Clurname Pty Ltd v Commonwealth Bank of Australia

Solicitor for the Respondent: Allens

Counsel for Ismene Pty Ltd: Mr RJ Burbidge QC and Mr J Clark

Solicitor for Ismene Pty Ltd: Russells

Counsel for Lifeplan Australia Friendly Society Ltd and for Big Sky Building Society Limited: Mr S Lawrance

Solicitor for Lifeplan Australia Friendly Society Ltd and for Big Sky Building Society Limited: Johnson Winter & Slattery

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 778 of 2012

AND: COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)

JUDGE: FOSTER J DATE OF ORDER: 2 MARCH 2015 WHERE MADE: SYDNEY

1. As soon as practicable, the parties bring in Short Minutes of Order giving effect to these Reasons for Judgment delivered this day (2 March 2015). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 778 of 2012

AND: COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)

JUDGE: FOSTER J DATE: 2 MARCH 2015 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The applicants commenced this proceeding on 4 June 2012 on their own behalves and also as representatives of a class of persons (the class) pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act). At the moment, it is not entirely clear to me how many persons or entities fall within the class as presently defined but I suspect that the number is not large. In the proceeding, the applicants claim declaratory relief, damages and other relief against the Commonwealth Bank of Australia (the bank) in connection with the investment by members of the class in certain sophisticated financial instruments. 2 The class was defined in the applicants' Statement of Claim in the following terms: 4. The group members to whom these proceedings relate are persons who, during the period between January 2006 and December 2007 (the 'Claim Period'): 4.1 acquired interests in one or more synthetic collateralised debt obligations ('SCDOs') identified in Schedule 1; [A reference to SCDOs within this pleading is a reference to the SCDOs identified in Schedule 1]; 4.2 acquired those interests in reliance upon information and advice provided by, as well as representations and recommendations made by, the Commonwealth Bank of Australia ('the CBA') about the SCDOs; and 4.3 suffered loss and/or damage as a result of their investment in SCDOs (the 'Group Members'). 3 In Schedule 1 to the Statement of Claim, the applicants list seven SCDOs to which the claims made in the proceeding are referable. 4 As defined in the Statement of Claim, the class is what is known as "an open class". That is, a number of persons are captured within the definition of the class who did not know about the proceeding or consent to becoming a group member at the time when the proceeding was commenced. 5 In circumstances which I shall explain in more detail later in these Reasons, the applicants have applied to the Court for an order for leave to amend the existing definition of the class so as to exclude therefrom certain investors who are referred to descriptively as "institutional investors" and "settled investors". That application has been made as one of several necessary steps which must be taken by the parties in order to consummate a settlement of the claims of a majority of the class members made in this proceeding. I shall refer to the order now sought by the applicants as "the class amendment order". 6 These Reasons for Judgment determine the applicants' application for the class amendment order. 7 Although the current application is not made at the same time as the settlement approval application, the making of the class amendment order is a fundamental precondition to the making of the settlement approval application. For this reason, the present application is of considerable significance to the class members, including, in particular, the institutional investors and the settled investors. 8 The Originating Process and the Statement of Claim have not yet been served upon the bank. Nonetheless, the bank has been aware for some years that certain persons and entities were contemplating suing it as a result of investments made by those persons and entities in the SCDOs. Those persons and entities were, and continue to be, represented by Ms Amanda Banton who, until very recently, was a partner at the law firm Piper Alderman and is now a partner at the firm of Squire Patton Boggs. 9 In the period from late 2011 until December 2014, Ms Banton conducted negotiations with the bank in an endeavour to settle the claims of all members of the class. In the period from mid-2012 to late 2014, this proceeding was held in abeyance, with the approval of the Court, in order to allow the parties to explore fully all opportunities for settlement. 10 By a Settlement Deed dated 19 December 2014 involving the bank, both of the applicants, Ms Banton and International Litigation Partners No. 5 Pty Limited (ILP), which is the litigation funder arranged by Ms Banton to fund the applicants in this proceeding, the applicants, the bank, Ms Banton and ILP agreed to settle the claims of approximately two-thirds of the members of the class upon the terms set out in that Deed. The settlement is conditional upon: (a) The definition of the class being amended so as to exclude the institutional investors and the settled investors. The consequence of those investors being excluded from the definition of the class is that they will be excluded from the settlement; (b) The requirement that persons and entities who wish to share in the fruits of the settlement register their interest for that purpose within a specified timeframe; and (c) The Court's approval of the settlement in due course. 