Court approves class action settlement and funding equalisation order

HFPS Pty Limited (Trustee) v Tamaya Resources Limited (in Liq) (No 3) [2017] FCA 650

The case had been expected to recover $30m but ended with a lump sum settlement sum of $6.75m. There was a risk that the defendant who the case was strongest against wouldn’t have enough money to pay a judgment. The settlement sum was approved based on the follow application of the proceeds:

    1. $1,9m to group members
    2. $1.153m to the funder (comprising project management fee of $428K plus commission of $725K equating on one view to a success fee of 42.5%)
    3. $3.4m legal fees being approved
    4. $275K for future administration costs

A funding equalisation order was used.

Amongst other things Wigney J made the following comments about the conduct of litigation funders and class action lawyers, and that despite imperfections in the system it facilitates compensation that wouldn’t otherwise be available:

  • an appropriate case may well arise in the future where it may be necessary for the Court to require evidence to be adduced from a senior officer of a litigation funder concerning the setting of commission rates.  It might also be appropriate for the Court to appoint a contradictor so the evidence can be properly examined and tested. 
  • Some aspects of the proposed settlement of this matter may give rise to the perception, at least at a superficial level, that the only real “winners” in this litigation were the lawyers and the litigation funders…. may cause some to wonder whether securities class actions like this matter are anything more than essentially entrepreneurial exercises that are generated by class action lawyers and litigation funders so as to earn fees and, in the case of litigation funders, a return on investment…Ultimately, however, the evidence led in support of the approval of the proposed settlement has demonstrated, on balance, that the settlement, including the Settlement Distribution Scheme, is fair and reasonable and in the interests of group members as a whole.  It represents a reasonable compromise of difficult and complex commercial litigation.  It does not unfairly or arbitrarily discriminate against or prefer the interests of one class of group members over the interests of others.  The group members will receive a reasonable amount in satisfaction of their claims in circumstances where, but for the intervention of the class action lawyers and a litigation funder, they would have been unlikely to recover anything.  The settlement should be approved.”

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