BMW Australia Ltd v Brewster & Anor; Westpac Banking Corporation & Anor v Lenthall & Ors

[2019] HCATrans 158

[2019] HCATrans 158

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S152 of 2019

B e t w e e n -

BMW AUSTRALIA LTD ACN 004 675 129

Appellant

and

OWEN BREWSTER

First Respondent

REGENCY FUNDING PTY LTD ACN 619 012 421

Second Respondent

Office of the Registry
  Sydney  No S154 of 2019

B e t w e e n -

WESTPAC BANKING CORPORATION

First Appellant

WESTPAC LIFE INSURANCE SERVICES LIMITED

Second Appellant

and

GREGORY JOHN LENTHALL

First Respondent

SHARMILA LENTHALL

Second Respondent

SHANE THOMAS LYE

Third Respondent

KYLIE LEE LYE

Fourth Respondent

JUSTKAPITAL LITIGATION PTY LIMITED

Fifth Respondent

KIEFEL CJ
BELL J
GAGELER J
KEANE J
NETTLE J
GORDON J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 14 AUGUST 2019, AT 9.45 AM

(Continued from 13/8/19)

Copyright in the High Court of Australia

KIEFEL CJ:   Yes, Mr Gleeson.

MR GLEESON:   Thank you, your Honour.  Could I move to paragraphs 6 and 7 of our outline and put our construction submissions on the provisions governing settlement and judgment, commencing with section 33V, which is on page 11 of volume 1. 

Subsection (1) implicitly authorises or recognises that the representative has power to provisionally enter settlements on behalf of the class with the respondent and bring those settlements to the court for approval in its supervisory jurisdiction.  Subsection (2) authorises the court to make orders for distribution out of the settlement that includes an ability for the court to treat the settlement as a pool and to aggregate the fruits of different claims and decide how it can be applied.

The power to make distributions as are just would include, we submit, a power to order that part of the sum be paid to any persons who have relevantly contributed to the achievement of the settlement, which could include the lawyers, the funder and a range of other persons.  We have given the examples in our footnotes 45 and 46 of the very wide range of class of persons who have been recognised as entitled to payments out of a settlement sum.  In footnote 46 we note that in three cases that has included payments in favour of a litigation funder.

It follows from that submission that both an FEO and a CFO could, we submit, be made under subsection (2) at the stage of settlement.  Your Honours will know that most actions under this part are resolved through a settlement.  Very few have proceeded to judgment.

Could I come to the judgment powers at 33Z.  Our submission on subsection (1) is that it is a facultative and flexible authorisation to the court to make a range of orders and other determinations, in addition to the court’s existing powers under sections 22 and 23.  It should not be read in any narrow fashion.

In respect to paragraph (e), if, as the appellants contend, damages should be read in no limited fashion, it is also notable that it allows for the award of damages in three different types of ways:  firstly, for the group as a whole; secondly for a sub‑group; or thirdly for individual group members.  As to the first and second of those, it empowers the court to award damages on an aggregate, or a pooled basis, with a need then to have a mechanism for deciding how those aggregate damages are distributed.  Thus, like section 33V, it is recognising that under this part, there are particular powers for the court to pool or recognise pools over rewards in the proceedings.

Paragraph (f) then fleshes out or clarifies paragraph (e) by indicating that where the damages are in an aggregate amount they need not specify amounts from individual group members.  Your Honour the Chief Justice yesterday raised with me that, of course, paragraph (g) is here – it is not in the equivalent State Act.  Our submission on that is it is but another provision – an extra one – at federal level which provides the court with the flexibility it needs to make any or all orders that are just out of either settlements or judgments.

Your Honours, could I make a specific submission on subsection (2) and ask you reject the proposition put yesterday that that provision means that when the court is ordering damages it can only order distribution to the group members and cannot recognise any claims of other persons or, indeed, obligations group members may have. 

The manner in which Mr Kirk put it is that subsection (2) erects an absolute barrier – all money from the damages must go to the group – and then he seeks to find three exceptions to that general rule, firstly, in section 33ZA(2) and then subsection (5) and finally in 33ZJ. 

We submit it should be read rather differently.  What it is doing is saying a court cannot simply award damages on the application of the representative and leave it to the representative to decide what is to happen to the money.  The court must, in some manner, make provision for the subject matter of payment or distribution to the group members entitled.

In determining what that provision is and what those entitlements are, the court, we submit, is permitted to recognise claims and obligations in respect to group members, particularly where people have contributed to the achievement of the award of damages.  So that the flexibility in making provision allows, within subsection (2), for proper claims of persons who have contributed to the fund to be recognised.

Now, Mr Leopold accepted that a fund equalisation order can be made under subsection (2), and we agree, but that being correct, in a fund equalisation order the court is not simply ordering the entirety of the damages go to the group members and only the group members.  What the court is in fact doing is saying prima facie as to the funded group members they would have to pay their contractual commissions to the funder or to the lawyers and, as such, out of the damages the court would recognise that obligation as part of the working out of the entitlement of the members. 

What the fund equalisation order does is to say, as between those people and those who are unfunded, a proportionate part of the contracted commissions should be distributed to the burden of the unfunded members and to that extent the court will be deducting from the damages received by the unfunded members their proportionate share of the commissions. 

Nothing different in principle happens under a CFO as compared to an FEO with respect to paragraph (2).  It is simply the court working out the ultimate entitlements having regard to those obligations in a manner that justice thinks appropriate.  If your Honours need an example of an FEO to test what I have said, I will give the reference to Money Max, where it is discussed in volume 5, at tab 41 at paragraph 9. 

Your Honours, our next submission is that looking at subsections (3) and (4), they confirm the notion that the provision which the court makes for the damages can take into account all matters of justice which bear upon the entitlements.  One can see the words “as it thinks just” in subsection (4), and that provides the same latitude and flexibility. 

KEANE J:   Mr Gleeson, do you accept that the occasion for the exercise of these powers that we are looking at is judgment and ‑ ‑ ‑

MR GLEESON:   The answer is yes, your Honour.  The occasion for the exercise of this power on a final basis is judgment or settlement.  So the two steps in our argument, as your Honours appreciate, are firstly, you can do these things on judgment or settlement as final orders.  The second step is can section 33ZF authorise on an interlocutory revisable basis orders which look forward to what the court considers is likely to occur on a final hearing where there is some good reason in justice to establish that position in advance provisionally. 

It is the court looking forward under 33ZF to the type of order that might be made.  In effect, the logic of Justice Lee’s order is to say – he says it in places in express terms – having regard to the sorts of claims in this proceeding and the common issues and so on, and the unity by which these people are bound in a common enterprise, this is a case where it is likely, at settlement or judgment, that there would be a pooling.  That is one judgment he is making.

The second judgment he is making is it is a case where it is likely that at settlement or judgment that the persons who have contributed to that success, the funder and the lawyers, will receive appropriate remuneration.  The third judgment he is making is that, in respect to the funder, the appropriate remuneration can include a reward for the risk taken and it will be structured on a particular basis, subject to the court’s review at the end of the matter.

The final judgment he is making, which ties those three together, is that there are interests in justice in the particular proceeding in the court on the interlocutory basis establishing that framework now as opposed to simply saying come back at settlement or judgment and make your claims then and we will work out what is reasonable.

That is the key judgment which we submit is available as a matter of power, which is to say that there are some cases – not every case – where there are interests in justice in establishing provisionally the framework which the court considers is likely to be borne out should the matter reach settlement or judgment.

