FEDERAL COURT OF AUSTRALIA

McAlister v State of New South Wales (No 2) [2017] FCA 93

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to sections 33V and 33ZF of the Federal Court of Australia Act 1976 (Cth) (the Act) and Rule 9.70 of the Federal Court Rules 2011 (the Rules) the settlement of the proceeding (the Proceeding) be approved on the terms set out in:

(a)    the confidential Settlement Deed executed by the parties on 8 September 2016 (Settlement Deed) being annexure “BJS3” to the affidavit of Ben Slade affirmed on 5 October 2016; and

(b)    the Settlement Scheme (Settlement Scheme) being annexure “JAT38” to the affidavit of Jennifer Tallis sworn on 14 November 2016.

2.    Pursuant to Rule 1.34 of the Rules, dispense with the requirement in Rule 9.71(2)(c) for an opinion of an independent lawyer that the settlement is in the interests of the Applicant.

3.    Pursuant to section 33ZF of the Act or otherwise, Maurice Blackburn be appointed Administrator of the Settlement Scheme and to act in accordance with the rules of the Settlement Scheme.

4.    Pursuant to section 37AF(1)(a) and/or 37AG(1)(a) of the Act, the following annexures be made confidential and be sealed on the Court file in envelopes marked “Not to be opened except by leave of the Court or of a Judge” and not be published or made available to any person, including the respondents and their legal representatives, and any electronic version be treated in an analogous fashion:

(a)    Confidential Annexures JAT38A, JAT39, JAT40, JAT41, JAT42, JAT43, JAT44, JAT45 and JAT46 to the affidavit of Jennifer Tallis sworn on 14 November 2016;

(b)    Confidential Annexure LFF1 to the affidavit of Lydia Fogl sworn on 14 November 2016;

(c)    Confidential Annexure JAT47 to the affidavit of Jennifer Tallis sworn on 21 November 2016; and

(d)    Confidential Annexure JAT48 to the affidavit of Jennifer Tallis sworn on 22 November 2016.

5.    Paragraph 10 of the Orders of 12 October 2016 be amended to include, after the words “made available”, the words “to any person, including the respondents and their legal representatives”.

6.    Maurice Blackburn has liberty to apply on an ex parte basis for directions in connection with the Settlement Scheme.

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

REASONS FOR JUDGMENT

MORTIMER J:

INTRODUCTION

1    This proceeding was commenced on 20 September 2013 and was listed for a trial of at least three months commencing on 27 September 2016. On 24 August 2016, the parties informed the Court they had reached an agreement to settle the proceeding. In due course, an application for settlement approval under s 33V of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) was made and, on 24 November 2016, I made orders approving the settlement. Due to time constraints, and the desirability of allowing the parties to proceed to implement the settlement reached, I informed the parties at the hearing that I accepted the applicant’s submissions and I would give written reasons for approving the settlement in due course. These are my reasons for the orders made on 24 November 2016.

2    The submissions made by the applicant in support of the settlement approval application were detailed, and were developed by senior counsel at the settlement approval hearing. The respondents made short written submissions on confined issues, to which I refer where necessary in these reasons, but substantively the respondents accepted the way in which the applicant’s submissions described the matters of which the Court needs to be satisfied.

3    Having accepted the applicant’s submissions, I have placed considerable reliance on those submissions in my reasons.

BACKGROUND

4    The proceeding concerned the treatment of people living in what is called under the applicable New South Wales legislation a “licenced residential centre” – Grand Western Lodge (GWL) in Millthorpe, regional NSW. The claim period for the proceeding extended from 1 January 2000 to 15 August 2011, the latter being the date on which the last residents were removed from GWL pursuant to orders made by the NSW Guardianship Tribunal.

5    Mr McAlister was one of the residents of GWL. The first respondent (the State of NSW) issued licences to the second respondent under the Youth and Community Services Act 1973 (NSW) in relation to the operation of GWL, and had ongoing monitoring and enforcement powers under that Act. The third respondent was the “licenced manager” of GWL and a director and shareholder of the second respondent.

