Lenthall v Westpac Banking Corporation (No 3)
[2021] FCA 1004
•9 August 2021
FEDERAL COURT OF AUSTRALIA
Lenthall v Westpac Banking Corporation (No 3) [2021] FCA 1004
File number: NSD 1812 of 2017 Judgment of: LEE J Date of judgment: 9 August 2021 Catchwords: REPRESENTATIVE PROCEEDINGS – large consumer class action with long procedural history – settlement approval application pursuant to s 33V of Federal Court of Australia Act 1976 (Cth) – where settlement has a “claims cap” – reasonableness of legal costs – consideration of costs referee report and reduction of certain fees –reasonableness of counsel’s fees – whether further notice should be issued to group members informing them of the need to register – whether power to order a further notice – whether ordering a further notice is a proper exercise of discretion – further notice appropriate in all the circumstances – whether Court appointed administrator should have access to list of group member information to send out further notices – extent to which the Court appointed administrator can communicate with group members – settlement approved Legislation: Federal Court of Australia Act 1976 (Cth) ss 33V, 33X, 33ZF Australian Law Reform Commission, Grouped Proceedings in the Federal Court (Report No 46, 1988)
Class Actions Practice Note (CPN-CA)
Cases cited: Australian Securities and Investments Commission v Richards [2013] FCAFC 89
Hearne v Street [2008] HCA 36; (2008) 235 CLR 125
Lenthall v Westpac Banking Corporation (No 2) [2020] FCA 423; (2020) 144 ACSR 573
Muswellbrook Shire Council v Royal Bank of Scotland NV [2017] FCA 414
Tasfast Air v Mobil Oil Australia Limited [2002] VSC 457
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 62 Date of hearing: 16 July; 9 August 2021 Counsel for the Applicants: Mr W A D Edwards with Ms M Cowden Solicitor for the Applicants: Maurice Blackburn Counsel for the Respondents: Mr A Leopold SC Solicitor for the Respondents: Allens Counsel for the Intervener: Mr N Hutley SC with Ms S Tame Solicitor for the Intervener: Roberts & Partners Lawyers Counsel for Mr A S Martin SC: Mr R Dick SC ORDERS
NSD 1812 of 2017 BETWEEN: GREGORY JOHN LENTHALL
First Applicant
SHARMILA LENTHALL
Second Applicant
SHANE THOMAS LYE
Third Applicant
KYLIE LEE LYE
Fourth ApplicantAND: WESTPAC BANKING CORPORATION ABN 33 007 457 141
First Respondent
WESTPAC LIFE INSURANCE SERVICES LIMITED ABN 31 003 149 157
Second Respondent
JUSTKAPITAL LITIGATION PTY LIMITED
Intervener
ORDER MADE BY:
LEE J
DATE OF ORDER:
11 AUGUST 2021
THE COURT ORDERS THAT:
Approval of Settlement
1.Pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (FCAA), the settlement of this proceeding be approved on the terms set out in:
a. the Deed of Settlement dated 27 April 2021 being Annexure JMS-1 to the confidential affidavit of Janice Mary Saddler sworn 13 May 2021 and pp 535-554 of Exhibit CJMS-1 to the Affidavit of Janice Mary Saddler sworn 9 July 2021 (Deed);
b. correspondence between the applicants and the respondents dated 10 May 2021, 14 May 2021 and 19 May 2021 exhibited at pp 555-559 of Exhibit CJMS-1 to the Affidavit of Janice Mary Saddler sworn 9 July 2021; and
c. the Settlement Scheme as defined in the Deed (Scheme) in the form attached to these orders.
2.Pursuant to s 33ZB of the FCAA, the persons affected and bound by the settlement of these proceedings and Orders 1, and 4 to 6 of these Short Minutes are the applicants, the respondents and Group Members (other than any Group Member who filed an opt out notice or is permitted to do so by Order 3) (Bound Group Members).
Further date for opt out for certain Group Members
3.Pursuant to s 33J(3) of the FCAA, the following Group Members shall be permitted to opt out of the proceeding by filing an opt out notice on or before 20 August 2021:
a. Greg Veitch;
b. Damien Reed;
c. Clint Azzopardi;
d. Andrew Morcos;
e. Susan Bales;
f. Sarah Clark;
g. Stephen Gleeson; and
h. Wayne Bradford.
Appointment of Administrator and approval of matters referred to in the Scheme
4.Pursuant to ss 33V and/or 33ZF of the FCAA, Janice Mary Saddler and Tristan Gaven (of Shine Lawyers) be appointed as Administrator of the Scheme to act in accordance with the Scheme subject to any direction of the Court, and to have the powers and immunities conferred by the Scheme on the Administrator, subject to any direction of the Court.