BELL J:   Mr Gleeson, a few moments ago you took us to paragraph 9 of the judgment in Money Max, to illustrate an order ‑ ‑ ‑

MR GLEESON:   I am sorry, your Honour, I should have said 5.

BELL J:   I see, thank you.

MR GLEESON:   I am sorry, my fault. 

BELL J:   I see.

MR GLEESON:   So QBE was opposing the CFO on the basis that what was likely to be made was an FEO.

BELL J:   Yes.

MR GLEESON:   It was then explained how the FEO deducts amounts from the unfunded class in a way which distributes the burden.

BELL J:   Yes.  In Money Max, and I think we see it in paragraph 9 in order 2, there was the provision that no amount payable was to exceed that amount that might have been paid, had the CFO not been made.

MR GLEESON:   Yes.  So what happened in the case below - this issue is not before you - was one of the discretionary attacks was Justice Lee should have attached paragraph 2 to the present CFO.

BELL J:   Putting to one side - I was just raising the matter.  I had understood you were submitting that, in essence, one might consider the CFO as achieving a like outcome to an equalisation order.

MR GLEESON:   I should clarify that, your Honour.  I am not submitting that a CFO will necessary achieve a like outcome.

BELL J:   No.

MR GLEESON:   It may.

BELL J:   Yes.

MR GLEESON:   Depending on the economics.  What happens in a very – in an action with big claims, where a lot of people are signed up to large amounts of commission, the amount of that commission is simply spread across the funded and the unfunded, and the funder gets X dollars.  It is possible, in that sort of large claim, that a CFO will achieve exactly the same economic outcome for both parties.

BELL J:   As the worked examples show, that is a possibility.

MR GLEESON:   Yes, a possibility.

BELL J:   Equally, there may be a departure.

MR GLEESON:   There may be a departure.  Now, what is significant about the present case is where one has, in our case, 80,000 small claims, they will not achieve a similar economic outcome, necessarily, unless you sign up many, many thousands of people.  So our ultimate submission is they are each available as a matter of power in response to the demands of the case.  There will be discretionary considerations as to which to choose.  There will be discretionary considerations whether to put the cap on it that was placed on it in Money Max.

In the present case, Justice Lee analysed this and said, “I do not need that cap because I am doing the problem slightly differently.  I am saying I have assessed that a fair reward is 25 per cent of the net, contrary to the funding terms, which was 30 per cent of gross.  I have put a cap on that.  You can never get more than three times costs.  Then I have added ‘and you can never get more than is fair and reasonable at the final hearing’.”  That, he says, is the balance which protects the group interest.

So our submission is certainly in terms of powers on settlement and judgment each of them is available in the manner I have sought to make out.  The critical question then becomes can you make it early under 33ZF and are there, as a matter of power, interests of justice which could justify it being made early?  That is the part of the argument I want to move to now, if I can.

Your Honours in terms of paragraphs 8 to 11 of our outline, could I ask the Court to have the common fund order itself, which is in the core appeal book commencing at page 36, and your Honours may need the appellant’s book of further materials, which has the underlying agreements.  Can I start with paragraph 2 of the order, which is the undertaking.  What is occurring there is that the court is accepting an undertaking being given by the funder:

the Applicants, and Shine Lawyers to each other and to the Court that they will comply with their obligations under the Funding Terms -

Pausing there, the power of the Federal Court to receive an undertaking is, of course, undoubted as part of its inherent jurisdiction to do justice as a superior court of record.  If necessary, it is further supported by sections 22, 23 and 33ZF.  So just at that stage of the process, the result of that undertaking being given to the court can be seen on page 45, paragraph 2 of the terms, that the funder is agreeing to bear, first of all, all:

the Legal Costs and Disbursements . . . in accordance with the –

underlying agreements.  I pause there.  Under the underlying agreements, it is a promise to bear 80 per cent of those costs and the lawyers take the risk on 20 per cent.  That is paragraph (a).  Under paragraph (c), which I will jump to, it is a promise to bear any adverse costs order in the proceedings.  In paragraph (d), it is a promise to provide the security for costs, which is inevitable in these matters, as well as (e) to pay all the costs of the referee.

Pausing there, the characterisation we would proffer is that the funder, on request of the representative but under the supervision of the court, is agreeing to provide the core necessaries for this action to have a prospect of going forward.  The core necessaries are those three aspects of costs that I have mentioned, and the lawyers are bearing the necessaries to a lesser extent which is taking the risk on 20 per cent of their fees.

Now, in accepting that undertaking, admittedly as part of a package, the court, we submit, was making an interlocutory decision that the decision of the representative to accept this funder and these lawyers, on these terms, as modified in the undertaking, was an appropriate exercise of the representative’s conduct of the action on behalf of the whole group.

Your Honours will see on page 53 clauses 23 and 24, that the parties accepted that this was also a deemed variation of the underlying funding agreements.  What then is the consequence for the proceeding of the court accepting that undertaking?  The essential consequence is this.  The proceeding has a large number of small claims which pursued separately are worth little.  If they can be pursued together, as per this proceeding, they acquire significant value.  The proceeding needs some form of funding and the CFO is a means by which the forward progress of the proceeding can be secured.

By accepting the undertakings – and putting it in slightly simpler terms – the court is ensuring that the inability of the class members to fund expensive separate litigation is no bar to their claims being determined on their merits.  When the primary judge and the Full Court said the order provides a stable base of funding, that, we submit, is the underlying idea and it is consistent with justice and consistent with the provisions of this part.

We would add to that, that immediately upon the undertaking being accepted, the group as a whole, and individually, are conferred a valuable benefit which is that they are saved the expense of those costly separate proceedings and they are given the chance of having their claim assessed on the merits. 

Your Honours, in the reply submissions, Westpac has said in response to this, but the members have another option.  They could pursue a scheme with the Financial Ombudsman if they so chose.  That, of course, as an administrative scheme, is not the same as having their rights determined under judicial power.  So that is the first part of what the order does.  The second part, returning to order 1 now, on page 36 – is that the order has imposed a contingent obligation on:

the Applicants and group members [to] pay from any Resolution Sum –

if it is achieved in the future, certain amounts, particularly, the funders’ fees:

prior to any distribution to group members –

The “Resolution Sum” is defined on page 44, paragraph (w), and it is tied to money which is received through a settlement or a judgment in the proceeding.  That is the first aspect to it.  The second aspect is if a group member brings a subsequent proceeding, an individual one relying on the findings.  So a “resolution sum”, as defined, not only is it contingent but it can only come about if this proceeding directly, or through its binding effect under 33ZB, has produced a beneficial outcome for group members.

Your Honours, the definition of “Group Members” is important - on page 43, paragraph (i).  It is quite carefully defined to be the:

persons who are identified as group members . . . and who do not opt out . . . by the time specified by the Court for doing so.

So order 1 is only impacting persons who have made the choice not to opt out by the time the court specifies, and it only impacts them to the extent that the proceeding leads to the achievement of fruits of their cause of action.

EDELMAN J:   Deemed not to have made the choice.

MR GLEESON:   Deemed, yes.  In terms of opt‑out, your Honours, could I observe under section 33J, which is volume 1, page 6, that there are two stages at which opt‑out can occur.  There is the primary stage authorised by the court, which ordinarily will occur before the hearing – subsection (4).  But there is also the ability under subsection (3) for a group member to ask the court to fix a later date.

