Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited

S&P Global Inc (Formerly McGraw-Hill Financial, Inc) (A Company Incorporated in New York) [2018] FCA 379 Liverpool City Council v McGraw-Hill Financial, Inc (now known as S&P Global Inc) [2018] FCA 1289 McAlister v State of New South Wales (No 2) [2017] FCA 93 Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (2017) 252 FCR 1; [2017] FCAFC 98 Mitic v OZ Minerals Limited (No 2) [2017] FCA 409 Modtech Engineering Pty Limited v GPT Management Holdings Limited [2013] FCA 626 Money Max Int Pty Limited (Trustee) v QBE Insurance Group Limited (2016) 338 ALR 188; [2016] FCAFC 148 Money Max Int Pty Limited (Trustee) v QBE Insurance Group Limited [2018] FCA 1030 Newstart 123 Pty Ltd v Billabong International Ltd (2016) 343 ALR 662; [2016] FCA 1194 Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited [2017] FCA 699 Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited (No 2) [2017] FCA 1231 Re Banksia Securities Limited (Rec & Mgr Appted) [2017] VSC 148 Redfern v Mineral Engineers Pty Ltd [1987] VR 518 Santa Trade Concerns Pty Limited v Robinson (No 2) [2018] FCA 1491 Skalkos v T & S Recoveries Pty Ltd (2004) 65 NSWLR 151; [2004] NSWCA 281 Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1999) 29 NSWLR 549 Timbercorp Finance Pty Ltd (In Liquidation) v Collins (2016) 259 CLR 212; [2016] HCA 44 Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR; [2000] FCA 1925 Yara Australia Pty Ltd v Oswal (2013) 41 VR 302; [2013] VSCA 337

Date of hearing: 25 May and 4 July 2018

Registry: New South Wales

Division: General

National Practice Area: Commercial and Corporations

Sub-area: Commercial Contracts, Banking, Finance and Insurance

Category: Catchwords

Number of paragraphs: 274

Counsel for the Applicant: Mr R McHugh SC and Mr D Sulan

Solicitor for the Applicant: Gilbert + Tobin

Counsel for the First Respondent: Mr S M Nixon SC and Mr J Hutton

Solicitor for the First Respondent: Jones Day

Counsel for the Second Respondent: Ms E Holmes

Solicitor for the Second Respondent: Johnson Winter & Slattery

Counsel for Quinn Emanuel Urquhart & Sullivan: Dr P Cashman

Counsel for Vannin Capital Operations Limited: Mr L Armstrong QC and Ms B Slocum

Solicitor for Vannin Capital Operations Limited: Baker McKenzie

Counsel for Mr N Jeffares, Objector Mr N Jeffares appeared in person

Table of Contents A INTRODUCTION [1] B THE CONFIDENTIALITY CLAIMS [17] C RELEVANT PRINCIPLES [22] D THE KEY FEATURES OF THE SETTLEMENT [23] E WHETHER THE SETTLEMENT IS FAIR AND REASONABLE [25] F WHETHER QUINN EMANUEL'S COSTS ARE REASONABLE AND PROPORTIONATE [83] G WHETHER GILBERT + TOBIN'S COSTS ARE REASONABLE [188] H WHETHER THE FUNDING CHARGES ARE REASONABLE AND PROPORTIONATE [191] I WHETHER THE SETTLEMENT DISTRIBUTION SCHEME IS FAIR AND REASONABLE [259] J WHETHER THE SCHEME ADMINSTRATION COSTS ARE REASONABLE [266] K WHETHER THE REIMBURSEMENT PAYMENT IS REASONABLE [271] L OTHER COSTS [273] M CONCLUSION [274]

BETWEEN: PETERSEN SUPERANNUATION FUND PTY LTD ACN 136 059 562 Applicant

AND: BANK OF QUEENSLAND LIMITD ABN 32 009 656 740 First Respondent

A INTRODUCTION 1 The applicant, Petersen Superannuation Fund Pty Ltd (Petersen), seeks Court approval of a proposed settlement of a class action pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (the Act). The class action has been settled, subject to Court approval, pursuant to an agreement in which the respondents are to pay the applicant and class members $12 million inclusive of costs in full and final settlement of their claims. 2 The proceeding concerns a fraudulent Ponzi scheme in which the retirement savings of hundreds of people were misappropriated by their financial advisor, Sherwin Financial Planners Pty Ltd and associated companies (Sherwin), through unauthorised withdrawals from Money Market Deposit Accounts (MMDAs) operated by the respondents, the Bank of Queensland Limited (BoQ) and DDH Graham Limited (DDH) as agent for BoQ. Mr Brad Sherwin, the architect of the fraud, has been jailed and his associated companies wound up. The fraud has had a devastating impact on class members, many of whom have lost the chance of the comfortable retirement for which they worked their whole lives. 3 It appears that the applicant's lawyers considered there was insufficient prospect of recovering substantial damages from Sherwin, and Petersen only brings the proceeding against BoQ and DDH, doing so on behalf of all persons who: (a) were advised by Sherwin to deposit monies into a MMDA; (b) entered into a contract for the supply of the MMDA product with BoQ and/or DDH, or alternatively with BoQ alone; (c) authorised a director, officer, employee or agent of Sherwin or Sherwin itself to act as an Authorised Signatory in respect of that MMDA; (d) deposited monies into the MMDA; and (e) have been unable to recover some or all of the funds so deposited. The proceeding is funded by a litigation funder Vannin Capital Operations Limited (Vannin). 4 The proposed settlement is an example of an increasing problem in class action litigation in that the legal costs and litigation funding charges are disproportionate to the settlement monies to be distributed to class members. I have three main concerns in relation to the proposed settlement: (1) the proportionality of the legal costs that the applicant's solicitors, Quinn Emanuel Urquhart & Sullivan (Quinn Emanuel) seek to claim from the settlement fund; (2) the reasonableness and proportionality of the funding charges for which Vannin seeks payment from the settlement fund; and (3) the fact that many class members will be bound in the settlement, but precluded from sharing in the proceeds of settlement because their claims are out of time and caught by limitation defences raised by the respondents. 5 I commence by noting that if Quinn Emanuel's claimed costs and Vannin's litigation funding charges are approved in the amounts sought (and taking account of the other deductions) then all but approximately $250,000 of the $12 million settlement will be eaten up, and class members will receive only 2% of the settlement. The Part IVA regime is intended to provide access to justice to the applicant and class members and it is not intended solely for the benefit of service providers such as lawyers and funders. The legitimate use of the Court's processes should not be undermined by proceedings that disproportionately benefit the funder and/or solicitor rather the litigants. 6 For the reasons I explain, in the particular circumstances of the case, it is appropriate to approve the settlement but to disallow a substantial amount of the legal costs and funding charges sought. I briefly summarise my reasons below. 7 First, the proposed settlement should be approved because I am satisfied that the quantum of the settlement is fair and reasonable. The core of the applicant's case is that the withdrawals made from account-holders' MMDAs on Sherwin's instructions were suspicious transactions which should have put DDH and/or BoQ on notice as to a serious or real possibility that Sherwin was committing a fraud on the account-holder. It is alleged that DDH's and/or BoQ's implementation of Sherwin's instructions to transfer money out of the MMDAs constituted: (a) a breach of the contract between the account-holder and DDH and/or BoQ; and (b) knowing assistance by DDH and/or BoQ of Sherwin's breach of fiduciary duties within the second limb of Barnes v Addy (1874) LR 9 Ch App 244 (Barnes v Addy). 8 Having regard to a confidential opinion (Counsel's Opinion) provided by the applicant's counsel (Mr Richard McHugh SC, Mr David Sulan and Mr Ryan May) I am satisfied that the applicant's case faces substantial risks on liability and has low prospects of success. The materials show that $12 million constitutes a high proportion of the aggregate claim value of registered class members' claims that are within time. 9 Second, insofar as any alleged unauthorised withdrawals from class members' MMDAs occurred before 11 March 2010 the respondents have pleaded limitations defences. Having regard to Counsel's Opinion I am satisfied that the claims of class members that are based on allegedly unauthorised withdrawals before 11 March 2010 are out of time, and they cannot recover damages. The settlement is based on the aggregate value of class members' claims that are within time and it is fair that class members whose claims are statute-barred do not share in the proceeds of settlement. 10 Third, in regard to the legal costs Quinn Emanuel seeks, it asks for approval of costs totalling $4,577,408 (mostly fees), which includes $1,002,408 already paid to it. I will use GST inclusive figures unless I state otherwise. If the claimed costs are approved the firm will be paid an amount of $3,575,000 from the settlement fund. Quinn Emanuel does not seek approval of $1,941,877 in disbursements it incurred in the proceeding (essentially because they were paid by Vannin, and Vannin seeks approval for their reimbursement) but in assessing the proportionality of costs the disbursements incurred must also be taken into account. When they are, Quinn Emanuel ran up total costs of approximately $6,519,285. 11 In the circumstances of the present case I consider costs of $6.5 million to be plainly disproportionate. For the reasons I explain, it is appropriate to reduce the claimed costs of $4.57 million by 40%, which is a reduction of $1,830,963. On that basis Quinn Emanuel's approved fees will total approximately $2,746,445 (of which it has already been paid $1,002,408). On that basis, it will be paid $1,744,037 from the settlement fund. 12 Fourth, in regard to the funding charges Vannin proposes, it seeks approval for the reimbursement of costs, disbursements and other expenses of the proceeding it has paid to Quinn Emanuel and third parties totalling $4,978,001 (Vannin Costs). The applicant argues, however, that Vannin should not be reimbursed many of these costs because they were incurred by Vannin in pursuit of its own commercial interests. The contentious amounts include: (a) $1,421,200 in premium expense for an "After the Event" (ATE) insurance policy taken out to cover any adverse costs order; (b) $267,772 being expenses Vannin incurred in obtaining its own independent legal advice on issues that arose during the proceeding and in the lead up to settlement; (c) some disbursements incurred through Vannin's direction that the respondents' security for costs application be opposed (against the express advice of Quinn Emanuel and counsel); and (d) book building costs paid by Vannin. 13 There is some force in the applicant's contentions in this regard but the funding agreement provides that Vannin is entitled to such reimbursement. The fact that Vannin is entitled to reimbursement of the contested amounts goes to the costs and risks it assumed in funding the proceeding and to what is a reasonable funding commission. Vannin is entitled to reimbursement of the Vannin Costs. 14 Fifth, in regard to the common fund order Vannin seeks, I am satisfied that such an order is appropriate. However, I am not prepared to approve the funding rate of 25% of the gross settlement that Vannin seeks and I will only approve a funding rate very much at the low end of the range. I will make a common fund order for Vannin to receive a funding commission of $1 million, which is a funding rate of 13.7% of the net settlement (after deduction of approved costs and disbursements), or 8.3% of the gross settlement. On that basis Vannin will be paid a total of approximately $5.98 million, made up of $4.98 million in reimbursement of Vannin Costs plus the funding commission. That is a reduction of $2 million from the total funding charges it seeks. 15 There are some further deductions from the settlement fund but in approximate terms the approved costs and funding charges will mean that two thirds of the settlement will be taken up by legal costs and funding charges and approximately one third will be distributed to class members. That is: (a) Quinn Emanuel is entitled to approximately $2.75 million (mostly fees) of which it has already been paid $1,002,408, which means $1.75 million will be distributed to Quinn Emanuel; (b) Vannin is entitled to approximately $5.98 million, all but $1 million of which is in reimbursement of amounts it paid out; and (c) approximately $4 million, or around 33% of the settlement sum, will be distributed to the applicant and registered class members with claims within time. 16 In the circumstances of the case I consider such costs and funding charges to be reasonable and proportionate. As a result of these orders the applicant and class members will be approximately $3.8 million better off than they would have been had the funding charges been approved in the amounts sought. They may remain unsatisfied with the result, and such a reaction would be understandable given what has happened to them. However, they should keep in mind that: (a) they would have recovered nothing without Vannin's funding and Quinn Emanuel acting largely on a no win-no fee basis; (b) there are no real winners in a settlement like this and Quinn Emanuel and Vannin have suffered substantial reductions to their proposed costs and funding charges; and (c). they are better off than if the case had proceeded to trial as in my view it was likely to fail.

B THE CONFIDENTIALITY CLAIMS 17 In relation to the issue of the proportionality of legal costs and funding charges, Quinn Emanuel and Vannin rely on affidavits of Mr Damian Scattini, the Quinn Emanuel partner with the conduct of the case and Mr Patrick Coope, Vannin's Regional Managing Director. The applicant also relies upon material in these affidavits to argue that the costs and funding charges are disproportionate. Each of Quinn Emanuel and Vannin however say that those affidavits are confidential and seek confidentiality orders. Without reaching a final view on the issue, to preserve the status quo I made confidentiality orders on 30 May 2018, subject to further order. 18 The Court may make an order for confidentiality if it is satisfied that the order is necessary "to prevent prejudice to the proper administration of justice" (s 37AG(1)(a) of the Act), and "necessary" is a "strong word": Hogan v Australian Crime Commission (2010) 240 CLR 651; [2010] HCA 21 at [30]. When considering making a confidentiality or non-publication orders it must also be kept in mind that a primary objective of the administration of justice is to safeguard the public interest in open justice: s 37AE. That is particularly so in the context of class actions, where the settlement is not simply a private bargain between the parties, but has a public dimension and the community has a significant interest in access to relevant information: Liverpool City Council v McGraw-Hill Financial, Inc (now known as S&P Global Inc) [2018] FCA 1289 (Liverpool) at [107] (Lee J); Santa Trade Concerns Pty Limited v Robinson (No 2) [2018] FCA 1491 at [26] (Lee J). 19 In the circumstances of the present case, so as to fully explain: (a) my decision to approve the settlement notwithstanding the low net recovery by class members; (b) my rejection of Quinn Emanuel's submissions regarding the proportionality of its claimed costs; and (c) my rejection of Vannin's submissions regarding the proportionality of its funding charges; I have found it necessary to refer to parts of Mr Scattini's and Mr Coope's affidavits. 20 I will not descend into the material which is asserted to be confidential except where I consider it necessary, but to the extent I do so I am not persuaded that a confidentiality order is necessary to prevent prejudice to the proper administration of justice. The proportionality of costs and funding charges in class actions is a matter of significant public interest, including through an ongoing inquiry by the Australian Law Reform Commission, and it is appropriate to give primacy to the public interest in open justice. That is not to say, however, that none of the material in those affidavits should be treated as confidential. 21 I will vary the existing confidentiality orders. Quinn Emanuel and Vannin are directed to draft orders to reflect an appropriate variation and to identify those parts of Mr Scattini's and Mr Coope's affidavits over which they continue to seek confidentiality.

C RELEVANT PRINCIPLES 22 The principles relevant to a settlement approval application under s 33V of the Act are well-established and it is unnecessary to repeat them here. I set them out in Kelly v Willmott Forests Ltd (in liquidation) (No 4) (2016) 335 ALR 439; [2016] FCA 323 (Kelly) at [62]-[77] and recently summarised them in Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527 (Caason) at [12]-[13]. I will address the reasonableness of the settlement essentially by reference to the factors set out in Class Actions Practice Note (GPN-CA) including the complexity and likely duration of the litigation, the reaction of the class to the settlement, the stage of the proceeding, the risks of establishing liability and quantum, and the range of reasonableness of the settlement in light of best recovery and all the attendant risks of the litigation, reflecting the considerations set out by Goldberg J in Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR; [2000] FCA 1925 459 at [19].

D THE KEY FEATURES OF THE SETTLEMENT 23 On 26 February 2018 the relevant parties agreed to settle the proceeding on terms set out in a binding Heads of Agreement, which included a requirement to enter into a settlement deed. On 28 May 2018 the parties executed the Settlement Deed. The key features of the Settlement Deed are as follows: (a) the parties agree to resolve the proceeding on the basis that DDH and BoQ each pay $6 million to the applicant and class members, which obligation is several and not joint; (b) Petersen enters into the Settlement Deed on its own behalf and on behalf of class members; and (c) upon each respondent paying their respective portions of the settlement sum, Petersen grants a broad release to that respondent and its related entities, doing so on its own behalf and on behalf of class members. 24 There are two other key features of the proposed settlement which do not arise from the Settlement Deed: (a) non-registered class members are bound in the settlement but are precluded from sharing in it. This is the result of class closure orders made in October 2017; and (b) the proposed Settlement Distribution Scheme (SDS) provides that claims by class members based on unauthorised withdrawals from their MMDAs prior to 11 March 2010 are excluded.

E WHETHER THE SETTLEMENT IS FAIR AND REASONABLE 25 I now turn to address the fairness of a settlement of $12 million inclusive of costs.

The breadth of the releases 26 The releases and covenants not to sue (releases) are expressed in broad terms. They provide that on its own behalf and on behalf of the class members Petersen releases and forever discharges the respondents and their related parties from: …any Claims that the Applicant or the Group Members now have, at any time had, or may have or, but for this Deed, could or might have had arising out of, relating to or in any way in connection with or incidental to the Proceeding or its subject matter (or any part of the Proceeding or its subject matter). The definition of "Claim" in the Settlement Deed is broad and encapsulates every conceivable type of claim, counter-claim or set off. 27 Releases of class members' claims "relating to or in any way in connection with or incidental to the Proceeding or its subject matter" might be read to extend to claims based in a class member's individual or unique circumstances, beyond those common claims which are the subject of the representative proceeding. The applicant only represents class members in respect of common claims as set out in s 33C of the Act, the existence of which are anterior to the claims actually pleaded in the proceeding. The applicant does not have authority to settle the other claims class members may have: see Timbercorp Finance Pty Ltd (In Liquidation) v Collins (2016) 259 CLR 212; [2016] HCA 44 at [52]-[53]; Dillon v RBS Group (Australia) Pty Ltd (No 2) [2018] FCA 395 (Dillon) at [34]-[54] (Lee J). 28 In my view the applicant's authority to settle extends to common claims that are not pleaded. The applicant (or more accurately the applicant's lawyers) will have made a forensic decision as to which of the available common claims are pleaded, and the utility of the class action mechanism is eroded if class members or their lawyers are able to circumvent an unsuccessful outcome by bringing a fresh case (either individual or another class action) pleading those common claims which were not pleaded in the first instance. It is counterintuitive to suggest that the applicant does not have authority to enter into a release dealing with non-pleaded common claims, which claims if brought within a separate later proceeding could be the subject of an issue estoppel or Anshun estoppel if the first proceeding had been litigated to judgment: Newstart 123 Pty Ltd v Billabong International Ltd (2016) 343 ALR 662; [2016] FCA 1194 (Newstart) at [58] (Beach J). 29 I proceed on the basis that the releases operate only in relation to claims that are within the meaning of s 33C, that is, the claims of class members which are in respect of, or arise out of, the same, similar or related circumstances as those that are advanced by the applicant in the proceeding. Construed in this way the releases are not too broad. For the avoidance of doubt, I would not have approved the settlement if it purported to bar class members' individual or unique claims beyond the s 33C claims that are the subject of the proceeding, since it would be beyond the authority of the applicant to give a release of these claims on behalf of class members.

