Reflective Loss, Trusts And Australian Class Action Settlements

Key Points

• Class actions brought by beneficiaries or unitholders of a trust are problematic as they encounter the reflective loss principle, which means that even though a unitholder might have a personal loss, he or she may not recover if it was reflected in a loss by the trust. The principle aims to avoid double recovery.
• The application of the reflective loss principle, while settled in company law, is unresolved in Australia in relation to a trust. The position was not determined here due to the settlement of the proceedings. However, the consideration of prospects of success as part of the settlement approval process suggests that the court thought the reflective loss principle applied to a trust.