Ghee v BT Funds Management Limited

THE MATERIALS 7 The applicant relies upon the following materials: (a) affidavits of Nathan Rapoport, Special Counsel with Slater & Gordon, the solicitor with the conduct of the proceeding on behalf of the applicant, made 2 December 2022, 4 April 2023, 14 June 2023, 28 September 2023, 9 November 2023 and 12 November 2023 (the First, Second, Third, Fourth, Fifth and Sixth Rapoport Affidavits respectively), the salient annexures to which include: (i) the Heads of Agreement dated 14 October 2022 (Heads of Agreement) between, on the one hand, the applicant, Slater & Gordon and Therium, and on the other hand, BTFM, WLIS and Westpac Banking Corporation Ltd, which is annexed to the First Rapoport Affidavit; (ii) the Confidential Opinion of Peter Collinson KC and Daniel Snyder of counsel dated 28 September 2023 (Confidential Opinion), which is annexed to the Fourth Rapoport Affidavit; (iii) the proposed Settlement Distribution Scheme (SDS), which is annexed to the Fifth Rapoport Affidavit; and (b) written submissions in support of the application dated 20 October 2023. 8 The respondents rely upon: (a) an affidavit of Richard Harris, a solicitor with Gilbert and Tobin, the solicitors for the respondents, made 10 November 2023; and (b) written submissions in support of a particular data verification process dated 10 November 2023. 9 Therium relies upon: (a) an affidavit of Louise Hird, an Investment Manager with Therium Capital Management (Australia) Pty Ltd and an investment adviser to the Therium Group, which includes the Therium entity funding the proceeding, made 12 October 2023; and (b) written submissions dated 16 October 2023. 10 Kerrie Rosati was appointed as an independent referee under s 54A of the Act to inquire and report in relation to the reasonableness of the applicant's legal costs (Costs Referee). She provided a report to the Court dated 7 June 2023 (Costs Referee's report).

THE RELEVANT PRINCIPLES 11 The world does not need another judgment setting out the applicable principles in relation to settlement approval under s 33V of the Act. They are well-established and I recently set them out in Webb v GetSwift Limited (No 7) [2023] FCA 90 at [15]-[17]. The organising principle of s 33V(1) is whether the proposed settlement is fair and reasonable and in the interests of the group members to be bound by the settlement, including as between the group members. Upon the Court deciding to approve the proposed settlement, s 33V(2) empowers the Court to "make such orders as are just with respect to the distribution of any money paid under a settlement".

OVERVIEW OF THE PROCEEDING 12 The proceeding concerns certain cash investment options BTFM offered to members of the BT Super for Life Superannuation Fund (SFL Fund) and BT Super for Life Plan with the Retirement Wrap (RW Fund) (together, the Funds) respectively, namely the SFL Cash Option and RW Cash Option (as those terms are defined in the further amended statement of claim dated 2 December 2021 (FASOC)). 13 The applicant brings the class action on behalf of herself and all persons who: (a) were members of the SFL Fund at any time between 29 October 2007 and 28 February 2011 (SFL Period) and had units or rights in or in respect of the "Super Cash" investment option (SFL Cash Member); (b) were members of RW Fund at any time between 28 February 2011 and 31 October 2019 (RW Period) and had units or rights in or in respect of the "Super Cash" or "Cash" investment option (RW Cash Member); (c) at any time in the SFL Period received payment from the SFL Fund, or in the RW Period received payment from the RW Fund, (as applicable), of all or part of the benefits of a deceased person who was an SFL Cash Member or RW Cash Member (as applicable); and/or (d) was the spouse of a person who was during the SFL Period or RW Period (as applicable) a SFL Cash Member or a RW Cash Member, and at any time during the SFL Period or the RW Period (as applicable) received payment from the SFL Fund or the RW Fund (as applicable) of all or any part of the member's account pursuant to an order or settlement in a Family Law Act 1975 (Cth) proceeding or a superannuation agreement within the meaning of Part VIIB of the Family Law Act. 14 The cash options were promoted as being for conservative account holders who wanted very low levels of risk and to preserve their capital. BTFM issued Product Disclosure Statements (PDSs) from time to time which stated that BTFM would invest "in cash via a life policy with [WLIS]". 15 BTFM invested the monies it received from members of the Funds in a life policy issued by WLIS (Life Policy). It did so in circumstances where at all material times both BTFM and WLIS were members of the BT Financial Group (BTFG), a business division within Westpac, and were subsidiaries of Westpac. 16 The Life Policy involved an arrangement whereby BTFM would pay premiums under the policy, comprising the funds invested by members. The premiums would be paid into certain 'Investment Portfolios' maintained by WLIS in its statutory funds which were governed under the Life Insurance Act 1995 (Cth). Each investment portfolio for the SFL Cash Option and RW Cash Option were divided into units with a value fixed at $1. The unit could not reduce in value and thereby could not be subject to any capital loss. In that sense, the investments in the Life Policy were "capital guaranteed". 17 At all material times until 2019 BTFM charged members in the Cash Options a monthly account fee of $5, but otherwise did not charge fees on funds invested in that option. That stood in contrast to other investment options available to members, in which BTFM charged (in addition to a monthly account fee): (a) prior to 2012, a management fee of 0.99% of the member's account balance; and (b) after 2012, an administration fee of around 0.45-0.50% of the member's account balance, and an investment fee which varied from option to option, but in some cases was around 0.50%. 18 The applicant alleges that WLIS had a broad discretion in setting the rate of income, if any, that would be earned by BTFM, as trustee, under the Life Policy (Income Rate). The rate of income was the fixed rate declared by WLIS from time to time. The Income Rate was an annual effective rate of interest which WLIS could declare at such intervals and for such periods as it determined, subject to the constraint that WLIS could not declare a rate less than zero. 19 It is alleged that the effect of that arrangement was that: (a) members' funds would be paid to WLIS as premiums under the Life Policy; (b) in consideration for those premiums, BTFM obtained a contractual promise that WLIS would declare income under the policy of not less than zero. Under the terms of the policy, WLIS did not promise to pay any income, and what it would pay was left entirely to its discretion; and (c) WLIS would earn revenue under the Life Policy, representing the difference between (i) the returns it made on underlying investments held in the statutory fund; and (ii) the Income Rate it paid to fund members under the Life Policy. Thus, if WLIS set a lower Income Rate, it would effectively keep a greater share of the returns from underlying investments for itself. 20 It is alleged that: (a) until late 2013 the investment portfolios in the WLIS's statutory fund attributable to the Cash Options were invested in the BT Institutional Managed Cash Fund, a conservative cash fund which invested in very low risk cash investments; and (b) in late 2013 WLIS determined, in its discretion, to change the underlying investments by investing in the newly created BT Medium Term Income Fund (MTIF). MTIF was expected to generate higher returns by investing in somewhat less liquid cash investments (in other words, earning a premium from taking on some liquidity risk). 21 The applicant alleges that the evidence shows that, in practice, Income Rates were set through consultation between WLIS and BTFM, and were principally set having regard to the revenue implications for WLIS (and thus BTFG) and with little or no consideration given to the members' best interests in increasing returns to the Funds (which would have been at WLIS's expense). 22 The crux of the applicant's case is that: (a) there was an obvious conflict of interest created by BTFM, acting as a trustee, investing monies from the Funds in the Life Policy, under which the margin earned by BTFM's related entity, WLIS, was inversely related to the Income Rates earned on behalf of members of the Funds; (b) BTFM did not appropriately manage the conflict of interest; rather, the conflict was exacerbated by the process for setting Income Rates, under which the BTFM and WLIS operated in an integrated manner, with a view to earning revenue for WLIS; (c) in doing so BTFM breached various legal duties it owed to the members under the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act); (d) there were alternative investment strategies available which would have offered much better expected returns on the funds invested by BTFM on behalf of members, similar (or lesser) levels of risk, and would have avoided the conflict of interest. BTFM belatedly invested in one such strategy in late 2019; (e) the breaches caused the applicant and group members to suffer loss and damage because the Funds, and thereby the members, would have earned higher investment returns if the breaches had not occurred; and (f) WLIS was an accessory to the Trustee's unlawful conduct both under statute and at general law (under the 'knowing receipt' limb of Barnes v Addy (1874) 9 Ch App 244). 23 The proceeding seeks compensation from BTFM and WLIS, both under statute and at general law, to be paid directly to group members, or in the case of BTFM by restoration of the relevant Fund, and an account of profits from WLIS.

THE PROPOSED SETTLEMENT 24 The key terms of the Heads of Agreement are as follows: (a) the settlement is conditional upon Court approval and is made without admission of liability; (b) BTFM and WILS must pay $29.95 million (settlement sum) (which amount has since been paid into an interest-bearing account and held on trust); (c) if the settlement is approved the settlement sum is to be distributed in accordance with orders made by the Court pursuant to s 33V(2) of the Act; (d) BTFM agrees that none of the settlement sum or its costs of and incidental to the proceeding will be funded through the exercise of any rights of indemnity in respect of trust assets. As such, group members are protected from the risk of the remaining members' interests in the Funds being diluted by such claims for indemnity; and (e) the applicant releases the respondents, Westpac and their officers on her own behalf and on behalf of the group members.

WHETHER THE PROPOSED SETTLEMENT IS FAIR AND REASONABLE

The Confidential Opinion 25 I have had the benefit of considering the Confidential Opinion of counsel briefed in the proceeding, Peter Collinson KC and Daniel Snyder, dated 28 September 2023. I cannot go to the detail of the Confidential Opinion and it must suffice to note that it addresses the risks the applicant faced in establishing the respondents' liability; the risks and variables in relation to establishing the quantum of group member's claims and how those risks and variables might affect quantum if the applicant is successful on liability at trial; the salient factors in relation to settlement approval under the Class Actions Practice Note (GPN-CA); whether the proposed deductions from the settlement sum under the SDS for legal costs, litigation funding charges, settlement administration costs and a reimbursement payment to the applicant are fair and reasonable; and the fairness of the assessment and distribution of group members' entitlements under the SDS. It is a considered and comprehensive opinion (running to 105 pages), and it concludes that the proposed settlement is fair and reasonable in the interests of group members to be bound by it and as between group members. I have given substantial weight to the Confidential Opinion.

