FEDERAL COURT OF AUSTRALIA

Inabu Pty Ltd v Leighton Holdings Limited [2014] FCA 622

THE COURT NOTES THAT:

1.    Subject to approval of the Court and without any admission of liability on the part of the Respondent, the Applicant and the Respondent have agreed to settle this proceeding on the terms contained in confidential annexure RG2-1 of the affidavit of Rebecca Gilsenan affirmed on 27 May 2014 (Proposed Settlement).

2.    Under the Proposed Settlement the Respondent is required to place the settlement amount that is the subject of the Proposed Settlement into an interest bearing account within 15 business days of 16 May 2014 being 6 June 2014.

THE COURT ORDERS THAT:

Notification of Proposed Settlement and Opt Out Rights

3.    An application pursuant to section 33V of the Federal Court of Australia Act 1976 (Cth) (Act) for orders approving the Proposed Settlement be listed for hearing on Friday 15 August 2014 (Approval Hearing).

4.    Group members be given notice pursuant to ss 33X(1)(a) and 33X(5) of the Act:

(a)    of the hearing of an application pursuant to section 33V of the Act for approval of the Proposed Settlement on the date specified in paragraph 3 of these orders;

(b)    of the fact that they must register their claim in accordance with paragraphs 14 (b) and (c) of these orders in order to be assessed for compensation from the Respondent as part of the Proposed Settlement,

(c)    of the fact that they may opt out of the proceeding in accordance with paragraph 13 of these orders; and

(d)    of the fact that they may oppose the Proposed Settlement in accordance with paragraph 14 (d) of these orders.

5.    The form and content of the Notice of Proposed Settlement and Opt Out Rights to all group members (Notice) which is Annexure A to these orders, be approved pursuant to s 33Y of the Act.

6.    The Notice be provided according to the following procedure at the expense of the Applicant:

(a)    the Respondent shall provide to a mail house distribution service nominated by it details of all shareholders recorded on the Leighton Holdings Limited (LHL) share register who purchased securities in LHL between 16 August 2010 and 11 April 2011 (inclusive) (Shareholders) and for whom no email address is listed on the LHL share register and by no later than 13 June 2014, the Respondent shall cause the mail house to send the Notice, by prepaid ordinary post to that Shareholder at the address recorded for that person on the LHL share register;

(b)    by no later than 4 pm on 13 June 2014 the Respondent shall cause the Notice to be sent by email to any Shareholders who have email addresses recorded on the LHL share register;

(c)    to the extent that any email sent to a Shareholder referred to in 6 (b) above experiences a delivery failure, the Respondent shall cause the mail house to send the Notice by prepaid ordinary post to that Shareholder at the address recorded for that person on the LHL share register, within two (2) business days of receiving the delivery failure notice;

(d)    by no later than 10 June before 4.00pm, the Applicant shall cause a representation of the Notice to be displayed on the website of the Applicant’s solicitors (Maurice Blackburn) and to remain so displayed until and including 15 August 2014.

7.    The information from the LHL share register referred to in paragraph 6 above shall not be disclosed to the Applicant, Maurice Blackburn or International Litigation Funding Partners Pte Ltd.

8.    The form and content of the Opt Out Notice, a sample of which is Annexure D to these orders, be approved pursuant to s 33Y of the Act.

9.    The form and content of the advertisement which is Annexure E to these orders (Advertisement) be approved pursuant to s 33Y of the Act.

10.    The Advertisement be published according to the following procedure at the expense of the Applicant:

(a)    by no later than 13 June 2014, the Applicant shall cause the Advertisement to be published in the legal notices or equivalent section in one weekday edition of the Australian Financial Review and one weekday edition of The Australian; and

(b)    advertisements in the terms of the Advertisement to be published in any further newspaper or website that Maurice Blackburn considers to be appropriate to reach the attention of group members, provided that such advertisements are not displayed or published after 20 June 2014.

11.    The form and content of the Notice of Proposed Settlement and Opt Out Rights to funded group members (FGM Notice) which is Annexure F to these orders be approved pursuant to s 33Y of the Act.

