Ellis v Commonwealth of Australia

[2023] NSWSC 550

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Ellis v Commonwealth of Australia [2023] NSWSC 550

Hearing dates:

17 April 2023

Date of orders:

17 April 2023 and 20 April 2023

Decision date:

25 May 2023

Jurisdiction:

Common Law

Before:

Beech-Jones CJ at CL

Decision:

See Schedule

Catchwords:

CIVIL PROCEDURE — representative proceedings — settlement or discontinuance — Court approval pursuant to s 173 of Civil Procedure Act 2005 (NSW) — Stolen Generations — amendment of group definition so that those First Nations children in the Northern Territory removed by authorities between 1912−1973 eligible to participate in the Territories Stolen Generations Redress Scheme are to be removed — remainder of definition consists of Deceased Removed Children and Kinship Group Members — $50.45 million settlement sum — reasonableness of settlement distribution scheme including deductions for plaintiff’s legal costs and disbursements, special payments to original and substituted lead plaintiffs, funder’s commission and after-the-event insurance premium, and costs of administration — settlement scheme provides payments to estates and family members of Deceased Removed Children and Kinship Group Members and to living Kinship Group Members —reasonable settlement as between the parties and as between group members — orders made approving settlement

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Court Suppression and Non-Publication Orders Act 2010 (NSW)

Cases Cited:

Blairgowrie Trading Ltd v Allco Finance Group Ltd (in liq) (No 3) (2017) 343 ALR 476; [2017] FCA 330

BMW AustraliaLtdv Brewster (2019) 269 CLR 574; [2019] HCA 45

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

Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527

Cubillo v Commonwealth (No 2) (2000) 103 FCR 1; [2000] FCA 1084

Cubillo v Commonwealth (2001) 112 FCR 455; [2001] FCA 1213

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

Findlay v DSHE Holdings Ltd [2021] NSWSC 249; (2021) 150 ACSR 535

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

Haselhurst v Toyota Motor Corporation t/as Toyota Australia (2020) 101 NSWLR 890; [2020] NSWCA 66

Hopkins v Macmahon Holdings Ltd [2018] FCA 2061

Peterson Superannuation Fund Pty Ltd v Bank of Queensland (No 3) [2018] FCA 1842; (2019) 132 ACSR 258

Quirk v Suncorp Portfolio Services Ltd (No 2) [2022] NSWSC 1457

Williams v Minister, Aboriginal Land Rights Act 1983 [1999] NSWSC 843; [1999] Aust Torts Report 81-526

Williams v Minister, Aboriginal Land Rights Act 1983 [2000] NSWCA 255; [2000] Aust Torts Reports 81-578

Williamson v Sydney Olympic Park Authority [2022] NSWSC 1618

Category:

Principal judgment

Parties:

Natalie Ellis as representative of the estate of Marita Parnell (Plaintiff)
Commonwealth of Australia (Defendant)
LSS Fund Services Pty Ltd ABN 51 736 975 213 as Trustee for Litigation Lending Fund 1 (Intervener)

Representation:

Counsel:
Mr L Armstrong KC; Mr AH Edwards (Plaintiff)
Ms V Thomas; Mr D Reynolds (Defendant)
Mr WAD Edwards SC; Ms M Cowden (Intervener; LLS)

Solicitors:
Shine Lawyers (Plaintiff)
Australian Government Solicitor (Defendant)

File Number(s):

2021/117924

JUDGMENT

1. This judgment constitutes the reasons for the orders made on 17 April 2023 and 20 April 2023 amending the group definition in representative proceedings and approving a settlement of those proceedings under s 173 of the Civil Procedure Act 2005 (NSW) (the “CPA”).

Summary

2. In April 2021, the original lead plaintiff, Ms Eileen Cummings, filed a statement of claim in this Court commencing these proceedings against the Commonwealth of Australia. The proceedings are a representative action within the meaning of Pt 10 of the CPA. At that time, the group members consisted of all First Nations children located in the Northern Territory who were removed by the relevant authorities from their families in the period 1931−1973 (the “Removed Children”) as well as close family members of those children, ostensibly, their parents and siblings (“Kinship Group Members”).

3. In August 2021, the Commonwealth announced the Territories Stolen Generations Redress Scheme (the “Redress Scheme”). The Redress Scheme is available to First Nations persons removed by authorities from their families or communities in the Northern Territory, Australian Capital Territory and Jervis Bay Territory, and who were alive as at 5 August 2021.

4. The announcement of the Redress Scheme prompted the parties to address the resolution of these proceedings. Through a series of discussions that culminated in a mediation held in August 2022, the parties reached an in‑principle settlement. The settlement was recorded in a Deed entered into on 20 October 2022 between the plaintiff, the Commonwealth and the litigation funder, LLS Fund Services Pty Ltd ABN 51 627 975 213 as Trustee for Litigation Lending Fund 1 (“LLS”) (the “Settlement Deed”). [1] The Settlement Deed provided that those Removed Children who could participate in the Redress Scheme would be taken out of the proceedings with a view to them participating in that scheme. In respect of those who remained within the amended group definition, the Settlement Deed provided that the Commonwealth would make a payment of $50.45 million (the “Settlement Sum”) which, after deductions for LSS’ commission and the plaintiff’s legal costs and disbursements, would be made available to the “estates” of Removed Children who had passed away and could not participate in the Redress Scheme (“Deceased Removed Children”) as well as Kinship Group Members and the estates of Kinship Group Members.

   1. Pages 12 to 22 of exhibit TRG-1 to the affidavit of Tristan Roland Gaven sworn 21 October 2022; The “Gaven Affidavit”.

5. On 28 October 2022, I made orders substituting Ms Natalie Ellis for Ms Cummings as the lead plaintiff. Ms Cummings is eligible to participate in the Redress Scheme and, as I understand, has chosen to do so. Ms Ellis is a Kinship Group Member. On that same day, I also made orders for the issuing of opt out notices and the distribution of information about the proposed settlement throughout the Northern Territory. This took place over the period from November 2022 to February 2023. One issue that arose during that process was a concern that the period referrable to when First Nations children were removed only commenced in June 1931. On 25 January 2023, I granted an application to extend the group definition so that it included First Nations children removed from 8 January 1912. [2]

   2. Ellis v Commonwealth of Australia, unreported, 25 January 2023, 2021/00117924. The pleading contends that the Commonwealth assumed control of the Northern Territory from South Australia from 1 January 2011.

