FEDERAL COURT OF AUSTRALIA

Ghee v BT Funds Management Limited [2023] FCA 1553

ORDERS

THE COURT ORDERS THAT:

Confidentiality

1.    Until further order, pursuant to ss 37AF and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) (the Act), on the ground that the order is necessary to prevent prejudice to the proper administration of justice, the material listed in Annexure A is confidential and not to be published or made available to any person other than:

(a)    the Court;

(b)    the Applicant and her legal representatives;

(c)    Therium Litigation Finance Atlas AFP IC (Therium) and its legal representatives; and

(d)    in relation only to the independent costs referee report of Kerrie Rosati dated 7 June 2023, a group member subject to the group member first signing an appropriate confidentiality undertaking.

2.    Pursuant to ss 37AF and 37AG(1)(a) of the Act, on the ground that the order is necessary to prevent prejudice to the proper administration of justice, until 25 January 2024, or if an appeal or application for leave to appeal has been filed in respect of these orders by that date then until further order, the material listed in Annexure B is confidential and not to be published or made available to any person other than:

(a)    the Court;

(b)    the Applicant and her legal representatives;

(c)    Therium and its legal representatives; and

(d)    in relation only to the independent costs referee report of Kerrie Rosati dated 7 June 2023, a group member subject to the group member first signing an appropriate confidentiality undertaking.

Approval of Settlement and Settlement Distribution Scheme

3.    Pursuant to s 33V(1) of the Act, settlement of the proceeding be approved on the terms set out in the Heads of Agreement executed by the Applicant, the Respondents, Therium, Slater & Gordon Limited and Westpac Banking Corporation dated 14 October 2022 (Heads of Agreement), a copy of which is exhibited as Exhibit NDR-46 to the affidavit of Nathan Daniel Rapoport affirmed 2 December 2022.

4.    Pursuant to s 33ZF of the Act, the Applicant is authorised nunc pro tunc for and on behalf of the group members as defined in paragraph 2 of the Further Amended Statement of Claim dated 2 December 2021, and for the avoidance of doubt, excluding any person who opted out in accordance with order 5 of the orders dated 29 September 2021 (Group Members), to enter into and give effect to the Heads of Agreement and the transactions contemplated for and on behalf of Group Members.

5.    Pursuant to s 33ZB(a) of the Act, the persons affected and bound by these orders are the parties to the Heads of Agreement and the Group Members.

6.    Pursuant to s 33V(2) of the Act, the Settlement Distribution Scheme (SDS), exhibited at pages 15 – 34 of Bundle Exhibit NDR-51 to the affidavit of Nathan Daniel Rapoport affirmed 9 November 2023, is approved.

7.    Pursuant to ss 33V(2) and 33ZF of the Act, Slater and Gordon Limited is appointed as the Settlement Administrator (as defined in the SDS).

8.    Pursuant to ss 33V(2) and 33ZF of the Act, for the purposes of the SDS the “Registration Deadline” is fixed as the date two weeks after the date of these orders.

9.    The Settlement Administrator has liberty to apply in relation to any matter arising under the SDS.

10.    Slater and Gordon release to Therium the amount of $20,000 which was paid into the trust account of Slater and Gordon as security for costs pursuant to order 1(c) of the orders of the Honourable Justice Lee made 21 February 2020.

Group Member Data

11.    If the Settlement Administrator considers that the entitlement of a Registrant to receive a distribution through the SDS needs to be verified, then:

(a)    the Settlement Administrator may request BT Funds Management Limited (BTFM) carry out automated and manual data matching checks to ascertain whether any particular Registrant should be accepted as a Registered Member Account Holder, a Registered Spouse, a Registered Death Benefit Recipient, a Registered Beneficiary or a Registered Legal Personal Representative (Registered LPR) (and if so in relation to which Member Account(s), and in the case of a Registered Death Benefit Recipient which Member Account(s) and which payment record), or alternatively found to be an Ineligible Registrant;

(b)    the Settlement Administrator is to provide to BTFM such information provided by the Registrant as is necessary to enable BTFM to carry out the necessary checks;

(c)    if such a request is made, BTFM is to comply with the request reasonably and as quickly as reasonably practicable after receiving the request;

(d)    on completion of the checks, BTFM is promptly to notify the Settlement Administrator whether the particular Registrant should be accepted as a Registered Member Account Holder, a Registered Spouse, a Registered Death Benefit Recipient, a Registered Beneficiary or a Registered LPR (and if so in relation to which Member Account(s), and in the case of a Registered Death Benefit Recipient which Member Account(s) and which payment record), or alternatively found to be an Ineligible Registrant, and the basis for forming that view; and

(e)    in making its determination for the purpose of paragraph 3.2 of the SDS, the Settlement Administrator may act on the basis of the determination by BTFM.

12.    Any personal information provided to BTFM pursuant to Order 11 or to the Settlement Administrator in response to a request made pursuant to Order 11 is to be deleted from BTFM’s or the Settlement Administrator’s system (as applicable) and otherwise destroyed within 14 days of the conclusion of the Settlement Distribution Scheme.

13.    Where, after being notified by BTFM of the matters in Order 11(d), the Settlement Administrator acting reasonably and in good faith considers it necessary for the purpose of making a determination in respect of a particular Registration under paragraph 3.2 of the SDS:

(a)    the Settlement Administrator may request that BTFM securely provide access to the records relevant to the assessment of the Registration within the BT Datasets (as defined in the SDS); and

(b)    BTFM must provide the Settlement Administrator with secure access to those records within 5 business days of the request through the provision of an appropriately secured and air-gapped laptop computer containing those records and provided on the basis that it be stored securely by the Settlement Administrator and returned to BTFM immediately after the Settlement Administrator has made its determination in relation to the entitlement of the relevant Registrants.

Deductions from Settlement Fund

14.    Pursuant to s 33V(2) of the Act, the following distributions from the Settlement Fund (as defined in the SDS) are approved for the purposes of the SDS (inclusive of GST if applicable):

(a)    the “Applicant’s Unpaid Legal Costs”, being the Applicant’s professional fees and disbursements on a solicitor and own client basis, including incurred in connection with the proceeding on her own behalf and on behalf of all Group Members in the proceeding, not already paid by Therium, in the amount of $4,700,555;

(b)    the “Funder’s Reimbursement”, in the amount of:

(i)    $2,716,489, being the sum paid by Therium to Slater & Gordon for legal fees and disbursements; and

(ii)    $1,180,000 being the sum paid by Therium for procuring ‘After the Event’ insurance and associated deeds of indemnity;

(c)    the “Funder’s Commission”, in the amount of $5,708,500;

(d)    the “Applicant’s Reimbursement Payment”, being the Applicant’s reasonable claim for compensation for the time and expenditure reasonably incurred by the Applicant in the interests of prosecuting the proceeding on her own behalf and on behalf of all Group Members, in the amount of $15,000; and

(e)    the “Settlement Administration Costs”, as defined in the SDS, being professional fees, administrative costs and disbursements incurred in connection with administering the SDS, in the amount of up to $215,000.00;

(f)    the “Mercer Costs”, as defined in the SDS up to a maximum of $30,000.00.

15.    The Settlement Administrator is granted liberty to apply for additional amounts of Settlement Administration Costs.

16.    Pursuant to s 33V(2) of the Act, for the purpose of clause 9.1 of the SDS, the Consumer Action Law Centre is approved.

Final orders

17.    The Settlement Administrator shall within 20 Business Days of the conclusion of distribution of the Settlement Fund, as defined in the SDS, apply to the Court for orders dismissing the Proceeding with no order as to costs and all costs orders vacated.

