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[2011] FCA 671
Federal Court of Australia
2011-06-15
Jacobson J
Original judgment source is linked above.
Number of paragraphs: 163
Counsel for the Applicant: Mr A J Bannon SC with Mr I S Wylie
Solicitor for the Applicant: Maurice Blackburn Pty Ltd
Solicitor for the First, Second and Third Respondents: Mr R G Harris of Allens Arthur Robinson
Counsel for the Fourth, Fifth and Sixth Respondents: Mr M H O'Bryan
Solicitor for the Fourth, Fifth and Sixth Respondents: Arnold Bloch Leibler
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 702 of 2006
JUDGE: JACOBSON J DATE OF ORDER: 2 MAY 2011 WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 702 of 2006
JUDGE: JACOBSON J DATE: 15 JUNE 2011 PLACE: SYDNEY
REASONS FOR JUDGMENT INTRODUCTION: 1 On 2 May 2011, I made orders under ss 33V and 33ZF of the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act") approving a settlement of a representative proceeding brought by the applicant ("Jarra Creek") against Amcor Limited and two of its subsidiaries ("the Amcor Respondents") and Visy Industries Holdings Pty Limited and two of its subsidiaries ("the Visy Respondents"). 2 On the same day, I made certain other orders sought by Jarra Creek in relation to the settlement. The orders included an order under s 33ZF of the Federal Court Act for the approval of reimbursement payments ("the Reimbursement Payments") to certain sample customers of both groups of respondents as well as confidentiality orders under s 50 of the Federal Court Act. 3 These are my reasons for approving the settlement and making the other orders.
Overview 4 The substance of the claim made by Jarra Creek is for recovery of damages said to have been suffered by Group Members by reason of price-fixing cartel arrangements made between the Amcor Respondents and the Visy Respondents, or one or more of them. 5 The existence of a price-fixing cartel between certain companies in the Visy Group and certain companies in the Amcor Group has achieved a degree of notoriety: see, for example, Australian Competition and Consumer Commission v Visy Industries Holdings Pty Limited (No 3) (2007) 244 ALR 673, especially at [315] and [319]-[320] per Heerey J ("ACCC v Visy (No 3)"). 6 Notwithstanding this, the allegations in the present proceeding were hotly contested, in particular, the nature and extent of the alleged arrangements and whether they were given effect to in a market-wide manner so as to apply, whether uniformly or at all, to all Group Members. 7 The question of loss and its measure were also hotly contested. The loss is said to be the amount by which prices paid by Group Members for corrugated fibreboard packaging ("CFP") during the period from 2000 to 2009 exceeded the amount which they would have paid "but for" the existence of the cartel. This amount is referred to as "the overcharge". 8 The amount of the overcharge said to have been levied against Group Members was calculated by Jarra Creek's expert economist, Professor Daniel Rubinfeld, to be approximately $475 million, inclusive of interest. This was comprised of $322,348,045 in respect of the Amcor Respondents and $153,183,588 in respect of the Visy Respondents. 9 The parties to the proceeding, and Jarra Creek's solicitors, Maurice Blackburn Pty Limited ("MBC"), entered into a Class Action Settlement Deed dated 10 March 2011 under which the parties agreed to settle the proceeding for a total payment of $120 million. That amount is comprised of $95 million, which is described as the Distribution Sum, and $25 million payable to MBC for legal costs and disbursements. 10 The Distribution Sum is to be distributed to Group Members who elect to participate in the settlement in accordance with a Loss Assessment Formula stated in a document entitled Amcor/Visy Class Action Settlement Distribution Scheme. The effect of the Formula is to allocate to each Participating Group Member a pro-rata amount of the Distribution Sum, according to each Member's loss as determined by an econometric model developed by Professor Rubinfeld. 11 The essential question which arises is whether the settlement is fair and reasonable in accordance with the principles stated in a number of authorities to which I will refer later. I heard submissions from the parties, principally from senior counsel for Jarra Creek, on 29 April 2011 and 2 May 2011 and came to the view at the conclusion of the hearing that the necessary test was satisfied.
The Settlement Deed 12 There are seven relevant features of the Settlement Deed. 13 First, it provides for the payment of a total Settlement Payment of $120 million to be paid as to two-thirds, that is to say $80 million by the Amcor Respondents, and as to the remaining one-third portion of $40 million by the Visy Respondents. 14 Second, out of the total Settlement Payment, the sum of $95 million is to be paid into an interest bearing bank account, to be paid to Jarra Creek and other Group Members in accordance with the Settlement Scheme. 15 The balance of the total settlement payment, that is to say $25 million, is to be paid to MBC for Jarra Creek's costs and disbursements, subject to verification of that amount as reasonable by an independent costs assessor and subject to Court approval. 16 Third, it binds all Group Members who have not, as at 7 March 2011, opted out of the Proceeding. Group Members are defined as all persons who purchased and paid more than $100,000 for CFP from one or more of the Amcor Respondents or the Visy Respondents, in Australia, between 1 May 2000 and 1 May 2005. 17 Fourth, it provides that the settlement is subject to Court approval under s 33V of the Federal Court Act and requires the Court's approval to the form and content of a notice to Group Members informing them of the main provisions of the settlement and of their right to be heard on the question of whether the settlement should be approved. 18 Fifth, it provides that, subject to the limited possibility of a surplus, the Amcor Parties and the Visy Parties have no interest in or claim to the sum of $95 million upon payment of that sum into a Settlement Distribution Fund Bank Account. 19 Sixth, it makes provision for the Settlement Scheme to contain a procedure for identifying Group Members and a formula for assessing the entitlement of each Group Member to a portion of the $95 million Distribution Fund, consistent with the methodology for calculating the overcharge and interest set out in Professor Rubinfeld's Rebuttal Report of 28 January 2011. 20 It also makes provision for the Settlement Scheme to contain a dispute resolution mechanism in relation to decisions as to a Group Member's entitlement, as well as for payment of compensation to sample customers who provided outlines of evidence in the proceeding to reimburse them for their time and expenditure, and also for payment of costs and disbursements in connection with the administration of the Settlement Scheme. 21 Seventh, it contains mutual releases from all claims arising out of the subject matter of the proceeding. The releases operate from the time at which the sum of $95 million is paid into the Settlement Distribution Fund Bank Account. 22 Although the releases are effective prior to the payment of the funds to Group Members, the proceeding remains on foot until finalisation of the Settlement Scheme. When that occurs, Jarra Creek will apply to the Court for orders dismissing the proceeding.
