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Schoneweiss v The Fourth Force Pty Ltd [2022] FCA 1236 (6 October 2022)

Last Updated: 18 October 2022

FEDERAL COURT OF AUSTRALIA

Schoneweiss v The Fourth Force Pty Ltd [2022] FCA 1236

File number:	SAD 156 of 2020
Judgment of:	CHARLESWORTH J
Date of judgment:	6 October 2022
Date of publication of reasons:	18 October 2022
Catchwords:	PRACTICE AND PROCEDURE– application for approval of settlement of a representative proceeding under s 33V of the Federal Court of Australia Act 1976 (Cth) – where applicant and Group Members allege contraventions of the Fair Work Act 2009 (Cth) – whether proposed settlement is fair and reasonable in the interests of Group Members to be bound to it – settlement having effect of Group Members sharing the liability to pay the lead applicant’s costs – whether legal costs proposed to be charged by lead applicant’s solicitors are reasonable – whether enduring suppression orders should be made over material relevant to proposed settlement – proposed settlement approved – assessment of costs deferred
Legislation:	Federal Court of Australia Act 1976 (Cth) s 33V Fair Work Act 2009 (Cth) s 570 Legal Profession Act 2006 (ACT)
Cases cited:	Australian Securities and Investments Commission v Richards [2013] FCAFC 89 Baker v Woolworths Group Limited (No 2) [2022] FCA 534 Blairgowrie Trading Ltd v Allco Finance Group Ltd (recs & mgrs apptd) (in liq) (No 3) [2017] FCA 330; 343 ALR 476 Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527 Evans v Davantage Group Pty Ltd (No 3) [2021] FCA 70 Kelly v Willmott Forests Ltd (in liq) (No 4) [2016] FCA 323; 335 ALR 439 Prygodicz v Commonwealth of Australia (No 2)  [2021] FCA 634 ; (2021) 173 ALD 277 Thomas v Romeo Lockleys Asset Partnership [2022] FCA 1106
Division:	Fair Work Division
Registry:	South Australia
National Practice Area:	Employment and Industrial Relations
Number of paragraphs:	20
Date of hearing:	14 June 2022
Counsel for the Applicant:	Mr M Whitbread
Solicitor for the Applicant:	Adero Law
Counsel for the Respondents:	Ms K Eaton
Solicitor for the Respondents:	Lynch Meyer

ORDERS

THE COURT ORDERS THAT:

Approval of Settlement

1. Subject to these orders, pursuant to s 33V and s 33ZF of the Federal Court of Australia Act 1976 (Cth) (FCA Act), the settlement recorded in the Deed of Settlement and Release and the Settlement Distribution Scheme forming annexures RMM1-1 and RMM1-2 to the affidavit of Mr Rory Michael Markham sworn on 8 March 2022 is approved.
2. Sub-clause 1.30.1 of the Deed is approved on the condition that the words “paragraph 5(b) of the Further Amended Statement of Claim filed in SAD 105/2020 proceedings on 26 October 2020” be substituted with the words “paragraph 5(b) of the Statement of Claim filed in SAD 156/2020 proceedings on 26 October 2020”.
3. Pursuant to s 33V and s 33ZF(1) of the FCA Act the Court authorises the applicant, nunc pro tunc, to enter into and give effect to the Deed for and on behalf of all class members who did not file an opt out notice in accordance with s 33J of the FCA Act.
4. Pursuant to s 33ZB(a) of the FCA Act, the persons affected and bound by these orders are the applicant and all group members (whether registered or not) who have not opted out of the proceedings.
5. Pursuant to s 33ZF of the FCA Act, Adero Law be appointed as the Settlement Administrator of the Settlement Distribution Scheme and authorised to act in accordance with clause 3 of the Settlement Distribution Scheme, subject to any direction of the Court.
6. Adero Law as Settlement Administrator under the Settlement Distribution Scheme has liberty to apply in relation to any matter arising under the Settlement Distribution Scheme.

