Harrold v Exactech Australia Pty Ltd

(a) Exactech US was negligent in the design, manufacture, evaluation and packaging of the Affected Devices, and Exactech Australia was negligent in their evaluation, distribution and sponsorship;

(b) both respondents supplied goods in contravention of the consumer guarantees of acceptable quality (s 54 of the ACL) and fitness for purpose (s 55 of the ACL), and their equivalents under the TPA;

(c) both respondents are liable for safety defects under s 138 of the ACL, and ss 75AC -75AD of the TPA; and

(d) Exactech Australia engaged in misleading or deceptive conduct and false representations as to quality, safety and durability contrary to ss 18, 29 and 33 of the ACL.

1. The applicant and group members seek damages and compensation for personal injury, economic loss, non-economic loss, loss of value of the Affected Devices, and other reasonably foreseeable losses arising from the respondent's contraventions and negligence.
2. The proceeding is at an early stage. It was commenced by originating application and statement of claim on 5 September 2024. Apart from pleadings and limited interlocutory steps, no lay or expert evidence has been filed. On 23 December 2024, the proceeding was stayed as against the second respondent following recognition of the Chapter 11 process as a foreign proceeding, further constraining progression on the merits.
3. In light of emerging insolvency risks and uncertainty regarding the availability of responsive insurance, the parties agreed to attempt mediation before the service of evidence. The matter was mediated by a highly experienced and able mediator, the Honourable Patricia Bergin AO SC, on 20 December 2024, and again on 3 March 2025.
4. Although the parties mediated in the absence of each other's expert evidence, it had by then become clear (from the Chapter 11 filings, the Model Law recognition application, and the respondents' correspondence of 27 November and 18 December 2024 concerning insurance exhaustion) that only limited funds were likely to be available. From the applicant's perspective, the objective was to avoid incurring the significant and effectively unrecoverable cost of expert evidence in circumstances where recoverability appeared to be the dominant consideration.
5. The parties reached agreement in principle on about 26 May 2025 on the terms now reflected in the Australian Settlement Deed, which is subject to approval (Settlement Deed).
6. On 15 September 2025, crystallising the parties' obligations under the proposed settlement, the United States Bankruptcy Court for the District of Delaware made the Bankruptcy Court Order authorising the second respondent to give effect to the Settlement Deed, for use of insurance proceeds as contemplated by the deed, and the funding arrangement.
7. The applicant estimates at this stage that there are about 5,000 group members, of which:

(a) by the end of 2025, it is projected that 610 will have undergone revision surgery;

(b) 439 are assumed to have suffered personal injury, but will not by that date undergo revision surgery; and

(c) the balance (of about 4,000) are assumed to be physically uninjured and claim damages only for loss of value and distress and disappointment.

1. I have had the very considerable benefit of reading a confidential opinion by counsel for the applicant as to the reasonableness of the settlement. While the opinion addresses risks relating to the merits of the applicant's claims, it is clear that the primary constraint on the value of the proceedings is the difficulty of recovering more from the respondents than is offered in the settlement. The second respondent, as I have said, is subject to Chapter 11 proceedings in the United States. The first respondent has limited assets and limited insurance. The proposed settlement provides a fixed sum which appears to be at least as favourable as the applicant could realistically achieve through litigation against the respondents (and probably more so), and does so in a relatively quick and cheap manner. There are thus compelling grounds in favour of the settlement which has been agreed.
2. I have also had the benefit of hearing from Mr Harrold and sixteen group members today, who have all supported the proposed settlement and who have spoken eloquently of their difficult personal circumstances as well as their well-justified desire for a quick resolution.
3. Turning to the key components of the Settlement Deed and proposed Settlement Distribution Scheme, the Assessed Compensation Amounts payable to Personal Injury Participating Group Members are limited to non-economic loss only, in the interests of simplifying assessment and minimising exposure to third-party repayment obligations. The releases are designed to preserve any claims by group members against surgeons (where surgery was performed privately) or public hospitals. Group members must register by the claim deadline (being a 60-day period from the settlement scheme's commencement).
4. One source of risk in the orderly distribution of compensation under the settlement scheme arises from the prospect of third-party recoveries, particularly by Medicare and private health insurers. It is anticipated that, whether individually or in bulk, all required Medicare repayments will be resolved before distribution. As to private health insurers, the applicant's solicitors intend to engage in negotiations with the insurers, but as a fallback, a Participating Group Member may elect to be reassessed as a Non-Personal Injury Participating Group Member claiming only for damages for distress and disappointment with a view to avoiding any obligation to reimburse private health insurers.
5. The settlement scheme includes a review mechanism for group members who wish to challenge their eligibility or characterisation. The payment of compensation will not occur until the Assessed Compensation Amounts have been determined for all Participating Group Members (including after review) and after all Third-Party Required Repayments have been determined and paid. If there is a shortfall or surplus in the settlement fund at the end of the process, there is a provision for a pro rata adjustment to the Assessed Compensation Amount of each group member.
6. The damages assessment protocol annexed to the settlement scheme sets out how each Participating Group Member's Assessed Compensation Amount is to be calculated. Claims are categorised in five ways by reference to the number and nature of revision surgeries undergone, with fixed amounts assigned to each category, on an ascending scale according to the severity of injury, as measured by whether there have been revision surgeries and to what extent there have been such revision surgeries.
7. As I have said, I am satisfied that the amounts to be deducted for legal fees and disbursements, administration of the settlement distribution scheme and payment to the lead applicant are all fair and reasonable.
8. In my view, the proposed settlement is fair and reasonable and in the interests of group members as a whole, and should be approved. The relatively modest outcome for the applicant and group members reflects the very real difficulty which they face in terms of recoverability of damages in the event that their claims are successful.
9. I congratulate the parties on reaching this compromise, and I thank counsel and solicitors for their helpful submissions and the efficient way in which the matter, overall, has been conducted.

I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.