Ashita Tomi Pty Ltd as trustee for Esskay Super Fund v RCR Tomlinson Ltd trading as RCR Tomlinson Ltd (No 2)

[2024] NSWSC 717

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Ashita Tomi Pty Ltd as trustee for Esskay Super Fund v RCR Tomlinson Ltd trading as RCR Tomlinson Ltd (No 2) [2024] NSWSC 717

Hearing dates:

13 June 2024

Date of orders:

13 June 2024

Decision date:

13 June 2024

Jurisdiction:

Equity - Commercial List

Before:

Nixon J

Decision:

Approval given to settlement

Catchwords:

REPRESENTATIVE PROCEEDINGS – shareholder class action – approval of settlement – consideration of legal costs, funding commission, payments to lead plaintiffs and costs of administering settlement scheme – consideration of proposed distribution methodology – no objection from any group member – common fund order made – settlement approved

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 173, 179, 183

Corporations Act 2001 (Cth), ss 674, 729

Court Suppression and Non-Publication Orders Act 2010 (NSW), ss 7-8

Cases Cited:

Ashita Tomi Pty Ltd as trustee for Esskay Super Fund v RCR Tomlinson Ltd trading as RCR Tomlinson Ltd [2023] NSWSC 344

BMW Australia Ltd v Brewster; Westpac Banking Corp v Lenthall (2019) 269 CLR 475; [2019] HCA 45

Camilleri v Trust Company (Nominees) Ltd [2015] FCA 1468

Cuong Ly; HIH Insurance Ltd (In Liq), Re v HIH Insurance Limited (In Liq) [2017] NSWSC 380

Ewok Pty Ltd atf E & E Magee Superannuation Fund v Wellard Ltd [2024] FCA 296

Findlay v DSHE Holdings Ltd; Mastoris v DSHE Holdings Ltd; Mastoris v Alliance Australia Insurance Ltd [2021] NSWSC 249

Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia; Whisson v Subaru (Aust) Pty Ltd; Kularathe v Honda Australia Pty Ltd; Brewster v BMW Australia [2022] NSWSC 1076

Quirk v Suncorp Portfolio Services Ltdin its capacity as trustee for Suncorp Master Trust (No 2) [2022] NSWSC 1457

Williams v FAI Home Security Pty Ltd (No 4) [2000] FCA 1925

Category:

Principal judgment

Parties:

Ashita Tomi Pty Ltd as trustee for Esskay Super Fund (First Plaintiff)
CJMcG Pty Ltd as trustee for CJMcG Superannuation Fund (Second Plaintiff)
Jorge Mayer (Third Plaintiff)
RCR Tomlinson Ltd trading as RCR Tomlinson Ltd (First Defendant)
Paul Dalgleish (Second Defendant)
Bruce James (Third Defendant)
Omni Bridgeway Limited in its capacity as appointed agent and investment manager for each of Omni Bridgeway (Fund 2) Pty Ltd and Omni Bridgeway (Fund 3) Pty Ltd and Burford Asia Investments Pte Ltd (Intervenors)

Representation:

Counsel:
P Meagher w A Ilic (Plaintiffs)
C Colquhoun SC (First Defendant)
WAD Edwards KC w M Cowden (Intervenors)

Solicitors:
Quinn Emanuel Urquhart & Sullivan (Plaintiffs)
Colin Biggers & Paisley Pty Ltd (First Defendant)
William Roberts Lawyers (Intervenors)

File Number(s):

2018/353304

Publication restriction:

Nil

EX TEMPORE JUDGMENT (REVISED 13 JUNE 2024)

1. By Amended Notice of Motion filed in court on 13 June 2024, the Plaintiffs bring an application under section 173 of the Civil Procedure Act 2005 (NSW) for approval of a settlement reached with the First Defendant, RCR.

2. The Plaintiffs have previously settled their claims against the Second and Third Defendants. This settlement was approved by Rees J on 5 April 2023: see Ashita Tomi Pty Ltd as trustee for Esskay Super Fund v RCR Tomlinson Ltd trading as RCR Tomlinson Ltd [2023] NSWSC 344.

