FEDERAL COURT OF AUSTRALIA
Impiombato v BHP Billiton Limited [2018] FCA 1272
File number: VID 649 of 2018 Judge: MOSHINSKY J Date of judgment: 3 August 2018 Date of publication of reasons: 23 August 2018 Catchwords: PRACTICE AND PROCEDURE – representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth) – open class – application for common fund order – applicable principles – whether appropriate to make common fund order – common fund order made Legislation: Federal Court of Australia Act 1976 (Cth), s 33ZF Cases cited: Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527
Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433
McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd [2017] FCA 947
Money Max Int Pty Ltd v QBE Insurance Group Ltd (2016) 245 FCR 191
Pearson v State of Queensland [2017] FCA 1096
Date of hearing: 3 August 2018 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 40 Counsel for the Applicant: Mr PW Collinson QC with Mr E Olivier Solicitor for the Applicant: Phi Finney McDonald Counsel for the Respondent: Ms W Harris QC with Dr M Rush Solicitor for the Respondent: Herbert Smith Freehills Counsel for the Intervener: Mr B Quinn QC with Ms E Levine Solicitor for the Intervener: Maurice Blackburn ORDERS
VID 649 of 2018 BETWEEN: VINCE IMPIOMBATO
Applicant
AND: BHP BILLITON LIMITED (ACN 004 028 077)
Respondent
JUDGE:
MOSHINSKY J
DATE OF ORDER:
3 AUGUST 2018
THE COURT ORDERS THAT:
1.Subject to further order, with reference to the Funding Terms (being Annexure A to these orders as may be further modified as the Court thinks fit) and pursuant to ss 23 and 33ZF of the Federal Court of Australia Act 1976 (Cth) and r 1.32 of the Federal Court Rules 2011 (Cth) and/or the implied power of the Court (or any of them), the Court directs that, upon Resolution:
(a)all Resolution Sums are to be paid to, and received by, the Lawyers and paid immediately into a Trust Account kept for that purpose;
(b)if, despite (a) above, the Applicant or any Group Member directly receive any amounts in respect of a Settlement or judgment of some or all of the Claims, he, she or it will cause the money, or an amount being the market value of the asset or benefit received, to be paid to the Lawyers to be dealt with as part of the Resolution Sum; and
the Lawyers pay from any Resolution Sum held in the Trust Account the amounts referred to in clause 4.1 of the Funding Terms in accordance with the Funding Terms, prior to any distribution to the Applicant and Group Members in accordance with…
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- Case
- [2018] FCA 1272
- Decision Date
CaseChat Overview and Summary
The court considered several legal principles in making its decision, including the general preference for the burden of costs to be shared equally among group members in representative proceedings, the advantage of providing certainty to group members about the maximum costs of participating in the action before opting out, and the need for continued judicial oversight to prevent disproportionate returns to the funder. The court also noted the extensive experience of the funder and the lawyers in conducting securities class actions and the unexceptional nature of the proposed funding terms.
After considering these factors, the court found that a common fund order as sought by the applicant was appropriate and in the interests of justice. The court emphasised that the 18% cap on the funding commission was a maximum and should not be seen as the inevitable reference point for the selection of the actual funding amount. The court also noted that the proposed funding terms provided for continued judicial oversight of the costs and allowed for the actual funding amount to be set by the court at a later stage when more information about the quantum of any settlement or judgment would be available.
The court made a common fund order pursuant to the terms proposed by the applicant, subject to certain conditions, including the provision of an undertaking by the funder, the applicant, and the lawyers to comply with their obligations under the funding terms and the court's order. The court also set out a timetable for the filing and serving of evidence and written submissions in relation to an interlocutory application filed by the respondent seeking to stay the proceedings.
In summary, the court found that it was appropriate to make a common fund order in the present proceeding, considering the proposed funding terms, the extensive experience of the funder and the lawyers, and the legal principles governing representative proceedings. The court's order provides for the funding of the proceedings by a litigation funder, subject to certain conditions and continued judicial oversight.