In the unlikely event that a group member has not opted out at the first stage but sees a settlement or judgment and says, for whatever reason, “I do not wish to take the benefit of it”, a group member could ask the court, under subsection (3), for leave to opt out.  What that means is that, in terms of a group member getting the benefit of a settlement or judgment or pursuing it in later proceedings, there is not only the decision not to opt out at the primary stage, there is an affirmative decision to accept the benefits and the fruits of the proceeding.

Your Honours, continuing with the effect of the CFO, in summary we would say that the only thing being imposed on a group member is to say that if you come to achieve fruits of your causes of action, which at the present are effectively valueless in our case, that will only occur after the Part IVA proceeding has been conducted on your behalf, after you have received the services of the funders and the lawyers and after you have had the opportunity to reject those benefits.

Order 1 is saying in that context, if you are in that situation, the price for your receipt of those benefits will be, firstly, that the service providers who have achieved the beneficial outcome will receive a reasonable remuneration, as it were, as a personal obligation; and, secondly, that will be recoverable as a lien on the fund.

Why is it recoverable as a lien?  It is for two reasons.  The first is to achieve security for payment for the service providers, consistent with the solicitor’s lien.  The second purpose is to ensure a rateable distribution of the burden of the fees across the whole group.  That is what order 1 is achieving.  It is establishing at the beginning a framework going forward upon which orders will be made at the final hearing, subject to variation in order to reflect these demands of justice.

There are two other things the order achieves.  If your Honours to go funding term, 6 on page 46, what that term establishes on an interlocutory revisable basis is the terms upon which the reasonable remuneration of the funder will be calculated at the end of the matter.  Paragraph (a) is dealing with reimbursement of legal costs and paragraph (b) is the commission for taking risk; (c) is the further commission on appeal.  Then there is the rider at the bottom, not more than:

the Court determines to be fair and reasonable –

So that is a provision on establishment of the terms of reasonable remuneration at the end of the matter.  The last thing the order achieves, and it is not a small matter, but it is part of the balance, is the division of the costs referee.  You will see those provisions, which in fact take up most of the order, paragraph 3 on page 36 through to paragraph 15 on page 39.

So as part of the package, the court is placing controls over excessive expenditure of legal costs, bearing in mind that that could operate to the detriment of the group.  Your Honours will see in particular order 14, again subject to further order, the legal costs that will be approved will not exceed those allowed in the reports of the costs referee.

So in assessing all questions in the case, statutory power, judicial power and acquisition of property, we would ask the Court to bring together the whole of this order, including each of the elements I have identified, which work together as a package and not, as much of the appellants’ argument do, simply seize upon one particular aspect of it in isolation.

If your Honours could go then to our outline, so I could wrap up this part of the argument, in paragraph 11.  We submit that the demands of justice, which are within the power in section 33ZF, can be looked at in at least three ways.  The first is the immediate establishment of terms between all parties to the enterprise, governing costs going forward, consistent with demands of justice which are likely to justify a final CFO if the proceedings are successful.  So the demands of justice which underpin the provisions I have been to - 33V, 33Z and so on - are here recognised on a provisional basis.

There is a second important, separate aspect to justice, which we would describe as the informational aspect to justice.  It can hardly be doubted that the right of the group members to opt out under section 33J is considerably enhanced if they know the terms of the enterprise.  If they do not know what is going to happen in respect to fees of lawyers or funders and they are simply told that will be in the discretion of the court at the end of the day they, one might think, are in a deficient position in respect to making a fully informed decision whether to opt out or not.

So, as a matter of power, it is at least relevant that an early order gives them that extra information and makes their choices within the statute more efficacious.  Your Honours, that part of the proposition, what we call the informational aspect of it, applies equally to an early FEO or an early CFO.

EDELMAN J:   It is a bit of a Goldilocks submission because if you give too much information then that undermines your submission that this is really just provisional and subject to variation, but if you give too little information then the terms are not really even a provisional guidance.

MR GLEESON:   We are identifying that there is an underlying demand of justice.  The discretion then for the trial judge is of course in the particular case is there benefit in the provisional establishment of terms, subject to later revision?  That requires an exercise of judicial ‑ ‑ ‑

EDELMAN J:   Your point at 11(a) really is that it is the immediate establishment of provisional terms.

MR GLEESON:   Yes, and to do that, but yes, the word “provisional” could be inserted before “terms”, then facilitates the informational aspect of justice.  The reason I have dwelt a little on the undertaking is not only it is a part of a package but it is something that takes effect legally instantaneously from day one. 

We agree that if the order simply said, “This is what a court thinks might happen at the end of the day”, then it would have a separate power, a separate constitutional problem, but it is not that sort of order.  It is the judge saying, “Based on what I currently know and what I see looking forward to the final hearing, these are just terms for the enterprise”.  That is the informational aspect of it. 

The final one which was particularly significant in the Full Court’s reasoning, particularly around paragraph 91, was the access to justice proposition that securing the funding base of the proceeding in a way that removes a risk to its ongoing prosecution is part of the proper supervisory function of the court in respect to Part IVA proceedings. 

We do not shy away from that as being an appropriate approach to justice.  This is not, as perhaps Mr Kirk suggested, courts beyond power, involving themselves in whether litigation is to be stirred up and maintained.  It is the courts responding to a basic demand within this part.  It is there to allow for, in particular, large numbers of small claims to be litigated when they otherwise would wither on the vine.  It is the court recognising a demand within the proceedings and it is responding to that demand, thereby ensuring that the claims at least are heard and determined on their merits.

Your Honours will see in paragraph 11 the final part of this submission on our part is that we would submit - and there is no difference in principle between recognising that all group members should bear the burden of the solicitor’s costs, including any uplift, and recognising that they should share the burden of the funder’s fees.

I indicated in answer to your Honour Justice Nettle yesterday, in looking at the order, that we submit that insofar as it, on page 46, paragraph 5(b), gives the lawyers an equitable lien or assignment over the fund for their just deserts as a second charge, consistent with the authorities in Australia and the United States that I went to, the same principle applies by analogy with respect to the funder under paragraph (a) once it is recognised that the funder is providing necessary services for the proceedings.

Your Honours, I had made a submission yesterday based on equity that there is no existing expense limitation and I have already referred to the 2015 report and the decision in Pettus.  Could I mention in the other authorities which wrap up the entirety of this part of the case, if your Honours could consider Stewart, which is in volume 7 at tab 63, there are a number of very pertinent observations for this case.  Commencing at paragraph 14, there is a reference to Justice Isaacs in Davies v Littlejohn, explaining that:

an equitable lien arises by operation of law, under a doctrine of equity, “as part of a scheme of equitable adjustment of mutual rights and obligations”.

That is relevant to the acquisition of property part to this case because if what this order is doing is operating informed by or analogous with notions of equitable lien, then it can readily be seen as part of a scheme of equitable adjustment of mutual rights and obligations which on no view would be characterised as an acquisition of property under section 51(xxxi).  Paragraph 16 next is important in discussing the solicitor’s lien and refers to Lord Justice Lindley in Guy v Churchill saying:

“[i]t is right that they who get the benefit of the recovery of money should bear the expense of recovering it”.

That is the underlying principle of justice in this order and then:

A similar notion underlies the principle expressed in Universal Distributing.

At paragraphs 22 and 23, the principle in Universal Distributing is restated and we emphasise that in the winding‑up the liquidator is entitled to claim:

costs and expenses, including remuneration, of creating –

the relevant fund and it is supported by a charge in equity.  That is the underlying notion of justice and to the extent it includes remuneration, when one applies that to our context, the remuneration of the funder or the lawyer includes the reward for the taking on of risk.

