Kelly v Willmott Forests Ltd

The application for class member registration and opt out 34 On 28 February 2014 the applicants in the 2007/08/09 Schemes proceedings sought orders for publication of a notice to class members regarding class member registration and opt out. On 3 April 2014 the parties in the 2010 Scheme proceeding (except for the Directors) sought similar orders. The parties were in broad agreement as to the form of the orders to be made ("the registration and opt out orders"). 35 The parties did not seek the class closure order I had suggested. Such an order would have meant that any class member who did not meet the requirements for a registration (including the requirements in relation to security for costs) would have been excluded from the class. The downside for the respondents in such an order would have been that, if the class actions were ultimately successful, it might be expected that some former class members would have had a renewed interest in pursuing their rights against the respondents. They might have re-agitated those rights provided they were still within time to do so. 36 The orders sought by the parties provided a better result for the respondents. They operated so that class members who did not satisfy the requirements for registration continued to be class members, but were excluded from seeking any relief in the proceeding or any benefit from a settlement (hence the description "non-participating class members"). In recent years such orders have become a relatively common device in "open class" representative proceedings. It is likely that the parties sought orders in that form because they provided the respondents with a greater level of finality on settlement or judgment. 37 There was no suggestion at the time of the registration and opt out orders that the parties apprehended a settlement in which the applicants would enter into binding loan enforceability admissions on behalf of the class members, which would preclude class members from defending loan enforcement proceedings on any basis, even in reliance on claims or defences which are not pleaded in the class actions and which are based in a class member's individual or unique circumstances. I did not anticipate such an eventuality.

The Annexure A Notices 38 By the orders made on 14 March 2014 in the 2007/08/09 Schemes proceedings, and on 3 April 2014 in the 2010 Scheme proceeding, M+K were required to give to class members a notice (the "Annexure A Notice") and a Class Member Registration Form ("Registration Form"). This was to be done by sending the Notice and the Registration Form to the last known email or mail address of the class members, and by publishing the Notice in The Australian, on M+K's website and on the website of the liquidators of Willmott Forests and Willmott Finance. 39 In the 2007/08/09 Scheme proceedings the Annexure A Notice and the Registration Form were sent to all class members except those listed on Annexure C to the orders. They were sent to approximately 2,978 class members, the great bulk of whom were not clients of M+K. Annexure C comprised 427 class members (most of whom were clients of M+K) who the parties agreed had satisfied the security for costs requirements by making an appropriate contribution to security, by pledging an appropriate contribution to security, or by showing that his or her inability to contribute was reasonable. 40 The Annexure A Notice provided information to class members about their right to opt out of the proceeding and the requirement to register as a class member, including the requirements in relation to security for costs. The Registration Form sought information as to any monies the class member had provided towards security for costs, the amount the class member intended to provide towards security for costs, and the class member's current financial circumstances. 41 In the 2010 Scheme proceeding the Annexure A Notice and the Registration Form were sent to all persons listed on the growers register for Willmott Forests Premium Forestry Blend 2010 Project, except for clients of M+K. The materials are not clear but it appears that the Notice and Registration Form were sent to approximately 218 class members who were not clients of M+K. In this proceeding security for costs was provided through an After the Event insurance policy so the Form did not seek information in that regard. 42 The Annexure A Notice and the Registration Form in this proceeding were relevantly the same as in the 2007/08/09 Schemes proceeding, except that they did not include information in relation to security for costs. 43 The Annexure A Notice in each proceeding informed class members that any person who wished to opt out of the proceedings was required to file an opt out notice by 2 June 2014, and that to be registered they were required to deliver a Registration Form to M+K by 2 June 2014.

The Annexure B Notice 44 By the same orders M+K were required to send a notice to class members in the form of Annexure B to the orders. In the 2007/08/09 Schemes proceedings the Annexure B notice was sent to the 427 class members listed on Annexure C to the 14 March 2014 orders. Of those 427 class members, 296 were clients of M+K and 131 were not. The materials are not clear but it appears that in the 2010 Scheme proceeding the Annexure B Notice was sent to about 139 class members who were clients of M+K. 45 The Annexure B Notice in each proceeding was a relatively standard form opt out notice which informed class members about the right to opt out of the proceedings. It did not include information about the registration procedure because these class members were treated as registered, having already shown their intention to participate in the case.

The orders for non-participating class members 46 The orders of 14 March and 3 April 2014 created the category of non-participating class members by providing that any class member who did not register: …shall remain a group member for all purposes of this proceeding but shall not, without leave of the Court, be permitted to make any claim or seek any relief in this proceeding, or seek any benefit pursuant to any settlement of this proceeding.

E. THE NUMBER OF REGISTERED AND NON-PARTICIPATING CLASS MEMBERS

The number of class members in the 2007/08/09 Schemes proceedings 47 Mr Willemsen deposed that before opt out there were approximately 3,405 class members in the 2007/08/09 Schemes proceedings, and that 240 class members filed opt out notices. The class therefore comprises approximately 3,165 persons. He said that 2,427 class members did not register in the class member registration process, and that there were 738 registered class members, of whom 512 were clients of M+K and 226 (about 31%) were not. 48 Therefore, 2,427 of the class members (about 77%) are not entitled to seek relief in the proceedings or obtain a benefit from settlement. Only 738 of the 3,165 class members (about 23%) are entitled to do so.

The number of class members in the 2010 Scheme proceeding 49 Mr Willemsen deposed that before opt out there were approximately 357 class members in the 2010 Scheme proceeding, and that 10 class members filed opt out notices. The class therefore comprises approximately 347 persons. He said that 182 class members did not register in the class member registration process, and that there are 165 registered class members, of whom 139 were clients of M+K and 26 (about 16%) are not. 50 Therefore, 182 of the class members (about 52%) are not entitled to seek relief in the proceeding or obtain a benefit from settlement. Approximately 165 of the 347 class members (about 48%) are entitled to do so.

F. The NOTICES OF PROPOSED SETTLEMENT 51 By orders made on 20 May 2015 in each proceeding M+K was required to publish a Notice of Proposed Settlement to class members by 22 May 2015, by sending it by email or prepaid ordinary post to their last known address and by placing a short form of the notice in The Australian newspaper. The form of the Notice of Proposed Settlement in the 2007/08/09 Schemes proceedings and the 2010 Scheme proceeding relevantly differed only to the extent that the terms of settlement are different and because class members in the 2010 Scheme proceeding were not required to make a contribution to security for costs. 52 The Notice informed class members of the essential terms of the settlements, their right to object to the settlements and their right to appear and make submissions at the settlement approval hearing. I am satisfied that they were sent to class members in accordance with the orders.

G. The OBJECTIONS to settlement approval 53 The Contradictor put on detailed submissions opposing settlement approval and I will not summarise them here. The other objections may be briefly summarised as follows: Reason for objection Objector(s) Loss of rights in relation to future claims or defences, including claims or defences relating to the respondents and third parties Registered class members • Mr Anderson • Mr Nealon • Mr Braham Non-participating class members • Dr Jackson • Mr Sostarko for Devine Designer Homes • Mr Spenceley • Mr Rennick Loss of rights in ongoing defence of loan enforcement proceedings by Willmott Finance in the Magistrates Court of Victoria, in which class members have incurred fees exceeding $13,000 Registered • Ms & Mr Rendon • Mr Tsardanis • Mr McInally Loss of rights for potential claim against M+K (not otherwise the subject of the objection in the first row) Registered • Mr Braham • Mr Anderson The level of legal costs Registered • Mr Braham Non-participating • Dr Jackson The settlement in the 2007/08/09 Schemes proceedings is significantly less advantageous than the settlement in the 2010 Scheme proceeding and inconsistent with it Registered • Mr Anderson • Mr Braham The settlement is inconsistent with the settlement of the Great Southern class action Registered • Mr Anderson Class members prefer that the proceedings go to trial on the basis that their claims are likely to be successful Registered • Mr McInally • Mr Nealon • Mr Braham Non-participating • Mr Saito The Bank's discount in the settlement of the 2010 Scheme proceeding is insufficient Non-participating • Mr Sostarko for Devine Designer Homes The settlement benefits the applicant but not the group members Registered • Ms & Mr Rendon • Mr Tsardanis • Mr McInally The settlement overstates the risks for the applicant in the 2010 Scheme proceeding Registered • Ms and Mr Rendon • Mr Tsardanis • Mr McInally

54 The objections were filed pursuant to the Notice of Proposed Settlement sent to class members which, amongst other things, informed class members of the effect of the binding loan enforceability admissions. The Notice relevantly stated that: The Deed is a legally binding document which binds the Lead Applicants, the respondents and M+K. If the proposed settlement is approved by the Federal Court, the Deed will bind you as a Group Member in the Willmott Group Proceedings, whether or not you are a Registered Group Member (unless you opted out of the Willmott Group Proceedings). Only Registered Group Members will be permitted to seek any benefit under the Deed." And that: It is important that you understand that Group Members will not be able to make individual claims or rely upon other defences that they may have additional to those common claims made in the Willmott Group Proceedings. This includes any individual or unique defences that they may have to claims by CBA or MISF for repayment of associated loans. It is important that all Group Members who borrowed from CBA or MISF to fund their investment in a Willmott Managed Investment Scheme understand that by approval of the settlement they will acknowledge and admit that the loans they obtained are valid and enforceable by CBA and MISF. (Underlining in original.) 55 In light of the objections the settlement parties argued that: (a) the low level of objections showed that the great majority of class members have no objection to the settlements and, by inference, that the settlements are fair and reasonable; (b) no class member complained that he or she had understood the registration and opt out notices in the narrow manner which the Contradictor contended they would be understood; and (c) no class member came forward and identified a claim based in his or her individual or unique circumstances, and by inference that no class members had such a claim. 56 In my view there is little force in these contentions. First, except perhaps in relation to sophisticated class members, I do not consider the class members' silence should be taken to indicate their approval or indicate the fairness of a settlement. 57 Second, it is an overstatement to say that no class member asserted that he or she did not understand the registration and opt out notice to state that there was a possibility that class members would or might be precluded from defending loan enforceability admissions in reliance on claims or defences which were not pleaded and which are based in their individual or unique circumstances. Senior Counsel for Mr Braham submitted that he had no reasonable expectation that the applicants could or would bind him to a settlement that contained an admission that is loan agreements were valid and enforceable although, as the respondents noted, Mr Braham was silent on this issue in his affidavit. It is likely that the same complaint lies behind the objections by Ms and Mr Rendon, Mr Tsardanis and Mr McInally. Each of them had engaged lawyers to defend loan enforcement proceedings brought by Willmott Finance, had defences on foot, and had paid more than $13,000 in legal fees in those proceedings. There would have been no point to their maintaining that approach had they been aware that they would or might be precluded from relying on their defences. 58 As Professor Morabito has said, "the practical realities of class actions have led a number of [US] Courts to conclude that minimal objection to the proposed settlement may not necessarily be equated to approval of the settlement by the class": Morabito V, "Judicial Responses to Class Action Settlements that Provide No Benefits to Some Class Members" (2006) 32 Monash University Law Review 75, 88-89. I note also that the respected empirical legal researchers Geoffrey Miller and Theodore Eisenberg concluded that: … notwithstanding frequent statements in judicial decisions to the contrary, the level of dissent is at best weak evidence of the fairness, adequacy, and reasonableness of class action settlements. (Eisenberg T and Miller G, "The Role of Opt-Outs in Class Action Litigation: Theoretical and Empirical Issues" (2004) 57 Vanderbilt Law Review 1529, 1538.) In my view it cannot be said that there is any necessary correlation between a low level of objections and the fairness or reasonableness of a settlement. 59 Third, I deal with the contention that no class member has a claim based in his or her individual or unique circumstances at [244]-[247] below. 60 In the present proceedings there is a further reason to attach little significance to the low level of objections. The Annexure A Notices, which were sent to the great majority of class members, informed them that if they did not register they were not permitted to seek relief in the proceedings or seek the benefit of a settlement. Class members who did not register must be taken to have understood this. Because non-participating class members were not entitled to obtain any benefit from a settlement it is unlikely that they will have paid close attention to the Notice of Proposed Settlement, and they may not have understood that the settlements include a binding admission that their loan agreements are valid and enforceable. 61 Care must be taken in approaching settlement approval on the basis that the silence of class members is equivalent to their assent. It is the Court's responsibility to protect class members' interests and the absence of objections (or a low level of objections) does not relieve it of the task: P Dawson Nominees Pty Ltd v Brookfield Multiplex Limited (No 4) [2010] FCA 1029 ("Brookfield Multiplex No 4") at [23] (Finkelstein J).

H. THE RELEVANT PRINCIPLES 62 The Court's task in a settlement approval application under s 33V of the Act is to decide if it is satisfied that the settlement is fair and reasonable having regard to the interests of the class members who will be bound by it (including as between class members). The Court assumes a protective role in undertaking this task : Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 71 FCR 250; [1996] FCA 1119 at 258 (Branson J); Lopez v Star World Enterprises Pty Ltd (1999) ATPR 41-678; [1999] FCA 104 ("Lopez") at [16] (Finkelstein J); Brookfield Multiplex No 4 at [23]; Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [7]-[8] (Jacobson, Middleton and Gordon JJ). 63 The Court should be alive to the possibility that a settlement may reflect conflicts of interest, for example, between the applicant and class members, between client and non-client class members or between subgroups within the class, or between the duty of the applicant's lawyers to client class members and the lawyers' duty to non-client class members. It should be kept in mind that the Court assumes its onerous burden at a stage of the proceeding when the interests of the applicant and the respondent have merged in the settlement and neither side seeks to critique the settlement from the perspective of class members. Both sides have become "friends of the deal". 64 In Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459; [2000] FCA 1925 at [19], Goldberg J set out a number of factors that may be relevant in an application for settlement approval: (a) the amount offered to each class member; (b) the prospects of success in the proceeding; (c) the likelihood of the class members obtaining judgment for an amount significantly in excess of the settlement offer; (d) the terms of any advice received from counsel and any advice from any independent expert in relation to the issues which arise in the proceeding; (e) the likely duration and cost of the proceeding if it continued to judgment; and (f) the attitude of the class members to the settlement. 65 His Honour also referred with approval at [19] to Re General Motors Corporation Pick-Up Truck Fuel Tank Products Liability Litigation (1995) 55 F 3d 768 in which the United States Court of Appeals for the Third Circuit referred at 785 to the nine-factor test it had adopted: (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. 66 I respectfully adopt Goldberg J's approach, but note that there is no requirement to deal with each of these factors. They are to be approached as a useful guide subject to the circumstances of any particular case: Haslam v Money for Living (Aust) Pty Ltd (Administrators Appointed) [2007] FCA 897 at [20] (Gordon J). I take the same approach to the settlement approval factors set out in Practice Note CM 17, which echo the factors discussed by Goldberg J. I have not dealt with each of these factors, or with each of the objections. It is unnecessary to do so when the settlements are to be refused on the grounds I set out. 67 The objectors' reasons for opposing settlement approval are another useful point of reference by which to determine the fairness and reasonableness of the settlement: Hobbs Anderson Investments Pty Ltd v Oz Minerals Limited [2011] FCA 801 at [4] (Emmett J). 68 The central issue is whether the proposed settlement is fair and reasonable in the interests of class members to be bound to the settlement. The Court is not concerned with the position of the applicants or the respondents. They have solicitors and counsel to advise them as to how their interests will be best served in the litigation, whereas absent class members do not: Lopez at [15]. In the present cases, the absent class members are the non-participating class members and those registered class members who are not clients of M+K. 69 In my view the Court's supervisory role is not limited only to those class members who do not have legal representation. The requirement for supervision flows from the use of the representative procedure which allows the applicant to bring the proceedings on behalf of other persons. The Court is concerned to protect the interests of all those represented persons, including by ensuring that a settlement does not favour one group of class members over another: Darwalla Milling Co Pty Ltd & Ors v F Hoffman-La Roche Ltd & Ors (No 2) (2006) 236 ALR 322; [2006] FCA 1388 ("Darwalla") at [34] and [60]-[64] (Jessup J); Thomas v Powercor Australia Ltd [2011] VSC 614 ("Thomas") at [25] (Beach J). 70 For this reason the Court requires the applicants' lawyers to candidly disclose any possible issues of controversy attending the proposed settlement, in order to satisfy itself that the class members' interests have been taken into account as fairly as might be expected of a lawyer acting directly for a client: Lopez at [16]. 71 The interests of class members may be protected to an extent if they become clients of the solicitors for the applicants, but it should be kept in mind that they will not enjoy all of the benefits of a traditional solicitor-client relationship. This reduces the level of protection. Class members are not parties to the proceedings and do not direct the conduct of the proceedings: Mobil Oil Australia Pty Ltd v State of Victoria (2002) 211 CLR 1; [2002] HCA 27 ("Mobil Oil") at [37]-[38], [40], and [50] (Gaudron, Gummow and Hayne JJ). This is so even where a class member signs a retainer with the applicant's solicitor. 72 Further, the applicant's solicitors ordinarily do not take detailed instructions from class members even when retained by them. This approach is usual because the number of class members often means that the utility of the class action mechanism would be lost or significantly reduced if it were necessary to do so, and because the initial trial ordinarily involves the Court deciding only the applicant's personal claim and the questions of fact and/or law which are common to the class ("common issues"). Ordinarily, it is only if the common issues are decided in favour of the class that it will become necessary to take detailed instructions from class members regarding their individual or unique circumstances. 73 M+K took this approach in the present cases. The pro forma Retainer, Authority and Costs Agreement ("Retainer Agreement") between M+K and its clients provides that instructions in the conduct of the proceedings will "primarily" be given by the applicants. The Retainer Agreement also provides that the class members who retain M+K "specifically instruct and retain M+K to make necessary decisions as to the procedural, investigative, preparatory, tactical and strategic decisions in relation to the conduct of the proceeding and, if specific instructions are required from anyone, then to seek those specific instructions as appropriate". M+K did not take detailed instructions from class members and for the great majority of them could not have known whether they had a claim or defence based in their individual or unique circumstances. 74 It is established that the Court should not second-guess the applicant's lawyers as to whether the settlement ought to have been accepted, or to proceed as if it knows more about the actual risks of the litigation than those lawyers. The Court takes the applicant's lawyers as it finds them, recognising that different applicants and different lawyers will have different appetites for risk. The question is whether the proposed settlement is within the range of reasonable outcomes, not whether it is the best outcome which the Court considers might have been won by better bargaining: Darwalla at [50]; Harrison v Sandhurst Trustees Limited [2011] FCA 541 ("Harrison") at [13] (Gordon J). 75 Some authorities suggest that to assist the Court in better understanding the applicant's prospects of success, the respondent's lawyers should provide a confidential opinion to the Court which objectively or candidly describes the merits of the case: Brookfield Multiplex No 4 at [4]; Pathway Investments Pty Ltd v National Australia Bank Ltd (No 3) [2012] VSC 625 at [6] (Pagone J). 76 I respectfully take a different view. Usually, the applicant's lawyer will have decided to accept a settlement without knowing the respondent's view of the weaknesses in its defence or the respondent's true "bottom line". Requiring the respondent to provide a confidential opinion would put the Court in a better position to assess the applicant's prospects of success than the applicant's lawyers. Practical difficulties may also arise if a respondent's lawyer is required to put on a confidential opinion. It is difficult to know what steps an applicant's lawyers could take to proceed further with a case if settlement approval were refused on the basis of confidential information provided by the respondent's lawyer to the Court, which could not be disclosed to the applicant or the applicant's lawyer. 77 In my view the fairness of a proposed settlement must be assessed by reference to the circumstances which could reasonably be expected to be knowable to the applicant and/or the applicant's lawyers.

