Raad & Ors v The Cosmetic Institute Pty Limited & Ors - [2024] NSWSC 650 - NSWSC 2024 case summary — Zoe

NSWNSWSC

Raad & Ors v The Cosmetic Institute Pty Limited & Ors

[2024] NSWSC 650

Supreme Court of NSW|2024-05-14|Before: Weinstein J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2024-05-14

Before

Weinstein J

Catchwords

[2016] FCA 323 Lopez v Star World Enterprises Pty Ltd (1999) ATPR 41-678
[1981] HCA 72 Wheelahan & Ano v City of Casey & Ors [2011] VSC 215 Williams v FAI Home Security Pt Ltd (No 4) (2000) 180 ALR 459
H Chiu
M Robinson (P1-P12) R J May (D5) A J McInerney SC

Source

Original judgment source is linked above.

Catchwords

[2016] FCA 323 Lopez v Star World Enterprises Pty Ltd (1999) ATPR 41-678[1981] HCA 72 Wheelahan & Ano v City of Casey & Ors [2011] VSC 215 Williams v FAI Home Security Pt Ltd (No 4) (2000) 180 ALR 459H ChiuM Robinson (P1-P12) R J May (D5) A J McInerney SCN Bentley (D6-D16) J TesarschN Cozens (D17) T Marskell (D18) M Hamdan (D19)

Judgment (25 paragraphs)

[1]

The Cosmetic Institute Pty Ltd (ACN 135 061 155) (D1) The Cosmetic Institute Parramatta Pty Limited (ACN 144 469 036) (D2) TCI Bondi Junction Pty Limited (ACN 165 531 895) (D3) TCI Southport Pty Ltd (ACN 605 603 423) (D4) Eddy Dona (D5) Niroshan Sivathasan (D6) Van Huu Anthony Nguyen (D7) Victor Lee (D8) Chi-Vien Duong (aka Charles Wong) (D9) Anh Huy Tang (D10) Napoleon Po Han Chiu (D11) Daniel Kwok (D12) Pedro Miguel da Silva Valente (D13) Fahreen Ali (D14) James Francis Christopher Kenny (D15) Sri Balakrishnan Darshn (D16) Certain Underwriters at Lloyd's subscribing to Policy No. 04012 (D17) Allied World Assurance Company, Ltd (D18) MDA National Insurance Pty Ltd (D19) Representation: Counsel: D Graham SC; H Chiu; M Robinson (P1-P12) R J May (D5) A J McInerney SC; N Bentley (D6-D16) J Tesarsch; N Cozens (D17) T Marskell (D18) M Hamdan (D19)

[4]

Background

The proceedings were commenced by Statement of Claim filed on 14 September 2017, almost seven years ago.
The 12 (current) plaintiffs are women who allege that they have suffered personal injury arising out of breast augmentation surgery performed on them by the sixth to sixteenth defendants at premises used by the first four defendants. Their claims are brought in negligence and for contraventions of guarantees under the Australian Consumer Law ("ACL"). One lead plaintiff settled her claim in 2023.
At the time of filing the Statement of Claim, the named defendants were:- 1. The companies allegedly responsible for organising, controlling and operating a system of breast augmentation surgery:- 1. The first defendant, The Cosmetic Institute Pty Limited ("TCI"); 2. The second defendant, The Cosmetic Institute Parramatta Pty Limited ("TCI Parramatta"); 3. The third defendant, TCI Bondi Junction Pty Limited ("TCI Bondi"); 4. The fourth defendant, TCI Southport Pty Ltd ("TCI Southport"); and (collectively the "TCI Companies") 1. The alleged architect of the breast augmentation system, Dr Eddy Dona. Dr Dona was also a director, and the surgical director, of the TCI Companies. (collectively "initial defendants")
On 21 March 2018, the initial defendants applied to de-class the proceedings, but those applications were dismissed by Garling J on 4 December 2018: see Rickhuss v The Cosmetic Institute Pty Ltd [2018] NSWSC 1848. The solicitor for the TCI companies ceased to act shortly after his Honour gave judgment. Those companies are in liquidation and are unrepresented.
On 19 June 2020, the plaintiffs joined the sixth to sixteenth defendants to the proceedings. The seventeenth to nineteenth defendants were joined to the proceedings on 10 December 2020.
No less than 54 Notices of Motion (including amended versions) have been filed in the proceedings. The parties have sought various forms of relief including applications to strike out or amend the pleadings, to de-class the proceedings, to access documents on subpoena (and to set aside subpoenas), for the production of documents on notice and for discovery. The Court heard extensive interlocutory argument over many years with respect to privilege, limitation defences, production of documents from experts, discovery from the plaintiffs, production from the plaintiffs' solicitors and on the recovery of costs, amongst other topics.
Much of the procedural history of the litigation is set out within the judgments of Garling J in Rickhuss v The Cosmetic Institute Pty Ltd [2018] NSWSC 1848 at [1]-[3]; Rickhuss v The Cosmetic Institute Pty Ltd (No.2) [2018] NSWSC 2000 at [1]-[8]; Rickhuss v The Cosmetic Institute Pty Ltd (No.2) [2020] NSWSC 393 at [1], [4]-[6]; Rickhuss v MDA National Insurance Pty Ltd [2020] NSWSC 1477 at [1]-[20]; Rickhuss v The Cosmetic Institute Pty Ltd (No 3) [2022] NSWSC 625 at [1]-[3], [20]-[28]; Rickhuss v The Cosmetic Institute Pty Ltd (No 4) [2023] NSWSC 666 at [1]-[2], [39]-[47], and in the judgment of the Court of Appeal in Nguyen v Rickhuss [2023] NSWCA 249.
Several mediations have been held, all of them unsuccessful. The matter has been listed for hearing on several occasions. On each occasion, for different reasons, the hearing was vacated. Notwithstanding the almost seven years which have passed, the hearing of the common questions was only just to take place.
The 19 defendants in the proceeding at the date of hearing this Notice of Motion can be conveniently separated into three groups.

