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[2020] FCA 1628
Federal Court of Australia
2020-10-08
Rares J
Original judgment source is linked above.
Background 6 The definition of "group member" in this proceeding applies to persons or entities who: (1) on or around 7 June 2011, derived financial benefit from: (a) producing cattle in Australia which were sold for live export to the Republic of Indonesia ("Producers"); (b) exporting cattle from Australia to the Republic of Indonesia ("Exporters"); or (c) providing transport services, mustering services, feed, agistment and/or other incidental services to Producers and/or Exporters; (2) suffered loss and or financial harm or damage as a result of the Export Control (Export of Live-stock to the Republic of Indonesia) Order 2011 (Cth); and (3) did not opt out of the proceedings. 7 The independent chairman and trustee of AFFF, Hugh Nivison, said in his affidavit of 28 September 2020 that AFFF had been formed on 16 July 1986 to promote the interests of the Australian agricultural sector, encourage collective action and cooperation across the sector, provide governments with opportunities to confer with the sector, and distribute information about the sector. AFFF is a charity registered with the Australian Charities and Not-for-profit Commission. The National Farmers Federation, the peak industry body for Australian agriculture, provides the secretariat for AFFF. 8 Mr Nivison explained that the trustees consider numerous criteria before deciding whether to provide financial assistance for litigation and legal matters that affect the interests of the entire sector, including in rural and regional Australia. He said that, since its inception, AFFF had given financial backing to over 100 court cases that related to issues about decisions of governments, industrial disputes, animal activism, mining rights, and farm finance and debt issues. 9 Mr Nivison said that the present proceeding was the first class-action that AFFF had supported and that it had decided to do so in October 2014 when it entered into a funding agreement with Brett Cattle. He explained that by 2 June 2020 AFFF had entered into funding agreements with 51 group members. He said that, since I delivered my reasons on 2 June 2020, a further 71 group members had contacted it or MinterEllison, the solicitors acting for Brett Cattle, expressing an interest or enquiring about entering into a funding agreement for their individual claims for damages. Mr Nivison said that from his discussions with some of the members of the class, he believed that there might be in the order of about 300 more group members located across Australia. He said that AFFF wished to be able to fund the individual claims of group members who are presently unfunded and seek to have their claims determined as part of this proceeding. 10 He referred to the current funding agreement pursuant to which funded group members take advice from and instruct MinterEllison to act on their claims. He said that AFFF retained the primary liability for any legal costs incurred. He said that group members had the final decision on the day-to-day management, including settlement, of their individual claims for loss as part of the proceeding. The funding agreement provides that AFFF has the right to be informed of key decisions and can terminate ongoing funding in specific circumstances. The terms of the funding agreement require that the group member pay 10% as a commission out of any compensation that the member receives. Mr Nivison said that the purpose of the commission was to compensate AFFF for its efforts, agreement to incur liabilities in pursuing the class-action, the particular group member's claims and to generate a return for AFFF that it would be able to deploy for its charitable purposes of supporting Australian farmers in the future. 11 AFFF is concerned about whether entry into a new litigation funding agreement with any group members on or after 22 August 2020 might fall outside the exemption in reg 10.38.01(1) if that were found to be entry into a new litigation funding scheme. Mr Nivison said that AFFF did not currently have an Australian financial services licence and did not intend to apply for one. 12 Mr Nivison said that he understood and believed that group members were interspersed throughout regional Australia and that many of them would need litigation funding from AFFF in order to be able to prosecute their individual claims for damages in this group proceeding. Mr Nivison said that he understood and believed that, were AFFF unable to enter into funding agreements with the balance of group members who had not done so prior to 22 August 2020, many of those persons would not be in a position to have their claims determined unless they could organise another form of funding in which it was possible that they might have to pay much higher commission than the 10% that AFFF required or they may not be able to organise any funding at all.
