FEDERAL COURT OF AUSTRALIA Sadie Ville Pty Ltd v Deloitte Touche Tohmatsu (A Firm) (No 7) [2023] FCA 1273 File number: VID 632 of 2017 Judgment of: MOSHINSKY J Date of judgment: 19 October 2023 Catchwords: CORPORATIONS – misleading or deceptive conduct – auditors – representative proceeding on behalf of shareholders in a company against the auditors of the company – where the applicant alleged that the auditors engaged in misleading or deceptive conduct in contravention of statutory provisions in relation to the conduct of certain audit and review engagements – where the parties reached an in-principle settlement on the eve of the trial – where the settlement was subsequently documented – where the applicant applied to the Court for approval of the settlement – held: settlement approved Legislation: Australian Securities and Investments Commission Act 2001 (Cth) Corporations Act 2001 (Cth) Federal Court of Australia Act 1976 (Cth), s 33V Fair Trading Act 1999 (Vic) Cases cited: Camilleri v The Trust Company (Nominees) Ltd [2015] FCA 1468 Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 68 Date of hearing: 19 October 2023 Counsel for the Applicant: Mr LWL Armstrong KC with Ms K Dovey Solicitor for the Applicant: Phi Finney McDonald Counsel for the Respondents: Mr PH Solomon KC with Mr A Shearer Solicitor for the Respondents: Clifford Chance ORDERS VID 632 of 2017 BETWEEN: SADIE VILLE PTY LTD (ACN 134 578 019) (AS TRUSTEE FOR SADIE VILLE SUPERANNUATION FUND) Applicant AND: DELOITTE TOUCHE TOHMASU (A FIRM) (ABN 74 490 121 060) First Respondent DELOITTE CORPORATE FINANCE PTY LIMITED (ACN 003 833 127) Second Respondent order made by: MOSHINSKY J DATE OF ORDER: 19 OCTOBER 2023 THE COURT ORDERS THAT: Approval of Settlement 1. Pursuant to ss 33V and 33ZF of the Federal Court of Australia Act 1976 (Cth) (Act), the Court approves: (a) the settlement of the proceeding between the applicant and the respondents upon the terms set out in the deed of settlement executed by the applicant, the respondents, Omni Bridgeway Limited, and Phi Finney McDonald Pty Limited, and dated 21 July 2023 and exchanged on 25 July 2023 (the Settlement Agreement); and (b) the scheme for the distribution of the settlement among Group Members (and any annexures therein) (the Settlement Distribution Scheme) filed by the applicant, (together, the Settlement Documents). 2. Pursuant to s 33ZF of the Act or otherwise, the Court authorises the applicant nunc pro tunc for and on behalf of persons who meet the definition of "Group Member" in paragraph 2 of the third amended statement of claim filed on 7 March 2022 and who did not file an opt out notice (Group Members) to enter into and give effect to the Settlement Documents and the transactions contemplated for and on behalf of Group Members. 3. Pursuant to ss 33ZB and 33ZF of the Act, the persons affected and bound by the settlement of the proceedings be the applicant, the respondents and the Group Members. 4. Pursuant to s 33ZF of the Act, Mr Roop Sandhu of Phi Finney McDonald be appointed administrator of the Settlement Distribution Scheme (Administrator) and is to act in accordance with the rules of the Settlement Distribution Scheme. Security for Costs 5. Upon Settlement Approval (as defined by the Settlement Agreement), Omni Bridgeway Ltd (formerly IMF Bentham Ltd) (Funder) is released from its obligations arising under the deed polls it executed in respect of the proceeding, given by the applicant as security for costs. Applicant's Costs and Expenses 6. Pursuant to ss 33ZF and 33V(2) of the Act: (a) the applicant's legal costs and disbursements on a solicitor and own client basis, incurred in connection with the proceeding on its own behalf and on behalf of all Group Members in the amount of $7,462,313.35 be approved; (b) the costs and disbursements incurred by the Administrator, in connection with the administration of the Settlement Distribution Scheme, from the date of the approval of the Settlement Documents to the date of completion of distribution of the Settlement Sum (within the meaning of the Settlement Distribution Scheme), be approved in an amount which shall not exceed $125,000 (subject to further order); and (c) the applicant's claim for compensation for the time and expenses incurred in the interests of prosecuting the proceeding on behalf of Group Members as a whole be approved in the amount of $30,000. Payment to Funder 7. Upon the undertaking of the Funder to the Court dated 24 July 2023, and pursuant to s 33V(2) of the Act and the provisions of the Settlement Distribution Scheme: (a) the sum of $5.13 million is to be paid by the Administrator to the Funder as commission; and (b) the sum of $2,673.74 plus GST is to be paid by the Administrator to the Funder as reimbursement of 'Project Costs' paid directly by the Funder. Other 8. The applicant has liberty to apply, to re-list the proceeding as soon as practicable, and no later than thirty days, after completion of the distribution of the Settlement Sum for the purpose of making final orders, including orders that: (a) the proceeding be dismissed, on the basis that the dismissal is a defence and absolute bar to any claim (either directly or indirectly) or proceeding by the applicant or any Group Member as against the respondents in respect of, or relating to, the subject matter of the proceeding, without prejudice to: (i) the right of any party to the Settlement Agreement to make an application to enforce the Settlement Agreement in a new proceeding; or (ii) the right of any Group Member to make application to the Court in accordance with the terms of the Settlement Distribution Scheme; or (iii) the right of the Administrator to refer any issues relating to the Settlement Distribution Scheme to the Court for direction or determination in accordance with the terms of the Settlement Distribution Scheme. (b) there be no order as to costs of the proceeding as between the applicant and the respondents, and all previous costs orders in this proceeding are vacated. Confidentiality 9. Pursuant to ss 37AF and 37AG(1)(a) of the Act, in order to prevent prejudice to the proper administration of justice each of: (a) the confidential joint opinion of counsel (Counsel Opinion); (b) the parts of the affidavit of Roop Sandhu sworn on 3 October 2023 (Sandhu Affidavit) identified in Annexure A hereto; and (c) the parts of the report of Kerrie-Ann Rosati dated 28 September 2023 (Rosati Report) identified in Annexure A hereto; (Confidential Materials) is to be kept confidential and is not to be accessed by any person other than by the Court, the applicant, the applicant's legal representatives, and Omni Bridgeway Ltd, for the periods specified in paragraph 10. 10. Subject to further order, the periods during which paragraph 9 operates are as follows: (a) in respect of material identified in Part 1 of Annexure A: a period of five years; (b) in respect of the Counsel Opinion and material identified in Parts 2 and 3 of Annexure A: until further order; (c) in respect of material identified in Part 4 of Annexure A: (i) until the day that is 38 days after the date on which an order for approval of the proposed settlement of this proceeding (the Settlement Approval Order) is made or alternatively the day such an order takes Final Effect (whichever is the later); or (ii) if the Settlement Approval Order does not take Final Effect, then until further order, and for the purpose of these orders Final Effect means the resolution of all appeals and any further appeals in respect of the Settlement Approval Order. 11. The Confidential Materials are prohibited from being disclosed by publication or otherwise, unless as otherwise permitted by paragraphs 9, 12 or 13. 12. Upon the expiration of the time period fixed by paragraph 10(c)(i), and if the Settlement Approval Order has taken Final Effect, the applicant shall file copies of the Sandhu Affidavit and the Rosati Report redacting (or in the case of RS-7, removing) all material identified in Parts 1, 2 and 3 of Annexure A (and if any appeal means that the Settlement Approval Order does not take Final Effect then this paragraph 12 shall lapse). 13. Notwithstanding paragraphs 9, 10 and 11: (a) nothing in these orders or otherwise operates to make confidential, or inhibits access to or disclosure (by publication or otherwise) of the content of: (i) the version of the Sandhu Affidavit filed on 3 October 2023; (ii) the version of the Sandhu Affidavit and the Rosati Report prepared and filed in accordance with paragraph 12; (b) nothing in these orders or otherwise prevents the provision by the Applicant or its solicitors of unredacted versions of the Counsel Opinion, the Sandhu Affidavit and the Rosati Report to persons defined as Group Members in paragraph 2 of the third amended statement of claim filed on 7 March 2022, provided that: (i) the said materials are to be kept confidential by the said Group Member and not disclosed to any other person save for legal or financial advisors for the purpose of obtaining legal or financial advice; and (ii) the solicitors shall decline to provide access as described herein unless the Group Member gives a written undertaking to the effect of 'i' hereof. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ANNEXURE A Part 1: The following material is General Advantage Material as that term is used in the Applicant's submissions filed on 10 October 2023: Sandhu Affidavit: • Paragraph 48(c) – the subparagraph, other than the last 10 words of it. Rosati Report: • Paragraph 22 – the remainder of the paragraph after the words "paragraphs 3.11 and 3.12 of the Overview"; • Paragraph 259 – the remainder of the paragraph after the words "I also note from the Overview that"; • KAR-3, page 13 (page 125 of the PDF) – subparagraph 3.12(c). Part 2: The following material is Privileged Material as that term is used in the Applicant's submissions filed on 10 October 2023: Sandhu Affidavit: • Paragraphs 138 to 156 inclusive; • Paragraphs 198 to 200 inclusive; • RS-7 – pages 174 to 212 inclusive; • RS-7 – pages 233 to 265 inclusive. Rosati Report: • KAR-3, page 26 (page 138 of the PDF) – paragraph 17.4, the last sentence only. Part 3: The following material is Personal Contact Material as that term is used in the Applicant's submissions filed on 10 October 2023: Sandhu Affidavit: • RS-6 – page 69, the address only; • RS-6 – page 112, the telephone numbers, email address, and address (twice occurring) only; • RS-6 – page 113, the HIN/SRN only; • RS-7 – page 266, the telephone number, email address, address, and HIN/SRN only. Rosati Report: • Paragraph 59 – the names of the three individuals mentioned in that paragraph only; • Paragraph 61(b) – the name of the individual mentioned in that paragraph only. Part 4: The following material is Tactical Advantage Material as that term is used in the Applicant's submissions filed on 10 October 2023 (save that such material that is identified in any of Parts 1, 2 or 3 hereof is not repeated in this Part 4): Sandhu Affidavit: • Paragraph 165 – the second percentage figure given in the paragraph; • Paragraphs 169 to 173 inclusive • Paragraph 213 – the paragraph, other than the first three sentences; • RS-6 – page 73, the percentage figures referred to in clauses 6.2, 6.3, and 8.1 only; • RS-6 – pages 80 to 81, the percentage figures referred to in the definitions of "Project Costs", "Project Management Fee" and "Remaining Costs", only; • RS-6 – page 88: (a) the last three lines of clause 8.6; (b) the balance of clause 8.7 after the words "initiative of a Respondent or an Additional Respondent", (c) clause 8.8; • RS-6 – page 91, the percentage figure referred to in clause 11.3 only; • RS-6 – page 92, the table; • RS-6 – page 105, the percentage figures referred to in clauses 6.2, 6.3, and 8.1 only; • RS-6 – page 108, the tables; • RS-6 – pages 132 to 133, the percentage figures referred to in clauses 6.2, 6.3, and 8.1 only; • RS-7 – pages 213 to 216 inclusive; • RS-7 – page 267 (other than the first, second and fourth paragraphs of the text). Rosati Report: • The entire report, including its annexures. REASONS FOR JUDGMENT MOSHINSKY J: Introduction 1 This is an application for approval of a settlement of a representative proceeding commenced under Pt IVA of the Federal Court of Australia Act 1976 (Cth). 2 The proceeding is brought by the applicant on behalf of persons who (in summary) acquired an interest in ordinary shares in Hastie Group Ltd (Hastie) during the period 14 June 2011 to 21 February 2012 (the Relevant Period) and entered into a litigation funding agreement with the litigation funder in relation to the proceeding. 3 The respondents to the proceeding are Deloitte Touche Tohmatsu (DTT), a firm of accountants, and Deloitte Corporate Finance Pty Ltd (DCF), a wholly-owned subsidiary of DTT. 4 During the Relevant Period, DTT were the auditors of Hastie and prepared: an audit report in respect of its audit of Hastie's financial statements for the financial year ended 30 June 2010; a review report in respect of its review of Hastie's financial statements for the half-year ended 31 December 2010; an audit report in respect of its audit of Hastie's financial statements for the financial year ended 30 June 2011; and an investigating accountants' report for inclusion in a draft prospectus released by Hastie on 14 June 2011 (the Pathfinder) and in a prospectus released by Hastie on 17 June 2011 (the Prospectus). 5 DCF prepared a report on directors' forecasts for inclusion in the Pathfinder and in the Prospectus. 6 Broadly, the applicant alleged that the respondents contravened various misleading or deceptive conduct provisions of the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission Act 2001 (Cth) and the Australian Consumer Law (Victoria), being the Australian Consumer Law text as applied by the Fair Trading Act 1999 (Vic). 