[8]

The Plaintiffs

The plaintiffs' 8th Further Amended Statement of Claim ("8FASOC") alleges that TCI and Dr Dona created, and then put into operation, a cosmetic breast augmentation surgical system which allegedly had several standardised elements:- 1. The selection, training and accreditation of doctors by Dr Dona to become TCI surgeons, and to perform a single method of breast augmentation surgery on all patients; 2. The set up of theatres, instruments and procedures and engagement of staff to perform breast augmentation surgery with patients under twilight sedation and using local anaesthesia; 3. Sub-standard infection control procedures; 4. A low price; ie $5,990 per breast augmentation surgery; 5. Upfront payments with an inadequate cooling off period; 6. Preoperative triage by non-medical staff and/or by review of photographs; 7. Standardised preoperative consultations; 8. Standardised and deficient information to patients; 9. A bulk purchase arrangement with implant manufacturers to use the same or a very similar type of implant on all patients; 10. Performance of breast augmentation surgery using the same method regardless of the anatomy or individual circumstances of the patients; 11. Standardised postoperative advice; 12. Inadequate quality control procedures; and 13. Unworkable handling of complaints and revision surgery.
This system, described by the plaintiffs as a "One Size Fits All Approach", was allegedly employed regardless of a patient's anatomy, including the patient's breasts being tuberous or ptotic, and the associated requirement for different or additional surgical approaches and techniques.
It is alleged that the plaintiffs and group members were all harmed by undergoing breast augmentation surgery in accordance with the One Size Fits All Approach.
The plaintiffs' expert evidence supports the allegations made in the 8FASOC:- 1. Evidence from Dr Matthew Griffiths, anaesthetist, supports the assertion that the method of anaesthesia used was inappropriate; 2. Evidence from Profs Anand Deva, Mark Ashton and Dr Rohit Kumar, three plastic surgeons:- 1. is critical of the TCI system, in particular the training and experience of the TCI surgeons, the use of a single method of breast augmentation surgery and the method of anaesthesia; 2. suggests that post-operative management of patients was unreasonable; and 3. indicates that the incidence of revisions at the TCI companies was higher than complication rates from published studies. 1. Prof Clifford Hughes, surgeon and expert in clinical governance, suggests that TCI and Dr Dona did not have an effective clinical governance framework and did not appropriately train and supervise the TCI surgeons; and 2. Evidence from Prof Michael Whitby, infectious diseases physician, suggests that all doctors ought to have been aware of basic infection control procedures and that the infection control procedures employed by TCI were inadequate. Prof Deva concurs with this view.

