Francis (Trustee) v Oculus Accounting Pty Ltd

Federal Court of Australia|2022-04-08|Before: Derrington J

Pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (Cth) the applicants be granted approval to settle and discontinue this proceeding in accordance with the Deed of Settlement dated 14 May 2021 and the Deed of Variation dated 18 February 2022.
That the costs order made on 30 April 2021 be set aside.
There be no order as to the costs of the proceedings.
Robert Neil Anderson, Garry Charles Francis, and Jodi Lee Francis each be relieved of any undertakings that they have given to this Court in this proceeding (whether express or implied) so far as those said undertakings may prohibit them from providing to any person who is a group member (as defined in s 33A of the Federal Court of Australia Act 1976 (Cth)) for the purposes of this proceeding with any document that came into their possession, power or control during the course of this proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 In this action, which is a representative proceeding brought under Part IVA of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), the lead applicants have provisionally settled their claim with the respondent, Oculus Accounting Pty Ltd (Oculus). The terms of that agreement are contained in a Deed of Settlement dated 14 May 2021 and a subsequent Deed of Variation dated 18 February 2022. The lead applicants now seek the Court's approval pursuant to s 33V of the Federal Court Act for approval of that settlement. They also seek ancillary orders.

Background 2 The background to the bringing of the action and the subsequent conduct of the proceedings is set out in my earlier reasons of 20 October 2021: Francis (Trustee) v Oculus Accounting Pty Ltd (No 2) [2021] FCA 1275 (Francis v Oculus (No 2)) and there is no need for me to repeat them here. Those reasons primarily dealt with a previous application by the applicants for leave to settle the action pursuant to s 33V although, for the reasons there given, orders were not able to be made on that occasion. In essence, the application was refused because: (a) the nature of extent of the benefits which the lead applicants might receive from the settlements were not satisfactorily disclosed; (b) unreasonable restraints were sought to be imposed upon the lawyers who had acted in the matter so as to prevent them from assisting other litigants in the prosecution of a claim against Oculus. 3 Both of those matters had the result that the Court was unable to conclude that the proposed compromise or discontinuance was "a fair and reasonable" one, or, "has been undertaken in the interests of the group members as a whole and not just the interests of the applicant and respondent", or, whether the group members would be "disadvantaged by the giving of approval to discontinue the proceedings": Francis v Oculus (No 2) [28] - [33].

The different circumstances of the present application 4 Subsequent to the dismissal of the initial application for leave to settled or discontinue the proceedings, further steps have been taken by the lead applicants to overcome the obstacles they had encountered. Most importantly, they have entered into an amending deed so as to alter the terms of settlement so as to negate those obstacles. Second, further affidavits have been filed containing evidence which clearly explain the new circumstances in which settlement is to take place. 5 On the current material it is now possible to ascertain that the amount to be paid by Oculus in settlement of the claim against it ($155,000.00) will only be utilised in defraying the expenses of the litigation and none of it will be received by the lead applicants. The amending deed has been included in the recently filed material and Mr Anderson, the solicitor for the applicants, has by his latest affidavit, identified how the funds will be distributed. The evidence also discloses that in order for the settlement to proceed a number of third parties have agreed to reductions in their costs or claims. 6 Further, by the Deed of Variation the erstwhile legal representatives have been released from their previous undertakings not to act in any matter relating to the claims against Oculus were they to be approached by any other class members who wished to pursue such litigation in the unlikely event that might occur. It follows that the second of the impediments to the grant of approval identified in my earlier reasons has also dissipated.

