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[2024] FCA 1524
Federal Court of Australia
2024-12-23
Ms J, Lee J
Original judgment source is linked above.
Counsel for the administrators: Mr G Donnellan with Ms K Morris
Solicitors for the administrators: JGA Saddler Slater and Gordon
Counsel for the respondents (NSD 244 of 2021): Ms J Findlay
Solicitor for the respondents (NSD 244 of 2021): Herbert Smith Freehills
Counsel for the respondents (NSD 1590 of 2012 and NSD 310 of 2021): Mr D Wong
Solicitor for the respondents (NSD 1590 of 2012 and NSD 310 of 2021): Clayton Utz
JOHNSON & JOHNSON MEDICAL PTY LIMITED (ACN 000 160 403) Third Respondent NSD 310 of 2021
BETWEEN: LISA TALBOT Applicant AND: ETHICON SĂ€RL First Respondent
JOHNSON & JOHNSON MEDICAL PTY LIMITED (ACN 000 160 403) Third Respondent
AND: BOSTON SCIENTIFIC CORPORATION First Respondent
BOSTON SCIENTIFIC PTY LIMITED Second Respondent
order made by: LEE J DATE OF ORDER: 23 december 2024
In NSD 1590 of 2012 and NSD 310 of 2021:
Settlement Deed and Settlement Scheme
Approval of Deductions from Settlement Fund 4. Pursuant to s 33V(2) of the FCA Act, the amount of $2,272,836.91 (GST incl) previously approved by the Court on an interim basis on 5 November 2024 as the costs incurred by the Administrators in conducting the administration for the period 21 September 2023 to 31 July 2024 (Interim Costs Order) is approved on a final basis. 5. Pursuant to s 33V(2) of the FCA Act, the following costs be approved and may be deducted from the interest accrued on the settlement sum to date: (a) Administration Costs for the period 21 September 2023 to 31 July 2024 (other than those falling within the Interim Costs Order) in the amount of $975,969.46 (GST incl); (b) for the period 1 August 2024 to 30 November 2024: (i) Administration Costs in the amount of $3,016,466.23 (GST incl); (ii) disbursements incurred by the joint Administrators in the course of administering this settlement between 1 August 2024 and 30 November 2024 in the amount of $1,165,308.74 (GST incl); (c) for the period 1 December 2024 to 18 December 2024, on an interim basis, and subject to further order by which the Court may increase or decrease the amount of such approved costs, the Administration Costs incurred by JGA Saddler in the amount of $304,841.07 (GST incl); and (d) the cost of the DGT Costs Lawyers report dated 20 December 2024 in the amount of $22,440.00 (GST incl). 6. Pursuant to s 33V(2) of the FCA Act, the Administrators be permitted, on an interim basis at the end of each quarter, to recover: (a) 75% of their future administration costs in administering the settlement; and (b) 100% of their future disbursements incurred in the course of administering the settlement; subject to further order by which the Court may increase or decrease the amount of such approved costs.
Declarations as to Notifiable Persons 7. Pursuant to s 21, s 33V(2), and/or s 33ZF of the FCA Act, or alternatively pursuant to the Court's implied jurisdiction, the Court declares that: (a) on 16 March 2023 upon the making of the order pursuant to s 33V(1) of the FCA Act that the settlement of the proceedings between the parties on the terms set out in the Settlement Deed executed 10 November 2022 be approved; and (b) the making of the order in paragraph 1 above, the respondents ceased to be "notifiable persons" within the meaning of s 3 of the Health and Other Services (Compensation) Act 1995 (Cth) (HOSC Act) in relation to any Claims made by Group Members in this proceeding. 8. Pursuant to s 21, s 33V(2), and/or s 33ZF of the FCA Act, or alternatively pursuant to the Court's implied jurisdiction, the Court declares that the Respondents are not "notifiable persons" within the meaning of s 3 of the HOSC Act in relation to any claims made by Group Members against the Settlement Fund. 9. Pursuant to s 21, s 33V(2), and/or s 33ZF of the FCA Act, or alternatively pursuant to the Court's implied jurisdiction, the Court declares that the Administrators are "notifiable persons" within the meaning of s 3 of the HOSC Act in relation to any claims made against the Settlement Fund.
