Summary
5 I commence by noting that the parties referred to Mr Pearson and the class members as "Aboriginals" and "Islanders" throughout the proceeding. For clarity I have adopted those expressions but I am concerned to explain that I intend no disrespect to Mr Pearson or other indigenous Australians by doing so. The parties also described the 1939 Act, the Islander Act, the 1965 Act and the subordinate legislation as the "Protection Acts". I have similarly adopted that description, even though I would not describe the effect of the statutory controls placed upon Aboriginals and Islanders under those Acts as protective.
6 The proceeding alleged the following three broad causes of action.
(1) During the claim period Aboriginals and Islanders were subject to various controls under the Protection Acts, including that any wages they earned while working away from the settlements, reserves or mission reserves (settlements) on which they were required to live were required to be paid by their employers to the Superintendent or Protector on the settlement rather than to them, to be held on their behalf in communal savings accounts created and maintained by the State (savings accounts). The proceeding alleged breach of trust and fiduciary duties owed by the State to Mr Pearson and class members and asserted that a substantial amount of the wages paid to the State were never paid to the Aboriginal and Islander employees who undertook the work, and that some of those monies were instead taken by the State and put to its own uses (the Stolen Wages Case).
(2) Contravention of the Racial Discrimination Act 1975 (Cth) (the RDA) in the provision of legal advice as part of the reparations scheme instituted by the State from 2002 (the Reparations Scheme) in respect of wages earned by Aboriginals and Islanders and held by the State which had not been paid to them (the Racial Discrimination Case).
(3) That the provisions of the 1939 Act and regulations which authorised the Superintendent or Protector to direct Aboriginals to undertake compulsory unpaid work on settlements were repugnant to Imperial anti-slavery legislation then in force in Queensland, and therefore invalid, because they authorised the enslavement of Mr Pearson and Aboriginal class members. The proceeding alleged that Aboriginals who were required to perform compulsory unpaid work were entitled to damages representing the reasonable value of their compulsory labour (the Slavery Case). This case does not apply to Islander class members as it is based in the 1939 Act and regulations which applied only to Aboriginals.
7 The salient considerations for the decision to approve the settlement include the following.
8 First, the Court had the benefit of a comprehensive confidential opinion from senior and junior counsel for the applicant and class members (Counsels' Opinion), which candidly considered the fairness and reasonable of the settlement as between the parties and as between the class members. Counsel assessed the strengths and weaknesses of each of the cases advanced in the proceeding and considered the difficulties and risks the applicant and class members faced in: proving that the State is liable to pay damages; and if the applicant and class members succeeded in proving liability, obtaining judgment in an amount commensurate to the substantial settlement that has been achieved. Counsel recommended that the Court approve the proposed settlement. It is appropriate to place significant weight on Counsels' Opinion.
9 Second, in my view the proceeding faced real risks and difficulties on liability and quantum, such that it was impossible for the applicant's lawyers to be confident of succeeding in the causes of action pleaded or, if they did succeed, obtaining any better result than the proposed settlement.
10 It is clear from the materials that Aboriginals and Islanders who were subject to the Protection Acts during the claim period suffered serious racial discrimination, being treated as lesser human beings than non-indigenous Australians, incompetent to manage their own affairs, and appropriate to be 'controlled' by government-appointed Superintendents or Protectors in relation to their ability or capacity to earn income, own property, move or travel to areas outside the settlements, marry, or even engage in customary native practices. On top of the discrimination and the indignity they suffered, it is clear enough for the purposes of the application that many class members did not receive all of the wages which were paid or ought to have been paid by their employers to the State for their work during the claim period.
11 As much has been acknowledged by the State in public statements and by the institution of the Reparations Scheme. But in the absence of the proposed settlement, the applicant and class members bore the onus to establish their claims to the requisite legal standard. The materials before the Court indicate that many class members would have likely faced real difficulties in doing so, or alternatively in proving an entitlement to compensation anywhere near the substantial amount that has been achieved through the proposed settlement. For claims brought on behalf of deceased estates, which comprise the majority of claims, those difficulties would likely have been extreme.
