Class Action Centre

CARI research “Settlement Distribution Schemes”

June 26, 2017


Click here to watch the Panel discussion “Achieving Finality to Class Action Litigation”

Full transcript:

[00:00:08] All right. So settlement distribution is a key part of class actions practice and the paper that Michael and I have written together was born out of a realisation that little attention is paid to settlement distribution either in academic examination or in terms of the depth of case law that is developed when the topic is the subject of multiple adversarial contests between parties. This is surprising - Firstly because we know that the vast majority of class actions settle and therefore have to be distributed. Those settlements need to be distributed and secondly because settlement distribution to a greater or lesser extent is really the second half of class actions but it's rarely discussed and one of the things that I think that I hope to develop is in a shareholder class action for example it's not really the second half it's the last fifth and then a mass tort claim that's more like the second half because of the time and complexity that's involved in distributing that type of a settlement. So Michael and I have set out to look a bit more closely at some of the issues and settlement distribution schemes so settlement distribution schemes are the mechanisms by which settlement money in a class action is divided up and distributed to group members. In the paper that's in your materials we've surveyed different types of settlement distribution schemes and the variation mostly arises out of the types of cases that they are that they relate to. We've identified the features in common in those schemes the differences the trade-offs that are made and ventured some conclusions about these things. Today I'm going to describe the landscape and use a few examples and Michael's going to talk about some of our observations and conclusions.

[00:02:02] So settlement distribution schemes form part of what needs to be approved at the settlement approval hearing under Section 33V of the Federal Court of Australia Act and its equivalents the same criteria apply to the terms of the settlement distribution scheme as applied to the headline settlement. That is that it is fairly reflects the claims made by group members and it is fair and reasonable as amongst group members and I think that latter criterion really has a lot of life in the context of settlement distribution schemes and in making that assessment about the fairness and reasonableness of a settlement distribution scheme the Court really does need to get involved in looking at the structure and the workings of the settlement distribution scheme in the approval process.

[00:02:56] The first type of scheme that I'll talk about is a shareholder settlement distribution scheme. The first these schemes are relatively uniform. The first step is an appointment of an administrator. That's usually the law firm who has conducted the class action. Their role changes at that point and they no longer act for individual group members but for the group as a whole. Occasionally a different model will be warranted or a different administrator will be appointed. But rarely is the changeover cost and loss of knowledge justified at least in the context of a shareholder action. The next step will be to collect claimant data and that is administrative data identification data and perhaps most importantly share trading data. In a closed class, this will usually have been done before the settlement is struck and in an open class that happens once the settlement has gotten underway. The next possible step which occurs in some settlement distributions is that group members are given an opportunity to check the data that's being ascribed or the trade data that is being ascribed to them. The next step which always happens is that a loss assessment formula is applied to that trade data. A loss assessment formula will usually focus on inflation as a measure of loss or the main measure of loss but occasionally other measures will be taken into account and there might be a balancing of different types of measures depending on what the issues are in that particular case that the scheme arises out of it. If expert work has already been done in the course of the trial preparation or liability phase of the case or if expert work has been done for mediation that work will usually form the basis for the loss assessment formula. If there hasn't been expert work done there will usually be a choice that has to be made by the proponents of the scheme about how much and whether to invest in expert work to inform the loss assessment formula and that will you know one of the most significant criteria to take into account there is what the cost is and how much you've got to distribute. So where there is plenty of money to distribute it may be justified to do some of that expert work but where isn't you don't want to spend all your money on a piece of expert work only to have nothing left to hand out under the formula that it creates. So the next step which is common to every form of settlement distribution scheme not just a shareholder scheme is that there is a review mechanism and a review period. Group members are advised of their assessment and have the opportunity to challenge it or request a recalculation. Once that review period has passed in a shareholder action there's a global distribution. And that's where the money is pushed out in what is hopefully a single distribution. There's always a bunch of housekeeping and mopping up tasks that follow from that such as unpresented cheques and so on and there is also a gathering up and reporting back to the Court. Most settlement distribution schemes will have a mechanism by which to deal with if I can call it the scraps so there will almost always be cents or dollars that are left over that aren't able to be distributed and that sometimes results in a donation to a charity or remitting the leftovers to the respondent.

