Wetdal Pty Ltd as Trustee for the BlueCo Two Superannuation Fund v Estia Health Limited

BEACH J: 1 The applicants seek my approval of the settlement of this proceeding pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (Cth). 2 The applicants commenced this Part IVA proceeding on their own behalf and on behalf of other persons who between 12 August 2015 and 6 October 2016 acquired an interest in ordinary fully-paid shares in Estia or long exposure to Estia shares by entering into equity swap confirmations in respect of Estia shares, and suffered loss or damage by the alleged infringing conduct of Estia. 3 The proceeding was commenced and continued as an "open class" representative proceeding, subject to what I will discuss later in terms of the Clayton's class closure contemplated by the orders made on 3 March 2020. 4 The proceeding had been listed for an initial trial to commence on 23 August 2021. But a settlement of $37.75 million was reached following a mediation which occurred in December 2020. 5 On 15 February 2021, the applicants and Estia subsequently entered into a Deed of Settlement by which Estia was to pay the sum of $37.75 million in settlement of the claims of the applicants and group members. That amount, together with accrued interest, was proposed to be distributed in accordance with a settlement distribution scheme, following the deduction of amounts representing the applicants' legal costs and disbursements, funding commission and administration costs. 6 For reasons that I will come to shortly concerning late registrations by group members, Estia has now agreed to contribute an additional $650,000 to the settlement sum. That agreement was reached on 29 April 2021. So, the total sum now available under the settlement is $38.4 million, which in my view is a fair and reasonable amount as justified by the confidential opinion of counsel provided to me. 7 I will discuss the settlement distribution scheme and relevant deductions later. 8 The relevant principles concerning s 33V applications are not in doubt. 9 I repeat what I said in Blairgowrie Trading Ltd v Allco Finance Group Ltd (No 3) (2017) 343 ALR 476 as to the general principles concerning approval under s 33V(1) (at [81] to [85]); see also Lee J's discussion in Smith v Commonwealth of Australia (No 2) [2020] FCA 837 at [6] to [12]. 10 Further, the commission rates, which are in two tiers, to be charged by the funders, and then tailored to a funding equalisation mechanism, are within a reasonable range (see for example Blairgowrie at [124] to [142]). I will return to discuss the funders' entitlements later. But as to funding equalisation mechanisms, I repeat what I said in McKay Super Solutions Pty Ltd (Trustee) v Bellamy's Australia Ltd (No 3) [2020] FCA 461 at [15] to [22]. Indeed, there are two issues caused by using such a mechanism in the present case, which I can do little about. First, I am not able to ratchet down the contractual commission rates if I thought that to be otherwise appropriate. Second, I cannot eliminate any duplication of allowing both the contractual commission and the ATE premiums, which on one view may be said to cover overlapping risks. So be it. I will return to these deductions later. 11 In summary, in my view: (a) the settlement is fair and reasonable overall and in the interests of group members; and (b) the proposed distribution of the settlement sum is fair and reasonable. 12 Further, group members have been adequately notified of the present application. 13 On 26 February 2021, the docket judge made orders for a s 33V notice to be issued to group members in the form approved (the first settlement notice). The orders were complied with. The first settlement notice was issued personally to group members who had registered already, and was published on the internet. This was the same means of notification as had earlier been used for the issuing of the registration and opt-out notice pursuant to orders earlier made by the docket judge on 3 March 2020 (the March 2020 notice), albeit that for reasons that I will explain in a moment the notification regime in those orders was, by error, not complied with by Estia with the result that some group members did not receive the March 2020 notice; I will refer to the group members who did not receive the March 2020 notice as the "omitted group members". 14 The first settlement notice informed group members about the basic parameters of the settlement, including its then aggregate amount of $37.75 million, and the estimated amount of the proposed deductions. As I have explained, that amount has now been increased to $38.4 million. Further, the first settlement notice informed group members that the amount of compensation that each group member would receive would be calculated in accordance with the settlement distribution scheme, and would depend upon the number of shares purchased by that group member, the date of purchase, whether any of those shares were sold, the overall losses of all registered group members sharing in the proposed settlement, the total amount of the deductions from the settlement sum and any interest earned on the settlement sum prior to final distributions. It also informed group members of the proposed releases and their effect. 15 But on 29 March 2021, and as a result of problems drawn to my attention concerning problems in the execution of the docket judge's earlier orders of 3 March 2020, it was necessary for me to make orders that a second s 33V notice (the second settlement notice) be issued to the omitted group members who had not received the March 2020 notice, even though they had already received the first settlement notice. I will discuss what occurred, its implications and how this was addressed in further detail shortly. The second settlement notice contained the same substantive information about the settlement as was contained in the first settlement notice, but ensured that people were not put on the back foot in responding to it. A large number of group members responded. 16 Now only a single substantive objection has been received to the proposed settlement. The objection was made by an unregistered group member in respect of the adequacy of the settlement sum. But it was not reasoned. And for the reasons given by Mr William Edwards, counsel for the applicants, in his carefully drawn but lengthy opinion as to the fairness and reasonableness of the settlement sum, this objection does not raise any barrier to settlement approval. 17 I should say that the balance of responses of group members to the first and second settlement notices were requests to be registered and to participate in the settlement. I have allowed them in. I will return to the question of notices later. 18 Before turning to some questions concerning group members and class closure, let me say something about the net returns to group members. The arithmetic makes it plain that the settlement is fair and reasonable in terms of the overall net returns to group members. And as to the question of distributions between group members inter-se, the settlement distribution scheme and the loss assessment formula are reasonable.

