Coatman v Colonial First State Investments Limited

Solicitor for the Respondents: Herbert Smith Freehills

12 March 2024 In the third sentence of paragraph 8, replacing "Frequently, class actions perform a public function by being employed to vindicate statutory policies such as disclosure to the securities market, approving cartels of posturing safe medical and pharmaceutical products: see Legg M, Class Actions, Litigation Funding and Access to Justice (Law Research Paper No 17-57, UNSW, 7 September 2017)" with "Frequently, class actions perform a public function by being employed to vindicate statutory policies such as disclosure to the securities market, prohibition of cartel conduct and the provision of safe medical and pharmaceutical products: see Legg M, Class Actions, Litigation Funding and Access to Justice (Law Research Paper No 17-57, UNSW, 7 September 2017)".

AND: COLONIAL FIRST STATE INVESTMENTS LIMITED First Respondent

order made by: MURPHY J DATE OF ORDER: 20 JUNE 2022

Settlement of proceeding

1. Pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (the Act), the settlement of this proceeding be approved on the terms set out in the Revised Settlement Deed and Revised Settlement Distribution Scheme (Scheme) appearing at pages 49 to 88 of Exhibit MN-9 of the non-confidential affidavit of Miranda Nagy dated 14 June 2022.
2. Pursuant to s 33ZF of the Act, the Applicant be authorised, nunc pro tunc, to enter into and give effect to the Settlement Deed and Revised Settlement Deed for and on behalf of all Group Members (being those persons who meet the definition of Group Members as set out in paragraph 2 of the Second Further Amended Statement of Claim and who have not previously opted out of the proceeding).
3. Pursuant to s 33ZB(a) of the Act, the persons affected and bound by the settlement are the parties to the Revised Settlement Deed and the Group Members.
4. Pursuant to s 33ZF of the Act: (a) Maurice Blackburn Pty Ltd is appointed as Settlement Administrator (as defined in cl 1 of the Scheme); (b) the First and Third Respondents are each appointed as Settlement Distributor (as defined in cl 1 of the Scheme); and (c) Joseph Robert Desoisa of Ernst & Young is appointed as Expert Consultant (as defined in cl 2(c) of the Scheme); and each is to act in accordance with the Scheme, subject to any direction of the Court.
5. The Settlement Administrator and Settlement Distributor have liberty to apply in relation to any matter arising under the Scheme.
6. The Settlement Administrator is within 20 business days of the final payment to the Group Members to apply to the Court for orders dismissing the Proceeding (Final Orders).

Costs 7. Pursuant to ss 33V(2) and/or 33ZF of the Act, the Applicant's costs of the proceeding and the costs of the Settlement Administrator be approved in the amount of $14,441,718.76, such amount being comprised of: (a) the amount of $14,363,530.76 for the Applicant's costs of the proceedings to the present date (including the costs of the report dated 30 May 2022 of Kerrie Rosati, the Court appointed costs referee); and (b) the amount of $78,188 for the costs of Maurice Blackburn Pty Ltd in acting as the Settlement Administrator. 8. All previous costs orders made in the proceeding prior to the date of these orders be vacated with effect from the date on which the Final Orders are made.

Reimbursement payment to Representative Applicant 9. Pursuant to ss 33V(2) and/or 33ZF of the Act, the amount of $25,000 be approved as reasonable to be paid to the Applicant for her time and efforts providing instructions on behalf of the Group Members.

Confidentiality 10. Pursuant to s 37AI of the Act, on an interim basis until a hearing on a date to be fixed, the confidential affidavit of Miranda Nagy dated 14 June 2022 (Nagy Confidential Affidavit) including Exhibit MN-10, and the report (including any annexures, exhibits or appendices) of the independent costs referee Kerrie Rosati dated 30 May 2022 (the Costs Report), shall not be published or disclosed without prior leave of the Court to any person other than: (a) the Court; (b) the Applicant; (c) the Applicant's legal representatives; and (d) in relation to the Costs Report only, any Group Member in accordance with order 12 of the order of Justice Murphy dated 29 April 2022. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

AND: COLONIAL FIRST STATE INVESTMENTS LIMITED First Respondent

order made by: MURPHY J DATE OF ORDER: 11 JULY 2022

Confidentiality

1. Order 10 of the orders dated 20 June 2022 (Interim Order) be varied such that the order shall operate until 5:00 pm on 9 August 2022, unless by that time an appeal or application for leave to appeal has been filed in respect of any of orders 1 to 9 of the orders dated 20 June 2022, in which case the Interim Order shall operate until further order.
2. From 5:00 pm on 9 August 2022, unless by that time an appeal or application for leave to appeal has been filed in respect of any of orders 1 to 9 of the orders dated 20 June 2022, pursuant to ss 37AF and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) (the Act), on the ground that the order is necessary to prevent prejudice to the proper administration of justice and until further order, the material set out in Annexure A (Confidential Material) is not be published or disclosed without prior leave of the Court to any person other than: (a) the Court; (b) the Applicant; (c) the Applicant's legal representatives; and (d) Maurice Blackburn Pty Limited; with such permitted disclosures to be on terms that none of those persons or entities disclose the Confidential Material or any part of it to any person or entity other than those listed in this order.
3. The Applicant have leave to file versions of the report of the Court Appointed Costs Referee, Kerrie Rosati dated 30 May 2022 (Costs Report) and the Confidential Affidavit of Miranda Nagy dated 14 June 2022, redacted in accordance with order 2 above.

Opt Out 4. Pursuant to s 337ZF of the Act, and notwithstanding order 26 of the orders dated 26 November 2021, Ms Guiliana Tullio / Pannacchione is deemed to have opted out of the proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

INTRODUCTION 1 By an interlocutory application dated 14 June 2022 the applicant, Ms Lesley Coatman, sought orders for Court approval of the proposed settlement of this class action under s 33V of the Federal Court of Australia Act 1976 (Cth) (the FCA Act). 2 The class action concerned the alleged failure of the first respondent, Colonial First State Investments Limited (Colonial), in its capacity as trustee of the Colonial First State FirstChoice Fund Superannuation Trust (FirstChoice Fund), to transfer members' monies as soon as reasonably practicable into a regulated, low-cost superannuation product known as a MySuper Product, in breach of statutory obligations under the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) and general law obligations. 3 On the eve of trial the parties reached an in-principle settlement pursuant to which Colonial agreed to pay the applicant and group members $56.3 million inclusive of costs in full and final settlement of the claim. At the conclusion of the settlement approval hearing I made orders to approve the settlement. I did so, in summary, because: (a) the proceeding was large, legally and factually complex, and strenuously defended and the in-principle settlement was reached at a stage when the parties were well informed as to the strengths and weaknesses of their respective cases; (b) the applicant faced real risks on liability and in achieving the quantum of damages sought; (c) the settlement fell comfortably within the range of reasonable outcomes having regard to the risks of the litigation; (d) under the settlement distribution scheme group members were to receive a fair share of the settlement proceeds, and there was to be a fair division of those proceeds as between group members; (e) the applicant's legal costs were fair and reasonable; and (f) the Court had the benefit of a thorough and considered opinion of the applicant's senior and junior counsel who recommended settlement approval in the terms proposed.

