LCM Funding Pty Ltd v Stanwell Corporation Limited

Federal Court of Australia (Full Court)|2022-06-16|Before: Anderson JJ

introduction 23 The principal issue raised by this appeal is whether the majority of the Full Court of the Federal Court of Australia (Full Court) was correct to find in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147; (2009) 180 FCR 11 (Brookfield FC) that a litigation funding scheme, having the characteristics identified in that case, was a managed investment scheme (MIS) within the meaning of s 9 of the Corporations Act 2001 (Cth) (Act).

Procedural History 24 In the proceeding below, the first respondent (Stanwell) alleged that the litigation funding scheme (Scheme) relating to proceeding QUD 19 of 2021 Stillwater Pastoral Company Pty Ltd v Stanwell Corporation Ltd & Anor (Class Action) constituted a financial product as defined in s 764(1)(m) of the Act, and was an unregistered MIS. Stanwell sought declarations to that effect and orders under s 1324(1)(a) of the Act restraining the appellant (LCM Funding) from engaging in the operation of an unregistered MIS and/or the issuance of a financial product without an Australian Financial Services Licence. 25 Before the primary judge, LCM Funding raised two arguments in response to Stanwell's claims. First, LCM Funding contended that the Scheme was not a financial product or an MIS by operation of the "grandfathering" provisions in regulation 10.38.01 of the Corporations Regulations 2001 (Cth) (Corporations Regulations), inserted by the Corporations Amendment (Litigation Funding) Regulations 2020 (Cth) (CALF Regulations). 26 Second, LCM Funding contended that, regardless of the outcome of the grandfathering issue, the Scheme was not a MIS and LCM Funding was not operating a MIS. LCM Funding accepted that the Scheme was relevantly indistinguishable from that in Brookfield FC but submitted that the majority decision in Brookfield FC was wrong. LCM Funding by its cross-claim dated 15 September 2021 sought two declarations. First, that the Scheme does not have the features of the definition of a MIS set out in s 9(a)(i) and 9(a)(ii) of the Act. Second, that LCM Funding and the second respondent (Stillwater) have not operated, and were not operating, a scheme with those features. LCM Funding also sought referral of the proceedings or part of them to the Full Court pursuant to s 25(6) of the Federal Court of Australia Act 1976 (Cth) (FCA Act), for the purpose of challenging the correctness of the majority in Brookfield FC.

primary judgment 27 The primary judge in Stanwell Corporation Limited v LCM Funding Pty Ltd [2021] FCA 1430; (2021) 157 ACSR 401 (PJ): (1) found in favour of LCM Funding on the grandfathering issue and dismissed Stanwell's application in QUD19 of 2021; (2) declined to make a referral to the Full Court under s 25(6) of the FCA Act; (3) proceeded to hear LCM Funding's argument that Brookfield FC was wrong, however, considered himself bound by the majority decision with the result that the primary judge dismissed LCM Funding's cross-claim with costs. 28 The following paragraphs from the PJ are instructive of the decision arrived at by the primary judge: [14] So in my view the scheme has been grandfathered, and as the scheme was entered into prior to 22 August 2020, then by reg 5C.11.01(1)(b) it was declared not to be a managed investment scheme. [15] But in any event, even if the scheme had not been grandfathered, there are strong arguments for saying that the scheme is not and was not a managed investment scheme as defined under s 9 of the Corporations Act on its proper construction. [16] Now in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11, Sundberg and Dowsett JJ held that the litigation funding scheme before them was a managed investment scheme. But I have significant doubts concerning Brookfield, although it would seem that the case before me is relevantly indistinguishable from Brookfield and that I am bound to apply it. But relevantly to that context, let me make these points at this stage as they are relevant to LCM Funding's referral application under s 25(6) of the FCA Act. [17] First, whilst Brookfield has stood for over 10 years, until relatively recently its effect has been reversed through administrative action and regulation. So, there has been no occasion to challenge it or reflect at a judicial level on whether its reasoning can withstand critical analysis. In other words, its longevity is no confirmation of any considered general acceptance. [18] Second, arguably the majority placed undue weight on the potential width of each element viewed separately within the composite language of the definition of a managed investment scheme in s 9, and as a consequence construed the definition as capturing an arrangement that could not realistically have been within the legislature's contemplation and which shares little with the kinds of schemes understood to constitute managed investment schemes. In so doing, arguably they adopted a construction inconsistent with one that would promote the purpose or objects of the Corporations Act. [19] Third, it is arguable that the majority mischaracterised litigation funding arrangements as an investment by group members of property to achieve benefits, when such arrangements principally provide a mechanism for persons who share commonality in their unlitigated and separate choses in action to secure the payment for legal services necessary to vindicate those choses on a contingent basis. [20] Fourth, the statutory regime applying to registered managed investment schemes is simply unfit for purpose if it is sought to apply its requirements to litigation funding schemes concerning representative proceedings principally controlled under the open class regime of Pt IVA of the FCA Act. The majority did not address this conceptual incoherence. [21] Now LCM Funding has applied to have the question of whether the scheme before me is a managed investment scheme within the meaning of s 9 reserved for the consideration of a Full Court. It wants to challenge the correctness of Brookfield. [22] But for the moment it is sufficient to say that I decline to make the referral sought by LCM Funding; I will explain my reasons later. [23] In summary, I would decline the relief sought by Stanwell in this collateral proceeding. Further, I would also decline to make the declarations sought by LCM Funding in its cross-claim which are designed to crystallise a determination by me on the Brookfield question in the event that I decline, as I have, to make the s 25(6) referral. Now although it is desirable that Brookfield be reconsidered by a Full Court, unless of course pre-emptive legislative changes seeking to enshrine it move the dial, that does not nevertheless justify me in making the declarations now sought by LCM Funding. … [175] Now I am bound by what the majority has said, but there is a strong case for arguing that it is appropriate for a Full Court to reconsider the majority decision in Brookfield…

grounds of appeal 29 LCM Funding relies on the following grounds of appeal: (1) The primary judge ought to have found that the Scheme does not, on the proper construction of the Act, have the features of the definition of a MIS set out in s 9(a)(i) and 9(a)(ii) of the Act, and on that basis was in error in refusing to make the first declaration sought by LCM Funding in its notice of cross-claim filed in the proceeding below. (2) The primary judge erred in refusing to make the second declaration sought by LCM Funding in the cross-claim on the basis that there was not sufficient utility in doing so: (a) because that decision was necessarily affected by the error in ground 1 in respect of the first declaration; (b) further or alternatively, in failing to find that there was clear utility in the court conclusively determining the issue as to whether LCM Funding or Stillwater had engaged in the conduct the subject of the second declaration, namely operation of a managed investment scheme.

background facts 30 The primary judge at PJ at [1]-[9] and [25]-[58] set out the background facts which are not in dispute in this appeal. Those facts may be summarised as follows. 31 On 20 January 2021, Stillwater commenced a representative proceeding seeking damages from Stanwell and CS Energy Ltd (CS Energy) for alleged contraventions of s 46 of the Competition and Consumer Act 2010 (Cth) as a result of Stanwell and CS Energy engaging in various bidding and re-bidding strategies in the National Electricity Market. 32 Each of Stanwell and CS Energy are Queensland electricity generators, the shares in which are wholly owned by the State of Queensland. Stillwater alleges that Stanwell and CS Energy each have a substantial degree of power in the market for the wholesale supply of electricity to the regional reference node in the Queensland Region of the National Electricity Market and to the Queensland Region through both the Directlink (Terranora) Interconnector and the Queensland-New South Wales Interconnector. Stillwater alleges that during the period from 1 January 2012 to 6 June 2017, each of Stanwell and CS Energy misused such market power by implementing trading strategies such as late re-bidding and early spiking resulting in spot price inflation, inflation of hedging costs, wholesale cost inflation and the like which ultimately drove up the cost of electricity to retail customers in Queensland. 33 The relevant class in the Class Action comprises 61,000 individuals who have entered into funding agreements with LCM Funding which is a subsidiary of Litigation Capital Management Limited (LCM) which carries on the business of litigation funding. 34 The funding agreements with each member are identical in their terms and constitute the Scheme. Each group member agrees that, while a member of the Scheme, they must retain the lawyers that are retained by Stillwater with LCM Funding's approval to prosecute their claims and to pay contingent fees to LCM Funding from any recovery. LCM Funding agrees to pay costs including adverse costs and security for costs, and has the right to engage with Stillwater about the steps to be taken in preparing, conducting, abandoning, postponing or resolving the Claims. 35 It was not in dispute on appeal that the Scheme is relevantly identical to the scheme that was under consideration in Brookfield FC and set out at [159]-[193] in the reasons of Jacobson J.

