Jarrama Pty Ltd v Caltex Australia Petroleum Pty Ltd

REASONS FOR JUDGMENT 1 The applicants and respondents have reached agreement subject to the approval of the Court as to the terms of a deed of settlement under which this proceeding is to be dismissed. The applicants commenced a representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth) ('the Act') on 2 January 2004. Pursuant to s 33V of the Act the proceeding cannot be settled or discontinued without the approval of this Court. 2 On 7 July 2004, the applicants filed a notice of motion seeking the Court's approval of a settlement of the proceeding. The hearing of this motion has been adjourned four times to enable the parties the time to reach an agreement as to the terms of the proposed deed of settlement. On 29 July 2004 agreement was reached between the parties to settle the proceeding. On 30 July 2004 the following orders, inter alia, were made: "8. This Notice of motion is adjourned and set down for hearing at 9.15 am on 27 August 2004, and subject to the conditions of the settlement described in the Settlement Notice being met, the applicants will seek the following orders: (a) pursuant to s 33V of the Federal Court of Australia Act,the deed of settlement in the form marked as exhibit MJG:1 to the affidavit of Martin John Garrett sworn 30 July 2004, tendered by consent and to be retained on the Court file, is approved by the Court; (b) the proceeding be dismissed; (c) the claims in the proceeding of the Applicants and all Group Members are dismissed on the basis that the dismissal is a defence and absolute bar to a proceeding brought by the Applicants and/or any Group Member based on the same or substantially the same causes of action; (d) this judgment is binding on all Group Members who did not opt out of the proceeding and the proposed settlement by 20 August 2004; (e) liberty to apply; (f) each party bear its own costs of this motion." 3 The Group Members on whose behalf the proceeding is brought were originally described in the statement of claim as: "all persons who have, as franchisees, entered into a franchise agreement with the first named Respondent, as franchisor, (whether by way of original agreements, assignment, renewal or otherwise) in connection with the operation of a petrol station site or sites." 4 On 30 July 2004 the court also made orders for the statement of claim to be amended so that the definition of Group Members for the purposes of the proposed settlement is as follows: "The Group Members to whom the Application relates are all persons who have entered into a Franchise Agreement with the First Respondent, being any documented agreement or agreements, including options to renew under those agreements, that were in force as at 2 January 2004 and remain in force as at 30 July 2004, between any person and the First Respondent, for that person to sell at a particular site on a retail basis, under the Caltex or Ampol brand (but not under the co-branded Caltex-Woolworths brand), fuel directly supplied by or on behalf of the First Respondent, and where the person occupies the site pursuant to a lease or license from the First Respondent, and/or any one or more members of the Caltex Group of companies doing business in Australia." Background 5 It is useful to set out the background to this proceeding in order to understand the issues that arise in relation to the proposed settlement. The applicants are each franchisees to a franchise agreement with the first respondent for the operation of certain petrol station sites. On 21 August 2003 the first respondents announced publicly a co-branding venture or alliance with Woolworths to establish co-branded service stations in Australia. The applicants brought an application as representative parties under Part IVA of the Act. In essence the applicants claimed that the first respondent's decision to enter into an arrangement with Woolworths to operate co-branded service stations breached the terms of the franchise agreements. In particular, the applicants claimed, as against both respondents (the second respondent being the holding company of the first respondent), breach of contract, breaches of ss 51AC, 51AA, 51AD and 52of the Trade Practices Act 1974 (Cth) and pursuant to s 20 of the Petroleum Retail Marketing Franchising Act 1980 (Cth) that the respondents were discriminating between the group members in respect of any discounts, allowances, rebates or credits given or allowed to the franchisees in respect of fuel. 6 On 27 January 2001 the proceeding was referred by order of Justice North to mediation. However, this was unsuccessful. On 22 February 2004 the respondents filed a notice of motion seeking orders that the proceeding be dismissed or stayed pursuant to subs 33N(1) of the Act and that the proceeding no longer continue under Part IVA of the Act. This motion was not granted. On 2 March 2004 the proceeding was referred to an external mediation which was also unsuccessful. Proposed deed of settlement 7 Under the terms of settlement the respondents offer to: i) alter the Retail Economic Model ('REM') which is an economic model used by the respondents to determine any profitability assistance that may be granted to a particular franchisee depending upon the circumstances of their franchise such that it increases the amount of assistance potentially available to franchisees who