12.    The Applicant shall provide the FGM Notice together with trading information for each group member who is a client of Maurice Blackburn and who had signed a funding agreement with International Litigation Funding Partners Pte Ltd prior to 16 May 2014 (Funded Group Members), in accordance with the following procedure:

(a)    by no later than 13 June 2014 the FGM Notice shall be sent to the last known email address of each Funded Group Member together with their most recent trading information held by Maurice Blackburn; and

(b)    within two (2) business days of receiving a delivery failure notice in respect of any email referred to in order 6 Maurice Blackburn shall send to the last known address of the Funded Group Member who did not receive their email the FGM Notice and trading information by prepaid ordinary post.

Class Closure and Settlement Participation

13.    Pursuant to s 33J of the Act, 4.00pm on 18 July 2014 be fixed as the date on or before which a group member may opt out of the proceeding.

14.    Pursuant to s33ZF of the Act:

(a)    4.00pm on 18 July 2014 be fixed as the date on or before which any Funded Group Members must deliver to Maurice Blackburn notification of any amendment necessary to the trading data recorded in the Notice of Claim Data sent to that Funded Group Member;

(b)    4.00pm on 18 July 2014 be fixed as the date on or before which any group member (with the exception of Funded Group Members) who wishes to receive compensation in the Proposed Settlement must deliver to Maurice Blackburn a Registration Form in the form set out in Annexure B to these orders;

(c)    4.00pm on 1 August 2014 be fixed as the date on or before which any group member (with the exception of Funded Group Members) who wishes to receive compensation in the Proposed Settlement must deliver to Maurice Blackburn a Statutory Declaration in the form set out in Annexure C to these orders;

(d)    4.00pm on 1 August 2014 be fixed as the date on or before which any group member who wishes to oppose the proposed settlement of the proceeding must provide written notice to Maurice Blackburn of their opposition to the proposed settlement at PO Box A266 Sydney South NSW 1235;

(e)    4.00pm on 14 August 2014 be fixed as the date on which the Applicant will deliver to the Court a list of all participating group members comprised of Funded Group Members and persons who have complied with order 14(c), in a sealed envelope marked “Confidential - not to be opened without leave of the Court”.

15.    If the solicitors for any party receive, on or before 4.00pm on 18 July 2014 a notice purporting to be an opt out notice referable to this proceeding, the solicitors shall file that notice with the Federal Court of Australia, NSW District Registry within three (3) days of receipt of the notice by the solicitors, and the notice shall be treated as an opt out notice received by the Court at the time it was received by the solicitors.

16.    All Funded Group Members be deemed to have registered their claim for compensation in this proceeding unless the Funded Group Member opts out of the proceeding.

17.    Except for Funded Group Members, any group member who neither opts out by 4.00pm on 18 July 2014 nor completes and returns a Registration Form and Statutory Declaration in accordance with orders 14(b) and (c) above by 4.00pm on 1 August 2014 will remain a group member for all purposes, but, subject to further order, shall not be entitled to receive a distribution from any amount agreed in settlement of these proceedings.

18.    Maurice Blackburn and the Respondent’s solicitors be granted leave to inspect the Court file to the extent that such material has not been the subject of a confidentiality order and copy any opt out notices filed.

19.    The notices and forms in Annexures A to F to these orders may be amended by Maurice Blackburn before they are posted, emailed or published in order to correct any postal, website, email address or telephone number or any typesetting or typographical error.

Material for approval hearing

20.    The Applicant file and serve an interlocutory application seeking Court approval of the Proposed Settlement in accordance with section 33V of the Act (Settlement Application) by no later than 4.00pm on 6 August 2014.

21.    The Applicant file any affidavit(s) in support of the Settlement Application and serve any non-confidential exhibits on the Respondent by no later than 4.00pm on 11 August 2014.

22.    The Respondent file any affidavit(s) in support of the Settlement Application and serve any non-confidential exhibits on the Applicant by no later than 4.00pm on 11 August 2014.

General

23.    The confidential annexure RG2-1 to the affidavit of Rebecca Gilsenan affirmed on 29 May 2014 in support of this application be confidential and not published pursuant to section 37AG(1)(a) of the Act.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    This is a representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth) (the Act) brought by Inabu Pty Ltd (Inabu) on behalf of group members who purchased shares in the respondent (Leighton) between 16 August 2010 and 11 April 2011. The proceeding was commenced on 30 October 2013. It alleges that during the period stated above, Leighton failed to adequately disclose to the market that its 2011 financial year prospects were likely to be substantially impacted by difficulties in its Al-Habtoor joint venture in Saudi Arabia and certain other projects.