LCM Funding's Submissions 36 Before the primary judge, Stanwell sought a declaration that the Scheme operated by LCM Funding to fund the Class Action constituted a financial product pursuant to s 764(1)(m) of the Act and an unregistered managed investment scheme pursuant to s 9 of the Act. 37 LCM Funding was successful before the primary judge in establishing that the Scheme relating to the Class Action was not a financial product or a MIS by reason of the "grandfathering" provisions in regulation 10.38.01 of the Corporations Regulations. The primary judge decided that "principal question" and dismissed Stanwell's claim for declaratory and injunctive relief: PJ at [82]-[142]. 38 An issue arises as to the utility of this appeal. 39 The position of Stanwell on appeal was that it did not seek to disturb the primary judge's finding that the Scheme had been grandfathered and was not a MIS. Stanwell, by its notice of contention dated 21 January 2022, sought that the appeal from the costs orders given on 17 December 2021 be dismissed and that the costs orders be affirmed. Stanwell otherwise on appeal: (1) submits to any order the Court may make in the proceeding; (2) does not oppose the substantive relief sought by LCM Funding in orders 1, 2(a) and 2(b) in the amended notice of appeal dated 17 December 2021; and (3) does not argue in favour of the correctness or otherwise of Brookfield FC. 40 The position adopted by Stanwell on appeal created the need for the Court to appoint Mr William Edwards of counsel as a Contradictor. 41 LCM Funding submitted that the appeal continues to have utility, for two reasons. 42 First, the appeal will vindicate LCM Funding's legitimate interest in obtaining a declaration that the Scheme is not a MIS which, but for the grandfathering provisions of the Corporations Regulations, would have required registration and compliance with Chapter 5C of the Act. 43 Second, the appeal is a convenient vehicle to overturn the Brookfield FC decision which, while it remains an authoritative statement of the law, burdens litigation funders with a legislative and regulatory regime characterised by uncertainty, inconvenience and the potential for mischief by class action respondents. 44 LCM Funding submits that the starting point is to identify the matter which was the subject of the competing claims at first instance as reflected in Stanwell's amended originating process and LCM Funding's cross-claim. At a high level of generality, LCM Funding submitted that the matter concerned whether the operation of the Scheme involved a contravention of the MIS provisions of the Act. More specifically, the matter concerned whether the Scheme constituted a MIS and if so, whether it had the benefit of the grandfathering provisions. 45 LCM Funding submits that but for the presence of Brookfield FC and its binding effect on a first instance judge, it seems reasonably likely from the primary judge's reasons that he would have concluded that the Scheme was not a MIS and did not need the benefit of the grandfathering provisions even if those provisions were otherwise satisfied. In these circumstances, LCM Funding submits that the appropriate orders that would have been made at first instance would have been to dismiss Stanwell's application and uphold LCM Funding's cross-claim with appropriate costs orders. 46 Whilst LCM Funding acknowledges that Stanwell's position on the grandfathering provisions is no longer an issue between the parties, that acceptance does not close the related, and in LCM Funding's submission, more fundamental aspect of the matter which is whether the Scheme is a MIS in the first place. LCM Funding contended before the primary judge, and continues to contend on this appeal, that the Scheme is not a MIS. Whilst Stanwell takes no active position on that question, LCM Funding currently faces the dismissal of its cross-claim with costs on that question. 47 LCM Funding submits that the effect of the dismissal of the cross-claim, as a matter of both ratio decidendi and practical effect, is a binding legal determination that any litigation funding scheme which exhibits the features of the Scheme is a MIS and requires registration and compliance with the other requirements of Chapter 5C of the Act unless the grandfathering provisions apply. 48 LCM Funding submits that in identifying the subject matter of the appeal over which the Court has jurisdiction, it is appropriate to focus on two particular aspects of the primary judge's orders. First, order 3 made on 17 November 2021, dismissing LCM Funding's cross-claim. Second, orders 1 and 2 made on 17 December 2021, requiring LCM Funding to pay Stanwell's costs of the cross-claim and not recover its own costs of the cross-claim from Stanwell. 49 LCM Funding submits that this Court, under s 28 of the FCA Act, has the power and duty to give such judgment as ought to have been given at first instance: Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [23]. LCM Funding submits that, if this Court is persuaded, that it should revisit Brookfield FC and conclude that Brookfield FC is wrong, then the Court can, and should, reverse each of the above orders made by the primary judge. Specifically, it should uphold the cross-claim. 50 LCM Funding submits that there is a broader utility in the appeal. LCM Funding points to the primary judge's identification of a number of aspects of the legislative and regulatory uncertainty which has been created by the Brookfield FC decision. 51 LCM Funding submits that this Court should take into account the affidavit evidence of Ms Susanna Ruth Lindsay Taylor, Head of Investments, APAC of LCM which, it is submitted, goes both to the objective uncertainty and inconvenience currently being experienced by participants in the litigation funding industry, including LCM Funding, as a result of Brookfield FC being considered good law. 52 LCM Funding submits that the affidavit evidence of Ms Taylor provides ample support for the primary judge's finding in PJ at [20] that the MIS regime is "unfit for purpose" if it is sought to apply its requirements to litigation funding schemes concerning representative proceedings. 53 LCM Funding submits that there exists a real and tangible interest in the subject matter of this appeal, broader than LCM Funding seeking vindication of its interest in the relief it sought below by the cross-claim. 54 LCM Funding submits that this Court retains jurisdiction to hear and determine the appeal, notwithstanding that as a result of LCM Funding's success on the grandfathering issue, the result of the appeal will not affect the continued operation of the particular Scheme the subject of the proceeding below. In LCM Funding's submission, appeal courts "preserve a discretion to determine a question which has ceased to be a live issue inter-partes where the determination would be in the public interest": Veloudos v Young (1981) 56 FLR 182 per Lockhart J at 190. LCM Funding contends that the determination of the appeal in the present case would be in the public interest.

Contradictor's Submissions 55 The Contradictor submits that this Court should not reconsider Brookfield FC at all in circumstances where that exercise would not result in any change to the substantive position of the parties, but rather, would result in answering an entirely moot question in respect of claimed declarations which are of no utility in determining the rights of the parties before the Court. 56 The Contradictor submits that once the primary judge reached the conclusion that the Scheme relating to the class action was entered into before 22 August 2020, it followed that it was not a MIS within the meaning of s 9 of the Act by reason of the "grandfathering" provisions contained in regulation 10.38.01 of the Corporation Regulations. 57 Two declarations were sought by LCM Funding in its cross-claim. The first declaration was that the Scheme relating to the Class Action did not have the features set out in the definition of MIS in s 9(a)(i) and 9(a)(ii) of the Act. The second declaration was that LCM Funding had not operated a scheme which had the features set out in s 9(a)(i) and 9(a)(ii) of the Act. The Contradictor submits that assuming the Court proceeds with the appeal, to succeed on the appeal insofar as the second declaration is concerned, LCM Funding must persuade this Court that the primary judge erred in holding that there was insufficient utility to make the second declaration which it seeks. 58 The Contradictor submits that the appeal lacks utility. The lack of utility of the appeal is a question separate from whether the declarations lack utility. In the Contradictor's submission, the utility operates at two levels: in the first respect, in terms of the appropriate use of the Court's resources and the proper exercise of judicial power, and in the second respect, in terms of the resolution of actual controversies between the parties. 59 The Contradictor submits that the fundamental question, as the primary judge recognised, is whether the Act applied. The primary judge found that it did not, because the Scheme in relation to the Class Action was not a MIS because s 9(n) of the Act defined it out of the statutory concept entirely. Having decided that, in the Contradictor's submission, it was of no moment whether or not the same result could have been reached by considering whether the litigation funding scheme in relation to the proceeding fell outside the s 9 definition because it did not have the features of the definition "managed investment scheme" set out in s 9(a)(i) and 9(a)(ii) of the Act. The Contradictor submits that the primary judge having answered the legal question posed by s 9(n) of the Act obviated the need for the Court to consider the mixed question of fact and law posed by sub-paragraph (a) of s 9 of the Act. In the Contradictor's submission, the primary judge cannot be criticised for deciding the controversy before the Court on a narrow and clear-cut ground. The Contradictor submits that the primary judge was correct to deal with the "principal question" first. Any other approach would have involved dealing with a contingent and theoretical question in advance of determining whether the Act even applied. 60 The Contradictor submits that any broader or generic concern about LCM Funding's position beyond the issues in this proceeding is irrelevant and does not demonstrate the appeal's utility. 61 The Contradictor submits that insofar as LCM Funding relies upon an extant issue as to costs to constitute a live controversy so as to attract the Court's jurisdiction, then the cross-claim costs are likely to be de minimis because the cross-claim was filed after the hearing, and in circumstances where it was never necessary at all. 62 The Contradictor submits that what is sought by LCM Funding amounts to an advisory opinion in respect of issues of which there is no longer a controversy between the parties, and that while there is a discretion to continue to determine an appeal even where the question is moot, the Court in this case ought not do so. 63 The Contradictor submits that insofar as LCM Funding relies upon the "public interest" and the importance of the question which it asserts justifies the issues being determined on appeal, the Contradictor submits that there is no "public interest" as there is no point of wider principle and the declarations sought do not remedy any adverse factual findings regarding LCM Funding's conduct nor address any adverse effects on its reputation.

