Lynch v Cash Converters Personal Finance Pty Ltd

ROBERTSON J: 1 This application is for approval pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth), which provides that representative proceedings may not be settled without the approval of the Court. 2 The role of the Court has been described in Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [8], as follows: The role of the court is important and onerous: Lopez v Star World Enterprises Pty Ltd [1999] FCA 104 at [16]. It is protective. It assumes a role akin to that of a guardian, not unlike the role a court assumes when approving infant compromises: P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 4) [2010] FCA 1029 at [23]; Tasfast Air Freight Pty Ltd v Mobil Oil Australia Ltd [2002] VSC 457 at [4], Carnie v Esanda Finance Corp Ltd (1995) 182 CLR 398 at 408. In the current context, the court's role is to protect those group members who are not represented … and whose interests may be prejudiced by their absence: Chats House Investments at 258; Darwalla Milling Co Pty Ltd (ACN 009 698 631) v F Hoffman-La Roche Ltd (No 2) (2006) 236 ALR 322 at [41]. See also McKenzie v Cash Converters International Ltd (No 3)[2019] FCA 10 at [24] per Lee J. 3 The representative proceedings were commenced on 30 July 2015. The respondents were Cash Converters Personal Finance Pty Ltd and Safrock Finance Corporation (Qld) Pty Ltd. 4 The matter was tried by Gleeson J over nine sitting days, concluding on 9 November 2018. 5 In general terms, the proceeding concerned the lawfulness of the respondents' use of a "brokerage model" of lending in the State of Queensland with respect to a payday loan product known as a "Personal Loan" in use during the period 30 July 2009 to 30 June 2013. 6 The applicant claimed that the use of the "brokerage model" by Cash Converters: (a) breached the maximum interest cap under cl 3 of the Consumer Credit (Queensland) Special Provisions Regulation 2008 (Qld) and s 32(1) of the Credit (Commonwealth Powers) Act 2010 (Qld), as then applicable, and thereby breached the requirements of s 21(1)(a) and (c) of the Consumer Credit Code (Qld); and (b) was, in all the circumstances, unconscionable in contravention of s 12CB(1) of the Australian Securities and Investments Commission Act 2001 (Cth). The applicant claimed recovery of brokerage fees, with interest, pursuant to s 21(2) of the Consumer Credit Code or s 32(3) of the Credit (Commonwealth Powers) Act, or statutory compensation pursuant to s 12GF(1) of the Australian Securities and Investments Commission Act. See Lynch v Cash Converters Personal Finance (No 4) [2018] FCA 988 at [5]-[6]; Lynch v Cash Converters Personal Finance Pty Ltd [2016] FCA 1536 at [6]-[8] per Gleeson J. 7 Some eleven months after final submissions, a Deed of Settlement was executed by the parties, by Maurice Blackburn Pty Ltd and by Cash Converters International Ltd, on 18 October 2019. The respondents to the representative proceedings are wholly-owned subsidiaries of Cash Converters International Ltd. 8 On 14 November 2019, I made orders pursuant to ss 33Y(2) and 33Y(3) of the Federal Court of Australia Act as to the form and content of the notice of proposed settlement to group members and as to the procedure for provision of that notice to group members. Further orders which I then made were (omitting subheadings): 5. The applicant serve on the respondents a draft copy of the proposed settlement scheme (Proposed Settlement Scheme), in accordance with the terms of the Settlement Deed by 21 February 2020. 6. The respondents provide any comments on the Proposed Settlement Scheme to the applicant by close of business on 6 March 2020. 7. An application for approval pursuant to s 33V of the Act be listed for hearing at 10.15am on 24 March 2020 (Section 33V Application). 8. On or before 13 March 2020 the applicant: (a) provide to the Associate to Robertson J and to the respondents, a copy of the orders proposed by the applicant to be made on the hearing of the Section 33V Application; (b) provide to the Associate to Robertson J and to the respondents, a copy of the proposed Settlement Scheme; (c) provide to the Associate to Robertson J, a copy of any confidential material on which the applicant seeks to rely for the purposes of the Section 33V Application over which he intends to seek confidentiality orders; (d) file and serve any submissions for the Section 33V Application. 9. The applicant file and serve any affidavits in support of his application for approval of the Conditional Settlement and serve any non-confidential exhibits on the respondents by 13 March 2020. 10. The respondents file and serve any affidavit material and any outline of submissions in relation to the Section 33V Application by 17 March 2020. 11. Any Group Member in the proceeding who intends to object to the proposed settlement, may attend the hearing of the Section 33V in person and seek leave to be heard for that purpose, but should use their best endeavours to notify Maurice Blackburn in writing by 13 March 2020 of the intention to do so. 12. Within three days of receiving notice from any Group Member of their intention to object to the proposed settlement in accordance with order 11 above, Maurice Blackburn advise the respondent of receipt of that notice and provide a copy of any written notice to them. 9 On the present application, I have before me: the proposed orders to be made, consented to by the respondents; the proposed settlement scheme; and the applicant's written submissions dated 13 March 2020. 