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Fowler v Airservices Australia [2009] FCA 1189 (19 October 2009)

Last Updated: 20 October 2009

FEDERAL COURT OF AUSTRALIA


Fowler v Airservices Australia [2009] FCA 1189


PRACTICE AND PROCEDURE – Court approval of representative proceeding – group members tightly confined and have provided continuing instructions to applicant’s solicitors – all group members have approved proposed settlement – global settlement sum and settlement distribution method specified – counsel and solicitors recommend settlement - whether any further notice required pursuant to s 33X(4) of the Federal Court Act - whether settlement is fair and reasonable – whether global settlement sum should be kept confidential


Federal Court Act 1976 (Cth) ss 33V, 33X


Australian Competition and Consumer Commission v Chats House Investments Pty Limited (1996) 71 FCR 250 cited
Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) (2006) 236 ALR 322 applied
Haslam v Money For Living (Aust) Pty Limited (Administrators Appointed) [2007] FCA 897 cited
Lopez v Star World Enterprises Pty Limited [1999] FCA 104; (1999) ATPR 41-678 cited
Multiplex Funds Management v P Dawson Nominees [2007] FCAFC 200; (2007) 164 FCR 275 cited
Taylor v Telstra Corporation Ltd [2007] FCA 2008 cited
Williams v FAI Homes Security Pty Ltd (No 4) [2000] FCA 1925; (2000) 180 ALR 459 considered


MERVYN FOWLER v AIRSERVICES AUSTRALIA


ACD 48 of 2007


BENNETT J
19 OCTOBER 2009
CANBERRA (HEARD IN SYDNEY)


IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY
GENERAL DIVISION
ACD 48 of 2007

BETWEEN:
MERVYN FOWLER
Applicant
AND:
AIRSERVICES AUSTRALIA
Respondent

JUDGE:
BENNETT J
DATE OF ORDER:
19 OCTOBER 2009
WHERE MADE:
CANBERRA (HEARD IN SYDNEY)

THE COURT ORDERS THAT:


  1. The settlement as detailed in the Deed of Release and Confidentiality exhibited to the affidavit of Heather Maree Wilson sworn on 16 September 2009 and marked “HMW-E4” be approved pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (Cth) (the ‘Settlement’).
  2. The method of proposed distribution of the monies to be paid under the Settlement as set out in the spreadsheet exhibited to the affidavit of Heather Maree Wilson sworn on 16 September 2009 and marked “Amended HMW-E6” be approved pursuant to s 33V(2) of the Federal Court of Australia Act 1976 (Cth).
  3. The documents exhibited to the affidavit of Heather Maree Wilson sworn on 16 September 2009 and marked “HMW-E1”, “HMW-E2”, “HMW-E5” and “HMW-E7” are confidential and are not required to be served on the Respondent and are to be kept on the Federal Court of Australia file in a sealed envelope marked “Not to be opened without leave of a Justice of the Federal Court of Australia” and that should any application be made to release these documents, notice of such application be first given to the Applicant’s solicitors.
  4. So much of the documents exhibited to the affidavit of Heather Maree Wilson sworn on 16 September 2009 and marked clause 2.1 of “HMW-E3”, clause 2.1 of “HMW-E4”, “HMW-E6” and “Amended HMW-E6” are confidential and are to be kept on the Federal Court of Australia file in a sealed envelope marked “Not to be opened without leave of a Justice of the Federal Court of Australia” and that should any application be made to release these document, notice of such application be first given to the Applicant’s solicitors and to the Respondent’s solicitors.
  5. Paragraph 19 of the Outline of Submissions filed by the Respondent on 17 September 2009 be kept confidential.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.


IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY
GENERAL DIVSION
ACD 48 of 2007

BETWEEN:
MERVYN FOWLER
Applicant
AND:
AIRSERVICES AUSTRALIA
Respondent

JUDGE:
BENNETT J
DATE:
19 OCTOBER 2009
PLACE:
CANBERRA (HEARD IN SYDNEY)

REASONS FOR JUDGMENT

  1. By notice of motion the applicant seeks the approval of the Court for a settlement of a representative proceeding under s 33V of the Federal Court Act 1976 (Cth) (‘the Act’).