6. On 17 April 2023, I heard an application brought by Ms Ellis to amend the group definition to remove those eligible to participate in the Redress Scheme. I also heard an application for the approval of the settlement. Having been provided with much of the material in advance, at the conclusion of oral argument, I made orders in the terms sought and stated that reasons would follow. On 20 April 2023, I made further orders that had been foreshadowed during the hearing, also with reasons to follow. This judgment constitutes those reasons.

7. It is not the function of this Court in considering whether or not to approve a settlement of a representative action to try the case that settled or make findings of fact about a dispute that has been resolved. Instead, the Court’s role is to consider the fairness and reasonableness of the proposed settlement, both as between group members and the defendant(s) and as between group members themselves. It suffices to state that, although at one level the payouts to group members will be relatively modest compared to the harm that was suffered, they still represent a very good outcome when consideration is given to the many legal and evidential hurdles the claims faced and the significant delay that was likely to ensue had the matter been litigated. The costs and fees that are deducted from the settlement are reasonable given the risks involved. This case represents a positive example of the benefits of representative actions.

8. The First Nations children who were taken from their families in the Northern Territory during the period the subject of the plaintiff’s claim form part of what is commonly referred to as the “Stolen Generation”. That phrase refers to those First Nations children who were stolen from their families, communities and culture. However, that is far too brief a statement of the suffering that was occasioned. Cataloguing everything that was taken, and from whom, is simply not possible. The practice of removing First Nations children from their families and the reasons for that practice remain highly controversial. For many, this period of removals represents another dark chapter in this country’s treatment of its First Nations people. However, like many other instances in our history, such injustices do not necessarily sound in a legal remedy or vindication. Injustices within the law are not an unknown feature of this country’s treatment of First Nations people. Hopefully, this settlement will provide some measure of justice, or at least recognition of the harm that was done.

The Claim and Component Parts of the Settlement

9. The various iterations of the statement of claim sought damages on behalf of the Removed Children for false imprisonment and negligence. One aspect of the former cause of action pleaded was that the Removed Children were taken without statutory authorisation. Recovery was sought on behalf of Kinship Group Members in negligence for mental harm occasioned by the removals. The statement of claim is detailed and complex. One part of the pleading asserts that, for the period of the claim (being originally from “no later than 12 June 1931 until not earlier than 10 December 1973”), the Commonwealth “established and implemented a system or regime” for the removal of children who were First Nations persons and of “mixed European descent” or “relatively light-skinned complexion”, in circumstances where the child was not “destitute or neglected” as required by the relevant statutory regime then in force. Due to the manner in which the proceedings unfolded, the Commonwealth was not required to, and did not, file a defence. As already noted, the period of removals was later amended on 25 January 2023 to commence from 8 January 1912.

10. The basic elements of the settlement have been outlined above. As between group members and the Commonwealth, the proposed settlement involves the deletion of Removed Children eligible to participate in the Redress Scheme from the group definition and a payment of the Settlement Sum (i.e $50.45 million) to resolve the claims of Ms Ellis and the balance of group members. The Settlement Deed includes the provision of a release by Ms Ellis and the remaining group members in favour of the Commonwealth, its officers, servants and in respect of “all Claims made in or arising out of any matter which is or ever has been the subject of the Proceedings or arising from or in connection with the conduct of Proceedings”. [3] There is nothing unusual about this form of release. It rises no higher than the binding effect of any judgment in the proceedings had the claims been fully litigated.

    3. TRG-1 at p 18.

11. Annexed to the Settlement Deed is a document outlining the proposed “Settlement Distribution Scheme” (“SDS”). It specifies the basis for distributing the proceeds of the settlement between the plaintiff and group members. [4] The proposed orders and the SDS contemplate the appointment of two members of the plaintiff’s solicitors, Shine Lawyers, as Administrators. Subject to the Court’s approval, the SDS provides for various deductions from the Settlement Sum, which I will outline shortly, as well as procedures for the submission and assessment of claims. Proofs of claims are to be lodged with the Administrators by group members. In the case of “Deceased Claimants” (i.e Removed Children or Kinship Group Members who have passed away), provision is made for either their legal representative, spouse (if there is no such representative) or children (if no spouse survives) to submit proofs of claims.

    4. TRG -1 p 23; Exhibit VA2 to the affidavit of Vicky Antzoulatos sworn 30 March 2022 at pp 319 to 336 (the “First Antzoulatos Affidavit”).

12. Claims under the SDS are to be assessed and amounts distributed in accordance with the “Assessment Methodology Schedule”. Under that schedule, all payments in respect of Deceased Kinship Group Members will be the same base amount from the pool. Claimants who are (living) Kinship Group Members will receive twice that base amount and the payments in respect of Deceased Removed Children will be three times that base amount. [5] With Deceased Claimants, payments will be made to the executors of any will, their surviving spouse (if there are no executors) or surviving children (if there is no surviving spouse). [6] It is not anticipated that many of the Deceased Claimants had a will or an appointed executor.

    5. VA 2 at p 334.

    6. VA1 pp 29 to 30.

13. One aspect of the settlement is that group members who wished to participate in the SDS were required to register with the plaintiff’s solicitors by 28 February 2023 (the “Registration Date”). Group members who did not register by this date continued to be group members, but their claims merged in the settlement with no entitlement to compensation. This Court was asked to give effect to this by making orders approving a form of “class closure”, a matter I address below.

14. On this application, it was estimated that the number of Deceased Removed Children in respect of whom claims have been lodged is 1008, the number of Kinship Group Members who had lodged claims is 105 and the number of Deceased Kinship group members in respect of whom claims have been lodged is 97. Based on those figures, and having regard to the proposed deductions, it was estimated that the base amount payable in respect of Deceased Kinship Group Members will be approximately $11,800, the amount payable to (living) Kinship Group Members will be approximately $23,600 and the amount payable in respect of Deceased Removed Children will be approximately $35,500.

