Botsman v Bolitho [2018] VSCA 278

175 We would accordingly refuse the applicant leave to add proposed grounds 6,

The application for leave to adduce fresh evidence

1. The applicant also made an application for leave to adduce fresh evidence prior to the hearing before us. The evidence sought to be adduced was:

(a) An affidavit of Mr Lindholm sworn 15 February 2018 relating to the

settlement distribution scheme. The applicant submitted that this affidavit is relevant to the reasonableness of the funder's commission and the legal costs.

(b) A letter from Mr Pitman dated 22 March 2018 addressed to this Court in which he records his attempts to access the deed and costs report, expresses his support for the applicant's appeal, and refers to a dispute between Mr Bolitho's lawyers and the SPR about the costs of distributing the settlement sum to debenture holders.

(c) A letter from Mr Lindholm to all debenture holders dated 10 April 2018 in which he notes that the settlement distribution scheme is yet to be approved by the Court. The applicant submitted that this letter is relevant to a dispute between the applicant and Mr Bolitho as to whether the distribution of the settlement sum has been delayed by the application for leave to appeal or by a dispute between Mr Bolitho and the SPR over the appropriate method of distribution.

(d) The statutory financials of Trust Co for the financial year ended 30 June

2017, which were said to be relevant to the issue of whether the settlement sum of $64 million is fair and reasonable.

(e) The statutory financials of the funder for the financial year ended 30

June 2017. It was submitted that this is relevant to the reasonableness of the commission and, more specifically, the question of whether the funder had exposed itself to a significant adverse costs risk.

1. The application for leave to adduce fresh evidence was opposed by Mr Bolitho and also by Trust Co in so far as the application related to its statutory financials.72
2. The principles concerning the receipt of fresh evidence on appeal are well- established,73 and it is unnecessary to set them out in any detail. In Clark v Stingel,74

72 The SPR filed a notice of intention not to respond to or contest the application.

73 See, eg, Foody v Horewood (2007) 62 ACSR 576, 598-601 [61]-[66]; Clark v Stingel [2007] VSCA

292 [25]; Apostolides v Kalenik [2011] VSCA 307; (2011) 35 VR 563, 581-2 [56].

74 [2007] VSCA 292.

this Court reiterated that leave to adduce fresh evidence on appeal should be given only if:

(a) by the exercise of reasonable diligence, such evidence could not have been discovered in time to be used in the original trial;

(b) it is reasonably clear that if the evidence had been available at the trial, and had been adduced, an opposite result would have been produced; and

(c) the evidence proposed to be adduced is reasonably credible.75

1. Mr Bolitho has observed that the statutory financials of Trust Co and the funder have been available online since December 2017. The applicant has not explained why she did not adduce these documents when she lodged her objection with the Court prior to the settlement approval hearing. We are not satisfied that the documents could not have been obtained with reasonable diligence prior to the hearing and, accordingly, we would refuse leave to adduce them.

1. We would also refuse leave to adduce the other three documents, being the affidavit of Mr Lindholm, the letter from Mr Pitman, and the letter from Mr Lindholm. In our view, these documents, taken at their highest, are only peripherally relevant to the issues raised by the grounds of appeal. In so far as the documents evidence any dispute concerning the settlement distribution scheme, they are insufficiently relevant to the appeal to warrant their admission as fresh evidence.

1. Mr Bolitho filed a notice of objection to the competency of the application for leave to appeal. Counsel for Mr Bolitho acknowledged that the applicant, as a person affected by and bound by the orders made, had a right to seek leave to appeal. The point was that because she did not bring the application in a representative capacity she could not rely on s 33ZC of the Supreme Court Act.

75 Ibid [25], citing Orr v Holmes [1948] HCA 16; (1948) 76 CLR 632, 635; Wollongong Corporation v Cowan (1955) 93

1. The first consequence of that was said to be that leave to appeal should be refused on the basis that she has insufficient interest to justify setting aside the settlement approval and that she could have, and should have, sought to opt out of the class.

183 The second consequence was said to be that the application is out of time.

184 Section 33ZC relevantly provides as follows:

(1) On an appeal by the plaintiff on behalf of group members and in respect of the judgment to the extent that it relates to questions common to the claims of group members, the parties to the appeal are the plaintiff, as the representative of the group members, and the defendant.

(2) On an appeal by a sub-group representative party on behalf of sub- group members in respect of the judgment to the extent that it relates to questions common to the claims of the sub-group members, the parties to the appeal are the sub-group representative party, as the representative of the sub-group members, and the defendant.

(4) The parties to an appeal in respect of the determination of a question that relates only to a claim of an individual group member are that group member and the defendant.

(5) If the plaintiff or the sub-group representative party does not commence an appeal within the time provided, another member of the group or sub-group may, within a further 21 days, commence an appeal as representing the group members or sub-group members, as the case may be.

(8) The notice of appeal must describe or otherwise identity the group members or sub-group members, as the case may be, but need not specify the names or number of those members.

1. Mr Bolitho submitted that the application for leave to appeal relates only to the claim of the applicant as an individual group member, and not to the claims of the group as a whole or a sub-group. Accordingly, the applicant does not act in a representative capacity and has no right to appeal under s 33ZC(2). It was further submitted that the applicant has no right to appeal under s 33ZC(5). Mr Bolitho

relied in this regard on an Australian Law Reform Commission Report which states that a group member may stand in the shoes of the plaintiff and commence an appeal pursuant to s 33ZC(5) where the 'group members' proceedings are unsuccessful'.76

1. It was also submitted that, if the application were taken to be made under s 33ZC(4), the Court should order that the applicant cease to be a group member so that the application would not interfere with the benefits accruing to the other group members pursuant to the judge's orders.

187 We are not persuaded that the application for leave to appeal is incompetent.

The acknowledgement that the applicant may seek leave to appeal subject to any necessary extension of time being given means that the application is not incompetent and that, at worst, any defect can be cured by an extension of time.

1. Difficult questions attend the question whether the applicant can rely on s 33ZC(5) in support of her application. Two potential impediments are suggested. First, it is contended that s 33ZC(5) operates where the plaintiff or sub-group representative does not appeal and this carries with it the connotation that it only applies where the group proceeding has been unsuccessful. The second impediment is the absence of representative capacity.

1. As to first point, there is, in our view, no sound reason for reading into s 33ZC(5) the requirement that the group proceeding be unsuccessful before an appeal may be commenced pursuant to that sub-section. Such a construction finds no support in the text of the provision. Further, it might be expected that, in many cases (especially those which proceed to trial), group members will achieve success on some, but not all, aspects of their claims. There would be a vexed question in such cases as to whether the group was 'unsuccessful'.

190 As to the second point, the applicant does not express in her application that

1. Australian Law Reform Commission, Grouped Proceedings in the Federal Court, Report No 46 (1988) [245].

the application is brought in a representative capacity, nor does she identify the persons represented as required by s 33ZC(8). There has been no process by which group members were advised that the applicant was purporting to represent them in the application.

1. In the circumstances, we are not persuaded that the applicant brings the proceeding in a representative capacity or that she can rely on s 33ZC. However, that does not render the application incompetent.

1. As the SPR observed, the High Court has stated in Dimitrov v Supreme Court of Victoria that s 33ZC is directed to procedural matters and does not remove the power of a group member to seek leave to appeal from settlement orders.77 As a group member bound by the terms of the settlement, who could have been a party to the proceeding at first instance, the applicant is entitled to bring an appeal against the approval orders made in the group proceeding.78

1. We would extend the time to bring the application. The points raised by the application are substantial. The potential operation of s 33ZC made identification of the applicable time limit more difficult and explains the delay. No prejudice was identified. We would also give the applicant the same extension to challenge the orders made by the judge in the SPR proceeding given that she is aggrieved by those orders and sufficiently interested in and affected by them.79

1. We shall return to the absence of any formal representative capacity on the part of the applicant when we consider what, if any, relief should issue in the event

77 (2017) 92 ALJR 12 [23]-[25] (Edelman J).

78 Cuthbertson v Hobart Corporation [1921] HCA 51; (1921) 30 CLR 16, 25; Link Agricultural Pty Ltd v Shanahan

[1998] VSCA 3; [1999] 1 VR 466, 475 [23].

79 Fortress Credit Corporation (Australia) II Pty Ltd (ACN 114 624 958) v Fletcher [2011] FCAFC 89; (2011) 85 ACSR 38,

1. Section 33C of the Supreme Court Act provides that a group proceeding may be commenced if:

(a) seven or more persons have claims against the same person;

(b) those claims are in respect of, or arise out of, the same, similar or related circumstances; and

(c) the claims give rise to a substantial common question of law or fact.

1. By section 33H, a group proceeding must be commenced by writ with an indorsement that identifies the group members and specifies the nature of the claims made on behalf of the group members and the relief claimed.80 It is also necessary to specify the questions of law or fact that are common to the claims of the group members.81

197 Section 33V provides:

(1) A group proceeding may not be settled or discontinued without the approval of the Court.

(2) If the Court gives such approval, it may make such orders as it thinks fit with respect to the distribution of any money, including interest, paid under a settlement or paid into court.

1. Although not explicitly set out, it is sufficiently clear that the settlement to which s 33V relates is the settlement of the claims that are brought by the group members against the defendant. The settlement will bring to an end those claims, usually in consideration of payment of money by the defendant.
2. Sub-section 33V(2) is premised on approval of the settlement having been given by the Court. It provides an ancillary power with respect to the distribution of

80 Supreme Court Act 1986 s 33H(2)(a)-(b).

81 Ibid s 33H(2)(c).

any money paid under the settlement or paid into Court.

1. Sub-sections 33V(1) and (2) confer two distinct, but related, powers: first, to approve the settlement and, second, to approve the distribution of payments under it. It is important not to elide these two powers.

1. The general principles to be applied in considering an application for approval of a settlement under s 33V have been propounded in a number of cases and are well-established.82 Those principles guide, but do not control, the Court's exercise of the power in s 33V to approve, or not approve, a settlement.

1. The organising principle which underpins s 33V is whether the proposed settlement is fair and reasonable and in the interests of the group members bound by the settlement.83 Consideration of that question is informed by a number of matters.

1. It is an essential starting point to identify the settlement and its terms. It is commonplace that a deed of settlement may address more than the settlement of the claims against the defendant and will also deal with the distribution of settlement money, including to a litigation funder. The structure of sub-ss 33V(1) and (2) suggests that such payments may be distributions of money that has been paid under a settlement to which the Court has given approval under s 33V(1). Those distributions are the subject of separate Court approval under s 33V(2).
2. The question of fairness interposes itself at various levels. Most obviously, there will need to be consideration of the fairness of a proposed settlement sum.

82 See Williams v FAI Home Security Pty Ltd [No 4] [2000] FCA 1925; (2000) 180 ALR 459, 465-6 [19] ('Williams');

Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd [No 2] [2006] FCA 1388; (2007) 236 ALR 322, 332-6 [30]-[40]

('Darwalla'); Blairgowrie Trading Ltd v Allco Finance Group Ltd (rec and mgr apptd) (in liq) [No 3] [2017] FCA 330; (2017) 343 ALR 476, 499-500 [81]-[85] ('Blairgowrie'). The approach of the Supreme Court of Victoria largely mirrors the approach taken by the Federal Court of Australia in respect of representative proceedings brought under Part IVA of the Federal Court of Australia Act 1976 (Cth).