THE NATURE OF THE CLAIM

  1. The applicant was employed by the respondent (‘Airservices’) for a period of 33 years from 18 April 1972. He signed a new contract of employment on 18 August 2000 when appointed to a new position with Airservices (‘the Contract’). His employment with Airservices was subsequently terminated with notice with effect from 31 January 2006. A dispute arose with respect to the quantum of the termination payment to be paid to him. In particular, the issue was whether he was entitled to a bonus payment calculated on a pro rata basis for his final months of service of less than a full financial year. Put another way, at issue was whether the obligation on the part of Airservices to pay to the applicant ‘an amount equal to Total Attainable Remuneration which would have been received and a payment in lieu of accrued Annual Leave’, as set out in clause 10 of the Contract, included an obligation to pay a proportion of the bonus which the applicant would have received had his employment remained on foot until the bonus payments were made at the end of the financial year. A further question arose as to whether his recreation leave and long service leave entitlements should have been calculated by reference to an amount including the bonus component.
  2. Broadly speaking, the dispute between the parties concerned:

The nature of the group members’ claims subsequent to the instructions received from the applicant in April 2006

  1. Deacons, the applicant’s solicitors, received instructions from 33 other individuals in relation to payments that each of those persons had received upon termination or resignation of his or her employment with Airservices.
  2. The claims of each of those other 33 individuals arose out of circumstances substantially similar to that of Mr Fowler in that:
    1. each was employed by Airservices Australia in a senior management position;
    2. each had signed a new contract of employment with Airservices in substantially the same terms as the contract signed by Mr Fowler;
    3. each had received a letter of offer from Airservices prior to signing the new contract of employment, with some variations in those letters;
    4. each had been terminated or had resigned from his or her employment with Airservices;
    5. each claimed that upon termination or resignation, Airservices did not pay their recreation leave and long service leave entitlements at a rate that took into account the bonus component;
    6. with one exception, each claimed that upon termination or resignation of his or her employment, Airservices did not pay the bonus component on a pro-rata basis for periods of service of less than a full financial year; and
    7. each had relied upon alleged representations as to the bonus component.
  3. After attempts to resolve the dispute between the parties, Deacons sought instructions from each of the 34 individuals (including the applicant) to commence proceedings as a representative proceeding by way of an application under Part IVA of the Act. One of these individuals instructed Deacons that he wished to withdraw from any further involvement in the representative proceeding. Each of the remaining 33 individuals (including the applicant) signed a costs agreement with Deacons (the ‘Deacons clients’). By a variation to the costs agreement, each Deacons client agreed to contribute to the legal costs of the representative proceeding proportionally in accordance with the proportion that his or her maximum individual claim bore to the combined total of the Deacons clients’ maximum individual claims. Therefore, the proceedings were commenced on behalf of a group comprising persons who had been employed by Airservices, who claimed to be entitled to a similar kind of payment upon termination of their employment and who had signed a costs agreement with Deacons and instructed Deacons to act for them in the proceedings.
  4. The group members in these proceedings are described in the application as:
...the former senior management employees of Airservices Australia (AsA) listed at Attachment 1 who were engaged under the terms of the employment contracts post-dating August 2000, whether as existing employees who were subject to contract renewal or new employees, and who have since left their employment with Airservices having been paid termination payments [at a rate that did not include the bonus component].

Each Deacons client is listed at Attachment 1 to the application (as amended by order of Stone J on 24 April 2009).

  1. The group was thus identified by criteria not limited to those associated with the nature of the claims themselves (Multiplex Funds Management v P Dawson Nominees [2007] FCAFC 200; (2007) 164 FCR 275 at [137]–[141] per Jacobson J).
  2. While I am informed that there are other former employees of Airservices not listed in Attachment 1 who otherwise come within the description set out in paragraph 2 of the application, those persons have not signed an agreement with Deacons. Those persons will not be bound by the proposed settlement.
  3. Following earlier unsuccessful attempts at settlement, including an attempted mediation, the matter has now been settled between the parties on the basis recorded in a “Deed of Release and Confidentiality”.