require profitability assistance. This model is designed to ensure all franchisees continue to have viable businesses in the circumstances; and ii) grant any Group Member who participates in the settlement and who operates a site located within 5 km of a co-branded Caltex-Woolworths site the right to an early termination of the site agreements relating to that site; and an 'exit payment' at the time of the early termination. The settlement is conditional upon the following: i) that in return for the benefits of the proposed settlement, the claims of all group members will be dismissed and all group members will release and be permanently barred from suing the respondents regarding matters arising out of or relating to the proceeding; ii) that it is approved by the Court; and iii) that it will only be effective if less than 10% of Group Members opt out of the proposed settlement (Caltex may waive this requirement). The applicants sent a notice of settlement pursuant to s 33X of the Act to each Group Member represented in these proceedings setting out the key terms of the proposed settlement. This notice of settlement set out the key terms of the proposed settlement as stated above. The notice of settlement also advised the Group Members of the date of the hearing of the application for approval of the proposed settlement and invited any Group Member who wished to object to the proposed settlement or dispute any of the terms to attend at the hearing. Opt out notices were to be submitted on or before 20 August 2004 and no Opt out notices have been submitted. No Group Member has appeared today to object or dispute the proposed terms of settlement. 8 It is clear that the determination by the Court of the issues in contention would have been a complex task. Further there were interlocutory disputes which would have taken some time to resolve. As well these matters highlighted some of forensic difficulties in respect of the ultimate success of the applicants in proving liability and damages. It is also clear that the deed of settlement referred to in these reasons and to be kept confidential reflects a settlement of issues which could have taken several weeks, if not months to hear. The settlement deal reflects negotiations which have taken place through all the states and representatives from all the states have been involved in the process leading to the settlement proposal. 9 I note, the effect of ss 33J and 33ZB of Part IVA is that any judgment pronounced would not have any binding effect in respect of members of the group who opted out of the proceeding on or before 20 August 2004. 10 Considerations relevant to the Court's approval under subs 33V(1) of the Act have been identified by Goldberg J in William v FAI Home Security Pty Ltd (No. 4) (2000) 180 ALR 489; [2000] FCA 1925: "Ordinarily the task of a court upon an application such as this, is to determine whether the proposed settlement or compromise is fair and reasonable, having regard to the claims made on behalf of the group members who will be bound by the settlement. Ordinarily in such circumstances the court will take into account the amount offered to each group member, the prospects of success in the proceeding, the likelihood of the group members obtaining judgment for an amount significantly in excess of the settlement offer, the terms of any advice received from counsel and from any independent expert in relation to the issues which arise in the proceeding, the likely duration and cost of the proceeding if continued to judgment, and the attitude of the group members to the settlement." Goldberg J also approved a nine-factor test adopted by the United States Court of Appeals for court approval of class action settlements in Re General Motors Corp Pick-Up Truck Fuel Tank Products Liability Litigation 55 F 3rd ed. 768 at 785 (1995): "... to help district courts structure their final decisions to approve settlements as fair, reasonable and adequate as required by Rule 23(e) [which requires court approval for settlement of class actions]. See Girsh v Jepson 521 F 2nd ed. 153 at 157 (1975) (3rd Cir). Those factors are: (1) the complexity and duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining a class action; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement in light of the best recovery; and (9) the range of reasonableness of the settlement in light of all the attendant risks of litigation." 11 Settlement is fair and reasonable and adequate having regard to the known group members, leave already having been granted to the applicants to amend the Statement of Claim to ensure that unknown group members or members who have chosen to opt out of either the proceeding or the settlement will not have their rights affected or diminished by the approval of the deed of settlement. The profitability assistance in the deed of settlement ensures fairness, in any event, in respect of all franchisees inter se. The benefits under the deed are not money sums offered to each Group Member, as is perhaps more common, but are the benefits referred to above. 12 I therefore propose to order that the proposed settlement of the proceeding be approved under the provisions of s 33V of the Act. The proceeding is otherwise dismissed with no orders as to costs. I will make orders in the form sought in the motion. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Crennan.