[00:06:30] An example of a shareholder distribution is the distribution in the Nufarm shareholder class action. That was a scheme that involved a lost centred a loss assessment formula based on inflation per share which varied across the period according to the risks at each phase during the claim period there was around 4000 members that participated in the settlement. It was an open class but a percentage of that class was signed up to a funding agreement. The length of the first phase that is from filing the case until the 33V decision was one year and 11 months and the settlement distribution was six months. I think perhaps the most noteworthy feature of this settlement distribution of shareholder settlement distributions generally as they are based on a formula. It's done electronically or computed and it requires a single piece or type of data which is share trading data to calculate. So I think I hope that begins to paint the picture of why a shareholder settlement distribution can be completed within six months and it is relatively cheap. The unit cost of distributing that particular settlement was about. So in calculating unit costs when I talk about that today it includes people who made claims but didn't get paid because there's an expense in dealing with rejecting claims as well as paying claims. So the next type of scheme that I want to talk about is a cartel settlement distribution scheme. These there's only been four such settlements in Australia. And those schemes have a number of features in common. So firstly, like in shareholder class actions an administrator is appointed.

[00:08:24] Secondly the participants in the settlement are identified and verified. Third is the submission of proofs of claims. So how claimants prove that they participated in transactions that were affected by the cartel behaviour. This could involve a very manual and time consuming process both for group members and the scheme administrator of collecting up evidence of each of the transactions that were affected by the alleged cartel behaviour. Or it might involve a or in one case it involved a data set that had been discovered from the respondents in the course of the litigation which was a massive data set of every single transaction that the company had entered into that was potentially affected by the cartel behaviour on a customer by customer basis so that particular scheme which I'll come to in a minute didn't involve that kind of looking through individually invoices of transactions. Fourth there will be some form of assessment of claims according to a formula which will include a scaling device so that the claims made fit the global settlement sum. Again, this formula will usually be based on expert work but if there hasn't been expert work done previously or in the liability phase of the case someone will have to make a decision about whether expert work is required to create an overcharge formula or whether that's something that could be based on for example settlements that have occurred in relation to the same cartel conduct but in other countries or something like that. And again, that's a trade-off as to how much you want to spend and what you've got to distribute at that stage. Fifth there will be a review mechanism and a review period. And finally, a global distribution.

[00:10:17] An example of a cartel settlement distribution scheme is the one that occurred in the Amcor and Visy Class Action that involved approximately fifteen hundred claimants. The first phase of the case took five years. The settlement distribution took six months. As I flagged a moment ago we used a respondent data set for every single transaction so instead of group members having to submit a proof of claim we just sent out what we thought that they had spent and they had to check and verify it. And secondly in that case we in the trial phase or the liability phase of the case we'd actually prepared a loss assessment for every single group member because we were seeking an order for aggregate losses there. So that was work that was able to be used in the second phase to just work out everybody's relative losses according to who put their hand up to participate and to shrink it to fit the settlement. So for those two particular reasons that is the data set and the work that had already been done in the liability phase that was a very efficient settlement distribution as well. Took six months and the unit cost of distributing that settlement was.

[00:11:37] That said dollars doesn't include any allowance for the millions of dollars that was spent on the expert work for trial that ultimately formed the basis of that distribution. The next type of settlement distribution schemes that I want to talk about are mass tort and product liability schemes. Here less than anywhere is there any typical form of mass tort settlement distribution scheme. So whereas shareholder and class action schemes are fairly similar and are driven or at the heart of those schemes is a formula that can be have data put in one end and an answer emerge from that in mass tort settlement distribution schemes or mass tort settlement distribution schemes have to accommodate the greatest differentiation of claims of any of these sorts of settlements and this reflects the various types and breadth of cases that are brought as mass tort or product liability class actions. But most often the type of harm that's experienced is personal injury or property damage harm. So one general or broad framework for a global sum settlement is sorry one broad framework for a mass tort settlement distribution scheme is a global sum settlement with individualised loss assessment that that type of settlement is non-adversarial as in the respondents or defendants settle on sum pay the money and then it is left to an administrator to divvy up fairly between group members. It involves dividing up a fixed pool of money. It includes a simplified or usually includes a simplified threshold assessment of eligibility liability or causation depending on the type of case that it is. And that threshold eligibility determination can be more or less justified and more or less expensive depending on the circumstances of the particular mass tort. So in deciding whether and what kind of threshold determination to have there's a weighing up process of how many claims do you expect to be weeded out by this process. What does that add to the cost of the distribution and what does it add to the time of the distribution. So I think some might say that it is always unfair to pay some undeserving claims because it takes money away from deserving claims. But I think the reality is with settlement distributions you have a fixed pool to distribute. So if you design a very complicated and expensive threshold criteria you will have spent the benefit that you might gain by weeding out some potentially unsuccessful claims at the beginning. So again it's a trade-off or a balancing process. And then the next step is a simplified individual assessment of claims. I'll come back to that in a moment. It will include a scaling device so the claims are assessed and then almost always shrunk but possibly occasionally increased to fit the global sum. There's a review mechanism and a review period and then a global distribution including a distribution to people who are to be reimbursed under statutory or contractual rights. Coming back to the simplified individual assessment concept, I want to pause there and just lay out in very simple steps the difference between an individualised assessment in a shareholder or cartel claim and in say a personal injury claim.

