Schofield v TFS Manufacturing (Settlement Approval)

Case [2023] FCA 1045

FEDERAL COURT OF AUSTRALIA

Schofield v TFS Manufacturing (Settlement Approval) [2023] FCA 1045   

File number: NSD 181 of 2020
Judgment of: LEE J
Date of judgment: 24 August 2023
Date of publication of reasons: 4 September 2023
Catchwords: REPRESENTATIVE PROCEEDINGS – settlement approval application pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) – representative proceedings brought against manufacturer and supplier of pelvic “mesh” implants – where group members afflicted by physical, psychological and psychosocial difficulties – where objections to proposed settlement received – where proposed settlement fair, reasonable and in the interests of group members – bifurcation of approval of settlement and distribution of settlement sum – settlement approved
Legislation: Federal Court of Australia Act 1976 (Cth) Pt IVA, ss 33V(1), 33V(2)
Cases cited:

Botsman v Bolitho [2018] VSCA 278; (2018) 57 VR 68

Fowkes v Boston Scientific Corporation [2023] FCA 230

J & J Richards Super Pty Ltd v Linchpin Capital Group Limited (Settlement Approval) [2023] FCA 656

Lifeplan Australia Friendly Society Limited v S&P Global Inc (Formerly McGraw-Hill Financial, Inc) (A Company Incorporated in New York) [2018] FCA 379

Liverpool City Council v McGraw-Hill Financial, Inc (now known as S&P Global Inc) [2018] FCA 1289
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Regulator and Consumer Protection
Number of paragraphs: 26
Date of hearing: 24 August 2023
Counsel for the applicants: Dr D Graham SC with Mr M Robinson
Solicitor for the applicants: AJB Stevens Lawyers
Counsel for the third respondent: Ms K Morgan SC with Mr D Wong
Solicitor for the third respondent: DLA Piper Australia
Counsel for the fourth respondent: Ms L McFee
Solicitor for the fourth respondent: Barry Nilsson
Counsel for the fifth respondent: Mr M Hutchings
Solicitor for the fifth respondent: Meridian Lawyers
Counsel for the sixth respondent: Mr D Weinberger
Solicitor for the sixth respondent: McCabes

 

ORDERS

NSD 181 of 2020
BETWEEN:

LINDSEY SCHOFIELD

First Applicant

MELISSA WEEDON

Second Applicant
AND:

TFS MANUFACTURING

First Respondent

IVS PTY LTD

Second Respondent

COVIDIEN PTY LTD (and others named in the Schedule)

Third Respondent

ORDER MADE BY:

LEE J

DATE OF ORDER:

24 AUGUST 2023

THE COURT ORDERS THAT:

1.The applicant bring in proposed orders approving the settlement in proper form as directed at the approval hearing to be made in Chambers.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT
(Delivered ex tempore, revised from the transcript)

LEE J:

A        INTRODUCTION

  1. Before the Court is a settlement approval application of a class action pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (FCA Act). These proceedings are the smallest of several class actions commenced in this Court by women who claim to have been injured as a consequence of having been implanted with various mesh devices for the treatment of pelvic organ prolapse (POP) and stress urinary incontinence (SUI). The other,…

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AGLC
Schofield v TFS Manufacturing (Settlement Approval) [2023] FCA 1045
Case
[2023] FCA 1045
Decision Date

CaseChat Overview and Summary

The case of Schofield v TFS Manufacturing (Settlement Approval) involved a settlement approval application brought under section 33V of the Federal Court of Australia Act 1976. The applicant, on behalf of a group of women who had been implanted with pelvic mesh devices, sought approval of a proposed settlement with the manufacturer and supplier of the devices, TFS Manufacturing. The group members were experiencing physical, psychological, and psychosocial difficulties as a result of the implants. The application was made following objections to the proposed settlement.

The primary legal issue before the court was whether the proposed settlement was fair, reasonable, and in the interests of the group members. The court was required to consider the evidence provided, including a well-reasoned confidential opinion from counsel for the applicants, and to determine if the settlement met the necessary criteria. Additionally, the court had to decide whether to bifurcate the approval of the settlement and the distribution of the settlement sum, considering precedents that suggested such bifurcation.

The court found that the proposed settlement of $41.45 million was fair, reasonable, and in the interests of the group members. The settlement was analyzed through a rigorous process involving several steps, including an assessment of group members’ potential damages, an analysis of a random sample of the group, and the application of various deductions and discounts. The court noted that the average compensation per group member in this case was significantly greater than in similar proceedings. The court also decided to bifurcate the approval of the settlement from the distribution of the settlement sum, aligning with previous cases that supported this approach.

The court approved the settlement, ordering that the proposed settlement be brought in proper form for approval in chambers. This decision ensures that the settlement can proceed while allowing further consideration of the distribution of the settlement sum.