The proceedings

3. The underlying proceeding, which was commenced in November 2018, is a proceeding under Part 10 of the Civil Procedure Act. The Plaintiffs bring claims against RCR on their own behalf and on behalf of the group members, being persons who acquired an interest in shares of RCR between 24 August 2017 and 12 November 2018 (Group Members).

4. The relevant factual background to the proceedings may be briefly summarised.

5. RCR was an engineering and infrastructure company listed on the Australian Stock Exchange.

6. From around late 2016, RCR entered into several contracts relating to the engineering, procurement and construction of solar farms (referred to as the EPC Solar Contracts).

7. In August 2017, RCR announced to the market that its earnings for the financial year ended 30 June 2017 were $35.2m, and provided positive earnings guidance for the coming financial year, forecasting strong earnings growth.

8. In February 2018, RCR affirmed the earnings guidance which had been provided in August 2017.

9. Five months later, on 30 July 2018, RCR entered a trading halt.

10. On 28 August 2018, in connection with publishing its annual financial report for the year ended 30 June 2018, RCR announced that it had experienced significant cost overruns on one of the EPC Solar Contracts known as Project Gretel; that its earnings before interest and tax for the financial year ended 30 June 2018 were a loss of $4.2m; and that it would be conducting a $100m capital raising pursuant to a prospectus, published that same day (the Prospectus), in order to address the financial impact of the cost overruns on Project Gretel.

11. Following those announcements, RCR’s share price fell sharply upon resumption of trading.

12. In around September 2018, RCR completed the $100m capital raising pursuant to the Prospectus.

13. In late November 2018, RCR entered into voluntary administration and, in March 2019, liquidators were appointed to RCR. The liquidators have forecast that the return to unsecured creditors will be nil.

14. The Plaintiffs have brought three broad claims against RCR.

15. First, the Plaintiffs allege that RCR contravened its continuous disclosure obligations under s 674 of the Corporations Act 2001 (Cth). Essentially, the Plaintiffs allege that RCR was aware, from around a year prior to the 28 August 2018 announcement, that the EPC Solar Contracts business was performing poorly and that this would have an adverse impact on RCR’s earnings, but failed to disclose this information to the market upon becoming aware of it, resulting in the Plaintiffs and Group Members suffering loss and damage.

16. Secondly, the Plaintiffs allege that RCR engaged in misleading or deceptive conduct in contravention of various statutory provisions by making misleading representations and omissions regarding the performance and prospects of its EPC Solar Contracts business. The pleading advances what may be termed as “direct” causation claims (namely, that the Plaintiffs and Group Members relied on these representations and thereby suffered loss) and in the alternative, what may be termed “indirect” causation claims (namely, that the misleading conduct resulted in RCR’s shares trading at an inflated price, causing loss and damage to the Plaintiffs and Group Members).

17. Thirdly, the Plaintiffs allege that RCR is liable under s 729 of the Corporations Act for misleading statements in the Prospectus. Again, the Plaintiffs advance direct causation claims (alleging reliance on the misleading statements in the Prospectus), and indirect causation claims based on a “no transaction” case (alleging that, but for this misleading conduct, the capital raising would not have gone ahead).

18. RCR has denied each of those claims.

19. This representative proceeding arose from the consolidation of three separate proceedings which had been commenced by, respectively, the three Plaintiffs. Orders consolidating the proceedings were made on 15 August 2019. Following consolidation, the litigation funders of the earlier separate proceedings came to be joint funders of the consolidated proceeding. Those funders are:

1. Omni Bridgeway Ltd in its capacity as appointed agent and investment manager for each of Omni Bridgeway (Fund 2) Pty Ltd and Omni Bridgeway (Fund 3) Pty Ltd; and

2. Burford Asia Investments Pte Limited.

(the Funders)

Proposed settlement

20. The proposed settlement was reached, in principle, at the conclusion of the second mediation in these proceedings which was held on 24 August 2023, nearly five years after the commencement of the proceedings. This mediation was held after extensive discovery had been provided and after the Plaintiffs had filed all of their lay and expert evidence, including on quantum.

