Kain v R&B Investments; Ernst & Young v R&B Investments; Shand v R&B Investments

[2025] HCATrans 14

[2025] HCATrans 014

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S146 of 2024

B e t w e e n -

JOHN BRUCE KAIN

Appellant

and

R&B INVESTMENTS PTY LTD AS TRUSTEE FOR THE R&B PENSION FUND

First Respondent

DAVID FURNISS

Second Respondent

BLUE SKY ALTERNATIVE INVESTMENTS LIMITED ACN 136 866 236 (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)

Third Respondent

ROBERT WARNER SHAND

Fourth Respondent

ERNST & YOUNG (A FIRM) ABN 75 288 172 749

Fifth Respondent

CHUBB INSURANCE AUSTRALIA LIMITED ACN 001 642 020

Sixth Respondent

DUAL AUSTRALIA PTY LTD ACN 107 553 257 ON BEHALF OF CERTAIN UNDERWRITERS AT LLOYD’S BEING:  (I) LIBERTY MANAGING AGENCY LIMITED FOR AND ON BEHALF OF SYNDICATE 4473; (II) ASTA MANAGING AGENCY LTD FOR AND ON BEHALF OF SYNDICATE NO. 2786 EVE; AND (III) HARDY (UNDERWRITING AGENCIES) LIMITED, MANAGING AGENT FOR AND ON BEHALF OF LLOYD’S SYNDICATE HDU 382

Seventh Respondent

ZURICH AUSTRALIAN INSURANCE LIMITED ACN 000 296 640

Eighth Respondent

XL INSURANCE COMPANY SE ARBN 083 570 441

Ninth Respondent

Office of the Registry
  Sydney  No S144 of 2024

B e t w e e n -

ERNST & YOUNG (A FIRM) ABN 75 288 172 749

Appellant

and

R&B INVESTMENTS PTY LTD AS TRUSTEE FOR THE R&B PENSION FUND

First Respondent

DAVID FURNISS

Second Respondent

BLUE SKY ALTERNATIVE INVESTMENTS LIMITED ACN 136 866 236 (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)

Third Respondent

ROBERT WARNER SHAND

Fourth Respondent

JOHN BRUCE KAIN

Fifth Respondent

CHUBB INSURANCE AUSTRALIA LIMITED ACN 001 642 020

Sixth Respondent

DUAL AUSTRALIA PTY LTD ACN 107 553 257 ON BEHALF OF CERTAIN UNDERWRITERS AT LLOYD’S BEING:  (I) LIBERTY MANAGING AGENCY LIMITED FOR AND ON BEHALF OF SYNDICATE 4473; (II) ASTA MANAGING AGENCY LTD FOR AND ON BEHALF OF SYNDICATE NO. 2786 EVE; AND (III) HARDY (UNDERWRITING AGENCIES) LIMITED, MANAGING AGENT FOR AND ON BEHALF OF LLOYD’S SYNDICATE HDU 382

Seventh Respondent

ZURICH AUSTRALIAN INSURANCE LIMITED ACN 000 296 640

Eighth Respondent

XL INSURANCE COMPANY SE ARBN 083 570 441

Ninth Respondent

Office of the Registry
  Sydney  No S143 of 2024

B e t w e e n -

ROBERT WARNER SHAND

Appellant

and

R&B INVESTMENTS PTY LTD AS TRUSTEE FOR THE R&B PENSION FUND

First Respondent

DAVID FURNISS

Second Respondent

BLUE SKY ALTERNATIVE INVESTMENTS LIMITED ACN 136 866 236 (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)

Third Respondent

JOHN BRUCE KAIN

Fourth Respondent

ERNST & YOUNG (A FIRM) ABN 75 288 172 749

Fifth Respondent

CHUBB INSURANCE AUSTRALIA LIMITED ACN 001 642 020

Sixth Respondent

DUAL AUSTRALIA PTY LTD ACN 107 553 257 ON BEHALF OF CERTAIN UNDERWRITERS AT LLOYD’S BEING:  (I) LIBERTY MANAGING AGENCY LIMITED FOR AND ON BEHALF OF SYNDICATE 4473; (II) ASTA MANAGING AGENCY LTD FOR AND ON BEHALF OF SYNDICATE NO. 2786 EVE; AND (III) HARDY (UNDERWRITING AGENCIES) LIMITED, MANAGING AGENT FOR AND ON BEHALF OF LLOYD’S SYNDICATE HDU 382

Seventh Respondent

ZURICH AUSTRALIAN INSURANCE LIMITED ACN 000 296 640

Eighth Respondent

XL INSURANCE COMPANY SE ARBN 083 570 441

Ninth Respondent

GAGELER CJ
GORDON J
EDELMAN J
STEWARD J
GLEESON J
JAGOT J
BEECH‑JONES J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON WEDNESDAY, 5 MARCH 2025, AT 10.00 AM

(Continued from 4/5/25)

Copyright in the High Court of Australia

____________________

GAGELER CJ:   For the transcript, I note that Justice Edelman is participating in the hearing remotely.  Mr Gleeson.

MR GLEESON:   Thank you, your Honour.  Your Honours, three short matters from yesterday.  Firstly, your Honour Justice Steward, we asked overnight whether the appellants agreed that nothing in Brewster stood in the way of a judgment or settlement CEO.  We got no response, so I will have to press on, on that issue.

Secondly, your Honour the Chief Justice, we have prepared an aide‑mémoire, which we would seek to rely upon, to answer the question about forms of FEOs and CFOs.  Could I note, on that aide‑mémoire that the first decision, Wetdal, is an example of what Justice Beach described as “FEO method 1”, whereas the second example, Equity Financial Planners, is an example of “FEO method 2”.

The two methods have in common that the unfunded group members have an obligation imposed upon them at settlement or judgment which they had they not agreed to by contract, and to that extent, the appellants’ argument that there has to be an underlying contract before an order could ever be just is inconsistent with both methods of the FEO.

As to method 1, it is further explained by Justice Beach in Blairgowrie v Allco, which is found in volume 7, tab 31, commencing at page 1889, particularly at 1960, in paragraph [99](d), where Justice Beach explains what was sometimes not appreciated about FEO method 1 was that when you add the unfunded group members ‑ ‑ ‑

GLEESON J:   Page 1960.

MR GLEESON:   Page 1960 – tab 32, I am told.

GAGELER CJ:   Thank you.

MR GLEESON:   When you add the unfunded group members’ contributions, which had been imposed upon them without their contract, across the whole group, the litigation funder then may say:  I am now entitled to my commission on that extra amount, which is now in the hands of the funded group members – and that happens – and that is an illustration of how, under the FEO method 1, the total amount that the funder may end up getting is greater than what might appear, on its face, to be the contractual entitlement.

In respect to the CFO, we have given an example from Uren, and we have given the example from your Honour Justice Beech‑Jones sitting at first instance in Ellis.  In Ellis, what we are calling the CFO, for convenience, is in fact found in paragraph 7(b) of the order, and it confirms what I sought to say yesterday, that the labels, in a sense, distract.  What we are talking about is authorising a deduction from the fund generated by, inter alia, the service of the funder in an identified amount of money.

The identified amount of money may, in turn, reflect a calculation which has used a commission rate which the court has approved as fair and reasonable, but ultimately what the court is approving – as per paragraph 7 of Ellis – are those distributions to those people in those amounts.  Our short point is that at the level of power, there can be no constraint which would prevent amounts of this type being deducted in favour of people who have provided services, whether they be legal services, funding services, administration services, reimbursement of plaintiffs’ shares and so on.

Could I also add that, in terms of form, even if the underlying calculation is through an FEO route, whether 1 or 2, the order usually ends up in the form of Ellis paragraph 7, namely, an authorisation of deductions, and the reasons will explain how one has reached the appropriate amount for the funder.  That is another reason why, as a matter of power, there can be no constraint.

Paragraph 5 is the case I referred to of your Honour Justice Gleeson, which was decided while Brewster was reserved, and your Honour noted at the time that the power to make it was in issue in Brewster, but it was a good example of a CFO made in advance of settlement or judgment but for a purpose which we would submit is obviously proper, namely, in order for plaintiff and defendants to go into settlement talks, they needed to know what was likely to be the amount which would be taken by the funder.

Just one of many examples why Brewster, we would submit, is plainly wrong in the majority to say that all CFOs prior to settlement or judgment are beyond power.

BEECH‑JONES J:   Mr Gleeson, may I ask this.  With FEO method 1 and 2, are they always simply an order about the distribution of the money paid, they are not an order directed to the group member to do anything – is that correct?

MR GLEESON:   Your Honour, my answer is in two parts.  What I have said is that often – FEO 1 and 2 – the ultimate order will look like Ellis paragraph 7.  But, in the reasons, you will see that the way in which it has been achieved is by one or two of those methods.  That is not to preclude that, in cases, a judge might have framed the order to directly reflect what FEO method 1 and 2 would say, but in terms of whether they are just, we would submit that they all fall within the breadth of the statutory concept of justice, then it is a question of the particular case.

Your Honours, the other matter, just to clarify from yesterday is, can I go back to the precise question which the court posed and answered, which is in the core appeal book, page 22, paragraph 1.  The question, in its second limb and its ultimate limb, was very precisely directed to whether there could be an authorised distribution to the solicitor:

otherwise than as payment for costs and disbursements incurred in relation to the conduct of the proceeding?

At a level of power, that is the generality of the question.  The question is not a narrower question, which is:  could it be done as a percentage of the settlement sum or via any other particular route?  The question of power is at a higher level of principle:  if the solicitor has rendered a service which is not properly described as costs and disbursements, can that be compensated by a deduction from the settlement?  That that is the correct reading of the question is made perfectly clear by these paragraphs.  Firstly, paragraph 21 ‑ ‑ ‑

GORDON J:   Sorry, what is made clear by these paragraphs?

MR GLEESON:   That the question is framed at the level of generality ‑ ‑ ‑

GORDON J:   Thank you.

MR GLEESON:   ‑ ‑ ‑ which is the “otherwise than as payment for costs and disbursements”, not in any particular form such as a percentage of the judgment sum.  That is made clear at 21, that the question is focusing on the “otherwise than payment for costs and disbursements”.  The court says that, of course:

may not be determinative –

when you come to the actual order – there could be other considerations such as:

the amount of the payment –

absolutely and relatively:

For example, a court may consider it just to make a modest allowance to a solicitor otherwise than as payment for costs and disbursements –

So, within the scope of the broader question is the ability, at the particular stage of the order, for example, to say:  the solicitors have incurred costs and disbursements of $1 million, they recover that out of the settlement; they have also provided security for costs and they have taken on the risk of adverse costs orders, under the court’s approval, I award the solicitors an additional amount of – let us say – $250,000 as remuneration for that service.

So, in a sense, it does touch upon your Honour Justice Beech‑Jones’ question, because, ultimately, it will be an amount which the court will be asked to award for the nonlegal costs and disbursement service.  The method by which it is reached may depend on percentage, it may not depend on percentage.

BEECH-JONES J:   Mr Gleeson, where it refers to “to a solicitor”, is that meant to be to the solicitor acting for the parties?

MR GLEESON:   Yes.  Paragraph 30 makes the same point clear, that the question is at a level of generality, and it is particularly made clear, at paragraph 84, that the terms of the particular:

variation or addendum to the costs agreement –

in this case:

are neither here nor there when it comes to the question of power –

and, equally, the terms of the particular proposed opt‑out notice is not relevant to the terms of power.  So, your Honours saw yesterday in the book of materials at page 63 to 64, clause 3A.2(c)(ii) that the particular addendum was contemplating remuneration in the form of a percentage of the sum recovered as is approved by the court.

But I also took your Honours to 3A.4, which showed that everything was to be in the discretion of the court as to form and value.  But the issue before your Honours is not, we would submit, at the stage of power, about percentages of the award, it is about the more general question of:  can you authorise some deduction referable to the service which is not legal costs and disbursements?

GAGELER CJ:   Mr Gleeson, the only reason that the broad question is being asked is for the purposes of giving the notice and then proceeding with the proposed course of action in this litigation.  We need to understand the question as raising the issue that the parties – an issue about the course of conduct that the parties are choosing to proceed with, here.

MR GLEESON:   I do not disagree with your Honour at a level of principle.  I am trying to be precise about the question.

GAGELER CJ:   Yes.

MR GLEESON:   The Full Court has made clear the distinction between power and discretion, and I certainly will not be running away from the construction of the State statutes – I will be coming to that in a little while.  But I am pointing out that, at the level of power, the question of principle is:  do you read down section 33V and 33J so that the types of orders that could be “just” in a particular case do not include orders where a solicitor receives a deduction from the fund otherwise than as payment of costs and disbursements?

If we are correct on that question, namely, you do not exclude that from the scope of power, then, when it comes to the settling of the notice – and, ultimately, if it gets to it, the approval of remuneration – one will need to look at precisely what is requested.  What we submit the Full Court is making clear is that they are not, at this stage, approving a payment by way of a percentage of the settlement.

That is what the solicitors have asked for.  That is what they wish to tell the group that they will be seeking from the court, and obviously, that has to be an honest and accurate statement of intention.  We do submit there is a distinction between the power question – if we are wrong on the power question in general, then you never get to the question of the particular form of it.

GAGELER CJ:   But you accept that dealing with the State statutes and the public policy argument is within the scope of the question?

MR GLEESON:   Yes.  To be clear, what I will be saying there is that at the level of the construction of the statute – the Commonwealth statute – in terms of what is just, one does not read down that conception of justice by reference to what may happen to be in particular State statutes from time to time.  If we are correct on that, that is the beginning and the end of the State statutes.

What I accepted, in answer to your Honour Justice Edelman yesterday, was that the stage when it comes to the making of an order, if the particular order is to authorise a deduction which would be contrary to a prohibition in a State statute, then that is, at the least, going to be highly relevant to whether that is a just order.

I am going to show your Honours, in due course, a case where an apparent contravention of a State statute was treated as not inevitably rendering the order unjust, so that is an issue.  So, the concession I have made is, at the stage of exercise of power, if there is a breach of a State statute, it will be relevant – highly relevant – to whether that order is just, but the question before your Honours is, at the high level of generality, do you read a limitation around what can be regarded as “just” within 33V by reference to what happens to be in particular State statutes from time to time?

GORDON J:   That last submission – maybe you will come to it when you take us to this case that you are going to take us to – but I had understood that you accepted yesterday that really, then, the question of power, discretion, or the exercise of that power, merged – could merge.

MR GLEESON:   Could merge, could merge.

GORDON J:   I understood you to accept that yesterday, so that, in a sense, the question at the high level of generality may, in the circumstances of this case, not be one at that level at all, because you cannot answer it without looking at these State statutes.

MR GLEESON:   To try and be clear, I am saying, at the high level of generality, construing 33V and 33J, what limits, as a matter of construction of a federal statute, can be placed around the concept of justice by reason that State statutes – which are not uniform across the Federation – from time to time may impose prohibitions upon particular conduct by solicitors.

My answer, at the high level of generality, is no limits are imposed on the concept of justice through that route.  What I am then accepting is, at the stage of the exercise of the power, one then says:  we now are being asked to approve a deduction of X dollars to a certain person.  If it be said that to do so is in breach of a State law, we then ask whether the concept of justice in the statute, properly applied to these facts, would permit that deduction to be made.

STEWARD J:   Mr Gleeson, can I ask you a question about power. Do we have to be at all concerned about section 43 of the Federal Court of Australia Act and the general plenary power to award costs?  There is a carve-out going in one direction for represented proceedings in subsection (1A).  Do you rely on any part of that broad power as informing the breadth of the word “just”, particularly subsections (2) and (3) which may be relevant – I do not know.  You can take it on notice.

MR GLEESON:   I can deal with that, your Honour.  It is part of the matrix because, first of all, (1A) has told us that there will not be costs against the group members and that is to be read together with section 33R, which says that if they proceed to litigate for individual causes of action, they can be subject to costs.  What 43 starts with in (1) is a:

jurisdiction to award costs –

of some breadth in the discretion of the judge, and 43(3) provides for some of the things the court can do in relation to ‑ ‑ ‑

STEWARD J:   Does 3(a) assist your commencement CFO case?

MR GLEESON:   Section 3(a) is conventionally understood to authorise a pre‑emptive costs order against the defendant in that unusual category of case where the defendant’s conduct has rendered the plaintiff arguably impecunious.  And if the action is otherwise considered bona fide, the court could make a pre‑emptive award against the defendant.  It also allows the court more conventionally to order costs against a party who has lost a particular issue along the way.  At the moment I would not rely upon it to advance our argument, unless I come back to your Honour.

STEWARD J:   Thank you.

MR GLEESON:   Your Honours, what I now propose to do is to deal with these seven topics before handing over to Mr Hartford Davis to deal with the question of conflicts in 1337P.  Firstly, I want to finish our submissions on Brewster; secondly, draw together our submissions on why a settlement CFO or SCFO or an early CFO or SCFO might be considered to be just within 33V, 33J, 33ZF; thirdly, deal with the question I just trespassed upon, which is how the State statutes are relevant at all in the construction of the federal statute; fourthly, your Honour Justice Stewart and Gordon’s questions about legal versus non legal services in the context of the LPUL; fifthly, section 183 of the LPUL; sixthly, the conduct rules; and seventhly, the common law public policy.

Could I mention just on the LPUL that not only does it postdate the federal Act, of course, it is not uniform legislation across Australia.  It is adopted in New South Wales, Victoria, subject to the addition of 33ZDA in Western Australia – not in the other states.

Now, could your Honours go back to Brewster, please.  I made a submission on paragraph 41 as to the recognised entitlement to justice which the plurality referred to, put to one side in respect to early CFOs as a matter for consideration at settlement or judgment, and then did not return to at the relevant place, which was paragraphs 85 to 90.  Next, at paragraph 47, which is at the heart of the ratio of the plurality, there is a fundamental distinction between:

Whether an action can proceed –

and:

how it should proceed –

The “can” question is said to be outside 33ZF, and the “how” question is said to be within section 33ZF.  Firstly, that confirms the plurality is dealing with the early CFO, because otherwise that question and distinction could not even potentially arise.  Secondly, we submit that is one of the fundamental errors in the plurality which call for its reopening.  Paragraph 48 again confirms it is the early CFO that is the subject of the decision.

Your Honours, without taking you to every other paragraph which makes clear the plurality is dealing with an early CFO, there are many, so if I could be permitted just to read onto the record every other paragraph which makes that good.  They are paragraphs 49, 50, 52, 53, 54, 59, 62 to 65, 67, 68, 70, 71, 73, 80, 81, 83, 84.

GAGELER CJ:   You could just say the whole judgment is directed to that issue. 

MR GLEESON:   The appellants have made us do this, your Honour.  They had the chance.  I could say that as well, your Honour, but I have given your Honour the detail if you need it. 

GAGELER CJ:   Thank you. 

MR GLEESON:   So, where that comes to is the simple proposition that there is no ratio from the plurality that a CFO or an SCFO prior to settlement or judgment is beyond power under 33V or 33J.  Next, if there is no such ratio from the plurality, that could only leave two judgments:  Justice Nettle and Justice Gordon, which would not make a majority, obviously enough. 

I would only say about Justice Nettle that he makes perfectly clear he is only dealing with early CFOs.  Paragraph 122 makes that clear.  Paragraph 124 and the first sentence of 125 makes clear that his Honour understands what he is agreeing with is a proposition that 33ZF is supplementary to do what is necessary incidental to achieve the objectives of other more detailed, specific provisions.  When his Honour says in the middle of 125 that the case has nothing to do with restitution, that is again because his Honour is not considering that that claim of justice properly arises prior to settlement or judgment.

Your Honour Justice Gordon’s reasons, as we apprehend them, may possibly be read as broader – particularly paragraph 135 – and your Honour has given more attention with respect to the settlement CFO than the other judgments, but one judgment does not make a majority.  That is what I want to say about Brewster does not preclude a settlement or judgment CFO and the 20‑odd cases around the country which have reached that conclusion on the reasons are correct.  They are the cases referred to by Justice Lee.

The next topic is to argue that there is error that should be reopened by this Court in the majority’s rejection of an early CFO, whether that is all early CFOs or the narrower category that I have referred to.  The way I propose to advance this argument ‑ ‑ ‑

GAGELER CJ:   I am sorry, what is a narrower category of early CFOs?

MR GLEESON:   The one that was defined in paragraph 3; the one that had the impermissible purpose of trying to incentivise to prop up this funder with no other apparent character to it.  We do not accept that that is the correct way to characterise the CFO in that case because, of course, you are not giving the funder an incentive for the heck of it.  The representative applicant is saying, I have to go to court and provide security for costs, I am going to be liable for adverse costs.  As your Honour Justice Steward points out, the group will not be liable for adverse costs, the representative applicant will be.  So, the representative applicant has to be able to make a suitable arrangement for own costs, plus security for costs, plus adverse cost risk.

The representative applicant goes to the funder to see if appropriate terms can be secured, even if provisionally, in order that the representative applicant can discharge its duty to the court.  So, by propping up the funder – if you want to use crude terms – you are not doing that as an end in itself, you are doing that as a means to ensuring the action can be put on a stable footing, which is how it had been described in Money Max and in the lower judgments in this case, for the benefit of – I do not want to overstate it, but it is for the benefit of both sides of the record, and I will not step away from that.

If you are the defendant – if you are one of these people over here, you want to know you are secure for your costs.  And some of your Honours may recall when these matters were first litigated as “maintenance and champerty” 25 years ago, some of the people in this courtroom were busy arguing on the funder side, I do not have to provide security for costs; on the class side, the argument was, it will be an abuse of process if you do not provide security for costs.

