Ingram as trustee for the Ingram Superannuation Fund v Ardent Leisure Limited

Counsel for the Applicants: Mr W Edwards KC with Mr J Green

Solicitor for the Respondents: Quinn Emanuel Urquhart & Sullivan

BETWEEN: COLIN GRAHAM INGRAM AND JUDY GAIL TULLOCH AS TRUSTEES FOR THE INGRAM SUPERANNUATION FUND Applicants

AND: ARDENT LEISURE LIMITED (ACN 104 529 106) First Respondent

ARDENT LEISURE MANAGEMENT LIMITED (ACN 079 630 676) Second Respondent

ARDENT LEISURE GROUP LIMITED (ACN 628 881 603) (and another named in the Schedule) Third Respondent

order made by: DERRINGTON J DATE OF ORDER: 30 november 2023

Settlement approval

1. The settlement of these representative proceedings be approved pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (FCA Act) on the terms set out in: (a) the Deed of Settlement, which is Confidential Exhibit GJW-1 to the Affidavit of Gregory John Whyte sworn 21 September 2023; and (b) the Settlement Distribution Scheme, which is Exhibit GJW-20 and its Confidential Quantum Schedule which is Confidential Exhibit GJW-21 to the Affidavit of Gregory John Whyte sworn 28 November 2023.
2. Pursuant to s 33ZB of the FCA Act, the persons affected and bound by the settlement of this proceedings are the Applicants, the Respondents and the group members other than those persons who opted-out in accordance with s 33J of the FCA Act.
3. The Court authorises the Applicants nunc pro tunc on behalf of the Group Members, to enter into and give effect to the Deed of Settlement and the transactions contemplated in it, for and on behalf of all Group Members.
4. Pursuant to ss 33V and 33ZF of the FCA Act: (a) the Participating Group Members as defined in the SDS and to whom the Residual Settlement Sum is to be distributed pursuant to the SDS are the Group Members who, in accordance with the orders of the Court made on 15 December 2022 registered their interests by 20 March 2023, or subsequently registered their interest by 24 November 2023 (and who are deemed to have registered their interest for the purpose of Order 7 of those orders); (b) Group Members who are not Participating Group Members shall not be permitted to seek any benefit pursuant to the settlement, or pursuant to the SDS.

Deductions from the settlement for the purposes of the SDS 5. For the purposes of the Settlement Distribution Scheme, the Court approves the following just deductions from the settlement sum: (a) the "Legal Costs Reimbursement Payments" (as defined in the Settlement Distribution Scheme), in the amount of $5,038,076.36; (b) the "Funder's Commission" (as defined in the Settlement Distribution Scheme) in the amount of $7,800,000; (c) the "Funder's Insurance Costs" (as defined in the Settlement Distribution Scheme) in the amount of $737,836; (d) the "Lead Applicants' Payment" (as defined in the Settlement Distribution Scheme) in the amount of $20,000; and (e) the "Administration Costs" (as defined in the Settlement Distribution Scheme) in the amount of up to $125,000.

Appointment of administrator and independent counsel 6. Mr Gregory Whyte of Piper Alderman be appointed as the administrator of the Settlement Distribution Scheme. 7. Mr Whyte has liberty to apply in relation to any matter arising under the Settlement Distribution Scheme. 8. The Independent Counsel for the purposes of the Settlement Distribution Scheme be Mr LWL Armstrong KC.

Consequential orders 9. All orders pertaining to the provision of security for the Respondents' costs be vacated, and all security returned. 10. The proceeding be dismissed, with no order as to costs against any party.

Confidentiality 11. Until further order, the material listed in Annexure A be kept confidential and its publication and disclosure be restricted within the meaning of s 37AF(1)(b)(i) of the FCA Act (on the ground that it is necessary to prevent prejudice to the proper administration of justice within the meaning of s 37AG(1)(a) of the FCA Act) and not be disclosed to any person other than by order of a Judge of the Court. 12. To give effect to order 11, the material referred to in that order remain on the Court file in a sealed envelope(s) marked "Confidential - Not to be Opened Except by Direction of a Judge of the Court". Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. Annexure A

1. The unredacted affidavit of Gregory John Whyte sworn 24 November 2023 (including confidential Exhibit GJW-7).
2. The unredacted affidavit of Gregory John Whyte sworn 28 November 2023 (including confidential Exhibits GJW-11, GJW-12 and GJW-21).
3. The unredacted affidavit of Charles Samuel Morris affirmed 28 November 2023 (including confidential Exhibits CSM-1, CSM-8, and CSM-9).
4. The unredacted submissions of Woodsford Litigation Funding 4 LLP dated 28 November 2023.

Introduction 1 By an interlocutory application dated 21 September 2023, the applicants sought approval of the settlement of an open class representative proceeding pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) consequent upon the parties' entry into a deed of settlement dated 23 August 2023 (the Settlement Deed). 2 The hearing of that application occurred on 30 November 2023. At the conclusion of the hearing, orders were made approving the proposed settlement and an agreed settlement distribution scheme (the Distribution Scheme), pursuant to which the settlement sum of $26 million would be distributed. These are the reasons for making those orders.

