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This decision concerned an application by the plaintiffs in the Arrium shareholder class action for a group costs order under s 33ZDA(1) of the Supreme Court Act 1986 (Vic) (Act). The plaintiffs sought orders that:

(a)   the legal costs payable to the Banton Group be calculated as 40% of the amount of any award or settlement obtained in the proceeding; and

(b)   the plaintiffs and all class members be liable to pay legal costs at the 40% rate.

The plaintiffs’ application also contemplated that should they be successful, the Banton Group would enter a costs sharing agreement with the existing funder, Equite Capital No 1 Pty Ltd (Funder). Under the agreement, the Banton Group would pay 50% of any payment received pursuant to a group costs order to the Funder (following any deductions for fees previously paid by the Funder and outstanding fees owed to the Banton Group) (see [62]).

The Existing Funding Arrangements 

In May 2018, the plaintiffs entered into a litigation funding agreement with the Funder under which the Funder would pay all legal costs and disbursements reasonably incurred by the Banton Group. Under the agreement the Funder was also entitled to a commission from the resolution sum which, at the time of the group costs order application, would have entitled the Funder to a 45% commission. Relevantly, the existing funding agreement also enabled the Funder to terminate the agreement at any time at its absolute discretion provided 7 days written notice was given (see [43]). For the purposes of the group costs order application, the Funder’s representative, Paul Lindholm, deposed that at the time of entering the funding agreement in 2018, the Funder had contemplated seeking a common fund order or a costs equalisation order. 

The Plaintiffs’ Submissions

The plaintiffs’ submitted that the group costs order should be granted for the following reasons (at [84]):

(a)   First, and most importantly, the order would ensure the continuation of the proceeding. Following criticisms from a Court-appointed contradictor, further evidence was filed by both Ms Banton (director of Banton Group and solicitor on the record) and the Funder which outlined that there was significant risk that the Funder would cease to fund the proceeding in the event that a group costs order of 40% was not granted.

(b)   Costs would be fairly distributed among all class members while giving certainty to the percentage net return to class members. It would also provide transparency and simplicity.

(c)   A group costs order would provide certainty in circumstances where the issue of whether the court has power to make a common fund order remains not settled.

(d)   The combined total of legal costs and a funding commission on a common fund basis at the rate of 30% of the gross resolution sum (as suggested by the contradictor) would result in a materially worse outcome to the class members than the group costs order sought.

(e)   While there were certain scenarios where applying for a common fund order or funding equalisation order at the conclusion of the proceeding could be better for class members, this should be weighed against the risk that the Funder was anticipated to withdraw from the proceeding should the group costs order not be made which would impact on the overall viability of the proceeding.

The plaintiffs further submitted that the 40% rate was appropriate because it was reasonable and proportionate to the risks assumed by the Banton Group in order to continue the proceeding (see [86]). In advancing this submission, the plaintiffs pointed to the Funder’s assessment of risk which was reflected in the commission rate of 45% under the existing funding agreement.


After adopting Nichols J’s consideration of the principles relevant to applications under s 33ZDA as set out in Fox v Westpac Banking Corporation [2021] VSC 573 and Allen v G8 Education Ltd [2022] VSC 32 (at [6]-[13]), John Dixon J turned to the facts of the current application. In concluding that a group costs order should be made, his Honour emphasised that were the application to be refused there was “a considerable risk” that the Funder would terminate the funding agreement and would refrain from entering the costs sharing agreement with the Banton Group. In his Honour’s view, this could result in the Banton Group ceasing to act for the plaintiffs (on the basis that the proceeding would no longer be commercially viable) and ultimately the termination of the proceeding “without adjudication on the merits” (see [105(a) to (d)]. His Honour noted (at [105(e)]:

Justice cannot be done in the proceeding if the plaintiffs and group members are not able to pursue their claims through the proceedings and must abandon them.

In accepting the rate of 40%, his Honour did require that the Funder make an undertaking to the Court not to seek to enforce any rights it may have in respect of the existing funding arrangement (see [105(g)]) thus enabling the group costs order to govern all costs and litigation funding charges in the proceeding.

The Contradictor and Defendants’ Position

In addition to criticising the quality of the evidence filed by the plaintiffs and Funder, the contradictor submitted that the key argument advanced by the plaintiffs, that the group costs order would enable the proceeding to continue to be viable, was not a relevant consideration to s 33ZDA (see [91]).

His Honour rejected this submission, emphasising that the extrinsic material relevant to s 33ZDA supported the view that the “legislature recognised continuation of an existing proceeding, much like the commencement of a new one, as enhancing access to justice” (see [92]). The risk that a proceeding would be discontinued or terminated was, in his Honour’s view, “a highly relevant consideration to whether a group costs order is appropriate or necessary to ensure that justice is done in the proceeding”.

In considering submissions on behalf of the defendant, his Honour rejected arguments that the costs sharing agreement as between the Banton Group and the Funder were “more a common fund order” or a “mere front” for a third-party funder. His Honour further emphasised that the statutory language does not “invoke an inquiry into the means by which the law practice chooses to fund its obligations” (at [101]). 

Investment Evaluation Principles

In the context of considering the relevant principles to be applied when assessing applications for a group costs order, his Honour noted that in addition to the principles developed by Nichols J, the consideration of the financial viability of both existing and proposed funding arrangements would be a relevant consideration for the Court to consider. His Honour went on (at [16]-[30]) to discuss how generally accepted investment and insurance principles (referred to as investment evaluation principles) may assist the Court in future determinations under s 33ZDA.

Bogan v The Estate of Peter John Smedley (Deceased) [2022] VSC 201

Supreme Court of Victoria, John Dixon J,
26 April 2022

Plaintiffs’ Solicitors: Banton Group
Respondents’ Solicitors: Baker & McKenzie, Ashurst
Plaintiffs’ Funder: Equite Capital No 1 Pty Ltd
Contradictor: Mr N De Young QC & Ms K Burke

Austlii Link: Available here

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