Federal Court Approves $12M Funder Commission in RAMS Settlement

• The Federal Court approved a $12 million funder's commission in the RAMS franchisee class action settlement.
• The total settlement was approximately $29.6 million, with about $16.6 million in deductions, leaving group members with 44 percent of the payout.
• The court justified the substantial commission by citing the high-risk nature of the litigation and the funder's $4 million outlay, noting that funding terms are set before the outcome is known.
• The ruling clarified that settlement deeds cannot impose contractual obligations on non-party group members without their explicit agreement.
• All group members were ordered to share deductions pro rata, ensuring unfunded members contribute to the class's costs and risks.

The Federal Court's ruling underscores its willingness to approve substantial funder commissions when justified by high litigation risk and significant capital exposure, even if the final percentage appears high in hindsight.

The Federal Court has formally sanctioned a substantial settlement in the class action brought by RAMS franchisees, a decision detailed in *Top Ryde Financial Services Pty Ltd v RAMS Financial Group Pty Limited (Settlement Approval) [2026] FCA 1652*. Handed down on October 30, 2026, the ruling approved a total settlement of approximately $29.6 million, from which about $16.6 million in deductions were authorized. This left the group members with approximately 44 percent of the total payout.

The core of the dispute involved 15 RAMS franchise businesses challenging the conduct of RAMS Financial Group (RFG). The franchisees alleged issues related to heightened scrutiny of loan applications, RFG's decisions to revoke authorized credit representative arrangements, and the termination of their franchises. The resolution was reached after the exchange of written closing submissions during a trial that proceeded concurrently with a separate case concerning the Fairfield franchise, where the court had previously identified a limited breach of RFG's good faith obligation and assessed the franchisee's lost opportunity at 12.5 percent.

The approved settlement sum included withheld trail commission with interest, alongside an additional amount of about $20.8 million. Furthermore, RFG committed to ceasing the withholding of future trail commission and offering buy-outs for future trailer income, addressing key grievances of the franchisee group.

A central aspect of the *Federal Court funder commission RAMS settlement* approval was the court's decision to greenlight a $12 million commission for the litigation funder. This figure, while acknowledged by the court to exceed the average percentage seen in some recent approvals, was justified by the high-risk nature of the litigation. The court emphasized that funding agreements are struck when the outcome remains uncertain, stating that "the price of the voyage is struck before the voyage is undertaken."

The court characterized the case as "quite high-risk litigation," noting the funder's significant financial commitment. The funder had paid $4 million in legal fees and disbursements, keeping its capital exposed throughout the trial. The approved $12 million commission represented three times the funder's direct outlay. It was also observed that under alternative formulas within the funding agreements, the commission could have been either $8.58 million or $16 million. Crucially, all but one franchisee had signed funding agreements, and no group member raised an objection to the proposed commission, reinforcing the court's view that "A headline percentage may conceal more than it reveals" regarding the true value of the funder's contribution.

Beyond the financial aspects, the Federal Court's ruling provided critical clarification regarding the enforceability of settlement deed provisions on non-party group members. The settlement deed had sought to impose various covenants, including promises concerning public statements and the destruction of documents, on group members who were not direct parties to the agreement. However, the court firmly rejected this overreach.

The court held that a representative applicant's capacity to settle a case does not grant them the authority to make separate contractual promises on behalf of every group member. It explicitly stated that silence from group members could not be construed as agreement to such terms. Consequently, the court's orders ensured that none of these obligations were imposed on non-party group members unless they had explicitly agreed to them. This aspect of the ruling significantly impacts the drafting and negotiation of *Australian class action settlement deductions* and broader settlement terms, particularly concerning the autonomy of individual group members.

The court also mandated that all group members would share the deductions pro rata. This measure ensures that unfunded members contribute their fair share to the expenditure and risk borne for the entire class, preventing them from benefiting from the funder's investment without contributing. Additionally, one franchise principal was granted until November 6, 2026, to dispute a late revision that reduced their share from approximately 20 percent to about 17 percent.

This *Federal Court funder commission RAMS settlement* offers important insights for legal practitioners involved in *litigation funding* and class action settlements across Australia. The decision underscores the Federal Court's pragmatic approach to *funder's commission approval criteria*, demonstrating a willingness to approve substantial commissions when justified by the inherent risks of the litigation and the capital exposed by the funder, rather than solely focusing on the final percentage in hindsight.

For lawyers advising on class action settlements or litigation funding agreements, the ruling clarifies that settlement deeds cannot unilaterally impose contractual obligations on non-party group members without their explicit agreement. This has direct implications for drafting and negotiation strategies, requiring careful consideration of how terms are presented and agreed upon by all affected parties. The court's balanced approach, rewarding funders for their critical role while safeguarding the rights and autonomy of individual group members, sets a precedent for future class action resolutions.

Lawyers advising on class action settlements or litigation funding agreements in Australia should note the Federal Court's willingness to approve substantial funder commissions when justified by high litigation risk and capital exposure. Additionally, the ruling clarifies that settlement deeds cannot unilaterally impose contractual obligations on non-party group members without their explicit agreement, impacting drafting and negotiation strategies.

Source: Original reporting via Australasian Lawyer