83 Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 71

FCR 250, 258; Lopez v Star World Enterprises Pty Ltd [1999] FCA 104 [15]-[16]; P Dawson

Nominees [2010] FCA 1029 [4]; Jarra Creek Central Packing Shed Pty Ltd v Amcor Ltd [2011] FCA

671 [70]; Australian Securities and Investments Commission v Richards [2013] FCAFC 89 [7]-[8]

('Richards'); Kelly v Willmott Forests Ltd (in liq) [No 4] [2016] FCA 323; (2016) 335 ALR 439, 454 [62] ('Kelly');

Caason Investments Pty Ltd v Cao [No 2] [2018] FCA 527 [12] ('Caason').

1. The Court is being asked to approve a compromise of litigation. Inevitably, that will require an assessment of whether the plaintiff is likely to succeed in the action, the measure of damages that a successful judgment would yield, the prospects of recovery, and the expenditure in costs, time and effort that would be required to bring the proceedings to a conclusion.84

1. That assessment does not involve a simple calculus but calls for matters of judgment based on imperfect knowledge and is influenced by the appetite for risk. It will be informed by the complexity and duration of the litigation and the stage at which the settlement occurs.85 It is important to acknowledge that it is the state of imperfect knowledge and the existence of risks that will have likely induced the settlement. It follows that those matters should be accorded a degree of prominence in any assessment of the reasonableness of the settlement.

1. Those considerations mean that there will rarely, or ever, be a single correct settlement. Strategic decisions must be factored into account but it is not the role of the Court to second guess those decisions.86

1. The question of fairness will also be relevant to the distribution of the settlement sum, particularly where, as is usually the case, the group members will receive less than their claimed losses and the costs of bringing the proceeding (both in terms of legal costs and funding costs) will need to be accounted for. It follows that there will often be questions of fairness as between group members, particularly where some, but not all, of the group members have funded the litigation or where it may be necessary to apportion the settlement sum between group members based on differences in their respective claims.87
2. An important issue of principle also arises as to the extent to which a settlement may make provision for, or seek to control (including by way of condition

84 See Williams [2000] FCA 1925; (2000) 180 ALR 459, 465 [19].

85 See generally Downie [2015] VSC 190 [99]-[100].

86 Blairgowrie [2017] FCA 330; (2017) 343 ALR 476, 500 [82]-[83].

87 See, eg, Richards [2013] FCAFC 89.

precedent),88 the distribution of money paid under the settlement. That matter requires consideration of the nature of the power exercised by the court and the particular terms of a settlement which is sought to be approved. The issue will arise in respect of payments made to a funder, payments made in respect of legal costs and disbursements, and payments made to particular group members, most commonly the lead plaintiff, on account of his or her particular effort in the conduct of the litigation.

1. Group proceedings exist to avoid a multiplicity of actions and are attractive to group members because it may not be feasible, for economic or other reasons, for a putative plaintiff to run his or her claim as a single proceeding.89 Many group proceedings will only be brought and prosecuted with the underwriting of a funder engaged in a commercial enterprise.

1. On occasion, legal practitioners fund proceedings by either accepting that their fees will only become payable in the event of a successful outcome (by judgment or settlement) or by deferring payment until the conclusion of the proceeding. That course is unlikely to be feasible in the case of large or more complex class actions.

1. More commonly, professional funders agree to fund group proceedings and, to that end, enter into funding agreements under which they fund the proceeding in return for a payment out of any settlement or judgment. Such funding commonly entails payment of the group members' costs during the running of the proceeding, provision of security for the defendant's costs, and an agreement to meet any adverse costs orders.
2. In the first place, any entitlement in the funder to obtain a return on its investment will rest in the contractual terms of the funding agreements and will

88 See Caason [2018] FCA 527 [28]-[38].

89 See generally P Dawson Nominees Pty Ltd v Multiplex Ltd [2007] FCA 1061 [22]-[25].

reflect a liability of those group members who have entered into such arrangements with the funder. Not all group members may have done so, particularly in an open class proceeding.

1. Unless bound by a funding agreement, and in the absence of a Court order under s 33V(2), a group member will have no obligation to pay any share of the costs or litigation funding charges in bringing the proceeding to completion by settlement or judgment. The inevitable scope for group members to 'free ride' leads to the potential for unfairness and injustice.

1. The injustice exists because some group members will stand to obtain windfall gains, that is, benefit from the litigation without meeting the costs of bringing the proceeding or bearing the risks of failure.90 Further, the funder may not recover its outgoing, let alone return a profit, if it is limited to recovering from funded members.

1. In order to overcome that potential unfairness, and because a funder may regard its contractual entitlements from funded group members as inadequate or inappropriate, the courts have approved payments to funders out of the settlement sum. As mentioned above,91 two models have been deployed: fund equalisation92 and common fund orders.93 In every case, the court must have an eye on the quantum of any commission and how it is to be borne.

1. In Money Max,94 the Full Court of the Federal Court emphasised that it was appropriate for a court exercising powers to approve the settlement of a group

proceeding to exercise some oversight over litigation funding charges. That was

90 See Earglow [2016] FCA 1433 [83]; Partial Settlement Reasons [112].

92 See, eg, Dorajay Pty Ltd v Aristocrat Leisure Ltd [2009] FCA 19 [14], [17]; P Dawson Nominees

[2010] FCA 1029 [26]-[28]; Modtech [2013] FCA 626 [58]; Earglow [2016] FCA 1433 [80]-[83].

93 See Money Max [2016] FCAFC 148; (2016) 245 FCR 191, 194 [3], 230-1 [199]-[205]; Blairgowrie [2017] FCA 330; (2017) 343 ALR 476,

502-16 [91]-[160]. See, eg, Pathway Investments Pty Ltd v National Australia Bank Ltd [No 3]

[2012] VSC 625 [19]-[20] ('Pathway Investments'); Farey v National Australia Bank Ltd [2014] FCA

1242; Caason [2018] FCA 527 [159]-[174].

94 [2016] FCAFC 148; (2016) 245 FCR 191.

because such charges will often represent the largest single deduction from the settlement, there will be a significant information asymmetry between the funder and the group members in relation to costs and risks, a group proceeding may represent the only real opportunity for individual claimants to recover losses, and group members have little opportunity for negotiation in relation to the funding commission.95

1. The Court identified a number of relevant, but not determinative, considerations to assess whether a proposed funding commission rate should be approved. It is important to recall that, in that case, the Court was being invited to determine a funding commission rate early in the proceeding and in advance of settlement.96 It was in that context that the Court identified the following matters as relevant.

(a) whether the funding commission rate had been agreed by sophisticated group members and the number of such group members who had agreed;

(b) the information provided to class members as to the commission;

(c) a comparison of the commission with commissions in other group proceedings and the broad parameters of the funding commission rates available in the market ;

(d) the litigation risks of providing funding in the proceeding, to be assessed prospectively and avoiding 'hindsight bias';

(e) the adverse cost exposure that the funder assumed;

(f) the legal costs expended and to be expended, and the security for costs provided, by the funder;

(h) any substantial objections made by class members in relation to any

(i) the likely actual recovery for group members under any pre-existing funding arrangements.97

1. In many cases, on an application to approve a settlement, a court will need to have regard to the quantum of any proposed payment to the funder and make an assessment as to whether the proposed payment is fair and reasonable in the circumstances. In the event that the court is not satisfied that the proposed payment is appropriate, it will be necessary to determine what consequences flow from that finding. For example, it may be that the court can approve the settlement under s 33V(1) but not the payment to the funder or, in an appropriate case, determine that a different amount than that claimed by the funder be approved for payment.98 The availability of such a power remains a matter of controversy on the basis that it may involve the court in rewriting the terms of a commercial agreement.99 We return to this issue below at [375] to [383].

1. The court's role is to satisfy itself that the plaintiff's legal costs, which will be deducted from the settlement sum, are reasonable in all the circumstances.100

Inevitably, although group members will be required to share the liability for the fees and disbursements, they will be disadvantaged in their ability to assess the reasonableness of such costs because the information available to them will often be limited.101

221 The importance of the court satisfying itself as to the reasonableness of costs

98 See generally Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia [No 6] [2011] FCA

277 [38], [42], quoted in Earglow [2016] FCA 1433 [119]-[120]. See also Blairgowrie (2017) 343

99 Liverpool City Council v McGraw-Hill Financial Inc [2018] FCA 1289, [18]-[52] ('Liverpool City

100 Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663 [348] ('Matthews').

101 Matthews [2014] VSC 663 [349], citing Modtech [2013] FCA 626 [27].

incurred is amplified where the court is being asked to make an order obliging all group members, including those who have no contractual obligations to the solicitors, to contribute to the costs of bringing the proceeding. Although such orders are necessary to avoid the injustice that arises if funded group members carried the burden of legal costs alone, they accentuate the need to ensure the reasonableness of the amount claimed.

1. In _Earglow,_102 Murphy J referred to the supervisory role of the court in relation to costs. His Honour stated that the court should satisfy itself that the arrangements meet any relevant legal requirements, contain reasonable and proportionate terms relative to the commercial context in which they were entered, and that the costs and disbursements are in accordance with relevant agreements and are otherwise reasonable.103

1. The assessment of the reasonableness of costs and disbursements will involve a consideration of:

(a) whether the work in a particular area, or in relation to a particular issue, was undertaken efficiently and appropriately;

(b) whether the work was undertaken by a person of an appropriate level of seniority;

(c) whether the charge out rate was appropriate having regard to the level of seniority of that practitioner and the nature of the work undertaken;

(d) whether the task and associated charge was appropriate, having regard to the nature of the work and the time taken to complete the task; and

(e) whether the ratio of work and interrelation of work undertaken by the solicitors and counsel was reasonable.104

224 In the usual case, the parties will seek to support the reasonableness of any

102 [2016] FCA 1433.

1. Ibid [91], citing Courtney v Medtel Pty Ltd [No 5] [2004] FCA 1406; (2004) 212 ALR 311, 322 [61], Modtech [2013] FCA 626 [32] and Newstart 123 Pty Ltd v Billabong International Ltd [2016] FCA 1194 [14].

104 Modtech [2013] FCA 626 [37], cited in Matthews [2014] VSC 663 [352].

payment of costs and disbursements by the provision of a report from an independent costs expert.105 However, it is the task of the court, not the costs expert, to determine whether the fees and disbursements claimed are reasonable and the court must have sufficient information to enable it to undertake that assessment.106

1. On occasion, courts have used registrars and other court officers to assess the reasonableness of costs107 or made use of a court-appointed referee.108 In _Lifeplan Australia Friendly Society Ltd v S&P Global Inc,_109 Lee J said that '[i]t may be the time has come for the Court to establish a regular practice of appointing a referee to inquire and provide a report to the Court.'110

1. An appeal from a judge of the Trial Division to the Court of Appeal is an appeal by way of rehearing. As Gageler J explained recently in Minister for Immigration and Border Protection v SZVFW,111 on an appeal by way of rehearing, an appellate court is required to determine the correctness of the judgment under appeal on the evidence adduced at the trial, supplemented by any further evidence

that the appellate court may allow to be adduced on the appeal.112

105 See Williams [2000] FCA 1925; (2000) 180 ALR 459, 465 [19]. See also King v AG Australia Holdings Ltd (formerly

GIO Australia Holdings Ltd) [2003] FCA 980 [15]; Guglielmin v Trescowthick [No 5] [2006] FCA

1385 [16]; Matthews [2014] VSC 663 [356]-[386].

