FEDERAL COURT OF AUSTRALIA

 

Darwalla Milling Co Pty Ltd & Ors v F Hoffman–La Roche Ltd & Ors (No 2) [2006] FCA 1388

REPRESENTATIVE PROCEEDING – settlement agreement – approval of settlement by court – whether proposed settlement scheme is fair and reasonable

Federal Court of Australia Act 1976 (Cth): Pt IVA, ss 21, 33V, 51A

Trade Practices Act 1974 (Cth): ss 45, 80, 82, 87, 163A

Darwalla Milling Co Pty Ltd v Hoffman-La Roche Ltd [2006] FCA 915

ACCC v Chats House Investments Pty Ltd (1996) 71 FCR 250

Lopez v Star World Enterprises Pty Ltd [1999] FCA 104

Williams v FAI Home Security Pty Ltd (2000) 180 ALR 459

Georgiou v Old England Hotel Pty Ltd [2006] FCA 705

GM Corp Pick-Up Truck Fuel Tank Products Liability Litigation 55 F 3d 768 (1995)

Detroit v Grinnell Corp 495 F 2d 448 (1974)

Girsh v Jepson 521 F 2d 153 (1975)

DARWALLA MILLING CO PTY LTD (ACN 009 698 631), LIENERT AUSTRALIA PTY LTD (ACN 008 293 007) AND BRISBANE EXPORT CORPORATION PTY LTD (ACN 010 345 150) v F.HOFFMAN-LA ROCHE LTD, ROCHE PRODUCTS PTY LTD (ACN 000 132 865), ROCHE VITAMINS AUSTRALIA PTY LTD (ACN 000 991 793), ROCHE VITAMINS ASIA PACIFIC PTE LTD, AVENTIS SA, AVENTIS ANIMAL NUTRITION PTY LTD (ACN 009 718 245), AVENTIS ANIMAL NUTRITION SA, AVENTIS ANIMAL NUTRITION ASIA PACIFIC PTE LTD, BASF AKTIENGESELLSCHAFT, BASF AUSTRALIA LTD (ACN 008 437 867) AND BASF EAST ASIA REGIONAL HEADQUARTERS PTY LTD

 

 

VID359 OF 1999

 

JESSUP J

27 OCTOBER 2006

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID359 OF 1999

 

BETWEEN:

DARWALLA MILLING CO PTY LTD (ACN 009 698 631) First Applicant   LIENERT AUSTRALIA PTY LTD (ACN 008 293 007) Second Applicant   BRISBANE EXPORT CORPORATION PTY LTD (ACN 010 345 150) Third Applicant

AND:

F.HOFFMAN-LA ROCHE LTD First Respondent   ROCHE PRODUCTS PTY LTD (ACN 000 132 865) Second Respondent   ROCHE VITAMINS AUSTRALIA PTY LTD (ACN 000 991 793) Third Respondent   ROCHE VITAMINS ASIA PACIFIC PTE LTD Fourth Respondent   AVENTIS SA Sixth Respondent   AVENTIS ANIMAL NUTRITION PTY LTD (ACN 009 718 245) Seventh Respondent   AVENTIS ANIMAL NUTRITION SA Eighth Respondent   AVENTIS ANIMAL NUTRITION ASIA PACIFIC PTE LTD Ninth Respondent   BASF AKTIENGESELLSCHAFT Tenth Respondent   BASF AUSTRALIA LTD (ACN 008 437 867) Eleventh Respondent   BASF EAST ASIA REGIONAL HEADQUARTERS PTY LTD Thirteenth Respondent

 

JUDGE:	JESSUP J
DATE OF ORDER:	27 OCTOBER 2006
WHERE MADE:	MELBOURNE

 

THE COURT ORDERS THAT:

 

1.                  The evidence contained in the confidential exhibitsto the affidavit of Kim Elizabeth Packer affirmed on 29 September 2006, being the exhibits set out in the schedule to this order, not be published to any person without the order of the Court.

Schedule:

·          Confidential Exhibit “KEP40”

·          Confidential Exhibit “KEP42”

·          Confidential Exhibit “KEP43”

·          Confidential Exhibit “KEP44”

·          Confidential Exhibit “KEP46”

2.                  The confidential exhibits referred to in Order 1 be sealed on the Court file and not be disclosed to any person without the order of the Court.

3.                  The settlement of this proceeding in accordance with the heads of agreement and the settlement distribution scheme set out in Schedules I and II respectively of the reasons of the Court published this day be approved.

4.                  The settlement sum referred to in cl 1.1(a) of the said heads of agreement be distributed to group members in accordance with those heads of agreement and the said settlement distribution scheme.

5.                  The settlement costs referred to in cl 1.1(b) of the said heads of agreement be dealt with in accordance with those heads of agreement and the said settlement distribution scheme.

6.                  All orders for costs made prior to this day be set aside.

7.                  There be no order as to the costs of the applicants’ Notice of Motion dated 11 July 2006.

8.                  The parties have liberty to apply.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID359 OF 1999

BETWEEN:

DARWALLA MILLING CO PTY LTD (ACN 009 698 631) First Applicant   LIENERT AUSTRALIA PTY LTD (ACN 008 293 007) Second Applicant   BRISBANE EXPORT CORPORATION PTY LTD (ACN 010 345 150) Third Applicant

AND:

F.HOFFMAN-LA ROCHE LTD First Respondent   ROCHE PRODUCTS PTY LTD (ACN 000 132 865) Second Respondent   ROCHE VITAMINS AUSTRALIA PTY LTD (ACN 000 991 793) Third Respondent   ROCHE VITAMINS ASIA PACIFIC PTE LTD Fourth Respondent   AVENTIS SA Sixth Respondent   AVENTIS ANIMAL NUTRITION PTY LTD (ACN 009 718 245) Seventh Respondent   AVENTIS ANIMAL NUTRITION SA Eighth Respondent   AVENTIS ANIMAL NUTRITION ASIA PACIFIC PTE LTD Ninth Respondent   BASF AKTIENGESELLSCHAFT Tenth Respondent   BASF AUSTRALIA LTD (ACN 008 437 867) Eleventh Respondent   BASF EAST ASIA REGIONAL HEADQUARTERS PTY LTD Thirteenth Respondent

 

JUDGE:	JESSUP J
DATE:	27 OCTOBER 2006
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1                     This is a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (‘the Federal Court Act’). The applicants allege that the respondents contravened s 45 of the Trade Practices Act 1974 (Cth) (‘the Trade Practices Act’), and claim declarations pursuant to s 163A of that Act (and/or s 21 of the Federal Court Act), damages pursuant to s 82 of that Act, injunctions pursuant to s 80 of that Act, orders pursuant to s 87 of that Act and consequential relief.

2                     Subject to approval by the court, the proceeding was settled by an agreement between the parties made in December 2005. By s 33V of the Federal Court Act, a representative proceeding may not be settled without the approval of the court. The question which now arises is whether the settlement of December 2005 should be approved by the court.

the parties and the claims

3                     The proceeding concerns certain vitamins used in the production of animal feed and animal feed supplements. Those vitamins, which have been referred to as ‘class vitamins’, are vitamins A, E, B1, B2, B5 and C, and Betacarotene and Canthaxanthin. The respondents produced and distributed those vitamins, in ways to which I shall refer in more detail presently, within the period to which the proceeding relates, 5 March 1992 to 31 December 1999 (‘the relevant period’). The applicants and the group members whom they represent, purchased and used those vitamins, or product containing those vitamins. The applicants alleged that, during the relevant period, a cartel existed between various of the respondents which would otherwise have been in competition with each other which was calculated to maintain the prices of the relevant class vitamins at levels higher than would have obtained in the absence of the cartel.

4                     Neither the applicants nor the group members which they represent were end consumers. The first applicant was a purchaser of premix containing certain of the class vitamins for animal nutrition or health purposes, and was a grower of chicken meat for human consumption with its own feed milling facilities. The second and third applicants were manufacturers, distributors and suppliers of premixes which contained class vitamins, and manufacturers and sellers of vitamins and mineral premixes for use in animal feed.

5                     The group members are described as follows:

‘(a) manufacturers, distributors and suppliers of pre-mixes containing vitamins A, E, B1, B2, B5, C, Betacarotene or Cantaxanthin for animal nutrition or health purposes (together and severally the ‘class vitamins’);

(b)                manufacturers , distributors and suppliers of stock feeds containing class vitamins;

(c)                producers of livestock including poultry, pigs, sheep and cattle, and dairy farmers, egg producers and aquaculturalists, who purchased stock feeds containing class vitamins;

(d)                manufacturers, distributors and suppliers of veterinary and performance enhancing preparations and supplements containing class vitamins;

(e)                manufacturers and distributors of pet food containing class vitamins;

who:

(i)            were at all relevant times ordinarily resident in or carrying on business in Australia; and

(ii)          paid at least two thousand Australian dollars (AUD$2000.00) in the period 5 March 1992 to 31 December 1999 for class vitamins or pre-mix or other animal health or nutrition products containing class vitamins; and

(iii)        are not Justices or Registrars of the High Court of Australia or the Federal Court of Australia.”

This description of the group members reflects what the evidence discloses to have been typical supply, acquisition and use arrangements in the industries in which the group members operated. It seems that vitamins used in the animal feed chain were almost always first incorporated into premixes of which there were, I was told, hundreds of different formulations. The appropriate premix was then selected for incorporation into stock feeds of various kinds. Those stock feeds were in turn selected by livestock producers of the kind referred to in par (c) of the description of the group members. In addition, appropriate premixes were selected by manufacturers of veterinary and performance enhancement preparations and supplements, and of pet food of various kinds.

6                     The respondents fall into three categories. The first category are the ‘Roche respondents’, being four related companies ultimately owned by Roche Holding AG, a Swiss corporation. F Hoffman-La Roche Ltd is a Swiss company which carried on business as a manufacturer and supplier of class vitamins in Switzerland, and which, on the applicants’ allegations, co-ordinated and supervised the manufacture and supply of class vitamins in Switzerland and elsewhere in the world through related companies. Roche Products Pty Ltd is an Australian company which imported class vitamins, and supplied them in Australia, save that, it alleges, between 1991 and 1998 it supplied class vitamins only to Roche Vitamins Australia Pty Ltd. That latter company is also a respondent and carried on business as a supplier of class vitamins (and, it alleges, premixes containing class vitamins) in Australia. Roche Vitamins Asia Pacific Pte Ltd is alleged by the applicants (but it does not itself admit) to have been, since 3 April 1997, a supplier of class vitamins in Singapore to have co-ordinated and supervised the supply of class vitamins in the Asia Pacific region, including Australia.

7                     The next category of respondents is what the applicants call the Aventis respondents. Aventis SA is incorporated pursuant to the laws of France, and is the ultimate holding company of the other Aventis respondents. The applicants allege that Aventis SA co-ordinated and supervised the manufacture and supply of class vitamins in France and elsewhere in the world through related companies, an allegation which is not admitted. Aventis Animal Nutrition Pty Ltd is an Australian company which, according to the applicants’ allegations, carried on business as an importer, packager and supplier of class vitamins in Australia and which, according to its own admissions, was an importer and supplier of class vitamins, and a manufacturer/packager and supplier of premix containing class vitamins. Aventis Animal Nutrition SA is a French company which carried on business as a manufacturer and supplier of class vitamins in France and, according to the applicants, co-ordinated and supervised the manufacture and supply of class vitamins in France and elsewhere in the world through related companies. Aventis Animal Nutrition Asia Pacific Pte Ltd is a Singaporean company which carried on business as a supplier of class vitamins in Singapore and, the applicants allege, which co-ordinated and supervised the supply of class vitamins in the Asia Pacific region, including Australia.

8                     The third category is what the applicants called the BASF respondents. BASF AG is a German company which was the ultimate holding company of the other BASF respondents, which carried on business as a manufacture and supplier of class vitamins (not including, according to its own admissions, the manufacture of vitamin B1 in the relevant period) in Germany and elsewhere and, according to the applicants, which co-ordinated and supervised the manufacture and supply of class vitamins in Germany and elsewhere in the world through related companies. BASF Australia Ltd is an Australian company which carried on business as an importer and supplier (and, the applicants allege, packager) of class vitamins in Australia (excluding, according to its own admissions, Betacarotene) and, it alleges, was a packager of premix. BASF East Asia Regional Headquarters Ltd is a Hong Kong company which, according to the applicants, carried on business as a supplier of class vitamins in Hong Kong and co-ordinated and supervised the supply of class vitamins in the East Asia region, including Australia, but which, according to itself, was a service company only.

9                     Although the applicants’ case as to the structure and operation of the three categories of respondents, and of the respondents themselves, is not wholly admitted, and although aspects of that case are denied, there are certain common features which may be regarded as having been established on the pleadings. Within each corporate group, the ultimate holding company is incorporated in Europe and, by reason of that circumstance, may be assumed to exercise control over the other respondents in that group. In each case there is a company established in the South East Asia region, although the significance to Australia, and actual role, of each such company remains controversial. In each case there is at least one company operating in Australia, which, it is admitted, imported class vitamins and supplied them to the Australian market, and/or, in certain cases, incorporated them in premix which was, in turn, supplied to the Australian market. This last aspect is significant for one element of the settlement. As I have said above, Australian manufacturers of premixes containing class vitamins are group members in the proceeding.

10                  The applicants allege that there were, during the relevant period, arrangements or understandings as between the European respondents, to maintain agreed market shares with respect to the class vitamins, to adhere to agreed prices and to supply the class vitamins in volumes that were agreed between them. It is alleged that these agreements were made as between the European respondents with a view to being implemented in global markets. The applicants allege that there was communication between the European respondents over the course of the relevant period in which they affirmed these arrangements or understandings, and in which they agreed to procure the implementation thereof by causing companies elsewhere in the world within the relevant corporate groups to observe them. It is alleged that the arrangements or understandings, as made, had the purpose, and would have, or have been likely to have had, the effect of substantially lessening competition and, as given effect to from time to time, in fact had that purpose and had, or would have been likely to have had, that effect in each case contrary to relevant provisions of s 45(2) of the Trade Practices Act. The applicants make a series of allegations, to which I need not refer further for present purposes, which would, if accepted, justify the conclusion that the conduct of which they complain occurred in Australia.

11                  The applicants also alleged that the European respondents implemented the arrangements or understandings within the South East Asian region by causing the regional respondents, within their respect corporate groups, to observe them. According to the applicants’ allegations, the regional respondents were not involved (and it is not clear whether they existed) over the whole of the relevant period, the allegation in other respects being that the European respondents caused the arrangements and understandings to be implemented directly in Australia. However, for part of the relevant period, the regional respondents were said to be involved in giving effect to the arrangements and understandings to which I have referred.

12                  The applicants next allege that the Australian respondents reached their own arrangements and understandings for what was in effect a co-ordinated system of co-operation between them to confine themselves to agreed market shares, to observe prices for class vitamins which they had agreed between each other and to supply class vitamins only in agreed volumes. It is also alleged that the Australian respondents agreed with each other, and with others, to implement in Australia the arrangements and understandings to which I have referred above, that is to say, those originating at the level of the European respondents and, for at least part of the relevant period, passed down the line by way of the regional respondents. It is alleged that, in making and in subsequently giving effect to arrangements or understandings along these lines, the Australian respondents acted in contravention of s 45(2) of the Trade Practices Act.

13                  The very brief survey of the applicants’ allegations which I have just set out does less than complete justice to a lengthy and complex Statement of Claim. In a contested proceeding, much greater care would need to be paid to each allegation, and to its relationship with other allegations. It should not be assumed, from the survey I have given, that the applicants have treated the three groups of respondents identically as between each other. Throughout the Statement of Claim there are differences in point of detail as between the groups of respondents, as between the respondents in each group and as between the allegations which relate to particular vitamins. For present purposes, it is sufficient to note that systematic and co-ordinated global arrangements, implemented in Australia, by which the respondents agreed on market shares, prices and volumes have been alleged against them by the applicants. Subject only to a possible qualification as to the application of the Trade Practices Act in the case of the respondents’ conduct occurring outside Australia, there can be little doubt but that the applicants’ allegations, if accepted, would amount to a serious contravention of s 45(2) of that Act.

14                  In their defences, the respondents have made a number of admissions. In no case is contravening conduct admitted with respect to the whole of the period for which the applicants sue. However, in many cases, the admissions relate to a very substantial portion of that period. The Roche respondents admit that there were arrangements of the kind alleged by the applicants at the global level in relation to all of the class vitamins, at the regional level in relation to five of the eight class vitamins, and at the Australian level in relation to vitamins A and E. The Aventis respondents admit that there were arrangements of that kind, for some of the relevant period, at all three levels but in relation to vitamins A and E only. The BASF respondents admit to the existence of such arrangements at the global level for all vitamins except B1, and at the Australian level for vitamins A and E only.

15                  When looked at within a purely Australian frame, the applicant has secured admissions from one respondent in each of the three corporate groups that arrangements or understandings of the kind alleged existed in Australia for a substantial part of the relevant period, but in relation to vitamins A and E only. In other respects, there are no admissions as to arrangements and understandings occurring purely within Australia.

