Courts continue to grapple with carriage disputes

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This case involved four competing securities class actions against The Star Entertainment Group Ltd (Star), commenced respectively by Slater & Gordon (S&G), Maurice Blackburn (MB), Phi Finney McDonald (PFM) and Shine (in that order). Each of the plaintiff firms, other than Shine, proposed to conduct the proceeding pursuant to a group costs order (GCO) as follows:

• S&G: 14%;
• MB: 10% of the first $50 million, 20% of the next $50 million, and 25% of any amount over $100 million; and
• PFM: 17%.

Shine, on the other hand, proposed to conduct the proceeding on a conventional ‘no-win no-fee’ basis.

As there were no proposals for consolidation of proceedings, the hearing was conducted on the basis that only one of the proceedings would continue, with the remaining three proceedings being permanently stayed.

Pursuant to a highly prescriptive process, each parties’ evidence and submissions was required to address ten identified topics, namely:

• proposal for carriage;
• practitioners (i.e., experience and resources);
• nature and scope of the causes of action advanced (and relevant case theories);
• group membership;
• funding and legal costs (including any proposed GCO);
• proposals for security;
• extent of any bookbuild;
• the state of preparation of the proceedings;
• any other material factor(s); and
• relief sought.

Each party filed voluminous evidence and submissions in relation to each of those topics, and sought to distinguish it (and its proceeding) from the others in various ways. However, Nichols J ultimately concluded that the vast majority of those factors were neutral in the overall determination of multiplicity.

Her Honour decided to award sole carriage to the S&G proceeding, primarily based on its unprecedented GCO rate of 14%. In doing so, her Honour agreed with the position adopted by the contradictors, and dismissed arguments raised by the other parties that:

• the rate was too low, in the sense that it was a ‘loss leader’ for S&G which would not ultimately be in class members’ interests;
• the financial position of S&G was such as to raise legitimate concerns as to its ability to adequately resource the proceeding through to a conclusion; and
• the rate proposed by MB would produce a better outcome for class members for lower settlement amounts, below approximately $80 million (which, despite the large estimated overall losses, was a realistic possibility in this case given the precarious financial position of Star and the lack of any information as to its insurance position).

D A Lynch Pty Ltd v The Star Entertainment Group Ltd  [2023] VSC 561 

Supreme Court of Victoria, Nichols J,
19 September 2023 

Plaintiff’s Solicitors: Slater & Gordon; Maurice Blackburn; Phi Finney McDonald;
Shine Defendant’s Solicitors: King & Wood Mallesons
Plaintiff’s Funder: N/A 

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