consideration 64 LCM Funding has a legitimate interest in obtaining a declaration that the Scheme is not a MIS which, but for the grandfathering provisions of the Corporations Regulations, would have required registration and compliance with Chapter 5C of the Act. 65 The primary judge declined to make the declarations sought in LCM Funding's cross-claim. The Contradictor does not contend that LCM Funding lacks a sufficient interest to found a "matter" to invoke the Court's jurisdiction under s 39B(1A) of the Judiciary Act 1903 (Cth). There exists a justiciable controversy in which LCM Funding has standing to seek the declaratory relief sought in the cross-claim. LCM Funding has a sufficient or real interest in obtaining the declaratory relief: Hobart International Airport Pty Ltd v Clarence City Council; Australia Pacific Airports (Launceston) Pty Ltd v Northern Midlands Council [2022] HCA 5, Kiefel CJ, Keane and Gordon JJ at [26]-[41]. 66 LCM Funding by its cross-claim does not seek an advisory opinion, but a determination by the Court of a real issue which remains joined between the parties, notwithstanding Stanwell on appeal submitting to any order the Court may make in the proceeding. It is relevant to note, that the question of whether the Scheme has the features of the definition of "managed investment scheme" set out in s 9(a)(i) and 9(a)(ii) of the Act, was put in issue by Stanwell who made submissions to the primary judge that the Scheme was a MIS. The primary judge found that the grandfathering provisions of the Corporations Regulations applied such that the Scheme was declared not to be a MIS. The primary judge declined to make the declarations sought in the cross-claim and made adverse costs orders against LCM Funding. LCM Funding now faces a binding decision against it which it seeks to reverse on appeal. The fact that Stanwell no longer wishes to be heard on the declarations sought by LCM Funding in its cross-claim, does not render the appeal inutile. 67 LCM Funding is presently faced with adverse costs orders in relation to the cross-claim. There has been no taxation of those costs and the Court is not in a position to determine, as the Contradictor submits, that the costs of the cross-claim are de minimis. That in and of itself, results in the appeal having utility. 68 For the reasons given, the appeal has utility and LCM Funding is entitled to have the merits of the appeal determined.

LCM Funding's Submissions 69 LCM Funding submits that the primary judge was of the view that there is a "strong case for arguing that it is appropriate for a Full Court to consider the majority decision" in Brookfield FC: PJ at [175]. 70 LCM Funding submits (and the Contradictor does not take issue with) the following summary of the reasoning of the majority in Brookfield FC which: (a) started from the position that the MIS definition in s 9 of the Act is intended to be broader than the definitions in prior iterations of corporations legislation of an "interest", "prescribed interest" and "participation interest": Brookfield FC at [2]-[18]; PJ at [162]; (b) discounted the effect of statements of Mr Miles in the second reading speech of the House of Representatives on 3 December 1997; Hansard p 11928 (Second Reading Speech) and other extrinsic materials to the Managed Investments Act 1998 (Cth) (Managed Investments Act) which suggest that Chapter 5C of the Act deals with a relatively narrow range of investment schemes: Brookfield FC at [21]-[23]; PJ at [163]; (c) applied the remarks of Mason J in Australian Softwood Forests Pty Ltd v Attorney-General (NSW); Ex rel Corporate Affairs Commission (1981) 148 CLR 121 (Softwood) at 129-130 in relation to the definition of the word "interest" in the Companies Act 1961 (NSW) to say that the words of the definition should not be read down by reference to legislative purpose: Brookfield FC at [23]-[24]; PJ at [164]; (d) considered it unhelpful to construe the definition by reference to any notion as to what was the "essence of a managed investment scheme", or by reference to an implied limitation to be derived from the Chapter 5C regulatory scheme itself: Brookfield FC at [28]-[33]; PJ at [165]; (e) conceptualised the scheme constituted by the litigation funding arrangements in a radically different way to that of Finkelstein J, the primary judge in Brookfield: Brookfield FC at [39]-[40]; PJ at [166]. Compare Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (No 3) (2009) 256 ALR 427 at [12]; and (f) alluded to, but did not resolve, the question of whether it was the funder or the lawyers, or a combination of both, who were "operating" the scheme, holding only that between them, they were operating an MIS which is unregistered and lacks a responsible entity: Brookfield FC at [104]; PJ at [169]. 71 LCM Funding submits that the circumstances in which a Full Court will reconsider and depart from the reasoning of an earlier Full Court are well-established, and were discussed in the decision of Allsop CJ (with Kerr and Mortimer JJ agreeing), in Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v FAK19 [2021] FCAFC 153 (FAK19). Relevantly, for present purposes: (a) it is frequently said that a Full Court will reconsider and depart from previous Full Court authority only if convinced that the earlier authority is "plainly wrong": FAK19 at [2]-[3]; (b) "plainly wrong" does not mean "obviously wrong". The words reflect the need to balance the risk of perpetuation of error in too rigid a stance in reconsideration of earlier decisions and the importance of the stable operation of the doctrine of precedent and the predictability of the law: FAK19 at [9], citing Gett v Tabet [2009] NSWCA 76; (2009) 254 ALR 504 (Tabet) at 565-566 [294] and Transurban City Link Ltd v Allan (1999) 95 FCR 553 at 560-561 (Transurban); (c) it is not possible, or even desirable, to formulate exhaustive criteria upon which the Full Court should act when asked to reconsider an earlier decision, for so much will depend upon the nature of the controversy, the strength of the arguments, and the particular circumstances attendant upon the case: FAK19 at [9], citing Transurban at 561 [31]; (d) a decision to depart from earlier authority involves not only a consideration of the jurisprudential nature and character of the error that leads to the conviction of past error, but also other considerations such as, by way of example, whether the earlier decision rested on principle carefully worked out and whether the earlier decision had been otherwise acted upon: FAK19 at [10], citing Tabet at [292]-[301]; (e) the caution that a Court should exercise before departing from earlier Full Court authority should be reflected in how parties approach the task of appellate advocacy and in how Full Courts approach calls and attempts to re-agitate questions of law (especially statutory construction), decided by earlier Full Courts. Parties should expect that a Full Court will demand submissions on matters such as why it should be convinced of error in the earlier decision, why it should exercise the power to depart when that power should be exercised cautiously, sparingly and with great care, why consistency and predictability of principle should give way, and why, if the matter is one of statutory construction, the error is clear or patent, not merely a difference of view as to meaning, or why it has produced unintended and perhaps irrational consequences: FAK19 at [18]. 72 The Contradictor did not take issue with LCM Funding's statement of the above principles. 73 LCM Funding submits that there are seven reasons why it is appropriate for this Full Court to reconsider the majority decision in Brookfield FC. 74 First, the primary judge observed that of the four judges who have considered the MIS issue there has been a 2:2 split. The primary judge found the reasoning of the majority in Brookfield FC to be problematic: PJ at [179]. There now exists effectively a 3:2 split against the majority decision in Brookfield FC. This, in LCM Funding's submission, is at least suggestive of the possibility of clear error in the majority's reasoning in Brookfield FC. 75 Second, the immediate reversal of Brookfield FC by administrative action and by regulation means that the importance of stability in the law has less weight. The reversal of Brookfield FC by administrative action and regulation meant that there was never any occasion to challenge the decision: PJ at [177]. 76 Third, in LCM Funding's submission, there are three additional factors to those listed by the primary judge at PJ at [176]-[179], which also favour reconsideration of Brookfield FC. The first additional matter is that the decision concerns a question of general importance, both because of the impact that the decision will now have on the litigation funding industry and because it concerns more broadly the proper approach to the construction of a generally worded definitional provision such as the MIS definition in s 9 of the Act. 77 The second additional matter is the application of the MIS regime to litigation funding schemes has irrational and clearly unintended consequences which are presently creating a substantial inconvenience. This provides a practical imperative for the Full Court's reconsideration. 78 The third additional matter is that there is at best an incompleteness in the ratio decidendi of Brookfield FC and at worst a fundamental inconsistency in the majority's reasoning in Brookfield FC as the primary judge identified at PJ at [150]-[154]. The ratio decidendi is that a scheme which contains the features of that under consideration in Brookfield FC (which are the same as the present Scheme) constitutes a MIS such that it is required to be registered and comply with the other requirements under the Act. However, the ratio decidendi leaves open and unanswered the question of who operates the scheme for the purpose of ss 601ED(5) and 601FB(1) of the Act and who is subject to the various obligations which fall upon the operator. LCM Funding submits that the majority in Brookfield FC did not conduct any detailed examination of how its finding could sit within the broader scheme of Chapter 5C of the Act. LCM Funding submits that the ratio decidendi is at best incomplete and that this failure in the reasoning of the majority in Brookfield FC indicates that the ratio decidendi is suspect or not sound. LCM Funding submits that there is fundamental uncertainty about the ratio decidendi in the majority decision in Brookfield FC and this provides this Court with an additional reason to reconsider its correctness. 79 LCM Funding submits that there is clear error in the majority's decision in Brookfield FC for the reasons summarised by the primary judge at PJ at [180]-[214]. The majority in Brookfield FC ought not to have eschewed a purposive approach to the construction of the MIS definition in favour of an overly technical approach to each element of the definition: PJ at [180]. Consideration of purpose in statutory interpretation is not optional: s 15AA of the Acts Interpretation Act 1901 (Cth). 80 LCM Funding submits that the majority's decision in Brookfield FC to set statutory purpose to one side may arguably have misapplied Mason J in Softwood at 129-130. 81 LCM Funding adopts the reasoning of the primary judge at PJ [195]-[201] concerning what the primary judge referred to as the "unresolved conceptual incoherence" in applying Chapter 5C of the Act to litigation funding schemes. 82 LCM Funding adopts the primary judge's concerns of the practical inconvenience of the current regime and the potential for it to conflict within the Court's supervisory jurisdiction under Part IVA of the FCA Act: PJ at [202]-[214]. This, in LCM Funding's submission, is another powerful indicator of a legislative intention that litigation funding schemes not fall within the MIS definition. 83 LCM Funding submits that the legislative history provides greater support for the proposition that it was not intended that litigation funding schemes would fall within the MIS definition. The Managed Investment Act passed in 1998 well after Part IVA of the FCA Act was introduced in 1991 makes no mention of representative proceedings. LCM Funding submits that the primary judge was correct to perceive a fundamental inconsistency in the role of the Court in the supervision of representative proceedings under Part IVA and the unstated but implicit premise of the majority in Brookfield FC that some person, unidentified, would operate a scheme and be the person charged with statutory responsibilities for successfully managing it. LCM Funding submits that the Scheme does not fall within the definition of a MIS in s 9 of the Act when properly construed having regard to the context of the definition within the Act as a whole. LCM Funding submits that litigation funding schemes are not, and should not be characterised as, a scheme for pooling the contributions of group members or otherwise subjecting them to a common enterprise to obtain benefits for group members. Rather, such arrangements, in LCM Funding's submission, are a mechanism by which the legal services can be provided and funded and the adverse costs risks of litigation can be borne to enable group members to vindicate or realise what is and at all times remains their property, namely their contestable choses in action, in an economic and effective manner. 84 The primary judge held that the first declaration sought in the cross-claim (namely that the Scheme did not have the features set out in s 9(a)(i) and 9(a)(ii) of the MIS definition of the Act) was foreclosed at first instance by the majority decision in Brookfield FC and could only be made on appeal: PJ at [222]-[223]. It follows, in LCM Funding's submission, that if Brookfield FC is overturned, the first declaration ought to have been made. 85 LCM Funding submits that there is clear utility in the Court making the second declaration sought in the cross-claim and that this is demonstrated by Ms Taylor's evidence. The making of the second declaration would provide LCM Funding with a firm basis to proceed knowing it is not the responsible entity of a MIS and does not have the obligations imposed on a responsible entity by Chapter 5C of the Act. 86 LCM Funding submits that the primary judge's order dismissing the cross-claim should be set aside. The two declarations sought by LCM Funding in the cross-claim should be made. The costs orders below should be altered accordingly.

