Krieger v Colonial First State Investments Limited - [2024] FCA 1402 - FCA 2024 case summary — Zoe

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Krieger v Colonial First State Investments Limited

[2024] FCA 1402

Federal Court of Australia|2024-06-03|Before: Murphy J

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Court

Federal Court of Australia

Decision date

2024-06-03

Before

Murphy J

Source

Original judgment source is linked above.

Judgment (61 paragraphs)

[1]

INTRODUCTION 1 The parties in this class action reached an in-principle settlement pursuant to which the first respondent, Colonial First State Investments Limited (Colonial), agreed to pay the applicants and group members $100 million inclusive of costs (Settlement Sum) in full and final settlement of the claim without admission of liability (proposed settlement). These reasons concern an interlocutory application dated 12 December 2023 by the applicants, Ms Marcel Krieger and Mr Jason Burton, seeking orders for Court approval of the proposed settlement under s 33V of the Federal Court of Australia Act 1976 (Cth) (the Act). 2 The applicants brought the class action against Colonial as trustee during the relevant period of the Colonial First State FirstChoice Fund Superannuation Trust (FirstChoice Fund). They brought the proceeding on their own behalf and on behalf of all persons who: (a) became members of the Colonial First State FirstChoice Fund Superannuation Trust (FirstChoice Fund) prior to 11 June 2013; (b) remained members on or after 1 July 2013 (the FOFA Reform Start Date); (c) were invested in Retail FirstChoice Products (Retail Members) or FirstChoice Employer Super Products (Employer Super Members); and (d) were charged the relevant fees, being Contribution Fees or Excess Management Fees (as defined in the Amended Statement of Claim (ASOC)), after the FOFA Reform Start Date. 3 After the proceeding was commenced (and after the relevant period in the proceeding) Avanteos Investments Limited (AIL) became trustee of the FirstChoice Fund. By orders made by consent on 11 December 2023 AIL was joined as the second respondent to the proceeding, for the purposes of settlement administration. 4 The proceeding was funded by Augusta Pool 1 UK Limited (the Funder), part of a group of companies operated by Augusta Ventures Limited, pursuant to a litigation funding agreement (LFA) between Augusta and the applicants. 5 The Court made orders to approve the settlement, and I now provide reasons for doing so.

[2]

[3]

RELEVANT PRINCIPLES 9 The fundamental issue for determination on an application for settlement approval under s 33V of the Act is whether the proposed settlement is fair and reasonable and in the interests of the group members who will be bound by it, including as between the group members. As I said in Webb v GetSwift Limited (No 7) [2023] FCA 90; 414 ALR 500 at [15]-[16]: The applicable principles in relation to settlement approval under s 33V of the FCA Act are now well-established. The Court's fundamental task is to determine whether the settlement is fair and reasonable and in the interests of the group members who will be bound by it, including as between the group members inter se: see for example, Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [7]-[8]; Kelly v Willmott Forests Ltd (in liq) (No 4) (2016) 335 ALR 439; 112 ACSR 584; [2016] FCA 323 at [68]-[77]; Camilleri v Trust Company (Nominees) Ltd [2015] FCA 1468 at [5]; Blairgowrie Trading Ltd v Allco Finance Group Ltd (recs and mgrs. apptd) (in liq) (No 3) (2017) 343 ALR 476; 118 ACSR 614; [2017] FCA 330 at [81]; Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527 at [12]; McKenzie v Cash Converters International Ltd (No 3) [2019] FCA 10 at [23]-[24]; Smith v Commonwealth (No 2) [2020] FCA 837 at [6]-[12]; and Prygodicz v Commonwealth (No 2) (2021) 173 ALD 277; [2021] FCA 634 at [85]-[88]. In undertaking that task, the Court: (a) assumes an onerous and protective role in relation to group members' interests, in some ways similar to Court approval of settlements on behalf of persons with a legal disability; (b) must be astute to recognise that the interests of the parties before it, and those of the group as a whole (or as between some members of the group and other members), may not wholly coincide; (c) relatedly to the second point, should be alive to the possibility that a settlement may reflect conflicts of interest or conflicts of duty and interest between participants in the common enterprise which has conducted the representative proceeding; (d) should understand that at the point of settlement approval, the interests of the parties will ordinarily have merged in the settlement. It is likely that they both will have become 'friends of the deal'. As a result, both sides may not critique the settlement from the perspectives of any group members who may suffer a detriment or obtain lesser benefits through the settlement; and (e) must decide whether the proposed settlement is within the range of reasonable outcomes, rather than whether it is the best outcome which might have been won by better bargaining.

[4]