[00:15:23] So in a cut in a shareholder claim you collect the trade data you verify you put it you'll apply a loss assessment formula to it. You deal with appeals and you pay compensation. In a personal injury claim you would have to take instructions from the claimant about their injury or how the tort has affected them. You'd have to request records so those records might include medical records financial records to statutory authorities who have rights to be reimbursed such as Medicare and Centrelink records from private insurers who have a contractual right to be reimbursed and somebody's employment records if they're claiming a loss of a loss of income. Then you have to review the records you might request further records as a result of that first review. You might go and obtain Medico legal reports or assessments you take instructions again based on what you've learned from the records and the assessments you interact with payback agencies to determine what the group member owes to them. Then you assess the claim deal with appeals and pay compensation to the person and the agencies to whom they owe a payback claim obligation. So I hope in very short terms that illustrates the very much or many more steps that are required to be taken in order to assess how mass tort affects somebody who is injured by it.

[00:16:52] A second broad framework for a mass tort settlement distribution is a process settlement. A process settlement is where the respondent or defendant remains involved in the process. So each claim is individually tested and negotiated between the parties. There isn't a fixed sum so it is not a global sum so there is indefinite liability I suppose for the responded to a defendant which is one of the reasons I think these are getting less and less popular. It will also involve a simplified threshold determination about eligibility a simplified individual assessment of claims a review mechanism and payment of claims individually as each one is finalised.

[00:17:40] Some of the variations that occur in relation to mass tort and product liability settlement distributions include a mechanism to make interim distributions in global sum settlements. This is where this this again is where you've either assessed a certain portion of claims or have confidence for one reason or another that you can distribute a portion of people's. You know it might be after threshold determinations are done. For example you could decide to distribute a small portion of the of the global sum. But again this involves a weighing up process because ultimately taking an extra step in the settlement distribution involve costs and it involves a delayed the final distribution. In the Hips Class Action that's settled recently and where that settlement distribution is underway, we're going to have to make interim distributions because that scheme provides for people to participate in the settlement for surgery that's yet to even occur or failures of these implants that are yet to even occur. So there's years to run under that scheme and so to not make a sort of an interim distribution would be most unfair to the people whose claims have been assessed now. But that's something that we will need to do with a lot of acute actuarial input and guidance so we can ensure that the scheme remains sufficient for the claims in the future. Another variation is some of these schemes provide for hardship payments which is an interim payment based on financial hardship and that can occur I guess in recognition of the fact that mass tort settlements take a lot longer to distribute than shareholder settlements and sometimes people who participate in this these sorts of settlements their injuries don't settle for a period of time. So unlike with a shareholder claim where you get the data you assess the claim and you pay it somebody is injury could be ongoing and you've actually got to wait until or at least in a process settlement you can actually wait until the injuries have settled to assess their claims in a global sum settlement. You will have to work out how to deal with things that have not yet settled. Another variation is fast track payments and that's a bit like a low doc loan I suppose that's something that we've built into the Hips settlement Hips Class Action settlement and it's a mechanism where group members who are entitled to participate in a settlement so those who make their way through the first threshold of eligibility can make a decision to accept a fixed sum of compensation which is at the lower end of the scale in order to avoid a slower more detailed and more expensive individualised assessment of their claim. And that's proven as far as we can tell to be quite popular. And that's I think the first time that we've done it so that data has yet to be finalised. Finally, another variation that I haven't spoken much about is a matrix or grid settlement. This is a form of settlement that is utilised a lot in the United States.