Orders

Orders of the court

1. The applicant bring in proposed orders approving the settlement in proper form as directed at the approval hearing to be made in Chambers.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

It is unnecessary to rehearse the principles informing settlement approval applications, which I set out in Fowkes v Boston Scientific Corporation [2023] FCA 230 (at [31]–[45]). Further, on the application, the Court has been provided with a comprehensive and well-reasoned confidential opinion on the proposed settlement and settlement scheme prepared by counsel for the applicants, Dr Graham SC and Mr Robinson. What follows is largely drawn from that opinion on the proposed settlement which, subject to matters to which I will return, is within the range of settlements which are fair, reasonable and in the interests of group members.B BACKGROUND The applicants, Ms Schofield and Ms Weedon, commenced these proceedings under Pt IVA of the FCA Act in February 2021. The proceedings were brought on behalf of women in whom one of two types of polypropylene mesh devices were implanted for the treatment of POP and SUI. The devices were the “Intravaginal Sling Implant” inserted with or without the use of an “IVS Tunneller” (IVS Implant) and the “Tissue Fixation System Implant” (TFS Implant) (collectively, implants). The implants were designed by the fourth respondent, Dr Peter Petros. Dr Petros published a series of papers about the IVS Implant with Professor Ulf Ulmsten in the 1990s. Professor Ulmsten went on to develop the transvaginal tape (TVT) for the treatment of SUI, which was taken up by Ethicon and was one of the mesh implants considered in the Ethicon proceedings. The IVS Implant was manufactured and supplied by IVS Pty Ltd (IVS) from an unknown date in or around August 2000. The implant was thereafter manufactured and distributed by the third respondent, Covidien Pty Limited (Covidien). Covidien acquired the interests and liabilities of IVS at that time. IVS has had, and continues to have, no role in this proceeding. IVS is understood to have no assets, and investigations have failed to reveal the existence of any available policy of insurance. The TFS Implant was manufactured and supplied by the first respondent, TFS Manufacturing Pty Ltd (TFS Manufacturing), between 2004 and 2016. TFS Manufacturing entered into voluntary administration in 2021. Dr Petros, a one-time registered medical practitioner and gynaecologist, is sued in negligence for using and advising the use of the implants on his own patients, or in assisting, supervising and advising other surgeons to use the implants on their patients. Dr Petros is now said to be impecunious on searches that have been conducted to date. MIPS Insurance Pty Ltd (MIPSI) and Chubb Insurance Australia Limited (Chubb) were later joined as respondents to the proceedings. MIPSI is the professional indemnity insurer for Dr Petros and Chubb is the products liability insurer for TFS Manufacturing. The parties have agreed to settle the proceedings for $41.45 million inclusive of third-party repayments, legal costs and disbursements, and administration costs. The settlement involves the execution of two deeds: one for the TFS sub-group and one for the IVS and Petros sub-groups.C CONSIDERATION

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Again, this is not necessarily a matter which directly bears upon the approval of the settlement under s 33V(1) of the FCA Act, but a version of the settlement scheme will be provided to me prior to making orders under s 33V(2) reflecting a payment, subject to this additional discount, to those 15 group members and, subject to the views of senior counsel, split differently between those persons who were direct patients of Dr Petros (being, I am told, four group members) and those who were not, although I am not wedded to any particular discount figure at this stage.F CONCLUSION On the material before the Court, this is a settlement which is clearly within the range of settlements which are fair, reasonable and in the interests of group members, and ought to be approved. Accordingly, I will make orders in chambers facilitating the course I have outlined.

Ratio Decidendi

Legal Principle Established

The parties have agreed to settle the proceedings for $41.45 million inclusive of third-party repayments, legal costs and disbursements, and administration costs. The settlement involves the execution of two deeds: one for the TFS sub-group and one for the IVS and Petros sub-groups.C CONSIDERATION At the settlement approval hearing, I was provided with and marked on the application a comparison table of the average group member recovery in these proceedings compared with the Boston Scientific and Ethicon proceedings, which is set out below (footnotes omitted): As can be seen, the average compensation in this class action is significantly greater per group member compared to the settlement in both the Boston Scientific and Ethicon proceedings. Accordingly, and without descending into detail given the confidential nature of the opinion of counsel, for the reasons evident above and in the opinion, this settlement is not a borderline case. The aggregate sum in compensation forming the basis for the proposed settlement is comfortably within the range of settlements which are fair, reasonable and in the interests of group members. Further, it is rationally based: the settlement figure has been analysed in a rigorous way involving at least four steps. First, the lawyers undertook a broad-brush, impressionistic assessment in order to assign group members to various bands or categories of damages based on the non-economic loss they might be awarded at trial. Secondly, the lawyers used information derived from the registration process to ascertain whether the general impressions formed about group members’ non-economic loss are realistic, which, among other things, enabled conclusions to be drawn about the number of potential group members who may be entitled to compensation; group member demographics and characteristics (which may affect some heads of damages); and where most of the group members are likely to fall in terms of severity of injury and the magnitude of their claim. Thirdly, an analysis was undertaken of a random sample of the group to determine whether the assumptions underpinning the proposed bands or categories of damages were fair, and what the total value of damages would be if the sum were extrapolated and applied to the whole. Fourthly, the lawyers applied various deductions and discounts (both globally and to various subsets of group members) to reach an opinion about whether the settlement sum is fair, reasonable and in the interests of group members. Through the process of opt-outs, approximately 370 women have been identified who have received an IVS or TFS Implant and are eligible to apply for compensation and, following the payment of damages to the lead applicants, a sum of approximately $31,550,000 will be available for investment and distribution to group members. D DISTRIUBTION OF THE SETTLEMENT SUM At the hearing, I raised with counsel for the applicants, Dr Graham SC, as to whether it would be appropriate to bifurcate the settlement approval process under s 33V of the FCA Act: that is, approve the proposed settlement and defer for subsequent consideration the further question of the distribution of the settlement sum pursuant to any settlement scheme, including as to unpaid legal costs and disbursements: see, for example, J & J Richards Super Pty Ltd v Linchpin Capital Group Limited (Settlement Approval) [2023] FCA 656 (at [60]–[61]); Botsman v Bolitho [2018] VSCA 278; (2018) 57 VR 68 (at 111 [198]–[203] per Tate, Whelan and Niall JJA).