The proceeding 3 The proceeding is a securities class action brought against Ardent Leisure Limited (ALL), Ardent Leisure Management Limited (ALM), Ardent Leisure Group Limited (ALG) and the Chief Executive Officer of ALL and ALM's "Theme Parks Division", Mr Craig Davidson. Broadly speaking, the corporate respondents are, amongst other things, the operators of the "Dreamworld" theme park. 4 The lead applicants, Mr Colin Ingram and Ms Judy Tulloch are holders (as trustees of the Ingram Superannuation Fund) of stapled securities in the corporate operator of Dreamworld, which traded on the Australian Securities Exchange (ASX) as "Ardent Leisure Group" under the code "AAD". The Ardent Leisure Group consisted of ALL and ALM. Its business was conducted through the Ardent Leisure Trust and units in that trust and shares in ALL comprised the stapled securities. The stapled securities were referred to by the parties as the "AAD Stapled Securities", and that definition is adopted in these reasons. 5 The action arose from information revealed about the respondents' systems and safety performance following the occurrence of a tragic incident at Dreamworld on 25 October 2016 on the "Thunder River Rapids Ride", which resulted in four people being fatally injured (the Incident). Following the Incident, the price of the AAD Stapled Securities declined by over 20%. 6 The group members are shareholders who held AAD Stapled Securities between 17 June 2014 and 25 October 2016, and who suffered loss or damage due to the fall in the price of the securities following the Incident. 7 The gravamen of the applicants' complaints is that, between 17 June 2014 and 25 October 2016, the price of AAD Stapled Securities was inflated on the ASX by reason of misleading representations made by the respondents as to the safety standards at Dreamworld and a failure to disclose material information concerning their adherence (or non-adherence) to safety standards. Two claims were made against the respondents as a result: first, that they engaged in misleading or deceptive conduct in contravention of one or more of s 1041H of the Corporations Act 2001 (Cth) (Corporations Act), s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth), and s 18 of the Australian Consumer Law (being Sch 2 to the Competition and Consumer Act 2010 (Cth)); and secondly, that they breached continuous disclosure obligations in Listing Rule 3.1 of the ASX Rules and s 674(2) of the Corporations Act. 8 In relation to the misleading or deceptive conduct claim, the applicants alleged that the respondents made various misleading representations to investors on Dreamworld's website and in annual reports to shareholders to the effect that the Ardent Leisure Group adhered to industry best practices and Australian Standards to ensure that all rides at Dreamworld were safe for guests, and that it had systems and procedures in place which maintained a safe environment for guests at all its facilities, including Dreamworld. 9 In relation to the claim based upon a failure to comply with continuous disclosure obligations, it was alleged that the Ardent Leisure Group and Mr Davidson knew or ought to have known that the Group did not adhere to industry best practices and Australian Standards to ensure the safety of rides at Dreamworld, that it did not have systems and procedures to ensure a safe environment for guests, and that there was a material risk or likelihood of a serious injury occurring on a ride at Dreamworld, including the Thunder River Rapids Ride, which would severely impact the patronage, revenue and costs of Dreamworld. 10 The action has been funded at all times by Woodsford Litigation Funding 4 LLP (the Funder). 11 On 15 December 2022, in advance of a mediation of the class action, the Court made orders pursuant to which group members were informed, amongst other things, that if they did not register their claims prior to 20 March 2023 then upon any settlement, orders would be sought that they not be entitled to make a claim for part of any settlement amount, but would otherwise be bound by the terms of the settlement. 12 Following the mediation, on 23 August 2023, the parties entered into the Settlement Deed. Pursuant to it, the settlement sum is to be distributed in accordance with the Distribution Scheme. Under that Scheme, the amount that will be available for distribution to group members after deductions (including for legal costs, payments to the Funder, payments to the applicants and settlement administration costs) is approximately $12.3 million, being 47% of the settlement sum.

Principles applicable to settlement approval 13 Section 33V of the Federal Court Act provides as follows: (1) A representative proceeding may not be settled or discontinued without the approval of the Court. (2) If the Court gives such an approval, it may make such orders as are just with respect to the distribution of any money paid under a settlement or paid into the Court. 14 Subsections (1) and (2) confer two distinct powers. First, to approve the settlement, and secondly, if approval is given, to approve the distribution of payments made under the settlement: Davaria Pty Ltd v 7-Eleven Stores Pty Ltd (2020) 281 FCR 501, 506 - 507 [23]. 15 The principles relevant to settlement approval under s 33V are well-established and it is unnecessary to assay them for present purposes: see, for example, Fowkes v Boston Scientific Corporation [2023] FCA 230 [31] - [45] (Fowkes v Boston Scientific); Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1468 [40] - [44]; Lifeplan Australia Friendly Society Limited v S&P Global Inc (Formerly McGraw-Hill Financial, Inc) (A Company Incorporated in New York) [2018] FCA 379 [12] - [15]. It suffices to note that the central task of the Court is to decide whether it is satisfied that the proposed settlement is fair and reasonable having regard to the interests of the group members who will be bound by it, including the interests of the group members inter se. The Court assumes a protective role in this context, though the Court's task is not to second-guess or "go behind" the tactical or other decisions made by the applicant's legal representatives. Rather, it is to satisfy itself that the decisions are within the reasonable range of decisions, having regard to the circumstances (known or knowable) and a reasonable assessment of risks. 16 This Court's Class Actions Practice Note (GPN-CA) sets out (at [15.5]) the factors that will usually be required to be addressed by the material filed in support of an application for settlement approval: see also Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459, 465 - 466 [19]; Blairgowrie Trading Ltd v Allco Finance Group Ltd (recs and mgrs apptd) (in liq) (No 3) (2017) 118 ACSR 614, 638 [82] - [85]. Whilst these factors have been said to provide a useful guide to whether a settlement should be approved, it must be remembered that there is no "checklist" of mandatory considerations: Fowkes v Boston Scientific [34].

The reasonableness of the proposed settlement 17 For the reasons that follow, the proposed settlement falls within the description of being fair and reasonable as between the applicants and the group members on the one hand, and the respondents on the other. It is also fair and reasonable as between the group members.