106 Modtech [2013] FCA 626 [35], cited in Matthews [2014] VSC 663 [355].

1. See, eg, Downie [2015] VSC 190 [199]-[201]; Williams v AusNet Electricity Services Pty Ltd [2017] VSC 474 [106], [121].

1. Section 54A of the Federal Court Act 1976 (Cth) empowers the Court to refer a proceeding or one or more questions arising in a proceeding to a referee for inquiry and report: see the discussion in Kadam v MiiResorts Group 1 Pty Ltd [No 4] [2017] FCA 1139; (2017) 252 FCR 298, 307-14 [35]-[62]. See, eg, Caason [2018] FCA 527 [122]-[153]; Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Ltd [2018] FCA 1030 [5]-[6]; Liverpool City Council [2018] FCA 1289 [69]. In Victoria, the Supreme Court has, on occasion, appointed a referee to assess the reasonableness of costs incurred in administering settlement distribution schemes. See, eg, Matthews v AusNet Pty Ltd [Ruling No 40] [2015] VSC 131 [29]; Rowe v AusNet Electricity Services Pty Ltd [Ruling No 9] [2016] VSC 731; Matthews v AusNet Pty Ltd [Ruling No 44] [2016] VSC 732.

109 [2018] FCA 379 ('Lifeplan').

111 [2018] HCA 30.

1. In cases where the appeal concerns a judge's application of legal standards to findings of primary fact, the appellate court is entitled to give effect to its own conclusion as to the proper inferences to be drawn from the facts.113 However, where the decision under appeal was made in the exercise of a judicial discretion, a more stringent standard applies, and the appellate court must be satisfied that the decision amounted 'to a failure to exercise the discretion actually entrusted to the court'.114

1. In a number of cases, the High Court has explained what constitutes a judgment made in the exercise of a judicial discretion. In Norbis v Norbis,115 the order that was appealed was made pursuant to a statutory power conferred on the Family Court to 'make such order as it thinks fit altering the interests of the parties' in matrimonial property. Mason and Deane JJ (with whom Brennan J agreed) said that the order involved an exercise of discretion because the application of the statutory criterion called for 'value judgments in respect of which there is room for reasonable differences of opinion, no particular opinion being uniquely right'.116 In Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission,117 the High Court said that 'discretion' refers to a decision-making process in which 'the decision-maker is allowed some latitude as to the choice of the decision to be made'.118

1. A decision to approve a proposed settlement pursuant to s 33V is a decision made in the exercise of a judicial discretion.119 The Court's task is to decide whether

the proposed settlement is fair and reasonable. Although the authorities provide

113 Ibid [40]-[41], citing Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531.

114 Ibid [37]-[38], quoting Lovell v Lovell [1950] HCA 52; (1950) 81 CLR 513, 519 and House v The King (1936) 55

115 [1986] HCA 17; (1986) 161 CLR 513.

117 [2000] HCA 47; (2000) 203 CLR 194.

119 Darwalla [2006] FCA 1388; (2006) 236 ALR 322, 332 [30]; Wingecarribee Shire Council v Lehman Brothers Australia

Ltd (in liq) [No 9] [2013] FCA 1350; (2013) 97 ACSR 227, 234 [44]; Kelly [2016] FCA 323; (2016) 335 ALR 439, 462 [114].

guidance as to the matters that are likely to inform that assessment, the Court must determine what matters are relevant in the context of the case at hand. The identification of the relevant matters, the conclusions drawn with respect to them, and any balancing exercise that must be undertaken as between the relevant considerations involve value judgments on which there may be reasonable differences of opinion.

1. If the Court approves a proposed settlement, s 33V(2) provides that the Court may 'make such orders as it thinks fit' with respect to the distribution of any money paid under a settlement or paid into Court. The same form of words was held by the High Court in Norbis v Norbis to denote the exercise of a judicial discretion.

1. As will be apparent from the discussion above, the conclusion that here the judge was exercising a judicial discretion in approving the settlement and making orders as to the distribution of the settlement sum (including legal costs and the commission to be paid to the funder) has implications for the standard of appellate review. To succeed on appeal, the applicant must meet the more stringent standard and establish that the judge in fact failed to exercise the discretion. To adopt the formulation used in House v The King, the applicant must establish that the judge acted upon a wrong principle, allowed extraneous or irrelevant matters to guide or affect him, mistook the facts, did not take into account some material consideration, or that, on the facts, his decision is unreasonable or plainly unjust.120

232 With those general principles in mind, we turn to the grounds of appeal.

233 We have set out the five grounds of appeal above at [158].

1. The grounds of appeal seek to impugn the judge's orders by focusing, first, on the payments out of the settlement sum in respect of legal costs and the funder's

120 (1936) 55 CLR 499, 504-5.

commission (grounds 1, 2 and 5) and, second, on the settlement sum itself (grounds 3 and 4).

1. The attack on the legal costs and the funder's commission has both procedural and substantive aspects. There is an overlap in some important respects between what were characterised as the procedural aspects of the settlement process in grounds 1 and 2 and the substantive contentions raised under cover of ground 5. For example, the contention in ground 2(a) that the judge failed to deal with the Pitman and Botsman objections overlaps with the contention that the judge erred in approving the legal costs and the funder's commission without having regard to the relative contributions to the settlement made by the group proceeding and the SPR proceeding in circumstances where the existence of the two proceedings was a central plank of the objections.

1. We will consider first the confidentiality orders made by the judge, before dealing with the judge's approval of the payments in respect of legal costs and the funder's commission. We will then deal with ground 2(d) (which relates to the decision not to appoint a contradictor) before turning to grounds 3 and 4, which concern the reasonableness of the settlement sum.

Grounds 1, 2(b) and 2(c): The confidentiality regime

1. It will be recalled that confidentiality was claimed, and ultimately ordered, in respect of the deed, the costs report, the affidavits of Mr Lloyd and Mr Green filed by Trust Co, the confidential affidavit of Mr Lindholm sworn 9 January 2018, the submissions of counsel for the SPR dated 23 January 2017, and the opinions of counsel for Mr Bolitho dated 19 January and 24 January 2018 respectively.

1. The applicant submitted that there was no justification for such a broad sweep of confidentiality and that, given the protective nature of the jurisdiction and in circumstances where the judge declined to appoint a contradictor, the breadth of the orders were inconsistent with principle.
2. Mr Bolitho submitted that the orders went no further than was strictly necessary in circumstances where the parties were required to be candid in the material provided to the court on an approval application, but also conscious that the settlement may not be approved and that the matter would proceed to trial.

1. Mr Bolitho relied on the relevant practice note which requires parties in an approval application to address the terms of any advice received from counsel and/or from any independent expert in relation to the issues that arise in the proceeding. The practice note further provides that orders for the confidentiality of evidence are orders of a kind which are commonly made on an application for approval.121

1. The SPR submitted that the basic principle is that group members are entitled to know as much as practicable about why settlement has been approved. They emphasised that the ability of the Court to determine whether a settlement is fair and reasonable depends on it being provided with candid professional opinions concerning the settlement and the factual matters supporting those opinions.122 The SPR submitted that the questions of confidentiality are largely matters of practice and procedure and that, except for the costs report, the scope of material over which confidentiality was maintained was not unusual. They further submitted that, in any event, there was no substantial injustice occasioned by the non-disclosure of the deed or the costs report.

1. Trust Co submitted that confidentiality orders in respect of affidavit material are commonly made in settlement approval proceedings. It submitted that parts of the evidence filed by it (for example, in relation to its insurance position) were inherently confidential and were agreed to be kept confidential pursuant to cl 3.8 of the deed.

243 Trust Co further submitted that group members were advised in the

121 Practice Note SC GEN 10 Conduct of Group Proceedings (Class Actions) [13.3]-[13.4].

122 See Pathway Investments [2012] VSC 625 [3], quoting P Dawson Nominees [2010] FCA 1029 [4]

and Lopez v Star World Enterprises Ltd [1999] FCA 104; (1999) ATPR 41-678 [42-678].

settlement notice that the Court would examine Trust Co's financial position and that the deed, which was available for inspection by group members, required Trust Co to file affidavits going to its financial and insurance position.

1. In assessing the competing submissions, there are two interlocking principles that must be applied. The first is the open court principle.123 That principle requires that court proceedings occur in open court and that evidence placed before a court is open to public scrutiny, save in exceptional circumstances.124 The principle is also reflected in the obligation imposed on courts to provide reasons for judgment in which conclusions are expressed openly and clearly.125 The second principle is that courts must act with procedural fairness, and that this generally demands that persons who are affected have access to the material on which the court is to act and be given an opportunity to respond by way of evidence and submissions.126

1. Those principles are not absolute. They may need to give way to the need for confidentiality in order to avoid prejudice to the administration of justice. As Crennan J observed in Gypsy Jokers Motorcycle Club Inc v Commissioner of Police, 'the availability and accessibility of all relevant evidence in judicial proceedings is not absolute.'127 However, any departures from the paradigm must be justified and must extend only so far as is strictly necessary for the furtherance of the administration of justice.128 It may involve the provision of material to legal advisers

on an undertaking as to confidentiality. To the extent that any orders may prohibit

123 See; Dickason v Dickason [1913] HCA 77; (1913) 17 CLR 50; Scott v Scott [1913] UKHL 2; [1913] AC 417; Russell v Russell (1976)

[1976] HCA 23; 134 CLR 495, 520 (Gibbs J); Condon v Pompano Pty Ltd [2013] HCA 7; (2013) 252 CLR 38.

124 Commissioner of the Australian Federal Police v Zhao [2015] HCA 5; (2015) 255 CLR 46, 60 [44].

125 Public Service Board of New South Wales v Osmond (1986) 159 CLR 656, 666-7 (Gibbs CJ).

1. See, eg, Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571, 589 (Rich J); Commissioner of Police (NSW) v Tanos [1958] HCA 6; (1958) 98 CLR 383, 395-6 (Dixon CJ and Webb J); Taylor v Taylor [1979] HCA 38; (1979) 143 CLR 1, 4-5 (Gibbs J), 15-6 (Mason J), 20 (Murphy J), 22 (Aickin J); Re JRL; Ex parte CJL [1986] HCA 39; (1986) 161 CLR 342, 350 (Mason J); Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172, 184-5 [35] (Kirby J); Condon v Pompano Pty Ltd [2013] HCA 7; (2013) 252 CLR 38, 99-100 [156]-[157] (Hayne, Crennan, Kiefel and Bell JJ), 110 [194] (Gageler J).

127 [2008] HCA 4; (2008) 234 CLR 532, 597 [189].