Costs

7. For the purposes of the Deed, the Administration Costs are fixed in the sum of $95,634.00 including GST.
8. For the purposes of sub-clause 1.10 of the Deed the amount of the “Assessed Adero Costs”:

(a) is to be determined in such a manner as the Court thinks fit, such determination to be made on or before 29 November 2022; and

(b) is not to exceed, in any event, the sum of $537,132.86 including GST.

9. The parties and Adero Law as an interested non-party have liberty to apply to vary the date in paragraph 8(a).
10. On or before 13 October 2022, the applicant’s solicitor (Adero Law) in its capacity as an interested non-party is to file and serve an affidavit deposing to the existence of any collateral agreement or arrangement affecting the operation or meaning of clause 7 of the costs agreement forming annexure RMM-3 to the affidavit of Mr Markham sworn on 31 May 2022.
11. On or before 13 October 2022, Adero Law is to:

(a) undertake a review of the time keeping records referred to in the reports of Ms Catherine Dealehr dated 30 May 2022 (First Dealehr Report) and 9 June 2022 (Second Dealehr Report), so as to ensure that they contain (and only contain) work that Adero Law asserts is properly chargeable to the applicant, and time entries Adero Law asserts are reasonably necessary for the performance of itemised activities; and

(b) file and serve on the applicant an affidavit:

1. disclosing the outcome of its review and annexing (in electronic form as appropriate) the revised time records;
2. providing a description of the tasks undertaken prior to the entry into the costs agreement and an explanation as to why they are said to be chargeable to the applicant;
3. discretely identifying the fees and disbursements said to be chargeable to the applicant for obtaining the opinion of any cost consultant;
4. providing a detailed description of the work undertaken in the preparation of pleadings, including the provision of work product justifying the professional fees and disbursements claimed against the applicant, and explaining those charges in light of the hours referred to in Table 11 and Table 21 of the First Dealehr Report; and
5. disclosing the extent to which any drafting, analysis, case theory preparation, modelling or other work product is a duplication of work produced in relation to any other litigation and explaining why duplicated work (if any) is claimed against the applicant.

12. All outstanding costs orders otherwise be vacated.

Confidentiality

13. For the purposes of sub-clause 15.1 of the Deed:

(a) the sub-clause is approved only to the extent that it refers to the Calculation Principles and the Model, assumptions and calculations set out within the Model as defined in the Deed;

(b) clause 15 is not otherwise approved.

14. Nothing in paragraph 13 excuses non-compliance by any person with the order in paragraph 15.
15. Pursuant to s 37AF and s 37AG(1)(a) of the FCA Act, in order to prevent prejudice to the proper administration of justice, the following documentary material (suppressed material) is to remain confidential and its publication is prohibited:

(a) the opinion of Mr Michael Whitbread of Counsel, forming annexure RMM–5 to the affidavit of Mr Markham sworn on 31 May 2022;

(b) sub-clause 5.2 and sub-clause 5.3 of the Deed dated 7 March 2022 referred to in the Annexure marked RMM1-1 to the affidavit of Mr Markham sworn on 8 March 2022;

(c) the Calculation Principles set out in Schedule 1 to the Deed, forming pages 46 to 47 and 63 to 64 of the affidavit of Mr Markham sworn on 8 March 2022;

(d) the Calculation Principles set out in Schedule 1 to the Deed, forming pages 56 to 57 and 73 to 74 of the affidavit of Mr Markham sworn on 31 May 2022;

(e) sub-clause 5.2 and sub-clause 5.3 of the Deed dated 7 March 2022 referred to in the Annexure Marked RMM1-1 to the affidavit of Mr Markham affirmed on 31 May 2022; and

(f) each of exhibits RMM3-1, RMM3-2 and RMM3-7 to the affidavit of Mr Markham sworn on 28 September 2022.