The scope of the proposed releases 26 Clause 3(f) of the Heads of Agreement provides that, if the proposed settlement is approved: The applicant (on her own behalf and on behalf of all Group Members) releases the Respondents and Westpac Banking Corporation, and their related entities, and officers, from all claims which they had, have or may have in the future against the Respondents relating to the matters which are the subject of the Proceeding to the extent permitted by law. Emphasis added in italics. 27 Acting on her own behalf the applicant can provide the respondents with whatever release she likes, but there are limits to her capacity to release the claims of group members. In Dyczynski v Gibson [2020] FCAFC 120; 280 FCR 583 at [250]-[251] (Murphy and Colvin JJ) and [395]-[396] (Lee J), the Full Court explained that the authority of the representative applicant in a class action does not extend to settling individual or idiosyncratic claims of group members (as opposed to 'common claims' as recognised under s 33C of the Act), subject to the qualifications expressed by Lee J (at [398]). 28 In doing so the Full Court disapproved Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51; 118 ACSR 592 at [56]-[58] (Santamaria, Ferguson and McLeish JJA) in which the Victorian Court of Appeal concluded that s 33ZF in Part 4A of the Supreme Court Act 1986 (Vic) (the equivalent to s 33ZF of the Act) supplies the privity which is otherwise absent in respect of the individual claims of group members, such that a settlement may be binding on group members in respect of both common claims the subject of the proceeding and any individual claims. Their Honours concluded (at [58]) that a class action can be settled "on whatever terms the parties have agreed and the Court has approved". 29 I am bound to follow Dyczynski and in any event I prefer that reasoning. I consider the applicant is only entitled to deal with group member's rights to the extent that the applicant is representing those rights, and the applicant only does so in respect of common claims recognised under s 33C of the Act. Having said that, in my view the authority of the applicant to provide a release in relation to group member's claims extends to common claims that are not pleaded but which could have been pleaded in the proceeding: see Petersen Superannuation Fund Pty Ltd v Bank of Queensland Ltd (No 3) [2018] FCA 1842; (2019) 132 ACSR 258 at [28] (Murphy J). 30 Under cl 3(f) of the Heads of Agreement the applicant purports to release "all claims" of the group members, including as against Westpac (which is not a party to the proceeding), "relating to the matters which are the subject of the Proceeding to the extent permitted by law". The phrase "relating to" has a broad meaning, and in my view the proposed release extends to cover all group member's claims "relating to" matters which are the subject of the proceeding including claims which are individual or idiosyncratic to the group member; that is, claims which are not common claims under s 33C. 31 I accept that the words "to the extent permitted by law" at the end of cl 3(f) are words of limitation, but what the law may or may not permit is uncertain, particularly when one has regard to the conflicting decisions in Dyczynski and Pekell as to the permissible scope of a release of group member's rights provided by a representative party. In that sense the scope of the proposed release of group members' rights against the respondents and/or Westpac, and their respective officers, is uncertain and unsatisfactory. It may be doubted that group members have such individual or idiosyncratic claims, but the applicant cannot know that. Nor can the Court. 32 I raised the difficulty with the scope of the proposed release in the settlement approval hearing. Mr Arnott SC for the respondents accepted that the releases proposed to be provided by the applicant on behalf of group members cannot and are not intended to go beyond the common claims of the group members which are or could have been pleaded in the proceeding. On that basis I consider that the scope of the releases of group members' rights in the Heads of Agreement are within the applicant's authority, and they do not stand in the way of settlement approval.

The preclusion of unregistered group members 33 The proceeding was initiated and has continued as an "open" class action. Thus unless they have opted out, all persons who fall within the group definition in the FASOC are group members and they may therefore be entitled to share in the proposed settlement. Based on data provided by BTFM, there appears to be approximately 77,000 group members.

The requirement that group members register 34 The proposed SDS, however, requires that group members register their interest if they are eligible to participate in the settlement. The task of ascertaining the eligibility of group members to participate falls to the Settlement Administrator, which is proposed to be Slater & Gordon. Upon approval of the settlement, registered group members may be entitled to a share of the proposed settlement, whereas group members who do not register (and have not opted out) will be bound by the settlement but not permitted a share in it. Thus, if approved the SDS will operate similarly to a class closure order. 35 Class closure orders are within the power of the Court having regard to the reasoning in Parkin v Boral Ltd (Class Closure) [2022] FCAFC 47; 291 FCR 116 (Murphy, Beach and Lee JJ). In large part the legitimacy of such orders depends on the adequacy of the notice given to group members: see Matthews v SPI Electricity Pty Ltd (Ruling No 13) [2013] VSC 17; 39 VR 255 at [79(c)] (Forrest J); Kelly v Willmott Forests Ltd (in liquidation) (No 4) [2016] FCA 323; 335 ALR 439 at [153]-[160] (Murphy J). 36 I considered it appropriate to order a comprehensive regime for notification to group members regarding the proposed settlement and the requirement to register. On 5 April 2023, I made orders requiring BTFM to prepare data (Group Member Data) from its records, to the extent available, directed at assisting the identification of group members and thereby assisting in notifying them of the proposed settlement, the requirement to register, and ultimately the distribution of settlement monies to group members. 37 On 15 June 2023, I made orders: (a) approving the form of a Notice of Proposed Settlement (Concise Notice), a regime for its distribution to group members, and the text of a notice to be displayed on Slater & Gordon's webpage for this proceeding (Website Text), and the text of an SMS to be sent to group members. The Concise Notice and Website Text informed group members of the proposed settlement that: (i) to ensure that they were eligible to receive an entitlement under the proposed settlement they must register by 4:00 pm (AEST) on 21 August 2023; and (ii) if they wished to object to the proposed settlement or any aspect of it they must notify that objection by completing a Notice of Objection to be provided to the Court by 4:00 pm (AEST) on 21 August 2023. The SMS directed group members to visit Slater & Gordon's webpage by searching "BT Super Class Action"; (b) approving the applicant's instruction of Link Market Services (Link) to develop, operate and maintain a custom online portal and a group member contact centre, directed at facilitating the registration process outlined in the Concise Notice and Website Text, the management of group member inquiries, and ultimately the direct payment of entitlements under the SDS to registered eligible group members; (c) requiring BTFM to securely share the Group Member Data with Link to enable Link to facilitate the distribution of the Concise Notice and the group member registration process; and (d) requiring BTFM to provide a de-identified version of the Group Member Data to Slater & Gordon. 38 The evidence shows that in the period from 17 to 26 July 2023, the Concise Notice was sent to group members by email, and in some cases, by post. In some limited instances, email delivery to group members failed, and no postal address was held. Of 18,250 notices sent by post, 2,612 were returned to sender. On 17 July 2023, the Website Text commenced to be displayed on Slater & Gordon's relevant webpage. To further notify group members of the proposed settlement, Slater & Gordon and Link respectively sent various mass emails, sent a mass SMS in accordance with the 15 June Orders and also undertook a social media campaign. 39 Due to an oversight by Slater & Gordon, a separate webpage which the firm had previously set up for persons to register their interest in the proceeding (Old Registration Platform) remained active after the Website Text was uploaded onto the main Slater & Gordon webpage for the proceeding. In the period from 17 July 2023 to 21 August 2023, 412 individuals registered via the Old Registration Platform, potentially in the mistaken belief that they were registering for the proposed settlement. An email was then sent to individuals who had not already registered via the correct link for the settlement. As at 11 September 2023, 193 of the 412 individuals had registered via the correct link for the settlement. 40 In my view, it is appropriate to treat any group member who registered their interest via the Old Registration Platform as having sufficiently registered. I so direct the Settlement Administrator. 41 In this case: (a) class closure will not come into effect until after settlement approval, and it is necessary in order to calculate the entitlement of each eligible group member to a share of the settlement sum and to distribute the settlement monies to them. The requirement for group members to register is not sought to be imposed at an early stage of the proceeding: Winterford v Pfizer Australia Pty Ltd [2012] FCA 1199 (Bromberg J); (b) class closure will only occur following a comprehensive notice regime to group members including by direct email and mail, on a website, direct SMS and by a social media campaign; (c) the Concise Notice and Website Text informed group members in clear terms that if they wished to ensure their eligibility to receive an entitlement under the proposed settlement, if approved, they must register by 4:00 pm (AEST) on 21 August 2023; (d) group members were also informed in clear terms that if they "wish to object to the Proposed Settlement or any aspect of it" they must notify that objection by 4:00 pm (AEST) on 21 August 2023; and (e) no group member objected to the requirement to register. 42 In the circumstances, the requirement for group members to register if they are to be eligible to share in the settlement monies, and to bind group members who do not register into the settlement such that they lose their rights to sue the respondents and Westpac but are not eligible to share in the settlement monies, does not stand in the way of settlement approval.

The Group Member Data verification dispute 43 The evidence shows that BTFM has transferred the accounts of all members who had active accounts in BT Super for Life and BT Super to the Mercer Super Trust. Under the SDS, for those group members for whom Mercer has the relevant details, it will facilitate the payment of any entitlement they have under the SDS (Eligible Mercer Account Holders). Thus, the registration of, and distribution of settlement monies to, those approximately 15,000 group members is likely to be relatively straightforward. 44 However, for the balance of the group members (approximately 62,000 persons), as at 11 September 2023 only 14,740 registration forms had been submitted by group members (excluding duplicate registrations where all information submitted by the registrant was the same). Of these Mr Rapaport identified: (a) 12,199 as being "high confidence matches" where it is highly likely that the person who submitted the registration is the person listed in the de-identified Group Member Data provided by BTFM; (b) 1,401 as being "possible matches" where at least one of the first name, surname or date of birth do not perfectly match BTFM's records, where further checks may be required to verify that the registrant is entitled to participate in the settlement; and (c) 1,157 as being "non-matches", where further checks of any unique single data points may be required. 45 It is common ground between the parties that, in order to verify that some persons who have registered with Slater & Gordon to participate in the settlement are in fact group members, it will be necessary for additional verification steps to occur. It is also common ground that BTFM is likely to hold customer data of its former members that may assist in carrying out that verification. 46 At present, Slater & Gordon cannot conduct the further checks Mr Rapoport considers necessary because the firm has only been provided with de-identified Group Member Data. The firm presently does not have the name, email addresses, postal addresses or phone numbers of group members in the Group Member Data, and Link has indicated that it is not prepared to conduct the necessary further checks, including because Slater & Gordon cannot sign off on them. 47 BTFM has, however, declined to provide its customer data to Slater & Gordon. The applicant seeks orders that BTFM be compelled to do so. BTFM resists such an order. In reliance on Mr Harris' evidence BTFM contends that: (a) it is better placed than Slater & Gordon to determine quickly and efficiently whether particular registered persons are in fact group members. It says that if Slater & Gordon raises a query with BTFM, BTFM will be able to check across the information it holds to confirm whether the registered persons are group members. Because this will occur within BTFM, it will be able to occur more efficiently than if data is requested by Slater & Gordon, obtained by BTFM and then produced to Slater & Gordon, with checks then being performed by Slater & Gordon and, potentially, further data being requested by Slater & Gordon if the verification is inconclusive; (b) it is preferable for group members if BTFM undertakes this work because it will do so free of charge to group members whereas if Slater & Gordon performs the work it will involve a charge for group members (although Slater & Gordon have agreed to reduce their charges to 50% of their standard hourly rates); and (c) that it takes significant precautions to only provide customer data to third parties who have been subject to rigorous testing of their cybersecurity standards. It says that the risk of compromise of individual personal information during any transfer to Slater & Gordon or of it being improperly accessed by third parties while held by Slater & Gordon is difficult to gauge. But it says that what can be assumed is that there will be added risk if Slater & Gordon is given access to the customer data. It also says that once the customer data is possessed by Slater & Gordon it will be practically impossible to reliably delete. It notes the recent high profile data breach suffered by HWL Ebsworth. It argues that keeping customer data within BTFM ensures that its former members are not exposed to the risks that arise from the transfer of customer data to a third party. 48 I can accept that it will be more efficient for BTFM to undertake the data verification work but in my view it would be inappropriate to leave it to BTFM to determine whether or not particular registered persons are in fact group members and eligible to participate under the proposed settlement. BTFM is a respondent to the proceeding and its interests are not aligned with those of the group members. 49 I accept that it will be more expensive if Slater & Gordon undertakes the data verification work, notwithstanding its offer to do that work at 50% of its standard rates. But I doubt that the costs differential will be material. Further, it is difficult to see how the Settlement Administrator can be properly satisfied that all group members who should be registered have been, unless it checks the data verification work by BTFM. And, as BTFM accepts, even if it undertakes the data verification work, Slater & Gordon will be required to undertake further verification work after that. 50 Having said all that, I accept that the transfer of the Group Member Data to Slater & Gordon will involve some cybersecurity risks, and it is best that those risks be avoided or, at the very least, minimised. 51 Accordingly, I made orders for the data verification work to be undertaken at first instance by BTFM. Then, pursuant to the safest regime upon which the parties can agree, I made orders for BTFM to provide Slater & Gordon with access to the Group Member Data so that it can undertake such data verification as it considers necessary. The parties agreed upon a regime under which BTFM provides the Group Member Data on an appropriately secured and air-gapped laptop computer which Slater & Gordon will securely store and immediately return to BTFM after they have undertaken their data verification work.

