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LEE J: 1 This is an application made pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (Act), that the Court approve a proposed settlement of a representative proceeding. The application raises no points of principle other than as to proportionality of costs and in relation to the scope of confidentiality orders sought. I will turn to these two topics later in these reasons. 2 The applicant commenced the proceeding on its own behalf and on behalf of other persons (group members) who acquired an interest in fully-paid shares in Kagara Ltd (Kagara) in the period between 29 September 2010 and 26 April 2012. Kagara is now in liquidation. The proceeding was commenced against the directors and officers of Kagara who held office and who participated in signing-off the company accounts in the claim period. 3 The class action is constituted as a "closed class" proceeding. That is, the class is defined by a funding criterion which restricts membership to the 215 group members who had entered into litigation funding agreements with IMF Bentham Limited (IMF). It was commenced on 29 September 2016. It is fair to say that the proceeding has not moved at the pace of summer lightning. 4 Following a mediation conducted after discovery but before evidence, the applicant entered into a deed of settlement dated 1 May 2018 and a deed of amendment dated 24 May 2018. By those deeds, the respondents were to pay the sum of $3 million in settlement of the claims of the applicant and group members. That amount, together with interest accruing on it, is proposed to be distributed to group members in accordance with a settlement distribution scheme following the deduction of amounts representing the applicant's legal costs and disbursements. 5 In relative terms, the amounts of those deductions are large, and the net return to group members in comparison to the overall settlement sum is troubling. The funding commission and administration costs proposed to be deducted amount to $2 million, being $1.5 million in relation to legal costs, and $500,000 by way of funding commission. 6 As is well-known, my task is to determine whether or not the proposed settlement is fair, reasonable and adequate having regard to the interests of group members. I have had the benefit of a detailed written opinion by Mr Edwards, counsel for the applicant, who is highly experienced in litigation of this type. It is comprehensive and involves a detailed analysis of the proposed settlement by reference to the various matters set out in the Class Actions Practice Note (GPN-CA) at [14.4]. It is unnecessary for the purposes of this judgment to set out the well-known principles which inform the evaluative task of the Court in approving settlements. For those interested, it is sufficient for me to refer to the principles summarised by Moshinsky J in Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1468 at [5], [40]-[51] and my judgment in Lifeplan Australia Friendly Society Limited v S&P Global Inc (Formerly McGraw-Hill Financial, Inc) (A Company Incorporated in New York) [2018] FCA 379 at [12]-[15]. 7 Needless to say, a settlement which involves a return to group members of only a third of the gross settlement sum is one that requires considerable and very careful scrutiny. It is a prima facie indication that something has gone wrong. Without descending into the details set out in the confidential opinion, there are some matters to which I should make reference in justifying my conclusion that this settlement, which involves a relatively small net return to group members, is one that ought to be approved. Before doing so, I should note something about the nature of the proceeding. 8 This has been conveniently summarised by Wigney J in Santa Trade Concerns Pty Limited v Robinson [2016] FCA 1510, where his Honour considered an application for leave to serve the fifth respondent outside the jurisdiction (at [16]-[21]): The crux of Santa Trade's case is that the financial statements were not prepared in accordance with the Australian Accounting Standards, were not prepared in accordance with the Corporations Act, and did not give a true and fair view of Kagara's financial position for the 2010 financial year. In particular, Santa Trade contends that Kagara's net assets were materially overstated, its expenses were understated and its net profits were overstated. Each of those allegations turns essentially on the allegation that Kagara's assets and expenses as recorded in the financial statements were affected by a particular policy that Kagara had adopted in relation to the amortisation of its mining assets. That policy was, in simple terms, to estimate or assume that all of Kagara's prospective mineral resources would convert to proven or probable mineral reserves at the rate of 100 per cent. The assumptions behind that so-called 100 per cent conversion policy are alleged to have been unreliable and improbable, that the policy accordingly should not have been adopted, and that it caused or resulted in an overstatement of Kagara's net assets and profits, or at the very least created a risk of such an overstatement. There is at least prima facie support for Santa Trade's allegations concerning the unreliability or improbability of the 100 per cent conversion policy and its effects on Kagara's stated assets, expenses