Regent Holdings v State of Victoria
[2015] VSC 422
•18 August 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
MAJOR TORTS LIST
S CI 2010 6132
| REGENT HOLDINGS PTY LTD (ACN 009 561 433) AS TRUSTEE FOR V.L. HALLIDAY INVESTMENT TRUST | Plaintiff |
| v | |
| STATE OF VICTORIA | First Defendant |
| and | |
| SOUTHERN OCEAN MARICULTURE PTY LTD (ACN 072 939 210) | Second Defendant |
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JUDGE: | GINNANE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 25 May 2015 – Further affidavit filed 23 June 2015 |
DATE OF JUDGMENT: | 18 August 2015 |
CASE MAY BE CITED AS: | Regent Holdings v State of Victoria and Anor |
MEDIUM NEUTRAL CITATION: | [2015] VSC 422 |
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Practice And Procedure – Application for approval of settlement of group proceeding – Settlement of proceeding after trial and while appeal pending – Whether approval can be given by Judge of trial division – Whether terms of settlement fair and reasonable – Whether claims for costs and disbursements reasonable – Abalone disease case – Settlement approved – Constitution Act 1985 (Vic) ss75, 75A; Supreme Court Act 1986 (Vic) s 33V.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Bongiorno | Maurice Blackburn Pty Ltd |
| For the First Defendant | Mr A Suddick | Victorian Government Solicitors Office |
HIS HONOUR:
The plaintiff, Regent Holdings Pty Ltd (‘Regent’), seeks the approval of the court of the settlement of a group proceeding.
Regent, on its own behalf and on behalf of 88 Group Members of a closed class, brought a group proceeding against the first defendant, the State of Victoria (‘the State’) and the second defendant, Southern Ocean Mariculture Pty Ltd (‘SOM’). Regent claimed that the State was vicariously liable, and SOM was directly liable in negligence for allowing an outbreak of a disease in wild abalone populations in the eastern and central zones of the Victorian abalone fishery in or about May 2006. Regent and the Group Members are Abalone Fishery Access Licence holders (‘AFL’).
On 7 June 2012, the Court ordered by consent that Regent provide security for the State’s costs in the sum of $2,070,000.00 in the form of a bank guarantee provided to the Senior Master. On 12 July 2013, the Court ordered by consent that Regent provide additional security for the State’s costs in the amount of $500,000.00 in the form of a bank guarantee provided to the Senior Master. Guarantees were provided on Regent’s behalf by Omni Bridgeway SA, the litigation funder.
Regent settled its claim against the second defendant, SOM. Maurice Blackburn wrote to the Group Members stating:
[O]nce the proceeds of the proposed settlement have been used to pay [Omni Bridgeway], security for costs and [Maurice Blackburn], it is unlikely that group members will receive any money as a result of this settlement.
Each of the Group Members consented to the settlement of the claim against SOM.
On 18 September 2013, Beach JA approved that settlement. His Honour ordered that:
Pursuant to s 33V(2) of the Supreme Court Act 1986, all amounts paid by SOM to Maurice Blackburn under the terms of the deed (Settlement Sum) be distributed as follows:
(a)if, in Maurice Blackburn’s opinion, it is financially beneficial to group members for an amount of the Settlement Sum to be used to satisfy orders that Regent provide security for costs in favour of the first defendant on 7 June 2012 and 12 July 2013, then an amount of the Settlement Sum may be used for that purpose;
(b)from the remainder, any amounts liable to be paid under the terms of the litigation funding agreements between each group member and Omni Bridgeway S.A. be so paid;
(c)any remaining amounts be held by Maurice Blackburn as controlled money in a controlled money account within the meaning of s 3.3.2 of the Legal Profession Act 2004, subject to further orders.
The case proceeded to trial against the State of Victoria between 23 September and 22 October 2013.
On 7 November 2013, Beach JA dismissed the proceeding and gave judgment for the State, finding for it on the issues of duty of care, breach of duty and causation.[1]
[1]See Regent Holdings Pty Ltd v State of Victoria & Anor [2013] VSC 601.
Regent Holdings appealed against that judgment, but then entered into a settlement agreement with the State of Victoria.