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

ANNEXURE A

ANNEXURE B

REASONS FOR JUDGMENT

MURPHY J:

INTRODUCTION

1    Before the Court is an interlocutory application filed 2 December 2022 in which the applicant in this class action, Tracy Ghee, seeks Court approval of a proposed settlement of the proceeding under s 33V of the Federal Court of Australia Act 1976 (Cth) (the Act). The applicant brought the class action on her own behalf and on behalf of approximately 77,000 former account holders (group members) in two superannuation funds of which the first respondent, BT Funds Management Limited (BTFM) was the trustee. The proceeding is funded by Therium Litigation Finance Atlas AFP IC (Therium) pursuant to a litigation funding agreement (LFA) it entered into with the applicant.

2    The applicant has reached an in-principle settlement with BTFM and the second respondent, Westpac Life Insurance Services Ltd (now known as TAL Life Insurance Services Ltd) (WLIS) (the proposed settlement) under which, if approved, the respondents will pay the applicant and group members $29.95 million (the settlement sum) inclusive of costs, without admission of liability, in full and final settlement of the proceeding.

3    For the reasons I explain, I am satisfied that the proposed settlement is fair and reasonable as between the applicant and group members on the one hand and the respondents on the other. I am also satisfied that it is fair and reasonable as between the group members. The proposed Settlement Distribution Scheme (SDS) is manifestly fair and equitable.

4    There is, however, a question as to Therium’s application for a common fund order (CFO) pursuant to which it seeks a litigation funding commission of $6.52 million (based on a multiple of 2.4 times the $2.716 million in legal costs Therium paid to Slater & Gordon, the solicitors for the applicant, for conducting the proceeding on behalf of the applicant), plus reimbursement of $1.180 million in premiums for after the event insurance (ATE insurance) and associated deeds of indemnity (together, ATE costs) and reimbursement of the legal costs it paid to Slater & Gordon. Putting to one side the reimbursement of the legal costs that Therium paid, it seeks litigation funding charges totalling $7.699 million, which equates to a funding rate of 25.7% of the gross settlement.

5    By asking for a $6.52 million funding commission plus reimbursement of its ATE costs I consider Therium seeks to charge a funding commission based, in part, on it assuming the risk of an adverse costs order and at the same time seeks reimbursement of its costs of defraying that risk. To my mind, that proposal involves some double dipping and, to an extent, Therium seeks have it both ways.

6    Therium’s application does not involve a gross overreach, but I concluded that the level of Therium’s expenditure in funding the proceeding and the risks that it assumed do not justify litigation funding charges of $7.699 million. I consider it appropriate to make orders which provides for Therium to be reimbursed the legal costs it paid, and to be paid total litigation funding charges of $6,888,500 (which encompasses its funding commission and its ATE costs), which equates to a funding rate of 23% of the gross settlement.

THE MATERIALS

7    The applicant relies upon the following materials:

(a)    affidavits of Nathan Rapoport, Special Counsel with Slater & Gordon, the solicitor with the conduct of the proceeding on behalf of the applicant, made 2 December 2022, 4 April 2023, 14 June 2023, 28 September 2023, 9 November 2023 and 12 November 2023 (the First, Second, Third, Fourth, Fifth and Sixth Rapoport Affidavits respectively), the salient annexures to which include:

(i)    the Heads of Agreement dated 14 October 2022 (Heads of Agreement) between, on the one hand, the applicant, Slater & Gordon and Therium, and on the other hand, BTFM, WLIS and Westpac Banking Corporation Ltd, which is annexed to the First Rapoport Affidavit;

(ii)    the Confidential Opinion of Peter Collinson KC and Daniel Snyder of counsel dated 28 September 2023 (Confidential Opinion), which is annexed to the Fourth Rapoport Affidavit;

(iii)    the proposed Settlement Distribution Scheme (SDS), which is annexed to the Fifth Rapoport Affidavit; and

(b)    written submissions in support of the application dated 20 October 2023.

8    The respondents rely upon:

(a)    an affidavit of Richard Harris, a solicitor with Gilbert and Tobin, the solicitors for the respondents, made 10 November 2023; and

(b)    written submissions in support of a particular data verification process dated 10 November 2023.

9    Therium relies upon:

(a)    an affidavit of Louise Hird, an Investment Manager with Therium Capital Management (Australia) Pty Ltd and an investment adviser to the Therium Group, which includes the Therium entity funding the proceeding, made 12 October 2023; and

(b)    written submissions dated 16 October 2023.

10    Kerrie Rosati was appointed as an independent referee under s 54A of the Act to inquire and report in relation to the reasonableness of the applicant’s legal costs (Costs Referee). She provided a report to the Court dated 7 June 2023 (Costs Referee’s report).

THE RELEVANT PRINCIPLES

11    The world does not need another judgment setting out the applicable principles in relation to settlement approval under s 33V of the Act. They are well-established and I recently set them out in Webb v GetSwift Limited (No 7) [2023] FCA 90 at [15]-[17]. The organising principle of s 33V(1) is whether the proposed settlement is fair and reasonable and in the interests of the group members to be bound by the settlement, including as between the group members. Upon the Court deciding to approve the proposed settlement, s 33V(2) empowers the Court to “make such orders as are just with respect to the distribution of any money paid under a settlement”.

OVERVIEW OF THE PROCEEDING

12    The proceeding concerns certain cash investment options BTFM offered to members of the BT Super for Life Superannuation Fund (SFL Fund) and BT Super for Life Plan with the Retirement Wrap (RW Fund) (together, the Funds) respectively, namely the SFL Cash Option and RW Cash Option (as those terms are defined in the further amended statement of claim dated 2 December 2021 (FASOC)).

13    The applicant brings the class action on behalf of herself and all persons who:

(a)    were members of the SFL Fund at any time between 29 October 2007 and 28 February 2011 (SFL Period) and had units or rights in or in respect of the “Super Cash” investment option (SFL Cash Member);

(b)    were members of RW Fund at any time between 28 February 2011 and 31 October 2019 (RW Period) and had units or rights in or in respect of the “Super Cash” or “Cash” investment option (RW Cash Member);

(c)    at any time in the SFL Period received payment from the SFL Fund, or in the RW Period received payment from the RW Fund, (as applicable), of all or part of the benefits of a deceased person who was an SFL Cash Member or RW Cash Member (as applicable); and/or

(d)    was the spouse of a person who was during the SFL Period or RW Period (as applicable) a SFL Cash Member or a RW Cash Member, and at any time during the SFL Period or the RW Period (as applicable) received payment from the SFL Fund or the RW Fund (as applicable) of all or any part of the member’s account pursuant to an order or settlement in a Family Law Act 1975 (Cth) proceeding or a superannuation agreement within the meaning of Part VIIB of the Family Law Act.

14    The cash options were promoted as being for conservative account holders who wanted very low levels of risk and to preserve their capital. BTFM issued Product Disclosure Statements (PDSs) from time to time which stated that BTFM would invest “in cash via a life policy with [WLIS]”.

15    BTFM invested the monies it received from members of the Funds in a life policy issued by WLIS (Life Policy). It did so in circumstances where at all material times both BTFM and WLIS were members of the BT Financial Group (BTFG), a business division within Westpac, and were subsidiaries of Westpac.

16    The Life Policy involved an arrangement whereby BTFM would pay premiums under the policy, comprising the funds invested by members. The premiums would be paid into certain ‘Investment Portfolios’ maintained by WLIS in its statutory funds which were governed under the Life Insurance Act 1995 (Cth). Each investment portfolio for the SFL Cash Option and RW Cash Option were divided into units with a value fixed at $1. The unit could not reduce in value and thereby could not be subject to any capital loss. In that sense, the investments in the Life Policy were “capital guaranteed”.

