Street v State of Western Australia
[2024] FCA 1368
•29 October 2024
FEDERAL COURT OF AUSTRALIA
Street v State of Western Australia [2024] FCA 1368
File number(s): WAD 237 of 2020 Judgment of: MURPHY J Date of judgment: 29 October 2024 Catchwords: REPRESENTATIVE PROCEEDINGS – application for court approval of settlement under s 33V of the Federal Court of Australia Act 1976 (Cth) – claim by Aboriginal and Torres Strait Islander workers in respect of wages earned but not paid between 1936 and 1972 – relevant principles in relation to settlement approval – key terms of proposed settlement – whether the settlement amount is fair and reasonable – whether proposed deductions are fair and reasonable – consideration of objections to the settlement – deductions from legal costs and funding commission necessary – common fund order made – settlement approved Legislation: Federal Court of Australia Act 1976 (Cth) ss 33V, 33ZB, 33ZF
Racial Discrimination Act 1975 (Cth) s 9
Federal Court Rules2011 (Cth) Div 9.2, r 26.12
Legal Profession Uniform Law (NSW) s 174
Limitation Act 1935 (WA) ss 38, 47
Native Administration Act 1905-1936 (WA)
Native Welfare Act 1905-1954 (WA)
Native Welfare Act 1963 (WA)
Slave Trade Act 1843 (Imp)
Cases cited: Allen & Anor v G8 Education Ltd (No 4) [2024] VSC 487
Augusta Pool 1 UK Ltd v Williamson [2023] NSWCA 93; 111 NSWLR 378
Baltic Shipping Co v Dillon [1991] NSWCA 19; 22 NSWLR 1
Blairgowrie Trading Ltd v Allco Finance Group Ltd (Recs & Mgrs Apptd) (In Liq) (No 3) [2017] FCA 330; 343 ALR 476
BMW Australia Ltd v Brewster [2019] HCA 45; 269 CLR 574
Bolitho v Banksia Securities Ltd (No 18) (remitter) [2021] VSC 666; 69 VR 28
Bradshaw v BSA Limited (No 2) [2022] FCA 1440
Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527
Camilleri v The Trust Company (Nominees) Ltd [2015] FCA 1468
Carkeek v Aubrey F Crawley & Co [2024] NSWSC 86
Carnie v Esanda Finance Corporation Ltd [1995] HCA 9; 182 CLR 398
Chocolate Factory Apartments v Westpoint Finance [2005] NSWSC 784
Collard v State of Western Australia (No 4) [2013] WASC 455; 47 WAR 1
Court v Spotless Group Holdings Ltd [2020] FCA 1730
Darwalla Milling Co Ltd v F Hoffman-La Roche (No 2) [2006] FCA 1388; 236 ALR 322
Downie v Spiral Foods Pty Ltd [2015] VSC 190
Dyczynski v Gibson [2020] FCAFC 120; 280 FCR 583
Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433
Elliott-Carde v McDonald’s Australia Ltd [2023] FCAFC 162; 301 FCR 1
Endeavour River Pty Ltd v MG Responsible Entity Ltd [2019] FCA 1719
Galactic Seven Eleven Litigation Holdings LLC v Davaria [2024] FCAFC 54; 302 FCR 493
Ghee v BT Funds Management Ltd [2023] FCA 1553
Greentree v Jaguar Land Rover Australia Pty Ltd [2023] FCA 1209
HFPS Pty Ltd (Trustee) v Tamaya Resources Ltd (In Liq) (No 3) [2017] FCA 650
In re General Motors Corp Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768 (3rd Cir. 1995)
Kuterba v Sirtex Medical Limited (No 3) [2019] FCA 1374
Mango Boulevard Pty Ltd v Whitton [2019] FCA 490
Mobil Oil Australia Pty Ltd v State of Victoria [2002] HCA 27; 211 CLR 1
Money Max Int Pty Ltd v QBE Insurance Group Ltd [2016] FCAFC 148; 245 FCR 191
O’Donnell v Commonwealth of Australia [2023] FCA 1227
Paroz v Clifford Gouldson Lawyers [2012] QDC 151
Pearson v State of Queensland (No 2) [2020] FCA 619
Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited (No 3) [2018] FCA 1842; 132 ACSR 258
Sister Marie Brigid Arthur (Litigation Representative) v Northern Territory of Australia (No 2) [2020] FCA 215
Timbercorp Finance Pty Ltd (in liquidation) v Collins; Timbercorp Finance Pty Ltd (in liquidation) v Tomes [2016] HCA 44; 259 CLR 212
Trevorrow v State of South Australia (No 5) [2007] SASC 285; 98 SASR 136
Webb v GetSwift Limited (No 7) [2023] FCA 90; 414 ALR 500
Williams v FAI Home Security Pty Ltd (No 4) [2000] FCA 1925; 180 ALR 459
Division: General Division Registry: Western Australia National Practice Area: Administrative and Constitutional Law and Human Rights Number of paragraphs: 410 Date of hearing: 28-29 October 2024 Counsel for the Applicant: Mr WAD Edwards KC and Mr AH Edwards Solicitor for the Applicant: Shine Lawyers Counsel for the Respondent: Mr A Crowe KC and Mr M Walker Solicitor for the Respondent: State Solicitor’s Office Counsel for the First Intervener: Mr AJL Bannon KC and Mr MW Guo Solicitor for the First Intervener: William Roberts Lawyers Counsel for the Second Intervener: Mr DR Sulan and Ms J Ibrahim Solicitor for the Second Intervener: Shine Lawyers REASONS FOR JUDGMENT
WAD 237 of 2020 BETWEEN: MERVYN STREET
Applicant
AND: STATE OF WESTERN AUSTRALIA
Respondent
LLS FUND SERVICES PTY LTD (ABN 51 627 975 213)
First Intervener
SHINE LAWYERS
Second Intervener
MURPHY J:
1. INTRODUCTION
This representative proceeding, colloquially known as the as the “Western Australia Stolen Wages Class Action”, is a significant matter in relation to a historic grievance between the First Nations peoples of Western Australia and the respondent, the State of Western Australia. The proceeding seeks damages for the widespread non-payment and underpayment of wages to Aboriginal and Torres Strait Islander people who worked in Western Australia between 11 December 1936 and 9 June 1972. There is no dispute that over that 36-year period thousands of Aboriginal men, women and children in Western Australia lived under strict legislative controls and many worked for little or no pay. For example, many Aboriginal men and boys worked on pastoral stations as ringers, or stockmen, sometimes from dawn till dusk seven days a week, and many Aboriginal women and girls worked as household domestics and nannies. They were fed or given rations, but provided little or no wages for the work they performed. During that period, many Aboriginal children who had been taken away from their parents and placed in institutions run by the State or by a church, were required to work before and after school and on weekends, and in some cases full-time, in laundries, farms and other places attached to the institutions. Those Aboriginal people were treated in a grossly discriminatory fashion compared to non-Indigenous people.
The applicant, Mr Mervyn Street, is a senior elder of the Gooniyandi People and an acclaimed artist, born circa 1940. The proceeding alleges that he worked on pastoral stations in the Kimberley from when he was around 10 years old, starting on the Louisa Downs station which is his traditional country, and was not paid wages until he was in his 30s. Mr Street brings the case against the State, as a class action under Part IVA of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and also an “old-style” representative proceeding under Division 9.2 of the Federal Court Rules2011 (Cth) (Rules), doing so on his own behalf and on behalf of all Aboriginal persons who during all or part of the period between 1936 and 1972 (claim period) worked in Western Australia under the operation of the Native Administration Act 1905-1936 (WA), the Native Welfare Act 1905-1954 (WA), or the Native Welfare Act 1963 (WA) and Aboriginal persons who claim as their descendants (class members).
These reasons concern an application for Court approval of a proposed settlement of the class action, and are centrally addressed to explaining why the Court is satisfied that it is appropriate to approve the proposed settlement as fair and reasonable in the interests of the class members, and as between the class members. They concern a matter of public importance and are necessarily lengthy. For those who do not wish to wade through the reasons in their entirety, I provide the following summary.
1.1 Summary
On 17 October 2023, the parties entered into a settlement of the proceeding, subject to Court approval (proposed settlement). The proposed settlement is contained in a Deed of Settlement (Settlement Deed), with an annexed Settlement Distribution Scheme (SDS or Scheme), which Scheme has since been revised. Under the Settlement Deed the State promises to pay up to $180.4 million (Settlement Sum), comprised of:
(a)an amount of up to $165 million (Settlement Fund Amount) in compensation; and
(b)an amount of up to $15.4 million (Agreed Costs Component) in respect to the applicant’s party/party costs of the proceeding up to the date of settlement approval.
The proposed settlement includes a public apology by the State. On 28 November 2023 the Legislative Assembly of the Parliament of Western Australian passed the following motion:
That this house formally acknowledges and apologises to Aboriginal and Torres Strait Islander people who worked in Western Australia between 1936 to 1972 for little or no wages.
The Premier of Western Australia moved and spoke in support of the motion, and expressed the following apology:
Today’s apology follows the settlement of a class action led by Mr Mervyn Street on behalf of Aboriginal people across Western Australia. The class action started in 2020 and sought justice for people who, over a long period of time, were subject to discriminatory legislation. This legislation was supposed to protect Aboriginal people, but instead resulted in hardship and exploitation. The controls imposed on Aboriginal people impacted on where they were allowed to work, travel and live. It also impacted on how much money they were paid, how they were paid and how they received their wages and entitlements. Legislation of this kind, particularly in the early part of WA’s colonial history, resulted in Aboriginal people working long hours without receiving any pay or an appropriate amount of pay. Instead, they were often paid through rations such as flour, sugar, tea, and tobacco. The “book down” system, in which people bought necessities on credit at the station store, also meant that some people never saw the money they were meant to be paid. Although the laws changed over the period, many controls remained in place until 1972.
Aboriginal men, women and children worked hard and made enormous contributions to the economic development of this state. However, they received only a fraction of their worth. The fact that this mistreatment existed for Aboriginal workers for decades is a blight on the legacy of successive governments. The fact that our laws facilitated these outcomes brings great shame. For that, we are sorry. These workers - men, women and children - worked under oppressive conditions. In many cases, there was a threat of violence. The impacts of these laws were felt across the state in a range of different work settings. The issues in this matter were complex. I acknowledge that each individual Aboriginal person’s work history will have been unique. However, as a community, many of these experiences were common. During the hearings in the class action proceedings, stories were told of Aboriginal people living and working in harsh conditions. We heard about men working 14-hour days as stockmen and musterers on pastoral stations; women working as domestics, cooking, cleaning and caring for children in homes all over Western Australia; and, on missions, young people working long hours before and after school, including in laundries or on farms attached to the institution.
…
In bringing a close to this shameful part of Western Australia’s history, on behalf of the State of Western Australia, I apologise to the Aboriginal men, women and children who worked in Western Australia between 1936 and 1972, often for decades, for no pay or not enough pay. We acknowledge that many of these people have not lived to see this day. For their family members who remain, we are sorry for the hurt and loss that your loved ones suffered. Their strong shoulders carried the weight of their families and communities. Their strong hands build up this state’s economy. Their strong minds and spirits pursued justice in the decades that followed, leading to this moment and the recognition they rightfully deserved.