16                  I should also mention at this stage that, on 28 February 2001, the court gave judgment in Australian Competition and Consumer Commission v Roche Vitamins Australia Pty Ltd (2001) 23 ATPR 42,806. The applicant Commission (‘the ACCC’) had commenced proceedings under s 77 for penalties under s 76 of the Trade Practices Act against each of the three Australian respondents concerned in the present proceeding. Each respondent admitted contraventions of s 45(2)(b) of that Act in relation to vitamins A and E, and joined with the ACCC in submitting that a penalty should be imposed. Acting on those submissions, the court imposed penalties totalling $26m, and each respondent was ordered to pay $65,000 towards the ACCC’s costs. This event is relevant in the present proceeding because the applicants proposed to rely on s 83 of the Trade Practices Act, under which findings of fact made in those proceedings would be prima facie evidence in this proceeding.

the settlement

17                  Commencing in June 2005, the parties undertook settlement negotiations, culminating in a mediation which took place on 15 and 16 December 2005. During the course of that mediation, the applicants accepted an offer from the respondents to settle the proceeding for the sum of $30.5m, plus costs of $10.5m. The settlement was governed by ‘heads of agreement’ signed by the parties’ solicitors on 16 December 2005, and was subject to the approval of the court. The agreement, the operative provisions of which are set out in Schedule I to these reasons, provides for the establishment of an interest-bearing account, called the ‘Vitamins Settlement Reserve Fund’ (‘the reserve fund’), into which the respondents would pay (and did pay) the total settlement of $41m by 13 January 2006. The agreement provides that, if and when the court approved the settlement, the $10.5m costs figure will be paid to the applicants’ solicitors, and the $30.5m settlement figure will be paid into an account called the ‘Vitamins Settlement Distribution Fund’ (‘the distribution fund’). The interest which has been earned on the reserve fund, and that which will, after approval, be earned on the distribution fund, are to the extent necessary to be applied to the payment of disbursements incurred in connection with obtaining court approval of the settlement and of the costs of administering the settlement scheme to which I next refer.

18                  The agreement provides for a settlement scheme pursuant to which the settlement sum of $30.5m will be applied and administered to the benefit of the applicants and the group members. The settlement scheme is the responsibility of the applicants, but, under the agreement, the respondents were given the opportunity to comment on it. The settlement distribution scheme was eventually finalised by the applicants on 10 July 2006. It is reproduced in Schedule II to these reasons. Significant features of it are as follows:

a.              What are described as ‘reimbursement payments’ are first to be paid from the settlement sum to group members nominated by name in the scheme. The purpose of these payments is to reimburse two of the group members for their out-of-pocket expenses incurred in connection with the prosecution of the proceeding, and to compensate seven of the group members for the time and effort which they have devoted to the proceeding on behalf of group members as a whole. The total of these reimbursement payments, as amended shortly before the hearing of the applicants’ motion, is $418,360.00.

 

b.             What remains of the settlement sum is then to be divided into two parts. The first part, 7.0/30.5 of the fund, is to be allocated to a ‘loss of market share fund’ (‘LMS fund’). The remaining part, 23.5/30.5 of the fund, is to be allocated to an ‘overcharge fund’. This division reflects the two main categories of damages which the applicants sought in the proceedings, to which I have referred above. That is to say, the view was taken that, if the total settlement sum were notionally divided into 30.5 parts, 7.0 of those parts should be available as damages for those group members who lost market share as a result of the respondents’ conduct, and 23.5 of those parts should be available as damages for those group members who were obliged to pay more for vitamins, and/or for products containing vitamins, as a result of the respondents’ conduct. There is, of course, no reason why a particular group member might not, depending on its circumstances, have legitimate claims under both categories.

 

c.              A group member who manufactured premix containing class vitamins during the relevant period, and which makes a properly documented claim, is treated as a ‘loss of market share’ claimant (or ‘LMS’ claimant) and is entitled to participate in the LMS fund. That entitlement is based directly upon the member’s purchases of class vitamins during the relevant period and the purchases of class vitamins during that period by all LMS claimants. In other words, the scheme in this respect is based upon an assumption that all manufacturers of premix will have lost some market share as a result of the respondents’ conduct, and should share in the fund established for that purpose rateably according to their purchases of class vitamins.

 

d.             The overcharge fund is available for distribution to all group members which have properly documented claims. The distribution of the overcharge fund as between group members requires first the calculation, in respect of each group member, of a figure described as ‘overcharge’. That having been done, the overcharge fund is to be allocated between group members rateably according to their established purchases of vitamins or of products containing vitamins. As will be seen from Table 1 in the settlement scheme, the ascertainment of the ‘overcharge’ involves the application to established purchases by each group member of a percentage factor which varies according to whether the group member was a premix manufacturer, a feed manufacturer, a livestock producer or an integrated livestock producer (or, in the case of the veterinary and pet food sectors: a manufacturer, distributor or supplier) and as to the particular industrial sector (or ‘supply chain’ as it is called) in which that group member operated. The scheme does not provide details as to the derivation of the percentage factors (set out in the column headed ‘Vitamin Cost and Absorption Rate’), but this has been dealt with comprehensively in the evidence before me, and I shall refer to it below.

 

e.              The scheme will be administered by the applicants’ solicitors. A group member seeking to participate will be required to lodge a proof of claim form in accordance with that set out in Schedule A to the scheme. The form is required to be accompanied by such invoices or other business records as are necessary to establish the claim.

 

f.               The applicants’ solicitors, as administrators under the scheme, will issue an assessment notice for each group member who lodges a claim. If the group member wishes to dispute that assessment, there will be a review procedure involving recourse to a named ‘independent counsel’. Questions of law can be referred to the court.

 

g.              The court is also given a role under the scheme if any issue arises in relation to the scheme, or the administration or the implementation of the scheme, and in connection with the possible extension of time limits set out in the scheme.

the publication of the proposed settlement

19                  On 11 July 2006, the applicants filed a Notice of Motion seeking inter alia orders for the publication to group members of a Notice of Proposed Settlement pursuant to s 33X(4) of the Federal Court Act. I dealt with that motion in the orders made on 18 July 2006: see Darwalla Milling Co Pty Ltd v Hoffman-La Roche Ltd [2006] FCA 915. That notice gave the group members an opportunity to object to the settlement, if they so desired, by notice sent to the court. The court received no objections.

20                  I am satisfied that the s 33X(4) notice to which I have referred was published in accordance with the orders made on 18 July 2006. The applicants’ solicitors took the following steps:

a.       On 19 July 2006, they sent to the group members registered with them (142 in total) a letter informing them of the fact of the settlement and attaching the s 33X notice and the proposed settlement scheme, including schedules.

 

b.      They caused the s 33X notice to be published in the Adelaide Advertiser, the Brisbane Courier Mail, the Canberra Times, the Hobart Mercury, the Melbourne Hearld-Sun, the Northern Territory News, the West Australian, the Sydney Daily Telegraph and the Australian on 20 July 2006.

 

c.       They caused the s 33X notice to be published in Stock and Land (Vic), the Land (NSW), Stock Journal (SA), Farm Weekly (WA), North Queensland Register, Queensland Country Life and the Weekly Times on 27 July 2006.

 

d.      On 19 July 2006 they caused to be available on the internet a new domain, www.vitaminsettlement.com.au, which was linked to the vitamin class action page on their own website.

 

e.       On 19 July 2006 they caused to be loaded onto the vitamins class action page on their own website, a statement informing the reader that a settlement had been reached in the vitamins class action, and providing a link to a representation of each of the s 33X notice and the settlement distribution scheme.

 

f.        On 25 July 2006 they sent a letter to each of 49 industry associations which they had identified as being likely to have members that included group members, such letter advising the addressee that a settlement had been reached in the vitamins class action, that the settlement might affect the addressee’s members and of certain basic features of the litigation and the settlement. A copy of each of the s 33X notice and of the settlement scheme was attached to the letter. The name and address of each of these industry associations is set out in a table contained in an exhibit to an affidavit upon which the applicants rely.

 

g.       On 17 July 2006 they caused to be issued to a number of major media organisations a press release headed ‘30.5 million dollar “vitamins” cartel class action for court approval’. Although it is fair to say this document was promotional as well as informative, it was calculated to raise public awareness of the litigation and of the settlement.

 

21                  The fact and size of the settlement was the subject of an item on the ‘PM’ program on ABC national radio at about 6:30 pm on 17 July 2006. Although the announcer described the litigation as ‘Australia’s first ever class action against a price fixing cartel’, it is, I find, unlikely that this news item would have gone further than merely to raise awareness, amongst members of the public, of the litigation in a general sense. It was not addressed to group members as such and there was nothing in it which is likely to have alerted a group member (otherwise only generally aware of the litigation) of the fact or purport of the s 33X notice.

22                  By contrast, on 18 July 2006 at about 12:15 pm on the program ‘SA Country Hour’, the reporter said not only that Australia’s first ever class action against a price fixing cartel had been settled, but also that many farmers could be eligible for compensation, that the respondents had agreed to pay $30.5m in damages, that, upon endorsement by the court, farmers, feed lotters and feed suppliers would be among those eligible to claim damages and that the lawyers were keen to hear from anyone who thought they were affected, it not being too late to join the claim. The applicants’ solicitor was interviewed on this program, and made it clear that persons who thought they were part of the group and had a claim should contact the solicitors and submit a proof of claim form.

23                  On a television news item on ‘WIN News’ at about 6:10 pm on 14 August 2006, it was said that primary producers and businesses who lost money to a ‘pharmaceutical price fixing cartel’ were being called on to join a class action. The announcer added that the court would decide whether to approve the settlement ‘for those who purchased vitamins from the companies for stock feed and veterinary use’. The reporter referred to the applicants’ solicitors, and to their statement that it was now time for any producer who had spent more than $2,000 on relevant products to come forward. The applicants’ solicitor was also interviewed on this program, and she made it clear that qualifying group members could share in the settlement if it were approved.

24                  In the period subsequent to 17 July 2006, the litigation, and the settlement, were frequently mentioned in the print media. However, of the items which were put in evidence before the court, only two contained any comment which might excite the interest of group members to the prospect that they had the opportunity to become involved in the litigation and to put their claims forward (an item in the Sydney Morning Herald on 18 July 2006 headed ‘Pharmaceutical Companies Settle First Cartel Class Action’ and an item in the Adelaide Advertiser on 22 July 2006 headed ‘Vitamins Settlement Businesses Can Claim’).

25                  Since the publication of the s 33X notice, the applicants’ solicitors received about 30 inquiries from group members regarding the settlement. Of these, about 20 were from group members who were already registered with the solicitors, and the remaining ten were new inquiries. Various details were discussed and points of clarification dealt with. The solicitors also spoke with certain of the larger group members regarding the settlement and distribution scheme. The attitude of these group members towards the settlement was positive. No-one expressed an objection to the settlement or the distribution scheme.

26                  In considering the probable efficacy of the steps taken to publish the s 33X notice, and of the applicants’ solicitors other steps calculated to publicise the facts of the litigation and of the settlement, I consider it significant that the group members were confined to businesses who had, over the relevant period, spent $2,000 or more upon vitamins or products containing vitamins, and did not include any end consumers. I am prepared to assume that persons in business of a particular kind would be more likely, one way or another, to encounter the publications to which I have referred above, and to be, at least broadly, conscious of the significance of them to their own circumstances. I also take into account the fact that the litigation has been on foot since 1999, and that the Australian respondents were the subject of orders by Lindgren J in the proceedings instituted by the ACCC to which I have referred in 2001.

27                  The intent of the s 33X notices was to maximise the prospect that group members who had not previously made contact with the applicants’ solicitors and who were otherwise not directly involved in the proceedings, would become aware of the settlement, have the means of accessing the terms of the settlement scheme, and be conscious of the opportunity available to them to object to the settlement or to the scheme. I am satisfied that that objective has been substantially if not wholly achieved. As I have noted above, there have been no objections lodged to the settlement or the settlement scheme. In the circumstances, I infer that reasonable group members are at least broadly aware of the terms of the proposed settlement and are content with it. That provides a powerful reason why I should approve the settlement, not only to the extent that it relates to the actual views of these group members, but also to the extent that absence of objections after wide publication of the terms of the settlement might be regarded as providing objective confirmation of the proposition which lies at the core of the applicants’ case, namely, that the settlement is fair, reasonable and adequate in the interests of group members as a whole.

28                  The notice under s 33X(4) informed group members that the applicants would seek the court’s approval of the settlement on 31 August 2006, the adjourned date of the applicants’ Notice of Motion of 11 July 2006. On 31 August, the applicants moved the court to approve the settlement, and the orders which they sought in that regard were consented to by the respondents.

29                  Mr Pagone QC, who appeared with Mr McArthur SC and Mr Armstrong for the applicants, submitted that the settlement was fair, reasonable and adequate in the interests of the group members as a whole and should, therefore, be approved.

the court’s approach under s 33v

30                  In ACCC v Chats House Investments Pty Ltd (1996) 71 FCR 250, 258, Branson J considered that the purpose intended to be served by s 33V(1) of the Federal Court Act was obvious. 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.”

The context in which Branson J made this observation was not one where her Honour was exercising jurisdiction under s 33V. Her Honour’s observation has been referred to on a number of occasions since by Judges of the court, but not, so far as I can find, for the purpose of identifying a criterion by reference to which approval should be given, or declined. Notwithstanding that circumstance, I consider, with respect, that Branson J accurately identified a consideration which must inform the exercise of the court’s discretion under s 33V, namely, the need to protect the interests of group members as a whole, and to ensure that those interests are not subordinated to those of the actual parties in the proceeding.

31                  This kind of approach was also taken by Finkelstein J in Lopez v Star World Enterprises Pty Ltd [1999] FCA 104. Having pointed out that the court’s task was to assess whether the compromise, in that case, was fair and reasonable, his Honour continued (at [15]):

“I am not so much concerned with the position of [the applicant] who, after all, has solicitors and counsel to advise him as to how his interests will best be served in the litigation. The group members are not protected in this way.”

In a passage which has been frequently referred to since, Finkelstein J pointed out that the court’s task under s 33V was, for that reason, an onerous one (at [16]).

32                  In their written submissions in the present case, the applicants referred to Lopez, and also to the judgment of Goldberg J in Williams v FAI Home Security Pty Ltd (2000) 180 ALR 459. His Honour said (at [19]):

“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 in such circumstances the Court will take into account the amount offered to each group member, the prospects of success in the proceeding, the likelihood of the 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 if continued to judgment, and the attitude of the group members to the settlement. In Re General Motors Corporation Pick-Up Truck Fuel Tank Products Liability Litigation 55 F 3d 768 at 785 the United States Court of Appeals for the Third Circuit referred to the nine-factor test it had adopted:

"... to help district courts structure their final decisions to approve settlements as fair, reasonable and adequate as required by Rule 23(e) [which requires court approval for settlement of class actions]. See Girsh v Jepson 521 F 2d 153 at 157 (1975) (3d Cir). Those factors are: (1) the complexity and duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining a class action; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement in light of the best recovery; and (9) the range of reasonableness of the settlement in light of all the attendant risks of litigation."

(See also County of Suffolk v Long Island Lighting Co 907 F 2d 1295 at 1323 (1990) (2nd Cir), 5 Moore´s Federal Practice 3rd ed, p 23-348.) This nine-factor test is equally helpful in the Australian jurisdiction and I find it a useful guide in considering the present proposed settlement.”

In their written submissions, having referred to the judgment of Goldberg J, the applicants continued:

“The principles laid down by Lopez and Williams No 4 have been applied on numerous occasions in this Court: see eg., Neill v. P & O Cruises Pty Ltd [2002] FCA 1325 (Weinberg J) at [6-10]; Jarrama Pty Ltd v. Caltex Australia Petroleum Pty Ltd [2004] FCA 1114 (Crennan J) at [10]; Courtney v. Medtel Pty Ltd [2004] FCA 1406 (Sackville J) at [37-42]). They have similarly been adopted for the equivalent procedure in the Supreme Court of Victoria: see Tasfast Air Freight v. Mobil Oil Australia Ltd [2002] VSC 457 (Bongiorno J); Verschuur v. Vynotas Pty Ltd [2004] VSC 130 (Mandie J). It is firmly established that the central question is whether the proposed settlement is fair, reasonable and adequate in the interests of the group members.”

33                  It is true that the judgment of Goldberg J in Williams has been referred to on a number of occasions by members of the court when exercising jurisdiction under s 33V. To the instances referred by the applicants as set out above may be added the judgment of Young J in Georgiou v Old England Hotel Pty Ltd [2006] FCA 705, [18]. In none of these cases (including the two Victorian ones referred to), however, does one find a practical elaboration of what it is about a particular settlement, or about settlements in general, that make it, or them, ‘fair and reasonable’. Further, although Goldberg J referred to a series of matters which the court would ordinarily take into account, subsequent judgments of the court under s 33V do not disclose any pattern of systematic consideration of such matters in the way, for example, of a check-list. In practice, every case is dealt with on its own merits, and by reference to specific factors which might raise serious doubts as to fairness and the like.

34                  The present case provides an example of why a check-list approach will not always be appropriate. Goldberg J suggested that, ‘ordinarily, the court would take into account the amount offered to each group member’. As is apparent from the settlement distribution scheme in the present case, the court does not know (and the applicants do not know) what will be the final entitlement of each group member under the settlement. Necessarily, no amount has been ‘offered’ to each group member. Likewise, for reasons explained elsewhere in these reasons, it is difficult to reach any measure of ‘the likelihood of the group members obtaining judgment for an amount significantly in excess of the settlement offer’. The settlement here is based on formulae, rules of thumb and assumptions which the court may well consider to be fair and reasonable as a means of disposing of the issues which the group members as a whole confront in this litigation, but which defy any attempt to identify which particular group members, if any, would be likely to obtain judgment at trial in any particular amount. On the other hand, some of the matters to which Goldberg J referred are, with respect, very useful in the context of the present case. The advice which the applicants have received from counsel, solicitors and experts lies at the centre of their justification for the settlement. The terms and comprehensiveness of those advices have been critical to my consideration of the matters arising under s 33V. The likely duration and cost of this proceeding, were it to continue to judgment, is a factor of particular significance. The attitude of the group members to the settlement is also something which, as appears below, plays a useful role in the present case.

35                  Save to the extent that they enunciate what would, with respect, be obvious, I have found myself less assisted by the nine factors which Goldberg J extracted from the judgment of the US Court of Appeals for the Third Circuit in re GM Corp Pick-Up Truck Fuel Tank Products Liability Litigation 55 F 3d 768, 785 (1995). An aspect of the extract from the judgment in GM Corp which appears on the face thereof, but which has not, I think, received explicit attention on the numerous occasions upon which the observations of Goldberg J have been followed, is that the Court of Appeals was operating by reference to r 23(e)(1)(C) of the US Federal Rules of Civil Procedure, which provides:

‘The court may approve a settlement, voluntary dismissal, or compromise that would bind class members only after a hearing and on finding that the settlement, voluntary dismissal, or compromise is fair, reasonable, and adequate.”