and profit position. A report prepared by Kagara's administrators in 2013 includes the following passages concerning Kagara's financial statements: 150. The statements at Schedule 3 evidence: … 150.7 assert impairment (write down) of $57.4M in FY09 and of $48.5M in FY11. According to the ASX announcement by Kagara Limited, the latter write down was a result of a more conservative view of legacy resources and reserves at Mr Garnet and Mungana by management. based on the Group's [the Kagara companies'] records, the amount of write down was established based on a change to the accounting estimate of its reserve/resource base used in the unit of production and amortisation of mine properties. At FY11, Kagara Limited changed the rate at which resources are estimated to convert to reserves (decrease from 100% to 70% on all resources) in deriving at the reserve/resource base. It appeared that historically the Group has been very optimistic about the ability and probability of converting its mineral resource to reserve. 150.8 While it is an acceptable industry practice to include in the reserve/resource base portion of indicated and measured resources which management is confident will be converted into reserves, it is difficult to justify including inferred mineral resources in the depreciation base as the tonnage, grade and mineral content of the inferred resources are usually estimated with a lower level of confidence. Although the conversion rate changed to 70% in FY11, applying a lower rate of conversion or even no conversion for inferred resource may have been more appropriate. If a more conservative rate was adopted, the asset impairment and loss for FY11 and FY12 (YTD [Year to Date] 30 April 12) would have been higher. Further analysis and investigation is required to determine if an inappropriate accounting treatment was adopted. Further support, at least to the prima facie standard, may also be found in various passages of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves - the so-called 'JORC' Code. As a listed public company, Kagara was obliged to prepare its financial statements in accordance with the JORC Code. It is unnecessary for present purposes to identify the relevant passages of the Code. Suffice it to say that the Code contains detailed provisions concerning the appropriate way to report mineral resources and oil reserves. Those provisions would suggest that it would be highly unlikely that all prospective mineral resources would convert to proven oil reserves. Also critical to Santa Trade's case is the allegation that the 100 per cent conversion policy was not disclosed in Kagara's financial statements, its annual report, or in any other material that Kagara disclosed to the ASX or the market generally. The non-disclosure of the policy may be inferred, again at least to the prima facie standard, both from Kagara's annual report and from the report prepared by Kagara's administrators. Santa Trade alleged that the non-disclosure of the 100 per cent conversion policy was not only relevant to whether the financial statements provided a true and fair view of Kagara's financial position and the accuracy of the other statements made in the annual report. It also revealed that Kagara had failed to comply with its disclosure obligations under the ASX Listing Rules and the Corporations Act. As previously noted, Mr Ashley was not only a director of Kagara throughout the 2010 financial year and at the time of the issue of Kagara's 2010 annual report. He was also chairman of the audit committee. There was also evidence that he had extensive experience in the natural resources industry and was a management accountant. It is at least open to infer at the prima facie stage that Mr Ashley either knew, or ought reasonably to have known, that Kagara had adopted the 100 per cent conversion policy, the effect that the adoption of that policy had on Kagara's financial statements, and that the policy was based on unrealistic or improbable assumptions that were inconsistent with the JORC Code. It is also open to infer that Mr Ashley was aware that Kagara's adoption of the 100 percent conversion policy had not been disclosed to the ASX or the market generally. 9 As can be seen from the above, it is plain that this was a complex proceeding. It involved highly technical matters concerning the running of a mining business and the proper accounting treatment of its mineral resources. It is likely that in the event the matter had proceeded to a contested hearing that a large amount of both lay and expert evidence would have been required to have been adduced. Given the state of interlocutory progress, it is unlikely that an initial trial would have occurred before next year and, with the possibility of appeals, the prospect of final curial resolution could have been some time away. 10 Perhaps not surprisingly, given this complexity, the risks associated with establishing liability on behalf of the respondents were not negligible. Without disclosing the confidential nature of the opinion which was in evidence before me as Exhibits A and B on the application, the overall or gross settlement struck was not one which was somehow wildly disproportionate or unable to be understood by reference to the prospects of the applicant succeeding on liability at an initial trial. 