To you all, we say sorry.
The proposed settlement is structured such that the quantum of the Settlement Fund Amount depends upon the number of participating class members (defined as “Original Eligible Claimants”):
(a)an Original Eligible Claimant (OEC) is:
(i)a class member who registered during the Court-ordered class member registration process (Registration Process);
(ii)who is alive, or if deceased there exists at least one “Descendant Eligible Claimant” who is eligible for a payment under the SDS; and
(iii)who the Court-appointed Administrator of the SDS is independently reasonably satisfied meets the criteria for eligibility under the Scheme on the basis of credible and cogent evidence (with minimum evidence as specified), including as to identification as an Aboriginal or Torres Strait Islander, having a date of birth before 9 June 1962, provision of a statement that the person was employed by at least one nominated workplace in Western Australia which existed at the relevant time and were paid no or nominal wages during the claim period, and the provision of information allowing payment of an entitlement under the Scheme to be made;
(b)a Descendant Eligible Claimant (DEC) is:
(i)a class member who is the living spouse or child of a deceased OEC who registered during the Registration Process; and
(ii)who the Administrator is reasonably satisfied meets the criteria for eligibility under the SDS.
Orders were made on 14 and 20 November 2023 providing for class members to be given notice of the proposed settlement, and for the conduct of a substantial physical outreach program to Aboriginal communities throughout Western Australia, including in remote locations, so that class members were informed of the requirement to register if they wished to be eligible for a payment under the SDS, and to assist them to register.
The Registration Process was reasonably effective. Although the number of OECs is presently unknown, and the final decision as to eligibility rests with the Administrator under the SDS, the solicitors for the parties have engaged in a process to preliminarily assess the registrations received to date. The parties agree that there are likely to be circa 8,000 to 9,500 OECs once all eligible registrations have been determined by the Administrator (including all late registrations). In my view it is appropriate to assess the fairness of the proposed settlement by reference to the middle of that range, being 8,750 OECs.
On the assumption that there are 8,750 OECs, the Settlement Sum will be $159.775 million, comprising the following payments:
(a)the Settlement Fund Amount of $144.375 million (representing 8,750 OECs multiplied by $16,500 per OEC), to be paid by the State in tranches as the Administrator accepts the eligibility of OECs; and
(b)the Agreed Costs Component (ACC) of $15.4 million, to be paid by the State upon expiry of the time for appeal from the settlement approval orders.
It is important to understand that the proceeding does not relate to the discriminatory and cruel way Aboriginal people were often treated during this appalling period of our history; it is concerned with the fact that many were not paid either properly or at all for their work. In the course of the proceeding the Court heard evidence from many Aboriginal people who were taken away from their families at a young age, placed into an institution run by the State or a church, where they were then required to work for no pay. Many of the children suffered inestimable grief and trauma by being forcibly removed from their families, and many were cruelly treated within the institutions and discriminated against. Many suffered lifelong psychological scars as a result. As is often the case with people, some managed to rise through the discrimination and trauma they were forced to endure and went on to have reasonably happy and productive lives. Others, through no fault of their own, were brought down by the way they were treated and their lives were blighted by it. The stories that I heard will stay with me forever, and I am deeply sorry that First Nations people were so disgracefully treated. The proposed settlement does not attempt to compensate Aboriginal people for the shameful way they were treated.
It is also important to understand that the applicant does not suggest that the proposed settlement represents full compensation for the unpaid or poorly paid work Aboriginal people performed over the 36-year claim period. The Court has reviewed the confidential opinions of expert forensic accountants and economists which attempt to estimate the aggregate wage loss suffered by the great many Aboriginal people who were not properly paid during that period. They offer quite different estimates of the aggregate wage loss likely to have been suffered, which to an extent arises because of the counterfactual behind the opinion of the State’s expert. Whatever expert estimate is used, it is plain that the proposed settlement represents a very substantial discount on full compensation plus interest.
Essentially, the applicant and his lawyers recommend the proposed settlement to the Court as the best result possible given the substantial legal hurdles facing the case, and the substantial risks that the claim brought by the applicant and class members will fail, or will succeed on claims which do not relate to all class members or in relation to which the quantum is relatively low compared to the proposed settlement.
The following matters are salient to my conclusion that it is appropriate to grant approval of the proposed settlement as fair and reasonable in the interests of class members who will be bound by it, including as between class members.
First, the Court has the benefit of comprehensive confidential opinions from senior and junior counsel for the applicant, W.A.D. Edwards KC, J. Creamer, A.H. Edwards and J.A. Brezniak (Counsels’ Opinion), which candidly considers the fairness and reasonableness of the proposed settlement in the interests of class members as a whole considered inter partes, and its fairness and reasonableness inter se, that is, as between class members. Counsel provided their opinions as officers of the Court rather than as advocates for the applicant and class members. Counsel assessed the principal risks and difficulties for the applicant and class members in the proceeding, including by making a risk-weighted assessment in light of the cumulative risks which the proceeding faces. Counsel also gave careful attention to the fairness and reasonableness of the proposed SDS as between class members. Counsel recommended that the Court approve the proposed settlement. It is appropriate to give significant weight to Counsels’ opinion.
Second, many of the claims in the proceeding are novel and difficult, and they carry risks in relation to liability, causation and quantum. Amongst other things, given that most of the claims arise in respect of conduct between 1936 and 1972, they face a significant risk of being barred by the application of various limitation periods upon which the State relies. Further, the class member’s claims are idiosyncratic being based in their individual employment circumstances, and there are likely to be substantial forensic difficulties for many class members in proving factual matters that are alleged to have occurred between 52 and 88 years ago, particularly where the OEC is deceased (as most are) and where most of the institutions and private employers for whom they worked are no longer operating. Many class members’ claims face a significant risk of failing because they cannot prove the factual matters on which their claims depend. The risks and difficulties associated with the claims are cumulative in the sense that one risk follows after another, to the point that it is impossible for the applicant’s lawyers to be confident of success in the proceeding. I am satisfied that there is a significant risk that if the case proceeds to trial the applicant’s and class members’ claims will fail, or they will succeed on claims which relate to only a subset of the class members and for a quantum less than the proposed settlement.
In a case with the substantial risks and difficulties of this proceeding, notwithstanding that it is nowhere near full compensation, a settlement of up to $180.4 million combined with a public apology is comfortably within the range of reasonable outcomes.
Third, the complex and difficult legal issues involved in the proceeding means that if the applicant is successful on the common issues in the initial trial there is likely to be an appeal. Any appeal will inevitably lead to further significant delay. Assuming the appeal process results in findings favourable to the class members, there will be further delay while the parties either attempt to negotiate a groupwide settlement, or a series of individual settlements with the prospect of further mini-trials in relation to any claims that are not compromised. Given the idiosyncratic nature of the class members’ claims, this not a case where it can be said that favourable liability findings will necessarily lead to substantial damages awards in favour of all class members.
The great majority of living class members are elderly, and many have passed away since the proceeding was commenced. It is likely that more class members will pass away during the pendency of any attempt to negotiate a groupwide settlement or a series of individual settlements. The advanced age of many class members, and the importance of them receiving compensation in their lifetime is material to my view that it is appropriate to approve the proposed settlement.
Fourth, the SDS provides for a fair division of the proceeds of the proposed settlement between eligible class members pursuant to uniform principles and procedures, the administration process does not involve “judgment calls” except perhaps in relation to the assessment of what constitutes “cogent and credible” evidence of eligibility, the Scheme provides a meaningful opportunity for review, and if it proceeds as planned the settlement administration process will not involve unreasonable costs or delay.
Fifth, there were 46 objections by class members to the approval of the proposed settlement, most of which were centrally directed to the inadequacy of the settlement amount compared to the aggregate wage loss that class members suffered, and to the contention that the settlement amount does not recognise the harsh or cruel treatment class members suffered. Many of the objections were powerfully made and I was touched by the anguish and hurt some objectors expressed about the discriminatory and unjust way they and their parents were treated, and the lasting legacy of economic and social hardship which arose from that. Their objections reflect the historical wrongs to which the proposed settlement relates, and act as a reminder of the importance of acknowledging the occurrence of those wrongs. I gave careful attention to the objections but, in the circumstances of the case, they do not justify refusing to approve the proposed settlement.
Sixth, there is a question as to whether the legal costs (including disbursements) proposed to be charged by the applicant’s lawyers, Shine Lawyers (Shine), are fair and reasonable and therefore appropriate to be deducted from the proposed settlement. Ultimately, Shine sought approval for legal costs in a total of $29,249,479, plus further monies for transition to the Scheme Administrator. This sum represented a discount, applied by Shine ahead of the settlement approval hearing, from the amount of $31,501,618 recommended as fair and reasonable by the independent Court-appointed Costs Referee, Ms Kerrie Rosati.
Even with Shine’s proposed discount that is a huge amount, which I consider to be excessive. I am persuaded that it is appropriate to adopt most of the independent Costs Referee’s reports, but I do not accept the conclusion that the fair and reasonable costs of the proceeding total $31.5 million, nor those parts of the reports which recommend approval of the amounts Shine charged for paralegals and law clerks. I consider it appropriate to approve Shine’s fees with a reduction of $4 million from the amount approved by the Costs Referee, bringing total costs and disbursements down to approximately $27.5 million. That remains a huge sum, but a $4 million reduction in Shine's costs from those approved by the independent Costs Referee is substantial, even for a large publicly listed firm like Shine.
At least in part, the excessive costs are attributable to excessive legal fees incurred post-settlement. Before the Costs Referee’s reports and before it proposed a discount to its fees, Shine had run up approximately $12 million in fees (not disbursements) including uplift charges for the work it undertook in the post-settlement Registration Process. After the Costs Referee’s reduction those fees came to approximately $11 million and after the discount Shine belatedly proposed those fees came to approximately $8.8 million. The Court should be cautious before approving costs of that magnitude for a post settlement registration process. Because of the characteristics of the cohort of class members the Registration Process had particular difficulties, and Shine performed the work to a high standard, but before it ran up such enormous costs post-settlement Shine should have come before the Court and given notice of that proposed expense.
Had the Court been approached I expect that a significantly less expensive solution could have been found. For example, it might have been appropriate to engage local Indigenous representatives on weekly or monthly contracts rather than hourly rates; or to engage a claims administration service. It might have been appropriate to take a less “Rolls Royce” approach. Shine needed to give greater attention to whether there were cheaper or more efficient ways of achieving a similar outcome, and to keep a much tighter grip than it did on the costs associated with the Registration Process.
Seventh, there is a question as to whether the funding commission sought by the litigation funder which funded the proceeding, LLS Fund Services Pty Ltd (the Funder), is fair and reasonable and therefore appropriate to be deducted from Settlement Sum. The Funder seeks reimbursement of the money it has paid out, being:
(a)$1,045,000 in premiums for after the event insurance (ATE Costs); and
(b)$13,358,868 it has paid to Shine for conducting the proceeding.