16. Upon the entry of the order in paragraph 15, all previous suppression, non-publication and confidentiality orders are revoked.
17. On or before 13 October 2022 the applicant is to upload to the Court file the materials referred to in paragraph 15, with the supressed material redacted in accordance with the order.
18. A request by any non-party for access to a document on the Court file is, by this order, allowed to the extent that the document is not the subject of an order under paragraph 15 and, to that end, a person requesting a copy of a document referred to in paragraph 15 shall (upon payment of any applicable fee) be provided with a copy of the redacted version of the document filed in accordance with paragraph 17.
19. There be a further case management hearing dedicated to the question of costs at 9:00am (ACDT) on 17 October 2022.
20. The parties and Adero Law as an interested non-party have liberty to apply.

REASONS FOR JUDGMENT

CHARLESWORTH J

1. This representative proceeding was commenced under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (FCA Act) by Mr Craig Schoneweiss as the lead applicant. The respondents are Fourth Force Pty Ltd (ACN: 084 438 773) and Dramet Pty Ltd (ACN: 109 544 425. Together, the respondents operate 58 supermarkets in South Australia and Queensland.
2. Mr Schoneweiss was a full-time employee of the respondents holding a managerial position covered by the General Retail Industry Award 2010. Mr Schoneweiss alleges that he did not receive his full entitlements under the Award with respect to the hours he worked, that he was expected or required to work in excess of rostered hours and that he was not lawfully remunerated for those additional hours. He further alleges that the respondents wrongfully deducted sums from his wages to cover the costs of his uniforms.
3. The Group Members similarly worked in managerial roles in the respondents’ supermarkets and their employment was covered by the Award. Mr Schoneweiss seeks declarations that the respondents have contravened the Fair Work Act 2009 (Cth) (FW Act) as well as orders for the payment of compensation and the imposition of civil penalties in unspecified amounts.
4. The respondents deny liability.
5. Section 33V(1) of the FCA Act relevantly provides that a representative proceeding may not be settled without the approval of the Court.
6. By an amended interlocutory application filed on 11 April 2022, Mr Schoneweiss sought the Court’s approval to settle the proceedings on the terms set out in a Deed of Settlement and Release dated 7 March 2022 and in accordance with an agreed distribution model (Proposed Settlement).
7. On 6 October 2022, I made orders approving the Proposed Settlement, notwithstanding that a question relating to the quantification of costs could not at that time be determined. I now provide written reasons for granting the approval. In due course it will be necessary to make orders quantifying the amount payable to Adero Law, the lawyer on the record for Mr Schoneweiss as the lead applicant. I do not propose in these reasons to explain why I am not presently satisfied that I should make an order for costs in the amount jointly agitated for by Mr Schoneweiss and in Adero Law in its own name and right. The costs will be quantified within a timeframe that permits payments to be made to participating employees in accordance with the time frames specified in the Deed.

THE DEED

8. The parties engaged in a private mediation after the opt out deadline passed. The outcome of the mediation was the agreement recorded in the Deed. It refers to the respondents in this action as “Drakes” and this proceeding as the “Drakes Class Action”, and makes provision for payments to be made to “Registered Group Members” and “Additional Registered Group Members”. Registered Group Members are those persons who registered to participate in the any settlement of the Drakes Class Action by 2 September 2021 and who have not otherwise opted-out. Additional Registered Group Members are unregistered Group Members who subsequently registered to participate in the Proposed Settlement by 6 May 2022 in accordance with orders made on 8 April 2022 that extended the time for registration. The terms of the Deed are otherwise to the following effect:

(1) the respondents deny liability;

(2) the respondents will pay $1,455,000.00 (excluding interest) in full and final settlement of the claims of the Registered Group Members;

(3) the respondents will pay a sum of $400,000 in lieu of civil penalties and will make a further payment of $190,000 in lieu of interest to both Registered Group Members and Additional Registered Group Members;