The Settlement Distribution Scheme 23 There are five critical features of the Scheme. The first is the appointment of MBC as Court appointed administrator. The second is the establishment of a procedure for the identification and verification of Group Members who are entitled to participate in the Settlement. The third is the assessment of claims by Participating Group Members and the identification of the formula by which claims are to be assessed and determined. The fourth is the establishment of a dispute resolution mechanism. The fifth is the provision for supervision of the Scheme by the Court. 24 These features are spelled out in some detail in the Settlement Scheme. I will refer only to the most salient details. 25 Participating Group Members are defined as those Group Members who have returned a Notice of Intention to Claim in the Settlement prior to the Settlement Participation date of 4 May 2011. 26 That date was extended by an order which I made on 2 May 2011 so that the expiry date of Notices of Intention to Claim has now been extended to 13 May 2011. 27 By the time the Settlement Scheme came into effect, MBC had given notice to Group Members and an opportunity to submit a Notice of Intention to Claim. This was done by a Notice approved by the Court on 29 March 2011. 28 The verification process for determining whether a person who has lodged a Notice of Intention to Claim is a Group Member is to be carried out by MBC. In carrying out this function, and in discharging its other obligations as Administrator, MBC is to do so properly, on behalf of Participating Group Members as a whole. 29 It is expected that MBC will be in a position to determine whether or not a person is a Group Member, and to assess claims based on transactional data obtained by MBC in the course of the proceeding. 30 However, if MBC is unable to do so, the Scheme makes provision for MBC to require the person to provide verification by invoices and other records. MBC may seek information from the Amcor Respondents and the Visy Respondents to assist in the verification of claims. 31 Upon the completion of the verification process, MBC is to issue a Notice of Claim Data upon which the Participating Group Member's Claim will be assessed. The Notice of Claim Data will be deemed to be accepted unless the Participating Group Member submits, within 14 days, a request for review. 32 Professor Rubinfeld is to assess the claim of each participating Group Member by applying the stipulated Loss Assessment Formula to the relevant Member's Notice of Claim Data. 33 Each Participating Group Member's interest adjusted overcharge will be calculated from Professor Rubinfeld's econometric models for transactions referable to whether the CFP was purchased from the Amcor Respondents or the Visy Respondents. 34 The Loss Assessment Formula is based upon the econometric models and is scaled by a common factor described as "α". The Formula for each Participating Group Member is: Final Assessed Value: = α x Interest Adjusted Overcharge where α = Distribution Sum Total Interest Adjusted Overcharge for All Participating Group Members
35 The effect of this Formula will be to assign each Participating Group Member a pro-rata amount of the Distribution Sum. I will address this question again when referring to Professor Rubinfeld's report tendered in support of the approval of the settlement. 36 Interest accrued on the Distribution Sum (and the Settlement Sum) will be applied in payment of Administration Costs and Reimbursement Payments. Residual interest will be distributed on a pro-rata basis to Participating Group Members. 37 Provision is made for an interim payment, described as a Preliminary Payment, to Participating Group Members. Apart from that, no distribution is to be made to such Members until the Final Assessed Value of all Participating Group Members has been determined. 38 The dispute resolution mechanism in the Settlement Scheme provides for a two-stage process. First, MBC may correct any "error, slip or omission". Second, in other cases, the request for review is to be referred to Independent Counsel as specified in the Scheme document. The person requesting a review by Independent Counsel is required to pay costs of $400 per hour. These costs are not refundable, even if the applicant is successful. 39 The provision for supervision of the Scheme by the Court permits MBC to refer any issue arising in relation to the Settlement Scheme to the Court for determination or approval.