The proposed confidentiality orders 4 The applicant (or more accurately her lawyers) sought overly broad confidentiality orders. The proposed confidentiality orders related to: (a) the entirety of the report of Ms Kerrie-Ann Rosati, the Court-appointed Costs Referee, who was directed to inquire into and report to the Court on the reasonableness of the applicant's legal costs which were proposed to be deducted from the settlement monies; and (b) the Commonwealth Bank of Australia Deed Poll (the CBA Deed Poll) which was an important element of the proposed settlement. 5 The applicant's lawyers did not seek suppression of the total amount of costs and disbursements they sought to charge. Nor did they seek that the Costs Referee's report not be disclosed to group members. An earlier order provided that, upon request, the Costs Referee's report could be disclosed to group members on a confidential basis. They sought confidentiality orders on the basis that the Costs Referee's report relied on documents and information that are confidential and/or subject to privilege, including documents going to the applicant's case theory and litigation strategy and communications with legal representatives, experts retained by the applicant and/or the applicant herself. It was submitted that it was in the interests of the administration of justice for such communications subject to legal professional privilege to remain privileged, even after the approval of any settlement. 6 In Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527 at [8]-[9], I said in the context of a settlement approval application: It is wrong to assume that confidentiality or non-publication orders will be routinely or automatically made. Part VAA of the Act provides that the starting point for consideration of such orders, and it is mandatory under s 37AE for the Court to take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice. The Court must be satisfied that the order is necessary "to prevent prejudice to the proper administration of justice" (s 37AG(1)(a)), and "necessary" is a "strong word": Hogan v Australian Crime Commission (2010) 240 CLR 651; [2010] HCA 21 at [30]. There is a basis for treating some of the applicants' material as confidential (at least until settlement approval orders made) but the application for confidentiality orders was far too broad and wasted the time of the parties and the Court. There is a public interest in not making overly broad confidentiality orders in approving settlements in class actions, particularly the interests of class members in having a proper understanding of a settlement which affects their interests. 7 In Liverpool City Council v McGraw-Hill Financial, Inc (now known as S&P Global Inc) [2018] FCA 1289 at [102] Justice Lee approved the remarks in Caason and said that the trend of seeking wide-ranging confidentiality orders when making a settlement approval application was to be discouraged. More recently in Clark v National Australia Bank Limited (No 2) [2020] FCA 652 at [13]-[15], showing signs of increasing frustration with the practice of seeking overly broad confidentiality orders, his Honour said: At the risk of sounding like a broken record, I have tried on a number of occasions to send the message to the profession that given the fact that the primary objective of the administration of justice is to safeguard the public interest in open justice, and that open justice is fundamental to the operation of the judicial power of the Commonwealth (particularly in circumstances where one is dealing with the extinguishment of rights of non-parties to the litigation), it is fundamental that any confidentiality orders made pursuant to Pt VAA of the Act be calibrated to ensure that only confidentiality orders that are necessary be made. As the High Court explained in Hogan v Australian Crime Commission [2010] HCA 21; (2010) 240 CLR 651 (at 654 [30]), the word "necessary" is a "strong word". The threshold for an order to be made has been made deliberately high, but again and again material is proposed to be the subject of confidentiality orders on settlement applications which, on any view of it, includes information that has already been revealed in public, is anodyne, or is otherwise able to be revealed without any real prejudice to the administration of justice. This unfortunate approach of overreach can be seen in this case by reviewing the so-called "confidential affidavits" that were not redacted. …one hopes that recognition of the importance of the primary objective of the administration of justice and the need to ensure transparency (particularly in relation to Pt IVA proceedings) will find wider acceptance and be reflected in a more careful approach to seeking such orders. 8 Class actions are not just disputes between private parties about private rights, they have a public dimension: Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 at [91]. The settlement of class action proceedings is not just a private bargain between the parties in which the parties may legitimately seek to keep aspects of the settlement confidential: McGraw-Hill at [107]. Frequently, class actions perform a public function by being employed to vindicate statutory policies such as disclosure to the securities market, prohibition of cartel conduct and the provision of safe medical and pharmaceutical products: see Legg M, Class Actions, Litigation Funding and Access to Justice (Law Research Paper No 17-57, UNSW, 7 September 2017). It is important to safeguard the public interest in open justice, which is entrenched in the settlement approval regime under Part IVA of the FCA Act: Jenkings v Northern Territory of Australia (No 4) [2021] FCA 839 at [64]-[65] (Mortimer J). 9 There is also a significant public interest in information relating to legal costs and litigation funding charges in class action litigation. In recent years those matters have been considered by the Australian Law Reform Commission and the Parliamentary Joint Committee on Corporations and Financial Services and have been the subject of much media commentary: see ALRC Report No 134, Integrity, Fairness and Efficiency - An Inquiry into Class Action Proceedings and Third-Party Litigation Funders, (December 2018); Parliamentary Joint Committee on Corporations and Financial Services, Litigation Funding and the Regulation of the Class Action Industry (21 December 2020); see also Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited (No 3) [2018] FCA 1842; 132 ACSR 258 at [20]; Endeavour River Pty Ltd v MG Responsible Entity Ltd (No 2) [2020] FCA 968 at [35]. 10 I found it difficult to see a proper basis for confidentiality orders over the entirety of the Costs Referee's report in circumstances where, upon approval, those costs were to be deducted from the settlement monies available for distribution to group members. Further, in approving a proposed settlement under s 33V of the FCA Act, the Court is exercising judicial power and is obliged to "take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice", and that such an order must be "necessary to prevent prejudice to the proper administration of justice": ss 37AE and 37AG of the FCA Act. 11 I could not understand how it could reasonably be said that a confidentiality order in relation to the entirety of the Costs Referee's report was necessary to prevent prejudice to the proper administration of justice, as s 37AG(1)(a) of the FCA Act requires. I had no difficulty in accepting that it was in the interests of the administration of justice for communications subject to legal professional privilege to remain privileged even after the approval of any settlement. I also accepted that the Court should be careful to ensure that any confidential documents and privileged information to which the Costs Referee had regard to in preparing her report did not become publicly available through the release of the report. But no confidential or privileged documents were annexed to the Costs Referee's report and the report did not set out or otherwise indicate the contents of any confidential or privileged documents, nor did it disclose the applicant's case theory and/or litigation strategy in any material way. 12 I informed counsel for the applicant that I would not make the proposed confidentiality orders, but I would make an interim confidentiality order under s 37AI of the FCA Act to preserve confidentiality in the meantime, and would consider an appropriately calibrated order which only sought confidentiality in respect of identified parts of the Costs Referee's report in relation to which it might reasonably be said that disclosure might reveal confidential or privileged information. I gave the applicant's lawyers time to consider the position, and to put on further material. Subsequently, I made orders allowing the redaction of a few select parts of the Costs Referee's report which arguably revealed confidential or privileged information. None of the redacted parts would have attracted legitimate public interest. 13 In relation to the CBA Deed Poll, the applicant argued that a confidentiality order should be made because the document was provided on the basis that it be kept confidential. But the agreement recorded in the Deed Poll was an important term of the proposed settlement and it should not be kept confidential. In any event, Colonial (appropriately) withdrew its claim of confidentiality over the CBA Deed Poll.

The provision of detailed reasons 14 The essential reasons for approving the settlement having been summarised above, some might think it unnecessary to provide comprehensive reasons for settlement approval. I take a different view. The Federal Court Class Actions Practice Note (GPN-CA) provides a detailed non-exhaustive checklist of the factors to be considered by judges in deciding whether a settlement is fair and reasonable in the interests of class members to be bound to it, and as between group members. It reflects an appreciation that in considering approval of a proposed settlement the Court takes on an onerous, protective, role which is akin to a court approving settlements on behalf of infants, and that reaching the requisite satisfaction can be difficult because, by the point of settlement approval, both sides have become "friends of the deal": Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [7]; Kelly v Willmott Forests Ltd (in liquidation) (No 4) [2016] FCA 323; 335 ALR 439 at [62]. 15 One can readily accept that giving careful scrutiny to a proposed class action settlement is not exciting work, but it is important. And the provision of detailed reasons for approving a settlement is essential to ensuring that group members can readily understand the basis upon which litigation in which they were involved, but did not control, was fairly resolved. More broadly, as was recently noted: …given their genesis and objects, and the public interest often associated with such large and high-profile cases, class action settlements are rightly subject to a degree of scrutiny not generally applied to more traditional forms of litigation. Parliaments, lawyers, academics, litigants, and the public at large are entitled to expect that they will have access to sufficient information about the resolution of class actions to enable them to evaluate whether the system is achieving its purposes. Jagot J, Murphy J and Moss A, Open Justice and Class Actions: Including a Judicial Perspective, The Australian Class Action - A 30-Year Perspective (Ed. Legg M and Metzger J, Federation Press, 2023).

