Federal Court of Australia

Sanda v PTTEP Australasia (Ashmore Cartier) Pty Ltd (Settlement Approval) [2023] FCA 143

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act), the settlement of this proceeding and the claims of the applicant and each group member on the basis set out in the deed titled “Deed of Settlement – Montara Class Action” exchanged on 29 November 2022 between Mr Daniel Sanda, the respondent, Maurice Blackburn Lawyers Pty Ltd, Harbour Fund II, L.P (Harbour), Gregory Phelps and Phelps Solutions Pty Ltd (Settlement Deed) be approved.

2.    Pursuant to s 33ZB of the FCA Act, all persons who are group members as defined in paragraph one of the further amended statement of claim dated 31 July 2017 (Group Members) are affected and bound by Order 1.

3.    Pursuant to s 33T of the FCA Act, Mr Gustav Lay be substituted as the applicant in the proceeding.

4.    Pursuant to ss 33ZF and 33K of the FCA Act, leave be granted to amend the statement of claim so as to include Mr Sanda as a group member in the proceeding.

5.    The need for the applicant to file any additional Court process in respect of Orders 3 and 4 be dispensed with.

6.    Orders 3 and 4 of the orders dated 15 November 2021 be vacated and damages and pre-judgment interest held on trust for Mr Sanda be released from the conditions upon which they are held on the date of these orders.

7.    Pursuant to s 37AI of the FCA Act, pending resumption of the hearing of the application for approval of the settlement of this proceeding, the publication and disclosure of material referred to at paragraph 32 of the third affidavit of Ms Rebecca Gilsenan dated 22 February 2023 be prohibited without prior leave of the Court to any person other than Mr Lay and his legal representatives.

THE COURT NOTES:

8.    Mr Lay is relieved of the obligation to serve material on the respondent in respect of the hearing on 3 March 2023.

9.    The “Settlement Scheme” referred to in cl 6 of the Settlement Deed is subject to the Court’s consideration at the hearing on 3 March 2023 by which approval is sought for the making of orders which are just with respect to the distribution of any money paid under the settlement.

10.    The undertaking of Harbour by its counsel to the Court that it will not seek to recover from the applicant or any Group Member under the litigation funding agreement between Harbour and those persons (Funding Agreement):

(a)    funding commission in an amount of more than 30% of the Proceeds (as defined in the Funding Agreement); and

(b)    any amount in respect of ATE insurance, being the item set out in paragraph (b) of the definition of “Legal Costs” in the Funding Agreement.

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

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from the transcript)

LEE J:

A    INTRODUCTION

1    This is a singular settlement approval application.

2    A Gilbertian scene unfolded at a case management hearing last week, called at short notice. The representative applicant in this class action, Mr Daniel Aristabulus Sanda, sought to appear by two counsel: one barrister supporting relief sought in an interlocutory application filed under his name (instructed by Maurice Blackburn, the solicitors who acted for Mr Sanda at the initial trial); and one barrister opposing other relief claimed in the same interlocutory application.

3    For reasons that one would have thought should have been obvious, I was not prepared to countenance this form of litigious dissociative identity disorder. It was necessary to regularise the terms of Mr Sanda’s retainer with his legal representatives.

4    The problem arises because Mr Sanda has had a falling out with Maurice Blackburn. Although he has no difficulties with the headline settlement sum struck to resolve the class action with the respondent, he has sworn and filed an affidavit asserting Maurice Blackburn has failed him in various ways, most notably by proposing to charge too much for its services. It is unnecessary for the purposes of this application to canvass these assertions in more detail, let alone consider whether the allegations have any merit.

5    Whatever else is unclear, two things are pellucid: first, Mr Sanda supports the Court approving the gross settlement sum and is content for Maurice Blackburn to advance an application for approval of that sum; and secondly, Mr Sanda wants his newly retained barristers, Dr Cashman and Dr Townsend, to oppose, among other things, the payment from any approved sum of the amounts claimed by Maurice Blackburn.

6    I proposed a pragmatic solution. If Mr Sanda was prepared to instruct Maurice Blackburn to act for him to seek approval of the settlement sum pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act), he could then appear by different counsel to oppose the balance of the orders sought at a subsequent hearing. This would, however, require another group member to come along, be substituted as a representative party under s 33T and give instructions to Maurice Blackburn to seek the deductions a new representative applicant contends are just pursuant to s 33V(2).

7    This course was adopted by consent. Accordingly, I made an order pursuant to s 37P(2) of the FCA Act that the question of what orders are just with respect to the distribution of any money paid under a settlement approved by the Court as contemplated by s 33V(2) be, to the extent necessary, determined separately and after the question of whether the settlement of this proceeding should be approved under s 33V(1).

