Justice Michael Lee declined a bid by Shine Lawyers for an additional $32 million, saying that this would mean the amount left over for women affected by the mesh products was unreasonable.
"The settlement, cannot be characterised as a good one from the perspective of group members, whatever belated attempts are made to put lipstick on a pig (or, perhaps more fairly, on a passably attractive sow)," the Federal Court judge said.
With the three women leading the class action being awarded between $555,000 and $1.2 million in damages, the thousands of remaining women, referred to as group members, would only be given a fraction of that from the $300 million settlement, especially given Shine's sought-after legal cut.
"In blunt terms, the group members, rather than those who were acting as their representatives, were now going to be left holding the bag," Justice Lee said.
The law firm has already been paid $82 million out of the settlement proceeds for running the 11-year-long class action. The $32 million relates to interest paid by Shine after seeking external financing to run the lawsuit.
In March this year, Justice Lee approved the settlement but said it was "borderline" in terms of reasonableness.
On Thursday, he said that giving a further $32 million to Shine would make the settlement "less than reasonable".
"Borderline means borderline. The settlement got a grudging and hesitant pass, not a credit," he said.
The ASX-listed law firm had paid $45 million in dividends to its shareholders since 2016 rather than keeping this money as a "buffer" for any additional expenses, the court found.
Shine had not acted prudently and reasonably, failing to take necessary steps to secure better sources of financing or to maximise recovery for the affected women, the judge said.
The firm can still apply to the court for a lower amount of interest, but will have to again explain why further costs should be taken from women who have "suffered greatly".
"Marriages and lives have been irreparably damaged and some ruined. The pain and anguish of the women who made representations opposing the settlement was palpable and moving," Justice Lee wrote.
The judge did not find that Shine acted contrary to its legal duties.
In an ASX statement, the law firm said the $32 million in interest was a "necessary cost" of running the class action.
Further submissions will be prepared and given to the court as Shine seeks to recover these amounts.
Managing director Simon Morrison said the firm was proud to have stayed in the fight and procure the $300 million settlement in one of the "longest running medical device class actions in Australian legal history".
Johnston & Johnston and its subsidiary Ethicon aggressively fought claims its vaginal mesh and tape implants were defective, taking the case all the way to the High Court.
After the medical firm failed to overturn findings its devices could cause significant injury to those implanted with them, it agreed to settle the proceeding.