By contrast, s 33V of the Federal Court Act identifies no criteria by reference to which the court should approve, or should decline to approve, a particular settlement. Although the notion that a settlement should be ‘fair and reasonable’ seems unobjectionable as a matter of principle, if that consideration is to inform the process of approval under s 33V, it should, in my respectful opinion, be because of its harmony with the scheme of Pt IVA of the Act, and because it tends to achieve the implicit object of the section. I can, with respect, see no particular warrant for incorporating into Pt IVA the requirements of rules of court in an overseas jurisdiction.

36                  It seems that the factors referred to in GM Corp had their origin in Detroit v Grinnell Corp 495 F 2d 448 (1974). In that matter, the US Court of Appeals for the Third Circuit heard an appeal from the District Court, in which one group of appellants attacked the settlement of a class action ‘on the ground that it is so small as to be grossly unfair on its face’, and objected to the manner in which the District Court had approved the settlement, and a second group of appellants sought to overturn the award of fees for various attorneys. The Court of Appeals said (at 462-463):

“The question becomes whether or not the District Court had before it sufficient facts intelligently to approve the settlement offer. If it did, then there is no reason to hold an additional hearing on the settlement or to give appellants authority to renew discovery. There is no doubt that it did. The Court specifically considered: (1) the complexity, expense and likely duration of the litigation, … (2) the reaction of the class to the settlement, …(3) the stage of the proceedings and the amount of discovery completed, …(4) the risks of establishing liability, … (5) the risks of establishing damages, … (6) the risks of maintaining the class action through the trial, … (7) the ability of the defendants to withstand a greater judgment, … (8) the range of reasonableness of the settlement fund in light of the best possible recovery, … (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation,

It appears, from the above extract, that the court in Detroit was not purporting to lay down a list of criteria by reference which applications for the approval of settlements ought to be decided, but rather was identifying the considerations which the District Court had in fact taken into account in determining the case before it on the facts.

37                  Those considerations were picked up by the US Court of Appeals for the Third Circuit in Girsh v Jepson 521 F 2d 153 (1975). The Court of Appeals said that the decision whether to approve a settlement was ‘left to the sound discretion of the District Court’ (at 156), and went on to say that ‘some of the factors which are relevant to a determination of the fairness of settlement were listed’ in Detroit (at 156-157). As it happens, the Court of Appeals held that the District Court, in Girsh, had referred to the nine factors in Detroit, but ought not, for other reasons, have approved the settlement in the case. It was from the Court of Appeals judgment in Girsh that the same court derived the nine factors in GM Corp, to which Goldberg J referred in Williams.

38                  I consider that the nine factors derived from GM Corp have at least two limitations for purposes of the present case. First, these factors were never stated to be exhaustive of the things which the court should consider under s 33V (and Goldberg J did not propose otherwise). As will appear from what follows hereunder, the present case involves specific problems and issues which no predetermined list could ever hope to anticipate. Secondly, as is apparent from the provenance of those factors to which I have referred above, their original purpose was substantially concerned with a consideration of the adequacy of an overall settlement sum. The factors throw little light on the proper resolution of the rather difficult inter se issues that arise in a proceeding such as the present.

39                  I have not found any discussion, either in the American or in the Australian authorities, as to the connotation that should be given to the words ‘fair’, ‘reasonable’ or (should it matter) ‘adequate’ in particular situations. In both jurisdictions the expression seems to have been used as composite one. The practical judicial approach has been, or so it appears to me, to identify any features of a settlement that are obviously unreasonable or unfair, a task which comes more easily to a court than the obverse one of assessing the reasonableness and fairness of a settlement in an environment generally devoid of negative indications. Where some group members object to a settlement and state their reasons therefor, their reasons will provide a convenient focus by reference to which the court will decide matters of fairness and reasonableness. They may, at the same time, distract the court from its task of critically evaluating the settlement in other respects. I am spared such distractions in the present case, but I am, as a result, left with only the broadest criteria against which to undertake that task.

40                  As appears from para 27 above, the applicants submitted that it was ‘firmly established that the central question is whether the proposed settlement is fair, reasonable and adequate in the interest of the group members’. I am minded to decide the present matter by reference to the question whether the proposed settlement is fair and reasonable in the interests of group members as a whole, but I must say that I approach the question of ‘adequacy’ with some caution. For reasons which I explain elsewhere, I doubt that the court is in the best position to assess the adequacy of the settlement in the present case, although I accept that manifest inadequacy would generally provide a strong reason to refuse approval under s 33V.

41                  I propose to consider each of the two categories of loss which the applicants have identified – overcharge loss and LMS loss – discretely. In relation to each, I propose first to consider whether the overall settlement sum is reasonable, having regard to the manner of its calculation and its relationship to a best possible case outcome for the group as a whole, the prospect of achieving an outcome at or near the best possible case, the extent of the weaknesses, substantive or procedural, in the applicants’ case, whether the settlement sum falls within a realistic range of likely outcomes, the forensic difficulties which would be involved in the conduct of the case to judgment, including the distractions, for an operating business, of being involved in such an undertaking, and the time and costs which have been saved by a settlement at this stage. I propose to turn then to the question whether the settlement, including the distribution scheme, involves any actual or potential unfairness to any group members, or categories of group members, having regard to all relevant matters, including whether the overall settlement sum, even if reasonable as such, involves unfair compromises by some members, or categories of members, for the benefit of others, and whether the distribution scheme fairly reflects the apparent or assumed relative losses suffered by particular members, or categories of members. Any consideration of the fairness and reasonableness of the settlement in the present case must take into account not only the overall settlement sum and its relationship with the amount that might be considered a best possible outcome after a successful trial, but also the structure and workings of the scheme by which that sum is proposed to be distributed amongst group members. The fairness and reasonableness of the settlement, from the point of view of any one group member, will necessarily depend on both of these factors.

fairness & reasonableness of overall settlement sum

42                  As I have said, the settlement scheme provides for an overall settlement sum of $30.5m. This was the amount that was paid into the reserve fund in January 2006. The interest subsequently earned on that fund was to be used to meet the disbursements involved in obtaining the court’s approval and the costs of administering the settlement scheme. It was from the outset contemplated as a possibility that these disbursements and costs would not use up all the interest earned since January 2006. Further, the so-called reimbursement payments (which I shall consider further below) are to be taken from the fund before any distribution to the generality of group members. For these reasons, when that distribution comes to be made, it would be a sheer coincidence if the sum remaining was exactly $30.5m. However, since the possibility of there being some residue of interest remaining in the fund must be considered speculative, and since the fairness etc of the reimbursement arrangements should be considered separately, it is appropriate to treat $30.5m as the sum for which the proceeding was settled. This sum is to be regarded as covering the applicants’ case for conventional loss and damage as well as their contingent claim for interest from the date when the cause of action arose under s 51A of the Federal Court Act.

43                  The formula for dividing the settlement sum – whatever it may precisely be at the time when the division comes to be made – between overcharge damages and LMS damages requires, as mentioned earlier, that the total sum be divided into 30.5 parts, with 23.5 of those parts being allocated to the former category and 7.0 of those parts being allocated to the latter category. From this it is implicit that the underlying settlement is one in which the respondents should be regarded as paying $23.5m as settlement for the claim relating to overcharge, and $7.0m as settlement for the claim relating to LMS. The question is whether these sums are within the range of fair and reasonable outcomes by way of settlement of this proceeding.

44                  Turning first to the overcharge damages, as I understand it, the applicants commence with the proposition that, prima facie at least, a trader who was affected by inflated prices the result of a cartel amongst its relevant suppliers was worse off by the amount of the additional expense to which it was put, in its purchases of vitamins or other affected product from those suppliers, as compared with the like expenses which would have been incurred in a non-cartel situation. A calculation of this detriment required the applicants to have two things: first, data showing the value of actual purchases of particular vitamins and product by group members over the relevant period; and secondly, a percentage figure representing the extent to which the price of each vitamin and product was higher than it would have been in a non-cartel situation. Purchase data was, of course, available to the applicants themselves, as they had made their own purchases. They had no reliable way of knowing, however, what was the actual value of the purchases across the whole group. This deficiency was supplied by the respondents in the negotiations leading to the settlement in December 2005. The respondents supplied the applicants, on a confidential basis, with details of their sales of each vitamin in Australia during the relevant period.

45                  Calculating the percentage by which the prices of the various vitamins and products were higher than they would have been in a non-cartel situation was a much more difficult task for the applicants. The respondents took issue with the applicants’ basic proposition in this respect, and could not be expected to be the source of any particular co-operation. The applicants’ approach to this task was to engage the services of two expert economists (one of whom had provided an expert opinion in similar litigation in Canada) to provide their estimates of those percentages. This they did, but it is clear from their reports – which are contained in confidential exhibits – that their conclusions are, at several points, based upon assumptions rather than hard data and involve alternatives and ranges, largely dependent upon which of the assumptions one accepts, rather than a single, unique, outcome. By applying the percentage so calculated, with all its imponderables, to the value of purchases from the respondents, in the way I have suggested, the applicants were able to derive an estimate of the additional amount which the group members as a whole spent on purchases of each vitamin over the relevant period.

46                  But the applicants were not entitled to assume that they would necessarily succeed for the whole of that amount. In this respect it is important to observe that, although the Australian respondents admitted the allegations of breach of s 45 of the Trade Practices Act in the proceedings brought by the ACCC to which I have referred, those proceedings related only to vitamins A and E, and they were not at all concerned with the matter of quantification of loss and damage. In the present proceeding too, the Australian respondents have admitted contraventions of the section in relation to those vitamins, but they have put in issue the very existence of the cartel in Australia in relation to the other vitamins, and the occurrence of loss and damage in relation to all vitamins. While the forensic realities which led the Australian respondents to make these admissions may have encouraged them likewise to participate in settlement negotiations, the really challenging task of quantification remained for the applicants, and in that they were provided with no admissions, and presumably could anticipate no particular assistance, from those or the other respondents.

47                  An additional concern for the applicants was that the respondents had pleaded that, to the extent that the applicants’ case concerned loss and damage that occurred more than three years before the commencement of the proceeding, it was time-barred by s 82(2) of the Trade Practices Act. In so far as the applicants claimed damages under s 82, it is hard to see that they would have had any answer to this defence. The proceeding was commenced in July 1999, yet the applicants’ allegations of loss and damage ran from March 1992. As against this, the applicants would have been able to point to their claim for injunctions under s 80 of the Trade Practices Act, and to their allied claim for damages under s 87. The established jurisprudence in the Full Court is that there is no limitation period in such a situation: Mayne Nickless Ltd v Multigroup Distribution Services Pty Ltd (2001) 114 FCR 108. However, Mr Pagone stressed, and I accept, that, in a case of the size and importance of the present one, the prospect of an argument succeeding, at some level, that s 87 should not be construed so as to defeat the apparent policy of s 82(2) could not be disregarded. In the circumstances, it was well within the bounds of reasonable negotiation for the applicants to allow for some risk that the earlier parts of their damages claim might be defeated by a limitations defence.

48                  The applicants were then obliged to confront the proposition, which the respondents took in their defences, that they did not in fact suffer any loss or damage at all, because the impact of higher vitamin prices (to the extent that there were any) was passed on down the line to their own customers, and ultimately to consumers. This point had two dimensions: first, the basic proposition itself, which had the potential, if accepted by the court, to make serious inroads into the case which the applicants might otherwise have been able to make in loss and damage; and secondly, the significance of the proposition, to the extent that it was valid, for the apportionment of group-wide loss and damage as between group members in different categories (ie in the sense that, to the extent that one group member passed on the price increase to a customer who was a group member in a different category, the former’s gain would be the latter’s loss), a matter to which I shall turn below when considering the architecture of the distribution scheme itself.

49                  In addition to the matters I have mentioned, the applicants’ advisers considered a number of matters which might be regarded as posing actual or potential difficulties for their clients in the prosecution of the litigation. These matters are canvassed in the confidential memoranda which have been made available to the court, and I am satisfied that each was and is a legitimate consideration influencing what should be regarded as a fair and reasonable settlement in the circumstances.

50                  It is not, I consider, the court’s function under s 33V of the Federal Court Act to second-guess the applicants’ advisers as to the answer to the question whether the applicants ought to have accepted the respondents’ offer: the court’s function is, relevantly, confined to the question 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. In settlement negotiations, some parties, and some advisers, tend to be more risk-averse than others. There is nothing unreasonable involved in either such position and, under s 33V, the court should, up to a point at least, take the applicants and their advisers as it finds them. Neither should the court consider that it knows more about the group members’ businesses than the applicants, or more about the actual risks of the litigation than their advisers. 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.

51                  Here the applicants commenced with a figure which could have been regarded as a ‘best possible outcome’ one. They were then obliged to take into account the difficulties which they would encounter in proving their case, and the defences which the respondents raised. There was also the overarching consideration that, whether considered as a representative proceeding in the technical sense or merely as a proceeding in which there were numerous applicants, the evidentiary task of establishing that each claimant or applicant had in fact suffered loss and damage even approximately fitting the conceptual template discussed above would have been very onerous and, it must be assumed, problematic in some instances at least. Finally, there was the strong prospect that whatever damages figure was in fact established at trial would attract interest pursuant to an order under s 51A of the Federal Court Act. I am satisfied that all these factors were taken into account by the applicants and their advisers.

52                  There is another matter which in a practical sense, added to the applicants’ justification for reaching a settlement at this stage of the proceeding. Although the proceeding had, in December 2005, been on foot for six and a half years, discovery had not yet been given by the parties. The potential size of the discovery process – even if limited to specific categories – in a proceeding such as the present needs only to be contemplated for the utility of avoiding it to be immediately apparent. The applicants’ irrecoverable costs in that regard are likely to have been considerable. I am satisfied that the applicants considered the cost saving which would result from a settlement achieved before discovery to be a significant practical inducement to settlement regardless of their views as to the strengths and weaknesses of their own case. This was manifestly a reasonable approach to settlement.

53                  In all the circumstances I am satisfied that the compromise settlement involving $23.5m for overcharge damages, including s 51A interest, is a fair and reasonable settlement in the circumstances facing the applicants and the group members.

54                  On the matter of the LMS damages, the applicants’ case is based on the circumstance that certain of the respondents, by themselves engaging in the business of manufacturing and selling premix in Australia, enjoyed an unfair competitive advantage as against the group members which manufactured and sold premix because of their (the respondents’) access to vitamins at prices which were not affected by the cartel. Accordingly, as mentioned above, the damages claimed here relate only to those group members which manufactured and sold premix.

55                  As a matter of calculation, the applicants were required to estimate the extent of the market share that was lost to the respondents as a result of their cartel pricing each year over the relevant period, the sales that were lost as a result, and the profit that was foregone on those sales. The figures for the various years, which may not, and probably would not, have been the same, had then to be added together to give a total for the profits lost over the relevant period for all premix manufacturers. More so even than in the case of the overcharge calculations considered above, these calculations required estimates and assumptions about states of affairs which would have, but which in fact did not, prevail. There were a number of important imponderables. The applicants had the advantage of what strikes me as a sophisticated analysis by one of their experts, Prof Philip Williams, but even he was obliged to make a number of assumptions, or to work to assumptions given to him by the applicants. In addition, the various issues mentioned above in connection with overcharge damages (pass-on pricing, limitations defences etc) were equally present in connection with LMS damages. I consider that the proof of the factual elements necessary to make good this head of damages would have been every bit as problematic as in the case of overcharge damages: probably more so.

56                  It is apparent from a reading of the applicants’ experts’ reports, and of the opinions of their legal advisers, that all concerned made a conscientious attempt to produce a systematic estimate of the actual group-wide lost market share damages, based on various assumptions. For this purpose they made use of the applicants’ own practical experience of the business and financial structures in the relevant market sectors, of the statistical tools available to the experts and of the professional experience and common sense of the legal advisers. For a number of reasons, they considered that this claim was likely to be more problematic than the overcharge claim – an assessment which, on my reading of the confidential material which was placed before the court, is well within the range of the reasonable. Each of the considerations to which I have referred in paras 44 to 53 above in the context of overcharge damages applies equally to the case of LMS damages. Taking those considerations into account, I am satisfied that the compromise settlement involvement $7.0m for LMS damages, including s 51A interest, is a fair and reasonable settlement in the circumstances facing the applicants.

fairness and reasonableness of distribution scheme

57                  I consider next the structure and workings of those provisions of the settlement scheme which will govern the distribution of the settlement sum as between group members. All group members will be entitled, on presentation of the required documentary proof of purchases, to participate in the distribution of the overcharge fund. A qualifying group member will be entitled to payment of a sum calculated in accordance with the following formula:

Entitlement = O_M / O_G x Overcharge fund

where O_M is the ‘overcharge’ for the particular qualifying claimant and O_G is the total ‘overcharge’ for all qualifying claimants. This simple formula is intended to entitle each claimant to the same proportion of the overcharge fund as is the proportion of its own ‘overcharge’ within the summed ‘overcharge’ of all claimants. Evidently, the concept of ‘overcharge’ is central to the formula and thus to the entitlement of each group member.

58                  Clause 6.4 of the distribution scheme defines ‘overcharge’, in relation to any one claimant, as the total Australian dollar value of all purchases of products containing class vitamins by that claimant during periods defined in the scheme multiplied by the applicable ‘vitamin cost and absorption rate’ set out in Table 1 (being part of cl 6.4). Use of the value of purchases by each claimant is consistent with the basis of the applicants’ estimate of total overcharge damages to which I have referred earlier in these reasons, and I need say nothing more about it. The real driver, as it were, of the distribution of the overcharge fund between group members is the concept of the ‘vitamin cost and absorption rate’. As will be seen from Table 1, that rate is 6.692% for all premix manufacturers, but it is less for businesses further down each supply chain (poultry, pig, cattle, etc) and the rates in different supply chains, even at corresponding levels (eg feed manufacturers) are not the same.