2    The parties to the proceeding have agreed, at a relatively early stage of the proceedings, to a proposed settlement. The terms of the settlement will provide for Leighton to pay an amount of $69.45 million (which includes $3.9 million for legal costs) to settle the proceedings.

3    The precise amount of the settlement fund to which a group member will be entitled is to be determined by the application of a complex loss assessment formula that will form part of the settlement scheme. The amount to which a group member is entitled will be defined by reference to the number of shares in Leighton that the group member acquired and sold during the claim period and the group member’s initial shareholding.

4    The settlement is conditional on a number of matters. The first is the Court making orders in relation to the opt-out period for group members and closing the class of group members who will participate in the proposed settlement. The second is Leighton not issuing a withdrawal notice under the settlement deed. The third is the Court approving the settlement pursuant to s 33V of the Act.

5    The circumstances in which Leighton may issue a withdrawal notice include the situation that a group member who has acquired a sufficiently large number of shares in Leighton elects to opt out of the proceedings.

6    Where a group member who has acquired such a number of shares opts out of the proceeding, the settlement deed provides for an option for Leighton to require an amount in respect of such group members to be held in escrow for a period of two years. If that option is exercised, the settlement would proceed upon the basis mentioned, that is to say, the establishment of the escrow account in respect of such members. If those members do not make a claim against Leighton in respect of the matters the subject of this proceeding during the escrow period, then the position is that the escrow amount would be distributed to participating group members according to the terms of the settlement scheme.

7    The substance of the present application is, relevantly, for the approval of opt-out notices and for the fixing of an opportunity for group members to opt out pursuant to s 33J of the Act, as well as for notification to be given to group members under s 33X(4) of the Act of the terms of the proposed settlement.

8    There are two forms of notice for which approval is sought. The first form is a Notice of Proposed Settlement and Opt-Out Rights that will be sent to all group members. The second is a Notice of Proposed Settlement and Opt-Out Rights that will be sent only to those group members who have entered into funding agreements in respect of this proceeding. Those group members are described as Funded Group Members.

9    The Notices of Proposed Settlement and Opt-Out Rights that will be sent to Funded Group Members and other group members combine the separate forms of notice that would ordinarily be sent in the case of a proposed settlement with those which give notice of group members’ entitlement to opt out of the proceeding. The combination of notices in this way has been adopted in other cases where a settlement occurs prior to the completion of the opt-out process. See, for example, Harrison v Sandhurst Trustees Ltd [2011] FCA 541 at [26] (Gordon J). Two different forms of the relevant notice have been drafted because of the different status of Funded Group Members and other group members.

10    In particular, by entering into funding agreements, Funded Group Members have indicated that they wish to take part in the proceeding and to receive compensation as part of any judgment or settlement that might be achieved. Those group members have already provided to their solicitors, Maurice Blackburn Cashman (MBC) information in connection with shares they acquired in Leighton during the relevant period. Accordingly, the application does not require Funded Group Members to take any further step to participate in the proposed settlement.

11    The notices set out a summary of the class action, a description of the proposed terms of settlement, a description of what members must do to participate in the settlement, notification of the date on which the Court will hear the application to approve the settlement and other matters which are of the type ordinarily included in such notices. I am satisfied that the terms of the notices comply with the principles stated in the authorities as to the central purpose of such a notice. See, for example, Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 6) [2011] FCA 277 at [9] (Flick J).

12    It seems to me that the notices are sufficiently comprehensible and clear. It is true, as was discussed with counsel during this morning’s application, that the notices do not tell group members, either precisely or within any range of figures, the amount or the approximate amount that they are likely to receive from the proposed settlement. However, this is a necessary incident of the nature of the settlement and is of a type which has been applied in other such cases. I am also satisfied that the methods of publication of the notices and the means by which notice is to be given are in accordance with the approach taken in well-established authorities. See, for example, Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) (2006) 236 ALR 322 at [20] (Jessup J).

