Bradshaw v BSA Limited (No 2)
[2022] FCA 1440
•30 November 2022
FEDERAL COURT OF AUSTRALIA
Bradshaw v BSA Limited (No 2) [2022] FCA 1440
File numbers: VID 488 of 2020 Judgment of: BROMBERG J Date of judgment: 30 November 2022 Catchwords: REPRESENTATIVE PROCEEDINGS – application for approval of settlement of representative proceeding – s 33V of Federal Court of Australia Act 1976 (Cth) – principles relevant to settlement approval – whether proposed settlement fair and reasonable – whether common fund order should be made and in what terms – relevant principles – whether certain deductions from settlement sums should be allowed – whether sum proposed as funder’s commission is appropriate – consideration as to the appropriate rate of commission in a proceeding instituted in the “no‑costs” jurisdiction of the Fair Work Act 2009 (Cth) – whether costs incurred by a funder for adverse costs insurance should be allowed – whether pre-retainer legal costs should be allowed in full – whether deduction sought for legal costs including uplift appropriate – whether non‑publication orders should be made – settlement approved on basis that the distribution of the settlement sum proposed be adjusted to reflect a reduction of the funder’s commission, the disallowance of adverse costs insurance and the disallowance in part of pre-retainer legal costs. Legislation: Fair Work Act 2009 (Cth)
Federal Court of Australia Act 1976 (Cth)
Independent Contractors Act 2006 (Cth)
Legal Profession Uniform Law Application Act 2014 (Vic)
Cases cited: Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 3) (2020) 385 ALR 625; [2020] FCA 1885
Augusta Ventures Limited v Mt Arthur Coal Pty Limited (2020) 283 FCR 123
Australian Education Union v State of Victoria (Department of Education and Early Childhood Development) (2015) 239 FCR 461
Australian Securities and Investments Commission v Richards [2013] FCAFC 89
Blairgowrie Trading Ltd v Allco Finance Group Ltd (Recs and Mgrs Apptd) (In Liq) (No 3) (2017) 343 ALR 476; [2017] FCA 330
BMW Australia Ltd v Brewster (2019) 269 CLR 574
Botsman v Bolitho (2018) 57 VR 68
Bradshaw v BSA Limited (2021) 394 ALR 76; [2021] FCA 1080
BSA Limited v Bradshaw, in the matter of BSA Limited (No 2) [2022] FCA 1182
BSA Limited v Bradshaw, in the matter of BSA Limited [2022] FCA 747
C7A/2017 v Minister for Immigration and Border Protection (No 2) [2020] FCAFC 70
Caason Investments v Cao (No 2) [2018] FCA 527
Clime Capital Ltd v UGL Pty Ltd [2020] FCA 66
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 398 ALR 404; [2022] HCA 1
Court v Spotless Group Holdings Ltd [2020] FCA 1730
Davaria Pty Ltd v 7 Eleven Stores Pty Ltd (2020) 281 FCR 501
Duck v Airservices Australia (No 3) [2021] FCA 304
Endeavour River Pty Ltd v MG Responsible Entity Ltd [2019] FCA 1719
Evans v Davantage Group Pty Ltd (No 3) [2021] FCA 70
Fair Work Ombudsman v Woolworths Group Limited (Case Management) [2022] FCA 376
Kellyv Willmott Forests Ltd (in liquidation) (No 4) (2016) 335 ALR 439; [2016] FCA 323
Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) v BHP Group Ltd (2019) 369 ALR 583; [2019] FCAFC 107
Kuterba v Sirtex Medical Limited (No 3) [2019] FCA 1374
Lenehan v Powercor [2020] VSC 82
Liverpool City Council v McGraw-Hill Financial, Inc (now known as S&P Global Inc) [2018] FCA 1289
Mann v Carnell (1999) 201 CLR 1
McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd (No 3) [2020] FCA 461
Modtech Engineering Pty Limited v GPT Management Holdings Limited (No 2) [2013] FCA 1163
Money Max Int Pty Ltd v QBE Insurance Group Ltd (2016) 245 FCR 191
Motorola Solutions, Inc v Hytera Communications Corporation Ltd (No 2) [2018] FCA 17
Mutch v ISG Management Pty Ltd (No 2) [2020] FCA 954
Ogawa (formerly Ms PD) v President of the Australian Human Rights Commission (Pseudonym) [2022] FCAFC 160
Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited (No 3) [2018] FCA 1842
Prygodicz v Commonwealth of Australia (No 2) [2021] FCA 634
Stanford v DePuy International Ltd (No 6) [2016] FCA 1452
Steelforce Trading Pty Ltd v Parliamentary Secretary to the Minister for Industry, Innovation and Science (No 2) [2018] FCAFC 47
Thomas v Romeo Lockleys Asset Partnership [2022] FCA 1106
Turner v Tesa Mining (NSW) Pty Limited [2019] FCA 1644
Uren v RMBL Investments Ltd (No 2) [2020] FCA 647
Webster (Trustee) v Murray Goulburn Co-Operative Co Limited (No 4) [2020] FCA 1053
Williams v Ausnet Electricity Services Pty Ltd [2017] VSC 474
Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459; [2000] FCA 1925
WorkPac Pty Ltd v Rossato (2021) 271 CLR 456
Division: Fair Work Division Registry: Victoria National Practice Area: Employment and Industrial Relations Number of paragraphs: 259 Date of hearing: 8 July 2022 Counsel for the Applicants/First Cross- Respondent: Mr I Pike SC with Mr J Dooley Solicitor for the Applicants/First Cross- Respondent: Shine Lawyers Counsel for the Respondent/ Cross-Claimant: Mr R Craig KC with Mr D Habashy Solicitor for the Respondent/ Cross-Claimant: Johnson Winter & Slattery Counsel for Marcomm Communications the Third Cross-Respondent (Second Cross-Claim) Mr M Kennedy Solicitor for Marcomm Communications the Third Cross-Respondent (Second Cross-Claim) Mackay Lawyers & Advisors Counsel for LLS Fund Services (Intervener) Mr W A D Edwards with Mr M Guo Solicitor for LLS Fund Services (Intervener) William Roberts Lawyers ORDERS
VID 488 of 2020 BETWEEN: PAUL BRADSHAW
First Applicant
SCOTT UREN
Second Applicant
AND: BSA LIMITED ACN 088 412 748
Respondent
AND BETWEEN: BSA LIMITED (ACN 088 412 748)
Cross-Claimant
AND: PAUL BRADSHAW (and another named in the Schedule)
First Cross-Respondent
AND BETWEEN: BSA LIMITED (ACN 088 412 748)
Cross-Claimant
AND: SCOTT UREN (and others named in the Schedule)
First Cross-Respondent
ORDER MADE BY:
BROMBERG J
DATE OF ORDER:
30 NOVERMBER 2022
THE COURT ORDERS THAT:
1.On or before 7 December 2022, the applicants, the respondent and LLS Fund Services Pty Ltd (LLS) consult, agree upon and provide to the Chambers of Justice Bromberg the terms of paragraphs [27]-[29] of the Settlement Distribution Scheme reformulated so as to accord with the reasons for judgment of the Court published on 30 November 2022, together with the terms of any consequential amendments to the Settlement Distribution Scheme that may be required.
2.The interim non-publication orders made on 12 July 2022 be set aside.
3.Subject to further order, pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) (FCA Act), there be no publication or other disclosure of the material specified in “Schedule 1” to these orders (other than to the Court, the applicants’ legal representatives, LLS, the legal representatives of LLS, the respondent and the legal representatives of the respondent), on the ground that it is necessary to prevent prejudice to the proper administration of justice under s 37AG(1)(a) of the FCA Act.
4.Subject to further order, pursuant to s 37AF of the FCA Act, there be no publication or other disclosure of the material specified in “Schedule 2” to these orders (other than to the Court, the applicants’ legal representatives, LLS and the legal representatives of LLS), on the ground that it is necessary to prevent prejudice to the proper administration of justice under s 37AG(1)(a) of the FCA Act.
5.Subject to further order, pursuant to s 37AF of the FCA Act, there be no publication or other disclosure of the material specified in “Schedule 3” to these orders (other than to the Court, LLS, and the legal representatives of LLS), on the ground that it is necessary to prevent prejudice to the proper administration of justice under s 37AG(1)(a) of the FCA Act.
6.On or before 12 December 2022, in relation to each of the documents specified in Schedules 1, 2 and 3, the document be redacted to reflect the non-publication provided for in the schedules and be filed by the party from whom the document originated.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
SCHEDULE 1
1.Confidential Written Submissions of BSA on settlement approval application dated 4 July 2022
Reference Text Paragraph 12(e).
Sub-heading C.
Paragraph 13.
Paragraph 14.
Footnotes 11 and 12.In accordance with yellow highlights in Annexure A to BSA’s proposed non-publication orders circulated on 11 July 2022.
2.Confidential Affidavit of A Piesiewicz dated 4 July 2022
Reference Text Sub-heading A.
Paragraph 7.
Paragraph 9(b).In accordance with the yellow highlights in Annexure B to BSA’s proposed non-publication orders circulated on 11 July 2022.
3.Confidential Exhibit APP-1 referred to in the affidavit of A Piesiewicz of 4 July 2022
Whole document.
4.Affidavit of V Antzoulatos dated 27 June 2022
Reference Text Paragraphs 101(c) and (d) – all title references to enable identification of report, author and company of author.
Paragraphs 103(c) to (g).In accordance with yellow highlights in Annexure B1 to BSA’s proposed non-publication orders circulated on 11 July 2022.
5.Exhibit VA-16 referred to in the affidavit of V Antzoulatos dated 27 June 2022
Whole document.
6.Exhibit VA-17 referred to in the affidavit of V Antzoulatos dated 27 June 2022
Whole document.
7.LLS outline of submissions dated 4 July 2022
Reference Text Paragraph 9(c) (the first seven words).
Paragraph 9(d).
Paragraph 10.
Paragraph 34.The first seven words.
The whole sub-paragraph.
The last sentence.
The last six words in the first sentence.
8.Affidavit of S Conrad dated 4 July 2022
Reference Text Paragraph 52. The first sentence.
9.Affidavit of A Becker sworn 21 July 2022
Reference Text Paragraph 10(b).
Paragraph 13.
Paragraph 14.
Paragraph 16.The second and third sentence.
All.
All.
All.
10.Confidential written submissions of BSA on application for non-publication orders
Reference Text Paragraph 3.
Paragraph 18.
Footnote 13.The words in brackets.
From “(a)” to end of the paragraph.
After the words “…including by reason of” to the end of the footnote.
SCHEDULE 2
1.Exhibit VA-14 to the affidavit of V Antzoulatos of 27 June 2022
Reference Text Page 119. The whole page.
2.Exhibit VA-15 to the affidavit of V Antzoulatos of 27 June 2022
Whole document.
3.Exhibit VA-22 to the affidavit of V Antzoulatos of 11 July 2022
Reference The name of a person or address on pages 28, 52, 59 to 116, 118, 121, 126, 130, 132, 138 and 141 to 144.
SCHEDULE 3
1.Affidavit of S Conrad dated 4 July 2022
Reference Text Paragraph 51.