OVERVIEW OF THE PROCEEDING 10 The class action concerned Colonial's alleged conduct, in its capacity as trustee of FirstChoice Fund, in continuing to pay commissions to financial advisers, pursuant to arrangements with financial advisers (Adviser Arrangements), from fees charged to members of its First Choice Fund who joined the fund prior to 11 June 2013, without the provision of any commensurate benefit to those members. This is alleged to have occurred in circumstances where Colonial ceased to have such Adviser Arrangements (and therefore neither charged the same fees, nor paid such commissions) in relation to members who joined the First Choice Fund after 11 June 2013. The conduct the subject of the proceeding occurred from 1 July 2013 to 1 June 2020. 11 The proceeding alleged that Colonial: (a) breached its duty arising under the general law and the covenant under the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) to act in members' best interests; (b) breached its duty at general law and the covenant under the SIS Act to avoid conflicts between its duties to and interests of members, and its personal interests or the interests of associated third parties; and (c) engaged in unconscionable conduct within the meaning of s 12CB of the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act). Colonial denies the allegations. 12 In relation to the commissions paid by Colonial to financial advisers, it is alleged that: (a) for Retail Members with financial advisers linked to their account (linked advisers) who joined before the Future of Financial Advice Reforms (FOFA Reforms) to the Corporations Act 2001 (Cth) (Corporations Act) took effect on 1 July 2013 (Pre-FOFA Retail Members), the commissions paid were percentage contribution commissions on amounts contributed or transferred by or for the benefit of a Retail Member (Contribution Commissions); and (b) for Employer Super Members with linked advisers who joined before 1 July 2013 (Pre-FOFA Employer Super Members) and Pre-FOFA Retail Members, commissions paid were percentage per annum trail commissions calculated as a percentage on the total balance of the member's account (Trail Commissions). 13 In relation to the fees Colonial charged members prior to the FOFA Reform Start Date of 1 July 2013 it is alleged that Colonial charged: (a) contribution fees to Retail Members calculated as a percentage of the amounts contributed or transferred by or for the benefit of a Retail Member (Contribution Fees); and (b) to Retail Members and Employer Super Members, fees described as management, investment or administration fees, which were calculated as a percentage of the member's funds under management (Management Fees). 14 It is alleged that Colonial's purpose in charging Contribution Fees, and in charging Management Fees at a level inflated by Trail Commission amounts (Excess Management Fees), was to fund Colonial's payment of commissions to financial advisers. Colonial denies these allegations. 15 The FOFA Reforms prohibited issuers or sellers of financial products from giving financial services licensees (or their representatives) "conflicted remuneration", being a benefit to a licensee who provides financial product advice to a retail client, where it could reasonably be expected to influence the choice of product recommended by the adviser: see Corporations Act ss 960 to 968. The proceeding alleged that the Adviser Commissions constituted conflicted remuneration. However, the conflicted remuneration provisions did not apply where the benefit was given under an arrangement entered into before the FOFA Reform Start Date (Grandfathered Commissions): Corporations Act s 1528 and Corporations Regulations 2001 (Cth), regs 7.7A.15B to 7.7A.16F. 16 From 7 June 2013, Colonial ceased to have Adviser Arrangements under which it paid Adviser Commissions in respect of new Retail and Employer Super Members who became members from 11 June 2013. However, it is alleged that by 11 June 2013, in respect of Pre-FOFA Members, Colonial had decided that it would continue to pay Grandfathered Commissions after the FOFA Reform Start Date. Accordingly, from the FOFA Reform Start Date to 31 May 2020, Colonial continued to have Adviser Arrangements pursuant to which it paid Adviser Commissions in respect of Pre-FOFA Members, and from July 2013 until various dates between 1 January 2019 and 31 May 2020, Colonial continued to charge Contribution Fees to Pre-FOFA Retail Members and Excess Management Fees to Pre-FOFA Retail and Employer Super Members. 17 On or about 29 October 2018 and 21 February 2020, Colonial made two decisions about ceasing payment of Adviser Commissions, and ceasing charging Contribution Fees and Excess Management Fees to Pre-FOFA Members. Between late October 2018 and June 2020, Colonial altered or amended its Adviser Arrangements so that by 1 June 2020, Colonial no longer paid Adviser Commissions in relation to all Pre-FOFA Members. By June 2020, Colonial ceased to charge Contribution Fees and Excess Management Fees to members. 18 It is alleged that Pre-FOFA Members received no benefit in return for Colonial's continued charging of Contribution Fees and Excess Management Fees, or Colonial's continued payment of Adviser Commissions. It is alleged that the Adviser Commissions were in the nature of "introducer fees" for the Financial Adviser having introduced the members or their employer to the FirstChoice Products, and did not involve any additional or ongoing service being provided by the Financial Adviser to the member. Pursuant to the Adviser Arrangements, the Financial Advisers were not required to provide any additional or ongoing services to the member in consideration for the Adviser Commissions. 19 In addition, it is alleged that at all material times Colonial had the ability to put members funds into options that had the same underlying investment profile, but where the high fees which funded Adviser Commissions were not paid. Colonial admitted that it had power to transfer Retail Members, subject to the provisions of the trust deed and the SIS Act, to a division, plan or class of the FirstChoice Fund in respect of which they were not liable to pay Contribution Fees or Excess Management Fees. And in respect of the Employer Members, in May 2020 Colonial closed the Pre-FOFA Employer Super Investment Options and in fact did exercise its transfer power, with the result that the investments of Pre-FOFA Employer Members were transferred to the equivalent Post-FOFA Employer Super Investment Option in respect of which they were not liable to pay Excess Management Fees.

[10]

The limited group member registration process 33 The Court made orders on 15 February 2023 fixing a date for opt out and ordering that any group member who did not opt out before the deadline of 12 June 2023 would remain a group member for all purposes. No group member registration or class closure orders were made before settlement was reached. That is appropriate in a class action concerning group members' superannuation as it is likely that many superannuation fund members will have a low level of engagement in relation to their superannuation. The 2018 Productivity Commission report titled "Superannuation: Assessing Efficiency and Competitiveness" (December 2018) found at 18: Some members are highly engaged with the super system - actively comparing products or opening SMSFs. But most are not. Many members simply default, and rely on their funds to manage their super for them. Levels of engagement are especially low among the young and members with low balances. … See more generally Alford v AMP Superannuation Ltd (No 2) [2024] FCA 423 at [19]-[31], [83] (Murphy J). 34 Then, upon the proposed settlement being reached, by orders made on 20 December 2023, group members were classified into the following four categories: (a) Type A Group Members - being members identified by the respondents that had a product with a linked adviser as at either or both of 1 July 2013 and 31 December 2018 but who did not pay an Adviser Services Fee (ASF). Payment of an ASF is used as a proxy to indicate that a group member has not suffered loss by payment of Advisor Commissions. Members had an option of entering into an ASF relationship with a financial advisor after Advisor Commissions ceased. Entering an ASF allowed a member to receive financial advisor services. It is therefore probable that a member who entered an ASF after the end dates of automatic advisor fees did so in order to continue receiving financial advice services that were available to them before the fee end dates, and which represented a service benefit associated with the fees they were charged by Colonial. The orders provided that Type A Group Members were required to register in order to provide information as to whether they received ongoing financial advice services in return for fees charged to their superannuation account. Under the proposed SDS, Type A Group Members who registered and confirmed that they did not receive ongoing financial advice services will be entitled to compensation. (b) Type B Group Members - being members who fall into two sub-categories: (i) first, members identified by the respondents who can be inferred from structural features of their accounts did not receive financial advice, being those who: (A) had no linked adviser as at 1 July 2013 or at 31 December 2018; or (B) had a linked adviser as at 1 July 2013 or at 31 December 2018, but did not have an ASF relationship; and (ii) second, members of the First Choice Employer Super product who were not group members in the Coatman class action, a partly overlapping representative proceeding alleging breach of trustee duties in relation to the Employer Super Product: see Coatman v Colonial First State Investments [2022] FCA 1611. The orders provided that Type B Group Members do not need to register. Under the proposed SDS they are automatically entitled to compensation. (c) Type C Group Members - being Retail Members identified by the respondents with a financial adviser linked to their account and an ASF relationship. Such group members are considered to have received ongoing financial advice services under these arrangements and on that basis have not suffered loss. The orders provided that they are not required to register, because under the SDS it is not proposed they will be entitled to compensation. (d) Type D Group Members - being members identified by the respondents who were eligible to be compensated in the Coatman class action and who are therefore expected to have individual loss below the proposed minimum of $20 after apportionment under the Scheme. The orders provided that they are not required to register, because it is not proposed they will be entitled to compensation. 35 Each category of group member received a different Notice of Proposed Settlement, informing them as to their eligibility (if any) to receive a distribution under the proposed settlement and any steps they were required to take in in order to receive a distribution. The Notice of Proposed Settlement explained to group members that the settlement would be distributed only to eligible Type A Group Members and Type B Group Members. The registration process was undertaken by Slater & Gordon and Deloitte in accordance with the orders. 36 For the reasons I explain when dealing with the fairness and reasonableness of the proposed SDS, notwithstanding the likely low level of engagement of group members with their superannuation, I was satisfied that the registration process applicable to Type A Group Members was appropriate in the circumstances of the case.