15. The deductions from the Settlement Sum for which approval were sought are as follows:

(i)   $1.9 million for the plaintiff’s legal costs and disbursements;

1. “Up to” $3 million for the cost of administering the settlement;

2. “Special payments” of $10,000 to the original lead plaintiff, Ms Cummings, and $5,000 to the substituted lead plaintiff, Ms Ellis;

3. $5.5 million for LSS’ commission or funding costs; and

4. $1 million as a component of the plaintiff’s legal costs and disbursements, being the premium cost for “after-the-event” insurance.

Approach to Approving Settlements of Representative Actions

16. Sections 173, 177 and 183 of the CPA provide:

“173 Approval of Court required for settlement and discontinuance

(1)   Representative proceedings may not be settled or discontinued without the approval of the Court.

(2)   If the Court gives such approval, it may make such orders as are just with respect to the distribution of any money, including interest, paid under a settlement or paid into the Court.

177 Judgment—powers of the Court

(1)   The Court may, in determining a matter in representative proceedings, do any one or more of the following—

(a)   determine a question of law,

(b)   determine a question of fact,

(c)   make a declaration of liability,

(d)   grant any equitable relief,

(e)   make an award of damages for group members, sub-group members or individual group members, being damages consisting of specified amounts or amounts worked out in such manner as the Court specifies,

(f)    award damages in an aggregate amount without specifying amounts awarded in respect of individual group members.

(2)   In making an order for an award of damages, the Court must make provision for the payment or distribution of the money to the group members entitled.

(3) Subject to section 173, the Court is not to make an award of damages under subsection (1) (f) unless a reasonably accurate assessment can be made of the total amount to which group members will be entitled under the judgment.

(4)   If the Court has made an award of damages, the Court may give such directions (if any) as it thinks just in relation to—

(a)   the manner in which a group member is to establish the member’s entitlement to share in the damages, and

(b)   the manner in which any dispute regarding the entitlement of a group member to share in the damages is to be determined.

183 General power of Court to make orders

In any proceedings (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order that the Court thinks appropriate or necessary to ensure that justice is done in the proceedings.”

17. In Findlay v DSHE Holdings Ltd [2021] NSWSC 249; (2021) 150 ACSR 535 (“DSHE Holdings”) at [12]−[14], Stevenson J described the principles to be applied in considering applications for approval under s 173 as follows:

“The central question for the Court is whether the proposed settlement is fair and reasonable in the interests of the group members considered as a whole. The Court’s role in relation to group members is supervisory and protective. The Court’s role is analogous to that which it assumes when approving settlements on behalf of persons with a disability.

When considering the reasonableness of the settlement inter partes, the Court is asked to determine whether the settlement is fair and reasonable considering the alternative, which is usually the risks and costs to which the plaintiff group members would be exposed were the matter to proceed to trial.

The question of whether the settlement is reasonable per se cannot be separated from ancillary questions concerning the approval of funding and legal costs. The evaluation of whether a settlement is fair and reasonable must be carried out by reference to what all group members obtain in their hands following the resolution of their individual claims in the event that the settlement is approved.” (citations and quotations omitted)

18. These observations were approved by Rees J in Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia [2022] NSWSC 1076 (“Toyota”) at [19]. Her Honour also observed the following (at [20]):

“[T]he first question is whether the settlement is reasonable inter partes, that is, between the representative plaintiff and defendant in each proceeding. The second question is whether the settlement is fair and reasonable inter se, that is, between group members. In determining these questions, the Court must be satisfied that the settlement has been undertaken in the interests of the group members as a whole and not just in the interests of the representative plaintiff and the defendant: Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 71 FCR 250 at 258 (per Branson J).”

Counsel’s Advice

19. A detailed joint opinion from Senior and Junior Counsel for the plaintiff, Mr Armstrong KC and Mr Edwards, concerning the proposed settlement was tendered on the approval application (the “Opinion”). [7] The Opinion was tendered on the basis that the plaintiff did not seek to waive privilege and confidentiality over it. The Court received the Opinion and made an order under the Court Suppression and Non-Publication Orders Act 2010 (NSW) to preserve the plaintiff’s ability to maintain those claims. It is not necessary to determine whether the orders have that effect.

    7. Exhibit VA3.

20. During his oral submissions, Mr Armstrong KC made various reference to the topics addressed by the Opinion. However, consistent with the plaintiff’s intention not to waive privilege over the Opinion, the submissions were not directed to having the Court adopt the views expressed in the Opinion, much less recite them in its reasons.

19. At the very least, the tendering of the Opinion on this basis enables the Court to be satisfied that the plaintiff and her advisers have considered all the relevant issues relating to the fairness and reasonableness of the settlement. It suffices to states that the Opinion confirms that all those issues have been comprehensively considered. The various matters addressed in this judgment were addressed in the Opinion.

Fair and Reasonable Settlement Inter Partes

22. As the above passage from DHSE Holdings makes clear, one aspect of the approval process is to consider the fairness of the settlement inter partes by comparing the proposed settlement with the various risks and costs the plaintiff and group members would have been exposed to had the matter proceeded to trial. To the extent that this analysis considers the prospects of success of the action which has in any event been compromised by the settlement, then the assessment is necessarily impressionistic. The parties worked hard to compromise their cause of action and thus avoid a judicial determination of their dispute. They do not approach the Court for an advisory opinion on the case that never ran or seek a post-match review of their performance. Allowing for that constraint and bearing in mind that the Commonwealth was never required to file a defence, a consideration of five related matters justifies the conclusion that the settlement is fair and reasonable inter partes.