59                  As is apparent from the nomenclature – ‘vitamin cost and absorption rate’ – each such rate has been calculated by reference to two factors: the higher cost of vitamins (or products containing vitamins) as a result of the cartel, and the absorption of that cost by the class of business in question. As to the former, from the confidential reports and opinions which were disclosed to the court, and from the supplementary explanations which were provided by counsel for the applicants on 31 August 2006, I understand that the factor takes account of the estimated incremental price of each vitamin (or product containing vitamin), expressed as a percentage of the estimated price that would have prevailed in the absence of the cartel, and the contribution, relative to other costs, of that incremental vitamin (or product) price in the cost structure of the particular kind of business to which the relevant item in Table 1 refers. As to the latter, from those same materials and explanations, I understand that the factor takes account of the estimated extent to which businesses of the particular kind absorbed, rather than passed on, the incremental cost of particular vitamins (or of products containing vitamins). Here the applicants have recognised two things: first, that to the extent that a particular increase in cost is passed down the line by way of higher prices to customers, it should not be treated as giving rise to any legitimate claim; and secondly, that in such a case, if the customer itself was a group member, that member’s higher costs arising from the first group member’s pass-down should be treated as giving rise to a legitimate claim.

60                  The design of the regime of distribution for which cl 6.3 and cl 6.4 of the scheme provide is such as to make for the distribution of a finite fund between an as yet unknown number of qualifying group members in a way which recognises, at the level of principle at least, the nature and extent of the loss and damage most likely to have been suffered by them. It operates according to broad rules of thumb, of course, such as the implicit rule that group members operating at a certain stage of a particular supply chain will all have felt the impact of the cartel in the same way relative to their purchases. That this may not reflect the actual experience of particular group members may be a reality, and it may, ultimately, lead to particular group members getting a better, or a worse, deal than they ought to have got in an ideal world in which this complex litigation was fought to the end and damages were awarded to each group member according to its actual loss and damage. But I am satisfied that the vitamin cost and absorption rates contained in Table 1 have been developed with great care and after making every possible use of the applicants’ own knowledge of the industries involved and of the financial and statistical data which is available to the applicants, and will produce results which are as close as may reasonably be, within the practical constraints imposed by the overall size of the settlement and the resources of the applicants, to the true relative overcharge damages suffered as between the various categories of group members referred to in the table. Although it is correct to say, as I have, that rules of thumb are involved, they are rules which are likely to be closely aligned with reality.

61                  Turning next to the distribution of the LMS fund, all independent premix manufacturers will be entitled, on presentation of the required documentary proof of purchases, to participate in that distribution. The entitlement will be calculated in accordance with the following formula:

Entitlement = P_M/ P_G x LMS fund

 

where P_Mis the money value of purchases of class vitamins for the particular qualifying claimant and P_G is the total money value of the purchases of class vitamins by all qualifying claimants. In other words, the LMS fund will be distributed pro-rata among qualifying claimants according to their expenditure on purchases of class vitamins during the relevant period.

62                  The formula for the distribution of the LMS fund among qualifying premix manufacturers assumes that the detrimental impact of cartel pricing on the profits of the premix manufacturers (ie resulting from lost market share) would be directly related to the money value of purchases of class vitamins from the respondents by those claimants. For example, it is assumed that a premix manufacturer whose purchases of class vitamins from the respondents during the relevant period were double those of a second premix manufacturer would have experienced a loss of profits twice the size of that experienced by the second premix manufacturer. In the confidential material made available to the court, the applicants’ experts and advisers have discussed the limitations of this approach but, ultimately, they have expressed the view that, in practical terms, it provides a reasonable basis for distributing a finite sum amongst those who will become entitled to participate. I am satisfied that the rule of thumb which the applicants have adopted in this respect provides a fair and reasonable approach to the distribution of the LMS fund amongst qualifying premix manufacturers.

63                  The applicants have also attempted to address the situation of a premix manufacturer who was so badly affected by the cartel, and by the loss of market share caused by it, that it ceased manufacturing premix altogether during the relevant period, with the result that it then ceased purchasing vitamins from the respondents. The applicants recognised that use of the value of vitamin purchases from the respondents over the relevant period would, in the case of such a business, understate the loss and damage suffered as a result of the cartel. To make some allowance for this, the applicants (in cl 5.4 of the settlement scheme) allowed for an additional amount to be notionally added to the vitamin purchases of such a premix manufacturer, being, as I understand it, for each month after the particular claimant ceased manufacturing premix, up to a maximum of 18 months, one twelfth of the average annual purchases of premix by that claimant over the 3 years before it ceased manufacturing premix. This would not apply in the case of a premix manufacturing business which was transmitted to a third party. This formula is based upon a rule of thumb which, in effect, gives to a claimant which ceased manufacturing premix during the relevant period the credit of a further period, up to a maximum of 18 months, during which it is assumed that it would, had it not ceased manufacturing, have continued to incur ongoing loss of profits as a result of cartel pricing; and, of course, it is based also on the assumption that such a claimant, having been affected so seriously by the cartel as to make the decision to cease manufacturing premix altogether, should be regarded as at least as seriously affected by the cartel pricing as was a premix manufacturer who continued to manufacture premix for such an 18–month period.

64                  There really is no way of knowing how close to reality are the rules of thumb and assumptions to which I have referred in the previous paragraph. The applicants have persuaded me, however, that some allowance ought to be made in this regard, and I am in no position to second guess the actual details of the allowance which they have made. In point of principle, the allowance is manifestly fair and reasonable, and I am prepared to accept it as such within the overall terms of the settlement.

strong case and weak case vitamins

65                  At this stage, it is appropriate to mention an aspect of the settlement which gave me concern. As I have indicated, the settlement involves a compromise in the way of most settlements. The applicants have taken into account the risk that they may not succeed, or not wholly succeed, in deciding to what extent they would be prepared to accept a discount on the face value of their overall claims for the purposes of settlement. This is, of course, a reasonable and commonplace approach. However, as indicated above, it is self-evident that the applicants, acting reasonably, ought not to regard their case as equally strong, or even approximately so, in relation to all of the class vitamins. In the case of vitamins A and E, the Australian respondents have admitted the existence of the cartel in Australia. In that respect, the trial would have been concerned with an assessment of loss and damage only. There are no admissions, however, in relation to the other vitamins. Further, I am satisfied from a perusal of the expert advice, and legal opinions, provided to the applicants that there were no grounds upon which the applicants might have reasonably believed that the case in relation to each vitamin was equally as strong as the case in relation to each other vitamin.

66                  What the applicants appear to have done is to have made a broad assessment, covering all vitamins, of the prospects of success of the case as a whole, taking due account of the particular vitamins in which the case would be a strong one, and of the vitamins in which the case was not self-evidently strong. On this ‘swings and slides’ approach, the applicants have derived an overall settlement figure which they considered to constitute a reasonable outcome. If taken by a single litigant, such an approach could not be criticised: in deciding whether to settle for a particular sum, he or she would inevitably tend to trade off strengths against weakness. Even in a case in which there are several applicants, it would be legitimate for them to reach terms amongst themselves in which those with a stronger case might agree to place those strengths on the scales in the interests of achieving a favourable overall settlement, to the advantage of those with a weaker case. However, different considerations apply in the case of a representative proceeding under Pt IVA of the Federal Court Act. In the present case, it must be assumed that, unbeknownst to themselves, group members with stronger cases would, by participating in the overall settlement, share the advantages of their stronger cases with their fellows who had weaker cases. Under s 33V(1) of the Federal Court Act, the role of the court is to protect the interests of those who have no voice at the bar table, and it must be said that there is no obvious reason why the court should not assume that those unheard group members whose cases are strong would regard it as unfair and unreasonable to make compromises in the interests of other group members whose cases are weak.

67                  As a result of these concerns, I had my associate correspond with the applicants’ solicitors on 8 September 2006 in the following terms:

“I am writing with regards to the application for approval of the proposed settlement scheme in the matter of Darwalla Milling Company Pty Ltd & Ors v F. Hoffman-La Roche Ltd & Ors VID359 of 1999 that was heard before his Honour on 31 August 2006.

His Honour still has a concern as to the fairness of the settlement with respect to the issues dealt with at pp 42-47 of the transcript, namely, issues concerning the possible different relative utilisation of “strong-case” vitamins, and “weak-case” vitamins, as between group members, or categories of group members. Counsel for the applicants suggested that his instructions were that the problem existed in the abstract only. His Honour is not persuaded that it is satisfactory to leave the matter there, and is prepared to provide the applicants with an opportunity to file further evidence on the subject, on or before 29 September 2006. If the applicants decide to follow that course, they should, if possible, ensure that that evidence deals with the question whether, during the claim period, there was in fact any, and if so what, difference, as between any, and if so what, group members, or categories of group members, in the relative values of their purchases of different vitamins from the Australian respondents and/or in the relative contribution, to the price of premix or feed, of the different vitamins. The applicants may, if they choose, accompany any such evidence with appropriate supplementary written submissions.”

In reply to this (and another) letter, the applicants’ solicitors filed further affidavit material, and written submissions by counsel, on 29 September 2006.

68                  The first new affidavit was that of Kenneth Ian Bruerton, an animal nutritionist of extensive experience engaged as a consultant to the third applicant. Over 27 years’ experience, he has acquired extensive knowledge of various pre-mix specifications, including the volume and value of vitamin components in pre-mixes used throughout the livestock industry in Australia. According to Mr Bruerton’s evidence –

·                    Most pre-mixes for ruminants contain vitamins A, D and E only. Pre-mixes specifically for beef animals usually also contain vitamin B1. The remaining B vitamins are not routinely added to these products.

·                    There are occasions when a particular vitamin is excluded from a pre-mix formulation; eg B1 is sometimes excluded from a pig finisher pre-mix, from a broiler finisher pre-mix or from a layer pre-mix. Vitamin A is sometimes not included in a particular pre-mix, generally when the pre-mix is obtained not as a complete pre-mix but as a performance enhancing supplement, and when vitamin A is thus not included, it will almost always be added back by the client by other means.

·                    Vitamin C is usually used only for animals under stress, or during the initial stages of growth.

·                    It is rare for pre-mixes to contain only one type of vitamin, and extremely rare for pre-mixes not to contain either vitamin A or vitamin E.

Treating vitamins A and E as those with respect to which the applicants’ case might be considered to be stronger, it would seem that one or other, and usually both, of these vitamins is present in almost all the pre-mixes used in the various livestock industry supply chains referred to in the evidence. Treating the other vitamins as those for which the applicants’ case is not self-evidently strong, the pattern of the usage of those vitamins is not evidently skewed towards a particular livestock supply chain, or particular categories of group members. From the evidence recently filed, including the confidential material included in that evidence, I am satisfied that, in these livestock supply chains, vitamins other than A and E generally tend, in volume and value terms, to be the minor component of the vitamin ingredients in the pre-mix; although, as Mr Bruerton stated, those vitamins, albeit used in small proportions, are vital to the overall effectiveness of the pre-mix to which they are added.

69                  In the light of the evidence and submissions recently filed, I am satisfied that there is not such a significant disparity between the utilisation of strong case and weak case vitamins as between the different livestock supply chains to regard this settlement as other than a fair and reasonable one on that ground.

70                  An affidavit was also provided by Dean Twist, Commercial Manager of the Pet Foods Division of Mars Inc, which trades as ‘Masterfoods’. He stated that, in the vast majority of cases, the pet foods manufactured by Masterfoods contain a range of added vitamins. The largest usage – both in volume and in cost – is of vitamins A and E, but a number of other vitamins are also used when appropriate. Almost all of the Masterfoods dry pet food products contain added vitamins A and E, and almost all of the wet pet food products contain added vitamin E. In each case, the vitamin concerned is added in much higher concentrations than the other vitamins with which this proceeding is concerned. In the circumstances, I am inclined to think that the conclusion I reached above with respect to the livestock supply chains is also apposite with respect to the pet food industry sector.

71                  With respect to the veterinary and/or performance enhancing supplement industry supply chain, Alan John Mains provided an affidavit affirmed on 26 September 2006. He is the managing director and proprietor of Myca Animal Health Pty Ltd, a group member in the proceeding. He said that, during the 1990’s, his company produced (and continues to produce) various supplements, including a standard vitamin B combination (containing a number of the B vitamins and vitamin C), a standard vitamin A and D combination, and a single vitamin product in respect of each of vitamin B1, vitamin E and vitamin C. I gather from the evidence of Mr Mains that, in the sector with which his company is concerned, there was nothing like the same emphasis upon the regular usage of vitamins A and E as in the other sectors to which I have referred. As against this, as submitted by counsel for the applicants, the number and value of the claims from this latter sector appear to constitute a very small percentage of the whole.

72                  In their written submission on this aspect, counsel for the applicants contended that it was neither feasible nor appropriate for the applicants to have prepared the distribution scheme on a basis which required the vitamin usage of the different group members to be disaggregated by reference to the applicants’ advisers’ assessment of what were the stronger case vitamins, and the weaker case vitamins. I accept that submission, but only because I also accept their submission that the relative utilisation of stronger case vitamins is not obviously skewed towards particular group members, or categories of group members. The stronger case vitamins appear to be widely used by almost all group members, and, with one exception, there is no category of group members where the utilisation of weaker case vitamins is a typically large in relative terms. The one exception is, as I have mentioned, the veterinary and/or performance enhancing supplement industry supply chain, and it might perhaps be said, in a perfect world, that group members in that supply chain stand to benefit from a settlement which is somewhat more favourable than they might have had the prospect of achieving if left to their own devices. The relative disadvantage which might thereby be felt by the other group members is, however, spread very thinly across the ranks of the latter, because of the small numbers of former. Counsel for the applicants submitted, in effect, that group members as a whole would regard this as a very small price to pay for the benefit of achieving a settlement in the proceeding.

73                  I think that the submissions of counsel in this respect are sound, and are justified in the light of the evidence which has been most recently filed. Although I am obliged to recognise that the relative utilisation of strong case, and of weak case, vitamins across all group members, and categories of group members is not uniform, the variation which exists appears to be relatively minor, and certainly not such as ought to preclude the court from considering the settlement as a whole to be fair and reasonable in the interests of all group members, if otherwise such a conclusion were appropriate.

compensation and reimbursement payments

74                  As I have indicated above, before any part of the settlement sum is available for distribution to group members, an amount is to be deducted therefrom by way of ‘reimbursement payments and out-of-pocket expenses’. These payments are in fact by way of compensation for the time expended by the applicants and nominated group members (‘the claimants’) in the preparation of the evidence in the case in the interests of group members as a whole, and by way of reimbursement of the out-of-pocket expenses which two of the claimants have incurred in relation to that preparation. These allowances have nothing to do with any amount which a successful party in court proceedings might be able to recover from the unsuccessful party: they represent neither damages nor a recognised category of recoverable costs. They are payments which arise wholly on the applicants’ side of the record, as it were, and conceptually reflect an arrangement by which multiple (directly participating) applicants in a proceeding might, as between themselves, compensate or reimburse those of their number who have made a particular contribution, in time or outlay, to getting the case up for presentation in court.

75                  I was informed by the applicants that, if such payments are approved as part of the settlement scheme in this proceeding, it will be the first occasion when that approach has been taken in an Australian court. It is a matter, therefore, which I must approach with great care, notwithstanding that the sums involved appear to be fairly modest in the context of the settlement as whole. There are, in addition, other reasons why the court should pause before approving payments of this kind. First, although the claimants are not fiduciaries apropos the generality of group members, they have chosen to remunerate themselves, albeit modestly, ahead of the distribution to group members of a sum which has been calculated by reference to the estimated loss and damage suffered by the latter. The sensitivity of the position in which the claimants find themselves in these circumstances is obvious. Secondly, although courts have long-established procedures, and scales, by reference to which to assess the propriety and quantification of parties’ claims to be compensated for the legal costs and expenses made necessary by successful litigation, the same cannot be said of the payments with which I am presently concerned. I am denied the advantage of court scales and taxation procedures. I have only the claimants’ own evidence on the matter of the reasonableness of the payments, and of the necessity for the work and outlays to which they relate. Thirdly, the court is denied the benefit of the contribution of a contradictor in relation to these payments. Although the same may be said of the settlement distribution scheme as a whole, the problem is particularly acute where the court has only the say-so of those who claim these benefits with respect, for example, to the time occupied on the work to which their claims relate and the hourly rates by reference to which particular categories of personnel should be compensated.

76                  Notwithstanding these reservations, I consider it prima facie reasonable that particular parties who have sacrificed valuable time and incurred expenses in the interests of prosecuting this proceeding on behalf of group members as a whole should be able to look to the corpus of the settlement sum for some degree of compensation and reimbursement. More importantly, perhaps, I would hold that group members who have benefited from the proceeding could not be heard to deny the reasonableness of such a proposition. As the applicants pointed out in their submission, payments of this kind occur frequently in class actions in the United States. There, both the philosophy behind, and the calculation of, the payments concerned are a little different from those relied upon by the applicants in this proceeding. The payments are commonly referred to as ‘incentive payments’, and take account not only of the time and expense involved getting up a case for trial, but also of the exposure and risks to which those who choose to be lead plaintiffs in class actions necessarily subject themselves. There is also on occasion, I detect, a suggestion that, as a matter of policy, there should be some encouragement for people to assume the role of lead plaintiffs, without whom the particular kind of generalised justice embodied in such proceedings could not be achieved.

77                  The evidence discloses the means by which the claims for compensation have been calculated. The time spent on particular tasks, or attendances, was identified, and an hourly rate was then applied to that time. The hourly rate differed according, it appears, to the supposed value of the time of the person who performed the task, or gave the attendance. The applicants’ solicitors suggested that persons who were company directors or senior managers might reckon their time to be worth $350 an hour, that persons in professional or senior technical positions, or the like, might reckon their time to be worth $200 an hour, and that persons performing clerical or similar functions might reckon their time to be worth $100 an hour. There was no explanation as to why these particular rates should be regarded as appropriate for the three identified levels of personal input. These hourly rates were not, however, utilised by all of the claimants: in some cases, the claimants used what they considered to be reasonable hourly rates for their own time.