[22]

The risks of establishing liability 54 Colonial denied all allegations, and it strenuously defended the proceeding. Even so, based on the materials I consider it appropriate to approach the proposed settlement on the basis that the applicants have good prospects of establishing the alleged breaches of statutory and general law obligations to avoid conflicts of interest and to act in members best interests, at least in respect of the Type B Group Members who had no adviser linked to their account. 55 However, the majority of group members had a linked advisor, which means that the applicants must establish that they received "no benefit" in return for Colonial's continued deduction of fees from their accounts for payment of Adviser Commission. Figures provided by Slater & Gordon show that there were 178,197 Type A group members who had linked advisers, compared to 84,384 Type B group members who had no linked advisers. That negative evidentiary burden is substantial, and there is a risk that the Court would not accept that the burden was discharged. For some Retail Members the issue may be finely balanced, and may have needed to be established on a case by case basis. The position is less clear in respect of Employer Super Members, where the fact that advice was not regularly given to individuals seems to have in part depended upon member apathy, which suggests that advisors were available. 56 There are also risks associated with the fact the FOFA Reforms expressly permitted the grandfathering of these types of fee arrangements. In the context of the best interests duty, this presented the possibility that the duty did not require Colonial's immediate attention to fee arrangements for existing members, and that instead it was permitted to remain inactive and to continue to collect members fees in accordance with the trust deed and the relevant PDSs. That presented even greater risks to the unconscionability case, which appears the weakest of the claims. There are obvious difficulties with making out unconscionability where conduct is expressly permitted by statute. The limitation defences also add risks to the applicants' case. 57 The risks of establishing liability in relation to some categories of group member point in favour of settlement approval.

[27]

Objections as to misclassification under the SDS 64 13 group members initially classified as Type C - those who had a linked adviser and an ASF relationship - objected primarily on the basis that they did not receive ongoing financial advice, and therefore should not be deemed ineligible for compensation. 65 In her second affidavit Ms Morrison deposed that in response to these objections the respondents reviewed their data, and identified that one of those 13 group members was incorrectly identified as a Type C group member when in fact they should have been a Type B group member. The respondents then identified a further 3,316 accounts affected by the same error, and those group members were reclassified as Type B, and included in the Type B loss calculations. 66 At the settlement approval hearing the respondents submitted that the other 12 Type C objectors were not misclassified. That issue was addressed through a modification to the Settlement Administrator's power so that Slater & Gordon could resolve whether, in respect of those objectors, there was in fact an error with the data recorded by Colonial in relation to their account. 67 If group members are correctly classified into categories then these objections do not justify refusing to approve the proposed settlement. For the reasons I explain in relation to the SDS, it is appropriate that group members who had a linked advisor and an ASF relationship do not receive compensation under the SDS. 68 A further two group members, Ms Morgan and Ms Spencer, objected to the proposed settlement on the basis that they did not receive compensation in the Coatman class action, and therefore should not be deemed ineligible for compensation (that is, they should not have been categorised as a Type D Group Member). In his second affidavit Mr Hansen deposed that as part of the settlement distribution in the Coatman class action, amounts were credited to the superannuation accounts of Ms Morgan and Ms Spencer. Ms Spencer appeared at the approval hearing and she ultimately accepted that she had in fact received compensation in the Coatman class action which she had had not noticed because no specific notification was sent to her. It is likely that in the absence of specific notification, Ms Morgan similarly missed the credit to her account. Ms Spencer also objected to the proposed settlement on the basis she had a second superannuation account with Colonial, which she had not registered. She was accepted as a late registrant in respect of this account, which dealt with this aspect of her objection. 69 These objections do not justify refusing to approve the proposed settlement.

[31]

The terms of the SDS 79 The SDS has the following key terms. 80 First, the SDS categorises group members into four categories consistently with the 20 December 2023 orders. Under the Scheme Type B Group Members will be compensated regardless of registration, Type A Group Members will be compensated if they registered and confirmed they did not receive financial advice services, and Type C and D Group Members were not required to register as they will not receive compensation. 81 Second, Colonial and AIL are jointly appointed as Settlement Distributor under the SDS, and they take responsibility for the distribution of the Settlement Sum. Ernst & Young (or following consultation with Slater & Gordon, another independent expert consultant) is appointed as the Expert Consultant and will perform the calculations underlying the distribution of the Settlement Sum. Slater & Gordon is appointed as the Settlement Administrator, and is permitted to engage the services of Deloitte to assist with scheme administration. Colonial is to provide group member data to Slater & Gordon to assist in the administration of the scheme. 82 Third, the implementation of the SDS is expressly subject to the ongoing supervision of the Court, and the Settlement Administrator or the Settlement Distributor may refer any issue arising in relation to the SDS or its administration to the Court. 83 Fourth, upon the settlement approval orders becoming final, Colonial will pay to Slater & Gordon an amount equal to: (a) the applicants' legal costs; (b) the litigation funding charges; and (c) the reimbursement payments to the applicants, in the amounts approved by the Court. The balance of the Settlement Sum (Residual Settlement Sum) will then be paid to the Settlement Account. 84 The Notice of Proposed Settlement informed group members that the deductions from the Settlement Sum would comprise approximately $32 million, leaving an estimated $68 million as the Residual Settlement Sum to be distributed to group members. 85 Fifth, an apportionment formula by which individual group member entitlements are proposed to be calculated is set out in Annexure A of the proposed SDS (Apportionment Formula). The Apportionment Formula is based on the loss calculation methodology used by the applicants' expert witness, Mr Andrew Ross of KordaMentha, in his report filed in the proceeding. 86 The Apportionment Formula involves: (a) adding: (i) the Contribution Fees paid annually as per the member statement balance date each financial year (applicable to Retail members only); and (ii) the Excess Management Fees incurred. Excess Management Fees are calculated as the nominal rebate to Group Members, being 0.6% per annum for Retail members and 0.44% per annum for Employer members, accrued monthly; then (iii) subtracting any actual rebate that was provided by Colonial; and (b) dividing the total in (a) above by the total loss of all group members; and (c) multiplying the result of (b) above with the Residual Settlement Sum (the Settlement Sum less the amounts approved by the Court to be deducted). 87 Under the Apportionment Formula: (a) simple interest at Court rates is applied to each of the Contribution Fees annually, and to Excess Management Fees as accrued monthly to the settlement date; and (b) individual group member entitlements are calculated as a proportion of the total loss and the Residual Settlement Sum is to be distributed on a pro rata basis. 88 Sixth, as group members have different account statuses or relationships with Colonial, the methods of payment vary in accordance with that status: (a) for group members who still have an active account in the FirstChoice Fund, the Settlement Distributor will increase their account balances by the applicable entitlement; (b) for group members for whom direct payment is impracticable, they may have funds paid to other superannuation accounts in accordance with their instructions, or by way of a trustee voluntary payment (TVP) to the Australian Taxation Office (ATO) under the Superannuation (Unclaimed Money and Lost Members) Act 1999 (Cth). 89 Seventh, the Scheme provides a threshold loss value of $20. If a group member is entitled to an amount less than $20, it will not be paid to them as the distribution of amounts less than $20 would cost the group more than $20 in administrative costs. 90 Eighth, the Settlement Distributor is obliged to report to the Settlement Administrator and the Expert Consultant throughout the settlement distribution process. At three-monthly intervals after the commencement of distribution of the Residual Settlement Sum, the Settlement Distributor is required to report on, amongst other things, the total quantum of the payment amounts distributed to group members in the preceding three months and the dates on which those payments were made. The Settlement Distributor is also required to report on the method in which payment amounts were distributed to group members (for example, whether payments were made in cash, into active accounts in the FirstChoice Fund, by way of transfer to another superannuation account or by TVP). 91 After the distribution of the Residual Settlement Sum, the Settlement Distributor must report to the Court on, amongst other things, the total quantum of payment amounts distributed to group members, the amounts representing the highest, lowest, mean and median payments to group members, the dates on which payments were made, and any other relevant matter as determined by the Settlement Distributor. 92 Ninth, the Settlement Distributor will distribute the Residual Settlement Sum within 6 months of the expiry of the appeal period from the approval orders, other than in exceptional circumstances, in which case the Settlement Distributor will report to the Court and the Settlement Administrator on the reasons for the delay and the steps that the Settlement Distributor proposes to take to address it. 93 Tenth, Mr Hanson's first affidavit addressed the issue of tax under the Scheme. He deposed that the amount of tax that will be deducted from the Residual Settlement Sum will be 10% for distributions made to the superannuation accounts of group members who are in the accumulation phase, 15% for the distribution of interest made on the Residual Settlement Sum to the superannuation accounts of members who are in the accumulation phase, and 0% for distributions made to superannuation accounts of members who are in the pension phase.