Finally, Mr Kirk referred you to paragraphs 47 and 48 and said they might be of assistance in this case because they confirm in general, if you are a mere stranger conferring benefits on others without request you do not receive a right to payment or compensation.  Of course, the relevant difference here is the funder and the lawyers are not strangers; they are acting on request of the representative.  They are conferring necessaries and benefits, producing a fund consistent with Universal Distributing, and the benefit is in the nature of salvage and there is a full opportunity to reject the benefit and that in response to that the demand of equity is recognised.

Your Honours, there are two other cases I would go to in the list of paragraph 11 of our outline.  The second is IMF v Meadow Springs which is in volume 3, tab 32.  The importance of this case can be perhaps picked up from the headnote on page 241, at roman (ii), which is that the liquidator had entered an agreement with IMF that it would fund certain liquidation on terms which included a commission.  The promise by the liquidator was, “I will pay you your fees in the event that a resolution sum is achieved in the future”.  You will see at the end of paragraph (ii) of the headnote, the promise was to pay:

whatever it was that IMF was entitled to be paid from that resolution sum -

One of the issues which the court examined was that the liquidator cannot actually pay anything out of the proceeds of the causes of action realised by the company unless the liquidator has the approval of the court for that payment to be made.  So it is very much like the present case where the individual applicants can say to the funder we agree, as far as we can with our terms, but it ultimately requires the court to be satisfied that it is proper that the moneys be paid out of the fund. 

That is the proposition which the Full Federal Court accepted.  Paragraph [64] – the Universal Distributing principle was treated as applicable.  Paragraph [71] explains the fee agreement in the way I have discussed it.  Then, at paragraphs [74] to [78], the court considers the reasonableness of the fee to be paid to IMF.  In doing so, it considers whether the percentage fee was appropriate. 

That is highly relevant to the judicial power argument because the notion that the court determining the reasonableness of a funders’ fee, having regard to risk, is antithetical to judicial power or involves notions of policy is clearly rejected by cases such as the present which show the matter can be amply dealt with within the judicial process.

Your Honours, the last of the cases I wished to refer to was Shirlaw, which is in volume 7 at tab 60.  This case puts the final nail in the coffin, I would submit, of the existing expense limitation.  You will see from the headnote, paragraph 1, that it was a provisional liquidator seeking an equitable lien for expenses and remuneration – both of them – over the assets, under the administration, which arises and survives the termination of appointment.  So that when the company has gone into full liquidation, the lien continues to exist for the benefit of the PL because of the underlying equitable notion. 

Now, this has nothing to do with whether there is a contract between the provisional liquidator and the company.  What it has to do with is the Universal Distributing principle, that the benefit you have brought about by your administration justified a personal and a proprietary remedy.  The Full Federal Court of Justices Sheppard, Burchett and Gummow, at page 228, discussing a number of the authorities which were then later discussed in this Court in Stewart, said at about point 2, following Hewett v Court:

Nor is it the case that a contract is necessary between equitable lienor and lienee to attract equitable intervention.  The trustee’s lien is an obvious example.

Then other examples are given.  In the next paragraph, there is a reference to Justice Deane in Hewett v Court, referring to Pomeroy, to the effect that:

in addition to equitable liens arising from contractual dealings in property, equity may raise liens based either upon general considerations of justice or upon the principle that he who seeks the aid of equity in enforcing some claim (eg in an administration of assets) must admit the equitable rights of others directly connected with, or arising out of the same subject matter –

I would also refer your Honours to page 230.  At point 3, the analogous position for the receiver and the manager is discussed, and particularly at point 8, that the underlying notion is one of “salvage.”  Now, in the present case, the Full Federal Court perceived a relevant analogy with the law of salvage; and we submit validly so.

Your Honours, returning to our outline, the matters at paragraph 12, which are the specific response to various appellants’ arguments, we rely upon our written submissions, plus submissions which are to follow.  The Full Federal Court dealt with those matters at 99 to 102, we submit, without error.  The only matter I would add is that Jackson v Sterling had little to do with this case.  It was clearly enough a case where the interlocutory order achieved something which was unavailable at the final hearing, and unavailable under any principle of justice, namely, converting an unsecured creditor to a secured creditor, and that is why it was beyond power.

Unless your Honours had questions on the statutory matters, that leaves only the constitutional matters which we submit will probably not be reached in this case.  If they are, in terms of judicial power we would embrace an approach taken by a number of the interveners that if the order is within statutory power it necessarily will be either judicial or incidental to judicial, without having to inquire further into its particular character, that is, if a CFO is appropriate to do justice in the proceeding, within the statute, by definition, it will be an exercise of judicial power, or incidental to judicial power at a minimum.

The essential reasons for that, we would summarise them as four.  Firstly, it is given to a court.  Secondly, the powers to be exercised not only in accordance with judicial process – that is, evidence, submissions, hearing and the like – but as an incident of the judicial process.  It is not done in some freestanding sense.  Thirdly, it is done under a general standard tethered to do justice in a proceeding.

What is perhaps most important – your Honour the Chief Justice asked Mr Kirk a question on this topic – does section 33ZF, as a matter of proper construction, authorise the court to decide the matter on considerations of mere policy or administration?  Clearly not.  Once that conclusion is reached then the power is necessarily judicial or ancillary to judicial.

Your Honours, we have given two authorities there which are familiar:  Cominos, on one side of the line; Precision Data v Wills on the other side of the line.  That, we submit, is the end of that part of the case.  If you need to go further and look at the CFO – that is, look at the particular exercise of power – you should again, we submit, reach the conclusion that it is judicial or incidental to judicial power.  Why?  It is made within the court’s supervisory jurisdiction.  It ensures justice between the representative, the class and the service providers in the enforcement and ultimate resolution of claims in a matter in which the court has jurisdiction, and there are strong analogies with the court’s supervisory jurisdiction over an administration and the court’s general powers over costs of a matter.

As to the former analogy, we rely upon what your Honour Justice Gageler said in Palmer v Ayres.  The point was made more briefly in the plurality judgment that the court’s supervision over administrations is a traditional judicial function and what we really have here is the statutory equivalent of an administration.

Your Honours, our final submission on judicial power is that, while you do not need to have historical or present day analogies, they amply exist.  I rely upon each of the cases I have been to yesterday and today.  On the other side of the line, a mere remuneration tribunal which simply set wages or terms in an industry unrelated to the court process where considerations of policy would be relevant would be something where there would be a judicial power problem.  This is not such a case.

Your Honours, can I conclude with section 51(xxxi) and ask the Court to go to Cunningham in volume 3 at tab 26.  For this purpose, although the whole of the case is relevant, could I invite the Court to go to Justice Gageler’s judgment at paragraphs 58 to 60 on page 945, about which Mr Free made some submissions.  At paragraph 58, your Honour says, consistent with long‑established principle, the first step is going to be does the law:

provide for the taking of property from a person and for the conferral of a corresponding interest in property on the Commonwealth or on another person.

As with judicial power, this question could be looked at at a higher level or at a lower level.  At the higher level, if the order is authorised by section 33ZF, which must be the assumption, the court has only been able to make it because it has been satisfied that whatever is achieved by the order it does justice in the particular proceeding.

We know that 33ZF can be used for all sorts of things, including for example costs orders.  In every case where 33ZF is properly attracted, we would submit there will not be an acquisition in the sense referred to in paragraph 58 and one does not need to look at the particular order.  That matter is raised by interveners. 

