Eckardt v Sims Ltd

Case [2022] FCA 1609

FEDERAL COURT OF AUSTRALIA

Eckardt v Sims Ltd [2022] FCA 1609

File number NSD 220 of 2019
Judgment of: WIGNEY J
Date of judgment: 23 December 2022
Catchwords:  REPRESENTATIVE PROCEEDINGS – settlement approval application – whether Court should approve settlement approval application per s 33V(1) of Federal Court of Australia Act 1976 (Cth) – consideration of applicable principles governing whether settlement approval application is fair and reasonable with regard to group members’ interests as a whole – funding equalisation – whether funding expenses should include applicant’s “after the event” insurance costs – proposed interim and final confidentiality regimes – settlement and confidentiality orders made
Legislation: Federal Court of Australia Act 1976 (Cth) pt IVA, ss 33V, 33V(1), 33V(2), 33X(4), 37AF, 37AG(1)(a)
Cases cited:

Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 3) (2020) 385 ALR 625; [2020] FCA 1885

BMW Australia Ltd v Brewster (2019) 269 CLR 574; [2019] HCA 45

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

Court v Spotless Group Holdings Ltd [2020] FCA 1730

Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) (2006) 236 ALR 322; [2006] FCA 1388

Endeavour River Pty Ltd v MG Responsible Entity Ltd (No 2) [2020] FCA 968

Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia [2022] NSWSC 1076

Perera v GetSwift Ltd (2018) 263 FCR 1; [2018] FCA 732

Wetdal Pty Ltd as Trustee for the BlueCo Two Superannuation Fund v Estia Health Ltd [2021] FCA 475

Williamson v Sydney Olympic Park Authority [2022] NSWSC 1618

Division: General Division
Registry: New South Wales
National Practice Area:  Commercial and Corporations
Sub-area:  Corporations and Corporate Insolvency
Number of paragraphs: 56
Date of hearing: 11 October 2022
Counsel for the Applicant:  Mr W Edwards SC with Mr A Edwards
Solicitor for the Applicant:  William Roberts Lawyers
Counsel for the Respondent:  Mr I Ahmed
Solicitor for the Respondent:  Herbert Smith Freehills

ORDERS

NSD 220 of 2019
BETWEEN:

PETER ECKARDT
Applicant

AND: SIMS LIMITED
Respondent

ORDER MADE BY:

WIGNEY J

DATE OF ORDER:

23 DECEMBER 2022

THE COURT ORDERS THAT:

Approval of settlement

1.Pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (Act), the settlement of the proceeding is approved upon the terms set out in:

(a)the Deed of Settlement at pages 115 to 143 of Exhibit BP-10 to the affidavit of Bill Petrovski sworn on 1 October 2022, as varied by the Deed of Variation at pages 144 to 150 of Exhibit BP-10 (Deed); and

(b)the revised Settlement Distribution Scheme, in the form at pages 15 to 33 of Exhibit BP-13 of the affidavit of Blagoj (Bill) Petrovski sworn on 12 October 2022 (Scheme).

2.Pursuant to s 33ZF of the Act, the Applicant is authorised, nunc pro tunc, to enter into the Deed and to give effect to the settlement and all transactions contemplated by it for and on behalf of the group members as defined in paragraph 2 of the Second…

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Eckardt v Sims Ltd [2022] FCA 1609
Case
[2022] FCA 1609
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CaseChat Overview and Summary

The case of Eckardt v Sims Ltd was heard in the Federal Court of Australia. The dispute involved the approval of a settlement reached in a representative proceeding. The court was tasked with determining whether the settlement was fair and reasonable for the group members, and if the requested confidentiality orders should be granted. The settlement proposed the deduction of substantial legal fees, administrative costs, and funding expenses, including "after the event" insurance costs. The applicant also sought interim and final confidentiality regimes for certain documents.