[32]

The reasonableness of the proposed SDS 94 In Camilleri v The Trust Company (Nominees) Ltd [2015] FCA 1468; 190 ACSR 191 at [43]-[44] Moshinsky J usefully summarised the authorities in relation to the fairness of a settlement distribution scheme, as follows: The cases indicate a number of factors relevant to the assessment whether a proposed distribution scheme is fair and reasonable having regard to the interests of the group as a whole. Some of these factors are as follows: (a) whether the distribution scheme subjects all claims to the same principles and procedures for assessing compensation shares; (b) whether the assessment methodology, to the extent that it reflects 'judgment calls' of the kind described above, is consistent with the case that was to be advanced at trial and supportable as a matter of legal principle; (c) whether the assessment methodology is likely to deliver a broadly fair assessment (where the settlement is uncapped as to total payments) or relativities (where the task is allocating shares in a fixed sum); (d) whether the costs of a more perfect assessment procedure would erode the notional benefit of a more exact distribution; (e) to the extent that the scheme involves any special treatment of the applicants or some group members, for instance via 'reimbursement' payments - whether the special treatment is justifiable, and whether as a matter of fairness a group member ought to be entitled to complain. There are also procedural factors which relate to the fairness of a proposed distribution process, such as: (a) whether appropriate individuals have been nominated to administer the scheme; (b) whether the procedures for lodging and assessing claims are appropriate and to be conducted in a timely manner; (c) whether the scheme incorporates appropriate 'checks and balances', such as procedures for ensuring consistency between assessments and meaningful opportunities for review (and objection) by group members. 95 In this case the main feature of the SDS that demands justification is the division of group members into four categories with only Type B Group Members, and Type A Group Members who register and confirm that they did not receive financial services, being eligible for compensation. 96 I consider those distinctions between categories of group members are justifiable by reference to differences in the cases of each different type of group member, as follows: (a) Type B Group Members have structural account features from which it is possible to infer that they did not receive any financial services, and thus no benefit from the fees deducted from their accounts. There is no imperative for a registration process when they can be assumed to have suffered a loss. Nor is registration required before compensation can be distributed to them. The respondent has access to their account details, and if not, it has access to the TVP mechanism to ensure they are paid any compensation to which they are entitled. A requirement for registration may unnecessarily shut some Type B Group Members out of compensation and it would involve wasted expenditure. Under the Scheme, registration is not required for this category of group members as they are automatically entitled to compensation; (b) Type A Group Members have account features which are indeterminate, as they had a linked advisor, but did not pay an ASF. In Ms Morrison's first affidavit, she deposed on the basis of Colonial's filed evidence which is uncontradicted by discovered documents, that some financial advisors linked to the accounts of members may have provided ongoing financial advice services to some group members, as this was a matter of agreement between the financial adviser and the member. Colonial's only agreement was with the financial advisor dealer group. It follows that whether those members received financial advice can only be confirmed by asking that member directly through a registration process. The requirement for registration is a barrier to receiving compensation but, absent a registration process, the parties are unable to be satisfied that only those entitled to compensation in fact receive compensation. And the evidential burden for registration by a Type A group member is minimal, as they needed only confirm that they did not receive financial advice services to be eligible for compensation under the Scheme; (c) Type C Group Members have account features from which it is possible to infer that they received ongoing financial services. It would be inappropriate for this group to receive compensation for non-delivery of a service that they in fact received. As Ms Stevenson, an objector categorised as Type C, pithily said in the settlement approval hearing, "if it was available and we didn't take it up, then it's on us. It's not on them". This category of group members are not required to register as they will not receive compensation under the Scheme; (d) Type D Group Members received overlapping compensation in a related class action, and any who have an entitlement are likely to recover an amount lower than the $20 threshold. They are also not required to register as they will not receive compensation under the Scheme; 97 It should be kept in mind that the median distribution under the Scheme will be approximately $327. This is a case where the costs of a more perfect procedure would speedily erode the notional benefit of such a process. In this scenario the SDS may provide "rough justice", but it is the only through the class action regime that these group members could have achieved any justice. 98 I am persuaded that it is fair and reasonable that: (a) Colonial and AIL are appointed as Settlement Distributor with joint responsibility for the distribution as they have significant experience in undertaking large scale remediation projects with similar features to the distribution proposed here. Indeed, Coatman itself is an example of such a project. It is to group members' benefit that they will not charge any fee for the provision of this service. They are the most well-placed and cost-effective entities to undertake this role; (b) Slater & Gordon is appointed as Settlement Administrator, as the firm is familiar with the case and is in a position to carry out an oversight role and to enforce the rights of group members under the SDS, if necessary; (c) Ernst & Young is appointed as the independent Expert Consultant given the complexity of the necessary calculations. Engagement of a specialised third party to undertake this discrete task also provides an impartial check on the conduct of both the Settlement Distributor and Settlement Administrator. This will be cost-effective for group members as Ernst & Young's charges will not come from the Settlement Account; (d) the methodology for loss calculation is based in the calculations by the applicants' loss expert prepared for the proceeding. That is appropriate as it ensures that the compensation payable to a group member is payable in accordance with the case theory of the litigation and in a quantum proportionate to the amount of Contribution Fees and Excess Management Fees they paid. The methodology does not involve judgment calls, and the calculation can be efficiently undertaken on the available data; (e) the SDS otherwise only distinguishes between group members by excluding those whose average notional loss is less than $20. That is a reasonable threshold to apply when the administrative cost of distributing payments below that threshold would cost the group more than the value of the payment, and because there is little prejudice to a group member of not receiving a payment of less than $20. According to draft distribution calculations performed by the respondents, this will operate to exclude 20,057 group members, or about 19.2% of the total number of group members who would receive a distribution; (f) the SDS permits the use of the TVP process as a distribution method for: (i) "related members", being people who received payments from the FirstChoice Fund on behalf of a deceased member who would have been eligible; and (ii) as a back-up payment method for other group members who cannot easily be identified. In my view the TVP process represents a reasonably effective method of ensuring that eligible members who have left the FirstChoice Fund receive their distributions: see Coatman at [87(h)]; (g) the proposed SDS does not contain a mechanism for individual reviews of group Members' entitlements and distributions. The Notice of Proposed Settlement informed group members of their categorisation, and group members had an opportunity to challenge that categorisation by objecting to the proposed settlement. Beyond their categorisation, there is little utility in allowing for individual reviews of distributions given the transparent and plainly fair Apportionment Formula. Further, given that the median distribution is only approximately $327, providing for individual reviews would generate costs which would quickly cost the group more than the value of the proposed distribution ; and (h) the proposed timeframe for distributions is within 6 months of the expiry of the Appeal Period. That appropriately takes into account the time and effort that will be required to distribute the Residual Settlement Sum, while holding the Settlement Administrator and Settlement Distributor to a high standard of efficiency in the interests of group members. 99 Having regard to the matters identified in Camilleri, I am satisfied that the SDS is fair and reasonable as between class members. In particular, it provides for a fair division of the proceeds of the proposed settlement between eligible class members pursuant to the same principles and procedures, the administration process does not involve judgment calls, and if it proceeds as planned the settlement administration process will not involve unreasonable costs or delay.

