Supreme Court New South Wales Medium Neutral Citation: Giabal Pty Ltd v Gunns Plantations Ltd (in liquidation) (No 2) [2023] NSWSC 201 Hearing dates: 2 March 2023 Date of orders: 10 March 2023 Decision date: 10 March 2023 Jurisdiction: Equity Before: Darke J Decision: Approval given to settlement of representative proceedings. Catchwords: CIVIL PROCEDURE – representative proceedings – settlement or discontinuance – court approval – whether the proposed settlement is fair and reasonable in the interests of group members as a whole – approval granted Legislation Cited: Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) Civil Procedure Act 2005 (NSW), Pt 10, s 173 Corporations Act 2001 (Cth), Pt 5C.1 Cases Cited: Quirk v Suncorp Portfolio Services Ltd in its capacity as trustee for the Suncorp Master Trust (No 2) [2022] NSWSC 1457 Category: Procedural rulings Parties: Giabal Pty Ltd (First Plaintiff) Geoffry Edward Underwood (Second Plaintiff) Gunns Plantations Ltd (in liquidation) (First Defendant) Gunns Ltd (in liquidation) (Second Defendant) Wayne Leonard Chapman (Third Defendant) Robert Watson and Erica Gay as the legal personal representatives for the estate of the late John Eugene Gay (Fourth Defendant) Rodney John Loone (Fifth Defendant) Leslie Ralph Baker (Sixth Defendant) Robert Henry Graham (Seventh Defendant) Robin Gray (Eighth Defendant) Paul Desmond Teisseire (Ninth Defendant) Andrew Gray (Tenth Defendant) Mathew Gary Wallace (Eleventh Defendant) Catlin Australia Pty Ltd (Twelfth Defendant) Chubb Insurance Australia Ltd (Thirteenth Defendant) Representation: Counsel: Mr I Pike SC with Mr T L Bagley (Plaintiffs) Mr J A Arnott SC and Ms A Hammond (Tenth to Eleventh Defendants) Mr D L Williams SC with Mr A J Barnett (Twelfth to Thirteenth Defendants) Mr G Donnellan with Mr E Olivier (LCM Operations Pty Ltd – intervening) Solicitors: Piper Alderman (Plaintiffs) Arnold Bloch Leibler (Eighth Defendant) Allens (Tenth to Eleventh Defendants) Kennedys Law (Twelfth to Thirteenth Defendants) File Number(s): 2018/76580 Publication restriction: None Judgment 1. These proceedings are representative proceedings brought pursuant to Part 10 of the Civil Procedure Act 2005 (NSW). They concern a number of managed investments schemes that were registered pursuant to Part 5C.1 of the Corporations Act 2001 (Cth) ("the Act"). The schemes involved the growing of eucalyptus trees on woodlots for the purpose of eventual harvest and sale. The schemes came to an end following the liquidation of the responsible entity for the schemes, Gunns Plantations Ltd (in liquidation) ("GPL"). GPL was part of a group of companies headed by its parent company, Gunns Limited (in liquidation) ("Gunns"). 2. The plaintiffs, Giabal Pty Ltd and Mr Geoffrey Underwood, bring the proceedings as representatives of 23 "growers" who acquired interests in one or more of six such schemes and have entered into a litigation funding agreement with LCM Operations Pty Ltd ("LCM"). The six schemes may be referred to as the GPL woodlot projects for the years 2002, 2003, 2005, 2006, 2008 and 2009. 3. The plaintiffs claim that they suffered loss and damage by reason of various alleged breaches of duty by: 1. GPL; 2. directors of GPL; 3. Gunns; and 4. the auditors of the compliance plans of the schemes ("KPMG"). 1. Declaratory relief and orders for payment of equitable compensation or damages are sought accordingly. 2. The proceedings were commenced by the filing of a Summons on 8 March 2018. On 13 April 2018, the Court granted leave to continue the proceedings against the companies in liquidation, GPL and Gunns, but that leave was revoked on 4 December 2019, whereupon GPL and Gunns (the first and second defendants) effectively ceased to be actively involved in the proceedings. The case proceeded against the third to ninth defendants, who are directors or officers of GPL, and the tenth and eleventh defendants as KPMG. 3. On 14 August 2020, two further parties were added as defendants to the proceedings. These were Catlin Australia Pty Ltd ("Catlin") as the twelfth defendant, and Chubb Insurance Australia Ltd ("Chubb") as the thirteenth defendant. Catlin is a first excess layer liability insurer and Chubb is a third excess layer liability insurer. The underlying or primary policy was an Investment Management policy issued by Chartis Australia Insurance Ltd to GPL in respect of the policy period from 30 November 2011 to 30 November 2012. The plaintiffs claim an entitlement to relief against Catlin and Chubb pursuant to the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) in respect of the alleged liabilities of GPL and its directors. 4. The plaintiffs' claims were identified in a Second Further Amended Commercial List Statement, to which each of the defendants has filed a Commercial List Response. Numerous cross-claims were filed as between the various defendants, for apportionment or contribution. By orders made by Ball J on 25 November 2022, it was ordered that there be a trial of the claims of the plaintiffs, together with a number of "common questions". The trial was set down to commence on 13 February 2023. 5. However, shortly prior to the hearing, the Court was informed that all parties (other than GPL and Gunns) had reached a settlement of the remaining claims in the proceedings. The parties to the settlement have agreed that its terms be kept confidential, but as the proceedings are representative proceedings, the settlement cannot be effected unless the Court gives its approval pursuant to s 173 of the Civil Procedure Act 2005 (NSW). 