FEDERAL COURT OF AUSTRALIA

Fordham v Commonwealth Bank of Australia [2023] FCA 1106

ORDERS

THE COURT ORDERS THAT:

Approval of Settlement

1.    Pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (Act), settlement of the proceeding be approved on the terms set out in:

(a)    the Settlement Deed executed by the Applicant, the Respondents and Slater and Gordon dated 18 October 2022, a copy of which is exhibited as “BH-02” to the affidavit of Benedict Tobin Hardwick affirmed 16 November 2022; and

(b)    the Settlement Distribution Scheme (and the annexures thereto), exhibited as “BH-10” to the affidavit of Benedict Tobin Hardwick affirmed 26 July 2023.

2.    Pursuant to s 33ZF of the Act, the Court authorises the Applicant, nunc pro tunc for and on behalf of Bound Group Members (being those persons who meet the definition of “Group Member” in the Further Amended Statement of Claim and who did not file an opt out notice in accordance with the orders made on 13 November 2020, as varied on 16 February 2021), to enter into and give effect to the Settlement Deed.

3.    Pursuant to ss 33ZB and 33ZF of the Act, the persons affected and bound by the settlement of the proceedings in paragraphs 1 and 2 and the dismissal order in paragraph 11 are the Applicant, the Respondents and all Bound Group Members.

4.    Pursuant to s 33ZF of the Act, Slater and Gordon be appointed Scheme Administrator of the Settlement Distribution Scheme, with assistance from Deloitte Financial Advisory Pty Ltd, to act in accordance with the rules of the Settlement Distribution Scheme.

Late Registrants

5.    Despite paragraph 5 of the orders made on 9 December 2022 (as varied by paragraph 1 of orders made on 21 February 2023 and paragraph 1 of orders made on 18 May 2023) and clause 5.1 of the Settlement Distribution Scheme, the Group Members identified by the unique IDs CBA66649334, CBA32445789, CBA93146197, CBA05243861, CBA04407507, CBA47465148, CBA52475614, CBA50783380, CBA06178934, CBA49618434, CBA10913661, CBA27970025, CBA90488676, CBA02686790, CBA42867342, CBA24205701/CBA84398418, CBA17559299, CBA76296448, CBA70421374, CBA65446960 and CBA54040305 be registered by the Scheme Administrator and be treated as Registered Group Members for the purposes of the Settlement Distribution Scheme.

Applicant’s Costs and Expenses

6.    Pursuant to s 54A of the Act and r 28.67 of the Federal Court Rules 2011 (Cth) (FCR), the referee report of Catherine Mary Dealehr dated 13 July 2023 (whose appointment to conduct an inquiry and make a report to the Court was made pursuant to paragraph 11 of the orders of 9 December 2022) be adopted, save that:

(a)    the estimated disbursements of $267,443.40 in respect of the period from 22 June 2023 to the date of the approval hearing is to be reduced by the amount of $50,277.30 that had been allowed for “out-of-scope tasks performed by Deloitte” to assist Slater and Gordon in relation to the approval hearing; and

(b)    the estimated settlement administration costs of Deloitte Financial Advisory Pty Ltd of $2,496,935 be increased by the amount of $249,694 on account of GST.

7.    Pursuant to ss 33ZF and 33V of the Act, the following distributions from monies paid under the settlement be approved:

(a)    the amount of $4,197,001.09 for the Applicant’s legal costs and disbursements to 21 June 2023, on a solicitor and own client basis, incurred in connection with the proceeding including subsequent to the date of the Settlement Deed;

(b)    the amount of $701,746.72 for the Applicant’s estimated legal costs and disbursements from 22 June 2023 to 4 August 2023, on a solicitor and own client basis, incurred in connection with the proceeding including subsequent to the date of the Settlement Deed;

(c)    the amount of $3,253,615.00 for the estimated legal costs and disbursements from 5 August 2023 incurred in connection with the administration of the Settlement Distribution Scheme;

(d)    the amount of $275,000 for the premium charged by Harbour Underwriting Limited with respect to an adverse costs insurance policy dated 22 December 2021;

(e)    the amount of $20,000 for the Applicant’s reasonable claim for compensation for the time and/or expenses incurred in the interests of prosecuting the proceeding on behalf of Group Members as a whole; and

(f)    the amounts of $3,000 for each of Debra Davies, David Wynn, Emily Woolley, Mark Lockwood and Sue-Anne Taylor, as a reasonable claim for compensation for the time and/or expenses incurred in connection with their role as sample group members in the proceeding.

8.    Prior to the distribution of the Residual Distribution Sum (as defined in the Settlement Distribution Scheme), as contemplated by cl 8.9 of the Settlement Distribution Scheme, the Scheme Administrator is to send to chambers a confidential affidavit deposing as to costs incurred by the Applicant and/or the Scheme Administrator since 16 August 2023, so that the Court may make a further order as to the amount of any approved administration costs and the Applicant’s legal costs over this period. Liberty to apply for this purpose is reserved.

Confidentiality

9.    Pursuant to s 37AF of the Act, to prevent prejudice to the proper administration of justice, the following paragraphs and annexures are confidential and are not to be published until further order:

(a)    section A of the confidential affidavit of Benedict Tobin Hardwick affirmed on 26 July 2023 which discusses the confidential opinion of counsel and the reasons for settlement;

(b)    annexure BH-16 of the confidential affidavit of Benedict Tobin Hardwick affirmed on 26 July 2023, being the confidential opinion of counsel;

(c)    annexure BH-18 of the confidential affidavit of Benedict Tobin Hardwick affirmed on 26 July 2023, being a notice of objection received from a group member containing personal information; and

(d)    annexures KM-04 of the confidential affidavit of Kirsten Marie Morrison affirmed on 16 August 2023, being a document describing the software, systems and processes to be designed by Deloitte Financial Advisory Pty Ltd to administer group member registration and the Settlement Distribution Scheme.

10.    Pursuant to s 37AF of the Act, to prevent prejudice to the proper administration of justice, the following are confidential until the end of the appeal period for this proceeding or further order:

(a)    confidential annexure BH-08 to the affidavit of Benedict Tobin Hardwick affirmed on 16 November 2022, being the Confidential Loss Assessment Formula;

(b)    section B of the confidential affidavit of Benedict Tobin Hardwick affirmed on 26 July 2023, being an estimate of the costs of proceeding to judgment; and

(c)    annexure BH-17 to the confidential affidavit of Benedict Tobin Hardwick affirmed on 26 July 2023, being a table containing estimated distributions of settlement funds prepared by Deloitte Financial Advisory Pty Ltd.

Final Orders

11.    Pursuant to ss 22, 23 or 33ZF of the Act or r 1.32 of the FCR and/or the Court's implied jurisdiction, and with effect from the date on which the final distribution of the Settlement Sum (including the Residual Distribution Sum) occurs under the Settlement Distribution Scheme, the proceeding against the Respondents is dismissed on the basis that:

(a)    the dismissal is a defence and absolute bar to any claim or proceeding by the Applicant or any Bound Group Member against the Respondents in respect of, or relating to, the subject matter of the proceeding, without prejudice to:

(i)    the right of any party to the Settlement Deed to make an application to enforce the Settlement Deed in a new proceeding;

(ii)    the right of any Registered Group Member (as defined in the Settlement Distribution Scheme) to make application to the Court in accordance with the terms of the Settlement Distribution Scheme; or

(iii)    the right of the Scheme Administrator of the Settlement Distribution Scheme to refer any issues relating to the Settlement Distribution Scheme to the Court for direction or determination in accordance with the terms of the Settlement Distribution Scheme; and

(b)    there be no order as to costs as between the Applicant and the Respondents and all previous costs orders in the proceeding between them are vacated.

12.    The Scheme Administrator has liberty to apply in relation to any matter arising in relation to the Settlement Distribution Scheme.

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

REASONS FOR JUDGMENT

O’BRYAN J:

Introduction

1    This is a representative proceeding brought under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (FCA Act) against the Commonwealth Bank of Australia (CBA) and two insurance providers, The Colonial Mutual Life Assurance Society Limited (CML) and AIA Australia Limited (AIAA) (together, the Insurers), in relation to certain consumer credit insurance policies issued to CBA’s customers between 1 January 2010 and 7 March 2018 (relevant period).