Deductions from Settlement Sum for purposes of Scheme
5.Pursuant to ss 33V and/or 33ZF of the FCAA, for the purposes of the Scheme, the Court approves:
a. the “Applicants Legal Costs and Disbursements” in the following amounts:
i.“Approved Legal Costs”, in the amount of $5,047,018.61 (GST incl); and
ii.“Approved Disbursements”, in the amount of $3,717,825.71 (GST incl);
b. the “Approval Costs”, in the amount of $508,041.59 (GST incl) up to and including 9 August 2021;
c. the “Insurance Costs” in the amount of $3,051,095.69; and
d. the “Other Costs” in an amount to in the amount of $32,895.00 (GST incl.); and
e. the “Applicants’ Reimbursement Payment”, being the following amounts in respect of the reasonable claim for compensation for the time and/or expenses incurred by the applicants in the interests of prosecuting the proceeding on behalf of Group Members as a whole of:
i. $20,000.00, in respect of the first applicant;
ii. $7,500.00, in respect of the second applicant;
iii. $7,500.00, in respect of the third applicant;
iv. $7,500.00, in respect of the fourth applicant.
Referee’s Report
6.Pursuant to r 28.67 of the Federal Court Rules 2011 (Cth), the Referee’s Report of Roland Patrick Matters dated 14 July 2021 be adopted, save for the following parts:
a.paragraph 3:
b.paragraph 87;
c.paragraphs 103 (1st sentence, the words “other than … report”); and
d.paragraph 105.
Matters to facilitate the administration of the Scheme
7.Pursuant to ss 33V and 33ZF of the FCAA, leave shall be granted to the Administrators of the Scheme to uplift from the Court the schedules referred to in Orders 2(a) and (b) made by the Court on 17 May 2021 (Original Group Member Lists) required to be provided to the Court in accordance with those orders.
8.Pursuant to ss 33V and 33ZF of the FCAA, the respondents provide to the Court and the Administrators of the Scheme an updated version of the Original Group Member Lists (Updated Group Member Lists) which:
a.removes any potential Group Member who has opted out of the proceeding;
b.removes the approximately ~18,000 persons referred to in paragraph 1(b)(ii) of Allens’ letter to Shine Lawyers dated 5 August 2021, being pp 1-2 of Exhibit MS-3 to the Affidavit of Malcolm Stephens sworn 8 August 2021; and
c.contains the mobile telephone numbers of persons who (following (a) and (b) above) remain in the Group Member Lists, to the extent that the records of the second respondent contain such telephone numbers.
9.The Administrator shall give a written undertaking to the Court within 14 days:
a.to only use the Original Group Member Lists and/or the Updated Group Member Lists (collectively Group Member Lists) for the purposes of administering the Scheme; and
b. to destroy all copies of the Group Member Lists (including any metadata or analysis derived from the Group Member Lists) in its possession and file and serve an affidavit confirming they have been destroyed at or before the time it files the Scheme’s concluding report in accordance with clause 57 of the Scheme.
10.Pursuant to ss 33V and 33X(5) of the FCAA, the form and content of the notice annexed to the Scheme be approved (Post-Approval Notice).
11.Pursuant to ss 33V and 33Y(2) of the FCAA, the Post-Approval Notice be distributed in accordance with the Post-Approval Notice Distribution Plan annexed to the Scheme.
Consequential matters
12.Pursuant to ss 22, 23 or 33ZF of the FCAA, rule 1.32 of the Federal Court Rules 2011 (Cth) and/or the Court’s implied jurisdiction:
a. the proceeding is (without the need for any further order) dismissed with no order as to costs, once the Administrator files the Scheme’s concluding report in accordance with clause 57 of the Scheme;
b. all previous costs orders are vacated save for costs orders made in relation to the common fund order application and the appeal to the Full Court of the Federal Court and the special leave application and the appeal to the High Court of Australia in respect of the common fund order application; and
c. all orders for the provision of security for costs are vacated, and any security lodged shall be released or returned to the applicants’ solicitors, or as they direct.
Confidentiality
13.Pursuant to s 37AG of the FCAA, a non-publication order is made in relation to the following documents until further order:
a. the confidential affidavit of Janice Mary Saddler sworn and filed on 13 May 2021 and Annexure JMS-1 to that affidavit;
b. the unredacted version of the affidavit of Janice Mary Saddler sworn and filed on 9 July 2021;
c. Confidential Exhibit CJMS-1 referred to in the affidavit of Janice Mary Saddler sworn and filed on 9 July 2021;
d. the unredacted version of Exhibit CJMS-2 referred to in the further affidavit of Janice Mary Saddler sworn and filed on 9 July 2021;
e. Exhibit JMS-3 referred to in the affidavit of Janice Mary Saddler sworn and filed on 15 July 2021;
f. the unredacted version of the affidavit of Christiaan Barclay Stanton Roberts sworn and filed on 15 July 2021;
g. Exhibit CJMS-4 referred to in the affidavit of Janice Mary Saddler sworn and filed 28 July 2021;
h. Exhibit CJMS-5 referred to in the affidavit of Janice Mary Saddler filed 6 August 2021.
14.Order 13 is made on the ground that the non-publication of those documents is necessary to prevent prejudice to the proper administration of justice.
THE COURT NOTES
15.Any releases or covenants not to sue contained in the Deed the subject of Order 1 are restricted to the claims the subject of these proceedings.
16. Order 2 does not bind persons who were not given advice by the first respondent, through its financial advisers in Westpac Financial Planning on insurance and the premiums payable on that insurance, and did not obtain insurance policies from the second respondent by reason of that advice after 11 October 2017.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Revised from the Transcript)LEE J:
A INTRODUCTION
This is an application pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (Act) for the approval of a settlement in an open class representative proceeding with a very large number of group members, commenced as long ago as October 2017. To suggest the proceeding has been hard-fought would be an exercise in considerable understatement.