78                  I set out below a table which shows, for each claimant, the total sum calculated by means of the process described in the previous paragraph, and the sum actually claimed by way of compensation for time input.

	Calculated Payment	Claimed Payment
	$	$
Darwalla Milling Co P/L	49,675.00	49,675.00
Lienert Australia P/L	266,014.67	80,000.00
BEC Feed Solutions P/L	289,674.00	80,000.00
Agribusiness Products P/L	289,155.00	50,000.00
Janos Hoey P/L	22,020.00	22,020.00
Performance Feeds P/L	5,415.00	5,415.00
Rabar P/L	5,785.33	5,785.33

 

79                  As will be seen, in the case of each of three of the claimants, the value of their calculated claims are well in excess of $200,000.00. Apparently appreciating the sensitivity of the subject, and noting that, where incentive payments have been allowed in the United States, allowances of this order were not generally to be found, the claimants concerned reduced their claims very considerably.

80                  Notwithstanding those reductions, there are two aspects of these claims that have given me concern. The first arises from what I would call a general cautionary feeling that one has about the basis of calculation of the claims. At the point of quantifying the amount of time spent by each of the claimants, the court has nothing but the say-so of the claimant concerned. There is no audit of the process or the result, and the applicants’ solicitors are in no position to certify as to the extent or nature of the attendances upon which the claims are based. Likewise, at the point of placing a money value on each hour, I have no reason to suppose that the standard rates supplied by the applicants’ solicitors are appropriate (apart, that is, from the claimants’ own say-so). As I have mentioned, there are no scales or taxation procedures. At both of these points, although the calculations are supported by spreadsheet records which look detailed enough as far as they go, there is very considerable generality in the way that some of the items are identified. If there is a risk that the real value of fair and reasonable compensation claims might be something less than stated in the spreadsheets, I am inclined to think that the claimants themselves should wear that risk. In other words, given that those who maintained the records on which the claims are based and then made the claims are the same parties as would stand to benefit from the granting of the claims, I consider that the court should be astute to identify any possibility of over-estimation and to make an appropriate allowance therefor.

81                  The second aspect of concern relates to a matter which I raised with the applicants by correspondence. After I reserved judgment, it appeared to me that the evidence upon which the applicants relied to have the court approve so much of the settlement distribution scheme as involved these compensation and reimbursement payments did not sufficiently discriminate between time and expenditure which related to the organisation and preparation of the claimants’ own cases, on the one hand, and time and expenditure which had a truly representative purpose, on the other hand. I took then, and I still take, the view that it would only be time and expenditure of the latter category for which a reasonable case for compensation or reimbursement out of the corpus of the settlement sum might reasonably be made. As a result, on 13 September 2006, my associate wrote to the applicants’ solicitors in the following terms:

“On the evidence and submissions in the proceeding to date, his Honour is provisionally of the view that it would be fair and reasonable to allow an appropriate sum to be carved out of what would otherwise be available for distribution amongst group members –

·          to compensate particular group members for the time and effort actually expended by them in pursuing the proceeding on behalf of group members as a whole; and

·          to reimburse particular group members such out of pocket expenses as have been reasonably and necessarily incurred by them in pursuing the proceeding on behalf of group members as a whole.

However, on the present state of the evidence, his Honour is not satisfied that the sums claimed in section 7 of the Settlement Distribution Scheme are confined to compensable items, and expenses, which meet the above requirements. Specifically, his Honour is not satisfied that the evidence sufficiently discriminates between work, or expenses, which were genuinely attributable to a representative purpose, on the one hand, and general attendance to the needs of the party’s own interests in the litigation, on the other hand. There is a view, which his Honour provisionally considers to be sound, that no beneficiary of a section 7 payment should thereby derive any compensation or reimbursement in connection with any work, effort or expense required for the establishment of the beneficiary’s own claim, such as would, in the case of ordinary group members, have to be dealt with under section 4 of the Scheme. That there might be a risk of section 7 having such an effect should, perhaps, be positively excluded by evidence which is much more specific, and more directed to this matter, than is presently the case.

Entries in the spreadsheets exhibited to the affidavits of the group members covered by section 7 of the Scheme which appear to have a potential for ambiguity in the sense referred to above include the following:

·          preparing data and information regarding vitamins purchases and loss;

·          reviewing and retrieving vitamins invoices [and similar];

·          directors’ meeting [ie of the group member];

·          meetings, phone calls etc with “own solicitor”;

·          search archives for relevant creditor invoices;

·          “retrieving documents”;

·          “collecting information”;

·          locating and sorting files etc.

In addition, his Honour notes that some entries in the spreadsheets are so broad and uninformative as to make any judgment about the legitimacy of the claims to which they relate impossible. Such entries include:

·          “peruse correspondence” [and similar];

·          “to June 2001 technical assistant” [amounting to 80 hours];

·          “review documents”;

·          “peruse financial review article on vitamins court case”;

·          “peruse article in Australian Pork Newspaper”.

Regarding the disbursement by way of payment to Chotals, his Honour notes that the invoice does not appear to give specific attention to whether each item of work by that firm of accountants had a representative purpose, or was predominantly concerned with advancing the case of the particular group member. In this respect, it may be noted that many of the attendances for which Chotals have charged a fee are marked “Attendance at Board Meeting”, and similar.

His Honour has asked me to bring the above concerns to your attention. His provisional view is that, unless those concerns are satisfactorily addressed, the applicants should not assume that the settlement will be approved. If you desire to file further affidavit evidence and/or written submissions, you should do so by 6 October 2006. If you wish to have the matter listed again in court, please telephone me for the purposes of fixing a suitable date.”

This correspondence led to the applicants filing a further affidavit, and making further written submissions, on 29 September 2006.

82                  Based on the affidavit of the applicants’ solicitor affirmed on 29 September 2006, counsel for the applicants identified the following categories of work with respect to which claims were made under this section of the settlement scheme:

(a)               ordinary attendances associated with litigation, such as giving instructions, reviewing correspondence, attending legal representatives and attending court or similar personal attendances;

(b)               time spent collecting information about production processes and costs, for the purposes of estimating pass-through and for the lost market share claims; and

(c)               time spent collecting data on expenditure on class vitamin products.

Counsel submitted that no group member other than the claimants was required, or will now be required, to spend significant time on the work and attendances referred to in categories (a) and (b). As a result of the settlement, the generality of group members will be entitled to participate in the distribution of the settlement sum upon proof of various details relating to their expenditure on class vitamins. In other words, according to counsel, it should only be in relation to work and attendances covered by category (c) that the claimants should be regarded as having derived an incidental benefit which will be of utility in the establishment of their own claims by reason of their involvement in getting up the case for the benefit of group members as a whole.

83                  The applicants’ solicitors have further reviewed the particulars of the attendances undertaken by the claimants, for the purpose of identifying those which relate to the collection of pricing data (mainly in the form of invoices) by them. These attendances were covered by the following items in the list contained in my associate’s letter:

·                    reviewing and retrieving vitamins invoices [and similar];

·                    ‘retrieving documents’;

·                    ‘collecting information’;

·                    locating and sorting files etc;

·                    ‘to June 2001 technical assistant’ [amounting to 80 hours].

Counsel submitted that it was, arguably, work and attendances of this kind that would be covered by category (c) in their break-up to which I have referred. The applicants’ solicitors undertook an analysis of the time records upon which the claimants, relied, whereby they calculated the total time spent by each of them collecting vitamin expenditure data of the kind to which I have referred and which, counsel submitted, would come within category (c). They also calculated the money value of that time. They produced the following table:

“(a) BEC Feed Solutions Pty Ltd – 193 hours or $41,442.50 (14% of the total value of all time spent by BEC);

(b)          Agribusiness Pty Ltd – 601 hours or $108,050 (37% of the total value of all time spent by Agribusiness);

(c)           Lienert Australia Pty Ltd – 79 hours or $13,566.67 (5% of the total value of all time spent by Lienert);

(d)          Rabar Pty Ltd – 10 hours or $1,133.33 (20% of the total value of all time spent by Rabar);

(e)           Darwalla Milling Co Pty Ltd – 59 hours or $17,650 (36% of the total value of all time spent by Darwalla);

(f)            Janos Hoey Pty Ltd – 57 hours or $7,200 (33% of the total value of all time spent by Janos Hoey);and

(g)          Performance Feeds Pty Ltd – 16 hours of $480 (10% of the total value of all time spent by Performance Feeds).”

84                  Counsel submitted that, at most, the claims covered by this section of the distribution scheme might be discounted by the sums referred to in the previous paragraph, representing the extent to which the relevant claims were referrable to attendances of a kind covered by their category (c). They submitted, however, that no such discounting, alternatively that something less than full discounting, should be undertaken for the following reasons. First, although the collection of pricing data may have the incidental benefit of assisting a particular claimant to establish the extent of its own expenditure on class items, that was not the purpose for which the data was collected in the first place. The data was collected, they submitted, to establish a solid factual and theoretical basis upon which the applicants’ cause of action under s 45 of the Trade Practices Act might be made good. Secondly, they submitted, in effect, that I should recognise the risks which the claimants took when they committed time and resources to the preparation of this proceeding, particularly in the early years when there was no indication that a settlement might be forthcoming. They effectively asked me to recognise, as a matter of policy, a distinction between applicants and group members who are prepared to make an early commitment of this kind, on the one hand, and the generality of group members who do not, so that payments of the kind presently under consideration should be seen as a kind of ‘incentive’ for litigants to adopt the former role.

85                  The question is not whether it would be fair and reasonable, in some absolute sense, for the claimants to be compensated as now proposed: the question is whether it would be fair and reasonable in the interests of group members as a whole for those persons to be so compensated. In the context of the present discussion, that question should not, I consider, be answered by reference only to the purpose for which particular time was devoted to the case in the course of preparation. If the result of work done in that time was in fact to produce data which will assist a claimant to establish its own claim in the settlement, I consider that it should not be heard to say that it should be compensated therefor from the fund otherwise available for distribution to group members as a whole. Put differently, if particular work or attendances have a dual purpose – one representative and one individual – I do not consider that the court, acting on the submissions only of the persons who would stand to benefit, should hold it to be fair and reasonable to classify the work and attendances as representative only for the purpose of obliging group members who have not been heard to forego some part of the settlement sum which would otherwise be available to them.

86                  As to the policy considerations urged by counsel, I hear, in their submissions, an echo of the policy underlying the allowance of incentive payments in the United States to which I have referred above. Counsel suggested that a similar policy objective should be perceived in the provisions of Pt IVA of the Federal Court Act. Although I cannot for my own part, perceive such a policy in those provisions, and although, sitting as a single Judge, I would be reluctant to introduce, for the first time, a policy principle that lead applicants should be able to carve-out some part of the settlement sum to compensate them for the risks and exposures to which they have been subject in the litigation, and to provide some kind of incentive for future litigants, I see no need to decide the present question by reference to either such consideration. The basis of the claim presently before me is that the claimants should be compensated for the time which they have devoted to getting up the case for trial. If a particular allowance, by way of carve-out from the settlement sum, is not to be regarded as fair or reasonable upon the basis which underlies its calculation, I do not consider it would be appropriate, in effect, to rationalise the approval of such an allowance upon some broader policy basis. If there comes a day when the court recognises, and is prepared to approve some kind of reward for, the risks and exposures to which lead applicants subject themselves in proceedings under Pt IVA, that step will be taken, I consider, consciously, and deliberately by reference to clearly identified criteria, and involving its own articulated basis of quantification.

87                  If they stood alone, I would not be prepared to approve payments for work and attendances of the kind covered by counsel’s category (c), where that would involve a reduction in the corpus of the settlement sum available to group members as a whole. In the present case, there are, however, other considerations, to which I shall presently turn.

88                  Regarding the work and attendances referred to in counsel’s categories (a) and (b), I am prepared to accept that, on the evidence filed, that work, and those attendances, have a purpose which is very substantially representative, and do not involve, as a incidental benefit, the establishment of the claim of a particular claimant of its own entitlement to a share of the settlement sum. Whether compensation from the settlement sum for this kind of input would be fair and reasonable might be tested by considering first a case which was not a representative proceeding, but which involved multiple, named, applicants. If some only of those applicants performed work, in the interests of all, of the kind covered by counsel’s categories (a) and (b), is it likely that a meeting of all applicants, acting fairly and reasonably, would vote to compensate the applicants who had done the work? In my estimation, such a question could only be answered in the affirmative. It is, of course, conceivable that some applicants might take the opportunistic course of keeping their hands out of their wallets once the work had been done, and the benefits derived. There may, of course, also be questions as to the valuation of the time and work which had been devoted to the case (a matter to which I shall turn presently). However, granted that the compensation payments involved would have to be reasonable in all the circumstances, I do not believe that, in the hypothetical situation contemplated, any of the ‘passive’ applicants would be acting fairly or reasonably to deny some kind of compensation to those who had done the work. The present case is, of course, that hypothetical case writ large. I must ask myself, in effect, whether it would be fair and reasonable for one of the ‘passive’ group members in the present case to deny the claimants an appropriately but conservatively measured degree of compensation for their time input. I do not believe so.

89                  Turning to the claims for out-of-pocket expenses, there are two claimants who make such claims. The details are set out in the table below:

Claimant	Claimed Payment
	$
Lienert Australia P/L	1,483
BEC Feed Solutions P/L	123,982

From the evidence which has been filed, and subject to the matter mentioned in the next paragraph, I am satisfied that these claims are with respect to actual expenses reasonably incurred by the claimants concerned in prosecuting the proceeding in the interests of group members as a whole.

90                  Of the expenses incurred by BEC Feed Solutions Pty Ltd (the renamed third applicant), there is a single item in the sum of $102,044.99. This was an invoice dated 22 June 2006 from their accountants, referred to in the penultimate paragraph of my associate’s letter set out in par 81 above. Although rendered by way of an invoice from a third party supplier, many of the sums there referred to related to attendances by people in the preparation of the case. The generality of the terms in which the work there done is described – eg. ‘Attendance at Board Meeting’ - necessitates a cautious approach on my part to the question whether this substantial disbursement should be allowed. As a result of my associate’s letter, the applicants’ solicitor, in her recent affidavit, provided more detail about these attendances, the result of which is that I am satisfied that they had a substantially representative purpose. The appropriateness of quantification, however, remains a concern, and I propose to approach that aspect as part of my overall application of the kind of cautionary factor to which I earlier referred.

91                  If the claimant’s calculated nominal sums for compensation and reimbursement are taken together, if the category (c) amounts are deducted, and if the result is compared with the sums in fact claimed, the result is as follows:

	Compensation (1) $	Reimbursement (2) $	Total (3) $	Category (c) (4) $	Net Total (5) $	Sums Claimed (6) $
Darwalla Milling Co P/L	49,675		49,675	17,650	32,025	49,675
Lienert Australia P/L	266,014	1,483	267,497	13,566	253,931	81,483
BEC Feed Solutions P/L	289,674	123,982	413,656	41,442	372,214	203,982
Agribusiness Products P/L	289,155		289,155	108,050	181,105	50,000
Janos Hoey P/L	22,020		22,020	7,200	14,820	22,020
Performance Feeds P/L	5,415		5,415	480	4,935	5,415
Rabar P/L	5,785		5,785	1,133	4,652	5,785
Total	$927,738	$125,465	$1,053,203	$189,521	$863,682	$418,360

In other words, the sum in fact being claimed by the claimants ($418,360) is slightly less than half the sum constituted by the nominal value of their claims (including claims for reimbursement), net of the so-called category (c) amounts ($863,682).

92                  Having reached this point, I am prepared to approach the claims on the basis that a discount of slightly over 50% has been applied by way of a cautionary factor of the kind I have mentioned above. I realise, of course, that the gross value of the claims was not constructed to yield this outcome, but it seems to be the effect of it. It has been brought about, quite evidently, by the preparedness of three of the claimants to apply very substantial discounts to the nominal value of their claims. It might, perhaps, be said that the nominal value of the other claimants’ claims remains unaffected either by the removal of category (c) items or by the application of a cautionary factor. So it does, but this is a matter as between the applicants and known, participating, group members. I do not perceive it to be any part of the court’s role to protect the interests of any of them against claims made by the others. They must all be taken to have expressly agreed to the distribution as between themselves of the global sum which will be carved-out of the settlement sum for these purposes. The court’s chief concern is with interests of the generality of the (non-participating) group members, and I am satisfied that they would be contributing less than half of the nominal value of the claimants’ claims, net of category (c) amounts.

93                  I consider that the implicit cautionary discount referred to above is, if anything, more than appropriate in the circumstances. I am prepared, therefore, to treat the compensation and reimbursement payments for which section 7 of the distribution scheme provides as fair and reasonable in the interests of group members as a whole and in the context of the settlement as a whole.

the administration of the distribution scheme

94                  The settlement scheme gives group members 60 days within which to lodge claims with the applicants’ solicitors, following notification of the settlement pursuant to an order of the court. Claims must be made in accordance with the proof of claim pro-forma set out in Schedule A to the scheme. The proof requirements imposed on group members by Schedule A are rigorous, and may be thought demanding. It is, however, reasonable that the applicants should impose those requirements. This is the settlement of what is essentially a commercial claim, and the group members are all trading enterprises. Were the applicants to permit the making of payments by reference to less rigorous proofs than are proposed, there would be an appreciable risk of the participation in the receipt of benefits by businesses which did not qualify under the settlement scheme. It is, of course, of the utmost importance that the workings of the settlement should be such as to maximise the opportunity for group members who have in fact suffered loss and damage falling within the parameters of the scheme to participate in the distribution of the settlement sum. I consider it no less important to ensure that the settlement sum is not dissipated to persons or businesses who do not so qualify. In the circumstances, I regard the provisions of section 4 of the settlement scheme as fair and reasonable.

95                  The settlement scheme also provides for the review, by ‘independent counsel’, of the primary assessments made by the applicants’ solicitors. The costs of any review are to be borne by the group member who seeks the review. These and other provisions of section 9 of the settlement scheme are, in my assessment, fair and reasonable.