That went through a number of court cases.  Eventually all courts and all funders got to the sensible solution:  if you are going to have a funded action, the interests of justice require these people to be protected for their costs if they win.  That is an interest of justice across the record.  What the early CFO does, amongst other things, is say they have that protection.  That is an interest of justice within 33ZF.  It is across the record.

There is then a second set of interests of justice which are between the representative, the group and the funder.  And those interests are:  the funder’s services are necessary for this action to be able to proceed, the funder is entitled to a fair fee for its services, the fair fee needs to be shared across all members of the group who choose not to opt out.  What the early CFO does is to say we will provisionally put in place those arrangements to secure justice between those people who are all part of the matter – contra Mr Hodge.  They are part of the matter because the funder is providing one of the services which allows the proceeding to go forward.

Now, the early CFO provisionally can be regarded as just because it meets those two claims of justice across the record and on the group side of the record.  It is as simple as that.  And once the CFO is available on settlement or judgment, for the reasons I put yesterday, it must be available provisionally in order to put in place – subject to the court’s later review – the arrangement, which, going forward, allows that proceeding to proceed on a stable footing.

It means that when the court devotes resources to the class action, the risk of the action collapsing through lack of legal costs on the plaintiff side is reduced; the risk of the defendants not getting their costs is eliminated; fairness between the group is established at the outset; and, in terms of what I call informational justice, when you come to the three issues I mentioned yesterday – opt‑out, class closure, carriage motion – group members can decide, and the court can decide, what is in the interests of members as a whole. 

That is the broad argument why the Brewster majority, with respect, is wrong.  The way I wanted to make that more specific – your Honour the Chief Justice might say I am getting in the details again, but this is critical to our argument.  I want to put it in this particular fashion – I have given you the overall argument.  The way I wish to do it, taking up your Honour Justice Gleeson’s question from yesterday, is to extract five propositions from your Honour Justice Gageler’s dissenting judgment to show you that Justice Edelman agreed with each of those propositions, and then to show you where I say the majority either failed to deal with them or erroneously dealt with them, if that is convenient. 

The first proposition is at paragraph 97 to 99.  This is the proposition that the words we are dealing with are words of width, conferring a broad power on a court to be exercised judicially, and the only limitation – picking up what Justice Wilcox had said – is to ensure that justice is done in the proceeding; Justice Edelman, to similar effect, paragraph 181.

Now, that topic is dealt with by the plurality in this fashion.  At paragraph 19, the plurality criticises the Full Federal Court for eliding what are words of limitation; and at paragraph 21, in the first sentence, the Full Court again is found to have elided words of limitation.  We would submit that is a fundamental error of statutory principle to treat words of breadth as words of limitation.

At paragraph 46, we see the same proposition in the second sentence – these are “words of limitation”.  So, the very same passage from Justice Wilcox in McMullin is not read as a passage urging these to be treated as words of limitation when, with respect, Justice Wilcox was saying the exact opposite.  That is the critical bridge to the proposition that the words are supplementary – paragraph 46 – and that is what leads to the critical paragraph 47, that you can distinguish the “can” from the “how”.  The notion that the power is solely supplementary is critical to these reasons.  It emerges again in paragraph 60.

GLEESON J:   Are you saying that these arguments are relevant to section 33V?

MR GLEESON:   No, your Honour, this is 33ZJ.  The argument is that the error ‑ ‑ ‑

STEWARD J:   Section 33ZF.

MR GLEESON:   Section 33ZF.

STEWARD J:   Yes.

MR GLEESON:   That the error which requires reopening and correction is to read 33ZJ as words of limitation as a purely supplementary gap‑filling source of power.  If that be an error that needs to be reopened and corrected, then the early CFO can be supported, consistent with the settlement CFO under the other provision.  So, the other place the supplementary emerges is then 69 – it is now mere gap‑filling; 70, to the same effect; then 94 brings the case home.  It is seen in 94 that it pushes 33ZF too far:

to supplement the legislative scheme by judicial involvement to ease the commercial anxieties of litigation funders –

That has two problems in it:  one is, it is the words of limitation, the supplementary reading of 33ZV; the second is to mischaracterise the early CFO as doing no more than making people like Mr Walker feel happier at night.  Justice Nettle took that same supplementary gap‑filling view at paragraph 124 that I took you to, and therefore a majority of four is founded on that principle, which, we submit, is in error.  That is our first step.

The second step is to look at what your Honour the Chief Justice said at paragraphs 100 to 102 – your Honour Justice Steward asked me about this type of reasoning yesterday.  But in the context of 33ZF, we have what is perhaps inherent in 33V and 33J, that a power to do what the court thinks appropriate or necessary in the proceedings to do justice embraces adaption to changing circumstances.

Here, we have changing circumstances par excellence in Campbells Cash & Carry where the excellent arguments of Mr Myers and his co‑counsel were readily dismissed by this Court, and then we have at 102 the story of adaption, testing and evaluation.  That language of “thinks” fit is, in fact, expressly in 33ZJ, so these observations, your Honour Justice Gleeson, directly apply to 33Z(1)(g) as well as 33ZF.

GLEESON J:   Are you still talking about 33ZF when you say 33ZJ?

MR GLEESON:   I am primarily 33ZF, but I have just tried to slip in there that the words “thinks” are also in 33Z(1)(g), so this argument straddles both.

GLEESON J:   I think I am maybe running behind everyone, but your notice of contention does not suggest that the CFO in this case could be – or the order could be made under 33ZF.

MR GLEESON:   That is correct, your Honour.

GLEESON J:   Right.

MR GLEESON:   So, this is in support of notice of contention ground 1.

GLEESON J:   Yes.  How does that issue arise?

MR GLEESON:   It arises because you have appellants saying that our arguments are foreclosed by Brewster.  I am meeting that on two levels.  Firstly, the Brewster ratio did not deal with settlement or judgment.  But at a second level, even if one is to look at this as a scheme, to look at how ZF fits together with 33V and 33J, and it is important to see it as a scheme, then the CFO is available under both of those provisions. 

So, the construction of 33V and J – which is what is the narrow issue before you, or the important issue – is informed by understanding how this scheme fits together.  The sort of observations that I – the reason I belaboured the plurality at 94, they are limiting power under 33ZJ but they are doing it by a conception of the scheme, that the scheme as a whole has within it this idea that the court is not to ease commercial anxieties of funders.

We submit what the Court should do is grapple with the scheme as a whole and come up with the straightforward answer that ZF, V, J, they authorise the CFO, early and late.  So, that is one answer.  And then the other answer is – I took you to the text of 33Z(1)(g), where we have the very similar language to ZF.  We have the language what “the Court thinks just”.  So, the submission then matches both those texts.

So, the second proposition, paragraphs 100 to 102 of Justice Gageler, to like effect Justice Edelman at paragraph 171 and 205.  So, the question then is how did the plurality deal with the always speaking nature of the provision.  In this area, we submit respectfully, there is a tension, if not an inconsistency.  If you start at paragraph 44, the plurality appears to be saying that you should not constrict the language to the precise conditions in 1991, and if that was where it ended, there could be no difficulty.  But by the time of paragraph 71, the Court says that:

the provisions of Pt IVA . . . do not involve the court . . . in a concern as to whether a litigation funder may be sufficiently satisfied with the prospective return on its investment to assume the financial risk of . . . litigation.

And the plurality goes on to say:

Much less do those provisions or the extrinsic materials reveal a concern that a desire on the part of a litigation funder to avoid . . . book building is a matter of concern for the court.

What here seems to be suggested is, because you cannot find in the specific statutory provisions or in the extrinsic materials that the Parliament turned its mind to whether book building was good or bad, that is something which allows you to place limits on 33ZF and it would be 33ZJ that prevent CFOs.

That is to freeze the statute in the 1991 legislative landscape, directly contrary to paragraph 44, and that is an error.  You will see the same error in paragraphs 83 to 84, where, in 83, because the ALRC did not target this particular defect, that is significant, and you therefore read Parliament – last sentence – as refraining from taking the course which the ALRC did not recommend.  That, we submit, as a matter of method, is freezing the statute in the surrounding legal landscape of 1991, which is an error of principle.

Your Honours, just on that point of what the ALRC said, you received a submission yesterday from Mr Foreman which I need to address.  In the ALRC report, he referred you to paragraph 293, which is in supplementary volume 2, page 522.

GORDON J:   I think he actually took us to 297.

MR GLEESON:   Yes, thank you, your Honour.  He took you to 297, what he did not take you to – perhaps your Honour Justice Beech‑Jones’ question picked this up – is that what the ALRC was recommending was clause 33(2), which is found in the draft Bill at page 566.  That would have done a number of things:  it would have given the Court express power to approve remuneration of practitioners and then it would have imposed a restriction on that power – perhaps understandable, given this was prior to the Abolition Act.

I do not think he clearly told you that those provisions were, in fact, rejected, they were not taken up by the Parliament.  And he did not take you to paragraph 289, where the commission referred to the common fund doctrine in the United States, referred to by the Supreme Court in Boeing, which goes back to Trustees v Greenough and Pettus decision – they are all in the materials:

The Commission agrees with the general approach in the United States.

They were supportive of the idea of the common fund order in principle, and they said:

any commitment of part of the monetary relief . . . to costs must be subject to appropriate regulation by the court –

So, what in fact happened was there were recommendations by the ALRC which appeared to contemplate, on the one hand, some introduction of a power which would cover common fund orders; on the other hand, specific powers in respect to solicitors.  None of that was taken up by the Parliament.  So, nothing can be drawn from this.

What actually happened was the Parliament left the language in the most general terms – the court may approve distributions which are considered just.  The only inference to draw from this is not the inference of the plurality at paragraph 83, but rather to say that the final decision of Parliament was to adopt the most general, broad language without any limitations dealing with these problems.  To return to where I started on this point – which is paragraphs 100 to 102 of Justice Gageler – we submit there are undoubtedly correct and the plurality erred in rejecting them.

Now, the third proposition we advance is from paragraphs 108 to 109.  The point put forward here, which is not addressed, with respect, by the plurality – and this is a point embedded in the text, it is not a policy choice as per Mr Hodge – is that, once one understands the provisions which generate the open class action with the representative having the ability to define the class and to conduct the proceedings, and to bring them to either a settlement or a statutory estoppel on the common issues, as it is put in 108:

The representative party takes the group members in tow, and they sink or swim together.

That statutory premise embedded in the text leads to the proposition in 109 that:

the notion of ensur[ing] that justice is done in the proceeding” –

within 33ZF and, we would say 33V, 33Z(1)(g):

cannot be confined to ensuring that justice is done in the resolution of the . . . matters –

across the record.  It includes:

procedural . . . and substantive justice . . . between the representative party and the group members in the conduct of the representative proceeding.

As “confirmed”, textually, by the court’s power to make an order:

of its own motion or on application by any party or any group member.

So, the standing for this order could not be broader.  So, that is a link between the open class action into this power not being confined solely across the record, leading then, at 110 and 111, to exemplification of procedural justice and substantive justice, which could include an order in the nature of a CFO.

Now, Justice Edelman, in different language, but to similar effect, dealt with this proposition at 182, 188, 193 and 200.  As to how the plurality dealt with this issue, if you start at paragraph 50, very much, but not exhaustively, the plurality is limiting this provision to justice across the record.  The reason the plurality endorses Justice Wigney in Blairgowrie is that:

The focus of the power . . . is upon ensuring . . . that justice is done in the proceeding as between the parties to it.  As a matter of the ordinary and natural meaning . . . they authorise an order apt to advance the effective determination by the court of the issues between the parties . . . Whether –

a funder has a:

sufficient financial inducement to support the proceeding is outside the concern –

and you will see, in paragraph 51, repeated references to issues between the parties.  So, there is a focus here, we submit, which is too narrow, that one limits these provisions to solely matters between the parties.  I say mostly but not exhaustively, because you will see in the last sentence of 51 there is a statement that it does not:

assist in doing justice between group members in relation to the costs –

Now, that at least recognises that justice between group members could be relevant, and we agree with that, clearly enough.  We disagree to say that the CFO cannot assist in doing justice between group members.  It can do that justice, for the reason at paragraph 41, which the Court set to one side, and for the reasons your Honour Justice Gageler gave at 108 through to 111.

But you will see in 52, 53 and 54, there is a repeated idea that the CFO is somehow directed solely, as it were, to an issue extraneous to the doing of justice either across the record or between group members, and that, with respect, is wholly erroneous, for the reason that I have given.  The only other treatment by the plurality of justice between the group, including the funder, is at paragraphs 85 to 90, and, as I have said, they do not address the issue.

I can deal with the fourth and fifth propositions more briefly.  The fourth proposition from your Honour is at paragraph 110, at the foot of page 619 of the CLR, that it is:

an unrealistic dichotomy to postulate that an order that serves to shore up the commercial viability of the proceeding from the perspective of the litigation funder can have nothing to do with enhancing the interests of justice.

Your Honour’s proposition, which we submit is undoubtedly correct, was expressly approved by the New Zealand Court of Appeal last year.  The case is found in volume 9, tab 54 – Simons.  The express approval is found on page 2935, in paragraph [134] of the reasons.  Simons is an interesting case, because the representative proceedings in New Zealand follow the old equity rule, they do not have the modern rule that we have, and the only power which was used to support the CFO was a power to give directions in that proceeding.

Nevertheless, the Court held that there was sufficient power to make a CFO, under the power we have just identified.  It is found in paragraph [127] of the judgment; it is section 146(4) of the Senior Courts Act.  It is a power to give directions that it thinks fit, supported by Rule 4.24.  In other words, even within a more traditional representative action, a power which has breadth to it – a power to give directions as the court thinks fit – is very easily understood by the New Zealand court to permit an order in the nature of a CFO, and the reasons why that could be regarded as just, you will see at paragraph [136].

GORDON J:   Rule 4.24 – it may not make a difference – in paragraph [35], it is the power which was being read together with it, was it not?

MR GLEESON:   The two were being read together, your Honour.

GORDON J:   Yes.

MR GLEESON:   So, the three reasons in paragraph [136] which could support a CFO are placing the proceeding on a “secure footing”, “better” information to class members:

less uncertainty about how the court might exercise its discretion –

Those reasons map the reasons which your Honour Justice Gageler gave at paragraph 113 of the reasons.

GAGELER CJ:   Mr Gleeson, I think I have a recollection that Simons went to the Supreme Court of New Zealand.  Am I right?

MR GLEESON:   I am told the analysis of power remains unchanged; the exercise of discretion was different.  So, to round out this point, we therefore submit, when you come back to that critical distinction at paragraph 47 of the plurality, between the “how” and the “can”, it collapses once one takes the correct approach that I have identified here.

The fifth matter that I was going to refer to was paragraph 113 of your Honour’s judgment.  And if one asks how the plurality dealt with the three reasons you gave there that could justify an early order, the first reason was that it would place the proceeding “on a secure footing”.  The majority, as I have shown you, have taken too narrow a view of what an early CFO does.  The second reason is:

reducing uncertainty on . . . how the Court might exercise statutory discretions –

If we are correct on the main issue that the CFO is available on settlement or judgment, then the plurality has not addressed this reason to give the early CFO.  The third reason of:

allowing group members to make more informed decisions –

has, with respect, been not addressed by the plurality.  So, the final things I will say, just before I come to the John factors, are we embrace what your Honour Justice Gageler said at 111 as to some of the notions of substantive justice that would support an early CFO or a settlement or judgment CFO.  We embrace the authorities your Honour has referred to there, including in the footnotes.

Your Honour Justice Edelman has dealt with those authorities in more detail at paragraphs 188, 193 and 200.  We embrace that analysis.  In our written submissions, we have identified a number of authorities for you on this topic.  I will just give the references in our written submissions.  It is paragraphs 30 and 74 to 76.  A number of those cases illustrate courts making orders which create new rights in order to achieve justice.  I will not take you to the detail of them, but they are all important.  Mr Hartford Davis will take you to one of them, which is an early authority of this Court, Nissen, which makes the point rather clearly.

The next concluding point is the question of sufficient criteria.  Your Honour Justice Gageler at 115 said that the courts are able to develop sufficient criteria, from time to time, under this concept of justice.  We agree with that.  Justice Edelman made that point at 199, 201, 202.  The plurality, to the contrary, at 59, say there was a lack of criteria, and we submit the plurality is in error because they have failed to consider the body of cases that I have just referred to in summary form, all of which demonstrate the courts working out criteria where awards of remuneration are made for people who provide services.

The final point in this group is as to FEOs, at paragraph 85 to 90.  To the extent the plurality suggests that an FEO will always provide a lower cost, that is factually wrong, for the reasons given by Justice Beach in Elliot‑Carde, which we have addressed in paragraph 10 of our submissions.

Your Honours, the next step is the John factors.  We respectfully adopt what the intervener is going to say on that topic.  In summary, we say the principle was not carefully worked out in a significant succession of cases and rests on errors, including a misunderstanding that an FEO will necessarily achieve a better outcome for group members.

There are differences between the reasons of the majority.  Importantly, perhaps, Brewster has been overtaken by surrounding developments, as I have been seeking to advance – surrounding developments in Wigmans with the carriage motion, where the early CFO is necessary or appropriate; Lendlease registration, the early CFO is necessary or appropriate; your Honour Justice Gleeson’s decision, an early CFO where a settlement is pending; we have the group costs regime in Victoria; we have the detailed experience of the Federal Court that to require funders in every case to book build, because an FEO is the only remuneration order, runs contrary to the purposes of this scheme.

Finally, as to mischief and inconvenience, Mr Hodge said yesterday we have nothing on that topic.  What we have, from the cases I have been referring to, including Justice Beach in Elliot‑Carde, is this most unfortunate situation of judges doing justice with one hand tied behind their back.  Everyone in the court is dancing around a possible CFO at the end of the matter without the provisional certainty obtained through a CFO, which enables all of the interests of justice which I have sought to identify.

Finally, it has not been independently acted upon in the sense that the second‑hand justice I have referred to has been necessary in the lower courts, but your Honours do have the chance to set this area of the law on the right footing.  We do urge you do.  I am told, your Honour the Chief Justice, the correct answer to your question is that the New Zealand Supreme Court refused leave to appeal in Simons [2024] NZSC 186 at paragraph [12], which says:

Nothing raised by the applicants suggests that their proposed challenge to the concurrent findings on jurisdiction . . . has sufficient prospect of success to justify the expense and delay of a further appeal.  The jurisdiction to make a CFO appears to arise naturally from the making of an opt‑out order.

Then some further brief reasons are given as to why leave was refused.  So, we would submit that is a further important development in a closely parallel jurisdiction where these issues have been grappled with, with perhaps more fullness of time than was available in 2019, and the Court should put this area of law on the right footing going forward.

Your Honours, the final thing I need to say on this part of the case is that I have referred, perhaps more than once, to the experience of the courts below in administering CFOs and FEOs.  When your Honours are reviewing the cases, while there are many in the materials, if I could just list, in bullet form, what we submit are the most useful cases for you.

They are, obviously enough, Elliott‑Carde, which is volume 8, tab 40; Justice Lee’s decision in Perera, volume 9, page 2809, which preceded Brewster but has proved enduring; Uren, which is volume 9, page 3120; Galactic Seven Eleven, which is volume 8, tab 43.  And in terms of the guidance which has been obtained through the GCO regime, which we say would then inform how the SCFO would be administered, a good example we have handed your Honours separately is 5 Boroughs NY Pty Ltd v State of Victoria (No 5) [2023] VSC 682.

Across all those cases, one of the huge pluses in terms of justice that the courts are perceiving in respect to the CFO is that it can prevent excessive windfalls that funders might sometimes enjoy under funding agreements, particularly if it is an early settlement without significant expenditure.  Your Honour Justice Beech‑Jones raised something about that, that is one of the reasons why the CFO is being regarded as just.

BEECH-JONES J:   Do you mean an early CFO, in that submission – or both?

MR GLEESON:   I mean both, in the sense that an early CFO prospectively allows the early settlement, but, I mean, a settlement CFO – where the case has come to settlement quickly – that the trial judges are saying, that the funding agreement was 25 per cent, we have power as a court to say that we will award a CFO instead, and the amount will work out at 10 per cent, and, by that means, we will avoid excessive windfalls to funders.

In many cases, book building is expensive, and its cost can only be subtracted from the returns to the group members.  That is not to say, pace Mr Hodge, we are saying you can get from the text a conclusion that book building is always bad or is always unjust, but it can be expensive and inappropriate in many cases.  The CFO can create greater flexibility and efficiency.  Professor Morabito’s work has proven – as best one can, empirically – that the presence of the GCO regime has tended to reduce commission rates in the market.  The relevant material – if I can just give your Honours the reference – is in volume 10, there are extracts from two of his more recent works – they are tabs 69 and 70.  The SCFO can be expected to be administered by the Full Court, likewise, to put downward pressure on premiums.

GLEESON J:   How do we rely on Professor Morabito’s work?

MR GLEESON:   I cannot say it is a constitutional fact.  What I can say is, in a second‑hand way, it is an empirical study which is repeatedly relied upon by the judges in the area as evidence of – to inform them on what might be just in the particular case, which is the way that the present Full Court dealt with it at paragraphs 113 to 114.

So, your Honours do not have to make precise findings on the extent to which the GCO has driven down market rates.  But, at the level of construing a power and being asked to – you are being asked to say justice includes an FEO but could never include a CFO, it is at least some available material to suggest that any such limitation would not be the sound one.  Your Honours, I am about to move to the State statutes.

