FEDERAL COURT OF AUSTRALIA City of Swan v McGraw-Hill Companies, Inc [2016] FCA 343 File number(s): NSD 656 of 2013 Judge(s): WIGNEY J Date of judgment: 12 April 2016 Catchwords: CORPORATIONS – representative proceeding – application for approval of settlement by Court pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) – where group members are a closed class – whether proposed settlement is fair and reasonable and in the interests of group members – where all group members approve or are not opposed to settlement Legislation: Australian Securities and Investments Commission Act 2001 (Cth), ss 12DA, 12DB(1)(a), 12DF Corporations Act 2001 (Cth), ss 1041E, 1041H, 1317S Federal Court of Australia Act 1976 (Cth), Pt IVA, ss 33A, 33H(1)(a), 33J, 33X, 33V, 33Y, 37AF, 37AG(1)(a), 33ZB, 3ZF Cases cited: ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1 Australian Competition and Consumer Commission v Chats House Investments Pty Limited (1996) 71 FCR 250 Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1468 Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd & Ors (No 2) [2006] FCA 1388 Lopez v Star World Enterprises Pty Ltd [1999] FCA 104 Modtech Engineering Pty Ltd v GPT Management Holdings Ltd [2013] FCA 626 P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 4) [2010] FCA 1029 Williams v FAI Home Security Pty Ltd (No 4) [2000] FCA 1925 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 Date of hearing: 24 March 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 48 Counsel for the Applicants: Mr M B J Lee SC with Mr J C Conde Solicitor for the Applicants: Squire Patton Boggs Counsel for the Respondents: Mr J C Hewitt Solicitor for the Respondents: Clifford Chance ORDERS NSD 656 of 2013 BETWEEN: CITY OF SWAN (ABN 21 086 180 442) First Applicant MOREE PLAINS SHIRE COUNCIL (ABN 46 566 790 582) Second Applicant BARON-HAY INVESTMENTS PTY LTD (ACN 008 703 151) Third Applicant AND: MCGRAW-HILL COMPANIES, INC First Respondent STANDARD & POOR'S INTERNATIONAL, LLC Second Respondent JUDGE: WIGNEY J DATE OF ORDER: 24 March 2016 THE COURT ORDERS THAT: Approval of Settlement 1. Pursuant to ss 33V and 33ZF of the Federal Court of Australia Act 1976 (Cth) (Act), the proposed settlement and dismissal of this proceeding, on the basis that there be no order as to costs of or incidental to the proceeding (including the application for these orders) and otherwise upon the terms of: (a) the Settlement Deed appearing at pp 18-44 of Confidential Exhibit LNG-1 to the affidavit of Ms Lisa Naomi Gallate sworn on 29 February 2016; and (b) the Settlement Distribution Scheme appearing at pp 7-36 of Confidential Exhibit AKB-12 to the affidavit of Ms Amanda Kim Banton sworn on 24 March 2016 (24 March Banton Affidavit) (including payments to the first applicant of $14,683.15 (plus GST) and the third applicant of $15,644.29 (plus GST) for reimbursement), (Settlement) is approved by the Court. 2. Pursuant to s 33ZF of the Act, the applicants are authorised, nunc pro tunc, to enter into the Settlement Deed and to give effect to the Settlement (and all transactions contemplated by it) for and on behalf of Group Members (as defined in para 4 of the applicants' Amended Statement of Claim) (Group Members). 3. Pursuant to s 33ZB of the Act, the persons affected and bound by the Settlement are the applicants, Group Members, IMF Bentham Limited (IMF) and the respondents. Administration of Settlement 4. Pursuant to s 33ZF of the Act, the applicants' solicitor, Squire Patton Boggs, is appointed as the administrator of the Settlement Distribution Scheme and is to act in accordance with the rules of that scheme, subject to any direction of the Court. Confidentiality 5. Pursuant to ss 37AF and 37AG(1)(a) of the Act, until further order, and in order to prevent prejudice to the proper administration of justice: (a) the Joint Confidential Opinion on Proposed Settlement of Mr M B J Lee SC and Mr J C Conde of counsel tendered in support of the application for approval of the Settlement; (b) Annexure AKB-1 to the affidavit of Ms Amanda Kim Banton sworn on 22 March 2016 (22 March Banton Affidavit); (c) Confidential Exhibits AKB-9, AKB-10 and AKB-11 to the 22 March Banton Affidavit; (d) Confidential Exhibit AKB-12 to the 24 March Banton Affidavit; (e) Confidential Exhibits RPM-3 and RPM-4 to the affidavit of Mr Roland Patrick Matters sworn 23 March 2016; and (f) Confidential Exhibit LNG-1 to the affidavit of Ms Lisa Naomi Gallate sworn 29 February 2016, are: (i) to be treated as confidential; (ii) to be sealed on the Court file in an envelope marked "Not to be opened except by leave of the Court or a Judge" and are not to be published or made available and any electronic version thereof is to be treated in an analogous fashion; (iii) subject to (iv) below, not to be disclosed to any person or entity except the applicants, their legal representatives and IMF, such permitted disclosures to be upon terms that none of those parties or persons disclose that material or any part thereof to any person or entity; and (iv) Annexure AKB-1 to the 22 March Banton Affidavit, referred to in (b) above, can be disclosed to the respondents and their legal representatives. Final orders 6. The proceedings be dismissed with no order as to costs of the proceedings or the costs of or incidental to the proceedings (including the application for order 1 above). 