Calculation of Group Members' Entitlements 40 Professor Rubinfeld's econometric model is based upon a methodology known as multiple regression analysis. He used this methodology to determine, on the basis of statistics, the relationship between prices and determinants of prices in a period not affected by cartel activity. He used data from fiscal year 2000 which was said to represent reliable pre-cartel data to make his calculations. 41 Deviations from that relationship in the years 2001 to 2009 were said by Professor Rubinfeld to reflect the effect of the cartel on prices paid for CFP. This enabled him to calculate for each Group Member for whom data was supplied by the Amcor Respondents or the Visy Respondents, a "but for" price, that is to say a price which Group Members would have paid in a non-collusive environment. 42 The relevant relationship between prices and their determinants varied by reason of a number of different factors applicable to the wide range of transactions engaged in between the Respondents and their customers. These factors included the size and type of the CFP product, the state and end-use category of the customer, and whether or not the customer was classified by the Amcor Respondents or the Visy Respondents as a contract customer. 43 Professor Rubinfeld's analysis therefore enabled him to calculate the loss suffered by each individual Group Member by applying the estimated effect of the cartel on the market, customised by reference to each Group Member's measurable characteristics. 44 The calculation was made upon the basis of data supplied by the Amcor Respondents and the Visy Respondents. Supplementary data was supplied by the Respondents after Professor Rubinfeld prepared his initial report. He used the supplementary data to prepare his "rebuttal report" which produced the figure of approximately $475 million to which I referred above. 45 Professor Rubinfeld explains in his Report filed in support of the approval application how the results of his loss assessment will be used to assign to each Participating Group Member a pro-rata amount of the Distribution Sum of $95 million, according to each Group Member's estimated loss determined by his econometric model. 46 The claims which Professor Rubinfeld will be required to calculate will be those Group Members notified by MBC to Professor Rubinfeld as Participating Group Members. 47 Professor Rubinfeld will assess the value of each Participating Group Member's claim using the interest adjusted overcharge stated in his rebuttal report and scaling it by the "α" factor so as to determine each Participating Group Member's proportion of the Distribution Sum. 48 The effect of the Loss Settlement Formula will be that each Participating Group Member will receive the proportion of its Interest Adjusted Overcharge stated in the rebuttal report that the Distribution Sum of $95 million bears to the Total Interest Adjusted Overcharge of all Participating Group Members. 49 Although not stated expressly by Professor Rubinfeld, it is clear from his statement of the Formula, and the manner in which he will use it to assess claims, that if all Group Members participate in the settlement, each will receive approximately one fifth or 20% of its Interest Adjusted Overcharge calculated in the rebuttal report. 50 It is also clear that this percentage figure will increase if not all Group Members participate in the settlement. It is not possible to state with any precision the extent of the increase because it will depend upon the characteristics of those individual Group Members who elect to participate. 51 In fairly general terms, if only half of all Group Members participate, then each may be expected to receive up to 40% of its Interest Adjusted Overcharge. But this percentage figure may be less if small customers do not participate. 52 However, what is important to note is that the Formula applies equally to all Group Members, the only variation in the amounts payable being dependent upon the application of the factors to which I referred earlier. Those factors apply equally as between Group Members because their effect is to customise the overcharge by reference to each Group Member's measurable characteristics.
Group Member Notification 53 On 29 March 2011, the Court made orders, inter alia, approving the form and content of a notice informing Group Members of the proposed settlement ("the Settlement Notice") and the method by which it would be given to Group Members. 54 The Settlement Notice contained the financial terms, including the payment of $25 milion for MBC's costs and disbursements. It also stated that the settlement was subject to Court approval which would be sought on 29 April 2011 and that Group Members may attend. It stated that, if approved, the settlement would bind all Group Members. 55 In addition, the Settlement Notice stated that Group Members who wished to make a claim must notify their intention by 4 May 2011. It also stated that Group Members who wished to oppose the Settlement must notify MBC by 22 April 2011 and provide an outline of the grounds together with any evidence. 56 The steps taken to comply with the Court's orders are recorded in the first affidavit of Ms Rebecca Gilsenan, a principal of MBC, sworn on 15 April 2011. The various steps consisted of notification by way of newspaper advertisements, email, post, publication on the MBC website and posting on the Federal Court's website. 57 Ms Gilsenan's fourth affidavit, dated 2 May 2011, provides a consolidated statement of all the steps that were taken, as well as updated information on responses received from Group Members. The steps taken, and other relevant information are as follows: The Settlement Notice was published on Tuesday 5 April 2011 in newspapers circulating nationally and in all States and territories. Emails containing the Settlement Notice were sent to 1,018 Group Members for whom MBC had a current email address. The emails were sent on 5 April 2011. Fifty-one of the emails bounced but the Settlement Notice was then sent by email or post to those persons or entities at the addresses obtained on the internet and from the White Pages. A reminder email was sent to the same list of 1,018 persons on 21 April 2011. On 4 April 2011, Settlement Notices were sent by post to 4,618 customers of the Amcor Respondents and the Visy Respondents for whom MBC had been given postal addresses by Group Members or by the Respondents. As at 2 May 2011, 727 Settlement Notices were returned to MBC marked "return to sender". There were 153 Visy customers for whom MBC did not have contact details. Publication of the Settlement Notice on the MBC website and the Federal Court website took place on 5 April 2011. 58 In addition to the steps set out above, the settlement of the Jarra Creek proceeding was reported extensively in the media. Also, the Amcor Respondents published ASX announcements about the settlement on the 9th and 10th of March 2011. 59 The Settlement Notice directed Group Members to the MBC website for further information on the settlement or to lodge a Notice of Intention to Claim. The number of hits received on the website up to 2 May 2011 is recorded in Ms Gilsenan's fourth affidavit. The most significant hits seem to me to be those for the Notice of Intention to Claim. There were 13,685 such hits. 60 The Settlement Notice also invited persons seeking further information to contact MBC. Ms Gilsenan arranged for a system to be put in place to record telephone and email enquiries. Up to 2 May 2011, there were 160 telephone enquiries and about 70 email enquiries. 61 Only one person who contacted MBC about the settlement expressed a negative reaction. That was about the size of the legal costs. However, that person did not provide the Court or MBC with a notice of opposition to the settlement.