THE MATERIALS 16 The applicant relied upon the following materials: (a) the affidavit of Nina Abbey, a senior associate with Maurice Blackburn, the solicitors for the applicant, dated 20 April 2022, which includes as an annexure the Deed of Settlement dated 1 April 2022 (the Principal Settlement Deed); (b) the non-confidential affidavits of Miranda Nagy, a partner of Maurice Blackburn, dated 31 May and 14 June 2022 (the First and Second Nagy Affidavits), which includes as annexures: (i) the proposed Settlement Distribution Scheme published by Maurice Blackburn on 6 May 2022 (the SDS); (ii) the Amending and Accession Deed dated 31 May 2022, to which Schedule 1 is the Amended and Re-Stated Deed of Settlement (the Revised Settlement Deed or the Deed); (iii) the Revised Settlement Distribution Scheme dated 31 May 2022 (the Revised SDS or the Scheme); and (iv) the affidavit of Mr Andrew Ross, an accountant and partner of KordaMentha, attaching his report in relation to the applicant's loss, dated 26 February 2021 (the Ross Affidavit). (c) the confidential affidavit of Miranda Nagy, dated 14 June 2022 (the First Confidential Nagy Affidavit), which amongst other things annexes: (i) the Confidential and Privileged Joint Opinion of Mr Jeremy Stoljar SC, Mr Adam Hochroth and Ms Shipra Chordia of counsel dated 14 June 2022 (the Confidential Counsels' Opinion); and (ii) the CBA Deed Poll. (d) the affidavit of Joseph Robert Desoisa, an actuary and partner of Ernst & Young, dated 10 June 2022 (the Desoisa Affidavit); (e) the affidavit of Lisa Cartwright, the Executive Director Remediation of the Colonial First State group, dated 10 June 2022 (the Cartwright Affidavit); (f) the affidavit of Matthew Neeves, Executive Manager, Colonial First State Tax, dated 10 June 2022 (the Neeves Affidavit); (g) the confidential affidavit of Ms Nagy dated 1 July 2022, regarding confidentiality orders (the Second Confidential Nagy Affidavit) and (h) the applicant's written submissions dated 14 June 2022. 17 In providing an overview of the proceeding, and in setting out the key provisions of the proposed settlement and of the SDS, I have directly drawn from these materials, sometimes extensively.

THE RELEVANT PRINCIPLES 18 The applicable principles in relation to settlement approval under s 33V of the FCA Act are now well-established. As I said recently in Webb v GetSwift Limited [2023] FCA 90 at [15]-[17]: [15] The Court's fundamental task is to determine whether the settlement is fair and reasonable and in the interests of the group members who will be bound by it, including as between the group members inter se: see for example, Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [7]-[8]; Kelly v Willmott Forests Ltd (in liquidation) (No 4) [2016] FCA 323; 335 ALR 439 at [68]-[77]; Camilleri v The Trust Company (Nominees) Ltd [2015] FCA 1468 at [5]; Blairgowrie Trading Ltd v Allco Finance Group Ltd (Receivers & Managers Appointed) (In Liq) (No 3) [2017] FCA 330, [81]; Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527 at [12]; McKenzie v Cash Converters International Ltd (No 3) [2019] FCA 10 at [23]-[24]; Smith v Commonwealth of Australia (No 2) [2020] FCA 837, [6]-[12]; and Prygodicz v Commonwealth of Australia (No 2) [2021] FCA 634 at [85]-[88]. [16] In undertaking that task, the Court: (a) assumes an onerous and protective role in relation to group members' interests, in some ways similar to Court approval of settlements on behalf of persons with a legal disability; (b) must be astute to recognise that the interests of the parties before it and those of the group as a whole (or as between some members of the group and other members) may not wholly coincide; (c) relatedly to the second point, should be alive to the possibility that a settlement may reflect conflicts of interest or conflicts of duty and interest between participants in the common enterprise which has conducted the representative proceeding; (d) should understand that at the point of settlement approval, the interests of the parties will ordinarily have merged in the settlement. It is likely that they both will have become "friends of the deal". As a result, both sides may not critique the settlement from the perspectives of any group members who may suffer a detriment or obtain lesser benefits through the settlement; and (e) must decide whether the proposed settlement is within the range of reasonable outcomes, rather than whether it is the best outcome which might have been won by better bargaining. [17] The Class Actions Practice Note (GPN-CA) at [15.5], sets outs the factors that are ordinarily required to be addressed in the material filed in support of an application for settlement approval. These factors, drawn from the remarks of Goldberg J in Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459 at [19], are to be approached as a guide, insofar as they are relevant to the circumstances of the case and not as a mandatory requirements: Caason at [13]; Davison v Commissioner of Police, NSW Police Force [2021] FCA 1324 at [47].

OVERVIEW OF THE PROCEEDING 19 The proceeding related to members' funds in a superannuation product named FirstChoice Employer Super (FCES), within the FirstChoice Fund. The funds answered the statutory definition of "Accrued Default Amounts" (ADAs), being amounts held on behalf of fund members who, like the applicant, had not made any choice about the investment options in which the superannuation was to be invested. By operation of legislation, Colonial was required to transfer ADAs to a low-cost superannuation product, known as a MySuper Product. 20 There was a statutory deadline to effect this transfer by 1 July 2017. The applicant's case was that, notwithstanding that deadline, Colonial was obliged to transfer ADAs into a MySuper Product as soon as reasonably practicable when that was in the best interests of members to do so. It was common ground that Colonial did not carry out the transfers until 12 November 2016 and 24 May 2017. The applicant claimed that was not as soon as reasonably practicable. 21 The applicant was a member of the FirstChoice Fund from 27 February 2008 to 21 January 2019 and between 27 February 2008 and 11 November 2016 she held an FCES ADA. Having not provided Colonial with an investment direction in relation to that FCES ADA, her ADA was transferred by Colonial to a MySuper Product in the FirstChoice Fund on 12 November 2016. 22 The proceeding alleged that, by not carrying out the transfers of the applicant's and group members ADAs until the above dates, Colonial contravened its statutory and general law duties to affected FCES members (FCES ADA Members). It also alleged that the second respondent, Ms Linda Elkins, who was a director of Colonial in the relevant period, failed to take steps to ensure that Colonial met its statutory and general law obligations, and thus contravened her own statutory obligations to FCES ADA Members, and was involved in Colonial's contraventions.

The class 23 The applicant brought the proceeding on her own behalf and on behalf of all persons meeting the definition in paragraph 2 of the Second Further Amended Statement of Claim (2FASOC). Broadly, the class was comprised of all FCES ADA Members, being persons who either received a payment from a deceased FCES ADA Member or were a spouse of an FCES ADA Member received a transfer of their spouse's FCES ADA interest as part of a family law settlement and who suffered loss by or as a result of the conduct of some or all of the respondents, as pleaded (group members). There were approximately 101,970 group members.