[15]

Approach to Approving Settlements of Representative Actions

Sections 173, 177 and 183 of the Act provide:- 173 Approval of Court required for settlement and discontinuance (1) Representative proceedings may not be settled or discontinued without the approval of the Court. (2) If the Court gives such approval, it may make such orders as are just with respect to the distribution of any money, including interest, paid under a settlement or paid into the Court. 177 Judgment - powers of the Court (1) The Court may, in determining a matter in representative proceedings, do any one or more of the following - (a) determine a question of law, (b) determine a question of fact, (c) make a declaration of liability, (d) grant any equitable relief, (e) make an award of damages for group members, sub-group members or individual group members, being damages consisting of specified amounts or amounts worked out in such manner as the Court specifies, (f) award damages in an aggregate amount without specifying amounts awarded in respect of individual group members. (2) In making an order for an award of damages, the Court must make provision for the payment or distribution of the money to the group members entitled. (3) Subject to section 173, the Court is not to make an award of damages under subsection (1) (f) unless a reasonably accurate assessment can be made of the total amount to which group members will be entitled under the judgment. (4) If the Court has made an award of damages, the Court may give such directions (if any) as it thinks just in relation to - (a) the manner in which a group member is to establish the member's entitlement to share in the damages, and (b) the manner in which any dispute regarding the entitlement of a group member to share in the damages is to be determined. 183 General power of Court to make orders In any proceedings (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order that the Court thinks appropriate or necessary to ensure that justice is done in the proceedings.
The central question on an application for approval of a representative proceeding is whether the proposed settlement is fair and reasonable and in the interests of group members considered as a whole: Australian Competition and Consumer Commission v Chats House Investments Pty Limited (1996) 71 FCR 250; [1996] FCA 1119 at 258; Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459; [2000] FCA 1925 ("Williams") at [19]-[23]; Lopez v Star World Enterprises Pty Ltd (1999) ATPR 41-678; [1999] FCA 104 at [15]; Camilleri v The Trust Company (Nominees) Limited (2015) 190 ACSR 191; [2015] FCA 1468 at [5]; Findlay v DHSE Holdings Ltd (2021) 150 ACSR 535; [2021] NSWSC 249 at [12]-[14] per Stevenson J; Haselhurst v Toyota Motor Corporation Australia Ltd [2022] NSWSC 1076 ("Haselhurst") at [19] per Rees J.
The proposed settlement must fall within a range of reasonableness, rather than being framed in any one particular way: Johnston v Endeavour Energy [2016] NSWSC 1132 ("Johnston") at [22] per Hoeben CJ at CL citing Darwalla Milling Co Pty Ltd v F Hoffman-La Roche & Ors (No 2) (2006) 236 ALR 322; [2006] FCA 1388 at 336 [40] per Jessup J ("Darwalla").
Section 173 of the Act is directed towards protecting non-party group members who are not represented on the substantive settlement application. Their interests trump the individual concerns of the protagonists who have a joint interest in obtaining a settlement approval: Australian Securities and Investments Commission v Richards [2013] FCAFC 89 ("ASIC v Richards") at [7]-[8] per Jacobson, Middleton and Gordon JJ.
The decision for the Court is discretionary and protective: Fowkes v Boston Scientific Corporation [2023] FCA 230 at [45] per Lee J; ASIC v Richards at [7]-[8] per Jacobson, Middleton and Gordon JJ.
In making its decision, the Court relies heavily upon the candid, frank and confidential opinion of the plaintiffs' legal counsel which sets out considerations material to the decision to accept the proposed settlement: Thomas v Powercor Australia Limited [2011] VSC 614 at [18] per Beach J; Wheelahan & Anor v City of Casey & Ors [2011] VSC 215 at [75] per Emerton J.
Rees J recently summarised the steps involved in the Court's assessment in Haselhurst (at [20]):- "[T]he first question is whether the settlement is reasonable inter partes, that is, between the representative plaintiff and defendant in each proceeding. The second question is whether the settlement is fair and reasonable inter se, that is, between group members. In determining these questions, the Court must be satisfied that the settlement has been undertaken in the interests of the group members as a whole and not just in the interests of the representative plaintiff and the defendant: Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 71 FCR 250 at 258 (per Branson J)."
There is no definitive or exhaustive list of factors that must or may be taken into account in approving a settlement, and the merits of each settlement must be considered having regard to its particular facts and circumstances. Approval should not be approached in a formulaic way: Darwalla at 333-335 [33]-[35].
