FEDERAL COURT OF AUSTRALIA
Clarke v Sandhurst Trustees Limited (No 2) [2018] FCA 511
File number: QUD 591 of 2015 Judge: LEE J Date of judgment: 11 April 2018 Catchwords: REPRESENTATIVE PROCEEDINGS – settlement approval pursuant to s 33V of Federal Court of Australia Act 1976 (Cth) – whether the proposed settlement is fair and reasonable in the interests of group members – consideration of relevant factors in relation to reasonableness of settlement – where proposed deductions from the settlement sum, taken individually, are fair and reasonable, but taken collectively cause a lower return to group members – very borderline case Legislation: Corporations Act 2001 (Cth), Ch 2L, ss 283DA, 283DA(b)(ii)
Federal Court of Australia Act 1976 (Cth), Pt IVA, ss 33V, 33ZF
Cases cited: Blairgowrie Trading Ltd v Allco Finance Group Ltd (res & mgrs apptd) (in liq) (No 3) [2017] FCA 330; (2017) 343 ALR 476
Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147; (2009) 180 FCR 11
Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1468
Date of hearing: 28 March, 11 April 2018 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 36 Counsel for the Plaintiff: Mr A Martin SC Solicitor for the Plaintiff: Shine Lawyers Counsel for the Defendant: Mr M Hoffmann QC Solicitor for the Defendant: Clyde & Co Australia Counsel for the Interveners: Mr N Hutley SC and Mr C Colquhoun Solicitor for the Interveners: Corrs Chambers Westgarth ORDERS
QUD 591 of 2015 BETWEEN: GRAEME CLARKE AND MARION CLARKE IN THEIR CAPACITY AS TRUSTEES OF THE G & M CLARKE SUPERANNUATION FUND
Plaintiffs
AND: SANDHURST TRUSTEES LIMITED ACN 004 830 737
Defendant
JUSTKAPITAL PORTFOLIO PTY LTD
First Intervener
JUSTKAPITAL LITIGATION PTY LTD
Second Intervener
JUDGE:
LEE J
DATE OF ORDER:
11 APRIL 2018
THE COURT ORDERS THAT:
In these Orders:
Administration Costs has the same meaning as it does in the Settlement Deed.
Group Member(s) means the persons and entities described in paragraph 5 of the further amended statement of claim, other than any such person or entity who has opted out of the proceeding.
Indemnity Fee has the same meaning as it does in the Settlement Scheme.
Plaintiffs’ Costs has the same meaning as it does in the Settlement Deed.
Settlement Deed means the Settlement Deed executed on 22 December 2017 which is behind tab 1 of Confidential Exhibit JMS1 to the affidavit of Janice Mary Saddler affirmed on 6 February 2018.
Settlement Scheme means the Settlement Scheme which is behind tab 2 of Confidential Exhibit JMS1 to the affidavit of Janice Mary Saddler affirmed on 6 February 2018, as amended on 11 April 2018.
1.Pursuant to…
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- Case
- [2018] FCA 511
- Decision Date
CaseChat Overview and Summary
The court had to determine if the proposed settlement was fair and reasonable, despite the deductions from the settlement sum being individually fair and reasonable but collectively causing a lower return to the group members. The court considered the prevailing market parameters for the funding fee and the complexity and cost of the litigation, given the relatively modest damages sought to be recovered. The court also took into account the evidence provided by Ms Jones, who stated that it is not unusual for group members to receive less than half the proceeds of a settlement. However, the court disagreed with this statement, asserting that such cases should not be considered 'not unusual' in the context of representative proceedings.
After considering all the factors, the court concluded that the proposed settlement was fair and reasonable in the interests of the group members. The court approved the settlement on the terms set out in the Settlement Deed and the Settlement Scheme, including the payment of the Indemnity Fee, Plaintiffs' Costs, and Administration Costs. The court also appointed Shine lawyers as the administrator of the Settlement Scheme and dismissed the amended originating application and the further amended statement of claim.
In summary, the court approved the proposed settlement in Clarke v Sandhurst Trustees Limited (No 2) after considering the fairness of the settlement sum, legal fees, and funding fee. The court found the settlement to be fair and reasonable in the interests of the group members, despite the relatively low return to them. The court also made orders regarding the administration of the Settlement Scheme, costs, and confidentiality of certain exhibits.
Orders
Orders of the court
In these Orders:
Administration Costs has the same meaning as it does in the Settlement Deed.
Group Member(s) means the persons and entities described in paragraph 5 of the further amended statement of claim, other than any such person or entity who has opted out of the proceeding.
Indemnity Fee has the same meaning as it does in the Settlement Scheme.
Plaintiffs’ Costs has the same meaning as it does in the Settlement Deed.
Settlement Deed means the Settlement Deed executed on 22 December 2017 which is behind tab 1 of Confidential Exhibit JMS1 to the affidavit of Janice Mary Saddler affirmed on 6 February 2018.
