Court makes common fund order in Takata airbags action

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This decision concerned an application for settlement approval under s 173 of the Civil Procedure Act 2005 (NSW) (CPA) in respect of six representative proceedings brought against car manufacturers who had installed Takata airbags. The proceedings were brought against the distributors of Toyota, Subaru, Honda, BMW, Nissan and Mazda motor vehicles in Australia. A seventh proceeding, brought against Volkswagen (Volkswagen Proceeding) did not form part of the settlement and is currently awaiting an appeal judgment following the plaintiff’s unsuccessful claim at first instance.

Under the terms of the settlement, the defendants would pay a combined sum of $52 million, equating to approximately $1,558 per vehicle when divided amongst the 33,400 participating class members. Following the proposed deductions of $16 million in legal costs, $13 million in funder’s commission and $2.5 million for administration costs, the net payment to class members was estimated to be approximately $600.

Reasonableness of Settlement

After finding that none of the very limited number of objections provided a basis upon which the settlement should be rejected, Rees J turned to the consideration of the overall reasonableness of the settlement, both in respect of reasonableness as between the parties and in light of what class members would receive “in hand” (at [19]).

In discussing the reasonableness of the proposed compromise as between the parties, her Honour noted the significant risks in respect of both liability and quantum faced by the plaintiffs which had been realised (at least at first instance) in the unsuccessful Volkswagen Proceeding (see [22]-[31]).

As to the proposed deductions from the global settlement sum (and the resulting $600 in hand amount for class members) her Honour first turned to the plaintiffs’ claim for legal costs which were supported by evidence from an independent costs’ expert, Ian Ramsey-Stewart (who had been appointed by the funder to prepare ongoing reports on the reasonableness of costs throughout the matter) together with a further report prepared by an independent costs’ assessor, Kerrie-Ann Rosati. While her Honour largely approved the overall costs sought by the plaintiffs, her Honour excluded one-seventh of the total common costs to reflect costs which had been incurred in respect of the Volkswagen Proceeding (but had been billed collectively as costs for the benefit of all proceedings) (see [45]-[46]).

In finding that the proposed funding commission of 25% was reasonable, her Honour had regard to evidence from the plaintiffs’ solicitors regarding the anticipated risk of the proceedings as well as evidence from Mr Greg Houston regarding the average and median commission rates over 58 previous court decisions (see [56]). Her Honour further noted that the commission was reasonable in light of the fact that the funder was set to “bear the gap” between the actual costs incurred and those recovered (including in respect of the disallowed proportion of costs of the Volkswagen Proceeding).

Finally, her Honour found that the $2.5 million costs estimated to be incurred by the administrator, Epiq, were reasonable and who were “likely to be able to do [the administration] more cheaply than the plaintiffs’ solicitors” (at [59]).

Power to make common fund order

The issue of whether the funder could recover its commission from the settlement sum, payable by way of a deduction from the amounts payable to class members regardless of whether they have entered into a funding agreement, was dealt with succinctly by her Honour. At [51] she confirmed that following Federal Court authorities, she was satisfied that the Court did have the power to make a common fund order at settlement of a proceeding under s 173(2) of the CPA:

The High Court's decision in Brewster does not preclude a common fund order being made once proceedings have settled. Such common fund orders have since been made in the Federal Court under of the equivalent provision of the Federal Court Act 1976 (Cth), being section 33V: Asirifi-Otchere v Swann Insurance (Aust) Pty Limited (No 3) (2020) 385 ALR 625; [2020] FCA 1885 at [14]-[15] (per Lee J); Hall v Arnold Bloch Leibler (a firm) (No 2) [2022] FCA 163 at [24] (per Beach J); Davaria Pty Limited v 7-Eleven Stores Pty Limited (2020) 384 ALR 650 at [41]  (Lee J, with whom Middleton and Moshinsky J agreed). Following these authorities, I am thus satisfied that the Court has the power to make a common fund order under to [sic] section 173(2) of the Civil Procedure Act.

Haselhurst v Toyota Motor Corporation Australia Ltd [2022] NSWSC 1076

Supreme Court of New South Wales, Rees J
29 June 2022

Plaintiffs’ Solicitors: Quinn Emanuel
Respondents’ Solicitors: Herbert Smith Freehills (Toyota); Clayton Utz (Subaru); K&L Gates (Honda); Ashurst (BMW); Allens (Nissan); Mills Oakley (Mazda)
Funder’s Solicitors: Watson Mangioni Lawyers
Plaintiffs’ Funder: Regency Funding Pty Ltd

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