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Group Costs Orders, also known internationally as contingency fees, are a new phenomenon in Australian class actions. The first Group Costs Order was handed down in this case, with the judge finding that it would provided certainty, simplicity and transparency of outcome for class members.

This is a shareholder class action against G8 Education Ltd in relation to the downgrade of its 2017 underlying EBIT forecast. 

In this judgment, Nichols J published her reasons for making the first ‘Group Costs Order’ (GCO) under s 33ZDA of the Supreme Court Act 1986 (Vic) (SCA) in a representative proceeding filed in the Supreme Court of Victoria. The GCO, which was made in December 2021, provided that:

  • the legal costs of the plaintiffs’ and class members’ lawyers, Slater and Gordon (SG), be calculated as 27.5% (including GST) of the amount of any award or settlement in the proceeding; and

  • liability for the payment of legal costs be shared among the plaintiffs and all class members.

The GCO also noted that SG had executed a deed poll by which they agreed to pay any adverse costs payable by the plaintiffs to the defendant in the proceeding; and the plaintiffs undertook not to apply for a GCO for a percentage any greater than 27.5%.

At [93], her Honour summarised the key reasons why she considered the GCO was “a suitable, fitting or proper way to ensure that justice is done in the proceeding in relation to the calculation of legal costs payable by the group to the solicitors conducting the proceeding”, which included the following:

  • the GCO would provide certainty, simplicity and transparency of outcome for class members in relation to the costs of litigation; as they will be guaranteed to receive no less than 72.5% of any settlement or judgment. It also relieved the plaintiffs of the risk of paying adverse costs and would ensure an equitable distribution of legal costs between class members;

  • the 27.5% rate set the maximum return to SG, and could be revised down by further order in the event it would deliver a disproportionate return to SG;

  • her Honour cautioned against placing too much weight on analysis which employs predictive modelling to demonstrate that a GCO could be expected to provide a better or worse financial outcome to class members than third party funding or a no win, no fee arrangement. Her Honour observed that (at [93(j)]):

Section 33ZDA is intended to be capable of operation early in a proceeding when predictive modelling will commonly be mired in uncertainty, as is the case on this application. It follows that comparative outcomes modelling must not be permitted to subsume the place of the evaluative inquiry required by s 33ZDA.

However, her Honour noted that SG’s express position was that, in the event a CGO was not made, it intended to obtain third-party funding, and the evidence established “a real prospect of group members obtaining a worse outcome in this case if third party funding is obtained” (at [93(g)]);

  • her Honour stated (at [93(k)]) that:

… for the reasons explained in [Fox v Westpac; Crawford v ANZ [2021] VSC 573], there is no warrant for exercising presumptive caution in exercising the power conferred by s 33ZDA, or for characterising a Group Costs Order as a funding mechanism of last resort. As discussed in Fox/Crawford, there is nothing in the statutory text, read in its context and by reference to its purpose, that would warrant such a characterisation.

  • however, her Honour placed “little weight” on the plaintiffs’ submissions that making the GCO would avoid delay in the proceeding and ameliorate the uncertainty of the risk that SG would terminate its retainer and costs agreement in the event a GCO was not made.

Allen v G8 Education Ltd [2022] VSC 32

Supreme Court of Victoria, Nichols J,
7 February 2022

Plaintiffs’ Solicitors: Slater and Gordon;
Defendant’s Solicitors: MinterEllison;
Contradictors: Claire Harris QC and James Page;
Plaintiffs’ Funder: N/A

Austlii Link: Available here

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