D.2 Power, the Principled Approach and the Evidence Generally
14 The Full Court of this Court and the New South Wales Court of Appeal have determined that no dicta of a majority of judges of the High Court can be identified in BMW v Brewster for the proposition that there is a want of power to make a Settlement CFO: Davaria (at 661 [41] per Lee J, Middleton and Moshinsky JJ agreeing); Brewster v BMW Australia Ltd [2020] NSWCA 272 (at [28], [30], [41]-[43] per Bell P, Bathurst CJ and Payne JA agreeing).
15 Thus, as the contradictor submitted, the prevailing orthodoxy is that the Court has power to make a Settlement CFO on the basis that: (a) it is fair, reasonable and in the interests of all group members (s 33V(1)); or (b) within the conception of a just order "with respect to the distribution of any money" (s 33V(2)). It follows that at this time and in the light of the clear statements by the Full Court and the New South Wales Court of Appeal as to the effect and extent of Brewster, it cannot be that the prevailing orthodoxy is plainly wrong so as to preclude the principled application of s 33V in making a Settlement CFO. Indeed, I am of the view that there is ample power to make a Settlement CFO, the question is rather one of discretion as to the whether a proposed form of order should be made in all the circumstances of the case.
16 Before proceeding further, it is worth saying something about the way in which the Court should approach this assessment of fairness or justness.
17 At a minimum it must extend to the Court's role in recognizing existing legal and equitable rights and obligations, but is not properly to be regarded as confined to merely recognising and adjudicating on legal rights and equities. This must be right because contextually the discretion is exercised at a stage when there are no adjudged legal and equitable rights. A settlement of a class action is a compromise of what may well be quite disparate underlying claims, where some claimants could (if litigation persisted to finality) win, and some might lose. Upon approval of a settlement the underlying claims of group members generally merge in the settlement, and they receive substituted rights to receive that for which the settlement approved under s 33V(1) provides, or which the Court otherwise provides.
18 In a similar way, when the s 33V discretion is exercised, the Court is unable to adjudge the legal and equitable rights as they arise between group members in any precise way, as those rights would depend upon, or may be informed by, the prior determination of their individual rights. As Mr Edwards, counsel for Balance, put it, the very purpose of the settlement is to avoid the need for these rights to be adjudged, and to save the cost of doing so (which, for small consumer claims in particular, are likely to be entirely disproportionate). Such an exercise would be not only impossible, but self-defeating. Some rough justice in settlements is not only permissible; it is desirable.
19 So when it comes to approving a settlement under s 33V(1), if the settlement provides for deductions from a gross settlement sum (including allowances in favour of persons other than the applicant and group members), the role of the Court is to ask itself whether the totality of what is before it can be described as fair and reasonable regardless of whether it includes any adjustments to, or approximations of, pure legal and equitable rights or obligations, or whether instead the Court should proceed to refuse the application (which will have the effect of requiring the Court to determine the rights, or would require the parties to come up with a different settlement that can be described as fair and reasonable).
20 Whether looked at through the prism of s 33V(1) or (2), the Court will be guided by analogy with recognised categories of legal or equitable rights and obligations, but is not limited by them, and the further something falls from such categories the less likely it is to be evident that the settlement can be regarded as fair and reasonable or just.
21 But how does one approach the question of the quantum of remuneration (either as part of a broader analysis for the purposes of s 33V(1), or in considering the exercise of an ancillary power, under s 33V(2))? In the context of an application under s 33ZF, in Money Max Int Pty Ltd (Trustee) v QBE Insurance Ltd [2016] FCAFC 148; (2016) 245 FCR 191 (at 209-10 [80]), the Full Court (Murphy, Gleeson and Beach JJ) set out the factors which, depending upon the circumstances, are relevant in the fixing of a commission rate for a litigation funder at the end of a class action:
(a) the funding commission rate agreed by sophisticated class members and the number of such class members who agreed. That can be said to show acceptance of a particular rate by astute class members;
(b) the information provided to class members as to the funding commission. That may be important to understand the extent to which class members were informed when agreeing to the funding commission rate;
(c) a comparison of the funding commission with funding commissions in other Part IVA proceedings and/or what is available or common in the market. It will be relevant to know the broad parameters of the funding commission rates available in the market;
(d) the litigation risks of providing funding in the proceeding. This is a critical factor and the assessment must avoid the risk of hindsight bias and recognise that the funder took on those risks at the commencement of the proceeding;
(e) the quantum of adverse costs exposure that the funder assumed. This is another important factor and the assessment must recognise that the funder assumed that risk at the commencement of the proceeding;
(f) the legal costs expended and to be expended, and the security for costs provided, by the funder;
(g) the amount of any settlement or judgment. This could be of particular significance when a very large or very small settlement or judgment is obtained. The aggregate commission received will be a product of the commission rate and the amount of settlement or judgment. It will be important to ensure that the aggregate commission received is proportionate to the amount sought and recovered in the proceeding and the risks assumed by the funder;
(h) any substantial objections made by class members in relation to any litigation funding charges. This may reveal concerns not otherwise apparent to the Court; and
(i) class members' likely recovery "in hand" under any pre-existing funding arrangements.