6    In broad terms, the claims made in the proceeding concerned how the applicant and other class members were treated while they were residents at GWL. The allegations covered a wide range of alleged conduct by the second and third respondents. There were allegations of physical mistreatment, psychological abuse, unjustified retention of the whole of the applicant’s pension payments, misappropriation of pension monies, failures to maintain and secure the premises so as to avoid the residents injuring themselves, and failures to adequately supervise and look after residents, especially those who were older or high care residents and those at risk of self-harm.

7    There were also allegations against the second and third respondents about breaches of licence conditions in relation to some or all of the conduct I have described. The claim against the State was one framed in negligence (both at common law and under the Civil Liability Act 2002 (NSW)) in relation to the way the State monitored compliance with the licence conditions imposed on the second and third respondents in the operation and management of GWL.

8    All the claims were denied by the respondents. The second and third respondents disputed at factual levels most of the allegations made against them. The State put in issue whether it owed a duty of care to the applicant and class members, as well as questions of breach and damage. Somewhat unusually, it also contended some of the licence conditions were invalid. Cross-claims were filed by each of the first, and the second and third respondents.

9    The evidence disclosed a great deal of work had been undertaken prior to the commencement of proceedings, both in terms of tracking down and interviewing former residents, reviewing the licensing arrangements with the NSW government, and obtaining expert evidence. After the proceeding was filed, as the applicant’s evidence noted, the matter was listed before the Court on more than 40 occasions (including three interlocutory hearings), although appearances were sometime avoided by a cooperative approach. The matter went through the dockets of three judges in this Court. The resources consumed before and after the proceeding commenced were on, any view, significant.

10    The trial was listed for a period of three months; that period not contemplated to include final submissions. The applicant filed outlines for 48 lay witnesses. The respondents filed outlines for 38 lay witnesses. Evidence from eight expert witnesses was also foreshadowed. A number of orders and directions had been made relating to the venue of the part of the trial to be held in and around Millthorpe so as to provide an environment likely, or as likely as possible, to be conducive to the applicant and class members being able to give the best evidence they could, given their special needs and disabilities, and given the strain giving evidence was likely to put them under. Appropriately, the respondents were all cooperative in these modifications to the usual trial process.

11    Two formal mediations were undertaken, with the Hon Peter Jacobson QC as mediator. The final mediation was conducted in August 2016 and produced a successful outcome.

12    The evidence relied upon by the applicant in support of the settlement approval application was:

(1)    Affidavit of Ben Slade affirmed on 5 October 2016;

(2)    Affidavit of Jennifer Anne Tallis sworn on 14 November 2016;

(3)    Affidavit of Lydia Fernandes Fogl sworn on 14 November 2016;

(4)    Affidavit of Jennifer Anne Tallis sworn on 21 November 2016;

(5)    Affidavit of Jennifer Anne Tallis sworn on 22 November 2016.

13    Some of these affidavits contained confidential annexures. The affidavit of Ben Slade affirmed on 5 October 2016 contained the confidential annexures BJS3, BJS4, BJS8, BJS9, BJS10, BJS11, BJS12, BJS13, BJS14 and BJS15. The affidavit of Jennifer Anne Tallis sworn on 14 November 2016 contained the confidential annexures JAT38A, JAT39, JAT40, JAT41, JAT42, JAT43, JAT44, JAT45 and JAT46. The affidavit of Lydia Fernandes Fogl sworn on 14 November 2016 contained confidential annexure LFF1; the affidavit of Jennifer Tallis sworn on 21 November 2016 contained confidential annexure JAT47; and the affidavit of Jennifer Anne Tallis sworn on 22 November 2016 contained confidential annexure JAT48. Those annexures were the subject of confidentiality orders made by the Court, with the consent of all parties, on 12 October 2016 and 24 November 2016.

