Funder slashed rates to secure $132.5M QBE settlement, judge says
Class Actions July 11, 2018 11:32 pm By Cat Fredenburgh | Melbourne

The litigation funder behind the Federal Court’s precedential ruling that established the first common fund order in an Australian class action agreed to cuts its rates as part of negotiations that resulted in the $132.5 million settlement of the class action against QBE Insurance.

In a judgment published Wednesday, Justice Bernard Murphy gave his reasons for signing off on the $30.75 million payout, representing a 23.2 percent cut, for International Litigation Funding Partners.

Class members who signed litigation funding agreements under which they agreed to payout rates of 32.5 percent or 35 percent for the funder will receive between $12.3 and $15.6 million more under the current funding rate of 23.2 percent, Justice Murphy said.

The funder agreed to slash the 30 percent funding rate proposed in Money Max’s application for a common fund order as part of settlement negotiations, the judge said, resulting in $9.01 million more for class members.

While the Full Federal Court signed off on a common fund order in the case in its landmark ruling, it did not agree to the rates proposed by ILF, saying a reasonable rate of commission would be determined at the end of the proceeding and that it would likely be lower that the proposed rate.

The Full Court’s ruling in the case in October 2016 ushered in a new era in class action litigation in Australia. The common fund order meant that every member of the ‘open’ class action was liable to pay ILF a portion of the commission out of the settlement proceeds, not just class members who signed a funding agreement with the firm.

In his reasons for approving ILF’s cut of the deal, Judge Murphy said the deal balanced the interests of all parties and showed the important role funders play in providing access to justice.

“The aggregate funding commission means that class members, who took no risk in a large, expensive and complex proceeding will share in more than $100 million after deduction of funding charges, and more than $80 million after deduction of funding charges and legal costs. It avoids excessive or disproportionate charges to class members while recognising the important role that litigation funding played in providing access to justice for Money Max and the class members,” Judge Murphy said.

Judge Murphy also gave his reasons for approving $21.8 million in legal fees for class action firm Maurice Blackburn, after the “unusually high” $22,514,715.33 million estimate the firm provided for its costs and disbursements was cut by $639,036.82.

Maurice Blackburn filed the case in September 2015 alleging that QBE engaged in misleading conduct and failed to meet its continuous disclosure obligations prior to announcing a shock loss of $254 million in the 2013 financial year.

Expectations were raised by QBE’s half yearly report in August 2013, which predicted an expected profit of $1 billion. The announcement of a loss in December of the same year surprised many and led to share values plummeting by 30 percent over two days.

QBE first agreed to the deal in principle in December 2017. In an ASX announcement at the time, the company said it had not admitted any wrongdoing and the settlement would have no material impact on 2017 second half earnings.

The applicant was represented by Maurice Blackburn. QBE was represented by Allens.

The case is Money Max Int Pty Ltd v QBE Insurance Group Ltd.

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Cat Fredenburgh

Cat Fredenburgh has been covering legal news for 12 years. She was previously Editor-in-Chief at US legal news publication Law360. She is the Co-Founder of Lawyerly.