Consideration 13 The application of the transitional provisions to a litigation funding agreement entered into with AFFF after 22 August 2020 was, in the circumstances, uncertain. As I have noted, both parties made submissions on that topic that supported their joint argument that the wording in the notice set out at [2] above was correct. 14 The definition of a litigation funding scheme in reg 7.1.04N(3) requires that a scheme have six features. All of those features appear to cover typical scenarios of litigation funding for group proceedings or class actions, such as the present. Crucially, reg 10.38.01(1) provides that the amendments to the Regulations that introduced the new definition of a litigation funding scheme in reg 7.1.04N(3) apply "in relation to litigation funding schemes…entered into on or after 22 August 2020". An interest in an existing litigation funding scheme, as defined in reg 7.1.04N(3) that has all of the features set out in that regulation, is a financial product for the purposes of s 764A(1)(m) of the Corporations Act 2001 (Cth). 15 In Australian Softwood Forests Pty Ltd v Attorney-General for the State of New South Wales; Ex relatione Corporate Affairs Commission (1981) 148 CLR 121 at 129, Mason J (with whom Gibbs CJ and Stephen J relevantly agreed) said that "the word 'scheme' requires that there should be some 'program, or plan of action'". 16 In October 2014, AFFF agreed to fund Brett Cattle as the lead applicant in the current proceeding and, as Mr Nivison explained 51 group members had entered into funding agreements with it by 2 June 2020. Accordingly, at that time, the basis on which AFFF was offering and providing litigation funding to anyone who was a group member in this proceeding was well-defined. In my opinion that basis amounted to a litigation funding scheme within the meaning of reg 7.1.04(3): Australian Softwood Forests 148 CLR at 129. 17 First, the dominant purpose of the scheme was for each group member to seek remedies to which the person may be legally entitled (reg 7.1.04N(3)(a)). Secondly, the entitlement arose out of similar or related circumstances, being loss or damage that each group member may have suffered as a consequence of the events the subject of the common questions (reg 7.1.04N(3)(b)). Thirdly, that entitlement related to circumstances that occurred in or after July 2011 and before Brett Cattle entered into its litigation funding agreement with AFFF in October 2014 (reg 7.1.04N(3)(c)). Fourthly, the steps taken to seek remedies for each of the group members included MinterEllison commencing and then acting in this proceeding (reg 7.1.04N(3)(d)). Fifthly, AFFF, as funder, provided funds to group members and an indemnity for any costs liability that Brett Cattle might incur to enable the group members to seek remedies in proceeding (reg 7.1.04N(3)(e)). Sixthly, AFFF is not a lawyer or legal practice (reg 7.1.04N(3)(f)). 18 Thus, from its inception in October 2014, the scheme that AFFF established had all of the six criteria in the definition of a litigation funding scheme in reg 7.1.04N(3) and, accordingly, fell within the exemption in reg 10.38.01(1). The scheme was a litigation funding scheme that was in existence before 22 August 2020. 19 Accordingly, I was satisfied that the grant of new interests (by AFFF entering into new litigation funding agreements on the pre-existing terms with group members) after 22 August 2020 would not amount to the entry by AFFF or those persons into a new litigation funding scheme. But for reg 10.38.01(1), any new funding agreement that AFFF entered into with a group member after 22 August 2020 would have created another interest, being a financial product, that AFFF will have issued. The issue of that interest will be in an existing litigation funding scheme to which each new entrant group member will become a party and will be exempt from the new regulations. The scheme is not one that will need to comply with the prospective operation of the amendments to the Regulations.
Conclusion 20 It was for these reasons that I made the orders on 8 October 2020 permitting the notice to be issued containing the statement set out above. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rares.
Brett Cattle Company Pty Ltd
Minister for Agriculture
RARES J: 1 On 8 October 2020 I made orders approving the form and content of a notice to group members pursuant to s 33X(5) of the Federal Court of Australia Act 1976 (Cth). The notice informed group members of: my principal findings on 2 June 2020 in Brett Cattle Company Pty Ltd v Minister for Agriculture [2020] FCA 732 in favour of the lead applicant, Brett Cattle Company Pty Ltd; the substance of the answers to the common questions that I answered in order 6 on 29 June 2020; their potential eligibility to make claims for their damages to be assessed; Brett Cattle's having entered into an arrangement with the Australian Farmers Fighting Fund (AFFF) to fund its legal costs and disbursements in respect of the conduct of the litigation to date; and AFFF's preparedness to enter into a funding agreement with individual group members on terms that it would pay their legal costs and disbursements of making a claim in return for a payment to it of a commission of 10% on any amount recovered. 2 As part of the notice, I approved the following statement: Entry by Group Members into litigation funding arrangements with the AFFF would not be the subject of the Australian Financial Services Licence and managed investment scheme regulations that now apply to litigation funding schemes entered into on or after 22 August 2020 (pursuant to the Corporations Amendment (Litigation Funding) Regulations 2020 (Cth)). 3 These are my reasons for approving that statement. 4 Both Brett Cattle and the respondents, the Former Minister for Agriculture, Fisheries and Forestry and the Commonwealth, submitted that the above statement was correct. That was because AFFF had entered into funding agreements with over 50 group members on terms similar to those it had with Brett Cattle prior to 22 August 2020. Accordingly, they argued, by then AFFF had established what amounted to a litigation funding scheme that fell within the exception made in the transitional provisions in the Corporations Regulations 2001 (Cth) in reg 10.38.01(1).
(1981) 148 CLR 121