When the proceeding first came before the Court all that time ago, I had hoped it could be brought on for an initial hearing with some promptitude. But, due to a number of complications primarily concerned with the funding arrangements and, in particular, a common fund order that I made (which was ultimately set aside by the High Court), there has been considerable delay and cost associated with this proceeding, particularly in relation to matters not directly related to the resolution of the substantive issues. Perhaps illustrative of the degree of perpetual contention between the parties is illustrated by the fact that I am starting to deliver this judgment at 3:36pm on the second day of what was supposed to be a consent application under s 33V of the Act.
In any event, the proceeding was commenced by the applicants on their own behalf and on behalf of group members, against Westpac Banking Corporation and Westpac Life Insurance Services Limited (Westpac Life). For convenience, I will refer to the respondents collectively as Westpac, unless specified otherwise. The group members are all persons who, on or after 21 February 2011, were: (a) given advice by what has been described in the proceeding as a “Westpac planner”; (b) obtained policies of insurance from Westpac Life by reason of that advice; and (c) are said to have suffered loss or damage by the conduct of Westpac. There is no need for me to set out the factual basis of the applicants’ specific claims; it suffices to note, for present purposes, that the claims were ones of some considerable complexity.
B THE SETTLEMENT
On 27 April 2021, the parties entered into a deed of settlement (Deed), including all the claims of the applicants and the group members. Somewhat surprisingly, notwithstanding how long ago the Deed was entered into, it is only today that all necessary material is before the Court in order to allow the application for the settlement approval to be resolved. It should be noted that this settlement was reached following a series of without prejudice discussions, which occurred after the second mediation, and prior to the hearing of an initial trial listed to commence on 10 May 2021 (with an estimate of three weeks).
On 16 July 2021, the Court commenced hearing the applicants’ interlocutory application dated 13 May 2021 seeking orders for the approval of the settlement. However, following a full day of hearing, I adjourned the application part-heard to enable the parties to consider two issues that I will address below: (1) the question of the reasonableness of the costs; and (2) the appropriate notice regime to ensure group members are aware of the settlement and to facilitate their registration to participate in the settlement, including access to and utilisation of certain lists containing contact information of group members that were previously used to send out notices in this proceeding (Group Member Lists).
Since the first day of hearing, the applicants have filed a revised minute of order, including a revised proposed settlement distribution scheme (Scheme), and three further affidavits.
I do not propose to set out in any detail the terms of the settlement. It suffices for present purposes to note the following key elements:
(1)Westpac will pay $7.5 million towards legal costs, and $1.5 million towards administration costs.
(2)Westpac will pay 50 per cent of the value of all Eligible Claims by Eligible Group Members (as those terms are defined in the Deed) (Maximum Value of Registered Claims), being persons who come forward to participate, by a date to be fixed by the Court. What is no doubt the cause of contention on the settlement approval application, is that the total amount to be paid by Westpac will not exceed $30 million. Put another way, Westpac are paying 50 cents on the dollar for the Eligible Claims of Eligible Group Members (inclusive of interest), but the aggregate of those amounts is capped at $21 million (Claims Cap).
(3)Westpac will pay the first instalment of the settlement sum of $19 million (being the $7.5 million for legal costs, the $1.5 million for administration costs, and $10 million towards Eligible Group Members’ claims) within seven days of the latter of either the expiry of the appeal period following any approval order being made, or any appeal being determined. Westpac will then proceed to “top up” that amount following a process of ascertainment of the Maximum Value of Registered Claims and, if not enough people come forward, there will be a reversion of that part of the $10 million already paid.
Accordingly, this is a somewhat unusual settlement where, if a sufficient number of group members do not come forward, there will be a reversion of part of the sum which would otherwise be payable pursuant to the settlement to Westpac.
C RELEVANT PRINCIPLES
I do not propose, yet again, to set out the principles by which the Court determines whether or not an order should be made under s 33V of the Act – this is very well-trod ground. The primary focus is whether the settlement amounts to a fair and reasonable compromise of the claims made on behalf of group members.
I will, however, touch upon one aspect, which is of particular relevance to the determination of this application. In Tasfast Air v Mobil Oil Australia Limited [2002] VSC 457, Bongiorno J said (at [4]):
The principles upon which s.33V is based might be said to be those of the protective jurisdiction of the Court, not unlike the principles which lead the Court to require compromises on behalf of infants or persons under a disability to be approved. In a group proceeding, ex hypothesi, there may be persons, in the community who can be affected by such settlement but know nothing of it …
To similar effect, the Full Court (Jacobson, Middleton and Gordon JJ) in Australian Securities and Investments Commission v Richards [2013] FCAFC 89 observed (at [8]):
The role of the Court is important and onerous: Lopez v Star World Enterprises Pty Ltd [1999] FCA 104 at [16]. It is protective. It assumes a role akin to that of a guardian, not unlike the role a Court assumes when approving infant compromises: P Dawson Nominees Pty Ltd v Brookfield Multiplex Limited (No 4) [2010] FCA 1029 at [23]; Tasfast Air Freight Pty Ltd v Mobil Oil Australia Ltd [2002] VSC 457 at [4], Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398 at 408. In the current context, the Court’s role is to protect those group members who are not represented by [the applicant’s solicitors] and whose interests may be prejudiced by their absence: Chats House Investments at 258; DarwallaMilling Co Pty Ltd (ACN 009 698 631) v F Hoffman-La Roche Ltd (No 2) (2006) 236 ALR 322 at [41].