GAGELER CJ:   We will take the morning adjournment.

AT 11.12 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.30 AM:

MR GLEESON:   Your Honours, I have now completed responding to Mr Hodge’s submissions; I am now turning to Mr Foreman’s submissions, as the counsel who has advanced the State statutes.  Our opening observation is that you have not received, in writing or orally, any principled explanation for how the State statutes are used to limit the concept of a “just” order within the federal statute, and absent any such bridge, the whole of the submission should be rejected.

The case that we have referred to, which is potentially relevant in the area, is P v P 181 CLR 583, which is found in volume 5, tab 24, page 1594. In that case, as the headnote reveals, the federal statute, the Family Law Act, conferred power on the Family Court to:

make such order in respect –

to matters, including the welfare of a child:

as it considers proper –

so, a conferral of power of the sort of breadth you see in the present case.  What was then attempted to be done was to rely upon a State statute, section 35 of the Guardianship Act, which:

prohibited the carrying out of medical treatment without consent being obtained –

under that Act, through New South Wales procedures, and the State Act was backed by criminal sanction.  The holding was that the Family Court did have jurisdiction to exercise the power under the federal statute, and the exercise of the discretion and the operation of the order was not limited by the provisions of the State statute.

The relevant principles are stated by the Court between pages 601 to 603, and they usefully illustrate when and how a State statute might be relied upon to try and narrow or alter the effect of the federal law.  At page 601 of the CLR at point 6, we embrace that:

Necessarily, the starting point for determining whether –

there could be a section 109 inconsistency:

lies in an identification of the intended scope and operation of the Commonwealth law.

The starting point in the present case is to identify the scope and operation of the relevant provisions of Part IVA, it is not to start with the State statutes.  The Court then distinguishes various situations.  The first situation is:

If the Commonwealth law confers jurisdiction –

in terms, conveying an intent – that the:

exercise is not to be confined or constrained by the prohibition requirements of State laws –

then there might be a question as to how far section 109 extends.  But:

Subject to that question, s. 109 . . . will . . . invalidate any State law to the extent that it would directly or indirectly . . . preclude, override or render effective the exercise by the federal court of the jurisdiction so conferred.

So, one possibility is that the Commonwealth law, properly construed, will then override the State law under section 109.  The next proposition, which is the converse situation, is that you might have a Commonwealth law conferring jurisdictional power, conveying an intent that it is to be exercised conformably with the requirements of State law.  In that event, the Commonwealth law, properly construed, permits the State law to do its work and there is, therefore, no inconsistency under section 109.

Now, what you have not heard from Mr Foreman is any principled attempt to conduct a construction exercise on these critical provisions of Part IVA, that they convey a legislative intent that the jurisdiction in them is to be exercised subject to section 185 of the LPUL in New South Wales, or the solicitors’ rule that they refer to.

BEECH-JONES J:   Does not he say at a general level these provisions take as an assumption the general regulation of the conduct of solicitors in their practice?

MR GLEESON:   Well, he referred to APLA, and I am going to show that APLA does not take him anywhere.  But if that is his proposition, at that high level of generality, it immediately has to embrace the procedural heterogeneity argument that we made in Bogan on which the Court is reserved, that in the territory we are in, the arrangements for the regulation of conduct of solicitors vary across the Federation.  You have the LPUL, which is New South Wales, Victoria and Western Australia.  In Victoria, you have the LPUL supplemented by 33ZDA.  You have no material before you on what the equivalent provisions are elsewhere across the Federation. 

So, where his argument would have to go is that section 33V, to take that provision, conveys an intent that when a court is exercising power under section 33V in a particular part of the Federation, it is to embrace whatever happened to be the laws regulating the conduct of solicitors in that part of the Federation, even if they be different to a different part of the Federation.  That is why I say the principled attempt to tease out what this construction is has not been undertaken. 

EDELMAN J:   Mr Gleeson, why would not the question of justice embrace just that?  Why would not the question of what is justice start with the premise that justice will depend upon the rules and the regulations that govern the conduct of solicitors of the Federation?

MR GLEESON:   Your Honour, with respect, it cannot be done at that level of generality.  I mentioned yesterday section 79.  What you received in writing was a detailed argument by the next appellant, Mr Lawrance, that section 79 provided the bridge whereby, when a court is exercising federal jurisdiction in a particular part of the Federation, it picks up the laws governing the profession in that Federation, implicitly not spelled out because they are laws regulating the exercise of federal jurisdiction – which we deny – and then by that means, one at least has a particular State law which is operating as a surrogate federal law.  That is a possible way in which the bridge might be done.

But a proposition at a higher level of generality that the court, because it happens to be sitting in Victoria, confines the concept of justice to what is just in Victoria when that might be different to what is just in New South Wales, because Victoria happens to have chosen different arrangements for the regulation of the legal profession from New South Wales, we would submit, is not a self‑evident intention you would put on these provisions.  That is not to say that we retreat from the concession I made yesterday and explained this morning – that at the time of actually making an order, the court grappled with a specific situation of sitting in a particular part of the Federation at that point may be asked to consider the relevance of the law of that polity.  But we are here at the higher stage of saying:  what is available as a matter of power?

GORDON J:   Can I ask a question about the level of generality in terms of your contention that the Uniform Law only applies in New South Wales, Victoria and Western Australia, with Victoria having the 33ZDA qualification.  You accept though, do you not, that in every other State and Territory there is a prohibition in relation to contingency fees?

MR GLEESON:   Well, we simply have not looked at the terms of that prohibition in each State.

GORDON J:   Well, I would be interested to know what your answer is to that submission because that, in itself, I think is a relevant consideration in considering the way in which you put it at the level of uniformity.

MR GLEESON:   Yes, I accept your Honour’s ‑ ‑ ‑ 

GORDON J:   It may not be that it is a uniform provision which has been adopted, but as I understood it, every State and Territory has a prohibition against it.

MR GLEESON:   And making that assumption against us, given that the appellants have not done the task of trespassing that ‑ ‑ ‑ 

GORDON J:   I am not asking about the assumption; I am asking whether or not that is – whether you accept that.

MR GLEESON:   Well, I cannot accept that immediately, your Honour, I would have to look at it, but I am going to make an assumption against us that even if every other State had it, we have to know what the terms of that are.  So, if the assumption is it should be tested against the materials – if the assumption is it is a section 183‑type provision in those terms, which is a Clyne’s Case prohibition, then I can deal with that material.  If it is in different terms in different places, that would raise different issues.

GORDON J:   I had thought it had been raised in one of the submissions, but I will have to go and look for it.

BEECH‑JONES J:   Mr Gleeson, if it is not a section 79 question, then it does not depend on where the court sits, but it depends on who the solicitor is and whether there is some prohibition on that particular solicitor, given the terms in which they practice, charging or seeking to recover the particular amount, does it not?

MR GLEESON:   Exactly, your Honour, and that is why I do not retreat from the proposition.  You cannot go straight from the federal statute to the State statute.  You have to know what the bridge is.  Section 79 is one possible bridge.  Another possible bridge is to say this is a law of the land, it is a State law which governs the conduct of that person in these terms and it is within the territorial competence of that State legislature to enact it, and then the court exercising federal jurisdiction at the stage of the exercise of power says, what am I to do with this as a relevant consideration.

BEECH-JONES J:   I am sorry, but I understood it reduces to this:  it is not just to recover – to award to a solicitor an amount that they are prohibited in law from recovering.  If a law of a particular State in which a solicitor practised allowed a proportion of the verdict, that may be one thing, but what is said is here – given the agreement that has been governed, it seems to be accepted that for this particular solicitor, it was governed by the Uniform Law and that prohibits it.

MR GLEESON:   Your Honour, I am going to meet that argument next.

BEECH-JONES J:   I understand you dispute that, but at the level of engaging with the relevant State law, I did not understand the argument to be any different to say this system does not enter into the scheme or assumes the relevant State or Territory regulation, but in this particular case at least, the relevant one applying to the particular solicitor is the Uniform Law.

MR GLEESON:   Yes, and what I said this morning, which I do not retreat from, is ‑ ‑ ‑

BEECH-JONES J:   You say discretion, not power.

MR GLEESON:   ‑ ‑ ‑ (a), discretion, not power, and (b), it will be relevant, in most cases highly relevant and in many cases determinative, but not necessary in every case.  The example I am going to come to show you is a case where the solicitors incurred a very substantial amount of disbursements in a way which did not comply with the UPL that governed them.  So, under State law, they should not have done it.

The decision of the Federal Court was that a matter of power, there was still power within the conception of justice under the federal law if there were sufficient ameliorating circumstances to award a deduction from the settlement.  When it came to the particular exercise of discretion, the judge said the ameliorating circumstances are not sufficiently great and so, in the balance of relevant considerations, I do not make the deduction.  That is how we say it works, that the concept of justice in the federal statute cannot be confined to the proposition that your Honour put to me, which is a summary of the appellant’s argument.  It is a highly relevant consideration.

STEWARD J:   Does that mean that the word “justice”, as I suggested to you yesterday, does not add anything to your power argument, really bites at the time of application?

MR GLEESON:   In our case, it bites at the time of application.  That is not to say that justice has not set some parameters around the exercise we are in – which is the reason why, when I embraced your Honour the Chief Justice’s paragraph 111 and Justice Edelman’s like paragraphs in Brewster, we have to be able to identify at a higher level of justice that there is a consideration of justice, which says, if I provide a reasonable service which I have been requested to do by someone – the applicant – which has generated a fund which your Honour has shared in, when your Honour had a chance to opt out of it, there is a consideration of justice.

STEWARD J:   I am just trying to work out how it hedges the power in your case.

MR GLEESON:   It hedges the power, because the underlying conception of a CFO is within what is just under these provisions.  If it were not, which is what the appellants say, we lose altogether.  So, at the higher level of generality, the appellants say to the extent the CFO involves the creation of a new right by the court against unfunded group members who previously had no obligation, they say that could never be within the conception of justice.  That is Mr Hodge’s argument.  So, that is an example of justice having some work to do in terms of setting parameters.  We say he is wrong on that.

We are now at the level down, where the argument being put is, as Justice Beech‑Jones just summarised to me, something like, it could never be within justice to authorise a deduction if there is any relevant breach of a State norm governing the conduct of solicitors.

STEWARD J:   I am just wondering whether it really makes any difference to answer the question of power in a case like this, or whether it really does come down to how it is applied to particular facts of the matter, which, as you say, might – where the State legislation may or may not be relevant.  I can understand it if it is designed to avoid obvious things, like a judge could not order a non‑party to pay the costs of a party who had nothing to do with the case.  That might be a way of hedging the power.  I am just not sure how else meaningfully it works at the power level.  That may not be a problem for you. 

MR GLEESON:   I cannot improve on what I have said so far.

STEWARD J:   All right.  I will not labour it.  Thank you.

MR GLEESON:   I appreciate your Honour’s question.  I am just – I cannot do any better than I have done.

STEWARD J:   Thank you.

GORDON J:   In relation to the State laws, they were listed at footnote 66 by reference to paragraph 44 of the Kain submissions, and include all of them.

GLEESON J:   Thank you, your Honour.  Your Honours, I am still at the bridge.  If I can briefly complete the bridge and hopefully not trip further over it, then I can get to the State statutes, because we are very strong on them.  I was taking you to P v P.  At 602, the first full paragraph then is a presumption that a federal law is:

not intended to confer jurisdiction –

to do something:

which is specifically prohibited and rendered criminal by the ordinary criminal law of the State or Territory –

And that immediately has to be qualified by the last paragraph on the page:

that ordinary approach . . . does not extend to the case where the State or Territory prohibition . . . is not imposed solely as part of the ordinary criminal law, but is imposed as an integral part of a statutory scheme conferring upon a local . . . body jurisdiction or powers which overlap or compete with the jurisdiction –

of the federal law.  In that area:

there is no presumption that it was the intent of the Parliament that the jurisdiction . . . should be overridden by –

the State law.  Our submission is that the relevant provisions of Part IVA fall into that area.  There is no presumption that they have ceded to State law and, on their proper construction, they do not.

The only other thing I want to say on the bridge point is that APLA was referred to yesterday.  APLA, we submit, only goes so far as saying that the right of practice under section 55B of the Judiciary Act is reflective of the right under State law.  It was not a case where the terms of the federal statute were sought to be read as giving way to the State statute.  Rather it was a case where the State prohibition on lawyers’ advertising was clear.  And there was an attempt to render that invalid under the Constitution on a series of grounds – implied freedom and so on – and all of them failed in this Court.  So, the actual issue in APLA is not the issue that is before you today.

GORDON J:   Sorry, I know you are rushing, but does that extend to include paragraph 32 of APLA?  Which is:

State and Territory schemes of regulation of the legal profession form part of the context in which federal jurisdiction is exercised –

EDELMAN J:   Mr Gleeson, while you are looking at that, this may be just asking Justice Gordon’s question from a different perspective, but do you go as far as to make a positive submission that the making of a CFO or the compliance with a CFO would not contravene section 183 if it were in federal jurisdiction?

MR GLEESON:   Yes, but that is both for the reasons I am just giving, but also for the construction reasons I am about to come to.  Paragraph 32, your Honour Justice Gordon, in APLA we do not challenge.  It is a paragraph stated at a level of generality.  It is not, we would submit authority for any proposition, because it was not an issue in APLA that any federal statute should be read as limited so as to give way to State regulatory regimes.  Now, could your Honours go to the ‑ ‑ ‑

GAGELER CJ:   Mr Gleeson, could I just understand the nature of the argument you are putting based on P v P which, of course, is a constitutional case.

MR GLEESON:   Yes.  As was APLA, your Honour.

GAGELER CJ:   I remember.

MR GLEESON:   I thought your Honour might have forgotten it, but it has been put to you yesterday as the case that destroys our argument.  It is a constitutional case.

GAGELER CJ:   Yes.  Are you going so far as to say that section 33ZV(2) authorises the making of an order which either authorises or gives effect to a breach of State law?  Is that what you are saying?

MR GLEESON:   Yes.  It goes that far, yes.

GAGELER CJ:   All right.  Well, it seems to me like a constitutional 109 point.  I am just raising a procedural question.  Have 78B notices been given?

MR GLEESON:   No.

GORDON J:   The reason why it is important is because if it is truly what you are contending for, then it may very well be that the States would like to know the answer to that question in the context of the management, which is why I took you to 32 of APLA.

MR GLEESON:   Yes, I accept that, your Honour.  We do not have 78B notices.  If that argument has a constitutional dimension, we cannot be heard on it in this hearing.  That has consequences.  But I would say we have only started what I am calling the bridge because of the failure of the appellants to tell you how they are getting to the State statute.  But, your Honours, can I now come to the statue, because if we are right on the statutes, you do not need the constitutional point. 

Could you go to the LPUL, which is volume 2.  I am now going to come to your Honour Justice Gordon and Justice Steward’s question.  Could you start, please, at section 102.

BEECH-JONES J:   Is that 102?

MR GLEESON:   Section 102.  Each of the firms of solicitors in this case are an incorporated legal practice.  Their entitlement to engage in legal practice and provide other services arises from section 103.  So, it is immediately part of the State statutory authorisation that an incorporated legal practice may provide nonlegal services – unincorporated as well.  Then please go to section 107, which applies where the practice is engaging in both legal and nonlegal services.  In order to protect consumers, this imposes a disclosure obligation in accordance with the Uniform Rules that the person must be informed:

(a)      whether the services are legal services; and

(b)      of any other matters specified in the Uniform Rules –

We provided your Honours overnight with the Legal Profession Uniform General Rules 2015, Part 3.7, rule 31, which says that the notice must set out:

the legal services to be provided –

State whether they are:

provided by an Australian legal practitioner –

Identify if they:

are not . . . provided by an Australian legal practitioner –

and to inform the consumer:

that the Uniform Law and these Rules apply to the provision of legal services but do not apply to . . . non‑legal services.

If that obligation is not complied with, section 107(3), as a protective provision, applies the standard of care as if a legal service to the nonlegal services.

So, it is a carefully calibrated scheme whereby the practice can provide both legal services and nonlegal services, customers are protected, but if they are not given the notice, they will get the standard of care as if it was legal services.  A legal service is defined in section 6 as:

work done, or business transacted, in the ordinary course of –

business, as your Honour Justice Beech‑Jones raised yesterday.  That raises a factual question of what is it ordinary for solicitors to do from time to time.

In this proceeding, at a level of power, the appellants have not sought or obtained any finding of fact that the assumption by solicitors of what I call the risk service is part of the ordinary course of legal practice.  It is not self‑evident that it is, but your Honours do not have findings of fact on that question and could not take judicial notice of that question.  Given that you are dealing with the first application for an SCFO in Australia, there is at least a reasonable argument that it is not yet an ordinary course of legal practice service.

BEECH‑JONES J:   Well, that might depend on how wide or narrow you put the scope, because if the question is provision of – assuming risk and indemnifying people who you are acting for in the course of litigation, that may be – it may be the ordinary course of legal practice is the conduct of the proceedings and what you are doing is work done or business transacted in the ordinary course of that.

MR GLEESON:   I am not precluding the possibility that it could be that.  What I am saying to your Honours, which was my point about power versus discretion, one thing the Full Court kept saying is, we are not at the stage of making an order, we are not yet at the stage of applying these provisions, and without there being a finding of fact that it is part of the ordinary course of legal practice and with that not being something you could take judicial notice on safely and it not having been argued below, we would submit you cannot and should not proceed on the basis that the risk service is a legal service.

That is not the whole of our argument, but what that is to say is that, if it is not a legal service then, in the provisions I have taken you to, this is something that can lawfully be done, but the degree of regulation of it under this statute is different to if it were a legal service.  The reason for that is, as soon as you go to the definition of “legal costs” on the facing page, they are the costs for the provision of legal services.

STEWARD J:   So, the question of what is a legal service will tell us whether your CFO is a legal cost.

MR GLEESON:   Yes, and where it goes from there, as your Honour will see, is – and I am leaving both possibilities open or seeking to do for another day – if it is a legal service, then if it is a legal cost, then, as your Honour Justice Gordon pointed out, section 172 would apply, and there would be a State law saying that in charging legal costs it must be no more than fair or reasonable in the circumstances.

So, if the view were ultimately taken it is legal costs, then the particular question at the level of exercise of power would be, at least for section 172:  is the making of a just order under 33V one which ensures that the costs are not in excess of what is fair and reasonable within the conception of section 172?  And even if the bridge is crossed and 172 becomes relevant or determinative at the stage of discretion, you would then be asking whether the amount being charged for the risk service, when taken together with the rest of the costs, is more than fair and reasonable, and it may well be that it completely satisfies State and federal law.

So, if one travels down the branch of:  these are ordinary course of legal practice, these are legal services, these are legal costs, one place you end up is in a State law provision 172, which, if it is relevant or determinative under section 33V, would then depend on the facts of the case.  So, 172 ‑ ‑ ‑

EDELMAN J:   Mr Gleeson, in a case where the solicitors enter an agreement for no win, no fee, is your submission that there are two services being provided – there is a legal service and a separate risk service?

MR GLEESON:   That is a difficult one, your Honour, I have to confess.  There is no clear answer to that.  It has not been considered by any court to date.  It is possible that it could be viewed one way or the other.  I just do not have clear answer I can give your Honour on that.  In a case like AMP v Wigmans, where your Honour was in the majority judgment, the Komlotex model, the Maurice Blackburn model, presented the matter as a single legal service, including the no win, no fee risk component.

In what is being propounded here, on the face of the addendum I have taken you to, that element of risk is being rolled into the risks of security for costs and adverse costs, and being defined as something other than costs and disbursements.  I cannot do any better than that, your Honour – as a matter of principle, it may depend.

But what I am trying to do is to say:  if you travel down the first road and you get to 172, you do not reach an adverse answer to the question of power, you simply reach an answer that, if they are legal costs and if 172 is relevant, as it would be – and, query, whether it is determinative – you would be asking whether it was more than fair and reasonable within the conception of State law in applying federal law.

That does not mean that the answer to the question of power was wrongly – the question was wrongly answered.  That is one possibility.  If you say these are nonlegal services and these are not legal costs, then 172 is silent on the matter – for good reason, because the scheme has been set up to recognise that some services are nonlegal.

The next step, your Honour Justice Steward asked about – if you are providing risk services, do you trip some other wire?  The answer to that is you do not.  That answer has been reached through this route.  The Full Federal Court in Brookfield Multiplex [2009] 180 FCR 11 held that funding arrangements for representative proceeding constituted a “managed investment scheme” under section 9 of the Corporations Act.

That decision led to a series of ASIC regulatory instruments exempting litigation funding schemes from the MIS provisions, however, in 2022, in LCM Funding v Stanwell 292 FCR 169, the Full Federal Court overturned Brookfield Multiplex and held that a funding arrangement is not a managed investment scheme.  We have sought to give your Honours a copy of the LCM decision, and we would refer your Honours to paragraph 22, where Justice Lee, who was adding some additional observation to Justice Anderson, who wrote the main judgment, explained that the fact that funding is not an MIS does not put it into some “unregulated” ‑ ‑ ‑

GORDON J:   Where are you reading, I am sorry, Mr Gleeson?

MR GLEESON:   Paragraph 22 on page 175.  The fact that it is not an MIS and so regulated does not put it in some unregulated “Bir Tawil zone”, and explained the role of the court in protecting the group members.

GAGELER CJ:   What does that mean, Mr Gleeson?  I have to be the one to ask.

BEECH‑JONES J:   I was too scared to ask.

GORDON J:   And the answer is?