7 The trial of the proceeding was due to commence on 29 May 2023 on an estimate of four weeks. Shortly before the trial was due to commence, the parties reached an in-principle settlement of the proceeding, subject to documentation and subject to Court approval. The parties subsequently entered into a deed of settlement. The settlement is subject to Court approval, as required by s 33V of the Federal Court of Australia Act. 8 The settlement sum is $18.5 million (inclusive of interest and legal costs). The legal costs are approximately $7.462 million and the funding commission (after a discount agreed to by the litigation funder) is $5.13 million. It is proposed that the applicant receive $30,000 on account of the time its officers have expended to pursue the litigation on behalf of group members. It is also proposed that the fee for administration of the settlement be no more than $125,000. After these and one other (minor) deduction, the balance for distribution to the applicant and group members (the claimants) is approximately $5.749 million. 9 In support of the application for approval, the applicant relies on: (a) an affidavit of Roop Sandhu, a principal lawyer employed by Phi Finney McDonald (PFM), the solicitors acting for the applicant, dated 3 October 2023 (the Sandhu Affidavit); (b) a costs report prepared by Kerrie-Ann Rosati, a principal of DGT Costs Lawyers, dated 28 September 2023 (the Rosati Report); and (c) a confidential opinion of counsel dated 10 October 2023 (the Confidential Counsel Opinion). 10 Both the applicant and the respondents have filed outlines of submissions in support of approval of the settlement. 11 For the reasons that follow, I consider it appropriate to approve the settlement. In preparing these reasons, I have drawn substantially on the outlines of submissions provided by the parties. Applicable principles 12 The applicable principles regarding approval of a settlement are well established. It is sufficient to refer to the summary of those principles set out in Camilleri v The Trust Company (Nominees) Ltd [2015] FCA 1468 at [5]. 13 The Court's Practice Note GPN-CA (Class Actions) sets out a non-exhaustive list of circumstances and considerations relevant to whether a settlement should be approved. Application of principles to the present case 14 I will first consider the reasonableness of the settlement as between the parties. I will then consider the reasonableness of the proposed settlement as between group members (including the reasonableness of the proposed deductions). Reasonableness of the settlement as between the parties Complexity, duration and stage of proceeding 15 An overview of the proceeding has been set out in the Introduction to these reasons. 16 The proceeding is substantial in size, as indicated by the four-week period allocated for the trial. The proceeding involved: (a) discovery and inspection of over 16,000 documents; (b) production of a further 125,000 documents pursuant to subpoena; (c) extensive evidence (in a total of eleven reports) from five expert witnesses; (d) a combined proposed tender list of almost 3,000 documents; (e) a combined total of 360 pages of opening written submissions; and (f) trial preparation commencing from around 29 November 2022. 17 The proceeding was highly contested and there were numerous interlocutory hearings and judgments, including an appeal. 18 The history of the proceeding suggests that there was a significant prospect that the determination following trial may not have been the end of the matter. 19 It is also apparent that the costs of a four-week trial would have been significant. 20 Approval of the proposed settlement will avoid: (a) the costs of the trial being incurred; (b) the costs of any appeals; and (c) any further delay to the claimants receiving compensation. Reaction of group members 21 The Court-approved notice sent to group members on 31 August 2023 notified group members of: (a) the proposed settlement, including proposed legal costs and other deductions from the compensation to be received by group members; (b) the process for the application for approval of the settlement; and (c) their right to object to the proposed settlement, and provided details of when and how an objection should be made, including a copy of the form to be used by any group member who wished to make an objection. In particular, group members were notified that any objection was to be filed by 28 September 2023. 