128 Pathway Investments [2012] VSC 625 [5]; Matthews [2014] VSC 663 [437].

or restrict the disclosure of information derived from a proceeding, the Open Courts

1. It is important to emphasise that there are no special rules that apply to group proceedings. Confidentiality orders must be justified by reference to the same principles as are applied in any other proceeding in the Court.

1. In assessing whether the confidentiality orders, in so far as they related to the costs report, involved an impermissible incursion on the open court principle or led to a denial of procedural fairness, the following factors are important.

1. First, Mr Trimbos, in his affidavit, deposed to the sum of legal costs and disbursements that had been incurred, or were likely to be incurred, up to settlement and stated that these were, in his opinion, fair and reasonable. However, the affidavit provided no detail as to the methodology that Mr Trimbos had employed or any of the reasoning supporting his ultimate conclusion. Self-evidently, the affidavit provided no basis for the Court itself to conclude that the costs had been reasonably incurred. All of the critical material going to the reasonableness of the costs was contained in the costs report which was a confidential exhibit to the affidavit rather than in the body of the affidavit itself. It follows that, without access to the costs report, a group member would not able to make any meaningful submission as to the reasonableness of the costs that had been incurred and which were ordered to be paid out of the settlement sum.

1. Second, the costs report was also kept confidential from the SPR and their lawyers. For this reason, the SPR were not able to make any submission as to the reasonableness of the costs, other than to draw attention to the principles set out by Gordon J in Modtech and to refer to their own costs and disbursements by way of comparison.

1. The refusal to provide the SPR or their lawyers with access to the costs report was not referred to in the reasons of the judge. In submissions before us, senior

counsel for Mr Bolitho submitted that the costs report was not disclosed to the SPR because his client and the SPR were 'not altogether aligned on all issues' and that there were 'aspects of the conduct of [Mr Bolitho's] case which we would not necessarily wish to share with them and aspects of the conduct of their case which they have not shared with us'.

1. It was submitted on behalf of Mr Bolitho that the costs report contained a detailed narrative of all the work that had been undertaken by his lawyers in preparing the matter for trial, that it was privileged and confidential, and that it was necessary to keep the report confidential, including from the SPR.

1. Similarly, Trust Co was also not privy to the costs report or the opinions and submissions filed on behalf of Mr Bolitho and the SPR. Accordingly, it was not in a position to assist the Court in relation to the reasonableness of the legal costs.

1. The third relevant factor is that the judge recorded in his reasons that cl 3.9 of the deed obliged the funder to obtain an expert report from a suitably qualified external costs consultant on the question whether the legal costs and disbursements had been reasonably incurred and were of a reasonable amount. The judge then said:

An affidavit of Mr Peter Trimbos dated 4 January 2018 exhibiting a confidential report concerning the legal costs and disbursements incurred by [the funder] has been made available for inspection by group members since

5 January 2018 and has been filed on a confidential basis in the proceeding.129

1. By reference to this paragraph, the applicant submitted that the judge had proceeded on a misconception that group members had been given access to the costs report whereas in fact the report was not available for inspection by group members.
2. The authorities surveyed above make it clear that, in the exercise of its protective role, the court will scrutinise the amount of costs and disbursements that are claimed. Self-evidently, the reduction in the amount that will be available to

group members may affect the reasonableness of the settlement and group members will rarely be in a position to meaningfully challenge the claim for costs and disbursements.

1. Here, the judge correctly considered the factors that bear upon the reasonableness of any claimed costs. In the passage extracted above at [146], the judge said that he was satisfied that the work had been undertaken efficiently and appropriately, by a person of an appropriate level of seniority, and at an appropriate charge out rate. In arriving at that conclusion, the judge relied on the single opinion from Mr Trimbos.

1. In Downie,130 J Forrest J concluded that he would not act on the basis of a single expert report notwithstanding that the relevant expert had substantial experience and had done her best to ensure that the estimate of costs was reasonable. This was because, in his Honour's view, the Court needs to be satisfied that there is an independent source of verification of the expert's figures.131 Accordingly, his Honour ordered an independent costs review to be undertaken by, in the first instance, either a costs registrar or judicial registrar of the Court.132

1. In _Matthews,_133 Osborn JA concluded, having examined in detail the evidence before him, that the provision of two independent opinions as to costs was sufficient and no further enquiry was warranted.134 We have already adverted to the observation of Lee J in the Federal Court that, generally speaking, independent verification of claimed costs should occur.135
2. In our view, the effect of the confidentiality regime meant that none of the applicant, Mr Pitman, any other group members, or the SPR could assist the Court in

130 [2015] VSC 190.

133 [2014] VSC 663.

135 Lifeplan [2018] FCA 379 [41].

a meaningful way in the assessment of the reasonableness of the claimed costs and disbursements. Even counsel for Mr Bolitho in their confidential opinion dated 19

January 2018 said that they could do no more than adopt Mr Trimbos's opinion on

the reasonableness of the costs. That difficulty was compounded by the fact that there were two proceedings conducted by different plaintiffs and different legal teams but brought for the benefit of the same persons, namely, all of the debenture holders. Any assessment of the reasonableness of the costs and disbursements incurred by Mr Bolitho's lawyers had to have regard to the potential overlap in the two proceedings and whether, in effect, the debenture holders were paying twice for the same work. It does not appear from the confidential costs report that Mr Trimbos was specifically asked to address that issue.

1. The submission advanced by Mr Bolitho that it was not appropriate to provide the SPR or their lawyers with access to the costs report on the basis that there was not a complete alignment of interest raises significant issues that were not addressed below. First, given that there had been, in effect, a joint preparation for the two proceedings and that there had been a full exchange of evidence, it is not clear where the relevant interests diverged. Second, the SPR were appointed by the Court to act in the best interests of the debenture holders. They had a duty to ensure that the debenture holders recovered, to the full extent possible, the amounts that they had lent to Banksia under the debentures. That strongly supported a unity of interest, at least as between the SPR and group members. Given their role as SPR and their extensive experience in the conduct of litigation, it might reasonably be expected that, armed with the confidential costs report, the SPR would have been well-placed to assist the Court in assessing the reasonableness of the claimed costs and disbursements.

1. It does not appear to us that there was a material conflict between the interests of the SPR, acting on behalf of the debenture holders, and the interests of group members in the group proceeding. In those circumstances, we are not persuaded that there was a proper basis to exclude the SPR or their lawyers from access to the

costs report. If there was such a conflict, the proper course was to compensate for the inability of the SPR to assist the Court on the question of the reasonableness of the claimed costs by the appointment of a contradictor. We shall return to this point later in these reasons.

1. The applicant made the additional point that providing the SPR with access to the confidential costs report would not have alleviated the absence of scrutiny in circumstances where the SPR were bound, by cl 3.11 of the deed, to instruct their lawyers to support the funder's application for the payment of costs and disbursements incurred in the sum of $4.75 million (plus GST). There is considerable force in that submission. It is perhaps futile to speculate whether, had the SPR been given access to the costs report, cl 3.11 would have precluded them from advancing proper submissions in relation to the appropriateness of the claimed amount. However, cl 3.11 provides an additional basis for concluding that the Court was denied informed assistance on the suitability of the proposed payment.

1. We are also not persuaded that it was appropriate to keep the confidential costs report from group members. If there was a concern about maintaining confidence, it could have been secured by appropriate undertakings. Again, if it were not possible to allow access, the appointment of a contradictor would have been necessary to alleviate the burden on the Court.

1. We are conscious that the making of confidentiality orders on an approval application is a matter of practice and procedure. However, we are satisfied that the inability of the SPR and group members to access the costs report constituted a denial of procedural fairness. If that regime was to be maintained, it was necessary for the Court to consider other means by which it could obtain assistance on the reasonableness of the claimed costs and disbursements, including by the use of a contradictor.

1. It is clear from his reasons that the judge thought that the problems associated with confidentiality could be overcome by fully explaining the basis for the approval

in the reasons for judgment and by including such parts of the confidential material as was necessary to explain the Court's decision. Certainly that course addressed one of the problems of confidentiality, namely, the threat to the open court principle. However, it did not ensure that the parties affected had a reasonable opportunity to respond to the evidence and submissions filed by the other parties. Further, the Court was denied the benefit of the assistance it required in order to discharge its protective oversight of distributions in favour of all group members.

1. It must be acknowledged that the absence of the applicant and her counsel before the judge meant that the issue of the confidentiality of the costs report was not ventilated in the detail that it was given before us. Nevertheless, the reasonableness of the claimed costs and the need for further scrutiny was clearly raised by Mr Pitman and in the Botsman objection. The issue was 'in the ring'. This is not a case where the point is only raised for the first time on appeal.

1. Confidentiality was claimed, and ultimately ordered, in relation to the affidavits of Mr Lloyd and Mr Green filed by Trust Co in compliance with its obligations under cl 3.8 of the deed.

1. The critical facts deposed to by Mr Lloyd and Mr Green were that Trust Co's available assets were essentially limited to its insurance cover of $75 million and that Perpetual (or its related entities) would not contribute to any settlement. These facts were ultimately recorded in the final orders under 'Other Matters'. There does not appear to have been any secret of the fact that the Perpetual entities would not stand behind Trust Co and that the offer exhausted the assets reasonably available to Trust Co. Given that the affidavit material did little more than recite the bare facts, it is not clear that any basis for confidentiality was established.

1. However, given that the substance of Mr Lloyd and Mr Green's evidence was exposed, we are not persuaded that there was a vitiating denial of procedural fairness in respect of this evidence.

Analysis: Opinions of counsel for Mr Bolitho and the SPR

1. It is a common feature of an approval application for a compromise of a group proceeding that counsel for each of the parties will provide a confidential advice to the court that candidly exposes the strength and weakness of the competing contentions and explains why, in the opinion of counsel, the settlement is appropriate.

1. In Camilleri v Trust Company (Nominees) Ltd, Moshinsky J succinctly explained why such opinions are valuable:

There are several factors, in particular, which give me comfort in relying on the opinions expressed in these documents. First, the proceeding is at a very advanced stage, with all the lay and expert evidence already filed. The settlement has occurred virtually on the eve of the trial. This places the parties and their lawyers in a good position to assess the strengths and weaknesses of the case. Secondly, the lawyers who have expressed the opinions have been involved in the proceeding for a long time and therefore are very familiar with the detail of the case. Thirdly, the opinions are well constructed and reasoned, giving me confidence in the opinions they express.136

1. The candid exposure of the strengths and weaknesses of the lawyer's own case is essential to the utility of the advice in the court's deliberations. In principle, there is a sound reason for the maintenance of confidentiality over such opinions.

1. Here, however, the opinions contained submissions that were not confidential, as evidenced by the fact that large portions of both the Bolitho counsel's opinions and the SPR counsel's opinions were reproduced in the reasons for judgment. Much of that material could have been placed in the open domain without trespassing on truly confidential matters. Further, it was not appropriate to leave the making of confidentiality orders until after the approval applications had been determined.
2. The most significant problem with the confidentiality over counsel's opinions was that the SPR and the Bolitho camps did not know what each was saying about the relative strengths of the two proceedings. That was a matter that counsel for

136 [2015] FCA 1468 [35].