The class closure orders precluding non-registered class members from sharing in the settlement 30 On 6 October 2017 the Court made orders for class member registration and opt out (class closure orders). The orders required opt out and class member registration notices to be sent to all persons whom DDH's records show have ever held an MMDA in respect of which a director, officer, employee or agent of Sherwin, or Sherwin itself, was an Authorised Signatory, and for the notices to be published on Quinn Emanuel's website and on the Federal Court website. The orders also provided for a short form notice to be published in Queensland in the Courier Mail and the Rockhampton Bulletin. 31 The opt out and class member registration notices informed class members of their right to opt out of the proceeding, the requirement to register if they wished to share in any settlement achieved at or shortly after the mediation, and the consequences of neither opting out nor registering. The notices said that if class members neither registered nor opted out by 14 December 2017 (the Class Deadline) they would be bound into any settlement that was achieved but barred from receiving any compensation under the settlement. 32 I am satisfied that Quinn Emanuel gave notice to the class members in accordance with the class closure orders. The evidence is that 193 persons registered by the Class Deadline. 33 The preclusion of non-registered class members from sharing in the settlement arises by operation of the class closure orders rather than because of any term in the Settlement Deed. Class closure orders of this type may be reasonably adapted to seeking or achieving justice in the proceeding because they facilitate the desirable end of settlement: Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (2017) 252 FCR 1; [2017] FCAFC 98 at [74]. This aspect of the settlement is not a reason to refuse settlement approval.

The late applications for registration 34 Two class members who failed to register by the Class Deadline have applied for orders that they be permitted to register late. 35 Ms Michelle Squire on behalf of the Hannay Squire Superannuation Fund contacted Gilbert + Tobin on 8 June 2018. She said that she had only just become aware of the existence of the proceeding because she and her partner had moved five times since 2013, had not kept their contact details updated, and did not know or have contact with any other class members. 36 Ms Leigh Brown on behalf of the A & L Brown Superannuation Fund contacted Gilbert + Tobin on 2 July 2018. She said that she only became aware of the existence of the proceeding about six months earlier and after the Class Deadline, and that due to circumstances including that her father had passed away during that time and she had significant duties as a carer for her mother with dementia, she did not follow through with enquiries about joining the class action at that time. 37 I will make orders to permit Hannay Squire Superannuation Fund and A & L Brown Superannuation Fund to now register as class members and participate in the settlement to the extent they are eligible (i.e. for losses that were suffered within time), as assessed by the Scheme Administrator.

The preclusion of class members from claiming losses suffered before 11 March 2010 38 The proceeding alleges that the respondents committed breaches of contract and/or knowingly assisted in breaches of fiduciary duties by giving effect to unauthorised withdrawals from the applicant's and class members' MMDAs. The respondents, however, plead that the claims of class members based on unauthorised withdrawals made before 14 March 2010 are statute-barred because those transactions took place more than six years before the proceeding was filed. There is a small question as to the date the proceeding was filed. Although the date inscribed by Quinn Emanuel on the Originating Application and Statement of Claim is 11 March 2016 those documents are stamped by the Court as having been filed on 14 March 2016. It is unnecessary to decide any question as to the date the case was filed. I proceed on the assumption (favourable to the applicant and class members) that the proceeding was commenced on 11 March 2016. 39 Under the proposed SDS any losses suffered through unauthorised withdrawals from the applicant's and class members' MMDAs before 11 March 2010 are not compensable. 40 I consider this aspect of the proposed settlement is fair and reasonable because claims based on transactions that occurred more than six years prior to the commencement of the case are statute-barred; and because the settlement is based on an assessment of the aggregate value of class members' claims that are within time.

The claims in the proceeding 41 In broad summary the applicant says that Sherwin advised the applicant and class members that MMDAs should be set up operated by BoQ and DDH as BoQ's agent. Upon the creation of the MMDAs and the applicant and class members depositing monies into the accounts, Sherwin fraudulently and without authority directed DDH and/or BoQ to withdraw funds from the MMDAs, which Sherwin misappropriated. The proceeding makes two main claims against BoQ and DDH.

The breach of contract claim 42 The applicant's primary case is that BoQ and DDH acted in breach of contract by giving effect to instructions from Sherwin to withdraw funds from the applicant's and class members' MMDAs in circumstances where the respondents knew or ought to have known that there was a serious or real possibility that the instruction to withdraw was fraudulent. The applicant alleges that an express or implied term of the contract with account-holders was that BoQ and DDH would question instructions received and not act in accordance with instructions if the surrounding circumstances raised a serious or real possibility that fraud was being committed. 43 This term of the contract is said to arise from a clause in the Product Disclosure Statement which accompanied the application form for MMDA products which stated, under the heading "Terms implied into the contract between banker and customer": Question a valid mandate - while we are subject to the primary duty to repay on demand an amount due to you, this is conditional upon our duty to question a request for payment. We will do this in circumstances which raise a serious or real possibility that fraud is being committed on the account. 44 The applicant asserts that there was a "serious or real possibility of fraud" based on emails Sherwin sent to DDH directing the withdrawal of funds, which allegedly contained indicia of fraud (suspicious emails) including: (a) "round robin" emails in which Sherwin instructed DDH to transfer money from one client's MMDA to another client's MMDA via a company owned or controlled by Sherwin, either in one email or over two separate emails sometimes only minutes apart; (b) "false notations in emails" in which Sherwin instructed DDH to transfer monies with notations that disguised the true nature and origin of the transaction, for example describing them as "application" and "fixed interest" when this was not the case; and (c) "personal use of funds emails" in which Sherwin instructed DDH to transfer monies from one client's MMDA to the personal bank account of a Sherwin employee or spouse. 45 The proceeding also makes two alternative breach of contract claims, by BoQ and DDH: (a) acting on instructions given by email when the application form and PDS for the MMDAs did not provide for the giving of withdrawal instructions by email. The applicant says that withdrawals could only be made through standard instructions provided in writing in the application form, by telephone or fax, or at BoQ branches; and (b) in the case of some class members, by implementing instructions to transfer money when those instructions were given by a person who was not an authorised signatory for the account. The applicant and class members are alleged to have only authorised specific individuals to act in this capacity and BoQ and DDH gave effect to instructions that were not from these people. 46 In relation to the breach of contract claims the respondents rely upon the six year limitation period in s 10(1) of the Limitation of Actions Act 1974 (Qld) (Queensland Limitations Act), which provides that an action for breach of contract shall not be brought more than six years after the date the cause of action arose. The relevant events occurred in Queensland and, having regard to Counsel's Opinion I am satisfied this is the applicable Limitations of Actions Act. 47 Breach of contract is actionable without proof of loss or damage and the applicant's and class members' causes of action accrued on breach, i.e. when BoQ or DDH gave effect to Sherwin's instructions. Having regard to Counsel's Opinion, class members' claims for breach of contract based on unauthorised withdrawals from their MMDAs before 11 March 2010 are statute-barred.

The 'knowing assistance' claim 48 As a secondary or fallback claim in the proceeding, the applicant alleges that the respondents knowingly assisted in Sherwin's breach of the fiduciary duties it owed to the applicant and class members as their financial advisor. DDH is said to have had sufficient knowledge of Sherwin's practices through the suspicious emails to be liable for knowing assistance within the meaning of the second limb of Barnes v Addy. BoQ was to be imputed with DDH's knowledge as a result of the relationship of agency between them. 49 In relation to this equitable claim the respondents rely upon the six year limitation period in Limitations Act by analogy. The question arises as to whether or not class members' claims are likely to be subject to the six year limitation period or a longer limitation period. This question was the subject of detailed consideration in Counsel's Opinion. I proceed on the basis that Counsel's Opinion is correct. It is in any event inappropriate to endeavour to resolve any controversy as to the applicable limitation period in the context of a settlement approval hearing. There has not been full argument on the matter and the Court is not required to be positively satisfied that the view taken by the applicant's lawyers regarding the applicable limitation period is correct. Its task is only to satisfy itself that such decisions are within the range of reasonableness having regard to the circumstances and knowledge of the applicant and its legal representatives. The Court should also take the applicant's lawyers as it finds them, recognising that lawyers may reach different views on contested legal issues and may have different appetites for risk: Kelly at [74]; Newstart at [12]; Clarke v Sandhurst Trustees Limited (No 2) [2018] FCA 511 (Clarke) at [31] (Lee J). 50 It is likely that, unless there was fraudulent concealment or other conduct by the respondents involving consciousness of wrongdoing, the Court would apply by analogy the six year limitation period in s 10(1) of the Queensland Limitations Act. In Gerace v Auzhair Supplies Pty Ltd (in liq) (2014) 87 NSWLR 435; [2014] NSWCA 181 at [70]-[75] (Beazley P, Meagher and Emmett JJA) the NSW Court of Appeal comprehensively reviewed the relevant authorities and said (at [75]): The grounds on which equity declines to permit a defendant to rely upon a statutory bar by analogy include where there has been fraudulent concealment, which requires either fraudulent conduct as an element of the right of action or conduct consisting of active concealment of a right of action that does not include fraud as an element. … The equitable doctrine is not confined to common law fraud or deceit and requires a consciousness on the part of the defendant that what is being done is wrong or that to take advantage of a particular situation involves wrongdoing… (Citations omitted.) Having regard to the materials, the prospects of the applicant being able to establish fraudulent concealment or other conduct by the respondents involving consciousness of wrongdoing are low. 51 I note that, following settlement approval, the NSW Court of Appeal handed down the decision in Lewis Securities Ltd (in liq) v Carter (2018) 355 ALR 703; [2018] NSWCA 118 (Lewis). In that case the Court concluded that the 6-year limitation period in s 1317K of the Corporations Act 2001 (Cth) (Corporations Act) did not apply because: (a) the 12-year limitation period in s 47(1) of the Limitation Act 1969 (NSW) applies directly to a claim for a constructive trust for knowingly assisting in a breach of fiduciary duties, and therefore equity would not apply a six-year period by analogy (at [62] and [72]); and (b) equity would not apply by analogy the six-year limitation period in s 1317K of the Corporations Act because of the requirements of a dishonest and fraudulent design in the second limb of Barnes v Addy (at [61]). 52 I am satisfied that the decision in Lewis does not alter the reasonableness of precluding class members from making claims under the settlement based on unauthorised withdrawals prior to 11 March 2010. First, the decision in Lewis, based as it is on the limitation period in the NSW statute, cannot be translated to the application of the limitation period in the Queensland Limitation Act. In Lewis (at [46]) Leeming JA expressly acknowledged the difference between the relevant New South Wales and Queensland legislation and explained that the Queensland Limitations Act has a narrower definition of trust than the NSW legislation considered in Lewis. Accordingly, the equivalent of s 47(1) in the Queensland legislation, being s 27, does not directly apply to claims under the second limb of Barnes v Addy. 53 Second, the facts of the present case are quite different to those in Lewis. In the present case the accessorial claim against the respondents is based on the lowest level of knowledge required by Baden v Société Générale for Favouriser le Développement du Commerce et de l'Industrie en France SA [1993] 1 WLR 509; [1992] 4 All ER 161, and the respondents are much further removed from the alleged breach of fiduciary duty than the accessories in Lewis, who were party to the alleged dishonest and fraudulent design. Leeming JA acknowledged (at [34]) that where no statute applies directly the question of analogy turns on the particular facts giving rise to the equitable claims and (at [35]) that the appropriate analogy may be with tort or contract. His Honour also observed (at [49]) that not all breaches of fiduciary duty or cases of Barnes v Addy liability are of the same character. 54 Finally, it must be kept in mind that, whatever the applicable limitation period I am satisfied that the prospect of the applicant being able to establish that BoQ and/or DDH had sufficient knowledge of Sherwin's fraud for a knowing assistance claim to succeed is low. 55 It is fair and reasonable that the SDS operates to preclude claims by class members based on unauthorised withdrawals from their MMDAs which took place before 11 March 2010. Even so it is readily understandable that many class members were surprised and dissatisfied with the preclusion of claims based on unauthorised withdrawals before 11 March 2010. They were not informed by Quinn Emanuel until after settlement that such claims were out of time and, while it made no difference to their substantive rights, it is unfortunate (and unsatisfactory) that they were not earlier informed about the possibility or likelihood that their claims would be statute barred.

The complexity and likely duration of the litigation 56 The case is legally and factually difficult, but not unusually complex for class action litigation. It was listed for hearing on 12 March 2018 on an estimate of three weeks. Both BoQ and DDH have shown determination in defending the proceeding and both are well resourced. If the case proceeded to hearing legal costs would significantly increase. Given the factual and legal issues involved in the case there must also be a real prospect that the respondents would appeal if they were unsuccessful at trial. 57 Having regard to the modest aggregate claim value, the complexity and likely duration of the litigation points in favour of settlement approval.

The stage of the proceeding at which settlement was achieved 58 After a mediation on 31 January 2018 the parties continued settlement negotiations. They did not enter into a Heads of Agreement until 26 February 2018. 59 By that time the applicant had filed its lay and expert evidence including an expert forensic accounting report and a tender bundle of documents and it was only two weeks before the trial was set to commence. The respondents had not filed their evidence at the time of the mediation but DDH provided an affidavit of its managing director, Mr Ugo Di Girolamo, who explained why DDH did not consider Sherwin's emails to be suspicious and why it was not on notice of a serious or real possibility that Sherwin was perpetrating a fraud on the applicant's and class members' MMDAs. 60 The late stage at which the proceeding settled means that the applicant's lawyers were sufficiently acquainted with the evidence likely to be faced at trial to form a view as to the adequacy of the settlement offered. That points in favour of approving the settlement.

The risks of establishing liability 61 Counsel's view is that the settlement is fair and reasonable in the interests of the class members to be bound by it, and the opinion sets out comprehensive reasons for reaching this view. I take into account counsel's obligation to candidly disclose the strengths and weaknesses of the claims by the applicant and class members and I proceed on the basis that Counsel's Opinion as to the prospects of the case on liability and quantum is correct. 62 I have also had regard to: (a) the confidential affidavits of Mr Scattini in which he sets out his view as to the risks of the case at different stages; (b) the affidavit of Mr Ugo Di Girolamo, Joint Managing Director of DDH, which includes an apparently credible explanation as to why DDH did not suspect that Sherwin was engaged in fraudulent activity; and (c) the confidential affidavits of Mr Coope in relation to an independent review of the applicant's prospects of success in the case conducted by Elizabeth Cheeseman SC, Caspar Conde and Daniel Habashy of counsel. 63 Having regard to all the materials I am satisfied that if the case proceeds to trial the applicant and class members face a significant risk that they will be unable to establish either the breach of contract or the knowing assistance claim. In my opinion the case has low prospects of success. That opinion is central to my conclusion that the proposed settlement should be approved.

The risks in relation to quantum and the range of reasonableness in the light of best recovery 64 Having regard to Counsel's Opinion and some preliminary estimates of the assessed losses of registered class members made by the Scheme Administrator I am satisfied that (leaving aside the substantial legal costs) the proposed settlement represents a high proportion of the aggregate value of class members' claims that are within time and within the range of reasonableness in light of best recovery. Of course, after deduction of legal costs the picture is somewhat different, but I will later deal with the quantum of approved legal costs. This consideration too points in favour of settlement approval.

The range of reasonableness of the settlement in light of all attendant circumstances 65 Having regard to Counsel's Opinion and the other confidential materials to which I have referred I am satisfied that the proposed settlement falls comfortably inside the range of reasonable outcomes. As I have said there is a significant risk that if the case proceeds to hearing the applicant's claims will not succeed, and I consider the settlement represents a high proportion of the aggregate value of class members' claims that are within time. I consider the settlement to be plainly reasonable in light of all the attendant circumstances.