Orders
Orders of the court
1. Subject to further order, with reference to the Funding Terms (being Annexure A to these orders as may be further modified as the Court thinks fit) and pursuant to ss 23 and 33ZF of the Federal Court of Australia Act 1976 (Cth) and r 1.32 of the Federal Court Rules 2011 (Cth) and/or the implied power of the Court (or any of them), the Court directs that, upon Resolution:
(a) all Resolution Sums are to be paid to, and received by, the Lawyers and paid immediately into a Trust Account kept for that purpose;
(b) if, despite (a) above, the Applicant or any Group Member directly receive any amounts in respect of a Settlement or judgment of some or all of the Claims, he, she or it will cause the money, or an amount being the market value of the asset or benefit received, to be paid to the Lawyers to be dealt with as part of the Resolution Sum; and
the Lawyers pay from any Resolution Sum held in the Trust Account the amounts referred to in clause 4.1 of the Funding Terms in accordance with the Funding Terms, prior to any distribution to the Applicant and Group Members in accordance with any distribution scheme approved by the Court.
2. Paragraph 1 of these orders is subject to the provision of an undertaking by each of G&E KTMC Funding LLC, the Applicant, and Phi Finney McDonald Pty Ltd to each other and to the Court in the terms set out in Annexure B to these orders (being that they will comply with their obligations under the Funding Terms (being those in Annexure A as may be further modified as the Court thinks fit) and the terms of paragraph 1), such undertakings to be given within seven days of the making of these orders.
3. By 4.00 pm on 14 September 2018, the respondent file and serve evidence in support of the claims for relief made by it in the interlocutory application filed on 27 July 2018 (Stay Application).
4. By 4.00 pm on 5 October 2018, the applicant file and serve any evidence in support of his arguments as to why the relief claimed by the respondent in the Stay Application should be refused.
5. By 4.00 pm on 12 October 2018, the respondent file and serve any evidence in reply in respect of the Stay Application.
6. By 4.00 pm on 19 October 2018, the respondent file and serve written submissions in support of the claims for relief made in the Stay Application.
7. By 4.00 pm on 24 October 2018, the applicant file and serve written submissions setting out his arguments as to why the relief claimed by the respondent in the Stay Application should be refused.
8. If Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) (Klemweb) commences a proceeding against the respondent, the documents in paragraphs 3 to 7 be served on Klemweb.
9. The Stay Application, and any issue regarding the consolidation or selection of proceedings, be listed for hearing at 10.15 am on 29 October 2018, on an estimate of one day.
10. Costs be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ANNEXURE A
BHP BILLITON LTD SHAREHOLDER CLASS ACTION
FUNDING TERMS
1. Definitions and interpretation
1.1 The following definitions apply in these Funding Terms:
Applicant
means a lead applicant or representative party in the Proceedings who has entered into a Funding Agreement with G&E KTMC Funding LLC whom, as at the commencement of the Funding Period, is Mr Vince Impiombato.
BHP
means BHP Billiton Ltd (ACN 004 028 077) and BHP Billiton Plc (3196209).
BHP Securities
means an ordinary fully-paid share issued by BHP and listed on the Australian Securities Exchange, the London Stock Exchange or the Johannesburg Stock Exchange.
Claim(s)
means the claim or claims the Applicant or any Group Member has or may have against any one or more Respondents for loss, damages and/or costs caused by the conduct of one or more of the Respondents in relation to or arising out of the Applicant or Group Member’s acquisition of an interest in BHP Securities during the period specified in the Statement of Claim in respect of the Proceedings as amended from time to time, or such other period as the Lawyers advise and the Funder accepts.
Costs Order
means any order made by a court requiring one or more parties to the Proceedings to pay the costs incurred by another party or parties to the Proceedings.
Court
means the Federal Court of Australia
Disbursements
means any expense the Lawyers incur whether as principal or agent on the Applicant and/or Group Members’ behalf in relation to the Legal Work, including (without limitation) barristers and other experts’ fees, searching fees, lodging fees, travel expenses, courier fees and photocopying fees.
Expenses
means all Professional Fees (including Remaining Costs), and Disbursements, and any other expenses involved in performing Legal Work and/or bringing proceedings against the Respondent, including Shared Expenses and Individual Expenses.
Funder
means G&E KTMC Funding LLC, its successors and assigns.
Funding
Agreement
means a funding agreement between the Funder and a Group Member in relation to the Claims, including the funding agreement between the Funder and the Applicant as at the commencement of the Funding Period entered into on 24 May 2018.
Funding Period
means the period commencing on 1 November 2017 and ending upon the Termination Date.
Funding Terms
means these terms.
