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[2019] FCA 712
Federal Court of Australia
2019-05-21
Moshinsky J
Original judgment source is linked above.
Introduction 1 This proceeding is a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth). In early May 2019, the applicants and the respondent (Vocus) jointly proposed a series of interlocutory orders designed to facilitate an early mediation. The parties subsequently provided a joint submission in support of the proposed orders. As I had a number of questions relating to the proposed orders, I listed the matter for a case management hearing. This took place on 15 May 2019. Subsequently, the parties prepared a revised form of the proposed orders (the Revised Proposed Orders), reflecting the matters discussed at the case management hearing. 2 It is proposed that the matter be referred to a mediation, to take place by a specified date, and that discovery orders be made to facilitate the mediation. Further, it is proposed that Group Members will have the option, exercisable before a nominated deadline, to opt out of the proceeding or to register its claim. If a Group Member does not do either of these things (that is, adopting the language used in the annexures to the Revised Proposed Orders, the Group Member "does nothing"), certain consequences are proposed to follow (described below). Thus, there are, in effect, three alternative scenarios: the Group Member opts out of the proceeding; the Group Member registers its claim; or the Group Member does nothing. 3 The proposed consequences in relation to each of the three scenarios may be summarised as follows: (a) The Group Member opts out of the proceeding. In this case, the person ceases to be a Group Member in the proceeding. This means that they will not be bound by any judgment in, or settlement of, the proceeding, and will be excluded from receiving any monetary compensation that results from the proceeding (whether by way of judgment or settlement). (b) The Group Member registers its claim. In this case, if the parties agree to settle the proceeding at the mediation or within six months after the conclusion of the mediation and the settlement is approved by the Court, the Group Member will be entitled to participate in that settlement, and will be bound by the settlement (including any releases given to Vocus, its related entities and/or its past and present directors in the settlement agreement). If the parties do not agree to settle the proceeding at the mediation or within six months after the conclusion of the mediation, the proceeding will proceed as usual - the person will remain a Group Member and be entitled to participate in any subsequent settlement or judgment. (c) The Group Member does nothing. In this case, the Group Member will not be entitled to receive any benefit or monetary compensation from any settlement (to be approved by the Court) of the proceeding agreed at the mediation or within six months after the conclusion of the mediation, but will be bound by the terms of any settlement agreement approved by the Court. Being bound by any settlement approved by the Court means that the Group Member will be bound by any releases provided to Vocus, its related entities and its officers and former officers in the settlement agreement. If the parties do not agree to settle the proceeding at the mediation or within six months after the conclusion of the mediation, the person will remain a Group Member. This means that the person may have its claim considered at any further mediation or as part of any settlement that takes place at some later time or, if the matter does not settle but proceeds to trial and a successful outcome is obtained, the person may be entitled to share in any monetary compensation that is obtained. 4 For the reasons set out below, I am prepared to make orders substantially in the terms of the Revised Proposed Orders.
Background to the application 5 In the proceeding, the applicants make allegations against Vocus including that: (a) on and from 29 November 2016 until the close of trade on 2 May 2017 (the Relevant Period), Vocus engaged in misleading or deceptive conduct by providing guidance for the 2017 financial year with respect to its revenue, earnings before interest, taxes, depreciation and amortisation, net profit after tax, and achievement of acquisition synergies, when it did not have reasonable grounds for doing so; (b) in the Relevant Period, Vocus breached its obligations of continuous disclosure, in contravention of s 674(2) of the Corporations Act 2001 (Cth) and the ASX Listing Rules, by failing to disclose various information that would have revealed that the guidance provided for the 2017 financial year would not be achieved and did not have reasonable grounds; and (c) consequently, persons who acquired an interest in ordinary shares in Vocus during the Relevant Period have suffered loss and should be compensated. 6 Vocus intends to defend the proceeding and to deny any liability. 7 According to the parties' joint submission, prior to the filing of the originating application and statement of claim, the parties engaged in extensive genuine steps within the meaning of the Civil Dispute Resolution Act 2011 (Cth). As part of these steps, Vocus's solicitors were provided with a copy of the originating application and statement of claim in a form that were in all material respects identical to the versions that were filed by the applicants on 24 April 2019. Following the provision of those documents and prior to the formal commencement of this proceeding, the solicitors acting for the applicants (Slater and Gordon Lawyers) and the solicitors acting for Vocus (Herbert Smith Freehills) engaged in extensive discussions to explore ways in which the proceeding could be conducted in a just, efficient, and cost effective manner. 8 The discussions between the parties resulted in the parties agreeing to jointly put forward to the Court the original proposed orders. As explained above, those proposed orders have been adjusted in light of the discussion at the case management hearing.