The relevant factors under the Class Actions Practice Note 52 Each of the relevant considerations in the Class Actions Practice Note (GPN-CA) point in favour of approving the proposed settlement. 53 The stage of the proceeding at which settlement was achieved. At the point that the parties entered into the Heads of Agreement discovery was complete; the applicant had filed her evidence including expert reports; the respondents had filed their evidence including lay evidence from various employees and expert reports, and the proceeding was listed for trial. By that time, the parties' lawyers were in a good position to make an informed assessment of the evidence to be adduced at trial, and the strengths and weaknesses of their respective cases. 54 The complexity and likely duration of the litigation. The proceeding raises complex technical and legal issues, including legal issues which have not previously been dealt with in a superannuation context. It is both factually and legally complex and the trial would likely take two to three weeks. The settlement avoids the uncertainty and delay associated with prosecuting the claims to judgment. In a large, complex and strenuously defended proceeding like this there is always the risk of an appeal, and the settlement also avoids the risk of uncertainty and delay associated with any such appeal. If settlement is not approved, the earliest that the case could realistically again be set down for trial would be in the second half of 2024. 55 The risks of establishing liability. In my view the applicant has reasonable prospects of establishing that BTFM was in a position of conflict when it invested in the Life Policy under which the margin earned by its related entity was inversely related to the Income Rates earned on behalf of members. The more difficult question is whether the applicant can establish that BTFM failed to appropriately manage that conflict and that the applicant and group members suffered loss as a result. I am though satisfied that the applicant faces risks of failing, in whole or in part, to establish the alleged breaches of duty under the SIS Act and at general law by BTFM, WLIS, or both. There are greater risks that the applicant will fail as against WLIS, which entails all the risks of establishing the claim as against BTFM, and then the additional risk of establishing WLIS's liability for knowing receipt of trust property which had been applied in breach of trust. 56 The risks of establishing loss or damage. In my view the applicant has reasonable prospects of establishing some causally related loss. I am though satisfied that the applicant faces some risks and uncertainty in that regard. There are various risks and variables in relation to quantum and a number of permutations as to how the different loss scenarios might play out, and the difference in quantum under the different scenarios is significant. 57 The reasonableness of the proposed settlement in light of the attendant litigation risks. The proceeding is large, complex and strenuously defended, the applicant is represented by experienced and competent lawyers, and the proceeding has risks on liability and quantum. I am satisfied that the proposed settlement falls within the range of reasonable outcomes in light of the attendant risks of the litigation. That is not to say that the applicant might not have obtained a greater sum had the case proceeded to judgment and been successful. As I said in Kelly at [74]: It is established that the Court should not second-guess the applicant's lawyers as to whether the settlement ought to have been accepted, or to proceed as if it knows more about the actual risks of the litigation than those lawyers. The Court takes the applicant's lawyers as it finds them, recognising that different applicants and different lawyers will have different appetites for risk. The question is whether the proposed settlement is within the range of reasonable outcomes, not whether it is the best outcome which the Court considers might have been won by better bargaining.

Whether the proposed SDS is fair and reasonable 58 The terms of the proposed SDS are summarised in the Fourth Rapoport Affidavit at [163]-[209]. For the reasons I now explain, I am satisfied that the SDS is fair and reasonable as between group members. 59 In relation to fairness as between group members, a particular concern of the Court is to confirm that the interests of the applicant, or the signed-up clients of the solicitors for the applicant or the litigation funder, are not being preferred over the interests of other group members. The arrangement should be framed to achieve a broadly fair division of the proceeds, treating like group members alike, as cost-effectively as possible: Camilleri v Trust Company (Nominees) Ltd [2015] FCA 1468 (Moshinsky J) at [5(e)]. This may involve judgment calls being made where a range of alternative approaches might have been open to adopt. To the extent that the scheme involves any special treatment of the applicant or some group members, for instance via a "reimbursement payment" to the applicant, it is relevant whether the special treatment is justifiable: Camilleri at [43(e)]. 60 There are also a number of procedural factors to consider when assessing the fairness of a proposed SDS: (a) whether an appropriate organisation or person has been nominated to administer the SDS; (b) whether the procedures for lodging and assessing claims are appropriate and to be conducted in a timely manner; (c) the nature and extent of the "judgment calls" proposed to be made by the scheme administrator; and (d) whether the SDS incorporates appropriate "checks and balances", such as procedures for ensuring consistency between assessments and meaningful opportunities for review (and objection) by group members: Camilleri at [44]. 61 In my view, the proposed SDS is fair and reasonable as between group members. The SDS its is discussed in detail in the Fourth Rapoport affidavit and I need not set that out here. It is also given careful consideration in the Confidential Opinion. I will though briefly note the following matters: (a) I am persuaded that it is appropriate to appoint Slater & Gordon as Settlement Administrator under the SDS. The firm have dealt with the group members over an extended period, have an intimate knowledge of the issues raised in relation to claims under the SDS, are experienced in administrating SDSs and propose to use Link for various delegated tasks where Link can provide those services more cheaply than it. There was no suggestion that Slater & Gordon is conflicted in acting as Settlement Administrator. (b) The proposed method for calculating "Entitlements" (as defined) under the SDS involves several judgment calls. I am satisfied that the judgment calls are consistent with the case that was to be advanced to trial and supportable as a matter of legal principle; the SDS subjects all claims to the same principles and procedures for assessing compensation shares; the task under the SDS involves allocating shares in a fixed sum, and the assessment methodology is likely to deliver broadly fair relativities; and in my view the costs of a more perfect assessment procedure would erode the notional benefit of a more exact distribution: Camilleri at [40]-[43]. (c) The proposed SDS does not contain a mechanism for group members to formally request a review of their Entitlements or distributions under the SDS. I am though persuaded that there is little utility in allowing for individual review, in light of the proposed methodology for calculating Entitlements and making distributions. Further, in the event of a dispute, the SDS empowers the Settlement Administrator to refer that issue to the Court. (d) The proposed SDS includes a minimum $10 threshold before a group member is entitled to receive a distribution under the scheme. I consider that threshold to be reasonable in light of the wastage and inefficiency in distributing amounts below that threshold. (e) The applicant proposed, and I accept, that the Consumer Action Law Centre is an appropriate organisation to be paid any residual funds left over after distribution to group members.

The reaction of the class 62 13 group members submitted a Notice of Objection or sent an email to Slater & Gordon or the Court indicating an intention to object. The objectors represent only a very small proportion of the approximately 14,700 group members who have registered to participate in the settlement and approximately 15,000 Eligible Mercer Account Holders (excluding those captured in the first figure). The applicant submits that the low level of objections is a relevant consideration in support of settlement approval. I accept that it is relevant, but it carries little weight and the Court remains responsible for protecting group members' interests: Money Max Int Pty Ltd v QBE Insurance Group Ltd [2016] FCAFC 148; 245 FCR at [50] (Murphy, Gleeson and Beach JJ). The objections provide a convenient focus by reference to which the Court may assess the fairness and reasonableness of a proposed settlement and it is the Court's task to make that assessment: Darwalla Milling Co Ltd v F Hoffman-La Roche (No 2) [2006] FCA 1388; 236 ALR 322 at [39] (Jessup J). 63 Of the 13 objectors, eight submitted Notices of Objection which indicate a reason for the objection, and they can be grouped as follows:

Objections to the level of legal costs and litigation funding charges 64 Four group members objected on the basis that the applicant's legal costs and the litigation funding charges proposed to be deducted from the settlement sum are excessive and should be disallowed. One objector said that the legal costs comprise more than 50% of the settlement amount; that such legal fees have no "fair basis in reality", that the case is only about "how much money the lawyers will make" and that $15 million in total deductions from the settlement sum is excessive. Another said that there are no special circumstances in the case that justify Therium's commission at the level sought and the amount of remuneration payable to Slater & Gordon and Therium should be reduced to 40% of the settlement sum. 65 As I later explain, I am satisfied that the applicant's legal costs of $7.364 million are fair and reasonable. It is appropriate to adopt the Costs Referee's report in relation to legal costs incurred up to 25 May 2023, and to vary it after that date because her assessment of future legal costs was just an estimate, which proved to be too low. It is also appropriate to approve litigation funding charges in a total of $6.888 million. 66 For those uninitiated in the huge legal costs and litigation funding charges commonly associated with conducting large, complex class action litigation, legal costs and litigation funding charges of such a magnitude may appear excessive. But there is nothing to indicate that any of the objectors have any expertise in the assessment of reasonable legal costs and litigation funding charges in litigation like this, or any understanding of the extent of legal costs and litigation funding charges commonly incurred in such litigation. Nor is there anything to indicate that any of them have read the Costs Referee's Report. This objection is an uninformed one and I do not accept it.

