Can defendants cost-cap the plaintiff’s action and succeed via attrition?
In the Bellamy's shareholder matter there are parallel securities class actions running and this issue concerns the respondent applying for 'costs-capping' orders which would limit the capacity of the plaintiffs to run their best case – The application was dismissed.
In this matter there are parallel class actions being conducted by Maurice Blackburn and Slater & Gordon respectively. In an earlier judgment (McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd  FCA 947) Beach J declined to stay either of the two proceedings, instead allowing both to proceed (one as an open class proceeding, and the other as a closed class proceeding). At the same time, his Honour indicated that he would make case management orders to achieve efficiencies and reduce overall costs (and subsequently did so, which resulted in a ‘Co-operation Protocol’ being agreed between the respective solicitors for the applicants).
In this judgment, his Honour dealt with an application by the respondent for ‘costs-capping’ orders to the effect that:
- the costs that may be recovered by the applicants pursuant to any costs orders made in their favour be assessed on the basis, in effect, that there was only one proceeding, with one set of counsel and one set of solicitors, and thus only a single set of costs; and
- further, the maximum recoverable party / party costs be fixed in the amount of approximately $4.46 million across both proceedings; or
- alternatively, the maximum recoverable party / party costs be fixed in the amount of approximately $2.23 million in each proceeding separately.
His Honour dismissed the application, essentially for the following reasons:
- although his Honour considered that he had power to make the orders sought (under s 33ZF, under the Rules and/or pursuant to the Court’s implied or incidental powers), he also considered that the ‘Co-operation Protocol’ had “achieved significant efficiencies in reducing unnecessary duplication in the conduct of the proceedings” (at ) (and, if it didn’t, further case management orders could be made if necessary);
- notwithstanding that, his Honour did accept that the costs of the two proceedings would to some extent be greater than the costs of a single proceeding (and that separate representation of the two applicants could not be justified on the ground of there being any conflict of interest between them), but nevertheless any unjustified duplication of costs could and should be addressed retrospectively at the end of the proceedings, on the basis of known facts;
- prospective costs-capping orders are usually more appropriate in smaller, less complex cases;
- the first of the orders sought by the respondent may disadvantage class members (in that any ‘gap’ between the actual costs incurred and the ‘cap’ would presumably come out of any damages award);
- even if he was inclined to make that order, he would only have done so on a mutual (or bilateral) basis; and
- the evidence presently before the Court was insufficient to enable the Court to assess the adequacy or otherwise of the specific quantum caps proposed in the second and third orders.
McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd (No 2)  FCA 215
Federal Court of Australia, Beach J, 25 February 2019
Applicants’ Solicitors: Slater & Gordon / Maurice Blackburn;
Respondent’s Solicitors: Minter Ellison;
Applicants’ Funders: IMF Bentham Ltd / ICP Capital Pty Ltd
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