The court approved a $52 million settlement in the 6 Takata airbag class actions. However, the plaintiffs will receive less than 40% of this amount.
$31.7 million deductions: The court was “initially taken aback” by the “confronting” amounts to be deducted from the settlement. However, ultimately, the court approved the following deductions from the settlement amount:
• Plaintiffs’ legal costs: $16.1 million ($15.57 million paid to the litigation funder, and $536,181 paid to the plaintiff’s solicitors)
• Litigation funder’s commission: $13 million
• Administration costs: up to $2.5 million for the costs of administering the distribution of the settlement
• Reimbursement of lead plaintiffs: $20,000 for each of the 6 representative plaintiffs.
These deductions totalled around $31.7 million, or nearly 2/3 of the settlement amount. When split between approximately 33,400 group members, the settlement was around $1,558 per vehicle. However, each group member would only receive about $600 per vehicle after the deductions.
Which cars? The class actions were brought against the distributors of Toyota, Subaru, Honda, BMW, Nissan and Mazda vehicles in Australia. The cars had Takata airbags that were later recalled.
Plaintiffs lost Volkswagen class action: A seventh class action against the distributors of Volkswagen vehicles did not form part of the settlement. The Volkswagen case went to trial. The plaintiff was unsuccessful. The plaintiff failed to establish liability and the court held that the plaintiff had not suffered any loss: Dwyer v Volkswagen Group Australia Pty Ltd t/as Volkswagen Australia (2021) ATPR ¶42-731; [2021] NSWSC 715. That case was appealed. The appellate judgment is reserved.
Allegations: The plaintiffs alleged that the vehicle distributors failed to comply with the consumer guarantee of acceptable quality in s 54 of the Australian Consumer Law (ACL) and the vehicles were not of merchantable quality under the former s 74D of the Trade Practices Act 1974 (Cth). They also alleged that the distributors engaged in misleading or deceptive conduct and unconscionable conduct given claims about the vehicles’ safety.
$52 million was a fair settlement: The NSW Supreme Court held that the $52 million settlement was fair and reasonable. The airbags were replaced at no cost to group members. The recall of the airbags was 99.9% complete. The least controversial and most likely attainable part of the damages claim was out-of-pocket expenses. On average, the group members incurred $300 out-of-pocket expenses per vehicle. The $600 expected damages was twice this amount. Damages for personal injury were excluded from the settlement. The litigation was hard-fought by highly competent and informed lawyers. To obtain a better result, the plaintiffs would probably have needed to go to trial, with extra costs and risks.
Same challenges as in Volkswagen: The risks were exemplified by the Volkswagen case which included mostly identical allegations. Four problems that arose in the Volkswagen case were likely to also be challenges in these 6 class actions.
• Need to prove propellant degraded beyond a threshold: Volkswagen contended that the airbags had no “propensity to explode” unless and until the PSAN propellant in a particular airbag inflator had actually degraded beyond a critical threshold, and that the plaintiffs had to prove that this threshold had been crossed in each vehicle before the airbags were replaced.
• Factors: The vehicle distributors contended that whether the threshold had been crossed depended on temperature, humidity, the vehicle’s age, usage, model and characteristics, usual parking location (garage vs street), and the presence of any desiccant.
• Non-compliance because of Takata: s 271: The distributors relied on s 271 of the ACL, arguing that even if there was non-compliance with s 54, such non-compliance was only because of Takata’s act, default or omission.
• Reasonable basis for safety claims: The distributors contended that they had a reasonable basis for any claims about safety, because Takata was a major specialist airbag manufacturer and had given contractual warranties about the airbags’ quality along with many compliant test results.
• No out of pocket damages: The lead plaintiff in the Volkswagen case was awarded no “out of pocket” damages because his airbag was replaced during a scheduled service and his wife drove him to and from the service centre.
Even split for each group member: Each group member would be paid the same amount under the approved settlement deed, regardless of the brand, type or cost of their vehicle. This was a practical approach where the main part of the claim was likely to be out-of-pocket expenses.
Legal costs were fair: The deduction of the plaintiffs’ legal costs was fair and reasonable. This case went to the High Court of Australia, involved some novel issues and involved expert witnesses from the US. It spanned over 4 years, multiple proceedings and many interlocutory applications. The court placed weight on the work of 2 experienced costs assessors. One of the assessors said the case had been run efficiently by a relatively small team, with minimal duplication. It was fair and reasonable to exclude the costs specifically billed to the Volkswagen case (around $300,000) and to exclude 1/7 of the common costs.
25% litigation funder’s commission was fair: It was fair and reasonable that a 25% funder’s commission ($13 million) be deducted from the settlement sum. The average and median rate of funding commission was 25%, based on 58 Australian cases. The litigation funder, Regency Funding Pty Ltd, spent around $18 million in legal costs. The funder bore the gap between this $18 million and the $16.1 million legal costs court order (of which only $15.57 million would be paid to the funder). This gap effectively reduced its commission. The funder provided security for costs of $8.43 million, and took the significant risk of adverse costs orders, estimated to be over $31 million. The funder also stopped inviting people to participate in the case, so it would not interfere with the ongoing recall message. The funder sought a 25% commission, even though it was entitled to 30% under its agreement with some group members. There was some controversy about the NSW Supreme Court’s power to make common fund orders. The court held that it had the power to make a common fund order under s 173(2) of the Civil Procedure Act 2005 (NSW).
Administrator’s costs: It was estimated that the cost of processing each group member’s claim would be $57. The administrator was experienced and likely to be cheaper than the plaintiffs’ solicitors. The court and the costs assessors considered the administrator’s fees to be fair and reasonable.
Reimbursement of lead plaintiffs: Reimbursement of $20,000 for each representative plaintiff was fair, reasonable and modest compared to other cases. It recognised the time, cost, stress, burden, and personal inconvenience they incurred in bringing the case for the benefit of all group members.
Late registrants: 109 people sought to register to participate in the settlement after the deadline. No party opposed their inclusion in the class. It was not expected that their inclusion would make any material difference to the existing registrants. The court ordered that the late registrants were deemed to have registered on time.
Source: Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia; Whisson v Subaru (Aust) Pty Ltd; Kularathne v Honda Australia Pty Ltd; Brewster v BMW Australia Ltd; Bond v Nissan Motor Co (Australia) Pty Ltd; Coates v Mazda Australia Pty Ltd (2022) ATPR ¶42-782; [2022] NSWSC 1076, 29 June 2022.
Explore our Practical Guide — Consumer guarantees at ¶30-023, and our Practical guide — Selling goods or services at ¶25-520. Check out our interactive Consumer guarantee case finder at ¶30-1000. It summarises each case in 2 lines. The comparative case table at ¶30-025 summarises each case in 1–2 paras. Find out more about the consumer guarantee of acceptable quality at ¶30-170. Start exploring consumer guarantees using our roadmap at ¶30-020.
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