Federal Court of Australia

Boulos v M.R.V.L. Investments Pty Ltd (Settlement Approval) [2024] FCA 1377

ORDERS

THE COURT ORDERS THAT:

Settlement Approval

1.    Pursuant to ss 33V(1) and (2) of the Federal Court of Australia Act 1976 (Cth) (FCA Act), the Court approves the settlement of this proceeding on the terms recorded in the Settlement Deed dated 21 December 2023 as varied by the Deed of Variation dated 3 October 2024 and the Settlement Distribution Scheme (SDS) contained in Annexure 1.

2.    The Court declares pursuant to s 33ZB of the FCA Act that the group members affected by the settlement are those persons defined as group members in the Further Amended Originating Application filed on 25 November 2021 who have not opted out of the proceeding.

3.    Rory Michael Markham of Adero Pty Ltd is appointed as administrator of the SDS.

4.    Pursuant to s 33V(2) of the FCA Act and for the purposes of the SDS, the following deductions from the settlement sum be approved:

4.1.    the “Approved Adero Costs” (as defined in the SDS), in the amount $832,060.39;

4.2.    the “Approved Funder Costs” (as defined in the SDS), in the amounts of;

4.2.1.    $$3,721,115.37 to be paid to ICP Funding Pty Ltd (ICP Funding) by way of funding commission and management fee;

4.2.2.    $2,563,384.03 to be paid to ICP Funding by way of reimbursement for project costs paid by ICP Funding in relation to the proceeding;

4.3.    the “Administration Costs” (as defined in the SDS, in the amount $723,805.

5.    Pursuant to ss 33Y of the FCA Act, the content of the notice contained in Annexure 2 (the Notice) is approved.

6.    On or before 29 November 2024, the administrator shall send a copy of the Notice to the Registered Group Members via their email addresses previously provided to Adero Law.

7.    The administrator shall notify the Court by email to the Associate to Justice Thawley when the distribution of funds under the SDS is complete.

8.    Upon the notification in Order 7:

8.1    these proceedings be dismissed;

8.2    all previous costs orders be vacated; and

8.3    there be no orders as to costs.

9.    The administrator has liberty to apply in relation to the SDS.

Confidentiality – Confidential Counsel Opinion

10.    Pursuant to s 37AF(1) of the FCA Act, and on the ground in s 37AG(1)(a) of that Act, Annexure RMM 6-16 to the Affidavit of Rory Michael Markham sworn on 30 October 2024, is not to be published or otherwise disclosed to any person or entity except the Court and Court Staff.

11.    Unless the Court otherwise orders, Order 10 continue until the notification in Order 7.

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

Annexure 1

SETTLEMENT DISTRIBUTION SCHEME

FEDERAL COURT OF AUSTRALIA

RAYMOND BOULOS

v

M.R.V.L. INVESTMENTS PTY LTD CAN 000 620 888

(NSD2168/2019)

(Merivale Class Action)

Merivale Class Action Scheme

Adero Law

3 Hobart Place,

City, ACT 2601

Ph: (02) 6189 1022

Ref: RM:CB:1096

Email: merivale@aderolaw.com.au

1.    BACKGROUND

1.1.    The Applicant, on behalf of himself and Group Members, and the Respondent (Merivale) have agreed to resolve the Merivale Class Action in full and final settlement of the Claims of all Group Members arising out of, or in connection with, the Merivale Class Action without the admission of any liability.

1.2.    The terms of the settlement are set out in the Settlement and Release Deed dated 21 December 2023 (Deed) and the Deed of Variation dated 3 October 2024 (Variation Deed). This Scheme sets out the terms on which the Settlement is to be administered. The Settlement and this Scheme are subject to the approval of the Court pursuant to s 33V(1) and (2) of the Federal Court of Australia Act 1976 (the Act). This Scheme does not become operative until the Effective Date.

1.3.    The purposes of this Scheme are to establish a procedure for:

1.3.1.    the fair and just calculation of the Settlement Entitlements of the Registered Group Members;

1.3.2.    the distribution of:

(a)    the Approved Funder Costs to ICP Funding Pty Ltd (ICP);

(b)    the Approved Adero Costs to Adero Pty Ltd (Adero);

(c)    the Administration Costs to the Administrator; and

(d)    the Settlement Entitlements to the Registered Group Members,

in the event that the Settlement receives Court approval.

1.4.    The Settlement Entitlements will be calculated using the same principles and calculation formulas as set out in this Scheme.

1.5.    The Merivale Class Action was settled for $19,250,000 (nineteen million and two hundred and fifty thousand dollars) (Settlement Sum), subject to the Court approving the settlement.

1.6.    This Scheme contemplates the following key steps:

1.6.1.    Rory Markham of Adero will be appointed as the Administrator of this Scheme and Merivale shall pay the Settlement Sum into Adero’s trust account;

1.6.2.    To the extent that Rory Markham is not appointed as the Administrator, Merivale will consent to the provision of the Employment Data to the Administrator, by Adero, on a confidential basis for the purposes of this Scheme only. Merivale will also consent to the use by the Administrator, whether Mr Markham or otherwise, of the Employment Data for the purposes of the Scheme. Merivale will otherwise owe no obligation under this Scheme;

1.6.3.    The Administrator will pay, out of the Settlement Sum and prior to the distribution of the Settlement Entitlements to Registered Group Members, the Approved Funder Costs to ICP, the Approved Adero Costs to Adero, and the Administration Costs to the Administrator;

1.6.4.    The Administrator will, for the purposes of this Scheme, model according to the Calculation Principles prepared by Adero, and calculate the Settlement Entitlements;

1.6.5.    For the avoidance of doubt, Merivale is not responsible for the preparation of the Calculation Principles, the Model, or otherwise the development of the methodology and assumptions that will be applied by the Administrator to calculate Settlement Entitlements.

1.6.6.    The Administrator will inform each Registered Group Member entitled to a Settlement Entitlement of the amount of that Group Member’s Anticipated Settlement Entitlement;

1.6.7.    Registered Group Members may initiate a review of their Anticipated Settlement Entitlement;

1.6.8.    Following the outcome of any review process, the Administrator will distribute the Settlement Entitlements to Registered Group Members according to a verification process and electronic funds transfer implemented by the Administrator; and

1.6.9.    The Administrator shall make all payments to Registered Group Members of the Settlement Entitlements in accordance with this Scheme.

2.    INTERPRETATION

2.1.    The meaning of defined words used in the Scheme are the same as in the Deed and the Variation Deed. Any additional words are defined below.

2.1.1.    Administrator means the entity appointed under clause 3 of this Scheme.

2.1.2.    Administration Costs means costs associated with the administration and implementation of this Scheme as assessed and approved by the Court.

2.1.3.    Aggregate Claims means the sum of the Weighted Loss Claim Amounts of all Registered Group Members.

2.1.4.    Anticipated Settlement Entitlement means an amount, calculated by the Model, and as otherwise in accordance with the Calculation Principles, which a Registered Group Member is apparently entitled to receive as part of the Settlement prior to any review process being engaged by any Group Member.

2.1.5.    Approved Adero Costs means the amount of $832,060.39 to be paid to Adero being the amount of the Applicant’s legal costs as assessed and approved by the Court not paid by ICP to Adero.

2.1.6.    Approved Funder Costs means the amount of $6,340,249.40 to be paid to ICP, being to the total of:

(a)    $2,248,672.35 to be paid to ICP by way of reimbursement for the Applicant’s legal costs and disbursements paid by ICP by the time of the Settlement Approval in relation to the Proceeding;

(b)    $314,711.68 to be paid to ICP by way of reimbursement for expenses (other than the Applicants’ legal costs and disbursements) paid by ICP in relation to the Proceeding;

(c)    $3,776,865.37 to be paid to ICP by way of funding commission and management fee.

2.1.7.    Calculation Principles means the principles contained in Schedule 1 of the Scheme and approved by the Court.

2.1.8.    Effective Date means the date of entry of orders by the Court approving the Scheme.

2.1.9.    Employee Entitlements means the entitlements, as determined by the Administrator, in accordance with the Hospitality Industry General Award 2010 (as varied from time to time) (Award).

2.1.10.    Employment Data means the data contained in the documents which were provided by Merivale to Adero, pursuant to Order 21 of the Orders dated 21 December 2022, on 12 April 2023, 19 April 2023, 28 April 2023 and 10 May 2023 (which data was also produced by Merivale by way of discovery to the Applicant pursuant to Orders 4 to 6 dated 25 October 2023) and Order 6 of the Orders dated 5 March 2024.

2.1.11.    Final Unregistered Group Members has the meaning given in Order 16 of the Orders dated 23 September 2024.

2.1.12.    Group Member Database means the database prepared and maintained by the Administrator in accordance with clause 5 of this Scheme.

2.1.13.    Group Member Information means:

(a)    the full name, residential address, email address and phone number of the Group Member;

(b)    a Bank State Branch (BSB), Account Number and Account name for a bank account, into which their Settlement Entitlement shall be paid; and

(c)    proof of identity of the Group Member, including passport number or drivers licence number.

2.1.14.    Loss Claim Amount means an amount, calculated by the Model, representing the Group Member’s claim.

2.1.15.    Model means the quantification loss model developed by Adero in aid of calculating the underpayment payable under the Award to the Applicant and Registered Group Members, and to distribute the Settlement Sum in a fair and equitable method.

2.1.16.    Net Settlement Distribution Fund means the settlement amount to be distributed to Group Members following the deduction from the Settlement Sum of the Approved Adero Costs, Approved Funder Costs, and Administration Costs.

2.1.17.    Registered Group Members has the meaning given in Order 15 of the Orders dated 23 September 2024.

2.1.18.    RGM Percentage means the Registered Group Member’s modelled claim as a percentage of the Aggregate Claims.

2.1.19.    Settlement Entitlement means an amount, calculated by the Model, and as otherwise in accordance with the Calculation Principles, and after determination of any review, which a Registered Group Member is entitled to receive as part of the Settlement.

2.1.20.    Scheme means this Settlement Distribution Scheme.

2.1.21.    Weighted Loss Claim Amount means the Loss Claim Amount with the relative weightings applied in accordance with clause 7.2 to 7.5 of this Scheme.

2.2.    In this Scheme:

2.2.1.    headings are for convenience only and do not affect interpretation; and

2.2.2.    the following rules apply unless the context requires otherwise:

(a)    the singular includes the plural, and the converse also applies;

(b)    a gender includes all genders;

(c)    if a word or phrase is defined, its other grammatical forms have a corresponding meaning;

(d)    a reference to a person includes a corporation, trust, partnership, unincorporated body or other entity, whether or not it comprises a separate legal entity;

(e)    a reference to dollars of $ is to Australian currency; and

(f)    a reference to anything done by any person includes a reference to the thing as done by a director, officer, servant, agent, personal representative or legal representative if permitted to be so done by law or by any provision of the Settlement and Release Deed and the Variation Deed or this Scheme.

3.    SCHEME ADMINISTRATOR

3.1.    Rory Markham of Adero will be the Administrator for the purposes of the Scheme. The Administrator, at his discretion, may utilise the services of any persons engaged by him in administering the Scheme. The Administrator accepts full responsibility for anything done by such a service provider.

3.2.    If the Court does not appoint Rory Markham as Administrator, Adero will take all steps reasonably necessary to enable the Administrator to perform its functions under this document, the Deed and the Variation Deed, including providing the Administrator with a copy of the Employment Data and a full digital copy of the Model which is capable of calculating Settlement Entitlements in accordance with the Calculation Principles.

3.3.    The Administrator will, subject to and in accordance with this Scheme, administer this Scheme in accordance with its terms, and in particular, will:

3.3.1.    prepare and maintain a Group Member Database;

3.3.2.    pay the Approved Adero Costs to Adero;

3.3.3.    pay the Approved Funder Costs to ICP;

3.3.4.    pay the Administration Costs to the Administrator;

3.3.5.    issue Anticipated Settlement Statements and Final Settlement Statements to Registered Group Members;

3.3.6.    confirm and otherwise obtain bank details of Registered Group Members;

3.3.7.    distribute the Settlement Entitlements payable to Registered Group Members; and

3.3.8.    notify the Court and Merivale of the conclusion of the administration of the settlement in accordance with clause 14 of this Scheme.

3.4.    The Administrator, in discharging any function or exercising any power conferred by this Scheme, shall do so as required by the Court to administer this Scheme fairly and reasonably in accordance with its terms, as a duty owed to the Court.

3.5.    If any conflict arises between the Administrator’s duties as trustee and Adero’s duties as the solicitor for the Applicant and Group Members, the Administrator shall apply to the Court for directions in that regard.

3.6.    The Administrator, and the Administrator’s staff, in discharging any function or exercising any power or discretion conferred by this Scheme, shall not be liable for any loss to Group Members arising by reason of any mistake, act or omission, provided such mistake or omission is made in good faith or of any other matter or thing except wilful neglect or individual fraud or deliberate wrongdoing on the part of the Administrator or the Administrator’s staff who are sought to be made liable.