7. Pursuant to s 33ZF of the Act, all costs orders previously made in this proceeding and in Proceeding No. NSD 503 of 2014 are vacated. 8. Orders 6 and 7 above take effect immediately after the "Effective Date" as defined in the Settlement Deed. 9. Squire Patton Boggs (as the administrator of the Settlement Distribution Scheme) and the parties have liberty to apply. THE COURT NOTES THAT: 10. The parties will notify the Court when the Effective Date referred to in order 8 has occurred. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT WIGNEY J: 1 The City of Swan, Moree Plains Shire Council and Baron-Hay Investments Pty Ltd are the applicants in representative proceedings commenced pursuant to Part IVA of the Federal Court of Australia Act 1976 (Cth). The respondents in those proceedings are McGraw-Hill Financial, Inc and Standard & Poor's International, LLC. The parties have agreed to settle the proceedings. Representative proceedings may not, however, be settled without the approval of the Court: s 33V of the FCA Act. On 24 March 2016 the settlement was approved and a number of ancillary orders were made. These are the reasons for the approval of the settlement and the making of ancillary orders. A brief description of the proceedings 2 Between 2005 and 2007, a large number of people invested money in financial products issued by Grange Securities Limited, later known as Lehman Brothers Australia Limited. The financial products in question were a type of synthetic collateralised debt obligation, or SCDO for short. It is not easy to adequately describe the features and characteristics of an SCDO in less than a few thousand words. It is a financial product of bewildering complexity and confounding opacity. It is sufficient, for present purposes, to say that the SCDOs in question here, most of which were oddly given the names of regional towns in various states of Australia, were dud investments. Those who invested in them lost most or all of their money. 3 The City of Swan, Moree Plains Shire Council and Baron-Hay Investments invested money in these particular SCDOs. They were not alone. At least 90 other people parted with their money to acquire interests in these products. For reasons it is in some respects difficult to comprehend, many of them, like the City of Swan and Moree Plains Shire Council, were local government authorities. Some were churches, universities, charitable trusts and other community or public bodies or organisations. It is, with respect, difficult to imagine that many of those bodies or organisations truly knew what they were getting themselves into. Other investors, like Baron-Hay Investments, at least appeared to be in the business of investing in securities and other financial products. 4 The respondents were involved in the operation of a well known financial services business called Standard & Poor's. For convenience the respondents will be referred to collectively as Standard & Poor's. Amongst other things, Standard & Poor's published credit ratings in respect of financial products. It assigned ratings in respect of the SCDOs issued by Grange that were in due course acquired by the City of Swan, Moree Plains Shire Council and Baron-Hay Investments. The credit ratings assigned to those SCDOs ranged between "AAA" and "AA-". Those ratings were towards the top of the range of credit ratings, thereby suggesting that the capacity of the rated SCDOs to pay interest, and principal at maturity, was extremely strong or very strong. 5 The City of Swan, Moree Plains Shire Council and Baron-Hay Investments alleged that when they decided to acquire the SCDOs in question they relied on Standard & Poor's' credit ratings. They contended that in assigning the credit ratings to the SCDOs, Standard & Poor's represented that the ratings were objective, independent, uninfluenced by conflicts of interests, were based on reasonable grounds and were the product of the exercise of reasonable care and skill. 6 Those representations were said to be misleading and deceptive. The applicants argued that, in fact, Standard & Poor's ratings were influenced by their relationship with the arrangers of the financial products, who paid for the ratings; the ratings were not based on reasonable grounds; and that the ratings were not the product of the exercise of reasonable care. It was also alleged that Standard & Poor's had failed to disclose to investors certain material facts relating to its relevant ratings modelling, methodology and testing. 