I. THE KEY FEATURES OF THE SETTLEMENTS 78 The four settlements are contained in one Settlement Deed. The settlement of each of the 2007/08/09 Schemes proceedings is conditional on settlement approval orders in the other 2007/08/09 Schemes proceedings. That is, the settlements are put forward as a "package". The settlement of the 2010 Scheme Proceeding may be approved on a stand-alone basis. The features of the 2007/08/09 Schemes proceedings settlements 79 There are seven key features to the settlements in these proceedings. 80 First, no compensation or damages is to be paid to the applicants or class members in respect of their losses, and there is no reduction in the outstanding balances of their loans from the Lenders. 81 This, coupled with the modest benefits in the settlements, is central to Mr Braham's and other objections to settlement approval. Mr Braham argued that the benefits of the settlements are illusory, or at best inconsequential, particularly when considered against the loss by the class members of all their claims and defences in relation to loan enforcement proceedings by the Lenders. In response the settlement parties essentially submitted that, for registered class members, the settlements provide some modest benefits which are fair and reasonable and in class members' interests because the proceedings are unlikely to be successful. 82 Second, $3.1 million will be paid by the respondents, to be expended on the pro rata reimbursement of class members who are or were M+K's clients and paid a total of $6.086 million in legal costs to the firm. 83 If it is accepted that it is likely that the proceedings will be unsuccessful at trial, the reimbursement of approximately 51% of the costs paid to M+K will provide a benefit to class members who made such payments. They will receive no reimbursement if the proceedings continue and are unsuccessful. The materials show that about 396 client class members made contributions to legal costs ranging from as little as $395 through to as much as $364,395. 84 Of course, the lower the degree of risk that the proceedings will be unsuccessful at trial the lower the benefit of the partial reimbursement of legal costs. If the proceedings are likely to be successful and recovery obtained, class members could reasonably expect to be reimbursed a higher percentage of their costs. 85 Such reimbursement provides no direct benefit to approximately 31% of registered class members because registered non-client class members did not pay any legal costs. They did, however, receive a benefit through the preparedness of other class members to pay costs who are unlikely to have done so unless their reimbursement was to be prioritised in any settlement. In such circumstances it is appropriate to prioritise the reimbursement. 86 Third, approximately $2 million of contributions made by class members to a fund for security for costs will be returned to them, in circumstances where some adverse costs orders have been made. 87 If it is accepted that it is likely the proceedings will be unsuccessful at trial, this reimbursement will provide a benefit to client class members (and the small number of non-client class members) who made contributions to security for costs. Their contributions will be reimbursed in circumstances where they would be lost if the proceedings continue and are unsuccessful at trial. 88 Again, the lower the risk that the proceedings will be unsuccessful at trial the lower the benefit to class members of the reimbursement of contributions to security for costs. Their contributions will be reimbursed if the cases are successful. 89 Such reimbursement provides no direct benefit to the many registered class members who did not make a contribution to security for costs but they received an indirect benefit through the contributions. The proceedings would have been stayed if the contributions had not been made. In my view the reimbursement is appropriate. 90 Fourth, for registered class members who are in default under their loan contracts, the Lenders agree not to commence or take any steps to prosecute any debt recovery proceedings against them until at least 60 days after orders approving settlement, in which time class members will have an opportunity to pay the arrears. If the loan is brought up to date the Lenders will allow the balance of the loan to be paid over the remaining term. 91 If it is accepted that it is likely the proceedings will be unsuccessful, this term provides a benefit for class members because their loans will be immediately repayable in full if the proceedings continue and are unsuccessful. 92 The evidence is that there are 79 class members in default of their loan agreements with MIS and 76 class members in default of the loan agreements with CBA. This term of the settlements benefits approximately 155 class members out of the 738 registered class members (about 21%). It provides no benefit for class members who did not take out a loan. 93 Fifth, the applicants provide binding admissions on behalf of the class members as to the validity and enforceability of the loan agreements between the Lenders and class members. In my view these admissions constitute a significant detriment to those class members who wish to defend loan enforcement proceedings brought by a Lender, particularly any class member who has individual or unique grounds to do so. For non-participating class members this detriment is not balanced by any benefit under the settlements. I will deal separately with this term of the settlements. 94 Sixth, the applicants agree on behalf of the class members, that if a class member obtains damages or compensation in any Third Party Proceeding (as defined) and an order for contribution is made against a Lender or a related party in respect of those damages or compensation, the class member will indemnify the Lender or related party against that order for contribution ("the indemnity term"). "Third Party Proceeding" is broadly defined, and includes any claim brought by the applicant or a class member against a person who is not a party to the Settlement Deed arising out of or relating to their investment in one or more of the relevant Schemes. 95 While this term does not preclude class members from commencing proceedings against third parties, such as against financial advisors who recommended the acquisition of interests in the Schemes, it will to some extent inhibit class members in making such claims. To the extent that the third party may claim contribution from a Lender or related party there would be no point to such proceedings. For non-participating class members, who cannot seek a benefit from the settlement, this is a disadvantage which is not balanced by any benefit. 96 Seventh, the applicants, on their own behalf and on behalf of the class members, provide broad releases to the respondents' benefit including that: (a) they release and discharge the respondents and their related parties from any "set-off or any other remedy or right" that the applicant or any class member may have against the respondents or their related parties relating to or arising out of or in respect of (either directly or indirectly) the enforceability of a loan agreement entered into by a class member with one or other of the Lenders; (b) they will not raise "any defence or right of set-off" against any of the respondents or their insurers where the defence or right of set-off relates to or arises out of or is in respect of (either directly or indirectly) any thing related to the proceedings including, without limitation, any thing arising out of or relating to the applicants' or class members' investments in any Scheme; and (c) they will not seek relief by way of cross claim or raise any defence or right of set-off against any of the respondents to the proceeding where such defence or right of set-off relates to or arises out of or is in respect of (either directly or indirectly) any thing relating to the proceeding including, without limitation, any thing arising out of or relating to the applicants' or any class member's investments in the Schemes. The releases operate in support of the binding loan enforceability admissions. 97 The asserted benefits of the settlements are modest, and largely apparent only if it is accepted that the proceedings are likely to fail. While the benefits of the settlements largely go to M+K's clients, it must be borne in mind that they funded the proceeding, provided most of the security for costs, and make up about 69% of registered class members. Registered non-client class members received a benefit from their having done so. In my view the prioritised reimbursement of costs and security for costs is appropriate in the circumstances. However, the binding loan enforceability admissions will constitute a significant detriment for some registered class members and some non-participating class members. For some registered class members the detriment of the admissions will outweigh the benefits of the other terms of settlement. For non-participating class members the detriment will not be balanced by any benefit. The features of the 2010 Scheme proceeding settlement 98 The settlement of this proceeding has six key features. 99 First, no compensation or damages is to be paid to the applicants or class members. However, the settlements provide for substantial reductions in class members' outstanding loans. The Lender, Willmott Finance, agrees not to commence or take any steps to prosecute any debt recovery proceedings until at least 30 days after the Effective Date (defined as 35 days after settlement approval) and to provide class members with outstanding loans with the following three options which will be accepted as payment in full: (a) Option 1 - each class member repays 50 cents in the dollar on the amounts outstanding on their loans, doing so within 14 days of the Effective Date; (b) Option 2 - each class member repays 60 cents in the dollar on the amounts outstanding on their loan, doing so in equal monthly instalments over 12 months with the first instalment to be paid 30 days after the Effective Date, and provides Willmott Finance a direct debit authority in respect of such payments; or (c) Option 3 - each class member repays 70 cents in the dollar on the amounts outstanding on their loan, doing so in equal monthly instalments over 24 months with the first instalment to be paid 30 days after the Effective Date, and provides Willmott Finance a direct debit authority in respect of such payments. 100 This term provides a substantial benefit for class members who have an outstanding loan with Willmott Finance. It provides for a significant reduction in their outstanding loans, depending upon how speedily a class member is prepared or able to repay the loan. The materials show that all but 14 of the registered class members in this proceeding had loans with Willmott Finance, although it is not clear how many have paid off their loans. 101 This term does not provide any benefit to non-participating class members (about 52% of the class) because they are not entitled to the benefits of any settlement. 102 Second, $1.408 million will be paid by the respondents, $1 million of which is to be expended on the pro rata reimbursement of class members who are or were M+K's clients and who paid a total of $1.749 million in legal costs to the firm. 103 If it is accepted that it is likely that the proceedings will be unsuccessful at trial, the reimbursement of approximately 57% of the costs paid to M+K will provide a benefit to those class members who paid costs. They will receive no reimbursement if the proceedings continue and are unsuccessful. Again, the lower the risk that the proceeding will be unsuccessful at trial the less the benefit of the partial reimbursement of legal costs. 104 This term provides no direct benefit to about 16% of registered class members (because registered non-client class members did not pay costs) but they received an indirect benefit from the costs that client class members paid. In such circumstances it is appropriate to prioritise the reimbursement. 105 Third, $408,000 (being the balance of the $1.408 million paid by the respondents) will be expended on a payment to Amtrust Europe Limited for an After the Event insurance policy taken out by the applicant to cover adverse costs. This insurance benefited the applicant because it protected him from liability for adverse costs and all class members benefited because they avoided a requirement to pay security for costs. The payment is the price of that benefit. 106 Fourth, the applicant provides binding loan enforceability admissions on behalf of the class members. Again, in my view these admissions will constitute significant detriment to class members who wish to defend loan enforcement proceedings brought by the Lender, particularly any class member who has individual or unique grounds to do so. For non-participating class members this detriment is not balanced by any benefit. As I have said, I will deal separately with this issue. 107 Fifth, the applicant agrees to the indemnity term on his own behalf and on behalf of the class members. As I said of the cognate clause, this term provides that if a class member obtains damages or compensation in any Third Party Proceeding (as defined) and an order for contribution is made against a Lender or a related party in respect of those damages or compensation, the class member will indemnify the Lender or related party against that order for contribution. To some extent this term of the settlements is likely to inhibit class members in making claims against third parties. For non-participating class members, who receive no benefit from the settlement, this is a disadvantage which is not balanced by any benefit. 108 Sixth, the applicants, on their own behalf and on behalf of the class members, provide broad releases to the same or effect as the releases in the 2007/08/09 Schemes proceedings. 109 In my view the benefits of the settlement in the 2010 Scheme proceeding are significant for registered class members with outstanding loans, but low for registered class members who did not take out loans or who have paid them off. Again, it is significant to my decision that the binding loan enforceability admissions will constitute a significant detriment for some registered and some non-participating class members. For some registered class members this detriment may outweigh the benefits of the settlement and for non-participating class members the detriment will not be balanced by any benefit.

J. THE BINDING LOAN ENFORCEABILITY ADMISSIONS 110 It is common ground that the binding loan enforceability admissions will preclude class members from defending loan enforcement proceedings by a Lender on any basis, even in reliance on claims, defences or counterclaims not pleaded in the class actions and which are based in the class member's individual or unique circumstances. 111 The Contradictor's opposition to settlement approval focused on this term of the settlements, and it is also significant to the objections by Mr Braham, Mr Anderson, Mr Nealon, Dr Jackson, Mr Sostarko, Mr Spenceley, Mr Rennick, Mr McInally, Ms and Mr Rendon and Mr Tsardanis. 112 In brief summary the Contradictor submitted (supported by Mr Braham) that: (a) the applicants had no authority or standing to plead claims made by class members beyond those claims founded in the same, similar or related circumstances and sharing a substantial common question of fact or law (see s 33C of the Act). Essentially, the Contradictor argued that the applicants had no authority to represent class members in the proceedings in relation to any individual claims or defences they possessed; (b) the applicants had no authority to settle claims beyond those claims founded in the same, similar or related circumstances and sharing a substantial common question of fact or law, or indeed any claims outside the pleaded case. Essentially, the Contradictor argued that through the binding loan enforceability admissions the settlements purport to settle class members' rights in relation to claims which fall outside those for which the applicants had authority to represent the class members and outside the pleaded case; (c) in the circumstances the Court has no power to approve the settlements; and (d) in the alternative, in the exercise of discretion the Court should not approve the settlements because, in all the circumstances, a settlement including the binding loan enforceability admissions is not fair or reasonable. 113 The settlement parties submitted that the applicants had authority to make such claims (alternatively, that class members were required to either raise their individual or unique claims within the class actions or to opt out), the applicants had authority to reach settlements in terms of the Settlement Deed, that the Court has power to approve the settlements, and that settlements including the binding loan enforceability admissions are fair and reasonable. 114 It is unnecessary to decide the questions of authority and power in the present applications because: (a) assuming that the applicants had authority to plead claims by class members beyond those based in the same, similar or related circumstances and sharing a substantial common question of fact or law (see s 33C of the Act), it is plain that the proceedings do not plead any claims based in class members' individual or unique circumstances. The pleadings only advance claims based on the common circumstances of the applicants and class members ("common claims"); (b) assuming that Part IVA allows the applicants to put forward claims based in the individual or unique circumstances of class members, or that the Part allows class members to advance their individual or unique claims within the class actions (see ss 33Q, 33R and 33S of the Act) neither the applicants or any class member did so; and (c) assuming that the applicants had authority to settle class members' claims or defences which are not pleaded in the class actions and which are based in their individual or unique circumstances, in the circumstances of the present cases I refuse to approve settlements that include the binding loan enforceability admissions. In the circumstances I do not consider the settlements to be fair or reasonable having regard to the interests of class members to be bound by them. However, that is not to say that settlements including such admissions could never be approved. I do not decide the questions of authority and power and I deal with the applications by the exercise of my discretion in relation to settlement approval.

The settlement parties' submissions 115 The settlement parties made the following main contentions. First, they submitted that the binding loan admissions are a necessary and appropriate term of the settlements because they provide finality to the respondents. They pointed to the public interest in finality of litigation and noted that the Settlement Deed is not unusual in providing for finality. 116 Second, in their central thrust, the settlement parties submitted that class members were given an opportunity to opt out of the proceedings and should have opted out if they wished to pursue other claims against the respondents in relation to the subject matter of the proceedings, including claims not pleaded by the applicants and claims or defences that are individual or unique to a class member. 117 They noted that the proceedings seek declarations (in respect of each pleaded cause of action) that the applicants and class members are not liable under their loan agreements with the Lenders and claim damages on behalf of the applicants and class members comprising their past and future liability under the loan agreements. They argued that the enforceability of the loan agreements is a principal issue in the proceedings and that class members must have understood that the enforceability of the loan agreements was a matter which was likely to be covered in any settlement. 118 They submitted that the Annexure A and Annexure B Notices informed class members that they would be bound by any judgment or settlement unless they opted out. On their submissions, class members were fully informed of the consequences of not opting out and must be assumed to have chosen not to do so on the express basis that they would be precluded from commencing any other proceedings against the respondents in relation to the matters the subject of the proceedings, or in relying on any individual or unique claim or defence in loan enforcement proceedings. They contended that, if class members did not opt out, the fact that a settlement will preclude them from raising individual defences or counterclaims "is a necessary consequence of the representative proceeding regime." 119 On the settlement parties' contentions, if class members have an individual or unique claim against the respondents (which is not statute barred and which they would not otherwise be estopped from advancing were the trial to proceed) they were required to assess whether they wished to pursue that claim at the opt out stage. They contended that if the Court were to permit class members to rely on the availability of any individual or unique claims or defences as a basis for ceasing to be a class member, or for objecting to settlement approval, then the purpose of the opt out process would be frustrated. 120 Third, in a related submission the settlement parties contended that if the proceedings continue to judgment and the applicants are unsuccessful (as the respondents contended is likely) class members will be estopped from seeking to challenge the enforceability of the loan agreements in any further proceeding under the principles in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45 ("Anshun") or the principles of abuse of process. They submitted that there is nothing in Part IVA to suggest that s 33ZB of the Act should be read down so that the binding effect of a judgment on a class member is not the same as the binding effect of that judgment on the representative party. On this argument the binding loan enforceability admissions were not unfair to class members as they would have lost any right to pursue their individual or unique claims or defences in any event. 121 In this regard the settlement parties submitted that class members who did not opt out could and indeed were required to raise any additional or individual causes of action or defences beyond the pleaded case within the class actions, but did not do so. They contended that if a class member considered that the applicants were not pursuing some alternative claim, whether or not that claim is common to all group members or a claim that is individual or unique to the particular group member, there were various options open to him or her to advance that claim. They submitted that class members could and were required to seek: (a) (in respect of an individual or unique claim) directions: (i) under s 33Q for the establishment of a subgroup and to appoint another class member as the representative party in relation to those issues; or (ii) under s 33R to permit the class member to appear in relation to those issues; (b) (if the issues raised by the alternative claim could not properly or conveniently be dealt with in the proceedings) directions under s 33S for the commencement of separate proceedings (either individual proceedings if the alternative claim related only to the particular class member or another representative proceeding if the alternative claims are common to a number of class members); or (c) orders under s 33T to substitute another class member as the representative party. They argued that no class member in the present proceedings had done so, despite being on notice through the Annexure A and Annexure B Notices. 122 Fourth, the settlement parties submitted that assertions by class members that they will be deprived of real and valuable rights that they would be able to independently press if the settlement were not approved, or that they were unaware of the possibility that those rights might be lost at the opt out stage, should be treated with great scepticism by the Court. They submitted that, to the extent that the binding loan enforceability admissions involved a detriment to class members, no class member had come forward with evidence that the detriment is anything other than theoretical, particularly the non-participating class members. 123 They argued that it could not be assumed that, in circumstances where the non-participating class members were insufficiently interested in the proceedings to register or opt out, that they might nevertheless have other claims (which they are not estopped from advancing, and which would not be statute barred) and which they might wish to prosecute or maintain after any trial of the proceedings. 124 Fifth, the settlement parties submitted that to the extent that the binding loan enforceability admissions amount to a disadvantage for non-participating class members, this is not a consequence of the settlements but of the registration and opt out orders which provided that class members who did not register are not entitled to seek the benefit of any settlement. They noted, and I accept, that if the settlement is not approved, by reason of the registration and opt out orders there is no prospect that the non-participating class members can obtain relief or a benefit by way of a judgment. 125 In these submissions the settlement parties relied heavily on judgments in the Great Southern class action by Croft J in Clarke v Great Southern Finance Pty Ltd (in liquidation) (No 2) [2012] VSC 338 at [16]-[18] ("Clarke No 2") and Clarke v Great Southern Finance Pty Ltd (in liquidation) [2014] VSC 516 ("Clarke No 4") and Judd J in Clarke v Great Southern Finance Pty Ltd (in liquidation) [2014] VSC 569 (which I will call "Clarke No 3").

Consideration 126 For the reasons I now explain, I do not accept the settlement parties' submissions. In my view the imposition of the binding loan enforceability admissions upon class members, in combination with the failure/refusal to offer them an opportunity to opt out of the settlements, means that the settlements are not fair or reasonable. In broad summary, this is because: (a) the binding loan enforceability admissions are likely to constitute a significant detriment for some class members; (b) the settlement parties give too much weight to the benefits of finality of litigation for the respondents; (c) the Annexure A and B Notices did not unambiguously inform class members that if they did not opt out they would or might be precluded from defending loan enforcement proceedings on any basis, including by relying on claims or defences which are not pleaded in the class actions and which are based in their individual or unique circumstances, having regard to: (i) the audience to whom the Notices were directed; (ii) the context in which class members read the Notices; and (iii) the terms of the Notices; and (d) if the class actions proceed to judgment and the applicants are unsuccessful on the common issues, it is unlikely that class members will be precluded from relying on individual claims or defences by an Anshun estoppel or because of abuse of process, essentially because: (i) class members could not have raised their individual or unique claims within the framework of the class actions, but even if they could there was no "requirement" for them to do so; and (ii) assuming it was open to class members to raise their individual or unique claims within the framework of the class actions, in the circumstances (including that the Notices were ambiguous) it was not "unreasonable" for them not to have done so.

The detriment for some class members 127 The binding loan enforceability admissions will operate to bar class members from denying the enforceability of their loan agreements for any reason, even where they seek to rely on claims or defences that are not pleaded in the class actions and are based in their individual or unique circumstances. It is likely therefore that settlements including the admissions carry a significant detriment for some class members. 128 For some class members the binding loan enforceability admissions are likely to be of no moment and I note that many class members did not take out a loan or have already paid off their loan. Mr Tserkezidis, a Manager at CBA, deposed that MIS and CBA made 1,935 loans to investors in the 2007/08/09 Schemes. He said that as at 1 July 2015, 901 of those loans had been repaid in full, and 59 class members with outstanding loans had opted out. This means that approximately 975 of the approximately 3,165 class members in the 2007/08/09 Schemes proceedings (about 31%) have outstanding loans. The position appears to be different in relation to the 2010 Scheme as Mr Willemsen deposed that all but 14 of the registered class members took out loans to acquire their interests in that Scheme, but it is unclear how many of the non-participating class members did so. 129 I accept that some, perhaps many, registered class members (most of whom are M+K's clients) may see the binding loan enforceability admissions as fair and reasonable. Under the settlements they will be reimbursed approximately half of the legal costs they paid and any contribution they made to security for costs. In the 2007/08/09 Schemes proceedings they will be allowed a period to catch up their loan repayments and then to pay the balance over the term of the loan, and in the 2010 Scheme proceeding they will receive a significant discount on the outstanding loan balance. Such class members may consider that the benefits under the settlements outweigh the detriment of the admissions, particularly if they consider that the relevant case has poor prospects of success. Also, some registered class members will be aware that they have no basis to defend loan enforcement proceedings other than on the grounds pleaded in the class actions and may therefore see the admissions as fair. 130 However, for other registered class members (both client and non-client) the detriment of the binding loan enforceability admissions may significantly outweigh any benefit in the settlements. For example, Mr Braham is a class member in the 2007/08/09 Schemes proceedings and he was a client of M+K at the relevant time. He paid a total of $165,000 in legal costs and contributed $50,000 to the fund for security for costs. At the date of the settlement approval hearing he owed CBA and MIS approximately $4.6 million pursuant to loans taken out to acquire interests in the Schemes. Under the settlements he will receive reimbursement of approximately $134,150, but he will be precluded from defending loan enforcement proceedings on any basis. He submitted, and I accept, that for him the imposition of the binding loan enforceability admissions is not balanced by any real benefit under the settlements. 131 Importantly, for 2,427 non-participating class members in the 2007/08/09 Schemes proceedings (about 77% of the class) and 182 non-participating class members in the 2010 Scheme proceeding (about 52% of the class), the detriment of the binding loan enforceability admissions is not balanced against any benefit. 132 The settlement parties submitted that the detriment for non-participating class members arises from the registration and opt out orders rather than from the settlements, but this submission misunderstands the effect of those orders. The binding loan enforceability admissions are imposed through the settlements, not through the orders. It is one thing to rely on the registration and opt out orders to exclude non-participating class members from the benefits of settlement or judgment, and quite another to impose a substantial detriment upon them through the settlements, particularly when (as I explain) that is to be done without adequate notice and without offering them an opportunity to opt out.

