Reilly v Australia and New Zealand Banking Group Limited (No 6)
[2024] FCA 965
•26 August 2024
FEDERAL COURT OF AUSTRALIA
Reilly v Australia and New Zealand Banking Group Limited (No 6) [2024] FCA 965
File number(s): VID 133 of 2020 Judgment of: O'BRYAN J Date of judgment: 26 August 2024 Catchwords: REPRESENTATIVE PROCEEDINGS – application for approval of the costs of administering the settlement distribution scheme and the amounts for final distribution to group members Legislation: Federal Court of Australia Act 1976 (Cth), ss 33V, 33ZF and 37AF Cases cited: Fordham v Commonwealth Bank of Australia [2023] FCA 1106
Reilly v Australia and New Zealand Banking Group Limited (No 5) [2023] FCA 896
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 29 Date of last submission/s: 16 August 2024 Date of hearing: Determined on the papers Solicitor for the Applicants: Slater and Gordon Solicitor for the First to Third Respondents: Herbert Smith Freehills Solicitor for the Fourth Respondent: Gilbert + Tobin ORDERS
VID 133 of 2020 BETWEEN: TRACEY REILLY
First Applicant
CATHERINE GALLI
Second Applicant
AND: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522
First Respondent
ZURICH AUSTRALIA LIMITED ABN 92 000 010 195
Second Respondent
ONEPATH GENERAL INSURANCE PTY LIMITED ACN 072 892 365 (and another named in the Schedule)
Third Respondent
ORDER MADE BY:
O'BRYAN J
DATE OF ORDER:
26 AUGUST 2024
THE COURT ORDERS THAT:
1.Order 7(a) of the orders of the Court made on 23 June 2023 be amended to read:
“the amount of $7,824,349.01 for the applicants’ legal costs and disbursements to 16 June 2023, on a solicitor and own client basis, incurred in connection with the proceeding including subsequent to the date of the Settlement Deeds and Settlement Distribution Scheme”.
2.Pursuant to order 8 of the orders of the Court made on 23 June 2023 and ss 33ZF and 33V of the Federal Court of Australia Act 1976 (Cth) (the Act), an additional amount of $406,002.75 from monies paid under the settlement, for the applicants’ legal costs and disbursements from 17 June 2023 incurred in connection with the proceeding including the administration of the Settlement Distribution Scheme, be approved.
3.Pursuant to s 37AF of the Act, to prevent prejudice to the proper administration of justice, the following documents are confidential and are not to be published until further order:
(a)annexure BH-32 to the affidavit of Benedict Tobin Hardwick affirmed on 16 July 2024, being the Settlement Distribution Scheme Administration Proposal from Deloitte Financial Advisory Pty Ltd dated 6 December 2022; and
(b)that part of annexure BH-34 to the affidavit of Benedict Tobin Hardwick affirmed on 16 July 2024 that is confidential annexure KM-04 to the affidavit of Kirsten Marie Morrison affirmed 16 August 2023, being the Settlement Distribution Scheme Administration Proposal from Deloitte Financial Advisory Pty Ltd dated 6 December 2022.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
O’BRYAN J:
Introduction
On 23 June 2023, the Court made orders approving the settlement of this proceeding pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (the Act), with reasons published in Reilly v Australia and New Zealand Banking Group Limited (No 5) [2023] FCA 896. Pursuant to the settlement, an aggregate amount of $47 million was paid by the respondents into a trust account held by the lawyers for the applicants, Slater and Gordon, (referred to in the Settlement Deed as the settlement fund) to be distributed in accordance with a Settlement Distribution Scheme that was approved by the Court. The Court appointed Slater and Gordon as Scheme Administrator of the Settlement Distribution Scheme, with assistance from Deloitte Financial Advisory Pty Ltd (Deloitte), to act in accordance with the rules of the Settlement Distribution Scheme.
Order 7 of the orders made on 23 June 2023 approved the following distributions from monies paid under the settlement pursuant to ss 33ZF and 33V of the Act:
(a)the amount of $7,886,441.64 for the applicants’ legal costs and disbursements to 16 June 2023, on a solicitor and own client basis, incurred in connection with the proceeding including subsequent to the date of the Settlement Deed and Settlement Distribution Scheme; and
(b)the amount of $2,055,060.33, for the applicants’ estimated legal costs and disbursements from 17 June 2023, on an indemnity basis, incurred in connection with the proceeding including the administration of the Settlement Distribution Scheme.
