Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited - [2017] FCA 1231 - FCA 2017 case summary — Zoe

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Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited

[2017] FCA 1231

Federal Court of Australia|2017-10-06|Before: Yates J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2017-10-06

Before

Yates J

Source

Original judgment source is linked above.

Judgment (12 paragraphs)

[1]

Pursuant to s 33J of the Federal Court of Australia Act 1976 (Cth) (the Act), 14 December 2017 at 4.00 pm AEST be fixed as the date and time on or before which a group member may opt out of this proceeding (Deadline).
Group members be given notice pursuant to s 33X(1)(a) and s 33X(5) of the Act of the fact that they may opt out of this proceeding in accordance with Order 4 of these Orders.
The form and content of the 'Opt Out and Registration Notice' (the Notice), and the abridged version of the Notice, as annexed to these Orders be, and are hereby, approved pursuant to s 33Y(2) of the Act.
Pursuant to s 33ZF of the Act, any group member who wishes to opt out of this proceeding must, on or before 4.30 pm AEDT on 14 December 2017, deliver to the New South Wales District Registry of the Court an opt out notice in the form of Schedule A to the Notice.
Pursuant to s 33Y(3) of the Act, the Notice be given to group members according to the following procedure: (a) the second respondent is to provide by 4.00 pm on 13 October 2017 to the solicitors for the applicant and to a third party distribution agent to be agreed between the parties (Distribution Agent) a schedule containing, according to the second respondent's records, the last known names, email addresses and / or postal addresses of persons and entities who the second respondent's records show have ever held a Money Market Deposit Account in respect of which a director, officer, employee or agent of Sherwin Financial Planners Pty Ltd or Sherwin Financial Planners Pty Ltd itself was authorised to act as an Authorised Signatory (Class Member Contact Schedule); (b) by the same time the second respondent is to notify the other parties of any post office boxes or addresses on the Class Member Contact Schedule which the second respondent believes to be associated with Sherwin Financial Planners Pty Ltd or any related entity; (c) the parties are promptly to confer as to what should occur in relation to potential group members for whom the only address held is a post office box or address believed to be associated with Sherwin Financial Planners Pty Ltd or any related entity. If the parties cannot reach agreement they are to promptly contact the Associate to Yates J to relist the matter; (d) the solicitors for the applicant are, until further order, to keep the contents of the Class Member Contact Schedule confidential; (e) the solicitors for the applicant are to instruct the Distribution Agent to cause the distribution of the Notice by 20 October 2017 to the email addresses and postal addresses (to the extent that such addresses have been provided) referred to in the Class Member Contact Schedule; (f) the solicitors for the applicant are to instruct the Distribution Agent to inform the solicitors for all of the parties of the details of any notices which are returned to the Distribution Agent undelivered; (g) continuously throughout the period from 20 October 2017 to 14 December 2017, the applicant's solicitors are to display the Notice on its website ; (h) as soon as practicable after 20 October 2017, the applicant is to cause to be published an abridged version of the Notice, as approved by the Court, in the following newspapers: (i) The Courier Mail, Queensland; and (ii) The Rockhampton Bulletin. (i) continuously throughout the period from 20 October 2017 to 14 December 2017, the Notice is to be displayed on the class action page for this Proceeding on the website of the Federal Court of Australia and be available for inspection at the District Registry of the Court in Sydney, Melbourne, Canberra, Brisbane, Adelaide, Perth, Hobart and Darwin.

What is a class action? A class action is an action that is brought by one or more persons (the Applicants) on their own behalf and on behalf of a group of people against other persons (the Respondents) where the Applicants and the Class Members have similar claims against the Respondents. Class Members are not individually responsible for the legal costs associated with bringing the class action. Generally, in a class action, only the Applicant is responsible for those costs. Class Members are bound by any outcome reached in the class action, unless they opt out of the proceeding. A binding result can happen in two ways: either by a judgment following a trial, or by a settlement which might happen at any time. If there is a judgment or a settlement of a class action, class members will not be able to pursue the same claims and may not be able to pursue similar or related claims against the respondent in other legal proceedings. Class Members should note that in a: (a) judgment following trial, the Court will decide various common factual and legal issues in respect of the claims made by the applicants and class members. Unless those decisions are successfully appealed, they bind the applicants, class members and the respondents. Importantly, if there are other proceedings between a class member and the respondents, it is likely that neither of them will be permitted to raise arguments in that proceeding which are inconsistent with a factual or legal issue decided in the class action. (b) settlement of a class action, where the settlement provides for compensation to class members, it may extinguish all rights to compensation which a class member might have against the respondents which arise in any way out of the events or transactions which are the subject-matter of the class action. If you consider that you have claims against any respondent in the class action referred to in this Notice which are based on your individual circumstances or otherwise additional to the claims described in the class action, then it is important that you seek independent legal advice about the potential binding effects of the Class Actions before the deadline for opting out (see below). The deadline is 14 December 2017.