22 Importantly, on 15 September 2023 each group member likely to receive compensation if the proposed settlement was approved was notified of the applicant's solicitors' estimate of their individual recoveries, applying the loss assessment formula included as Schedule A to the settlement distribution scheme, as described in the Sandhu Affidavit at paragraphs 195-201. 23 The correspondence sent to group members on 15 and 18 September 2023 again noted that any objections to the proposed settlement were due by 28 September 2023. 24 Only one group member has objected to the proposed settlement, being an objection from a group member I will refer to as "Mr H" dated 1 September 2023. 25 Mr H's objection appears at pp 266-268 of the Sandhu Affidavit. In broad terms, and omitting one paragraph which is (at present) confidential, his contentions are: (a) the settlement which is presently under consideration is based heavily on the litigation funder recovering its outlay and on updated legal advice on the potential legal outcomes; (b) the proposed settlement fully compensates the litigation funder and pays for the legal costs, but provides only a very small return on shareholder losses. This is totally unacceptable; and (c) looking over the lengthy legal battle which has occurred since 2011, and the "general strong disregard by DTT in relation to their blatant accounting wrongdoing", DTT needs to pay full damages plus interest and legal costs. 26 Although I have not reproduced the confidential paragraph, I have had regard to it. 27 Mr H has indicated in his objection that he does not intend to appear at the approval hearing, but requests that his submission be considered in his absence. 28 I have given careful consideration to this objection. I observe that, while the amount that is proposed to be paid to the litigation funder is substantial, it does represent a discount on the amount it was entitled to under the litigation funding agreements. Further, while the return to claimants does seem comparatively small (a matter I discuss elsewhere) this needs to be assessed in the context of the merits of the applicant's case and its prospects of success. It is true that the proposed settlement is based, in part, on updated legal advice, but it is natural and, indeed, important that legal advice be updated as a proceeding progresses, to take into account new developments in the proceeding. 29 Thus, while I have had regard to Mr H's objection, I do not consider the matters he has raised to provide a sufficiently strong reason not to approve the settlement. 30 I note that there have been no other objections in relation to the proposed settlement. This is in circumstances where detailed information has been provided to group members in relation to the proposed settlement. Litigation risks 31 An assessment of the applicant's prospects, including the risks relating to establishing liability and causation of loss and damage, is set out in the Confidential Counsel Opinion. 32 Further, an indication of the litigation risks is helpfully provided in the respondents' outline of submissions at paragraphs 6 to 53. The respondents submitted at paragraph 53: In view of the discussion above, it is clear that the Applicant's claims faced considerable obstacles. In view of what is known, and the advanced stage of the proceedings at the time settlement was agreed, the claims may properly be described as fraught and weak. There is a very considerable likelihood that the claims would not have succeeded, with the result that they would have been dismissed with costs awarded in favour of the Deloitte Parties. In these circumstances, and for the reasons addressed in the Applicant's submissions, the settlement reached is fair and reasonable and ought to be approved. 33 The respondents' submissions, in the paragraphs to which I have referred, provide a clear and useful analysis of the potential difficulties faced by the applicant in this proceeding. Comparison to best-case outcome and prospects assessment 34 An assessment of the applicant's prospects, including the reasonable settlement range, is set out in the Confidential Counsel Opinion. Overall assessment 35 In accordance with the established procedure in applications of the present kind, the four members of counsel who were briefed to appear for the applicant at the trial have provided (in the Confidential Counsel Opinion) a very detailed opinion to the Court, setting out their assessment of the various strengths and weaknesses of the applicant's claims. The Confidential Counsel Opinion deals with matters that go to the heart of the applicant's prospects. The opinion is confidential. I therefore do not refer to it in detail in these reasons. It suffices to say, for present purposes, that on any reasonable view the applicant faced risks in the litigation. If any of the many identified risks eventuated, the claimants would have received nothing. 