The Revised Proposed Orders 9 The Revised Proposed Orders (omitting the annexures) are in the following terms: Defence 1. The respondent not be required to file a defence until further order. Discovery 2. By 4.00 pm on 29 July 2019, the respondent provide to the applicants the categories of documents listed in Annexure A to these orders by way of discovery. Discovery may be made in tranches. Mediation 3. Pursuant to s 53A(1) of the Federal Court of Australia Act 1976 (Cth) (FCAA), the Court refers these proceedings to mediation which is to occur by no later than 23 October 2019. 4. The mediation is to be conducted by a mediator agreed between the parties, with such agreement to occur by no later than 2 October 2019. If the parties cannot agree to a mediator by this date, the mediator is to be National Operations Registrar Lagos or another registrar nominated by her. Opt Out and Registration Deadline 5. Pursuant to ss 33J and 3ZF of the FCAA, 4.00 pm on 13 August 2019 be fixed as the date before which: (a) a Group Member may opt out of the proceeding; (b) a Group Member who wishes to participate in the proceeds of any settlement of this proceeding must register their claim by doing so in the manner set out in these orders, (the Deadline). Notice 6. Subject to Order 16, pursuant to s 33X of the FCAA, notice (Notice) be given to Group Members of: (a) the commencement of the proceeding and their right to opt out of the proceeding; (b) the requirement that they register their claim in order to participate in any distribution of any amount agreed in a settlement of the proceeding; and (c) the consequence that if they do not opt out of the proceeding and do not register their claim they will not be entitled to participate in (or receive any benefit or monetary compensation from) any settlement (to be approved by the Court) of the proceeding agreed at the Mediation or within six months after the conclusion of the Mediation. 7. Subject to Order 16, pursuant to s 33Y(2) of the FCAA, the form and content of the Notice set out in Annexure B to these Orders is approved. 8. The Notice may be amended by the parties before it is emailed, posted, displayed or published in accordance with Order 9, in order to correct any website or email address or telephone number or other non-substantive error. Distribution of the Notice 9. Pursuant to s 33Y(3) of the FCAA, the Notice is to be given to Group Members on or before 13 June 2019 according to the following procedure: (a) the Respondent shall cause its share registry service provider, Computershare Limited (Computershare), to send the Notice to all persons who acquired a legal interest in ordinary shares in Vocus Group Limited (Vocus) (VOC shares) during the period from 29 November 2016 to the close of trade on 2 May 2017 (inclusive) as identified in respondent's register of shareholders. The respondent shall do so in accordance with the requirements set out in the protocol in Annexure C (Computershare Protocol), with the distribution to occur on 11 June 2019; (b) by 3 June 2019, the respondent shall provide a copy of this Order 9 including the Computershare Protocol to Computershare; (c) should the respondent become aware of any actual or potential noncompliance with the Computershare Protocol, the respondent is to notify the applicants within two (2) business days of so becoming aware. The applicants and the respondent are directed to advise the Court of such non-compliance by email to the Associate of Justice Moshinsky; (d) the applicants shall cause a copy of the Notice to be sent by email or prepaid ordinary post to each Group Member who has, at the date of this order, entered into a Funding Agreement with Investor Claim Partner Pty Ltd or ICP Capital Pty Ltd (together, ICP) or Woodsford Litigation Funding Limited (Woodsford) or identified herself, himself or itself to the applicants' solicitors as a potential Group Member (even if they have not entered into a Funding Agreement with ICP or Woodsford), and for whom the applicants' solicitors hold a current email address or postal address (jointly Existing Registered Group Members); and (e) the applicants shall cause a copy of the Notice, together with copies of the most current version of the originating application, the pleadings, these orders, and any application for a common fund order, to be displayed