11 As Ms Banton said in evidence before me, the following procedure is laid down by the Settlement Deed, namely: (a) First, the applicants are to notify all members of the class (as presently defined) of: (i) The proposal to amend the definition of the class so as to exclude some members of the class; and (ii) The deadline for class members to raise objections. (b) Second, the applicants are to seek a date for the hearing of the applicants' application for the class amendment order and to notify all members of the class of that date; (c) Third, the applicants are to notify the non-excluded class members of the applicants' intention to apply for orders requiring persons and entities in that subclass who wish to receive compensation to register by a specified date, failing which they will remain a class member but will not be entitled to participate in the compensation scheme to be established by the Deed; and (d) Fourth, if the class amendment order and the claimant registration orders are made, the applicants will thereafter proceed to seek Court approval for the settlement of the proceeding on behalf of those persons and entities falling within the amended definition of the class (which will not include the institutional investors or the settled investors) upon terms that all remaining claims will be compromised. That compromise will affect all remaining claims including those of investors who are covered by the amended class definition but who have not registered to share in the compensation within time. 12 Consistently with the procedure outlined by Ms Banton, on 19 December 2014, upon the application of the applicants, the Court made orders: (a) Requiring that notice be given to all members of the class of whom the applicants, Ms Banton and the bank were aware, of: (i) The applicants' intention to make application to the Court to amend the definition of the class as presently specified in their Originating Process and Statement of Claim; (ii) The applicants' intention to seek the Court's approval of the terms of the Settlement Deed and the settlement embodied therein; (iii) The stipulation that members of the class must register in order to participate in the proposed settlement; (iv) The circumstance that members of the class had the option to opt out of the proceeding; and (v) The fact that members of the class may object to the proposed class amendment order. (b) Approving the form of the notices to be given and setting a program and timetable for the remaining steps to be taken. The form of the notice to be sent to each of the subclasses which were intended to be excluded from the settlement was tailored in each case to the particular circumstances of that subclass. The notice in respect of the institutional investors differed appropriately from the notice to be sent to the settled investors. 13 One of the orders made on 19 December 2014 was an order that the hearing of the applicants' application for the class amendment order be fixed for 26 February 2015. In addition, the deadlines for members to take a number of other important steps were specified as 2 March 2015 which, of course, is today's date. Some of those deadlines have subsequently been extended by the Court. 14 On 19 December 2014, the Court also ordered that certain materials be kept confidential. At the time, those materials included the Settlement Deed itself. 15 On 26 February 2015, the applicants filed an Application for an Order relating to the Procedure to be followed in a Representative Proceeding in which they sought a specific order in the following terms: Pursuant to sections 33K and 33V of the [Federal Court of Australia] Act [1976 Cth] the Applicants have leave to: (a) amend the definition of group members in the proceeding in the terms set out in paragraph 4 of the proposed Amended Originating Application exhibited at pages 1-8 of Exhibit AKB-1 to the affidavit of Amanda Kim Banton made 20 February 2015; and (b) file the Amended Originating Application and an Amended Statement of Claim in the forms exhibited to the affidavit of Amanda Kim Banton made on 20 February 2015. 16 The proposed amended definition of the class is found at pages 5 and 6 of Exhibit AKB 2 and is in the following terms: The group members to whom this proceeding relates are those persons who: 1. During the period between January 2006 and December 2007 (the 'Claim Period'): 1.1 acquired interests in one or more SCDOs identified in Schedule 1; 1.2 acquired those interests in reliance upon information and advice provided by as well as representations and recommendations made by the CBA about the SCDOs; and 1.3 suffered loss and/or damage as a result of their investment in the SCDOs; and 1.4 are not a pension fund, mutual fund, insurance company, investment bank, commercial trust, endowment fund, hedge fund or fund manager, which is not a self-managed superannuation fund; and 1.5 have not prior to the date of filing this Amended Originating Application entered into a settlement agreement or arrangement with the CBA in connection with one or more of the SCDOs (which does not include taking any steps as required by the Court in these proceedings, including registering as a group member of the proceedings in order to participate in any settlement of the proceedings). 