96                  The settlement scheme reserves a limited role to the court. This is consistent with the fact that the proceeding itself will remain on foot until the distribution of the settlement sum has been completed in accordance with the scheme. For the court to have the kind of role proposed (such as dealing with issues of law which arise out of assessment reviews), it is necessary that there be a juridical basis for the court’s intervention. Merely to have approved the distribution of an agreed sum as between group members, according to the settlement scheme, would not, in my view, provide such a basis. The applicants propose that the court should, having approved the settlement, make orders that the settlement fund be distributed, and administered generally, in accordance with the settlement scheme. They submitted that such an order might be made under s 33V(2) of the Federal Court Act, 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.’

I agree that this subsection would provide the court with power to make an order of the kind proposed. I consider that the limited role which is proposed for the court in the settlement scheme is appropriate in the context of the administration of the scheme as a whole. Although the distribution of moneys to group members under the settlement scheme will finally settle the claims of those members which were raised in the proceeding, the orders under s 33V(2) should, in my view, be regarded as interlocutory, since, as between the applicants and the respondents, they do not dispose of the proceeding.

the applicants’ legal costs

97                  A significant part of the settlement is the $10.5m representing the applicants’ legal costs and disbursements. Within 7 days of the date of approval by the court of the settlement, that sum, together with any interest which has accrued thereon, will be paid to the applicants’ solicitors. Those solicitors do not propose to charge any group member individual legal costs, whether for the past conduct of the proceeding or for the future administration of claims under the settlement scheme. As I have said, any disbursements required in connection with the settlement approval process itself will be met by the interest which has been earned on the settlement sum since 13 January 2006. The solicitors will not charge any further professional costs beyond the $10.5m, and the interest thereon, to which I have referred.

98                  Joseph Anthony Mazzeo is a solicitor and legal costs consultant who has practised on his own account exclusively in the area of legal costs consultancy since 1992. He has prepared, or supervised the preparation of, more than 5,000 bills of costs and detailed assessments of costs under High Court, Federal Court, Supreme Court and County Court scales. He is regularly retained by plaintiff and defendant lawyers to advise and appear in relation to legal costs disputes. He claims an experience in the costing of large and complex litigation, including class action proceedings in this court. In late December 2005, he was engaged by the applicants’ solicitors to undertake a detailed review of their file, to assess their costs and disbursements, and to provide his professional opinion as to whether the sum of $10.5m, plus any interest earned on that amount after 13 January 2006, was fair and reasonable. Mr Mazzeo carefully reviewed and considered the files and papers of the applicants’ solicitors in relation to this proceeding. In an affidavit sworn on 15 June 2006, he said that the material which he reviewed included the following:

“- 290 Lever arch folders of correspondence each containing approx 500 pages;

- 110 Lever arch folders of court documents together with 44 bound volumes of court documents;

- 5 Lever arch folders of transcripts in relation to 30 separate hearings;

- 1 Lever arch folder of court decisions and orders;

- 48 Lever arch folders of documents supplied by the Respondents containing product information and documents obtained under subpoena;

- 152 Lever arch folders and 15 bound volumes of briefs to Counsel;

- 82 Lever arch folders of documentation and invoices provided by the Applicants together with 20 manila folders of invoices;

- 37 Lever arch folders relating to the European criminal prosecutions, the USA, Canadian, and other global civil litigation;

- 17 Lever arch folders relating to administration of the proceedings and disbursements;

- 50 Lever arch folders relating to materials proving loss, research, discovery, memoranda and advices;

- 5 Lever arch folders of copy accounts and counsels fees slips; and

- 2 Lever arch folders containing the printout of fees and disbursements.”

 

Mr Mazzeo said that the applicants’ solicitors provided him with a detailed printout of the work performed until 15 May 2006, and of disbursements incurred until 15 June 2006, which printout came to 692 pages of closely typed entries. He carefully reviewed the printout and compared it to the solicitors’ file. He reached his own opinion about the fees and disbursements which were reasonably chargeable.

99                  Mr Mazzeo exhibited copies of the retainer agreement entered into between the solicitor and each of the applicants in the proceeding. A significant feature of each such agreement is that legal fees would be paid only if the applicants’ claim were successful. The agreement provided that, in the event of a successful outcome, the applicants’ bill for legal costs would include a series of components, one of which was ‘success fee’ defined as follows:

‘Success Fee: Once the amounts in 4.1-4.5 have been calculated, we may then add 25% of that figure to the total. This is a success fee which we may add pursuant to the Legal Practice Act 1996 (Vic) for conducting this case on a No Win/No Charge basis. This success fee compensates us for the risk associated in pursuing the Class Action in this way. This is not 25% of the judgment or settlement of the Class Action. A success fee will not be added in the event that a bill is rendered pursuant to termination of this Agreement under Clause C7 or G1.’

A ‘successful outcome’ was defined so as to include, relevantly for present purposes, money recovered by way of settlement or legal fees or disbursements. The agreement provided that, in the event of a successful outcome, the applicants would not be required to pay costs from their own money.

100               In a further affidavit sworn on 24 August 2006, Mr Mazzeo assessed the applicants’ total professional costs and disbursements, to 21 August 2006, as follows:

Amount (inclusive of GST)
Professional Fees	6,468,993.25
Uplift fee on Professional Fees	1,617,248.31
Interest calculated on Professional Fees to 15/12/05	1,308,711.93
Paid Disbursements	2,324,297.63
Interest calculated on Disbursements to 15/12/05	519,009.43
Unpaid Disbursements	1,023,575.13
Total	$13,261,835.68

Mr Mazzeo expressed the opinion, in his affidavit, that each of the items set out above was reasonable, including the 25% uplift to which, in his opinion, the solicitors were entitled pursuant to their agreements. He mentioned a number of other matters in his affidavit, including various respects in which the solicitors had made ‘concessions’, in the sense of forgoing sums which, under the agreement with the applicants, they would have been entitled to claim as professional fees and disbursements. Finally, he concluded as follows:

‘The Respondents have agreed to pay, the Applicants have agreed to accept, and I am informed by Kim Parker and believe MBC propose to charge the following legal costs in relation to this proceeding:

(a)               $10.5 million for professional fees and disbursements up to and including the date of approval of the settlement (plus accrued interest on the Settlement Costs which to 21 August 2006 is $359,589.59, not including those disbursements incurred in connection with obtaining Court approval of the settlement;

(b)               $357,456.83 for disbursements incurred and received in connection with obtaining Court approval of the settlement from 16 December 2005 to 24 August 2006, which are to be paid from interest on the Settlement Sum. Disbursements of this type for which invoices are received subsequent to the date of this affidavit will be the subject of later applications to the Court for approval for payment; and

(c)                Professional fees and disbursements incurred by MBC in connection with the administration of the Settlement Scheme at the hourly rates which are set out in exhibit “JAM-2” in the First Mazzeo Affidavit. Such fees and disbursements, which are to be paid from interest on the Settlement Sum, will be the subject of later applications to the Court for approval for payment.’

101               On occasions in the past, settlements have been criticised where they involve a global sum out of which an undisclosed contribution will be made by the successful parties to their own legal representatives. Such a criticism cannot be directed at the present settlement. The amount to be paid to the applicants’ solicitors by way of costs is both transparent and explicit. It has been announced in the notice of settlement published pursuant to s 33X of the Federal Court Act. Equally important is the circumstance that the applicants’ proposition that the settlement sum is fair and reasonable in the interests of group members as a whole stands or falls by reference only to the settlement sum of $30.5m, and does not to any extent rely upon the prospect of any part of moneys to be paid by way of costs being available to group members.

102               As to the costs figure of $10.5m itself, as appears from what I have set out above, the applicants have sought to justify it in a thorough and professional way, and have done so through the affidavit of an independent and experienced costs consultant. Unlike the compensation and reimbursement payments to which I have referred above, I can be confident that Mr Mazzeo has undertaken his task according to long-established practices and parameters by which disputes as to solicitors’ entitlements to their costs are routinely settled. Because the present sum will represent a payment by the applicants to their own solicitors, it is appropriate at Mr Mazzeo undertook his estimations as between solicitor and a client. In the circumstances, I have no reason to go behind his opinion that the costs figure claimed by the applicants is fair and reasonable.

conclusion

103               For the above reasons I propose to approve the settlement of this proceeding in accordance with the heads of agreement set out in Schedule I and the settlement distribution scheme set out in Schedule II. I shall order, pursuant to s 33V(2) and s 33ZF(1) of the Federal Court Act, that the settlement sum referred to in cl 1.1(a) of the heads of agreement be distributed to group members, and that the settlement costs referred to in cl 1.1(b) of the heads of agreement be dealt with, in accordance with the heads of agreement and the settlement distribution scheme.

I certify that the preceding one hundred and three (103) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.

Associate:

Dated: 27 October 2006

Counsel for the Applicant:	G Pagone QC, G McArthur SC, & L Armstrong
Solicitor for the Applicant:	Maurice Blackburn Cashman
Counsel for the 1st, 2nd, 3rd & 4th Respondents:	P Jopling QC
Solicitor for the 1st, 2nd, 3rd & 4th Respondents:	Clayton Utz
Counsel for the 6th, 7th, 8th & 9th Respondents:	P Brereton
Solicitor for the 6th, 7th, 8th & 9th Respondents:	Baker & McKenzie
Counsel for the 10th, 11th, & 13th Respondents:	P Allaway
Solicitor for the 10th, 11th, & 13th Respondents:	Blake Dawson Waldron
Date of Hearing:	31 August 2006
Date of Judgment:	27 October 2006

SCHEDULE I

Darwalla Milling Company Pty Ltd & Ors v F. Hoffmann-La Roche Ltd & Ors

Federal Court of Australia No.V359 of 1999

Background

A.             The Parties are the parties to Federal Court of Australia (the “Court”) Proceedings No.V359 of 1999, a representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth) (the “Act”) in which the Applicants on their own behalf and on behalf of the group members (as defined in the Fifth Further Amended Statement of Claim, the “Group Members”) claim damages and other relief from the Roche Respondents, the Aventis Respondents and the BASF Respondents (collectively, the “Respondents”) on alleged causes of action as pleased in the Fifth Further Amended Statement of Claim filed (the “Proceedings”).

B.              The Parties have agreed to seek approval of a resolution of the Proceedings from the Federal Court under s 33V of the Act on the terms and conditions set out in this Agreement.

Operative provisions

1.               Settlement Payment

1.1                 The Parties agree to resolve the Proceedings on the following basis:

(a)                 payment by the Respondents to the Applicants and the Group Members in the sum of $A30.5 million (the “Settlement Sum”); and

(b)                 payment of the Applicants’ costs and disbursements of the Proceedings by the Respondents in the sum of $A10.5 million (the “Settlement Costs”),

(together, the “Settlement Payment”).

2.                    Releases

2.1                 Upon transfer of the Settlement Payment as provided for in clause 5.1, the Proceedings as between the Applicants, Group Members and Respondents, including the Applicants’ and Group Members’ claims for compensation, interest and legal and administrative costs and disbursements (present and future), are fully and finally settled. For the avoidance of doubt, and subject to any order of the Court, the Proceedings shall remain on foot to the extent necessary to implement the Settlement Scheme.

2.2                 Upon the transfer of the Settlement Payment as provided for in clause 5.1, the Applicants release the Respondents from any and all claims arising in relation to the matters which are now or were at any time the subject of the Proceedings. The Respondents thereafter have no liability in the Proceedings or for costs.

3.                   Payment into Settlement Reserve Fund

3.1                 On or before 13 January 2006 the Respondents will pay into an interest-bearing bank account to be called the Vitamins Settlement Reserve Fund (the “Settlement Reserve Fund”) the full amount of the Settlement Payment. The Settlement Reserve Fund shall be held in an interest-bearing account with the Commonwealth Bank of Australia and the solicitors for each Party shall be the signatories to the account.

4. Court approval

4.1 The settlement is subject to Court approval.

4.2 The Applicants will be responsible for tendering such expert or other evidence to the Court as may reasonably be required to facilitate court approval of the settlement. In support of that objective, each party will recommend approval of the settlement and will instruct its legal representatives to do all things consistent with the representatives’ professional obligations to enable the Applicants to obtain the Court’s approval of the settlement.

4.3 Subject to the Applicants providing an affidavit of an independent costs assessor verifying the Applicants’ legal and administrative costs and disbursements, the Respondents will consent to the Applicants’ application to the Court for the Settlement Costs to be paid in respect of legal and administrative costs and disbursements.

5. Payment into Settlement Distribution Fund

5.1 Upon approval by the Court f the settlement as provided for in this Heads of Agreement, the sum held in the Settlement Reserve Fund will be paid as follows:

(a) The Settlement Costs will be paid to the Applicants’ solicitors (“MBC”) together with any interest which accrues thereon while in the said Fund;

(b) The Settlement Sum together with any interest which accrues thereon while in the said Fund will be paid into an account to be established in accordance with the orders of the Court under section 33V of the Act (“Settlement Scheme”) to be called the Vitamins Settlement Distribution Fund (“Settlement Distribution Fund”).

5.2 Upon approval by the Court of the settlement as provided for in this Heads of Agreement, interest earned on the Settlement Sum in the Settlement Reserve Fund, or on the Settlement Distribution Fund, will to the extent necessary be applied to payment of:

(a) Disbursements incurred in connection with obtaining court approval of the settlement, including without limitation counsel’s and experts’ fees;

(b) Costs of administering the Settlement Scheme including without limitation notices to group members and costs of assessing and distributing group members’ (including for these purposes the Applicants’) share of the Settlement Sum. Such costs may arise as fees paid to an external administrator, or fees and disbursements of the Applicants’ solicitors as approved by the Court.

Any interest not required to be applied in accordance with this clause is part of the Settlement Distribution Fund and will be for distribution to the Applicants and Group Members.

5.3                In the event that the Court does not approve the settlement provided for in this Heads of Agreement by 31 December 2006, the moneys in the Settlement Reserve Fund shall be repaid to the Respondents together with all interest earned on the said fund. MBC shall do all things necessary to facilitate this payment.

5.4                Once the Settlement Payment and any interest is applied as set out in clauses 5.1 and 5.2 the Respondents will have no right, title or interest in or claim to any part of the Settlement Payment or interest (including any claims as Group Members). The Settlement Distribution Fund is non-reversionary to the Respondents.

6. Settlement Scheme

6.1 The Settlement Sum shall be applied and administered in accordance with the Settlement Scheme.

6.2 The Applicants will provide the Respondents with information and a reasonable opportunity to comment to the Applicants’ solicitors on the content of any proposed Settlement Scheme.

6.3 Except as provided for in clauses 3 and 5, no part of the Settlement Sum is to be paid to any person or entity other than an Applicant or Group Member.

6.4 The proposed Settlement Scheme will contain a dispute resolution mechanism.

7. No admissions, injunctions or declarations

7.1 The Respondents make no admissions beyond those specifically pleaded in their Defences and Points of Defence filed with the Court.

7.2 There will be no orders for relief except as are necessary to give effect to this Heads of Agreement and are otherwise agreed by all the Parties.

8. Provision of documents and information

8.1 The Australian Respondents will at their own expense provide (in such form as may reasonably be requested and to the extent it is reasonably practicable) such documents as may be requested by the Applicants’ solicitors to calculate the Applicants’ and Group Members’ entitlements in relation to the Settlement Sum.

8.2 The Respondents will have no liability in respect of the Australian documents, information or assistance provided.

9. Groups severally liable

9.1 Each corporate group of Respondents agrees to be severally liable for their individual contribution to the Settlement Payment. The Respondents have agreed these respective amounts under common interest privilege. Each Respondent group’s respective contribution to the Settlement Payment will remain subject to common interest privilege.

10. MBC covenant not to act

10.1 Except to the extent necessary to give effect to this Heads of Agreement, the Applicants’ solicitors, including the partners of MBC, covenant not to accept instructions or to provide any assistance to any other person in relation to any matters which are not or were at any time the subject of the Proceeding.

11. Confidentiality

11. Except to the extent necessary to give effect to this Agreement and in particular to enable the Applicants’ solicitors to communicate with their clients in relation to the settlement, the agreed amounts of the Settlement Payment and the terms and conditions of the settlement will remain without prejudice and confidential until an application for approval is made to the Court.

12. No further step in the Proceedings

12.1 The Parties agree that no further step is t be taken inter partes in the Proceedings other than those provided for in this Heads of Agreement.

13. No other orders for sots

13.1 Save in relation to the Settlement Costs there shall be no order for inter partes costs of or incidental to the application for Court approval of the settlement.

13.2 The Parties will jointly request that the Court upon approval of the settlement also vacate all costs orders made in the Proceedings. No Party will take any step to enforce any such costs order.

14. Entire agreement and legal effect

14.1 This Heads of Agreement constitutes the entire agreement of the Parties in relation to the matters the subject of this Agreement and supersedes the agreement made by the Parties on 15 December 2005.

14.2 This Heads of Agreement is legally binding on the Parties.

SCHEDULE II

Darwalla Milling Company Pty Ltd & Ors v F. Hoffmann-La Roche Ltd & Ors

Federal Court of Australia No.V359 of 1999

SETTLEMENT DISTRIBUTION SCHEME

1.                   OVERVIEW

1.1.               This settlement distribution scheme (“Settlement Scheme”) establishes a procedure for the distribution of funds received from the Respondents pursuant to a settlement of this proceeding approved by the Court (“Settlement”).

1.2.               In summary, the Settlement Scheme provides for:

(a)                 The division of the Settlement Distribution Fund into two funds;

(b)                 The administration of the claims;

(c)                 The deadline for submission of the Proofs of Claim;

(d)                 The types of claims able to be made under the Settlement Scheme;

(e)                 The assessment of claims made under the Settlement Scheme;

(f)                  The treatment of interest accruing on the settlement funds;

(g)                 Review of assessments of Claims;

(h)                 The timing of payments to Applicants and Group Members; and

(i)                   A disputes resolution process.