The confidential opinion 18 The Court has had the benefit of a confidential opinion on the proposed settlement prepared by counsel for the applicants, Mr Edwards KC and Mr Green. That opinion was provided by counsel in their capacity as officers of the Court, rather than as advocates for the applicants and group members. 19 The advanced nature of the proceeding has enabled counsel to make an informed assessment of the strengths and weaknesses of the proceeding, the evidence, the costs likely to be involved should the proceeding continue to trial, and the further costs and delay that could result if the proceeding went on to trial and then on appeal. The confidential opinion dealt comprehensively and candidly with the considerations relevant to whether the settlement should be approved and, although the detail of it cannot be discussed, it addressed: the stage and complexity of the proceeding; the risks the applicants faced in establishing liability in respect of each claim; the risks faced by the applicants in establishing causation and the risks associated with quantifying loss; the extent of dilution that would be caused by the inclusion of late registered group members; and the releases contained in the Settlement Deed. 20 The opinion concluded that the settlement is fair, reasonable and in the interests of the group members. Moreover, as it has been given by highly experienced and well respected counsel who have been closely involved in the matter, it must be given significant weight. From the Court's point of view, as informed by the confidential opinion, it may be said that the proposed settlement reflects an outcome which is not only within the realistic range of likely outcomes, but sits towards the more favourable end of such outcomes for both the applicants and the group members. 21 Without revealing the views expressed in the confidential opinion, the following brief (and independent) observations can be made about the proceeding and the risks which attended the claims made in it. 22 The proceeding was commenced on 17 June 2020. At the time that it settled, the matter was all but ready for trial. The proceeding had been on foot for more than three years, all the evidence had been filed, and the issues were fully joined between the parties. Although there was a narrow scope of disagreement between the parties as to factual matters, each aspect of the claims raised against the respondents was fiercely defended. If the matter went to trial, it was expected to run for four weeks. 23 Although a cursory review of the matter suggests that the applicants would have reasonable prospects of establishing liability in relation to at least one of their causes of action, the claims raise complex issues, including in relation to causation and quantum. In particular, there are questions which would need to be resolved as to the determination of the quantum of the loss. 24 As mentioned, the applicants claim that the price of AAD Stapled Securities was inflated on the ASX by reason of misleading representations made by the respondents as to the safety standards at Dreamworld and a failure to disclose material information concerning their adherence to safety standards. Rather than proving that the respondents' alleged conduct caused loss to the shareholders, the applicants seek to establish causation by the concept of "market-based" or indirect causation. This method is thoroughly discussed in the reasons of Beach J in TPT Patrol Pty Ltd v Myer Holdings Ltd (2019) 293 FCR 29, though there is no need to consider its intricacies any further for present purposes. 25 In the event the applicants were to succeed on establishing causation, damages would likely be sought on the "inflation-based measure", being the difference between the price paid for a security and the market price which would have prevailed had the alleged contraventions not occurred. However, there may have been some difficulty with this. In many securities class actions, the claim is founded upon the late or delayed fulfilment of the market disclosure obligations. In those circumstances, the impact of the late disclosure might fairly be taken as a good indicator of what the position would have been had the required disclosure occurred at an earlier time. In contrast, here, the occurrence of the tragic incident precipitated the decline in the value of the securities - that is, the decline in value was a result of the crystallisation of the risk which it is said the respondents ought to have disclosed. In this respect, it cannot be doubted that the actual occurrence of the Incident is different to a disclosure of the risk or likelihood that the Incident (or some other incident) might occur. On a preliminary view, therefore, it is not unfair to assume that the disclosure of the risk, as opposed to its crystallisation, is likely to have had a less detrimental impact on the price of the securities. It suffices to say that the applicants might have faced some difficulties in quantifying the losses claimed as a result. Indeed, the appropriate measure of loss where a claim is based on a failure to disclose a risk of an event occurring does not seem to have been considered previously in the context of a shareholder class action. 26 Beyond that, there is a real likelihood that the litigation would not end with a trial. The issues raised in the proceeding are ones which are yet to be resolved at an appellate level, including whether market-based causation is sufficient in cases involving the alleged non-disclosure of information that is material to the price of listed securities. There also remain questions about the correct methodology for assessing loss and damage in the context of alleged contraventions that have inflated the price of securities. The likelihood of an appeal and the implications for group members in terms of delay, uncertainty and costs is a relevant factor in settlement approval: see Kirby v Centro Properties Limited (No 6) [2012] FCA 650 [4]. 27 These matters, in addition to those raised in the confidential opinion, all support the approval of the proposed settlement.