21. The terms of the settlement are recorded in a deed dated 12 September 2023.

22. The deed provides, relevantly, for:

1. the payment of a settlement sum of $40m, to be funded by RCR’s insurers, in full and final satisfaction of all claims made in the proceedings;

2. the release of the Plaintiffs’ and the Group Members’ claims against RCR; and

3. each party to bear their own costs of the proceedings.

23. The deed also provides for the Plaintiffs to seek Court approval for the payment of their reasonable legal costs out of the settlement sum, and for the Plaintiffs and the Funders to seek an order for the payment of a funding commission from the settlement sum.

24. The settlement is on the basis of no admission of liability and is expressed to be subject to the Court’s approval.

25. On this application for approval of the settlement, the Plaintiffs seek orders for the following deductions to be made from the settlement sum:

1. an amount of $8m (or such other amount as the Court may approve) on account of a funding commission payable to the Funders;

2. an amount of $11,010,155.84 on account of the Plaintiffs’ reasonable legal costs;

3. an amount of $60,000, representing a payment of $20,000 to each of the three lead Plaintiffs for the time expended by them in fulfilling their representative roles; and

4. an amount of $269,940 on account of the costs of the entity which will administer the settlement, if approved (Settlement Administrator).

26. It is proposed that following these deductions, the net amount be distributed to registered Group Members in accordance with a Settlement Distribution Scheme. The Plaintiffs seek an order that The Advisory Company be appointed as Settlement Administrator.

27. Pursuant to the Settlement Distribution Scheme, and consistently with orders made by this Court on 29 November 2023, the Group Members who are entitled to participate in the settlement are those who registered in accordance with orders made by this Court on 11 November 2022 or 29 November 2023. Those Group Members who have previously entered into a litigation funding agreement with one of the Funders are deemed to have registered.

28. In early December 2023, the Group Members were notified of the proposed settlement by way of a Court-approved notification, and were provided with information regarding the need to register in order to participate in the settlement and how to do so. They were also provided with information regarding the steps they should take if they opposed any terms of the proposed settlement.

29. In total, 5,338 Group Members have registered to participate in the settlement.

30. There has been no objection to any of the terms of the proposed settlement notified by any Group Member.

31. RCR made submissions in support of the Plaintiffs’ application for approval of the settlement. In addition, the Funders were granted leave to intervene on the application. They have made submissions in support of the proposed common fund order, that is, for the orders that payments be made from the settlement amount to the Funders in respect of their funding commission and for the reimbursement of costs paid by them.

Orders under the Court Suppression and Non-Publication Orders Act

32. The Plaintiffs and the Funder sought orders under the Court Suppression and Non-publication Orders Act 2010 (NSW) in relation to certain of the material that was made available to me for the purpose of considering whether to approve the settlement. That material included, as is customary, a confidential joint opinion of Ms Collins SC, Mr Meagher, Mr Atkin and Ms Ilic, directed to the reasonableness of the proposed settlement.

33. I was satisfied that I should make such orders. It is not necessary that they be set out in these reasons.

Principles

34. The principles regarding approval of the settlement of a representative proceeding were conveniently summarised by Stevenson J in Findlay v DSHE Holdings Ltd; Mastoris v DSHE Holdings Ltd; Mastoris v Alliance Australia Insurance Ltd [2021] NSWSC 249 at [12]-[14] (footnotes omitted):

“The central question for the Court is whether the proposed settlement is fair and reasonable in the interests of the group members considered as a whole. The Court’s role in relation to group members is supervisory and protective. The Court’s role is analogous to that which it assumes when approving settlements on behalf of persons with a disability.

When considering the reasonableness of the settlement inter partes, the Court is asked to determine whether the settlement is fair and reasonable considering the alternative, which is usually the risks and costs to which the plaintiff group members would be exposed were the matter to proceed to trial.

The question of whether the settlement is reasonable per se cannot be separated from ancillary questions concerning the approval of funding and legal costs. The evaluation of whether a settlement is fair and reasonable ’must be carried out by reference to what all group members obtain in their hands following the resolution of their individual claims in the event that the settlement is approved’.”

35. In addition, there is a comprehensive overview of the relevant authorities and principles by Moshinsky J in Camilleri v Trust Company (Nominees) Ltd [2015] FCA 1468 at [5], which I will not repeat here.