Then, for its return on investment in the case the Funder seeks a common fund order of 20% of the gross settlement.
Assuming that there are 8,750 OECs, the gross settlement will be $159.775 million (8,750 OECs x $16,500 plus $15.4 million for the ACC). A common fund order of 20% of the gross settlement would therefore mean a funding commission of approximately $31.955 million.
I am not persuaded that a funding commission of just under $32 million is fair and reasonable in the circumstances of the case. I consider that a funding commission of 16% of the Settlement Sum is “just” pursuant to s 33V(2) of the FCA Act. Assuming there are 8,750 OECs, the commission will total $25,564,000. That amount plus reimbursement of $14.403 million in Project Costs it has paid ($13.358 million in legal costs and $1.045 million for ATE Costs). It represents a commercially realistic return and properly reflects the costs and risks taken on by the Funder. It represents a return on investment (ROI) of 2.77 times the Funder’s expenditure.
Intuitively, 16% seems too low, which gave me cause for some reflection. But it provides a reasonable ROI given the quantum of the settlement and the unusual operation of the funding arrangements which materially reduce the costs and risks the Funder took on. The Funder ceased to fund the case about a year before trial (upon reaching the funding cap); thus it did not fund the case to the mediation at which the settlement was reached, and it did not fund the case for trial even though the proposed settlement was reached only five days before trial. By October 2023 when the proposed settlement was reached, the total legal costs of the proceeding were approximately $18.2 million, and the Funder had paid less than $10 million of that total. If its ATE Costs are included the Funder had paid approximately $11 million prior to the proposed settlement being reached. Overall Shine “funded” the case nearly 50-50 with the Funder, and yet the Funder seeks recovery of a funding commission as if it funded the whole case.
It is also necessary to understand that the requirement for Shine (rather than the Funder) to resource the case to the extent that it did imposed a significant further cost burden on class members through Shine’s 25% uplift fees. By the end of the case (using the Costs Referee’s assessment of reasonable costs of $31.5 million) Shine had charged approximately $2.69 million in uplift fees. Such fees would have been much less had the Funder fully funded the proceeding.
Eighth, the applicant submitted that Mr Street should be paid a $45,000 reimbursement payment to reflect the work he undertook as the representative applicant. I accept that Mr Street worked hard and effectively in his role as the representative applicant, but was troubled as to the amount of that payment given the modest size of the payments to be made per OEC. However, following receipt of further submissions I became persuaded that it is fair and reasonable to allow Mr Street a reimbursement payment of $45,000, and to allow a reimbursement payment of $5,000 for each of the seven sample group members.
The Court expresses its gratitude to the parties and their lawyers for the way in which they conducted the case. The parties’ lawyers provided excellent representation throughout the case, and they maintained a professional approach to each other which made case management more straightforward, particularly during the logistical challenges and interruptions in the preservation of evidence hearings in relatively remote locations. More importantly, the Court thanks the parties and their lawyers for achieving a settlement including a public apology in relation to these historic and grievous wrongs. The Court hopes the settlement will assist Aboriginal and Torres Strait Islander communities to move forward from the trauma they suffered.
I now turn to consider the proposed settlement in detail. I thank the parties for their detailed submissions, upon which I have directly drawn at various points.
2. THE EVIDENCE
The applicant relied upon affidavits of:
(a)Ms Vicki Antzoulatos, a solicitor employed by Shine with the conduct of the proceeding for the applicant, filed 8 October 2024 (First Antzoulatos Affidavit), 22 October 2024 (Second Antzoulatos Affidavit), 25 October 2024 (Third Antzoulatos Affidavit), 28 October 2024 (Fourth Antzoulatos Affidavit), 29 October 2024 (Fifth Antzoulatos Affidavit) and 29 October 2024 (Sixth Antzoulatos Affidavit); and
(b)Ms Sarah Thomson, a solicitor employed by Shine, filed 13 November 2024.
The applicant filed written submissions dated 8 October 2024, supplementary submissions dated 25 October 2024, and further written submissions on 7 November 2024.
The State relied upon affidavits of Mr Daniel Gorman, a solicitor employed in the State Solicitor’s Office with the conduct of the proceeding for the State, filed 14 June 2024 (First Gorman Affidavit), 22 October 2024 (Second Gorman Affidavit) and 25 October 2024 (Third Gorman Affidavit). The State filed written submissions dated 22 October 2024, and further written submissions dated 27 October 2024.
The Funder relied upon affidavits of Mr Stephen Conrad, an executive officer of the Funder, filed 10 October 2024 (First Conrad Affidavit) and 24 October 2024 (Second Conrad Affidavit), and the First Antzoulatos Affidavit. The Funder filed written submissions dated 10 October 2024, submissions in reply dated 24 October 2024, and further submissions on 1 November 2024.
Shine was given leave to intervene. It filed written submissions dated 22 October 2024.
3. THE CLASS
The class members to whom this proceeding relates are persons who:
(a)are Aboriginal or Torres Strait Islander persons who lived in Western Australia during all or part of the period from 11 December 1936 to 9 June 1972;
(b)during all or part of the claim period were a “native” as defined by:
(i)s 2 of the Native Administration Act 1905-1936 (WA) (as amended from time to time in the claim period) (the 1936 Act), including by the Native Welfare Act 1905-1954 (WA) (the 1954 Act); and/or
(ii)s 4 of the Native Welfare Act 1963 (WA) (as amended) (the 1963 Act); and
(c)during all or part of the claim period worked in Western Australia at a time when they were a “Controlled Native” or had their property controlled under the 1936 Act, the 1954 Act or the 1963 Act (collectively, the Control Acts),
all persons meeting sub-paragraphs (a) to (c) being a Working Controlled Aboriginal, and if a Working Controlled Aboriginal has died (Deceased Working Controlled Aboriginal), then any legal personal representative or beneficiary of the estate of the Deceased Working Controlled Aboriginal who has the capacity to claim on behalf of that estate. Any person who has a right (equitable or otherwise) in respect of the administration of, or property forming part of, the estate of the Deceased Working Controlled Aboriginal is also a class member.
3.1 The Class Member Registration Process
The proceeding was commenced as an “open class” class action in October 2020.
Prior to filing the proceeding Shine attempted to have class members register their interest in participating in the case, and it continued its efforts to have class members register throughout the course of the case.
Pursuant to orders made on 26 May 2021, the Court approved the form and content of an opt out notice, an information brochure, an advertisement and an announcement to be broadcast on radio. Shine engaged experts, including Aboriginal experts, to assist in drafting the information to be provided to class members so as to maximise the prospect that it would be understandable and effective for a cohort of Aboriginal class members which is highly vulnerable, with a high degree of socio-economic disadvantage, low levels of literacy and numeracy, in which many class members are of advancing years and living in remote locations.
Pursuant to those orders Shine conducted a physical outreach program by attending 62 communities in Western Australia to communicate with class members in relation to the proceeding and the opt out process. As part of that program, Shine also sought to identify sample group members to put forward their specific claims. A substantial number of class members registered to participate in the class action in the course of that outreach program.
On 17 October 2023, the parties reached the proposed settlement. On 2 November 2023, the applicant filed an interlocutory application seeking Court approval of the proposed settlement, and interlocutory orders including orders for:
(a)class member registration and class closure, to the effect that only class members who register and are found by the Administrator to be eligible will be entitled to share in the proposed settlement, and that class members who do not register will be bound by the settlement but will not be permitted to seek any benefit under the settlement, without leave of the Court; and
(b)a Notice of Proposed Settlement (Settlement Notice) and an information brochure to be provided to class members to inform them of the proposed settlement, of the requirement to register in order to participate in the proposed settlement, and of their right to object to the proposed settlement.
The Settlement Deed provided that a registration process was a requirement of the proposed settlement. Indeed, the Settlement Fund Amount is calculated by reference to the number of registered OECs multiplied by $16,500 per OEC, capped at $165 million. The Settlement Deed requires that a class member be registered and be found to be eligible by the Administrator (and thus an OEC) before the State is required to make a payment of $16,500 in respect of that OEC. Absent a registration process there would be no Settlement Fund Amount. Further:
(a)the registration form to be utilised would collect all the information the State requires before making a $16,500 payment relating to that OEC. That removed the need for two notice procedures, one to give notice of the proposed settlement and one for settlement distribution. Two separate notice procedures was likely to cause substantial delay and extra cost, in large part because of the necessity to use physical outreach programs to reach the class, and also had the potential to confuse class members; and
(b)the vast majority of living OECs are elderly, having worked between 1936 and 1972, and it was important to streamline processes to allow faster distribution of settlement amounts.
In the circumstances the Court concluded that a class member registration process was appropriate.
Shine again engaged experts, including Aboriginal experts, this time to assist in drafting the Settlement Notice and information brochure to be provided to class members so as to maximise the prospect that it would be understandable and effective for a cohort of class members with the particular characteristics of this class. The Court approved the Settlement Notice and information brochure in the terms proposed.
On 14 November 2023 the Court made orders requiring the publication of the Settlement Notice and information brochure:
(a)to the communities and towns listed in the orders;
(b)via a physical outreach program described in the orders;
(c)on a page of the Shine website titled “Western Australia Stolen Wages Class Action”;
(d)on the Federal Court website;
(e)to the next of kin deceased persons on the customer list for the “2012 Reparations Scheme”; and
(f)in such other manner the applicant considered best calculated to bring them to the attention of class members.
The orders also required publication of advertisements regarding the proposed settlement in newspapers and by radio.
In compliance with the 14 November 2023 orders:
(a)advertisements of the proposed settlement were published in 18 newspapers in Western Australia;
(b)radio announcements in relation to the proposed settlement were broadcast on 31 radio stations operating in Western Australia;
(c)the Settlement Notice and information brochure were published on Shine’s website, and also on the Federal Court website and made available for inspection at each Federal Court registry;
(d)the Settlement Notice and information brochure were sent by post to all persons not identified as deceased who were on the “customer list” for the State 2012 Reparations Scheme that was established in relation to stolen wages in Western Australia, and for whom the State held postal information;
(e)the Settlement Notice and information brochure were sent by email to all persons and Aboriginal organisations to whom an opt out notice was provided, and to those individuals and Aboriginal organisations who provided email addresses in connection with the State 2012 Reparations Scheme; and
(f)the Settlement Notice and information brochure were communicated along with updates via direct electronic and postal mailouts on 16 different occasions between 30 November 2023 and 19 September 2024.
