Evans v Davantage Group Pty Ltd (No 3)

• Jurisdiction: Australia Federal only
• Judgment Date: 05 February 2021
• Neutral Citation: [2021] FCA 70
• Date: 05 February 2021
• Court: Federal Court

FEDERAL COURT OF AUSTRALIA

Evans v Davantage Group Pty Ltd (No 3) [2021] FCA 70

File number:	VID 982 of 2018
Judgment of:	BEACH J
Date of judgment:	5 February 2021
Catchwords:	REPRESENTATIVE PROCEEDINGS – approval of settlement – common fund order – returns to group members – deduction for “after the event” insurance premium – potential scope of s 33V(2) of the Federal Court of Australia Act 1976 (Cth) – excess returns – cy‑prés doctrine – settlement distribution scheme – settlement approved
Legislation:	Federal Court of Australia Act 1976 (Cth) ss 33V, 33X, 33Z, 33ZB, 33ZF
Cases cited:	Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 3) [2020] FCA 1885 Blairgowrie Trading Ltd v Allco Finance Group Ltd (No 3) (2017) 343 ALR 476 BMW Australia Ltd v Brewster (2019) 374 ALR 627 Evans v Davantage Group Pty Ltd [2019] FCA 884 Evans v Davantage Group Pty Ltd (No 2) [2020] FCA 473 Kuterba v Sirtex Medical Limited (No 3) [2019] FCA 1374 Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Ltd (2018) 358 ALR 382 Newstart 123 Pty Ltd v Billabong International Ltd (2016) 343 ALR 662 Perera v GetSwift Limited (2018) 263 FCR 92 Simpson v Thorn Australia Pty Ltd (t/a Radio Rentals) and Others (No 5) (2019) 141 ACSR 424 Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459
Division:	General Division
Registry:	Victoria
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Number of paragraphs:	130
Date of hearing:	1 February 2021
Counsel for the Applicant:	Mr BF Quinn QC with Mr D Fahey
Solicitor for the Applicant:	Baker & McKenzie
Counsel for the Respondent:	Dr CO Parkinson
Solicitor for the Respondent:	Herbert Smith Freehills
Counsel for the Intervener:	Mr LW Armstrong QC with Mr M Guo
Solicitor for the Intervener:	Aptum Legal

ORDERS

		VID 982 of 2018
BETWEEN:	BRETT WILLIAM EVANS Applicant
AND:	DAVANTAGE GROUP PTY LTD (ACN 161 967 166) Respondent

order made by:	BEACH J
DATE OF ORDER:	5 FEBRUARY 2021

THE COURT ORDERS THAT:

1. Subject to order 2, the settlement of the proceeding be approved under s 33V of the Federal Court of Australia Act 1976 (Cth) subject to any necessary modifications of the settlement distribution scheme (SDS).

2. Within 7 days of these orders, the applicant submit draft orders to accord with these reasons:

(a) reflecting necessary modifications to the SDS; and

(b) more generally dealing with the implementation of the settlement.

3. Liberty to apply.

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

REASONS FOR JUDGMENT

BEACH J:

1 The application before me is to approve a settlement of this group proceeding under s 33V of the Federal Court of Australia Act 1976 (Cth).

2 This proceeding was commenced by the applicant on his own behalf and on behalf of other natural persons who between 1 July 2013 and 28 May 2015 in respect of their purchases of motor vehicles were provided by the respondent (Davantage) with a National Warranty Company Product Disclosure Statement (NWC PDS) and purchased from Davantage warranties that purported to provide financial protection for mechanical failure (the NWC warranties).

3 In each case the NWC warranties were constituted by a document titled “Customer Contract and Declaration” which was signed by an authorised representative of Davantage and the person to whom the NWC warranties were to be issued and incorporated the NWC PDS which was issued by an authorised representative of Davantage prior to or at the time of executing the former document.

4 The applicant has made the following allegations.

5 First, it was said that the NWC PDSs contained a clause stating that the NWC warranties were discretionary risk products, which meant that even if a consumer made a claim that fell within their terms and was not the subject of any exclusion, Davantage was not obliged to pay all claims that fell within the terms and conditions of the NWC warranties.

6 Second, it was said that by reason of the discretion which Davantage retained to reject or accept claims the premium payments made to Davantage by the applicant and group members were unsupported by consideration. In other words, Davantage’s obligations to make a payment in response to a claim under the NWC warranties were illusory. Accordingly, it was said that Davantage would be unjustly enriched if it was permitted to retain the premium payments or any benefits from the use of the premium payments. In the circumstances, it was said that the applicant and group members were entitled to restitution (the no consideration claims).

7 Third, it was said that Davantage’s conduct in issuing the NWC warranties which did not have any substance or provide any substantial protection for the applicant and group members amounted to unconscionable conduct in contravention of s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). By reason of this unconscionable conduct, it was said that the applicant and group members were entitled to damages comprising the sum of the premium payments and transaction costs including the interest charges in respect of loans obtained to finance the premium payments (the unconscionable conduct claims).

8 Fourth, it was said that if any contract was formed between Davantage and purchasers of the NWC warranties, the contracts contained unfair contract terms within the meaning of s 12BF of the ASIC Act. Accordingly, the NWC warranties were void, and the applicant and group members were entitled to restitution (the unfair contract terms claims).

9 Fifth, it was said that Davantage’s conduct in issuing the NWC warranties conveyed representations which were misleading or deceptive in breach of s 1041H of the Corporations Act 2001 (Cth) and s 12DA of the ASIC Act. In issuing the NWC warranties it was said that Davantage falsely represented to purchasers that the NWC warranties conferred some benefit of value. By reason of this misleading or deceptive conduct, it was said that the applicant and group members were entitled to damages comprising the sum of the premium payments and transaction costs (the misleading or deceptive conduct claims).

10 Earlier in the proceeding I determined a separate question. The question which was posed was: “Are the Respondent’s promises in the Applicant Warranty that are subject to clause 11 of the Applicant Warranty, illusory?”. On 11 June 2019, I delivered judgment on that question (Evans v Davantage Group Pty Ltd [2019] FCA 884). I answered the separate question in the affirmative, finding that the promises in the NWC warranties were illusory. But given the various matters raised in Davantage’s defence, I could not determine whether the fact that the consideration was illusory rendered the NWC warranties void and therefore whether group members were entitled to restitution.

11 The proceeding has now settled following extensive mediation discussions. A deed of settlement and release has now been executed by the parties, counterparts of which were exchanged on 5 October 2020 (the main settlement...