The largest product recall in Australian history
KordaMentha Partner Owain Stone, leader of KordaMentha’s Forensic practice, reflects on the role that he and his team played in the recall of the Pan Pharmaceuticals Pty Ltd (‘Pan’) products from April 2003 and, most recently, the class action between various customers of Pan Pharmaceuticals against the Therapeutical Goods Authority (‘TGA’) and others.
'I was first involved in the recall a few days after it happened. I was engaged by a law firm who, at the time, was advising a high-profile customer of Pan on the appropriate course of action for which they could ensure a complete claim. My role at that stage involved assisting the company to develop a robust and supportable claim for the costs and loss of profits arising from the product recall. This included participating in discussions with Pan’s Liquidator and their advisors on a assessment of loss process in which to measure the compensation for each returned product.
The loss of profit claim was complex, requiring the analysis of month by month sales patterns, pricing and profitability, comparison with forecasts and a consideration of the impact of changes in product ranges. There were particular difficulties in sourcing alternative supply and access to supermarket shelf space in the period after the recall. The quantum of this claim was eventually agreed with Pan’s Liquidator.
KordaMentha has had two subsequent roles arising from the Pan recall, both in relation to the class action against the TGA and others relating to the Pan recall.
The first role involved the provision of two Expert Witness reports that detailed the loss and damage suffered by key representative plaintiffs in the class action. We were responsible for analysing the historical performance of the claimants in order to create an assessment of the likely future performance of the affected products. I provided Expert Evidence reports in respect to the loss and damage suffered by two of the representative parties in the class action, each relating to a different major claimant.
Loss assessment process
In late 2010, prior to any hearings, a settlement was reached between the TGA and the class. This led to KordaMentha’s second and current engagement in which I was appointed forensic accountant.
My role is to consider the nearly 100 additional claims made under the Settlement Distribution Scheme and to assess the amount that should be admitted for the settlement process.
In total, these claims are valued in excess of $67 million. The agreed loss assessment process requires that we carry out cost effective reviews of these claims. Many of them are standalone claims for either loss of profits after the recall; additional costs arising from the product recall; or for products that were either unsold or returned by customers.
Due to the large number of additional claims, we considered the possibility that there might have been some double counting. To prevent double claims on the same product, we assess accepted claims together, particularly for those relating to the loss of profits on confirmed but undelivered products, stock on hand, and the loss of future profits.
The claims posessed varying values and degrees of complexity. Assessing them has been made more difficult by the passage of time which has seen a number of the claimants changing financial systems and personnel.
But our long standing involvement in this product recall, strong knowledge with the types of issues that arise in claims of this nature, and size of our Dispute Analysis team has enabled us to efficiently deal with these multiple claims in a timely manner.’