Interim settlement distribution approved amidst mounting fees and interest charges for funder

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In an earlier judgment in this matter (Davaria Pty Ltd v 7- Eleven Stores Pty Ltd (No 11) [2022] FCA 331) O’Callaghan J approved a proposed settlement of the proceeding in the amount of $98 million, but deferred to a later hearing the question of the approval of deductions from the settlement sum (including legal costs and funding commission). Judgment on the approval of the proposed deductions is presently reserved. In advance of that judgment, the applicants’ funder applied for approval of an interim distribution to it from the settlement sum, as partial recompense for the amounts which it had paid on account of the applicants’ legal costs. The application was based on the fact that the funder had borrowed in excess of $20 million for the purpose of financing the litigation, and was incurring, and would continue to incur, substantial fees and interest charges on those borrowings until they were repaid (and that an interim distribution to it would enable it to repay at least a portion of those borrowings earlier than otherwise).

His Honour accepted that s 33V(1) and (2) of the Federal Court of Australia Act 1976 (Cth) confer two distinct powers: (i) to approve the overall settlement (sub-s (1)); and (ii) to approve the distribution of the settlement sum (sub-s (2)). His Honour was satisfied that the latter permitted the Court, in an appropriate case, to make the order sought (notwithstanding that the settlement distribution scheme made no provision for any interim distributions). His Honour was also satisfied that it was appropriate, in the circumstances of this case, to make such an order.

As to the amount of the interim distribution, the funder sought  an order for payment of approximately:

• $16.7 million, being the amount certified by the expert costs consultant as representing the reasonable costs of the proceeding. However, that figure was not accepted by the contradictor as the amount which the Court should ultimately approve, and accordingly the contradictor submitted that the interim distribution should be limited to
• $10 million (as the ‘irreducible minimum’ of legal costs that may ultimately be approved). His Honour adopted the contradictor’s submissions, and therefore approved an interim distribution in that amount.

Davaria Pty Ltd v 7-Eleven Stores Pty Ltd (No 12) [2022] FCA 699

Federal Court of Australia, O’Callaghan J,
17 June 2022

Applicants’ Solicitors: Levitt Robinson
Respondent’s Solicitors: N/A
Applicants’ Funder: Galactic Seven Eleven Litigation Holdings LLC

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