17    At all material times until 2019 BTFM charged members in the Cash Options a monthly account fee of $5, but otherwise did not charge fees on funds invested in that option. That stood in contrast to other investment options available to members, in which BTFM charged (in addition to a monthly account fee):

(a)    prior to 2012, a management fee of 0.99% of the member’s account balance; and

(b)    after 2012, an administration fee of around 0.45-0.50% of the member’s account balance, and an investment fee which varied from option to option, but in some cases was around 0.50%.

18    The applicant alleges that WLIS had a broad discretion in setting the rate of income, if any, that would be earned by BTFM, as trustee, under the Life Policy (Income Rate). The rate of income was the fixed rate declared by WLIS from time to time. The Income Rate was an annual effective rate of interest which WLIS could declare at such intervals and for such periods as it determined, subject to the constraint that WLIS could not declare a rate less than zero.

19    It is alleged that the effect of that arrangement was that:

(a)    members’ funds would be paid to WLIS as premiums under the Life Policy;

(b)    in consideration for those premiums, BTFM obtained a contractual promise that WLIS would declare income under the policy of not less than zero. Under the terms of the policy, WLIS did not promise to pay any income, and what it would pay was left entirely to its discretion; and

(c)    WLIS would earn revenue under the Life Policy, representing the difference between (i) the returns it made on underlying investments held in the statutory fund; and (ii) the Income Rate it paid to fund members under the Life Policy. Thus, if WLIS set a lower Income Rate, it would effectively keep a greater share of the returns from underlying investments for itself.

20    It is alleged that:

(a)     until late 2013 the investment portfolios in the WLIS’s statutory fund attributable to the Cash Options were invested in the BT Institutional Managed Cash Fund, a conservative cash fund which invested in very low risk cash investments; and

(b)    in late 2013 WLIS determined, in its discretion, to change the underlying investments by investing in the newly created BT Medium Term Income Fund (MTIF). MTIF was expected to generate higher returns by investing in somewhat less liquid cash investments (in other words, earning a premium from taking on some liquidity risk).

21    The applicant alleges that the evidence shows that, in practice, Income Rates were set through consultation between WLIS and BTFM, and were principally set having regard to the revenue implications for WLIS (and thus BTFG) and with little or no consideration given to the members’ best interests in increasing returns to the Funds (which would have been at WLIS’s expense).

22    The crux of the applicant’s case is that:

(a)    there was an obvious conflict of interest created by BTFM, acting as a trustee, investing monies from the Funds in the Life Policy, under which the margin earned by BTFM’s related entity, WLIS, was inversely related to the Income Rates earned on behalf of members of the Funds;

(b)    BTFM did not appropriately manage the conflict of interest; rather, the conflict was exacerbated by the process for setting Income Rates, under which the BTFM and WLIS operated in an integrated manner, with a view to earning revenue for WLIS;

(c)    in doing so BTFM breached various legal duties it owed to the members under the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act);

(d)    there were alternative investment strategies available which would have offered much better expected returns on the funds invested by BTFM on behalf of members, similar (or lesser) levels of risk, and would have avoided the conflict of interest. BTFM belatedly invested in one such strategy in late 2019;

(e)    the breaches caused the applicant and group members to suffer loss and damage because the Funds, and thereby the members, would have earned higher investment returns if the breaches had not occurred; and

(f)    WLIS was an accessory to the Trustee’s unlawful conduct both under statute and at general law (under the ‘knowing receipt’ limb of Barnes v Addy (1874) 9 Ch App 244).

23    The proceeding seeks compensation from BTFM and WLIS, both under statute and at general law, to be paid directly to group members, or in the case of BTFM by restoration of the relevant Fund, and an account of profits from WLIS.

THE PROPOSED SETTLEMENT

24    The key terms of the Heads of Agreement are as follows:

(a)    the settlement is conditional upon Court approval and is made without admission of liability;

(b)    BTFM and WILS must pay $29.95 million (settlement sum) (which amount has since been paid into an interest-bearing account and held on trust);

(c)    if the settlement is approved the settlement sum is to be distributed in accordance with orders made by the Court pursuant to s 33V(2) of the Act;

(d)    BTFM agrees that none of the settlement sum or its costs of and incidental to the proceeding will be funded through the exercise of any rights of indemnity in respect of trust assets. As such, group members are protected from the risk of the remaining members’ interests in the Funds being diluted by such claims for indemnity; and

(e)    the applicant releases the respondents, Westpac and their officers on her own behalf and on behalf of the group members.

WHETHER THE PROPOSED SETTLEMENT IS FAIR AND REASONABLE

The Confidential Opinion

25    I have had the benefit of considering the Confidential Opinion of counsel briefed in the proceeding, Peter Collinson KC and Daniel Snyder, dated 28 September 2023. I cannot go to the detail of the Confidential Opinion and it must suffice to note that it addresses the risks the applicant faced in establishing the respondents’ liability; the risks and variables in relation to establishing the quantum of group member’s claims and how those risks and variables might affect quantum if the applicant is successful on liability at trial; the salient factors in relation to settlement approval under the Class Actions Practice Note (GPN-CA); whether the proposed deductions from the settlement sum under the SDS for legal costs, litigation funding charges, settlement administration costs and a reimbursement payment to the applicant are fair and reasonable; and the fairness of the assessment and distribution of group members’ entitlements under the SDS. It is a considered and comprehensive opinion (running to 105 pages), and it concludes that the proposed settlement is fair and reasonable in the interests of group members to be bound by it and as between group members. I have given substantial weight to the Confidential Opinion.

The scope of the proposed releases

26    Clause 3(f) of the Heads of Agreement provides that, if the proposed settlement is approved:

The applicant (on her own behalf and on behalf of all Group Members) releases the Respondents and Westpac Banking Corporation, and their related entities, and officers, from all claims which they had, have or may have in the future against the Respondents relating to the matters which are the subject of the Proceeding to the extent permitted by law.

Emphasis added in italics.

27    Acting on her own behalf the applicant can provide the respondents with whatever release she likes, but there are limits to her capacity to release the claims of group members. In Dyczynski v Gibson [2020] FCAFC 120; 280 FCR 583 at [250]-[251] (Murphy and Colvin JJ) and [395]-[396] (Lee J), the Full Court explained that the authority of the representative applicant in a class action does not extend to settling individual or idiosyncratic claims of group members (as opposed to ‘common claims’ as recognised under s 33C of the Act), subject to the qualifications expressed by Lee J (at [398]).

28    In doing so the Full Court disapproved Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51; 118 ACSR 592 at [56]-[58] (Santamaria, Ferguson and McLeish JJA) in which the Victorian Court of Appeal concluded that s 33ZF in Part 4A of the Supreme Court Act 1986 (Vic) (the equivalent to s 33ZF of the Act) supplies the privity which is otherwise absent in respect of the individual claims of group members, such that a settlement may be binding on group members in respect of both common claims the subject of the proceeding and any individual claims. Their Honours concluded (at [58]) that a class action can be settled “on whatever terms the parties have agreed and the Court has approved”.

29    I am bound to follow Dyczynski and in any event I prefer that reasoning. I consider the applicant is only entitled to deal with group member’s rights to the extent that the applicant is representing those rights, and the applicant only does so in respect of common claims recognised under s 33C of the Act. Having said that, in my view the authority of the applicant to provide a release in relation to group member’s claims extends to common claims that are not pleaded but which could have been pleaded in the proceeding: see Petersen Superannuation Fund Pty Ltd v Bank of Queensland Ltd (No 3) [2018] FCA 1842; (2019) 132 ACSR 258 at [28] (Murphy J).