D UNCONTROVERSIAL MATTERS
On this application, I have had the benefit of a very detailed opinion provided to the Court on a confidential basis by counsel currently appearing on behalf of the applicants, being Mr W A D Edwards and Ms M Cowden. Reflecting the complexity of this proceeding, the opinion is 139 pages in length. Although a number of those pages are directed to dealing with matters of legal principle, the opinion primarily sets out, in great detail and persuasively, the basis upon which counsel have come to the opinion that the proposed settlement embodied in the Deed, and the distribution for which the Scheme provides, does represent a fair and reasonable compromise of the claims made on behalf of group members and, further, it is a settlement that is in the interests of group members.
In forming this view, counsel are cognisant of the fact that the settlement is a lump sum settlement but with features of a process settlement, because, as explained above, the amount that Westpac is required to pay will vary depending upon how many group members come forward to participate in the settlement.
An important component of counsel’s assessment of the fairness and reasonableness of the settlement is that, at the time the settlement was struck, information presented by Westpac revealed that the theoretical maximum value of the Eligible Claims (including interest) was $76.5 million, of which Westpac would pay 50 per cent (that is, $38.25 million).
Further, it is evident that during the course of the settlement bargaining process, Westpac would not agree to a settlement calculated on the assumption that 100 per cent of Eligible Group Members would come forward. Westpac, I am satisfied, insisted upon a “cap”, and despite efforts by those acting for the applicants to negotiate otherwise, it is apparent that a settlement would not have occurred without such a cap being included. For their part, the applicants’ legal representatives, including counsel preparing the opinion, also made what might be described as “participation rate” assumptions (upon which their view of the reasonableness of the settlement depends). I will return to this matter below, but I highlight it now because this really underpins a controversial part of the settlement.
What is manifest is that the proposed settlement amount in total represents an appropriate compromise given the complexity of the case, the likelihood of the success of the applicants, and the inevitability of there being a lengthy process. Even if the applicants were successful at an initial trial, the litigation would likely be drawn out; including, no doubt, appeals to the Full Court and potentially to the High Court. I have little doubt that standing back and having regard to the proceeding generally and my assessment of the likely prospects of success, the settlement is well within the range of that which could be regarded as being fair and reasonable. Indeed, even if it is the case that the only settlement that was possible was one that came with the Claims Cap, then this does not detract from my assessment, so long as I am satisfied that the Scheme does not operate so as to undermine the fairness of the settlement by fettering group members participating effectively. I will return to this matter below.
It is then necessary to turn to the two issues of contention on the application.
E THE REASONABLENESS OF THE COSTS
On any view of it, the costs incurred in relation to this proceeding were highly significant. No doubt this was a natural consequence of the matters I have already touched upon. However, three aspects relating to costs require specific mention in this judgment:
(1)the report of the costs referee and various reductions that are to be made based upon that report;
(2)an issue relating to fees charged by counsel, being counsel other than those who appeared on the settlement approval application; and
(3)a recent increase in approval costs.
I will deal with each of these matters in turn.
E.1 Report of the Costs Referee
On 28 April 2021, I appointed Mr Roland Matters (Referee), a legal costs expert, to inquire into and report to the Court on the fairness and reasonableness of the legal costs incurred in the proceeding (Costs Referee’s Report).
As I have said above, at the commencement of the second day of the hearing, a revised Scheme was provided to the Court. Among other things, this updated the figures of a number of costs to be approved based on some preliminary views I expressed on the first day of hearing as to various items in the Costs Referee’s Report which were the subject of challenge. It is unnecessary, for the purposes of this judgment, to set out at any length the views I expressed during the course of the first day of the hearing – this is evident from the transcript. In essence, there were a number of items that were the subject of controversy. Two merit specific mention.
First, was an uplift fee of an amount of approximately $466,248.09 (including GST). The Referee in his report indicated that the uplift fee was unable to be charged in accordance with the applicable legal regime applying to such a fee, and it was not pressed on behalf of those acting for the applicants.
Secondly, there were issues relating to the amount charged with respect to the following costs: (a) costs disclosure; (b) travel; (c) the process by which items were divided, allocated and recorded; (d) multiple personnel being used for various attendances; and (e) a grab-all amount described as “pleadings and filing”. The amounts charged in respect of these categories of costs, the Referee’s proposed reduction and the current position of Shine Lawyers in relation to those amounts are set out in the following table (extracted from [41] of the affidavit of Janice Mary Saddler sworn 28 July 2021):
Category of Cost
Referee’s Reduction
Shine Lawyers Proposed Reduction following Hearing
Shine Lawyers Proposed Reduction following Hearing (including GST)
Uplift Fee*
$409,801.35
$466,248.09
$466,248.09
Costs Disclosure
$3,182.00
$3,182.00
$3,500.20
Travel
$87,557.50
$87,557.00
$96,312.70
Divided, Allocated & Recorded
$115,437.33
$115,473.33
$127,020.70
Multiple Personnel
$133,257.74
$68,548.89
$75,403.78
Pleadings & Filing
$104,719.00
$11,154.50
$12,269.95
SUBTOTAL
$853,954.92
$752,163.81
$780,755.42
As can be seen from the above, the reduction against the legal costs initially claimed on behalf of Shine Lawyers is $780,755.42 (inclusive of GST).