Paragraph 25.The final sentence.
The figure before the words “of the resolution sum”.
2.Exhibit SC-4 to the affidavit of S Conrad dated 4 July 2022
Whole document.
3.Exhibit SC-1 to the affidavit of S Conrad dated 4 July 2022
Reference Text First page, sentence commencing “Shine Lawyers has requested…” The first figure and figure following the words “assuming we only attract…” and before “…of potential”. Second page, sentence commencing “I have attached…” The words after “(Tabs 1 and 2)” to end of sentence. Second page, sentence commencing “I have also attached…” The words after “(Tab 3)” to end of sentence. Second page, sentence commencing “[a]s referred to in paragraphs…” Whole paragraph and following three paragraphs until the words “…I will send you a copy” overleaf. Section titled “Quantum”. The words following “Shine has been…” up to “…estimate of $50 million” overleaf. Section titled “Costs”. The words following “factual matrix…” up to conclusion of that paragraph.
The sentence commencing “[t]herefore…” and concluding “…by Shine”.Section titled “Timing”. The whole paragraph. Section titled “Recoverability”. The whole paragraph except “I am unaware whether BSA has any indemnity insurance policies in place.” Section titled “Recommendation”. All paragraphs in this section until end of document.
4.Exhibit SC-2 to the affidavit of S Conrad dated 4 July 2022
Reference Text First page. Entire first page. Second page. Entire second page except “…the CAC recommended the matter to the Board”. Third page. Entire third page.
REASONS FOR JUDGMENT
BROMBERG J:
INTRODUCTION
By an amended interlocutory application dated 7 July 2022, Paul Bradshaw and Scott Uren, the applicants, sought court approval under s 33V of the Federal Court of Australia Act 1976 (Cth) (FCA Act) of a proposed settlement of a class action they brought against the respondent, BSA Limited. Having made a deed of settlement, the applicants, BSA and LLS Fund Services Pty Ltd (Funder) jointly proposed that the settlement be approved together with an agreed settlement distribution scheme (Settlement Distribution Scheme) pursuant to which they propose that the settlement sum of $20 million be distributed.
I was persuaded that the Court should approve the settlement. On 26 July 2022, I made an order approving the settlement as well as an order approving the Settlement Distribution Scheme in part. My reasons for approving the settlement are set out below.
However, I have not been persuaded that the Settlement Distribution Scheme as proposed by the parties should be approved without amendment. In furtherance of the Court’s protective role in relation to the interests of group members, I have determined that the settlement sum should be distributed differently from that proposed by the parties. My preparedness to approve an amended Settlement Distribution Scheme is also explained in the reasons which follow.
Before turning to those reasons, it is useful to set out at a high level, the key issues in the proceeding.
The applicants and group members are telecommunications technicians who install and maintain telephone and other telecommunications services. BSA is a contracting company operating in the telecommunication industry where it provides technical services to telecommunication providers. The applicants claim that since 2003 they and group members had provided their services to BSA as employees of BSA and that they were not paid various employee entitlements due to them under the Fair Work Act 2009 (Cth) (FW Act) and the Telecommunications Services Award 2010, an industrial award made under the FW Act.
Broadly speaking, the key question in the proceeding is whether the applicants and group members provided their services to BSA as employees of BSA or, alternatively as BSA contends, provided services to their own corporations, those corporations having contracted with BSA to provide services to BSA as an independent contractor. Whereas the applicants contend that, taking account the totality of their relations with BSA, they and each group member were engaged by BSA as its employees, BSA contends that it had no legal relationship with those individuals and that the agreements it made were made with corporate entities from whom it received services under an independent contractor relationship.
By their originating application, the applicants sought declarations that; the applicants and group members are employees of BSA, are covered by the Award and that BSA have breached the Award and contravened the FW Act. They also sought orders under ss 545 and 546 of the FW Act for the payment of compensation and the imposition of civil penalties. In the alternative, the applicants sought an order, under s 16 of the Independent Contractors Act 2006 (Cth), varying the ‘Pleaded BSA Agreements’ (as defined in the statement of claim) by inserting a term that BSA pay a sum to each of the applicants and group members such that they would be placed in the position they would have been in had they been employees of BSA.
Aside from denying liability, BSA also issued cross-claims against the applicants, group members and their associated corporations. The cross-claims are premised on the Court finding that BSA was the employer of the applicants and group members and, on that premise, seek the reimbursement of monies paid by BSA to the associated corporations in respect of the services provided by the applicants and group members.
On 30 March 2022, the parties entered into a deed of settlement (Deed) by which BSA agreed to pay $20 million (Settlement Sum) in settlement of the claims of the applicants and group members and the cross-claims, with no admissions of liability. The Settlement Sum is to be paid by BSA in three instalments over a two year period. The Deed contemplates that if BSA successfully raises capital (referred to as a “Capital Raise”), in certain circumstances, the first two instalments may be increased and the last correspondingly decreased. In return, the applicants and group members provide broad releases from all actions, claims and demands they have in relation to the subject matter of the proceeding.
I note here that an issue arose between the parties as to whether money raised by BSA in April and May 2022 constituted a “Capital Raise”. On 1 June 2022, BSA commenced proceedings against the applicants seeking a declaration on the meaning of the term “Capital Raise” (Declaratory Proceeding): see BSA Limited v Bradshaw, in the matter of BSA Limited [2022] FCA 747 and BSA Limited v Bradshaw, in the matter of BSA Limited (No 2) [2022] FCA 1182. It was held in the Declaratory Proceeding that the money raised by BSA did not constitute a “Capital Raise” which would have increased the first payment to be made by BSA under the Deed (described at [57] below). That proceeding is of relevance because the parties seek that the applicants’ costs of the Declaratory Proceeding be paid out of the Settlement Sum.
Pursuant to the Deed, the Settlement Sum, after deductions including for legal costs and a funding commission for the Funder, is to be distributed to the applicants and group members under the terms of the Settlement Distribution Scheme. Pursuant to the Settlement Distribution Scheme, as proposed, after the deductions, the residual amount that will be available for distribution to the applicants and group members is approximately $10.7 million which is approximately 53% of the Settlement Sum.
The settlement approval application was heard on 8 July 2022. Much of the time at the hearing was devoted to various aspects of the Settlement Distribution Scheme.
On 26 July 2022, I made orders that approved the Deed and certain parts of the Settlement Distribution Scheme pursuant to s 33V(1) of the FCA Act. That section relevantly provides that a class action may not be settled without the approval of the Court. If the Court grants approval, it may make such orders as are just with respect to the distribution of any money paid under a settlement: s 33V(2) of the FCA Act.
My orders were as follows:
Approval of Settlement
1Pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (Cth) (FCAA), the settlement of this proceeding be approved on the terms set out in:
(a)The Settlement Deed dated 30 March 2022 attached and marked A (Deed); and
(b)The Settlement Distribution Scheme (Scheme) attached and marked B, save as to those parts thereof which are expressed to be subject to the Court’s determination or approval, which parts shall be the subject of further order.
2Pursuant to s 33ZB of the FCAA, the persons affected and bound by the settlement of these proceedings and Orders 1, 3 and 4 of these orders are:
(a)the Applicants, the Respondent, the Second Cross-Respondent (First Cross Claim), the Second Cross-Respondent (Second Cross Claim), the Third Cross- Respondent (Second Cross Claim) and Group Members (other than any Group Members who filed an opt out notice); and
(b)LLS Fund Services Pty Ltd ABN 51 627 975 213 as Trustee for Litigation Lending Fund 1 (LLS), Shine Justice Ltd and Shine Lawyers Pty Ltd.
3Pursuant to s 33V, s 33ZB(a) and s 33ZF of the FCAA or otherwise, only Group Members who are eligible to participate in the Scheme in accordance with clauses 12 and 13 thereof shall be entitled to receive a distribution from the settlement.
Appointment of Administrator and approval of matters referred to in the Scheme
4Pursuant to ss 33V and/or 33ZF of the FCAA, Shine Lawyers Pty Ltd be appointed as Administrator of the Scheme (Administrator) to act in accordance with the Scheme subject to any direction of the Court, and to have the powers and immunities conferred by the Scheme on the Administrator, subject to any direction of the Court.
Consequential matters
5Pursuant to ss 22, 23 or 33ZF of the FCAA, rule 1.32 of the Federal Court Rules 2011 (Cth) and/or the Court’s inherent jurisdiction the proceeding (including all cross claims still on foot) is (without the need for any further order) dismissed with no order as to costs, with effect from the date on which the Administrator notifies the Associate to the Honourable Justice Bromberg (or another Justice of the Federal Court of Australia presiding over the proceedings) of the final payment having been made to Group Members in accordance with the Scheme.
6Within 28 days of the date that “Final Settlement Approval” has occurred within the meaning of the Deed the Respondent shall discontinue the Cross-Claims filed by it against those Group Members who have opted out of the proceedings and any corporate Cross-Respondent associated with such Group Member on the basis that:
(a)such discontinuance is subject to a right of reinstatement;
(b)there be no liability on the part of the Respondent to pay the costs of any Cross-Respondent to that discontinued claim unless within 14 days of the receipt of the notification required by paragraph (d), a Cross-Respondent makes an application seeking costs, in which case any liability will be determined by the Court;
(c)the requirements of rule 26.13 of the Federal Court Rules 2011(Cth) are dispensed with.
(d)the respondent shall forthwith notify each Group Member who has opted out and any associated corporate Cross-Respondent of that Group Member of this order, by sending to the email address on the Opt Out Notice of the Group Member or to the Group Member’s last known email or postal address, a copy of this order together with a brief plain English explanation of its content and effect.
7The parties, the Administrator and LLS have liberty to apply to relist the matter for the purpose of seeking orders consequential to or in connection with the Deed and/or the Scheme.
The version of the Settlement Distribution Scheme approved by order 1(b) did not approve those aspects of the Settlement Distribution Scheme that provide for the deduction of various costs from the Settlement Sum or the distribution of the Settlement Sum. Those aspects of the Settlement Distribution Scheme were expressed to be subject to the Court’s further determination or approval.
I now provide my reasons for making the 26 July 2022 orders to approve the settlement pursuant to s 33V(1) of the FCA Act, and my preparedness to make further orders for the distribution of the Settlement Sum pursuant to s 33V(2) of the FCA Act.
THE EVIDENCE
At the commencement of the hearing, the applicants relied on the affidavits of Vicky Antzoulatos, a partner at Shine Lawyers, sworn on 9 May 2022, 27 June 2022 and 7 July 2022, (the First, Second and Third, Antzoulatos Affidavits). The applicants also relied on short written submissions on the settlement approval application dated 27 June 2022.