The terms of the settlement
Regent and the State executed a Deed of Settlement dated 15 December 2014. The Deed recited that:
in order to avoid the expense, inconvenience, uncertainty and delay of the Appeal and the taxation of the State’s Costs, Regent on its own behalf and on behalf of Group Members and the State have agreed to resolve the Appeal and the State’s Costs on the terms set out in this deed.
The Deed provided that settlement of the claims was conditional upon the obtaining of court approval. The term ‘claims’ was defined to include claims against the State in the proceeding and the ‘Appeal by Regent, on its own behalf and on behalf of the Group Members, including the claims for damages, interest and costs’.
The Deed contained the orders that Regent would seek and the steps that it would then take and provided that the State would consent to such orders.
The Deed provided that Regent would pay ‘the Settlement Sum’ in full and final satisfaction of the State’s Costs within 5 business days of the Court approval ie the Court approving the settlement. The Settlement Sum is $2,570,000.00.
The Group Members retainer and funding arrangements
Every Group Member entered into a retainer agreement with Maurice Blackburn, the plaintiff’s solicitors, and a funding arrangement with Omni Bridgeway SA, who was the litigation funder.
The arrangement between the Group Members, Maurice Blackburn and Omni Bridgeway was as follows:
a. Regent retained Maurice Blackburn as its lawyers in pursuing its claims;
b. Omni Bridgeway was responsible for:
i. paying Maurice Blackburn’s professional costs;
ii. reimbursing Maurice Blackburn’s disbursements;
iii.any adverse costs orders against Regent, including any security for costs.
Any amounts received from the litigation were to be applied in the following order:
a. first, to Omni Bridgeway, as reimbursement of its costs in bringing this claim;
b.secondly, to Maurice Blackburn, for payment of a proportion of its outstanding legal fees;
c.thirdly, 40% of the remainder is payable to Omni Bridgeway as a funding commission; and
d.lastly, the remainder was to be paid to each of the Group Members.
Procedural history
I gave directions approving a notice to be sent to all Group Members notifying them of the application for approval of the settlement. On 24 March 2015, I approved a form of notice to be sent to Group Members. Each member of the group received notice of this application for approval of the settlement. No one gave notice of opposition to the approval of the settlement.
The approval section
Section 33V (1) of the Supreme Court Act 1986 (Vic) requires the approval of the Court for the settlement of a group proceeding. Section 33V(2) states that:
If the Court gives such approval, it may make such orders as it thinks fit with respect to the distribution of any money, including interest, paid under a settlement or paid into court.
Can approval of the settlement be granted by a judge of the Trial Division?
As Regent has filed an appeal, an initial question to be answered is whether a judge of the Trial Division can decide the application to approve the settlement or whether the Court of Appeal must do so.
Regent argued that a Judge of the Trial Division can determine the application, because the ‘court’ permitted to decide the approval application is, or includes, the court in which the proceeding was commenced. The term ‘group proceeding’ includes an appeal.
I consider that that submission is correct. Section 33V gives the court power to approve the settlement. The court is defined by s 31 of the Act to mean the Supreme Court. The term ‘Supreme Court’ is not further defined. However by s 75 of the Constitution Act 1985 (Vic), the Judges of the Court are defined to include all the Judges of the Court. By s 75A the Court is divided into the Court of Appeal and the Trial Division. But both the Court of Appeal and the Trial Division are the Court. Therefore a judge sitting in the Trial Division is the Court for the purposes of s33V of the Supreme Court Act.
A similar approach to the approval of settlements in class actions has been applied in at least one Federal Court decision, in which a judge of the Federal Court approved a settlement after trial and before an appeal was heard.[2] Save for minor differences, the terms of s 33V of the Supreme Court Act are identical to s 33V of the Federal Court of Australia Act 1976.
[2]Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (No.9) [2013] FCA 1350 (Jacobson J).
Why Regent says that the settlement should be approved
Regent argued that the settlement should be approved for the following reasons. First, all Group Members were treated the same in the settlement. Secondly, the State of Victoria had compromised its costs position by a substantial amount. Thirdly, no Group Member had objected to the settlement. Regent submitted that that was unsurprising since all Group Members had signed the retainer and the funding agreement. Fourthly, Maurice Blackburn obtained each of the Group Members’ consent to the settlement of the proceeding against SOM on the basis that that the funds received from that settlement would be used to fund the case against the State. Fifthly, the prospects of Regent succeeding against the State on appeal had to be assessed after taking into account Beach JA’s findings at trial and the memoranda of advice that Regent obtained from counsel. Sixthly, the appeal would only concern Regent as a licence holder in the Western Zone and, even if Regent succeeded on appeal, other Group Members who stood at different levels of economic abstraction would not necessarily succeed.