17 Subparagraph 1.4 contains the definition of "institutional investors" and subparagraph 1.5 contains the definition of "settled investors". 18 On 24 February 2015, the applicants filed an affidavit sworn by Ms Banton in respect of the whole of which they sought and were granted confidentiality orders. 19 On 26 February 2015, the applicants' application for the class amendment order was heard by me. 20 The evidence before me on that occasion established that all of the notices required to be sent to class members pursuant to the orders made by the Court on 19 December 2014 had been sent strictly in accordance with those orders. 21 Prior to 26 February 2015, three entities gave notice of their intention to oppose the making of the class amendment order. Ms Banton takes the view that two of those entities are institutional investors: Lifeplan Australia Friendly Society Limited (Lifeplan) and Big Sky Building Society Limited (Big Sky). The remaining objector is an investor who had previously settled with the bank, Ismene Pty Limited (Ismene). 22 At the hearing on 26 February 2015, the applicants were represented by Senior Counsel. The bank was represented by Senior and Junior Counsel. Both the applicants and the bank made submissions on that occasion in support of the orders sought by the applicants. Lifeplan and Big Sky were also represented by Counsel, as was Ismene. 23 At the commencement of the hearing, Senior Counsel for Ismene sought an adjournment of the hearing of the application for the class amendment order upon two grounds. First, he submitted that some of the materials which had been ordered by the Court in the orders made on 19 December 2014 to be filed and served had been made available to his instructing solicitors a little later than those orders allowed. Second, he wished to pursue steps to secure copies of certain materials, essentially comprising evidence of the negotiations between the bank and its legal representatives, on the one hand, and Ms Banton and ILP, on the other hand. He also wished to cross-examine Ms Campbell, who is a partner at Allens, the solicitors for the bank in the present proceeding. Ms Campbell had sworn three affidavits in support of the present application. 24 After hearing argument on the question of adjournment and in respect of the other matters raised by Senior Counsel for Ismene, I refused the adjournment application and also refused his application to cross-examine Ms Campbell. Thereafter, the parties put their arguments. However, towards the end of oral argument, a request was made by Counsel for Lifeplan and Big Sky to have access to the Settlement Deed and to Ms Banton's confidential affidavit sworn on 24 February 2015. I granted both requests upon appropriate terms as to confidentiality. This led to the need for further submissions to be made by the parties. Those additional submissions were made in writing by Lifeplan, Big Sky and Ismene on 27 February 2015. Responses by the applicants and the bank were made yesterday (1 March 2015). All of those Written Submissions will be placed on the Court file. I have read and considered them for the purposes of deciding the present application.

The Evidence 25 The applicants relied upon the following affidavits, namely: (a) Three affidavits sworn by Ms Banton on 19 December 2014, 20 February 2015 and 24 February 2015 respectively; (b) Three affidavits sworn by Ms Campbell on 18 December 2014, on 25 February 2015 and on 26 February 2015 respectively; and (c) An affidavit sworn by Thomas Lewis Bagley on 25 February 2015. 26 In her first affidavit, at paragraphs 15 to 19, Ms Banton outlined the claims made in the proceeding as follows: 15. Between 2006 and 2007 the Applicants and Group Members acquired investments in one or more of the SCDOs from the Respondent. 16. The SCDOs are complex, highly sophisticated, structured financial products which, due to their structure, have many risks. The structure of the SCDOs is set out at paragraphs 20-34 of the SOC and the key risks of the SCDOs are set out at paragraph 35 of the SOC. 17. The Applicants each acquired one or more of the SCDOs and allege that they suffered losses arising out of their acquisition of the SCDOs in reliance on information, advice and recommendations received from the Respondent. 18. By way of summary, the Applicants allege in the Proceedings that the Respondent: (a) recommended to the Applicants that they acquire holdings in the SCDOs, in circumstances where the Respondent knew or ought to have known that those products were unsuitable for the Applicants having regard to their conservative investment strategies, and in the case of Gloucester, the investment guidelines for local government authorities pursuant to the Local Government Act and the Ministerial Order dated 15 July 2005 and gazetted on 29 July 2005 in relation to investments in place at the relevant time; (b) advised the Applicants about whether to make an investment in the SCDOs, recommended the SCDOs to the Applicants and/or suggested that the Applicants consider investing in the SCDOs, and in doing so owed a duty of care to the Applicants to exercise reasonable care and skill, and was negligent in providing those services in breach of its duty; (c) engaged in misleading and deceptive conduct in breach of section 1041H of the Corporations Act, made false and misleading statements in breach of s 1041E of the Corporations Act, and in breach of s 12DA of the ASIC Act, in relation to its disclosure of the risks of the SCDOs; (d) breached its obligations pursuant to s 912A of the Corporations Act; (e) breached clause 2.2 of the Code of Banking Practice, to which the Respondent is a signatory; and (f) acted in breach of its fiduciary obligations to the Applicants. 