The benefits of finality for the respondents must be balanced with the class members' interests 133 I accept, as the settlement parties contended, that parties to a settlement generally hope to resolve all their disputes and in most cases there is little point in seeking to settle proceedings without seeking to settle the totality of them: Tongue v Council of the City of Tamworth [2004] FCA 209 at [45] (Allsop J). As Gordon J said in Harrison at [26], when granting approval to a class action settlement: …it is not uncommon in settlements for full releases to be made of all outstanding claims, whether directly at issue in the proceedings or not. The releases are given, as Counsel for the applicants submitted, as the price of finality. Gordon J's remarks were, however, made in the context of a settlement that allowed class members who were unhappy with the settlement to opt out at that point. The settlements in the present cases do not provide that opportunity. 134 It is easy to understand the basis on which the respondents sought the binding loan enforceability admissions: the Lenders' interest in finalising the litigation surrounding the loans and the public interest in finality of litigation is plain. However, the benefits of finality must be balanced against the interests of class members. In the present cases the binding loan enforceability admissions coupled with the failure/refusal to provide class members an opportunity to opt out of the settlements gives too much weight to finality. 135 It is noteworthy that the Second Reading Speech for the Federal Court of Australia Amendment Bill 1991 (Cth) (Australia, House of Representatives, Parliamentary Debates (Hansard), 14 November 1991 at 3174-3175 ("Second Reading Speech") did not include finality of litigation as a general objective of Part IVA. In fact, absolute finality is difficult to achieve for a respondent to Part IVA proceedings because class members have a right to opt out of the proceeding, and because they are often permitted to opt out of a settlement. 136 Although Part IVA does not expressly empower the Court to provide class members an opportunity to opt out of a settlement, it is clear that the Court has power to do so. Section 33J allows the Court to fix another date for opt out which will extend the period during which a class member may opt out, and 33ZF allows the Court to make any order which the Court thinks appropriate to ensure that justice is done in the proceeding. Nor is there anything in Part IVA to indicate a legislative intention against providing class members with an opportunity to opt out at the point of settlement. The courts have often provided class members such an opportunity: see Courtney v Medtel Pty Ltd (No 4) [2004] FCA 1233 at [15] (Sackville J); Morabito M, "Judicial Responses to Class Action Settlements that Provide No Benefits to Some Class Members" (2006) 32 Monash University Law Review 75, 96; Grave D, Adams K and Betts J, Class Actions in Australia (2nd ed, Law Book Co, 2012) p 579. 137 In the United States the Courts are expressly required to give consideration to allowing class members to opt out of a settlement. In December 2003 Rule 23 of the United States Federal Rules of Civil Procedure was amended to provide that in class actions "the Court may refuse to approve a settlement unless it affords a new opportunity to request exclusion to individual class members who had an earlier opportunity to request exclusion but did not do so." As Professor Morabito has noted, this amendment was based on a recognition of the benefit of providing an additional safeguard for class members by allowing them to opt out at the point of settlement. 138 In Principles of the Law of Aggregate Litigation (Issacharoff S, Klonoff R, Nagareda R and Silver C, American Law Institute Publishers, 2010) pp 242-3 the learned reporters said that "as a matter of fairness, a class member should have an opportunity to opt out after learning about the actual terms of a settlement". They expressed the following principle: Second Opt-Out In any class action in which the terms of a settlement are not revealed until after the initial period for opting out has expired, class members should ordinarily have the right to opt out after the dissemination of notice of the proposed settlement. If the court refuses to grant a second opt-out right, it must make an on-the-record finding that specific reasons exist for its refusal. While recognising that a court may find that a second opt out would be inappropriate in a particular case, the reporters said: Specifically, the likelihood of a second opt out would have the salutary effect of forcing the parties to reach terms that are sufficiently attractive to deter massive opt outs. Defendants seek global peace, and large numbers of opt-outs defeat the very purpose of a class action, particularly when there is any likelihood that opt-outs would pursue their own litigation. To avoid large numbers of opt-outs, the parties would inevitably avoid settlements that are patently unfair to class. 139 Allowing class members to opt out of a settlement may reduce the incentives for a respondent to settle, but this can be dealt with by the inclusion of terms, for example, which allow a respondent to withdraw from a settlement if more than a specified percentage of class members or more than a specified proportion of total class claims opt out of the settlement. Such terms are common in class action settlements in the United States and have been included in a number of Australian settlements: e.g. King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) [2003] FCA 980. 140 Whether it is in the interests of justice to provide class members with an opportunity to opt out at the point of settlement will, of course, depend upon the circumstances of the case. In the present cases the failure to provide class members with an opportunity to opt out of the settlements is material to my refusal to approve them.

The failure to provide adequate notice to class members 141 The settlement parties submitted that class members should be taken to have chosen not to opt out on the express basis that the consequences of not opting out might include that they would be precluded in other proceedings from relying on claims or defences which are not pleaded in the proceedings and are based in their individual or unique circumstances. In this submission they relied on the decisions in Clarke No 2, Clarke No 3 and Clarke No 4. 142 In Clarke No 3 Judd J dealt with an application by a group of class members seeking orders that they cease to be class members, pursuant to ss 33KA and 33ZF of the Supreme Court Act 1986 (Vic). The application was made after the proceeding had been settled but before the settlement approval hearing. The principal submission by the class members was that they should be permitted to cease to be class members (in effect, to opt out of the settlement) because the settlement provided that the plaintiff on behalf of the class members admitted the validity and enforceability of their loan agreements. If the settlement was approved class members would be precluded from raising any claims or defences in other proceedings on grounds which were not pleaded in the class actions, including claims or defences which were individual or unique to their circumstances. The class members submitted that had they known that their right to maintain such claims or defences might be restricted through a settlement in the class action they would have taken steps to opt out of the proceedings. 143 His Honour held (at [22]) that the application was not competent as class members had no right to apply under ss 33KA and 33ZF, and his Honour proceeded to act on his own motion (at [26]). Therefore, strictly speaking, his Honour's detailed reasons are obiter dicta. 144 His Honour said (at [46]) that the appropriate protection of the individual claims of class members …is adequately achieved through the opt out process, provided the opt out notice is sufficient to define the scope of the proceeding and permit a meaningful decision. The notices were sufficient for that purpose. Had the applicants a viable basis to resist their obligations under the loan agreements, on grounds other than those pleaded in the group proceeding, they had an adequate informed opportunity to choose whether to opt out prior to the commencement of the trial, and ought to have done so. Nor was there any ambiguity about the prospect of settlement. ERA Legal was under no illusion as to their clients' prospects for maintaining individual defences while remaining a member of the group. (Emphasis added.) 145 His Honour went on to say (at [51]-[53]): The nature of the group proceeding was defensive. The plaintiffs alleged that the loan agreements were void and unenforceable. The Bank contended to the contrary. Group members had an opportunity to opt out of the proceeding, insofar as they might wish to maintain a different or novel defence. Upon judgment, group members would be bound by answers to the common questions, and thereafter precluded from litigating other defences to the obligations under the loan agreements. It should have come as no surprise to group members to find, as a term of the Deed of Settlement, the Bank would insist on their right to recover under the loan agreements. Group members were advised of the possibility of a negotiated settlement prior to the opt out deadline. No doubt they hoped for a different and better outcome. To permit a number of group members, dissatisfied with the terms of the Deed, to opt out would be inconsistent with the benefits they have enjoyed as group members throughout the trial. The term binding group members to repay loan obligations does not, in my view, constitute a material change in the scope of the group proceeding. Group members would be precluded from advancing new novel [sic] individual defences had the case proceeded to judgment. Thus, to include in the Deed a term precluding them from relitigating a challenge to loan obligations in the Deed, negotiated by the parties, cannot constitute a material change to the scope of the issues for final determination between the parties, nor was it inherently unfair. 146 In Clarke No 4 Croft J dealt with the settlement approval application. A large number of class members opposed settlement approval on the basis that, amongst other things, the binding loan enforceability admissions in the settlement deed would preclude them from running defences or counterclaims in loan recovery proceedings that were argued to be outside the pleaded case, including defences or counterclaims which were individual or unique. 147 Croft J held that it was incumbent on objectors to provide particulars of their individual defences or counterclaims and to articulate the reasons why the loss of such individual rights meant that the settlement was not fair or reasonable. In the absence of such particulars and reasons his Honour held that no weight should be given to that aspect of the class members' objections (at [119]). Then, on the assumption that there was some reality in the objectors' assertions as to the existence of their individual claims, Croft J gave further consideration to the questions before the Court. To this extent his Honour's detailed reasons are, strictly, obiter dicta. 148 His Honour said (at [123]): It is clear….that the purpose of the opt-out procedure is to preserve the right of individuals with claims that arise from the same subject matter as the group proceedings to choose whether to commence individual proceedings. The necessary corollary of this for group members who do not opt out is that they must be taken to have chosen to be bound by the issues raised in the group proceedings and their ultimate resolution. If that were not so, the purposes of the group proceedings legislation would be frustrated. 149 His Honour concluded (at132]): …any group members with purported claims or defences different to those pleaded in the group proceedings, and who wished to pursue those claims or defences, could have and should have opted out. By not opting out, as submitted by the [respondents], group members must be taken to have accepted that the claims as pleaded in the group proceedings represent all of the claims reasonably available to them. This is the reality of the way the class action regime operates. That being so, it follows that the [respondents] are entitled to assume that the only challenges to the enforceability of the Loan Deeds group members wished to pursue were those made in the group proceedings. It would not be reasonable for group members to raise different claims or defences in subsequent proceedings. Further, the [respondents] should be entitled to seek and achieve a complete settlement of the matters in dispute between them and the group members regarding the Loan Deeds. It would be an abuse of the Court's process, especially having regard to the opt-out procedure, for any group members to frustrate this entitlement by bringing subsequent claims or defences regarding the Loan Deeds. (Emphasis added.) His Honour approved the settlements which included binding loan enforceability admissions. 150 After I heard the present applications, Robson J handed down judgment in Timbercorp Finance Pty Ltd (In liquidation) v Collins and Tomes [2015] VSC 461 ("Collins and Tomes"). In this case three class members in the Timbercorp class action (Woodcroft-Brown v Timbercorp Securities Ltd (in liq) & Ors) sought to defend loan enforcement proceedings brought by Timbercorp Finance on grounds that included counter claims and defences not pleaded in that class action and at least one ground that was individual or unique to the class member (see [188]ff). They did so in circumstances where judgment had previously been delivered deciding the common issues in favour of the respondents, including Timbercorp Finance: Woodcroft-Brown v Timbercorp Securities Ltd (in liq) & Ors (2011) 253 FLR 240; [2011] VSC 427 (Judd J) ("Timbercorp"). In Collins and Tomes Robson J answered the preliminary question by holding that class members were not precluded from raising any of the defences pleaded by reason of their participation as class members in the Timbercorp class action. 151 His Honour respectfully disagreed (at [679]) with the statements of Judd J in Clarke No 3 and Croft J in Clarke No 4. While my decision turns on the facts of the present cases, I take a broadly similar view to that of Robson J, and I respectfully disagree with the statements of Judd and Croft JJ in Clarke No 2, Clarke No 3 and Clarke No 4. I note that judgment in an appeal against the decision in Collins and Tomes is currently reserved before the Supreme Court of Victoria Court of Appeal. 152 I do not accept that a "necessary corollary" of the right to opt out is that class members who do not do so must be taken to have accepted that the claims pleaded in a class action represent all claims "reasonably available" to them. Amongst other things, this would entail that class members would be precluded in subsequent proceedings from raising even those claims or defences that were insufficiently "related" to the applicant's claims to satisfy the threshold requirements of s 33C of the Act, and also precluded in relation to sufficiently "related" claims which were not pleaded in the class action and which are based in the individual or unique circumstances of a class member. 153 Nor do I accept that it is necessarily unreasonable for class members, in subsequent proceedings, to assert different claims or defences to those advanced in a class action. Whether class members should be permitted to do so will in part depend upon the sufficiency of the opt out notice provided to class members. In regard to the sufficiency of an opt out notice I respectfully take a different approach to Judd and Croft JJ. In my view if an opt out notice is to operate to preclude class members from subsequently advancing any claims or defences that are not pleaded in the class action and which are based in their individual or unique circumstances, that must be stated in unambiguous terms. The Court must be cautious to ensure that the individual rights of class members, in relation to claims about which the Court knows nothing, are not impinged upon. 154 In Clarke No 3 (at [45]-[46]) Judd J accepted as correct the statement of French J (as he then was) in Zhang v Minister for Immigration, Local Government and Ethnic Affairs (1993) 45 FCR 384 at 405; [1993] FCA 715 ("Zhang"), where his Honour explained: …in a case in which the group members have not raised individual claims but have been defined into the group on their related circumstances and the common issue, it is necessary that care be taken to ensure that claims based on individual circumstances of which the Court knows nothing are not prejudiced. As Judd J accepted (at [46]), the interests of class members in relation to their individual claims can be protected through the opt out process "provided the opt out notice is sufficient to define the scope of the proceeding and permit a meaningful decision" by class members as to whether or not to opt out. 155 In Collins and Tomes Robson J disagreed with the statements of Judd and Croft JJ as to the sufficiency of the opt out notices in the Clarke class action. His Honour found (at [618]) that the notices did not fairly warn class members that, unless they opted out, they would or might be precluded from raising any individual defences to loan enforcement proceedings. His Honour said that this was a critically important issue to the class members and the notices failed to address it. I agree. 156 I consider the opt out notices in the present cases were insufficient to put class members on notice that they would or might be precluded in the way the settlement parties now contend. Whether an opt out notice is sufficient to permit class members to make a "meaningful decision" (to use Judd J's expression in Clarke No 3) in relation to their right to opt out requires an understanding of the context in which class members will read the notice, and a consideration of the terms of the notice having regard to the audience to which it is directed. Given the importance of the decision to class members, if it is to be contended that if they do not opt out they will or might be precluded from advancing claims or defences which are not pleaded in the class action and which are based in their individual or unique circumstances, the opt out notice must unambiguously state this warning in terms that are understandable by a layperson. 157 I also agree with Robson J that where an opt out notice purports to provide a warning about the consequences of not opting out (as the Annexure A and B Notices in the present cases did) class members are likely to treat them as comprehensive and "not merely selective of some of the adverse consequences that might flow from not opting out while omitting other adverse consequences": Collins v Tomes at [620]. This acts to aggravate the failure to warn. 158 The principal purpose of a notice under 33X or 33Y of the Act is to ensure that class members can make an informed decision concerning their rights. Clarity and simplicity are essential if an opt out notice is to have its intended effect: King v GIO Australia Holdings Limited [2001] FCA 270 at [14]-[16] (Sackville, Hely and Stone JJ). 159 In the present cases the registration and opt out notices were aimed at a broad class of investors who, although made up of people with sufficient wealth to invest in the Schemes, included the undiscerning as well as the shrewd, the less educated together with the well-educated and the uninformed and accepting together with those who are astute, informed or sceptical. The notices were not directed to a class of lawyers and should not be construed as if they are to be read by such an audience. As Wilcox J said in McMullin v ICI Australia Operations Pty Ltd (No 6) (1998) 84 FCR 1; [1998] FCA 658 at 260: Any notice that is to be issued to members of the public in connection with a representative proceeding must be readily comprehensible by non-lawyers. It should be written in plain English. In my view, to support their submissions the settlement parties sought to carefully parse the Annexure A and B Notices as a lawyer would, selectively relying on some parts of the Notices and ignoring or downplaying other parts. That is not how the Notices should be construed, but even if they are I consider the Notices are not clear. 160 At the time I approved the Annexure A and Annexure B Notices there was no suggestion by the parties that the proceedings might be settled on a basis that included terms such as the binding loan enforceability admissions. This may explain why the Notices failed to inform class members in unambiguous terms that if they did not opt out they would or might be precluded from defending loan enforcement proceedings on any basis, including in reliance on claims or defences that are not pleaded and which are based in their individual or unique circumstances. 161 It is significant that the applicants conceded that the binding loan enforceability admissions: …may create a risk that some Group Members may lose an individual right to contest the validity and/or enforceability of a loan agreement, which risk may not have been envisaged by every Group Member or at least by those Group Members who had no knowledge that such a compromise could reasonably arise from the Group Proceedings. In my view this concession did not go far enough. In the present circumstances I find it difficult to see how class members could have reached an understanding of the "risk" to which the applicants refer, or obtained the "knowledge" that the binding loan enforceability admissions could reasonably arise. 162 Importantly, in their written submissions the applicants said that the "risk" they identified was "obviously mitigated" by the Notice of Proposed Settlement because the notice informed class members who were concerned about the binding loan enforceability admissions that they could opt out or object. This submission misunderstood the terms of the settlements and the Notice of Proposed Settlement. Under the settlements class members are not afforded an opportunity to opt out and the Notice of Proposed Settlement did not state otherwise.

The context in which the Notices were read 163 I now turn to the context in which the Annexure A and Annexure B Notices were read by class members. The context included that the proceedings only make claims based in issues that are common to all class members, the allegations that the loan agreements are void and unenforceable is only made in relation to the common claims, and the Defences only respond to the common claims. Any class members who reviewed the pleadings (to which they were referred by the Notices) are likely to have concluded that the proceedings did not concern any individual or unique claim or defence which they possessed. 164 Those class members who sought advice from M+K are likely to have been left with the same impression. Mr Willemsen deposed: In a great many of [sic] conversations I had with group members who were or became M+K clients I said to them that the class actions for Willmott investors were going to be dealing with common issues and were expected to be a cost-effective way for claims to be brought to Court, the alternative of bringing individual claims being so expensive as to be prohibitive. 165 Mr Willemsen also said that when taking initial instructions from clients it was M+K's practice to deal only with the common issues. M+K did not at that point seek instructions in respect of any issues that any client may have had different from those pleaded in the class action or which were unique to the client. It is hard to see why class members would have seen their individual or unique circumstances as significant in the decision whether to opt out when the class lawyers did not even ask about them. 166 Further, the Retainer Agreements provided to M+K's clients (and I infer to many class members who declined to become clients of the firm) informed them that the unique issues of class members were to be dealt with at a later stage of the proceedings. Clause 10 of the Retainer Agreement stated: After the case for investors has been built up and the best time, strategically, has arrived to address each investor's own unique issues and embark on settlement negotiations the stage 2 individually time-costed fees will be billed to me/us by reference solely to my/our individual file. No part of the stage 2 fees will be applied to the class action file as they relate only to my/our own unique issues and evidence. The materials indicate that Stage 2 was not reached (except perhaps in relation to 87 class members who were individually sued by a Lender). At no point did M+K advise class members that the time had "arrived to address each investor's own unique issues". 167 The pre-prepared script, used by M+K in responding to approximately 250 telephone enquiries and 104 email enquiries about the registration and opt out process, is also relevant. In part it stated: If you would prefer to initiate proceedings in relation to your Willmott investment on your own, or would prefer to reserve the right to initiate proceedings at some time in the future, you must opt-out of the Willmott Class Actions. If you remain a class member you will be bound by any decision made in the Willmott Class Actions. 168 The script did not clearly inform class members that if they did not opt out they might be precluded from relying on their unique individual circumstances in defending loan enforcement proceedings by a Lender. Instead, M+K informed class members that they should opt out if they wished to initiate their own proceedings against the respondents. The two situations may involve quite different considerations. It might be expected that many class members would lack the resources to bring their own proceedings against the respondents, whereas they might have little option but to defend loan enforcement proceedings brought against them. 169 The materials show that M+K recognised the distinction between common and individual issues, and informed class members that individual issues would be dealt with at a later stage of the class actions. I conclude from the materials that very few class members were advised that their individual issues meant that they should opt out and commence separate proceedings. 170 Importantly, there is nothing in Mr Willemsen's evidence to show that even one class member asked about the potential for a settlement that included a term that might preclude the class member from defending loan enforcement proceedings in reliance on claims or defences which are not pleaded in the class actions and which are based in his or her individual or unique circumstances. I would expect some class members, particularly the 87 class members who were already defending loan enforcement proceedings, to have raised such a question had they been on notice that such an outcome was possible. Mr Willemsen did not state that M+K advised even a single class member that there was a possibility that he or she would or might be so precluded.