NOTICE

  1. A notice pursuant to s 33X of the Act has been given to each Deacons client. Subsequently, a letter was sent to each Deacons client enclosing a s 33J Notice, which notified them of the date set by the Court, being 24 July 2009, by which they may opt out of the proceedings. Deacons did not receive notification from any Deacons client that he or she had determined to opt out of the representative proceedings. Deacons has received continuing instructions from each Deacons client, with the exception of Mr Balachandran, in relation to the conduct of the proceedings subsequent to 24 July 2009. I shall continue to refer to the Deacons clients excluding Mr Balachandran as the ‘Deacons clients’. I shall discuss Mr Balachandran later in these reasons.
  2. During the course of the representative proceedings Deacons has sought, and received, instructions from each Deacons client, in relation to all offers of settlement that have been made. Similarly, each Deacons client has been informed of the method to be used to calculate the proportion of any settlement that he or she would receive, taking into account legal costs and disbursements. Each Deacons client notified Deacons either in writing or orally to accept an offer of settlement put on behalf of Airservices on or about 21 August 2009. Oral or written instructions have been received from each Deacons client that the terms of the proposed Deed of Release and Confidentiality are acceptable.
  3. Each Deacons client was provided by email with a schedule that detailed the proposed distribution to be made to that person as part of the proposed global settlement. I am informed that each notified Deacons client has responded. Each has approved the proposed global settlement and the methodology of proposed distribution. There has been some query by some of the Deacons clients as to the specific allocation but that does not affect the fact that, as at the date of the hearing of this notice of motion, each of the 33 members of the group comprising the Deacons clients has given instructions to settle as proposed.
  4. Each of the Deacons clients was notified via email that the proposed application to the Federal Court to approve the proposed settlement was to be heard on 17 September 2009. I am informed that each Deacons client replied by email or by telephone. Each Deacons client has instructed Deacons that he or she is prepared to execute the Deed of Release and Confidentiality to give effect to the proposed settlement.
  5. Accordingly, I made an order as sought in the notice of motion that the applicant is not required to give any further notice pursuant to s 33X(4) of the Act of the application for approval of the settlement.

Mr Balachandran

  1. The exception referred to above is Mr Balachandran. Mr Balachandran is a named Deacons client. His wife, Mrs Balachandran, had informed Deacons that Mr Balachandran has been ill with the result that he has difficulties with memory and ‘does not know what he is saying’. Subsequently, Deacons received a letter from a doctor who has the joint care of Mr Balachandran at the Neurosurgery Service at Royal Price Alfred Hospital. The letter states that Mr Balachandran has undergone multiple brain operations for a condition which caused profound cognitive impairment such that, as at 9 September 2009, he did not have the intellectual capacity to manage his own affairs. Deacons subsequently received a copy of a general power of attorney whereby, in or about 1991, Mr Balachandran had appointed Mrs Balachandran as his attorney.
  2. On 14 September 2009, Mrs Balachandran was provided with the schedule that detailed the proposed distribution to be made to Mr Balachandran as part of the proposed global settlement. Mrs Balachandran was also sent a hard copy of the Deed of Release and Confidentiality. Mrs Balachandran has informed Deacons that she approves the proposed settlement, the methodology for distribution and the proposed distribution to Mr Balachandran.
  3. It follows that each of the members of the representative group has been informed of the proposed settlement, the method of distribution and the actual or approximate amount to which he or she is entitled. None has opposed the proposed settlement and each has indicated approval.

THE NATURE OF THE DISPUTE

  1. By evidence and submission Airservices has set out the issues and its position in relation to the claim made against it. In summary, should the proceedings progress to a full hearing, Airservices would submit that, on a proper interpretation of the terms of the Contract and letters of offer entered into by the Deacons clients and Airservices, Airservices was not required to pay a pro-rata bonus on termination of employment to the Deacons clients. Airservices would argue that, on a proper interpretation of the terms of the relevant contracts of employment and letters of offer and the Long Service Leave (Commonwealth Employees) Act 1976, it was not required to pay to any Deacons client on termination of employment an amount in lieu of accrued but untaken annual leave or long service leave at a rate which included a bonus component. Further, Airservices denies making the representations that the Deacons clients claim were made during the course of negotiation and explanation of the Contract to them.