Settlement Scheme means the Settlement Scheme which is behind tab 2 of Confidential Exhibit JMS1 to the affidavit of Janice Mary Saddler affirmed on 6 February 2018, as amended on 11 April 2018.
1. Pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (Act) the settlement of the representative proceeding and the claims of the plaintiffs and each Group Member be approved on the terms set out in the Settlement Deed and the Settlement Scheme including payment in accordance with the Settlement Scheme of:
(a) the Indemnity Fee in the amount of $5,055,000.00;
(b) the Plaintiffs’ Costs in the amount of $4,909,024.49; and
(c) the Administration Costs in the amount of $260,000.00 (subject to further order).
2. Shine lawyers be appointed administrator of the Settlement Scheme.
3. The amended originating application and the further amended statement of claim be dismissed.
4. The administrator and any Group Member have leave to approach the Court to seek directions in relation to the administration of the Settlement Scheme.
5. Forthwith upon the conclusion of the administration of the Settlement Scheme, the administrator is to file a report which includes confirmation of the amount that has been charged in relation to the administration of the Settlement Scheme, which will be considered by the Court in the determination of any variation to Order 1(c) above.
6. All previous unsatisfied costs orders in the proceeding be vacated.
7. There be no order as to costs of the proceeding.
8. Pursuant to ss 37AF and 37AG(1)(a) of the Act, until further order of the Court, in order to prevent prejudice to the proper administration of justice, Exhibit JMS1 to the confidential affidavit of Janice Mary Saddler affirmed on 13 March 2018 is not to be published or made available and not to be disclosed to any person or entity.
9. Pursuant to ss 37AF and 37AG(1)(a) of the Act, until further order of the Court, in order to prevent prejudice to the proper administration of justice, Confidential Exhibit DJ3 to the affidavit of Diane Lesley Jones affirmed 11 April 2018, is not to be published or made available or disclosed to any person or entity other than Counsel for the parties to the proceeding.
10. Other than Orders 8 and 9 (which apply generally), pursuant to s 33ZB of the Act, the persons and entities affected and bound by the balance of these orders, including the s 33V order, are the plaintiffs, the defendant and the Group Members who have not opted out of the proceeding.
11. The hearing commencing on 29 October 2018 be vacated.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
In considering the proposed funding fee, I have had regard to Mr Hutley’s submissions. At least at the present stage of the evolution of funded litigation in this Court, the funding agreement is not out of the ordinary. The amounts proposed to be charged by the funder are within what might be regarded as prevailing market parameters and, indeed, the 30 per cent figure now pressed (together with the abandonment of the management fee) could be regarded as within the range of comparable amounts charged in similar proceedings (expressed as a pure percentage). I stress the words as a pure percentage because pointing to a figure which is commercial does not address the issue that I have raised above about what I regard as the structural difficulty occasioned by litigation of this complexity and cost when the damages sought to be recovered, on a best case scenario, are relatively modest.D CONSIDERATION It follows from what I have set out above that I am faced with an unusual scenario where I have come to the conclusion that the ‘headline’ Settlement Sum is fair, the amount of legal fees being charged is fair, and the funding fee pressed on behalf of the funder is also fair. The question which arises is, when each of these elements of the proposed settlement are put in the balance, is the result in terms of the return to group members something which is fair and reasonable and in their interests? To use a word I have used in a different context in this judgment, this involves the consideration of a ‘counterfactual’ (given that I do not propose to interfere with the funding arrangements), which is the progression of this proceeding to an initial trial. In my view, when forming a view for s 33V purposes, this is the appropriate counterfactual, even though there is no doubt some prospect that if the approval application is refused, a different bargain may be struck between the parties, subject to Court approval. I referred earlier to the evidence of Ms Jones who, in [40] of her affidavit, deposes to the following: In my experience, it is not unusual for group members to not receive 50% of the proceeds but the settlement is approved by the Court as fair and reasonable. Although it is desirable that group members receive at least 50% of the settlement, there are other factors which may mean that this is not possible, for example, the risks involved, the complexity of the case, the costs needed to prosecute the case and the possibility that but for the funding the case would not proceed. I confess that this evidence does not accord with my experience. That is, I do not consider a settlement which provides for group members receiving less than half the proceeds of the settlement as, in any way, usual. Indeed, in my experience, applicants have been somewhat chary in putting forward settlements which would involve such an outcome. This is not to say that there have not been cases where such settlements have been approved and, indeed, I am aware of such cases, but they cannot be said to be ‘not unusual’. There must be a good reason why a settlement could be considered fair from the perspective of group members, when the lawyers, experts and the funders get more out of it than the people who have allegedly suffered a wrong. Such cases arise, but it would not be a good reflection on how Part IVA of the Act operates if they could be described as ‘not unusual’.