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This judgment relates to a securities class action brought against Blue Sky Alternative Investments Ltd (Blue Sky), a company in liquidation.

In an earlier judgment in this proceeding, Lee J had made a number of observations concerning the Court's power to make a solicitor’s common fund order (i.e., an order which provides for a payment to a solicitor or solicitors of an amount for funding a proceeding, in addition to costs and disbursements, out of any settlement or judgment sum). Though the question of a common fund order did not directly arise there (and his Honour was not required to reach any decision), it was raised during his Honour’s consideration of a proposed consolidation agreement and recent commentary in Davaria Pty Ltd v 7-Eleven Stores Pty Ltd (No 13) [2023] FCA 84 (at [190]) that no such power exists).

During a case management hearing on 15 November 2023, his Honour required each respondent to seek specific instructions in respect of the following question (marked as MFI-1):

Is it any respondent's position in this proceeding that if a common fund order is proposed, which order provides for a payment to a solicitor or solicitors for ‘funding’ the proceeding (that is, proposes an amount to be paid to solicitors over and above a payment representing costs and disbursements) that, by reason of that fact alone, such an order could not be characterised as being ‘just’ and hence within power?

Blue Sky and the fifth to eighth respondents (the insurers) adopted no position in respect of the above question. The second, third and fourth respondents, however, contended that the answer to the question is ‘yes’ such that if a solicitors' common fund order is proposed in the proceeding, the Court is bereft of power to make it.

Having regard to the broader significance of the issue, and the need for appellate guidance as to the bounds of the Court’s existing power to make such orders, his Honour determined that it was appropriate in all the circumstances that an order be made pursuant to s 25(6) of the Federal Court of Australia Act 1976 (Cth) that the following question be referred to a Full Court for determination:

Is it a licit exercise of power, pursuant to statutory powers conferred within Pt IVA of the Federal Court of Australia Act 1976 (Cth), or otherwise, for the Court, upon the settlement or judgment of a representative proceeding, to make an order (being a ‘common fund order’, as that term is defined in Davaria Pty Ltd v 7-Eleven Stores Pty Ltd [2020] FCAFC 183; (2020) 281 FCR 501 at [19], [22]-[30]) which would provide for the distribution of funds or other property to a solicitor otherwise than as payment for costs and disbursements incurred in relation to the conduct of the proceeding?

R&B Investments Pty Ltd (Trustee) v Blue Sky Alternative Investments Limited (Administrators Appointed) (in liq) (Reserved Question) [2023] FCA 1499

Federal Court of Australia, Lee J,
28 November 2023

Applicants’ Solicitors: Banton Group (First Applicant), Shine Lawyers (Second Applicant)
Respondents’ Solicitors: Gilbert + Tobin (1R), Arnold Bloch Leibler (2R), GRT Lawyers (3R), Corrs Chambers Westgarth (4R), Clyde & Co (5R), Wotton + Kearney (6R), Colin Biggers & Paisley (7-8R)
Applicants’ Funder: International Litigation Partners No 10 Pte Ltd and LCM Funding Pty Ltd

[2023] FCA 1499

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