Colonial's statutory and general law obligations 24 The proceeding alleged that as trustee of the FirstChoice Fund, Colonial had a statutory obligation pursuant to s 55(1) of the SIS Act not to contravene the following covenants taken to be included in the governing rules of the FirstChoice Fund during the relevant period: (a) the Pre-2013 Best Interests Covenant - it was alleged that at all material times up to and including 30 June 2013, pursuant to s 52(2)(c) of the SIS Act (as then in force), the governing rules of the FirstChoice Fund included a covenant by Colonial that it would ensure that its duties and powers were performed and exercised in the best interests of the beneficiaries of the FirstChoice Fund; (b) the Best Interests Covenant - it was alleged that from July 2013 until 1 July 2021, pursuant to s 52(2)(c) of the SIS Act, the governing rules of the FirstChoice Fund included a covenant by Colonial to perform its duties and exercise its powers in the best interests of beneficiaries; (c) the Pre-2013 Care and Skill Covenant - it was alleged that at all material times up to and including 30 June 2013, pursuant to s 52(2)(b) of the SIS Act (as then in force), the governing rules of the FirstChoice Fund included a covenant by Colonial that it would exercise, in relation to matters affecting the FirstChoice Fund the same degree of care, skill and diligence as an ordinary prudent person would exercise in dealing with property of another for whom the person felt morally bound to provide; (d) the Care and Skill Covenant - it was alleged that from 1 July 2013, pursuant to s 52(2)(b) of the SIS Act, the governing rules of the FirstChoice Fund included a covenant by Colonial to exercise, in relation to matters affecting the FirstChoice Fund, the same degree of care, skill and diligence as a prudent superannuation trustee would exercise in relation to an entity of which it is trustee and on behalf of the beneficiaries of which it makes investments; and (e) the No Conflicts Covenant - it was alleged that at all material times since 1 July 2013, pursuant to s 52(2)(d) of the SIS Act, the governing rules of the FirstChoice Fund included a covenant by Colonial that, where there was a conflict between its duties to the beneficiaries, or the interests of the beneficiaries, and its duties to any other person or the interests of it, or an associate of it, it is to: (a) give priority to the duties to and interests of the beneficiaries over the duties to and interests of other persons; (b) ensure that the duties to the beneficiaries are met despite the conflict; (c) ensure that the interests of the beneficiaries are not adversely affected by the conflict; and (d) comply with the prudential standards in relation to conflicts. 25 The proceeding also alleged that during the relevant period, as trustee of the FirstChoice Fund, Colonial had the following obligations under general law: (a) a duty to carry out the terms of the trust (Duty to Perform the Trust Terms); (b) a duty to deal with the assets of the FirstChoice Fund in the best interests of the beneficiaries of the fund (Best Interests Duty); (c) (subject since 1 July 2013 to s 58B of the SIS Act) a duty to avoid, in performing its role as a trustee of the FirstChoice Fund, conflicts between its duties to beneficiaries and the interests of beneficiaries, on the one hand, and its personal interests or interests of associated third parties; and engagements with associated third parties which are inconsistent with its duties to beneficiaries and the interests of beneficiaries (General Law Conflicts Duty); (d) a duty to exercise care, diligence and skill of a prudent professional trustee in the management and investments of the assets of the relevant fund (Duty of Prudent Management); and (e) a duty to avoid obtaining unauthorised profits by reason of acting as a trustee of the FirstChoice Fund (General Law Profits Duty).

Ms Elkins' statutory obligations 26 The proceeding further alleged that at all material times since 1 July 2013, pursuant to s 52A of the SIS Act, the governing rules of the FirstChoice Fund contained a covenant by each director of Colonial, including Ms Elkins, for the periods that she was a director of Colonial that they: (a) exercise, in relation to all matters affecting the FirstChoice Fund the same degree of care, skill and diligence as a prudent superannuation entity director would exercise in relation to an entity where he or she is a director of the trustee of the entity and that trustee makes investments on behalf of the entity's beneficiaries (Director's Care and Skill Covenant); (b) perform the director's duties and exercise the director's powers as director of the corporate trustee in the best interests of the beneficiaries (Director's Best Interests Covenant); (c) where there is a conflict between the duties of the director to the beneficiaries, or the interests of the beneficiaries, and the duties of the director to any other person or the interests of the director, the corporate trustee or an associate of the director or corporate trustee: (i) give priority to the duties to and interests of the beneficiaries over the duties to and interests of other persons; (ii) ensure that the duties to the beneficiaries are met despite the conflict; (iii) ensure that the interests of the beneficiaries are not adversely affected by the conflict; and (iv) to comply with the prudential standards in relation to conflicts, (Director's No Conflicts Covenant). (d) exercise a reasonable degree of care and diligence for the purposes of ensuring that the corporate trustee carries out the covenants referred to in s 52 of the SIS Act (Director's Diligence Covenant).

Liability for involvement 27 Pursuant to s 55(3) of the SIS Act, a person who suffers loss or damage as a result of conduct of another person that was engaged in a contravention of the covenants may recover the amount of the loss or damage by action against any person "involved" in the contravention. The proceeding alleged that Ms Elkins was so "involved".

Claims arising from failure to conduct the Suitability Determination and the Promotion of Financial Interests Determination as soon as reasonably practicable 28 Under relevant prudential standards, Colonial was required to identify a suitable MySuper Product to which ADAs were to be transferred. It was alleged that in order to determine whether a MySuper Product was suitable for ADAs to be transferred to it, Colonial was required to make two determinations: (a) first, to decide: (i) whether the MySuper Product was one which Colonial was authorised to offer in the FirstChoice Fund, in some other RSE within its business operations or in an RSE outside its business operations; (ii) whether it was a product into which members were eligible to make contributions; and (iii) whether it was a product to which Colonial was legally able to attribute ADAs (the Suitability Determination); and (b) second, to form the view that attribution of ADAs to the MySuper Product promoted the financial interests of members or a class of members who held ADAs (the Promotion of Financial Interests Determination). 29 It was alleged that Colonial did not make the Suitability Determination or the Promotion of Financial Interest Determination until 10 June 2016. 30 The first substantive claim in the proceeding was that Colonial failed to make those determinations as soon as reasonably practicable in circumstances where it had available to it all the information necessary to undertake those determinations earlier than it did. The proceeding alleged that a prudent trustee in Colonial's position was required to comply with the covenants and general law obligations set out above and would have carried out the determinations as soon as reasonably practicable. On that basis, it was alleged that Colonial contravened the Pre-2013 Care and Skill Covenant, the Care and Skill Covenant, the Pre-2013 Best Interests Covenant, the Best Interests Covenant, the No Conflicts Covenant, and the general law obligations set out above. 31 The second substantive claim was that Ms Elkins failed to take steps to cause Colonial to make the relevant determinations as soon as reasonably practicable in circumstances where Colonial had available to it all the information necessary to undertake those determinations earlier than it did. The proceeding alleged that a prudent director in Ms Elkins' position who was required to comply with the Director's Care and Skill Covenant, the Director's Best Interests Covenant, the Director's No Conflicts Covenant, and the Director's Diligence Covenant, would have taken steps to ensure that Colonial carried out relevant determinations as soon as reasonably practicable. It was alleged that Ms Elkins, in contravention of those covenants, did not do so. 32 The third substantive claim was that, on the basis set out in the preceding paragraph, Ms Elkins was "involved" in Colonial's contraventions of the SIS Act for the purposes of s 55(3) of that Act.

Claims arising from alleged failure to carry out the transfer of the FCEA ADAs to a MySuper Product as soon as reasonably practicable 33 Next it was alleged that Colonial failed to carry out the transfer of FCES ADAs to a MySuper product as soon as reasonably practicable. The applicant said that there were at least two reasons for Colonial's delay in transferring those monies, both of which involved a conflict of interest: (a) first, Colonial knew from early on that it would lose revenue after the FCES ADAs were transferred, because members would pay less fees. It was said that Colonial embarked on a campaign to persuade FCES ADA members to give investment directions - namely, written instructions directing Colonial to retain FCES ADAs within default superannuation products rather than transferring them to a MySuper Product. The applicant said that Colonial sought to delay the transfer of FCES ADAs because the longer that campaign ran, the more investment directions Colonial could obtain and the lower its decline in revenue would be; and (b) second, once ADAs were transferred to a MySuper Product, conflicted remuneration (as statutorily defined) was no longer permitted to be paid to financial advisers in respect of those ADAs. It was said that Colonial sought to delay the transfer of ADAs for as long as possible to reduce the impact on adviser commission, including by maximising the number of investment directions received from FCES ADA members. 34 Colonial did not effect the transfer of FCES ADAs until November 2016 and May 2017. The proceeding alleged that it would have been reasonably practicable for Colonial to have carried out the FCES ADA transfers earlier, and in any event on a date no later than between 1 July 2015 and 31 December 2015. 35 The fourth substantive claim in the proceeding was that a prudent trustee in Colonial's position who was required to comply with the Pre-2013 Care and Skill Covenant, the Care and Skill Covenant, the Pre-2013 Best Interests Covenant, the Best Interests Covenant, the No Conflicts Covenant, and the general law obligations referred to above, would have transferred FCES ADAs as soon as reasonably practicable. The proceeding alleged that, in delaying the transfers to later than as soon as reasonably practicable, Colonial contravened those covenants and its general law obligations. 36 The fifth substantive claim was that Ms Elkins failed to take steps to cause Colonial to carry out the transfer of FCES ADAs as soon as reasonably practicable. It is alleged that a prudent director in Ms Elkins' position who was required to comply with the Director's Care and Skill Covenant, the Director's Best Interests Covenant, the Director's No Conflicts Covenant, and the Director's Diligence Covenant, would have taken steps to ensure that Colonial carried out the Suitability Determination and the Promotion of Financial Interests Determination as soon as reasonably practicable. The proceeding alleged that Ms Elkins, in contravention of those covenants, did not do so. 37 The sixth substantive claim was that, on the basis set out above, Ms Elkins was "involved" in Colonial's contraventions of the SIS Act for the purposes of s 55(3) of that Act.