13    The reasons why I am satisfied that I should make the orders are sufficiently explained in the written submissions of counsel which I will mark “MFI1”. The only issue upon which it seems to me to be necessary to comment is the issue of the class closure orders.

14    The proceeding was commenced as an open class proceeding but the effect of the orders sought today will be to close the class of persons entitled to participate in the proposed settlement. This arises from the terms of the scheme which include a number of steps. Firstly, it requires a person to elect whether or not to opt out of the proceeding by 18 July 2014.

15    Second, it requires a person who is not a Funded Group Member to deliver to MBC data in relation to their shareholdings in Leighton by 18 July 2014, that is to say, the same date as the opt-out date. Such a group member is required to give notice electronically of the relevant details and is then required to execute a statutory declaration which will be sent to the shareholder to verify their shareholdings. The statutory declaration is required to be executed by 1 August 2014.

16    Importantly, the class closure orders which are sought today provide, in paragraph 15, that except for Funded Group Members, any group member who neither opts out by 4:00 pm on 18 July 2014, nor completes and returns a registration form and a statutory declaration in accordance with certain other orders that I propose to make, will remain a group member for all purposes, but subject to further order of the Court, shall not be entitled to receive a distribution from any amount agreed in settlement of these proceedings. This consequence is explained in clear terms to the relevant group members in paragraph 27 of the notice.

17    That paragraph states that if the group member does nothing and the settlement is approved, the group member will not receive compensation but will be bound by the settlement and will not be able to claim compensation from Leighton in the future in relation to the circumstances giving rise to the present proceeding. The Court has power to make class closure orders of this kind pursuant to s 33ZF of the Act. Orders providing for class closure have been made in a number of cases, including the decision in Thomas v Powercor Australia Ltd [2011] VSC 614 at [34]-[36] (Beach J); Collin v Aspen Pharmacare Australia Pty Ltd [2013] FCA 952 at [5] (Davies J) and Matthews v SPI Electricity Pty Ltd (Ruling No 13) [2013] VSC 17 (J Forrest J).

18    In Matthews his Honour discussed comprehensively all of the authorities which have dealt with the power of the Court to make class closure orders. His Honour was satisfied that he had power to make such an order under the provisions of the Supreme Court Act 1986 (Vic) and he referred to the similar provisions contained in Part IVA of the Act. His Honour stated that the decision which had “most excited” the interest of the parties in the case before him was the decision of Bromberg J in Winterford v Pfizer Australia Pty Ltd [2012] FCA 1199.

19    His Honour there refused to make a class closure order. He said that there must be “some compelling reason” for the Court to make such an order: Winterford at [5]. However, J Forrest J observed that Bromberg J was faced with a class closure application at a very early point in the proceeding and it was not surprising in the context of that case that he imposed such a stringent test: see [36]. Justice J Forrest considered that in the matter before him the position was considerably different.

20    It seems to me that the decision in Winterford is also distinguishable in the present case. It is true that the application is made at a very early point in the proceedings but it is necessary to bear in mind that the proceeding is one which has been the subject of extensive media coverage. Moreover, I am satisfied that it is appropriate to exercise the power under s 33ZF to make a class closure order in this case for two reasons.

21    First, it is necessary to facilitate the settlement and to provide for the distribution of the settlement proceeds in an efficient manner. There are a large number of group members who may be entitled to a portion of the fixed sum of money which is to be available for distribution. The proceeding is, as I have said, presently constituted as an open class proceeding and neither the applicant nor its solicitors, MBC, know the identity of all of the persons who may fall within the class. Accordingly, it is necessary for those group members who wish to take part in the settlement to identify themselves and provide their trading information so as to enable an efficient and orderly distribution of the funds.

22    Second, I am satisfied that the orders which are sought allow a sufficient period of time between the provision of notices to group members informing them that they need to take steps in order to participate in the proposed settlement and the time by which they must take such steps. The period which is allowed in the present case is a period of seven weeks. This is because even though registration details would need to be provided by group members on or before 18 July 2014, the relevant cut-off date is 1 August 2014 by which group members are required to send to Leighton the statutory declaration.

Associate:

Dated:    6 June 2014