on the website of the applicants' solicitors, https://www.slatergordon.com.au/classactions/current-class-actions/Vocus and at www.vocusclassaction.com.au, and to remain continuously so displayed up to and including the Deadline. Opt out 10. Pursuant to s 33ZF of the FCAA, and subject to any further order of the Court, any Group Member who wishes to opt out of this proceeding must, before the Deadline, send an opt out notice, in the form of Schedule B to the Notice to the Victorian District Registry of the Federal Court of Australia at the email address vicreg@fedcourt.gov.au (with the subject line 'Opt Out Notice VID419/2019') or postal address: Federal Court of Australia Registry, Level 7, 305 William St, Melbourne, Victoria 3000. 11. The applicants' solicitors and the respondent's solicitors have leave to inspect and make copies of any opt-out notices on the Court file sent pursuant to Order 10. 12. If, on or before the Deadline, the solicitors for any party or ICP or Woodsford receive a notice purporting to be an opt out notice referable to this proceeding, the solicitors must file the notice in the Victorian District Registry of the Federal Court of Australia within two (2) business days after receipt, with a notation as to the date of receipt, and the notice shall be treated as an opt out notice received by the Court at the time it was received by the solicitors or ICP or Woodsford. Registration 13. Subject to Order 16, pursuant to s 33ZF of the FCAA, any Group Member who wishes to participate in any distribution of any amount agreed in a settlement of this proceeding is obliged, before the Deadline, to register their claim, by: (a) if that Group Member has as at the date of these orders already signed a funding agreement with ICP or Woodsford - providing to Slater and Gordon, or taking reasonable steps to provide to Slater and Gordon, the information set out in Order 14(a) to (f) below, before the Deadline to the extent it has not already been provided; (b) if that Group Member has not as at the date of these orders already signed a funding agreement with ICP or Woodsford - (i) executing a funding agreement with ICP or Woodsford, and providing to Slater and Gordon, or taking reasonable steps to provide to Slater and Gordon, the information set out in Order 14(a)-(f) below before the Deadline; or (ii) completing, or taking reasonable steps to complete, a registration form either: (A) online, which is substantially in the form of Schedule A to the Notice, and made available at web address: www.vocusclassaction.com.au, before the Deadline; or (B) in hard-copy form, which is Schedule A to the Notice, and returning that hard copy form to Slater and Gordon before the Deadline. (New Registered Group Member). 14. In order to register for the purpose of Order 13(a) or (b) a Group Member shall provide or take reasonable steps to provide: (a) the Group Member's name and address and/or email address; (b) any relevant and available account number, Holder Identification Number (HIN) or Securityholder Reference Number (SRN); (c) the number of Vocus securities held by that Group Member as at close of trade on 28 November 2016; (d) all transactional information (date of acquisition, quantity of Vocus securities acquired, price per security, brokerage paid) regarding Vocus securities acquired from 29 November 2016 to 2 November 2017; (e) all transactional information (date of sale, quantity of securities sold, price per security, brokerage paid) regarding Vocus securities sold from 29 November 2016 to 2 November 2017; and (f) documentary evidence (e.g. transaction receipts) in support of each of the matters the subject of items 14(b)-(e), above. Failure to provide such information will not render the Group Member's registration invalid. 