Order 8 of the orders made on 23 June 2023 stipulated that, prior to the distribution of the Residual Distribution Sum (as defined in the Settlement Distribution Scheme), the Scheme Administrator must send to chambers a confidential affidavit deposing as to costs incurred by the applicants and/or the Scheme Administrator since 13 June 2023, so that the Court may make a further order as to the amount of any approved administration costs and the applicants’ legal costs over that period.
In accordance with order 8, on 17 July 2024 the applicants sent to chambers an affidavit of Benedict Tobin Hardwick affirmed on 16 July 2024. Mr Hardwick is a lawyer at Slater and Gordon having the care and conduct of the proceeding on behalf of the applicants. The affidavit was described as “confidential” and made broad ranging claims of confidentiality over its contents. I will return to the confidentiality orders sought by the applicants below. However, it is necessary to record that the claims of confidentiality over the contents of the affidavit involved gross overreach and a failure to appreciate the importance of the public interest in open justice, as reflected in the requirement contained in s 17 of the Act that the jurisdiction of the Court be exercised in open court. The principle of open justice is not absolute, and the Court is empowered under Part VAA of the Act to make suppression or non-publication orders if the order is, relevantly, necessary to prevent prejudice to the proper administration of justice. In the present case, however, the public interest in open justice, particularly in the context of a class action, greatly outweighs the applicants’ private interest in maintaining confidentiality over their evidence.
In his affidavit, Mr Hardwick deposed that:
(a)in respect of the applicants’ legal costs and disbursements up to 16 June 2023, the actual costs incurred were $62,092.63 less than the amount approved by the Court; and
(b)in respect of the applicants’ legal costs and disbursements from 17 June 2023, the actual costs incurred are $396,002.75 higher than the amount approved by the Court, and Slater and Gordon anticipate that a further $10,000 (including GST) will be incurred in professional fees in the final stages of administration of the settlement amount, being a total increase of $406,002.75.
I note for completeness that Mr Hardwick’s affidavit contained (numerically trivial) errors which I have corrected in the preceding paragraph. At paragraph 8 of his affidavit, Mr Hardwick gives a figure of $62,091.84 as the reduction in the applicants’ legal costs and disbursements up to 16 June 2023, but the figures in the tables given at paragraphs 6 and 7 show that the correct number is $62,092.63. At paragraph 13, Mr Hardwick gives a figure of $396,003.32 as the increase in the applicants’ legal costs and disbursements from 17 June 2023, but the figures in the tables at paragraphs 11 and 12 and the figures in paragraph 14 show that the correct number is $396,002.75.
Thus, the net increase in the costs of the proceeding and administration of the settlement is the sum of $343,910.12. Again, I note for completeness that Mr Hardwick’s affidavit contained another (numerically trivial) error in the addition of the increases in costs in paragraph 16.
The applicants seek the Court’s approval pursuant to ss 33ZF and 33V of the Act to make an additional distribution of that amount from the monies paid under the settlement. The respondents informed the Court that they did not wish to be heard on this application.
Before considering the increase in costs, it is appropriate to note the current stage of the distribution of settlement funds.
Distribution of settlement funds
In his affidavit, Mr Hardwick deposed that, on 22 November 2023, Slater and Gordon determined that $37,265,735.31 would be distributed to 55,064 group members in respect of 117,398 insurance policies. When determining the amount of the distribution, Mr Hardwick had regard to the legal costs and disbursements which were approved by the Court on 23 June 2023 as well as anticipated variations to those amounts.
Mr Hardwick’s affidavit explained the procedures undertaken by Slater and Gordon to make the above distribution. This included verifying bank account details provided by registered group members and sending communications to group members who did not provide valid bank account details, requesting they provide valid bank account details. A number of payments were unable to be made by reason of group members failing to provide valid bank account details or failing to complete identification verification processes, which necessitated further steps to effect payment to those group members. At the completion of those steps, $36,277,563.16 had been distributed to group members. There remains a total of $1,625,465.35 of settlement funds.
The applicants seek the Court’s approval to apply $343,910.12 of the remaining settlement funds to the net increase in the costs of the proceeding and administration of the settlement. The residual settlement funds of $1,281,554.66 would then be distributed in the same manner as the first distribution. Mr Hardwick deposed that he did not believe that the net increase in the costs of the proceeding and administration of the settlement would significantly impact the group members participating in the settlement for the following reasons.
First, at the time of Court approval of the Settlement Distribution Scheme, Slater and Gordon expected a total amount of at least $37 million to be available to be distributed to group members. As at the date of the affidavit, after accounting for the net increase in costs, Slater and Gordon expect a total of $37,559,117.82 to be distributed to group members.