19. Each of the SCDOs experienced substantial credit events in the period from August 2007 to October 2008 and either unwound at zero return to investors, matured at minimal or no return to investors, or were sold by investors at a market value well below the purchase price of the SCDOs. The Applicants and Group Members suffered loss of the difference between the price paid for the SCDOs and the price recovered on the sale, maturity or default of the SCDOs. 27 In the same affidavit, Ms Banton then went on to describe in some detail the course of the negotiations which had taken place between her and representatives of the bank. She said that she had sent a letter of demand to the bank on 12 October 2011 and that, between November 2011 and March 2012, she had engaged in "without prejudice" correspondence with the bank's solicitors with a view to attempting to resolve the claims of the applicants and the other nine funded class members for whom she had originally acted. She noted that no settlement had been achieved by March 2012. 28 Ms Banton said that this proceeding was commenced on 4 June 2012 because of concerns that some of the claims might become statute barred if action was not taken at that time. 29 On 25 October 2012, Ms Banton sent a further letter to the solicitors for the bank endeavouring to persist with "without prejudice" negotiations in an endeavour to settle the proceeding. At paragraph 25 of her first affidavit, Ms Banton said: 25. Between October 2012 and December 2014, I have engaged (on behalf of the Applicants and Group Members) in ongoing without prejudice discussions with the Respondent's solicitors with a view to resolving the Proceedings prior to formal service. In addition to engaging in regular written and telephone without prejudice correspondence with Mr Foster and Ms Campbell of Allens, during this period I attended the following four without prejudice settlement meetings: 25.1 A without prejudice meeting on 29 November 2012 at the offices of the Respondent's solicitors. This meeting was attended by Mr Foster and Ms Campbell of Allens, Ian Jackman SC of counsel (for the Respondent), one or more employees of the Respondent, myself, Denée Theodorou and Lisa Gallate of Piper Alderman, and Christopher Withers of counsel (for the Applicants and Group Members). 25.2 A mediation on 8 October 2013 at the offices of the Respondent's solicitors, at which the Honourable Kevin E. Lindgren AM, QC (Mr Lindgren), a retired judge of the Federal Court of Australia, acted as mediator. This mediation was attended by Mr Foster and Ms Campbell of Allens, Mr Jackman SC, several employees of the Respondent including internal legal officers and financial officers of the Respondent, myself, Ms Theodorou and Louise Treloar of Piper Alderman, Michael B.J. Lee SC of counsel (for the Applicants and Group Members), Paul Lindholm as a representative of the litigation funder, ILP, and Susie Jones, Finance Manager of Gloucester. The mediation did not resolve the Proceedings and was adjourned to be reconvened at a later date. 25.3 A re-convened mediation on 9 April 2014 at the offices of the Respondent's solicitors, at which Mr Lindgren continued to act as mediator. This mediation was attended by Mr Foster and Ms Campbell of Allens, Mr Jackman SC, several employees of the Respondent (including internal legal officers and financial officers of the Respondent), myself, Ms Theodorou and Ms Treloar of Piper Alderman, Noel Hutley SC and Mr Withers of counsel (for the Applicants and Group Members), Mr Lindholm representing ILP, and Robert Gardos, a director of Clurname. 25.4 A further mediation on 17 September 2014 at the offices of the Respondent's solicitors, at which Mr Lindgren again acted as mediator. This mediation was attended by Mr Foster, Ms Campbell and Thomas Bagley of Allens, several employees of the Respondent (including internal legal officers and financial officers of the Respondent), myself and Ms Theodorou of Piper Alderman, and Mr Lindholm representing ILP. 30 It is noteworthy that, in the period from late November 2012 to September 2014, the parties involved Mr KE Lindgren AM QC, a most distinguished former judge of this Court, in their endeavours to settle the matter. Mr Lindgren conducted a mediation which spanned a considerable period of time in an endeavour to bring about a settlement. 31 At paragraphs 30 to 45 of her first affidavit, Ms Banton described in detail the steps that were taken by her and other lawyers at Piper Alderman to identify and contact unknown group members. 