Mr Bolitho expressly addressed in their first opinion but there was no opportunity for the SPR to deal with that important issue having regard to that opinion. We are not persuaded that there was any conflict of interest that required the opinions to be kept secret in that way. The judge was denied the benefit of fully informed submissions on this point.

1. Further, the supplementary opinion of counsel for Mr Bolitho also addressed in terms the Pitman and Botsman objections in circumstances where the objectors were denied access to that consideration. That process was unfair and placed an undue burden on the judge. If the material could not have been provided to Mr Pitman or the applicant for the justifiable reason of confidentiality, then a contradictor should have been appointed.

1. In our view, the material before the judge did not support the making of confidentiality orders in the form that they were made. They constituted a significant impediment on the ability of the parties and group members to advance submissions on matters that were central to the applications for approval of the settlement and payment of the legal costs and funder's commission. They went further than was necessary.

277 The judge was denied the benefit of the assistance to which he was entitled.

The protective role of the Court to ensure that settlements are fully and appropriately tested was frustrated by the high degree of confidentiality and the inability of the various parties to consider and test the material that had been provided to the Court but kept secret from other parties.

Grounds 2(a) and 5: The distribution of the settlement sum

1. The attack on the approval of the funder's commission payment had both procedural137 and substantive dimensions.138

1. By ground 2(a), the applicant contends that the judge failed to properly consider the Pitman and Botsman objections. Principally, this ground alleged that the judge failed to deal with the fact that there were two proceedings which contributed to the settlement and that this was relevant to both the commission payment and the payment in respect of legal costs.

1. The extent to which the funder was seeking to recover a commission on the whole settlement, part of which was attributable to the settlement of the SPR proceeding, was raised by paragraph 6 of the Botsman objection and in Mr Pitman's oral submissions before the judge. In paragraph 6 of her written objection, the applicant objected to the funder's commission on the basis that there was no transparency in how the figure was calculated and that, applying the approach adopted by Robson J in the partial settlement, it represented a significant windfall in favour of the funder. The paragraph contained a calculation premised on the settlement sum being split evenly between the two proceedings. That proportion yielded a settlement sum of $32 million which, having regard to a 30 per cent contractual entitlement and a 55 per cent take-up by debenture holders, produced a commission of $5.28 million ($32 million x 30 per cent x 55 per cent). On that basis, the proposed commission included a $7 million windfall.

1. The question whether the judge took into account that issue significantly overlaps with ground 5, under which it is contended that it was an error to approve the commission without proper regard to the relative contributions of the two proceedings and on the assumption that the entire settlement sum was attributable to the group proceeding.

282 In support of ground 5, the applicant submitted that the funder's commission

had been calculated, or at least calibrated, as a percentage of the settlement sum of

$64 million. The applicant contended that this methodology was revealed by a

'worked example' given by the judge in his reasons.139 It was submitted that this involved an error because it failed to properly take into account the SPR proceeding and the work done by the SPR and their lawyers. It was contended that the preponderance of work carried out by the SPR meant that only 50 per cent of the settlement pool, at most, was attributable to the group proceeding and that any funding commission should have been calculated on, or compared to, that reduced settlement sum.

1. The applicant submitted that, although the judge referred to the two proceedings, he failed to properly consider the significance of them given that the point was directly raised in paragraph 6 of the Botsman objection. The applicant noted that the SPR were contractually bound to support the commission payment but, notwithstanding that obligation, the evidence of the SPR did not actually support the reasonableness of the payment.

1. In this respect, the applicant referred to the evidence of Mr Lindholm in his confidential affidavit in which he deposed that the proposed settlement of the SPR proceeding with Trust Co was reasonable and represented a good commercial outcome for the debenture holders and that the terms of the deed, including as to the distribution of the settlement sum, represented the 'best possible outcome that could be achieved in all the circumstances and after extensive negotiations' between the parties to the deed. The applicant submitted that this evidence fell short of a positive statement that the funding commission was reasonable.

1. Mr Bolitho submitted that ground 5 entailed an attack on a discretionary judgment based on a factual misconception that the SPR had shouldered most of the practical, evidentiary and financial burden of the conduct of the proceedings. It was contended that this submission was not disclosed to Mr Bolitho and that it could have been answered by evidence and submissions to the contrary.

286 Mr Bolitho submitted that there were three matters that distinguished the

settlement from 'an ordinary settlement'. First, the settlement related to both the group proceeding and the SPR proceeding through the payment of one undivided settlement sum of $64 million. Second, Trust Co gave up any claim to remuneration which Mr Bolitho valued in the order of $11 million. Third, the settlement provided for a distribution to all debenture holders, including those who had opted out of the proceeding. Based on those matters, it was contended that it would be misleading to approach the proposed commission payment of $12.8 million (plus GST) as a fraction of the $64 million settlement sum.

1. Mr Bolitho further submitted that the judge did not simply apply a percentage commission but assessed the proposed commission by reference to three alternative methods. The judge applied the principles adumbrated by the Full Court of the Federal Court in _Money Max._140 Having done so, the judge concluded that the proposed commission was reasonable. The judge then compared the commission claimed by the funder to a proposed funding equalisation mechanism and to the 25 per cent common fund rate notified to group members under the notice to group members and opt out notice approved by Robson J on 2 June 2016.

1. The funder submitted that the judge was aware of and carefully considered the existence and content of the SPR proceeding. The judge did not proceed on the basis that the value of the claim was confined to the $64 million settlement sum as the judge recorded that, in addition to the cash component, there was the benefit of the release and discharge given by Trust Co in relation to its entitlement to remuneration, which counsel for Mr Bolitho had submitted was in the order of

$11 million.141 It was submitted that the judge did not proceed on the basis of fixing a particular percentage, but assessed the reasonableness of the commission having regard to the principles expressed by the Full Federal Court in Money Max.142

289 The funder further submitted that the judge was conscious of the approach

140 [2016] FCAFC 148; (2016) 245 FCR 191.

142 [2016] FCAFC 148; (2016) 245 FCR 191.

taken by Robson J in the partial settlement. It was also submitted that the judge's conclusion as to the reasonableness of the commission took into account the fact that group members were well informed of the litigation funding arrangements and commission and that the proposed commission fell within an acceptable range having surveyed a number of other group proceedings.

1. The funder noted that the judge had ascribed weight to the fact that only one objection, that of Mr Pitman, had sought to impugn the proposed commission.143 It was submitted that, had the arguments advanced by the applicant under ground 5 been the subject of objection before the judge, further evidence could have been adduced. That evidence might have included the basis upon which the funding commission was determined and agreed with the SPR, expert evidence concerning funding rates, evidence concerning the current class action funding activities of the funder, evidence concerning the relationship between the group proceeding and the SPR proceeding, evidence of the funder's financial position, and a supplementary affidavit of the costs consultant.

1. The SPR submitted that they supported the funder's application for payment of the commission and legal costs and disbursements. In that respect, the SPR submitted that their support, which they were obliged to give under the terms of the deed, reflected a pragmatic decision based on their commercial judgment that such support was a necessary component of achieving the wider settlement that was in the best interests of debenture holders. The SPR relied on the evidence of Mr Lindholm that the terms of the deed represented the 'best possible outcome that could be achieved in all circumstances and after extensive negotiations.'
2. Before the judge, the SPR did not specifically address the commission but, as mentioned, did draw to the judge's attention paragraph 6 of the Botsman objection. On the application for leave to appeal, counsel for the SPR accepted that it was difficult to conclude that the judge gave adequate consideration to three key issues,

namely, what was the appropriate denominator for the purposes of assessing the funding commission; the relative contribution of the parties to the settlement sum; and the question whether an integer in the calculation ought to have been all of the debenture holders or the percentage who signed a funding agreement. Notwithstanding that submission, it was submitted that it did not necessarily follow that the orders of the judge should be set aside having regard to the fact that they involved the exercise of a discretion.

293 In assessing the competing submissions, it is convenient to return to the

judge's findings in relation to the appropriateness of the funding commission.

1. The judge accepted the submission that the proposed commission was appropriate having regard to the principles framed in _Money Max._144 Applying those principles, the judge recorded that the detail of the funding arrangements had been provided to group members, that group members who had accepted the terms of the funding agreement were well aware that a 30 per cent rate could be charged, and that some 5 per cent of group members had opted out of the proceeding when the first common funding fee of 25 per cent was disclosed.145

1. Next, the judge set out an analysis of funding commissions in other proceedings by reference to the decision of Beach J in Blairgowrie.146 The judge recorded that the proposed settlement was $64 million plus the release and discharge by Trust Co of any claim to remuneration. In that respect, the judge simply recorded the fact that counsel for Mr Bolitho had suggested that this was valued in the order

146 [2017] FCA 330; (2017) 343 ALR 476, cited in Reasons [89]

1. The judge addressed the funder's commission in paragraphs 72 to 95 of his reasons. Almost all of those paragraphs, which contain the totality of the judge's reasoning on the appropriateness of the commission payment, were taken verbatim, and without elaboration, from the confidential opinion of counsel for Mr Bolitho dated 19 January 2018.

1. It may be accepted that Trust Co was making a payment that equated to its total available resources, there was little evident opposition to the settlement and, for the reasons set out in the judgment, the commission payment was, at least on its face, consistent with commission payments in other cases. In those circumstances, it is perhaps explicable that the judge adopted Mr Bolitho's submissions as reflecting his reasons for approving the settlement and, in particular, the commission payment.

1. That said, the adoption of counsel's opinion gives rise to a number of concerns. The opinion which contained the paragraphs adopted by the judge was said to be confidential and was not available to the other parties, including the SPR and their counsel. Given that a critical part of the opinion was replicated in the reasons for judgment, it is not obvious why at least those parts of the opinion were required to be kept confidential.

1. Further, the verbatim adoption of the contentions of one party, even in the context of an order that is not opposed, gives rise to concerns that the court has not adequately assessed all of the relevant matters or has failed to give its own reasons for its conclusions.

1. The concerns are particularly acute where the court is exercising a protective jurisdiction in which many affected parties are not before the court but rely on the plaintiff, his advisers, and the funder. Those parties will no doubt be in favour of the settlement and, with the support of the settling defendant, the application for approval will have many of the hallmarks of an unopposed application. However, that cannot deflect the court from ensuring rigorous scrutiny.

301 The SPR proceeding was significant in a number of respects.

1. The SPR proceeding was brought for the benefit of the debenture holders and was funded by them. With a very modest exception for those few debenture holders who had opted out of the group proceeding, there was a complete overlap between the group members and the debenture holders in whose interests the SPR acted.

1. The trial of the two proceedings was to be heard together. The SPR were responsible for the preparation of much of the evidence to be adduced at trial on behalf of both plaintiffs. We were informed that the SPR had filed eight witness outlines, 18 witness statements and 16 expert reports (from eight different experts). By contrast, Mr Bolitho had filed one affidavit of the plaintiff and three expert reports (from two experts).

1. Senior counsel for Mr Bolitho submitted that much of the expert evidence filed by the SPR went to questions of causation that were relevant to the SPR proceeding but not the group proceeding. He observed that, had there not been a joint trial, he would not have commissioned more than a quarter of that material. That submission recognises that the group proceeding benefitted from the work done by the SPR in the preparation of their proceeding.

