Premier Lara Giddings made the announcement this morning before she leaves for the Council of Australian Governments' meeting in Canberra tomorrow.

“The appointment of a probity auditor will ensure the settlement process is handled transparently and in accordance with our legal obligations,” Ms Giddings said.

According to Ms Giddings, any settlement amount will come from the Intergovernmental Agreement funding which has been provided for this purpose.

She said that the maximum Gunns could receive under the arrangement would be $23 million.

“I recognise that for many in the community there is little appetite for payments of any kind to be made to Gunns, especially amongst the workers affected by the company’s decision to exit native forest harvesting," she said.

“I have sympathy for this view, however the Solicitor General has advised that the complex legal issues surrounding Gunns’ native forest contracts with Forestry Tasmania must be resolved in order to progress the Intergovernmental Agreement.

“Section 22 of that agreement requires that a process must be entered into before payments can begin flowing to contractors. This has now occurred.

“While the State Government has received legal opinion that Gunns has elected to terminate its contracts it is also apparent that, as a result, the company has certain residual legal rights.”

Ms Giddings said the appropriate course of action was to attempt to reach a commercial settlement with the company to extinguish those rights and end any commercial relationship between Gunns and Government.

She said the State Government hoped to resolve the issue as soon as possible.

“A key condition of any arrangement made with Gunns will be that no money will be transferred to the company until payments have begun flowing to affected contractors and forest workers.”