The class members

14    The class members were defined in the Further Amended Statement of Claim as people who resided at GWL “for some time within the period 1 January 2000 to 15 August 2011” and who suffered loss or damage as a result of the conduct I have summarised above.

15    After considerable investigations, the applicant’s legal representatives deposed, and I accept, that they were satisfied they had identified all the former residents of GWL who fell within the definition of the class. No class member opted out the proceeding. A significant number had died. Thus, the Court was able to be satisfied that the settlement proposal was communicated to all members of the class (or their representatives), and all members of the class (or their representatives) were given an opportunity to object to it. None did so.

16    The class members, including the applicant, have a range of special needs and disabilities. Ms Tallis deposed in her affidavit sworn on 14 November 2016 that approximately 88% of the class members had been diagnosed with schizophrenia and 24% had been diagnosed with intellectual disabilities. It was apparent from much of the other material before the Court, including that adduced in support of various interlocutory applications about the trial process, that the residents of GWL (both male and female) had complex, and changing, medical and psychiatric conditions. The class members displayed a range of abilities in their capacity to understand and retain information provided to them, to make choices and decisions, to communicate, and to interact with those around them.

17    The particular attributes of the class members affected not only arrangements for the trial itself, but also the form, content and communication of documents such as notices required under s 33X of the Federal Court Act, including, for present purposes, notices required by s 33X(4) of the Act. The settlement notices went through several iterations until the Court was satisfied they provided the information required, and did so in a way which ensured so far as possible that each class member would be given the information in a way she or he was likely to understand. For some class members, this meant the notices were sent to their guardians, financial managers or carers, with the applicant’s solicitors at Maurice Blackburn being required to ensure those individuals had subsequently explained the contents of the notices to the class member. The evidence demonstrated there were several class members who, because of particular health issues, were unlikely to have capacity to understand the notices, or for whom it was deemed by those treating the class member unwise for the class member to be confronted with this information at a given time. For each of those individuals, the applicant’s solicitors undertook to ensure the class member’s situation would be monitored so that she or he could be informed of the settlement and its effect on her or him at a time deemed suitable by those treating her or him. I am satisfied in the circumstances this was a fair and reasonable approach to take.

18    I consider the particular attributes of the class members in this proceeding was an important factor in assessing the reasonableness of the proposed settlement, in that the settlement avoided for the applicant and the class members what was plainly going to be an acutely difficult experience in giving evidence. Those attributes also led me to place considerable weight on the fact that a settlement of the proceeding would bring finality and certainty to the claims of the class members at a very much earlier point in time than would otherwise have been the case – a matter of particular benefit to class members who face a number of challenges in their daily lives. I also consider the interests of the families of those class members who have died are served by finality coming several years earlier than is otherwise likely to have been the case.

The settlement and proposed settlement scheme

19    The notice served in accordance with s 33X(4) of the Federal Court Act describes the nature of the settlement. I use those terms because, while the settlement deed as a whole remains a confidential document, the notices are in the public domain, as they are attached to orders made by the Court on 12 October 2016:

4.2    In summary, Mr Powell, Avibin Pty Ltd and the State of New South Wales have agreed to pay the following amounts:

(a)    $4.05 million dollars in compensation (Compensation), which is to be shared amongst the Applicant and Class Members as described in paragraph 4.6 below; and

(b)    $3 million for the applicant’s legal costs plus a further amount for the balance of the applicant’s legal costs to be agreed or assessed.

4.3    The Applicant’s total costs (including costs to date and estimated future administration costs of the proposed settlement) are in the order of $6.9 million (including GST), of which $3 million has been agreed as referred to in (b) above. The parties have not yet been able to reach agreement regarding the balance of the Applicant’s costs (Costs Balance). The Applicant and First Respondent have agreed to continue negotiations regarding the Costs Balance and will either agree on an amount payable or refer the matter to the Federal Court for an assessment of costs. The amount of Class Member Compensation referred to in paragraph (a) above will not be affected by this process.

