FEDERAL COURT OF AUSTRALIA

Wotton v State of Queensland (No 11) [2018] FCA 1841

ORDERS

THE COURT ORDERS THAT:

1.    The sum of $233,540 (“the Financial Counselling Sum”) be set aside from the settlement sum to be applied for the purposes of clause 51A of the Palm Island Class Action Settlement Scheme in the form attached as Schedule 1 to the orders made 15 June 2018 (“the Scheme”).

2.    Until further order or the completion of the administration of the Scheme, whichever occurs first, financial counselling, advice, and assistance be provided by the Indigenous Consumer Assistance Network Ltd (“ICAN”) to registered group members pursuant to clause 51A of the Scheme on the terms and in the manner described in the affidavit of Aaron Davis made 26 June 2018.

3.    For the purposes of clause 51A of the Scheme and prior to the payment of any part of the Financial Counselling Sum, ICAN is to account to the Administrator monthly during the administration of the Scheme by delivering on or before the last business day of each month, an itemised invoice in relation to the costs and expenses incurred in that month for the provision of financial counselling, advice, and assistance provided to registered group members.

4.    Within 10 business days after the delivery of an itemised invoice pursuant to paragraph 3 of these orders, the Administrator pay to ICAN the amount set out in such invoice from the Financial Counselling Sum, unless the Administrator has cause to approach the Court for direction in relation to any issue regarding such payment.

5.    The orders made 15 June 2018 be varied to increase the amount of “administration costs” as defined in the Scheme and allowed by sub-paragraph 5(c) by the amount of $10,359.60, so that the total allowed for administration costs is $1,561,109.60.

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

REASONS FOR JUDGMENT

MURPHY J:

1    This proceeding is a class action brought by the applicants on their own behalf and on behalf of all Aboriginal and Torres Strait Islander people who were ordinarily resident on Palm Island as at 19 November 2004 and who remained ordinarily resident there as at 25 March 2010, against the respondents the State of Queensland and the Commissioner of the Police Service of Queensland, alleging various breaches of s 9(1) of the Racial Discrimination Act 1975 (Cth) by reason of the conduct of members of the Queensland Police Service in November 2004.

2    On 15 June 2018 I made orders under s 33V of the Federal Court of Australia Act 1976 (Cth) (the Act) approving an in-principle settlement of the class action, pursuant to which the State of Queensland agreed to pay $30 million in settlement of the class members’ claims and costs and to provide a public apology: see Wotton v State of Queensland (No 10) [2018] FCA 915.

3    At the settlement approval hearing I expressed a concern that some members of the Palm Island Aboriginal community might have limited education and financial literacy and might be vulnerable to being exploited by predatory behaviour by traders. I asked the parties to consider whether the settlement distribution scheme should include provision to set aside a sum of money so that class members, or at least those who wish to receive it, be provided with financial counselling and assistance.

4    The parties adopted the suggestion and included cl 51A in the settlement distribution scheme, the Palm Island Class Action Settlement Scheme (the Scheme). It provides:

The Court has said that an amount to be determined at a later date will be made available for the Indigenous Consumer Assistance Network (or “ICAN”) so that they can give financial counselling services to all of the registered group members who are being paid out of the settlement fund. ICAN will account to the scheme administrator for the use of the money that they are given.

I approved the Scheme including cl 51A, and made directions for the filing of evidence relevant to any amount of money to be set aside for such services.

5    Subsequently the applicant filed an affidavit by Mr Aaron Davis, Chief Executive Officer of the Indigenous Consumer Assistance Network Ltd (ICAN) made on 27 June 2018. In reliance on that evidence on 9 August 2018 I made orders approving $233,540 to be set aside from the settlement fund and be applied in accordance with the Scheme for the provision of financial counselling, advice and assistance to registered class members through ICAN. I now provide my reasons for doing so.

The evidence

6    There are 441 registered class members who presently appear to be entitled to share in the settlement. Approximately 170 of those persons are likely to receive a maximum of $10,000 in compensation under the Scheme, while another approximately 105 are likely to receive a maximum of $20,000 in compensation. Of the remaining approximately 166 class members, many will receive upwards of $65,000 in compensation.

7    Mr Davis deposed that ICAN is prepared to provide individual class members with financial counselling if they wish to take it, and also offer broader financial counselling programs to the community. He confirmed the desirability of providing class members with financial planning and said:

Remote Indigenous communities experience a combination of geographical, historical and cultural factors which increase situational vulnerability to consumer detriment, when coupled with lower literacy rates and limited access to financial counselling services. The combination of these factors presents a unique set of circumstances for Indigenous-specific consumer exploitation to occur.

