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This was a class action against Westpac Banking Corporation and two related companies (together Westpac) on behalf of persons who acquired consumer credit insurance policies for Westpac credit cards, flexi loans or personal loans between 1 January 2010 and 30 June 2019. The applicant alleged, among other things, that Westpac engaged in misleading or deceptive conduct and/or unconscionable conduct, including by representing that the policies were not optional or provided value and by using unfair tactics in arranging the issue of the policies.

In this judgment, O’Bryan J gave reasons for approving a settlement of the proceeding in the amount of $29 million, pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth). His Honour found that the settlement was fair and reasonable as between the applicant and Westpac (see [51]-[55]) and as between class members (see [59]). In approving the settlement, his Honour made orders approving the following deductions from the settlement sum:

  • approximately $6.7 million for the applicant’s legal costs and disbursements (including uplift) of the applicant to the date of the settlement approval – in doing so, his Honour adopted the report of the Court-appointed costs referee Cate Dealehr, save for one minor and insignificant exception;

  • approximately $1.6 million for the potential future costs of the administration of the settlement, comprising approximately $575,000 for the applicant’s solicitors’ (Slater & Gordon) estimated legal fees and approximately $1 million for disbursements associated with the work of Deloitte, including the development of a secure registration portal and assessment of the data provided through that portal;

  • approximately $275,000 for the reimbursement of the costs of Slater & Gordon holding after the event (ATE) insurance for adverse costs in the proceeding. His Honour opined that, when considering whether the costs of ATE insurance may be properly deducted from a settlement of a representative proceeding, analogous considerations arise whether the insurance was obtained by a third-party litigation funder that is entitled to a funding commission, or by a law firm running a matter on a no win, no fee basis that is entitled to an uplift fee. His Honour said that “[t]he costs would be assessed as reasonable if the terms of the policy are appropriate in the context of the proceeding and the premium charged for the policy has been determined in a competitive market setting. The costs of ATE insurance may not be reasonable if a proceeding is brought in a “no costs” jurisdiction” (at [91]). In the present case, his Honour was satisfied that it was reasonable for the costs of Slater & Gordon obtaining ATE insurance to be deducted from the settlement sum, on the basis that there was a real prospect that the claims might fail, the amount insured under the policy was reasonable, the policy was acquired in a competitive market, and, having regard to Slater & Gordon’s costs agreement, there could be no expectation that the risks of an adverse cost order had been factored into, and were effectively absorbed by, Slater & Gordon’s uplift fee. In relation to that final consideration, his Honour noted that “[t]he potential need for insurance against an adverse costs order, and the additional costs involved in taking out such insurance, were disclosed in the legal costs agreement” (at [92]).

  • $20,000 as the applicant’s reimbursement payment and $30,000 as the sample class members’ combined reimbursement payments.

After the above deductions, approximately $20.3 million will be transferred to registered class members, being approximately 70% of the total settlement sum.

Kemp v Westpac Banking Corporation (No 4) [2023] FCA 830

Federal Court of Australia, O’Bryan J,
21 July 2023

Applicant’s Solicitors: Slater & Gordon
Second Respondent’s Solicitors: Allens
Applicant’s Funder: N/A

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