JAGOT J:
1 This case involves an application seeking orders approving and giving effect to a settlement which has been reached between the applicant and the respondent, as well as supplementary orders for suppression of certain material filed in support of the application.
2 I was assisted by the provision of comprehensive written submissions by the applicant setting out reasons why the orders should be made and a confidential joint opinion of counsel. In summary, I accept the submissions for the applicant.
3 Section 33V of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) requires that the settlement of a representative proceeding be approved by the Court. The relevant principles are as follows:
(1) the role of the Court is protective, including responsibility for protecting the interests of group members who are not represented by the applicant's solicitors; and
(2) in exercising its supervisory role, the Court is to be satisfied that the settlement is "fair and reasonable" having regard to the claims of group members as a whole, including as between group members; and
(3) reasonableness in this sense constitutes a range, which means that the question for the Court is whether the proposed settlement and settlement distribution scheme fall within that range: see Blairgowrie Trading Ltd v Allco Finance Group Ltd (No 3) [2017] FCA 330 at [83].
4 Although there is not a definitive set of factors that the Court must take into account, a number of factors have been identified as relevant to assessing whether a settlement is reasonable. These include:
(1) the complexity and duration of the litigation;
(2) the stage of the proceedings;
(3) the risks of establishing liability, establishing damages and maintaining the class action;
(4) the ability of the respondent to withstand a greater judgment than the prospective settlement sum;
(5) the range of reasonableness of the settlement in the light of the best recovery;
(6) the range of reasonableness of the settlement in light of all the risks of litigation; and
(7) the reaction of the class to the settlement. An important consideration in this respect is whether group members were given timely notice of the critical elements of the settlement, because if appropriate notice was given and there were no objections, this is a "highly relevant consideration in support of a settlement": Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1468 at [5(f)].
5 In respect of the assessment of those factors, I accept the submissions of the applicant as follows:
(1) as to the complexity and duration of the litigation: I accept that the proceeding has been both complex and lengthy.
(2) as to the stage of the proceedings: the proceeding was at an advanced stage when the parties agreed the proposed settlement in December 2019. Nevertheless, the proceeding had been listed for an initial trial commencing on 30 March 2020 and had exchanged discovery, served lay and expert evidence and exchanged lists of documents. There were, however, certain steps that needed to be completed, not least of which involved resolving the form of the applicant's pleading following the respondent's successful application to strike out certain paragraphs of the claim.
(3) as to the risk so of establishing liability: establishing damages and maintaining the class action, I have taken into account the information in the confidential counsels' opinion.
(4) as to the ability of the respondent to withstand a greater judgment sum than the prospective settlement sum: there is no evidence to suggest that the respondent could not have withstood a greater judgment than the settlement sum.
(5) as to the range of reasonableness of the settlement in the light of the best recovery: again, I have had regard to the confidential counsels' opinion.
(6) as to the range of reasonableness of the settlement in light of all the risks of litigation: again, I have had regard to the matters set out in the confidential counsels' opinion.
(7) as to the reaction of class members to the settlement: it has been noted that a very small number of registered class member requested a review of their estimated distribution but no registered class member has notified any opposition to the settlement. In this regard, as set out in the written submissions for the applicant:
a. The settlement notice and the abridged notice were published and the settlement notice was sent to registered class members in accordance with the court's orders of 11 February 2020 with the consequence that registered class members have been given ample notice of the salient terms of the settlement;
b. Between 26 February 2020 and 20 March 2020, the applicant's solicitors received only 63 requests from registered class members for a review of their estimated distribution of which 58 disclosed an error, slip, or omission in that member's trade data or other identification details;
c. Approximately 85% or registered class members will receive a higher amount than their estimated distribution; and
d. Although 7 registered class members have expressed ongoing dissatisfaction with the loss assessment formula in the settlement distribution scheme, none have notified opposition to the proposed settlement.
Further, all but one of these particular registered class members received a nil estimated distribution because they should their shares in the respondent during the relevant period when it is alleged the shares were at an inflated value.
6 I accept the submission that the lack of opposition to the proposed settlement among registered class members supports the conclusion that it is fair and reasonable. I also accept the submission that I should be satisfied that the settlement is fair as between registered class members. In this regard, I also accept the submissions of the applicant as follows:
(1) although the lead applicant will receive more from the settlement relative to other class members due to an additional reimbursement payment of $25,000, this is appropriate and fair. As pointed out, the applicant's director and shareholder has provided day-to-day instructions on behalf of the applicant in the proceeding and has diligently performed his role investing many hours for the benefit of group members;
(2) the litigation funder has agreed to significantly reduce its funding commission on the basis that the settlement distribution scheme includes a funding equalisation scheme that adjusts returns to registered class members so as to distribute the burden of litigation funding equally between all such members; and
(3) the settlement distribution scheme provides for an efficient distribution of the net settlement proceeds to registered class members, essentially, on a pro rata basis in accordance with a loss assessment formula.
7 In terms of the legal costs and disbursements incurred by the applicant in the proceeding, I accept the information contained in the expert report of Lydia Fernandes Fogl dated 22 April 2020 (the Fogl Report). For the reasons set out in the Fogl Report, I am satisfied that the legal costs and disbursements incurred by the applicant were charged in accordance with the relevant costs agreement and are fair and reasonable with the consequence that it is appropriate that these costs be deducted from the settlement sum. I also accept that the applicant's solicitors will occur administration costs in administering the settlement distribution scheme and it is, again, fair and reasonable that these costs be provided for out of the settlement sum. Accordingly, I accept the submission of the applicant that the proposed settlement and settlement distribution scheme are fair and reasonable and in the interests of group members.