Could I then, against that submission, descend to the particular and say one has to look not at the statutory power but at the way it is used to see what the law is actually doing.  If one takes that dissent, we would urge on the Court, as I put earlier, one must look at the whole of the CFO, not simply look at the part of it which the appellants are seizing upon. 

One cannot simply say what this CFO is doing is contingently charging the future fruits of action.  Rather, one must say that the CFO as a package is an acceptance of the undertakings as a quid pro quo for saying, if the services are provided by the lawyers and the funders and they achieve a successful fund, if they turn your almost valueless cause of action into something valuable and if you choose to accept the benefits of the proceedings, then in response to that there is a demand of justice that you should bear the reasonable fees of the service providers and they should be secured in the two senses I have mentioned:  secured out of the fund, both to ensure the service providers get paid and to ensure the burden is borne rateably.

Now, if that is looking at the CFO as a whole, we would say at the paragraph 58 stage the law is not providing for the taking of property from one and conferring upon it in another.  It is the working out rather of an equitable lien in the manner I discussed earlier.  If we are wrong on the paragraph 58 stage, paragraph 59 raises the question whether the:

legislative acquisition of property is congruent with . . . compensation or rehabilitation to the former owner –

That is the test of the general level of congruence and we agree with Mr Free when he said yesterday that what one is asking here is would it be congruent with the overall object and purpose of the law to require the funder to pay back the very amount which, under paragraph one if he is entitled to receive as consideration for the services in paragraph two?  Would that be congruent?  And the short answer is, no, of course it would not because it would destroy or frustrate the entire purpose of the order.

Now, your Honour in that paragraph has then gone on to say, with reference to Airservices, footnote (80), to the judgment of Chief Justice Gleeson and Justice Kirby, applying Justice Brennan in Mutual Pools, that there is a test, a particular way of ascertaining congruence.

Now, whether the Court says this is the only way of ascertaining congruence, or it is a useful way of looking at congruence, does not matter for our argument. If this is a relevant way of looking at congruence, could I put our argument? Our argument is that the relevant law is supported by section 51(xxxix) of the Constitution as a law incidental to the execution of judicial power and it is supported by section 77 as a law defining the jurisdiction of the Federal Court.

Pursuant to those powers, the law has authorised orders which are necessary to do justice.  And the particular means that has been chosen by the order is to say that in order to make efficacious this package of rights and obligations between the various parties, it is necessary not only to order a personal remuneration, but to secure it via an equitable lien.  And the reason it is necessary to secure it, I have already explained the two reasons earlier.

So in such a case, it is a necessary or characteristic feature of the legislatively chosen means, which are appropriate to the objective within power, that when you make a common fund order, you do not order the funder to pay back the very money it receives under the order.  If you did, you would destroy the whole point of the order.  So if congruence is tested in that fashion, we would submit just terms would be incongruent.

Finally, in paragraph 60, your Honour Justice Gageler has said in some cases there may be an additional and separate aspect to characterisation, which is where what would otherwise be an acquisition is merely “incidental to”:

the law’s adjustment of competing rights –

and claims.  If it is necessary to look at that aspect of characterisation as a separate exercise, we would respectfully adopt the Commonwealth’s application of it to the facts in paragraph 51 of their submissions where they explain the nature of the competing adjustments involved.

Your Honours, finally, if all else fails on acquisition, there are necessarily just terms because of the conditions which have necessarily been satisfied in making the order.  Unless your Honours have questions, they are our submissions.

KIEFEL CJ:   Thank you.  Yes, Mr Sheahan.

MR SHEAHAN:   Your Honours, before I turn to the construction question, four factual matters pertinent to our case.  The first is that in this matter, the BMW matter, it is not an appeal.  There is no order.  The evidence in support of the application before the Supreme Court is not complete. 

The question that has been raised has therefore been necessarily raised at a level of principle.  It is raised in terms by reference to the order sought – at page 8 of the core appeal book – but it has been agitated both in the Court of Appeal and here at the level of principle directed to – and as we understand it, only to - the requirements in the proposed order for the group members to contribute to the funders’ expenses and remuneration and not more generally to the terms of the proposed order, which might end up taking a quite different aspect at the end of the day.

The second thing is that the order, in this case, will be sought to be justified by reference to the practical necessity of a common fund order in a case of this kind, that is to say, in this case.  Mr Scattini, in the evidence which has been admitted so far in the supplementary book, deals with this in paragraphs 27 through to 30 – pages 52 to 53:

From my experience, I believe that group members in an open class action do not have any particular incentive to sign a litigation funding agreement –

for the obvious reason that, it being an open class action, they stand to benefit from the outcome whether they enter into a funding contract or not.  Secondly, consistently with that and with his duties, really, he says in 28:

Indeed, it has been my invariable practice in [these Proceedings to inform any Group Member who has contacted me that there is no requirement to sign the litigation funding agreement in order to participate –

in the fruits of the proceeding.  Then, in paragraphs 29 and 30, he goes on to give evidence based on his experience of dealing with litigation funders in relation to matters of this kind.  Prior to common fund orders, he says, they:

often considered it was uncommercial to fund class action proceedings on an open class basis where large numbers of people had individually suffered relatively modest loss and damage.

He gives the reasons.  In paragraph 30, he expresses his belief as to the importance of common fund orders in cases of this kind.  We will seek to persuade the Court in due course that those considerations are directly pertinent to this litigation.

That points to a small distinction between our case and the Westpac Case.  Mr Leopold said to the Court yesterday that there was no finding that a common fund order, as opposed to some sort of litigation funding, was necessary for the claim in his case to be vindicated, but in our case we will seek to prove that a common fund order is a practical necessity for the vindication of the rights of these group members.

The third point is that the funding terms insofar as they impose monetary obligations on the group members have the qualities of being contingent, provisional and defeasible.  The contingency is double.  The terms do not operate at all unless there is an undertaking given in accordance with the chapeau to the order, and it is contingent on there being a resolution.  “Resolution” is defined in the appeal book at page 11 to mean:

when all or any part of the Resolution Sum is received –

So we are talking about the receipt of judgment moneys or settlement moneys.  The group members’ monetary obligations under clause 8 operate upon resolution, which your Honours will see at page 13.  Until there are funds all this is contingent.

The orders create monetary obligations on group members only provisionally.  Your Honours know that already; it is part of the express terms of the order and it is repeated in clause 8 on page 13.  In addition, that is superadded to the ordinary right of the court to amend or vary an interlocutory order if circumstances have changed to make a change appropriate.  Here, the power to amend is built into the order itself.

Thirdly, these rights are liable to defeasance by opt‑out.  The final thing to note about them is that, subject to the considerations addressed by our learned friend, Mr Gleeson, as to the possibility of there being general law rights to equitable liens and so on, the order itself is enforceable as we understand it only by proceedings for contempt, that is, it creates in the group members purely personal obligations owed to the court.  There is no transfer of property by virtue of the order.

The result, as our learned friend, Mr Gleeson, emphasised yesterday, is that the order does not bite on the group members’ cause of action until there is a resolution sum, that is, until after security for costs have been provided – in this case they have been.  An order for security for costs in the sum of $200,000 in each of the six related matters has been made, covering security only up to the filing of the defence.  So it is just the first instalment.

GORDON J:   Do you mind speaking up, Mr Sheahan.  I am losing your voice.