Gross Recovery
means the gross amount payable by way of Settlement or judgment in respect of the Claims, inclusive of any amount paid pursuant to a Cost Order against a Respondent.
Group Member(s)
means all persons who are identified as group members in the Proceedings and who do not opt out of the Proceedings by the time specified by the Court for doing so.
Interlocutory
Costs Order
means an order that the Respondents or an Other Party or any of them pay the Applicant’s costs or any part thereof prior to any Settlement of the Claims or final court determination of the Applicant’s Claim.
Individual
Expenses
means Legal Work in connexion with the specific Claims of a specific Group Member, not including the Shared Expenses.
Lawyers
means Phi Finney McDonald Pty Ltd (ACN 618 727 905), or any firm of lawyers appointed in their place.
Legal Work
means such advice and Legal services to the Applicant and Group Members or for the Group Members’ benefit, incurred on or after 1 November 2017, including the Shared Expenses and Individual Expenses reasonably necessary to: (a) investigate the Claims; (b) prosecute the Claims; (c) negotiate a Settlement of the Claims; (d) comply with the Funding Agreements and these Funding Terms; (e) negotiate to secure and maintain funding on behalf of the Group Members in relation to the Claims; and (f) provide all project management and administrative services with respect thereto.
Other Parties
means any other person or entity which:
(a) becomes a party to the Proceedings at the initiative of a Respondent; or
(b) the Lawyers recommend be joined to the Proceedings and in respect of whom the Funder agrees in writing to accept adverse Cost Order exposure.
Outlay
means all Expenses paid by the Funder plus any premium paid by the Funder for the provision of any insurance or bond against an adverse costs order.
Proceedings
means any legal proceedings to prosecute some or all of the Claims, including:
(a) proceedings brought in contemplation of those legal proceedings including, without limitation, proceedings for preliminary discovery; and
(b) any other proceedings or process as part of or consequent on the class action (including any alternative dispute resolution processes engaged to resolve some or all of the Claims),
but does not include any appeals of such legal proceedings or related enforcement actions unless the Funder has (in its absolute discretion) agreed to fund the particular appeal or enforcement proceedings.
Professional Fees
means the Lawyers’ reasonable professional fees incurred for the sole purpose of performing the Legal Work
Remaining Costs
means the ‘at risk’ component of the Lawyers’ Professional Fees, only payable to Lawyers by the Funder in the event of Resolution, comprising:
(a) “Conditional Fees” being the 40% deferred portion of the Lawyers’ reasonable professional fees incurred for the sole purpose of performing the Legal Work; plus
(b) an “Uplift Fee” being a success fee calculated as a 25% uplift on Conditional Fees.
Resolution
means when all or any part of a Resolution Sum other than an Interlocutory Costs Order amount is received and, where a Resolution Sum is received in parts (other than in respect of any Interlocutory Costs Order amount), a “Resolution” occurs each time a part is received.
Resolution Sum
means the amount or amounts, or the market value of any goods or services, for which some or all of the Claims are Settled, or for which judgment is given, including the value of any favourable terms of future supply of goods or services, any interest and any costs recovered pursuant to a Costs Order in favour of the Applicant or by agreement.
Respondent
means BHP Billiton Ltd and any Other Parties named as defendants or respondents in the Proceedings.
Retainer
Agreement
means the retainer and costs agreement between the Lawyers and a Group Member, including the costs agreement signed by Vince Impiombato on 24 May 2018.
Settlement
means any full or partial settlement, agreement, compromise, discontinuance, withdrawal, dismissal or waiver of the Claims or part of the Claims, and “Settle”, “Settles” and “Settled” shall be construed accordingly.
Shared Expenses
means Legal Work for the common benefit of Group Members, or a sub-group of Group Members, and includes Legal Work in connexion with the specific Claim of the Applicant.
Termination Date
means the date on which the termination of these Funding Terms in accordance with clause 8 below becomes effective.
Trust Account
is defined as an interest-bearing trust account established and maintained by the Lawyers for the sole purpose of receiving Resolution Sums under these Funding Terms.
1.2 Unless the context otherwise requires, the following rules of interpretation apply to these Funding Terms:
1.2.1 a reference to any agreement or document is a reference to such agreement or document as validly amended, varied, restated, assigned or novated from time to time (in each case, other than in breach of the relevant agreement or the provisions of these Funding Terms, in which case it shall remain a reference to such agreement or document immediately prior to such amendment); and
1.2.2 a reference to any legislation or legislative provision includes any statutory modification, amendment or re-enactment of that legislation or legislative provision, and includes any subordinate legislation or regulations issued under that legislation or legislative provision.