1. The overlap between the two proceedings raised the clear potential that at least part of the settlement sum payable under the deed was referrable to the SPR proceeding. That flowed from the terms of the deed and the evidence relating to the preparation for trial, and was reinforced by the fact that in the partial settlement the parties had expressly attributed part of that settlement to the Banksia proceeding and part to the group proceeding.

1. The fact that part of the settlement sum may have been referrable to the SPR proceeding was important because it had the potential to impact the amount of commission that the funder was contractually entitled to under the funding agreement. It also was relevant to the issue of whether the reasonableness of the commission sought under the deed should be assessed by reference to the total

settlement sum or some lesser amount and whether a common fund order was appropriate and, if so, in what form.

1. As to the first matter, the funder had an entitlement as against those group members who had entered into a funding agreement. Subject to court approval, the funder was entitled to a commission of 30 per cent of the 'Resolution Sum', which was defined in the funding agreement to mean 'any money received or payment made to settle, compromise or resolve one or more or all of the Claims'. In turn, the

'Claims' were defined to mean 'the claim or claims that the Plaintiff has or may have against some or all of the Defendants and for loss and damage caused to the Plaintiff by the conduct of one or more of the Defendants in relation to or arising out of the acquisition by the Plaintiff of [the debentures]'. For that purpose, 'Plaintiff' was defined to mean any person who had agreed with the funder to be bound by the funding agreement. At the very least, a question arises as to whether the 'Resolution Sum' under the funding agreement should be treated as the same as the settlement sum under the deed.

1. The second and third matters may be considered together. The deed contemplated an application for approval of the commission which, as Mr Bolitho submitted, was in the nature of a common fund order. As noted, the effect of the common fund order is to allow the funder to recover a commission out of the total settlement sum. The purpose of the common fund order is to overcome the problem of group members benefitting from a settlement without contributing to the costs of the proceeding. However, as already noted, all of the debenture holders were underwriting the cost of the SPR proceeding. To the extent that there was an overlap in preparation, there was a significantly reduced scope for freeriding by group members. Incongruously, if the funder's commission was based on the settlement sum, there was the potential for it to get the benefit of the work of the SPR which it was not paying for.

1. To the extent that the reasonableness of the proposed commission was to be tested as a proportion of the settlement sum, it was important that attention be given

to whether the appropriate denominator was the settlement sum or some proportion of it on the basis that it was paid in settlement of both the group proceeding and the SPR proceeding.

1. Even if, as Mr Bolitho submitted to the judge, the existence of the two proceedings made it difficult to determine an appropriate denominator and that the payment should be assessed more globally by reference to the matters identified in Money Max,148 it remained necessary to factor in, as an essential ingredient of the settlement, the existence, nature, and inter-relationship of the two proceedings.

1. Those matters that we have just identified meant that it was essential to consider the extent to which the settlement sum payable under the deed was referrable to the SPR proceeding. Resolution of that issue was not to be arrived at by a simple empirical analysis and may not have produced a precise proportion. Unlike in the partial settlement approved by Robson J, the parties had not expressly provided for an apportionment of the settlement sum between the two proceedings.149

1. However, some consideration of the inter-relationship between the two proceedings was required by reference to the overlap in work undertaken. Further, an assessment of the relative strengths of the two proceedings would have provided a rational basis for an apportionment.

1. It is clear from the judge's reasons that he was conscious of the fact that the settlement resolved both proceedings and that the two proceedings were closely interrelated. He recorded the SPR's submission that they had acted in a way that advanced the prospects of the group proceeding succeeding and that they had shouldered the enormous practical, evidentiary and financial burden of the conduct

of the proceedings.150 The judge further recorded that the SPR had fully supported

148 [2016] FCAFC 148; (2016) 245 FCR 191.

the group claim and that the success of the group proceeding was 'likely dependent on the support of the SPRs and their legal team'.151

1. Notwithstanding those matters, the judge did not address the relative strengths of the two proceedings, nor did he expressly test the reasonableness of the commission having regard to the relative contributions of the two proceedings to the extent that they could be estimated.

1. In their confidential opinion dated 19 January 2018, counsel for Mr Bolitho expressed an opinion on the relative strength of the group proceeding compared to the SPR proceeding. In contrast, counsel for the SPR in their confidential submissions dated 23 January 2018 gave a different opinion as to the relative strengths of the proceedings and, importantly, a different perspective on the relevant contribution that each proceeding made to the achievement of the settlement.

1. We note that, given the advices were not exchanged between the lawyers for Mr Bolitho and the SPR, neither party was able to address the other side's submissions. The competing views were not exposed by the judge nor analysed in his reasons.

1. Counsel for Mr Bolitho fastened on the judge's observation that the settlement sum was reasonable in light of the 'not insignificant risks' in prosecuting Banksia's claims, the likely delay that would be occasioned to bring the matter to trial and obtain judgment, and the risks of paying a large adverse costs order if unsuccessful.152 It was submitted that this reflected a conclusion that there were not insignificant risks in the SPR proceeding but no such qualification was expressed in relation to the group proceeding.
2. That reference, and the judge's general observations on the interrelationship between the two proceedings, does not persuade us that the judge adequately or squarely addressed the significance of the SPR proceeding to the settlement and, in

particular, to the appropriateness of the commission.

1. The failure of the judge to address this question may be explicable on the basis that he was concerned not to disclose matters that suggested any equivocation on the part of Mr Bolitho or the SPR as to the strength of their proceedings against Trust Co. However, there is no suggestion in the reasons that the judge's assessment of the appropriateness of the commission took into account the contribution of the SPR proceeding to the settlement.

1. On critical questions concerning the interrelationship between the two proceedings, the Court was denied the benefit of a proper contest. That was because of the confidentiality orders, the contractual obligation on the part of the SPR to support the settlement, and the judge's refusal to appoint a contradictor. The issues were raised before the judge by Mr Pitman and by the applicant but, in our respectful view, were not given the attention that was plainly warranted.

1. In our view, the judge's conclusion that the distribution on account of the funder's commission was fair and reasonable cannot stand in the absence of the scrutiny that the issues demanded.

Ground 2(d): The decision not to appoint a contradictor

1. In our view, many of the problems that we have adverted to could have been avoided had a contradictor been appointed to assist the Court in the approval applications.

324 The judge concluded that the appointment of a contradictor would be a

'gratuitous waste of limited resources'.153 With respect, we are unable to agree. In our view, there was an inherent tension between, on the one hand, the

confidentiality regime which precluded the SPR and Mr Bolitho from access to each other's legal advice, and, on the other, the conclusion that a contradictor was not necessary because there was no reasonable likelihood that the Court would be denied the assistance of the parties. Counsel for the SPR fairly acknowledged that a contradictor would have assisted the Court in circumstances where there was extensive confidentiality and where the terms of the deed of settlement obliged the SPR to support the proposed distributions from the settlement sum.

1. The need for a contradictor was made plain by Mr Bolitho's submission that the SPR could not be given access to his legal advice or the costs report because there was not a complete commonality of interest. Given that the SPR was under a duty to act in the best interests of all the debenture holders, it is difficult to see how there could be any divergence between the SPR and group members.

1. In the unusual circumstances of this case, it was in Mr Bolitho's personal interest to allocate or apportion any settlement in a way that favoured the SPR proceeding rather than his own proceeding. That was because, the costs of the SPR apart, each dollar that was recovered by the SPR was payable to the debenture holders, of which he was one, whereas each dollar of settlement in the group proceeding was liable to be made subject to the funder's commission. This was not a case where the two proceedings were being run on behalf of different parties.

The conflict between the funder and group members

1. Before the judge, senior counsel for Mr Bolitho submitted that the appointment of a contradictor may be desirable where there is a relevant conflict of interest or duty but no such conflict was present in the approval applications. The first, but not the second, part of that submission is correct.

1. Counsel submitted that there would be a conflict of interest or duty if group members were not being treated equally in the settlement. For example, if funded members were to be afforded a premium by reason of having agreed to fund the proceeding, that would give rise to a potential for a divergence of interest between

group members. However, it was said that all of the debenture holders, including those who opted out of the group proceeding, were recovering an equal proportion of their losses. Therefore, it was said that there was no conflict of interest requiring the appointment of a contradictor.

1. The conflict identified by counsel is certainly one that may give rise to the need for the appointment of a contradictor. But it is not the only kind of conflict that may arise. There are many examples of conflicting interests which may justify or require the appointment of a contradictor.154 One example that might arise relates to decisions about what share of settlement proceeds should be provided to a funder.155

1. It is the nature of group proceedings that are funded by third parties on a commercial basis that a potential conflict may arise between the funder and group members in relation to the size of any commission that is payable to the funder.

1. In circumstances where a common fund order is sought, the plaintiff may have an interest in obtaining a common fund order on the basis that it might reduce the liability that the plaintiff had under a funding agreement. The funder will often play a critical role in negotiations and, understandably, may seek to maximise its return on its investment. The position of the funder is more acute in circumstances where the funder is the source of instructions about how the case is to be run and on what terms it may settle. On the other hand, group members have an interest in minimising any common fund order.

1. In the present case, the claim for what was, in effect, a common fund order and the claim for legal costs gave rise to a potential conflict of interest between the funder and group members. There can be no doubt that the funder played a central role in the negotiations, and the settlement secured an agreement that it would claim

$12.8 million (plus GST) in commission and $4.75 million (plus GST) in legal costs to

154 Jeremy Kirk SC, 'The Case for Contradictors in Approving Class Action Settlements' (2018) 92

1. There was a powerful interest on the part of the funder, with respect to its commission, to treat all of the settlement sum as referable to the group proceeding and to minimise the significance of the SPR proceeding. Given that the SPR proceeding was brought for the benefit of, and paid for by, the debenture holders there was a significant potential for conflict. In assessing the significance of the SPR proceeding, the Court was limited to the assistance given by the applicant in her objection. The SPR had contracted itself out of actively testing the settlement.

1. Similar issues of conflict also arose in the claim for legal costs in circumstances where it was plainly not in the interests of Mr Bolitho's lawyers to challenge their own costs. The problems we have adverted to above associated with the examination of the legal costs could only have been met by relaxing the confidentiality regime, appointing another independent expert, or at least appointing a contradictor with access to all of the material.

1. There is a heavy burden on the court in approving distributions for funders' commissions and legal costs. The funder has an obvious interest in maximising its return and recovering its legal costs. The defendant may have little interest in how any settlement sum is distributed other than to the extent that the distribution may imperil court approval. Group members may not have access to all of the relevant information and may not be well-placed to ensure that any settlement is fair and reasonable.

1. The burden on the court should not be increased by terms of settlement that inhibit parties from assisting the court. Here, the judge's refusal to appoint a contradictor, which was motivated by a desire to avoid costs, failed to adequately come to grips with the potential for conflict and the need to ameliorate the burden on the court in assessing the appropriateness of the claimed commission and costs.