36. As outlined in those authorities, there are two key questions to be addressed on an application such as this: first, whether the settlement is fair and reasonable inter partes, that is, as between the Plaintiffs and RCR; and secondly, whether the settlement is fair and reasonable inter se, that is, as between Group Members.

37. In Williams v FAI Home Security Pty Ltd (No 4) [2000] FCA 1925 at [19], Goldberg J identified the following considerations as relevant to an assessment of the reasonableness of a proposed settlement:

“Ordinarily the task of a court upon an application such as this, is to determine whether the proposed settlement or compromise is fair and reasonable, having regard to the claims made on behalf of the group members who will be bound by the settlement. Ordinarily in such circumstances the Court will take into account the amount offered to each group member, the prospects of success in the proceeding, the likelihood of the group members obtaining judgment for an amount significantly in excess of the settlement offer, the terms of any advice received from counsel and from any independent expert in relation to the issues which arise in the proceeding, the likely duration and cost of the proceeding if continued to judgment, and the attitude of the group members to the settlement. …”

Is the settlement fair and reasonable inter partes?

38. The Plaintiffs rely on the evidence of their solicitor, Mr Damian Scattini, and the confidential joint opinion of their senior and junior counsel. I have been much assisted by the comprehensive and well-reasoned views expressed by them.

39. The confidential joint opinion addresses, in detail, the risks faced in establishing liability and damage, by reference to each of the claims advanced in the proceeding; the risks faced, in the event that claims are successful, in recovering damages from RCR, having regard to the insurance position; and the proportion of the total loss of registered Group Members that the settlement sum represents.

40. Separately, RCR has outlined in its submissions in support of this application its own views regarding the difficulties that arise in the Plaintiffs’ case on liability and causation, and regarding the insurance position.

41. I am comfortably satisfied having regard to this material that a settlement of these proceedings for $40m is fair and reasonable as between the Plaintiffs and RCR.

42. The settlement sum is a substantial amount and represents a substantial proportion of the total claims of registered Group Members. This settlement has been achieved after two mediations and five years of litigation. The alternative to settlement would be a lengthy and complex trial, attended by the risks which have been identified in the confidential opinion, at significant further expense and with significant further delay until the final resolution of the claims against RCR.

Is the settlement fair and reasonable inter se?

43. When considering the reasonableness of the settlement inter se, the Court must determine whether the proposed arrangements for distributing the fixed pool of settlement funds between the claimants are fair and reasonable: Camilleri at [5]. As was explained by Moshinsky J in that case (at [40]):

“the manner in which the settlement sum is to be distributed requires assumptions to be adopted and judgment calls to be made. … There is no single approach which alone can qualify as reasonable for sharing the fixed pool of funds among the claimants. Inevitably, adjustments in a given approach will be favourable for certain group members at the expense of others.”

44. His Honour added (at [41]) that the question, therefore, is whether the proposed arrangements for distributing the settlement sum are “within the bounds of fairness and reasonableness”.

45. The first issue concerns the proposed payment from the settlement fund of $11,010,155.84 (inclusive of GST) for the reimbursement of legal costs.

46. There are various categories of such costs. First, there are costs incurred prior to consolidation of the proceedings, in each of the three individual representative proceedings. On consolidation, an order was made that the costs in those individual proceedings be costs in this consolidated proceeding. Secondly, there are costs incurred in the proceedings since consolidation, which have been paid or are payable by the Funders. Thirdly, there are the costs of the hearing of this application, as well as the solicitors’ costs which have been incurred, or are estimated to be incurred, in respect of the Settlement Distribution Scheme.

47. The notification which was sent to Group Members in early December 2023 informed them that it was proposed to deduct an amount of around $12m from the settlement sum in respect of the costs of the proceedings. No Group Member has notified any objection to a deduction in that amount, which exceeds the amount sought on this application.

48. The proposed payment in respect of costs represents the amount of the Plaintiffs’ reasonable costs which has been determined by an independent costs assessor, Mr Ian Ramsay Stewart.