[33]

The proposed reimbursement payment to the applicant 100 The applicants sought an order that a reimbursement payment of $20,000 be deducted from the Settlement Account and paid to each of them for their time, inconvenience and expense in prosecuting the claims on behalf of group members. 101 In her second affidavit Ms Morrison deposed as to the categories of work the applicants were required to undertake in the litigation, and it is sufficiently clear that a significant proportion of the time devoted by the applicants to this litigation was time expended for the benefit of all group members. She also deposed that the time expended by each of the applicants on the case could otherwise reasonably be expected to have been devoted to other income-producing activities or otherwise in enjoyment of free time. 102 It is established that the representative applicant in a class action who has sacrificed time or incurred expenses in prosecuting the proceeding on behalf of group members may be entitled to some reimbursement from the corpus of any settlement or judgment: Caason Investments Pty Ltd v International Litigation Partners No.3 Ltd [2018] FCAFC 176; 265 FCR 487 (Allsop CJ, Middleton and Perram JJ); Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Ltd [2018] FCA 1030; 358 ALR 382 at [212]. 103 A payment of $20,000 per applicant is within the range of amounts commonly allowed by the courts as a reimbursement payment. Professor Morabito's empirical research identified the median and average reimbursement payments made to applicants in Federal Court class actions to be $19,105 and $30,408 respectively: see Morabito V, An Evidence-based Approach to Class Action Reform in Australia - Common Fund Orders, Funding Fees and Reimbursement Payments (January 2019). The figures suggest that the $30,408 figure is skewed by large outliers: Kuterba v Sirtex Medical Limited (No 3) [2019] FCA 1374 at [23] (Beach J). 104 It is also relevant that the group members were notified of this proposed deduction in the Notice of Proposed Settlement and no group member made any objection to the payment. I am satisfied that the deduction of such amounts is "just" pursuant to s 33V(2) of the Act.

[36]

Settlement administration costs 110 Slater & Gordon also sought settlement administration costs in the amount of $1,277,029.27 for its work as the Settlement Administrator, comprising $110,000 in professional fees and $1,167,029.27 in disbursements. 111 In her second affidavit Ms Morrison deposed that: (a) the estimated professional fees are for ongoing work by Slater & Gordon's Client Engagement Team to respond to group member enquiries and to maintain website and email updates until the payment distributions are completed; and (b) the disbursements are for Deloitte's work, which had largely been completed, being facilitating the distribution of Notices of Proposed Settlement to group members and the registration of cohort Type A (which included 178,197 group members) and responding to group member enquiries. Deloitte issued a draft invoice of $1,011,299.30, constituted by time costs of $615,827.30 and expenses (unit prices for postage and other fixed fee items) of $395,472. Deloitte's work included: (i) design and deployment of a platform for collection, storage and management of group member data; and group member registration, claim submission, dissemination of preliminary assessment outcomes and communications with group members; (ii) establishment of a Remediation Claims and Contact Centre to provide frontline support to communicate with group members and respond to their enquiries; (iii) distribution of Notices of Proposed Settlement to Group Members; (iv) preparation of final group member registration data for provision to the respondents; and (v) data analysis and reporting activities on the Registration Platform and Contact Centre activities. 112 Ms Morrison said that group member enquiries were particularly high-volume in this proceeding, at approximately 32,000 or 8% of group members. (She said that the typical forecast response rate is 2%, and her first affidavit is evidence that Deloitte's initial cost estimate was provided on the basis of that estimated response rate). Deloitte requested additional operator resources on 13 February 2024 and 23 February 2024 to assist with the daily call volume and clear a backlog of voicemails. On 19 March 2024, on instruction from Slater & Gordon, Deloitte extended the Contact Centre service from 15 March 2024 to 28 March 2024 to assist management of registration attempts. I am satisfied that these extensions, which increased settlement administration costs, were necessary. It would have been unfair to group members to leave the backlog of enquiries at 15 March 2024 unaddressed. 113 The disbursement amount, which was budgeted in advance, allowed a buffer of approximately $150,000. I considered it appropriate to maintain this buffer as Ms Morrison deposed that a substantial part of that buffer had been consumed by higher-than-expected counsel costs in preparing for the settlement approval hearing, and because it is likely Slater & Gordon will require further assistance from Deloitte in reviewing the loss calculations performed by the respondents and other data analysis work. 114 The scale of the settlement administration supports the conclusion that it was necessary to engage Deloitte for the work described. These costs appear proportionate and necessary in a large case involving 395,645 group members and 84,205 distributions after exclusions. The Costs Referee reviewed Slater & Gordon's budgeted professional fees and Deloitte's charges and assessed those charges as fair and reasonable. There is no good reason to depart from the Costs Referee's assessment, and I approve settlement administration costs in the amount of $1,277,029.27. 115 I therefore approve the deduction of the applicants' costs from the Settlement Account in the total of $8,744,453.68, to be distributed as follows (a) $4,560,960.80 to be paid to the Funder in reimbursement of the legal costs it paid; (b) $4,183,492.89 to be paid to Slater & Gordon, comprising: (i) $2,906,463.62 for costs incurred in its capacity as solicitor for the Applicants; and (ii) $1,277,029.27 for costs incurred in its capacity as Settlement Administrator.