Second, group members who successfully submitted their bank account details and received payments have already received more than was estimated in the Notice of Estimated Distribution sent to them prior to settlement approval and will receive further funds upon distribution of the residual sum. Mr Hardwick deposed that, when calculating the amounts that were included in the Notices of Estimated Distribution, Slater and Gordon included a 2.5% buffer to account for any unforeseen costs.
Third, as at the date of his affidavit, the settlement fund had accrued interest which, on an after-tax basis, would supplement the amount available for distribution by approximately $120,000.
Should the increase in costs be approved by the Court?
In his affidavit, Mr Hardwick provided an explanation of the increase in costs from 17 June 2023. The increase has three components.
The first component is on account of an increase in the fees charged and to be charged by Slater and Gordon above the estimated fees as at the date of approval of the settlement. On 23 June 2023, the Court approved an amount of $520,738.33 for the applicants’ estimated professional legal costs from 17 June 2023 onwards. Slater and Gordon have incurred $534,547.08 in professional fee legal costs, which is $13,808.75 higher than the approved amount, and has estimated a further $10,000 in costs until completion of the final distribution. Mr Hardwick deposed that the applicants’ legal costs have been slightly higher than anticipated, partly due to there being more challenges organising payment to group members and more sustained group member engagement than he had anticipated having regard to his experience in the related proceeding against the National Australia Bank. The increase is modest and I am satisfied that it is appropriate for the additional fees to be paid out of the settlement fund.
The second component is a sum of $153,432.20 which was omitted by error from the amounts approved by the Court on 23 June 2023. The sum equates to the amount of GST required to be charged by Deloitte on its fees up to 16 June 2023. The Expert Costs Report of Cate Dealehr dated 2 June 2023, that was tendered at the time of the settlement approval, referred to Deloitte’s charges of $1,534,322 as inclusive of GST when in fact the charges were before GST. The error was identified by Slater and Gordon after the Court had approved the settlement in this proceeding (and in the related proceeding against Westpac Banking Corporation), but before the Court had approved the settlement in the related proceeding against the Commonwealth Bank of Australia (CBA). In the CBA proceeding, the Court approved an additional amount to cover the GST charge, having received evidence explaining the error in Ms Dealehr’s report: Fordham v Commonwealth Bank of Australia [2023] FCA 1106 (Fordham) at [91] and [92]. In the present proceeding, I am satisfied that is appropriate for the additional GST charge to be paid out of the settlement fund.
The third component is a net increase in fees charged by Deloitte in the administration of the Settlement Distribution Scheme of $228,761.80. Mr Hardwick’s affidavit provided a high level explanation of the net increase in fees and attached a revised cost estimate (in the form of a table of fees) that Deloitte had provided Slater and Gordon on 10 November 2023 in relation to this proceeding and the related Westpac proceeding. As explained by Mr Hardwick, the revised cost estimate identified that:
(a)some of the budgeted costs were higher than anticipated;
(b)there were additional costs which had not been anticipated; and
(c)there had been some cost savings from the original estimate.
The evidence adduced by Mr Hardwick with respect to Deloitte’s costs was insufficient to enable the Court to assess properly whether the increased costs were appropriate. The Court will be vigilant to ensure that the interests of group members are protected and that only reasonable costs are charged in a settlement distribution process. For that reason, the Court informed the applicants that further evidence was required with respect to the increase in Deloitte’s costs.
The applicants subsequently filed an affidavit of Kirsten Marie Morrison affirmed 16 August 2024. Ms Morrison is also a lawyer at Slater and Gordon and, together with Mr Hardwick, has the care and conduct of this proceeding on behalf of the applicants, specifically in relation to settlement approval and administration. Ms Morrison’s affidavit annexed a letter from Deloitte providing far more detailed information concerning their original cost estimate and the reasons that the costs incurred from 17 June 2023 were higher than originally anticipated. It is unnecessary to reproduce the detail contained in the Deloitte letter. I am satisfied on the basis of the further evidence that the additional costs incurred in settlement administration were reasonably and properly incurred.
In conclusion, I am satisfied that it is appropriate to approve, pursuant to ss 33ZF and 33V of the Act, payment out of the settlement fund of the net increase in the costs of the proceeding and administration of the settlement in the sum of $343,910.12. I will make orders to the effect that:
(a)order 7(a) of the orders made on 23 June 2023 will be varied such that the amount of $7,886,441.64 which was approved for the applicants’ legal costs and disbursements to 16 June 2023 will be reduced by $62,092.63 to $7,824,349.01; and
(b)order 8 of the orders made on 23 June 2023 will be varied such that an additional amount of $406,002.75 will be approved for the applicants’ estimated legal costs and disbursements from 17 June 2023.