In relation to the reduction originally identified by the Referee in respect of the category “pleadings and filing”, I am satisfied on the basis of material provided that has been sworn by Ms Saddler that the reduction proposed by Shine Lawyers is, in all the circumstances, appropriate. Accordingly, orders will be made adopting the Costs Referee’s Report subject to the matters referred to in the above table.
E.2 Counsel’s Fees
On the first day of the hearing, it became apparent that, due to the precise terms of the reference order, the Referee’s Report understandably did not inquire into certain disbursements that had been incurred, focusing rather on the legal costs charged by the solicitors.
As a consequence, on the first day of the hearing, I had regard to the amount charged by counsel and formed the preliminary view that the costs charged by persons I described as the Relevant Disbursement Payees seemed, at least in some respects, extraordinarily large. While the vast bulk of those legal costs had already been paid by the funder, some payments remain outstanding. Accordingly, prior to making any order regarding those outstanding fees of preliminary concern, it was necessary to provide procedural fairness to the Relevant Disbursement Payees who may be affected by such an order. Mr Dick SC appeared on behalf of one of the Relevant Disbursement Payees today and adduced evidence from an expert costs assessor, Ms Elizabeth Harris, as to whether the costs charged by senior counsel had been properly incurred.
In relation to the only Relevant Disbursement Payee who sought to be heard, there was an acceptance, following the receipt of the report of Ms Harris, that the original fees should be reduced by an amount of around $70,000. Additionally, it was indicated that there is now no intention on behalf of senior counsel to charge an uplift fee. In those circumstances, given the thorough report of Ms Harris, I am satisfied that there has been appropriate scrutiny into the fees that caused me prima facie concern, and it seems to me appropriate that the Scheme be amended to reflect the concessions made by counsel.
There is no material before the Court in relation to the other Relevant Disbursement Payees, other than that they have confirmed they do not wish to be heard on the application. However, even if the amounts charged by those persons were to be reduced to the extent of senior counsel’s fees, the amount in question would be relatively minor, and the accounting complications that could arise are such that there is no utility in further steps being taken to inquire into these fees.
E.3 Approval Costs
There has been a recent increase in approval costs involving the expenditure of approximately $83,000 since the first day of the settlement approval hearing, together with an additional amount of almost $90,000 that was overlooked initially relating to postage. I am satisfied that these additional costs have been caused, in large part, by a mistake concerning a disbursement and by amounts which, at first glance, appear significant but perhaps are not out of proportion to the additional work that needed to be undertaken, given the complexity of this settlement approval application.
In all, I am satisfied that, given the combined work of both the Referee in relation to the solicitor’s fees, and the inquiry that was undertaken in relation to the balance of the disbursements initially of concern, the fees proposed to be charged can now be said to be fair and reasonable.
F NOTIFICATION TO GROUP MEMBERS
As noted above, the second major issue of controversy relates to the proposal by the applicants to put in place a regime of further notification to group members.
F.1 Notice of Proposed Settlement
As is already evident, the calculation of the Maximum Value of Registered Claims is the fulcrum on which the total amount payable upon the settlement depends and, in this regard, is central to the assessment the Court needs to make. The Maximum Value of Registered Claims is defined in the Deed to mean “50 per cent of the value of all Eligible Claims by Eligible Group Members.” The definition of an “Eligible Claim” is a claim by a “Participating Group Member” and a “Participating Group” is in turn defined as “a Group Member who comes forward to participate in the Settlement by a date to be fixed by the Court”.
The first point that needs to be made is that it is clearly fair and reasonable to only distribute parts of the settlement sum to those group members with Eligible Claims who have taken a step to register and participate in the settlement. It has become a common feature of settlements that in order to allow distributions in open class proceedings to occur, it is necessary that there be a “drop-dead” date by which people seeking to participate in a settlement bring forward sufficient details of their claim to allow an administrator to distribute the settlement. Put simply, the whole process of settling a case such as this cannot work, unless there is certainty by some date as to those that will participate in a settlement. Finality, as with all aspects of litigation, is critical.
