This was a shareholder class action against Woolworths Group Ltd (Woolworths). On 2 August 2022, Beach J made orders approving a settlement of the proceeding for the sum of $44.5 million. In this judgment, his Honour addressed the appropriate deductions from the settlement sum for: (i) the funder’s commission, and (ii) legal costs and disbursements.
His Honour ordered that the funder’s commission be set at $4.73 million, being its contractual entitlement at the date of settlement approval. The applicants had sought an order approving a higher funding commission of $7.42 million, which they submitted was the appropriate deduction because:
However, his Honour rejected the applicants’ proposal, on the basis that they had not previously indicated they were going to seek a common fund order, and class members were not notified in the notice of settlement that they were going to seek such an order. His Honour thus found that the funder was only entitled to its contractual entitlement of $4.73 million.
At the first return of the settlement approval application, his Honour considered that the total sum of the applicants’ legal costs and disbursements potentially was disproportionate and sent the matter out for assessment by a Court-appointed costs referee (Mr John White).
Ultimately, the referee’s report recommended a substantial reduction in the applicants’ legal costs and disbursements. In this judgment, his Honour set out his comprehensive reasons for rejecting the referee’s report in its entirety. Those reasons included the following.
First, his Honour found that the referee wrongly decided that the costs agreement of the applicants’ solicitors, Maurice Blackburn (MB), was void, with the result that he wrongly disallowed MB’s uplift fee of 25% and professional fees of $194,274.74 for investigation work. His Honour found that the referee’s decision was infected with three errors:
Second, his Honour found the referee’s reasons for reducing MB’s professional fees for various periods throughout the matter by more than $1 million were not sufficient to enable the parties (and his Honour) to know that the reductions made were justified.
Third, his Honour found that the referee’s global reduction of 10% ($789,537.98) to MB’s professional fees for not being proportionate was not justified. His Honour observed that the referee had erroneously considered the quantum of the settlement compared to the quantum of costs, rather than “the amount that was reasonably expected to be recovered at the outset of and throughout the matter had the proceedings been successful, relative to the costs” (at ). His Honour also said that the figure the referee had used in his report did not reflect the costs actually claimed by MB, and he had failed to correctly apply the relevant case law, such as Blairgowrie Trading Ltd v Allco Finance Group Ltd (in liq) (No 3) (2017) 343 ALR 476;  FCA 330 at  and Foley v Gay  FCA 273 at -. His Honour found that “the referee misapplied the standard of proportionality and otherwise did not sufficiently reveal how and why the proposed reduction was made” (at ).
For the above reasons, his Honour rejected the referee’s report and ordered that MB’s legal costs and disbursements be allowed in full, in the amount of $14.6 million.
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