Response by Group Members 62 As at 11 am on 2 May 2011, a total of 1,010 Notices of Intention had been received by MBC. 63 This represents less than 25% of the total number of 4,606 Group Members but it constitutes a higher percentage when the value of sales made to those Participating Group Members is taken into account. 64 The total value of CFP sales made to the 1,010 Group Members who had elected as at 2 May 2011 to participate in the settlement amounts to approximately $3.5 billion. Professor Rubinfeld calculated that the total value of sales to all Group Members was $8 billion but he considered that $5.7 billion of those sales were affected by the overcharge. 65 The reason why not all of the total sales of $8 billion were affected by the overcharge appears to be that in later years, in particular 2008-2009 in the case of Amcor and 2006-2009 in the case of Visy, sales to Group Members were not affected by the overcharge. 66 If the value of sales to the 1,010 Participating Group Members is calculated as a percentage of the value of sales made to all Group Members, whether or not they were affected by the overcharge, the percentage figure of $3.5 billion is to be measured against the figure of $8 billion. This gives a percentage figure, measured as a proportion of total sales, of 44%. 67 If the correct way of calculating the percentage as a measure of the value of acceptances is to take into account the total value of sales to all Group Members that were affected by the overcharge, the figure of $3.5 billion is to be taken as a portion of sales of $5.7 billion. The relevant percentage would therefore be approximately 61%.
The principles applied in approving the settlement 68 The principles are well established. I endeavoured to summarise them by reference to the leading authorities as at 2007 in Taylor v Telstra Corporation Ltd [2007] FCA 2008 at [56]-[66] ("Taylor v Telstra"). 69 A more recent exposition of the principles is to be found in the judgment of Flick J in Pharm-a-Care Laboratories Pty Limited v Commonwealth of Australia (No 6) [2011] FCA 277 at [20]-[25]. 70 The underlying principle stated in all of the authorities is that the essential question is whether the settlement is fair and reasonable having regard to the claims made by Group Members who will be bound by it. However, this question is usually considered by reference to a number of relevant factors. 71 The factors which are usually taken into account are the amount offered to each Group Member, the likelihood of Group Members obtaining judgment for an amount significantly in excess of the settlement offer, the terms of any advice by counsel and any independent expert, the likely duration and cost of the proceeding and the attitude of Group Members: Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459 at [19] per Goldberg J ("Williams v FAI"). 72 Two other important considerations were referred to by Jessup J in Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (2006) 236 ALR 322 at [50] ("Darwalla"). First, it is not the Court's function to second guess the applicant's advisers as to the question of whether an applicant (and group members) ought to accept an offer of settlement; the Court should not consider it knows more about the risks of the litigation than the Group Members' advisers. Second, there will rarely be one unique outcome which should be regarded as the only fair and reasonable one; so long as the settlement falls within the range of fair and reasonable outcomes, taking everything into account, it will qualify for approval. 73 In P Dawson Nominees Pty Limited v Brookfield Multiplex Ltd (No 4) [2010] FCA 1029 at [19]-[24] ("Brookfield Multiplex"), Finkelstein J identified six factors which led him to conclude that the settlement was fair and reasonable. Most of the factors conform with those referred to above but one of them should be noted. This is the fact that no Group Member opposed the settlement. 74 As to this, Finkelstein J observed at [23], that the absence of an objector adds to the Court's responsibility. But his Honour pointed out that a large number of group members were institutional investors, well able to assess the benefits of settlement so that: "[i]f any of them were unhappy with the proposal I am sure they would have come forward" 75 Finkelstein J also said, at [24], that it was impossible to ignore the vagaries of litigation and the risk of failure, as well as the expense that would be incurred in protracted litigation and the likely appeals that would follow when novel points of law are at issue. Thus, in that type of litigation, which was large and complex, the parties were well served by a "bird in the hand" approach. 76 The question of the amount of the legal fees and disbursements payable to the applicant's solicitors and other representatives and advisers is also a factor to be taken into account. Finkelstein J referred to this in Brookfield Multiplex at [21]. I will return to this when addressing the fairness and reasonableness of these fees. 77 Finally, Finkelstein J drew attention in Brookfield Multiplex at [4] to the reliance which the Court places on the parties' lawyers. His Honour observed that the application for approval is really a proposal put up by "both sides". Thus, while the applicant's lawyers carry the burden, all parties bear the responsibility of ensuring that the Court is provided with the information necessary to assess the fairness of the proposed settlement.
Reasons for approving the settlement 78 There are three essential reasons why I came to the view that I ought to approve the settlement. First, the proceeding is very complex and raises numerous difficult questions of fact and law, as to which the usual remarks about the vicissitudes of litigation are particularly apt. I therefore have no hesitation in accepting the advice of counsel, and of an independent expert, as to the reasonableness of the settlement. 79 Second, no Group Member has come forward to oppose the settlement. 80 Third, notwithstanding the very large amount of the costs and disbursements payable to MBC, I have independent evidence as to their fairness and reasonableness and there is no suggestion that the interest of the lawyers in obtaining payment of their fees was put ahead of the interest of the Group Members in the negotiation of the overall amount of the settlement. 81 I will expand on each of these considerations below.