The First Antzoulatos Affidavit annexed the Deed and Settlement Distribution Scheme (as it then was). In the Second Antzoulatos Affidavit, Ms Antzoulatos addressed, amongst other matters, the proposed settlement, the steps taken to notify group members of the proposed settlement, objections to the settlement, her own assessment of the complexity of the litigation, the merits of the claim, the reasonableness of the settlement and the costs of the proceeding. The annexures to the Second Antzoulatos Affidavit included:
(1)a confidential affidavit of Arno Becker, Chief Financial Officer and Interim Chief Executive Officer of BSA, sworn on 21 April 2022 pursuant to clause 2.4(b) of the Deed, which in turn deposes to a confidential report prepared by [name redacted] of [name redacted] dated 29 September 2022 (the [name redacted] Report);
(2)the expert report of Christopher Hill, Chartered Accountant and Registered Liquidator, dated 27 June 2022;
(3)the expert report of Catherine Mary Dealehr, a costs consultant, dated 27 June 2022;
(4)a confidential and without prejudice loss assessment report of Mariano Rossetto prepared for the purpose of mediation (Mediation Loss Assessment Report); and
(5)the confidential counsel opinion of Mr Ian Pike SC and Mr Jonathon Dooley who appeared for the applicants (the Counsel Opinion).
In the Third Antzoulatos Affidavit, Ms Antzoulatos addressed, amongst other matters, the applicants’ legal costs and other proposed deductions from the Settlement Sum, further objections to the proposed settlement, settlement registration and settlement modelling. Annexed to this affidavit is a supplementary expert report of Ms Dealehr dated 30 June 2022 (Second Dealehr Report).
In response to concerns I raised during the course of the approval hearing regarding the sufficiency of the applicants’ evidence on costs, including the pre-retainer and pre-commencement costs and the costs of the settlement approval itself, the applicants filed the further affidavits of Ms Antzoulatos sworn on 11 July 2022 and 14 July 2022 (the Fourth and Fifth Antzoulatos Affidavits). The applicants also filed an affidavit of Mariano Rossetto, Chartered Accountant, sworn on 12 July 2022 (Rossetto Affidavit) regarding the “Loss Assessment Formula” adopted in Schedule 1 of the Settlement Distribution Scheme. The applicants later filed a second supplementary expert report of Ms Dealehr dated 26 July 2022 (Third Dealehr Report).
On 14 July 2022, the applicants also submitted an amended version of the Settlement Distribution Scheme that incorporated amendments that had been agreed or were proposed as a consequence of matters raised at the settlement approval hearing.
BSA relied on an affidavit of Andreas Piesiewicz, a partner at Johnson Winter & Slattery, sworn in connection with the settlement approval application on 4 July 2022 (Piesiewicz Affidavit). The Piesiewicz Affidavit annexed BSA’s confidential mediation paper and its annexures, which included the [name redacted] Report and a report prepared by McGrath Nicol dated 29 September 2021 and its annexures. BSA also relied on written submissions on the settlement approval application dated 4 July 2022.
The Funder was granted leave to intervene on the settlement approval application to make submissions in relation to Court approval for various payments to be deducted for its benefit from the Settlement Sum pursuant to the Settlement Distribution Scheme. It relied on the affidavits of Stephen Conrad, Chief Executive Officer of the Funder, affirmed on 4 July 2022 and 14 July 2022 (the First and Second Conrad Affidavits), and written outlines of submissions on the settlement approval application dated 4 and 14 July 2022.
The parties also filed material relating to proposed non-publication orders sought to replace the interim non-publication orders made on 12 July 2022. I discuss this material further below at [237]-[255].
BACKGROUND TO THE PROCEEDING AND SETTEMENT APPROVAL APPLICATION
The procedural background to the proceeding is described in the Second Antzoulatos Affidavit at [45]-[69], the Fourth Antzoulatos Affidavit at [7]-[15] and the First Conrad Affidavit at [20]‑[27]. As there described, Shine began investigating the prospect of a class action against BSA in around January 2019. Shine approached the Funder about funding the proceeding in about February 2019.
Ms Antzoulatos deposed that on 23 November 2018, Shine had commenced another class action in this Court entitled Robert Mutch v ISG Managements Pty Ltd, being proceeding number VID 1492 of 2018 (Mutch Proceeding). The Mutch Proceeding was also funded by the Funder. Ms Antzoulatos deposed that the issues in the Mutch Proceeding are very similar to the issues in this proceeding. Ms Antzoulatos deposes that in the circumstances, Shine was already familiar with the issues and investigations that needed to take place prior to the commencement of the proceedings.
Ms Antzoulatos deposed that there was an extensive period of without prejudice negotiations with BSA’s lawyers prior to the proceeding being filed. A chronology of communications with BSA and BSA’s lawyers prior to the commencement of the proceeding was annexed to the Fourth Antzoulatos Affidavit.
The proceeding was commenced as an open class action by originating application and statement of claim filed on 24 July 2020.
On 23 November 2020, I made orders regarding, inter alia, the common issues to be determined at the initial trial, and requiring the parties to file and serve a list setting out proposed categories of discovery sought in the proceeding.
In late November and December 2020, the applicants filed a reply to the defence, and the applicants and their corporate entities filed defences to the first and second cross-claims.
On 16 March 2021, I made orders, inter alia, requiring the parties to give discovery of documents falling within agreed categories of discovery.
On 4 June 2021, I made orders, including:
(1)granting leave for BSA to file and serve cross-claims against group members and their associated corporations;
(2)requiring Shine to make the pleadings filed in the proceeding available for download from its website from 7 July 2021 until further order of the Court;
(3)staying the cross-claims and ordering no further steps be taken by BSA or by the relevant cross-respondents in respect of them;
(4)requiring BSA to provide the applicants with a list of all group members in the proceeding known to BSA together with the last known contact details of those persons.
On 11 and 15 June 2021, the applicants gave discovery of documents falling within agreed categories (with further discovery later given on 30 June, 12 August and 24 September 2021).
On 30 July 2021, BSA gave discovery of 40,124 documents falling within agreed categories.
On 4 June 2021 and 2 August 2021, I made orders relating to an opt out process, including approving the form of an Opt Out Notice and fixing 24 September 2021 as the date before which a group member may opt out of the proceeding. The Opt Out notice gave instructions as to the various options available to group members in relation to the class action and explained that all group members (other than those who opted out) would be bound by the Court’s determination of the common issues at the initial trial and any settlement of the class action.
Further to an interlocutory application filed by the applicants, on 7 September 2021, I made orders for a corrective notice to be distributed to group members regarding the opt out process: see Bradshaw v BSA Limited (2021) 394 ALR 76; [2021] FCA 1080.
In the Second Antzoulatos affidavit, Ms Antzoulatos deposed that following distribution of the opt out notice and corrective notice, 72 group members had opted out of the proceeding.
On 14 October 2021, the parties commenced a private mediation of the proceeding. The mediation was adjourned and reconvened on 5 November 2021. The parties subsequently reached an agreement to resolve the proceeding and exchanged signed heads of agreement on 8 February 2022. On 30 March 2022, the Deed was executed and counterparts exchanged between all relevant parties.
SETTLEMENT APPROVAL PROCESS
On 31 March 2022, the Court made procedural orders to facilitate the hearing of the applicants’ settlement approval application. The orders included orders regarding the proposed form and manner for the distribution of a notice to group members regarding the proposed settlement, the Court approval process and key dates for the related steps.
On 11 May 2022, the Court approved the form of a Notice of Proposed Settlement (Settlement Notice).
The Settlement Notice described the Settlement in the following terms (emphasis in original):
[11]Under the proposed settlement of the BSA Class Action, without the admission of any liability, BSA will pay a total sum of $20 million in traches (Settlement Sum) to settlement the claims, including the Cross Claims, inclusive of legal fees and disbursements, any interest, and funder’s costs and commissions, without admission of any liability by any of the parties.
[12] If the proposed settlement is approved by the Court:
(a)the applicants and group members (other than those who have opted out of the BSA Class Action… will release BSA and its related parties from each and every claim made by them and./or on their behalf in the BSA Limited Class Action. This release does not include other claims for loss, damage and./or compensation that the applicants and group members may have and which are not made in the BSA Class Action; and
(b)BSA releases the applicants and group members (other than those who have opted out of the BSA Limited Class Action[…]) from each and every claim made by BSA in the BSA Limited Class Action including each of the claims set out in the Cross Claims.
[13]The Settlement Sum represents, in Shine Lawyers’ view, a substantial compromise on the sum that the applicants may recover if the applicants’ and group members’ claims succeeded in full and the cross claims failed (the Best Case Scenario). However, BSA does not share this view. It considers that, firstly, the applicants’ claims will not succeed, secondly, even if they did, group members would not themselves succeed in providing their own individual claims, thirdly, not many group members would actually attempt to prove their own individual claims and, fourthly, that BSA’s cross claims for repayment and compensation would succeed such that the applicants and group members may be liable to repay money to BSA, or the Court would choose not to award any compensation to the applicants and group members even if their claims succeeded. The applicants’ representatives also closely considered the ability of BSA to pay a substantial judgment obtained in the proceedings in the Best Case Scenario, and in particular its publicly available financial statements, which as at December 2021, disclose (amongst other things) current net case of $3,441,000. As such, BSA’s agreement to pay the Settlement Sum was reached after extensive negotiations and consideration by the legal representative for the applicants and group members of a number of factors including the complex legal issues, the inherent risks with continuing to run the case to trial, as well as BSA’s financial capacity to meet any judgment.
[14]The Settlement Sum will be paid over three years, with minimum part-payments as follows:
(a)$4.4 million by 30 June 2022 (Instalment 1);
(b)$6.6 million by 30 June 2023 (Instalment 2); and
(c)$9 million by 30 June 2024 (Instalment 3) or the remaining balance of the Settlement Sum owing as at that date if more than the minimum amounts have been paid (Remaining Balance).
[15] Further, under the proposed settlement:
(a)If BSA raises funding in excess of $8 million in readily available funds prior to 30 June 2022, then BSA must pay $3.6 million of that funding towards the Settlement Sum, in addition to Instalment 1, and Instalment 3 will be reduced by the additional amount paid by BSA leaving the Remaining Balance;
(b)If BSA raises funding in excess of $12 million in readily available funds prior to 30 June 2023, then BSA must pay $5.4 million of that funding towards the Settlement Sum, in addition to Instalment 2, and Instalment 3 will be reduced by the additional amount paid by BSA leaving the Remaining Balance;
(c)BSA does not need to make the payments of $3.6 million in a, or $5.4 million in b, if the amounts raised are for the purpose of addressing delay between the receipt of payment from BSA’s client(s) and BSA’s needs or obligations to pay its workforce (including both independent contractors and employees) or to meet other operational costs.
[16]How the settlement will be administered, including the process to work out if you have an “Eligible Claim” will be set out in a “Settlement Distribution Scheme”, which is the plan prepared by Shine Lawyers to determine to whom compensation will be paid, how much they are entitled to, and how that compensation will be paid. The person reasonable for administering the settlement scheme is called the “Settlement Administrator”. The Settlement Administrator is proposed to be Shine Layers. The Settlement Distribution Scheme and the identity of the Settlement Administrator will need to be approved by the Court…
The Settlement Notice contained a section dealing with how group members should register to participate (emphasis in original):
[22]If you have already (a) entered into a funding agreement with LLS and a Retainer with Shine Lawyers and/or (b) previously registered for the class action with Shine Lawyers, you do not need to take any further steps to register your claim and interest in participating in the settlement…
[23]If you have not previously registered for the class action, you will need to register before you can receive any compensation, because the applicants intend to ask the Court to approve the settlement on the basis that only registered group members will be eligible to receive a distribution. To register you must complete the registration form at Annexure 1 to this Notice and return it to Shine Lawyers. Alternatively you can complete and submit an online registration form on the Shine Lawyers website … You must register before 17 June 2022. Registrations received after that time will not be accepted, and you will be treated as having not validly registered.
