Perera v GetSwift Ltd
[2018] FCA 732
•23 May 2018
FEDERAL COURT OF AUSTRALIA
Perera v GetSwift Limited [2018] FCA 732
File numbers: NSD 226 of 2018
NSD 440 of 2018
NSD 580 of 2018Judge: LEE J Date of judgment: 23 May 2018 Catchwords: REPRESENTATIVE PROCEEDINGS – three overlapping open securities class actions against the same respondent – consideration of circumstances which have led to the rise of competing securities class actions – consideration of remedial response to competing class actions in Australia and North America – identification of multiple factors relevant to response – substantially the same claims and substantially the same causes of action – consideration of proposed common fund order and advantages of a funding model linking risk and return to funders by reference to costs incurred – comparative analysis of proceedings including proposals for reducing legal costs and likely return to group members – whether a continuation of duplicative proceedings would amount to an abuse of process – whether equity should intervene to enjoin parties to prevent multiplicity of proceedings – whether a “declassing” order should be made under s 33N(1) or s 33ZF of the Federal Court of Australia Act 1976 (Cth) – application for a permanent stay of two of the proceedings allowed – orders facilitating stay of two proceedings and continuation of one open class proceeding
EQUITY – equitable remedies to control multiple proceedings before the Court and protecting the processes of the Court – bills of peace
Legislation: Acts Interpretation Act 1901 (Cth), s 15AA
Civil Dispute Resolution Act 2011 (Cth)
Corporations Act 2001 (Cth), Pt 9.6A, s 1041E
Federal Court of Australia Act 1976 (Cth), Pt IVA, ss 5(2), 22, 23, 33A, 33C, 33C(1), 33D, 33H, 33J, 33L, 33N(1), 33N(1)(a), 33N(1)(b), 33N(1)(c), 33N(1)(d), 33Q, 33R, 33S, 33T, 33V, 33X, 33Z, 33Y, 33ZB, 33ZF, 33ZF(1), 37M(3), 37P(2)
Federal Court Rules 2011, r 1.32
28 USC § 1407 (2012) (US)
All Writs Act 28 USC § 1651 (2012) (US)
Anti-Injunction Act 28 USC § 2283 (2012) (US)
Federal Rules of Civil Procedure, r 23
Private Securities Litigation Reform Act of 1995, Pub L No 104-67, 109 Stat 737 (US)
Securities Litigation Uniform Standards Act of 1998, Pub L No 105-353, 112 Stat 3227 (US)
Supreme Court of Judicature Act 1873 (UK)
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Date of hearing: 11, 13, 24, 27 April, 7 May 2018 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 380 Counsel for the Applicant in NSD226/2018: Mr WAD Edwards (11, 13, 24, 27 April 2018)
Ms A Banton of Squire Patton Boggs (7 May 2018)Solicitor for the Applicant in NSD226/2018: Squire Patton Boggs Counsel for the Applicant in NSD440/2018: Mr P Brereton SC and Dr B Kremer (13 April 2018)
Dr B Kremer (11, 24, 27 April 2018, 7 May 2018)Solicitor for the Applicant in NSD440/2018: Corrs Chambers Westgarth Counsel for the Applicant in NSD580/2018: Mr D Collins QC and Dr O Bigos (11, 13, 24 April 2018)
Mr T Finney of Phi Finney McDonald (27 April 2018)
Mr D Collins QC (7 May 2018)Solicitor for the Applicant in NSD580/2018: Phi Finney McDonald Counsel for the Respondents in all proceedings: Mr A Shearer (11, 13, 24 April 2018)
Ms M Fox of Quinn Emanuel Urquhart Sullivan (27 April, 7 May 2018)Solicitor for the Respondents in all proceedings: Quinn Emanuel Urquhart Sullivan
Table of Corrections 25 May 2018 At paragraph [99], the heading “D.2.1 Stays & Abuse of Process” has been removed. 14 June 2018 At paragraph [255], the word “not” has been inserted between the words “were” and “identified”. ORDERS
NSD 226 of 2018 BETWEEN: DWAYNE CAVAN SHANAHAN PERERA
Applicant
AND: GETSWIFT LTD
First Respondent
JOEL MACDONALD
Second Respondent
JUDGE:
LEE J
DATE OF ORDER:
23 May 2018
THE COURT ORDERS THAT:
1.This proceeding be permanently stayed.
2.For the avoidance of doubt, the permanent stay of this proceeding does not prevent the applicant making and moving upon any application as a group member in proceedings NSD 580 of 2018 pursuant to s 33T of the Federal Court of Australia Act 1976 (Cth) where he contends that Mr Webb, the applicant in that proceeding, is not able adequately to represent the interests of the group members in that proceeding including, without limitation, in circumstances where Mr Webb has failed to comply with any order relating to security for costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 440 of 2018 BETWEEN: SHAUN MCTAGGART
First Applicant
SAMANTHA MCTAGGART
Second ApplicantAND: GETSWIFT LTD
First Respondent
JOEL MACDONALD
Second Respondent
BANE HUNTER
Third Respondent
JUDGE:
LEE J
DATE OF ORDER:
23 may 2018
THE COURT ORDERS THAT:
1.This proceeding be permanently stayed.
2.For the avoidance of doubt, the permanent stay of this proceeding does not prevent the applicants making and moving upon any application as group members in proceedings NSD 580 of 2018 pursuant to s 33T of the Federal Court of Australia Act 1976 (Cth) where they contend that Mr Webb, the applicant in that proceeding, is not able adequately to represent the interests of the group members in that proceeding including, without limitation, in circumstances where Mr Webb has failed to comply with any order relating to security for costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 580 of 2018 BETWEEN: RAFFAELE WEBB
Applicant
AND: GETSWIFT LTD
First Respondent
JOEL MACDONALD
Second Respondent
JUDGE:
LEE J
DATE OF ORDER:
23 MAY 2018
THE COURT ORDERS THAT:
1.The applicant file and serve a statement of claim on or by 4:00 pm on 28 May 2018.
2.The respondents file and serve a defence to the statement of claim on or by 4:00 pm on 6 June 2018.
3.On or by 2:00 pm on 7 June 2018, the applicants serve on the respondent and the solicitor for Mr Perera and the solicitor for the McTaggart applicants a copy of a proposed opt out notice and provide a copy to the Associate to Justice Lee.
4.On or by 2:00 pm on 7 June 2018, the applicants serve on the respondent a copy of a draft common fund order and provide a copy to the Associate to Justice Lee.
5.The matter be listed for a case management hearing at 9:00 am on 8 June 2018, for the purpose, among other things, of making orders in relation to the form and distribution of the opt out notice and that Mr Perera and the McTaggart applicants, International Litigation Partners No 18 Pte Ltd and Vannin Capital Ltd have leave to intervene, if they so wish, at the case management hearing for the purposes of making submissions as to the form of the opt out notice.
6.Leave be granted to the applicants to issue a subpoena to ComputerShare Investor Services Pty Ltd in substantially the same form as comprises Annexure “A” to the interlocutory application filed in NSD 226 of 2018 dated 9 March 2018.
7.Costs of the proceedings to date be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
LEE J:
A Introduction
[1]
B Contextual Matters
[10]
B.1 The Competing Securities Class Action Emerges
[10]
B.2 The Procedural Contradiction of Securities Class Actions
[30]
C The Factual & Procedural History of the Matter
[38]
C.1 Pre-Proceeding Background
[38]
C.2 The Competing Actions Emerge and the Court Orders
[44]
C.3 The Conduct of the Hearing and Summary of the Proposals
[63]
C.3.1 Mr Perera
[65]
C.3.2 McTaggart Applicants
[69]
C.3.3 Mr Webb
[72]
C.3.4 GetSwift
[74]
C.4 Group Definition and Overlap – A Logical Difficulty
[76]
D Remedial Response to Competing Class Actions: A Survey
[83]
D.1 The Australian Experience
[83]
D.2 The North American Experience
[95]
E Remedial Responses: Power & Applicable Principles
[105]
E.1 Identifying the Available Responses
[105]
E.2 Questions of Power & Applicable Principles
[109]
E.2.1 Permanent Stays
[109]
E.2.2 Declassing
[125]
E.2.3 Equitable Jurisdiction
[145]
E.3 Conclusions as to Questions of Power
[166]
F Factors Other Than Possible Comparative Net Returns
[168]
F.1 Introduction & Relevant Factors Relied Upon
[168]
F.2 Experience of Legal Practitioners
[172]
F.3 Available Legal Resources
[173]
F.4 State of Preparation
[174]
F.5 Funding Resources Available Including Security
[176]
F.5.1 The Funders’ Financial Position Generally
[177]
F.5.2 The Proposals for Security
[185]
F.6 Substantive Merits of Proceedings Generally
[199]
F.7 Substantive Merits of the Individual Cases of the Applicants
[206]
F.8 The Existence of Funding Agreements
[210]
F.9 The Number of Funded Group Members
[216]
F.10 Moral Hazard and Absence of Deadlock Provision
[218]
F.11 Estimated Cost
[225]
F.12 Measures for Controlling Legal Costs
[226]
F.13 Measures to Control Expert Costs
[231]
F.14 The Webb Proceeding and Public Policy
[235]
F.15 Prejudice to Third Parties
[240]
G Should a Common Fund Order be made?