The reaction of the class to the settlement 66 Another useful method of considering the reasonableness of a proposed settlement is by reference to the objections to settlement by class members: Darwalla Milling Co Ltd v F Hoffman-La Roche (No 2) (2006) 236 ALR 322; [2006] FCA 1388 at [39] (Jessup J). 67 On or about 30 April 2018 class members were sent a Court-approved Notice of Proposed Settlement which informed them of the key terms of the settlement (including the approximate quantum of the legal costs, litigation funding charges and other deductions for which Court approval was to be sought) and of their right to object to the proposed settlement. On or about 11 May 2018 class members were sent an Amended Notice of Proposed Settlement which corrected an error in the earlier notice and increased the amount of Vannin Costs by $1.065 million to reflect the ATE insurance premium it paid. 68 Twenty-three class members (or groups of class members) filed objections to settlement approval, which is approximately 11% of the 193 registered class members. This relatively high level of objection is understandable when: (a) many class members are highly aggrieved about the fraudulent misappropriation of their retirement savings and they have strong feelings about the case; (b) it was only after the settlement that class members were told that the settlement amount would be substantially consumed by legal costs and funding charges; and (c) it was only after the settlement that class members were first told that they could not recover compensation for any unauthorised withdrawals from their MMDAs which occurred before 11 March 2010. 69 Gilbert + Tobin maintained a register of emails and telephone calls received from class members following receipt of the Notices of Proposed Settlement and the evidence is that approximately 50% of the calls and emails received from class members were neutral as to the settlement and 50% of class members indicated they were unhappy with the settlement. Gilbert + Tobin categorised the class members' concerns into three main categories of issues, being: (a) the quantum of the settlement sum; (b) the preclusion of claims by class members based on unauthorised withdrawals which occurred before 11 March 2010; and (c) the level of legal costs and litigation funding charges proposed to be charged. 70 The objections filed with the Court can be categorised as follows: Reason for objection Objectors Whether the settlement is in the interests of the group members, or only in the interest of the applicant, respondents and applicant's lawyers/Funder • James Martin Ryan (C & J Ryan Superannuation Fund) • Kenneth Bedford (Bedford Superannuation Fund) The size of the settlement sum, including how calculated • Andrew Shine (A&N Shine Superannuation Fund) • Beverley Holliday (by her advocate and daughter Adrienne Lynch) (Holliday Superannuation Fund P/L) • James Martin Ryan (C & J Ryan Superannuation Fund) • Dorothy Jordan • Ian and Susan Jolly (Jolly Superannuation Fund) • Michael Reynolds (Mick Reynolds Superannuation Pty Ltd) • Carolyn and Robert Hildebrand • Chris Pychtin (Pychtin Superannuation Fund Pty Ltd) • Gregory Rigbye (Greg Rigbye Superannuation Fund) • Kenneth Bedford (Bedford Superannuation Fund) • Catherine and Robert Spence (RG and CL Spence Superannuation Fund) • Jill and Enzo Topatig • Nigel Jeffares (Nigel Jeffares Super Fund P/L) Size of the fees and costs sought to be deducted from the settlement sum by Quinn Emanuel and Vannin, including deduction of $1.065 million from the settlement sum to pay AmTrust for ATE insurance • Andrew Shine • Bernadette Nora Carroll • Beverley Holliday (by her advocate and daughter Adrienne Lynch) (Holliday Superannuation Fund P/L) • James Martin Ryan (C & J Ryan Superannuation Fund) • Christine Bussian (Chris Bussian Superannuation Fund) • Dorothy Jordan • Ian and Susan Jolly (Jolly Superannuation Fund) • Joseph and Bernadette Carroll (Damian Carroll Superannuation Fund) • Michael Reynolds (Mick Reynolds Superannuation Pty Ltd) • Carolyn and Robert Hildebrand • Chris and Anne Pychtin (Pychtin Superannuation Fund Pty Ltd) • Prudence Raymond (PJ Raymond Superannuation Fund) • Gregory Rigbye (Greg Rigbye Superannuation Fund) • Kenneth Bedford (Bedford Superannuation Fund) • Catherine and Robert Spence (RG and CL Spence Superannuation Fund) • Jill and Enzo Topatig • Barrie Seabrook • Nigel Jeffares (Nigel Jeffares Super Fund P/L) Common Fund Order • Beverley Holliday (by her advocate and daughter Adrienne Lynch) • Nigel Jeffares (Nigel Jeffares Super Fund P/L) Settlement distribution scheme, including lack of detail as to calculation of payments to group members • James Martin Ryan (C & J Ryan Superannuation Fund) • Kenneth Bedford (Bedford Superannuation Fund) Conflicts between Quinn Emanuel and Vannin; Quinn Emanuel ceasing to act for the group members • James Martin Ryan (C & J Ryan Superannuation Fund) • Kenneth Bedford (Bedford Superannuation Fund) Limitation period and exclusion from recovery of losses suffered prior to 11 March 2010 • Andrew Shine • Elizabeth Ann Spence • Christine Bussian (Chris Bussian Superannuation Fund) • Ian and Susan Jolly (Jolly Superannuation Fund) • Michael Reynolds (Mick Reynolds Superannuation Pty Ltd) • Carolyn and Robert Hildebrand • Chris and Anne Pychtin (Pychtin Superannuation Fund Pty Ltd) • Prudence Raymond (PJ Raymond Superannuation Fund) • Catherine and Robert Spence (RG and CL Spence Superannuation Fund) • EJ and MV Purcell (Purcell SMSF) • Barrie Seabrook • Nigel Jeffares (Nigel Jeffares Super Fund P/L) Non disparagement clauses in the Settlement Deed • Nigel Jeffares (Nigel Jeffares Super Fund P/L) General concern about the effect of fraud on group members • John and Candace Hawkins (C & J Hawkins Superannuation Fund) Unspecified objection • Stephen and Glenys Railton (Railton Superannuation Fund)

71 I will deal with the objections by reference to these categories.

The quantum of the settlement 72 I effectively considered this issue when dealing with the risks of establishing liability, the risks in relation to quantum and the range of reasonableness of the settlement in light of all attendant circumstances. One can readily understand class members' disappointment with a settlement of $12 million inclusive of costs when it is plain that they were expecting much more, and it is proposed that it be largely subsumed by legal costs and funding charges. It is impossible not to sympathise with the position of people who have had their life savings misappropriated by fraud, but it must be kept firmly in mind that: (a) it was Sherwin that perpetrated the fraud; (b) there is little in the materials to support the allegation that the respondents knowingly assisted in the fraud; (c) many class members' claims are statute-barred and if the case proceeds to trial they cannot recover damages; (d) the settlement represents a high proportion of the aggregate value of class members' claims that are within time; and (e) the case has poor prospects of success at trial. 73 The quantum of the settlement is comfortably within the range of reasonable settlements of the case. This is not a basis upon which to refuse settlement approval.

The amount of legal costs and litigation funding charges. 74 As I said at the outset I have concerns as to the proportionality of the costs and funding charges proposed to be deducted from the settlement and there is force in this category of objections. Even so, I consider the proposed settlement to be in the class members' interests because the settlement represents a high proportion of the aggregate value of class members' claims that are within time and the case has low prospects of success at trial. To the extent that costs and funding charges are disproportionate and therefore unreasonable they will be reduced.

The common fund order 75 One class member objects to the making of a common fund order per se, and others do not oppose a common fund order but object to the funding rate. As I will explain, I consider a common fund order to be appropriate in the circumstances of the case but consider the proposed 25% funding rate of the gross settlement to be disproportionate. I decline to make a common fund order at a 25% funding rate and will instead make an order at the rate of 8.3%. At that funding rate I am satisfied that the funding charges are proportionate to the claim value and the recovery by class members, and these objections do not justify refusal to approve the settlement.

The lack of detail in the SDS as to the calculation of payments to class members 76 Some objectors oppose settlement approval on the basis that the SDS provides insufficient detail as to how the compensation payments to class members are to be calculated. I will deal with this objection when considering the reasonableness of the SDS. I would not refuse settlement approval on this ground.

The breakdown in the relationship between Quinn Emanuel and Vannin 77 Some class members object to the settlement on the basis that the settlement reflects the breakdown in the relationship between Quinn Emanuel and Vannin, rather than fairly reflecting the merits of the case. I am well satisfied that by early 2018 the relationship between Quinn Emanuel and Vannin had broken down, but there is nothing to show that this deterioration resulted in a lower settlement than might otherwise have been achieved. The materials indicate that the settlement reflects revised views about the strength of the case on liability and the aggregate value of class members' claims that are within time. This is not a reason to refuse settlement approval.

Quinn Emanuel ceasing to act for the class members 78 The applicant and some class members object to Quinn Emanuel's costs on the basis that the firm withdrew from acting for the applicant and class members following Vannin's application for the appointment of a costs referee. They argue the withdrawal increased costs because the settlement approval application had to be taken over by Gilbert + Tobin. 79 As I will explain, while Quinn Emanuel's decision to withdraw from acting was ill considered, it did not result in materially increased costs. I have taken the increased costs into account in the reduced amount in which Quinn Emanuel's costs are approved. This is not a basis upon which to refuse settlement approval.

The preclusion from claiming losses suffered before 11 March 2010 80 Some class members object to the settlement because class members' claims that are based on unauthorised withdrawals from their MMDAs before 11 March 2010 are not eligible to receive compensation. For the reasons already explained, this is not a basis upon which to refuse settlement approval. It would not be fair and reasonable if class members whose claims are statute-barred and therefore unable to succeed at trial are permitted to share in a settlement based on the aggregate value of class members' claims that are within time.

The confidentiality and non-disparagement clauses 81 Mr Nigel Jeffares appeared as an objector on his own behalf and on behalf of other class members who are members of a support group named the Superannuation Crisis Support Group. He expressed the concern that class members may be gagged by the confidentiality and non-disparagement clauses in the Settlement Deed, including by being restricted in giving evidence before the Financial Services Royal Commission. 82 Mr Jeffares' submissions were considered and helpful, and I thank him for the assistance he has provided to other victims of Sherwin's fraud. However his concerns regarding the confidentiality and non-disparagement clauses are misplaced. The non-disparagement clause in the Settlement Deed binds only the named parties and not class members. Confidentiality in the terms of settlement was lost when the Notice of Proposed Settlement (which included the settlement amount and other key terms) was sent to class members and the quantum of the proposed settlement was published in mass media. Any subsisting confidentiality in the terms of settlement was lost when the key terms of settlement were the subject of submissions in open court. I note also that the confidentiality orders I have made do not restrict publication of the terms of settlement or inhibit class members from speaking or giving evidence in relation to the case. This is not a basis upon which to refuse settlement approval.

F WHETHER QUINN EMANUEL'S COSTS ARE REASONABLE AND PROPORTIONATE

The claimed costs 83 Quinn Emanuel submits that it incurred costs in the proceeding totalling $6,581,076, made up as follows (all amounts are inclusive of GST unless otherwise stated): (a) costs of the proceeding charged of $1,002,408 (and paid by Vannin); (b) unpaid costs in the proceeding of $3,989,728; (c) unpaid costs of the security for costs application of $332,352; (d) unpaid costs of $176,066 incurred by reason of and after Quinn Emanuel's withdrawal from acting as solicitors for the applicant; and (e) a 25% uplift fee payable in the event of success pursuant to s 182 of the Legal Profession Uniform Law (NSW) (Uniform Law) of $1,080,520. This total does not include disbursements which Quinn Emanuel incurred in the proceeding totalling $1,941,877 (which have been paid by Vannin), and if they are included Quinn Emanuel ran up total costs of $8,522,953. I note in passing that there are some differences in the costs figures in the Referee's Report and those provided in Quinn Emanuel's and Vannin's submissions but the differences are not material and it is unnecessary to explain them. The figures I use should be treated as approximate rather than exact. 84 In the settlement approval hearing counsel for Quinn Emanuel submitted that the firm had made a "substantial concession" by forgoing an uplift fee of $1.08 million which should "put to one side the quibbles about the minute aspects of the costs". It said that the uplift fee, if not foregone, would "take out of the pot" a large amount that would otherwise be payable by class members. As I will explain, I accept the Referee's conclusion that, because the costs agreement failed to properly describe what would constitute a 'successful outcome' under the agreement, Quinn Emanuel is not entitled to charge an uplift fee. In those circumstances I do not treat its waiver of the uplift fee as a concession. However, nothing turns on that. Whether or not the firm was entitled to a $1.08 million uplift fee under the costs agreement I would have reached the same view on the proportionality of costs. 85 Quinn Emanuel did though make other concessions. It seeks approval of costs in a reduced amount of $4,577,408 (or 38% of the settlement) which includes $1,002,408 already paid to it (the claimed costs). If the claimed costs are approved Quinn Emanuel will be entitled to receive an additional payment of $3,575,000 from the settlement (or approximately 30% of the settlement). 86 It must be kept in mind, however, that taking account of disbursements of approximately $1,941,877, Quinn Emanuel ran up costs totalling approximately $6,519,285. Quinn Emanuel does not seek approval of the disbursements incurred because they were paid by Vannin, and Vannin seeks their reimbursement as part of the Vannin Costs.

The requirement for Court oversight of costs charged to class members 87 Judicial oversight of the costs proposed to be charged is an important part of the Court's role in protecting class members' interests. In Redfern v Mineral Engineers Pty Ltd [1987] VR 518 at 523 Tadgell J said, and I respectfully agree: The court's surveillance over costs as between solicitor and client is assumed with a view to preventing any unfair advantage by solicitors in their charges to their clients. It stems, it seems, from the notion that ordinarily a solicitor is presumed to be in a position of dominance in relation to his client as a result of his presumed knowledge of the law and of what may and may not be properly charged by way of fees. Were a strict view not taken it might be open to a solicitor to overreach his client or otherwise act oppressively towards him on the matter of costs. His Honour's observations were made in the context of a taxation of costs but they have been cited with approval in the settlement approval context: see Modtech Engineering Pty Limited v GPT Management Holdings Limited [2013] FCA 626 at [26] (Gordon J) and Kelly at [332]. 88 In class actions the requirement for judicial supervision of legal costs proposed to be charged is obvious because: (a) the applicant's solicitor is in a more dominant position vis-a vis a class member than in a solicitor-client relationship in individual litigation; (b) class members are commonly not told about the mounting costs as they are incurred and they suffer a significant information asymmetry in that regard; (c) it is not necessary for class members to retain the applicant's solicitor and commonly they do not, yet they are usually made liable for a pro rata share of the costs; (d) even where class members retain the applicant's solicitor they do not provide instructions as to the running of the class action and have no control over the quantum of costs, yet they are usually made liable for a pro rata share of the costs; (e) class members are unlikely to pay much attention to legal costs because they are usually only payable upon success and from the successful outcome; (f) it is usually not until after settlement is achieved that class members are told the total costs claimed, but they are not told (and it is commonly very difficult to accurately estimate) what their pro rata share of the costs will be; and (g) the Court has a protective role in relation to class members' interests. 89 There is no real question that all class members who share in the benefits of a settlement should pay a proportionate share of the costs incurred to obtain it: see Caason at [108] and the cases cited. The question is whether the costs which Quinn Emanuel seeks be deducted from the settlement are reasonable and proportionate.

The appointment of a Costs Referee 90 On 27 March 2018 Lee J made orders directing Mr Roland Matters, costs consultant (the Referee) to conduct an enquiry into the reasonableness of Quinn Emanuel's costs and to report to the Court on that question. On 26 April 2018 I made orders to expand the reference and directed the Referee to conduct an enquiry as to whether the following categories of costs incurred are fair and reasonable and to provide a report to the Court as to: (a) the costs and disbursements of the proceeding charged or proposed to be charged by Quinn Emanuel; (b) the costs and disbursements of the proceeding claimed by Vannin; (c) the legal costs and disbursements of the proceeding charged or proposed to be charged by Gilbert + Tobin; (d) the costs and disbursements of the security for costs application; and (e) the quantum of any costs thrown away by Quinn Emanuel's withdrawal from acting in the proceeding. 91 The fees and disbursements incurred by Quinn Emanuel total approximately $6.5 million, which would soak up more than half the settlement, and the applicant, some objectors and Vannin contend that Quinn Emanuel's costs are excessive. In such circumstances it was clearly appropriate for the Court to appoint an independent costs referee and it would have been wrong to rely upon the report of a costs assessor appointed by Quinn Emanuel: see Caason at [111]-[124] and the remarks of Lee J in Lifeplan Australia Friendly Society Limited v S&P Global Inc (Formerly McGraw-Hill Financial, Inc) (A Company Incorporated in New York) [2018] FCA 379 (Lifeplan) at [40]-[41] and Dillon at [66]. 92 The Referee undertook a comprehensive enquiry in relation to Quinn Emanuel's costs including by reviewing documents filed in the proceeding, witness statements, the discovery database, tax invoices and Quinn Emanuel's electronic accounting and time records, and considering written and oral submissions from Quinn Emanuel, Vannin and Gilbert + Tobin. On 20 June 2018 the Referee provided a 68-page report with eight lengthy attachments (the Referee's Report) to the Court and the parties. 93 The Referee's Report is predicated on an express assumption that Quinn Emanuel's costs are proportionate. The report states (at paragraph 4.2): I have assumed that, if charged for, performance of the work directed to the tasks summarised at paragraph 40 of the affidavit of Damian John Scattini sworn 22 May 2018 (Mr Scattini's 22 May affidavit) and the tasks summarised at paragraph 10 of the affidavit of Damian John Scattini sworn 8 June 2018 (Mr Scattini's 8 June affidavit) prior to formation of "the view" expressed at paragraph 194 of Mr Scattini's 22 May affidavit, will result in legal costs being charged that are no more than those proportionately and reasonably incurred within the meaning of sub-section 172(1)(a) of the Legal Profession Uniform Law (NSW) (the Uniform Law). 94 Under the heading "Assumptions made in addition to assumptions reported in my reasons" the report states (at paragraph 21): If charged for, performance of the work directed to the task summarised at paragraph 40 of Mr Scattini's 22 May affidavit and the tasks summarised at paragraph 10 of Mr Scattini's 8 June affidavit prior to formation of "the view" expressed at paragraph 194 of Mr Scattini's 22 May affidavit, will result in legal costs being charged that are no more than those proportionately and reasonably incurred within the meaning of sub-section 172(1)(a) of the Uniform Law. To explain these references I note that: (a) paragraph 40 of Mr Scattini's affidavit of 22 May 2018 summarised the work undertaken by Quinn Emanuel to obtain documentary evidence of suspicious emails; (b) paragraph 10 of Mr Scattini's affidavit of 8 June 2018 summarised the work required to estimate class members' losses, including obtaining evidence of the pleaded breaches of contract and suspicious emails, evidence of the identity of class members and their full MMDA statements, and evidence concerning the nature of the transactions into and out of class members' MMDAs and particularly whether or not those transactions were purportedly authorised; and (c) paragraph 194 of Mr Scattini's 22 May affidavit states that during further negotiations that followed the mediation on 31 January 2018 Quinn Emanuel formed the view that the aggregate value of class members' claims that appeared to be within time was a factor favouring acceptance of the respondents' $12 million final settlement offer. 95 When that is understood, the gist of the Referee's assumption is that the costs associated with estimating class members' losses, up to the point of settlement, were proportionately incurred within the meaning of sub-section 172(1)(a) of the Uniform Law. Before me, all parties approached the question of costs on the basis that the question of proportionality was a matter for the Court, not the Referee. 96 The Referee concluded that Quinn Emanuel incurred costs in a total of $6,540,433, made up as follows (exclusive of GST): (a) legal costs charged in the proceedings (and paid by Vannin) of $911,280; (b) disbursements charged in the proceeding of $1,795,568; (c) GST reimbursement charged of $258,584; (d) legal costs proposed to be charged in the proceeding of $3,250,000; and (e) GST reimbursement proposed to be charged of $325,000. That total does not include Quinn Emanuel's asserted entitlement under the costs agreement to a 25% uplift on its unpaid fees payable in the event of success pursuant to s 182 of the Uniform Law. 97 Assuming proportionality, the Referee concluded that, generally, the extent of the services provided by Quinn Emanuel was reasonable, and the great bulk of costs were reasonably incurred. The Referee concluded that the costs should be reduced by $133,159, to $6,407,273.

