Clime Capital climax: Common funding, equalisation and confidentiality

Shareholder class action – Settlement approval – Common fund v funding equalisation order – Whether adequate notice of proposed settlement distribution given to class members – Approval of legal costs, funding commission and applicant’s reimbursement payment – Settlement approved

Application for confidentiality orders over documents filed in support of settlement approval – Whether orders necessary to prevent prejudice to the proper administration of justice – Orders granted

This action was against UGL Pty Ltd (UGL), in which the applicant alleged that UGL breached its continuous disclosure obligations by failing to disclose to the market that its $900 million Ichtys Project for the construction of a combined cycle power plant in the Northern Territory was behind schedule and suffering from increased project costs. The applicant also alleged that UGL engaged in misleading or deceptive conduct.

Clime Capital Ltd v UGL Pty Ltd [2020] FCA 66 (‘Clime Capital’)

Anastassiou J gave reasons for his approval of a settlement of the proceeding in the aggregate amount of $18 million. His Honour said the settlement sum was a “substantial sum in the context of the claims made in the proceeding” (at [30]) and stated that this conclusion was “fortified…by the fact that a settlement was reached at an advanced stage in the preparation of the proceeding for trial.”

His Honour also approved the following proposed settlement distribution scheme (SDS):

  • $7.9 million to class members (being 43.9% of the settlement sum);
  • $4.05 million to the applicant’s funder, IMF Bentham Ltd (IMF) (being 22.5% of the settlement sum);
  • $5.95 million for legal costs (being 33% of the settlement sum). The court appointed costs assessor concluded that the fair and reasonable costs of the applicant’s solicitors in the proceeding was in the range of $6.04 million to $6.07 million. His Honour said the amount was reasonable due to the circumstances;
  • $82,281.65 to the representative applicant for the reimbursement of its time and effort in the litigation. His Honour did note that the applicant and IMF had also entered into a side agreement pursuant to which IMF had agreed to waive the applicant’s obligation to pay its proportion of the funding commission ($48,55.69). This did not impact upon the distribution of the settlement sum or the reasonableness of the settlement; and
  • $15,0544.40 to IMF for its project costs.

Ultimately, his Honour held that, based on the information provided to class members in multiple letters and the Notice of Settlement, class members had been given adequate notice of terms and operation of the settlement.

Clime Capital Ltd v UGL Pty Ltd (No 2) [2020] FCA 257 (‘Clime Capital’ (No 2)’)

His Honour made orders under s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) (FCCA) that certain material contained in documents filed by the applicant in support of its settlement approval application be kept confidential.

Section 37AG(1)(a) of the FCAA provides that the Court may make a suppression order or non-publication order on the ground that “the order is necessary to prevent prejudice to the proper administration of justice.” His Honour referred with approval to the High Court’s statement in Hogan v Australian Crime Commission (2010) 240 CLR 651; [2010] HCA 21 that ‘necessary’ is a “strong word”, which can be contrasted with “convenient, reasonable or sensible”. His Honour also observed that this statement is now expressly contained in the updated Class Actions Practice Note (GPN-CA).

However, in the circumstances, his Honour held that it was appropriate to make the orders in respect of the confidential material, which fell into four categories.

Categories 1 and 2 contained confidential information in relation to funding and legal costs, including pricing mechanisms, the applicant's prospects of success in the proceeding and the formula and procedure for distribution of settlement funds, including their rationales. His Honour observed that “[i]t is well accepted that the Court should not permit disclosure in a manner which allows the Court's processes to become "a vehicle for advantaging or prejudicing trade rivals"” (at [20]), and concluded that “[t]he services provided by solicitors and funders should not be impeded by the loss of confidentiality that may provide competitors for the provision of these services with an unfair advantage” (at [21]). His Honour also held that although the commercial interests to be protected were that of the applicant’s solicitors and funder (and not the applicant’s itself), it would not be cost effective to require that the solicitors and funder be substituted as the moving parties for the orders sought.

Category 3 contained confidential information subject to without prejudice privilege regarding mediation or settlement of the proceeding. In making the order, his Honour said that “the protection of privileged material is an accepted basis to make a confidentiality order” (at [23]), and held that “[w]here, as here, the information has been disclosed to the Court in accordance with express orders preserving the confidentiality of the material and for the purpose of a settlement approval, confidentiality orders to preserve the privileged material should be made as a matter of course” (at [22]).

Category 4 contained personal information concerning class members and employees of the applicant and the applicant’s funder, which are unrelated to the controversy in the proceeding. In making the order, his Honour observed that non-publication/suppression orders in respect of class members’ personal information had been made in previous cases.

His Honour determined to limit the duration of the non-publication/suppression order “until further order,” His Honour said that, in his view, “the practice in the class action context strikes the right balance between the protection of the legitimate interests that may be adversely affected by disclosure of the information, while not precluding any person who may be able to demonstrate a countervailing interest from applying to the Court for a variation to the orders” (at [30])).

Case details

Clime Capital Ltd v UGL Pty Ltd [2020]
FCA 66; Clime Capital Ltd v UGL Pty Ltd (No 2) [2020] FCA 257

  • Federal Court of Australia, Anastassiou J
  • 22nd of February, 2020 and 4th of March 2020,
  • Applicant’s Solicitors: Phi Finney McDonald;
  • Respondents’ Solicitors: Herbert Smith Freehills;
  • Respondent’s Funder: IMF Bentham Limited

Read more about this case on Austlii: Clime Capital Ltd v UGL Pty Ltd (No 2) [2020] FCA 257

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