[242]
G.1 Introduction
[242]
G.2 The Timing of Common Fund Order
[244]
G.3 An Order is Appropriate
[247]
H Comparative Estimates of Likely Returns to the Group
[250]
H.1 The Comparative Analysis – the Approach Taken
[250]
H.1.1 Assumptions in Orders
[251]
H.1.2 Differences Between Funding Proposals and Other Costs
[253]
H.2 Miscellaneous Contentions as to Comparative Financial Analysis
[258]
H.2.1 Mr Perera’s Fundamental Objection to the Process Adopted
[260]
H.2.2 Mr Perera’s more Specific Objection as to Contingencies
[264]
H.2.3 The McTaggart Applicants’ Objections as to ATE Costs in the Webb Proceeding
[265]
H.2.4 The McTaggart Applicants’ Submissions as to Webb “book build” Costs
[276]
H.2.5 Varying Costs as to Interlocutory Applications
[277]
H.2.6 The Evidence in Relation to the Late Mediation and Evidence in Reply
[279]
H.3 The Need for Common Assumptions
[280]
H.4 The Funding Models Generally
[283]
H.5 The Results of the Comparison: MFI B
[295]
I Summary of Findings
[305]
J An Assessment Of What Should Be Done
[325]
J.1 The Need for a Multifactorial Approach
[325]
J.2 Conclusions on the Comparative Multifactorial Assessment
[328]
K Orders as to the Other Proceedings
[331]
K.1 Permanent Stay the Appropriate Remedy
[331]
K.2 Alternative Relief
[350]
K.2.1 Equitable Relief
[350]
K.2.2 Declassing
[351]
K.3 The ‘Remedy’ of s 33T and Case Management Powers
[356]
K.4 Opt Out, Funding Agreements & Intervention
[362]
L Arbitraging Procedure, A Potential Issue
[371]
M Conclusion & Orders
[377]
A INTRODUCTION
The controversy between the first respondent (GetSwift) and persons who acquired an interest in its listed securities presents for consideration a problem of signal importance relating to the conduct in this Court of Part IVA representative proceedings: the Court’s response to the phenomenon of competing securities class actions.
In this matter (to use that word in its constitutional sense), three open class actions have been brought at the instigation of three different firms of solicitors, each with the support of different litigation funders: NSD 226 of 2018 (Perera Proceeding), NSD 440 of 2018 (McTaggart Proceeding) and NSD 580 of 2018 (Webb Proceeding).
It is beyond the scope of these reasons to conduct an economic analysis of litigation funding and to deal, in any exhaustive way, with how the commercial opportunities presented to funders, and to solicitors with commercial relationships with funders, intersect with the role of the Court as an arm of government and the roles of solicitors as fiduciaries and officers of the Court in the administration of justice – these are very large and complex topics. What requires present attention is how the Court deals with competing commercial enterprises which seek to use the processes of the Court to make money and the role of the Court in ensuring the use of those processes for their proper purpose and informed by considerations including: (a) the statutory mandate (s 37M(3) of the Federal Court of Australia Act 1976 (Cth) (Act)) to facilitate the just resolution of disputed claims according to law and as quickly, inexpensively and efficiently as possible; and (b) the furtherance of the Court’s supervisory and protective role in relation to group members.
I will make orders ensuring that only one of the three current open class actions continues. This result, and the ancillary orders facilitating that result, ensures protection of the Court’s processes and gives effect to the considerations to which I have just referred.
Regrettably, these reasons are lengthy because of a perceived need to explain the background as to how the issue of multiplicity of competing class actions has arisen, deal with complex and contested issues as to power deal and then, following a comparative analysis, to make a determination as to an appropriate remedial response. At the outset, however, I wish to emphasise three things.
First, as I will explain, other occasions of competing class actions have led to different procedural outcomes (and may well do so in the future); this is, after all, a case management decision rooted in the particular circumstances of the cases subject to case management. Here, the issue has emerged very early, the cases proposed to be advanced are substantially the same, and all interested parties are agreed that grasping the nettle now makes sense (although each of the representative applicants, unsurprisingly, differs as to the particular remedial response for which they advocate). This may not be the case in subsequent cases where apparently competing actions may raise different common issues for consideration, or span different time periods, or advance conflicting case theories (that is, bona fide and not as a stratagem to distinguish one case from another). In some cases there may be a sound reason to think the various promotors of the class action may, without undue delay, come to a consensus as to how the issue of competing claims is resolved which is acceptable to the Court. Each instance of competing class actions needs to be managed by reference to the bespoke circumstances before the Court. Having said this, although this case management decision is focussed on the particular circumstances, for reasons I will explain, the issues with which I am confronted reflect themes which now increasingly recur in what has emerged as the usual form of securities class actions.
Secondly, the comparative assessment undertaken below is a multifactorial one reflecting the considerations identified by the parties and also the accumulated experience of how analogous multiplicity issues have been handled by courts in Australia, and also how North American courts have dealt with competing class actions, albeit in the different context of certification. It should be stressed that any principled assessment between class actions is not so crude so as to be determined by reference only to the relative size of the funding commission spruiked in promotional material. It is inconsistent with the principled exercise of judicial power, and also unedifying, for the Court to be perceived as akin to a metaphorical auctioneer going around the room adopting the curial equivalent of entreating: “Are we all done? It’s now going to go under the hammer!” The Court’s role is to quell controversies in accordance with Chapter III of the Constitution and, in doing so, ensure its processes are used for the purposes for which they were designed. To the extent a determination is required as to which open class securities class action goes forward, the weight to be given to a particular relevant consideration, including ‘headline’ commission rates of funders, will necessarily vary depending on the particular circumstances.
Thirdly, much of what follows has, as its point of departure, the expectation that this dispute will resolve in the same way as all other securities class actions have done to date: by way of a paction sanctioned by the Court. I have not yet seen a defence, let alone evidence. Ratiocinations premised on this settlement assumption are based on nothing more than empirical evidence as to what is likely, and must not be seen as an indication that this matter is one GetSwift should or will necessarily settle; nor that any settlement will involve the payment of substantial compensation to group members. Moreover, as will be seen, this judgment involves reference to modelling done by reference to various damages scenarios. It should be obvious, but is worth emphasising, that these scenarios have been chosen to reflect various hypotheses based on ranges of damages suggested by the applicants’ solicitors (including estimates which have been disavowed as not reflecting the reality of a particularised claim). Modelling needs inputs and, in the absence of any evidence, nothing should be made of the figures chosen which, at least in part, simply reflect past experience of cases of this sort.
I will return to the first two of these matters below, but part of working out how to manage and resolve a perceived problem, is appreciating why it exists. With this in mind, it is useful to start with asking the question: how did we get here? Or, put more particularly, how did the phenomenon of competing securities class actions arise?
B CONTEXTUAL MATTERS
B.1 The Competing Securities Class Action Emerges
The first Australian securities class action which bears all the essential characteristics of the genus was the Aristocrat class action (NSD 362 of 2004 Dorajay Pty Ltd v Aristocrat Leisure Ltd). As an illustration of how things have changed, and how the possibility of civil liability to investors for a breach of continuous disclosure obligations has seeped into the legal consciousness, it is well to remember the circumstances that gave rise to that litigation. A senior executive of Aristocrat had brought an action for wrongful dismissal. In the defence, Aristocrat, a listed company, contended that it was entitled to dismiss the executive for a number of reasons, including the fact that he had been responsible for failing to disclose material information to the market of investors in Aristocrat shares. The notion of a listed entity defending a legal proceeding by impliedly admitting that its investors may have been misled is something which seems from another age, and yet it is less than a generation ago.
The post-Aristocrat securities class action not only has a common form, but often has a familiar genesis and development. A significant drop in the value of securities is scrutinised to determine whether it is likely that the relevant drop had been occasioned by the late revelation of material information. Premised on assumptions that: (a) the value of the relevant security reflects the expected discounted value of future cash flows to the security holders; and (b) that the security operates in an efficient market, the information released prior to the price-drop is reviewed to ascertain whether it was likely to have caused the market to alter its expectation of future cash flows (hence causing a repricing of the security to reflect these altered expectations). Analysis takes place as to whether there is a sufficient basis for assuming the existence of contravening conduct during a period anterior to the revelation (this will usually involve close consideration of any relevant disclosures and available analyst reports). Further analysis is undertaken as to the size of the potential loss that may be related to the suspected contravening conduct over an identified period (the duration of which is identified by the preceding analysis).
Following this, if all the relevant boxes are ticked, the bugle is sounded. Funding terms are discussed and (at least prior to the advent of common funds orders) there is a concerted effort to sign up institutional and other group members. At some time during this developmental stage, an announcement might be made of a potential class action, garnering media attention which may augment the number of affected shareholders who may wish to participate actively in the proposed class action, but also may precipitate a further decline in the price of the securities.
Of course, some actions may have different origins, such as an approach by a ‘whistle-blower’ or revelations through public inquiries, and the time needed for the analysis may vary considerably, but to anyone who has been involved actively in securities class actions since their advent, the pattern described above is familiar.
I hasten to add that by identifying a commonplace pattern, I do not suggest that the development of the usual form of securities class actions should be looked upon askance. To the contrary, an informed observer would likely recognise that a consequence of these developments has been a heightened awareness among corporations, through their officers, of their obligations to act in such a way as to avoid continuous disclosure breaches and contravention of the norms prohibiting misleading and deceptive conduct. This is not the place to debate the social utility of securities class actions; this would involve a range of considerations which raise complex and collateral assessments (such as, for example, its impact on the price of D&O and ‘Side C’ liability cover), but despite what some would describe as their ‘commercialisation’ and concerns which may arise concerning a premature announcement of a proposed class action that never proceeds, it can be argued cogently that they have served, and continue to serve, a role in not only providing for significant amounts to be paid to investors for claimed losses occasioned by allegations of corporate malefaction (that would, absent securities class actions, never have been paid), but they also have occasioned a private regulatory discipline on the conduct of listed companies and their dealings with the market of investors in their securities.