However, the notion of a drop-dead date must be tempered with ensuring that there has been a proper and meaningful opportunity given to group members to register to participate in a settlement. In an attempt to secure this end, on 17 May 2021, I approved and ordered a notice of proposed settlement to be sent to the potential group members to inform them of the requirement to register (Notice). The Notice was settled by me in circumstances where I had in mind the observations I made in an earlier interlocutory judgment in this proceeding: Lenthall v Westpac Banking Corporation (No 2) [2020] FCA 423; (2020) 144 ACSR 573. There, I said the following in relation to the way in which information is communicated to group members (at 586–8 [45]–[50]):
45… [Cases], such as this case, involve very significant classes (in this case, 88,000), and it is inevitable there will be persons within the class who are unsophisticated in financial and legal matters, including those who may have either literacy problems, or at least have some difficulty in taking in complex information in written form. Given the protective role of the Court, it is important to bear in mind that those with low levels of literacy are more prone to disadvantage and are more vulnerable in their interactions with the legal system: for example, see the discussion of the impact of low levels of literacy on access to justice outcomes in rural, regional and remote communities in Law Council of Australia, The Justice Project Final Report – Part 1: Rural, Regional and Remote Australians (August 2018) p 23. Although not the subject of evidence on the application, it is not unduly stretching the bounds of s 144(1) of the Evidence Act 1995 (Cth) to remark that it is not reasonably open to question that advanced Western societies have reached a stage where significant parts of the community, and, in particular, younger members of the community, more readily digest information conveyed to them in an audio-visual rather than written form.
46Connected to this phenomenon, a number of studies in the United States have suggested that both the quantity and quality of adult reading abilities are in decline: see, for example, Alice Horning, “Reading, Writing and Digitizing: A Meta-Analysis of Reading Research”, (2010) 10(2) Reading Matrix 243. Further, although there is scant readily accessible recent data, according to a 2012 report of the OECD, some 12.6% of Australian adults attained only Level 1 (of 5) or below in literacy proficiency. At that level of literacy, adults can read brief texts on familiar topics and locate a single piece of specific information identical in form to information in the question or directive, but otherwise experience difficulty: Organisation for Economic Cooperation and Development, Australia - Country Note: Survey of Adult Skills First Results (OECD, 2012) at 3. An Australian Bureau of Statistics commentary of that OECD Survey noted that:
[a]round 3.7% (620,000) of Australians aged 15 to 74 years had literacy skills at Below Level 1, a further 10% (1.7 million) at Level 1, 30% (5.0 million) at Level 2, 38% (6.3 million) at Level 3, 14% (2.4 million) at Level 4, and 1.2% (200,000) at Level 5.
Australian Bureau of Statistics, 4228.0 - Programme for the International Assessment of Adult Competencies, Australia, 2011-12 (
47It seems to me quite obvious that in large scale consumer class actions, the Court is communicating to a number of people who are within cohorts who have attained only basic levels of literacy.
48The concept of “readability” has spawned various tests which have been used to measure the readability of certain texts, providing quantitative estimates of the style difficulty of different writing examples. “Readability” has been variously defined, but in essence consists of three aspects: “comprehension, fluency (reading speed), and interest”: see Grant Richardson and David Smith, “The Readability of Australia's Goods and Services Tax Legislation: An Empirical Investigation”, (2002) 30(3) Federal Law Review 475 at 478. If information must be conveyed in writing, there is a need to adopt a form of language, structure and design, which maximises the chance of all the intended audience readily understanding the information sought to be communicated.
49Leaving aside the adoption of plain language, I consider the time has come for those proposing notices to consider new modes of communicating complex information. This need will only become more acute as we progress (if that is the right word) further into the age of social media.
50Put more directly, it is simply complacent to continue to make the assumption that sending complex information in written form is the best way of communicating information to group members in some types of class actions, and consideration should be given as to whether supplementary or substitute modes of conveying information should be adopted.
For my part, the comments that I made in Lenthall (No 2) reflect the accumulated experience of the Court in communicating to group members, particularly in consumer class actions. But my concerns are not simply confined to a case such as the present. There are a number of circumstances in which the Court is required to apprise third parties of information, often complex information. In the past, at least in my view, reflecting the legislative choice that the position of group members in an opt-out regime is sufficiently addressed by a notification process (as contemplated in the Australian Law Reform Commission Report, Grouped Proceedings in the Federal Court (Report No 46, 1988)), this Court has been content to proceed on the assumption that information is effectively conveyed by notices of the type that have commonly been sent out, including in the form of the draft opt-out notice which forms part of the Class Actions Practice Note (CPN-CA).
I do not think these assumptions are particularly well-grounded. This was the point I was seeking to make in Lenthall (No 2). The problem of conveying complex information in writing will only increase as we become a society where a dominant mode of communication is increasingly visual and important messages, including from government agencies, are often transmitted by pithy social media messages. Looking back on the Notice in this case, it is fair to say, that at over seven and a half pages, it is a lengthy and somewhat complex document. The key messages are emphasised by the use of bolding and adopting simple language, and the Notice does provide sufficient information about the different choices open to group members. It was required to convey a large amount of information in the simplest form possible and although I do not think the process miscarried, this does not mean the Court could not do better. Rereading the Notice now, I am content that it sufficiently performed its function, but I can now think of ways I would simplify it further.
It is in this context, that I have some concerns as to whether the Notice effectively communicated the information concerning registration to group members. The primary source of my concern is that notwithstanding the terms of the Notice – which indicated that it was in the interests of those claiming compensation to register – only 13,000 group members have come forward. Although at first glance 13,000 group members may appear to be a large figure, the Notice was sent out to over 100,000 people who could conceivably be group members.