36 I note that the proposed settlement represents a less than 50% result when compared against the 'best case outcome'. However, very little, if any, significance ought to attach to that kind of comparison. Cases are investigated and commenced upon certain matrices of information. The lawyers can assess the potential outcome in the event of success and can create a 'commercial' value for the case by discounting the best-case result according to some internal assessment of the various risks applying to the case. As the litigation progresses, it is invariably the experience, especially in complex class actions, that a swathe of new information comes to light. Sometimes it enhances the applicant's prospects. Sometimes it reveals new risks. Sometimes it justifies a conclusion that, when the revised risks are fully taken into account, and a cost/benefit analysis undertaken, the 'commercial' value of the claim is appreciably less than it was earlier thought to be. And sometimes it requires a great deal of legal work, and therefore cost, to obtain that further information and do that further analysis. That is not a reflection of inefficiency or of the class action regime failing or faltering. It is the nature of litigation and if sometimes it means that the class members receive only a small portion of their 'best case outcome', then provided that the case was properly prepared and appraised, the necessary conclusion is that the commercial value of the claims was less than had been hoped. 37 The settlement here reflects a modest and probably disappointing outcome for class members. The applicant submits, and I accept, that this is a reflection of the risks that ultimately proved to attach to their claims, and of the costs that had to be incurred in getting the information that finally enabled a full assessment of their prospects. It does not at all negate the fairness or reasonableness of the settlement that has been achieved, when it is measured, as it should be, against a realistic commercial valuation of the claims rather than their best-case potential. Reasonableness of the settlement as between group members 38 The next question is whether the proposed arrangements for sharing the settlement fund among the claimants is fair and reasonable having regard to the various balancing considerations that are involved in the particular case. One aspect of this further question relates to the deductions that are proposed to be taken from the 'gross' settlement fund to pay legal costs, the funder's commission and other deductions. I will first deal with the proposed deductions and then deal with the proposed regime for distribution of the post-deduction amount (the 'net' settlement sum) among the claimants. Proposed deductions 39 If the proposed settlement is approved, a sum of $7,462,313.35 will be deducted in respect of legal costs (Costs Deduction). This amount will be divided and paid to: (a) the funder, Omni Bridgeway (Omni) in reimbursement for legal costs Omni funded; (b) PFM and Slater and Gordon Lawyers (S&G), in reimbursement of the portion of professional fees carried by PFM/S&G on a conditional basis pending the determination of the proceeding. 40 The precision with which a Court will require an applicant's legal representatives to justify the claimed legal costs will vary depending on factors including: (a) the quantum of the costs; (b) the quantum as compared against the settlement sum; (c) whether group members have a contractual relationship with the applicant's solicitors and/or funder; and (d) the scale and duration of the work in respect of which the costs were incurred. 41 PFM engaged an independent expert legal costs consultant, Ms Rosati, to prepare an expert report to assess whether the legal costs and disbursements incurred by PFM (and initially by Slater and Gordon Lawyers) are fair and reasonable. The Rosati Report sets out Ms Rosati's conclusions and reasoning. 42 For the reasons set out in the Rosati Report, and having regard to the lengthy and complex nature of the proceeding as set out in the Sandhu Affidavit, I consider that the deductions for legal costs and disbursements are fair and reasonable in all the circumstances. 