FEDERAL COURT OF AUSTRALIA

Baker v Woolworths Group Limited (No 2) [2022] FCA 534

ORDERS

THE COURT NOTES THAT:

A.    The Applicants have withdrawn the application for settlement approval filed on 12 November 2021 pursuant to s 33V of the Federal Court of Australia 1976 (Cth).

THE COURT ORDERS BY CONSENT THAT:

1.    The interlocutory application filed on 12 November 2021 be dismissed.

2.    The matter be listed for a case management hearing concurrently with proceeding no NSD 581 of 2021 before Justice Perram on a date to be fixed.

3.    No order as to costs.

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

REASONS FOR JUDGMENT

MURPHY J:

INTRODUCTION

1    By an interlocutory application dated 12 November 2021 the applicants in this salary underpayment class action sought Court approval for a proposed settlement and discontinuance of the proceeding pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (Cth) (FCA). The application was made pursuant to a Settlement Deed dated 7 October 2021 made with the respondents to the proceeding, Woolworths Group Limited and Woolworths (South Australia) Pty Ltd (together, Woolworths).

2    A number of group members objected to approval of the proposed settlement and discontinuance. One objector said, pithily:

This settlement is only good for the lawyers who are getting all their fees paid @ a high cost. Everyone else gets nothing really. This should not be legal.

There is some force in the objection.

3    In short, under the Deed the applicants will discontinue this proceeding which seeks to recover on their behalf and on behalf of group members asserted salary underpayments by Woolworths in relation to their employment in a supermarket or a Big W Discount Department Store (Big W); the applicants and group members will be barred from bringing or participating in another class action but they may recover any such underpayments through a proceeding brought by the Fair Work Ombudsman in relation to broadly similar alleged salary underpayments (FWO proceeding).

4    Under the proposed settlement group members will lose their rights to seek to vindicate their claims through the vehicle of this class action, yet they are to receive no material benefit through the settlement. Pursuant to the Deed, upon discontinuance of this proceeding, unless the FWO proceeding is discontinued the group members are not permitted to commence or participate in a subsequent class action; and they will only be permitted to pursue their claims through individual proceedings and/or (indirectly) through the FWO proceeding, the former of which is unlikely to be economically feasible for many of them. In contrast, the applicants’ solicitors, Adero Law, will be paid $1.75 million for legal costs, and the two applicants will receive reimbursement payments of $17,500 and $7,500 respectively.

5    The claims in the FWO proceeding overlap but are not entirely coextensive with the claims in this proceeding, but Woolworths covenanted in the Deed that it would apply any principles derived from the FWO proceeding for the benefit of the applicants and group members. The parties argued that group members may achieve essentially the same result in the FWO Proceeding as in this proceeding, which is to their advantage as, unlike this proceeding, they will be able to do so at no cost.

6    In my view it is not in the group members’ interests for them to lose the benefit of the class action as a vehicle for them to vindicate their rights to recover any salary underpayments they can establish. The applicants and Adero Law could have brought individual proceedings for the applicants, but instead they brought a class action on behalf of themselves and the group members, and in doing so they took on obligations, including fiduciary obligations, to represent group members’ interests. In summary, the shortcomings for group members in relying on the FWO proceeding to recover the salary underpayments they seek through this proceeding, are that:

(a)    the limitation period applicable to group members’ claims will run against them from the date of discontinuance of this proceeding. If the FWO proceeding is later discontinued, or if it is settled without determining principles which can be applied to any outstanding claims of group members in this proceeding, and they wish to bring another class action or their own individual proceeding, their claims may have been eroded to an extent or even extinguished;

(b)    the FWO proceeding only relates to approximately 19,000 of the 27,633 group members in this proceeding because it is for a shorter period and Big W employees are not covered by that proceeding’s definition of “salaried employee”;

(c)    this proceeding makes two claims under the General Retail Industry Award 2010 (the Award) which are not agitated in the FWO proceeding, being claims for contraventions of the “evening work” and “Saturday work” provisions;

(d)    this proceeding seeks the imposition of a penalty for a greater number of contraventions of the Award, and also seeks a penalty for “serious contraventions” under s 557A of the Fair Work Act 2009 (Cth) (the FWA) which provides for a maximum penalty which is 10 times that otherwise allowed; and the FWO proceeding does not make an equivalent claim. Those matters give rise to the possibility that any pecuniary penalties imposed in this proceeding, and made payable to the applicants and group members, will exceed the penalties that may be payable through the FWO proceeding; and

(e)    Woolworths have publicly acknowledged contraventions of the Award and have undertaken a program to remediate past and present employees for the financial consequences of its contraventions. To date they paid approximately $350 million in reimbursement of salary underpayments and interest. But this remediation program has been undertaken on the basis of Woolworths’ understanding of the effect of the Award, and their “attendance and time worked” records. Some group members in this proceeding dispute the correctness of the attendance and time worked records in relation to them, which is not a matter which can be determined by the application of any Award interpretation principles that may derive from the FWO proceeding.

In circumstances where there are some real advantages for group members in seeking to vindicate their rights through the vehicle of this class action, rather than through a subsequent class action or subsequent individual proceedings, it is not in their interests that they be cast adrift from the class action: Williams v FAI Home Security Pty Ltd (No 4) [2000] FCA 1925; 180 ALR 459 at [22] per Goldberg J.