4.4    Under the terms of the Settlement Deed, the Federal Court of Australia will enter a judgment against Mr Powell, Avibin Pty Ltd and the State of New South Wales, and award damages of:

(a)    $2 million from the State of New South Wales;

(b)    $2.05 million from Mr Powell and Avibin Pty Ltd.

4.5    In exchange for receiving the Compensation, the Applicant and Class Members will:

(a)    release each of the Respondents from all claims made in the GWL Class Action (and claims in relation to the subject matter of the GWL Class Action) and will not be able to bring any further claims in relation to the GWL Class Action;

(b)    not disparage (criticise or ridicule) the State of New South Wales, Adrian Powell or his company, Avibin Pty Ltd; and

(c)    keep the details of the settlement confidential.

4.6    The process by which the $4.05 million Compensation is to be distributed between the Class Members is outlined in a draft Settlement Distribution Scheme (Settlement Scheme). A copy of the Settlement Scheme will be given to you by Maurice Blackburn on request.

4.7    The Settlement Scheme contains a confidential damages assessment methodology (Assessment Methodology), which:

(a)    has been used to calculate the Compensation Estimate for each Class Member – the amount calculated for you is in the letter with this Notice; and

(b)    if the settlement is approved by the Court, will be used to calculate the final amount to be paid to each Class Member.

20    As I have noted, the settlement deed provides (in cl 12.12) that the terms of settlement are confidential, subject to a number of limited exceptions. The exception of present relevance is cl 12.12(b), which relevantly provides that the matters set out in cl 10 may be disclosed publicly. Clause 10.1 provides:

10.1    Within two Business Days of completion of the Settlement Scheme, the Applicant must apply to the Court for the following orders pursuant to section 33Z(1)(f) of the FCA:

(a)    Judgment for the Applicant against the First Respondent;

(b)    An award of damages in favour of the Applicant and Group Members against the First Respondent in the aggregate amount of $2,000,000;

(c)    Judgment for the Applicant against the Second Respondent and Third Respondent;

(d)    An award of damages in favour of the Applicant and Group Members against the Second Respondent and Third Respondent in the aggregate amount $2,050,000;

(e)    That the Respondents pay the costs of the Applicant as agreed or taxed;

(f)    The cross claims be dismissed with no order as to costs; and

(g)    The Proceeding be otherwise dismissed.

21    The detailed circumstances of the class members remain confidential. So too does the methodology by which compensation will be calculated for each class member, and the sums of compensation payable to each class member based on that methodology. Having considered the evidence about that methodology, and taking into account counsel’s independent opinion about the compensation outcome for Mr McAlister produced by that methodology compared to counsel’s opinion of what Mr McAlister might be awarded by a Court if his claim succeeded, I am satisfied that it is likely to produce a fair and reasonable amount of compensation for each of the class members, when balanced against the risks of proceeding to trial.

22    I considered there was nothing inappropriate in the circumstances about the maintenance of a limited form of confidentiality of this kind, in particular confidentiality concerning how the compensation payments for each individual class member were to be calculated.

23    The process by which the settlement scheme will be administered is as follows. The administrator of this settlement scheme is Mr Slade, a principal of Maurice Blackburn. He is responsible for the calculation of the “compensation estimate” for each class member in accordance with the “Confidential Damages Assessment Methodology”. Once the estimate is calculated for each class member, the administrator will notify each of the class members of the amount of the compensation estimate less 20%, comprised of a review reserve (10%) and provision for Commonwealth liabilities (10%). I note that class members have already been given some estimate of their likely settlement sum in the letters which went out with the settlement notices. Review can be sought of the compensation estimate if any class member is dissatisfied with the figures. The administrator can make both interim and final distributions of the sums received.

RELEVANT LEGISLATIVE PROVISIONS

24    Section 33V of the Federal Court Act provides:

Settlement and discontinuance—representative proceeding

(1)    A representative proceeding may not be settled or discontinued without the approval of the Court.