2    The consumer credit insurance policies were:

(a)    the CreditCard Plus policy, which related to credit cards provided by CBA and was issued by CML; and

(b)    the Loan Protection policy, which related to personal loans advanced by CBA and was issued by CML.

3    At all relevant times, CML was wholly owned by CBA. On 15 March 2021, the Court made orders for a life insurance scheme pursuant to Pt 9 of the Life Insurance Act 1995 (Cth), which took effect from 1 April 2021 and which provided that AIAA was liable for and assumed certain liabilities of CML as specified in the scheme. On 1 April 2022, AIAA was joined to the proceeding on the basis that if any liabilities of CML, as alleged in the proceeding, had transferred to AIAA under the scheme, then AIAA was liable for the relief claimed against CML.

4    The applicant was a customer of CBA, and alleges that she acquired the Loan Protection policy, the issue of which was arranged by CBA on behalf of CML. The applicant brings the proceeding on her own behalf and on behalf of all other persons who acquired at least one of the consumer credit insurance policies during the relevant period and have suffered loss or damage by reason of the alleged contravening conduct of the respondents, and/or at whose expense the respondents were unjustly enriched, as alleged in the statement of claim. The representative proceeding is what is colloquially referred to as an “open” class action.

5    The applicant and group members are ordinary members of the community who, in connection with the acquisition of consumer credit facilities from CBA, also acquired one or more of the consumer credit insurance policies issued by CBA on behalf of CML. The value of the individual claims of the applicant and each of the group members is very modest, but in aggregate is substantial.

6    The evidence before me on the settlement approval application demonstrates that a very large number of policies were issued by CBA in the relevant period. The solicitors for the applicant, Slater and Gordon, estimated that there are up to 701,400 group members in this proceeding, being persons who acquired at least one or more of the consumer credit insurance policies in the relevant period. Approximately 750,000 opt out notices were distributed and approximately 440 potential group members opted out.

7    Slater and Gordon have conducted the proceeding on a “no win no fee” basis and there is no litigation funder involved. Under a legal costs agreement entered into with the applicant, Slater and Gordon are entitled to charge an uplift fee calculated as 25% of their professional fees incurred if the outcome of the proceeding is successful. A successful outcome of the proceeding is defined in the agreement as the applicant receiving an amount of money after payment of all liabilities or a reasonable offer of settlement is made that Slater and Gordon recommend.

8    The initial trial of this proceeding was listed to commence on 6 June 2023 and was scheduled to run for four weeks.

9    On 18 October 2022, the applicant entered into a settlement deed with CBA and the Insurers to bring about a settlement of the applicant’s claims (Settlement Deed). The principal terms of the settlement are that, subject to the approval of the Court under s 33V of the FCA Act:

(a)    CBA and the Insurers will pay an aggregate amount of $50 million in full and final settlement of the claims made against them;

(b)    the payment of the settlement sum is made by CBA and the Insurers without admission of liability;

(c)    the settlement sum will be paid into a trust account held by Slater and Gordon and distributed in accordance with a Settlement Distribution Scheme (also subject to Court approval); and

(d)    the applicant and each group member will release CBA and the Insurers from all claims arising out of or in any way related to the sale or issue of the consumer credit insurance policies.

10    By amended interlocutory application dated 25 November 2022, the applicant sought orders to facilitate the settlement of the proceeding. On 9 December 2022, I made orders that included:

(a)    an order requiring notice of the proposed settlements to be given to group members in a prescribed form, which notices included information concerning the requirement to register in order to receive compensation under the settlement and the right to object to the settlement;

(b)    an order specifying a date by which group members were required to register to participate in the settlement and a date by which group members were required to lodge any notice of objection to the settlement;

(c)    an order appointing a referee pursuant to s 54A of the FCA Act for the purpose of conducting an inquiry and making a report in writing to the Court with respect to the reasonableness of the applicant’s legal costs incurred in relation to the proceeding, up to and including the date of the hearing of the settlement approval application on a solicitor and own client basis, and the reasonableness of the costs proposed to be incurred in connection with settlement administration in the event the proposed settlement is approved; and

(d)    otherwise setting a timetable for the hearing of an application for approval of the settlement by the Court.

11    These reasons concern the application for approval of the settlement under s 33V of the FCA Act. The application was heard on 4 August 2023. At that hearing, the applicant relied on:

(a)    three affidavits of Benedict Tobin Hardwick, a lawyer employed by Slater and Gordon with responsibility for the conduct of the proceeding on behalf of the applicant, comprising an affidavit dated 16 November 2022 and two affidavits dated 26 July 2023 (on of which was marked as confidential);

(b)    an affidavit of Kirsten Marie Morrison, a lawyer employed by Slater and Gordon, dated 3 August 2023;

(c)    an expert costs report of Catherine Mary Dealehr dated 13 July 2023; and

(d)    a written outline of submissions dated 28 July 2023.

12    The respondents did not file any material in the settlement approval application. At the hearing, counsel for respondents indicated that they supported the application and made confined oral submissions in support.

13    I heard the settlement approval application on 4 August 2023. Following the hearing, the applicant filed two further affidavits of Ms Morrison dated 16 August 2023 and 25 August respectively, together with a further written outline of submissions dated 25 August 2023, to address several discrete issues which I indicated had not been sufficiently addressed. Having received and considered that material, I have determined that it is appropriate to make orders approving the settlement. These are my reasons for making those orders.

14    It should be noted that a representative proceeding making similar allegations was brought against National Australia Bank (NAB) in 2018 (proceeding VID 1238 of 2018). An agreement to settle that proceeding was reached in October 2019, prior to the commencement of this proceeding. The settlement was approved by the Court in May 2020: Clark v National Australia Bank Limited (No 2) [2020] FCA 652 (National Australia Bank No 2). Representative proceedings making similar allegations have also been brought against Westpac Banking Corporation (Westpac) (proceeding VID 134 of 2020) and Australia and New Zealand Banking Group Limited (ANZ) (proceeding VID 133 of 2020). Like the present proceeding, each of those proceedings was commenced in 2020. Slater and Gordon represented the applicants in each of those proceedings and also conducted those proceedings on a “no win no fee” basis. Orders have been made approving settlements in both the Westpac proceeding and the ANZ proceeding: see Kemp v Westpac Banking Corporation (No 4) [2023] FCA 830 (Kemp v Westpac (No 4)) and Reilly v Australia and New Zealand Banking Group Limited (No 5) [2023] FCA 896 (Reilly v ANZ (No 5)). Whilst each of those other proceedings concerned similar consumer credit insurance policies, and similar allegations were made in each proceeding, each of the proceedings was distinct. The allegations concerned the manner in which, and the circumstances in which, the policies were sold by each of the banks, and therefore depended upon facts peculiar to each bank. The approval of the settlement of each proceeding, and particularly the assessment of the fairness and reasonableness of the settlement, also depended on the circumstances of each case. In that regard, it should be noted that the number of insurance policies issued and the amount of premiums paid differed as between each of the proceedings, which inevitably affected the parties’ assessment of a reasonable compromise of the claims made.

Relevant principles

15    The settlement of a representative proceeding is governed by s 33V of the FCA Act which provides as follows:

33V 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    I recently summarised the principles governing the assessment required to be made by s 33V of the FCA Act in Kemp v Westpac (No 4) at [17]-[21]. Those principles are well-established.

The nature of the proceedings and the claims made

17    As noted above, the proceeding concerns two types of consumer credit insurance policies issued by CBA to its customers on behalf of CML between 1 January 2010 and 7 March 2018: the CreditCard Plus policy and the Loan Protection policy. In broad terms, the policies insured against the risk of being unable to repay credit card and personal loans by reason of the borrower’s death, the borrower’s unemployment as a result of involuntary termination or retrenchment, the borrower being unable to perform their usual occupation, business or profession on account of illness or injury, the borrower being unlikely to return to their usual occupation by reason of sickness or injury, or the borrower being diagnosed with cancer, coronary artery disease requiring bypass surgery, heart attack or stroke.

18    The catalyst for this proceeding (similarly to the Westpac and ANZ proceedings) appears to have been the issue by the Australian Securities and Investments Commission (ASIC) in July 2019 of Report 622 titled “Consumer credit insurance: Poor value products and harmful sales practices”. The Report concerned reviews that had been undertaken by lenders, including CBA, at the requirement of ASIC, of the sale of consumer credit insurance in the period from 2011 to 2018. The Report made adverse findings with respect to sales practices and product design of consumer credit insurance policies. ASIC had issued earlier adverse reports with respect to the sale of consumer credit insurance policies, being Report 256 titled “Consumer credit insurance: A review of sales practices by authorised deposit taking institutions” issued in October 2011, and Report 361 titled “Consumer credit insurance policies: Consumers' claims experiences” issued in July 2013.

