Improving returns for class action group members

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We look at the key lessons from our involvement in Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited & Anor. 

As echoed in recent judgments and the recent Australian Law Reform Commission report into class actions, costs are an important issue in class actions. Petersen canvassed a number of issues around maximising returns to group members.

What are the key takeaways?

  • If you act as a plaintiff firm, take care to ensure that your fees (and your funder’s fees) are reasonable and proportionate. You might need to seek earlier advice from an expert about quantum and Counsel about prospects of success.
  • Using a Scheme Administrator to assess and distribute settlement proceeds to group members can result in group members receiving a greater proportion of settlement proceeds.

Overview of the case

Petersen was a class action proceeding. The class members claim related to an alleged Ponzi scheme in which their retirement savings were misappropriated by their financial advisor. The financial advisor was not a defendant.

The class sought damages from the defendant bank where the accounts were held and the bank’s agent, alleging they ought to have noticed the suspicious activity taking place in the bank accounts.

The class and the defendants reached a settlement and applied for judicial approval.

Judgment

The proposed legal fees and funding costs would have resulted with class members receiving only 2% of the settlement. Justice Murphy was highly critical of that outcome and adjusted the plaintiff firm’s legal fees and the funders costs.

The Court found that proportionality should be a necessary consideration in cases where (one or more of):

  • damages are less than $30 million
  • settlement is not achieved until late in the case
  • the liability case is not strong, and the case is strenuously defended
  • there are multiple respondents 

The Court approved the settlement after adjustments to legal fees and funding costs. The class members would receive 33% of the settlement sum.[1]

Using a Scheme Administrator

As part of the Settlement Distribution Scheme, we were appointed as Scheme Administrators.  In a case where costs to group members were already in issue, the appointment of a Scheme Administrator assisted in ensuring the greatest possible return to group members. 

Appointing a forensic accountant as Scheme Administrator meant that:

  • expert advice was used to quantify the entitlement of each class member
  • the distributions were made efficiently, relying on systems we regularly use to effect large scale distributions.

The ALRC found that it may be that, particularly in securities class actions, an accounting firm, share registry service or claims administration company could undertake such work as competently and with greater cost efficiency than the plaintiff’s solicitors. [2]  

How we can help

Even at early stages of litigation, we can advise you on the potential quantum and the issues that matter in demonstrating loss.

We have extensive experience in efficiently distributing funds to large groups, including insolvency Administrations and the Iraq Funds Distribution Project.[3]  When combined with the technical loss quantification expertise of our forensic accountants, we can assist with maximising returns for class members.

Watch our video on the key takeaways from our CPD session on Quantum in Securities Class Actions:

Class actions video

Find out more in our handout from our CPD session on Quantum in Securities Class Actions. 

Watch our video on what the ALRC report recommendations mean for stakeholders in securities class actions: 

 

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