Grounds 3 and 4: The reasonableness of the settlement sum

338 The judge found that the settlement sum was reasonable on three bases. First,

he accepted the evidence of Mr Green, and the assessment by Mr Lindholm, to the effect that the settlement sum exhausted the moneys that were available to Trust Co.156 Second, the judge found that, putting to one side any question of recoverability, the sum was a reasonable compromise of the proceeding.157 Third, the judge was satisfied that Mr Bolitho and the SPR had followed a proper process for settling the claims, including by seeking advice from counsel as to the parameters of a reasonable settlement and by engaging in an extensive negotiation process.158

1. By grounds 3 and 4, the applicant seeks to challenge the judge's finding that the settlement sum was reasonable. In essence, the applicant contends that it was not reasonable to exclude Perpetual as a potential source of funds, notwithstanding its unwillingness to indemnify Trust Co or contribute to any settlement or judgment.

1. The applicant's central contention was that it was unreasonable on the part of Mr Bolitho not to join Perpetual and, had he done so, the amount available for settlement would not have been limited to the insurance resources available to Trust Co. The applicant submitted that Trust Co was a professional trustee company and subject to prudential and statutory oversight and its parent should be responsible for its conduct. Further, Trust Co had misrepresented to the SPR that Perpetual stood behind, and would meet any liabilities of, Trust Co. The applicant submitted that this was misleading and deceptive and that the SPR had relied on the representations by not joining Perpetual as a defendant.
2. As senior counsel for Trust Co submitted before us, the short answer to these grounds is the finding of the judge that the settlement sum represented a reasonable compromise having regard to the risks of litigation but ignoring questions of the recoverability of any judgment. In other words, the judge was satisfied that the settlement sum was reasonable even if Trust Co were capable of meeting a much larger judgment. The grounds of appeal do not attack that finding.

1. However, for the following additional reasons, we are not satisfied that the judge was wrong to conclude that the settlement sum was reasonable in circumstances where Perpetual had not been joined to the proceeding.

1. The first basis for the joinder of Perpetual relied on by the applicant was that the solicitors for Trust Co had misled the solicitors for the SPR in relation to the financial position of Trust Co and the willingness of Perpetual to stand behind it. On a fair reading of the correspondence, the solicitors for Trust Co represented that there was no reason to think that Trust Co could not meet any potential judgment, including because it was a wholly-owned subsidiary of Perpetual.

1. Even if those representations had the effect of discouraging the SPR from further considering joining Perpetual to their proceeding, that does not assist the applicant. First, the representations were not made to group members and were not relied on by Mr Bolitho to forbear joining Perpetual. Second, the submissions made by counsel for the SPR to the judge, which were set out in his Honour's reasons,159 including that there was no reasonable prospect of further recovery, provided a cogent basis as to why parent entities of Trust Co were not joined to the proceeding.

1. It would be a rare case that approval of a settlement would be refused because the plaintiff had not joined and made claims against other parties. The question whether other parties should be joined is often a complex one involving difficult forensic decisions. Self-evidently, it requires formulation of a cause of action, but it also entails assessments of cost and delay and strategy and increases the risk of costs in the event of failure. It may also affect the duration of the trial and the need for further interlocutory steps. It cannot be said that the failure to join Perpetual made the settlement unfair or unreasonable. Nor did it imperil the judge's conclusion that Trust Co was providing all of the resources that it reasonably had available to it towards the settlement.

346 Finally, we note that these grounds were only advanced on the premise that

Perpetual and other companies in its group were released from liability under cl 5.3.1 of the deed. That clause provided that, on payment of the settlement sum, Mr Bolitho on his own behalf and on behalf of all group members released and discharged Trust Co and 'its Related Entities' from all claims. 'Related Entity' is defined to include any related body corporate within the meaning of s 50 of the Corporations Act. It is not necessary to determine the correctness of that premise. Even if Perpetual was released from all claims, we would nevertheless reject grounds

347 It follows that we would reject grounds 3 and 4.

348 For the reasons that we have given above, we would uphold grounds 1, 2 and

1. The question then arises as to what consequences should flow from those conclusions. Following the first day of hearing before us, the parties were invited to file written submissions addressing the following two questions:

Question 1: What are the sources of power under which the Court can approve the settlement (or affirm its approval at first instance)?

Question 2: What scope is there for the Court, under those sources of power, to approve the settlement (or affirm its approval at first instance) but:

a. vary the funder's commission pursuant to the settlement; and/or

b. vary the sum representing the funder's recoverable legal fees; and/or

1. remit the issue of the funder's commission and/or the sum representing the funder's recoverable legal fees to another judicial officer?

350 These questions were also addressed by the funder in its submissions.

1. The parties were in agreement that, given that the appeal is by way of rehearing, this Court could exercise the power conferred by s 33V to approve the settlement. The parties disagreed on whether the Court could approve the settlement but vary or remit the issue of the funder's commission and legal costs.

352 The competing submissions focused on the terms of the deed and, more

specifically, cl 2.1.3. It will be recalled that this clause makes the deed subject to and conditional on 'the making of the Approval Orders in the Proceedings'. The funder submitted that, properly construed, the funder's application for the commission and legal costs is part of the 'Approval Orders' and, for that reason, the Court cannot approve the settlement without also approving the commission and the payment in respect of costs. The funder's construction was supported in substance by Mr Bolitho and the SPR. The applicant submitted that cl 2.1.3 fetters the Court's power and should therefore be read down or severed from the deed. Trust Co made no submission on the proper construction of cl 2.1.3, beyond submitting that it would not be open to the Court to sever cl 2.1.3 in the event that the clause could not be read down in the manner suggested by the applicant.

1. In our opinion, it is open to this Court to approve the settlement under s 33V(1) but to decline to approve the two proposed distributions in respect of legal costs and the funder's commission and to remit those matters for determination by a judge in the Trial Division. We reach that conclusion by reference to the terms of the deed.

1. We would come to the same conclusion even if the deed expressly purported to make approval of the settlement conditional upon the claimed payments also being approved as part of the overall settlement. That is because, as mentioned, the Supreme Court Act gives the Court the power to approve the settlement of the claims against the defendant without, at the same time, approving the distribution of any money that is paid under the settlement.

1. The starting point for the resolution of this aspect of the appeal is our conclusion that the judge's holding that the proposed payments in respect of legal costs and the funder's commission were fair and reasonable cannot stand.

1. The funder submitted that, if this Court refused to approve the commission payment, that would render the condition precedent in cl 2.1.3 of the deed

unsatisfied and therefore trigger cl 2.4, which requires the parties to renegotiate in good faith.

1. Clause 2.4 provides that, in the event the Court does not make the approval orders sought 'by reason of the quantum of the funder's commission' claimed by the funder pursuant to the application referred to in cl 3.10, the parties to the deed must, in good faith, seek to negotiate an alternative funder's commission that the Court is likely to approve. In the event that the parties cannot agree on an alternative commission which is satisfactory to the funder, the funder may give notice that the conditions in cl 2.1 have not been met, with the consequences provided for in cl 2.2. Clause 2.2 provides that the deed shall cease to have effect.

1. That submission, which was in substance supported by Mr Bolitho and by the SPR, was based on a particular construction of the deed. It is therefore necessary to recap the critical terms of the deed.

1. The deed provides for the settlement of the proceedings against Trust Co by the payment of the settlement sum. Clause 4 provides that, unless otherwise ordered by the Court, Trust Co will pay the settlement sum in full and final settlement of the claims of all group members and Banksia in the proceedings. The deed also requires Mr Bolitho and Banksia and the SPR to release Trust Co from all claims on payment of the settlement sum.160

1. Relevantly, the deed is 'subject to and conditional upon' a number of conditions being satisfied, including, by cl 2.1.3, 'the making of the Approval Orders in the Proceedings'. The 'Approval Orders' are defined to mean 'the orders sought in the Bolitho Approval Application and BSL Approval Application'. The 'Bolitho Approval Application' is defined to mean 'the application by Bolitho for approval of the Settlement pursuant to ss 33V and 33ZF of the Supreme Court Act.'

361 Clauses 3.10 and 3.11 contemplate that the funder would apply for payment

in respect of its commission and also in respect of its costs and disbursements. Similar provision is made in cl 3.12 for an application by Mr Bolitho for a special payment to him of $75,000.

1. The funder submitted that the term 'Approval Orders' means the orders sought in the Bolitho Approval Application including on the funder's application (said to be made through Mr Bolitho) for a commission payment of $12.8 million (plus GST). It relied on the fact that the summons filed by Mr Bolitho sought an order that the settlement of the proceeding in respect of his claims against Trust Co be approved on the basis of the deed, including as concerns the making of payments from the settlement sum for reimbursement of costs in the sum of $4.75 million (plus GST), a funder's commission in the sum of $12.8 million (plus GST), and a payment to the plaintiff in the sum of $75,000. It was contended that there was a single Bolitho approval application which addressed each of those components.

1. It was further submitted that a contrary construction would offend fundamental principles of contractual construction, including that the agreement must be construed as a whole with all clauses given work to do. The funder pointed to cls 2.4 and 3.15 which each address circumstances in which the 'Approval Orders' are not made 'by reason of' the quantum of the funder's commission. It was submitted that cl 2.4 would be incapable of being engaged and therefore redundant if the 'Approval Orders' did not include the making of an order for a commission in favour of the funder.

1. That submission was advanced as part of the funder's broader contention that the Court could not approve the settlement but at the same time decline to approve either the commission or the payment for costs and disbursements. It was submitted that the deed requires that the settlement sum, commission, and payment for costs and disbursements all succeed or fail together.

365 In our view, the funder's submission cannot be accepted.

1. As a matter of text, the deed makes express provision for an application by Mr Bolitho for approval of the settlement.161 The 'Settlement' means 'the settlement of the Proceedings by the Parties'.

1. There are two textual reasons why the determination of the commission and legal costs is not part of that application. First, the application for approval of the commission is not made by Mr Bolitho but by the funder. Second, cl 3.10 contemplates that the funder's application is to be made at the hearing of the Bolitho Approval Application. The funder's application is thus a separate application from the Bolitho Approval Application. Clause 3.10 obliges Banksia, the SPR and Trust Co to support the funder's application. We also note that a separate obligation exists in cl 3.8 which requires Trust Co to support the approval applications by filing affidavit evidence in support in relation to the settlement sum.

1. We reject the funder's submission that divorcing the orders approving the settlement from the approval of the commission and legal costs would render cl 2.4 redundant or meaningless. Although cl 2.4 contemplates that the Court might not make either of the approval orders sought by reason of the quantum of the funder's commission, that does not carry with it the proposition that the Court could not approve the settlement without approving the funder's application for its commission.

1. In our view, the deed treats the approval of the settlement as involving a separate and distinct step from the determination of the funder's applications for the payment of its commission and costs and that these steps may be undertaken sequentially.

1. Sub-sections 33V(1) and (2) and s 33ZF of the Supreme Court Act provide an independent basis for the same conclusion.

1. As already observed, s 33V(1) contemplates that the Court will make an order approving the settlement of the claims brought in the group proceeding. Sub- section 33V(2) deals with the Court's power to approve the distribution of money paid under the settlement. The two provisions confer two distinct powers.