The Settlement Notice explained the consequences of not registering to participate (emphasis in original):
[42]If you did not opt out of the BSA Limited Class Action before 4.00pm on 24 September 2021 and you do not take steps to register with Shine Lawyers to participate in the settlement (that is, you do nothing), then you will be bound by the settlement, however if the Court approves the settlement on the basis put forward by the applicants you will not be entitled to the distribution of any monies from the settlement. This is because the applicants intend to ask the Court to approve the settlement on the basis that only registered group members receive a distribution.
[43]If you do nothing, it also means that if the settlement is approved you will no longer have the right to pursue any claims against BSA and its related parties (including related bodies corporate and BSA’s past or present directors and officers) of the kind made in the BSA Limited Class Action. Similarly, BSA will no longer have the right to pursue any claims made in the Cross Claims against you.
In relation to how much group members will receive under the settlement, the Settlement Notice set out that (emphasis in original):
[26]The dollar amount you receive if you register to participate and are found to be eligible will be worked out following a process set out in the Settlement Distribution Scheme… The precise amount that will be payable to each individual group member is not yet known and cannot yet be accurately estimated, including because it depends on information which has not yet been provided by group members who have not yet registered, such as the length of time group members provided services to BSA and the number of hours worked each day based on group member data to be provided by BSA.
[27]Importantly, group members’ entitlements will be calculated using an agreement entitlement calculation model that has regard to, at least, the factors mentioned above (Calculation Model). As mentioned above, the Settlement Distribution Scheme, including the Calculation Model must be approved by the Court.
[28]Please note you will not receive the full value of your claim under the settlement. The settlement is a compromise of the claims made taking into account, amongst other matters, BSA’s financial capacity to pay and the risk that the applicants might lose the class action.
The Settlement Notice contained a section dealing with “legal costs and other costs in the class action”. This stated as follows (emphasis in original):
[29]In a Notice you may have received in around August 2021 [the opt out notice], you were told that Shine Lawyers was running the case, and that funding for the litigation was being provided by LLS. The Notice also included that on settlement of the class action, “the Court will be asked to deduct from the compensation received amounts representing Shine’s legal costs and a funding commission payable to LLS, and to distribute those legal and funding costs fairly among all persons who have benefited from the class action. That is, lawyers’ costs and LLS’s commission payment will come out of any compensation. The effect of this kind of order, if made, would be that all group members how benefit will contribute to the legal and funding costs of the compensation moneys, whether or not those group members signed up to a funding agreement with LLS.”
[30]The total costs incurred by the applicants in running the proceeding has been approximately $3,115,000. A portion of these have been paid by LLS.
[31] The amounts which are proposed to be deducted from the settlement are for:
(a)Project Costs paid and/or incurred by LLS of approximately $2,615,000, principally relating to legal costs (for fees and disbursements incurred in running the class action, primarily comprised of fees paid to the solicitors, barristers, and experts who were involved in the case) and other costs (including payment of premiums for adverse costs insurance to cover the applicants’ and group members’ adverse costs risks).
(b)Funding commission: the Applicants will seek Court approval of a payment of approximately $5,500,000 to LLS (representing approximately 27.5% of the Settlement Sum) in return for its funding of this class action and taking on the risks of losing the class action and the risks of adverse costs orders. In simple terms, a common fund order requires group members who receive compensation to pay a percentage of it to the litigation funder who has provided funding for the proceeding. It will be a matter for the Court to determine whether a common fund order or another form of cost-sharing order should be made and the amount of the funding commission which are reasonable in the circumstances of the case, and which may therefore be deducted from the Settlement Sum.
(c)Shine Lawyers’ legal costs not paid by LLS total an estimated amount of $500,000 in addition to settlement approval costs of approximately $200,000.
(d)Administration Costs, in an estimated amount of $300,000 payable over 3 years, the reasonableness of which the Court will consider.
(e)Lead Applicant’s Reimbursement Fee, in an estimated amount of $30,000 ($15,000 payable to each lead applicant), being an amount to reimburse the applicants for the time and expense of conducting the class action, the reasonableness of which the Court will consider.
[32]The Court will need to approve deduction of any of these costs in advance and may approve lesser amounts than what is proposed. If you have a concern about the costs proposed to be deducted, you are free to file a “Notice of Objection to the Proposed Settlement”…
The Settlement Notice, at [39]-[41], provided details of the process by which group members could object to the settlement, and stated that the deadline for objecting was 30 June 2022. Attached to the Settlement Notice was a form entitled “Notice of Objection to Proposed Settlement”.
Ms Antzoulatos deposes that between 13 May 2022 and 17 June 2022, the Settlement Notice was published on Shine and the Court’s website, and distributed directly by email to approximately 3,400 group members and by post to approximately 930 group members. I am satisfied by the evidence of Ms Antzoulatos that reasonable attempts have been made to contact known group members to bring the proposed settlement to their attention.
On 22 June 2022, I made orders, inter alia, that a further notice be sent to group members advising them that there was an error in the Court’s email address used in the Notice of Objection. The order further extended the time for group members to object to the settlement and file evidence in respect of any objection to 6 July 2022.
Between 22 and 24 June 2022, the further notice was emailed and posted to group members by Shine.
In the event five objections were lodged by group members. The first objection was lodged by Mr Shahin Tahmasebi on 15 June 2022. By his objection, Mr Tahmasebi contended that: the proposed settlement fails to deliver justice; the Settlement Sum is not adequate having regard to the asserted value of group members’ claims; and it is the lawyers who stand to benefit most from the proposed settlement.
The second objection was lodged by Mr Hung Thanh Tran on 23 June 2022. Mr Tran objected to the proposed settlement on the basis that it was “unfair and unjust”.
The third objection was lodged by Mr Binh Van To on 27 June 2022. Mr To did not specify the grounds of his objection and indicated within his Notice of Objection that he wished to give oral submissions at the settlement approval hearing. However, Mr To did not attend the hearing.
The fourth Notice of Objection was lodged by Mr Andrew Stowers on 1 July 2022. Rather than providing grounds for his objection, Mr Stowers appears in substance to have been seeking to opt out of the proceeding, on account of his advanced age, using the Notice of Objection form after the opt out period had ended.
The fifth objection was lodged by Mr Achraf Allach on 3 July 2022. Broadly speaking, the nature of Mr Allach’s objection is that: the Settlement Notice is vague as to the terms of the settlement; the proposed deductions from the Settlement Sum in favour of Shine and the Funder are confusing, high and disproportionate; group members have to wait to be paid over three years; and the proposed settlement is not fair, reasonable, and adequate in light of the harm suffered by group members.
Ms Antzoulatos otherwise deposed, at [43] of the Second Antzoulatos Affidavit, that since notification of the settlement to group members, Shine had received approximately 55 emails expressing appreciation for the resolution of the proceeding.
As at 7 July 2022, Ms Antzoulatos deposed at [16]-[19] of the Third Antzoulatos Affidavit, that 986 group members have registered their interest to participate in the settlement, 240 of whom have executed costs agreements and funding agreements with Shine and the Funder.
OVERVIEW OF THE PROPOSED SETTLEMENT AND SETTLEMENT DISTRIBUTION SCHEME
The key features of the settlement, as embodied in the Deed, are as follows:
(1)BSA agrees to pay the Settlement Sum of $20 million in full and final settlement of the claims, inclusive of legal fees, disbursements, interest and the Funder’s costs and commission.
(2)The Settlement Sum is paid over two years, with minimum part payments of: $4.4 million by 30 June 2022 (Instalment 1), $6.6 million by 30 June 2023 (Instalment 2), and $9 million by 30 June 2024 (Instalment 3) (or the remaining balance of the Settlement Sum as at that date if more than the minimum amounts have been paid).
(3)If BSA completes any defined “Capital Raise” in one or both of the financial years ending 30 June 2022 and 30 June 2023, then the amounts payable in Instalments 1 and 2 are increased by the defined “FY 22 Capital Raise Payment” and the “FY 23 Capital Raise Payment” as applicable, with a corresponding reduction to Instalment 3 (or in other words, if BSA were to complete any defined “Capital Raise”, the payment of part of the Settlement Sum would be accelerated, with the total Settlement Sum remaining at $20 million).
(4)The Settlement Sum be distributed in accordance with the Settlement Distribution Scheme as approved by the Court.
(5)In consideration for the Settlement Sum, the applicants on their own behalf and on behalf of the group members release and forever discharge each of the BSA Released Parties (as defined in the Deed) jointly and severally from each and every claim made by (or on behalf of) the applicants or any group member in the proceeding. This release does not extend or apply to any other claims for loss, damage and/or compensation that the applicants and any group members may have and which are not made in the proceeding.
(6)Similarly, BSA releases and forever discharges each of the applicants, their corporate entities and the group members (other than those who have opted out of the proceeding) jointly and severally from each and every claim made by BSA in the proceeding including the cross-claims.
(7)The proposed settlement is conditional on Court approval and the passing of any appeal period or dismissal of any appeal.
(8)Shine is not to accept instructions from any person to maintain or commence proceedings in any jurisdiction against BSA arising out of any of the matters the subject of the proceeding.
Critically, the Deed provides that while the Settlement Sum (after deductions) is to be applied to registered group members, all group members (other than those who opted out) will be bound by the settlement.
The settlement was approved on the terms set out in the Deed. The Deed was attachment “A” to the orders I made on 26 July 2022.
The key features of the Settlement Distribution Scheme (as proposed) are as follows:
(1)The Settlement Distribution Scheme shall be administered and applied by the Settlement Distribution Scheme Administrator. The proposed Administrator is Shine.
(2)The Administrator will hold the Settlement Sum in an interest bearing account until it is distributed.
(3)The Settlement Distribution Scheme shall apply to group members who lodge a “Settlement Registration Notice” and/or who have registered with Shine by 17 June 2022 (participating group members).
(4)The Administrator is to create a “Confirmed Group Member Schedule”.
(5)The Administrator shall calculate each participating group member’s claim using the “Loss Assessment Formula” described in Schedule 1 of the Settlement Distribution Scheme.
(6)The Administrator will notify participating group members of the calculation of their individual settlement entitlement by way of an assessment notice and give them an opportunity to request a review of the assessment notice.
(7)Prior to any distribution to participating group members, the Administrator will deduct the defined legal, funding and other costs approved by the Court from the Settlement Sum, leaving the residual Settlement Sum.
(8)From the residual Settlement Sum, the Administrator will distribute the entitlements of participating group members proportionately to the aggregate of the claims of all participating group members.
The above aspects of the Settlement Distribution Scheme were approved by my orders of 26 July 2022. The Settlement Distribution Scheme, as approved, was attachment “B” to those orders.
