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[2008] FCA 1849
Federal Court of Australia
2008-12-05
Lindgren J
Original judgment source is linked above.
INTRODUCTION 1 By notice of motion filed on 13 November 2008 the applicant (Mr Stoyef) applies pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (FCA Act) for the Court's approval of the settlement of this proceeding which is a representative proceeding brought under Pt IVA of the FCA Act. 2 On 27 November 2008 I made an order approving the settlement and associated orders. These are the reasons why I made those orders.
FACTS 3 I set out the general nature of the facts alleged in the amended statement of claim in my reasons for judgment on an earlier pleading dispute: see Stoyef v Masu Financial Management Pty Ltd (2008) 66 ACSR 585; [2008] FCA 897. It suffices for present purposes to note that: · Mr Stoyef brought the proceeding as a representative party; · he and the group members are persons who were clients of a financial services business conducted by the respondent (Masu) and who, in reliance on advice given by Masu, invested in one or more "Westpoint Products" as defined in para 2(b) of the amended statement of claim, and "suffered loss" as a result; · excluded from the group members are persons who were represented in another specified proceeding against Masu or who had brought any other proceeding against it in respect of circumstances similar to those referred to; and · generally speaking, the Westpoint Products were defined as financial products in the nature of promissory notes issued by Westpoint Corporation Pty Ltd (Westpoint) or by other entities within the group of companies known as the Westpoint Group (Westpoint entities). 4 The affidavit evidence showed that inquiries made by officers of the Australian Securities and Investments Commission (ASIC) (which represented the interests of Mr Stoyef and the group members) identified 116 clients of Masu. 5 ASIC's investigations in relation to the collapse of the Westpoint Group revealed that in relation to the 116 investors named on the Masu client list: (a) four of the clients did not invest in any of the Westpoint Products; (b) one of the clients did not receive advice from Masu; (c) twenty-three of the clients were part of a class action in another court; and (d) two of the clients had commenced their own legal proceedings against Masu. By reason of the definition of the group members in the form of amended application, these 30 clients were not group members, leaving 86 clients who fell within the definition. 6 ASIC officers contacted with 85 of the 86 investors or members of their families or their professional representatives. The one investor outstanding was a trust of which two of Masu's directors were the trustees. In Masu's records, the client in that case was identified as "Martin Speiser and Suren Pather as trustee for the Masu Trust". 7 Following service of opt out notices, 49 group members opted out. That left the applicant and 36 group members - a total of 37 individuals (86 minus 49). 8 The evidence showed that 83 of the 86 group members reached a private settlement with Masu. On a confidential basis, Masu's solicitors advised ASIC of the identity of those 83. Particulars of them were checked against the client list of 86 names and they were all found to be within that list. The 49 group members who opted out were within the 83 clients who had settled.
Section 33L 9 Section 33L of the FCA Act provides that if, at any stage of a representative proceeding, it appears likely to the Court that there are fewer than seven group members, the Court may, on such conditions (if any) as it thinks fit, order that the proceeding continue under Pt IVA or order that it no longer continue under that Part. 10 It did not appear likely to me that there were fewer than seven group members. 11 Only 49 group members opted out, thereby clearly ceasing to be group members. 12 I did not need to decide whether there are other ways in which a person can cease to be a group member, and if so what those other ways might be. The only other way that might be suggested to be relevant here was that persons ceased to be group members because the fact of the settlements somehow signified that they no longer satisfied the definition of "group members" in the originating process. 13 The definition of the group members included as an element that they "suffered loss". The terms of the settlements between Masu and the 83 group members were not in evidence. I did not infer that the terms of the settlements established that the 83 group members had not suffered loss as at the relevant time - the time of commencement of the proceeding. 14 It was therefore my view that s 33L was not enlivened. 15 Even if, contrary to my view just expressed, the number of group members had fallen below seven, the proceeding did not thereupon automatically cease to be a proceeding under Pt IVA. Since I did not make an order under s33L, the proceeding continued to be a proceeding under that Part and it was appropriate that I entertain the motion for approval of the settlement. 16 If I had thought that s 33L was enlivened, I would have ordered that the proceeding continue under Pt IVA and then approved the settlement. It would have served no useful purpose to order that it no longer continue under that Part (see [17]ff below).
Discretion 17 The three remaining group members were: (a) Mr Stoyef; (b) Susan Windred; and (c) Messrs Speiser and Pather are as trustee for the Masu Trust.
Messrs Speiser and Pather are represented by solicitors who have indicated that their clients have no objection to the matter proceeding to settlement with the two individuals as discussed below. 18 I will not relate the detail of the settlement in these reasons because it was an aspect of the settlement that its terms be kept confidential. I made an order that the affidavit material disclosing those terms be kept in sealed envelopes in the Court file, not to be opened except by order of a judge. The evidence shows that following negotiation, a settlement was reached under which: · the claims of Mr Stoyef and Mr Windred were compromised on terms which, on their face, appear to be reasonable from their viewpoint; · Mr Stoyef and Ms Windred were to retain dividend rights arising from any dividends paid by liquidators of the relevant Westpoint entities; · each party was to bear its own cost of the proceeding, and existing costs orders were to be vacated; · ASIC was to issue a press release but the actual terms of the settlement were to remain confidential. 19 ASIC, has provided evidence that it will not seek to recover amounts in payment of costs or disbursements from Mr Stoyef. 20 In concluding that the Court should approve the settlement, I took into account the following: (a) the apparent reasonableness of the agreed compromise; (b) each of Mr Stoyef and Ms Windred had approved the settlement, after having had the benefit of advice from solicitors at ASIC; (c) all other group members have settled with Masu or (in one case) are directors of Masu; (d) the case was complex; (e) the case involved contested factual and legal issues and there were risks for the group members in proceeding to a final hearing and determination; (f) a settlement would avoid considerable cost and delay; (g) the case was unlikely to come on for final hearing for some 12 months or so.
CONCLUSION 21 It was for the above reasons that I made the orders on 27 November 2008 approving the settlement. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.
Associate: Dated: 8 December 2008 Counsel for the Applicant: Mr M Dicker
Solicitor for the Applicant: Australian Securities and Investments Commission
Stoyef
Masu Financial Management Pty Ltd