[00:20:45] It's rarely utilised in Australia and it's where you've got a grid if you like and certain sums are ascribed to different experiences so it could be a grid that has criteria around age the number of operations that you've had whether you've lost income and those sorts of things and I guess it's just a way to try and ascribe money in short and cheaper ways to certain experiences and to avoid the costs and delay of individual assessment. An example of a process type scheme is the DePuy Knee Implant settlement scheme that's a relatively small scheme in the sense that there are only 400 group members or around that participating in it. It doesn't have a limit on respondent liability and there's some simplification in tariffs for certain types of experiences for non-economic loss damages. That case took two years and nine months in the first half up to settlement approval. And the length of the distribution has been four years five months and continuing. That is an extremely long time relative to the other periods of time that I have talked about. I think it's unacceptably long but there are a couple of things to say about that length of time which includes that like the Hips Class Action provided for claims to be made for claims that arise in the future. So some of those claims arose after the 33V judgement and weren't already crystallised at that time. And there's no time limit on resolving individual claims so people whose injuries haven't settled and who are continuing to undergo surgery and so on can delay resolving their claim as you can do up to a point through the Court process in order to take into account the entirety of their experience. The unit cost of distributing that settlement I don't actually have an average. I've only got a range. The cheapest case to cost.

[00:22:53] Dollars in legal costs to resolve and the most expensive so far.

[00:23:01] So that is slow expensive but most closely tracks the Court process or most closely mimics what would happen to you if you were running an injuries claim through the Court process. That said it lacks the discipline that the Court process because it's interparty. I think that creates further delay because it lacks the discipline that the Court process and deadlines impose. The final mass tort example is a global sum settlement and it's the Kilmore bushfires Class Action settlement. It is a global sum that involves simplified individual assessments of causation and loss by barristers and in some instances loss adjusters. It involved approximately nineteen hundred injuries claims and nine thousand property claims. The first phase of the case took six years and that went ran through a very lengthy trial the distribution phase for personal injuries claims it was just under two years and for property loss claims it was two years and two months. The claims in that case were highly differentiated and very. The Court gave very detailed consideration to the scheme that was put before it in the settlement approval and that's probably the most detailed consideration that I've seen in any judgments of a settlement scheme.

[00:24:32] I think the unit cost of distributing claims in those in the bushfires case overall was on average a bit over dollars and that breaks down into about a claim for property claims and dollars per claim for personal injury claims.

[00:24:52] I guess a conclusion that I want to leave you with about settlement distribution schemes and settlement distributions is that shareholder and cartel class actions are at one end of the continuum in terms of cost complexity and time and mass tort claims are very much at the other end of the continuum I'll hand over to Michael now to talk about some of our conclusions.

[00:25:26] Okay. So you can see that there's been quite a bit of work has gone into trying to ascertain exactly how settlement distribution schemes work. What I'm going to do now is to effectively I guess draw on that experience. The goals of class actions versus judicial statements to then try and work out well what is it that an SDS - Settlement Distribution Scheme - is supposed to achieve and what are the sort of the I guess the guidelines as to how they should operate. So to start with what we what we can get from the case law that we can get from the purpose behind class actions is that there's a real need here to balance precision with efficiency and that is a sort of feel like an overarching concern in this space. The individual compensation is meant to reflect the merits of the individual claim but at the same time the distribution process is meant to be completed in a manner that minimises cost and delay. And as we effectively know from having had to deal with overriding purposes and overarching purposes this idea of precision efficiency sometimes they work together but often they can be in conflict. So what we have in terms of guidance is that we're not here for the sort of the perfect outcome but what we're trying to do is to achieve a reasonable process. And you can see here it's about processing those claims fairly and efficiently.

[00:27:09] Now when we try to work out what that means settlement distribution scheme is I guess in a sort of an interesting animal in the fact that it's a settlement and normally when we think about a settlement the parties can resolve that however they want. They walk away and they know they're done. But here because we're in the class action context your settlement distribution scheme operates in the shadow of the law. OK. But that shadow is not clear.

[00:27:45] It's not like there's been a trial where all of these questions have been resolved although that sometimes happens. But even when there's been a trial you don't have the judgment. You don't have the actual resolution of the factual questions or of the legal questions. So when we start to look for guidance substantive law still plays an important role here. And so when you're looking at how the settlement discussion scheme gets put together there is consideration of the elements of the causes of action that are being brought. Things such as the compensation principle the idea that the aim is to compensate the person for the loss that they have actually suffered. So what we see is law is the yardstick it's the way in which the settlement distribution scheme gets measured.