What is the BOQ Class Action about? On 11 March 2016, Petersen Superannuation Fund Pty Ltd ACN 136 059 562 (Petersen) commenced class proceedings against Bank of Queensland Limited ABN 32 009 656 740 (BOQ) and DDH Graham Limited ABN 28 010 639 219 (DDH) (the BOQ Class Action) on behalf of itself, and other persons, who invested money in a BOQ financial product, namely the "Money Market Deposit Account" (MMDA). Petersen, together with other persons in the class (the BOQ Class Members), was advised by Sherwin Financial Planners Pty Ltd (SFP) and/or other persons and companies associated with SFP (collectively Sherwin) to deposit funds into a BOQ MMDA for the purpose of investment. Petersen alleges that Sherwin acted without authority and fraudulently in respect of the funds invested in Petersen's BOQ MMDA (the Petersen MMDA). Petersen contends that BOQ and DDH, as operators and administrators of the Petersen MMDA, ought to have been on notice of any suspicious activity taking place, including any indicia of fraud, on the Petersen MMDA by Sherwin, pursuant to the obligations owed by BOQ and DDH to Petersen under the terms of the MMDA (the Petersen Contract). BOQ and DDH deny Petersen's allegations and are defending the BOQ Class Action. Further to this, BOQ has filed a cross claim against Petersen. In effect, it alleges that if BOQ is found to have breached the Petersen Contract and the breach (or breaches) are found to have caused loss or damage to Petersen, that being the loss of Petersen's investment funds, then Petersen is liable to indemnify BOQ under the terms of the Product Disclosure Statement for its financial loss. Petersen denies BOQ's allegations and is defending the cross claim. The BOQ Class Action is funded by a litigation funder, Vannin Capital Operations Limited (Vannin Capital). You can obtain a copy of Vannin Capital's Litigation Funding Agreement by contacting Quinn Emanuel Urquhart & Sullivan (Quinn Emanuel) on (02) 9146 3548 or by email meaganbertolatti@quinnemanuel.com

What you need to do Option A: Register your interest in receiving compensation from any settlement If you do not wish to opt out and if you wish to participate in any settlement of the class action you must complete the "Class Member Registration Form" enclosed with this Notice and post it to Quinn Emanuel at level 15, 111 Elizabeth Street, Sydney NSW 2000. Registrations must be received by Quinn Emanuel before 4:00pm AEST on 14 December 2017. Registrations received after this time will not be accepted with the result that you will be treated as having not responded to this notice (see Option C below).You can contact Quinn Emanuel on (02) 9146 3548 or email meaganbertolatti@quinnemanuel.com to be informed about the progress of the BOQ Class Action. Option B: If you want to opt out If you do not wish to remain a class member of the BOQ Class Action, you must opt out of the BOQ Class Action, by completing and returning the attached Opt Out Notice, prior to or on the Opt Out date, 14 December 2017. If you opt out of the class action, you will not be bound by or entitled to share in the benefit of any order, judgment or settlement in the BOQ Class Action, but you will be at liberty to bring your own claim against the Respondents provided that you issue Court proceedings within the time limit applicable to your claim (which time limit may or may not have already expired). If you wish to bring your own claim against the respondents you should seek your own legal advice about your claim and the applicable time limit prior to opting out. If you wish to opt out of the BOQ Class Action you must do so by completing a "Notice of opting out by class member" (Schedule A to this Notice), and return it to the Registrar of the Federal Court of Australia at the address on the form. IMPORTANT: the Notice must reach the Registrar by no later than 4:30pm AEDT on 14 December 2017 otherwise it will not be effective. You should submit the Notice of Opting Out by Class Member if: (a) you qualify as a BOQ Class Member and you wish to opt out of the BOQ Class Action; or (b) you believe that you have been incorrectly identified as a BOQ Class Member, because you do not meet the criteria set out in the section headed "Are you a class member?" above. Each class member seeking to opt out should fill out a separate form. If you are opting out on behalf of a company or business, please provide your name, the name of the company or business and your position within the company or business (e.g. director or partner). Option C - Not respond to this notice If you do nothing, you will remain a class member in the class action and you will be bound by any court judgment or settlement agreement. However, if there is a settlement agreement and if the settlement agreement provides for compensation to be payable, you will not be permitted to benefit from the settlement unless you have registered your interest in receiving compensation from settlement (see Option A above). In other words, if you do nothing, you will lose your right to participate in any settlement of this class action, though you may (depending on the facts of your claim) still be able to benefit from any judgment in this class action if it does not settle.