The terms of the Annexure B Notices 171 I start with the Annexure B Notices because they are more straightforward. In each proceeding this Notice was in relevantly the same terms and it largely went to class members who were M+K's clients. I infer that it went to class members such as Mr Braham, Mr Nealon, Mr Anderson, Ms and Mr Rendon, Mr Tsardanis and Mr McInally, each of whom objected to the binding loan enforceability admissions. 172 The Notice commenced by informing class members that it is important and should be carefully read. It provided a summary of the claims in the proceedings which referred only to the pleaded common claims. It summarised the respondents' defences and stated: The Respondents reject the allegations and are defending the claims on a number of grounds, including that the product disclosure statements were not defective or misleading or deceptive, there was no unconscionable conduct and no duty of care was breached. The Notice did not refer to any claims or defences based in class members' individual or unique circumstances. At the end of the Notice class members were told where they could obtain a copy of the pleadings. Any class member who looked at the pleadings would have seen that they only made claims based in the common circumstances of the applicants and all class members. 173 Next, under the heading "What is a class action?" the Notice explained the concept of class members being "bound" by a judgment or settlement in a class action. It stated: What is a class action? A class action is an action that is brought by one person ("the Applicant") on his or her own behalf and on behalf of a group of people ("class members") against another person ("the Respondent") where the Applicant and the class members have similar claims against the Respondent. Class members are bound by any judgment or settlement entered into in the class action unless they have opted out of the proceeding. This means that: (a) if the class action is successful, class members may be eligible for a share of any settlement monies or Court-awarded damages; (b) if the class action is unsuccessful, class members are bound by that result; and (c) regardless of the outcome of the class action, class members will not be able to pursue their claims against the Respondent in separate legal proceedings unless they have opted out. (Emphasis added in italics.) 174 The settlement parties contended, and I accept, that the word "similar" in the opening paragraph of this section echoed the requirements of s 33C of the Act. In the context, class members are likely to have understood the phrase "bound by any judgment or settlement entered into in the class action" by reference to their "similar" claims. That is, the common claims made in the proceeding, as they were summarised in the preceding paragraph or as they were made in the pleadings to which class members were referred. 175 The settlement parties sought to rely on sub-paragraph (c) in this section, arguing that it informed class members that unless they opted out they would have no right to pursue any claims against the respondents in separate proceedings. I do not accept that the Notice clearly stated this. First, this section is headed "What is a class action?" and it is directed at describing class actions generally rather than expressly dealing with the consequences of not opting out (which is dealt with in a later section). 176 Second, the Notice warned of a preclusion from bringing claims in separate proceedings rather than a preclusion from defending proceedings, such as loan enforcement proceedings. As I have said, the two situations involve different considerations. While many class members may lack the resources to bring their own proceedings against the respondents, they might have little choice but to defend loan enforcement proceedings. 177 Third, a later section of the Notice (which expressly dealt with the consequences for class members of not opting out) said something different. The later section provided: What will happen if you choose to remain a class member? Unless you opt out, you will be bound by the outcome of the class action. If the class actions are successful, you will be entitled to share in the benefit of any order, judgment or settlement in favour of the Applicant and group members. (In some cases you may have to satisfy certain conditions before your entitlement arises.) If the actions are unsuccessful or not as successful as you might have wished, you will not be able to sue on the same claim in any other proceedings. (Emphasis added in italics.) 178 In my view this qualifies sub-paragraph (c) in the earlier section. There is only one way to read the phrase "you will not be able to sue on the same claim". In the circumstances class members are likely to have read the phrase to mean that if they did not opt out they would be precluded from suing in other proceedings on the common claims that were pleaded. I note again that the stated preclusion is against suing on the same claim and not in relation to defending proceedings. This section seriously undermines the settlement parties' argument. 179 In my view there is little in the Annexure B Notice to support the settlement parties' submission that class members would have understood the Notice to mean that, if they did not opt out, they would or might be precluded from defending loan enforcement proceedings by relying on claims or defences which are not pleaded in the class action and which are based in their individual or unique circumstances. In any event, it cannot be said that the Notice unambiguously so provided.

The terms of the Annexure A Notices 180 The Annexure A Notices in each proceeding were relevantly the same. The only difference of significance is that the Notice in the 2010 Scheme proceeding did not include the section headed "What is security for costs?" because class members in that case were not required to provide security. 181 An Annexure A Notice was sent to approximately 2,978 of the 3,405 class members in the 2007/08/09 Schemes proceedings, and to 218 of the approximately 357 class members in the 2010 Scheme proceeding, the great majority of whom were not clients of M+K. 182 The notices are lengthy and not straightforward for a non-lawyer to understand. I mean no criticism of the parties in this regard as the task of combining information about class member registration, security for costs and the right to opt out in one notice was not without difficulty. 183 The Annexure A Notice commenced by informing class members that the Notice is important and it should be carefully read. Doing so in the same terms as the Annexure B Notice, the Notice provided a summary of the claims in the proceedings which referred only to the pleaded common claims and summarised the respondents' defences. It did not refer to any claims or defences based in class members' individual or unique circumstances. At the end of the Notice class members were told where they could obtain a copy of the pleadings. Any class member who read the pleadings would understand that they only advanced claims based in circumstances common to the applicants and all class members. 184 Next, under the heading "What is a class action?" the Notice explained the concept of class members being "bound" by a judgment or settlement (doing so in the same terms as the Annexure B Notice). As I said in relation to that Notice (at [171]) class members are likely to have understood the reference to being "bound by any judgment or settlement entered into in the class action" as meaning their "similar" claims, being the common claims pleaded, as they were summarised in the preceding paragraph or as they were made in the pleadings to which class members were referred. In my view class members are likely to have understood sub-paragraph (c) to be qualified by the later section which expressly dealt with the consequences of a failure to opt out in the present cases. 185 Next, a section headed "What is security for costs?" (which was not included in the Notice in the 2010 Scheme proceeding) informed class members of the requirements in relation to security for costs. It said: What is security for costs? At this stage of the class action proceedings, the Court has ordered the Applicants to provide $1,730,379 as security for the legal costs of the Respondents. The Applicants are not able to personally fund security in that amount. Accordingly, the class members have been requested to contribute towards a pool of funds. Each class member who wishes to pursue a claim against any or all of the Respondents in the class action proceedings is requested to make a real contribution to the pool of funds to be used as security for costs. If they do not agree to make such a contribution the class member is requested to provide information to explain why the class member is unable or reasonably unwilling to contribute to the pool of funds to be used as security for costs. You cannot be compelled to provide a contribution to security for costs. However, if you fail to make a contribution and also fail to provide information showing that you are unable or unwilling to do so and that your unwillingness is reasonable, there may be serious consequences for your legal rights. You may lose your rights to make any claim in respect of or relating to the subject matter of these class actions against the respondents in this or any other proceeding. Importantly, if the Applicants are successful in the class action proceedings, the contributions made to provide security for costs will be returned to the class members that contributed the money. (Emphasis added in italics.) In the 2007/08/09 Schemes proceedings similar words to the emphasised passage also appeared in the Registration Form. 186 One cannot be certain how class members will have understood the phrase "in respect of or relating to the subject matter of these class actions". The settlement parties submitted that the "subject matter" of the proceedings includes the loan agreements to fund the purchase of an interest in a Scheme and is not limited to the causes of action pleaded. They argued that class members would have understood that by not registering they faced the prospect that any claim they might have in relation to the loan agreements might be compromised. 187 I do not accept this. Lawyers may understand the breadth of the expressions "subject matter" and "relating to" but the Annexure A Notice was not directed to such an audience. The meaning of the expression "subject matter of these class actions" is not clear-cut and class members may well have understood it to mean the common claims pleaded in the proceedings. The expression "relating to" may have provided a broader meaning but, having regard to the later reference in the Notice to the "same claim", class members may have taken it to refer to claims related to the common claims pleaded. 188 Such questions of construction are matters for lawyers and the fact that these questions as to the proper construction of the Notice arise illustrate that it failed to unambiguously inform class members that, if they did not register (or opt out), they would or might be confronted by the preclusion for which the settlement parties now contend. Class members could have reasonably expected that the possibility of such an outcome would be clearly stated, if indeed that was to be the case. 189 The next section of the Notice headed "What class members must do", which expressly dealt with the consequences of not registering and not opting out, is central to my decision. It stated: What class members must do If you consider that you are a class member in the WFL class actions, you must choose one of the following options: Option A If you wish to make a claim against any or all of the Respondents in the class action proceedings, you must complete the "Class Member Registration Form" (at the end of this notice) and return it to M+K Lawyers. In order to register, you must: (a) provide the information requested in the Class Member Registration Form; and (b) if making a contribution to security for costs, provide the contribution by 4.00pm on 2 June 2014 in accordance with the remittance notice attached to the Class Member Registration Form. Class members have been previously asked to make the following contribution: (a) 15% of your investment amount if you obtained a loan from CBA or MISF to fund your investment in the Projects; (b) 8.5% of your investment amount if you did not obtain a loan from CBA or MISF to fund your investment in the Projects; or (c) a lesser amount that you are able to contribute having regard to your financial circumstances. If you are unsure about what constitutes a 'real contribution' or what information you must provide, please contact M+K Lawyers or seek your own legal advice without delay. In addition to the above, if you register as a class member, you will be bound by the outcome of these class action proceedings, so that: (a) if the class action proceedings are successful, you will be entitled to share in the benefit of any order, judgment or settlement in favour of class members (you may have to satisfy certain conditions before your entitlement arises); and (b) if these class action proceedings are not successful, or are not as successful as you might have wished, you will not be able to sue on the same claim in any other proceedings (including by way of defence, counterclaim or otherwise in any proceeding commenced against you by one or more of the Respondents). Option B If you do not wish to be a class member and wish to preserve your right to take your own legal action against one or more of the Respondents, you should opt out of the class action proceedings by completing the "Notice of Opting Out" (at the end of this notice) and return it to the Registrar of the Federal Court of Australia at the address on the form. IMPORTANT: the notice must reach the Registrar by no later than 4:00pm on 2 June 2014, otherwise it will not be effective. If you opt out then you will not be affected by any orders made in these class action proceedings. If you opt out: (a) your rights will not be determined by these class action proceedings; (b) you will not be entitled to share in the benefit of any judgment or settlement in these class action proceedings; (c) you will be able to commence separate proceedings on your own behalf if you wish to do so. …. Option C If you do nothing (i.e. you do not register to make a claim and do not complete and return an opt out notice), you will remain a class member but will be prevented from making a claim in respect of or relating to the subject matter of these class action proceedings against any or all of the Respondents by a separate proceeding and from making a claim at a later stage of these proceedings. In other words, if you do nothing, you will lose your rights to bring any claim against any of the Respondents in relation to the allegations made in these class action proceedings, including by way of defence, counterclaim or otherwise in any proceeding commenced against you by one or more of the Respondents. Option D If you want to challenge the orders made by the Court requiring the registration of claims against the Respondents, you must send a written notice to M+K Lawyers, setting out the challenge you want to make and the reasons for that challenge. You may then be required to attend the Court at a later date to have your challenge heard.

(Emphasis added in italics.) 190 Again, there is only one way to read the phrase in Option A "you will not be able to sue on the same claim in any other proceeding including by way of defence [or] counterclaim". In the circumstances class members are likely to have understood it to mean that, if they did not opt out, in subsequent proceedings they could not rely on the common claims pleaded in the class actions, whether by claim, defence or counterclaim. It is unlikely that class members will have understood it to mean that they would or might be precluded from relying on claims or defences which are not pleaded in the class actions and which are based in their individual or unique circumstances. 191 The section titled Option B informed class members that if they wished to preserve their right to initiate their own legal action against the respondents they should opt out. It did not inform them that they should opt out if they wished to preserve any rights to defend proceedings brought against them. As I have said, these situations may involve different considerations. 192 The settlement parties contended that a necessary corollary of Option B is that class members would understand that, if they did not opt out, all of their rights would be determined within the class actions. I doubt that class members would have understood that this extended to the possibility that they might be precluded from defending loan enforcement proceedings upon grounds that are individual and unique to them, which are not pleaded in the actions and about which M+K knew nothing. 193 The section titled Option C informed class members that, if they did not register or opt out, they would remain class members but would be prevented from making a claim "in respect of or relating to the subject matter of the class actions", and "[i]n other words if you do nothing, you will lose your rights to bring any claim against any of the Respondents in relation to the allegations made in these class action proceedings" (emphasis added). 194 As I have said, one cannot be sure how class members will have understood the broad expression "relating to the subject matter of the class actions". The expression may be read broadly, but if class members read it having regard to the reference in Option A to a preclusion from suing on the "same claim" or by reference to the preclusion from suing "in relation to the allegations made in these class action[s]" they are likely to have understood it more narrowly. They may have understood the Notice to indicate a preclusion on suing in other proceedings on the common claims pleaded in the proceeding and claims related to them. 195 In the context in which class members read the Notice, it is unlikely that they would have understood Option C to mean that, if they did not register or opt out, they would or might be precluded from defending loan enforcement proceedings by relying on claims or defences which are not pleaded in the class actions and which are based in their individual or unique circumstances. Class members could reasonably expect any such preclusion to be unambiguously stated, if it was to be the case. 196 As can be seen, the Annexure A and B Notices used different expressions at different points to explain how class members might be bound by the outcome of the class actions. For example, at one point the Annexure A Notice informed class members that they would be precluded from bringing any claim or defence "in respect of or relating to the subject matter of the class actions", and then immediately narrowed this to a preclusion "in relation to the allegations made in the class actions", and at another point the Notice informed class members that they would be precluded only from suing on the "same claim". The few sentences in the Notice which touched on the important issue of whether judgment or settlement in the class actions might foreclose class members' rights to bring or defend proceedings based on claims which are not pleaded and which are based in their individual or unique circumstances are in my view ambiguous. 197 In the circumstances it would be wrong to infer from the Notices that class members were aware of but untroubled by the prospect that an outcome of the class actions could include a settlement that bound them into an admission that their loan agreements were valid and enforceable, or a foreclosure on claims or defences that are not pleaded in the class actions and are based in their individual or unique circumstances. It is noteworthy that there is no evidence that even one class member asked about the potential for a settlement that would preclude him or her from defending loan enforcement proceedings in reliance on their individual or unique circumstances. In my view the proper inference from the terms of the Notices, the context in which they were read by class members, and the complexity of the legal questions involved, is that many class members are unlikely to have understood that such an outcome was possible. 198 In any event, it cannot be said that the Notices unambiguously informed class members that if they did not register or opt out they would or might be subject to a settlement which precluded them in the way the settlement parties now contend.

Will class members be precluded from relying on individual claims, defences or counterclaims by Anshun estoppel or abuse of process? 199 The settlement parties further submitted that settlements including the binding loan enforceability admissions are fair and reasonable because, if the proceedings continue to judgment and are unsuccessful (as the respondents contended is likely), class members will be barred by Anshun estoppel or by principles of abuse of process from challenging the enforceability of their loan agreements in subsequent proceeding. 200 In this submission the settlement parties again relied heavily on the decisions in Clarke No 2, Clarke No 3 and Clarke No 4. In Clarke No 3 Judd J said (at [35]) that the applications to cease to be class members were "predicated on the assumption that, had the case proceeded to an adverse judgment, group members would retain the right to defend existing or potential recovery proceedings on grounds other than those explicitly litigated in the proceeding." His Honour rejected that proposition. At [38] Judd J cited with approval the remarks of Croft J in Clarke No 2 (at [16]-[18]) where his Honour said: A further consideration is that it is, in reality, the opponents of this application who bear the risk of not being able to agitate all aspects of their defences or counterclaims by electing to remain group members. The risk they run is that on determination of the Group Proceedings, they will not be permitted - on the basis of abuse of process, Anshun estoppel, election or perhaps on other bases - to pursue all or any aspects of their defences or counterclaims in the individual proceedings. 201 At [50]-[53] Judd J said: While it is true that the proposed individual defences might theoretically be raised in existing proceedings that have been stayed, this group proceeding was unusual. It took the form of a collective defence to the Bank's rights of recovery under loan agreements. Existing and potential defences were subsumed in the group proceeding. That was the intended purpose of the group proceeding. The mere existence of a prior recovery proceeding brought by the Bank, or a counterclaim, does not assist the applicants. The nature of the group proceeding was defensive. The plaintiffs alleged that the loan agreements were void and unenforceable. The Bank contended to the contrary. Group members had an opportunity to opt out of the proceeding, insofar as they might wish to maintain a different or novel defence. Upon judgment, group members would be bound by answers to the common questions, and thereafter precluded from litigating other defences to the obligations under the loan agreements. It should have come as no surprise to group members to find, as a term of the Deed of Settlement, the Bank would insist on their right to recover under the loan agreements. Group members were advised of the possibility of a negotiated settlement prior to the opt out deadline. No doubt they hoped for a different and better outcome. To permit a number of group members, dissatisfied with the terms of the Deed, to opt out would be inconsistent with the benefits they have enjoyed as group members throughout the trial. The term binding group members to repay loan obligations does not, in my view, constitute a material change in the scope of the group proceeding. Group members would be precluded from advancing new novel individual defences had the case proceeded to judgment. Thus, to include in the Deed a term precluding them from relitigating a challenge to loan obligations in the Deed, negotiated by the parties, cannot constitute a material change to the scope of the issues for final determination between the parties, nor was it inherently unfair. 202 In Clarke No 4 Croft J said (at [125]): It is a "central and pervading tenet of the judicial system [that] controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances". [D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1, 17 [34] (Gleeson CJ, Gummow, Hayne and Heydon JJ).] This principle is reflected in the doctrines of issue estoppel, Anshun estoppel and abuse of process. In Johnson v Gore Wood & Co [[2002] 2 AC 1] Lord Bingham discussed the distinctions between these principles and said [at 31]: But Henderson v Henderson [(1843) 3 Hare 100; [1843-60] All ER Rep 378] abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. Chief Justice French approved the emphasised part of this passage in Aon Risk Services Australia Limited v Australian National University [(2009) 239 CLR 175 at 194 [34]] Lord Bingham, then the Master of the Rolls, commenced his Lordship's judgment in the Court of Appeal in Barrow v Bankside Agency Ltd with reference to the rule in Henderson v Henderson: The rule … is very well known. It requires the parties, when a matter becomes the subject of litigation between them in a court of competent jurisdiction, to bring their whole case before the court so that all aspects of it may be finally decided (subject, of course, to any appeal) once and for all. In the absence of special circumstances, the parties cannot return to the court to advance arguments, claims or defences, which they could have put forward for decision on the first occasion but failed to raise. The rule is not based on the doctrine of res judicata in a narrow sense, nor even on any strict doctrine of issue or cause of action estoppel. It is a rule of public policy based on the desirability, in the general interest as well as that of the parties themselves, that litigation should not drag on for ever and that a defendant should not be oppressed by successive suits when one would do. That is the abuse at which the rule is directed. (Emphasis in original.) 203 Croft J held that the binding loan enforceability admissions in that settlement were not unfair to class members because, upon judgment or settlement, class members would be barred from asserting any claims or defences that their loan agreements were unenforceable because of issue estoppel, Anshun estoppel and abuse of process. His Honour said (at [126]) that "the enforceability clauses cannot and do not detract from the fairness and reasonableness of the settlement; they simply provide certainty for all parties as to where the group members stand." 204 In Collins and Tomes Robson J respectfully disagreed with their Honours' statements in Clarke No 2, Clarke No 3 and Clarke No 4 and, while my decision is based in the facts of the present cases, I take a broadly similar view to Robson J. 205 There is no question that judgment in a Part IVA proceeding will bind class members (s 33ZB of the Act) and they will be precluded in subsequent proceedings from asserting claims that were unsuccessful in the class action. Nor is there any real question that the principles of Anshun estoppel and abuse of process apply to Part IVA proceedings such that a judgment may preclude class members from later asserting claims that could have been made in the class action. 206 As the plurality (Gaudron, Gummow and Hayne JJ) said in Mobil Oil (at [34]), what is decided in a class action is: …the claims that are made, or could be made, against the defendant by all those in the "class" or "group" that is identified in the proceeding… (Emphasis in original.) Their Honours said (at [39]-[40]): ...There is, therefore, a real possibility that some group members would remain "perfectly ignorant of the proceedings, and of what is really going on". That is, some of those who would benefit from success in the proceeding (but thereby lose the opportunity to pursue their individual claim in some way, or to some effect, different from the group proceeding) may have their rights affected without their knowing or consenting to that being done. So much follows from the fact that Pt 4A provides for what is sometimes called an "opt out", rather than an "opt in", procedure. (Emphasis added. Citations omitted.) 207 In Tomlinson v Ramsey Food Processing Pty Ltd (2015) 323 ALR 1; [2015] HCA 28 at [40] ("Tomlinson") (handed down after the present applications were heard but in relation to which the parties made submissions) the majority (French CJ, Bell, Gageler and Keane JJ) said: Traditional forms of representation which bind those represented to estoppels include representation by an agent, representation by a trustee, representation by a tutor or a guardian, and representation by another person under rules of court which permit representation of numerous persons who have the same interest in a proceeding. To those traditional forms of representation can be added representation by a representative party in a modern class action. Each of those forms of representation is typically the subject of fiduciary duties imposed on the representing party or of procedures overseen by the court (of which opt-in or opt-out procedures and approval of settlements in representative or class actions are examples), or of both, which guard against collateral risks of representation, including the risk to a represented person of the detriment of an estoppel operating in a subsequent proceeding outweighing the benefit to that person of participating in the current proceeding. (Emphasis added. Citations omitted.) The Court accepted that class members in Part IVA proceedings may be bound to an estoppel which precludes them from advancing claims in subsequent proceedings if those claims could have been made in the class action. 208 Before me, it is common ground that a judgment or settlement of the class actions will bind class members to an estoppel in respect of the common claims which are pleaded in the actions. It is also common ground, at least between the Contradictor and the settlement parties, that a judgement or settlement may bind class members to an estoppel in respect of common claims that could have been pleaded in the class actions but were not. Mr Braham, however, contended that a class member could only be bound to an estoppel in respect of common claims that are pleaded, and not common claims which are not pleaded. 209 I am not inclined to agree with Mr Braham's contention, but it is unnecessary to decide this question given my view that, in the present circumstances, class members are unlikely to be estopped in relation to any individual or unique claims they possess and that class members should be afforded an opportunity to opt out of the settlements. 210 Before dealing further with this issue I note that a decision as to whether class members may later be precluded from asserting claims or defences by the principles of Anshun estoppel or abuse of process is premature at this point. There is little or no material before the Court as to any claims or defences which class members may possess which are based in their individual or unique circumstances, and it cannot be conclusively decided that, if the class actions proceed to judgment, a particular class member will be precluded from asserting his or her individual or unique claims in subsequent proceedings. Amongst other things, the precise nature of any particular class member's individual or unique circumstances has not been identified and there is no evidence before the Court as to; (a) whether such a class member received legal advice about the registration and opt out notice; (b) how the class member understood the notice; (c) when the class member became aware that he or she had a viable claim or defence based in his or her individual or unique circumstances; (d) why the class member did not raise his or her individual or unique claim within the class action; or (e) why the class member did not opt out. It cannot be known at present whether it is just in all the circumstances that the class member be so precluded.