The court found that the deductions were not disproportionate to the group member recoveries, considering the complexities and risks of the litigation. It concluded that the proposed settlement was fair and reasonable to the group members as a whole. Regarding the confidentiality orders, the court determined that some documents should be permanently non-publishable due to containing confidential legal advice and being subject to legal professional privilege. Other documents were to be non-publishable for a limited period, until 49 days after the settlement approval, to prevent prejudice if an appeal against the settlement approval was filed. The court also addressed the costs associated with the approval application and found the proposed fees and costs to be reasonable.

The court made several orders, including approving the settlement on the terms set out in the Deed of Settlement and the revised Settlement Distribution Scheme. It authorised the applicant to enter into the Deed and give effect to the settlement on behalf of the group members. The court appointed an administrator for the scheme and approved the amounts to be deducted from the settlement sum. It also made confidentiality orders for certain documents and vacated previous costs orders. The proceeding was to be dismissed after the distribution under the scheme was complete.

Orders

Orders of the court

Approval of settlement

1. Pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (Act), the settlement of the proceeding is approved upon the terms set out in:

(a) the Deed of Settlement at pages 115 to 143 of Exhibit BP-10 to the affidavit of Bill Petrovski sworn on 1 October 2022, as varied by the Deed of Variation at pages 144 to 150 of Exhibit BP-10 (Deed); and

(b) the revised Settlement Distribution Scheme, in the form at pages 15 to 33 of Exhibit BP-13 of the affidavit of Blagoj (Bill) Petrovski sworn on 12 October 2022 (Scheme).

2. Pursuant to s 33ZF of the Act, the Applicant is authorised, nunc pro tunc, to enter into the Deed and to give effect to the settlement and all transactions contemplated by it for and on behalf of the group members as defined in paragraph 2 of the Second Further Amended Statement of Claim (save for any person who has opted out of the proceeding) (Group Members).

3. Pursuant to s 33ZB of the Act, the persons affected and bound by the settlement of the proceeding are the Applicant, Respondent, Group Members, William Roberts Pty Ltd and the Funder.

Referee’s Reports

4. Pursuant to s 54A of the Act and r 28.67 of the Federal Court Rules 2011 (Rules), the Court adopts in full the two reports of the Referee appointed pursuant to order 18 of the Court’s orders made on 6 July 2022, being the reports from Ian Ramsey-Stewart dated 23 September 2022 and 28 September 2022, as provided by Mr Ramsey-Stewart to the Associate to Wigney J.

Appointment of Administrator

5. Pursuant to ss. 33ZF and 23 of the Act, William Roberts Pty Ltd is appointed Administrator of the Scheme, to act in accordance with the Scheme and have the powers and immunities contemplated by the Scheme.

Approval of amounts to be deducted pursuant to the Scheme

6. Pursuant to s 33V of the Act, the following amounts are approved for the purposes of the Scheme (utilising defined terms from it):

(a) the amount of $6,259,515.64 for “Project Costs” to be paid to the Funder, comprising the sum of: (A) the amount of $5,461,430.45 legal costs and disbursements in including the fees paid to the Referee in the amount of $27,500, and (B) the amount of $798,085.19 to be paid to the Funder in respect of after-the-event insurance premiums, including applicable tax;

(b) the amount of $5,440,557.67 for “Funding Commission” to be paid to the Funder;

(c) the amount of $3,022,684.49 for “Unpaid Legal Costs” to be paid to William Roberts;

(d) an amount up to $241,123.95 for “Administration Costs”; and

(e) the amount of $10,000 to be paid to the Applicant for the “Applicant’s Reimbursement Payment”.

Deemed Registrant

7. Further to Order 6 made on 6 July 2022, the person identified at paragraph 11(b) of the affidavit of Blagoj (Bill) Petrovski sworn on 12 October 2022 be treated as a “Registered Group Member” for the purposes of the Scheme.