43 The amount of the Costs Deduction can also be contrasted against the costs estimates provided by the applicant's legal representatives over time as set out in paragraph 47 of the applicant's submissions. 44 If the proposed settlement is approved, $5.13 million will be deducted and paid to Omni as its entitlement to commission pursuant to the funding agreement (Omni Commission). 45 The basis upon which the Omni Commission has been calculated is set out in the Sandhu Affidavit. The reasonableness of the Omni Commission is also addressed in the Confidential Counsel Opinion. 46 For the reasons set out in that confidential material, and in all the circumstances, I consider that the Omni Commission is fair and reasonable. 47 If the proposed settlement is approved, $30,000 will be deducted and paid to the applicant (Applicant Reimbursement). 48 The natural persons who provided instructions on behalf of the applicant for the purposes of the proceeding (Mr Golden and Ms Barnard) have spent in excess of 243 hours working on the proceeding (Total Applicant Hours). Mr Golden and Ms Barnard are retired, but both still engage in consulting work from time to time (in legal reporting and publishing, respectively). 49 It is established that a lead applicant who has sacrificed time in prosecuting a proceeding on behalf of a class should be entitled to some reimbursement in compensation for the time attributable to the representative features of their involvement. 50 If an hourly rate of $150 were applied to the Total Applicant Hours, it would give rise to compensation of $36,450. The applicant, however, acknowledges that: (a) there is some uncertainty in relation to an appropriate hourly rate; and (b) some of the Total Applicant Hours may have been specifically for the personal benefit of the applicant, as opposed to that spent for the benefit of group members, and therefore the Applicant Reimbursement figure has been discounted to $30,000 (a reduction of over 17%). 51 In the context of the scale of the proposed settlement, and the duration and complexity of the proceeding, I consider that the Applicant Reimbursement is fair and reasonable compensation for the applicant. 52 If the proposed settlement is approved, a sum not exceeding $125,000 (Administration Amount) will be deducted and paid to PFM to cover the cost of administering the settlement distribution scheme. 53 The proposed settlement does allow for an application to subsequently be made to the Court for a higher sum to be paid in respect of administration costs, but that is only intended to be sought if circumstances arise where: (a) there is further Court involvement in the distribution process (pursuant to clauses 5.3 or 10 of the Scheme); and (b) the amount of $125,000 does not cover PFM's costs of administering the distribution of the settlement, including participating in any such Court process or processes. 54 The deduction sought for administration costs is relatively modest, reflecting the fact that the administration of the Scheme is not particularly large or complex. I consider that it is fair and reasonable in all the circumstances. Proposed settlement distribution scheme 55 Following the deductions set out above and a minor reimbursement to the funder for an expense incurred, the sum estimated to be available for distribution to the claimants (Estimated Distribution Sum) is $5,749,745.54. 56 The Estimated Distribution Sum at present excludes the following amounts which will be added back at the time of final calculations: (a) any portion of the Administration Amount not used for the administration of the proposed settlement; and (b) interest accrued on the settlement sum, which has been paid by the respondents to PFM, and which is presently in an interest-bearing account, accruing interest for the benefit of the claimants. As a result, the amount actually distributed to the claimants is likely ultimately to be greater than the Estimated Distribution Sum. 57 As to the detailed operation of the proposed distribution: (a) the distribution will be governed by the loss assessment formula set out in Schedule A to the settlement distribution scheme; (b) aspects of the formula are confidential, as set out in the Sandhu Affidavit at paragraphs 198-200; (c) the formula uses the conventional 'last in first out' methodology to determine which shares are sold, including when a group members held multiple categories of shares; (d) each group member has already been notified of their individual estimate, as referred to above; (e) Mr Sandhu seeks to be appointed as administrator of the settlement