2.                   SETTLEMENT AMOUNT

Settlement Funds

2.1.               The Respondents have without admission paid the sum of $30.5m for distribution to the Group Members (“Settlement Sum”) and $10.5m representing the Applicants’ legal costs and disbursements (“Settlement Costs”), into an interest bearing account (the “Settlement Reserve Fund”). Representatives from the solicitors for each party to this proceeding are the signatories to the account.

2.2.               Within seven days of the date of approval by the Court of the Settlement, the sums held in the Settlement Reserve Fund will be paid as follows:

                   ii.                        The Settlement Sum, together with any interest which accrues thereon while in the Settlement Reserve Fund, will be paid into an interest-bearing account to which Bernard Murphy and Kim Parker of the Applicants’ solicitors, Maurice Blackburn Cashman Pty Ltd (“MBC”) are signatories (the “Settlement Distribution Fund”); and

                  iii.                        The Settlement Costs, together with any interest that accrues thereon while in the Settlement Reserve Fund, will be paid to MBC.

3.                   SETTLEMENT DISTRIBUTION FUND

Division Into Two Funds

3.1.               Upon approval of the Settlement, all payments under Clause 7 will be deducted from the Settlement Distribution Fund.

3.2.               The balance of the Settlement Distribution Fund will be divided as follows:

                 iv.                        7/30.5 of the Settlement Distribution Fund will be allocated to the “Loss of Market Share Fund”; and

                   v.                        23.5/30.5 of the Settlement Distribution Fund will be allocated to the “Overcharge Fund”.

4.                   CLAIMS ADMINISTRATION

4.1.               MBC will administer claims made under Clauses 5 and 6 of the Settlement Scheme. In doing so, MBC will act as lawyers working as the claims administrator with an obligation to do so properly on behalf of the Group Members as a whole, and not as the lawyer for any individual Group Member.

4.2.               Persons who are excluded from making a claim under the Settlement Scheme are:

                 vi.                        Respondents to this proceeding or their related bodies corporate (as defined in Section 50 of the Corporations Act 2001 (Cth)) (“Related Bodies Corporate”); and

                vii.                        Group Members to or for whom the Respondent or their Related Bodies Corporate have provided, other than under the Settlement Scheme, any payment, benefit or other advantage, including without limitation any discount, allowance, rebate, or credit in relation to goods acquired, on account of or in connection with any claim, or potential claim, arising out of the subject of this proceeding.

4.3.               Each Group Member making a claim under Clause 5 or 6 (“Claimant”) must submit a Proof of Claim to MBC in the form set out in Schedule A no later than 60 days following notification of the Settlement Scheme pursuant to an order of the Court approving Settlement. The Proof of Claim must be served on MBC in accordance with the notice provisions set out in Clause 12.

4.4.               A Group Member who does not submit a Proof of Claim within 60 days following notification pursuant to the order of the Court approving Settlement is not entitled to claim under the Settlement Scheme.

4.5.               Each Proof of Claim must be submitted with:

              viii.                        Such invoices, business, financial or other records, which will prove the claim made by the Claimant on the balance of probabilities. Where any such records do not exist, or are no longer in the possession of the Claimant, the Claimant must provide a written explanation in the Proof of Claim as to why they do not exist or are no longer in the possession of the Claimant; and

                  ix.                        A statutory declaration made by an authorised representative of the Claimant verifying the accuracy of the Proof of Claim and the information provided under Clause 4.5(a).

4.6.               If the information provided by the Claimant is insufficient to enable MBC to complete the claims assessment, MBC may require the Claimant to provide and verify additional information to support any claim or part thereof upon 21 days’ notice. If a Claimant does not provide sufficient information, the claim or part shall be disallowed, subject to any Review Assessment under Clause 9.

4.7.               In accordance with the methodology set out in Clauses 5 and 6, MBC will assess the validity and amount of each claim based on the Claimant’s Proof of Claim and any further information requested from the Claimants or any third party.

4.8.               Following an assessment of the claim by MBC under Clause 4.7, MBC will issue an assessment notice to the Claimant (“Assessment Notice”).

4.9.               Except as between Related Bodies Corporate, MBC shall keep strictly confidential, including from other Claimants, any information regarding the claims of the Claimants obtained in the claims administration process.

5.                   LOSS OF MARKET SHARE FUND

5.1.               A Group Member can only claim loss of profits arising from loss of market share under this Clause if it was a manufacturer of premix containing Class Vitamins (“Premix”) during the period 5 March 1992 to 28 February 1999 (“Claim Period”) or any part of the Claim Period.

5.2.               The Group Members described in Clause 5.1 and who comply with Clause 4.3, shall be referred to in the Settlement Scheme as “LMS Claimants”.

5.3.               Each LMS Claimant will be entitled to a payment from the Loss of Market Share Fund according to the following formula:

LMS Claimant’s entitlement ($)	=	Purchases of Class Vitamins during the Claim Period by LMS Claimant ($)	X	Loss of Market Share Fund ($)
		Purchases of Class Vitamins during the Claim Period by all LMS Claimants ($)

5.4.               If a LMS Claimant permanently ceased manufacturing Premix at any time during the Claim Period, other than where that Premix manufacturing business has been transmitted to a third party, its purchases of Class Vitamins will be taken as its purchases of Class Vitamins during the Claim Period plus, for each month of the Claim Period following such cessation up to a maximum of 18 months, a deemed purchase allowance calculated as:

Average annual purchases of Class Vitamins in the three years prior to cessation of Premix manufacturing ($)

x

(1.5 ÷ 18)

5.5.               LMS Claimants are also entitled to make an Overcharge Claim under Clause 6 of the Settlement Scheme.

6.                   OVERCHARGE FUND

6.1.               All Group Members are entitled to make a claim for Overcharge under this Clause 6.

6.2.               The Group Members that make a claim under Clause 6, and who comply with Clause 4.3, shall be referred to in the Settlement Scheme as “Overcharge Claimants”.

6.3.               Each Overcharge Claimant will be entitled to a payment from the Overcharge Fund according to the following formula:

Overcharge Claimant’s entitlement ($)	=	Overcharge for the individual Overcharge Claimant ($)	X	Overcharge Fund ($)
		Overcharge for all Overcharge Claimants ($)

6.4.               For the purpose of Clause 6.3 and subject to Clause 6.6, Overcharge means the total Australian dollar value of all purchases of products containing Class Vitamins (“Class Vitamin Products”) by an Overcharge Claimant during the relevant periods as set out in Schedule B, multiplied by the applicable “Vitamin Cost and Absorption Rate” set out Table 1:

Table 1: Estimated Vitamin Cost and Absorption Rates

	Categories	Vitamin Cost and Absorption Rate
Livestock Industry (Meat – Poultry) Supply Chain
1.	Premix Manufacturers	6.692%
2.	Feed Manufacturers	2.330%
3.	Livestock Producers	0.052%
4.	Integrated Livestock Producers[1]	3.586%
Livestock Industry (Meat – Pig) Supply Chain
5.	Premix Manufacturers	6.692%
6.	Feed Manufacturers	3.171%
7.	Livestock Producers	0.054%
8.	Integrated Livestock Producers	4.881%
Livestock Industry (Meat – Cattle) Supply Chain
9.	Premix Manufacturers	6.692%
10.	Feed Manufacturers	1.428%
11.	Livestock Producers	0.011%
12.	Integrated Livestock Producers	2.198%
Livestock Industry (Meat – Horse) Supply Chain
13.	Premix Manufacturers	6.692%
14.	Feed Manufacturers	4.644%
15.	Livestock Producers	0.164%
16.	Integrated Livestock Producers	7.148%
Livestock Industry (Meat – Other) Supply Chain
17.	Premix Manufacturers	6.692%
18.	Feed Manufacturers	1.006%
19.	Livestock Producers	0.008%
20.	Integrated Livestock Producers	1.548%
Livestock Industry (Other – Dairy) Supply Chain
21.	Premix Manufacturers	6.692%
22.	Feed Manufacturers	1.428%
23.	Livestock Producers	0.009%
24.	Integrated Livestock Producers	2.008%
Livestock Industry (Other – Eggs) Supply Chain
25.	Premix Manufacturers	6.692%
26.	Feed Manufacturers	2.330%
27.	Livestock Producers	0.039%
28.	Integrated Livestock Producers	3.276%
Veterinary and/or Performance Enhancing Supplement Industry Supply Chain
29.	Veterinary and/or Performance Enhancing Supplement Manufacturers	7.331%
30.	Veterinary and/or Performance Enhancing Supplement Distributors/Suppliers	0.034%
Pet Food Industry Supply Chain
31.	Pet Food Manufacturers	13.418%
32.	Pet Food Distributors.	0.002%

 

[1] Integrated Livestock Producers means Livestock Producers that purchase Premix directly from a premix manufacturer.

6.5                 If an Overcharge Claimant’s operations fall within more than one of the categories referred to in Table 1 (“Category”), the Overcharge Claimant is entitled to receive compensation for overcharge for each Category. In such cases, a separate calculation of Overcharge will be performed for each Category and then added together to determine the Overcharge Claimant’s individual Overcharge for the purpose of determining its entitlement under Clause 6.3.

6.6                 For the purpose of calculating Overcharge, expenditure on Class Vitamin Products shall not include expenditure on account of medication, enzyme, pigment, flavour, ionophore or animal growth promotant additives included in the Class Vitamin Products.

7.                   REIMBURSEMENT PAYMENTS AND OUT OF POCKET EXPENSES

Reimbursement Payments

Within 14 days of approval by the Court of the Settlement, nominated Group Members will each receive a “Reimbursement Payment” in accordance with the Table 2 below, on account of the significant time and effort those nominated Group Members expended in pursuing this proceeding on behalf of and to obtain a benefit for all Group Members.

Table 2: Reimbursement Payments

Applicants’ Out of Pocket Expenses

7.1.               In addition to the Reimbursement Payments, the Applicants will be reimbursed for the following out of pocket expenses reasonably and necessary incurred in connection with this matter:

Table 3: Applicants’ Out of Pocket Expenses

7.2.               The payments under this Clause 7 are to be paid out of the Settlement Distribution Fund before division of the Fund under Clause 3.

 

8.                   INTEREST FROM FUNDS

8.1.               Interest earned on the Settlement Sum in the Settlement Reserve Fund, or on the Settlement Distribution Fund (“Fund Interest”), will to the extent necessary be applied to payment of:

                    x.                        Disbursements incurred in connection with obtaining court approval of the Settlement, including without limitation counsels’ and experts’ fees;

                  xi.                        Costs of administering the Settlement Scheme including without limitation notices to Group Members, costs of assessing and distributing Group Members’ share of the Settlement Sum and costs relating to any Review Assessment. Such costs may arise as fees and disbursements of the Applicants’ solicitors, as approved by the Court.

8.2.               MBC will obtain Court approval of its professional fees and disbursements of administering the Settlement Scheme, prior to being paid the same from the Fund Interest.

8.3.               Any Fund Interest not applied in accordance with Clause 8.1, shall be allocated to the two funds referred to in Clause 3.2 pro rata according to the balance held in each fund, and will be available for distribution in accordance with Clauses 5 to 7 inclusive.

9.                   REVIEW ASSESSMENT

9.1.               If a Claimant disputes its Assessment Notice, it may within 28 days of the date of the Assessment Notice request that a review assessment be performed by the Independent Counsel (“Review Assessment”), failing which the Claimant shall be deemed to accept the Assessment Notice as binding and subject to paragraph 11.1 no appeal shall lie therefrom. Each Claimant shall be advised of the availability of a Review Assessment at the time the Assessment Notice is issued.

9.2.               John Dixon of Counsel shall be Independent Counsel under the Settlement Scheme. In the event that Mr Dixon should become unavailable, David Bailey of Counsel shall be Independent Counsel. In the event that Mr Bailey should become unavailable, a commercial barrister of at least 15 years post-admission experience shall be nominated as Independent Counsel by the Chairman of the Victorian Bar Council.

9.3.               Independent Counsel may by written notice require the Claimant to submit further documentation in support of the application for Review Assessment and such documentation shall be submitted within 21 days, failing which it shall be excluded from consideration.

9.4.               In accordance with the methodology set out in Clauses 5 and 6, Independent Counsel shall determine the validity and amount of each claim made by the Claimant based on the Claimant’s Proof of Claim and any further information requested from the Claimants or any third party.

9.5.               The Review Assessment shall be in writing and shall be issued within 35 days of the date of the request for the Review Assessment or the date of any notice given by Independent Counsel under Clause 9.3, whichever is later.

9.6.               Any determination by the Independent Counsel of an amount of damages to which a Claimant is entitled is binding on the Claimant. A Claimant has liberty to apply to the Court on a question of law arising from a determination of Independent Counsel.

9.7.               The Claimant requesting the Review Assessment under the Settlement Scheme shall pay the costs of the Review Assessment.

9.8.               The cost of a Review Assessment will be $3,750.00 for a Review Assessment that takes up to 10 hours to complete. If the time taken to complete a Review Assessment is greater than 10 hours but less than 15 hours, Independent Counsel will waive any fees beyond the fixed amount of $3,750.00. If the Review Assessment takes in excess of 15 hours to complete, the Review Assessment will cost $3,750.00 plus $375.00 for every hour spent on the Review Assessment beyond the first 15-hour period.

9.9.               Independent Counsel may require a Claimant to provide security for the costs of a Review Assessment in the sum of $3,750.00. If security is not provided as required within 30 days, Independent Counsel shall issue a Review Assessment in the amount of the Assessment Notice.

9.10.            The amounts referred to in Clauses 9.8 and 9.9 are exclusive of GST.

9.11.            If the costs of a Review Assessment have not been paid by the Claimant as at the allowable dates for distribution of the Overcharge Fund under Clause 10.1 and the Loss of Market Share Fund under Clause 10.2, MBC shall deduct those costs from any sum otherwise due to be distributed to the Claimant under the Settlement Scheme.  The Claimant shall remain liable for any costs not recovered by a deduction pursuant to this Clause and MBC, in administering the Settlement Scheme, may apply to the Court for an order requiring the Claimant to pay those costs.

9.12.            The time for doing any act or thing under this clause of the Settlement Scheme may be extended by direction of the Independent Counsel.

10.                TIMING OF PAYMENT

10.1.            The payments under Clause 7 will be paid within 14 days of the date of approval by the Court of the Settlement.

10.2.            Subject to any further order or direction by the Court, the monies held in the Loss of Market Share Fund will be distributed within 28 days of the finalisation of assessments of all claims under Clause 5, including any Review Assessments of those claims.

10.3.            Subject to any further order or direction by the Court, the monies held in the Overcharge Fund will be distributed within 28 days of the finalisation of assessments of all claims under Clause 6, including any Review Assessments of those claims.

11.                GENERAL DISPUTE RESOLUTION OR ALTERATION OF THE TERMS OF THE SETTLEMENT SCHEME

11.1.            MBC may refer any issues arising in relation to the Settlement Scheme or the administration and implementation of the Settlement Scheme to the Court for determination. Without limiting the foregoing, if MBC considers it necessary or desirable to establish a mechanism for estimating any thing for the purposes of this Scheme not already provided by this Scheme, MBC may refer the mechanism to the Court for its approval.

12.                NOTICE

12.1.            Notice under the Settlement Scheme is effective if it is:

                 xii.                        Addressed to the person to who it is to be given; and

               xiii.                        Either;

1.                   Delivered or sent by pre-paid mail to that person’s address;

2.                   Sent by fax to that person’s fax number and the machine from which it is sent produces a report that states that it was sent in full; or

3.                   Sent by email to that person’s email address and the machine from which it is sent produces a report that states that the email has been opened by the recipient.

12.2.            A notice that complies with this Clause 12 will be deemed to have been given and received:

               xiv.                        If it was sent by mail to an addressee in Australia, two clear business days after being sent;

                xv.                        If it is sent by mail to an addressee overseas, five clear business days after being sent;

               xvi.                        If it is delivered or sent by fax, at the time stated on the report that is produced by the machine from which it is sent; and

             xvii.                        If it is sent by email, at the time a read receipt report states it has been opened by the recipient.

12.3.            MBC’s address, fax number and email address are those set out below or as MBC may subsequently notify the sender:

Vitamins Class Action

Maurice Blackburn Cashman Pty Ltd

PO Box 523J

MELBOURNE VIC 3001

Fax: (03) 9600 2407

Email: vitamins.settlement@mbc.aus.net

 

13.                TIME

13.1              The time for doing any act or thing under the Settlement Scheme may be extended by agreement between MBC and a Claimant, or in the absence of any agreement, by direction of Independent Counsel or the Court.

DATED the 31^st day of August 2006

Schedule A.: Proof of Claim

 

AUSTRALIAN VITAMINS CLASS ACTION

Claims Administrator

Maurice Blackburn Cashman Pty Ltd

Level 10, 456 Lonsdale Street

MELBOURNE VIC 3000

PO Box 523J

MELBOURNE VIC 3001

Telephone: 1800 810 812

PROOF OF CLAIM

1. Definitions

In this document:

”Claimant” means a Group Member making a claim under the Settlement Scheme.

“Claim Period” means the period 5 March 1992 to 28 February 1999.

“Claims Administrator” means Maurice Blackburn Cashman Pty Ltd (“MBC”).

“Class Vitamins” means vitamins A, E, B1, B2, B5, C, Beta-carotene or Canthaxanthin for animal nutrition or health purposes (together and individually).

“Class Vitamin Products” means Class Vitamins and products containing Class Vitamins.

“Excluded Group Members” are:

(a)           Respondents to the Vitamins Class Action or their Related Bodies Corporate;

(b)           Group Members to or for whom any Respondent(s) or their Related Bodies Corporate have provided, other than under the Settlement Scheme, any payment, benefit or other advantage, including without limitation any discount, allowance, rebate, or credit in relation to goods acquired, on account of or in connection with any claim, or potential claim, arising out of the subject of the Vitamins Class Action.