The securities class action has also been important as the vehicle driving the procedural development of Part IVA of the Act. One of these developments is of direct relevance to the present issue. It can be traced back to Aristocrat, where the primary judge, in an interlocutory hearing, took the view that a closed class (which included a criterion restricting composition of the group to those who had retained the solicitors for the applicant) was inappropriate because closed classes had the effect that “the clear legislative intention [of Part IVA] is subverted”: see Dorajay Pty Ltd v Aristocrat Leisure Ltd [2005] FCA 1483; (2005) 147 FCR 394 at 433 [135] per Stone J. That decision was followed shortly thereafter: see Rod Investments (Vic) Pty Ltd v Clark [2005] VSC 449 (Hansen J)) and Jameson v Professional Investment Services Pty Ltd [2007] NSWSC 1437; (2007) 215 FLR 377 (Young CJ in Eq). The heterodoxy that a class defined by reference to a funding or similar criterion was invalid was, however, eventually exposed in Multiplex Funds Management Ltd v P Dawson Nominees Pty Ltd [2007] FCAFC 200; (2007) 164 FCR 275 (French, Lindgren and Jacobson JJ), in essence because of the text of a critical provision within Part IVA, s 33C, which expressly provided that a proceeding could be commenced by only some of the persons who had claims against a respondent.
This was a boon to litigation funders. It meant that a class could be constructed of persons who had signed funding agreements with an individual funder, thus eliminating the difficulty of so-called ‘free riders’, that is, persons who had not signed funding agreements but who would be part of any open class. However, like a ‘Whac-A-Mole’ game, where one mole is whacked by a mallet but another pops up, a further problem then emerged – if closed classes were allowed, how did a respondent obtain certainty against additional claims by settling only a closed class? A further procedural expedient resulted: allowing the ‘opening up’ and then ‘closing down’ of a class – this allowed certainty to be delivered to a respondent in settling what had originally been commenced as closed class proceedings (although this, in turn created its own controversies, which now appear to be largely resolved: see Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [2017] FCAFC 98; (2017) 252 FCR 1 at 20-22 [70]-[76] per Jagot, Yates and Murphy JJ).
But how should these arrangements, pursuant to which these funded proceedings were brought, be characterised? The superficial answer was simply as a means by which a proceeding governed by Part IVA of the Act could be conducted to the benefit of group members, the funder and the solicitors. A more complex answer was provided by the Full Court in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147; (2009) 180 FCR 11, where the majority (Sundberg and Dowsett JJ) found that the bilateral (or, with the solicitors, trilateral) arrangements pursuant to which these funded class actions were conducted were unregistered managed investment schemes for the purposes of the Corporations Act 2001 (Cth). A majority of the Full Court held that the class action (or, more particularly, the scheme constituted by the agreements which allowed the class action to be funded and maintained) had the following characteristics: (a) the promises given by the group members and the funder were ‘money’s worth’ contributed for the purposes of the litigation funding arrangement made in return for their acquiring rights to share in any judgment sum, and the benefit of the funder’s promises to meet legal costs; (b) the opportunity to prosecute a claim, with virtually no exposure to any costs or outgoings in the event of failure, was a benefit accruing to group members produced as a result of all parties carrying out their obligations under the scheme and that a successful prosecution of those claims would yield financial benefits to group members, the funder and, indirectly, the solicitors; (c) the pooling of contributions, which was effected by the group members making their individual promises available for the purposes and benefit of the scheme and, ultimately, for the funder’s benefit; (d) the litigation funding arrangement was a common enterprise in that there was a shared purpose of pursuing group members’ claims successfully that would then benefit the group members, the funder and the solicitors.
The Full Court’s conclusions remain authoritative as a statement of how at least two of the three arrangements put in place for the prosecution of a class action against the present respondent should be conceptualised. This is notwithstanding the fact that unlike Brookfield Multiplex, all of the class actions with which we are concerned are open class. As will be explained, two of the three class actions involve the now familiar arrangement of funding agreements being signed by a number of group members and hence involve contractual relationships similar, but not identical, to those involved in Brookfield Multiplex. The third involves no funding agreements in the conventional sense (as between group members and the funder) but a single agreement to fund the litigation, relying on the Court making a common fund order. This characterisation point is significant in that this type of litigation, unlike conventional litigation, is one where there exists a shared purpose of each of the participants in the enterprise which transcends the representative applicants’ individual purpose to maintain their claim for statutory compensation. It will be necessary to return to thus unusual aspect of Part IVA funded proceedings below. This characterisation is also useful in illustrating that despite their differences, each proceeding, in effect, represents a common enterprise of a commercial character which uses the Court’s processes to obtain mutual benefits for each of the group members, the funder and the solicitors. The use of the processes of the Court in this way is, of course, entirely licit, but it brings into focus the point I made at the outset: the necessity of the Court, in safeguarding its processes, to control the use of those processes for a commercial enterprise and ensure that any such use is consistent with the role of the Court, the just and efficient resolution of claims, and the Court’s supervisory and protective role towards group members.
Returning to the background narrative, in May 2010, a Class Order (Australian Securities and Investments Commission, Class Order, [CO10/333], 5 May 2018) exempted funded proceedings from the definition of managed investment schemes and also exempted funders and lawyers from the requirement to hold an Australian Financial Service Licence or act as an authorised representative of a licensee to provide financial services associated with funded proceedings. According to a discussion paper prepared by the New South Wales Office of the Legal Services Commissioner entitled “The Regulation of Third Party Litigation Finding in Australia” (March 2012), this had been immediately preceded by an announcement, by the then responsible Minister, noting that the Federal Government recognised that class actions are already subject to a regulatory regime consisting of legislation, court rules, and the legal profession rules protecting the interests of clients and, as a consequence, that the government did not consider it necessary to impose further regulatory burdens for litigation funders. The result was a reversion to business as usual, allowing conduct of closed class securities actions, and an environment whereby any regulation was as imposed by legislation governing the conduct of class actions and the Court and, indirectly, by the norms governing the conduct of lawyers.
An inevitable consequence of the rise of the closed class representative proceedings was the rise of the competing class action. The reason was simple: if a proceeding could be commenced on behalf of only some of the investors, then this allowed a further, differently funded class action to ‘hoover up’ the balance (or a substantial part) of the unsigned class.
If one pauses, one might be forgiven for thinking that these developments and, in particular, the emergence of these common enterprises, would not have been expected by those who were responsible for the report of the Australian Law Reform Commission (ALRC) tabled in Parliament in December 1988 entitled ‘Grouped Proceedings in the Federal Court’ (ALRC Report) upon which Part IVA of the Act was largely, but not wholly, based. The original design, as noted in the ALRC Report at [92], was identified as follows:
The main objective of [the class action regime]…is to secure a single decision on issues common to all and to reduce the cost of determining all related issues arising from the wrongdoing. To achieve maximum economy in the use of resources and to reduce the cost of proceedings, everyone with related claims should be involved in the proceedings and should be bound by the result.
(Emphasis added)
Consistently with this, in describing the general objectives of the Bill which inserted Part IVA in the Act, the then Attorney-General stated that it would:
provide a new representative action procedure in the Federal Court. The new procedure will enhance access to justice, reduce the costs of proceedings and promote efficiency in the use of court resources…The Bill gives the Federal Court an efficient and effective procedure to deal with multiple claims. Such a procedure is needed for two purposes. The first is to provide a real remedy where, although many people are affected and the total amount at issue is significant, each person’s loss is small and not economically viable to recover in individual actions. It will thus give access to the courts to those in the community who have been effectively denied justice because of the high cost of taking action. The second purpose of the Bill is to deal efficiently with the situation where the damages sought by each claimant are large enough to justify individual actions and a large number of person wish to sue the respondent. The new procedure will mean that groups of person, whether they are shareholders or investors, or people pursuing consumer claims, will be able to obtain redress and do so more cheaply and efficiently than would be the case with individual actions.
(Second Reading Speech by Attorney-General, House of Representatives, 14 November 1991, Hansard, at pp 3174-3175)
Given the policy objectives of Part IVA of the Act, the emergence of the notion rejected in Brookfield Multiplex, preventing closed classes by reference to a solicitor or funding criterion, is on one level understandable, because it was clearly anticipated that open classes of those affected by mass wrongs would be the norm and not the exception. The leitmotiv of the ALRC Report was the provision of access to justice to those with claims that could not be pursued practically by ordinary, inter partes litigation; it was not an occasion for consideration being given to the rise of litigation funding which, it must be said, has allowed Part IVA to be used very successfully in prosecuting mass claims. So much so that, according to a leading academic expert in Australia’s class action regime, Professor Vince Morabito (An Empirical Study of Australia’s Class Action Regimes, Fifth Report: The First Twenty-Five Years of Class Actions in Australia (Report, Monash University, 20 July 2017) since the introduction of Part IVA in 1992, there have been (at least as at July 2017), over 513 class actions commenced in relation to 335 legal disputes. Of course, a significant number of these proceedings are multiple class actions over the same legal dispute, as is evident from these statistics.
