FEDERAL COURT OF AUSTRALIA

Davaria Pty Limited v 7-Eleven Stores Pty Ltd (No 15) [2023] FCA 1604

ORDERS

THE COURT NOTES THAT:

A.    In these orders:

a.    Settlement Scheme has the meaning given to it by Order 1(b) of the orders made on 31 March 2022 (First Settlement Orders).

b.    Administrator means Steven Nicols of the accounting firm Nicols & Brien, appointed as the Administrator of the Settlement Scheme pursuant to the First Settlement Orders.

c.    Application means the Administrator’s application to further amend the Settlement Scheme which is the subject of these orders.

THE COURT ORDERS THAT:

1.    Pursuant to ss 33V and 33ZF of the Federal Court of Australia Act 1976 (Cth), the Settlement Scheme annexed to the First Settlement Orders be amended in the manner set out in Annexure “A” to these orders.

2.    Pursuant to s 33ZF of the Federal Court of Australia Act 1976 (Cth), the amendments to the Settlement Scheme made by order 1 are taken to have effect from 22 March 2022.

3.    The costs of the Application be costs of the Administration.

4.    The Administrator and parties have liberty to apply.

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

ANNEXURE A

REASONS FOR JUDGMENT

O’CALLAGHAN J:

1    On 31 March 2022, I approved the settlement of these proceedings on the terms set out, inter alia, in the Settlement Scheme annexed to the orders and appointed Steven Nicols of the accounting firm Nicols & Brien as the Administrator of the Settlement Scheme.

2    The Administrator now seeks orders on the papers pursuant to ss 33V or 33ZF of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) amending the Settlement Scheme in two minor ways. One involves something that was omitted from the Settlement Scheme. The other arises because of personnel issues. (I will not repeat what I said about ss 33V or 33ZF in Davaria Pty Ltd v 7-Eleven Stores Pty Ltd (No 13) [2023] FCA 84 at [345]ff.)

3    The Contradictor does not oppose the making of the orders sought by the Administrator.

4    The Administrator relied on two affidavits of his own, sworn 11 October and 6 December 2023, respectively.

5    Turning first to the omission. Clause 34(c) of the Settlement Scheme and the court approved notices given to group members prior to the approval of the Settlement Scheme communicated an intention that the Settlement Scheme would be administered to compensate the group members in VID182/2018 in respect of the additional monies that they might have earned instead of spending their time operating their 7-Eleven stores (called the “Alternative Income Claim”). The Alternative Income Claim was one of the two alternative bases to assess a VID182/2018 group member’s loss – the other was any unpaid or underpaid labour supplied by director and guarantor group members for the time they spent in operating their 7-Eleven store (called the “Award Shortfall Claim”).

6    The Administrator pointed out in his affidavit evidence and written submissions that the loss assessment methodology in cl 45 of the Settlement Scheme does not expressly provide for a mechanism to assess the Alternative Income Claim. As currently drafted, it only provides a mechanism that assesses the Award Shortfall Claim.

7    The Administrator thus sought to amend the Settlement Scheme to include an express mechanism to facilitate the assessment of the Alternative Income Claims.

8    That is proposed to be done by amending cl 45 and inserting new clauses 45A to 45D to provide for alternative methodologies for working out the VID182 Claim Amount. The proposed cl 45A methodology incorporates the presently existing mechanism for working out the shortfall between the VID182 Group Members’ hypothetical award wages and their actual wages for working in their 7-Eleven store. The proposed cl 45B methodology provides for an assessment of an “Assessed Counterfactual Income”. Proposed cl 45C, read with proposed cl 80(b), provide a mechanism by which the Remuneration Expert engaged by the Administrator would assess the earning capacity of the VID182 Group Member had they sought alternative employment rather than devoting their time to operating their 7-Eleven store.

9    Proposed cl 45D provides that the VID182 Claim Amount for any VID182 Group Member will be the higher of the proposed cll 45A or 45B amounts. The Administrator submitted, and I agree, that this is fair because the VID182 Group Member should be paid at least an amount which is not less than either (a) the value of the labour supplied to their 7-Eleven store; or (b) their actual lost opportunity in alternative employment.

10    The second set of amendments arise out of personnel issues. The first concerns Mr Hart. The second concerns Mr Imlay.

11    Clause 79 of the Settlement Scheme currently provides that “Christopher David Hart will be appointed by the Administrator as the Remuneration Expert”.

12    Although cl 55 of the Settlement Scheme provides that the Administrator, at his discretion, may use the services of any persons engaged by him including other experts in administering the Settlement Scheme, which contemplates a grant of power to the Administrator to engage such remuneration consultants as he pleases, the Administrator submitted, and I agree, that there is a possibility that the Remuneration Expert, being expressly appointed by force of cl 79 and with express duties conferred by cll 42(a)(ii), 80 and 81, is not liable to be dismissed or replaced by the Administrator, at least without leave of the court.

13    The evidence shows that Mr Hart has demonstrated either an unwillingness or inability to perform the office of Remuneration Expert.

14    He last attended a conference with the Administrator and Mr Imlay on 29 August 2023. On 25 September 2023, 9 October 2023, and 18 October 2023, Mr Imlay sought to make contact with Mr Hart by email, with no response. On 18 October 2023, Mr Imlay sought to make contact with Mr Hart by telephone, which went to voicemail.

15    On 19 October 2023, the Administrator determined to terminate Mr Hart’s services.

16    On 6 November 2023, Mr Imlay sent an email to Mr Hart to terminate his instructions.

17    The Administrator has sourced an alternative remuneration expert, Mr John Day.

18    The Administrator submitted, and I agree, that Mr Day’s curriculum vitae indicated that he is appropriately qualified to assume the role of Remuneration Expert.

19    The Administrator submitted that “[f]or the avoidance of doubt, to enable Mr Hart to be removed and Mr Day appointed, it is appropriate to amend cl 79 of the Settlement Scheme to strike out words appointing Mr Hart and replace them with a power to appoint any suitably qualified person from time to time. Such an amendment would obviate the need to return to court to replace Mr Day if unforeseen circumstances required it”. I agree.

20    Clause 55 of the Settlement Scheme provides that: “It is proposed that Brett Richard Imlay, special counsel at Levitt Robinson, will be primarily responsible for the work to be carried out on behalf of the Administrator under the control and direction of the Administrator”. It goes on to say that the Administrator, at his discretion, may use the services of any persons engaged by him.

21    Mr Imlay has resigned from Levitt Robinson, effective 22 December 2023. Another solicitor, Ms Chrystalla Georgiou, a partner at Levitt Robinson, is proposed to replace Mr Imlay in his role under the Settlement Scheme.

22    The Administrator submitted that “[w]hilst the better construction of cl 55 is one which grants [him] power to engage such solicitors as he pleases… the express reference to Mr Imlay being primarily responsible for the work to be carried out on behalf of the Administrator may give rise to an argument that [his] general power to engage others should be read down”. The Administrator thus suggested simply deleting the quoted words in paragraph [19] above. I agree.

23    The Administrator submitted, and again I agree, that it was reasonable for him to dismiss Mr Hart and engage Mr Day to allow the administration of the Settlement Scheme to continue without undue delay.

24    As the Administrator submitted:

This application comes squarely within the scope of s 33V(2) [of the FCA Act] being for the just distribution of money paid under a settlement. The orders sought secure a more just outcome because it better reflects the intended operation of the Settlement Scheme, as disclosed to group members at time of settlement approval, and gives effect to the alternative loss claims as pleaded in paragraph 16(a) and paragraph 16(b) of the VID182 2FASOC. See particularly Davaria Pty Ltd v 7-Eleven Stores Pty Ltd (No 13) [2023] FCA 84 at [348].

Alternatively, the power conferred by s 33ZF is enlivened because the orders sought are in the nature of a correction of an unintended error or omission in the drafting of the Settlement Scheme and the making of the correction appropriate or necessary to ensure that justice is done in the proceeding.

25    The Administrator raised the question of whether notice of the amendments should be given to group members, but that is not necessary. The application is intended to bring the Settlement Scheme into conformity with what had been previously communicated to group members; they have already assented to a Settlement Scheme which compensates for the Alternative Income Claim; and they have registered to participate in the Settlement Scheme and supplied information to the Administrator on the basis of that assumption. A group member is not required to make any further decisions concerning their rights or interests as a result of the amendments proposed.

26    I will order that the amendments to the Settlement Scheme to take effect retrospectively, from 22 March 2022 (the date that the Settlement Scheme was first approved).

27    For those reasons, I make the orders sought by the Administrator.

28    Costs of, and incidental to, this application will be costs in the administration.

Associate:     

Dated:    14 December 2023

SCHEDULE OF PARTIES