Returns to group members 19 Calculations have been made of indicative distributions of the settlement sum based on two scenarios concerning group members who registered late. 20 Scenario one concerns the situation where I allow in all late registered group members so that they are admitted to participate as registered group members. 21 Scenario two concerns the situation where I allow in all late registered group members, other than what I will describe as the O'Sullivan claimants. 22 Before I discuss the calculations, I should say something about the registered group members and sub-categories thereof. 23 In addition to the original funded group members and those group members who registered prior to the initial class deadline of 27 April 2020, which I will describe broadly as the pre-mediation registered group members, for the purposes of the scenario calculations, the following additional sub-categories of group members have been treated as admitted to participate as registered group members: (a) Late registered group members, being: (i) group members who registered after 27 April 2020 but before the mediation; (ii) group members who did not receive the March 2020 notice, but who received the first settlement notice and registered on or prior to 23 April 2021, in accordance with the extended deadline in the 29 March 2021 orders; (iii) group members who did not receive the March 2020 notice, but who received the second settlement notice and registered on or prior to 23 April 2021, in accordance with the extended deadline in the 29 March 2021 orders. (b) Further late registering group members, being group members who did not receive the March 2020 notice, but who received the first or second settlement notices and registered on or after 24 April 2021 but before 4 May 2021, being the date of the settlement approval hearing. (c) Further late registering group members, being group members who did receive the March 2020 notice, but who did not register prior to mediation. This sub-category includes the O'Sullivan claimants. They have been treated as registered group members for the purposes of the calculations in scenario one only. 24 Now the calculations have been prepared based on information up to and including 3.00 pm on 3 May 2021 based on the registration and objection documents received up to that point in time. Any further registration and objection documents that may still be received, mean that it is not possible to calculate the final group member distribution entitlements at this time. But I am satisfied that the impact of any further late registering group members, or any future audit of such material, will result in limited dilutionary impact and/or will likely be immaterial. 25 Scenario one would result in the following distribution of the revised settlement sum, assuming that I approve the applicants' legal costs in the sums sought: Distribution Total legal costs (incl approval hearing costs and administration costs, excl applicant reimbursement) $5,515,726 Funders' Project Costs $1,038,797 Funders' commission $8,748,602 Funded group members $18,842,019 Unfunded group members $4,254,856 Total $38,400,000

26 Under scenario one, the total proportion of the revised settlement sum which is to be paid to eligible group members, after deduction of approved legal costs and disbursements and the funders' contractual entitlement, is expected to be approximately 60.15%. 27 Scenario two would result in the following distribution of the revised settlement sum: Distribution Total legal costs (incl approval hearing costs and administration costs, excl applicant reimbursement) $5,515,726 Funders' Project Costs $1,038,797 Funders' commission $9,014,429 Funded group members $19,188,587 Unfunded group members $3,642,461 Total $38,400,000

28 Under scenario two, the total proportion of the revised settlement sum which is to be paid to eligible group members, after deduction of approved legal costs and disbursements and the funders' contractual entitlement, is expected to be approximately 59.46%. 29 This may seem counterintuitive given that scenario one includes more group members than scenario two, but it is to be explained in terms of how the funding equalisation mechanism will operate. I will return to discuss the O'Sullivan claimants later. 30 Let me now say something in more detail concerning registered and unregistered group members.

Registered and unregistered group members 31 As I have indicated, since the commencement of the proceeding on 15 July 2019, the Court has approved three notices to be sent to group members. 32 First, group members were sent the March 2020 notice for opt out and registration. But it was learned in April 2021 that the process of issuing the notice had miscarried due to an error which resulted in only a portion of the group members being sent the March 2020 notice. 33 Second, group members were sent the first settlement notice pursuant to the 26 February 2021 orders. 34 Third, once the error in relation to the distribution of the March 2020 notice was discovered, group members including the omitted group members were then sent the second settlement notice which contained an omnibus notice of opt out and registration and replacement notice of proposed settlement pursuant to my orders made on 29 March 2021. 35 On 3 March 2020, orders facilitating a Clayton's class closure were made. 36 Those group members who were sent the March 2020 notice were given the opportunity to either register their claim or "opt out" of the proceeding by 27 April 2020. 37 Group members could register their claim by, by 27 April 2020, as applicable: (a) entering into a funding agreement; or (b) completing and returning a group member registration form. 38 Group members who neither opted out nor registered their claim by 27 April 2020 were, subject to further order, treated as group members for the purposes of any judgment or settlement but not entitled, without leave, to receive compensation. 39 I will discuss the effect of these orders later. 40 After it was discovered that the process of distribution of the March 2020 notice had miscarried, the following steps were taken. 41 First, omitted group members were given the opportunity to opt out by 23 April 2021, and were also informed that if they wished to participate in the proposed settlement they should register their interest by the same date. 42 Second, the group members who had already registered an objection in response to the first settlement notice on the grounds that they wished to participate were deemed to have registered pursuant to the 29 March 2021 orders. 43 Third, the orders made on 3 March 2020 by the docket judge were varied so that they did not apply to omitted group members. The effect of this was that the class closure orders only remained binding on group members who did receive the March 2020 notice, but did not register in accordance with it. The order was, of course, expressed to be subject to further order. 44 Now a substantial number of omitted group members did register by 23 April 2021, or were deemed to have done so. And their potential admission to the settlement diluted the returns to be received by other group members by approximately 4%, absent any further contribution from Estia to the settlement. 45 So, group members therefore fall into several broad categories, but as I have said, there are several sub-categories in each of those broad categories. 46 First, there are those group members who registered in accordance with the Court approved processes, being: (a) the group members who signed litigation funding agreements (funded group members) and were taken to have registered without the need for further steps by the March 2020 orders, or who registered in accordance with the March 2020 orders, but who have not signed funding agreements; these two cohorts together comprising the pre-mediation registered group members; (b) the omitted group members, being of course unfunded, who either registered following the first settlement notice (and prior to the second settlement notice) and who have the benefit of the deeming order made on 29 March 2021 such that they are taken to have registered in accordance with the process put in place by those orders, or who registered following the second settlement notice and prior to the extended class deadline of 23 April 2021; these two cohorts together comprising the late registered group members. 