7    I informed the parties that, if the terms of the proposed settlement and discontinuance remained as they were, I would not approve the application. The parties adjourned the application to consider whether to put on evidence and further submissions to address the matters raised. Subsequently, the applicants withdrew the application and on 16 March 2022 I made orders by consent to dismiss the application. I now provide my reasons for doing so.

THE EVIDENCE

8    The applicants relied on affidavits of Mr Rory Markham, principal solicitor of Adero Law, sworn on 10 December 2021 and 14 December 2021 with their various attachments; and on the opinion of Mr Terrence Lynch and Mr Faheem Anwar of counsel dated 13 December 2021 in respect of the proposed settlement and discontinuance (Counsels’ Opinion). The Opinion was filed on a confidential basis, but in the approval hearing the applicants waived privilege and relied on it as their written submissions in support of the application.

9    Woolworths relied on an affidavit of Sally-Anne Mary Stewart, solicitor at Ashurst, affirmed on 14 December 2021.

THE BACKGROUND FACTS

The proceeding

10    The class action was filed on 29 November 2019. Following amendments to the statement of claim on 18 June 2020 and 22 September 2021, the applicants each represent a different sub-group of group members.

11    Mr Baker brings the proceeding on his own behalf and on behalf of all persons;

(a)    employed by Woolworths Group Limited at any time within the period 29 November 2013 and 29 November 2019 (the Baker relevant period);

(b)    in a position in a supermarket or Big W in the “general retail industry” within the meaning of that phrase in the Award;

(c)    whose remuneration, at any time during the Baker relevant period, was calculated by reference for an annual salary (Salaried Position);

(d)    who was a “full-time employee” or “part-time employee” as those terms are defined in the Award; and

(e)    who in any pay period in the Baker relevant period worked a rostered hour,

(Woolworths sub-group members).

12    Mr Piro brings the proceeding on his own behalf and on behalf of all persons meeting the same criteria but who were employed by Woolworths (South Australia) Pty Ltd (Woolworths SA) at any time within the Baker relevant period (Woolworths SA sub-group members).

13    In short, the class action is brought by the applicants on their own behalf and on behalf of Woolworths’ employees in a Salaried Position who worked at a Woolworths supermarket, Woolworths Metro, or Big W from 29 November 2013 to 29 November 2019. The proceeding makes claims pursuant to s 45 of the FWA alleging a large number of contraventions by Woolworths of various provisions of the Award during the Baker relevant period, as well as alleged failures by Woolworths to record the number of overtime hours worked by employees as required by s 535 of the FWA and cl 3.34 of the Fair Work Regulations 2009 (Cth).

14    In respect of each of the contraventions the proceeding seeks compensation pursuant to s 545(2)(b) of the FWA, and the imposition of pecuniary penalties pursuant ss 546(1) and (3).

15    There are approximately 27,633 group members, 2,858 of whom have registered their interest with Adero Law, and 380 of whom have entered into a retainer agreement. Adero Law is conducting the case on a no-win no-fee basis.

The FWO proceeding

16    On 17 June 2021, more than 1½ years after this proceeding was commenced, the FWO proceeding was filed. Thereafter the proceedings have been case managed together by Perram J.

17    The FWO Proceeding is brought on behalf of 70 named employees of Woolworths (one of whom is Mr Baker), and a group referred to as “Salaried Employees”, which is defined as follows:

Each of Woolworths Limited and Woolworths SA […] during the period from 17 June 2015 to 30 September 2019 […] employed in their supermarkets and other food retailing and grocery stores outlets […]full time and part-time salaried employees.

18    On 21 July 2021, the applicants filed an application to intervene in the FWO proceeding. That application was adjourned pending the outcome of this approval application.

19    On 22 September 2021 the applicants filed a further amended statement of claim to more closely align the substantive claims made in it with those made in the FWO proceeding.

Notice to group members of the proposed settlement and discontinuance of the proceeding

20    On 11 November 2021 Perram J made orders, by consent, for group members to be sent a Notice of Proposed Settlement and Opt Out (the Notice) by 15 November 2021. The orders provided a deadline of 8 December 2021 for any group member who:

(a)    wished to opt out of the proceeding, to complete an opt out notice and file it with the Court; or

(b)    wished to oppose any aspect of the approval application, to complete a notice of objection and file it with the Court and send it by email to Adero Law.

21    While the Notice informed group members that they could raise an objection to the proposed settlement, it did not inform them that, as the applicants no longer wished to act in a representative capacity, one or more of the group members could seek to be substituted as the representative applicant(s).

The crossover between the two proceedings

22    Stated shortly, in both proceedings it is asserted that the relevant Woolworths’ employees were employed on annual salaries, which were inadequate to ensure that they were paid the minimum due to them under the Award. Both proceedings allege contravention of the Award; and the same relief is sought in both proceedings, compensation and penalties. Woolworths’ remediation program has been undertaken on the basis of Woolworths’ understanding of the effect of the Award, and its attendance and time worked records. A common question in this proceeding and several contentions in the FWO proceeding put in issue the correctness of Woolworths’ understanding in relation to those matters.

23    However, as I said at [6(a)-(d)] above, there are four key ways in which the two proceedings are different from one another. In my view the FWO proceeding is significantly although not wholly co-extensive with this proceeding.

The settlement deed

24    On 7 October 2021, the applicants, the respondents, Adero Law, and Mr Markham, entered into the Deed, which proposed to effect the settlement and discontinuance of the proceeding according to the terms set out therein, subject to Court approval.