MR GLEESON:   The answer is, ask the man.  I am sorry, your Honours, he is occupied elsewhere today.  So, the substantive analysis is in Justice Anderson at paragraphs 156 to 174, and Bir Tawil is a landlocked area of desert between Egypt and Sudan that is unclaimed by either country, coming from the Arabic word “tall well”.

Your Honours, where we get to is, if it is a funding service – whether it is provided by an external funder or a solicitor – it does not need independent MIS regulation.  Then ‑ ‑ ‑

GORDON J:   Sorry, have you finished with the LPUL?

MR GLEESON:   No, I am coming to the hard bit now, your Honour.  I have just dealt with the easy bit, which is 172.

GORDON J:   Yes, are you going to come and deal with 183?

MR GLEESON:   Can we come to 183.  Textually – and I will break it down – it is a prohibition upon the entry of “a costs agreement” – pause there, “a costs agreement” is undefined but, in this scheme, is an agreement under which costs are charged, legal costs are charged, for the provision of legal services.

STEWARD J:   Why do you confine it to legal services?  I assume you mean “legal” in a traditional sense?

MR GLEESON:   Yes.

STEWARD J:   Yes.

MR GLEESON:   I mean, in the sense of the legal services, which have their correlative in legal costs, are what leads to a costs agreement – and you do not see a definition of “costs agreement” but if you look, for instance, at section 180(4):

A costs agreement cannot provide that the legal costs to which it relates are not the subject to a costs assessment.

Yet, then you look at 181(1):

A costs agreement . . . may provide that the payment of some or all of the legal costs is conditional on the successful outcome –

So, your Honour the Chief Justice asked yesterday, is this a costs agreement?  My answer was, parts may be and parts may not be, in the same document.  It is a costs agreement insofar as it provides for the payment of legal costs for legal services.

So, the first at least potential answer to 183 – I do not say it is necessarily a complete answer, it may or may not be – is if the services are not legal services and it is not legal costs, then, so far as the agreement provides for them, it is not a costs agreement, and section 183 is silent on them.  That makes perfect sense, because it is about regulating the charges for legal costs.  But that is only the first step.  The next step is the “under which”.

GORDON J:   Before you get to the “under which”, if, on your first analysis on 172, then it would be a prohibition.  That is, if you – under the 172 route.

MR GLEESON:   If the funding service is a legal service ‑ ‑ ‑ 

GORDON J:   Within the definition of “legal services”, then, you have a prohibition.

MR GLEESON:   ‑ ‑ ‑ then you have a prohibition.

GORDON J:   Thank you. 

MR GLEESON:   So, you look at its content.  The second step is the “under which”.  You are prohibiting:

a costs agreement under which –

that is, where, by virtue of the contractual obligations in the agreement, something happens.  And so, where it is not under and by virtue of the agreement but by virtue of the order of a court that something happens, then section 183 has no application.

GAGELER CJ:   Even if the agreement provides for the making of an application to a court for that thing to happen.

MR GLEESON:   Even if that, because that is not an agreement “under which”; as it reads on, the amount is calculated in a particular way.  That is simply an agreement permitting of the solicitor, on the client’s behalf, making an application to a court for an order, which the court may or may not make.  If that is correct – the “under which” – that is the end of section 183.

BEECH-JONES J:   If you read that section bearing in mind the objects of 126, would that construction not tend to undermine that this is providing safeguards, and has to apply them, regardless of the type of business structure?

MR GLEESON:   Your Honour, there is no tension between what I have just put and section 126 objectives.  This is saying – and I have only got halfway through 183 ‑ ‑ ‑

BEECH-JONES J:   I understand you have a host of arguments.

MR GLEESON:   But the “under which” is saying – let us look at the mischief of it.  The “under which” is saying, we do not want contracts or bargains between the solicitor and the client where effect of that bargain is to create a contractual entitlement to a payment calculated by reference to the outcome.

The vice that is being targeted by the provision – which goes back to Clyne, that I will come to – is that, if such a bargain were made, the view is – and it really has fiduciary and undue influence notions behind it as well as, perhaps, a remnant of champerty – the view is, that would be a bargain being made in advance of the outcome of the proceedings being known, when the client may not have the necessary information or skills to assess whether the proposed proportion is reasonable, where the amount that the solicitor would receive under the contract may be out of all proportion to the value of the work performed and, most importantly, where there is no mechanism by which the court can review or vary that bargain.

STEWARD J:   Your “under which”, is that designed to use the ADJR jurisprudence as an analogy?

MR GLEESON:   That idea, yes, and the idea in the arbitration cases “under which”, “governed or controlled by”, where it is the contract which has created the thing which is deemed to be the vice.  But the reason it is a vice – as I have sought to put from those propositions – is the client would be bound, in advance, to a fixed proportion of the settlement, not necessarily having the skills to assess whether that is a fair bargain, where the amount may be out of all proportion to the work done and no court mechanisms of review.  So, putting all those points together, that is the underlying purpose of why the prohibition is upon bargaining of this kind.  We have dealt with the “under which” in paragraph 63 of our submissions, referencing ‑ ‑ ‑

EDELMAN J:   Mr Gleeson, I cannot recall from BMW v Brewster, but was there an argument put in BMW v Brewster – either in this Court or in the Federal Court – that section 183 of the Civil Procedure Act, which was sort of the analogue of the federal provision, was limited by section 183 of the Uniform Law?

MR GLEESON:   I cannot answer that definitively, your Honour.  I know that has been argued in some of the cases.

EDELMAN J:   Your submission, I take it, would be that the policy in the operation of 183 of the Uniform Law just does not speak to the breadth of a provision like section 183 of the Civil Procedure Act if it is construed in the same way as section 33V and so on?

MR GLEESON:   Yes.  But at the level I am currently at, at construction, the “under which” is tied to a very particular set of contractual obligations, those in which:

the amount . . . or any part of that amount, is calculated by reference to the amount of any award or settlement . . . recovered in –

the proceeding, and so, the vice is the one I have identified, of the bargain with the client with that particular object where there is no court adoption or approval of the object.

And as I say, where does it come from?  It comes back through Clyne, but, ultimately, it is sourced back into ideas of undue influence, that this type of bargain is capable of undue influence and/or it is a remnant of champerty.  But it must be taken in its terms and not applied in a loose manner in which it is applied by the appellants.  Your Honours, the appellants say this:  Kain says, in chief, this section:

prohibits the payment or charging of an amount calculated by reference to the amount of –

the award.  So, in that submission, it wholly ignores the fact that the prohibition operates upon a costs agreement under which a particular promise is extracted from the client by contract.  Shand, with respect, is even worse – in chief at 44:

A solicitor must not be remunerated by a contingency fee.

So, in that version, there is no “costs agreement under which”, there is a general prohibition of State law:  a solicitor must not be remunerated, whether by court or otherwise, by a contingency fee.  Then, in the Shand reply at 16, this provision is interpreted to cover the:

client’s agreement to seek approval for payment of an amount that is calculated by reference to the amount of any award or settlement –

Again, the terms of the provision have disappeared in those arguments.  For those reasons, your Honours, even if it was legal services, even if power and discretion were merging, this provision simply does not capture the application to the court on instructions for an appropriate deduction under the section, and that is what the Full Court correctly held in the present case.

If I can just take your Honours to the critical reasons – that is in the core appeal book, paragraph 85 to 87.  We defend those paragraphs.  Your Honour Justice Gordon, that is what I wanted to say about LPUL.  Can I come to the Solicitors’ Rules, which is ‑ ‑ ‑

BEECH-JONES J:   Mr Gleeson, can I ask you one question about 172(1).  I think you were taken there by Justice Gordon – that appears to oblige them to:

charge costs that are no more than fair and reasonable –

and then, in particular, are:

proportionately and reasonably incurred –

If you are in the area of legal costs, how would a proportion of the judgment sum, over and above legal costs, be incurred?

MR GLEESON:   It would not be over and above – this is the problem with the way the question is framed.  If we are in the area of legal costs, that is only because everything is being treated as a legal service.  So, the legal service, as your Honour put to me in the argument, includes providing the security for costs and taking on the risk of an adverse costs order.  So, you would then ask, given I am doing that extra thing for you and given that is a legal service, and given a legal cost is a cost for a legal service, is it fair and reasonable that I receive something more than what would otherwise be my ordinary costs for having taken on that extra service?

You then get to a question of the method, the means – by what means would you measure that additional service?  That is why I commenced this morning by saying the question is simply about, could you authorise something extra?  And then the method should not be allowed to subvert what is actually happening, which is one is ascertaining a fair reward for that service.  So, that is how you would do it under 172.  Your Honours, the rules are found in supplementary volume 1, tab 3, page 322.  The language is: 

must not do anything –

(i)calculated to dispose . . . directly or indirectly, any benefit in excess of . . . fair and reasonable remuneration for legal services –

and then there is the second limb.  So, the first submission is – I will just put them in bullet point form – applying to the court for an order that the court will make, in its discretion, as to what the solicitor will receive for its services in the matter does not offend the terms of “calculated to dispose”.

The second submission is it comes back to the same issue about legal services.  If the risk service is not part of “legal services”, then even the court order is not imposing anything: 

in excess of . . . fair and reasonable remuneration for legal services –

it is dealing with a separate subject matter.  Thirdly, or alternatively, if the risk service is part of the legal service, it raises your Honour Justice Beech‑Jones’ question, even if applying to the court is a calculation to dispose – which it is not – the question would then be:  what is fair and reasonable remuneration, including that extra service?  And so, the rule is not offended in any case where, under State law, what you have received for the extra service is within fairness and reasonableness, and that would then be a question of fact in each case.  The rule is drawn from undue influence.  That is made clear in volume 10 at 3645.  Page 3645, the explanation by the Law Council.

GORDON J:   This is tab 68?

MR GLEESON:   Yes.  In March of last year, the rule was:

amended to clarify the scope of the Rule and to address a gap in the Rule about improper influence on a third party as well as the client.

It is to:

clarify the expression of the prohibition . . . on the exercise of “undue influence”, by expressing the Rule in a more detailed and precise formulation –

as well as adding a further category.

GORDON J:   That was not the sole purpose for the rule, though, was it?  That is just – did they not amend it to make sure that it extended to address that issue, or have I misunderstood it?

MR GLEESON:   With respect, your Honour, what the Law Council was correctly saying was, it has always been about undue influence, we are making that purpose clearer by the language we are using, as well as extending it to members of the immediate family.  But the important thing is, it is of the same genus as 183, because it is about dealings between the solicitor and the client where the solicitor is extracting from the client the benefit which is deemed to be wrongful in some fashion.  It is simply not about what happens when one has an order made by the court.

JAGOT J:   Can I just ask – could I take you back to section 183?

MR GLEESON:   Yes, your Honour.

JAGOT J:   In that part of the Division 4 costs agreement.  I do not think “costs agreement” itself is defined.  There are various provisions that are, obviously, related to legal services and, therefore, legal costs.  Section 183 refers to:

the amount payable to the law practice –

it does not refer to “legal costs”.  If, for example, the word “costs” was not before the word “agreement” in line 1 – I know that it is there, but if it said a law practice must not enter into an agreement under which the amount payable to the law practice, you would not read that as confined to legal costs.  You would read it as a broader prohibition.

So, this argument about 183 is putting a lot of emphasis on the word “costs” in line 1 and tying it back to legal costs, because that is the provision that it is in – which I get.  But it is not – but then you have the words:

under which the amount payable –

which are much broader.  It might suggest that, really, what this is trying to do is actually say, you cannot enter into an agreement that does that thing, more generally, so that the addendum, which presents itself – I mean, actually, in terms, as an addendum or an insertion into the costs agreement itself, because it is then the inserted after – I am in page 63 of the further materials – it is then being inserted after clause 3 of the costs agreement – a new clause 3A.  I mean, I know the form of this agreement does not dictate what it actually, legally is, but you would read it – certainly if you are a lay person, the client, you would just see this, 3A.2(c), as just part of the costs agreement.  In that event, how does subclause 2 not fall within an “amount payable”?

MR GLEESON:   Your Honour, two answers.  The first is:  assume that is correct, it does not deal with the point about the “under which”, which is, is the agreement which is obliging the client to pay a percentage of the settlement or is it the court’s order, and the court’s ‑ ‑ ‑ 

JAGOT J:   Sure, I get that point.  I understand that.  I am not asking – yes, that point is totally separate.

MR GLEESON:   Okay, that argument is there.  So, on your Honour’s point, we would press that in a scheme where the incorporated practice is recognised as providing both legal services and nonlegal services, there is differential regulation in respect to the two areas of services.  So, the second point only goes anywhere if it be found that the risk service falls outside a legal service.  If it does not, then the point is not operative.

JAGOT J:   I know, it just – two thoughts here.  Labelling something a risk service.  I mean, in a sense, I could label something a photocopy service, or a morning tea service, or whatever I wanted to put on it – you know, what gets people in the door is the legal service and then I can have all these other services and say, well, they are not really legal services, so they do not have to be fair and reasonable – legal document service or something, I do not know, you could just put labels on anything.  So, there is that point as to is it valid to sort of draw this distinction between ‑ ‑ ‑ 

MR GLEESON:   If I could answer that one, your Honour.

JAGOT J:   Yes.

MR GLEESON:   That is governed by the definition of what is ordinarily part of what a solicitor does; it is factually intensive.  Today, you could take judicial notice that providing a photocopying service is so intimately related to pushing the trolleys to court that it can be charged for.  The only point I was seeking to make was that whether the risk service has been exposed as such is not the subject of any findings before your Honour.  We urge caution on judicial notice.  That is all I can say about that.

JAGOT J:   No, I understand that.  I am just raising these in case you want to address any of these points.

MR GLEESON:   Thank you, your Honour.  How I would like to address your Honour’s main point is you should not just delete the word “costs” from “costs agreement”.  It has been used in many places in here, and it is used in a context where it is accepted that both legal and nonlegal services may be provided.  We would submit Parliament’s intention is that, to the extent you provide the legal services, you are under this higher degree of supervision; to the extent you provide the nonlegal services, you are not under this degree of supervision of your costs; and what you can charge is not subject to fair and reasonable rules.  It is not subject to this particular rule.  It is left solely to what might be the more general professional disciplinary provisions, to the extent what you are doing is so heinous that it reflects upon your professional standing.  That is the deliberate choice reflected in 172 and reflected in 183 – that is the answer I would give your Honours.

JAGOT J:   Just the last question.  The Legal Profession Uniform Law Application Act 2014 – which is supplementary 14 – it has a definition of “ordered costs” in section 63, as opposed to Uniform Law costs.  Uniform Law costs are legal costs; ordered costs are:

Costs payable under an order . . . of a court –

and then Part 7 applies to Uniform Law costs and ordered costs, and then there are other provisions of that Act which are not in the authorities or the legislation.  But basically, if you ordered costs, you get caught under the cost assessment and other related provisions of this Application Act 2014.

Is what you say that in terms of the order that is sought or is agreed to be sought under the addendum something to the effect that insofar as it deals with – that, again, ordered costs would be – because it says “means costs” and we are dealing with legal costs, that this is – so the order itself would fall into two parts?  Is that how it would work?  That part 1 would be legal costs of the order covered by 3A.2(c)(i) ‑ ‑ ‑

MR GLEESON:   Yes. 

JAGOT J:   ‑ ‑ ‑ and that insofar as the order then provided for remuneration for risk as per subclause 2, it would be outside Part 7 of this Act?  Is that how it works?  It is a sense that it is costs.

MR GLEESON:   It is a cost, yes. 

JAGOT J:   But is not ordered costs?  Is that how you would put it?

MR GLEESON:   I would have to check, your Honour.

JAGOT J:   It is just that the scheme is broader than just the provisions that we have.  That is all.

MR GLEESON:   Your Honour, can I just check how ordered costs fit with legal costs?

JAGOT J:   Sure.  Of course.  No problems.

MR GLEESON:   Thank you for that, your Honour.  So just conclude on the rule and ‑ ‑ ‑

GORDON J:   Sorry, what rule are we talking about now, Mr Gleeson?

MR GLEESON:   Rule 12.2 on page 322.  So, I was at the stage of the submissions of assuming that you treat the funding service as a legal service, so assume that argument against us.  This rule still does not prevent an application to a court for the court to determine what is to be a reasonable deduction under 33V and, to the extent that at the exercise of the power this 12.2 is relied upon, it would be a relevant consideration – not necessarily determinative – but in any event, the consideration would be:  is the amount you are receiving in excess of a fair and reasonable remuneration for your services, which now include your risk management services?  And that does not mean that there will be any breach of the law until one has considered what the fee is in a particular case.  So, for that reason, at least at this stage before your Honours, this arrangement is within power.

Your Honours, I gave you the reference to the Law Council explaining that the rule is from the territory of undue influence, meaning like section 183, it is about dealings between the solicitor and the client which have led to the client either agreeing or dealing in favour of the solicitor in a manner that is considered wrongful, they are not about court orders.

There is one authority that has considered the rule, which is Atanaskovic Hartnell v Birketu.  This is the Court of Appeal stage of that litigation which is in volume 8 at tab 46.  The discussion in the judgment of Justice Gleeson of the Court of Appeal is at paragraphs 105 to 108, particularly at paragraph 106.  His Honour identified that the rule was made under the power conferred section 423(2)(c) of the LPUL:

relating to the conduct of solicitors to “avoid conflicts of interest” –

This is in the context of whether the power implicitly contains an exception for fully informed consent, which the Court of Appeal has held it does, contrary to the submission yesterday.

GAGELER CJ:   Conflict of interest is not the same as undue influence.

MR GLEESON:   No.  But at least as identified by the Court of Appeal, that is the source of the power.  A power sourced in the idea of avoiding conflicts of interest is all about the dealings between the solicitor and the client, and it has nothing to do with saying the court does not have the power to authorise an appropriate remuneration.

GAGELER CJ:   It has a lot to do about the incentives of the professional.

MR GLEESON:   Yes.  And the dealing in which the solicitor is at risk or actuality of allowing the private incentive to prevail over the duty in the dealing which is being extracted from the client, it is remote from saying the court which supervises these officers – the Supreme Court of New South Wales or the Federal Court in the present case – does not have the power to authorise an appropriate remuneration.

EDELMAN J:   In effect, it is an instantiation of what I think Mr Hodge referred to, and what the House of Lords described in Royal Bank of Scotland v Etridge as an irrebuttable presumption of undue influence.

MR GLEESON:   That may be so, your Honour, in the case of the dealing where there is this impermissible incentive which has or may have infected the transaction under which the benefit is moving from the client to the solicitor, as opposed to not saying a single word about the powers which the court which supervises the officer – or the Federal Court – the court exercising federal jurisdiction can exercise to award fair remuneration.

For those reasons, even if your Honours do not go down the path of whether they are legal services, 183 and the solicitors’ rule, on their face, do not preclude either what is framed in the question or what is in the addendum.  Your Honours, that leaves the common law public policy which was advanced by Mr Lawrance.  Can I turn to him.  He took you to one case, Pittman.  I am going to have to mention this series of cases – Pittman, Wallersteiner, Trendtex, Clyne, Fostif and then Smits v Roach – because to adopt Pittman as the current public policy of Australia would be a grievous misunderstanding of what has occurred over 130 years of law in Australia and the United Kingdom.  Pittman is in volume 9, tab 50, page 2827.

The facts are important.  The arrangement was one where the client had incurred a pre‑existing debt to the solicitor and the agreement – which is found at about point 5, on page 2827, second column – was that if the solicitor acted for the client in fresh litigation and it was successful, the client would assign the debt to the solicitor.  At the foot of that page, Mr Justice Wills described it as:

a perfectly honest transaction . . . and he held with reluctance that the assignment was invalid –

In the report that we have of the Master of the Rolls, what is said is that:

a solicitor could not make an arrangement of any kind with his client during the litigation . . . to give him any advantage in respect of the result of that litigation.

the reason being the temptation would be too great.  Based on that statement of the law, a no win, no fee agreement is contrary to the United Kingdom’s public policy.  Your Honour Chief Justice raised that question.  That is how broadly it was stated in Pittman.  Any agreement in which any advantage might be obtained in respect of the result is bad because of the temptation. 

If your Honours can go next to Wallersteiner, which is volume 9, tab 60, page 3129.  Lord Denning at 3149 at letter D confirmed that this was the status of English law in 1975:

English law has never sanctioned an agreement by which a lawyer is remunerated on the basis of a “contingency fee,” that is that he gets paid the fee if he wins, but not if he loses.

Pittman is cited.  At letter F:

It mattered not whether the sum to be received was . . . sole remuneration, or to be an added remuneration (above his normal fee), in any case it was unlawful –

There is then a reference to the Abolition Act in the United Kingdom.  Over the page at letter B, his Lordship says:

contingency fees . . . are contrary to public policy . . . in England.

This appears from Pittman.  Then, at letter D, refers to the solicitors’ rule, which refers to a contingency fee in a way that would capture a no win, no fee agreement.  So, as of 1975, a no win, no fee agreement was unlawful in England.

Over the page, his Honour – his Lordship doubted whether that was still a sound rule, but accepted it was still the rule of England – letter C – and then sought to craft an exception for particular litigation, which was unsuccessful.  If your Honours then go to Trendtex, which is volume 9, tab 57, page 3024, at page 3058 ‑ ‑ ‑ 

BEECH‑JONES J:   Sorry, what was the page number again, Mr Gleeson? 