47 The group members referred to in (b) above are not bound by the class closure orders, because that order was varied so that it did not apply to omitted group members. The group members referred to in (a) above registered before the class closure orders took effect. All of these cohorts are registered group members. 48 Second, there is a cohort who have not registered in accordance with the Court-approved processes but have attempted to do so late. This category includes two subgroups, being: (a) group members who did receive the March 2020 notice, but did not register in accordance with it (and so are prima facie bound by the class closure orders made by the March 2020 orders, because the 29 March 2021 orders were not varied in their favour) but who nonetheless now seek to benefit; these are the O'Sullivan claimants. (b) group members who did not receive the March 2020 notice, but did receive the first and second settlement notices, but did not register by the extended class deadline of 23 April 2021 but have sought to do so since that time. 49 Third, there are group members who have not sought to register at all. 50 In my view, and given that the settlement sum is now to be $38.4 million, it is fair and reasonable to include subject to what I say below: (a) late registered group members who registered after 27 April 2020 but before the mediation; (b) late registered group members who registered in accordance with my orders on 29 March 2021 and before 23 April 2021; (c) late registered group members who registered after 24 April 2021 and before 4 May 2021. 51 I will say something about the O'Sullivan claimants later. 52 It is worth setting out here what happened concerning the error in the distribution of the March 2020 notice. 53 The applicants' solicitors, Phi Finney McDonald (PFM), identified that an unusually large number of objections to the proposed settlement were received following the issuance of the first settlement notice, and raised the issue with Minter Ellison, the solicitors for Estia. 54 Following the making of inquiries, Minter Ellison identified that Link Market Services, Estia's share registry service provider, erroneously applied an incorrect filter that meant that the March 2020 notice was sent only to "brand new shareholdings", being group members who had acquired Estia shares for the first time in the relevant period, rather than all shareholders who acquired Estia shares. Apparently, this error meant that Link only used 1,275 rows of data to send out the March 2020 notice, rather than 14,344 rows of data. 55 It appears there were some 5,227 group members (following de-duplication) who were sent the second settlement notice, because they had not been sent the March 2020 notice or registered following the first settlement notice. These are the omitted group members. 56 Following the issuance of the second settlement notice, which gave the omitted group members an opportunity to register by 23 April 2021, a substantial number of group members (more than ~1,000) sought to register to participate in the proposed settlement. 57 The revelation that Estia and Link had failed to properly distribute the March 2020 notice changed the calculus in the settlement. Hence the settlement sum was increased from $37.75 million to $38.4 million.

Section 33ZF(1) 58 As a precursor to discussing the class closure question, I should now say something about s 33ZF(1). 59 Let me first say something about s 33ZF(1) and, for that purpose, repeat with some modification what I said in Evans v Davantage Group Pty Ltd (No 2) [2020] FCA 473 at [50] to [57]. 60 The plurality in BMW Australia Ltd v Brewster; Westpac Banking Corporation v Lenthall (2019) 94 ALJR 51 emphasised that whilst the power provided by s 33ZF(1) is wide, it is essentially a supplementary or gap-filling power. And as a supplementary source of power for Part IVA, it is not to be supposed that s 33ZF(1) was intended to meet the exigencies of litigation not adverted to at all by the provisions of Part IVA. So, s 33ZF(1) may not be "relied upon as a source of power to do work beyond that done by the specific provisions which the text and structure of the legislation show it was intended to supplement" (at [70]). Section 33ZF(1) "cannot be given a more expansive construction and a wider scope of operation than the other provisions of the scheme" (at [70]). And to do so "would be to use …s 33ZF … as a vehicle to rewrite the scheme of the legislation" (at [70]). Rather, s 33ZF(1) has the effect of "support[ing] any interlocutory procedural order necessary to ensure that the pleaded issues are resolved justly between the parties" (at [21]). Of course, a just resolution could include a judgment (s 33Z) or a settlement approved by the Court (s 33V). 61 Let me say something further about Nettle J's analysis, which resonates harmoniously with that of the plurality, so that I can then synthesise the common themes of the majority; in the present context it is not necessary to discuss the reasons of Gordon J to the extent that they travel beyond the views of the plurality or Nettle J. 62 It is useful to recall that the issue before the Court concerned the exercise of power under s 33ZF(1) to make a common fund order at an early stage of the proceedings. The issue did not concern any settlement approval under s 33V(1) or the exercise of any express power under s 33V(2), the latter of which provides: If the Court gives such an approval, it may make such orders as are just with respect to the distribution of any money paid under a settlement or paid into the Court. 63 Understandably then, Nettle J carefully expressed himself by reference to s 33ZF(1) and referred to "a common fund order ("CFO") of the kind in issue in these matters" (at [122]) and "the kind of CFOs sought in these matters" (at [125]). His context and kind was an early common fund order which he held was not empowered by s 33ZF(1) and was outside the legislative purpose; such a purpose "did not extend to addressing uncertainties on the part of litigation funders as to the financial viability of funding such proceedings" (at [126]). Contrastingly, s 33V(1) speaks to the other end of the time spectrum where the action is for all practical purposes over and no such in futuro uncertainties or financial viability of funding questions are in play. 64 So, he was clearly contrasting "the broad generality of s 33ZF(1)" with "the detail and specificity of other provisions such as… s 33V…" (at [124]). But he accepted that s 33ZF(1) could be used as a supplementary power to do what was necessary or incidental to achieving the objectives of, inter-alia, s 33V itself including facilitating a just outcome and finality. Of course, necessarily anterior to that is a settlement in principle that may have been achieved through mediation. In other words, exercising a power to facilitate a mediation is consonant with achieving such an objective, and well within the power or purpose of s 33ZF(1). 65 It would seem that Nettle J considered that his analysis was consistent with the plurality's views on the matters that I have just described (see his references at [122] and [128]). 66 In summary, s 33ZF(1) can be used "to support any interlocutory procedural order necessary to ensure that the pleaded issues are resolved justly between the parties" (at [21]) or "to bring the matter to a fair hearing on a just basis" (at [45]). But s 33ZF(1) "is essentially supplementary" or "gap-filling" notwithstanding that it is broad (at [46], [60], [69] and [70]). So, and importantly, it was in the context of those observations that it was said that s 33ZF(1) could be used to "ensure that the proceeding is brought fairly and effectively to a just outcome" (at [47], [50], [51] and [54]).