CONSIDERATION

The Court’s approach under Section 33V of the Federal Court Act

  1. As Branson J said in Australian Competition and Consumer Commission v Chats House Investments Pty Limited (1996) 71 FCR 250 at 258: ‘it is appropriate for the Court to be satisfied that any settlement or discontinuance of representative proceedings has been undertaken in the interests of the group members as a whole, and not just in the interests of the applicant and the respondent’. The Court’s task is to assess whether the compromise is fair and reasonable (Lopez v Star World Enterprises Pty Limited (1999) ATPR 41-678; [1999] FCA 104 at [15] per Finkelstein J).
  2. In the present case, each Deacons client has had the benefit of advice from solicitors and counsel as to how his or her interests are best served in the litigation and by the proposed settlement. My task is to determine whether the proposed settlement is fair and reasonable having regard to the claims made on behalf of the group members who will be bound by the settlement (Williams v FAI Homes Security Pty Ltd (No 4) [2000] FCA 1925; (2000) 180 ALR 459 at [19] per Goldberg J). While the nine factor test adopted by Goldberg J in Williams is not a rigid test to be applied, it is useful as a guide (Haslam v Money For Living (Aust) Pty Limited (Administrators Appointed) [2007] FCA 897 at [20] per Gordon J.)
  3. The approach to be taken by the Court was recently reviewed by Jessup J in Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) (2006) 236 ALR 322. Jessup J pointed out that there is little specificity that can be attached to the words “fair” or “reasonable”. His Honour expressed the opinion that the practical judicial approach appears to be to identify any features of a settlement that are obviously unreasonable or unfair (Darwalla at [39]).
  4. The evidence establishes that the proposed global amount, the methodology for distribution and the effect of the settlement on the payments to be made to the individual members has been adequately set forth to each of those members of the Deacons client group. As was the case in Darwalla, no objection, and no matter said to be unfair or unreasonable, has been raised in this case by any group member who will be covered by the settlement. As a result, I, like Jessup J in Darwalla, am left with only the broadest criteria to assess the reasonableness and fairness of the proposed settlement.

Global settlement sum

  1. Jessup J considered whether the overall settlement sum was reasonable having regard to: the manner of its calculation and its relationship to the best possible case outcome for the group as a whole; the prospects of achieving an outcome at or near the best probable case; the extent of the weaknesses, substantive or procedural, in the applicant’s case; whether the settlement sum falls within the realistic range of likely outcomes; the forensic difficulties which would be involved in the conduct of the case to judgment; and the time and costs which have been saved by a settlement at that particular stage of the proceedings (Darwalla at [41]).
  2. As noted by Jacobson J in Taylor v Telstra Corporation Ltd [2007] FCA 2008 at [63], Jessup J also said at [50] that he did not consider that it was the Court’s function under s 33V to second guess the applicants’ advisors in the answer to the question whether the applicants ought to have accepted the respondent’s offer. The question is whether the agreed settlement falls within the range of a fair and reasonable outcome, taking everything into account. As Jessup J also pointed out in Darwalla, there is rarely, if ever, a case in which there is a unique outcome which should be regarded as the only fair and reasonable one.
  3. Deacons has presented a letter of advice from Mr Sharma, the partner of Deacons who has been involved in the conduct and carriage of these proceedings. Mr Sharma recognises that he provides his opinion in relation to the proposed settlement on his own behalf and on behalf of the other Deacons partner involved in the conduct and carriage of the proceedings, in their capacity as officers of the Court. That advice sets out a history of the negotiations, including the fact that negotiations were conducted for the applicant and the Deacons clients by senior and junior counsel. Counsel joined with Deacons in recommending the proposed settlement to the Deacons clients. Mr Sharma’s opinion sets out the perceived strengths and possible weaknesses and complexities of the claim, and adverts to the time and costs estimated to be incurred if the matter were to proceed to a hearing on the second set of issues concerning the alleged representations made by Airservices to the Deacons clients (‘the representations issue’).
  4. Senior counsel for Airservices also has an obligation to assist the Court in ensuring that the settlement is fair and reasonable. Airservices is obliged to conduct proceedings as a model litigant. Senior counsel for Airservices assures the Court that the proposed settlement and the percentage of each claim that will be received by each member of the group ‘is more than fair and reasonable’ to each Deacons client. He also notes that this settlement took place before the construction of clause 10 of the Contract was determined; depending on that outcome, there may have been the need to hear the representations issue. In line with Mr Sharma’s advice, Airservices notes that if the matter proceeds to a hearing, it has the potential to be of considerable length and complexity, particularly if it were to proceed to a hearing on the different representations alleged to have been made to each Deacons client.
  5. It is difficult, without entering into a detailed consideration of the strengths and weaknesses of the respective cases, to determine whether the settlement truly reflects the likely outcome of the proceedings. Airservices has explained the defences that it would have brought to bear in the proceedings. A hearing involving 33 different sets of alleged representations, which are generally denied by Airservices, would indeed be long and complex. This would diminish the amount that would ultimately be paid to each Deacons client, even if each such person were successful.
  6. Accordingly, I am satisfied that the percentage of each claim that is to be received by each Deacons client is, at the least, fair and reasonable, taking into account Airservices’ detailed defences and the likelihood that the matter would be lengthy if it proceeded to its conclusion, with the attendant costs and the general vicissitudes of litigation. I am fortified in that conclusion by the opinion of Mr Sharma on behalf of Deacons and the fact that there was a mediated outcome during which the Deacons clients were represented by senior and junior counsel. Further, senior counsel for Airservices, acknowledging his obligation to the Court and the obligation of Airservices as a model litigant, has expressed the view that the settlement is more than fair and reasonable for the Deacons clients.

