Wright Rubber Products Pty Ltd v Bayer AG (No 3)
[2011] FCA 1172
•20 October 2011
FEDERAL COURT OF AUSTRALIA
Wright Rubber Pty Ltd v Bayer AG (No 3) [2011] FCA 1172
Citation: Wright Rubber Products Pty Ltd v Bayer AG (No 3) [2011] FCA 1172 Parties: WRIGHT RUBBER PRODUCTS PTY LTD (ACN 075 384 100) v BAYER AG, BAYER AUSTRALIA LTD (ACN 000 138 714), CHEMTURA CORPORATION, CROMPTON MANUFACTURING COMPANY, INC and CHEMTURA AUSTRALIA PTY LTD (ACN 005 225 507) File number: VID 882 of 2007 Judge: TRACEY J Date of judgment: 20 October 2011 Legislation: Federal Court of Australia Act 1976 (Cth) ss 33V, 33ZF, 50, Part IVA
Trade Practices Act 1974 (Cth) ss 4D, 45, 45A
United States Bankruptcy Code Ch 11Practice Note CM 17
Cases cited: Jarra Creek Central Packing Shed Pty Ltd v Amcor Limited [2011] FCA 671 compared
Taylor v Telstra Corporation [2007] FCA 2008 cited, appliedDate of hearing: 2 September 2011 Place: Melbourne Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 25 Counsel for the Applicant: Mr I S Wylie Solicitor for the Applicant: Maurice Blackburn Counsel for the First and Second Respondents: Mr C A Moore Solicitor for the First and Second Respondents: Baker & Mackenzie Counsel for the Third and Fifth Respondents: Mr L Merritt Solicitor for the Third and Fifth Respondents: Mallesons Stephen Jaques
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 882 of 2007
BETWEEN: WRIGHT RUBBER PRODUCTS PTY LTD (ACN 075 384 100)
ApplicantAND: BAYER AG
First RespondentBAYER AUSTRALIA LTD (ACN 000 138 714)
Second RespondentCHEMTURA CORPORATION
Third RespondentCROMPTON MANUFACTURING COMPANY, INC
Fourth RespondentCHEMTURA AUSTRALIA PTY LTD (ACN 005 225 507)
Fifth Respondent
JUDGE:
TRACEY J
DATE OF ORDER:
2 SEPTEMBER 2011
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.Pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (“the Act”), the settlement of the proceeding upon the terms set out in the settlement agreement and in the proposed settlement distribution scheme, being annexures “A”, “C” and “D” respectively to the affidavit of Brooke Wendy Dellavedova sworn 28 June 2011, be approved.
2.Pursuant to s 50 of the Act, the confidential exhibits to the affidavit of Brooke Wendy Dellavedova sworn 23 August 2011, being the exhibits set out below, be sealed and filed with the Court as confidential exhibits and marked “Not to be opened without leave of the Court or a Judge”;
· Confidential Exhibit “BD6”
· Confidential Exhibit “BD22”
· Confidential Exhibit “BD23”
· Confidential Exhibit “BD24”
· Confidential Exhibit “BD25”
· Confidential Exhibit “BD26”
· Confidential Exhibit “BD28”
· Confidential Exhibit “BD29”
· Confidential Exhibit “BD30”
· Confidential Exhibit “BD33”
· Confidential Exhibit “BD34”
· Confidential Exhibit “BD35”
3.Pursuant to ss 33X and 33Y of the Act, the form and content of the Notice of Settlement to group members (Notice of Settlement) attached to these orders is approved.
4.Within five (5) days of the approval of the form and contents of the Notice of Settlement by the Court the solicitors for the Applicant cause the Notice of Settlement to be:
(a) Sent by email or prepaid post to the last known address of persons who have lodged a registration of interest form with the Applicant’s solicitors in relation to these proceedings;
(b) Sent by the Australasian Plastics & Rubber Institute (APRI) to all members and all subscribers to its Journal;
(c) Displayed on the website of Maurice Blackburn and to remain displayed continuously up to and including 3 October 2011; and
(d) Made available for inspection at the offices of the Applicant’s solicitors throughout Australia up to and including 3 October 2011.
