Toner v CuDeco Limited (Receivers and Managers Appointed) (In Liquidation)

This case arose from a shareholder class action about CuDeco Ltd and its Rocklands mine project in north-west Queensland. CuDeco had operated a mining and mineral processing business and later went into liquidation. The broader proceeding continued against other respondents, but this judgment focused on one part of the case only: a proposed settlement between the applicant, Leo Toner, and KPMG.

KPMG had audited CuDeco’s financial reports for the 2016 and 2017 financial years. The applicant alleged that KPMG’s audit opinions conveyed that CuDeco’s financial reports gave a true and fair view, complied with accounting standards, and were based on reasonable grounds and reasonable skill and care. The applicant said those opinions and related representations were misleading or false because the financial reports allegedly did not in fact comply with accounting standards or present a true and fair view. It was also alleged that these matters caused or materially contributed to CuDeco shares trading at inflated prices, causing loss to shareholders who bought during the relevant period.

The proceeding had been on foot since April 2022. It had already involved amended pleadings, defences, discovery disputes, lay evidence, expert evidence and multiple mediations. On 30 September 2025, the applicant and KPMG exchanged an amended settlement deed. The Court then had to decide whether to approve that settlement and, separately, whether to approve the proposed way the settlement money would be handled.

Bennett J identified two related but distinct questions. First, was the proposed settlement with KPMG fair and reasonable and in the interests of the group members who would be bound by it? Secondly, was the proposed Settlement Distribution Scheme fair and reasonable, including the proposed deductions for legal costs, funding commission and other expenses?

That distinction mattered because this was only a partial settlement. The claims against KPMG were being resolved, but the broader proceeding against other respondents was continuing. That meant the Court had to think carefully about whether money should be distributed now, whether deductions should be allowed now, and how to protect group members while the rest of the case remained unresolved.

The Court also had to consider procedural fairness. Group members had been given notice of the proposed settlement and options to register, do nothing, or object. The Court considered whether the registration and administration process was adequate and whether there had been any substantive objections. Bennett J was satisfied on the evidence that there had been no substantive objections to the proposed settlement.

The judgment sets out the established principles for settlement approval under section 33V of the Federal Court of Australia Act 1976 (Cth). The Court’s fundamental task is to determine whether the settlement is fair and reasonable and in the interests of the group members who will be bound by it, including as between group members themselves.

Bennett J adopted the usual protective approach taken in representative proceedings. By the time a settlement approval application is heard, the parties before the Court will usually both want the deal approved. The Court therefore does not simply accept the parties’ agreement at face value. It must be alert to the possibility that the interests of the applicant, lawyers, funder and different categories of group members may not fully align.

The Court also emphasised that its role is not to decide whether the settlement is the best imaginable outcome. The question is whether the proposed settlement falls within the range of reasonable outcomes. That same independent scrutiny applies to the proposed deductions and distribution arrangements. The terms of a funding agreement are relevant, but they do not govern the result. The Court must reach its own view about what is appropriate.

Bennett J said the claims against KPMG were not novel, but they did involve questions of fact and law of considerable complexity. The Court accepted that a reasonable degree of legal and evidentiary complexity was likely to arise from proving whether the KPMG audits were not the product of reasonable skill and care, how the relevant audit standards applied, what had to be proved under section 1041E(1) of the Corporations Act 2001 (Cth) and related provisions, and what the applicant had to establish on causation and loss.

The Court also noted that complex questions of quantum arose. Bennett J had the benefit of confidential material analysing the total value of the claims, the litigation risks, costs and potential outcomes. Because the settled claims overlapped with the ongoing claims, the Court was careful not to reveal confidential merits material in public reasons. Even so, the judge made clear that the risks and uncertainties of the litigation had been carefully analysed.

On that basis, Bennett J said there was no difficulty concluding that the settlement with KPMG was fair and reasonable. The Court therefore approved the settlement itself following the December 2025 hearing.