15. By 26 August 2019, the Respondent and Applicants must each file in a sealed envelope marked 'Confidential List of Group Members - Not to be opened without leave of the Court or a Judge', a list of Group Members to whom the Notice was sent in accordance with Orders 6 and 9, in the form contemplated by Section 4(a) of the Computershare Protocol, which list shall contain for each Group Member: (a) name, postal address and email address; (b) the method by which the Notice was sent; (c) the date on which the Notice was sent; (d) whether and which distribution attempts failed; and (e) the form of the evidence by which the failed distribution attempt was identified, including, but not limited to, by way of receipt of an email delivery failure notification, or receipt of a prepaid ordinary post envelope marked 'return to sender' (or similar). Other orders in aid of mediation 16. Pursuant to s 33ZF of the Act, and subject to any further order of the Court, any Group Member who neither opts out nor registers as a Group Member on or before the Deadline in accordance with the manner provided for in these Orders: (a) shall remain a Group Member for all purposes of this proceeding, including for the purpose of being bound by any judgment in this proceeding and being entitled to participate in any award of damages by the Court if this proceeding does not settle; but (b) will not, without leave of the Court, be entitled to seek any benefit pursuant to (or monetary compensation from) any settlement (to be approved by the Court) of this proceeding agreed at, or within 6 months after the conclusion of, the mediation to occur pursuant to Order 3, but will be bound by the terms of any settlement agreement approved by the Court in respect of such settlement. 17. Any Group Member wishing to challenge or seek a variation of Order 16 must deliver to the applicants' solicitors, by no later than the Deadline, written notice of the challenge or variation sought and a statement of the reasons for the challenge or for seeking the variation (as the case may be), and the solicitors shall forthwith notify the respondent and the Court of the notice and the reasons. 18. Nothing in Order 16 precludes any Group Member who does not opt-out pursuant to Order 10 from having their claims considered at any mediation or settlement that takes place at some future time, if no settlement (to be approved by the Court) of this proceeding is agreed at, or within 6 months after the conclusion of, the mediation to occur pursuant to Order 3. 19. Pursuant to s 33ZF of the FCAA, by 9 September 2019, the applicants shall: (a) deliver to the solicitors for the respondent a list of Existing Registered Group Members and New Registered Group Members (on a de-identified basis) (Confidential De-Identified List) which list shall contain: (i) a unique identification number for each Existing Registered Group Member and New Registered Group Member; (ii) the information referred to in Order 14(c)-(e) for each Existing Registered Group Member and New Registered Group Member to the extent that information is known to ICP, Woodsford or the applicants' solicitors at that date and confirmation of whether or not the evidence required by Order 14(f) has been received; and (iii) any amendments to the information as notified to Slater and Gordon by that date. (b) file, in a sealed envelope marked 'Confidential List of Class Members - Not to be opened without leave of the Court or a Judge', a list of Existing Registered Group Members and New Registered Group Members, which list shall contain: (i) a unique identification number for each Existing Registered Group Member and New Registered Group Member; (ii) the information referred to in Order 14(a)-(f) for each Existing Registered Group Member and New Registered Group Member; and (iii) any amendments to the information as notified to Slater and Gordon by that date. 20. The costs of and incidental to the procedure set out in Orders 3 to 19 above are costs in the proceeding. For the avoidance of doubt, answering enquiries by Group Members and members of the public in relation to the Notice is work incidental to Orders 3 to 19 above. 21. The Confidential De-Identified List, and any information contained therein, is to be kept confidential to: (a) the respondent's legal advisers and any insurer and their legal advisers; (b) those officers and employees of the respondent who have the conduct of this proceeding on behalf of the respondent and/or are involved in providing instructions for the purposes of settlement discussions; and (c) experts retained by the respondent in the proceeding. 22. The website at address www.vocusclassaction.com.au at which the online versions of any schedules to the Notice are to be available will be administered by Slater and Gordon Lawyers. Case Management 23. The matter be listed for a case management hearing on 30 October 2019 at 9.30 am.