THE COURT DIRECTS THAT:
Settlement Deed and Settlement Scheme
Approval of Deductions from Settlement Fund 4. Pursuant to s 33V(2) of the Federal Court of Australia Act 1976 (Cth), the amount of $637,684.34 (GST incl) previously approved by the Court on an interim basis on 5 November 2024 as the costs incurred by the Administrators in conducting the administration for the period 21 September 2023 to 31 July 2024 (Interim Costs Order) is approved on a final basis. 5. Pursuant to s 33V(2) of the Federal Court of Australia Act 1976 (Cth), the following costs are approved and may be deducted from the interest accrued on the settlement sum to date: (a) Administration Costs for the period 21 September 2023 to 31 July 2024 (other than those falling within the Interim Costs Order) in the amount of $271,396.78 (GST incl); (b) for the period 1 August 2024 to 30 November 2024: (i) Administration Costs in the amount of $969,309.40 (GST incl); (ii) disbursements incurred by the joint Administrators in the course of administering this settlement between 1 August 2024 and 30 November 2024 in the amount of $180,425.60 (GST incl). (c) for the period 1 December 2024 to 18 December 2024, on an interim basis, and subject to further order by which the Court may increase or decrease the amount of such approved costs, the Administration Costs incurred by JGA Saddler in the amount of $11,257.13 (GST incl); and (d) the cost of the DGT Costs Lawyers report dated 20 December 2024 in the amount of $7,480.00 (GST incl). 6. Pursuant to s 33V(2) of the FCA Act, the Administrators be permitted, on an interim basis at the end of each quarter, to recover: (a) 75% of their future administration costs in administering the settlement; and (b) 100% of their future disbursements incurred in the course of administering the settlement; subject to further order by which the Court may increase or decrease the amount of such approved costs.
Orders for Production 7. Pursuant to ss 33X(5) and 33ZF of the FCA Act, the registrants and group members listed in Confidential Annexure C: (a) if they have already been assessed as an eligible group member, will continue to be a group member for the purposes of the Proceedings but will only be entitled to receive the first interim payment and will not be entitled to receive any further distributions from the settlement; (b) if they were not otherwise eligible to participate in the Proceedings as a group member, will be deemed to have been assessed as an ineligible registrant and will not be entitled to receive any distributions from the settlement.
Declarations as to Notifiable Persons 8. Pursuant to s 21, s 33V(2), and/or s 33ZF of the FCA Act, or alternatively pursuant to the Court's implied jurisdiction, the Court declares that: (a) on 16 March 2023 upon the making of the order pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (Cth) that the settlement of the proceedings between the parties on the terms set out in the Settlement Deed executed 12 July 2022 (as varied by the Deed of Variation of Settlement Deed executed 26 October 2022) be approved; and (b) the making of the order in paragraph 1 above, the respondents ceased to be "notifiable persons" within the meaning of s 3 of the Health and Other Services (Compensation) Act 1995 (Cth) (HOSC Act) in relation to any Claims made by Group Members in this proceeding. 9. Pursuant to s 21, s 33V(2), and/or s 33ZF of the Federal Court of Australia Act 1976 (Cth), or alternatively pursuant to the Court's implied jurisdiction, the Court declares that the respondents are not "notifiable persons" within the meaning of s 3 of the HOSC Act in relation to any claims made by Group Members against the Settlement Fund. 10. Pursuant to s 21, s 33V(2), and/or s 33ZF of the Federal Court of Australia Act 1976 (Cth), or alternatively pursuant to the Court's implied jurisdiction, the Court declares that the Administrators are "notifiable persons" within the meaning of s 3 of the HOSC Act in relation to any claims made against the Settlement Fund.