19    The applicant alleged that in arranging the issue of the policies and/or charging the premiums under the policies, the respondents contravened a number of laws, including:

(a)    the prohibition of misleading and deceptive conduct in s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act);

(b)    the prohibition of unconscionable conduct in s 12CB of the ASIC Act;

(c)    the prohibition against asserting a right to payment for unsolicited financial services in s 12DM of the ASIC Act;

(d)    the prohibition against representing that a debtor is required to pay the cost of insurance taken out or arranged by the credit provider in s 143(1)(b) of the National Credit Code;

(e)    the requirement that a provider of financial product advice must act in the best interests of the client in relation to the advice in s 961B of the Corporations Act 2001 (Cth) (Corporations Act);

(f)    the requirement that a provider of financial product advice must only provide advice to the client if it would be reasonable to conclude that the advice is appropriate to the client in s 961G of the Corporations Act; and

(g)    the requirement that a provider of financial product advice must give priority to the interests of the client when giving advice in s 961J of the Corporations Act.

20    The claims made for misleading and deceptive conduct and breach of the National Credit Code were based on allegations that, at the time of sale of the policies, the customer was told that they needed to take out the policy in order to obtain their credit card or personal loan, or the customer was not informed (sufficiently or at all) that they were acquiring the policy or that the policy was optional.

21    The unconscionable conduct claim was based on allegations that:

(a)    the policies were of no real value or benefit to the customer, and the respondents knew or should have known this; and

(b)    the policies were sold in ways that failed to ensure that the customer agreed to the policy or understood the terms, including applicable exclusions.

22    The claims made regarding the provision of inappropriate financial product advice were based on allegations that CBA representatives provided an oral recommendation or statement of opinion that the customer should purchase the policies, or would benefit from the policies, in circumstances where the recommendation or statement could reasonably be regarded as being intended to influence the customer in making a decision in relation to the policies, and where a reasonable person might expect the relevant CBA representative to have considered their objectives, financial situation and needs.

23    The applicant also alleged that the policies were liable to be set aside for unilateral mistake on the basis that:

(a)    the applicant and at least some of the group members acquired the policies and paid the premiums under them under one or more of the following causative mistaken beliefs:

(i)    that the policy was compulsory, or that they were required to take out the relevant policy in order to obtain the credit card or personal loan, or that the policy formed part of (and was not separate to) their credit card or personal loan;

(ii)    that they would be eligible for the policy cover (in that they were not excluded from one or more of the benefits under the policy), or the relevant policy had material value to them; or

(iii)    that they had not acquired any policy; and

(b)    the respondents were aware that circumstances existed which indicated that the applicant and some group members were acquiring their respective policies under one or more of the mistaken beliefs.

24    The primary relief sought in the proceeding is repayment of premiums paid under the policies plus interest and orders setting aside the policies.

25    Each of the respondents denies the allegations and their settlement of the proceeding is without admission of liability.

26    A significant issue in the proceeding is the application of statutory limitation periods. The proceeding was commenced on 9 June 2020, but seeks recovery in respect of premiums paid on policies in the period 1 January 2010 to 7 March 2018. The period 1 January 2010 to 9 June 2014 is more than 6 years prior to the commencement of the proceeding. In an interlocutory judgment in the ANZ proceeding, I ruled that, in respect of the misleading conduct claims and the unconscionable conduct claims, the applicants could not at law recover loss or damage incurred earlier than 6 years prior to the commencement of the proceeding: Reilly v Australia and New Zealand Banking Group Limited (No 2) [2020] FCA 1502. The claims for loss and damage made in this proceeding were amended to conform with that ruling. However, the question of the application of limitation periods also hangs over the other claims for relief in this proceeding.

The terms of the Settlement Deed and the Settlement Distribution Scheme

Settlement Deed

27    As noted above, the applicant entered into the Settlement Deed with CBA and the Insurers. Slater and Gordon was also a party to the Settlement Deed. The terms of the settlement reached was summarised earlier and are in reasonably standard form. The operation of the settlement is subject to the Court’s approval.

28    The key terms of the Settlement Deed are as follows.

(a)    CBA must pay the sum of $50 million in settlement of the proceeding: cl 5.2.

(b)    The respondents’ entry into, and performance of, the Settlement Deed is undertaken without admission of liability: recital D.

(c)    Payment of the settlement sum is to be made into a trust account held by Slater and Gordon (the settlement fund) and distributed in accordance with the Settlement Distribution Scheme, which is also subject to Court approval. The settlement fund must be administered by an administrator, who is to be Slater and Gordon or, with the respondents’ consent, such other person who consents to be bound by the terms of the Settlement Deed: cll 3.3(f), 5.2, 5.3.

(d)    Upon the making of an order by this Court approving the settlement, all claims made by the applicant and any group member against any respondent arising, either directly or indirectly, out of or in any way related to the proceeding, including all costs, are fully and finally settled, and the applicant (on her own behalf and on behalf of all group members) releases and discharges each of the respondents from all such claims: cl 6.1.

(e)    Upon payment of the settlement sum, no respondent will have any liability to the applicant, group members or Slater and Gordon in relation to any such claims, although the respondents remain bound to perform their obligations under the Settlement Deed and the settlement more generally: cl 7.

29    It is relevant to note that the release and discharge of the CBA and Insurers from the claims made in the proceeding and all liability in relation to the claims does not apply to any insurance claim that a group member has for the payment of benefits under the terms of the consumer credit insurance policies: see the definition of “Claims” in cl 1.

Notification and registration

30    On 24 November 2022, following the execution of the Settlement Deed, I made orders requiring the respondents to provide Slater and Gordon with the following information for each potential group member (being customers identified by CBA for the purpose of the opt out procedure in this proceeding who purchased one of the policies during the relevant period, paid a premium for that policy, and did not receive a refund in full for any premiums paid):

(a)    their customer identification number, name, last-known address, email address and mobile phone number;

(b)    if available, details of any current transactional bank account held by the potential group member with CBA (to facilitate payment of their entitlement, if any, under the Settlement Distribution Scheme);

(c)    the relevant policy or policies they took out;

(d)    for each policy taken out, the policy number, the sales channel, the amount of premiums, refunds, remediation and claims paid under the policy, the date on which a premium was first paid, whether the policy was continuing and, if not, the date on which it was terminated; and

(e)    any other information reasonably required to assist the applicant in administering and distributing the Settlement Distribution Scheme.

31    On 9 December 2022, I made orders providing for potential group members to be notified of the proposed settlement of the proceeding (on the terms set out in the Settlement Deed), and the requirement to register in order to be eligible to receive compensation through the settlement. More than 760,000 people were sent those notifications. Approximately 78,000 potential group members registered for the purposes of the settlement.

32    The applicant filed comprehensive evidence concerning the work involved in the notification and registration processes, including responding to enquiries from a large number of potential group members and verifying information. It is unnecessary to set out that evidence more generally, but the work was extensive.

Settlement Distribution Scheme

33    The Settlement Distribution Scheme is to be administered and applied by the Scheme Administrator with the assistance of the Administrator Staff and Deloitte Financial Advisory Pty Ltd (Deloitte). The Scheme Administrator will, subject to and in accordance with the Settlement Distribution Scheme, hold the settlement fund on trust for the applicant, registered group members and parties to whom distribution is to be made under the Scheme.

34    The Scheme contains provisions with respect to the registration process for group members and the process for verifying information in relation to each group member.

35    The Scheme provides that, prior to distribution from the settlement fund to registered group members, the following payments are to be made in the following order of priority:

(a)    an amount to Slater and Gordon for the applicant’s legal costs and estimated administration costs, which includes costs payable by the Scheme Administrator to Deloitte for services to administer the Settlement Distribution Scheme;

(b)    an amount to Slater and Gordon for the premium charged by an insurer, Harbour Underwriting Limited, with respect to an adverse costs insurance policy;

(c)    an amount to the applicant for her reimbursement payments; and

(d)    an amount to each sample group member for the sample group member’s reimbursement payment.

36    The balance of the settlement fund is to be distributed to the registered group members. Under the Scheme, the amount to be distributed to each registered group member is to be determined by the following steps.