THE PROPOSED SETTLEMENT 38 On 24 March 2022, the parties reached an in-principle settlement of the proceeding. The terms of that settlement were originally documented in the Principal Settlement Deed dated 1 April 2022. Then, on 27 May 2022, for reasons unrelated to the proceeding, Avanteos Investments Limited (AIL) replaced Colonial as the trustee of the FirstChoice Fund. As a consequence of the change of trustee, the parties agreed to a Revised Settlement Deed dated 31 May 2022. On 1 June 2022, AIL was joined as third respondent to the proceeding, and other consequential steps were taken to regularise the documentation relating to the settlement, as detailed in the Second Nagy affidavit.

The key terms of the Revised Settlement Deed 39 Pursuant to the Deed, upon Court approval of the settlement and the Approval Orders becoming "final" (as defined), Colonial was obliged to pay within 21 days: (a) the settlement amount of $56.3 million (the Settlement Sum) (less the amounts to be paid pursuant to (b) and (c) below) into an interest bearing controlled money bank account opened by Colonial's solicitors (Settlement Account); (b) the applicant's legal costs to the applicant's solicitors; and (c) $25,000 to the applicant's solicitors to be remitted to the applicant to reimburse her for her time and effort in providing instructions in the proceeding on behalf of group members.

The no detriment clause 40 The Deed provides that the Settlement Sum will not be met from the Operational Risk Financial Requirement (ORFR) reserves held by Colonial or AIL or otherwise met from the assets of the FirstChoice Fund, and will not be the subject of any claim for indemnity by Colonial or AIL. 41 ORFR reserves are financial reserves required to be held by registrable superannuation entities to address operational risk events that may affect business operations. Ordinarily, it is permissible for ORFR reserves to be replenished from assets held by the superannuation fund, but any such transaction for the purposes of paying the Settlement Sum may have a deleterious effect on the interests of current members of the FirstChoice Fund including group members. The purpose of the no detriment clause is to protect against such an outcome.

Releases 42 Under the Deed, upon Court approval becoming "final", the proceeding and the applicant's and group members' claims will be fully and finally settled with no admissions as to liability or wrongdoing. The applicant, on her own behalf, and on behalf of group members: (a) releases and discharges the respondents (and related parties, defined as all related bodies corporate and present and former directors, officers, partners, servants, contractors and agents of those entities jointly) jointly and severally from the applicant's and group members' claims; (b) covenants not to sue the respondents (and related parties, as defined) in respect of the applicant's and group members' claims (cl 7.1(c)); and (c) agrees that the Revised Settlement Deed may be pleaded by the respondents (and related parties, as defined) as a bar to any claim brought by the applicant or any group member in breach of the terms of the Deed.

Provision for the Settlement Distribution Scheme 43 The Deed requires that the SDS provide: (a) that an independent expert consultant will be appointed to oversee the distribution of the Settlement Sum; (b) equitable guiding principles and methodology for the calculation and effecting of payments from the Settlement Distribution Fund to Group Members; (c) that the Settlement Distributor will communicate with group members regarding payments from the Settlement Distribution Fund; (d) that the Settlement Distribution Fund will be fully distributed within 12 months of the expiry of the Appeal period other than in exceptional circumstances; (e) for reporting by the Settlement Distributor to the independent expert consultant, to Maurice Blackburn (to be appointed as the Settlement Administrator) and to the Court; and (f) Colonial and AIL shall have no recourse to the Settlement Sum or Colonial's or AIL's ORFR reserves or any assets of the FirstChoice Fund for the costs of distribution of the Settlement Sum, including the costs of the Expert Consultant.

Finalisation of proceedings and costs orders 44 Following the distribution of Settlement Distribution Fund in accordance with SDS, the proceeding is to be dismissed with no order as to costs and any extant costs orders made as at the date of the Revised Settlement Deed are to be vacated.

The CBA Deed Poll 45 The statement of agreed facts filed on 1 March 2022 states that at all material times the CBA was the ultimate holding company of Colonial. However, on or around 13 May 2020, KKR, a global investment firm, purchased a 55% interest in Colonial. On 1 December 2021, the sale was completed. 46 As part of the settlement, on 31 March 2022 CBA executed a deed poll in favour of the applicant and group members in which it undertook, amongst other things, to fund Colonial to pay any judgment debt or settlement sum (upon Court approval) should Colonial be unable to meet the full amount of any judgment debt or settlement sum from its immediately available assets or insurance.

The Krieger Undertaking 47 The Notice of Proposed Settlement sent to group members on 6 May 2022 informed them that if the proposed settlement was approved by the Court, it might impact their ability to recover loss and damage in another class action in which they may be group members, namely Marcel Eugene Krieger & Anor v Colonial First State Investments Limited (proceeding no. VID1141/2019) (Krieger Proceeding), to the extent that the same loss or damage is sought to be recovered in that proceeding. 48 Several things should be noted in relation to that. First, the applicants in the Krieger Proceeding (whom I assume are group members in the present case) did not file a notice of objection to the proposed settlement. Second, after the Notice of Proposed Settlement was sent to group members, the parties in the Krieger Proceeding agreed to a form of undertaking to be made by Colonial in that proceeding which clarified the impact of the settlement of this proceeding. Colonial provided an undertaking that it would not contend in the Krieger Proceeding: (a) that the definition of "Applicant's and Group Members' Claims" in the Revised Settlement Deed in this proceeding includes any of the claims made in the Krieger Proceeding in respect of the period 11 June 2013 to 30 June 2015; and (b) that the claims made in the Krieger Proceeding in respect of the period 11 June 2013 to 30 June 2015 are otherwise released by the Revised Settlement Deed in this proceeding or the Court's approval of that settlement.