MR SHEAHAN:   I am sorry, your Honour.  I should stand closer to the microphone.  All the costs of the litigation will have been incurred and the risks of an adverse costs order will have then suffered.  Turning then to the other obligations imposed by the order on group members, they are properly characterised, in our submission, as negligible.  The obligations as to payment are in clauses 8 and 11 on pages 13 and 14 of the appeal book.  In the remainder of the provisions, the only ones that impose obligations on the group members are these - clause 15, which deals with dispute resolution and, as your Honours will see from the chapeau:

(including but not limited to a dispute relating to the Settlement of the Proceedings or an appeal of the Proceedings) -

Now, it looks like, in a sense, it ties the hands of group members.  In substance, it recognises them as having rights which they would not otherwise have.  Group members have no entitlement in a class action to, as it were, dip their oar in on whether proceedings should be the subject of an appeal or whether they should be settled. 

They have a right to appear at a settlement approval hearing to complain about the settlement that has been reached but they have no to right to dispute whether there should be a settlement on any terms in particular.  The effect of this provision is that if a group member creates a dispute between him or herself and the funder and the plaintiff as to whether there should be an appeal or a settlement, the group member is entitled to agitate rights under this clause that they would not have otherwise to produce a binding outcome on them, the funder and the plaintiff.  This is an advantageous provision for group members.

The other clauses which bind group members are 17 and 18, which deal with confidential information.  On analysis, they do really no more than to state what might be thought to be obvious, which is that you might be given in the course of this information that is confidential about these proceedings and if that occurs you should treat it as confidential.  It could achieve exactly the same outcome without the clause simply by making ad hoc impositions of the duty of confidentiality before providing information to group members.  This is just an efficiency mechanism.

This very limited interference with group members and their rights can be contrasted with the interference that is attached to orders that are commonly made by the court.  I want to give your Honours one example but it might be convenient to do it after the break.

KIEFEL CJ:   Yes, thank you, Mr Sheahan.

AT 11.01 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.15 AM:

KIEFEL CJ:   Yes, Mr Sheahan.

MR SHEAHAN:   Thank you, your Honour.  We have handed up a small bundle of supplementary materials.  I wanted to take your Honours to the last document.  In the Supreme Court of New South Wales there is a practice note dealing specifically with search orders and helpfully attached to the practice note is a sample form of search order.  I wanted to take your Honours to it just by way of ‑ ‑ ‑

GORDON J:   Are you referring to the Anton Piller order practice note?

MR SHEAHAN:   Yes.  Yes, that is what it is, your Honour.  Just as a reminder of how far‑reaching and intrusive interlocutory orders made in the course of the court’s ordinary jurisdiction, under the most generally expressed powers conferring jurisdiction on the court, can be.  The form of order starts with a penal notice.  It is on the fourth of the sheets that your Honours have ‑ third or fourth.  By paragraph 6 of the order:

This order must be complied with by you by:

(a)      yourself; or

(b)any director, officer, partner, employee or agent of yourself; or

(c)      any other person having responsible control of the premises.

So it is not confined even to people who might be intended to be parties to these proceedings.  By clause 8:

you must permit members of the search party to enter the premises –

By clause 9, there are a series of other things you must do:  permit them to come and go, permit them to search and inspect.  By (c) “disclose to them” various things, so a positive obligation of conduct is imposed on the person concerned.  Same in (d) “disclose”:

disclose . . . the whereabouts of all computers ‑

(e):

do all things necessary to enable . . . access –

and (g):

permit the independent computer expert –

to examine all your computer records, so far as the order applies to them.  By paragraph 14:

you must:

(a)      inform and keep the independent solicitor informed of –

various things:

(b)      permit the independent solicitor –

to do various things.  By 15, entitled to receive a list.  20 deals with, in considerable detail, the inspection of computers, the copying of disks and digital information.  21 deals with self‑incrimination.  23 imposes more positive obligations:

you must:

(a)at or before the further hearing on the return day . . . to the best of your ability inform the applicant in writing as to –

a list of things, (i) to (iv), and then:

make and serve on the applicant an affidavit setting out –

that information. Then in 25 there is a restriction on your freedom of speech. All of this is done pursuant to section 23 of the Supreme Court Act which is, in terms, just a general conferral of jurisdiction on the court.  When these orders were first made, they were novel and controversial innovations.  They are now a standard part of the forensic toolkit and they authorise, as we say, by very general words.

If I could turn then to the text of section 183, the words “appropriate or necessary” – and we are here in the joint appeal book, volume 1, tab 7 – and 183 is at page 65.  The words “appropriate or necessary” may take some colour from each other.  We accept that.  But, we submit, that “necessary” does not mean, in this context, “indispensible”, as it does not in most contexts.  And we rely, in that respect, on the authority cited in our written submissions at paragraph 17 from the judgment of Justices Gummow and Crennan in Thomas v Mowbray citing what was said in McCulloch v Maryland, now a very long time ago.

As for “ensure”, as we submit, it means to make certain.  That does not seem to be cavilled with.  But, to make certain what is a strong concept that assists a broader construction of the power, it means, in effect, to avoid any risk – I would say any non‑trivial risk – that justice is not done in the proceedings.  The Court may make an order that is appropriate or necessary to avoid any such risk.  The use of the word “ensure”, in other words, emphasises the breadth of the power rather than its limitations.

Then, there is the expression, “in the proceedings”.  In their submissions, BMW, in our respectful submission, proceed in the first instance by setting up false dichotomies.  They say, in paragraph 26, that that does not capture orders that are directed to the rights of third parties.  They say, in paragraph 27, that it does not capture orders that are concerned with a commercial reward to the funder.  

These are, in truth, false dichotomies.  They fail to recognise that making an order that confers rights on a third party, including a right to a reasonable remuneration, is not the object of a common fund order.  It is the means employed in a common fund order to fructify and otherwise, in the hypothesis, valueless claim, and thereby to secure the certain certainty of justice in the proceedings.  They are means, not ends. 

Underlying many of our learned friends’ submissions, with respect, is a suggestion that a common fund order is about the funder.  Truth, common fund orders are about the plaintiff and, through the plaintiff, the group members.  The plaintiff makes the application.  The plaintiff is concerned to see that he or she has the funds to conduct the litigation, has the means to provide security for costs which are likely to be ordered and has – and this is, perhaps, most important – protection against the risk of personally bearing:

an adverse costs order –

in any litigation but particularly in litigation of this size is as likely as not to be ruinous.  The plaintiff will apply for a common fund order in particular if there is no practical means of securing stable funding otherwise.  There may be, in some cases, means of funding a class action otherwise than using the vehicle of a common fund order.  You may have a law firm that is prepared to do the case, as it were, on spec, or for a fee uplift if the jurisdiction permits it.  That sometimes happens, in particular where there is public interest litigation and law firms do it on a public spirited basis.

There may be a claim where a smallish number of claimants – more than seven – have substantial enough claims that together they can create a book that is sufficient to create a viable funding model.  The standard securities class action is often of that kind.  Institutional investors are the first people who are approached to sign up with their funding agreements.  They have significant exposure, they are educated and sophisticated litigants or participants in these claims.  They can be done on a closed‑class basis.  You do not need a common funding law, but this litigation, we will seek to prove, is not of that kind.

The fact that this sort of dynamic exists in relation to class actions has been recognised by the Australian Law Reform Commission in its most recent report and the relevant extracts are in the bundle that we handed up, in particular at paragraphs 4.27 to 4.35 they deal with common fund orders.  The Court will see at 4.29, in the Commission’s discussion paper, it proposed not only that the court be given an express statutory basis to make common fund orders so that one did not have to have at least this part of this debate, but also the common fund order should be mandatory in all class action proceedings.