Over its 11 years of financial counselling and capability service delivery to Aboriginal and Torres Strait Islander peoples, ICAN has uncovered a number of systemic consumer issues where traders were found to be targeting Indigenous consumers through practices of telemarketing, door-to-door trading of goods and services at inflated prices and signing residents up to inflated and illegal consumer credit contracts. Usually, Indigenous consumers do not have the financial capacity to enforce their legal rights in respect of these predatory behaviours. ICAN’s consumer advocacy work in the above areas has led to a number of enforcement actions by state and federal consumer regulators against various traders who were found to be operating unconscionably or in direct breach of consumer credit laws.

There is an opportunity to provide preventative specialist financial counselling and financial literacy services, to ensure as best as possible that registered group members in the class action are informed of the implications of the settlement monies they will be receiving, receive support to mitigate their exposure to such predatory behaviour, and to understand their options and rights. Further, in my experience, many Indigenous people find it difficult to navigate the laws and regulations surrounding the receipt of government benefits and are not aware of the penalties and costs that they may be exposed to by failing to report the receipt of a substantial sum of money.

8    He said that ICAN is a charity that has been operating in North Queensland and the Torres Strait since October 2007, with the objective of empowering Indigenous consumers, and it delivers financial counselling, and financial capability and training services to Indigenous peoples with a particular focus on delivering these services to remote communities. He said that ICAN is structured as a public company limited by guarantee, with four Directors and 18 employees across four offices located in Cairns, Townsville and the Yarrabah and Palm Island Aboriginal communities. It is registered with the Australian Charities and Not for Profits Commission and is funded by the Commonwealth Department of Social Services and the Queensland Department of Communities, Child Safety and Disability Services.

9    Mr Davis stated that ICAN has extensive experience in delivering local financial counselling and financial capability services to the Palm Island community. He said that in 2007 ICAN commenced providing money management services in the Yarrabah and Palm Island Aboriginal communities in a program which was part of a larger Federal government scheme, doing so over 6.5 years. Through that program ICAN provided a number of specialist financial capability services including in relation to financial counselling, financial literacy education, No Interest Loans, Tax Help, consumer advocacy services and an introduction to home ownership.

10    Mr Davis stated that ICAN has devised a project plan for the delivery of financial counselling services to class members and considered the resources that it believes are necessary to ensure class members are provided with adequate financial counselling, both in an individual and group capacity. It has prepared a budget, which Mr Davis exhibited to his affidavit, which details the amounts that ICAN considers will provide the necessary resources to ensure, as best as possible, that class members receive:

(a)    specialist advice about the implication of the settlement on existing government payments and entitlements;

(b)    specialist advice on dealing with creditors wanting payments for existing debts;

(c)    referrals to ethical investment advice, including Palm Island home ownership;

(d)    referrals and linkages to the Queensland Public Trustee for people that want to make a will or have a disability which impacts their capacity to make reasoned financial judgements;

(e)    support to prevent economic abuse by family or friends; and

(f)    financial literacy education/advocacy to prevent/address exploitative trader behaviour.

11    Pursuant to the budget, Mr Davis said that it will cost $233,540 to be able to offer and deliver such services to individual class members if they want it, and more broadly to in a group capacity. The budget includes provision for, amongst other things:

(a)    the cost of a senior financial counsellor for 1 day per week of on-site financial counselling and 1.5 days per week of off-site casework for the 12 months that is expected to take to administer the Scheme, including travelling costs and the provision of items such as a laptop, telephone and insurance. That is on top of the existing 1 day per week of financial counselling services that ICAN already provides on Palm Island;

(b)    ICAN to deliver a communication strategy to ensure that the availability of such services are well promoted; and

(c)    ICAN to provide six financial literacy workshops, and to coordinate two community barbecue events with project partners including the Department of Human Services, Ethical Financial Planning Representative, the Public Trustee of Queensland and the Commonwealth Bank of Australia.

12    The question arises as to whether the deduction of $233,540 from the settlement fund is in the interests of class members. I note that class members will receive differing amounts of compensation under the Scheme, some of which will be much larger than others, and I expect that not all class members will require or be interested in receiving financial counselling. Class members seek compensation through the case and although any pro rata reduction in their individual recoveries from the settlement will be minimal, there is nothing to show that all class members agree to it.

Determination

13    The Court’s task under s 33V(1) is to decide whether a proposed settlement is fair or reasonable in the interests of class members as a whole, as well as the class members inter se. It has an important and onerous role; akin to acting as a guardian of class members’ interests: Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [7]-[8] (Jacobson, Middleton and Gordon JJ); Lopez v Starworld Enterprises Pty Ltd [1999] FCA 104 at [15]-[16] (Finkelstein J). Upon being satisfied that a settlement is fair and reasonable the Court has power pursuant to s 33V(2) to “make such orders as are just with respect to the distribution of any money paid under a settlement”.

