Australian Securities and Investments Commission v Richards

In the case of Australian Securities and Investments Commission v Richards, the Federal Court of Australia was tasked with assessing the fairness and reasonableness of a proposed settlement in a representative proceeding under Part IVA of the Federal Court of Australia Act. The proceeding was initiated by Mrs Richards and involved a class of investors who had suffered losses due to financial products offered by Storm Financial. The litigation sought to address the terms of a proposed settlement, particularly the imposition of a levy on certain group members to cover legal costs, which was later supplemented by a "funders’ premium" offered only to clients of a specific law firm, Levitt Robinson. The fairness of this premium became a central issue in the case.

The court had to determine whether the proposed settlement was fair and reasonable to all group members, considering the ex post facto offer of advantageous terms only to clients of Levitt Robinson. The legal issues included the applicability of sections 564 of the Corporations Act 2001 and 109(10) of the Bankruptcy Act 1966, and whether these sections, along with relevant case law, provided an appropriate analogy to the circumstances of the case. The court found that these statutory regimes and cases did not provide an appropriate analogy due to the inequality of opportunity afforded to group members to share in the funders’ premium.

The court's reasoning concluded that the settlement could not be considered fair and reasonable to all group members, given the ex post facto offer of advantageous terms only to clients of Levitt Robinson. This constituted a substantial wrong that the Court was obliged to correct. Consequently, the orders directed the parties to bring in orders to give effect to these reasons for judgment, ensuring that the settlement addressed the identified errors of principle and provided a fair resolution for all group members.