(4) the respondents will pay an additional amount of $220 for each Additional Registered Group Member (of which there were 79) totalling $17,380.00;

(5) the respondents will make an additional payment in full and final settlement of the claims of each Additional Registered Group Member as defined in sub-clause 1.2 of the Deed;

(6) the amounts in [9(2)] to [9(5)] above are defined as the Settlement Sum;

(7) payments to individuals are to be calculated under an agreed model (explained in part in a document titled “Calculation Principles”) incorporated as “Annexure C” to the Deed and referred to as the Settlement Distribution Scheme;

(8) unregistered Group Members will not participate in the distribution;

(9) by clause 10, the parties to the Deed make the following acknowledgments:

10 Costs Generally

10.1 Adero Law and Drakes acknowledge and agree that:

...
10.1.2 Registered Group Members and Additional Registered Group members have a liability to contribute to and pay the Assessed Adero Costs and the Administration Costs.
10.1.3 Contributions for such costs will be deducted from the Settlement Entitlements that Registered Group Members and Additional Registered Group Members will receive as Eligible Group Members under the Scheme, following an assessment and determination by the Court of such costs.

(10) for the purposes of that clause, the expressions “Adero Costs” and “Assessed Adero Costs” are defined as follows:
1.3 Adero Costs means the:

1.3.1 legal costs and disbursements of and incidental to the Drakes Class Action (including solicitor, counsel and expert fees) incurred by the Applicant on behalf of themselves and Group Members;
1.3.2 any other amount payable to Adero Law in connection with its services for and on behalf of the Applicants and Group Members;
1.3.3 costs and disbursements incurred by Adero Law in carrying out its duties and obligations as Administrator under and incidental to this Scheme;
...
1.10 Assessed Adero Costs means Adero Costs as assessed and ordered by the Court at the time of entering the Approval Orders, or such Adero Costs as assessed and determined by way of a formal assessment and subsequently ordered by the Court.

and
(11) Adero Law will be paid the amount for the Assessed Adero Costs following assessment and order of the Court at the time of entering the orders for the approval of the Proposed Settlement prior to distribution of the Settlement Sum to the eligible Registered Group Members and Additional Registered Group Members.