25    Clause 1 of the Deed sets out a number of definitions, including the following:

26    The relevant period under the Deed (Deed relevant period) is 29 November 2013 to the date of the Deed (7 October 2021) inclusive, which is longer than the Baker relevant period (which ends on 23 November 2019). The extended length if the period is not a matter of great significance as no contraventions are alleged to have occurred after 23 November 2019. It does though slightly improve the position for Woolworths SA sub-group members who may face a limitations defence in relation to any underpayments arising before 18 June 2014 (the date 6 years prior to the filing of the amended statement of claim which introduced those claims).

27    Clause 2.1 of the Deed provides that the proposed discontinuance is conditional upon the Court making the approval orders sought. Clause 2.2 provides that the Deed will be terminated and will be of no force and effect (with the exception of cl 8 regarding confidentiality and cl 9 regarding Woolworths’ liability for the expenses of the Notice), in the event the Court declines to make the approval orders.

28    Clauses 4, headed “Rights to pursue individual claims and make submissions in FWO proceeding”, provides that neither the proposed discontinuance, nor anything in the Deed, prevents:

(a)    group members other than the applicants from pursuing any Claims that are the subject of this proceeding in another proceeding against Woolworths, as long as it is not a class action: cl 4(a);

(b)    the applicants from seeking leave to intervene in the FWO proceeding for the sole purpose of making a submission that any penalty that the Court orders in the FWO proceeding should be paid to the applicants and group members. Importantly, however, the applicants are expressly precluded from making any submission as to whether a pecuniary penalty should be imposed against Woolworths or the quantum of any such penalty: cl 4(b); or

(c)    Adero Law from representing the applicants in respect of making the submission referred to in (b) above: cl 4(c).

29    Clause 5.1, headed “Covenants by applicants and group members”, provides, in subclause (a), that subject to cl 5.1(b):

(a)    other than to enforce the Deed or a term of the attached Deed Poll for execution by Woolworths, neither the applicants nor any group member will commence a class action against Woolworths involving an Underpayment Claim in relation to their employment in a supermarket or Big W during the Deed relevant period; and

(b)    if either applicant or any group member falls within the definition of group member in any class action brought by anyone else against Woolworths in connection with any Underpayment Claim in relation to their employment in a supermarket or Big W during the Deed relevant period, the applicants or group members concerned must opt out of any such proceeding.

30    Clause 5.1(b) provides that cl 5.1(a) will cease to operate if the FWO proceeding is discontinued.

31    Clause 5.1(c) provides that, subject to the covenants by Woolworths in cl 5.3, the applicants release Woolworths, their employees, agents, former employees and former agents, and their Related Parties, from all Underpayment Claims; and, the applicants covenant not to bring or pursue, or procure that any other person brings or pursues such a claim.

32    Clause 5.1(e) provides that, except as permitted under cl 4(b), the applicants and group members are not permitted to make submissions in the FWO proceeding, or otherwise seek to participate in the FWO proceeding. That is, the applicants and group members are expressly precluded from making any submissions as to whether a pecuniary penalty should be imposed against Woolworths or the quantum of the penalty.

33    Clause 5.2, headed “Covenants by Adero and Rory Markham”, relevantly provides:

(a)    that, other than to enforce the Deed or a term of the Deed Poll, Adero Law and Mr Markham must not cause or encourage the applicants or any group members or third parties, to commence proceedings of any kind against Woolworths or their Related Parties in respect of any Underpayment Claim; and must not act in any such proceedings: cl 5.2(a)(i) and (ii); and

(b)    except as permitted by cl 4(c), that Adero Law and Mr Markham must not act for any party in connection with the FWO proceeding or otherwise participate in the FWO proceeding: cl 5.2(b).

34    Clause 5.3, headed “Covenants by the Respondents”, relevantly provides:

(a)    subject to the approval orders being made and the proceeding being discontinued, that following determination of the Principles from the FWO proceeding or any Subsequent Representative Proceedings, Woolworths agree to apply the Principles to calculate whether any applicant or group member is entitled to further payment in respect of the Deed relevant period; and insofar as any applicant or group member is so entitled to make such payments to them: cl 5.3(a);

(b)    that within seven days of the settlement approval orders Woolworths will execute the attached Deed Poll: cl 5.3(b);

(c)    that Woolworths will neither oppose nor consent to any application made by the applicants to intervene in the FWO proceeding pursuant to cl 4(b): cl 5.3(c);, and

(d)    that, if, as a result of the submissions made by the applicants in accordance with cl 4(b), the Court orders that a civil penalty be distributed to the applicants and group members, Woolworths agree to consent to orders that the civil penalty be distributed in the following way: cl 5.3(d):

(i)    be paid first in discharge of Adero Law’s reasonable fees (as agreed, assessed or ordered) in the preparation and discharge of those submissions; and

(ii)    any remaining amount be distributed by the respondents in accordance with the Court’s decision.

35    Clause 6 provides that, within 20 business days of the later of either: the proceeding being discontinued or the expiry of the Appeal Period (as defined), Woolworths must pay:

(a)    $1.75 million to Adero Law in full satisfaction of the Applicants’ Costs (as defined), both as between the applicants and Woolworths, and Adero Law and the applicants. Upon Woolworths making that payment to Adero Law, the firm releases the respondents and the applicants from all Claims in respect of the Applicants’ Costs: cll 6.1(a)-(b)(i) and 6.3; and

(b)    $17,500 to the Mr Baker and $7,500 to Mr Piro: cl 6.1(a)-(b)(ii) and (iii).

