consideration
40 Given the foregoing, it is necessary to determine the application on the basis of the power in s 33V and the relevant principles to which reference has been made. As was foreshadowed, the applicants have failed to demonstrate on either test that it is appropriate to make an order pursuant to that section approving the discontinuance of the proceedings. It is therefore unnecessary to reach a conclusion as to whether it is sufficient to show that such approval would not be unfair, unreasonable, or adverse to the interests of other group members, or whether it is instead necessary to demonstrate that discontinuance is fair and reasonable and in the interests of the members of the representative proceeding as a whole.
41 An initial issue is that the Court is left in great doubt as to whether the lead applicants, Mr and Mrs Francis, will receive any money from the settlement of their individual claim against Oculus. In particular, there is no apparent term or mechanism in the Deed governing the distribution of the settlement sum. In the ordinary course, a settlement deed which provided for the payment of a settlement sum to a plaintiff's solicitors would be construed such that the plaintiff is beneficially entitled to the entirety of that sum. Although that is apparently not the intention of the parties, the applicants failed to adduce evidence establishing the true position. Their written outline referred to a "schedule of the proposed distribution of settlement monies", but this was not put into evidence. It ought to be stressed, again, that it was not the responsibility of the Court to request such a document from the applicants. In any event, it was also not established that there was any legal basis for the applicants being bound to distribute the settlement sum in accordance with that schedule. It was, after all, only a proposed distribution.
42 The notice to group members did include the following statement, under the heading, "The consequences for Mr and Mrs Francis of obtaining the court orders and completing their proposed conditional settlement with Oculus are as follows":
7. Mr and Mrs Francis have advised in writing to their solicitor Mr Robert Anderson that they will forgo receiving any personal financial benefit out of the proposed conditional settlement.
The notice then continued:
8. Filing fees and other outlays incurred to date in respect of conducting the representative proceedings will be reimbursed to the solicitor Mr Anderson.
9. The large insurance premium paid to the "after the event" insurer ("ATE"), to provide an indemnity for Mr and Mrs Francis against any personal exposure they may have for an order to pay the respondent's legal costs (an adverse costs order) in the representative proceedings, will be reimbursed.
10. The two barristers and the solicitor who have conducted the representative proceedings up to date on instructions from Mr and Mrs Francis will be each paid a nominal sum in part recompense for their services.
11. A person who has conducted extensive inquires and investigations into the various claims against Oculus as a preliminary to the commencement of the proceedings will be paid a nominal sum in part recompense for his services.
43 Those statements were also not the subject of any evidence, nor was it demonstrated that any such statements of intention would be binding upon the applicants as against their legal representatives. Mr and Mrs Francis would be prima facie entitled to the entirety of the settlement sum paid pursuant to the Deed and there was no evidence which displaced that entitlement. It is also difficult to see how their legal representatives could, consistent with their fiduciary duty to the applicants, fail to advise them of their entitlements in this respect once the settlement sum is paid. The applicants might be liable to pay their representatives for professional fees and outlays up to the entirety of that sum following the achievement of a "successful" result in the litigation, but this too was not demonstrated. The same is true of any liability they would have to the provider of the premium for the after the event insurance cover.
44 It would be unfair and unreasonable to permit a representative party to use the discontinuance of a representative proceeding for their own benefit in negotiating a settlement of their individual claim, no matter the prospects of recovering of any judgment on behalf of group members from the respondent. It ought to be noted that there is no evidence to suggest that is what has occurred. However, the onus lies with the applicants to demonstrate that the discontinuance is fair and reasonable. They have failed to do so in circumstances where they may receive money in connection with the discontinuance and it has not been shown that their receipt of any such amounts is fair and reasonable. This issue alone supports the conclusion that it would not be appropriate to approve the proposed discontinuance and the other circumstances of the case do not displace that conclusion. As the applicants are likely to bring a further application under s 33V, it is appropriate to identify and consider certain other issues concerning their proposed discontinuance.
