FEDERAL COURT OF AUSTRALIA

Peterson v Merck Sharp & Dohme (Aust) Pty Ltd (No 7) [2015] FCA 123

THE COURT ORDERS THAT:

1.    The persons affected by the orders below are the Applicant, the Respondents and all the Group Members (as defined in paragraph 2 of the Further Amended Statement of Claim filed 7 July 2008) who have not opted out under s 33J of the Federal Court of Australia Act 1976 (Cth) (“the Federal Court Act”).

2.    Pursuant to s 33V of the Federal Court Act, the settlement of this proceeding conformably with the Australia-Wide Settlement Agreement dated 22 February 2013, as successively amended and supplemented by:

    the Amendment and Supplement to the Settlement Agreement dated 26 June 2014;

    Amendment No. 2 to the Australia-Wide Settlement Agreement dated 30 September 2014;

    Amendment No. 3 to the Australia-Wide Settlement Agreement dated 9 October 2014; and

    Annex C Point and Award Determination as amended on 6 November 2014 and exhibited as Exhibit JKC-1 to the Affidavit of Julie Kirsten Clayton affirmed on 11 November 2014 (“Amended Annex C”),

(collectively, “the Amended Agreement”) be approved.

3.    The proceeding be dismissed.

4.    The Eligible Claimant Amount referred to in the Amended Annex C be distributed in accordance with the Amended Agreement.

5.    All orders for costs made in this proceeding prior to this day be set aside.

6.    There be no order as to the costs of the Applicant’s application dated 7 October 2014.

7.    The confidential affidavit of James Michael Higgins affirmed 10 November 2014 and Exhibit JMH2-1 to the Affidavit of James Michael Higgins affirmed 10 November 2014 be sealed and kept confidential on the court file and not be published without further order of the court.

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

THE COURT ORDERS THAT:

1.    The persons affected by these orders are the Applicant, the Respondents and all the individuals named in Table A to the Statement of Claim filed 16 October 2008 who did not opt out pursuant to the order of 1 March 2013.

2.    Pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth), the settlement of this proceeding conformably with the Australia-Wide Settlement Agreement dated 22 February 2013, as successively amended and supplemented by:

    the Amendment and Supplement to the Settlement Agreement dated 26 June 2014;

    Amendment No. 2 to the Australia-Wide Settlement Agreement dated 30 September 2014;

    Amendment No. 3 to the Australia-Wide Settlement Agreement dated 9 October 2014; and

    Annex C Point and Award Determination as amended on 6 November 2014 and exhibited as Exhibit JKC-1 to the Affidavit of Julie Kirsten Clayton affirmed on 11 November 2014 (“Amended Annex C”),

(collectively, “the Amended Agreement”) be approved.

3.    The proceeding be dismissed.

4.    The Eligible Claimant Amount referred to in the Amended Annex C be distributed in accordance with the Amended Agreement.

5.    All orders for costs made in this proceeding prior to this day be set aside.

6.    There be no order as to the costs of the Applicant’s application dated 7 October 2014.

7.    The confidential affidavit of James Michael Higgins affirmed 10 November 2014 and Exhibit JMH2-1 to the Affidavit of James Michael Higgins affirmed 10 November 2014 be sealed and kept confidential on the court file and not be published without further order of the court.

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

REASONS FOR JUDGMENT

1    Consequent upon the rejection, on 17 May 2013, of the applications for the court’s approval of the settlement of these proceedings – Peterson v Merck Sharp and Dohme (Aust) Pty Ltd (No 6) [2013] FCA 447 – the parties modified their settlement agreement, and have now applied for approval of the modified settlement pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (“the Federal Court Act”). The reasons which follow below deal with that application. In providing them, I assume a familiarity with my reasons of 17 May 2013.

2    The parties’ agreement now provides for the distribution of the total settlement sum between all of the 1660 group members in the Peterson proceeding to whom I referred in para 3 of my reasons of 17 May 2013, and all the (known) group members in the Reeves proceeding, according to a points system which recognises the differential impacts of existing personal circumstances presumptively predisposing to the occurrence of myocardial infarction. I do not need to set out the details of this system in these reasons. It is sufficient to say that the problem to which I referred in para 17 of my earlier reasons has now been addressed. This has, of course, been done by the application of a rule of thumb, but it is a fair and reasonable one when measured against the reasoning of the Full Court in its judgment of 12 October 2011.

3    The problem to which I referred in para 22 of my earlier reasons has also been addressed. In relation to each of the group members referred to, an assessment has already been made whether he or she satisfies the gate criteria. The result is part of the agreement itself, rather than depending on the judgment of the applicants’ solicitors. Further, what was previously a ceiling on the total amount that would be payable to group members has now, in effect, become the settlement sum itself: the amount of $497,500 will be distributed to the group members who satisfy the gate criteria. Together with the points system to which I have referred, this means that the sum to be paid to each group member is known, and is provided for in the agreement.

4    The applicants have now sought, and received, the advice of senior and junior counsel as to the appropriateness, in the circumstances, of the settlement which they have reached with the first respondent. That advice has been made available to the court on a confidential basis. The court’s approval of the settlement would be consistent with the advice given to the applicants. The same counsel appeared at the hearing of the s 33V application, this time in the role of amicus curiae to represent the interests of the group members as a whole. They submitted that the settlement should be approved.