Regent relied on the consideration that the amounts payable to Omni Bridgeway were for expenditure on disbursements and not for professional fees. Maurice Blackburn had written off substantial professional fees. The amounts payable to Omni Bridgeway and Maurice Blackburn were payable under the funding agreements made with Group Member and had already been authorised by Beach JA’s order of 18 September 2013. Even if the Court approved the settlement, Omni Bridgeway would not recover substantial costs incurred or compensation for its involvement in the litigation.
The principles applicable to the approval of the settlement of a group proceeding
In Downie v Spiral Foods Pty Ltd,[3] J Forrest J described the Court’s jurisdiction under s 33V of the Supreme Court Act as supervisory. The Court considers:
a.whether the proposed settlement is fair and reasonable as between the parties to the litigation, having regard to the claims of the group members;
b.whether the proposed settlement is in the interests of group members as a whole and just not in the interests of the plaintiff and the defendants.
[3][2015] VSC 190 [42]-[57].
The application of the principles
First issue: is the settlement fair and reasonable?
The ‘fair and reasonable’ issue requires consideration of:
(a)the complexity and duration of the litigation (both to date and into the future – particularly if the case is not settled and proceeds to verdict);
(b) the attitude of the group members to the settlement;
(c) the stage of the proceeding at which settlement is proposed;
(d) the relative risks of establishing liability;
(e)the relative risks of establishing loss and damage for both the plaintiff and the group members;
(f) whether the claim would be able to continue to judgment as a class action;
(g) the ability of the defendant to withstand (i.e. to pay) a judgment that is
greater than the settlement sum;
(h)the terms of any advice received from counsel and/or from any independent expert in relation to the issues which arise in the proceeding.
The settlement sum and deductions
As stated, the amount of the settlement sum is $2,570,000, payable by Regent to the State, towards the State’s costs. The settlement sum will be paid out the amount received from the settlement with SOM.
No group member will receive any payment under the settlement.
The complexity and duration of the litigation
Regent’s case involved claims for damages for economic loss caused by alleged negligence and breaches of statutory duties of employees of the State. The existence of such duties requires determination of complex questions, as the authorities to which Beach JA referred illustrate. The trial ran for 19 days and only concerned licence holders in the Western Zone. No assessment of damages occurred. If the appeal succeeded, the matter might be referred back for retrial, with no certainty that the licence holders in any zone would succeed.
The settlement provides certainty and protects the Group Members from liability for costs. The plaintiff’s solicitor expressed the view that the likelihood was that the Settlement Deed represented the best settlement achievable.
The attitude of the Group Members to the settlement
The Group Members were given notice of the settlement approval application and no member lodged a notice of opposition to it.
The stage of the proceeding at which the settlement is proposed
The settlement was agreed after trial and judgment delivered dismissing the proceeding against the State. It is significant that Regent’s claims and the State’s defences to those claims have been considered by Beach JA and the claims dismissed.
The relative risks of establishing liability and the relative risks of establishing loss and damage for both the plaintiff and the Group Members
As stated, Regent’s claim involved challenging issues concerning negligence and the extent of statutory duties and economic loss. Regent failed at trial. The trial judge’s reasons indicate the complexity of the issues on which Regent had to succeed in order to establish an entitlement to damages for economic loss. In addition, I have considered the written advice of counsel, including leading senior counsel who had no involvement in the trial, about the prospects of Regent succeeding.
Risks on causation and assessment of damages
I consider that there is a likelihood that Regent and the Group Members will ultimately be unsuccessful in this proceeding. The issues of causation and assessment of damages raised questions of complexity. The settlement is within the range of reasonable outcomes for complex litigation in which the plaintiff and the Group Members may well fail.
Whether the claim would be able to continue to judgment as a class action?
Whether the claim would be able to proceed to judgment as a class action would depend upon the decisions made as to whether to continue the proceeding and in particular the appeal.
The ability of the defendant to withstand a judgment that is greater than the settlement sum
As the defendant was the State of Victoria, there was no issue about the its capacity to pay a settlement sum.