Nonetheless, some factors are likely to be relevant. These include:- 1. The complexity and duration of the litigation; 2. The reaction of the class to the settlement; 3. The stage of the proceedings; 4. The risks and prospects of success of establishing liability and damages; 5. The risks of maintaining a class action; 6. The ability of the defendants to withstand a greater judgment; and 7. The reasonableness of the settlement in light of the "best case" recovery and the attendant risks of litigation. 8. See Williams at [19]; Modtech Engineering Pty Ltd v GPT Management Holdings Ltd [2013] FCA 626 at [11], [13].
A court may be led to conclude that a proposed settlement is not fair and reasonable and in the interests of group members as a whole for reasons, including but not limited to:- 1. The settlement may have an adverse effect on group members that goes beyond the claims and defences in the representative proceedings; 2. The adverse effect is not balanced by any proposed benefit under the settlement; 3. Preparation of the proceedings has been adversely affected by funding or other difficulties not disclosed to group members; 4. Potential conflicts of interest are not properly recognised and addressed in the course of the settlement application; 5. Less than the whole of the costs of the proceeding have been scrutinised and are proposed to be the subject of reimbursement through the settlement fund; and 6. The prospects of success of the claim are not properly laid before the Court. 7. See Kelly v Willmott Forests (in liq) (No 4) (2016) 335 ALR 439; [2016] FCA 323 at [6]-[12].
I am satisfied that none of the reasons set out at [45] above apply to this case. In my view, the proposed settlement is fair and reasonable and in the interests of the group members as a whole.
In relation to objections made by group members, Hoeben CJ at CL set out the following principles in Johnston (at [22]):- "(xvi) An important consideration is whether group members were given timely notice of the critical elements so that they had an opportunity to take steps to protect their own position if they wished. Once appropriate notice is given, the absence of objections or other response action from group members is a relevant consideration in support of the settlement and all its elements. (xvii) Where a group member objects to the settlement, an important question is whether the objector is prepared to assume the role and risks of being lead plaintiff. It is easy for group members who face no adverse costs risk to want a plaintiff to fight to the very end. The weight to be given to objections will diminish where the objector is unwilling or unable to take on all of the economic and other burdens which the plaintiff otherwise bears." (citations omitted).
In Ellis v Commonwealth of Australia [2023] NSWSC 550 ("Ellis"), Beech-Jones CJ at CL (as his Honour then was) stated (at [7]):- "It is not the function of this Court in considering whether or not to approve a settlement of a representative action to try the case that settled or make findings of fact about a dispute that has been resolved. Instead, the Court's role is to consider the fairness and reasonableness of the proposed settlement, both as between group members and the defendant(s) and as between group members themselves. It suffices to state that, although at one level the payouts to group members will be relatively modest compared to the harm that was suffered, they still represent a very good outcome when consideration is given to the many legal and evidential hurdles the claims faced and the significant delay that was likely to ensue had the matter been litigated. The costs and fees that are deducted from the settlement are reasonable given the risks involved. This case represents a positive example of the benefits of representative actions."
For reasons set out below, I respectfully adopt the remarks of Beech-Jones CJ at CL in relation to this case. The great majority of group members' claims are modest, in the sense that they are nowhere near catastrophic. That is not to diminish the harm suffered by the group members. However, bearing in mind the obstacles faced by the group members (seven years on, and in truth at the beginning of the litigation), the likely appeals that lie ahead on a multiplicity of issues, the unrecoverability of some costs even in the event of success, the possibility of a pyrrhic victory against the TCI companies and/or Dr Dona and the delay of some years before the litigation is complete (and compensation paid), in my opinion the settlement represents the best chance for group members to achieve compensation that in some fashion reflects the harm they have allegedly suffered. To paraphrase Beech-Jones CJ at CL, in my view this is a case that demonstrates the advantages of representative proceedings as a vehicle in complex medical negligence proceedings where harm has been relatively moderate.