(a)    First, the Scheme Administrator will calculate, for each registered group member, the total amount of premiums and interest paid in respect of policies held by them and deduct any amount refunded, paid for any claims on the policies, or paid by way of remediation (which amount is referred to as the registered group member’s individual unweighted premium amount). If that amount is less than $10.00, the registered group member will not be entitled to compensation and the following steps will not apply. This is because the costs of administering and distributing such small amounts would exceed the compensation payable.

(b)    Second, the Scheme Administrator will then apply to each registered group member’s individual unweighted premium amount the weightings set out in the “Loss Assessment Formula” (to arrive at an individual weighted premium amount). The weightings are as follows:

(i)    if the relevant policy was acquired prior to 9 June 2014 (that is, outside the usual statutory limitation period) (policies affected by limitation periods), a discount of 85% is to be applied to the unweighted premium amount;

(ii)    if the relevant policy was acquired within the statutory limitation period, and through the online sale channel (policies sold online), a discount of 45% is to be applied to the unweighted premium amount; and

(iii)    if the relevant policy was acquired within the statutory limitation period and, through any sales channel other than the online sales channel (policies not sold online), no discount is to be applied to the unweighted premium amount.

(c)    Third, the balance of the settlement fund will be distributed rateably between registered group members calculated by reference to each registered group member’s weighted premium amount as a proportion of the sum of all registered group members’ weighted premium amounts.

37    The Scheme provides that the Scheme Administrator may refer any issues relating to this Settlement Distribution Scheme to the Court for direction or determination.

38    In its original form, the Scheme also contained provisions for a “hold back sum” of $50,000. That sum was to be deducted from the settlement fund and retained by the Scheme Administrator for a period of one year for the purpose of making distributions to approved late registrants. The Scheme made provision for potential group members to apply to register to participate in the settlement during the period of one year after settlement approval, and for the Scheme Administrator to make a distribution from the hold back sum if satisfied on the basis of a statutory declaration that the person is a potential group member and that they did not register their claim during the registration period due to no fault of their own. Those provisions were excised from the amended Settlement Distribution Scheme in respect of which the applicant sought orders at the hearing on 4 August 2023. As a result, the provision of a hold back sum did not arise for determination in this application.

39    The Scheme contemplates that there will likely be an initial distribution from the settlement fund followed by a residual distribution. This is because an amount will be retained from the initial distribution to cover administration costs (as referred to above), but those costs can only be estimated at this time. If the administration costs are lower than estimated, the residual of the settlement fund will be distributed in the same manner as the initial distribution.

Estimated distribution from the settlement fund

40    The Court was provided with estimates of the amounts that would be distributed to group members pursuant to the Settlement Distribution Scheme, after payment of the costs of the litigation and the administration of the settlement fund.

41    Mr Hardwick deposed (in his open affidavit of 26 July 2023) that, if settlement is approved (in the revised form without a hold back sum), the distribution of the settlement sum of $50 million is expected to be as follows:

(a)    approximately $41.74 million (being approximately 83.5%) of the total settlement sum will be transferred to registered group members;

(b)    approximately $4.20 million (being approximately 8.4%) of the total settlement sum will be applied to meet the legal costs and disbursements of the applicant to date;

(c)    approximately $3.76 million (being approximately 7.51%) of the total settlement sum will be withheld to meet the potential future costs of the administration;

(d)    $275,000 (being approximately 0.06%) of the total settlement sum will be paid in reimbursement of the costs of holding adverse costs insurance in the proceeding;

(e)    $20,000 (being approximately 0.04%) of the total settlement sum will be paid to the applicant as the applicant’s reimbursement payment; and

(f)    $15,000 (being approximately 0.03%) of the total settlement sum will be paid as the sample group members’ reimbursement payment.

42    Some details of the above evidence were inaccurate, although the inaccuracy did not affect the overall picture. As discussed further below, the report of Ms Dealehr records that:

(a)    the reasonable legal costs and disbursements of the applicant to 21 June 2023 is approximately $4.2 million;

(b)    the reasonable legal costs and disbursements of the applicant from 22 June 2023 to the date of the settlement approval hearing is approximately $0.75 million; and

(c)    the costs of the administration of the settlement scheme (including registration by group members) incurred to date and expected to be incurred, by both Slater and Gordon and Deloitte, is approximately $3 million.

43    As discussed further below, the applicant seeks two adjustments to be made to the above figures in Ms Dealehrs’ report. The effect of the adjustments is:

(a)    to reduce the legal costs and disbursements of the applicant from 22 June 2023 to the date of the settlement approval hearing by approximately $50,000 (so that the costs are approximately $0.7 million); and

(b)    to increase the estimate costs of the administration of the settlement scheme by approximately $250,000 (so that the costs are approximately $3.25 million).

44    Overall, the effect of the adjustments is to increase the costs of the settlement by approximately $200,000. This does not materially change the amount to be distributed to registered group members. The applicant also submitted that, by the time settlement is made, interest earned on the settlement fund, which will be added to the amount to be distributed to registered group members, will exceed the additional amount of $200,000 to be paid as part of the costs of the settlement.

45    As at the date of hearing, the key financial metrics with respect to the compensation expected to be payable to the registered group members were as follows:

(a)    the total number of registered group members who are eligible to receive compensation is 78,126;

(b)    the total number of policies held by registered group members eligible to receive compensation is 149,140;

(c)    the total net premiums paid in respect of those policies (less refunds, remediation or claims paid) is approximately $107.7 million;

(d)    as noted above, approximately $41.74 million in compensation is expected to be paid to registered group members;

(e)    in respect of policies affected by limitation periods, the total number of such policies held by registered group members is 90,743 and the compensation expected to be paid to those registered group members is approximately $8.56 million which represents about 12.55% of the net premiums paid by them;

(f)    in respect of policies sold online that are not affected by limitation periods, no such policies were held by registered group members and, accordingly, the compensation expected to be paid in respect of those policies is nil; and

(g)    in respect of policies not sold online that are not affected by limitation periods, the total number of such policies held by registered group members is 58,397 and the compensation expected to be paid to those registered group members is approximately $32.85 million which represents about 83.28% of the net premiums paid by them.

Is the settlement fair and reasonable?

46    The first question that arises is whether the proposed settlement of the proceeding between the applicant and the respondents is fair and reasonable. I am satisfied that it is. In reaching that view, I have taken account of the following matters.

47    First and foremost, I have had regard to the confidential opinion of counsel for the applicant. The opinion was detailed, comprehensive and, in my view, balanced in its assessment of the prospects of success of each of the causes of action. The opinion addressed the nature of the claims and defences, the risks of establishing liability, the risks of establishing loss and damage, the reasonableness of the settlement in light of the best recovery, and the risks of the litigation.

48    Second, I have had regard to the key financial metrics relating to the compensation likely to be paid to group members, which are set out above. In my view, the amounts payable are fair and reasonable having regard to the matters discussed in the confidential opinion of counsel for the applicant.

49    Third, I take account of the fact that, despite the very large number of potential group members and the large number of registered group members, there were relatively few objections to the settlement. At the time of the hearing, there were about 25 formal or informal objections (where more than 760,000 people were notified of the proposed settlement). It is unnecessary to traverse each objection in detail. Only one of the objectors, Jason Hendy, appeared at the hearing to make submissions. Broadly stated, there were three categories of objection made.

50    The first category of objections concerned the quantum of the proposed settlement overall and the quantum of the proposed deductions from the settlement. I have taken these objections into account. However, for the reasons expressed above, I am satisfied that the settlement is fair and reasonable as to overall quantum. I consider the proposed deductions from the settlement sum below.

51    The second category of objections concerned the proposed distribution to a particular group member. Objectors within this category fell into two sub-categories. In the first sub-category, objectors claimed that they were, or ought to be, entitled to receive distributions in amounts greater than those that they had been assessed as being entitled to receive. In the second sub-category, objectors claimed that the distributions to be made to them did not compensate them for claims that they had made on their policies but which had been denied. Mr Hendy, who appeared at the hearing, fell into that second sub-category.

52    As to the first sub-category, Mr Hardwick and Ms Morrison deposed to the steps taken by Slater and Gordon with respect to each of the objections. Although they differed in each case, the steps taken variously included:

(a)    contacting the objector for the purpose of seeking or providing further information;

(b)    contacting the respondents for the purpose of seeking further information in relation to policies held by certain objectors; and

(c)    undertaking a review of an objector’s proposed estimated distribution by reference to information provided by the objector and other information available to Slater and Gordon.

