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This judgment concerns a multiplicity issue heard together with group costs order (GCO) applications by the plaintiffs’ solicitors. Nichols J considered the multiplicity issue in light of the differing applications from both plaintiffs’ solicitors for a GCO. The different GCO proposals were ultimately determinative on which proceeding was to proceed.

The Court noted the statutory criterion provided by s 33ZDA is whether a GCO is “appropriate or necessary to ensure that justice is done in the proceeding”.

The Nelson plaintiffs (represented by Slater & Gordon) sought a GCO of 24.5%. The proposal put forward by the Sanders plaintiff (represented by Shine Lawyers) included a “ratchet” provision whereby the quantum of costs would reduce if the amount recovered was over

$100m and reduce further at $150m. Alternatively, they sought a flat 24.5% rate. Both plaintiffs’ solicitors also offered undertakings that they would not apply to increase the GCO rate later in the proceeding and made submissions as to this providing certainty of recovery, transparency for the group members, fair distribution of the legal costs, the availability of indemnities for adverse costs and security, and that the rate sought was prima facie proportionate. The parties further submitted that compared with the alternative of third-party litigation funding, the means by which the retainers each specified the proceeding would or could proceed if a GCO was not ordered, a GCO would result in a better financial return for class members.

Mr Sanders and Mr Nelson both gave evidence as to their understanding of the benefits of a GCO, in particular in relation to simplicity and transparency.

As to the appropriateness of the GCO rate, Nichols J explained that the statutory criterion is “open-textured and provides the Court with a large measure of significantly unguided discretion” ([38]). Her Honour noted that “reasonableness and proportionality . . . can meaningfully inform” the percentage ([37]) and one consideration is whether the percentage is “proportional to the risk undertaken by the law firm in funding the proceedings” ([37]). Her Honour said that while the inquiry is prospective, the appropriate rate of return can be assessed using accepted investment and insurance principles as an important consideration, and the GCO rate may nevertheless be revisited by the Court including of its own motion.

Mr Sanders adduced expert evidence in relation to the Internal Rate of Return (IRR) that would accrue to Shine under a GCO but the Court found that the quality of instructions and reasoning in the report rendered it of no real assistance.

Mr Nelson instead adduced evidence from principal solicitor, Mr Chuk of Slater & Gordon, which was accepted, explaining the factors informing the proposed rate including a comparison to third-party funding and the modelling of potential costs payable to and by the firm, having regard to a reasonable range of foreseeable outcomes. Mr Chuk’s view that questions of proportionality are best handled when the facts have crystallised and the rate will need review, was accepted by the Court.

The Court was not satisfied that the “ratchet” approach proposed in the Sanders proceeding was appropriate as it held that the plaintiff had not established a proper evidentiary basis for the proposal, namely why the percentages changed in a particular way at what amount they changed to. However, her Honour was satisfied that it is not beyond power to make such an order in the appropriate case and that it is not “inherently apt to mislead or confuse” ([112]). Her Honour was ultimately minded to make the GCO.

As to the multiplicity issue, her Honour had regard to established precedent, applying the factors set out in Wigmans v AMP Ltd (2021) 270 CLR 623 at [107].

As the parties did not agree on consolidation as an alternative to a stay of one proceeding, Nichols J embarked on the process of ascertaining appreciable differences between the parties. Her Honour analysed various factors, such as whether one side had been a “price setter” and conferred benefit to class members in that way, and the “ratchet” provision put forward by Shine.

However, Nichols J ultimately found difference in only one aspect, being the quality and particularity of the pleading and for that reason, awarded carriage to the Nelson proceeding (to be conducted by Slater & Gordon). The GCO was consequently made in favour of Mr Nelson, and the Sanders proceeding was stayed.

Nelson v Beach Energy; Sanders v Beach Energy [2022] VSC 424

Supreme Court of Victoria, Nichols J,
1 August 2022

Nelson Plaintiffs’ Solicitors: Slater & Gordon Sanders
Plaintiff’s Solicitors: Shine Lawyers
Defendant’s Solicitors: Herbert Smith Freehills
Plaintiffs’ Funder: N/A

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