5    The matters referred to above, taken in the context of the situation which was before the court on the previous occasion, have persuaded me that the architecture of the settlement agreement, including so much thereof as provides for a discriminating distribution of the settlement sum amongst group members, is fair and reasonable, not just for the applicants but for the group members as a whole.

6    The striking feature of the settlement is the size of the overall settlement sum itself. The small number of group members whose entitlement is not to be discounted by reference to any personal circumstances – ie those who will receive a payout at the maximum level – will receive only $4,629.36 each. It is, in my view, inconceivable that, independently advised, a person in such a situation would regard that sum as adequate compensation for the loss and damage associated with a heart attack to the occurrence of which Vioxx made a material contribution. By definition, the claim of such a person would not be retarded by the problems of causation which beset the applicant in the Peterson proceeding in the Full Court.

7    How this outcome can be reconciled with the need to do justice to those whose claims will become res judicata upon the making of final orders in these proceedings is a subject which has troubled me greatly in my consideration of the applications which are now before the court. The object of a representative proceeding under Pt IVA of the Federal Court Act is to secure determinations of questions which will be instrumental in the disposition of the claims of numerous potential applicants. In the Peterson proceeding, an earlier Full Court required that there be an articulation of questions which, if they were common ones, would be answered in a way that would bind the parties, particularly the respondents, in relation to all such claims. The answers given to those questions provided a foundation for the applicant in that proceeding to establish his own case on causation and other non-common questions. This he failed to do.

8    One might have anticipated that the next step would have been for the applicant in that proceeding to bring forward the claims of other group members, to be tested against the answers given to the common questions and their own individual circumstances. I do not suggest that this would have been an uncomplicated project. Being a representative proceeding, the prospect that the applicant would have been required to give security would have been a real one: see Madgwick v Kelly (2013) 212 FCR 1. However, considerations such as this were not adverted to on the occasion of the present application. Rather, counsel for the applicants accepted that the court might infer that the view had been taken that the prospect of any group member achieving what would, in a non-class action environment, be regarded as full compensation for an actionable injury suffered by him or her was now regarded as negligible. Counsel also accepted that that view involved a professional appreciation of the circumstances of the facts of all of the group members whose claims will be dismissed if the present applications are granted.

9    At the hearing of the s 33V applications, I was informed that the total settlement sum was a “negotiated figure”. Counsel for the applicants was unable to provide any other justification for the figure, or to relate it to the circumstances of those whose claims remain outstanding. But it does not take much imagination to perceive the character of the chips that were on the table during the negotiations referred to. On the judgment of the Full Court, the applicant in the Peterson proceeding was exposed to a costs liability which would, I infer, dwarf the settlement sum. Absent some other expedient, there is little doubt but that the applicant would have been ruined by the enforcement of the respondents’ entitlements in this regard. The temptation for him to compromise the claims of the other group members as a means of extracting himself from this liability would, I infer, have been irresistible. When looked at in this way, the settlement which the court is now being asked to approve has, to say the least, a certain whiff of expediency about it.

10    As against the concerns which I have just expressed, there are three considerations which favour the approval of that settlement. The first is that, by reason of events to which I referred in my reasons of 17 May 2013, the group whose claims remain to be considered in the Peterson proceeding is now finite, known and closed. The group in the Reeves proceeding has always been thus. The applicants’ solicitors have informed all those group members of the terms of the settlement which is now proposed (save for the details of a very late, minor, correction to one of the calculations, from which only one group member would be detrimentally affected, and he knows of it and has no objection). Very few objections have been received, and they have been responded to by the applicants’ solicitors in correspondence to which the court has been exposed. I would not regard any of those objections as sufficient to stand in the way of the approval of the proposed settlement. Otherwise, the group members who might consider that they have claims worthy of being advanced in court have been kept fully informed, and appear to be content for the applicants (in both proceedings) to proceed in the way that they have.

11    The second consideration is s 33T(1) of the Federal Court Act. In the circumstances facing the applicant in the Peterson proceeding, it would seem entirely reasonable for one of the other group members to put himself or herself forward as the lead applicant in that proceeding, with the associated obligations, and risks, of a party. There has been no application under this section. I do not see why the applicant, having run a major case in the interests of group members, but having failed on his own claim, should continue to be exposed to those obligations and risks in the interests of others who are content to remain below the parapet.

12    The third consideration is an intensely pragmatic one. What would be the best possible default position for group members if the proceedings were not now settled? There is no way of compelling the applicants to prosecute the proceedings. Assuming that they did not do so, later if not sooner either the respondents or the court itself would move under rr 5.22 and 5.23 of the Federal Court Rules 2011 (Cth). The only conceivable outcome of such an interlocutory proceeding would, as it seems to me, be the dismissal of the proceedings. If this occurred, the group members would be denied even the nominal monetary acknowledgement that the present settlement proposal involves.

13    On the strength of those three considerations, and notwithstanding the concerns expressed earlier in these reasons, I consider that the settlement should be approved under s 33V of the Federal Court Act. To the extent that my reasons above relate only to the Peterson proceeding, there is no reason to see the Reeves settlement in a different light.

Associate:

Dated:    26 February 2015