Given the characteristics of the cohort of class members the physical outreach program to Aboriginal communities was central to informing class members of the proposed settlement, of the need to register to participate in the proposed settlement, and of their right to object to the proposed settlement if they wished. Between 19 November 2023 and 15 June 2024, the Shine team of lawyers, law clerks and paralegals visited 104 locations across Western Australia. At each town or community visited as part of the outreach program, Shine hosted an information session, generally lasting for 2-3 hours, and after each session, the Shine team would provide copies of the Settlement Notice and registration forms to key stakeholders in the community or town and to people who were not able to attend. Shine also:
(a)held 21 additional information and registration sessions upon invitation to provide information to class members who were unable to travel to an ordinary information session;
(b)distributed the settlement material to any community members who requested copies for family members and to key community facilities;
(c)attended residences or other community locations to take registrations from class members who did not or could not attend the larger sessions;
(d)conducted further registration and information sessions via video link; and
(e)where Shine was unable to visit a location in person due to the remoteness of that community, the applicant took steps to contact communities to arrange assistance to community members, for example, by providing a video link between the Community Office and Shine.
On 17 June 2024 the Court made orders to extend the registration date and to require the republication of the Settlement Notice and information brochure. I made these orders following a case management hearing where Shine put on evidence to the effect that many class members would miss out on the opportunity to register if the original registration deadline was maintained. The evidence was to the effect that the rate at which registration forms were being received indicated that class members were continuing to learn about the proceedings.
Pursuant to the orders made 17 June 2024 the Shine team travelled back to Western Australia in August and September 2024 and conducted further information sessions in a further seven locations upon invitation to AGMs of various Aboriginal land councils, and large communities where Shine was informed by stakeholders that there was still a number of class members who had not completed a registration form and required assistance.
140 of the locations listed in the orders made 14 November 2023 were not visited as part of the outreach program. In respect of 102 of those places, Shine considered the populations were so small and so remote that the cost and time of scheduling an in-person visit was disproportionate to the likely level of class member engagement. In respect of the remaining communities, populations often were able to attend information sessions held nearby. Flooding prevented an information session in one community, but Shine provided registration details to a key contact there.
Up to 30 September 2024, Shine received 15,178 registration forms on behalf of class members who had registered electronically, on the phone with Shine team members, in person at an outreach information session, or using a hardcopy registration form.
3.2 Class closure
On 20 November 2023 the Court made orders for class member registration and class closure. The orders provide:
1.Pursuant to s 33ZF of the Federal Court of Australia Act 1976 (Cth) (the Act), any Group Member who does not register under the Registration Process:
(a)will remain a group member for all purposes of this proceeding; and
(b)shall not without leave of the Court be permitted to seek any benefit under the proposed settlement, if the settlement is approved by the Court (otherwise than in accordance with clauses 23 to 26 of the proposed Settlement Distribution Scheme).
2.For the purposes of order 1, a group member will be taken to have registered under the Registration Process if they submit an Application for Registration Form or an amended or supplemented Application for Registration Form by the Registration Date that is in accordance with clauses 8 and 9 of the Settlement Distribution Scheme. A failure to provide the additional information sought in the Application for Registration Form that is not referred to in clause 9 of the Settlement Distribution Scheme does not mean the person so lodging an Application for Registration Form is not registered under the Registration Process.
…
Clause 22 to 26 of the proposed SDS relates to late registrations. The balance of the relevant orders included a process for Shine to endeavour to rectify deficiencies in the registration forms provided to it, and to report to the Court in that regard.
The effect of the class closure orders, coupled with the release in the Settlement Deed, means that class members who neither opted out nor registered by the extended registration deadline continue to be class members; are therefore bound by the release in the Settlement Deed, but precluded by the orders from sharing in the compensation achieved through the proposed settlement.
3.3 Deficient registrations
By the orders made 20 November 2023 Shine was directed to attempt to contact and rectify registration forms for people who lodged an incomplete form, and for Shine to report to the Court identifying applications that were received that did not meet the requirements of the Registration Process (Deficient Registrations), before the settlement approval hearing.
In the Third Antzoulatos Affidavit Ms Antzoulatos deposed as to the number of Deficient Registrations and Shine’s rectification efforts. She said that, following amendments to the SDS agreed on 4 October 2024 which sought to reduce barriers to registration, many Deficient Registrations have been rectified and more will be rectified.
She deposed that, as at 30 September 2024, Shine had assessed 4,176 Registrations as Deficient Registrations for not meeting the minimum requirements prescribed by clause 8 and/or 9 of the SDS. Following amendments to the SDS and relaxation of the eligibility criteria the Shine team had reviewed 3,619 (87%) of these Deficient Registrations, and have rectified 1,009 (24%) of the total. She provided the following reasons for the Deficient Registrations:
(a)366 required a signature;
(b)1,743 did not provided current identification; and
(c)1,030 failed to meet one or more (or a combination of) the other eligibility criteria.
In Ms Antzoulatos’ view, where only the signature or identification requirements are not met, a large portion will ultimately be assessed as eligible registrations. This is because the 1,009 Deficient Registrations that have already been rectified were of that type, and the only reason that more were not rectified already is that Shine ran out of time to contact all the relevant class members prior to the settlement approval hearing. In her view, with more time, rectification numbers should increase.
This leaves a not-insignificant group of 1,030 where the rectification work will be more difficult, for example because there is a possibility that class members who did not record a date of birth or a name of an Original Potential Claimant did not do so because they are precluded from doing so by lack of records, or perhaps by cultural factors which prevent the sharing of certain information.
Shine has made commendable efforts, at huge expense, to have class members register, and the process cannot go on forever. Under the SDS the Administrator is required to make efforts to rectify Deficient Registrations, and the Court expects that the Administrator will take a practical approach to the requirement for credible and cogent evidence to satisfy the eligibility criteria, and take into account to the particular vulnerabilities and characteristics of the cohort of class members.
3.4 Late registrations
Because of the characteristics of the cohort of class members it is appropriate to take a flexible approach to compliance with the registration deadline. On the eve of the settlement approval hearing on 28 October 2024 Ms Antzoulatos deposed that 350 registrations had been received between the extended registration deadline of 30 September 2024 and the settlement approval hearing. The settlement approval orders provide for those late registrants who are found to be eligible to be included in the settlement distribution.
3.5 The number of registrants
In the First Antzoulatos Affidavit Ms Antzoulatos deposed that Shine received 15,178 registration forms from potential claimants between 14 November 2023 and 30 September 2024. She broke those registrations down into the following categories:
(a)2,576 registration forms received on behalf of Original Potential Claimants;
(b)11,241 registration forms received on behalf of Descendant Potential Claimants;
(c)1,067 duplicate registration forms;
(d)41 registration forms that have since been withdrawn;
(e)22 registration forms that have not indicated whether they are lodging a living claim or descendant claim; and
(f)231 registration forms that are incomplete or received from Papua New Guinea.
In the Third Antzoulatos Affidavit, Ms Antzoulatos states that after de-duplicating the dataset, there are approximately 14,000 registrants. After reviewing the registrations and accounting for late registrants, Shine’s preliminary assessment is that there are approximately 9,500 Original Potential Claimants. Shine has undertaken an initial eligibility assessment and applied the State’s estimated acceptance rate of between 85% and 90% to produce an estimate of 8,000 to 8,500 OECs. Taking the State’s higher acceptance rate, the number comprises approximately 2,331 living OECs and 6,129 deceased OECs.
In the settlement approval hearing it was common ground that the range of likely outcomes in terms of the number of OECs is between 8,000 and 9,500.
4. OVERVIEW OF THE APPLICANT’S CASE
The proceeding is centrally based in the provisions of the Control Acts, the terms of which changed over the claim period.
So far as private employment is concerned:
(a)under the 1936 Act it was not permissible to employ Aboriginals without a permit granted by a State government Protector or Inspector (save for “half-blood” or less persons who did not live in the manner of “full blood” Aboriginal persons, to use the regrettable terms from that legislation). Under the 1954 Act the permit system ceased to exist, and it instead provided that all Aboriginals who were employed or engaged “shall be under the supervision” of the Commissioner of Native Welfare (Commissioner). Following passage of the 1963 Act it was no longer provided that Aboriginals be employed or engaged “under the supervision” of the Commissioner;
(b)under the 1936 and 1954 Acts, agreements with Aboriginals for service or employment had to be witnessed by an authorised person and provide for “substantial, good and sufficient rations, clothing and blankets”; and
(c)under each of the Control Acts, the Inspector or the Commissioner had a right of access to all premises where Aboriginals worked or lived.
So far as employment within State-run or church-run institutions is concerned:
(a)under each of the Control Acts, either Aboriginals could be removed and confined to reserves or institutions and the inmates of such reserves or institutions were obliged to follow all reasonable instructions and commands of the manager and could be disciplined, including by specified forms of corporal punishment, or it was permissible to make regulations to permit those things; and
(b)under the 1936 Act, Aboriginal inmates of reserves or institutions could be “called upon to work during such reasonable hours as the superintendent or manager may direct”, but no person under the age of 14 (or the age of 16 following the 1954 Act) could be compelled to work or placed out at employment without the consent of the Commissioner. The power to call on an Aboriginal inmate to undertake work during reasonable hours ceased following passage of the 1954 Act, but Aboriginal inmates could be required to undertake “industrial training” of 4-6 hours a day.
The proceeding makes the following broad claims.
Fiduciary claims: The essence of the fiduciary claims is that by the combination of the protective purpose of the powers available to the State under the 1936, 1954 and 1963 Acts (for the currency of each), the power of the State to affect the interests of working Aboriginals who were “controlled” under those Acts (Working Controlled Aboriginals), and the vulnerability and reliance of Working Controlled Aboriginals on the State’s exercise of those powers, there existed a fiduciary relationship between the State and Working Controlled Aboriginals attached to the exercise or non-exercise of statutory powers. This relationship is alleged to give rise to several duties:
(a)the principal duties are the “Work Duties”, alleged to be owed to Working Controlled Aboriginals in connection with specified statutory powers; and
(b)secondary limited duties (for persons who were “Native Wards” during the currency of the 1936 and 1954 Acts) are the “Ward Duties”, alleged to arise by reason of the same specified statutory powers but with the addition of the statutory guardian/ward relationship expressed in those Acts.
In each case, Mr Street relies on the acts and omissions of the Commissioner, Protectors, Inspectors, Superintendents and Managers (Relevant Officers) as servants or agents of the State.
Under the umbrella of the fiduciary claims it is alleged that class members were entitled to fair compensation for the work they performed:
(a)in the case of work performed by Aboriginal people for private employers (e.g. pastoral stations), the claim against the State is based on the existence of the fiduciary relationship alleged to found the Work or Ward Duties which should have led the State to exercise its power to require the employment arrangements to be such that fair compensation was both payable and paid, supervise them, and pursue the workers’ claims for payment on their behalf against the private employer;
(b)in the case of work performed by Aboriginal people within State-run institutions, the claim against the State is put in the same way, but more directly because the State was the employer;
(c)in the case of work performed by Aboriginal people within “non-State-run” institutions (e.g. religious missions), the claim is also direct, on the footing that the superintendents of those institutions were acting as servants or agents of the State, and therefore the State was the employer; and
(d)it is also put on the alternative footing that compulsory unpaid work of the kind alleged at those places was beyond the power conferred by the Acts, or otherwise repugnant to the imperial proscription on slavery.