3.7.    Notwithstanding anything elsewhere in this Scheme, the Administrator may at any time correct any error, slip, or omission occurring during the course of the administration of this Scheme.

4.    ADMINISTRATION PERIOD

4.1.    The administration and settlement distribution steps set out in this Scheme are required to be completed in accordance with the timeframes set out in this Scheme, subject to any further Court order which may vary the Scheme.

5.    GROUP MEMBER DATABASE

5.1.    The Administrator will create and maintain a database of Registered Group Members.

5.2.    The Group Member Database maintained by the Administrator shall include the:

5.2.1.    Group Member Information in respect of Registered Group Members as maintained by Adero in its capacity as solicitor for the Applicant; and

5.2.2.    Group Member Information as submitted by Registered Group Members to the Administrator pursuant to this Scheme.

5.3.    The Administrator is to confirm the bank account details of each Registered Group Member prior to distribution of the Settlement Entitlements. Confirmation of the bank account details is to be obtained via phone (or email should this be requested by the Group Member).

5.4.    In creating the Group Member Database, if the Administrator does not have some or all of the Group Member Information required in order to distribute any Settlement Entitlement, he will contact the Group Member to seek to obtain the information. Such information is to be obtained and contained via a secure portal.

5.5.    If after multiple attempts at contacting the Group Member, the Administrator is unable to contact the Group Member and receive the relevant information required to distribute the Settlement Entitlement, a final communication must be sent stating that should the Group Member not reply by a certain date, the Administrator will send the Settlement Entitlement to the Public Trustee and Guardian to be held as an “unclaimed amount” pursuant to section 259 of the Legal Profession Act 2006 (ACT).

6.    MODEL DATABASE & MODELLING OF REGISTERED GROUP MEMBERS’ CLAIMS

6.1.    A database will be created by the Administrator which will be used for the purposes of determining the value of Settlement Entitlements payable to Registered Group Members (Model Database).

6.2.    Merivale will consent to:

6.2.1.    to the extent the Administrator is not Mr Markham, the provision by Adero of the Employment Data to the Administrator; and

6.2.2.    the use of the Employment Data by the Administrator for the purposes of discharging its obligations under this Scheme.

For the avoidance of doubt, this Scheme is not intended to and will not impose any obligation on Merivale to provide any further employee records or information in respect of Registered Group Members.

6.3.    The Model Database maintained by the Administrator shall include the following information in respect of Registered Group Members:

6.3.1.    Group Member Database as provided by the Administrator; and

6.3.2.    Employment Data.

7.    CALCULATION OF SETTLEMENT SUM AND ANTICIPATED SETTLEMENT ENTITLEMENTS

7.1.    Within fourteen (14) Days after the Effective Date or 7 days of the Court’s determination of the Approved Adero Costs, Approved Funder Costs, and Administration Costs, whichever is the later, the Administrator will calculate the Anticipated Settlement Entitlement of each Registered Group Member as follows.

7.1.1.    First, the Administrator will calculate the claims of each Registered Group Member using the Model (Loss Claim Amount). The Administrator is to calculate the average Loss Claim Amount. If the Administrator determines there is insufficient data to model an individual’s claim, the average Loss Claim Amount is to be assumed as being their Loss Claim Amount;

7.1.2.    Second, the Administrator will apply the relevant weighting to the Loss Claim Amount described below at clauses 7.2 to 7.5 (Weighted Loss Claim Amount);

7.1.3.    Third, the Administrator will calculate the aggregate of all Registered Group Members’ weighted modelled claims (Aggregate Claims);

7.1.4.    Fourth, the Administrator will calculate each Registered Group Member’s modelled claim as a percentage of the Aggregate Claims (RGM Percentage);

7.1.5.    Fifth, the Administrator will subtract the amount of the Approved Adero Costs, Approved Funder Costs and Administration Costs from the Settlement Sum to calculate the balance payable as total Settlement Entitlements to Registered Group Members (Net Settlement Distribution Fund);

7.1.6.    Sixth, the Administrator will multiply the RGM Percentage by the Net Settlement Distribution Fund to calculate each Registered Group Member’s proportionate share of the Net Settlement Distribution Fund, which amount shall be their share (being their Anticipated Settlement Entitlement).

7.2.    Different relative weightings will be applied in the Scheme to the Loss Claim Amount (as defined above in clause 7.1.1) of all Registered Group Members, having regard to whether they were employed in any period of their employment during the Claim Period (being 25 December 2013 to 24 December 2019) in a role that is identified as being a managerial role within the Model.

7.3.    These weightings are to be applied because the strength of each Registered Group Members claim is affected by whether they were engaged in a managerial position that might have precluded them from coverage under the Award.

7.4.    A relative weighting of 100% will be applied to the portion of Registered Group Member’s Loss Claim Amount for work performed in a non-managerial role.

7.5.    A relative weighting of 70% will be applied to the portion of the Registered Group Member’s Loss Claim Amount for work performed in a managerial role, with such figure to be the subject of determination by the Court prior to distribution.

7.6.    The Anticipated Settlement Entitlement is subject to the calculation of the Net Settlement Distribution Fund and the completion of any Reviews conducted pursuant to clause 9.2.

7.7.    The final Settlement Entitlement for each Registered Group Member will be determined by the Administrator once all reviews (if any) provided for in clause 9.2 have been completed and the Administrator has calculated:

7.7.1.    all individual Loss Claim Amounts;

7.7.2.    the Weighted Loss Claim Amounts;

7.7.3.    the Aggregate Claims; and

7.7.4.    the Net Settlement Distribution Fund.

7.8.    Registered Group Members will be provided with an opportunity to apply to the Administrator for a Review of their Loss Claim Amount, as the case may be, in accordance with clause 9.2.

8.    ANTICIPATED SETTLEMENT STATEMENTS

8.1.    As soon as practicable after the Effective Date, the Administrator will issue, or cause to be issued to each Registered Group Member, an Anticipated Settlement Statement (in the form referred to in clauses 8.3 and 8.4 below).

8.2.    Anticipated Settlement Statements will be issued via email to the email address set out in the Group Member Information, and if there is no email address, to the postal address set out in the Group Member Information.

8.3.    The Anticipated Settlement Statement will be in the form of Schedule 2 to this Scheme and will set out the following:

8.3.1.    the identity of the Registered Group Member;

8.3.2.    the amount of the Registered Group Member’s Loss Claim Amount;

8.3.3.    the amount of the Registered Group Member’s Weighted Loss Claim Amount;

8.3.4.    the Aggregate Claims;

8.3.5.    the Net Settlement Distribution Fund and a breakdown showing how that sum has been calculated; and

8.3.6.    their Anticipated Settlement Entitlement.

8.4.    If the Registered Group Member has no Settlement Entitlement, the Settlement Statement will be in the form of Schedule 3 to this Scheme.

9.    REVIEW

9.1.    A junior barrister practising in the ACT or NSW and willing to perform the work will be appointed by the Administrator to conduct any review of the Anticipated Settlement Statements that is applied for by any Registered Group Member (Reviewer).

9.2.    The Anticipated Settlement Statements shall be taken to be accepted as accurate by the Registered Group Member to whom it relates, unless the Registered Group Member within twenty-one (21) days of receiving the Anticipated Settlement Statements submits to the Administrator a written request (Review Request) for a review of the Anticipated Settlement Statement (Review), together with copies of all documents on which the Registered Group Member relies for the purposes of the Review, including any statement of reasons for making the Review Request.

9.3.    Should a Group Member submit a Review Request, the Administrator will review any material and reasons that the Group Member wants to raise and will at his discretion, correct any errors arising from Merivale’s data or the Administrator’s application of Model to the Respondent’s data. If the Administrator determines that the Settlement Entitlement should be amended, the Group Member will be notified of the change as soon as practicable. Following which, the Group Member has seven (7) days to notify the Administrator whether they still wish for a Review to be performed by the Reviewer, otherwise the revised determination by the Administrator will then be taken to be the Group Member’s Settlement Entitlement.

9.4.    The cost of each Review by the Reviewer will be fixed at $1,500 plus GST.

9.5.    If, after the Administrator has reconsidered the Anticipated Settlement Entitlement in the Anticipated Settlement Statement in accordance with clause 9.3, and the Registered Group Member confirms that he or she still presses the Review Request in accordance with clause 9.2, then subject to clause 9.6 the Administrator shall, within seven (7) days of receiving that confirmation, refer it (and any supporting documentation) to the Reviewer for consideration.

9.6.    Where the Administrator forms the view that the Registered Group Member’s Final Loss Payment Amount will likely be less than $1,500, the Registered Group Member must on written request by the Administrator pay the sum of $1,500 plus GST into the Settlement Distribution Account within fourteen (14) days of being requested to do so, failing which the request for Review will lapse.

9.7.    Within twenty-one (21) days of receiving the confirmed Review Request, the Reviewer will consider the Review Request and if satisfied there is an error, slip, or omission in the Anticipated Settlement Statement for that Registered Group Member, will notify the Administrator in writing of that fact (Review Determination), and the Administrator will correct the Anticipated Settlement Statement to which the request relates (Amended Anticipated Settlement Statement).

9.8.    The Review is limited to a determination based on the hours-worked records, the Group Member’s employment period, their position(s) (and relevant duties), the venues, the payments made by Merivale during the relevant period, the appropriate classifications under the Award, and the application of any model or formula applied by the Administrator or as ordered by the Court. The Reviewer will have reference to Merivale’s data, any documents or material the Group Member can produce in relation to their employment and any statutory declaration the Group Member would like to make. In the case of an individual who is taken to have worked in a managerial role, consideration may need to be given as to whether that Group Member likely held an Award covered position and whether the relevant weighting was applied to their Anticipated Settlement Entitlement.

9.9.    The Administrator must provide a copy of the Amended Anticipated Settlement Statement or otherwise inform the Registered Group Member of the outcome of their Review as soon as practicable after receiving the Review Determination and/or preparing the Amended Anticipated Settlement Statement.

9.10.    If the Review Request does not result in the requesting Registered Group Member receiving $500 or more than they would have received but for the Review Request, then the Registered Group Member must pay the costs of the Review, which will be deducted from the Registered Group Member’s Final Settlement Entitlement, or if this amount is insufficient, from any sum paid by the Registered Group Member pursuant to clause 9.6.

10.    DISTRIBUTION OF NET SETTLEMENT DISTRIBUTION FUND

10.1.    As soon as practicable after:

10.1.1.    all Anticipated Settlement Statements have been sent to Registered Group Members;

10.1.2.    all periods of Review from all Anticipated Settlement Statements have expired and any Review Requests made by Registered Group Members have been finally determined and Amended Anticipated Settlement Statements have been sent to Registered Group Members; and

10.1.3.    the Approved Adero Costs, Approved Funder Costs, and Administration Costs have been deducted from the Settlement Sum,

the Administrator will distribute the Net Settlement Distribution Fund in accordance with clauses 10.5 and 10.7.

10.2.    As soon as practicable after the events referred to in clause 10.1 have occurred, the Administrator will prepare and cause to be distributed, a further statement to each Registered Group Member (Final Settlement Statement). The Final Settlement Statement will be in the form of Schedule 4 to this Scheme and will set out the following:

10.2.1.    the identity of the relevant Registered Group Member;

10.2.2.    their Loss Claim Amount;

10.2.3.    the Weighted Loss Claim Amount;

10.2.4.    the Aggregate Claims;

10.2.5.    the Net Settlement Distribution Fund and a breakdown showing how that sum has been calculated; and

10.2.6.    their Final Settlement Entitlement, being their distribution from the Net Settlement Distribution Fund.

10.3.    Any slip or omission on the face of the Final Settlement Statements must be notified to the Administrator within fourteen (14) days of the date on which the Final Settlement Statement was sent to the relevant Registered Group Member (Final Review Date), failing which the Final Settlement Statement will be deemed correct.

10.4.    If satisfied, after receipt of a notification pursuant to clause 10.3, that a Final Settlement Statement discloses an error, slip, or omission on its face, the Administrator will correct the Final Settlement Statement to which the request relates and make all necessary incidental and consequential amendments to any other Final Settlement Statement to any and all affected Registered Group Members.

10.5.    Within fifty-five (55) days of the later of the expiration of the Final Review Dates of all Registered Group Members, or the correction of any Final Settlement Statements, the Administrator will distribute the Final Settlement Entitlements to each of the Registered Group Members (calculated based on the amount of the Net Distribution Fund as at the date of the distribution), by Electronic Funds Transfer to the nominated bank account set out in the Group Member Database.

10.6.    If the Administrator is unable to distribute the Net Settlement Distribution Fund within the time prescribed in clause 10.5 above, he will do so as soon as practicable thereafter and in any event by the date which is eight (8) months after the Effective Date or such later date as the Court may order on the application of the Administrator (Final Distribution Date).

