//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2007] FCA 2008
Federal Court of Australia
2007-12-13
Jacobson J
Original judgment source is linked above.
AND: TELSTRA CORPORATION LTD (ACN 051 775 556)
REASONS FOR JUDGMENT Introduction 1 By a notice of motion dated 10 December 2007, Mr Taylor asks the Court to approve the proposed settlement of these proceedings pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) ("the Act"). 2 In accordance with cl 5 of the Deed of Settlement dated 9 November 2007 between, inter alia, Mr Taylor and Telstra Corporation Ltd ("Telstra"), Telstra consents to the orders sought in the notice of motion. 3 In support of the application for approval of the settlement, Mr Taylor relies upon the following:
up to a maximum of $0.05 per Eligible Share. 49 The scheme also provides that should insufficient shareholders participate such that there are funds remaining within the settlement fund after the proper operation of the scheme, then those funds will be returned to the respondent. However, it appears to be the intention of the scheme that the whole of the fund be dealt with in accordance with the terms of the agreed settlement. 50 Mr Fowlie's affidavit of 10 December 2007 deals with the orders I made under s 33X(4) of the Act on 12 November 2007 regarding notification of the proposed settlement. 51 I should add that following publication of the notice of the scheme in newspapers on 15 November 2007 the parties became aware that the text of the notice differed to a small degree from the text which I approved. The parties subsequently approached me and further orders were made on 20 November 2007 requiring the applicant to publish a corrective notice in newspapers. The corrective notice was published on 23 November 2007. 52 I do not propose to set out the details of advertisement of the proposed settlement which are recorded in [4] to [13] of Mr Fowlie's affidavit of 10 December 2007. However, I am satisfied on the evidence that there has been extensive and sufficient notice to group members of the proposed settlement. The Notices of Objection 53 Of the more than 29,000 shareholders affected by the proposed settlement, only five objections were lodged with the Court by 3 December 2007, but two further objections were lodged after the date fixed by my orders. 54 The essence of the objections is that they raised four objections to the proposed settlement. The first is to the amount of the settlement. The second is that the fees payable are too high. The third is said to be that there is provision in the settlement deed for destruction of certain documents. The fourth is as to the exclusion of some shareholders as eligible participants in the settlement, notwithstanding that they fell within the definition of the group contained in the statement of claim. 55 Messrs Slater & Gordon represent 223 members of the group. That is to say 223 clients have retained that firm to represent them in the proceedings. One of the clients lodged two separate notices of objection. The reason there are two notices is that there are two separate legal owners of the shares. The Legal Principles 56 Section 33V(1) of the Act provides that a representative proceeding may not be settled or discontinued without the approval of the Court. The purpose intended to be served by s 33V was stated succinctly by Branson J in Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 142 ALR 177 at 184. Her Honour said: 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. 57 In Lopez v Starworld Enterprises Pty Ltd [1999] FCA104, Finkelstein J pointed out at [16] that the Court's task under s 33V is an onerous one. His Honour observed at [15] that he was not concerned so much with the position of the applicant, who was represented by solicitors and counsel, but with other group members, many of whom are not protected in this way. 58 In Williams v FAI Home Security Pty Ltd (No. 4) (2001) 180 ALR 459 at [19], Goldberg J said: Ordinarily the task of a court upon an application such as this, is to determine whether the proposed settlement or compromise is fair and reasonable, having regard to the claims made on behalf of the group members who will be bound by the settlement. Ordinarily…the court will take into account the amount offered to each group member, the prospects of success…, the likelihood of group members obtaining judgment for an amount significantly in excess of the settlement offer, the terms of any advice received from counsel and from any independent expert in relation to the issues which arise in the proceeding, the likely duration and cost of the proceeding… and the attitude of the group members to the settlement. 59 His Honour referred to a nine-factor test which has been adopted in the United States in considering whether to approve settlements as fair and reasonable. 