Radio Rentals settlement approved, with a twist

Class actions – Settlement approval – Settlement approved – Consideration of the application of cy-près doctrine or analogous principles in relation to distribution of settlement monies – Need to prove distribution of monies to class members would be impracticable or impossible

This judgment relates to the settlement approval of the class action commenced against Radio Rentals alleging misleading or deceptive conduct, unconscionable conduct and unfair contract terms in breach of various statutory obligations.

The Settlement

The settlement involved the payment of $29 million with deductions for legal costs and administration costs and a lead applicant reimbursement payment. Justice Lee approved the settlement, finding it fair and reasonable in all the circumstances and noting that the releases provided were reasonable.

His Honour’s decision contains minimal discussion of the principles regarding settlement approval, with his Honour noting (at [5]) that:

… the world does not need another judgment where the principles informing whether or not a settlement should be approved are set out in any detail. The principles are pellucid and do not require further explanation.

Lead Applicant Reimbursement Payment

In approving the $10,000 reimbursement payment to the lead applicant, his Honour acknowledged that whilst being a representative applicant involves “some anxiety and stress”, that should not be a basis for the justification of the payment. Rather, his Honour held that the justification for a reimbursement payment is to compensate the lead applicant for their “exertions” in their helping to bring the class action.

Cy-près Distributions

The decision is most significant for his Honour’s discussion of whether the Court has power to make orders permitting a settlement administrator to effect a cy-près distribution, and if so, the circumstances in which the power should be exercised.

The proposed Settlement Distribution Scheme contained a clause, which provided that where there remained a residual amount in the settlement distribution fund, the settlement administrator could, at its discretion, distribute it to the Financial Rights Legal Centre.

His Honour held that the Court has power to make orders permitting a settlement administrator to effect a cy-près distribution both in equity and under Part IVA of the Federal Court of Australia Act 1976 (Cth) (FCAA). His Honour noted that in the United States, the Supreme Court accepted that the cy-près doctrine can apply in circumstances where a settlement fund cannot be practically distributed.

His Honour also noted that courts in Australia have the power in equity to order a cy-près payment from a trust generally where there was:

(a) a case of initial impracticality or impossibility and either an out-and-out intention to benefit charity or a general charitable intention and a possible mode of effectuating that intention; or

(b) a case of supervening impracticability or impossibility; or

(c) a case where a trust has exhausted its original purpose and a surplus remains.

His Honour held (at [24]) that it followed that the Court had the power in equity to make an order for a cy-près scheme in the context of a class action where it would be either impracticable or impossible to distribute some or all of a settlement to class members individually.

In the alternative, his Honour also noted (at [25]-[26]) that s 33V(2) of the FCAA empowered the Court to make an order for a cy-près scheme, provided that the scheme was “just” (in that the funds were to be distributed to a charity or cause closely related to whom the money would otherwise be owed, but could not be paid.)

However, his Honour was not persuaded that it was generally appropriate to make orders approving a cy-près scheme at the time of settlement approval. Instead, his Honour stated (at [27]):

If such an order is to be made, it should be made pursuant to a specific order in relation to a specific sum, upon the court being satisfied that distribution to those otherwise legally entitled to the specified sum, is impracticable or impossible. It is conceivable that this state of satisfaction might be reached at the time of approval, but it seems to me that in many cases, consideration of this issue may need to be deferred to await assessment of how earlier distributions have proceeded.

In the circumstances, his Honour was not satisfied on the evidence that it was necessarily impracticable or impossible to distribute all of the settlement fund to class members at the time of approval. Instead, his Honour proposed that the settlement administrator be given liberty to apply for further orders regarding any residual settlement sum, should one arise.

Case details

Simpson v Thorn Australia Pty Ltd t/as Radio Rentals (No 5) [2019] FCA 2196 

  • Federal Court of Australia, Lee J,
  • 20 December 2019
  • Applicant’s Solicitors: Maurice Blackburn;
  • Respondents’ Solicitors: Quinn Emanuel, Gillis Delaney Lawyers, Lander & Rogers;
  • Applicant’s Funder: N/A

Read more about this case on Austlii: Simpson v Thorn Australia Pty Ltd t/as Radio Rentals (No 5) [2019] FCA 2196 

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