MR GLEESON:   Page 3049.  His Lordship came back to this question and confirmed at letter B that a no win, no fee arrangement in the United Kingdom was still unlawful, and it is still valid after the Abolition Act, and he refers to In re Trepca Mines.  So, what you have heard yesterday is essentially a speech based on the law of the United Kingdom between the late 19th century and at least the time of Trendtex trading.

We would urge you to consider perhaps the authorities of this Court as more relevant.  First of all, Clyne’s Case, which is in volume 4, at tab 15, at page 1180.  In the classic passage, the court said at page 203 of the CLR – this is in advance of the Abolition Act:

It may be necessary some day to consider whether maintenance as a crime . . . as obsolete . . . special considerations must apply to a solicitor –

and accepted that a no win, no fee arrangement was appropriate if two conditions were met.  The first was belief in:

a reasonable cause of action –

And in the second case:

he must not . . . bargain with his client for an interest in the subject‑matter of litigation, or . . . for remuneration proportionate –

citing Fleming in The Law of Torts.  That position is then referenced to some earlier cases.  So, the precise statement by this Court in Clyne, firstly no win, no fee is not in itself bad; Pittman does not represent the law of Australia.

Secondly, to the extent the remainder prohibition, it was must not bargain with the client for an interest in the subject matter of litigation.  It is about entering the bargain under which that situation arises, it is not about anything to do with a court exercising its statutory powers to approve a remuneration.  The second last part of this submission, if I could just complete it, your Honours, is in Fostif, which is in the same volume. 

EDELMAN J:   Just before you move on to Fostif, very quickly, do you say that there is any rational principle that can justify a difference between a bargain on a no win, no fee basis or a bargain on a contingency fee basis?

MR GLEESON:   The only possible rational principle – and it may be questioned – is if, in the bargain on the contingency basis, the incentive that the solicitor has, if one is thinking of conflict of interest terms, or the potential for overriding the fair will of the client, if one is thinking in undue influence terms, is regarded as conceptually greater than merely no win, no fee. 

So, that is why I said earlier in the bargain if there is any remaining support for this view, it would be the idea that if it is being entered in advance without court supervision and with the customer potentially not fully informed, there may be a greater risk in the contingency fee.  Whether that should remain the law, that is a matter for your Honours.  But in either event, the way the proposition is formulated in Clyne is about bargains; it is not about getting court orders.  So, Fostif, tab 14, page 1051.

GORDON J:   What paragraph number, please?

MR GLEESON:   Paragraph 86.  Under the Abolition Act, it preserves “no wider rule of law” than:

the cases in which a contract is treated as contrary to public policy and otherwise illegal.

That is a different and correct statement of the effect of the Abolition Act to the position in England under Lord Denning.  In terms of the English authorities, in various places they are deprecated, including paragraphs 80 and 81, and re Trepca Mines is deprecated.  In short, the United Kingdom law does not represent Australia’s law. 

Your Honours, the final point on my submission if I can just give you the reference – you were taken to Smits v Roach, Justice McClellan’s decision at first instance yesterday, at paragraphs 249 to 252.  I believe you were not taken to the Court of Appeal, which is volume 9, tab 56, where, at paragraph 69 to 70, the court rejected Justice McClellan’s reasoning on the Smits v Roach point. 

Your Honours, that leaves with Mr Hartford Davis to deal with the two remaining issues.

GAGELER CJ:   All right.  We will deal with that after lunch.  Mr Hartford Davis, how long will you be in your submissions?

MR HARTFORD DAVIS:   I will try to limit it to 15, 20 minutes.

GAGELER CJ:   Thank you.  We will take the luncheon adjournment.

AT 12.50 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.14 PM:

GAGELER CJ:   Yes, Mr Hartford Davis.

MR HARTFORD DAVIS:   Your Honours, Mr Gleeson has asked me to apologise that because of a health issue he is not able to be here this afternoon.  He intends no discourtesy by that.

If your Honours have the respondent’s oral outline, I am dealing with paragraphs 9 and then very briefly paragraph 10.  We wish to start with the most abstract form of the argument on equitable conflicts, which is put by Mr Kain in written submissions at paragraph 46 where our learned friend says that:

It is also not within the meaning of “just” to make a Solicitors’ CFO where such an order places a solicitor in a position of conflict or potential conflict –

And our learned friends emphasise at paragraph 48 the fact that it is the court order itself which is generating or at least recognising that conflict.  To meet that proposition in its most general form, can we take your Honours please to the decision of this Court in Nissen v Grunden, which can be found in volume 5, tab 22.

GAGELER CJ:   The CLR reference please.

MR HARTFORD DAVIS: Yes, it is 14 CLR 297.

GAGELER CJ:   Thank you.

GORDON J:   I am sorry to ask, what tab was that?

MR HARTFORD DAVIS:   Tab 22.

GORDON J:   Thank you, I apologise.

MR HARTFORD DAVIS:   Would your Honours start, please, at page 1550, using the JBA numbering.  Your Honours will see at the bottom of 1550 ‑ ‑ ‑

GLEESON J:   What is the CLR numbering?

STEWARD J:   Can we have the Commonwealth Law ‑ ‑ ‑

MR HARTFORD DAVIS:   I am sorry, page 302 of the report.

STEWARD J:   Thank you.

GAGELER CJ:   You can just stick with the CLR page references, thank you.

MR HARTFORD DAVIS:   I will, thank you.  At the bottom of page 302, your Honours can see a paragraph beginning:

The case came before àBeckett J. –

Who was the trial judge, and in the last couple of lines on that page your Honours see that the trial judge had:

allowed the executors, Nissen and Pallin, a commission of £5 per cent on the net profits of the business during the two years –

which had passed to that point and for the future.  At issue, the beneficiaries by litigation guardian put into issue the ability of the Court to make an order approving such a commission, amongst other things.  If your Honours could turn to page 312 in the judgment of Justice Isaacs, about halfway down the page is a paragraph beginning:

Looking at the matter first of all from the standpoint of principle –

Referring to the practice of the Court of Chancery in England.  Then, about five lines from the bottom, there is a sentence beginning:

The rule and the reason for it are stated in many cases, but most distinctly I think in Broughton v Broughton, by Lord Cranworth –

And over the page on 313 in the extract from Lord Cranworth – in line 3 at the top of CLR page 313:

The result therefore is, that no person in whom fiduciary duties are vested shall make a profit of them by employing himself –

et cetera.  So, one could see that the origin or basis for the principle of the Court of Chancery which was in issue was the fiduciary status of the person seeking the order.  His Honour makes clear in the first full paragraph on page 313:

the Court has laid down the general rule that a trustee cannot employ himself, and then say that the work was necessary and that the amount of time and labour he bestowed was reasonable and the charges fair.

But – and this is the passage we rely on – three lines down:

In England however the principle I have referred to was only allowed to operate for the benefit of the estate, and not to its disadvantage and the Court’s disallowance of remuneration ceased when special circumstances presented themselves which made it apparent to the Court that some remuneration was necessary or reasonably necessary to attract, as I may term it, the requisite services for the benefit of the estate.

His Honour there says, or makes reference to:

The cases referred to by the learned Chief Justice are instances of that exception –

That is a reference to the discussion of the cases by the Chief Justice commencing at CLR 305, halfway down the page, over to CLR 307.  At the bottom of CLR 307 over to 308, the Chief Justice concludes that there was jurisdiction to order the past and future commission which was in issue.

Would your Honours then turn to page 311.  In the concluding paragraph of the reasons of the Chief Justice, where his Honour summarises the appellate proceedings – being the proceedings brought by the litigation guardian of the beneficiaries of the trust disputing the commission – they:

may be summed up as an appeal to the Court to enforce some supposed rigid cast iron rules binding on the Court which prevent it from doing justice.  I take leave to say that there are no such rules.  No case has been cited, nor do I know of any, which shows that the Court is precluded from doing justice by any such cast iron rules.

What we take from the case is that a trustee’s remuneration – including where necessary, and appropriate and reasonable – by a commission from the profits made in the business of the trust, can be regarded as a just order; despite that the trustee is the paradigm of a disinterested fiduciary; despite the conflict between the trustee’s interest in being paid for his time, on one hand, and his duty to the beneficiaries on the other; despite that the beneficiaries may object, as they did in this case; despite there being no pre‑existing contractual right to remuneration.  Indeed, this jurisdiction exercised in equity to grant remuneration to trustees is only logically necessary because in many cases there was no remuneration provided for the trustees within the instrument creating the trust.

JAGOT J:   I think you mind find somewhere in all these myriad legal professional rules that executors’ fees, if the solicitor is an executor as regulated – like mortgage fees, for example – they are all regulated.

MR HARTFORD DAVIS:   They are.  In fact, that was an issue in this case because the way the argument had been developed was that the particular rule and procedure that was applicable for trustees’ commission required a specific kind of originating process to be filed.  That had not been filed and so the Court was thrown upon the general equitable jurisdiction.  That is why ‑ ‑ ‑

JAGOT J:   The point, I think, is that if these rules go to such an effort to regulate solicitors acting as executors – which somewhere I am pretty sure they do; solicitors acting as mortgage brokers – does that not suggest that they are trying to regulate the costings for these services?

MR HARTFORD DAVIS:   Yes, your Honour, clearly.  The proposition I am seeking to meet at the moment, at a higher level of abstraction, is that the mere existence of possibility of conflict in equity might preclude the order from being just, but I do accept that there is another layer that one has to get to in connection with regulation of solicitors’ remuneration, and I am coming to that shortly.  But it is not to detract from the proposition that where there may be specific regulation of a specific type of charge that would fall to be considered as part of the discretion under 33V.

A more focused version of the appellants’ submission was that there is something particular about the role of a solicitor in the administration of justice which means that an order remunerating a solicitor under 33V could never be just, and we seek to answer that proposition at two levels.  The first is to emphasise that there is inherent in any solicitor charging practice which is separate and distinct from the old, scaled variety of costs where there is a predefined charge that can be levied in any case for a particular piece of work – inherent in any ordinary work done by a solicitor, including pursuant to time‑based charging, there will be a conflict.

That point was exposed in a case your Honours will find in volume 8, tab 47, Law Society of NSW v Foreman (1994) 34 NSWLR 408. Tab 47. If I could ask your Honours, please, to turn to page 437 in the report, which is 2635 in the JBA. His Honour Justice Mahoney says in the first full paragraph on the page, putting aside special provisions:

a costs agreement which provides for charges on an hourly or similar basis is likely to involve a conflict between the solicitor’s duty and his interest.

And that includes because it:

ordinarily involves that the solicitor may determine how much time is to be spent on the client’s litigation and by whom.  It will therefore put the solicitor in a position in which her duty to her client (to do the work in such time that the costs will be no more than they need be) may be in conflict with her interest (that she receive more costs rather than less).  The temptation may exist to spend upon the client’s litigation time for which costs would not otherwise be billed or to engage on it staff whose time could or would not be used elsewhere in the firm.

And if your Honours see after letter E, his Honour refers to:

the second aspect of budget pressure.

What his Honour is here describing is a regular feature of the way that law firms and solicitors as businesses are now organised.  A few lines down – four lines down from that paragraph:

It was expected of them –

Being the solicitors within, as it was, Clayton Utz:

during the relevant period (months or quarters), those budgets would be achieved:  it was remarked upon if they were not.  The problem of achieving a budget fixed in advance is itself a difficult one.  No doubt if sufficient work to fulfil the budget is available, the budget may be achieved by working sufficiently long or sufficiently hard.  If sufficient work is not available, more difficult problems arise in billing costs sufficient to fulfil the budget.

His Honour then refers to:

The temptations involved –

being:

of the kind to which I have referred; engaging staff –

and the like.  So, the point we draw from this is that, in any solicitor remuneration, there is inherently a conflict.  The conflict is required to be managed appropriately, including by the disclosures required by the Uniform Law and are capable of supervision.

But the mere existence of the conflict or possibility of the conflict in the basis on which the solicitor is paid or the basis under which the solicitor charges does not, for that reason, render an order sharing the remuneration, for example, across a class under 33V(2), an unjust order.  The key question in such a case will be whether the conflict has been appropriately managed, whether the costs incurred as reasonable, and so on.

To shift forward a generation and enter into the realm of present discourse, being representative actions, if your Honours will take the core appeal book, page 34, paragraph 68, their Honours point to an example of:

the Kilmore East‑Kinglake Bushfire Class Action –

having been:

conducted on a “No Win‑No Fee” basis and at the point of settlement . . . after a trial lasting 208 days, the reasonable Court‑approved legal fees and disbursements that were due to the solicitors totalled $60 million –

Their Honours remark upon something which they say:

Those experienced in acting for applicants in class actions will understand –

at the beginning of 68, is that, “irrespective” of how they are funded:

tensions can and do sometimes arise between the commercial interests of solicitors or funders in finalising a settlement.

The example of the no win, no fee Bushfires Case where $60 million in reasonable fees had been incurred at the time of settlement illustrates, in our respectful submission, that the existence or possibility of a conflict operating upon the solicitor at the time that the settlement is being negotiated or at the time at which the order under 33V is being sought does not preclude the order, by that reason alone, from being within the category of just orders.  It just means that, in the usual way, the conflict has to be managed and the court, in approving the settlement, is astute to the existence of the conflict and needs to be satisfied about the way in which it has been dealt with and duties discharged.

STEWARD J:   That argument has a propensity of saying that any conflict is all right, because there will always be curial supervision. 

MR HARTFORD DAVIS:   Plainly, that proposition, in that form, could not be accepted and we do not advance.  What we do say is, in a sense, the inverse of that.  The mere existence of a conflict does not preclude the order from being just.  The mere existence of it does not take it out of the realms of something that can be just.

Whether it is just will depend on how it is managed, how it disclosed, whether there is fully informed consent, the content of the opt‑out notice in a representative action, and whether it was appropriately managed will be the subject of strict scrutiny on the settlement approval application.  That is not to say that court approval is the panacea for any conflict, it is just to say that the mere existence of the conflict does not preclude it from being just.

Indeed, that is another point we make.  It is that, at the heart of the 33V jurisdiction or the exercise of the court’s function will be interrogation into the very question of whether the conflict has been appropriately managed, and the Full Court made that point at core appeal book page 34, paragraph 67, in the last part of the paragraph, by reference to a decision of Justice Lee in McKenzie v Cash Converters: 

as part of its supervisory and protective role, the Court will have the onerous burden of being required to “be alive to the possibility that a settlement may reflect conflicts of interest –

et cetera.  So, in a sense, that is part of our case – that is part of our submission in this part of the case – is the 33V jurisdiction exists at least in part so that the Court can closely scrutinise the extent to which conflicts were managed.  It would detract from the jurisdiction to say that there could never be a just order merely because there was the possibility or actuality of such a conflict.

At court book page 35, paragraph 70, their Honours refer to the decision in Gill v Ethicon Sarl (No 12) and then they quote from the reasons of Justice Lee at paragraph 71.  I wanted to take your Honours through some of the aspects of Gill v Ethicon Sarl, which are instructive, because they inform the way in which the court goes about the settlement approval function when there is a conflict, and they illustrate the use of the tools that the court has in scrutinising the way in which the conflict was managed.

Gill v Ethicon Sarl is in volume 8, tab 45.  If your Honours turn to page 2520, at paragraph 5, what had occurred was that the law firm conducting the representative proceeding had undertaken to cover disbursements and found it necessary, in the course of the very long pelvic mesh proceedings, which we were heavily contested and involved multiple different expert disciplines, and therefore extensive disbursement costs, the firm had found it necessary to enter into “disbursement funding facilities” and had accrued very significant interest on those funding facilities which, as at 31 May 2023, amounted to some $32 million.

What they then sought was an order under 33V approving reimbursement to them of the interest burden of the disbursement facility.  Justice Lee ultimately refuses the order, including because of the existence of what he regarded as an improperly managed conflict.  But your Honours will notice at paragraph 7, page 2521, his Honour thought:

There is no issue as to power to make the payment if I was satisfied it was just to make it.

But, at paragraph 8:

The exercise of the discretion . . . is conditioned upon –

various matters, including the issues of conflict.

EDELMAN J:   Mr Hartford Davis, you do not step away from Mr Gleeson’s submissions about, at least in relation to the rules, that one of the other motivating concerns is that this is a relationship to which the rules of undue influence would traditionally operate.  So, it is not just conflict principles, it is conflict principles that arise within the context of a potential relationship of undue influence.

MR HARTFORD DAVIS:   Yes, your Honour.  I certainly do not resile from anything Mr Gleeson said, and I can accept what your Honour says.  I do not mean to elide or overlook the relevance of undue influence.  And, indeed, one of the factual matters that moved his Honour to decline the relief that was sought in this case was that there had been inappropriate disclosure and no adequate evidence that the lead plaintiff had been given the opportunity to get advice about the suitability of the fees and had given fully informed consent to them.

And I will point that out as I go through, but the burden of my submissions is on the conflict aspect, and the purpose of coming to the case is to illustrate the broader point that, in the 33V area, conflict is something the court focuses on and has tools to interrogate.  Page 2546, paragraph 105, there is a heading “B.7” where his Honour makes findings as to the view taken within the law firm about recoverability.  I will not go through the evidence, but it is apparent upon reading the judgment that there had been disclosure, there had been affidavit evidence about what decisions were made and what considerations were taken by whom at the relevant points in time for the funding facility to be agreed to, and the various costs incurred under that facility.

GORDON J:   Do you mean to the court?

MR HARTFORD DAVIS:   I am sorry, your Honour?

GORDON J:   Do you mean to the court?

MR HARTFORD DAVIS:   Justice Lee went through and made findings on the evidence that was put before him about how the decisions had been made at the time.  And what the things his Honour says – which I am coming to – is that there was insufficient evidence to persuade him that the conflict had been appropriately recognised and managed, and so, therefore, he refused the order.

GORDON J:   I thought – it may not matter – that it had not been notified to the applicants.

MR HARTFORD DAVIS:   I am sorry, it had not – that is a separate finding.  His Honour found it had not been sufficient.  The fully informed consent of the applicant had not been appropriately demonstrated.

GORDON J:   Thank you.

MR HARTFORD DAVIS: Now, at paragraph 108, may I take up the point that your Honour Justice Jagot was raising with Mr Gleeson about the Legal Profession Uniform Law Application Act before lunch.  As I understood the question, or the dialogue, your Honour was interested to know how the dichotomy that we draw between costs for the legal services – as compared to what we are calling the “risk service” – are dealt with under Part 7 of the Uniform Law Application Act dealing with costs assessments.

We will provide the full form of Part 7 of the Application Act this evening, to the extent it assists, because we think your Honours have not been provided with the full text of Part 7 yet.  But the critical issue is that whether a particular item of remuneration falls within Part 7 depends upon whether it falls within the definition of “ordered costs”, which:

means costs payable under an order or rule of a court –

and so, therefore, whether one is under Part 7 depends upon whether the court’s costs jurisdiction could be exercised so as to impose the cost or amount upon the respondent.

And that will be a difficult question, on a case‑by‑case basis, and I just draw to attention that in paragraph 108 – this actually happens to be the most advanced thinking that we could find, at least over lunch, on novel questions about whether, for example, in this case, the reimbursement – the interest incurred on the funding facility – could be ordered against a respondent under the court’s powers so as to then be able to be assessed under Part 7. And his Honour is saying that interest on a disbursement facility is at least arguably recoverable under the court’s general costs powers.

So, I just draw that to attention as a way, hopefully, of assisting with the questions before the break about Part 7 of the Uniform Law Application Act.  Would your Honours please turn to 2551.  His Honour is there finding that:

the facts as revealed in the evidence do not establish to my satisfaction that Shine –

the firm:

took the necessary steps to . . . (5) recognise that any conflict arose between the interests of their clients and group members –

et cetera.  That is one of the key reasons why the order that was sought under 33V was not awarded, namely, because the conflict had not been appropriately recognised and managed.

Page 2555, paragraph 133, your Honours will observe that there was a contradictor in the case.  We emphasise the paragraph as showing that the moving party in a 33V application will have a probative burden to establish the justice and reasonableness of the order, and so, if there is any difficulty in understanding precisely what happened and how conflicts were managed at the time and within the bowels of the business and the minds of the decision‑makers at the relevant point where the costs were incurred or, we would add, the settlement negotiated – if there is some deficiency in the proof, then the burden will not be met and the order will not be made under 33V.

That deals with the point that our learned friends make in writing, that it is sometimes not possible to know how the conflict operated or was managed, appropriately or otherwise, in the facts as they actually happened.  If the court is not satisfied that the conflict was appropriately managed, then the 33V relief will not be granted.  Your Honours, unless there are any questions, that concludes what I was going to say about our paragraph 9 of the oral outline.  Then, I just wanted to deal very briefly with the 1337P notice of contention point.

GAGELER CJ:   Do you press it?

MR HARTFORD DAVIS:   I do not have instructions to abandon it, but may I say this.  We accept that the reserved question is limited to the powers under Part IVA, and we accept that a power under exercised under 1337P is not a power under Part IVA.

GAGELER CJ:   Do you also accept that it was no part of the proposal that was before the Court to invoke these provisions of the Supreme Court Act (Vic)?

MR HARTFORD DAVIS:   Yes, and that is what I was coming to.

GAGELER CJ:   Is this not entirely hypothetical?

MR HARTFORD DAVIS:   It is, but it is not, for that reason, entirely irrelevant.  It has a marginal relevance and, other than the sentence I am about to complete, I do not propose to say anything more about it.

The sole relevance of section 1337P is to show that the 33V power, for example, will fall to be exercised on a case-by-case basis within a jurisdictional environment where there may be different laws applicable

under section 79 of the Judiciary Act, State by State, and in civil jurisdiction under corporations legislation, that the freedom to exercise rules of different superior courts may be exercised from time to time.  So, it does not rise any higher than the point Mr Gleeson was developing by reference to section 79.  In effect, it is just another illustration of the jurisdictional heterogeneity that is contemplated in federal legislation.

