This was a class action on behalf of owners of units in a 36-storey residential building known as ‘Opal Tower’, located in Sydney Olympic Park, in connection with the building’s construction and partial structural failure.
In this judgment, Black J delivered his reasons for approving a settlement of the proceeding in the amount of (approximately) $50 million. His Honour was satisfied that the settlement was fair and reasonable to class members as a whole, including because it represented a significant percentage of the “best case” outcome for the plaintiffs and class members in the proceeding, notwithstanding significant risks. His Honour was also satisfied that the settlement was fair and reasonable between class members, including because the method for distributing the settlement sum under the Settlement Distribution Scheme (SDS) reflected the manner in which the plaintiffs’ case was to be put if the trial had proceeded.
His Honour also found that the following deductions from the settlement sum sought by the plaintiff were fair and reasonable:
However, his Honour was not satisfied that the proposed deductions from the settlement sum for the funder’s commission ($13.1 million) and the costs of ‘after the event’ insurance (ATE insurance) it obtained ($5.1 million) were fair and reasonable. The reasons why his Honour did not approve those deductions included the following:
In light of the above, his Honour found that the funder was not entitled to recover its ATE insurance costs on top of its funding commission. His Honour said that he would allow no more than a deduction to the funder equating to a multiple of 2.6X the project costs, being the commission rate disclosed to class members in their funding agreements. However, a 2.6X multiplier would have resulted in the funder receiving 29.56% of the gross settlement sum, which his Honour said was “not justified by any evidence that that would be an objectively reasonable rate of return on [the funder’s] investment” (at [86]).
Ultimately, his Honour agreed with the contradictor that a fair and reasonable settlement would be achieved if the total deduction for the funder’s commission and ATE insurance costs was 25% of the gross settlement sum. In so finding, his Honour observed that no question arose as to the Court’s power to override the parties’ contractual entitlements in the course of approving the settlement, because (as set out above) the funding agreements expressly provided that the funder’s commission was not to exceed any amount that the Court determined to be reasonable in all the circumstances.
Supreme Court of New South Wales, Black J,
28 November 2022
Plaintiffs’ Solicitors: Corrs Chambers Westgarth
Second Defendant’s Solicitors: MinterEllison
Third Defendant’s Solicitors: DLA Piper
Plaintiffs’ Funder’s Solicitors: M2M Law
Plaintiffs’ Funder: Augusta Pool 1 UK Ltd
Austlii Link: Available here
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