The key terms of the proposed SDS 49 The proposed SDS has the following key terms. 50 First, Colonial and AIL are jointly appointed as Settlement Distributor under the SDS, and they take responsibility for the distribution of the Residual Settlement Sum (being the Settlement Sum less the Court-approved applicants legal costs). Ernst & Young (or following consultation, another independent expert consultant) is appointed as an Expert Consultant and will perform the calculations underlying the distribution of the Residual Settlement Sum. 51 Maurice Blackburn is appointed as Settlement Administrator and is authorised to enforce the SDS on behalf of group members, to receive reports from the Settlement Distributor in respect of the settlement distribution and consult with the Settlement Distributor in respect of group member communications. The work involved in actually effecting payments was to be done by the Settlement Distributor with the assistance of the Expert Consultant. 52 The implementation of the SDS was expressly subject to the ongoing supervision of the Court, and the Settlement Administrator or the Settlement Distributor may refer any issue arising in relation to the SDS or its administration to the Court. 53 Second, consistently with the Revised SDS, the SDS provided that the payment of the Settlement Sum must not be met from either Colonial's or AIL's ORFR Reserves or assets of the FirstChoice Fund. 54 Third, the calculation of amounts to be distributed to group members who are or were FCES ADA Members, and who are not deceased and are not subject to an order or settlement under the Family Law Act 1975 (Cth) (the Family Law Act) (Transferred Members) is to be carried out by way of an Apportionment Formula (Annexure A to the SDS) which was derived from the methodology adopted by the Applicant's loss expert, Mr Ross of KordaMentha, to calculate the Applicant's loss for the purposes of the initial trial. 55 Fourth, the Apportionment Formula is only to be applied without adjustment in respect of the interests of Transferred Members. There were, however, other group members whose interests derived from the interests of Transferred Members or who were otherwise affected by an order or settlement under the Family Law Act. For these group members, the SDS provided for the Apportionment Amount to be adjusted in three ways, which it is unnecessary to set out here. 56 Annexure A of the SDS provides that some group members are excluded from the distribution. These group members fell into two main categories: (a) first, group members whose notionally apportioned loss (Individual Average Notional Apportionment) was greater than $0 but less than $20. These group members would not receive a distribution because the cost of administering that distribution was likely to be greater than their individual recovery; and (b) second, group members whose Individual Average Notional Apportionment was less than or equal to $0. These Group Members were, self-evidently, not entitled to a distribution. Any Individual Average Notional Apportionment greater than $0 but less than $20 would be redistributed to group members whose Individual Average Notional Apportionment was greater than or equal to $20, with the result that there would be no net loss from the Residual Settlement Sum to be distributed to the group member cohort as a whole. 57 Sixth, any interest earned on the Residual Settlement Sum after it had been paid into the FirstChoice Fund would be distributed to group members on a pro rata basis. 58 Seventh, as group members were in different circumstances, the methods of payment would vary in response to those circumstances. In certain circumstances, where a group member's account was closed over 12-months before the date of payment, the payment under the would be made by way of a trustee voluntary payment (TVP) to the Australian Taxation Office (ATO), under the Superannuation (Unclaimed Money and Lost Members) Act 1999 (Cth). 59 Eighth, the Settlement Distributor is obliged to report to the Settlement Administrator and the Expert Consultant throughout the settlement distribution process. At three-monthly intervals after the commencement of distribution of the Settlement Sum, the Settlement Distributor is required to report on, amongst other things, the total quantum of the payment amounts distributed to group members in the preceding three months and the dates on which those payments were made. The Settlement Distributor is also required to report on the method in which payment amounts were distributed to group members (for example, whether payments were made in cash, into active accounts in the FirstChoice Fund, by way of transfer to another superannuation account or by TVP). 60 After the distribution of the Settlement Sum, the Settlement Distributor must report to the Court on, amongst other things, the total quantum of payment amounts distributed to group members, the amounts representing the highest, lowest, mean and median payments to group members, the dates on which payments were made, and an explanation of the nature of any written communications made to group members. 61 Ninth, the SDS provides for communications to be made to group members throughout the settlement distribution process, including in relation to group members with an account in the FirstChoice Fund by identifying on that group member's periodic statement the amount distributed and that it relates to the class action settlement. Where a group member does not have an account in the FirstChoice Fund, communications are to be made by ordinary mail or by email. Group members are to be given the opportunity to update their details with Colonial and AIL.

The Counsel's Confidential Opinion 62 The Court had the considerable benefit of the Confidential Joint Opinion of Mr Jeremy Stoljar SC, Mr Adam Hochroth and Ms Shipra Chordia of counsel dated 14 June 2022 (the Confidential Opinion). That opinion was provided by Counsel not as advocates for the applicant but in their capacity as officers of the Court, with an obligation to candidly expose all relevant matters in relation to the reasonableness of the proposed settlement. 63 The Confidential Opinion addressed whether the settlement is fair and reasonable in the interests of group members and as between group members by reference to a number of considerations which broadly reflect those in the Practice Note, including: (a) the complexity and likely duration of the litigation; (b) the stage reached in the proceeding when the proposed settlement was agreed; (c) the risks of establishing liability; (d) the risks of establishing loss and damage in the amounts claimed; (e) the range of reasonableness of the proposed settlement in light of the best recovery; (f) the range of reasonableness of the proposed settlement in light of all the risks of the litigation; and (g) the reaction of the class to the proposed settlement. 64 Because the Confidential Opinion is confidential and privileged I cannot go to its detail. It suffices to note that the opinion is thorough and considered, and that counsel consider the proposed settlement to be fair and reasonable having regard to the interests of group members and as between group members. In deciding to approve the settlement I gave substantial weight to the Confidential Opinion.

The scope of the releases 65 Having regard to the definition of "Applicant's and Group Member's Claims" in the definitions clause of the Revised Settlement Deed, the releases and covenants not to sue provided by the applicant on behalf of the group members are appropriately confined to the claims made in the proceeding and common claims arising out of, or in connection with, the subject matter of the proceeding, being within the scope of the of the common issues that are the subject of the proceeding for which the applicant has representative authority under the FCA Act: see Webster (Trustee) v Murray Goulburn Co-Operative Co. Limited (No 4) [2020] FCA 1053 at [19]. The releases go no further than to release the common claims of the applicant and group members which are, or could have been, advanced in the proceeding: Prygodicz v Commonwealth of Australia (No 2) [2021] FCA 634 at [129]. In my view the releases and covenants not to sue do not stand in the way of settlement approval.

The stage of the proceedings at which settlement was reached 66 The in-principle settlement was reached on 24 March 2022 following a mediation, when the proceeding was set down for a four-week trial to commence the following week. The settlement was reached after the applicant's lawyers had completed their analysis of Colonial's voluminous discovery, after the parties had served their lay and expert evidence, and after the parties had served their respective outlines of opening submissions. That is, it was reached when the applicant's lawyers were in a good position to make an informed assessment of the evidence to be adduced at trial, and the strengths and weaknesses of the applicant's case. This consideration points in favour of settlement approval.

The complexity and likely duration of the litigation 67 The Confidential Opinion and the Confidential Nagy Affidavit show that the case was factually and legally complex. The claims in the proceeding raised legal issues which have not previously been dealt with in a superannuation context, and the factual matrix was dense and involved extensive lay and expert evidence. In my view it would have been difficult for the applicant to be confident of the outcome. Further, in a large, complex and strenuously defended case like this there was always the prospect of an appeal which would mean that resolution of the proceeding could take years. That weighed in favour of settlement approval.

The risks of establishing liability 68 In my view, the applicant had good prospects of establishing that Colonial owed FCES ADA Members the statutory and general law obligations that were alleged. But the question as to whether in all the circumstances pertaining to the relevant period it was, in fact, reasonably practicable for Colonial to make the ADA transfers earlier than it did was complex and strenuously contested. 69 The applicant had the onus of establishing that Colonial did not make the ADA transfers as soon as reasonably practicable. In contending that the Court should not be persuaded as to that, Colonial had the easier path. The applicant's case on the question was heavily reliant on independent expert evidence, technical in nature, from Mr Stephen Huppert, an actuary and independent consultant and advisor in the superannuation sector, and Mr Hayden King, an experienced executive in the superannuation and financial services industry. Colonial proposed to contend that Mr Huppert's reports and Mr King's reports were inadmissible in their entirety. Without expressing any view as to the merits of that contention, there must have been a risk that Colonial might succeed in its argument. 70 Unlike the applicant, Colonial was not forced to rely upon the evidence of experts who opined as to what they would have done. It was able to rely upon the evidence of experienced executives who worked on the very ADA transfer project that was the subject of the proceeding, Ms Elkins and Ms Daniella McClellan, the Executive Manager of Program Delivery at Colonial. The gist of their evidence was that, in all the circumstances, it was not unreasonable for Colonial to have transferred the FCES ADAs when it did, due to the demands on its resources made by other regulatory requirements during the relevant period. 71 Resolution of this factual issue was likely to depend upon how the lay and expert witnesses fared in cross-examination, and that could not be known. The applicant faced a risk that her case would not succeed on this issue, and if it did not, the applicant's case would fail on liability. That weighed in favour of settlement approval.

The risks of establishing loss or damage 72 If the applicant was able to establish that Colonial did not make the ADA transfers as soon as reasonably practicable, the applicant and group members were likely to have suffered causally related loss and damage. Essentially, that was because the fees and charges rendered against their accounts in the FirstChoice Fund were likely to have been higher than they would have been in a MySuper Product. But there were risks that the applicant would be unable to establish loss or damage in line with the amount sought or the amount achieved in the proposed settlement. 73 Mr Ross, the loss expert in relation to the applicant's personal claim, filed a report that showed considerable variability in the applicant's loss depending upon the date selected as the counterfactual date for the ADA transfers. That is, the loss did not increase in a linear way as time passed; rather, it fluctuated in line with market movements over the range of counterfactual dates. If the applicant succeeded in establishing that the ADA transfers were not made as soon as reasonably practicable, she also had to establish the date by which the transfers should reasonably have been made. It was not necessarily the case that, the earlier the date that the Court found it was reasonably practicable to make the ADA transfers, the greater the aggregate loss. 74 This issue of the aggregate claim value was given careful attention in the Confidential Nagy Affidavit and in the Confidential Opinion. In my view, there was a risk that the applicant would be unable to establish aggregate loss in the amount sought or the amount achieved in the proposed settlement. This too weighed in favour of settlement approval.