11 This brings me to the next point, which seems to me to be highly material in the context of the complicated nature of this proceeding, and that is the factors affecting recoverability. Steps had been taken by those acting for the applicants to obtain copies of the policies of insurance benefiting the directors. One policy had a limit of $20 million and there did not appear, based on the applicant's legal representatives' investigations, to be any other ready source of satisfying a judgment. 12 It followed that it was reasonable to work on the assumption that the applicant and group members were never going to be able to recover more than the limit of the policy. Of course, that policy was a wasting asset during the course of the litigation, as it was likely to be depleted by the expenditure of defence costs in answer to the claims made by the applicant and also any competing claims made on the policy from other creditors. Between them, there were five sets of legal representation on behalf of the respondents, including substantial commercial law firms (Minter Ellison, Jackson McDonald, Corrs Chambers Westgarth and Ashurst) and counsel were independently briefed. 13 To anyone experienced in commercial litigation, the quantum of costs that had already been incurred and the escalation of those costs as the matter proceeded towards an initial hearing, was easy to contemplate. With the prospect of appeals and a depleting asset, issues of recoverability correctly loomed very large when it came to considering settlement. In this respect, reference should be made to the fact that there were two competing demands on the policy identified by the applicants: one from the Australian Taxation Office, and one by the liquidator for insolvent trading claims. If either or both of those claims proceeded to trial or settled before the class action was resolved, the policy limits might be very significantly eroded. This partly explains settlement at a relatively early stage. All in all, and notwithstanding the proportionality issue I address below, I am satisfied of the fairness and reasonableness of the gross settlement sum. 14 I now turn to the deductions. As to legal costs, there have been repeated admonitions in recent judgments of this Court about the lack of utility of evidence being obtained from experts retained by solicitors for the applicant. Despite this, such an affidavit has been read on this application. It is appropriate I temper my criticism somewhat given that the Class Action Practice Note has not yet been changed to reflect the fact that the Court has now said a number of times, that the best way of providing material to the Court for an assessment of the reasonableness of costs, is by the appointment of a referee to prepare a report or, if there are real questions as to whether the costs associated with the appointment of a referee are justified, then the provision of an affidavit by the solicitor exhibiting billing records (at least in the first instance). 15 Leaving this issue aside, given the stage the proceeding had reached and after reviewing the opinion evidence by the costs consultant, I do not have particular issues as to the quantum of costs charged given the complexity of the matter (leaving aside relativity or proportionality concerns). As to funding fees, the amount proposed to be deducted has been reduced from the amount that the funder would otherwise have been entitled to claim if the funding agreements had been enforced according to their terms. No doubt this pragmatic approach was taken because of the perceived difficulty in persuading the Court that a further deduction by way of funding would have been appropriate, given the modest gross settlement sum. 16 In all the circumstances, it seems to me that the funding deduction is reasonable. The settlement distribution scheme itself operates in an orthodox manner and there is nothing about it that is a source of concern. 17 It follows that I consider the settlement to be fair and reasonable and in the interests of group members notwithstanding my residual concern that this case falls into that category of class actions that raise real issues as to the appropriateness of the litigation. There exist a variety of mechanisms for prospective applicants to obtain early information about likely recovery prior to, or at the commencement of, litigation. In the future, it would be unwise for those acting for applicants to assume that the Court will not intervene and substantially reduce legal costs (and, following any legislative change currently foreshadowed by the Australian Law Reform Commission, funding charges) if cases are commenced or pursued where the game is not worth the candle. Sensitivity to proportionality of legal costs is a critical component in ensuring compliance with the overarching purpose. Although it may have been somewhat later than was optimal, at least in the present case there was some effort to resolve the matter well in advance of an initial trial given concerns about proportionality. 18 Prior to dealing with the issue of confidentiality, there is only one other matter to which I will make very brief reference. The deed of release in evidence provides that, subject to the approval orders becoming effective and the settlement sum being received, the group members: "release and discharge the Respondents from all Claims arising out of or in any way connected with the Court Proceedings or the subject matter of the Court Proceedings or Kagara Ltd". 