23. First, it is my impression that the pleaded claims faced a number of significant, although not necessarily insurmountable, legal obstacles including, but not restricted to: whether the Commonwealth was vicariously liable or otherwise liable for the acts of statutory office holders in the Northern Territory during the relevant period; whether the pleaded duty of care was compatible with the statutory scheme surrounding the removal of First Nations children; whether any such duty of care extended to carers and siblings of the children removed and the mental harm they suffered; and whether any limitation periods expired in respect of the pleaded causes of action, assuming they were relied on by the Commonwealth. In that regard, I note that two previous cases raising similar, although not identical, claims were unsuccessful (Cubillo v Commonwealth (No 2) (2000) 103 FCR 1; [2000] FCA 1084 and on appeal (2001) 112 FCR 455; [2001] FCA 1213; Williams v Minister, Aboriginal Land Rights Act 1983 [1999] NSWSC 843; [1999] Aust Torts Report 81-526 and on appeal [2000] NSWCA 255; [2000] Aust Torts Reports 81-578; “Cubillo”).

24. Second, given the passage of time it seems likely that the plaintiff would have encountered significant evidential difficulties in obtaining evidence concerning the removal of First Nations children in individual cases. Many, if not all, of the witnesses who could give evidence of the circumstances surrounding the removals will either have passed away or be very old. While aspects of the general policy applied by the authorities in respect of removals appear to be well documented, it is unclear whether official records of particular removals exist and, even if they do, they may not assist the plaintiff’s case and that of the group members.

25. Third, an estimate of the maximum, or likely, amount of damages that might have been awarded to group members in the event their claims succeeded is difficult to calculate. Nevertheless, if the claim had ultimately been successful, it seems very likely that the amount recoverable by, or in respect of, a removed child would be substantially in excess of those stated in [14], although an assessment of how any such award would translate to the amended group definition is not straightforward. In Cubillo, damages were assessed on a contingent basis, namely, that the two plaintiffs were removed as children without the consent of their mother. [8] The plaintiffs’ damages in Cubillo were assessed at $110,000 and $125,000, with interest only awarded from the date the claims were commenced. Those amounts seem at the low end of the range by contemporary standards.

    8. 103 FCR 1 at [1546].

26. Fourth, had this matter not been settled, then the further delay until judgment at first instance was likely to be considerable. With allowance for significant interlocutory disputes, it is difficult to envisage any hearing commencing within three years. Such a hearing would have likely addressed common questions and the individual claims of a small subset of group members. A hearing would have occupied many months of court time and likely would have encountered logistical difficulties in taking evidence from aged witnesses from the Northern Territory. The preparation of a judgment would have been a lengthy task. In Cubillo, O’Loughlin J reserved for only four months, a prodigious effort given the judgment that was published. Given the novelty of some of the issues raised, it is likely that any first instance judgment in favour of the plaintiff in this case would have been appealed. Absent an agreed resolution, individual claimants could have faced many years before they saw a return from contested litigation. My assessment of the characteristics of the group is that the effect of such delay would have been particularly acute.

27. Fifth, the evidence read on the application confirms that, prior to negotiating the settlement, the plaintiff’s solicitors undertook detailed research to ascertain the likely size of the group and their characteristics. [9] The Opinion reveals that the plaintiff’s legal advisors were aware of the various issues and obstacles the claims faced. The settlement was negotiated by lawyers who knew what they were doing.

    9. The First Antzoulatos Affidavit at [49] to [57]; the Gaven Affidavit at [21] to [27].

28. Accordingly, subject to considering the balance of the matters set out below, I was more than satisfied that the settlement was fair and reasonable inter partes.

Fair and Reasonable Settlement Inter Se

29. Consistent with the above passage from DHSE Holdings, the next issue to consider is the fairness and reasonableness of the settlement as between group members. The plaintiff’s submissions referred the Court to the following passage from the judgment of Moshinsky J in Camilleri v The Trust Company (Nominees) Ltd [2015] FCA 1468 at [43]−[44] as a useful distillation of the approach to adopt:

“The cases indicate a number of factors relevant to the assessment whether a proposed distribution scheme is fair and reasonable having regard to the interests of the group as a whole. Some of these factors are as follows:

(a)   whether the distribution scheme subjects all claims to the same principles and procedures for assessing compensation shares;

(b)   whether the assessment methodology, to the extent that it reflects ‘judgment calls’ of the kind described above, is consistent with the case that was to be advanced at trial and supportable as a matter of legal principle;

(c)   whether the assessment methodology is likely to deliver a broadly fair assessment (where the settlement is uncapped as to total payments) or relativities (where the task is allocating shares in a fixed sum);

(d)   whether the costs of a more perfect assessment procedure would erode the notional benefit of a more exact distribution;

(e)   to the extent that the scheme involves any special treatment of the applicants or some group members, for instance via ‘reimbursement’ payments – whether the special treatment is justifiable, and whether as a matter of fairness a group member ought to be entitled to complain.

There are also procedural factors which relate to the fairness of a proposed distribution process, such as:

(a)   whether appropriate individuals have been nominated to administer the scheme;

(b)   whether the procedures for lodging and assessing claims are appropriate and to be conducted in a timely manner;

(c)   whether the scheme incorporates appropriate ‘checks and balances’, such as procedures for ensuring consistency between assessments and meaningful opportunities for review (and objection) by group members.”

30. The terms of the SDS are outlined above at [11]−[15]. The scheme subjects all claims to the same principles and procedures for assessment. More significantly, although blunt, I am satisfied that the assessment methodology is broadly reflective of the pleaded case, is “supportable as a matter of legal principle”, is likely to deliver a “broadly fair assessment” of the claims relative to one another and that the “costs of a more perfect assessment procedure would erose the notional benefit of a more exact distribution”.

31. The financial costs of assessing the damage suffered by each group member (or each removed child) and then comparing it to other group members (or other removed children) would have been very high. It would have been overwhelmingly likely to consume a very large proportion of the Settlement Sum. Moreover, group members may have been affronted to have their distress compared to other group members and found to be less. The proposed methodology broadly reflects the stronger legal claim that Removed Children might have had for unlawful imprisonment and in negligence compared to the negligence claims of Kinship Group Members and the likelihood that Removed Children suffered more than Kinship Group Members.