[6]

SIGNED BY OR ON BEHALF OF EACH CLAIMANT: ……………………………………… ……………………………………………. Capacity of the person signing (e.g., claimant, executor, lawyer or other capacity) DATED: 2017 Abridged Notice Notice to Class Members Federal Court of Australia Class Action against Bank of Queensland & DDH Graham The Federal Court has ordered that this notice be published for the information of any persons or companies, who were advised by Sherwin Financial Planners Pty Ltd (SFP) and/or other persons and companies associated with SFP to deposit funds into a Money Market Deposit Account (MMDA) with the Bank of Queensland Limited which was operated by DDH Graham Limited, for the purpose of investment. Quinn Emanuel Urquhart & Sullivan (Quinn Emanuel) acts for Petersen Superannuation Fund Pty Ltd which has commenced a class action in the Federal Court of Australia seeking compensation for persons who lost money invested by Sherwin Financial Planners Pty Limited and/or Bradley Sherwin from the Bank of Queensland Limited and DDH Graham Limited. Those persons on whose behalf this proceeding has been commenced are referred to in this notice as "Class Members". A class action can be commenced by one person on behalf of Class Members without the consent or involvement of the Class Members. However, Class Members can "opt out" of the proceedings. If you wish to participate in any settlement in the proceedings then you must register by 14 December 2017. In order to register, please contact Quinn Emanuel at the details set out below. If you do not want to remain as a Class Member then you must submit an "opt out" notice form to the NSW Registry of the Federal Court of Australia by 14 December 2017. If you do not "opt out" but do not register you will not be entitled to receive any payment that may be made to registered Class Members as a result of the settlement of the proceedings. Information on how to opt out, together with further information regarding your rights in relation to this class action can be obtained by contacting Quinn Emanuel on (02) 9146 3548 or email meaganbertolatti@quinnemanuel.com.

[7]

Introduction 1 This proceeding is a representative proceeding brought pursuant to Part IVA of the Federal Court of Australia Act 1976 (Cth) (the Act). It has been listed for final hearing commencing on 12 March 2018, with an estimated duration of three weeks. 2 The applicant, Petersen Superannuation Fund Pty Ltd (Petersen), alleges that the respondents are responsible for losses caused to it and the group members by alleged failures in the operation of a financial product known as a Money Market Deposit Account (MMDA) held by clients of Sherwin Financial Planners Pty Limited (SFP). The alleged failures relate to transactions said to have been carried out fraudulently on these accounts by SFP over a period of approximately nine years from 10 March 2004 to 24 January 2013. The second respondent, DDH Graham Ltd (DDH), administered these accounts as agent of the first respondent, Bank of Queensland Limited (BOQ). 3 The respondents' lay evidence and expert reports are to be filed and served by 1 December 2017. In the course of the hearing of the present application, I informed the parties that I will order that a mediation take place by 31 January 2018. 4 The parties agree that, pursuant to s 33X(1)(a) and s 33X(5) of the Act, an order should now be made giving notice to group members that they may opt out of the proceeding. The substantial disagreement between the parties has been whether, in light of the fact that a mediation will be ordered, a registration process should also be put in place. Further, there is disagreement between the parties as to the form that the notice to group members should take should I come to the view that a registration process should be put in place. Finally, there is disagreement as to how the notice to group members should be published and distributed. 5 At the hearing, I informed the parties of my conclusions on a number of the issues that have been raised and, in light of those conclusions, I made orders providing for a further draft opt out and registration notice to be prepared by the respondents and served on the applicant, with the applicant notifying the respondents of any further objections it might have on the form of the notice. I also informed the parties that I would publish written reasons for my conclusions.

[8]