30    Under cl 3(f) of the Heads of Agreement the applicant purports to release “all claims” of the group members, including as against Westpac (which is not a party to the proceeding), “relating to the matters which are the subject of the Proceeding to the extent permitted by law”. The phrase “relating to” has a broad meaning, and in my view the proposed release extends to cover all group member’s claims “relating to” matters which are the subject of the proceeding including claims which are individual or idiosyncratic to the group member; that is, claims which are not common claims under s 33C.

31    I accept that the words “to the extent permitted by law” at the end of cl 3(f) are words of limitation, but what the law may or may not permit is uncertain, particularly when one has regard to the conflicting decisions in Dyczynski and Pekell as to the permissible scope of a release of group member’s rights provided by a representative party. In that sense the scope of the proposed release of group members’ rights against the respondents and/or Westpac, and their respective officers, is uncertain and unsatisfactory. It may be doubted that group members have such individual or idiosyncratic claims, but the applicant cannot know that. Nor can the Court.

32    I raised the difficulty with the scope of the proposed release in the settlement approval hearing. Mr Arnott SC for the respondents accepted that the releases proposed to be provided by the applicant on behalf of group members cannot and are not intended to go beyond the common claims of the group members which are or could have been pleaded in the proceeding. On that basis I consider that the scope of the releases of group members’ rights in the Heads of Agreement are within the applicant’s authority, and they do not stand in the way of settlement approval.

The preclusion of unregistered group members

33    The proceeding was initiated and has continued as an “open” class action. Thus unless they have opted out, all persons who fall within the group definition in the FASOC are group members and they may therefore be entitled to share in the proposed settlement. Based on data provided by BTFM, there appears to be approximately 77,000 group members.

The requirement that group members register

34    The proposed SDS, however, requires that group members register their interest if they are eligible to participate in the settlement. The task of ascertaining the eligibility of group members to participate falls to the Settlement Administrator, which is proposed to be Slater & Gordon. Upon approval of the settlement, registered group members may be entitled to a share of the proposed settlement, whereas group members who do not register (and have not opted out) will be bound by the settlement but not permitted a share in it. Thus, if approved the SDS will operate similarly to a class closure order.

35    Class closure orders are within the power of the Court having regard to the reasoning in Parkin v Boral Ltd (Class Closure) [2022] FCAFC 47; 291 FCR 116 (Murphy, Beach and Lee JJ). In large part the legitimacy of such orders depends on the adequacy of the notice given to group members: see Matthews v SPI Electricity Pty Ltd (Ruling No 13) [2013] VSC 17; 39 VR 255 at [79(c)] (Forrest J); Kelly v Willmott Forests Ltd (in liquidation) (No 4) [2016] FCA 323; 335 ALR 439 at [153]-[160] (Murphy J).

36    I considered it appropriate to order a comprehensive regime for notification to group members regarding the proposed settlement and the requirement to register. On 5 April 2023, I made orders requiring BTFM to prepare data (Group Member Data) from its records, to the extent available, directed at assisting the identification of group members and thereby assisting in notifying them of the proposed settlement, the requirement to register, and ultimately the distribution of settlement monies to group members.

37    On 15 June 2023, I made orders:

(i)    to ensure that they were eligible to receive an entitlement under the proposed settlement they must register by 4:00 pm (AEST) on 21 August 2023; and

(ii)    if they wished to object to the proposed settlement or any aspect of it they must notify that objection by completing a Notice of Objection to be provided to the Court by 4:00 pm (AEST) on 21 August 2023.

38    The evidence shows that in the period from 17 to 26 July 2023, the Concise Notice was sent to group members by email, and in some cases, by post. In some limited instances, email delivery to group members failed, and no postal address was held. Of 18,250 notices sent by post, 2,612 were returned to sender. On 17 July 2023, the Website Text commenced to be displayed on Slater & Gordon’s relevant webpage. To further notify group members of the proposed settlement, Slater & Gordon and Link respectively sent various mass emails, sent a mass SMS in accordance with the 15 June Orders and also undertook a social media campaign.

39    Due to an oversight by Slater & Gordon, a separate webpage which the firm had previously set up for persons to register their interest in the proceeding (Old Registration Platform) remained active after the Website Text was uploaded onto the main Slater & Gordon webpage for the proceeding. In the period from 17 July 2023 to 21 August 2023, 412 individuals registered via the Old Registration Platform, potentially in the mistaken belief that they were registering for the proposed settlement. An email was then sent to individuals who had not already registered via the correct link for the settlement. As at 11 September 2023, 193 of the 412 individuals had registered via the correct link for the settlement.

40    In my view, it is appropriate to treat any group member who registered their interest via the Old Registration Platform as having sufficiently registered. I so direct the Settlement Administrator.

41    In this case:

42    In the circumstances, the requirement for group members to register if they are to be eligible to share in the settlement monies, and to bind group members who do not register into the settlement such that they lose their rights to sue the respondents and Westpac but are not eligible to share in the settlement monies, does not stand in the way of settlement approval.

The Group Member Data verification dispute

43    The evidence shows that BTFM has transferred the accounts of all members who had active accounts in BT Super for Life and BT Super to the Mercer Super Trust. Under the SDS, for those group members for whom Mercer has the relevant details, it will facilitate the payment of any entitlement they have under the SDS (Eligible Mercer Account Holders). Thus, the registration of, and distribution of settlement monies to, those approximately 15,000 group members is likely to be relatively straightforward.

44    However, for the balance of the group members (approximately 62,000 persons), as at 11 September 2023 only 14,740 registration forms had been submitted by group members (excluding duplicate registrations where all information submitted by the registrant was the same). Of these Mr Rapaport identified:

45    It is common ground between the parties that, in order to verify that some persons who have registered with Slater & Gordon to participate in the settlement are in fact group members, it will be necessary for additional verification steps to occur. It is also common ground that BTFM is likely to hold customer data of its former members that may assist in carrying out that verification.

46    At present, Slater & Gordon cannot conduct the further checks Mr Rapoport considers necessary because the firm has only been provided with de-identified Group Member Data. The firm presently does not have the name, email addresses, postal addresses or phone numbers of group members in the Group Member Data, and Link has indicated that it is not prepared to conduct the necessary further checks, including because Slater & Gordon cannot sign off on them.

47    BTFM has, however, declined to provide its customer data to Slater & Gordon. The applicant seeks orders that BTFM be compelled to do so. BTFM resists such an order. In reliance on Mr Harris’ evidence BTFM contends that:

48    I can accept that it will be more efficient for BTFM to undertake the data verification work but in my view it would be inappropriate to leave it to BTFM to determine whether or not particular registered persons are in fact group members and eligible to participate under the proposed settlement. BTFM is a respondent to the proceeding and its interests are not aligned with those of the group members.

49    I accept that it will be more expensive if Slater & Gordon undertakes the data verification work, notwithstanding its offer to do that work at 50% of its standard rates. But I doubt that the costs differential will be material. Further, it is difficult to see how the Settlement Administrator can be properly satisfied that all group members who should be registered have been, unless it checks the data verification work by BTFM. And, as BTFM accepts, even if it undertakes the data verification work, Slater & Gordon will be required to undertake further verification work after that.

50    Having said all that, I accept that the transfer of the Group Member Data to Slater & Gordon will involve some cybersecurity risks, and it is best that those risks be avoided or, at the very least, minimised.

