Background
Top Ryde Financial Services Pty Ltd and Tina Wodecki brought a representative proceeding arising from RAMS Financial Group Pty Limited’s heightened scrutiny of loan applications, revocation of authorised credit representative arrangements, and steps to terminate the Ryde franchise. The case was tried concurrently with a related proceeding concerning the Fairfield franchise, and the evidence substantially overlapped.
After written closing submissions had been exchanged but before closing addresses were completed, the parties agreed to settle. The settlement sum was $29,624,397.67, including withheld trail commissions, interest, and an additional amount of approximately $20.8 million. RAMS also agreed to stop withholding 25% of future trail commissions and to offer each group member a buyout of its future trailer-income entitlement.
The proposed deductions totalled $16,574,966.37: a $12 million funding commission, reimbursement of $4 million in funded legal costs and disbursements, $461,354.87 in unfunded solicitors’ costs and disbursements, and $113,611.50 in settlement-approval and distribution costs.
The Court’s Holding
Justice Lee approved the settlement under s 33V(1) of the Federal Court of Australia Act 1976 (Cth), finding it fair and reasonable and in the interests of group members. Findings in the related Fairfield proceeding demonstrated genuine risks concerning liability, causation, and damages, while the settlement delivered substantial monetary and continuing benefits. The allocation of the additional amount by reference to each franchise’s highest loan-book value during the relevant 12-month period was rational and fair.
The Court also approved all proposed deductions and their pro rata allocation across the class through funding equalisation. Although the $12 million funding commission was high, it was just when assessed without hindsight against the litigation’s risks, the $4 million in capital exposed, the extensive work required, and the funding agreements made by almost all members of the small, commercially experienced class. Group members nevertheless retained the right to seek assessment of the approved legal costs and disbursements.
The approval did not impose separate contractual covenants or acknowledgments in the settlement deed on absent group members who had not agreed to them. The Court also gave RAMS Blackburn seven days to dispute its revised allocation before distribution and made temporary non-publication orders protecting privileged communications and detailed costs material.
Key Takeaways
- A settlement reached after evidence has been heard may be assessed against the concrete litigation risks revealed at trial and in a related judgment.
- A large funding commission can be approved where it fairly reflects the risks assumed, capital exposed, contractual context, and circumstances existing when funding was obtained.
- Settlement approval binds group members to the resolution of their claims, but does not by itself authorize representative applicants to impose additional contractual obligations on absent members.
Why It Matters
The decision illustrates the Federal Court’s close scrutiny of both class-action settlements and litigation-funding returns. Headline commission percentages are not decisive: the statutory question is whether the deduction is just in light of the proceeding’s particular risks, economics, and history, assessed without treating a successful outcome as proof that the original risks were slight.
It also draws an important boundary around representative authority. Court approval and binding settlement orders may resolve absent members’ claims, but separate promises—such as restrictions on public statements or obligations to destroy documents—require the affected member’s agreement.