53    I am satisfied that the steps taken by Slater and Gordon to verify the entitlements of individual group members were appropriate.

54    As to the second sub-category, the objections were based on a misunderstanding of the claims made in this proceeding. The proceeding was not brought to enforce the policies or recover amounts allegedly owing by way of benefits under the policies. It was brought to recover premiums paid for the policies. As noted earlier, the settlement of the proceeding will not affect any insurance claim that a group member may have against CBA for recovery of a benefit payable under a policy held by that person.

55    The third category of objections concerned difficulties encountered by individuals in the registration process for settlement. Objectors in this category claimed that they had been unaware of the requirement to register to participate in the settlement or the process by which registration was to occur, or that they had encountered technical issues when attempting to register, which prevented them from registering successfully. A number of objectors requested that they be permitted to participate in the settlement.

56    In respect of the third category of objections, Mr Hardwick and Ms Morrison deposed to the steps taken by Slater and Gordon with respect to each of the objections. For all such objections in that category, the applicant has applied to include the group member as a registered group member to enable them to participate in the settlement. I am satisfied that the inclusion of those group members is appropriate given the evidence that is before the Court, and orders will be made to that effect.

Is the proposed Settlement Distribution Scheme just?

57    The second question that arises is whether the proposed Settlement Distribution Scheme, and particularly the differential distribution of the settlement fund in accordance with the “Loss Assessment Formula” in the Settlement Distribution Scheme, is just within the meaning of s 33V(2). I am satisfied that it is just for the following reasons.

58    The proceeding encompassed a wide range of claims involving diverse legal and factual elements and issues including that:

(a)    claims were brought in respect of two types of consumer credit insurance policies arranged by CBA on behalf of CML;

(b)    the claims covered policies between 1 January 2010 and 7 March 2018 and in circumstances where claims in respect of policies issued prior to 9 June 2014 were potentially subject to limitation periods;

(c)    the claims covered policies issued online as well as policies issued through other channels (such as in branch or by telephone) where the circumstances of the sales process differed according to the sales channel; and

(d)    the claims involved different causes of action each of which raised discrete factual and legal issues.

59    As I observed in Kemp v Westpac (No 4) at [58] and in Reilly v ANZ (No 5) at [57], the statutory requirement that orders for the distribution of settlement monies be just dictates that, in determining the amounts to be paid out of the settlement funds to registered group members who have claims falling within different combinations of the categories summarised above, consideration must be given to the different prospects of success of the claims in those different combinations. Equally, the statutory requirement allows recognition of the fact that any assessment of the prospects of different combinations of claim types may become increasingly speculative. Further, in cases which involve a very large number of claims and claimants and where each individual claim is for a relatively modest sum of money, differences in the assessment of prospects across different combinations of claim types may become relatively minor and counterbalanced by the margin for error in the assessment.

60    As outlined above, the Settlement Distribution Scheme requires the differential distribution of the settlement fund to registered group members in accordance with the “Loss Assessment Formula”. The “Loss Assessment Formula” divides the claims of registered group members into three broad categories, and applies a discount (of different amounts) to the claims in two of the categories. The confidential opinion of counsel addresses the reasons for determining the “Loss Assessment Formula” based on an assessment of the differing prospects of success of claims falling within those categories. Overall, I am satisfied that the categories selected for differentiating between group member claims, and the discounts applied, represent a just approach to the distribution of the settlement fund as between registered group members.

61    Two other matters require mention.

62    First, the Settlement Distribution Scheme contemplates that Slater and Gordon, with the assistance of Deloitte, be appointed to administer the Scheme. The applicant submitted, and I accept, that it is appropriate for Slater and Gordon to be the Scheme Administrator given that the proposed role of the administrator in this case involves a degree of complexity in carrying out individual assessments of group member claims: see Dillon v RBS Group (Australia) Pty Limited (No 2) [2018] FCA 395 at [20] per Lee J.

63    Second, and as noted above, the Scheme initially proposed by the applicant, and annexed to the affidavit of Ben Hardwick dated 16 November 2022, also contained provision for a “hold back sum” of $50,000. This was to make provision for potential group members to apply to register to participate in the settlement during the period of one year after settlement approval, and for the Scheme Administrator to make a distribution from the hold back sum if satisfied that the person did not register their claim during the registration period due to no fault of their own. A hold back sum arrangement was also sought by the applicant in the Westpac proceeding, and was initially sought by the applicants in the ANZ proceeding (although it was not subsequently pressed), on identical terms. The reasons for which the arrangement was sought in the Westpac and ANZ proceedings are detailed in Kemp v Westpac (No 4) at [63] and Reilly v ANZ (No 5) at [62]. In short, Slater and Gordon sought to address a perceived shortcoming in its administration of the settlement reached in the equivalent NAB proceeding, having regard to the feedback received by it from a consumer advocacy body in connection with the settlement of that proceeding. For the reasons outlined in Kemp v Westpac (No 4) at [67], I did not make orders providing for the proposed hold back sum arrangement in the Westpac proceeding, and the orders were not ultimately sought in the ANZ proceeding: see Reilly v ANZ (No 5) at [65]. Having regard to those earlier decisions, the applicant in this proceeding did not press for a hold back arrangement as part of the Settlement Distribution Scheme.

Is the allowance for litigation and administration costs appropriate?

64    The third question that arises, also under s 33V(2), is whether the allowance proposed to be made out of the settlement fund for litigation and administration costs is appropriate.

65    As set out earlier, there are four principal categories of litigation and administrative costs that are proposed to be paid out of the settlement sum comprising:

(a)    the legal costs (including the success fee) and disbursements of the applicant up until Court approval of the settlement;

(b)    the estimated costs of the settlement administration;

(c)    reimbursement of the costs of holding adverse costs insurance in the proceeding; and

(d)    reimbursement payments for the applicant and the sample group members.

66    Each of these categories of costs is considered in turn.

Legal costs and disbursements of the applicant up until the approval hearing

67    I summarised the principles governing the Court’s discretion to approve payment of legal costs and disbursements incurred by an applicant in a representative proceeding out of the settlement sum in Kemp v Westpac (No 4). Briefly stated, the legal costs and disbursements must be in accordance with the terms of the relevant costs agreements; they must be fair and reasonable having regard to the work undertaken; and they must be proportionate, in the sense that, at the time the work was to be performed and the costs expended, the costs were proportionate to the value of the benefit expected to be gained from the work. It is now established practice for the Court to appoint a referee to review the costs and disbursements claimed: see Kemp v Westpac (No 4) at [71]-[72] and the authorities cited therein.

68    By orders made on 9 December 2022, I appointed Ms Dealehr as a referee for the purpose of conducting an inquiry and making a report in writing to the Court stating, with reasons, her opinion on:

(a)    the reasonableness of the applicant’s legal costs incurred in relation to the proceeding, up to and including the date of the hearing of the settlement approval application (including costs anticipated and yet to be incurred as at the date of the report) on a solicitor and own client basis; and

(b)    the reasonableness of the costs proposed to be incurred in connection with settlement administration, in the event the proposed settlement is approved.

69    This section of the reasons concerns Ms Dealehr’s report with respect to the reasonableness of the applicant’s legal costs incurred in relation to the proceeding, up to and including the date of the hearing of the settlement approval application. The reasonableness of the costs proposed to be incurred in connection with settlement administration is considered in the next section of the reasons.

70    Ms Dealehr provided a report to the Court dated 13 July 2023.

71    Ms Dealehr’s report disclosed her substantial expertise and experience as an Australian costs lawyer over 35 years.

72    As to methodology, Ms Dealehr relied on the gross sum costs method of calculating and assessing reasonable legal fees. Ms Dealehr explained that:

It is my experience that the Courts will accept a methodology that estimates costs on a lump sum by relying on legal practice’s management software to prove their legal fees, provided such information was sufficient to explain the time and task undertaken, by whom and for what purpose. Therefore, I see my role includes determining whether the records relied on are sufficient and also whether they are derived from probative source records of the law practice.