5.Within five (5) days of approval of the form and contents of the Notice of Settlement by the Court, the District Registrar of the Victorian District Registry of the Federal Court of Australia cause the Notice of Settlement to be displayed on the Federal Court website and to remain displayed up to and including 3 October 2011.
6.Within five (5) days of the date on which orders are made approving the settlement of this proceeding, the solicitors for the Applicant cause the settlement distribution scheme and Proof of Claim form to be:
(a) Displayed on the website of Maurice Blackburn and to remain displayed up to and including 3 October 2011; and
(b) Available for inspection at the offices of the Applicant’s solicitors throughout Australia up to and including 3 October 2011.
7.All cost orders made in this proceeding prior to these orders be set aside.
8.There be no order as to the costs of the Applicant’s notice of motion dated 28 June 2011.
9.The solicitors for the Applicant have liberty to apply.
10.Such further or other orders as the Court deems appropriate.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
NOTICE OF SETTLEMENT – “RUBBER CHEMICALS CLASS ACTION”
In 2007 a class action was commenced in the Federal Court of Australia (Proceeding) by Wright Rubber Products Pty Ltd (the Applicant) against Bayer AG, Bayer Australia Ltd, Chemtura Corporation and Chemtura Australia Pty Ltd (the Respondents). The Proceeding arises out of an alleged cartel to fix the price of certain rubber chemicals (Rubber Chemicals) between 1 July 1995 and 31 December 2001 (the Cartel Period). The Second Amended Statement of Claim details the claims (which the Respondents deny) and includes a full list of the Rubber Chemicals.
The Proceeding is brought by the Applicant on its own behalf and on behalf of all persons who are class members as defined in the Proceeding. Class members are bound by any judgment or settlement entered into in the Proceeding unless they have opted out of the Proceeding.
This notice is being published in accordance with an order made by the Federal Court of Australia on 2 September 2011.
ARE YOU A CLASS MEMBER?
You are a class member if you were a commercial manufacturer of Rubber Compounds and/or Rubber Products who, during the Cartel Period:
paid at least AU$5,000 for Rubber Chemicals or at least AU$10,000 for Rubber Compounds; and
were ordinarily resident in or carrying on business in Australia, not a Justice or Registrar of the High Court of Australia or the Federal Court of Australia and not a Respondent in this Proceeding or an entity related to such a person within the meaning of the Corporations Act 2001.Rubber Compounds means compounds of natural or synthetic rubber and other raw materials manufactured using Rubber Chemicals. Rubber Products means intermediate and/or finished products manufactured using Rubber Compounds for manufacturers and consumers.
If you are, or think you might be, a class member then you should read this notice carefully, as it may affect your rights. If you have entered into a settlement agreement with some or all of the Respondents, you may not have a claim in the Proceeding.
SETTLEMENT OF CLASS ACTION
The parties have agreed to settle the Proceeding. The Federal Court has approved the settlement, and also approved a “Settlement Distribution Scheme” for distributing the settlement money among the Applicant and other class members.
Under the settlement:
·The Bayer Respondents have paid AU$750,000;
·Chemtura Corporation will pay AU$750,000[1] by a combination of approximately:
[1] On 18 March 2009, Chemtura Corporation filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the US Bankruptcy Court, Southern District of New York (Case No. 09 011233 (REG)). As part of the settlement Chemtura Corporation allowed the Applicant and class members’ claim in its Chapter 11 Case as a general unsecured claim in the amount of $750,000 to be paid under its Chapter 11 plan of reorganization (the Plan). The Plan was confirmed by the US Bankruptcy Court by order dated 3 November 2010.