Were parts of the March 2020 orders beyond power? 67 Let me then turn more directly to the question of class closure and registration orders. 68 Section 33ZF(1) has been the source of power by which the Federal Court has regularly made class closure and registration orders. For example, it was the basis of the Full Court's decision endorsing such orders in Melbourne City Investments Pty Ltd v Treasury Wine Estates (2017) 252 FCR 1 at [74] and [75] per Jagot, Yates and Murphy JJ, being an order of the kind made in the present proceeding by the March 2020 orders. 69 But in the wake of BMW, a challenge was made to the making of such orders under the cognate s 183 of the Civil Procedure Act 2005 (NSW). That question was referred to the NSW Court of Appeal in Haselhurst v Toyota Motor Corporation Australia Ltd (2020) 101 NSWLR 890, where the Court answered the question in the negative on 22 April 2020, on the basis that the order in that case effected a contingent extinguishment of group members' choses in action and so could not be said to be necessary or appropriate to ensure that justice was done in the proceeding. 70 Subsequently, there was a further decision of the NSW Court of Appeal in Wigmans v AMP Ltd (2020) 102 NSWLR 199, where Haselhurst was fortified. In Wigmans there was lukewarm acceptance of what I had said in Newstart 123 Pty Ltd v Billabong International (2016) 343 ALR 662. Macfarlan, Leeming and White JJA said at [128]: We agree that the extinguishment of the rights of unregistered group members in that and other cases have underpinned the settlement, and it is contemplated by the orders impugned in this appeal. We can also envisage cases where there has been an in principle settlement, after which group members are notified, and given the opportunity to participate (it might be expected that such notification would advise the quantum offered to group members and the mechanism by which their claims would be assessed), and if what Beach J has written about unregistered group members being given adequate opportunity to participate is understood in that sense, then to that extent there is no difficulty with the reasoning. However, that is not what is proposed by Komlotex and AMP. It is not proposed that all group members be given any opportunity at all to participate in any settlement, but rather only those which register. We respectfully disagree with the reasoning insofar as it is relied on to justify what Komlotex and AMP propose. 71 Now it is to be noted that the mediation of the present proceeding was conducted in circumstances where the March 2020 orders had been made very shortly before Haselhurst, but where it was known that their validity was under a potential cloud by reason of Haselhurst and Wigmans. 72 Are the March 2020 orders concerning registration valid? Do they remain in force in respect of the recipients of the March 2020 notice who failed to register? An affirmative answer must be given to each question. What then should be said of Haselhurst and Wigmans? 73 By reason of BMW, Haselhurst determined that the barring order made as part of the class closure orders in that case was beyond power under s 183. The Court found that the purpose and effect of the order at issue (order 16) was to effect a contingent extinguishment of unregistered group members' rights of action against the respondents. The Court said that an order which destroyed a person's cause of action within the limitation period, without a hearing and with no guarantee that the person would necessarily know of the outcome or consequence of their failure to register, was not an order that was "necessary to ensure that justice is done in the proceedings" or "appropriate ... to ensure that justice is done in the proceedings". It was found that s 183 was not a source of power to extinguish group members' rights before settlement of the proceedings or a judgment in the proceedings. But these observations were all in the context of the Court analysing the particular order before it. 74 I should set out the order in question (order 16): Pursuant to s 183 of the Act, any Group Member who neither opts out in accordance with Order 12 nor registers in accordance with Order 15 on or before the Class Deadline shall remain a Group Member for the purposes of any judgment or settlement but, in the event that an in-principle settlement is reached before the commencement of the trial on the common issues and that settlement is ultimately approved by the Court, shall be bound by the terms of the settlement agreement and barred from making any claim against the Defendant in respect of or relating to the subject matter of this proceeding, including participating in any form of compensation or otherwise benefiting from any relief that might be ordered or agreed. 75 Now the order impugned in Haselhurst, which was said to effect an impermissible extinguishment of the claims of group members, is quite different to the March 2020 orders made by the docket judge in the present case. The relevant orders, which in my view provide a suitable precedent for use in other cases, were in the following terms: 8. Pursuant to section 33ZF of the Act, and subject to any further order of the Court, any Group Member who by the Class Deadline does not: (i) register in accordance with the manner provided for in Order 6 above; or (ii) opt out of this proceeding in accordance with the manner provided for in Order 4 above (Unregistered Group Member), will remain a group member for all purposes of this proceeding and shall not, without leave of the Court, be permitted to seek any benefit pursuant to any settlement (subject to Court approval) of this proceeding that occurs before final judgment. 9. Any Group Member wishing to seek a variation of Order 8 must deliver to the Applicants' solicitors, by no later than the Class Deadline, written notice of the variation sought and a statement of the reasons for seeking the variation, and the solicitors shall forthwith notify the Respondent and the Court of the notice and the reasons. 76 There are two significant differences between the March 2020 orders in this case, and the orders in Haselhurst. 77 First, the March 2020 orders do not use the language of extinguishment or "barring", but rather are expressed in terms of a group member not being "permitted to seek any benefit pursuant to any settlement (subject to Court approval)". So, the orders are expressly in anticipation of the exercise of power that must occur at the s 33V stage, where the Court must consider whether it is just to distribute the settlement only to those who have manifested an interest by registering. 78 Second, the March 2020 orders are expressly conditioned by the words "without leave of the Court", to indicate that the question as to whether unregistered group members ought receive a distribution is a question that the Court will need to consider in future. Of course, that would be at the time of the later s 33V application. 