7 The City of Swan, Moree Plains Shire Council and Baron-Hay Investments commenced representative proceedings on the basis of those allegations of misleading and deceptive conduct by Standard & Poor's. They alleged that in engaging in that conduct, Standard & Poor's contravened ss 1041E and 1041H of the Corporations Act 2001 (Cth) and ss 12DA, 12DB(1)(a) and 12DF of the Australian Securities and Investments Commission Act 2001 (Cth). They also alleged that Standard & Poor's breached its duty to exercise reasonable care when it published or disseminated the relevant ratings in Australia. They contended that Standard & Poor's was liable to compensate them for the loss and damage they suffered when the SCDOs in question were subject to significant defaults which ultimately led to the loss of the money invested by them. 8 The City of Swan, Moree Plains Shire Council and Baron-Hay Investments commenced the proceedings not only on their own behalf, but also on behalf of other investors who, between 2005 and 2007, acquired the SCDOs in question in reliance on Standard & Poor's credit ratings. Subject to one additional condition or criterion, the investors so defined became the group members in the representative proceedings for the purposes of ss 33A and 33H(1)(a) of the FCA Act. The additional condition or criterion that defined the group members for the proceedings was that they had entered into a litigation funding agreement with Bentham IMF Limited (formerly IMF (Australia) Limited) either before the commencement of the proceedings, or by the time the proceedings were amended by adding Baron-Hay Investments as an additional applicant. The proceedings are accordingly "closed-class" representative proceedings. There are ninety group members in addition to the three applicants. 9 It is also worth noting that not only have each of the applicants and, by definition, all the group members, entered into funding agreements with IMF, but all are also represented by the same solicitors. Each of the applicants and all the group members have entered into retainer agreements with the law firm Squire Patton Boggs. That is somewhat unusual for a representative proceeding of this size and scale. 10 These proceedings are related to proceedings that were heard and determined in this Court by Rares J. In those proceedings (Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028; (2012) 301 ALR 1) Wingecarribee Shire Council and a number of other applicants (including the City of Swan) made various claims against Grange concerning various SCDOs that they acquired from or through Grange. The SCDOs the subject of the Wingecarribee proceedings included the SCDOs the subject of these proceedings. Wingecarribee Shire Council and the other applicants claimed that Grange's conduct in relation to the SCDOs acquired by them caused them loss and damage. 11 Wingecarribee Shire Council and the other applicants were successful in their claims against Grange. As indicated earlier, Grange subsequently became Lehman Brothers Australia. Lehman Brothers Australia is in the process of being wound up in insolvency. The applicants and group members in the Wingecarribee proceedings have been admitted as creditors in the winding up of Lehman Brothers Australia. Interim dividends in the winding up have been paid to them in respect of their proofs of debt. They are also entitled to receive future payments in the winding up should any be able to be made. 12 The vast majority of the group members in these proceedings have lodged proofs of debt in the liquidation of Lehman Brothers Australia in respect of their failed investments in the relevant SCDOs. For the most part those proofs of debt have been accepted and have been the subject of interim dividends in the winding up. As will be seen, the possibility of the group members receiving dividends in the future in the winding up of Lehman Brothers Australia is a relevant factor to consider in assessing the reasonableness of the settlement. 13 Standard & Poor's filed a defence to the proceedings. It claimed, amongst other things, that the loss and damage suffered by City of Swan and the other applicants was caused by their failure to take reasonable care of their own interests and that any damages payable to them should be reduced accordingly. It contended that it should not be found liable in negligence and that, because it at all times acted honestly, it ought fairly to be excused for any contraventions of ss 1041E or 1041H of the Corporations Act pursuant to s 1317S of the Corporations Act. Standard & Poor's also pleaded that Grange was responsible for the loss or damage suffered by City of Swan and the other applicants and that City of Swan and the other applicants are estopped or precluded from seeking or obtaining findings that conflict with the findings made by Rares J in the Wingecarribee proceedings. 