32 At paragraph 45 of her first affidavit, Ms Banton summarised the position as at the date of that affidavit (19 December 2014) in the following terms: 45. Accordingly, as a result of my attempts to contact Group Members both prior to and after Proceedings were filed: 45.1 a further 21 Group Members retained Piper Alderman to act on their behalf in relation to the Proceedings, which Group Members were all Piper Alderman Contacts and were not persons who responded to the Advertisements (bringing the total Funded Group Members to 29, including the Applicants); and 45.2 there are a further 13 entities which I understand may have suffered losses on the SCDOs and may be Group Members of the Proceedings but which have either: 45.3 informed Piper Alderman that they do not wish to be represented by Piper Alderman in relation to the Proceedings and/or do not wish to be involved in the Proceedings; 45.4 instructed Piper Alderman that they have retained other solicitors to act on their behalf in relation to the Proceedings; 45.5 instructed Piper Alderman that they do not wish to be contacted by Piper Alderman in relation to the Proceedings; or 45.6 been contacted by Piper Alderman by telephone and email on numerous occasions and have not responded further to such contact from Piper Alderman. 33 In her first affidavit, Ms Banton referred to the important terms of the proposed settlement. She focussed some attention on the preconditions to settlement. These comprise the making of the class amendment order, the making of the class closure orders through the registration process and the making of the settlement approval order. At paragraphs 56 to 59, Ms Banton described the persons who would be bound by the Settlement Deed in the following terms: 56. It is intended that the following persons will be bound by the Settlement Deed (subject to approval of the settlement by the Court): 56.1 Group Members which are not Institutional Investors or Settled Investors, and which submit a Group Member Registration Form by the Registration Date (Registered Group Members); and 56.2 Group Members which are not Institutional Investors or Settled Investors, and which do not submit either a Group Member Registration Form by the Registration Date or an [sic] Notice of Opt-Out Form by the Opt-Out Date (Bound Group Members). 57. Registered Group Members will be entitled, pursuant to clause 3.1(a) of the Settlement Deed and paragraph 9 of Schedule B to the Settlement Deed, to a distribution from any settlement of the Proceedings, subject to Court approval of that settlement. 58. It is intended that Bound Group Members will not be entitled to a distribution from any settlement of the Proceedings, however will be bound by the terms of the Settlement Deed, by reason of: 58.1 the Class Closure Orders sought in the Interlocutory Application; 58.2 the Deed Entry Orders which are to be sought by the Applicants at the same time as filing an application for the Approval Orders; and 58.3 clause 3.1(a) of the Settlement Deed and paragraph 9 of Schedule B to the Settlement Deed, which do not provide for any share of the Settlement Sum (as defined in the Settlement Deed) to be distributed to Bound Group Members. 59. Accordingly, the following Group Members will not be bound by the Settlement Deed: 59.1 Group Members which are Institutional Investors or Settled Investors, by reason of the Class Amendment Order amending the group definition prior to the making of the Approval Order; and 59.2 Group Members which submit a Notice of Opt-Out Form by the Opt-Out Date, by reason of the orders sought in the Interlocutory Application. 34 In addition, at paragraph 60, Ms Banton summarised the financial benefits to be received by registered group members in the event that the settlement is effected in accordance with the Settlement Deed. That material is confidential. 35 In the balance of her first affidavit, Ms Banton went on to describe other important features of the settlement, including the giving of releases and indemnities on behalf of group members and the mechanics of the distribution of the settlement sum. 36 As I have already noted, I am satisfied that the orders of the Court in relation to the giving of notice to group members made on 19 December 2014 have been complied with. In arriving at that conclusion, I have relied upon the affidavits of Ms Campbell and Mr Bagley in particular. 37 On or about 13 February 2015, Ismene lodged with Squire Patton Boggs a notice of objection to the class amendment order. The ground of objection upon which Ismene relied in that notice was that it settled its proceeding against the bank at a time when it was unaware that the present proceeding had been commenced, with the consequence that: …It would be inherently unfair for Ismene to receive a smaller settlement sum under its settlement agreement with CBA than it would as a group member in the class action. 38 On or about the same time, Lifeplan and Big Sky also lodged a notice of objection to the class amendment order. They made the following points in that notice: (a) The proposed exclusion of institutional investors is not in the interests of the class members as a whole but only in the interests of a subset of those members. (b) To date, the class has been defined as an open class (which definition included the institutional investors) thereby enabling litigation funding to be more easily obtained. For that reason, the applicants should not be permitted now to narrow the class. (c) The Court ought not be too quick to conclude that the bank will not settle with the applicants if institutional investors are included in the settlement. The evidence led by the applicants in support of that conclusion is unpersuasive. (d) In addition, having regard to the terms of the litigation funding deeds with ILP into which both Lifeplan and Big Sky have entered, each of those entities will remain liable to ILP on a contingent basis for significant sums in the event that they are excluded from the settlement.

