Privatising Medibank Private: is it a mutual?

The proposed sale of Medibank Private has raised an interesting legal issue: who ‘owns’ or enjoys rights in the Medibank Private fund? Is it a mutual fund?

In other words, is there a difference between ownership of Medibank Private Limited (the
managing organisation of the Medibank Private fund) and the fund
itself and, if so, do members of the fund have certain rights to the benefit
of the fund and associated assets which need to be considered
in any scheme for the sale of Medibank Private?

This issue was considered in Parliamentary Library Research Brief no. 2 2006–07 which concluded that the fund was not a mutual fund and "members could not, in the event of a sale, claim entitlement to compensation on the basis that they were the owners of the fund. They would not, for instance, have an entitlement to share in any premium or goodwill paid by a purchaser for the organisation. That does not mean, however, that members could not claim compensation for loss of certain statutory rights over the fund and associated assets."

The Finance Minister has responded by releasing the advice of Blake Dawson Waldron which considers the matters raised in the Research Brief.

The BDW advice rejects the Research Brief’s conclusion that "Medibank Private fund (as opposed to Medibank Private Limited) is best characterised as a government-controlled not-for-profit entity".

The advice considers the nature of "membership" and the interests of "contributors": "“The Fund” is simply a shorthand expression for a set of certain assets and liabilities of MPL. The Fund is not a separate entity. It has none of the hallmarks of a legal entity—it is not able to contract, to own property or to be sued. A person becomes a contributor (a member of the Fund) by entering into a contract with MPL, not the Fund."

It concludes that "Contrary to what is stated in the Brief, contributors have no interests or property rights in assets comprising the Fund, or enforceable rights to the benefit of Fund assets. For this reason, the Commonwealth will not be liable to pay compensation as suggested in the Brief."

UPDATE 21 December 2007: the Rudd Labor Government will not privatise Medibank Private

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