APPROVAL

9. The principles to be applied on an application under s 33V of the FCA Act are well-established. They were recently summarised in reasons for judgment on a similar application and need not be set out in detail here: Thomas v Romeo Lockleys Asset Partnership [2022] FCA 1106 (at [37] – [42]). The overarching principle is that a proposed settlement must be fair and reasonable, first, as between the applicant, group members and the respondents, and secondly, as between the group members themselves: Evans v Davantage Group Pty Ltd (No 3) [2021] FCA 70, Beach J (at [17]); Blairgowrie Trading Ltd v Allco Finance Group Ltd (recs & mgrs apptd) (in liq) (No 3) [2017] FCA 330; 343 ALR 476, Beach J (at [81]); Prygodicz v Commonwealth of Australia (No 2)  [2021] FCA 634 ; (2021) 173 ALD 277 (at [85]).
10. The Court has a protective role in relation to the interests of group members who are not directly represented in the proceedings, not unlike the role assumed by the Court when approving settlements on behalf of infants: Australian Securities and Investments Commission v Richards [2013] FCAFC 89, Jacobson, Middleton and Gordon JJ (at [8]); Kelly v Willmott Forests Ltd (in liq) (No 4) [2016] FCA 323; 335 ALR 439, Murphy J (at [62]); Blairgowrie (at [81] – [85]); Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527, Murphy J (at [12]); Baker v Woolworths Group Limited (No 2) [2022] FCA 534, Murphy J (at [37]).
11. In this case, the Group Members were able to be easily identified. They were notified of the proceedings and the terms of the Proposed Settlement pursuant to orders made on 18 March 2021, 3 August 2021 and 8 April 2022. I am satisfied that each of them has received the ordered notifications, either by email or post. I am also satisfied that they have been afforded an opportunity to make an informed decision as to whether they might opt out of the action, register to participate in the Proposed Settlement, or lodge an objection to it.
12. Out of a total of approximately 772 identified potential Group Members, it appears that only 207 Group Members have chosen to register. The low registration rate is curious, but it is not necessarily reflective of Group Members viewing the settlement as negative, especially given that no objections to the Proposed Settlement have been received.
13. This proceeding was commenced by an originating application and statement of claim filed on 26 October 2020. Provisional settlement was reached within 16 months, at a stage of the litigation where no orders had yet been made for the filing of evidence, no expert witnesses engaged and no formal discovery undertaken.
14. I have considered the reasonableness of the Proposed Settlement in light of the early stage of the proceedings, the asserted total value of the claims of the Registered Group Members and Additional Registered Group Members and the quantum of the claimed costs presently asserted by Adero Law. The settlement occurs in a legal context in which s 570 of the FW Act would in the ordinary course operate to prevent Mr Schoneweiss (and through him the Group Members) from recovering their costs from the respondents, even if their claim were wholly successful. As discussed in Romeo Lockleys, the effect of s 570 of the FW Act is that there is a heightened risk that continuation of the proceedings will become an exercise in diminishing returns, not only for Mr Schoneweiss but for all Group Members.
15. I have had regard to the confidential opinion of Mr Michael Whitbread of Counsel, including his assessment of the total value of the claims. I am satisfied that the total sum to be paid by the respondents is within the range of reasonableness that is appropriate for approval.
16. As to the reasonableness of the Proposed Settlement in relation to the Group Members who have chosen not to register (and so will not participate in the distribution of the Settlement Sum), I am cognisant of the fact that the Deed makes no provision for a payment to be made to them and that their claims against the respondents will be extinguished. I am nonetheless satisfied that the Proposed Settlement is fair and reasonable in that they have been provided with at least two notices of their right to object and/or opt out and that they have been informed of the consequences of exercising (or choosing not to exercise) those options.

Costs issues

17. The Court is presently aware of a number of circumstances that are relevant to determining the rights and liabilities as between (at least) Mr Schoneweiss and Adero Law. They include the circumstance that a costs agreement entered into by Mr Schoneweiss is void and the circumstance that Adero Law has not complied with certain obligations under the Legal Profession Act 2006 (ACT). Those matters may in due course affect the quantification of the Assessed Adero Costs. The necessity to consider the various issues affecting the legal relationship between Adero Law and Mr Schoneweiss has contributed to the delay in making orders for the approval of the Proposed Settlement. For present purposes, I have concluded that those issues do not warrant the Court withholding its approval of the terms of settlement contained in the Deed, but they do require further evidence and consideration.
18. The Deed itself appropriately provides that the costs amount is to be determined by the Court. The Court has made orders with a view to requiring Adero Law to make additional disclosures before any further steps toward the assessment of costs are taken. Costs are to be assessed within timeframes specified in the Deed so that payments by the respondents can then be made in accordance with its terms.
19. The structure of the Deed is such that the costs will be deducted from the total Settlement Sum before it is then shared between those participating in it in accordance with the terms of the Deed. Accordingly, any liability to pay the Assessed Adero Costs will be shared rateably among those receiving payments. No share of the costs liability will be borne by those who are not otherwise entitled to a payment in accordance with the Deed. That is an appropriate structure and will ensure that there is parity as between the eligible Registered Group Members and the Additional Registered Group Members.

Confidentiality

20. The Court will not approve the whole of the confidentiality clause contained in clause 15 of the Deed. The parties were invited to furnish the Court with minutes of order for the suppression of more limited information. I am satisfied that there should be suppression orders in the terms sought and will not approve any part of the Deed that imposes an obligation of confidentiality in respect of material that is not subject to those suppression orders.

Associate:

Dated: 6 October 2022