Whether it is appropriate to adopt the Referee's report 98 The applicant, Quinn Emanuel and Vannin took different positions on whether the Court should adopt the Referee's Report: (a) the applicant contends that the Court should not adopt the Referee's Report. It argues that the Referee's reasoning is unclear and the conclusions reached are partly based on material errors such that the Court should not be satisfied that the report provides a sufficient and reasonable basis to conclude that Quinn Emanuel's claimed costs are fair and reasonable. The applicant contends, amongst other things, that: (i) the Referee made material errors of calculation or quantification, including substantially overstating the number of documents the firm reviewed, so that the Referee's conclusion as to the reasonableness of the substantial fees incurred in relation to document production, inspection, management and discovery was erroneous; and (ii) the Referee should have concluded that the costs agreement between Quinn Emanuel and the applicant is void pursuant to s 185(1) of the Uniform Law because it does not satisfy the requirements of s 181(2)(b). Further, once the costs agreement is understood as void, the Referee erred in concluding that the firm could charge any costs for its "speculative" or "conditional" work, that is, the initial work for which it has already been paid $1,002,408 (incl. of GST); (b) Quinn Emanuel contends that the Referee's Report should be adopted insofar as it relates to the reasonableness of its costs. It does not accept the Referee's conclusion that that it is not entitled to charge a 25% uplift on its unpaid fees (but offers to waive those fees provided it is paid the amount that it seeks); (c) Vannin does not oppose the Court's adoption of the Referee's Report, and submits since it paid the Vannin Costs as it was obliged to under the funding agreements, it should be reimbursed all fees and disbursements, including those that the Referee found were not reasonably incurred; and (d) the applicant also submits that Quinn Emanuel ought to bear the costs of their fees which are found not to be fair and reasonable (to be achieved by deduction from amounts otherwise payable to Quinn Emanuel from the settlement fund). 99 I accept that the Referee erred in concluding that Quinn Emanuel produced, inspected or reviewed approximately 1,710,363 documents and that (by applying a rate of $6 per document) costs in the vicinity of $10 million would be justifiable. I accept Mr Scattini's evidence that Quinn Emanuel reviewed approximately 566,807 documents, which is less than one third of the number of documents to which the Referee referred, and that the firm incurred fees in the order of $1.75 million for such work. Quinn Emanuel did not seek costs anywhere near $10 million in relation to its work in producing, inspecting and reviewing documents, and the Referee did not allow costs in anything approaching that amount. The Referee only concluded that, insofar as it could be said that some of the costs involved in the security for costs dispute were not reasonably incurred, that was more than balanced by the parsimony that Quinn Emanuel applied to quantifying legal costs in respect of document production, inspection, management and discovery. I am not persuaded that the Referee's overall conclusion that costs of $6,407,273 were reasonably incurred is materially flawed. 100 Some parts of the Referee's Report could be clearer and reasonable minds may differ in relation to some of his conclusions, but it is plain from the report that the Referee conducted a thorough review, took an analytical approach, and took into account the parties' written and oral submissions on the issues in dispute. 101 It is well-established that the reference procedure is not to be treated as some sort of warm up for the real contest: Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1999) 29 NSWLR 549 at 563-4 (Gleeson CJ) and 566-7 (Mahoney JA). In Caason at [132] I set out the principles that apply to adoption of a referee's report as follows: (a) an application contending that a report not be adopted is not an appeal; (b) the discretion to not adopt a report should be exercised consistently with the purpose of the reference; (c) where the report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition to accept the report; (d) where the report reveals some error of principle, patent misapprehension of the evidence or manifest unreasonableness in fact finding, then there would arise reasons for rejecting it; and (e) the referee should give sufficient reasons to enable the parties and the Court to know that the conclusion is not arbitrary or influenced by improper considerations, and is not affected by the flaws described in (d) above. Where, as in the present case, the Court has the benefit of a costs referee's report that uses a reasonable methodology and shows an analytical and thorough approach there are good reasons for the Court to adopt it. It is appropriate that I do so. 102 I will however deal in more detail with: (a) Quinn Emanuel's asserted entitlement to the uplift fee; (b) the applicant's contention that Quinn Emanuel is not entitled to any fees beyond the sum of $1,002,408 (incl of GST) already paid to it; and (c) whether costs were increased by Quinn Emanuel's decision to cease acting for the applicant.

Whether Quinn Emanuel is entitled to a 25% uplift on its unpaid fees 103 Quinn Emanuel says that - provided the Court approves payment to the firm of the additional amount of $3.575 million - it will waive any claim to an entitlement under the costs agreement to be paid a 25% uplift on its unpaid fees. I found this conditional waiver curious when the firm is only permitted to charge costs that are fair and reasonable (s 172(1) of the Uniform Law) and the quantum of reasonable costs will be as approved by the Court. Upon the Court approving the quantum of reasonable costs it will be impermissible for the firm to charge any further amount, whether or not the Court approves the amount Quinn Emanuel seeks. 104 While submitting that the Referee's Report should be adopted, counsel for Quinn Emanuel contends that the Referee erred in concluding that the firm was not entitled to charge an uplift fee. 105 The costs agreement between the applicant and Quinn Emanuel is headed "Retainer and Conditional Costs Agreement" and dated 16 June 2016 (the costs agreement). It is composed of two parts, one part having unconditional application and the other part having application conditional upon the applicant obtaining "a successful settlement or judgment". 106 The costs agreement states: You have also entered into a Funding Agreement with Vannin Capital (Vannin). Vannin is providing financial assistance on this matter which will enable us to conduct the litigation without seeking a contribution to the legal costs and expenses from you unless your case is successful (as defined below). We have agreed with Vannin to conduct the litigation accordance with the Funding Agreement, incorporating the Terms of Engagement which are annexed to the Funding Agreement. This includes an agreement between Vannin and us in relation to our Legal Costs. Vannin has agreed to pay the first $800,000 towards our professional fees on our usual terms. We agree to accept legal instructions after this amount, on a speculative, or "no win, no charge" basis in relation to our professional costs as defined below. Successful Outcome Of The Matter We will only be entitled to receive payment of our Legal Costs from you, beyond the first $800,000, in the event that you obtain a successful settlement or judgment. Professional Fees We will charge you professional fees for the work we do based on hourly rates…. [Here the costs agreement sets out the hourly rates for the Quinn Emanuel lawyers working on the case.] Uplift Fees In the event that you obtain a successful outcome, we will charge an additional 25% "uplift" on our professional fees. 107 Section 181 of the Uniform Law relevantly provides: Conditional costs agreements (1) A costs agreement (a "conditional costs agreement") may provide that the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate. (2) A conditional costs agreement must-- (a) be in writing and in plain language; and (b) set out the circumstances that constitute the successful outcome of the matter to which it relates. 108 Section 185 of the Uniform Law relevantly provides: Certain costs agreements are void (1) A costs agreement that contravenes, or is entered into in contravention of, any provision of this Division is void. Note: If a costs agreement is void due to a failure to comply with the disclosure obligations of this Part, the costs must be assessed before the law practice can seek to recover them (see section 178(1)). (2) A law practice is not entitled to recover any amount in excess of the amount that the law practice would have been entitled to recover if the costs agreement had not been void and must repay any excess amount received. (3) A law practice that has entered into a costs agreement in contravention of section 182 is not entitled to recover the whole or any part of the uplift fee and must repay the amount received in respect of the uplift fee to the person from whom it was received. 109 Before the Referee the applicant submitted that the "no win, no charge" or conditional part of the costs agreement failed to set out in plain language the circumstances that would constitute a "successful outcome" as required by s 181(2). The applicant contended that the expression "successful settlement" in the costs agreement cannot be construed to apply to any settlement that sees one or more of the respondents paying the applicant any amount. It used the following hypothetical examples to demonstrate why such a construction would be wrong: (a) the respondents agree to pay the applicant $1, which meant that the applicant was thereafter liable to pay Quinn Emanuel $5 million in costs; (b) one respondent agrees to pay the applicant $1 million, but the applicant's case against the other respondent is dismissed, and the applicant is ordered to pay $7 million in costs; or (c) a settlement where, after deductions for costs and litigation funding commission, the applicant and class members recovered nothing. The applicant submits that none of these examples constitute either a "successful outcome" or a "successful settlement" which is the expression used in the costs agreement. 110 Quinn Emanuel argued to the contrary. The Referee reached the conclusion that the cost agreement was in contravention of s 181(2)(b) in that it did not "provide the parties to it with the ability to know that any particular circumstance(s) will or will not constitute a successful outcome." The Referee found that the conditional part of the costs agreement was therefore void pursuant to s 185(1) and that pursuant to s 185(3) Quinn Emanuel was not entitled to charge an uplift fee. 111 There is a sound basis for the Referee's conclusion in this regard and it is appropriate to adopt the Referee's Report. The purpose of s 181(2) is to ensure that it is clear what circumstances will constitute a "successful outcome" and thereby create an obligation to pay an uplift fee. 112 Further, even if Quinn Emanuel's contention that it has a contractual entitlement to the uplift fee is accepted, not much turns on that when the Court's task is to decide whether the Quinn Emanuel's costs are reasonable and proportionate. The exercise of the power to approve the quantum of costs to be deducted from a settlement pursuant to ss 33V and 33ZF of the Act requires consideration against all the relevant circumstances, including but not limited to the applicable costs agreement. In the circumstances of the present case, having regard to the Referee's review, and to the lack of proportionality between legal costs and the recovery by class members, I would not approve the uplift fee.

Whether Quinn Emanuel can charge reasonable costs for the "conditional" work it undertook 113 The Referee reached the view that the conditional part of the costs agreement is void, but said that: (a) the costs agreement is in two parts, one part having conditional application and the other part being unconditional; (b) Quinn Emanuel and Petersen expressly contracted for severability; and (c) a costs agreement may be enforced in the same way as any other contract (s 184 of the Uniform Law). The Referee turned to consider Quinn Emanuel's entitlement to charge costs by reference to s 172 of the Uniform Law. That section provides: Legal costs must be fair and reasonable (1) A law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and that in particular are - (a) proportionately and reasonably incurred; and (b) proportionate and reasonable in amount. (2) In considering whether legal costs satisfy subsection (1), regard must be had to whether the legal costs reasonably reflect - (a) the level of skill, experience, specialisation and seniority of the lawyers concerned; and (b) the level of complexity, novelty or difficulty of the issues involved, and the extent to which the matter involved a matter of public interest; and (c) the labour and responsibility involved; and (d) the circumstances in acting on the matter, including (for example) any or all of the following - (i) the urgency of the matter; (ii) the time spent on the matter; (iii) the time when business was transacted in the matter; (iv) the place where business was transacted in the matter; (v) the number and importance of any documents involved; and (e) the quality of the work done; and (f) the retainer and the instructions (express or implied) given in the matter. (3) In considering whether legal costs are fair and reasonable, regard must also be had to whether the legal costs conform to any applicable requirements of this Part, the Uniform Rules and any fixed costs legislative provisions. (4) A costs agreement is prima facie evidence that legal costs disclosed in the agreement are fair and reasonable if - (a) the provisions of Division 3 relating to costs disclosure have been complied with; and (b) the costs agreement does not contravene, and was not entered into in contravention of, any provision of Division 4. 114 Having considered Quinn Emanuel's claimed costs by reference to s 172(2), the Referee concluded that total costs of $6,407,273 are reasonable. 115 The applicant contends that the Referee erred in failing to conclude that, by reason of the fact that the costs agreement was void pursuant to s 185(1), it was impermissible for Quinn Emanuel to charge any costs beyond the sum of $1,002,408 (incl of GST) the firm had already been paid. 116 There is a sound basis for the Referee's conclusion and it is appropriate to adopt the Referee's report. Section 185(1) of the Uniform Law provides that a cost agreement that does not comply with the provisions of Division 4 is void. Section 185(3) specifically addresses the circumstances of the present case - a conditional costs agreement entered into in contravention of s 182 - and it provides that a law practice that has done so is not entitled to recover the whole or any part of the uplift fee. It does not state that in such circumstances it is impermissible for the law practice to charge reasonable and proportionate costs. It would be a harsh result if, in circumstances where the applicant continued to instruct Quinn Emanuel to undertake legal work and the work achieved a $12 million settlement, Quinn Emanuel was not permitted to charge some reasonable costs. 117 Further, even if the applicant's contention is accepted, the Court's task is to approve the deduction of reasonable and proportionate costs from the settlement. The relevant considerations in the exercise of the power to approve the quantum of costs to be deducted from a settlement pursuant to ss 33V and 33ZF of the Act include but are not limited to the validity of the costs agreement. Having regard to the Referee's conclusion that Quinn Emanuel's costs of $6,407,273 were reasonably incurred, and the unfairness inherent in the applicant's contention that the firm should receive nothing for its work, I consider the Referee's conclusion is appropriate.

Whether costs were increased by Quinn Emanuel's decision to cease acting for the applicant 118 On 8 March 2018 Quinn Emanuel circulated draft minutes of orders setting a timetable for the settlement approval process. On the question of its reasonable costs the draft minutes contemplated that Quinn Emanuel would engage an independent costs specialist to provide a report to the Court. On 9 March 2018 Vannin filed an interlocutory application seeking leave to intervene, to make submissions as to costs matters, and to seek a common fund order. On the issue of costs, Vannin's draft minutes of orders proposed the appointment of a costs referee pursuant to Division 28.6 of the Federal Court Rules 2011 (the Costs Reference). 119 At a case management hearing on 12 March 2018 Quinn Emanuel informed the Court that it considered the Costs Reference created a conflict which required that the firm cease to act other than in relation to its claim for costs. On 14 March 2018 Quinn Emanuel filed and served a Notice of Intention to Cease to Act. 120 On 21 March 2018 Mr Scattini wrote to Baker McKenzie, Vannin's solicitors. He said that Quinn Emanuel was required to cease acting because the Costs Reference put the firm in a position of conflict, and that the Costs Reference meant that: …QE would be required to make submissions that are directly opposed to the interests of the Applicant's [sic] and Group Members. QE's ethical and fiduciary duties proclaim that such a circumstance puts us in a position of conflict. Even if informed consent by the Applicant could be used to militate [sic] against that conflict, there is no practicable means of obtaining that consent from Group Members, whose interests at this point may well diverge from the Applicant. Perhaps even more significantly, it is unclear to us whether the giving of consent for QE to act against the interests of Group Members would expose the Applicant to a claim for breach of its duties to Group Members, however those duties are formulated. 121 Mr Scattini also said that the conflict: …is simple to resolve. [Vannin's] Costs Reference must be withdrawn. QE will then, as is the ordinary course in class action proceedings, and contemplated by the Practice Note, obtain an independent costs assessor's report. We had, prior to your application, retained [name omitted] to perform that assessment and that remains our proposal. 122 On 27 March 2018 Vannin withdrew the Cost Reference component of its interlocutory application. Nevertheless Lee J considered it appropriate to order a Cost Reference. Mr Scattini then said that as far as Quinn Emanuel was concerned the conflict no longer existed and the firm was willing and able to return to the role as solicitor for the applicant. However, senior counsel took the view that it would be best if Gilbert + Tobin, which had been appointed in the interim, continued to act for the applicant. 123 Quinn Emanuel's approach in notifying an intention to cease acting was ill considered and unnecessary. In any lawyer/client relationship there is a conflict between the lawyer's interest in maximising legal fees and the client's interests in minimising them, or at least in only paying reasonable fees. The existence of that conflict does not mean that the lawyer must cease acting, and there are many ways in which such a conflict may be managed. Before me, counsel for Quinn Emanuel conceded that the conflict is one which arises in most class actions and it was manageable. 124 The reasonableness of Quinn Emanuel's costs were always going to be considered by the Court as part of the settlement approval process. There are various ways in which the Court may be satisfied in that regard, including by relying on expert evidence from a costs consultant engaged by the applicant's solicitors, appointing a contradictor to represent class members' interests in relation to costs (Kelly v Willmott Forests Ltd (in liquidation) (No 5) [2017] FCA 689), appointing an expert to audit the report of the costs consultant engaged by the applicant's solicitors (Money Max Int Pty Ltd v QBE Insurance Group Ltd [2018] FCA 1030 at [160]-[180]) or referring the reasonableness of costs to a Court-appointed referee or to a court-appointed expert rather than rely on the report of applicant's costs expert (Caason at [111]-[124]; Lifeplan at [40]-[41]; Dillon). 125 It was for the Court to decide what method was most appropriate in the circumstances of the case. On 27 March 2018 Lee J decided that it was appropriate to appoint the Referee to conduct a Costs Reference. I took the same view on 26 April 2018. 126 The effect of Quinn Emanuel notifying an intention to cease acting was that the applicant was forced to engage another firm of solicitors, Gilbert + Tobin, which had no prior involvement in or knowledge of the case. That gave rise to a real risk of delay and extra costs being incurred in the settlement approval application, which could not be in the interests of the applicant and class members. 127 Mr Crispian Lynch, a partner in Gilbert + Tobin, estimates that approximately $40,000 in costs was thrown away by Quinn Emanuel's withdrawal from the proceeding. The Referee disagreed with the description "costs thrown away" and preferred to describe them as "increased costs". He quantified the increased costs at $18,033, and I accept that quantification. It is difficult to understand the basis for the Referee's distinction but the essential point is that the applicant and class members have suffered increased costs by reason of Quinn Emanuel's ill-considered decision to cease acting. I have not required Quinn Emanuel to pay the amount of $18,033, but I have taken the increased costs into account in reducing its approved costs.

The proportionality of Quinn Emanuel's costs 128 As I have said, the proportionality of Quinn Emanuel's costs was not part of the Referee's assessment, and it is a matter for the Court. 129 I start by noting that there is an increasing problem in class action litigation in that the quantum of legal costs and funding charges are disproportionate to the recoveries by class members. This usually seems to occur where one or more of the following factors are present: (a) damages are less than $30 million; (b) settlement is not achieved until late in the case; (c) the liability case is not strong and the case is strenuously defended; (d) there are multiple respondents; and (e) the applicant's lawyers are insufficiently experienced or cautious (or perhaps competent) for such large, complex and strenuously contested litigation. This occurs in a minority of cases but it is a problem which requires attention. 130 Section 172 of the Uniform Law introduced the requirement that costs be "proportionately and reasonably incurred" and "proportionate and reasonable in amount". The predecessor provision in NSW, s 319 of the Legal Profession Act 2004 (NSW), said only that legal costs must be "fair and reasonable". However the requirement that costs be proportionate is not new. In Skalkos v T & S Recoveries Pty Ltd (2004) 65 NSWLR 151; [2004] NSWCA 281 the NSW Court of Appeal considered whether costs were "reasonably and properly incurred" pursuant to the Legal Profession Act 1987 (NSW). Ipp JA (with whom Sheller JA and Grove J agreed) said (at [8]) that: In my opinion, in determining whether costs have been reasonably and properly incurred, it is relevant to consider whether those costs bear a reasonable relationship to the value and importance of the subject matter in issue. (Citations omitted.) Ipp JA referred to "the principle of proportionality" and said that the cost assessor had failed to properly take into account the proportionality between the amount of the verdict in the case and the amount assessed for costs. 131 The requirements of s 172 of the Uniform Law are echoed in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). Section 37M(1) provides that the overarching purpose of the civil practice and procedure provisions of the Act is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. Section 37M(2)(e) states that, without limiting the generality of subsection (1), the overarching purpose includes the "resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute". Section 37N(1) and (2) require that the parties to a civil proceeding in the Federal Court, and the parties' lawyers, act in a way which is consistent with the overarching purpose. Section 37N(4) provides that in exercising the discretion to award costs in a civil proceeding the Court must take account of any failure to comply with the duty in s 37N(1). 132 The Civil Procedure Acts in different states indicate what the proportionality of costs should be measured against. For example, s 60 of the Civil Procedure Act 2005 (NSW) provides that costs should be "proportionate to the importance and complexity of the subject-matter in dispute" and s 24 of the Civil Procedure Act 2010 (Vic) requires that costs be "reasonable and proportionate to…the complexity or importance of the issues in dispute; and…the amount in dispute". In Yara Australia Pty Ltd v Oswal (2013) 41 VR 302; [2013] VSCA 337 at [13] the Victorian Court of Appeal (Redlich and Priest JJA and Macaulay AJA) considered that section and said: There is plainly no costs matrix or formula that can be applied in determining whether the parties have met their obligations. Rather, the court must weigh the legal costs expended against the complexity and importance of the issues and the amount in dispute, in order to determine whether the parties used reasonable endeavours to ensure those costs were proportionate. 133 Rule 44.3(5) of the English Civil Procedure Rules 1998, as amended, provides the following useful definition: Costs incurred are proportionate if they bear a reasonable relationship to - (a) the sums in issue in the proceedings; (b) the value of any non-monetary relief in issue in the proceedings; (c) the complexity of the litigation; (d) any additional work generated by the conduct of the paying party; and (e) any wider factors involved in the proceedings, such as reputation or public importance.