Given the terms of the group membership in this case, it is difficult, indeed impossible, on this application, to form any precise view as to the extent of group membership. It is apparent that there is reason to think that 18,000 or so of the recipients of earlier notices are unlikely to have Eligible Claims. So the question arises, if one was to proceed on the basis of a group membership which may be as many as 88,000 (or a lower, but nevertheless substantial number of persons), why did they not come forward to register when it might be thought that it was objectively in their commercial interests to do so?
In this regard, Mr Leopold SC, counsel appearing on behalf of Westpac stressed on a number of occasions that the Court should not engage in any speculation about what was described as the “evidentiary gap” in explaining why it is that only 13,000 people have registered. Mr Leopold disputed whether the numerator of 13,000 could be regarded as “alarmingly low” without there being some precision in the denominator, and pointed to the lack of any specific evidence based on samples or otherwise which would establish that the figure of 13,000 should be a source of concern. Further, Mr Leopold pointed to the fact that, even assuming that the figure could be regarded as very low, this could be the result of “ordinary human lethargy” or otherwise caused by something other than the fact that the information had not been effectively communicated to group members. Particular emphasis was placed on the terms of the Notice, which did make it clear, for example (at [22]):
… It is in your interest to register, because if you do not then you will not have the opportunity to recover any money from Westpac if you do have an eligible claim.
(Emphasis in original).
Westpac also made the point that, in any event, there was a lack of utility in any further communication being provided to the potential group members. Emphasis was placed on the notion that any protective and supervisory role of the Court goes no further than ensuring that all group members are treated fairly (including having a fair opportunity to participate in any settlement). It is not part of the Court’s role, it was said, to give its imprimatur to communications to group members which have the purpose of, in effect, persuading them to participate in the settlement.
In this regard, reliance was placed on the comments of Wigney J in Muswellbrook Shire Council v Royal Bank of Scotland NV [2017] FCA 414, being a case where notices that had been approved by the Court and sent to the group members included clear and concise information concerning their rights and options. His Honour stressed (at [43]):
A stage must be reached in any representative proceedings where fairness does not require the sending of further notices to group members who have clearly manifested an intention not to participate in any way, or at any time, in the proceedings …
In short, the position of Westpac is that this stage has already been reached in this proceeding; the Court has, without the need for further notices, already sufficiently fulfilled its supervisory and protective role in respect of group members, who have been fairly informed of the existence of the proceeding and their right to participate in the settlement. Indeed, it was said that: (1) in the circumstances of this case there is no power to approve further notices because to do so would be extraneous to the statutory purpose, in that it would have the effect of, essentially, persuading group members to participate in the settlement; and (2) in any event, the provision of a further notice would be an inappropriate exercise of discretion.
I will deal with each of these submissions in turn.
First, as to the issue of power, it is trite to recall that the Court’s statutory role is to determine whether the settlement is fair and reasonable. As I have already indicated, both on the previous occasion and today, part of my assessment as to whether or not the settlement is fair and reasonable is reaching a level of satisfaction, in circumstances where there is a Claims Cap, that group members have been fairly and properly apprised of their ability to participate in the settlement. Accordingly, the issuance of further notices appears to fall clearly within the power of the Court in approving a settlement under s 33V(1) of the Act. Even if I am wrong in relation to this, s 33X(5) of the Act provides an extremely wide power for the Court to order notices to be issued at any stage of a proceeding if it is considered to be appropriate for such notices to be issued. All of these powers exist, even without recourse to s 33ZF of the Act (which has been the source of some controversy in this proceeding), which itself provides a power for the Court to make any order it regards as appropriate or necessary to ensure that justice is done in the proceeding.
Secondly, the real question is whether or not it is an appropriate exercise of discretion to order further notices to be sent in the circumstances. The points made by Westpac, although no doubt motivated by self-interest, are not to be dismissed on that basis alone. It is correct, as Westpac submits, that previous notices have at least attempted to be clear and concise in apprising the group members of their rights and options, and that the last Notice, which was deliberately formulated in terms as clear as possible, did not come out of the blue as far as group members were concerned.
Notwithstanding this, the protective and supervisory role of the Court in representative proceedings is one of great importance. I do not accept that it is not open to the Court to conclude, based on what has occurred in this case, that the current participation rate is much lower than one would expect in circumstances where the group members are being told, in effect, that if they register and they are Eligible Group Members, they will be able to recover compensation. As anyone experienced in Pt IVA proceedings knows, there will always be counterintuitive responses to notices from time to time, and this seems to me to fall into that category of case, given only 13,000 group members have registered.
It may be, as Mr Leopold put it so pithily, that the registration numbers are a result of people being lethargic; or perhaps some people may be sufficiently distrustful of class actions that they do not wish to participate on any basis. Having said that, it is appropriate for the Court to take a conservative approach that reflects its protective role. This conservative approach requires the Court to be assured that group members have made an informed decision after having the relevant information communicated to them in the simplest possible way.
Accordingly, it is an appropriate exercise of discretion to order that further notification be made to group members in the most effective and simplest form practicable.
F.2 Access to the Group Member Lists
Having found that it is an appropriate exercise of the Court’s discretion to order a further notice to be sent to group members, the next issue of controversy concerns access to and utilisation of the Group Member Lists previously used to send out notices in this proceeding.