32. Otherwise, I note six matters concerning the SDS.

33. First, I was satisfied that it was appropriate to appoint two members of the plaintiff’s solicitors’ firm to administer the SDS. As legal practitioners, they are subject to ethical obligations and the Court’s supervision. In practical terms, I do not envisage any real scope for conflicts of interest or conflicts between interest and duty to arise from their appointments. It can be expected that they will bring a large amount of existing knowledge about group members to their task.

34. Second, as already noted, it is a condition of participation in the SDS that claimants submit a proof of claim to the Administrators of the scheme before the Registration Date (28 February 2023). [10] In the absence of that occurring, they cannot participate in the SDS and, by operation of the Settlement Deed, they will be barred from bringing claims under the SDS or against the Commonwealth. [11] As noted, at the hearing of the approval application the plaintiff sought orders giving effect to this, being an order under s 173 of the CPA approving the Settlement Deed and the SDS, and a further order binding any group member who did not submit a proof before the Registration Date to, inter alia, the releases in the Settlement Deed and confirming they were no longer entitled to make a claim under the SDS.

    10. TRG-1, p 29; clause 7.1.

    11. TRG-1, p 18; clause 10.2.

35. These orders seek to give effect to a form of “class closure” by crystallising the precise group members within a class who may lodge a claim on a Settlement Sum and providing that all group members, including those who may not make such a claim, release the Commonwealth from the claims made in the proceedings. The power to make such an order has been the subject of judicial consideration. It has been held that s 183 of the CPA does not authorise the making of a “class closure” order, and thus such an order cannot be made prior to the conclusion of the proceedings (Haselhurst v Toyota Motor Corporation t/as Toyota Australia (2020) 101 NSWLR 890; [2020] NSWCA 66; “Haselhurst”). It is unnecessary to consider this further because the plaintiff relies on the power to approve a settlement conferred by s 173 of the CPA. In that regard, in Haselhurst, Payne JA, with whom Bell P, Macfarlan JA, Leeming JA and Emmett AJA agreed, stated (at [105]):

“The difficulty with the respondents’ argument, however, is that the effect of order 16 is to address a matter, the barring of a claim held by a Group Member, which is addressed in s 173 in the case of a settlement and s 177 in the case of a judgment, in each case supplemented by the specific power in s 179 to make a judgment binding all Group Members. It is, so the plurality in Brewster explains, incongruous to read a power into s 183 when other provisions of Part 10 make specific provisions apt to accommodate that task but which operate at the conclusion of the proceeding. The power to bar a claim held by a Group Member is one that arises at the conclusion of a representative proceeding…” (emphasis added)

36. Accordingly, I was satisfied that I had the power to make the orders described at [34].

37. In terms of discretion, the affidavit evidence read on the application reveals that, over the period from 4 November 2022 to 28 February 2023, the plaintiff’s solicitors distributed to a large number of communities in the Northern Territory hard copies of notices advising of the proposed settlement, group members’ right to opt out and the necessity to lodge a proof of claim by the Registration Date to participate in the settlement. [12] There was also wide and continuous publication of those matters via newspapers, radio and social media. [13] The plaintiff’s solicitors undertook an “outreach program” consisting of multiple visits to Alice Springs, Tennant Creek, Katherine and Darwin during that period. [14]

    12. See Gaven Affidavit at page 209; First Antzoulatos Affidavit at [72].

    13. First Antzoulatos Affidavit at [72].

    14. First Antzoulatos Affidavit at [80].

38. These efforts produced a strong response. Between 7 November 2022 and 28 February 2023, 2,446 proofs were submitted by those group members wishing to participate in the settlement. By a process that is not necessary to describe, it was determined that these proofs corresponded to the 1008 Deceased Removed Children, 105 Living Kinship Group members and 97 Deceased Kinship group members noted above (at [14]). [15] This compares favourably to the original estimate of the size of the group after Removed Children eligible to participate in the redress scheme were taken out of the group definition. [16] In these circumstances, I considered the interests of certainty warranted the making of orders for “class closure”.

    15. First Antzoulatos Affidavit at [60] and [68].

    16. First Antzoulatos Affidavit at [56].

39. Third, one person objected to the settlement. That person noted that her grandmother had been removed from her family. She is concerned that under the SDS she cannot make a claim in respect of her grandmother or on her behalf. Under the SDS, the only means by which a grandchild could participate in the settlement is if they were the executor (and beneficiary) under the will of a Deceased Removed Child or Deceased Kinship Group Member. [17] However, in approving the settlement, I accepted the plaintiff’s submission that to otherwise allow grandchildren to participate in the settlement would so dilute the amounts payable that it would risk rendering the settlement unfair. I note that grandchildren are not bound by the settlement and any releases given to the Commonwealth.

    17. TRG-1, p 30; clause 8.3.

40. Fourth, the SDS makes provision for the Administrators to have their costs of administering the settlement paid out of the Settlement Sum. To obtain payment, the Administrators must submit their claim to a Costs Assessor, who will then make a written assessment of whether and to what extent the costs claimed are “allowable as costs reasonably and necessarily incurred in or connection with” the SDS. The Administrators may deduct those costs allowed by the Costs Assessor from the Settlement Sum. However, they must approach the Court if they seek additional costs. [18]

    18. TRG-1, p33; clause 10.

41. Fifth, under the SDS, the Administrators may refer any issue arising in relation to the SDS or its administration for determination or directions by the Court. Further, upon the conclusion of the SDS, the Administrators are required to prepare a report concerning the administration of the settlement and provide it to the Court, the plaintiff and the Commonwealth. [19] On 20 April 2023, I made a further order to the effect that, if the administration of the SDS was not concluded after six months from the date of payment of the Settlement Sum, then the Administrators must provide the Court with a report on the progress of the administration of the SDS, with further reports every six months until completion. This order was not made out of concern about this particular settlement, but because of a more general concern that settlements in group actions may be subject to long administrations with consequential delays in the distribution of funds.

    19. TRG-1, p 35; clause 14.

42. Sixth, an assessment of the fairness of the SDS cannot be undertaken without considering the proposed deductions from the settlement amount. They are addressed next.