Consideration 39 The problem presented to the Court by the current application is not entirely new, although the precise circumstances may not have a precedent. The problem is simply this. The applicants commenced this proceeding with an open class definition of the class and now seek to exclude two substantial subclasses or subsets of that class, both from the definition of the class and, more importantly, ultimately from the settlement. The interests of those members of the class who are to be excluded from the definition of the class are likely to be in conflict with the interests of those members of the class who are to remain in the class. This state of affairs creates a prima facie conflict of interest for Ms Banton, and possibly ILP, which has to be resolved. It must be remembered that Ms Banton has asserted both in her open affidavits and in her confidential affidavit that the bank will not settle this proceeding at all if the applicants insist upon including both the institutional investors and the settled investors in the proposed settlement. 40 Some criticism has been made by the opponents to the relief claimed in the present application of the quality of the evidence adduced in support of that application. Senior Counsel for Ismene and Counsel for Lifeplan and Big Sky both submitted that the Court should not accept Ms Banton's perceptions as to the position of the bank as probative of the bank's position in fact nor should the Court accept her assertions in that regard but should require the bank itself to give evidence. It seems to me that this criticism is unreal. Ms Banton cannot know the bank's true position or its "bottom line". The Court requires the applicants' solicitor to disclose her views and, provided they are considered to be within the range of reasonable assessments, the Court ought not look behind them or investigate them using powers not available to the applicants' solicitor. In addition, here, Senior Counsel for the bank today informed the Court on specific instructions from the bank that his client's position is as outlined by Ms Banton. Adding to Ms Banton's evidence on the point by way of sworn evidence from the bank does not seem to me to be warranted. I think that I should proceed upon the basis that the bank will not settle the present proceeding if the institutional investors and the settled investors remain as class members. 41 The principal difficulty remains: How does the Court address and alleviate the conflict of interest to which I have referred? 42 A similar state of affairs was considered by Goldberg J in Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459. In that case, his Honour was asked to approve a settlement pursuant to s 33V of the Federal Court Act in circumstances where, at the same time, the Court was being asked to limit or narrow the group definition. The fact that these two claims for relief were heard at the same time meant that, in the proceeding before his Honour, the narrowing of the definition of the group was a matter being propounded to the Court at a time when and notwithstanding that no prior notice of the applicants' application to narrow the group definition had been given to group members. At 466-467 [22]-[24], his Honour said: 22 I consider that a potential conflict of interest arises where a representative party in a representative proceeding seeks to settle the proceeding by limiting or narrowing the definition of the group so as to exclude some of the group members from the settlement. It is in the interests of those who can obtain a benefit under the settlement to have it approved rather than to have the proceeding continue. It is not in the interests of those who will not obtain a benefit under the settlement to have it approved with the result that the proceeding will terminate. Rather it is in their interests for the proceeding to continue, at least until it generates an offer of settlement which will give them a benefit. If the proposed settlement is approved, then they will be cast adrift from any representative proceeding and they will become group members without the benefit of a representative proceeding. The present proceeding calls to mind the observation of the United States Supreme Court in Deposit Guaranty National Bank v Roper 445 US 326 at 339 (1980): Where it is not economically feasible to obtain relief within the traditional framework of multiplicity of small individual suits for damages, aggrieved persons may be without any effective redress unless they may employ the class-action device. 23 This potential conflict of interest must be resolved by considering how best to have regard to the interests of the present group members who are not beneficiaries of the settlement. At the least they should be given notice of the proposed settlement and thereby be given the opportunity to put their views before the court before a determination is made whether to approve the settlement. 24 Thus far I have considered whether in determining whether to approve the settlement, as a matter of principle, I should have regard to the interests of those present group members who will not benefit from the settlement. That issue must also be considered by reference to the provisions of s 33X(4) of the Act. 43 His Honour solved the problem with which he was confronted by requiring appropriate notice of the applications to be given to all of the group members. 44 At 468-469, [28]-[30], his Honour went on to discuss further reasons as to why he required such notice to be given. 45 In the present case, the applicants have proceeded upon the basis that the appropriate course was to seek orders from the Court for the giving of notice to all group members before applying for the class amendment order, thus proceeding in a fashion which was consistent with the reasoning of Goldberg J in Williams. It is also consistent with the approach taken by Forrest J in Matthews v SPI Electricity Pty Ltd (No 13) (2013) 39 VR 255 at 274 [79] esp at [79(e)]. 