Insufficient information 67 Another group member objected on the basis that no information has been provided in regards to the loss incurred by group members individually or in total or in relation to what group members may each expect to receive upon approval of the proposed settlement. 68 There is little force to do this objection: (a) as regards the lack of information regarding the loss incurred by group members, the Website Text makes clear that loss will be calculated according to a formula contained in the SDS. Group members had an opportunity to review the settlement formula in the SDS before the approval hearing and there is nothing to indicate that Mr Banks did so. A range of potential outcomes are possible in relation to the quantum of compensation or account of profits that might be recoverable in the proceeding, dependent on various liability findings, and it is unrealistic to expect the applicant to disclose those matters to group members in a Notice of Proposed Settlement; and (b) as regards the asserted failure to disclose and estimate what each individual could expect to receive under the proposed settlement, any such estimate would have been speculative because of a number of variables, including: (i) the number of group members who register and are determined to be eligible; (ii) the size of the claimed losses of eligible group members; and (iii) the amount of the Court-deductions from the settlement sum. It would be impractical to make an estimate at this stage and if an estimate were made it would be highly uncertain and likely to mislead group members.

Other objections 69 Another group member objected on the basis that she believed she would only be eligible for a minimal amount of compensation as a result of the relatively small size of her retirement savings and the brief amount of time that her savings were invested in the Cash Option. That may well be her position but it does not justify refusing to approve the proposed settlement. 70 A further group member objected on the basis that the respondent should be penalised to a greater degree than the proposed settlement sum provides. This objection misunderstands the nature of the proceeding. The proceeding is a claim for compensation for losses suffered by the applicant and group members; it does not seek the imposition of a civil penalty on the respondents and no such relief is available to the applicant. 71 The basis for another objection is unclear. That objector wrote "Interest and legal costs as full and final settlement of the claims in the class action". I treated that as an objection on the basis that the proposed settlement does not include interest and legal costs, and is therefore inadequate. As I have said, in my view the proposed settlement falls within the range of reasonable outcomes of the proceeding and this objection does not justify refusing to approve the proposed settlement. 72 Another group member objected on the basis that he was "unable to register" because he did not have his BT account number. He assumed that he therefore could not make a claim. He was contacted by Slater & Gordon and he then completed the registration process. Again, that is not a reason to refuse to approve the settlement.

THE PROPOSED DEDUCTIONS FROM THE SETTLEMENT SUM 73 The SDS provides that, prior to distribution to eligible group members, the Settlement Administrator shall deduct from the settlement sum any Court-approved: (a) legal costs; (b) litigation funding charges and costs; (c) settlement administration costs; and (d) a reimbursement payment to the applicant. 74 In approving a settlement under s 33V, the Court will, as part of its protective and supervisory role in relation to group members, only allow deductions from the settlement sum in an amount that the Court is satisfied are fair and reasonable viewed from the perspective of group members: Bellamy's Australia Ltd v Basil [2019] FCAFC 147; 372 ALR 638 at [13] (Murphy, Gleeson and Lee JJ).

Whether the applicant's legal costs are reasonable and proportionate 75 It will usually be 'just' pursuant to s 33V(2) of the Act to order that the reasonable legal costs incurred by the applicant be deducted from the settlement sum before distribution of the balance to group members. The effect of such an order will be that group members who will share in the fruits of the settlement will pay a pro rata share of the legal costs of obtaining the settlement. 76 But in exercising its protective role the Court must be satisfied that the legal costs proposed to be deducted are reasonable and proportionate. 77 The Costs Referee's report is detailed and thorough. She concludes that reasonable legal costs incurred in the period up to 25 May 2023, plus estimated reasonable legal costs for the period from 26 May 2023 up to the settlement approval hearing on 13 November 2023, total $7,060,046. That reflects a 7% reduction on the costs claimed by Slater & Gordon up to 25 May 2023. 78 Slater & Gordon accepts the Costs Referee's report in respect to legal costs incurred up to 25 May 2023 but it contends that her estimate of the reasonable costs for the period from 26 May 2023 until the settlement approval hearing was just an estimate, which has proven to be too low. 79 For the period from 26 May 2023 until the settlement approval hearing the Costs Referee estimated legal costs at $567,901, comprising $299,946 for conditional professional fees, $74,986 for uplift on those conditional fees and $192,968 for counsel's fees and other disbursements. The estimate did not, however, include an estimate of Link's variable charges, which had previously been estimated in the range of $265,000-$355,000. 80 In the Fifth Rapoport Affidavit Mr Rapoport deposed that the actual costs incurred by Slater & Gordon in the period from 26 May 2023 to the settlement approval hearing were $872,399, comprising $506,893 for professional fees (to which no uplift is applied and which reflects a 7% reduction in fees consistent with the reduction the Costs Referee considered appropriate in the earlier period) and $365,506 in disbursements (principally Link charges of $213,172 and counsel's fees of $109,807). 81 He states, and I accept, that the reasons why Slater & Gordon's professional fees incurred after 26 May 2023 were greater than the estimate that the firm had provided to the Costs Referee include that: (a) the estimate did not include any fees relating to group member enquiries because those were highly unpredictable; (b) the work to prepare the SDS and evidence in support of the settlement approval application, including the work assisting counsel in relation to the Counsel Opinion, exceeded that which was estimated; (c) more time was spent liaising with and providing instructions to Link than had been estimated; (d) more work was done analysing registrations and preparing for the implementation of the distribution formula in the SDS than had been anticipated would be done prior to the hearing of the settlement approval application; and (e) the extensive correspondence with the respondents regarding the Settlement Administrator obtaining access to the Group Member Data in order to assess registrations, which also required further analysis of registrations and further liaising with Link, was not anticipated. 82 It is appropriate to adopt the Costs Referee's Report in relation to the applicant's costs up to and including 25 May 2023 without variation. In relation to the period from then until 13 November 2023 it is appropriate to vary it by increasing the allowance for the applicant's legal costs by $304,498. 83 I therefore approve the deduction of the applicant's reasonable and proportionate legal costs of $7,364,544 from the settlement sum to be paid: (a) to Therium in reimbursement of the legal costs it paid; and (b) to Slater & Gordon for the balance.

Whether the proposed litigation funding charges are reasonable and proportionate

Therium's application 84 By an interlocutory application dated 13 October 2023, Therium seeks orders pursuant to s 33V of the Act approving the deduction of the following amounts for payment to it, pursuant to the SDS: (a) $2,716,489 in reimbursement of legal costs paid by Therium to Slater & Gordon; (b) $6,519,574 as a funding commission calculated on a multiple of 2.4 times the legal costs paid by Therium; and (c) $1,180,000 in reimbursement of ATE insurance premiums and associated deeds of indemnity paid or to be paid by Therium. 85 Therium seeks an order that the above amounts be deducted by way of a CFO.

Ms Hird's evidence 86 Therium relies on the affidavit of Ms Hird dated 12 October 2023. She was not cross-examined and I accept her evidence. 87 Ms Hird deposed that in early 2019, Slater & Gordon approached the Therium group and enquired whether it was interested in investigating and funding a potential claim against BTFM. Subsequently, over a number of months, Therium together with Slater & Gordon investigated the potential claim. 88 She said that the proposed claim had a number of risks and difficulties. Through May and June 2019 Therium discussed the potential claim with Slater & Gordon and the funding terms Therium might offer (including potential funding multiples) and the risks Therium perceived in respect of the claim. 89 It was Therium's policy to obtain ATE insurance in all cases that it funded in jurisdictions which have a "loser pays" costs rule and where it agrees to provide an adverse costs indemnity to the funded party. She said that Therium includes the costs of ATE insurance as a separate item in "Litigation Costs" under its LFAs, such that ATE costs would be separately charged to the funding commission. Some Therium LFAs provided for ATE costs to be included in the costs to which the funding commission multiple is applied, but that is determined on a case-by-case basis. 90 Ms Hird said that by July 2019: (a) Therium had informed Slater & Gordon that it sought a funding commission calculated on a 2.4 times multiple on invested capital (which was below its benchmark rate), plus an entitlement to recover all of its costs, including the cost of ATE insurance to meet any requirement to pay adverse costs. On that basis, for every dollar Therium paid in relation to the case it would be entitled to both: (a) $1 in return of its costs; and (b) $2.4 as a funding return; (b) in response to Therium's concerns as to the amount of costs likely to be incurred as against the quantum of recovery (depending on different scenarios that were modelled) Slater & Gordon proposed terms whereby Therium would pay 50% of its professional fees and 100% of disbursements up to an agreed cap, and that Slater & Gordon would undertake the other 50% of any necessary work on a no win-no fee basis with a potential 25% uplift on the conditional portion of its fees; (c) Slater & Gordon proposed that the proceeding be conducted on an "open class" basis as that would deliver compensation to a greater number of group members, and reduce costs as book-building costs would be avoided, which in turn would increase the net return to group members; and (d) Slater & Gordon proposed that the applicant seek a common fund order at an appropriate juncture in the proceeding. 91 Ms Hird said that if Therium could not recover its ATE costs as a cost outlaid, then it would require a higher commission return in order to satisfy its investors. Further, although Therium would not fund a class action and provide an indemnity for adverse costs without taking out ATE insurance, hypothetically, if it did not take out ATE insurance its risk would be significantly greater and it would seek a higher return on its investment which would flow through to a higher rate of commission. 92 In around August 2019 Therium entered into an LFA with the applicant and Terms of Engagement with Slater & Gordon. Those agreements had the following key elements: (a) the applicant agreed to engage Slater & Gordon as her solicitors and Slater & Gordon agreed to enter into the Terms of Engagement with Therium; (b) Therium agreed to fund 50% of Slater & Gordon's professional fees and 100% of the disbursements incurred up to a fixed cap, pursuant to the Claim Budget which provided for total legal costs of $3,743,966, made up of $1,846,900 in professional fees and $1,897,066 in disbursements; (c) Therium was therefore obliged to pay legal costs up to a fixed cap of $2,820,516 (incl. GST). In the event the cap was reached, Slater & Gordon was obliged to continue prosecuting the proceeding until judgment or settlement of the proceeding; (d) Slater & Gordon agreed to enter into a conditional legal cost agreement with the applicant to cover the other 50% of the costs of the proceeding, under which it would be entitled to seek a 25% uplift on the conditional fees; (e) Therium agreed to indemnify the applicant for the risk of an adverse cost order and would obtain ATE insurance to manage that exposure, doing so on the basis it could recover this cost through any settlement or judgment in favour of the applicant; (f) Therium agreed to provide security for costs to the extent required, and the cap that applied to its obligations to pay legal costs excluded any amounts that it was required to pay into court for security for costs or paid to secure a deed of indemnity; (g) the proceeding was to be conducted on an open class basis; (h) the applicant agreed to instruct Slater & Gordon to seek a common fund order at an appropriate juncture; (i) Therium was entitled to be reimbursed from any judgment or settlement in favour of the applicant (in first priority to other amounts payable) any "Litigation Costs" it had paid, which included legal costs, ATE costs and any costs associated with security for costs, and taxes; and (j) after reimbursement to Therium of its Litigation Costs, and any payment to the Settlement Administrator for the costs of settlement administration, and to Slater & Gordon for its unpaid costs (including the conditional element), Therium was entitled to payment of a funding commission calculated at 2.4 times the Litigation Costs it had paid. 93 Therium obtained ATE insurance and associated deeds of indemnity for security for costs at a cost of $1.180 million, for which it paid $828,000 in upfront premiums and fees for the deeds of indemnity and was required to pay a contingent premium of $352,000 upon a successful outcome in the proceeding. Therium calculated the necessary level of cover by reference to the Claim Budget and it selected the ATE policy in a competitive process in which AmTrust offered the lowest price. 94 The legal costs Slater & Gordon incurred substantially exceeded the Claim Budget it had proposed. In late 2021 Slater & Gordon requested a $2.53 million increase being an additional $1.1 million for professional fees and $1.42 million for disbursements. The proposed increase in the funding cap was based on a Varied Claim Budget provided by Slater & Gordon in which it estimated total legal costs at $7,886,661 made up of professional fees of $5,690,865 (being an increase of $3,843,965) and disbursements of $2,195,795 (being an increase in $298,730). 95 Therium was not prepared to increase the funding cap as it considered that if it invested further funds it would be unlikely to obtain a 2.4 times multiple on any further investment, particularly in circumstances where other distributions would also be sought from any favourable settlement or judgment, including Slater & Gordon's unpaid fees plus uplift. 96 She said that Therium later offered to provide some additional funding so as to meet the additional disbursements under the Revised Claim Budget, but only if Slater & Gordon agreed to some variations to the "waterfall" of priorities in the payments out of any favourable settlement or judgment. Slater & Gordon did not accept that offer and instead determined to continue to prosecute the proceeding by carrying its further fees and meeting the further disbursements on a no win-no fee basis. Thereafter, Therium did not provide any further funding and Slater & Gordon did not invoice it for any further professional fees or disbursements.