The terms of any advice received from counsel and/or from any independent expert in relation to the issues which arise in the proceeding
I have referred to the advice that Regent has obtained from counsel. It is appropriate that that advice remain confidential, but I have taken it into account in deciding to approve the settlement.
The second consideration: the representative parties’ interests as against the remainder of the Group Members
The second consideration concerns the representative parties’ interests as against the remainder of the Group Members. The Court examines the internal workings of the settlement and whether individual Group Members are treated differently, particularly in their entitlement to an award of damages.[4]
[4]Downie v Spiral Foods Pty Ltd [2015]VSC 190 [51].
The Court has to be satisfied that the settlement has been undertaken in the interest of Group Members as a whole, and not just in the interests of the plaintiffs and the defendants.[5]
[5]Mercieca v SPI Electricity Pty Ltd [2012] VSC 204.
I have described the details of the Settlement Deed earlier in this judgment. There is no ‘internal differentiation’ in this settlement. No Group Member receives any amount under the settlement.
The litigation funder
Regent also made submissions about the role of the litigation funder, Omni Bridgeway. It submitted that since the High Court decision in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd[6], litigation funders have become commonplace in group proceedings, especially those employing a “closed class” as in this case. There was nothing atypical about the funding agreement. It was relevant that every Group Member, not just the representative party, had agreed to the arrangement and had acceded to, and benefited from, expenditure under the arrangement.
[6](2006) 229 CLR 386.
Costs
The Court in exercising its protective role under s 33V of the Supreme Court Act scrutinizes the quantum of costs and any other deductions from the amounts available to Group Members.[7] In determining whether to approve the deduction of costs from the settlement sum, the Court must be satisfied that the costs claimed are ‘reasonable in the circumstances’.[8] This must occur even when the proposal involves the payment of costs to the party being sued. In this case, the settlement requires Regent to pay a sum towards the State’s costs. This amount will be paid out of the sum paid by SOM. Amounts have already been paid from the SOM settlement to Omni Bridgeway.
[7]Downie v Spiral Foods Pty Ltd [2015] VSC 190[177]-[179].
[8]Downie v Spiral Foods Pty Ltd [2015] VSC 190 [177]-[179].
Counsel for Regent submitted that the reasonableness of the amount of fees can be assessed by reference to what was actually owed under the retainer. He submitted that it was unlikely that any Group Member would receive a payment, even if there was a review of the costs.
The State referred to its own costs and the amount of security which had been provided, as indication of the large amount of costs that had been incurred. The State’s costs on a solicitor/client basis were said to be $6,720,252.30.
To consider the overall operation and reasonableness of the settlement I required evidence from a costs consultant. A costs affidavit was filed by Mr John White, who is a barrister and solicitor of the Supreme Court of Victoria and has experience of more than 30 years in legal costing.
He was retained to review documentation provided and to prepare a report as to whether in his opinion:
(a)the costs paid to Maurice Blackburn by Omni Bridgeway, on behalf of the Plaintiff, for professional charges and disbursements up to and including the trial are reasonable in all the circumstances, and
(b)the costs incurred by the Plaintiff with Maurice Blackburn since the trial are reasonable in all the circumstances.
Mr White stated that the case was difficult and complex, as was evidenced by matters such as the length of the trial, the breadth of factual matters in issue, the potential quantum of the claim, the extent of documentary evidence and the highly technical nature of the evidence, including expert evidence, and the number of counsel briefed, being three on each side.
Mr White stated that in order to formulate an opinion as to whether the costs paid to Maurice Blackburn by Omni Bridgeway, on behalf of the plaintiff, for professional charges and disbursements up to and including the trial were reasonable in all the circumstances, regard should be had to the likely outcome of a hypothetical application issued by the plaintiff pursuant to s 3.4.38 of the Legal Profession Act 2004 seeking taxation of the costs claimed from it by Maurice Blackburn.
Mr White expressed the opinion that it would be highly improbable that the total quantum of the detailed bill would be reduced by more than 20 per cent.
He accordingly, expressed the opinion that the costs paid by Omni Bridgeway, on behalf of the plaintiff, for professional fees and disbursements up to and including the trial were reasonable.
He also expressed the opinion that the quantum of costs incurred by the plaintiff since the trial was within the range one would expect and on that basis most likely reasonable.