12 The difficulties and risks vary between the three cases advanced but each faced serious obstacles. For example, in the Stolen Wages Case the applicant and many class members faced difficulties in proving on the balance of probabilities that: (a) they were not paid 'pocket money' at the time, or that they were only paid modest amounts; (b) they did not withdraw monies from the savings accounts or withdrew little; (c) they did not make withdrawals from the savings accounts by placing orders in the settlement store or made few orders; and (d) they did not receive all the wages that their employers paid or ought to have paid to the State for their work. Insofar as class members were able to overcome these obstacles, they also faced risks in relation to the quantum of their claims; that the losses they were able to prove would be less than they would achieve through the proposed settlement.
13 For many class members the difficulties they would face include that:
(a) the relevant events occurred between 48 and 81 years ago, many class members are elderly and their recall in relation to everyday events from that time such as whether they withdrew money from a savings account or placed an order at a settlement store are likely to have faded with the effluxion of time. Recollections of such events occurring so long ago may be honestly held but nevertheless be unreliable, or at least not as rationally probative as evidence such as contemporaneous documentary records which contradict them;
(b) there is a general paucity of records in relation to the relevant events and the former employers, and the former Superintendents and Protectors, are mostly deceased. Where records do exist they sometimes, apparently often, do not accord with class members' recollections; and
(c) the majority of claims are on behalf of deceased estates. The paucity of records and the fact that in such cases there can be no direct evidence from the person who undertook the work as to the wages earned, whether pocket money was paid, and the extent of any withdrawals from the savings accounts or orders placed in the settlement store, means that the difficulties of establishing many such claims are likely to be extreme.
14 The applicant and many of the class members assert that they did not make any, or only made modest, withdrawals from their respective savings accounts. However, in relation to Mr Pearson (and also some of the ten sample class members), the State produced contemporaneous records which tended to show that Mr Pearson and the relevant sample class members made many more withdrawals than they now recall. To explain the inconsistency between their evidence regarding the extent of withdrawals and the documentary records upon which the State relies, the applicant's lawyers submitted that it should be inferred that:
(a) the withdrawals were made without Mr Pearson's knowledge or permission to cover shortfalls in the rations provided by the State to him and other people on the settlement, when the State was obligated to provide adequate rations without payment; and/or
(b) the withdrawals were fraudulent.
15 Mr Pearson denied making or authorising such withdrawals but there is no other evidence that withdrawals were made without Mr Pearson's knowledge or permission for rations. It is likely the State would have contended that Mr Pearson was mistaken in his recall of everyday events from so long ago. Nor is there any direct evidence that withdrawals from the savings account in relation to Mr Pearson were fraudulent. There is material which indicates deficiencies in the administration of the savings accounts generally and that some misappropriation occurred, and the State has publicly acknowledged that some misappropriation occurred. There is though little to show misappropriation by reference to the particular savings accounts of identified class members. In each case it would have been up to the class member to prove that the general failings in the administration of the savings accounts applied in their particular case and that fraud was the explanation for particular withdrawals. Class members were likely face substantial difficulties establishing to the requisite legal standard that fraud was the explanation for withdrawals where there is little to show that other than that they do not recall making such withdrawals. Some aspects of the litigation also faced serious difficulties because of the Limitation of Actions Act 1974 (Qld) (Limitations Act).
16 Third, the proposed settlement is substantial, and is in addition to $56.5 million paid under the Reparations Scheme. In my view the proposed settlement falls comfortably at the high end of the range of reasonable settlements.
17 Fourth, the complexity and likely duration of the litigation meant that, assuming that the proceeding was ultimately successful, it would have been years before class members received any compensation absent the proposed settlement. The vast majority of living class members are elderly, with an approximate age range between 63 and 96. Many have passed away since the proceeding was commenced. The advanced age of many class members, and the importance of their receiving compensation in their lifetime, to the extent possible, is an important consideration.
18 Fifth, the size of the class, their ethnic and socio-economic background and frequently their remote location, would have meant that it would have been extremely expensive, difficult and time-consuming to litigate class members' individual claims if they were successful in the initial trial. The applicant proposed to seek aggregate damages but that path would have been fraught with difficulty.
19 Sixth, the SDS employs a loss assessment methodology which takes into account broad differences between class members in a way that is essentially fair and reasonable, and it provides mechanisms for review and appeal of the assessment of the compensation payable.
20 The proposed costs of the settlement administration under the SDS are fair and reasonable. The role of the Administrator was put to tender to four accounting firms. Ultimately I appointed Mr Anthony James Jonsson and Mr Anthony Raymond Beven of Grant Thornton Australia Ltd (Grant Thornton) to the role because they possess relevant expertise including a history of working with indigenous communities, have a Cairns-based office, provided a fixed quote subject only to Court-approved increases, and the solicitor for the applicant recommended their appointment.