The legal costs incurred by Therium 97 Before it ceased to provide further funding for the proceeding Therium had paid legal costs in a total of $2,716,489, which costs have been assessed as reasonable by the Costs Referee. 98 In my view it is manifestly 'just' pursuant to s 33V(2) that Therium be reimbursed the amount it paid for the applicant's legal costs. Therium has an entitlement under the LFA to be reimbursed such costs from the gross settlement, and making such an order will mean that the group members who share in the fruits of the settlement will pay a pro rata share of the legal costs of obtaining the settlement.

Therium's proposed litigation funding charges 99 Therium also seeks: (a) payment of a funding commission in the sum of $6,519,574, calculated on a multiple of 2.4 times the legal costs it paid; and (b) reimbursement of $1,180,000 paid by it in ATE costs.

Power to make a common fund order at the point of settlement approval 100 As I have said many times over the years, upon approval of a settlement under s 33V(1) of the Act, I consider s 33V(2) provides power to make an order that is directed at fairly and equitably distributing the burden of litigation funding expenses amongst all persons who have benefited from the action, whether such an order be called a CFO, an expense sharing order or by some other nomenclature. I expressed my reasons for that view in cases such as Uren v RMBL Investments Ltd & Anor (No 2) [2020] FCA 647 at [50]-54]; Webster (Trustee) v Murray Goulburn Co-Operative Co. Limited (No 4) [2020] FCA 1053 at [110]-[112]; and Court v Spotless Group Holdings Limited [2020] FCA 1730 at [77]-[80], and I will not do so again. 101 I thought this question had been put to bed by the decisions of the Full Court in Davaria Pty Ltd v 7-Eleven Stores Pty Ltd [2020] FCAFC 183; 281 FCR 501 at [42] (Lee J, with whom Middleton and Moshinsky JJ agreed), and the NSW Court of Appeal in Brewster v BMW Australia Ltd [2020] NSWCA 272 at [28(iv)-(v)], [30] and [41]-[43] (Bell P with whom Bathurst CJ and Payne JA agreed) but, alas, that was not the case. Most recently in Elliot-Carde v McDonald's Australia Limited [2023] FCAFC 162 [170] (Beach J), [423] (Lee J), [504] (Colvin J) confirmed that the Court has power under s 33V(2) of the Act to make a CFO at the point of settlement approval. I hope that is the end of the issue.

Therium's submissions 102 Therium contends that a funding commission of $6.52 million plus reimbursement of its ATE cost is fair and reasonable, and it seeks a common fund order in that regard. 103 It says that the proceeding is large, novel and complex, and that it faced real risks on liability and quantum. It also faced a risk that BTFM might proactively remediate the group members as some superannuation trustees have done which would have meant that its investment was wasted. Further, at the time it agreed to fund the proceeding there was an absence of similar claims for it to use as a reference point to assess risk. 104 It argues that a funding commission of $6.52 million representing a 2.4 multiple of the legal costs it had paid is reasonable compensation for its risks of funding the proceeding, the principal risk being non-recovery of the legal costs it paid. In view of the risks and uncertainties of the case it submits that the risk of it not recovering the legal costs advanced was a real and significant risk. 105 Therium also submits that it faced a risk of being required to meet an adverse costs order. Although it had obtained ATE insurance to defray that risk, the cover provided under the ATE policy was limited to $4 million and Therium was therefore exposed to the risk of an adverse costs order for any adverse costs order above that. In circumstances where the applicant's reasonable costs have been assessed by the Costs Referee at more than $7 million Therium had an exposure to adverse costs beyond the policy limit. 106 Further, Therium says (and I accept) that the funding commission it seeks is less than its entitlement under the LFA. Under the LFA it is entitled to apply the multiple of 2.4 times to its ATE costs as well as to its paid legal costs. If the terms of the LFA were applied it would be entitled to a funding commission of $9,351,574 which equates to a funding rate of 31.2% of the gross settlement. 107 Therium also notes that the funding commission it seeks is less than Therium's benchmark multiple (which I shall not disclose for reasons of commercial confidentiality). It notes that in Blairgowrie Trading Ltd v Allco Finance Group Ltd (in liq) (No 3) [2017] FCA 330 at [128] Beach J said that where a litigation funder charges commission by way of a multiple of costs it is usual for it to be at a multiple of three times. 108 It says that, taken together, the proposed funding commission of $6.52 million plus ATE costs of $1.180 million will mean litigation funding charges total $7.699 million, which equates to 25.7% of the gross settlement sum. It contends that a funding commission of 25.7% of the gross settlement sum is reasonable and accords with commissions allowed in other funded class actions. It relies on: (a) the settlement approval decisions in Clarke v Sandhurst Trustees Ltd (No 2) [2018] FCA 511 at [26] (Lee J) and Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527 at [165] (Murphy J) (approving a funding rate of 30%); Bradgate (Trustee) v Ashley Services Group Ltd (No 2) [2019] FCA 1210 at [19(2)] (Middleton J) (approving an average funding equalisation rate of 33.18%); and Sanda v PTTEP Australasia (Ashmore Cartier) Pty Ltd [2023] FCA 143 at [24] (Lee J) (approving a funding rate capped at 30%, excluding recovery of ATE); (b) the empirical research of Professor Vince Morabito: (i) Professor Morabito's 2019 study titled "An Evidence-Based Approach to Class Action Reform in Australia: Common Fund Orders, Funding Fees and Reimbursement Payment" (Monash University, January 2019), indicates that 25% of the gross settlement was the median funding rate in all funded class actions settled until the end of 2018; and (ii) Professor Morabito's 2023 study titled "Empirical perspectives on twenty-one years of funded class actions in Australia" (Monash University, April 2023) indicates that 22.1% of the gross settlement was the median funding rate in all funded class actions prior to the decision in Brewster, whereas after Brewster the median funding rate is 25% of the gross settlement. 109 Therium submits that the question as to whether it is reasonable for Therium to be paid a funding commission plus be reimbursed its ATE costs out of the gross settlement sum involves consideration as to whether the combined sum of the funding commission and the ATE costs are unreasonably high, citing Williamson v Sydney Olympic Park Authority [2022] NSWSC 1618 at [83] (Black J). It says that it is appropriate to allow the deduction of the ATE costs in addition to a funding commission of $6.52 million for the following reasons: (a) unlike in other cases, the funding commission was not intended to cover all of Therium's risk of exposure to an adverse costs order. Rather, the funding commission was expressly set on the basis that Therium would obtain ATE insurance, the cost of which it would separately charge for. It says that absent the ATE insurance it can be inferred that Therium would have required a higher funding commission because its risk would not have been mitigated by the ATE policy; (b) the funding commission it seeks and reimbursement of the ATE costs means total litigation funding charges will be $7,699,574, which equates to 25.7% of the gross settlement, which represents a fair and reasonable return for Therium. It argues that this case is distinguishable from Williamson where Black J did not allow the funding commission sought plus ATE costs because it equated to 29.56% of the gross settlement sum. Here, by comparison, the rate sought by Therium is not unreasonably high, sitting as it does at 25.7%; (c) allowing Therium to recover its ATE costs on top of the funding commission would not result in an outcome where group members are left with almost no return, as in Petersen at [5]. It says that under the proposed settlement group members will receive more than 50% of the gross settlement sum, and the ATE costs sought to be recovered make up only 3.94% of the gross settlement; (d) the cost of the ATE cover was determined in a competitive market setting, and the level of cover was appropriately calculated by reference to the Claim Budget; and (e) although it ceased to fund legal costs in the proceeding in March 2022, it remained exposed to the risk of an adverse costs order beyond the limit of the ATE cover, and its exposure in that regard was increasing as the proceeding continued.

