Georgiou v Old England Hotel Pty Ltd

REASONS FOR JUDGMENT 1 This is an application for approval of settlement of representative proceedings pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) ('FCA Act'). The applicant commenced proceedings on his own behalf and on behalf of other persons ('group members') who fell ill and suffered physical injury or financial loss after consuming food contaminated with salmonella bacteria prepared or sold by the respondent in the period from 23 December 2003 to 7 January 2004. 2 The applicant has reached agreement with the respondent to settle the representative proceedings. Section 33V of the FCA Act provides that representative proceedings cannot be settled or discontinued without the Court's approval. Consequently, the applicant applied to the Court for approval of the proposed settlement agreement by notice of motion dated 28 March 2006.

background 3 The notice of motion came before me on 31 March 2006. On that day, after hearing submissions from counsel, I adjourned the application to 7 April 2006. It is convenient to summarise the issues raised at the hearing on 31 March 2006 because they inform the subsequent actions taken by the parties, and the reasons why I am now prepared to approve the settlement of the proceeding. 4 At the hearing on 31 March 2006, I raised two main issues concerning the form of the proposed settlement agreement, and invited counsel to make further submissions about those matters in due course. The first issue concerned a provision in the proposed settlement agreement which contemplated amendment to the statement of claim after Court approval to finalise the list of group members. The provision set out the circumstances in which the Court may add or delete persons from that list. Clause 1.1(g) of the proposed settlement agreement provided: 'On filing of the affidavit set out in sub-paragraph (f) above, the Statement of Claim be amended in an approved Form so that the Group Members to whom the proceeding relates within the meaning of Section 33H of the [FCA] Act be the Claimants. However, the addition or deletion of persons to or from the said list may be effected at any time by the Court if it is satisfied that the omission or inclusion of the person on the said list was the result of a slip by the Applicant's Lawyer or the Court.' I expressed concern at the hearing on 31 March 2006 that the proposed grounds upon which the Court may add or delete persons from the finalised list of group members under cl 1.1(g) were too narrow, having regard to the decision of Moore J in King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) [2003] FCA 980 ('King'). In that case, Moore J considered the question whether the Court should make an order finalising the class of group members and, in particular, whether the Court should be able to add or delete persons from the final list of group members in circumstances other than those resulting from some kind of slip or mistake. His Honour considered that the Court should reserve a power to add or delete group members in 'other circumstances', and he so ordered: at [7]. 5 The second matter I raised with counsel on 31 March 2006 arose from my consideration of Finkelstein J's decision in Lopez v Star World Enterprises Pty Ltd (1999) 21 ATPR 41-678 ('Lopez'). In that case, Finkelstein J was concerned with an application for approval of a settlement agreement under which an expert would determine the quantum of damages to which each group member would become entitled. The settlement agreement provided that the expert's determination would not be subject to review. His Honour expressed some reservation as to whether the Court's jurisdiction to supervise the settlement process could be ousted in that fashion: at 42,671. 6 In the present case, the proposed settlement agreement is similar to that considered by Finkelstein J in Lopez, in that it provides for a process whereby the quantum of damages of group members' claims is to be assessed and determined by agreed counsel. The agreed counsel is to act as an expert. Under cl 5.12 of the proposed settlement agreement: '[a]ny determination of the Agreed Counsel of an amount of damages to which the Claimant is entitled is, subject to paragraph 5.10 hereof, binding on the Claimant and the Respondent with no right of appeal therefrom.' Clause 5.10 sets out a special process in respect of a claimant who is under a disability, which provides that the assessment of damages is subject to Court approval. 7 In Lopez, Finkelstein J resolved the issue by reserving liberty to any group member to apply to the Court to challenge the validity or enforceability of any of the provisions of the settlement scheme. In the light of Lopez, I wished to consider whether the Court needed to take any, and if so what, steps to preserve its supervisory jurisdiction, and whether the device of reserving liberty to apply provided a completely satisfactory mechanism for doing so. 8 Another issue raised at the 31 March hearing concerned the notice requirement imposed by s 33X(4) of the FCA Act. Section 33X(4) provides that unless the Court is satisfied that it is just to do so, an application for approval of a settlement under s 33V must not be determined unless notice has been given to group members. The applicant sought to dispense with that requirement in the present case. Notwithstanding that notice of the proposed settlement agreement had not been given to group members, counsel for the applicant, Mr Armstrong, submitted that it was appropriate to approve the proposed settlement for essentially two reasons. First, Mr Armstrong contended that the cost of advertising was expensive and was not warranted in this case. Secondly, he contended that the notice requirement was unnecessary in the circumstances, having regard to the process in the proposed settlement agreement for notifying group members of the settlement of the proceeding, and giving them an opportunity to immunise themselves from the effects of the settlement agreement if they so desired. 9 Mr Armstrong submitted that the notice requirement was designed to ensure that group members are not bound by a settlement agreement of which they have not been given notice. He pointed out that the proposed settlement agreement contained a process whereby group members were to return claim forms in order to access the benefit of the settlement agreement, and any group member who did not want to be bound by the settlement could achieve that result by not returning the claim form. Counsel also submitted that notice of the proposed settlement was unnecessary because the present case lacked 'an element of compromise' of the value of the group members' claims. This was not a case where the parties had agreed on a lump sum that was to be distributed in a way that involved any form of discounting of the value of each group member's claim. Rather, the respondent had effectively agreed to pay each group member's claim in full in accordance with the assessment process set out in the proposed settlement agreement. 10 Having considered these submissions, I was not persuaded to dispense with the notice requirement on 31 March 2006. I was conscious that group members may wish to raise issues concerning the form, content and finality of the proposed settlement arrangement before the Court approved it. Accordingly, I ordered that on or before 4 April 2006, the applicant cause a notice in the terms annexed to the orders to be published in one of The Age, Saturday Age or Sunday Age newspapers, and one of The Herald Sun, Saturday Herald Sun or Sunday Herald Sun newspapers. I adjourned the application for approval of the proposed settlement agreement to 7 April 2006 so as to allow notice of the settlement and notice of the application to the Court for its approval to be advertised in accordance with section 33X(4) of the FCA Act.