What does proportionality of costs mean in the context of class actions 134 Beach J explained the requirement for costs to be proportionate in Blairgowrie Trading Ltd v Allco Finance Group Ltd (Receivers & Managers Appointed) (in liq) (No 3) (2017) 343 ALR 476; [2017] FCA 330 (Blairgowrie) at [181]. His Honour said, and I respectfully agree: But what is claimed for legal costs should not be disproportionate to the nature of the context, the litigation involved and the expected benefit. The Court should not approve an amount that is disproportionate. But such an assessment cannot be made on the simplistic basis that the costs claimed are high in absolute dollar terms or high as a percentage of the total recovery. In the latter case, spending $0.50 to recover an expected $1.00 may be proportionate if it is necessary to spend the $0.50. In the former case, the absolute dollar amount as a free-standing figure is an irrelevant metric. The question is to compare it with the benefit sought to be gained from the litigation. Moreover, one should be careful not to use hindsight bias. The question is the benefit reasonably expected to be achieved, not the benefit actually achieved. Proportionality looks to the expected realistic return at the time the work being charged for was performed, not the known return at a time remote from when the work was performed; at the later time, circumstances may have changed to alter the calculus, but that would not deny that the work performed and its cost was proportionate at the time it was performed. Perhaps the costs claimed can be compared with the known return, but such a comparison ought not to be confused with a true proportionality analysis. Nevertheless, any disparity with the known return may invite the question whether the costs were disproportionate, but would not sufficiently answer that question. (Emphasis added.) 135 There are, however, inherent uncertainties in class action litigation which mean that the determination of what the applicant's lawyers might reasonably expect to achieve in the litigation may not be as straightforward as in ordinary inter partes litigation. As I explained in Caason (at [148]-[152]): Class actions are to be conducted for the benefit of the applicants and class members rather than for service providers such as lawyers (or funders) and the costs should be proportionate. However, as I said in Earglow at [99] proportionality of costs is not necessarily to be measured against the result achieved in the litigation and it can be appropriate to assess it against the amount in dispute. As Beach J said in Blairgowrie Trading Ltd v Allco Finance Group Ltd (Receivers & Managers Appointed) (in liq) (No 3) (2017) 343 ALR 476; [2017] FCA 330 (Blairgowrie) at [181], the proportionality of legal costs cannot be assessed on the simplistic basis that the costs claimed are high in absolute dollar terms or high as a percentage of the total recovery. Like Beach J, I consider the appropriate question is the benefit which the solicitors reasonably expected the applicants and class members would achieve not the benefit they actually achieved. I say this, first, because in large, complex and strenuously defended class actions it is exceedingly difficult at the commencement of a proceeding to make a reasonably accurate assessment of the quantum of a settlement or judgment that may ultimately be achievable, or of the costs that will necessarily be incurred to achieve that result. Over the life of such proceedings it is common for the views formed at the outset about the risks of the case and the likely quantum of any settlement or judgment to be revised following discovery, evidence preparation and exchange, and mediation. Second, any settlement or judgment achieved will to an extent reflect the aggregate claim value. In a class action that is a function of the number of participating class members and the value of their individual claims. In an "open" class action the number of class members who will register and the value of their claims, and therefore the aggregate claim value, cannot be known until after a class member registration process. Third, the likely quantum of legal costs can be estimated by the applicant's lawyers at the outset and a case budget prepared, as in the present case. In large complex and strenuously defended class action litigation the accuracy of the case budget is subject to numerous matters outside the applicant's solicitors' control which are exceedingly difficult to accurately budget. In circumstances where the applicant's solicitors cannot be expected to be completely accurate in assessments they make at the commencement of a case about the level of risk, the likely aggregate claim value and the likely quantum of legal costs, the proper question in relation to proportionality of legal costs is what settlement or judgment amount it was reasonable for the applicant's solicitors to expect would be achieved by class members, not what they actually achieved. It is true that the applicant's solicitors know more about the risks of the case than the class members, but that does not mean they should not be paid costs reasonably incurred in pursuing a benefit for class members which they reasonably expected to be achievable. Nor does it mean that the applicant's solicitors should be punished when, by reason of the strenuous defence of the proceedings, the costs blow out. (Emphasis added.)

Mr Scattini's evidence 136 Mr Scattini deposes to various matters in support of Quinn Emmanuel's submission that the claimed costs are proportionate. Having regard to all the evidence I am not satisfied that they are. 137 I commence by noting that I am satisfied on the material that the reason why Quinn Emanuel and counsel recommended the respondents' final settlement offer of $12 million inclusive of costs was: (a) the risk that the case would not succeed on liability; and (b) that a great many of the registered class members' claims were likely to be statute-barred which meant that the estimated aggregate claim value was substantially lower than Quinn Emanuel previously thought. I am also satisfied that Quinn Emanuel did not reach the view that many registered class members' claims were likely to be out of time until some days after the mediation on 31 January 2018. 138 In the settlement approval hearing I asked Quinn Emanuel to address the following question: Why there was only a question about analysis of loss in the lead up to the mediation [which was shortly before trial], and why wasn't the loss analysis performed earlier? That is, why did it take so long to work out that what was thought to be a $60 million case was in fact a $12 million case? When would a reasonable solicitor have performed such an exercise? 139 Mr Scattini responded to these questions in an affidavit made 8 June 2018 in which he referred back to his earlier affidavit affirmed 22 May 2018. He states that initially he formed the view that class members suffered an "underlying recoverable loss" of approximately $20 million. However by the time the proceeding was filed in March 2016 and by applying appropriate counterfactuals he believed the case may been worth "in the order of $60 million". He says that view was, however, always predicated on: (a) being able to find critical evidence including sufficient examples of the "suspicious emails"; and (b) the class remaining "open". He says that the class member registration process, ordered by Yates J on 6 October 2017 over the applicant's objection (see Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited (No 2) [2017] FCA 1231), significantly reduced aggregate claim value by an amount which was unknowable until the registration deadline on 14 December 2017. 140 Mr Scattini states that estimating class members' losses depended upon obtaining three forms of evidence: (i) evidence of the pleaded practices; (ii) the identity of the class members and their full MMDA statement histories; and (iii) evidence concerning the nature of the transactions into and out of the class members' MMDAs, particularly whether those transactions were authorised or not. Mr Scattini described the work he undertook in this regard and says that it was exceedingly difficult if not impossible to estimate class members' losses at an early date. He says that the aggregate value of their claims could not be reasonably estimated until around the time of the mediation (which was only two months before trial). 141 He states that Quinn Emanuel and counsel were concerned from the outset that there may be statute of limitations issues with class members' claims but to the extent that such claims were premised on the existence of DDH's practices in relation to the suspicious emails from Sherwin (rather than on specific transactions) it was unclear when those practices materialised. Further, he says that there were prospects that the claims in equity were within time, since it was arguable that no limitation period would apply. 142 Mr Scattini also deals with delays in obtaining class members' MMDA statements from the respondents, other difficulties associated with estimating class members' losses, and the steps taken by Quinn Emanuel to assess loss. In summary, he says that: (a) Petersen was selected as the representative applicant because, based on the date Mr and Mrs Petersen invested their money with Sherwin and the dates of the first transactions on their MMDA, its claim would not be time-barred provided the proceeding was filed by 11 March 2016; (b) he was aware that other class members would have deposited funds into their MMDAs earlier and possibly suffered unauthorised withdrawals, but without their MMDA statements it was not possible to determine when their causes of action might have accrued. He says that based on transcripts of ASIC examinations and discussions with counsel he considered persons who suffered unauthorised withdrawals from their MMDAs more than six years before the proceeding commenced would have "some prospects" of recovery; (c) while he had little documentary evidence at the time the proceeding was filed, he anticipated that informal requests for documents, discovery, subpoenas, and discussions with group members would result in a large number of "suspicious emails" being identified to strengthen the claim. To find evidence of the pleaded practices, particularly the suspicious emails, Quinn Emanuel obtained and reviewed voluminous discovered and subpoenaed documents. Much of that work was not complete until mid-September 2017 and some further targeted review occurred in the period to mid-November 2017; (d) the Ponzi scheme was complicated and used techniques designed to hide the effect of the fraud from the victims, such as layering transfer requests and disguising fraudulent transactions. In order to identify examples of the pleaded practices it was often necessary to trace the transactions across multiple emails which was a laborious process. It was not until mid-November 2017 that the applicant was able to finalise the pleaded (fraudulent) practices upon which it relied; (e) even then, it was not possible at that time to reasonably estimate class members' losses because the firm did not have full MMDA statements. He says that class members' losses could not be determined without knowing the extent to which any unauthorised withdrawals directed by Sherwin concerned funds which had been deposited by the class member concerned or alternatively funds which had themselves been placed into the MMDA by unauthorised transfers from other MMDAs; (f) in August to September 2016 Mr Scattini instructed a forensic accountant, Ms Janine Smith of Vincents Chartered Accountants (Vincents), to undertake an analysis of Petersen's MMDA and to trace the many transactions listed on the MMDA statement, with a view to establishing the applicant's loss. That was a difficult and protracted process and it was only in August 2017 that Vincents had sufficient material from discovery, subpoenas and class members to produce a report; (g) throughout 2017 Quinn Emanuel only had access to a limited number of class members' MMDA statements, and the complexity and cost of the work involved in assessing loss meant that it was not viable to do this work for each class member; (h) based on analysis of discovered documents, including emails, Quinn Emanuel reached the view that the vast majority of the fraudulent practices pleaded in the proceeding occurred on or after 11 March 2010, and increased over time. He considered that was consistent with the progress of a Ponzi scheme before its collapse, and this was corroborated by the Vincents report. On the information then available he says that it was reasonable to form that view, and Quinn Emanuel had no reason to believe that the data set of identified examples was not representative of the class as a whole; (i) by 7 April 2017 DDH's discovery, which included the allegedly "suspicious emails" and some class members' MMDA statements, was substantially complete (however by agreement the period covered was limited to 1 January 2009 - 1 February 2013); (j) on 31 October 2017, Quinn Emanuel served a notice to produce on DDH seeking further MMDA statements for 78 class members covering the period from 10 March 2004 to 24 January 2013. DDH provided those documents on 13 December 2017, so Quinn Emanuel was not in a position to assess whether or not registered class members' claims were statute-barred prior to the deadline for registrations on 14 December 2017; (k) DDH did not provide last known contact details of Sherwin clients despite numerous requests, and Quinn Emanuel only obtained these details through the registration process in December 2017. This impeded the firm's ability to corroborate its analysis of class members' losses suffered through unauthorised withdrawals; (l) in approximately December 2017 Mr Scattini instructed a forensic accountant, Mr Tony Samuel, Managing Director of Sapere Forensic Analysis (Sapere), to develop a model which would allow for an estimate of class members' losses including the pleaded 'loss of opportunity' counterfactuals. In order to provide inputs for the model Quinn Emanuel reviewed 40 MMDA statements and attempted to identify class members' contributions into their MMDA and their authorised withdrawals from their MMDA; (m) by 9 January 2018, after further requests for MMDA statements to DDH, Quinn Emanuel had complete MMDA statement histories for 85 of the 193 registered class members; (n) class members' self-assessed losses tended to be inaccurate and unhelpful, since many class members were elderly, distressed and not financially sophisticated. Of the 193 registered class members 30 were unable to provide any estimate of their losses; (o) the process of verifying transactions to estimate loss was necessarily inexact. Quinn Emanuel reviewed documents in the discovered and subpoenaed material to identify the nature of the transactions on the MMDA statements, including email instructions. In some cases the firm contacted class members directly in an effort to determine what were the legitimate deposits into and withdrawals from the MMDAs. Due to gaps within the documents, the transaction descriptions on MMDA statements being anodyne, and the passage of time, there were instances in which Quinn Emanuel could not verify whether the transaction was authorised or not. However, generally Quinn Emanuel held a high degree of confidence that its review produced inputs for the Sapere model which were reasonably accurate and appropriate to be relied on at mediation; (p) putting to one side the "loss of opportunity" claims, the Sapere analysis resulted in a loss estimate which represented about 60% of class members' self-assessed losses. To reach an estimate of the aggregate claim value Quinn Emanuel therefore applied a 40% discount to the self-assessed losses of the remaining class members; (q) the difficulties faced by the applicant in finalising its lay and expert evidence necessitated a number of requests to extend the dates for the service of the evidence. Although the respondents were required to file their evidence by 1 December 2017, they did not do so, meaning that in the lead up to the mediation Quinn Emanuel had no indication of the respondents' case on the evidence; (r) on 31 January 2018, the day of the mediation, the solicitors for DDH provided Quinn Emanuel with the affidavit of Mr Girolamo, DDH's Joint Managing Director, in which he explained why DDH did not suspect that Sherwin was engaged in fraudulent activity; and (s) after the mediation Quinn Emanuel conducted an analysis of registered class members' MMDA statements to ascertain which were undoubtedly "within time". On 2 February 2018 Quinn Emanuel requested DDH to provide, on a without prejudice basis, the statements of all registered class members which had not already been provided to it. DDH provided those statements on 6 February 2018. It was not until then that Quinn Emanuel had MMDA statements for all 193 registered class members. 143 Upon receipt of that material Quinn Emanuel reached a different view as to the number and value of registered class members' claims that were likely to be within time. Having done so Mr Scattini and counsel recommended acceptance of the respondents' final settlement offer of $12 million inclusive of costs, a sum much lower than Mr Scattini's previous view of aggregate claim value.

