The mechanics of the settlement
20 The second issue is the fairness, reasonableness and adequacy of what may be described as the mechanics of the settlement process. The Scheme contains a convenient summary of the steps involved which, omitting clause references, is as follows:
(i) Maurice Blackburn will be appointed as Administrator of this Scheme;
(ii) Participating Group Members will submit to Maurice Blackburn Proofs containing the Objective Data pursuant to Orders of the Court;
(iii) Maurice Blackburn will construct a database collating the information submitted by Participating Group Members in their Proofs and upon which their claims to a distribution out of the Aristocrat Settlement Distribution Fund will be calculated;
(iv) Maurice Blackburn will notify each Participating Group Member of the information which pertains to them in a Notice of Claim Data and give them an opportunity to notify any objections to it;
(v) following the resolution of any objections to the Notice of Claim Data Maurice Blackburn will finalise the database and use it to calculate the entitlement of each Participating Group Member to a distribution out of the Aristocrat Settlement Distribution Fund;
(vi) Maurice Blackburn will notify each Participating Group Member of the calculation in an Assessment Notice and give them an opportunity to notify any objections to it;
(vii) each Participating Group Member will have an opportunity to object to its Notice of Claim Data or Assessment Notice;
(viii) following resolution of any objections Maurice Blackburn will notify Aristocrat whether any part of the [non-funded group members] Fund is repayable to Aristocrat;
(ix) interest on the Aristocrat Settlement Distribution Fund shall be applied to the extent necessary to payment of Administration Costs;
(x) IMF will notify Maurice Blackburn of the amount of the payment which each Participating [funded group member] is required to make to it pursuant to the funding agreement between IMF and that Participating Group Member;
(xi) Maurice Blackburn will deduct from the Aristocrat Settlement Distribution Fund any Administration Costs outstanding and then from the balance shall:
(a) distribute the [funded groups members] Fund between Participating [funded group members], after paying to IMF the amounts payable out of each Participating [funded group member's] allocation; and
(b) distribute the [non-funded group members] Fund between Participating [non-funded group members] (with any repayment to Aristocrat that might be required).
I am satisfied that this is an accurate summary of the main features of the Scheme which, as I have mentioned, is concerned with the distribution of the settlement monies.
21 I do not need to review in detail each aspect of the Scheme. I will, however, comment on several key aspects of the Scheme and explain why I am satisfied that they are fair, reasonable and adequate.
22 Clause 3 of the Scheme provides that in acting as administrator Maurice Blackburn has an obligation to do so on behalf of group members as a whole, and may not act as lawyer for individual group members in relation to their particular claims. Maurice Blackburn has also undertaken not to seek to recover either from the settlement sum or from individual group members any costs they incur in acting for individual group members or in discharging their function as administrator (those costs are discussed in more detail at [30] et seq below). There is an exception to this in clause 7, which obliges a group member seeking review of Maurice Blackburn's assessment of the value of their claim to pay for the costs of that review assessment, and, if required by Independent Counsel, provide security for costs of the review assessment. Independent Counsel is defined in the Scheme as being "an independent member of the Victorian Bar empowered under this [Scheme] to finally determine any objection to an Assessment Notice or Notice of Claim Data".
23 It is apparent, however, that there is little scope for much serious dispute as to the value of individual claims. This is so because the Scheme primarily provides for the application for specific formulae to objective data. The only real scope for discretion on Maurice Blackburn's part is to be found in clause 4, which relates to submission and assessment of claims. As was explained by Mr Armstrong,
[Clause 4.4] permits Maurice Blackburn as the administrator either to accept a proof [of claim] notwithstanding that some information might not be included or if there is information not included which the administrator considers is necessary then the firm is entitled to require a group member to provide that additional information and if they don't, they get assessed as having a nil value claim.
24 It is important to note, however, that this provision is for practical purposes now largely historical, as all proofs of claim to be considered have been received by Maurice Blackburn (and in relation to the funded group members, already assessed). Only the claims of the non-funded group members, including those late non-funded group members who were included in the proposed settlement as a result of my judgment of 26 August 2008, remain to be assessed. The Scheme additionally provides for Maurice Blackburn to send those group members who have not yet been assessed, a Notice of Claim Data inviting that group member to correct errors made on the basis of their proof. Once any issues have been resolved the value of the claim is assessed by applying the Loss Assessment Formula to the objective data. This task involves, in the words of Mr Armstrong, "the application of relatively simple equations to data that has been objectively verified. The number that is produced is the number that is produced". There is, as I commented at the hearing, scope for error but not for discretion. The group member is then sent a Notice of Assessment. Any dispute over a group members' assessment is to be reviewed by Independent Counsel, whose decision is binding except in relation to questions of law. As well as being a primary basis for my satisfaction as to the fairness, reasonableness and adequacy of the Scheme in general, the lack of discretion afforded to the administrator under the Scheme is an additional factor in favour of approving Maurice Blackburn to act as administrator.
25 The entitlement to seek a review assessment is extended to Aristocrat in clause 7.9. This raises an issue in respect of the $27 million made available for distribution to the non-funded group members. As mentioned above, any balance that remains following distribution is to be refunded to Aristocrat, which means that Aristocrat itself has an interest in challenging the assessments of non-funded group members' claims. If Aristocrat requests a review assessment, it is treated as a participating group member for this purpose, and accordingly bears the costs of the review assessment calculated on a solicitor/client basis (in addition to any other amounts Aristocrat is required to pay under the Deed).
26 Clause 10 of the Scheme deals with the litigation funder, IMF, which is a party to the Deed. Counsel for the applicant explained clause 10 in the following way:
The funder has funding agreements with the funded group members which give it entitlements to, relevantly for these purposes, a share of the funded group members' individual recovery amounts. Clause 10 is designed to set up and regulate a process for letting the funder know as soon as possible how much its clients, as it were, are going to receive, and then for IMF to let the administrator know, 'This is what we are entitled to under our funding agreements with each of those individuals'.
Clause 10.3 requires specific mention… because it is intended to require Maurice Blackburn to act on the information that they are given by IMF in relation to IMF's entitlements. The purpose for that is, if there is a dispute between the funder and a particular funded group member, they can sort it out separately. It should not hold up this process.
27 Clause 11 deals with the distribution of the settlement sum once the value of all claims, including preliminary payments to funded group members, has finally been assessed. It is unnecessary for me to comment on the details of this clause. I note, however, that clause 11.9 provides that the completion of the distribution of the settlement sum shall satisfy any and all rights, claims or entitlements of all participating group members and all other group members in or arising out of the proceeding. Those group members not participating in the settlement are nevertheless bound by the outcome of the proceeding, a point plainly made on several occasions in communications between Maurice Blackburn and non-funded group members. That all group members are bound is, as Mr Armstrong observed, "not only appropriate but necessary for the resolution of these kinds of proceedings and in the interests of justice, having regard, frankly, to Aristocrat's entitlement, to the finality of the claims against it so far as Part IVA permits finality to be given".
28 The final clause I wish to note, apart from provisions relating to costs and administration costs, is clause 12, which provides that Maurice Blackburn may refer any issues arising in relation to the Scheme to the Court.
29 I am satisfied in the circumstances that the Scheme provides for the fair, reasonable and adequate distribution of the settlement sum.