60 In Darwalla Milling Co Pty Ltd v F Hoffmann-La Roche Ltd (No. 2) (2007) 236 ALR 322, Jessup J took a slightly different approach from Goldberg J. His Honour observed at [3] that each case is dealt with on its own merits and by reference to specific factors which might raise serious doubts as to fairness. His Honour said at [35] that he could see no particular warrant for incorporating into Part IVA of the Act the requirements of the rules of the court of an overseas jurisdiction. His Honour said at [39] that: The practical judicial approach has been…to identify any features of the settlement that are obviously unreasonable or unfair…[and] where some group members object to a settlement and state their reasons…, their reasons will provide a convenient focus by reference to which the court will decide matters of fairness and reasonableness. 61 Jessup J at [41] proceeded on the basis of considering whether the overall settlement sum was reasonable having regard to: the manner of its calculation and its relationship to the best possible case outcome for the group as a whole; the prospects of achieving an outcome at or near the best probable case; the extent of the weaknesses, substantive or procedural, in the applicant's case; [and] whether the settlement sum falls within a realistic range of likely outcomes… 62 The test applied by his Honour at [41] was to determine whether the settlement involved any actual potential unfairness to any group member or categories of group members having regard to all relevant matters, including: whether the overall settlement sum involved unfair compromises by some members or categories of members for the benefit of others; and whether the distribution scheme fairly reflected the apparent or assumed relative losses suffered by particular members or categories of members. 63 Jessup J at [50] also said that he did not consider that it was the Court's function under s 33V to second‑guess the applicants' advisers as to the answer to the question whether the applicants ought to have accepted the respondents' offer. 64 He also said at [50]: the court's function is, relevantly, confined to the question of whether the settlement was fair and reasonable. There will rarely, if ever, be a case in which there is a unique outcome which should be regarded as the only fair and reasonable one…the court should, up to a point at least, take the applicants and their advisers as it finds them…So long as the agreed settlement falls within the range of fair and reasonable outcomes, taking everything into account, it should be regarded as qualifying for approval under s 33V. 65 More recently in Haslam v Money for Living (Aust) Pty Ltd (Administrators Appointed) [2007] FCA 897 Gordon J said at [19] to [20] said that she did not consider that the analysis undertaken by Goldberg J ought to be read as seeking to incorporate into Part IVA of the Act the requirements of the rules of court of an overseas jurisdiction. 66 She said at [20]: The analysis provided and continues to provide a useful guide in considering applications for approval under s 33V…It should, in appropriate cases and subject to the circumstances of any particular case, continue to be employed as a useful guide. Grounds of Approval of the Settlement 67 It seems to me that whether I adopt the approach of Jessup J or that taken earlier by Goldberg J, I ought to approve the settlement. My reasons for this are as follows. 68 Counsel for the applicant have provided a joint opinion that the proposed settlement is fair and reasonable. This is a matter which carries weight in the exercise of my discretion although, of course, ultimately it is for me to satisfy myself in accordance with the relevant principles. 69 I have given careful consideration to the objections which have been raised. 70 As I said previously, the first objection is as to the amount of the settlement. In my view the matters which point in favour of the fairness and reasonableness of the amount are four-fold: (i) there were arm's length negotiations between the applicant and the respondent; (ii) the evidence establishes that the amount which has been offered was the best amount that could be achieved on a negotiated basis; (iii) the only alternative to accepting the settlement offered by Telstra was for Mr Taylor to run the proceedings with the inherent risks of such a procedure; and (iv) the risks included the possibility of an adverse costs order. 71 As I have said earlier, Jessup J in Darwalla drew attention to the approach which the Court should take, namely that the Court should take the legal advisers as it finds them. Of course, that is a matter which has bearing in relation to the members of the group who retained Slater & Gordon, but it does seem to me also to be a matter which I ought to take into account in considering the fairness and reasonableness of the settlement proposal. 72 The second objection was as to the fees that are payable. I have considered the evidence of Mr Thompson who is an independent and accredited costs assessor. He is the principal of the firm known as Blackstone Legal Costing Pty Ltd. He has assessed the costs as fair and reasonable. It should be noted that Mr Thompson points out that the actual professional costs incurred by Messrs Slater & Gordon exceed the amount that has been claimed. Moreover, although Slater & Gordon have undertaken work in relation to the files of the 223 group members who retained them, the firm will not be charging costs for that work. The estimate of the amount of those costs would be in excess of $100,000. Slater & Gordon will incur irrecoverable costs in administering the settlement. They have not charged a success fee or any uplift in their fees nor have they charged for disbursements including overseas calls. 