Background
The applicants brought a representative proceeding against Commonwealth Financial Planning Limited, Financial Wisdom Limited, CommInsure and AIA Australia concerning advice about CommInsure life-insurance products between August 2014 and August 2020. They alleged that advisers recommended or retained products carrying excess premiums compared with substantially equivalent or better products available elsewhere, while failing adequately to disclose conflicts and incentives.
The claims included alleged breaches of financial-advice and fiduciary obligations, as well as knowing receipt allegations. The parties agreed to settle for $22.5 million. After proposed deductions, $5.12 million was to be distributed to participating registered group members under a unit-based scheme, with new clients receiving double the units per premium band because their claims were assessed as stronger.
The Court’s Holding
Justice Beach approved the settlement under s 33V of the Federal Court of Australia Act 1976 (Cth), finding it fair and reasonable despite the comparatively modest share of the gross settlement available for distribution. The Court accepted that the claims’ estimated value and prospects had materially deteriorated, including because of difficulties proving liability and causation on a common basis. On the evidence, participating group members’ expected payments represented substantial proportions of their assessed excess-premium losses.
The Court approved deductions including an $8,297,060 common fund commission for Woodsford, $1,086,082.50 for after-the-event insurance and security-related costs, $7,258,696.28 in legal costs and disbursements, and administration costs. It also made orders under ss 33V, 33ZF and 33ZB authorising the applicants to give effect to releases and covenants not to sue for group members, including releases benefiting non-parties. Justice Beach held that s 33ZB was not, by itself, a complete answer to the authority issue; a s 33ZF order was desirable to address it directly.
Key Takeaways
- A settlement may be approved even where group members receive less than half the gross fund, if the outcome is reasonable in light of litigation risk and likely individual recoveries.
- The Court approved a 36.9% funding commission and additional ATE-related deductions after assessing the funder’s aggregate return as reasonable and proportionate.
- For settlement releases extending to non-parties, orders under both ss 33ZF and 33ZB can provide a stronger basis than relying on s 33ZB alone.
Why It Matters
The decision gives detailed guidance on settlement approval in funded Australian class actions where claim value and prospects have declined significantly. It confirms that aggregate distribution percentages are not decisive; the Court will examine the realistic value of group members’ individual claims, litigation risks, and the efficiency of the proposed distribution method.
It also squarely addresses the authority problem created by broad releases for non-parties. Practitioners negotiating such releases should seek explicit authority orders under s 33ZF alongside binding orders under s 33ZB.