[40]

The litigation funding arrangements 125 The funding commission allowed by the LFAs entered into by the applicants is not straightforward to calculate, and to my mind is far from transparent. The LFAs initially provided the following commission and fees: (a) Commission A: If the Claim Proceeds are $50 million or less, an amount equal to 2.5 times the Project Costs incurred plus 0.25 times the amount of Undrawn Claim Funding. For the purposes of calculating Commission A, Project Costs exclude administrative fees and adverse costs insurance premiums. (b) Commission B: If the Claim Proceeds are more than $50 million but less than or equal to $100 million, an amount equal to Commission A plus 10% of the Claim Proceeds between $50 million and $100 million (inclusive). (c) Commission C: If the Claim Proceeds received into the Trust Account are more than $100 million but less than or equal to $200 million, an amount equal to Commission A plus Commission B plus 5% of the Claim Proceeds between $100 million and $200 million (inclusive). (d) Commission D: If the Claim Proceeds received into the Trust Account are more than $200 million, an amount equal to Commission A plus Commission B plus Commission C plus 2.5% of the Claim Proceeds greater than $200 million. 126 The original case budget estimated the total costs and disbursements to be approximately $5.2 million, of which Augusta would fund approximately $4.4 million. There were two budget variations agreed in the course of the proceeding: (a) the first variation, agreed in April/May 2021, provided for the Funder to advance approximately $1.5 million in funding beyond the original case budget as well as an additional ATE insurance premium. This came about because the costs of obtaining and reviewing discovery was greater than originally anticipated; and (b) the second variation, agreed in October 2022, provided for the Funder to advance approximately $4.6 million in additional funding due to increased estimates of the time required for the remaining stages of the proceeding, including trial, again including additional ATE cost to cover increased adverse costs exposure. Under the LFA the Funder was entitled to charge a budget variation fee for those variations. 127 As part of the second variation the Funder also sought an increase in the funding commission to reflect the larger case budget. The following changes were agreed: (a) Commission A: If the Claim Proceeds received into the Trust Account are $50 million or less, an amount equal to 2.5 times the Project Costs incurred plus 0.25 times the amount of Undrawn Claim Funding. (b) Commission B: If the Claim Proceeds received into the Trust Account are more than $50 million but less than or equal to $100 million, an amount equal to Commission A plus 12.5% of the Claim Proceeds between $50 million and $100 million (inclusive). 128 The quantum of the proposed settlement means that the rates under Commission B apply, subject to the Court's determination of what is fair and reasonable.

[42]

Whether to make a common fund order 131 It is established that the Court has power under s 33V(2) of the FCA Act to allow the deduction of litigation funding charges from the common fund of the class members' recoveries in an amount the Court considers to be "just", so as to fairly and reasonably compensate the funder for providing the funding which contributed to the creation of the common fund: Elliott-Carde v McDonald's Australia Ltd [2023] FCAFC 162; 301 FCR 1 per Beach J at [170], per Lee J at [423] and per Colvin J at [504]. 132 Here, the Funder only entered into LFAs with the applicants, and did not engage in book-building. Because no book-building occurred, and only the applicant entered into a litigation funding agreement, it is meaningless to consider whether a different funding mechanism, such as a funding equalisation order, is preferable to the proposed CFO. As the applicants submitted, this is a paradigm case where a CFO is appropriate. In any event, it is wrong to approach the question as to what constitutes a fair and reasonable funding charge from the starting point that a funding equalisation order is to be preferred to a CFO: Elliott-Carde at [140] (Beach J); Galactic Seven Eleven Litigation Holdings LLC v Davaria [2024] FCAFC 54; 302 FCR 493 at [62]-[63] (Murphy J, with whom Lee and Colvin JJ agreed). 133 It is relevant too that the Funder offered to fund the proceeding on the basis that it would seek a CFO, and the Notice of Proposed Settlement informed group members that a CFO would be sought. No group member objected to a CFO being made, but there were objections to the quantum of the proposed litigation funding charges. 134 I am satisfied that it is 'just' pursuant to s 33V(2) to make a common fund order in favour of the Funder. Such an order will operate to ensure that the expense incurred to achieve the proposed settlement is spread equitably across the class which will benefit from the expenditure, while also ensuring that Augusta is fairly remunerated for the costs and risks it took on, and it will do so in a transparent manner that is straight forward for group members to understand. The question is what funding commission would be "just" in the circumstances of the case.

[43]

Principles relevant to determining a fair and reasonable funding commission 135 In Money Max Int Pty Ltd v QBE Insurance Group Ltd [2016] FCAFC 148; 245 FCR 191 at [80] (Murphy, Beach and Gleeson JJ) the Full Court set out a non-exhaustive list of considerations relevant to deciding what constitutes a fair and reasonable funding commission in the circumstances of a case, which considerations have been applied or approved in numerous decisions by single judges and intermediate courts of appeal. They relevantly include: (a) the information provided to class members as to the funding commission; (b) a comparison of the funding commission with funding commissions in other Pt IVA proceedings and/or what is available or common in the market; (c) the litigation risks of providing funding in the proceeding, assessed without hindsight bias, and recognising that the Funder took on those risks at the commencement of the proceeding; (d) the quantum of adverse costs exposure that the Funder assumed, again recognising that assumption of risk was done at the commencement of the proceeding; (e) the legal costs expended and to be expended by the Funder; (f) the amount of the settlement, and the proportionality of the commission bearing in mind the risks assumed by the Funder; (g) class members' likely recovery "in hand" under any pre-existing funding arrangements; and (h) any substantial objections made by class members in relation to any litigation funding charges. 136 The Full Court said that it expected that the courts will approve funding commission rates "that avoid excessive or disproportionate charges to class members but which recognise the important role of litigation funding in providing access to justice, are commercially realistic and properly reflect the costs and risks taken by the funder, and which avoid hindsight bias": Money Max at [82]. When determining the reasonableness of litigation funding charges the Court does not engage in a "race to the bottom" and funding rates should be set that provide an appropriate reward for the risk undertaken by the funder: Kuterba at [12] (Beach J); Endeavour River Pty Ltd v MG Responsible Entity Limited [2019] FCA 1719 at [29] (Murphy J). 137 As I said recently in Street v State of Western Australia [2024] FCA 1368 at [284]-[285]: The proper analysis of the reasonableness of a proposed litigation funding charge is multifactorial and the relevant considerations and the weight to be given to them in any particular case will depend upon all of the circumstances, rather than just by reference to the amount of the settlement or judgment or by comparison to funding rates available in the market. In Bolitho v Banksia Securities Ltd (No 18) (remitter) [2021] VSC 666; 69 VR 28 at [1966], John Dixon J said, and I agree: It is fundamental that the assessment by a court of a fair and reasonable return for a litigation funder more naturally emerges from the inputs specific to the litigation funder - primarily the level of funding, and promise of funding, that it provides and the period of exposure to risk - than a denominator applied to the settlement or judgment sum. In Augusta Pool 1 UK Ltd v Williamson [2023] NSWCA 93; 111 NSWLR 378 at [102] per Ward P (with Bell CJ and Adamson JA agreeing at [1] and [169] respectively) the NSW Court of Appeal held that one matter properly to be taken into account in assessing whether a proposed settlement is fair and reasonable is whether the funder is receiving a reasonable rate of return.