Settlement distribution scheme

  1. As in Darwalla, there is a settlement distribution scheme which does not specify precisely what the final entitlement of each group member will be under the settlement, although in this case:
  2. The evidence provides a basis for calculating the total claims made by or on behalf of the Deacons clients and the percentage of these total claims made up by the individual claims of each Deacons client. This percentage is used to calculate the proportion of the global settlement sum to be paid to each Deacons client, allowing for costs. This enables the Court to understand the basis on which the amounts payable to the individual members of the group have been calculated. Where the global settlement and the method of distribution have been established, the fact that there is a degree of uncertainty in the precise distribution does not prevent approval being given to the settlement (Lopez).
  3. There has already been payment by the Deacons clients on account of costs incurred to date. The proposed schedule for distribution takes account of those payments of costs and it follows that the individual group members have been notified of, and approve the quantum of, the costs incurred. I am satisfied that there is no need for further evidence of the reasonableness of those costs.
  4. Accordingly, taking account of:

I am satisfied that it is appropriate so to approve it.

CONFIDENTIALITY

  1. The applicant seeks an order that two classes of documents be kept confidential.
  2. The first class of documents consist of the costs agreements between the Deacons clients and Deacons, the schedules showing the payments to be made to each Deacons client, which include the costs payable by each member of the group, and the opinion of Mr Sharma as to the history of the matter and his perceptions of the strengths or weaknesses of the Deacons clients’ case. The applicant seeks an order that the first class of documents be kept confidential from Airservices. Airservices does not seek access to this class of documents and consents to their remaining confidential. In my opinion such a course is appropriate, as the documents relate to the arrangements between the Deacons clients and their solicitors, Deacons.
  3. A confidentiality order is sought in respect of a second class of documents but not that they be kept confidential from Airservices. The second class of documents was, initially, the Deed of Release and Confidentiality and the amended Deed of Release and Confidentiality in their totality, and the schedule setting out the proposed distribution of the global settlement sum to each Deacons client (‘the distribution schedule’). At the hearing, the second class of documents was limited only to the distribution schedule and a specific clause of each Deed: clause 2.1. That clause sets out the global settlement sum to be paid by Airservices to the Deacons clients. That figure is the same in both the Deed and amended Deed. The amendment to the Deed relates to the withholding of tax from the settlement sum and is irrelevant for present purposes.
  4. Airservices contends that the publication of the global settlement sum would be embarrassing and misleading because there are other employees of Airservices, who are not part of the Deacons clients group, who may be subject to contracts of employment similar to the Contract but who do not allege representations by Airservices. Airservices emphasises that, from its perspective, the global settlement was reached by taking into account the contractual issue and the individual allegations of representations, the cost of litigation and the time involved in that litigation. Airservices submits that it is appropriate to keep the global settlement and the individual payments confidential, as it is prejudicial to Airservices to make public that settlement amount. Further, Airservices says that it is reasonable to assume that one of the factors taken into account in determining the settlement was the fact that the settlement would be accompanied by a deed of confidentiality.
  5. Both parties support an order that clause 2.1 of the Deed and amended Deed be kept confidential. The Deed and amended Deed provide that the Deacons clients must not disclose the content of the Deed (which includes the global sum), or any discussions or correspondence relating to the negotiation of the Deed or the subject matter of the proceedings without the consent of Airservices. That clause, agreed between the parties, would be put at naught if the documents that set out the payments were made public. The requirement of confidentiality forms part of the settlement of the proceeding. In my view, it is appropriate that the confidentiality order be made.
I certify that the preceding thirty eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett.

Associate:


Dated: 19 October 2009


Solicitor for the Applicant:
Ms H Wilson of Deacons


Counsel for the Respondent:
Mr R C Kenzie QC


Solicitor for the Respondent:
Blake Dawson

Date of Hearing:
17 September 2009


Date of Judgment:
19 October 2009

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