It is difficult to imagine a more powerful affirmation of the utility, of the mechanism.  They were persuaded ultimately not to recommend that they be mandatory but they maintained the recommendation that they should be put on a secure legislative footing so that, as we say, this kind of debate was not required.

GAGELER J:   Did they suggest any particular safeguard should be built into a legislative footing?

MR SHEAHAN:   I do not believe so, but I will check, your Honour.  My recollection is that they thought that the courts were doing a good job in that respect, to be less prosaic.  The legislation and the response of the Law Reform Commission reflects, in our submission, an assessment that for the most part organic development of procedures and processes in relation to class actions and their funding is the preferable course, the market being dynamic, new vehicles and methods of dealing with litigation funding emerging from time to time, and the Court’s responses to what emerges changing from time to time.

To take one example, in the Westpac Case it was, I think I am right to say, Justice Lee’s suggestion that there be a costs multiple cap on the funder’s commission.  That was not something, I think, proposed by the plaintiff, by the applicant in those proceedings, but the court of its own motion is proposing these things in order better to achieve justice in the proceedings.

Finally, on section 183 and its terms, contrary to our learned friend Mr Kirk’s submissions, this is not about construing the Act to create an institutional bias of any kind, in particular a bias against defendants.  Rather, what is happening is redressing a bias that inheres in the system on account of the costs of litigation and our cost‑shifting rules.  That bias previously gave a kind of practical immunity to would‑be defendants in many kind of mass tort, mass breach of contract, mass breach of fiduciary duty cases.  Such claims ‑ even as class actions, even after Fostif ‑ might struggle to find funding, might struggle to be viable absent a common fund order.

KIEFEL CJ:   Put like that, it sounds rather like a policy decision to address biases, and that would be one made by a court.

MR SHEAHAN:   Your Honour, it is not so much that it is a policy decision made by a court.  I am responding to Mr Kirk’s submission here that there is some sort of bias set up.  There is no bias.  The statute has a policy in it.  The policy is to promote access to justice, thereby to enhance two things:  the rule of law and the enforcement by private means of all sorts of public‑interest statutes.

Insofar as a similar point is put in terms of equity by my learned friend, Mr Gleeson, there is no general equitable principle that those who benefit from the efforts of another must contribute in equity to the expenses:  see our reply, paragraph 6, footnote 6.

The cases where there is a non‑contractual restitutionary right to payment involve a concept of either a moral duty to act – necessitous intervention – or a pre‑existing legal right or duty to act.  The decision relied upon by the Full Court at paragraph 103, an 1880 Court of Appeal decision, I think, in the UK, National Bolivian Navigation, through House of Lords was a case about trustees.  The Full Court explains it in terms of bond‑holders, but wrapped up in that was a trust.  It was a case about their ability to recover from trust fund expenses – trust funds – I am sorry, expenses incurred in performing their duties.

That is also the explanation of the Universal Distributing principle considered in Atco.  It is also, as it happens, the original explanation of the American cases, although it has moved to a broader unjust enrichment foundation:  see the foundational American case of Trustees v Greenough 105 US 527 (1881) which Mr Gleeson referred to yesterday.

EDELMAN J:   Is the reason for the distinction between recovery in some cases of legal or moral duty and no recovery in other cases that in the former group of case the parties recovering are not officious interveners?

MR KIRK:   That is one way of explaining it, but really that is a way of explaining the broader principle which is that the Australian, reflecting the English common law – or general law, I should say – will not impose a duty to reimburse someone who has volunteered their services without request or consent in the absence of particular exceptional circumstances, so we would rather cast the onus the other way.  Those exceptional circumstances are necessitous intervention, moral duty or of course where you have a pre‑existing legal right or duty.

EDELMAN J:   They tend to be matters, though, that show that the person was not intervening officiously.

MR KIRK:   That is another way of putting it, but we would put it more in terms of there being a moral or such like duty.  In terms briefly of some claimed analogies, Mr Gleeson took the Court yesterday to the Corporations Act, Division 60, to fill in my ignorance about how liquidators are remunerated.  That is a detailed statutory scheme, as your Honours saw, and in particular section 60‑12 sets out a list of matters that the court is required to take into account.  It rather illustrates exactly what we do not have here.

My learned friend, Mr Gleeson, referred yesterday to Beddoe directions, by referring to ASIC v GDK.  Such a direction, as your Honours will appreciate, is quite like judicial advice to trustees provided under the Trustees Acts, and typically involves the court considering a proposed course of action with its proffered justification, often, certainly for trustees, accompanied by counsel’s advice, where the court then indicates whether the person is warranted in taking that course and, if so, as your Honour the Chief Justice raised yesterday, certain protections come into play for the person taking that action.  That is a world away from setting contractual‑type terms and a commercial rate of return for a third party’s investment opportunity. 

Mr Gleeson this morning said in response to a question from your Honour Justice Keane about making CFOs in a judgment at the end, and the relationship of an earlier CFO to that, that a CFO involves an order, he said words to the effect of “on an interlocutory, on a revisable basis, orders looking forward, establishing an amount in advance provisionally” and Mr Hutley similarly said that any settlement will have to be approved at the end and Mr Sheahan said it only cuts as regards benefits to the funder when there is a resolution sum.

All of these variants seem to ultimately say that what is really in play when the rubber hits the road, in terms of the transfer of funds to the funder, what is really in play is exercise of other powers – in the New South Wales scheme, section 173, 33V; or 177, 33Z.  If so, how is an early CFO other than a pre‑emption of a later exercise of different powers at a future time in circumstances not yet at issue?  Why should section 183, or ZF, be taken to encompass making pre‑emptive orders, or predictions, about what will be done under other powers at a later time in different circumstances?

Now, your Honour Justice Edelman put this just before lunch today to Mr Hutley.  What if the order stated it only operates until judgment or other order – or words to that effect?  If so, and assuming it specifies rate, what legal right or duty does that modify?  None at all because, as Mr Sheahan said, it can only cut when there is a resolution sum.  So, to include a rate in such an order with a prologue of the kind your Honour Justice Edelman suggested would illustrate, clearly, that it is an order of no effect.  It is wasted words other than a prediction as to what will happen later.

EDELMAN J:   It is like a supercharged Beddoe order. 

MR KIRK:   But it is not a Beddoe order, with respect, because a Beddoe order is about, first, as I said, giving protection but, secondly, as I will come to emphasise in a minute, a Beddoe order is saying, yes, you can take that course of action.  So, sometimes, as your Honours will well appreciate – as illustrated by the Macedonian Case in this Court – sometimes trustees go to seek advice about litigating – is it right that I litigate this? 

When the court answers on advice it does not say “And, by the way, you are going to win”.  It says words to the effect of you have got a properly arguable case and you can take it.  It is a stage removed from actually specifying what is going to happen, whereas a CFO actually specifies what is going to happen.  Mr Gleeson said this morning that the order establishes the framework now, that is, that the court considers it is likely to be borne out if and when they reach judgment.

Again, we adopt that formulation and it is fundamentally inconsistent, with respect, with this Court’s decision in Bass in terms of overturning in an answer to a question where that answer depended on facts not yet known or fully established.  It is not the role of courts exercising the judicial power of the Commonwealth, in our respectful submission, to give parties the benefit of their prediction in a formal court order of what order they may or may not make later under other powers and such cannot be taken to have been intended, at least in the absence of very clear words.