73 Although the amount of the costs looked at in isolation seems to be a large figure, it is necessary to take into account the stage at which the settlement has been reached. It is evident from the evidence that has been filed and the fact that settlement was reached only about two weeks before the hearing that a substantial amount of work has gone into the preparation of the case. The global figure is as I have said $1.25 million, but approximately a third of that is comprised of expenses and disbursements including counsel's fees. 74 I do not consider that it is necessary to take the step which was taken by Sackville J in Courtney v Medtel Pty Ltd (No. 5) 212 ALR 311 at [57] to [60]. His Honour there suggested that evidence should be presented from an independent cost consultant. Here I have such evidence in Mr Thompson's affidavit. 75 The third objection was as to the possible destruction of documents. However, the objection is based on a misreading of cl 10(a) of the Deed of Settlement. The destruction of documents contemplated by that clause does not authorise the destruction of the primary evidence in the possession, custody or power of Telstra. It provides only for destruction of documents in the possession of, or controlled by, Mr Taylor. 76 The final objection deals with the exclusion of certain group members from participation in the settlement. The confidential affidavit of Mr Fowlie of 9 November 2007 dealt with this in [26], [28] and [29]. I did make an order for confidentiality of the whole of the affidavit but Mr Gageler SC has this afternoon waived the confidentiality of the provisions of those paragraphs and it is convenient to refer to them because they explain why the eligible participants in the settlement comprise fewer than all of those who are members of the group defined in the statement of claim. 77 Telstra's lay evidence discloses that the briefing to the government did not take place until after the market closed on 11 August 2005. Accordingly, even if Telstra was required to disclose the information, the earliest time when disclosure should have occurred would have been at the time of the briefing. It follows that even on Mr Taylor's case, group members who purchased shares on 11 August 2005 could not have purchased shares in an inflated market. 78 The exclusion of group members who purchased shares on 5 and 6 September 2005 is explained by the fact that an earnings warning was released before the market opened on 5 September 2005. The reason eligible participants are limited to those who purchased up to 2 September 2005 is that the period 3-4 September 2005 was a weekend and no transactions took place on those days. The earnings warning was released before the market opened on 5 September 2005. Accordingly, on Mr Taylor's own case, from 5 September 2005 the market was fully informed. Mr Fowlie gives an opinion that the consequence of this is that group members who purchased on 5 and 6 September 2005 did not purchase shares in an inflated market. 79 The exclusion of the category of group members who purchased shares between 12 August 2005 and 2 September 2005 but who sold those shares before 6 September 2005 is that they sold in a market which was unaffected by the actions or inaction of Telstra. On Mr Taylor's own case, group members who bought and sold shares in that market did not suffer loss and damage. The opinion given by Mr Fowlie is that the applicant would be unable to demonstrate that any selective disclosure of the information which apparently took place prior to 5 September 2005 did not cause the share price to decline. His opinion is hence that any difference between the price paid on purchase and the price received on sale by a group member in respect of shares sold before 6 September 2005 would reflect movements in the share price unrelated to the information which was said to be required to be disclosed under s 674 of the Corporations Act. 80 Taking into account therefore the matters put by the objectors and the evidence referred to above, I have come to the view that applying the tests stated in the authorities the overall settlement is fair and reasonable and, as I have said, I propose to approve it. It follows that I will make orders in terms of [1] to [14] of the minutes of order that were handed to me today. 81 I will also order that the Order 3 made in the four paragraph set of orders of 12 November 2007 be varied so as to exclude from it [26], [28] and [29] of Mr Fowlie's confidential affidavit of 9 November 2007. I certify that the preceding eighty-one (81) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.
Counsel for the Applicant: S Gageler SC, withF Kunc SC and N J Beaumont
Counsel for the Respondent: T Bathurst QC with P Brereton
Taylor
Telstra Corporation Ltd