The prevalence and commercial attractiveness to funders of the securities class action, compared to other types of class actions, is evident from the following statistics also gathered by Professor Morabito (as provided to the ALRC), on substantive claims advanced in funded Part IVA proceedings filed between the introduction of Part IVA in 1992 and 3 March 2018:
Types of claims Number of class actions
Claims by shareholders 61 (52.1%). Claims by investors 25 (21.3%) Consumer protection claims 11 (9.4%) Mass tort claims 4 (3.4%) Claims by employees/workers 4 (3.4%) Product liability claims 4 (3.4%) Claims by franchisees, agents &/or distributors 4 (3.4%) Claims by real estate owners 1 (0.8%) Claims by alleged victims of racial discrimination in non-migration proceedings 1 (0.8%) Claims by alleged victims of cartels 1 (0.8%) Misfeasance in public office claim 1 (0.8%) Total 117 (100%)
This brings us to the final development of which mention ought to be made and which has had the important effect of encouraging the commencement of open class representative proceedings. This was the emergence of the common fund order in Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Limited [2016] FCAFC 148; (2016) 245 FCR 191 (Murphy, Gleeson and Beach JJ). Rather than the economics of a class action being dictated by the size of sign-up, a common fund order allows an open class representative proceeding to be commenced without the necessity to build a book of group members who have bargained away part of the proceeds of their claim. Instead of addressing the ‘free-rider’ problem by making ‘funding equalisation orders’ (to redistribute the additional amounts received ‘in hand’ by unfunded class members pro rata across the class as a whole), the Court indicated its willingness to fashion a solution whereby the funder, who had borne the risks of the litigation, is recompensed from the common fund of proceeds obtained by the group as a whole.
Following on from this, in Blairgowrie Trading Ltd v Allco Finance Group Ltd (recs and mgrs appt) (in liq) (No 3) [2017] FCA 330; (2017) 343 ALR 476, Beach J accepted, in the context of that case, that it was reasonable for the funder to receive a funding commission rate of 30% of the net settlement sum having regard to a range of factors, including those identified in Money Max at 209 [80], being:
(a)the proportion of group members who had voluntarily accepted the funding agreement, and how the proposed rate under the common fund order compared to the rate recoverable under the funding agreement;
(b)how the proposed rate compared to other funding commission rates available, and to alternative funding mechanisms;
(c)the risks assumed by the funder;
(d)whether the commission to be received by the litigation funder was proportionate to the amount received by the group members; and
(e)whether group members had an opportunity to opt out of the proceeding, or to notify their objections to the proposed funding commission.
Beach J observed that the percentage a funder receives varies from case to case, but most commonly falls within a range of 25% to 40%, and that the proposed common fund order was at the lower end of that range. Had the gross settlement sum been substantially higher, Beach J would have applied a ‘sliding scale’ to the commission rate and accordingly set a lower rate “so that the amount paid to the funder would have remained proportionate to the investment and risk undertaken by the funder” (at 516 [160]).
Most recently, in Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527 at [159]-[174], Murphy J returned to the topic in the context of a funder seeking a common fund order at a rate of 30% of the gross recovery, which his Honour was prepared to order for reasons which included: first, a common fund order (which involved the funder not seeking the commission rate or project management fees to which it was contractually entitled) left all group members better off; secondly, it represented a simpler and more transparent mechanism for fairly apportioning funding charges; thirdly, group members were able to opt out if they wished; fourthly, the funder’s rate of return was low; and fifthly, it accorded with the Money Max factors referred to above, including that the rate was within the range of the funding rates available or common in the class action litigation funding market and that it was not a large settlement. Common fund orders are sought in this case. I return below to some criticisms of common fund orders and how the common fund order in this case may address some of these criticisms.
The developments I have traced, culminating in the prospects of recovery out of a common fund, have now led to the present competitive market where funders and solicitors are in competition for carriage of class actions which they subjectively perceive as having prospects of success and hence the prospect of delivering a commercial return (a conclusion which could no doubt have been drawn by even a moderately interested observer). According to a recent presentation by the President of the ALRC, the Honourable Justice SC Derrington entitled, ‘Litigation Funding Inquiry’ (Speech delivered at the Increased Regulation of Litigation Funding – A Timely Crackdown or a Regulatory Solution in Search of a Problem? Seminar, Monash University, 9 April 2018), approximately 25 funding entities are currently operating in the Australian market. Additionally, according to information provided to the ALRC, approximately one-quarter of class actions that were proceeding through the Court in 2015 and 2016 were related actions. The only available conclusion is that this competitive market for funding and the emergence of open class securities class actions means that this Court is highly likely to continue to be confronted with the spectre of competing funded securities class actions.
B.2 The Procedural Contradiction of Securities Class Actions
One matter left out of this historical survey is a characteristic of this type of litigation, which is both striking and singular. That is, that since the Aristocrat class action, there have been over 60 funded securities class actions commenced but not one of these actions has proceeded to the delivery of judgment following a fully contested hearing (albeit two have settled after an initial trial, but before judgment and at least one has settled during the course of the initial trial).
It might be thought that there is something odd about Chapter III judicial power being invoked with great regularity without the controversy, in respect of which jurisdiction is invoked, ever being resolved by final determination of contested common issues between the parties. There are a number of reasons why this might be the case. First, such litigation is expensive. Secondly, it involves risk as at least one issue, commonly described as ‘market based causation’, is yet to receive express acceptance by the High Court (notwithstanding its acceptance by Perram J, in obiter, in Grant-Taylor v Babcock and Brown Ltd (in liq) [2015] FCA 149; (2015) 322 ALR 723 at 765-766 [219]-[220]; in the decision of the Full Court (on a pleading dispute) in Caason Investments Pty Ltd v Cao [2015] FCAFC 94; (2015) 236 FCR 322 at 333 [68] per Gilmour and Foster JJ; the decision of Brereton J in Re HIH Insurance Ltd (in liq) [2016] NSWSC 482; (2016) 335 ALR 320; and the relatively recent observations of two Full Courts as to indirect causation in ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; (2014) 224 FCR 1 at 272 [1375]-[1376] per Jacobson, Gilmour and Gordon JJ and Chowder Bay Pty Ltd v Paganin [2018] FCAFC 25 at [61] per Besanko, Markovic and Lee JJ). Thirdly, speaking generally, many cases have involved a real risk for the respondent of proof of contravening conduct, as such costly litigation is likely to be commenced only when the subjective view of those commencing the litigation is that it is likely that contravening conduct will be able to be established; this is because it is only in such circumstances that there is an efficient allocation of the resources of the funder (although, it must be said, these subjective views may well be wrong and a more competitive funding market and the entry of different players may lead to some cases being commenced which would not otherwise have been prosecuted at a more embryonic and ‘risk averse’ stage of the development of securities class actions). Fourthly, connected to the previous point, respondents and insurers have generally been likely to seek to minimise risk by being open to settlement, provided an acceptable sum can be agreed (including in cases of real risk for the respondent where the amount paid cannot be characterised as payment of a ‘nuisance sum’).
To this list I would add a further and potentially worrisome reason for cases not proceeding to judgment following an initial trial. By reason of the very nature of the commercial model I have described, a desire exists on behalf of the funders to not only obtain a return, but to obtain that return with celerity. To those acting for applicants, there is a need to be alive to the possibility arising of a conflict between the commercial imperatives and demands of the funder, and the interests of the applicants and group members in maximising the recovery of their claims. To suggest simplistically that there is always an alignment between the funder and group members (because each have an interest in maximising relevant claims) is to fail to appreciate the difference between a commercial enterprise seeking consistent and predictable returns (and management of risk spanning a number of projects), with the position of a group member involved in one action who has a relatively small amount at stake which the group member may be willing to wager on the possibility of a greater return. I recently discussed this issue in Clarke v Sandhurst Trustees Limited (No 2) [2018] FCA 511 at [6]-[7] in the context of a settlement approval in a case where relatively modest damages were sought, and yet costs and funding charges were large compared to the recovery ultimately returned to group members.
No doubt this issue could prove a fertile ground for a sophisticated economic and behavioural analysis, but it suffices to note that those acting for applicants have an important role in the administration of justice in ensuring that the interests of group members are not swamped by the interests of funders in obtaining predictable and early returns. This important role is buttressed by the protective and supervisory role that this Court has in approving settlements of such litigation. I stress that, to the extent relevant, the history of settlement approvals suggests that there has been no difficulty and there is no reason whatsoever to doubt the conscientiousness of those commonly acting for applicants, but it might be thought at the very least surprising that this type of litigation never, ever runs to a conclusion. For reasons I have explained, the factors favouring resolution of these types of claims are often powerful, but given that no cases have fully run, one must be alive to the possibility that at least in some cases, the economic interests of funders may have driven or influenced compromise in cases where running the case to judgment may have been better from the perspective of group members. At the very least, the notion of the sliding scale whereby the amount recoverable by a funder increases to reflect the increased risk associated with running a case to a conclusion may serve to operate as an important counterweight in this regard. Further, as I will explain below, the related point is that any funding terms set at the outset of litigation should reflect the reality that these cases never have resulted in a final judgment.
The result of all of this is that there is potential procedural contradiction in the way in which securities class actions are conducted and managed. On the one hand, one goes through the solemnity of making orders on the basis that the litigation will be the subject of an initial trial at which contested issues will be determined by the application of judicial power, while on the other hand recognising that this, at least until now, never happens. Vast costs are commonly incurred and often, in the events that happen, are ultimately wasted. In my view, the time has come for the Court to recognise the reality (including in the context of applications such as the present), that securities class actions, at least as presently structured, are overwhelmingly likely to resolve by a bargain, subject to Court approval. To use an imperfect metaphor, managing litigation and incurring legal costs on the basis of an expectation that these cases will run is a bit like a passenger purchasing a railway ticket every day from Eastwood to Central, while knowing it is almost inevitable that they will be getting off the train every day at Strathfield, or, as is unfortunately more commonly the case, at Redfern (for the Victorians in the present matter, one can replace the destinations used in the last sentence with Williamstown Beach to Flinders Street, Footscray and North Melbourne, respectively).