THE SETTLEMENT AND DISCONTINUANCE APPLICATION

36    In the interlocutory application dated 12 November 2021, the applicants sought the following orders:

THE COURT ORDERS THAT:

1.    The discontinuance of these proceedings be approved pursuant to section 33V of the Federal Court of Australia Act 1976 (Cth).

2.    The Applicants be authorised nunc pro tunc to enter into and give effect to the Settlement Deed dated 7 October 2021 (Deed) for and on behalf of Group Members.

3.    The persons affected and bound by these orders are the Applicants, Group Members, the Respondents, and Adero Law.

4.    These proceedings be discontinued, or the Applicants be granted leave to file a notice of discontinuance, on terms that:

(a)    the Applicants and Group Members are prevented from bringing, and undertake that they will not bring, any further representative proceeding against the Respondents in respect of any Underpayment Claim (as defined in the Deed) in relation to their employment in a supermarket or Big W Discount Department Store (including Big W Optical) during the Relevant Period (as defined in the Deed), and they will opt out of any such proceeding brought by any third party, other than proceedings for breach of the Deed;

(b)    the bar referred to in order 4(a) will cease to operate if the Federal Court Proceedings NSD581 of 2021 (FWO Proceedings) are discontinued;

(c)    other than to enforce the Deed or a term of the Deed Poll (as defined in the Deed), the Applicants are prevented from bringing, and undertake that they will not bring, any proceedings of any kind against the Respondents in respect of any Underpayment Claim; and

(d)    each party is to bear its own costs.

THE COURT NOTES THAT:

5.    The Respondents undertake to calculate whether any Applicant or Group Member is entitled to any further payment pursuant to their contract of employment in respect of the period from 29 November 2013 to the date of the Deed by applying the proper interpretation of the General Retail Industry Award the Fair Work Act 2009 (Cth) and the contracts of employment of affected employees as determined by the Court:

(a)    in the FWO Proceedings; or

(b)    if the FWO Proceedings are discontinued, any subsequent representative proceeding that is brought in respect of the claims that are made in this Proceeding following the discontinuance of the FWO Proceedings, as permitted by order 4(b) above.

6.    The Respondents undertake, insofar as any Applicant or Group Members are entitled to a further payment having regard to the calculations performed pursuant to paragraph 5 above, to make such payment to them.

THE RELEVANT PRINCIPLES

37    Section 33V requires Court approval before a class action may be settled or discontinued. Before approving a settlement the Court must be satisfied that the proposed settlement is fair and reasonable in the interests of affected group members, including as between group members: Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [7] (Jacobson, Middleton and Gordon JJ); Kelly v Willmott Forests (No 4) [2016] FCA 323; 335 ALR 439 at [62] (Murphy J). As has been said many times, the Court has an onerous role to protect the interests of group members who are not directly represented in the proceedings, which is not unlike the role that the Court assumes when approving settlements on behalf of infants. An applicant must demonstrate an entitlement to an order for approval of the proposed settlement even when the order is not opposed, and the Court should be alive to the possibility that the proposed settlement may reflect conflicts of interest or duty between the applicant or applicant’s solicitor and group members or between group members: Parkin v Boral Limited (Class Closure) [2022] FCAFC 47 at [130]-[131] (Murphy and Lee JJ with Beach J agreeing) citing Kelly at [63] and McKenzie v Cash Converters International Ltd (No 3) [2019] FCA 10 at [24] (Lee J).

38    As I recently explained in Turner v TESA Mining (NSW) Pty Ltd (No 2) [2022] FCA 435 at [8]-[10], for many years the test for approval of a proposed discontinuance was the same as that for a proposed settlement. Then, in Laine v Thiess Pty Ltd [2016] VSC 689 at [34] Dixon J applied a slightly less strict test; whether discontinuance would be unfair or unreasonable or adverse to the interests of group. In Turner v TESA, I concluded that, in relation to a proposed discontinuance where the practical effect will be to return group members to the position they were in before commencement of the class action, the appropriate test is that expressed in Laine.

39    However, in the circumstances of the present case it cannot be said that the practical effect of the proposed discontinuance will be to return group members to the position they were in before commencement of the proceeding. Amongst other things, if discontinuance of the class action is approved:

(a)    unless the FWO proceeding is subsequently discontinued, group members will be precluded from commencing or participating in another class action in relation to the claims in the proceeding;

(b)    group members are only permitted to pursue their claimed salary underpayments in the FWO Proceeding and/or in individual proceedings, and it is likely that the cost of bringing individual proceedings will mean that many group members will be deterred from taking that course; and

(c)    the limitation period will run from the date of discontinuance and the rights of group members to bring their salary underpayment claims in another proceeding will be progressively eroded from that date. If the FWO proceeding is discontinued or if it is concluded without determining principles applicable across to the claims of group members in this proceeding, the claims of many group members may have been eroded or even extinguished.

40    The Deed describes the resolution of the proceeding as a “settlement”, Counsels’ Opinion is titled “Opinion in respect of the proposed settlement of the above proceedings”, and the Deed provides for the payment of the applicants’ costs and for reimbursement payments to the applicants. This application is for approval of a settlement which involves a discontinuance, rather than a discontinuance simpliciter.

41    In the circumstances of this case it is not appropriate to apply the test in Laine; the appropriate test is whether the proposed settlement and discontinuance is fair and reasonable in the interests of group members to be bound by the settlement, including as between group members.

THE PARTIES’ SUBMISSIONS

The applicants’ submissions

42    The applicants submitted that the proposed settlement is fair and reasonable in the interests of group members to be bound by it.