If it please the Court.

GAGELER CJ:   Thank you.  Mr Lenehan.

MR LENEHAN:   Your Honours, in supporting ground 1 of Mr Gleeson’s notice of contention, can I start by adopting and embracing his submissions concerning the errors in Brewster.  If those submissions are right, it of course requires a particular approach to the John factors, because this Court has said, including in John, that it has a fundamental constitutional responsibility to avoid the perpetuation of incorrect construction of statutory provisions.

So, that gives rise to what was in fact described in John as “special considerations” in approaching a reopening question, that is, the Court will more readily reconsider its earlier decisions in those circumstances.  John, in fact, is an example of that because, of course, your Honours will recall in John that, having concluded that the earlier decision in Curran is wrong, together with the fact that there were differences in the reasoning in that earlier decision, the Court reopened Curran even though it was satisfied that there was John factor 4 significant reliance by taxpayers on Curran.

So, that coheres with what your Honour Justice Edelman has said in cases like Vunilagi about the relative importance that your Honours attribute to each of the John factors.  But, perhaps more importantly for present purposes it puts in, we say, proper perspective what was said by Mr Hodge yesterday, attributing particular importance to the state of evidence regarding John factor 3.  As we understood what Mr Hodge said, he seemed to say that that, in itself, is an obstacle to reopening.

Now, we submit, of course, that there is significant inconvenience, and I will come back to that, but even if there was not, it would not matter much if Mr Gleeson is right about the correctness of Brewster and we, in turn, are right about the differences in the reasoning of the majority in that case.  So, can I then turn immediately to that and how we identify those differences.  Mr Gleeson has already addressed your Honours, and I will not return to this, on the fact that 33ZF(1) is obviously, facially, very broad, or, to use the word, open‑textured, picking up on a description of your Honour Justice Edelman in Brewster.

I would add to the points that he made that your Honours should also notice the words “any order” that appear in 33ZF, which your Honours would recall the Full Court in Lenthall indicates that the starting point is that everything that follows that is of some “amplitude and flexibility”.

The only other point to note in addition to what Mr Gleeson put to your Honours is that the words “appropriate or necessary” which follow the important word “thinks” are to be understood as meaning suitable or fitting for the identified purpose or, to pick up what your Honour Justice Edelman said in Brewster, reflecting what your Honour in turn said in Vella, something that is reasonably adapted to that purpose.  The short point is that one finds throughout this provision words of considerable latitude.

Then, turning immediately to the reasoning of plurality and the differences between the approach of your Honour Justice Gordon and Justice Nettle to the problem, their Honours in the plurality nevertheless discerned, on the face of those words, limitations and constraints that prevented the making of a CFO.

That is what we have described in our written submissions as the words of limitation approach.  It is the approach that Mr Gleeson identified as problematic in their Honours’ criticism of the Full Court, and Mr Gleeson, your Honours will recall, showed your Honours where you find that reasoning in the joint reasons, particularly at paragraphs 50 and then 53, recalling that in 50 their Honours say they are discerning that limitation:

As a matter of the ordinary and natural meaning of these words –

So, from that, they discern from those words the distinction that Mr Gleeson has criticised this morning, that is, a concern that the provision is regulating how the matter is to proceed, not whether the matter is to proceed at all.  We adopt the way in which Mr Gleeson said that is wrong, principally by reference to your Honour Justice Gageler’s reasons at 108 to 111, starting with the contextual point about the nature of the proceeding in 108 and then moving forward to what your Honour says at 110 about the “unrealistic dichotomy” that is involved in that, I am going to call it facial reasoning of the joint reasons.

But the significant point for the purposes of John factor 2 is that, of course, your Honour Justice Gordon and also Justice Nettle did not, in fact, adopt a similar approach.  Your Honours no doubt discerned a similar limitation, but you, in doing so, located that in the broader context and also the purpose.  We accept, as your Honours have seen, that that does line up, broadly speaking, with other aspects of the joint reasons, because their Honours went on to buttress what they said by reference to, what I am going to call, the arid text by reference to context and purpose.

But, even accepting those similarities, there are differences.  One important difference your Honours will see in the reasons of Justice Nettle at 124 and 125.  In particular, if your Honours look to footnote (174) which appears at the end of 124, and drop down the page, you will see a series of authorities commencing with Anthony Hordern and ending with your Honour Justice Gageler’s reasons in Victorian Building Authority.

All of those authorities are concerned with the so‑called Anthony Hordern principle.  That is, of course, the idea that a general provision will usually be interpreted so that it does not contradict a specific power that imposes conditions and restrictions which must be observed in the exercise of the same power.  You see, if your Honours then move to 125, that his Honour appears to apply that approach towards the end of that paragraph, so referring to there being specific provisions in the context in which 33ZF sits:

in respect of whom and the point in time –

both on the restrictions or conditions:

at which, orders distributing –

et cetera.  That implies, his Honour says:

implies exclusion of a construction . . . that permits of the making of a CFO.

Now, as we have pointed out, the joint reasons in fact – your Honours see this at paragraph 48 – eschewed any reliance on Anthony Hordern, said that the approach that they were about to unfurl is not dependent upon acceptance of the submission that is made at 38, which does undoubtedly involve Anthony Hordern.

As we understand what their Honours went on to do, and you see this particularly at paragraph 60 and 70, there are essentially two steps.  The first is you take from the specificity of the provisions in the Part that there is a hierarchy of provisions, and one – 33ZF – is incidental to the others.  Then the second step was to show that the making of CFOs involved giving 33ZF an operation that went beyond the operation of those other more detailed – I will call them primary provisions in the Part.

So, that is an approach which obviously is different to the Anthony Hordern logic.  It has some resonance with, say, approaches to delegated legislation and repugnancy, but it appears that their Honours took a distinctly different approach to the approach that Justice Nettle understood to be applied.

Your Honour Justice Gordon applied an approach which we think is similar to the joint reasons, an example of that is at paragraph 147.  But even then – and this is the point that Mr Gleeson made, I think yesterday – there are still differences between that aspect of your Honour’s reasons and the joint reasons in that the joint reasons can be taken to imply that a CFO may be permissible at a later stage of the proceeding, whereas your Honour seemed to regard that as impermissible.

In broad terms, the answer to both of those species of contextual arguments is really the same.  In short, it is the answer that your Honour the Chief Justice and Justice Edelman gave in your dissenting reasons.  That is that the Act is replete with very broadly expressed powers, and 33ZF takes its place alongside those powers.  That immediately, in response to the approach apparently applied by Justice Nettle, gives difficulties in terms of Anthony Hordern, because, by reason of the general nature, it is impossible, we say, to conclude that the powers are so limited and qualified so as to exclude the operation of other more generally expressed powers – that is the point your Honour the Chief Justice made.

But that same point – the Act contains a series of very broad powers – makes it difficult, we say, to discern bright line limitations by reference to what I have called the scope of operation reasoning, even if it is correct to say that 33ZF is described as a gap‑filling provision.  The short point is that those broadly expressed powers mean that the gaps, if you like, are very wide and, we say, leave ample room for that kind of order, particularly if it is accepted that other provisions allow for the making of such an order at the end of the proceeding.  That, of course, is the point made by both your Honour the Chief Justice and Justice Edelman in the aspects of the reasons that Mr Gleeson went to this morning.

GAGELER CJ:   Mr Lenehan, in practical terms, what is the difference between an early CFO made under 33ZF and the expectation of a settlement CFO or a judgment CFO which appears to exist on the basis of the Full Court authority in the Federal Court?  What, in practical terms, is the difference?

MR LENEHAN:   There may, in practical terms, be very little difference, your Honour, which may suggest that the scheme has been misunderstood in Brewster, we would say.

GAGELER CJ:   Or that the practice has just accommodated Brewster and the underlying concerns that motivate your intervention are being addressed by other means.

MR LENEHAN:   Well, that is perhaps so, your Honour, but, of course, discussions between the Bench that may or may not ultimately translate into an order provide people in the position of my clients far less security and certainty than they may otherwise have, when I come to inconvenience.

BEECH‑JONES J:   Mr Lenehan – I am a bit scared to ask this, because of what happened, but just broadly – how is an interim CFO and CFO phrased?  Does it say something like:  subject to further order, the court orders that if this case is settled or proceeds to judgment, then there will be a deduction.  Is that the style of the order?

MR LENEHAN:   I believe that is right, your Honour.  I will see if we can turn up any examples, while I am on my feet.

BEECH‑JONES J:   All right.  I did not want to delay you, but that was my query.

MR LENEHAN:   Of course, your Honour knows that the usual way in which these things are made leaves provision for all of those things to be revisited at a later date.

BEECH‑JONES J:   I do not know – I never made one – but I will take your word for it.

MR LENEHAN:   The upshot of what I have said so far is that there are, we say, significant differences between the majority.  That bears the point that I made at the outset on the force with which a belief is held that the ratio in the earlier case cannot be justified, the point your Honour Justice Edelman made in Vunilagi.  And, as I mentioned before, that means that your Honours are potentially in a position which is similar to John, a position which the Court said was, of itself, sufficient to warrant reopening and in spite of a strong reliance factor in issue in that case.  Now, in the couple of minutes that I have left, can I ‑ ‑ ‑ 

GORDON J:   In John it was determinative, though, of the outcome of the appeal.

MR LENEHAN:   I am sorry, your Honour?

GORDON J:   In John the considerations were identified because the question was raised in revisiting a decision which was, if correct, determinative of the outcome of the appeal.

MR LENEHAN:   Yes, that is so, and that is why, your Honour, I am firmly embracing what was said by Mr Gleeson this morning.

GORDON J:   Thank you.

MR LENEHAN:   Can I briefly address the position regarding the third factor?  We do accept the position made by Mr Hodge.  The Court certainly does not have material before it that would allow it to precisely and exhaustively quantify the effect of Brewster on either the litigation funding market or group members.

What one does have is the evidence of a very experienced participant in that market, Mr Walker, who has sought to identify the changes in the market over time and the way in which that bears on funders and class members.  Now, to the extent there is pressed against us a possible, I will call it Mickelberg objection, I have said what I want to say about that in paragraph 4 of our outline.  Can I briefly invite your Honours to take up the affidavit, just to tell your Honours what we get from it, in particular?

So, in paragraph 37, you will see that Mr Walker observes that there was an influx of money – of both capital and funders – into the local market following Money Max.  From there, if your Honours move to paragraph 42, you will see that he expresses the view that the increased competition “drove funding rates down” in that period.  And if your Honours go back to paragraph 40, you will see that he identifies a feature of that period being comparatively greater certainty to both funders and to claimants.

Contrast that with what happens after Brewster.  First, identifying the market, if your Honours go back to 38 and 39, you will see the market only gains one new entrant and a number of existing entrants no longer fund new class actions in the market, so, it has shrunk.  Then, if one moves forward to paragraphs 44 and following, you will see that he observes that that period has been characterised by uncertainty and doubts on the part of funders as to whether many class actions are commercially viable, which has, in his opinion, in turn:

put upward pressure on funding rates.

See paragraph 45.   And then see paragraph 46, all of that has resulted in capital becoming:

harder to come by –

and concentrated in the hands of existing players, and then, obviously, only been made available at comparatively higher prices.  One also, see paragraph 41, by definition no longer has the sort of competition between class actions that Mr Gleeson mentioned yesterday.  Instead, see again paragraph 46, there has been a greater enthusiasm for closed class actions, and if your Honours go a few pages on, to 60 and 61, you will see that those developments appear to have led to a reduction in the variety of the kinds of class actions that are funded.

Now, your Honours would have seen in our written submission we have sought to supplement that material by reference to things that are said by members of the Federal Court and also scholars, and we say that what Mr Walker has said is consistent with those.  We fully accept ‑ ‑ ‑

GAGELER CJ:   Mr Lenehan, it does not seem to address the question that I raised about the difference, in practical terms, between an interim CFO and a final CFO.

MR LENEHAN:   That is so.

GAGELER CJ:   He seemed to be talking about doubts about any form of CFO being caused by Brewster.  Is that right?

MR LENEHAN:   That is so, your Honour, yes.  The only other point that – I am told, in answer to your Honour Justice Beech‑Jones’ question, that you find an example of an interim CFO at paragraphs 9 and 10 in Money Max.

BEECH-JONES J:   Money Max.  Thank you.

MR LENEHAN:   The final point before I sit down, your Honours, is Mr Hodge again made the point that we would accept that the availability of GCOs in Victoria muddies the picture somewhat.  But, as your Honours have seen, we say that in itself involves another species of inconvenience in the sense that the relatively uniform approach that existed across a number of jurisdictions has now been fractured, resulting in what appears to be a degree of forum‑shopping.

The upshot of all of that is that we understand that our friends do not say John factor 4 is in play, nor do we understand them to suggest that Brewster was based on a principle worked out in a stream of authority, John factor 1.  And what I have said so far on John factors 2 and 3 mean, we say, that the Court should reopen Brewster and overrule it.

Unless your Honours have any further questions, those are the submissions the Association makes.

GAGELER CJ:   Thank you.  That takes us back to Mr Hodge.

MR HODGE:   Thank you, your Honours.  I have seven matters in reply.  The first matter is going to cause all of us pain, it is about dealing with the form of orders and FEOs.  I just want to show you two more examples of a form of CFO and FEO and then also identify something about the, I think, aide-mémoire that your Honours have been handed up by the respondents earlier today, which I only originally noticed as I was sitting down.

I might deal with it in this order.  If your Honours take up the aide‑mémoire and you go to page 2 of the aide-mémoire, where it refers to two different methods of FEO; FEO method 1 and FEO method 2.  Although in form those look different, they in fact seem to be mathematically the same, so that those are actually both FEO method 2.  I am not sure that your Honours have before you, then, an example of FEO method 1 as it is described by Justice Beach.

So, just to explain that so that later there is not some uncertainty about it, what is described as FEO method 2 there is straightforward in the sense that it says:  here is an identified amount that is obliged to be paid by the applicant and funded group members to the funder, that amount will now be apportioned pro rata across all group members, both funded and unfunded.  That is straightforward.  What is described as FEO method 1 is one where one identifies what is the amount that is due by the funded group members and the applicant to the funder and does that by a calculation of a percentage.

Then, as a second step says:  now take that percentage and assume that that percentage was also applied to the entitlement of the unfunded group members, and then take the resulting among from that second step and now distribute that pro rata across all participating group members – meaning pro rata to what their respective entitlements are to the judgment sum.  That means that the mathematical effect is to equalise it out.  That is, they will all end up at exactly the same position with what is having been taken out in the first place just being the amount that has been paid over to the funder.

As we apprehend it, the other form of FEO that Justice Beach is referring to is one where the steps are done in a different order so that the amount that comes from the unfunded group members goes into the pot of what is received by the funded group members and then the funder’s proportion is applied to that increased pot for the funded group members so that ultimately it produces a greater return to the funder.  I know this is painful and agonising, but I just wanted to identify that about those orders, and you can ‑ ‑ ‑

GORDON J:   What is the best example of what you described as a stepped process?

MR LENEHAN:   We have not been able to find one that reflects, in a way that I can identify and point your Honours to, that form that is identified by Justice Beach.

BEECH-JONES J:   Mr Hodge, with both of them, is there an order that says there shall be paid out of the fund X dollars to a funder?

MR HODGE:   Yes, I think that is effect.  I will hand up to your Honours, but I think there has been sent to the Registry, a decision of Clyne. 

GAGELER CJ:   Mr Hodge, we might be best to do this another way. 

MR HODGE:   Thank you. 

GAGELER CJ:   There should be able to be agreement between the parties as to what these terms refer to, and there should be agreement as to what orders have been made in the past that fit the descriptions.

MR HODGE:   Yes.

GAGELER CJ:   Can we leave it to you to come up with an agreed piece of paper?

MR HODGE:   You can.  We will ‑ ‑ ‑

GAGELER CJ:   You can have a nexus, if you like.

MR HODGE:   Yes.  I think that would be convenient to deal with it.

GORDON J:   I should say from the outset that in Brewster, and it continues – and I raised it with you and then raised it again with Mr Gleeson – I am by no means certain that even when people are referring to CFOs, early CFOs, settlement CFOs and judgment CFOs, we are actually talking about the same thing.  So, there needs to be some – and it would be very helpful to identify with precision what it is each of you thinks you are talking about.

MR HODGE:   Yes.  I am more optimistic that we are all talking about the same thing but unable to find a good example of just one form of order.

GORDON J:   I think it is reinforced by the way the question is posed, because when you go to Davaria at those paragraphs, there are a number of things covered.

MR HODGE:   Yes.

BEECH-JONES J:   Just for my part, I would just be interested to know the actual order that is made being, as I said, a distribution payment to a person and then what we are then talking about is the calculation of what amount goes to what person – which is not usually done by an order, or the order might incorporate it – but the form of the order, for all these final ones, at the moment appears to be that ultimately a court simply says it shall be ordered that X amount Y be paid to person Z.

MR HODGE:   Yes.

BEECH-JONES J:   That might be my hang‑up of trying to get exactly to fit it into the structure of, say, 33V(2).

MR HODGE:   It is the case – and I think this would be common at the Bar – to say the form of order is, at least, usually in the way it is done – perhaps that is the problem, that we cannot say universally, but usually the way it is done that it will say either lump sum amount or percentage amount of settlement sum is to be paid to – either it might be paid to the funder or it might be paid into a trust account for the benefit of the funder.  Then, from that settlement sum, there will be deductions of other things and then it will be in accordance with some annexure which is at a plan that an administrator is going to carry out in order to try to figure and distribute the amounts to all group members.

GAGELER CJ:   Mr Hodge, let us talk about this homework.

MR HODGE:   Yes.

GAGELER CJ:   So, what we are looking for is a document that covers the subject matter of the first and second respondents’ aide-mémoire that goes back a little further.  We would like a definition or description of each of these forms of order – a conceptual description of what it is they are seeking to do.  We would also then like to see an example of the actual form of order and how it was worked out.  You may be able to do that by referring to paragraphs in a judgment and the order made as a result of the reasoning.  If there is a difference between you as to how these terms are being used, we would like identified in the document.  How long would that take?  A couple of weeks?

MR HODGE:   I think we should say by the end of next week, rather than say by the end of this week.

GAGELER CJ:   Yes, all right.

GORDON J:   Can I just raise one issue.  When we are talking the conceptual ideas, it is really the back end – it is the working out which is often not reflected in the order.  That is why we need a description of what it is that is being done.  Because as you point out, sometimes it is just a single sentence being an order made, but the actual reflection of that is not found in the order itself.

MR HODGE:   No and often, one of the things that creates ‑ ‑ ‑

GORDON J:   It may be clearly obvious, but that is the bit that I am concerned about.

MR HODGE:   It might be that – because sometimes it will refer to a confidential annexure to a solicitor’s affidavit, it might be that, between all of the parties here, we can find a way to obtain – even if it is in some redacted form – the level of detail your Honour is looking for. 

GAGELER CJ:   Is that the first point of your seven points? 

MR HODGE:   That is the first point.  The second point is there was a submission made yesterday by the respondents that our submission cannot stand in light of our acceptance of clause 5.1(a)(i) of the protocol that has been agreed in this case, and so I need to take your Honours to that in order to explain it.  Can I ask your Honours to take up, first, the appellant’s book of further materials.

If your Honours go to page 25, what the respondents pointed to orally was that 5.1(a) divides the amounts that will be paid to the solicitors and into (i) and (ii).  What was said – that we accept, as we do – was that it will be possible to have a cost equalisation order made with respect to (i).  That is, the:

legal costs and disbursements –

And that that stands in the way of acceptance of our submission more generally about the scope of the powers in 33V and 33Z(1)(g).  Section 33Z(1)(g) can, in a sense, be dealt with in a very straightforward way, because your Honours will see within (a)(i) there is a specific reference to 33ZJ.  That is, you can equalise costs when there is a judgment in accordance with the power conferred by section 33ZJ, and there is no issue of it being inconsistent with our position, in respect of 33Z(1)(g).

Then, with respect to settlement, we accept – and I will come back to it – that there is no issue with respect to using 33V(2) to equalise costs.  As I previously indicated yesterday, we accept that on the basis both of the general form of equitable principle in relation to the distribution of costs as in respect of beneficiaries of the fund.  We also accept it with respect to 33V(2), which is the way it was framed by the plurality in Brewster.

It is perhaps worth just noting one other thing about this, in case it causes confusion later.  Your Honours were taken to the costs agreement.  If your Honours go to page 50 of the appellant’s book of further material, this is the costs agreement.  The submission, as we apprehended it, was to say, when you look at clause 3, the applicant is not actually ultimately, really, going to be liable for these amounts of money.

Therefore, there would be an issue on our construction with the applicant being able to divide these costs under the equalisation power under 33V(2).  We do not want to debate the effect of the terms of the costs agreement if ultimately that, for some reason, stands in the way when a court might come to make an order as to whether or not there could be a distribution of legal costs.  That is something for a later time and not for this Court.  It makes no difference to our argument.