46 Lifeplan and Big Sky are not satisfied with the approach taken by the applicants. Both in oral submissions made on 26 February 2015 and in their Written Submission made on 27 February 2015, those corporations emphasised that they would remain contingently liable to ILP in respect of a number of matters even if they were excluded from the definition of group members and even if the proceeding were settled. Counsel for those corporations submitted that, when due regard is paid to the terms of the relevant litigation funding deeds, in the event that his clients terminated the litigation funding arrangement, they would remain liable to ILP for costs, a share of the project management fee as defined in the deeds, and commission. He submitted that, in the event that ILP were to terminate the litigation funding deeds entered into with his clients (which he argued would be the most likely scenario in light of the settlement), his clients would remain liable contingently for costs and a share of the project management fee. 47 These submissions are accurate insofar as the terms of the litigation funding deeds are concerned. 48 However, in a letter sent by ILP to the solicitors for Lifeplan and Big Sky dated 20 February 2015, ILP stated that it did not consider that the litigation funding agreements with Lifeplan and Big Sky had the effect contended for by those corporations. Rather, ILP argued that, if the settlement is approved, with the consequence that ILP would not be in a position to continue funding any claims against the bank in respect of the subject matter of the present proceeding, then Lifeplan and Big Sky would not have any ongoing liability to ILP in respect of any settlement or judgment sum it might receive from the bank in respect of that separate claim. 49 Since that letter was written, ILP, through Senior Counsel for the applicants, has indicated to the Court that ILP would be prepared to enter into a covenant to the same effect as the assertions made in its letter dated 20 February 2015 and thereby remove the impact of the terms of litigation funding deeds on Lifeplan and Big Sky in the event that the proposed settlement is consummated. 50 In addition, Lifeplan and Big Sky submitted that I should not place much weight upon Ms Banton's opinion on the critical question of whether the bank would be prepared to settle the proceeding in the event that the class amendment order was not made and the institutional investors and the settled investors were left as members of the class. I have already indicated my view about that matter. It seems to me that I should give weight to the opinions of Ms Banton in that regard. 51 Finally, it was submitted on behalf of Lifeplan and Big Sky that Ms Banton's views as to the likelihood of success on the part of institutional investors and settled investors should not be accorded much weight. She said that those investors would face greater obstacles in proving their claims than the remaining members of the class. As matters have turned out, I do not think that I need to give too much weight to that opinion at this stage, although there is some force in the proposition that the institutional investors and the settled investors are in a very different position from the remaining members of the group. 52 Ismene made a detailed submission in which it sought to persuade the Court that it had been misled into signing its Settlement Deed with the bank in September 2012, in effect, by the silence of the bank in failing to inform it that the present proceeding had been commenced and, further, in failing to inform it that the bank was engaged in or had been engaged in negotiations with Ms Banton in relation to claims which ultimately found their way into the Statement of Claim in the present proceeding. 53 These submissions have provoked a detailed response from the bank and, indeed, from the applicants. Amongst other things, both groups submitted that I should not take any notice of these allegations because they are not supported by any evidence and ought not to be allowed to interfere with the present application. 54 There is no evidence before me to support much of what has been submitted on behalf of Ismene. That is not to say that Ismene is not entitled to feel some disquiet about the circumstances in which it came to settle with the bank. However, at paragraphs 10 to 16 of her affidavit sworn on 25 February 2015, Ms Campbell said: 10. On 19 September 2012, CBA entered into a confidential settlement arrangement with Ismene Pty Limited in relation to its acquisition of CDOs from CBA (the Ismene Settlement). 11. Mr Foster and I acted for CBA in negotiating the Ismene Settlement. We were instructed in that regard by David Courtness (Senior Legal Counsel at CBA). 12. At the time of the Ismene Settlement, I was not aware of the existence of these proceedings. 13. On or about 4 October 2012, I conducted a search on the Federal Court's 'Federal Law Search' website for claims filed against CBA. I conducted that search after hearing Amanda Banton (the solicitor for the Applicants) make a public statement. I cannot now recall what Ms Banton said in that statement, but I recall that it caused me to check to see whether she had filed proceedings against CBA in respect of CDOs. 14. As a result of that search, I discovered that these proceedings had been filed against CBA. Prior to conducting that search, I was not aware of the existence of these proceedings. I informed Mr Foster and Mr Courtness of the results of my search on 4 October 2012. 15. I have been informed by Mr Foster, and believe, that: (a) he was not aware of the existence of these proceedings at the time of the Ismene Settlement; and (b) he was not aware of the existence of these proceedings until I brought them to his attention on 4 October 2012. 16. I have been informed by Mr Courtness, and believe, that: (a) he was not aware of the existence of these proceedings at the time of the Ismene Settlement; (b) he was not aware of the existence of these proceedings until I brought them to his attention on 4 October 2012; and (c) to the best of his knowledge, other members of the legal team and management team at CBA: (i) were not aware of the existence of these proceedings at the time of the Ismene Settlement; and (ii) were not aware of the existence of these proceedings prior to 4 October 2012. 55 The upshot of that evidence is that, at the time the bank settled with Ismene, no one at the bank was aware that the present proceeding had actually been commenced. The bank's solicitors were also unaware of that circumstance when the settlement with Ismene was agreed. 