Direct quantum meruit Aboriginal Institution Claims: An overlapping basis for the claims of some class members is the claim against the State in respect of work required to be done by Aboriginal people, typically children, at Aboriginal Institutions for no pay – either because the Aboriginal Institutions were State-run, or because the managers of “non-State run” Aboriginal Institutions (such as missions) were acting as servants or agents of the State, and therefore the State was the employer.
Statutory duty claims: An overlapping basis for the claims of some class members is the claim for breach of statutory duty alleging conduct amounting to dealing in persons in order to be dealt with as slaves contrary to ss 2 and 3 of the Slave Trade Act 1843 (Imp) (Slave Trade Act). That claim asserts the existence of the statutory tort and its breach by (for example) the State knowingly causing or permitting an Aboriginal person to be admitted to an Aboriginal Institution to perform work under conditions of slavery. This claim is maintained for those who did work while in an Aboriginal Institution at any time in the claim period, and those who performed work under the permit system of employment for which the 1936 Act provided.
Trust claims: Additional claims are made concerning what are described as the Lost Wages, Management, Ward and Saved Wages Trusts. Each is alleged to be an express or implied statutory private trust arising from the operation of the relevant provisions of one of the Control Acts. For instance, under the 1936 Act the Commissioner was empowered to direct that a portion of wages be paid to him, and the State accepts that amounts were in fact paid and held (being the Saved Wages Trust).
RDA claims: The final claim arises under the Racial Discrimination Act 1975 (Cth) (RDA). The applicant alleges that the class members generally have certain common characteristics – in particular, low education, literacy and numeracy, limited financial means and access to legal advice, and mistrust of government. The essence of the RDA claim is that the State 2012 Reparation Scheme in relation to the non-payment or underpayment of wages to Aboriginal workers failed to have proper regard to those characteristics and had the effect of nullifying or impairing the recognition, enjoyment or exercise, on an equal footing, of the class members’ human rights. It is also alleged to have been administered in a way which increased the prospect that people would either not apply, or be unsuccessful if they did. The claim is brought on behalf of (at least) all class members who were alive at the time a complaint in this regard was filed with the Australian Human Rights Commission on 21 July 2020.
The relief sought for the fiduciary claims, the statutory duty claims and the trust claims is declaratory relief and general law relief by way of equitable compensation, account (and interest on such monetary relief as is awarded). The relief sought on account of the RDA claims is declaratory and statutory damages under s 46PO(4)(d) of the Australian Human Rights Commission Act 1986 (Cth), aggravated and exemplary damages and an apology.
5. THE PRINCIPLES RELEVANT TO SETTLEMENT APPROVAL
5.1 Under Part IVA of the FCA
The applicable principles in relation to settlement approval of a class action brought under Part IVA of the FCA Act are well established. Section 33V(1) provides that a representative proceeding may not be settled or discontinued without the approval of the Court. Section 33V(2) provides that if the Court gives such an approval, it may make such orders as are just with respect to the distribution of any money paid under a settlement or paid into the Court.
As I said in Webb v GetSwift Limited (No 7) [2023] FCA 90; 414 ALR 500 at [15]-[16]:
The applicable principles in relation to settlement approval under s 33V of the FCA Act are now well-established. The Court’s fundamental task is to determine whether the settlement is fair and reasonable and in the interests of the group members who will be bound by it, including as between the group members inter se: see for example, Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [7]-[8]; Kelly v Willmott Forests Ltd (in liq) (No 4) (2016) 335 ALR 439; 112 ACSR 584; [2016] FCA 323 at [68]-[77]; Camilleri v Trust Company (Nominees) Ltd [2015] FCA 1468 at [5]; Blairgowrie Trading Ltd v Allco Finance Group Ltd (recs and mgrs. apptd) (in liq) (No 3) (2017) 343 ALR 476; 118 ACSR 614; [2017] FCA 330 at [81]; Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527 at [12]; McKenzie v Cash Converters International Ltd (No 3) [2019] FCA 10 at [23]-[24]; Smith v Commonwealth (No 2) [2020] FCA 837 at [6]-[12]; and Prygodicz v Commonwealth (No 2) (2021) 173 ALD 277; [2021] FCA 634 at [85]-[88].
In undertaking that task, the Court:
(a)assumes an onerous and protective role in relation to group members’ interests, in some ways similar to Court approval of settlements on behalf of persons with a legal disability;
(b)must be astute to recognise that the interests of the parties before it, and those of the group as a whole (or as between some members of the group and other members), may not wholly coincide;
(c)relatedly to the second point, should be alive to the possibility that a settlement may reflect conflicts of interest or conflicts of duty and interest between participants in the common enterprise which has conducted the representative proceeding;
(d)should understand that at the point of settlement approval, the interests of the parties will ordinarily have merged in the settlement. It is likely that they both will have become ‘friends of the deal’. As a result, both sides may not critique the settlement from the perspectives of any group members who may suffer a detriment or obtain lesser benefits through the settlement; and
(e)must decide whether the proposed settlement is within the range of reasonable outcomes, rather than whether it is the best outcome which might have been won by better bargaining.
The Class Actions Practice Note (GPN-CA) at [15.5] sets out the following factors the Court may consider on an application to approve a settlement:
(a)the complexity and likely duration of the litigation;
(b)the reaction of the class to the settlement;
(c)the stage of the proceedings;
(d)the risks of establishing liability;
(e)the risks of establishing loss or damage;
(f)the risks of maintaining a class action;
(g)the ability of the respondent to withstand a greater judgment;
(h)the range of reasonableness of the settlement in light of the best recovery;
(i)the range of reasonableness of the settlement in light of all the attendant risks of litigation; and
(j)the terms of any advice received from counsel and/or from any independent expert in relation to the issues which arise in the proceeding.
Those factors are derived from Williams v FAI Home Security Pty Ltd (No 4) [2000] FCA 1925; 180 ALR 459 at [19] (Goldberg J) which relied on the factors identified by the United States Court of Appeals for the Third Circuit in In re General Motors Corp Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768 (3rd Cir. 1995). There is no requirement to deal with each of these factors; they are to be approached as a useful guide, subject to the circumstances of the particular case: Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527 at [13] (Murphy J).
In practical terms, there are three primary aspects to any proposed settlement, which attract different considerations:
(a)whether the settlement inter partes is fair and reasonable having regard to the interests of the class members, considered as a whole;
(b)whether the proposed arrangements for distributing the Settlement Sum inter se among the class members are fair and reasonable, again taking the class members as a whole; and
(c)whether the proposed deductions from the Settlement Sum, for example, for past or future legal costs, for any insurance premiums, and for remuneration of any litigation funder, are fair and reasonable in all the circumstances.
5.2 Under Division 9.2 of the Rules
Rule 9.21 relevantly provides:
Representative party - general
(1)A proceeding may be started and continued by or against one or more persons who have the same interest in the proceeding, as representing all or some of the persons who have the same interest and could have been parties to the proceeding.
(2)The applicant may apply to the Court for an order appointing one or more of the respondents or other persons to represent all or some of the persons against whom the proceeding is brought.
…
Unlike Part IVA this rule contemplates representative proceedings by either an applicant or a respondent.
Rule 9.22 relevantly provides:
(1)An order made in a proceeding for or against a representative party is binding on each person represented by the representative party.
(2)However, the order can be enforced against a person who is not a party only if the Court gives leave.
…
Nothing in Division 9.2 of the Rules requires leave or approval of the Court before a representative applicant (or representative respondent) can settle a representative proceeding brought under the Division. There is no provision akin to s 33V of the FCA Act. Rule 26.12(4), however, provides that “a representative party must not discontinue a party’s claim without first obtaining the leave of the Court.”
As I explained in Sister Marie Brigid Arthur (Litigation Representative) v Northern Territory of Australia (No 2) [2020] FCA 215 at [74]-[79] and O’Donnell v Commonwealth of Australia [2023] FCA 1227 at [18], the authorities indicate that an applicant in a Division 9.2 representative proceeding should not be permitted to compromise a claim in a way which affects the rights of members of the represented class without leave of the Court. Division 9.2 is to be treated as “a flexible rule of convenience” with the Court retaining “the power to reshape proceedings at a later stage”: see Carnie v Esanda Finance Corporation Ltd [1995] HCA 9; 182 CLR 398 at 422 (Toohey and Gaudron JJ).
In my view it is appropriate to approach settlement of an “old style” representative proceeding brought under Division 9.2 of the Rules on the same basis as settlement of a representative proceeding under Part IVA of the FCA Act. Before approving a settlement in a Division 9.2 proceeding which affects the rights of represented persons, the Court should be satisfied that the compromise is fair and reasonable in the interests of the represented persons and as between them: Arthur at [79].
6. THE KEY TERMS OF THE PROPOSED SETTLEMENT
Under the proposed settlement the State promises to pay the applicant and class members the Settlement Sum, being an amount of up to $180.4 million, comprising:
(a)the Settlement Fund Amount, being an amount of up to $165 million, calculated by multiplying $16,500 by the number of OECs, up to 10,000 OECs (on the basis of the eligibility criteria in the SDS, as previously described), to be paid by the State in tranches as the Administrator accepts the eligibility of OECs; and
(b)the Agreed Costs Component, being an amount of $15.4 million, being party/party costs assessed by the Costs Referee.
The Settlement Fund Amount is not to be understood as a series of individual settlements of a particular amount to be paid to each OEC, but rather it is a settlement on a common fund basis where the quantum of the fund is ascertained by accumulating amounts paid on account of (but not to) each OEC.
The Settlement Fund Amount is not a fixed sum, and the intersection between the Settlement Deed and the SDS means the latter has implications for ascertainment of what the Settlement Fund Amount is; not just for how it is distributed. The State’s covenant to pay the Settlement Fund Amount capped at $165 million is limited by the Administrator’s determination of the number of OECs, according to the criteria in cl 50 of the SDS. It is common ground between the parties that the eligibility criteria under cl 50 are not intended to create difficult barriers, and over the course of the Registration Process the State progressively agreed to weaken those requirements as it became apparent that they caused difficulties for class members who wished to register.
The exact ascertainment of the Settlement Fund Amount will not occur until after the Administrator has made eligibility determinations (which can take into account information provided by Shine and be fast-tracked by State confirmation. This means that the parties and the Court do not yet have data which enables exact calculation of the Settlement Fund Amount. But as I have said, the solicitors for the parties have engaged in a process to preliminarily assess the OECs registered to date. The parties agree that there are likely to be circa 8,000 to 9,500 OECs at the conclusion of the Registration Process, and the Court will assess the proposed settlement by reference to the middle of that range.
The Agreed Costs Component of $15.4 million is a maximum sum for party/party costs, rather than a fixed sum. But it has become a fixed sum by the Costs Referee’s assessment that the applicant’s party/party costs exceed $15.4 million.
7. THE SALIENT CONSIDERATIONS FOR SETTLEMENT APPROVAL
7.1 The releases and bars against suit
Clause 9 of the Settlement Deed provides the following releases:
On and from the Exhaustion of Appeal Date:
9.1This Deed may be pleaded as a bar to any further proceedings by the Applicant and Group Members made in, arising out of or in connection with, whether directly or indirectly, the allegations in and the facts, matters and/or circumstances of the Proceeding, against the State Party (including the Respondent’s present and former officers, servants, employees, agents, successors and assigns). Such a bar will not prevent the Scheme Administrator, the Applicant or any Group Members from making any application to the Court in connection with the administration of the Settlement Distribution Scheme.
