FEDERAL COURT OF AUSTRALIA

Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 8) [2011] FCA 745

THE COURT ORDERS THAT:

1.    Clause 8.1 of the Loss Assessment Process pursuant to the Settlement Distribution Scheme is amended by adding at the end of that clause:

“or in default by reference to the average foreign currency exchange rate available at the Australian Taxation Office for April 2003 and May 2003 or in default by reference to the average foreign currency exchange rate available at the Reserve Bank of Australia from 28 April 2003 to 28 May 2003.”

2.    Annexure A to the Setttlement Distribution Scheme is amended:

a.    by deleting under the heading “Paralegal” the entry “K Hung $120”;

b.    by adding above the heading “Paralegal” a heading “Lawyer/Paralegal” and an entry “K Hung $220”.

3.    The Court approves the sum of $30,000 as forming part of the “Administration Costs” for the purposes of clause 10.1.2 of the Settlement Distribution Scheme.

4.    Liberty is reserved to adduce further evidence in support of the approval sought for the payment of “Administration Costs” in the amount claimed in Order 2 of the Notice of Motion as filed on 28 June 2011.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1    On 25 March 2011 reasons for decision were given approving a settlement in this proceeding: Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 6) [2011] FCA 277. Orders giving effect to those reasons were made on 14 April 2011 and entered on 11 May 2011.

2    Thereafter, on 16 June 2011, two Notices of Motion were filed seeking a variation of the orders made on 14 April 2011. One of those Motions invoked a power reserved by the Settlement Distribution Scheme to approach the Court for approval for the payment of monies; the other Motion invoked Order 35 r 7 of the Federal Court Rules. The orders sought in those Motions were made, including an order approving the payment of legal expenses incurred in bringing the Motions: Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 7) [2011] FCA 715. One of the orders then made addressed the factual circumstance that arose when some Group Members had not made a claim within the time prescribed by clause 3.4 of the Settlement Distribution Scheme. The time within which a claim could be made was extended and notice was given to all Group Members who had not made claims within time. Apparently a further three Group Members have now made claims within the time as extended.

3    A yet further Notice of Motion was filed on 28 June 2011 seeking a variation of particular provisions of the Scheme. The orders sought were as follows:

1.    That pursuant to clause 13.2 of the Settlement Distribution Scheme, clause 8.1 of the Loss Assessment Process be amended to include at the end of that clause the words “or in default, by reference to the foreign currency exchange rate available at the Australian Taxation Office for April 2003 and May 2003 or the average foreign currency exchange rate available at the Reserve Bank of Australia from 28 April 2003 to 28 May 2003”.

2.    That a sum be approved as forming part of the “Administration Costs” for the purposes of clause 10.1.2 of the Settlement Distribution Scheme.

4    This further Motion invokes the liberty to apply to the Court reserved to the Administrator of the Scheme. Order 3 as made on 14 April 2011 thus provided as follows:

Liberty is granted to the administrator of the Distribution Scheme to apply to the Court for orders in connection with the Distribution Scheme including any order, approval or guidance of the kind contemplated by the Distribution Scheme.

Moreover, clause 13.2 of the Scheme further provided as follows:

13.    Supervision by the Court

13.1    The Administrator may refer any issues arising in relation to the Settlement Distribution Scheme or the administration of the Settlement Distribution Scheme to the Court for determination, including without limitation issues regarding the entitlement of Group Members, or the correction of any error slip or omission occurring in the course of administration of the Settlement Distribution Scheme, or any actual or potential conflict of interest of the Administrator.

13.2    If the Administrator considers it necessary to do so, he may approach the Court in respect of any amendment required to this Scheme to ensure the efficient and fair distribution of the Fund to Group Members, or otherwise if in his opinion such amendment is reasonable and necessary for the proper administration of the Scheme. The Administrator may obtain confirmatory opinion of Senior Counsel prior to approaching the Court pursuant to this clause.

13.3    Any costs incurred in any application made by the Administrator, shall be deemed to be costs incurred as Administration Costs.

A Variation of Clause 8.1?

5    The Settlement Distribution Scheme as approved in April 2011 defined the “Loss Assessment Process” as meaning “the process set out in Annexure ‘C’ …”. The “Loss Assessment Process” was referred to at the outset of the Scheme by way of “Background” as being one of the “major steps” envisaged. Clause 7.6 provided that any “Review” which was to be carried out was to apply that process.

6    Clause 8.1. of the “Loss Assessment Process” provides as follows:

8.    Claims in a Foreign Currency

8.1    Overseas Sponsor Group Members are likely to have incurred Heads of Claim in their local currencies. Some local Group Members may also have incurred costs or suffered losses in foreign currencies. All such Claims should be submitted in the currency in which they were incurred. In the absence of compelling other reasons, foreign currencies shall be converted to AUD by reference to the average opening carded on demand airmail buying rate in relation to the foreign currency available at the Commonwealth Bank from 28 April 2003 to 28 May 2003.

7    The need to re-visit clause 8.1 arises because one Group Member has submitted a claim in Philippine pesos and another has submitted a claim in Chinese renminbi. The Commonwealth Bank, however, has not retained exchange rates for these currencies for the period from 28 April 2003 to 28 May 2003. But the Administrator of the Settlement Distribution Scheme has discovered that the Australian Taxation Office does maintain records of the average exchange rates for foreign currencies, including Philippine pesos, and further discovered that the Reserve Bank of Australia can provide details of exchange rates for the Chinese currency.