45 In connection with the previous issue, it is relevant to observe that it is not a complete answer that the applicants will receive or retain no part of the settlement sum. The proposed discontinuance must be shown to be fair and reasonable in the circumstances, which include any amounts being paid in connection with the discontinuance to the applicants or otherwise. It is part of the Court's supervisory function to ensure that the applicants' legal representatives do not themselves unfairly or unreasonably benefit from the proposed discontinuance. Again, it is not suggested that there is evidence that they will. Rather, there is no evidence upon which the Court could conclude that they will not and the applicants have therefore failed to meet the onus of establishing that they will not.
46 Another concerning feature of the Deed is the agreement by Bounty Law, Mr Turnbull and Mr Coburn to be restrained from acting in any future proceedings against Oculus and from assisting or being involved in any actual or prospective proceedings against Oculus in future. The consideration for their acceptance of such restraint appears to lie in the manner in which the settlement sum is to be distributed but, again, this was not the subject of evidence.
47 The approval of a settlement or discontinuance is not to validate or pass judgment upon the enforceability of the terms on which that is to occur: Williams v FAI Homes Security Pty Ltd (No 5) [2001] FCA 399 [26]. Likewise, it would not be appropriate on this application to conclude that such a restraint is not enforceable. For present purposes, it is sufficient that the restraint may be enforceable and thus may affect the interests of other group members.
48 Although such a restraint may not be objectionable in the context of a settlement of the claims of all group members: see e.g. P Dawson Nominees Pty Ltd v Brookfield Multiplex Limited (No 4) [2010] FCA 1029 [31]; the agreement to the restraint in this case substantially undercuts the applicants' written submissions as to the position of other group members if they wished to proceed individually against Oculus following the discontinuance of the proceedings. In particular, those submissions stated:
Next, it is respectfully pointed out that the court file of the representative proceedings contains all of the pleadings filed and delivered by both the applicant and the respondent. Further, the respondent has completed disclosure of relevant documents. This material will give any legal advisor considering individual action by another group member a "head start" on understanding the issues involved in the proceedings and obtaining access to the disclosure documents. Therefore, all of the time and effort which has been contributed by both the applicants in the representative proceedings, and the court resources which have also been expended on the proceedings, will not be wasted, but in fact will confer a substantial benefit upon each group member, obtained by them without any expenditure or effort on their own part.
49 Likewise, Mr Turnbull for the applicants made the following submission at the case management hearing on 2 July 2021:
I'm sure Mr Dickie [Counsel for Oculus] recognises that anybody who is a class member can commence their own proceedings probably in the Magistrates Court and they've got the fruits of all the effects that have been put in to date. Pleadings, disclosure, it's all on the court file and they can get access to the disclosure.
I understand Mr Dickie is quite content that that would be made available on request.
50 Those statements stand in contrast to the restraint, which would ostensibly prevent Bounty Law from providing other group members with the fruits of the representative proceeding in terms of disclosure and any other documentation which is not readily accessible by members of the public from the court file: see Rules, r 2.32. It is a separate matter whether the applicants or Bounty Law would be free to provide other group members with documents disclosed by Oculus as part of disclosure without breaching the obligation discussed in Hearne v Street (2008) 234 CLR 125. That obligation is owed to the Court and could not simply be waived by Oculus. It is to be acknowledged that the applicants' solicitors included a "Dropbox" link in the notice sent to group members by which documents relating to the proceedings could be accessed. However, that does not determine whether Bounty Law could or would continue to provide such access following the discontinuance of the proceedings. Indeed, the provision of continued access may constitute a breach of the restraint in the Deed.
51 The essential problem with the position created by the restraint is that, apart from being able to access some documents on the court file such as the pleadings, the group members would not have any real "head start" in individual proceedings against Oculus. The access to the pleadings is of limited value where the legal representatives for any group member bringing individual proceedings against Oculus would have to start afresh in terms of gathering evidence to support the matters alleged in the pleading. The Deed also purports to have the effect of preventing group members from briefing the Counsel who have acted on their behalf in the representative proceeding and who would, presumably, have the greatest familiarity with the pleadings, the material and the issues in the proceedings. This means that approval of the proposed discontinuance entails taking from the other group members any benefit which they have accrued by these proceedings have been brought on their behalf. The discontinuance may therefore be considered to be unfair, unreasonable and adverse to the interests of group members.