Could class members, or were class members required to, raise their individual or unique claims or defences in the class actions? 211 In dealing with the possibility that class members may be confronted by an Anshun estoppel, the first main question is whether class members could have raised their individual or unique claims or defences within the framework of the class actions by making applications under ss 33Q, 33R or 33S of the Act. The settlement parties submitted not only that class members were entitled to make an application under these provisions and thereby assert their individual claims or defences, but that they were required to do so if they were to avoid being precluded from relying on their individual claims or defences in subsequent proceedings. 212 I do not accept this submission. It is common in class actions for some class members to share claims with the applicant which are based in the same, similar or related circumstances and to also have another claim or claims against the respondents arising from the same milieu but based in their individual circumstances (or at least in different circumstances to the applicant). The words "same, similar or related circumstances" in s 33C(1) refer to tiers of similarity between the claims commencing at the narrowest point with "sameness" and widening through "similarity" to "relatedness". "Relatedness" is the outer limit of eligibility. As French J (as he then was) said in Zhang (at 404-405): In each case there is a threshold judgment on whether the similarities or relationships between circumstances giving rise to each claim are sufficient to merit their grouping as a representative proceeding. At the margins, these will be practical judgements informed by the policy and purpose of the legislation. At some point along the spectrum of possible classes of claim, the relationship between the circumstances of each claim will be incapable of definition and a sufficient level of particularity, or too tenuous or remote to attract the application of the legislation. 213 A part of a class member's claim which is based in his or her individual circumstances may nevertheless be "related" to the common claims. Whether that part of a class member's claim should be dealt with within the class action or outside it will depend on the facts and a practical judgment may be required. 214 Ordinarily, courts take the approach of leaving the identification of class members' individual issues or claims until after an initial trial in which the Court hears and decides the common issues and the applicant's individual claims: Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2009] FCAFC 26 at [7] (Moore, Sundberg and Tracey JJ). After the decision on the common issues the Court can decide whether there are any individual claims and may give directions to deal with them in separate proceedings or within the framework of the class action. As Lindgren J said in Bright v Femcare Ltd (2002) 195 ALR 574; [2002] FCAFC 243 ("Bright v Femcare") at 580 [18]: …ordinarily one would expect that, in an attempt to give effect to the legislative intention, a means will be sought, by case management techniques, to enable a representative proceeding to continue to the stage of resolution of the substantial common issues on the basis that after that stage is completed, an order under s 33N or directions under s 33Q will be made… I took this course in the present cases and the parties were directed to prepare common questions for determination at the initial trial. The initial trial was to determine the common questions and the applicants' personal claims. 215 On the settlement parties' construction of Part IVA any class member who possesses an individual or unique claim must either give up that claim at the opt out stage or bring his or her own proceeding. I do not accept this. I say this, first, because this construction is likely to lead to a multiplicity of proceedings and it is inconsistent with the general objectives of Part IVA in the Second Reading Speech which include allowing claimants to group their common claims so as to reduce legal costs and increase efficiency. It is also inconsistent with the aim of protecting defendants from multiple suits and the risk of inconsistent findings: Bright v Femcare at [152] (Finkelstein J). 216 Consider the position of class members who have claims based in the same, similar or related circumstances as the applicant and which give rise to a substantial common question of fact or law, which are supplemented by some additional claims based in their individual circumstances. As the Contradictor submitted, on the settlement parties' argument: (a) those class members are required to identify their individual claims and opt out of the class action in order to avoid the possibility that a judgment or settlement at the common issues stage would be both unsatisfactory for them and bar them from subsequently litigating their individual issues; (b) having opted out, those claimants must commence separate proceedings which are likely to plead the same common claims (although supplemented by an articulation of their individual claims). Immediately, the respondents face essentially duplicated proceedings, perhaps many of them, which may be brought in different courts. So do the courts; (c) almost inevitably, the applicants in the class action, the respondents, and the plaintiffs in the individual cases will be drawn into interlocutory disputes about matters such as the transfer of cases between registries of the Court or between courts, the stay of the individual cases or the class action, the consolidation of the various cases into one court, shared discovery, shared experts and joint representation. This is inefficient and wastes the resources of the parties and the courts; (d) this inefficiency and waste occurs in circumstances where the core of the various cases continues to be the common issues pleaded in the class action, when the class action will deal with the claims of those claimants, and when the class action is likely to be further advanced towards trial than the cases brought by individual plaintiffs. In most cases it is likely that the class action will proceed first; (e) if the class action proceeds first and resolves the common issues in favour of the applicant and class members: (i) there is likely to have been no need for class members to have opted out in the first place and no requirement for them to articulate their individual issues. The time and cost expended in individual pleadings and interlocutory disputation will have been wasted; and (ii) the claimants who opted out to bring their own proceedings will not be bound by any finding on the common issues. Those individual plaintiffs, the respondents and the courts are likely to be caught up in further disputation while the parties work out whether, and if so how, the result in the class action applies to the individual proceedings; and (f) if the class action proceeds first and resolves the common issues against the applicant and class members then it can be accepted that the individual plaintiffs might proceed with their cases. Because they opted out they will not be bound by the result in the class action, but there is a likelihood that the courts will treat an attempt by them to revisit the common issues determined in the class action as an abuse of process: Reichel v Magrath (1889) 14 App Cas 665 at 668 (Lord Halsbury LC); State Bank of NSW Ltd v Stenhouse Ltd (1997) Aust Tort Rep 81-423 at 64,089 (Giles CJ Comm D); Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 at [88]-[99] (Giles, McColl and Campbell JJA). It is likely that any trials of the individual actions will, in substance, comprise trials only of plaintiffs' individual issues. Again, the time and cost expended in individual pleadings and interlocutory disputation would have been wasted because the same result could have been achieved, after determination of the common issues, by orders made in the class action under ss 33Q, 33R or 33S. 217 Second, it is established that the position of class members is "essentially passive" until after resolution of the common issues: P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 2) [2010] FCA 176 at [31] (Finkelstein J); Thomas v Powercor Australia Ltd (Ruling No 1) [2010] VSC 489 at [37]-[39] (J Forrest J). This points away from any requirement on class members to identify any individual or unique claims they possess additional to their common claims and to opt out, failing which they will be confronted by an Anshun estoppel in relation to such claims. 218 Third, the settlement parties' contention that ss 33Q, 33R or 33S entitled, indeed required, class members to raise any individual or unique claims within the class actions misconstrues those provisions. 219 Section 33Q provides: Determination of issues where not all issues are common (1) If it appears to the Court that determination of the issue or issues common to all group members will not finally determine the claims of all group members, the Court may give directions in relation to the determination of the remaining issues. (2) In the case of issues common to the claims of some only of the group members, the directions given by the Court may include directions establishing a sub-group consisting of those group members and appointing a person who consents to the appointment to be the sub-group representative party on behalf of the sub-group members. (3) Where the Court appoints a person other than the representative party to be a sub-group representative party, that person, and not the representative party, is liable for costs associated with the determination of the issue or issues common to the sub-group members. 220 The section does not, in terms, extend a right to class members to appear to seek orders for the determination of sub-group or individual issues. The scheme of Part IVA is that the applicant has the conduct of proceedings on behalf of the class members. The applicant's lawyers owe fiduciary duties to class members who are their clients and they also owe duties to class members who are not their clients. These duties may or may not be fiduciary in nature, but the applicant's lawyers at least have a duty to act in the class members' interests: McMullin v ICI Australia Operations Pty Ltd [1997] FCA 1426 ("McMullin") (Wilcox J); Courtney v Medtel Pty Ltd (2002) 122 FCR 168; [2002] FCA 957 at [57] ("Courtney") (Sackville J); King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) (2002) 121 FCR 480; [2002] FCA 872 at [24], [27] ("King") (Moore J); Bray v F. Hoffman-La Roche Ltd [2003] FCA 1505 at [15] ("Bray") (Merkel J). 221 It is noteworthy that rights of appearance by class members in Part IVA proceedings are limited, and where class members are permitted to appear the Part expressly so provides: e.g. s 33T, 33R. There are good policy reasons for this. One can readily understand the inefficiency, cost and delay that could occur in large Part IVA proceedings if it was open to class members to appear to raise their individual issues at times of their own choosing. As Robson J said in Collins and Tomes at [524]: The time, cost, inefficiency and delay of side-tracking the group proceeding to hold case management directions [under ss 33Q, 33R or 33S] for any interested group member on any question arising out of the same, similar or related circumstances might well be contrary to the overarching obligation under the Civil Procedure Act. 222 Robson J cited with approval the finding in Earglow Pty Ltd v Newcrest Mining Ltd (2015) 230 FCR 469; [2015] FCA 328 at [141], where Beach J refused to order that the individual claims of two class members be heard in the first stage of that class action, holding that it would not be conducive to resolving the proceeding "as quickly, inexpensively and efficiently as possible" as required by the overarching purpose in s 37M of the Act. Beach J explained: First, they are likely at the least to cause the acceleration of the incurring of costs or additional costs that may otherwise (on some contingencies) never need to be incurred... Second, I cannot say that they would quicken the resolution of the proceedings; on one view they may even extend the first stage trial. Third, I also cannot be satisfied that the proceedings would run more efficiently if the orders were made. I take a similar view. 223 If s 33Q extends a right to class members to appear to seek directions in relation to any individual claims that are not pleaded in the proceedings I would expect that to be clearly set out: Collins and Tomes at [423]. In the absence of plain words I do not construe s 33Q in a way that might seriously reduce the utility of the Part IVA procedure. In my view the power to give directions under s 33Q is to be exercised on application by an applicant or on the Court's own motion. 224 Section 33R provides: Individual questions (1) In giving directions under section 33Q, the Court may permit an individual group member to take part in the proceeding for the purpose of determining a question that relates only to the claim of that member. (2) In such a case, the individual group member, and not the plaintiff, is liable for costs associated with the determination of the question. 225 The section is permissive rather than coercive, which points away from class members being "required" to make an application or risk being precluded from subsequently asserting their individual claims. The power to permit an individual class member to appear is predicated on the Court giving directions under s 33Q, and such directions are to be given on application by a party or on the Court's own motion, rather than on the application of a class member. 226 Section 33S provides: Directions relating to commencement of further proceedings Where an issue cannot properly or conveniently be dealt with under section 33Q or 33R, the Court may: (a) if the issue concerns only the claim of a particular member - give directions relating to the commencement and conduct of a separate proceeding by that member; or (b) if the issue is common to the claims of all members of a sub-group - give directions relating to the commencement and conduct of a representative proceeding in relation to the claims of those members. 227 Again, the provision does not, in terms, provide a right of appearance by a class member seeking case management directions. The power is predicated on a decision that an issue cannot properly or conveniently be dealt with under ss 33Q or 33R. 228 Section 33T relevantly provides: Adequacy of representation (1) If, on an application by a group member, it appears to the Court that a representative party is not able adequately to represent the interests of the group members, the Court may substitute another group member as representative party and may make such other order as it thinks fit. This section contemplates an application and appearance by a class member, but it is of no relevance in the present cases. There is no evidence that, at the relevant time, there were any grounds upon which any class member may have been able to satisfy the Court that the applicants were not adequately representing the interests of class members. 229 Importantly, even if it is accepted that ss 33Q, 33R, 33S, 33T (or 33ZF) entitle class members to seek directions in respect of their individual claims, there is nothing in those provisions to show that unless class members make application under those provisions they are required to do so on pain of losing their rights to assert such claims in subsequent proceedings. If it were intended that class members who did not make such applications risked losing their rights to rely upon individual claims that were not pleaded I would expect that to be stated in plain terms. I agree with Robson J's remarks in Collins and Tomes (at [508]-[510]) where his Honour said: If such was the object of the Act, surely the Act would have mandated that group members must raise for directions and possible determination all claims and questions not otherwise covered by the plaintiff's claims in the group proceeding and all claims and questions not resolved by the determination of the group question or questions common to all group members. As noted above, before the Part 4A regime was introduced, class actions were unlikely to get off the ground if group members' claims had idiosyncratic dimensions and did not enjoy sufficient commonality. To resolve this Parliament only needed to establish a regime under which class actions could be brought despite idiosyncratic dimensions and individual claims. It would be a much greater step, and indeed a step that was not required to resolve the difficulties facing plaintiffs wishing to bring a group proceeding, to establish a regime under which all idiosyncratic dimensions and individual claims must be raised and determined within the group proceeding. The concern of Part 4A was to ensure that idiosyncratic dimensions and individual claims do not prevent the initiation of a group proceeding. It is one thing for Parliament to acknowledge that the difficulties arising from idiosyncratic dimensions and individual claims should not prevent group proceedings from occurring, but it is another thing entirely for Parliament to say that all individual questions and claims must be brought into the group proceeding. The second proposition would result in group proceedings becoming lengthier and more complex, thereby exacerbating the problems sought to be addressed by the Part 4A regime. The second proposition would also tend to undermine the basic common law right of an individual to have her or his individual legal disputes resolved by a court of law in which the individual is entitled to appear to control the conduct of his or her own case. (Emphasis in bold added.) 230 Fourth, the settlement parties' submissions boils down to the proposition that, if class members do not opt out, a Part IVA proceeding will be their only chance of litigating their rights even in relation to claims that are not pleaded in the proceeding, have not been identified or raised in the proceeding, are based in their individual or unique circumstances, and about which the Court knows nothing. 231 I am unable to accept this. In Collins and Tomes Robson J said (at [490]), and I agree: It is correct to say that Part 4A is concerned with efficiency. However, that does not entail that group members should only have 'one shot' at litigation, regardless of the nature of the group proceeding, the broader circumstances or the nature of the defence. It would be a leap to say that the 'one shot' at litigation must include seeking case management of claims which have not already been made in that group proceeding but which arise from the 'same, similar or related circumstances', lest they be precluded. Likewise, a concern with use of court resources and fairness to the defendants does not necessitate blanket preclusion. It might even be counterproductive.

Whether it was "unreasonable" for class members not to have raised their individual or unique claims 232 The second main question in dealing with the possibility that class members may be precluded from subsequently advancing any individual claims or defences they possess by Anshun estoppel or abuse of process, is whether it was unreasonable for class members not to raise their individual claims within the class actions. 233 In Anshun (at 602) their Honours said: ... there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. 234 Deciding whether or not it was unreasonable for a plaintiff not to litigate closely related claims in the one proceeding requires consideration of all the relevant facts, including "any real or reasonably perceived difficulties in raising the relevant claim earlier, and any other explanation for the failure to raise the claim previously": Gibbs v Kinna [1999] 2 VR 19; [1998] VSCA 52 at [28] ("Gibbs v Kinna") (Kenny JA); Collins and Tomes at [617]. 235 As the majority explained in Tomlinson, the question of whether class members will be precluded by Anshun estoppel or abuse of process requires an examination of the justice of doing so. Their Honours said (at [38]-[39]): It is a principle at the core of our legal system that a party claiming or denying the existence of a legal right or obligation should have an opportunity to present evidence and arguments to establish the facts and law on which the claim or denial is founded. There are countervailing considerations, some of which operate to create exceptions to that principle. Finality and fairness, including maintaining the certainty of past adjudicated outcomes and ensuring the predictability of future adjudicated outcomes, are amongst those countervailing considerations, and the estoppels informed by those considerations are amongst the exceptions to the principle. The operation of an estoppel, it must be remembered, is to preclude the assertion in a subsequent proceeding of what is claimed to be the truth. The justice of binding to an estoppel a person who was a party to an earlier proceeding is readily apparent: the person has already had an opportunity to present evidence and arguments. The justice of binding to an estoppel a person whose legal interests stood to benefit from the making or defending of a claim by someone else in an earlier proceeding will often also be apparent. With the benefit of the claim or defence also comes the detriment of the estoppel. That, at least, is the underlying theory. But it is a theory which has limitations. It would be quite unjust for such a person to be precluded from asserting what the person claims to be the truth if the person did not have an opportunity to exercise control over the presentation of evidence and the making of arguments in the earlier proceeding and if the potential detriment to the person from creating such an estoppel was not fairly taken into account in the decision to make or defend the claim in the earlier proceeding or in the conduct of the earlier proceeding. (Emphasis added.) 236 Amongst other things, the highlighted passage indicates that it will be unjust to preclude a class member from subsequently asserting a claim where the potential detriment to a class member from binding him or her into an estoppel was not fairly taken into account by the class member's decision to make the claim in the earlier proceeding, i.e. in a Part IVA context, the decision not to opt out. That is significant in the present cases because the Annexure A and B Notices did not unambiguously inform class members that they would or might be precluded from subsequently asserting claims which are not pleaded and which are based in their individual or unique circumstances. 237 I broadly agree with Robson J in Collins and Tomes (at [639]) where his Honour said: When determining whether Anshun estoppel precludes each group member from bringing his/her individual claim or defence, courts will be required to consider, among other factors: (a) the terms of the opt-out notice; (b) whether the group member was aware of the group proceeding; (c) how well he/she understood the opt-out notice and group proceedings; (d) why the group member did not opt out; (e) whether the group member sought legal advice; (f) whether the group member was represented by the same solicitors acting for the representative plaintiff; (g) the extent of the group member's involvement in the conduct of the group proceeding; (h) the similarity and relationship between the individual claim/defence and the claims and questions dealt with in the group proceeding; (i) when the group member became aware of their individual claim/defence; (j) the reason why the group member did not raise the individual claim/defence in the group proceeding; (k) how the court would have managed the individual claim/defence had it been raised in the group proceeding; and (l) the prejudice, if any, to the defendants to the group proceeding caused by the failure to raise the individual claim/defence in the group proceeding. 238 I can see nothing in the present cases to show that the asserted "failure" of class members to bring forward their individual claims by making applications under ss 33Q, 33R, or 33S was unreasonable. 239 I say this, first, because before Anshun estoppel or abuse of process will apply class members must be unambiguously informed that if they do not opt out they will or might be precluded from advancing claims or defences in subsequent proceedings and clearly informed of the extent of the preclusion. They must be comprehensively informed of the potential detriment from any estoppel which is asserted will arise if they do not opt out: Collins and Tomes at [642]. As I have said, in my view the Annexure A and Annexure B Notices were insufficient in this regard. 240 Second, even if it is accepted that class members were able to raise their individual claims or defences within the class actions by applications for orders under ss 33Q, 33R or 33S, it cannot be said that such applications were clearly open to them. I have found no authority to support the contention that class members were able to make (or had in any previous case made) such an application at that stage and no evidence that M+K or any other lawyer advised class members to do so. In my view there were real or at least reasonably perceived difficulties in such applications: Gibbs v Kinna at [28]. 241 Third, M+K had an obligation to act in the class members' interests. If applications under ss 33Q, 33R or 33S were necessary then M+K was obliged, at least, to inform class members of their rights in that regard. M+K did not inform class members that they were entitled to make an application under those provisions, let alone advise them that they were required to apply for such orders if they were to avoid being precluded in subsequent loan enforcement proceedings from relying on their individual claims or defences. 242 Fourth, (assuming that class members had raised their individual claims under ss 33Q, 33R or 33S), while it is impossible to be definitive it is unlikely that I would have made orders under those provisions at that point. Such orders are would have been likely to have side-tracked the proceeding and to have led to delay and inefficiency in resolving the proceedings, contrary to s 37M of the Act. I am likely to have seen it is inefficient to identify individual issues at that stage because, if the proceedings were successful on the common claims there would have been no need for class members to agitate their individual claims. If the proceedings were unsuccessful on the common claims the individual claims could be dealt with then. There is no prejudice for the respondents in the asserted failure of class members to make such applications. 243 Fifth, the respondents' submission that class members should have applied for an order under s 33T to substitute a class member as the representative party has no merit. The Court may make such an order where it is satisfied that the applicant "is not able adequately to represent the interests of group members". The settlement parties did not suggest any basis upon which class members might have been able to assert that the applicants were not adequately representing class members' interests.

K. Are there any class members who have individual claims or defences? 244 I accept the settlement parties' contention that it may be doubted that many class members possess claims or defences based on their individual or unique circumstances. I say this, first, because it seems unlikely that a significant proportion of class members will possess individual or unique defences or counterclaims, for example, defences based on the principles in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14 or Garcia v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48, or claims based in representations made to an individual class member (e.g. Collins and Tomes at [188]). Mr Willemsen deposed that only one of the 87 class members who were sued by a Lender in loan recovery proceedings had an individual defence. 245 Second, as the respondents noted, although some objectors identified claims they might pursue if the settlements did not include the binding loan enforceability admissions, none of the claims they identified are based in their individual or unique circumstances. As the respondents argued, the claims were common to all class members but were not pursued in the class actions. By way of example, the respondents pointed to Mr Braham's proposed claim that CBA "knew or suspected that Willmott Forests was experiencing financial difficulties and was increasingly dependent upon sales of new schemes in order to meet operating costs of its existing schemes." They submitted, and I accept, that this claim is no different in substance from the causes of action pleaded and it could have been made on behalf of all class members who made a claim against CBA or MIS. 246 However, (while I mean no criticism by this) M+K did not seek instructions from class members in relation to any individual claims or defences which they might possess, except from those class members who were individually sued by a Lender. Nor did the Annexure A and B Notices clearly inform class members that they were required to identify and put forward any individual claims or defences or risk being precluded from relying upon them. 247 The Court must be cautious to ensure that claims based upon the individual circumstances of class members, about which the Court knows nothing, are not prejudiced: Zhang at 405. In the present circumstances I am not prepared to approve settlements which include the binding loan enforceability admissions and that do not allow class members to opt out.