Deductions from the Settlement Sum

43. I have set out above (at [15]) the deductions from the Settlement Sum for which approval was sought.

Plaintiff’s Legal Costs and Disbursements

44. The form of the order that was made on 17 April 2023 authorised the deduction of $2.9 million from the Settlement Sum for the plaintiff’s legal costs and disbursements. This deduction includes the $1,000,000 premium for after-the-event insurance. It is addressed below. In respect of the balance, the affidavit evidence reveals that, in accordance with their contractual arrangements, the plaintiff’s solicitors billed LLS for 100% of the disbursements and 75% of the professional fees they had accumulated. The plaintiff’s solicitors “carried” the remainder of the fees incurred.

45. As at 27 February 2023, the total legal costs and disbursements that had been incurred by the plaintiff was $1,765,045.58, which included a 25% uplift on the amount carried by the solicitors. [20] By 13 April 2023, the estimate of the costs and disbursements incurred, including the uplift, increased to $2,145,951.60. [21] The increase arose because of, inter alia, the additional work in approaching the Court to amend the group definition (to encompass First Nations children removed between 1912 and 1933; see above at [5]) and the conduct of additional outreach programs in February 2023 which had not previously been anticipated. [22]

    20. First Antzoulatos Affidavit at [98] to [103], corrected by the Second Antzoulatos affidavit at [14].

    21. Second Antzoulatos Affidavit at [19].

    22. Second Antzoulatos Affidavit at [24].

46. The plaintiff filed affidavits explaining in detail the legal work that was undertaken, by whom it was undertaken, why it was undertaken and the cost of undertaking it. The various costs agreements and some timesheets were also tendered. This material was reviewed by an experienced costs assessor, Ms Kerrie-Ann Rosati. Ms Rosati swore an affidavit annexing a comprehensive report that reviewed the reasonableness of the costs. The outcome of her assessment was that, after allowance for an arithmetical error on her part in relation to the uplift, the fair and reasonable costs of the plaintiff was $1.946 million. [23] It is unnecessary to describe Ms Rosati’s report in any detail. It suffices to state that I was satisfied that the figure for which approval was sought, namely $1.9 million, was reasonable both in terms of the work done and by whom it was done.

    23. Exhibit KAR 1 to the Affidavit of Kerri-Ann Rosati sworn 14 April 2023 at page 62, corrected at Tr 17/04/2023 p 43.2.

Funder’s Commission and Premium for After-the-Event Adverse Costs Insurance

47. At the hearing of the application, LLS was granted leave to intervene to be heard in support of so much of the application that sought approval for deductions for its $5.5 million commission and $1 million premium for after-the-event insurance. The former represents 10.9% of the Settlement Sum. The total of both amounts represents 12.88% of the Settlement Sum.

48. The litigation funding agreement was tendered. It is the subject of a non-publication order, however, it is necessary to refer to parts of it to explain the reasons for the approval. Under the funding agreement, LLS committed to, inter alia, provide funding to investigate the claims and, upon its election and subject to conditions, to fund the proceedings, pay any adverse costs order that might be incurred in the proceedings and provide such security for costs as might be ordered by a court. [24] LLS was also entitled to receive a 20% commission of the claim proceeds [25] and recover its “Project Costs”, which included the legal costs and disbursements payable by it as well as any premium paid for adverse costs insurance. [26]

    24. VA 2, p 5.2.

    25. VA 2, p 27.

    26. VA 2, p 8.

47. LLS read an affidavit from its Chief Executive Officer, Stephen Conrad, affirmed on 30 March 2023. Again, parts of that affidavit are the subject of a non-publication order on the basis that they are commercial in confidence. It is not necessary to refer to any of the confidential parts of the affidavit in this judgment. In his affidavit, Mr Conrad explained the process by which LLS decided to initially fund an investigation of the plaintiff’s claim and then the conduct of the proceedings. He also described the efforts to obtain after-the-event adverse costs insurance. Mr Conrad stated that LLS was not prepared to fund any class action for a commission below 20% of the gross resolution sum. He noted one case that LLS funded in Queensland for 20% of the gross resolution sum. He said that the selection of that rate was based, in part, on “social justice considerations”. [27] Mr Conrad noted that, in this case, LLS was discounting its contractual rate by around 45%. Mr Conrad referred to various publications and judgments concerning the rate charged by litigation funders, the effect of which was that, with one possible exception, the rate charged in this case was well below what is commonly charged. The one exception was Peterson Superannuation Fund Pty Ltd v Bank of Queensland (No 3) [2018] FCA 1842; (2019) 132 ACSR 258, where Murphy J declined to allow a deduction rate of 25% on the basis that it would leave affected group members with almost no return, but instead made a common fund order that resulted in a commission payment to the funder of 8.3% of the gross settlement sum. That case is not comparable to this one. In all the other cases, the funder’s commission substantially exceeded that which was charged in this case (see, for example, Blairgowrie Trading Ltd v Allco Finance Group Ltd (in liq) (No 3) (2017) 343 ALR 476; [2017] FCA 330 at [124] being 22.1%; Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527 at [165] being 30%; Hopkins v Macmahon Holdings Ltd [2018] FCA 2061 at [10] being 19%).

    27. Conrad affidavit at [34].

48. LLS’s written submissions contended that it was not in dispute that without litigation funding the claim could not have been commenced. It described the claim as “novel, complex and difficult” and thus having a significant level of associated risk. I accept that characterisation, although I note that the defendant’s solvency was not an issue. The submissions contended that the contractual rate of 20% was “well-below market”, [28] and the fee sought to be charged was again “a significantly lower rate”. [29] The submissions continued: [30]

“Given LLS advanced funding to all group members in the open class, it is appropriate to allow a return by reference to the settlement sum produced for all … (i.e., the gross settlement sum).”

