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The Banksia Financial Group
4 July 2016
Dear Member
http://www.banksiagroup.com.au/File.axd?id=f4c01e84-18d9-4cd6-8656-69457d6795d9
Banksia Mortgage Fund (ARSN 089 852 246) (BMF)
Responsible Entity: Banksia Mortgages Limited (BML)
I am writing to you as you have amounts invested in BMF. As you would be aware, those amounts were
invested by BML in debentures issued by Banksia Securities Limited (In Liquidation) (Receivers and
Managers Appointed) (BSL) as at 25 October 2012.
This letter is to inform you of developments relating to your BMF investment with respect to the class
action proceedings in the Supreme Court of Victoria (proceeding no SCI 2012 7185) (the Class Action)
which was brought by Laurence Bolitho on his own behalf on and on behalf of others (Group Members)
who have suffered loss or damage they claim was caused by the conduct of BSL and the other
defendants to the Class Action. Details of the allegations made against BSL and the other defendants in
the Class Action are set out in the Third Further Amended Statement of Claim filed in the Class Action, a
copy of which is available at www.banksiaclassaction.com.au.
1 Background
On 24 June 2016, BML received correspondence entitled 'Class Action Notice to Group Members
– Banksia Securities Limited Debenture Holders' (Class Action Notice) in respect of the Class
Action. The Class Action Notice is attached at Annexure A. The Class Action Notice informs
Group Members of (among other things):
• their right to 'opt-out' of the Class Action;
• a proposed partial settlement in the Class Action (the Proposed Settlement) of the
claims made against all defendants other than BSL and The Trust Company (Nominees)
Limited (Trust Co) (the Settling Defendants); and
• their right to object to the Proposed Settlement.
In relation to the Proposed Settlement, under section 33V of the Supreme Court Act 1986, any
class action may not be settled or discontinued without the approval of the Court. In determining
whether to approve a settlement, the Court must be satisfied that the settlement is fair and
reasonable and that it has been undertaken in the interests of group members as a whole. In this
context, the Court has appointed an independent senior barrister, Mr David O'Callaghan QC, to
act as 'amicus curiae' (or 'friend of the Court') for the purpose of making submissions to the Court
about the Proposed Settlement on matters of law or on relevant facts which might not otherwise
be made to the Court.
2 Delegation
BML, as the holder of debentures issued by BSL as at 25 October 2012, is a Group Member in
the Class Action. It is therefore necessary for BML to decide whether to:
(a) 'opt-out' of the Class Action; and / or
(b) oppose the Proposed Settlement.
page 2
Each of the directors of BML is a defendant in the Class Action and party to the Proposed
Settlement. On that basis, each of the directors of BML considered that he had a material
personal interest in, and was in a position of conflict with respect to the matters set out in the
Class Action Notice and the decisions which BML is required to make in respect of those matters
(as summarised above).
Accordingly, on 4 July 2016 the Board of BML passed a resolution which authorised me, in my
role as Executive Manager of The Banksia Financial Group, to consider those matters and make
the necessary decisions on behalf of BML without direction, influence or interference by the
directors of BML.
3 Decisions
I have considered the Class Action Notice, together with the Third Further Amended Statement of
Claim filed in the Class Action. I have also read and considered a letter of advice from Allens
lawyers on the decisions which BML is required to make and concur with the views and
recommendations set out in that letter of advice.
Having done so, I have decided that it is in the best interests of the members of BMF that:
1 BML should not 'opt-out' of the Class Action;
2 BML should not oppose the Proposed Settlement but should instruct Allens to write to Mr
David O'Callaghan QC (who has been appointed as 'amicus curiae' for the purposes of
the Court's consideration of the Proposed Settlement) in the form of the letter in
Annexure B, to raise certain matters regarding the Proposed Settlement with a request
that Mr O'Callaghan take those matters into account in considering the topics on which he
will make submissions to the Court concerning the Proposed Settlement.
In making these decisions, I confirm that I have not conferred with the directors of BML and have
not received any direction, influence or interference by or from them.
4 What does this decision mean for you?
Provided that certain conditions precedent to the Proposed Settlement are satisfied, including
that:
(a) the Supreme Court of Victoria is satisfied that the Proposed Settlement is fair and
reasonable and that it has been undertaken in the interests of Group Members as a
whole; and
(b) not more than 2% (by face value of the debentures on issue by BSL as at 25 October
2012) of Group Members opt out of the Class Action by 4pm (AEST) on 15 July 2016
then, according to the Class Action Notice,
and the Proposed Settlement becomes binding, the decision of BML not to opt out of the Class
Action means that it will receive a distribution from the proceeds of the Proposed Settlement. If
and when such a distribution is received by BML, it proposes, in turn, to make a distribution to the
members of BMF.
You should note that BML is not a party to the Class Action and cannot give any guarantee to
BMF members that the Proposed Settlement will be approved by the Court or that the distribution
described above will be made to BML under the Proposed Settlement.
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5 Further circular
BML will issue a further circular to BMF members once the Court has made a decision on
whether the Proposed Settlement is to be approved.
Yours faithfully
Craig McInnes
Executive Manager
The Banksia Financial Group