L. THE RISKS OF ESTABLISHING LIABILITY 248 The pleadings centre on the duties and obligations owed to the investors in the Schemes by the responsible entities, the Directors, and the Lenders. They are legally and factually complex and were supplemented by submissions. I provide only a broad summary, which risks a level of inaccuracy, but not to an extent that is material to my decision. 249 The applications seek: (a) declarations that the relevant PDSs are "defective" within the meaning of s 1022A of the Corporations Act 2001 (Cth) ("Corporations Act"), associated declarations that each respondent is a "liable" person within s 1022B, and damages; (b) damages under the Corporations Act and the Australian Securities and Investments Commission Act 2001 (Cth) ("ASIC Act") for engaging in conduct that is liable to mislead the public in relation to financial services and/or making a statement or disseminating information in the PDSs which is false in a material particular or materially misleading and likely to induce people to apply for financial products; (c) declarations that Willmott Forests contravened its duties under the Corporations Act, that the Directors were involved in those contraventions, and that the Directors contravened their duties under the Corporations Act, and damages; (d) declarations that Willmott Forests contravened the ASIC Act by committing unconscionable conduct, misleading or deceptive conduct and/or misleading conduct in relation to financial services, and damages; and (e) declarations under s 601MB of the Corporations Act that the agreement to acquire an interest in the relevant Scheme is void or otherwise unenforceable. 250 In summary, in relation to Willmott Forests and the Directors, the proceedings allege that: (a) Willmott Forests failed to disclose the "significant risk" under s 1013D of the Corporations Act that it would be unable to meet its obligations because it depended on sales of interests in future managed investment schemes to fund its obligations under each Scheme, that the deferred fee business model meant that it might not have the funds necessary to maintain the forest plantation in each Scheme for the life of the Scheme, and that a replacement responsible entity might not be secured in the event of Willmott Forests' insolvency; (b) in regard to the above matters Willmott Forests failed to disclose "material information" under s 1013E of the Corporations Act that it knew and was required to disclose. It also failed to disclose the "material information" that maintenance fees were not adequately funded and that there would be a pooling of funds because application fees were used to pay maintenance fees for other Schemes; (c) the PDSs are misleading or deceptive because of the failure to disclose the "significant risks" and "material information and because they contained certain alleged misleading or deceptive statements; (d) the PDSs are "defective" because they failed to disclose the alleged significant risks and material information, and because they were misleading or deceptive; (e) because the Directors reviewed and authorised the PDSs they were "involved" in: (i) the preparation of the PDSs and caused them to be defective and accordingly they were "liable persons" under s 1022B of the Corporations Act; (ii) the misleading or deceptive conduct; and (iii) Willmott Forests' contraventions of s 601FC of the Corporations Act and contravened s 601FD of the Corporations Act. (f) Willmott Forests, with the knowing involvement of the Directors, disseminated the defective and/or misleading PDSs to the potential investors who relied upon that information in acquiring an interest in the relevant Scheme and in many cases in entering a loan agreement with one of the Lenders; and (g) each investor's agreement to acquire an interest in the Scheme is void and/or unenforceable pursuant to s 601MB of the Corporations Act. 251 Against the Lenders the proceedings allege that: (a) Willmott Forests was authorised by the relevant Lender to originate and procure loans on its behalf, in essence, that the Lender was engaged in an enterprise with Willmott Forests as its agent to sell interests in the relevant Scheme and to make loans to the investors to acquire such interests; (b) the relevant Lender held out to prospective investors that Willmott Forests acted for and on behalf of it and operated with its apparent authority; (c) the relevant Lender knew or ought to have known that Willmott Forests would use the allegedly defective and/or misleading PDSs to procure and originate the loans; (d) Willmott Forests' conduct in preparing and disseminating the PDSs was within the scope of the agency or within the relevant Lender's apparent authority; (e) each Lender is a "liable person" within the meaning of s 1022B of the Corporations Act; (f) in the alternative, that each Lender: (i) is vicariously liable for the relevant contraventions by Willmott Forests; (ii) breached its common law duty of care to the investors to take all reasonable steps to ensure that the significant risks and material information were disclosed in the PDSs; (iii) engaged in unconscionable conduct by entering the loan agreements without disclosing the significant risks and material information and/or without taking all reasonable steps to ensure that Willmott Forests did so; and (g) each loan agreement between an investor and a Lender is such an integral part of the relevant Scheme that it cannot be severed from the agreement to acquire an interest in that Scheme and the loan agreement is also void pursuant to s 601MB of the Corporations Act. It is worth noting that the claim that the loan agreements are void and unenforceable is based entirely on the common claims pleaded. 252 Willmott Forests and the Directors deny that they failed to disclose the alleged significant risks and material information at the relevant time. They deny that the PDSs were defective and that they were misleading or deceptive. They also allege that they took reasonable steps to ensure that the PDSs were not defective and therefore they were not liable for any loss and damage suffered by reason of s 1022B(7). 253 Amongst other things, they submitted that: (a) there is no representation in the PDSs that the upfront application fees would be quarantined from Willmott Forests' other funds and used solely for the purposes of the Scheme in respect of which it was paid. They described this contention as misconceived because the application fees were not monies intended to be paid into trust, being variously described in the PDSs as a "fee", "cost" or "price". As a fee, once they were received they became the property of the recipient and there was no requirement for the responsible entities to keep them separate. They noted, as Davies J observed in Re Willmott Forests Ltd (No 2) (2012) 88 ACSR 18; [2012] VSC 125 at [83], the tax deductibility of the application fees depended upon them having the character of outgoings on the investor's revenue account; (b) there is no basis for the allegation that the supplementary PDS issued in relation to the 2009 Scheme (after the collapse of the Timbercorp and Great Southern managed investment schemes) was misleading in stating that Willmott Forests had not experienced a reduction in woodlot sales, expected to be able to continue as a going concern and had a reasonable prospect of attracting a new responsible entity should Willmott Forests become insolvent. The respondents contended that those allegations depended on the existence of the deferred fee model, for which there was no factual foundation, and that the year ended 30 June 2009 was Willmott Forests' second-best year on record. 254 CBA and MIS alleged that the PDSs did not fail to disclose the asserted significant risks and material information and were not misleading or deceptive. Willmott Finance took the same approach, and adopted the submissions of CBA and MIS. In summary, they submitted that: (a) even if the applicants could demonstrate that the PDSs were defective there is no real prospect of the Lender being held to be a "liable person". The PDSs were not prepared on behalf of a Lender and the Corporations Act provides that damage suffered because of a defective PDS can only be recovered from a "liable person". Section 1022B(3)(b) defines "liable person" as the person by whom or on whose behalf the PDS was prepared, and each other person involved in the preparation of the PDS who directly or indirectly caused or contributed to it being defective. Section 1013A provides that a PDS is a document prepared by the issuer of a financial product or the person making the offer to sell a financial product. The Lender was not the issuer of the interest in the Schemes and was not offering to sell interests in the Schemes; (b) the PDSs contained an express statement that the Lender did not cause or authorise the issue of the PDS and, to the extent permitted by law, expressly disclaimed and took no responsibility for any part of the PDS other than those parts to which the Lender gave its express consent. The only parts of the PDSs to which a Lender gave its express consent were the form of the Finance Application attached to the PDSs, the Summary of the Loan Agreement in the PDSs and the references to the Lender in the PDSs in the form and context in which they are included. The Lenders submitted that this was fatal to the applicants' case based in agency; (c) the loan Origination and Management Deed between Willmott Forests and MIS and CBA did no more than provide for Willmott Forests to originate and manage investors' loans. It did not extend to preparation of the PDSs and the statements that MIS and CBA were the "preferred financiers" did not show the alleged agency; (d) the Lenders were not involved in the preparation of the PDSs and did not directly or indirectly cause the PDSs to be defective. The only parts of the PDSs they were responsible for was those parts which related to provision of loan finance. The Lenders submitted that the applicants' tender list did not include any document to suggest that they had any involvement in the preparation of the parts of the PDSs that the applicants alleged to be defective. They submitted that the witness statements filed on behalf of MIS and CBA confirmed this; (e) the Lenders were not vicariously liable for Willmott Forests' alleged breaches of the Corporations Act and the ASIC Act, noting that vicarious liability principles do not apply to breaches of statutory duties, relying on Darling Island Stevedoring and Lighterage Co Ltd v Long (1957) 97 CLR 36; [1957] HCA 26 at 52-3. Even if common law vicarious liability principles applied, it is clear on the face of the PDSs that the Lenders did not authorise or direct the making of any representations other than those specifically identified. Liability under the relevant statutory provisions hinged upon a person being "involved in" the contraventions, and there was no such allegation, nor that the Lenders had the requisite knowledge of the essential facts constituting the contraventions; (f) the Lenders were not involved in unconscionable conduct in contravention of the ASIC Act by entering into the loans and/or by failing to take all reasonable steps to ensure that Willmott Forests complied with its statutory obligations in respect of the PDSs. They had no obligation to ensure that Willmott Forests complied with its statutory obligations and undertook no such responsibilities, as the disclaimer in the PDSs made clear; (g) the Lenders owed no common law duty of care to the applicants and there were no pleaded matters that would warrant the imposition of such a duty on it in the present cases. Amongst other things, there was an arms-length relationship between the investors as borrower and a Lender, the borrowers did not seek and the Lenders did not provide advice in relation to the Schemes, and each Lender's disclaimer in the PDSs meant that no investor could have reasonably thought that the Lender was providing advice; (h) the allegation that s 601MB of the Corporations Act applies to the loan agreements is unsustainable. This section applies to "a contract entered into by a person" "to subscribe for an interest" in a managed investment scheme and is not directed to loan agreements of the type entered into between the investors and a Lender; and (i) the allegation that the loan agreements were such an integral part of the relevant Schemes that they cannot be severed from the agreements to acquire an interest in the Schemes is not sustainable. That allegation cannot operate to transform the loan agreements into contracts "to subscribe for an interest". An investor could acquire an interest in the Scheme without taking out a loan from one of the Lenders, and without taking out any loan at all.

The different factual allegations underpinning the 2010 Scheme proceeding 255 Some additional factual allegations underpin the 2010 Scheme proceeding, which are pleaded at paragraphs 107-147 of the Statement of Claim. I describe these allegations as "the second limb" of this case, and in my view they are important. They include that: (a) the Report by Administrators dated 14 March 2011 into the collapse of the Willmott Group ("Administrators' Report") stated that the Administrators understood that in late 2009 CBA advised the Willmott Group that it was no longer willing to provide loan finance for investors; (b) on 24 May 2010 Willmott Forests made a public announcement that it had secured a third party financial institution to provide loan finance for investors. It stated that, given the current market uncertainty, this was confirmation of the "success and robustness" of its business model; (c) the Administrators' Report stated that the replacement lender was Merricks Capital, and that the arrangement was subject to certain conditions including a minimum of $40 million of sales of interests in the 2010 Scheme; (d) the 2010 Scheme achieved only $19.6 million of sales; (e) the Administrators' Report stated that on 28 May 2010 a document titled "Strategic Forecast Scenarios - Comparative Summary" was presented to the Board of Willmott Forests. Under the scenario of $50 million of sales of interests in the 2010 Scheme the document noted that cash would run out in August 2010. Under this scenario the Willmott Group would be unable to meet a number of its banking covenants as at 30 June 2010, 31 December 2010, 30 June 2011 and 31 December 2011; (f) the Administrators' Report stated that, upon the minimum $40 million of sales not having been achieved, there was no third party financial institution to provide loan finance for investors; (g) in the 2010 Scheme Willmott Finance provided the loan finance for investors. The loans to investors totalled $18.2 million, internally funded by the Willmott Group; and (h) the Administrators' Report stated that it was likely that the Willmott Group was insolvent from no later than 30 June 2010, when it was established that the forecast 2010 Scheme sales would not be achieved and alternative sources of finance were not readily available. (i) in its announcement of 24 May 2010 Willmott Forests did not disclose to prospective investors that it only had the support of the third party financial institution for loan finance for investors if it achieved a minimum $40 million of sales. (j) Willmott Forests did not disclose to prospective investors that the minimum sales condition had not been met and that the success and robustness of its business model was therefore seriously jeopardised; (k) the forest plantations for the 2010 Scheme were not established; and (l) the appointment of the Administrators happened only 68 days after the applicant executed his loan agreement with Willmott Finance. The applicants alleged that the 2010 Scheme proceeding could succeed on this second limb of the case, standing alone.

The evidence 256 The only statements filed by the applicants in each proceeding are their personal witness statements. They did not file any other evidence, and did not put on any expert evidence in support of their deferred fee model case, a central theme in the proceedings. They said that they would have relied at trial on the Administrators' Report and on documents in their tender list. 257 In the 2007/08/09 Schemes proceedings: (a) Willmott Forests and the Directors filed detailed witness statements by: (i) Marcus Derham, Chief Executive Officer of Willmott Forests from 1991 to September 2010 (when it was placed into administration) and an executive director since 1995; (ii) Jonathan Madgwick, non-executive director from March 1994 and Chairman of the Board of Willmott Forests from March 1994 to July 2000; (iii) James Higgins, non-executive director from July 2000 and Chairman of the Board from December 2000 until April 2009; (iv) Hugh Davies, non-executive director from July 2000; (v) Raymond Smith, non-executive director from August 2008 to March 2011; (vi) David Smith, Willmott Forests employee from January 1990 to October 2010; (vii) Stephen Arrowsmith, Willmott Forests Financial Controller from March 2003 and Chief Financial Officer from 2005 to September 2010; (viii) Ryan Jay Phin, Chartered Accountant and member of the Willmott Forests finance department from February 2006 to April 2007 and from December 2007 to December 2010; and (ix) Barry Wight, Engagement Leader of the Willmott Group administration, filed 8 December 2014 by the first and seventh respondents; (b) MIS and CBA filed detailed witness statements by: (i) Stuart Seear, Risk Executive at CBA Institutional Banking Division; (ii) Glenn Olley, Relationship Executive of the CBA; and (iii) Loretta Venten, Head of Institutional Loan Markets for Victoria, South Australia, Western Australia and New Zealand of the CBA. 258 In the 2010 Scheme proceeding the respondents were not required to file and serve their evidence as at the date of settlement. The evidence of Willmott Forests and the Directors in the 2007/08/09 Schemes proceedings also applied in the 2010 Scheme proceeding, but I do not know what further evidence they or Willmott Finance might rely on, particularly to meet the second limb of that proceeding. 259 Willmott Forests' former Chief Financial Officer from 2003, Mr Arrowsmith, made a witness statement, as did Mr Phin, another member of Willmott Forests' Finance Department, and Mr Smith, a forester who headed a team of 30 people working on the forest plantations. In brief, Mr Smith states that he prepared estimates of the expected costs and expected revenues from the plantations and provided that information to Mr Phin and/or Mr Arrowsmith. They state that they prepared detailed financial models for each of the Schemes, and the thrust of their evidence is that each Scheme was viable on a stand-alone basis. 260 Mr Arrowsmith states: From about as early as 2006, separate forecasts were prepared for each project. With the assistance of Mr Addicott, either I or Mr Phin of my staff would model the financials for each scheme and then I would analyse the models. The forecast showed the estimated profit to WFL [Willmott Forests] at the conclusion of the project as well as outline what expenditure was required for each project and where the funding would come from. All projects were forecast to be cash positive to WFL over the life of the project. Projects were modelled to achieve both an acceptable return to WFL on a "stand alone" basis and an acceptable rate of return for investors. (Emphasis added.) The cash flow forecasts to which Mr Arrowsmith referred showed positive net cash flows for the relevant Schemes. 261 He also states that he was confident in CBA's support for the Willmott Group until (on his evidence, contrary to earlier assurances) CBA abruptly withdrew the $135 million loan facility on 6 September 2010. He states that, had CBA continued to support the Willmott Group, the company would have survived. 262 To succeed against the Directors the applicants must show not only that there were "significant risks" and "material information" which were required to be disclosed in the PDSs and which were not disclosed, but that the Directors were aware of this. It is likely that determination of this question will revolve around what Willmott Forests' financial records show about its financial position at the relevant times, the Directors' evidence as to what they knew at the relevant times, what the contemporaneous documents show the Directors knew, and what steps the Directors took. 263 The Directors' evidence is to similar effect to Mr Arrowsmith's evidence. For example, Mr Derham states that Willmott Forests' Schemes were cash flow positive and projected to remain as such through each of the relevant Schemes. He dates Willmott Forests' financial difficulties from early July 2010 when it became apparent that sales of interests in the 2010 Scheme were much lower than expected. Willmott Forests was placed into a trading halt on 5 July 2010. His evidence indicates that from that point on there were difficulties with the banking syndicate, including in the syndicate asserting that Willmott Forests was in breach of the facility but waiving the alleged breaches for fixed periods. He says that Willmott Forests sought several extensions of time within which to meet the requirements set by the banking syndicate, but on 6 September 2010 the syndicate withdrew the facility. 264 The evidence of Mr Seear, Mr Olley and Ms Venten, all senior executives of CBA, supports the evidence put on by Willmott Forests and the Directors. Their evidence is that CBA supported Willmott Forests and its business, that Willmott Forests provided the CBA with accurate and reliable information and financial forecasts, and that they were confident that Willmott Forests' management could accurately forecast future revenue and costs. They regarded Willmott Forests as having a proven track record, strong management and good corporate governance. In March 2009 CBA undertook due diligence and approved a syndicated loan facility to Willmott Forests of $135 million. The gist of their evidence is that until July 2010 Willmott Forests complied with its loan obligations. 265 As I have said, the applicants did not put on evidence from an independent accounting expert to support their deferred fee model case. In the absence of such evidence the applicants said that they would have relied at trial on documents in their tender list, but the Court was not taken to any document in that list. 266 However, Mr Willemsen deposed to a letter sent by M+K to the solicitors for CBA and MIS on 15 December 2014, a few days prior to the mediation. The letter referred to eight specific documents discovered by CBA and asserted that they supported the applicants' claims in the 2007/08/09 Schemes proceedings and contradicted CBA's Defence and its witness statements. The letter stated that the documents: (a) directly contradicted the evidence of Mr Olley that in the period to 31 July 2009, based on the information provided to him by Willmott Forests he believed that Willmott Forests was in a good financial position, that its business operations were viable and that the Schemes would continue to maturity; (b) went some way towards explaining the allegedly "carefully constructed" evidence of Mr Seear that from March 2006 to June 2009 Willmott Forests remained comfortably in compliance with its financial covenants, and that he had no concerns about Willmott Forests' financial position arising out of his review of its covenant compliance reporting; (c) showed that in the period between January and May 2009 CBA formed the conclusion that the likely drop in sales of managed investment schemes, combined with CBA's decision to cease to provide grower finance, was likely to cause the failure of managed investment scheme companies including Willmott Forests and thus the failure of investments made in the relevant Schemes; (d) showed that, despite reaching this conclusion, CBA permitted Willmott Forests to write a further approximately $60 million in loans to investors in the 2009 Scheme, thereby effectively shifting CBA's exposure in the various Schemes to the investors in the 2009 Scheme; (e) showed that CBA had identified a conflict of interest arising from it providing end-finance to individual borrowers in order to shift CBA's exposure to managed investment scheme investors; and (f) included statements that: (i) "if CBA does not provide origination arrangements going forward, existing CBA corporate exposures are very likely to become impaired, as MIS companies cannot operate in their current structures without this funding for their sales" per Mr Olley on 26 April 2009; (ii) "CBA end-finance loans (MIS Funding Product) to MIS investors will be progressively wound back as quickly as possible. It was acknowledged that non-provision of this funding will result in the MIS companies having an unworkable business model going forward…"; (iii) "Non-provision of end-finance to existing MIS Companies which have had the product in the past, has the potential for bad publicity due to likelihood it will result in those MIS Companies going out of business"; and (iv) "Key Risk/Issues: Failure of a Responsible Entity (originator) resulting in failure of the actual investment schemes." 267 The applicants did not, however, take the Court to these documents, and neither the documents or the contention that they showed unconscionable conduct was identified, considered or analysed in Counsel's Opinion. Nor was the Court taken to any document to show that the expenses that were forecast to be incurred over the life of the Schemes were expected to exceed the upfront application fees paid. The applicants did not explain how the Court would be in a position to form a conclusion favourable to the applicants from the respondents' financial records and other documents without the assistance of expert evidence. 268 The respondents submitted that there were no documents in the applicants' tender list which showed that Willmott Forests' expenses in the Schemes were likely to have exceeded the upfront application fees paid. They argued that the absence of an expert's report and documents supporting the applicants' case showed that the applicants could not succeed with the deferred fee model case. They noted that even if the applicants could establish that Willmott Forests' cash flow forecasts were incorrect they could not succeed unless they also established that Willmott Forests and the Directors were aware the forecast were incorrect. In the absence of any supporting document in the applicants' tender list they submitted there is no prospect that the applicants could do so. 269 In my view the absence of an independent expert's report supporting the applicants' allegations regarding the "significant risks" inherent in the alleged "deferred fee model" meant the applicants' prospects of success at trial were materially reduced.