[00:28:38] So the guidance that we then get is that the settlement distribution scheme needs to be consistent with the applicable law and the pleaded claim but it doesn't have to be as precise as if the claim was actually determined by a Court. So that gives you the guidance. The question is where do you draw the line. Having that those sort of goal posts. And I think what that means is you need to allocate compensation consistent with the harm or loss experienced.

[00:29:14] So the idea is the group member that suffers greater harm or loss gets compensated more than the person who suffered less. And then there's a statement I think it's in one of the Bonsoy judgments where it's pointed out that it's very rare that you can have a class action where you simply take the settlement sum and just divide it by the number of group members. That doesn't happen because those group members have not all suffered the same loss. And you've got to take that into account because that's what the law does. You also need to take account of the prospects of success. And so here weaker claims should recover less than stronger claims. So there needs to be an assessment there as to the strength of the claims. And you can see that takes time and effort. So the idea here is you're treating like with like. But you're also recognising when there are differences now that then I think leads to two interesting questions. How does a settlement distribution scheme deal with legal uncertainty and how does it deal with factual uncertainty. So we don't have a trial that's determined what the applicable law is. Now in some cases precedents will be clear and you'll be able to go on. Well you know of course we don't see how that works. But for those who have been involved in shareholder class actions causation calculation of loss or damages. Well you know you pick up the pleading and there's a whole bunch of different methods or suggestions there.

[00:30:46] So the guidance has been suggested by the courts is that when you look at the assessment methodology what you're asking is whether it's consistent with the case that was to be advanced at trial and supportable as a matter of legal principle. Now that doesn't necessarily narrow what you can then use. It still leaves it quite broad but it does take out of the equation the idea that I want to use some sort of loss assessment approach that was not in issue in that particular case. And if you think about it the reason that would make sense is because you've communicated with group members in terms of opt out notices settlement notices this is what this class action is about. Pleadings are put up on Court Web sites for group members to be able to assess. So there's information out there as to the way in which this class action is going to proceed. Now a recent statement here by Justice Mortimer fairness and reasonableness are moderate standards rather than ones which require absolute certainty or confidence in a particular point of view about legal issues. Now Justice Mortimer was talking about a settlement Section 33V settlement but that statement to me applies just as well to the settlement distribution scheme.

[00:32:06] If the yardstick is fairness and reasonableness we don't have to have exact precision in terms of what the settlement distribution scheme does but we are still trying to make sure that the legal position is arguable and pleaded. Now the ability to apply the law is also going to depend on the available factual information. So if you don't have a lot of facts available because it's early settlement then your ability to make some fine grain determinations in relation to the law may in fact not exist.

[00:32:48] So what I think we see is that there's this unavoidable exercise of judgment as to whether the choice of the available legal requirements favour some group members over others. There needs to be a consideration of that. And you then look to see whether there is a broadly fair division of the fund.

[00:33:08] And I think where we tend to come out is on close calls on questions of detail the courts will not be troubled by that. Where they would be concerned is where if there is a choice to be made about a legal requirement and it has a significant impact can that choice be justified to the Court because the Court should be going well if this is really going to change the outcome that a group member's going to get. Why is that the case. Why is that choice made now that justification might be well because there's going to be cost and life if we try to go down that route and it might be that that's going to be sufficient. But there's also going to be this question of well. Is that going to be a fair outcome and you come back to these sorts of tests about is it worthwhile incurring the greater cost for the precision or is the precision that you're going to achieve going to undermine what you're setting out to do because it doesn't. It uses up funds that would otherwise be distributed to the group members.