8    For the reasons set out below, I am satisfied that the settlement should be approved.

B    BACKGROUND

9    There is no need for me to set out the background to this class action. For those interested, a summary is provided by Yates J in Sanda v PTTEP Australasia (Ashmore Cartier) Pty Ltd (No 7) [2021] FCA 237 (at [1]–[7]) (Primary Judgment).

10    Of present relevance is that following the initial trial, Mr Sanda and the respondent reached a settlement, which is embodied in a deed of settlement (Settlement Deed).

11    The proposed settlement provides that the respondent will pay a sum in settlement of: first, this proceeding (NSD 1245 of 2016) (Sanda Proceeding); secondly, the proceedings known as the “Liman Proceeding” (NSD 1719 of 2016 and NSD 1720 of 2016) in which 2,225 of the group members in the Sanda Proceeding are also group members; thirdly, an appeal from the Primary Judgment brought by the respondent (NSD 1294 of 2021); and fourthly, all defined “claims” the subject of a release under the Settlement Deed.

12    The effect is to capture all claims against the respondent by both Mr Sanda and any group member for losses arising from the respondent’s negligence in relation to the oil spill the subject of the proceedings.

13    At bottom, the settlement provides that a sum of $192,500,000 (inclusive of costs and disbursements) is to be paid in full satisfaction of any group member claims.

C    RELEVANT PRINCIPLES

14    The world does not need another judgment setting out the principles to be applied in determining an application for approval of a settlement under s 33V of the FCA Act. What is worth recording, however, is the course that I have taken in bifurcating the settlement approval process.

15    Section 33V is in the following terms:

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.

16    Having regard to the text and conditional permissive language of s 33V(2), it is beyond doubt that the Court has the power to approve the proposed settlement and defer the question of the distribution of the settlement sum: see Davis v Quintis Ltd (Subject to Deed of Company Arrangement) [2022] FCA 806 (at [2]–[3] per Lee J).

17    As the Victorian Court of Appeal said in Botsman v Bolitho (No 1) [2018] VSCA 278; (2018) 57 VR 68 (at 111 [198]–[203] per Tate, Whelan and Niall JJA):

198.         Although not explicitly set out, it is sufficiently clear that the settlement to which s 33V relates is the settlement of the claims that are brought by the group members against the defendant. The settlement will bring to an end those claims, usually in consideration of payment of money by the defendant.

199.        Sub-section 33V(2) is premised on approval of the settlement having been given by the Court. It provides an ancillary power with respect to the distribution of any money paid under the settlement or paid into Court.

200.        Sub-sections 33V(1) and (2) confer two distinct, but related, powers: first, to approve the settlement and, second, to approve the distribution of payments under it. It is important not to elide these two powers.

201.        The general principles to be applied in considering an application for approval of a settlement under s 33V have been propounded in a number of cases and are well-established. Those principles guide, but do not control, the Court’s exercise of the power in s 33V to approve, or not approve, a settlement.

202.        The organising principle which underpins s 33V is whether the proposed settlement is fair and reasonable and in the interests of the group members bound by the settlement. Consideration of that question is informed by a number of matters.

203.        It is an essential starting point to identify the settlement and its terms. It is commonplace that a deed of settlement may address more than the settlement of the claims against the defendant and will also deal with the distribution of settlement money, including to a litigation funder. The structure of sub-ss 33V(1) and (2) suggests that such payments may be distributions of money that has been paid under a settlement to which the Court has given approval under s 33V(1). Those distributions are the subject of separate Court approval under s 33V(2).

(Citations omitted).

18    The question of whether it is appropriate to bifurcate the process contemplated by s 33V in any given settlement application necessarily depends upon the bespoke circumstances of the case.

19    In some cases, it will not be possible to form a view on whether a gross settlement sum represents a result which is fair, reasonable and in the interests of group members without identifying, with specificity, the net amount that will eventually be paid to each group member. In other cases, it may be possible to form a view that the proposed settlement is of such a character as to commend settlement, irrespective of the precise quantum of funds which will be approved by the Court as just deductions from the proceeds of any judgment or settlement sum.

D    THE PROPOSED DEDUCTIONS

20    This case represents a good example of the latter situation, notwithstanding a foreshadowed dispute as to whether the proposed deductions from the settlement sum for both legal costs and funding commission are just.