Contradictor's Submissions 87 The Contradictor submits that LCM Funding in its submissions does not say what the "purpose" overlooked by the majority in Brookfield FC is, though it seems to be endorsing the obiter view of the primary judge that "the overall legislative purpose … is to regulate closely the operation of a scheme whereby members may otherwise be at risk of losing the capital which they have invested and surrendered day to day control of…": PJ at [188]. 88 The Contradictor submits that it may be accepted that Chapter 5C of the Act regulates schemes where members may be at risk of losing their capital, but that does not mean that Chapter 5C only extends to schemes where "capital" has been placed "at risk" in a traditional sense, and nor does it connote that it is confined to traditional understandings of what "capital" and "risk" are. There is no doubt that a person's causes of action are contributions of money's worth; there was no difference of opinion in Brookfield FC on that question. The Contradictor submits that if a person surrenders control of his or her cause of action by subjecting it to the controls for which the funding agreement in a funded closed class action provide, such that its outcome is affected by the decisions taken by the funder or representative applicant as to how it should be litigated, that person's property is "at risk". 89 The Contradictor submits that there is nothing in the purposive construction advanced by LCM Funding which suggests that the majority in Brookfield FC was wrong to broadly construe the statutory expressed "pooled" and "common enterprise". The Contradictor submits that no clear error has been shown in the majority's approach to construing the statutory expressions "pooled" and "common enterprise". 90 The Contradictor submits that there is no inconsistency between Chapter 5C regulation and Part IVA of the FCA Act. The litigation funding arrangements for the Class Action existed before proceedings were commenced and were independent of the commencement of the proceedings. The Scheme was entered into on 17 June 2020 and the work programme, which the primary judge found was an integral part of it, had commenced on 20 February 2020 and was partly carried out prior to 22 August 2020: PJ at [101]-[105]. All that work occurred before the commencement of the Class Action on 17 January 2021. The Contradictor submits that at all times before the commencement of the Class Action, the Court had no jurisdiction to supervise the operation of the Scheme. The Contradictor submits that it would have been possible for the claims of persons who signed up to the litigation funding agreements to be entirely resolved without commencing proceedings at all, and without any court oversight under Part IVA of the FCA Act. 91 The Contradictor submits that the absence of any regulation by the Court prior to the commencement of the Class Action, or any certainty that there will ever be any regulation by the Court, may well be a very real reason why Parliament would want funded class actions to be regulated under the provisions of the Act. 92 The Contradictor submits that it would involve considerable overreach to construe Part IVA of the FCA Act as the exclusive or prime means for regulating the commercial relationships lying behind funded class actions. 93 The Contradictor submits that the criticism of the majority in Brookfield FC, on the basis that their approach leaves open the question of who operates the scheme for the purposes of s 601ED(5) of the Act is misplaced. That is because, in the Contradictor's submission, if the Scheme is a "managed investment scheme", the fact that LCM Funding and the lawyers have structured it in a way which makes it difficult to work out who is the Scheme operator is their problem. As the majority said in Brookfield FC, there was little doubt that the funder and the solicitor were operating the scheme: Brookfield FC at [104]. 94 The Contradictor submits, in any event, that it is somewhat unreal to suggest that the funder does not at all times have practical control over all material decision-making in the funded Class Action. The Contradictor submits that the funding agreement gives LCM Funding practical control over everything, both before and after proceedings are commenced. In that regard, the litigation funding agreement provides: (1) The funder must agree as to the strategy and tactics of prosecuting the claims: Rule 38. (2) The funder appoints the lawyers, controls the term of their retainer and can replace them at any time: Rule 21. (3) The fund has the benefit of an irrevocable direction to the lawyers in a form approved by it, requiring any recovery to be applied in a particular way: Rules 60 and 61. (4) The funder can terminate the agreement, including in its absolute discretion with 15 days' notice: Rules 28.2-28.3. 95 The Contradictor submits, for the reasons advanced, that this Court should not decide whether Brookfield FC is wrongly decided.