In saying this, it must be recognised that the settlements do not happen by accident. A determined, well-resourced respondent will not make a substantial settlement offer unless persuaded that the applicant is prepared, absent settlement, to run the case and is capable of doing so. Settlements also usually reflect a material risk that the applicant will succeed on liability and can establish losses suffered by the class. For a respondent to be persuaded of such a risk usually requires the applicant’s lawyers to undertake substantial work. Similarly, a conscientious applicant will not accept a low settlement offer unless persuaded that there is a significant risk that the case will fail on liability or that the claimed losses will not be established. To be in a position to accept a conditional settlement offer requires work, often very substantial work.
Having noted this, the Court is to facilitate the quick and efficient disposition of litigation. In the case of securities class actions which will likely settle, this seems to me to require the Court to take an active role (including by fashioning interlocutory orders as to discovery and evidence) so that if, as anticipated, the case settles, it settles with alacrity or at least as early as practicable, with the minimum of cost for all parties and group members. Moreover, any orders as to common funds ought to reflect the reality of the empirical data as to prevalence of settlement of these cases, bearing in mind that the risk of a funder paying adverse costs of a trial in a securities class action has never once materialised.
It is against the background of these historical and contextual matters, that I come to the present issue.
C THE FACTUAL & PROCEDURAL HISTORY OF THE MATTER
C.1 Pre-Proceeding Background
GetSwift is a technology company founded in 2015, listed in 2016, and which relevantly provides software for businesses to manage what are described as ‘last-mile’ delivery functions. After listing, GetSwift, at various times, made announcements to the ASX about agreements and ‘partnerships’ signed with clients. On 11 December 2017, the company announced a $75 million capital raising, at $4.00 per share. On 19 January 2018, the Australian Financial Review reported that GetSwift had allegedly failed to inform the market that its agreements with some customers had been terminated, and further alleged that it had announced the revenue forecasts tied to an agreement with the Commonwealth Bank of Australia prematurely. Shortly thereafter, on 22 January 2018, GetSwift shares were placed in a trading halt, and two days later were suspended from official quotation, pending the company’s response to questions from the ASX. A number of announcements relevant to the company’s suspension from official quotation (including questions raised by the ASX) were then apparently released up to reinstatement to official quotation on 19 February 2018.
The evidence on this application suggests that before entering the trading halt on 22 January 2018, GetSwift’s share price was $2.92, however, following reinstatement, it declined to $0.51 as at the close of trade on 21 February 2018 – a total decline of approximately 82.5%.
Ms Banton, a partner of Squire Patton Boggs (SPB), a large international law firm, gives evidence that SPB began investigating possible claims against GetSwift on 19 January 2018 and published a ‘Notice of Investigation’ into a potential class action on 2 February 2018 on the SPB website. Its purpose was to seek to bring the SPB investigations and the potential class action to the attention of shareholders who acquired shares in GetSwift in the period 24 February 2017 to 19 January 2018. A dedicated ‘GetSwift Class Action’ webpage and email address were established so that interested investors could register their interest online and obtain more information. Eventually, 103 shareholders chose to register with the SPB (Perera Funded GMs). The Perera Funded GMs are persons who also entered into funding arrangements with a funding entity, International Litigation Partners No 18 Pte Ltd (ILP18).
Mr Pagent, a partner of Corrs Chambers Westgarth (CCW), a large national firm of solicitors, gives evidence that on 20 February 2018, a litigation funder, Vannin Capital Operations Limited (Vannin) announced it was investigating a potential class action against GetSwift and its executive directors and invited shareholders who purchased shares in GetSwift between 24 February 2017 and 19 January 2018 to register their interest in the proposed class action. Apparently, 441 investors registered their interest in participating in the class action via the website and 208 investors signed litigation funding agreements with Vannin (McTaggart Funded GMs).
Mr Phi, a solicitor with Phi Finney McDonald (PFM), which he describes as a “specialist class action law firm”, gives evidence that prior to 20 February 2018, preliminary steps were taken by PFM to consider and assess the merits of a potential claim against GetSwift. Preliminary discussions also took place between Mr Phi and representatives of Therium Capital Management Limited (Therium) about funding. Mr Phi gives evidence, which I accept, that he decided against announcing a potential class action until after GetSwift resumed trading as, in his experience, announcing a class action prior to the resumption of trading (or even shortly after an alleged corrective disclosure) may allow a respondent to argue that any share price fall was caused, at least in part, by the threat of a class action. He also deferred because: (a) his view was that it was appropriate to review analyst reports and media commentary to form a view as to the precise cause of a particular share price reaction; and (b) his preference was not to announce a class action until after he was satisfied that appropriate funding could be secured on terms he considered were favourable to group members. Despite this initial preference, following the filing of the Perera Proceeding on 20 February 2018, he caused an announcement of PFM’s investigation to be published on PFM’s website and the potential PFM class action was reported by the media the following day.
Mr Phi also deposes to a flurry of activity immediately prior to the filing of the Perera Proceeding. On 19 February 2018, two further potential class actions were publicly announced before close of trading that day. The solicitors announcing those potential claims were Gadens and MC Lawyers & Advisers. I pause to note that nothing further has been heard by any party as to these two, at one time, proposed class actions.
C.2 The Competing Actions Emerge and the Court Orders
As noted above, the Perera Proceeding was commenced by SPB on 20 February 2018 against GetSwift and Mr Joel Macdonald, an officer of GetSwift. A report was published by the Australian Financial Review the same day reporting that ‘International Litigation Partners’ was the funder. The originating application was listed for a first case management hearing on 23 March 2018, which was then adjourned to 29 March 2018.
An overlapping class action, being the McTaggart Proceeding, was issued by CCW on 26 March 2018 against GetSwift, Mr Macdonald and Mr Bane Hunter, the Executive Chairman of GetSwift. Following communication with my chambers, this proceeding was also listed for a first case management hearing on 29 March 2018.
On 29 March 2018, following discussion with the parties and a short adjournment, I indicated that I was disposed to make orders facilitating each of the applicants putting before the Court their proposals for how the issue of the competing class actions should be dealt with. The transcript records that there was no opposition to this course by either of the applicants or GetSwift, and orders were made in the Perera Proceeding and the McTaggart Proceeding for the parties, by 4 pm on 9 April 2018, to exchange and then file any affidavit evidence and submissions directed to:
(a)the manner and form by which security for costs is to be provided in the respective proceedings;
(b)the details, including any proposed percentage subject to further order, of the terms of any common fund order to be sought in the proceedings;
(c)whether, subject to the filing of a defence, any issues in the proceeding are suitable for reference to a referee or whether a Court appointed or joint expert be appointed or retained in relation to any issue;
(d)an estimate by the applicants’ solicitors, on affidavit, of the costs that are likely to be incurred (on the assumption) that issues of contravening conduct and causally related loss are in dispute;
(e)the number of funded group members and the aggregate number of shares held by all funded group members;
(f)what, if anything, is proposed to deal with potential overlap between the Perera Proceeding and the McTaggart Proceeding, such as a consolidation of the two proceedings; a permanent stay of one of the proceedings; an order declassing one of the proceedings under either s 33N(1) or s 33ZF of the Act; an order closing the class in one (but not the other) proceeding; or orders allowing a joint trial of both proceedings with each left constituted as open class proceedings;
(g)in the event a temporary or permanent stay or declassing of a proceeding is proposed, the matters relied upon in support of that contention.
I then, again without objection, listed the two proceedings for a further case management hearing on 13 April 2018, with a view to determining any application made by any party relating to the matters the subject of submissions filed pursuant to the orders made on 29 March 2018.
In effect, as is evident from these orders, I put in place a process by which each of the then applicants could put their ‘best foot forward’ to come up with a detailed proposal and, if only one proceeding was to go forward, explain why it was that their proceeding should be preferred. To preserve the integrity of the process as to funding proposals, I further noted in the orders that “there should be no discussion between the applicants, the applicants’ lawyers or the funder in this proceeding and the applicant, the applicant’s lawyers or the funder in the Related Proceeding as to the content of the material to be filed and served pursuant to [the orders] until after the exchange provided for by that order”. The parties complied with my orders, albeit slightly late.
An unexpected development then arose.
Very shortly after the exchange between Mr Perera and the McTaggart applicants, an interlocutory application was filed on behalf of Mr Raffaele Webb seeking orders: that he be granted leave to intervene in both proceedings; for a regime for a notice to group members to be approved; as to distribution of the notice; and for an adjournment of the case management hearing until late May or June 2018.
I arranged for the immediate relisting of the matter and a further case management hearing took place on 11 April 2018. At that time, following exchanges between the Bench and the parties, the adjournment of the case management hearing was not pressed and I made orders that Mr Webb have leave nunc pro tunc to intervene in the Perera Proceeding and the McTaggart Proceeding for the limited purpose of appearing at the case management hearing on 11 April 2018, and for the purpose of making any application he wished to make on 13 April 2018. Consistently with the orders earlier made, I ordered Mr Webb to exchange with the other applicants any affidavit evidence, submissions, and any other material related to the same issues which were the subject of the earlier exchange. I again preserved the integrity of the process by not allowing access by Mr Webb or his legal advisers to any material already filed and by noting in the orders that there be no discussions between the applicants. Finally, to prevent any procedural vulgarities that might have arisen as to the status of Mr Webb as an intervener, I indicated that I would grant leave to Mr Webb, on 13 April 2018, to file in Court, and have returnable instanter, an originating application commencing a Part IVA proceeding.
