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This decision relates to the approval of the settlement of a representative proceeding commenced against auditors, Pitcher Partners. The case is the third settlement reached in relation to claims arising from Slater & Gordon’s acquisition of a UK-based Professional Services Division from Quindell plc for approximately $1.25 billion in March 2015. Each of the three representative proceedings were commenced by the lead applicant, Matthew Hall, represented by Maurice Blackburn and funded by ILP15.

The proposed settlement in the current proceeding was for $41 million, with the funder, ILP15 seeking a funding commission of 28% ($11.48 million). In contrast, the applicant contended that the Court should approve a reduced commission of 25.6% ($10.5 million) on the basis that the funder’s return should not be viewed in isolation but within “the context of a common funding agreement with the two other class actions commenced by the applicant for the same or overlapping group members” (at [24]). The previous proceedings had settled for $36.5 million and $28 million, with the funder receiving payments of $8 million and $7.4 million respectively. The applicant alleged that previous payments to the funder had periodically reduced the risk borne by the funder over the life of the three proceedings which should be reflected in the commission rate to be applied in the current proceeding.

Equalisation or Funding Order?

After weighing up the possibility of applying a funding equalisation order (FEO) and the differing approaches to the FEO application, Beach J concluded that it would be preferable in the current circumstances to make a common fund order (CFO) under s 33V(2). In resolving that a CFO would be appropriate, his Honour emphasised the following key considerations at [42]:

  • First, a CFO would be conceptually consistent with how the funding commission was dealt with in the previous related class actions.
  • Second, his Honour concluded that if funding had not been provided by ILP15, the applicant would not have been able to maintain the class action or procure the current proposed settlement.
  • Third, ILP15 assumed the risk of significant adverse costs.
  • Fourth, ILP15 did not cease to provide funding when the primary wrongdoer settled.
  • Finally, the notice to class members confirmed that the funder may seek a CFO.

The Appropriate Rate

After considering the applicant’s argument that the commission rate should be reduced to take into account the progressive “de-risking” which had occurred as a result of the earlier settlements, his Honour concluded that the funder’s position of a 28% commission should be preferred.

While acknowledging that the current proceeding was one of three related class actions, his Honour emphasised that as the last proceeding to settle, it could be argued that the proceeding in fact carried the most risk (see [49]). His Honour further noted that while the funder had enjoyed the return of capital from the earlier settlements, it had nevertheless needed to continue to deploy more capital in the current proceeding (which had in turn increased the funder’s risk). Finally, his Honour referred to the funder’s ongoing risk of adverse costs which were “magnified” as the proceeding ran to trial and were not reduced by settled of the earlier proceedings (see [49]).

Hall v Pitcher Partners (a firm) [2022] FCA 1524

Federal Court of Australia, Beach J,
28 October 2022 

Applicant’s Solicitors: Maurice Blackburn
Respondents’ Solicitors: SBA Law, Corrs, Minter Ellison
Applicant’s Funder: International Litigation Partners No 15 Pte Ltd (ILP15) represented by Banton Group
Austlii Link: Available here

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