(2)    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.

25    Section 33ZB of the Federal Court Act is in the following terms:

Effect of judgment

A judgment given in a representative proceeding:

(a)    must describe or otherwise identify the group members who will be affected by it; and

(b)    binds all such persons other than any person who has opted out of the proceeding under section 33J.

26    Section 33ZF of the Federal Court Act provides:

General power of Court to make orders

(1)    In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.

(2)    Subsection (1) does not limit the operation of section 22.

27    Rule 9.70 of the Federal Court Rules 2011 (Cth) stipulates:

Compromise or settlement of matter in proceeding

(1)    If a litigation representative agrees to the compromise or settlement of any matter in dispute in a proceeding, the litigation representative must apply to the Court for approval of the agreement.

(2)    If the Court approves the agreement, the agreement is binding on the person by or for whom it was made as if:

(a)    the person were not under a legal incapacity; and

(b)    the litigation representative had made the agreement as the person’s agent.

(3)    The Court may, as a condition of approval, require that any money or other property payable for the benefit of a person under a legal incapacity be dealt with by way of a settlement, or in any other way that the Court considers appropriate.

Note:    The Court may give approval subject to conditions—see rule 1.33.

(4)    If the Court does not approve the agreement, the agreement is not binding on the person under a legal incapacity.

28    Rule 9.71 provides:

Application by litigation representative for approval of agreement

(1)    An application by a litigation representative for approval of an agreement must be made by filing an interlocutory application.

(2)    The interlocutory application must be accompanied by the following:

(a)    an affidavit stating the material facts on which the application relies;

(b)    the agreement that is sought to be approved;

(c)    an opinion of an independent lawyer that the agreement is in the best interests of the person under a legal incapacity.

CONSIDERATION

29    There was no dispute between the parties about the principles to be applied by the Court in considering whether to approve a settlement proposal under Pt IVA of the Federal Court Act, and also in considering whether to approve the settlement of a proceeding brought on behalf of a person under a legal disability, for the purposes of r 9.70 of the Federal Court Rules.

30    Consideration should also be given to the matters set out in the Court’s “Class Actions Practice Note (GPN-CA)”, in particular the matters in paragraphs 13 and 14 of that practice note.

31    Taking into account the claims made on behalf of all class members who will be bound by the settlement, the Court must be satisfied that the settlement is a fair and reasonable one: Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [7]; Hobbs Anderson Investments Pty Limited v Oz Minerals Limited [2011] FCA 801 at [3]. In determining whether to approve a settlement proposal, the Court must look beyond the interests of the applicant and consider whether the settlement is in the interests of all class members: Australian Competition and Consumer Commission v Chats House Investments Pty Limited [1996] FCA 1119; 71 FCR 250 at 258; Oz Minerals at [3]. That does not mean the Court will engage in any “second guessing” of the decision to enter into the settlement, or of the advice given to the applicant: see the observations of Jessup J in Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) [2006] FCA 1388; 236 ALR 322 at [50]. While, as Jacobson J pointed out in Taylor v Telstra Corporation Ltd [2007] FCA 2008 at [56]-[66], there may be some differences of emphasis in the authorities about how a court is to determine whether a settlement is fair and reasonable, an assessment of that kind is a familiar task for a court.

32    In terms of fairness, it requires careful assessment of how the interests of both the applicant and the class members are dealt with, the attitudes of class members to the settlement, the risks of continuing the proceeding to trial, and the costs and resources involved in doing so. In terms of reasonableness, the task requires an assessment by the Court of the applicant’s prospects of success and the risks involved in the claim as put, the likelihood of class members obtaining orders in excess of what they will receive under the settlement proposal, and the opinions of counsel and of an independent expert (as the Class Actions Practice Note requires). In order to avoid the “second guessing” of which Jessup J spoke in Darwalla, many of these matters must be considered with a degree of removal from too close an intellectual engagement with the various legal and factual arguments available to each side. Although the Court’s role is a protective one, it is not the Court’s task to descend into the arena of the forensic fight. Fairness and reasonableness are moderate standards, rather than ones which require absolute certainty or confidence in a particular point of view about legal issues, if there can ever be such certainty in the law in any event.