Registration 6 The starting point is the respondents' contention that, as a mediation is in prospect, it is appropriate that a registration process be put in place. 7 A number of cases have recognised the appropriateness of such a step, even though the representative action regime under Part IVA of the Act is based on an opt out, and not opt in, model. The rationale for making an order of the kind sought by the respondents was recently discussed by the Full Court in Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited [2017] FCAFC 98 at [72]-[75]: 72 The Commonwealth Parliament, in implementing a core recommendation of the Australian Law Reform Commission in its report Grouped Proceedings in the Federal Court, Report No 46 (Canberra, 1988) at [127], expressed a legislative intention to adopt an opt out rather than an opt in procedure: Second Reading Speech, Federal Court of Australia Amendment Bill 1991 (Cth), House of Representatives Parliamentary Debates, Hansard, 14 November 1991 p 3,175. It must be accepted that the requirement for class members to take active steps to "register" in order to share in a settlement of a class action undercuts to some extent the opt out rationale underpinning the Part IVA regime. In Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1; [2002] HCA 27 at [40] (Gaudron, Gummow and Hayne JJ) their Honours said: Group members, however, need take no positive step in the prosecution of the proceeding to judgment to gain whatever benefit its prosecution may bring. 73 Class proceedings are intended to require little or no active involvement by class members and class members participate principally for the limited purpose of taking the benefit or suffering the burden of the findings made on the common questions: P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 2) [2010] FCA 176 at [16] (P Dawson No 2) (Finkelstein J). As J Forrest J said in Thomas v Powercor Australia Ltd (Ruling No 1) [2010] VSC 489 (Thomas v Powercor No 1) at [30], "one of the consequences of the opt out model, as was clearly intended by the legislature, is the ability of group members to "sit back" and watch the proceeding unfold". There must be a good reason to exercise the discretion to make a class closure order which may operate to deny the benefits of a settlement to class members who do not opt out and who do not take the active step of registering: P Dawson No 2 at [17]. 74 Having said this, if a class closure order operates to facilitate the desirable end of settlement, it may be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding and therefore appropriate under s 33ZF of the Act. The courts have accepted on numerous occasions that, in order to facilitate settlement, it is appropriate to make orders to require class members to come forward and register in order to indicate a willingness to participate in a future settlement, and to make orders that class members be bound into the settlement but barred from sharing in its proceeds unless they register: see for example, Matthews v SPI Electricity & SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 13) (2013) 39 VR 255; [2013] VSC 17 at [22]-[80] (Matthews v SPI No 13) (J Forrest J) and the authorities there referred to; Farey v National Australia Bank [2014] FCA 1242 at [11]-[16] (Jacobson J); Inabu Pty Ltd v Leighton Holdings Pty Ltd [2014] FCA 622 at [17]-[22] (Jacobson J); Newstart 123 Pty Ltd v Billabong International Ltd [2016] FCA 1194 at [67]-[68] (Beach J). An important aspect of the utility of a class proceeding is that they may achieve finality not only for class members but also for the respondent. 75 The rationale behind such class closure orders is that a requirement for class members to register their claims will facilitate settlement, because it allows both sides to have a better understanding of the total quantum of class members' claims, permits the settlement amount to be capped by reference to the number of class members, and assists in achieving finality (to the extent the Part IVA regime permits): see Grave D, Adams K and Betts J, Class Actions in Australia (2nd ed, Lawbook Co, 2012) at [14.410]. A class closure order that precludes class members, who neither opt out nor register, from sharing in a subsequent settlement may facilitate settlement, and therefore be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding. 8 Petersen opposed an order providing for registration, and thus closing the class of group members for the purposes of settlement. It argued that such an order was neither necessary nor appropriate because, unlike other cases where such an order has been made, the respondents in the present case know, or can ascertain, the identity of group members. This is because DDH has the application forms signed by the account holders which specify that the financial planner was Sherwin or Sherwin Financial Planners. 9 Petersen also argued that the respondents know, or can ascertain, the transactions conducted on the relevant accounts and can thereby inform themselves of the likely losses suffered by the group members. Thus, it said, the requirement for certainty which facilitates settlements is not present, or is not present to the same degree, in the present case as it has been in other cases. 10 Petersen also expressed concern that the requirement for registration within a relatively short period of time has the potential to cause unfairness to group members who, Petersen argues, are likely to include elderly superannuants who would wish to participate in a mediation but, due to their age and financial position, would be unable to particularise and quantify their claims by a deadline date as early as, say, the end of November 2017. 11 Further, Petersen argued that the requirement for registration may actually be a barrier to settlement because unregistered group members would be permitted to bring subsequent proceedings if the registered group members reach a settlement: Money Max Int Pty Ltd v QBE Insurance Group Ltd [2016] FCAFC 148; (2016) 245 FCR 191 at [195]. 12 I am not persuaded by these arguments. It is appropriate that a registration process be put in place. 13 Whilst I would accept that, in the present case, the respondents are in a position to know with reasonable precision the identity of the group members, they are not in a position to know with relative certainty the likely amount of the losses which those persons might claim they have suffered by reason of the conduct alleged. One impediment to the respondents gaining knowledge of that fact from the records they hold is that they will not know with reasonable or appropriate confidence the transactions which group members will allege were unauthorised transactions for which the respondents should be held liable. The respondents submitted, and I accept, that it should really be for the group members to provide the assessment of their losses rather than for the respondents to attempt to second-guess what the group members claims will be in that regard. 14 Relatedly, I do not accept that it would be onerous for group members to quantify their claims within a reasonable period of time. I should think that the group members would have a clear understanding of what they believe they have lost by unauthorised transactions having been carried out on their accounts. Some group members might be "elderly", in the sense that they are retirees - the sense in which the applicant seemed to use this term. I do not accept that the task of quantifying and notifying the amount of their claims would place a disproportionate burden on these group members. 15 Finally, the applicant did not elaborate on why, in this case, a requirement for registration would be a barrier to settlement. It is certainly not apparent to me why that would be so.