[44]

The information provided to group members 138 The opt out notice relevantly informed group members as follows: Litigation Funder's Remuneration 4.8. In exchange for paying the Applicants' legal costs and agreeing to pay adverse costs and security for costs, the Litigation Funder may seek to be paid an amount (remuneration) out of any settlement or Court awarded compensation in the event of a successful outcome. 4.9. If any compensation becomes payable as a result of any order, judgment, or settlement in the class action, the Applicants and/or the Litigation Funder may ask the Court to make an order that some of that compensation recovered for Class Members be used to pay the Litigation Funder's remuneration. 4.10. The amount of the Litigation Funder's remuneration must be approved by the Federal Court. The Court will only make an order for remuneration to be paid to the Litigation Funder in an amount that the Court considers appropriate. If the Applicants and/or Litigation Funder seek an order for remuneration, the amount they seek will not exceed 2.5 x the amount spent by the Litigation Funder on the class action, plus between 5% and 12.5% of any settlement or judgment sum recovered for Class Members, plus certain fees as may be approved by the Court. (Emphasis added.) 139 In my view that information was likely to be difficult to understand for many group members and uninformative without their also being informed about how much the Funder had spent on the class action. Another difficulty with that information is that the Funder seeks funding charges calculated as 2.5 x legal costs plus 12.5% of part of the settlement sum, plus ATE insurance costs, and that is not clearly stated. 140 The Notice of Proposed Settlement informed group members as follows: Litigation Funding Costs and ATE Insurance 26. Augusta will seek payment of a litigation funding commission which will total approximately $18 million. 27. In addition, Augusta has secured 'After the Event' (ATE) insurance to cover the lead Applicants' risk of being ordered to pay the Respondent's legal costs in the event of an unsuccessful outcome and in order to provide security for the Respondent's costs during the conduct of the Proceeding. ATE insurance costs are estimated to total approximately $5 million and will be sought by Augusta to be paid from the Settlement Sum. 28. Augusta has entered into a Litigation Funding Agreement with each of the Lead Applicants. Slater and Gordon has entered into a Conditional Legal Costs Agreement with each of the Lead Applicants. Legal costs and funding charges have been agreed to by each of the Lead Applicants. Augusta and Slater and Gordon will seek a common fund order (CFO) from the Court as part of the Settlement Approval which will seek to deduct payments for total legal costs and funding costs from the Settlement Sum and that each group member shares equally in the payment of these costs. The Court will need to be satisfied that sharing the costs in this way under a CFO is fair and reasonable to Group Members. 141 The information provided at this stage was clear. Group members could be expected to understand from the Notice of Proposed Settlement that the Funder would seek approximately $23 million in commission and ATE costs at the settlement approval hearing, which was the amount in fact sought.

[45]

A comparison of the funding commission with funding commissions in other Pt IVA proceedings and/or what is available or common in the market 142 A funding commission of $23,111,979 (which includes ATE Costs and Security Costs) represent a funding rate of 23.1% of the gross $100 million settlement. That is comfortably within the range of funding rates available or common in the litigation funding marketplace in 2019 when the proceeding was commenced. Professor Morabito's most recent empirical report, Group Costs Orders and Funding Commissions (January 2024), divides analysis of funding commissions into the pre-GCO period (prior to the introduction of Group Costs Orders (GCOs) in Victoria in 2020) and the post-GCO period in which the availability of GCO's gave rise to lower funding rates. The median funding commission rate in the pre-GCO period when this proceeding was commenced was 24.9%. Even against the median post-GCO commission of 22.7%, the 23.1% funding rate sought here compares favourably. 143 But it is simplistic to assert that a particular funding rate is fair and reasonable because it falls within the range of the funding rates commonly available in the litigation funding market. It is necessary to be cautious when comparing headline funding rates, as one is not always comparing apples with apples: Galactic at [89] (Murphy J, with whom Lee and Colvin JJ agreed). Two particular matters often mean that a comparison of funding rates has limited value: (a) the quantum of the settlement, as higher funding rates will be appropriate in lower settlements: e.g. Blairgowrie Trading Ltd v Allco Finance Group Ltd (in liq) (No 3) [2017] FCA 330; 343 ALR 476 at [160]; and (b) the terms of the particular funding arrangements, which affect the costs and risks taken on by the funder. 144 As I said Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433 at [179]: It should be kept in mind that it is not enough to consider the funding commission rate on a stand-alone basis. The funding arrangements reached may be structured in a variety of ways which can affect the costs and risk taken on by the funder and therefore affect the reasonableness of the funding commission rate. For example, a funder might agree: (a) to provide funding to cover adverse costs but not to meet the applicant's legal costs and disbursements, with the case being conducted by the applicant's solicitors on a conditional fee basis to be paid by class members from any settlement conditional on success; (b) to pay disbursements only, with the case being conducted by the applicant's solicitors on a conditional fee basis; (c) to only pay costs and disbursements up to a fixed cap or to pay a fixed percentage of the costs and disbursements, with the remainder left to the applicant's solicitors to be paid by class members conditional on success; or (d) to cover the risk of adverse costs liability through After the Event Insurance with the premium to be paid by class members from the settlement sum upon success. 145 Here the funding arrangements were structured by the Funder so that it shared the costs and risk of the case with Slater & Gordon. The Funder provided funding for 100% of disbursements throughout the litigation, and 75% of professional fees, except for part of the discovery phase, where it provided only 50% of the professional fees. As it eventuated, by the end of the proceeding the Funder had paid $4,560,960.80 and legal costs and Slater & Gordon had incurred and carried $2,906,463.62 in legal costs including uplift fees. 146 While Ms Morrison deposed as to the funding rates in five recent Slater & Gordon class actions. I did not find those case examples of much assistance as the funding rates ranged from 11% to 29%, and each case had factors that may not be present here. 147 I sought further submissions from the Funder in relation to cases which involve risk sharing between the funder and the applicants' solicitors. The Funder relied on the following cases, tabulated as follows: Case involving risk sharing Details of risk sharing Funding charges approved (% of gross settlement sum) Ghee The gross settlement was $29.95 million. The funder was obliged to pay 50% of professional fees and 100% of disbursements up to a low fixed cap in the context of that case, with the solicitors being entitled to a 25% uplift on the other 50%. 23% Spotless The gross settlement was $95 million. The funder's obligation to pay the legal costs and disbursements incurred in the proceeding were capped at $6.65 million "which was well short of any reasonable assessment of the amount of costs and disbursements likely to be incurred if the proceeding went to trial." The funding cap was reached approximately 9 months before the trial was listed to start, with the solicitors carrying the remaining costs. 20.5% Webster (Trustee) v Murray Goulburn Co-Operative Co Ltd (No 4) [2020] FCA 1053 The gross settlement was $37.5 million. The funder was not obliged to pay professional fees at all (i.e., the funding was disbursements only, plus security for costs and an adverse costs indemnity). Counsel's fees were asserted to be funded, but they may have been charged on a no win, no fee basis. 23% Hall v Slater and Gordon Ltd [2018] FCA 2071 The gross settlement was $36.5 million. The funder paid a small portion of professional fees and disbursements. The applicant's lawyers claimed $5.3 million in costs, but the funder had only contributed $930,421.03 towards those fees, and a further $1.07 million towards disbursements and security: see [35] and [91]. 21.92% Blairgowrie Trading The gross settlement was $40 million. In an initial agreement, the funder agreed to pay 75% of professional fees and 100% of disbursements. However following interlocutory dismissal of the common fund application, the funder provided 100% of disbursements, with all professional fees only to be paid on a successful outcome: see [19]. Ultimately, the funder paid approximately $2.4 million in legal costs, of a total $10.5 million incurred, and put up $7.25 million in security. 22% Average funding commission awarded 22%