22 I accept the submission made on behalf of Balance that what the Court was doing in Money Max was seeking to develop criteria which may be relevant to assessing a reasonable return for providing litigation funding. There has been some criticism that that task involves the Court trespassing into areas in respect of which it has limited expertise and embarking upon an unusual judicial task without sufficient guideposts. But I think the concerns underlying these criticisms are exaggerated. This is for at least two reasons.
23 First, as to the nature of the task, in determining reasonable remuneration, the Court is undertaking a task similar to that undertaken in the fixing of reasonable remuneration in a number of different contexts, but doing so in a new context where the form of provision of the service - the advancement of capital to enable claims to be litigated (and protect against adverse costs) - is one of recent development.
24 Some examples pointed out in submissions and otherwise include:
(1) where the Court fixes rates of remuneration for professional persons who take on the role of trustee, which has been done by reference to the market rate for such services. As was explained in Lewin on Trusts (16th ed, 1964), at pp 2-1-202 citing Re Masters [1953] 1 WLR 81, in connexion with the Court's jurisdiction to order remuneration to a trustee who stipulates he is not willing to accept appointment without the same, "[w]hen the court does order remuneration it is the usual practice to provide for remuneration by way of a fixed salary or, occasionally, by a fixed percentage and not by way of professional charges";
(2) although we are now used to standardised time-based rates or scales of fees of insolvency practitioners, historically, when Chancery appointed receivers, the practice was for the appointee to ask for remuneration for care and pains at the time of appointment, but its amount was not in general fixed until the first passing of account, upon which the receiver would be allowed either a percentage of receipts, or a gross sum by way of salary: see Daniell's Chancery Practice (1901) Chap XXVII, Sect 5, p 1441; as Daniell explains, there was no general rule which universally prevails with respect to the principles on which the allowance was to be fixed, but the degree of difficulty in collecting the receipts was relevant - under some circumstances, an order was made that the receiver should be allowed such salary as the judge might think, on the passing of each account, was reasonable; the receiver could also apply for allowances beyond salary for any extraordinary trouble or expenses incurred, if it would be inequitable for the parties to take the benefit of the exertions of the receiver without defraying his expenses;
(3) the Court is engaged in a similar task when fixing the remuneration of liquidators and trustees in bankruptcy; such persons, acting to the benefit of all creditors, will be allowed the expenses of bringing in a fund including reasonably incurred litigation funding expenses (IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (in liq) [2009] FCAFC 9; (2009) 253 ALR 240 (at 254 per North, Emmett and Rares JJ)), but they are also entitled to remuneration and this too can be charged against the fund: In Re Universal Distributing Co Ltd (In Liq) (1933) 48 CLR 171 (at 174-5 per Dixon J);
(4) as the Full Court pointed out in Westpac Banking Corporation v Lenthall [2019] FCAFC 34; (2019) 265 FCR 21 (at 42 [74], 48-9 [102] per Allsop CJ, Middleton and Robertson JJ), a salvor was allowed a reward, and courts developed principles for calculating the same by reference to factors developed in the law of maritime concerning the nature and extent of the risk undertaken and the nature and extent of the benefit conferred (value of property salvaged);
(5) sheriffs could not at common law take a reward for doing their duty, but fees came to be allowed by custom regulated by reasonableness: see Allen O, The Duties and Liabilities of Sherriffs, In Their Various Relations to the Public and to Individuals, as Governed by the Principles of Common Law, and Regulated by the Statutes of New York (1845), Chap XIII, p 347ff; while sheriffs' poundage came to be regulated by statute (Statute of Elizabeth (29 Eliz c4)), the basis of the award was that the sheriff had recovered money for the creditor and was entitled to reasonable remuneration for the risk and expense of levying execution; and
(6) in the absence of a payment clause and consent, an executor or administrator may seek the Court to exercise an inherent power to award commission for their "pain" and "troubles", with "pains" being the responsibility, anxiety and worry of the executor, "troubles" being the work carried out by the executor, meaning the Court is to take numerous factors into account including the size and complexity of the estate, the work that was done, the length of time taken and the amount of work delegated by the executor: see Nissen v Grunden (1912) 14 CLR 297; Re Moore [1956] VLR 132.
25 Secondly, in this case detailed evidence and other materials have been made available to the Court. As touched upon above, expert material has been adduced showing that the amount of remuneration sought by Balance (25% of the gross settlement sum) is towards the middle of the range of rates offered or accepted by funders for class actions in Australia, The relevant data concerning rates is in evidence from 1997 to present, and is collected in the Expert Report of Greg Houston dated 1 December 2020 (at [16], [20], Appendix A1). Further in evidence is a study authored by Professor Vince Morabito entitled "An Evidence-Based Approach to Class Action Reform in Australia: Common Fund Orders, Funding Fees and Reimbursement Payment" (January 2019) and a further study by Professor Morabito entitled "Remuneration to Litigation Funders in the Post-Money Max Era (14 October 2020). It is unnecessary to wade into the specifics which can be seen from this helpful material, but speaking very generally, it shows a generally consistent pattern of CFOs being made at around this level.