The preclusion of certain unregistered group members 28 This proceeding was commenced as an open class. On 15 December 2022, the Court made certain "class closure" and "registration" orders in anticipation of the mediation. Relevantly, those orders fixed 20 March 2023 as the date by which a group member could "opt out" of the proceeding and required group members to be notified that, if they did not register their claims prior to 20 March 2023, the applicants would seek orders from the Court that unregistered group members not be entitled to make a claim for part of any settlement sum, but that they be bound by the terms of settlement (if approved by the Court). 29 Though some doubt may have previously existed on the point, it is now established that the Court has power to make class closure orders in appropriate cases: see Parkin v Boral Ltd (2022) 291 FCR 116. While the interests of group members may sometimes be adversely affected by such orders, it is also in their interests that settlement be achieved, or at least be achievable. It has been recognised that, without a registration process, settlement is more difficult. In the present case, the mediation was conducted, and the settlement sum reached, by reference to the value of the claims of the group members who had registered by the required date of 20 March 2023. 30 Following the parties' entry into the Settlement Deed, further orders were made on 25 September 2023, pursuant to which group members were required to be notified of the proposed settlement and the proposed deductions from the settlement sum. Mr Whyte, a partner at Piper Alderman, the solicitors for the applicants, deposed that those steps have been taken, and his evidence ought to be accepted. Relevantly for present purposes, the 25 September 2023 orders made provision for unregistered group members who wished to apply for leave to seek a benefit from the settlement to register their claims with Piper Alderman, and advised members as to how to object to the settlement. 31 The majority of objections received in relation to the settlement (aside from two objections to certain deductions and the terms of the settlement, which are discussed below) related to group members who wished to participate in the proposed settlement, notwithstanding that they had not registered their claims until after the 20 March 2023 deadline. Subject to the Court's satisfaction, the applicants did not seek to preclude persons who registered late from being admitted to the settlement, as long as they had registered their claims prior to the date of the settlement approval hearing. That is reflected in the proposed Distribution Scheme, which provides that "Participating Group Members" are permitted to share in the settlement sum. Participating Group Members are defined as group members who, "in accordance with the orders of the Court made on 15 December 2022, have registered its or their interests by 20 March 2023, or have subsequently registered their interests by 24 November 2023 [being the date of the settlement approval hearing], if the Court approves". 32 The applicants adduced evidence which demonstrated that the claims of group members who registered their interests prior to the settlement approval hearing are minimal in value. In their confidential opinion, counsel assessed in detail the extent of dilution that inclusion of these late registered group members would cause, and, nevertheless, expressed their satisfaction that the proposed settlement remains fair and reasonable. That view should be accepted. The minimal value of those additional claims has the consequence that their admission results only in a de minimis dilution of the settlement - being a dilution in the order of a fraction of 1%. 33 It is therefore appropriate to allow group members who registered by the date of the settlement hearing to participate in the settlement. 34 It is not appropriate, however, to allow any further unregistered group members to share in the settlement sum. Rather, it is fair and reasonable to ensure that no further late-registering group members are admitted. 35 The orders affecting unregistered group members underpinned the settlement and, although the settlement sum of $26 million contains some elasticity as to what may be regarded as a fair and reasonable compromise of the claims of group members, that elasticity is limited. 36 In approving the settlement, there must be certainty on who may participate in it and who is barred from doing so. Importantly, the orders made by the Court on 15 December 2022 and 25 September 2023 gave more than adequate notice to unregistered group members as to how their rights might be affected. The settlement notice which was distributed to group members pursuant to the 25 September 2023 orders stated the following: C. AM I ELIGIBLE TO PARTICIPATE IN THE SETTLEMENT? 11. You are a group member if you acquired an interest in fully paid AAD Stapled Securities between 17 June 2014 and 25 October 2016 and suffered a loss or damage by the reason of the Respondents/ alleged misleading conduct, unless you validly opted out of the class action. 12. Group members were sent a notice in early 2023 which invited them to register, and stated that the lead applicants intended to seek an order that group members who had not registered by the deadline would not be entitled to participate in any settlement agreed to by no later than 14 days after the conclusion of the trial. 13. The Applicants propose that the settlement only be distributed to: (a) group members who registered by the Class Deadline of 20 March 2023, specified by the Federal Court - and notified to group members in a written notice sent in January 2023; and (b) a small number of persons who registered late but still registered before the settlement was agreed, so their data could be considered as part of settlement discussions. 14. It is proposed that persons who registered by the Class Deadline of 20 March 2023, (or before the settlement was agreed) will be treated as eligible group members who may receive a distribution from the settlement. 15. It is proposed that persons who did not register in time will be treated as ineligible group members, and will not receive any distribution from the settlement (although they will be bound by it, and lose the ability to bring claims against Ardent which were covered by the class action). If you disagree with this, you should object to the settlement, provide your details, and explain to the Court why you should be able to participate in it. See Section G ("Your Options"). (Emphasis and errors in original). 37 In the circumstances, further unregistered group members should be precluded from sharing in the settlement sum and bound to the settlement.

The scope of the releases in the Settlement Deed 38 The Settlement Deed, which itself is confidential, contains clauses by which the applicants give certain releases on their own behalf and on behalf of group members, subject to the Court making orders to bind all group members under ss 33V and 33ZB of the Federal Court Act. 39 Generally, releases in a settlement of a class action cannot extend beyond the claims the subject of the proceeding: see Smith v Commonwealth of Australia (No 2) [2020] FCA 837 [145]. Counsel for both parties rightly acknowledged at the hearing that any releases contained in the Settlement Deed must be construed consistently with the applicants' statutory authority. As the Full Court explained in Dyczynski v Gibson (2020) 280 FCR 583 at 644 - 645 [250] - [251] and 676 - 677 [395] - [396], the authority of the representative applicant does not extend to settling individual or idiosyncratic claims of group members. The applicants are entitled only to deal with group members' rights to the extent that they represent those rights, and only in respect of "common claims" recognised under s 33C of the Federal Court Act. To the extent that the Deed might contain words which connote a release broader than that which the applicants are permitted to give, they cannot have effect in that way. Indeed, the Deed contains a severability clause which would, if necessary, read down the release to the extent of the applicants' authority. 40 Without revealing the contents of the Deed (which is confidential), the following observations can be made. First, the releases contained in the Deed are a common feature of settlements in commercial litigation. Secondly, it is unlikely that the settlement could have been obtained without releases of the type given. Thirdly, in any event, the scope of the releases is not of much practical concern. The relevant period of time with which this proceeding is concerned ended on 25 October 2016, being over seven years ago. To the extent that any group members might have a claim or cause of action against the respondents which would fall within the releases, it is very likely that they would now be statute-barred. 41 In light of these matters, the releases do not stand in the way of settlement approval. It is appropriate that the s 33ZB order binds the group members to such releases.