21    It is well established that the Court has the power to control the legal costs payable under a settlement as part of its supervisory jurisdiction. As the Full Court noted in Bellamy's Australia Ltd v Basil [2019] FCAFC 147; (2019) 372 ALR 638 (at 641 [13] per Murphy, Gleeson and Lee JJ), in approving a settlement under s 33V, the Court will, as part of its protective and supervisory role in relation to group members, only allow deductions from the settlement sum in an amount that the Court is satisfied are fair and reasonable viewed from the perspective of group members, taking into account considerations of whether, among other things, the costs are duplicative or excessive.

22    Accordingly, given the Court will not allow a payment of legal costs which is over and above what could be considered fair and reasonable or just, there is no difficulty in not specifying that precise sum presently.

23    At least in some cases, I can foresee difficulties in approving a settlement sum without there being clarity as to the amount to be paid to a litigation funder. This might be the case because of an application for a common fund order. It would also be the case in circumstances where, depending upon the resolution of a debate concerning the enforceability of contractual promises made to a funder, the resolution of that argument might impact upon whether the settlement could be regarded as fair, reasonable and in the interests of group members.

24    Although this initially caused me some pause, the issue has been resolved in this case because of an undertaking proffered to the Court by the funder, Harbour Fund II, LP (Harbour). That undertaking provides that Harbour will not seek to recover either from the applicant or, more relevantly, any group member under the funding agreement, a funding commission in an amount of more than 30 per cent of the proceeds of the settlement (as defined in the funding agreement), or any amount for “after the event” (ATE) insurance.

25    If Harbour was to enforce its bargain according to its terms, it would be entitled to a greater commission (40 per cent) and the recovery of expenses for ATE insurance. I have no doubt that I would have had significant difficulty in approving a settlement which allowed the recovery of ATE insurance against group members, but this is no longer an issue.

26    There has been no suggestion by anyone other than Mr Sanda that the funding agreement should be the subject of any equitable relief or statutory intervention. There are, as explained by the Full Court in Money Max International Pty Ltd v QBE Insurance Group Ltd [2016] FCAFC 148; (2016) 245 FCR 191 (at 221–222 [92] per Murphy, Gleeson and Beach JJ) (see also Liverpool City Council v McGraw-Hill Financial, Inc (now known as S&P Global Inc) [2018] FCA 1289 (at [37]–[58] per Lee J)) questions as to the Court’s power to interfere with the terms of agreements between a litigation funder and funded class members. With that said, such questions do not arise at this stage, as I am satisfied that irrespective as to whether the proposed funding deduction is eventually allowed, this determination would not impact upon my overall assessment that the “headline” or gross settlement sum is fair, reasonable and in the interests of group members.

E    THE PROPOSED SETTLEMENT

27    There is little I need to say about the underlying merits of the proposed settlement.

28    Of course, I have had regard to the factors set out in the Class Actions Practice Note (GPN-CA) (at [14.3]–[14.4]) and the relevant principles canvassed in Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1468 (at [40]–[45] per Moshinsky J) and Lifeplan Australia Friendly Society Limited v S&P Global Inc (Formerly McGraw-Hill Financial, Inc) (A Company Incorporated in New York) [2018] FCA 379 (at [12]–[15] per Lee J).

29    I have had the benefit of a detailed opinion concerning the proposed settlement prepared by senior and junior counsel for the applicant. The assessment of the value of group member claims is based on a methodology that not only relies upon that adopted by Yates J, but also accounts for other and higher estimates.

30    In short, if the methodology adopted by Yates J for assessing damages for the lead applicant is applied to the information currently available concerning the claims of the remaining group members, then the proposed settlement sum of $192,500,000 appears likely to exceed the current value of the remaining claims, together with costs to date and the costs of the distribution of the settlement sum.

31    Furthermore, for a variety of reasons, I am far from convinced that it would be possible to award aggregate damages in this case. It is likely that the counterfactual to any settlement along the lines proposed would have necessitated the individual proof and quantification of a vast number of claims of Indonesian seaweed farmers (upwards of 15,000), with the attendant forensic difficulties that might be thought to arise from such a spectre. I do not think it is an understatement to say that there would be real and significant risks in proving quantum for group members without very considerable work being undertaken to prepare such individual claims.

32    For the reasons given by counsel, there is no question that the proposed settlement falls within the range of reasonable settlements and ought be approved.

F    CONCLUSION

33    I accept the undertaking provided by Harbour and will make orders approving the proposed settlement.

34    Immediately following my delivery of the above reasons ex tempore, I made orders providing for the substitution of a group member, Mr Gustav Lay, as the applicant; an order under s 33ZF confirming the position of Mr Sanda as a group member in the proceeding; and leave to be granted under s 33K for the amendment of the group member definition to include Mr Sanda.

Associate:

Dated:    27 February 2023