Complexity of proceeding and prospects of success 82 The complexity of the proceeding and the large number of issues in dispute between the parties is evident from the pleadings, the issues that were ventilated in the Court during directions hearings and interlocutory applications, as well as the written openings filed by the parties. The settlement was announced in open Court before the trial got underway but I had read the written openings before I came on to the bench on the first day of the hearing. 83 I was assisted in my understanding of the detail and complexity of the issues in dispute from what I read in the written openings. However since the proceeding settled (subject to Court approval) before the openings were relied upon in open court, I am precluded from referring to them except in a way which maintains the confidentiality of the contents. Nevertheless, much of the written openings merely expanded upon material which was referred to in open court in interlocutory hearings or directions hearings so that it is possible for me to refer to refer to certain aspects of the openings without destroying their confidentiality. 84 In summary terms, the proceeding concerns allegations that in the first half of 2000 the Amcor Respondents and the Visy Respondents entered into an arrangement that provided for market sharing and price fixing in relation to the supply of CFP to customers of their respective businesses. This arrangement is described as "the primary cartel arrangement" to which it is alleged the Respondents gave effect in the ensuing years up to November 2004. 85 Jarra Creek's allegation that the Respondents gave effect to the primary cartel arrangement focuses upon the contention that the two groups of Respondents entered into a number of secondary arrangements about price increases for non-contract customers and contract negotiations with certain large customers. These arrangements and negotiations are referred to as the secondary cartel arrangements. 86 As stated earlier, the gravamen of these allegations is that Group Members paid higher prices for CFP between 2000 and 2009 than they would have paid but for the cartel arrangements. The reason why the overcharge is said to apply to the period after the end of 2004 is that Jarra Creek apparently alleges that there was a flow on effect of the price fixing arrangements after the end of the cartel period in about November 2004. 87 Jarra Creek's claim as to the existence of the primary cartel arrangement and the secondary cartel arrangement depended largely upon the evidence expected to be given by former officers of the Amcor Respondents and the Visy Respondents. 88 Plainly enough, any applicant who relies upon evidence it intends to call from officers or former officers of the respondent companies embarks upon a difficult exercise, as to which it is never possible to predict the outcome with any degree of certainty. 89 This is so notwithstanding the fact that much of the evidence going to the existence of the alleged primary cartel arrangement and secondary cartel arrangement was contained in, or based upon, statements obtained or given in earlier proceedings, including the proceedings brought by the Australian Competition and Consumer Commission ("ACCC") against Visy. 90 The Respondents' written openings point to what are said to be discrepancies in the evidence of the witnesses and possible gaps in the proofs which the Respondents contend left Jarra Creek in the position that the evidence would not establish that the Amcor Respondents made or gave effect to the primary cartel arrangement or the secondary cartel arrangements. 91 The secondary cartel arrangements were based upon evidence to be called from former officers of the Respondents in relation to annual arrangements for price increases charged to Amcor and Visy non-contract customers and arrangements made with specific contract customers of both groups of Respondents. This evidence was expected to be voluminous. 92 Nor did Visy's election to settle the proceeding brought by the ACCC provide an easy path for Jarra Creek to establish liability in relation to the particular claims made in this proceeding. Each of the Respondents emphasised differences in the claims now made and those which were the subject of the proceeding brought against Visy by the ACCC. The Amcor Respondents and the Visy Respondents therefore contended that the settlement of that proceeding did not constitute admissions for the purpose of the present proceeding. 93 What seems to me to be important is that this proceeding does not mirror the allegations made by the ACCC. The burden of Jarra Creek's claim is that the cartel arrangements were made and given effect to in a uniform or market-wide manner. This contention is resisted by both groups of Respondents so that real questions of fact fell for determination. That was an issue which could only be determined after a detailed consideration of a very large quantity of evidence. 94 Whilst the lines between the parties were clearly drawn in the written openings, the outcome of the factual questions depended upon my assessment of evidence yet to be adduced at the hearing. Plainly, that was a matter as to which my mind was open to persuasion. 95 As Finkelstein J said in Brookfield Multiplex at [24], it is impossible to ignore the vagaries of litigation and the risks of failure as well as the expense to be incurred in protracted litigation. 96 It seems to me to be plain that the pre-trial estimate of the duration of the hearing of six weeks would have been exceeded by a substantial amount. Not only did the issues encompass the nature and scope of the cartel and its implementation, they extended to the quantification of loss. 97 The claim that the Amcor Respondents and the Visy Respondents successfully colluded across the entire market (adversely and uniformly affecting all customers) would have to be determined in light of the detailed evidence as to the complexity of the market for CFP products. Competition in the market fell to be considered having regard to detailed evidence as to the features of the market including matters such as: the different uses and characteristics of CFP products; the costs incurred by customers in switching suppliers; and the geographical areas over which CFP was supplied.