73    Ms Dealehr further explained that, in undertaking the inquiry, she had had regard to the following questions formulated by Gordon J in Modtech Engineering Pty Ltd v GPT Management Holdings Limited [2013] FCA 626 at [37]:

(a)    whether the work in a particular area, or in relation to a particular issue, was undertaken efficiently and appropriately;

(b)    whether the work was undertaken by a person of appropriate level of seniority;

(c)    whether the charge out rate was appropriate having regard to the level of seniority of that practitioner and the nature of the work undertaken;

(d)    whether the task (and associated charge) was appropriate, having regard to the nature of the work and the time taken to complete the task; and

(e)    whether the ratio of work and interrelation of work undertaken by the solicitors and the counsel retained was reasonable.

74    Ms Dealehr’s report sets out the terms of the legal costs agreement entered into between the applicant and Slater and Gordon on 22 April 2020. The agreement provided that the solicitors’ fees would be based on specified hourly rates for different categories of legal practitioners and paralegal staff. The agreed rates were not increased during the course of the proceeding. Ms Dealehr concluded that the rates were reasonable save in respect of the most junior category of legal practitioner, and Ms Dealer made a downward adjustment in the agreed rate.

75    Ms Dealehr’s report contained a detailed examination of the applicant’s legal costs incurred in relation to the proceeding up to 21 June 2023 and the applicant’s estimated legal costs up to the date of the approval hearing on 4 August 2023. After conducting the examination and making a number of adjustments to the legal costs and disbursements charged by Slater and Gordon, Ms Dealehr expressed the opinion that:

(a)    the applicant’s reasonable legal costs (professional costs and disbursements) calculated on a solicitor and own client basis up to 21 June 2023 were a total amount of $4,197,001.09, comprising:

(i)    solicitors’ fees (excluding the 25% success fee) of $2,846,427.93;

(ii)    a 25% success fee of $711,606.18;

(iii)    disbursements of $638,966.18 (of which counsel’s fees were $283,322.42 and experts’ fees were $214,893.02); and

(b)    the applicant’s estimated reasonable legal costs (professional costs and disbursements) calculated on a solicitor and own client basis from 22 June 2023 to the approval hearing were a total amount of $752,024.02, comprising:

(i)    solicitors’ fees (excluding the 25% success fee) of $387,664.50;

(ii)    a 25% success fee of $96,916.12; and

(iii)    disbursements of $267,443.40 (of which counsel’s fees are estimated at $114,300.78).

76    In her report, Ms Dealehr expressed doubts concerning an allowance of $50,277.30 that had been made in the estimated disbursements for the period from 22 June 2023 until the approval hearing for “out-of-scope tasks performed by Deloitte” to assist Slater and Gordon in relation to the approval hearing. Ms Morrison deposed in her supplementary affidavit of 16 August 2023 that those costs were not incurred. Accordingly, the allowed disbursements will be reduced by that amount.

77    The applicant submitted that the legal costs and disbursements of Slater and Gordon endorsed in Ms Dealehr’s report are proportionate to the nature of the proceeding, the litigation involved and the benefit of it. In relation to the issue of proportionality, Ms Dealehr expressed the following opinions (footnotes omitted):

S+G’s Costs Agreement is subject to the provisions of the Uniform Law. The Uniform Law requires legal costs to be proportionally incurred and proportionate in amount as well as reasonably incurred and reasonable in amount. Factors including level of skill, specialisation, complexity, novelty, difficulty, labour, urgency, commercial sensitivity, and responsibility are relevant to the question of proportionality as well as the question of whether the fees are fair and reasonable.

The question arises whether S+G’s costs are proportional is properly a question to be considered at the time the work is being performed and not left to the conclusion of the matter with the benefit of hindsight. I do not consider that the fees as allowed to be disproportionate for the work done taking into account the complexity and importance of the dispute as well as the amount in dispute.

In coming to the above opinion, I draw on my experience in what legal costs have been allowed in class actions in which I have been directly involved and which have been approved by the Courts.

78    The applicant submitted that: the proceedings were complex and hard-fought; the value of group members’ claims was potentially very substantial; and the fact that significant legal fees were incurred is unsurprising.

79    Having considered Ms Dealehr’s report and the evidence filed in support of it, I consider it appropriate to adopt Ms Dealehr’s report pursuant to s 54A of the FCA Act and r 28.67 of the Federal Court Rules 2011 (Cth) (FCR) in so far as the report concerns the legal costs and disbursements of the applicant up until the approval hearing, save in the one respect referred to earlier. The estimated disbursements of $267,443.40 in respect of the period from 22 June 2023 to the date of the approval hearing is to be reduced by the amount of $50,277.30 that had been allowed for “out-of-scope tasks performed by Deloitte” to assist Slater and Gordon in relation to the approval hearing.

The estimated costs of the settlement administration

80    In her report, Ms Dealehr also expressed the opinion that the estimated reasonable legal costs of Slater and Gordon (professional costs and disbursements) in relation to the future settlement administration totalled $3,003,912, comprising:

(a)    solicitors’ fees of $506,986; and

(b)    disbursements of $2,496,935 (being the estimated costs of Deloitte).

81    In relation to solicitor’s fees, Ms Dealehr’s report concluded that:

In my opinion, S+G’s estimated future professional fees post approval to the completion of the scheme administration calculated at $506,986.00 is reasonable. I note that S+G have removed their original claim for $90,000 for cost and maintenance of the Hold-Back Sum, which was included in their original estimate provided to me on 2 May 2023, and as such their estimated professional fees have been reduced. In coming to the above opinion, I draw on my experience in what legal costs have been allowed in class actions for the costs of administration in which I have been directly involved and which have been approved by the Courts. Matters taken into account to reach this conclusion include the calculation does not include any uplift fee as S+G would not be engaged by the applicant but rather court appointed. The hourly rates of S+G set out in its LCA are reasonable rates. The size of the likely final number of group members to the settlement scheme is substantial and the time required to complete the scheme is more than 12 months.

82    I have no difficulty in accepting Ms Dealehr’s opinion with respect to the fees of Slater and Gordon.

83    In relation to the estimated costs of Deloitte, Ms Dealehr’s report noted that the estimate included costs incurred to date which had not yet been paid by Slater and Gordon, as well as estimated future costs to the conclusion of the settlement administration. Ms Dealehr’s report also stated:

In the ANZ and Westpac proceedings, Deloitte’s fees to complete the scheme administration was [sic] approximately $1.5 million and $1 million respectively. In my opinion, the total estimate for Deloitte to complete the scheme administration is reasonable, taking into account the larger number of group members in the CBA proceeding as compared to the other CCI proceedings. I have also examined their terms of engagement including their rates which I consider reasonable.

84    It is apparent that the estimated settlement administration costs of Deloitte in this proceeding greatly exceed the estimated costs in the ANZ and Westpac proceedings. This is a matter that required explanation. The applicant submitted that the estimated settlement administration costs in this proceeding are reasonable and proportionate given:

(a)    the complexities involved with the number of different categories of group members;

(b)    the number of persons who received the first settlement notice (over 760,000 persons) and the number of persons who registered to participate in settlement (over 82,494 persons); and

(c)    the disbursements associated with the work of Deloitte, including development of a secure registration portal and assessment of the data provided through that portal.

85    In support of that submission, Ms Morrison deposed in her affidavit dated 3 August 2023 that the following factors had contributed to higher Deloitte fees (of approximately $1.5 million) incurred to the date of the hearing:

(a)    There was a larger number of group members in this proceeding (up to 701,400 group members in this proceeding, compared to up to 423,028 in the ANZ proceeding and 318,508 in the Westpac proceeding), necessitating the review of larger datasets and the generation and distribution of more notices of proposed settlement.

(b)    The dataset provided by the respondents in this proceeding included 15 spreadsheets with contact, claims, premium, remediation and refund data for 1,169,443 policies. Each spreadsheet used different identifying information, extensive duplication, and multiple categories of claims, remediations and refunds. Therefore, manual cross-checking was required to ensure accurate data mapping.

(c)    There were a greater number of registrations in this proceeding (a total of 82,494 registrations, being 9,934 more than in the ANZ Proceeding and 14,955 more than in the Westpac Proceeding), requiring more Deloitte resourcing to review and assess the registration forms and to generate and distribute notices of estimated distribution.

(d)    There was a greater number of enquiries in this proceeding, and although the registration period in this proceeding commenced 74 days after the ANZ proceeding and 20 days after the Westpac proceeding, further resourcing from Deloitte was required to respond given the higher volume of enquiries on the CBA proceeding. Approximately 44% of all enquiries received by Deloitte related to the CBA proceeding.