Reasonableness of the settlement 7 Absent those inhibitions it can now be said that the proposed settlement of the class action is fair and reasonable and in the interests of the group members as a whole or, at least, they will not be disadvantaged by the granting of approval. A number of the relevant reasons are set out in Francis v Oculus (No 2) but in summary they include: (a) Oculus has very limited resources with which to meet any judgment against it in this action. (b) It is unlikely that there exists any professional indemnity insurance policy which might respond to the claims brought in these proceedings. (c) The proposed settlement will not advance the interests of any of the group members over the others in the sense that none will receive any monetary benefit from the settlement. (d) It may be that the lead applicants will have certain costs and expenses met, however, those costs and expenses were theoretically incurred for the benefit of all group members in any event. The legal fees and disbursements can be described as "reasonable and proportionate". In the scheme of class action litigation they might even be described as somewhat minimal. (e) The class members are not prejudiced by the termination of the proceedings in terms of any relevant limitation period. As an aside it is not necessary nor desirable to attempt to alter the operation of s 33ZE of the Federal Court Act, even assuming the Court had power to do so. Any interested party might seek whatever order is appropriate in their interests if and when it becomes relevant. (f) The class members have been given notice of the original application for leave to settle the proceedings. Whilst they have not been given express notice of the current application, it is more or less in substance a continuation of the earlier one. No class member sought to be involved in any way in that earlier application and it is highly doubtful that any would have expressed any interest in the current one. It is difficult to imagine a scenario in which any class member might wish to pursue the current class action proceedings and the provision of a further notice would only likely cause confusion and added costs as well as delay. (g) As a general assessment the claim sought to be advanced in this action was relatively weak. Whilst it may have had some merit in some cases, in general terms the complaint sought to be agitated was by investors in speculative shares in circumstances where the obvious risks of the investment materialised. 8 It follows that the standard required by s 33V has been met and an order ought to be made pursuant to that section that the applicants be granted leave to settle and discontinue this proceeding in accordance with the Deed of Settlement dated 14 May 2021 and the Deed of Variation dated 18 February 2022.

Other orders 9 No party seeks any order for costs in their favour. Indeed it seems to be agreed that there be no order as to the costs of the proceedings. There is no harm in making that order. The Court was, however, invited to set aside a prior order as to the costs of an interlocutory application that has been entered. The power to do so exists under r 39.05 of the Federal Court Rules 2011 (Cth) where, inter alia, the party in whose favour it was made consents. In this case the order was made in favour of the applicants consequent upon the dismissal of an application by Oculus that it be represented by its director. As the applicants consent to the setting aside of that costs order, there is no reason why it should not be made. 10 An order is also sought which has the effect that other class members might make use of any documents obtained in the course of the current proceedings in any future proceedings. No objection is raised by Oculus in relation to the making of such an order and it is appropriate in the circumstances of this case. It follows that an order should be made that the applicants be relieved of any undertaking, whether express or implied in relation to the provision of any document obtained in these proceedings to any of the class members.

Appropriateness of these proceedings 11 Despite some misgivings and after some reflection I feel that it would be remiss of me to leave this matter without mentioning the inappropriateness of the current proceedings in general. I have doubts that the action should ever have been commenced. It is not apparent that proper inquiry was undertaken as to whether there was any likelihood of any real recovery were it to be successful, or that any relevant inquiry was made as to the existence of insurance or assets which might be used to satisfy any judgment. The pleading was badly articulated. It required substantial amendments and its defects were never remedied. The conduct of the proceedings lacked clarity and direction, particularly in relation to the appropriateness or otherwise of joining insurers. Moreover, the applicants displayed, through their legal representatives, an apparent lack of intention to advance the action at any pace. The proceedings should also never have been commenced as a class action under Part IVA of the Federal Court Act. It is doubtful that there were any real common questions which might have been conveniently answered. Even if there were, it is not apparent that those advising the applicants had sufficient knowledge or understanding of the class action procedures to enable them to adequately advance the action under Part IVA. The result of the improvident venture appears to have been no more than the transfer of approximately $500,000 from Oculus to several legal practitioners and others participating in the class action industry. That is especially poignant in the context of the lead applicants' claim being only $100,000. The interests of the class members were not advanced one iota. Indeed, in some respects it is likely that they were damaged by the process. Overall, it is an act of mercy to all concerned that the proceedings be terminated. 12 I should note that Mr Monks who appeared today has only recently been briefed in the proceedings. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.

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