consideration 96 Mindful of the circumstances in which a Full Court will reconsider and depart from the reasoning of an earlier Full Court as identified by Allsop CJ (Kerr and Mortimer JJ agreeing) in FAK19, we have determined that the decision of the majority in Brookfield FC is, with respect, plainly wrong for the reasons that follow: FAK19 at [2]-[3]. 97 It is convenient to start with the relevant statutory provisions. 98 Section 9 of the Act defines a "managed investment scheme", which is then subject to the detailed regime in Chapter 5C, as follows: managed investment scheme means: (a) a scheme that has the following features: (i) people contribute money or money's worth as consideration to acquire rights (interests) to benefits produced by the scheme (whether the rights are actual, prospective or contingent and whether they are enforceable or not); (ii) any of the contributions are to be pooled, or used in a common enterprise, to produce financial benefits, or benefits consisting of rights or interests in property, for the people (the members) who hold interests in the scheme (whether as contributors to the scheme or as people who have acquired interests from holders); (iii) the members do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions); or … but does not include the following: … (n) a scheme of a kind declared by the regulations not to be a managed investment scheme. 99 We adopt the primary judge's analysis at PJ [60]-[66]: [60] The meaning of "a scheme" is not defined, but in Australian Softwood Forests Pty Ltd v Attorney-General for New South Wales (1981) 148 CLR 121, Mason J stated that "all that the word "scheme" requires is that there should be "some programme or plan of action"' (at 129). [61] Further, "interest" is to be construed broadly, albeit within its statutory context. In that regard the word "interest" includes the feature that people contribute money or money's worth as consideration to acquire rights (interests) to benefits produced by the scheme, whether the rights are actual, prospective or contingent and whether they are enforceable or not. The definition of "managed investment scheme" also refers to the pooling of contributions to produce benefits consisting of rights or interests in property, for the members who hold interests. And an "interest" in a managed investment scheme is also defined as a right to benefits produced by the scheme, whether the right is actual, prospective or contingent and whether it is enforceable or not. More generally, "interest" means or at least includes a "right" and has a broad, general meaning (see Australian Securities and Investments Commission v Lewski (2018) 266 CLR 173 at [50] to [56]). [62] Now the statutory definition of a "managed investment scheme" embodies and requires three features in its (a)(i) to (iii) aspects. [63] The first feature is that people contribute money or money's worth as consideration to acquire rights (interests) to benefits produced by the scheme, whether the rights are actual, prospective or contingent and whether they are enforceable or not. In this context, "contribute" means to be made available or to pay or supply. [64] The second feature is that contributions are to be pooled or used in a common enterprise to produce financial benefits or benefits consisting of rights or interests in property for the people (the members) who hold interests in the scheme, whether as contributors to the scheme or as people who have acquired interests from holders. So, a member of a managed investment scheme is a person who holds an interest in the scheme. [65] The third feature is that members do not have day to day control over the operation of the scheme, whether or not they have the right to be consulted or to give directions. [66] Now as is apparent, subpara (n) of the definition of a managed investment scheme excludes "a scheme of a kind declared by the regulations not to be a managed investment scheme". This is relevant to the present context. 100 The task of construing the definition of "managed investment scheme" in s 9 of the Act commences with consideration of the text of the provision itself, as well as its context, including the general purpose and policy of the provision. As French CJ and Hayne J observed in Certain Lloyd's Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378 at [24]: The context and purpose of a provision are important to its proper construction because, as the plurality said in Project Blue Sky Inc v Australian Broadcasting Authority, "[t]he primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute" (emphasis added). That is, statutory construction requires deciding what is the legal meaning of the relevant provision "by reference to the language of the instrument viewed as a whole", and "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed". (Some citations omitted.) See also Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v Moorcroft [2021] HCA 19; (2021) 95 ALJR 557; (2021) 391 ALR 270 per Kiefel CJ, Keane, Gordon, Steward and Gleeson JJ at [15]. 101 In addition, it is necessary to have regard to the imperative in s 15AA of the Acts Interpretation Act 1901 (Cth): "In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation." 102 The purpose or object of the provision is to be gleaned from its text and context, and reading the statute as a whole. 103 Chapter 5C was inserted into the Act by the Managed Investments Act. The amendments were made following the publication of the Australian Law Reform Commission and the Companies and Securities Advisory Committee Report entitled "Collective Investments: Other People's Money", (1993) ALRC 65 (Report). This Report investigated the extent to which the law at the relevant time provided adequate and effective protection of the interests of investors in what were described as "collective investment schemes". The principle aim of the new provisions was to ensure there was adequate and effective protection for investors. 104 The Report at [2.5] identifies three kinds of risk that could result in a loss to investors: (a) investment or market risk (the risk that the investment will decline in value, either because the market declines in value or because the particular investments of the scheme declines in value); (b) institution risk (the risk that the institution which operates the scheme will collapse); and (c) compliance risk (the risk that the operator of the scheme will not follow the scheme's constitution or the law governing the scheme, or will act dishonestly). 105 In the Second Reading Speech, Mr Miles said: Managed investment schemes are any type of scheme where an investor purchases an interest from a professional manager and manages the funds received to produce a return. Schemes encompass a wide range of investment products and services including property, equities and cash management trusts as well as smaller schemes such as ostrich farms and pine plantations … 106 In Brookfield Multiplex Ltd v International Litigating Funding Pte Ltd (2009) 180 FCR 11, the primary judge, Finkelstein J, at [37] identified the evident purpose of the provisions of Chapter 5C as "the essence of a managed investment scheme, stripped of all its technicalities, is a scheme in which people invest money (or money's worth) in a common venture with the expectation of profit that will result from the efforts of others …" 107 Jacobson J in Brookfield FC was in dissent. At [294], Jacobson J considered the context in which the provisions of Chapter 5C were introduced into the Act and stated: The context includes the comments in the Explanatory Memorandum to the Managed Investments Bill and the recommendation of the Parliamentary Joint Committee. These comments … indicate that the regulatory regime introduced by [Chapter] 5C was intended to govern collective investments where financial contributions are gathered from investors and are pooled or used in a common enterprise. 108 The purpose or object of the managed investment scheme provisions, as identified by Finkelstein J at first instance and Jacobson J in dissent in Brookfield FC, in our view, encapsulate the general purpose and policy of the provisions. 109 With these principles in mind, we turn to consider the reasoning of the majority (Sundberg and Dowsett JJ) in Brookfield FC in construing the definition of "managed investment scheme" in s 9 of the Act. 110 The primary judge undertook a detailed consideration of why the reasoning of the majority in Brookfield FC was problematic and why there was a strong case for arguing that it is appropriate for a Full Court to reconsider the majority decision in Brookfield FC: PJ at [175]. We agree with the primary judge's analysis of the majority in Brookfield FC and the criticisms which the primary judge made of the logic and reasoning of the majority. The primary judge undertook the following analysis of Brookfield FC. 111 The ratio decidendi in Brookfield FC was that the litigation funding scheme in that case was a MIS within the meaning of the statutory definition in s 9 of the Act. The majority held that the closed class action before them fell within subparagraph (a) of the managed investment scheme definition in s 9 of the Act: PJ at [161]. 112 The majority considered that the definition in s 9 of the Act was intended to be broader than the definitions in prior iterations of corporations legislation of an "interest", "prescribed interest" and "participation interest": PJ at [162]. 113 The majority discounted the effect of statements in the Second Reading Speech and other extrinsic materials to the Managed Investments Act 1 which suggested that Chapter 5C of the Act was to deal with a relatively narrow range of investment schemes: PJ at [163]. 114 The majority applied what Mason J said in Softwood at 129 and 130 in relation to the definition of the word "interest" in the Companies Act 1961 (NSW) to say that the words of the definition before them should not be read down by reference to legislative purpose: PJ at [164]. 115 The majority considered it unhelpful to construe the definition by reference to any notion as to what was the essence of a managed investment scheme, and considered that the operation of subparagraph (a) of the definition in s 9 of the Act should not be limited by reference to an implied limitation to be derived from the Chapter 5C regulatory scheme itself: PJ at [165]. 116 The majority conceptualised the scheme constituted by the litigation funding arrangements in a manner quite at odds with the primary judge, Finkelstein J, who had characterised the scheme by saying that in essence the plan involved putting in place a group of persons willing to participate in proceedings against Multiplex, ensuring that those persons would not be exposed to costs, retaining a firm of solicitors that would act on the group's behalf, and making sure that the legal fees would be paid. But the majority rejected that Finkelstein J's characterisation. The majority characterised the scheme in Brookfield FC as follows at [39] and [40]; PJ at [166]: We would prefer to describe the scheme as having the following purpose: • to facilitate the realization of claims by group members against Multiplex, using legal services to be provided by MBC at the expense of the Funder; • which company also undertakes to meet any order for costs made against group members or any order for security for Multiplex's costs; • with the intention that the Funder be reimbursed from, and derive a profit from, the proceeds of such realisation; and • that the group members be otherwise protected from any liability for their own costs, any order that they pay Multiplex's costs, or any order that they give security for costs in the relevant proceedings. Steps in the scheme include: • the Funder offering to undertake the payment of group members' costs, to meet any order for costs made against group members, and to provide security for costs if necessary; • MBC offering to accept instructions on the basis that it will look to the Funder for its costs and outlays in accordance with the terms of the scheme; • the group members accepting the Funder's offers and instructing MBC accordingly; • the subsequent conduct of the matter; and • the distribution of the Resolution Sums. 117 The majority held that the (a)(i) aspect of the s 9 definition, being the contribution of money or money's worth as consideration to acquire rights to benefits produced by the scheme, was satisfied. It was said that the promises given by group members to pay to the funder a percentage of the resolution sum and by the funder to pay group members' costs, adverse costs and security for costs, constituted "money's worth". It was said that the word "contribute" means to "supply or pay along with others to a common fund or stock" or to "give in common with others; give to a common stock or for a common purpose", foreshadowing the requirement for pooling or use in a common enterprise (Brookfield FC at [52]). It was said that it may be "unwise to construe the definition narrowly merely because there may be difficulties in applying part of the regulatory regime" (Brookfield FC at [55]). In that context their Honours rejected an argument that because group members' promises were inapt to be held separately, valued and held in trust for group members, as required by ss 601FC(1)(i) and (j), they could not be considered a contribution under (a)(i) of the definition. And it was said that group members' promises were given as consideration to acquire benefits produced by the scheme, being the realisation of group members' claims: PJ at [167]. 