“Group Members” are:

(a)           Manufacturers, distributors and suppliers of premixes containing Class Vitamins;

(b)           Manufacturers, distributors and suppliers of stock feeds containing Class Vitamins;

(c)           Producers of livestock including poultry, pigs, sheep and cattle, and dairy farmers, egg producers and aquaculturalists, who purchased stock feeds containing Class Vitamins;

(d)           Manufacturers, distributors and suppliers of veterinary and performance enhancing preparations and supplements containing Class Vitamins;

(e)           Manufacturers and distributors of pet food containing Class Vitamins;

who

                  (i)          Were at all relevant times ordinarily resident in or carrying on business in Australia;

                 (ii)          Paid at least two thousand Australian dollars (AUD$2,000.00) in the period 5 March 1992 to 31 December 1999 for Class Vitamins or Premix or other animal health or nutrition products containing Class Vitamins; and

               (iii)          Are not Justices or Registrars of the High Court of Australia or the Federal Court of Australia.

“Premix” means premix containing Class Vitamins.

“Proof of Claim” means a properly completed Claim Form, Statutory Declaration, Supporting Documents Inventory and all Supporting Documents.

“Purchase Period” means a period less than or equal to the Claim Period as specified.

“Purchase Value” means the actual price paid for purchases of Class Vitamins Products in Australian dollars excluding sales taxes, freight and delivery charges.

“Related Bodies Corporate” mean related bodies corporate as defined in Section 50 of the Corporations Act 2001 (Cth) which provides that: Where a body corporate is:

(a)           a holding company of another body corporate; or

(b)           a subsidiary of another body corporate; or

(c)           a subsidiary of a holding company of another body corporate; the first-mentioned body and the other body are related to each other.

“Respondents” to the Vitamins Class Action are F. Hoffmann – La Roche Ltd, Roche Products Pty Ltd, Roche Vitamins Australia Pty Ltd, Roche Vitamins Asia Pacific Pte Ltd, Aventis SA (formerly Rhone-Poulenc), Aventis Animal Nutrition Pty Ltd, Aventis Animal Nutrition SA, Aventis Animal Nutrition Asia Pacific Pte Ltd, BASF AG, BASF Australia Ltd and BASF East Asia Regional Headquarters Pty Ltd.

“Settlement Scheme” means the Settlement Distribution Scheme in the Vitamins Class Action approved by the Court on [insert date].

“Supporting Documents” means documents including without limitation invoices, business, financial or other records, evidencing the purchase of Class Vitamins Products or where applicable, expenditure on additives such as medications, enzymes, pigments, flavours, ionophores or animal growth promotants.

“Vitamins Class Action” means Federal Court of Australia Proceeding No. V359 of 1999, Darwalla Milling Company Pty Ltd & Ors v F. Hoffmann La-Roche Limited & Ors.

“Vitamins Class Action Settlement” means the settlement of the Vitamins Class Action approved by the Federal Court of Australia on [insert date].

2. Important information

2.1            You should obtain and read the Notice of Settlement dated [insert date] and the Settlement Scheme. These documents may be viewed at http://mbc.aus.net/vitamins or obtained by telephoning the Claims Administrator on 1800 810 812 to request a copy.

2.2            To be eligible to make a claim under the Settlement Scheme you must be a Group Member and submit a Proof of Claim by [insert date]. Excluded Group Members cannot make claims under this Settlement Scheme. If you are not sure whether you are a Group Member or an Excluded Group Member please call the Claims Administrator on 1800 810 812.

2.3            If you are a Group Member and have not opted out of the Vitamins Class Action then you are already bound by the Vitamins Class Action Settlement. That is, you have no further legal recourse to the Respondents in respect of the subject of the Vitamins Class Action except under the Settlement Scheme.

2.4            Any Group Member that fails to submit a Proof of Claim by [insert date] is not entitled to make a claim under the Settlement Scheme.

2.5            It is impossible to determine the value of any individual entitlement of an Overcharge Claimant until all Overcharge Claims have been assessed and any Review Assessments have been completed. It is impossible to determine the value of loss of market share. The value of each individual entitlement depends upon, among other factors, the total number of valid claims submitted for each claim type and the assessed value of those claims.

3. instructions

To make a claim you must:

3.1            Complete the Claim Form. The Claim Form must be filled out completely and must be typed or printed. You must complete the Claim Form accurately as you will be required to sign a Statutory Declaration and provide Supporting Documents to verify the information provided in your Claim Form.

3.2            Complete a separate Claim Form for each Claimant which is a separate legal entity (for example where you operate a corporate group comprising more than one corporation).

3.3            Provide a Historical Company Extract or Business Name Extract or equivalent for each Claimant.

3.4            Arrange an authorised representative of each claimant to sign the Statutory Declaration before a person who is authorised to witness the signing of a Statutory Declaration and submit it with the Proof of Claim. A Proof of Claim submitted without a signed Statutory Declaration will be invalid and the claimant will not be entitled to make a claim under the Settlement Scheme.

3.5            Provide such Supporting Documents as will prove your purchases of Class Vitamins Products on the balance of probabilities. That is, the Supporting Documents must establish that it is more likely than not that the Claimant made the purchases of Class Vitamins Products that you claim were made.

3.6            Complete Schedule 1 to the Statutory Declaration (listing the Supporting Documents you are providing). Where any Supporting Documents do not exist or are no longer in your possession you must provide an explanation as to why they do not exist or are no longer in your possession.

3.7            Send by registered post or deliver your completed Proof of Claim so that the Claims Administrator receives it no later than [insert date].

3.8            Retain a photocopy of your completed Proof of Claim (including all Supporting Documents and other attachments).

3.9            Contact the Claims Administrator if you have any questions. DO NOT CONTACT THE COURT.

3.10         Do not mail or deliver your Proof of Claim to the Court or to anyone other than the Claims Administrator.

4. PROCEDURE FOR ASSESSMENT NOTICES

4.1            The Claims Administrator will use your Proof of Claim to determine the Purchase Value of your purchases of Class Vitamins Products.

4.2            The Claims Administrator may require you to provide additional information upon 21 days’ notice to you.

4.3            If you do not provide sufficient information to prove your claim or any part of your claim, your claim or the relevant part shall be disallowed, subject to any Review Assessment.

4.4            The Claims Administrator has the right to adjust any claim based upon the information provided by you or from a third party.

4.5            The Claims Administrator will assess the individual overcharge for each Overcharge Claimant (Clause 5 of the Settlement Scheme) and the individual Class Vitamins Purchases for each Loss of Market Share Claimant (Clause 6 of the Settlement Scheme) and issue an Assessment Notice to each claimant.

4.6            Any Review Assessments will be completed.

4.7            Once all Review Assessments (if any) for the Overcharge Claims are complete, the entitlement of each Overcharge Claimant to the Overcharge Fund will be calculated and a distribution made to the Overcharge Claimant equal to that entitlement.

4.8            Once all Review Assessments (if any) for the Loss of Market Share are complete, the entitlement of each Loss of Market Share Claimant to the Loss of Market Share Fund will be calculated and a distribution made to the Loss of Market Share equal to that entitlement.

4.9            The Claims Administrator will act as lawyers to administer the claims on behalf of the Group Members as a whole, and not as the lawyer for any individual Group Member. The Claims Administrator can assist you with administrative questions regarding the preparation and submission of your Proof of Claim. However, if you require individual legal advice regarding the preparation and submission of your Proof of Claim, you should retain solicitors other than MBC.

5. Disputes regarding settlement

5.1            You may dispute your Assessment Notice by requesting that Independent Counsel perform a Review Assessment.

5.2            You will be provided with further information about the Review Assessment when your Assessment Notice is issued.

 

VITAMINS CLASS ACTION SETTLEMENT

CLAIM FORM

TO: Claims Administrator

Maurice Blackburn Cashman Pty Ltd

Level 10, 456 Lonsdale St

MELBOURNE VIC 3000

PO Box 523J

MELBOURNE VIC 3001
Telephone: 1800 810 812

1. Confidentiality and PrivacY

MBC requires that you provide certain information and documents to enable it to assess and administer your Claim. MBC will keep the contents of any information you provide to MBC for this purpose confidential and in particular will not reveal the contents of any information you provide to MBC to other Group Members. Upon completion of your Claim MBC will return your information at your request. Otherwise, the information will remain stored in MBC’s possession for a period of seven years after completion of your Claim, following which MBC is authorised to destroy the information. MBC has a Privacy Policy that explains how MBC collects, uses, discloses and protects personal and sensitive information. You may view MBC’s Privacy Policy at its website at http://mbc.aus.net or by telephoning 1800 810 812 to request a copy.

2. IS THIS CLAIM RELATED TO ANY OTHER CLAIM?

Have you completed a Proof of Claim for any other Claimant(s)?	£	Name of Other Claimant(s):	_____________________________ _____________________________
Is a Proof of Claim being submitted on behalf of any other Claimant which is a Related Body Corporate?	£	Name of Other Claimant(s):	_____________________________ _____________________________
Is the Claimant a member of a corporate group in which the ultimate holding company is foreign?	£	Name of the parent company of the Claimant	_____________________________ _____________________________

3. Claimant’s Identification and Contact Details

All correspondence to you concerning your claim will be sent to the postal address provided below. If your address changes after you submit this Proof of Claim, you must immediately notify MBC in writing.

Business or trading name of Claimant:
Legal status o         Corporation o         Executor	o         Sole proprietor o         Partnership o         Other ____________	Legal name of Claimant:
		ACN/ABN:
Postal Address
Residential Address (if different from above)
Address of principal place of business during the Claim Period
Contact person
Title/Position of contact person
Telephone Number (business hours)		( )
Mobile Telephone Number
Email address
Facsimile Number		( )

4. RECEIPT OF ANY OTHER SETTLEMENT PAYMENTS ETC

Are you a Group Member to or for whom any of the Respondents or their Related Bodies Corporate have provided any payment, benefit or other advantage, including without limitation any discount, allowance, rebate or credit in relation to goods acquired, on account of or in connection with any claim, or any potential claim, arising out of the subject of the Vitamins Class Action? Yes £ No £ Unsure £

5. Transfer or Assignment of Right to Claim

If you acquired the rights that are the basis for the claim asserted herein from some other person or entity, for example, by transfer or assignment, attach a separate page explaining the legal basis for your derivative rights and attach documentation evidencing such rights.

6. Incorporated Entities - Historical Company Extract

If your business was operated by an incorporated entity at any time during the Claim Period, you must give the Claims Administrator a full company search, also called a historical company extract, in respect of that entity. The historical company extract must be dated within 56 days of the date of your Proof of Claim. Company extracts are produced by the Australian Securities and Investment Commission (“ASIC”). To purchase a Company Extract you can:

(a)            Contact ASIC for the nearest ASIC Service Centre on 03 5177 3988, 8.30am to 7pm Eastern Standard Time on weekdays, email info.enquiries@asic.gov.au, or visit http://www.asic.gov.au; or

(b)            Conduct an online or telephone search using an Information Broker. An Information Broker may include additional service delivery fees. You can search for an Information Broker on the ASIC website at http://www.asic.gov.au.

OR My business is (or was) incorporated but I have been unable to obtain a Historical Company Extract because:

7. Other Registered Entities

If your business was registered in your state or territory but was not incorporated at any time during the Claim Period, you must give MBC a business name extract or equivalent extract in respect of your business. To purchase a business name extract you should contact the applicable Government Registry referred to below:

OR My business is (or was) registered but I have been unable to purchase a business name extract because:

8. Previous Details

If during the Claim Period you used a business or trade name or were located at an address other that the name and address set out above, indicate each such name and/or address.

 

Other Business or Trade Name	Other Addresses	Period

9. Industry of Operation

Please indicate in which of the following industries your business operated during any part of the Claim Period. If none of those categories apply to your business operations please attach a separate page describing in detail those operations.

10. additives

Did any of the Class Vitamin Products purchased by you during the Claim Period contain any of the following additives?

Medications	£	Pigments	£	Animal growth promotants	£
Enzymes	£	Flavours	£	Ionophores	£

11. PURCHASES OF CLASS VITAMINS PRODUCTS

 

VITAMINS CLASS ACTION SETTLEMENT

Commonwealth of Australia

STATUTORY DECLARATION

Statutory Declarations Act 1959

 

I, ________________________________________________________________________________ [Name, address and occupation] make the following Declaration under the Statutory Declarations Act 1959 on behalf of [Claimant].

1.          I make this Statutory Declaration from my own personal knowledge except where otherwise stated.

2.          I have the appropriate authority to submit this Proof of Claim on behalf of the Claimant.

3.          I have read and understood the Notice of Settlement dated [insert date], the Settlement Scheme and the Proof of Claim. The terms used in this Statutory Declaration have the same meaning as defined in paragraph 1 of the Proof of Claim.

4.          The Claimant is a Group Member.

5.          The Claimant is not an Excluded Group Member.

6.          The Claimant did not opt out of the Vitamins Class Action by filing a Notice of Opt Out with the Court.

7.          No other claim under the Settlement Scheme has been or will be submitted by the Claimant, its directors, shareholders, officers or employees on behalf of the Claimant.

8.          The Claimant has disclosed any and all transfers and/or assignments of rights to compensation regarding the vitamins price fixing cartel the subject of the Vitamins Class Action.

9.          The Claimant has included information and documents in relation to only Class Vitamins Products purchased in Australia during the relevant Purchase Periods referred to in paragraph 10 of the Claim Form.

10.       I acknowledge and agree that the Claims Administrator may disclose any and all information pertaining to this claim to the Federal Court of Australia.

11.       All information provided by me in the Proof of Claim is true and correct and specifically, accurately reflects the Claimant’s purchases of Class Vitamins Products during the relevant periods.

12.       The Settlement Documents provided by me and set out in Schedule 1 to this Statutory Declaration are true and correct copies of those documents and accurately reflect the Claimant’s purchases of Class Vitamins Products during the relevant periods.

I understand that a person who intentionally makes a false statement in a Statutory Declaration is guilty of an offence under Section 11 of the Statutory Declarations Act 1959, and I believe that all statements made by me in this Declaration are true in every particular.

Signature: ………………………………………..

Declared at on of 2006

Before me,

Signature (of person before whom the Declaration is made and who is a person described in Schedule 2): ………………………………..

Full name, qualification and address of person before whom the Declaration is made (in printed letters) ……………………………………………………………………………………………………………

VITAMINS CLASS ACTION SETTLEMENT

STATUTORY DECLARATION

Schedule 1: Supporting Documents

 

The following documents that I am providing are the best available documents in my possession, that evidence the Claimant’s purchases of Class Vitamins Products for the relevant periods:

Item	Document Date	Document Description	Purchases of Class Vitamins Products to which the document relates
1
2
3
4
5
6
7
8
9

The Claimant is unable to provide the following Supporting Documents:

Item	Document Date	Document Description	Purchases of Class Vitamins Products to which the document relates	Reason for not being able to provide this document
1
2
3
4
5
6
7
8

 

VITAMINS CLASS ACTION SETTLEMENT

STATUTORY DECLARATION

Schedule 2: Persons before whom a Statutory Declaration may be made

 

A statutory declaration under the Statutory Declarations Act 1959 may be made before–

(1) a person who is currently licensed or registered under a law to practise in one of the following occupations:

Chiropractor Dentist Legal practitioner

Medical practitioner Nurse Optometrist

Patent attorney Pharmacist Physiotherapist

Psychologist Trade marks attorney Veterinary surgeon

(2) a person who is enrolled on the roll of the Supreme Court of a State or Territory, or the High Court of Australia, as a legal practitioner (however described); or

(3) a person who is in the following list:

Agent of the Australian Postal Corporation who is in charge of an office supplying postal services to the public

Australian Consular Officer or Australian Diplomatic Officer (within the meaning of the Consular Fees Act 1955)

Bailiff

Bank officer with 5 or more continuous years of service

Building society officer with 5 or more years of continuous service

Chief executive officer of a Commonwealth court

Clerk of a court

Commissioner for Affidavits

Commissioner for Declarations

Credit union officer with 5 or more years of continuous service

Employee of the Australian Trade Commission who is:

(a) in a country or place outside Australia; and

(b) authorised under paragraph 3 (d) of the Consular Fees Act 1955; and

(c) exercising his or her function in that place

Employee of the Commonwealth who is:

(a) in a country or place outside Australia; and

(b) authorised under paragraph 3 (c) of the Consular Fees Act 1955; and

(c) exercising his or her function in that place

Fellow of the National Tax Accountants’ Association

Finance company officer with 5 or more years of continuous service

Holder of a statutory office not specified in another item in this list

Judge of a court

Justice of the Peace

Magistrate

Marriage celebrant registered under Subdivision C of Division 1 of Part IV of the Marriage Act 1961

Master of a court

Member of Chartered Secretaries Australia

Member of Engineers Australia, other than at the grade of student

Member of the Association of Taxation and Management Accountants

Member of the Australasian Institute of Mining and Metallurgy

Member of the Australian Defence Force who is:

(a) an officer; or

(b) a non-commissioned officer within the meaning of the Defence Force Discipline Act 1982 with 5 or more years of continuous service; or

(c) a warrant officer within the meaning of that Act

Member of the Institute of Chartered Accountants in Australia, the Australian Society of Certified Practising Accountants or the National Institute of Accountants

Member of:

(a) the Parliament of the Commonwealth; or

(b) the Parliament of a State; or

(c) a Territory legislature; or

(d) a local government authority of a State or Territory

Minister of religion registered under Subdivision A of Division 1 of Part IV of the Marriage Act 1961

Notary public

Permanent employee of the Australian Postal Corporation with 5 or more years of continuous service who is employed in an office supplying postal services to the public

Permanent employee of:

(a) the Commonwealth or a Commonwealth authority; or

(b) a State or Territory or a State or Territory authority; or

(c) a local government authority;

with 5 or more years of continuous service who is not specified in another item in this list

Person before whom a statutory declaration may be made under the law of the State or Territory in which the declaration is made

Police officer

Registrar, or Deputy Registrar, of a court

Senior Executive Service employee of:

(a) the Commonwealth or a Commonwealth authority; or

(b) a State or Territory or a State or Territory authority

Sheriff

Sheriff’s officer

Teacher employed on a full-time basis at a school or tertiary education institute

Schedule B. Class Vitamin Products and Relevant Periods