Consideration 10 The topic of class closure was discussed by the Full Court of this Court (Jagot, Yates and Murphy JJ) in Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (2017) 252 FCR 1 (Treasury Wine) at [70]-[80]. 11 At [72], the Full Court acknowledged that the requirement for class members to take active steps to "register" in order to share in a settlement of a class action "undercuts to some extent the opt-out rationale underpinning the Pt IVA regime". Nevertheless, the Full Court expressed the following views at [74]-[79]: 74 Having said this, if a class closure order operates to facilitate the desirable end of settlement, it may be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding and therefore appropriate under s 33ZF of the Act. The courts have accepted on numerous occasions that, in order to facilitate settlement, it is appropriate to make orders to require class members to come forward and register in order to indicate a willingness to participate in a future settlement, and to make orders that class members be bound into the settlement but barred from sharing in its proceeds unless they register: see for example, Matthews v SPI Electricity Pty Ltd (No 13) (2013) 39 VR 255 at [22]-[80] (Matthews v SPI No 13) (J Forrest J) and the authorities there referred to; Farey v National Australia Bank Ltd [2014] FCA 1242 at [11]-[16] (Jacobson J); Inabu Pty Ltd v Leighton Holdings Ltd [2014] FCA 622 at [17]-[22] (Jacobson J); Newstart 123 Pty Ltd v Billabong International Ltd (2016) 343 ALR 662 at [67]-[68] (Beach J). An important aspect of the utility of a class proceeding is that they may achieve finality not only for class members but also for the respondent. 75 The rationale behind such class closure orders is that a requirement for class members to register their claims will facilitate settlement, because it allows both sides to have a better understanding of the total quantum of class members' claims, permits the settlement amount to be capped by reference to the number of class members, and assists in achieving finality (to the extent the Pt IVA regime permits): see Grave D, Adams K and Betts J, Class Actions in Australia (2nd ed, Lawbook Co, 2012) at [14.410]. A class closure order that precludes class members, who neither opt out nor register, from sharing in a subsequent settlement may facilitate settlement, and therefore be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding. 76 However, we share the views expressed by the primary judge in relation to a class closure order that also precludes class members from sharing in a subsequent judgment. In our view the Court should be cautious before making a class closure order that, in the event settlement is not achieved, operates to lock class members out of their entitlement to make a claim and share in a judgment. That is, the facilitation of settlement is a good reason for a class closure order but, if settlement is not achieved, an order to shut out class members who do not respond to an arbitrary deadline is not. 77 Caution should also be exercised in relation to the stage at which a class closure order is made. In our view, the Court should usually not exercise the discretion to make a class closure order based merely on a respondent's assertion that it is unwilling to discuss settlement unless such an order is made. It is a common if not inevitable feature of opt out class actions that the defendant will be faced with uncertainty regarding the quantum of class members' claims: P Dawson No 2 at [31]; Thomas v Powercor No 1 at [37]-[38]. 78 We respectfully agree with the approach taken by Bromberg J in Winterford v Pfizer Australia Pty Ltd [2012] FCA 1199 at [9] where his Honour declined to make a class closure order in circumstances where the pleadings were not closed, common questions had not been settled, opt out notices had not been sent out, no settlement discussions had been undertaken, and no settlement discussions were proposed unless the Court made a class closure order. As his Honour said, to make a class closure order at that stage "would turn on its head the very nature of the opt-out model chosen by the legislature." See also Camping Warehouse Australia Pty Ltd v Downer EDI Ltd [2015] VSC 122 at [16] (Sifris J). 79 Whether it is appropriate to order class closure is a question of balance and judicial intuition. The Court must take into account the interests of the class as a whole in requiring class members to take steps to facilitate settlement, and consider the surrounding circumstances including the point the case has reached, the attitude of the parties, and the complexity and likely duration of the case: see Matthews v SPI No 13 at [75]-[79]. This will often involve striking a balance between the conflicting interests of class members. (Emphasis added.) 12 As the highlighted part of [74] makes clear, the Full Court accepted that the Court has power pursuant to s 33ZF of the Federal Court of Australia Act to make orders for a process of registering claims in order to facilitate a settlement of a representative proceeding, and that such orders may include an order that class members who do not register are bound into the settlement but barred from sharing in the proceeds. The rationale for such orders was explained by the Full Court at [74]-[75]. 