Victoria flexes muscle on adopting contingency fees (group costs orders)

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These are three class actions in relation to “flex commissions” paid to car dealers by Westpac, St George, ANZ and Macquarie Leasing. Although the claims in the proceedings are not identical, the issues raised in each proceeding are substantially similar. In each case, the plaintiffs allege that the car dealers were acting on behalf of the lenders and engaged in conduct that was, among other things, unfair within the meaning of s 180A(1)(b) of the National Consumer Credit Protection Act 2009 (Cth).

In this judgment, Nichols J made a group costs order (GCO) of 24.5% sought by the plaintiffs in each proceeding, pursuant to s 33ZDA of the Supreme Court Act 1986 (Vic) (SCA).

In an earlier decision, her Honour refused to make a GCO of 25% in the Westpac and ANZ proceedings (Fox v Westpac Banking Corporation [2021] VSC 573). That decision turned, in large part, on her Honour’s finding that the plaintiffs were beneficiaries of existing funding arrangements in which Maurice Blackburn was acting on a no-win no-fee (NWNF) basis and had indemnified the plaintiffs against the risk of adverse costs. Her Honour found that, notwithstanding a subjective intention on the part of Maurice Blackburn to seek third party funding in the event that GCOs were not made, the NWNF agreements were not expressly interim or conditional, in the sense that they would cease to bind Maurice Blackburn in the event that a GCO was not made. In these circumstances, her Honour was not persuaded that the appropriate comparator for the proposed GCOs was third party litigation funding in which a funder would charge a commission in addition to reimbursement of legal costs. Ultimately, her Honour held that the plaintiffs’ contention that class members would be “better off” under the proposed GCOs, including (and especially) financially better off, was not made out on the evidence.

Following that decision, Maurice Blackburn entered into new retainers and costs agreements with the plaintiffs that express a clear objective contractual intention for costs to be governed by way of a GCO (with the current NWNF arrangement being interim in nature and made for the purposes of facilitating an application for a GCO) and if a GCO is not made, a preparedness to enter into a funding agreement with a third-party funder consistent with the terms of each plaintiff’s retainer. Maurice Blackburn also entered into an amended costs sharing agreement with Vannin, which provides for costs and fee sharing where a GCO is made and sets out the terms on which a related entity will fund the proceedings in the event that a GCO is not made. Each of the plaintiffs also filed evidence expressing their reasons for seeking a GCO, which had not been filed in support of the initial GCO applications.

On this occasion, her Honour was satisfied that fixing a GCO of 24.5% was appropriate or necessary to ensure that justice is done in each of the proceedings, including because:

• The GCO will provide certainty to class members, including by guaranteeing that class members recover 75.5% of any settlement sum or damages award, which protects against costs and funding fees disproportionately eroding compensation.
• The GCO will deliver funding at a cost that is clearly no worse and in fact marginally better than the alternative third-party funding arrangement negotiated with Vannin, pursuant to which the impost on the plaintiffs and class members would be 25% of any recovered amount, subject to the funder obtaining a common fund order. Her Honour also observed that this alternative arrangement was itself reasonable or competitive by relevant measures, including by reference to publicly available data establishing the mean and average returns to class members in class actions with third-party funding.
• The GCO will provide, from the outset, equality between class members in the sharing of liability for legal and funding costs.
• The GCO could reasonably be regarded as promoting the alignment of the interests of the lawyers and the interests of the plaintiffs and class members in maximising recoveries and conducting the proceeding efficiently.

Fox v Westpac Banking Corporation (No 2) [2023] VSC 95

Supreme Court of Victoria, Nichols J,
3 March 2023

Plaintiffs’ Solicitors: Maurice Blackburn
Defendants’ Solicitors in S ECI 2020 2946: King & Wood Mallesons
Defendants’ Solicitors in S ECI 2020 3365: Herbert Smith Freehills
Defendants’ Solicitors in S ECI 2020 3924: Gilbert + Tobin
Plaintiffs’ Funder: Costs sharing arrangement with Vannin

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