Mallia v Colonial First State Investments Ltd

Mallia v Colonial First State Investments Ltd [2026] FCA 463 is a Federal Court decision approving the settlement of a representative proceeding. The underlying claims concerned group insurance arranged for members of several superannuation funds and allegations that the trustee obtained insurance from a related insurer at excessive premiums when substantially equivalent or better, cheaper alternatives were said to be available.

The important limit is this: the Court was not deciding final liability after a trial. It was deciding whether a proposed $140 million settlement, and the deductions from that settlement, were fair and reasonable for group members. The settlement was approved on a non-admissions basis. The Court approved most deductions, including a 27.5% funding commission and specified legal and administration costs, but refused to authorise a claimed $4,488,400 for after the event insurance costs and fees for deeds of indemnity used for security for costs.

The commercial story began with the way group insurance was arranged for members of four superannuation funds. The applicant alleged that Colonial First State Investments Ltd, as trustee, owed duties to act in the best interests of members and not improperly use its position to gain an advantage for itself or a related entity. The related entity in question was the insurer that issued the group policies.

In broad terms, the allegation was that the trustee obtained group insurance from that related insurer at excessive premiums, even though other available insurance products were substantially equivalent or better and cheaper. The alleged difference in price was described as the excess premiums. The insurer was also alleged to have known, or ought to have known, of the trustee's duties and to have been involved in, and knowingly taken receipt of, profits relating to those excess premiums.

The group members were people who were members of at least one of the identified funds and held insurance cover under a group policy issued for the period between 22 January 2020 and 15 February 2022. The proceeding itself was commenced on 22 January 2020, after investigations that had started in November 2018.

The case then developed in the way large commercial class actions often do. There were multiple pleading amendments. AIA Australia Limited was joined after the transfer of the second respondent's life insurance business. The pleadings were later expanded and refined following discovery and expert work. Security for costs issues arose. Discovery was extensive, with 27,000 documents produced. By the time settlement was reached, this was not an early or purely speculative claim. It had already involved years of factual, expert and procedural work.

The immediate legal issue before Bennett J was not whether the pleaded allegations would have succeeded at trial. The Court's task was narrower and more practical. Under s 33V of the Federal Court of Australia Act 1976 (Cth), the Court had to decide whether the proposed settlement of the representative proceeding should be approved. It also had to decide whether the proposed deductions from the settlement sum were fair and reasonable.

That distinction matters. A settlement approval judgment does not convert allegations into findings of wrongdoing. Instead, the Court supervises the compromise to make sure it is appropriate for the group as a whole. In this case, the Court considered the settlement deed, the deed of variation, the settlement distribution scheme, affidavit evidence, submissions from the parties, submissions from the litigation funder and submissions from a contradictor appointed to assist the Court.

The deductions issue was commercially significant. The funder sought a commission and reimbursement of costs, including costs associated with after the event insurance that provided cover for adverse costs exposure. The Court therefore had to assess not just the gross settlement figure, but how much of that figure should actually be available for distribution to group members after legal costs, funding charges, reimbursements and administration expenses were taken out.

The appointment of a contradictor is also worth noting. It shows that the Court treated the approval process as an active supervisory exercise. In large settlements, especially where many people are affected and only a small number object, the Court still independently tests whether the proposed outcome is fair.

The Court approved the settlement. Bennett J recorded that the proceeding had resolved on terms including payment of $140 million in full and final settlement of the applicant's and group members' claims, on a non-admissions basis and with no order as to costs. The Court authorised the applicant to enter into and give effect to the settlement deed and deed of variation on behalf of group members and approved the settlement distribution scheme.

The Court also made the settlement binding on the applicant, the respondents and group members. Avanteos Investments Limited was joined as the fourth respondent. The Court appointed the first respondent and Avanteos Investments Limited jointly as settlement distributor, Ernst & Young as expert consultant and Shine Lawyers as settlement administrator, with leave to apply for directions about administration of the scheme.

On deductions, the Court approved a 27.5% commission payable to Woodsford Litigation Funding 1 LLP. It also approved legal costs and disbursements, including uplift, in the amount of $15,717,695.01, reimbursement of $20,000 to the applicant, reimbursement of $1,000 each to four named individuals, stamp duty of $1,494, Shine Lawyers' administration expenses of $374,226.37 and Ernst & Young's expert consultant expenses of $712,236.80.