The further part that your Honours were taken to which is the proposed addendum, which is on page 63.  Your Honours will see in relation to the addendum that there is a distinction that has been drawn carefully between the legal costs on the one hand and the solicitors’ CFO part on the other, and including as to how those amounts are to be sourced, in effect.  So, if you have a look at 3A.2, you will see (i) is providing for the legal costs and disbursements to be shared:

pro rata in proportion to their respective recoveries –

Then you will see (ii) is concerned with the solicitors’ CFO and that that is something that is to be paid by payment of a percentage sum of the resolution sum.  Your Honours were directed to 3A.4, and just to close off on that addendum, 3A.4(b) to which Mr Gleeson took you, and it says:

you do not agree to any particular remuneration, or form of remuneration, to be paid to Banton Group from the Resolution Sum –

That seems to tie back just to 3A.2(c)(ii), which is the thing that is being paid from the resolution sum, rather than being concerned with (i).  In our submission, none of that has any bearing on the critical argument that we are making, which is there is no issue with being able to equalise costs at the end of a proceeding, and there is no issue under 33V(2) with doing so.

Can I then move to the third point, which arises from an exchange between your Honour Justice Beech‑Jones and Mr Foreman.  An answer that was given by Mr Foreman might have suggested that there was a divergence between him and me as to what kind of orders are permissible under section 33V(2).  In particular, the way in which his answer was framed might have suggested that his conception is narrower than mine, that it is confined to a circumstance where there is a liability that already exists and can therefore be shared.

We have discussed that I am hoping that I can happily report that there is not a divergence between us and that, more accurately, the point that Mr Foreman was making was that one category of the kind of orders that could be made under section 33V(2) would be an order that provides for the adjusting of the distributions between the applicants and funded group members and unfunded group members to take account of a liability that had been incurred by the applicant or the applicant and funded group members in running the litigation and bringing in the fund, but that is not the confines of what could be done under 33V(2).

It would also extend to an order that adjusts for the distributions between the applicants, funded group members and unfunded group members to take account of expenses that had been incurred by the applicant in the running of the litigation and bringing in the fund.  It would extend to the making of an order that is not a distribution itself of the fund but is rather in relation to the carrying out of tasks for the making of the distribution and then providing for the payment of the costs of that.  That would be in the nature of providing that an administrator is to be remunerated and that that remuneration will come from the fund in order to carry out the necessary distribution.

BEECH-JONES J:   But why in your argument do you accept the latter?  Because I thought your argument has as its foundation some legal or equitable obligation of the, in this case, unfunded group members to make the payment.  As I understand what you say with legal fees, well, there is effectively some equitable obligation that arises from the fact the solicitors did the work to produce the settlement, but why would that have application to the future administration of the fund? 

MR HODGE:   There are two answers to that.  The first answer is:  why would 33V(2) allow for providing for an administrator and paying for the costs?  The answer is because 33V(2) provides that an order that is just can be made in relation to the distribution of the fund; distributing the fund, if it requires an administrator, is going to require an order for that to happen.  That is an order in relation to the distribution of the fund.  Insofar as you have to provide for the cost to be paid, that would ordinarily be paid out of the fund.  The second part of that ‑ ‑ ‑

BEECH-JONES J:   Do you mean it is a cost of the distribution?

MR HODGE:   It is a cost of carrying out the things that are necessary for the distribution, yes.  The second part of that which I think is really the nub of your Honour’s question and comes to the fourth point is why, if that is permissible within the ambit of section 33V(2), is it not permissible to make an order for a common fund order in the way in which we are all attempting to describe it?

The answer to that is that when it comes to a common fund order, what stands it apart from everything else that we are talking about is that it is not a situation where you are equalising the distribution – that is, the distribution as between applicant funded group members and unfunded group members – and it is not an order which is providing for the distribution to applicant funded group members and unfunded group members.

It is instead an order that is said to be made in order to provide for a payment to a non‑party to the proceeding on the basis of what is said to be their contribution to bringing in the fund.  Our submission is – which I will not seek to repeat what I said yesterday – that that does not fall within the conception of what is 33V(2), that that has a justification that is different and distinct from the distribution of the fund.  The way in which it has been put orally, particularly yesterday by the respondents, was to say – and I will identify a few different descriptions, the first was, the fairly simple language says:

if it is a just aspect of distribution of that money, it may be paid, and that can include to people who have contributed to the fund.

Then a little later:

is the fair distribution of that fund, having regard to all people who have proper claims on the fund, which includes the people that have contributed to the fund.

Then also, your Honour Justice Edelman asked a question which is:

Are you saying the payment of an administrator for the costs of administration is a distribution?

And the answer was “yes”.  Today, the way in which it was put is, what we are talking about is a deduction from the fund generated by a service by the funder.  When one considers those oral submissions with paragraph 16 of the respondents’ written submissions, and the third criterion that they identify, it would seem that the way that the respondents frame the power under section 33V(2) is that it provides for the power to effect a distribution of the fund, or part of the fund, to any person who comes forward and makes a claim on the fund.  Then there is a question of discretion whether there is a just basis for distributing part of the fund to that person.

The submission that we make, and therefore do not repeat, is that that approaches things in the wrong way.  What is happening is the distribution of the settlement sum and the settlement sum is the thing that has come from the settlement, which is the settlement of the claims.  There is not some freestanding power there to decide that it is just for anybody who comes forward to say, I would like part of that fund, in order to have it distributed to them.  Could I then move to the fifth ‑ ‑ ‑

GAGELER CJ:   I am not sure that that really addresses part of what I saw as the force of Mr Gleeson’s argument, that if you actually look at the funding – if you look at the costs agreement in the present case, you can see that the applicant is agreeing to pay the costs only funded by the funder.  If you look at the formal arrangements here, you really do have, even in respect of what everyone agrees to be the legal costs and disbursements, a third party providing the funds at the beginning, and the applicant is never really at risk as to costs.  Sorry, that is very badly put.

MR HODGE:   No, I understand the point that your Honour makes.  There are two answers to it.  One is specific to the particular facts of this costs agreement, which I think it is perhaps worth me just pointing something out about, which I will do very quickly.  The second, which is the more important point from our perspective, is the point of principle, which I will come to as quickly as I can. 

Can I ask your Honours to go back to the applicant’s book of further material and go to page 50, which is the costs agreement.  You will see at about point 8 there is a heading which is 3 which is “Funding Agreement”, and it is that part that Mr Gleeson was pointing your Honours to in order to say in reality the applicant is not actually at risk here ultimately because they will not have to pay the money.  That might be true in a sense, but it does not follow that they are not the ones that are incurring the liability.  To make that clear, if your Honours go to page 57 you will see the general terms of business which form part of the costs agreement.  You can see clause 1.1:

We will charge you professional fees on a time basis.

And then a further explanation of what happens.  So, it is undoubtedly the case that the liability is being incurred on the instruction of the applicant, but then of course there is a funding agreement that will provide for a third party payer to pay for that, and then in turn will provide that if the third party payer does not pay then, in effect, the applicant will be excused from having to remunerate the law firm.

GORDON J:   Well, that is clause 3.2.

MR HODGE:   Yes.  And that might ultimately – in this particular case, it might or might not have some consequence if one was to get to the end and be asking for a costs equalisation order, if there was some reason to suppose that they were not actually costs, because for some reason, by virtue of the way that things were done, it meant that there was never any liability as opposed to a liability of the applicant, but that liability being discharged by the funder having paid on behalf of the applicant.

GORDON J:   Your short point is that ‑ ‑ ‑

EDELMAN J:   But the ‑ ‑ ‑

GORDON J:   Sorry, Justice Edelman, you go ahead.

EDELMAN J:   The liability can never arise, though.  That is the problem.  Although the funders obligations are calculated by reference to a notional liability, that notional liability can never be an obligation to pay.  It can never be a call on that obligation.

MR HODGE:   I am sorry, is your Honour referring to the obligation of the applicant to pay his solicitors?

EDELMAN J:   The combination of 3.1 and 3.2.

MR HODGE:   I do not think I can agree that the consequence of 3.1 and 3.2 is that no liability arises on behalf of the applicant as distinct from that liability not being something that would be enforced against the applicant in the event that the funder did not pay.  But if the funder has paid, the funder is paying in order to discharge the liability that has been incurred by the applicant, that is, by R&B Investments Pty Ltd.

But in a way, that is a point of detail about this particular costs agreement, which is not the point that we are seeking to make and which goes ultimately to the question of:  could you distribute the legal fees in this particular case?  The point that we are seeking to make is in relation to 33V(2) and the commission, which is distinct from these legal costs, that the way in which the respondents have to put the power in 33V(2) is to say that it is broad enough to extend to being able to distribute this fund to any person, including a non‑party to the proceeding, with it not being a defined category of people who can come forward, but instead it then being a question in each case as to whether as a matter of justice it would be appropriate to pay some part of the fund to that person.

Our argument is that goes outside the scope of what is plainly envisaged by 33V(1) and (2) together, which is:  33V(1), a settlement of the claims with the settlement sum for those claims made by the applicant and group members; 33V(2) providing for the mechanisms of the distribution and the fairness of distribution between those people who are entitled to the settlement sum.  Then the tack onto that, which is relevant to the Chief Justice’s question and the second part of my answer, is that the way in which it is framed at the moment is as if it is the funder who is contributing to the bringing in of the fund and that is a criterion that has been added orally and is not in the written submissions, but it is significant in this way.

If one thinks about it, the person who is bringing in the fund is the applicant.  The funder is funding the applicant to do so, but it is no more right to say that it is the funder bringing in the fund than it is to say in the case of liquidations that if the liquidator has a line of credit with a bank that allows it to operate in order to secure property, or the liquidator also enters into a litigation funding agreement with a funder, that it is the funder who is bringing in the fund.  The person who is in that role who is carrying out that task of bringing in the fund is the applicant, not the applicant’s lawyers, not the funder – all of those people are pursuant to contract providing assistance to the applicant to do so.

Can I then turn to the fifth submission that we want to address, which is 33Z(1)(g).  The submission that was made about 33Z(1)(g) is that – and accordingly – I withdraw that.  The submission made was, where a solicitor has provided services which have led to the creation of the fund, whether they be strict legal services or risk services, would be within the scope of a just order to authorise as deduction out of the fund in favour of that person, which may be calculated on a commission basis. 

Can I note two things about this.  The first is, insofar as one is then talking about the idea that 33Z at judgment point is going to provide for some extra ability to distribute, the next section immediately afterwards – 33ZA – deals with a process of distribution in relation to any fund that is produced.  The second point is to just direct your Honours’ attention to something raised by the plurality in Brewster.  If your Honours take up that decision and go to page 613 of the decision, your Honours will see at paragraph 89 what the plurality identifies, based on the footnotes, is that there would be a power to make an FEO where a settlement is reached under section 33V – that is paragraph 89.

Then in relation to 90, the proposition that they raise is that where it runs to judgment, rather than being settled, the FEO is something that could be made at that point in time under section 33ZF.  We commend that analysis for this reason, which is when you look at 33Z and 33ZA, those sections together are dealing with specific things in relation to judgment and determining of issues, then in 33ZA, dealing with the distribution of a fund that is created as a result of judgment.  And it has to be something in addition to those sections that is the thing that is capable of giving rise even to an FEO, and that is really the effect of the reasoning of the plurality of paragraph 90.

The sixth point that I wanted to address was Brewster and what I will say is the question of the issue before this Court.  Can I start by identifying the question that we were asked overnight by the respondents is whether we would agree that nothing in Brewster stands in the way of a settlement or judgment CFO under section 33V(2) or 33Z(1)(g).  I think it is fair to say we all were not able to agree to that because we relied upon reasoning that comes out of the plurality and Justice Gordon as reasons why we would say this is against the conception of the case that is put forward by the respondents here.

But on the narrower question, which is, is it necessary to overturn Brewster in order for the respondents to succeed here in relation to a settlement CFO or a judgment CFO, my answer is no on behalf of my client.  I apprehend that at least one of the other appellants will say that they have a different answer to that, but my answer is, the reasoning in Brewster is confined to the ability – or the decision in Brewster, what is determined is the ability to make a commencement CFO under section 33ZF, and it is not necessary to overturn that in order for the respondents to succeed here, notwithstanding that we rely upon and have referred to persuasive parts of the plurality reasoning and Justice Gordon’s reasoning as informing the questions that your Honours have to answer in relation to 33V(2) and 33Z.

EDELMAN J:   Your submission, in effect, is that it is not necessary to overturn it, in the sense that it could be left if you are wrong as a matter of principle, as a sort of a shell of a decision that just applies in relation to the one provision.

MR HODGE:   I do not know that I would agree with the descriptive language of a “shell of a decision” but as we apprehend it, what is determined in Brewster, having regard to the justification that was put forward in Brewster, is that a commencement CFO ought not be made on the basis of it putting on a sure and stable footing the economics of the class action.  That is what is determined by the plurality and Justice Nettle.  As everyone notes, Justice Gordon appears to have gone further in your Honour’s reasoning compared to the plurality, but that is what is determined and that will stand.

The complaint that is made, at least by the intervener, is about that thing.  That is the thing that they say is something that is causing inconvenience.  That is, that there is a problem that arises for them by virtue of the fact that they cannot get a commencement CFO in order to have security and certainty.  In our submission, which I will not labour, there is nothing in Brewster that would necessarily follow to say that the respondents have to fail, and there is nothing that has been identified with respect by the respondents that would suggest that the reasoning in Brewster in relation to those specific issues is wrong, or that the arguments that they now wish to make were not considered by the plurality and Justice Nettle and Justice Gordon in that case.

Then, the seventh point is the argument that is made that a justification for – there are two justifications for why the Court ought to return to Brewster, setting aside the effect on this specific case.  One is that Brewster has been overtaken by surrounding developments; the other is that there is some practical impediment that has been created for litigation funding.  Can I deal with the second one first.  Your Honour the Chief Justice’s question goes to the heart of this and has been addressed by Justice Beach in Elliott‑Carde.

Can I give your Honours the reference to that.  If you go to volume 8 of the joint bundle of authorities and the decision of Elliott‑Carde (2023) 301 FCR 1. Then the point made by Justice Beach is at paragraph 128, which starts at the bottom of page 24 and carries over to page 25. Your Honours will see what Justice Beach says, which is:

Anyway, judges for the moment have treated the use of s 33ZF(1) in this way as being chilled by Brewster and accordingly have dealt with the matter in other practical ways by indicating informally at case management hearings that they may be favourably disposed to making a settlement CFO in due course if the occasion arises.  And so doing, one can only wonder what the practical difference is between so indicating on the one hand or making an interlocutory CFO at that time on the other hand, which can be later varied in the known world of an exercise of power under s 33V(2).

And that, we say, ultimately answers your Honour the Chief Justice’s question.  There is not some practical issue that has arisen.  The manner in which the Federal Court, at least, has gone about dealing with the apparent concern of funders to have certainty as to the economic stability of running class actions in light of CFOs is to say, well, it is something that can be dealt with by effectively indicating that it is likely that at the conclusion a CFO would be made.  Now, of course, if the Court was to conclude that there is simply no power to make CFOs, all of that will change, but it also will not matter because then there will be no power to make CFOs.

The first reason, then, to say that Brewster ought to be revisited was that it has been overtaken by surrounding developments.  There were three issues that were identified orally as to what are those surrounding developments.  One was Wigmans and a carriage motion.  As we apprehended it, the point that was being made is that it could conceivably be relevant on a carriage motion in determining between competing class action operators that it might be necessary to make some form of order in relation to what could be the future remuneration for the funder, and presumably perhaps also for the lawyers, based on how they are competing.

That is not an issue that is dealt with by Brewster, and it might be that there is some form of order that would be made which would, for example, cap what is the amount of remuneration that would be able to be received by the funder that wins the carriage fight and nothing in Brewster would say that that is an order that is impermissible either by the exercise of – well, presumably, the exercise of 33ZF or perhaps some other power.

The second example was Lendlease, where it was suggested that an early CFO is necessary, or appropriate.  This case, obviously, is reserved before your Honours at the moment, but in relation to Lendlease, the issue in Lendlease is about soft class closure.  As we apprehend it, the point that was being made was that when a notice is sent to group members, it might be useful if you are asking them to register as part of a soft class closure to be able to say something about the funding arrangements and the footing on which the funding arrangements have been put. 

But that, with respect, is a practical issue that the court confronts, or the courts confront, all the time in relation to opt‑out notices in general, which is you have to tell people things where you cannot be certain as to what the outcome is, including, for example, what the actual value of the class action is ultimately going to be.  There is always going to be uncertainly.  Nothing in relation to the desirability or otherwise of soft class closures is a reason to suggest that Brewster needs to be revisited.

Then, the third reason was the detailed experience of the Federal Court in relation book building.  With respect, this is a very large topic that, in order to understand the economics of book building and what is and is not desirable – which is one of the reasons why yesterday I referred to Justice Lee’s decision ultimately in relation to Lenthall v Westpac – because trying to understand and evaluate the costs and what makes economic sense as to whether to book build or not is something that requires a lot of evidence and requires going through and evaluating a whole series of

possibilities across a wide number of class actions.  It is not something where the court could simply take, as an assumption, that book building is necessarily bad, that Brewster is something that would encourage book building and, therefore, it must follow that Brewster is something that ought to be revisited.

Your Honours, those are our submissions.

GAGELER CJ:   Thank you.  Mr Foreman.

MR FOREMAN:   Your Honours, I thought I had 10 points in 10 minutes.  I think I now have 11 points in hopefully not more than 11 minutes, but we will see how we go.  Your Honours, the first matter relates to the funding agreement itself and Mr Gleeson’s reliance on clause 3 of that agreement.  Your Honours have the bundle of further materials.

GAGELER CJ:   I think we have memorised clause 3.

MR FOREMAN:   Yes.  Your Honours, the short point is, if your Honours turn to page 50, clause 3 has nothing to do with any of the questions that are arising today.  It has nothing to do with it whatsoever, and let me explain why.  If your Honours see at point 5 on the page, there is a reference to “General Terms of Business”:

This document, together with our General Terms of Business, set out the terms of our offer to provide legal services to you –

Then there is clause 3 in relation to the funding agreement.  It sets out certain things in relation to what was the position in relation to ILP’s funding arrangement.  But the whole point of this exercise is this funding agreement falls away.  This funding agreement, and this clause in particular, is replaced by the addendum.  If your Honours turn to page 63 ‑ ‑ ‑

GORDON J:   Your point yesterday was it is replaced by the addendum and that is why it is within, as I understood it, the unlawful aspect of 183 of the Uniform Law.

MR FOREMAN:   Yes.

GORDON J:   That was the submission you made yesterday.

MR FOREMAN:   Yes.  And what I am addressing here is Mr Gleeson’s submission that somehow, because of the construction of clause 3, which is no longer operative, there has been some concession ‑ ‑ ‑

GORDON J:   It would no longer be operative if what was proposed – the subject of the opt‑out notice and these arrangements were put in place.

MR FOREMAN:   Yes.

GORDON J:   At the moment, it is operative.

MR FOREMAN:   Yes.  And what is said is, if your Honours turn to page 63, the fact that 3A.2(c)(i) – about legal costs and disbursements being shared – the fact that no issue has been raised in that is some type of concession, given the terms of clause 3, there are at least two answers to that.  First, 3A.1:

You have instructed us to seek Court orders establishing a funding arrangement in substitution for –

the arrangement.  So, that goes, it goes.

BEECH-JONES J:   Is this point 1?

MR FOREMAN:   Clause 3A.1.

BEECH-JONES J:   Yes, 3A.1 comes after 3, so 3 stays.

MR FOREMAN:   No, your Honour, it says:

You have instructed us to seek Court orders establishing a funding arrangement in substitution for the ILP Funding Agreement described . . . above.

GORDON J:   It goes if the court orders are made.

MR FOREMAN:   Yes.

BEECH-JONES J:   You mean, the whole thing goes.

MR FOREMAN:   Yes, because, your Honour, there is no funding – this is the whole point of the exercise.  The solicitors are going to operate this matter without a funding agreement – without a funder.  That is why we are here.  That is the whole point of the entire exercise, that this regime is to replace what the funders were doing.  That is why we are here.  That is why – and there is a range of answers, but that is one of the reasons why there was no issue with clause 3A.2(c)(i), because that only operates if the clause 3 that relates to the funding agreement goes away.

BEECH‑JONES J:   But if the orders are not made, does the old clause 3 still survive?

MR FOREMAN:   Yes.

BEECH‑JONES J:   Yes.

MR FOREMAN:   Yes.

GAGELER CJ:   And the orders are not going to be made until the end.

MR FOREMAN:   Sorry, this is the opt‑out notice.  So, the orders that would trigger – according to Ms Banton’s affidavit, the orders that would trigger her to amend the costs agreement are the issuing of the opt‑out notice and the terms that say where the court has the power.

BEECH‑JONES J:   But once it is amended, clause 3A only engages to remove clause 3 if the orders it seeks are made at the end?

JAGOT J:   No.

BEECH‑JONES J:   Is that not right?

MR FOREMAN:   No.

JAGOT J:   No, that is not right.  You have to look at 3A.3, which says:

In the event that orders are made as described in clause 3A.2(d) then –

BEECH‑JONES J:   The opt‑out notice.  I see.

MR FOREMAN:   Yes.

GORDON J:   So, the chronology is, at the moment we have a funding agreement, see clause 3 of the costs agreement.

MR FOREMAN:   Yes.

GORDON J:   It is proposed now that there be an application to the court – we are here working out whether or not it is going to be done – under the court orders would be made for the opt‑out notice, which would trigger three things:  an amendment to the costs agreement, and involvement in the addendum, which brings about the removal of the funding agreement clause 3.1, and an opt‑out notice to reflect those arrangements.

MR FOREMAN:   Yes.

GORDON J:   Your argument is that all of those things are done at the request of the applicant.