10.7.    Any amounts which have not been paid in cleared funds to a Registered Group Member (save those referred to in clause 5.5) within three (3) months of the Final Distribution Date and any interest accrued on such amounts will:

10.7.1.    if a further distribution of those funds to the relevant Registered Group Members would result in each of those Registered Group Members receiving a further distribution in excess of $100, be distributed to those Registered Group Members; or

10.7.2.    if a further distribution of those funds to the Registered Group Members would result in each of those Registered Group Members receiving a further distribution of less than $100, be paid to Youth Law Australia.

10.8.    Any amounts which have not been paid in cleared funds to a Registered Group Member within three (3) months of any further distribution pursuant to clause 10.7, will be paid to Youth Law Australia.

10.9.    The Final Settlement Statements will be final and binding on each Group Member and the completion of distributions made pursuant to clauses 10.5, 10.7 and 10.8 will satisfy the claims of the Applicant and all Group Members.

11.    APPROVED DEDUCTIONS

11.1.    The Administrator shall charge a fixed amount of $723,805 as Administration costs, irrespective of the number of such Registered Group Members.

11.2.    The Administrator recognises that there may be some costs in implementing the Scheme that will be unrecoverable, but will nonetheless abide by the fixed Administration Costs of $723,805.

11.3.    Within seven (7) Days of receiving payment from Merivale, the Approved Adero Costs are to be paid to Adero, the Approved Funder Costs are to be paid to ICP, and Administration Costs are to be paid to the Administrator out of the Settlement Sum, in priority to the Settlement Entitlements.

12.    GROUP MEMBERS’ PERSONAL TAXATION ISSUES

12.1.    Each Group Member is responsible for obtaining his or her own taxation advice in respect of the distribution of the Settlement Entitlement that he or she receives.

13.    FINAL UNREGISTERED GROUP MEMBERS

13.1.    Final Unregistered Group Members remain as such for all purposes of the proceedings and will remain a Group Member for all purposes of the proceedings, and are not entitled to, and will not receive, a distribution from the Settlement Sum or any other amount.

14.    REPORTING ON ADMINISTRATION

14.1.    Throughout the course of the administration of the Scheme, the Administrator must provide sixth-monthly reports to the Court, copied to Merivale’s solicitors and the Applicant’s solicitors (should Rory Markham not be appointed as the Administrator by the Court), detailing the progress of distributions to Registered Group Members, including the number of payments made, the amounts paid, the dates of payment, the Group Members to whom payment has been made and the number of any outstanding payments.

14.2.    Within five (5) business days of the Administrator distributing the final payment to Group Members of the Settlement Entitlements, including in accordance with clauses 10.7 and 10.8, the Administrator is to notify the Associate to Justice Thawley (or another Justice of the Federal Court of Australia presiding over the Proceedings) of that having occurred and of the following:

14.2.1.    that the Administrator has paid:

(a)    the Settlement Entitlements to Registered Group Members;

(b)    the Approved Adero Costs to Adero;

(c)    the Approved Funder Costs to ICP;

(d)    the Administration Costs to the Administrator;

14.2.2.    whether any time periods in the Scheme were not complied with by a party;

14.2.3.    that subject to clause 14.2.2 above, the parties have complied with their respective obligations under the Scheme; and

14.2.4.    that the Scheme has been administered in its entirety.

14.3.    Within seven (7) days of the step contained in clause 14.2, the Administrator is to notify Merivale of the same information contained in clause 14.2.

15.    COURT SUPERVISION

15.1.    Consistent with Part IVA of the Act, the implementation of this Scheme is subject to the Court’s supervision.

15.2.    The Administrator may refer any issues arising in relation to the Scheme or the administration of the Scheme to the Court for determination.

16.    NOTICE

16.1.    Any notice of document to be given or delivered pursuant to this Scheme shall be deemed to be given or delivered and received for all purposes associated with this Scheme if it is:

16.1.1.    addressed to the person to whom it is to be given; and

16.1.2.    either:

(a)    delivered or sent by pre-paid mail to that person’s postal address, being in respect of any Group Member, the address notified in the Group Member’s Registration Form where they were considered to have become a Registered Group Member; or

(b)    sent by e-mail to that person’s e-mail address being in respect of any Group Member, the e-mail address notified in the Group Member’s Registration Form where they were considered to have become a Registered Group Member.

16.2.    A notice or document that complies with clause 16.1 will be deemed to have been given, or delivered and received:

16.2.1.    If it was sent by mail to an addressee in Australia, two (2) clear business days after it was sent;

16.2.2.    If it was sent to an addressee outside of Australia, five (5) clear business days after it was sent; and

16.2.3.    If it was sent by e-mail, at the time it is sent.

Schedule 1

Calculation Principles

1.    The intention of this Schedule 1 is to explain the principles upon which the Model has been established by Adero and which will continue to govern the calculation of Settlement Entitlements for the purposes of the Scheme.

2.    When using the Model to calculate Settlement Entitlements for Registered Group Members, the following information, data, details and principles will be utilised and adopted by the Administrator:

2.1.    the Employment Data; and

2.2.    the following agreed principles set out in the table below will be adopted:

3.    Settlement Sum and Settlement Entitlements Cap

3.1.    In keeping with the Deed and Variation Deed, Settlement Entitlements must be calculated on the basis that the Settlement Entitlements for Registered Group Members are capped at the sum of $19,250,000 less the Approved Adero Costs, Approved Funder Costs and Administration Costs as approved by the Court (Settlement Entitlements Cap).

4.    Balancing Discount

4.1.    To achieve the Settlement Entitlement Cap, the Model applies a balancing discount to the underpayment of Registered Group Members. This means the Registered Group Members receive an equal portion of their calculated claim once costs are removed.

Schedule 2

Anticipated Settlement Statement

Dear [insert Registered Group Member name]

RAYMOND BOULOS v M.R.V.L. INVESTMENTS PTY LTD ACN 000 620 888, NSD2168/2019

You are receiving this Anticipated Settlement Statement because you registered to participate in the settlement of the Merivale Class Action.

In accordance with the scheme approved by the Court for calculating and paying employee entitlements to registered group members (Scheme), there has been a preliminary determination by the Scheme Administrator that you are entitled to receive a payment pursuant to the settlement approved by the Court.

Having regard to information about your employment (including your payslip data and duration of employment) and the calculation principles approved by the Court (Model), please find below the following calculations regarding the settlement:

(i)    the Approved Adero Costs are $832,060.39 (the amount approved by the Court for legal costs other than those paid by the funder); and

(ii)    the Approved Funder Costs are $6,284,499.40 (the amount approved by the Court for legal costs paid by the funder of the proceeding, other costs paid by the funder in relation to the conduct of Proceeding, and the funder’s commission and management fee for funding and managing the funding of the proceeding); and

(iii)    the Administration Costs are $723,805 (the amount approved by the Court for fees for the administration of the settlement).

Pursuant to the Scheme, the amount referred to above is taken to be accepted as accurate unless a written request for a review is made.

If you think the Loss Claim Amount is incorrect or you consider a reduction was mistakenly applied to your Loss Claim Amount as the Administrator had incorrectly identified that you were employed in a managerial role, you must submit a written request for a review of this Anticipated Settlement Statement (Review). A written request may be submitted by writing to the Administrator via email at merivale@aderolaw.com.au by [insert date] (being 21 days from receiving this document). Please provide copies of all documents you wish to rely on for the purposes of the Review, including any statement of the reasons for making the Review Request.

The Review is limited to a determination based on the hours worked records, your employment period, your position(s) (and relevant duties), the venues, the payments made by Merivale during the relevant period, the appropriate classification under the Award, and the application of any model or formula applied by the Administrator or as ordered by the Court. The Reviewer will have reference to Merivale’s data, any documents or material the Group Member can produce in relation to their employment, and any statutory declaration the Group Member would like to make. In the case of an individual who is deemed to have worked in a managerial role, consideration may need to be given as to whether that Group Member likely held an Award covered position and whether the relevant weighting was applied to their claim.

If the Review does not result in you receiving $500 or more than you would have received, then you will be required to pay the costs of the Review, which will be deducted from your Settlement Entitlement. If the Administrator forms the view that your final Settlement Entitlement will likely be less than $1,500, the Administrator may make a written request for you to make a payment to cover the fee of the Review prior to the Review.

The Review will be done by a junior barrister of the ACT or NSW at a fixed cost of $1,500 plus GST.

Within 28 days of receiving the request for the Review, you will be notified of the outcome by the Administrator.

We can confirm that no further deductions will be made for any legal costs in relation to the Merivale Class Action (except for any costs described above in relation to a Review).

We confirm that Your Settlement Entitlement contained in this document is not final and is subject to change depending on whether Group Members request a Review and it results in a change in their Loss Claim Amount and / or Weighted Loss Claim Amount.

Prior to any distribution of the Settlement Sum to Registered Group Members you will receive a Final Settlement Statement which will contain your Final Settlement Entitlement.

Please do not contact Merivale in respect of your settlement payment. Merivale is not involved in the assessment of the amount of your payment, and is otherwise not involved in the administration of the Scheme and has denied all liability in the Merivale Class Action.

Sincerely,

Adero Law

Schedule 3

Anticipated Settlement Statement

Dear Group Member

RAYMOND BOULOS v M.R.V.L. INVESTMENTS PTY LTD CAN 000 620 888, NSD2168/2019 

You are receiving this Settlement Statement because you registered to participate in the settlement of the Merivale Class Action.

In accordance with the scheme approved by the Court for calculating and paying employee entitlements to registered group members (Scheme), there has been a determination by the Scheme Administrator that you are NOT eligible to receive a payment because your employment records indicate that you have been properly remunerated.

Pursuant to the Scheme, no compensation is taken to be accepted as accurate unless a written request for a review is made.

If you think this is incorrect, you must submit a written request for a review of this Anticipated Settlement Statement (Review). A written request may be submitted by writing to the Administrator via email at merivale@aderolaw.com.au by [insert date] (being 21 days from receiving this document).

Please provide copies of all documents you wish to rely on for the purposes of the Review, including any statement of the reasons for making the Review Request.

The Review is limited to a determination based on the hours worked records, your employment period, your position(s) (and relevant duties), the venues, the payments made by Merivale during the relevant period, the appropriate classification under the Award, and the application of any model or formula applied by the Administrator or as ordered by the Court. The Reviewer will have reference to Merivale’s data, any documents or material the Group Member can produce in relation to their employment, and any statutory declaration the Group Member would like to make. In the case of an individual who is deemed to have worked in a managerial role, consideration may need to be given as to whether that Group Member likely held an Award covered position and whether the relevant weighting was applied to their claim.

As your final Settlement Entitlement is likely less than $1,500, the Administrator will require you to pay $1,500 plus GST into the Distribution Account [insert bank details]. If the Review does not result in you receiving $500 or more, then you will be required to pay the costs of the Review, which will be deducted from your Settlement Entitlement.

The Review will be done by a junior barrister of ACT or NSW at a fixed cost of $1,500 plus GST.

Within 28 days of receiving the request for the Review, you will be notified of the outcome by the Administrator.

Please do not contact Merivale in respect of your settlement payment. Merivale is not involved in the assessment of whether you are or are not entitled to receive any payment, and is otherwise not involved in the administration of the Scheme and has denied all liability in the Merivale Class Action.

If you have any queries, please contact Adero at merivale@aderolaw.com.au.

Sincerely,

Adero Law

Schedule 4

Final Settlement Statement

Dear [insert Registered Group Member name]

RAYMOND BOULOS v M.R.V.L. INVESTMENTS PTY LTD ACN 000 620 888, NSD2168/2019

You are receiving this Settlement Statement because you registered to participate in the settlement of the Merivale Class Action.

Having regard to information about your employment (including your payslip data and duration of employment) and the calculation principles approved by the Court (Model) AND any reviews requested by Registered Group Members, please find below the following calculations regarding the settlement:

Pursuant to the Scheme, the amount referred to above is deemed to be a final and accurate amount that you are entitled to receive in keeping with the settlement arrangements approved by the Court.

If you think there is an error, slip, or omission contained in this document, you must notify the Administrator within 14 days of the date on which this document was sent to you by sending an email to merivale@aderolaw.com.au. If you do not notify the Administrator within 14 days then this document will be taken as being correct.

The Administrator will pay the amount referred to above (by way of electronic funds transfer to the bank account you previously nominated when registering your interest as a group member). If there has been a change in your bank account details, please urgently contact Adero via email at merivale@aderolaw.com.au. The amount referred to above will be paid as soon as practicable.

Sincerely,

Adero Law

Annexure 2

Dear Registered Group Member

The Applicant Mr Boulos, and Merivale reached a settlement agreement for $19,250,000. The Applicant has filed an application seeking the Court approve the settlement and make orders for the money to be distributed fairly and equitably to the Registered Group Members.

It is a term of the settlement agreement that Registered Group Members be informed of an obligation owed by Mr Boulos and that this communication be sent out to Registered Group Members requesting you also act consistently with the same obligation outlined below.