The range of reasonableness of the proposed settlement in light of the best recovery 75 In my view, in the circumstances of the present case, there was little utility in assessing the proposed settlement against best recovery. Doing so would involve assuming the applicant's complete success on novel legal questions, assuming success on the factual question as to whether it was reasonably practicable for Colonial to make the ADA transfers earlier than it did, and assuming that the ADA transfers ought reasonably to have been made on the earliest date posited by the applicant. Apart from that being completely unrealistic, it seemed that aggregate loss was not linear over time which meant that assuming the earliest posited date for the ADA transfers was not necessarily the same as the date applicable for the "best recovery". 76 I considered it more useful to assess the reasonableness of the proposed settlement by reference to what the applicant and group members might reasonably have expected to achieve having regard to all the risks of the litigation.

The range of reasonableness of the proposed settlement in light of all the risks of the litigation 77 This question was given careful attention in the Confidential Nagy Affidavit and in the Confidential Opinion. Having regard to their consideration, and reflecting on the evidence filed in the proceeding, I was satisfied that the proposed settlement fell comfortably within the range of reasonable outcomes having regard to all the risks of the litigation. 78 As I said in Kelly at [74]: It is established that the Court should not second-guess the applicant's lawyers as to whether the settlement ought to have been accepted, or to proceed as if it knows more about the actual risks of the litigation than those lawyers. The Court takes the applicant's lawyers as it finds them, recognising that different applicants and different lawyers will have different appetites for risk. The question is whether the proposed settlement is within the range of reasonable outcomes, not whether it is the best outcome which the Court considers might have been won by better bargaining. That is not, however, to suggest that better bargaining might have achieved a better result in the present case; far from it. Rather, it is to note that the applicant was represented by an experienced and competent legal team, in a large, complex and strenuously contested piece of litigation with real risks on liability and quantum. On the eve of trial the applicant's lawyers reached the considered conclusion that the proposed settlement was fair and reasonable. I would not lightly second-guess that conclusion.

The reaction of the class to the proposed settlement 79 A total of 18 notices of objections were received by the deadline, and one further objection was received out of time which I treated as having been lodged within time. Of those objections, 13 contained no substantive comments regarding the proposed settlement and they appear to have been made in error. Those group members appear to have misunderstood the purpose of the notice of objection and lodged a completed notice in the belief that lodgement was required in order to participate in the settlement. 80 Turning then to the other eight notices, the following group members made substantive objections. 81 Ms Jennifer Belke, Mr Lee Thomas and Ms Guiliana Tullio opposed settlement approval on the basis that the quantum of the proposed settlement was inadequate. Ms Tullio further said that she could not decide whether the proposed settlement was fair or reasonable unless and until she was told how much loss the group members had collectively suffered. She also relied on the civil penalty imposed by the Court in Australian Securities and Investments Commission v Colonial First State Investments Ltd [2021] FCA 1268 (ASIC proceeding) to assert that, because Colonial was penalised in that case, the claims in this case had validity. 82 Those objections do not justify refusing to approve the proposed settlement. Having considered the confidential materials I was, unlike Ms Tullio, in a position to understand group members' aggregate loss at different points in time, and (as discussed above) I was satisfied that the proposed settlement is fair and reasonable having regard to the attendant risks of the litigation. Ms Tullio's reliance on the decision in the ASIC proceeding was misconceived. The penalty imposed by the Court in that proceeding related to different allegations of misconduct and it did not bear upon the reasonableness of the proposed settlement in this proceeding. 83 Mr Stephen Monks and Mr Michael De Vincentiis opposed settlement approval on the basis that the fees charged by Colonial were too high. This objection had no merit. It may or may not be the case that Colonial's fees for managing group members' superannuation monies were excessive, but that did not bear upon whether the proposed settlement is fair and reasonable. To the extent that Colonial's fees exceeded those that would have applied in a MySuper product that was taken into account in the applicant's loss estimates. 84 Mr Michael Valaris opposed settlement approval on the basis that his loss of potential earnings was greater than the settlement distribution he would receive. This objection did not justify refusing to approve the proposed settlement. On the assumption that Mr Valaris' losses exceed the amount that he will receive under the SDS, the proposed settlement remains fair and reasonable because it appropriately reflects the risks associated with the litigation. 85 For completeness, I note that Ms Tullio also said that she wished to opt out of the proceeding, and instead intended to pursue an individual action. There was no objection to Ms Tullio being permitted to opt out after the deadline for doing so, and I made an order to allow that.

The proposed SDS 86 I set out the salient terms of the SDS at [49]-[61] above. Usually an SDS will be fair and reasonable if group members receive a fair share of the settlement proceeds, there is a fair division of those proceeds as between group members, and the settlement administration process does not involve unreasonable costs or delay: Caason at [91]; Endeavour River Pty Ltd v MG Responsible Entity Ltd [2019] FCA 1719 at [11]. 87 I was satisfied that the terms of the SDS in the present case were fair and reasonable in the interests of group members, and as between group members, including because: (a) Colonial and AIL are appointed as the Settlement Distributor and they took joint responsibility for the distribution. As explained in the Cartwright Affidavit, Colonial and AIL have significant experience in undertaking large scale remediation projects with similar features to the distribution proposed here; (b) unlike the administration work in most class action settlements, here the settlement distribution was to be undertaken without recourse to the settlement funds or Colonial's or AIL's ORFR Reserves or assets of the FirstChoice Fund. The administration would be at no cost to the applicant and group members, which maximised their recovery under the settlement and also meant that current members of the FirstChoice Fund (some of whom may be group members) do not carry the cost; (c) Maurice Blackburn was appointed as the Settlement Administrator. The firm would not undertake the settlement administration work, but as Settlement Administrator it was authorised to enforce the SDS on behalf of group members, receive reports from the Settlement Distributors in respect of the settlement distribution, and consult with the Settlement Distributors in respect of group member communications. Thus, the firm was in a position to carry out an important oversight role and to enforce the rights of group members under the SDS, if necessary; (d) Mr Robert Desoisa of Ernst & Young, was appointed as the Independent Expert Consultant. Ernst & Young is a large well-known accounting firm with an established reputation and its appointment would enhance the accuracy and impartiality of the distribution calculations. That also reduced the need for a further review process with obvious cost and efficiency benefits. The costs of Ernst & Young were to be borne by the Settlement Distributor and not to come from the Settlement Sum; (e) the methodology for calculating group members' distributions under the SDS was objective, applied consistently to all group members' claims and reasonably adopted the loss methodology adopted by the applicant's loss expert, Mr Ross, consistent with the case that was to be advanced at trial. Doing so would promote fairness in the distribution of the settlement monies because the distribution would be based on the actual claim expressed by the applicant and the evidence on which the applicant intended to rely in support of those claims; (f) the methodology to be adopted under the Apportionment Formula calculated loss as the difference between the counterfactual ADA balance (being what the value of the group member's ADA balance would have been if it had been transferred to the relevant MySuper Account earlier) and the actual ADA balance (being the value of the group member's ADA balance on the actual date of transfer). Thus, notwithstanding the large number of group members, the SDS established a method by which each group member's rateable entitlement to a share of the settlement proceeds was to be calculated by reference to the individual circumstances of that group member having regard to the size of the ADA associated with that person's claim, the actual fees and costs (including insurance premiums) charged in respect of that ADA net of rebates and adjustments, and the actual returns received in the investment options that the ADA was invested in before and after the transfer; (g) the SDS otherwise only distinguished between group members by excluding those whose average notional loss is less than $20. In my view, that was reasonable because otherwise the cost of distributing such nominal payments would likely be excessive relative to the value of the payments. It should also be noted that the threshold is set at the stage of calculating the notional loss of each group member. Thus, such group members, whether or not to be excluded, would recover only a pro rata portion of $20; and (h) the SDS provides for differing methods of payment to group members depending on their circumstances. All but one of the methods do not require explanation. That method is the TVP process which is applied where a fund member provided instructions to roll over their superannuation account with the FirstChoice Fund to another fund or to payout the balance of their FirstChoice Fund account, more than 12 months prior to remediation payments under the Scheme being made. Under the TVP process, which is described in Ms Cartwright's affidavit, the ATO makes use of inter-fund data that is uniquely in the possession of the ATO and it leads a matching and consolidation process aimed at ensuring that the remediation payments under the SDS find their way to the correct person. The TVP process has the advantage of not requiring communication from group members many of whom are very passive in relation to their superannuation. I was persuaded on the evidence that use of the TVP process is not merely an appropriate method of distributing the proceeds of the settlement to former superannuation fund members. It is likely to be the most effective method of ensuring that persons who left the FirstChoice Fund more than 12 months before payments under the SDS are made, will receive their money in a timely fashion compared to any other available method. 88 The Neeves and Cartwright Affidavits addressed the issue of tax under the Scheme, and state that the remediation payments to group members under the SDS would be taxed in a manner commensurate with its legal character as a capital gain on the realisation of an asset (namely the chose in action that will have merged in the settlement). Group members will either be taxed at the discounted Capital Gains Tax rate of 10% applicable to superannuation for the disposal of an asset held for more than 12 months, or at 0% for group members in the retirement phase. In the event that any refund of tax paid to the ATO is made, it will be distributed to group members.