[17]

Fair and Reasonable Settlement Inter Partes

I will first consider whether the proposed settlement is fair and reasonable between the plaintiffs (and group members) and the defendants.
As I have indicated, the parties are in dispute as to breach of duty, causation and damages. There are also real limitation issues which are in dispute. There are risks with the claim against every party on multiple bases, but these are not necessarily insurmountable. Having said that, the proposed settlement is a compromise taking into account the very real risks attendant upon this litigation. Even the best case has risk which is unforeseeable. Here, at least some of the risks can be foreseen, and they are considerable.
If the plaintiffs were to continue the litigation, it appears that they would have to address a number of complex factual and legal issues, including establishing that:- 1. the TCI system in fact existed as alleged; 2. the system constituted a breach of the non-insurer defendants' duty of care to the plaintiffs, including establishing that the system was not widely accepted in Australia by peer professional opinion as competent professional practice; 3. the insurer defendants' policies covered the respective defendants' conduct in the circumstances; and 4. the applicable limitation period had not expired in respect of the pleaded causes of action.
The common questions trial was set down for a period of 14 weeks commencing on 15 April 2024. The parties' estimate in their draft trial plan was well in excess of that period, and it is possible, if not likely, that the trial of the common questions would have in fact required more time than was estimated meaning that the common questions trial would not have been finished until early 2025. Taking into account the protracted nature of the proceedings and the parties' conduct of the litigation to date, it is also possible that there would have been further interlocutory arguments, and then the judgment of this Court and likely appeals.
In any event, if one assumes that the trial would have been complete within 14 weeks, that the plaintiffs would have been successful, and the defendants would not have appealed, it would then have been necessary to determine causation and damages in respect of the individual plaintiffs and group members. The group members would have been required to seek legal representation for their individual claims. If a group member could not expect to recover damages in excess of $100,000 (a real issue with respect to some group members' claims), their legal costs would be limited by the Legal Profession Uniform Law Application Act 2014 (NSW) to the greater of $10,000 or 20% of the amount recovered. Those group members would likely struggle to obtain legal representation (on a no win, no fee basis) following a successful outcome in the common questions trial. It is also likely that any settlement reached (or judgment delivered) following a successful outcome in the common questions trial would not occur for some years thereafter.
The proposed settlement represents a certain outcome for the plaintiffs, and also gives substantial certainty to the group members, save for the uncertainty with respect to the quantum of compensation received by each individual group member (to which see below). Although solicitors were first instructed approximately 10 years ago, the decision to accept the proposed settlement was expeditious when considered against the possibility of this litigation continuing for years to come. That decision also provides certainty by way of limiting the group members' legal costs, and avoids the likelihood for group members to be required to pay individual legal costs in the future. Further, I am satisfied that the sum set aside for damages is well within the likely range of damages, after notional discounting.
Taking into account the matters set out above and the in-depth analysis set out in counsels' confidential opinion, I am satisfied that the proposed settlement is fair and reasonable "inter partes".

[18]

Fair and Reasonable Settlement Inter Se

In order to determine whether the proposed settlement is fair and reasonable between group members, it is necessary to consider the Settlement Scheme which forms part of exhibit TLG-1 to Mr Goldberg's affidavit, and is explained in detail in the confidential opinion of counsel.
The touchstone of the Damages Assessment Protocol (schedule 1 to the Settlement Scheme) is an assessment of each group member's non-economic loss by the proposed Administrator of the Settlement Scheme, Turner Freeman Lawyers. The proposed scheme provides for the determination of payments to group members, in bands, based upon an assessment of their non-economic loss, from which the effect of the group members' disability on their capacity to work, perform household or personal care tasks and requirement for treatment (if any) is to be extrapolated. Despite the inexact nature of these correlations, I consider that it is appropriate to rely upon them in the circumstances of the large number of group members, and where the alternative would be individual assessments of all heads of damage (which would significantly increase legal costs).
Group member sampling and surveys were conducted in order to develop a picture of the typical group member. Simple, but well considered, exclusions and assumptions were applied to the information obtained from the samples and surveys in order to determine the amount of compensation a group member might receive based upon an assessment of non-economic loss. Sample group analysis was conducted to confirm that those exclusions and assumptions were appropriate, based on the distribution of group members between different bands and the compensation to be received by reference to each band. Group members may receive more (or less) than what they might have received if their claim was settled on the basis of an individual assessment of all heads of damage, allowing for discounting. This is common in representative proceedings concerning personal injury, given that it is "impossible to assess damages for pain and suffering and loss of amenities of life by any process of arithmetical calculation": Todorovic v Waller (1981) 150 CLR 402; [1981] HCA 72 at 412 per Gibbs CJ and Wilson J. It also acknowledges that group members have benefited from shared legal costs and the avoidance of duplication of work through the vehicle of a representative proceeding.
A full assessment of each head of damage will be conducted for group members with more significant injuries, but their damages are to be capped at $300,000.
The Settlement Scheme also takes into account contingencies, including the potential registration of further group members, the potential requirement for group members to apply to the Court for individual settlement approval, bulk repayments required to be paid to Medicare and other third parties which have not yet been negotiated and the adjustment of distributions depending upon the balance remaining after all claims have been assessed. In my opinion, bearing in mind the difficulties and variabilities attendant upon the administration of such a large group (1033 registered group members), the Settlement Scheme is comprehensive and equitable.
I am satisfied that the proposed settlement is fair and reasonable "inter se".