(a)14% (AU$105,000) in cash; and
(b)86% (AU$645,000) in new common stock in the reorganized Chemtura Corporation. The number of shares allocated will be based on a valuation of US$13.45[2] per share. The stock will then be sold by the Applicant and the proceeds will become part of the settlement sum.
[2] The valuation per share according to the Plan.
·The sum of AU$1.1m will be paid to the Applicant’s solicitors, Maurice Blackburn, as partial payment for costs and disbursements incurred in this matter. Those amounts (which were subject to verification by an independent legal costs assessor and Court approval) are inclusive of all costs and disbursements incurred by the Applicant since the case was commenced in 2007, including in relation to an appeal, and settlement approval and administration. Maurice Blackburn will forego a significant portion of its costs and disbursements.
·By way of example, on 31 August 2011 approximately AU$389,929.37 (being the total of the payment from the Bayer Respondents and the value of the Chemtura settlement as at that date (AU$1,489,929.37) less the AU$1.1m partial reimbursement to Maurice Blackburn on account of costs and disbursements incurred) would have been available for distribution to class members who lodge eligible claims supported by business records.
·The sum of AU$25,040 will be paid to the Applicant by way of compensation and reimbursement for time and expenditure reasonably incurred in a representative capacity.
·The remainder of the settlement amount will be available for distribution to class members who lodge eligible claims supported by business records, described in the “Proof of Claim” form which can be viewed at the website below.
·Class members are entitled to a maximum of 6% of the value of their purchases of Rubber Chemicals and 0.4% of their purchases of Rubber Compounds during the Cartel Period.
·If the entitlement of all claimants exceeds the amount available for distribution, then the amount will be distributed to claimants in proportion to each claimant’s claim. If the entitlement of all claimants is less than the amount available, the remainder will be paid to Maurice Blackburn towards payment of the Applicant’s unpaid costs and disbursements.
·If a class member is dissatisfied with the amount assessed for its claim under the Settlement Scheme then it may request a review by an independent barrister, who will charge the class member a fee.
·Maurice Blackburn will not charge class members any costs in relation to the class action or for participating in the settlement. If any class member wishes to engage separate solicitors then it will need to enter a separate costs arrangement with those solicitors.
·The full terms of the settlement and Settlement Distribution Scheme may be by obtained by contacting Maurice Blackburn.
WHAT YOU MUST DO
If you are a class member and you do want to participate in the settlement then you must submit a properly completed “Proof of Claim” form to Maurice Blackburn by 3 October 2011. You can obtain the Proof of Claim by contacting Maurice Blackburn. You can submit your Proof of Claim by mail, facsimile or e-mail.
Class members who do not submit a properly completed Proof of Claim form by the deadline will lose the right to make any claim under the settlement agreement or against the Respondents in respect of the alleged cartel.
If you are a class member but you do not want to participate in the settlement then there is nothing you need to do. After the deadline passes on 3 October 2011 you will lose the right to make any claim under the settlement agreement or against the Respondents in respect of the alleged cartel.
FURTHER INFORMATION
If you are not sure whether you are a class member, are not sure whether to complete and return the Proof of Claim, or have any other questions, you may contact the Applicants’ lawyers or visit the Maurice Blackburn website or seek your own legal advice.
You should act quickly. Class members who wish to make a claim must submit their completed Proof of Claim form by 3 October 2011 or they will lose their rights.