[53]

CONFIDENTIALITY 165 With the exception of the Confidential Opinion, neither the applicants nor the Funder made a blanket claim of confidentiality. The applicants and Funder each sought confidentiality orders over specified parts of documents filed in the proceeding, including: (a) the LFAs (and their variations) between the Funder and the Applicants; (b) the CCAs between the applicants and Slater & Gordon; (c) the Deloitte Engagement Letter; (d) the Cost Referee's Report; (e) personal information contained in material submitted by or concerning the objectors; (f) the ATE insurance policy documents; (g) parts of Ms Morrison's first affidavit; and (h) parts of Mr Martin's affidavit. 166 Even so, the orders sought were too broad. In Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527 at [8]-[9], I said in the context of a settlement approval application: … It is wrong to assume that confidentiality or non-publication orders will be routinely or automatically made. Part VAA of the Act provides that the starting point for consideration of such orders, and it is mandatory under s 37AE for the Court to take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice. The Court must be satisfied that the order is necessary "to prevent prejudice to the proper administration of justice" (s 37AG(1)(a)), and "necessary" is a "strong word": Hogan v Australian Crime Commission (2010) 240 CLR 651; [2010] HCA 21 at [30]. There is a basis for treating some of the applicants' material as confidential (at least until settlement approval orders made) but the application for confidentiality orders was far too broad and wasted the time of the parties and the Court. There is a public interest in not making overly broad confidentiality orders in approving settlements in class actions, particularly the interests of class members in having a proper understanding of a settlement which affects their interests… See also Liverpool City Council v McGraw-Hill Financial, Inc (now known as S&P Global Inc) [2018] FCA 1289 at [102] (Lee J); in Clark v National Australia Bank Limited (No 2) [2020] FCA 652 at [13]-[15] (Lee J). 167 Further, as I said in Coatman at [8]-[9]: Class actions are not just disputes between private parties about private rights, they have a public dimension: Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 at [91]. The settlement of class action proceedings is not just a private bargain between the parties in which the parties may legitimately seek to keep aspects of the settlement confidential: McGraw-Hill at [107]. Frequently, class actions perform a public function by being employed to vindicate statutory policies such as disclosure to the securities market, prohibition of cartel conduct and the provision of safe medical and pharmaceutical products: see Legg M, Class Actions, Litigation Funding and Access to Justice (Law Research Paper No 17-57, UNSW, 7 September 2017). It is important to safeguard the public interest in open justice, which is entrenched in the settlement approval regime under Part IVA of the FCA Act: Jenkings v Northern Territory of Australia (No 4) [2021] FCA 839 at [64]-[65] (Mortimer J). There is also a significant public interest in information relating to legal costs and litigation funding charges in class action litigation. In recent years those matters have been considered by the Australian Law Reform Commission and the Parliamentary Joint Committee on Corporations and Financial Services and have been the subject of much media commentary: see ALRC Report No 134, Integrity, Fairness and Efficiency - An Inquiry into Class Action Proceedings and Third-Party Litigation Funders, (December 2018); Parliamentary Joint Committee on Corporations and Financial Services, Litigation Funding and the Regulation of the Class Action Industry (21 December 2020); see also Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited (No 3) [2018] FCA 1842; 132 ACSR 258 at [20]; Endeavour River Pty Ltd v MG Responsible Entity Ltd (No 2) [2020] FCA 968 at [35]. 168 Although the applications for confidentiality were not as broad as some, I am not satisfied that they are all necessary to prevent prejudice to the proper administration of justice: s 37AG(1)(a) of the Act.

[55]

Estimates of costs, fees, funding amounts, insurance estimates and premiums not confidential after expiry of the appeal period 170 The applicants and the Funder sought confidentiality orders in respect of information regarding: (a) funding amounts provided at various points, including the reasons for funding increases; (b) estimates of legal costs and uplift fees, as well as estimates of fees incurred on a no win no fee basis; and (c) costs and limits of ATE insurance; 171 I accept that there may be commercial reasons that Slater & Gordon and the Funder prefer their costs, charges and estimates to be kept confidential. But in my view those commercial reasons come nowhere near meeting the test of being necessary to prevent prejudice to the proper administration of justice. A primary objective of the administration of justice is to safeguard the public interest in open justice, and open justice is fundamental to the operation of the judicial power of the Commonwealth. It is important that confidentiality orders do not rob group members and the public of the ability to understand the basis for the legal costs and litigation funding charges to be charged by deduction from a class action settlement. After all, those two amounts are usually the largest single deductions, and group members must be permitted to understand the basis of the charges to be deducted from the common fund of their recoveries. I note also that I have found it necessary to disclose some of the revisions to the case budget in these reasons, and those matters cannot remain confidential. 172 Having said that, I accept that disclosure of some such information may in some circumstances prejudice the applicants in the event of an appeal from settlement approval, or in a trial in the proceeding. To protect against that, the orders provide that the confidentiality of such information (at least that which is not disclosed in these reasons) extends until the expiry of the appeal period, or if an appeal is brought, until further order.