9.2The Applicant and Group Members release and forever discharge the State Party (including the Respondent’s present and former officers, servants, employees, agents, successors and assigns), from all actions, proceedings, claims and demands whatsoever which the Applicant and Group Members or any person claiming by, through or under any of them may now or hereafter have against them or any of them for loss or damage sustained by any Applicant or Group Member or any person claiming by, through or under them as a result of or arising out of or in connection with, whether directly or indirectly, the allegations in and the facts, matters and/or circumstances giving rise to the Proceeding.
9.3The Applicant and the Group Members acknowledge that they, or any person acting on their behalf, have no further claims or demands against the State Party (including the Respondent’s present and former officers, servants, employees, agents, successors and assigns), as a result of, or arising out of or in connection with, whether directly or indirectly, the allegations in, and the facts, matters and/or circumstances giving rise to the Proceeding.
The Settlement Deed does not contain a definition of the claims made in the proceeding. But, broadly put, the proceeding brings claims under various causes of action regarding the non-payment or underpayment of wages to Aboriginal men, women and children during the claim period, and a racial discrimination claim regarding the State Reparation Scheme in relation to non-payment or underpayment of wages to Aboriginal workers.
The extent of the proposed release of “all actions, proceedings, claims and demands whatsoever” which class members may have “as a result of or arising out of or in connection with, whether directly or indirectly, the allegations in and the facts, matters and/or circumstances giving rise to the Proceeding” was unclear in my view. The breadth of the release and bar against suit gave rise to a concern that the Settlement Deed might purport to effect a release of class members’ claims not raised in the proceeding and non-common claims based in their individual circumstances. For example, it might be argued that the claims of an Aboriginal child who sought to bring a suit against the State for alleged unlawful removal from her family and placement in one of the institutions which are the subject of the unpaid wages claims in the proceeding, or against the State for physical or sexual abuse in one of those institutions, might be argued to arise indirectly from “the facts, matters and/or circumstances giving rise to the Proceeding”. Yet the proceeding does not advance such claims.
I considered a release in those terms to be impermissible as this proceeding does not advance any such claims, and the applicant does not have representative authority under Part IVA of the FCA Act beyond the scope of the common claims under s 33C. The applicant represents group members “only with respect to the claim the subject of [the] proceeding, but not with respect to their individual claims.”: Timbercorp Finance Pty Ltd (in liquidation) v Collins; Timbercorp Finance Pty Ltd (in liquidation) v Tomes [2016] HCA 44; 259 CLR 212 at [39], [49], [53]-[54] (French CJ, Kiefel, Keane and Nettle JJ), [122] and [141]-[142] (Gordon J); Dyczynski v Gibson [2020] FCAFC 120; 280 FCR 583 at [96], [106(a)], [201], [249]-[251] (Murphy and Colvin JJ), and [395]-[396] (Lee J). The applicant’s representative authority is not, however, strictly limited to the claims actually pleaded in the proceeding. In Mobil Oil Australia Pty Ltd v State of Victoria [2002] HCA 27; 211 CLR 1 at [34] Gaudron, Gummow and Hayne JJ explained that what is decided in a class action is “the claims that are made, or could be made, against the defendant by all those in the “class” or “group” that is identified in the proceeding” (emphasis added).
When the Court suggested that the proposed releases and bars against suit were arguably impermissible the parties conferred and agreed to the following order, which the Court has made.
Any releases, or covenants not to sue given by Group Members are restricted to the claims the subject of this proceeding, and similar or related claims that could have been the subject of this proceeding, insofar as such releases and covenants not to sue are consistent with Part IVA of the Federal Court of Australia Act.
With that restriction to the operation of the releases and bars against suit the Court considers the releases to be within the scope of the applicant’s authority.
7.2 The preclusion of unregistered class members sharing in the settlement
An important feature of the proposed settlement is that the releases together with the class member registration and class closure orders mean that class members that neither opted out nor eligibly registered pursuant to those orders continue to be class members and therefore bound by the releases. In effect their claims will be merged such that they lose their right to sue and they will not receive compensation under the settlement.
While that may seem harsh for such class members, I am nevertheless satisfied that the proposed settlement is fair and reasonable. Essentially that is because:
(a)the extensive registration and outreach program undertaken by Shine which was well-performed;
(b)the flexible approach taken in relation to Deficient Registrations given the particular characteristics of the cohort of class members;
(c)the number of registrants achieved through the Registration Process;
(d)the several extensions of the deadline for registration; and
(e)the fact that even after post-settlement approval the Administrator can admit further late registrants (and the State informed the Court that it would take a cooperative approach to that).
I am satisfied that class members were given ample notice that, should they neither eligibly register nor opt out before the deadline, they would be bound by the proposed settlement but be unable to share in the compensation under the settlement.
I considered it to be appropriate to make the class closure orders because:
(a)through the proposed settlement the State sought, as far as practicable, to achieve finality in relation to the claims which are the subject of the proceeding. It would only have practical finality if class closure orders were made so that class members who did not opt out, but who failed to register despite the comprehensive publication regime, and extensive outreach program are bound into the settlement but not entitled to recover under the settlement. I was satisfied that class closure was fair and reasonable given the comprehensive publication regime and outreach program;
(b)the proposed settlement will benefit the substantial body of class members who made the effort to register their claims, which would permit them to recover compensation without the uncertainty and risk of the case proceeding to trial. Through the publication regime and outreach program class members who had not opted out were informed that should they not register before the deadline (which was then extended) they would be bound by the proposed settlement and thus lose their right to claim damages but be precluded from sharing in the settlement monies;
(c)it was open to the Court to extend the period for registration, and it did so on several occasions. Even after settlement approval the SDS provides that the Administrator is able to accept late registrations. The State informed the Court that it would take a cooperative approach in that regard; and
(d)class closure orders would have to be made at some point, and the most efficient course was that they be made then.
Further, class members were given the opportunity to object to the settlement, and none objected to the preclusion of class members who neither opt out nor eligibly register. This preclusion is a necessary part of the settlement to afford the State finality in respect of the claims that were or could have been brought in the proceeding.
7.3 Counsels’ Opinion
The Court has the benefit of two comprehensive confidential opinions from senior and junior counsel for the applicant which candidly consider the fairness and reasonableness of the proposed settlement as between the parties, and its fairness as between class members. Counsel provided their opinions as officers of the Court rather than as advocates for the applicant and class members. Counsel considered the risks and difficulties facing class members in avoiding the operation of the time limitation defences raised by the State; in proving factual matters from more than 50 years ago including where the person alleged to have performed unpaid work is deceased and the employer or institution where they worked is no longer operating or in existence; in establishing the existence of the alleged Work Duties and Ward Duties and in establishing that the State was liable for any breaches of such duties if they were found to exist; in establishing the existence of the quantum meruit claims; in relation to questions of statutory interpretation including in relation to Imperial proscriptions on slavery; in establishing the existence of any of the trusts in individual cases as a factual matter; in establishing the existence of the alleged statutory duty; in establishing liability in respect of the RDA claims; and associated with achieving quantum in excess of the proposed settlement.
Counsel provided a risk-weighted assessment of the reasonableness of the proposed settlement having regard to the risks and difficulties the proceeding faces, and as against best recovery. Counsel recommended that the Court approve the proposed settlement as fair and reasonable inter partes in the interests of the class members to be bound to it. Counsel also gave careful attention to the fairness and reasonableness of the proposed SDS, and recommended that the Court approve the proposed settlement as fair and reasonable as between the class members.
The Court has given significant weight to Counsels’ Opinion.
7.4 The stage of the proceedings at which settlement was reached
The parties reached the proposed settlement after eight days of testimony by the applicant and a number of class members in the preservation of evidence hearing, after all the evidence for the trial was filed, after the exchange of expert opinions in relation to quantum, following a series of mediations, and five days before the trial was listed to commence. By that point the applicant had filed detailed written opening submissions for the trial, and the State had prepared a detailed confidential written outline of their position for the mediation which the Court has reviewed.
The proposed settlement was reached at a point in the proceeding when the parties and their lawyers were in a position to make an informed assessment of the evidence to be adduced at trial, the strengths and weaknesses of their respective cases on liability and quantum, and the costs likely to be incurred by proceeding to trial. This also favours approval of the proposed settlement.
7.5 The complexity and likely duration of the litigation
The litigation has been on foot since 2019, and it was for trial in October 2023 on an estimate of four weeks, eight days of testimony already having been heard in the preservation of evidence hearing. The initial trial involved 165 factual and legal issues for determination. The applicant’s written opening submissions exceeded 230 pages in length, without dealing with the State’s defences which were to be addressed in reply.
The claims advanced by the applicant are at the high-end of legal complexity and some are attended by considerable difficulty. Many of the legal issues are novel, particularly with respect to the establishment of the alleged fiduciary duties that comprise a central part of the applicant’s case, and the factual issues are complicated by the need for individualised assessments in respect to each class member.
Whoever loses the initial trial is likely to appeal. The complexity and likely duration of the litigation weigh heavily in favour of approving the settlement.
7.6 The prospect of appeals and the age of the class members
The difficult legal issues involved in the proceeding means that if the applicant is successful on the common issues in the initial trial there is likely to be an appeal, which will take significant time. Then, if the appeal findings are favourable to the class members, more delay will occur while the parties attempt to negotiate either a groupwide settlement or a series of individual settlements, in each case with the prospect of further mini-trials over any claims that are not compromised. Given the highly individualised nature of the claims of class members this not a case where it could be said that favourable liability findings will necessarily lead to substantial damages awards in favour of all class members.
Shine submits that, consistently with the Court’s power under ss 33V and 33ZF of the FCA Act, the manner in which any legal costs are to be apportioned, including the way in which the Applicant’s Actual Costs are to apportioned, is subject to the Court’s discretion to decide what is “just”. It says that is also recognised clause 8.7 of the Settlement Deed which provides that the ACC will be paid to the applicant or at his direction “or as the Court orders”.
It contends that its proposed apportionment of the ACC and the Applicant’s Actual Costs is fair and reasonable in all the circumstances because:
(a)Shine bore the risk and burden of the majority of costs in this proceeding – being approximately $16 million of the total $29.4 million in legal costs and disbursements (i.e., approximately 54% of all legal costs and disbursements incurred). It says that although the litigation would not have commenced but for the Funder’s funding it is equally true that the litigation would not have continued (and, ultimately, successfully settled) without Shine’s significant contribution to the legal costs of the case. It contends that it is therefore fair and reasonable for Shine to be proportionately awarded 54% of the Agreed Costs Component and the equivalent percentage split in the subsequent deductions from the Settlement Fund Amount for the payment of the balance of the Applicant’s Actual Costs;
(b)Shine was also forced to bear additional cost and risk because there were lengthy periods of time between Shine incurring legal costs and the ultimate payment of invoices by the Funder;
(c)while the Funder partially funded the Outreach Program which resulted in a higher number of registrations of affected class members, Shine funded an equivalent amount in respect of the costs of that program;
(d)Shine claims costs of the proceeding have been assessed by the Costs Referee as fair and reasonable; and
(e)while Shine’s costs and disbursements totalled $33.2 million, Shine accepted the proposed reductions by the Costs Referee to $31.5 million and voluntarily resolved to apply a significant further discount of $2.25 million to its charges which brought the total cost and disbursements down to $29.25 million.