Quantum 98 The question of the quantum of loss and damage was, in my view, the most difficult issue falling for determination in Jarra Creek's proceeding. 99 Jarra Creek's claim for damages in an aggregate amount of approximately $475 million rested largely upon whether I preferred the evidence of its expert, Professor Rubinfeld to that of the Amcor Respondents' econometric evidence of Professor Hausman and Visy's econometric report of Professor Bartels. 100 A serious issue was also raised by both groups of Respondents as to whether the power to award damages in an aggregate amount, as sought by Jarra Creek under s 33Z(1)(f) of the Federal Court Act was enlivened. 101 The Respondents' openings pointed to what they contended to be numerous "flaws" in Professor Rubinfeld's methodology and evidence. It is unnecessary to list all of them but they included an attack upon his use of the year 2000 as the benchmark year and an attack upon his assumptions that the alleged cartel arrangements had a uniform market-wide impact. 102 At the heart of the Respondents' approach to the question of damages is that in determining loss it is necessary to take into account the idiosyncratic circumstances of each Group Member. 103 This approach involved an evaluation of the lay evidence as well as an attack upon Professor Rubinfeld's report. There were other issues raised in relation to the reliability of Professor Rubinfeld's model including the assertion that it failed widely accepted econometric tests and that it relied on incomplete data. 104 The outcome of the dispute on the quantification of loss depended not only upon an evaluation of lay evidence but upon an assessment of the competing views of a number of highly qualified experts. 105 A critical issue also arose as to whether Group Members "passed through" any additional supply costs caused by the cartel behaviour to their own customers. The Respondents contended that they did so and that accordingly no loss was suffered by Jarra Creek or other Group Members. 106 The resolution of this issue would have turned on lay and expert evidence. Furthermore, it was possible that Group Members passed through some but not all of the additional cost and that there was no uniformity in their approach. If that were so real difficulties arose as to how to determine the extent of "pass-through". 107 Moreover, the Respondents' contention as to the absence of power to award lump sum damages under s 33Z(1)(f) raised an issue which may be the subject of competing judicial authority. 108 The Respondents' fundamental contention was that s 33Z(1)(f) does not permit the assessment of damages otherwise than in accordance with recognised legal principles. That view is supported by the observations of Ormiston JA (with whom Phillips and Charles JJA agreed) in Schutt Flying Academy (Aust) Pty Limited v Mobil Oil Aust Limited (2000) 1 VR 545 at [35]-[37] ("Schutt") to which Gleeson CJ referred with approval in Mobil Oil Aust Pty Limited v Victoria (2002) 211 CLR 1 at [23]. 109 However, in ACCC v Golden Sphere International Inc (1998) 83 FCR 424 at 448 ("Golden Sphere"), O'Loughlin J observed that the position taken by the respondents in that case, namely that the applicant should call each and every person to prove their individual loss, would have "emasculated" the whole purpose of representative proceedings. 110 It is not entirely clear whether the observations of O'Loughlin J in Golden Sphere are inconsistent with those of Ormiston JA in Schutt. It is sufficient for present purposes to say that there was a real issue in the present case as to whether the approach taken in Golden Sphere applied in the present case so as to require a large number of individual Group Members to prove their individual losses. 111 Also, there was a real issue raised by the Respondents as to whether the provisions of s 33Z(3) excluded the operation of the power conferred by s 33Z(1)(f) to award an aggregate amount. Section 33Z(3) provides that the Court is not to make an award under s 33Z(1)(f) "unless a reasonably accurate assessment" may be made of the total amount of damages to which Group Members will be entitled. 112 The Respondents relied on s 33Z(3) to assert that the idiosyncratic nature of the market for CFP products made it impossible for the Court to be satisfied on the evidence to be called before me that a reasonably accurate assessment could be made. They contended that the claims propounded by Jarra Creek and the sample customers, McCain, Mitolo, Corrick Plains, Lerinda and Mason Fresh, were not representative of the wide range of customers who made up the Group Members. 113 Whether or not the Respondents' contentions are correct turns plainly enough, upon the evidenced to be called and my assessment of it. For reasons mentioned above, their contentions also raise a question of law. Whatever the outcome may have been, it is likely that my decision would have been the subject of an appeal.
Advice from counsel and expert economist 114 The evidence in the approval application included two advices from Senior and Junior Counsel, Mr A J Bannon SC and Mr I S Wylie. The first advice addressed the settlement and the second dealt with the settlement distribution scheme. The effect of the advices was that the settlement and the settlement scheme were fair and reasonable. 115 I was also provided with an expert report from an economist, Dr Christopher Jon Pleatsikas, who considered that, from an economic perspective, the settlement was fair and reasonable to Group Members. 116 Advice from counsel and an expert such as Dr Pleatsikas are an important consideration in determining whether to exercise the power conferred by s 33V. So much is clear from the authorities to which I referred above. 117 It is true, as Jessup J said in Darwalla, that the Court's function is not to second-guess an applicant's advisers. But I do not consider that his Honour's remarks at [50] suggest that the discretion conferred on the Court is merely an exercise of rubber stamping the advice given by the applicant's advisers. What his Honour emphasised was that the Court's function is to decide whether the settlement is "within the range" of fair and reasonable outcomes taking everything into account. 118 The advices obtained by an applicant are but one factor, albeit an important one in the Court's determination of the ultimate question of fairness and reasonableness. Here I have given considerable weight to the advices, but I have also taken into account the nature and complexity of the issues raised in the proceeding to which I referred above. As I said earlier, it is for this reason that I have no hesitation in accepting the advices as to the fairness and reasonableness of the settlement. 119 The observations of Finkelstein J in Brookfield Multiplex at [24] as to the vagaries of litigation and the value of the "bird in the hand approach" are apt. They point against second-guessing the advice. Indeed, they support it. 120 I should add that I was satisfied that the terms and conditions of the settlement scheme are consistent with those contained in other such schemes that have been approved by the Court. 121 Importantly, as mentioned earlier, the effect of the Loss Assessment Formula is that it operates in like manner for all Group Members. They are treated equally, the only variations in the calculation of individual losses being referable to particular Group Members' distinguishing features, for example, the type of CFP product and whether or not they were contract or non-contract customers.