Consideration 110 I am satisfied that in the circumstances of the case it is 'just' pursuant to s 33V(2) to make an order that Therium's reasonable litigation funding charges be deducted from the common fund of the group members' recoveries. 111 First, and most fundamentally, that is because Therium paid $2.716 million of the legal costs the applicant incurred in bringing the proceeding. In so doing, it assumed substantial costs from the outset, when the outcome was far from certain. It took on the risk that it would not recover the capital that it invested in the case (including its loss of opportunity to spend its capital on other investments), doing so in return for reimbursement of its costs and payment of a funding commission if the case was successful. 112 Therium also indemnified the applicant in respect of any adverse costs order made in the proceeding. It is likely that if the applicant's case was unsuccessful at trial an adverse costs order of approximately $7 million would have been made. Therium defrayed $4 million of that risk through ATE insurance, but it still had a risk for adverse costs above the policy limit. 113 In short, Therium provided the finance that enabled the class action to be run to a successful conclusion, doing so on the basis that it would seek a CFO. A common fund order will mean that the group members who share in the fruits of the settlement will pay a pro rata share of the litigation funding charges incurred in obtaining the settlement. Further, it would not be 'just' if Therium was not remunerated fairly for the costs and risks it took on from group members' recoveries. 114 Second, the applicant's alleged loss is modest, and I infer that she would not have agreed to be the representative party unless her legal costs were paid and she was indemnified in respect of the adverse costs risk. Although Therium funded the proceeding for its own commercial purposes, in doing so it facilitated access to justice for more than 70,000 group members. It is 'just' that Therium be fairly remunerated from the common fund of the recoveries of those who benefited from the proceeding. 115 Next, a CFO is a transparent mechanism for fairly apportioning funding charges across the class and it is straightforward for group members to understand. There is no good reason why the applicant should carry the litigation funding costs of the proceeding alone, and it is not fair or equitable that group members be permitted to take the benefit of the proposed settlement without paying a proportionate share of the funding costs of achieving that settlement. 116 Therium agreed to fund the proceeding on the basis that it would be conducted on an open class basis without undertaking any book-building, and in the expectation that a CFO was likely to be made. I infer that Funder would not have agreed to fund the proceeding on such a basis in the absence of the applicant's agreement to seek a CFO at an appropriate stage of the proceeding. 117 Only the applicant entered into an LFA with Therium. In those circumstances a funding equalisation order (FEO) is not the appropriate counterfactual or comparator. A FEO in the present case could only operate to share across the class the applicant's personal obligation to pay a funding commission. That result would be unfair because Therium would recover only a de minimis amount and it would not be fairly remunerated for the costs and risks it assumed. It would also unjustly enrich group members who, in that hypothetical, would have had a 'free ride' (financed by Therium) in achieving their recoveries: see Uren v RMBL at [64]. 118 There was nothing inappropriate about structuring the funding arrangements so that only the applicant executed a LFA. Such an approach is entirely consistent with the opt out nature of the Part IVA regime and with the Court's exhortations to plaintiff law firms and funders not to engage in the wasted expense of book-building: see Perera v GetSwift Ltd [2018] FCAFC 202; (2018) 263 FCR 92 at [295] (Middleton, Murphy and Beach JJ); Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) v BHP Group Limited [2019] FCAFC 107; 369 ALR 583 at [69(2)] (Lee J with whom Middleton and Beach JJ agreed). 119 Because no book-building was undertaken, and no group members entered into an LFA, there can be no meaningful comparison between the amount that would be charged to group members under a putative FEO and the proposed CFO. 120 Finally, the Notice of Proposed Settlement informed group members that a CFO would be sought and that they had a right to object to any aspect of the proposed settlement. No group member objected on the basis that an FEO was fairer or preferable to a CFO. 121 That then leaves the question as to whether Therium's proposed litigation funding charges are reasonable and proportionate. 122 I can see no objection in principle to a funding commission being calculated as a multiple of capital invested, as Therium proposes, rather than as a percentage of a settlement or judgment in favour of the applicant and group members: Evans v Davantage Group Pty Ltd (No 3) [2021] FCA 70 at [58]-[73] (Beach J); Williamson at [51]. 123 In Money Max at [71] the Full Court said that there is no reason in principle for the Court to treat litigation funding costs incurred to achieve a settlement differently from legal costs incurred to achieve a settlement. I accept that one difference is that, unlike lawyers, litigation funders are not amenable to regulation of their fees via taxation. But litigation funding charges have become a standard cost for group members in funded class actions and against that backdrop the Full Court explained (at [72]): It is appropriate that the Court exercise some oversight over litigation funding charges to class members when: (a) the largest single deduction from the recoveries of class members in funded class actions is usually the funding commission (or an equivalent amount under a funding equalisation order); (b) there is often a significant information asymmetry between the funder and the class members in relation to the costs and risks associated with the action; (c) at least for some claimants the only opportunity they have to recover losses suffered through alleged breaches of the law is through the funded class action; and (d) for small shareholders the opportunity for negotiation of the funding commission is limited or non-existent. Since then the courts regularly supervise the reasonableness of litigation funding charges in class actions. 124 The Full Court went on to state (at [80]): We do not seek to and cannot predetermine the relevant considerations for the approval of a reasonable funding commission rate. They will be a matter for the judge hearing the approval application and it will depend upon the circumstances. However, it seems likely that the relevant considerations would include the following: (a) the funding commission rate agreed by sophisticated class members and the number of such class members who agreed. That can be said to show acceptance of a particular rate by astute class members; (b) the information provided to class members as to the funding commission. That may be important to understand the extent to which class members were informed when agreeing to the funding commission rate; (c) a comparison of the funding commission with funding commissions in other Pt IVA proceedings and/or what is available or common in the market. It will be relevant to know the broad parameters of the funding commission rates available in the market; (d) the litigation risks of providing funding in the proceeding. This is a critical factor and the assessment must avoid the risk of hindsight bias and recognise that the funder took on those risks at the commencement of the proceeding; (e) the quantum of adverse costs exposure that the funder assumed. This is another important factor and the assessment must recognise that the funder assumed that risk at the commencement of the proceeding; (f) the legal costs expended and to be expended, and the security for costs provided, by the funder; (g) the amount of any settlement or judgment. This could be of particular significance when a very large or very small settlement or judgment is obtained. The aggregate commission received will be a product of the commission rate and the amount of settlement or judgment. It will be important to ensure that the aggregate commission received is proportionate to the amount sought and recovered in the proceeding and the risks assumed by the funder; (h) any substantial objections made by class members in relation to any litigation funding charges. This may reveal concerns not otherwise apparent to the Court; and (i) class members' likely recovery "in hand" under any pre-existing funding arrangements. 125 The Full Court's approach to the determination of a reasonable funding commission rate has been followed or cited with approval in numerous single judge decisions and in intermediate appellate decisions. 126 In BMW Australia Ltd v Brewster [2019] HCA 45; 269 CLR 574 the High Court held that s 33ZF of the Act does not provide power to make a CFO. That does not, however, reduce the weight of the remarks in Money Max in relation to the relevant factors when considering making a CFO under another power. 127 In Money Max (at [82]) the Full Court said that it expected that the courts: …will approve funding commission rates that avoid excessive or disproportionate charges to class members but which recognise the important role of litigation funding in providing access to justice, are commercially realistic and properly reflect the costs and risks taken by the funder, and which avoid hindsight bias. 128 It is important that the approval of funding commission rates does not become a "race to the bottom" and funding rates should provide an appropriate reward for the risk undertaken by a litigation funder: Kuterba v Sirtex Medical Limited (No 3) [2019] FCA 1374 at [12] (Beach J); Endeavour River Pty Ltd v MG Responsible Entity Limited [2019] FCA 1719 at [29] (Murphy J). 129 Turning, first, to the consideration in Money Max at [80(a)], here only the applicant signed an LFA and therefore, the funding commission rate agreed by sophisticated group members is not a relevant comparator. Similarly, in relation to the consideration in Money Max at [80(b)], the evidence does not explain what information the applicant was provided in relation to an appropriate funding rate. These factors are neutral. 130 Second, Money Max at [80(c)] provides that in assessing a fair and reasonable return for a funder it is appropriate to take into account the funding commission allowed in other class actions and/or the broad parameters of the funding rates available or common in the market. 131 I accept that a funding rate of 25.7% of the gross settlement is within the broad parameters of the litigation funding market at the time the proceeding was commenced, but that does not take things very far. Professor Morabito's research in relation to the available funding rates shows that there is a great range in the funding rates available in the market or approved by the Court, with some examples well below 25% of the gross settlement. Further, and more fundamentally, the necessary analysis of what constitutes a reasonable litigation funding charge does not stop at the headline funding rate. Indeed, it is erroneous to place too much emphasis on a comparison of the headline funding rate under the relevant LFA with the headline funding rates available in the market. Doing so assumes all other things about the funding arrangements are equal, when commonly they are not. 132 In Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433 at [179] I explained as follows: The funding arrangements reached may be structured in a variety of ways which can affect the costs and risk taken on by the funder and therefore affect the reasonableness of the funding commission rate. For example, a funder might agree: (a) to provide funding to cover adverse costs but not to meet the applicant's legal costs and disbursements, with the case being conducted by the applicant's solicitors on a conditional fee basis to be paid by class members from any settlement conditional on success; (b) to pay disbursements only, with the case being conducted by the applicant's solicitors on a conditional fee basis; (c) to only pay costs and disbursements up to a fixed cap or to pay a fixed percentage of the costs and disbursements, with the remainder left to the applicant's solicitors to be paid by class members conditional on success; or (d) to cover the risk of adverse costs liability through After the Event Insurance with the premium to be paid by class members from the settlement sum upon success. And the reasonableness of a funding rate will also commonly depend upon the size of the settlement or judgment, which is again case specific: Money Max at [80(g)]. 133 The proper analysis of the reasonableness of a proposed litigation funding charge is multifactorial and the relevant considerations and the weight to be given to them in any particular case will depend upon all of the circumstances, rather than just by comparison to funding rates available in the market. I agree with the remarks of Dixon J in Bolitho v Banksia Securities Ltd (No 18) (remitter) [2021] VSC 666 at [1966], where his Honour said: It is fundamental that the assessment by a court of a fair and reasonable return for a litigation funder more naturally emerges from the inputs specific to the litigation funder - primarily the level of funding, and promise of funding, that it provides and the period of exposure to risk - than a denominator applied to the settlement or judgment sum. 134 Therium's reliance on the decisions in Clarke, Caason, Bradgate and Sanda is overstated. Those decisions merely go to show that what constitutes a reasonable funding rate depends on case specific factors such as the size of the case and the other funding terms. For example: (a) in Clarke Lee J allowed a funding rate of 30% of the gross settlement, doing so in the context that the settlement was low ($16.85 million inclusive of costs) and the LFA required payment of 40% of the gross settlement sum (at [3]) and entitled the funder to a sizeable management fee. The funder submitted that the Court had no power to vary the LFA, but given the amount of the proposed deductions for legal costs and litigation funding charges only pressed for a 30% funding rate and also agreed to forego its management fee (at [26]); (b) in Caason the settlement was again low ($19.25 million inclusive of costs), and the LFA required payment of either 35% or 40% of the gross settlement sum plus payment of a $756,402 Project Management Fee. I approved a 30% funding rate on the gross settlement in circumstances where: (i) the funder went into evidence to say that, in the circumstances of the case, a 30% funding rate would mean that the funder received an annualised return on investment of negative 3% and a total return on investment of negative 20%; (ii) a 30% funding rate was a better result for group members than the funding rate allowed by the LFAs; and (iii) I did not allow the Project Management Fee provided for in the LFA; (c) in Bradgate Middleton J allowed a funding rate of 33.18% of the gross settlement in circumstances where: (i) the settlement was low (only $14.6 million); (ii) the LFAs entered into by group members had an average funding rate of 40.77% and sophisticated institutional investors made up the bulk of the claim value such that the agreed funding rate was the product of negotiation between well represented parties in equal bargaining positions; and (iii) the funder did not seek a common fund order, and instead sought an FEO at a 30% funding rate; (d) in Sanda Lee J allowed a funding rate of 30% of the gross settlement in the context that the case had settled after a lengthy trial and after an appeal had been filed. The LFAs between the funder and 15,482 group members provided for a 40% funding rate, but the funder undertook not to seek to recover more than 30% and also agreed not to seek to recover its ATE costs (at [24]). 135 Further, in response to competition, litigation funders are often prepared to "sharpen their pencils" by reducing the proposed funding rate. To provide just examples: (a) in 2018 in the GetSwift class action, in a carriage motion involving three competing litigation funders, Therium proposed a funding rate of the lesser of: (i) a multiple of 2.2 times its expenses if a settlement was reached on or before 12 April 2019, or 2.8 times if there was a successful resolution after that date; and (ii) 20% of the net litigation proceeds (that is, the settlement sum less the Court approved legal costs). Therium's tender was successful. The other two litigation funders proposed to fund the proceeding at: (a) the lesser of 25% of the net litigation proceeds or 22.5% of gross proceeds; (b) 10% of gross litigation proceeds before an early date, 20% of gross litigation proceeds until 42 days prior to the initial trial and 30% of gross litigation proceeds thereafter: see Perera v GetSwift Limited [2018] FCA 732; 263 FCR 1 at [68], [72] (Lee J) (GetSwift first instance). All of the rates offered were below those commonly available in the market; and (b) earlier this year, in the Star Casino class action, in a carriage motion involving four competing law firms, the successful tenderer, Slater & Gordon, proposed a funding rate of just 14% of the gross litigation proceeds; and the other three made the following proposals: (i) Phi Finney McDonald, which was backed by a litigation funder, sought a funding rate of 17% of the gross litigation proceeds; (ii) Maurice Blackburn sought a group costs order incorporating an "upwards rachet" mechanism being 10% of the gross litigation proceeds up to $50 million; 20% on that portion which exceeded $50 million and up to $100 million; and 25% on that portion which exceeded $100 million; and (iii) Shine sought to conduct the case on a no win-no fee basis, with a 25% uplift on its professional fees payable upon a successful outcome. See DA Lynch v Star Entertainment Group; Drake v Star Entertainment Group; Huang v Star Entertainment Group; Jowene v Star Entertainment Group [2023] VSC 561 at [45] (Nichols J). Again, those rates (particularly the rate of 14%) are significantly below the funding rates commonly available. 