Costs and security

8. Order 4 of the orders made on 13 August 2021 requiring the provision of security for costs is vacated and all deeds of indemnity executed and provided by ICP Capital Pty Ltd and AmTrust Europe Limited as security for the Respondent’s costs, be returned by the Respondent to the Applicant by providing them to the Applicant’s solicitors or destroyed by the Respondent within 56 days from the date of these orders.

9. Pursuant to r 2.43 of the Rules, the monies paid into Court on 7 December 2020 in the amount of $40,000 pursuant order 5 of the orders made by the Court on 1 December 2020 as security for the Respondent’s costs, be returned to the Applicant by deposit into the Applicant’s solicitors’ trust account. The Applicant’s Solicitors are to pay the $40,000 to the Funder within 5 business days of receipt as cleared funds into their trust account.

10. All costs orders made to date in the proceeding are vacated.

11. No order as to costs.

Dismissal after completion of distribution

12. The proceeding is dismissed 7 days after the Administrator (as that term is defined in the Scheme) notifies the Court and the parties in writing that the distribution under the Scheme is complete.

13. Upon the dismissal of the proceeding, the Respondent, and the Respondent’s legal representatives are released from the undertaking to the Court noted in the Court’s orders dated 21 August 2020.

Confidentiality orders

14. Until further order, pursuant to ss. 37AF and 37AG(1)(a) of the Act, and in order to prevent prejudice to the proper administration of justice, the material identified in Annexure A to these orders is:

(a) to be treated as confidential;

(b) not to be published or made available and any electronic version thereof is to be treated in an analogous fashion;

(c) not to be disclosed to any person other than:

(i) the Court;

(ii) the Applicant and his legal representatives; or

(iii) ICP Capital Pty Ltd and Investor Claim Partner Pty Ltd (together, ICP or Funder) and their legal representatives; and

(d) not to be disclosed to the Respondent or its legal representatives, other than to the extent that the material identified in Annexure A has previously been disclosed to them during this proceeding.

15. Until 49 days from the date of any order approving the proposed settlement in these proceedings under s 33V of the Act, and in order to prevent prejudice to the proper administration of justice, the material identified in Annexure B to these orders is:

(a) to be treated as confidential;

(b) not to be published or made available and any electronic version thereof is to be treated in an analogous fashion;

(c) not to be disclosed to any person other than:

(i) the Court;

(ii) the Applicant and his legal representatives; or

(iii) ICP and its legal representatives; and

(d) not to be disclosed to the Respondent or its legal representatives, other than to the extent that the material identified in Annexure B has previously been disclosed to them during this proceeding.

16. Within 28 days from the date of these orders, the Applicant is to file with the Court redacted copies of each of the documents set out in Annexures A and B (except those documents filed by the Funder set out in order 17 below), with those redactions to be applied in accordance with the details set out in Annexures A and B.

17. Within 28 days from the date of these orders, the Funder is to file with the Court a redacted copy of the affidavit of John Walker affirmed 11 October 2022 (with Confidential Exhibit JW-2) with those redactions to be applied in accordance with the details set out in Annexure B.

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

Full text does not contain this section.