MB CONTACT DETAILS
Website:
Email: [email protected]
Telephone: (03) 9605 2892
Fax: (03) 9258 9610
Contact: Erdem Ozyurek
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 882 of 2007
BETWEEN: WRIGHT RUBBER PRODUCTS PTY LTD (ACN 075 384 100)
ApplicantAND: BAYER AG
First RespondentBAYER AUSTRALIA LTD (ACN 000 138 714)
Second RespondentCHEMTURA CORPORATION
Third RespondentCROMPTON MANUFACTURING COMPANY, INC
Fourth RespondentCHEMTURA AUSTRALIA PTY LTD (ACN 005 225 507)
Fifth Respondent
JUDGE:
TRACEY J
DATE:
20 OCTOBER 2011
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
On 2 September 2011 I made orders pursuant to ss 33V, 33ZF and 50 of the Federal Court of Australia Act 1976 (Cth) (“the Act”) approving the settlement of this proceeding. The terms of the settlement are contained in a settlement deed which was executed on 25 May 2011 and amended on 7 June 2011 (“the deed”) and a related proposed settlement distribution scheme (“the scheme”) all of which are exhibited to the affidavit of Ms Brooke Dellavedova sworn on 28 June 2011. At the time of making the orders I announced that I would publish my reasons at a later date. These are those reasons.
This is a representative proceeding, brought under Part IVA of the Act. It was commenced in 2007. The applicant represents group members who are commercial manufacturers of “Rubber Compounds” and “Rubber Products”. It is alleged that they were forced to pay higher prices for these products because of a global cartel arrangement to which the first, third and fourth respondents were party with other manufacturers and suppliers of Rubber Chemicals. The cartel arrangement is said to have been entered into in or about July 1995. It was allegedly given effect to in Australia by the second and fifth respondents. The applicant contends that, in doing so, the respondents contravened the provisions of ss 4D, 45 and 45A of the Trade Practices Act 1974 (Cth) which was, at relevant times, in force.
On 5 February 2009 the Court ordered by consent that the fourth respondent cease to be a party to the proceeding.
The first and second respondents (whom it will be convenient to refer to as the Bayer respondents) and the third and fifth respondents (the Chemtura respondents) each filed defences in which they denied all of the material allegations which were levelled against them.
Whilst the trial was pending the parties entered into the deed and the scheme which they brought to the Court for approval.
Section 33V of the Act provides that:
“(1)A representative proceeding may not be settled or discontinued without the approval of the Court.
(2)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.”
The principles which have guided the Court in the exercise of its power under s 33V were collected by Jacobson J in Taylor v Telstra Corporation [2007] FCA 2008 at [56]-[66]. His Honour there said:
“Section 33V(1) of the Act provides that a representative proceeding may not be settled or discontinued without the approval of the Court. The purpose intended to be served by s 33V was stated succinctly by Branson J in Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 142 ALR 177 at 184. Her Honour said:
It is appropriate for the court to be satisfied that any settlement or discontinuance of representative proceedings has been undertaken in the interests of the group members as a whole and not just in the interests of the applicant and the respondent.
In Lopez v Starworld Enterprises Pty Ltd [1999] FCA 104, Finkelstein J pointed out at [16] that the Court’s task under s 33V is an onerous one. His Honour observed at [15] that he was not concerned so much with the position of the applicant, who was represented by solicitors and counsel, but with other group members, many of whom are not protected in this way.
In Williams v FAIHome Security Pty Ltd (No. 4) (2001) 180 ALR 459 at [19], Goldberg J said:
Ordinarily the task of a court upon an application such as this, is to determine whether the proposed settlement or compromise is fair and reasonable, having regard to the claims made on behalf of the group members who will be bound by the settlement. Ordinarily…the court will take into account the amount offered to each group member, the prospects of success…, the likelihood of group members obtaining judgment for an amount significantly in excess of the settlement offer, the terms of any advice received from counsel and from any independent expert in relation to the issues which arise in the proceeding, the likely duration and cost of the proceeding… and the attitude of the group members to the settlement.
His Honour referred to a nine-factor test which has been adopted in the United States in considering whether to approve settlements as fair and reasonable.
