Court cuts Adero’s costs citing concerns

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This matter concerned two representative proceedings (the ‘Thomas Proceeding’ and ‘Shina Proceeding’) which were commenced against two related partnerships operating supermarkets in New South Wales and South Australia. As the primary claim against the respondents was the same, an order was made for the proceedings to be determined concurrently.

The lead applicants, Mr Thomas and Mr Shina were full time employees and managers for the respondents. Their employment was governed by the General Retail Industry Award 2010 (Award). The applicants alleged:

• That they did not receive their full entitlements under the Award with respect to their hours worked.
• That they were expected or required to work in excess of their rostered hours which they were not lawfully remunerated for.
• That the respondents wrongfully deducted sums from their wages to pay for the costs of their uniforms.

The respondents admitted the allegation with respect to the uniform costs, but otherwise denied liability.

The parties sought approval to settle the proceedings on the terms made in a Deed of Settlement and Release (Deed) and in accordance with an agreed distribution model (Proposed Settlement).

Deed

After private mediation, the parties recorded the outcome in the Deed. The Deed included conditions to the following effect:

1. That the respondents deny liability.
2. That the respondents will make a payment in full and final settlement of the registered class members’ claims not exceeding $1,550,000.00 including interest.
3. That payments to individual class members are to be calculated under an agreed model referred to as the Settlement Distribution Scheme.
4. That the respondents will make a further payment (Costs Amount) to Adero Law “as an expression of goodwill and in recognition that Group Members should not be disadvantaged financially in the context of raising the issues or concerns that are the subject of the Romeo Class Actions…” (at [17]). The Costs Amount was “… the amount of $825,000.00 (inclusive of GST), or such other reasonable amount as ordered and approved by the Court” (at [17]).
5. That the Deed be kept confidential.

The Court raised a number of concerns with the Deed including:

1. The public interest in ensuring the confidentiality of the entire Deed was not apparent.
2. The appropriateness of the payment of the Costs Amount to Adero Law was questionable.
3. It was uncertain whether the class members would regard the outcome as a success in the context of a no win, no fee clause in the costs agreement.
4. The class members were not given sufficient information to enable them to make an informed decision as to whether to oppose settlement approval.

Cost Agreement

Adero Law had a conditional costs agreement with the lead applicants. Adero Law conducted the proceedings on a no-win, no-fee basis and charged a 25% uplift fee. In support of a contention that the Costs Amount should be $825,000, counsel for the lead applicants relied on the opinions of the cost consultants, particularly Ms Dealehr. In determining the reasonableness of the Costs Amount, Charlesworth J considered the question as if the costs were being assessed as between Adero Law and its clients under the Legal Profession Act 2006 (ACT) (LPA).

Non-compliance with the Legal Profession Act

Her Honour noted that Adero Law failed to comply with various provisions of the LPA including:

Her Honour considered the failure to comply with s 269(1)(d) as being particularly egregious because there was a material risk that any judgment sum awarded would be consumed by legal fees. Adero Law’s failure to provide the lead applicants with a timely estimate of costs meant that the applicants were not able to make an informed decision on the viability of progressing their claims to trial. By breaching s 284 of the LPA, Adero Law’s costs agreement was deemed void under s 287(1) of the LPA. As an additional consequence, Adero Law was not entitled to recover their uplift fee. Her Honour concluded that a reduction of 25% should be applied to Adero Law’s total claimable costs.

Claimable Costs

Her Honour cited Gordon J in Modtech Engineering Pty Ltd v GPT Management Holdings Ltd [2013] FCA 626 regarding the role of the Court in assessing requests to deduct solicitors’ fees from a proposed settlement sum (at [93]):

1. “are the fees and disbursements of an unreasonable amount having regard to, inter alia, the nature of the work performed, the time taken to perform the work, the seniority of the persons undertaking that work and the appropriateness of the charge out rates for those individuals; and
2. if the work is unreasonable in the circumstances, can the group members be considered to have approved (explicitly or impliedly) the costs claimed.”

Despite Ms Dealehr’s costs assessment, the Court determined that for the purposes of the Deed, the Costs Amount should be fixed at $560,893.52. The Court made a number of observations with respect to Adero Law’s costs including:

• Excessive Claims – Her Honour rejected the assertion in Adero Law’s instructions that the proceedings contained a high degree of complexity. Her Honour noted that the matter was referred to mediation at an early stage, that the content of the pleadings in the two proceedings were very similar and that much of the work was unnecessary.

• Amount for Disbursements – Her Honour generally accepted Ms Dealehr’s assessment of the reasonableness of the disbursements. However, her Honour was critical of counsel’s charges for attempting to persuade the Court that the Costs Amount should be $825,000.

• Estimated Additional Costs – Her Honour did not accept the additional costs estimated by Ms Dealehr in relation to the additional hearing held on 14 June 2022 as this hearing was the result of the low-quality evidence prepared by Adero Law. Her Honour further rejected the 12.5% loading applied by Ms Dealehr for skill, care and attention.

Approval

Her Honour approved the Deed prepared by the parties and clarified that the payment of the Settlement Sum is a fair and reasonable solution to the risk that a successful judgment sum would be consumed by legal fees. 

Orders 

The Court’s orders included:

• That the settlement recorded in the Deed of Settlement and Release and the Settlement Distribution Scheme be approved.
• That for the purpose of the Deed of Settlement and Release, the Costs Amount is $560,893.52.
• That the applicants, the respondents and Adero Law have liberty to apply to vary the Costs Amount.

Thomas v Romeo Lockleys Asset Partnership [2022] FCA 1106

Federal Court of Australia, Charlesworth J
19 September 2022

Applicants’ Solicitors: Adero Law
Respondents’ Solicitors: Crawford Legal
Applicants’ Funder: N/A

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