MR FOREMAN:   Yes, yes.  And, also, your Honour, that there is no benefit – as Mr Gleeson sought to do – about the absence of disagreement about 3A.2(c)(i), because that only – he was relying on clause 3 to say there is some concession in us not raising the question of legal costs.  But clause 3 is gone. 

GORDON J:   Your point, though, is that what is under 3A.2(c)(i) are the costs themselves without the funding agreement ‑ ‑ ‑

MR FOREMAN:   Yes.

GORDON J:   ‑ ‑ ‑ being the costs incurred by the solicitors in running the litigation.

MR FOREMAN:   Yes, yes.  Once clause 3 goes, it is a usual costs agreement and the general terms of business provide, for example, the applicant has to pay the costs.  The other submission I would make, your Honours, is that there is an air of unreality about Mr Gleeson’s reliance on clause 3 in any event.  It is entirely hypothetical, so I will spend no more than 30 seconds.  If we are in that funding world and the funder did not pay the costs, the case would not run.

GORDON J:   The case what?

MR FOREMAN:   The case would not run.  There is the assumption in Mr Gleeson’s argument that somehow the case would get to the end, run to a mediation, or judgment, or something, without the funder complying with its obligations to pay the costs and, therefore, somehow there is some magic in clause 3.

But, perhaps, given that clause 3 is gone, I will not say any more about that, other than to say this as a more general comment.  There was a tendency, with respect to Mr Gleeson, to try to reinvent the case and make it something about something that it was not – it was about GCOs, not the solicitors’ common fund order, but it was about a fixed amount, not a percentage‑based amount, and so on.

As I think has been said, we would respectfully submit that regard has to be paid to the way in which the case was run and the issues that were before the court below.  One issue that was not before the court below was any concern about 3A.2(c)(i) – it was about (c)(ii), which was the solicitors’ CFO, being the percentage‑based amount.  That was my first point.  My second point relates to section 33V(2) and its construction.  Your Honours have obviously seen it many times but, at the risk of repetition, it provides that:

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

So, the primary function of that clause is to get the money from wherever it is to group members.  Those are orders with respect to distribution – how does it get into the hands of group members?  And that is why a cost like an administrator or advertising to identified group members, that is why those costs are within the scope of the provision.

There is a third topic.  Mr Gleeson said I had not explained how the New South Wales statute was relevant and how that became a question of construction relevant to this federal Act.  I do not want to repeat everything I said yesterday, but as I said, it is relevant to the proper construction of “just” as it arises in this question, namely, just to make a solicitors’ CFO, being an order to a solicitor practicing in New South Wales in the Federal Court of Australia.  That is why all of the APLA, and all of those matters, and the fact that legal regulation in the Federal Court is a matter for State‑based laws – that is why the State‑based laws are able to be taken into account.

GAGELER CJ:   So, an element of justice being lawful?

MR FOREMAN:   Yes.  Call me old‑fashioned, but yes, that is certainly an element of it.  And just in relation to, and I will not ‑ ‑ ‑

BEECH-JONES J:   Well, you say, at least at this point, determinative?

MR FOREMAN:   Yes.

JAGOT J:   Can I just – when you say “to a solicitor”, you mean, as Justice Beech-Jones already said, to the solicitor in this proceeding ‑ ‑ ‑ 

MR FOREMAN:   Yes, sorry.

JAGOT J:   ‑ ‑ ‑ who is an incorporated legal practice to whom certain rules apply that do not apply to sole practitioners or law firms, as I read the Rules.  And Mr Gleeson relied on rules 102 and 107 in particular.  I mean, it seems odd, but to this solicitor may be a different answer, maybe, to another solicitor, who is a law firm.

MR FOREMAN:   Yes.  Well, I do not think, with respect, there is any difference, when one comes to – which I will come to – the relevant provisions of 183.  There is no relevant distinction in that regime and, in my submission, no relevant distinction because they are incorporated versus not.  And, indeed, one would think that would be ‑ ‑ ‑ 

JAGOT J:   But the question is confined to “the solicitor”, which is an incorporated legal practice.

MR FOREMAN:   Yes.

JAGOT J:   Whether that matters or not is another question.

MR FOREMAN:   Yes.  This is the practise in New South Wales, which is what we are dealing with.  Can I just, as this Court has said many times, the first step in this exercise is to construe the relevant provision.  Again, basic but important, and I just draw your Honours’ attention to what is said in P v P, at the bottom of page 601 going over to 602, identifying that construction exercise.

JAGOT J:   Which tab is that, sorry?

MR FOREMAN:   It is in P v P 181 ‑ ‑ ‑ 

JAGOT J:   Tab 24, sorry.

MR FOREMAN:   The bottom of page 1612, going over to 1613, it is a question of construction:

if the terms of the Commonwealth law conferring jurisdiction or power convey a legislative intent that the jurisdiction or power must be exercised conformably with applicable prohibitions and requirements of State law, the jurisdiction will, as a matter of construction, be accordingly confined with the result that there is no inconsistency for the purposes of s. 109.

We now know there is no 109 argument pressed, so it only goes so far, but the point is, this, in the Federal Court – when one is looking in a federal court which applies or assumes the State‑based regulation, this is classically a case where the power to a solicitor has to be exercised in accordance with the State‑based law.

I can then go on to point number 4 – and there were various submissions about legal costs and legal services.  The first observation, as your Honour Justice Jagot made, is that 183 is not limited to legal costs, it is any payment.  But, in any event, various submissions were made about legal services being work done or business transacted in the ordinary course of legal practice.

The respondents have sought to draw a distinction between a “risk services”, so‑called, and “legal services”.  The risk services they identify are providing security for costs and indemnifying for adverse costs.  It was said to be a matter of evidence to be proven.  We have two responses to that, the first of which, there are multiple examples of solicitors providing so‑called “risk services” in class actions conducted on a no win, no fee basis.  So, we would say, on that basis, it is considered part of legal services, being something done in the ordinary course of practice.

Mr Gleeson referred, in passing, to Wigmans v AMP.  Obviously, the decision of this Court did not focus on the precise arrangements, but can I just give your Honours a reference to the first‑instance decision, Wigmans v AMP [2019] NSWSC 603 at 58, 182 and 219, where it is confirmed that Maurice Blackburn on a no win, no fee arrangement provided the so‑called risk service as well in the course of practice, being adverse costs, indemnity and security for costs. They did so on the traditional basis of a no win, no fee arrangement.

Another example is Smith v Australian Executor Trustees [2016] NSWSC 17 at 9. Another example is – and I am going to mispronounce this, maybe I will just spell it – Prygodicz v Commonwealth (No 2) [2021] FCA 634 at 25. That was just an indemnity for adverse costs, it is not clear the position in relation to security – that is what we found over lunch. To say that the so‑called risk services are something that is beyond the scope of the legal practice is not something we needed evidence for, the consequence being that even if 183 is limited to legal costs, they are within the prohibition on a percentage‑based fee.

Can I give the second answer which arises out of something with respect to what your Honour Justice Beech‑Jones said at transcript page 87, line 3680, which is if this order is made and solicitors come to provide these services, if they do not already, then it becomes part of the ordinary course of practice, and it will become “legal services”, and therefore regulated by the Act.

Can I go to the fifth point, which is Mr Gleeson wanted to argue that some parts of the agreement were a cost and some were not.  Two propositions.  That is not how the case has been conducted.  For example, Ms Banton said she was amending:

the terms of . . . existing costs agreement –

in her affidavit, paragraph 17, at page 16 of the appellant’s further materials, and no distinction has ever been sought to be drawn that part of it was a costs agreement and part of it was not.

But second, in any event, your Honours, in the context of the protective arrangements and provisions that we are here dealing with, would not permit Mr Gleeson’s proposed construction of a document that is meant to be protective, that you can choose which bits are costs agreements and which are not, depending upon what suits.  Sixth, Mr Gleeson addressed at some length the term “under which”, focusing on the source of the entitlement.

I will not repeat what we say in chief, which we maintain that the prohibition is broader and the mischief and what it is directed at is not the source of the obligation but the nature of the payment.  But, even if that is wrong, the short point is a solicitor cannot lawfully enter into a contract to receive a percentage‑based amount, and that is of itself determinative of what is just in these circumstances, because it is not just for the court to make an order which could not be the subject of a lawful contract.  We need to just pause for a second, with respect – sorry, I withdraw that.

In my respectful submission, it is relevant to consider and take a step back to see what is actually happening here by reference to page 82 of the transcript, around line 3460, where Mr Gleeson said what has been done “carefully” here was to avoid section 183.  So, what we have is a circumstance where a solicitor has recognised that the payment, if it was the subject of a contract, would contravene 183, and have attempted to have a regime which is designed to avoid that obligation – I say, as a matter of interpretation and construction, it is still within the prohibition, because it is still calculated as a percentage, but even if that is wrong, what you have is someone ‑ ‑ ‑

BEECH‑JONES J:   Mr Foreman, are you talking about the passage where Mr Gleeson said:

this is carefully done, to make sure that any possible legal obligation is not breached –

MR FOREMAN:   Yes:

and it is making perfectly clear that this does not trigger section 183 –

BEECH‑JONES J:   Right.  It is a little bit different to “avoid”.

MR FOREMAN:   Sorry, I ‑ ‑ ‑

BEECH‑JONES J:   I just wanted to make – I just think that ‑ ‑ ‑ 

MR FOREMAN:   Yes.

BEECH‑JONES J:   That that is the passage you are referring to?

MR FOREMAN:   Yes, it is, and – I am trying to speak quickly – I withdraw the suggestion of “avoid”.  I will adopt Mr Gleeson’s words:  to not trigger section 183.  So, there is an effort to not trigger section 183 and yet to create an arrangement where the client agrees and is obligated to go to the court for an order – because, obviously, it is the client making the application – to make an order for the very thing that cannot be achieved under 183, and it is said that this would be within the concept of a just order.  In my respectful submission, that serves to illustrate that what is being sought here is not within the concept of a just order.

GAGELER CJ:   Why?  Because it is caught by section 183, or because it is working around section 183?  It is not clear what you are putting.

MR FOREMAN:   Sorry, I am putting both.  My submission, which I have made in writing, I made yesterday and I maintain, is that it is within 183 because 183 is about the method of calculation being based on a percentage.  And the effect of what is going to occur here is that it will be based on a percentage.  That is sufficient to trigger section 183.  The fact that the percentage is determined by the court does not prevent it from being within the terms of 183, and as I think we said in our written submission, it is a bargain on terms.  But even if that is wrong, it is similarly not just if, given that, in circumstances where what is being done is sought to work around a provision to achieve a result ‑ ‑ ‑

STEWARD J:   And you say a Federal Court judge could not justly make an order which is for the purpose – I will use neutral language – of circumnavigating around 183 in a carefully structured way?

MR FOREMAN:   Yes, yes, that is so.  Can I just deal very briefly ‑ ‑ ‑

GORDON J:   Is this number 7?

MR FOREMAN:   Yes – it might be number ‑ ‑ ‑

GAGELER CJ:   I fear it is number 6. 

MR FOREMAN:   Yes. 

GORDON J:   No, 6 is “under which”.

MR FOREMAN:   I am trying because I added a point at the start. 

GAGELER CJ:   Seven.

MR FOREMAN:   I think it could be – on my list it is point number 6 – so I think it could be point number 6.  I will be very brief on this question of conflict.  As Mr Hartford Davis said, that jurisdiction arose because, traditionally, the role of a trustee was gratuitous.  A modern example cited by – and I will not take your Honours to it, I will just give your Honours the reference – our friends is Re Sutherland 50 ACSR 297, at tab 52 – the relevant paragraphs are 11 to 12. It is a jurisdiction of exercise sparingly in exceptional cases and the factor that it is taken into account is whether there is, really, any alternative. It is very different to what we are dealing with here.

In relation to the case of Law Society v Foreman – no relation – the fact that there can be a conflict when fees are charged does not help in circumstances where the legislature has said, yes, you can charge an hourly rate, but you cannot charge a percentage rate.  The decision serves just to emphasise the fact that sometimes – to quote Chief Justice Street – human frailty will be unequal to the task.  In any event, the regulator said, consistently with section 172, you can charge a reasonable fee.

So, in my respectful submission, it goes nowhere, as does the reliance on something like the Bushfire Case or the other case of Gill where there was a payment of $32 million picked up, or the fact that for example there can be issues when a case gets to day 208.  Most cases do not, and most cases do not get to a $60 million fee level.  So, to take examples and say, well, there is a conflict in that instance in a no win, no fee situation, does not really assist, particularly in circumstances where, as I took your Honours to yesterday, Court v Spotless indicates the problems that arise when a funder is involved which become translated to a solicitor.

I think I have four points very briefly to go, the first of which is there was some reference by Mr Gleeson to the Australian Law Reform Commission report about group members contributing to costs.  It was said I did not raise that.  At page 39, line 1493, I referred to section 33ZJ, which is the provision that allows costs to be taken from the judgment sum when there is a shortfall between recovered costs and the actual costs.

Point number 8, there was some reliance or reference to Professor Morabito.  In my respectful submission, it does not prove anything that is relevant to your Honours.  At best, leaving aside all the difficulties of the nature of the material, all it shows is correlation, if anything, not causation, and you need to consider other matters such as movement in interest rates, markets, et cetera.  Further, it relates to a GCO, not a CFO, and we are not dealing with a GCO here. 

Two final points.  In relation to the aide‑mémoire, in the FEO method, there were some submissions made about contractual entitlement.  I just draw your Honours’ attention to the fact that in each case what was being spread was the existing contractual entitlement.  It was that entitlement, as is seen from paragraph 1(a) of the aide‑mémoire, referring to “contractual entitlement” and (2) referring to “payable to the Funder”.  So, it is money that is already owed which is being distributed.

Finally and, in my respectful submission, most importantly, is the proposition in relation to Brewster and CFOs generally.  There has been many submissions made about the importance of CFOs to bring certainty for class closure, for mediation and various other matters of that kind.  All of these submissions assume the absence of book building.  They all assume that, as has become common place, one or two group members are signed up, you get yourself an applicant, and you can head off to court.

When your Honours come to read the decision of Justice Beach in Elliott‑Carde, which is the decision on which the Full Federal Court based their reason that there was power to make a CFO, it pervades that decision that book building is bad and that that is relevant matter to consider in relation to the power to make a CFO.  However, it was established in Brewster as an integral part of the reasoning that book building is not a relevant consideration by both the majority and your Honour Justice Gordon and it is not something that can be taken into account.

The proper position is that, as I think was said, if you run a business you incur costs, and if you take the trouble to sign sufficient group members to have an economic justification before the proceeding is commenced, then all of the issues about uncertainty fall away.  They all fall away because you have taken the steps before the case commences to get sufficient group members to justify the economic position.  We addressed this in our written submissions at paragraphs 21 to 29.

The other point to note here is that the ability to sign up one person and go and get a common fund order has a tendency to increase the number of competing class actions because you do not need to take the step of ensuring they are economically justified by book building before that occurs.  As was noted by the majority at paragraph 94 in Brewster, there were open class actions before 2016 and, in my respectful submission, the reasoning of this Court in Brewster, of the plurality and Justice Gordon in relation to book building, is a matter that precludes – or demonstrates the error in Justice Beach’s decision in Elliott‑Carde and demonstrates that there is no power to make a CFO.

If it please the Court.

GAGELER CJ:   Thank you, Mr Foreman.  Mr Lawrance, your time has been squeezed a little.

MR LAWRANCE:   Your Honours, at transcript 86, your Honours Justice Gordon and Justice Steward asked a question about what other forms of regulation might be relevant to this kind of financing.  Mr Gleeson answered that question, at least in part, this morning.

There are some other regulations that your Honours should be aware of.  I think in the time I have, I will just have to give your Honours the references to them.  In the Corporations Regulations, regulation 5C.11.01, and within that regulation, I should particularly draw your Honours’ attention to subclause (2A)(f), which imposes this condition upon the declaration that a litigation funding scheme not be a managed investment scheme.  Paragraph (f) says:

the funder is not a lawyer or legal practice that provides a service for which some or all of the fees, disbursements or both are payable only on success.

Your Honours should also be aware of regulations 7.1.04N(a) and (b), and regulation 7.6.01(1)(x) and (y).  Then, in the Legal Profession Uniform Law, section 258, read together with rule 91BA in the Legal Profession Uniform General Rules. We have provided those materials to your Honours. In the time I have, I do not think I can expand on it.

In reply to Mr Gleeson, firstly, when one comes to P v P, if one were looking for an indication of a legislative intent in the Federal Court Act that the power in section 33V or the power in section 33Z be exercised conformably with the applicable prohibitions on contingency fees in the various State laws, then your Honours might find such an indication in the fact that the Federal Court Act does not provide for the court to maintain a role of practitioners but, nevertheless, assumes that lawyers who appear in the Court will be admitted to practise in a State or Territory and, therefore, comply with the laws regulating profession there.

Secondly, as regards what was put by my learned friend concerning the Court of Appeal’s decision in Smits v Roach, it is apparent from paragraphs 45 and 48 of the reasons that it was not in issue on the appeal that the relevant parts of the costs agreement were champertous.  At paragraphs 69 and 70 – which are the paragraphs referred to by Mr Gleeson – what the court there is dealing with was his Honour’s decision that the non‑champertous parts were not severable.

One way it is clear to see that the court was not saying that there was not such a common law principle against a solicitor bargaining for an interest in the outcome is that in paragraph 70 – one of the two paragraphs referred to by Mr Gleeson – there is a reference by Justice Sheller, with whom the other members of the court agreed, to the decision of Justice Bryson in Hogarth v Gye, where his Honour Justice Bryson said at paragraph 8, this:

a common law principle prevents a solicitor from purchasing the subject matter of a lawsuit, and of course from purchasing a proportion of it.

Lastly, as regard to the submission that was put about the common law rule prohibiting bargains, we accept that, and we had sought to put our submission to acknowledge that.  What we submitted was that it is inconsonant with the common law rule to construe 33V and 33Z the way that the Full Court has, because doing so creates a statutory structure that undermines the common law rule.  For that reason, it is inconsonant.

If one assumes that Mr Gleeson is correct in his contention that there has been no breach of section 183 of the Uniform Law, then what is happening in this case, on the Full Court’s construction, if it stands, is that the solicitor is being incentivised by the prospect of sharing in the winnings, and that is the incentive that the common law rule is directed against, and that is why we say it is inconsonant.

Your Honours, those are our submissions.

GAGELER CJ:   Thank you, Mr Lawrance.

JAGOT J:   Sorry, I have a question. Section 258(1)(b) of the Legal Profession Uniform Law 2014 (NSW) which you have then referred to rule 91BA – I was not quite sure what you said of the Legal Profession Uniform General Rules 2015.

MR LAWRANCE:   Yes, rule 91BA contained a rule that was relevant to section 258(1A)(c), which provides for the Uniform Rules to specify a type of scheme to come within the exception to the prohibition against promoting or operating a managed investment scheme.

JAGOT J:   Sure, but I do not read any prohibition in there.  Did you refer to a prohibition if it was a law practice?

MR LAWRANCE:   If I can perhaps do it this way.  If your Honour has the rule ‑ ‑ ‑

JAGOT J:   I have the rule on I just cannot see a prohibition in there.  I thought you said there was a prohibition somewhere, I did not see it.

GORDON J:   Did you not rely on 258 (1)?

MR LAWRANCE:   I do not put the submission that the costs agreement in this case would contravene section 258 (1). I direct your Honours to it in answer to the question that your Honour and also Justice Steward asked yesterday, because it is a provision that is relevant to the regulation of this type of financing. I do not submit that this agreement contravenes it.

STEWARD J:   Is the net effect, though, that if it is a permissible business service, it has to be done as a managed investment scheme under the Corporations Regulations?

MR LAWRANCE: No, I do not submit that. What seems to have occurred is that the Corporations Regulations, to which I have referred your Honours, and also this section 258 and rule 91BA have assumed that the conduct – or have assumed that a litigation funding scheme would be a managed investment scheme which, indeed, was the case at least until a decision in LCM v Stanwell that your Honours were taken to this morning.  LCM v Stanwell was delivered in June 2022.  The regulation 5C.11.01 was made after that in December 2022.

The reason I do not, in answer to your Honour Justice Gordon’s question, submit that there would be a breach of 258(1) here is that I do not submit that the litigation funding scheme in this case on the evidence before you would be a managed investment scheme, but I thought your Honours should be aware of it in answer to your Honour’s question, and I think the answer to your Honour Justice Steward’s question is that a number of legislative provisions have been enacted possibly on the assumption that a litigation funding scheme would be a managed investment scheme.

JAGOT J:   Can I just ask – and maybe it is for the parties – leaving aside 258(1)(a), which is about managed investment schemes, 258(1)(b) enables the Uniform Rules to provide certain services that a law practice cannot do – I am assuming there are none.  I do not know, but that is a question for the parties.  And 259 also provides in (b):

the provision of other services . . . in circumstances where –

there is:

a conflict of interest –

Again, I do not know whether particular rules have been made in reliance of 259 that are of any relevance.

MR LAWRANCE:   The answer to your Honour’s question, as best as I can answer it, is I am not aware of any such rules other than the case of 258(1)(b) or in the case of 259.

GAGELER CJ:   Mr Lawrance, that could be possibly taken into account in the note that will be provided by the parties by the end of next week.

MR LAWRANCE:   If it pleases your Honour.

GAGELER CJ:   Very well.  The Court will consider its decision in this matter and will adjourn until 10.00 am tomorrow.

AT 4.23 PM THE MATTERS WERE ADJOURNED