Mr Boulos has agreed that he personally will not make any statements or publish any statements or make any publications that do the following and that he will not encourage or assist any other person to do the same:

Should any statements or publications be published by Mr Boulos which goes against the obligation set out above, then he must remove or seek the statements or publications be removed (to the extent that removing or seeking the removal is within his control).

For the purposes of the agreement, a “publication” includes any form of content or media on any forum, including a video published on a website or social media platform (such as any videos published on YouTube or any sponsored content posted between “stories” on Instagram).

REASONS FOR JUDGMENT

THAWLEY J:

INTRODUCTION

1    This is an application for approval of a proposed settlement of a wages underpayment class action under s 33V of the Federal Court of Australia Act 1976 (Cth) (FCA Act). The settlement, if approved, would involve the respondent paying the applicant (Mr Boulos) and group members $19.25 million in full and final settlement of the proceeding (Settlement Sum), without admission of liability. The settlement is recorded in a Deed of Settlement dated 21 December 2023 (Deed) and a Deed of Variation dated 3 October 2024 (Variation Deed). In his affidavit dated 30 October 2024, the applicant’s solicitor, Mr Rory Markham of Adero, has put forward a Settlement Distribution Scheme (SDS) which addresses distribution of the net proceeds of the Settlement Sum. Also annexed to that affidavit is a confidential opinion from both senior and junior counsel for the applicant on the merits of the settlement reached.

2    The mechanics of the proposed settlement are broadly as follows. The settlement is contingent on the Court excluding unregistered group members from receiving compensation from the settlement. The Court would make a declaration under s 33ZB of the FCA Act that the group members affected by the settlement are all the group members as defined in the Further Amended Originating Application filed on 25 November 2021 who have not opted out of the proceeding. The applicant would release the respondent (M.R.V.L.) from the liability claims against it. M.R.V.L. is to pay $19.25 million to Mr Markham of Adero as the scheme administrator and Mr Markham of Adero (as administrator) would: (a) pay the Approved Funder Costs to ICP Funding Pty Ltd and Investor Claim Partner Pty Ltd (ICP), (together, the Funders); (b) pay the Approved Adero Costs to Adero; and (c) pay (or retain) the approved Administration Costs. The remaining funds would be distributed to the registered group members in accordance with the methodology set out in the SDS.

3    The various proposed deductions from the Settlement Sum referred to above may be summarised as follows:

(a)    The Approved Funder Costs are the funding and claims management costs of the Funders, comprising:

(i)    a “Funding Commission and Management Fee” in the amount of $4,393,731.10 (which is equivalent to 22.8% of the Settlement Sum);

(ii)    reimbursement of the “Project Costs” paid by ICP Funding to fund the claim in the amount of $2,563,384.03, comprised of:

(A)    $1,228,732.31 – legal costs paid to Adero by the Funders which would be reimbursed by Adero to the Funders;

(B)    $1,019,940.04 – disbursements reimbursed to Adero in respect of disbursements incurred by Adero during the proceedings;

(C)    $261,909.39 – costs of the managed investment scheme established for the purposes of the proceedings;

(D)    $52,802.29 – expenses paid by ICP Funding for the benefit of group members.

(b)    The Approved Adero Costs are Adero’s claimed costs and disbursements that have not been met by the Funders. The total sought is $1,503,327.44.

(c)    The Administration Costs are the claimed cost of administering and implementing the SDS in the amount of $723,805, payable to Mr Markham as proposed administrator.

OVERVIEW OF THE PROCEEDING

4    It is helpful to begin with the following broad overview of certain aspects of the proceeding.

5    On 10 December 2019, Adero agreed to act for the applicant on a “no-win no-fee” basis until litigation funding was obtained, with a right to terminate in certain circumstances.

6    The proceedings commenced on 24 December 2019. The applicant contends that the respondent, who supplies labour to “Merivale” hospitality businesses, contravened the Fair Work Act 2009 (Cth) (FW Act) by underpaying him and the respondent’s hospitality workers (Group Members) employed in the period from 25 December 2013 to 24 December 2019 (Relevant Period). The applicant’s claim includes that:

(a)    the Hospitality Industry (General) Award applied during the Relevant Period and that the Merivale Employee Collective Agreement 2007 did not have any lawful operation under the FW Act;

(b)    even if the Agreement was lawful, the Group Members were underpaid under the Agreement.

7    The precise number of Group Members is unknown, but there are thought to be at most 14,428. The respondent produced a list of 14,428 email addresses to which opt-out notices were sent in November 2020.

8    There are now 2,895 people who have registered to participate in the settlement.

9    The respondents deny liability and raise a number of defences. The claim has been vigorously defended and is likely to continue to be vigorously defended if the proceedings continue.

10    The Funders provided $200,000 to Adero in March 2021 in order to meet counsels’ fees incurred and anticipated in respect of the hearing of a separate question. The separate question concerned certain aspects of the pleading and was, in broad terms, intended to clarify whether or not the Agreement or the Award applied. If the Award applied, the applicant’s case was significantly stronger than would have been the case if the Agreement was valid.

11    On 29 March 2021, there was a hearing in relation to the separate question and reasons for the Court’s judgment were delivered on 30 March 2021: Boulos v MRVL Investments Pty Ltd (No 2) [2021] FCA 309. The reasons favoured the applicant in concluding that the Workplace Authority Director did not have power to rescind a decision that the Agreement did not pass the “fairness test” which applied at the relevant time under the Workplace Relations Act 1996 (Cth): at [57]. It would follow that the claims of the Group Members were likely to be determined under the Award rather than the less favourable Agreement.

12    On 12 May 2021, Mr Boulos and the Funders entered into a Litigation Management and Funding Agreement (LMFA), which Mr Boulos appears to have agreed to enter in March 2021. There are 102 other Group Members who entered into an LMFA with the Funders.

13    On 6 December 2023, the applicant and M.R.V.L. engaged in a settlement conference which resulted in an agreement that, subject to court approval, M.R.V.L. would pay $18 million inclusive of costs to settle the claims of the applicant and the Group Members.

14    On 21 December 2023, the parties executed the Deed setting out the terms of the agreement to settle the proceedings for $18 million. The proceeding was listed for an approval hearing, but the applicant informed the respondent, and later the Court, that the applicant could no longer support the settlement. Ultimately, by way of the Variation Deed made on 3 October 2024, the Settlement Sum was increased to $19.25 million.

PRINCIPLES

15    The principles to be applied in considering an application for approval of a proposed settlement of a Part IVA class action are well established. The central question is whether the settlement is fair and reasonable in the interests of the group members as a whole. The principles have been set out in numerous cases, including Camilleri v The Trust Company (Nominees) Ltd [2015] FCA 1468 at [5] (Moshinsky J) and Fowkes v Boston Scientific Corporation [2023] FCA 230 at [31] – [45] (Lee J). 

16    There is no single way in which a settlement should be framed: Blairgowrie Trading Ltd v Allco Finance (in liq) (No 3) [2017] FCA 330; 343 ALR 476 at [82]; Mitic v Oz Minerals Ltd (No 2) [2017] FCA 409 at [9]. The questions are: (a) whether the proposed settlement is within the range of reasonable outcomes having regard to the circumstances which are known by, or could reasonably be expected to be knowable to, the applicant and the applicant’s lawyers; and (b) whether there has been an appropriate and reasonable assessment of the relevant risks based on those circumstances: Kelly v Willmott Forests Ltd (in liq) (No 4) [2016] FCA 323; 335 ALR 439 at [74], [77]; Blairgowrie at [82], [83].

17    There are three aspects of the proposed settlement which require particular consideration in the present application:

(1)    whether the settlement is fair and reasonable as between the parties to the proceeding having regard to the interests of the Group Members considered as a whole;

(2)    whether the proposed arrangements for distributing the Settlement Sum among the Group Members are fair and reasonable, again taking into account the interests of the Group Members as a whole; and

(3)    whether the proposed deductions from the Settlement Sum are fair and reasonable in all the circumstances.

IS THE SETTLEMENT FAIR AND REASONABLE?

18    Having regard to the confidential opinion of counsel for the applicant, and to the various risks associated with the litigation, including establishing and quantifying liability and the risk associated with recovery from a respondent with few identified assets, the Court is satisfied that the settlement is fair and reasonable even if the entirety of the deductions sought are made. That does not mean that the deductions should be allowed in full.

ARE THE DISTRIBUTION ARRANGEMENTS FAIR AND REASONABLE?

19    In Camilleri at [43]-[44], Moshinsky J said:

The cases indicate a number of factors relevant to the assessment whether a proposed distribution scheme is fair and reasonable having regard to the interests of the group as a whole. Some of these factors are as follows:

(a)     whether the distribution scheme subjects all claims to the same principles and procedures for assessing compensation shares;

(b)     whether the assessment methodology, to the extent that it reflects ‘judgment calls’ of the kind described above, is consistent with the case that was to be advanced at trial and supportable as a matter of legal principle;

(c)    whether the assessment methodology is likely to deliver a broadly fair assessment (where the settlement is uncapped as to total payments) or relativities (where the task is allocating shares in a fixed sum);

(d)     whether the costs of a more perfect assessment procedure would erode the notional benefit of a more exact distribution;

(e)     to the extent that the scheme involves any special treatment of the plaintiffs or some group members, for instance via ‘reimbursement’ payments – whether the special treatment is justifiable, and whether as a matter of fairness a group member ought to be entitled to complain.

There are also procedural factors which relate to the fairness of a proposed distribution process, such as:

(a)     whether appropriate individuals have been nominated to administer the scheme;

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

(c)     whether the scheme incorporates appropriate ‘checks and balances’, such as procedures for ensuring consistency between assessments and meaningful opportunities for review (and objection) by group members.

20    The registered Group Members’ claims (Loss Claim Amount) are proposed to be calculated using a claims calculation model (Model). The proposed distribution will depend on an individual’s employment type, length of time employed, number of hours worked each day, any interest notionally earned (which depends on when they were employed) and the total deductions from the Settlement Sum.

21    In his affidavit sworn 30 October 2024, Mr Markham explained the operation of the Model and why various approaches were adopted rather than others. The Model will use information provided by the respondent. There are weighty costs considerations against seeking to obtain this information from each individual group member.

22    The administrator will calculate the average Loss Claim Amount under cl 7.1 of the SDS. If the administrator determines there is insufficient data to model an individual’s claim, their Loss Claim Amount will be assumed to be the average. Under cl 7. 2, the administrator will then apply a weighting to the Loss Claim Amount having regard to the timing of employment and whether the person was employed in a managerial role. Clauses 7.3 to 7.5 explain:

7.3.    These weightings are to be applied because the strength of each Registered Group Members claim is affected by whether they were engaged in a managerial position that might have precluded them from coverage under the Award.

7.4.    A relative weighting of 100% will be applied to the portion of Registered Group Member’s Loss Claim Amount for work performed in a non-managerial role.    

7.5.    A relative weighting of 70% will be applied to the portion of the Registered Group Member’s Loss Claim Amount for work performed in a managerial role, with such figure to be the subject of determination by the Court prior to distribution.

23    Under the SDS, “Anticipated Settlement Statements” will be issued, setting out a range of information including the relevant person’s “Anticipated Settlement Entitlement”: cl 8. The SDS contemplates a mechanism for review: cl 9. It contains provisions designed to discourage reviews which would result in the relevant group member receiving less than $500. After all “Anticipated Settlement Statements” have been sent and all periods of review have elapsed and any “Review Requests” have been determined, the administrator will distribute the “Net Settlement Distribution Fund”: cl 10.1.

24    The Court is satisfied that the distribution arrangements are fair and reasonable, including as between the Group Members. A more precise model, or one which allowed for speculative or unreasonable requests for review, would result in prohibitive administration costs, such that an unsatisfactory amount of the Settlement Sum would be depleted by those costs.

THE PROPOSED DEDUCTIONS

25    As mentioned earlier, there are three classes of deductions: the Funders’ costs; Adero’s unfunded costs; and administration costs. It is convenient to deal first with Adero’s costs. Some of its legal costs were paid by the Funders during the course of the proceedings, but some of its costs were incurred before funding and it was not paid for all of its costs during the funded period.

Adero’s Costs

General observations

26    Ultimately, the question in relation to Adero’s costs is whether an order for a deduction in respect of the amount claimed is “just”, within the meaning of s 33V of the FCA Act.

27    In Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433 at [91], Murphy J made the following observations as to what a Court should generally do when determining whether an order in relation to costs under s 33V is “just”:

… The Court should satisfy itself that the arrangements in relation to legal costs meet any relevant legal requirements, contain reasonable and proportionate terms relative to the commercial context in which they were entered, and that the costs and disbursements are in accordance with the terms of the relevant agreements and are otherwise “reasonable” …

28    In Petersen Superannuation Fund Pty Ltd v Bank of Queensland Ltd (No 3) [2018] FCA 1842; 132 ACSR 258 at [88], Murphy J made a number of observations relevant to the importance of judicial supervision of legal costs. These observations are also relevant to the importance of legal practitioners complying with their statutory and ethical obligations. A failure to comply with what is required and expected is serious. Murphy J’s observations were:

In class actions the requirement for judicial supervision of legal costs proposed to be charged is obvious because: (a) the applicant’s solicitor is in a more dominant position vis-a-vis a class member than in a solicitor-client relationship in individual litigation; (b) class members are commonly not told about the mounting costs as they are incurred and they suffer a significant information asymmetry in that regard; (c) it is not necessary for class members to retain the applicant’s solicitor and commonly they do not, yet they are usually made liable for a pro rata share of the costs; (d) even where class members retain the applicant’s solicitor they do not provide instructions as to the running of the class action and have no control over the quantum of costs, yet they are usually made liable for a pro rata share of the costs; (e) class members are unlikely to pay much attention to legal costs because they are usually only payable upon success and from the successful outcome; (f) it is usually not until after settlement is achieved that class members are told the total costs claimed, but they are not told (and it is commonly very difficult to accurately estimate) what their pro rata share of the costs will be; and (g) the Court has a protective role in relation to class members’ interests.

29    At a settlement approval hearing of the present kind, there is no true contradictor in relation to a claimant’s solicitor’s legal costs. This makes it all the more important for those solicitors to keep records which allow for proper determination and scrutiny of the claims for costs and to provide the Court with sufficient information and assistance in order that it can be satisfied that the claims are appropriate, particularly as to the amount of the claim. If there have been breaches of statutory obligations relevant to a proper determination of whether costs should be borne by group members, those should be drawn to the Court’s attention as facts material to the decision which the Court must make under s 33V. It would be improper to put forward a claim for legal costs knowing that there existed facts, not before the Court, which put in doubt, or materially adversely affected, an important aspect of a claim for costs.

Adero’s claim for costs

30    Adero relied principally on two reports prepared by a costs referee experienced in assessing legal costs: a Costs Report dated 19 June 2024 and a Supplementary Costs Report dated 23 October 2024 (together, the Costs Reports). Adero submitted that the costs referee’s opinion should be accepted.

31    It should be noted at the outset that the costs referee was provided with quite limited material. The most important document she was provided was an excel spreadsheet which was said to contain a line-by-line itemisation of professional fees and disbursements. So far as can be determined from the Costs Reports and the evidence of Mr Markham, the costs referee was not provided with any time recording protocols or other information from which to form a view about whether the spreadsheet itself could be regarded as reliable in the sense of containing sufficient information from which to ascertain whether the charges recorded in it would be allowable on a solicitor and client basis or as being otherwise accurate – compare: Watson & Co Superannuation Pty Ltd v Dixon Advisory and Superannuation Services Ltd (Settlement Approval) [2024] FCA 386.

32    The costs referee was not apparently provided all billing records and invoices for professional costs or other material to assist checking the accuracy or appropriateness of the entries in the spreadsheet. The costs referee was not provided with access to Adero’s electronic file. Given that the costs referee was required to limit the length of her report, and that there was a limit in time and costs, she did not call for the electronic file: CB310 at [4].

33    Speaking generally, if a costs referee believes that he or she cannot undertake the task requested reliably, by reason of time or cost or other constraints, that matter should be raised and addressed or at least disclosed in the report.

34    The costs referee did not state whether the descriptions in the itemisations in the spreadsheet were sufficient to enable reasonably reliable views to be formed. The referee provided “high-level comments and observations” in relation to entries and narrations of work performed: CB312 at [21]; CB336 at [18]. Although Adero’s submissions on this application for approval referred to the “assessment of the independent costs assessor as to the fair and reasonable costs of the proceeding”, the use of the word “assessment” implies a level of sophistication of analysis which was not undertaken: CB41 at [5].

35    It should also be noted at the outset that the Costs Report approached the matter on the basis that the relevant costs agreement between Adero and the applicant was valid and “generally compliant” with the relevant statutory provisions.

36    As is noted below, the costs agreement breached aspects of the relevant statutory regime and was invalid. The lack of attention to the terms of the agreement causes concern as to the reliability of the conclusions in the Costs Reports as a whole.

37    The total costs considered by the costs referee to be reasonable to deduct from the Settlement Sum was $3,718,999.79 comprised of (see Adero’s email of 25 November 2024):

    $2,605,419.32 in professional fees, including: fees actually incurred ($2,376,961.38); fees which were estimated to be incurred for settlement approval ($133,457.94); and fees of $95,000 claimed in relation to work done in increasing the settlement figure from $18m to $19.25m (CB337 at [33]);

    $1,113,580.46 in disbursements, including: incurred disbursements ($972,780.46 (CB315 at [48])); disbursements which were estimated to be incurred for settlement approval ($126,500 (CB315 at [48])); and the cost of the Costs Reports ($14,300 (CB315 at [48], 337 at [32])).

38    The total costs paid by the Funders to Adero were $2,248,672.35, comprised of:

    $1,228,732.31 in legal fees; and

    $1,019,940.04 in disbursements;

39    There was also an additional $33,000 not considered by the costs referee in respect of invoices of counsel annexed to the Mr Markham’s affidavit of 21 November 2024.

40    At the approval hearing, the amount of legal costs and disbursements claimed by Adero was stated to be $1,609,792, by reference to a summary attached to Mr Markham’s affidavit of 21 November 2024: CB691. During the hearing, a claim for an uplift of 25% on pre-funding costs of $425,859 – namely $106,464.75 – was abandoned, with the result that the claim became a claim for the amount of $1,503,327.

41    During the approval hearing, the Court asked what comprised the amount (then) of $1,609,792 and received a partial response, including that the professional costs during the no-win no-fee period were $425,859.

42    Immediately after the approval hearing, the Court inquired again (by email) as to what the amount comprised and was provided a response as to how the amount of $1,503,327 was calculated, but with little additional information as to what it comprised.

43    The costs therefore claimed by Adero total $1,503,327.44, said to be comprised of:

(a)    $1,376,687.02 in professional fees incurred:

(i)    in the period before funding which was stated to be $425,859 by the costs referee and Mr Markham: CB311 at [13]; T34.10-13; and

(ii)    “the amount unfunded”, the composition of which has not been fully explained – see: email from Adero sent on 25 November 2024 after the hearing; 

(b)    $126,640.42 in disbursements unpaid by the funder, being an amount which includes the $33,000 for counsel invoices which Adero has informed the Court it will reimburse to Litigation Lending Services Ltd (LLS): T67:26-36. Apart from the $33,000 the disbursements were not identified.

The Costs Agreement

44    The applicant signed a “Retainer & Costs Agreement” with Adero on 10 December 2019.

45    Clause 15 and Sch 1 item 5 provided that the Costs Agreement was governed by the laws of New South Wales and that the parties submit to the courts of that jurisdiction. In the Costs Report, the costs referee said that the Costs Agreement “states that the law of the ACT applies” to the agreement: CB310 at [8]. The costs referee did not mention that the express terms of the Costs Agreement were directly contrary to this conclusion and did not explain which part of the Costs Agreement made the statement asserted.

46    When the issue was raised at the approval hearing, Mr Markham stated (T43.1):

I think in recollection, the reason why we had this initial difficulty in this matter, as opposed to other matters, is we had a New South Wales office and the matter was drafted in …

47    Mr Markham also stated (T43.20-23):

I had always understood it to be the LPA of the ACT, because that’s where the relevant licences of the practitioners was based. There was no licences for New South Wales solicitors with the societies.

48    That there may have been an intention that the Costs Agreement was to be governed by the laws of the ACT finds some support in the definition of “Legal Profession Act” at cl 1.1(l) (which contained a reference to the Legal Profession Act 2006 (ACT) (ACT LPA)) and the fact that the interest contemplated by cl 5.14 is calculated by reference to ACT Supreme Court rates.

49    Given that the ultimate issue is one which arises under s 33V of the FCA Act, it is sufficient for present purposes to proceed on the basis on which Adero has proceeded, namely that the Costs Agreement was intended to be governed by the ACT LPA. It is reasonably possible that “NSW” was mistakenly entered at Sch 1 item 5 rather than “ACT” and that it was the common intention of Adero and the applicant that it should have been “ACT” consistently with the way in which Mr Markham has addressed the Court on this application. In any event, Adero’s argument proceeded by reference to the ACT LPA and it is appropriate to address its claim for a deduction on that basis.

50    The Costs Agreement was a “no-win no-fee” costs agreement (cl 5.3) and provided for an uplift in fees of 25%: cl 5.5. No estimate was given as to the amount of the uplift as opposed to the manner in which it was to be calculated. Adero submitted that this was a breach of s 284(3) of the ACT LPA and the Court proceeds on that basis.

51    The costs referee considered that the Costs Agreement was “generally compliant with the provisions of Division 3.2 of the [ACT] LPA save for the uplift fee disclosure requirements”: CB314 at [38]. The costs referee stated:

Whilst the disclosure of the uplift fee in the Adero costs agreement is not technically compliant, I am not aware of any objection by the Applicant to the proposed charge …

52    In its Reply Submission of 21 November 2024, Adero pursued the 25% uplift fee, despite what Adero referred to as its “technical non-compliance”: CB43 at [11(a)]. After the respondent raised questions about the compliance of the Costs Agreement with the ACT LPA in its written submissions, Adero submitted in its Reply Submissions at [5]:

The issue of non-compliance has already been considered by the cost assessor [sic – referee] who made no comment on whether Adero’s fees should be reduced for the non-compliance, save a 10% reduction to its professional fees in respect of possible duplication of work. Adero submits the Court ought to accept the assessment of the independent costs assessor as to the fair and reasonable costs of the proceeding.

53    No explanation was given by the costs referee as to why the Costs Agreement was appropriately described as “not technically compliant”. The non-compliance results in the Costs Agreement being void – see: s 287(1) of the ACT LPA.

54    Not only was the Costs Agreement void, as Mr Markham accepted during the approval hearing, but a law practice which enters into a costs agreement in contravention of s 284(3) is guilty of an offence with a maximum penalty of 50 penalty units as is each principal of the practice – see: ss 284 (5), (6) and (7).

55    Although Mr Markham submitted that the Costs Agreement was void, he submitted that costs were recoverable under s 279(a) of the ACT LPA which provides:

279    On what basis are legal costs recoverable?

Subject to division 3.2.2 (Application—pt 3.2), legal costs are recoverable—

(a)    under a costs agreement made in accordance with division 3.2.5 or the corresponding provisions of a corresponding law; …

56    Section 279(a) could not apply to a costs agreement which is void. Such an agreement is void precisely because it was not made “in accordance with” div 3.2.5. Mr Markham ultimately abandoned the submission that s 279(a) applied. Mr Markham submitted that, under the ACT LPA, costs for the pre-funded period would be recoverable in accordance with the applicable scale of costs, relevantly the Federal Court Scale – see: s 279(b). If this provision did not apply, the final possibility was that costs would be recoverable “according to the fair and reasonable value of the legal services provided” – see: s 279(c).

57    These matters were not considered by the costs referee because of the view taken that the Costs Agreement was “generally compliant” and that the non-compliance with s 284(3) was “technical”.

58    No reasoned position has been put forward by Adero as to what the appropriate costs would be for the pre-funding period if the assessment were undertaken at scale rates or for the fair value of the services provided.

59    In its Reply Submissions, Adero submitted (CB42 at [10]):

[I]f costs were allowed under the Federal Court scale of costs, then they likely would have been in excess of the amount actually allowed by the cost assessor for the relevant period. There is no evidence that would show that applying the Federal Court scale would reduce the amount being sought.

60    Mr Markham was not able to make good the submission in the first sentence by reference to the evidence before the Court or the scale. The basis for the submission is obscure.

61    The second sentence suggests a misunderstanding. It was Adero’s obligation to put forward a supportable and appropriate claim for costs and to provide to the Court sufficient material and assistance to be satisfied that it was just to make an order for the deduction of the claimed costs.

62    Mr Markham submitted during the approval hearing that the question of the amount of scale costs could be submitted to a referee for determination and that Adero would bear the cost for this exercise and agree to cap its costs to the amount of the pre-funding professional costs of $425,859: T60.1-16. This submission is addressed below.

63    Clause 7.1 of the Costs Agreement contained an estimate for the work to be performed up until the First Case Management Hearing (FCMH) of $400,000. Clauses 7.1 to 7.3 provided:

7.    Fee Estimate

7.1    It is estimated that it will cost $400,000.00 in legal fees, costs and disbursements for Adero to perform the following Work in relation to the Claim:

(a)    initial bookbuild;

(b)    drafting and briefing counsel to prepare pleadings;

(c)    first case management conference; and

(d)    correspondence with the Respondent.

7.2    The Claimant acknowledges that it is aware of the variables that may affect total legal costs and disbursements in relation to the Claim, and any Proceedings, including (but not limited to):

(a)    the issues that arise, and complexities in relation to, the Claim;

(b)    how long Proceedings, or the claim, continue before they are resolved;

(c)    the amount of evidence to be compiled, produced, received, analysed, etc;

(d)    the litigation and dispute resolution tactics adopted by the Claimant and the Respondent(s);

(e)    the length of any hearing or trial;

(f)    the number and nature of witnesses to be called upon to give testimony, reports, or otherwise provide evidence; and

(g)    unexpected delays or issues that are outside the control of Adero.

7.3    Adero will inform the Claimant as soon as possible if they need to revise the Estimate. Adero’s commitment is to ensure that the Claimant remains in control of their expenditure on legal services.

64    The word “Work” was defined in cl 1.1(u) in the following way:

Work means the legal services Adero is to provide, that Adero considers reasonably necessary to prepare for, pursue, and resolve the Claim, including representing and advising the Claimant with respect to the Claim and Proceedings, in relation to:

(i)    preliminary due diligence in relation to the Claim and the Proceedings;

(ii)    preparatory legal work in relation to the Claim and Proceedings; and

(iii)    managing or assisting in any book build of person(s) for participation in a class, joint or representative action in relation to the Claim and Proceedings

65    In the last sentence of his affidavit of 30 October 2024 at [79], Mr Markham stated:

The fees were estimated to be $400,000 to the time of the first case management conference.

66    By its submissions dated 11 November 2024, the respondent appropriately drew the Court’s attention to certain cases in which Adero’s costs agreement had been considered by this Court and which contained clauses identical to clause 7.1 of the Costs Agreement. These include: Thomas v Romeo Lockleys Asset Partnership [2022] FCA 1106 (Romeo 1); Thomas v Romeo Lockleys Asset Partnership (No 2) [2022] FCA 1276 (Romeo 2), and Schoneweiss v Fourth Force Pty Ltd (No 2) [2022] FCA 1489.

67    In Schoneweiss, cl 7.1 of the relevant agreement was identical to cl 7.1 in the present case – see: Schoneweiss at [45]; [135]. In Schoneweiss, Mr Markham submitted that “the amount of $400,000 [in cl 7.1] represented the amount of work in progress Adero Law would be prepared to accrue before it exercised an entitlement to cease to act for Mr Schoneweiss in the proceeding if litigation funding could not be secured” and that the amount “was not in fact a genuine estimate of the costs that would be incurred in the performance of the work described”: at [145]. Charlesworth J stated at [145]:

In other words, the $400,000.00 figure [in both Thomas (No 2) and Schoneweiss] in clause 7.1 did not represent Adero Law’s estimate of the cost of the particular work referred to in clause 7.1. That matter was not disclosed to the Court at the time of the Approval Application. It should have been.

68    In its submissions dated 11 November 2024, the respondent submitted at [26] and [27] (footnotes included in square brackets):

26.    In view of Adero’s position regarding the $400,000 “estimate”, in Romeo 2 and Schoneweiss, the Court determined that Adero never provided any estimate at all as to the costs of the litigation and there was no attempt by Adero to give a genuine estimate even to the early stages of the proceeding [Romeo 2, [51]-[56]; Schoneweiss, [154]]. That was found to be a breach of s 269(1)(d) of the LP Act, warranting a reduction in the claimed costs [Romeo 2, [56]; Schoneweiss, [154]].

27.    It is not for the Respondent to take a positive stance one way or the other on this issue. However, it may be appropriate for the Applicant to address whether, in light of the apparent factual similarities with Romeo 2 and Schoneweiss, the Court should be satisfied that Adero has complied with its legal obligations under s 269(1)(d) of the LP Act.

69    Adero responded to this issue, not having raised it with the Court or the costs referee, in its Reply Submission of 21 November 2024, prepared by Mr Markham. In those submissions, it was stated that “the reason the costs agreement disclosed legal fees up to an amount of $400,000 was because this amount was the upper limit of costs it could carry the proceeding without funding”. Paragraph 8 stated:

Further, Adero submits that the reason the costs agreement disclosed legal fees up to an amount of $400,000 was because this amount was the upper limit of costs it could carry the proceeding without funding. The intention was never to mislead the Applicant in respect of the true cost of pursuing the action. The costs agreement was a no-win-no-fee agreement, which had been entered into on the basis that funding would be secured and that Adero considered it was able to absorb up to $400,000 in costs. This was communicated to the Applicant at the time he entered the costs agreement.

70    No evidence was adduced in relation to the main assertions in this paragraph.

71    At the approval hearing, Mr Markham: (a) accepted that the Costs Agreement comprised the entirety of the agreement between Adero and the applicant: T38.20; and (b) submitted that cl 7.1 was intended to be an estimate of legal costs up until the FCMH, consistently with what was stated in his affidavit of 30 October 2024 at [79]. I understood Mr Markham to withdraw the first sentence of [8] of Adero’s Reply Submissions to the extent that the sentence conveyed anything inconsistent with these two propositions.

72    The Costs Agreement contained a discretion in cl 5.10 to terminate the Costs Agreement if funding was not secured. There is no express mention of an amount of $400,000 being relevant to this right. The Costs Agreement began with the statement:

Adero intends to secure funding to pursue the Claim but will conduct the Claim on a speculative, no-win no-fee basis until such funding is secured.

73    It was uncontroversial at the approval hearing that the Costs Agreement contained no estimate of total fees for the proceedings. In the Costs Report, the referee considered that there was an estimate for total costs of $400,000: CB311 at [10]. This understanding of cl 7.1 is not correct. Presumably because the costs referee held this view, the referee did not consider whether there was a breach of s 269(1)(d) of the ACT LPA, as there plainly was.

74    Adero did not furnish the costs referee with any comment about cl 7.1 or what it meant, nor with a reference to the cases in which the clause had been considered. Upon receipt of the report (or any draft, if drafts were provided), Adero did not apparently draw to the costs referee’s attention that cl 7.1 was not, on any view of what it meant, an assessment of total costs.

75    At the approval hearing, Mr Markham accepted that there was a breach of cl 269(1)(d) of the ACT LPA. No estimate of total fees was given in the Costs Agreement. It was not submitted that providing such an estimate was not “reasonably practicable” within the meaning of s 269(1)(d). Even it had been, there was no range of estimates given for total costs in accordance with s 269(1)(d) or at all.

The LMFA

76    The LMFA contained a “budget” being an “estimate of the costs and disbursements to be expended in resolving the Claims up to the conclusion of a trial in the Class Action”.

77    It appears that the applicant agreed to enter into the LMFA around 16 March 2021, but in any event before the hearing of the separate question on 29 March 2021. The LMFA, entered into on 12 May 2021, provided for a payment of $200,000 which might be recovered if a condition subsequent was not met. An amount of $200,000 in disbursements was paid on 23 March 2021. This related to counsels’ fees already incurred and to be incurred in relation to the separate question hearing: CB597; T38-39.

78    Payment of Adero’s professional fees (at 70% of the invoiced amount) and disbursements incurred by Adero (at 100% of the invoiced amount) started on 22 July 2021. This was after the separate question had been heard and reasons for judgment delivered (30 March 2021).

79    By 3 September 2024, the total disbursements paid by the Funders was $1,019,940.04 and the total professional fees was $1,228,732.31: CB598. These amounts are claimed as part of the Funders’ Project Costs referred to earlier.

80    It should also be noted that the Funders did not apparently accept all of Adero’s invoices for fees. The relevant schedule discloses that invoices for professional fees of $149,780.68 were not paid (in addition to non-payment of 30% of accepted invoices). This provides some comfort that the fees and disbursements paid by the Funders were examined by them before payment and therefore some comfort that those fees are appropriate.

Consideration

81    As noted earlier, Adero abandoned its claim for an uplift fee of 25% on the pre-funding professional costs of $425,859, namely the amount of $106,464.75. It now claims a total of $1,503,327 calculated in the manner mentioned earlier, namely (in essence) by subtracting the costs and disbursements paid by the Funders to Adero from the total reasonable costs as appear in the Costs Reports.

82    In the Costs Report, the costs referee applied a “relatively small” reduction to professional costs of 10% to account for “possible duplication of work between the large number of fee earners working on the matter and the attendances on the Funder”: CB314 at [39]. The costs referee discounted claimed professional fees of $2,641,068.21 by 10% to find the reasonable amount to be $2,376,961.38 – see: Costs Report at [19], [39], [40], [48].

83    The costs referee applied the same reduction of 10% to the anticipated professional fees up to the time of the approval hearing: CB314 at [41]. How Adero’s anticipated professional fees were calculated in this respect is not disclosed either in the Costs Report or in the evidence.

84    In the Supplementary Costs Report, the costs referee applied a reduction of 7.5% to Adero’s professional costs, but this is of no real significance because Adero does not seek any more than $95,000: CB337 at [29], [33].

85    I consider the appropriate reduction to the professional costs the subject of the Costs Report to be 35%, which provides for an amount for professional costs of $1,716,694.34.

86    In addition to the matters referred to above, I have taken the following into account in reaching this conclusion.

(a)    I cannot infer from the evidence which was adduced by Adero or from the Costs Reports that the recording of charges in Adero’s spreadsheet was careful or accurate or ultimately that it provides of itself a reliable basis to calculate what costs should be allowed, whether on a solicitor client basis or any other basis. Notwithstanding, it sets a parameter by indicating that the costs which should be allowed could not be above that amount.

(b)    The payment of invoices by the Funders provides some comfort that the amounts in those invoices reflect appropriate charges for costs and disbursements, noting that the Funders rejected some claims for professional fees, which in turn raises a question whether those fees would be allowed on a solicitor client basis.

(c)    The manner in which the Costs Report considered the terms of the Costs Agreement and addressed compliance by Adero with the ACT LPA mentioned earlier suggest a lack of attention to detail, perhaps caused by the timing and costs constraints imposed on the costs referee.

(d)    The Costs Reports were prepared on the basis of limited information, in particular a spreadsheet which I infer was large, but the reliability of which is obscure. I cannot conclude that the costs referee’s identification of charges which would not be allowed on a solicitor client basis are reliable.

(e)    I am unable to accept the costs referee’s reduction of 10% as reliable. Even where a Court orders indemnity costs, it is not uncommon for a reduction of that magnitude on taxation.

(f)    In relation to the pre-funded period, the actual professional costs were said to be $425,859. Ultimately, I consider this amount should not be treated any differently to all the fees as recorded in the spreadsheet notwithstanding that, at least by the time of the approval hearing, Adero accepted it had breached certain requirements of the ACT LPA and accepted that the Costs Agreement was void.

(g)    Adero submitted that the Court should take into account that Adero did not charge interest of $165,286.52 on the amount of pre-funding costs of $425,859 which it was said Adero was entitled to charge under the Costs Agreement: CB43 at [11(b)]: T61. Adero was not entitled to charge interest on the amount of $425,859 because the Costs Agreement was void. Nevertheless, I take into account that, as a matter of fact, Adero has not received interest in relation to any professional costs incurred.

(h)    As mentioned earlier, I take into account that Adero only claimed $95,000 for the period 1 February 2024 to 1 October 2024, the subject of the Supplementary Costs Report. I also take into account certain anomalies apparently contained in the spreadsheet where the rate charged by Adero in relation to certain practitioners could apparently have been more, which Adero calculates to be $194,135.14: CB43 at [12]. I accept that there may be errors against Adero’s financial interests in the spreadsheet just as it is likely there are errors in its favour.

(i)    The total of $3,080,732.74 for costs and disbursements does not offend against considerations of proportionality, although they might be regarded as high for a matter which did not progress significantly past pleadings. Significant work was performed and a description of it was provided to the costs referee: CB321-323.

87    A referral to a referee to determine the pre-funding costs of $425,859 on a scale basis would incur additional costs (to Adero) and delay. In any event, if that process were to be embarked upon, I would have referred for inquiry and report the claim by Adero to costs and disbursements of $1,503,327.44 given that Adero did not clearly identify the composition of the whole of that amount, as opposed to how Adero calculated the amount. As noted earlier, of the total claimed by Adero for deduction from the Settlement Sum of $1,503,327.44 the total professional fees were said to be $1,376,687.02, comprising:

(a)    fees incurred in the period before funding of $425,859: CB311 at [13]; T34.10; and

(b)    “the amount unfunded”, the composition of which was left unexplained. Given that the professional fees for the pre-funding period were $425,859, then “the amount unfunded” must be $950,828.02. The funded amount of professional costs was $1,228,732.31: CB598. Funded professional costs were paid at a rate of 70%. It follows that a part of “the amount unfunded” is $368,619.69 (70% of $1,228,732.31). There was also apparently an amount of $149,780.68 which the Funders rejected: CB598. If one adds this amount to $368,619.69 then “the amount unfunded” becomes $518,400.37. Even assuming these matters in Adero’s favour, that leaves an amount of $432,427.65 unexplained. I also note that there is a reference in the Costs Report to the unfunded amount being $578,121.25, which might have been an amount unfunded as at 4 December 2023: CB311 at [13].

88    The costs associated with a referral – which would need to involve a reliable assessment of costs – would most likely have fallen on Adero given that the necessity of it would have been attributable to the manner in which Adero has approached establishing its costs sufficiently for the Court to be satisfied that the order is “just” under s 33V.

89    In the Costs Report, the costs referee considered a disbursement of $2,750 should not be claimed as a solicitor client cost, but otherwise allowed all of the disbursements totalling $975,530.46 to result in the amount of $972,780.46: at [19], [22], [23] and [48]. That amount should be allowed.

90    In the Costs Report, the costs referee considered reasonable the estimated professional costs of $148,286.60 (but reduced by 10%) and estimated disbursements of $126,500 up to the time of settlement approval, totalling $259,957.94: at [41], [46] and [48]. Whilst no real explanation has been given as to how the professional fees were calculated, the total seems reasonable and the costs referee’s view should be accepted.

91    I do not consider it appropriate to deduct from the Settlement Sum the disbursement of $11,000 for the Costs Report. Adero briefed the costs referee inadequately, including by failing to draw to the costs referee’s attention the issues surrounding cl 7.1, the terms of which had (by that time) been the subject of other decisions in this Court. Nor did Adero draw to the costs referee’s attention that Adero had not given an estimate of total costs, contrary to the costs referee’s conclusion as to the meaning of cl 7.1. The costs associated with the Costs Report should be borne by Adero. It is impossible to know what further inquiries or different approaches the costs referee may have taken if these issues had been raised.

92    In the Supplementary Costs Report, the costs referee addressed costs from 1 February 2024 to 1 October 2024. Adero sought $95,000 in relation to this period although the amount claimed to have been incurred was higher. This amount should be allowed, as should the costs of the Supplementary Costs Report being $3,300. As noted earlier, I have taken Adero’s position in this respect into account in its favour in examining the other integers of what amount should be deducted for Adero’s claimed unfunded costs and in considering the appropriate reduction to the total professional fees incurred.

93    It follows that I consider that the total of the costs with which the Costs Reports dealt which ought to be deducted from the Settlement Sum is $3,047,732.74, comprising professional costs of $1,945,152.28 and disbursements of $1,102,580.46, as follows:

    $1,716,694.34 – professional costs, being 65% of $2,641,068.21;

    $133,457.94 – professional costs to approval hearing;

    $95,000 – professional costs incurred in renegotiating settlement;

    $972,780.46 – disbursements, being the amount in fact incurred less $2,750;

    $126,500 – disbursements to approval hearing;

    $3,300 – cost of the Supplementary Costs Report.

94    To this should be added the $33,000 in counsel fees which Adero is to pay to LLS, providing a total of $3,080,732.74.

95    It follows that the “Approved Adero Costs” are $832,060.39, being the total costs of $3,080,732.74 less the funded costs and disbursements of $2,248,672.35 already paid to Adero.

The Funders’ Costs

96    The Funders’ deductions are sought by way of common fund order (CFO). The Court has power to make a CFO upon approval of the settlement of a representative proceeding under s 33V of the FCA Act: Elliott-Carde v McDonald’s Australia Limited [2023] FCAFC 162; 301 FCR 1 at [170] (Beach J); [423] (Lee J) and [504] (Colvin J); Galactic Seven Eleven Litigation Holdings LLC v Davaria [2024] FCAFC 54; 302 FCR 493 [32] (Murphy J), [136] (Lee J) and [142] (Colvin J); Davaria Pty Ltd v 7-Eleven Stores Pty Ltd [2020] FCAFC 183; 281 FCR 501 at [22]-[25] (Lee J).

97    The issue is whether, in the circumstances, the Court should exercise its power under s 33V, on the basis that it is a just order with respect to the distribution of the Settlement Sum. This necessarily requires consideration of the amount which should be ordered and involves a commonsense evaluative assessment by the Court: Galactic at [76] and [77] (Murphy J); [136] (Lee J); and see [156] and [159] (Colvin J). A non-exhaustive list of potentially relevant factors was identified by the Full Court in Money Max Int Pty Ltd (Trustee) v QBE Insurance Ltd [2016] FCAFC 148; 245 FCR 191 at [80] (see also Galactic at [86]) where the Full Court (Murphy, Gleeson and Beach JJ) stated:

[80]    We do not seek to and cannot predetermine the relevant considerations for the approval of a reasonable funding commission rate. They will be a matter for the judge hearing the approval application and it will depend upon the circumstances. However, it seems likely that the relevant considerations would include the following:

(a)     the funding commission rate agreed by sophisticated class members and the number of such class members who agreed. That can be said to show acceptance of a particular rate by astute class members;

(b)     the information provided to class members as to the funding commission. That may be important to understand the extent to which class members were informed when agreeing to the funding commission rate;

(c)     a comparison of the funding commission with funding commissions in other Part IVA proceedings and/or what is available or common in the market. It will be relevant to know the broad parameters of the funding commission rates available in the market;

(d)    the litigation risks of providing funding in the proceeding. This is a critical factor and the assessment must avoid the risk of hindsight bias and recognise that the funder took on those risks at the commencement of the proceeding;

(e)    the quantum of adverse costs exposure that the funder assumed. This is another important factor and the assessment must recognise that the funder assumed that risk at the commencement of the proceeding;

(f)     the legal costs expended and to be expended, and the security for costs provided, by the funder;

(g)    the amount of any settlement or judgment. This could be of particular significance when a very large or very small settlement or judgment is obtained. The aggregate commission received will be a product of the commission rate and the amount of settlement or judgment. It will be important to ensure that the aggregate commission received is proportionate to the amount sought and recovered in the proceeding and the risks assumed by the funder;

(h)    any substantial objections made by class members in relation to any litigation funding charges. This may reveal concerns not otherwise apparent to the Court; and

(i)     class members’ likely recovery “in hand” under any pre-existing funding arrangements.

98    At [82], the Full Court stated:

[W]e expect that the courts will approve funding commission rates that avoid excessive or disproportionate charges to class members but which recognise the important role of litigation funding in providing access to justice, are commercially realistic and properly reflect the costs and risks taken by the funder, and which avoid hindsight bias.

Legal costs and disbursements

99    The Funders have paid Adero’s invoices in the proceeding in the amounts of:

    $1,228,732.31 in Adero’s professional fees;

    $1,019,940.04 in counsel’s fees and other disbursements invoiced by Adero.

100    These costs are appropriately recovered by way of deduction from the Settlement Sum.

MIS Scheme and direct disbursements

101    ICP Funding paid CASL Governance a total of $261,909.39 in relation to its costs of acting as a Responsible Entity of the Merivale Scheme. The funding would not have been provided in the absence of an MIS. It is appropriate to allow these costs. The circumstances of this case are not analogous to those in Dixon Advisory where the costs were associated with an MIS in relation to a proceeding which was stayed and from which the Group Members received no real benefit.

102    I accept that the amount of $52,802.29, comprising expenses paid by ICP Funding for the benefit of Group Members, is appropriately deducted for reimbursement to the Funders.

Funding Commission and Management Fees

103    A CFO is appropriate in the circumstances of the present case.

104    First, the registered Group Members stand to benefit from the proceedings by receiving compensation for their alleged losses, a benefit which would not have arisen had it not been for the litigation funding. It is unlikely that Adero would have continued to fund the litigation on a no-win no-fee basis to conclusion and possible that its conduct of the hearing of the separate question on 29 March 2021 would have been prejudiced without funding. The funding has contributed to a settlement being achieved and, I infer, to a more successful outcome than would otherwise have been the case – as to which see: Uren v RMBL Investments Ltd (No 2) [2020] FCA 647 at [57] (Murphy J); Hall v Arnold Bloch Leibler (No 2) [2022] FCA 163 at [30] (Beach J).

105    As Lee J observed in Elliott-Carde at [380]:

… [A] Settlement CFO might be thought to be consistent with general equitable principles that a person who benefits from another’s efforts in producing a fund is obliged to provide appropriate value in return, as is reflected in the underlying principle that it would be inequitable for the person who has created or realised a valuable asset, in which others claim an interest, not to have the costs, expenses and fees incurred in producing the asset paid out of the fund or property created.

106    Secondly, the Group Members have also had the benefit of claims management services provided by ICP, including collating and storing information and data obtained in respect of Group Members’ claims, facilitating the sending of notices and other communications to Group Members, monitoring legal costs and, consistently with the terms of the LMFA, receiving advice from the applicant’s legal representatives and providing them with day-to-day instructions regarding the conduct of the proceeding. I infer that ICP has contributed to achieving the ultimate settlement outcome.

107    As to the amount which should be allowed, the Funders referred to four matters relating to the risk it undertook over the period of the litigation.

108    First, the Funders referred to (and it is to be accepted that) ICP Funding assumed risks of significance in relation to the litigation as a whole.

109    ICP Funding submitted that funding commenced when the separate question had not been decided, with the implication that the risks were greater than they would have been had funding commenced after the separate question had been determined.

110    An amount of $200,000 for disbursements was paid on 23 March 2021 before the LMFA commenced on 12 May 2021. The amount of $200,000 was paid, amongst other things, in order to ensure that senior and junior counsel could appear at the hearing of the separate question: CB368 at [62]. The separate question was heard on 29 March 2021 and reasons for judgment were delivered on 30 March 2021. The LMFA was not in fact entered into until 12 May 2021. It contained a condition subsequent which, if not met, would have required re-payment of the amount of $200,000. The condition subsequent was met on 20 July 2021: CB409. Apart from the amount of $200,000, funding payments commenced on 22 July 2021.

111    If the reasons for judgment on 30 March 2021 in relation to the separate question had not favoured the applicant, a funder acting commercially would consider whether it should still into the LMFA. The LMFA was not entered into until 12 May 2021.

112    It is to be accepted that there was risk for the Funders. The proceedings involved various issues which might have been decided against the applicant, the proceedings would have been expensive and the proceedings could have been unsuccessful. The Funders exposure to adverse costs is addressed later.

113    Secondly, the Funders submitted that recovery was not certain. It was submitted that the Funders considered that M.R.V.L. had little or no assets from which it could meet any judgment awarded against it and that there was no reason to consider that the claims might be covered by insurance held by M.R.V.L. The Funders noted that Mr Markham stated that he held an expectation that, for commercial reasons, other entities in the Merivale group would honour any money judgment awarded against M.R.V.L. in the proceeding. I give this matter some weight. However, the recovery risk at the time of funding is in part a function of the level of the ultimate award of damages, if any. The higher the amount, the greater the risk.

114    Thirdly, the Funders submitted that there was a CFO risk when ICP Funding agreed to fund the proceeding. I give this matter some weight, but the risk was significantly ameliorated once the condition subsequent was met. As at 16 March 2021 and 12 May 2021, an application for special leave to appeal to the High Court was pending, in which it was intended to challenge the Federal Court’s power to make a settlement CFO, it having already been held in BMW Australia Ltd v Brewster [2019] HCA 45; 269 CLR 574 that the Court does not have power to make a CFO at an earlier stage. The condition subsequent was (CB183):

Funder writing to the Lawyers confirming the outcome of the High Court of Australia 7-Eleven Judgment has caused the Funder to consider further funding over the Initial Advance of $200,000 referred to in clause 4(a) to be commercially viable.

115    The condition subsequent was met on 20 July 2022: CB409.

116    Fourthly, the Funders referred to the quantum risk, namely that when ICP Funding agreed to fund, there was significant uncertainty about the potential value of the claim, because of the uncertainty about the total number of Group Members, the risk that fewer Group Members than anticipated would register to participate in any settlement or judgment, the limited data on which to base an estimate of the value of Group Members’ alleged underpayments, and the risk that data needed to calculate Group Members’ claims at its conclusion would ultimately turn out to be incomplete or unavailable. The Funders submitted (and I accept) that uncertainty about the claim value presented a funding risk in circumstances where the return to the funder was to be calculated as a percentage of the claim proceeds.

117    The Funders referred to the fact, and it is to be accepted, that the “Funding Commission and Management Fee” proposed to be deducted is less than the return to the Funder provided for under the LMFA between the applicant and the funded Group Members. Apart from the applicant, 102 of the 2,895 Group Members have entered into LMFAs with the Funders. It was not suggested that the Group Members were “sophisticated” in the sense that word is used in Money Max at [80(a)].

118    Under the LMFA, ICP Funding was entitled to receive the Project Costs paid and a funding commission of 25% of the Net Claim Proceeds, being the Claim Proceeds less the Project Costs. ICP was entitled to a Manager’s Fee of 3% of Net Claim Proceeds, plus GST. GST was considered not to be applicable in respect of the Funder’s Fee such that the Funders were entitled to 28.3% of the Net Claim Proceeds, inclusive of GST. The Funders observed that the funding commission rates were agreed after Adero had approached several other commercial litigation funders to fund the proceeding and there were no more favourable terms available. That is true. On the other hand, the circumstances were different in March 2021 than when the earlier commercial litigation funders had been approached, in that a separate question was about to be heard.

119    Further, the position was significantly different on 12 May 2021 when the LMFA was entered into because the separate question judgment had been delivered and it favoured the applicant.

120    The aggregate Funding Commission and Management Fee now sought was calculated based on the original settlement sum of $18 million, being 28.3% of the Net Claim Proceeds from the $18 million settlement. The Funders agreed to fix the Funding Commission and Management Fee at this amount, in order to facilitate the parties agreeing to a revised settlement for which the Court’s approval is now sought. Under the revised settlement, the proposed litigation funding charges of $4,393,731.10 represent 26.33% of the Net Claim Proceeds (being the revised Settlement Sum of $19.25 million less the Project Costs). By the Funders agreeing to fix the litigation funding charges they seek at the lower amount, this additional sum is now available for distribution to Group Members.

121    It is relevant also to note that the Group Members were informed of the intention to seek a CFO in the amount now proposed in the notices distributed in January 2023, in advance of the Court ordered mediation. Further, in the proposed settlement notice approved on 5 March 2024 (when the proposed settlement was $18 million), Group Members were notified that the proposed deductions from settlement included the Funding Commission and Management Fee in the amount of $4,393,731.10.

122    The Funders observed that the Funding Commission and Management Fee of $4,393,731.10 equates to a multiple of about 1.7 times the Project Costs of $2,563,384.03 incurred by ICP Funding in the proceedings to date. The Funders referred to Blairgowrie at [128], where Beach J observed that where litigation funders in the Australian market charge commissions based on a multiple of costs (rather than – or as an alternative to – a percentage of claim proceeds) it is usual for it to be at a multiple of three times.

123    The Funders submitted, and I accept, that there is still some risk as to an adverse costs order in a ‘no costs’ jurisdiction such as that contemplated by s 570 of the FW Act. The Funders submitted, and I accept, that s 570 would not of itself necessarily prevent a third party costs order being made against a litigation funder, although it would be a relevant matter in considering whether such an order should be made – see: Augusta Ventures Limited v Mt Arthur Coal Pty Ltd [2020] FCAFC 194; 283 FCR 123 (Allsop CJ, Middleton and White JJ); Duck v Airservices Australia (No 3) [2021] FCA 304; 304 IR 99 at [9], [39], [40] and [54] (Bromwich J); Bradshaw v BSA Limited (No 2) [2022] FCA 1440 at [127] (Bromberg J). As those cases demonstrate, however, the risks of an adverse costs order are very considerably reduced.

124    The Funders submitted that the Funding Commission and Management Fee rate is lower than the best terms that were available for this claim and compares favourably to commission rates in other Part IVA proceedings.

125    As to the first proposition in that submission, the evidence suggests that the funding terms offered by ICP Funding were the only terms Mr Markham could obtain for funding this proceeding. Of course, no funder was approached after the reasons for judgment on the separate question and the timing of approaches to other funders is unclear.

126    As to the second proposition, the Funders observed that the Funding Commission and Management Fee sought represents 22.82% of the gross Settlement Sum and submitted that this compares favourably with funding rates in other class actions, referring to:

(a)    Blairgowrie at [125]-[129], where Beach J identified that the prevailing commission rates in Australia at that time were between 25% and 40% of the gross settlement sum.

(b)    Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 3) [2020] FCA 1885; 385 ALR 625 at [25], where Lee J concluded that a commission to the funder of 25% of the gross settlement sum was towards the middle of the range and that the material “shows a generally consistent pattern of CFOs being made at around this level”.

(c)    Haselhurst v Toyota Motor Corporation Australia Ltd [2022] NSWSC 1076 at [56], in which Rees J accepted expert evidence, based on an analysis of 58 decisions, that the prevailing average and median funding commission was 25%.

127    I do not consider a comparison of this case with numerous different cases to be particularly useful, albeit not irrelevant. Each case necessarily turns on its particular facts. The question of risk, including risk as to adverse costs, is relevant to the level of commission.

128    The Funders appropriately referred to Bradshaw in which Bromberg J approved a funding commission rate of 18.66%. The Funders referred in particular to what his Honour said at [118], namely that the funder’s share of the proceeds of a settlement “ought to be lower in an employment class action than in a commercial class action”. This general observation must be understood in light of the reasons as a whole. In Bradshaw at [117] and [118], Bromberg J stated:

[117]     …There are a number of reasons for thinking that funding commission rates charged and/or allowed in employment class actions should be significantly lower than the rate appropriate for ‘shareholder’ or other commercial class actions.

[118]     The primary reason why, in my view, a funder’s share of the proceeds of a settlement ought to be lower in an employment class action than in a commercial class action, is that applicants in an employment class action have the advantage of the “no costs” jurisdiction provided for by s 570 of the FW Act. By reason of that advantage, there is a far lower risk in an employment class action of a funder being required to meet adverse costs orders or provide security for costs. The lower financial risks assumed by the funder should be reflected in both the commission rates charged by funders as well as any assessment of a fair return to the funder made in the context of the Court making a CFO.

129    At [129], his Honour observed:

There are other features of an employment class action which, in terms of striking an appropriate reward for the funder, are relevant. In Augusta [Ventures Ltd v Mount Arthur Coal Pty Ltd [2020] FCAFC 194] at [136], White J referred to the character of an employment class action which at [137] he broadly identified as the “pursuit of a claim for basic industrial entitlements.” His Honour sought to distinguish as inapt a characterisation of the worker and the funder as being engaged in “a common enterprise” in the way that the relationship between an applicant and a funder in a commercial class action may well be characterised. At [136] his Honour said this:

The character of the claims being pursued by the applicant should also be kept steadily in mind. A claim for wages in respect of work performed does not ordinarily have the same speculative or contingent quality of many Pt IVA actions. Neither of the present two actions is “a piece of commercial litigation”, to adopt the description of Allsop CJ and Middleton J in Madgwick v Kelly [2013] FCAFC 61; (2013) 212 FCR 1 at [77] in respect of litigation commenced by investors whose investments made with anticipated taxation advantages had proved unsuccessful.

130    At [140], his Honour stated:

All of those considerations strongly suggest that, on average and being mindful that case specific considerations should dominate the analysis, a significantly lower funding commission is likely to be justifiable for an employment class action than may be the case for a commercial class action. It may well be the case, based on the limited information put before me, that for commercial class actions the average funding commission rate is now in the low to mid 20s. On that basis it may be supposed that, on average, funding commission rates for employment class actions will fall well short of 20%.

131    The Funders submitted (footnotes omitted):

[51]    First, as accepted above, the ‘no costs’ jurisdiction provided for by s 570 is a relevant consideration in assessing the risks assumed by a funder in an employment class action. However, the reasonableness of the proposed funding charges is to be assessed against the totality of the costs and risks assumed by the funder in a given case. For the reasons addressed above, the other risks associated with this proceeding were significant. Further, the average and median funding commission rates in other class actions include in their calculations the commission rates approved in a large number of securities class actions. These have historically been considered to involve a lower risk for funders than other types of class actions.

[52]    Second, the distinction drawn by Bromberg J at [129] – between the nature of the relationship between a worker and funder in an employment class action and the “common enterprise” between an applicant and funder in a commercial class action – as the basis for inferring that commission rates would (or should) be lower in employment class actions is not supported by other cases. There are numerous other types of funded class actions that are not commercial in nature (e.g. environmental, consumer, mass tort claim) and the returns to funders approved in many of those cases have been equivalent or higher than those regularly approved in commercial cases, reflective of the particular risks associated with those cases.

[53]    Third, Bromberg J at [130]-[140] referred to the availability of other available mechanisms to pursue employment claims, including the standing of employee organisations and the Fair Work Ombudsman to bring representative proceedings, as a basis for supposing that “on average” funding commission rates for employment class actions will be lower than those in commercial class actions. However, the evidence here indicates otherwise. Mr Markham deposes to his understanding that funding commission rates of 25% are sought in two other funded employment class actions presently before this Court, and that the funding rate agreed under the LMFA was comparable to rates agreed with funders in other employment claims at the time. There is also no suggestion that group members’ claims in this case might otherwise have been advanced by a union or the Ombudsman.

132    I approach the present matter on the basis that what is “just” depends on all of the particular circumstances of the proceedings, one of which is the fact that the matter is an employment class action in which, for example, risks as to costs are less than they might otherwise be. The fact that the class action is litigated against the background of the FW Act, and s 570 in particular, is just one element relevant to risk. It is the totality of the circumstances, including the totality of the risks, which must be examined.

133    Finally, the Funders submitted that the Funding Commission and Management Fee is proportionate to the Settlement Sum, namely that a return to the Funders of $4,393,731.10 is not disproportionate to the Settlement Sum of $19.25 million, having regard to the result achieved and the costs and risks undertaken. The funders submitted, and I accept, that there was no “windfall gain”.

134    Taking all of these matters into account, I consider a “just” order to be for a Funding Commission and Management Fee of $3,721,115.37. This represents a funding commission of 19% and a management fee of 3.3% (including GST), being a total of 22.3% of the Net Claim Proceeds of $16,686,616, being $19,250,000 less the Project Costs of $2,563,384.

135    In addition to what is stated above, the principal reasons for considering this to be the “just” order, are as follows:

(a)    First, only the applicant and 102 registered members agreed to an LMFA. The CFO will affect the balance of the Group Members, as is just, but it is relevant to the level of the commission allowed that they did not agree to an LMFA.

(b)    Secondly, none of the Group Members who did agree to an LMFA has been shown to be “sophisticated” (Money Max at [80(a)]) in the sense of being shown to be experienced in such matters or with financial or other skills, training and experience relevant to an informed decision to enter into an LMFA. If some group members have such experience, it is unlikely to be many.

(c)    Thirdly, whilst it is to be recognised that the Funders bore risks generally including some risk as to costs, the risks of an adverse costs order were greatly diminished.

(d)    Fourthly, again on the topic of risk, it is not possible to say definitively what would have occurred if the separate question had not been determined favourably to the applicant on 30 March 2021, but it is quite likely that the Funders would have considered it against their interests to enter into the LMFA on 12 May 2021 or, to the extent it was suggested that they were obliged to enter into the LMFA, that they would have relied on the right to terminate the LMFA on the basis that in its “opinion (determined in its absolute discretion) taking further steps to pursue the Claim is no longer commercially viable for the relevant Funder”: cl 10(b)(ii) at CB191. Apart from $200,000 in disbursements paid shortly before the separate question hearing, real funding did not commence until payment of invoices for professional fees and disbursements on 22 July 2021. At this point, it was commercially unlikely that a settlement would not be achieved or that any such settlement would not cover both the Funders’ outlays and Adero’s costs. The commercial risk of any substantial loss was at best slight, albeit the prospects of any significant gain were far from clear.

(e)    Fifthly, I have taken into account the evidence that Mr Markham was not able to find other funders, but it is not clear when these attempts occurred. It is likely that other funders would have been interested if an approach had been made immediately before or after the separate question decision. Of course there was presumably no approach to a funder after that hearing because of the agreement reached before the separate question hearing for the applicant to enter into the LMFA. However, as mentioned, the commercial risk had significantly decreased immediately after the separate question hearing.

Administrator costs

136    The amount sought for “Administrator Costs” is appropriate.

137    Mr Markham of Adero should be appointed administrator because of his familiarity with the Model and his involvement in establishing the SDS. This is likely to result in a cost saving compared with the position if a different administrator were to be appointed. Mr Markham is to perform the work of administrator in his capacity as a principal of Adero and the Administrator Costs are to be paid to Adero.

OBJECTIONS

138    By 3 April 2024, 15 objections had been received from Group Members. Nine of these specified no grounds. The remaining objections raise various concerns, including that the amount (then $18 million), was considered too little. Six of the objections have since been withdrawn. The Court has considered the objections in reaching the conclusion that, taking into account the various risks, the settlement should be approved.

139    One objection should be mentioned further. In a clearly articulated objection dated 2 April 2024, an objector stated that she was unable to make an informed assessment about whether or not to object without being supplied with further information. She said she was provided by Adero with a form to sign in order to be granted access by Adero to certain documents. She then stated:

The form was signed and provided to Adero Law on 18 March 2024. Adero Law confirmed receipt of the Request for Inspection on 25 March 2024. On 28 March 2024 I contacted Adero Law to ask when the documents would be provided. No response has been received to date. Without access to the documents, most relevantly the Settlement Distribution Scheme, I am unable to assess whether the settlement as proposed is appropriate. I therefore have no information available to me to assess the proposed settlement and so object to it on that basis.

140    In his affidavit of 30 October 2024, Mr Markham stated:

[204(e)]    1 of the Group Members has been contacted however at this stage she has not provided a response as to the whether she wishes for her objection to be maintained. In the objection notice she indicated she required further information in order to determine whether to object, including a copy of the settlement distribution scheme. I will cause an employee to provide the settlement distribution scheme upon filing of this affidavit and will be able to make any submissions to the Court as to whether the objection is being maintained at the hearing date of 25 November 2024.

141    The Court was not addressed on the matter at the approval hearing. Adero’s refusal or failure to respond to this Group Member’s request within a reasonable time after it was made was unexplained. It is unsatisfactory that the request remained unanswered for over 7 months.

CONCLUSION

142    The settlement should be approved, as should the deductions in the amounts referred to above.

Associate:

                     Dated: 29 November 2024