No opposition 122 In Brookfield Multiplex at [23], Finkelstein J observed that the absence of an objector adds to the Court's responsibility. However, his Honour went on to point out that a large number of group members were institutional investors who could be expected to look after their own interests. 123 Here, Group Members consist of persons or companies that purchased $100,000 or more of CFP in the five year period referred to in the Statement of Claim. Some will be large companies such as McCain. Others will be small business owners. The range is likely to be wide. 124 It is true that some Group Members may have only a small stake in the action but all are business owners who should be able to assess the benefits (or disadvantages) of the settlement. 125 This is particularly so where the proceeding has received a large amount of media attention and the settlement was also covered extensively in the media. 126 I expressed some concern in the settlement hearing about the relatively low percentage of responses from Group Members. My concern was that there may have been some defect in the notification process. However, I was satisfied that the steps taken by MBC as set out in the first and fourth affidavits of Ms Gilsenan were sufficient to bring the settlement notice to the attention of an overwhelming majority of Group Members. 127 Moreover, the settlement of the proceeding was referred to in at least 106 separate print media, broadcast media and internet stories. 128 It follows in my view that the absence of opposition to the settlement by any Group Member is a significant factor to be taken into account in exercising my discretion under s 33V.
Legal Fees and Disbursements 129 The question of whether the legal fees and disbursements are fair and reasonable is a separate question from whether the settlement is fair and reasonable. This is because no question arises of any part of the sum of $25 million for costs and disbursements being available to Group Members. 130 Nevertheless, I was required to consider the fairness and reasonableness of the costs and disbursements because of the conditions stated in the Settlement Deed. In particular, the Settlement Deed provides that the payment of the sum of $25 million for MBC's costs and disbursements be subject to verification of that amount as reasonable by an affidavit sworn by an independent costs assessor and subject to approval by the Court as part of the process of approving the settlement. 131 Jarra Creek provided me with an affidavit sworn by an experienced and independent costs consultant, Mr Joseph Anthony Mazzeo. 132 Mr Mazzeo made what appears to me to be a thorough and careful examination of the files and records of MBC relating to the proceeding. He was assisted in the task by two staff members and by two clerical staff of MBC. 133 In Mr Mazzeo's opinion, the accounts rendered by MBC for the time of its personnel were properly and reasonably incurred and reflected work reasonably done for the furtherance of the proceeding. He was also satisfied that the disbursements for counsel's fees, expert witnesses and all other disbursements were properly and reasonably incurred. 134 Mr Mazzeo assessed the total amount of reasonable fees and disbursements as $26,310,093.95, which exceeds by approximately $1.3 million the amount payable under the Settlement Deed. 135 He considered that MBC's charges, which were based on hourly rates for time necessarily spent in connection with the proceeding, were fair and reasonable when considered on a solicitor and own client basis, and in accordance with the retainer agreement entered into by Jarra Creek. Mr Mazzeo stated that the hourly rates were in accordance with those charged by legal firms in Sydney and Melbourne in complex litigation, including class actions. 136 I have no reason to go behind Mr Mazzeo's opinion that the amount of the costs and disbursements is fair and reasonable. The same approach was taken by Jessup J in Darwalla at [101]-[102]. 137 Whilst I therefore accepted the figure of $25 million for costs and disbursements, I did not do so without some hesitation. Ultimately, I was persuaded by the evidence in Ms Gilsenan's first and fourth affidavits and by Mr Mazzeo's affidavit, that the enormity of the costs was explained by the complexity of the litigation and the hard fought nature of the proceeding which brought it before the Court on a large number of occasions for the determination of interlocutory disputes, in particular disputes about the scope of discovery. 138 It also needs to be borne in mind that there was no litigation funder for this proceeding. MBC conducted the proceeding on a conditional fee basis and therefore took upon itself the risk that the proceeding may not be successful. MBC would have been entitled to an "uplift" of 25% on its fees because of s 305 of the Legal Profession Act 2004 (NSW), but it did not do so. 139 Notwithstanding my acceptance of the large amounts for costs and disbursements in this proceeding, figures such as this should not be regarded as the norm. 140 In the course of one interlocutory dispute last year, I described the fee of $1.7 million for Professor Rubinfeld's first expert report as "staggering". I do not resile from that description even though I approved the disbursements figure. I did so upon the basis of Mr Mazzeo's opinion and having regard to the terms of the settlement. 141 Similar comments apply to the legal fees and other disbursements. Ordinarily amounts such as these represent a barrier to the access to justice reforms which underlie the recommendations made by the Australian Law Reform Commission: see Australian Law Reform Commission, Group Proceedings in the Federal Court, Report No 46 (1988) vol 1, [14], [16]-[20] and [39]. 142 It appears that in the present case the charges are explained by what I said at [137] and by the magnitude of the claim for damages. Nonetheless the ordinary approach to the way in which costs are incurred ought to be dictated by the overarching purpose of civil litigation which includes the requirement that proceedings be conducted as quickly, inexpensively and efficiently as possible.