The reaction of the class to the settlement 42 Piper Alderman received 26 objections to the settlement pursuant to the process provided for in the 25 September 2023 orders. 24 of those objections concerned group members wishing to be included in the settlement, notwithstanding that they had registered after 20 March 2023. This issue has been dealt with above, and those members have been permitted to share in the settlement. 43 One of the two remaining objections concerned the fact that there is no admission of liability by the respondents under the settlement. Although this objection was received from a "potential" group member - in that it was not confirmed whether that person was in fact a holder of AAD Stapled Securities in the claim period - it is nonetheless appropriate to consider it. Given the complexity of the proceeding, the inherent risks of litigation, and the significant risks facing the applicants in establishing loss, the non-admission of liability does not weigh against approving the settlement. Further, it is relevant that this is not a case directly involving claims for personal injury (for example), such that an absence of acknowledgement might carry more weight. 44 The final objection concerned the amount of legal costs and the Funder's commission proposed to be deducted from the settlement sum. These deductions are discussed in depth below. For the reasons stated there, the proposed deductions are fair and reasonable and do not stand in the way of settlement approval. 45 None of the objections justify refusing to approve the proposed settlement. 46 Further, whilst a large number of group members had fairly small claims, a number of them had significant claims. The absence of objection from any of those group members weighs in favour of approving the settlement.

The proposed distribution of the settlement sum 47 In addition to approving the proposed settlement, the proposed distribution of the settlement sum must be assessed. A large portion of the settlement hearing was concerned with the Distribution Scheme and, in particular, whether the deductions for payments to the Funder were fair and reasonable. The Funder intervened to support those matters. 48 In summary, the Distribution Scheme proposes the following deductions from the settlement sum of $26 million: (a) $5,038,076.36 in respect of the costs and disbursements incurred by the applicants to initiate and progress the proceeding (including estimated costs associated with obtaining approval of the proposed settlement and $50,000 in adverse costs paid in relation to a separate application brought by the applicants under s 247A of the Corporations Act); (b) $7,800,000 to the Funder (being 30% of the settlement sum) on account of the "Funder's Success Fee"; (c) $737,836 to the Funder to reimburse it for the costs of obtaining an "after the event" (ATE) insurance policy; (d) $20,000 to the applicants on account of their role in progressing the representative proceeding; and (e) $125,000 to the administrator of the Distribution Scheme on account of estimated (but capped) costs associated with administering the Scheme. 49 This leaves a residue of $12,279,087.64 (being approximately 47% of the settlement sum) to be paid to group members. This amount is to be distributed amongst the registered group members pro rata according to the proportion of their claim value against the aggregate value of the claims, together with any interest earned on the settlement sum prior to its distribution. 50 For the reasons that follow, it is "just" for the settlement sum to be distributed in accordance with the Distribution Scheme.

The litigation funding agreement 51 It is first useful to set out the applicants' obligations under the litigation funding agreement between them and the Funder (the Funding Agreement). 52 By cl 8.3 of the Funding Agreement, the applicants are obliged to seek the following from the Court: … an order to the effect that the Gross Proceeds will be applied, within 10 Business Days of receipt, in the order of priority set out below: 8.3.1 first, to reimburse the Funder the Cash Outlay, any Adverse Costs paid or payable by the Funder or an ATE insurer (including, for example, in relation to any interim Order for Adverse Costs), and any security for costs paid by the Funder; 8.3.2 second, to pay, pari passu and pro rata, any balance, in satisfaction of any sums due in respect of the Action, to: 8.3.2.1 the Funder, the Funder's Success Fee; 8.3.2.2 the Lawyers, any deferred fees and any uplift thereon in accordance with the Lawyers Engagement; and 8.3.2.3 the ATE insurer any unpaid premium that is due; and 8.3.3 third, to pay any balance to the Claimant Group in accordance with a distribution scheme approved by the Court. 53 "Cash Outlay" is defined in cl 1.10 to mean "the total amount of Action Costs advanced by the Funder, or payable pursuant to Funding Notices, plus all other fees and costs relating to the Claims reasonably incurred by the Funder". 54 "Action Costs" is defined as: … the legal and other fees and costs (including applicable GST) reasonably incurred in relation to the Claims, including: 1.2.1 the Lawyers' Fees, not exceeding AU$3,000,000 (exclusive of GST); 1.2.2 third-party costs, not exceeding AU$1,600,000 (exclusive of GST) including Counsel's fees, but excluding premiums (that are not deferred or conditional) and other costs relating to after-the-event ('ATE') insurance; and 1.2.3 insurance premiums (that are not deferred or conditional) and other costs relating to ATE insurance and/or other cover for Adverse Costs pre-agreed by the Funder, not exceeding AU$1,000,000 (inclusive of any applicable Insurance Premium Tax). 55 Clause 1.21 provides that the "Funder's Success Fee" is the greater of 35% of the Gross Proceeds, or 3.5 times the Cash Outlay. 35% of the Gross Proceeds would have been $9,100,000, whilst 3.5 times the Cash Outlay would have been in the order of $15.2 million. 56 Clause 8.4 also obliges the applicants to seek a common fund order.