13 In my view, the Revised Proposed Orders, including the elements relating to registration of claims and the consequences of not doing so, are appropriate in all the circumstances and are reasonably adapted to the purpose of seeking or obtaining justice in the proceeding. It is apparent from their terms that the Revised Proposed Orders have been carefully designed to facilitate an early mediation of the proceeding, with the various procedural steps focussing on matters that are likely to provide an early mediation with the best prospects of success. These procedural steps include: the discovery of key documents; the provision of Group Member transaction data; and the opt out and registration processes. 14 I accept the parties' submission that an early mediation of the proceeding is desirable. If the matter can be resolved at a mediation, or soon thereafter, it is likely to avoid a great deal of time and expense, consistently with the objectives set out in s 37M of the Federal Court of Australia Act. In the present case, I consider that weight should be accorded to the views of both parties and their lawyers (who are experienced in class action litigation) that the orders sought will assist in facilitating an early resolution of the proceeding. 15 The Revised Proposed Orders provide for Group Members to have the option, exercisable before the nominated deadline, to opt out of the proceeding or to register their claim. It is proposed that, if a Group Member does not opt out and does not register its claim (ie, the Group Member does nothing), the Group Member will not (without leave of the Court) be entitled to seek any benefit pursuant to (or monetary compensation from) any settlement (to be approved by the Court) of the proceeding agreed at, or within six months after the conclusion of, the mediation, but will be bound by the terms of any settlement agreement approved by the Court in respect of such settlement. As indicated above, the Full Court in Treasury Wine at [74] accepted that there is power to make such orders pursuant to s 33ZF of the Federal Court of Australia Act and noted that such orders had been made in numerous cases. By way of example, I note that the Revised Proposed Orders are broadly similar to those made by this Court in Bradgate (Trustee) v Ashley Services Group Limited [2017] FCA 1591 at an early stage in that litigation. 16 Consistently with the observations of the Full Court in Treasury Wine at [76], in the event that the matter does not settle at mediation or within six months thereafter, it is not proposed that a Group Member who does not opt out and does not register (that is, a Group Member who does nothing) would be shut out from participating in a favourable judgment in the proceeding or any settlement that takes place after the period of six months following the mediation. This supports the view that the Revised Proposed Orders do not go further than reasonably necessary to facilitate the early resolution of the proceeding. I accept the parties' submission that the period of six months is a reasonable period in which additional negotiations may be required to enable settlement to be achieved following the mediation. 17 One of the matters I raised at the case management hearing related to the period of time between notices being sent to Group Members and the deadline (being the time by which a Group Member may opt out of the proceeding or register its claim). A period of four weeks was originally proposed. At the case management hearing I indicated that I considered a period of two months to be appropriate in the circumstances, to ensure Group Members have adequate time to consider their options and, if they wish, obtain legal advice. This is reflected in the Revised Proposed Orders. The deadline is now 13 August 2019, rather than the date originally proposed (28 June 2019). 18 A second matter I raised at the case management hearing was whether the materials that had been prepared, in particular the notice to Group Members, made the consequences of "doing nothing" sufficiently clear. A number of adjustments were discussed at the case management hearing to highlight the consequences of "doing nothing". These adjustments have been incorporated in the Revised Proposed Orders (including the annexures). In particular, a second paragraph has been added to the "Important Information" at the commencement of the notice to Group Members. 19 A third matter I raised at the case management hearing concerned the choice that is offered to Group Members of either: (a) signing a funding agreement and providing the information set out in the registration form; or (b) simply completing the registration form. Counsel for the applicants indicated that, in either case, the Group Member would be taken to be registered and that whether the Group Member adopted course (a) or (b) would not affect the Group Member's share of any settlement moneys. The applicants offered to make adjustments to the materials to make the position clearer in this regard. These changes have been incorporated in the Revised Proposed Orders (including the annexures). In particular, a new paragraph 30 has been added to the notice to Group Members. 20 The fourth matter I raised at the case management hearing concerned the notification process for shares held by a custodian. As a result of the submissions made at the case management hearing, I am satisfied that the relevant provision in the Computershare protocol (paragraph 3.1) and the relevant part of the notice (paragraph 8) are satisfactory. 21 Accordingly, I am satisfied that the Revised Proposed Orders are appropriate to ensure that justice is done in the proceeding, so as to engage the Court's power under s 33ZF of the Federal Court of Australia Act. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.
Fisher (trustee for the Tramik Super Fund Trust)
Vocus Group Limited
[2015] VSC 122
(2017) 252 FCR 1
(2013) 39 VR 255
(2016) 343 ALR 662