Quinn Emanuel's submissions 144 Quinn Emanuel contends that its claimed costs are proportionate, including because: (a) although it has incurred unpaid costs of $5,578,668 up to 27 June 2018 (which includes its asserted entitlement to an uplift) it only seeks Court approval for payment of an additional amount of $3.575 million and class members will therefore receive the benefit of a significant discount; (b) if the amount of $3.575 million is approved, the firm will receive total costs of $4,577,408 (inclusive of the amount of $1,002,408 already paid to the firm), and the firm will not then seek to charge the 25% uplift fee to which it claims to be entitled; (c) the Referee concluded that total costs of $6,407,273 were reasonably incurred, from which it follows that the reduced amount of $4,577,408 which the firm seeks be approved is reasonable and proportionate; (d) the applicant was informed of the quantum Quinn Emanuel's costs and that costs as approved by the Court would be deducted from the settlement sum prior to settlement, and the settlement was accepted on this basis. Quinn Emanuel says the applicant has only recently articulated its opposition to Court approval of its fees, and says it would not have agreed to the proposed settlement or carried out substantial additional (unpaid) work in the settlement approval application if it had anticipated this would be the applicant's position; (e) class members were informed of the quantum of the claimed costs in the Notice of Proposed Settlement; (f) there has been considerable delay between when the work underpinning the claimed costs was done and when Quinn Emanuel will receive payment for it, which should be taken into account when deciding whether the costs are reasonable and proportionate; (g) Quinn Emanuel did not increase the rate charged for its work over the period of the case, notwithstanding that the costs agreements made provision for an increase in charge rates; (h) the firm did not seek to incorporate into its costs agreement any provision for interest on accrued costs, although that is both permissible and commonly done in class action litigation; (i) Quinn Emanuel does not seek to recover from the settlement sum costs of $332,352 (incl. of GST) associated with resisting the application for security for costs; (j) the firm accepted the risk of non-payment in the event that the proceeding was not successful by taking on the case on a largely no win-no fee basis, but it was to be paid in full upon success. That should be taken into account when deciding whether the costs are proportionate and reasonable; (k) Quinn Emanuel's agreement to act on a no win-no fee basis lowered the funding commission charged by Vannin for the benefit of class members; (l) Quinn Emanuel acted ethically, professionally and responsibly throughout the case; and (m) Quinn Emanuel has carried out substantial additional legal work in connection with seeking Court approval of the settlement and payment for its unpaid legal costs to date, for which it does not seek payment. 145 Quinn Emanuel accepts the requirement for proportionality of costs, but argues that it is not a determinative or overriding consideration. It is simply one of the many factors that may be taken into account in evaluating whether the proposed settlement is fair and reasonable. Adopting my remarks in Caason at [152], Quinn Emanuel submits, and I accept, that proportionality should be measured against the settlement or judgment amount that the applicant's solicitors reasonably expected would be achieved in the litigation, not what was actually achieved. 146 Quinn Emanuel also submits, and I accept, that it believed the case had reasonable prospects of success. It would not have agreed to act substantially on a no win-no fee basis otherwise. Mr Scattini gave evidence that at the commencement of the case he considered that damages would be "in the order of $60 million", and Mr Coope gave evidence to similar effect. Quinn Emanuel submits that there was a reasonable basis for those views and proportionality should not be measured against the $12 million result actually achieved. 147 Quinn Emanuel contends the Court should studiously avoid seeking to evaluate or second guess the conduct of the firm during the litigation. In this regard it relies on the recent report of the Victorian Law Reform Commission (VLRC), Access to Justice - Litigation Funding and Group Proceedings, March 2018 at [5.58], which states: The Commission notes that the Federal Court recently observed that, subject to the question of proportionality, the courts will not reject expert evidence, or apply a subjective view of what legal work is 'really worth' divorced from the commercial context, without very good reason. Clearly, the courts rely on the expertise of costs experts, which underscores the need for the assessments they give to be accurate and free of bias. (Citations omitted.) 148 Quinn Emmanuel also argues, and I accept, that the proportionality of costs must be considered in light of the substantive and procedural complexity of the litigation. It submits that the proceeding involved complex questions of law and fact across all the causes of action pleaded, but especially in relation to the knowing assistance claim and the limitations defences. It says that the difficulty and complexity of establishing the causes of action and overcoming the limitations defences was one of the reasons it recommended accepting the $12 million settlement. 149 The firm further argues that there were complicated individual issues and questions of fact in respect to assessment of loss including: (a) how to demonstrate that the pleaded practices were connected to the loss suffered, including the difficulty in identifying examples of the pleaded practices; (b) how to identify the providence of the transactions appearing on the face of the MMDA statements, in circumstances where the applicant and class members had very little knowledge about the transactions and sometimes did not even know of the existence of the relevant MMDA; and (c) the expert banking and forensic accounting evidence. It also points to complex and lengthy procedural issues, including with respect to discovery, subpoenas, interlocutory applications and security for costs, as well as complexities introduced by reason of the breakdown of the relationship between Quinn Emanuel and Vannin, including Vannin's late decision to appoint its own lawyers to provide advice as to the prospects of success of the proceeding. 150 Quinn Emanuel also submits, and I accept, that the proportionality of costs must be considered in light of the forensic attitude and conduct of the respondents, who strenuously denied liability and vigorously contested the proceeding. It says legal costs were increased because of numerous interlocutory disputes, including the security for costs application, disputed evidence, issues in respect of subpoenas, the notice to produce and discovery. 151 In support of a finding that its costs are proportionate Quinn Emanuel seeks to rely on a comparison of the costs approved in other class action settlements. It notes that: (a) in Clarke, Lee J expressed concern about lawyers, experts and funders getting more out of the settlement than the class members, but nevertheless approved a $16.85 million settlement where 31% went to legal costs, 30% went to the funder and the remaining 39% was distributed to the class members. Although considering the settlement to be "very borderline" his Honour approved the legal costs as fair and reasonable; (b) in Re Banksia Securities Limited (Rec & Mgr Appted) [2017] VSC 148, Robson J approved a settlement of $5.2 million out of which 49% went to legal costs, 16.5% went to the funder and the remaining 34.5% was distributed to class members; (c) in Camping Warehouse v Downer EDI [2016] VSC 784, Digby J approved a settlement of $8.25 million plus agreed legal costs of $2.85 million; and (d) in McAlister v State of New South Wales (No 2) [2017] FCA 93, Mortimer J approved a settlement in which the sum for distribution to class members was $4.05 million plus legal costs. The respondent had agreed to pay the applicant's legal costs of $3 million plus a further amount for the balance of the applicant's legal costs to be agreed or assessed by the Court. At issue between the parties was a claim for further legal costs of $3.9 million. Her Honour noted that the amount of costs in issue between the parties was almost as much as the compensation payment, but said on the basis of the evidence that the amount was "explicable". 152 In conclusion, Quinn Emanuel argues that while class members may have an understandable sense of grievance that, after payment of reasonable legal costs and funding charges, they may receive a lesser percentage of the $12 million settlement than they might consider desirable, this must be considered in context. The relevant context is not only class members' expectations as to what they might have received had the matter gone to trial and succeeded, but also the prospect that they might not have succeeded and the reality that, but for the investment by Quinn Emanuel and Vannin, class members would not have recovered anything at all.

Analysis 153 At the heart of Quinn Emanuel's submissions is the proposition that until around the time of the mediation it was exceedingly difficult if not impossible (a) to assess class members' losses and estimate the aggregate value of class members' claims; and (b) to assess how many or what proportion of class members' claims were likely to be statute-barred, which also played into the difficulty of estimating aggregate claim value. 154 As I will explain, I do not accept that the task of coming to a reasonable estimate of aggregate claim value was impossible. Indeed it was essential for Quinn Emanuel to undertake the work necessary to reach a reasonable estimate of aggregate claim value much earlier than the firm did, and essential for that estimate to take into account the possibility that many class members' claims were likely to be statute-barred. 155 It is important to keep in mind that Quinn Emanuel's claimed costs are $4,577,408, largely comprised of its fees. When the disbursements Quinn Emanuel incurred of $1,941,877 are also taken into account the firm ran up costs totalling approximately $6,519,285. If legal costs of $6.5 million were to be approved, that would soak up more than half the settlement before any deduction for litigation funding charges. 156 I consider Quinn Emanuel ran up costs which are plainly disproportionate to what could reasonably be expected to be achievable in the litigation. 157 First, and most fundamentally, the fees and disbursements are disproportionate because Quinn Emanuel did not perform the necessary work to reach a reasonable estimate of the aggregate value of class members' claims until about the time of the mediation on 31 January 2018, which was shortly before trial. Nor, until after the mediation, did the firm perform the work to reach a reasonable estimate of the approximate number and/or aggregate value of class members' claims that were likely to be out of time. By the time Quinn Emanuel realised that a great many of the registered class members' claims were likely to be statute-barred it had run up costs which were disproportionate. 158 There is little force in Quinn Emanuel's contention that the Court should studiously avoid seeking to evaluate or second guess the firm's conduct during the litigation. In the circumstances of this case, in deciding whether costs are proportionate it is necessary to give close consideration to the way the firm conducted the case. The authorities on which Quinn Emanuel seeks to rely relate to the considerations regarding whether to approve a settlement, not deciding whether the applicant's solicitor's costs are proportionate. 159 I accept Mr Scattini's evidence that the task of estimating class members' losses, and the task of ascertaining how many or what proportion of class members' claims were likely to be out of time and their approximate value, was difficult. I accept too that it was time-consuming and that any estimate of loss would be inexact. 160 However, as I have said, I do not accept it was impossible. In my view it was essential for the necessary work to be undertaken. Mr Scattini was aware from an early date (or at least should have been aware) of the risk that many class members' claims might be statute-barred at the time the class action was commenced. Amongst other things, the materials show: (a) Sherwin became a client of DDH in around 2003 and began transitioning its clients' cash accounts to DDH in December that year. That is the earliest time that Sherwin could have made unauthorised withdrawals from its clients' MMDAs through DDH and BoQ; (b) Mr Scattini states that "given the dates in issue, I presumed at least some of the potential Group Members claims would likely be out of time and liable to a successful limitations defence"; (c) Mr Scattini states that in the period before the proceeding was commenced: By this time Quinn Emanuel and Counsel were concerned that many of the Group Members may be out of time for their breach of contract claims. However, we considered there may be prospects that a claim could be brought in equity even for those Group Members, because it was arguable that no limitation period would be applicable. Furthermore, to the extent that the claims were premised on a practice (rather than specific transactions), it was unclear when that practice had materialised. (d) on 9 March 2016 Mr Scattini wrote to the solicitors for both respondents and requested a standstill agreement to toll the statute of limitations for the class members in the proposed class action. The respondents did not agree to do so; (e) Mr Scattini states that in selecting a lead applicant he endeavoured to select a class member whose claims would be unlikely to be time-barred on any basis; (f) Mr Coope states that by an email dated 4 March 2016 he agreed to fund the proceeding on an 'open' class basis "because of Mr Scattini's concern that some group member claims could potentially be out of time if the action proceeded as a closed class"; (g) on 9 March 2016 Mr Scattini wrote to the applicant and said that it was arguable that the limitation period for some of the transactions which form the basis of its claims will expire on 12 March 2016, and accordingly the proceedings would be speedily issued; and (h) in July 2016 each of the respondents pleaded that any class members' claims based on or relating to withdrawals from their MMDAs prior to 14 March 2010 were statute-barred. 161 Quinn Emanuel and counsel considered (correctly in my view) that the earliest date the relevant causes of action could have accrued was the date upon which the applicant or class member suffered an unauthorised withdrawal. At the time the proceeding was commenced Mr Scattini was, or should have been, cognisant of the possibility that Sherwin may have been making fraudulent withdrawals from class members' MMDAs well before March 2010. He went to some trouble to select the Petersen Superannuation Fund as the lead applicant because it was unlikely to be statute-barred, but then gave insufficient attention to whether class members' claims were within time. 162 Mr Scattini says that he proceeded on the basis of an assumption, based on a sample set of documents, that most of Sherwin's fraudulent transactions occurred after March 2010 (and were therefore within time) and that such transactions increased over time, which he says is a feature of a Ponzi scheme. That assumption was not without foundation but it was not sufficiently well grounded to justify incurring $6.5 million in fees and disbursements without doing the work necessary to reach a more reliable estimate of the aggregate value of class members' claims likely to be within time. 163 In my view the insufficient attention Quinn Emanuel gave to the effect that the limitations issue could have on aggregate claim value can be seen in Mr Scattini's instructions to Sapere. He instructed Sapere to build a model capable of estimating class members' losses by recalculating the monthly balances of their MMDAs commencing from a start date of January 2004. As a result Sapere's modelling is likely to have included losses which were out of time. 164 In circumstances where Mr Scattini was (or at least should have been) aware of the risk that many class members' claims could be statute-barred it was wrong for Quinn Emanuel to expend $6.5 million in fees and disbursements without reaching a more reliable estimate of the approximate value of class members' claims that were likely to be within time. Mr Scattini and his team did not do so until the days after the mediation and I am satisfied on the materials that they then reached a considerably lower estimate of aggregate claim value. 165 Further, much of Mr Scattini's evidence about the difficulties of estimating class members' losses is based on the fact that Quinn Emanuel did not receive all MMDA statement histories until late in the litigation. I consider the firm should take a large share of the responsibility for that. The evidence shows that: (a) Quinn Emanuel sought discovery from DDH, limited by agreement to the period from 1 January 2009 to 1 February 2013. That discovery included the allegedly suspicious emails, completed application forms for MMDA accounts and MMDA statements, and it was provided by 7 April 2017. While it would have been difficult, it is not clear why the cases of sufficient class members could not have been worked up earlier and some preliminary loss modelling undertaken; (b) it was not until seven months later, on 31 October 2017, that Quinn Emanuel served a notice to produce seeking further MMDA statements covering a longer period. DDH produced those documents on 13 December 2017. Again, it is not clear why it took seven months for Quinn Emanuel to realise that the discovery was inadequate or why the firm waited until 31 October 2017 to seek further documents; (c) it was not until 21 December 2017 (less than three months before trial) that Quinn Emanuel requested DDH to provide full statement histories for MMDAs which were to be analysed by Sapere. DDH produced those documents on 9 January 2018. At that point Quinn Emanuel had complete MMDA statement histories for 85 of the 193 registered class members. It is not clear why the firm left its request so late; (d) it was not until 2 February 2018 (after the mediation and less than two months from trial) that Quinn Emanuel finally requested DDH provide the MMDA statements of all registered class members which had not already been provided. DDH provided them on 6 February 2018 and then Quinn Emanuel had MMDA statements for all 193 registered class members. (e) Mr Scattini states that at that time "access to Group Members' full MMDA statement histories became necessary in order to ascertain which of the 193 Registered Group Members' claims were within time". It is not clear why the firm left that important work to such a late date. It appears that DDH produced the requested documents with reasonable speed but to the extent DDH did not, it was for Quinn Emanuel to pursue that issue with the docket judge. 166 I accept that Quinn Emanuel did not know the identity of all registered class members until 14 December 2017, when the class closure orders took effect. However Vannin's submissions state that 60 class members entered into funding agreements (at another point it says 45 persons did so) and given the book building that occurred it is reasonable to assume that many did so before the registration process took place. Given that it was only based on information about 40 class members, I find it difficult to see why the Sapere loss modelling could not have been commenced much earlier. 167 Pursuant to s 37M and 37N of the Act Quinn Emanuel was required to run the case in a proportionate way. In this instance that meant that the firm was required to perform the necessary work to reach a reasonable estimate of approximate aggregate claim value, and the effect of time limitations issues on that estimate, before running up $6.5 million in costs. If necessary the firm should have applied to the docket judge for directions which would have allowed it to undertake such work before incurring disproportionate costs. 168 Second, it was always likely that a six year limitation period would apply to class members' breach of contract claims, and that was the class members' best case. It is clear on the materials that the knowing assistance claim was difficult, and that was the only area of real uncertainty in relation to the applicable limitation period. A six year limitation period was the most likely outcome for class members. 169 Mr Scattini states that he and counsel took the view that it was arguable that no limitation period would be applicable to the equitable claims of knowing assistance. However, the orthodox approach is that the time limit in equity follows the statute unless there is some fraudulent concealment or other conduct by the respondents involving a consciousness of wrongdoing. While one should be careful to avoid hindsight bias, there is nothing in the evidence that might justify the view that the respondents were involved in fraudulent concealment and little that might justify the view that the respondents had some consciousness of wrongdoing; certainly not enough to justify running up $6.5 million in fees and disbursements. 170 Third, Quinn Emanuel submits that at the outset of the litigation it formed the view that there was a "reasonable probability" the claim was worth $60 million, and therefore the costs incurred are proportionate. But the evidence does not establish that. Mr Scattini states that his initial view was that the case against the respondents "could have concerned" losses in the order of $20 million or more, based on publicly available reports of what had been defrauded from persons who retained Sherwin as their financial advisor and deducting the amount he understood was claimed in another class action commenced in relation to Sherwin's conduct. He says that to that could be added lost opportunity damages and interest. That estimate was not much more than a stab in the dark. 171 Mr Scattini then says that, at the time the proceeding was filed, he believed the aggregate claim value could rise substantially if a larger number of suspicious emails were uncovered. This view was partly based on his review of transcripts of ASIC examinations and an affidavit of an ASIC lawyer. He says that with the application of appropriate counterfactuals and interest he believed at that time that the 'potential' recovery from the proceedings "could have been in the order of $60 million or more." 172 That belief as to the 'potential' recovery was premised on a number of assumptions favourable to the applicant. Further, and importantly, the evidence shows that Mr Scattini did not properly consider the possibility that many class members' claims would be statute-barred. In my opinion the $60 million estimate was another stab in the dark and not a sufficient basis to run up $6.5 million in fees and disbursements. 173 That is not to say that it was unreasonable for Quinn Emanuel to commence the proceeding on the basis of a rough and ready estimate that aggregate claim value might potentially be up to $60 million. In class actions it is commonly the case that a good estimate of aggregate claim value cannot be made until later. How far down the road Quinn Emanuel should have proceeded, in the circumstances of the present case, before undertaking the necessary work to reach a more reliable estimate of aggregate claim value is a different question. 174 Fourth, Mr Scattini says that his view of aggregate claim value was in part predicated on the class remaining 'open' and he says he opposed the class closure orders for this reason. It is incorrect to suggest that the class closure order is the reason for the low settlement and high costs. That order closed the class for the purposes of settlement but not for the purposes of any judgment, and if Quinn Emanuel and counsel had considered the case was likely to succeed at trial and that sufficient class members' claims remained within time, they could have recommended refusal of the settlement offer and proceeded to trial. All class members would have been able to participate in any judgment that was obtained. 175 Fifth, the proportionality of costs should be considered in light of the complexity of the case, but the complexity of the present case is not such as to justify the claimed costs. The proceeding involved some substantive and procedural complexity but, as the Referee concluded, it was not unusually complex for a class action. 176 Sixth, the proportionality of costs should be considered in light of the forensic attitude and conduct of the respondents, and I have no doubt that the respondents' strenuous defence increased costs. It should however have been obvious that an allegation that a major bank had knowingly assisted fraudulent activity would be vigorously defended and that substantial costs would be incurred as a result. That can be said to have heightened the requirement for Quinn Emanuel to undertake sufficient work to reach a reliable estimate of the aggregate value of class members' claims likely to be within time, much earlier than the firm did. 177 Seventh, Quinn Emanuel's reliance on other class action settlement approval decisions is misplaced. Those decisions turn on their own facts and the facts of the present case bear little relationship to them. A determination of whether costs are proportionate involves a fact-intensive analysis and it cannot be made merely by a comparison with other cases of the costs approved as a percentage of the settlement amount. 178 Eighth, Quinn Emanuel's reliance on the passage cited from the recent VLRC Report is misplaced. The VLRC Report expressly states that acceptance of expert evidence as to the reasonableness of costs is subject to the question of proportionality, and in the present case the Referee did not deal with proportionality. 179 Ninth, the fact that the applicant was informed prior to settlement of the quantum of Quinn Emanuel's costs and that court-approved costs would be deducted from the settlement sum is not to the point. It was open to the applicant and class members to object to the claimed costs and they have done so. Nor is it to the point that class members were informed of the quantum of the claimed costs in the Notice of Proposed Settlement. Upon being given notice of the quantum of legal costs an unusually high percentage of class members objected to settlement approval on the basis that the costs are excessive. 180 Tenth, the Referee concluded that Quinn Emanuel is not entitled to an uplift fee. Putting that asserted entitlement to one side, I accept that the claimed costs represent a reduction from the amount that Quinn Emanuel is entitled to charge under the costs agreement. The question nevertheless remains whether the claimed costs are proportionate. Nor does it advance the matter far for Quinn Emanuel to submit that it did not exercise every right to payment to which it may have been entitled under the costs agreement (e.g. an annual increase in charge-out rates), or to rely on the fact that the costs agreement did not provide for interest on accrued costs despite this being said to be "commonly done" in class actions. 181 In these circumstances it is appropriate to refuse to approve Quinn Emanuel's claimed costs and instead to approve them in a reduced amount. First, I note that the Referee found that some fees and disbursements incurred by Quinn Emanuel were not reasonably incurred, being: (a) $176,423 in fees already paid by Vannin; (b) $105,446 in unpaid fees relating to the security for costs application; (c) $133,519 in disbursements paid by Vannin; and (d) $4,928 of the disbursements paid by Vannin in relation to the security for costs application (which appear in part to be a duplication of amounts contained in the figure of $133,519). I adopt the Referee's report in this regard. Quinn Emanuel does not seek to recover fees associated with resisting the security for costs application so the amount of $105,446 in unpaid fees for that application can be put to one side. 182 The burden of the disallowance of fees and disbursements that were not reasonably incurred by Quinn Emanuel should fall on it rather than on Vannin. Vannin did not incur the costs and it was obliged to pay them on receipt of an account. It is appropriate to reduce Quinn Emanuel's approved costs by the amount of the disallowance. 183 My concerns in relation to Quinn Emanuel's claimed costs, however, go beyond the disallowed items. As I have said, I consider the firm ran up fees and disbursements which are disproportionate to what could reasonably be expected to be achieved in the litigation. In these circumstances, rather than treating the fees and disbursements which were not reasonably incurred separately, I will subsume them into the reduction in the claimed costs based on the lack of proportionality. 184 It is unnecessary for the Court to embark on an item by item reduction on proportionality grounds. The Court's task in a settlement approval application is not a taxation and it is allowable to take a broad brush approach. The reduction on proportionality grounds could be made to either fees or disbursements but it will be simpler to apply the reduction to Quinn Emanuel's unpaid fees. By this route Vannin will be reimbursed the disbursements it paid which Quinn Emanuel either unreasonably or disproportionately incurred, and Quinn Emanuel's payment from the settlement fund will be reduced by that amount. 185 It would be open to make a percentage reduction based on the $6.5 million of fees and disbursements Quinn Emanuel ran up, but the evidence does not permit me to sufficiently understand which disbursements may have been avoided had Quinn Emanuel taken a proportionate approach. I therefore make the percentage reduction based on the claimed costs of $4.577 million, which are largely Quinn Emanuel's fees. 186 It is appropriate to reduce the claimed costs of $4,577,408 by 40% (or $1,830,963) to the sum of $2,746,445. I therefore approve the amount of $1,744,037 ($2,746,445 less the amount of $1,002,408 already paid to the firm) to be deducted from the settlement fund for Quinn Emanuel's costs. Taking into account disbursements of $1,941,877 Quinn Emanuel's total costs will be $4,688,322. 187 In the circumstances of this case costs of approximately $4.69 million are proportionate. Amongst other things, such an amount is more than the class members will receive from the settlement, and sufficient to have allowed Quinn Emanuel to undertake the work to reach a realistic view of what was reasonably achievable in the litigation and then seek to resolve the case on that basis.