The more difficult issue was the Settlement Distribution Scheme. At the first hearing, Bennett J considered that there were deficiencies in the material that made it impossible to rule on the fairness and reasonableness of the proposed scheme. Further evidence and submissions were therefore required.

The concern centred on deductions from the settlement fund. Under clause 7.2 of the proposed scheme, deductions were to be made in order of priority for the funder’s commission and total legal costs, the applicant’s own costs and expenses, and the administrator’s costs of running the distribution scheme if a distribution actually occurred. The Court stressed that while the funding agreement and the parties’ positions were relevant, they did not control the outcome.

A major complication was that this was a partial settlement only. One respondent had settled, but the balance of the proceeding remained on foot. Bennett J described the application as involving an element of novelty in that respect, although the Court accepted there was no barrier in principle to making a distribution from a partial settlement. The real question remained overall fairness and reasonableness.

The Court noted that in a partial settlement, if costs or commissions are reimbursed before the whole case is over, those payments may need to be properly accounted for in the final analysis. The Court also noted that there was no clear delineation between costs incurred in relation to KPMG and costs incurred in relation to the remaining respondents, because of the structure of the case and the commonality of issues. That was not surprising, but it made the fairness assessment more delicate.

The result was limited approval. Bennett J approved the Settlement Distribution Scheme only so far as it provided for reimbursement of the funder’s costs and remuneration or commission. The balance of the KPMG settlement sum was to be retained in a holding account until the overall completion of the litigation. In other words, the Court approved the compromise with KPMG, but did not allow the rest of the settlement money to be distributed out immediately while the broader case was still unresolved.

Most businesses will never be involved in a shareholder class action of this scale, but the decision still gives useful guidance for any business involved in multi-party litigation, funded proceedings or settlements that need court approval.

First, settlement approval is evidence-heavy. It is not enough to show that the settling parties have reached a commercial compromise. If the Court’s approval is required, parties should expect to justify the settlement amount, the proposed deductions, the administration process and the timing of any payments.

Secondly, partial settlements create special problems. If one defendant settles while claims continue against others, it may be difficult to separate costs cleanly or to know whether an interim distribution is fair. That is especially true where the issues overlap across respondents. Businesses and advisers should think carefully about whether a holding account is more realistic than an immediate distribution.

Thirdly, funding arrangements do not dictate the result. Even if a funding agreement provides for commission or reimbursement, the Court will still decide for itself what is fair and reasonable. Businesses using funded litigation should expect scrutiny of both the amount and timing of those payments.

Finally, this case shows that a court may approve a settlement but still narrow the proposed payment structure. That can affect cash flow, timing and settlement strategy. If your business is negotiating a partial resolution in a larger dispute, the design of the settlement mechanics can be just as important as the headline settlement figure.

The proceeding was commenced in April 2022. The settlement approval application was brought by interlocutory application dated 13 October 2025. The first approval hearing took place on 18 December 2025. Bennett J approved the settlement with KPMG on 22 December 2025, but required further evidence and submissions on the Settlement Distribution Scheme, which were filed on 30 January 2026. The published reasons and orders are dated 10 March 2026.

The orders also dealt with intervention by the litigation funder, Equite Capital No. 4 Pte Ltd, and confidentiality over certain material concerning settlement terms, merits analysis, costs and strategic considerations.

This page summarises the Federal Court’s public reasons and orders in Toner v CuDeco Limited (Receivers and Managers Appointed) (In Liquidation) [2026] FCA 239, delivered by Bennett J on 10 March 2026. The judgment records that the settlement with KPMG was approved, and that the Settlement Distribution Scheme was approved only to the extent of reimbursement of the funder’s costs and remuneration or commission, with the balance of the KPMG settlement sum to be retained in a holding account until the overall completion of the litigation.

Some underlying material considered by the Court was confidential, including parts of submissions, affidavits, settlement information, merits analysis and costs material. The public reasons still provide a clear basis for explaining the Court’s approach and the practical outcome.