49. Mr Ramsay Stewart has provided a detailed and helpful report, explaining the methodology which he adopted to determine the Plaintiffs’ reasonable costs and explaining the deductions which he has made in coming to the final figure. In Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia; Whisson v Subaru (Aust) Pty Ltd; Kularathe v Honda Australia Pty Ltd; Brewster v BMW Australia [2022] NSWSC 1076 at [40], Rees J observed that, although costs assessors do not displace the protective role of the Court, “the evidence of an experienced costs assessor may be of great assistance to the Court in highly complex and expensive proceedings”. This proceeding plainly meets that description. Her Honour quoted with approval the following observations of Beach J in Blairgowrie Trading Ltd v Allco Finance Group Ltd (Recrs & Mgrs Apptd) (in liq) (No 3) [2017] FCA 330 at [180]:

“Generally, let me say that my role is not that of a taxing registrar or master. Further, subject to the question of proportionality, if unchallenged expert opinion is put before the Court which sets out a commercial and reasonable methodology consistent with the terms of any retainer and which demonstrates that it has been accurately and thoroughly applied to sufficient and probative source records of the solicitors, then it is no part of my function to:

(a)    reject that evidence as to whole or part without very good reason; or

(b)    apply one’s own subjective view of what the legal work is ‘really worth’, divorced from the reality of the commercial context within which the work was carried out and the expenses incurred.”

50. I am satisfied, on the basis of Mr Ramsay Stewart’s report, that the amount sought to be deducted from the settlement fund by way of legal costs represents the amount of the Plaintiffs’ reasonable costs. It follows that it is fair and reasonable that this sum be reimbursed.

51. The second issue concerns the proposed payment of $8m to the Funders for funding commission. It is proposed that this amount be deducted from the sum which is to be paid in settlement of all Group Members’ claims, whether or not they have entered into a funding agreement with the Funders. Such an order is usually termed a “common fund order”.

52. I am satisfied that the Court has power to make a common fund order where a representative proceeding is brought to an end by a settlement: see Haselhurst at [51] per Rees J; Quirk v Suncorp Portfolio Services Ltdin its capacity as trustee for Suncorp Master Trust (No 2) [2022] NSWSC 1457 at [43]-[44] per Stevenson J; and the authorities cited in those decisions.

53. In determining whether such an order should be made in this proceeding, it is necessary to consider whether the proposed amount of funding commission is reasonable and proportionate: Quirk v Suncorp Portfolio Services at [45]. Relevant considerations include whether, but for the Funders’ willingness to fund the proceeding and to risk an adverse costs order, the proceedings would have commenced at all; whether the amount sought by way of funding commission is less than the Funders’ contractual entitlement; and whether the proposed funding commission, considered as a percentage of the settlement sum, is within the range of funding commissions paid in representative proceedings such as these: see Quirk v Suncorp Portfolio Services at [47]-[49].

54. Having regard to those considerations, I am satisfied that a common fund order should be made in this case and, in particular, that it is fair and reasonable that a funding commission be paid to the Funders in the amount sought. I have reached that view for three main reasons.

55. First, the evidence of Mr Scattini is that it was only by reason of the provision of litigation funding that these proceedings were able to go ahead and to achieve compensation for Group Members. It should also be noted that, shortly after the proceedings were consolidated, an interim common fund order was made pursuant to section 183 of the Civil Procedure Act. Within a month of that order being made, the High Court handed down judgment in BMW Australia Ltd v Brewster; Westpac Banking Corp v Lenthall (2019) 269 CLR 475; [2019] HCA 45, holding that section 33ZF of the Federal Court of Australia Act 1976 (Cth), which is the equivalent of section 183 of the Civil Procedure Act, did not empower the Court to make a common fund order in advance of a settlement occurring in a representative proceeding. In February 2020, this Court set aside the interim common fund order in this proceeding, and varied the consolidation orders nunc pro tunc such that (a) this proceeding was not being funded on the funding terms which had previously been agreed, and (b) the Funders did not undertake to fund the proceeding on the basis of those terms.

56. At around the same time, the Funders agreed with the Plaintiffs that they would continue to comply with their obligations under the previous funding terms pending negotiation and entry into a further co-funding agreement, including their obligations to pay the Plaintiffs’ legal fees and costs and to pay any adverse costs order. Subsequently, new co-funding agreements were entered into by the Plaintiffs and the Funders in August 2020.

