FEDERAL COURT OF AUSTRALIA Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433 File number: VID 406 of 2014 Judge: MURPHY J Date of judgment: 28 November 2016 Catchwords: REPRESENTATIVE PROCEEDINGS – Settlement approval pursuant to s 33V of Federal Court of Australia Act 1976 (Cth) (the Act) – whether the proposed settlement is fair and reasonable in the interests of class members to be bound to it – consideration of relevant factors in relation to reasonableness of settlement - whether the proposed settlement distribution scheme is fair and reasonable –whether the legal costs incurred are reasonable – whether the applicant should be reimbursed for expenses incurred for work done on behalf of class members – whether the settlement approval costs and administration costs are reasonable – whether the funding commission to be deducted is fair and reasonable in the interests of class members – whether the Court has power to approve the proposed settlement and to make orders under ss 33V, 33Z, 33ZF and 23 of the Act to reduce an excessive funding commission – conclusion that the Court has such power – relevant factors in relation to whether the litigation funding commission is fair and reasonable –whether funding commission rates between 26% and 30% and the aggregate funding commission are fair and reasonable – settlement approved Legislation: Corporations Act 2001 (Cth) Federal Court of Australia Act 1976 (Cth) Legal Profession Act 2004 (Vic) Legal Profession Uniform Law, Schedule 1 to Legal Profession Uniform Law Application Act 2014 (Vic) Supreme Court Rules 1970 (NSW) Cases cited: Australian Securities and Investments Commission v Newcrest Mining Limited (2014) 101 ACSR 46; [2014] FCA 698 Australian Securities and Investments Commission v Richards [2013] FCAFC 89 Blairgowrie Trading Ltd v Allco Finance Group Ltd (2015) 325 ALR 539; [2015] FCA 811 Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1468 Carnie v Esanda Finance Corporations Ltd (1995) 182 CLR 398; [1995] HCA 9 City of Swan v McGraw-Hill Companies, Inc [2016] FCA 343 Courtney v Medtel Pty Limited (2002) 122 FCR 168; [2002] FCA 957 Courtney v Medtel Pty Limited (No 5) (2004) 212 ALR 311; [2004] FCA 1406 Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) 236 ALR 322; [2006] FCA 1388 Dorajay Pty Ltd v Aristocrat Leisure Limited [2009] FCA 19 Earglow Pty Ltd v Newcrest Mining Ltd (2015) 230 FCR 469; [2015] FCA 328 Farey v National Australia Bank Ltd [2016] FCA 340 Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540; [2002] HCA 54 Guglielmin v Trescowthick (No 5) [2006] FCA 1385 Harris v Jones 41 FRD 70 (D Utah 1966) Hypertouch Inc. v The Superior Court of San Mateo County, 128 Cal App 4th 1527 (Ct App 2005) In Re General Motors Corporation Pick-Up Truck Fuel Tank Products Liability Litigation 55 F3d 768 (3d Cir 1995) Jarra Creek Central Packing Shed Pty Ltd v Amcor Limited [2011] FCA 671 Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] 94 FCR 167; [1999] FCA 1363 Keith Hercules & Sons v Steedman (1987) 17 FCR 290; [1987] FCA 730 Kelly v Willmott Forests Ltd (in liquidation)(No 4) [2016] FCA 323 King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) [2003] FCA 980 Kirby v Centro Properties Limited (No 6) [2012] FCA 650 Matthews v AusNet Electricity Services Pty Ltd & Ors [2014] VSC 663 McMullin v ICI Australia Operations Pty Ltd (No 6) (1998) 84 FCR 1; [1998] FCA 658 Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1; [2002] HCA 27 Modtech Engineering Pty Ltd v GPT Management Holdings Ltd [2013] FCA 626 Modtech Engineering Pty Ltd v GPT Management Holdings Limited (No 2) [2013] FCA 1163 Money Max Int Pty Ltd v QBE Insurance Group Limited [2016] FCAFC 148 Newstart 123 Pty Ltd v Billabong International Ltd [2016] FCA 1194 Owners of the Ship "Shin Kobe Maru" v Empire Shipping Company Inc (1994) 181 CLR 404; [1994] HCA 54 P Dawson Nominees Pty Ltd v Brookfield Multiplex Limited (No 4) [2010] FCA 1029 Pathway Investments Pty Ltd & Anor v National Australia Bank Limited (No 3) [2012] VSC 625 Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 6) [2011] FCA 277 Re HIH Insurance Ltd (In Liq) (2016) 113 ACSR 318; [2016] NSWSC 482 Re Medforce Healthcare Services Ltd (in liq) [2001] 3 NZLR 145 Rowe v AusNet Electricity Services Pty Ltd & Ors [2015] VSC 232 Thomas v Powercor Australia Ltd [2011] VSC 614 Timbercorp Finance Pty Ltd (In liquidation) v Collins and Tomes [2015] VSC 461 Wepar Nominees Pty Ltd v Schofield (No 2) 99 ACSR 234; [2014] FCA 225 Woolf v Snipe (1933) 48 CLR 677 Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459; [2000] FCA 1925 Williams v FAI Home Security Pty Ltd (No 5) [2001] FCA 399 Zhang v Minister for Immigration, Local Government and Ethnic Affairs (1993) 45 FCR 384; [1993] FCA 715 Australian Law Reform Commission, Grouped Proceedings in the Federal Court, Report No 46 (Canberra, 1988) Barker G, "Third Party Litigation Funding in Australia and Europe" (Working Paper No 2, Centre for Law and Economics, ANU College of Law, December 2011) Graves D, Adams K and Betts J, Class Actions in Australia (2nd ed, Lawbook Co, 2012) IMF (Australia) Ltd, "Submission to the Productivity Commission: Access to Justice Arrangements" (18 November 2013) Legg M, "Reconciling Litigation Funding and the Opt Out Group Definition in Federal Court of Australia Class Actions - The Need for a Legislative Common Fund Approach" (2011) 30(1) Civil Justice Quarterly 52 Morabito V, "An Australian Perspective on Class Action Settlements" (2006) 69 Modern Law Review 347 Morabito V, "An Empirical and Comparative Study of Reimbursement Payments to Australia's Class Representatives and Active Class Members" (2014) 33 Civil Justice Quarterly 175 Morabito V, An Empirical Study of Australia's Class Action Regimes, Second Report (Australian Research Council, September 2010) Morabito V, An Empirical Study of Australia's Class Action Regimes, Fourth Report (Australian Research Council, July 2016) Productivity Commission, Productivity Commission Inquiry Report, Access to Justice Arrangements, Volume 2 (No 72, 5 September 2014) Waye V and Morabito V, "Financial Arrangements with Litigation Funders and Law Firms in Australian Class Actions" (Paper presented at the Litigation Costs Funding and Behaviour Symposium, Leiden University, December 2015) Waye V, Trading in Legal Claims: Law, Policy & Future Directions in Australia, UK and US (Presidian Legal Publications, 2008) Date of hearing: 14 April 2016 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 200 Counsel for the Applicant: Dr M J Collins QC and Mr A Nash Solicitor for the Applicant: Slater & Gordon Lawyers Counsel for the Respondent: Ms W A Harris QC and Mr R G Craig Solicitor for the Respondent: Herbert Smith Freehills Counsel for the Objector: Mr K Mylonas REASONS FOR JUDGMENT VID 406 of 2014 BETWEEN: EARGLOW PTY LTD Applicant AND: NEWCREST MINING LIMITED Respondent JUDGE: MURPHY J INTRODUCTION 1 Before the Court is an application for approval of the settlement of a shareholder class action pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (the Act). I earlier made orders approving the proposed settlement and I now provide my reasons for doing so. 2 The applicant, Earglow Pty Limited (Earglow), and the respondent, Newcrest Mining Limited (Newcrest), entered into a deed of settlement dated 21 February 2016 (the proposed settlement). Under the proposed settlement Newcrest is required to pay $36 million inclusive of legal costs and interest (settlement sum) in full and final settlement of the proceeding, and Earglow on its own behalf and on behalf of all class members provides broad releases to Newcrest and its related parties from the claims made either directly or indirectly by the applicant and class members in the proceeding. The settlement sum is to be distributed pursuant to the proposed Settlement Distribution Scheme (the Distribution Scheme). 3 Registered class members (RCMs), being class members who registered in the class member registration process, can participate in the distribution of the settlement sum. Unregistered class members (UCMs), being those who did not register, are precluded from participating in the distribution of the settlement sum and their claims will be extinguished as a consequence of settlement approval. 4 The proceeding is funded by a litigation funder, Comprehensive Legal Funding LLC (the Funder) and Earglow. A large number of class members entered into a litigation funding agreement. The balance of class members did not. The vast majority of RCMs entered into a funding agreement with the Funder and a retainer with the solicitors for the applicant, Slater & Gordon (funded RCMs), but approximately 60 RCMs did not do so (unfunded RCMs). 5 For the reasons I explain, having regard to the factors set out in Class Actions Practice Note CM 17 (relevantly unchanged in the revised Class Actions Practice Note (GPN-CA) issued on 25 October 2016), I am satisfied that the proposed settlement is fair and reasonable in the interests of the class members to be bound to it. I am so satisfied notwithstanding that UCMs are bound to the settlement but will not receive its benefits. I am satisfied that the terms of the proposed Distribution Scheme are fair and reasonable in the interests of class members. 6 A question arose as to the Court's power to approve the proposed settlement under s 33V but to reduce the percentage litigation funding commission (funding commission) to be deducted and paid to the Funder pursuant to the Distribution Scheme (as provided in the funding agreements) if the Court considers the funding commission to be excessive. Earglow accepted that the Court could refuse to approve a settlement on the basis that the funding commission was excessive but argued that the Court has no power to approve, disallow or vary the funding commission agreed between the Funder and funded RCMs. 7 In my view if the Court considers a proposed settlement of class proceedings to be fair and reasonable in the interests of class members, except that the funding commission to be deducted under the proposed Distribution Scheme is excessive, the Court's powers are not limited to a binary choice between approving the proposed settlement or refusing approval. I consider the Court has power to approve the settlement and reduce the funding commission rate or quantum. 8 I am however satisfied that the funding commission to be deducted in the present case is fair and reasonable. The funding agreements provide funding commission rates of between 26% and 30% depending on the number of shares each class member acquired in the relevant claim period and the Distribution Scheme provides for the deduction of a funding commission at those rates from the settlement amounts of funded RCMs, and an equivalent deduction from the settlement amounts of unfunded RCMs. I also consider the aggregate funding commission of $6.78 million to be fair and reasonable. Indeed I consider the total funding commission to be low having regard to the expenditure and risk taken on by the Funder. 9 I thank the parties for their detailed submissions upon which I have directly drawn at some points. THE RELEVANT PRINCIPLES 10 I set out the relevant principles in a settlement approval application in Kelly v Willmott Forests Ltd (in liquidation)(No 4) [2016] FCA 323 (Kelly) at [62]-[77]. They are well-established and it is unnecessary to repeat them. The central task of the Court in a settlement approval application under s 33V of the Act is to decide if it is satisfied that the proposed settlement is fair and reasonable having regard to the interests of the class members who will be bound by it, including as between class members. The Court assumes a protective role in undertaking this task. 11 I will deal with whether the proposed settlement is fair and reasonable under the following headings: (a) the position of unregistered class members; (b) the list of factors in Class Actions Practice Note CM 17; (c) the reasonableness of the Distribution Scheme; and (d) the reasonableness of the funding commission. A. THE POSITION OF UNREGISTERED CLASS MEMBERS 12 The originating application initially made claims on behalf of the applicant and on behalf of an "open class" comprising all persons who acquired an interest in Newcrest shares on the Australian Securities Exchange (ASX) in the period from 13 August 2012 until 6 June 2013 inclusive (claim period) and who suffered loss and damage by or resulting from the pleaded conduct of Newcrest. This position changed through consent orders on 29 July 2015 which allowed for opt out, and required those class members who wished to pursue a claim in the proceeding to register in a class member registration process, except for funded class members who were deemed to have registered (the opt out and registration orders). 13 Order 9(b) of the opt out and registration orders provided that class members who neither opted out nor registered by 28 August 2015: …shall remain a group member for the purposes of any judgment or settlement but shall be barred from making any claim against the Respondent in respect of or relating to the subject matter of this proceeding, including participating in any form of compensation or otherwise benefiting from any relief that might be ordered or agreed. It provided that UCMs remained class members but were not to be entitled to make a claim in the proceeding or benefit from any settlement. Order 10 provided that any class member that sought a variation of Order 9(b) was required to give written notice together with reasons for seeking the variation by 28 August 2015. 14 Pursuant to the orders, the solicitors for the applicant, Slater & Gordon, published an opt out and registration notice on 7 August 2015 on its website and by advertisements in the legal notices or equivalent section of a weekday edition of the Australian Financial Review and The Australian, and the Court put the notice on its website. Slater & Gordon also sent the notice by email or letter to approximately 309 class members who had expressed an interest in the proceeding through the Slater & Gordon website. 15 Only three class members opted out. At the date of the approval application the class comprised 4,442 RCMs and an unknown number of UCMs. As I have said, the vast majority of RCMs entered into a funding agreement but approximately 60 RCMs did not do so. Earglow submitted that it was not possible to identify the number of UCMs because many of the shareholdings in Newcrest were beneficially held. I accept that it was impossible to be accurate but the applicant's legal representatives should have attempted to give the Court an estimate. 16 I note that there were approximately 81,000 Newcrest shareholders at 31 August 2012 and approximately 87,000 shareholders at 31 August 2013: see Earglow Pty Ltd v Newcrest Mining Ltd (2015) 230 FCR 469; [2015] FCA 328 (Earglow) at [29]-[30] (Beach J). I also note that the claim period spans ten months. It is likely that over the claim period many times more than 4,442 persons acquired Newcrest shares on the ASX. I infer that only a relatively low proportion of all class members registered and that there are many more UCMs than there are RCMs. The Notice of Proposed Settlement 17 On 24 February 2016 the parties informed Beach J that a settlement had been reached subject to Court approval. They put forward agreed minutes of orders including that class members be sent a Notice of Proposed Settlement. Beach J made orders in accordance with the agreed minutes of orders which required that a Notice of Proposed Settlement be posted on Slater & Gordon's website and be sent by email or ordinary post to the last known email or postal address of each RCM. The orders did not require the notice to be given to UCMs. 18 On 10 March 2016 I approved the form and content of the Notice of Proposed Settlement as the applicant proposed. Reflecting the fact that only RCMs could participate in the settlement the notice only related to the position of RCMs. It informed RCMs in general terms about the key features of the proposed settlement, that they were entitled to access the proposed Distribution Scheme under which the settlement sum was to be distributed, and that they could object to the proposed settlement. It included a Notice of Objection to be completed by any class member who did so object. 