10 In terms of evidence, there is before me an affidavit affirmed by Ms Miranda Nagy, solicitor, dated 14 November 2019. She is a Principal Lawyer of the solicitors for the applicant who has the day-to-day carriage of the proceeding. The exhibits to that affidavit comprise the Deed of Settlement dated 18 October 2019 and a summary of demographic data about the group members in the proceedings. 11 There next is an affidavit of Ms Elizabeth Mukherji, solicitor, a Senior Associate of the solicitors for the applicant. That affidavit is primarily directed to matters relevant to the making of the orders referred to at [8] above, but contains some material relevant to the present proposal that Maurice Blackburn Pty Ltd be appointed as Claims Administrator. 12 There is an affidavit of Ms Lydia Fogl, an independent costs consultant, dated 12 March 2020 annexing a copy of her report as to the reasonableness of the professional fees and disbursements incurred or estimated to be incurred on behalf of the applicant in the proceeding, as well as the reasonableness of the proposed costs and disbursements of the administration of the Settlement Scheme. 13 There is then a further affidavit of Ms Nagy dated 13 March 2020 dealing with the following matters: (a) compliance with the 14 November 2019 Orders regarding the notice; (b) responses to the proposed settlement; (c) Group Member Information; (d) the proposed Settlement Scheme and method of processing refund payments; (e) the appointment of a Claims Administrator; (f) estimated returns to group members; and (g) the proposed reimbursement payment to the applicant, Mr Lynch. 14 Ms Nagy deposed that information provided by the respondents to Maurice Blackburn disclosed that there are 68,380 group members, excluding those who have opted out, to whom around 161,200 personal loans were made during the relevant period, and from whom $67,398,120.01 was charged in brokerage fees. Ms Nagy considered that the most likely scenario was that the solicitors for the applicant would locate 65% to 70% of group members and therefore those group members would receive a return in the range of approximately 63.88% to 68.79% of brokerage fees charged, with a median amount of between $402.42 and $433.38. 15 There is also a supplementary affidavit of Ms Nagy dated 18 March 2020 correcting the range of possible scenarios for the recovery rate of total brokerage fees charged to group members, including an estimate of the claim for interest charged on those brokerage fees and the claim for pre-judgment interest. This did not alter the estimated range specified at [14] above, the calculation of which did not include those additional amounts. 16 Importantly, I also have the benefit of a confidential opinion (confidential exhibit CM-1 to the affidavit of Ms Claire Mainsbridge made on 18 March 2020) prepared by senior counsel and junior counsel for the applicant, those counsel being well-experienced in representative proceedings. 17 That opinion addresses the matters now referred to in the Class Actions Practice Note (GPN-CA) at [15.3] and [15.5]. In light of the complexity of the representative proceeding; the lack of any substantial opposition of group members to the settlement; the issues surrounding liability; and other matters which are referred to in the opinion, I find that the settlement is fair and reasonable and in the interests of all group members. 18 My reference in [17] above to the lack of any substantial opposition is to the one email from a group member who indicated that she wished to object to the settlement because, she contended, Cash Converters owed her the entire amount she had borrowed. It seems to me that that claim for a full refund of the total amount borrowed is without legal merit. I also note that the applicant's solicitors' attempt to contact that group member has been unsuccessful. 19 I find that the orders of 14 November 2019 have been complied with and that the majority of group members (65%) are likely to recover approximately 69% of the brokerage fees they paid. 20 I find that the amount of the applicant's costs is proportionate to the nature of the litigation and the benefit that was reasonably anticipated from it. 21 I find that that it would be appropriate for Maurice Blackburn Pty Ltd to be appointed Claims Administrator, given its familiarity with the matter to date and its experience administering settlements in other class actions, including the McKenzie proceedings. 22 I find that the amount estimated and proposed to be distributed for the administration of the settlement is reasonable. 23 I also find that the amount proposed to be paid to the applicant for work undertaken by him in obtaining this result on his own behalf and behalf of the group members is a sum appropriate to that work. 24 I make the orders proposed. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.