2. Funding Agreements and Retainer Agreements
2.1 For the duration of the Funding Period, these Funding Terms will prevail over:
2.1.1 any inconsistent provision in the Funding Agreements which, subject to these Funding Terms, shall continue in full force and effect; and
2.1.2 any inconsistent terms of the Retainer Agreements which, subject to these Funding Terms, shall continue in full force and effect.
3. Obligations of the Funder
3.1 The Funder must pay the Outlay.
4. Costs and Commission
4.1 Subject to further order, upon Resolution the Funder is entitled to be paid or to have distributed from any Resolution Sum, as consideration for the funding of the Proceedings, an amount less than 18% of the Gross Recovery.
4.2 The amount referred to in clause 4.1 above will not become due or owing by the Applicant and Group Members unless and until a Resolution occurs.
5. Relationship Between the Applicant, Lawyers and Funder
5.1 The Lawyers’ professional duties are owed to the Applicant and not to the Funder.
5.2 The Funder will give day-to-day instructions to the Lawyers on all matters concerning the Claims and the Proceedings, subject to clause 5.3 and clause 7.
5.3 The Applicant may override any instruction given by the Funder, subject to clause 7 below. The Applicant may give binding instructions to the Lawyers and make binding decisions on behalf of the Group Members in relation to the Proceedings up to the time of any court approval of settlement of the Claims or the delivery of judgment in respect of the common issues in the Proceedings (including, but not limited to, instructions and decisions in relation to Settlement), save where, in the reasonable professional opinion of the Lawyers, separate instructions are required from the Group Members.
5.4 The Lawyers will:
5.4.1 keep the Funder fully informed of all matters concerning the Claims and the Proceedings, including any mediation and settlement discussions; and
5.4.2 ensure that the Funder is given all necessary information and advice in order for the Funder to provide informed instructions.
6. Confidentiality
6.l The Funder shall strictly maintain the confidentiality of any information provided to the Funder by the Applicant or the Lawyers for a purpose connected to the Proceedings and shall adopt proper and effective procedures for maintaining the confidentiality and safe custody of the information.
7. Settlement
7.1 If there is a disagreement between the Funder and the Applicant as to whether to settle the Proceedings, or as to the appropriate terms for the settlement of the Proceedings:
7.1.1 the Lawyers will brief the most Senior Counsel of those retained by the Lawyers to advise as to whether, in Senior Counsel’s opinion, settlement of the Proceedings on the terms is fair and reasonable in all of the circumstances;
7.1.2 representatives of the Funder may attend any conference with Senior Counsel at which the issue is to be discussed;
7.1.3 the legal costs of obtaining counsel’s advice shall be met by the Funder as part of the Expenses; and
7.1.4 the advice of Senior Counsel will be final and binding on both the Applicant and the Funder.
7.2 Without limiting clause 7.1 above, in determining whether a proposed settlement is reasonable having regard to all the circumstances, Senior Counsel may proceed as he or she sees fit to inform himself or herself before forming and delivering his or her advice, but any such determination shall include the following considerations:
7.2.1 the strengths and weaknesses of the claims of all Group Members;
7.2.2 the quantum of the claims of all Group Members and any difficulties which might exist in proving that quantum;
7.2.3 the recoverability of a judgment sum from the Respondent;
7.2.4 the extent to which further legal costs incurred in the Proceedings are likely to be recoverable from the Respondent;
7.2.5 the risk of the Funder being ordered to pay adverse costs and the quantum of such costs. Counsel will have regard to this factor as though all Group Members carried such risk rather than the Funder;
7.2.6 the requirements of the Federal Court of Australia’s Practice Note GPN-CA;
7.2.7 the matters set out at paragraph [248.95] of the Australian Securities and Investments Commission’s Regulatory Guide 248: Litigation schemes and proof of debt schemes: Managing conflicts of interest (April 2013); and
7.2.8 any other matters Senior Counsel considers relevant
8. Termination
8.1 The Funder’s obligations under these Funding Terms may only be terminated by order of the Court, granted on application made by the Applicant or the Funder, and upon notice given to the Applicant, the Funder and such other persons as ordered by the Court.