79 So, the March 2020 orders are not orders which effect an extinguishment of group member claims, contingently or otherwise. The true position is that the claims of group members would not be extinguished until such time as the settlement was approved under s 33V and those claims merged in the settlement as approved by judgment of the Court, with the otherwise consequent dismissal of the claims. This would then be made binding on them under s 33ZB. It may be noted that at that point, which follows group members being afforded an opportunity to be heard, what is occurring is that the Court is making an order under s 33V. The fact that unregistered group members' rights merge in the settlement and consequent dismissal without them receiving anything is no more than the consequence of the exercise of power under s 33V with respect to a just distribution of the settlement. 80 In my view, the construction adopted by the Court of the particular orders before it in Haselhurst does not apply in the present case. The decision is readily distinguishable for that important reason alone. 81 But I would venture to also observe, with respect, the following. 82 First, an order of the kind under consideration, as was made by the docket judge, does not effect a contingent extinguishment of group member choses in action at all. Indeed, the notion of a contingent extinguishment is to my mind problematic in any event. If there is a contingency, nothing has been extinguished. But there is more. If that contingency is expressed in an interlocutory order, which is susceptible to variation, it is unclear how anything could be said to be extinguished if the contingency itself may be redefined or removed by a later and final order. 83 Second, BMW was directed to a different problem, where the purpose of the early common fund order was said to be to ensure the economic viability of a proceeding and to put it on a stable foundation so that it could go ahead. It was said that such a purpose was extraneous to dealing with the substantive rights of group members in the proceeding. Now I might say that in many cases where early common fund orders have been made, that was not the purpose. But in any event, a class closure order is not in the same category. Its purpose is not extraneous to dealing with the substantive rights of group members in the proceeding. Indeed, the opposite. Its very focus is on how those substantive rights are to be adjusted inter se in the event that the proceeding settles. 84 Third, I should note for completeness that The Owners - Strata Plan No 87231 v 3A Composites GmbH (No 3) [2020] FCA 748 occurred in a different context and not for the purpose identified in Melbourne City Investments of facilitating the desirable end of settlement. It can be put to one side. 85 Let me now say something about Wigmans. In Wigmans, the Court considered the form of a proposed notice to group members which referred to an intention on the part of the applicant and respondent that in the event a settlement were reached, they would apply for an order excluding any group member who had neither registered nor opted out by the relevant deadline from receiving any benefit pursuant to the settlement. In other words, they did not propose a barring order of the kind which failed in Haselhurst. The notice was to flag an intention that group members who did not register in a timely way may receive nothing from the settlement. The Court held that the orders made issuing the notice were beyond power. 86 It was said that what was proposed was contrary to a fundamental precept of Part 10 of the Civil Procedure Act (the cognate of Pt IVA), confirmed by the High Court in Mobil Oil v State of Victoria (2002) 211 CLR 1, because (at [79]): … If what is contemplated by Komlotex and AMP comes to pass, group members who take no positive step will gain no benefit from any settlement and will have their rights extinguished. Indeed, it is reasonable to expect that the extinction of passive or unregistered group members' rights would be one of the drivers of any settlement between registered group members and AMP. This prima facie gives rise to a conflict between group members who are registered and those who are not. 87 It was said that a fundamental precept was that the representative applicant acts for all group members, and that group members may do nothing prior to a settlement and still reap its benefit. It was said that a settlement whereby registered group members receive payment but unregistered group members receive nothing but have their rights extinguished "is contrary to the essence of the opt-out regime. This prima facie falls squarely within what was held in Haselhurst" (at [95]). It was said that the fact that the proposed notice only communicated a present intention to seek a future order extinguishing rights was not the end of the analysis, as the question was "whether the practical effect of the orders conforms with the statute" (at [104]) which it did not do; it was said that the present intention was proposed to be deployed to prevail upon group members to make binding decisions as to whether to opt out. Further, it was said that what was proposed gave rise to a conflict between group members who were registered and those who were not, and that a conflict was real, immediate and direct because the representative would be propounding a settlement where registered group members receive nothing and have their rights extinguished, notwithstanding that the representative applicant is meant to be representing them. 88 More generally, in Wigmans the parties also accepted that Haselhurst was correct and Wigmans was premised upon its correctness. But if Haselhurst is problematic, then the Wigmans foundation is problematic. But Wigmans has problematic aspects even if Haselhurst was not problematic. 89 First, Part IVA is not inconsistent with group members being required to take a positive step before settlement or judgment at an initial trial. Now Part IVA generally permits group members to adopt a passive stance, but they can be required to give, for example, discovery in some circumstances; see Regent Holdings Ltd v State of Victoria (2012) 36 VR 424. As was said in Regent Holdings (at [12]), concerning the statement of the High Court in Mobil Oil (being the same passage cited in Wigmans): … that statement does not mean that it is of the essence of a Pt 4A proceeding that group members not be required to take any positive step before common questions of liability have been resolved. Read in context, and understood against the background of the case with which the High Court was concerned, it means no more than that there are some Pt 4A actions in which that is likely to be so. This case illustrates that there will be circumstances in which group members may be asked to take some step before common questions of liability are resolved. 