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
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
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
"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
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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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