Victorian Registry, Federal Court of Australia (VID406/2014).
The Newcrest class action was commenced by Slater and Gordon in the Federal Court of Australia on 21 July 2014 on behalf of Earglow Pty Limited (the Representative).
The Representative alleged that:
(a) Between 13 August 2012 and 6 June 2013 (the Class Period), Newcrest engaged in misleading or deceptive conduct and breached its continuous disclosure obligations in relation to:
- its forecasted gold production for the financial year ending 30 June 2014 through to the financial year ending 30 June 2017;
- the recoverable value of certain of its gold mine assets; and
- the payment of a final dividend in respect of its securities for the financial year ending 30 June 2013;
(b) Newcrest’s conduct caused its securities to trade on the ASX at artificially inflated prices; and
(c) Persons who acquired Newcrest securities during the Class Period suffered loss and damage as a result.
The Representative claimed damages and other remedies for all group members in the proceeding.
Comprehensive Legal Funding LLC (CLF) provided litigation funding to the Representative and the majority of Represented Group Members (“RGMs”). Under this arrangement, CLF:
- indemnified the Representative against any adverse costs orders;
- posted $4,750,000 in bank guarantees to the Federal Court as security against such an order; and
- paid legal costs incurred in prosecuting the proceeding, including the cost of solicitors, barristers, consultants and independent experts.
By entering into litigation funding agreements with CLF the Representative and the majority of Represented Group Members (“Funded RGMs”) agreed:
- to reimburse CLF for the legal costs that it paid during the proceeding; and
- to pay CLF a percentage of any entitlement that they would receive (net of legal costs).
On 22 February 2016, the parties notified the Court that they had agreed on terms for a proposed settlement and executed a Settlement Deed.
The proposed settlement was approved, with Newcrest paying:
- a Settlement Sum of $36 million, inclusive of interest and legal costs; and
- interest accrued on the account in which the Settlement Sum is held for a period of up to 90 days (less any account fees and taxes at the corporate tax rate of 30%).
RGMs eligible to receive a distribution from the Settlement Sum were persons who:
- met the definition of “Group Members” in the Second Further Amended Statement of Claim;
- validly registered their participation in the proceeding (for the purposes of the Court’s orders dated 29 July 2015, as amended by the orders dated 12 October 2015); and
- did not file an opt-out notice.
Under the Settlement Scheme:
- Court-approved legal costs (including the Applicant’s own legal costs and other reasonable costs and expenses) were deducted from the Settlement Sum prior to individual RGM entitlements being calculated. The effect of this was that court-approved legal costs were shared on a pro rata basis by all RGMs, irrespective of whether they executed a legal costs agreement with Slater and Gordon;
- The funding commission for all Funded RGMs was deducted from their individual entitlements and paid to CLF.
- All RGMs that did not enter a litigation funding agreement with CLF (“Non Funded RGMs”) were subject to a “funding equalisation mechanism’. The amount of funding commission which would have been payable to CLF by each Non-Funded RGM had that RGM entered into a funding agreement was calculated and deducted from the individual entitlement of each Non Funded RGM. These amounts were redistributed to all RGMs, including Non-Funded RGMs, on a pro-rata basis; and
- Court-approved settlement administration costs were payable first from any interest earned on the Settlement Sum, and then second from the Settlement Sum prior to final distribution.
1. Settlement with ASIC (18 June 2014).
2. Settlement Approval (10 April 2015).
3. Settlement Approval (28 November 2016).