The Federal Court of Australia has reached a decision on ASIC’s appeal against an “unfair” $82.5 million Storm settlement.
In May this year, ASIC was given the go-ahead to appeal a settlement reached between former Storm Financial clients and Macquarie Bank.
Under the settlement, around 315 investors who funded the class action were to be compensated for approximately 42% of their losses, while around 735 investors were only to get back about 18% of their losses, as estimated by Levitt Robinson.
The difference between the rates of compensation arose from a funders’ premium of $28.875 million to be paid to investors who funded the class action.
The Full Court decided that the distribution of the settlement sum was not fair and reasonable to all class (or group) members. It said that the unfairness arose in two ways:
The lack of opportunity afforded to class members who were not clients of Levitt Robinson to share in the premium proposed to be paid to those funding the action
The inappropriate calculation of the premium by reference to success fees obtained by commercial litigation funders
“In the circumstances outlined, the settlement cannot be said to be fair and reasonable to all group members. A substantial wrong has occurred which the Court is obliged to correct,” the Full Court stated.
In discussing the funders’ premium aspect of the settlement, Justices Jacobson, Middleton and Gordon said it was like a small number of group members (who were also clients of Levitt Robinson) were able to place a bet on a horse race after the race had run and knowing the result of the race.
ASIC Chairman Greg Medcraft welcomed the decision, saying once again that the proposed distribution of the money was irrational and unfair.
“The disparity between the compensation outcomes for the majority of class action members and the minority of class action members and how that was disclosed, was at the heart of our concerns.”