G WHETHER GILBERT + TOBIN'S COSTS ARE REASONABLE 188 Gilbert + Tobin quantifies the fees and disbursements it incurred in acting for the applicant in the settlement approval application from 26 March 2018 to 25 May 2018 in a total of $262,705. Having regard to the circumstances of the case both Gilbert + Tobin and counsel have reduced their fees, and the Court thanks them for doing so. Gilbert + Tobin reduced its fees by $57,508 from $166,417 to $108,909. Even without Gilbert + Tobin's reduction the Referee concluded that the fees and disbursements are reasonable. I adopt the Referee's Report in that regard. 189 For the period after 25 May 2018 Gilbert + Tobin seeks approval of a further $25,000 (plus GST) for the balance of the settlement approval application and a further $10,000 (plus GST) in fees and disbursements associated with any final communications to the Court, the Scheme Administrator and counsel in connection with the conclusion of the proceeding. I approve those amounts as reasonable. 190 Gilbert + Tobin took over the conduct of the settlement approval application following Quinn Emanuel giving notice of intention to cease acting, doing so at a point when the application was something of a poisoned chalice. The Court thanks the firm for doing so and for the high quality of its work.

H WHETHER THE FUNDING CHARGES ARE REASONABLE AND PROPORTIONATE

The Vannin costs 191 Vannin seeks a reimbursement of legal costs, disbursements and other expenses of the proceeding (Vannin Costs) which total $4,978,001.52, made up as follows: (a) professional fees paid to Quinn Emanuel of $1,002,408; (b) third party disbursements of $88,446.47 not invoiced through Quinn Emanuel; (c) ATE premiums paid in a total of $1,421,200; (d) costs incurred by Vannin for its own legal advice of $267,772.02; (e) payment to Gilbert + Tobin of $250,000 on account of costs; (f) disbursements incurred by Quinn Emanuel and paid by Vannin of $1,941,877; and (g) an outstanding third party disbursement of $6,297.50 incurred around February 2018 but not notified to the Court until September 2018.

Fees and disbursements incurred by Quinn Emanuel 192 Vannin relies on the Referee's conclusion that: (a) all of Quinn Emanuel's professional fees (paid and as yet unpaid) are fair and reasonable, save that: (i) Quinn Emanuel's fees paid by Vannin should be reduced by $176,423; and (ii) Quinn Emanuel's unpaid professional fees relating to the security for costs application should be reduced by $105,446; (b) all disbursements paid by Vannin (including Vannin's own legal fees and the applicant's costs) are fair and reasonable, save for: (i) $133,159 (incl. of GST) in disbursements paid by Vannin to third parties; (ii) $4,928 of disbursements paid by Vannin in relation to the security for costs application; and (c) Gilbert + Tobin's costs are fair and reasonable. 193 I adopt the Referee's report but note that he did not determine whether Vannin ought to be reimbursed the fees and disbursements it has paid which were not reasonably incurred by Quinn Emanuel. Again, any issue regarding Quinn Emanuel's unpaid professional fees relating to the security for costs application can be put aside because the firm has waived those fees. 194 Vannin submits that it should be reimbursed all amounts paid to Quinn Emanuel for fees and all amounts paid to third parties for disbursements incurred by Quinn Emanuel in the proceeding, notwithstanding that the Referee found that some of the Quinn Emanuel fees and disbursements were not reasonably incurred. The applicant supports that submission. 195 As I have said, Vannin was contractually bound under the litigation funding agreements to pay invoiced fees and disbursements within 15 days of receiving a valid funding notice, and it could only refuse payment if it disputed that the fees or disbursements fell within the scope of the retainer. Mr Coope says that he reviewed Quinn Emanuel's invoices upon receipt, and raised queries from time to time, but did not raise a dispute. He says that, having kept an eye on the fees and disbursements, Vannin paid the amounts due under the funding notices within or close to their due date, as required. I accept that Mr Coope reasonably assumed that Quinn Emanuel properly discharged its duties as the applicant's solicitor and only charged fees and disbursements that were legitimately and properly chargeable. 196 As I have said, I consider the burden of any fees or disbursements which were not recently incurred should fall on Quinn Emanuel rather than upon Vannin or the class members. Vannin should be reimbursed all the fees and disbursements it has paid, including those later found by the Referee not to be reasonably incurred. Since I have allowed Vannin to recover the full amount of the fees and disbursements it has paid, and I have approved Quinn Emanuel's claimed costs with a 40% reduction, it is unnecessary to deal with the submissions dealing with item by item reductions.

The ATE policy premium 197 Under the funding agreement between Vannin and the applicant, Vannin agreed to indemnify the applicant against any adverse costs order in the proceeding, up to a specified cap. Entering into ATE insurance is a condition precedent of the agreement. 198 Vannin obtained ATE insurance through AmTrust Europe Limited (AmTrust) for any adverse costs order up to the specified cap. Vannin paid the initial premium of $355,300 on 20 June 3016. As the insurance is "after the event" there is also a contingent premium payable on success. A contingent premium of $1,065,900 is payable upon settlement approval and Vannin seeks an order for reimbursement of the total ATE premium of $1,421,200. The definition of "Funder's Costs" in the funding agreement expressly provides that the premium payable for ATE insurance must be reimbursed to Vannin from any successful outcome in the litigation, in first priority. 199 The applicant opposes the deduction from the settlement fund of the $1,421,200 cost of the ATE insurance. It submits that such insurance was only for Vannin's benefit since the insurance covered the risk of an adverse costs order to which only Vannin was exposed pursuant to its indemnity to the applicant. 200 Vannin says it should be reimbursed and argues that obtaining ATE insurance is a condition precedent of the funding agreement, that such insurance was part of the contractual bargain between the parties, and that the overall benefit of the insurance is for the applicant and class members. It contends that, given the ATE insurance is at a reasonable rate, is recoverable as "Funder's Costs" under the funding agreement and it was a cost actually incurred, it should be reimbursed. 201 Funding agreements usually provide for the funder to indemnify the applicant against any adverse costs order, and the risk the funder takes in that regard is often important to the percentage funding rate. Of course, the parties to funding agreements may structure their arrangements largely as they wish but in my experience Vannin's funding agreement is unusual. Under Vannin's agreement the applicant and class members are required to pay a funding commission of the greater of: (a) 25% of any gross settlement; or (b) three times the aggregate of all (broadly based) costs in the proceeding, adverse costs, and any security for costs paid in cash; and then also to reimburse the substantial cost of any ATE insurance. 202 By asking the Court not to approve reimbursement for the ATE insurance, the applicant effectively asks the Court to rewrite the funding agreement. I consider the Court has power under ss 33V or 33ZF to vary the funding commission required to be paid by class members under their funding agreements: see Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433 at [113]-[132]; Blairgowrie at [101] and Mitic v OZ Minerals Limited (No 2) [2017] FCA 409 at [27]-[29] (Middleton J). However, that power has recently been doubted (see Liverpool at [148]) and varying other terms of the agreement would be a further step. In my view the fact that Vannin was required to advance only $355,300 to pass off the risk of adverse costs, and that the $1,421,200 total cost of the ATE insurance is ultimately carried by the applicant and class members should be addressed in a different way. It is relevant to the level of risk Vannin assumed and what constitutes a reasonable reward for that risk.

The costs of the security for costs application 203 The parties spilled a lot of ink in relation to the costs incurred by Quinn Emanuel in defending the respondents' application for security for costs. Quinn Emanuel has, however, waived its fees in that regard, and the dispute boils down to where the burden of the disbursements incurred in defending the application should fall. 204 The facts are as follows: (a) the respondents sought security for costs; (b) under the funding agreement Vannin had a choice to provide security for costs itself, by way of a Deed of Indemnity, or under an ATE policy; (c) Vannin offered to provide an ATE insurance policy covering the respondents' costs up to a fixed cap; (d) the respondents did not accept this was adequate security and filed an application for security for costs; (e) Mr Scattini states, and I accept, that he and counsel firmly advised Vannin that the ATE policy was unlikely to constitute adequate security. He advised that it was in the applicant's interest for Vannin to provide a Deed of Indemnity, to provide a bank guarantee or to pay reasonable security in cash, and that unless Vannin did so the security for costs application was likely to succeed; (f) Vannin did not accept this. It sought and obtained advice from independent senior counsel that there was a reasonable prospect the ATE policy would be considered adequate security; (g) Yates J held that the ATE policy did not constitute adequate security for costs: Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited [2017] FCA 699; and (h) Vannin then agreed to pay $1.486 million into Court as security for costs, as Mr Scattini had earlier recommended. 205 In essence the applicant contends that Vannin was motivated by its own interest in opposing the security of the costs application. It argues that by requiring Quinn Emanuel to defend the application against the view of the lawyers retained in the case Vannin unreasonably incurred costs and it should not be reimbursed those costs. 206 Vannin submits that it was entitled under the funding agreement to elect to provide the ATE policy, and to press for its use because it would be less expensive (ultimately) for the applicant and class members. It disagrees that the alternative options would have required Vannin to hazard more of its own funds and it seeks reimbursement of the disbursements incurred by Quinn Emanuel in defending the application. 207 On my view of the evidence Vannin opposed the security for costs application largely in its own interests. Essentially it did so because if an ATE policy was found to be adequate security it could avoid the substantial upfront cost of providing a Deed of Indemnity or paying security in cash. 208 Ordinarily, I would expect costs incurred at a funder's behest in unsuccessfully opposing an interlocutory application, against the firm advice of the applicant's lawyers, to be borne by the funder. However, under the definition of "Funder's Costs" Vannin is entitled to recover from any settlement fund, as first priority, "all and any costs and expenses (including disbursements) incurred directly or indirectly by the Funder in relation to the Action" including "any fees and costs in respect of securing… Security for Costs". 209 Putting to one side whether there is power to effectively rewrite the funding agreement in the way the applicant requests, the fact that these costs must be reimbursed should be addressed as part of considering the costs and risk Vannin took on and therefore what is a reasonable funding commission.

The costs incurred by Vannin for its own legal advice 210 Vannin seeks orders for reimbursement of costs of $267,772 it incurred in obtaining its own legal advice from Ashurst and Baker McKenzie, including advice of senior counsel. The relevant advices pertain to: (a) an initial assessment of the prospects of success in the proceeding; (b) the prospects of the ATE policy being accepted as adequate security for costs (which I have dealt with above); and (c) the prospects of success in the proceeding, obtained shortly prior to the mediation. 211 The Referee concluded the quantum of the costs incurred for the advices was fair and reasonable, but there remains a question as to whether such costs should be reimbursed to Vannin by deduction from the settlement fund. 212 The applicant argues that the costs Vannin incurred in retaining Baker McKenzie and senior counsel to advise it on the prospects of success leading up to the mediation were incurred solely in Vannin's commercial interests, as part of the cost of its business as a commercial litigation funder, and they should not be reimbursed from the settlement fund. 213 Vannin submits that the definition of "Funder's Costs" entitles it to recover from the settlement fund its legal costs incurred directly or indirectly in relation to the proceeding, the funding agreements and the retainer between Quinn Emanuel and the applicant. It argues: (a) it was appropriate for it to obtain initial legal advice in relation to the prospects of success and "due diligence" costs are expressly included within the definition of "Funder's Costs"; (b) it was appropriate to obtain a second opinion in relation to the prospects of successfully opposing the security for costs application, doing so was in the interest of the applicant, and such costs fall within "Funder's Costs"; and (c) in circumstances where it had developed concerns about the conduct of the litigation by Quinn Emanuel it was reasonable for Vannin to take the precaution of obtaining a second opinion as to the prospects of the litigation prior to the mediation, and to relay the substance of the opinion to the applicant. It says that such costs also fall within "Funder's Costs". 214 Of course, a funder may seek any independent advice it wishes at any point in litigation, but it is unusual for a funding agreement to directly fix the applicant and class members with the costs incurred in obtaining such advice. In the present case the applicant and class members were already paying for the applicant's lawyers through their contractual promises to pay the agreed funding commission, the applicant was not told that Vannin was seeking a second opinion from senior counsel in the lead up to the mediation, and the applicant did not instruct that such advice be obtained. There is no evidence that the applicant had lost confidence in Quinn Emanuel so as to require a second opinion, and it is unlikely that the applicant and class members would have wished to have the costs of two sets of solicitors and counsel working on the same issues deducted from any settlement that might be achieved. 215 On my view of the evidence Vannin incurred: (a) the cost of the initial prospects advice in order to decide whether or not to fund the proceeding; (b) the cost of the security for costs advice because it did not accept Quinn Emanuel's and counsel's advice (which advice later proved correct); and (c) the costs of a second opinion prior to the mediation because it had lost confidence in Quinn Emanuel's opinion. Those costs were incurred in pursuit of Vannin's own commercial interests rather than those of the applicant and class members and, ordinarily, they would be carried by the funder. However, under Vannin's unusual funding agreement the costs of obtaining its own advice falls within the definition of the "Funder's Costs", and therefore must be reimbursed to Vannin from any successful outcome in the proceeding. 216 Again, the fact that such costs are passed on to the applicant and class members is relevant to the costs and risks taken on by Vannin in providing funding for the proceeding, and what constitutes a reasonable funding commission.

Whether a Common Fund Order should be made, and if so at what funding rate

Should a common fund order be made? 217 The proceeding was commenced on an "open class" basis and the class includes persons who have entered into a funding agreement with Vannin (funded class members) and persons who have not (unfunded class members). The applicant and approximately 60 class members have entered into a funding agreement with Vannin at a funding rate of 25% of the gross settlement, and there are 193 registered class members in total. 218 Vannin seeks a common fund order at 25% of the gross settlement, which equates to $3 million. The applicant initially opposed the common fund order and argued for a funding equalisation order instead, but in the finish it accepted that a common fund order is simpler and more transparent. However, it says that a 25% funding rate is excessive and should not be approved. One objector opposes a common fund order per se, and other objectors oppose the 25% funding rate. 219 I consider a common fund order to be appropriate and in the interests of justice in the proceeding. 220 First, without an order equalising the payment of funding charges across the class it seems likely that the entirety of any recovery by funded class members would go towards paying Vannin's funding charges. Funded class members comprise less than one third of the registered class members and there is no good reason why they should carry the burden of the proceeding when unfunded class members also benefit from it. 221 Second, a common fund order will mean that all class members will pay the same pro rata share of legal costs and funding commission from any amounts they receive from the settlement. It is in the interests of justice in the proceeding that the burden of the legal costs and funding charges incurred in achieving the settlement fall equally upon all class members who stand to benefit from it. 222 Third, a common fund order is a simpler and more transparent mechanism than a funding equalisation order for fairly apportioning funding charges across the class. It is easier for class members to understand and it avoids disputes about whether, on their proper construction, the funding agreement permits Vannin to charge a funding commission on the "grossed up" amount redistributed to funded class members from unfunded class members' recoveries. 223 Fourth, a common fund order means that funded class members (who have entered into funding agreements which require them to pay a funding commission of the greater of: (a) 25% of any gross settlement; or (b) three times the aggregate of all (broadly based) costs in the proceeding, adverse costs, and any security for costs paid in cash) get the benefit of funding at a Court-approved funding rate, which, for the reasons I will explain, is materially lower. 224 Further, if a common fund order is not made, unfunded class members (who have not entered into funding agreements) are likely be saddled with a funding rate based on the higher funding rates in the funding agreement through a funding equalisation order. Through a common fund order they too will get the benefit of a lower Court-approved funding rate. 225 Class members may, of course, be able to obtain the benefit of a Court-approved funding rate without a common fund order. The Court has held that it has power to vary the funding commission required to be paid by class members under their funding agreements, but that power has recently been doubted. Allowing the application for a common fund order avoids any controversy as to the Court's power to approve a funding commission in a lower amount. 226 Fifth, unfunded class members were informed in the Opt Out and Registration Notice that Vannin may apply for them to pay the same funding rate as funded class members. The Notice of Proposed Settlement informed class members that Vannin would seek a common fund order, and they have had the opportunity to object and file submissions in that regard. To the extent that some class members have objected the Court will take those objections into account. 227 Having said this, a common fund order will only be appropriate and in the interests of justice in the proceeding if it is made at a reasonable rate. The real question is what is a reasonable funding rate in the circumstances of the present case.