90 So, it is not a fundamental precept of representative proceedings that group members can never be required to take any positive step at an early stage in the proceeding. I said in Earglow Pty Ltd v Newcrest Mining Ltd (2015) 230 FCR 469 at [47] to [52]: I accept that group members other than the lead applicant can be and have been compelled by court order to actively participate in representative proceedings at a time prior to the first stage trial and without any s 33Q or s 33R consideration coming into play. Examples of such compulsion include the following contexts: (a) Provision of discovery has been compelled in at least four cases (P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 2) [2010] FCA 176; Thomas v Powercor Australia Ltd (No 1) [2010] VSC 489 (Thomas); Regent Holdings Pty Ltd v Victoria (2012) 36 VR 424 (Regent Holdings) and Jarra Creek Central Packing Shed Pty Ltd v Amcor Ltd [2011] ATPR 42-361). (b) Provision of particulars of group members' claims has been compelled in at least seven cases (Kirby v Centro Properties Ltd (2011) 84 ACSR 87 (No VID 326 of 2008), pursuant to an order made on 14 February 2011; Thomas; Meaden v Bell Potter Securities Ltd [2011] FCA 136; Regent Holdings; Weimann v Allphones Retail Pty Ltd (No 3) [2009] FCA 1292; Murphy v Overton Investments Pty Ltd [1999] FCA 1123 and Williams v FAI Home Security Pty Ltd [1999] FCA 1771). (c) Provision of a contribution towards security for costs has been contemplated in at least one case, namely Madgwick v Kelly (2013) 212 FCR 1 where it was held that an order for security for costs was appropriate, and that it was fair that the group members who stood to benefit from the proceeding make a real but not oppressive contribution to a pool of funds for security. (d) Provision of particulars of group members' identities has been compelled in order to facilitate the service of subpoenas (Kirby v Centro Properties Ltd, unreported, Federal Court of Australia, 8 February 2011, transcript of hearing at T22 and T45). But the context of these examples is all important. Discovery and particulars of group members' claims may be accelerated in order to facilitate a mediation so that there can be an adequate appraisal of potential quantum ranges for the total class and the avoidance of a disproportionate level of information asymmetry. Discovery and particulars from group members may be accelerated because they are relevant to the trial on common issues. For example, in a cartel proceeding where a common issue at the liability stage is whether an arrangement to price collude was put into effect involving a large number of customers over a long time frame over an entire industry, inputs into a multiple regression linear analysis (to establish a positive value for the relevant dummy variable) may require data from all group members, so that a statistical analysis can be performed for the first stage trial in order to determine whether the arrangement was put into effect. More generally, discovery from particular group members may be accelerated because they might have documents relevant to one of the common issues. But to admit of these possibilities and justifications does not support the proposition that whenever the Court perceives it to be convenient, such an acceleration can be or should be ordered. Section 33ZF still needs to be satisfied. Moreover, in the present case the application that I am addressing is not covered by the foregoing scenarios. 91 Second, it is interesting, but not determinative, that when the Victorian Parliament enacted Part 4A of the Supreme Court Act 1986 (Vic), they included s 33ZG, which gave specific power to require group members to take a step to be entitled to benefit, but prefaced s 33ZG with the words "[w]ithout limiting the operation of section 33ZF, an order under that section may -". So, s 33ZG was declarative or elaborative of the general grant of power conferred by s 33ZF, which is common to both Pt IVA and the Victorian legislative analogue (see Muswellbrook Shire Council v Royal Bank of Scotland NV [2016] FCA 819 at [21] per Rares J). 92 Third, there is nothing in BMW that requires the conclusion that s 33ZF cannot be called in aid to require group members to take a positive step in the proceeding. BMW did not so hold. Further, there is nothing in BMW evincing any intention that any just resolution (at [21]) be limited only to a judgment, so as to render beyond power an order which is directed to facilitating a mediation or the ultimate exercise of power under s 33V. Section 33ZF enables an order which is directed to ensuring that a mediation can proceed effectively, particularly if the ultimate goal is to facilitate an exercise of power under s 33V. 93 Fourth, nothing in BMW requires the conclusion that a notice cannot be issued stating that it is the intention of a party to move the Court for a particular order in the future, even if there is doubt as to whether the Court can or will make that order. Section 33X(5) permits a notice to be issued informing group members of "any matter". That includes any matter relevant to their decision to opt out. I see no reason to read down s 33X(5) so as to prevent group members of being informed of such a thing. Section 33X(5) is facultative, not restrictive. Nothing in Pt IVA precludes the Court from directing that a notice be given to group members under s 33X(5) informing them, prior to determining whether they should exercise their right to opt out, of any relevant matter affecting such a choice that they need to consider including that: (a) application may be made for a common fund order under s 33V(2) on settlement; or (b) if they do not take a positive step of registering their interest before a mediation, this may have consequences for them when the Court comes to exercise any power under s 33V in considering what is fair and reasonable between group members inter-se. 94 Fifth, I have difficulty with Wigmans' analysis of conflict of interest and its view as to the consequences of such a conflict existing. Even if the sending out of a notice did manifest that a conflict of interest may arise because of the intention held by the representative, that is not a reason to deprive group members of that information. In the event that a settlement was procured by a representative in a position of conflict, the question that would then arise is whether it should be approved under s 33V. The Court is there. Settlements require approval to guard against such conflicts causing unfair prejudice to group members in the settlement context. Indeed, the presence of an actual or potential conflict is a reason to send out a relevant notice to group members. It would enable group members to consider whether they wished to make an application under s 33T. More generally, the scheme of Part IVA confers authority on the representative who like any fiduciary must manage conflicts in accordance with established principle, subject to oversight of the Court and the right of other group members to seek to replace the representative. 95 For the foregoing reasons, with respect and with reluctance, I consider Wigmans to be problematic. But again, I can distinguish it. In the present case I am not dealing with a prospective notice. I am dealing with the actuality of a notice which has been sent and which has already conveyed information to group members. My function is to consider, in the light of what has happened and what was communicated to recipients of the March 2020 notice who failed to register, whether it is just to admit or exclude them from the settlement. So, Wigmans does not stand in my way in considering that it may be just not to admit these group members to the settlement. 96 In my view, the March 2020 orders made in the present case were within power. So, the O'Sullivan claimants should have acted in accordance with their terms.