distribution scheme, which would be an efficient arrangement as Mr Sandhu has already overseen communications with all group members which constitute required steps for the purposes of the scheme, and therefore if Mr Sandhu is appointed, such steps would not need to be repeated, minimising further delay to the claimants receiving compensation. Further: (i) Mr Sandhu has extensive experience in conducting class action litigation, including having administered such a scheme previously, and he is well qualified to take on this role; (ii) over 77% of group members have already retained PFM to act for them in relation to the proceeding; and (iii) this settlement distribution scheme is not one in which the administrator is likely to be required to exercise discretions relating to the valuation of claimants' claims as against each other. The loss assessment formula and the distribution protocol overall are essentially mathematical or accounting exercises, in which a Court-approved formula is applied to objectively-verifiable data to produce a certain figure, which is then paid out in a quite mechanistic way to the relevant claimants. 58 Accordingly, in my view, this is a case in which it is appropriate for the solicitor who had carriage of the matter to be appointed as administrator. 59 In all the circumstances, I consider that the proposed distribution process is fair and reasonable. Conclusion 60 In light of the above, I consider that the settlement is fair and reasonable as between the parties, and also fair and reasonable as between the claimants. I therefore consider it appropriate to approve the settlement. 61 I will therefore make orders regarding settlement approval substantially in the form sought by the applicant. Confidentiality orders 62 The applicant applies for confidentiality orders in relation to four categories of material, which are described as: (a) Tactical Advantage Material; (b) General Advantage Material; (c) Privileged Material; and (d) Personal Contact Material. 63 I note that, previously, the respondents foreshadowed that they may seek confidentiality over certain material, including the settlement sum. However, in advance of the hearing today, the respondents indicated that they would not seek a confidentiality order in respect of that material. 64 In the applicant's outline of submissions, there is reference to a body of material called Agreed Confidential Material. The material in this category was the material that the applicant considered it was under a contractual obligation to the respondents to keep confidential. However, the respondents no longer seek confidentiality in respect of that material and the applicant does not seek confidentiality over that material. Accordingly, that body of material can be put to one side for the purposes of considering confidentiality. 65 Returning to the four categories of material in respect of which the applicant seeks confidentiality orders, the applicant seeks ongoing confidentiality orders for the General Advantage Material, the Privileged Material and the Personal Contact Material. In relation to the Tactical Advantage Material, the applicant seeks (in summary) confidentiality for a period of 38 days after the making of orders approving the settlement. 66 There is no issue between the parties as to the confidentiality orders sought for the Tactical Advantage Material, the Privileged Material and the Personal Contact Material. I consider it appropriate to make the orders sought in relation to that material (subject to a minor adjustment discussed during the hearing). 67 In relation to the General Advantage Material, the respondents made submissions that put in issue whether the orders sought are appropriate. I consider that the material in this category should be adjusted to remove material that is also covered in the category of Privileged Material. I consider that the period of confidentiality for the General Advantage Material should be limited to five years (subject to further order). When I raised both of these matters with senior counsel for the applicant in the course of the hearing, he indicated that the applicant did not oppose this course. When limited in these ways, and having considered the content of the relevant material, I am satisfied that the material is commercially confidential and the order is appropriate. 68 I will therefore make confidentiality orders as sought by the applicant, with these adjustments. I certify that the preceding sixty-eight (68) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky. Associate: Dated: 23 October 2023