8    With the benefit of hindsight many problems – both in this case and others – could be avoided. With the benefit of hindsight perhaps clause 8.1 could have been more widely drafted to have allowed recourse to an alternative means of converting claims made in foreign currencies. Perhaps when drafting clause 8.1 a claim in Philippine pesos or Chinese renminbi may not have been envisaged. But, when drafting that clause, it would have been undoubtedly prudent to inquire at that point of time as to the records in fact maintained by the Commonwealth Bank and – if those records were not comprehensive – to have drafted clause 8.1 in a different manner. But no such inquiries were then undertaken.

9    Further cause for concern arises by reason of the fact that difficulties were already in contemplation in respect to the two claims now in issue prior to the hearing of the two Notices of Motion earlier this month. Why the present application was not incorporated within the ambit of the orders previously sought – or at least foreshadowed - was not satisfactorily explained. There was no evidence of any systematic steps having been taken prior to the filing of the Motions on 16 June 2011 to determine if there were any other potential difficulties in the administration of the Scheme that could conveniently have been brought before the Court at the same time.

10    Every application made to this Court incurs further legal costs and depletes the amount of monies otherwise available for distribution to Group Members. No course should be encouraged whereby those administering funds in representative proceedings can advance seriatim each problem as and when they emerge.

11    The fact remains, however, that those drafting the Scheme envisaged the prospect of the Administrator needing to approach the Court in respect to matters arising in respect to the administration of the Scheme. That is what the Administrator has properly done in the present application and the variation he seeks to clause 8.1 should be made.

Administration Costs

12    Clause 10.1 of the Scheme provides in part as follows:

10.    Administration Costs

10.1    The Administrator may obtain payments of Administration Costs from time to time from the Fund. The Administrator shall observe the following requirements in obtaining such payments:

10.1.1    the Administrator shall as far as possible seek payments from Interest accumulated in the Fund;

10.1.2    the Administrator shall seek approval of the Court to make payments of Administration Costs from the Fund, not more than once every calendar month, unless special circumstances make it necessary to do so in respect of a disbursement incurred;

…

The time constraint imposed by clause 10.1.2 was not the subject of any submission during the hearing. The approval of “Administration Costs” was of course included in the orders made on 22 June 2011. But the fact of that constraint only serves to emphasise the need for those administering the Scheme to carefully consider the reasons for invoking this Court’s jurisdiction and the orders to be sought and to ensure that all matters that can practically be included in a single application are brought at one and the same time.

13    The second of the orders sought in the Notice of Motion as filed on 28 June 2011 nevertheless sought approval of “Administration Costs” pursuant to clause 10.1.2. That application was before the Court and could conveniently be addressed at the same time as the variation sought in respect to clause 8.1.

14    An affidavit quantified “Administration Costs” for the period from 25 March 2011 to 31 May 2011 in the sum of $52,856.60. That sum was supported by an invoice separately identifying gross sums of professional fees; disbursements and GST. Also annexed to the affidavit were time sheets. The affidavit stated that in the opinion of the deponent that “the rates applied in the Invoice are fair and reasonable”.

15    Considerable reservation was expressed during the hearing of the Motion on 29 June 2011 as to how the Court was to form any view as to the appropriateness of either the individual work undertaken or the appropriateness of the work as a whole. Time sheets set forth in cryptic terms the nature of the work undertaken, the identity of the person who performed the work and the amount charged. But that information did little to assist in forming any view as to the appropriateness of the sum of $52,856.60 for approximately two months work.

16    The professional and ethical obligations of the solicitor deposing to the views expressed in the affidavit obviously provide considerable comfort in assisting a conclusion as to the appropriateness of the amount.

17    The view was expressed during the course of the hearing, however, that the supervision exercised by the Court when granting “approval” could not be properly exercised in the absence of knowing more as to the costs that had been incurred.

18    Further assistance was thus sought to be provided in a supplementary affidavit filed after the hearing of the Motion. That affidavit attempted a broad characterisation of the nature of the work undertaken but, with respect, fell short of providing a sufficiently certain factual foundation upon which a decision could comfortably be made that the entirety of the amount claimed should be “approved”. To express such an observation is not to express any final conclusion as to whether or not the entirety of the amount claimed should ultimately be “approved” and is certainly no conclusion that any part of the amounts claimed were not properly incurred. It is simply a conclusion that further detail should be provided before any final decision can be made. Pending the provision of such further information as may be advanced, an order should nevertheless now be made that $30,000 is “approved” – a decision as to whether the balance of the amount claimed should be “approved” is deferred.

19    It should finally be noted that one of the persons assisting in the administration of the Scheme (Mr K Hung) was previously a paralegal but has now been admitted as a solicitor. Annexure A to the Scheme which set forth the rates at which persons charged should thus also be amended to reflect the difference in “charge-out-rates” for a paralegal as opposed to a solicitor.

20    The orders as finally sought were slightly different to those sought in the Motion.

ORDERS

21    The Orders of the Court are:

1.    Clause 8.1 of the Loss Assessment Process pursuant to the Settlement Distribution Scheme is amended by adding at the end of that clause:

“or in default by reference to the average foreign currency exchange rate available at the Australian Taxation Office for April 2003 and May 2003 or in default by reference to the average foreign currency exchange rate available at the Reserve Bank of Australia from 28 April 2003 to 28 May 2003.”

2.    Annexure A to the Setttlement Distribution Scheme is amended:

a.    by deleting under the heading “Paralegal” the entry “K Hung $120”;

b.    by adding above the heading “Paralegal” a heading “Lawyer/Paralegal” and an entry “K Hung $220”.

3.    The Court approves the sum of $30,000 as forming part of the “Administration Costs” for the purposes of clause 10.1.2 of the Settlement Distribution Scheme.

4.    Liberty is reserved to adduce further evidence in support of the approval sought for the payment of “Administration Costs” in the amount claimed in Order 2 of the Notice of Motion as filed on 28 June 2011.

Associate:

Dated:    1 July 2011