Decision

Reasons for decision

In my view, the overall deductions are not disproportionate to the group member recoveries in all the circumstances. That is so given the difficult and complex nature of the litigation, the risks inherent in such litigation and the lateness of the proposed settlement.CONCLUSION IN RESPECT OF THE FAIRNESS OF THE SETTLEMENT Having considered the detailed evidence adduced by the applicant and the written and oral submissions advanced on the applicant’s behalf, I am satisfied that the proposed settlement is fair and reasonable to the group members as a whole and should be approved. I propose to make the orders sought by the applicant to approve and give effect to the settlement. CONFIDENTIALITY The applicant has sought suppression or non-publication orders pursuant to s 37AF and s 37AG(1)(a) of the FCA Act in respect of certain documents on the basis that such orders are necessary to prevent prejudice to the proper administration of justice. There are two broad classes of documents in respect of which the orders are sought. As will be seen, the confidentiality orders applicable to the second category operate for only a limited period of time. The first category, detailed in ‘Annexure A’ to the proposed orders, includes the confidential opinions of counsel in respect of the proceeding and the proposed settlement. I am satisfied that it is appropriate to make a non-publication order in respect of those opinions given that they contain confidential legal advice that would in any event be the subject of legal professional privilege. Confidentiality orders should generally be made in respect of documents of this nature so as to encourage candour in respect of settlement approval applications. The other document in the first category of documents is the ATE insurance policy taken out by the funder. That policy contains a confidentiality clause. It is apparently on that basis that the non-publication order is sought. Despite that confidentiality clause, I am not persuaded that disclosure of the terms of the policy would cause prejudice to the proper administration of justice, other than perhaps in circumstances where the settlement was not approved. I will, however, include this document in the orders which relate to the second category of documents. If any person wishes for me to make an order specifically protecting this document from disclosure for a longer period, they may apply for such an order within 49 days after the approval of the settlement. The second category of documents, detailed in ‘Annexure B’ to the proposed orders, are documents the disclosure of which would cause prejudice to the proper administration of justice if the settlement is not approved. The non-publication order sought in respect of those documents expires 49 days after the approval of the settlement. That is no doubt designed to take into account the possibility, remote as it may seem, that an appeal is filed in respect of the approval of the settlement. I am satisfied that it is appropriate to make the limited non-publication orders in respect of the second category of documents on the basis that they would prejudice the applicant and group members if the orders approving the settlement are the subject of a successful appeal and the matter does not ultimately settle.

Ratio Decidendi

Legal Principle Established

It suffices at this point to note that the referee separately addressed the prospective fees and costs associated with the approval application and hearing. He concluded that $142,980.89 would be reasonable fees for the approval of the settlement. That figure was based on an estimate provided by the applicant’s solicitors, plus a 15 per cent buffer to account for possible unforeseen complications. While this appears to be a fairly large amount for an unopposed approval application, I am satisfied, based on the referee’s opinion, that it is not unreasonable. I should also note in this context that the applicant adduced, as would be expected, fairly voluminous evidence in support of the approval application. That evidence included the confidential opinions of counsel.Administration costs An amount of $241,123.95 is to be deducted from the settlement sum on account of the anticipated costs of administering the settlement scheme. That sum is to be paid to the settlement administrator, who also happens to be the applicant’s solicitors. The reasonableness of the proposed deduction for administration costs is also addressed in the referee’s report. The work associated with settlement administration in a case such as this includes: the compilation of claims information; consultation with group members; the calculation of entitlements; the review of those calculations where necessary; and the distribution of payments. On the basis of 1450 participating group members, the administration cost per group member is just over $165. The reasonableness of that amount is confirmed by the referee. There is no apparent reason why the referee’s opinion should be discounted or the reasonableness of the deduction doubted.Legal fees and disbursements The total amount referable to legal fees and disbursements which is proposed to be deducted from the settlement sum is $8,484,114.94. That amount is made up of two sums of money: first, the sum of $5,461,430.45, which is the amount of the legal fees and disbursements that has already been paid to the applicant’s solicitors by the litigation funder and is a component of the “project costs” to be paid to the funder; and second, the sum of $3,022,684.49, which is the amount of the legal fees and disbursements not yet paid to the applicant’s solicitors. The latter figure includes the approval costs and is to be paid to the applicant’s solicitors. It is worth noting that of the almost $8.5 million paid or payable in respect of legal fees and disbursements, approximately $2.3 million is referable to fees paid or payable to experts retained by the applicant and about $650,000 represents fees paid or payable to counsel. The total amount paid or payable in respect of legal fees and disbursements referable to the conduct of the proceeding is, on just about any view, a staggeringly large amount. That is so even having regard to the nature and complexity of the proceeding, the length of time it was on foot, and the fact that it was settled fairly shortly before trial.