On 7 May 2015, the Court approved the Bonsoy class action settlement which had been brokered just prior to trial in October last year. As well as a reminder of the high stakes nature of product liability class actions for all parties, the settlement approval decision confirms that the courts take a pragmatic approach when it comes to the settlement of product liability class actions.
THE LONG ROAD TO SETTLEMENT
As is often the case with product liability class actions, the Bonsoy class action followed a voluntary recall and the threat of regulatory action. The recall, on Christmas Eve 2009, was prompted by allegations of unusually high levels of iodine in Bonsoy soy milk. A class action in the Victorian Supreme Court against the Australian distributor of Bonsoy followed in 2010, brought on behalf of all consumers who alleged injury by reason of their consumption of the soymilk in the 5 year period prior to the recall. Both the Japanese manufacturer and exporter (which Corrs represented) were later joined as defendants to the proceedings.
The settlement was reached with a 6 week trial looming and involved a $25 million lump sum payment inclusive of costs and a settlement distribution scheme. Under the proposed scheme, the group members’ entitlement to part of the proceeds is dependent upon an assessment that the claim satisfies causation and any relevant statutory thresholds.
WHAT IS A FAIR AND REASONABLE SETTLEMENT?
In his reasons Justice Forrest noted (at ) that when assessing whether to approve a settlement under section 33V of the Supreme Court Act 1986 (Vic), a court will consider 2 questions:
- “Whether the proposed settlement is fair and reasonable as between the parties having regard to the claims of the group members; and
- Whether the proposed settlement is in the interests of the group members as a whole and not just in the interests of the plaintiff and the defendants”
Three main themes emerge in Forrest J’s consideration of these questions:
Certainty – As the risks of establishing causation were excluded from consideration (due to the requirement that group members satisfy causation and the statutory impairment thresholds under the settlement distribution scheme), the Court’s focus was on the relative risks of establishing liability and the likely recovery at trial. Concluding that there were reasonably good prospects that at least 2 of the 3 defendants would be found to be liable at trial, his Honour concluded that the settlement was fair and reasonable, notwithstanding that the group members would not receive the full amount they would likely be entitled to following trial. Once the costs, uncertainties and complexities associated with proceeding to trial, the subsequent individual causation assessments, and consideration of potential difficulties associated with enforcing any judgment in Japan were taken into account, the certainty of a fixed sum settlement was a “powerful factor” in favour of approval.
Fairness to the group members – Given the individual assessment process proposed and the opportunity for review of those assessments under the proposed settlement distribution scheme, his Honour concluded that the group members would be no worse off than they would have been if their cases proceeded to judgment and the interests of group members were therefore appropriately protected.
Scrutiny of costs and administration expenses – In the exercise of its protective role, the Court will scrutinise the costs component claimed in respect of the proceedings and the administration by the legal representatives for the group members. There was expert evidence tendered to justify the $8.5million claimed by Maurice Blackburn in respect of these costs. Forrest J directed that a costs or judicial registrar examine that evidence and report to the Court regarding the reasonableness of the costs claimed.
Finally, Justice Forrest made clear that the Court will take a close interest in the drafting of the terms of any proposed settlement distribution scheme to ensure it will operate fairly as between group members. Although it will not involve itself in daily supervision, the Court will remain available to keep an eye on the administration of the scheme if required.