On that date, I also made an order appointing Shine as the Administrator. I accept that Shine has considerable experience in this process and with this proceeding, and it is appropriate in the circumstances of this case for the role of Administrator to be undertaken by that firm.
My orders of 26 July 2022 also approved the “Loss Assessment Formula” described in Schedule 1 of the Settlement Distribution Scheme. The origin and justification for the Loss Assessment Formula is described in the Rossetto Affidavit.
In summary, the process of assessing an individual group member’s claim is based on BSA’s records of the work completed by each technician in the period 24 July 2014 to 23 July 2020. The Loss Assessment Formula then provides for the calculation of the income and benefits that each group member would have received were they determined to be employees of BSA in accordance with the Award. The relevant classification applied under the Award in respect of each group member is a Telecommunications Technician employed by BSA on a casual basis. The applicable base hourly rate of pay is as provided for by the Award as amended from time to time.
The calculation method is described at paragraphs [3]-[5] of the Loss Assessment Formula. A group members’ total claim is calculated as the total of their: ordinary wage, plus casual loading, plus overtime, plus allowances (including travel allowance, telephone allowance and tool allowance), plus superannuation at 9.5%. The assumptions applied in the Loss Assessment Formula are described at paragraphs [6]-[21].
After the total claim for all participating group members has been calculated, the amount that each group member will receive in the settlement is calculated in accordance with the formula set out at paragraph [4] of the Loss Assessment Formula. The effect of that formula is that each participating group member will receive a pro rata settlement distribution of the residual Settlement Sum.
My orders made on 26 July 2022 did not approve the deduction of any specific amounts from the Settlement Sum. This aspect of the Settlement Distribution Scheme was reserved for further determination and approval of the Court.
In summary, the total amounts proposed to be deducted from the Settlement Sum, as set out at [22] in the Third Antzoulatos Affidavit, are as follows:
1.the applicants’ legal costs and disbursements incurred prior to the settlement of the proceeding, comprising:
(1)$1,916,376.44 in professional fees and disbursements (including GST) paid by the Funder (Funder’s Costs);
(2)$500,665.48 (including GST) in remaining professional fees incurred by Shine, including a 25% uplift in those fees in the amount of $107,318 (the Unfunded Shine Fees); and
(3)$689,700 in respect of adverse costs insurance (ATE insurance) premium paid by the Funder (ATE Insurance Premium);
2.$5.5 million on account of funding commission at a rate of 27.5% (Funder’s Commission);
3.$427,878.80 in respect of the applicant’s settlement approval costs (up to and including 8 July 2022) (Settlement Approval Costs);
4.$122,487.75 on account of Shine’s future costs as Administrator (Administration Costs);
5.lead applicants’ fees in the amount of $30,000 (being $15,000 to each of Mr Bradshaw and Mr Uren) (Lead Applicants Fees); and
6.$110,000 in respect of the applicants’ costs of the Declaratory Proceeding (Declaratory Proceeding Costs).
In the Settlement Distribution Scheme, the Funder’s Costs and ATE Insurance Premium are collectively referred to as the “Funder’s Project Costs”. The Unfunded Shine Fees are referred to in the Settlement Distribution Scheme as the “Applicants’ Remaining Costs”.
The explanation for Funder’s Costs and the Unfunded Shine Fees arises from the terms of the litigation funding agreements the applicants entered with the Funder and the costs agreements made with Shine. Pursuant to those agreements, the Funder is responsible for 80% of professional fees, and 100% of disbursements incurred in relation to the proceeding and Shine is responsible for the remaining 20% of professional fees. The Funder’s Costs referred to above are the Funder’s share of the legal costs and the disbursements that it has already paid to Shine during the course of the proceeding. The Unfunded Shine Fees are Shine’s unfunded fees, which are deferred and only payable to Shine upon it achieving a successful outcome in the proceeding. Due to the speculative basis for recovery, the costs agreement provided that Shine would charge an uplift fee of 25% on those unfunded fees.
If the amounts the applicants and the Funder propose be deducted are approved in full, then the residual Settlement Sum available for distribution to the applicants and group members is approximately $10.7 million (approximately 53%). It is appropriate for the Court to carefully scrutinise the amounts sought to be deducted from the Settlement Sum and much of the hearing time was devoted to that topic. As will be seen later in these reasons, I form the view that it would be just that the quantum of some of these deductions be reduced.
The basis for each of the deductions is addressed in detail at [122]-[154] of the Second Antzoulatos Affidavit, [6]-[12] of the Third Antzoulatos Affidavit, [7]-[22] of the Fourth Antzoulatos Affidavit and [5]-[10] of the Fifth Antzoulatos Affidavit, the reports of Ms Dealehr and the affidavits of Mr Conrad on behalf of the Funder.
My orders made on 26 July 2022 also did not approve the breakdown of the amounts to be distributed in each of the proposed instalments. Those aspects of the Settlement Distribution Scheme were reserved for further determination and approval of the Court, and the paragraphs that otherwise dealt with those matters in the Settlement Distribution Scheme (at [27]-[29]) were left marked as “placeholder”. As I later outline, the terms of those paragraphs will now need to be revised to accord with these reasons.
The amended form of the Settlement Distribution Scheme submitted on 14 July 2022 had proposed that paragraphs [27]-[29] provide as follows:
[27]Within 14 Business Days of receipt of payment of Instalment 1 as defined in clause 2.5(b)(i) of the Settlement Deed and the FY 22 Capital Raise Payment (if paid) as defined in clause 1.1 of the Settlement Deed, or within 14 Business Days following Final Settlement Approval (subject to clause 30 below), whichever is the later, the Settlement Administrator will make the following payments from it, as approved by the Court:
a.first, a payment to the Funder (or to another entity at the Funder’s direction) as partial reimbursement of the Funder’s Project Costs in the amount of $1,783,336.82 and should the FY 22 Capital Raise Payment be paid, an additional amount of $822,739.62 as reimbursement of the Funder’s Project Costs (and the amount payable in respect of Project Costs in Instalment 2 will be reduced by this amount upon receipt of this payment), as the case may be;
b.secondly, should the FY 22 Capital Raise Payment be paid, a payment to the Funder (or to another entity at its direction) in the amount of $636,354.14 for part payment of the Funder’s Commission (and the amount payable in respect of Funder's Commissions in Instalment 3 will be reduced by this amount upon receipt of this payment), as the case may be;
c.thirdly, a payment to Shine Lawyers of $110,146.40 representing 22% of the Applicants’ Remaining Costs of $500,665.48 (including 25% uplift of $100,133.09) and should the FY 22 Capital Raise Payment be paid, an additional amount equal to 18% (total 40%) of the Applicants’ Remaining Costs (and the amount payable in respect of Instalment 3 will be reduced by this amount upon receipt of this payment), as the case may be;
d.fourthly, an amount of $427,878.80 in respect of settlement approval professional fees and disbursements as approved by the Court;
e.fifthly, an amount representing Shine’s Administration Costs as approved by the Court in respect of the distribution of Instalment 1 and the FY 22 Capital Raise Payment (if paid), with Shine to first submit its costs to the Court for approval prior to distribution, by way of communication with the Associate to his Honour Bromberg J or another judge of the Federal Court as appropriate;
f.sixthly, a payment of $110,000 in respect of the Applicants’ Declaratory Proceedings Costs as approved by the Court;
g.seventhly, to each of the Lead Applicants, the whole of the Lead Applicant Fee totalling $30,000; and
h.eighthly, to Participating Group Members, an amount equal to 22% of the proportion which the Final Assessment of each Participating Group Member bears to the aggregate of the Final Assessment of all Participating Group Members and should the FY 22 Capital Raise Payment be paid, an additional amount equal to 18% (total 40%) of the proportion which the Final Assessment of each Participating Group Member bears to the aggregate of the Final Assessment of all Participating Group Members (and the amount payable in respect of Instalment 3 will be reduced by this amount upon receipt of this payment), as the case may be.
[28]Within 14 Business Days of receipt of payment of Instalment 2 as defined in clause 2.5(b)(ii) of the Settlement Deed and the FY 23 Capital Raise Payment (if paid), as defined in clause 1.1 of the Settlement Deed, or within 14 Business Days following the Final Approval Order (subject to clause 30 below), whichever is the later, the Settlement Administrator will make the following payments from it, as approved by the Court:
a.firstly, a payment to the Funder (or to another entity at its direction) as reimbursement of the Funder’s Project Costs in the sum of $822,739.62;
b.secondly, a payment to the Funder (or to another entity at its direction) in the amount of $1,852,265.60 for part payment of the Funder’s Commission and should the FY 23 Capital Raise Payment be paid, an additional amount in the sum of $2,188,641 (and the amount payable in respect of the Funder's Commissions in Instalment 3 will be reduced by this amount upon receipt of this payment), as the case may be;
c.thirdly, a payment to Shine Lawyers of an amount equal to 33% of the Applicants’ Remaining Costs and should the FY 23 Capital Raise Payment be paid, an additional amount equal to 27% (total 60%) of the Applicants’ Remaining Costs (and the amount payable in respect of Instalment 3 will be reduced by this amount upon receipt of this payment), as the case may be;
d.fourthly, an amount representing Shine’s Administration Costs as approved by the Court in respect of the distribution of Instalment 2 and the FY 23 Capital Raise Payment (if paid), with Shine to first submit its costs to the Court for approval prior to distribution, by way of communication with the Associate to his Honour Bromberg J or another judge of the Federal Court as appropriate;
e.fifthly, an amount, if sought by LLS by re-listing the matter after 8 July 2022, and if then approved by the Court, for any Declaration Proceeding Adverse Costs: and
f.sixthly, to Participating Group Members, an amount equal to 33% of the proportion which the Final Assessment of each Participating Group Member bears to the aggregate of the Final Assessment of all Participating Group Members and should the FY 23 Capital Raise Payment be paid, an additional amount equal to 27% (total 60%) of the proportion which the Final Assessment of each Participating Group Member bears to the aggregate of the Final Assessment of all Participating Group Members (and the amount payable in respect of Instalment 3 will be reduced by this amount upon receipt of this payment), as the case may be.
[29]Within 14 Business Days of receipt of payment of Instalment 3 or the Remaining Balance as the case may be, as defined in clause 2.5(b)(iii) of the Settlement Deed, or within 14 Business Days following the Final Approval Order (subject to clause 30 below), whichever is the later, the Settlement Administrator will make the following payments from it, as approved by the Court:
a.first, a payment to the Funder (or to another entity at its direction) in the amount of $3,647,734.40 for part payment of the Funder’s Commission or otherwise the remaining balance of the Funder’s Commission as the case may be;
b.secondly, a payment to Shine Lawyers of 45% of the Applicants’ Remaining Costs or otherwise the remaining balance of the Applicants’ Remaining Costs as the case may be;
c.thirdly, an amount representing Shine’s Administration Costs as approved by the Court in respect of the distribution of Instalment 3 or the Remaining Balance, as the case may be, with Shine to first submit its costs to the Court for approval prior to distribution, by way of communication with the Associate to his Honour Bromberg J or another judge of the Federal Court as appropriate; and
d.fourthly, to Participating Group Members, 45% (or the remaining balance as the case may be) of the proportion which the Final Assessment of each Participating Group Member bears to the aggregate of the Final Assessment of all Participating Group Members.