What should I now do with the O'Sullivan claimants? 97 The O'Sullivan claimants were sophisticated and substantial shareholders; they were "Top 20 shareholders" in Estia in the relevant period. They knew of the class action in 2019 and contacted the litigation funder. They received the March 2020 notice when it was issued, but they did not register. 98 Now the notice was clear and unambiguous. It said, in an emphasised box on page 1: If you wish to participate in this class action you must comply with this Notice by Monday 27 April 2020. If you do not do so your rights may be lost. If you have not already registered, you have three options: 1. Register to have the opportunity to receive any compensation that may become available in this class action pursuant to any settlement (subject to Court approval) that occurs before the delivery of judgment following trial. 2. Do nothing and lose any rights to any compensation if this action settles before the delivery of final judgment (as described below). 3. Complete an 'opt out' form and lose a right to any compensation available in this action but keep your right to try and get compensation yourself. 99 It said on page 3, under the heading "Your Options", that there were different consequences depending on what option was chosen. And it said under the sub-heading "Option B - Do Nothing": Group members who do not register (Unregistered Group Members) will remain a group member in the Estia Class Action and be bound by the outcome (whether by way of settlement or judgment) but will not, without leave of the Court be permitted to seek any benefit of the Estia Class Action pursuant to any in-principle settlement (subject to Court approval) of this proceeding agreed to by the parties prior to final judgment. You will be an Unregistered Group Member if you do nothing in response to this Notice, unless you have already registered for the Estia Class Action. 100 It further said on page 4 (at [20]): If you object to the protocol described in this Notice, in that you object to making one of the three choices described above, you must send a written notice to Phi Finney McDonald by Monday 27 April 2020 setting out the challenge you will make and the reasons for that challenge. You may then be required to attend the Victorian District of the Federal Court at a later date to have your challenge heard. 101 It further said in "Annexure - Details about your Options" under the heading "Option B - Do not respond to this Notice" what the options were and repeated similar statements to those above, ending with an emphatic statement: If you wish to have the opportunity to participate or receive any benefit from a settlement of the Estia Class Action, the safest course is to register as per Option A above now. 102 Having been presented with clear information as to what would happen, the question arises as to whether there is any good reason why the stated consequence of which the O'Sullivan claimants were informed should not apply to them at the s 33V stage. Their failure to register deprived the applicants of information about the size of their claim, or whether they were interested in participating at all. Indeed, the conduct of the O'Sullivan claimants in making initial inquiries and then failing to register following the March 2020 notice was apt to create the impression that those persons had considered the question of participating and made a positive choice not to seek to participate in the class action. Now Mr O'Sullivan admits receipt of the notice but says that he "failed to notice there was a reply by date" and he "let the matter drift". 103 It could be said to be just in the circumstances now to exclude the O'Sullivan claimants from the settlement by the exercise of the power under s 33V to make orders approving the settlement distribution scheme on the basis that they are excluded from receiving a distribution, which is an exercise of s 33V(1) power, or making a positive order excluding them from receiving a distribution, which is an exercise of s 33V(2) power. I also note that no application was made by any group member who received the March 2020 notice, including the O'Sullivan claimants, to vary the class closure orders in accordance with the March 2020 orders, a course that was drawn to their attention in the March 2020 notice. 104 On balance however, I consider it just to admit the O'Sullivan claimants, and not at a discounted claim value. I will not hold their inadvertence against them as I am not satisfied that other group members have been substantially prejudiced by their neglect. True it is that if they had acted in accordance with the March 2020 notice, the applicants may have had the opportunity to seek more at the mediation. But I cannot value the lost opportunity. 105 Finally on this whole topic, it is just to approve the settlement on the basis of approval of a settlement distribution scheme that results in no money being paid to unregistered group members. There is an interest in finality in litigation, as I recognised in Newstart 123 at [68]. Part IVA contemplates that group members will have to manifest an interest to participate in a proceeding at some stage (see, for example, s 33ZA(3) providing for group members to be notified of any fund constituted under s 33Z(2) following judgment and given a time to prove on the fund). Where the proceeding settles for a lump sum, in my view the appropriate time to do that is prior to the settlement approval hearing. I consider it to be fair and reasonable and in the interests of group members as a whole to achieve finality, to exclude from participation in the settlement unregistered group members as at the date of my orders approving the settlement. Persons who have not manifested an interest at that time, notwithstanding the receipt of two notices issued by the Court, should not be permitted to participate. 106 Let me now proceed to the question of deductions from the settlement sum.

Deductions from the settlement sum - the funders 107 Investor Claim Partner Pty Ltd (ICP) and ICP Capital Pty Ltd (together the ICP entities) and LLS Fund Services Pty Ltd (LLS) (together, the funders) were granted leave to appear in the applicants' s 33V application. 108 In late 2016, the ICP entities commenced investigation of a potential proceeding against Estia in relation to the events giving rise to this proceeding. They subsequently sought legal advice regarding the merits of the claim, which process was largely completed by late 2017. Having received that advice, the ICP entities determined to fund a proceeding against Estia based on the cause of action advised by the potential applicant's solicitors, PFM, engaged PFM to act in the proceeding, and commenced the process of book building. 109 Prior to and during the course of this proceeding, the ICP entities entered into a litigation funding agreement (ICP LFA) with a number of Estia shareholders. This was all in anticipation of litigation, but no proceeding was yet commenced. 110 Meantime, in January 2018, the ICP entities became aware that William Roberts Lawyers (WR), funded by LLS, were investigating the prospect of commencing a representative proceeding against Estia, but based on a case theory different to that being considered by the ICP entities and PFM. Discussion commenced soon after to consolidate the claims. In the following eleven months, PFM and WR endeavoured to consolidate the two case theories. 111 Nevertheless, in December 2018 while those efforts were continuing, the ICP entities, LLS, PFM and WR negotiated a co-funding agreement. This agreement set out the terms upon which ICP Capital and LLS would jointly fund any proceeding commenced against Estia. The intention of the parties was that ICP Capital would be responsible for a percentage of the funded professional fees, disbursements, any adverse costs orders, and the cost of any policy of after the event (ATE) insurance, and LLS would be responsible for the balance of 25% of those costs. It also recorded that PFM would engage WR to undertake certain work. 112 The parties, in order to give effect to that intention, agreed that: (a) each month, WR would invoice PFM for the professional fees and expenses incurred by WR (cl. 7.3(a)); (b) PFM would then invoice their professional fees and expenses incurred to ICP Capital (including the costs and expenses incurred by WR) (cl. 7.3(b)); (c) ICP Capital would pay each monthly invoice from PFM, with certain limitations, and the disbursements incurred by PFM and WR), and LLS would then reimburse ICP Capital 25% of each monthly invoice (cl. 7.6 and 7.7); (d) a budget would be maintained for the Project Costs, defined to mean the costs "incurred by the parties in progressing the Investigation and the Court Proceeding" (Recital I); (e) ICP and LLS would provide day to day instructions on the basis of utmost good faith; (f) it was the parties' intention that, in the event of a successful outcome of the proceeding, each of the ICP Capital and LLS would recover the Project Costs that each had funded from the proceeds of the successful outcome; (g) any funding commission payable by FGMs under the terms of the ICP LFA would be paid "75 percent to ICP or ICP Capital as the case may be and 25 percent to LLS"; and (h) LLS and ICP Capital would use their best endeavours to jointly enter into an ATE insurance policy to insure against the risk of an adverse costs order (cl. 6.1). 113 On 14 January 2019, the ICP entities and ICP Funding Pty Ltd entered into an ATE insurance policy (the ATE policy) with AmTrust Europe. 114 These proceedings were subsequently commenced on 16 July 2019. 115 Following the issue of proceedings, the parties to the initial co-funding agreement amended that agreement. I do not need to elaborate. 116 The relevant question is whether the costs and disbursements sought to be recovered under the proposed settlement are fair and reasonable.