14 The proceedings were commenced in April 2013. The pleadings did not finally close until March 2015. It would appear that the two years between the commencement of the proceedings and the close of the pleadings was largely taken up by procedural matters, including the need to obtain leave to serve the originating process overseas, the making of amendments to the pleadings and an unsuccessful strike-out application by Standard & Poor's. There were also a number of directions hearings. Pursuant to orders made at those directions hearings, evidence in the form of affidavits, expert reports and outlines of evidence was exchanged and filed. 15 In August 2015, the proceedings were set down for a six week trial to commence on 19 October 2015. That trial date, however, was later vacated. The trial was then listed to commence on 29 August 2016 for five weeks. Notice of the proposed settlement and opt-out rights 16 In the meantime, it seems that the parties were endeavouring in earnest to settle the proceedings. Those efforts eventually bore fruit. In November 2015 Squire Patton Boggs wrote to all group members concerning a proposed settlement offer. Amongst other things, the solicitors set out the terms of the proposed settlement in some considerable detail and asked the group members to indicate their response to the proposed settlement. The letter provided each group member with an estimate of the amount each group member would receive. That estimated payment comprised an estimate of each member's share of the proposed settlement sum, less the member's share of amounts payable to IMF under the funding agreement and each group member's share of the amount paid or payable to Squire Patton Boggs in respect of costs. 17 Importantly, the letter also summarised advice which had been given by trial counsel in respect of the reasonableness of the proposed settlement. The solicitors indicated that they agreed with the views of trial counsel. Those views were based to an extent on the information then available concerning the prospects of further dividends being paid to group members in the winding up of Lehman Brothers Australia. 18 It will be necessary, in due course, to return to the terms of the proposed settlement and trial counsels' opinion in relation to it. Suffice it to say at this stage that, armed with this information, none of the group members communicated any objection to the proposed settlement. On that basis, Squire Patton Boggs, on behalf of the applicants, proceeded to formalise the settlement with Standard & Poor's. 19 On 2 March 2016, the Court approved the form and content of a notice to group members pursuant to ss 33X and 33Y of the FCA Act. The notice contained details of the proposed settlement of the proceedings and the members' right to opt-out of the proceedings pursuant to s 33J of the FCA Act. The notice required any group member who wished to opt-out of the proceedings to submit an opt-out notice to the Court by 16 March 2016. Any member who elected to opt-out would not participate in any settlement, and would not be bound by the settlement. They would be able to commence their own proceedings against Standard & Poor's if they wished to do so. 20 The notice also required any group member who did not wish to opt-out of the proceedings, but who wished to oppose the proposed settlement, to notify Squire Patton Boggs of that fact. No group member elected to opt-out of the proceedings. No group member communicated any opposition to the proposed settlement. A brief description of the settlement 21 The terms of the settlement were confidential. The Court made suppression orders pursuant to ss 37AF and 37AG(1)(a) of the FCA Act in respect of much of the documentary evidence that recorded the terms of the settlement. The main basis of the suppression orders was that confidentiality was necessary to prevent prejudice to the proper administration of justice. The information covered by the orders included, amongst other things, confidential and privileged communications between the applicants and group members and their lawyers. If that material was disclosed and the settlement was not approved, the applicants would most likely be prejudiced in their further conduct of the proceedings. 22 The settlement is subject to three conditions. The first condition is that the Court approves the settlement. 23 The second condition is that Standard & Poor's enter into an agreement with Lehman Brothers Australia (in liquidation) a term of which was that Standard & Poor's would withdraw certain proofs of debt it had lodged in the winding up of Lehman Brothers Australia. That condition has now been satisfied. 24 The third condition is related to the second. It is that the agreement between Standard & Poor's and Lehman Brothers Australia concerning the withdrawal of the proofs of debt be approved by the creditors or committee of inspection of Lehman Brothers Australia, or the Court. That condition has also now been satisfied. 25 The withdrawal of Standard & Poor's' proofs of debt in the winding up of Lehman Brothers Australia is of some considerable significance to the settlement. That is because it improves the prospect of group members who have lodged proofs of debt receiving a dividend or a further dividend in the winding-up of Lehman Brothers Australia. The two Standard & Poor's proofs of debt, which relate to the claims made against it in these proceedings, were each somewhere in the vicinity of $250 million. 26 Under the terms of the settlement, Standard & Poor's will pay a settlement sum, inclusive of interest and legal costs, to settle the proceedings. The amount of the settlement sum is confidential. It is sufficient to say that it is a very large sum, though considerably less than the estimate of the total amount claimed by the applicants and group members. 27 The process by which the settlement sum is to be distributed is set out in a detailed document entitled "Settlement Distribution Scheme". The detail of that settlement distribution scheme is mostly confidential. It is, in any event, unnecessary to rehearse much of that detail. It is sufficient to note that the amount of each individual claim is calculated by means of a simple and fairly orthodox formula. The scheme includes a process by which individual claimants are able to apply for internal and external review of the amount of their claim as calculated by the administrator of the scheme. 28 Perhaps unsurprisingly, the distribution scheme also provides for payments to IMF to be deducted from the amount to be distributed to group members. Those payments represent amounts payable or paid pursuant to the terms of the funding agreements each applicant and group member entered into with IMF, and the retainer agreements each group member entered into with Squire Patton Boggs. In simple terms, the amounts payable to IMF include a percentage of the "project costs", which include the legal fees paid or payable, a "funding fee" calculated as a percentage of the settlement sum, and reimbursement for legal fees and costs paid to Squire Patton Boggs (and the solicitors who preceded Squire Patton Boggs). 29 More will be said later concerning legal costs. In relation to the other amounts payable to IMF, on any view the amount which will be received by IMF as a result of the settlement will be extremely large. IMF's funding fee pursuant to the funding agreements is 33 percent of the settlement sum. It is also entitled to 15 percent of the project costs, which include legal costs. This was the bargain struck between IMF and each of the applicants and group members. Each of the applicants and group members have effectively approved (or at least not opposed) the settlement in full knowledge that a significant portion of their share of the settlement sum will go to IMF. 30 In those circumstances, the very large payment to be made to IMF pursuant to the settlement does not provide a proper basis for the Court to decline to approve the settlement. That said, there may come a case where the amount to be paid to a litigation funder consequent to a settlement is so disproportionate to the risk and expense to which the funder was exposed in the proceedings, that it provides a proper basis for the Court to refuse to approve the settlement. That may be so even if the group members all entered into funding agreements and all approved the settlement. This, however, is not such a case. 31 One final aspect of the distribution scheme should be noted. The distribution scheme provides for additional payments to be made to two of the applicants, City of Swan and Baron-Hay Investments. Those payments represent the reimbursement of expenditure incurred by those two applicants in their capacity as representative applicants. City of Swan is to be reimbursed $14,683.15 and Baron-Hay Investments $15,644.29. Detailed evidence was led in support of those proposed reimbursement payments. That evidence demonstrated that the payments were reasonable and appropriate in the circumstances. They would also appear to be generally within the range of reimbursement payments typically made to representative applicants in representative proceedings: see Morabito V, "An Empirical and Comparative Study of Reimbursement Payments to Australia's Class Representatives and Active Class Members" (2014) 33 CJQ 175 at 186. Approval of settlements – some relevant considerations 32 In approving a settlement pursuant to s 33V of the FCA Act, the central question is whether the proposed settlement is fair and reasonable and in the interests of group members considered as a whole: Australian Competition and Consumer Commission v Chats House Investments Pty Limited (1996) 71 FCR 250 at 258; Williams v FAI Home Security Pty Ltd (No 4) [2000] FCA 1925; (2000) 180 ALR 459 at [19]; Lopez v Star World Enterprises Pty Ltd [1999] FCA 104; Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1468 at [5]. Reasonableness is a range, and the question is whether the proposed settlement falls within that range: Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd & Ors (No 2) [2006] FCA 1388; (2006) 236 ALR 322 at 339[50]. 33 There is no definitive or exhaustive list of factors that must or may be taken into account in approving a settlement. The merits of each settlement must be considered having regard to the particular facts and circumstances of the case. Approval should not be approached in a formulaic way, as if there is a "check-list" of factors that need to be ticked-off: see Darwalla at [33]-[35]. Nevertheless, the factors that are likely to be relevant include: the complexity and duration of the litigation; the stage of the proceedings; the risks and prospects of success of establishing liability and damages; the risks of an appeal; and the reasonableness of the settlement in light of the "best case" recovery and the attendant risks of litigation: see generally Williams at [19]; Modtech Engineering Pty Ltd v GPT Management Holdings Ltd [2013] FCA 626 at [11] and [13]. The views of counsel (and solicitors) concerning these matters, and the reasonableness of the settlement, are also likely to be relevant. 34 The absence of any objection or opposition to the settlement by any group member or group members is a highly relevant consideration, at least where the Court is satisfied that all group members have been given timely notice of the critical elements of the settlement: P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 4) [2010] FCA 1029 at [23]; Camilleri at [5(f)]. Where there has been fully informed consent by all group members, the Court's task or role is less likely to be protective in nature, or to involve second guessing tactical or other decisions that may have been made by the group members. 35 In relation to legal fees, the Court's task is not to perform a taxation of the fees. Rather, the Court considers whether the fees and disbursements are unreasonable in any respect having regard to, amongst other things, the nature of the work performed, the time taken to perform the work, the seniority of the persons undertaking the work and the appropriateness of the charge out rates of those persons: Modtech at [32]. If the fees are unreasonable, the question may arise whether the group members may nonetheless be considered to have approved the fees, either expressly or impliedly. The settlement should be approved 36 These are unquestionably difficult and complex proceedings. That is readily apparent when regard is had to the reasons for judgment in the related proceedings in Wingecarribee. It is equally apparent when consideration is given to the judgments of Jagot J, at first instance, and the Full Court, on appeal, in similar proceedings concerning liability for losses arising from credit ratings assigned to other SCDOs: ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1 (Full Court); Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 (Jagot J). 37 The matter is ready for hearing. If the settlement is not approved, the proceedings will proceed to trial in August 2016. Whilst it is tempting to think that many of the issues that would be likely to arise if this matter proceeded to trial have already been determined, in one way or another, in the Wingecarribee and ABN AMRO proceedings (albeit that the latter proceedings involved different facts, different SCDOs and an apparently different ratings model), it is nonetheless tolerably clear that there remain significant liability, damages and appeal risks involved in this matter if it proceeded to trial. 38 If the matter proceeds to trial, it has been estimated that further legal costs (including counsels' fees) of up to $2 million may be incurred. It is also likely that the claims of the applicants and group members will not be finally determined for some considerable time. It might reasonably be expected, for example, that judgement on the common issues would be reserved, not handed down immediately. There would then have to be a further claims resolution process in respect of individual group member claims, possibly involving a series of further hearings. The likelihood therefore is that the matter would not be resolved for some considerable time, even in the absence of an appeal. 39 The settlement sum is significantly less than the "best case" recovery by the applicants and group members. Consideration has been given to the views of trial counsel in relation to the reasonableness of the settlement sum having regard to the merits of the case. That advice is obviously confidential. Close consideration has also been given to the opinion of separate counsel briefed to consider the reasonableness of the settlement. That opinion addresses, amongst other things, the litigation risks in bringing this matter to trial, the reasonableness of the settlement sum and the views of trial counsel. That advice is likewise confidential. 40 The reasonableness of the settlement sum depends, to a certain extent, on the amount and timing of any further dividends that group members may receive in the winding up of Lehman Brothers Australia. The proportion of each group member's total loss from their investment in the SCDOs that they ultimately recover depends not only on the amount recovered in these proceedings, but also the potential dividends in the winding up. Both trial counsel and counsel briefed to specifically consider the reasonableness of the settlement advert to that matter. The most recent estimate given by the liquidators of Lehman Brothers Australia is that they are likely to pay a total dividend in excess of 80 cents in the dollar. While it is by no means certain that the group members will receive a dividend of this amount, this estimate and the possibility that group members will receive it must nonetheless be factored into the equation. 41 Having regard to all the evidence and information concerning the proposed settlement sum, including the confidential advice of counsel, it cannot be concluded that the settlement sum is an unreasonable compromise. 42 The most significant consideration in the circumstances of this matter, however, is that all group members have given their fully informed consent to (or at least have not opposed) the proposed settlement. This is a "closed-class" representative proceeding. The identity of each and every group member is known. Each has entered into a funding agreement with IMF. Unusually, perhaps, each of the group members has also retained the applicants' solicitors, Squire Patton Boggs, to represent them. Squire Patton Boggs provided each group member with detailed information and advice concerning the settlement, including the advice of trial counsel. Each has also been given information about the quantum of legal fees and disbursements. None of the group members has indicated any opposition to the settlement or the fees. 43 Each group member has also been given notice of the settlement distribution scheme. The means by which the amount to be distributed to each group member from the settlement sum is to be calculated is orthodox, relatively straightforward and uncontroversial. It could not be suggested that the applicants, or any particular group members, are being favoured over any other group members. No group member has communicated any objection to the distribution scheme, including the amounts to be paid to IMF. 44 In relation to legal costs, the "project costs" incurred by the applicants up to 23 March 2016 total $4,537,671.38 (excluding GST). Most of the costs consist of fees, charges and disbursements invoiced by Squire Patton Boggs pursuant to their retainer. Detailed evidence has been led concerning the make-up and break-down of the costs. There is also independent evidence, in the form of an expert report from an experienced legal costs consultant, to the effect that the costs are fair and reasonable in all the circumstances and that the costs have been quantified in accordance with the contractual relationships. 45 As already indicated, Squire Patton Boggs act for all the applicants and group members. There has been satisfactory disclosure to the group members of the legal costs in the context of the settlement. No group member has raised any objection to the costs. 46 In all the circumstances, it cannot be concluded that the legal costs incurred in the conduct of the proceedings are unreasonable. 47 Having regard to all of these factors, including the nature and complexity of the proceedings, the inherent litigation risks, the amount of the settlement sum, the possibility, if not probability of the payment of further dividends in the winding up of Lehman Brothers Australia, the views of counsel, the reasonableness of the costs incurred and, most significantly, the fact that there has been no objection by any group member to the settlement, it must be concluded that the settlement is fair and reasonable and in the interest of group members as a whole. It should be approved. ORDERS 48 It was in all the circumstances appropriate to make orders in accordance with the short minutes of orders prepared by the parties. Those orders included: an order approving the settlement deed and settlement distribution scheme; an order pursuant to s 33ZF of the FCA Act that the applicants were authorised to enter into and give effect to the settlement for and on behalf of the group members; an order pursuant to s 33ZB of the FCA Act that the persons affected and bound by the settlement were the applicants, the group members, IMF and the respondents; and an order pursuant to s 33ZF that the applicants' solicitor, Squire Patton Boggs, was appointed as the administrator of the settlement distribution scheme and was to act in accordance with the rules of that scheme, subject to any direction of the Court. As noted earlier, suppression orders pursuant to ss 37AF and 37AG of the FCA Act were also made in respect of various exhibits. An order was also made dismissing the principal proceedings with no order as to costs. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney. Associate: Dated: 12 April 2016