33    Reflecting the state of the law prior to its coming into effect, [14.5] of the Class Actions Practice Note provides that the material filed in support of an application for Court approval of a settlement will usually need to address at least the following factors:

(a)    the complexity and likely duration of the litigation;

(b)    the reaction of the class to the settlement;

(c)    the stage of the proceedings;

(d)    the risks of establishing liability;

(e)    the risks of establishing loss or damage;

(f)    the risks of maintaining a class action;

(g)    the ability of the respondent to withstand a greater judgment;

(h)    the range of reasonableness of the settlement in light of the best recovery;

(i)    the range of reasonableness of the settlement in light of all the attendant risks of litigation; and

(j)    the terms of any advice received from counsel and/or from any independent expert in relation to the issues which arise in the proceeding.

34    The applicant’s submissions correctly note that, by the use of the word “usually” in the Class Actions Practice Note, some caution is sounded to the effect that these factors are not exhaustive, and are not mandatory: see Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1468 at [5] (Moshinsky J), and the authorities there referred to.

35    It is also critical – especially in a case such as the present – that the way the Court approaches these kinds of factors is tailored specifically to the particular circumstances of the proceeding: see Darwalla at [33]-[34].

36    Approval under r 9.70 of the Federal Court Rules involves a smaller range of considerations because the question is only whether the settlement is in the best interests of the applicant as a represented person, rather than looking at the interests of the class members as a whole. I adopt the approach I set out in Scandolera v State of Victoria [2015] FCA 1451; 331 ALR 525 at [26]-[27], where I said:

As I noted in my reasons for approving settlement in Butler v Djerriwarrh Employment & Education Services Inc [2015] FCA 296, in determining whether or not to approve the settlement, for the purpose of rendering it binding on the applicants, the Court must be satisfied the settlement is in their best interests, or beneficial to their interests. That is not a requirement of the Rules themselves but stems from the nature of the jurisdiction exercised by the Court where a party is under a disability and unable to conduct a proceeding himself or herself.

It is the Court’s responsibility to determine, for itself, whether the settlement is beneficial to the interests of the person under a disability: see Somerset v Ley [1964] 1 WLR 640 sub nom Re Ley’s Trusts [1964] 2 All ER 326; Permanent Trustee v Mills [2007] NSWSC 336; 71 NSWLR 1 at [29] per Hammerschlag J; Fisher v Marin [2008] NSWSC 1357 at [29] per Rothman J; Button v CSL Ltd [2014] FCA 601 at [31] per Barker J.

Whether the settlement agreement should be approved pursuant to s 33V of the Federal Court Act

37    There were no objections to the settlement by any of the class members. A review of one compensation estimate was sought, and Ms Tallis deposed that the issue raised was minor and no impediment to the settlement proceeding. Indeed, 14 class members completed Attachment D to the settlement notice, which was entitled “Expression of Support for the Proposed Settlement”. Their responses are covered by confidentiality orders made by the Court, but I have read the responses and I am satisfied that the sentiments they express support the approval of the settlement. Ms Tallis also deposes that class members and their carers or representatives who have communicated with Maurice Blackburn have expressed:

(a)    relief that the trial would not proceed as listed;

(b)    excitement at the prospect of receiving compensation; and

(c)    satisfaction with the amount of the Compensation Estimates notified to them.

38    Again, because of the particular attributes of the applicant and class members, I consider this evidence to be of great significance in determining whether the settlement is fair and reasonable.