52 It should also be noted that the agreement to the restraint raises some questions in the case of Mr Turnbull and Mr Coburn, each of whom are presumably bound by the 2011 Barristers' Rule which governs the professional conduct of barristers in relation to practice in Queensland. This is not the appropriate forum in which to reach any conclusion as to the propriety of their agreement to that restraint, particularly in the absence of affording them notice of the issue and the opportunity to make submissions. However, consideration should be given as to whether the position they are taking conflicts with r 24 of the 2011 Barristers' Rule. As I say I expressly refrain from making any finding on the issue and their agreement to the restraint may be adequately explained. However, it is not irrelevant that the terms of the settlement, which the Court is asked to approve as being reasonable, will deny group members access to the lawyers who are most familiar with the matter.
53 Those issues aside, the other circumstances of this case do broadly support the making of an order pursuant to s 33V approving the discontinuance of the representative proceeding:
(1) The causes of action presently advanced against Oculus seem to have a reasonable foundation and Mr and Mrs Francis may secure a favourable verdict if the matter proceeds to trial. However, they no longer wish to pursue their action or the representative proceeding. It also seems likely that they do not or will not have access to sufficient resources to continue acting as the representative party in the proceedings. Although the proceedings have been ongoing for some time, there has not been any significant progress towards a trial. The claims advanced are not without some complexity and the costs of bringing them to a resolution would not be inconsiderable.
(2) It is now apparent that there is unlikely to be any substantial recovery even if a judgment were to be obtained against Oculus. There is no insurer standing behind it or directors who might provide funds to meet any judgment. The company's directors are without means to meet a substantial judgment against it even if they were so minded. The evidence before the Court also discloses that the directors have largely disencumbered themselves of any substantial assets, although the extent to which they have actually rendered themselves judgment proof is yet to be determined. It suffices to observe that even if they were pursued by some presently unidentified mechanism, it is most unlikely that any recovery would meet the group members' claims to any great extent.
(3) The other group members were given notice of the present application by a letter identifying the circumstances faced by the lead applicants, the circumstances of the litigation, the opportunity for any group member to take over conduct of the proceedings, and the opportunity to attend the hearing of the lead applicants' application and to object to the making of the orders sought. None have raised any objection to the discontinuance or sought to be substituted as the representative party in the proceedings. This is perhaps unsurprising in the absence of any likelihood of substantial recovery.
(4) The current litigation has no direct funding in the sense that it is not supported by a litigation funder. The lead applicants have an after the event insurance policy which indemnifies them with respect to an adverse costs order. Given the poor chances of recovering any substantial damages, there is little prospect of any other insurer offering cover. The existing insurer does not appear to be willing to provide cover to any other party.
(5) The solicitors presently engaged by the lead applicants have been acting upon a contingency basis in the sense that they will not charge their usual fees save on the occurrence of particular outcomes. This support is not likely to continue and they are unwilling to act for another group member on that basis given the action's lack of viability.
54 Those circumstances weigh heavily in favour of exercising the discretion to approve the discontinuance. As the evidence has emerged, it is difficult to understand why the action was commenced as a representative proceeding in the first place. One might assume that the representative parties would have achieved substantially greater success had they commenced proceedings in the standard form. During an interlocutory hearing, the Court received evidence of the large amount of costs paid by Oculus to its own solicitor which, in total, was a multiple of the lead applicants' claim. Whereas that claim on its own might have been settled favourably for the applicants, that outcome could not occur given the representative proceeding incorporated a wide range of other parties. The representative proceeding was also somewhat mired in difficulties surrounding the availability of insurance cover in respect of the group members' claims and, ultimately, it was unable to be progressed with anything nearing expedition.