118 The majority held that the (a)(ii) aspect of the definition, being pooling, or use in a common enterprise, of the contributions to produce financial benefits for the members, was satisfied. The majority held that pooling in the relevant sense required only that the contributions be "available, and known to be available, for a relevant purpose, regardless of physical location" (Brookfield FC at [92]), and the scheme was a "common enterprise" in the relevant sense; the majority did not separately consider the word "used". It is also convenient to note here that the (a)(iii) aspect of the definition, being the absence of day-to-day control of the members, was not in issue: PJ at [168]. 119 The majority considered, but did not resolve, the question of whether it was the funder or the lawyers who were "operating" the scheme: PJ at [169]. 120 The primary judge then turned to consider the dissenting judgment of Jacobson J. We respectfully agree with the primary judge's analysis of the dissenting judgment. 121 The primary judge observed that Jacobson J, by applying a purposive approach, considered that the (a)(ii) aspect of the definition was not satisfied because the contributions of group members, being their contractual promises to pay the funder from any resolution sum, were not pooled in the relevant sense, as "the purpose of the individual group members in giving their contractual undertakings was not to produce financial (or other) benefits from the pooling of those contributions" but rather was "to deal with the financial benefits consisting of the realisation of the members' claims for compensation, if and when produced": Brookfield FC at [269]; PJ at [171]. 122 Jacobson J described the features of the scheme in Brookfield FC at [272] as follows: Here, the contractual undertakings of group members may, in a loose sense, make possible the financial benefits that are contemplated. But it would be wrong to equate these promises with the provision of funds by a contributor which are combined in a discernible pool that is then used to produce financial benefits for the benefit of contributors. 123 The primary judge observed that in Brookfield FC there was no pool of the underlying choses in action against the defendant and also no contingent pooling of property yet to be received, such as a settlement sum or damages award: PJ at [172]. 124 The primary judge observed that Jacobson J found that the contributions were not used in a common enterprise. In Jacobson J's view, the correct characterisation of the arrangements was that the so-called contributions were part of the price or cost of the funder's agreement to fund the litigation: PJ at [173]. 125 The primary judge observed that Jacobson J considered that the context in which the statutory definition appears reinforces the view that the arrangements before him did not constitute a managed investment scheme. Jacobson J considered the evident purpose of Chapter 5C as being "to protect the investment of pooled contributions, or contributions that are used in a common enterprise, by a person who has day-to-day control". In contrast, what occurred in the case of Brookfield FC was the use by the funder of its own funds to obtain a financial benefit for the members: PJ at [174]. 126 The primary judge considered himself bound by what the majority had said but was of the view that there was a strong case for argument that it is appropriate for a Full Court to reconsider the majority decision in Brookfield FC: PJ at [175]. 127 The primary judge then identified problematic aspects of the reasoning of the majority in Brookfield FC. 128 The primary judge noted that soon after Brookfield FC was handed down, another Full Court in National Australia Bank v Norman (2009) 180 FCR 243 (Norman) per Gilmour J at [183] to [185] reached a different conclusion to applying the provisions of Chapter 5C to a scheme. The difference between these two decisions has not been resolved: PJ at [178]. 129 The primary judge was of the view that the majority in Brookfield FC ought arguably not to have eschewed a purposive approach to the construction of the managed investment scheme definition in favour of an overly technical approach to each element of the definition: PJ at [180]. 130 The primary judge was of the view that the majority in Brookfield FC, in deciding to set the statutory purpose to one side may have arguably misapplied the remarks of Mason J in Softwood. The primary judge reasoned that this misapplication by the majority may have been due to a failure to appreciate the difference in legislative intention in the definition of a MIS since the introduction of the Managed Investments Act, compared to the definition of an "interest" or "prescribed interest" prior to 1998. The primary judge observed that Mason J's comment that the words of the definition of "interest" in the Companies Act should not be read down by reference to legislative purpose were made in a context where the definition was "so general and all-embracing that it is impossible to say that it necessarily excludes particular transactions which appear to be covered by the general words" (at 130). The primary judge noted that Mason J importantly commented that it "would be different if we could glean from the legislative provisions an overall purpose which, being limited in scope, justified a reading down of the definition": PJ at [181]. 131 The primary judge observed that the overall legislative purpose of the present regime, being the one considered in Brookfield FC, is to closely regulate the operation of a scheme whereby members may otherwise be at risk of losing the capital which they have invested and surrendered day-to-day control of, including to regulate the ability of members to achieve a ready exit from the scheme. But, in the primary judge's view, that purpose does not cohere with the inclusion of a funded class action in the definition of a MIS in circumstances where there already exists a statutory regime regulated the conduct of class actions in the best interests of group members, including through the supervisory role of the Court over Part IVA. The primary judge observed that group members in a class action do not place capital at risk in the same way as that which usually occurs in a MIS, and the statutory regime already provides for the circumstances in which a group member may withdraw from a class action through the exercise of opt out rights: PJ at [188]. 132 The primary judge was of the view that the above considerations, arguably tell against the inclusion of a funded class action within the definition of a managed investment scheme, and suggest that, to the extent that the general language of the definition could possibly be read as encompassing a funded class action, nonetheless an interpretation which does not so extend should have been preferred if open: PJ at [189]. 133 The primary judge was of the view that the majority arguably placed too wide a construction on the terms "contribute", "pooled" and "used in a common enterprise" in the MIS definition. The primary judge observed that even if one were to accept that the contingent promises of group members to pay a funder from any resolution sum fall within the expression "money's worth", those promises are not "contributed" to the scheme nor are they "pooled" and "used in a common enterprise" in the sense intended by the legislature. In the primary judge's view, the clear import of the definition is that the "money or money's worth" contributed by members, forms the capital which is invested or deployed in the scheme with the object of producing benefits to flow to those who made the contributions. In the primary judge's view that is the sense in which the contribution, pooling or use occurs and it is inapposite to a funded class action: PJ at [190]. 134 The primary judge noted at PJ [191] that the majority in Brookfield FC held at [56] that: [I]f a scheme falls within the s 9 definition, and if it is required to be registered, then it must be constituted and conducted so as to comply with Ch 5C. It follows that one cannot hold that a particular scheme is not within the s 9 definition simply because its structure does not comply with the requirements of Ch 5C. If the scheme must be registered then it must be constituted and conducted so as to permit registration. 135 The primary judge noted that this passage from the majority judgment seemed to suggest that one could not consider whether the interpretation of the definition would cohere with the statutory scheme as a whole. The primary judge stated that it is not unfair to say that the majority's reasoning appears to have been to accept that there are many requirements in Chapter 5C, but that the inaptness of any one or more particular requirements to the scheme under consideration could not meaningfully inform the scope of the definition itself. The primary judge observed that, if this is the correct reasoning, the majority arguably did not pay sufficient regard to the principle that an enactment must be read as a whole: PJ at [192]. 136 The primary judge noted that in Norman a decision handed down only 10 days after Brookfield FC, a differently constituted Full Court held that a scheme which was incapable of being registered as a MIS could not be a MIS within the meaning of the statutory definition. The primary judge noted that the tension between Brookfield FC and Norman remains unresolved and that White J in Australian Securities and Investments Commission v Great Northern Developments Pty Ltd (2010) 242 FLR 444 preferred the observations of Gilmour J in Norman to the majority in Brookfield FC on this point: PJ at [193] and [194]. 137 The primary judge then sought to elaborate more generally on the topic which he described as the "unresolved conceptual incoherence in applying Chapter 5C to litigation funding schemes": PJ at [195]. 138 The primary judge at PJ [196], then posed the question - "who is to be the responsible entity of the scheme that is required to operate the scheme under s 601FB(1), this being a central objective of the changes made by the Managed Investments Act?" 139 The primary judge in answer to the question posed, opined that the funder is not a good candidate, as the funder typically, and in the present case, does not have day to day control over the litigation, that being reposed in the representative applicant and its ability to give instructions to the lawyers. The primary judge then opined that the lawyers are not a good candidate either, and, in any event, are prohibited from operating a MIS. The primary judge noted that it is uncertain as to who the responsible entity of a litigation funding scheme should be and whether or not litigation funders could be the responsible entity consistent with the obligations of a responsible entity under the Act: PJ at [196]. 140 The primary judge at PJ [197], then posed the question - "if it is the litigation funder who is to be the responsible entity of the scheme, how could the litigation funder comply with the central obligation in s 601FC(1)(c) for the responsible entity of a managed investment scheme to act in the best interests of the members of the managed investment scheme and, if there is a conflict between its own interests and the members' interests, to give priority to the members' interests, that is, to act as a fiduciary?" 141 The primary judge noted that if the funder is taken to be the responsible entity, this requirement would appear to restrain the funder from exercising its contractual rights in its own interests to withdraw from funding proceedings in respect of which it had become clear that the proceedings lacked sufficient prospects of recovery or were otherwise uneconomic. Moreover, the primary judge observed, to impose a fiduciary duty on a funder as the responsible entity of a litigation funding scheme would be particularly inapposite given that in a litigation funding scheme, it is only the funder who has placed its capital on risk, and where the funder will have fiduciary duties to its shareholders and investors which might conflict with those of members: PJ at [197]. 142 The primary judge at PJ [198], then posed the question - "how could scheme property, being at least ex hypothesi the contractual promises of members to pay certain sums to the funder from any resolution sum, be held on trust for members of the scheme by the responsible entity as required by s 601FC(2)? The primary judge noted that the expression "scheme property" is defined in s 9 relevantly to include "contributions of money or money's worth to the scheme"". 143 The primary judge then referred to the majority's reasoning in Brookfield FC at [64] that said of this: If a particular arrangement is within the s 9 definition, and if it is required to be registered, then by force of the legislation, scheme property is to be held on trust by the responsible entity. It may be that this requirement necessitates some degree of adjustment to traditional views as to the appearance and functions of a trust, but Parliament may take such a step. 144 The primary judge noted that this observation of the majority arguably overlooks that if scheme property is inherently incapable of being held on trust for scheme members, that may be a powerful contextual indication that the putative scheme property is not in fact scheme property within the meaning of the statute: PJ at [198] and [199]. 145 The primary judge then noted that it seems that on the Brookfield FC approach, the "scheme property" necessarily includes all promises made by the group members and all promises from the funder; and further that the members of the scheme who benefit from the use of the scheme property include not just all group members but also the funder. The primary judge observed that there would appear to be a disjunct in applying the notions of scheme property and trust to a funded litigation arrangement: PJ at [200]. 