39    While on topics connected with the attributes of the class members, I consider it of some importance in this proceeding that the working out of the claims of individual class members, even if the applicant’s claims had succeeded, was likely to be fraught with difficulty. The precariousness of the health of some class members is a real factor. The time and resources necessary to adduce evidence about each of their individual circumstances in order to resolve their claims would have been much greater than in many class actions. Communications with class members need great care, and take much time and effort. Obtaining evidence (including medical evidence) is also more intensive than in many other cases. Adducing that evidence in an environment which would enable class members to be treated fairly and have a reasonable opportunity to give their best evidence, as I have noted above, presents particular challenges. The risks of not being able to maintain and complete the class action after the completion of the applicant’s claims was considerable.

40    These considerations attach to the risks of both the applicant and the class members proving their case and their damages. Both liability and damages claims depended to an extent on the credibility and reliability of the evidence to be given by the applicant and eventually, the class members. The challenges in adducing the best evidence from the applicant and the class members were likely to be considerable, even with substantial modifications to the Court’s processes. As I have noted, the second and third respondents mounted a substantial contest on the factual underpinnings of the applicant’s claims. The first respondent had a number of legal arguments which, if successful, could have resulted in no liability for the State at all.

41    The applicant submitted there was some doubt about the capacity of the second and third respondents to satisfy any judgment made against them, and the Court should weigh this as a factor in approving the settlement. There was no evidence before the Court concerning the financial position of the second and third respondents, nor the position of their insurers. The existence of insurers for the second and third respondents was, at least, a matter that was before the Court in the course of these proceedings. I am not able to be satisfied, one way or the other, whether the second and third respondents had or lacked capacity to satisfy a large judgment debt. However, I can of course note that they have agreed to pay the applicant over $2 million, with the State agreeing to $2 million exactly. The second and third respondents therefore can be taken to have a reasonable capacity to meet a judgment debt.

42    How much larger any compensation figure may have been had the matter been fully litigated is difficult to even estimate. What would have changed, obviously, is the amount of legal costs in issue, due to a trial lasting more than three months, including travel to various hearing venues, considerable expert evidence, and the need to take evidence probably more slowly than usual to accommodate the needs of the applicant and his witnesses. The legal costs would have been very large indeed. Perhaps the second and third respondents had additional capacity to satisfy such orders as well, or perhaps not. There is simply no evidentiary basis to reach a conclusion one way or the other. I do not consider this factor tends for or against approval of the settlement, save that the Court is entitled to assume the second and third respondents can meet the financial obligations they have undertaken in the settlement deed.

43    Settlement was reached late in these proceedings and shortly before the trial was scheduled to commence, at a stage where the parties, and the Court, were apprised of the detail of the claims and defences, and the evidence proposed to be adduced to support them. As the applicant’s submissions noted, over 20,000 documents had been discovered so there was a high level of knowledge about the documentary evidence either supporting or detracting from the parties’ positions. Settlement at this later stage means the parties, and those producing opinions in relation to settlement, could have confidence the agreed outcome appropriately took into account the strengths and risks in the case as it was to be ultimately framed. The Court can also have that confidence.

44    It is apparent from some of the features of the proceeding I have already described that this was a factually and legally complex piece of litigation. There were issues of legal principle involved which could have had ramifications well outside this proceeding – the liability of the State in the circumstances pleaded being one example. The centrality of issues such as that to the proceeding increased the likelihood of an appeal, and therefore the drawing out of the finalisation of the proceedings over several more years. Combined with the particular attributes of many of the witnesses, the evidentiary side of the case alone had a high level of complexity.

45    There were written opinions in evidence from both solicitors and counsel for the applicant. I have placed considerable weight on these opinions. I am satisfied that it is appropriate to consider counsels’ opinion as that of an “independent expert” for the purposes of the Class Actions Practice Note. Counsel at the independent Bar are required to act with independence and in the interests of the administration of justice, including by providing independent advice. The opinions were thorough, and balanced. Since they are both subject to confidentiality orders, I say no more about their content.

46    I accept the applicant’s submissions that, when the risks attending the litigation are taken into account, the proposed settlement is “well within the range of what would be regarded as reasonable”. I also accept that the methodology adopted in the settlement scheme appropriately allocates the funds available between the class members, based on criteria that are relevant and individualised to each class member. Those conclusions are also consistent with the contents of the independent opinion.