PRINCIPLES RELEVANT TO SETTLEMENT APPROVAL
Section 33V(1) of the FCA Act provides that a representative proceeding may not be settled without the approval of the Court. The principles to be applied in a settlement approval application under s 33V are well-established.
Subsections 33V(1) and (2) of the FCA Act confer two distinct powers: first, to approve the settlement; and, secondly, if the approval is given, to approve the distribution of payments made under the settlement: see e.g. Davaria Pty Ltd v 7 Eleven Stores Pty Ltd (2020) 281 FCR 501 at [23]-[24] (Lee J, with whom Middleton and Moshinsky JJ agreed).
The fundamental question is whether the proposed settlement is fair and reasonable and in the interests of the group members bound by the settlement, considered as a whole. This requires consideration of whether the proposed settlement is fair and reasonable, first, as between the applicant, group members and the respondent, and second, as between the group members: see e.g. Evans v Davantage Group Pty Ltd (No 3) [2021] FCA 70 at [17] (Beach J) and the authority there cited. The Court assumes an onerous and protective role in relation to group members’ interests which is not unlike the role the Court assumes when approving settlements on behalf of infants: Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [8] (Jacobson, Middleton and Gordon JJ); Thomas v Romeo Lockleys Asset Partnership [2022] FCA 1106 at [38] (Charlesworth J) and the authorities there cited.
Guiding considerations have been set out in many authorities and are helpfully collected in Botsman v Bolitho (2018) 57 VR 68 at [203]-[208] (Tate, Whelan and Niall JJA) where the Victorian Court of Appeal said (citations omitted):
[203]It is an essential starting point to identify the settlement and its terms. It is commonplace that a deed of settlement may address more than the settlement of the claims against the defendant and will also deal with the distribution of settlement money, including to a litigation funder. The structure of sub-ss 33V(1) and (2) suggests that such payments may be distributions of money that has been paid under a settlement to which the Court has given approval under s 33V(1). Those distributions are the subject of separate Court approval under s 33V(2).
[204]The question of fairness interposes itself at various levels. Most obviously, there will need to be consideration of the fairness of a proposed settlement sum.
[205]The Court is being asked to approve a compromise of litigation. Inevitably, that will require an assessment of whether the plaintiff is likely to succeed in the action, the measure of damages that a successful judgment would yield, the prospects of recovery, and the expenditure in costs, time and effort that would be required to bring the proceedings to a conclusion.
[206]That assessment does not involve a simple calculus but calls for matters of judgment based on imperfect knowledge and is influenced by the appetite for risk. It will be informed by the complexity and duration of the litigation and the stage at which the settlement occurs. It is important to acknowledge that it is the state of imperfect knowledge and the existence of risks that will have likely induced the settlement. It follows that those matters should be accorded a degree of prominence in any assessment of the reasonableness of the settlement.
[207]Those considerations mean that there will rarely, or ever, be a single correct settlement. Strategic decisions must be factored into account but it is not the role of the Court to second guess those decisions.
[208]The question of fairness will also be relevant to the distribution of the settlement sum, particularly where, as is usually the case, the group members will receive less than their claimed losses and the costs of bringing the proceeding (both in terms of legal costs and funding costs) will need to be accounted for. It follows that there will often be questions of fairness as between group members, particularly where some, but not all, of the group members have funded the litigation or where it may be necessary to apportion the settlement sum between group members based on differences in their respective claims.
Further, the Court’s assessment as to whether the applicants and group members are likely to succeed in their claims at trial, and as to the quantum of the damages they may obtain if they do succeed, involves the exercise of judgement based on imperfect knowledge: see Prygodicz v Commonwealth of Australia (No 2) [2021] FCA 634 at [87] (Murphy J). In making an assessment as to the reasonableness of the proposed settlement the Court must take into account the appetite for risk of the applicants and/or the applicants’ lawyers.
As Murphy J said in Kellyv Willmott Forests Ltd (in liquidation) (No 4) (2016) 335 ALR 439; [2016] FCA 323 at [74] (citations omitted):
It is established that the Court should not second-guess the applicant’s lawyers as to whether the settlement ought to have been accepted, or to proceed as if it knows more about the actual risks of the litigation than those lawyers. The Court takes the applicant’s lawyers as it finds them, recognising that different applicants and different lawyers will have different appetites for risk. The question is whether the proposed settlement is within the range of reasonable outcomes, not whether it is the best outcome which the Court considers might have been won by better bargaining.
See also Blairgowrie Trading Ltd v Allco Finance Group Ltd (Recs and Mgrs Apptd) (In Liq) (No 3) (2017) 343 ALR 476; [2017] FCA 330 at [82]-[83] (Beach J); Stanford v DePuy International Ltd (No 6) [2016] FCA 1452, at [116] (Wigney J); Prygodicz at [87].
The factors stated in Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459; [2000] FCA 1925 at [19] (Goldberg J), now reflected in the Class Actions Practice Note (GPN-CA) at 15.5, are a useful guide to the considerations relevant in deciding whether a proposed settlement is fair and reasonable. They include:
(1)the complexity and likely duration of the litigation;
(2)the reaction of the class to the settlement;
(3)the stage of the proceedings;
(4)the risks of establishing liability;
(5)the risks of establishing loss or damage;
(6)the risks of maintaining a class action;
(7)the ability of the respondent to withstand a greater judgment;
(8)the range of reasonableness of the settlement in light of the best recovery;
(9)the range of reasonableness of the settlement in light of all the attendant risks of litigation; and
(10)the terms of any advice received from counsel and/or from any independent expert in relation to the issues which arise in the proceeding.
WHETHER THE PROPOSED SETTLEMETN IS FAIR AND REASONABLE
As is apparent from the description of the claim earlier in these reasons, the proceeding is complex. The proceeding has settled at a stage where the applicants were about to begin preparation of their evidence, seek the Court’s determination of a dispute as to outstanding discovery documents and set down a trial date. Any trial of the proceeding would likely have been of substantial duration – in my estimation at least 2-3 weeks. If the proceeding was not settled, it seems to me that it was unlikely that it would have been ready for trial before the second half of 2023. Further, it is unlikely that any judgment in respect of the common issues would have been delivered before early 2024. With the prospect of appeals, and individual determination of group members’ claims, even in the event of success at a trial of common issues, the applicants and group members would be unlikely to receive any money from the litigation until mid-2024 at the earliest.
As the authorities described above establish, there is no one or obvious way in which a settlement should be framed, either as between the group members and the respondent, or in relation to sharing any compensation amongst the group members. The question is whether the proposed settlement falls within a reasonable range, and is fair and reasonable as between the group members.
Counsel have provided an opinion that the settlement is fair, reasonable and adequate, both between the parties, and as between the group members. Counsel provide the opinion as officers of the Court rather than advocates for the applicants and group members and the opinion dealt candidly with the considerations set out in the Practice Note and other relevant considerations.
As is standard in an application of this kind, this opinion is the subject of a non-publication order, and it is necessary to be circumspect in these reasons in order to preserve confidentiality. That is particularly so where the opinion addresses whether the proceeding has a reasonable prospect of success, including because that analysis may prejudice the claims of any group member who chose to opt out and to bring his or her own proceeding.
On the basis of the Counsel Opinion and my own consideration of the issues, I have been able to make a broad but sufficiently adequate assessment of the complexity of the litigation, the risks of establishing liability on the pleaded case, the risks of establishing loss or damage, the range of a reasonable settlement in light of the best likely recovery and the range of a reasonable settlement in light of other attendant risks of litigation.
It is apparent that the proposed settlement represents a substantial compromise on the sum that the applicants and group members would have been awarded if they were successful in full and the cross-claims failed. The Settlement Notice issued to group members candidly disclosed this, and the reasons why the applicants’ legal representatives nonetheless considered the settlement to be fair and reasonable.
In my opinion, having regard to the nature of the claims made in the proceeding and the substantial risks involved in establishing liability (of which I say more later); the factual complexity of the case; a comparison between the Settlement Sum and the best possible recovery; a comparison between the Settlement Sum and what might reasonably be expected to be achieved in the litigation taking into account the cross-claims and the likelihood that any loss and damage established may be off-set against monies paid by BSA to corporations associated with the applicants and group members; the ‘opportunity cost’ of further time and money being expended to fully litigate the matter as against the in-hand benefit of a sum in settlement; BSA’s financial capacity to pay any judgment sum beyond the Settlement Sum; and other litigation risks, the Settlement Sum is within the range of reasonable outcomes and constitutes a fair and reasonable compromise of the claims of the applicants and group members.
I consider that the $20 million payment offered by BSA after commercial negotiation is likely to be a good result in the circumstances for the applicants and group members. I say that bearing in mind the risky nature of the litigation but, also and in particular, what the publicly available evidence indicates as to BSA’s capacity to withstand a larger settlement or larger judgment. That the Settlement Sum is to be paid in instalments is not unreasonable in those circumstances. Further, if BSA successfully raises capital in certain circumstances, the quantum of the initial two instalments may be increased.
As between group members, I am satisfied that the settlement is fair and reasonable. There is no discrimination in the Settlement Distribution Scheme between group members according to whether group members retained Shine and/or entered into a contractual relationship with the Funder.
Each group member will receive that proportion of the residual Settlement Sum which their claim bears to the aggregate claims of all registered group members in accordance with the Loss Assessment Formula. I am satisfied the Loss Assessment Formula is fair and appropriate and results in a reasonable assessment of each group member’s total claim. The proposed pro rata settlement distribution will thus lead to group members receiving an equal return relative to their claims after deduction of all costs allowed to be deducted from the residual Settlement Sum.
Further, the claims assessment process is reasonable, efficient and transparent and includes mechanisms to efficiently correct any administrative errors and review the individual assessments where there is any dispute.
Subject to what I say about the quantum of the deductions below, in my view the distribution proposed at paragraphs [27]-[29] of the Settlement Distribution Scheme as submitted on 14 July 2022 achieves a broadly fair division of the proceeds as between the applicants, the group members, the Funder and Shine. Group members will receive a minimum of 22% of their portion of their individual settlement entitlement in Instalment 1, a minimum of 33% in Instalment 2, and 45% (or the remaining balance) in Instalment 3. The Funder and Shine do not seek to recover in priority to group members, and the payments to them are made in roughly proportionate instalments as those to group members. This has the consequence that the Funder and Shine continue to share in the risk of non-payment by BSA of subsequent tranches of the Settlement Sum. I consider this to be appropriate and a factor in favour of the fairness and reasonableness of the proposed distribution process contemplated by the Settlement Distribution Scheme. I do not consider it to be unreasonable that the Administration Costs (in respect of the distribution of Instalment 1), Lead Applicant Fees, Settlement Approval Costs and Declaratory Proceeding Costs are deducted from Instalment 1.
I also note that none of those group members who objected, except Mr To, indicated that they wished to appear and make oral submissions at the settlement approval hearing, and Mr To did not in fact attend. In so far as submissions were made by the objectors, they were brief and really amounted to little more than unsubstantiated opinions. It is understandable that group members may be disappointed by the settlement, however, while I have given consideration to the objections, they do not cause me to question the fairness and reasonableness of the settlement reached between the parties.