It is convenient to interrupt the account of what occurred to deal with a matter that has arisen in written submissions filed after oral submissions on behalf of both Mr Perera and the McTaggart applicants. These applicants submit that Mr Webb obtained some advantage by reason of what occurred.
The McTaggart applicants submit that when the Court comes to weigh up the respective advantages and disadvantages of the competing proposals, the Court should take into account “the fact that the Webb applicant enjoyed a process advantage compared with the McTaggart (and Perera) applicants”. This was said to arise because, after setting up what the parties accepted was a “competitive tender” process, Mr Webb’s “late entry put him at a clear advantage” apparently because at the time they submitted their respective proposals, the McTaggart applicants (and Vannin) and Mr Perera (and ILP18) “thought they were in a two-horse race, not a three-horse race, and they bid accordingly. But Webb knew it was a three-horse race, and he was able to bid accordingly”. It is also said that some apparent unfairness was occasioned because whereas Mr Perera and the McTaggart applicants were required to submit their evidence and proposals by 4.30 pm on 9 April 2018, Mr Webb was given until 4.30 pm on 12 April 2018 and this meant that Mr Webb was allowed to incorporate developments between 9 April and 12 April.
Mr Perera colourfully submits that allowing persons such Mr Webb (PFM/Therium) to come along “at the heel of the hunt” would “encourage a phenomenon of entrepreneurial lawyers and funders parasitically lying in wait to steal the work product of those who have conscientiously been investigating claims on behalf of real people who have retained them”. The submission continues:
It might be added that what the conduct of Webb/PFM/Therium has led to in this case, is undermining the entire point of the competitive bid process which the Court’s orders put in train. Had it been known at the outset that there were three tenderers, what occurred would likely have been different, just as one does not go to an auction to buy a house expecting to pay the same price if there is only one other registered bidder, as if there are more than one. The market was distorted, and the process will have miscarried to the extent Webb/PFM/Therium’s proposal is considered at all.
I reject these submissions for at least seven reasons.
First, Mr Webb did not have access to any of the material filed by the other applicants. He (and PFM and Therium) like Mr Perera (and SPB and ILP18) and the McTaggart applicants (and CCW and Vannin), all knew that to the extent the Court was having regard to their respective responses to the topics the subject of the common orders, those responses were to be prepared without contacting or having access to the materials of the other applicants.
Secondly, it is notable that the McTaggart applicants’ submissions are silent as to the details of the ‘developments’ which are asserted to have presented Mr Webb with a competitive advantage between the first exchange (between Mr Perera and the McTaggart applicants on 9 April) and the second exchange (between Mr Perera and the McTaggart applicants on the one hand, and Mr Webb on the other, on 12 April). Given Mr Webb did not have access to any of the details of the earlier proposals put forward, no relevant distortion occurred.
Thirdly, no complaint whatever was made by the legal representatives of Mr Perera and the McTaggart applicants at the case management hearing on 11 April 2018 as to the orders made on that date binding Mr Webb and the respondents. Ultimately, and more generally, the orders made as to the process to be adopted were not the subject of objection by any party.
Fourthly, what was put in place was not some process of bargaining between the Court (in its protective role as to group members) and scheme promotors; the analogy to an auction is, with respect, inapt. Each applicant party was to put its best foot forward. The applicant parties did so, and to the extent I consider relevant, the proposals will be judged on their individual merits. In this regard, the evidence that ILP18 would have approached the process differently in the event a third participant was to be involved (and not just a competition with Vannin) is not to the point. What the orders sought to elicit, among other things, was a considered proposal which best served the twin ends of furthering the overarching purpose and protecting the interests of group members, not the optimal commercial ‘deal’ for the funder pitched at the level to beat (but only just) the commercial ‘deal’ likely proposed by another funder.
Fifthly, the notion that Mr Webb has acted in a way which can be accurately described as “parasitically lying in wait to steal the work product” of others is, with respect, not a fair characterisation of what has occurred. Mr Webb did not put up his hand by the time of the first case management hearing and indeed I expressed some criticism of this on 11 April 2018 (when I made it plain that toing and froing between applicant lawyers was not going to defer progress of the substantive proceeding). In defence of Mr Webb, however, Mr Phi provided an explanation of why his attention was directed to attempting to negotiate funding terms (which, on the evidence, only occurred on 4 April 2018) and as to why he deferred the commencement of proceedings. For reasons I will come back to, the evidence revealed that this was time well spent. Moreover, no doubt the orders made by the Court at the first case management hearing were not anticipated by Mr Webb.
Sixthly, to the extent relevant, senior counsel for Mr Webb has submitted that the proposal put forward by Mr Webb reflects, at least as to funding rates and budgeted legal costs, those funding terms agreed with Therium and the budget proposed by PFM on 4 April 2018 – well before any orders were made on 11 April 2018.
Seventhly, let me assume for a moment that Mr Webb had some unarticulated process advantage. There has been no descent into the detail as to how the supposedly superior and well thought through proposals and submissions made by Mr Perera and the McTaggart applicants would have changed. Each now submits that their respective proposals are superior, if the Court conducts a principled multifactorial analysis. As I noted in the Introduction, to proceed on the basis of an auctioneer procuring further bids would not only be unseemly, but also would undermine what the Court was trying to achieve: each applicant party putting forward considered and optimal funding proposals which, in the view of that applicant party, would best advance the interests of group members.
C.3 The Conduct of the Hearing and Summary of the Proposals
When all the proceedings came before the Court for the first time on 13 April 2018, detailed evidence was adduced and submissions were made as to the approach the Court should take to resolve the issue of the competing class actions, the powers of the Court in this regard and the comparative merits of the competing proposals. Indeed, in an attempt to conclude argument, the Court sat late until it became clear that further time was needed to complete submissions. Indeed, as it happened, further argument then spanned three further listings with additional submissions and materials being filed after each listing.
By the end of this process, it was possible to summarise the principal contentions of each of the applicants and GetSwift. I will return to the various submissions made by each of the applicant parties of a comparative nature below, but the principal submissions can be broadly summarised as follows.
C.3.1 Mr Perera
As to power and the applicable legal principles, it was submitted that neither Part IVA, nor any other part of the Act, gives the Court the power to act as regulator with complete discretion and that the structure and words of the statute delimit ‘regulatory activity’ in two ways: first, the foundation of Part IVA is that representative proceedings can be commenced on behalf of “some or all” persons with claims against the same person (s 33C(1)) without their consent, and group members have the statutory right to choose to opt out (s 33J), necessarily carrying with it a consequential choice to vindicate their rights outside a group proceeding commenced on their behalf. Hence, Part IVA expressly contemplates that there may be more than one proceeding against the one respondent; and secondly, as a consequence of the opt out regime, it is not prima facie vexatious, oppressive or an abuse of process for a group member to commence a separate, individual proceeding (or a separate class action), unless the group member has not opted-out of an earlier-commenced class action: see Smith v Australian Executor Trustees Limited [2016] NSWSC 17 at [22] (Ball J); Oliver v Commonwealth Bank of Australia (No 2) [2012] FCA 755; (2012) 205 FCR 540 at 541-542 [3] and 544 [15] (Perram J).
It follows, it was submitted, that the mere fact that a second class action is commenced does not provide a sound basis for permanently staying either the second, or the first, action. Put another way, it was said to be a “logical fallacy” that the mere existence of competing class actions is a principled basis for permanently staying one of them. Mr Perera recognised that these submissions as to power were inconsistent with the obiter views expressed by Beach J in McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd [2017] FCA 947, where his Honour observed that were it not for the fact that a substantial number of group members had committed themselves to litigation funding agreements and retainers in each proceeding before the Court, his Honour would have permanently stayed one of them: [8], [96]-[97]. It was further submitted “it is exceedingly doubtful whether, absent specific legislative warrant, this Court has the power on such grounds to permanently stay a regularly commenced representative proceeding which is not an abuse of process” and that a permanent stay “would be a novel step which would almost certainly be appealed, resulting in significant delay to the effective prosecution of group members’ claims”.
As to the appropriate orders to be made, Mr Perera submitted that the Perera Proceeding should proceed as an open class action, and the Court should temporarily stay, or adjourn, the other proceedings until shortly after the date for opt out has passed in the Perera Proceeding and, subject to consideration of the number of persons who opt out, the remedy was then to either close or declass the other proceedings. At least when the McTaggart Proceeding was its only competitor, the contention was that the discrimen for deciding whether to close or declass (under s 33N of the Act) was whether the McTaggart Proceeding had “insufficient registered group members to justify it continuing as a representative proceeding”. This submission, and the further submission that the Webb Proceeding should, in any event, be declassed, necessarily presupposes that the Court has such a power in the present circumstances. This contention is controversial and it will be necessary to return to it below.
As to the proposal of Mr Perera as to the conduct of the Perera Proceeding, it had the following components:
(a)Mr Perera is the representative party, having acquired seven parcels of shares in November and December 2017 (each of which were sold at a profit) and he bought his first loss-making shares on 5 January 2018;
(b)Mr Perera represents group members (including Perera Funded GMs who comprise 103 members of the class and who acquired 2,575,804 shares in the relevant period);
(c)the Perera Proceeding is funded by ILP18; this is a special purpose entity and corporations related to ILP18 have monies on trust with SPB;
(d)both funding agreements and retainer agreements (between the Perera Funded GMs and SPB) have been entered into with each of the Perera Funded GMs;
(e)the ILP18 funding agreement provides for a commission ranging between 25% and 40% (discriminating between group members on the basis of the amount of shares held) but it is proposed that a common fund order be made which involves payment of the lesser of 25% of net proceeds or 22.5% of gross proceeds (which sum will be capped to ensure that it is an amount not greater than 25% of net proceeds);
(f)as to a proposal relating to security for costs, Mr Perera indicated that ILP18 was prepared to abide by any order as to security, be it by way of cash deposit, bond or insurance cover;
(g)no suggestion was made that any substantive question could be referred to a referee or be the subject of evidence from a Court appointed expert.