57. Having regard to those events, it is plain that the commitment of the Funders to fund the payment of legal costs and to fund any adverse costs order, including after the decision in Brewster, was critical to the continuation of these proceedings.

58. Secondly, the proposed funding commission, representing 20% of the settlement sum, is less than the Funders’ contractual entitlement under almost all of the Co-Funding Agreements. Some 2,435 Group Members have entered into Co-Funding Agreements. In all but six cases, the commission payable under the terms of the agreement, for a settlement reached at this stage of the proceedings, is 25%. In the remaining six, it is 20%.

59. The notification sent out to all Group Members in early December 2023 informed them of the quantum of the proposed commission and informed them that they could object, if they wished, to any term of the settlement (whether or not they chose to register to participate in the settlement). However, not one Group Member has raised any objection to the amount of the commission.

60. Thirdly, I was provided with evidence of the funding commissions which have been approved in representative proceedings (and, in particular, shareholder class actions) over the past five years, and I am satisfied that a commission of 20% of the settlement sum is within the range and, for that matter, at the lower end of the range of such commissions.

61. Although the funding commission is a very substantial sum, the Funders took on very substantial risk. I have already referred to the risks involved in establishing the Group Members’ claims and the risks in relation to the insurance position. The Funders provided some $4m by way of security for costs in these proceedings. If the Plaintiffs’ claims had failed, it is likely, on the evidence before me, that the Funders would have been exposed to a loss in an amount well over $20m (representing the Plaintiffs’ costs to the conclusion of the proceedings, together with Mr Scattini’s estimate of the exposure to an adverse costs order on a party-party basis). In addition, as I have noted above, the Funders took on the risk of continuing to fund the proceedings in circumstances where there was uncertainty regarding the implications of the Brewster decision.

62. If the Funders were to receive only reimbursement of the legal costs they have paid, they would recoup most, but not all, of their investment (having regard to the discount proposed by Mr Ramsay Stewart in determining the Plaintiffs’ reasonable costs). However, the Funders would not receive any return on that investment for the considerable risks which they took on in funding the proceedings.

63. I am satisfied, having regard to the complexity of the proceedings, the significant time and cost expended in prosecuting the proceedings, the risks involved in prosecuting the claims of the Plaintiffs and the Group Members, the contractual entitlements of the Funders, and the material provided to me regarding the range of funding commissions in other shareholder class actions, that the proposed funding commission of $8m is reasonable and proportionate.

64. The third issue concerns the payment of $20,000 to each of the three Plaintiffs. The sum proposed to be paid is comparable to payments to lead plaintiffs which have been approved in other representative proceedings of similar complexity: see Ewok Pty Ltd atf E & E Magee Superannuation Fund v Wellard Ltd [2024] FCA 296 at [92]-[94] and the authorities referred to therein.

65. Mr Scattini gave evidence of the extent of the involvement of each of the Plaintiffs in the conduct of the representative proceeding over the past five years, and the burdens placed upon each of them.

66. The Court-approved settlement notification which was provided to Group members notified them of this proposed payment to each of the Plaintiffs “as reimbursement for the time and expenses incurred in their role as lead representatives of the RCR Class Action”. No Group Member has objected to this proposed payment.

67. In those circumstances, I am satisfied that the proposed payment is fair and reasonable.

68. The fourth issue concerns the proposed deduction on account of the costs of the Settlement Administrator for administering the Settlement Distribution Scheme. Mr Scattini obtained quotes from three other suitably qualified service providers and determined that the quote provided by the proposed Settlement Administrator was the most competitive in terms of cost (while also being satisfied that it was the superior offering in terms of the service to be provided). Mr Scattini has also given evidence that the proposed fee is reasonable having regard to his recent experience in the administration of class action settlements. When notified of the settlement, Group Members were advised that it was estimated that the costs of administering the settlement would be $230,000 (excluding GST). The proposed payment of $269,940 (including GST) is only marginally above that estimate. In addition, Mr Ramsay Stewart has considered the proposed payment to the Settlement Administrator and has formed the view, based on his experience and the tasks involved in the administration of the Settlement Distribution Scheme, that this payment is reasonable.