19 I am satisfied that the solicitors for the applicant published the Notice of Proposed Settlement in accordance with the orders of 24 February 2016. I have some disquiet regarding the fact that UCMs were not sent the Notice of Proposed Settlement and in my opinion it would be better if they had been. However, UCMs were given adequate notice as to how their rights might be affected by the opt out and registration orders, the opt out and registration notice expressly informed them that if they wished to challenge Order 9(b) they had a deadline in doing so, they were given an adequate opportunity to register so as to participate in any settlement or judgment, and the settlement received widespread publicity. It is arguable that there was no point to sending UCMs the Notice of Proposed Settlement when they were precluded from participating in the settlement. 20 In all the circumstances I would not refuse settlement approval on the basis that UCMs were not sent the Notice of Proposed Settlement. Consideration regarding unregistered class members 21 Under the settlement deed UCMs are to be bound into the releases provided but will not receive any benefit of the settlement. 22 This result essentially arose because of Order 9(b) and, on one view, I can assume that the factors justifying that order were considered at the time it was made. On that basis I could treat it as unnecessary to revisit the matters underpinning the order as part of settlement approval. However, I consider it better to give fresh attention to the matters underpinning the exclusion of UCMs as part of the settlement approval application because: (a) UCMs' substantive rights will be finalised if the proposed settlement is approved: see Newstart 123 Pty Ltd v Billabong International Ltd [2016] FCA 1194 (Newstart) (Beach J) at [65]; (b) the opt out and registration orders were made by consent and without a contradictor; and (c) the effect of orders such as Order 9(b) on the interests of class members may not be fully apparent to class members or the Court until a settlement is proposed: see for example Kelly at [37]. 23 A number of considerations therefore arise. 24 The first question is whether the Court has power to make orders which operate so that UCMs remain as class members and are bound by any settlement or judgment but are precluded from making claims in the proceeding and receiving the benefit of any settlement or judgment. 25 I consider the Court has power to make such an order pursuant to ss 33ZF(1) and 23 of the Act. It is established that the power in s 33ZF(1) is very wide and not to be construed narrowly. In Money Max Int Pty Ltd v QBE Insurance Group Limited [2016] FCAFC 148 (Money Max) at [161]-[165] (Murphy, Gleeson and Beach JJ) the Full Court said: In terms of the text of s 33ZF(1), we largely agree with the observations of Beach J in Earglow Pty Ltd v Newcrest Mining Ltd (2015) 230 FCR 469 at [33] where his Honour said: … although in a general sense s 33ZF(1) has been described as a plenary power, nevertheless it is not unlimited. It is in one sense both trite and question begging to assert that the power must be exercised judicially. But let me pass to the language of s 33ZF(1) itself. It uses the language "make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding". Grammatically, "thinks" is to be applied distributively, so that it reads "thinks appropriate" or "thinks necessary"; there is no "is" before "necessary". But as applied distributively, "thinks appropriate" has a lower threshold than "thinks necessary". But in the composite phrase, the concept is "thinks appropriate... to ensure that justice is done in the proceeding" [my emphasis]. In other words, although the words "thinks appropriate" have a lower threshold than "thinks necessary", nevertheless the relevant element of necessity in another guise is enshrined in the coupling of the words "to ensure that". In summary, the question becomes whether I think it is appropriate, to ensure that justice is done in the proceeding, to make the orders sought by Newcrest. It is not whether I think it to be merely convenient or useful per se. Section 33ZF(1) is not a licence for me to impose my own expansive case management philosophy. Rather, I must be satisfied that any order that is made satisfies the statutory test. Now I accept that s 33ZF(1) is a very wide power and ought not to be construed narrowly. Nevertheless, any exercise of power has to fit within the statutory formulation. However, the word "necessary" and similarly the phrase "to ensure" depend upon and must be construed in their context. … In our view, in context, there is less of a difference between "appropriate to ensure justice" and "necessary to ensure justice" than might initially appear. In s 33ZF "necessary" identifies a connection between the proposed order and an identified purpose as to which the Court must be satisfied before making an order. The expression "necessary to ensure that justice is done" has shades of meaning and admits of degrees of comparisons and in context the expression should not be given a narrow construction. The requirement that a proposed order be "necessary to ensure that justice is done in the proceeding" does not require that the Court be satisfied that unless the order is made the administration of justice will collapse or that justice in the proceeding will not be "ensured" in the sense of being certain. Section 33ZF provides a wide power directed at enabling the Court to make orders to deal with the novel problems that might arise through a new statutory procedure for representative proceedings, and the expression "necessary to ensure that justice is done" requires that the proposed order be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding. (Citations omitted.) 26 I consider the Court has power under s 33ZF to make orders such as Order 9(b), but it should be cautious in making such orders and take care in relation to the notice given to class members. 27 The next question is whether such an order is appropriate to ensure justice in the present case. 28 Orders to require class members to take the affirmative step of registering at a point when neither settlement nor a favourable judgment has been secured has been the subject of academic criticism: Morabito V, "An Australian Perspective on Class Action Settlements" (2006) 69 Modern Law Review 347 at 353-357. It can be said that such a requirement operates to reverse the procedure under the Part IVA regime from an opt out to an opt in procedure. 29 Attempts to introduce into federal rule 23 class actions in the USA a similar requirement to take the affirmative step of providing "proof of claim" were found to be inconsistent with the opt out procedure: see Harris v Jones 41 FRD 70 (D Utah 1966). In Hypertouch Inc. v The Superior Court of San Mateo County, 128 Cal App 4th 1527 (Ct App 2005) at 1546 the Court of Appeal of California said: It is now settled that, under federal rule 23, prior to the determination of liability, members of a plaintiff class may not be advised that unless they affirmatively request inclusion in the class or perform some other act they will be excluded. 30 While class members' interests may be adversely affected by orders that require them to take an affirmative step and register in a registration process, that must be balanced with the fact that it is in class members' interests that settlement be achieved, or at least achievable. Without a class member registration process settlement is more difficult. 31 In my view the preclusion of UCMs from the settlement is fair and reasonable because: (a) if UCMs were not precluded from making claims Newcrest could not achieve the finality in relation to class members' claims which it sought, and it is unlikely that Newcrest would have agreed to the settlement; (b) if UCMs were permitted to participate in the settlement it would have been difficult for Earglow (or its lawyers) to be satisfied that the proposed settlement was fair and reasonable for the identified class members as Earglow could not know how many UCMs might wish to make a claim and participate in the proposed settlement; (c) it is in the interests of those class members who have displayed an interest in participating in any settlement and in the interests of justice in the proceeding that a settlement be reached. It is likely that this term of settlement is a central part of the agreement reached; and (d) UCMs were given adequate notice as to how their rights would be affected by the opt out and registration orders. They were also given adequate notice of their right to apply to vary Order 9(b) and no class member so applied. They were given an adequate opportunity to register so as to participate in any settlement or judgment. 32 In my opinion class members' interests would have been better served if the order to exclude them from participation only operated in the event of a settlement and did not limit their rights to participate if the matter proceeded to judgment. However, given that the proceeding has settled nothing turns on that. The proposed extended preclusion of UCMs' claims 33 The opt out and registration notice informed class members that if they did not opt out or register in the proceeding: …any cause of action you might otherwise have had against Newcrest in respect of the matters the subject of the class action will no longer be available. In other words, if you do nothing, you will lose your right to make any claim for damages or other relief against Newcrest in relation to the matters the subject of the allegations made against Newcrest in the class action. (Emphasis added.) That part of the notice reflected the terms of Order 9(b) which operated to preclude class members who neither opted out nor registered from making any claim against the respondent "in respect of or relating to the subject matter of this proceeding." UCMs should be taken to have understood that potential preclusion. 34 However, the interlocutory application before the Court sought the following order: The proceeding be dismissed on the basis that the dismissal is a defence and absolute bar to any claim (either directly or indirectly) or proceeding by the Applicant or any Group Member arising out of or related in any way to the matters which are or were at any time or could have been the subject of the proceeding or any part of the proceeding or raised in the proceeding… (Emphasis added.) Under the proposed order the preclusion on class members' claims would extend beyond claims "in respect of or relating to the subject matter of this proceeding" to claims "arising out of or related in any way to the matters which…could have been the subject of the proceeding or any part of the proceeding." (Emphasis added.) 35 The principal purpose of the opt out and registration notice was to ensure that class members could make an informed decision concerning whether to opt out or to register. Class members are likely to have treated the warning about the preclusion on class members' claims as comprehensive and not merely selective of some of the adverse consequences that might flow from not opting out and not registering, while omitting other adverse consequences: Timbercorp Finance Pty Ltd (In liquidation) v Collins and Tomes [2015] VSC 461 at [620] (Robson J); Kelly at [157]. 36 I doubt that, in practical terms, the extended preclusion would have detrimentally affected UCMs' interests as it seems unlikely that UCMs would have taken a different course had they understood its operation. But UCMs were not sent the Notice of Proposed Settlement and were not given the opportunity to object to the proposed settlement. I cannot know whether any of them contend that they would have objected had they been informed of the extended scope of the proposed preclusion. 37 The Court should be careful to ensure that the individual rights of class members in relation to claims about which the Court knows nothing are not impinged upon: Zhang v Minister for Immigration, Local Government and Ethnic Affairs (1993) 45 FCR 384 at 405; [1993] FCA 715 at [41] (French J); Kelly at [247]. I indicated to the parties that I would be disinclined to approve a settlement under which the preclusion of UCMs' claims went further than they were warned in the opt out and registration notice, when UCMs were not informed of the extended preclusion through the Notice of Proposed Settlement, UCMs are not to be permitted to opt out of the settlement and are not permitted to participate in the proposed settlement. 38 In response the parties put forward the following draft minute of consent orders: The proceeding be dismissed on the basis that the dismissal is a defence and absolute bar to any claim (either directly or indirectly) or proceeding by the Applicant or any Group Member in respect of, or relating to, the subject matter of the proceeding, without prejudice to…[Several exceptions which are not relevant]. This brought the proposed preclusion on class members' claims into line with the information class members were provided in the opt out and registration notice. It removed the impediment to settlement approval which I had identified. 39 The position of UCMs is not a basis to refuse settlement approval. B. THE FACTORS IN CLASS ACTIONS PRACTICE NOTE CM 17 40 Whether the proposed settlement is fair and reasonable may be assessed by reference to the non-exhaustive list of factors set out in Class Actions Practice Note CM 17 (which applied at the date of hearing). Those factors echo the considerations set out by Goldberg J in Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459; [2000] FCA 1925 at [19] (including by reference to the nine-factor test adopted by the United States Court of Appeals for the Third Circuit in In Re General Motors Corporation Pick-Up Truck Fuel Tank Products Liability Litigation 55 F3d 768 (3d Cir 1995) at 785. 41 In summary, having regard to these factors, the proposed settlement is fair and reasonable in the interests of class members because: (a) the solicitors for Earglow are experienced in class action litigation and they recommend the settlement; (b) the confidential opinion of Dr Matthew Collins and Alan Nash of counsel (Counsels' Opinion) is comprehensive and counsel recommend the settlement; (c) the settlement was reached at a stage when Earglow's lawyers were in a position to make an informed assessment of the evidence and the strength of the respective cases, and when the respondent's intention to continue to strenuously defend the proceeding was plain; (d) no RCM objected to the settlement, and the UCMs who did so are to be treated as having registered; (e) the proceeding is very factually complex and Earglow faces material risks in establishing that Newcrest withheld material information or did not have reasonable grounds for its releases to the ASX; (f) Earglow faces material risks in relation to establishing loss and damage, and in relation to the quantum of loss and damage; (g) some of the legal issues are effectively "all or nothing" propositions and it is difficult to predict the outcome on those issues; (h) when a discount is applied for the material risks in the case the settlement sum falls within the range of reasonable outcomes in the proceeding; (i) the settlement achieves certainty in circumstances where judgment at trial is likely to have been the subject of an appeal; (j) Earglow has already incurred substantial costs in conducting the proceeding to date and the costs of running the trial (and through any appeals) would increase the legal costs substantially. On any view these will not be fully recovered; and (k) if the settlement is not approved, there is likely to be a substantial delay in class members obtaining compensation. 42 I now explain this view in more detail. The reaction of class members to the proposed settlement 43 No RCM objected to the proposed settlement. The only objections are from eight UCMs, and their objection is not to the proposed settlement but to the fact that they are excluded from it because they failed to register. 44 Each of the objectors gave reasons why they did not register prior to the 28 August 2015 deadline, the essence of which is that they were unaware of the requirement for registration. One objector, Kostas Mylonas, appeared in support of his objection. 