To answer a point made by Mr Sheahan, provisionality, of the sort I have just sought to emphasise, does not go just to the exercise of discretion, it is inherent in the very nature of the task.  In terms of CFOs at the end of the process, if I can deal with something my learned friend, Mr Gleeson, said yesterday.  He said the Court does need to resolve this.  I have said, your Honours, do not.  If your Honours consider you do, we submit for the avoidance of doubt that cannot be made at the end of the process.

As regards judgments, the arguments are much the same about text, principle of legality, the constitutional arguments and so forth.  Then, I noted in‑chief, as your Honours appreciate, there is no equivalent to 33Z(1)(g) in Part 10, and contrary to what Mr Sheahan said, well, you cannot just read one back in as though the Parliament of New South Wales had not been careful in its drafting.

As regards settlement, I acknowledge there is, at least, some textual foothold there in section 33B or section 173 of Part 10, particularly subsection (2).  Nevertheless, much the same arguments, we would say, about principle of legality, constitutional arguments also apply and, further, it would be a rather odd result if a CFO could be made for a settlement but not in relation to judgments.  My learned friend, Mr Gleeson, said this morning and Mr Leopold referred to this – or Mr Free did too, I think ‑ that the undertaking given by the funder is part of the package.  He said it is the quid pro quo for the promises made by the funder.

He spoke of the immediate establishment of terms between the parties to the enterprise – again, I respectfully adopt what Mr Gleeson said – and illustrates that what is going on is a bargain sought to be implemented, with the court as the one needing to be persuaded of the merits of the bargain, and making the final choice as to what should be included within it.  What price is to be extracted for the funder’s quid pro quo?

And that is part of the difference from a Beddoe order, or a trustee advice or so forth.  And it is well illustrated by what his Honour Justice Lee did in the Westpac Case where he reduced the funding commission from what JustKapital sought, and imposed a cap on recovery, and at the end of his judgment he said, I recognise this is different from what you have proposed.  It is your choice whether you give the undertaking.  Implicitly he is saying, but that is the best deal I am going to give you.

That, in our respectful submission, again is not the sort of role courts and judges should be playing in exercise of judicial power of the Commonwealth, at least in the absence of very clear words.  It also illustrates why the recitation of words like “supervisory jurisdiction,” which all of the respondents did, do not capture what is involved in making a CFO.

My learned friend, Mr Gleeson, and my learned friend, Mr Sheahan, sought to emphasise that group members who do not like the bargain struck can opt out.  Not all group members will know in time, as I put in‑chief.  Those group members who do know may feel they have little choice.  There is also a premise underlying my learned friends’ argument which is not necessarily correct, though it may be.  There is no guarantee that a CFO will be made before opt out is offered.  Opt out can be offered early, and it is implicit in my friends’ argument that a CFO can be made at any time.

Turning then briefly to some points made specifically by my learned friend, Mr Sheahan.  Mr Sheahan seeks to dismiss the significance of points we made about the need to not only set the rate but delineate the terms of the new relationship between the plaintiff, the group members, and the third‑party funder.  It is because that new relationship is created that provisions relating to, for example, confidentiality, exchange of information, privilege and so forth is required.

My learned friend said the dispute resolution clause was offering something advantageous to group members, but that is an incident of there being a new relationship and it is to be contrasted, for example, to section 171, 33T, where the court has a power to replace a representative party or a sub‑representative party if not adequately protecting the interests of the group members.

Mr Sheahan said in apparent answer to our principle of legality argument that Anton Piller orders are intrusive and detailed.  True.  But they do not authorise the transfer of a substantial portion of the property.  They are in substance simply about asset or evidence preservation. 

My friend said that setting a rate of return in a CFO is not the object but the means.  That is a distinction without a difference.  The practical and legal effect is to do so, thereby transferring valuable rights.

In answer to our contextual and Anthony Hordern arguments, Mr Sheahan started by conceding that section 183ZF had to take colour from its surroundings.  But my friend then went through the sections and sought to explain almost every specific provision as though it were merely a specific manifestation of the general principle set out in section 183. 

So to do is to turn principles of statutory construction on their heads, including Anthony Hordern and the broader principle that manifests that in general the specific applies over the general.  It ignores Project Blue Sky, paragraphs 69 to 71, that you seek to construe as a whole, giving effect to harmonious goals where all words are presumed to have effect and not be harmonious.

It ignores Consolidated Media Holdings that the process of statutory construction starts and ends with the text, and insofar as he relied on beneficial or remedial argument, he ignored Alcan, paragraph 47, that the best guide to purpose is the word “employed”.

Despite purportedly agreeing with us in adopting what Justice Wilcox said in McMullin v ICI that the purpose of ZF, 183, is to deal with unforeseen issues from novel procedure, he seeks to recast it as in effect the primary procedural provision in the part, and so did Mr Hutley.  So to do ignores Justice Sackville’s insight that I quoted yesterday that 33ZF is not a vehicle for rewriting the legislation and it is directly contrary to the very purpose of Part IVA and Part 10, which is to delineate a new procedure with care.

If I could take your Honours very briefly to the supplementary materials that Mr Sheahan handed up this morning, to go to the second reading speech made in New South Wales to illustrate the point – I think it is the second last document just before the Anton Piller order.  At page 28067, top right‑hand side of Hansard, Mr Hatzistergos, the Attorney, said:

In New South Wales, rules 7.4 and 7.5 of the Uniform Civil Procedure Rules 2005 make some provision for representative proceedings. However, these rules lack procedural clarity. The regime that is proposed by these amendments will provide a greater level of certainty for both litigants and the court, and will enhance the community’s access to justice.

That was the point I sought to make yesterday.  The old equitably‑based rule was found in the rules around courts in Australia.  The innovation of Part IVA was to delineate a new, quite detailed, carefully thought through procedure for representative proceedings.  The approach Mr Sheahan takes is to take us back to that and say there is just one general principle and we will make the rest up as we go along.

My friend, Mr Sheahan, said Part 10 ought not be approached as though a code and referred, for example, to section 87 of the TPA or the CCA. The provisions made in sections 177, 178 and the other ones we relied upon delineate specific aspects of representative proceedings and how they are to be dealt with. That is not to say that substantive powers such as in section 87 or 82 of the TPA, CCA are not applicable.

Part IVA deals with how matters are to be dealt with within the new procedure.  There is the same answer in relation to Mr Hutley’s point about interest.  There is no inconsistency there whatsoever.  As to the existence of a market, Mr Sheahan seemed to admit there is a distinction between open and closed classes.  So there is for open classes where CFOs are sought.  No doubt it is relevant to take account of broader funding markets, but the rate

is set by the court in the unique circumstances where the third party funder gets the chance to invest in a broad class action where everyone is bound.

Finally and briefly, to deal with a couple of points made by Mr Hutley.  Most of my learned friend’s address was a policy‑based cri de coeur about why third party funding should be permissible.  He was addressing himself to the wrong jurisdiction, with respect.  My friend said that a CFO was an interlocutory order of a kind the court might make at the conclusion of the case.  That is not an order, that is a prediction and there is no other interlocutory order which involves any such thing.

For the reason raised by the question from your Honour Justice Gageler this morning, in our respectful submission, a CFO cannot be sufficiently characterised as interlocutory.  No doubt it has some interlocutory characteristics but that is not an adequate characterisation.  It operates according to its terms.  It speaks unless it is varied and in those terms it speaks to the final resolution of the case, doing so long in advance of knowing what the relevant circumstances are.  May it please the Court.

KIEFEL CJ:   The Court reserves its decision in this matter and adjourns to 9.30 am on Friday, 16 August in Sydney.

AT 4.01 PM THE MATTER WAS ADJOURNED