Legal costs and disbursements 57 The first deduction contemplated under the Distribution Scheme is the amount of $5,038,076.36 for the applicants' legal costs and disbursements incurred in relation to the proceeding. 58 With the exception of the adverse costs relating to the application brought under s 247A of the Corporations Act, all costs which are sought to be deducted have been assessed by a referee, Mr Roland Matters. Mr Matters was appointed pursuant to orders made on 29 March 2021 to conduct six-monthly inquiries as to whether the legal costs charged or proposed to be charged by the applicants' solicitors were reasonable. As such, it can be said that Mr Matters is very familiar with this proceeding and the costs incurred in progressing it. 59 Based upon the matters set out in Mr Matters' report, it is fair and reasonable for the applicants' legal costs to be paid out of the settlement sum before any distribution is made to the group members. Each of the costs and disbursements sought by Piper Alderman for the proceeding have been determined by Mr Matters to have been reasonably incurred, and the Court can be satisfied that the amounts claimed are proportionate to the litigation and the expected benefit at the time the costs were incurred. Extensive steps have been undertaken by Piper Alderman since the commencement of the proceeding on 17 June 2020 and, by the time the settlement was reached, the matter had been set down for trial for some time. 60 It is appropriate, however, to separately address the $50,000 sought for adverse costs associated with the s 247A application, which was not assessed by Mr Matters. By that application, which was brought shortly after the present proceeding was filed, the applicants sought to obtain certain insurance documentation from the respondents for the purpose of ascertaining the economic viability of the proceeding and the respondents' capacity to meet a judgment against them. The application was ultimately dismissed, and the applicants were ordered to pay the respondents' costs associated with it. The parties agreed to resolve the adverse costs order in the amount of $50,000 and those costs were paid by the Funder. 61 As extracted above, cl 8.3.1 of the Funding Agreement obliges the applicants to seek an order from the Court that any "Adverse Costs" paid or payable by the Funder in relation to the class action be repaid to it. 62 In circumstances where the application was clearly brought for the benefit of group members and to advance the representative proceeding: see Ingram as trustee for the Ingram Superannuation Fund v Ardent Leisure Limited [2020] FCA 1302 [1]; Ingram as trustee for the Ingram Superannuation Fund v Ardent Leisure Limited (No 2) [2020] FCA 1390 [37]: it is just, within the meaning of s 33V(2), that the adverse costs resulting from it be deducted from the settlement sum and repaid to the Funder.

Payments to the Funder 63 As mentioned, the Funder intervened at the hearing in support of two proposed deductions. Namely, the amount representing the Funder's commission and the amount for the Funder's insurance costs.

