Judge finds group members interests not advanced “one iota” in Oculus class action

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This was a class action against accounting and tax advisory service Oculus Accounting Pty Ltd (Oculus). The claim alleged that Oculus had provided the applicants and class members with investment or financial advice in relation to subscribing to shares in besieged internet music service Guvera.

As the proceeding progressed the applicants’ legal representatives realised the claim was unviable and not worth pursuing due to the significant costs that it would entail and the lack of any prospects of recovering any judgment from Oculus or its insurers.

In an earlier decision, Derrington J refused to grant an unopposed application to discontinue and settle the proceeding (Francis (Trustee) v Oculus Accounting Pty Ltd (No 2) [2021] FCA 1275). His Honour refused the application because: (i) the benefits the lead applicants might receive from the settlement (if any) were not satisfactorily disclosed; and (ii) unreasonable restraints were sought to be imposed upon the applicants’ lawyers to prevent them from assisting other litigants in the prosecution of subsequent claims against Oculus. His Honour held that the restraints were unfair, unreasonable and adverse to the interests of class members because any class member bringing subsequent individual proceedings against Oculus would have to ‘start afresh’ and substantially lose all of the benefit of the conduct of the class action to date.

In this decision, his Honour approved the settlement and discontinuance of the proceeding, on the basis that the amended materials before the Court fully disclosed the terms of the settlement and removed the unreasonable restraints against the applicants’ lawyers. His Honour also took the opportunity to reflect in obiter on the inappropriateness of the proceeding, stating (at [11]) that “I have doubts that the action should ever have been commenced”. Aside from issues of poor preparation and presentation, his Honour expressed doubt that any real common questions existed, and said that it was not apparent that the applicants’ legal representatives had sufficient knowledge or understanding of the class action procedures to enable them to adequately advance the action. His Honour concluded (at [11]):

The result of the improvident venture appears to have been no more than the transfer of approximately $500,000 from Oculus to several legal practitioners and others participating in the class action industry. That is especially poignant in the context of the lead applicants’ claim being only $100,000. The interests of the class members were not advanced one iota. Indeed, in some respects it is likely that they were damaged by the process. Overall, it is an act of mercy to all concerned that the proceedings be terminated.

Francis (Trustee) v Oculus Accounting Pty Ltd (No 3) [2022] FCA 363

Federal Court of Australia, Derrington J,
8 April 2022

Applicants’ Solicitors: Bounty Law
Respondent’s Solicitors: Stacks Law Firm
Applicants’ Funder: N/A

Austlii Link: Available here

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