The decisions in the Timbercorp and Great Southern class actions 270 In my view (contrary to Mr Braham's submissions) the decision in the Timbercorp class action and the (previously) unpublished reasons for judgment of Croft J in the Great Southern class action (which his Honour annexed to the judgement in Clarke No 4) ("the Great Southern reasons") are relevant in assessing the prospects of success in the present cases. While the PDSs and surrounding facts in those class actions are different from the present cases, the managed investment schemes to which those actions related had similar features to the present Schemes and similar legal issues arose. 271 In Woodcroft-Brown v Timbercorp Securities Ltd (in liq) & Ors (2011) 253 FLR 240; [2011] VSC 427 ("Timbercorp") Judd J held in relation to "significant risk" that the responsible entity and its directors had to have actual knowledge of the particular risk as being a significant risk under s 1013D, not merely that they ought to have had that knowledge, before there was any obligation to disclose. His Honour did not accept that the responsible entity or the directors had knowledge of any risk that required disclosure noting that no one else seemed to appreciate the risk including auditors, bankers, market analysts and rating agencies. 272 Essentially, his Honour held that at the time that the schemes were offered to the public, the responsible entity had no legal obligation to disclose information about a (then) non-existent significant risk of financial collapse. His Honour decided that, because management were managing the relevant events and risks and because the bankers for Timbercorp continued to support it, there was no relevant non-disclosure in the PDSs and no requirement to issue a supplementary PDS: Timbercorp at [149]-[150], and see [50], [69], [71], [101,] [126], [271] and [557]. In relation to "material information" Judd J said (at [156]) that where a piece of information is not required to be disclosed under s 1013D it is difficult to imagine such information having the materiality requiring disclosure under s 1013E. 273 His Honour's approach was upheld in Woodcroft-Brown v Timbercorp Securities Ltd (in liq) & Ors (2013) 96 ACSR 307; [2013] VSCA 284 ("Timbercorp appeal") (Warren CJ, Buchanan JA and Macaulay AJA) at [130]-[140]. Special leave to appeal on the proper construction of "significant risk" was refused by the High Court: Woodcroft-Brown v Timbercorp Securities Limited [2014] HCA Trans 085 lines 665-675 (French CJ). Judd J's approach to "significant risk" was endorsed by Croft J (at [345]) in the Great Southern reasons. 274 In Timbercorp the allegations of misleading and deceptive conduct were based on representations made in the PDSs and the defendants' silence following the occurrence of alleged adverse events. Judd J held (at [41]) that the "adverse matters" alleged did not make the PDSs misleading or deceptive. Insofar as the PDSs contained representations as to the viability and strength of the Timbercorp Group his Honour said (at [42]) that the defendants established reasonable grounds for their expressions of confidence. His Honour considered that the adverse events could not be divorced from the capacity of the Group to successfully manage their impact, and the mere occurrence of the adverse matters did not make the defendants' representations as to the strength of the Group misleading, in effect because the adverse matters were able to be successfully managed (at [73]). His Honour's approach was upheld in the Timbercorp appeal at [212]-[225]. 275 In the present cases the respondents' evidence is directed at making out similar defences to those accepted by Judd J and by the Court of Appeal. I consider the decisions in Timbercorp and Timbercorp appeal indicate difficulties for the applicants in establishing that Willmott Forests failed to disclose the alleged significant risks and/or material information in the PDSs and in establishing misleading or deceptive conduct. 276 Mr Willemsen said, and I accept, that the publication of the Great Southern reasons was a key catalyst for the settlements. The reasons show that, had the action not been settled, the applicant's case would have completely and comprehensively failed. Amongst other things, Croft J's analysis of the relevant statutory provisions against a roughly similar factual backdrop did not assist the applicants. While the result in that case cannot be transposed to the present cases, the detailed rejection of the applicant's claims following a lengthy and hard-fought trial, published only a few days before the mediation, would have been far from encouraging to the applicants in the present cases. Contrary to Mr Braham's submissions, it would be surprising if the publication of the reasons did not embolden the respondents and cause M+K and counsel to take a less favourable view of the applicants' prospects of success.

Mr Braham's submissions 277 The gist of the settlement parties' contentions in relation to the settlements of the 2007/08/09 Schemes proceedings is that the modest benefits of the settlements are fair and reasonable because the prospects of success in the proceedings are low. Against this, Mr Braham argued that the settlements are "essentially a capitulation, or acknowledgement of inevitable failure" in circumstances where no evidence had been put forward that the class actions were bound or likely to fail. He submitted that several matters indicated that the 2007/08/09 Schemes proceedings had some merit. 278 First, he argued that the pleadings were prepared by senior and junior counsel and M+K had certified that the facts and available legal material provided a proper basis for each allegation in the pleading. There is little force in this contention. It is far from uncommon for proceedings, certified by lawyers in good faith, to turn out to have little merit. Especially in large complex proceedings it is common for a less rosy view of the prospects of success to emerge as the evidence unfolds. It would be curious if the results in Timbercorp and in the Great Southern class action (as shown by the Great Southern reasons) did not adversely affect M+K's view of the prospects of success in the present cases. 279 Second, Mr Braham sought to rely on the judgment in Kelly No 1 in which I treated the case as arguable. This contention has no substance. In dealing with the question of security for costs in that case I assumed that the proceedings had a reasonable prospect of success because the claims are prima facie regular on the face of the pleadings and disclose various arguable causes of action (at [45]-[48]). I explained that it was not feasible to reach any reasonably accurate preliminary view as to prospects of success at that early stage in the proceeding. 280 Third, Mr Braham relied on the contents of a confidential opinion by Mr Moore and Mr Nigel Evans of counsel dated 11 April 2014 ("the April 2014 Opinion"), procured by M+K specifically at the request of Mr Braham's personal solicitors, B2B Lawyers, and supplied to Mr Braham through that firm. It was provided to Mr Braham shortly before the opt out period commenced, after class members had been called on to pay contributions to security for costs, and after Mr Braham (along with other class members who had invested more than $200,000 in the Schemes) had been asked to make a further contribution to security for costs. 281 To avoid destroying confidentiality in the April 2014 Opinion it must suffice to note that it stated that the applicants had reasonable prospects in the proceedings against the respondents. There is substance to Mr Braham's contention and I have had some difficulty in reconciling the April 2014 Opinion with Counsel's Opinion in support of settlement approval. The differences between the two opinions may be explicable on the basis that the earlier opinion was provided before discovery was made, and before publication of the Great Southern reasons, as Mr Willemsen said, but counsel did not explain the change in position. 282 Fourth, Mr Braham submitted that M+K's letter of 15 December 2014 (to which I referred at [266]) advanced a powerful argument that by May 2009 CBA had decided to withdraw as quickly as possible from providing investor finance for the Schemes, knowing that this would dramatically impede sales of interests in the 2009 Scheme, make Willmott Forests' business model unworkable and cause it to fail, leaving no-one to perform the obligations of the manager of the schemes for which Willmott had been paid by the investors. He argued that, notwithstanding this knowledge, CBA continued to advance loans to investors such as Mr Braham until 30 June 2009 and did not inform them of its conclusion that Willmott Forests would fail and the investments would become worthless. He argued that there was considerable merit in an argument that this was unconscionable conduct by the CBA in connection with the supply or possible supply of financial services, in contravention of s 12CC of the ASIC Act. There is some force in this contention too and I reiterate that the documents referred to were not identified, considered or analysed in Counsel's Opinion.

Conclusion 283 On the basis of the foregoing matters it might have been appropriate to assess the settlements on the basis: (a) in the 2007/08/09 Schemes proceedings, that the case against Willmott Forests and the Directors is no better than a 50-50 proposition, and the case against the Lenders is weak; and (b) in the 2010 Scheme proceeding, the case against Willmott Forests, the Directors and Willmott Finance, has reasonable prospects of success, largely because of the second limb of this proceeding. However, I cannot express a view about the prospects of success in circumstances where, as I later explain, there are some significant gaps in M+K's preparation of the proceedings, Counsel's Opinion is not as complete as I would expect in complex proceedings such as these, and I am not presently satisfied that the applicants' lawyers have properly informed the Court as to the prospects of success. 284 If revised settlements are brought before the Court for approval, the applicants will be required file a further opinion from counsel addressing the prospects of success in more detail, and provide further information about matters such as the approach M+K took to negotiations, whether and to what extent any funding difficulties have effected the settlements and how the present gaps in case preparation have been addressed.

M. The ADEQUACY of case preparation 285 The parties reached the settlements at a second Court-ordered mediation on 17 December 2014, about two months before the trial was set to commence on 23 February 2015. There were then some difficulties in finalising the settlement and the parties did not exchange signed counterparts of the Settlement Deed until 7 April 2015. 286 By the date of the mediation the pleadings were settled, the respondents had provided discovery, the applicants had filed and served a tender list of documents upon which they proposed to rely at trial, the applicants had filed their personal witness statements, and the respondents in the 2007/08/09 Schemes proceedings had filed extensive witness statements. Witness statements in the 2010 Scheme proceeding were not yet due. Extensive work had been undertaken by the applicants' legal team. Contrary to Mr Braham's contentions, I accept that the settlements are the product of arms-length negotiations between the parties and that the applicants' lawyers bona fide considered that the terms of settlement offered at the mediation represented the respondents' final negotiating position. 287 However, in Counsel's Opinion Mr Moore made some disclosures about the adequacy of the case preparation by the applicants' lawyers. I commend counsel for doing so. In providing candid disclosure Counsel's Opinion was consistent with the obligation to the Court in a settlement approval application. 288 It is necessary to deal with some limited aspects of Counsel's Opinion without destroying confidentiality in it: see Brookfield Multiplex No 4 at [17]; Jarra Creek Central Packing Shed Pty Ltd v Amcor Ltd [2011] FCA 671 at [160]-[161] (Jacobson J). Accordingly, I largely deal with this issue by reference to some further disclosures about the adequacy of case preparation in the evidence of Mr Willemsen, both express and to be inferred. 289 Mr Willemsen put on evidence as to the difficulties in funding the litigation and the adequacy of case preparation. He said that although his expectation "was that M+K ultimately would be in receipt of sufficient funding from its clients to be able to take the case through to trial", many clients had found it difficult to provide ongoing funding for the litigation, the security for costs applications had put extra time and cost pressure on class members, a large proportion of class members were paying their fixed fee payments by instalment arrangements, and M+K did not want to find itself in a position where a large portion of the available funds were utilised for pre-trial work leaving "hopelessly inadequate funding in place for the trial". He said that trial counsel's brief was suspended from April to early November 2014, but that all work required to be done for the applicants in that period was undertaken by M+K and a new junior counsel, Ms Thiagarajan, who was engaged to review the voluminous discovery and confer with trial counsel in that regard. In effect, while conceding that there were significant difficulties in funding the litigation, Mr Willemsen said that the difficulties did not mean that the proceedings were not properly prepared. 290 In my view Mr Willemsen sought to downplay the difficulties in funding the litigation and the deficiencies in case preparation which arose as a result. The materials indicate that M+K did not retain experienced Senior Counsel for the trial (as it had told its clients it would), suspended the retainers of counsel briefed for the trial, Mr Moore and Mr Nigel Evans, from April 2014 to early November 2014, and did not engage an independent expert forensic accountant to provide a report on the central issue in the cases. While M+K engaged a new junior counsel to consider the voluminous discovered documents it did not make funds available for trial counsel to properly do so. It appears that insufficient preparation for trial had taken place by the time of the mediation, and it may be doubted that there would have been sufficient time to properly prepare the cases for trial. It is likely that this resulted in significant gaps in the preparation of the cases and adversely affected the applicants' lawyers view as to the adequacy of the settlement offers made. 291 M+K's decision not to engage an independent forensic accountant is illustrative. Mr Willemsen provided several reasons for this decision. He said that a class member who opted out of the 2007/08/09 Schemes proceedings had provided him, in confidence, with copies of reports by two independent forensic accountants regarding the 2004/05/06/07/08 Schemes, prepared for use in other Court proceedings ("the Confidential Experts' Reports"). He produced the reports as confidential exhibits and said that his assessment was that the reports did not sufficiently support the applicants' case in relation to aspects of Willmott Forests' deferred fee model. He did not, however, detail the shortcomings in the reports to which he referred, confidentially or otherwise. 292 Mr Willemsen also said that he had a concern, stemming from the judgment in Timbercorp, that any independent forensic accountant's opinion adduced on behalf of the investors was unlikely to count for much if Willmott Forests was able to prove that it nevertheless had the continuing support of its bankers until a time after the last interests in the 2010 Scheme (or perhaps the 2009 Scheme) were sold. 293 Next, Mr Willemsen pointed to the cost of obtaining an independent forensic accountant's report. Based on his experience acting for the applicants in the Timbercorp and Great Southern class actions he estimated that it would cost in the order of $366,000-$436,000 to obtain a report. He said that such expense would have placed excessive strain on the available funding at the time when M+K needed to brief such an expert, and that such expense was not warranted in light of the contents and conclusions in the Confidential Experts' Reports and what he expected would emerge in the respondents' evidence about the extended duration of the financial support Willmott Forests received from its bankers. He said that the applicants intended instead to rely on documents that were to be (and were) identified in the applicants' tender list along with source documents in respect of which subpoenas had been served. 294 Senior Counsel for the applicants submitted that the utility of calling expert evidence was explored at some length by M+K and ultimately a forensic decision was made not to adduce such evidence. He submitted that there were good reasons for the decision and it is not the Court's role, and the Court is not in a position, to second-guess the decision. 295 I do not accept these submissions. First, the allegation that Willmott Forests was dependent for its survival on future sales of interests in future managed investment schemes is central in the proceedings. The absence of an independent forensic accountant's opinion supporting this principal allegation is a significant gap in the applicants' case in each proceeding, particularly when it appeared that the respondents would call expert evidence to the contrary. As the Directors contended: … it is difficult to imagine how the Applicants would even begin to establish that WFL's business model created a performance risk that was significant in the absence of expert evidence….it is a fair inference that the reason that the Applicants have not adduced any expert evidence in these Proceedings, despite the obvious importance of that evidence to the allegations made by the Applicants, is because expert evidence would not have been of assistance. Although Mr Willemsen said that the applicants would have relied at trial on documents in the applicants' tender list, I was not directly taken to any document which the Court would understand as making out the applicants' case in the absence of an expert's report. 296 Second, the respondents were likely to conclude from the absence of an expert's report that the applicants could not find a reputable expert to support their cases. Before me the Directors submitted: It should be noted that M+K's clients have contributed more than $6 million in fees for the purposes of these Proceedings. That is more than sufficient funds to allow for a proper financial investigation of WFL's business model by an expert. Accordingly, it is a fair inference that the reason that the Applicants have not adduced any expert evidence in these Proceedings, despite the obvious importance of that evidence to the allegations made by the Applicants, is because expert evidence would not have been of assistance. MIS and CBA made submissions to similar effect. They described it as "telling" that the applicants did not file any expert reports addressing the alleged "deferred fee model" case. This must have been anticipated by M+K, which tends to indicate that the decision not to engage an expert was based in funding difficulties rather than a forensic analysis of the requirements of the applicants' cases. 297 Third, the materials tend to show that expert evidence favourable to the applicants was available. Mr Willemsen deposed that counsel and a senior associate of M+K met with David Garvey, a partner in the accounting firm PKF, to discuss engaging him to provide an independent expert's report. He said that Mr Garvey stated that he was familiar with Willmott Forests' business model and had provided an expert's report in other Court proceedings regarding the viability of Willmott Forests managed investment schemes. Mr Willemsen said nothing to indicate that he considered Mr Garvey was not an appropriate expert witness or that his preliminary views did not support the cases being advanced. 298 In broad terms the Confidential Experts' Reports seem to me to be favourable to the applicants, and the accountants who provided those reports are reputable and experienced expert witnesses. Even if I accept that the reports did not go as far as Mr Willemsen would have liked, I consider that filing and serving reports in similar terms to support the central theme in the applicants' case would have meant that M+K was materially better placed to advance the applicants and the class members' interests. This tends to indicate that the decision not to obtain an expert's report was not based on a forensic analysis of the requirements of the applicants' cases. 299 Fourth, the thrust of Mr Willemsen's evidence is that having regard to the difficulties in funding the litigation he was not persuaded that an independent forensic accountant's report would have assisted the applicants' cases. I see this evidence as expedient and I do not accept it. In large part I say this because: (a) initially Mr Willemsen made no mention in his evidence that difficulties in funding the litigation played a part in the decision not to obtain an expert's report; (b) the difficulties for the applicants following the Timbercorp and Timbercorp appeal decisions were not new. Judd J handed down the judgment in Timbercorp on 1 September 2011, and the Court of Appeal handed down judgment in the Timbercorp appeal on 10 October 2013. This tends to show that M+K's decision not to engage an independent expert was made when difficulties in funding the litigation became acute rather than in response to these decisions; (c) M+K did not obtain an expert's report and make a forensic decision not to call the witness. Instead, the firm simply did not engage an expert at all; (d) there is no material to show that counsel agreed with or even participated in the decision not to engage an expert; and (e) M+K did not inform class members that it had made a reasoned decision not to engage an expert witness because it would not assist the cases. In fact, the firm did not inform class members at all. In a letter to client class members dated 4 September 2014 seeking fixed fee payments for the "trial stage" of the proceedings M+K advised that substantial work would need to be done in that stage, including most or all of a list of tasks set out in the letter. One of the tasks on the list was: Producing from any witness from whom we propose to lead evidence of expert opinion a report, due under Court order to be filed by 26 September 2014. The true position was that no expert had even been engaged and there was no prospect that an expert could be briefed and a report prepared in time for trial. 300 Having considered the materials, I am not presently satisfied that M+K and counsel were in a position to properly inform the Court in the settlement approval applications. This is a relevant consideration: Brookfield Multiplex No 4 at [20]. I accept that, to an extent, a conclusion as to the sufficiency of case preparation may involve second-guessing the applicants' lawyers, but this is not to substitute the Court's assessment of the risks of litigation for that of the lawyers. Such a conclusion instead relates to the task of assessing fairness and reasonableness of a settlement, an incident of which is a judgment as to whether the Court can be satisfied on the materials before it that the applicants' lawyers were in a position to properly inform the Court about the merits of the class claims.

N. THE FAILURE TO INFORM REGISTERED CLASS MEMBERS ABOUT THE DEFICIENCIES IN CASE PREPARATION 301 The materials show that M+K recommended the four class actions to disgruntled investors in the Schemes. The firm made it clear in public statements and in correspondence with class members that the proceedings were and would continue to be funded by fixed fee payments made by those class members who retained the firm. 302 Each class member who retained M+K agreed to pay the firm a fixed fee for each identified stage in the proceeding, to be called for by M+K at the requisite stage. This approach to funding the huge legal costs involved in the proceedings had the inherent risk that, over the course of the litigation, an insufficient number of clients would continue to make fee contributions. In an apparent effort to deal with this risk M+K wrote to its clients to inform them that they may be required to make a further Contingency Adjustment Payment if, as at specified dates, the number of M+K's paid-up clients had fallen by a specified number. The firm also wrote to class members to inform them that if there were not a sufficient number of clients to make it "economically viable" for M+K to run the class actions the firm reserved the right to not proceed further with them. 303 Most of the registered class members entered a Retainer Agreement with M+K and, having done so, they have a solicitor-client relationship with the firm. M+K therefore had a fiduciary duty to act in their interests, as well as common law duties and contractual obligations: Maguire v Makaronis (1997) 188 CLR 449; [1997] HCA 23 at 463 (Brennan CJ, Gaudron, McHugh and Gummow JJ). The firm's primary obligations include obligations to properly prosecute their interests, properly prepare the proceedings, and to inform class members of any circumstances which prevented it from doing so. 304 Importantly, there is nothing in the materials to show that M+K informed registered class members of the funding difficulties or of the resultant gaps in case preparation. Nor is there anything to show that M+K informed them that the cases were not economically viable or that the firm did not wish to proceed further with the actions. 305 Unless they were otherwise informed by M+K, registered class members who had retained the firm and collectively paid some $7.835 million in costs in the proceedings (and approximately $2 million in security for costs) were entitled to assume that the firm was properly preparing the proceedings. They were entitled to expect, amongst other things, that an independent expert's report would be obtained to support the central allegation in the cases (particularly when they paid fees in part based on the cost of obtaining such a report), that the team of counsel for trial would include "a highly regarded QC" (as M+K informed class members in a letter of 1 February 2011), that trial counsel would be paid to assess the voluminous discovery, and that trial counsel would be provided sufficient time and paid sufficiently to allow proper preparation for trial. 306 The funding difficulties that existed did not give M+K a licence to cease to properly prepare the cases on behalf of registered client class members who were continuing to make the required payments (at least not without informing them). 307 In my view registered class members who were not M+K's clients were in essentially the same position. M+K accepted instructions to act as the solicitor in "open class" representative proceedings and in doing so took on the obligation to act in the interests of all class members, not just its clients. There was no requirement for class members to retain the firm and M+K was well aware that many registered class members had chosen not to do so. Mr Willemsen deposed that following the registration and opt out process approximately 226 of the 738 registered class members in the 2007/08/09 Schemes proceedings (about 31%) were not clients of M+K, and that approximately 26 of the 165 registered class members in the 2010 Scheme proceeding (about 16%) were also not clients. 308 Some authorities provide that the applicant's lawyers owe fiduciary duties to class members who are not clients, although the decisions tend to assume this rather than analyse the issue: see McMullin; Courtney at [57]. Associate Professor Legg argues that, by reference to the established criteria, a fiduciary relationship exists between an applicant's lawyers and class members: Legg M, "Class Action Settlements in Australia - the Need for Greater Scrutiny" (2014) 38(2) Melbourne University Law Review 590, 596. Other authorities describe the applicant lawyer's duty as being to conduct the representative proceeding on behalf of the applicant in a way that is consistent with the interests of class members including those who are not clients: King at [24] and [27]; Bray at [15]; Dorajay Pty Ltd v Aristocrat Leisure Ltd [2009] FCA 19 at [8] (Stone J). 309 The difference in the authorities is of no significance in the present cases. M+K was under a duty, at least, to act consistently with the interests of non-client class members and was not permitted to act in a manner that was contrary to class members' interests. Unless otherwise informed by M+K, registered class members who were not the firm's clients were entitled to expect that M+K would properly prosecute their interests, properly prepare the proceedings, and inform them of any circumstances which prevented the firm from doing so. The funding difficulties that existed did not give the firm a licence to cease to properly prepare the cases, at least not without informing them. 310 M+K did not inform registered class members (either client or non-client) that difficulties in funding the litigation had led to significant gaps in case preparation which might adversely affect prospects of success at trial or the applicants' lawyers consideration of the adequacy of a settlement offer. If registered class members had been so informed, they could have taken steps to protect their own interests. If they were informed early enough they could have opted out of the proceedings in accordance with the registration and opt out orders, or if they were not informed until after the opt out period was closed an application could have been made to the Court to extend that period. In the circumstances such an application would have had some force. 311 It is helpful to look at this issue through the prism of Mr Braham's objection. In 2008 and 2009 he invested $2.52 million in the Schemes, obtaining loan finance from MIS and CBA to do so. He signed a Retainer Agreement with M+K in March 2011. He alleged that, pursuant to M+K's advice, he disputed the enforceability of the loans and stopped paying instalments. By the date of the settlement approval hearing his alleged indebtedness to MIS and CBA was in the order of $4.6 million. 312 Mr Braham paid a total of $165,000 in legal fees to M+K, as well as contributing $50,000 to the fund for security for costs. He also engaged B2B Lawyers and Mr Cawthorn QC to separately advise him prior to the opt out stage and (I infer) paid for their services. Shortly before opt out and at a time when M+K was seeking a further contribution to security for costs from Mr Braham, M+K provided him with the April 2014 Opinion which informed him that there were reasonable prospects of success in the proceedings. Mr Braham did not, however, pay the required fee payment for the pre-trial stage as requested by M+K. 313 I infer from the size of Mr Braham's investments in the Schemes, the level of his alleged indebtedness to the Lenders, and the financial support he gave to the proceedings, that the class actions were (and are) of great importance to him. He would have been concerned to know of any significant difficulties in funding the litigation and resultant gaps in case preparation which might adversely affect the prospects of success at trial or by settlement. In my view he was entitled to expect that M+K would inform him of any such matters in a timely way so that he could make an informed decision to protect his own interests, including as to whether to opt out of the proceedings or to seek an extension of the opt out period. He was not so informed. 314 In my view the settlements should not be approved unless class members are given an informed opportunity to opt out.

