FEDERAL COURT OF AUSTRALIA
Endeavour River Pty Ltd v MG Responsible Entity Limited [2019] FCA 1719
File number: VID 1010 of 2018 Judge: MURPHY J Date of judgment: 16 October 2019 Date of publication of reasons 18 October 2019 Catchwords: REPRESENTATIVE PROCEEDINGS – application for court approval of settlement under s 33V of the Federal Court of Australia Act 1976 (Cth) – whether the proposed settlement is fair and reasonable – whether proposed litigation funding commission is fair and reasonable – application adjourned – leave to put on further evidence and submissions in the event that the application for the proposed funding commission is maintained Legislation: Federal Court of Australia Act 1976 (Cth) ss 33V, 37M, 54 Cases cited: Australian Securities and Investments Commission v Richards [2013] FCAFC 89
Blairgowrie Trading Ltd v Allco Finance Group Ltd (Recs & Mgrs Apptd) (In Liq) (No 3) [2017] FCA 330; (2017) 343 ALR 476
Bolitho v Banksia Securities Ltd (No 6) [2019] VSC 653
Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527
Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) [2006] FCA 1388; (2006) 236 ALR 322
P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 4) [2010] FCA 1029
Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433
Kelly v Willmott Forests Ltd (in liquidation) (No 4) [2016] FCA 323; (2016) 335 ALR 439
Kuterba v Sirtex Medical Limited (No 3) [2019] FCA 1374
Liverpool City Council v McGraw-Hill Financial, Inc (now known as S&P Global Inc) [2018] FCA 1289
Matthews v AusNet Electricity Services Pty Ltd & Ors [2014] VSC 663
Mitic v OZ Minerals Limited (No 2) [2017] FCA 409
Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Limited [2016] FCAFC 148; (2016) 338 ALR 188
Perera v GetSwift Limited [2018] FCA 732; (2018) 263 FCR 1
Re Banksia Securities Ltd (Rec & Mgr Apptd) (in liq)(No 2) [2018] VSC 47
Date of hearing: 16 October 2019 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 36 Counsel for the Applicant: Mr B Quinn QC and Mr D Fahey Solicitor for the Applicant: Slater & Gordon Counsel for the Respondents: Ms W Harris QC and Ms F Shand Solicitor for the Respondents: Herbert Smith Freehills ORDERS
VID 1010 of 2018 BETWEEN: ENDEAVOUR RIVER PTY LTD
Applicant
AND: MG RESPONSIBLE ENTITY LIMITED
First Respondent
MURRAY GOULBURN CO-OPERATIVE CO. LIMITED
Second Respondent
JUDGE:
MURPHY J
DATE OF ORDER:
16 OCTOBER 2019
THE COURT ORDERS THAT:
1.Pursuant to ss 37AF and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) (the Act) until further order of the Court, in order…
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- Case
- [2019] FCA 1719
- Decision Date
CaseChat Overview and Summary
The legal issues before the court involved an application for court approval of the settlement under section 33V of the Federal Court of Australia Act 1976. The court had to consider the fairness and reasonableness of the proposed settlement, including the settlement administration costs, miscellaneous deductions, and the funding commission. The court's decision hinged on whether the proposed funding commission was fair and reasonable in the interests of the class members. The court also had to consider the evidence provided by the parties, including expert opinions and research on comparable class actions, to inform its decision.
The court found that the proposed reimbursement payment and settlement administration costs were fair and reasonable, based on the evidence provided and comparisons with similar cases. However, the court was not persuaded that the proposed funding commission, which represented a significant deduction from the settlement sum, was fair and reasonable. The court noted that litigation funding charges have become a standard cost for class members in funded class actions and that the court should exercise some oversight over these charges due to the information asymmetry between the funder and the class members. The court therefore adjourned the hearing to allow for further evidence and submissions on the funding commission issue, if the application for the proposed funding commission was maintained.
The final orders of the court included treating certain documents as confidential and not to be published or disclosed except to specified parties, deeming two group members to have opted out of the proceeding, and adjourning the hearing to a later date. The court's decision highlighted the importance of ensuring that the terms of a proposed settlement are fair and reasonable for all class members, particularly in cases involving litigation funding.