C.3.2 McTaggart Applicants
It is inappropriate that I express any views, at present, as to the ability of either ILP18 or Vannin to enforce any apparent promise requiring payment in the circumstances of a payment made to Perera Funded GMs or the McTaggart Funded GMs by settlement or other resolution of their claims in the Webb Proceeding. No party addressed this issue in submissions and it would be premature for me to express even preliminary views as to the nature of the relevant contractual provisions and, if an obligation exists, what, if anything, should be done about it. It is presently relevant only to the extent it bears upon whether the course I have decided upon is practicable, and also as to the issue of what should be said in any opt out notice to the Perera Funded GMs and the McTaggart Funded GMs as to the possibility, notwithstanding the making of a common fund order, that they may be subject to some future claim by ILP18 and/or Vannin.
This Court has already expressed views about its ability to use various powers to amend funding agreements when it considers it necessary or appropriate to do so: see Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433 (Murphy J); Blairgowrie (No 3) (Beach J) and Mitic v OZ Minerals Limited (No 2) [2017] FCA 409 (Middleton J). Other larger issues may arise as to varying funding agreements and as to the ability of a funder to seek to enforce promises given in the course of a common enterprise to use the processes of the Court in circumstances where the proceeding, contemplated by the common enterprise, is stayed and does not constitute the vehicle pursuant to which the group member recovers compensation. These questions may need to be addressed in due course and I will say no more about the topic for present purposes other than to make two points.
First, as I have already foreshadowed, it will be necessary for something to be said concerning this issue in the course of opt out and it is for this reason that I will give leave to Mr Perera (and ILP18) and the McTaggart applicants (and Vannin) to make any submissions that they wish to make as to what should be communicated to group members, including the Perera Funded GMs and the McTaggart Funded GMs. Additionally, subject to hearing argument on approval of an opt out notice, it may be appropriate for consideration to be given to a regime being put in place whereby the only communication made to any group members concerning opt out is to be a communication approved by the Court. The purpose of this would be to ensure there is discipline and precision in the messages communicated. Additional consideration ought to be given as to whether, in these unusual circumstances, it is appropriate that an independent lawyer (possibly a junior barrister) to be appointed to answer any queries that the group members may have concerning the terms of the opt out notice. I am conscious that this may raise novel issues in circumstances where, in the case of the Perera Proceeding, the Perera Funded GMs are also, as I understand it, clients of SPB.
Secondly, I mentioned above that this issue is relevant to the extent it bears upon consideration as to whether the course of staying funded proceedings is practicable. In making orders for the parties to put forward proposed funding arrangements, I was conscious of the comments of Beach J in Bellamy’s at [23] where his Honour, in dealing with the differences between Australia and the United States, noted that any sealed bid process could not have a meaningful utility “given the existence, magnitude and exposure” of the contractual arrangements that were entered into in that case between two litigation funders. Here, of course, the problem that arises in relation to the existing contractual arrangements does not loom in the same way as it did in Bellamy’s because of the relatively small number of funded group members. But another point made by Beach J (at [39]) in this context has present relevance. This was that group members who have entered into funding arrangements may wish to opt out of the non-stayed proceeding and run their own actions or may seek to join, together with other funded group members, an attempt to commence a further class action. As Beach J observed, such a result would be unsatisfactory. Indeed, left unchecked it could lead to a different type of multiplicity and would serve to undermine the protective steps I have taken and the cost and efficiency goals achieved in allowing only one open class proceeding to go forward.
Fundamental to Part IVA is that each group member has a statutory right to opt out. The right represents a protection for group members in circumstances where consent is not required for an applicant to represent them. People may have an array of reasons for opting out, for example, scruples about being involved in any litigation, a corporate desire not to be involved in securities litigation, an unhappiness about the basis upon which the litigation is to be funded or conducted, and so on. It is not the place of the Court to interfere with any group member making a bona fide decision to opt out, irrespective of whether the Court may consider the group member is acting idiosyncratically or even contrary to what might objectively be perceived as being in their interests. Protection is not paternalism.
What would be troubling, however, in circumstances where a funded proceeding has been stayed, would be for a funder of stayed proceedings to use what are alleged to be the benefit of their contractual rights under funding agreements to, in effect, ‘force’ opt out, as the price of providing comfort to funded group members that they will not be saddled with two sets of imposts. It would, in my view, be similarly undesirable for the promotors of stayed proceedings to ‘lobby’ group members or encourage opt out for the reason of commercial promotion of a further competing class action. I hasten to say that I do not think there is any basis for believing that either ILP18 or Vannin or their agents or the solicitors would rely on the provisions of the funding agreement in some sort of minatory way or act otherwise than conscientiously. I make these points merely to stress, as a matter of process, that great care needs to be taken in communicating Court approved messages to the funded group members about the relative advantages and disadvantages of opting out of the non-stayed proceeding and that the Court should take an active role in ensuring that correct, independent and complete information is given in order to allow group members to exercise an informed decision as to opt out. For one thing, those opting out should be aware of the prospect, subject to hearing submissions, that if they opt out, consistently with Part VB case management objectives, their individual proceeding may be adjourned pending a mediation (and if then unresolved) pending the determination of common issues in the open class proceeding.
The existence of the problems occasioned by the existence of funding agreements entered into by a book building programme raises novel issues, but ones that, with active case management, will be able to be surmounted. It follows that this complication does not serve to outweigh the desirability of only one class action going ahead and, to the extent relevant, this was taken into account in my consideration of whether permanent stays or other relief should be ordered.
L ARBITRAGING PROCEDURE, A POTENTIAL ISSUE
One thing that should be evident from my survey of the history of funded securities class actions is the commercial sophistication of the promotors of such litigation and the flexibility of those promotors in driving and adapting to changes in the procedure by which class actions are governed.
In Section D.2 above, I referred to the attempts by plaintiff lawyers to circumvent reforms in federal courts in the United States as to the conduct of securities class actions, by adopting the expedient of commencing securities proceedings in state courts. As I have explained, this has caused very significant, ongoing collateral disputation.
Developing and adapting procedure and maintaining control over securities class actions in Australia has not been beset with any similar difficulty to date, because the vast bulk of securities class actions have been commenced in the Federal Court and, when on rare occasions they have been commenced in the Supreme Court of Victoria and created multiplicity, cross-vesting orders have allowed securities class actions elsewhere to be linked up to other proceedings in this Court.
It has been possible to ensure the competing GetSwift class actions were case managed together and for the issue of competing class actions to be resolved with alacrity with the active and commendable cooperation of all participants. It would be naïve, however, not to recognise that the possibility of a stay will not cause disquiet among those who may, in another matter, contemplate promoting a future competing securities class action. No doubt other steps taken by this Court to maximise the return to group members in settlements by controlling legal, funding and other costs, might also be thought as inimical to the interests of those who stand to make a return from these common enterprises.
In finance, arbitraging, in general terms, refers to the practice of taking advantage of price differences and capitalising upon the imbalance between markets. As a result of the autochtonous expedient (in this case reflected in Part 9.6A of the Corporations Act) of allowing class actions seeking relief for a breach of a Commonwealth statute to be commenced in a number of State courts with class action regimes, the theoretical possibility of some form of procedural ‘arbitrage’ exists.
The promotors of class actions can, at least initially, exercise a choice of forum and it should come as no surprise that the response to one court taking active steps to exercise discipline and control over securities class actions (and competing actions in particular), may be for decisions to be made which represent an attempt to obtain an advantage by commencing securities class actions in the same matter in different courts. One result of this would be to increase overall costs and make case management and a speedy comparative analysis to be undertaken, more problematical. For a variety of reasons, such a development would be highly undesirable and, like in the past, remedial responses will no doubt have to be fashioned consistent with the provisions of the cross vesting legislation, considerations as to comity and the need to avoid multiplicity. It suffices to note that the possibility of such developments occurring highlights the point I made at the commencement of these reasons: one size does not fit all and how one manages competing class actions is essentially a case management decision rooted in the particular circumstances of the relevant matter.
M CONCLUSION & ORDERS
Each party sought orders which would involve the Court taking steps to resolve multiplicity in one form or another. Having said this, I should finally note that I did give consideration to whether or not I should simply adopt a ‘wait and see’ approach. I do not consider that this was an appropriate response in the present matter for the same reasons it was rejected by Beach J in Bellamy’s. It is important for this problem to be resolved as soon as possible and to give each of the parties and group members certainty about the bases upon which this matter is to be conducted. Moreover, given my findings, to allow multiplicity to continue would cause the perpetuation of a state of affairs which must be brought to an end.
Special problems no doubt arise when one promotor has decided, for some reason, to commence a proceeding in another court exercising federal jurisdiction, which conduct will no doubt necessitate some delay not present here. In the case of competing securities class actions all before the Court, however, one of the potential difficulties in just allowing the promoters of the various common enterprises to sort it out amongst themselves, is that there is a danger that any compromise between promotors (whereby each funder somehow ‘wets their beak’), may simply result in increased costs and may indirectly encourage forms of anti-competitive behaviour.
Apart from making orders arranging for the interlocutory progression of the Webb Proceeding and permanent stays being granted in relation to the Perera Proceeding and the McTaggart Proceeding, I will also direct the provision of a draft opt out notice and fix a hearing at which time an opt out notice will be approved. For reasons I have explained, I will grant leave for Mr Perera, the McTaggart applicants and their funders to appear at that hearing. Additionally, prior to the approval of an opt out notice, I will make orders setting out the precise terms of the common fund order.
