Eaton v DePuy International Ltd

This case came out of a long-running product liability settlement, not a new consumer complaint. The original representative proceedings were brought in the Federal Court against DePuy International Ltd and Johnson & Johnson Medical Pty Ltd concerning a knee prosthesis marketed as the LCS Duofix Femoral Component. The claim was that the implant was not fit for purpose or of merchantable quality.

The proceedings settled in 2012 under a court-approved deed. That deed did not simply provide for a lump sum to be divided among group members. Instead, it created a structured compensation regime. One protocol dealt with whether a person was eligible to receive compensation. Another dealt with how compensation would be categorised and assessed. If disputes remained, they could be referred to an Independent Counsel, a barrister appointed under the protocol, whose decision would bind the parties subject to a right of appeal for error of law.

Mr Eaton was one of the group members. He had total knee replacement surgery in July 2007 using the affected implant. The implant was voluntarily recalled in 2009. He then underwent two revision surgeries, on 1 December 2010 and 7 December 2011. On 16 January 2012, shortly after the second revision surgery, he fell at home and injured his right knee and left shoulder. The judgment records that complications followed and that, in the latter part of 2016, he required an above-knee amputation of his right leg.

Mr Eaton sought compensation for economic loss, non-economic loss and gratuitous care. The respondents accepted that he was an Eligible Group Member. The dispute was about how much compensation he should receive and, in particular, whether a rupture in his right patellar tendon was caused by the affected implant or by the fall itself. Independent Counsel partly allowed his claim but rejected important parts of it, including his contention that the ruptured tendon was caused by the affected implant. Mr Eaton challenged that determination, first unsuccessfully before the primary judge and then successfully before the Full Court.

The Compensation Protocol mattered because it split the assessment task into separate parts. First, an Eligible Group Member had to be placed into one of four categories under cl 3.1. Category A applied where the person did not meet the criteria for Categories B, C or D. Category B applied to one revision plus one other surgical procedure consequent on the affected implant. Category C applied to one revision plus two or three other surgical procedures. Category D applied where one or more of three criteria were met, including cl 3.1(d)(iii), which covered a person who had experienced extraordinary and significant complications or injury in excess of what group members in Categories A, B or C would experience as a result of failure of the affected implant.

The protocol then linked category to compensation. Under cl 4.1, Categories A, B and C carried fixed amounts for non-economic loss and gratuitous care. Category D(i), D(ii) and D(iii) required individual assessment. That meant the category question was not a side issue. It could materially change the amount and method of compensation.

The protocol also set out a process for deciding category disputes. Medical records were to be provided. If the claimant considered they fell within Category D(iii), their lawyer had to notify the respondents. In the absence of that notification, the parties were to try to agree whether the claimant fell into Category A, B, C, D(i) or D(ii). If they could not agree, there was a stepped process involving a treating surgeon’s report and then an assessor’s report. Only if the applicable category remained in dispute after that report would Independent Counsel be requested to determine the dispute in accordance with cl 10.

Clause 10 separately dealt with referrals to Independent Counsel. It allowed referral of a dispute about category, a dispute about the amount of compensation for financial losses, and a dispute about the amount of compensation for non-economic loss and gratuitous care where that compensation was to be individually assessed. The referring party had to notify the other party of its intention, state its final position, and identify the proposed Independent Counsel. The parties could make written submissions, and Independent Counsel was to determine any items in dispute and provide a written assessment.

The appeal raised several issues, but two were central. First, whether Independent Counsel was required to afford procedural fairness before deciding a category issue that materially affected compensation. Secondly, whether Independent Counsel was permitted to determine the category applicable to Mr Eaton when, according to Mr Eaton, that issue had not been referred in that way and the parties had agreed he should be assessed under cl 3.1(d)(iii) rather than cl 3.1(d)(ii).

The judgment’s catchwords show the Court also considered the distinction between an expert and an arbitrator, whether any failure to provide procedural fairness would have made a difference to the outcome, and the relevance of materiality to a breach of an implied contractual term of procedural fairness. Those are important points for business readers because many contracts use labels such as expert, assessor or independent counsel without spelling out the process in enough detail.

The catchwords and introductory reasons also show there were arguments about causation and novus actus interveniens. In practical terms, those issues concerned whether the correct legal test had been applied to the chain between the affected implant, the fall, the tendon rupture and later consequences. But the Full Court’s orders make clear that the appeal succeeded on the procedural fairness and category grounds, and those findings were enough to set aside the determination.

For businesses, the key legal point is not that every private decision-maker must run a full hearing. It is that if the process allows a person to decide a disputed issue that can materially alter compensation or rights, the contract and the conduct of the process must give the affected party a fair opportunity to deal with that issue.

The Full Court granted an extension of time and leave to appeal, allowed the appeal, and set aside the primary judge’s orders. It then made two declarations of error of law against Independent Counsel.

First, the Court declared that Independent Counsel made an error of law by not giving Mr Eaton the opportunity to tender further evidence or make submissions as to whether, contrary to the agreement reached between the parties, he had experienced extraordinary and significant complications or injury in excess of that to which Eligible Group Members in Category A, B or C would experience as a result of failure of an affected implant within the meaning of cl 3.1(d)(iii) of the Compensation Protocol.

Secondly, the Court declared that Independent Counsel made an error of law in determining a dispute as to the category applicable to Mr Eaton within cl 3.1 of the Compensation Protocol without giving him that opportunity. The Court set aside the 5 October 2023 determination and referred the determination of Mr Eaton’s claim for non-economic loss and gratuitous care to a different Independent Counsel for determination according to law. The respondents were ordered to pay Mr Eaton’s costs of the appeal and the proceedings before the primary judge.