The Funder's commission 64 The Distribution Scheme contemplates a deduction of $7,800,000 (or 30% of the settlement sum) on account of the "Funder's Success Fee" identified in cl 1.21 of the Funding Agreement. It ought to be noted that, under the return structure contained in the Funding Agreement, the Funder would be entitled to a commission of approximately $15.2 million. Quite appropriately, the Funder has not sought to recover that full entitlement. 65 The Funder's commission is proposed to be paid by way of a common fund order, which would have the result that the group members contribute equally to the costs of progressing the representative proceeding from any entitlement they are due to receive. Although the question of the Court's power to make a common fund order may have historically been one of great contention, any doubt was recently resolved by the Full Court in Elliott-Carde v McDonald's Australia Ltd (2023) 301 FCR 1. In particular, each member of the Full Court confirmed (at 7 [10], 30 [170], 65 [408] and 82 [504]) that s 33V confers a discretionary power to make a common fund order on settlement as part of the Court's power to make any orders which are just under s 33V(2). 66 The question of whether the Court should make a common fund order, and in what amount, is guided by the factors which were (non-exhaustively) set out in Money Max Int Pty Ltd v QBE Insurance Group Ltd (2016) 245 FCR 191, 209 - 210 [80]: (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. 67 It is appropriate to make a common fund order in the present case. The Funder assumed a not insignificant amount of risk in committing to fund this proceeding. It has been involved in the proceeding for over four years and, in total, has expended approximately $4.3 million. The Funder advanced funding to all group members and it is appropriate to allow it to receive a return on its investment by reference to the settlement produced for all those group members. It is also relevant that group members were clearly notified that a common fund order would be sought on the application for settlement approval. No substantial objection to this was received. 68 The real concern in this matter is whether the amount of commission proposed is fair and reasonable. In assessing this, the Court must keep steadily in mind the market and the perception of risk at the time the action was funded. Funding rates should provide an appropriate reward for the risk undertaken by a litigation funder, and the approval of funding commission rates should not become a "race to the bottom": see Court v Spotless Group Holdings Limited [2020] FCA 1730 [82]. 69 Mr Whyte gave detailed evidence of the circumstances surrounding the entry into the Funding Agreement and the commencement of this proceeding. Mr Morris, the Funder's representative, also gave evidence on this point. What their evidence reveals is that the circumstances of entry into the Funding Agreement in this case were somewhat unique, in the sense that the negotiations took place over a long period of time during which there was an uncertain market. Those circumstances can be summarised as follows. 70 Piper Alderman commenced investigations into the claims which are now the subject of the proceeding on or about 27 June 2018. Those investigations continued until the proceeding was commenced on 17 June 2020. As Mr Whyte deposed, obtaining funding for the class action was a necessary precondition for its commencement. The applicants were not in a financial position to fund the action, nor were they willing to meet any adverse cost orders or pay security for costs. They only agreed to act as representative applicants in the proceeding in the event that litigation funding was secured. 71 Mr Whyte explained that, in 2018, he had it in mind that the case would be commenced on an open class basis, with the most likely funding structure involving the funder seeking a common fund order. However, as events transpired, by the time the proceeding was ready to be commenced, there was legal doubt as to the availability of this structure. That was ultimately reflected in the terms that funders were prepared to offer at the time. 72 Piper Alderman approached four funders in relation to the action. On 11 October 2019, an "initial term sheet" was provided by the now Funder, Woodsford Litigation Funding 4 LLP. At the time that offer was presented, two funders had already declined to finance the proceeding, and the third had not provided any proposed terms. In the circumstances, Mr Whyte agreed to the offer. Relevantly, it provided that the Funder's commission would be the greater of 2.5 times the cash outlay or 25% of the proceeds. 73 In the period between Mr Whyte's agreement to the initial term sheet on 11 October 2019 and the execution of the Funding Agreement on 19 August 2020, a number of events occurred which placed the litigation funding market into what might be described as a state of turbulence. In particular: (a) On 4 December 2019, the High Court's decision in BMW Australia Ltd v Brewster (2019) 269 CLR 574 was handed down, which created uncertainty as to whether common fund orders were available, and whether a "book" of registered group members was required to be built prior to the commencement of a representative proceeding; (b) In March and April 2020, two decisions of the New South Wales Court of Appeal determined that interlocutory class closure orders extinguishing the rights of group members before settlement or trial were not permitted: see Wigmans v AMP Ltd (2020) 102 NSWLR 199; Hazelhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia (2020) 101 NSWLR 890; and (c) On 22 May 2020, the Federal Government announced that litigation funders would be subject to greater regulatory oversight, would be required to hold an Australian Financial Services Licence, and would be required to comply with certain legislative requirements relating to managed investment schemes. 74 Further, from January 2020, Australia was faced with the outbreak of the COVID-19 pandemic and associated shutdowns. This impacted not only the funding market, but the financial viability of the class action - the visitation numbers at the corporate respondents' Australian businesses were significantly impacted which, in turn, impacted their revenue and potential ability to meet a judgment in the event the applicants succeeded in any claims against them. As Mr Morris deposed, ALG reported a decline in revenue of $85 million in the financial year ended 30 June 2020, and a decline of $125.4 million from the equivalent prior period in the accounts reported for the half-year ended 31 December 2020. 75 Following discussions with the Funder, on or about 17 January 2020, it was proposed that the calculation of the Funder's commission would be increased from the greater of 25% of proceeds or 2.5 times the cash outlay to the greater of 35% of proceeds or 3.5 times the cash outlay. 76 Mr Whyte formed the view that it was in the best interests of group members to maintain the opportunity to obtain funding from the Funder, even though it required an increase to the initial pricing agreed to. Based on his experience, he considered that the revised terms still proposed commercial and standard rates at the time that they were offered. 77 In the light of these circumstances, there are a number of reasons why the amount of the Funder's commission is justifiable. 78 As Mr Whyte deposed, the proceeding could not have been conducted without litigation funding, and when the Funding Agreement was entered into, two other litigation funders had already refused to offer funding. The commission now sought is proportionate to the risks and financial exposure that the Funder assumed, which included: (a) its commitment to fund $6 million for the costs of the proceeding, with the potential to fund cost overruns; (b) the provision of an indemnity for adverse costs which was unlimited in amount (although this was partially offset by the ATE insurance obtained, which is discussed below); (c) the uncertainty in 2019 as to whether a common fund order could be made; (d) the respondents' uncertain financial position, particularly in light of COVID-19; (e) the legally novel nature of the proceeding, it being an action based on the non-disclosure of a risk; (f) the uncertainty of the quantum of the claim; and (g) the lengthy period of time it would have taken to progress the proceeding to completion. 79 Another factor which weighs heavily in support of approving the commission sought are the risks which existed in relation to establishing the quantum of the loss claimed. Mr Whyte also deposed (confidentially) to his perception at the inception of the proceeding of the comparative risk of this class action compared to other securities class actions. It suffices to say that the proceeding did involve significant risk. 80 Further, as is set out above, the litigation funding market was undoubtedly in a state of uncertainty at the time the funding was obtained. The factual matrix within which the proceeding was funded, such as the outbreak of COVID-19 and the uncertainty (at the time) regarding the respondents' insurance position tends to support the view that a higher funding commission is appropriate. 81 Whilst the percentage sought for the Funder's commission might look high at first blush, it is but a reflection of the market at the time and the circumstances surrounding this particular case. It is appropriate to give substantial weight to the evidence given by Mr Whyte and Mr Morris as to the considerations which were influential when the Funding Agreement was entered into and the Funder's commission agreed. 82 Notably, the commission now sought ($7,800,000 or 30% of the settlement sum) is significantly less than that which is payable under the Funding Agreement - being $15.2 million - and therefore that which the group members were informed, by the opt-out notice, would be deducted from any amounts payable upon settlement. Indeed, the amount sought represents a multiple of 1.8 of the cash expended by the Funder. 83 When one looks at the commission by reference to the cash expended by the Funder, the commission proposed is low in comparison to that approved in many other class actions: see, for example, Lynden Iddles v Fonterra Aust Pty Ltd [2023] VSC 566 (Iddles v Fonterra); Williamson v Sydney Olympic Park Authority [2022] NSWSC 1618 (Williamson v SOPA); Hall v Arnold Bloch Leibler (a firm) (No 2) [2022] FCA 163; Clarke v Sandhurst Trustees Limited (No 2) [2018] FCA 511. No doubt many cases could also be pointed to which have much lower multiples than the present. Nevertheless, these comparisons provide comfort that the commission sought is within a reasonable range of potential outcomes. 84 In the circumstances, the Funder's commission should be allowed and a common fund order made at a rate of 30%.