Importantly, the Court did not approve everything sought. Bennett J expressly said the Court would not authorise payment of $4,488,400 on account of after the event insurance costs and fees for deeds of indemnity provided by the respondents by way of security for costs. That is one of the most practical features of the decision. It shows that even where a settlement is approved overall, individual deductions can still be rejected if the Court is not satisfied they should reduce the amount available to group members.

The Court also dealt with settlement administration issues that often matter in large proceedings. It made confidentiality orders over various categories of material, including privileged, without prejudice and commercially sensitive material. It also regularised the position of certain late or defective opt-out notices, while preserving group membership for people who later said they did not wish to opt out. These orders are procedural, but they show the practical complexity of administering a settlement involving a very large class.

The first lesson is about related-party arrangements. If your business chooses a related insurer, supplier, platform or service provider, the decision should be supported by records that explain the commercial rationale. Price is not the only factor, but if a more expensive related-party option is chosen, the file should show what alternatives were considered, whether the products were genuinely comparable, what non-price benefits were identified and why the final choice served the interests of the people affected.

This is especially important where the cost is ultimately borne by customers, members, investors or employees rather than by the decision-maker alone. In those settings, later allegations may focus not just on price, but on conflicts, duties and whether the decision-maker preferred its own group's interests over the interests of the people relying on it.

The second lesson is about litigation and settlement management. If a dispute becomes a class action or another multi-party claim, the headline settlement amount is only part of the picture. Courts will look closely at who receives what, whether legal costs are proportionate, whether a funding commission is justified and whether other claimed expenses should really come out of the settlement fund. Businesses assessing settlement exposure should therefore model both the gross figure and the likely net distribution position.

The third lesson is about process discipline. This proceeding involved years of interlocutory work, multiple pleading amendments, security for costs issues and extensive discovery. That is a reminder that weak documentation at the time of a commercial decision can become expensive much later. A short, well-prepared internal paper recording the reasons for a related-party procurement decision may be far more valuable than trying to reconstruct those reasons years later during discovery.

Businesses do not need to wait for litigation to use this case constructively. It is a useful prompt to review the documents that would be most important if a related-party arrangement were later challenged. Start with board papers, procurement records, pricing comparisons, product comparison tables, conflict declarations, approval memoranda and any communications showing why one provider was selected over another.

If your business offers a bundled product, membership, employee benefit or insurance-linked service, also review whether the people paying for the arrangement could understand who the provider was, whether it was related to your business and what value they were receiving. The Court's decision does not determine the underlying allegations, but the pleaded case shows the kind of factual narrative that can be built where a claimant says a related-party arrangement delivered poorer value than available alternatives.

On the dispute-management side, this case also shows the importance of planning for settlement administration. In large claims, issues such as opt-out validity, confidentiality, appointment of administrators and expert consultants, and the mechanics of distribution can all become significant. Even businesses that expect to settle should prepare for a court-supervised process rather than assuming the parties can simply agree a number and move on.

Is this an unfair contract terms case? Not on the published material summarised here. The Court classified the matter within the Commercial and Corporations practice area, sub-area Commercial Contracts, Banking, Finance and Insurance, but the decision itself concerns settlement approval in a representative proceeding.

Does a low number of objections guarantee approval? No. The Court noted that only 11 objections had been received, with two not being true objections in substance, but the Court still independently assessed the settlement and the deductions.

What does non-admissions basis mean here? It means the settlement resolved the claims without the respondents admitting liability. That is another reason businesses should avoid reading the approval judgment as a final merits ruling on the pleaded allegations.

The proceeding was commenced on 22 January 2020 after investigations that began in November 2018. AIA Australia Limited was joined in October 2021 following the transfer of the second respondent's life insurance business on 1 April 2021. The settlement deed was dated 6 February 2026 and was varied on 24 March 2026. Bennett J made the approval orders on 25 March 2026, and the reasons were published on 17 April 2026.

This page should be read as a note on the Court's settlement approval decision and the practical business implications of the allegations and orders. It should not be read as a final judicial determination of the underlying alleged misconduct.