I also consider the treatment of the unregistered group members to be fair and reasonable. As noted above, it is proposed that unregistered group members (who did not opt out) will not receive any distribution, but will nevertheless be bound by the settlement. I am satisfied that group members have been given clear notice of the registration process and the consequences of not registering and not opting out in the Settlement Notice. The Settlement Notice also made clear that group members could object to the proposed settlement, and provided details of how to do so.
The Third Antzoulatos Affidavit identifies at [16] that after 17 June 2022 (being the date group members were initially required to register) a further 48 individuals expressed an interest in registering for the settlement. I am satisfied that the Settlement Distribution Scheme provides a fair and reasonable process for determining whether late-registrants may participate in the settlement.
For these reasons, I consider the proposed settlement to be fair and reasonable as between the parties and as between the group.
It is for the above reasons that I made orders on 26 July 2022 to approve the settlement pursuant to s 33V(1) of the FCA Act and to approve the Settlement Distribution Scheme on the basis that paragraphs [27]-[29] thereof will be the subject of further consideration and approval. It is to that further consideration to which I now turn.
PROPOSED DEDUCTIONS FROM THE SETTLEMENT SUM
Funder’s Commission
I will deal first with the question of the Funder’s commission payment. A common fund order (CFO) is sought calculated at 27.5% of the Settlement Sum to produce a commission payment of $5.5 million. No party queried my power to make such an order on settlement pursuant to s 33V(2) of the FCA Act if I was so minded. In this case, no alternative order was sought by the applicants or the Funder for the making of a funding equalisation order.
The Court may make a CFO at settlement approval pursuant to s 33V of the FCA Act: see Davaria at [41]-[42] (Lee J, with whom Middleton and Moshinsky JJ agreed). The power to make such orders in the context of settlement approval is relatively well established: see e.g. Evans; Uren v RMBL Investments Ltd (No 2) [2020] FCA 647; Webster (Trustee) v Murray Goulburn Co-Operative Co Limited (No 4) [2020] FCA 1053; McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd (No 3) [2020] FCA 461; Clime Capital Ltd v UGL Pty Ltd [2020] FCA 66.
The real question is whether, in the exercise of the Court’s discretion, the proposed CFO constitutes an order that, in the circumstances of the case, is “just” within the meaning of s 33V(2) of the FCA Act: Court v Spotless Group Holdings Ltd [2020] FCA 1730 at [80].
Whether a Court should approve a CFO, and in what amount, is a question to be guided by factors such as those non-exhaustively set out in Money Max Int Pty Ltd v QBE Insurance Group Ltd (2016) 245 FCR 191 at [80] (Murphy, Gleeson and Beach JJ) which include:
(1)whether the funding commission rate was agreed by sophisticated class members and the number of such class members who agreed;
(2)the information provided to class members as to the funding commission;
(3)a comparison of the funding commission with funding commissions in other Pt IVA proceedings and/or what is available or common in the market;
(4)the litigation risks of providing funding in the proceeding, assessed without hindsight bias, and recognising that the funder took on those risks at the commencement of the proceeding;
(5)the potential quantum of adverse costs exposure that the funder assumed, recognising that assumption of risk was done at the commencement of the proceeding;
(6)the legal costs expended and to be expended, and the security for costs provided, by the funder;
(7)the amount of any settlement or judgment, and the proportionality of the commission bearing in mind the risks assumed by the funder;
(8)any substantial objections made by class members in relation to any litigation funding charges; and
(9)class members’ likely recovery “in hand” under any pre-existing funding arrangements.
In my view, it is appropriate to make a CFO. The Funder advanced funding to all group members in the open class, and it is appropriate to allow a return by reference to the settlement produced for all those group members, whether registered or unregistered.
The applicants and group members in this proceeding were given notice of the intention to seek a CFO via the Opt Out Notice approved and distributed in August 2021. The Settlement Notice approved in May 2022 quantified the amount sought in funding commission as $5.5 million. I am prepared to infer that these notices were understood by group members, and that they registered to participate in the settlement (or did not register as the case may be) on the understanding that the applicants would seek an order to pay the Funder’s commission from the Settlement Sum. In respect of those group members who entered costs agreements and funding agreements, those agreements expressly provided that the applicants were to seek a CFO.
As previously stated, a small number of objections were received. Those objections do not specifically engage with whether a CFO should be made.
The more difficult question is whether the CFO proposed by the Funder is “just” and in particular whether the proposed commission rate is appropriate. For those reasons given by Beach J in Blairgowrie at [120]-[122] it is appropriate for the Court to set a commission rate or, to label the exercise differently, determine the share of the proceeds of the settlement that should be made available to the Funder. That exercise is largely a forensic exercise which is dependent upon the adequacy of the information available to the judge, but as with the other legal contexts described by Beach J at [121], “the judge has to do the best he or she can on the evidence available, albeit incomplete or imperfect”.
Further assistance from the parties is required in order to formulate the precise amounts that will be distributed to the Funder, Shine, the applicants and group members in accordance with the terms of paragraphs [27]-[29] of the Settlement Distribution Scheme, which my orders require the parties to revise so that those terms accord with the distribution of the Settlement Sum contemplated by these reasons. That assistance is primarily required because the material before me does not allow me to accurately determine the share of the disallowed legal costs referrable to the Funder and the share referrable to Shine. It is for that reason that I am unable to specify in the table which follows the precise figure for the Funder’s Commission and for Shine’s uplift fee. The further information required will be available to Shine and to the Funder and I would expect that by agreement those parties will arrive at precise calculations which accord with these reasons and are then reflected in the revised terms of paragraphs [27]‑[29] of the Settlement Distribution Scheme which my orders require the parties to provide.
TABLE OF DEDUCTIONS ALLOWED FROM SETTLEMENT SUM
Deduction Amount (incl. GST) Funder’s Commission To be calculated but approximately $3.732 million Legal costs Pre-30 April 2019 costs $55,006 Other legal costs until settlement (including junior counsel’s fees not allowed by Ms Dealehr) $2,465,128 Settlement approval application costs (1 April 2022 to 12 July 2022) $522,489 Uplift fee To be calculated but less than $96,257 Declaratory proceeding costs $131,265 Administration costs $122,500 Lead applicants’ fees $30,000 NON-PUBLICATION AND OTHER ORDERS
I made interim non-publication orders on 12 July 2022, before the settlement had been approved, preventing the disclosure of certain material filed by the parties in support of the settlement approval application to non-parties or to other parties (Interim Orders). The Interim Orders were made under s 37AI(1) of the FCA Act which empowers the Court to make a “suppression order or non-publication order…without determining the merits of the application [for such an order]” until the application is determined. The Interim Orders were expressed to be “until further order of the Court, on the ground that it is necessary to prevent prejudice to the proper administration of justice under s 37AG(1)(a) of the FCA Act.”
I sought submissions from the parties on the form of non-publication orders sought if the settlement were to be approved and on 20 and 21 July 2022, the parties provided submissions on their proposed orders. On 5 August 2022, my Chambers wrote to the parties, inter alia, informing them of my preliminary determinations of their applications for non-publication orders and asking for any further submissions from the parties in response. On 12 August 2022, the Funder provided their further submissions which, as discussed further below, the applicants partially adopted for the purpose of their own additional application for non-publication of certain material. BSA did not provide any further submissions.
In considering whether to make the non-publication orders sought, I have had regard to the relevant provisions governing the power to make such orders and the grounds upon which they may be made which are set out in Part VAA of the FCA Act and particularly ss 37AE, 37AF and 37AG. In Caason (No 2) at [8] Murphy J noted:
It is wrong to assume that confidentiality or non-publication orders will be routinely or automatically made. Part VAA of the Act provides that the starting point for consideration of such orders, and it is mandatory under s 37AE for the Court to take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice. The Court must be satisfied that the order is necessary “to prevent prejudice to the proper administration of justice” (s 37AG(1)(a)), and “necessary” is a “strong word”: Hogan v Australian Crime Commission (2010) 240 CLR 651; [2010] HCA 21 at [30].
It is also useful to note that a person seeking an order under s 37AF bears the onus of persuading the Court to make the order and the onus has been described as “a very heavy one”: see C7A/2017 v Minister for Immigration and Border Protection (No 2) [2020] FCAFC 70 at [13] (Katzmann, Wigney and Abraham JJ).
Applicants’ proposed non-publication orders
By their submissions filed on 20 July 2022, the applicants sought non-publication orders under ss 37AF and 37AG of the FCA Act in relation to four matters if the settlement were approved. First, the applicants sought orders to prevent the disclosure of certain paragraphs of the Second Antzoulatos Affidavit which related to information relevant to aspects of the applicants’ personal lives. These proposed orders sought to prevent publication of this material to non‑parties and to BSA on the basis that it was “personal information not previously disclosed to…other parties”. Second, the applicants sought orders in relation to notes taken by Mr Bradshaw in connection with tasks undertaken for the proceeding over which the applicants claim legal professional privilege. Third, the applicants sought to prevent the publication of the Counsel Opinion which was prepared on a confidential basis and not disclosed to BSA. Fourth, the applicants sought orders to prevent the disclosure of certain personal details of group members which were contained in several documents filed by the applicants and only disclosed to the Court and the Funder.
The applicants did not specify under which ground(s) of s 37AG they sought non-publication orders. I have determined not to grant the orders sought over the first matter on the basis that none of the grounds under s 37AG of the FCA Act are met. The mere fact that the information is said to be of a personal nature and has not been disclosed to other parties is insufficient to meet any of the grounds under s 37AG(1). It is not clear under which ground(s) the applicants seek to justify the orders sought in relation to this material, however, I can infer that they are likely sought under s 37AG(1)(a). To the extent that the applicants’ submissions suggest that the disclosure of this material would cause the applicants embarrassment, it is well established that mere embarrassment is not sufficient to meet the high standard that s 37AG(1)(a) imposes: see Ogawa (formerly Ms PD) v President of the Australian Human Rights Commission (Pseudonym) [2022] FCAFC 160 at [27] (Rares, Perry and Hespe JJ).
In relations the second to fourth matters above, having regard to the mandatory consideration in s 37AE and the grounds under s 37AG(1), I am satisfied that it is necessary to prevent prejudice to the proper administration of justice for this material not to be published or disclosed other than in so far as it has been necessary to refer to that material in these reasons in order to safeguard the public interest in open justice: see Liverpool City Council v McGraw‑Hill Financial, Inc (now known as S&P Global Inc) [2018] FCA 1289 at [109] (Lee J) at [120].
BSA’s proposed non-publication orders
BSA made submissions on 21 July 2022, with an accompanying affidavit sworn by Arno Becker of the same date seeking orders over certain documents, including in relation to what Mr Becker deposed was non-publicly available commercially sensitive information regarding BSA’s finances and business model, provided by BSA to the other parties and the Court, for which BSA sought to prevent disclosure to non-parties.