Confidentiality
As noted earlier, Mr Hardwick’s affidavit was described as “confidential” and made broad-ranging claims of confidentiality over its contents. I invited the applicants to file any evidence or submissions in support of the confidentiality claims. Ms Morrison’s affidavit addressed the confidentiality claims.
In her affidavit, Ms Morrison stated that the applicants wished to confine their request for confidentiality orders under s 37AF of the Act to the following material:
(a)annexure BH-31 to Mr Hardwick’s affidavit which contained the expert costs report by Cate Dealehr dated 2 June 2023;
(b)annexure BH-32 to Mr Hardwick’s affidavit which contained Deloitte’s proposal to provide services in connection with the administration of the settlement distribution scheme dated 6 December 2022;
(c)that part of annexure BH-34 to Mr Hardwick’s affidavit which contained annexure KM-04 to the affidavit of Ms Morrison affirmed on 16 August 2023 and filed in the CBA proceeding; and
(d)those parts of annexure KMM-01 to Ms Morrison’s affidavit (being the letter from Deloitte dated 16 August 2024 explaining the increase in their costs as discussed above) highlighted as confidential.
Category (a) must be rejected for the simple reason that Ms Dealehr’s report dated 2 June 2023 was tendered in evidence without restriction at the settlement approval hearing in this proceeding on 16 June 2023. Having been received in open court, there is no justification for now imposing confidentiality restrictions over the document. Further and in any event, I would not have made a non-publication order in respect of that report. Ms Morrison deposed that the applicants sought a non-publication order in respect of the report because it contains a detailed description of Slater and Gordon’s professional rates, resourcing decisions, and internal processes for discovery review, lay and expert evidence preparation, and trial preparation. Ms Morrison deposed that this information is commercially sensitive because it may be applied to proceedings beyond the ANZ/Westpac/CBA consumer credit insurance proceedings and, if it were made publicly available, Slater and Gordon’s competitors would be able to use line items to offer and deliver competing legal services. I do not accept that Ms Dealehr’s report reveals competitively sensitive information. To the extent that it reveals professional fee rates, it is proper that those rates are disclosed publicly. In circumstances where the fees charged by Slater and Gordon, counsel and Deloitte are sought to be paid from the settlement sum, and the payment of those fees is subject to Court approval, there is a public interest in full disclosure of the basis on which the fees have been calculated, including hourly rates.
Categories (b) and (c) relate to the same document, being Deloitte’s proposal to provide services in connection with the administration of the settlement distribution scheme dated 6 December 2022. That document formed annexure KM-04 to the affidavit of Ms Morrison affirmed 16 August 2023 that was read in the CBA proceeding. In the CBA proceeding, I made a non-publication order in respect of that document for the reason that the proposal set out detailed information concerning Deloitte’s methodology for developing and operating the settlement scheme registration and administration process, and therefore contains proprietary know-how belonging to Deloitte which is confidential and the disclosure of which would be commercially detrimental to Deloitte: Fordham at [107]. It is therefore appropriate that I make the same order in this proceeding.
In respect of category (d), Ms Morrison deposed that the applicants are seeking a non-publication order in respect of certain parts of Deloitte’s letter on the basis that those parts disclose detailed explanation of the know-how obtained from Deloitte’s experience on the settlement administration in this proceeding, including Deloitte and Slater and Gordon’s process and workflow to address both planned and unplanned issues. Ms Morrison further deposed that the information regarding price variations also discloses rates, or information from which rates can be derived. Ms Morrison has been informed by Deloitte that the information so disclosed would be valuable to a competitor to Deloitte in seeking to leverage the experience and know-how of Deloitte in undertaking the settlement administration in this proceeding for that competitor to tender for future similar work.
I reject the application for a non-disclosure order in respect of any part of the Deloitte costs letter. Having read the sections of the letter which are sought to be suppressed, I am not persuaded that they are of sufficient competitive significance that they warrant a non-publication order. I consider that the description of work undertaken by Deloitte is anodyne. In so far as the letter enables Deloitte’s fee rates to be calculated, in circumstances where Deloitte’s fees will be paid from the settlement sum and the payment of those fees is subject to Court approval, there is a public interest in full disclosure of the basis on which the fees have been calculated, including rates.
Conclusion
I will make orders in accordance with the above reasons.
I certify that the preceding twenty nine (29) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan. Associate:
Dated: 26 August 2024
SCHEDULE OF PARTIES
VID133/2020 Respondents
Fourth Respondent:
QBE INSURANCE (AUSTRALIA) LIMITED ACN 003 191 035
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