(Delivered ex tempore, revised from the transcript)
A INTRODUCTION AND BACKGROUND 1 In March 2023, for reasons explained in Fowkes v Boston Scientific Corporation [2023] FCA 230 and Gill v Ethicon SĂ rl (No 10) [2023] FCA 228, I made orders pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) approving the settlement of the following representative proceedings: (1) Kathryn Gill v Ethicon SĂ rl (NSD 1590 of 2012) (Gill proceeding); (2) Lisa Talbot v Ethicon SĂ rl (NSD 310 of 2021) (Talbot proceeding); and (3) Debra Fowkes v Boston Scientific Corporation (NSD 244 of 2021) (Fowkes proceeding). 2 Following the settlement approval, I made orders pursuant to s 33V(2) of the FCA Act approving a settlement distribution scheme in relation to each proceeding, and appointed administrators. 3 A dispute has now arisen in relation to the settlement distribution schemes, specifically the proper party to any Medicare bulk payment agreement (BPA). 4 The respondents contend that they are no longer "notifiable persons" within the meaning of the Health and Other Services (Compensation) Act 1995 (Cth) (HOSC Act). It is said that following the settlement approval, the claims of the group members have been extinguished against the respondents and the group members have instead received substituted rights under the settlement scheme against the administrator. The respondents submit that as a consequence, the administrators are the proper party to any Medicare BPA, being the "notifiable person" under the HOSC Act, and that the respondents no longer have any obligations under the HOSC Act or responsibility in relation to determining and resolving recovery amounts. 5 The reason why this is a justiciable controversy is that the Commonwealth (as represented by Services Australia) appears to have taken a different view, as articulated in a letter dated 17 December 2024 from the Australian Government Solicitor to Freehills (AGS Letter), notwithstanding that the Commonwealth has not favoured the Court with any assistance as to why its construction of the HOSC Act is correct. 6 It is unnecessary to recount the long and sorry history of these proceedings. It suffices to note, for present purposes, that I am anxious to ensure, with as much dispatch as possible, the amounts payable pursuant to the settlement scheme are paid to group members. It is highly unfortunate that this has not progressed as quickly as anticipated, nor involved at least an interim distribution prior to Christmas. 7 I have long made it clear to the parties that I wished to do all that I can do expedite the process, and it appears this collateral dispute is yet another hurdle thrown in the way of speedy resolution. For this reason, I have listed the matter outside of term and on an urgent basis to resolve this dispute in accordance with the dictates of the overarching purpose.
B RELEVANT PROVISIONS 8 The starting point is the HOSC Act. The relevant definitions in s 3 are as follows: "claim" means a claim in writing. "notifiable person" , in relation to a claim for compensation, means: (a) if the person against whom the claim is made has entered into a contract or arrangement with an insurer under which amounts of compensation that become payable as a result of the claim are to be paid by the insurer--the insurer; or (b) if paragraph (a) does not apply but the person against whom the claim is made is a member of a representative organisation that could, in performing its function of making payments in respect of amounts of compensation that its members are liable to pay, make a payment in respect of amounts of compensation that become payable as a result of the claim--the representative organisation; or (c) otherwise--the person against whom the claim is made. 9 Section 22 provides: Restriction on making settlements (1) The notifiable person must not make a settlement in respect of the claim for compensation unless: (a) the notifiable person has informed the compensable person that the compensable person may be liable to pay amounts under this Act or the Charges Act as a result of the settlement being made; or (b) the Chief Executive Medicare has, within the 6 months prior to the day on which an amount of compensation was fixed under the settlement, given to the notifiable person a notice under section 21 in respect of the claim. (2) For the purposes of this section, payment of an amount into a court is taken to constitute the making of a settlement. (3) Subsection (1) is taken not to have been complied with in relation to the payment of an amount into a court unless, at the time of the payment, the notifiable person lodges with the court a copy of the notice under section 21 in respect of the claim. 10 Section 23 provides: Notice of judgment or settlement (1) The notifiable person must notify the Chief Executive Medicare in writing if a judgment or settlement has been made in respect of the claim. (2) The notice must be given within 28 days after the judgment or settlement is made. (3) The notice given to the Chief Executive Medicare under subsection (1) must contain the following information: … 11 Section 34 provides: Bulk payment agreements (1) The Chief Executive Medicare may, on behalf of the Commonwealth, at any time after 18 months following the commencement of this Act, enter into an agreement with a person that contains provisions to the effect that: (a) the person will pay the Commonwealth a specified amount; and (b) the person will: (i) give the Chief Executive Medicare information of a kind specified in a determination made by the Chief Executive Medicare under subsection (2); and (ii) give the information in a way specified in the determination; …