43    First, they contended that the settlement does not compromise any entitlement to payment of any group member pursuant to the Award, as Woolworths have covenanted to apply the principles enunciated in the FWO proceeding to calculate whether any of the applicants or group members are entitled to any further payment in respect of the Deed relevant period, and if so to make such payment to them. They said that the covenant by Woolworths will ensure that all group members will be paid any Award entitlements in full, based on the principles enunciated in the FWO proceeding. Mr Markham deposed that he did not consider the applicants would be able to continue or settle this proceeding on any more favourable terms with respect to questions of law, fact, or relief than could be achieved in the FWO proceeding.

44    The applicants also said that Woolworths’ execution of the Deed Poll will readily enable any group member individually, or in a representative proceeding, to enforce the covenant to ensure that group members receive their full entitlements under the Award.

45    Second, they submitted that while group members have relinquished their right to bring or participate in any subsequent class action in respect of any Underpayment Claims against Woolworths in respect of the Deed relevant period, the covenant by Woolworths obviates the need for any such class action. They said that in the unlikely event that the FWO proceeding is discontinued, the proposed settlement preserves the right of group members to bring or take part in another class action.

46    The applicants also said that the proposed settlement does not prejudice the group members’ ability to have their individual claims decided by a court, as the proposed settlement preserves the right of group members to bring an individual proceeding making claims which are subject of this proceeding.

47    Third, the applicants submitted that, while approval of the discontinuance application will mean that the claim for imposition of penalties in this proceeding is abandoned, the overlap between the FWO proceeding and this proceeding suggests that the evidence about the circumstances relevant to the contraventions and pertinent to the question of whether and in what amount penalties should be imposed is likely to be the same in both proceedings. Essentially, they argued that there is nothing to show that the quantum of penalties that might be imposed in the FWO proceeding would be materially different from any penalty that might be imposed in this proceeding if it is not discontinued.

48    They also contended that group members will not suffer disadvantage in relation to any penalties because the Deed preserves the ability of the applicants and Adero Law to seek leave to intervene in the FWO proceeding for the purpose of making submissions that any penalties that might be ordered in that proceeding should be paid to the applicants and group members. Woolworths agreed to neither consent to nor opposed the application for intervention.

49    Fourth, the applicants argued that the proposed settlement and discontinuance is not so much a “commercial settlement” of the group members’ claims, but more an arrangement to have those claims determined in the FWO proceeding. They contended that the proposed discontinuance is analogous to the position where there are competing class actions and orders are made to allow one of the competing proceedings to go forward. They submitted that is advantageous for group members as it allows them to avoid incurring further legal costs in this proceeding.

50    Fifth, Mr Markham deposed that, if the applicants were successful in this proceeding, either by settlement or judgment, Adero Law intended to seek an order so that the cost of the proceeding would be shared by all group members who would be the beneficiaries of any determination or settlement. He said that as the proceeding is brought under the FWA, by operation of s 570 of that Act, it is unlikely that an order for costs will be made against Woolworths. It was said that a significant advantage of the proposed settlement is that it provides for Woolworths to pay Adero Law its costs and disbursements of bringing this proceeding, in an agreed amount of $1.75 million, which costs will not diminish or come out of the quantum of what might have been obtained if this proceeding had been determined, nor what may be obtained by group members through the FWO proceeding.

51    Mr Markham also deposed that Adero Law had incurred costs of approximately $2.2 million, comprising $1.92 million (excluding GST) in legal fees and approximately $270,466 in disbursements. He said that if the proceeding remains on foot, the legal costs likely to be incurred up until the FWO proceeding is concluded will be in the vicinity of $3.6 million (inclusive of costs to date).

52    Sixth, the applicants accepted that the terms of the proposed discontinuance will mean that group members will not receive the amounts they are entitled to under the Award until after the conclusion of the FWO proceeding, which is not expected to occur until 2023. They said, however, that there is no reason to suppose that the present case could be determined any earlier than the FWO proceeding, noting that the two proceedings are being case managed together.

53    Seventh, the applicants accepted that the limitation period applicable to group members’ claims have, since 29 November 2019, been suspended by operation of s 33ZE(1) of the FCA, and pursuant to s 33ZE(2) will begin to run again from the date that settlement and discontinuance is effected. Thus, group members’ claims will become progressively statute barred from that date and on each day thereafter. But they argued that did not mean it was appropriate to refuse to approve the proposed settlement and discontinuance.

54    Eighth, they accepted that if discontinuance of this proceeding is approved, and the FWO proceeding does not conclude in a way in which principles are determined that can be applied to calculate any further salary underpayments amounts due to group members, the Deed does not preserve the rights of group members to bring a subsequent class action against Woolworths. In that eventuality, group members may only seek to vindicate their rights to recover any salary underpayments by commencing individual proceedings. The applicants accepted that this aspect of the proposed settlement weighs against approval, but said that the nature of the FWO proceeding means that the likelihood of it being concluded in a way which does not determine such principles is “remote”.

55    Ninth, in relation to the objections to approval by eight group members, the applicants noted that two of the objections are by group members who complained about not receiving any payments under Woolworths’ remediation program, which could be because they were not entitled to any additional amounts based on Woolworths’ interpretation of the Award, or because they carried out work that was not recorded in Woolworths’ attendance and time worked records. Insofar as that is the case, the applicants said that the covenant provided by Woolworths under the Deed will ensure that group members will receive their full entitlements under the Award.