69. In those circumstances, I am satisfied that the proposed payment to the Settlement Administrator is fair and reasonable.

70. The final issue concerns the mechanism for the distribution of the balance of the Settlement Sum as between the Plaintiffs and the Group Members after deductions have been made by way of funding commission, reimbursement of legal costs and the payments to the Plaintiffs and the Settlement Administrator. The net amount remaining after those payments will be approximately $20.7m.

71. Mr Scattini considered several possible approaches to distributing the settlement sum, which are set out in his affidavit, each of which he identified as having advantages and disadvantages. Ultimately, he settled upon, and the Plaintiffs have proposed, an approach that will result in a distribution of the net settlement sum based upon the value (determined according to the purchase price) of the “net” shares acquired by a Group Member during the relevant period. The balance of the settlement sum will be distributed amongst Group Members on a pro rata basis, according to the value of a Group Member’s “net” shares relative to the total value of the “net” shares of all Group Members.

72. The “net” shares are to be determined on the basis of a “Last In First Out” methodology. Mr Scattini has explained that the Last In First Out methodology is intended to bring to account any sales of RCR shares made by Group Members during the period in which the market for RCR shares is alleged to have been inflated. He identified the rationale for bringing such sales to account as having been explained by Brereton J in Cuong Ly; HIH Insurance Ltd (In Liq), Re v HIH Insurance Limited (In Liq) [2017] NSWSC 380 at [10]-[18]: namely, (at [12]) “the same misleading and deceptive conduct that distorted the market adversely to the plaintiffs as purchasers when they purchased their shares, distorted the market in favour of each plaintiff as a vendor when and if that plaintiff sold its shares during the relevant period”.

73. No Group Member has objected to the distribution of the net settlement sum on the basis outlined in the Settlement Distribution Scheme.

74. I am satisfied that the Settlement Distribution Scheme is, to use the language of Moshinsky J in Camilleri at [42], “within the bounds of reasonableness in achieving a broadly fair, ‘rule of thumb’ distribution between the claimants”. It treats the lead Plaintiffs and Group Members alike; it does not discriminate between different classes or categories of Group Members; it is transparent; and it is capable of being applied by the Settlement Administrator without complex analysis of individual circumstances.

75. Finally, I note that six Group Members sought to register for participation in the settlement after the registration date had passed. It is proposed that the late registrants be deemed to have registered by that deadline. No person has objected to this proposal and I am satisfied that it is fair and reasonable.

ORDERS

76. For those reasons, I make the following orders.

The Court NOTES that:

In these orders:

“Funders” means Omni Bridgeway Limited (ACN 067 298 088) in its capacity as appointed agent and investment manager for each of Omni Bridgeway (Fund 2) Pty Ltd (ACN 621 682 504) and Omni Bridgeway (Fund 3) Pty Ltd (ACN 621 682 460), and Burford Asia Investments Pte Ltd.

“Group Members” has the meaning given to it in the Further Amended Commercial List Statement filed by the Plaintiffs on 6 July 2023.

“The Advisory Company” means Sonority Pty Ltd (ACN 660 124 167) trading as The Advisory Company.

The Court ORDERS that:

Settlement Approval

1. Pursuant to section 173 of the Civil Procedure Act 2005 (NSW) (the Act), the settlement of this proceeding against the First Defendant be approved on the terms set out in:

1. the Deed of Release and Settlement dated 12 September 2023 (Settlement Deed), which appears at Confidential Exhibit DS-2 to the affidavit of Damian Scattini affirmed 13 May 2024 (Scattini Affidavit); and

2. the Settlement Distribution Scheme dated 3 May 2024 (SDS), which appears at pages 4 to 20 of Exhibit DS-1 to the Scattini Affidavit.

2. Pursuant to section 183 of the Act, the Plaintiffs are authorised, nunc pro tunc, to enter into and give effect to the Settlement Deed for, and on behalf of, all Group Members other than those Group Members who have opted out of the proceeding.

3. Pursuant to section 179 of the Act, these orders are binding upon all Group Members other than those Group Members who have opted out of the proceeding.