O. THE CONFLICTS OF INTERESTS 315 Having regard to the terms of the settlements several potential conflicts of interest arise. 316 First, in each settlement there is a conflict between the interests of the applicants and registered class members on the one hand, and the interests of non-participating class members on the other. 317 On the one hand, it is in the interests of the applicants and registered class members to obtain the benefits of the settlements by having them approved by the Court. The benefits are provided in exchange for various detriments including the binding loan enforceability admissions. Essentially, the applicants seek Court approval on the basis that the benefits outweigh the detriments. 318 On the other hand, by operation of the registration and opt out orders, non-participating class members are not entitled to the benefits of the settlements. If the settlements are approved they will suffer the imposition of binding loan enforceability admissions without receiving any corresponding benefit. It is not in the interests of non-participating class members to be precluded from defending loan enforcement proceedings on any basis. Their interest is in the proceedings continuing, at least until a settlement is reached which does not preclude them from bringing claims or defences against the respondents based in their individual or unique circumstances, or which allows them to opt out of a settlement which they consider to be unfair. 319 Second, in each settlement there is a conflict between, on the one hand M+K's duty to the applicants and those registered class members who are clients of the firm, and on the other hand its duty to class members including non-participating class members who are not its clients. 320 As I have said, the applicants and most registered class members entered a Retainer Agreement with M+K. They are in a solicitor-client relationship and the firm had (and has) fiduciary duties (as well as common law duties and contractual obligations) to act in their interests. Having reached the view that the settlements are in clients' interests M+K has a duty to seek Court approval. 321 On the other hand, having taken on the obligation to represent the interests of class members who are not its clients, including the non-participating class members, M+K has a duty to act consistently with their interests. It is not in the interests of non-participating class members that they suffer the imposition of binding loan enforceability admissions which will preclude them from defending loan enforcement proceedings on any basis. Their interest is in the proceedings continuing, at least until an offer is made which does not so preclude them or which allows them to opt out. 322 These conflicts are not properly addressed in the materials filed, and I am not satisfied that the applicants or the applicants' lawyers gave them proper attention. Before any (revised) settlement can be approved the conflicts must be addressed and the Court be satisfied that they have been properly dealt with. 323 There is also a conflict between M+K's interest in receiving legal costs and the interest of class members in minimising legal costs, or at least in paying only reasonable legal costs. I deal with this conflict under the next heading.

P. The reasonableness of M+K's legal Costs 324 The applications seek orders that: (a) $3.1 million paid by the respondents in the 2007/08/09 Schemes proceedings be expended on the pro rata reimbursement of M+K's clients who paid legal costs in those proceedings; and (b) $1 million paid by the respondents in the 2010 Scheme proceeding be expended on the pro rata reimbursement of M+K's clients who paid legal costs in that proceeding. The reimbursement in the 2007/08/09 Schemes proceedings would represent approximately 51% of the $6.086 million in legal costs paid by class members, and in the 2010 Scheme proceeding it would represent approximately 57% of the total amount of $1.749 million in costs paid in that case. 325 I have no difficulty with the proposal to distribute $4.1 million paid by the respondents to those class members who paid costs to M+K, on a pro rata basis. There is a principle, in other contexts, that persons who incur expenses to create a fund should be entitled to recover them as a first charge or priority on the fund, for example, in relation to the expenses of receivers or liquidators: see Moodemere Pty Ltd (in liq) v Waters [1988] VR 215 (Kaye, Murphy and Tadgell JJ); Re Universal Distributing Company Ltd (in liq) (1933) 48 CLR 171; [1933] HCA 2 (Dixon J). As Davies J said in Thackray v Gunns Plantations Ltd (2011) 85 ACSR 144; [2011] VSC 380 at [41]: …the existence of the lien does not depend on the status of the person claiming it. The categories of persons to whom the principle may apply are not closed. For present purposes it is sufficient to note that the principle has been applied with respect to receivers and receivers and managers. The underlying principle in each case is that it would be inequitable for the person who has created or realised a valuable asset, in which others claim an interest, not to have his or her costs, expenses and fees incurred in producing the asset paid out of the fund or property created. (Emphasis added. Citations omitted.) 326 Similar considerations of fairness lead me to conclude that the class members who paid to bring the proceedings should not be left carrying the burden of unrecovered costs, and they should be reimbursed in priority to class members who made no contribution to the costs. In the present cases the pro rata reimbursement reflects each relevant class member's interest in the monies paid by the respondents and it is eminently fair and reasonable: see Thomas at [30]. 327 However, the question remains as to whether the amount of approximately $7.835 million charged by M+K to class members was reasonable. 328 Mr Willemsen pointed to several matters which he said showed that M+K's costs were reasonable. He said that all amounts incurred by M+K's clients for legal costs were exclusively determined in accordance with the fixed fee tables provided to the Court, and that no premium or uplift had been applied. He exhibited examples of the pro forma Retainer Agreement at different dates, documents detailing the structure and timing for the required fixed fee payments, a 456 page compilation of M+K's time records (which did not set out the hourly rate charged or the fee for each item of work because that was not the basis of the charges), a 34 page printout of disbursements incurred totalling $1,468,462.99, and a schedule setting out the fee payments made to M+K by its clients together with copies of the relevant trust balance ledgers. 329 Mr Willemsen also sought to justify the reasonableness of M+K's costs by reference to the respondents' estimated solicitor-client costs. He deposed that the $6.086 million charged in the 2007/08/09 Schemes proceedings was reasonable by reference to the respondents' estimates of their solicitor-client costs of between $8.3 million and $11.17 million (as estimated in the security for costs application). He deposed that $1.749 million charged in the 2010 Scheme proceeding was reasonable by reference to an approximate estimate of the respondents' likely costs. 330 Notwithstanding the evidence going to the reasonableness of M+K's costs, at the hearing Senior Counsel for the applicants submitted that M+K was not required to satisfy the Court as to the reasonableness of the costs charged to class members. Essentially, Senior Counsel submitted that there was no warrant to consider the reasonableness of the costs because the settlements do not provide for M+K to receive any amount for legal costs and because the applicants do not seek an order that M+K's costs be approved by the Court. 331 I do not accept this submission. The Court has oversight over the costs charged between a solicitor and client, including the power to review, moderate or fix those costs: see Woolf v Snipe (1933) 48 CLR 677; [1933] HCA 5 at 677 (Dixon J). As Dixon J explained at 678, the jurisdiction is in part: …founded upon the relation to the Court of attorneys and solicitors considered as its officers. This jurisdiction, commonly called the general jurisdiction of the Court, enables it to regulate the charges made for work done by attorneys and solicitors of the Court in that capacity, and to prevent exorbitant demands. 332 In Redfern v Mineral Engineers Pty Ltd [1987] VR 518 at 523, cited with approval in Modtech Engineering Pty Limited v GPT Management Holdings Limited [2013] FCA 626 at [26] (Gordon J), Tadgell J said in the context of a taxation: The court's surveillance over costs as between solicitor and client is assumed with a view to preventing any unfair advantage by solicitors in their charges to their clients. It stems, it seems, from the notion that ordinarily a solicitor is presumed to be in a position of dominance in relation to his client as a result of his presumed knowledge of the law and of what may and may not be properly charged by way of fees. Were a strict view not taken it might be open to a solicitor to overreach his client or otherwise act oppressively towards him on the matter of costs. 333 In the present cases I am well satisfied that the Court should exercise its power to oversee the costs charged to class members. There is an inherent conflict between the interests of M+K in being paid legal costs and the interests of client class members in minimising legal costs, or at least in paying only reasonable costs or only the costs agreed under the Retainer Agreement. In the present cases there is a pronounced information asymmetry between M+K and its clients in relation to costs, and the firm is in a position of particular dominance. Each client class member knows only the fixed fee contributions that he or she paid and not the total overall and class members have limited or no insight into whether M+K undertook (properly or at all) the legal work which underpinned the firm's entitlement to charge costs. Because each class member paid only his or her costs contribution, he or she is unlikely to have been interested in ensuring that M+K's charges were reasonable overall. As a result it is likely that M+K's fees have largely been unchallenged. 334 The applicants also submitted that the Court should not consider the reasonableness of M+K's costs because the monies paid by the respondents under the settlements are unrelated to costs. I do not accept this. The relevant clauses of the Settlement Deed provide for $4.1 million paid by the respondents to be expended on partially reimbursing those class members who paid costs, and I have no doubt that when M+K negotiated for those monies it did so in an effort to obtain reimbursement of the costs paid by its clients. The firm took a similar approach to reimbursement of the costs paid by its clients when settling the Great Southern class action: see Clarke No 4 at [136]. 335 The applicants further submitted that the question of reasonableness fell to be determined when the costs were paid or through a taxation, and that the Court should not consider the reasonableness of the costs charged as part of the settlement approval hearing. I do not accept this. This submission appears to have been made on M+K's behalf rather than on behalf of the class members as it cannot be in the class members' interests that Court supervision of the costs charged be delayed or avoided. I can see no good reason why the reasonableness of the costs charged should not be considered in the settlement approval applications when the Settlement Deed provides that the amounts to be paid are to be expended on reimbursement of costs charged, when class members paid M+K more than $7.835 million in costs, and when there is evidence that the firm did not perform some important parts of the legal work underpinning the entitlement to costs. In my view the assessment of the reasonableness of M+K's costs may affect the real "return" to class members under the settlements as M+K would be required to disgorge any costs that are shown to have been excessive. If that occurs class members will receive a higher pro rata level of reimbursement. 336 Finally, the applicants submitted that the Court should take the same approach to legal costs as in Clarke No 4. In that case the fee arrangements were relevantly the same as in the present cases, as M+K charged professional fees to the class members on a fixed fee basis for each identified stage of the proceedings and not on a time-spent basis. In the settlement approval application the applicant sought orders that $19,976,474.61 paid under the settlement be distributed to class members, in pro rata reimbursement of the legal costs they paid. 337 In that case some class members objected to settlement approval on the basis that the settlement provided a significant benefit to M+K through payment of their fees with no discount or mechanism for verifying the reasonableness or otherwise of those fees. The objectors did not, however, contend that M+K's fees were excessive. Croft J made orders that $19,976,474.61 be distributed to the class members. His Honour accepted (at ) the plaintiff's submission that "extensive material" had been put before the Court regarding "the basis of the fee arrangements between [M+K] and its clients, how those arrangements operated in practice and how the fees correlated to the work performed", which allowed the Court to be satisfied that the costs charged were fair and reasonable. His Honour did not require M+K to put on evidence by an independent expert legal costs assessor as to the reasonableness of M+K's charges and there was no independent or objective assessment of the costs charged. 338 His Honour concluded (at [137]):: …there is no force in the objection with respect to the M+K Lawyers' fees. First, no party has objected to the nature and extent of fees charged, and certainly not the insurers of GSMAL who propose to fund the payment. Secondly, the proposal is for a refund of fees actually paid by the plaintiffs to M+K Lawyers. It is not a payment to that firm for outstanding fees, it is a refund to those who have already paid those fees, so that if the settlement is not approved, it is the plaintiffs who have paid those fees who will suffer - to the advantage presumably of the insurers to GSMAL - not M+K Lawyers. Thirdly, and most significantly from the perspective of the group members, the fees are paid out of a separate fund under the proposed settlement, so that if they were reduced, no advantage would flow to group members without a renegotiation of the terms of the proposed settlement - a matter not within the function or power of the Court to effect in this context. 339 In my view Clarke No 4 can be distinguished from the present cases. First, unlike in Clarke No 4, in the present cases there is an objection to the reasonableness of the legal costs charged. Mr Braham objected to settlement approval on the basis that class members made fixed fee payments to M+K for work to be undertaken in identified stages of the proceedings, which the firm did not undertake either properly or at all. The evidence indicates that M+K did not retain experienced Senior Counsel for the trial, suspended the retainers of Mr Moore and Mr Nigel Evans of counsel from April 2014 to early November 2014, did not engage an independent expert forensic accountant to provide a report on the central issue in the cases, and did not make funds available for trial counsel to fully consider and assess the voluminous discovered documents. 340 Second, although the materials before Croft J in Clarke No 4 did not include an independent cost assessor's opinion, his Honour was satisfied in relation to the objections on the basis of "extensive material". In the present cases I cannot be so satisfied. The materials before me set out how the fee arrangements were proposed to work and how Mr Willemsen said that the costs charged correlated to the legal work performed. However, without meaning any disrespect to Mr Willemsen, it cannot be said that his evidence about the costs charged is objective and the other materials do not take the issue far. Amongst other things, the reasonableness of M+K's costs cannot be established by comparison with the respondents' costs when those costs related to four legal teams rather than one and the respondents were required to provide extensive discovery and the applicants were not. 341 The materials show that M+K charged and was paid approximately $1.18 million in legal costs for the "pre-trial" stage in the proceedings which covered the period between 1 March and 1 September 2014. The interlocutory timetable required any expert's report to be filed by 26 September 2014 and I infer that the anticipated costs and disbursements for that stage included the cost of obtaining an expert's report. However, no expert's report was obtained and in this period some other important aspects of case preparation work were restricted or put on hold. 342 The materials also show that for the "trial" stage M+K was paid approximately $1.448 million in legal costs in the proceedings, which covered the period from 1 September 2014. The cases settled at the mediation on 17 December 2014. The materials are silent as to whether M+K intends to retain these monies or to refund them to class members in whole or in part. 343 On the materials I cannot be satisfied that M+K undertook the legal work that underpinned its entitlement to be paid fees for the pre-trial and trial stages of the litigation or whether in all the circumstances the legal costs the firm charged are reasonable. Such an assessment is impossible without the applicants putting on evidence from an independent costs assessor following access to M+K's files or by a Registrar of the Court undertaking a costs assessment. 344 If the decision in Clarke No 4 is not distinguishable, I would respectfully decline to follow it. I shortly explain this by reference to the three reasons to which Croft J referred in the passage cited above. 345 First, in my view the fact that few class members object to the applicants' lawyers costs (in the present cases only Mr Braham) is not an important consideration. As I have said, individual class members may be unaware of the quantum of costs overall, and are unlikely to be interested in taking on the burden of an enquiry into the reasonableness of those costs. Further, the Notice of Proposed Settlement did not invite objections in relation to costs. 346 Second, it is not central that the applications do not seek Court approval of M+K's costs and a payment to the firm for outstanding fees, or that the amounts are to be reimbursed to class members. The settlements identify the monies paid by the respondents as to be expended on reimbursement of legal costs, there is a connection between the real level of reimbursement to class members under the settlements and the reasonableness of costs charged to them, and the Court has an important supervisory role over costs charged to class members. 347 Third, while the Court cannot alter the terms of a class action settlement, the Court should not be wedged by the terms of settlement into approving a settlement without appropriately protecting class members' interests in relation to costs. In my view class members will receive a higher reimbursement if the costs charged are found to be excessive. 348 In the present cases, having regard to the conflict of interests in relation to costs, the information symmetry, class members' likely lack of interest in the quantum of costs overall, the connection between the level of legal costs and the real reimbursement to class members, and the evidence that some important parts of the legal work were not undertaken, M+K must put on material to satisfy the Court as to the reasonableness of costs charged.

Q. THE OTHER RELEVANT FACTORS AND OTHER OBJECTIONS 349 Given that approval of the settlements is to be refused on the grounds set out above it is unnecessary to deal in detail with the other factors relevant in a settlement approval application or the other objections to approval. It suffices to briefly note my views on the main remaining objections as follows: (a) in the 2007/08/09 Schemes proceedings some objectors opposed settlement approval on the basis that is less advantageous for class members than the settlement in the 2010 Scheme proceeding, arguing that the two settlements are "inconsistent". There is no force in this objection. Amongst other things, there are significant differences in the factual allegations underpinning the 2010 Scheme proceeding (as set out at [255]), investors were invited to acquire interests in the 2010 Scheme at a later date than in the earlier Schemes and at a time when any "significant risks" would have been more apparent (on the applicant's argument), and the investors in the 2010 Scheme suffered greater individual losses than those in the earlier Schemes because they did not obtain the benefit of a tax deduction. It is unsurprising that there are significant differences between the settlements; (b) in the 2007/08/09 Schemes proceedings some objectors opposed settlement approval because they wish to preserve their rights to sue third parties, including financial planners. There is little force in this objection. Under the settlements class members retain any right to sue third parties, although they will be bound by the indemnity term. The indemnity term provides finality for the respondents so that they are not forced to contribute to judgements or settlements in related litigation and, were the settlements otherwise fair and reasonable, the indemnity term would not in my view justify a refusal to approve the settlements; (c) some objectors opposed settlement approval because they wish to preserve their rights to sue M+K or other advisors who they allege advised them to cease making loan repayments to CBA and MIS, leading them to accrue a significant amount of interest, only to now have the validity of the loans confirmed. There is little merit this objection. The settlements do not preclude class members from commencing proceedings against M+K or other advisors in relation to such advice, and it seems unlikely that any such litigation will be affected by the indemnity term; (d) Mr Anderson opposed approval on the basis that the settlement is less advantageous for class members than the settlement of the Great Southern class action. There is no force to this objection. It is unsurprising that the settlements are different when the facts of the cases are different and the settlements were reached in different circumstances; and (e) in the 2010 Scheme proceeding some objectors opposed settlement approval on the basis that the settlement overstated the risks for the applicant and that the discount on loan repayments is insufficient. I cannot deal with this objection without receiving further material regarding the risks on liability to which I have referred. Having said this, the Court's task is only to decide whether the settlement falls within the range of reasonable outcomes, not to substitute its assessment of the risks of litigation for that of the applicants or the applicants' lawyers.

R. Conclusion 350 For the reasons I have set out I refuse the applications for settlement approval. I will allow four weeks for the parties to consider their positions and the parties must thereafter bring the matters on for a case management conference. The parties are to consult with each other and then with chambers as to an appropriate date for this conference. Any party or objector seeking an order for costs is to file short submissions in that regard within 14 days. Any party opposing an order for costs is to file short submissions in reply within seven days thereafter. I certify that the preceding three hundred and fifty (350) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy.

SCHEDULE OF PARTIES VID 1485 of 2011

Applicants Second Applicant: MARGARET KELLY (NEE ILACQUA) Respondents Second Respondent: JONATHAN DAVID MADGWICK Third Respondent: MARCUS DERHAM Fourth Respondent: JAMES WILLIAM ANTONY HIGGINS Fifth Respondent: HUGH THOMAS DAVIES Sixth Respondent: RAYMOND MAXWELL SMITH Seventh Respondent: BIOFOREST LIMITED (IN LIQUIDATION) (ACN 096 335 876)

Applicants Second Applicant: MARGARET KELLY (NEE ILACQUA)

Respondents Second Respondent: JONATHAN DAVID MADGWICK Third Respondent: MARCUS DERHAM Fourth Respondent: JAMES WILLIAM ANTONY HIGGINS Fifth Respondent: HUGH THOMAS DAVIES Sixth Respondent: RAYMOND MAXWELL SMITH Seventh Respondent: WILLMOTT FINANCE PTY LTD (RECEIVERS & MANAGERS APPOINTED) (ADMINISTRATOR APPOINTED) (ACN 081 274 811)