28. Intervener submissions at [20].

29. Intervener submissions at [24].

30. Intervener submissions at [25].

51. This submission raises the issue as to whether this Court can make an order on a “common fund basis” for the deduction of LLS’s commission as part of the approval of a settlement under s 173 of the CPA. In BMW Australia Ltd v Brewster (2019) 269 CLR 574; [2019] HCA 45, it was held that s 183 of the CPA does not permit the Court to make a “common fund order” prior to settlement. However, this is an application for approval of a settlement under s 173 of the CPA. Rees J has held that this Court has the power to make a common fund order under s 173(2) (Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia [2022] NSWSC 1076 at [51]). Her Honour was followed by Stevenson J in Quirk v Suncorp Portfolio Services Ltd (No 2) [2022] NSWSC 1457 at [44]. I cannot discern any reason not to follow those judgments. The use of the phrase “common fund order” in this context may not be particularly helpful. An order authorising the deduction of an amount from a settlement sum as payment to a litigation funder answers the description “order… with respect to the distribution of any money” in s 173(2) of the CPA.

52. As noted, under the litigation funding agreement, LLS was obliged to indemnify the plaintiff for any adverse costs order. However, it was also entitled to recover the cost of any premium paid for adverse costs insurance. One argument against authorising the deduction of the $1 million premium from the Settlement Sum is that it simply allows a funder to recover the costs of the obligation it assumed to the plaintiff; i.e., the premium is just its own “cost of doing business”. It is not necessary to consider this further in this case because the approach governing such deductions was set out by Black J in Williamson v Sydney Olympic Park Authority & Ors [2022] NSWSC 1618 (at [83]):

“It seems to me that the question for the Court is not whether the ATE costs [i.e. the premium for adverse costs insurance] in isolation from the Funder Commission, or the Funder Commission in isolation from the ATE costs, are unduly high, but whether the totality of the Funder Commission and ATE costs are so high that the settlement documented by the Settlement Deed and SDS … are not reasonable unless they reduced. I have comfortably formed that view for the reasons noted below. Where I have concluded that that deduction of both the Funder Commission and the ATE costs would be unreasonable, all that is required to resolve that matter is to reduce the total amount payable.” (emphasis added)

53. In approving so much of the settlement that involved the payment of the commission to LLS and reimbursement of the premium for adverse costs insurance, I was overwhelmingly satisfied that the total of those amounts represented a reasonable cost for the group in bringing the proceedings. I have already commented on the obstacles faced by the plaintiff and group members in succeeding in their claims (see above at [23]−[26]). LLS assumed a significant risk of not recovering the costs, disbursements and premiums it funded. On any view of prevailing market rates for funders’ commissions and having regard to the real benefits group members will derive from the settlement, the amount to be deducted and paid to LLS is relatively modest as a proportion of the Settlement Sum (being 12.88%).

SDS Administration Costs

54. The orders made on 17 April 2023 included an order approving the deduction of an amount up to $3,000,000 for the “Administration Costs” of the SDS. The mechanism for payment of these costs, including the supervisory role played by the costs assessor, is outlined above (at [40]).

55. An affidavit sworn by the plaintiff’s solicitor described the work expected to be undertaken in administering the SDS as follows: [31]

    31. First Antzoulatos Affidavit at [156].

“a.   review and assessment of each Proof to ascertain what further information, if any, is required from the Registered Representative.

b.   contacting all Registered Representatives of which further information is required from;

c.   collation of all Proofs submitted in relation to each deceased estate and Registered Representative to de-duplicate the Participating Claimants Database to consolidate such claims;

d.   conduct an initial assessment of eligibility based on the group member definition to determine provisional eligibility;

e.   for those Claimants deemed provisionally eligible, confirmation of details such as identity of Registered Representative (to determine relationship to the Claimant) and other details such as the removal of the claimant using the National Archives of Australia database;

f.   preparation of a Distribution Statement for each Participating Claimant including application of the Loss Assessment Formula and Assessment Methodology Schedule;

g.   distribution of the Distribution Statement and receipt of any objections from Registered Representatives.

h.   collation of the identification, contact and bank transfer details of Participating Claimant;

i.   arranging payment to each eligible Participating Claimant;

j.   preparation of Administrators’ report(s).”

56. The plaintiff’s solicitor estimated the administration costs as approximately $2,479 per “Claimant” (i.e. per Kinship Group Member, Deceased Removed Child or Deceased Kinship Group Member). On its face, these estimates appeared reasonable. However, in granting approval, I also relied on the role of the costs assessor in reviewing the costs of the administration.

Payments to Lead Plaintiffs

57. On 17 April 2023, I approved the deduction of $10,000 as a payment to the original lead plaintiff, Ms Cummings, and $5,000 to the substituted lead plaintiff, Ms Ellis. In respect of Ms Cummings, the plaintiff’s solicitor described the substantial amount of time she had spent communicating with other group members about the proceedings and her solicitors with respect to taking advice and receiving instructions. [32] Since October 2022, Ms Ellis has undertaken a similar role. [33]

    32. First Antzoulatos Affidavit at [139] to [141].

    33. First Antzoulatos Affidavit at [142] to [145].

58. In Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) (2006) 236 ALR 322; [2006] FCA 1388, Jessup J observed (at [76]):

“I consider it prima facie reasonable that particular parties who have sacrificed valuable time and incurred expenses in the interests of prosecuting this proceeding on behalf of group members as a whole should be able to look to the corpus of the settlement sum for some degree of compensation and reimbursement.”

59. This statement is applicable to the position of Ms Cummings and Ms Ellis.

The Orders

60. Order 2, made on 17 April 2023, effected the amendment to the group definition to remove those eligible to participate in the Redress Scheme. I was satisfied that it was appropriate to make that order. The benefits offered by the Redress Scheme exceed those available under this settlement and the removal of claimants eligible to participate in the scheme enhances the benefits available to those who remain in the group.

61. Order 3, made on 17 April 2023, approved the settlement of the proceedings on the terms set out in the Settlement Deed and the SDS pursuant to s 173 of the CPA. Order 4, made on 17 April 2023 and pursuant to s 183 of the CPA, authorised the plaintiff to enter into the Settlement Deed and to give effect to the settlement and all transactions contemplated by it for and on behalf of group members.