Administration of Settlement

4. Pursuant to sections 173 and/or 183 of the Act, The Advisory Company be appointed as administrator of the SDS (Settlement Administrator) to act in accordance with the SDS subject to any direction from the Court, and to have the powers and immunities conferred by the SDS on the administrator, subject to any direction of the Court.

5. The Settlement Administrator is granted liberty to apply to relist this Proceeding for the purpose of seeking orders consequential to or in connection with the SDS upon not less than three clear business days’ notice to each of the parties to this Proceeding, and the Court.

Deductions from settlement sum for the purpose of the SDS

6. Pursuant to ss 173(2) and/or 183 of the Act, and for the purposes of the SDS, the Court approves the following settlement deductions under the SDS (utilising defined terms from it):

1. the amount of $8,000,000 payable to the Funders by way of funding commission (referred to in the SDS as the ‘Funding Commission’);

2. the amount of $11,010,155.84 (inclusive of GST), for the Plaintiffs’ legal costs (referred to in the SDS as the ‘Plaintiffs’ Reasonable Costs’), comprised of:

1. $115,956.01 (inclusive of GST) to be paid to Piper Alderman for costs incurred prior to this Court’s consolidation order on 15 August 2019 but not yet paid;

2. $80,400.80 (inclusive of GST) to be paid to Omni Bridgeway (Fund 2) Pty Ltd for costs incurred by CJMcG Pty Ltd as trustee for the CJMcG Superannuation Fund prior to this Court’s consolidation order on 15 August 2019;

3. $241,202.41 (inclusive of GST) to be paid to Omni Bridgeway (Fund 3) Pty Ltd for costs incurred by CJMcG Pty Ltd as trustee for the CJMcG Superannuation Fund prior to this Court’s consolidation order on 15 August 2019;

4. $908,879.07 (inclusive of GST) to be paid to Burford Asia Investments Pte Ltd for costs incurred by Ashita Tomi Pty Ltd as trustee for the Esskay Super Fund prior to this Court’s consolidation order on 15 August 2019;

5. $249,942.18 (inclusive of GST) to be paid to ICP Capital Pty Limited for costs incurred by Mr Jorge Mayer prior to this Court’s consolidation order on 15 August 2019;

6. $9,066,103.87 (inclusive of GST) to be paid to the Funders, in equal shares, for costs incurred by the Plaintiffs and paid or payable by the Funders up to 31 March 2024;

7. up to $299,233.00 (inclusive of GST) to be paid to the solicitors for the Plaintiffs for costs incurred, or estimated to be incurred, between 1 April 2024 and the date of the hearing of this motion;

8. up to $48,438.50 (inclusive of GST) to be paid to the solicitors for the Plaintiffs for costs incurred, or estimated to be incurred in respect of the SDS;

3. the amount of $60,000 to be paid to the Plaintiffs, in equal shares, as compensation for the time expended by each of the Plaintiffs in carrying out their role as representative plaintiffs (referred to in the SDS as the ‘Plaintiffs’ Reimbursement Payments’); and

4. the amount of $269,940.00 (inclusive of GST) payable to the Settlement Administrator for its role in administering the SDS (referred to in the SDS as the “Administration Costs”)

(together, the Settlement Deductions).

Late Registrants

7. The persons identified at page 149 of Exhibit DS-1 to the Scattini Affidavit are deemed to have registered by the registration deadline, being 4.00pm AEDT on 19 January 2024.

Dismissal and costs

8. All existing costs orders in this Proceeding are vacated.

9. The Settlement Administrator is to notify the Court and the parties to this Proceeding once the administration of the SDS has been completed, seven days after which notification this Proceeding is to be dismissed with no order as to costs (without the need for any further order).

Return of security

10. The Court to release the funds (including any interest or other amounts which have accrued on such funds) held by it as security for costs (Security Amount), by way of bank transfer to the Funders in equal shares.

11. Liberty to apply on three days’ notice.

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Amendments

21 June 2024 - 21 June 2024 - [176] - Amendment to order 6(b)(vii) made under the Slip Rule

Decision last updated: 21 June 2024