[19]

Objections

Ten group members provided written objections to the proposed settlement. Their objections were largely in relation to the adequacy of the amount of compensation they are likely to receive, the deduction for legal costs and the perceived lack of transparency in the Settlement Scheme.
Three group members addressed the Court at the hearing of the Notice of Motion. They described the pain and suffering they attributed to the breast augmentation surgery and echoed the written objections to the effect that the amount of compensation they would receive under the proposed settlement was inadequate. Their evidence was admitted for the limited purpose of identifying their subjective views about the proposed settlement.
The proposed settlement sum takes into account the risks associated with proceeding to a hearing and other considerations, including but not limited to those set out at [54]-[57] above. It is not reflective of the full value of the group members' claims if they were wholly successful at a final hearing. That, in my opinion, is reasonable in the circumstances (fully canvassed in counsels' confidential advice).
On 16 April 2024, group members were notified that the proposed Settlement Scheme would be accessible on the Turner Freeman Lawyers website. It has been available since 23 April 2024. It is understandable that it may be unsettling for group members to have the proposed settlement approved without knowing the exact amount of compensation one might receive. However, putting the contingencies involved in the administration of the Settlement Scheme to one side (see, eg, [64] above), it would not be possible to ascertain the exact amount of compensation for individual group members under a proposed settlement unless a full assessment of non-economic loss was conducted for each claim. In circumstances where approval of the proposed settlement is not a certainty, it is for good reason that a full assessment is not conducted in a class action of this size because it is possible that such an expensive exercise may need to be revised (multiple times) in future.
I address the deduction for legal costs and disbursements under the proposed settlement at [82]-[85] below.
I thank the group members for expressing their objections. I acknowledge the real and lasting harm that they have suffered and their considerable courage for speaking out in a public environment about matters concerning their anatomy. Without their participation, this representative proceeding, which will benefit so many women, would not have been possible. I have taken their objections into account.

[21]

Payment to the Plaintiffs

Order 9(a) made on 14 May 2024 authorised the deduction of $2.81 million from the proposed settlement sum to the plaintiffs based on damages agreed upon by the parties.
A conflict of interest exists between the plaintiffs and non-plaintiff group members, because the plaintiffs will receive sums of money in accordance with the proposed settlement which are likely to be more than that received by the majority of non-plaintiff group members. In Darwalla, Jessup J held that it may be appropriate for that to occur in the right circumstances (at [76]):- "I consider it prima facie reasonable that particular parties who have sacrificed valuable time and incurred expenses in the interests of prosecuting this proceeding on behalf of group members as a whole should be able to look to the corpus of the settlement sum for some degree of compensation and reimbursement."
The representative plaintiffs in this case have undoubtedly incurred personal expenses and sacrificed a significant amount of time in attending medical appointments, conferences and providing instructions to their legal advisers. It is reasonable to compensate them for this time and expense, which is not uncommon in like representative proceedings: see Darwalla at [88], Johnston at [50]-[54]; Ellis at [57]; Stanford v DePuy International Ltd (No 6) [2016] FCA 1452 ("Stanford") at [158].
However, unlike most cases, under this proposed settlement the plaintiffs will not receive a lump sum specifically referable to compensation for time expended and personal expenses. Instead, the parties have agreed upon (very significantly reduced) damages for each representative plaintiff on an individual basis. In each case these figures are likely greater than they would otherwise receive under the Settlement Scheme. The payment of damages to representative plaintiffs prior to the distribution of funds to group members was approved as a component of the settlement in Schofield v TFS Manufacturing Pty Ltd [2023] FCA 1045 ("Schofield") at [16] and [26]. In my opinion, such a payment is appropriate in the instant case.
In addition to the time expended and personal expenses incurred, I consider the payments to the representative plaintiffs to be fair and reasonable for three reasons. Each reason pertains to the plaintiffs themselves and not to the group members.
First, it is well known that personal injury cases ordinarily necessitate the examination and publication of medical records and reports. In this case the expert reports refer to the plaintiffs' breast augmentation surgery in detail and they have had their private anatomy examined multiple times and photographed. It is reasonable to expect that the discomfort and embarrassment caused by this intrusion into their privacy was magnified because of the intimate nature of the claims, media attention and reporting, and because each plaintiff was a representative of a larger group of individuals (with the exception of the fifth plaintiff).
Second, the plaintiffs have accepted the risk of liability to pay the defendants' costs of the proceedings if they are unsuccessful. Between the 19 defendants, at least 9 firms of solicitors have been instructed and 23 counsel briefed, including 4 senior counsel. It is likely that some of those numbers are in fact higher. The current iteration of the pleadings on the substantive claim spans five volumes, and the proceedings have a tortured seven year procedural history. It is fair to say that the costs involved in defending the claim to date are enormous and that if the plaintiffs were required to pay any or all of the defendants' costs (which is a real possibility), it is not farfetched to expect that most, if not all, would be placed in a position of extreme financial hardship.
Third, upon consideration of the evidence before me it is apparent that a smaller (but still very significant) discount on damages with respect to the representative plaintiffs' claims is reasonable on multiple bases. For example, it is likely, although I cannot be sure, that the lead plaintiffs were chosen because of the strengths of their respective claims.
Like Ellis, this is another exemplary case demonstrating the benefits of representative proceedings. The fair but compromised outcome achieved by the proposed settlement was only made possible by the risks and responsibilities taken up by the representative plaintiffs. Therefore, in my opinion, the deduction from the proposed settlement sum on account of the plaintiffs' damages is fair and reasonable.