C FUNDAMENTAL ASPECTS OF CLASS ACTION SETTLEMENTS 12 The next point is to focus on the present nature of the rights of the group members. 13 The purpose of a s 33V order, which is then accompanied by an order under s 33ZB (making the s 33V order binding on group members) is that by order of the Court, it operates to affect the rights of both the parties and group members. In the common case where the settlement resolves all of the claims of the group members (as that term is used in s 33C), the effect of the s 33V order is that there is a transformation of the rights of the group member. 14 Foundational to the class action regime under Pt IVA is the concept of a "claim". The "claim" owes its existence separately from and prior to the class action and is not a right or entitlement to relief, but the existence of a set of circumstances which, through the exercise of judicial power, may grant a right or entitlement to relief when a claimant's legal rights against another person are considered. Although a "claim" may be a type recognised by law, even if they are unable to ground a right or entitlement to relief, this did not mean a claim existed. Accordingly, it is important to recognise that what is being resolved in a settlement under s 33V is a claim, which encompasses but is not co-extensive with the legal rights or entitlement to relief that a group member had against the person against whom the class action was being brought. 15 The effect of the settlement approval orders in these proceedings was to extinguish those rights against the respondents and substitute them through the operation of the FCA Act for alternative rights. What the Court has done is to set up a settlement fund and set out the basis upon which the group members are entitled to participate in that fund. It is sufficient for present purposes to say that the group members' rights at present include the right to have the settlement fund distributed according to its terms. 16 The analogy between group members and cestuis que trust pursuant to an express trust is one that is obvious, but here the rights are perhaps broader than those rights in equity, and the group members have a legal right to ensure that the administrators administer the fund according to the terms of the approved deed. It is unnecessary to go into further detail as to precise questions of characterisation. The point of this exercise is simply to illustrate that the rights against the respondents have been wholly extinguished and there is no longer extant (to use the words of the definition of a "notifiable person" under the HOSC Act) a "claim for compensation" against the respondents (or, indeed, against anyone else).
D CONSIDERATION 17 The contentions advanced on behalf of the respondents ought to be accepted for the following reasons. 18 First, it is tolerably plain that the administrators are the "notifiable person" within the meaning of the HOSC Act because the group members' claims to participate in the settlement fund are made against them. This is because in order to determine the "notifiable person", one must first identify the "claim for compensation" to which that status of notifiable person relates. Having identified the "claim for compensation" one then considers "against whom the claim is made" and then (if applicable) that person's (a) insurance; or (b) membership of a representative organisation (HOSC Act, s 3(a) and 3(b)). 19 Secondly, as explained above, the effect of the settlement approval orders is that the previous "claims for compensation" have now been substituted for a right to participate in the settlement fund. As I said in Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 3) [2020] FCA 1885; (2020) 385 ALR 625 (at 629-630 [17]): Upon approval of a settlement the underlying claims of group members generally merge in the settlement, and they receive substituted rights to receive that for which the settlement approved under s 33V(1) provides, or which the Court otherwise provides. 20 Thirdly, and relatedly, the persons against whom the current claims are made must be the administrators. Under the HOSC Act a "claim" is defined as "a claim in writing" (see above (at [8])). Further, the respective schemes support the respondents' construction because the administrators, among other things: (1) determine eligibility of group members; (2) assess and determine "claims"; (3) are subject to a right of review should a group member not agree with a determination of their claim; and (4) subject to the Court's approval, control the Settlement Fund against which the Court has given the group members rights in substitution of their original claims. 