[00:34:21] Now the next aspect is factual uncertainty. Now here once again the trial doesn't find the facts so we have some information and the nature of the class action the common issues are the ones that are being developed for trial. And so you would expect that those facts are going to be available depending on the point at which the settlement occurs and that can vary quite considerably. So Rebecca talked about the Amcor/Visy case where there you had an expert economist who had effectively developed a model that could be used for the settlement distribution scheme but you'll also have cases where you're going to settle very close to commencement. So the Leighton Class Action for me is probably the best example because that settled effectively I think about six months after it was commenced. Now in that situation you don't have a lot of time to develop very many much of the evidence at all. You'll have some but you got to work with what you've got but then compare that with say settlements that occur after there's been a full trial. So if you think about Kilmore East or you think about the DuPuy Hips case you've actually had the case go to trial all of the evidence has been gathered and it's been presented there. You're in a much better position to be able to say well we've got the facts that we need at least on the common issues and so that can be utilised or turned into what you're trying to design with the settlement distribution scheme. But when it comes to the individual factual issues you need a mechanism to be able to obtain that from the group members. And the real question here is to what extent do you get it as part of some sort of registration class closure process because often with the shareholder class action you might be able to get most of what you need at that point. Or do you need to build that into the settlement distribution scheme as the steps that need to be undertaken and it's important I think to realise here that if you're starting to ask group members for information you're making the process more onerous for them. And if you make it more onerous then group members may go I'm not going to be bothered I'm not going to participate. And so you don't want to front end that request for information too much because you may actually deter group members from participating. And then lastly there's a question about do you need to verify those facts. Is there some way in which you actually try to test them and in some ways that can be done because you actually have you know the barristers that make conduct the assessment of the personal injury case or it might be as simple as you have the shareholder who has to give the statutory declaration saying yes this is actually you know what I did and I did rely on the share price. Now the next aspect is the individual assessment and this is at the heart of what the settlement distribution scheme does. It tries to determine compensation for individuals having effectively come out of a class action which was designed at trying to determine common questions. And I think Rebecca's sort of already explained this in that the shareholder and the cartels settlement distribution schemes are generally a much simpler and straightforward to operate than the mass torts. But I think it's good to try to explain why that is the case.

[00:38:05] And I think what it comes down to is that the inputs that you need from the group members in relation to a shareholder or a cartel case only really vary in relation to quantity. How many shares did you hold or how many of this particular product did you purchase. There's not a variation in terms of quality. So when you start to look at a personal injury case and you're looking at something like lost earning capacity or pain and suffering it's not just a matter of saying well you know did you suffer pain and suffering there has got to be an examination of the degree.

[00:38:42] And that I think is what makes the mass torts settlement distribution scheme more problematic or more time consuming in relation to individual assessment. Now we touched on the matrix which calls for a picture of Keanu Reeves. And as a question then as to whether a matrix may in fact be a better way to proceed and there's some pros and cons of that to get an example of how they work in the US. The paper on page 23 sets out the matrix from the NFL Concussion Injury Class Action. But what you see with the matrix is generally it's quicker and cheaper and it's more certain because at the time of settlement you are showing to the person well if you fit into this box this is the amount of money that you receive. The problem however is the matrix and he takes account of some but not all relevant factors. And it's less able to take account of individual issues such as the magnitude of the injury. So what do you get with the matrix is it's likely to be less accurate but more consistent. And so there's pros and cons in trying to go down the matrix route. But I think there's no doubt that's something that's going to be promoted more and more in Australia because of the concern by group members about being able to get payouts quickly. And so that I think may be one of the factors that drives consideration of it. The role of the respondent. Are they going to have a role in the settlement distribution scheme or not. Generally, that's the respondent there, they pay their money and they leave. OK. But Rebecca focused on the process settlement distribution scheme which was DePuy Knee. What you see there is it's more costly and it takes longer particularly compare it to Kilmore East which I think is quite you know here's Kilmore East many more people and yet that settlement which attracted you know some complaints about delay took half the time in which to reach completion. So you get this problem of it being costly and it being delayed but it's the adversarial aspect of it does have the approach should be more akin to the Court. And so the precision in fact might be greater under that sort of approach. But what you're seeing here is the trade-offs that need to be made in how the settlement distribution scheme gets designed. So I want to turn to is then review and oversight. So as Rebecca mentioned the settlement distribution scheme it's approved as part of the Section 33V settlement approval hearing. What's important to note here is that so the Court gets to look at the distribution scheme and raise questions raise concerns. But assume it approves it. OK. Based on what its seen in terms of providing review and oversight what the Court is then able to do is either maintain jurisdiction over the settlement distribution scheme generally or and maybe provide for administrator parties group members to be able to come and seek directions and orders. Now I've got an example here taken from the orders for Kilmore East. Now my argument would be that I think this is probably the optimal way to do it. But I'm happy to be shouted down.

[00:42:44] The advantage of these orders is that it allows the plaintiff the group members and the scheme administrator all of them are able to apply if there's any issues that arise in relation to the administration of the scheme. Some orders that are made by the courts will only make that order in relation to the administrator. So what that means is the group members who might have a problem don't are not included in the order and then aren't able to raise their concerns.

[00:43:15] The other thing that I think's important is Order 10 where these orders are structured so that the actual piece of litigation is not dismissed until after the settlement distribution scheme is complete.