45 Their objections are as follows: (a) Five objectors expressly complained about the adequacy of the notification: (i) Mr Mylonas and Sally Carter stated that they wrote to ASIC complaining of Newcrest's conduct on 23 June 2014, and on 17 August 2014 they expressed an interest in the proceeding through the Slater & Gordon website. Slater & Gordon's records show that a "registration pack" was sent to their email address on 5 June 2015, but no delivery notification was received from the destination server. Mr Mylonas and Ms Carter stated that the email from Slater & Gordon probably went to their spam folder or was deleted and that they were unaware of the requirement to register. They did not register before the deadline and they complained about the adequacy of the methods Slater & Gordon used to inform shareholders of the requirement to register. (ii) Simon Grose, as trustee of Jayne Grose and Simon Grose Investments Pty Ltd, stated that he did not register because he was never contacted directly. He said that he never purchased either The Australian or the Australian National Review (sic), he was not made aware of the requirement to register, and that he did not register in the proceeding because Slater & Gordon did not adequately notify class members of that requirement. (iii) Michael Nash of Mace Constructions Pty Ltd (as trustee for the Nash Family Superannuation Fund) and his wife Catherine Nash stated that they were overseas from 1 August 2015 until 1 September 2015 and provided a copy of their travel itinerary as evidence. They said that they did not receive the opt out and registration notice and that Slater & Gordon should have sent the notice to shareholders by mail or email. (iv) Christopher Bollam stated that he was unaware of the requirement for registration and that the methods Slater & Gordon used to inform shareholders of the action were inadequate. (b) Martin Depisch stated that he was overseas during the period that the requirement for registration was notified and that he was unaware of it. (c) Mark Law states that he contacted Slater & Gordon by telephone on 22 July 2014 in order to register his claim and understood that his claim was registered. He said that Slater & Gordon did not notify him that it was necessary to take any further steps. He said that he would have done so had he been told. (d) Yuri Pintov, as trustee for Pintov Superannuation Fund, stated that he had been in very poor health since December 2014 and was unable to pay attention to financial publications. He said that he did not receive any communication about the requirement to register from his broker or the share registry, and that he would have definitely noted any such communication. He stated that he only heard about the proposed settlement by overhearing a conversation in a doctor's waiting room in February 2016. 46 The materials show that Slater & Gordon complied with the orders of 29 July 2015 in publishing the opt out and registration notice as they did. For practical purposes it must be assumed that a notice in appropriate terms, approved by the Court, and published by means approved by the Court is an adequate method of ensuring that class members are informed of the requirement to register. The objectors did not register in the prescribed class member registration process and prima facie they have no right to participate in the benefits of settlement and no right to object to the settlement. 47 Having said this, the purpose of s 33X is to give notice to class members "in the most efficient and effective way": Explanatory Memorandum, Federal Court of Australia Amendment Bill 1991 (Cth) at [33]. It would have been straightforward for Newcrest to have obtained the name and address of all persons who acquired Newcrest shares in the claim period from the computerised share register and to provide that information to a commercial mail house on a confidential basis. It would have been relatively inexpensive for the applicant to pay the commercial mail house to send the registration and opt out notice to all such persons. That course has been taken in numerous shareholder class actions. 48 When class members' postal addresses are readily and inexpensively ascertainable that will usually be the "most efficient and effective" method of providing notice to them. Although it is likely that a significant proportion of the recipients of a notice so addressed would have been custodians rather than the owners of the shares, many custodians are likely to have been under a fiduciary or contractual obligation to provide the notice to the shareholders they represented, or would have done so as a matter of practice. Mailing the notice to shareholders at the address provided on the share register would have meant that more class members were informed of the requirement to register. 49 Notwithstanding my view that it would have been better to post the opt out and registration notice to class members, I make no finding that class members were provided with inadequate notice. Instead, I approach the objections to settlement by the eight objectors on the basis that there is a question about the adequacy of the notice they received. It is appropriate to order that the objectors be treated as having registered so that they are eligible to participate in the settlement. Beach J took a similar approach in Newstart at [71]. 50 The eight objections to settlement approval therefore fall away and I proceed on the basis that there are no objections. The stage of the proceeding 51 The settlement was reached one week before trial and after an unsuccessful mediation held on 1 and 2 February 2016. It was made at a stage when Earglow and its lawyers were in a position to make an informed assessment of the evidence likely to be adduced at trial, of the strength of the respective cases, the likely course of the trial and the costs involved should the proceeding continue. Earglow and its lawyers were in a position to assess Newcrest's approach to the litigation, including its professed confidence in its factual and legal position and its determination to continue to vigorously defend the proceeding to judgment, and on appeal if it was unsuccessful at trial. This points in favour of settlement approval. The complexity and likely duration of the litigation 52 Newcrest is Australia's largest gold mining company and the fourth largest in the world. It operates a number of gold mines located in Australia, Papua New Guinea, Indonesia and Cote D'Ivoire. 53 The Second Further Amended Statement of Claim (SFASOC) alleges failures by Newcrest to properly disclose information to the ASX and involves interrelated claims of misleading and deceptive conduct and breach of s 674(2) of the Corporations Act 2001 (Cth) (Corporations Act). It relates to events that took place with respect to Newcrest's business in the claim period and focuses primarily on information provided by Newcrest to the ASX throughout the claim period regarding future gold production over the period from the 2014 financial year (FY14) to the 2017 financial year (FY17) and expected capital expenditure for that period as compared against Newcrest's internal gold production expectations. The commencement of the claim period reflects Newcrest's release to the ASX of information as to its future gold production in a series of ASX releases (August 2012 Releases), confirmed by Newcrest's release of further information in February 2013 (February 2013 Release). The end of the claim period reflects Newcrest's release of an update concerning its future gold production expectations and other matters (characterised by Earglow as a Corrective Disclosure). 54 The SFASOC alleges that the representations conveyed in the August 2012 Releases (August 2012 Representations) were inconsistent with the reality of the amount of gold that Newcrest was in fact likely to produce based on its long-term planning documents for each of the key mines. It alleges that notwithstanding that it had become impossible for Newcrest to achieve its published gold forecast at the level of capital expenditure indicated in the August 2012 Releases, Newcrest did not withdraw the August 2012 Representations and then effectively repeated its earlier messages about gold production in February 2013. It also alleges largely related breaches of s 674(2) of the Corporations Act by Newcrest failing to disclose information to the ASX which was material to the price of Newcrest shares. 55 Some of the alleged misleading representations or non-disclosures relate to the whole claim period, some commence during the period, and one commences just over one week before the end of the claim period and finishes at the end of the claim period. 56 Newcrest largely admits one of the allegations in the SFASOC, described by Earglow as the "Selective Briefing Claim". It admits that its investor relations manager provided certain institutional analysts with information regarding management's expectations for FY14 gold production which it did not disclose to the ASX. It conceded that it had breached s 674 of the Corporations Act in not disclosing that information to the market from 4 June 2013 (that is, in the last three days of the claim period). The Australian Securities and Investments Commission carried out an investigation into Newcrest's conduct and commenced a proceeding against it which resulted in the imposition of $1.2 million in pecuniary penalties: see Australian Securities and Investments Commission v Newcrest Mining Limited (2014) 101 ACSR 46; [2014] FCA 698 (the ASIC proceeding). 57 The SFASOC is largely focussed on what Newcrest ought to have known. It does not allege that Newcrest deliberately withheld relevant information from the market (except in respect to the Selective Briefing Claim). Earglow seeks to make out that Newcrest was "aware" of material information through inferences drawn from other matters supported by the views of its mining and accounting experts. It argues that Newcrest's internal modelling supported different conclusions from those reached by Newcrest at relevant points in time and that Newcrest should have reached the same or similar conclusions. 58 Newcrest strenuously denies that it made the alleged representations and argues that: (a) it did not provide a guidance or outlook figure for future gold production for any year other than FY17 and did not represent that there would be a constant growth in gold production of 5-10% per annum over the five-year period from FY12; (b) it did not represent that its FY14-FY17 gold production "would" or "was likely to" be at certain levels, and such a representation would be inconsistent with the very nature of the forward-looking gold production information it provided. Newcrest argues that, if the alleged representations were made, they only spoke of its production expectations or aspirations as at the date of issue of the August 2012 and February 2013 Releases. The estimates of future gold production were expressly characterised by Newcrest, via the disclaimers, as point in time estimates, they were not "continuing" representations as alleged and were not capable of being relied upon by Earglow and causing loss by reason of acquisitions of shares made through the claim period. 59 Newcrest also says that even if the alleged representations were made they were not misleading or deceptive as they were either: (a) accurate statements as to Newcrest's then current expectations regarding its future gold production; or (b) representations as to future matters which were accurate in the case of FY14 gold production, and in respect of which the time for performance had not arrived in the case of FY17 gold production; or (c) representations as to future matters and/or matters of opinion made on reasonable grounds. Newcrest filed detailed evidence to support the existence of reasonable grounds for its statements regarding future gold production. It says that Earglow's expert evidence as to future gold production would not be of material assistance to the Court as it was directed to whether Newcrest ought to have come up with different forward-looking production guidance rather than going to the existence or otherwise of reasonable grounds. 60 Newcrest argues that the alleged material information relating to its future gold outlook for FY14-FY17 necessarily comprised matters of opinion. Moreover, it said that such forecasts were only disclosable to the ASX if they were held by the Board and senior management and they were not. It argues that the information within Newcrest was the product of ongoing iterations of planning documents and had not been seen, adopted or endorsed by the Board and were for internal management purposes. Therefore, Newcrest says it did not have any "information" that was disclosable nor was it "aware" of such information. 61 It also says the information was not sufficiently material because Earglow did not allege that Newcrest was obliged to disclose to the market a different gold production outlook, only that the gold production outlook it provided was "not reliable" or was unlikely to be achieved. It argues that such a disclosure would not be meaningful and would do little more than raise questions about the magnitude of any likely departure from the earlier provided outlook. It says that the information that the forward-looking statements carried inherent risk and uncertainty was "generally available", particularly because of the express disclaimer in the FY12 Results Presentation. 62 Newcrest also argues that it was not required to disclose that it was likely to take a substantial impairment charge over its "at risk" mines and/or that it was unlikely to pay a final dividend for various reasons. 63 The evidence filed by the parties includes: (a) statements by 19 lay witnesses for Newcrest, most of which speak to technical issues concerning the operation of Newcrest's individual mines; (b) an analyst from UBS, subpoenaed by Newcrest; (c) a mining expert for Earglow, Mr Gemmel; (d) two expert accounting witnesses, one for each party; (e) three expert "materiality" witnesses (as to the materiality of the alleged non-disclosed information in relation to the share price), one for Earglow, and two for Newcrest; (f) two expert economists who undertook "event studies" (to show the losses suffered through the alleged non-disclosures), Mr Torchio for Earglow and Dr Unni for Newcrest. 64 The case is very factually and technically complex. The nature of Earglow's claims are that it was the accumulation of a large number of facts, some interrelated and some independent, that should have caused Newcrest to make releases to the ASX that differed from the releases it actually made. 65 In part the factual complexity arises from the requirement for Earglow to establish what the more realistic quantum of Newcrest gold production would be at various different mines at various future points in time, which is a highly technical matter. Earglow filed evidence from Mr Gemell based on Newcrest's internal planning documents in which he put forward his assessment of the likely production outcomes if different assumptions were made concerning capital expenditure. In response, Newcrest filed statements by a large number of experienced mining executives located at the mines who were tasked with operating them and achieving production and capital expenditure outcomes, as well as members of senior management and members of the Newcrest Board. 66 The factual complexity also relates to the interplay between factors such as: (a) the complexities and general uncertainties attendant upon Newcrest's business. The level of production at a given goldmine may be affected by a number of factors many of which may be difficult to predict with accuracy; (b) the variety of conditions affecting each of Newcrest's mines. Newcrest's mines are located in different geographical areas and face different challenges which render accurate production forecasts difficult; (c) the fact that Newcrest's production information is derived from the individual production inputs from each of Newcrest's mines and errors with respect to expected production at one mine might be offset by counterbalancing errors at another mine; (d) the different claims as to why Newcrest production forecasts were unreliable focus on different and technical aspects of each mine; (e) Newcrest's production guidance to the ASX was based on future production at multiple sites which had the capacity to alter its future production. If it was experiencing production shortfalls at one site it could take steps to increase production at other sites so as to meet production guidance; (f) Newcrest's business is sensitive to changes in the short-term and long-term gold price and some of its mines are affected by exchange rate fluctuations; and (g) the extent to which capital expenditure on plant and equipment will increase or maintain gold production is complex and difficult to predict. 67 Against the backdrop of this factual complexity, Earglow has the burden of establishing facts sufficient to establish matters including : (a) that the production outcomes forecast by Newcrest were inaccurate and/or unlikely; (b) the more probable production outcomes of each of Newcrest's mines at different points in the claim period, including the assumptions and assessments underpinning Earglow's evidence as to the likely production outcomes and the interrelationship between capital expenditure and production; (c) that Newcrest's management ought to have been aware of the more likely production outcomes; (d) that Newcrest's conclusions as to the carrying value of its "at risk" mines were unsound; (e) the likely quantum of the impairments that Newcrest ought to have recognised in relation to its "at risk" mines, including the assumptions underpinning Earglow's evidence as to the impairments to those mines and the likely production outcomes at those mines; (f) that Newcrest's management ought to have been aware of those impairments; (g) the causal nexus between the likely impairments and Newcrest's unwillingness to pay a final dividend; (h) the likely attitude and reaction of the share market to the relevant information had it been disclosed in the manner in which Earglow says it should have been disclosed; (i) the causal nexus between the alleged Selective Briefing, the publication of the relevant analysts' reports and the share price reaction; and (j) the causal nexus between the Corrective Disclosure and the share price reaction. 68 The case also includes some strenuously contested legal issues. One issue relates to how causally related loss may be established. The SFASOC alleges that, while some class members directly relied upon Newcrest's representations, the balance of class members rely on indirect or "market-based" causation. Newcrest contends that such a causal mechanism is not available at law. In Re HIH Insurance Ltd (In Liq) (2016) 113 ACSR 318; [2016] NSWSC 482 Brereton J accepted a market-based theory of causation but the question has not been decided by an intermediate court of appeal. Another issue is the proper meaning of "awareness" under the continuous disclosure regime. 69 There is also an issue as to the correct loss measurement methodology in the context of alleged contraventions that have had the effect of increasing or unjustifiably maintaining the price of shares on the ASX. The pleadings contemplate four different methodologies namely: (a) Loss Methodology 1 - the no transaction methodology. This assumes that the shareholder would not have purchased Newcrest shares had the market been properly informed; (b) Loss Methodology 2 (LM2) and Loss Methodology 3 (LM3) - these methodologies seek to identify the amount by which each class member paid too much for their Newcrest shares by reason of Newcrest's misconduct. The difference between LM2 and LM3 turns on how inflation "received" by the shareholder upon the sale of shares (at an inflated price) during the claim period is treated. LM2 matches share sales during the period with share acquisitions during the period. LM3 aggregates inflation paid on share acquisitions during the claim period and nets the inflation paid on share acquisitions against inflation received upon share sales. (c) Loss Methodology 4 (LM4) reflects Earglow's argument that loss and damage arises upon revelation to the market of previously undisclosed information relevant to the price of Newcrest shares, rather than the (conventional) approach that loss and damage crystallises at the point class members purchased Newcrest shares at an inflated price. Earglow takes the position that LM4 reflects the best methodology to be applied, although it seeks to leave open the other methodologies. The respondent argues that none of the identified methodologies are tenable. There is also a related and significant issue as to whether Earglow's evidence establishes loss. 70 The trial was due to commence on 29 February 2016 and was set down for 12 to 14 weeks. If the trial went ahead and judgment was given in favour of Earglow on the common issues there is a real risk of Earglow incurring significant further costs and delays in defending an appeal or appeals and obtaining recovery for the group members. The likelihood of an appeal or appeals and their implications for group members in terms of delay, uncertainty and costs is a relevant factor in settlement approval: see Kirby v Centro Properties Limited (No 6) [2012] FCA 650 at [4] (Middleton J). 71 The high level of factual and legal complexity and the likelihood that the litigation will continue if Earglow was successful at trial strongly points to approval of the settlement. It is difficult for the applicant to be confident of the outcome in such a complex and hotly contested case and a "bird in the hand" approach to settlement is well understandable. The risks of establishing liability and in relation to loss and damage 72 The high level of factual complexity, the risk that Earglow would be unable to establish some of the factual matters underpinning its claims, and the contested legal issues on liability are such that there are significant risks for Earglow in establishing liability. It seems unlikely that that Earglow would have been entirely successful on all aspects of its claim and the best that it could hope for was partial success. The confidential Counsels' Opinion comprehensively deals with the risks of establishing liability and I am satisfied that the settlement has been reached having regard to a full appreciation of those risks. 73 There are also material risks for Earglow in relation to loss and damage. As Earglow concedes, some of these legal issues are effectively "all or nothing" propositions, such that failure would seriously undermine recovery for the class as a whole. The resolution of one or more of these issues in favour of the respondent could have a significant impact on the overall quantum of class members' recoveries. 74 In particular I note that Earglow relies upon the evidence of the event study undertaken by Mr Torchio. The event study in his report is based on LM4 and it does not include a full event study that models the inflation in the price of Newcrest shares over the whole of the period. This poses a material risk in relation to establishing loss. Earglow's evidence will only extend to other loss measurement methodologies and periods by extrapolation from Mr Torchio's report. The respondent's event study expert, Dr Unni, opines that the Newcrest share price was not inflated as a result of the alleged misleading representations or non-disclosures, and there is no loss. 75 The material risks on liability and quantum strongly point to settlement approval. Comparison of the settlement against Earglow's and class members' best recovery and in light of the risks of the litigation 76 Earglow submits, and I accept, that the complexity of the case and the all or nothing nature of some of the legal issues make it difficult to predict the best recovery. Having said this, it is likely that the best case scenario for Earglow and class members (if the case was entirely successful on the pleaded claims and under the LM2, LM3 or LM4 methodologies) is that they would recover damages significantly greater than the $36 million inclusive of costs settlement that was achieved. 77 I infer from the materials that the proposed settlement falls well short of the settlement quantum that Earglow, Slater & Gordon and the Funder were endeavouring to achieve in commencing the proceedings. However, that does not take the issue very far. The question is whether, having regard to the risks on liability and quantum, the proposed settlement falls within the range of recovery by Earglow and class members that is reasonable. 78 Having regard to the material risks on liability and quantum the settlement sum is within the reasonable range. C. THE REASONABLENESS OF THE DISTRIBUTION SCHEME 79 It is axiomatic that for the proposed settlement to be fair and reasonable as between RCMs the Distribution Scheme must achieve a fair division of the proceeds of the settlement. 80 The Distribution Scheme provides that: (a) the following amounts be deducted from the settlement sum: (i) Earglow's legal costs; (ii) the costs of settlement approval and the actual and anticipated costs of administering the Distribution Scheme; (iii) Earglow's expenses incurred in its capacity as the applicant; and (iv) the funding commission to be paid to the Funder. (b) once those amounts are deducted, a "Loss Assessment Formula" is to be applied to determine each class member's share of the amount available for distribution. The Loss Assessment Formula applies a blend of two of the pleaded loss methodologies with discounts based on the respective strengths of claims relating to different periods of time in the claim period; (c) in relation to funded RCMs the Funder will be paid a funding commission calculated by reference to each class member's recovery (in accordance with the funding commission rates in the funding agreement); (d) in relation to unfunded RCMs, the Distribution Scheme includes a "funding equalisation mechanism" under which an amount equivalent to the funding commission that would have been payable if the class member had entered into a funding agreement is deducted from that class member's entitlement, and the sum of those amounts redistributed on a pro rata basis to all class members; and (e) a principal solicitor employed by Slater & Gordon is to be the Administrator of the Distribution Scheme. The Administrator is required to act independently and make decisions that benefit the body of RCMs as a whole rather than acting as the lawyer for any individual RCM. 81 In summary, putting to one side the reasonableness of the funding commission, I am satisfied that the Distribution Scheme is fair and reasonable in the interests of class members because: (a) the Distribution Scheme subjects all claims to the same principles and procedures for assessing each individual class member's share of the available compensation; (b) the funding equalisation mechanism for unfunded RCMs is fair and reasonable; (c) the appointment of an employed solicitor of Slater & Gordon as the Administrator is reasonable; (d) the assessment methodology under the Distribution Scheme is likely to deliver a broadly fair relative payout as between individual class members; (e) to the extent that the Distribution Scheme involves matters of judgment it is consistent with the case that was to be advanced to trial and supportable as a matter of legal principle; (f) the Distribution Scheme contains appropriate review mechanisms; and (g) the deductions from the settlement sum of the applicant's legal costs, the applicant's expenses claim, the legal costs of settlement approval and administration costs of the Distribution Scheme are fair and reasonable. 82 I now deal with the features of the Distribution Scheme in more detail. The funding equalisation mechanism 83 If not for the funding equalisation mechanism unfunded RCMs would receive more "in hand" than funded RCMs who effectively financed the proceeding by pooling their promises to pay the Funder a funding commission. This mechanism is fair and reasonable because it achieves equality of treatment between class members. I can see no good reason why funded RCMs should carry the litigation funding costs of the proceeding alone and unfunded RCMs should be permitted to take the benefit of the proposed settlement but not pay a proportionate share of the funding costs of achieving that settlement. Such orders have been made in numerous cases: see for example Dorajay Pty Ltd v Aristocrat Leisure Limited [2009] FCA 19 at [14] and [17] (Stone J); P Dawson Nominees Pty Ltd v Brookfield Multiplex Limited (No 4) [2010] FCA 1029 (Dawson Nominees No 4) at [28] (Finkelstein J); Modtech Engineering Pty Ltd v GPT Management Holdings Ltd [2013] FCA 626 (Modtech) at [58] (Gordon J). The appointment of Mr Finney as Administrator 84 Under the Distribution Scheme an employed solicitor of Slater & Gordon, Timothy Finney, is appointed as Administrator. In acting as Administrator he will have an obligation to act impartially, not as the solicitor for any class member. 85 I accept Earglow's submission that Mr Finney has extensive past experience acting in this kind of role and that he possesses the necessary specialised legal skills. The efficient administration of the Distribution Scheme will be assisted by these skills. It is optimal that the Administrator has familiarity with the subject matter of the proceeding so that the claims can be finalised as quickly as possible and so that there is consistency across the assessments. The most readily available source of such skills is Mr Finney, the lawyer with the most intimate knowledge of the issues. 86 The Distribution Scheme involves distribution of a fixed settlement sum and there is a risk of conflicts of interest between competing claimants. To a limited extent the Administrator's task may involve balancing the different interests of class members. That is another reason to appoint Mr Finney because he is an experienced solicitor, he should be conscious of the risk of such conflicts, and he should understand the need to refer issues to the Court for guidance in the event that it becomes necessary (as the Distribution Scheme provides). This feature of the Distribution Scheme is fair and reasonable. The Loss Assessment Formula 87 I consider the loss assessment methodology under the Scheme is likely to deliver a broadly fair relative payout as between individual class members. While it incorporates what can be described as "judgment calls" as to the strengths of class members' claims at different points through the claim period, to the extent that the Distribution Scheme involves matters of judgment it is consistent with the case that was to be advanced to trial and supportable as a matter of legal principle. It is likely that the cost of a more perfect assessment procedure would erode the notional benefit of a more exact distribution: see Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1468 at [43] (Moshinsky J). This feature of the Distribution Scheme is fair and reasonable. The review mechanisms 88 Under the Distribution Scheme individual RCMs have the opportunity to correct any perceived errors in the initial assessment made in their claim and are able to seek a review of the Administrator's assessment. The review mechanisms operate to discourage unmeritorious requests for reviews and provide an appropriate avenue by which legitimate issues can be resolved. I consider the review mechanisms to be fair and reasonable. The deduction of Earglow's legal costs 89 The Distribution Scheme provides that an amount in reimbursement of Earglow's legal costs is to be deducted from the settlement sum prior to distribution to RCM's. This provision reflects the funding agreements and as far as funded RCMs are concerned a deduction is appropriate. 90 However, unfunded RCMs did not retain solicitors and this provision of the Distribution Scheme will mean that they will pay a proportionate contribution to the legal costs incurred in the proceeding. I have no difficulty with this. It is fair and reasonable that unfunded RCMs pay a proportionate share of the legal costs incurred to obtain a settlement from which they claim a benefit. I can see no good reason why funded RCMs, who effectively financed the proceeding, should carry the burden of legal costs alone. Orders requiring that unfunded or non-client class members make a proportionate contribution to legal costs incurred in bringing a class action from which they claim a benefit have been made in numerous cases: Thomas v Powercor Australia Ltd [2011] VSC 614 at [30] (Beach J); Modtech at [24]; Kelly at [325]-[326]; Newstart at [40]. Such orders are consistent with the policy behind s 33ZJ of the Act which has the aim that, upon success in a class action, class members pay a reasonable share of the applicant's costs. 91 There is, though, a question as to the reasonableness of the legal costs proposed to be deducted. The Court has a supervisory role in relation to costs paid by class members and should scrutinise costs in the settlement approval process: Kelly at [11], [333] and [346]. 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": Courtney v Medtel Pty Limited (No 5) (2004) 212 ALR 311; [2004] FCA 1406 at [61] (Sackville J); Modtech at [32]; Newstart at [14]. 92 For the Court to obtain such satisfaction usually requires expert evidence from an independent costs consultant: see for example Williams v FAI Home Security Pty Ltd (No 5) [2001] FCA 399 at [19] (Goldberg J); King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) [2003] FCA 980 at [15] (Moore J); Guglielmin v Trescowthick (No 5) [2006] FCA 1385 at [16] (Mansfield J); Jarra Creek Central Packing Shed Pty Ltd v Amcor Limited [2011] FCA 671 at [130] (Jacobson J). 93 In the present case an experienced costs consultant, Elizabeth Harris, has provided reports dated 5 April 2016 and 12 April 2016 (Costs Reports) which show that she: (a) considered the provisions of the Legal Profession Act 2004 (Vic) in relation to the basis of charges between a Victorian legal practitioner and its client and costs recoverable pursuant to a legal costs agreement (LCA), including as to the scope of the retainer, the complexity, novelty or difficulty of the matter, the quality of the work done, the place where and the circumstances in which the legal services were provided, the time within which the work was required to be done and other relevant matters; (b) considered the terms of the funding agreements between the Funder and Earglow and funded RCMs, the Terms of Engagement between the Funder and Slater & Gordon, and the LCAs between Slater & Gordon and Earglow and funded RCMs; (c) took into account the costs estimates provided by Slater & Gordon at different points; (d) considered the hourly rates proposed to be charged by Slater & Gordon and expressed the view that the rates charged are within the range of rates charged by Australian law firms with the expertise and capacity to conduct class actions comparable to the present case; (e) considered whether the costs and disbursements were reasonable in amount, or reasonably incurred having regard to the circumstances in which the work was undertaken, including whether the work was undertaken efficiently and appropriately, whether the work was undertaken by a person at the appropriate level of seniority, whether the task and charge were appropriate having regard to the nature of the work, the time taken, and the ratio of work and interrelation of work undertaken by the solicitors and counsel retained; (f) considered the time records of Slater & Gordon, the nature of the time entries, and the total hours per day of recorded time, (g) reviewed sufficient parts of the electronic and hard copy file held by Slater & Gordon; (h) identified and considered whether it was appropriate that costs and disbursements incurred in relation to several discrete areas of work be recoverable. These areas included the "book build" and client engagement process, the cross-claims, the pre-litigation negotiation process, the intervention in the ASIC proceeding, the use of technology to verify share trading data, the use of non-lawyer internal experts, the level of non-chargeable research, and the level of non-chargeable administrative work; (i) identified and considered whether it was appropriate that various disbursements incurred be recoverable, including counsel's fees (including as to the reasonableness of interstate counsel's fees, the engagement of multiple senior counsel, and the engagement of counsel in relation to privilege issues), disbursements under numerous headings, experts fees, subpoena costs and the advice provided by another firm to persons relevant to the proceeding; and (j) applied the approach taken in Modtech, Modtech Engineering Pty Ltd v GPT Management Holdings Limited (No 2) [2013] FCA 1163 (Modtech No 2) (Gordon J), Matthews v AusNet Electricity Services Pty Ltd & Ors [2014] VSC 663 (Matthews) (Osborn JA), Rowe v AusNet Electricity Services Pty Ltd & Ors [2015] VSC 232 (Emerton J), including the requirement for an appropriate balance in relation to the level of information to be made available to the Court and the costs associated with the provision of that information: see Re Medforce Healthcare Services Ltd (in liq) [2001] 3 NZLR 145. 94 I consider Ms Harris did a thorough job and the Costs Reports comprehensively dealt with the relevant issues in relation to the reasonableness of Earglow's legal costs. Her opinion as to the reasonable costs in the proceeding is well-founded and largely reliable. 95 The professional costs charged by Slater & Gordon totalled $7,284,134.73 but in Ms Harris's opinion it was only appropriate to allow solicitor/own client professional costs in a total of $6,631,856.89, which constitutes a reduction of $652,277.84. I accept Ms Harris's opinion in that regard. 96 I also accept Ms Harris's view that it was appropriate to reduce the allowable disbursements incurred by Slater & Gordon but I take a different view in relation to one relatively minor component of the disbursements. Ms Harris did not allow all of $99,471.70 charged to Earglow by Ernst & Young for responding to a subpoena issued to it. Ms Harris accepted that the costs she disallowed were "likely to be reasonable", but she declined to positively express an opinion in that regard due to a partial lack of corroborating material provided by Ernst & Young. She only treated $57,511.30 as recoverable. 97 The corroborating material which was said to be insufficient concerned a time entry breakdown of three smaller invoices provided by Ernst & Young regarding its costs. It must be kept in mind that these were amounts charged to Earglow by an entity that was essentially opposed to it in the litigation. Unless Earglow proceeded to tax those charges it was required to pay the amount charged. Having regard to the amount disallowed, the time and expense involved in any taxation of costs and class members' interest in the distribution of monies without delay, I do not accept that the applicant was obliged to go to taxation or that it would have provided any significant benefit. The whole charge should be treated as recoverable. 98 Consistently with Ms Harris's report, but with that small change, I consider it to be fair and reasonable to allow a total of $10,279,057.12 (being professional fees of $6,631,856.90 and disbursements of $3,647,200.22) to be deducted from the settlement sum in reimbursement of Earglow's reasonable legal costs. The total legal costs fall within the range of the costs commonly approved in large complex class actions such as the present case. 99 Finally I note that the legal costs must be proportionate as well as reasonable: s 172 Legal Profession Uniform Law, Schedule 1 to Legal Profession Uniform Law Application Act 2014 (Vic) (although noting that the transitional provisions mean that this legislation does not apply to the present case). Total legal costs in the present case make up almost 30% of the settlement sum and this might be said to be disproportionate. However, proportionality of costs is not necessarily to be measured against the result achieved in the litigation and it can be appropriate to assess it against the amount in dispute. The materials before me tend to show that the costs incurred reflect the view taken by the applicant's legal representatives of the merits and quantum of the case (for which there were reasonable grounds) and their attempts to achieve a better result for class members. The fact that the costs to be deducted make up almost 30% of the settlement does not mean the settlement is not fair and reasonable in the interests of class members. The reimbursement of Earglow's expenses 100 The Distribution Scheme provides for an amount to be deducted from the settlement sum in reimbursement of Earglow's expenses incurred in prosecuting the proceeding on behalf of the class as a whole. 101 Earglow does not seek an "incentive" payment of the type that is common in class actions in the USA, which operate to incentivise a representative applicant to come forward when none are forthcoming and to compensate the applicant for the risks it takes and the work it performs on behalf of the class. Having said this, I agree with Beach J that it should not be assumed that an incentive or reward style payment can never be authorised or justified and it will depend upon the circumstances: Farey v National Australia Bank Ltd [2016] FCA 340 (Farey) at [43] (Beach J). 102 When Earglow agreed to act as the applicant in the proceeding it did so on the express basis that its managing director, Mr Boorne, would be entitled to render invoices for the time and expenses incurred in acting as the representative party, that these would be treated as a disbursement and paid by the Funder, and that the Funder would bear the costs of any shortfall in the event of the Court not approving reimbursement of the whole of the invoices rendered. 103 Mr Boorne rendered invoices in September 2014 and March 2016 seeking payment of an amount representing: (a) 94.17 hours spent by Mr Boorne in attending decision-making meetings, the mediation and obtaining independent legal advice in relation to Earglow's exposure to adverse costs liability; and (b) $10,261.26 for out-of-pocket expenses incurred in obtaining the independent legal advice. 104 The courts have accepted on numerous occasions that an applicant who has sacrificed time and incurred expenses in the interests of prosecuting a proceeding on behalf of the class as a whole should be entitled to reimbursement from the settlement sum: see Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) 236 ALR 322; [2006] FCA 1388 at [76] (Jessup J); Dawson Nominees No 4 at [29]; Matthews at [423]-[426]; Farey at [42]; Newstart at [47]. 105 A question arises as to the reasonableness of the expenses claimed. Ms Harris considered each aspect of the applicant's expenses claim, she did a thorough job and her opinion as to the expenses claim is well-founded and largely reliable. However, Ms Harris disallowed the applicant's time and out-of-pocket expenses in obtaining independent legal advice regarding its exposure to adverse costs liability. Ms Harris considered that this was not an expense incurred on behalf of the class. 106 I disagree. Earglow's exposure to a risk of a substantial adverse costs order only arose because it agreed to act as representative party for all class members. It had no exposure to adverse costs if it was just a class member in the proceeding (see s 43(1A) of the Act). It is often the case that a person taking on the role of applicant in a large class action will require legal advice as to exposure to adverse costs liability before and sometimes during the proceeding. Earglow is unlikely to have agreed to be the applicant and/or unlikely to have continued in that role unless it was satisfied in relation to that exposure. 107 It is fair and reasonable that class members be required to reimburse the costs of such advice from a successful outcome in the case, rather than the applicant being left to carry such costs alone. If not, claimants might be dissuaded from acting as the representative party, without whom there is no class action and the access to justice aims of the Part IVA regime would be frustrated. 108 I allow the deduction of $57,802.50 from the settlement sum in reimbursement of Mr Boorne's expenses claim because: (a) Earglow agreed to act as the applicant on the basis that Mr Boorne would be entitled to render invoices for time and expenses incurred in acting in that capacity; (b) it was disclosed to class members (at the time that each entered a funding agreement and LCA) that Earglow intended to make a claim for the time and expenses incurred in acting as a representative party; (c) Mr Boorne charged a rate of $419 per hour plus GST for the period up to September 2014 and $450 per hour plus GST for the period covered by the March 2016 invoice. Having regard to the hourly rate charged by Mr Boorne in investment management services that he renders, the rates do not appear unreasonable; (d) the contemporaneous time records are reasonably detailed and supported by corresponding records in Slater & Gordon's time records; (e) the travel costs and document discovery costs appear reasonable; (f) it is appropriate that Earglow be reimbursed the time and cost of obtaining independent legal advice in relation to its adverse costs risks; and (g) the total hours and the overall quantum of Mr Boorne's claim are within the range of reimbursement payments in the empirical research undertaken by Professor Morabito: Morabito V, "An Empirical and Comparative Study of Reimbursement Payments to Australia's Class Representatives and Active Class Members" (2014) 33 Civil Justice Quarterly 175, 186: see also City of Swan v McGraw-Hill Companies, Inc [2016] FCA 343 (City of Swan) at [31] (Wigney J); Newstart at [43]. The deduction of the costs of the settlement approval application and the administration costs of the Distribution Scheme 109 The Distribution Scheme provides that the costs of the settlement approval application and the administration costs of the Distribution Scheme be deducted from the settlement sum. 110 There was a significant amount of legal work involved in the settlement approval application and, if settlement is approved, there is a significant amount of legal and administrative work involved in the administration of the Distribution Scheme. Both the settlement approval application and the proper administration of the Distribution Scheme are necessary costs of the proceeding and it is appropriate that such costs be deducted from the settlement sum. 111 Again a question arises as to the reasonableness of such costs. Ms Harris gave detailed consideration to the legal costs of the settlement approval hearing and the proposed costs of administering the Distribution Scheme. I accept her opinion and, consistently with that opinion, I consider it to be fair and reasonable that $429,706.25 be deducted from the settlement sum to cover such costs and disbursements. 112 I now deal with the deduction of the funding commission under the Distribution Scheme. D. THE REASONABLENESS OF THE FUNDING COMMISSION 113 The Distribution Scheme provides that an amount representing the funding commission payable by funded RCMs be deducted from their settlement amounts (as provided by their funding agreements) prior to the distribution to RCMs under the proposed settlement. 114 Clause 7 of the funding agreements provides that Earglow and funded class members authorise Slater & Gordon to pay the Funder a percentage funding commission ranging between 26% and 30%, depending upon how many relevant shares the class member acquired in the claim period. 115 The Funder has a contractual entitlement to be paid a funding commission but it is common ground between the parties that the Court has power to refuse to approve the proposed settlement on the basis that the quantum or rate of the funding commission is excessive. That power is plain from the terms of s 33V. 116 In Australian Securities and Investments Commission v Richards [2013] FCAFC 89 (Richards) (Jacobson, Middleton and Gordon JJ) the Full Court set aside settlement approval orders made by the primary judge. Under the settlement a 35% "funder's premium" of $28.875 million was to be deducted from the settlement sum and paid to a subset of class members who had provided monies for the litigation. The Full Court said (at [42]-[43]) that this deduction was not fair and reasonable for class members for two essential reasons: (a) because the legal firm acting for the applicant and some class members did not afford class members who were not clients of that firm an equal opportunity to share in the funder's premium (at [46]-[51]); and (b) because it was inappropriate to calculate the funder's premium by reference to the funding commissions charged by commercial litigation funders (at [52]). 117 The power to refuse settlement approval because a funding commission is excessive or disproportionate, notwithstanding that the applicant and class members agreed to it, was recognised by Wigney J in City of Swan at [30]. His Honour approved the settlement notwithstanding the "extremely large" funding commission charged (essentially because the applicants and class members had agreed to the funding commission and had not opposed settlement approval) but 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. 118 I respectfully agree with Wigney J. I do not, however, take his Honour to be proposing that the Court's power to refuse settlement approval is limited only to those cases where the funding commission is "so disproportionate" to the funder's risk and expense. The Court's power is not limited to such circumstances, and whether a funding commission is fair and reasonable may involve more considerations than just whether it is disproportionate: see, for example, Richards. I take a similar view to the remarks of Pagone J in Pathway Investments Pty Ltd & Anor v National Australia Bank Limited (No 3) [2012] VSC 625 (Pathway) at [20] where his Honour said that "it might be necessary for separate justification of the amounts paid to a litigation funder before the Court approves a settlement…". 119 In Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 6) [2011] FCA 277 at [38] and [42], Flick J observed that the Court has power to make an order approving a settlement but subject to a condition which limits the funding commission payable. His Honour said: Some reservation, however, was expressed during the course of the hearing (and still remains) as to the extent to which this Court should scrutinise both the quantum of monies proposed to be paid to a litigation funder and the percentage that that amount bore to the overall settlement. If the amount payable in any particular case is considered to be inappropriate, it would be regrettable if the only power that the Court has is to refuse approval of the settlement. It would be regrettable if a settlement which otherwise satisfied the legitimate but competing concerns of the parties to the litigation was not approved only by reason of the quantum of the amount payable to a litigation funder. … Short of refusing approval to a settlement, it may be that the power of the Court conferred by s 33ZF(1) to "make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding" confers a power to grant approval – but subject to a condition limiting the amount payable to the litigation funder. Obviously enough, even if the power could be so exercised, it should not be done without hearing submissions and perhaps evidence from the funder concerned. That evidence may address both the risks of providing funding in the proceeding presently before the Court and the risks incurred more generally in providing funding in other proceedings. Such a conditional order would not itself operate as any variation of the contractual agreement reached between the funder and each group member. His Honour did not further pursue his reservations because he considered the funding commission in that case to be reasonable, because it was lower than that paid in other proceedings and the overwhelming majority of class members expressed no objection to it. 120 Earglow argued that Flick J was wrong in concluding that the Court had power to make a settlement approval order conditional on a reduction in the funding commission. It submitted that, if the Court considered that the funding commission to be deducted from class members' settlement amounts under a proposed settlement was excessive or disproportionate, the Court's power was limited to either approving or refusing the settlement. I respectfully agree with Flick J as to the power to make such a conditional order. 121 I now turn to deal with the Court's power. The relevant legislative provisions 122 Section 33V of the Act provides: 33V Settlement and discontinuance - representative proceeding (1) A representative proceeding may not be settled or discontinued without the approval of the Court. (2) If the Court gives such approval, it may make such orders as are just with respect to the distribution of any money paid under a settlement or paid into the Court. 123 Section 33ZF provides: 33ZF General power of Court to make orders (1) In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding. (2) Subsection (1) does not limit the operation of section 22. 124 Section 33Z provides: 33Z Judgment – powers of the Court (1) The Court may, in determining a matter in a representative proceeding, do any one or more of the following: … (g) make such other order as the Court thinks just. 125 Section 23 provides : 23 Making of orders and issue of writs The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders…as the Court thinks appropriate. Earglow's contentions as to the Court's power 126 Earglow contended that there is no basis for interpreting ss 33V, 33ZF, 33Z or 23 as affording the Court power to interfere with class members' freely assumed contractual rights and obligations under a funding agreement. It argued that there is no power to approve, disapprove or otherwise directly vary amounts payable to a funder under its contractual arrangements with funded class members. It submitted that where, in the Court's opinion, the funding commission makes a proposed settlement unfair or unreasonable the proper order is to reject the proposed settlement. 127 On Earglow's submissions s 33V(2) is directed only to the distribution of a settlement amount to which the Court has given its approval. It argued that s 33V(2) empowers the Court to approve aspects of a settlement distribution scheme and to prohibit distributions to a funder that fall outside of its contractual entitlements under the funding agreements, but such an order would not amount to an approval, non-approval or variation of the funder's contractual rights. On its argument s 33V(2) goes no further than to confer a power to make orders as to how a settlement sum is to be distributed to and amongst class members and does not empower the Court to make orders affecting what those class members do with the distributions, including by meeting their contractual obligations to a funder. 128 Earglow also noted that funding agreements usually provide (as do the present funding agreements at cl. 8.3) that if the funding agreement or any part thereof is annulled, voided or held unenforceable the class member must do all things necessary to ensure that the funder receives any remuneration, entitlement or other benefit to which the funding agreement refers or contemplates. It argued that if the Court interfered with the operation of the funding agreement by setting a lower rate of funding commission the Funder would merely recover the balance of its contractual entitlements directly from class members either by consent or in separate proceedings. On its submissions, there would be no utility in making an order which had the effect of setting a lower funding commission but which had no ultimate monetary benefit for funded class members. 129 Earglow submitted that the powers under s 33V can be compared with the situation where a class action does not settle but instead proceeds to judgment. It argued that when a class action proceeds to judgment the Court's powers under ss 33Z and 33ZA with respect to the award of damages and distribution to class members do not include an ability to limit or vary the amounts payable to a funder under a funding agreement. It also contended that in assessing the reasonableness of the proposed settlement, consideration must be given to the fact that any award of damages to funded class members at the end of the trial would attract a funding commission in accordance with the terms of the funding agreements. 130 In relation to s 33ZF Earglow emphasised that the Court's power is confined to such orders as it considers necessary or appropriate to ensure that justice is done in the proceeding. On its submissions that expression confines the scope of the power to making orders pertaining to the attainment of justice in respect of the matters in issue between the parties to the proceeding. It argued that the rate of funding commission charged by a funder pursuant to a funding agreement falls outside this requirement, as it relates to a decision by a class member to pay a portion of any prospective settlement distribution entitlement to a third party. It went as far as to say that, even if the Court considered the funding agreement to be misleading or unlawful, that would be a controversy falling outside the scope of ensuring that justice is done in the proceeding. 131 In the alternative Earglow also contended that the language of s 33ZF enshrines an "element of necessity" (see Earglow at [33]) such that the Court can only make an order if it considers that justice will not be done without the order being made. It noted that the section does not prohibit conduct which is otherwise lawful (Courtney v Medtel Pty Limited (2002) 122 FCR 168; [2002] FCA 957 (Courtney) at [52] (Sackville J)) and argued that s 33ZF does not empower the Court to replace a just outcome with one that the Court considers to be more just. Rather, Earglow said, the power under the section is only relevant in circumstances where the Court considers that, unless it made a specific order in respect of the funder's entitlements to the funding commission, justice would not be done in the proceeding. It submitted that interference with the Funder's contractual rights to payment under the funding agreements would not have the requisite "element of necessity" such as to enliven the Court's power under the section. 132 In relation to s 33Z Earglow submitted that it confers a power on the Court to do particular things when "determining a matter in a representative proceeding" including making an award for damages. It said that the "matter" is the justiciable controversy between the parties and an application for settlement approval under s 33V does not involve the Court determining any such matter. It argued that even if an individual funded class member objected to the enforceability of the terms of the funding agreement it had entered into with a funder, that would be a controversy between that funded class member and the funder and it would not be between the parties to the proceeding. It said that the proper course for an affected class member or the funder would be to issue separate proceedings. Consideration as to the Court's power 133 The Court's principal task in a settlement approval application is to decide whether the proposed settlement is fair and reasonable having regard to the interests of class members to be bound to it. In a funded class action like the present case I consider that an element of that task must include having regard to the funding commission that will be payable by class members under the settlement, essentially because that commission will be deducted from their settlement amounts pursuant to the terms of the settlement for which approval is sought. The funding commission rate and aggregate quantum necessarily affect the fairness and reasonableness of the proposed settlement for class members because the deduction will directly impact on the quantum of compensation they will receive "in hand". 134 In my view the Court's power to make orders approving a proposed settlement but disallowing or varying the funding commission to be deducted from class members' settlement amounts under the settlement inheres in its powers: (a) to determine whether a proposed settlement is fair and reasonable (s 33V(1)) and upon settlement approval to "make such orders as are just with respect to the distribution of any money paid under a settlement" ( 33V(2)) (emphasis added); (b) to "make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding" including on its own motion (s 33ZF(1); (c) to "make such other order as the Court thinks just" (s 33Z); and/or (d) "to make orders of such kinds… as the Court thinks appropriate" (s 23). 135 There is force in Earglow's contention that funded RCMs freely entered into the funding agreement and that the Court should not interfere with contractual rights and obligations of the Funder and class members, but that force is undermined in the circumstances of the present case. 136 I say this, first, because the contention is based on the misconception that the deduction of an amount for the funding commission only relates to class members who entered into funding agreements. That is not the case. The Distribution Scheme includes a funding equalisation mechanism which applies to unfunded RCMs who chose not to enter into a funding agreement, the effect of which is that unfunded RCMs are saddled with the deduction of an amount based on the funding commission they would have paid had they done so at a rate to which they have not agreed. 137 I would not conclude that the proposed settlement is fair and reasonable for unfunded RCMs unless I approve the rate of deduction under the funding equalisation mechanism and that rate is the equivalent of the funding commission rate. If the funding commission rate is excessive then the deduction of an equivalent amount under a funding equalisation order will not be fair and reasonable. 138 Second, although funded RCMs made a choice in entering into the funding agreements, at least for small shareholders that choice was limited. It is likely that their only avenue to recover their alleged losses was through the proceeding, that they suffered a significant information asymmetry compared to the Funder in relation to the costs and risks the Funder assumed, and their opportunity for negotiation of the funding commission was limited or non-existent: see Money Max at [72]. 139 Third, in entering into funding agreements with class members the Funder must have understood that the Court has a protective role in relation to class members' interests, that their claims could not be settled without Court approval, and that settlement approval could be refused if the Court considered the funding commission to be excessive. Earglow expressly accepted the Court's power in that regard. 140 I have no difficulty in accepting that it is no part of the Court's task in a settlement approval application to inquire or intrude into what class members might choose to do with any settlement monies they receive. However, I consider the Court's task includes assessing whether it is fair and reasonable in the interests of class members that charges incurred in relation to the proceeding be deducted from their settlement amounts under the proposed settlement. 141 Section 33ZF(1) is intended to confer on the Court the "widest possible power" and is aimed at empowering the Court to deal with the types of unforeseen difficulties that might arise in the introduction into Australian law of the (then) novel representative procedure regime in Part IVA. The section should be construed as liberally as its terms and context permit and should not be given a narrow construction. It should not be hedged in by making implications or imposing limitations not found in its express words: McMullin v ICI Australia Operations Pty Ltd (No 6) (1998) 84 FCR 1 (McMullin No 6); [1998] FCA 658 at 4; Courtney at [48]; Owners of the Ship "Shin Kobe Maru" v Empire Shipping Company Inc (1994) 181 CLR 404 at 421; [1994] HCA 54 at [29]; Money Max at [161]-[165]. 142 The same can be said of s 33Z. In Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540; [2002] HCA 54 at [267] Kirby J observed: From these provisions, it is clear that the Parliament intended to arm the Federal Court with a wide and flexible armoury of powers, capable of being adapted to the particular needs and novel circumstances of representative proceedings and any matter in such proceedings. Representative proceedings are not traditional litigation; nor should they be subjected to all of the requirements of such litigation. To confine the grant of such a statutory power is incompatible with the oft-repeated statements in this Court concerning the construction of grants of such powers to superior courts. In particular, it is inappropriate to impose upon such grants of power strictures derived from earlier times and traditional powers in litigation between individual parties. (Citations omitted.) 143 The requirement for Court oversight of litigation funding charges so as to protect class members' interests is a relatively new development. There is no sign that the drafters of the Australian Law Reform Commission Report (Australian Law Reform Commission, Grouped Proceedings in the Federal Court, Report No 46 (Canberra, 1988)) or Parliament in enacting Part IVA foresaw the inception and development of commercial third-party litigation funding of class actions. The first funded shareholder class action was filed in 2003 and the use of litigation funding in class actions has grown significantly since that time. In the last six years 49.5% of all class actions filed in this Court have been funded by a litigation funder and since 2003 there has only been one shareholder class action in Australia resolved without the involvement of a litigation funder: Morabito V, An Empirical Study of Australia's Class Action Regimes, Second Report (Australian Research Council, September 2010) (Second Empirical Report) p 37; Morabito V, An Empirical Study of Australia's Class Action Regimes, Fourth Report (Australian Research Council, July 2016) p 8; Money Max (at [73]-[76]). 144 The result of these developments is that litigation funding charges have become a standard cost for class members in funded class actions. Against this backdrop, in Money Max the Full Court said (at [72]): It is appropriate that the Court exercise some oversight over litigation funding charges to class members when: (a) the largest single deduction from the recoveries of class members in funded class actions is usually the funding commission (or an equivalent amount under a funding equalisation order); (b) there is often a significant information asymmetry between the funder and the class members in relation to the costs and risks associated with the action; (c) at least for some claimants the only opportunity they have to recover losses suffered through alleged breaches of the law is through the funded class action; and (d) for small shareholders the opportunity for negotiation of the funding commission is limited or non-existent. 145 The breadth of the Court's powers under ss 33ZF, 33Z and 23 is confirmed by its jurisdiction to control representative proceedings so as to ensure fairness to class members. In Carnie v Esanda Finance Corporations Ltd (1995) 182 CLR 398 at 408; [1995] HCA 9 at [5] Brennan J observed that …it is precisely because of the flexible utility of the representative action that judicial control of its conduct is important, to ensure not only that the litigation as between the plaintiff and defendant is efficiently disposed of but also that the interests of those who are absent but represented are not prejudiced by the conduct of the litigation on their behalf. Although Carnie concerned a representative proceeding under the Supreme Court Rules 1970 (NSW) rather than the Part IVA regime, Brennan J's observation is equally apposite to provisions of the kind found in Part IVA: Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1; [2002] HCA 27 at [21] (Gleeson CJ). Sections 33ZF and 33Z are directed, at least in part, to the issue of judicial control of representative proceedings so as to protect class members' interests. 146 In the context of a settlement approval application under s 33V the Court's role to protect class members' interests is plain. In Richards (at [8]) the Full Court said: [t]he role of the court is important and onerous. It is protective. It assumes a role akin to that of a guardian, not unlike the role a court assumes when approving infant compromises. In the current context, the court's role is to protect those group members who are not represented by [the solicitors for the applicant] and whose interests may be prejudiced by their absence. 147 There is a parallel in the Court's power to oversee the legal costs charged pursuant to legal costs agreements, which are proposed to be deducted from class members' settlement amounts. Section 23 of the Act includes a power to make orders in relation to solicitor-client legal costs: Keith Hercules & Sons v Steedman (1987) 17 FCR 290 at 300 (Lockhart J), 302-303 (Sheppard J); [1987] FCA 730. In representative proceedings s 33ZF provides an additional general power in relation to legal costs proposed to be charged to class members: Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] 94 FCR 167; [1999] FCA 1363 at [36] (Merkel J). The Court is not bound simply to accept the fee rates proposed to be charged under legal costs agreements between solicitors and class members and seeks to ensure that only reasonable legal costs are charged to class members: see Modtech at [26]-[54]: Kelly at [324]-[348]. 148 Earglow did not argue that if the Court considered the legal costs charged to be excessive the Court only had power to refuse to approve the settlement, and it accepted that the Court has power to approve the proposed settlement but reduce the legal costs to be deducted. Earglow's acceptance of the Court's power in that regard is discordant with its contention that the Court has no power to approve settlement but reduce the funding commission to be deducted. 149 If a proposed settlement is fair and reasonable except that the Court considers the claimed legal costs to be excessive, it is difficult to see why it would be appropriate (or fair and reasonable in the interest of class members) for the Court to make orders refusing settlement approval. It would be quicker, cheaper and more efficient and therefore consistent with the overarching purpose in s 37M of the Act, and also just and appropriate, to approve the settlement but order that only reasonable legal costs be deducted from the settlement. I note that in Modtech Gordon J was not satisfied as to the reasonableness of the applicant's legal costs (at [24]-[54]) or the reasonableness of the applicant's expenses claim (at [62]-[73]). Her Honour directed the parties to file an amended settlement distribution scheme and, once that had occurred, made orders approving the settlement. The issues surrounding the quantum of the applicant's legal costs and expenses claim were put over to a later hearing (Modtech No 2 at [3]) and her Honour ultimately approved the applicant's legal costs and expenses in a reduced quantum. 150 The same can be said where a proposed settlement is fair and reasonable in the interests of class members except that the Court considers the funding commission to be excessive. In such circumstances it is quicker, cheaper and more efficient (and just and appropriate in the interests of class members) to approve the settlement and reduce the funding commission. There are, of course, specific legislative provisions which empower Court supervision of the reasonableness of legal costs (e.g. the Legal Profession Uniform Law) but there is no reason in principle for treating litigation funding costs incurred to achieve a settlement differently from legal costs incurred to achieve the settlement": Money Max (at [71]). 151 I can see little merit in Earglow's contention that the scope of the Court's power under ss 33ZF(1) and 33Z is confined to making orders in respect of the matters in issue between the parties to the proceeding. 152 First, the aim of the provisions is to empower the Court to deal with unforeseen difficulties arising from the introduction of the new Part IVA procedure (McMullin No 6 at 4; Courtney at [48]) which speaks against so confining the scope of the power. 153 Second, in a settlement approval application the Court's central task is to assess whether a settlement is fair and reasonable in the interests of class members to be bound to it and they are not parties to the proceeding. That assessment may relate to issues as between class members and have little to do with matters in issue between the applicant and respondent. I note that in Richards the Full Court set aside settlement approval for reasons that included the unfairness of the proposed funder's premium as between class members and unrelated to matters in issue between the parties. 154 Third, it is implicit in Earglow's acceptance of the Court's power to refuse settlement approval if the funding commission charged to class members is excessive, that the Court is empowered to make orders in respect of matters that are not in issue between the parties. 155 Earglow's contention that, even if the Court considered that a funding agreement is misleading or unlawful, that that would be a controversy falling outside the scope of ensuring that justice is done "in the proceeding", is impossible to accept. If class members were misled as to the requirement to pay a funding commission I would have no difficulty in concluding that a settlement that proposed the deduction of that commission from class members' settlement amounts was not fair or reasonable in their interests. 156 I do not accept Earglow's submissions as to the "element of necessity" required for an order under s 33ZF. The requirement that an order to disallow or to reduce the funding commission can only be made if the Court thinks it "appropriate or necessary to ensure that justice is done in the proceeding" does not mean that the Court must consider that justice is certain (in the sense of "ensured") if the proposed order is made or that injustice is certain if the order is not made. It requires only that the proposed order be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding: Money Max at [165]. 157 I conclude that, if in a settlement approval application the Court considers the proposed settlement is fair and reasonable except that the funding commission is excessive or exorbitant, the Court has power to approve the settlement and reduce the funding commission to be deducted pursuant to the terms of the settlement. Having regard to ss 33V, 33ZF(1), 33Z(1)(g) and 23 I do not accept that the Court's powers are limited to a binary choice between approving or rejecting the proposed settlement. In such circumstances it may be "just", "appropriate", or "appropriate or necessary to ensure that justice is done in the proceeding" that the Court make orders approving the settlement but reducing the funding commission to be deducted under the settlement. 158 It is unnecessary to go far into Earglow's contention that if orders are made to reduce the funding commission that may be deducted under a settlement to be approved, the Funder is contractually entitled to force class members to pay the shortfall in separate proceedings. If it becomes the case that commercial third party litigation funders seek to fund proceedings before the Court but to deny that they are bound by orders made in the proceeding, the Court could move to require that funders undertake to be so bound before class proceedings are permitted to continue. The Court should not be constrained in exercising its protective role in relation to class members' interests or allow its power to do so to be rendered ineffective. Consideration as whether the funding commission is unreasonable or excessive 159 I start by noting that it would be inappropriate to make orders to reduce the funding commission on the basis that it is excessive without the Funder being given an opportunity to make submissions and perhaps to put on evidence. In the present case the Funder was on notice of the Court's consideration of the funding commission. The Funder did not seek to appear but Earglow put on submissions consistent with the Funder's interests. There is, though, no issue in this regard as I am satisfied that the funding commission in the present case is fair and reasonable. 160 The Distribution Scheme provides for the funding commission to be deducted from the settlement sum prior to distribution to RCMs. The funding agreement provides (cl. 7) that the funding commission is calculated on the principal entitlement of each funded class member after the costs of bringing the proceeding are deducted. That approach is fair because the settlement must include an allowance for the applicant's legal costs. The funding agreement provides for the following funding commission rates, depending on the number of relevant shares class members acquired during the claim period: (a) 30% - when less than 1 million shares; (b) 28% - when between 1 and 5 million shares; and (c) 26% - when in excess of 5 million shares. 161 The aggregate funding commission to be deducted from the proposed settlement and paid to the Funder is $6,786,729.07. This equates to a weighted average funding commission for RCMs of 26.8%, which reflects some discounts to the commission amounts charged by the Funder. 162 I address the reasonableness of the funding commission to be deducted by reference to some considerations raised by the parties and the non-exhaustive list of considerations set out in Money Max (at [80]) where the Court said (although in a different context): …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. The benefit of the funding arrangements 163 Earglow contended, and I accept, that the Court should have regard to the fact that the Funder's agreement to provide funding allowed the proceeding to be commenced, and was a precondition to the class members receiving any benefit under the proposed settlement. 164 A large number of Newcrest shareholders claim to have been affected by its alleged misconduct, and their claims are a serious issue worthy of the Court's attention. Notwithstanding the seriousness of the alleged misconduct, for many individual shareholders the loss and damage they suffered is significantly disproportionate to the cost of prosecuting an individual claim. I accept that Earglow would not have brought the proceeding in the absence of litigation funding and that without litigation funding no remedy would be available to shareholders who have suffered loss. It cannot be doubted that litigation funding of class actions provides a real measure of access to justice: Money Max at [192]. In the present case litigation funding has allowed approximately 4,442 RCMs to recover some of their alleged losses, and without it they would have made no recovery. 165 Even so, litigation funding is allowed so as to facilitate access to justice and such access may be reduced by excessive funding charges. I accept that the funding arrangements have benefited class members, but the Court's role to protect class members' interests includes protecting them in relation to excessive litigation funding charges. A comparison of the funding commission with funding commissions in other Part IVA proceedings and/or what is available or common in the market 166 Earglow did not address funding commission rates in other Part IVA proceedings. There are, however, are some publicly available materials which indicate the commonly available rates. Having regard to these materials I consider the funding commission rates in the present case to be at the low end of the range of what is offered in shareholder class actions and/or what is available or common in the market. 167 The main litigation funders operating in Australia are Bentham IMF Ltd (IMF), Hillcrest Litigation Services Limited (HLS), LCM Litigation Fund Pty Ltd (LCM), Litigation Lending Services Pty Ltd, Comprehensive Legal Funding LLC (CLF) (the present Funder), International Litigation Funding Partners Pte Ltd (ILF) and Quantum Litigation Funding Pty Ltd (Quantum): see Productivity Commission, Productivity Commission Inquiry Report, Access to Justice Arrangements, Volume 2 (No 72, 5 September 2014) 608 (Productivity Commission Report). 168 In 2006 the Law Council of Australia reported that there were five main funders operating in Australia and they charged funding commission at rates between 15% and 40% of the result in the case: Graves D, Adams K and Betts J, Class Actions in Australia (2nd ed, Lawbook Co, 2012) p 816-817 and 829, citing Law Council of Australia, Litigation Funding - Standing Committee of Attorneys General (14 September 2006) p 6 (Law Council Report). 169 In the same year Professor Vicki Waye of the University of South Australia conducted a study of litigation funding in Australia which included interviewing senior management personnel in six litigation funding firms. Professor Waye reported their funding commission rates as follows: (a) funder A - 40% of net recoveries, but perhaps lower if the claim value is greater than $10 million; (b) funder B - between 20% and 40% of net recoveries, and on average around 30%; (c) funder C - between 20% and 45%, but in difficult and lengthy matters between 35% and 40%. If the matter settles early the rate is generally lower; (d) funder D - between 30% and 40%, in some cases escalating as the time required to resolve the case increases; (e) funder E - between 35% and 50%, but less if the case settles within six months of execution of the funding agreement; and (f) funder F - between 15% and 30%, but in a large class action 35%. Waye V, Trading in Legal Claims: Law, Policy & Future Directions in Australia, UK and US (Presidian Legal Publications, 2008) pp 283-284. 170 In 2010 Professor Morabito reported from empirical research that the average funding commission rate charged in funded class actions settled at that time was approximately 30%: see Second Empirical Report, pp 5, 41. 171 In 2011, although the source of the information is not clear, Dr G. Barker of Australian National University reported that the funding commission rates of the main litigation funders operating in Australia ranged between 20% and 45%. In part drawing from the funders' websites, Dr Barker said that IMF charges between 20% and 45% (and sometimes also a project management fee), Quantum charges between 20% and 30%, HLS charges between 30% and 45% and CLF charges between 25% and 35%: Barker G, "Third Party Litigation Funding in Australia and Europe" (Working Paper No 2, Centre for Law and Economics, ANU College of Law, December 2011) p 29 172 In the same year, based on the Law Council Report and the Second Empirical Report, Associate Professor Legg wrote that the typical funding commission rate in class actions was between 30% and 40% of the proceeds of the litigation, depending on the length of the case, the need for appeals and the size of the claim: Legg M, "Reconciling Litigation Funding and the Opt Out Group Definition in Federal Court of Australia Class Actions - The Need for a Legislative Common Fund Approach" (2011) 30(1) Civil Justice Quarterly 52 at 56. 173 IMF is by far the largest funder operating in Australia. Over the last 5 years it has funded approximately half of the funded class actions that have been commenced and its funding commission rates are significant for the purposes of comparison with the present case: Waye V and Morabito V, "Financial Arrangements with Litigation Funders and Law Firms in Australian Class Actions" (Paper presented at the Litigation Costs Funding and Behaviour Symposium, Leiden University, December 2015) (Leiden Paper) p 8 citing Allens Linklaters, "Class Actions: A Ten Year Survey" (May, 2015) and IBIS World, "Litigation Funding in Australia" (April 2015) p 20. 174 IMF submitted to the 2014 Productivity Commission Inquiry into Access to Justice that, depending on claim size, resolution sum, expected duration and risks undertaken, it charges funding commission rates of between 25% and 40% plus a percentage of the legal budget as a project management fee: IMF (Australia) Ltd, "Submission to the Productivity Commission: Access to Justice Arrangements" (18 November 2013) p 4. IMF's submission included an audited report by Ernst & Young which summarised all completed cases funded by IMF from 19 October 2001 to 30 June 2013. The Ernst & Young report shows that IMF received approximately 33.5% of the monies received in settlement or judgment in those cases of which it had paid approximately one third in legal and other costs (with such costs representing about 11% of the settlement or judgment monies obtained). Claimants received approximately 66.5% of the settlement or judgment monies achieved. The Productivity Commission accepted this submission: Productivity Commission Report, p 622. 175 In December 2015 Professors Waye and Morabito reported that the average funding commission rate charged in funded class actions was approximately 31%: Leiden Paper, p 21. 176 Although settlement approval judgments routinely state the legal costs incurred, most do not reveal the rate of funding commission charged by the funder or the aggregate amount. It is difficult to see why the funding commission rate and quantum should be treated as confidential when the funding commission is a standard cost and in funded class proceedings it is usually the single largest deduction from the settlement. Funded and unfunded class members may know the different funding commission rates in a proceeding but will have limited insight into the aggregate funding commission charged. In my view the Court should require disclosure of the funding commission rate and quantum. Doing so will assist the Court in deciding whether the funding commission is fair and reasonable including by allowing comparison with rates charged in other cases. 177 The few judgements in shareholder class actions where the courts have set out the funding commission rate also tend to show that the rates in the present case are at the low end of the range. Relevant examples include: (a) Pathway – funded by ILF at rates between 30% and 40%: see Pathway at [20]; (b) Modtech – funded by CLF at rates between 25% and 30%: see Modtech at [57]; (c) Wepar Nominees Pty Ltd v Schofield (No 2) 99 ACSR 234; [2014] FCA 225 – funded by LCM at 33.3%: see Wepar at [31]; (d) Blairgowrie Trading Ltd v Allco Finance Group Ltd (2015) 325 ALR 539; [2015] FCA 811 – funded by ILF at rates between 32.5% and 35%: see Blairgowrie at [45]; (e) City of Swan – funded by IMF at 33%: see City of Swan at [29]; and (f) Money Max – funded by ILF at rates between 32.5% and 35%: see Money Max at [23]. 178 While the fact that the present funding commission rates are at the low end of the range in comparable cases is significant to my view, that is not the end of the enquiry. The question is whether the rates are objectively reasonable. Although the Court should be cautious in refusing to approve funding commission rates that are within the commonly offered range, the objective reasonableness of the rate in a particular case cannot be determined just by reference to market rates. 179 It should be kept in mind that it is not enough to consider the funding commission rate on a stand-alone basis. The funding arrangements reached may be structured in a variety of ways which can affect the costs and risk taken on by the funder and therefore affect the reasonableness of the funding commission rate. For example, a funder might agree: (a) to provide funding to cover adverse costs but not to meet the applicant's legal costs and disbursements, with the case being conducted by the applicant's solicitors on a conditional fee basis to be paid by class members from any settlement conditional on success; (b) to pay disbursements only, with the case being conducted by the applicant's solicitors on a conditional fee basis; (c) to only pay costs and disbursements up to a fixed cap or to pay a fixed percentage of the costs and disbursements, with the remainder left to the applicant's solicitors to be paid by class members conditional on success; or (d) to cover the risk of adverse costs liability through After the Event Insurance with the premium to be paid by class members from the settlement sum upon success. 180 The funding agreement in the present case had a $5 million cap on legal costs which the Funder was required to pay, although it could elect to continue to provide funding beyond the cap. Upon the cap being exceeded, and the Funder electing not to continue to provide funding, Slater & Gordon was obliged to conduct the case to resolution on a conditional fee basis. The materials show that the Funder continued to pay the applicant's legal costs past the cap. The cap reduced the risks for the Funder in relation to legal costs expenditure but it did not ultimately reduce the amount it paid. This does not alter my view as to the reasonableness of the funding commission rates. The funding commission rate agreed by sophisticated class members and the number of such class members who agreed 181 The materials show that approximately 88.34% of the RCMs were recorded as "Institutional investors" by Slater & Gordon, and that they held approximately 96.18% of the relevant shares acquired by RCMs in the claim period. Conversely, only 11.16% of the RCMs were recorded as "Retail investors" and they held approximately 3.82% of the relevant shares. 182 I infer that institutional investors are medium to large shareholders with access to competent legal advice, some of whom will have been class members in other shareholder class actions. They will have an understanding of the funding commission rates that are commonly available and they agreed to the funding commission rates in the funding agreement. At least for these more sophisticated class members I would be cautious before ordering a reduction in the agreed rate. However, this says nothing about the position of the significant number of small shareholders. The information provided to class members as to the funding commission 183 As a general proposition, the better the quality of information given to class members about the funding arrangements, the funding commission and the costs and risks of litigation which underpin the funding commission rate, the more likely it is that the funding commission to which they have agreed is properly seen to be reasonable. 184 So far as funded RCMs are concerned, the materials show that class members were provided with a letter of advice by Slater & Gordon which set out its view as to the merits of the case, doing so in essentially positive terms. They were provided a copy of the funding agreement and upon request provided with a detailed overview of the operation of the funding agreement, although that did not deal with the Funder's risk or its likely reward. Upon entry into a confidentiality undertaking they were also able to obtain a detailed preliminary advice, but the Court was not provided with that advice. 185 From the information before the Court it is not clear that funded RCMs had sufficient information to make a reasonable assessment of the costs and risks of the litigation being taken on board by the Funder or its potential reward. They were told little to explain or justify the funding commission rates and it is likely that there was a significant information asymmetry between the Funder and class members as to the risks being assumed by the Funder. 186 So far as unfunded RCMs are concerned, they were informed prior to registration that a funding equalisation order would be sought but they were told little or nothing to explain or justify the funding commission rate which would underpin the deduction of a funding equalisation amount. The litigation risks of providing funding in the proceeding. 187 As I have said, the case is highly factually and legally complex and at the point of commencement the applicant faced material risks in relation to establishing liability and quantum. The Funder would have been aware of these risks at that point, although perhaps not their full extent. The material risks in the present case are significant to my view that the funding commission is fair and reasonable. 188 This is not a case in which the problem of hindsight bias arises. Such a bias might arise when the risks which were perceived to exist at the commencement of a case have not materialised or are materially reduced and the case appears less risky. I infer from the materials that as the present case went on the risks on liability and quantum became more evident. The quantum of adverse costs exposure that the Funder assumed 189 The Funder assumed the risk of adverse costs liability at the commencement of the proceeding and the funding agreement did not cap the Funder's obligation in this regard. 190 It can be said that most complex commercial litigation settles, even more so with class actions, probably because they often have significant added uncertainties. In such cases there is often an opportunity for an applicant to settle cheaply, or on a "walk away" basis, if the case is seen to have severely weakened as it progresses. It is, however, one thing to express a sanguine view about the real risks of adverse costs liability and entirely another to take on board the multi-million dollar exposure to adverse costs liability involved in a class action like the present case. 191 If the applicant is unsuccessful on the common issues in the present case the adverse costs order would likely total in the order of $12-15 million. If the applicant had abandoned the case immediately before the trial the adverse costs order would likely total in the order of $6-$8 million. This is also significant to my view that the funding commission in the present case is fair and reasonable. The legal costs expended and to be expended, and the security for costs provided, by the funder 192 At the time the proceeding was commenced Slater & Gordon estimated the legal costs at $5-$7 million and, subject to the cap to which I have referred, the Funder accepted the obligation to pay such costs. As it eventuated, the Funder continued to meet the costs after the cap was exceeded and the legal costs totalled approximately $10.7 million. The Funder also provided security for costs in a total of $4.75 million. 193 The Funder's obligation to pay such substantial legal costs and to provide security for costs in such a large amount is important to my conclusion that the present funding commission is fair and reasonable. The amount of any settlement or judgment 194 Because the settlement sum in the present case is much lower than in cases such as, for example, Pathway and Modtech, the aggregate funding commission of $6.78 million is modest in comparison. For example, the $115 million settlement inclusive of costs in Pathway is likely to have meant the funder received a funding commission in the order of $30 to $40 million. The $75 million settlement inclusive of costs in Modtech is likely to have meant the funder received a funding commission in the order of $16 million to $20 million. 195 In the present case there can be no suggestion that the size of the settlement means that the aggregate funding commission is so large that it is excessive or disproportionate to the expense and risk taken on by the Funder: see Money Max at [87]. Having regard to the substantial costs and risks taken on by the Funder I consider the funding commission of $6.78 million to be low. I infer from the materials that the Funder agreed to fund the case based on a view that the applicant and class members would achieve a significantly higher settlement or judgement. I doubt that the Funder would have agreed to take on the substantial costs and risks I have described if it considered that upon success it would only be entitled to a funding commission in this order. 196 The aggregate funding commission is fair and reasonable. Any substantial objections made by class members in relation to any litigation funding charges. 197 As I said earlier (at [43]-[50]), no RCMs objected to the proposed settlement. The only objections are from eight UCMs, whose objections were not to the proposed settlement but to the fact that they were to be excluded from the benefits of the settlement. I have ordered that the objectors be treated as RCMs and their objections therefore fall away. 198 The absence of objections to the funding commission is objective evidence that the proposed funding commission is fair and reasonable, but it carries little weight in the decision. Most class members are likely to have a low level of engagement in relation to the action and the Notice of Proposed Settlement informed class members they could object to the proposed settlement but did not expressly inform them that they could object to the funding commission. In any event, in a settlement approval application it is the Court's responsibility to protect class members' interests and the absence of objections or a low level of objections does not relieve it of that task: Money Max at [50]; Kelly at [58] and [61]. Conclusion as to the reasonableness of the funding commission 199 I consider the funding commission rate and the aggregate funding commission in the present case to be fair and reasonable in the interests of class members. E. CONCLUSION 200 For these reasons I approved the proposed settlement. I certify that the preceding two hundred (200) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy. Associate: Dated: 28 November 2016