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This was an application to approve a proposed settlement of the pelvic mesh class action. As is well known, the applicants’ claims (for misleading or deceptive conduct, statutory product liability and negligence) were successful, following a lengthy trial before Farrell J (Gill v Ethicon Sarl (No 5) [2019] FCA 1905). An appeal by the respondents to the Full Court was subsequently dismissed (Ethicon Sarl v Gill (2021) 288 FCR 338; [2021] FCAFC 29), and so too an application for special leave to appeal to the High Court (Ethicon Sarl v Gill [2021] HCATrans 187).

The ’headline’ settlement sum was $300 million. Notwithstanding that the applicants’ solicitors had already recovered approximately $41.3 million from the respondents by way of adverse costs orders made in the proceeding, they sought approval to deduct from the settlement sum further costs of approximately $38.1 million, as well as approximately $26 million on account of accrued interest under a disbursement funding facility that was used to fund the proceeding, and estimated settlement administration costs of up to approximately $36.9 million.

There were hundreds of written and oral objections to the proposed settlement from class members. However, after considering the potential value of class members’ claims by reference to evidence of sampling and extrapolation, and in light of the legislative regimes restricting recovery of damages for economic and non-economic loss in cases of this kind, Lee J approved the proposed settlement, albeit not without “some hesitation” (at [2]). His Honour stated that the overall settlement sum was not “sufficiently generous as to be self-evidently fair” (at [4]), that “the proposed settlement sum is within the range of fair and reasonable outcomes, albeit at the lowest end of that scale” (at [131], [170]), and that the “reasonableness of the headline figure is far from obvious” (at [132]). However, his Honour said (at [140]):

… my concerns are somewhat assuaged by the fact that the real problem in the settlement (such as it is) is not the headline figure, but the amounts to be deducted from the fund before the balance goes to group members.

His Honour deferred to a later hearing the approval of the amounts sought to be deducted by the applicants’ solicitors on account of costs. His Honour also deferred the approval of the proposed settlement distribution scheme. Pursuant to earlier orders, his Honour had, over the opposition of the applicants’ solicitors, conducted a tender process for the role of scheme administrator. In a separate judgment (Gill v Ethicon Sarl (No 11) [2023] FCA 229) his Honour indicated that he would refer the assessment of the tenders received to a referee for inquiry and report. His Honour said:

[9] At least in very large settlements, it seems to me we have reached the stage where it is incumbent upon the Court to examine closely process and administration costs, which appear to be burgeoning, and to be open to innovative ways in which the interests of group members may be protected at all stages of the settlement process. It is easy to spend other peoples’ money, even when solicitors administering a fund act conscientiously and remind themselves of their duties. Class actions necessarily throw up conflicts between interest and duty. The Court relies upon practitioners to manage those conflicts appropriately and (save for some notable and rare exceptions) close attention by practitioners to managing conflicts appropriately has been a hallmark of the Australian class action experience over the last thirty years. But it must be recognised that the Court demands a great deal of solicitors, no doubt often vexed by billing targets (a fortiori employed solicitors of listed companies with announced revenue forecasts), to ensure they put the minimisation of costs at the forefront of undertaking work for the benefit of non-clients, including administering schemes for the distribution of funds.

[13] The conduct of settlement distribution schemes can be a commercial opportunity of some real value and should not just be presented on a platter, without appropriate scrutiny, to the solicitors who have acted for the applicant.

Lastly, his Honour was critical of the applicants’ solicitors in several respects, including the amount of time which it took them to finalise a deed of settlement following the ‘in principle’ settlement, and the adequacy of the first draft of the proposed settlement notice to class members which required substantial reading.

Gill v Ethicon Sarl (No 10) [2023] FCA 228

Federal Court of Australia, Lee J,
16 March 2023

Applicants’ Solicitors: Shine Lawyers
Respondents’ Solicitors: Clayton Utz
Applicants’ Funder: N/A

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