(e)    There were more types of “Run to Home Communications” sent in the final weeks of the registration period in this proceeding, including emails and text messages sent to cohorts of potential group members who had not commenced the registration process.

(f)    In this proceeding only, the dataset provided by the respondents included CBA bank details for potential group members. Registrants were matched to relevant bank details associated with their unique ID or their email address and given the option of electing to have any distribution amounts paid into this bank account. Therefore, more Deloitte resourcing was required to analyse, extract and display this information to registrants.

(g)    In this proceeding only, the dataset provided by the respondents did not include some additional "good will/compensation refunds" that had been made by the respondents. Registrants had to be provided with information regarding their refunds, claim payments and/or remediation payments recorded in the respondents’ data in the online registration portal, and then asked additional questions to confirm whether they received any additional refunds and, if so, the amount of these payments. More Deloitte resourcing and platform functionality was required to enable these additions to the online registration portal.

86    Ms Morrison further deposed that the following factors contribute to the higher estimate of future Deloitte fees (of approximately $1 million):

(a)    The higher number of registrations in this proceeding, being 82,494 registrations, requiring more Deloitte resourcing to review, assess, generate and distribute final distribution amounts, to perform the necessary security and fraud prevention checks, and to perform at least two rounds of distributions.

(b)    Given the large number of enquiries already received in this proceeding (53,064), it is expected that the registrants will continue to be highly engaged and require Deloitte resourcing to address their enquiries.

87    At the approval hearing, I remained concerned about the level of Deloitte’s incurred and estimated fees, and requested the applicant to provide further evidence concerning those fees.

88    Subsequent to the hearing, the applicant filed a confidential affidavit of Ms Morrison affirmed on 16 August 2023. Although the affidavit was titled “confidential”, ultimately the applicant only sought confidentiality restrictions in respect of annexures KM-04 and some parts of annexures KM-05 and KM-08. For the reasons given below, I will only make non-publication orders in respect of annexure KM-04.

89    Ms Morrison’s further affidavit set out the information that was provided to Ms Dealehr in relation to Deloitte’s costs, including Deloitte’s proposal of 6 December 2022, Deloitte’s engagement letter of 15 December 2022, a summary of Deloitte’s fees for work undertaken as at 31 March 2023 and expected fees for work to be undertaken, and a summary of Deloitte’s fees for work undertaken as at 31 May 2023. Ms Morrison deposed that:

(a)    In December 2022, Slater and Gordon approached Deloitte to assist with the administration of the settlement of all three consumer credit insurance proceedings, including to develop registration portals in each of the proceedings and to set up dedicated communication lines to respond to enquiries and assist potential group members.

(b)    On 6 December 2022, Deloitte provided an initial proposal and on 15 December 2022 Deloitte provided an engagement letter.

(c)    The December 2022 cost estimate was prepared on a consolidated basis for all three consumer credit insurance proceedings and then a proportion of the total costs was allocated per proceeding based on estimated group member size. This methodology was adopted because there were efficiencies and economies of scale in Deloitte running the three projects consecutively and substantial elements of the services are volume sensitive (resulting in variable costs), so that there is a direct correlation between the number of group members and the effort required by Deloitte.

(d)    Based on that methodology, the December 2022 cost estimate allocated approximately 49% of the overall project costs to the CBA proceeding.

90    Ms Morrison’s affidavit included detailed information concerning the work undertaken by Deloitte, costs estimates given and actual costs incurred over time.

91    Ms Morrison’s affidavit also informed the Court that there was an error in Ms Dealehr’s report in that Deloitte’s costs of $2,496,935 were described as inclusive of GST when in fact they were exclusive of GST. The costs should be increased by an amount of $249,694 to a total of $2,746,629. Ms Morrison deposed to her view that the increase in the allowance for Deloitte’s costs would not have a negative impact on the expected distribution amounts to group members because the proposed increase will be met by interest that is expected to be earned on the settlement fund until the distributions are made, which was not taken into account when group members’ distributions were calculated.

92    Having considered Ms Dealehr’s report and the additional evidence that has been filed in respect of Deloitte’s costs, I am satisfied that the allowance that has been made for settlement administration costs (including the addition of GST) is appropriate. I will therefore make an order adopting Ms Dealehr’s report pursuant to s 54A of the FCA Act and r 28.67 of the FCR in so far as the report concerns settlement administration costs, save for the inclusion of an additional amount of GST of $249,694.

The costs of holding adverse costs insurance

93    The applicant sought reimbursement out of the settlement sum for the costs of holding insurance against the risk of an adverse costs order in the proceeding (typically referred to as “after the event” or “ATE” insurance). The applicant seeks reimbursement in the same amount ($275,000) and on the same basis as sought by the applicants in the Westpac and ANZ proceedings.

94    The legal costs agreements entered into between Slater and Gordon and the applicant stated that Slater and Gordon had, by letter dated 22 April 2020, provided the applicant with an indemnity against an adverse costs order in the proceeding. The legal costs agreement also made provision for Slater and Gordon to acquire insurance against the risk of an adverse costs order in the proceeding. Clauses 8.4 and 8.5 of the legal costs agreement stated as follows:

8.4     In pursuing this class action it may be necessary to take out an insurance policy to provide protection for the lead plaintiff and/or any other claimants with specific roles in the litigation, in respect of any costs orders that they might be required to pay if the class action is unsuccessful (since the lead plaintiff does face a costs risk if the claim is unsuccessful). Such a policy will involve the payment of a premium to the insurer at the conclusion of the litigation, if the claim is successful, as well as potentially involving other expenses beforehand. Depending on the duration of the litigation and the legal costs involved, this premium could be substantial – in some cases, potentially above $1million.

8.5     We will arrange for such an insurance policy to be in place on the best terms we can obtain, if we determine that it is necessary in order to pursue the litigation. You agree that the expenses involved in this process, and in particular the premium to be paid to the insurer, will form part of the group costs in the litigation.

95    A copy of the ATE insurance policy procured by Slater and Gordon on behalf of the applicant was put before me in evidence in the present application. Having regard to the terms of the policy, it can be observed that the policy was acquired on 22 December 2021 and that the premium payable under the policy (including stamp duty), which the applicant now seeks reimbursement of from the settlement fund, is $275,000.

96    The question whether it is reasonable to reimburse the costs of ATE insurance out of settlement proceeds has been considered in a number of cases, to which I referred in Kemp v Westpac (No 4). In some cases that involved litigation funding, the Court has refused to allow a separate reimbursement to the funder of the costs of ATE insurance acquired by the funder on the basis that the funding fees claimed were in an amount that would be expected to cover all of the funder’s costs incurred in respect of the risks of an adverse costs order: see Kemp v Westpac (No 4) at [90] and the cases referred to therein. In Williamson v Sydney Olympic Park Authority [2022] NSWSC 1618, Black J expressed the view (at [83]) that the appropriate question to be asked is whether the combined sum of the funder’s fees and the ATE insurance premiums are unreasonably high. In Eckardt v Sims Ltd [2022] FCA 1609, Wigney J approved the reimbursement out of the settlement fund of both the funder’s fee and the cost of ATE insurance premiums that had been paid (at [43]).

97    As I explained in Kemp v Westpac (No 4), analogous considerations arise in the context of a class action that is conducted by solicitors on a “no win no fee” basis, but where the solicitors are entitled to a “success fee”. An adverse costs order is a material risk faced by the representative applicant and the applicant’s solicitors. The acquisition of ATE insurance to mitigate that risk is a reasonable step to be taken by the applicant and the applicant’s solicitors. The solicitors ought to be permitted to recover the costs of an ATE insurance policy if the Court is satisfied that the costs are reasonable and that the costs are not otherwise being recovered through the solicitors’ success fee. The costs would be assessed as reasonable if the terms of the policy are appropriate in the context of the proceeding and the premium charged for the policy has been determined in a competitive market setting.

98    In the circumstances of the present case, I am satisfied that it is just for the costs of the ATE insurance (premiums and applicable stamp duty) to be reimbursed out of the settlement fund. Although the applicant adduced very limited evidence with respect to the ATE policy acquired for the purposes of the hearing, the policy is in substantially the same form as was acquired for the purposes of the Westpac and ANZ proceedings. I consider it reasonable that Slater and Gordon acquired such insurance having regard to the nature of the proceeding and the risks faced. There was a real prospect that all of the claims made might fail. The amount insured under the ATE policy was reasonable in the circumstances. Having regard to the legal costs agreement, I am satisfied that there could be no expectation that the risks of an adverse cost order had been factored into, and were effectively absorbed by, Slater and Gordon’s success fee. The potential need for insurance against an adverse costs order, and the additional costs involved in taking out such insurance, were disclosed in the legal costs agreement.