The previous notices in this case have been sent to group members via a third-party provider. In part, this was a pragmatic approach that I adopted in circumstances where, in a case already characterised by interlocutory disputation, there was a foreshadowed dispute about whether it would be appropriate to provide information concerning the identity of group members to the solicitors acting for the applicants. It seemed to me that, provided I could be satisfied that the costs associated with sending out the notices were the same, it was convenient for that task to be undertaken by a third-party provider.
However, the circumstances that warranted notices being distributed by a third-party provider are very different from the present situation, where the Court proposes to appoint an administrator to distribute an approved settlement. The role of the administrator of the Scheme is an important one, as the administrator is acting as an officer of the Court in order to discharge an important function for the benefit of group members. Accordingly, provided I am satisfied there is no real prejudice to Westpac or third parties, the appropriate course is that the administrator should be responsible for any further communication to the potential group members and, afterwards, to group members who have registered and are entitled to take part in the settlement.
While one may have thought that by now natural forces would have spawned an efficient market of professional settlement administrators undertaking the administration role at competitive rates, the fact is that such a market has not developed in Australia. Hence, the Court is constantly left with the fall back, like in this case, of appointing the solicitors for the applicant(s), here Shine Lawyers, to act in the role of administrator.
There are two aspects to Westpac’s opposition to the Group Member Lists being provided to the administrator. The first is that there is insufficient evidence about the various security measures that the administrator has in place. This, it was said, coupled with the fact that there is a growing risk of cyberattacks on law firms, should give the Court real pause in providing information that Westpac is the custodian of on behalf of its customers, to an entity such as a law firm that does not have in place rigorous security and confidentiality protocols. The second point is that the information that will be provided – mobile telephone numbers, email addresses, and personal information – is information provided to Westpac by its customers in circumstances where Westpac is under an obligation to deal with that information in a confidential way. No doubt there would have been a legitimate expectation on behalf of the customer that any material provided to Westpac would be dealt with in accordance with privacy obligations attending to the use and dissemination of that material.
Finally, it should be noted that although there was some initial suggestion by the applicants that a third-party provider could be marginally more expensive than the administrators in sending out the notices, the issue of costs does not play a part in determining the course that the Court should take in circumstances where Westpac, no doubt conscious of its obligation to do all it can to protect the information of its customers, agreed to cover any additional costs in relation to the retention of the third-party provider.
In circumstances where the administrator has obligations to administer the Scheme in accordance with the orders of the Court, it seems to me appropriate that the administrator should have access to the Group Member Lists and be the one charged with the responsibility of contacting group members.
Having said this, I was not prepared to agree to the initial regime proposed by the applicants that the administrator be given, in effect, carte blanche authority to determine what communications should be sent to group members. There is a line to be drawn between doing everything that is necessary in order to give comfort to the Court that group members have been properly informed as to their rights, and doing that which would result in group members being harassed or importuned by serial communications. No doubt, where that line is drawn may be somewhat difficult to ascertain.
In the end, it is necessary for the Court to keep control over what precisely is being communicated to group members during the course of the administration process. Accordingly, any general communications made to potential group members, either prior to registration, or sent generally to group members through the course of the eligibility process, should be ones that are approved by the Court. Further, the circumstances of this settlement are that Westpac has made no admissions concerning liability, and has agreed to the settlement in circumstances where it maintains that the applicants’ case is misconceived. Accordingly, it seems to me that Westpac has a legitimate interest in information not being allowed to be sent by an officer of the Court in circumstances where it may have some reputational impact upon Westpac.
It should also be noted that the Group Member Lists are to be provided to the administrators in circumstances whether they are being provided pursuant to a compulsory production order. Hence the Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 obligation of confidence attaches to the Group Member Lists. Given that the Group Member Lists contain information provided to Westpac by a third party, the implied obligation of confidence should be accompanied and supplemented by some express undertaking about the future use of the information. Further, it should also be acknowledged that the information provided be destroyed at the conclusion of the administration process, and there be some confirmation to both the Court and Westpac, by way of an affidavit filed by the administrator, that destruction has occurred.
Finally, the draft orders anticipate post-approval settlement notices being sent by email, or by letter if an email address is unavailable, together with an SMS message. Indeed, in this case the evidence establishes that Westpac has an amount of over 70,000 mobile telephone numbers of group members. In my view an SMS message being sent to group members would ameliorate concerns I have about the form of communication, as this will likely operate as an effective mode of conveying to group members the need to register to receive any compensation to which they may be entitled. Having said this, as Westpac has correctly noted, if an SMS message is to be sent, it should make clear that the recipient is not simply registering for compensation, but rather that they are registering in order to ascertain whether they are eligible for compensation.
G ORDERS
I have been provided with some detailed short minutes of order relating to the proposed notification. The Scheme and orders that the applicants seek will need to be further amended in order to reflect my reasons, particularly relating to the issue as to costs, and also to provide for the additional protections I have indicated concerning the use of confidential information.
I note that the orders that accompany these revised reasons are those that were ultimately entered.
I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee. Associate:
Dated: 23 August 2021
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