146 The primary judge went on to opine that the majority's analysis in Brookfield FC arguably obscures that what happens when a group member enters into a litigation funding agreement is that each group member agrees upon a mechanism for payment of legal services on a contingent basis. Just as in a traditional no win/no fee arrangement, a group member may promise to pay its lawyers if successful and agree to deduct such payment from any recovery. In a funded action a group member agrees to pay the funder for the costs involved in running the action including the risk taken on by the funder. The primary judge opined, that if the latter is a managed investment scheme, then on the logic of the majority reasoning in Brookfield FC it is hard to see how the former is not. But under the traditional arrangement, it has been assumed to date that group members do not contribute anything to the scheme but simply adopt a contingent mechanism by which they will pay for the legal services required and risk taken on by the lawyers in working out whether the group members have a viable case, and if so, prosecuting it on their behalf: PJ at [201]. 147 The primary judge noted that s 168 and 169 of the Act require a registered managed investment scheme to set up and maintain a register of members that must contain each member's name and address, with a failure to do so being an offence of strict liability. But as the primary judge observed, in the case of an open class action, this requirement cannot sensibly be complied with: PJ at [203]. 148 The primary judge referred to the requirements of s 601FC(1)(d) of the Act which requires the responsible entity of a managed investment scheme to treat members who hold interests of the same class equally. The primary judge observed that it is unclear how this might affect the negotiation of a settlement where one subset of the group may have stronger claims than another: PJ at [204]. 149 The primary judge referred to s 1012B of the Act which requires the responsible entity of a managed investment scheme to issue a product disclosure statement to all prospective members of the scheme. The primary judge noted that this requirement cannot practically be complied with in the context of an open class action. At present, ASIC has granted relief in relation to this requirement, which will expire on 22 August 2025 (see ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787): PJ at [205]. 150 The primary judge noted that ASIC has also had to grant exemptions by operation of Instrument 2020/787 concerning the valuation of scheme property under s 601FC(1)(j): PJ at [206]. 151 The primary judge opined that many aspects of the managed investment scheme regime create a potential for conflict with the Court's supervisory jurisdiction under Part IVA of the FCA Act. Sections 601KA to 601KE prevent members of a managed investment scheme from withdrawing from the managed investment scheme other than in accordance with those provisions, which vary depending upon the liquidity of the scheme. In contrast, the primary judge observed, group members have an unqualified right to opt out of a representative proceeding prior to the date fixed for opt out under s 33J of the FCA Act. The primary judge noted that ASIC has presently provided relief in relation to this, but that does not address the underlying incoherence of the statutory framework for managed investment schemes and litigation funding: PJ at [209]. 152 The primary judge referred to the requirement under s 1012B of the Act for a product disclosure statement to be issued to prospective members of a scheme. The primary judge observed that scheme members will receive the kind of detailed information about contemplated class action proceedings that would ordinarily be included in group member notices, but without that information being properly assessed and disseminated under Court supervision under Part IVA. In addition, a product disclosure statement is required to contain information that may, if disseminated publicly, confer a tactical advantage on the respondent to a potential class action, including as to budgeting. In contrast, the Federal Court Rules 2011 (Cth) allow such information to be redacted from the copy of the funding agreement served upon a class action respondent: PJ at [210] and [211]. 153 The primary judge also opined upon the incoherence of the requirements of Chapter 5C and the conduct of representative proceedings under Part IVA. The primary judge observed that the conduct of a representative proceeding is controlled by the representative applicant using external legal assistance and also by the Court under Part IVA. It is not controlled by the funder. If there is required to be a responsible entity for a litigation funding scheme being a managed investment scheme, the primary judge posed questions - "what does that entail? Who is it? What does it operate or control? How does that sit with and interact with the control and operation of the representative proceeding itself, the representative applicant and the external legal representatives? How does that all sit with the extensive powers and supervisory role of the Court under Pt IVA?" The primary judge observed that none of these aspects were considered by the majority in Brookfield FC: PJ at [212]. 154 The primary judge observed that, if funds are received at settlement, they are allocated by operation of s 33V(2) of the FCA Act and under the Court's powers, not under a regime for managed investment schemes concerning scheme property: PJ at [213]. 155 The primary judge also posed further questions which arise if litigation funding is a managed investment scheme. The primary judge noted that funds would normally by direction of the Court be held by the representative applicant on trust to disburse and allocate in accordance with the Court's directions. The primary judge then posed the questions - "is it suggested that they would be held by a separate responsible entity as scheme property when received? If so, how? How could this operate in the face of s 33V(2) concerning any settlement sum? How could this operate in the face of ss 33Z(2) and (4) and 33ZA concerning a judgment sum?": PJ at [214]. 156 We respectfully agree with the primary judge's analysis of the deficiencies in the reasoning of the majority in Brookfield FC. In addition to the problematic features identified by the primary judge, we would also highlight the following issues which we consider to be persuasive in concluding that the reasoning of the majority in Brookfield FC was, with respect, plainly wrong. 157 Section 169(6A) of the Act requires the register of a registered scheme to provide: (a) the date on which every issue of interest takes place; (b) the number of interests in each issue; (c) the interests held by each member; (d) the class of interests; and (e) the amount paid, or agreed to be considered as paid, on the interests. 158 Because at every point in the life of a registered scheme, you must be able to record these critical matters identified in s 169(6A) of the Act in the register, it is simply not possible to do this in a typical scheme, as group members do not know at the outset the amount, if any, that will be recovered from the representative proceeding. That will not be known until the conclusion of the representative proceeding, which means it is impossible to comply with the requirements of s 169(6A) of the Act. 159 The contingent promises in a typical scheme cannot constitute "scheme property" as defined by s 9 of the Act. First, because they do not satisfy subparagraph (a) of the definition because they are not capable of being invested, or otherwise dealt with, by the operator of the scheme as contemplated by s 601GA(1)(b) of the Act. Second, because the contingent promises are not capable of being held separately from other property or valued regularly as required by s 601FC(i) and (j) of the Act. They are not received by the funder (or any other person) as the operator of a scheme to invest and deal with in an effort to augment the property of the scheme and ultimately produce benefits for the members of the scheme. 160 Group members on entry into a typical scheme do not "acquire rights (interests) to benefits produced by the scheme" within the meaning of s 9(a)(i) of the Act. The rights of the group members lie in their respective choses in action, which remain the property of the individual members at all times until they merge in settlement or judgment. That there is no acquisition of interests by group members, is confirmed by the fact that one cannot say at the outset how many interests have been acquired by each member out of a total issue of interests, nor could the voting provisions of s 253C of the Act operate because the interests are impossible to value in any coherent way: see also s 252B, s 252D, s 252L, s 601FM and s 601FG of the Act. 161 In a typical scheme there is no pooling or use in a common enterprise, to produce financial benefits for members. In a funded class action, any pooling of funds only occurs at the end of the operation of the scheme, at the time of settlement approval or the exercise of the court's powers on judgment, rather than at the start of the scheme to enable the scheme to do its work. The benefits received by members are simply what is generated from the realisation of their chose in action with the funding agreement providing a mechanism for the payment of legal services and risk taken on by lawyers in prosecuting the case on behalf of the group members. 162 We agree with LCM Funding's submission that the legislative history of Part IVA of the FCA Act and Chapter 5C of the Act provide further support for the proposition that the Parliament did not intend that litigation funding schemes would fall within the MIS definition under s 9 of the Act. When the Managed Investment Act was enacted in 1988, the Federal Court regime for class actions was in force and well-known, with Part IVA being introduced following a comprehensive Report. The Part IVA regime creates a statutory framework for representative proceedings in these circumstances, it is unlikely that the Parliament would have intended to overlay upon the Part IVA regime an additional regulatory regime being a MIS in the absence of a clear indication in the statutory text or in extrinsic materials. The Managed Investments Act contains no such clear indication in its text nor does the Explanatory Memorandum to the Managed Investments Bill 1997 (Cth). 163 We agree with LCM Funding's submissions that at the heart of a MIS under Chapter 5C of the Act is the ability to identify who is the responsible entity of the scheme that is required to operate the scheme under s 601FB(1) of the Act. The three categories of persons typically involved in running a class action are the lawyers, funders and representative applicants. The funder would not appear to be a responsible entity as the funder, typically, and in this case does not have day to day control over the litigation. That day to day control is reposed in the representative applicant and its ability to give instructions to the lawyers. The lawyers would not appear to be the responsible entity of the scheme and in any event are prohibited by s 2.7.5 of the Legal Profession Act 2004 (Vic) (which has a counterpart in all Australian jurisdictions) from operating a MIS. The representative applicant would not appear to be the responsible entity required to operate the scheme. In circumstances where it is uncertain or not possible to identify who is the responsible entity this suggests that litigation funding schemes do not fall within the meaning of a MIS under s 9(a) of the Act. 164 There are further aspects of the MIS regime which are incapable of application to a typical litigation funding scheme. That is because of the requirement under s 168 and 169 to maintain a register of members which values the interest of each member. These requirements make it impossible for a typical litigation funding scheme to comply with other provisions of the managed investment scheme regime under Chapter 5 of the Act. It is sufficient to provide some examples: s 601FM - Removal of responsibility entity by members; s 601GA(4) - Members' rights to withdraw from the scheme; s 601GC - Members rights to change the constitution of the scheme; s 601KA - Limitation on members' rights to withdraw from the scheme; and s 601KB - Non-liquid schemes - how payments are to be made. The operation of each of these provisions requires the responsible entity to be able to value the member's interest. As this cannot be done at all points in time during the life of the litigation funding scheme, it is impossible for a typical litigation funding scheme to comply with these provisions of a managed investment scheme under Chapter 5C of the Act. 165 That so many provisions of the managed investment scheme under Chapter 5C of the Act are incapable of application or impossible for a typical litigation funding scheme to comply with, is a strong indicator that the MIS regime under Chapter 5C of the Act was not intended to apply to litigation funding schemes. 166 Considering the text of s 9 of the Act itself, as well as its context and the general purpose and policy of the managed investment scheme regime under Chapter 5C of the Act, we are of the view that the present Scheme (which is relevantly identical to the scheme under consideration in Brookfield FC) plainly does not have the features set out in the definition of "managed investment scheme" s 9(a)(i) and 9(a)(ii) of the Act. 167 For the reasons given, the decision of the majority in Brookfield FC is, with respect, plainly wrong.