Reimbursement payments

99    The applicant sought reimbursement of the settlement sum for:

(a)    an amount of $20,000 to be paid to the applicant for her work in prosecuting the proceeding as the representative applicant; and

(b)    an amount of $3,000 to be paid to each of the five sample group members for their work in prosecuting the proceeding on behalf of group members (being $15,000 in total).

100    I accept the applicant’s submission that payments of these kinds and in similar amounts has been recognised as appropriate in class actions “given the time, stress, burden, and personal inconvenience likely to arise as a result of a representative plaintiff’s involvement in the proceedings”: see for example Darwalla Milling Co Pty Limited v F Hoffman-La Roche Ltd (No 2) [2006] FCA 1388; 236 ALR 322 at [74]-[93] per Jessup J; Matthews v Ausnet Electricity Services Pty Ltd [2014] VSC 663 at [423]-[424]; Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527 at [176]-[177] per Murphy J; National Australia Bank Ltd (No 2) at [20] per Lee J; Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia; Whisson v Subaru (Aust) Pty Ltd; Kularathne v Honda Australia Pty Ltd; Brewster v BMW Australia Ltd; Bond v Nissan Motor Co (Australia) Pty Ltd; Coates v Mazda Australia Pty Ltd [2022] NSWSC 1076 at [60] (Rees J).

101    Mr Hardwick deposed to the work undertaken by the applicant and each of the sample group members in respect of the proceeding. On the basis of that evidence, I am satisfied that the amounts of the proposed reimbursements are reasonable and should be paid out of the settlement fund.

Late registrations

102    The applicant seeks orders for the registration of 21 group members (late registrants), identifiable by their unique identification numbers, who did not register within the time provided by the Court’s orders. In doing so, the applicant seeks to enable those group members to participate in the settlement.

103    The evidence of Mr Hardwick and Ms Morrison indicates that there are, in general terms, two categories of late registrants. The first category comprises group members who contacted Deloitte or Slater and Gordon either by post or by telephone on or prior to the last day for registration (29 May 2023) for assistance with registering to participate in the settlement but were unable to reach an operator due to administrator error or resourcing constraints. The second category comprises group members who have lodged notices of objection, or have otherwise communicated with, the Court in connection with the proposed settlement seeking to be included in the settlement. Of the second category of late registrants, the majority had been prevented from registering before the last day for registration due to administrative error, technical difficulties or difficult personal circumstances. Some of these late registrants attempted to register before the registration deadline, and some attempted to contact Slater and Gordon or Deloitte for assistance after the deadline had passed. The applicant contended that it was fair and reasonable to seek an order to extend the registration deadline for each of the 21 late registrants identified on the basis that they had been prevented from registering, and thus participating in the settlement, by circumstances beyond their control, or on the basis of their efforts to be included subsequently.

104    I readily accept that it is appropriate to extend the registration deadline for those late registrants in the first category identified above, and for those in the second category who provided an explanation as to why they had been unable to register in time. I have some reservations regarding the extension of time for those late registrants in the second category who provided no adequate explanation as to why they did not register by the deadline. Nevertheless, I consider that it is appropriate in the present circumstances to make orders extending the time for registration of this group of late registrants, having regard to their small number and acknowledging their efforts in preparing and lodging a notice of objection or otherwise communicating with the Court.

Confidentiality

105    The applicant sought non-publication orders under s 37AF of the FCA Act in respect of certain material filed in connection with the settlement approval, on the basis that the orders were necessary to prevent prejudice to the proper administration of justice.

106    Having considered the material before me, I consider that a non-publication order should be made in respect of:

(a)    the confidential opinion of counsel as to the applicant’s prospects of success in the proceeding and the fairness and reasonableness of the proposed settlement, as well as Slater and Gordon’s assessment of that opinion and the proposed settlement (which is reproduced at annexure BH-16 of the confidential affidavit of Mr Hardwick dated 26 July 2023 and discussed in section A of the same affidavit); and

(b)    a notice of objection which is reproduced at annexure BH-18 to Mr Hardwick’s confidential affidavit dated 26 July 2023 and which contains information personal to the objector.

107    As noted earlier, the applicant also sought non-publication orders in respect of annexures KM-04 and some parts of annexures KM-05 and KM-08 to the affidavit of Ms Morrison affirmed on 16 August 2023. Those annexures contain documents issued by Deloitte to the applicant with respect to the services provided by Deloitte. I consider that a non-publication order ought to be made in respect of annexure KM-04. That annexure contains a copy of Deloitte’s proposal dated 6 December 2022. The proposal sets out detailed information concerning Deloitte’s methodology for developing and operating the settlement scheme registration and administration process. I accept the applicant’s evidence and submission that the proposal contains proprietary know-how belonging to Deloitte, which is confidential and the disclosure of which would be commercially detrimental to Deloitte. I do not accept, though, that the disclosure of annexures KM-05 and KM-08 would prejudice the proper administration of justice. Annexure KM-05 contains a copy of Deloitte’s engagement letter of 15 December 2022 and annexure KM-08 contains a letter from Deloitte to Slater and Gordon dated 16 August 2023 explaining the difference in Deloitte’s costs in this proceeding in comparison to the ANZ and Westpac proceedings. The parts of those annexures in respect of which the applicant sought non-publication orders were as follows:

(a)    The table on pages 4 to 5 of Deloitte’s engagement letter which describes the work to be undertaken by Deloitte – in my view, the description is anodyne and does not reveal proprietary information.

(b)    The table on page 7 of Deloitte’s engagement letter which sets out Deloitte’s hourly rates for different levels of employees engaged on the project – in circumstances where Deloitte’s fees will be paid from the settlement sum, and the payment of those fees is subject to Court approval, there is a public interest in full disclosure of the basis on which the fees have been calculated, including hourly rates.

(c)    Annexure 1 of Deloitte’s engagement letter which sets out Deloitte’s standard terms and conditions – again, in circumstances where Deloitte is performing services in respect of the Settlement Distribution Scheme, and the Settlement Distribution Scheme is subject to Court approval, there is a public interest in full disclosure of the terms and conditions on which Deloitte is providing those services.

(d)    Item 1 to 4 on pages 2 to 4 of Deloitte’s letter of 16 August 2023 which also describes the work undertaken and to be undertaken by Deloitte – in my view, the description is anodyne and does not reveal proprietary information.

108    The applicant also sought a limited non-publication order in respect of the following categories of information:

(a)    the “Loss Assessment Formula” (which affects the relative distribution of the settlement fund between three categories of group members) and other material that refers to, or is derived from, the application of the “Loss Assessment Formula” (being confidential annexure BH-08 to the affidavit of Mr Hardwick dated 16 November 2022 and annexure BH-17 to the confidential affidavit of Mr Hardwick dated 26 July 2023); and

(b)    evidence regarding Slater and Gordon’s estimate of the applicant’s likely costs in proceeding to judgment (being section B of the confidential affidavit of Mr Hardwick dated 26 July 2023).

109    The second non-publication order will only continue until the end of the appeal period for this proceeding. I am satisfied that these categories of information may provide CBA with an unfair forensic advantage in the event that the orders made approving the settlement of this proceeding were successfully appealed and the proceeding was to continue to trial. The information concerning the “Loss Assessment Formula” reveals, to some extent, Slater and Gordon’s assessment of the prospects of different categories of claim. The information regarding Slater and Gordon’s estimate of the applicant’s likely costs in proceeding to judgment also reveals, to some extent, Slater and Gordon’s litigation strategy in the proceeding. Accordingly, I am satisfied that a non-publication order in respect of these two limited categories of information until the end of the appeal period for this proceeding is necessary to prevent prejudice to the proper administration of justice.

Conclusion

110    For the reasons set out above, I consider that the settlement is fair and reasonable in the interests of group members, the distribution of the settlement fund as between group members is just, and the allowance proposed to be made out of the settlement fund for litigation and administration costs is appropriate. I commend the parties on resolving this proceeding by agreement.

Associate:

Dated:    15 September 2023