6. On 24 February 2023, the plaintiffs filed a Notice of Motion seeking various orders, including an order for approval of the settlement pursuant to s 173. The motion, which was heard by me on 2 March 2023, was supported by: 1. an affidavit of the plaintiffs' solicitor, Gordon Grieve, sworn on 24 February 2023, together with Exhibit GTG-6 to that affidavit; 2. a confidential affidavit of Mr Grieve, sworn on 27 February 2023, together with Confidential Exhibit GTG-7 to that affidavit; 3. a further confidential affidavit of Mr Grieve, sworn on 7 March 2023, together with Confidential Exhibit GTG-9 to that affidavit (provided to the Court on 9 March 2023); and 4. a confidential Joint Opinion on Settlement dated 1 March 2023 given by senior and junior counsel for the plaintiffs. 1. The Court also admitted evidence adduced by the litigation funder, LCM, who had leave to intervene in the application. LCM relied upon a confidential affidavit of Polina Kolomoitseva sworn on 28 February 2023, together with Confidential Exhibit PK-1. 2. Both the plaintiffs and LCM provided written submissions in support of the application. The tenth and eleventh defendants (KPMG), and the twelfth and thirteenth defendants (Catlin and Chubb) informed the Court that they supported the application for approval. The third to ninth defendants did not seek to be heard on the application, and neither did the first and second defendants. 3. Notice of the application (in a form approved by the Court on 20 February 2023) was sent by the plaintiffs' solicitors to the 23 group members. There is evidence that 20 of the 23 members have indicated their consent to the approval of the settlement, either by returning a copy of the notice indicating such consent or by sending correspondence to that effect. The notices stated that if a group member failed to indicate a position by 24 February 2023, the group member would be presumed to have consented to the proposed settlement. There is no suggestion that any group member is opposed to approval of the settlement. 4. The settlement is embodied in a binding Heads of Agreement that has been executed by all parties to it, as well as a Settlement Deed that has been executed by all parties to it. The Settlement Deed, in the form as finally executed, was provided to the Court on 9 March 2023. There is also a Settlement Distribution Scheme which sets out the manner in which a settlement sum is to be dealt with. As already noted, the parties to the settlement have agreed to keep its terms confidential. 5. On an application under s 173 of the Civil Procedure Act for approval of a settlement of representative proceedings, it is necessary to satisfy the Court that the proposed settlement is fair and reasonable in the interests of group members as a whole (see, for example, Quirk v Suncorp Portfolio Services Ltd in its capacity as trustee for the Suncorp Master Trust (No 2) [2022] NSWSC 1457 at [16]-[18]). 6. I have read and considered the evidence referred to above, the Joint Opinion on Settlement, and the submissions made to the Court. Having done so, I am comfortably satisfied that the proposed settlement is fair and reasonable in the interests of group members as a whole. 7. In reaching that conclusion I have had regard to all the circumstances relevant to an assessment of the settlement, including the following: 1. the nature and potential value of the claims brought by the plaintiffs in the proceedings; 2. the apparent strengths and weaknesses of those claims, and the range of possible or likely outcomes for the plaintiffs had the claims proceeded to trial; 3. the likely costs of proceeding to trial; 4. the amount of the settlement sum; 5. the agreements between LCM and group members for the funding of the litigation (including the manner in which such agreements allocated litigation risks); 6. the agreements between LCM and group members as to how the settlement sum is to be applied and distributed as between LCM and group members; 7. the manner in which part of the settlement sum is to be distributed amongst the group members; 8. the characteristics of the group (being a closed class of 23 investors) and the members that comprise the group (who are apparently sophisticated investors, most of whom are experienced legal practitioners); and 9. the lack of any objection to the settlement from any party or group member. 1. As part of the overall assessment of fairness and reasonableness, I have specifically considered the reasonableness of the settlement sum and the reasonableness of the legal costs that are to be deducted from it. I have also specifically considered the fairness and reasonableness of the amount of the funding commission that is to be paid to LCM, and the fairness of the proposed method of distribution of the remaining funds amongst the group members. 2. The plaintiffs have brought in Short Minutes of Order. Amongst other things, the form of orders provide for approval to be given to the settlement on the terms of the Heads of Agreement, the Settlement Deed and the Settlement Distribution Scheme. The form of orders also contain ancillary orders to give effect to the settlement, including the appointment of a scheme administrator. The form of orders seems to me to be appropriate, so orders will be made in accordance with the Short Minutes of Order. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 March 2023