The introductory reasons also state that leave to appeal should be granted because the decision below was attended with sufficient doubt and substantial injustice may have resulted if leave were refused. That is significant. It indicates the Court did not treat the fairness problem as merely technical. The denied opportunity was serious enough to justify undoing the determination and sending the matter to a different decision-maker.

The judgment’s catchwords show that the distinction between an expert and an arbitrator was a live issue on the appeal. The available reasons do not fully set out the Court’s complete analysis on that point, so it is sensible not to overstate it. But the case still gives a practical lesson. In commercial drafting, parties often assume that calling someone an expert or independent counsel will keep the process informal and insulated from fairness complaints. This decision shows that labels are not enough.

What matters is the function the person is performing under the contract. If the person is merely making a technical assessment within a tightly defined field, the process may look more like classic expert determination. If the person is deciding disputed issues that affect legal rights, compensation categories or causation, the process may require more procedural discipline. The more the role resembles adjudication of a dispute, the more dangerous it is to leave fairness steps unstated.

That does not mean every business should abandon expert determination. It remains a useful tool for valuation disputes, technical measurements and streamlined claims handling. But the clause should match the task. If the decision-maker may need to resolve contested legal or mixed factual issues, the contract should say what notice must be given, what submissions can be made, whether further evidence can be requested, and what happens if the decision-maker proposes to decide the matter on a basis not advanced by either side.

In this case, the protocol itself was detailed, but the dispute still arose because category, agreement between the parties, and the scope of the referral became entangled. That is exactly the kind of problem businesses should try to prevent at drafting stage.

Most businesses will never operate a court-approved class action settlement deed. But many do use private decision-makers in contracts and claims processes. Examples include independent experts in supply contracts, assessors in insurance or warranty schemes, review panels in franchise systems, and barristers appointed to determine disputes under settlement deeds. This case is a reminder that efficiency and finality depend on process design. If the process is unclear, the business may end up with appeals, re-determinations and extra cost.

The first practical lesson is to define the scope of each referral. If category is one issue and quantum is another, say so clearly. If the parties can agree category and only dispute amount, record that agreement expressly and identify what remains in dispute. If the decision-maker is allowed to revisit category anyway, the clause should say that and should also set out the response process.

The second lesson is to build procedural fairness into the mechanics. That does not require a full hearing. It usually means notice of the issue to be decided, access to the material to be relied on, and a fair chance to provide submissions or further evidence if a decisive issue changes. The Court’s orders show that a failure at this point can amount to an error of law under the contractually limited appeal mechanism.

The third lesson is to think carefully about category-based compensation systems. They are commercially attractive because they create speed and predictability. But they only work if the categories are tightly drafted, the trigger points are clear, and the process for moving from one category to another is transparent. If a category decision can shift a claim from a fixed amount to an individual assessment, that issue should be treated as central, not administrative.

The protocol in this case shows how much turns on document design and process conduct. Clause 3 dealt with category. Clause 4 dealt with non-economic loss and gratuitous care. Clause 5 dealt with financial losses. Clause 10 dealt with referral to Independent Counsel. On paper, that structure is sensible. In practice, however, a dispute can still arise if the parties and the decision-maker do not stay aligned on what exactly has been referred and what assumptions are common ground.

Businesses should therefore treat the referral notice as a critical document, not a formality. It should identify the issue or issues in dispute, the final position of each side, the category position if relevant, and the documents being relied on. If the process permits written submissions only, the timetable should be realistic and should include a mechanism for further submissions if the decision-maker indicates that a different issue may be determinative.

Conduct matters as much as drafting. Even a well-written clause can fail if the decision-maker decides the matter on a basis that the parties were not given a proper chance to address. The Court’s declarations in this case focused on the absence of an opportunity to tender further evidence or make submissions on whether Mr Eaton had experienced extraordinary and significant complications or injury within cl 3.1(d)(iii). That is a practical warning for anyone administering a private claims process. If the issue shifts, the process must shift with it.

Businesses should also keep a clear written record of any agreement reached during the process. The Court’s orders refer to the issue being decided contrary to the agreement reached between the parties. If agreement on category or scope is important, it should be documented in a way that leaves little room for later uncertainty.

The Full Court judgment is dated 27 March 2026. The appeal was from Casey v DePuy International Ltd (No 4) [2024] FCA 724. The Independent Counsel determination that was set aside was dated 5 October 2023. The representative proceedings themselves were commenced in 2010 and settled in 2012 under a court-approved deed.

This page remains under review rather than final publication status because the available judgment text used here ends part-way through the reasons. The Court’s orders and the key factual and procedural points are clear, but some detailed reasoning on procedural fairness, materiality, the expert versus arbitrator distinction, causation and novus actus interveniens should be checked against the complete judgment before treating this as a complete doctrinal summary.

This page is based on the Federal Court judgment in Eaton v DePuy International Ltd [2026] FCAFC 33. The available text clearly identifies the parties, the settlement structure, the relevant protocol clauses, the issues raised on appeal and the Court’s orders. It also identifies the appeal as arising from Casey v DePuy International Ltd (No 4) [2024] FCA 724.

Because the reasons available for this page are incomplete, this note focuses on what can be stated confidently from the judgment text: the commercial setting, the protocol structure, the issues argued, the declarations made, and the practical drafting and process points that follow from those orders.