I will hear from the parties at a case management hearing as to whether any variation is sought to these procedural directions in the Webb Proceeding, and on the issue of costs.
I certify that the preceding three hundred and eighty (380) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee. Associate:
Dated: 23 May 2018
Annexure A
ANNEXURE B
COST ASSUMPTIONS WITH ADJUSTMENTS A. Early Mediation Cost Assumptions Perera Costs Item Phi Finney Sch A Adjustment or non-adjustment reason Corrected Amount 1 – Investigating Claims $150,309.50 $150,309.50 2A – Statement of Claim $114,108.50 $114,108.50 2B – First Directions $16,786.00 $16,786.00 2C – Common Fund Order Application / Competing Class Action $33,682.00 $33,682.00 2D – Application for share register and issue of notice to shareholders $18,645.00 $18,645.00 3A – Receipt of Particulars $26,334.00 $26,334.00 3B – Receipt of Defence $9,988.00 $9,988.00 3C – Request for Particulars $19,750.50 $19,750.50 7 – Mediation $93,461.50 $93,461.50 Number of hearings $4,500.00 $4,500.00 Mediator $8,000 $8,000.00 Miscellaneous expense (10% of disbursement total) (AKB-3 p6) 0 Figure in AKB-3 omitted from Perera calculation; add it $1,250.00 Total incl. GST $495,565.00 $496,815.00 nb: does not include Perera requested 10% contingency McTaggart Costs Item Phi Finney Sch A Adjustment or non-adjustment reason Corrected Amount Legal and factual analysis and pleadings $246,360.00 $246,360.00 Case management conference on 13 April 2018 $172,878.00 $172,878.00 Mediation expenses $92,639.00 Use 1/2 of original estimate for two day mediation of $192,278 $96,139.00 Disbursements @ 50% of Late Mediation Estimate $343,800.00 Estimate was $587,600 for 2 days late mediation, which includes $550,000 in experts fees [CJP-36, Pagent 94]. Remove experts fees. $18,800.00 Management and Reporting Loading @ same average rate in CJP-36 (15.5%) $179,888.00 Apply 20% to legal fees above as no basis in evidence for 15.5% assumption. $103,075.40 Plus GST $103,556.50 Adjusted to reflect above adjustments. $63,725.24 Total incl. GST $1,139,121.50 $700,977.64 Webb Costs Item Phi Finney Sch A Adjustment or non-adjustment reason Corrected Amount Investigation / pre-drafting claim $125,000.00 $125,000.00 Bookbuild / communicating terms / identifying representative $0.00 Mr Phi deposed in the Second Phi Affidavit at [12] that none of Mr Webb, the funder Therium or Phi Finney McDonald intended to conduct such a bookbuild, and had not done so, and then at [13] that a common fund order regime would negate the purpose of such a bookbuild and hence avoid those costs. If the Court allows Mr Webb’s proceeding to proceed on an open basis and makes a common fund order in that proceeding, these costs will not be incurred, and hence has been excluded from the Further Revised Model. See further [16] - [17] of Submissions of 1 May 2018 $0.00 Preliminary Strategic Case Work $185,000.00 $185,000.00 Multiplicity-related application $150,000.00 $150,000.00 Draft claim $153,000.00 $153,000.00 Filing, First Directions $90,000.00 $90,000.00 Particulars, Defence & Close Pleadings $148,000.00 $148,000.00 Group Member Communications and Reporting (half of total allowed estimate) $20,000.00 $20,000.00 Mediation $137,000.00 $137,000.00 Add costs associated with 6 monthly independent review of fees $0.00 These costs are built into the Webb Original Costs Estimate total, and does not require separate provision in the Further Revised Model, on the following grounds:
a. the Webb Applicant expects the work of that assessor to be largely costs neutral, in that it is likely to increase the extent to which the Webb Applicant’s approved costs will be less than total legal costs incurred; and in any event
b. the assessor’s costs otherwise would be incurred by the other Applicants in the course of applying for approval of any proposed settlement of the proceeding, hence a true ‘like for like’ comparison ought either to exclude those costs or include them for all three applicants.
See further [26]-[28] of Submissions of 1 May 2018$0.00 Add costs associated with 5% annual increase in fees $0.00 Webb's cost estimates have regard to provision for annual 5% rate increases. See further [29]-[31] of Submissions of 1 May 2018 $0.00 Total incl. GST $1,008,000.00 $1,008,000.00 Total Professional Fees $520,500.00 $520,500.00 Total Disbursements and Counsel Fees $487,500.00 $487,500.00 Upfront Component of Professional Fees $390,375.00 $390,375.00 Deferred Component of Professional Fees $130,125.00 $130,125.00 B. Late Mediation Cost Assumptions Perera Costs Item Phi Finney Sch A Adjustment or non-adjustment reason Corrected Amount Original Cost Estimate incl. GST $1,957,932.00 $1,957,932.00 5F - Respondent Expert Evidence (Professional Fees) $87,054.00 5G - Applicant Reply Expert Evidence (Professional Fees) $73,414.00 Correct error in Disbursements - 2 x Expert Reports in Chief Confidential Annexure A only includes $250,000 for reports in chief. AKB-3 has those costs as $400,000. Add the missing difference of $150,000 $150,000.00 Disbursements - 2 x Expert Reports in Reply $150,000.00 $150,000.00 Miscellaneous expense (10% of disbursement total) (AKB-3 p6) Figure in AKB-3 omitted from Perera calculation; add it $60,150.00 Total incl. GST $2,268,400.00 $2,318,082.00 nb: does not include Perera requested 10% contingency McTaggart Costs Item Phi Finney Sch A Adjustment or non-adjustment reason Corrected Amount Legal and factual analysis and pleadings $246,360.00 $246,360.00 Case management conference on 13 April 2018 $172,878.00 $172,878.00 Security for costs $12,535.00 Not included in other estimates. Will be dealt with on this application Discovery $246,717.00 $246,717.00 Subpoenas $58,188.00 $58,188.00 Advice on evidence $35,670.00 $35,670.00 Lay evidence $47,908.00 Annexure B was adjusted to match Perera with no respondent lay evidence. For present purposes, it must include respondent lay evidence. Add it. $119,770.00 Expert evidence (professional fees) $484,710.00 $484,710.00 Case management hearings $65,595.00 $65,595.00 Mediation expenses $92,639.00 Use 1/2 of original estimate for two day mediation of $192,278 $96,139.00 Management and Reporting Loading @ same average rate in CJP-36 (15.5%) $359,776.00 Consistent with the original Late Mediation estimate in CJP-36. No evidentiary basis for reduced estimate in McTaggart Applicants' evidence. $359,776.00 Disbursements $687,600.00 Fix Typo: disbursements amount is $587,600 not $687,600: Pagent [94], CJP 36. Of these, $550,000 are experts. $587,600.00 Plus GST $251,057.60 Do not apply GST to US expert fees (50% of $550,000). Apply GST to remaining amounts. $219,840.30 Total incl. GST $2,761,633.60 $2,693,243.30 Webb Costs Item Phi Finney Sch A Adjustment or non-adjustment reason Corrected Amount Original Cost Estimate incl. GST $2,792,000.00 $2,792,000.00 Less Interlocutory Applications ($366,000.00) Assume no interlocutory applications - multiplicity application costs already included in Original Cost Estimate. See further [17] to [23] of Submissions of 1 May 2018 ($366,000.00) Less costs of Bookbuild / communicating terms / identifying representative ($100,000.00) Mr Phi deposed in the Second Phi Affidavit at [12] that none of Mr Webb, the funder Therium or Phi Finney McDonald intended to conduct such a bookbuild, and had not done so, and then at [13] that a common fund order regime would negate the purpose of such a bookbuild and hence avoid those costs. If the Court allows Mr Webb’s proceeding to proceed on an open basis and makes a common fund order in that proceeding, these costs will not be incurred, and hence has been excluded from the Further Revised Model. See further [16] - [17] of Submissions of 1 May 2018 ($100,000.00) Add costs for case management hearings $0.00 The Webb Original Cost Estimate is organised by stage, and the specific costs of case management hearings are built into those stages. For instance, to the extent that issues of discovery are dealt with at a case management hearing, the associated cost is reflected in the total estimate of Discovery-related costs. See further [23] of Submissions of 1 May 2018 $0.00 Add costs associated with 6 monthly independent review of fees $0.00 These costs are built into the Webb Original Costs Estimate total, and does not require separate provision in the Further Revised Model, on the following grounds:
a. the Webb Applicant expects the work of that assessor to be largely costs neutral, in that it is likely to increase the extent to which the Webb Applicant’s approved costs will be less than total legal costs incurred; and in any event
b. the assessor’s costs otherwise would be incurred by the other Applicants in the course of applying for approval of any proposed settlement of the proceeding, hence a true ‘like for like’ comparison ought either to exclude those costs or include them for all three applicants.
See further [26]-[28] of Submissions of 1 May 2018$0.00 Add costs associated with 5% annual increase in fees $0.00 Webb's cost estimates have regard to provision for annual 5% rate increases. See further [29]-[31] of Submissions of 1 May 2018 $0.00 Revised Total incl. GST $2,326,000.00 $2,326,000.00 Total Professional Fees $1,071,000.00 $1,071,000.00 Total Disbursements and Counsel Fees $1,255,000.00 $1,255,000.00 Upfront Component of Professional Fees $833,250.00 $803,250.00 Deferred Component $277,750.00 $267,750.00
85
20
12