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[2011] FCA 277
Federal Court of Australia
2011-03-25
Flick J
Original judgment source is linked above.
Number of paragraphs: 51
Counsel for the Applicant: Mr S A Kerr SC and Mr S Robertson
Solicitor for the Applicant: McLachlan Thorpe Partners
Counsel for the First Respondent: Mr M J O'Meara
Solicitor for the First Respondent: Corrs Chambers Westgarth
Counsel for the Second to the Sixth Respondents: Mr R Hollo and Mr D H Mitchell
Solicitor for the Second to the Sixth Respondents: Moray & Agnew Lawyers
IN THE FEDERAL COURT OF AUSTRALIA NSW DISTRICT REGISTRY GENERAL DIVISION NSD 1991 of 2008
BETWEEN: PHARM-A-CARE LABORATORIES PTY LTD (ACN 003 468 219)
JUDGE: FLICK J DATE OF ORDER: 25 MARCH 2011 WHERE MADE: SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA NSW DISTRICT REGISTRY GENERAL DIVISION NSD 1991 of 2008
BETWEEN: PHARM-A-CARE LABORATORIES PTY LTD (ACN 003 468 219)
JUDGE: FLICK J DATE: 25 MARCH 2011 PLACE: SYDNEY
REASONS FOR JUDGMENT 1 The present proceeding was commenced on 23 December 2008 pursuant to Part IVA of the Federal Court of Australia Act 1976 (Cth), namely as a representative proceeding. Part IVA sets forth in detail from s 33A through to s 33ZJ the manner in which a representative proceeding is to be commenced and resolved. 2 There has to date been a number of contested (and protracted) interlocutory applications. Those applications have resulted in a number of interlocutory judgments: Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia [2009] FCA 1203; Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 2) [2010] FCA 187; Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 3) [2010] FCA 361, 267 ALR 494; Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 4) [2010] FCA 749; Pharm-a-Care v Commonwealth of Australia (No 5) [2010] FCA 1204. 3 Thereafter a mediation took place between 15 and 17 November 2010. An offer of settlement emerged which extended to the settlement of both this proceeding and a proceeding commenced in the Supreme Court of New South Wales. 4 The settlement of a representative proceeding in this Court is not left entirely to the parties to negotiate but requires the approval of the Court: s 33V. On 23 February 2011 a Notice of Motion was accordingly filed seeking approval to the settlement in accordance with terms set out in a Deed of Settlement finalised in November 2010. That Motion was supported by a number of affidavits. 5 It is the resolution of that Motion which is now before the Court. 6 It is considered that approval should be granted.
Part IVA - Notice of the Proposed Settlement 7 For present purposes it suffices to trace the history of the proceeding back to 6 December 2010. On that date a Notice of Motion was filed seeking the approval of the Court pursuant to s 33X to the form of notice to be given to group members advising them of the intention to approach the Court for approval of the proposed settlement. 8 Section 33X is an important provision found within Part IVA. It provides in part as follows: Notice to be given of certain matters (1) … (2) … (3) … (4) Unless the Court is satisfied that it is just to do so, an application for approval of a settlement under section 33V must not be determined unless notice has been given to group members. (5) The Court may, at any stage, order that notice of any matter be given to a group member or group members. (6) Notice under this section must be given as soon as practicable after the happening of the event to which the notice relates. Section 33Y supplements s 33X and provides as follows: Notices - ancillary provisions (1) This section is concerned with notices under section 33X. (2) The form and content of a notice must be as approved by the Court. (3) The Court must, by order, specify: (a) who is to give the notice; and (b) the way in which the notice is to be given; and the order may include provision: (c) directing a party to provide information relevant to the giving of the notice; and (d) relating to the costs of notice. (4) An order under subsection (3) may require that notice be given by means of press advertisement, radio or television broadcast, or by any other means. (5) The Court may not order that notice be given personally to each group member unless it is satisfied that it is reasonably practicable, and not unduly expensive, to do so. (6) A notice that concerns a matter for which the Court's leave or approval is required must specify the period within which a group member or other person may apply to the Court, or take some other step, in relation to the matter. (7) A notice that includes or concerns conditions must specify the conditions and the period, if any, for compliance. (8) The failure of a group member to receive or respond to a notice does not affect a step taken, an order made, or a judgment given, in a proceeding. 9 It is of importance that any notice be both accurate (Williams v FAI Home Security Pty Ltd (No 3) [2000] FCA 1438 at [24]) and expressed in as plain and simple language as is consistent with the information sought to be communicated (Courtney v Medtel Pty Limited [2001] FCA 1037 at [10] to [11]). A misleading or inaccurate notice may affect the decision to be made by a group member: eg, King v GIO Australia Holdings Ltd [2001] FCA 270 at [14] to [15]. These requirements have previously been the subject of comment in the present proceeding when consideration was given to the form and content of the notice advising group members of their right to "opt out" of the group: Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 4) [2010] FCA 749 at [19] to [20]. 10 It will be further noticed that s 33X(5) provides that the Court may order at "any stage" that a notice be "given to a group member or group members". If a deficiency emerges as to the notice of an application for approval, s 33X(5) would confer sufficient power upon the Court to order any such deficiency to be the subject of a further notice. That sub-section, of course, is not confined to the giving of a further notice to those circumstances in which a deficiency emerges. Notwithstanding the power to order the giving of a further notice, it is of importance to ensure that a notice as first given to group members is properly drafted at the outset and serves the purpose sought to be achieved by s 33X(4). It is incumbent upon all parties to a proceeding to provide as much assistance to the Court as is possible when approving the form of notice. It benefits no party, and only exposes them to further unnecessary cost and expense, if any deficiency in a notice is not identified. And the incurring of further costs obviously depletes the monies otherwise available for distribution to group members. 11 Considerable attention was thus given to the form and content of the notice as drafted by Pharm-a-Care. Submissions as to the form and content of that notice repeatedly came before the Court on 20 and 21 December 2010. 12 A number of aspects of the form of notice as originally proposed received particular attention, including the following. 13 First, although the offer of settlement agreed upon in November 2010 embraced both the representative proceedings in the Supreme Court of New South Wales and this Court, the powers and functions of this Court were necessarily confined to the proposed settlement of the proceeding in this Court alone. It was no part of the power being exercised by this Court to purport to give notice to the group members in the State Court such as may have required the approval of that Court. The manner in which the State Court proceeding was to be resolved was a matter for that Court. The form of notice as finally approved, however, necessarily made reference to the State Court proceeding. 14 Second, it was considered of importance to provide notice to the group members in this Court of the quantum of the offer and the approximate amount of monies that would be available for distribution between group members. The notice thus set forth the amount being offered by the Respondents and the approximate quantum of the monies that were to be paid (for example) to the litigation funder, IMF (Australia) Ltd (the "Litigation Funder"). It may safely be assumed that the best indication that can be provided at the outset as to the total amount of monies available for distribution will be a matter of particular interest to a group member. Given the amount proposed to be paid to the Litigation Funder as a percentage of the overall settlement sum, an affidavit was required to be filed as to that percentage being "within the range" of that paid in other representative proceedings. 15 Third, the notice informed group members of the date upon which the application was to be made to this Court for approval of the proposed settlement. Prominence was given to the statement that a group member need not take any steps if a group member supported the proposed settlement; and prominence was given to the need to file a Notice of Objection if a group member opposed the proposed settlement and the date by which any such Notice of Objection was to be made. Although the manner in which a claim was to be made by a group member in the event that the settlement was approved may have been more a matter for consideration at that time when approval was sought for the settlement, it was nevertheless considered that the notice should be amended so as to expressly inform group members of the need to make a claim if the settlement was approved. The concern was that notice that a group member need not do anything if the settlement was supported may have potentially lulled a group member into a belief that he need not do anything thereafter to make a claim. The draft form of notice was thus amended to make this more apparent. 16 Fourth, the manner in which it was proposed to distribute monies was the subject of a separate document entitled "Settlement Distribution Scheme". The notice advised group members of the manner in which that document could be accessed. Given the integral part played by that Scheme to the proposed settlement, the form and content of the Scheme also came under scrutiny. The Scheme, in very summary form, proposed: the making of a claim; a decision being made in respect to the claim; the formulae - or the manner in which a claimant's proportion of the available funds was to be determined; and a process whereby a review of the decision could be sought and who was to undertake that review. Although those persons involved (for example) in conducting any review process would necessarily depend upon the particular legal or factual issues to be resolved, the draft notice was revised to set forth the approximate range of fees that would be charged by each of the persons that may be potentially involved in the decision-making process. Initial concern was expressed as to the proposal that a fee may be charged for those who sought review. The proposed Scheme contained provision for seeking "security" for the costs to be incurred and the return of that security in the event (for example) that the review resulted in a figure being payable greater than 15% of that originally proposed. Concern as to the appropriateness of fixing upon a 15% variance was allayed when the comparison was made to Order 62, Rule 46(4A) of the Federal Court of Australia Rules 1979 (Cth). The Scheme was also varied such that there was an express obligation of "good faith" imposed upon those making decisions and an express obligation to discharge those functions "independently." The Scheme was also revised to include, in as simple a manner as possible, the formulae or the manner in which the monies were proposed to be distributed. To further attempt to explain the manner of distribution, the Scheme was further revised to include - as an example - the manner in which a particular claim would be hypothetically resolved. 17 Considerable attention was given to the form and content of the notice given to group members of the proposed settlement at the outset partly to facilitate the process whereby approval of that settlement could take place pursuant to s 33V. 18 On 21 December 2010, an order was made pursuant to s 33X and 33Y as to the form of the notice to be given to group members. Of relevance for present purposes is the fact that group members are only those who have entered into a litigation funding agreement with the Litigation Funder.
Section 33V Approval - Principles To Be Applied 19 Evidence in support of the orders now sought included evidence as to the service of the notice as approved by the Court upon group members. 20 Notice having been given, approval is now sought pursuant to s 33V and the "general power" conferred by s 33ZF. Section 33V provides as follows: Settlement and discontinuance - representative proceeding (1) A representative proceeding may not be settled or discontinued without the approval of the Court. (2) If the Court gives such an approval, it may make such orders as are just with respect to the distribution of any money paid under a settlement or paid into the Court. The purpose to be served by s 33V has been said to be "obvious": Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 71 FCR 250 at 258. Branson J there observed: The purpose intended to be served by s 33V(1) is obvious. It is appropriate for the court to be satisfied that any settlement or discontinuance of representative proceedings has been undertaken in the interests of the group members as a whole, and not just in the interests of the applicant and the respondent. In my view, s 33V proscribes not only complete settlement of proceedings without the approval of the court, but also settlement of claims against a joint respondent, or settlement of any substantive claim against a respondent. These observations have since been oft-cited: eg, Fowler v Airservices Australia [2009] FCA 1189 ("Fowler v Airservices Australia") at [20] per Bennett J; Haslam v Money for Living (Aust) Pty Ltd [2007] FCA 897 at [17] per Gordon J. 21 Although s 33V(1) itself imposes no express constraint on the manner in which the Court may either grant of refuse approval, it has repeatedly been said that the task of the Court is to determine whether a proposed settlement is "fair and reasonable". Thus, by way of example, in Williams v FAI Home Security Pty Ltd (No 4) [2000] FCA 1925, 180 ALR 459, Goldberg J observed: [19] Ordinarily the task of a court upon an application such as this, is to determine whether the proposed settlement or compromise is fair and reasonable, having regard to the claims made on behalf of the group members who will be bound by the settlement. Ordinarily in such circumstances the Court will take into account the amount offered to each group member, the prospects of success in the proceeding, the likelihood of the group members obtaining judgment for an amount significantly in excess of the settlement offer, the terms of any advice received from counsel and from any independent expert in relation to the issues which arise in the proceeding, the likely duration and cost of the proceeding if continued to judgment, and the attitude of the group members to the settlement. See also: Dorajay Pty Ltd v Aristocrat Leisure Ltd [2009] FCA 19 at [10] per Stone J; Vernon v Village Life Ltd [2009] FCA 516 at [44] to [45] per Jacobson J; P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 4) [2010] FCA 1029 ("Brookfield Multiplex") at [18] per Finkelstein J. Section 33V(1), it will be noted, applies to both the settlement or discontinuance of a representative proceeding and leave to discontinue will not be granted where it is not "fair and reasonable" to do so: eg, Mercedes Holdings Pty Ltd v Waters (No 1) [2010] FCA 124, 77 ACSR 265 per Perram J. 22 And, in determining what is "fair and reasonable" it is to be recognised that there may well be few cases where there is only one outcome which can be so described: Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd [2006] FCA 1388, 236 ALR 322. Jessup J there thus observed: [50] It is not, I consider, the court's function under s 33V of the Federal Court Act to second-guess the applicants' advisers as to the answer to the question whether the applicants ought to have accepted the respondents' offer; the court's function is, relevantly, confined to the question whether the settlement was fair and reasonable. There will rarely, if ever, be a case in which there is a unique outcome which should be regarded as the only fair and reasonable one. In settlement negotiations, some parties, and some advisers, tend to be more risk-averse than others. There is nothing unreasonable involved in either such position and, under s 33V, the court should, up to a point at least, take the applicants and their advisers as it finds them. Neither should the court consider that it knows more about the group members' businesses than the applicants, or more about the actual risks of the litigation than their advisers. So long as the agreed settlement falls within the range of fair and reasonable outcomes, taking everything into account, it should be regarded as qualifying for approval under s 33V. See also: Taylor v Telstra Corporation Ltd [2007] FCA 2008 at [64] per Jacobson J; Fowler v Airservices Australia at [25] per Bennett J. 23 In the Brookfield Multiplex proceeding, supra, approval was sought to the compromise reached to settle two class actions. The applicants were represented by a firm of solicitors, Maurice Blackburn. In approving the settlement, Finkelstein J identified the factors that led him to conclude that the settlement in those two proceedings was "fair and reasonable" as follows: [18] Should the proposed settlement be approved? A settlement will be approved under s 33V if it is fair and reasonable. The factors which have led me to conclude that what has been proposed is fair and reasonable are as follows. [19] First, the terms of the settlement were agreed in arm's length negotiations. [20] Second, when the settlement was agreed in principle, the case had reached the stage, as a result of detailed pleadings, the provision of lengthy particulars and discovery, that Maurice Blackburn and counsel had sufficient information to assess the merits of the class claims. [21] Third, Maurice Blackburn and its counsel, who have recommended the settlement, are specialists in class action litigation. They understand, and are able to assess and evaluate, the risks and rewards of this kind of litigation. Moreover, the fees to which they will be entitled under the proposal are shown by independent evidence to be fair and reasonable. It could not be suggested that the lawyers' interests have been put ahead of the class members. [22] Fourth, the class members will recover in the order of 62 cents in the dollar of Maurice Blackburn's estimate of the reasonable value of their respective claims, which is a significant recovery. [23] Fifth, no class member opposes the settlement. In this case this is a significant factor. Generally speaking, it is dangerous to assume that silence equals assent as class members with only a very small stake in the action have little incentive to object. The court is there to protect their interests, acting akin to a guardian. The absence of any objector adds to the court's responsibility; it does not relieve it of its task. Here, however, a large number of class members (and in terms of the dollar value of their claims they represent around 99%) are institutional investors. Most, if not all, have in-house legal departments. In any event they are experienced investors. They, more than most, are able to assess the benefits of the settlement. If any of them were unhappy with the proposal I am sure they would have come forward. [24] Sixth, it is impossible to ignore the vagaries of litigation and the risk of failure in a case such as this, as well as the expense that will be incurred by protracted litigation and the likely appeals that will follow when novel points of law are at issue, whichever way the trial goes. In this type of litigation the parties are well served by a "bird in the hand" approach. His Honour had also previously referred to the fact that "the court should encourage the settlement of class actions" (at [2]). 24 When considering another application for approval pursuant to s 33V in other proceedings also involving the conduct of the Therapeutic Goods Administration, Sackville J in Courtney v Medtel Pty Limited (No 5) [2004] FCA 1406, 212 ALR 311 ("Courtney v Medtel Pty Limited (No 5)") addressed the specific question as to costs and disbursements sought to be approved in the particular circumstances of that case. His Honour there suggested: [61] … that evidence should be presented from an independent solicitor or costs consultant, directed to the following matters: (i) the reasonableness of the terms of the fee and retainer agreements (including the provisions for ancillary services, interest and an uplift factor); (ii) whether the fees and disbursements actually charged by the Solicitors have been calculated in accordance with the fee and retainer agreement; (iii) confirming that, so far as the solicitor or costs consultant can determine, no significant portion of the fees and disbursements charged by the Solicitors have been inappropriately or unnecessarily incurred in conducting the proceedings … I made it clear that I did not expect the evidence to involve an exhaustive review of the files maintained by the Solicitors. I had in mind an overview that could be undertaken over a period of about two days. 25 It should finally be noted that an application for the approval of a settlement is an application in which all parties bear some responsibility: Brookfield Multiplex. Finkelstein J there observed: [4] Despite the obvious advantages of settling class actions, there remains the need to ensure that the interests of class members are adequately looked after. In the trial preparation, and the conduct of the trial itself, their protection depends, in no small measure, on the capacity of the named applicant to monitor the actions of the lawyers who have been retained to run the case. When it comes to a settlement it is the court that assumes responsibility for protecting the interests of the class members. In that task the court necessarily places considerable reliance on the parties' lawyers. I say "parties' lawyers" to make clear that I do not think that it is just the applicant's lawyers that carry the burden of ensuring that the court is given sufficient information to assess whether a proposed settlement is to be approved. A settlement proposal is, in reality, a proposal put up by both sides. So the respondent's lawyers should also bear some responsibility for ensuring that the court has all the information that objectively describes the merits of the case and brings to the court's attention the obstacles to recovery and the benefits to be derived from the proposed settlement. This responsibility is only heightened in the present proceeding in the case of the First Respondent, the Commonwealth of Australia, by reason of the special status it occupies as a "model litigant": cf. Fowler v Airservices Australia at [27] per Bennett J. 26 These principles as developed by prior decisions of this Court have now been supplemented by Practice Note CM 17. That Practice Note commenced on 5 July 2010 and paragraph 11 provides in part as follows: Court approval of settlement 11.1 When applying for Court approval of a settlement, the parties will usually need to persuade the Court that: (a) the proposed settlement is fair and reasonable having regard to the claims made on behalf of the group members who will be bound by the settlement; and (b) the proposed settlement has been undertaken in the interests of group members, as well as those of the applicant, and not just in the interests of the applicant and the respondent/s. 11.2 When applying for Court approval of a settlement the parties will usually be required to address at least the following factors: (a) the complexity and likely duration of the litigation; (b) the reaction of the group to the settlement; (c) the stage of the proceedings; (d) the risks of establishing liability; (e) the risks of establishing loss or damage; (f) the risks of maintaining a representative proceeding; (g) the ability of the respondent to withstand a greater judgment; (h) the range of reasonableness of the settlement in light of the best recovery; (i) the range of reasonableness of the settlement in light of all the attendant risks of litigation; and (j) the terms of any advice received from counsel and/or from any independent expert in relation to the issues which arise in the proceeding. To a large extent the Practice Note reinforces the principles previously developed. 27 The relevance of any particular consideration, and the weight to be given to it, will depend upon the circumstances of each individual case.
Approval - The Facts? 28 Fundamental to any consideration of a settlement of any proceeding - including a representative proceeding when Court approval is required - is an assessment as to the prospects of success should the matter proceed to final hearing. 29 Those advising the Applicant have obviously formed the view that the offer made by the Respondents in the present proceeding ought to be accepted. And that view was formed after mediation. A note of the progress of that mediation prepared by the Applicant was before the Court, as was a document prepared in October 2010 entitled Applicant's Mediation Position Paper (Quantum). Although the contents of that note were kept confidential from the Respondents in the event that the settlement was not approved, it is sufficient for present purposes to record that the note sets forth the competing offers being made and the broad parameters within which various components of the overall offers were discounted. Also before the Court, but again kept confidential from the Respondents, were three separate notes setting forth "litigation risks" focusing upon the perceived strengths and/or weaknesses in respect to key elements of the causes of action being relied upon by the Applicant, namely: the existence of a duty of care under the Therapeutic Goods Act 1989 (Cth); the appropriate test of causation for misfeasance in public office; and the calculation of the quantum of damages. Also made available to the Court were copies of various opinions that had been obtained by the Applicant. A matter also separately addressed in the note as to "duty of care" was the ability of the Applicant to recover any judgment monies from the individual Respondents in circumstances where the First Respondent, the Commonwealth of Australia, was denying vicarious liability. The position of the individual Respondents had been addressed as follows in a Position Paper prepared for the purposes of the mediation: [24] The individual respondents have the benefit of a limited indemnity from the Commonwealth. However, the indemnity expressly does not cover any liability for damages or legal costs the individual respondents are ordered to pay if that liability arises in any way from: (a) the use by them of their position as an officer of the TGA or the Department to intentionally and deliberately cause detriment to any person; (b) a wilful breach of their duty; or (c) conduct on their part which was not in good faith (including acting with reckless indifference in the exercise of their functions and/or powers). The vicarious liability of the one Respondent capable of meeting any judgment, namely the Commonwealth, and the practical inability of the remaining Respondents to satisfy any substantial judgment - unless indemnified - was a matter which properly had to be taken into account by the Applicant's advisors. 30 It is unnecessary for the Court to express any concluded view as to the merits of any of the issues canvassed in those notes and opinions. And it would be manifestly inappropriate to disclose the contents of those opinions and thereby destroy the Applicant's claim for privilege. When considering the grant or withholding of approval to a proposed settlement that which should be scrutinised with some degree of care, however, is the manner in which an Applicant has informed itself as to the reasonableness of the offers being made. 31 In the present proceeding, it is concluded that the Applicant has properly informed itself as to the strengths and weaknesses of the causes of action it was seeking to rely upon. The manner in which it approached the negotiated settlement at the mediation was informed by reference to the opinions of not only its own legal advisors but also the opinions of independently retained Senior Counsel and persons learned in the areas of law involved. 32 Reliance must also necessarily be placed upon the assessment of the proposed settlement by those most immediately affected, namely the group members themselves. 33 The notice as approved on 21 December 2010 has been given. The form and content of that notice has again been revisited. The view has again been reached that that notice has placed the group members in a position whereby they can make an informed decision as to whether to support or oppose the proposed settlement. 34 There were 162 group members in the present proceeding - but now there are 161. Of these members, three Notices of Objection were filed - one each from Self Adhesive Systems Pty Limited; Australian Naturopathics Pty Ltd; and S & D Chemicals Pty Ltd. None of those objectors appeared in Court to supplement by way of oral submissions the content of their written objections. Their objections have nevertheless been taken into account. And, at the outset of the hearing of the Motion seeking approval, the Court was advised that a number of group members were present. But none wished to make any oral submission or be heard when invited to do so. It is of importance that all persons having an interest in the approval process undertaken pursuant to s 33V be informed of the issues to be considered and given an opportunity to be heard - either in support or in opposition to approval being granted. Such an opportunity has been extended in the present proceeding. 35 To the extent that one or other of the objectors to the settlement advanced the proposition that the Applicant should not have discounted the prospects of success, those objections are misplaced. There was every reason why the Applicant properly formed the view that the prospect of being 100% successful was questionable. Also rejected is the relevance of any comparison between the quantum of a settlement in another proceeding in this Court arising out of the same background facts and the quantum now proposed in this proceeding. Each settlement must necessarily depend upon the facts and circumstances of the litigation involved and as defined by the pleadings. 36 As in other proceedings (eg, Fowler v Airservices Australia at [30] to [33]), the settlement which the Court is now asked to approve is not a settlement whereby an identified sum is to be paid to an identified group member. Rather, the approval which is sought is approval to distribution pursuant to the Settlement Distribution Scheme of which notice has been given. No group member has expressed any opposition to the available monies being distributed in accordance with that Scheme, including the manner in which a particular claim is to be determined and (where requested) reviewed. 37 It is considered that the proposed settlement should be approved pursuant to s 33V and s 33ZF. Those facts upon which particular reliance has been placed in approving the settlement include the following, namely the fact that: the proceeding has reached the stage where the pleadings have closed and the issues to be resolved have been identified with sufficient clarity to enable an informed view to be reached by the legal representatives of all of the parties as to the potential strengths and/or weaknesses of their competing positions; the proceeding involves self-evidently complex legal and factual issues; the settlement has been reached after a mediation conducted by an eminent and skilful Queen's Counsel, the Honourable Roger Gyles AO, a former Judge of this Court; the parties themselves have been represented throughout by experienced Counsel and solicitors; the quantification of the amounts claimed and the extent to which those amounts should be properly discounted have been the subject of detailed and thorough consideration by the Applicant's legal advisors (in particular); prior to the proposed settlement being reached, the hearing had been listed for 3 months commencing on 7 March 2011. That estimate may nevertheless have been erroneous. A more current estimate was for a hearing of up to 7 ½ months. An estimate of legal costs to be incurred by the Applicant, but saved in the event that the settlement is approved, was conservatively estimated as being between $3.7m and $4.96m; the manner of distribution of settlement monies, in accordance with the Settlement Distribution Scheme, seems appropriate and has received the endorsement of an overwhelming number of group members; and only three objections have been received. Other associated factors include the fact that: the issues to be resolved included what would have involved protracted factual disputes with no certainty of result other than the certainty that further considerable legal costs would have been incurred. One estimate, for example, of the extent of the documentary evidence to be tendered by the Applicant alone was in excess of 100 lever arch volumes. The Applicant was intending to call 13 witnesses and the Commonwealth had indicated an intention to call 30 witnesses, including 5 expert witnesses; and the proceeding to date had already involved a number of contested interlocutory hearings and considerable legal costs. Moreover, had the case proceeded to hearing, it was likely that any judgment would not have been delivered until late 2011. Given the complexity of the factual and legal issues to be resolved, the prospect of an appeal could not have been discounted. The prospect of an application for special leave to appeal to the High Court of Australia could not be altogether ignored. The "bird in the hand" approach referred to by Finkelstein J in the Brookfield Multiplex proceeding, and the encouragement given to all parties to resolve disputes by agreement, further support the prudence of approving the settlement in the present proceeding. 38 Some reservation, however, was expressed during the course of the hearing (and still remains) as to the extent to which this Court should scrutinise both the quantum of monies proposed to be paid to a litigation funder and the percentage that that amount bore to the overall settlement. If the amount payable in any particular case is considered to be inappropriate, it would be regrettable if the only power that the Court has is to refuse approval of the settlement. It would be regrettable if a settlement which otherwise satisfied the legitimate but competing concerns of the parties to the litigation was not approved only by reason of the quantum of the amount payable to a litigation funder. 39 In the present proceeding it should be emphasised that the amount so payable, expressed as a percentage of the total settlement sum, is accepted by the parties to be below that which has been recovered in other Part IVA proceedings. It should also be emphasised that the Notice to group members pursuant to s 33X itself contained details as to the amounts to be paid to the litigation funder in the present proceeding. And, armed with that knowledge, only 3 of the 161 group members objected. 40 A tentative view is nevertheless expressed that the reservation expressed during the hearing is not adequately answered by pointing to the fact that group members may elect to "opt out" of a representative proceeding and remain free to accept or reject the terms upon which funding is to be provided. Nor may it be adequately answered by the fact that the overwhelming number of group members may not object to a proposed settlement. A view may be formed by one or a number of group members, that "something is better than nothing". That view may be reinforced by a reality that individually any one group member may not possess the resources to pursue major litigation. 41 Group members may, for example, be content to receive 10% of a proposed settlement and for a litigation funder to receive 90%. Even that small percentage may be "better than nothing". 42 Short of refusing approval to a settlement, it may be that the power of the Court conferred by s 33ZF(1) to "make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding" confers a power to grant approval - but subject to a condition limiting the amount payable to the litigation funder. Obviously enough, even if the power could be so exercised, it should not be done without hearing submissions and perhaps evidence from the funder concerned. That evidence may address both the risks of providing funding in the proceeding presently before the Court and the risks incurred more generally in providing funding in other proceedings. Such a conditional order would not itself operate as any variation of the contractual agreement reached between the funder and each group member. 43 But such reservations need not be further pursued. The percentage of the settlement monies to be paid to the litigation funder in the present proceeding is accepted to be below that paid in other proceedings and the overwhelming number of group members has expressed no objection to the amount. 44 The approval which is sought also extends to approval of the payment of legal costs to Pharm-a-Care and costs reimbursing Pharm-a-Care and two representative group members (Ian Trevorrow Agencies Pty Limited and Pacific Resources International) of the costs and expenses caused by acting as Applicant and representative group members. 45 Evidence as to the costs and expenses incurred by Pharm-a-Care has been filed and approval should extend to those payments. The reasonableness as to the fees payable to the Applicant's legal advisors (for example) has been deposed to by an independent legal costs consultant who has prepared or supervised the preparation of a vast number of bills of costs and assessments of costs in the High Court, the Federal Court and the Victorian Supreme Court and County Court. Such evidence was presumably adduced with the observations of Sackville J in Courtney v Medtel Pty Limited (No 5) in mind. 46 The amount claimed by Pharm-a-Care in its capacity as the representative sponsor was the subject of a separate affidavit filed by its Group Operations Manager. A schedule of costs was prepared. The time taken on various tasks was (inter alia) "allocated according to [the Group Operations Manager's] recollection, or … from my diary notes". Costs were allocated to work characterised as "Representative Work", "PAC work" or "Unidentified". The uncertainty as to whether a claim fell within either of the other two categories, leads to uncertainty as to whether or not any amount should be approved if its proper characterisation cannot be "identified". Payment of the amount claimed for "unidentified costs" is not approved. A modest amount was also included for photocopying and courier charges. As the deponent further properly recognised, "it would be appropriate to apply a discount to whatever amount was approved by the Court …". It is considered appropriate that the amount claimed should be discounted. Although any percentage discount is to some extent only an estimate, it is considered that the total amount claimed - excluding the "unidentified" claim - should be discounted by 15%. 47 The amount claimed by Ian Trevorrow Agencies Pty Ltd is for a modest sum and is supported by an affidavit of its General Manager. The amount claimed by Pacific Resources International, the sub-group representative for suppliers, is also supported by an affidavit of a director. The payment of the amounts claimed is approved. 48 It should finally be noted that all Respondents have, not surprisingly, supported the proposed settlement. Although the First Respondent (the Commonwealth of Australia) and the individual Respondents have throughout been separately represented, for the purposes of the present Motion, they took the course of filing a joint written outline of submissions. But some degree of care may need to be exercised when considering submissions jointly prepared. Not all respondents in a representative proceeding may contribute equally (or at all) to the monies provided by way of settlement. The less the amount being contributed, the greater may be the self-interest of any particular respondent in ensuring that approval is secured. The self-interest of any particular respondent has necessarily to be taken into account when considering the assistance that may be gained from submissions advanced. 49 In the present proceeding it is sufficient to note that the Court has been assisted by all submissions that have been made. A proposition jointly advanced by all Respondents in their written outline of submissions should nevertheless be noted, namely: … an application for approval of a settlement under section 33V of the FC Act is, in effect, a joint application by the applicant and the respondents. The applicant does not carry the entirety of the burden of giving to the court sufficient information to assess whether a settlement is approved. The respondents also bear some responsibility for ensuring that the court has all the information that objectively describes the merits of the case and brings to the Court's attention the obstacles to recovery and the benefits to be derived from the approved settlement … Notwithstanding this acceptance of "responsibility", none of the Respondents adduced any evidence in the hearing of the present Notice of Motion. Nor did they have access to all of the evidence of the Applicant. In some circumstances it may be desirable, if not necessary, for a respondent to discharge this "responsibility" to also adduce evidence (for example) as to how they approached a mediation and their own assessment as to the competing strengths and/or weaknesses of their own case. It remains a matter for an individual party to decide what evidence it wishes to adduce. But it is curious that the Respondents in the present proceeding accepted the limited "responsibility" espoused in their submission but did nothing to adduce evidence within their own control. Presumably this was a position deliberately adopted by all Respondents, including the First Respondent - a "model litigant". In the present proceeding it is not considered that such an approach warrants the refusal of approval pursuant to s 33V and s 33ZF.
Conclusions 50 After the hearing of the Motion had concluded, an affidavit was filed deposing to drafting errors in the Loss Assessment Process as set forth in the Settlement Distribution Scheme. These errors do not warrant any further notices being forwarded to group members or the withholding of approval (subject to the correction of the drafting errors). Pursuant to ss 33V and 33ZF of the Federal Court of Australia Act 1976 (Cth), and after having taken into account those matters set forth in paragraph [11] of Practice Note CM 17, it is concluded that approval should be given to the settlement in accordance with the terms set out in the Deed of Settlement finalised in November 2010.
ORDERS 51 The Orders of the Court are: 1. The parties are to bring in Short Minutes of Orders to give effect to these reasons within 14 days. I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick.
Pharm-a-Care Laboratories Pty Ltd
Commonwealth of Australia