56    Tenth, the Deed operates to prohibit Adero Law from acting in any proceedings of any kind against Woolworths in respect of any Underpayment Claim, including any individual claim brought by a group member. Essentially, the applicants submitted that this does not disadvantage group members because the likelihood of the FWO proceeding being discontinued or concluding without determining applicable “principles” is “remote”, and thus it is unlikely that there will be any requirement for other proceedings. In relation to the fact that any proceedings brought by individual group members must be brought through another law firm, the applicants said that Adero Law has done little work on the individual issues of group members (as distinct from the applicants) and therefore there was unlikely to be any significant duplication of work if other lawyers are engaged for that purpose. They also submitted that it cannot be known at present whether Adero Law would be willing to act for the group members in any subsequent representative proceeding on a no win no fee basis and without the benefit of any litigation funding.

Woolworths’ submissions

57    First, Woolworths submitted that the proposed settlement is intended to ensure that group members will, if necessary, be appropriately remediated following the Court’s determination in the FWO proceeding (or any subsequent class action should the FWO proceeding be discontinued). In the Deed, Woolworths undertakes to apply the principles from the FWO proceeding or any subsequent class action to calculate any further payments to which group members may be entitled and to make such payments where they are so owing.

58    Woolworths said that the respondents’ compromise in this regard is significant because, with the exception of the two claims in this proceeding which are not agitated in the FWO proceeding, the claims in the proceedings overlap entirely. Accordingly, the FWO proceeding will, to a substantial degree, resolve the common questions of law which bear upon the applicants and group members, but at no cost to group members. Accordingly, the proposed settlement preserves group members’ claims and provides a mechanism for their enforcement, without compromising those claims or the quantum in the same way that a conventional settlement would.

59    To the extent that there are additional claims raised in this proceeding that are not agitated, and will not be resolved, in the FWO proceeding, that ought not affect the Court’s assessment of the reasonableness of the proposed settlement given:

(a)    the proposed settlement does not preclude the FWO from advancing those claims should they be considered tenable; and

(b)    in any case, the evidence indicates that the FWO’s view is that any compensation flowing from the alleged contraventions of the “evening work ” and “Saturday work ” provisions of the Award was fully discharged by the salary paid and the remediation payments made by Woolworths.

60    Second, the proposed settlement operates to preserve group members’ individual claims based on disputing the sufficiency or accuracy of Woolworth’s attendance and time worked records. While such claims would need to be prosecuted separately by group members, rather than as part of a class action, that outcome does not depart materially from the consequence of this proceeding being decided by a judgment on the common issues. It was argued that if this proceeding remains on foot, group members’ individual claims based on their asserted hours worked will require independent and separate determination(s) following the trial of the common issues, given the lack of commonality in the factual substratum of their claims.

61    Third, the proposed settlement ensures that all group members are remediated for the entirety of the Deed relevant period, notwithstanding that many such persons only became group members by reason of amendments to the group member definition and may arguably be limited in the period for which they may claim. The amended statement of claim filed on 18 June 2020 introduced claims against Woolworths SA for a sub-group that, prior to the amendment, was not a part of the group in the proceeding. If this proceeding remains on foot, Woolworths say that there is a real possibility that any entitlements of Woolworths SA sub-group members in this proceeding will be substantially less than their entitlements under the Deed because the six year limitation period applicable to those claims should be calculated by reference to the date of the amendments rather than the date the proceeding commenced.

62    Fourth, to the extent that there remains a question as to whether any penalty imposed by the Court should be paid to the Commonwealth or to the group members, the settlement preserves the applicants’ ability to seek leave to intervene in the FWO proceeding to make submissions that any penalty should be paid to group members; Woolworths have agreed not to oppose not consent to any application to intervene.

63    Relatedly, Woolworths argued that while this proceeding raises a claim for the imposition of a penalty for a “serious contravention” under s 557A of the FWA, the absence of an equivalent claim in the FWO proceeding is an insufficient basis to decline to approve the settlement.

64    Fifth, the proposed settlement improves the position of group members insofar as legal costs is concerned, as Woolworths have agreed to pay the applicants’ legal costs fixed in the amount of $1.75 million, and Adero Law has agreed to release group members from all claims for costs. As a consequence, group members will be entitled, in full, to any remediation that may flow from the determination in the FWO proceeding which will not be eroded by an obligation to contribute to the legal costs incurred. It was said that, in circumstances where s 570(2)(b) of the FWA confers only very limited power upon the Court to make a costs order against Woolworths (namely, where the Court is satisfied that Woolworths’ unreasonable act or omission has caused the applicants to incur the costs), the applicants face a real risk that their costs in this proceeding will not be recoverable from Woolworths and will be payable by the applicants and group members.

CONSIDERATION

65    It seems likely that many group members in this proceeding will have only modest claims for compensation for any salary underpayments which exceed the remediation payments already made by Woolworths, but they may also be entitled to a payment from any pecuniary penalties that are imposed. There are real advantages for group members in having the vehicle of this class action to seek to vindicate their asserted rights to recover salary underpayments from Woolworths, including that it is unlikely to be economically feasible for many group members to do so through individual proceedings. Presently, they have the benefit of a class action which is being conducted on their behalf by Adero Law on a no-win no-fee basis.