19 A covenant not to sue is purported to be given in similar terms on behalf of group members. A deed of amendment was signed by the parties which then included the following clause: Subject to the Approval Orders being made and becoming Finally Effective, and the Settlement Sum being received into the account of the Administrator as cleared funds, the Applicant and each of the Group Members, as a separate agreement to the releases and bars to action provided for in this Deed, covenant not to sue, or to otherwise bring or assert or, if applicable, continue to prosecute, any Claim against any person (whether a Party or otherwise) arising out of or in any way connected with the Court Proceedings or the subject matter of the Court Proceedings or Kagara Ltd. 20 In order to understand these provisions it is also worth making reference to the definition of "Claims" which is defined as meaning: Claims means all past, present or future known or unknown actions, suits, claims, proceedings or demands whenever and however arising, including claims for costs including costs of preparing the Deed of Settlement and/or this Deed, making or responding to or in any way connected with an Approval Application, and administering any Settlement Distribution Scheme. 21 The terms of the deed and the settlement deed raise, yet again, an issue that has been discussed in a number of judgments of this Court which deal with s 33V applications. Those acting for applicants have a fiduciary duty to group members. That duty is one which at the very least involves them taking no steps to act contrary to the interests of group members connected with the conduct of Part IVA proceedings. The representation of an applicant of group members is, although the term is perhaps not entirely apposite, a statutory agency. That agency is for a limited purpose. 22 That agency is, as s 33A of the Act makes clear, to act as a representative party on behalf of group members, being a member of a group on whose behalf the proceeding has been commenced. It is commenced to deal with the claims of the group members, being claims which are in respect of, or arise out of, the same, similar or related circumstances and which give rise to at least one substantial common issue of law or fact. It is not to act more generally on behalf of the group members including purporting to give releases, indemnities or covenants which go beyond dealing with the claim which is the subject of the Part IVA proceeding. 23 The terms of this deed, like many other deeds which have been prepared in the settlements of Part IVA proceedings, fails to recognise the limited nature of the agency of the applicant in dealing only with claims within the scope of the class action. Having said that, when I make orders, I will make it clear that what is being resolved through the combined operation of ss 33V and 33ZB of the Act is the resolution of the claims of group members by settlement (being the claims the subject of the class action and nothing more). 24 Recently in Liverpool City Council v McGraw-Hill Financial, Inc (now known as S& P Global Inc) [2018] FCA 1289 I had cause, in Section I of that judgment, to deal with confidentiality orders and the trend in Part IVA approval hearings for wide-ranging confidentiality orders to be sought. It is unnecessary for me to repeat what I said there other than to stress that before the Court makes any confidentiality order pursuant to s 37AF, there must be some material before the Court upon which it can reasonably reach the conclusion that it is necessary to make an order prohibiting publication. 25 Reference was made on the application to the fact that all relevant parties had agreed that certain documents were to be kept confidential. This is not to the point. Indeed, it is when both sides agree that information should be kept from the public that the court will be "most vigilant" (see R v Legal Aid Board; ex parte Kaim Todner (a firm) [1999] QB 966 at 977). The need for vigilance arises "from the natural tendency for the general principle to be eroded and for exceptions to grow by accretion as the exceptions are applied by analogy to existing cases". 26 Like in Liverpool City Council, it is appropriate for the community to have access to relevant information about the operation of class actions and how public resources are being used by private commercial enterprises, and there is a real interest in the community having access to information as to the funding and other costs associated with class actions (which are not simply disputes between private parties about private rights, but perform a broader and public function). The disproportionality of return and costs in cases such as this is a matter of legitimate public interest. 27 I have been persuaded to make a limited confidentiality order in this case because I consider the order is necessary to prevent prejudice to the proper administration of justice, but such orders will be restricted to the two exhibits which contain the confidential opinions of counsel, together with material which identifies the specific distributions made to individual group members. 28 Otherwise, I am prepared to make the orders proposed by the applicant and approve the settlement of the proceeding. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.