8.2 If an application to terminate these Funding Terms is made by the Funder or the Applicant, and the Court grants that application, then all obligations of the Applicant, Group Members, the Funder and the Lawyers under these Funding Terms will cease on the Termination Date, save that the Funder must pay:
8.2.1 any outstanding costs pursuant to clause 3.1 above incurred up to the Termination Date; and
8.2.2 to the extent such amounts are not captured by clause 8.2.1 above, any adverse Costs Order against the Applicant (whether made before or after the Termination Date) to the extent that it relates to costs which have arisen in, or are attributed to, the period ending on the Termination Date.
8.3 Termination of these Funding Terms shall not affect the rights or obligations of any Group Members who have executed a Funding Agreement (including the Applicant), the Funder and/or the Lawyers under the Funding Agreements or the Retainer Agreements (as is relevant), which shall remain in full force and effect in accordance with their respective terms.
ANNEXURE B – FORM OF UNDERTAKING
No. VID 649 of 2018
Federal Court of Australia
District Registry: Victoria
Division: General
VINCE IMPIOMBATO
Applicant
BHP BILLITON LIMITED (ACN 004 028 077)
Respondent
UNDERTAKING
[G&E KTMC Funding LLC OR Mr Vince Impiombato OR Phi Finney McDonald Pty Ltd] undertakes to [the other two of G&E KTMC Funding LLC OR Mr Vince Impiombato OR Phi Finney McDonald Pty Ltd] and to the Court to comply with its obligations under the Funding Terms (being Annexure A to the orders dated ___ August 2018) and the terms of Order l of those Orders.
Signature:
_______________________________________________
Party:
[G&E KTMC Funding LLC OR Mr Vince Impiombato OR Phi Finney McDonald Pty Ltd]
Signatory:
Capacity:
Date of signature:
Background
Background to the litigation
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
There may be advantages in making a common fund order at an early stage in the proceeding: Perera v GetSwift Ltd (2018) 127 ACSR 1 at [244]-[246]; see also Money Max at [174]. In some cases, there may be a multiplicity of proceedings, requiring this issue to be resolved prior to the making of a common fund order: see McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd [2017] FCA 947 at [22].Consideration For the following reasons, I consider a common fund order as sought by the applicant to be appropriate and in the interests of justice. First, in general terms, the interests of justice in representative proceedings favour the burden of costs incurred for the benefit of all group members being shared equally among them: see Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527 (Caason) at [161]. Secondly, the funding terms provide for a funding commission of “an amount less than 18% of the Gross Recovery”. Under the proposed terms, the actual funding amount will be set by the Court at a later stage in the proceeding, when it will have the advantage of more complete information about the quantum or likely quantum of any settlement or judgment, most likely at the point of settlement approval or the distribution of damages: see Money Max at [79]. This gives group members certainty about the maximum total costs of participating in the action, so that they can make an informed decision before opting out, while also providing for continued judicial oversight of those costs so that the Court may prevent ‘windfalls’ or a disproportionate return to the funder: see Money Max at [85]-[89]. While the cap is expressed as a percentage of the Gross Recovery, it may be that the actual funding amount will be calculated in some other way, provided that it is less than the dollar amount that equals 18% of the Gross Recovery. As noted above, the respondent did not oppose the application. The respondent helpfully provided written submissions to assist the Court, outlining various relevant matters. One of the observations contained in the respondent’s written submissions was that the 18% maximum commission proposed by the applicant “will, once embodied in an order, become the inevitable reference point for the selection of the final funding rate”. The applicant, in his reply submissions, rejected this observation and stated that it failed to acknowledge the advantage to group members of providing certainty about the maximum costs of the proceeding prior to opt out. I accept the applicant’s submission that the 18% figure is a maximum and should not be seen as the inevitable reference point for the selection of the actual funding amount. Thirdly, apart from the costs and commission terms, the funding terms proposed by the applicant are unexceptional and are substantively the same as those previously approved by Beach J in McKay Super Solutions Pty Ltd v Bellamy’s Australia Ltd (VID163/2017), by order dated 3 April 2018. Fourthly, the proposed funding terms have been agreed to by a funder with extensive international experience in conducting securities class actions and assessing class action risk. The application follows a lengthy and thorough investigation of group members’ claims by lawyers with extensive experience in conducting representative proceedings and in negotiating funding terms in the interests of group members.