51    Accordingly, I made orders for the data verification work to be undertaken at first instance by BTFM. Then, pursuant to the safest regime upon which the parties can agree, I made orders for BTFM to provide Slater & Gordon with access to the Group Member Data so that it can undertake such data verification as it considers necessary. The parties agreed upon a regime under which BTFM provides the Group Member Data on an appropriately secured and air-gapped laptop computer which Slater & Gordon will securely store and immediately return to BTFM after they have undertaken their data verification work.

The relevant factors under the Class Actions Practice Note

52    Each of the relevant considerations in the Class Actions Practice Note (GPN-CA) point in favour of approving the proposed settlement.

53    The stage of the proceeding at which settlement was achieved. At the point that the parties entered into the Heads of Agreement discovery was complete; the applicant had filed her evidence including expert reports; the respondents had filed their evidence including lay evidence from various employees and expert reports, and the proceeding was listed for trial. By that time, the parties’ lawyers were in a good position to make an informed assessment of the evidence to be adduced at trial, and the strengths and weaknesses of their respective cases.

54    The complexity and likely duration of the litigation. The proceeding raises complex technical and legal issues, including legal issues which have not previously been dealt with in a superannuation context. It is both factually and legally complex and the trial would likely take two to three weeks. The settlement avoids the uncertainty and delay associated with prosecuting the claims to judgment. In a large, complex and strenuously defended proceeding like this there is always the risk of an appeal, and the settlement also avoids the risk of uncertainty and delay associated with any such appeal. If settlement is not approved, the earliest that the case could realistically again be set down for trial would be in the second half of 2024.

55    The risks of establishing liability. In my view the applicant has reasonable prospects of establishing that BTFM was in a position of conflict when it invested in the Life Policy under which the margin earned by its related entity was inversely related to the Income Rates earned on behalf of members. The more difficult question is whether the applicant can establish that BTFM failed to appropriately manage that conflict and that the applicant and group members suffered loss as a result. I am though satisfied that the applicant faces risks of failing, in whole or in part, to establish the alleged breaches of duty under the SIS Act and at general law by BTFM, WLIS, or both. There are greater risks that the applicant will fail as against WLIS, which entails all the risks of establishing the claim as against BTFM, and then the additional risk of establishing WLIS’s liability for knowing receipt of trust property which had been applied in breach of trust.

56    The risks of establishing loss or damage. In my view the applicant has reasonable prospects of establishing some causally related loss. I am though satisfied that the applicant faces some risks and uncertainty in that regard. There are various risks and variables in relation to quantum and a number of permutations as to how the different loss scenarios might play out, and the difference in quantum under the different scenarios is significant.

57    The reasonableness of the proposed settlement in light of the attendant litigation risks. The proceeding is large, complex and strenuously defended, the applicant is represented by experienced and competent lawyers, and the proceeding has risks on liability and quantum. I am satisfied that the proposed settlement falls within the range of reasonable outcomes in light of the attendant risks of the litigation. That is not to say that the applicant might not have obtained a greater sum had the case proceeded to judgment and been successful. As I said in Kelly at [74]:

It is established that the Court should not second-guess the applicant’s lawyers as to whether the settlement ought to have been accepted, or to proceed as if it knows more about the actual risks of the litigation than those lawyers. The Court takes the applicant’s lawyers as it finds them, recognising that different applicants and different lawyers will have different appetites for risk. The question is whether the proposed settlement is within the range of reasonable outcomes, not whether it is the best outcome which the Court considers might have been won by better bargaining.

Whether the proposed SDS is fair and reasonable

58    The terms of the proposed SDS are summarised in the Fourth Rapoport Affidavit at [163]-[209]. For the reasons I now explain, I am satisfied that the SDS is fair and reasonable as between group members.

59    In relation to fairness as between group members, a particular concern of the Court is to confirm that the interests of the applicant, or the signed-up clients of the solicitors for the applicant or the litigation funder, are not being preferred over the interests of other group members. The arrangement should be framed to achieve a broadly fair division of the proceeds, treating like group members alike, as cost-effectively as possible: Camilleri v Trust Company (Nominees) Ltd [2015] FCA 1468 (Moshinsky J) at [5(e)]. This may involve judgment calls being made where a range of alternative approaches might have been open to adopt. To the extent that the scheme involves any special treatment of the applicant or some group members, for instance via a “reimbursement payment” to the applicant, it is relevant whether the special treatment is justifiable: Camilleri at [43(e)].

60    There are also a number of procedural factors to consider when assessing the fairness of a proposed SDS:

(a)    whether an appropriate organisation or person has been nominated to administer the SDS;

(b)    whether the procedures for lodging and assessing claims are appropriate and to be conducted in a timely manner;

(c)    the nature and extent of the “judgment calls” proposed to be made by the scheme administrator; and

(d)    whether the SDS incorporates appropriate “checks and balances”, such as procedures for ensuring consistency between assessments and meaningful opportunities for review (and objection) by group members: Camilleri at [44].

61    In my view, the proposed SDS is fair and reasonable as between group members. The SDS its is discussed in detail in the Fourth Rapoport affidavit and I need not set that out here. It is also given careful consideration in the Confidential Opinion. I will though briefly note the following matters:

(a)    I am persuaded that it is appropriate to appoint Slater & Gordon as Settlement Administrator under the SDS. The firm have dealt with the group members over an extended period, have an intimate knowledge of the issues raised in relation to claims under the SDS, are experienced in administrating SDSs and propose to use Link for various delegated tasks where Link can provide those services more cheaply than it. There was no suggestion that Slater & Gordon is conflicted in acting as Settlement Administrator.

(b)    The proposed method for calculating “Entitlements” (as defined) under the SDS involves several judgment calls. I am satisfied that the judgment calls are consistent with the case that was to be advanced to trial and supportable as a matter of legal principle; the SDS subjects all claims to the same principles and procedures for assessing compensation shares; the task under the SDS involves allocating shares in a fixed sum, and the assessment methodology is likely to deliver broadly fair relativities; and in my view the costs of a more perfect assessment procedure would erode the notional benefit of a more exact distribution: Camilleri at [40]-[43].

(c)    The proposed SDS does not contain a mechanism for group members to formally request a review of their Entitlements or distributions under the SDS. I am though persuaded that there is little utility in allowing for individual review, in light of the proposed methodology for calculating Entitlements and making distributions. Further, in the event of a dispute, the SDS empowers the Settlement Administrator to refer that issue to the Court.

(d)    The proposed SDS includes a minimum $10 threshold before a group member is entitled to receive a distribution under the scheme. I consider that threshold to be reasonable in light of the wastage and inefficiency in distributing amounts below that threshold.

(e)    The applicant proposed, and I accept, that the Consumer Action Law Centre is an appropriate organisation to be paid any residual funds left over after distribution to group members.

The reaction of the class

62    13 group members submitted a Notice of Objection or sent an email to Slater & Gordon or the Court indicating an intention to object. The objectors represent only a very small proportion of the approximately 14,700 group members who have registered to participate in the settlement and approximately 15,000 Eligible Mercer Account Holders (excluding those captured in the first figure). The applicant submits that the low level of objections is a relevant consideration in support of settlement approval. I accept that it is relevant, but it carries little weight and the Court remains responsible for protecting group members’ interests: Money Max Int Pty Ltd v QBE Insurance Group Ltd [2016] FCAFC 148; 245 FCR at [50] (Murphy, Gleeson and Beach JJ). The objections provide a convenient focus by reference to which the Court may assess the fairness and reasonableness of a proposed settlement and it is the Court’s task to make that assessment: Darwalla Milling Co Ltd v F Hoffman-La Roche (No 2) [2006] FCA 1388; 236 ALR 322 at [39] (Jessup J).

63    Of the 13 objectors, eight submitted Notices of Objection which indicate a reason for the objection, and they can be grouped as follows:

Objections to the level of legal costs and litigation funding charges

64    Four group members objected on the basis that the applicant’s legal costs and the litigation funding charges proposed to be deducted from the settlement sum are excessive and should be disallowed. One objector said that the legal costs comprise more than 50% of the settlement amount; that such legal fees have no “fair basis in reality”, that the case is only about “how much money the lawyers will make” and that $15 million in total deductions from the settlement sum is excessive. Another said that there are no special circumstances in the case that justify Therium’s commission at the level sought and the amount of remuneration payable to Slater & Gordon and Therium should be reduced to 40% of the settlement sum.

65    As I later explain, I am satisfied that the applicant’s legal costs of $7.364 million are fair and reasonable. It is appropriate to adopt the Costs Referee’s report in relation to legal costs incurred up to 25 May 2023, and to vary it after that date because her assessment of future legal costs was just an estimate, which proved to be too low. It is also appropriate to approve litigation funding charges in a total of $6.888 million.

66    For those uninitiated in the huge legal costs and litigation funding charges commonly associated with conducting large, complex class action litigation, legal costs and litigation funding charges of such a magnitude may appear excessive. But there is nothing to indicate that any of the objectors have any expertise in the assessment of reasonable legal costs and litigation funding charges in litigation like this, or any understanding of the extent of legal costs and litigation funding charges commonly incurred in such litigation. Nor is there anything to indicate that any of them have read the Costs Referee’s Report. This objection is an uninformed one and I do not accept it.

Insufficient information

67    Another group member objected on the basis that no information has been provided in regards to the loss incurred by group members individually or in total or in relation to what group members may each expect to receive upon approval of the proposed settlement.

68    There is little force to do this objection:

(a)    as regards the lack of information regarding the loss incurred by group members, the Website Text makes clear that loss will be calculated according to a formula contained in the SDS. Group members had an opportunity to review the settlement formula in the SDS before the approval hearing and there is nothing to indicate that Mr Banks did so. A range of potential outcomes are possible in relation to the quantum of compensation or account of profits that might be recoverable in the proceeding, dependent on various liability findings, and it is unrealistic to expect the applicant to disclose those matters to group members in a Notice of Proposed Settlement; and

(b)    as regards the asserted failure to disclose and estimate what each individual could expect to receive under the proposed settlement, any such estimate would have been speculative because of a number of variables, including: (i) the number of group members who register and are determined to be eligible; (ii) the size of the claimed losses of eligible group members; and (iii) the amount of the Court-deductions from the settlement sum. It would be impractical to make an estimate at this stage and if an estimate were made it would be highly uncertain and likely to mislead group members.

Other objections

69    Another group member objected on the basis that she believed she would only be eligible for a minimal amount of compensation as a result of the relatively small size of her retirement savings and the brief amount of time that her savings were invested in the Cash Option. That may well be her position but it does not justify refusing to approve the proposed settlement.

70    A further group member objected on the basis that the respondent should be penalised to a greater degree than the proposed settlement sum provides. This objection misunderstands the nature of the proceeding. The proceeding is a claim for compensation for losses suffered by the applicant and group members; it does not seek the imposition of a civil penalty on the respondents and no such relief is available to the applicant.

71    The basis for another objection is unclear. That objector wrote “Interest and legal costs as full and final settlement of the claims in the class action”. I treated that as an objection on the basis that the proposed settlement does not include interest and legal costs, and is therefore inadequate. As I have said, in my view the proposed settlement falls within the range of reasonable outcomes of the proceeding and this objection does not justify refusing to approve the proposed settlement.

72    Another group member objected on the basis that he was "unable to register” because he did not have his BT account number. He assumed that he therefore could not make a claim. He was contacted by Slater & Gordon and he then completed the registration process. Again, that is not a reason to refuse to approve the settlement.

THE PROPOSED DEDUCTIONS FROM THE SETTLEMENT SUM

73    The SDS provides that, prior to distribution to eligible group members, the Settlement Administrator shall deduct from the settlement sum any Court-approved:

(a)    legal costs;

(b)    litigation funding charges and costs;

(c)    settlement administration costs; and

(d)    a reimbursement payment to the applicant.

74    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: Bellamy's Australia Ltd v Basil [2019] FCAFC 147; 372 ALR 638  at [13] (Murphy, Gleeson and Lee JJ).

Whether the applicant’s legal costs are reasonable and proportionate

75    It will usually be ‘just’ pursuant to s 33V(2) of the Act to order that the reasonable legal costs incurred by the applicant be deducted from the settlement sum before distribution of the balance to group members. The effect of such an order will be that group members who will share in the fruits of the settlement will pay a pro rata share of the legal costs of obtaining the settlement.

76    But in exercising its protective role the Court must be satisfied that the legal costs proposed to be deducted are reasonable and proportionate.

77    The Costs Referee’s report is detailed and thorough. She concludes that reasonable legal costs incurred in the period up to 25 May 2023, plus estimated reasonable legal costs for the period from 26 May 2023 up to the settlement approval hearing on 13 November 2023, total $7,060,046. That reflects a 7% reduction on the costs claimed by Slater & Gordon up to 25 May 2023.

78    Slater & Gordon accepts the Costs Referee’s report in respect to legal costs incurred up to 25 May 2023 but it contends that her estimate of the reasonable costs for the period from 26 May 2023 until the settlement approval hearing was just an estimate, which has proven to be too low.

79    For the period from 26 May 2023 until the settlement approval hearing the Costs Referee estimated legal costs at $567,901, comprising $299,946 for conditional professional fees, $74,986 for uplift on those conditional fees and $192,968 for counsel’s fees and other disbursements. The estimate did not, however, include an estimate of Link’s variable charges, which had previously been estimated in the range of $265,000-$355,000.

80    In the Fifth Rapoport Affidavit Mr Rapoport deposed that the actual costs incurred by Slater & Gordon in the period from 26 May 2023 to the settlement approval hearing were $872,399, comprising $506,893 for professional fees (to which no uplift is applied and which reflects a 7% reduction in fees consistent with the reduction the Costs Referee considered appropriate in the earlier period) and $365,506 in disbursements (principally Link charges of $213,172 and counsel’s fees of $109,807).

81    He states, and I accept, that the reasons why Slater & Gordon's professional fees incurred after 26 May 2023 were greater than the estimate that the firm had provided to the Costs Referee include that:

(a)    the estimate did not include any fees relating to group member enquiries because those were highly unpredictable;

(b)    the work to prepare the SDS and evidence in support of the settlement approval application, including the work assisting counsel in relation to the Counsel Opinion, exceeded that which was estimated;

(c)    more time was spent liaising with and providing instructions to Link than had been estimated;

(d)    more work was done analysing registrations and preparing for the implementation of the distribution formula in the SDS than had been anticipated would be done prior to the hearing of the settlement approval application; and

(e)    the extensive correspondence with the respondents regarding the Settlement Administrator obtaining access to the Group Member Data in order to assess registrations, which also required further analysis of registrations and further liaising with Link, was not anticipated.

82    It is appropriate to adopt the Costs Referee’s Report in relation to the applicant’s costs up to and including 25 May 2023 without variation. In relation to the period from then until 13 November 2023 it is appropriate to vary it by increasing the allowance for the applicant’s legal costs by $304,498.

83    I therefore approve the deduction of the applicant’s reasonable and proportionate legal costs of $7,364,544 from the settlement sum to be paid: (a) to Therium in reimbursement of the legal costs it paid; and (b) to Slater & Gordon for the balance.

Whether the proposed litigation funding charges are reasonable and proportionate

Therium’s application

84    By an interlocutory application dated 13 October 2023, Therium seeks orders pursuant to s 33V of the Act approving the deduction of the following amounts for payment to it, pursuant to the SDS:

(a)    $2,716,489 in reimbursement of legal costs paid by Therium to Slater & Gordon;

(b)    $6,519,574 as a funding commission calculated on a multiple of 2.4 times the legal costs paid by Therium; and

(c)    $1,180,000 in reimbursement of ATE insurance premiums and associated deeds of indemnity paid or to be paid by Therium.

85    Therium seeks an order that the above amounts be deducted by way of a CFO.

Ms Hird’s evidence

86    Therium relies on the affidavit of Ms Hird dated 12 October 2023. She was not cross-examined and I accept her evidence.

87    Ms Hird deposed that in early 2019, Slater & Gordon approached the Therium group and enquired whether it was interested in investigating and funding a potential claim against BTFM. Subsequently, over a number of months, Therium together with Slater & Gordon investigated the potential claim.

88    She said that the proposed claim had a number of risks and difficulties. Through May and June 2019 Therium discussed the potential claim with Slater & Gordon and the funding terms Therium might offer (including potential funding multiples) and the risks Therium perceived in respect of the claim.

89    It was Therium’s policy to obtain ATE insurance in all cases that it funded in jurisdictions which have a “loser pays” costs rule and where it agrees to provide an adverse costs indemnity to the funded party. She said that Therium includes the costs of ATE insurance as a separate item in “Litigation Costs” under its LFAs, such that ATE costs would be separately charged to the funding commission. Some Therium LFAs provided for ATE costs to be included in the costs to which the funding commission multiple is applied, but that is determined on a case-by-case basis.

90    Ms Hird said that by July 2019:

(a)    Therium had informed Slater & Gordon that it sought a funding commission calculated on a 2.4 times multiple on invested capital (which was below its benchmark rate), plus an entitlement to recover all of its costs, including the cost of ATE insurance to meet any requirement to pay adverse costs. On that basis, for every dollar Therium paid in relation to the case it would be entitled to both:

(b)    in response to Therium’s concerns as to the amount of costs likely to be incurred as against the quantum of recovery (depending on different scenarios that were modelled) Slater & Gordon proposed terms whereby Therium would pay 50% of its professional fees and 100% of disbursements up to an agreed cap, and that Slater & Gordon would undertake the other 50% of any necessary work on a no win-no fee basis with a potential 25% uplift on the conditional portion of its fees;

(c)    Slater & Gordon proposed that the proceeding be conducted on an “open class” basis as that would deliver compensation to a greater number of group members, and reduce costs as book-building costs would be avoided, which in turn would increase the net return to group members; and

(d)    Slater & Gordon proposed that the applicant seek a common fund order at an appropriate juncture in the proceeding.

91    Ms Hird said that if Therium could not recover its ATE costs as a cost outlaid, then it would require a higher commission return in order to satisfy its investors. Further, although Therium would not fund a class action and provide an indemnity for adverse costs without taking out ATE insurance, hypothetically, if it did not take out ATE insurance its risk would be significantly greater and it would seek a higher return on its investment which would flow through to a higher rate of commission.

92    In around August 2019 Therium entered into an LFA with the applicant and Terms of Engagement with Slater & Gordon. Those agreements had the following key elements:

(a)    the applicant agreed to engage Slater & Gordon as her solicitors and Slater & Gordon agreed to enter into the Terms of Engagement with Therium;

(b)    Therium agreed to fund 50% of Slater & Gordon's professional fees and 100% of the disbursements incurred up to a fixed cap, pursuant to the Claim Budget which provided for total legal costs of $3,743,966, made up of $1,846,900 in professional fees and $1,897,066 in disbursements;

(c)    Therium was therefore obliged to pay legal costs up to a fixed cap of $2,820,516 (incl. GST). In the event the cap was reached, Slater & Gordon was obliged to continue prosecuting the proceeding until judgment or settlement of the proceeding;

(d)    Slater & Gordon agreed to enter into a conditional legal cost agreement with the applicant to cover the other 50% of the costs of the proceeding, under which it would be entitled to seek a 25% uplift on the conditional fees;

(e)    Therium agreed to indemnify the applicant for the risk of an adverse cost order and would obtain ATE insurance to manage that exposure, doing so on the basis it could recover this cost through any settlement or judgment in favour of the applicant;

(f)    Therium agreed to provide security for costs to the extent required, and the cap that applied to its obligations to pay legal costs excluded any amounts that it was required to pay into court for security for costs or paid to secure a deed of indemnity;

(g)    the proceeding was to be conducted on an open class basis;

(h)    the applicant agreed to instruct Slater & Gordon to seek a common fund order at an appropriate juncture;

(i)    Therium was entitled to be reimbursed from any judgment or settlement in favour of the applicant (in first priority to other amounts payable) any “Litigation Costs” it had paid, which included legal costs, ATE costs and any costs associated with security for costs, and taxes; and

(j)    after reimbursement to Therium of its Litigation Costs, and any payment to the Settlement Administrator for the costs of settlement administration, and to Slater & Gordon for its unpaid costs (including the conditional element), Therium was entitled to payment of a funding commission calculated at 2.4 times the Litigation Costs it had paid.

93    Therium obtained ATE insurance and associated deeds of indemnity for security for costs at a cost of $1.180 million, for which it paid $828,000 in upfront premiums and fees for the deeds of indemnity and was required to pay a contingent premium of $352,000 upon a successful outcome in the proceeding. Therium calculated the necessary level of cover by reference to the Claim Budget and it selected the ATE policy in a competitive process in which AmTrust offered the lowest price.

94    The legal costs Slater & Gordon incurred substantially exceeded the Claim Budget it had proposed. In late 2021 Slater & Gordon requested a $2.53 million increase being an additional $1.1 million for professional fees and $1.42 million for disbursements. The proposed increase in the funding cap was based on a Varied Claim Budget provided by Slater & Gordon in which it estimated total legal costs at $7,886,661 made up of professional fees of $5,690,865 (being an increase of $3,843,965) and disbursements of $2,195,795 (being an increase in $298,730).

95    Therium was not prepared to increase the funding cap as it considered that if it invested further funds it would be unlikely to obtain a 2.4 times multiple on any further investment, particularly in circumstances where other distributions would also be sought from any favourable settlement or judgment, including Slater & Gordon’s unpaid fees plus uplift.

96    She said that Therium later offered to provide some additional funding so as to meet the additional disbursements under the Revised Claim Budget, but only if Slater & Gordon agreed to some variations to the “waterfall” of priorities in the payments out of any favourable settlement or judgment. Slater & Gordon did not accept that offer and instead determined to continue to prosecute the proceeding by carrying its further fees and meeting the further disbursements on a no win-no fee basis. Thereafter, Therium did not provide any further funding and Slater & Gordon did not invoice it for any further professional fees or disbursements.

The legal costs incurred by Therium

97    Before it ceased to provide further funding for the proceeding Therium had paid legal costs in a total of $2,716,489, which costs have been assessed as reasonable by the Costs Referee.

98    In my view it is manifestly ‘just’ pursuant to s 33V(2) that Therium be reimbursed the amount it paid for the applicant’s legal costs. Therium has an entitlement under the LFA to be reimbursed such costs from the gross settlement, and making such an order will mean that the group members who share in the fruits of the settlement will pay a pro rata share of the legal costs of obtaining the settlement.

Therium’s proposed litigation funding charges

99    Therium also seeks:

(a)    payment of a funding commission in the sum of $6,519,574, calculated on a multiple of 2.4 times the legal costs it paid; and

(b)    reimbursement of $1,180,000 paid by it in ATE costs.

Power to make a common fund order at the point of settlement approval

100    As I have said many times over the years, upon approval of a settlement under s 33V(1) of the Act, I consider s 33V(2) provides power to make an order that is directed at fairly and equitably distributing the burden of litigation funding expenses amongst all persons who have benefited from the action, whether such an order be called a CFO, an expense sharing order or by some other nomenclature. I expressed my reasons for that view in cases such as Uren v RMBL Investments Ltd & Anor (No 2) [2020] FCA 647 at [50]-54]; Webster (Trustee) v Murray Goulburn Co-Operative Co. Limited (No 4) [2020] FCA 1053 at [110]-[112]; and Court v Spotless Group Holdings Limited [2020] FCA 1730 at [77]-[80], and I will not do so again.

101    I thought this question had been put to bed by the decisions of the Full Court in Davaria Pty Ltd v 7-Eleven Stores Pty Ltd [2020] FCAFC 183; 281 FCR 501 at [42] (Lee J, with whom Middleton and Moshinsky JJ agreed), and the NSW Court of Appeal in Brewster v BMW Australia Ltd [2020] NSWCA 272 at [28(iv)-(v)], [30] and [41]-[43] (Bell P with whom Bathurst CJ and Payne JA agreed) but, alas, that was not the case. Most recently in Elliot-Carde v McDonald’s Australia Limited [2023] FCAFC 162 [170] (Beach J), [423] (Lee J), [504] (Colvin J) confirmed that the Court has power under s 33V(2) of the Act to make a CFO at the point of settlement approval. I hope that is the end of the issue.

Therium’s submissions

102    Therium contends that a funding commission of $6.52 million plus reimbursement of its ATE cost is fair and reasonable, and it seeks a common fund order in that regard.

103    It says that the proceeding is large, novel and complex, and that it faced real risks on liability and quantum. It also faced a risk that BTFM might proactively remediate the group members as some superannuation trustees have done which would have meant that its investment was wasted. Further, at the time it agreed to fund the proceeding there was an absence of similar claims for it to use as a reference point to assess risk.

104    It argues that a funding commission of $6.52 million representing a 2.4 multiple of the legal costs it had paid is reasonable compensation for its risks of funding the proceeding, the principal risk being non-recovery of the legal costs it paid. In view of the risks and uncertainties of the case it submits that the risk of it not recovering the legal costs advanced was a real and significant risk.

105    Therium also submits that it faced a risk of being required to meet an adverse costs order. Although it had obtained ATE insurance to defray that risk, the cover provided under the ATE policy was limited to $4 million and Therium was therefore exposed to the risk of an adverse costs order for any adverse costs order above that. In circumstances where the applicant’s reasonable costs have been assessed by the Costs Referee at more than $7 million Therium had an exposure to adverse costs beyond the policy limit.

106    Further, Therium says (and I accept) that the funding commission it seeks is less than its entitlement under the LFA. Under the LFA it is entitled to apply the multiple of 2.4 times to its ATE costs as well as to its paid legal costs. If the terms of the LFA were applied it would be entitled to a funding commission of $9,351,574 which equates to a funding rate of 31.2% of the gross settlement.

107    Therium also notes that the funding commission it seeks is less than Therium’s benchmark multiple (which I shall not disclose for reasons of commercial confidentiality). It notes that in Blairgowrie Trading Ltd v Allco Finance Group Ltd (in liq) (No 3) [2017] FCA 330 at [128] Beach J said that where a litigation funder charges commission by way of a multiple of costs it is usual for it to be at a multiple of three times.

108    It says that, taken together, the proposed funding commission of $6.52 million plus ATE costs of $1.180 million will mean litigation funding charges total $7.699 million, which equates to 25.7% of the gross settlement sum. It contends that a funding commission of 25.7% of the gross settlement sum is reasonable and accords with commissions allowed in other funded class actions. It relies on:

(a)    the settlement approval decisions in Clarke v Sandhurst Trustees Ltd (No 2) [2018] FCA 511 at [26] (Lee J) and Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527 at [165] (Murphy J) (approving a funding rate of 30%); Bradgate (Trustee) v Ashley Services Group Ltd (No 2) [2019] FCA 1210 at [19(2)] (Middleton J) (approving an average funding equalisation rate of 33.18%); and Sanda v PTTEP Australasia (Ashmore Cartier) Pty Ltd [2023] FCA 143 at [24] (Lee J) (approving a funding rate capped at 30%, excluding recovery of ATE);

(b)    the empirical research of Professor Vince Morabito:

(i)    Professor Morabito’s 2019 study titled “An Evidence-Based Approach to Class Action Reform in Australia: Common Fund Orders, Funding Fees and Reimbursement Payment” (Monash University, January 2019), indicates that 25% of the gross settlement was the median funding rate in all funded class actions settled until the end of 2018; and

(ii)    Professor Morabito’s 2023 study titled “Empirical perspectives on twenty-one years of funded class actions in Australia” (Monash University, April 2023) indicates that 22.1% of the gross settlement was the median funding rate in all funded class actions prior to the decision in Brewster, whereas after Brewster the median funding rate is 25% of the gross settlement.

109    Therium submits that the question as to whether it is reasonable for Therium to be paid a funding commission plus be reimbursed its ATE costs out of the gross settlement sum involves consideration as to whether the combined sum of the funding commission and the ATE costs are unreasonably high, citing Williamson v Sydney Olympic Park Authority [2022] NSWSC 1618 at [83] (Black J). It says that it is appropriate to allow the deduction of the ATE costs in addition to a funding commission of $6.52 million for the following reasons:

(a)    unlike in other cases, the funding commission was not intended to cover all of Therium’s risk of exposure to an adverse costs order. Rather, the funding commission was expressly set on the basis that Therium would obtain ATE insurance, the cost of which it would separately charge for. It says that absent the ATE insurance it can be inferred that Therium would have required a higher funding commission because its risk would not have been mitigated by the ATE policy;

(b)    the funding commission it seeks and reimbursement of the ATE costs means total litigation funding charges will be $7,699,574, which equates to 25.7% of the gross settlement, which represents a fair and reasonable return for Therium. It argues that this case is distinguishable from Williamson where Black J did not allow the funding commission sought plus ATE costs because it equated to 29.56% of the gross settlement sum. Here, by comparison, the rate sought by Therium is not unreasonably high, sitting as it does at 25.7%;

(c)    allowing Therium to recover its ATE costs on top of the funding commission would not result in an outcome where group members are left with almost no return, as in Petersen at [5]. It says that under the proposed settlement group members will receive more than 50% of the gross settlement sum, and the ATE costs sought to be recovered make up only 3.94% of the gross settlement;

(d)    the cost of the ATE cover was determined in a competitive market setting, and the level of cover was appropriately calculated by reference to the Claim Budget; and

(e)    although it ceased to fund legal costs in the proceeding in March 2022, it remained exposed to the risk of an adverse costs order beyond the limit of the ATE cover, and its exposure in that regard was increasing as the proceeding continued.

Consideration

110    I am satisfied that in the circumstances of the case it is ‘just’ pursuant to s 33V(2) to make an order that Therium’s reasonable litigation funding charges be deducted from the common fund of the group members’ recoveries.

111    First, and most fundamentally, that is because Therium paid $2.716 million of the legal costs the applicant incurred in bringing the proceeding. In so doing, it assumed substantial costs from the outset, when the outcome was far from certain. It took on the risk that it would not recover the capital that it invested in the case (including its loss of opportunity to spend its capital on other investments), doing so in return for reimbursement of its costs and payment of a funding commission if the case was successful.