56 Senior Counsel for Ismene did apply to cross-examine Ms Campbell and I refused that application. I have no reason at all to doubt the substance of Ms Campbell's evidence. 57 The main reason why the Court should not go down the path of looking at Ismene's allegations as part of its consideration of the present application is that there is no point in doing so. If, in fact, Ismene was misled at the time it entered into the settlement with the bank, then it will have an opportunity in due course to move to set aside the Settlement Deed and to pursue its original claims unhindered by the settlement, should it be inclined to do so. 58 The present proceeding does not include any claim on behalf of Ismene or anyone else to attack a settlement agreement entered into with the bank at some time prior to today. The applicants do not intend to make such a claim and no such claim will, therefore, be made in the present proceeding. Unless and until such a claim is made, Ismene will be confronted, inevitably, with the terms of its settlement with the bank which no doubt include appropriate releases and/or covenants not to sue. 59 The class amendment order which is sought and the member registration process which is to be undertaken both have the effect of limiting or closing the class so as to exclude from the present proceeding and, thus, from any settlement, the institutional investors, the settled investors and any other person or entity which does not register in accordance with the registration orders. As far as the institutional investors and the settled investors are concerned, their rights will be preserved, subject to one matter to which I will come in a moment - that is to say, they will be free to sue the bank should they desire to do so and to take whatever steps that they wish to take in order to give vent to their rights. Persons and entities who do not avail themselves of the proposal to register will not share in the fruits of the action and those who remain within the definition of group members will, therefore, be bound by the settlement without obtaining any benefit therefrom. 60 Counsel for Lifeplan and Big Sky also submitted that, whilst it appeared that his clients' rights were being preserved by what is in prospect and thus that they were not going to suffer any prejudice if they were excluded, there was nonetheless some prejudice that would flow to them. That prejudice was described by him as being the loss of the benefit of having ILP involved in funding, amongst other things, his clients' claims against the bank. I do not think that that is a prejudice of any moment. Had Lifeplan and Big Sky not been engaged with ILP, they would have had to prosecute their claims on their own, or with the support of some other funder. Further, in light of the fact that ILP is prepared to secure their position against the foreshadowed contingent liabilities to it, it seems to me that those two corporations will be in the same position as they would have been in had they been required to bring their own action. 61 I have not referred in any detail to Ms Banton's confidential affidavit sworn on 24 February 2015. At the moment it is subject to confidentiality orders, although it has now been shown to all parties at the Bar table. Notwithstanding the confidentiality attached to that affidavit, I am in a position, I think, to note that, at paragraphs 11 to 24 of that affidavit, Ms Banton outlines her views as to the fairness and reasonableness of the class amendment order. 62 In the end, it seems to me that the choice is stark. Either the Court makes the order as sought and facilitates a settlement for a majority of the members of the group (being a settlement which is likely to receive the support of the lawyers for the applicants) and leave to their own actions the claims of the institutional investors and the settled investors or the Court refuses to make the class amendment order and, as a result, will almost certainly stultify all prospects of settlement. In the circumstances, I have decided to make the class amendment order. 63 I had entertained the idea that perhaps I should postpone making any order at the moment and defer further consideration of the present application until the parties bring forward the settlement approval application. However, I think that that would be unwise, given that a number of other steps are dependent upon the making of the class amendment order and given that, in particular, members of the class will have to decide before then whether to opt out or not. It is preferable that they make that decision in light of the outcome of the present application. 64 The one matter to which I intended to return is the question of limitations. I do have some concerns about the possibility that the bank will raise a limitation defence against excluded parties and that, notwithstanding the circumstance that time has not been running while the present proceeding is on foot, when I make the class amendment order, only a day or two will be left within which the institutional investors and (possibly) the settled investors will be required to decide whether to bring a proceeding of their own and then to institute that proceeding. For this reason, in addition to requiring a commitment from ILP to relieve the excluded members of the class from any contingent liabilities under the litigation funding deeds which those members have with that organisation, I will also require the bank to undertake to the Court to accept that time will not run against excluded members for a period of 30 days from today, so that excluded members of the class will have sufficient time properly and adequately to consider their position. 65 So, for all of the above reasons, I propose to make the order which has been sought, subject to the two matters which I have raised. I will direct the parties to confer and to let me have a form of order as soon as possible. 66 I will reserve the question of costs generally. I note, however, that the principal parties, being the applicants and the bank, do not seek any order for costs against any of the objectors. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.