What is a reasonable and proportionate funding rate 228 Vannin argues that the Court should approve a funding rate of 25% of the gross settlement which equates to a funding commission of $3 million. As I have said, if a $3 million funding commission were to be approved, on top of the Vannin Costs and Quinn Emanuel's claimed costs (and the other deductions) there would only be about $250,000 left for distribution to the class members. 229 Vannin submits however that it is not responsible for class members' investments in MMDAs through Sherwin or for the modest outcome in the litigation. It contends that, although a $3 million funding commission represents a substantial proportion of the settlement after deduction of reasonable fees and disbursements, that is not due to any fault of Vannin and simply reflects the fact that class members' claims proved to be worth less than they, Quinn Emanuel or Vannin had originally hoped. 230 Vannin further argues that it contracted with the applicant and funded class members to provide litigation funding for reward; that it performed its side of the bargain and expended substantial monies to fund the attempt by the applicant and class members to recover value for their claims. It contends that having regard to the circumstances that existed at the time the funding agreements were entered into, and Vannin's substantial exposure that it accepted in good faith as the proceeding continued, a common fund order at a funding rate of 25% on the gross settlement constitutes reasonable remuneration for the risk it took. 231 Vannin's submissions are not without merit but in the circumstances of the present case and by reference to the principles set out in Money Max Int Pty Limited (Trustee) v QBE Insurance Group Limited (2016) 338 ALR 188; [2016] FCAFC 148 (Money Max) at [80] (Murphy, Gleeson and Beach JJ), I consider it appropriate to set a funding rate very much at the low end of the range. I will approve a funding commission of $1 million which equates to a funding rate of 13.7% of the net settlement (after approved fees and disbursements) or 8.3% of the gross settlement. 232 First, a funding commission should be proportionate to the amount sought and recovered in the proceeding: Money Max at 80. 233 Discerning the amount sought in the present case is not straightforward. Like Mr Scattini, Mr Coope's initial approach to estimating aggregate claim value was really just a stab in the dark. He says that in around February 2016 he formed the view that the "maximum amount" recoverable in the proceeding would be more than $60 million. He did so on the basis of the Administrator's Report to Creditors in respect of the Sherwin companies, which identified that approximately $85 million of total funds under management had been lost through the fraud. Of that loss, $25 million was attributed to funds invested with Wickham Securities (it is not clear whether that attribution was by Mr Coope or by the Administrator) which was the subject of a separate class action, which left a balance of at least $60 million that Mr Coope concluded was "potentially recoverable" in the proposed class action. 234 Putting to one side the unreliability of such a rough and ready estimate, it had the obvious problem that it did not take into account the risk that many class members' claims might be out of time. 235 Importantly, Mr Coope says that Mr Scattini did not tell him that Quinn Emanuel and counsel were concerned that many class members' breach of contract claims might be out of time. He states that Quinn Emanuel's only communication to him about limitation period difficulties concerned the applicant's claim. In that regard he says that by mid-February 2016 he understood that Mr Scattini was concerned to commence the class action by a particular date in March 2016 so as to avoid any argument about the expiry of a limitation period in respect of the applicant's claim only. 236 He also states, however, that by an email dated 4 March 2016 he agreed to fund the proceeding on an 'open' class basis "because of Mr Scattini's concern that some group member claims could potentially be out of time if the action proceeded as a closed class." 237 I have two difficulties with Mr Coope's evidence in this regard. First, given that he understood the applicant's claim faced a risk of being statute-barred it is hard to see how he would not also have understood that the same limitation period may also affect class members' claims. Second, on its face the contention that Mr Coope did not know that class members' claims faced a risk of being statute-barred appears to be inconsistent with his statement that his reason for agreeing to fund the case on an open class basis was to address Mr Scattini's concern that a closed class could mean some class members' claims would potentially be out of time. 238 However, Mr Armstrong QC, senior counsel for Vannin, submits that Mr Coope's evidence should be understood as showing that he thought that any potential limitation period difficulties in relation to class members' claims were solved by bringing the proceeding as an open class action. 239 It is not clear to me that this is what Mr Coope's evidence meant but not much turns on it. If Mr Coope had such an understanding it was completely erroneous. Pursuant to s 33ZE of the Act, the commencement of a class action operates to suspend the running of any limitation period that applies to a class member's claim. It does not, somehow, bring back within time a class member's claim that is already statute-barred. There is nothing in the materials to explain how Mr Coope could have reached so flawed a view of the operation of the Act. 240 Mr Coope is legally qualified, the materials show that he met regularly with Mr Scattini to get reports on and make decisions in the case, and he took a firm hand in directing the case. On at least one occasion he went so far as to override Quinn Emanuel's and counsel's view and on two occasions he obtained contrary legal advice. In circumstances where it should have been readily apparent that many class members' claims might be time-barred it was not reasonable or proportionate for Vannin to expend millions of dollars in funding an action based on such an erroneous understanding. Vannin directed and funded the case without requiring that the necessary work be performed to enable a reliable estimate to be made of the aggregate claim value of class members' claims within time. 241 Whether Mr Coope did not turn his mind to the potential limitation problems facing class members' claims because Quinn Emanuel did not alert him to any concerns in that regard, whether he gave insufficient attention to the issue generally, or whether he did not give attention to the issue because he misunderstood the operation of s 33ZE of the Act, the result is the same. Mr Coope continued to direct and Vannin continued to fund a case on the basis of a seriously over-blown estimate of aggregate claim value, and did not require the work to be undertaken to get to a more reliable estimate. 242 I do not accept Vannin's contention that the proportionality of the funding commission should be approached on the basis that the case was a $60 million claim. It was never realistic to expect $60 million to be achievable in the litigation and I will not assess proportionality against that amount. 243 The amount recovered in the proceeding is more straightforward. The settlement is $12 million inclusive of costs and, on the assumption that the respondents' offer includes an allowance for legal costs, proportionality should be assessed net of costs. The approved costs and disbursements are approximately $4.69 million and the net settlement (after costs) is therefore approximately $7.31 million. A $3 million funding commission would comprise 41% of the net settlement, even before taking into account the other substantial costs, and would be neither reasonable nor proportionate. 244 As Lee J said in Clarke at [29] "[t]here must be a good reason why a settlement could be considered fair from the perspective of group members, when the lawyers, experts and the funders get more out of it than the people who have allegedly suffered a wrong." There is no good reason in the present case, and in my view funding charges should only be approved in a significantly lower amount than the sought. 245 Second, the quantum of adverse costs exposure the funder assumes is an important consideration: Money Max at . 246 Under the funding agreement Vannin agreed to indemnify the applicant against adverse costs up to a specified cap, but the agreement required that ATE insurance be obtained. Vannin obtained ATE insurance at an initial premium cost of $355,300. That cost was at Vannin's risk because, if the case was unsuccessful, it could not recover that amount. 247 Importantly however, Vannin having paid that premium (and class members being obliged to pay the conditional premium from any successful outcome in the case) Vannin no longer had any adverse costs exposure. If the case was unsuccessful the insurer would pay the adverse costs up to the specified cap. The $1,065,900 cost of the contingent premium for the insurance is not Vannin's expense. It is payable only upon success in the litigation and by deduction from the settlement fund and as such it is entirely borne by the applicant and class members. 248 Further, unlike the position in Clarke (at [5]), this is not a case where the funder carried the ATE premium cost as a cost of its business. Under Vannin's funding agreement all ATE premium costs are directly recoverable by Vannin from the settlement fund. 249 It follows that Vannin's exposure to an adverse costs order was low, its expense in insuring that risk was low, and the substantial cost of adverse costs cover is ultimately directly met by the applicant and class members rather than by Vannin. 250 Third, the quantum of legal costs expended and to be expended in the litigation, and any security for costs paid, are important considerations: Money Max at . 251 Under the funding agreement Vannin was only obliged to pay Quinn Emanuel's fees up to $800,000 (although in total it paid $1,002,408 (incl. of GST)), and upon receipt of that amount Quinn Emanuel was obliged to conduct the case on a no win-no fee basis. Vannin was not required to pay Quinn Emanuel's fees after the initial period but it paid disbursements of $1.94 million. 252 In my view Vannin's expenditure on costs was at the low end, it did not face a risk paying legal fees if the case proceeded to trial, and Quinn Emanuel rather than Vannin carried the majority of costs. This also points towards a low funding commission. 253 Vannin did advance $1.486 million in security for costs, but that money was not really at risk because Vannin had taken out an ATE insurance policy. If the case was unsuccessful the insurer was obliged to pay the adverse costs and Vannin would have recovered the amount advanced. 254 Fourth, the funding agreements provide for Vannin to be reimbursed amounts incurred largely in pursuit of its own commercial interests which further reduced the level of the cost and risk Vannin took on. The reimbursements fall into three categories: (a) $255,829 Vannin paid to obtain a second opinion from Ashurst in relation to the security for costs application (including senior counsel) and a second opinion from Baker McKenzie (including senior counsel) prior to mediation in relation to the prospects of success; (b) the disbursements incurred by Quinn Emanuel in defending the security for costs application (the firm having agreed to waive its fees) which Vannin insisted on defending against the advice of Quinn Emanuel and counsel; and (c) the costs associated with the book building work undertaken to identify class members and sign them up to a litigation funding agreement. The book building work was undertaken by Quinn Emanuel (with the assistance of another law firm, Berrill & Watson) and invoiced to Vannin. The cost of book building which was largely for Vannin's benefit was thus passed on to the applicant and class members. These matters also point to a lower funding commission. 255 Fifth, it is relevant to compare the funding commission sought with those in other Part IVA proceedings and/or what is available or common in the market: Money Max at . 256 I set out the publicly available material regarding funding rates in the market in a recent settlement approval decision and I need not reiterate that: see Money Max [2018] FCA 1030 at [197]-[204]. As I said in that case (at [200]) it is appropriate to be cautious in comparing 'headline' funding rates since the reasonableness of the funding rate often depends on case-specific factors including the risks assumed by the funder through the particular funding terms. 257 In the present case, if regard is had just to the headline rate, a funding rate of 25% of the gross settlement is within prevailing market rates at the time the case was commenced. But a comparison of funding rates is only useful when one is comparing like with like and that is not the case here. That is so because, as set out above, Vannin did not assume the risks of adverse costs, passed on substantial costs to class members and was not obliged to pay most of the legal fees associated with the litigation. 258 I accept that the case was difficult and it involved significant risks on liability and quantum, and that having regard to the period over which Vannin has had its money out a funding commission at $1 million may mean that it will suffer a loss by funding the case. However, the amount that could reasonably be expected to be achieved in the litigation is low, the recovery by class members is low, Vannin's conduct in directing and funding the case without obtaining a reliable estimate of aggregate claim value of class members' claims within time was not reasonable or proportionate, and it should not receive a funding commission divorced from those matters. In the circumstances I consider a funding rate of 13.7% of the net settlement to be reasonable and proportionate, which equates to 8.3% of the gross settlement.

I WHETHER THE SETTLEMENT DISTRIBUTION SCHEME IS FAIR AND REASONABLE 259 The aim of the Amended SDS is to produce a fair, cost effective and quick process which will result in the expeditious assessment of class members' claims and distribution of settlement monies into the hands of class members entitled to recover. Its salient terms include: (a) subject to further order of the Court, any class member who did not register their claim before the 14 December 2017 class closure deadline will remain a class member for all purposes but will not be entitled to receive a distribution from the settlement fund nor to receive notices under the SDS; (b) registered class members that have suffered losses prior to 11 March 2010 will not be entitled to recover proportionately for those losses; (c) registered class members that have suffered losses after 11 March 2010 will be entitled to recover proportionately for those losses; (d) Mr Wynand Mullins, a partner of the accounting firm Ferrier Hodgson is appointed as the Scheme Administrator; (e) timelines for each step in the SDS; (f) the Scheme Administrator will establish a database of registered class members; (g) the Scheme Administrator will assess each registered class member's losses and provide an opportunity for registered class members to notify the Scheme Administrator of any errors in the loss assessment and propose adjustments, by identifying authorised transactions on their MMDA; (h) the following Court-approved amounts are to be deducted from the settlement fund: (i) Quinn Emanuel's costs; (ii) the Vannin Costs and funding commission; (iii) the costs of administering the SDS (settlement administration costs); and (iv) a payment to Mr and Mrs Petersen for the time spent providing instructions and acting on behalf of class members (reimbursement payment); (i) the Scheme Administrator will distribute the remaining settlement monies pro rata between all registered class members assessed as being entitled to recover compensation; and (j) provision for what is to be done with any unpresented cheques and residue monies after settlement distribution is complete. 260 The applicant submits that it is appropriate to appoint Mr Mullins as Scheme Administrator, that he has the capacity to undertake the required work, understands the obligation to act fairly and impartially in assessing class members' claims, and understands the obligation to seek directions from the Court should any question arise as to the proper administration of the SDS. I accept these submissions. 261 By orders on 30 May 2018 I approved an SDS which provided that the Scheme Administrator would undertake a review of registered class members' MMDA statements to determine the net outflow (if any) of transactions after 10 March 2010 from each registered class member's MMDA to a series of Sherwin accounts nominated in a schedule to the SDS. The Scheme Administrator would then provide a preliminary assessment of loss to each registered class member entitled to recover, who had 28 days to notify any adjustments they proposed to the assessment and to provide any evidence in support of that adjustment. The Scheme Administrator would then consider the proposed adjustments and determine whether to make them in his absolute discretion. 262 Although the SDS contained the safeguard that class members could object to the preliminary loss assessment and seek adjustments, the applicant recognised that this method of assessment had limitations and possibly a significant degree of imprecision. The applicant submitted that this was reasonable having regard to the small amounts class members will receive, the expense and time likely to be associated with a more exact process, and the advanced age of many class members. I was persuaded that the cost of a tracing exercise in respect of each registered class member's MMDA was likely to substantially erode the amount available for class members see Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1468 at [43]. That is borne out by the substantial costs incurred by the applicant's solicitors in retaining Ms Janine Smith of Vincents Chartered Accountants to ascertain the losses of a subset of class members. 263 Subsequently a number of registered class members raised concerns that the preliminary loss assessment excluded some material unauthorised withdrawals from their MMDAs, and in some cases said that the assessments were incorrect by a substantial amount. This led to Gilbert + Tobin filing an application for an Amended SDS. On 16 August 2018 I made orders approving an Amended SDS changing the scheme so that, before the Scheme Administrator makes a preliminary loss assessment, each registered class member is given the opportunity to identify any unauthorised transactions after 10 March 2010 of an amount more than $10,000, by providing a statutory declaration and identifying such transactions on their MMDA statement. 264 The Amended SDS is an improvement, although it too has its limitations. I remain satisfied that the substantial time and cost of attempting some form of tracing exercise is inappropriate having regard to the relatively small amounts available for distribution, and the advanced age of many class members. I consider the loss assessment methodology in the Amended SDS is likely to deliver a broadly fair relative payout as between individual registered class members. 265 I am satisfied the Amended SDS is fair and reasonable.

J WHETHER THE SCHEME ADMINSTRATION COSTS ARE REASONABLE 266 By orders on 30 May 2018 Mr Mullins was appointed as Scheme Administrator and the quote provided of $65,000 was approved as Scheme Administration Costs. On 31 August 2018, Ferrier Hodgson wrote to the Court seeking approval for a further $44,000 of fees and disbursements, made up of: (a) $9,000 for costs incurred to 31 July 2018; and (b) $35,000 for costs to administer the Amended SDS, including costs already incurred from 1 August 2018. 267 With respect to costs incurred to 31 July 2018, Mr Mullins says that the firm's unadjusted professional time costs were approximately $86,000, which is $21,000 more than the estimate provided for the work. Making allowances for write-offs and charging for some time of senior staff at a lower rate, Mr Mullins says his adjusted professional time costs to 31 July 2018 is $74,000 excluding GST, or $9,000 more than the original estimate. 268 Mr Mullins says that the key matters which caused costs to exceed his estimate were: (a) entering new and additional MMDA statements that were provided on 12 July 2018 in substitution of MMDA statements previously provided; (b) replacing marked MMDA statements with clean MMDA statements; (c) entering MMDA statements that are significantly longer than the length of an MMDA statement estimated based on the sample provided; (d) higher than expected levels of inquiries (over 110 calls) from or on behalf of RGMs who did not understand the process and documents provided. Mr Mullins says this required lengthy explanations over the phone and assistance to callers with their queries; (e) higher than expected level of enquiries from RGMs who wish to challenge Mr Mullins' preliminary assessment by other means including identifying certain transactions as unauthorised and modifying the statutory declaration accordingly, providing detailed documentary support for these transactions, and objecting to the preliminary assessment of loss but not indicating any transactions on the basis that they had no knowledge of the MMDA; (f) higher than expected utilisation of senior staff to assist with complex queries from RGMs and their agents; and (g) unforeseen delays, and receiving additional information requiring rework and changes to the original timetable. 269 Based on the costs to date and the unanticipated additional work required, Mr Mullins estimates costs from 1 August 2018 will be $50,000 plus GST. These costs are largely due to the amendment to the SDS approved on 16 August, which created unanticipated additional work. The Amended SDS required Ferrier Hodgson to send further letters to all 208 RGMs, which explained the amendment to the SDS and the process for RGMs to challenge the preliminary assessment of loss by identifying unauthorised transactions. He has adjusted this amount down to $35,000 in recognition of the complexities of the matter, the losses suffered by group members and the scrutiny given to costs in this case. 270 I am satisfied that the further Scheme Administration Costs are fair and reasonable in the circumstances and I approve such costs in a total of $109,000.

K WHETHER THE REIMBURSEMENT PAYMENT IS REASONABLE 271 The applicant seeks an order for a $25,000 reimbursement payment to be deducted from the settlement fund and paid to its directors in reimbursement for their time and expenses incurred in prosecuting the proceeding on behalf of the class. It is well-established that a representative party may be entitled to an additional part of any settlement to reflect the heavier burden it has typically borne: Caason at [176]; Money Max [2018] FCA 1030 at [212]; Caason Investments Pty Ltd v International Litigation Partners No.3 Ltd [2018] FCAFC 176 (Allsop CJ, Middleton and Perram JJ). 272 Mr and Mrs Petersen are elderly and were unwell during some of the period over which the case ran. Under the terms of the funding agreement they were required to travel from Queensland to meet with Vannin and Quinn Emanuel bi-monthly, and they attended numerous additional meetings with Quinn Emanuel and counsel and with class members at town hall meetings. They found their work in the case emotionally and physically exhausting. I consider that $25,000 is reasonable compensation for the assiduous and commendable effort to which Mr and Mrs Petersen went.

L OTHER COSTS 273 By orders made on 11 July 2018 I approved costs in the amount of $19,917.48 for the fees and disbursements of the Referee and $10,523.30 for fees of the Distribution Agent in providing notices to class members. I am satisfied these deductions are fair and reasonable.

M CONCLUSION 274 I direct the parties to prepare draft orders reflecting these reasons within ten days. If the parties cannot reach agreement as to the form of the draft orders they must file their competing versions and short submissions (no more than three pages) explaining the position they take. I certify that the preceding two hundred and seventy-four (274) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy.