Federal Court of Australia Stanwell Corporation Limited v LCM Funding Pty Ltd [2021] FCA 1430 File number: QUD 201 of 2021 Judgment of: BEACH J Date of judgment: 17 November 2021 Catchwords: CORPORATIONS – cartel representative proceeding – bidding strategies of Queensland electricity generators – managed investment scheme – litigation funder – purpose of scheme – whether two separate schemes – financial product – whether funding scheme constitutes a financial product – s 764A(1)(m) of the Corporations Act 2001 (Cth) – whether scheme an unregistered managed investment scheme – s 9 of the Corporations Act – whether scheme grand-fathered under the Corporations Regulations 2001 (Cth) – regs 5C.11.01, 7.1.04N, 10.38.01 – application of the Corporations Amendment (Litigation Funding) Regulations 2020 (Cth) – doubts concerning Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11 – reference to Full Court – reference refused – originating application dismissed – utility of declarations sought under cross-claim – cross-claim dismissed Legislation: Competition and Consumer Act 2010 (Cth) s 46 Corporations Act 2001 (Cth) ss 9, 168, 169, 601ED, 601FA, 601FB, 601FC, 601GC, 601KA, 601KB, 601KC, 601KD, 601KE, 764A, 911A, 1012B, 1324 Corporations Amendment (Litigation Funding) Regulations 2020 (Cth) regs 5C.11.01, 7.1.04N, 10.38.01 Corporations Amendment Regulation 2012 (No. 6) Amendment Regulation 2012 (No. 1) (Cth) regs 7.6.01, 7.6.01AB Corporations Regulations 2001 (Cth) regs 5C.11.01, 7.1.04N, 10.38.01 Federal Court of Australia Act 1976 (Cth) ss 25, 33J, 33K Managed Investments Act 1998 (Cth) Cases cited: Australian Securities and Investments Commission v Great Northern Developments Pty Ltd (2010) 242 FLR 444 Australian Securities and Investments Commission v Lewski (2018) 266 CLR 173 Australian Securities and Investments Commission v Macro Realty Developments Pty Ltd (2016) 111 ACSR 638 Australian Softwood Forests Pty Ltd v Attorney-General for New South Wales (1981) 148 CLR 121 Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11 Brookfield Multiplex Limited v International Litigation Funding Partners Pte Ltd (No 2) (2009) 76 ACSR 323 National Australia Bank v Norman (2009) 180 FCR 243 Division: General Division Registry: Queensland National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 232 Date of last submissions: 20 September 2021 Date of hearing: 13 September 2021 Counsel for the Plaintiff: Mr P Franco QC with Ms J Buncle Solicitor for the Plaintiff: Minter Ellison Counsel for the First Defendant: Mr JT Gleeson SC with Mr A Hochroth Solicitor for the First Defendant: Gilbert + Tobin Counsel for the Second Defendant: Ms D Bampton Solicitor for the Second Defendant: Piper Alderman Counsel for the Interested Party Mr M Hodge QC with Ms F Lubett Solicitor for the Interested Party Herbert Smith Freehills ORDERS QUD 201 of 2021 BETWEEN: STANWELL CORPORATION LIMITED (ACN 078 848 674) Plaintiff AND: LCM FUNDING PTY LTD (ACN 638 076 098) First Defendant STILLWATER PASTORAL COMPANY PTY LTD (ACN 101 400 668) Second Defendant CS ENERGY LTD (ACN 078 848 745) Interested Party order made by: BEACH J DATE OF ORDER: 17 november 2021 THE COURT ORDERS THAT: 1. The first defendant's application under s 25(6) of the Federal Court of Australia Act 1976 (Cth) that all questions in the proceeding be reserved for consideration by the Full Court be dismissed. 2. The plaintiff's originating process be dismissed. 3. The first defendant's cross-claim be dismissed. 4. Within 14 days of the date of these orders, the parties file and serve proposed minutes of orders and short submissions (limited to 3 pages each) on the question of costs. 5. Liberty to apply. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT BEACH J: 1 On 20 January 2021, Stillwater Pastoral Company Pty Ltd commenced a representative proceeding seeking damages from Stanwell Corporation Ltd and CS Energy Ltd flowing from alleged contraventions of s 46 of the Competition and Consumer Act 2010 (Cth) as a result of Stanwell and CS Energy engaging in various bidding and re-bidding strategies in the National Electricity Market. 2 Each of Stanwell and CS Energy are Queensland electricity generators, the shares in which are wholly owned by the State of Queensland. Consequently, they are government owned corporations within the meaning of s 5 of the Government Owned Corporations Act 1993 (Qld) and accordingly, for the purposes of s 4A of the Competition and Consumer Act, related bodies corporate. 3 Stillwater's case is that Stanwell and CS Energy each have a substantial degree of power in the market for the wholesale supply of electricity to the regional reference node in the Queensland Region of the National Electricity Market and to the Queensland Region through both the Directlink (Terranora) Interconnector and the Queensland-New South Wales Interconnector. It is said that during the period 1 January 2012 to 6 June 2017, each of Stanwell and CS Energy misused such market power by implementing trading strategies such as late re-bidding and early spiking resulting in spot price inflation, inflation of hedging costs, wholesale cost inflation and the like which ultimately drove up the cost of electricity to retail customers in Queensland who purchased their electricity by various means. 4 Now the representative proceeding as presently constituted involves a closed class concerning group members satisfying the following criteria, which I recently permitted to be amended under s 33K(1) of the Federal Court of Australia Act 1976 (Cth): The group members to whom this proceeding relates are all persons who between 20 January 2015 and 20 January 2021 (Claim Period): (a) purchased electricity from a retailer in Queensland (QRNEM Retailer); or (b) purchased electricity as a customer of an Embedded Network where the vendor of the electricity (or a related entity) purchased it from a QRNEM Retailer; or (c) paid or became liable to pay electricity outgoings to a landlord, under a lease or as a tenant, in circumstances where the landlord passed through the cost of electricity the landlord purchased from a QRNEM Retailer; or (d) procured and consumed electricity directly from the Spot Market in Queensland; or (e) entered into a power purchase agreement, as a purchaser, for the supply of electricity in Queensland; or (f) any combination of subparagraphs (a) to (e); and (g) suffered loss or damage by the conduct pleaded herein; and (h) have as at 13 September 2021 entered into a litigation funding agreement with LCM Funding Pty Ltd; and (i) were not at any material time, and are not as at the date of this Originating Application, any of the following… … 5 As one can see from the group definition, the proceeding is funded by LCM Funding Pty Ltd, with criterion (h) entailing the closed class structure. 6 Let me say now that it should not be assumed that I will allow the proceeding to proceed to trial as a closed class. It is not a plain vanilla commercial class action where investors seek to recover the value of their investments. Rather, it is one where the breadth of the alleged gaming strategies of these electricity generators has adversely affected all Queensland electricity consumers. The proceeding is a paradigm case of one that should be open. First, that is consistent with the philosophy of Part IVA of the FCA Act. Second, the conduct, if established, affects potentially more than a million electricity consumers in Queensland, not just the fortunate 50,000 or so that have signed up. I doubt that all consumers were notified of or given the opportunity to sign up. Third, the proceeding dispels the myth of the so called advantages of book building in a case of this type. The book building here has resulted in an unnecessary, costly and inefficient delay of seven months in order that over 50,000 retail customers be separately signed up to individual funding agreements. There is little justification for such a barrier to entry so to speak or justice. Fourth, to allow the proceeding to remain closed will incentivise others to launch parasitic actions to cover the balance of the universe of electricity consumers. So the potential for and the vice of a multiplicity of proceedings. And indeed if not productive of such multiplicity now, that position may be all but inevitable if I later deliver a judgment in favour of the present closed class, unless I open the class after judgment. And if then, why not now? Indeed, why should the residual universe of consumers have the benefit of the asymmetry at that stage? They should be subject now to the potential risks and benefits, subject to any right to opt out. 7 But for the moment I do not need to address the representative proceeding directly, which is in my docket, but rather the satellite litigation that now needs to be disposed of that has impeded the progress of the representative proceeding. 8 In a collateral proceeding now before me, Stanwell has sought declarations that the purported litigation funding scheme operated by LCM Funding to fund the representative proceeding involves a financial product(s) pursuant to s 764A(1)(m) of the Corporations Act 2001 (Cth) and constitutes an unregistered "managed investment scheme" as defined in s 9 of that Act. 9 Stanwell also seeks orders restraining both LCM Funding and Stillwater from operating such an unregistered management investment scheme, issuing such financial products without an Australian Financial Services Licence or aiding and abetting or being involved in such conduct in contravention of relevant provisions of the Corporations Act and the Corporations Regulations 2001 (Cth) (the Regulations) as amended by the Corporations Amendment (Litigation Funding) Regulations 2020 (Cth) (CALF Regulations). 10 For the following reasons I would dismiss this collateral proceeding. Let me summarise my reasons before getting into the detail. 11 The principal question before me turns upon the operation of the "grandfathering" provisions in reg 10.38.01 of the Regulations, which was inserted by the CALF Regulations. The effect of reg 10.38.01 is that a "litigation funding scheme", being a scheme having the features described in the current reg 7.1.04N(3) or the former reg 5C.11.01(1)(b), will neither attract the requirement to hold an AFSL nor constitute a managed investment scheme if it was entered into prior to 22 August 2020. So the question is whether the litigation funding scheme in the present case was entered into prior to 22 August 2020. In my view it was. 12 By 21 August 2020, nearly 11,000 persons had entered into litigation funding agreements with LCM Funding in respect of the scheme in question, which I will elucidate later, which had all the features of a litigation funding scheme within the meaning of reg 7.1.04N(3) or the former reg 5C.11.01(1)(b), including that its dominant purpose was for each of its members to seek remedies concerning the misuse of market power by Stanwell and CS Energy. 13 Further, the fact that the scheme as at 22 August 2020 was still in the investigative phase with the work program to be completed was immaterial given that the work program was an integral part of achieving the purpose of seeking remedies for the general members of the scheme. 14 So in my view the scheme has been grandfathered, and as the scheme was entered into prior to 22 August 2020, then by reg 5C.11.01(1)(b) it was declared not to be a managed investment scheme. 15 But in any event, even if the scheme had not been grandfathered, there are strong arguments for saying that the scheme is not and was not a managed investment scheme as defined under s 9 of the Corporations Act on its proper construction. 16 Now in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11, Sundberg and Dowsett JJ held that the litigation funding scheme before them was a managed investment scheme. But I have significant doubts concerning Brookfield, although it would seem that the case before me is relevantly indistinguishable from Brookfield and that I am bound to apply it. But relevantly to that context, let me make these points at this stage as they are relevant to LCM Funding's referral application under s 25(6) of the FCA Act. 17 First, whilst Brookfield has stood for over 10 years, until relatively recently its effect has been reversed through administrative action and regulation. So, there has been no occasion to challenge it or reflect at a judicial level on whether its reasoning can withstand critical analysis. In other words, its longevity is no confirmation of any considered general acceptance. 18 Second, arguably the majority placed undue weight on the potential width of each element viewed separately within the composite language of the definition of a managed investment scheme in s 9, and as a consequence construed the definition as capturing an arrangement that could not realistically have been within the legislature's contemplation and which shares little with the kinds of schemes understood to constitute managed investment schemes. In so doing, arguably they adopted a construction inconsistent with one that would promote the purpose or objects of the Corporations Act. 19 Third, it is arguable that the majority mischaracterised litigation funding arrangements as an investment by group members of property to achieve benefits, when such arrangements principally provide a mechanism for persons who share commonality in their unlitigated and separate choses in action to secure the payment for legal services necessary to vindicate those choses on a contingent basis. 20 Fourth, the statutory regime applying to registered managed investment schemes is simply unfit for purpose if it is sought to apply its requirements to litigation funding schemes concerning representative proceedings principally controlled under the open class regime of Pt IVA of the FCA Act. The majority did not address this conceptual incoherence. 21 Now LCM Funding has applied to have the question of whether the scheme before me is a managed investment scheme within the meaning of s 9 reserved for the consideration of a Full Court. It wants to challenge the correctness of Brookfield. 22 But for the moment it is sufficient to say that I decline to make the referral sought by LCM Funding; I will explain my reasons later. 23 In summary, I would decline the relief sought by Stanwell in this collateral proceeding. Further, I would also decline to make the declarations sought by LCM Funding in its cross-claim which are designed to crystallise a determination by me on the Brookfield question in the event that I decline, as I have, to make the s 25(6) referral. Now although it is desirable that Brookfield be reconsidered by a Full Court, unless of course pre-emptive legislative changes seeking to enshrine it move the dial, that does not nevertheless justify me in making the declarations now sought by LCM Funding. 24 Let me begin with some background matters and then I will identify the relevant legislative provisions. Only then can the grandfathering question be meaningfully asked and answered. Some factual background 25 LCM Funding is a wholly owned subsidiary of Litigation Capital Management Limited (LCM), which carries on the enterprise of litigation funding. LCM funds legal actions in Australia through LCM Funding. Moreover, LCM Advisory Limited, another wholly owned subsidiary of LCM, holds an AFSL that now permits it to operate litigation funding schemes by itself or through any authorised representative such as LCM Funding. 26 The usual practice of LCM, and through it LCM Funding, is first to conduct internal due diligence when considering whether to fund a representative proceeding. If it still has an interest in funding following the internal due diligence, it will enter into an external due diligence agreement with a law firm and a potential representative applicant if identified at that point. 27 If LCM is satisfied with the results of the internal and external due diligence process and any relevant legal advice such that it remains interested in funding the action, it may then enter into a work program agreement with the lawyers and potential representative applicant. These arrangements, inter-alia, require the lawyers to take the steps required to commence a representative proceeding, including preparing a pleading. 28 If a closed class proceeding is proposed, the work program will include book building where potential group members are identified who then enter into funding agreements with the relevant funding subsidiary, which in the present case is LCM Funding. The book building usually occurs through an online web portal. 29 In the present case the web portal for the representative proceeding went live on 17 June 2020 and the first funding agreement was signed electronically by a group member the same day. 30 By 11.59 pm on 21 August 2020, 10,982 group members had signed funding agreements through the web portal. Group members continued to sign funding agreements on 22 August 2020 and thereafter. 31 By 20 January 2021 when the representative proceeding was commenced, 50,825 group members had signed funding agreements. Moreover, additional persons have since signed funding agreements, which justified my order under s 33K(1) of the FCA Act to broaden the group member definition to include such persons. 32 Now as it is not unimportant, let me at this stage identify some of the features of each funding agreement. 33 First, the parties to each funding agreement are LCM Funding, described as the "Funder", and a group member, described as the "Claimant". The external lawyers are not a party. 34 Second, the recitals to each funding agreement state: A. The Claimant believes the Claimant has one or more valid claims as stated in Item 3 of the Schedule ("Claim"), and for that purpose has retained / intends to retain the Lawyers to prosecute the Claim. B. Believing that other persons may have claims that are the same or similar to the Claim, the Funder has formed / intends to form a scheme bearing the name in Item 1 of the Schedule ("Scheme") under which persons having such claims and agreeing to join the Scheme ("Members"), with the benefit of funding and other assistance from the Funder and using the services of the Lawyers, might recover damages or other compensation as regards those claims and for the mutual benefit of the Members and the Funder. C. This document provides for the Claimant to become a Member of the Scheme. 35 I will return to these recitals later, including the reference to the capitalised Scheme. I will discuss the differences, if any, between this contractual capitalised concept and legislative references to the lower case "scheme" in terms of a managed investment scheme or litigation funding scheme later. 36 Third, the funding agreement comprises a terms sheet including the schedule and the rules of the Scheme annexed to the terms sheet. 37 Fourth, clause 1 of the terms sheet provides: Subject to clause 3, the Claimant becomes a Member of the Scheme on the terms of the Contract. 38 Fifth, the schedule to the terms sheet describes the claim as: A claim or claims by consumers of electricity in the State of Queensland to recover compensation for losses suffered as the result of particular conduct by Stanwell Corporation Limited and CS Energy Limited on the National Electricity Market in the period from January 2013 to June 2017, which conduct had the effect of wrongfully inflating the price of electricity for consumers of electricity in the State of Queensland. 39 Sixth, the schedule describes the Scheme name as "The 2020 QLD Energy Class Action Scheme", which is also the name stated at the head of the rules. 40 Seventh, the rules define the Scheme as (r 2.33): 2.33 "Scheme" means a scheme: 2.33.1 Having the name stated at the head of these rules; 2.33.2 Comprised of Members and the Funder; 2.33.3 Formed and operated for the sole purpose of prosecuting and making recovery under Claims. 41 So, in substance, the Scheme is defined as comprising the group members and LCM Funding and was formed and operated for the sole purpose of prosecuting and making recovery under the claims. And more particularly r 4 provides that the purpose of the Scheme is: Purpose: The purpose of the Scheme is to provide a structure by which Members, with benefit of funding from the Funder and using the services of the Lawyers, might recover damages or other compensation as regards the Claims and for the mutual benefit of the Members and the Funder. 42 Eighth, and so to be clear at this point, in my view each claimant becomes a member of the Scheme on the date of entering into the funding agreement; so much follows from clause 1 of the terms sheet and r 5. 43 Ninth, the rules define the "Work Program" as follows (r 2.36): "Work Program" means the Work Program as defined in the Work Program Agreement and/or any other investigations by the Funder and / or the Lawyers at the request of the Funder of: 2.36.1 The merits and quantum of the Claims; 2.36.2 The likely Action Costs (including cost of ATE Insurance); 2.36.3 The likely Adverse Costs; 2.36.4 The prospects of recovery of damages or other monetary compensation sufficiently exceeding Action Costs; or other work performed in relation to the identification and recruitment of Members including by publicity and digital marketing. 44 So, the work program is defined as the work defined in the work program agreement between LCM Funding and Piper Alderman dated 20 February 2020 (r 2.37) and/or any other investigations by LCM Funding and/or Piper Alderman involving the merits and quantum of the claims, the costs of the class action, the prospects of any recovery or any other work performed in relation to the identification and recruitment of group members. Group members are not parties to such a work program agreement, but are parties to the Scheme. 45 Tenth, the "Work Program Period" means (r 2.39) the period: (a) starting on the date of the work program agreement being 20 February 2020; and (b) ending on the earliest of: (i) the date the LCM Funding issues a funding confirmation notice; (ii) the date LCM Funding terminates the funding agreement; (iii) the date, with LCM Funding's prior written approval, a defendant is served with the originating process for an action; and (iv) 270 days after the first of the funding agreements becomes binding. 46 In the present context, the work program period ended on 22 January 2021, being the date that Stanwell was served with the originating process in the representative proceeding. 47 Now Stanwell says that the work program, which was performed subject to the work program agreement between LCM Funding and Piper Alderman, can be distinguished from the Scheme. I will return to discuss this matter later. 48 Eleventh, as to LCM Funding's liability during the work program period, rr 35 to 37 provide: 35. Work Program: During the Work Program Period: 35.1 The Funder will carry out the Work Program; and 35.2 lf requested by the Funder, the Lawyers may carry out the Work Program as to inform the Funder's own investigation. 36. Funder's obligations: Notwithstanding any other provision of the Contract, during the Work Program Period the Funder's obligation is limited to the payment of Work Program Costs. 37. Outcomes of Work Program: The Funder may notify the Lawyers in writing that the outcomes of the Work Program were satisfactory to the Funder. Notice so given is a "Funding Confirmation Notice". 49 Further, rr 40, 41 and 47 provide: 40. Funder's obligations: Notwithstanding any other obligations to the Scheme, prior to the conclusion of the Work Program Period, the Funder shall have no obligation to fund the Actions or make any payments in respect of the Scheme. During the Work Program Period the Funder's obligation is limited to the payment of Work Program Costs. 41. Cap on funding: lf the Funder remains a party to the Scheme following the completion of the Work Program Period, subject to the other rules, so long as the Funder remains party to the Scheme the Funder must fund one or more Actions for sums not exceeding in aggregate the Funding Limit. … 47. Cessation of funding: To avoid doubt, the Funder is not obliged to fund or otherwise support any Action (or Appeal) after the Funder ceases to be party to the Scheme. 50 Further, relevant in part to the work program, r 24 provides: Funder's liability: 24.1 The Funder does not offer any opinion or recommendation on the merits of the Claims, or on the creditworthiness of any Defendant or any insurers of a Defendant, including that when the Funder undertakes the Work Program, the Funder does so for its sole benefit and without liability to others. 24.2 Nor does the Funder assume a duty of care or fiduciary duty in favour of the Scheme or any Members. 51 At this point, I should also set out some further definitions. 52 Rule 2.38 defines "Work Program Costs" as follows: "Work Program Costs" mean the Funder's costs of performing Work Program, including the Work Program Costs as defined in the Work Program Agreement. 53 Further, even more broadly r 2.2 defines "Action Costs" as follows: "Action Costs" mean: 2.2.1 Due Diligence Costs; 2.2.2 Work Program Costs; 2.2.3 Lawyers' Costs in (including but not limited to): (a) Identifying, recruiting and liaising with Members; (b) Preparing, settling, filing at Court and serving on any Defendants any documents in an Action and / or an Appeal (such as originating application or summons, statement of claim, affidavit/s, third party notice/s, defence to a counter-claim, application/s for an order for discovery of documents, minutes of order); (c) Corresponding with the Defendants and any representatives of the Defendants; (d) Preparing for and attending to interview such Members as they think necessary for an Action, then preparing witness statements; (e) Preparing for and attending to confer with experts and preparing records of such conferences; (f) Preparing for and attending any pre-trial hearing or other step preliminary to a trial of an Action; (g) Obtaining, compiling and analysing evidence, including documentary evidence; (h) Preparing for and attending at any hearing of an Action or settlement conference or mediation, and making record of the proceedings - including any transcript fee charged by a Court; (i) Negotiating, preparing or settling any agreement to settle an Action (in whole or in part) out of the Court; 2.2.4 Such other Lawyers' Costs that are incurred for the dominant purpose of assisting with preparing, conducting and / or resolving prosecution of the Claims; … 2.2.10 All costs and expenses (including legal fees, Counsel fees, expert or consultant fees, disbursement, travel and accommodation costs) incurred by the Funder with respect to the Claims and / or the Scheme, including but not limited to: (a) Identifying and recruiting Members; (b) Negotiating, preparing, administering or enforcing any Member Agreements or the Retainer Agreement; (c) Due Diligence; (d) Work Program; (e) Funding any security for Adverse Costs, including by way of a Deed of Indemnity; (f) Quantifying any Adverse Costs order; (g) Meetings with the Lawyers and other interested parties for the dominant purpose of preparing, conducting and / or resolving prosecution of the Claims or in relation to the Scheme; … 54 Twelfth, whilst a party to the scheme, LCM Funding will pay the action costs (r 22.1). As I have indicated, action costs is to include the due diligence costs, the work program costs, the lawyers costs and all costs and expenses incurred by LCM Funding with respect to the claims and/or the Scheme. 55 Thirteenth and more broadly, the role of LCM Funding is described as follows (r 22): Role of the Funder: While party to the Scheme, the Funder: 22.1 Will pay the Action Costs and any Adverse Costs, subject to and in accordance with the terms of these rules and the separate contract between the Lawyers, the Funder and the Representative; 22.2 If an Action requires, will meet any order for security for Adverse Costs and in its discretion may arrange for the order to be met by ATE Insurance or a Deed of Indemnity; 22.3 Subject to rules 16 and 38 and Part 18 may engage with the Representative as to the steps to be taken, or not taken, in preparing, conducting, abandoning, postponing or resolving the Claims. This includes: 22.3.1 Discussing the prosecution of the Claims with the Lawyers with no Member present; 22.3.2 Having access and input to documents being prepared by the Lawyers for an Action or to be put in evidence; 22.3.3 Attending and speaking at meetings with any Defendant or insurer as regards disposal of the Claims; 22.4 May retain its own lawyer to keep informed of the progress of the Claims (including any pending or actual Action or Appeal) but only at Funder's expense and with no right of such lawyer to interfere in the management or resolution of the Claims. 56 Fourteenth, LCM Funding has various rights to terminate the funding agreement, including if it notifies members that the work program was unsatisfactory, that in LCM Funding's opinion a suitable member with strong prospects of success in an action is not willing to act as representative, that in LCM Funding's opinion there are insufficient members in the Scheme or that the quantum of claims is not sufficient for LCM Funding to commercially justify the likely costs of progressing the action. LCM Funding may also terminate in its absolute discretion on 15 days written notice, given either to an individual member or all members. But notwithstanding termination, LCM Funding's obligation to meet accrued action costs and adverse costs to the time of termination survives. 57 Fifteenth, subject to a 15 day cooling off period members can only exit the Scheme in accordance with their opt out rights once an action has been brought. Further, on and from the moment of joining the Scheme, each member has subjected himself to a contractual fetter on seeking to vindicate his chose in action by any means outside the Scheme, save with the consent of the lawyers and LCM Funding. Further, whilst a member remains in the Scheme, the member has contractually bound himself to retain the lawyers retained by the representative applicant with the approval of LCM Funding to prosecute the member's claim on the instructions of the representative applicant, without interference from the member as to common questions and so as to be bound by any decision on the common questions. 58 Sixteenth, rr 68 to 71 provide the following: 68. AFSL not required: Under regulation 5C.11.01 of the Corporations Regulations 2001, the Scheme is not a managed investment scheme for the purposes of the Corporations Act 2001 (Cth), and under regulation 7.6.01(1)(x) of the Corporations Regulations 2001 (Cth) the Funder need not hold an Australian financial services licence for the purposes of the Scheme. If at any time, in Funder's reasonable opinion, either or both of those exemptions cease to operate, the Funder may elect to terminate further funding to the Scheme, without prejudice to rights and obligations then accrued. In that case, the Funder remains entitled to recover the Outstanding Funding from any later Recovery. 69. Funding agreement: These terms constitute a funding agreement between the Members and the Funder for the purposes of regulation 5C.11.01(b)(v) of the Corporations Regulations 2001 (Cth). 70. Conflicts of interest: the Funder declares that it holds, and so long as exempted under regulation 7.6.01(1)(x) of the Corporations Regulations 2001 (Cth) and as party to the Scheme will hold, adequate practices for managing any conflict of interest that may arise in relation to activities that may be undertaken by the Funder or an agent of the Funder, in relation to the Scheme, where "adequate practices" has its meaning in regulation 7.6.01AB(4) of the Corporations Regulations 2001 (Cth). 71. National Credit Code: Under ASIC Class Order [CO 13/18] made under the National Credit Code (Cth), Funder's provision of credit to the Scheme / Members is excluded from that Code. The relevant statutory provisions 59 Section 9 of the Corporations Act defines a "managed investment scheme", which is then subject to the detailed regime in Chapter 5C, as follows: managed investment scheme means: (a) a scheme that has the following features: (i) people contribute money or money's worth as consideration to acquire rights (interests) to benefits produced by the scheme (whether the rights are actual, prospective or contingent and whether they are enforceable or not); (ii) any of the contributions are to be pooled, or used in a common enterprise, to produce financial benefits, or benefits consisting of rights or interests in property, for the people (the members) who hold interests in the scheme (whether as contributors to the scheme or as people who have acquired interests from holders); (iii) the members do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions); or … but does not include the following: … (n) a scheme of a kind declared by the regulations not to be a managed investment scheme. … 60 The meaning of "a scheme" is not defined, but in Australian Softwood Forests Pty Ltd v Attorney-General for New South Wales (1981) 148 CLR 121, Mason J stated that "all that the word "scheme" requires is that there should be "some programme or plan of action"' (at 129). That meaning can be relied on for present purposes notwithstanding that Australian Softwood Forests was dealing with a different but analogous legislative regime. 61 Further, "interest" is to be construed broadly, albeit within its statutory context. In that regard the word "interest" includes the feature that people contribute money or money's worth as consideration to acquire rights (interests) to benefits produced by the scheme, whether the rights are actual, prospective or contingent and whether they are enforceable or not. The definition of "managed investment scheme" also refers to the pooling of contributions to produce benefits consisting of rights or interests in property, for the members who hold interests. And an "interest" in a managed investment scheme is also defined as a right to benefits produced by the scheme, whether the right is actual, prospective or contingent and whether it is enforceable or not. More generally, "interest" means or at least includes a "right" and has a broad, general meaning (see Australian Securities and Investments Commission v Lewski (2018) 266 CLR 173 at [50] to [56]). 62 Now the statutory definition of a "managed investment scheme" embodies and requires three features in its (a)(i) to (iii) aspects. 63 The first feature is that people contribute money or money's worth as consideration to acquire rights (interests) to benefits produced by the scheme, whether the rights are actual, prospective or contingent and whether they are enforceable or not. In this context, "contribute" means to be made available or to pay or supply. 64 The second feature is that contributions are to be pooled or used in a common enterprise to produce financial benefits or benefits consisting of rights or interests in property for the people (the members) who hold interests in the scheme, whether as contributors to the scheme or as people who have acquired interests from holders. So, a member of a managed investment scheme is a person who holds an interest in the scheme. 65 The third feature is that members do not have day to day control over the operation of the scheme, whether or not they have the right to be consulted or to give directions. 66 Now as is apparent, subpara (n) of the definition of a managed investment scheme excludes "a scheme of a kind declared by the regulations not to be a managed investment scheme". This is relevant to the present context. 67 Prior to the amendments arising from the CALF Regulations, a "litigation funding scheme" was declared by reg 5C.11.01(1)(b) of the Regulations not to be a managed investment scheme. Regulation 5C.11.01 was amended to declare litigation funding schemes not to be a managed investment scheme by the Corporations Amendment Regulation 2012 (No 6) (Cth) as amended by the Corporations Amendment Regulation 2012 (No. 6) Amendment Regulation 2012 (No. 1) (Cth) with effect from 12 July 2013. 68 I should note that the explanatory statement to the Corporations Amendment Regulation 2012 (No 6) explained that the amendments were to "clarify that litigation funding schemes, as well as similar arrangements, are not managed investment schemes (MIS) under section 9" (p 1). The implication from that statement was that the view of the majority in Brookfield was perhaps considered to be anomalous. 69 So, prior to 22 August 2020, reg 5C.11.01 relevantly provided: 5C.11.01 Certain schemes not managed investment schemes (1) For paragraph (n) of the definition of managed investment scheme in section 9 of the Act, each of the following schemes is declared not to be a managed investment scheme: … (b) a scheme (a litigation funding scheme) that has all of the following features: (i) the dominant purpose of the scheme is for each of its general members to seek remedies to which the general member may be legally entitled; (ii) the possible entitlement of each of its general members to remedies arises out of: (A) the same, similar or related transactions or circumstances that give rise to a common issue of law or fact; or (B) different transactions or circumstances but the claims of the general members can be appropriately dealt with together; (iii) the possible entitlement of each of its general members to remedies relates to transactions or circumstances that occurred before or after the first funding agreement (dealing with any issue of interests in the scheme) is finalised; (iv) the steps taken to seek remedies for each of its general members include a lawyer providing services in relation to: (A) making a demand for payment in relation to a claim; or (B) lodging a proof of debt; or (C) commencing or undertaking legal proceedings; or (D) investigating a potential or actual claim; or (E) negotiating a settlement of a claim; or (F) administering a deed of settlement or scheme of settlement relating to a claim; (v) a person (the funder) provides funds, indemnities or both under a funding agreement (including an agreement under which no fee is payable to the funder or lawyer if the scheme is not successful in seeking remedies) to enable the general members of the scheme to seek remedies; (vi) the funder is not a lawyer or legal practice that provides a service for which some or all of the fees, disbursements or both are payable only on success; … (2) In this regulation: … general member: (a) in relation to a litigation funding scheme—means a member of the scheme who: (i) is not the funder; and (ii) is not a lawyer providing services for the purposes of the scheme… 70 Further, the same amendments inserted regulations providing for a service in relation to a litigation funding scheme to be exempt from the requirement to hold an AFSL and provided for a regime for management of conflicts of interest in place of the Chapter 7 regime applying to financial products. 71 Now the CALF Regulations amended the Regulations by removing the reference to litigation funding scheme from reg 5C.11.01, removing the exemption from holding an AFSL in respect of a litigation funding scheme, and substituting reg 7.1.04N. 72 Further, in terms of their operative force, reg 10.38.01 provided that the amendments made under the CALF Regulations applied in relation to litigation funding schemes, insolvency litigation funding schemes and litigation funding arrangements entered into on or after 22 August 2020 and relevantly defined litigation funding scheme as a "litigation funding scheme mentioned in subregulation 7.1.04N(3) (as in force on 22 August 2020)". It said: 10.38.01 Application of amendments relating to litigation funding (1) The amendments made by the Corporations Amendment (Litigation Funding) Regulations 2020 apply in relation to litigation funding schemes, insolvency litigation funding schemes and litigation funding arrangements entered into on or after 22 August 2020. (2) In this regulation: insolvency litigation funding scheme means an insolvency litigation funding scheme mentioned in regulation 5C.11.01 (as in force on 22 August 2020). litigation funding arrangement means a litigation funding arrangement mentioned in regulation 5C.11.01 (as in force on 22 August 2020). litigation funding scheme means a litigation funding scheme mentioned in subregulation 7.1.04N(3) (as in force on 22 August 2020). 73 It is convenient to set out regs 5C.11.01 and 7.1.04N of the CALF Regulations. 74 Regulation 5C.11.01 provides: 5C.11.01 Certain schemes not managed investment schemes (1) This regulation is made for the purposes of paragraph (n) of the definition of managed investment scheme in section 9 of the Act. … (5) An arrangement (a litigation funding arrangement) that has all of the following features is declared not to be managed investment scheme: … (e) the arrangement is not: (i) an insolvency litigation funding scheme; or (ii) a litigation funding scheme mentioned in subregulation 7.1.04N(3). 75 So, a litigation funding arrangement that is a reg 7.1.04N(3) litigation funding scheme is not exempted from the definition of a managed investment scheme by reg 5C.11.01(5). So, assuming Brookfield to be good law, a litigation funding scheme is a managed investment scheme because it satisfies the three features of the relevant definition in s 9. Further, a litigation funding scheme within reg 7.1.04N(3) of the CALF Regulations will be a financial product (reg 7.1.04N(1) and s 764A(1)(m)). 76 Regulations 7.1.04N(1), (3) and (4) as in force on 22 August 2020 and continuing in force relevantly provide: 7.1.04N Specific things that are financial products—funding schemes and arrangements relating to insolvency and litigation (1) This regulation is made for the purposes of paragraph 764A(1)(m) of the Act. … Litigation funding schemes (3) An interest in a scheme (a litigation funding scheme) that has all of the following features is declared to be a financial product: (a) the dominant purpose of the scheme is for each of its general members to seek remedies to which the general member may be legally entitled; (b) the possible entitlement of each of its general members to remedies arises out of: (i) the same, similar or related transactions or circumstances that give rise to a common issue of law or fact; or (ii) different transactions or circumstances but the claims of the general members can be appropriately dealt with together; (c) the possible entitlement of each of its general members to remedies relates to transactions or circumstances that occurred before or after the first funding agreement (dealing with any issue of interests in the scheme) is finalised; (d) the steps taken to seek remedies for each of its general members include a lawyer providing services in relation to: (i) making a demand for payment in relation to a claim; or (ii) lodging a proof of debt; or (iii) commencing or undertaking legal proceedings; or (iv) investigating a potential or actual claim; or (v) negotiating a settlement of a claim; or (vi) administering a deed of settlement or scheme of settlement relating to a claim; (e) a person (the funder) provides funds, indemnities or both under a funding agreement (including an agreement under which no fee is payable to the funder or lawyer if the scheme is not successful in seeking remedies) to enable the general members of the scheme to seek remedies; (f) the funder is not a lawyer or legal practice that provides a service for which some or all of the fees, disbursements or both are payable only on success. (4) In this regulation: general member, in relation to a litigation funding scheme, means a member of the scheme who: (a) is not the funder; and (b) is not a lawyer providing services for the purposes of the scheme. 77 Now it should be apparent that the definitions of a litigation funding scheme in reg 7.1.04N(3) (as in force on and from 22 August 2020) and in reg 5C.11.01(1)(b) (as in force prior to 22 August 2020) are identical. As is apparent, the six features of a litigation funding scheme that were set out in reg 5C.11.01(1)(b) prior to the CALF Regulations are the same as the six features of a litigation funding scheme that are now set out in reg 7.1.04N(3) of the CALF Regulations. 78 Accordingly, by operation of reg 10.38.01, a litigation funding scheme having the six features specified entered into prior to 22 August 2020 is declared not to be a managed investment scheme and is not a financial product in respect of which an AFSL is required. 79 Further, pursuant to regs 5C.11.01, 7.1.04N and 10.38.01 of the CALF Regulations, if there is a litigation funding scheme that satisfies all of the six features in reg 7.1.04N(3), the litigation funding scheme contains general members who will benefit from that scheme and the litigation funding scheme was entered into on or after 22 August 2020, then an interest in a scheme will be a managed investment scheme for the purpose of s 9 and an interest in a scheme will be a financial product for the purpose of s 764A(1)(m). 80 For such a litigation funding scheme entered into on or after 22 August 2020, the scheme must be registered pursuant to s 601ED if it has 20 or more members (s 601ED(1)). If it is not registered, a person must not operate the scheme (s 601ED(5)). The responsible entity of a managed investment scheme must hold an AFSL authorising it to operate a managed investment scheme (s 601FA) and comply with the obligations that attach to that AFSL. Further, because an interest in a managed investment scheme is a financial product (s 764A(1)(ba)(i)), dealing in interests in the scheme will be regulated by Chapter 7. Further, irrespective of whether the scheme is a managed investment scheme, if an interest in the scheme is a financial product, then no person may carry on business dealing with interests in the scheme, creating a market for such interests or providing relevant advice in relation to such interests without holding an AFSL covering the provision of such services (ss 766A(1)(a) to (c), 766B(1) and 911A(1)). 81 Having briefly summarised the legislative framework, let me then turn to the principal question. Has the litigation funding scheme been grandfathered? 82 The matter for me to determine is whether or not the terms of each funding agreement gave rise to a litigation funding scheme entered into prior to 22 August 2020, such that the scheme was grandfathered by reason of reg 10.38.01 of the CALF Regulations. 83 Now in this respect, Stanwell says that the relevant litigation funding scheme to fund the class action did not satisfy the requirements of regs 5C.11.01(1)(b)(i) or (v) of the Regulations prior to 22 August 2020 or reg 7.1.04N(3) of the CALF Regulations. So it is said that the relevant litigation funding scheme to fund the class action is not exempt from the CALF Regulations. 84 Stanwell says that each funding agreement created two distinct arrangements. 85 It is said that the first arrangement was the work program, the dominant purpose of which was for the benefit of LCM Funding to investigate the feasibility of commencing the then foreshadowed class action. 86 It is said that the second arrangement was the defined Scheme in each funding agreement, the dominant purpose of which was to enable its members to seek remedies. 87 Stanwell says that the entry into of each funding agreement did not constitute the entry into of a litigation funding scheme for the purpose of reg 5C.11.01(1)(b) of the Regulations prior to 22 August 2020 or reg 7.1.04N(3) of the CALF Regulations. Rather, it says that the entry into of each funding agreement only made provision for the entry into of a litigation funding scheme being the "Scheme", if and when the work program was completed to the satisfaction of LCM Funding. 88 It says that the terms in each funding agreement governing the "Work Program" demonstrate that it was not a scheme that satisfies the elements of reg 5C.11.01(1)(b)(i) or (v) of the Regulations prior to 22 August 2020 or regs 7.1.04N(3)(a) or (e) of the CALF Regulations. 89 Stanwell says that the dominant purpose of the work program was for the sole benefit of LCM Funding investigating the feasibility of commencing the then foreshadowed class action against Stanwell and CS Energy. So, the dominant purpose of the work program was not designed to enable each of the members to seek remedies to which the member may be legally entitled, because group members were not party to the work program agreement. It says that any benefit that might later accrue to group members by reason of the work program was incidental and contingent. So, it says that reg 5C.11.01(1)(b)(i) of the Regulations prior to 22 August 2020 or reg 7.1.04N(3)(a) of the CALF Regulations was not satisfied. 90 Further, Stanwell says that LCM Funding had no obligation during the work program to make any payments in respect of the defined Scheme. So, at that time LCM Funding did not provide funds or indemnities under each funding agreement to enable the group members to seek remedies. So, reg 5C.11.01(1)(b)(v) of the Regulations prior to 22 August 2020 or reg 7.1.04N(3)(e) of the CALF Regulations was not satisfied. 91 Further, Stanwell says that LCM Funding had an obligation to fund its own costs for the work program, including the work program costs as defined under the work program agreement to which only LCM Funding and Piper Alderman were parties. 92 Stanwell says that its position is supported when the dominant purposes and obligations of LCM Funding under the work program and the defined Scheme are contrasted. 93 The Scheme is described as having the sole purpose of prosecuting and making recovery for the group members, and to provide a structure by which group members might recover damages. But Stanwell says that it was only after the work program was satisfactorily completed that the Scheme commenced. It says that it was only after that point in time that LCM Funding was obliged to fund one or more actions pursuant to the terms of each funding agreement, which would only then appear to satisfy reg 7.1.04N(3)(a) of the CALF Regulations. 94 Now LCM Funding, whilst a party to the Scheme, was required to pay the action costs and any adverse costs. But Stanwell says that LCM Funding had no obligation to pay such costs, other than work program costs, at any point in time prior to the completion of the work program agreement. 95 Further, Stanwell says that the work program contemplates work undertaken only by LCM Funding and Piper Alderman for the sole benefit of LCM Funding, and with no stipulation or obligation on LCM Funding to fund the actions or make any payments in respect of the Scheme during this time. But the Scheme, on the other hand, expressly obliges the provision of funding by LCM Funding in relation to the class action, which therefore enables the seeking of remedies for each of its group members. 96 Further, it is said that each funding agreement provides that LCM Funding can terminate the funding agreement in its absolute discretion if the work program revealed that the then foreshadowed class action did not present an attractive commercial proposition for LCM Funding. Therefore, according to Stanwell, it cannot be said that the work program and the steps taken prior to the creation of the Scheme had the dominant purpose of pooling contributions to produce benefits for the group members, and to ultimately vindicate group members' rights. Group members' rights would not be vindicated had the work program not been completed to LCM Funding's satisfaction because it was able unilaterally to terminate the funding agreement. 97 Now Stanwell had to accept that LCM Funding had paid a significant amount in action costs by 22 August 2020. Further, each funding agreement defines "action costs" to include work program costs. But it is said that each funding agreement imposed no positive obligation on LCM Funding during the work program period to make any payments other than those associated with work program costs. 98 Further, Stanwell says that the terms of each funding agreement provided that the work program period commenced on 22 February 2020 and that it was completed on the earliest of the several events, described above. It is said that each of those events had either not occurred or occurred on a date after 22 August 2020. 99 Generally and accordingly, Stanwell says that only on the date that the work program was completed under each funding agreement did the relevant scheme commence. 100 I would reject Stanwell's arguments. It has not established that the relevant scheme was entered into on or after 22 August 2020. Indeed, its arguments are unattractive as a matter of both contractual construction and commercial reality. 101 In my view the relevant litigation funding scheme is the capitalised Scheme identified in the funding agreements. Such a scheme was entered into prior to 22 August 2020. Indeed, upon LCM Funding and group members entering into the first funding agreements on 17 June 2020, a scheme was entered into having the features set out in reg 5C.11.01(1)(b) and reg 7.1.04N(3). Accordingly, by operation of reg 10.38.01, the scheme being the capitalised Scheme is not caught by the amendments made by the CALF Regulations. 102 Let me elaborate in some detail on the basis for my conclusion. 103 Now Stanwell contends that the funding agreements created two distinct arrangements being first, the work program and, second, the Scheme defined in the funding agreements. It asserts that it was the work program that was entered into prior to 22 August 2020, but the work program did not satisfy the features of a scheme that could have been grandfathered. Accordingly, it says that by the time the Scheme commenced, which it says did satisfy each of the features of a litigation funding scheme, the relevant date of 22 August 2020 had passed. 104 But in my view the funding agreements did not create two separate arrangements with different dominant purposes. Rather, the work program was an integral part of achieving the dominant purpose of the Scheme for members to seek remedies. In my view the Scheme established by the funding agreements, which includes but is not limited to the work program, satisfies each of the features of reg 5C.11.01(1)(b) or the equivalent reg 7.1.04N(3) such that the litigation funding scheme arose prior to 22 August 2020. 105 Now in determining whether a litigation funding scheme was entered into prior to 22 August 2020, the question is whether the various features identified in reg 5C.11.01(1)(b)(i) – (vi) or the equivalent reg 7.1.04N(3) were present prior to that date. In my view they were. And it does not matter that additional members entered on or after 22 August 2020. 106 First, the requirement is that there be a scheme, but there is no dispute between the parties that all the concept "scheme" requires is that there be some programme or plan of action. It is not in doubt that the funding agreements evidence the existence of a programme or plan of action in that broad sense. 107 Second, the dominant purpose of the scheme must be for each of its general members to seek remedies to which the general member may be legally entitled. In my view this was satisfied in relation to the capitalised Scheme. I will return to discuss this in detail later. 108 Third, the possible entitlement of each of the general members to remedies must arise out of the same, similar or related transactions or circumstances that give rise to a common issue of law or fact. In my view, the provisions of the funding agreements make clear that this requirement is satisfied. The group members are all consumers of electricity in Queensland who allegedly suffered loss or damage by the conduct of Stanwell and CS Energy in inflating the cost of electricity, which conduct was said to have been engaged in in contravention of s 46 of the Competition and Consumer Act. Further, the relevant transactions or circumstances occurred before each funding agreement was entered into. 109 Fourth, reg 5C.11.01(1)(b)(iv) or its reg 7.1.04N(3) equivalent provides a broad, non-exhaustive description of the steps taken to seek remedies for each of the general members under a litigation funding scheme. But the steps are not limited to the commencement of legal proceedings, but include investigating a potential or actual claim (reg 5C.11.01(1)(b)(iv)(D)). So what is contemplated is a litigation funding scheme in which no legal proceedings are ever commenced, and all that occurs is the investigation of a claim that is then not litigated. But such a scheme is still entered into for the dominant purpose of the general members seeking remedies to which they may legally be entitled, notwithstanding that the ultimate purpose may not be achieved because no legal action is taken. 110 Fifth, in the present case LCM Funding has provided funds, indemnities or both under the funding agreements to enable the general members to seek remedies. LCM Funding paid a significant amount in action costs, which were work program costs, by 22 August 2020. Such funds were provided to enable each member to seek remedies in that they funded the investigation of potential or actual claims. I will elaborate on this further in a moment. 111 Sixth, the funder is not a legal practice, and so the relevant requirement is satisfied. 112 Let me now elaborate further with respect to two matters. 113 In terms of reg 5C.11.01(1)(b)(i) or its reg 7.1.04N(3) equivalent and dominant purpose, Stanwell asserts that the dominant purpose of the work program was for the sole benefit of LCM Funding investigating the feasibility of commencing the then foreshadowed class action. It relies on r 24.1 of the funding agreements, which states as I have already set out that "when the Funder undertakes the Work Program, the Funder does so for its sole benefit and without liability to others." 114 Stanwell also makes much of the fact that during the work program period, LCM Funding had no obligation under the funding agreements to make any payments in respect of what it narrowly defines as the scheme, that is, something separate to the work program. 115 But I reject Stanwell's dominant purpose analysis based upon its analysis of the work program provisions. 116 First, the recitals to each funding agreement identify the member's belief that it has a claim, the member's intention to retain the lawyers to prosecute the claim, and the formation of the scheme by LCM Funding to enable the members and others with similar claims, with the benefit of funding and other assistance from LCM Funding and using the services of the lawyers, to recover damages or other compensation as regards those claims and for the mutual benefit of the members and LCM Funding. That is not supportive of Stanwell's position. 117 Now Stanwell says that one must have regard to the precise language used. Recital A states that the member either has retained or "intends to retain the Lawyers to prosecute the Claim" and recital B states that LCM Funding either has formed or "intends to form a scheme" (recitals A and B). It is said that the use of the word "intends" in both recital A and B to the funding agreement militates against the construction that the funding agreement automatically creates the scheme. It is said that the entry into of the funding agreement did not automatically result in LCM Funding having a relationship with the member which had the dominant purpose of it seeking remedies for that member and the entry by the member into the funding agreement was not in and of itself entry by the member into the scheme. It is said that recitals A and B of the funding agreement are consistent with the position that entry into of the funding agreement makes provision for the subsequent entry into of the scheme at a particular point in time. It is said that that particular point in time is when the work program ends, and the scheme commences. But in my view this is all too narrow. 118 True it is that the recitals speak prospectively. That is unsurprising. But recital C in terms provides that "This document provides for the Claimant to become a Member of the Scheme". And clause 1 of the terms sheet makes it plain that this occurs when the funding agreement is entered into, not at a later time such as when the work program ends. 119 Second, the express sole purpose of the scheme is set out in r 4, which to set out for convenience again states: Purpose: The purpose of the Scheme is to provide a structure by which Members, with benefit of funding from the Funder and using the services of the Lawyers, might recover damages or other compensation as regards the Claims and for the mutual benefit of the Members and the Funder. 120 Clearly, this is the stipulated purpose at inception, that is, at the time a person enters into a funding agreement. It is not a purpose which speaks only at a later time. Further, part of the fulfilment of that purpose involves the performance of the work program. 121 Third, the dominant purpose of a scheme is to be ascertained objectively. Pursuant to the funding agreements considered as a whole, the dominant purpose of the scheme is for each general member to seek remedies to which they may be entitled. The work program is one of the activities undertaken by or on behalf of LCM Funding directed at achieving that purpose. Investigating the viability of general members' claims is consistent with and driven by the larger objective of seeking remedies for the general members. 122 Further, the fact that the scheme may terminate if the work program is not satisfactory to LCM Funding does not mean that the work program is not undertaken for the dominant purpose of seeking remedies for the general members. Regulation 5C.11.01(1)(b)(iv) or its reg 7.1.04N(3) equivalent contemplates that a litigation funding scheme may go no further than the investigation stage. 123 Further, upon entry into of each funding agreement, each group member assumed obligations to pay contingent fees to LCM Funding, including from any recovery that may be obtained at any point including prior to the commencement of the proceeding including during the work program period. There is no reason why the negotiation of a settlement of a claim as a step that may be taken to seek remedies for group members as part of a litigation funding scheme could not occur during the work program period. And group members' obligations to pay for the achievement of such a settlement arose upon entry into of the funding agreements. Indeed, one of the percentage levels for the commission was fixed for the period 15 April to 15 October 2020. Further, members were bound by various other obligations from inception (rr 7, 16.3, 32 and 33). 124 Further, after the 15 days cooling off period, group members were locked in to the Scheme with only limited and defined means of exit and immediately precluded from seeking to vindicate their choses in action outside the Scheme as part of the price for the benefits of LCM Funding supporting the investigation phase. By so locking themselves in they in turn assisted in the conduct of the work program, one part of which was to ascertain whether there were enough persons willing to join the Scheme to make it viable. 125 Accordingly, in my view, performing the work program, which included signing up a sufficient number of group members, was an integral part of achieving the dominant purpose of the Scheme for members to seek remedies. 126 Now it may be accepted that clause 40 of the funding agreement stated, as I have already set out: Funder's obligations: Notwithstanding any other obligations to the Scheme, prior to the conclusion of the Work Program Period, the Funder shall have no obligation to fund the Actions or make any payments in respect of the Scheme. During the Work Program Period the Funder's obligation is limited to the payment of Work Program Costs. 127 Stanwell says that it follows that any funds provided for the work program costs cannot be for the dominant purpose of seeking remedies for the general members but were instead for the purpose of LCM Funding deciding whether funding the class action was a worthy investment. But this argument is misconceived. 128 LCM Funding's obligation to fund the work program costs (r 35) is in fulfilment of the broader r 4 purpose for the benefit of the members. Further, the fact that the funder may have an out of the type suggested does not negate the broader purpose. The fact that there are some terms in favour of the funder is hardly surprising. There are rights and liabilities imposed on both parties to a funding agreement. But that does not undermine the r 4 purpose. 129 Further, Stanwell points out that the work program commenced on 20 February 2020, nearly four months before the first member signed a funding agreement. The work program ended on 22 January 2021, being the date that Stanwell was served with the originating process in the representative proceeding. Stanwell says that if the work program was driven by the larger objective of seeking remedies for the general members, then the work program would not need to be terminated at that point or at any point because it would continue to be for the purpose of seeking remedies for the general members in the class action. 130 Stanwell says that the fact that the work program was terminated on 22 January 2021 reinforces its submission that the Scheme, and not the work program, had the dominant purpose of seeking remedies for each of its general members, and the litigation funding scheme (being the Scheme) commenced when the work program was terminated. 131 But this is all unconvincing. The termination date does not assist Stanwell. The fact that it is contractually provided for does not entail that from the inception of each funding agreement, the performance of the work program was not under the umbrella of the broader r 4 purpose. It was a part of rather than separate from the Scheme. 132 Further, Stanwell says that the work program included the identification and recruitment of members through publicity and digital marketing. It is said that the purpose of this process was to enable LCM Funding to establish whether the potential quantum of damages recoverable in respect of the claim was sufficient to meet LCM Funding's investment criteria. It is said that this aspect of the work program did not have the purpose of seeking remedies for members of an existing scheme. Rather it was directed to testing the markets, that is, recruiting members in order to ascertain whether or not a future litigation funding scheme was attractive or commercially viable from the perspective of LCM Funding. 133 But in my view, Stanwell's points are misplaced. To test support and to ensure its viability may of course have been in part in the interests of LCM Funding. But it was also in the interests of the members, in terms of the viability and economics of any proposed proceeding. And indeed each member for their own purpose had an interest in LCM Funding funding the proceeding. Again, this was all in furtherance of the r 4 purpose. The fact that the work program in this respect may have had a dual purpose dimension to it, that is, being to the advantage of both LCM Funding and the members does not undermine the broader point. 134 Further, Stanwell says that it is difficult to construe the immediate locking in of members under each funding agreement as being for any purpose other than to provide LCM Funding with time and certainty to evaluate the commercial prospects of creating a future litigation funding scheme. And it says that there was no material benefit to members in being locked in for the extent of the work program. But this point goes nowhere. The very locking in of a member who signed the funding agreement supports the point of the application of the r 4 purpose from inception. A member was being locked in on the basis of various promises made by the funder to achieve the relevant purpose. 135 Further, Stanwell says that LCM Funding's submission that all steps in the work program were directed towards the commencement of an action is incorrect. The investigation of the feasibility and value of the claims was taken to permit LCM Funding to make an informed commercial decision as to whether to fund the class action. It is said that it would be just as accurate to say that the work program steps were directed to not commencing an action as they were directed to commencing one. Further, it is said that there is nothing intrinsic to the steps themselves which implies that they could only be taken for the benefit of group members. But this point is also misplaced. The fact that these steps had a dual dimension or advantage from the funder's perspective does not entail that they were not in fulfilment of the broader purpose. 136 Further, Stanwell contends that because group members were not party to the work program agreement referred to in the funding agreements pursuant to which the work program was performed, then the dominant purpose of the work program was not designed to enable each of the group members to seek remedies to which they may be legally entitled. But I also reject this point. 137 Regulation 5C.11.01(1)(b)(iv) or its reg 7.1.04N(3) equivalent states that the steps taken to seek remedies for each of the general members of a litigation funding scheme "include a lawyer providing services in relation to…investigating a potential or actual claim". The language of the regulation does not require that a lawyer provide services directly to the general member. So, the fact that group members were not party to the work program agreement is of little relevance to the question of whether the scheme in place prior to 22 August 2020 satisfied each of the relevant criteria. 138 Further, I agree with LCM Funding that rule 24.1 of each funding agreement, which I have already set out, does not detract from its case on dominant purpose. Rule 24 does not require any different view to be taken of the agreed purpose of the scheme, being for the purpose of seeking remedies for the general members. Rather, r 24 is concerned with LCM Funding's liability to and relationship with the members of the scheme. It makes clear to a member that it should not take LCM Funding as having undertaken the work program and being satisfied of its outcome as representing any opinion or recommendation as to the merits of the claims or the likelihood of any recovery. It is understandable that LCM Funding should want to make this clear. 139 Further, there is another difficulty in treating the work program as a separate arrangement from the Scheme. Regulation 7.1.04N operates to declare a litigation funding scheme a financial product for the purpose of s 764A(1)(m) of the Corporations Act, and without the prior exemption from the requirement to hold an AFSL. In so doing, the litigation funding scheme would then attract for the benefit of persons considering signing funding agreements the provisions of the Corporations Act regulating those who offer financial products, including the need to hold an AFSL. It would be an anomalous outcome, and contrary to the apparent purpose of the CALF Regulations, if the members were signed up to funding agreements with substantial obligations and a limited ability to exit, but were not during the course of the work program period entitled to such protections until the separate scheme as envisaged by Stanwell arose; at that latter time it would be too late for the protections to be efficacious. 140 In summary, I reject Stanwell's case on dominant purpose. It is not consistent with the underlying contractual arrangements and is commercially incoherent. Let me move to another matter that I can quickly dispose of. 141 In terms of reg 5C.11.01(1)(b)(v) concerning funding and/or indemnities, Stanwell asserts that this regulation or its reg 7.1.04N(3) equivalent was not satisfied in relation to the arrangements in place prior to 22 August 2020 because LCM Funding had no requirement, stipulation or obligation during the work program to make any payments in respect of the scheme and accordingly LCM Funding did not provide funds or indemnities under the funding agreements to enable the group members to seek remedies. But action costs include the work program costs. Accordingly, the payment by LCM Funding of the work program costs for the investigation of the merits of group members' claims satisfies the relevant requirement that the funder provide funds under a funding agreement to enable the members of the scheme to seek remedies. LCM Funding was obliged to and did fund the steps to investigate group member claims. 142 In summary, in my view the Scheme as contractually stipulated or in substance the litigation funding scheme constituted by the funding agreements has been grandfathered. That being so, Stanwell's originating process must be dismissed. 143 But in any event I would not have granted Stanwell the relief sought even if I was wrong on grandfathering. Let me explain. Relief sought by Stanwell 144 After the hearing but by consent, Stanwell filed an amended originating process modifying the relief sought. Further, LCM Funding filed a notice of cross-claim, seeking declaratory relief. I will return to this cross-claim later. But for the moment let me concentrate on the relief sought by Stanwell, although this is hypothetical in the result. But even if I was wrong on grandfathering I would have refused the relief sought. 145 First, as to the financial product aspect of the case, I would have refused injunctive relief in any event. 146 Now by reason of s 1324(6) of the Corporations Act, I have power to grant an injunction restraining particular conduct even if there is no threatened danger of a future contravention of that Act. But whilst not confined by equitable principles, an injunction under s 1324(1) even with the flexibility injected by s 1324(6) should generally only be made if the injunction will have some utility or will serve some purpose within the contemplation of that Act as I discussed in Australian Securities and Investments Commission v Macro Realty Developments Pty Ltd (2016) 111 ACSR 638 at [53]. There is no such utility or purpose here. 147 The injunctive relief sought by Stanwell focuses on seeking a restraint on the future issuance of a financial product without an AFSL. But there is no evidentiary basis on which I could now conclude that there is a real risk of LCM Funding doing so in contravention of the Corporations Act let alone of Stillwater being an accessory to such a contravention. The representative proceeding is brought on a closed class basis. Further, I have recently made orders pursuant to s 33K(1) of the FCA Act permitting the group member definition to be amended to include persons otherwise falling within the definition who had signed funding agreements up to and including 13 September 2021. But there is no evidence of an intention by LCM Funding to enter into funding agreements with any further persons. 148 But in any event LCM Funding is an authorised representative of LCM Advisory, which as I have said holds an AFSL the terms of which permit it or its authorised representatives to issue financial products being interests in litigation funding schemes. And I do not have material before me on which I could conclude that LCM Funding could not lawfully issue such products in that capacity. 149 Accordingly, the injunctive relief concerning the financial product question is neither justified nor necessary. Moreover, there would have been little utility in making any declarations. 150 Second, as to the managed investment scheme aspect of the case, I would also have refused injunctive relief, regardless of the outcome on the grandfathering question. Even if Stanwell had succeeded on negating grandfathering, Stanwell has not established that LCM Funding is operating the relevant scheme in contravention of s 601ED(5) of the Corporations Act. 151 Now I note that in Brookfield at [104], the majority stated: There is some debate about whether the Funder or MBC is presently the responsible entity for the purposes of Ch 5C. Both fulfil functions which might be thought to be part of the operation of the scheme, but neither is qualified to be a responsible entity as required by s 601FA. If either is operating the scheme, it will be in breach of s 601ED(5). There can be little doubt that between them, they are operating the scheme which is unregistered and lacks a responsible entity… 152 But in a later judgment on relief, the majority refused to declare that the funder or lawyers had operated an unregistered managed investment scheme in contravention of the Corporations Act. In Brookfield Multiplex Limited v International Litigation Funding Partners Pte Ltd (No 2) (2009) 76 ACSR 323 at [31] they stated: We are not inclined to declare that any of the first, second and third respondents contravened Ch 5C by operating an unregistered scheme. As we observed in our earlier reasons at [104], there was no real attempt to identify which of the respondents was operating the scheme for the purposes of s 601ED(5) of the Act. It is probable that, amongst them, they were doing so, but it does not necessarily follow that each or any of them was doing so. They may have been acting in concert to produce that result, but we do not understand that proposition to have been expressly advanced. Nor do we understand the appellants to have raised a case based upon any provision of the Act which extends the categories of persons liable for the conduct of others. In those circumstances we should not make a declaration as to relatively serious misconduct. We also doubt whether such a declaration would serve any useful purpose. 153 Accordingly, whatever Brookfield stands for as to whether a scheme in the form in issue in that case or in analogous terms in my case satisfies the definition of a managed investment scheme in s 9, it does not contain any ratio or considered obiter that the litigation funder or any other person is operating such a scheme for the purpose of s 601ED(5). In those circumstances I would have been free to decide that question for myself if I had needed to. 154 Further, I would note that there is an inconsistency within Brookfield itself. Because the majority construed the definition of a managed investment scheme in s 9 with little regard to the consequences for the operation of the substantive provisions of the Corporations Act or of Part IVA of the FCA Act, they avoided answering the central question. If there was a managed investment scheme, who was operating it? Now if it is not possible to identify a single person and in particular the litigation funder as capable of operating the alleged managed investment scheme, that may confirm that paragraph (a) of the definition of a managed investment scheme could not be read as relevantly extending. So if I had needed to decide the question I may not have been required to find Y to be legally true when another part of the same precedential judgment left open whether X, a necessary predicate for Y to be true, was itself true, and on examination I found X not to be true in the case at hand. 155 Now Stanwell has asserted that it is LCM Funding which has operated and is operating the relevant scheme, with Stillwater as an accessory. But Stanwell has not advanced any evidence or coherent argument to show that it is LCM Funding who is operating the scheme within the meaning of s 601ED(5). There has been no exploration in the evidence or submissions of the respective conduct of LCM Funding, Stillwater or Piper Alderman in relation to the operation of the scheme. Nor have any submissions been advanced by Stanwell as to the proper construction of s 601ED(5) and in particular what it means to "operate" a managed investment scheme within the statutory concept. 156 Indeed, Stanwell has not explained how LCM Funding could be said to be operating the scheme when it is Stillwater, as the representative party, who has the statutory carriage of the representative proceeding under Part IVA of the FCA Act and under my supervision. Now clearly LCM Funding has input into various decisions as to the prosecution of the representative proceeding, but it has no ability to control them; see an analogous concept of control under s 50AA of the Corporations Act. 157 In my view, and irrespective of the grandfathering question, Stanwell would not have been entitled to any injunctive relief against LCM Funding. Further, and as a corollary of not having established a primary contravention, Stanwell would not have been awarded an injunction against Stillwater in the terms sought either. 158 Let me say something about the declaratory relief. Now whilst it would have been open to me to make a declaration, assuming Stanwell's negation of grandfathering, I would have declined to do so. The declaration sought would have had little utility in the absence of any injunctive relief that I would not in any event have granted. 159 In summary, even if I had taken a different view on grandfathering, I would not have given Stanwell the relief that it sought. Referral application 160 Now as I explained at the outset, LCM Funding sought a referral to the Full Court on the basis that the relevant scheme before me was indistinguishable from Brookfield, that Brookfield was incorrect, and that it wanted to challenge Brookfield. Now I have declined to make that referral. But before explaining my reasons let me say something more about Brookfield. 161 The ratio of Brookfield was that the litigation funding scheme in that case was a managed investment scheme within the meaning of the statutory definition. The majority held that the closed class action before them fell within paragraph (a) of the managed investment scheme definition. 162 First, their Honours considered that the definition in s 9 was intended to be broader than the definitions in prior iterations of corporations legislation of an "interest", "prescribed interest" and "participation interest". 163 Second, their Honours discounted the effect of statements in the second reading speech and other extrinsic materials to the Managed Investments Act 1998 (Cth) which suggested that Chapter 5C of the Corporations Act was to deal with a relatively narrow range of investment schemes. 164 Third, their Honours applied what Mason J said in Australian Softwood Forests at 129 and 130 in relation to the definition of the word "interest" in the Companies Act 1961 (NSW) to say that the words of the definition before them should not be read down by reference to legislative purpose. 165 Fourth, their Honours considered it unhelpful to construe the definition by reference to any notion as to what was the essence of a managed investment scheme, and considered that the operation of paragraph (a) of the definition should not be limited by reference to an implied limitation to be derived from the Chapter 5C regulatory scheme itself. 166 Fifth, their Honours conceptualised the scheme constituted by the litigation funding arrangements in a manner quite at odds with the primary judge, Finkelstein J, who was a notable class actions jurist. Now the primary judge had characterised the scheme by saying that in essence the plan involved putting in place a group of persons willing to participate in proceedings against Multiplex, ensuring that those persons would not be exposed to costs, retaining a firm of solicitors that would act on the group's behalf, and making sure that the legal fees would be paid. But the majority rejected that characterisation. They recharacterised the scheme as follows (at [39] and [40]): We would prefer to describe the scheme as having the following purpose: • to facilitate the realization of claims by group members against Multiplex, using legal services to be provided by MBC at the expense of the Funder; • which company also undertakes to meet any order for costs made against group members or any order for security for Multiplex's costs; • with the intention that the Funder be reimbursed from, and derive a profit from, the proceeds of such realisation; and • that the group members be otherwise protected from any liability for their own costs, any order that they pay Multiplex's costs, or any order that they give security for costs in the relevant proceedings. Steps in the scheme include: • the Funder offering to undertake the payment of group members' costs, to meet any order for costs made against group members, and to provide security for costs if necessary; • MBC offering to accept instructions on the basis that it will look to the Funder for its costs and outlays in accordance with the terms of the scheme; • the group members accepting the Funder's offers and instructing MBC accordingly; • the subsequent conduct of the matter; and • the distribution of the Resolution Sums. 167 Sixth, the majority held that the (a)(i) aspect of the s 9 definition, being the contribution of money or money's worth as consideration to acquire rights to benefits produced by the scheme, was satisfied. It was said that the promises given by group members to pay to the funder a percentage of the resolution sum and by the funder to pay group members' costs, adverse costs and security for costs, constituted "money's worth". It was said that the word "contribute" means to "supply or pay along with others to a common fund or stock" or to "give in common with others; give to a common stock or for a common purpose", foreshadowing the requirement for pooling or use in a common enterprise (at [52]). It was said that it may be "unwise to construe the definition narrowly merely because there may be difficulties in applying part of the regulatory regime" (at [55]). In that context their Honours rejected an argument that because group members' promises were inapt to be held separately, valued and held in trust for group members, as required by ss 601FC(1)(i) and (j), they could not be considered a contribution under (a)(i) of the definition. And it was said that group members' promises were given as consideration to acquire benefits produced by the scheme, being the realisation of group members' claims. 168 Seventh, the majority held that the (a)(ii) aspect of the definition, being pooling, or use in a common enterprise, of the contributions to produce financial benefits for the members, was satisfied. Their Honours held that pooling in the relevant sense required only that the contributions be "available, and known to be available, for a relevant purpose, regardless of physical location" (at [92]), and the scheme was a "common enterprise" in the relevant sense; their Honours did not separately consider the word "used". It is also convenient to note here that the (a)(iii) aspect of the definition, being the absence of day-to-day control of the members, was not in issue. 169 Eighth, the majority alluded to but avoided resolving the important question of whether it was the funder or the lawyers who were "operating" the scheme. 170 Now Jacobson J was in dissent. Let me highlight three points that he made. 171 First, applying a purposive approach he considered that the (a)(ii) aspect of the definition was not satisfied because the contributions of group members, being their contractual promises to pay the funder from any resolution sum, were not pooled in the relevant sense, as "the purpose of the individual group members in giving their contractual undertakings was not to produce financial (or other) benefits from the pooling of those contributions" but rather was "to deal with the financial benefits consisting of the realisation of the members' claims for compensation, if and when produced" (at [269]). And as he said (at [272]): Here, the contractual undertakings of group members may, in a loose sense, make possible the financial benefits that are contemplated. But it would be wrong to equate these promises with the provision of funds by a contributor which are combined in a discernible pool that is then used to produce financial benefits for the benefit of contributors. 172 If I might say so, his analysis is quite persuasive. Further, there was, of course, no pooling of the underlying choses in action against the defendant and also no contingent pooling of property yet to be received, such as a settlement sum or damages award. 173 Second, so far as he was concerned, nor were the contributions used in a common enterprise. The correct characterisation of the arrangements was that the so-called contributions were part of the price or cost of the funder's agreement to fund the litigation. 174 Third, he considered that the context in which the statutory definition appears reinforces the view that the arrangements before him did not constitute a managed investment scheme. His Honour considered the evident purpose of Chapter 5C as being "to protect the investment of pooled contributions, or contributions that are used in a common enterprise, by a person who has day-to-day control". Contrastingly, what was occurring was the use by the funder of its own funds to obtain a financial benefit for the members. 175 Now I am bound by what the majority has said, but there is a strong case for arguing that it is appropriate for a Full Court to reconsider the majority decision in Brookfield. Let me briefly make the following points. 176 First, of the four judges who have considered the question, there has been a two:two split. 177 Second, the effect of Brookfield was immediately reversed by administrative action and then by regulation. For that reason, there was never any occasion to challenge the decision. 178 Third, soon after Brookfield was handed down, a significant aspect of the reasoning of the majority in Brookfield, that is, that one cannot reason from difficulty in applying the provisions of Chapter 5C to a scheme to the conclusion that the scheme is not within the definition of a managed investment scheme, was the subject of a different conclusion from another Full Court in National Australia Bank v Norman (2009) 180 FCR 243 and [183] to [185] per Gilmour J. The difference between the two decisions has not been resolved. I will return to this later. 179 Fourth, and with considerable respect to the views expressed by the majority in Brookfield, there are problematic aspects of their reasoning. 180 The majority ought arguably not to have eschewed a purposive approach to the construction of the managed investment scheme definition in favour of an overly technical approach to each element of the definition. Indeed, the discernment of statutory purpose is important where the statutory provision here uses a series of open textured, protean words whose proper application can only be ascertained in light of the purpose sought to be achieved. 181 Moreover, the majority's decision to set statutory purpose to one side may arguably have misapplied the remarks of Mason J in Australian Softwood Forests. This may have been due to a failure to appreciate the difference in legislative intention in the definition of a managed investment scheme since the introduction of the Managed Investments Act, compared to the definition of an "interest" or "prescribed interest" prior to 1998. Mason J's comment that the words of the definition of "interest" in the Companies Act should not be read down by reference to legislative purpose were made in a context where the definition was "so general and all-embracing that it is impossible to say that it necessarily excludes particular transactions which appear to be covered by the general words" (at 130). But his Honour importantly commented that it "would be different if we could glean from the legislative provisions an overall purpose which, being limited in scope, justified a reading down of the definition". 182 Those comments were made in the context of a definition which was designed "in such a fashion as to include almost any profit making scheme which does not fit within an exclusion relating to other interests…which are already regulated under the CB" (explanatory memorandum to the Companies Bill 1981 (Cth) at [401]). 183 But the context of the managed investment scheme definition is different. The explanatory memorandum to the Managed Investments Bill 1997 (Cth) (at [19.4] to [19.5]) stated: Managed investment schemes are currently regulated under the 'prescribed interest' provisions of the Law. The complex and seemingly all embracing definition of 'prescribed interest' has been widely criticised because of its lack of precision. The definition of a 'managed investment scheme' … will provide greater certainty and guidance as to what investment arrangements are to be regulated under the Law. The definition sets out the key elements of a managed investment scheme for the purposes of the Law. 184 More generally, the law reform which led to the Managed Investments Act was prompted by a number of high profile collapses of prescribed interest schemes in the 1990s, stemming in part from the inability of illiquid property schemes to meet buy-back obligations due to large numbers of requests for redemptions in times of economic downturn. The Managed Investments Act, in response to the ALRC's Report No 65, Collective Investments: Other People's Money (1993), adopted a number of recommendations to protect investors, including the advent of a single responsible entity, licensing of scheme operators, registration of schemes with the regulator, compliance measures, the requirement to hold scheme property on trust, and specific methods for withdrawal from a scheme depending on the liquidity of the scheme property. 185 Now I note that the prior regime, for example, under the Companies (NSW) Code, involved a very broad definition of "prescribed interest", similar to the earlier concept of "interest" in s 76(1) of the Companies Act analysed in Australian Softwood Forests. 186 Further, there was a necessity for a management company by or on behalf of which prescribed interests had been or were proposed to be issued. Further, there was a separate trustee with an approved deed, being a trustee for the holders of prescribed interests and holding the relevant assets, under which various covenants were given binding the trustee and the management company with respect to their various but different roles. 187 But the structure enshrined by the Managed Investments Act sought to collapse those two entities into one entity, namely, the responsible entity, due to the obvious problems that had occurred with the two-party structure of a management company and a trustee (second reading speech, House of Representatives, 3 December 1997; Hansard p 11928). 188 Now the overall legislative purpose of the present regime being the one considered in Brookfield is to regulate closely the operation of a scheme whereby members may otherwise be at risk of losing the capital which they have invested and surrendered day to day control of, including to regulate the ability of members to achieve a ready exit from the scheme. But that purpose does not cohere with the inclusion of a funded class action in the definition of a managed investment scheme in circumstances where there already exists a statutory regime regulating the conduct of class actions in the best interests of group members, including through the supervisory role of the Court. Group members in a class action do not place capital at risk in the same way as usually occurs in a managed investment scheme and the statutory regime already provides for the circumstances in which a group member may withdraw from a class action through the exercise of opt out rights. 189 In my view, these considerations arguably tell against the inclusion of a funded class action within the definition of a managed investment scheme, and suggest that, to the extent that the general language of the definition could possibly be read as encompassing a funded class action, nonetheless an interpretation which does not so extend should have been preferred if open. 190 Further, the majority arguably placed too wide a construction on the terms "contribute", "pooled" and "used in a common enterprise" in the managed investment scheme definition. Even if one were to accept that the contingent promises of group members to pay a funder from any resolution sum fall within the expression "money's worth", those promises are not "contributed" to the scheme nor are they "pooled" or "used in a common enterprise" in the sense intended by the legislature. The clear import of the definition is that the "money or money's worth" contributed by members forms the capital which is invested or deployed in the scheme with the object of producing benefits to flow to those who made the contributions. That is the sense in which the contribution, pooling or use occurs and it is inapposite to a funded class action. 191 Further, the majority held (at [56]) that: [I]f a scheme falls within the s 9 definition, and if it is required to be registered, then it must be constituted and conducted so as to comply with Ch 5C. It follows that one cannot hold that a particular scheme is not within the s 9 definition simply because its structure does not comply with the requirements of Ch 5C. If the scheme must be registered then it must be constituted and conducted so as to permit registration. 192 But that seems to suggest that one could not consider whether the interpretation of the definition would cohere with the statutory scheme as a whole. Indeed, it is not unfair to say that the majority's reasoning appears to have been to accept that there are many requirements in Chapter 5C, but that the inaptness of any one or more particular requirements to the scheme under consideration could not meaningfully inform the scope of the definition itself. If that is the reasoning, the majority arguably did not pay sufficient regard to the principle that an enactment must be read as a whole. 193 Notably, in Norman, a decision handed down only 10 days after Brookfield, a differently constituted Full Court held that a scheme which was incapable of being registered as a managed investment scheme could not be a managed investment scheme within the meaning of the statutory definition. 194 The tension between Brookfield and Norman remains unresolved. Indeed, on that aspect I note that White J in Australian Securities and Investments Commission v Great Northern Developments Pty Ltd (2010) 242 FLR 444 preferred the observations of Gilmour J in Norman to the majority in Brookfield on this point. At [89] and [90], he said: It is true that in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11, Sundberg and Dowsett JJ said (at [56]): The scheme of the Corporations Act is to define the term "managed investment scheme" in s 9 and to regulate some of those schemes pursuant to Ch 5C. Many of the regulatory provisions will affect the constitution and conduct of any scheme which must be registered. In other words, if a scheme falls within the s 9 definition, and if it is required to be registered, then it must be constituted and conducted so as to comply with Ch 5C. It follows that one cannot hold that a particular scheme is not within the s 9 definition simply because its structure does not comply with the requirements of Ch 5C. If the scheme must be registered then it must be constituted and conducted so as to permit registration. In my respectful view, that observation does not give full weight to the fact that not only does s 601ED(5) provide that a person must not operate a managed investment scheme that is required to be registered unless the scheme is so registered, but s 601ED(1) requires the managed investment scheme to be registered if other provisions of that section are satisfied. I prefer the later observations of Gilmour J (with whom Spender J agreed) in National Australia Bank Ltd v Norman at [183]. His Honour said: As I have already explained, s 601EE allows managed investment schemes to be wound up where a person operates a scheme in contravention of s 601ED(5). Section 601ED(5) prohibits a person from operating a managed investment scheme that is required to be registered, unless the scheme is so registered. Section 601ED(5), accordingly, envisages that the unregistered managed investment scheme is of a kind which ought to have been, and could in fact have been, registered. 195 Let me elaborate more generally on the topic of the unresolved conceptual incoherence in applying Chapter 5C to litigation funding schemes. This is a non-trivial problem that has not been grappled with. 196 Who is to be the responsible entity of the scheme that is required to operate the scheme under s 601FB(1), this being a central objective of the changes made by the Managed Investments Act? The funder is not a good candidate, as the funder typically and in the present case does not have day to day control over the litigation, that being reposed in the representative applicant and its ability to give instructions to the lawyers. The lawyers are not a good candidate either and in any event are prohibited from operating a managed investment scheme. It is uncertain as to who the responsible entity of a litigation funding scheme should be and whether or not litigation funders could be the responsible entity consistent with the obligations of a responsible entity under the Corporations Act. 197 Further, if it is the litigation funder who is to be the responsible entity of the scheme, how could the litigation funder comply with the central obligation in s 601FC(1)(c) for the responsible entity of a managed investment scheme to act in the best interests of the members of the managed investment scheme and, if there is a conflict between its own interests and the members' interests, to give priority to the members' interests, that is, to act as a fiduciary? If the funder is taken to be the responsible entity, this requirement would appear, for example, to restrain the funder from exercising its contractual rights in its own interests to withdraw from funding proceedings in respect of which it had become clear that the proceedings lacked sufficient prospects of recovery or were otherwise uneconomic. Moreover, to impose a fiduciary duty on a funder as the responsible entity of a litigation funding scheme would be particularly inapposite given that in a litigation funding scheme, it is only the funder who has placed its capital on risk, and where the funder will have fiduciary duties to its shareholders and investors which might conflict with those of members. 198 Further, how could scheme property, being at least ex hypothesi the contractual promises of members to pay certain sums to the funder from any resolution sum, be held on trust for members of the scheme by the responsible entity as required by s 601FC(2)? The expression "scheme property" is defined in s 9 relevantly to include "contributions of money or money's worth to the scheme". Now the majority in Brookfield at [64] said of this: If a particular arrangement is within the s 9 definition, and if it is required to be registered, then by force of the legislation, scheme property is to be held on trust by the responsible entity. It may be that this requirement necessitates some degree of adjustment to traditional views as to the appearance and functions of a trust, but Parliament may take such a step. 199 But that observation arguably overlooks that if scheme property is inherently incapable of being held on trust for scheme members, that may be a powerful contextual indication that the putative scheme property is not in fact scheme property within the meaning of the statute. 200 Further, it seems that on the Brookfield approach, the "scheme property" necessarily includes all promises made by the group members and all promises from the funder; and further that the members of the scheme who benefit from the use of the scheme property include not just all group members but also the funder. There would appear to be a disjunct in applying the notions of scheme property and trust to a funded litigation arrangement. 201 Further, the majority's analysis in Brookfield arguably obscures that what happens when a group member enters into a litigation funding agreement is that each group member agrees upon a mechanism for payment of legal services on a contingent basis. Just as in a traditional no win/no fee arrangement a group member may promise to pay its lawyers if successful and agree to deduct such payment from any recovery, in a funded action a group member agrees to pay the funder for the costs involved in running the action including the risk taken on by the funder. But if the latter is a managed investment scheme, then on the logic of the majority reasoning in Brookfield it is hard to see how the former is not. But under the traditional arrangement, it has been assumed to date that group members do not contribute anything to the scheme but simply adopt a contingent mechanism by which they will pay for the legal services required and risk taken on by the lawyers in working out whether the group members have a viable case, and if so, prosecuting it on their behalf. 202 Let me deal with some other matters. 203 Sections 168 and 169 require a registered managed investment scheme to set up and maintain a register of members that must contain each member's name and address, with a failure to do so being an offence of strict liability. But in the case of an open class action, this requirement can not sensibly be complied with. And as LCM Funding points out, ASIC lacks power to waive this requirement. Now ASIC has indicated that it will not take regulatory action in respect of non-compliance by responsible entities of open litigation funding schemes. But this would not prevent a class action respondent objecting to a funded open class action on the basis of non-compliance with ss 168 and 169. Further, ASIC's attempt in any event to address this indirectly through exempting compliance with s 912A(1)(c) is artificial to say the least. 204 Further, s 601FC(1)(d) requires the responsible entity of a managed investment scheme to treat members who hold interests of the same class equally. But it is unclear how this might affect the negotiation of a settlement where one subset of the group may have stronger claims than another. 205 Further, s 1012B requires the responsible entity of a managed investment scheme to issue a product disclosure statement to all prospective members of the scheme. But this is a requirement that cannot practically be complied with in the context of an open class action. ASIC has presently granted relief in relation to this requirement, which will expire on 22 August 2025 (see ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787). 206 Further, ASIC has also had to grant exemptions by operation of Instrument 2020/787 concerning the valuation of scheme property (s 601FC(1)(j)). All no doubt expedient, but hardly coherent with the statutory framework. 207 Further, the managed investment scheme regime gives group members a statutory right to call a members' meeting and receive statements of resolutions to be moved on. But in the case of an open class action, this will be practically impossible to comply with. Further, the requirement that any special or extraordinary resolution put to a vote at such a meeting be decided by a poll, with the member allocation of votes determined by the value of their interest in the managed investment scheme, cannot practically be complied with given the nature of the scheme property in a litigation funding scheme, assuming that the majority in Brookfield correctly characterised that concept. 208 Further, aspects of the managed investment scheme regime create a potential for conflict with the Court's supervisory jurisdiction under Part IVA of the FCA Act. Let me make the following points. 209 Take ss 601KA to 601KE which prevent members of a managed investment scheme from withdrawing from the managed investment scheme other than in accordance with those provisions, which vary depending upon the liquidity of the scheme. Contrastingly, group members have an unqualified right to opt out of a representative proceeding prior to the date fixed for opt out under s 33J of the FCA Act. Now ASIC has presently provided relief in relation to this, but that does not address the underlying incoherence. ASIC's conduct is merely an expedient poly-filler. 210 Take the requirement under s 1012B for a product disclosure statement to be issued to prospective members of a scheme. So, scheme members will receive the kind of detailed information about contemplated class action proceedings that would ordinarily be included in group member notices, but without that information being properly assessed and disseminated under Court supervision. 211 Further and relatedly, a product disclosure statement is required to contain information that may, if disseminated publicly, confer a tactical advantage on the respondent to a potential class action, including as to budgeting. Contrastingly, this Court's rules allow such information to be redacted from the copy of the funding agreement served upon a class action respondent. 212 Further, the conduct of a representative proceeding is controlled by the representative applicant using external legal assistance and also by the Court under Pt IVA. It is not controlled by the funder. If there is required to be a responsible entity for a litigation funding scheme being a managed investment scheme, what does that entail? Who is it? What does it operate or control? How does that sit with and interact with the control and operation of the representative proceeding itself, the representative applicant and the external legal representatives? Indeed, how does that all sit with the extensive powers and supervisory role of the Court under Pt IVA? None of these aspects were considered in Brookfield and have yet to be satisfactorily addressed. 213 Further, if funds are received at settlement, they are allocated by operation of s 33V(2) and under the Court's powers, not under a regime for managed investment schemes concerning scheme property. Likewise in terms of any recoveries or fund under any judgment; see ss 33Z(2) and (4) and 33ZA. 214 Any such funds would normally by direction of the Court be held by the representative applicant on trust to disburse and allocate in accordance with the Court's directions. Is it suggested that they would be held by a separate responsible entity as scheme property when received? If so, how? How could this operate in the face of s 33V(2) concerning any settlement sum? How could this operate in the face of ss 33Z(2) and (4) and 33ZA concerning a judgment sum? 215 I do not need to linger further on what was left unresolved, indeed unidentified, by the majority in Brookfield. Although there are problematic features concerning Brookfield, I have determined not to accede to the Full Court referral. 216 First, my ruling on grandfathering, if in favour of LCM Funding, as it is, renders the problems in Brookfield hypothetical. Moreover, if I had been against LCM Funding on grandfathering and had applied Brookfield notwithstanding my considerable reservations, it could then have directly challenged Brookfield on appeal. Either way it was appropriate for me to deal with the grandfathering question now, particularly as it involved factual and contractual construction questions that it was desirable for me to determine. 217 Second, since the argument before me there has been circulated an exposure draft of the Treasury Laws Amendment (Measures for Consultation) Bill 2021: Litigation Funders to be presented to the Commonwealth Parliament seeking to enshrine, by an amendment to the definition of "managed investment scheme" in s 9 that adds "a class action litigation funding scheme", the majority view in Brookfield. If that occurs, that may render any Full Court consideration of Brookfield unnecessary in any event. In other words, any reference to the Full Court may have been an exercise in futility. 218 Third and in any event, any Full Court hearing may have been delayed to wait and see what occurred with the evaluation or passage of the bill. Indeed for all I know there may be some substantial delays. It may need to be modified to bring its scope within the referral contemplated by paragraph 51(xxxii) of the Constitution bestowed by the States under the Corporations Agreement 2002 (as amended), assuming that the approval of the Forum constituted thereunder has not been sought, and also assuming that the concept of "managed investment schemes" under clause 507(1)(a) is limited to its objectively ascertained meaning as at the inception of that clause, which pre-dated Brookfield and was also not affected by or considered under the 2017 amendments. It may need to be modified to address direct or indirect conflicts with the provisions of Pt IVA of the FCA Act or at least to deal with the arguable conceptual incoherency in seeking to shoe-horn the statutory model for managed investment schemes under the Corporations Act into a funding mechanism designed to facilitate access to justice under the open class regime enshrined in Pt IVA, where class actions are controlled by representative applicants, with external legal representation and advice, and by the Court, rather than by group members exercising their democratic rights under a so called managed investment scheme, or by funders or any other entity expediently nominated as a responsible entity. Who knows? Of course, these are all matters for others. But it is at the least to suggest that any reference to the Full Court may have entailed significant delay. That is a further reason for not making the referral. The cross claim declarations 219 By its cross-claim, LCM Funding seeks two declarations. 220 First, it seeks a declaration that the scheme does not have the features set out in the (a)(i) and (ii) aspects of the managed investment scheme definition. 221 Second, it seeks a declaration that each of LCM Funding and Stillwater have not operated within the meaning of ss 601ED(5) and/or 601FB(1) and are not operating a scheme that has the features set out in the (a)(i) and (ii) aspects of the definition. 222 Now LCM Funding has accepted before me that the first declaration is likely foreclosed at first instance by the majority decision in Brookfield and could only be made on appeal. That being said though, the parties before me did not identify an authority where a judge at first instance has been faced with a binding authority on point Y but where: (a) point Y is only legally correct if X is true; (b) the binding authority on point Y has declined to determine if X was true in the case before them; (c) but on examination before a trial judge in another case, X is not true. 223 Perhaps as a trial judge I can conclude that the doctrine of precedent (accepting that Y is true) should yield to the higher demand of coherency (if X is not true, Y has no foundation). But I will not so conclude. Accordingly, I refuse to make the first declaration. 224 Now the position is clearer with respect to the second declaration, which is not foreclosed by Brookfield and is open to be made, regardless of the outcome of the grandfathering dispute. As Brookfield and Brookfield (No 2) demonstrate, it was no part of the ratio of the majority that either the funder or the lawyers in that case were operating the relevant scheme. I am satisfied that whatever view one takes of the features of the managed investment scheme definition, it is not possible to identify any single person, and in particular LCM Funding, as a person operating the alleged scheme. So it would have been open to me to declare that neither LCM Funding nor Stillwater have operated or are operating such a scheme. 225 Moreover, to the extent that tension might have arisen between that declaration and the declaration given in Brookfield, that tension only arises because different questions would have been being decided. It arises only because Brookfield answered one question without considering the implications for the Corporations Act or Part IVA of the FCA Act more generally. 226 But having said that, on balance I do not consider that there is sufficient utility in making the second declaration and so decline to do so. 227 Accordingly, LCM Funding's cross-claim will be dismissed. Miscellaneous 228 There is one other unrelated matter that I should briefly address. One week prior to the funding/managed investment scheme question I heard argument from the parties in the representative proceeding involving two contested security for costs applications brought by the respondents, Stanwell and CS Energy. The issues debated involved the quantum of security and the form that it should take. 229 After oral argument I immediately gave a ruling and then made necessary orders. I did so for, in summary, the following reasons. 230 Concerning both respondents, issue was taken with the form of security proposed in relation to deeds of indemnity from AMTrust Europe Ltd. I had no difficulty with the form given, first, the net asset position of that entity (albeit with only non-Australian assets), second, the fact that the proposed deeds had been modified to allay the substantive concerns of the respondents, third, that security in the form proposed had been found to be acceptable in many other class actions and, fourth, that adequate separate security not in the form of deeds of indemnity was to be provided dealing with securing the cost of obtaining an Australian judgment and then securing the registration and enforcement of that judgment in the United Kingdom. 231 Further, in respect of each application there was an argument about quantum. Now none of this was an exact exercise, but rather impressionistic. In substance I more accepted the respondents' positions but sought to ensure approximate parity between them. As for Stanwell, I accepted generally the revised Fogi estimate (as calculated by Stanwell) of $1,732,472 and rounded this up to $1.75 million. As for CS Energy, I took its open offer of $1,735,000, which involved in my view an appropriate compromise, and also rounded this to $1.75 million. Now in oral argument Stanwell nevertheless contended for a higher figure for security, but its arguments were not persuasive as I indicated during oral argument. Even factoring in some pre-commencement action costs and a component for what was labelled as "skill, care and responsibility", the amount it sought of $2.13 million was excessive; I declined to also horse-trade beyond $1.75 million, particularly given that Stillwater's evidence on one view supported only $1.188 million. Further, in forming my views on quantum I had no reason to give anything other than significant weight to the affidavit evidence of Ms Kathryn Finlayson, solicitor for Stanwell, and Ms Elizabeth Poulos, solicitor for CS Energy. Conclusion 232 For the foregoing reasons, I decline to make the s 25(6) referral and will dismiss Stanwell's proceeding and LCM Funding's cross-claim. I will give the parties an opportunity to address me on costs. I certify that the preceding two hundred and thirty-two (232) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Beach. Associate: Dated: 17 November 2021