66    If leave to discontinue the proceeding is granted, the proceeding will come to an end without group members receiving any material benefit, notwithstanding it is in the interests of group members for the proceeding to continue, at least until it generates an offer of settlement which will give them a benefit. By acting in the proceeding Adero Law took on an obligation to represent the interests of group members or at least not to act contrary to their interests, whether or not the group members retained the firm. In relation to those 380 group members with whom Adero Law has entered into a retainer agreement, it has contractual and fiduciary obligations to act in their interests. In my view a potential conflict of interest, and a conflict of interest and duty has arisen. Adero Law has an interest in being paid the substantial costs it has incurred, which it will receive upon discontinuance being approved, while it is in the group members’ interests for the proceeding to remain on foot. In my view if the proposed settlement and discontinuance is approved, the group members will have lost the benefit of this class action as a vehicle to vindicate their rights and many of them may suffer disadvantage as a result.

67    Essentially, the applicants argued that the proposed settlement and discontinuance is fair and reasonable having regard to the interests of group members as they will be able to obtain redress through the FWO proceeding, at no cost, whereas in this proceeding they would incur costs. However, this argument eludes a number of other consequences which may result from that.

68    First, it is uncontentious that, pursuant to s 33ZE(2) of the FCA, the limitation period applicable to group members’ claims will begin to run again from the date that settlement and discontinuance is effected, and group members’ claims may progressively be eroded by operation of the limitation period each day thereafter. If approval is granted, unless the FWO proceeding is discontinued, by operation of the Deed group members are not permitted to bring or participate in another class action. However, by the time the FWO proceeding is discontinued (if that occurs) the operation of the limitation period applicable to group members’ claims will mean that there is a real risk that by that time the claims of many group members will have been eroded or perhaps even extinguished.

69    The Deed does not contain a clause to ensure that, upon discontinuance of this proceeding, group members’ rights to recover any salary underpayments from Woolworths will not be eroded by operation of the limitation period. It would have been a straightforward matter to address that, as Woolworths could have agreed that, if the FWO proceeding is discontinued, it would not rely on a limitations defence. It did not do so.

70    To avoid such an outcome group members could now commence their own individual proceedings, but it seems unlikely that many group members will do so because: (a) it is unlikely to be economically feasible; (b) Adero Law has indicated to group members that they may safely rely on the FWO proceeding to vindicate their rights; and (c) group members are likely to wait to see whether the FWO proceeding provides them some relief before commencing an individual proceeding.

71    Beyond the bare assertion that there is only a remote chance of the FWO proceeding being discontinued, the parties put on no evidence which would enable me to make any proper assessment as to whether the FWO proceeding is or is not likely to proceed. At a high level, it seems likely that the FWO proceeding will continue, but whether or not it is discontinued, settled or proceeds to judgment will be a matter for the FWO; and the applicants and group members in this proceeding will have no say in it. Thus, if discontinuance of this proceeding is approved, group members will be reliant upon the FWO proceeding, brought by a party that does not have obligations to represent their interests.

72    The possibility of the FWO proceeding being discontinued should not be brushed off as a small matter, particularly when one has regard to the fact that it could result in group members’ claims being eroded or even extinguished by operation of the limitation period. Nor should it be treated as a small matter when the possibility of that serious consequence for group members could have been readily addressed in the terms of the proposed settlement.

73    The applicants raised the possibility of amending the Deed to provide that discontinuance will not take effect for a short period of time following approval, and I accept that the provision of a short period of grace would reduce the disadvantage. But that does not go far enough when, for the reasons explained above, it seems unlikely that many group members will commence individual proceedings whether or not they are provided a period of grace.

74    It should also be kept in mind that if group members wish to commence another class action or their own individual proceeding they must find new solicitors, as Adero Law has covenanted that it will not act in any proceedings of such a kind. The Deed requires Adero Law to vacate the field, taking with it the knowledge it has acquired about the case, and it cannot be known whether any other law firm(s) will be prepared to act for group members on a no-win no-fee basis, or at all. Even if group members can find solicitors who will bring a class action or individual proceedings on a no-win no-fee basis, group members will incur the extra costs of getting those firms up to speed on the case. This represents a material disadvantage for group members because, presently they have the benefit of a class action in which they can seek to vindicate their claims, in which substantial legal work has been undertaken and which they do not have to pay for unless their claims are successful.

75    Second, while the Deed preserves the rights of group members to commence another class action if the FWO proceeding is discontinued it does not preserve the rights of group members to commence another class action if the FWO proceeding concludes in a way which does not determine principles which can be applied in relation to group members’ claims (pursuant to Woolworths’ covenant). It is not difficult to envisage circumstances where the FWO proceeding may conclude in such a way; for example, a settlement which involves the payment of an undifferentiated lump sum amount for the benefit of the group members in the FWO proceeding. If this occurs group members in this proceeding may suffer disadvantage in the same manner as if the FWO proceeding is discontinued, and also because they will be precluded from bringing another class action and may only bring individual proceedings. As I have said, there are real advantages for group members in being able to seek to vindicate their rights through the vehicle of a class action.

76    Again, beyond the applicants’ bare assertion that there is only a “remote” chance of the FWO proceeding being concluded without determining principles that may be applied in relation to group members’ claims, there is no evidence which would enable me to make a proper assessment of the likelihood of such a conclusion. I also note that; (a) whether or not the FWO proceeding is concluded without determining such principles will be a matter for the FWO and the applicants and group members will have no say in it; (b) Woolworths may be incentivised to settle the FWO proceeding in a way which limits their future exposure under the Deed Poll; and (c) undifferentiated lump sum settlements are commonplace. Again, the possibility that the FWO proceeding may be concluded in such a way should not be brushed off as a small matter, particularly when it would have been straightforward for the parties to include a clause in the Deed which protected the interests of group members in this event.

