The Ref’s Call: Pelvic mesh class actions demonstrate the courts’ growing and innovative use of referees in complex cases

By Simone Michel (Legal Writer – Practical Guidance Dispute Resolution) and Michael Kontoudis (Senior Legal Writer – Practical Guidance Dispute Resolution)

Recent decisions of the Federal Court in high-profile class actions highlight the emerging trend for the courts to appoint referees in novel and innovative ways in a broad range of complex commercial matters, from the determination of liability and damages to the identification of candidates to conduct settlement distribution schemes.

On 16 March 2023, the Federal Court of Australia approved a $300 million settlement in the Johnson & Johnson pelvic mesh class action, representing the largest product liability class action lawsuit settlement in Australia to date: Gill v Ethicon Sàrl (No 10) [2023] FCA 228 (Johnson & Johnson Class Action).

On that same date, the Federal Court also approved a $105 million settlement in a related class action against Boston Scientific Corporation: Fowkes v Boston Scientific Corporation [2023] FCA 230 (Boston Scientific Class Action).

These class actions concerned product liability and compensation claims against manufacturers and suppliers of synthetic pelvic mesh and sling implants alleged to have caused complications in a significant number of women who had undergone surgery to implant these products.

In both matters, the Federal Court used or contemplated the use of references in many varied ways.

The Federal Court’s powers to order references are set out in s 54A of the Federal Court of Australia Act 1976 (Cth) and Division 28.6 of the Federal Court Rules 2011 (Cth) and are broadly similar to those employed in State and Territory courts. These provisions empower the court to appoint a referee (often a senior barrister or subject matter expert) to provide a report to the court that addresses specified questions concerning factual or legal issues in a dispute, which report may subsequently be adopted, varied or rejected by the court.

Using referees to determine damages and liability

Prior to the settlement of the Johnson & Johnson Class Action, Lee J attempted to design a streamlined process for the assessment of group member claims. To achieve this, Lee J appointed Julian Sexton SC to identify a set of “paradigm cases”, in respect of which a report would be prepared that assessed those cases to determine key issues relating to damages and liability, including a claimant’s loss or damage, the cause of that loss or damage, and the amount of damages payable. The idea was that this “master report” could then be adopted and followed in the future to assess individual claims using more streamlined references.

The terms of the reference were broad and the referee was given leeway to conduct his inquiry “without undue formality or delay” and in the manner he thought fit, including by making inquiries in person or by telephone.

In the Boston Scientific Class Action, which had settled before trial, Lee J stated (at [184]) that if the settlement in that matter were not approved, it was his intention to order references to determine liability and assess individual claims in lieu of a traditional trial process.

Using referees to manage the distribution of settlement schemes

These class actions also highlight that courts are increasingly contemplating the use of referees to facilitate their supervisory and protective functions in class actions, including oversight and management of the distribution of settlement schemes.

In both the Johnson & Johnson Class Action and the Boston Scientific Class Action, Lee J has proposed (but has not yet ordered) the appointment of a referee to conduct a tender and identify candidates to administer the distribution of settlement funds amongst group members, in light of the need for courts to be “open to innovative ways” and to use “creative thinking” to protect group members and contain costs: see Gill v Ethicon Sàrl (No 11) [2023] FCA 229 at [9] and [10].

In light of the estimate of the applicants’ lawyers that the costs of administering the settlement scheme would exceed $36 million, Lee J noted that “the assumption that solicitors for applicants in [class actions] should become scheme administrators by default is a notion which needs to be exploded” and that the court should explore “whether there were cheaper and better ways to distribute the settlement sum justly among group members”: Gill v Ethicon Sàrl (No 11) [2023] FCA 229 at [9] and [13].

While it is relatively common for the court to appoint referees (usually experienced costs lawyers) to assess the costs of a settlement distribution scheme, it is more novel for the court to engage a referee to assist the court’s protective and supervisory function by overseeing a competitive tendering process for a fund administrator.

Are you prepared for a court to appoint a referee in your case?

With finite resources and expanding caseloads, courts across Australia have been zealous in their pursuit of efficiency and prudent case management in recent years. It is little surprise that courts have demonstrated a willingness to explore new ways to facilitate the expeditious conduct of complex commercial cases, including by appointing referees to determine all manner of questions in proceedings.

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