136 Here, there is nothing to show that Slater & Gordon approached other funders , and I cannot know whether Therium would have offered a lower funding commission had there been some competition to fund the case. But it is worth noting that Therium commenced to fund GetSwift about a year earlier than this case, and it agreed to a funding commission of no more than 20% of the net proceeds of the litigation. The same funding rate in this case would have resulted in litigation funding charges of approximately $4.4 million. But not too much should be made of that when GetSwift and the present case are quite different. 137 Third, Money Max at [80(d)] provides that the litigation risks associated with the case are critical in assessing the reasonableness of proposed funding charges, and the assessment of those risks must avoid hindsight bias and recognise that the funder took on those risks at the commencement of the proceeding. As I have said, while this case had some real risks on liability it had reasonable prospects of success, and (assuming success) it had reasonable prospects of establishing causally related loss (although the range of possible outcomes on quantum is significant). I do not consider it to be a high risk case. 138 Fifth, the quantum of legal costs expended and to be expended in the litigation is an important consideration: Money Max at [80(f)]. In submissions Therium accepted that the "principal risk" it assumed was the risk of non-recovery of the legal costs it had paid. In the Claim Budget for the litigation Slater & Gordon estimated total legal costs at $3,743,966 comprising $1,846,900 in professional fees and $1,897,066 in disbursements, and Therium was only obliged to pay 50% of professional fees and 100% of disbursements. Thus, Therium's liability for legal costs was capped at $2,820,516 (incl GST). Any further legal costs were to be carried by Slater & Gordon on a 'conditional' basis (ie, "no win-no fee") and met by the applicant and group members from any settlement or judgment in their favour, together with an "uplift" on the conditional fees. And Therium actually paid $2.716 million before it ceased funding 139 The estimate of total legal costs in the Claim Budget was ridiculously low. Unless the case could be speedily settled (which could not be guaranteed) legal costs were always going to exceed that. Slater & Gordon should not have conducted the case on the basis of such an unrealistic Claim Budget and Therium should not have been either so naïve or so focussed on its own interests to have funded the case on such a basis. I infer that the driver behind such a low budget was Therium rather than Slater & Gordon, as it was not in the firm's interests to propose such a low budget. And the low Claim Budget was not in group members' interests because it meant that, upon achieving some success in the litigation (which in my view was the most likely outcome) group members would be obliged to pay an uplift fee of up to 25% of the conditional fees. As it eventuated, and as should have been expected by both Slater & Gordon and Therium, reasonable legal costs totalled $7.364 million. This meant that Therium only assumed an obligation to pay 37% of the legal costs reasonably incurred in prosecuting the case. Thus, the great majority of what Therium accepts was its principal risk in the case was not taken by it; instead it was taken by Slater & Gordon. 140 The fact that the great bulk of the principal risk in the case was not taken by Therium is material to my view that it would not be 'just' to allow it the total litigation funding charges that it seeks. 141 In this context it is also worth noting that the evidence does not show that the substantial cost overrun occurred because of unforeseen or unforeseeable events in the litigation. As I have said, I consider the estimate of total legal costs in the Claim Budget was exceedingly low and almost impossible to achieve unless the case could be speedily settled. And obtaining a speedy yet adequate offer of settlement from the respondents was not within the control of Slater & Gordon or Therium. As I said in Webb at [55]: Unless there is a good reason to think this will eventuate (and that is expressed as an assumption) a realistic case budget should not be based on a prediction that the opposing party will make a reasonable settlement proposal at an early stage, and it should include a significant buffer for costs that may arise from unforeseen events in the litigation. Such costs are "known unknowns"; they commonly arise in strenuously contested class action litigation and they are often substantial. There is an unfortunate trend developing in which plaintiff law firms and litigation funders put forward unrealistic case budgets, and legal costs then substantially overrun the budget. Absent exceptional circumstances, a law firm or funder which succeeds in winning a carriage motion on the basis of its estimate of legal costs or litigation funding charges should not expect to receive more than that. 142 Fifth, the quantum of adverse costs exposure the funder assumes is another important consideration (Money Max at [80(e)]). 143 Under the LFA Therium agreed to indemnify the applicant against any adverse costs order and to pay any security for costs. Therium took out ATE insurance to defray the adverse costs risk up to the $4 million limit on the ATE policy. But it accepted that its principal risk was the risk that it would not recover the legal costs it paid rather than any risk of liability for an adverse costs order above the insured limit. Most likely that is because Therium understood that the case had reasonable prospects of some success, and that it is rare that a competent funder is required to pay adverse costs. The overwhelming majority of funded class actions settle, and even where the funder reaches the view that the case is likely to fail it is often possible to agree on a costs only or a walk away settlement. In my view the risk that Therium would be called on to pay substantial adverse costs was low. 144 Therium obtained ATE insurance at the commencement of the proceeding and later increased the level of cover. It paid upfront premiums totalling $528,000, which was at its risk because, if the case was unsuccessful, it would not recover them. The LFA provided for ATE costs to be passed on to the applicant and group members by deduction from the gross settlement, on a multiple of 2.4 times. Therium does not now seek a multiple of its ATE costs, but that was the basis on which it took on the risk of the case. 145 Sixth, I accept that the LFA provides that Therium is entitled to be paid a multiple of 2.4 times of legal costs and ATE costs. But allowing a 2.4 times multiple on legal costs and ATE costs would result in litigation funding charges of $9.351 million, which would equate to 31.2% of the gross litigation proceeds. It would also mean that: (a) legal costs and litigation funding charges would consume $17 million of the $29.95 million settlement; and (b) litigation funding charges would exceed legal costs, in circumstances where Slater & Gordon took on the majority of the principal risk in the case. In my view it would be neither reasonable nor proportionate to allow litigation funding charges of $9.351 million, which I consider Therium recognised. 146 Seventh, under the ATE policy Therium is required to pay a contingent premium of $352,000 upon a successful resolution of the case. This cost was not a risk that Therium assumed. Whether paid to Therium on a multiple of 2.4 times, or reimbursed on a dollar for dollar basis as Therium now seeks, that cost was always going to be borne by the applicant and group members by deduction from the gross settlement. 147 Eighth, the question as to whether it is reasonable to allow a litigation funder to be paid a funding commission in return for the risks it takes on, plus be reimbursed the ATE costs it has paid, has been considered in a number of cases: (a) in GetSwift first instance at [193] Lee J observed that one way or another, upon success in litigation, the applicant and group members pay for the cost of any indemnity against an adverse costs order. They either pay it by way of a direct reimbursement of the funder's ATE costs from the gross settlement or judgment, or they pay it because the cost of the indemnity is absorbed by the funder into its funding rate. (b) in Petersen (at [202]-[203]) I held that because the funder took out ATE insurance it mitigated its risk of exposure to an adverse costs order through the indemnity it provided the applicant. And because the ATE costs were ultimately to be met by the applicant and group members by deduction from any gross settlement, the risk the funder took on were lower and a lower funding commission was appropriate; (c) in Spotless at [96] I observed in the course of the hearing that the funder should not be permitted to separately charge for its ATE costs, and at the same time point to its exposure to the risk of an adverse costs order to justify the funding rate that it sought. In response the funder withdrew its application for reimbursement of its ATE costs; (d) in Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 3) [2020] FCA 1885; 385 ALR 625 at [32] Lee J referred to his remarks in GetSwift first instance, and in the context of an application for a common fund order said that a funder should not be permitted to recover: …the costs of the funder performing its central obligation to provide an indemnity against adverse costs. If a funder wishes to defray their risk of performing that obligation it is matter for the funder but, in my view, it is not a cost that ought be passed on separately to group members when the Court controls the remuneration. (e) in Davantage at [84] Beach J allowed the recovery of ATE costs in addition to a funding commission, but said that: Now I have some sympathy for the view that if I was considering the first option, then allowing the ATE premiums, whether as a direct recovery or within the base, would have its difficulties. After all, the 25% first option would reflect the relevant remuneration or reward for all risks assumed by the funder. So, if it sought to enter into ATE insurance to defray or minimise risk, that would be on its own coin. It could not have both the relevant premiums and insist on the 25%. But I do not have that scenario. (f) in Bradshaw v BSA Limited (No 2) [2022] FCA 1440 at [161]-[162] Bromberg J said: Where a funder defrays its risk of providing an indemnity to an applicant in relation to an adverse costs order which may be made against an applicant, the funder cannot charge for both taking the risk and defraying the risk. Only one or the other can be justified. To claim both would be to double-dip or as Murphy J said in Spotless at [96] "to have it both ways": see further Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 3) (2020) 385 ALR 625; [2020] FCA 1885 at [32] (Lee J) and [Davantage] at [84] (Beach J). Here, the Funder has sought to justify "the commission component of the deductions in favour of the Funder for which approval is sought" on, inter alia, the risk of "exposure to adverse costs". Having done that, the Funder cannot legitimately seek either the reimbursements of the costs of defraying that risk or seek that those costs be counted as part of the capital which the Funder put at risk. (g) in Wetdal Pty Ltd as Trustee for the BlueCo Two Superannuation Fund v Estia Health Limited [2021] FCA 475 at [125] Beach J allowed a funder to recover both a funding commission and the amounts paid under the ATE policy. His Honour was, though, at pains to say that the funder was only seeking to recover its contractual entitlements under the LFA and he was not able "to consider afresh what commission rate would reflect the relevant remuneration and reward for all risks assumed by the funders, and how such a rate ought reflect the mitigation of risk effected by the ATE policy." 148 There are also some cases in which judges have allowed the funder to receive both a funding commission and reimbursement of its ATE costs: (a) in Williamson at [83] Black J said that the appropriate question to be asked was whether the combined sum of the funder's commission and the ATE costs are unreasonably high. His Honour concluded that the combination of the proposed funding rate and ATE costs in that case resulted in unreasonable litigation funding charges, and he therefore fixed a lower funding rate; and (b) in Eckardt v Sims Ltd [2022] FCA 1609 at [40]-[43] Wigney J cited Williamson with approval and approved the payment to the funder of both a funding commission and the funder's ATE costs. His Honour did so on the basis that the total funding charges were within a reasonable range. 149 In Kemp v Westpac (No 4) [2023) FCA 830 at [91] and in Fordham v Commonwealth Bank of Australia [2023] FCA 1106 at [96], both no win-no fee class actions, O'Bryan J held that the lawyers should be able to recover their ATE costs on top of the 25% uplift for conducting the case on a conditional basis. Those decisions are not, however, on all fours with the present case. In both cases O'Bryan J was satisfied that there could be no expectation that the risk of an adverse costs order had been factored into and was effectively absorbed by the uplift fee to which the lawyers may be entitled upon success in the litigation. 150 In my view there is no real difficulty with approaching the issue on the basis proposed in Williamson. The question can be boiled down to whether the combined amount of the proposed funding commission and ATE costs is reasonable and proportionate. Indeed, that was the effect of the approach I took in Petersen and in Spotless. 151 Having said that, it is undesirable to permit litigation funders to charge a funding rate based in part on the indemnity it provides to the applicant in relation to the risk of an adverse costs order, and then to allow the funder to be reimbursed the cost of providing that indemnity from the proceeds of the litigation. As Bromberg J put it in Bradshaw, the funder should not be allowed to charge for both taking the risk and for defraying the risk. Arrangements under which litigation funders separately charge for ATE costs on top of the headline funding rate are not transparent for group members, are not easily understandable, and such charges are often large. There is no good reason for funders to separately charge such amounts when the approximate exposure to adverse costs risk is known from the outset of the case and can be built into the funding rate. And the separate imposition of such charges has a tendency to mislead group members, who are primarily focused upon the headline funding rate. 152 Those matters too are material to my view that it would not be 'just' to allow Therium the total litigation funding charges that it seeks. 153 Eighth, after all of the proposed deductions are made the applicant and group members will receive only approximately half of the proposed settlement. That is an undesirable outcome which requires close attention to the legal costs and litigation funding charges. As I said in Caason (at [148]): Class actions are to be conducted for the benefit of the applicants and class members rather than for service providers such as lawyers (or funders) and the costs should be proportionate. 154 Turning then to determine the total litigation funding charges that I consider to be reasonable and proportionate in the circumstances of the case, allowing a funding commission of $6.52 million plus reimbursement of $1.180 million in ATE costs means that total funding charges would be $7.699 million, which equates to 25.7% of the gross settlement. In my view the legal costs paid by Therium, and the low risk it assumed of an adverse costs order above the ATE policy limit, do not justify allowing total litigation funding charges of $7.699 million. As against that, if I allow a funding commission of $6.52 million, but do not allow Therium to be separately reimbursed its ATE costs, after paying the ATE costs Therium would receive an effective funding commission of $5.339 million, which equates to 17.8% of the gross settlement. In my view an effective funding commission of $5.339 million, would not fairly remunerate Therium for the costs and risks it assumed. 155 I consider it appropriate to order the deduction of total funding charges of $6,888,500 which equates to 23% of the gross settlement. Such an amount is in my view reasonable and proportionate in the circumstances of the case.