21 BELAW, or any such firm of solicitors the Administrator decides in its discretion to appoint, will act as Advisor to the Administrator. The costs of the Advisor could not be entirely fixed, largely because of difficulties in estimating at the outset the cost of communicating with class members, given the particular characteristics of the class. Instead, the orders provide for the Advisor's costs to be the subject of ongoing reporting to the Court at three monthly intervals by Ms Elizabeth Harris, an independent legal costs expert, as a referee (Costs Referee). This would allow the Court to monitor and supervise the reasonableness and proportionality of costs charged or proposed to be charged by the Advisor under the SDS.
22 Seven, I was satisfied that the proposed deductions from the settlement sum for legal costs and litigation funding charges are fair and reasonable.
(a) The applicant's legal costs are substantial, totalling $13,881,952.17. The applicant relied upon the report of an independent legal costs consultant, Mr Alan Adrian, and I appointed the Costs Referee to review aspects of the proposed charges. I was satisfied that the legal costs are reasonable for a class action of this size, novelty and difficulty and having regard to the unique challenges the case presented in terms of communicating effectively with the class.
(b) The litigation funding commission payable under the extant common fund order made on 25 August 2017 is $38 million, representing 20% of the gross settlement. To those not experienced in large, complex and strenuously defended class action litigation, $38 million may seem an extraordinary amount for litigation funding. But having given careful thought to the question, I considered the size of the charge to be fair and reasonable, including because:
(i) the funder, Litigation Lending Services Ltd (LLS), paid approximately $12.65 million in legal costs and disbursements, and I estimate it would have been required to pay close to $17 million by the end of the trial of the common issues. It was also exposed to further legal costs to be incurred in a later hearing seeking aggregate damages. I estimate that LLS faced a risk of an adverse costs order of $15 million or higher if the case was ultimately unsuccessful. The costs and risks faced by a funder are central considerations in assessing the reasonableness of the proposed funding commission, and in light of those matters, the amount is fair and reasonable;
(ii) at the time LLS agreed to fund the proceeding, a 20% funding rate compared favourably with the rates generally offered for 'standard' class actions in the litigation funding marketplace, and this is far from a standard class action. A 20% funding rate was (and remains) highly favourable for a high-risk case like this one which involved a large class, high costs, novel causes of action, historical claims with evidentiary problems, and real risks on liability and quantum. A higher funding rate would have been justifiable; and
(iii) the case concluded with a favourable result for the applicant and class members, and the funding commission is proportionate to the compensation the proceeding recovered. Class members will receive approximately 73% of the settlement after deduction of litigation funding charges and legal costs.
23 In passing I note that making the common fund order at that early stage of the proceeding meant that a seriously disadvantaged section of the Australian community were provided with greatly enhanced access to justice. The case was commenced on a 'closed' class basis and the applicant only sought orders to 'open' the class on the proviso that a common fund order was also made: see Pearson v State of Queensland [2017] FCA 1096 (Pearson) at [7]-[17]). The common fund order that was made allowed thousands more people, many of whom are elderly, not well-educated, lack commercial and legal sophistication and who live in isolated communities, to become class members and to share in the settlement. Converting the proceeding from a 'closed' to an 'open' class action also benefited the State by enabling it to approach the case on the basis that it would be able to achieve greater finality in relation to the claims made in the proceeding.
24 Ninth, thirteen class members raised objections to the proposed settlement on behalf of themselves and their families. One thing which stands out from the objections is the evident anguish, torment and anger which some class members still feel about the discriminatory and unjust way Aboriginals and Islanders were treated between 1939 and 1972, and the lasting legacy of economic and social hardship still felt by their families. Those objections were powerful and the emotion with which they were expressed reflected the importance of the proposed settlement to class members and the historical trauma to which it relates. The objections also show that for some class members achieving justice through the proceeding is about more than just money.
25 I gave the objections serious consideration but, for the reasons I explain, none of them justified refusing to approve the proposed settlement. The proposed settlement is eminently fair and reasonable having regard to the difficulties the proceeding faced on liability and quantum. I hope that the public recognition of the historical wrongs that were perpetrated, both through the settlement itself and through the Queensland government's public announcement, will provide some closure.