In Darwalla Milling Co Pty Ltd v F Hoffmann-La Roche Ltd (No. 2) (2007) 236 ALR 322, Jessup J took a slightly different approach from Goldberg J. His Honour observed at [3] that each case is dealt with on its own merits and by reference to specific factors which might raise serious doubts as to fairness. His Honour said at [35] that he could see no particular warrant for incorporating into Part IVA of the Act the requirements of the rules of the court of an overseas jurisdiction. His Honour said at [39] that:
The practical judicial approach has been…to identify any features of the settlement that are obviously unreasonable or unfair…[and] where some group members object to a settlement and state their reasons…, their reasons will provide a convenient focus by reference to which the court will decide matters of fairness and reasonableness.
Jessup J at [41] proceeded on the basis of considering whether the overall settlement sum was reasonable having regard to:
the manner of its calculation and its relationship to the best possible case outcome for the group as a whole; the prospects of achieving an outcome at or near the best probable case; the extent of the weaknesses, substantive or procedural, in the applicant’s case; [and] whether the settlement sum falls within a realistic range of likely outcomes…
The test applied by his Honour at [41] was to determine whether the settlement involved any actual potential unfairness to any group member or categories of group members having regard to all relevant matters, including: whether the overall settlement sum involved unfair compromises by some members or categories of members for the benefit of others; and whether the distribution scheme fairly reflected the apparent or assumed relative losses suffered by particular members or categories of members.
Jessup J at [50] also said that he did not consider that it was the Court’s function under s 33V to second‑guess the applicants’ advisers as to the answer to the question whether the applicants ought to have accepted the respondents’ offer.
He also said at [50]:
the court’s function is, relevantly, confined to the question of whether the settlement was fair and reasonable. There will rarely, if ever, be a case in which there is a unique outcome which should be regarded as the only fair and reasonable one…the court should, up to a point at least, take the applicants and their advisers as it finds them… So long as the agreed settlement falls within the range of fair and reasonable outcomes, taking everything into account, it should be regarded as qualifying for approval under s 33V.
More recently in Haslam v Money for Living (Aust) Pty Ltd(Administrators Appointed) [2007] FCA 897 Gordon J said at [19] to [20] said (sic) that she did not consider that the analysis undertaken by Goldberg J ought to be read as seeking to incorporate into Part IVA of the Act the requirements of the rules of court of an overseas jurisdiction.
She said at [20]:
The analysis provided and continues to provide a useful guide in considering applications for approval under s 33V… It should, in appropriate cases and subject to the circumstances of any particular case, continue to be employed as a useful guide.”
These principles are reflected in the terms of Practice Note CM 17. Paragraph 11 of the Practice Note advises applicants for approval under s 33V that:
“Court approval of settlement
11.1When applying for Court approval of a settlement, the parties will usually need to persuade the Court that:
(a) the proposed settlement is fair and reasonable having regard to the claims made on behalf of the group members who will be bound by the settlement; and
(b) the proposed settlement has been undertaken in the interests of group members, as well as those of the applicant, and not just in the interests of the applicant and the respondent/s.
11.2When applying for Court approval of a settlement the parties will usually be required to address at least the following factors:
(a) the complexity and likely duration of the litigation;
(b) the reaction of the group 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 representative proceeding;
(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.”
Ms Dellavedova has dealt with all of the factors which are referred to in paragraph 11.2 in an affidavit which she has sworn in support of the application. A good deal of the material exhibited to Ms Dellavedova’s affidavit is necessarily confidential. It includes privileged legal advice and evidence prepared for the purpose of the proceeding. This material should be protected from disclosure by orders made under s 50 of the Act: cf Jarra Creek Central Packing Shed Pty Ltd v Amcor Limited [2011] FCA 671 at [154]-[160] (per Jacobson J). In determining to approve the settlement I have had regard to this confidential material.
The litigation has developed to a point where the issues are clearly defined. The parties are, therefore, in a position to assess the strengths and weaknesses of their respective cases and to make informed decisions about the basis for settlement. The applicant’s solicitors, who are most experienced in the conduct of class actions, have recommended that the proceeding be compromised on the terms provided for in the deed and the scheme. Their recommendation has been supported by the opinion of counsel who has long been involved in the proceeding on behalf of the applicant.