55 The final issue to be considered is the effect of discontinuance on the interests of other group members. On the one hand, it is important to emphasise that discontinuance itself will not determine the claims of other group members: Babscay at 555 [20] - [22]. Save for the next mentioned point, they will be at liberty to pursue their claims individually if they wish to do so and, in that context, it is relevant that the running of limitation periods relevant to those claims has been suspended by s 33ZE of the Act, which provides:
33ZE Suspension of limitation periods
(1) Upon the commencement of a representative proceeding, the running of any limitation period that applies to the claim of a group member to which the proceeding relates is suspended.
(2) The limitation period does not begin to run again unless either the member opts out of the proceeding under section 33J or the proceeding, and any appeals arising from the proceeding, are determined without finally disposing of the group member's claim.
56 As Lee J observed in Gill v Ethicon Sarl (No 4) [2019] FCA 1814, the reference to a "determination" of a representative proceeding seems to refer to a "judicial resolution" of the proceedings, a concept which would not encompass their mere discontinuance: but see Calinoiu v QLD Law Group - A New Direction Pty Ltd [2019] FCA 2194 [8] per Lee J. In any case, there is at least a real risk that discontinuance might be taken to "determine" the proceedings for the purposes of s 33ZE(2) or, alternatively, that the suspension ceases to have effect upon discontinuance: Babscay at 558 - 559 [33] - [35]. While that might seem to be inconsistent with the plain language of s 33ZE(2), the alternative would be the permanent suspension of the running of the limitation period, an extraordinarily unjust outcome from the perspective of the respondent to a discontinued representative proceeding.
57 In relation to the latter issue, Mr Turnbull for the applicants submitted that an order could be made pursuant to s 33ZF to restart the running of the limitation period once the group members have been served with notice of the discontinuance and thereby protect Oculus from an indefinitely running limitation period. Aside from the impropriety of Counsel for the lead applicants seeking an order which would be adverse to the interests of other group members and which the respondent had not sought, it is not entirely clear that s 33ZF would empower the Court to substantially alter the operation of s 33ZE: Wotton v Queensland at 545 [41]. The applicants' written submissions referred to the decision in Gill v Ethicon Sarl (No 4) in which orders were made to modify the operation of s 33ZE to ensure that, if the suspension of the running of the limitation period lapsed upon certain persons ceasing to be group members, it did not lapse for a period of time. In discussing the reasons for making that order, Lee J referred to the decision of Goldberg J in Williams v FAI Home Security Pty Ltd (No 5) where a similar order was made extending the suspension of the limitation period in respect of certain persons excluded from a settlement for a period of one month after the giving of notice of the settlement. It seems that the orders made in those cases, which merely delayed any lapsing of the suspension of the limitation periods, can be distinguished from the order proposed by Mr Turnbull to restart the running of the limitation period. That order would not merely alter the timing of the operation of s 33ZE, but would instead change the operation of the section in relation to the other group members' substantive rights. In the absence of the respondent having moved for such an order and satisfied the Court as to the power to make it, it is not appropriate to make it.
58 The only further observation to be made is that, if the applicants were to seek an order in relation to the possible lapsing of s 33ZE, a more appropriate order might be one that prevents any lapsing of the suspension from taking effect for a period after the discontinuance has occurred. Unlike the order which Mr Turnbull seemed to seek at the hearing, such an order would be consistent with his duty not to act contrary to the interests of those in respect of whom Mr and Mrs Francis act in a representative capacity: Dyczynski at 673 [379].
59 Notwithstanding the issue discussed above, the notice sent to the other group members in advance of the present application advised them of the risk that the running of the limitation periods would resume and none has raised any objection or sought to take over the action from the applicants. It is also relevant that the risk is of the resumption of running of the limitation periods. In that case, the usual limitation period has been extended by the period of time during which these proceedings have been ongoing, being approximately 21 months. Subject perhaps to the making of an order described above to delay the potential resumption of the running of the limitation periods, I am not persuaded that the risk of such resumption outweighs the approval of the proposed discontinuance. If the other group members are provided sufficient opportunity to avoid the potential adverse consequences of the limitation period resuming, those consequences do not really militate against permitting the lead applicants to discontinue these proceedings.