47    The applicant pointed to an additional factor: namely, the likely impact of the proceeding on class members. It will be apparent from my reasons that I agree that is a significant consideration. Another factor weighing in favour of approval is that settlement brings to an end a very long process of litigation (three years in this Court before trial), concerning events occurring more than 16 years ago. The third respondent, as an individual, is also entitled to finality. The potential adverse effects on individuals within the various State departments and authorities who were going to be witnesses, giving instructions, or otherwise closely involved in the litigation, and who have also lived through the events with which this proceeding is concerned, should not be overlooked. When the State is a party to any proceeding, it can be too easily forgotten that there are individuals responsible for carrying out duties associated with the State being such a party, and those individuals may also be affected by prolonged and difficult litigation.

Whether the settlement agreement should be approved pursuant to r 9.70 of the Federal Court Rules in relation to Mr McAlister

48    In her affidavit of 21 November 2016, Ms Tallis deposes that the Principal Legal Officer of NSW Trustee and Guardian, Ms Catherine Phang, was closely involved in the negotiation leading to the proposed settlement, including the mediation on 18 and 23 August 2016. Ms Tallis deposes that Ms Phang has instructed Maurice Blackburn to make an application to the Court seeking approval of the settlement of the proceeding on the terms set out in the deed and through the proposed settlement scheme.

49    Given the obviously appropriate performance of Ms Phang’s obligations as Mr McAlister’s litigation representative, and given the matters to which I have referred at [38] to [45] above, which are relevant to Mr McAlister individually, I am satisfied that it is in the best interests of Mr McAlister for this settlement to be approved by the Court.

The unresolved issue between the applicant and the first respondent as to costs

50    The settlement includes an agreement by the respondents to pay the sum of $3 million by way of legal costs to Maurice Blackburn. That does not resolve the question of legal costs as between the parties, and at the hearing in November 2016 the Court was informed that negotiations are ongoing in relation to the remainder of the costs. One of the amendments I required to be made to the notices to class members was the inclusion of specific reference to the amount agreed to be paid to Maurice Blackburn by way of costs, so that class members were informed about that payment. They were also all clearly informed no additional liability rested with class members to pay any legal costs to Maurice Blackburn. As the respondents’ submissions noted, approval of the settlement does not affect the respective rights of the parties to continue to negotiate, based on their competing perspectives, about the remainder of the claim by Maurice Blackburn in relation to legal costs.

51    It is clear from the terms of the deed the sum allocated for legal costs is not carved out of any compensation payment that otherwise would have been paid to class members, but rather is a stand-alone payment. To the extent the Court has a role in considering the sum agreed to be paid by way of legal costs as part of the settlement approval process is fair and reasonable, there is evidence before the Court from Mr Slade, Ms Tallis and Ms Lydia Fernandes Fogl, a costs assessment expert, that explains why the costs of this proceeding have been high, and why the sum of $3 million, although it is almost as much as the compensation payment of just over $4 million, is explicable.

52    What, if any, further costs are agreed between the parties is a matter for them. As senior counsel for the State submitted at the settlement approval hearing, Maurice Blackburn have assumed the risk in this regard. I do not consider these arrangements provide any impediment to the Court approving the settlement.

Orders regarding confidential documents

53    On 12 October 2016 and on 24 November 2016, orders were also made preserving the confidentiality of certain evidence adduced in support of the settlement approval by the Court. The parties were agreed on the appropriateness of these orders, and I accept the orders were appropriate in the circumstances. Preservation of the confidentiality of the matters contained in those documents (the detailed circumstances of the class members, the methodology for calculating settlement and the like) are all matters which I am satisfied assisted in producing a final and binding outcome, and the resolution of this complex proceeding.

Associate:

Dated:    14 February 2017

SCHEDULE OF PARTIES