77    Third, the applicants and some group members make claims for salary underpayments in which they dispute the accuracy of Woolworths’ attendance and time records. Presently, although these claims are based in their individual hours worked and the particular records that apply to them rather than being common claims, they are made within the framework of the class action and they have the benefit of lawyers acting on their behalf on a no-win no-fee basis. If discontinuance of this proceeding is approved, the only way group members can preserve their rights to bring such claims is by bringing their own individual proceedings now, doing so at their own expense and with new solicitors. These individually based claims cannot be resolved by the application of any award interpretation principles derived from the FWO proceeding, and it seems doubtful that the FWO proceeding could determine principles which relate to the accuracy of the attendance and time records in relation to different individuals. Assuming discontinuance is granted, if group members do not commence those proceedings now, the limitation period applicable to those claims will begin to run again from the date of discontinuance, and their entitlements in respect of any individual claim they wish to bring may be eroded over time. This represents a material disadvantage for those group members.

78    The applicants’ submission that this does not represent a material disadvantage for group members, as they would have been required in any event to make individual claims following success in the trial of the common issues, must be rejected. There is a significant difference between the legal costs and risks that a group member will take on if pursuing such a claim within the framework of the class action, as compared to costs and risks associated with doing so in an individual proceeding in this or another court.

79    Fourth, both this proceeding and the FWO proceeding seek the imposition of pecuniary penalties against Woolworths. Although it cannot be known whether penalties will be imposed, and if so in what quantum, it is relevant that Woolworths have publicly announced that approximately 5,700 Salaried Employees were not paid in accordance with the Award, and to date Woolworths had made remediation payments which exceed $350 million. In circumstances where it appears that Woolworths admits contraventions of the Award which were widespread, pervasive and systematic, there must be a real possibility that substantial penalties will be imposed.

80    If approval is granted to discontinue this proceeding, the claim for penalties in this case will be abandoned. In my view, this may cause material disadvantage for group members. Presently the group members have the benefit of a class action in which the applicants seek the imposition of substantial penalties and seek that the penalties be paid to the applicants and group members as the victims of the contraventions found. If this proceeding is discontinued, group members will be left in the position that the applicants can seek leave to make submissions in the FWO proceeding but have no guarantee that leave will be granted, and the applicants will not be permitted to argue for the imposition of penalties nor make submissions as to the quantum of any penalties that should be imposed.

81    Contrary to the applicants’ contentions, there is a possibility that any pecuniary penalties imposed in the FWO proceeding will be less than the penalties that may have been imposed in this proceeding. That is so because this proceeding relates to a larger number of affected persons and a longer relevant period, it alleges two further contraventions, and seeks penalties for “serious contraventions” under s 557A of the FWA whereas the FWO proceeding does not. Pursuant to s 539(2) of the FWA the maximum penalty for a “serious contravention” is 10 times the maximum penalty otherwise allowed. Again, the possibility of a larger penalty being imposed in this proceeding should not be brushed off as a small matter.

82    Further, having regard to the fact that this proceeding relates to a larger number of affected persons than the FWO proceeding, it seems quite unlikely that persons who fall within the class definition of this proceeding but fall outside the definition of Salaried Employees in the FWO proceeding will be entitled to an order that a penalty imposed in the FWO proceeding should be paid to them.

83    Fifth, I have no difficulty in accepting that the Deed provides a benefit for group members because Woolworths have agreed to pay Adero Law’s costs and the firm has released group members from any further claim for costs. If this proceeding continues and is successful, it is likely that group members will be required to pay Adero Law’s costs from any monies received, pursuant to their no-win no-fee retainer agreements or pursuant to s 33ZJ of the FCA. Pursuant to the Deed, any compensation group members obtain through the FWO proceeding will not charged with Adero Law’s costs, which is to their benefit.

84    Having said that, the significance of that benefit can only be assessed having regard to the size of any settlement or judgment that might be obtained in this proceeding if it is not discontinued, including the quantum of any penalties which might be payable to group members. The evidence does not permit an assessment of that kind. Depending on the quantum of the penalties imposed the legal costs that group members avoid through these clauses of the Deed may not be particularly material. It is noteworthy too that group members are not exposed to legal costs in this proceeding unless they are successful.

85    Sixth, it is a matter for the docket judge but it seems likely that the two proceedings will be heard together. I accept the applicants’ contention that there is no reason to think that the common issues in this proceeding would be heard and determined any earlier than the hearing and determination of FWO proceeding. Having said that, if approval is granted to discontinue this proceeding, and the FWO proceeding is subsequently discontinued for some reason or is concluded without determining principles which may be applied to the group members in this proceeding, there is a real prospect that group members will suffer material delay in vindicating their rights, because they will then have to commence another class action or bring their own individual proceedings. Further, as I have said, it cannot be known whether any other law firm(s) will be prepared to act for group members on a no-win no-fee basis, or at all. If group members can find solicitors who will bring a class action or individual proceedings on a no-win no-fee basis, group members will incur the extra costs of getting those firms up to speed on the case. This represents a material disadvantage for group members

CONCLUSION

86    For these reasons I informed the parties that, if the terms of the proposed settlement and discontinuance remained as they were, I would not approve the application. The parties adjourned to consider whether to put on further evidence and submissions to address the matters raised. Subsequently, as I have said, the applicants withdrew the application and I made orders to dismiss it, by consent.

Associate:

Dated:    11 May 2022