14    I am satisfied that offering effective financial counselling services and programs to class members is in their interests.

15    First, Mr Davis said, and I accept, that a range of geographical, historical and cultural factors mean that many members of the Palm Island Aboriginal community have low levels of education and financial literacy. They are vulnerable to exploitation, and over the last 11 years ICAN had seen many examples of traders unfairly targeting Aboriginal consumers and seeking to take advantage of them. There was also evidence before the trial judge that in 2006 Palm Island ranked in the 89th percentile of disadvantaged Aboriginal communities in Australia: see Wotton v State of Queensland (No 5) [2016] FCA 1457 at [53] (Mortimer J). That is, even among Aboriginal communities which are notoriously disadvantaged when compared to other identifiable Australian communities, Palm Islanders suffer disproportionate difficulties.

16    Second, financial counselling, advice and assistance will be offered to all registered class members, and even class members receiving small amounts may require some level of assistance. The evidence establishes that class members are likely to benefit from the provision of access to impartial advice from financial counsellors who are familiar with the situation of Aboriginal people on Palm Island: (a) to assist those class members with low education and/or financial literacy to put the money to best use; (b) to protect class members from exploitation by predatory third parties; (c) to assist class members in relation to any effect on their government entitlements or benefits through the receipt of lump sum compensation; and (d) to inform class members of their options and rights. I am satisfied that offering financial counselling and advice is in the interests of all class members, even those receiving smaller amounts.

17    For those class members in the SERT group, compensation upwards of $65,000 is likely to provide an opportunity for that person to make significant changes to their, and their family’s, situation. Given their possible vulnerability to exploitation that might not occur unless they receive advice directed to putting the money to their best use. It is plainly in their interests that they receive preventative financial counselling and financial literacy services from an impartial organisation with experience in the Palm Island community.

18    Third, having regard to the interest that has been and will be earned on the $30 million settlement fund, setting aside $233,540 for financial counselling will not materially reduce the corpus of the settlement fund. The effect on the pro rata distributions to individual class members will be minimal.

19    I am satisfied that it is just to make an order to set aside the amount of $233,540 amount from the settlement fund to be applied to provide financial counselling, advice and assistance to registered class members, and I consider the Court has power to make such orders under s 33V(2) of the Act.

20    Alternatively, if there be any doubt as to the power under s 33V, pursuant to s 33ZF of the Act the Court is empowered to make “any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding” including on its own motion. Under s 33Z of the Act in “determining a matter in a representative proceeding” the Court has power to make “such other order as the Court thinks just”.

21    As I said in Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433 at [141]-[142]:

Section 33ZF(1) is intended to confer on the Court the “widest possible power” and is aimed at empowering the Court to deal with the types of unforeseen difficulties that might arise in the introduction into Australian law of the (then) novel representative procedure regime in Part IVA. The section should be construed as liberally as its terms and context permit and should not be given a narrow construction. It should not be hedged in by making implications or imposing limitations not found in its express words: McMullin v ICI Australia Operations Pty Ltd (No 6) (1998) 84 FCR 1 (McMullin No 6); [1998] FCA 658 at 4; Courtney at [48]; Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 at 421; [1994] HCA 54 at [29]; Money Max at [161]-[165].

The same can be said of s 33Z. In Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540; [2002] HCA 54 at [267] Kirby J observed:

From these provisions, it is clear that the Parliament intended to arm the Federal Court with a wide and flexible armoury of powers, capable of being adapted to the particular needs and novel circumstances of representative proceedings and any matter in such proceedings. Representative proceedings are not traditional litigation; nor should they be subjected to all of the requirements of such litigation. To confine the grant of such a statutory power is incompatible with the oft-repeated statements in this Court concerning the construction of grants of such powers to superior courts. In particular, it is inappropriate to impose upon such grants of power strictures derived from earlier times and traditional powers in litigation between individual parties.

(Citations omitted.)

22    I note that in King v AG Holdings Ltd (formerly GIO Holdings Ltd) [2003] FCA 980 Moore J approved a settlement distribution scheme which provided that residue settlement funds would be paid to the Australian Institute of Management for the benevolent purpose of training corporate officers and directors, or to the Australian Shareholders Association. If the power under s 33ZF extends to the disposition of settlement funds to third party organisations such as those it must extend to the use of settlement funds for the provision of beneficial services to those class members who choose to utilise the service.

23    In my view orders to ensure that vulnerable class members receive any financial counselling or advice they need so that they are protected, as best as possible, against exploitation, and protected in relation to any effect on their government entitlement or benefits, falls comfortably within the requirement that the order be appropriate in the interests of justice in the proceeding.

Associate:

Dated:    23 November 2018