Statement of Receipts and Payments of the Consolidated Fund and ...

gj^YPTANATORY NOTES ON SPECIFIC CONTINGENT LIABILITIES
(a) State Bank Victoria
The State Bank Merger Agreement between the Treasurer of Victoria and the
Commonwealth Bank of Australia (CBA) contains a number of warranties and indemnities which
could lead to the CBA making future claims on the State. These claims are limited to the extent
that the CBA may not claim against the State if it can claim under an insurance policy, if the
matter has been provided for in the final accounts, or if the amount is less than $1 million.
Notice of any claims must be made within five years, or in the case of a claim relative to
tax, in seven years. CBA must also give notice of potential claims within three months of
becoming aware of the claim.
The Merger Agreement provides that CBA must give notice to the Treasurer of the nature
or anticipated nature of any claim, and where possible, the amount of the claim within three
months of CBA first becoming aware of the claim.
CBA is also required to give notice to the Treasurer of any litigation which may lead to a
claim. The Treasurer has the option of taking over the conduct of the litigation.
The Treasurer has received a number of notices under the Merger Agreement. The
majority of these notices are either ambit in their nature or relate to litigation or potential
litigation where the amount in dispute is considered to be too small to give rise to an actual claim
under the Merger Agreement. Where appropriate, however, the Treasurer has taken over
conduct of litigation instituted against CBA.
To date, CBA has only lodged one claim for payment against the State. The claim is still
under consideration by the State. No amount has yet been paid to CBA under the Merger
Agreement. Also, a number of the underlying actions for which a notice has been lodged have
subsequently been resolved with no claim made upon the State.
At this stage, it is not considered appropriate to record a contingent liability for the notices
on the claims.
(b) Building Societies Uquidity Support Scheme
Following the collapse of the Farrow Group, the Government, in conjunction with the then
Victorian Building Societies Council (VBSC), established a liquidity support scheme for building
societies.
The scheme involved the establishment of a line of credit to the VBSC from VicFin. The
line of credit was secured by an indemnity from the Director of Housing. The VBSC in turn
secured its loans to building societies borrowing under the scheme by taking charges over the
assets of those societies.
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