It is not necessary to set out at length the principles which apply to applications under s 37AF with respect to commercially sensitive information, which are set out in a large number of judgments of this Court. However, it is useful to note that commercial sensitivity can be an appropriate basis for suppression or non-publication orders. The relevant principles were conveniently summarised by the Full Court (Perram, Pagone and Bromwich JJ) in Steelforce Trading Pty Ltd v Parliamentary Secretary to the Minister for Industry, Innovation and Science (No 2) [2018] FCAFC 47 at [4], the Court there endorsing principles previously expressed by Perram J in Motorola Solutions, Inc v Hytera Communications Corporation Ltd (No 2) [2018] FCA 17 at [8]-[9]. Relevantly, the Court observed that:
It might be thought that the mere protection of commercial-in-confidence information, which is essentially what Hytera seeks in this case, fits less comfortably within the statutory words ‘necessary to prevent prejudice to the proper administration of justice’. But this Court has held in a number of cases that commercial sensitivity can be an appropriate basis for making a suppression or non-publication order: see Australian Broadcasting Commission v Parish (1980) 29 ALR 228 at 235 per Bowen CJ; Australian Competition and Consumer Commission v Cement Australia Pty Ltd (No 2) [2010] FCA 1082 at [23] per Greenwood J; Cyclopet Pty Ltd v Australian Nuclear Science and Technology Organisation [2012] FCA 1326 at [7] per Jacobson J; Australian Competition and Consumer Commission v Air New Zealand Ltd (No 3) [2012] FCA 1430 (‘Air New Zealand (No 3)’) at [35]; Australian Competition and Consumer Commission v Origin Energy Electricity Ltd [2015] FCA 278 (‘Origin Energy’) at [148] per Katzmann J; ASE16 v Australian Securities and Investments Commission [2016] FCA 321 at [93] per Markovic J.
There are cogent reasons for this which have variously been described in those cases, but they are generally associated with preserving the integrity of the litigious process, likely to be jeopardised if commercial competitors could benefit from court ordered production of trade secrets by parties to a suit. That said, it is important to recall that the order must be necessary to protect the administration of justice. It can readily be imagined that a carte blanche approach to applications for s 37AF orders for which commercial confidentiality is claimed as a basis, would jeopardise the interest the public has in being able to access court documents under the Federal Court Rules 2011 (Cth) or to engage meaningfully with reasons published by the Court. As I have explained at [6(6)] of these reasons above, the safeguarding of that interest as a primary objective of the administration of justice is a mandatory consideration for the Court. Particularly is that so in cases such as the present, where the Agreement, and its interpretation, may become a central plank in the ultimate resolution of the proceeding, and thus, to the intelligibility of future reasons delivered by the Court.
BSA submits that most of the information over which it seeks non-publication orders was “provided by BSA to the applicants (a) on a confidential basis, (b) for the purposes of mediation, and (c) subject to confidentiality undertakings.” Having regard to the evidence before me, particularly Mr Becker’s affidavit of 21 July 2022 and exhibit VA-17 to the Second Antzoulatos Affidavit, I accept this submission. BSA have not taken a “carte blanche approach” to the material over which it seeks non-publication orders. Instead, the material identified in their submissions and evidence is, save for the material discussed immediately below, specific, targeted and demonstrate that BSA’s commercial competitors could benefit from the disclosure of this material which discloses information about BSA’s finances and business model which are not publicly available. I am therefore satisfied that non-publication orders are necessary to prevent prejudice to the proper administration of justice.
I have not made non-publication orders over the information disclosed in parts of Mr Becker’s affidavit, namely, parts of paragraphs 10, the whole of paragraphs 11, 12 and 15. These paragraphs discuss BSA’s affairs in a general manner and I do not accept that if this information were in the public domain, a commercial competitor of BSA would be likely to gain an advantage over BSA such that it would be “likely to have a significant impact on [BSA’s] business and profitability” or that the administration of justice would be prejudiced by its disclosure. Accordingly, the orders I have made do not extend to this information.
The Funder’s proposed non-publication orders
On 20 July 2022 and 12 August 2022, the Funder made submissions seeking non-publication orders. The Funder initially sought non-publication in relation to a broader range of material in the affidavit of Stephen Conrad dated 4 July 2022, however, this was narrowed by its submissions of 12 August 2022. The application for non-publication orders is now pressed by the Funder on three bases. First, that disclosure of certain material should be prevented because it is confidential and subject to claims for legal professional privilege by either the Funder or the applicant. Second, because the material is subject to a contractual obligations of confidentiality. Third, because the material is commercially sensitive.
With respect to the material under the first basis, the Funder seeks non-publication orders over three documents, being:
(1)Paragraph 51 of the 4 July 2022 affidavit of S Conrad, being a reference to Mr Conrad’s view on the legal opinion expressed within the Counsel Opinion (para [51]);
(2)Exhibit SC-1 to the 4 July 2022 affidavit of S Conrad, being a copy of Ms Lisa Brentnall’s report to the Funder’s CAC (SC-1); and
(3)Exhibit SC-2 to the 4 July 2022 affidavit of S Conrad, being a copy of the minutes of the meeting of Funder’s CAC of 30 April 2019 (SC-2).
The claim with respect to para [51] refers to Mr Conrad’s view on the advice given in the Counsel Opinion. I need not decide whether the Funder can properly claim legal professional privilege or “common interest privilege” over this material, as they submitted. For the reasons stated at [243] above, I am satisfied that the Counsel Opinion and Mr Conrad’s discussion of its contents at para [51], is confidential and ought to be the subject of non-publication orders.
Turning to SC-1 and SC-2, I note that the applicants wrote to my Chambers on 12 August 2022 and confirmed that they also made their own claim of confidentiality over SC-1 and SC-2, adopting the Funder’s submissions that those documents were covered by legal professional privilege. A claim of privilege is a proper basis for the making of confidentiality or non-publication orders: see McGraw Hill at [120]. I accept that SC-1 and SC-2 are confidential. I accept that parts thereof are also subject to claims for legal professional privilege by the Funder. However, I note that there are sections of those documents which were disclosed in Mr Conrad’s 4 July 2022 affidavit over which no claim of confidentiality is made and there is, therefore, an inconsistency between Mr Conrad’s conduct and maintenance of confidentiality over the entirety of SC-1 and SC-2 which effects a waiver of any legal professional privilege the Funder may have held over those documents: see Mann v Carnell (1999) 201 CLR 1 at [28] (Gleeson CJ, Gaudron, Gummow and Callinan JJ). I will make orders for SC-1 and SC-2 to be suppressed other than where confidentiality has been waived (see Schedule 3 to the orders which accompany these reasons). I note further that in so far as these reasons refer to the contents of SC-1 and SC-2, I have regarded the need to maintain open justice as paramount to the interest in the proper administration of justice.
With respect to the material identified under the second basis above at [248], the document to which these proposed orders relates is Exhibit SC-4 to the 4 July 2022 affidavit of S Conrad, being a copy of the Funder’s ‘Portfolio Adverse Costs Insurance Policy’ with AmTrust. I am satisfied that the material is the subject of contractual confidentiality obligations, referred to in Mr Conrad’s affidavit at Schedule A, item 12, and is properly the subject of non-publication orders.
With respect to the third basis above at [248], the Funder seeks orders over paragraph [25] of Mr Conrad’s 4 July 2022 affidavit which it submits is commercially sensitive. The figure reveals the initial rate of commission of the “gross settlement proceeds” recommended by the CAC of the Funder to their board of directors if the proceeding was “resolved more than 12 months from commencement”. The Funder submits that disclosure of this figure in Mr Conrad’s evidence will reveal the provisional commission rates which the Funder offers to fund proceedings and, together with the rate which is now sought to be claimed, is valuable to its competitors and prospective clients because it reveals the extent to which the Funder may be prepared to discount its commission. The Funder submits that there is no evidence to support the assumption that this information is public and that it is “reasonably foreseeable” that revelation of this information to competitors or future clients “would be exploited to LLS’ detriment.”
In support of this argument, the Funder sought to rely on the observations of Murphy J in Endeavour River at [36]. His Honour there found that the relevant material was commercially sensitive information and accepted the funder’s confidentiality claims. I accept the Funder’s submission in this case that information about the Funder’s preparedness to discount its commission rates in a specific matter is not public or already known to competitors on the evidence before the Court. Therefore, an order to prevent the publication of this information is necessary to prevent prejudice to the proper administration of justice.
The parties are ordered to file the material mentioned in orders [3]-[5] of these reasons on or before 12 December 2022.
THE ORDERS TO BE MADE
The terms of paragraphs [27]-[29] of the Settlement Distribution Scheme which are now marked with placeholders in the Settlement Distribution Scheme approved by my orders on 26 July 2022, need to be reformulated to accord with the distribution of the Settlement Sum contemplated by these reasons. Once that is done, I will make an order that the settlement of this proceeding is approved on the terms of the Settlement Distribution Scheme including the terms of those paragraphs.
The parties (by whom I mean the applicants, BSA and the Funder) are directed to reformulate the terms of paragraphs [27]-[29] of the Settlement Distribution Scheme as earlier proposed and as set out at [236] above, so that those terms accord with these reasons. That reformulation should remove any arrangements which have become redundant, such as the reference in the former paragraph [27] to the “FY 22 Capital Raise Payment”. It should otherwise be consistent with the Settlement Deed in so far as that involves no inconsistency with the distribution contemplated by these reasons. The terms should also be based upon an Administration Cost of $122,500. If leave is sought by Shine and any order made permitting an increase in those costs, orders can be made at a later time adjusting the final distribution under the Settlement Distribution Scheme.
I intend that the first instalment provided by BSA pursuant to the Deed be distributed as soon as practicable and before 23 December 2022. The terms of the reformulated paragraphs should reflect that intent. I appreciate that the distribution to participating group members of the first instalment may require more time because of the capacity provided in the Settlement Distribution Scheme for Assessment Notices to be challenged and reviewed. I would, however, expect that by at least 23 December 2022 the Assessment Notices required to be sent to participating group members pursuant to paragraph [17] of the Settlement Distribution Scheme will have been sent. If there are consequential amendments required to other paragraphs in the Settlement Distribution Scheme beyond the amendments to paragraphs [27]-[29], the parties should identify the proposed amendments. If my intended timing of the distribution cannot be accommodated I expect an affidavit to be provided by the Administrator explaining why. In order to accommodate the intended timing of the first distribution I will direct the parties to provide the reformulated paragraphs (including any consequential amendments) on or before 7 December 2022.
I should further indicate that in addition to providing the revised paragraphs, the parties should provide to my Chambers a document which, by setting out the relevant calculations made, verifies that the deductions allowed are consistent with those contemplated by these reasons. Furthermore, if there is disagreement or other difficulty, my Chambers should be promptly made aware so that immediate steps can be taken to find a prompt resolution.
I certify that the preceding two hundred and fifty-nine (259) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Bromberg. Associate:
Dated: 30 November 2022
SCHEDULE OF PARTIES
VID 488 of 2020 First Cross-Claim
Second Cross-Respondent
SOUTHERN ELECTRICAL AND DATA PTY LTD
Second Cross-Claim
Second Cross-Respondent
ESCOM COMMUNICATIONS PTY LTD
Third Cross-Respondent
MARCOMM COMMUNICATIONS
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