Orders
Orders of the court
1. Pursuant to ss 37AF and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) (the Act) until further order of the Court, in order to prevent prejudice to the proper administration of justice:
(a) schedules D, E and F of annexure EPC-4 to the affidavit of Emma Oliva Pelka-Caven affirmed on 14 August 2019; and
(b) the confidential affidavit of Andrew Paull affirmed on 9 October 2019 and its annexures;
be treated as confidential, not be published or made available and not be disclosed to any person or entity except to the docket Judge, his or her personal staff, any officer of the Court authorised by the docket Judge, the Applicants, their legal representatives, and IMF Bentham Ltd, and such permitted disclosures to be upon terms that none of those parties or persons disclose that material or any part thereof to any person or entity.
2. Pursuant to s 33J and 33ZF of the Act the two group members named at paragraph 94 of the confidential affidavit of Andrew Paull affirmed on 9 October 2019 be deemed to have opted out of the proceeding.
3. The hearing be adjourned to 18 November 2019 at 10.15 am.
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
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
Having regard to Mr Paull’s evidence about the quantum of reimbursement payments allowed in comparable securities class actions, and the research of Professor Morabito in relation to reimbursement payments allowed in class action litigation (Professor V. Morabito, ‘An Evidence-Based Approach to Class Action Reform in Australia: Common Fund Orders, Funding Fees and Reimbursement Payments’, Monash University, January 2019), I consider the claimed reimbursement payment of $12,500 is fair and reasonable.The proposed settlement administration costs The orders for a cost referee included an order that required Ms Harris to report as to the reasonableness of the sum proposed for settlement administration costs, and whether she could propose a cheaper and equally efficient way of conducting the settlement administration than that proposed by the applicant. Ms Harris had regard to other recent comparable matters in which she had been involved, including one in which an independent party submitted a tender for appointment as the administrator. In Ms Harris’ opinion $130,000 (inclusive of GST) was a reasonable and proportionate fee for the work. Having regard to the sums commonly allowed for such work, that amount is at the low end of the range and I am satisfied that it is fair and reasonable.The proposed miscellaneous deductions The cost of the work involved in preparing Ms Harris’ report is proposed to be payable from the settlement sum. The cost reference has provided the Court with the benefit of an independent assessment of the reasonableness of the legal costs and settlement administration costs proposed to be charged, and I consider the $19,310 cost of the report to be reasonable. The applicant seeks the deduction of $5,717 from the settlement sum to be paid to IMF for disbursements it incurred which are recoverable as Project Costs under the funding agreements. Mr Paull’s affidavit provides evidence in that regard and it is fair and reasonable to allow that deduction.The proposed funding commission For the reasons I now explain, I am not presently persuaded that the proposed deduction of $13,472,805 from the settlement sum, representing the funding commission payable to IMF under the funding agreements, is fair and reasonable in the interests of class members. The funding agreements provide for a funding rate of 30% or 35% of the gross settlement or judgment depending upon the number of units the class member acquired during the relevant period. The proposed deduction represents a funding rate of approximately 32% of the gross settlement and approximately 34% of the settlement net of legal costs. In Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Limited [2016] FCAFC 148; (2016) 338 ALR 188 (Money Max) at [71] the Full Court said that there is no reason in principle for the Court to treat litigation funding costs incurred to achieve a settlement differently from legal costs incurred to achieve a settlement. Counsel’s Opinion accepted that proposition. Litigation funding charges have become a standard cost for class members in funded class actions and against that backdrop the Full Court explained (at [72]):It is appropriate that the Court exercise some oversight over litigation funding charges to class members when:(a)the largest single deduction from the recoveries of class members in funded class actions is usually the funding commission (or an equivalent amount under a funding equalisation order);(b)there is often a significant information asymmetry between the funder and the class members in relation to the costs and risks associated with the action;(c)at least for some claimants the only opportunity they have to recover losses suffered through alleged breaches of the law is through the funded class action; and (d)for small shareholders the opportunity for negotiation of the funding commission is limited or non-existent.