The ATE insurance 85 The Funder obtained a policy of ATE insurance on 25 November 2020 to cover adverse costs that were ordered or agreed to be paid to the respondents in the proceeding. It now seeks to be reimbursed for the cost of the insurance premiums, totalling $737,836. In this context, it is relevant to note the applicants' obligations under cl 8.3.2.3 of the Funding Agreement. 86 Whether a funder ought to receive both a commission and a payment on account of ATE insurance premiums paid has received varied treatment by the courts. In Eckardt v Sims Ltd [2022] FCA 1609 [37], Wigney J noted the following: Some doubt has been cast on the reasonableness of a funder receiving, as part of a settlement, both a sizeable commission and a payment in respect of ATE insurance premiums: see Perera v GetSwift Ltd (2018) 263 FCR 1; [2018] FCA 732 at [193]; Asirifi-Otchere at [32]; Court v Spotless Group Holdings Ltd [2020] FCA 1730 at [96]. There are, however, some cases in which settlements have been approved in circumstances where funders received both commission and reimbursement of ATE insurance premiums: see Wetdal Pty Ltd as Trustee for the BlueCo Two Superannuation Fund v Estia Health Ltd [2021] FCA 475 at [125]. 87 The principles were addressed more recently by O'Bryan J in Fordham v Commonwealth Bank of Australia [2023] FCA 1106 [96]. Ultimately, when considering whether a funder ought to be entitled to reimbursement of the ATE insurance premium, consideration is given to whether the overall amount to be received by the funder is "not reasonable" or "unreasonably high": Iddles v Fonterra [133]; Williamson v SOPA [83]. 88 In the present case, if the Funder is allowed to be paid its commission and the ATE insurance premium, the percentage of the settlement sum to be paid to the Funder will increase slightly from 30% to 32.8%. The return to group members would correspond to 47%. 89 That return compares favourably to a number of class action settlements: see, for example, Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527. It cannot be said that a return of this percentage is problematic or disproportionate. The costs were economically expended (and Mr Matters has essentially allowed them in full), and although the litigation funding was expensive, it was necessary. 90 Although obtaining ATE insurance may be regarded as "the cost of doing business", it must be borne in mind, at least in the present case, that the commission combined with the price of the ATE insurance premiums was the price at which the Funder was prepared to take on the risk of funding the proceeding. Undoubtedly, if the cost of ATE insurance was to never be recoverable in addition to commission, the Funder would have simply incorporated that cost into its funding premium. Here, the Funder has instead sought to pass on the price of the insurance to group members without a mark-up or any profit margin. There is transparency to this approach. 91 The ATE insurance has provided value to group members, in that it allowed security for costs to be provided by way of deeds of indemnity from the insurer. As Mr Morris deposed, if the Funder was required to provide security by way of payment into Court, it would have priced its return differently by requiring a higher return to reflect the additional capital that would be held by the Court. 92 The ATE insurance costs ultimately represent a very small proportion of the overall settlement sum. In the circumstances, it is just to allow a deduction of $737,836 for the ATE insurance premium.

Payment to the applicants 93 The Distribution Scheme also provides for a payment to the representative applicants of $20,000 in recognition of their time and expense incurred in progressing the proceeding. Mr Whyte's affidavit evidence sets out a summary of the work undertaken by the applicants in progressing the representative proceeding, including giving instructions throughout the proceeding and at key junctures of it, and giving affidavit evidence for the purpose of the proceeding. 94 It is well established that a representative applicant may be entitled to an additional amount of any settlement to reflect the heavier burden it has typically borne: Caason Investments Pty Ltd v International Litigation Partners No 3 Ltd (2018) 265 FCR 487, 489 [5]. Indeed, as was said in Clark v National Australia Bank Ltd (No 2) [2020] FCA 652 [20], class actions like the present cannot be conducted without individuals being prepared to do work which, to an extent, is not to their own personal benefit. There is no doubt that the applicants have done a substantial amount of work in progressing the representative proceeding which is not wholly for their own benefit. The $20,000 sought, which equates to less than 1% of the settlement sum, is undoubtedly within the appropriate range of compensation for the applicants' work. It is just for that amount to be deducted from the settlement sum on account of the applicants' role in progressing the proceeding.

Settlement administration costs 95 The final proposed deduction is for settlement administration costs in the amount of $125,000. Under the Distribution Scheme, Mr Whyte is to be appointed as the administrator. In this role, he is required to act independently rather than as the solicitor for any of the group members. 96 Piper Alderman, and Mr Whyte, are undoubtedly experienced in administering settlement schemes. It is also beneficial that Piper Alderman is familiar with the proceeding, and will be able to distribute funds cheaply and quickly as a result. Mr Whyte deposed, and it can be accepted that, he and his team are intimately familiar with the loss model under the Scheme, as well as each of the group members that have registered their claims with the firm. 97 Mr Whyte also deposed that two quotes were obtained from external accounting firms to administer the Distribution Scheme, one for $126,000 and another for $313,500 to $352,000. In comparison, Piper Alderman has agreed to cap its costs at $125,000 if it is allowed to administer the Distribution Scheme. If there is any doubt about the reasonableness of these proposed costs, they have been independently assessed by Mr Matters and determined to be reasonable. That opinion should be accepted. 98 It is appropriate that Mr Whyte be appointed as administrator, and that the costs of administration be deducted from the settlement sum.

Conclusion 99 For these reasons, the proposed settlement is fair and reasonable. It was appropriate to approve the proposed settlement and the accompanying Distribution Scheme. 100 For completeness, it ought to be noted that shortly after the conclusion of the hearing, the Court was advised that the "Ardent Leisure" group of companies had rebranded to "Coast Entertainment". ALL is now Coast Entertainment Operations Limited, ALM is now Coast Entertainment Management Limited, and ALG is now Coast Entertainment Holdings Limited.

Confidentiality 101 In these reasons, the confidentiality of certain affidavits and documents on which the parties relied has been maintained. Whilst it is always preferable for there to be as much public access as possible to the material on which a court determines a matter, there are limited exceptions, of which the present is one. The maintenance of limited confidentiality in relation to legal advice and price sensitive information is often essential for allowing parties to resolve proceedings short of a trial. If the price of attempting to settle proceedings was that parties would be required to disclose legal advice or the matters that impacted their decision to compromise, the propensity of matters to settle would sharply reduce. In the circumstances, it was appropriate to make the orders sought in relation to confidentiality. I certify that the preceding one hundred and one (101) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.

Associate: Dated: 30 July 2024 SCHEDULE OF PARTIES QUD 182 of 2020 Respondents Fourth Respondent: CRAIG MALCOLM DAVIDSON Intervener: WOODSFORD LITIGATION FUNDING 4 LLP