after the date on which the settlement is approved by the Court.

4.3              If persons additional to those in the SIGM who were not identified on the GIO database as persons to whom Form C should have been sent are ordered by the Court to be included in the FLIGM, and prove entitlements to payment in the manner set out herein, and the total of such additional payments exceeds $5,000,000.00 ($5 million), then the First Respondent will increase the Settlement Sum by the amount of the additional payments in excess of $5 million.

Pro rata payment of Identified Group Members’ losses

4.4              The loss on each eligible share is to be calculated as follows:

(a)               for shares sold on the ASX between 5 January 1999 and 15 February 1999 where the registered owner did not receive:

(i)                  the GIO capital return of $0.38 per share; plus

(ii)                the GIO interim dividend of $0.12 per share;

- the difference between the revised AMP takeover offer of $5.35 per share and the daily closing price of GIO shares on the day of sale, as notified to MBC by GIO;

(b)               for shares sold on the ASX between 15 February 1999 and 20 December 1999 - the difference between the revised AMP takeover offer of $5.35 per share and the daily closing price of GIO shares on the day of sale as notified to MBC by GIO, less 50 cents being:

(iii)               the GIO capital return of $0.38 per share; plus

(iv)              the GIO interim dividend of $0.12 per share;

which payments were made by GIO to shareholders on 15 February 1999;

(c)               for shares compulsorily acquired in the GIO Scheme of Arrangement - $2.10 per share, being the revised AMP takeover offer of $5.35 per share less $3.25 being:

(i)                  the compulsory acquisition price of $2.75 per share; plus

(ii)                the GIO capital return of $0.38 per share; plus

(iii)               the GIO interim dividend of $0.12 per share.

4.5              The loss suffered by each Identified Group Member is to be calculated as the sum of the losses on the eligible shares held by that Identified Group Member.

4.6              Total loss and damage in the proceeding is to be calculated as:

(a)               the sum of the losses on the eligible shares sold on the ASX after 4 January 1999 but before the GIO Scheme of Arrangement on 20 December 1999, calculated as set out in paragraph 4.4 above; plus

(b)               the number of eligible shares compulsorily acquired in the GIO Scheme of Arrangement, multiplied by $2.10;

(“the total loss and damage”).

4.7              The nett settlement moneys (being the Settlement Fund less the amount, if any, by which the further legal costs and disbursements of processing the payments exceeds the interest accruing on the Settlement Fund, as provided for in section 5 below) shall be applied in payment of the loss suffered by each Identified Group Member, in the proportion of the nett settlement moneys to the total loss and damage in the proceeding (‘the settlement entitlement’).

First tranche payments to Identified Group Members

4.8              Once the FLIGM has been approved by the Court, MBC will send a letter to each Identified Group Member setting out MBC’s calculations of that Identified Group Member’s loss, as described in paragraphs 4.4 to 4.7 above.

4.9              Not later than 30 November 2003, or such later date as may be directed by the Court, MBC will disburse from the Settlement Fund payments in satisfaction of 50% of the settlement entitlement of each Identified Group Member (“the first tranche payments”).

Second tranche payments to Identified Group Members

4.10          Once:

(a)               all Identified Group Members who are able to be located have been located;

(b)               all disputes regarding entitlements have been resolved either by agreement or by order of the Court; and

(c)               all legal costs and disbursements incurred by MBC in administering the process of distributing the settlement entitlements (including resolving any disputes in relation thereto) have been calculated;

the balance of the Identified Group Member’s entitlement will be paid.

4.11          After the second tranche payments have been made, if any amount remains in the Settlement Fund which when allocated as set out in paragraph 3.5 would result in payment to any person on the FLIGM of less than $5, no further amount will be paid to that Identified Group Member. Instead, the balance remaining in the Settlement Fund on account of all such amounts shall be paid to the Australian Institute of Management for the purposes of training corporate officers and directors, or to the Australian Shareholders’ Association.

5.                  COSTS OF PROCESSING AFTER COURT APPROVAL

5.1              The costs and disbursements of MBC incurred in arranging and administering the distribution of the Settlement Fund as provided by this Settlement Scheme (“the processing costs”) shall be paid on a solicitor and own client basis from the Settlement Fund as and when those costs are incurred on a monthly basis, subject to the approval of the Court. MBC will not seek to recover from the Settlement Sum, the Settlement Fund or any settlement entitlement any individual costs relating to any Identified Group Member.

DATED: 21 August 2003