62. Orders 5 and 6, made on 17 April 2023, confirmed the binding effect of the settlement on the plaintiff, group members, the Commonwealth and LSS. These orders effected the “class closure” described above.

63. Order 7, made on 17 April 2023, gave approval under s 173(2) of the CPA for the deduction of the amounts noted above at [15] from the Settlement Sum for the purposes of the SDS. Order 8 appointed the Administrators, being two members of the plaintiff’s solicitors.

64. As noted, on 20 April 2023, I made a further order to the effect that if the administration of the Scheme was not concluded after six months from the date of payment of the Settlement Sum, then the Administrators must provide to the Court a report on the progress of the administration with further reports every six months until completion of the administration.

65. Lastly, I note that the orders made on 17 April 2023 included orders under the Court Suppression and Non-Publication Orders Act 2010 (NSW) concerning counsel’s opinion as well as parts of the affidavits including material that was commercial in confidence to LSS (and not necessary to disclose for the purposes of explaining the Court’s approval).

SCHEDULE

Interim Orders made on 17 April 2023

Pursuant to s 10 of the Court Suppression and Non-publication Orders Act 2010, there be no disclosure of the text of:

(a)   The affidavit of Vicky Antzoulatos dated 30 March 23, including Exhibit VA-2 (except for pages 319‑336) and Exhibit VA-3;

(b)   The highlighted material in the Intervener’s submissions; and

(c)   The highlighted material in the affidavit of Stephen Conrad dated 30 March 2023.

These orders are made as the disclosure at this point, would prevent the proper administration of justice.

These orders shall operate throughout the Commonwealth until further order.

Final Orders made on 17 April 2023

Amendment of group definition

1. Pursuant to s 163(1) of the Civil Procedure Act 2005 (CPA), paragraph 1(a) of the “Description of Group Members” and paragraph 2(a) of the body of the Amended Statement of Claim filed on 6 October 2022 be amended by the insertion of the following words “are or were persons who were deceased prior to 5 August 2021 (‘Removed Children’) who…”. (emphasis added)

Approval of settlement

1. Pursuant to s 173 of the CPA, the settlement of this proceedings on the terms set out in:

a)   the Settlement Deed dated 21 October 2022 (Deed); and

b)   the Settlement Distribution Scheme in the form attached to these orders as Annexure A (SDS),

be approved.

1. Pursuant to s 183 of the CPA, the Plaintiff 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 group members.

Binding effect of settlement

1. For the avoidance of doubt, any group member who did not, before the Registration Date, submit a Proof to the Administrators shall:

a)   remain a group member for all purposes of this proceeding;

b)   be bound by the releases given in the Deed; and

c)   not be entitled to claim any Payment or otherwise claim any distribution pursuant to the SDS or the settlement.

1. Pursuant to s 179 of the CPA, the persons affected and bound by orders 3 to 5 are the Plaintiff, the group members (other than those who have opted out pursuant to paragraph 6 of this notice of motion), the Defendant, and the Funder.

Approval of costs and commission

1. Pursuant to s 173(2) of the CPA, the following amounts are approved for the purposes of the SDS (utilising defined terms from it):

a)   the amount of $2,900,000 as the “Plaintiff’s Legal Costs and Disbursements”;

b)   the amount of $5,500,000 as the “Funding Costs”;

c)   an amount up to $3,000,000 for "Administration Costs";

d)   the amount of $10,000 as the “Original Plaintiff’s Reimbursement Payment”; and

e)   the amount of $5,000 as the “Substituted Plaintiff’s Reimbursement Payment”. Scheme Administrator.

1. Vicky Antzoulatos and Sarah Thomson, both of Shine Lawyers, be jointly appointed as Administrators of the SDS.

2. The Administrators and the Defendant have liberty to apply in respect of any matter arising in or in relation to the administration of the Scheme upon not less than three (3) clear business days’ notice to each other and the Court.

Costs orders

1. All existing costs orders in the proceedings be vacated.

Dismissal of Proceedings

1. The proceeding is dismissed 7 days after the Administrator notifies the Court and the parties in writing that the distribution under the SDS is complete.

THE COURT DIRECTS that:

1. The parties provide draft final orders under the Court Suppression and Non-publication Orders Act 2010, as well as a further order to provide for interim reporting of the matters noted in clause 14.2 of the proposed Settlement Distribution Scheme, by midday Wednesday, 19 April 2023.

Orders made on 20 April 2023

The Interim Non-publication orders made on 17 April 2023 are revoked and in lieu thereof, the Court makes the following orders:

1. Pursuant to ss 7 and 8(1)(a) of the Court Suppression and Non-publication Orders Act 2010 or the inherent jurisdiction, in order to prevent prejudice to the proper administration of justice:

a)   the following evidence filed by the Plaintiff is not to be disclosed to any person or entity except to LLS Fund Services Pty Ltd (ABN 51 627 975 213) as trustee for Litigation Lending Fund 1’s (Funder) or its legal representatives:

1. exhibit VA-2, other than pages 319 to 336.

2. exhibit VA-3; and

b)   the evidence, or information that identifies evidence, contained in Annexure B, of these Orders is not to be disclosed to any person or entity except the Funder’s legal representatives and the Court (except where the information has already been provided to the Plaintiff or their legal representatives); and

c)   any person or entity to whom such disclosure is made pursuant to (a) or (b) hereof may not disclose that material or any part thereof to any other person or entity without prior leave of the Court.

(1A)   These orders are to operate for a period of 30 years.

1. Pursuant to s 11 of the Court Suppression and Non-publication Orders Act 2010, Order (1) is to apply throughout the Commonwealth.

2. In the event the administration of the Scheme is not concluded after six months from the date the Defendant pays the Settlement Sum into the Settlement Distribution Fund under the Deed, and is not expected by the Administrators to be concluded sooner than one month from that date, the Administrators shall prepare and submit to the Court, with a copy to be provided to the Plaintiff and Defendant, a report as to progress of the administration including, so far as possible, the matters in cl 14.2 of the SDS, and provide an updating report each six (6) months until completion of the administration.

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Annexures, pdf

Endnotes

Decision last updated: 25 May 2023