Very interesting information concerning the Mornington Peninsula Shire’s involvement in a legal action that came to court late last year has reached Bandicoot. The shire is sueing Jardine Lloyd Thompson, a British insurance multinational, for possible “breach of fiduciary duty”.

On the sidelines is an anonymous third party calling itself “Appalled Vic Ratepayers”, which claims the matter involves the “unnecessary loss of approx $100 mil of Vic ratepayer funds” but beyond that makes only unsubstantiated, highly defamatory assertions that no sane Bandicoot would publish.

Merely reading them is enough to require the drawing of a neatly ironed kerchief across the suddenly beaded brow.

allsop CJThe Federal Court of Australia’s Chief Justice, James Allsop (right), last 20 December granted MPSC’s application to see documents related to an insurance plan the Municipal Association of Victoria had established for local councils.

The shire had begun buying its insurance through this MAV facility during the stewardship of former chief executive officer Dr Michael Kennedy OAM. This was discontinued after current CEO Carl Cowie was appointed.

Local weekly newspaper the Mornington News reported in July 2015 that, having put its insurance out to tender, the shire had saved almost $700,000 “due to a number of factors including a more competitive insurance sector … rather than staying with the MAV insurance facility”.

Other councils took part in the open tender.

The paper said the shire had estimated insurance would cost it some $1.2–1.5 million, based on figures for the previous financial year, 2014-15.

Wikipedia describes Jardine Lloyd Thompson Group plc, also known as JLT Group or simply JLT, as “a British multinational corporation that has its headquarters in London … It provides insurance, reinsurance, employment benefits advice and brokerage services”.

The Federal Court judgement states that the MPSC “was member of mutual liability insurance scheme established for local authorities by Municipal Association of Victoria; [the] prospective respondent had involvement in management and administration of scheme; prospective applicant sought copies of agreements between [MAV] and prospective respondent; whether prospective applicant had a reasonable basis for its belief that it may have a right to relief against the prospective respondent for breach of fiduciary duty – application granted”.

Simona goryClaire HarrisThe shire cited a number of cases in support of its application, which was put to the court by Ms Simona Gory (right), who practises in commercial and public law.

Acting for Jardine Lloyd Thompson was Claire Harris SC (above), whose CV states she “practises broadly in general commercial law and in public law matters … Her commercial experience has a strong focus on insurance and professional negligence.” Ms Harris has been a barrister since 2003. She was made a silk last November.

The case was due to return to court mid-last month for further hearing “as to confidentiality, costs and the form of orders”. Bandicoot will see what information might be available about that hearing.

In his Reasons for Judgement, Chief Justice Allsop outlined that the documents the shire seeks “(relate) to a liability insurance scheme for local authorities in Victoria and Tasmania called the Liability Mutual Scheme (the LMI Scheme), in which JLT has involvement and of which the Council was formerly a member.”

Of the various insurances the shire is obliged to buy, JLT had provided several, “since at least 2001”, the judge stated, “including broking and advisory services in relation to a number of lines of insurance. Whether it did so in relation to public liability and professional indemnity insurance was a matter of contested evidence on this application.”

The shire claims it “may have a right to relief against JLT’s involvement in two of the schemes, according to Chief Justice Allsop.

His Reasons stated that agreement had been reached on all but one category of documents, which cover agreements between JLT and the MAV for the period 2011 to 2015 inclusive.

The nub of the disagreement appears to relate to a report by the Victorian Auditor-General that, under the headline ‘Lack of competitive tendering for the provision of insurance services’, stated:

“The service provider – and its predecessor organisation – have provided insurance services to MAV dating back to 1987. Since the original management agreement was established in July 1993 no subsequent management agreements have been subject to a competitive tender process.

“This is despite an independent review in 2010 of risk management services raising concerns about the performance of the provider, and a recommendation for competitive tendering.

… In July 2012, MAV entered into a new 10-year agreement with the same service provider, with a possible five-year extension. … For a contract of this value councils are required to undertake a public tender or expression of interest process, unless an exemption is granted by the minister.

“Similar standards apply to all state government departments and agencies under Victorian Government Purchasing Board requirements.

“With no market testing for the past 10 years, MAV cannot reliably demonstrate value for money from its insurance business activities or that the arrangements with its service provider are appropriate for the needs of member councils.”

(Emphasis added by Allsop CJ.)

The email that arrived in Bandicoot’s inbox contained a covering letter addressed to Mr Jack Davis, Victorian Ratepayers Association president. It was headed ‘Unnecessary loss of approx $100 mil of Vic ratepayer funds since 1986’.

The anonymous letter was signed “Appalled Vic Ratepayers”. It said: “We wish to remain anonymous at this time as we propose to press our own Councils to join with the Mornington Shire Council [sic] in the Federal Court in a class action against JLT; with a view to incorporate the MAV in this action …”

The letter also calls for an investigation of the MAV by the Independent Broad-based Anti-corruption Commission (IBAC), Victoria’s anti-corruption agency with jurisdiction over the public sector.

That is as far as Bandicoot is prepared to go in publishing the anonymous letter from the “appalled’ ratepayers. Suffice to say the state Auditor-General’s report makes some red-hot claims, set out above, against the MAV, on which the MAV may care to comment publicly. It may have good reasons not to have put the insurance out to competitive tender, in which case it may care to detail those reasons.

Meantime, the Federal Court hearing will add to the shire’s legal costs and the collective Mornington Peninsula rates bill.