21 Fourthly, to the extent that it matters, there are other contextual factors which favour the conclusion that the administrators are the "notifiable person" under the HOSC Act. The "overarching purpose" of a settlement distribution scheme is to "maximise efficiency and minimise cost to group members". Conversely, settlement distribution schemes can become cumbrous. Concluding the administrators are the notifiable person under the HOSC Act, which streamlines the settlement distribution scheme, achieves this overarching purpose and avoids a more complex process. Section 34 requires the "person" who enters into the BPA to "pay the Commonwealth" and "give the Chief Executive Medicare information" about the group members or compensable persons (see above (at [11])). As the respondents correctly note: (1) under the relevant schemes, the only person able to pay the Commonwealth are the administrators, who are in control of the funds; and (2) the only person who can give the Commonwealth information about the group members are the administrators. The schemes provide for the administrators to gather such information, not the respondents. 22 Relatedly, there are significant practical consequences of the administrator being a "notifiable person" under the HOSC Act, including in terms of efficiency to pay money and give information or whether a BPA would be amenable to agreement if the respondents are the "notifiable person". 23 Although the AGS Letter places much emphasis on the fact that the HOSC Act does not contemplate circumstances in which, following settlement, the claim that has existed up until that point ceases and is replaced by a new and different claim, this is the whole point of the class action regime provided for by s 33V of the FCA Act. Indeed, as I said in Fowkes v Boston Scientific Corporation [2023] FCA 230 (at [186]): [The statutory right to recover amounts from the compensation payable to Participating Group Members] is supported by the imposition of penalties on a "compensation payer" who fails to attend to reimbursement of such payments prior to paying a claimant. Boston and the solicitors for Ms Fowkes appear to have operated under the assumption that Boston is the "compensation payer" who would be liable to a penalty in the event that payments are made to Participating Group Members prior to third party payers being reimbursed. I do not think this construction of the legislation is correct but, in any event, reimbursement of any valid claims of third party payers ought to be attended to as a priority by an administrator in a settlement of a class action involving personal injury claims. 24 Accordingly, I am prepared to make the declaration sought by the administrators (who have properly taken a neutral position in relation to this application) to reflect the fact that the administrators are the "notifiable persons" for the purposes of the HOSC Act.
E FURTHER MATTERS 25 As Ms Findlay, counsel for the respondents in the Fowkes proceeding, helpfully explained, through a slip, the orders provided by the parties in March last year to reflect my settlement approval orders in Fowkes v Boston Scientific Corporation did not include a s 33ZB order. 26 I have noted on previous occasions that at an earlier stage of the evolution of Pt IVA regime, s 33V orders were not accompanied by s 33ZB orders. This fundamentally misconceives the operation of the scheme: the only way in which orders of the Court bind non-parties is through the statutory estoppel that arises upon the making of a s 33ZB order: see Dyczynski v Gibson [2020] FCAFC 120; (2020) 280 FCR 583 (at 665-666 [338]-[342] per Lee J, Murphy and Colvin JJ agreeing); J & J Richards Super Pty Ltd v Linchpin Capital Group Limited (Settlement Approval) [2023] FCA 656 (at [97] per Lee J). 27 This order ought to have been included in the short minutes of order provided to my Chambers to reflect the orders made at the settlement approval. There is a limit to how much the Court can parse through pages and pages of short minutes of order to ensure that all necessary orders have been included and that the draft orders are without error. 28 I would be inclined to regularise the position, subject to providing procedural fairness to group members who may oppose such an order being made now. Orders will be made to facilitate this end. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee.
Associate: Dated: 24 December 2024 Schedule No. NSD 1590 of 2012 Federal Court of Australia District Registry: New South Wales Division: General Second Applicant DIANE DAWSON Third Applicant ANN SANDERS Second Respondent ETHICON, INC. Third Respondent JOHNSON & JOHNSON MEDICAL PTY LIMITED ACN 000 160 403 No. NSD 310 of 2021 Second Respondent ETHICON, INC. Third Respondent JOHNSON & JOHNSON MEDICAL PTY LIMITED ACN 000 160 403 No. NSD 244 of 2021 Second Respondent Boston Scientific Pty Limited
Gill
Ethicon SĂ rl
(2020) 385 ALR 625
(2020) 280 FCR 583