Shine notes that the SDS contemplates the payment of funds in tranches progressively over time depending upon the number of registrations that are accepted as being eligible for payment. It says that there is therefore uncertainty as to the time by which the administration of the SDS will be completed. It argues that, having regard to the circumstances outlined above, it is fair and reasonable for Shine to be reimbursed promptly and separately for its fees from the ACC, with any remaining costs of the SDS to apply the same percentage split until such time as the Funder is fully reimbursed for its funding contribution.
Shine further argues that, while not much turns on the contractual entitlements conferred on the Funder under the LFA and the SLT (because of the discretion to decide what is “just” under s 33V(2) of the FCA Act), the apportionment it proposes is nonetheless consistent with the terms of the Settlement Deed and the LFA. In particular, it says that under the LFA, the Funder’s entitlement to payment as a first priority is limited to the applicant’s share of the costs, as opposed to costs generally incurred in connection with the proceedings.
It submits that under clause 6.1 of the LFA, the Funder is entitled to “LLS Entitlements” from any “Claim Proceeds”, and that:
(a)“Claim Proceeds” relevantly includes “any agreement in respect of costs, any money received as part of a claims resolution process… settlement [or] judgment...”;
(b)“LLS Entitlements” relevantly means “an amount equal to the Claimant’s Share of the Project Costs,” including the legal costs and disbursements associated with the proceeding and any alternative dispute resolution process;
(c)“Claimant’s Share” is defined to mean “the share borne by the Claimant calculated by reference to the proportion that the amount of the Claims bears to the total amount of the Relevant Claims”;
(d)“Claimant” means Mr Street; and
(e)“Relevant Claims” means “claims of persons who have, or may have, claims which are the same or similar to the Claims, against some or all of the Respondents. Unless otherwise stated, Relevant Claims include the Claim [being the legal claim or claims of the applicant against any respondent].”
On Shine’s argument:
(a)under clause 6.1(a) of the LFA, upon receipt of the Claim Proceeds, the applicant agrees to instruct Shine to pay the LLS Entitlements (i.e., including the applicant’s share of the costs) to the Funder in accordance with cl 6.2(b) of the LFA;
(b)under clause 6.2(b)(i) of the LFA, from the Claim Proceeds, the Claimant and Shine will, as a first priority, pay the LLS Entitlements (i.e., including the applicant’s share of the costs) to the Funder within 7 days of receipt of the Claim Proceeds.
Shine contends that the Funder has no entitlement to the entirety of the ACC (or the Applicant’s Actual Costs) as a matter of first priority. It argues that the Funder is only entitled to priority payment of the “LLS Entitlement” (being the applicant’s share of the claim and costs, relative to all other class members).
13.3 The Funder’s submissions.
The Funder submits that the terms of the LFA between it and the applicant, and the terms of the SLT between it and Shine, provide that the Funder is to be paid first from all “Claim Proceeds” (as defined). It says that under the LFA, the Funder has priority in relation to the $15.4 million ACC from the State, so as to reimburse it for the $13.358 million it has paid to Shine, plus reimbursement of its ATE Costs, plus part payment of its funding commission.
However, the Funder proposes a concession, which involves the $15.4 million ACC being distributed as follows:
(a)first, $80,000 in reimbursement to the applicant and sample group members;
(b)second, $150,000 as payment to the Costs Referee for past invoices;
(c)third, reimbursement to the Funder of approximately $13.358 million it paid to Shine for legal costs;
(d)fourth, reimbursement to the Funder of approximately $1.045 million it paid in ATE Costs; and
(e)fifth, the remaining $766,132, going towards the Funder’s commission.
The Funder calculates its commission under subparagraph (e) above on the basis of 20% of the $15.4 million ACC, which equals $3.08 million. The Funder then seeks the balance of its 20% commission attributable to the ACC ($2,313,869) to be paid from the first tranche of the Settlement Fund Amount.
The Funder submits that the balance of the first tranche of the Settlement Fund Amount, and each subsequent tranche, should be distributed as follows:
(a)first, to each OEC in respect of which the tranche is paid, the proposed minimum payment of $10,000;
(b)second, 20% of the gross Settlement Fund Amount of each tranche to the Funder on account of commission (noting for the first tranche, the Funder would receive the part commission of $2,313,869 referred to above plus 20% of the gross Settlement Fund Amount. Then, for the second tranche payment onwards, the Funder would receive 20% of the gross Settlement Fund Amount tranche paid);
(c)third, for accrual of reserves for administration costs and the “Top-up Payment Reserve” contemplated (from which top-up payments to OECs are paid), and payment of Shine’s unpaid costs and disbursements.
Thus the Funder submits that it should be paid all of the $15.4 million ACCC amount in reimbursement of costs paid to Shine, ATE Costs and part payment of commission, and the balance of its funding commission should be paid to it from the Settlement Fund Amount in priority to any payment of Remaining Costs to Shine, but not in priority to base payments due to OECs under the SDS.
13.4 Analysis
I do not accept Shine’s contentions as to the proper construction of the LFA and the SLT.
The LFA provides that:
(a)Claim Proceeds includes any monies recovered by virtue of any costs order or an agreement in respect of costs. It therefore includes the ACC;
(b)Project Costs relevantly includes all legal costs paid by the Funder to Shine and its ATE Costs;
(c)the costs to which Shine’s interlocutory application relates fall within the definition of Remaining Costs under the LFA, and also the definition of Remaining Costs under the CCA between Shine and the applicant; and
(d) the “LLS Entitlements” comprising “the Claimant’s Share of the Project Costs” and the Funder’s commission is to be paid to the Funder as first priority, and the Remaining Costs are to be paid to Shine as second priority (cl 6.2(b)(i) and (ii)).
Under the LFA the Claimant’s share of the Claim Proceeds is the third priority, but it is common ground that the $10,000 base payment in respect of each OEC is to be set aside by the Administrator to the Minimum Payment Reserve Account before reimbursement or payment of legal costs and funding commission.
The SLT expressly provides that Shine must act consistently with the LFA, and not seek to recover any Remaining Costs other than in accordance with the SLT and the LFA.
In my view the LFA and SLT provide that the Funder has priority over Shine in relation to all Claim Proceeds, including the ACC. The SLT requires Shine to act consistently with the LFA.
With respect to the priority between Shine and the Funder in relation to the $15.4 million ACC, Shine’s reliance on the limitation in the definition of “Claimant’s Share” to “the share borne by [Mr Street of the ACC] calculated by reference to the proportion that the amount of the Claim bears to the total amount of the Relevant Claims” is misconceived. At present there is only one Claimant, the applicant. No other class member has as yet been admitted as an eligible claimant under the SDS. The legal costs incurred in the proceeding are the applicant’s costs, and the class members had (and have) no liability to Shine for legal costs. I consider the ACC is paid by the State to defray the party/party costs the applicant incurred. That is recognised in clause 8.7 of the Settlement Deed which states “[t]he Agreed Costs Component or any tranche thereof will be paid to the Applicant, or at his direction, or as the Court orders…” (emphasis added).
If the case had not settled there would likely have been some legal costs attributable to individual eligible class members, but here all of the legal costs incurred are the applicant’s costs. Thus, the applicant’s share of the ACC is the entirety of the ACC, and under the LFA and the SLT the Funder is entitled to first priority in obtaining reimbursement of the legal costs it has paid.
Further, even if the definition of “Claimant’s Share” reflects the parties’ intention in relation to one Claimant only and (contrary to my view) there is presently more than one Claimant, the priority terms replicate the Funder’s first priority in relation to any other Claimant who is admitted as eligible to receive a payment under the SDS. Thus, the Funder has first priority in relation to other Claimants’ shares of the Agreed Costs Component, if that was the case.
However the LFA is with the applicant, and whether those terms should apply across to all class members is a matter for the Court. Both Shine and the Funder accepted, the Court’s task under s 33V(2) of the FCA Act is to approve the deduction and payment of reasonable and proportionate costs from the settlement, and to approve the deduction and payment of reasonable and proportionate litigation funding charges, on the basis of what the Court considers to be “just”. They accepted that the exercise of the power to approve the quantum of costs and/or funding charges to be deducted, and the priority of such payments, pursuant to s 33V of the Act requires consideration against all the relevant circumstances, including but not limited to the applicable costs agreement and LFA. In that sense, not much may turn on the particular terms of any applicable costs agreement or LFA: Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited (No 3) [2018] FCA 1842; 132 ACSR 258 at [112], [117] (Murphy J).
Even so, to my mind the starting point is that Shine and the Funder, unlike class members for example, are sophisticated repeat players in class actions and litigation funding. The contractual bargain they struck should not lightly be departed from, and there is a public interest in keeping people to their freely entered bargains: Baltic Shipping Co v Dillon [1991] NSWCA 19; 22 NSWLR 1 at 9 (Gleeson CJ).
In relation to the ACC, I consider it would not be “just” pursuant to s 33V to order that the Funder lose its priority in relation to the Project Costs it invested in the case. It should be reimbursed its legal costs of $13.358 million and its ATE Costs of $1.045 million as first priority from the ACC. In that way the Funder will no longer be “out of pocket” and the only remaining amount to be paid to it is its return of investment, the funding commission.
I take a different view however in relation to the fairness of Shine being required to wait until after the Funder has been paid the entirety of its funding commission before Shine commences to recover any of the very substantial costs it has incurred and carried. That is what the contractual arrangements between the applicant and the Funder in the LFA, and between Shine and the Funder in the SLT require, but I am satisfied that it would not be “just” in all the circumstances to so order.
Shine submits that the costs sharing across the whole proceeding was 54% Shine / 46% Funder. The Funder says the relevant consideration is not costs incurred but rather risk taken on. It contends (and I accept) that Shine knew that 75% of their fees would be paid as incurred, regardless of the outcome of the proceeding, while the Funder's expenditure was entirely at risk. I accept too that unpaid work in progress is of a different character to advancing cash, as the Funder did.
