Case: Vernon v Village Life Ltd [2009] FCA 516
Outcome: cited
Applicants file an affidavit upon the receipt of the Settlement Sum in accordance with the Terms of Settlement and Further Terms of Settlement. Upon the filing of that affidavit, the Further Amended Application filed on 22 February 2008 be dismissed. In the principal proceeding, the application is brought by the applicants as a representative party on behalf of 102 group members although some of those group members represent more than one individual or corporation. By the Further Amended Application and the Further Amended Statement of Claim, the applicants claim relief said to arise out of conduct on the part of the respondent involving negligence; negligent misstatement; contraventions of ss 912A , 945A , 1012A and 1041H of the Corporations Act 2001 (Cth) (the " Corporations Act "); contraventions of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (the "ASIC Act"); and contraventions of s 851 of the Financial Services Reform Act 2001 (Cth), in connection with the investment by the group members as clients of the respondent, in four financial products issued by Westpoint Corporation Pty Ltd or entities related to that corporation. The financial products were promissory notes described as Market Street Mezzanine Finance Promissory Notes, Ann Street Mezzanine Finance Promissory Notes, Bayshore Mezzanine Finance Promissory Notes and York Street Mezzanine Finance Promissory Notes. The claims have been the subject of a mediation between the applicants and the respondents sponsored by the Australian Securities and Investments Commission. That mediation resulted in the parties entering into the Terms of Settlement document of 19 June 2009 and Further Terms of Settlement. Under the Terms of Settlement document of 19 June 2009 the parties agree to distribute a settlement fund of $5,976,426.00 in full satisfaction of the claims of the group members which would provide for a return of 62.5 cents in the dollar in respect of each claimant's investment. Ms Sue Youngsook Lee was inadvertently included within the claim group. She was not an investor in any of the above Westpoint products. By order, she was removed from the class of group members. The group members now consist of 101 group members. Total claims constitute $9,512,281.27. Consistent with the Further Terms of Settlement, having regard to the removal of Ms Lee's claim, an amount of $5,945,176.00 will be distributed to the group members. The rateable distribution of 62.5 cents will not alter. The applicants now seek the Court's approval pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (the "Act") of the Terms of Settlement represented by the two Settlement Agreements. In considering that question, I have considered all of the affidavit material relied upon by the applicants in support of the sanction. I also considered the principles identified by Jacobson J in Taylor v Telstra Corporation Ltd [2007] FCA 2008 at [56] to [66]; the observations of Goldberg J in Williams v FAI Homes Security Pty Ltd (No. 4) (2001) 180 ALR 459; Darwalla Milling Co Pty Ltd v F Hoffmann-Laroche Ltd (No. 2) (2007) 236 ALR 322 per Jessup J; and Vernon v Village Life Ltd [2009] FCA 516. The nine factor test described by Goldberg J in Williams v FAI Homes Security Pty Ltd (No. 4) as "helpful in the Australian jurisdiction" derives from a nine factor test adopted by the United States Court of Appeals for the third circuit in Re General Motors Corp Pick-Up Truck Fuel Tank Products Liability Litigation 55 F3d 768 at 785. There is some debate in the authorities about the emphasis to be given to the nine factor test in applying the essential test the Court must address. However, the essential question is whether the settlement is fair and reasonable having regard to the claims made by the group members who will be bound by the settlement in the context of the facts pleaded; the prospects of success in the principal proceeding; the likelihood of group members obtaining judgment for an amount significantly in excess of the settlement distribution; the likely duration and cost of proceedings; and the weaknesses, substantial or procedural, in the case advanced by the group members and whether the settlement sum falls within a realistic range of likely outcomes. The Court will also have regard to the terms of any advice received by group members from counsel as well as any expert advice in relation to the issues raised by the proceeding. The Court will not second-guess the advice of the applicants' advisers. The Court takes the advice into account in determining whether the settlement is fair and reasonable, that is to say, whether the agreed settlement falls within the range of fair and reasonable likely outcomes, taking everything into account.