disposition 168 The following orders seem appropriate. The appeal be allowed. The primary judge's order dismissing the cross-claim is set aside. LCM Funding's cross-claim be allowed and declarations made accordingly. The costs orders made against LCM Funding by the primary judge be set aside. The costs of the contradictor are to be paid by LCM Funding. Stanwell is to bear its own costs of the appeal. 169 However, as there may be other issues relating to costs before the primary judge, the Court directs that within seven days the parties confer and file proposed agreed orders giving effect to the reasons of the Court. If there is disagreement between the parties they are to file separate orders and a short written submission. The final orders of the Court will be determined on the papers. I certify that the preceding one hundred and forty-seven (147) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anderson.

Managed Investments Act 1998(Cth)

Corporations Amendment (Litigation Funding) Regulations 2020(Cth)

Legal Profession Act 2004(Vic)

Companies Act 1961(NSW)

012] HCA 56; (2012) 248 CLR 378 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Gett v Tabet [2009] NSWCA 76; (2009) 254 ALR 504 Hobart International Airport Pty Ltd v Clarence City Council; Australia Pacific Airports (Launceston) Pty Ltd v Northern Midlands Council [2022] HCA 5 Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v FAK19 [2021] FCAFC 153 Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v Moorcroft [2021] HCA 19; (2021) 95 ALJR 557; (2021) 391 ALR 270 National Australia Bank Ltd v Norman [2009] FCAFC 152; (2009) 180 FCR 243 Stanwell Corporation Limited v LCM Funding Pty Ltd [2021] FCA 1430; (2021) 157 ACSR 401 Transurban City Link Ltd v Allan [1999] FCA 1723; (1999) 95 FCR 553 Veloudos v Young (1981) 56 FLR 182

MIDDLETON J: 1 I have had the considerable benefit of reading the draft reasons of Anderson J and the separate draft reasons of Lee J. 2 I agree with the conclusions of Anderson J that this appeal is utile and Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147; (2009) 180 FCR 11 is plainly wrong. Once this conclusion is reached, then the declarations that were sought before the primary judge are appropriate and should be made by the Court. 3 I also agree with the further observations made by Lee J in elaboration of the reasons of Anderson J. 4 Finally, I agree with the orders suggested by Anderson J subject to the parties conferring and filing proposed orders (including as to costs) giving effect to the reasons of the Court. I certify that the preceding four (4) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Middleton.

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