I accept that the Funder was at risk for the nearly $10 million it advanced in legal costs up to the point of settlement, and the $1.045 million in ATE Costs it paid. But the Funder’s share of the risk in the case is not as it suggests. And, while there is a public interest in holding Shine to the bargain it entered into with the Funder, the following matters are material to my view:
(a)the Funder’s entitlement to first priority reflects the view that it was to fund the proceeding. As it eventuated, it funded only half of the proceeding, and the balance was “funded” by Shine;
(b)up to the point of settlement Shine incurred and carried more than $8.2 million in legal costs above the $10 million funding cap. That amount included disbursements, and therefore involved advancing cash. At that point Shine had resourced nearly 50% of the case, which it would lose if the case was unsuccessful, and it would receive no risk commission if the case was successful. It is unlikely that that was Shine’s intention when the case was commenced. The 25% uplift cannot be seen as a risk commission. It usually barely covers borrowing costs and wage expenditure given the time value of money;
(c)it was open to the Funder to continue to fund the proceeding after the funding cap was reached but it chose not to do so. Alternatively, it was open to the Funder to reinstate funding when the case was approaching trial, but it chose not to do so;
(d)it was directly in the Funder’s interests for the Registration Process to be extensive and well performed so that as many class members as possible registered. Because the Funder seeks a 20% funding commission, the greater the number of registered OECs the greater its total funding commission would be. Even then the Funder did not fully fund the case. By the settlement approval hearing, after the Costs Referee’s reductions, Shine claimed legal costs of $31.5 million which (less the $13.358 million which the Funder had paid) meant Shine had carried approximately $18 million in costs to that point. There was no real risk that it would not recover the reasonable post-settlement component of those costs, but that expenditure increased the case resourcing shouldered by Shine;
(e)there was no guarantee of settlement occurring when it did, five days before trial. If the case had continued, as it might have, Shine would have been on the hook for further substantial costs and disbursements which it would lose if the case was unsuccessful. The Funder had not agreed to reinstate funding even at that point; and
(f)the Funder did not meet its end of the bargain. The evidence shows that the Funder was contractually obligated to pay Shine’s invoices within 30 days, subject to an ability to obtain a refund or credit note if the Costs Referee engaged by the Funder later found the costs to be unreasonable. The Funder did not comply with those terms and the time period between the issuance of a final invoice and payment of that invoice was significant, with an average of 196 days delay which forced Shine to carry more of the costs and risk of the case that it had bargained for.
The amount of the reasonable legal costs Shine carried is reduced by my disallowance of $4 million of its fees from the amount approved by the Costs Referee, but it is nevertheless appropriate to treat it as having carried approximately 50% of the costs and risk of the case.
Taking all of this into account, in my view it is “just” that the priority of payment as between the Funder and Shine be such that after the Funder has been reimbursed its Project Costs, Shine receive what is left of the ACC in part payment of the Applicant’s Actual Costs, and thereafter as provided in the SDS, from each tranche, Shine be paid the Applicant’s Actual Costs and any Transitional Allowance in an equal amount to that which the Funder is paid its funding commission, and at the same times, until the Applicant’s Actual Costs are paid in full. The amount due to Shine for the Applicant’s Actual Costs is substantially less than the amount due to the Funder for its commission, so Shine will be paid out before the Funder is paid out.
CONCLUSION
The Court has provided the parties with draft orders to reflect these reasons. The parties should confer and provide any suggested changes, but reflecting these reasons, within 7 days.
I certify that the preceding four hundred and ten (410) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Murphy. Associate:
Dated: 27 November 2024
SCHEDULE 1 – FUNDER’S CASE SCHEDULE
Name of case and description Type of claim Citation Percentage of gross (a) In Blairgowrie Trading Ltd v Allco Finance Group Ltd (Recs and Mgrs apt) (Federal Court of Australia, NSD1609/2013), a common fund order was made at resolution with a commission rate of 30% of the net resolution sum (22.1% of the gross resolution sum). Shareholder (2017) 343 ALR 476,
515–516 at [143]–
[160].22.1% (b) In CaasonInvestmentsPtyLimitedvCao(No2) (Federal Court of Australia, NSD1558/2012), a common fund order was made at resolution approving a rate of 30% of the gross resolution sum. Shareholder [2018] FCA 527 at
[165].30% (c) In Petersen Superannuation Fund Pty Ltd v Bank of Queensland Ltd (No 3) (Federal Court of Australia, NSD362/2016), Murphy J declined to award the commission rate of 25% sought as it would leave only approximately $250,000, or 2% of the resolution sum, to be distributed amongst group members and instead, made a common fund order at resolution that resulted in a commission payment to the funder of 8.3% of the gross resolution sum. Investor (against bank which operated accounts of Ponzi scheme architect) (2018) 132 ACSR
258, 260 at [5] and
262 at [14].8.3% (d) In Hopkins v Macmahon Holdings Limited (Federal Court of Australia, NSD1346/2015), a common fund order was made at resolution that resulted in a commission payment to the funder of an amount representing 19% of the gross resolution sum, or 35% of the net resolution sum. Shareholder [2018] FCA 2061 at
[10].19% (e) In Money Max Int Pty Limited v QBE Insurance Group Limited (Federal Court of Australia, VID513/2015), a common fund order was made at resolution that resulted in a commission payment to the funder of an amount representing 23.2% of the gross resolution sum, or 27.5% of the net resolution sum. Shareholder (2018) 358 ALR 382,
384-5 at [8].23.2% (f) In Kuterba v Sirtex Medical Limited (Federal Court of Australia, VID1375/2017), a common fund order was made at resolution that resulted in a commission payment to the funder of an amount representing 25% of the gross settlement sum. Shareholder [2019] FCA 1374 at
[7].25% (g) In Hall v Slater & Gordon Limited (Federal Court of Australia, VID1213/2018), a common fund order was made at resolution that resulted in a commission payment to the funder of an amount representing 21.92% of the gross resolution sum, or 28.07% of the net resolution sum. Shareholder [2018] FCA 2071 at
[84]–[97].21.92% (h) In Pearson v State of Queensland (Federal Court of Australia, QUD714/2016), a common fund order of 20% of the gross settlement sum was left in place by Murphy J on settlement approval, but the evidence on the hearing where the early common fund order was set was that the funder (LLS) had committed to a low rate mindful of the social justice aspect of that case (which was on behalf of very disadvantaged Aboriginal persons). Human Rights [2020] FCA 619 (and
see [2017] FCA
1096).20% (i) In Uren v RMBL Investments & Anor (Federal Court of Australia, VID1093/2018), a common fund order was made at resolution which resulted in a return to funders of 25% of the gross resolution sum Shareholder [2020] FCA 647 at
[48].25% (j) in Webster atf the Clar Pty Ltd Superfund Trust v Murray Goulburn Co- Operative Co Limited & Ors (Federal Court of Australia, VID508/2017), a common fund order was made which resulted in a return to the funders of 23% of the gross settlement sum. Shareholder [2020] FCA 1053 at
[125];
[2020] FCA 1405.23% (k) In Court v Spotless Group Holdings Limited (Federal Court of Australia, VID561/2017), a common fund order was made which resulted in a return to the funders of 22.5% of the settlement sum, net of costs (20.5% of the gross settlement sum). Shareholder [2020] FCA 1730
[101].20.5% (l) In Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd & Anor (NSD544/2019), a common fund order was made which resulted in a return to the funder of 25% of the gross settlement sum. Consumer (junk insurance) (2020) 385 ALR 625,
633 at [28].25% (m) In Evans v Davantage Group Pty Ltd (No 3) (Federal Court of Australia, VID982/2018), a common fund-type order was made which resulted in a return to the funder of 28.77% of the gross settlement sum. A further 43.5% of the residual resolution sum of $680,000 was returned to the funder (representing a return to the funder of an additional 3.11% of the original resolution sum), not included in the right-hand column. Consumer (motor vehicle warranties) (2021) 398 ALR
490, 507 at [113].
[2021] FCA 70 at
[39(b)], [53], and
[59].28.77% (n) In Hall v Arnold Bloch Leibler (No 2) (Federal Court of Australia, VID1010/2019), a common fund-type order was made which resulted in a return to the funder of 28% of the gross settlement sum. Shareholder (against legal advisor) [2022] FCA 163. 28% (o) In Quirk v Suncorp Portfolio Services Pty Ltd in its capacity as trustee for the Suncorp Master Trust (No 2) (New South Wales Supreme Court, 2019/193556), a common fund order was made which resulted in a return to the funder of 37% of the net settlement sum. Superannuation [2022] NSWSC 1457
[45]-[51].25% (p) In Bradshaw v BSA Ltd (No 2) (Federal Court of Australia, VID 488/2020), a common fund order was made which resulted in a return to the funder (LLS) of 18.66% of the gross settlement sum. Bromberg J based the rate, inter alia, on the fact that there are lower financial risks associated with an employment class action, which attracted the no costs jurisdiction of s 570 of the FairWorkAct2009 (Cth). LLS had sought a higher rate be approved than the Court ultimately allowed. Employment [2022] FCA 1440 at
[168] to [170].18.66% (q) In Hall v Pitcher Partners (Federal Court of Australia, VID918/2018), a common fund order was made which resulted in a return to the funder of 28% of the gross settlement sum. Shareholder (against auditor) [2022] FCA 1524 at
[2] and [51].28% (r) In Lay v PTTEP Australasia (Ashmore Cartier) Pty Ltd (Federal Court of Australia, NSD1245/2016), a common fund like order was made which resulted in a return to the funder of 30% of the settlement sum Environmental [2023] FCA 242 30% (s) In Haswell v Commonwealth (Federal Court of Australia, NSD431/2020) a common fund order was made which results in a return to the funder of 25% of the gross settlement sum Environmental [2023] FCA 1093 25% (t) In Ingram & Anor v Ardent Leisure Ltd (Federal Court of Australia, QUD182/2020), a common fund order was made which resulted in a return to the funder of 30% of the gross settlement Shareholder Orders of Justice Derrington dated 30
November 2023; Judgment reserved30% (u) In Ghee v BT Funds Management Limited (Federal Court of Australia VID962/2019), a common fund order was made which resulted in a return to the funder of 21.8% of the gross settlement sum Consumer (junk insurance) [2023] FCA 1553 21.8% (v) In Galactic Seven Eleven Litigation Holdings LLS v Pareshkumar Davaria (Federal Court of Australia, VID180/2018, VID182/2018), the Full Court made a common fund order which resulted in a return to the funder of 25% of the gross settlement sum Franchisee [2024] FCAFC 54 25% (w) Marcel Eugene Krieger & Anor v Colonial First State Investments Limited & Anor (Federal Court of Australia, VID1141/2019), the Federal Court made a common fund order which resulted in a return to the funder of 18% of the gross settlement sum. Consumer (superannuation) [reasons not yet published] 18% (x) In Compumod Investments Pty Limited as Trustee for the Compumod Pty Limited Staff Superannuation Fund & Anor v Universal Equivalent Technology Limited (formerly ACN 603 323 182 Limited and formerly Axsesstoday Limited & Ors (Federal Court of Australia, NSD917/2020) a common fund order was made which resulted in a return to the funder of 21.7% of the gross settlement sum. Bondholders [2024] FCA 917 21.7% (y) In Ewok Pty Ltd as Trustee for the E & E Magee Superannuation Fund v Wellard Limited (Federal Court of Australia, VID175/2020) a common fund order was made which resulted in a return to the funder of 21.15% of the gross settlement sum. Shareholder [2024] FCA 296 21.15%
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