The reasonableness of the applicant's legal costs 89 The case was conducted by Maurice Blackburn on a no win-no fee basis, which meant that it had an entitlement to an uplift fee upon success. The Court has a supervisory role in relation to costs to be paid by group members and is required to properly scrutinise legal costs as part of the settlement approval process: Kelly at [11], [333] and [346]; Earglow at [91]. I made orders to appoint the Costs Referee; to inquire into and provide a report to the Court in relation to the reasonableness of Maurice Blackburn's fees and disbursements for the proceeding, and in relation to the reasonableness of any sum proposed to be charged by Maurice Blackburn for settlement administration costs. 90 Ms Rosati is a reputable independent costs expert who has regularly drawn party/party and solicitor/client bills of costs in large commercial matters in the Supreme Court of New South Wales and in the Federal Court over the past 24 years, regularly conducts costs assessment/taxation processes for solicitor clients, corporate clients and government agencies including the Australian Consumer and Competition Commission, the ATO and the Department of Home Affairs, regularly advises parties involved in large commercial matters regarding costs, and provides expert opinions in relation to costs in Supreme Court of New South Wales and Federal Court proceedings. 91 The Costs Referee provided a report dated 30 May 2022 within which she dealt with the salient issues concerning the reasonableness of the fees and disbursements charged by Maurice Blackburn. The report concluded that: (a) appropriate cost disclosures were made to the applicant; that the retainer was compliant with the Legal Profession Uniform Law (NSW) (ULPL) and the rates charged by the solicitors were within the range of rates routinely charged by solicitors in matters such as this, within the range of rates disclosed in the retainer and increased only as permitted by the retainer; (b) while some of the rates charged by counsel, particularly senior counsel, were at or above the upper end of the usual range, their hourly rates were fair and reasonable in the circumstances of the proceeding, were disclosed to the applicant, and were within the range of rates routinely charged by counsel for working on complex commercial litigation and representative proceedings; (c) the work undertaken in discovery (the largest component of all the work) generally appeared to be reasonable in light of the size and scope of discovery and the circumstances of the matter; (d) the time and costs incurred in relation to preparation of the lay and expert evidence (the second largest component of all the work) appeared generally to be fair, reasonable and proportionate; (e) the total expert's fees were "quite significant", but none of the rates charged seemed unreasonable or excessive; (f) the expert's fees were likely to be considered to be fair and reasonable on the basis that the engagement of each of the experts was required in order for the applicant to prove her case; and (g) that the general disbursements incurred were fair and reasonable. 92 The Costs Referee recommended that the following amounts be approved as fair and reasonable costs and disbursements on a solicitor and client basis: (a) Maurice Blackburn's professional fees in the amount of $8,740,528.43; (b) an uplift fee of 25% on the professional fees for conducting the case on a conditional fee basis as permitted by the ULPL, being $2,185,132.11; (c) total counsels' fees of $750,870.49; (d) total experts' fees of $1,661,462.31; (e) general disbursements of $269,234.25; (f) interest on professional fees and disbursements owing from time to time of $211,748.35; (g) Maurice Blackburn's costs and disbursements for the period from 1 May 2022 to the Approval Hearing of $506,385; and (h) Maurice Blackburn's costs and disbursements for the Settlement Administration of $78,188. After allowing for the cost of her report, the Costs Referee concluded that the applicant's fair and reasonable costs on a solicitor and client basis totalled $14,441,718.76. 93 Having regard to the complexity and size of the case, and the careful attention the Costs Referee gave to the reasonableness of the legal costs proposed to be charged, I was satisfied that it was appropriate to adopt the report and approve Maurice Blackburn's fees and disbursements, on a solicitor client basis in the sum of $14,441,718.76. 94 I note that because the firm carried the substantial costs and disbursements of the case for approaching three years, rather than being paid by a litigation funder, group members will recover substantially more of the Settlement Sum. On the assumption that a commercial litigation funder would have sought about 20-25% of the gross settlement sum, and taking account of Maurice Blackburn's entitlement to an uplift fee for taking the case on a no win-no fee basis, group members are better off by approximately $10 million to $12 million than they would otherwise have been.

The applicant's reimbursement payment 95 The applicant sought an order that a reimbursement payment of $25,000 be paid to her from the Settlement Sum, for her time, inconvenience and expense in prosecuting the claim on behalf of group members. 96 It is established that the representative applicant in a class action who has sacrificed time or incurred expenses in prosecuting the proceeding on behalf of group members may be entitled to some reimbursement from the corpus of any settlement or judgment. That compensation is for the time and expense attributable to the representative features of that person's involvement as a party in the litigation, not to compensate that person for the time and expense which are an ordinary incident of the person's involvement in their own interests: Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Ltd [2018] FCA 1030; 358 ALR 382 at [212]; Farey v National Australia Bank Ltd [2016] FCA 340 at [42]. 97 The Second Nagy Affidavit shows that the applicant participated in approximately 20 conferences with her legal team, including travelling 60 km each way by car between her home and Maurice Blackburn's Traralgon office on numerous occasions, and that she also spent significant time reviewing, considering and providing instructions in relation to the preparation of her affidavit affirmed on 15 December 2020, providing instructions and receiving updates on the case including in relation to the mediation and settlement of the proceeding, and reviewing correspondence and other documents sent by Maurice Blackburn. 98 A reimbursement payment of $25,000 is consistent with empirical research published by Professor Vince Morabito that identified the median and average reimbursement payments made to representative applicants in Federal Court class actions to be $19,105 and $30,408 respectively: see Prof. V Morabito, An Evidence-based Approach to Class Action Reform in Australia - Common Fund Orders, Funding Fees and Reimbursement Payments, January 2019. In Kuterba v Sirtex Medical Limited (No 3) [2019] FCA 1374 at [23], Beach J described the median amount as the "more useful statistic to show the central tendency" in the quantum of reimbursement payments. 99 A payment in that quantum also sits comfortably with recent reimbursement payments approved as reasonable by the Court: see for example, Court v Spotless Group Holdings Limited [2020] FCA 1730 ($25,000 approved); Inabu Pty Ltd as trustee for the Alidas Superannuation Fund v CIMIC Group Limited [2020] FCA 510 ($25,000 approved); Zantran Pty Limited v Crown Resorts Limited (No 4) [2022] FCA 500 ($25,000 approved); Lenthall v Westpac Banking Corporation (No 3) [2021] FCA 1004 ($20,000 approved for the first applicant, and a further $22,500 shared between the remaining three applicants); Whittenbury v Vocation Limited (in liquidation) [2021] FCA 829 ($20,000 approved); Wetdal Pty Ltd as Trustee for the BlueCo Two Superannuation Fund v Estia Health Limited [2021] FCA 475 ($18,024 approved to two applicants). 100 I considered a reimbursement payment of $25,000 to be fair and reasonable.

CONCLUSION 101 For those reasons I made the attached orders. I certify that the preceding one hundred and one (101) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Murphy.