[22]

Plaintiffs' Legal Costs and Disbursements

Order 9(b) made on 14 May 2024 authorised the deduction of $8.9 million from the proposed settlement sum for the plaintiffs' legal costs and disbursements.
In Stanford, Wigney J set out the principles in relation to legal costs in a settlement approval for a representative class action:- "[I]n assessing the fairness and reasonableness of the costs component of a proposed settlement, the Court takes a pragmatic approach, seeking some independent verification of the reasonableness of the costs claimed, but not imposing an onerous or exhaustive task upon an applicant: Courtney v Medtel Pty Ltd (No 5) [2004] FCA 1406; 212 ALR 311. The Court's task is not to perform a taxation of the fees. Rather, the Court considers whether the fees and disbursements are unreasonable in any respect having regard to, amongst other things, the nature of the work performed, the time taken to perform the work, the seniority of the persons undertaking the work and the appropriateness of the charge out rates of those persons: Modtech at [32]. The Court should not approve an amount that is disproportionate, but such an assessment cannot be made on the simplistic basis that the costs claimed are high in absolute terms, or high as a percentage of the total recovery: Foley v Gay [2016] FCA 273 at [23]-[24]."
In his affidavit, Mr Gardiman provides a breakdown of the plaintiffs' costs and disbursements of the proceedings by reference to the $8.9 million deduction from the proposed settlement sum. That there has been a very significant discount applied to the plaintiffs' overall costs of the proceedings is an understatement.
Although a Court may be assisted by a detailed assessment performed by a costs consultant, that is not a requirement: see Schofield at [19]-[20]. Indeed, such is the discount applied to costs in the instant case, I can be confident that any costs assessment would allow a sum for costs far in excess than that claimed and would amount to a wasted expenditure which would deplete the fund available to group members. Given the nature and complexity of the claim, the number of group members, the procedural history of the litigation (set out at [2]-[9] above) and the significant discount applied to costs, I am satisfied that this deduction from the proposed settlement sum is reasonable.

[23]