No class member has objected to the settlement.
The applicant’s decision to compromise the proceeding had regard to the vagaries of litigation. These included the lack of certainty on questions of liability and the expenses likely to be incurred in the conduct of a lengthy trial and possible appeals. Another consideration which weighed heavily in the present case was the capacity of the respondents to meet any damages awarded should the applicant be successful at trial.
In 2009 the second respondent, the Chemtura Corporation, filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court, Southern District of New York. The applicant filed proofs of claim in the bankruptcy proceeding. The Chemtura Corporation filed a plan of re-organisation under Chapter 11. Provision was made in the plan for the amount of $750,000 to be set aside to meet any liability of the Corporation to the applicant and group members in the present proceeding. That sum was to be made up, as to 14%, by cash and, as to 86%, by the issue of common stock in the re-organised corporation. The plan was approved by the Bankruptcy Court in November 2010. The share price of the common stock was, of course, subject to market fluctuations.
The Bayer respondents agreed to contribute $750,000 to a settlement fund.
By the time the deed was entered into, the applicant’s legal fees had exceeded $600,000 and disbursements in excess of $500,000 had been incurred.
In the absence of any further contributions to the settlement fund, had an agreement not been reached, it would not have been long before legal fees and disbursements would have grown to the point where no funds would have been available for distribution to the applicant and the group members.
The scheme provides for the applicant’s solicitors to receive only $500,000 by way of reimbursement for disbursements and $600,000 as part payment of their fees. The applicant’s solicitors have prepared an itemised statement of the applicant’s fees and disbursements for the work performed in relation to the proceeding up to 30 June 2011. The statement and the supporting documentation was reviewed by an independent legal cost consultant. I am satisfied, on the basis of his report, that the solicitors have incurred considerably more than the amount allowed for disbursements and could properly have charged a good deal more than the amount allowed for their fees.
A formula was then devised to facilitate the calculation of the entitlements of the applicant and the group members to the balance of the fund.
The scheme provides for the making of a payment to the applicant by way of compensation and reimbursement for the time and expenditure it had reasonably incurred in acting as the representative party. This payment was, in my view, reasonable having regard to the time, expense and responsibility undertaken by the applicant in prosecuting the proceeding.
The scheme provides that each group member who purchased Rubber Chemicals will be entitled to a sum calculated by multiplying its total expenditure on Rubber Chemicals during the relevant period by 0.06. The six per cent figure represents an estimate of the over-charging attributable to the alleged cartel conduct. An estimate has been relied on because of the cost and expense which would have been involved had a detailed economic analysis been conducted and because of the unavailability of some of the data which would have been needed to make more precise calculations.
The six per cent estimate has been based on settlements of class actions which have been brought in Canada arising out of the same alleged cartel agreement.
The scheme also provides that each group member who purchased Rubber Compounds will be entitled to a sum calculated by multiplying its total expenditure on Rubber Compounds during the relevant period by .004. The .4% figure represents the estimated inflation to Rubber Chemicals prices caused by the alleged cartel conduct (that is, the estimated 6% overcharge), multiplied by an estimated average rate of inclusion of Rubber Chemicals in Rubber Compounds. The estimate was based on an expert report which calculated the average inclusion of Rubber Chemicals in ten typical Rubber Compounds.
The estimates on which the calculations are based appear to me to be justified having regard to the material on which they were founded. Had expert evidence been obtained it is unlikely that the percentage figures would have varied significantly. The cost of obtaining that expert evidence would have reduced, if not eliminated, the pool from which the settlement payments are to be made.
I was unable to detect any actual or potential unfairness to any group member arising from the outcomes produced by these formulae.
In all of these circumstances I considered that the proposed settlement was fair and reasonable having regard to the interests of the group members.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey. Associate:
Dated: 20 October 2011
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