Conclusion
I consider that the resolution of the proceeding as proposed in the Settlement Deed and scheme is in the interests of the Group Members as a whole and should be approved. I have taken into account the plaintiff’s chances of success on appeal and the likelihood of obtaining judgment, the lack of opposition, and matters contained in the confidential affidavit that may affect the further conduct of the proceeding.
The claims of Group Members connected with zones other than the Western Zone were not dealt with at trial. However, there is no reason to conclude that claims by Group Members in other zones would not encounter the same complexities and challenges as the plaintiff’s claim did. As previously stated, I have taken into account that no Group Member has opposed the approval of the application.
I have also taken into account evidence contained in the confidential affidavit about the attitude of Omni Bridgeway to the litigation and the state of what was described as the ‘war chest issue’.
I approve the settlement and authorize the entry into it. I will make ancillary orders to give effect to the approval.
What documents should be kept confidential?
Paragraph 5 of the orders that the plaintiff seeks is that :
The Confidential Affidavit of Jacob Isaac Noozhumurry Varghese affirmed 15 May 2015 shall remain confidential and will remain in a sealed envelope marked “not to be opened except by leave of the Court or a Judge” until:
a. the expiration of 28 days; or
b. in the event of an appeal from these orders, any order of the Court of Appeal or this Court.
In Downie v Spiral Foods Pty Ltd, J Forrest J considered the extent to which material filed in support of an application should be kept confidential.[9] His Honour ordered that the confidential affidavit should not be sealed and should be available for inspection on the court file subject to redactions that related to the merits and value of the claim and the reasons for acceptance of the offer made by the defendants, that contained confidential information relating to the plaintiff or any other group member and the parts of the affidavit that related to matters which had been agreed with the defendants to be kept confidential.
[9][2015] VSC 190 [39].
His Honour stated that if a group member was sufficiently interested and wished to obtain access to that material, he would entertain such an application, but only on the basis of the provision of an undertaking as to confidentiality.
Regent filed a redacted version of the solicitor’s confidential affidavit supporting the application. I accept that the parts of the affidavit for which confidentiality is claimed should have that status for the 28 day period. However, I would hear any application by any interested person for earlier access to the affidavit.
Orders
I make the following orders:
1. Pursuant to section 33V(1) of the Supreme Court Act 1986 (Vic) (the Act), the Court approves:
a. the settlement of the group proceeding under a deed of settlement between the plaintiff and the first defendant (the Deed), such settlement to be binding on all group members;
b. the discontinuance of appeal in the Court of Appeal proceeding number S APCI 2013 0176.
2. Pursuant to section 33ZF of the Act, the Court nunc pro tunc authorises the plaintiff to enter into and give effect to the Deed for and on behalf of the group members.
3. Pursuant to sections 33V(2) and 33ZF of the Act, the Court approves the following payments from that money paid by second defendant to Maurice Blackburn (referred to in Order 2(b) of Beach JA made on 18 September 2013):
a. $2,570,000 to the first defendant under the Deed (the Settlement Sum);
b. from the remainder, any amount liable to be paid under the terms of the litigation funding agreements between each group member and Omni Bridgeway S.A., being Exhibit JIV-4 to Jacob Varghese’s Affidavit affirmed 15 May 2015.
4. Pursuant to section 33ZF of the Act, upon payment of the Settlement Sum to the first defendant under the Deed:
a. the bank guarantee No GO108023073 provided by Australia and New Zealand Banking Group Limited for the benefit of the State of Victoria on the Application of Omni Bridgeway S.A. and held by the Senior Master of the Supreme Court of Victoria pursuant to the orders made on 7 June 2012 and 12 July 2013 be returned to the plaintiff’s solicitors; and
b. any previous orders as to costs be vacated.
5. Paragraph two of the order of Ginnane J made on 29 May 2015 is vacated.
6. The Confidential Affidavit of Jacob Isaac Noozhumurry Varghese affirmed 15 May 2015, in its unredacted version, shall remain confidential until:
a. the expiration of 28 days; or
b. in the event of an appeal from these orders, any order of the Court of Appeal or this Court; or
c. further order of the Court.
7. The Plaintiff serve (where applicable, by email) a copy of this order and the Court’s reasons for judgment of 18 August 2015 on all Group Members by 5pm on Wednesday 19 August 2015.
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