Costs of Administering the Settlement Distribution Scheme

Order 3(c) made on 14 May 2024 authorised the deduction of $1.1 million for "Administration Costs" of the Settlement Scheme to be paid to the Administrator in 12 monthly instalments.
A summary of the methodology of the Settlement Scheme is outlined at [61]-[64] above.
In his affidavit, Mr Gardiman refers to a similar scheme, the TFS Settlement Scheme, which is a publicly available document and was approved in Schofield. At [18]-[19] of his affidavit, Mr Gardiman states:- "By reference to clause 13.2 of the TFS Settlement Scheme, it may be seen that the Scheme Administrator is entitled to charge $475 for the cost of determining a group member's eligibility; a further $2,775 for the purpose of determining a group member's damages, and a further $1,106 in respect of administrative expenses, for a total of $4,356 plus GST per group member. By reference to the TFS Settlement Scheme, it is my expectation that the time involved in administering the proposed Settlement Scheme in these proceedings, on a per capita basis, is not materially different to the time involved in the administration of the TFS Settlement Scheme. Nevertheless, Turner Freeman proposes to charge approximately 22% of the sum allowed by the TFS Settlement Scheme which provides a saving, as compared with the TFS Settlement Scheme, in the order of $3,300,000."
It is reasonable to expect that similar costs would be involved for each group member assessment in the instant scheme as in the TFS Settlement Scheme. That the proposed Administrator proposes to charge less than 25% of the sum allowed by the TFS Settlement Scheme is an indication of the reasonableness of the cost of administration. Given the number of group members in these proceedings, I am satisfied that administration costs in the sum of $1.1 million are fair and reasonable.
I observe that Turner Freeman Lawyers, who are experienced personal injury practitioners with acquired corporate knowledge of the group members, are in the best position to administer the Settlement Scheme economically and expeditiously. They are also in the best position to negotiate with Medicare and private health insurers to reduce third party payments, so that the available fund is maximised.

[24]

Orders

I made the orders in the Short Minutes of Order filed in Court on 14 May 2024 as follows:- 1. The plaintiffs have leave to file and serve the Eighth Further Amended Statement of Claim in the form which is annexed and marked "A". 2. Pursuant to s 173 of the Civil Procedure Act 2005 (NSW), the settlement is approved on the terms set out in the executed Parties' Deed of Settlement and Release which appears at pages 6-32 of Exhibit TLG-1 to the Affidavit of Terence Goldberg sworn 10 May 2024. 3. Pursuant to s 173 of the Civil Procedure Act 2005 (NSW):- 1. the proposed Settlement Scheme, the form of which appears at exhibit "TLG-1" pages 33 to 66 to the Affidavit to Terence Goldberg sworn 10 May 2024 be approved. 2. Turner Freeman Lawyers be appointed the Scheme Administrator. 3. Deductions from the Settlement Fund for payment of the Scheme Administrator's costs of administering the scheme, in the manner set out at 13.1 of the Scheme, be approved. 1. Pursuant to section 179 of the Civil Procedure Act 2005 (NSW), the persons affected and bound by the settlement on the terms set out in the Parties' Deed of Settlement and Release are the plaintiffs, the defendants, and the Group Members in the Eighth Further Amended Statement of Claim. 2. The plaintiffs' and Group Members' claims as against the defendants are dismissed with no order as to costs of the proceedings. 3. All cross-claims are dismissed with no order as to the costs of the cross-claims. 4. All prior costs orders as between the parties are vacated (excluding costs orders made in the Court of Appeal proceedings), save as to the orders that the parties' share as to 1/6 the costs of the facilitators, and the Law In Order costs of the Court Book. 5. Pursuant to section 7 of the Court Suppression and Non-Publication Orders Act 2010 (NSW):- 1. the Parties' Deed of Settlement and Release is to be kept confidential and is not to be disclosed to any person until further order on the grounds that the order is necessary to prevent prejudice to the proper administration of justice. 2. The Confidential Opinion of Counsel is to be kept confidential and is not to be disclosed to any person until further order on the grounds that the order is necessary to prevent prejudice to the proper administration of justice. 3. The Affidavit of Armando Gardiman sworn 6 May 2024 in its unredacted form is to be kept confidential and is not to be disclosed to any person until further order on the grounds that the order is necessary to prevent prejudice to the proper administration of justice, save that the affidavit may be published in the redacted form which appears at Annexure "B" to these orders. 4. The Affidavit of Terence Goldberg sworn 10 May 2024 in its unredacted form is to be kept confidential and is not to be disclosed to any person until further order on the grounds that the order is necessary to prevent prejudice to the proper administration of justice, save that the affidavit may be published in the redacted form which appears at Annexure "C" to these orders. 1. Pursuant to sections 173(2) and 183 of the Civil Procedure Act 2005 (NSW), the following deductions be approved and paid:- 1. Payments to the plaintiffs (in the individual sums set out at 89 of the Affidavit of Terence Goldberg sworn 10 May 2024) in the sum of $2,810,000; 2. A payment to Turner Freeman Lawyers of $8,900,000 inclusive of GST representing costs of the proceedings.

Raad & Ors v The Cosmetic Institute Pty Limited & Ors

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Cases Cited (32)