The proposed reimbursement payment to the applicant 156 It is proposed that the applicant receive a reimbursement payment of $15,000 for her time and expense reasonably incurred in prosecuting the claim on behalf of the class. It is established that a representative party may be entitled to an additional part of any settlement to reflect the heavier burden it has typically borne: Caason at [176]; Money Max [2018] FCA 1030 at [212]; Caason Investments Pty Ltd v International Litigation Partners No.3 Ltd [2018] FCAFC 176 (Allsop CJ, Middleton and Perram JJ). 157 For the reasons explained in the Fourth Rapoport Affidavit I am satisfied that the deduction of such an amount is appropriate. It is also relevant that the group members were notified of this proposed deduction via the Website Text and no group member made any objection to the payment.

The proposed payment to Mercer 158 Mercer is a third party to the proceeding, and under the SDS it is required to facilitate distributions to approximately 16,026 group members who are Eligible Mercer Account Holders. Mercer gave an indicative estimate of $22,195 which is a modest expense in the scheme of the case. I am satisfied that the deduction of an amount of not more than $30,000 is appropriate.

The proposed settlement administration costs 159 In the Fifth Rapoport Affidavit, Mr Rapoport deposed that the work involved in administering the settlement in accordance with the proposed SDS will include: (a) providing further instructions to and liaising with Link regarding further reconciliation of registrations against the Group Member Data; (b) reviewing the results of the further reconciliations; (c) based on the results of all reconciliations, assessing and making a determination in respect of each registration, which for most will be very quick and largely automated but for some will require more consideration and manual human assessment; (d) in some cases, requesting and then reviewing the relevant identified Group Member Data to aid in assessing a registration; (e) in some cases, requesting further information from the registrant to aid in assessing their registration; (f) once a determination has been made in respect of all registrations, providing the list of Potential Mercer Account Holders to BTFM and then processing the list of Eligible Mercer Account Holders received from BTFM; (g) applying the formula and methodology in the SDS to work out the Entitlements and distributions for eligible registrants and Eligible Mercer Account Holders; (h) making payment to Mercer of the total of the distributions for Eligible Mercer Account Holders and providing the associated list with the individual distributions; (i) making or causing payments of distributions to be made to registrants and an email to be sent to each registrant notifying them of the outcome of their registration; (j) continuing to liaise with Link as required, including in relation to enquiries from registrants and others and making payments and sending emails to registrants; (k) continuing to manage enquiries from registrants or others that are received by or escalated to Slater and Gordon; (l) engaging a tax agent to prepare tax returns in relation to the interest earned from holding the settlement sum in an interest-bearing account and provisioning for and paying tax; (m) making the priority payments specified in the SDS and approved by the Court; (n) managing any bounced payments to Mercer or registrants and dealing with any remaining surplus funds; and (o) dealing with unexpected issues that may arise and considering whether it is appropriate to refer any issues to the Court or seek further orders from the Court. 160 Slater & Gordon estimates that its professional fees for such work would total between $120,000 and $180,000 if charged at the firm's standard hourly rates, but it will charge its fees at a discounted rate of 50%. Its estimate of its professional fees for the work is therefore $60,000 to $90,000. The applicant seeks approval of up to $90,000 for the Settlement Administrator's fees. 161 Link has provided an estimate of its future costs of approximately $80,000. Factoring in an allowance for the risk that Link charges will exceed its estimate, the applicant seeks approval of up to $100,000 in settlement administration costs for Link's charges. 162 The applicant also seeks approval of up to $25,000 representing $20,000 for a tax agent to prepare tax returns in relation to the interest earned from the settlement sum over two or possibly three financial years, and $5,000 in miscellaneous other disbursements. 163 The applicant's estimate of future settlement administration costs has some uncertainty, but I am persuaded that it is fair and reasonable to allow the deduction of up to $215,000 from the settlement sum to cover settlement administration costs.

CONFIDENTIALITY ORDERS 164 Both the applicant and Therium sought confidentiality orders in respect to information the subject of legal professional privilege, information which might confer a tactical advantage on the respondent if the settlement approval is overturned on appeal, and information which is subject to commercial confidentiality. In broad terms the confidentiality orders they propose are not overly broad and are appropriately calibrated, which was a welcome change. The proposed orders also differentiate between material over which confidentiality should apply: (a) until settlement approval; (b) until the expiry of the appeal period in relation to the settlement approval orders and if an appeal or application for leave to appeal is filed, until further order; and (c) until further order. 165 I told the parties that I intended to make the confidentiality orders sought but upon preparing these reasons I found that I could not properly explain my reasons if the Claim Budget, the Revised Claim Budget, and matters relevant to the ATE costs and policy limit remained confidential. I found it necessary to reduce the scope of the confidentiality orders made after hearing from the parties. I certify that the preceding one hundred and sixty-five (165) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Murphy.