Legal costs 117 By the 26 February 2021 orders, Mr Ian Ramsey-Stewart was appointed pursuant to s 54A of the Act to inquire and report in relation to the reasonableness of the legal costs charged and to be charged in this proceeding. Pursuant to that reference, Mr Ramsey-Stewart prepared a report dated 26 March 2021. 118 Mr Ramsey-Stewart concluded that apart from the limited costs deductions made by him, there was no proportion of the fees or disbursements charged by PFM or WR that were unreasonably incurred. Further, he concluded that the reasonable solicitor and own client costs allowed by him were not disproportionate to the overall scope and nature of the claim. 119 I will adopt the report of Mr Ramsey-Stewart. Moreover, his estimate is fair and reasonable. Further, from the amount allowed by me for the applicants' legal costs, being $5,515,725.63, I will approve reimbursement to the funders of the amount sought.

ATE premiums 120 I also accept that the amounts paid or payable by the funders under the ATE policy appear to be costs properly and reasonably incurred for the purposes of the funding arrangements and generally. 121 The ATE policy insured against the risk of the ICP entities being required to indemnify the applicants for any adverse costs that they were required to pay to Estia, up to a limit. The ICP entities have paid $500,000 by way of premiums under the ATE policy, and have been invoiced, and are liable to pay, an additional $298,771.35 by AmTrust for premiums due under the terms of the policy, and interest on the premium amounts. 122 Group members were informed of the funders' intention to seek orders that amounts paid or payable under the ATE policy be reimbursed from any settlement sum. Further, deduction of those amounts paid under an ATE policy from the settlement sum was contemplated by the ICP LFA. 123 In addition to the ATE policy premiums, the funders also seek payment from the settlement fund of the cost to the ICP entities of having AmTrust provide three irrevocable deeds of indemnity in favour of Estia in satisfaction of the applicants' obligation to provide security for Estia's costs. In aggregate, the cost to the funders of the inception of those deeds was $176,250.33. 124 The aggregate of the ATE policy premiums, interest on those amounts, and the cost of the indemnities, is $975,021.35. 125 Further, I should say that I accept the submissions of Mr Bernie Quinn QC for the funders that there is no occasion now to consider whether the amounts of funding commission that the funders seek to recover might affect whether the ICP entities ought be entitled to recover out of the settlement sum the amounts paid under the ATE policy. In the present case, the ICP entities seek to recover from the settlement sum their contractual entitlements under the ICP LFA. No one is asking me to make a common fund order. Now the commission payment sought to be recovered from the settlement sum simply reflects the remuneration agreed between the ICP entities and the funded group members. Therefore, I am not able to consider afresh what commission rate would reflect the relevant remuneration and reward for all risks assumed by the funders, and how such a rate ought reflect the mitigation of risk effected by the ATE policy. 126 I will allow the amounts sought.

Funding equalisation order - commission rates 127 No common fund order has been sought. What has been sought is a funding equalisation order by which: (a) the ICP entities will claim their contractual entitlement to commission under the ICP LFA of either 25% or 28% of each funded group member's gross entitlements in the settlement, depending on whether the group member held and retained more or less than 3.4 million Estia shares, and subject to the ICP entities' obligation under the funding arrangements to pay 25% of that commission to LLS; and (b) the amount that the unfunded group members would have paid to the ICP entities had they also entered an ICP LFA is then distributed pro rata across all participating group members. 128 In my view, it is just that the costs of the proceeding be spread amongst the members of the group in the manner suggested. Section 33V(2) confers the necessary power. 129 In my view, the commission rates are reasonable. 130 Further, the legal costs and disbursements that the funders have expended for the purposes of this proceeding are fair, reasonable and proportionate, and should be approved. 131 In summary, it is appropriate that I make a funding equalisation order in the terms sought.

Other matters 132 Let me briefly address some other matters. 133 First, I have no difficulty with the applicants' reimbursement payments totalling $18,024. They are modest, justified on the material, and well within the tolerable range suggested by the statistics synthesised by Professor Vince Morabito elsewhere. 134 Second, in terms of the administration of the settlement distribution scheme, the amount of $287,829 is not unreasonable in terms of the costs involved. 135 Third, in terms of the releases, they are not incongruent with the matters discussed by me in Newstart 123 at [56] to [61].

Conclusion 136 For the foregoing reasons, I will approve the settlement and make the necessary orders. I certify that the preceding one hundred and thirty-six (136) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Beach.