Court of Appeal decides Great Southern Settlement Deed precludes Group Member from raising dispute as to debt

  • Author : Bridget Slocum - 17-03-2017

In a recent case note ( I summarised the High Court

In a recent case note ( I summarised the High Court’s decision on the Timbercorp Anshun preliminary question.  In that update, I noted that the High Court’s observation that a representative plaintiff was not a privy of group members might impact the future conduct of group proceedings in Australia.  In particular, settlements of group proceedings.

On Friday 17 March 2017, the Supreme Court of Victoria Court of Appeal handed down its judgment in Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51 (Pekell).  In their joint judgment, their Honours Justice Santamaria, Ferguson and McLeish JJA clarified the enforceability of group proceeding settlement deeds. 

The deed of settlement in question in the Great Southern group proceeding contained releases in favour of inter alia Bendigo Bank, together with acknowledgements on behalf of group members regarding the loan agreements.  The settlement deed was approved by orders of the Supreme Court.  By paragraph 2 of those orders, the Court gave the representative plaintiffs in the Great Southern group proceeding the group members’ authority to enter and give effect to the settlement deed and the transactions contemplated therein.

The Pekell proceeding was an appeal from the decision of Associate Justice Randall to set aside Bendigo Bank’s statutory demand.  Randall AsJ had set aside the statutory demand on the basis that a dispute arose inter alia as to whether the releases and acknowledgements in the settlement deed executed by the representative plaintiffs was binding on Pekell Delaire Holdings.

The Court of Appeal allowed Bendigo Bank’s appeal.

Pekell Delaire Holdings maintained that Randall AssJ had rightly set aside the statutory demand because:

·       the Court had been asked by Bendigo Bank to determine a difficult question of law in relation to the enforceability of the settlement deed, which in itself supported the Associate Judge’s decision that a dispute as to the debt existed;

·       the order approving the deed had to be read down so that it applied only to the settlement of common issues in the group proceeding, in accordance with the High Court’s observations as to privies in Timbercorp; and/or

·       the bank had not fulfilled its onus to prove that Pekell Delaire Holdings was a group member, and therefore bound by the settlement deed.[1]

Existence of Dispute

The Court of Appeal decided that the question before them was whether Pekell Delaire Holdings was precluded from advancing its disputes as to the debt owed, by virtue of the releases in the deed of settlement.  That question simply was a point of law which could properly be answered in determining the application under s 459G of the Corporations Act 2001 (Cth).

Effect and Scope of Court Order approving Settlement

The Court of Appeal determined that:

·       s 33ZF of the Supreme Court Act 1986 enabled a Court approving a proposed settlement of a group proceeding to make orders binding the plaintiff, group members and other parties to a settlement or authorising a representative plaintiff to enter and give effect to a settlement deed on behalf of group members.

·       an order so made supplies the privity which the High Court had observed in Timbercorp was otherwise absent in respect of the individual claims of group members;

·       this enabled the settlement of a group proceeding on whatever terms the parties have agreed and the Court has approved; and

·       each of the group members was on notice of the application to approve the settlement deed and had the opportunity to opt out of the group proceeding before judgment.

The Court of Appeal noted as a matter of policy that if group members were not bound by settlement deeds approved by the Court it would impose “a remarkable constraint on those negotiating settlements of group proceedings” (at [57]).

The Bendigo Bank sought declaratory relief in the proceeding in relation to the binding nature of the deed of settlement against all group members.  The Court of Appeal declined to grant this relief because:

·       Bendigo Bank failed to seek the relief in the originating motion or before the Associate Judge;

·       Pekell Delaire Holdings did not represent all group members; and

·       group members were not on notice of the application for declaratory relief.

[1] This case note does not consider this issue which raises issues particular to Pekell Delaire.

About the Author

Bridget Slocum

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