[00:43:29] So the Court very clearly retains jurisdiction over the matter. There are some orders I've seen where the Court will actually dismiss the proceedings at the point where the orders are made but then they'll have orders where they allow the administrator to be able to apply. And I think that raises a concern then as to what effect that has on the scope of the Court's orders and what they are able to do. And just as an example if you dismiss the proceedings could that create problems for a Court that then wanted to go back and rely on Section 33ZF which is couched in terms of how it applies to in any proceeding conducted under this part. Is there still a proceeding being conducted if the Court is made or is dismissing those proceedings.

[00:44:26] In terms of review and oversight the Court appoints an administrator. Interestingly they almost always use Section 33ZF to do this. What we know is that the administrators required to distribute the funds in accordance with the SDS. OK. But the precise responsibilities of the administrator and the source of those responsibilities is still a developing area. And in the paper there's a number of quotations from various judges about how they see that working. And you'll also see that there's some situations where administrators have tried to approach the court about various things which I will come to in a moment. The other review mechanism which Rebecca summarised in relation to each of the SDS schemes was that there's always a mechanism for a group member to correct errors and potentially to seek a review of decisions. And the thing about this is what that entails varies quite considerably.

[00:45:31] And so in the paper I compare what usually happens in relation to a shareholder with what happened in relation to the economic loss and property losses in Kilmore East and what you'll see is in the Kilmore East example far more extensive ability for the group member there to raise concerns.

[00:45:50] They even get to provide contentions. So in terms of the Court oversight, it seems to be agreed that what the Court is doing is asking are these procedures being correctly followed. So here's the SDS. You're the administrator. Are you effectively following what's in that SDS but there's a number of questions that have arisen. Can a Court provide judicial advice as to the construction of the SDS. Sounds a bit like a trustee seeking judicial advice. We have a decision in which the Court said yes it can do that. Can a Court review an individual assessment. In other words come along and basically say well you've been through the SDS but I'm going to replace or change that assessment. The Court has said no. Can the Court amend the SDS?

[00:46:45] The Court said yes and it has done so. So I think in the bushfire class actions there was a change that was made to allow solicitors to perform some of the assessment rather than just barristers. And then can the Court approve costs. Yes it can. And we've seen the innovation in Victoria with the use of special referees to actually do that sort of cost assessment. Now what's possible in relation to review I would suggest probably depends on the scope of Sections 33 V2 and 33ZF which Justice Lee has helpfully touched on already this morning so this afternoon. The orders that are made as part of the settlement approval. What does that say? And then what are the terms of the actual settlement distribution scheme. Now I've posed a lot of questions I haven't answered them. So at that point I'd turn it over for questions and comments.

[00:47:50] Do we have much time? Let's say five minutes for questions.

[00:48:08] Can you explain a little bit more about those settlement distribution schemes in which there is active Court supervision. It seems to me talked about as a continuum of schemes from those where. the scheme is approved by the Court but basically it’s up to the parties with leave to come back where there was more supervision by the Court - what's the difference in terms of the Court.

[00:48:33] So while I'll have you can guess. Rebecca tell me I've got it wrong. I actually think it's something that's just changed over time. The impression that I get is that there wasn't a lot of Court overview. Well there wasn't an overview that was overt and picked up by the media. But you then have a class action like bushfires where there are so many people that are affected. And it's the Court effectively says well this is something that we think we should be spending more time you know looking at following what's going on. And that to me seems to be becoming the norm. So when you look at the Federal Courts Practice Note they have now introduced a whole bunch of procedures around doing just that. And I suspect what they've done is they've seen what happened with the bushfires in Victoria and gone that's that that that is in keeping with what the role of the Court should be. We're going to pick that up.

[00:49:39] And another question just quickly. In all of these settlement distribution schemes - is it always just lawyers that administer the scheme and carry out the work or are there other professionals and other people used as well?

[00:49:39] It's always lawyers that are the administrator but in a number of schemes, other professionals take roles. So, for example, the Kilmore bushfires settlement, there are property loss adjusters who go out and assess claims and have some capacity to determine this. There is a role for surgeons in determining certain disputes about. I can't think of another example but there is scope in property or business interruptions claims for forensic accountants to take part of the role so it depends on the type of case. In the Amcor/Visy Class Action, while the lawyers were the administrators the expert economist actually did the dividing up - it was his model that was used. 


Please share this post