Reimbursement Payments 143 Claims for reimbursement payments were made for the five sample Group Members and for two other Group Members, G W Pty Limited and Greencorp Pty Limited. 144 I was provided with affidavit evidence from each of the companies that sought reimbursement for their expenses and time in assisting in the conduct of the proceeding. 145 The reimbursement payments were sought upon the basis that each of those Group Members undertook various tasks in preparation for the trial that were in the interests of all Group Members. 146 The five sample Group Members gave extensive discovery and prepared evidence to be given at the trial. G W Pty Limited and Greencorp Pty Limited prepared evidence to be given in the interests of Group Members as a whole. 147 The total amount of the reimbursement payments was $90,007. The largest amount was for McCain in the sum of $33,796. The smallest was G W Pty Limited which claimed $3,085. I was provided with detailed schedules showing the work done and time charge for each of the claimants. 148 In Darwalla at [75]-[76] Jessup J expressed some reservations before coming to the conclusion that it was reasonable that particular parties who have sacrificed time and incurred expenses in the interests of prosecuting the proceeding on behalf of all Group Members should be able to look to the settlement sum for reimbursements. 149 I also have reservations about the concept of "re-imbursement" for time incurred by Group Members. Ordinarily, a successful party is not entitled to be paid for time spent in the conduct of litigation. Whilst it is true that Group Members (other than Jarra Creek) are not parties to the proceeding, they stand to benefit from it. 150 Nevertheless, I was prepared in this case to follow the approach adopted by Jessup J and approve the reimbursement payments. In doing so, I took into account the relatively modest amounts involved and I accepted Ms Gilsenan's evidence that the amounts are conservative and reasonable. 151 I also accepted Ms Gilsenan's evidence that it was fair and reasonable that the seven entities referred to above spent time and incurred the expenses claimed representing and furthering the interests of Group Members as a whole. 152 That said, Jessup J considered the approach to be "prima facie" reasonable. That suggests it may be one that will require further consideration in future matters.
Confidentiality 153 I made a temporary confidentiality order in relation to a number of affidavits filed by Jarra Creek in support of the settlement. That order was made for a period of seven days to enable the Amcor Respondents and the Visy Respondents to consider whether they wished to make any further claim for confidentiality. No such claim was made. 154 The only continuing confidentiality order relates to the opinions of counsel and the opinion of Dr Pleatsikas. I ordered, pursuant to s 50 of the Federal Court Act, that those opinions be kept confidential and be sealed on the Court file in an envelope marked "Not to be opened except by leave of the Court." 155 In making that order, I followed the course adopted in a large number of proceedings including Williams v FAI; Darwalla; Taylor v Telstra; Dorajay Pty Limited v Aristocrat Leisure Limited [2009] FCA 19; Vernon v Village Life Limited [2009] FCA 516 and Brookfield Multiplex. 156 The only discussion of the reasons for such an order is to be found in Finkelstein J's judgment in Brookfield Multiplex. His Honour stated at [17] that counsel's opinion was privileged and was filed on the basis that privilege would be maintained. 157 In my opinion, there is no inconsistency between the maintenance of confidentiality in the advice of counsel and the tender of the advice in support of an application for approval of the settlement under s 33V. 158 This seems to me to follow from the fact that when the advice is tendered, an applicant cannot know whether the Court will approve the settlement. It is therefore not inconsistent with the maintenance of confidentiality for an applicant to tender the advice upon the condition that if approval is withheld, confidentiality is preserved. No waiver is to be implied by this conduct: Mann v Carnell (1999) 201 CLR 1 at [29]. 159 It seems to me that the same approach applies even if the settlement is approved. The advice is tendered on a confidential basis for the limited purpose of seeking the Court's approval. Having regard to the context in which the disclosure is made, this conduct is not inconsistent with the maintenance of confidentiality even if the settlement is approved: Osland v Secretary to the Department of Justice (2008) 249 ALR 1 at [49]. 160 Although I have made an order for confidentiality, as Finkelstein J observed in Brookfield Multiplex at [14] and [17], some aspects of the advice must be quite obvious so that disclosure of those aspects of it can be made in my reasons without destroying confidentiality in the written memoranda. 161 I therefore note that counsel took into account: the difficulties of proving the existence of the cartel and its implementation in the uniform and market-wide way alleged by Jarra Creek. the likely duration of the trial the difficulties in determining causation and quantification of loss, including the question of whether the evidence of the overcharge was sufficient to enable a lump sum award to be made under s 33Z(1)(f) the difficulties associated with the pass-through defence. 162 Dr Pleatsikas also took into account the nature and complexity of the disputes between the experts.
Orders 163 The orders which I made on 2 May 2011 are set out above.
I certify that the preceding one hundred and sixty-three (163) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.
Jarra Creek Central Packing Shed Pty Ltd
Amcor Limited
(1998) 83 FCR 424
(2007) 244 ALR 673
(2006) 236 ALR 322
(1999) 201 CLR 1
(2002) 211 CLR 1
(2008) 249 ALR 1
(2000) 1 VR 545
(2000) 180 ALR 459