1. The power in s 33V(2) given to the Court to make such orders 'as it thinks fit' with respect to the distribution of any money, including interest, paid under a settlement is a broad one. It logically succeeds the approval of the settlement under s 33V(1) and has a different focus.

1. The determination of a claim for funder's commission and legal costs raises an issue that relates to the relationship between the funder and group members. The defendant, who will have committed funds in settlement of the claims against it, is not directly affected by the payments that are to be made out of the settlement. That distinction supports the dichotomy between the powers.

1. In some cases, the funder may seek no more than the payment of its contractual entitlements under a funding agreement. In other cases, and the present is an example, the funder will seek a payment in the form of a common fund order and the source of any right in the funder for payment will be the terms of the court order. The effect of the court order will commonly be to strike a commission rate that differs from that contained in the funding agreement and the commission will usually be recoverable from the settlement sum payable to all group members rather than only those who have subscribed to funding agreements.

1. In some cases, an issue has arisen as to whether the court is limited to approving or rejecting the claimed sum arising from the funding agreement as part of the overall settlement or whether it can order a different amount to that claimed. Resolution of that issue remains controversial.

1. In three cases, judges of the Federal Court have expressed a preference, without deciding, that the court has power to vary a funding commission claimed by

a funder: Murphy J in Earglow,162 Beach J in Blairgowrie,163 and Middleton J in Mitic v

1. In Liverpool City Council,165 Lee J said he very much doubted that the power exists for the court to interfere with and vary funding agreements in the context of a settlement by altering the contractual promises of group members to pay commission, except where, because of individual circumstances, there is an established legal or equitable basis to interfere with those contractual rights.166

1. It is not necessary, in the present proceeding, to enter into that debate because the terms of the deed leave no room for doubt that the amount payable for commission and costs is the amount determined by the Court. In this case, the funder does not seek to rely on the funding agreements that it entered into with just over half of the debenture holders, other than as a benchmark against which the reasonableness of any commission payment might be judged.

1. It is important to add that, under s 33V of the Supreme Court Act, a group proceeding may not be settled without the approval of the Court. It follows that any agreement to settle is not enforceable without the approval of the Court. Further, it will often be the case that the funder is not seeking to rely on the funding agreement (especially where not all group members have subscribed to a funding agreement) but rather seeks the intervention of the court to make a common fund order or a fund equalisation order to overcome the problems that may arise if a funder is confined to relying on the contractual terms of the funding agreements into which it has entered. In those circumstances, references to the freedom to contract and the difficulties of the court altering contractual promises needs to be qualified.

380 It may readily be accepted that the determination by a court of an appropriate

162 [2016] FCA 1433 [133]-[158].

163 [2017] FCA 330; (2017) 343 ALR 476, 504 [101].

164 [2017] FCA 409 [27]-[31].

165 [2018] FCA 1289.

level of commission to be paid to a funder raises significant issues of policy and power. In respect of power, Lee J has noted the difficulty in finding within the general powers of ss 33Z and 33ZF a power to interfere with and vary funding agreements.167 Central to his Honour's concern is the difficulty in a court altering a litigation funding agreement which reflects a common enterprise with a shared economic purpose.

1. Those concerns do not arise in circumstances where the funder is not seeking to enforce or obtain the benefit of the funding agreement and the relevant deed of settlement for which approval is sought is couched in terms which impose an obligation to pay the amount approved by the court. In our view, ss 33V(2) and

1. The questions of policy nevertheless remain. It is no doubt difficult for a court to determine what might be an appropriate return on capital or appropriate reward for the risks associated with underwriting a legal proceeding that would otherwise not be brought without the support of the funder. Nevertheless, as the analysis in Money Max makes clear,168 the determination of whether a claimed payment is fair and reasonable is readily amenable to judicial determination. There is no reason in principle why the court should be precluded from determining an appropriate payment having regard to all of the relevant circumstances.

1. Further, a contrary approach to the powers in s 33V would entail that this settlement would fail unless the Court also approved the payment to the funder of

$12.8 million (plus GST) for commission and $4.75 million (plus GST) for costs. In

other words, the making of what is in effect a common fund order would be a condition precedent for the approval of the settlement by the Court. The Court would be unable to approve the settlement without approving the payments for the commission and costs and disbursements.

168 Money Max [2016] FCAFC 148; (2016) 245 FCR 191, 208 [72], [79]-[83].

1. In Caason,169 Murphy J considered a settlement deed which contained an express term that the performance of the settlement was conditional upon the court making a common fund order unless that condition was waived by the plaintiffs. A common fund order was defined in that proceeding to be an order which obliged participating group members who had not entered into a funding agreement with the funder to pay to the funder a proportion of any amount or sum determined by the court.170

1. Murphy J observed that he readily accepted that the court could make orders to achieve equality of treatment between funded and unfunded class members. However, he concluded that a condition precedent which conditioned settlement on the court making a common fund order was 'completely inappropriate.'171

1. His Honour explained that such a clause was inappropriate, first, because the making by the court of a common fund order depends on the court being satisfied that such an order is appropriate to ensure that justice is done in the proceeding. One of the relevant factors is the rate at which the common fund order would be made.172 He concluded that the question whether a common fund order is appropriate to ensure justice in the proceeding is a matter for the court and should not be something procured by the applicants or the funder through a condition precedent.173

1. The second reason given by Murphy J was that, if the court decides that the settlement terms are otherwise fair and reasonable but a common fund order should not be made, the condition precedent would permit the applicants to walk away from the settlement and proceed to trial. His Honour concluded that it was not in

the best interests of class members that a fair settlement should be abandoned with

169 [2018] FCA 527.

the consequence that they face the risk of trial in order to give the funder a chance to receive a higher funding commission than would have been available under the funding agreements.174

1. Finally, Murphy J concluded that the condition precedent was inconsistent with the overarching purpose in s 37M of the Federal Court of Australia Act 1976 (Cth).175 He observed that the use of such a condition precedent in the settlement of class action proceedings should be 'strongly discouraged'.176

1. The construction of s 33V that we favour, which permits the Court to approve the settlement by making the approval orders but declining to approve payment of the commission or legal costs in the amounts sought, better reflects the statutory scheme.

1. It follows that, in our view, the Court can approve the settlement of the group proceeding and authorise the settlement by the SPR of their proceeding in advance of the determination of the application by the funder for its costs and commission.

1. Whether this Court can or should approve a settlement before considering whether it should approve, under s 33V(2), the distribution of any money paid under a settlement depends on a number of factors which are informed by the organising principle that underpins s 33V. Important to the resolution of that question will be the terms of the funding agreement and the terms of settlement. However, it must be remembered that what is being sought is the exercise of two statutory powers.
2. As a practical matter, a court may decline to approve a settlement in advance of considering whether to approve distributions from the settlement sum. That is, the court may determine that it is appropriate to deal with the applications together and not approve all of them because one or more of the elements are not appropriate.

In such a circumstance, it may be apt to say that the court does not make the approval order by reason of the commission claimed by the funder.

1. Such an approach was taken by Beach J in Blairgowrie.177 In that case, Beach J rejected a submission that he should approve the payment of the settlement sum in advance of the determination of the question of the appropriate funder's commission.178

1. In our view, it is appropriate here to separate out the question whether to approve the settlement and the question whether to approve distributions of any money paid under that settlement. Principally, that is because the applicant has not impeached the finding of the judge that the settlement sum represented the total amount that was available to Trust Co to meet any judgment and that, in any event, the settlement sum represented a fair and reasonable compromise of the claims made by both Mr Bolitho and the SPR.

1. In essence, the process by which the judge concluded that the payments to the funder for legal costs and commission should be approved miscarried. The critical matters were not given the attention that they required.

1. It remains the position that there has been no access by the SPR and Mr Bolitho's lawyers to each other's legal advice, the applicant's lawyers have not been given access to the confidential opinions of counsel for Mr Bolitho, and the SPR remain bound by the terms of the deed. That has had a consequence that, even before this Court, the issues have not been ventilated to the extent necessary to enable the Court to be satisfied that the claimed payments for commission and legal costs are appropriate distributions to be made from the settlement sum.
2. In our view, on a remitter, in considering whether to approve the claimed commission and legal costs, the remitter judge would not be bound by a binary choice between approving the claimed amounts or refusing them. It would be open

177 [2017] FCA 330; (2017) 343 ALR 476.

to the judge to determine the appropriate payments that should be made. That would not involve any rewriting of the deed.

1. The deed expressly reserves to the Court the power to determine the amounts to be payable on the application by the funder for payment in respect of commission and legal costs. The obligation to pay is not the amount claimed but rather the amount determined by the Court.

1. In relation to commission, the deed expressly provides that the amount to be distributed to the funder is 'the amount approved by the Court under clauses 3.10 and 3.11'. The amount approved will depend upon the Court's disposition upon hearing the funder's application. It follows that the payment might be for a different amount than that claimed. That being so, the terms of the deed do not entail a binary choice either to approve the claimed amount or refuse to order any payment. Nor would an order approving a smaller payment by way of commission, if that were thought appropriate, entail an impermissible rewriting of the deed.

1. For the reasons given above in relation to grounds 1, 2 and 5, we would not approve the amounts sought by the funder under cls 3.10 and 3.11 of the deed. We accept the submission of the funder that it would be inappropriate for this Court to determine and impose a commission and amount of legal costs. However, for the reasons given above, that course does not entail a refusal to make the 'Approval Orders' within the meaning of the deed nor does it engage cl 2.4.

401 There should be a grant of leave to appeal and the appeal should be allowed.

We will remit to a different judge of the Trial Division of the Supreme Court for determination the issue of the approval of the distribution from the Settlement Sum of the claim for legal costs and disbursements and the funder's commission.

LAURENCE JOHN BOLITHO First Respondent BANKSIA SECURITIES LIMITED (ACN 004 736 458) Second Respondent THE TRUST COMPANY (NOMINEES) LIMITED (ACN 000 154 441) Third Respondent

RSD CHARTERED ACCOUNTANTS (ABN 60 616 244 309) Fourth Respondent

PATRICK JOHN GODFREY Fifth Respondent NICHOLAS LIVINGSTONE CARR Sixth Respondent PETER WILLIAM KEATING Seventh Respondent GEOFFREY GRENVILLE SKEWES Eighth Respondent GEOFFREY S A LIPSHUT Ninth Respondent MAXWELL BROWN & MOUNTJOY (A PARTNERSHIP) Tenth Respondent

LANTERN LEGAL GROUP PTY LIMITED Eleventh Respondent

INSURANCE HOUSE PTY LTD (ACN 006 500 072) Twelfth Respondent THE CHANNEL SYNDICATE 2015 Thirteenth Respondent THE AMTRUST SYNDICATE 1206 Fourteenth Respondent CHAUCER SYNDICATES LIMITED Fifteenth Respondent

JOHN ROSS LINDHOLM AND PETER DAMIEN McCLUSKEY IN Sixteenth Respondent

THEIR CAPACITY AS JOINT AND SEVERAL SPECIAL PURPOSE

AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 004 736

BANKSIA SECURITIES LIMITED (RECEIVERS AND MANAGERS Seventeenth Respondent

AUSTRALIAN FUNDING PARTNERS LIMITED (ACN 167 628 527) Eighteenth Respondent