A proposed settlement in a long-running class action lawsuit against AMP and its life insurance division has sparked controversy over the distribution of compensation, with the majority of the payout earmarked for legal fees rather than clients.
More than 100,000 Australians joined the Federal Court case, which was launched over seven years ago and alleges that AMP Financial Planning and its authorised representatives charged excessive premiums and failed to provide objective, best-interest financial advice to clients. The lawsuit contends these breaches of corporate law affected thousands of customers nationwide.
Under the proposed $29 million settlement, court documents reveal that approximately $22 million—over three-quarters of the total amount—would be allocated to lawyers' fees. The four lead applicants in the case are set to receive $20,000 each, while a prioritised representative claimant would receive $10,000. After deducting nearly $1 million in administrative costs, the remaining sum of about $7.25 million would be divided among the other claimants, potentially resulting in average individual payouts of just $63.
AMP, a publicly traded company valued at more than $5.7 billion, stated it had no role in controlling costs after agreeing to the settlement without admitting liability. A Federal Court judge appointed a confidential “costs referee” to review the fees and determine whether they are “fair and reasonable” before deciding whether to approve the settlement. Objections have been filed citing concerns over the adequacy of the compensation relative to legal expenses, fueling wider debate over the effectiveness and fairness of class action mechanisms in Australia.
Senior lawyers involved in the case, including representatives from Shine Lawyers and Piper Alderman, along with litigation funder Woodsford Litigation Funding, rejected characterizations that payouts are determined by averaging losses. Instead, they explained that losses are assessed individually for each group member. Since the class action’s initiation in July 2020, the legal teams and funder together billed nearly $62 million in costs, though the firms have now capped their expenses at approximately $22 million, according to court notices.
Shine Lawyers, which has offices across Australia, defended class actions as essential tools for compensating individuals who otherwise lack viable means to address large-scale corporate misconduct. However, some group members expressed disappointment and frustration over the settlement’s distribution. One claimant described feeling “astounded” that the bulk of funds would be absorbed by lawyers and the litigation funder, with ordinary participants likely to receive only minimal amounts.
The case highlights ongoing tensions in the Australian legal system regarding the balance between access to justice through class actions and the costs involved, particularly when legal fees significantly diminish the compensation available to affected consumers. The Federal Court’s decision on whether to approve the settlement is pending.