8 My attention was drawn to the decision in Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia [2020] NSWCA 66 in which, the New South Wales Court of Appeal determined that s 183 of the Civil Procedure Act 2005 (NSW) (the CPA), which is the analogue of s 33ZF of the FCA Act, cannot be used to make an order that extinguishes, even contingently, a group member's claim in the event of a settlement. The power to make such an order can only be made as part of a settlement approval or judgment under ss 173, 177 and 179 of the CPA which are the analogues of ss 33V, 33Z and 33ZB of the FCA Act. I accept the submission of the applicant that it is clear from the reasoning in Toyota that the Court is able to make an order extinguishing a group member's claim under ss 33V and 33ZB of the FCA Act at the time of approving a settlement.
9 The real question which arises in the present case is whether the Court now should make an order under s 33V that would have the effect of extinguishing the claims of unregistered group members as part of approving the settlement. I accept the submission for the applicant that unless some form of extinguishment occurs, the resolution of the proceeding does not, in fact, resolve the matter insofar as the respondent is concerned because group members who remained group members and did not opt out could later assert that their claims had not been resolved and advance those claims against the respondent.
10 In this regard, reference should be made to the decision in Newstart 123 Pty Ltd v Billabong International Ltd [2016] FCA 1194 , where Beach J at [68] observed:
The orders affecting the UGMs [unregistered group members] have underpinned the settlement. Absent such orders, the settlement would not have been agreed to by Billabong. That would not have been in the interests of group members as a whole. Moreover, now that the settlement is to be approved, there needs to be finality and certainty on who can participate and who is barred. Otherwise distributions under the scheme cannot be finalised. It cannot be correct to say that a UGM, who has been given adequate opportunity to participate, can come along months or years later and belatedly seek a distribution or even commence a new proceeding against Billabong. That is not conducive to efficiency, finality or justice for group members generally or indeed Billabong. Yet that would be the likely counterfactual if the bars were not in place. Those who posit that barring orders should not be made, do not posit a satisfactory alternative to address such questions.
11 It is important to observe the consequences mandated by Part 10 of the FCA Act. Persons may become group members without doing anything at all and without knowing that status. That depends upon the unilateral act of the representative plaintiff and the lawyers retained. Persons who are group members may not learn of that status through active solicitation or through notices authorised by the Court or through other means.
12 In the present case, the position is analogous to the situation described by Beach J. The affidavit of Paul Nichols, the solicitor for the respondent, concerned his instructions from the respondent's chief legal and risk officer. Those instructions are to the effect that the respondent would not have agreed to settle the proceeding if the settlement did not resolve the claims made in the proceeding in their entirety, including extinguishing the claims of any class member who had not oped out and who had not registered to become a registered class member. I accept the submission for the applicant that this is a conventional approach to settlement resolution. I consider that given the history of the notifications in this matter and the opportunities that have been given to class members to either register or opt out, there would be no unfairness in making the barring order that the applicant now seeks and which the respondent has made clear was a reason why it entered into the settlement.
13 For these reasons, I am satisfied that the orders approving the settlement and the consequential orders thereupon should be made.
14 In terms of the suppression orders which are sought under ss 37AF and 37AG(1)(a) of the FCA Act, I note that such orders may be made only if they are necessary to prevent prejudice to the proper administration of justice. In this regard, I accept the submission for the applicant in relation to the five categories of documents which are sought to be the subject of suppression orders, that it is necessary to make the orders in the circumstances which have been described.
15 First, as to the confidential opinion, it is subject to a claim for legal professional privilege that has not been waived and refusing to supress this information would be inconsistent with the nature of the privilege as a fundamental right and would discourage candour in counsel expressing their views concerning class action settlements. Further, if the opinion were disclosed to the respondent and the settlement had not been approved, there would be a risk of conferring a significant tactical advantage on the respondent, which will not arise in circumstances where I have indicated that I will approve the settlement.
16 Second, the same reasoning applies to the loss assessment formula but in addition to being the subject of an unwaived claim for privilege the loss assessment formula also is commercially sensitive as it reveals the assessment of the applicant's legal team in relation to claim allocations methodologies.
17 Third, as to the claimed value calculations, again, they are subject to an unwaived claim for privilege but also, would reveal the assessment of the applicant's legal team in relation to maximum claim values.
18 Fourth, as to the redacted portions of the funding agreement, I agree that suppression of the two aspects should be provided for in the circumstances where to do otherwise would risk conferring a tactical advantage on the respondent.
19 Fifth, as to the settlement deed, I note that there is an obligation on the parties to keep the settlement deed confidential, save for certain permitted disclosures which include the settlement notice which discloses the quantum of the settlement sum, which is not, in itself, confidential. In circumstances where it is not necessary for the settlement deed to be disclosed in order to explain why the settlement is fair and reasonable, I am content that the order for confidentiality should also be made over the remaining confidential components of the settlement deed.
20 Accordingly, orders will be made to give effect to proposed orders 19-27 on the revised basis on which they are to be submitted.
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot .