Plaintiff v Defendants

CIVIL PROCEDURE - Application by special purpose receivers appointed by the Court for power to settle proceedings - Whether receivers are justified in exercising such power in entering into a deed of settlement - Whether settlement is just and reasonable - Section 37 Supreme Court Act 1986.

1 In October 2012, Banksia Securities Limited ("Banksia"), a non-bank property lender, collapsed owing some $660 million to investors, including many retirees in regional and rural communities in Victoria. At the time of its collapse, Banksia owed approximately $663 million to approximately 15,622 debenture holders and had 956 loans outstanding to third party borrowers, totalling approximately $527 million.[1]

2 It is widely recognised that the collapse of Banksia had a devastating general impact on many parts of Victoria and elsewhere, and particularly on the regional community in and around Kyabram, and a profound personal impact on the lives of many individual debenture-holders transcending the economic losses that are the subject of these proceedings.[2] The personal anguish and the tragic personal consequences in many cases flowing from such events cannot be underestimated. Any judge hearing applications of the kind presently before the Court could not but be moved by the tragic personal and economic consequences, and could only wish that the clock could be turned back and events made to unfold differently. Of course, this is not possible and all the Court can do now is to have full regard to the best interests of the debenture-holders in light of the realities of the present situation and the resources available. The litigation flowing from the Banksia collapse has, unsurprisingly, been the subject of considerable public interest and concern. The issues of principle as to the duties of professional trustees and the directors of financial institutions raised by these proceedings are all of considerable general importance. It is incumbent upon legislators and regulators to carefully examine the events that led to the collapse of Banksia and take any lessons that flow from this into legislative and regulatory reform as a matter of urgency. At least if legislators and regulators do take heed in this way, some good may come out of what is to many debenture-holders and communities an unmitigated disaster.

3 From the perspective of the special purpose receivers of Banksia, Mr John Ross Lindholm and Mr Peter Damien McCluskey ("the SPRs"), and their legal advisors, the collapse of Banksia was the result of spectacular "gatekeeper" failure.[3] At every turn, those "gatekeepers" charged with duties to safeguard the interests of others, namely the debenture-holders, failed to do so. At the statutory apex of the regulatory structure designed to protect the interests of debenture-holders was Banksia's trustee, The Trust Company (Nominees) Limited ("Trust Co"). Banksia's position is that Trust Co's performance of its statutory and common law duties was totally inadequate.

4 At this stage there has been a return to debenture-holders of 82 cents in each dollar of outstanding principal.[4] However, having regard to accrued interest since the collapse of Banksia - now over five years ago - the effective and true return to debenture-holders is approximately 76 cents in the dollar.[5] This means that debenture-holders are still owed approximately $172 million in outstanding principal and accrued interest under the Banksia Trust Deed.[6] Consequently, whilst the realisations achieved by the SPRs are perhaps better than initially expected, the losses are still very substantial and significant, particularly when regard is had to the demographic profile of the debenture-holders.

5 As I have observed in more general terms, it is, of course, not possible to attach a dollar figure to the stress and wider impact on many elderly rural investors in having their day-to-day savings accounts frozen under a cloud of uncertainty and for only 76% of those savings ultimately to have been gradually returned to them over an extended period of time. I accept that, to them, the suggestion made in some quarters during the course of this litigation that the significance of the losses should be downplayed because the SPRs succeeded in recovering over 80 cents in the dollar of principal, is doubtless of little or no comfort. It bears particular emphasis that they invested in a secured debt security under the prudential and statutory oversight of a professional trustee. They were, in my view, justified in thinking their money was safe.

6 In April 2016, the SPRs caused Banksia to settle its claims against Banksia's directors and officers, its auditors (RSD Chartered Accountants ("RSD") and Maxwell Brown & Mountjoy) and its legal advisors (Harwood Andrews) ("the Partial Settlement"). Bolitho's claims against the directors and RSD were settled at that time. The settlement amount was $13.25 million and was approved by Robson J on 26 August 2016.[7] Following the Partial Settlement, Trust Co maintained its third-party claims against those defendants.

7 Banksia's claim in Supreme Court Proceeding S CI 2015 01384 ("the Banksia Proceeding") and the claims made by debenture-holders in Supreme Court Proceeding S CI 2012 07185 ("the Bolitho Group Proceeding"), together, allege that Trust Co's position of conflict led to its repeated and comprehensive failure thereafter to take the steps that a prudent trustee concerned to protect the interests of Banksia and its debenture-holders would have taken in the circumstances. That failure, it is contended, resulted in loss and damage to Banksia and, consequently, its debenture-holders, in excess of $170 million, including losses flowing from Banksia's ultimate collapse.

8 In summary, it is contended that the proposed settlement sum of $64 million ("the Settlement Sum") is clearly fair and reasonable and in the interests of debenture-holders given:

(a) Trust Co has in effect stated on oath to this Court that it is contributing everything that is available to Trust Co towards the settlement of the claims;

(b) the figure of $64 million otherwise falls within a reasonable settlement range as advised by trial counsel on the assumption, encouraged by Trust Co and its legal advisors up until very recently, that judgment against Trust Co of over $170 million could be satisfied; and

(c) the SPRs have followed a proper process in settling the claims on the terms set out in the confidential deed of settlement executed on 4 December 2017 ("the Settlement Deed"). They have only taken into account relevant considerations and there can be no sensible suggestion of bad faith or impropriety.

9 At the hearing of the application for approval of the settlement on 30 January 2018, issues of confidentiality were raised in relation to the reason why the maximum settlement sum Trust Co could offer is as it is. However, as Senior Counsel for the plaintiff in the Bolitho Group Proceeding put it:[8]

Ultimately we submit it's a matter for Your Honour how much of [the confidential affidavits] remain confidential because insofar as the court desires, and in our submission ought inform the world, the community, the debenture holders... of the reason why the Court is in favour of the settlement, is prepared to approve it [and] why it would be approved. That reason is by itself so far and away the most important reason that it must be referred to we submit, it must be, and, therefore, the court will necessarily need to explain the rationale because that's fundamental to it.

It was put by Trust Co that disclosing the confidential information in full would have a "chilling effect" on negotiations of this kind in other cases.[9] Yet this does not detract from the position put by the Plaintiff that the Court may - and indeed is duty bound to - give reasons as to why the settlement is appropriate but is rather a factor to consider in determining whether additional context - not being strictly necessary for the Court's decision - ought to be provided.

10 Mindful of the fact that the disclosure of confidential information by this Court is irreversible, in that one who is aggrieved by the disclosure has no effective means of appeal or other redress against the decision to disclose the information, Trust Co was invited to draft a form of words disclosing the confidential information to the extent thought appropriate. The proposed disclosure by Trust Co is, in my view, sufficient to explain why no further funds are available to Trust Co, and was included in Other Matters in the Orders made approving the settlement on 30 January 2018 ("the Approval Orders").[10]

11 In relation to the other aspects of the confidential settlement it is the position of the parties that it is a matter for the Court to determine the extent to which otherwise confidential information should be disclosed in these reasons for the purpose of providing transparent and informative reasons for the approval of these applications.[11] The parties can take it that to the extent other aspects of the confidential settlement are disclosed in these reasons it is on this basis.

12 On 24 December 2012, Mr Lawrence John Bolitho ("Mr Bolitho" or "the Plaintiff") commenced a group proceeding on his own behalf and on behalf of all debenture-holders of Banksia to recover losses in respect of the debentures held by them, following the collapse of Banksia in 2012. As at the date of the settlement approval hearing on 30 January 2018, the claim brought by the Plaintiff in the Bolitho Group Proceeding on his behalf and on behalf of group members is for a maximum sum of approximately $222 million.[12] This sum has been calculated on the basis of outstanding principal, applying interest in accordance with the Penalty Interest Rates Act 1983.

13 Following the approval of the partial settlement in 2016, the remaining claims in the Bolitho Group Proceeding concern the alleged actions and inactions of Banksia and Trust Co in relation to the issue of debentures by Banksia, the acquisition of Statewide Secured Investments Ltd ("Statewide") by Banksia in 2009, the subsequent transfer of loans constituting the majority of the Statewide loan book into the Banksia balance sheet and the issue, and redemption, of debentures for the benefit of former Statewide debenture-holders.

14 Following the Partial Settlement in 2016, the Plaintiff's claim in the Bolitho Group Proceeding for damages and interest is now brought against the following defendants:

(a) Banksia, against which the Plaintiff and the group members have claims in debt and pursuant to statute; and

(b) Trust Co, the trustee appointed pursuant to Chapter 2L of the Corporations Act 2001 to act on behalf of debenture-holders, against which the Plaintiff and group members have claims pursuant to statute and for alleged breaches of trust by allowing Banksia to become insolvent as a result of the merger with Statewide in 2009, the subsequent transfer of Statewide's overvalued loans to Banksia and the rollover and redemption of Statewide debentures at their face value.

15 On 4 December 2017**,** Mr Bolitho, BSL Litigation Partners Limited ("BSLLP" - the litigation funder for the class in the Bolitho Group Proceeding), Banksia and Trust Co executed the Settlement Deed to give effect to a further partial settlement. In respect of the Bolitho Group Proceeding, the further partial settlement concerns the claims brought by Mr Bolitho against Trust Co as described previously. Mr Bolitho's and the group members' claims against Banksia remain on foot because they are the sole remaining creditors of Banksia and are therefore entitled to receive whatever distributions may be made to them in the winding-up of Banksia by its liquidators in due course. There remain some third party litigation claims brought by Banksia against insurance entities, which are as yet unresolved. The nature of those causes of action or their worth is not a matter of present relevance and is, consequently, not addressed further.

16 The further partial settlement also settles claims made by Banksia in the Banksia Proceeding against Trust Co. By the Banksia proceeding, the liquidators sought to recover losses alleged to have been suffered by Banksia itself as a result of Trust Co's breach of certain duties alleged to have been owed to it by Banksia. The further partial settlement follows three Court-ordered mediations conducted by the Hon Raymond Finkelstein AO QC on 21 and 22 July and 28 August 2014; the Hon Michael McHugh AC QC on 13 and 14 April 2015; and the Hon Efthim AsJ on 9 and 27 November 2017.

17 As the further partial settlement involves the settlement of claims made in a group proceeding, a proceeding brought pursuant to Part 4A of the Supreme Court Act 1986, the settlement is conditional upon the receipt of the Court's approval. As is discussed further in the reasons which follow, the question whether the settlement should receive the Court's approval is dependent upon the Court finding that it is fair, proper and appropriate and is likely to be in the interests of the group members as a whole. These questions arise out of the Plaintiff's application under ss 33V and 33ZF of the Supreme Court Act for approval of the settlement by the Court.

18 In support of this application, the Plaintiff relies upon the confidential joint opinion of counsel for the Plaintiff dated 19 January 2018 and a supplementary confidential joint opinion of counsel dated 24 January 2018 exhibited to affidavits of Anthony Zita of the same dates filed in the Bolitho Group Proceeding. Reliance is also placed on the affidavit of Mr Christopher Green sworn 13 December 2017; the affidavit of Mr Geoffrey Lloyd sworn 13 December 2017; the external costs consultant's report exhibited to the affidavit of Peter Trimbos dated 4 January 2018; and also the materials filed in Supreme Court Proceeding S CI 2017 05023 ("the Special Purpose Receivers' Proceeding") (save for the confidential affidavit of John Lindholm sworn 9 January 2018 filed in that proceeding, to which access is limited to practitioners and other persons involved in that proceeding). Only two objections to the proposed settlement, and the granting of this application, were received as a result of the giving of notice of the hearing of the application for approval of this settlement, namely from Mr Chris Botsman on behalf of his mother, Ms Wendy Botsman, a Banksia debenture holder, and from Mr Keith Pitman and also on behalf of his wife, both also debenture holders.

19 By Originating Process dated 8 December 2017, as amended on 30 January 2018, the SPRs seek relief by way of a judicial direction from this Court pursuant to s 283HB of the Corporations Act 2001 - alternatively, under s 37 of the Supreme Court Act 1986 or the inherent jurisdiction of the Court - that they:

(a) have the power to settle the claims made against Trust Co in the Banksia Proceeding and the Bolitho Group Proceeding ("the Proceedings") on the terms set out in the Settlement Deed (which is confidential); and

(b) are justified in causing Banksia to settle its claims against Trust Co in the Proceedings on the terms set out in the Settlement Deed.

20 The SPRs, and also Banksia, rely on two affidavits of Mr John Ross Lindholm sworn 9 January 2018 and, in particular, the confidential affidavit setting out Mr Lindholm's reasons for the settlement. The SPRs, and Banksia, also rely on the truth and accuracy of the affidavits filed by Trust Co under the terms of the Settlement Deed from Mr Christopher Green and Mr Geoffrey Lloyd of Perpetual Limited ("Perpetual").

21 By orders of Black J in the Supreme Court of New South Wales made on 30 September 2015 and 29 February 2016, the SPRs were appointed as joint and several special purpose receivers of certain assets of Banksia; namely, Banksia's causes of action against the various defendants, including Trust Co, in the Proceedings. The reason for their appointment stemmed from concerns relating to the perceived independence of the receivers, McGrathNicol, appointed by Trust Co to the assets in light of McGrathNicol's commercial relationship with Trust Co.

22 The position occupied by the SPRs and their legal advisors in relation to the Proceedings is, they submit, to be seen from four, related, perspectives:[13]

(a) First, the SPRs' principal role has been to vigorously prosecute Banksia's claims against Trust Co in the Banksia Proceeding;

(b) Secondly, as a party to the Bolitho Group Proceeding, it has adopted a position consistent with the interests of the debenture-holders in advancing the prospects of Mr Bolitho's claims against Trust Co succeeding, including by the claim for contribution against Trust Co in that proceeding;

(c) Thirdly, especially in light of Trust Co's disablement, as it is said, by reason of its conflict, the SPRs have performed an important oversight role in protecting the interests of debenture-holders consistent with their statutory duties under Chapter 2L of the Corporations Act; and

(d) Fourthly, the enormous practical, evidentiary and financial burden of the conduct of the Proceedings has been shouldered by the SPRs and their legal team, with the co-operation and assistance, where appropriate, of counsel for Mr Bolitho - in particular, Mr Norman O'Bryan SC.

23 The factual context in which the allegations arise in the proceedings was the amalgamation, in early 2009, of Banksia with Statewide ("the Amalgamation"). Statewide was another, larger debenture-issuer, which was insolvent as a result of its perilous financial and capital position. Both Banksia and Statewide were finance company debenture-issuers regulated by trust deeds under Chapter 2L of the Corporations Act.

24 Those trust deeds included the usual kind of financial and operating covenants for issuers of debentures of that kind. Two critical covenants in the Banksia Trust Deed were (a) the requirement, contained in clause 8.01, that Banksia's total external liabilities not exceed 97% of its total tangible assets ("MCAR"); and (b) the requirement in clause 11.01 that Banksia only invest in authorised investments, such as mortgage loans with a loan to value ration not exceeding 70% ("Permitted Loans").

25 Banksia's ability to continue as a going concern in the ordinary course of business depended upon it staying within the MCAR. Both Banksia and Statewide financed their business operations by issuing debentures pursuant to public prospectuses in accordance with the requirements of the Corporations Act. Trust Co consented to be named in the prospectuses issued by both Banksia and Statewide, and reviewed and commented on those prospectuses before providing its consent to be named in those prospectuses.

26 Trust Co was the trustee for each of Banksia and Statewide and, by virtue of that position, Banksia says that it had, or ought to have had, superior knowledge of Statewide's particular financial circumstances. Banksia alleges that the Amalgamation ultimately led to its collapse in late 2012. Immediately prior to the Amalgamation, Statewide's financial and capital position was substantially worse than Banksia's, and it was likely insolvent and no longer a going concern.

27 In relation to the events surrounding the Amalgamation, a number of uncontroversial factual matters are clear. In the present context, it is useful to briefly set out some of those matters.

28 On 13 March 2009, the Banksia Board resolved to enter into the Amalgamation. The Amalgamation agreement was executed on 18 March 2009 ("the Amalgamation Agreement"). It provided for the Amalgamation to become effective on 30 March 2009 by the purchase of Statewide's shares by Banksia's parent, Securities HoldCo Limited, for nil consideration. On or about 18 and 19 March 2009, Banksia and Statewide informed Trust Co that Banksia and Statewide had agreed to merge their businesses and Trust Co was sent a copy of the press release of Banksia announcing the transaction on 19 March 2009. That press release stated that:

The Boards of Directors of The Banksia Financial Group and Statewide Secured Investments have reached agreement to amalgamate the two Kyabram based businesses. Discussions between the companies have been taking place over the past several months. The amalgamation will be effective from Monday 30 March 2009.

The amalgamated entity will trade under The Banksia Financial Group banner, a business well known in financial circles throughout Eastern Australia with offices in Melbourne and Adelaide and a major branch and agency network in regional Victoria.

29 Following the effectiveness of the Amalgamation Agreement on 30 March 2009, the Amalgamation was implemented by the progressive transfer of substantially all of Statewide's loans and debentures to Banksia from approximately May 2009 to October 2010.

30 It is submitted that it ought to be uncontroversial that the Amalgamation was entered into without adequate due diligence, without meaningful external advice and without a properly documented lease agreement.[14] No proper process for the implementation of the Amalgamation had been considered or developed. Trust Co apparently made no inquiries of the directors of Banksia as to any of these matters.[15] Moreover, it appears that even after the Banksia Board's decision to amalgamate in March 2009, there was inadequate due diligence and independent advice throughout the implementation of the Amalgamation.

31 Whilst it was apparent from a relatively early stage that the Amalgamation was having a negative impact on Banksia, the full extent of the negative impact was not discovered and revealed for some time. Banksia continued to trade until 25 October 2012, when it was placed into external administration by Trust Co's appointment of receivers following a general review of Banksia's business operations that had been initiated by Banksia's new Chief Executive Officer, Mr Warren Shaw, that had identified additional provision of at least $40 million - overwhelmingly, it seems, due to transferred Statewide loans - resulting in Banksia's substantial net asset deficiency.

32 Mr Bolitho alleges that he and the group members suffered financial loss because of the statements in, or omissions from, prospectuses issued by Banksia in respect of which Bolitho group members have a claim for damages against Banksia, the auditor and the directors of Banksia; and because of breaches, or involvement in breaches, of statutory and, or alternatively, equitable obligations by Banksia, Trust Co, the auditor and the directors in relation to debentures issued by Banksia. All the defendants deny that they are liable to Bolitho and the Group Members in respect of these claims.

33 Banksia has brought a number of related claims against Trust Co arising out of the Amalgamation and the resulting external administration of Banksia. As with respect to the claims made in the Bolitho Group Proceeding, those claims are denied. Banksia's principal claim against Trust Co is for statutory conflict of duty on the basis that Trust Co was on "both sides" of the transaction as trustee acting in a manner that was in the interests of Statewide and its debenture holders, but was not in the interests of Banksia and its debenture holders. Secondly, Banksia seeks to pursue a parallel cause of action in contract and tort arising from the same, or substantially the same, facts and circumstances as the primary statutory claim for breach of duty; thirdly, Banksia makes claims against Trust Co for assisting in serious breaches of fiduciary duty in relation to the implementation of the Amalgamation. Finally, Banksia also claims damages or equitable compensation in respect of amounts of Annual or Additional Remuneration to Trust Co from April 2009 on the footing that Trust Co should not have been the trustee given its statutory conflict. Banksia also seeks a related declaration that Banksia is not obliged to pay, or to agree to pay, any Additional Remuneration to Trust Co under provisions in this respect contained in cl 18.02 of the Trust Deed.

34 Running alongside Banksia's claims are the claims made against Trust Co in the Bolitho Group Proceeding. The two proceedings are closely interrelated. The Plaintiff in the Bolitho Group Proceeding makes similar allegations of conflict as the Banksia Proceeding and also alleged a series of further breaches directed at Trust Co's failure to exercise its statutory duties of reasonable diligence under s 283DA of the Corporations Act. Those breaches are also picked up by Banksia in its Amended Reply and Defence in the Banksia Proceeding dated 3 October 2017 and by Banksia in its Amended Defence dated 25 October 2016 in the Bolitho Group Proceeding. Importantly, Banksia also makes claims of contribution against Trust Co in the Bolitho Group Proceeding that in turn rely upon the allegations made in the Banksia Proceeding. Unlike the claims in the Bolitho Group Proceeding, claims made by Banksia are on behalf of all debenture-holders and are, consequently, not subject to any deduction for a litigation funder's fee.

35 The position of the SPRs has been to fully support Bolitho's claims against Trust Co. The SPRs' judgment has been that the interests of debenture-holders are maximised by having both avenues of recovery available. The two sets of claims have distinct juridical bases and offer different advantages and disadvantages but overall operate in a complementary manner that improves the prospects of greater recovery by debenture-holders. The SPRs and their legal advisors have also been conscious that the evidence filed in the proceedings, especially in relation to causation and loss and damage, has been specifically framed in support of Banksia's claims (not Bolitho's) and that the success of Mr Bolitho's claims is likely dependent on the support of the SPRs and their legal team.

36 Given this interrelationship, I accept the contention that the only viable course open to the SPRs in the circumstances and in the interests of the debenture-holders in accordance with the SPRs' statutory duties, has been to pursue a settlement with Trust Co of the claims made against Trust Co by both Banksia and in the Bolitho Group Proceeding.

Notice given to group members in Bolitho Group Proceeding

37 Notice was given to group members of the Trust Co settlement in the manner ordered on 8 December 2017. The notice informed group members of the matters referred to in paragraph 13.6 of the Group Proceedings Practice Note.[16] The terms of the proposed settlement were disclosed in detail,[17] including the Settlement Sum, the release and discharge in respect of Trust Co's remuneration claims, the proposed use of the Settlement Sum to pay the Plaintiff's legal costs and disbursements of $4.75m (plus GST), the funder's commission of $12.8m (plus GST) ("the Funder's Commission"), $75,000 to Mr Bolitho, any distribution costs, and the distribution of the remainder to the debenture-holders.

38 It is important to observe that the notice approved by the Court on 8 December 2017 was not the first notice given to group members by Court order in this proceeding. A notice was approved by Robson J on 2 June 2016 in respect of the proposed partial settlement and provided group members with an opportunity to opt-out of the class action. Robson J described the opt-out notice in Re Banksia Securities Limited (receivers and managers appointed) (in liquidation) as follows:[18]

1. In June 2016, the Court ordered that an opt out notice be sent to all group members. The opt out notice informed group members of the proposed settlement of the Bolitho proceeding, that was subject to court approval. Group members were advised that:

Under the proposed settlement, the plaintiff will receive $5.2 million on his behalf and on behalf of group members who have not opted out. The proposed settlement involves the settlement sum being distributed as follows:

$2.55m for the payment of the Plaintiff's legal costs attributable to the claims made against the settling Defendants;

$1.3m for the payment of a common funding fee to the Plaintiff's litigation funder (which means that all debenture holders, including those who have not signed agreements to fund the class action are effectively required to pay, out of the settlement proceeds they would otherwise receive, a commission to the litigation funder); and

$1.35m being the balance of the settlement sum and which is equivalent to approximately 0.25 cents for each $1 of debentures held by the debenture holders (ie for each $100 of debentures you hold you will receive a distribution of approximately 25 cents; for each $1000 of debentures that you hold you will receive a distribution of approximately $2.50).

In conjunction with the application for the approval of the proposed settlement, the plaintiff will also apply to the Court for approval of a payment, by way of "a common funding fee" of $1.3m to the Litigation Funder. This application will be made pursuant to s 33ZF of the Supreme Court Act 1986 (Vic) which permits the Court to make any order which it thinks appropriate or necessary to ensure that justice is done in the proceeding.

1. As discussed above, about 5 per cent of the group members opted out of the group proceeding after the opt out notice was circulated in June 2016. They remain at liberty to take what proceedings they think fit. I was informed by the plaintiff that no group members had stated to the plaintiff that they objected to the proposed settlement.

39 Group members were therefore given an opportunity to opt-out of the proceeding in compliance with s 33J(1) of the Act. Approximately 5% of debenture-holders by value opted-out in the manner prescribed by s 33J(2) of the Act.

40 It should also be noted that in the opt-out notice, a litigation funding commission equal to 25% of the settlement sum payable under the Partial Settlement was disclosed to group members. This was made explicit in the notice, where the litigation funding commission was described as follows: "[t]he 'common funding fee' represents 25% of the $5.2 million settlement sum payable in respect of the settlement of the Banksia Group Proceeding_._" While the Plaintiff ultimately agreed to a lower funding commission, it is notable that no group member objected to the terms of the Partial Settlement.[19] In excess of 55% of group members had entered into a written litigation funding agreement with BSLLP which provided for a funding commission of 30%,[20] and so it is unsurprising that they did not object. It might be inferred that the 45% of group members who had not entered into a written funding agreement also did not object to the proposed 25% rate as appropriate remuneration to the litigation funder for financing the conduct of the proceeding on their behalf, which has concluded successfully at no risk or expense whatsoever to themselves.

41 As has already been noted,[21] after the giving of notice as ordered by the Court on 8 December 2017, only two objections were received; being those from Mr Chris Botsman and from Mr Keith Pitman.

42 In summary, the Settlement Deed provides that, in settlement of the claims made against Trust Co in each of the Bolitho Group Proceeding and the Banksia Proceeding:

(a) Trust Co will pay the Settlement Sum ($64,000,000) into the trust account of the solicitors for the plaintiff in the Bolitho Group Proceeding;[22]

(b) Trust Co releases and discharges "[Banksia] and its Creditors from all Claims for remuneration or indemnity of any kind under the [Banksia] Trust Deed";[23]

(c) the Plaintiff in the group proceeding, Banksia, and the SPRs release Trust Co from the claims made in the Proceedings and other possible claims;[24]

(d) the Settlement Sum be distributed as follows in accordance with cl 4.3.2 of the Settlement Deed:

(i) payment of the Funder's Commission of $12.8 million (plus GST) to BSLLP;[25]

(ii) payment of the legal costs and disbursements incurred by BSLLP in the conduct of the group proceeding in the sum of $4.75 million (plus GST) to BSLLP to the extent to which those legal costs and disbursements are not to be satisfied from the sum of approximately $1,757,000 presently held on trust by BSLLP for group members;[26]

(iii) payment of the sum of $75,000 by way of reimbursement to the Plaintiff in the group proceeding;[27] and

(iv) thereafter, the balance of the Settlement Sum to be distributed by the solicitors for the Plaintiff in the group proceeding with the assistance of BSLLP to all debenture-holders on a pari passu basis.

43 The release and discharge given by Trust Co in cl 5.4.3 of the Settlement Deed concerns both Trust Co's existing application for remuneration by which Trust Co seeks the sum of $3.9 million for work performed in the period from October 2012 to February 2014 and any further claims for remuneration in the period from February 2014 to the present. The provisions of this sub-clause of the Deed provides that Trust Co:

in relation to Banksia and [the SPRs], releases and discharges [Banksia] and its Creditors from all Claims for remuneration or indemnity of any kind under the [Banksia] Trust Deed.

The existing claim was the subject of Banksia Securities Ltd (recs & mgrs apptd) (in liq) v The Trust Co (Nominees) Ltd (Remuneration Entitlement Priority Proceedings)[28] and The Trust Co (Nominees) Ltd v Banksia Securities Ltd (recs and mgrs apptd) (in liq).[29]

44 While several of the conditions precedent intended to ensure that these applications were brought before the Court in a timely manner in the hope of achieving a swift distribution to debenture-holders have already been satisfied, the following conditions precedent remained at the commencement of the hearing of these applications:

(a) the making of the Approval Orders;[30] and

(b) if the Approval Orders are made, the expiry of the appeal period or the confirmation of or making of the Approval Orders on appeal.[31]

As the Approval Orders were made at the conclusion of the hearing of these applications, the only remaining condition precedent is the latter one, namely, the expiration of the appeal period or the confirmation of or making of the Approval Orders on appeal.

45 There are, as indicated at or in connection with the hearing of these applications some other provisions of the Settlement Deed which should be noted. Of present relevance are the following:

(a) Having regard to the unwillingness of Trust Co's related entities to give it any further financial support to satisfy any adverse judgment against it - as set out in the Approval Orders - [32] Trust Co required BSLLP to provide undertakings (executed as deeds poll) from each of senior counsel for the Plaintiff and a director of BSLLP, inter alia, to the effect that each would not:[33]

commence, conduct, fund, assist, procure, encourage or otherwise be involved in any manner whatsoever in any Claim or proceeding against Perpetual or its Related Entities in connection with Perpetual not indemnifying Trust Co or making any contribution in respect of any adverse judgment in relation to the Proceedings or Perpetual not making any public announcement that it will not so indemnify Trust Co; and

to engage a suitably qualified external costs consultant to prepare an expert report to be filed... concerning whether the legal costs and disbursements incurred by BSLLP and claimed... have been reasonably incurred and are of a reasonable amount.

An affidavit of Mr Peter Trimbos dated 4 January 2018 exhibiting a confidential report concerning the legal costs and disbursements incurred by BSLLP has been made available for inspection by group members since 5 January 2018 and has been filed on a confidential basis in the proceeding.

46 The principles to be applied in relation to Court approval of the settlement of group proceedings were the subject of detailed consideration by Robson J in Re Banksia Securities Limited (rec & mgr apptd).[34] Accordingly, in my view, there is little to be gained by yet again rehearsing these principles and, instead, I rely upon the most helpful and clear statement contained in this judgment of Robson J, a statement which also reflects the position put in the submissions with respect to these applications:[35]

1. The settlement of the Bolitho proceeding will not take effect unless and until the settlement is approved by the Court, pursuant to the requirements of the Supreme Court Act.

43. The relevant provisions of the Supreme Court Act are as follows:

S 33V (1) A group proceeding may not be settled or discontinued without the approval of the Court.

(2) If the Court gives such approval, it may make such orders as it thinks fit with respect to the distribution of any money, including interest, paid under a settlement or paid into Court.

S 33ZB A judgment given in a group proceeding -

(a) must describe or otherwise identify the group members who will be affected by it; and

(b) subject to section 33KA, binds all persons who are such group members at the time the judgment is given.

S 33ZF In any proceeding (including an appeal) conducted under this Part the Court may, of its own motion or on application by a party, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.

1. The purpose to be served by s 33V has been said to be 'obvious'; Branson J observed:[36]

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.

1. Court approval is required under s 33V of the Supreme Court Act, notwithstanding that the proposed settlement would result in only a partial settlement of the Bolitho proceeding. The powers conferred by s 33V have been construed as authorising approval by way of partial settlement in a group proceeding.[37]
2. In Blairgowrie Trading Ltd v Allco Finance Group,[38] Wigney J considered an application for orders under s 33ZF in a shareholders' group proceeding. His Honour made several observations on the meaning and application of s 33ZF(1) of the Federal Court Act, which is in pari materia to s 33ZF of the Supreme Court Act.
3. First, s 33ZF of the Supreme Court Act confers a broad, discretionary power on the Court in relation to representative proceedings:[39]

The only express limitation or requirement in s 33ZF is that the court thinks the order is appropriate or necessary to ensure that justice is done in the proceeding. No other limitation should be read into the section.

1. Further, because the power is discretionary:[40]

Even if the express requirement that the order be appropriate or necessary to ensure that justice is done in the proceedings is satisfied, the court retains a residual discretion whether or not to make the order.

1. Secondly, Wigney J said that the issue or reason for making an order under s 33ZF 'must also be one that has arisen in, or relates to, "the proceeding".' His Honour said:[41]

The section... is not directed... at resolving theoretical or practical problems concerning litigation funding that might occur in representative proceedings generally. Nor is it concerned with issues or problems concerning the rights or interests of... litigation funders. Justice "in the proceeding" would not ordinarily involve any consideration of the commercial interests of a litigation funder unless they gave rise to some issue or problem that has, or is likely to have, some direct impact on the proceeding.

1. Thirdly, because s 33ZF requires that 'justice is done', the section:

[A]lso suggests that the particular issue or problem must somehow relate to the just hearing and determination of the claims, or the enforcement of the rights or subject-matter in issue in the proceeding... A requirement that justice is done also suggests that the proposed order must be fair and equitable. That will ordinarily involve a consideration of the position of all parties.[42]

[I]t is appropriate, in construing s 33ZF, to recognise the unusual position of group members in a representative proceeding brought pursuant to Pt IVA. Consent is not required for a person to become a group member and, while group members may benefit from a representative proceeding, their rights might also be adversely affected since they are bound by any judgment in the proceeding unless they have opted out. In these circumstances, in considering the exercise of the power in s 33ZF, the court should be concerned to ensure that the interests of those who are absent, but represented, are not prejudiced by the conduct of the litigation on their behalf.

1. Fifthly, Wigney J said that in considering the position of all group members - both those who signed the litigation funding agreement and those who did not - it must be borne in mind that the Federal Court Act contemplates that the group members may include so-called 'free riders.' It is the plaintiff who assumes the burden being liable to bear the costs and expenses of advancing the claims in the proceeding, and that is obviously fair because under the opt out system someone can be a group member without their consent or knowledge.
2. In addition to the above points raised by Wigney J, the amicus curiae submitted that the Court must be satisfied that any proposed settlement of a representative proceeding is in the interests of the group members as a whole.[44] The applicant bears the onus of showing that settlement is in the interests of all group members.[45] It is for that reason that the solicitor for the plaintiff has 'a duty to the non-funded group members to conduct the proceeding in a manner consistent with their interests.'[46]
3. The amicus curiae also submitted that it has been recognised in several decisions that those group members who provide funding under the terms of a funding agreement should not be left worse off than those group members who did not sign the agreement.[47] This point is particularly relevant in relation to the fees claimed by the litigation funder, discussed further below.
4. Practice Note 10 of 2015[48] states that in order to approve a settlement the Court will usually need to be persuaded that the proposed settlement:

(a) 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) has been undertaken in the interests of group members and not just in the interests of the plaintiff and defendants.[49]

1. In determining whether the proposed settlement is fair and reasonable, and in the interest of the group members as a whole, regard should be had to the arrangements with the legal representatives of the plaintiff and the litigation funder, as a portion of the Bolitho settlement sum was to be paid to the litigation funder as reimbursement of legal costs and a further amount as consideration for financing the Bolitho proceeding.

It should be observed that in relation to these applications, no amicus or contradicter was appointed by the Court as, in my view, the matters raised for consideration by these applications were more than adequately addressed in the submissions and evidentiary material before the Court; including the only two objections received to the proposed settlement.

47 The SPRs are receivers appointed by the Supreme Court of New South Wales pursuant to the statutory regime provided by Chapter 2L of the Corporations Act. This is a unique specie of court-appointed receiver that is analogous to but not coterminous with court-appointed receivers under the court's general equitable jurisdiction or under s 37 of the Supreme Court Act 1986. There is some debate as to whether the source of the Court's jurisdiction to make a direction approving the proposed settlement is more correctly regarded as lying within the Court's general equitable jurisdiction or under the provisions of s 37 of the Supreme Court Act or under the more particular or specific provisions of s 283HB of the Corporations Act. For the reasons which follow, it is not, in my view, necessary to finally determine this question, as it is clear that drawing upon all these sources, as the Court may, there is sufficient jurisdiction and there is no need in the present circumstances to be more definitive in this respect.

48 It is important to have regard to the statutory context in understanding the scope and limitations of the SPRs' powers and any directions given by the Court. In particular, I accept that it is appropriate to have regard to (1) the fact that the SPRs are court-appointed and subjected to the Court's supervision as officers of the Court; (2) the source of their protective jurisdiction under s 283HB of the Corporations Act to act at all times in the interests of debenture-holders; and, (3) the subject-matter of the special purpose receivership (i.e., legal causes of action for over $100 million in complex proceedings on behalf of thousands of investors). Given those matters, it is appropriate for the Court to evaluate whether the proposed settlement of Banksia's claims against Trust Co is reasonable and in the interests of debenture-holders.

49 It is also relevant and appropriate to have regard to the position taken by the courts in respect of directions sought by an insolvency practitioner, such as a liquidator, in analogous external administration contexts; for example, under s 411 of the Corporations Act. While a court will not ordinarily make a direction as to a matter which involves a commercial decision of an insolvency practitioner, it may give directions as to the reasonableness of a contemplated exercise of a discretion, particularly where a receiver represents numerous interests and that exercise of discretion might otherwise expose the receiver to criticism. That approach reflects the fact that, particularly where a court has appointed an insolvency practitioner to perform a role, the insolvency practitioner can reasonably look to the court for advice and direction in respect of decisions which are capable of giving rise to controversy and are not merely matters of commercial judgment.[50] As Goldberg J explained in Re Ansett Australia Ltd v Korda:[51]

There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised. It is insufficient to attract an order giving directions that the liquidator or administrator has a feeling of apprehension or unease about the business decision made and wants reassurance.

50 I accept that the decision of the SPRs plainly involves more than the making of a commercial decision, but also the exercise of legal judgment as to the legal merits of large claims being prosecuted by the SPRs on behalf of nearly 16,000 debenture-holders. The decision to settle those claims is also one that is capable of giving rise to controversy. The subject-matter of the direction sought is particularly apt for curial approval and closely resembles the approval process with respect to the settlement of the Bolitho Group Proceeding.

51 The Court's function in giving a direction of the kind sought by the SPRs does not require it to reconsider all of the factors that the SPRs have considered, but as explained by Brereton J in Re One.Tel Networks Ltd, requires the Court to:[52]

...be satisfied, before making a direction, that the decision is proper and reasonable; at least usually, this will necessitate consideration of the liquidator's reasons, and the process by which the decision has been reached.

Nevertheless, some examination of the merits of the compromise cannot be avoided in that regard.[53]

52 In my opinion, it is clear that the proposed settlement sum of $64 million is fair and reasonable, and in the interests of debenture-holders. There are three essential reasons for this view.

53 Before turning to these reasons, it is helpful to note the financial and insurance position of Trust Co, as follows:

(a) the total limit of liability under Trust Co's professional indemnity insurance policies is $75 million (inclusive of defence costs);

(b) of that limit of liability approximately $13 million (exclusive of GST) has been eroded by defence costs of Trust Co in defending itself in the Proceedings; and

(c) Trust Co otherwise has no material assets available or source of funds, including from The Trust Company Limited, to contribute to the settlement of the Proceedings.

54 The first reason is that the underlying justification for the settlement is that the evidence establishes that Trust Co is contributing everything that is available to it towards the settlement of the claims. As part of the settlement approval process, Trust Co has been required to file affidavits to prove the accuracy of that basic premise for the settlement. It is on the basis of this affidavit evidence that the Court is satisfied that everything available to be contributed by Trust Co is to be contributed towards the Settlement Sum.

55 It is submitted that the evidence establishing that everything available to be contributed by Trust Co is to be contributed towards the settlement means that it follows, inexorably, that the settlement sum is fair and reasonable. The usual position for a proposed settlement of a group proceeding and, it follows, a proceeding such as the Bolitho Group Proceeding, is that the Court will make an assessment of the strengths and weaknesses of the claims and defences in the proceeding. In the present circumstances, the position is, however, somewhat different. There is no question that the proceedings, the Bolitho Group Proceeding and the Banksia Proceedings, though interrelated and covering some common ground, are multi-issue, complex proceedings. It is also quite clear that the resources which would need to be applied to their preparation and the conduct of the trial would be very considerable indeed. It is also clear that the multiplicity of issues raised and the extent of the evidence in support of the claims and defences in those proceedings mean that it would be impossible to be confident of a particular outcome, issue by issue or overall. In relation to the partial settlement, Robson J observed:[54]

1. The case is large and complex. The matter had been set down for a 12-week trial (now estimated 10-week trial commencing February 2018). I was informed that there are 7,000 pages of witness statements and affidavits, and the documentary evidence relied on at the trial will be extensive.

His Honour was then speaking, as at mid-2016, with respect to approval of the Partial Settlement. Subsequent developments in the Proceedings indicate that, even with a partial settlement, the remaining trial of the Proceedings would not be significantly shorter in duration, if at all, and that the evidentiary material remains extensive.

56 Having regard to these matters, the position remains as stated by Robson J in the Partial Settlement approval proceedings:[55]

1. However, the most important consideration in the proposed settlement is not the strength and weaknesses of the respective cases but the ability of the defendants to pay any award of damages to the debenture holders. It is unnecessary to assess the evidentiary or legal issues on liability or quantum, which is the role of the trial judge, and in view of the extant action against Trust Co, and Trust Co's third party claims against the directors and auditors it would be inappropriate to do so.

The gravamen of this statement remains powerful and compelling in the present context. The practical reality which the Court and all involved in these proceedings face is that, in relation to the claims the subject of the Settlement Deed, there is simply no more money available to contribute to the Settlement Sum. This means that the choice is to approve the settlement and to facilitate the distribution of the Settlement Sum to debenture-holders - as the Settlement Deed provides to all debenture-holders, not simply those the subject of the Bolitho Group Proceeding - or to spend further money on pursuing the proceedings. As Robson J observed, one might speculate as to the strengths and weaknesses of the respective cases, but even if the claims were established, considerable sums of money would have been expended in so doing; money which will not be recoverable having regard to the financial position of Trust Co as is established by the evidence. Moreover, there is no basis for thinking that the successful pursuit of these proceedings to judgment in favour of the claimants would affect the position as between Trust Co and Perpetual, against which no claim has been made in these proceedings and where no basis of claim is even suggested.

57 The second reason is that the figure of $64 million does fall within a reasonable settlement range, as advised by Senior Counsel on the assumption judgment against Trust Co of over $170 million could be satisfied. In other words, even if a judgment against Trust Co could be satisfied in full from a combination of Trust Co's available insurances moneys, assets of Trust Co and contributions from Perpetual and its related entities, the Settlement Sum is reasonable in light of the not insignificant risks in prosecuting Banksia's claims, the likely delay that would be occasioned to bring the matter to trial and obtain judgment and the risks of paying a large adverse costs order if unsuccessful. Moreover, as previously observed, the claims made in the proceedings are multiple, and complex, and some do raise novel legal and equitable points.

58 The third reason is that the plaintiffs in the Proceedings have followed a proper process in settling the claims on the terms set out in the Settlement Deed. In particular, they have sought and obtained advice from Senior Counsel as to the parameters of a reasonable settlement before engaging in negotiations with Trust Co and reaching the proposed settlement; they have engaged in an extensive negotiation process over a long period of time in order to obtain the best possible outcome for debenture-holders; and the SPRs have regularly consulted with and sought the feedback of the Debenture-Holder Committee ("the Committee") as to a reasonable settlement figure and the Committee has expressed its overall support for the proposed settlement with Trust Co.

59 Additionally, it bears noting that if this matter proceeded to a full trial and the plaintiffs in the proceedings were to prevail, it is nonetheless unlikely that debenture holders would receive any distribution before four years or so had passed, given the time required for the trial, judgment writing and the resolution of likely appeals to the Court of Appeal and application(s) for special leave to the High Court.[56] Generally speaking, there are good reasons to decline to place significant weight upon a consideration such as this: group members ought not to be bound to an unfair settlement simply because of the ability of a defendant or defendants to cause delays. However, in the present circumstances, where the settlement is otherwise fair and reasonable, additional support for approval can be found in avoiding the delay associated with further litigation, especially having regard to the demographics of the group members in question.

60 Thus, in summary, in regard to these matters and the evidence more broadly, the position is that the proposed settlement of the claims against Trust Co is reasonable and represents a good commercial outcome for debenture-holders and this is reinforced by the following six considerations:

(b) the unwillingness of Trust Co's ultimate parent, Perpetual, or any of its related entities to indemnify or contribute at all to any judgment against Trust Co in the Proceedings;

(c) the extensive and robust negotiations that the SPRs and the Plaintiff have been involved in to reach the settlement;

(d) the advice of trial counsel as to reasonable settlement parameters;

(e) the demographic of debenture-holders and the likely delay in any financial distribution were Banksia to prevail at a full trial (and likely appeals); and

61 As I have observed previously, there has not been a contradicter or an amicus appointed for the purpose of the present applications. As I have indicated broadly, I do not regard the appointment of either as necessary in the present circumstances, having regard, particularly, to the evidence as to the assets available to Trust Co for the purpose of the proposed settlement. In the course of the hearing of these applications and in the written submissions in support, the claimant parties have properly and comprehensively canvassed competing arguments to such an extent that appointment of a contradictor or an amicus would both be unnecessary and, in my view, a gratuitous waste of limited resources now available for distribution to debenture-holders. For these and the preceding reasons in relation to the proper approach to considering whether the settlement of the proceedings is fair and reasonable, it is not necessary to consider competing arguments in detail. Nevertheless, having regard to the public interest and concern in relation to these proceedings, it may assist to set out, as a helpful summary, the Banksia submissions in this respect:[57]

1. In the absence of a contradictor, it is appropriate for counsel to bring to the Court's attention any competing arguments against the reasonableness of the settlement sum. Four essential arguments might be made:

(a) the amount to be distributed to debenture-holders is approximately $44 million against a claim in excess of $170 million and therefore is well under one-third of the value of the claim;

(b) Perpetual under the pressure and spotlight of public trial would likely in fact contribute a significant amount over and above the available insurance moneys towards a settlement of the proceedings or towards satisfaction of any judgment;

(c) now that Banksia has been made aware of Trust Co's true insurance and financial position and the unwillingness of Perpetual to support its subsidiary (Trust Co), steps could be taken to join an upstream Trust Co/Perpetual entity to the Proceedings that does have very significant available assets (based on a review of the most recent statutory filed accounts) to contribute towards any judgment. In particular, the SPRs could take steps to join Trust Co's parent, Trust Company Limited, to the Proceedings under s 283F(1)(b) on the basis that it was involved in the contraventions by Trust Co of ss 283AC and 283BD(f);[58]

(d) even though the settlement achieves a beneficial economic outcome it does not give the debenture-holders "justice" and hold Trust Co to account for serious derelictions of statutory and equitable duties.[59]

1. The response to those competing arguments is as follows:

(a) the fact the settlement sum is well short of the quantum of the claim is principally a reflection of the amount available to be contributed by Trust Co. Based on the amounts Trust Co and Perpetual have sworn on oath are available for Trust Co to contribute towards a settlement, there is no reliable prospect of obtaining any more. The reasonableness of the settlement must be informed by what Trust Co has to give. Trust Co says, in effect, it has given all it has to give and that there is no more. In any event, the sum to be distributed is still a very significant amount (in both absolute terms and relative to settlement sums for large claims of this kind) and it is also necessary to recognise the risks and delays associated with the continued prosecution of the Proceedings.

(b) As to (b) above, in the face of the affidavits filed by Trust Co and Perpetual, the SPRs could not rationally be expected to take the punt that such a circumstance might eventuate and in so doing risk the debenture-holders receiving nothing because they were unsuccessful at trial or substantially less because Trust Co's available insurance moneys were further substantially eroded and the SPRs themselves spent millions of dollars more in conducting a trial (and surviving likely appeals);

(c) whilst it might be possible to take steps to join Trust Company Limited and the SPRs may well be justified in doing so if the settlement did not proceed, the SPRs could not be regarded as being required to do so having been presented with a settlement sum that is within the parameters of trial counsel's advice (on the assumption that full recovery was realistic). Such a step would also presumably be vigorously contested, would result in further delay and the success of such a step is far from certain;

(d) whilst special purpose receivers and liquidators may properly have regard to the public interest, in the absence of an overwhelming direction from debenture-holders to do so, it would not be appropriate for the SPRs and consistent with their role to continue to pursue the Proceedings solely in a quest to achieve justice and accountability through a public judgment and in so doing put at risk receiving anything at all for debenture-holders. Furthermore, the proposed settlement can readily be seen as affording a measure of justice to debenture-holders beyond the substantial economic return. This is also a consideration the Court is able to take into account in its reasons for judgment on the settlement applications.

1. Whilst there might be plausible competing arguments, those arguments are clearly not a basis for concluding that the settlement sum is unreasonable and that the SPRs are not justified in entering into the Settlement Deed.

62 Although these submissions were made on behalf of the SPRs, the position put is, in substance, equally applicable to the Bolitho Group Proceeding, though on the basis of differing statutory provisions. Moreover, though these submissions are contained in confidential written submissions, the issues were canvassed at the hearing, save that the reference to Perpetual's position was initially not raised directly, but was, ultimately, stated clearly in "Other Matters" in the Approval Orders made on 30 January 2018.[60] In this respect, it should be noted that when the Perpetual Group acquired Trust Co in 2013, the present litigation was already in train and it was agreed as part of the acquisition that neither Perpetual Limited nor any of its subsidiaries agreed to meet any adverse judgment or settlement arising from this litigation. It is, therefore, not a situation where a parent company is refusing to meet the claims against the liabilities of a subsidiary in circumstances where the relevant acts or omissions occurred during the period of the parent-subsidiary relationship.

63 Approval is sought for the payment of legal fees and disbursements of $4.75 million (plus GST) from the Settlement Sum as an element of the overall approval. The payment of legal fees and disbursements is the subject of cll 3.11 and 4.3.2 of the Settlement Deed.

64 The effect of inclusion of the goods and services tax paid or payable on the legal fees and disbursements will mean that the sum of $5,225,000 will be paid from the Settlement Sum pursuant to cl 4.3.2 of the Settlement Deed if the Court approves the payment of the legal fees.

65 Having regard to the position that the group members as a whole benefit from the legal costs incurred, the legal representatives of the Plaintiff in the Bolitho Group Proceeding are entitled to their costs out of the settlement amount. As has been said previously, the "legal costs should be borne by those who benefitted from those legal costs being incurred - the group members as a whole".[61] Nevertheless, the provisions of s 33V of the Supreme Court Act require that the Court be satisfied that the costs incurred are reasonable.[62]

66 In Downie v Spiral Foods Pty Ltd,[63] J. Forrest J provided a statement as to the role of the Court in reviewing costs and administration expenses in circumstances like the present:[64]

1. The proceeding has been settled on an 'all in' or 'inclusive' of costs basis. Given that the group members as a whole benefit from the legal costs incurred, Ms Downie's solicitor, Maurice Blackburn, is entitled to its costs out of the settlement amount.[65] However the Court, in the exercise of its protective role under s 33V of the Supreme Court Act will scrutinise, at times closely, the quantum of those costs and any other deductions from the amount available to group members.
2. This is important for two reasons. First, as the costs are deducted from the settlement sum, it has the potential to affect the reasonableness of the settlement.[66] Secondly, the group members lack detailed information about the legal costs incurred so as to be able to challenge the plaintiff's solicitor's claimed costs.[67]
3. In determining whether to approve the deduction of costs from the settlement sum, courts must be satisfied that the costs claimed are 'reasonable in the circumstances'.[68] This does not necessarily require a taxation of the costs claimed (although it may),[69] but rather the tendering of 'sufficient' evidence so as to enable the court to make an assessment as to whether the costs were reasonably incurred.[70] In group proceedings, usually this evidence will come from an independent solicitor or costs consultant.[71]
4. As noted by Gordon J in Modtech (No 1),[72] and Osborn JA in Matthews,[73] it is the Court, and not the independent costs expert who must determine whether fees and disbursements are reasonable. In this application, it is particularly important to be satisfied that the costs are reasonable because, as in Matthews,[74] the net amount available for distribution to group members will be affected by the amount deducted to pay Maurice Blackburn.
5. The factors to be taken into consideration in determining whether the costs claimed are reasonable will vary from case to case. Amongst other factors, it may be necessary to consider:

(a) whether the work in a particular area, or in relation to a particular issue, was undertaken efficiently and appropriately;

(b) whether the work was undertaken by a person of appropriate level of seniority;

(c) whether the charge out rate was appropriate having regard to the level of seniority of that practitioner and the nature of the work undertaken;

(d) whether the task (and associated charge) was appropriate, having regard to the nature of the work and the time taken to complete the task; and

(e) whether the ratio of work and interrelation of work undertaken by the solicitors and the counsel retained was reasonable.[75]

67 In support of the application for approval of payment of these legal fees and disbursements, reliance is placed on the affidavit of Mr Peter Trimbos, a Law Institute of Victoria Accredited Specialist in Costs Law, to which is exhibited his Confidential Report on Fairness and Reasonableness of the Plaintiff's Solicitors' Own Client Costs and Disbursements in respect of the Bolitho Group Proceeding.[76]

68 Mr Trimbos has concluded that the following legal costs and disbursements now claimed:

(a) have been reasonably incurred by the Plaintiff and are fair and reasonable in amount:

(i) professional fees of $387,929.30 (GST inclusive) billed to the Plaintiff since 1 July 2016 by his solicitors;[77]

(ii) disbursements totalling $3,079,250.25 (GST inclusive) billed to the Plaintiff since 1 July 2016 by his solicitors;[78]

(i) anticipated future costs to finalise the settlement of $400,796.00 (GST inclusive) for professional fees and $354,260.44 for disbursements;[79]

(i) 30% of the total fair and reasonable fees incurred by the Plaintiff as at 30 June 2016 of $3,575,114.82, being $1,072,534.45.[80]

69 In total, the amounts which Mr Trimbos concludes are fair and reasonable, fairly and reasonably incurred, or reasonably incurred by the Plaintiff and which are fair and reasonable in amount sum to $5,294,770.44. This sum exceeds the GST-inclusive sum claimed in respect of legal fees and disbursements by $69,770.44.

70 As indicated in the preceding reasons, it is the Court's role to determine whether the fees and disbursements are reasonable, although the Court is assisted by the independent costs expert's opinion. The material on legal costs prepared by Mr Trimbos and provided by the Plaintiff does, in my opinion, properly address the following issues. First, whether the work undertaken was appropriate; secondly, whether the work undertaken was undertaken efficiently; thirdly, whether the work undertaken was undertaken by a person of appropriate seniority; fourthly, whether the charge out rate was appropriate; and fifthly, whether the interrelation of the work undertaken by the solicitors and senior counsel and junior counsel was appropriate. Mr Trimbos deposes that, in his opinion, as explained in his Confidential Report, costs incurred were reasonable and the work undertaken was appropriate. Mr Trimbos identifies in great detail invoices relating to the work performed.

71 More particularly, I am satisfied, on the basis of the opinions set out in Mr Trimbos' Confidential Report and the annexed source materials, that:[81]

(a) the costs incurred by the plaintiff's solicitors and counsel in the conduct of this proceeding over the last five years are reasonable given the multitude of parties and resulting complexity of the proceeding, the interlocutory applications heard and determined in the proceeding, the need for extensive case-management of this proceeding, including case-management of this proceeding with related proceedings, the copious documentary evidence which has been reviewed, and the extensive preparation for trial (which it was first foreshadowed would be set down for trial in early 2016, was later set down for hearing in 2017, and finally in 2018);

(b) the solicitors and counsel engaged by the plaintiff have been engaged on their usual terms. The Court may be reassured by the role of the plaintiff's litigation funder, a sophisticated participant in this litigation with access to significant knowledge and experience of litigation, in providing oversight in respect of the engagement of solicitors and counsel on reasonable terms;

(c) all legal costs have been incurred in respect of (i) the conduct of this proceeding on behalf of group members; and (ii) the advancement of common questions on behalf of the plaintiff and group members (other than to the relatively minor extent necessary for pleading the plaintiff's claim in the various iterations of the statement of claim) and defending interlocutory applications which, had they been successful, might have derailed the entirety of the claim and prevented group members from benefitting from its prosecution.

72 On 13 March 2014, the Plaintiff and BSLLP (which was at that time known as International Litigation Partners Limited) entered into a litigation funding agreement ("the Litigation Funding Agreement"). Prior to that date the costs of the Bolitho Group Proceeding had been borne by the Plaintiff's solicitor, Mr Elliott, who had acted on a "no win, no fee" basis and had been responsible for the payment of all external costs and disbursements. Once the defendants sought substantial security for their costs, it became apparent that litigation funding would be required as Mr Elliott could not bear the costs of the proceeding and provide the required security alone.

73 Pursuant to the Litigation Funding Agreement, BSLLP agreed to pay the Plaintiff's costs of the case ("Case Costs", a defined term in the Litigation Funding Agreement, which includes inter alia the costs of bringing the proceeding, amounts paid by way of security for costs, and adverse costs orders), in return for the repayment of the Case Costs and consideration for the financing of the case and the performance by BSLLP of its obligations under the agreement up to a maximum of 30% of any money received or payment made to settle, compromise or resolve any or all of the claims made in the Bolitho Group Proceeding ("the Resolution Sum"). The Case Costs and consideration are to be paid from the Resolution Sum.

74 By a letter dated 6 June 2014, the Plaintiff's solicitor wrote to all group members providing an update on the progress of the proceeding, including the statement of claim and the mediation then scheduled for 21 and 22 July 2014 to be conducted by the Hon Raymond Finkelstein QC. Of importance to this analysis of the claim for litigation funding is the discussion of the defendants' applications for security for costs, the representative plaintiff's costs and the Litigation Funding Agreement set out in that letter.

75 The Plaintiff's solicitor noted that all of the defendants to the Bolitho Group Proceeding had recently announced their intention to make applications for substantial security for past and future costs and, in addition, the immediate payment of a large part of their legal costs incurred to date. Mr Elliott said that "[t]he delays in the progress of the case and the applications for security for and immediate payment of costs totalling more than one million dollars ($1,000,000) has made third party litigation funding of this case necessary."

76 While the Bolitho Group Proceeding required litigation funding, it was not available from an existing commercial litigation funder. Mr Elliott explained as follows:

After consultation with your representative plaintiff, Mr Laurence Bolitho and his solicitor, Mr Rob Crowe of Riordan Legal, Shepparton, I wrote to all potential and suitably qualified third party litigation funders known to me seeking expressions of interest from them to provide litigation funding for our class action. I was unsuccessful in arranging litigation funding with any of them.

As I have been personally funding the disbursements and Counsels' fees and providing my legal services to the class action on a no win, no fee basis for the past 18 months, I have an obvious interest in the continuation and ultimate success of the Banksia Class Action. Nevertheless, I am not in a position to continue personally funding the case or meet any significant security for costs or immediate payment of costs orders which may be made by the Court. Accordingly, I have recently arranged for a group of experienced and financially strong investors to subscribe for shares in a new public company that has agreed to act as our litigation funder. A company associated with my family is a significant investor and I am one of the three directors of this newly incorporated company named - BSL Litigation Partners Limited ("BSLLP").

77 Mr Elliott went on to advise group members that:

(a) Mr Bolitho had received independent legal advice before entering into the Litigation Funding Agreement;

(b) A copy of the Litigation Funding Agreement was available on the Banksia Class Action website;

(c) A Sample Litigation Funding Agreement on the same terms was enclosed with the letter for group members' consideration, and Mr Elliott asked that each group member represented in the group proceeding enter into the same funding agreement with BSLLP;

(d) The funding agreement contemplates that "subject to Court approval, BSLLP will be entitled to the recovery of the legal costs and disbursements which it has funded plus a success fee of a maximum 30% out of the net settlement or judgment proceeds, if the group proceeding is successful. If the group proceeding is unsuccessful BSLLP will not be entitled to recover any money it has expended on the case";

(e) Mr Elliott would continue to act as solicitor on a no win/no fee basis but BSLLP would pay for disbursements (such as Counsel's fees and witness expenses) and any order for costs or security for costs. It should be noted that Mr Elliott ceased to act as solicitor for the Plaintiff in late 2014, and for the last approximately 36 months Mr Bolitho has been represented by Portfolio Law Pty Ltd. Portfolio Law Pty Ltd does not act on a "no win/no fee" or conditional costs basis. The costs incurred by BSLLP have therefore been significantly greater than those expected at the time that Mr Elliott wrote to group members; and

(f) Group members have a right to opt out of the group proceeding, which they may do at any time, although Mr Elliott stated his expectation that the Court would make orders that a formal "opt out" notice be sent to all group members advising them of their rights in this regard and providing time to opt out (as has now occurred).

78 Mr Elliott asked group members to complete an "Acknowledgment & Acceptance of Litigation Funding form" enclosed with the letter. He stated that "[i]t is desirable that you obtain your own independent advice on these proposed litigation funding arrangements. If you agree with them, please return the completed and signed form to me in the enclosed reply paid envelope."

79 In response to this letter, approximately 5,413 group members who hold approximately 55% of the outstanding debentures by face value issued by Banksia acknowledged and accepted the proposed litigation funding. Following the completion of the opt-out process ordered by Robson J on 2 June 2016, the 5,413 group members now represent approximately 57% of the group by value.[82]

80 The Litigation Funding Agreement dealt with a wide range of matters with respect to the ongoing conduct of the Bolitho Group Proceeding. Under the provisions of this agreement, the lawyers for Bolitho and BSLLP would determine what claims should be pursued in the proceeding; BSLLP would give day-to-day instructions to the lawyers on all matters concerning the claims and proceedings, and may give binding instructions to lawyers and make decisions on behalf of Bolitho in relation to the claims; and BSLLP could, in its sole discretion, following consultation with the lawyers, cease to fund any claim.

81 As set out in the reasons of Robson J with respect to the Partial Settlement approval:[83]

1. Under the funding agreement with Bolitho, BSLLP:

(a) agreed to provide management services in respect of the case, including advising Bolitho on strategy, database and document management, reporting to Bolitho in respect of progress, and facilitating Alternative Dispute Resolution processes;

(b) would pay the costs of the proceeding;

(c) would not seek reimbursement of any internal overheads incurred as part of the proceeding costs;

(d) agreed to pay any adverse costs order; and

(e) agreed to provide security for costs.

The lawyers will hold that part of the resolution sum[84] ordered by the Court as being due to [BSLLP] under this Agreement on trust for [BSLLP] and that part belonging to the plaintiff and all other members of the class Action on trust for each of them with the resolution sum to be dispensed in accordance with this [Agreement] and any Court order.

63. Clause 12.1 of the funding agreement provided:

Subject to any necessary Court order, the plaintiff acknowledges and agrees that upon resolution, [BSLLP] is entitled to be paid from the resolution sum as follows:

12.1.1 the case costs paid by [BSLLP] in relation to the class actions to which the resolution sum relates;

12.1.2 a further amount, as Consideration for the financing of the Case and performance of [BSLLP] of its various obligations under this [Agreement], being a maximum of 30% of that Resolution Sum.[85]

82 In financing the Bolitho Group Proceeding, BSLLP:

(a) paid or agreed to pay security for costs in excess of $1.5 million;

(b) accepted liability for adverse costs against all defendants, with the quantum of that possible liability likely to exceed $15 million;

(c) paid legal costs and disbursements (or, looking prospectively, being expected to pay such costs and disbursements up to the effective conclusion of the proceeding) of approximately $7.8 million.

In total, BSLLP's total costs of funding the group proceeding had the proceeding been unsuccessful might have been in excess of $23 million.

83 Having been established for the purpose of financing this proceeding, BSLLP has given (or agreed to give) the following security for costs for the benefit generally of all group members:

(a) giving security in the sum of $80,632.27 in respect of an application by the fifth defendant pursuant to consent orders made by Ferguson J (as her Honour then was) on 28 February 2014;

(b) giving security in the sum of $80,632.27 for the sixth to ninth defendants' costs pursuant to consent orders made by Ferguson J on 17 March 2014;

(c) giving initial security in the sum of $90,000 for Trust Co's costs pursuant to consent orders made by Ferguson J on 16 December 2014;

(d) pursuant to consent orders made by Croft J on 19 September 2017 giving security in the sum of $480,000 in respect of Trust Co's costs of and incidental to the Trial Preparation Phase by 9 October 2017; and

(e) pursuant to the 19 September 2017 consent orders, being obliged to give $720,000 by way of security for Trust Co's costs of and incidental to the Trial Phase of the proceeding by 31 January 2018.

It is clear that, had any security ordered or agreed in the Bolitho Group Proceeding not been provided by BSLLP, the Plaintiff's claims would have been stayed.

84 In my view, it is clear, as submitted, that in agreeing to finance the Bolitho Group Proceeding, BSLLP accepted a very significant adverse costs risk. The evidence indicates that the costs of Trust Co from the commencement of the proceedings until December 2017 are in the vicinity of $13 million, of the sixth to ninth defendants, which were expected to be $6.33 million by 30 August 2016 and Banksia's costs of $7.7 million (which, reportedly with costs and disbursements, were likely to incorporate all the legal costs and disbursements incurred by the SPRs from the commencement of the proceeding). These figures alone amount to approximately $27 million in legal fees, without taking into account Banksia's own costs of its defence of the claims made against it in the Bolitho Group Proceeding or in the fourth and fifth defendants' costs of the proceedings. Whilst some of these costs risks were mitigated through the Partial Settlement and Trust Co and other affected defendants might have sought to recover their costs from Banksia, the receivers of Banksia or the liquidators of Banksia in the event that Banksia was unsuccessful in the Banksia Proceeding, BSLLP must be regarded as having accepted an adverse costs risk significantly in excess of $15 million in undertaking to finance the proceeding. Moreover, BSLLP paid legal costs and disbursements, or will be liable for anticipated costs and disbursements, in the order of $7.8 million. This is clearly very significant expenditure on the costs of the Bolitho Group Proceeding for a litigation funder established as an ad hoc litigation funder for a proceeding which would have foundered in the absence of litigation funding.

85 There is a further issue in relation to the reasonableness of the arrangement which causes the Funder's Commission to be paid on sums distributed to debenture-holders who opted out of the Bolitho Group Proceeding. Under the proposed settlement arrangements, approximately 5.2% of group members who have opted out of the proceeding will receive a pari passu distribution under the Settlement Deed. I do not, however, consider that there is any unfairness or unreasonableness in the distributions to debenture-holders who have opted out being reduced by the payment of the Funder's Commission in the same way as the payments to be paid to group members. I am of this opinion because debenture-holders who have opted out retain their rights against Trust Co and, while their loss will be diminished by the amount which they will receive as a result of this settlement, they will remain entitled to recover the entirety of their loss from Trust Co. Thus the settlement represents a windfall for debenture-holders who have opted out, and I consider that this arrangement is fair and reasonable.

86 The principles set out by the Full Federal Court in Money Max Int Pty Ltd v QBE Insurance Group Ltd[86] provide a useful set of factors for considering the reasonableness of a proposed Court ordered funding fee. The suggested factors are necessarily relevant to the Court's satisfaction that it is appropriate to approve a particular funding fee under ss 33V(2) or 33ZF of the Supreme Court Act. It is of primary importance that, absent the provision of litigation funding by BSLLP, this proceeding would have stalled as a result of no established litigation funder being willing to finance the proceeding, orders for security for costs being made by the Court, and the Plaintiff's and group members' inability to finance the proceedings themselves. The factors in Money Max are perhaps better suited to considering the position of an established commercial litigation funder which habitually funds group proceedings for profit. However, they may, in my view, sensibly be adapted to the circumstances of a new litigation funder which is established for the specific purpose of taking on the risk in a particular proceeding on a commercial basis.

87 Three different funding arrangements have now been disclosed to Bolitho group members at different times:

(a) in the 6 June 2014 letter, which enclosed a copy of the Litigation Funding Agreement, group members were told that a funding fee of 30% would be sought;

(b) in the opt-out notice and notice to group members sent according to orders of the Court made on 2 June 2016, group members were told that the Plaintiff and BSLLP would seek a "common fund" payment of $1.3 million (or 25% of the sum for which the partial claim was settled). After making this disclosure, only 5% of group members opted-out;

(c) in the notice to group members sent according to orders made on 8 December 2017, a litigation funding fee of $12.8 million plus GST.

88 In Money Max,[87] this is referred to as being possibly "important to understand the extent to which class members were informed when agreeing to the funding commission rate". Those group members who accepted the terms of the litigation funding agreement were well aware that a 30% rate could be charged under the Litigation Funding Agreement. Some 5% of group-members opted-out of the proceeding when the first common funding fee of 25% was disclosed. A significantly lower percentage funding fee is now proposed. It does not seem reasonable that any group member who had agreed to the terms of the Litigation Funding Agreement would now complain about the Plaintiff and BSLLP seeking a significantly lower sum by way of a Funder's Commission than that which was previously disclosed.

89 A comprehensive comparative analysis of funding commissions in other Pt IVA proceedings was recently conducted by Beach J in Blairgowrie Trading Ltd v Allco Finance Group Ltd (receivers and managers appointed) (in liq) (No 3),[88] where his Honour identified the following:

(a) that in Australia "[i]t is usual for a litigation funding agreement to provide for the funder to receive, upon resolution of the proceeding (whether by way of settlement or judgment), reimbursement of all costs and expenses which the funder has paid, plus a percentage of the resolution sum (usually now defined as the gross resolution sum, inclusive of costs). That percentage varies from case to case, but is most commonly in the range of 25% to 45%. The proposed, in essence, 22.1% rate compares favourably with the usual range";[89]

(b) as concerns securities class actions "retail investors most commonly pay a figure of around 35%, whilst institutional investors most commonly pay a figure of around 30% of the gross resolution sum";[90]

(c) it is common for a "project management fee" equal to 20% of the costs paid (including legal costs and other costs such as amounts paid by way of security) are often recoverable, although Beach J said of the funder in the case "IFLP does not charge such fees, which is commendable";[91]

(d) Beach J had regard to the following papers which refer to litigation funding commissions typically falling in a range from 20% to 45% of recoveries:[92]

(i) Dr George Barker in "Third Party Litigation Funding in Australia and Europe" (Working Paper No 2, Centre for Law and Economics, ANU College of Law, December 2011) at 29:

In 2006, the Law Council was advised that [litigation funding companies] usually charge between 15 and 40% of an award or settlement. In 2010, IMF, Quantum and Litigation Lending Services Pty Ltd (LLS) all typically charged commissions that ranged between 25 and 40% of net litigation proceeds; although IMF also charged 'project management fees', "calculated as 25% uplift on its actual out of pocket expenses." CLF typically charged a commission of between 25 and 35% of net litigation proceeds, but did not charge a project management fee. Currently, commissions appear to range between 20 and 45%.

(ii) IMF stated in its "Submission to the Productivity Commission: Access to Justice Arrangements" (18 November 2013) at [1.10]:

In return for IMF's promise of funding, claimants assign to IMF a share of any damages or settlement proceeds that are recovered from the opposing parties to their claims. The assignment includes reimbursement of all amounts IMF has paid, a project management fee (which is a percentage of the legal budget) and a percentage of the recoveries (typically in a range of 25-40% depending on claim size, resolution sum, expected duration to resolution and risks undertaken). IMF is paid nothing if the claims are unsuccessful (and, in fact, will likely have to pay a substantial adverse costs order).

90 A review of the settlement approval decisions in 2016 and 2017 in which the settlement sum, legal costs and disbursements and litigation funding fees are disclosed reveals that Courts are habitually approving litigation funding commissions within this range, even on common fund applications. The Plaintiff's counsel identified the following settlements in 2016 and 2017 for which this information is known:[93]

Farey v National Australia Bank [2016] FCA 340

Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433

Camping Warehouse v Downer EDI [2016] VSC 784[94]

Mitic v OZ Minerals Ltd (No 2) [2017] FCA 409

Blairgowrie Trading Ltd v Allco Finance Group Ltd (Receivers & Managers Appointed) (In Liq) (No 3) [2017] FCA 330; (2017) 343 ALR 476

HFPS Pty Ltd atf The Hunter Facility Project Services Pty Ltd Superannuation Fund v Tamaya Resources Ltd (In Liq) (No 3) [2017] FCA 650

91 The Plaintiff observes that the gross percentages (excluding the "idiosyncratic" Camping Warehouse Australia Pty Ltd v Downer EDI Limited settlement) are in a range of 17% to 27% of the total settlement sums approved. The net percentages are in the range of 26% to 45% of settlement sums less legal costs and disbursements.

92 The settlement of the proceeding is in the sum of $64 million, plus the benefit of the release and discharge granted by Trust Co which was suggested by counsel for the Plaintiff to be likely to have a value to debenture-holders in the order of $11.16 million. While debenture-holders may well have hoped to recover the entirety of their loss, the Settlement Sum is nevertheless a very significant and commercial sum.

93 As suggested by Beach J in Blairgowrie Trading Ltd v Allco Finance Group Ltd (receivers and managers appointed) (in liq) (No 3),[97] on a settlement sum in excess of $50 million, it may be difficult to justify a litigation funding fee of 30% of the settlement sum. Of course, a 30% fee on $50 million would involve the payment of a sum of $15 million to the litigation funder. Despite the very significant risks taken by BSLLP in this proceeding, the Funder's Commission of $12.8 million which has been agreed is only 85% of what a court might approve on a $50 million settlement. Moreover, it should be noted that the Funder's Commission is the subject of only one objection filed in accordance with the orders made on 8 December 2017, being the objection from Mr Pitman.

94 On the basis of the principles in Money Max,[98] the Funder's Commission is, in my view, reasonable and provides an appropriate return to BSLLP for the risk which it has undertaken in this case. I consider that on these principles, the Funder's Commission should be approved by the Court pursuant to ss 33V(2) and 33ZF of the Supreme Court Act.

95 In summary, I consider that the Funder's Commission should be regarded as reasonable and should not be regarded as any impediment to the approval of the settlement by the Court. Moreover, some comfort is to be gained that this is an appropriate view having considered the Funder's Commission in the context of the Money Max principles; a funding equalisation mechanism; and the 25% rate communicated to all debenture-holders prior to opt out. Additionally, the Funder's Commission is near to the bottom of the range of payments to a litigation funder which would be acceptable under any of those principles. Accordingly, the Court approved the payment of the Funder's Commission.

96 Mr Bolitho's work on the Bolitho Group Proceeding is set out in the submissions to the Court. On the basis of the material provided, I accept the estimate of 750 hours of time spent on these proceedings over the course of the last five years to be very conservative.

97 The community in and around Kyabram, where Mr Bolitho lives and works, was, as I have observed previously, badly affected by the collapse of Banksia. The Australian Financial Review described the situation in an article entitled "The Banksia effect on a town" published on 15 December 2012, nine days before the writ was filed in this proceeding, as follows:

There hasn't been a day in the past seven weeks that Jenny Hay didn't cry.

The owner of the Western Gums caravan park, near Kyabram in Victoria's north, lost her life savings when Banksia finance group collapsed. Now, she may lose her business, her house - and her dog.

Mrs Hay, who was partially paralysed from her waist down in a medical accident a few years ago, is struggling to afford the health care to manage her pain.

Her husband, Peter, is dying. His funeral expenses went down with the lender. "He's all I've got", she said.

"I will probably have to get rid of Davis, my dog. I just can't afford to feed him and us".

"But it's so hard. You work until you drop, you have to keep going because we have nothing left".

The Hays are relying on food donations from a local charity. But there is a practical limit to the town's generosity: Banksia's collapse has had a big economic impact on Kyabram, where it was regarded by many residents as the local bank.

On Friday Banksia's receivers, McGrath Nicol, updated investors in Ballarat, Shepparton and Kyabram, where 600 people from the 7000-person town heard Tony McGrath promise they will get back 50 to 65 per cent of their savings.

One person asked how much the firm was being paid. Don't give a "bullshit answer", he said.

McGrath Nicol got $1.3 million for one month's work. By September, when the final payment is due, the total could be $4 million to $5 million, Mr McGrath said, drawing murmurs and mocking laughs.

"Obviously for all these affected people, most would be in the position that they want certainty sooner rather than later", he said.

David Baker, who lives nearby in Echuca and put all his savings in Banksia, is about to lose his phone. He can't afford to pay the bill.

"I also lost the pension that came through the week the company collapsed", he said.

Laurie Bolitho put his money in Banksia and savings from two community groups. "We all invested in good faith", he said.

98 Mr Bolitho is very well-known in Kyabram through his years of work as a bus driver for Walters Bus Service and his significant community involvement. In addition to the Australian Financial Review article, news of Mr Bolitho's involvement with the proceeding was spread by articles in:

(b) the Kyabram Free Press on 2 and 9 January 2013;

(d) the Shepparton News on 9 January 2013, 28 November 2014 and 4 December 2015; and

Several meetings with debenture-holders were attended by Mr Bolitho, solicitors and counsel. One of these meetings was reported in the Kyabram Free Press article of 9 January 2013. It is unsurprising that Mr Bolitho became a key contact with affected debenture-holders and that he spent significant time addressing enquiries about the conduct of the proceeding. I accept that Mr Bolitho has read documents filed in the proceeding, discussed them with his legal representatives, given instructions, received advice, attended mediations, and generally performed the role of an engaged representative plaintiff.

99 Given how the Plaintiff's claim is cast, Mr Bolitho spent very little time on matters which were solely relevant to the individual aspects of his claim. Thus, with the exception of providing copies of debenture certificates and related documents to his solicitors, I accept that all work performed by Mr Bolitho may properly be described as having been done "in a truly representative capacity".

100 In Downie v Spiral Foods Pty Ltd,[99] J. Forrest J set out the principles concerning the reimbursement of plaintiffs:[100]

1. In Darwalla, Jessup J approached the task by considering whether it would be 'fair and reasonable in the interests of group members as a whole for [the lead plaintiffs] to be so compensated.'[101] In other words, it requires asking 'whether it would be fair and reasonable for one of the "passive" group members in the present case to deny the claimants an appropriately but conservatively measured degree of compensation for the time input'.[102] The compensation is for time actually input; it is not an 'incentive payment' for taking on the role of lead plaintiff as has been adopted in the US class actions system.[103]
2. A primary consideration in assessing the fairness and reasonableness of compensating the lead plaintiff from the settlement sum is what the sum claimed relates to. In Darwalla, Jessup J only allowed the lead plaintiffs amounts for time and expenditure spent 'in a truly representative capacity' - but not for that spent pursuing individual aspects of their claims.[104] This required looking not just to the purpose for which particular work was done but also whether the result of the work done was in fact representative.[105]
3. The role of the lead plaintiff should not be underestimated. Having seen at first hand, both as counsel and trial judge, the work put in by a lead plaintiff and the stress and anxiety occasioned by the fulfilment of their role in court, it is only fair and reasonable that he or she be compensated for their time and effort.
4. However, that said, there must be a reasonable attempt to endeavour to quantify the expenses incurred by the lead plaintiff.

101 More recently, in Farey v National Australia Bank Ltd,[106] Beach J also addressed the issue of reimbursement of lead plaintiffs:[107]

1. The individual applicants have spent some time devoted to their role as lead applicants in the proceeding, albeit less time than might otherwise have been the case had the proceeding not been stayed. Apparently no precise records have been maintained in relation to the time spent, but [the solicitor] estimates that each of the individual applicants would have spent in excess of 20 hours devoted to that role...
2. In the circumstances, in my view it would be fair and reasonable to the individual applicants, and to the group members as a whole, for the individual applicants to receive an additional payment from the settlement sum in the relatively modest amount sought to compensate them for their time so spent.
3. Professor Vince Morabito has undertaken empirical analysis of the justification for and the quantum of reimbursement payments to applicants (V Morabito, "An Empirical and Comparative Study of Reimbursement Payments to Australia's Class Representatives and Active Class Members" (2014) 33 CJQ 175). On any view, the amount to be deducted for the applicants for the time expended is very modest when one considers the ranges reported by Professor Morabito. It is also to be noted that I am not approving any deductions for time spent on their individual claims. Moreover, the deductions are not some proxy for any incentivisation award; I am using "incentivisation" to refer here to reward rather than restitution in the sense of reasonable recompense for the time and effort expended. The deductions are just and there is adequate power to approve them as part of approving the settlement (ss 33V(2) and 33ZF(1)). But to say that the present proposed payments are not incentivisation payments should not be taken to indicate that such reward style payments cannot ever be authorised or justified. There is adequate statutory power (ss 33V(2) and 33ZF(1)) to approve incentive reward payments and their deduction from the settlement proceeds. ...

102 Applying the approach set out in these cases, I am of the view that the claim for reimbursement by Mr Bolitho accords with the approach in these cases and falls within the ordinarily acceptable range of reimbursements. I note that the $75,000 reimbursement sought represents approximately 0.12% of the Settlement Sum and, in my view, should sensibly be regarded as imposing a miniscule impost on the return available to debenture-holders.

103 Finally, it should be observed that Mr Bolitho's commencement of this proceeding and his undertaking of significant work on this proceeding have enabled all group members to recover a significant part of their losses without any of them incurring the risk and expense of instituting uneconomic individual proceedings to recover their losses. This class action was the only realistic way in which the debenture-holders could achieve redress, and it is appropriate therefore that Mr Bolitho be reimbursed ahead of other group members for the time and costs incurred by him which has permitted this claim to reach a fair and reasonable settlement.

104 In conclusion, I consider that it is fair and reasonable that the proposed reimbursement to Mr Bolitho be approved.

105 As indicated at the hearing of these applications, the Plaintiff intends to propose a "Settlement Scheme" for approval. Aspects of a draft Settlement Scheme were discussed in the course of that hearing. In light of those discussions, a further application will be made to the Court for approval of a Settlement Scheme in due course.

106 For the preceding reasons, the Approval Orders were made on 30 January 2018 in both the Bolitho Group Proceeding and the Banksia Proceeding.

THE TRUST COMPANY (NOMINEES) LTD (ACN 000 154 441)

(formerly known as RICHMOND SINNOTT and DELAHUNTY)

LANTERN LEGAL GROUP PTY LTD T/A HARWOOD ANDREWS

JOHN ROSS LINDHOLM AND PETER DAMIEN McCLUSKEY IN THEIR CAPACITY AS JOINT AND SEVERAL SPECIAL PURPOSE RECEIVERS OF BANKSIA SECURITIES LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 004 736 458)

BANKSIA SECURITIES LIMITED (RECEIVERS AND MANAGERS APPOINTED)

[1] Affidavit of John Ross Lindholm (9 January 2018), [9].

[2] And see below, [97].

[3] See John C Coffee, Gatekeepers: The Professions and Corporate Governance (Oxford University Press, 2006).

[4] Affidavit of John Ross Lindholm (9 January 2018), [9].

[5] Expert Report of Michael Potter (24 November 2017), [2.30].

[6] Expert Report of Michael Potter (24 November 2017), [2.30].

[7] Re Banksia Securities Limited (rec & mgr apptd) [2017] VSC 148.

[8] Transcript (30 January 2018), 14; see also the concurring submissions of Banksia at 23.

[10] Orders made by Croft J on 30 January 2018 set out in Other Matters:

The Court is satisfied that the Settlement Sum as provided for in the Deed of Settlement and Release represents all funds available to The Trust Company (Nominees) Limited including all insurance and all contributions from third parties joined by it and that there are no other sources of funds or assets available to contribute to any settlement or adverse judgment. The Perpetual Group acquired the Trust Company (Nominees) Limited in 2013. The litigation against the Trust Company (Nominees) Limited had been commenced in 2012, a year earlier, and it related to events that occurred in 2009. Whilst the Trust Company (Nominees) Limited already had insurance arrangements in place, neither Perpetual Limited nor any of its subsidiaries agreed as part of the acquisition to meet any adverse judgment or settlement arising from this litigation and that remains the position.

[11] See Transcript (30 January 2018), 14, 38-9, 48-51.

[12] Confidential and Privileged Joint Opinion on Settlement of the Claims Made Against the Third Defendant in the Banksia Group Proceeding (19 January 2018), Appendix A.

[13] See The Special Purpose Receivers' and Banksia's Confidential Submissions in Support of Settlement Approval (23 January 2017), [4].

[14] The Special Purpose Receivers' and Banksia's Confidential Submissions in Support of Settlement Approval (23 January 2017), [19].

[15] The Special Purpose Receivers' and Banksia's Confidential Submissions in Support of Settlement Approval (23 January 2017), [19].

[16] Supreme Court of Victoria, Practice Note SC Gen 10 - Conduct of Group Proceedings (Class Actions) (30 January 2017), [13.6].

[17] See Supreme Court of Victoria, Practice Note SC Gen 10 - Conduct of Group Proceedings (Class Actions) (30 January 2017), [13.6(g)].

[18] [2017] VSC 148, [75]-[77].

[19] As was recorded by Robson J in Re Banksia Securities Limited (rec & mgr apptd) [2017] VSC 148, [77].

[20] Re Banksia Securities Limited (rec & mgr apptd) [2017] VSC 148, [58].

[21] See above, [18].

[24] Settlement Deed, cl 5.1 and cl 5.2.

[28] [2016] VSC 328.

[29] [2016] VSCA 324.

[32] See the Other Matters of the Orders made on 30 January 2018, set out above in footnote 10.

[34] [2017] VSC 148.

[35] Re Banksia Securities Limited (rec & mgr apptd) [2017] VSC 148, [42]-[56].

[36] ACCC v Chats House Investments Pty Ltd [1996] FCA 1119; (1996) 71 FCR 250, 258.

[37] Wheelahan v City of Casey [2011] VSC 215; Matthews v SPI Electricity Pty Ltd [2013] VSC 74 [9], [23].

[38] [2015] FCA 811; [2015] 325 ALR 539 ('Blairgowrie').

[39] Blairgowrie [2015] FCA 811; [2015] 325 ALR 539 [97], [98].

[40] Blairgowrie [2015] FCA 811; [2015] 325 ALR 539 [104].

[41] Blairgowrie [2015] FCA 811; [2015] 325 ALR 539 [113].

[42] Blairgowrie [2015] FCA 811; [2015] 325 ALR 539 [114] (citation omitted).

[43] Blairgowrie [2015] FCA 811; [2015] 325 ALR 539 [115] (citations omitted).

[44] ACCC v Chats House Investments Pty Ltd [1996] FCA 1119; (1996) 71 FCR 250, 258.

[45] Mercedes Holdings Pty Ltd v Waters (No 1) [2010] FCA 124; (2010) 77 ACSR 265 [10].

[46] Dorajay Pty Ltd v Aristocrat Leisure Ltd [2009] FCA 19 [8] ('Dorajay'); citing King v AG Australia Holdings Ltd [2002] FCA 872; (2002) 121 FCR 480, 489 (Moore J).

[47] See Dorajay [2009] FCA 19; P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 4) [2010] FCA 1029 [28]; Modtech (No 1) [2013] FCA 626 [58]; Blairgowrie [2015] FCA 811; [2015] 325 ALR 539 [147].

[48] Section 11(1) of the Supreme Court of Victoria Practice Note No 10 of 2015 Conduct of Group Proceedings (Common Law Division) (Practice Note 10 of 2015).

[49] Section 11(2) of Practice Note 10 of 2015 enumerates the factors that should be addressed by the parties when applying for court approval of a settlement. These factors were listed by Forrest J in Downie v Spiral Foods Pty Ltd [2015] VSC 190, [49]; and applied by Murphy J in Kelly v Wilmott Forests Ltd (in liquidation) (No 4) [2016] FCA 323. See also Pharm-A-Care Laboratories Pty Ltd v Commonwealth of Australia [2011] FCA 277, [27]: '[t]he relevance of any particular consideration, and the weight to be given to it, will depend upon the circumstances of each individual case.'

[50] See Re MF Global Australia (in liq) [2012] NSWSC 994; (2012) 267 FLR 27 at 34 [7].

[51] [2002] FCA 90; (2002) 115 FCR 409 at 428 [65].

[52] [2014] NSWSC 457; (2014) 99 ACSR 247 at 256 [36].

[53] See Re MF Global Australia (in liq) [2012] NSWSC 994; (2012) 267 FLR 27.

[54] Re Banksia Securities Limited (rec & mgr apptd) [2017] VSC 148, [79].

[55] Re Banksia Securities Limited (rec & mgr apptd) [2017] VSC 148, [83].

[56] Transcript (30 January 2018), 12-4.

[57] The Special Purpose Receivers' and Banksia's Confidential Submissions in Support of Settlement Approval (23 January 2017), [94]-[96].

[58] This would appear reasonably open in circumstances where Trust Co at all relevant times was controlled by Trust Company Limited the relevant individuals were employed by Trust Company Limited and reported to other senior officers of Trust Company Limited and the interactions with Banksia were largely through the face of Trust Company Limited.

[59] See the views expressed in Financial Markets Authority v Prince and Partners Trustee Company Limited [2017] NZHC 2059 in approving a settlement in analogous circumstances and emphasising the important public interest in holding trustee's companies to account.

[60] See above [9], [45] and footnote 10 which sets out this statement in "Other Matters".

[61] Modtech Engineering Pty Ltd v GPT Management Holdings Limited [2013] FCA 626, [24]; and see also Re Banksia Securities Limited (rec & mgr apptd) [2017] VSC 148, [65].

[62] See Redfern v Mineral Engineers Pty Ltd [1987] VicRp 47; [1987] VR 518; and see Re Banksia Securities Limited (rec & mgr apptd) [2017] VSC 148, [65].

[63] Downie v Spiral Foods Pty Ltd [2015] VSC 190.

[64] Downie v Spiral Foods Pty Ltd [2015] VSC 190, [177]-[181].

[65] Modtech Engineering Pty Ltd v GPT Management Holdings Limited [2013] FCA 626, [24].

[66] Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663, [347].

[67] Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663, [349]; Modtech Engineering Pty Ltd v GPT Management Holdings Limited [2013] FCA 626, [27].

[68] Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663, [348]; Modtech Engineering Pty Ltd v GPT Management Holdings Limited [2013] FCA 626, [32].

[69] Modtech Engineering Pty Ltd v GPT Management Holdings Limited [2013] FCA 626, [32], cf A v Schulberg (No 2) [2014] VSC 258, [17] where Beach JA, having formed a 'general view as to reasonableness' based on expert costs evidence, stated that he would entertain an application for a taxation.

[70] Modtech Engineering Pty Ltd v GPT Management Holdings Limited [2013] FCA 626, [34]-[35], citing Re Medforce Healthcare Services Ltd (in liq) [2001] 3 NZLR 145, 155.

[71] Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663, [350].

[72] Modtech Engineering Pty Ltd v GPT Management Holdings Limited [2013] FCA 626, [35].

[73] Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663, [355].

[74] Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663, [346]-[348].

[75] Modtech Engineering Pty Ltd v GPT Management Holdings Limited [2013] FCA 626, [37]. Approved of in Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663, [352].

[76] Confidential Exhibit PT-1 to the Affidavit of Peter Trimbos (4 January 2018) ("Trimbos Confidential Report on Costs (4 January 2018)").

[77] Trimbos Confidential Report on Costs (4 January 2018), [166].

[78] Trimbos Confidential Report on Costs (4 January 2018), [167].

[79] Trimbos Confidential Report on Costs (4 January 2018), [168].

[80] Trimbos Confidential Report on Costs (4 January 2018), [172].

[81] Confidential and Privileged Joint Opinion on Settlement of the Claims Made Against the Third Defendant in the Banksia Group Proceeding (19 January 2018), [116].

[82] There are 15,267 debenture-holders with 22,742 accounts. Prior to opt-out, the group members who had accepted the litigation funding arrangements represented approximately 55% of the group by value. After opt-out, the group members who had accepted the litigation funding arrangements represented approximately 57% of the group by value.

[83] Re Banksia Securities Limited (rec & mgr apptd) [2017] VSC 148, [61]-[63].

[84] The funding agreement defines 'resolution sum' as any money received, or payment made, to settle, compromise or resolve one or more or all of the claims.

[85] The further amount envisaged is referred to as the 'uplift'.

[86] [2016] FCAFC 148; (2016) 245 FCR 191 ("Money Max").

[87] Money Max Int Pty Ltd v QBE Insurance Group Ltd [2016] FCAFC 148; (2016) 245 FCR 191 at 209 [79(b)].

[88] [2017] FCA 330; (2017) 343 ALR 476.

[89] Blairgowrie Trading Ltd v Allco Finance Group Ltd (ACN 007 721 129) (rec & mgr apptd) (in liq) (No 3) [2017] FCA 330; (2017) 343 ALR 476 at 509 [125].

[90] Blairgowrie Trading Ltd v Allco Finance Group Ltd (ACN 007 721 129) (rec & mgr apptd) (in liq) (No 3) [2017] FCA 330; (2017) 343 ALR 476 at 509 [126].

[91] Blairgowrie Trading Ltd v Allco Finance Group Ltd (ACN 007 721 129) (rec & mgr apptd) (in liq) (No 3) [2017] FCA 330; (2017) 343 ALR 476 at 509 [127].

[92] See Blairgowrie Trading Ltd v Allco Finance Group Ltd (ACN 007 721 129) (rec & mgr apptd) (in liq) (No 3) [2017] FCA 330; (2017) 343 ALR 476 at 510 [129(b)-(c)].

[93] Confidential and Privileged Joint Opinion on Settlement of the Claims Made Against the Third Defendant in the Banksia Group Proceeding (19 January 2018), [176].

[94] See the comments of Beach J in Blairgowrie Trading Ltd v Allco Finance Group Ltd (Receivers & Managers Appointed) (In Liq) (No 3) [2017] FCA 330; (2017) 343 ALR 476 at 516 [156], "... I have reviewed Camping Warehouse Australia Pty Ltd (formerly Mountain Buggy Australia Pty Ltd) v Downer EDI Ltd [2016] VSC 784, but the rate approved in the idiosyncratic context of that case, the nature of the funder and the leveraging off another case and another settlement justifies me giving it little weight in the present context." In that case, litigation funding was only required when security for costs was ordered days before trial. The proceeding settled on the fourth day of trial. Very limited work was undertaken by the litigation funder and the funding commission sought by the litigation funder (and ordered by the Court) reflected that limited work.

[95] The settlement sum in Camping Warehouse Australia Pty Ltd v Downer EDI Ltd [2016] VSC 784 was not inclusive of costs.

[96] The net funding commission was described in the case by Wigney J as 28%, but this was on the basis that the payment to the litigation funder (the sum of $1,152,713 recorded in the table) included both a percentage of the costs expended and a funding commission. The "pure" funding commission represented 28% of the sum available for distribution to group members.

[97] [2017] FCA 330; (2017) 343 ALR 476 at 516 [160].

[98] Money Max Int Pty Ltd v QBE Insurance Group Ltd [2016] FCAFC 148; (2016) 245 FCR 191.

[99] [2015] VSC 190; see also Darwalla Milling Co Pty Ltd v F Hoffman La Roche Limited (No 2) [2006] FCA 1388; (2006) 236 ALR 322; Jarra Creek Central Packaging Shed Pty Ltd v Amcor [2011] FCA 671; Modtech Engineering Pty Ltd v GPT Management Holdings Ltd (No 2) [2013] FCA 1163; and Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663.

[100] Downie v Spiral Foods Pty Ltd [2015] VSC 190, [171]-[174].

[101] Darwalla Milling Co Pty Ltd v F Hoffman La Roche Limited (No 2) [2006] FCA 1388; (2006) 236 ALR 322 at 351 [85].

[102] Darwalla Milling Co Pty Ltd v F Hoffman La Roche Limited (No 2) [2006] FCA 1388; (2006) 236 ALR 322 at 352 [88].

[103] Darwalla Milling Co Pty Ltd v F Hoffman La Roche Limited (No 2) [2006] FCA 1388; (2006) 236 ALR 322 at 347 [76]; see also at 351-2 [86].

[104] Darwalla Milling Co Pty Ltd v F Hoffman La Roche Limited (No 2) [2006] FCA 1388; (2006) 236 ALR 322 at 348 [81].

[105] Darwalla Milling Co Pty Ltd v F Hoffman La Roche Limited (No 2) [2006] FCA 1388; (2006) 236 ALR 322 at 351 [85].

[106] [2016] FCA 340.

[107] Farey v National Australia Bank Ltd [2016] FCA 340, [41]-[43].