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
- further, the maximum recoverable party / party costs be fixed in the amount of approximately $4.46 million across both proceedings
- 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.
- 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
Read more on Austlii: McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd (No 2)  FCA 215
Andrew WatsonNational Head of Class Actions, Class actions, Melbourne
"I'm an experienced litigator in class actions, particularly for shareholders who have been victims of corporate misconduct."
Ben SladeState Managing Principal, Office leader, Class actions, Sydney
"I am driven to give a voice to those who would otherwise have to suffer because those who have done them wrong are all too powerful."
Brooke DellavedovaPrincipal Lawyer, Class actions, Melbourne
"I am passionate about getting the best possible outcome for my clients and class actions provides an excellent opportunity for claimants to band together to bring claims they might not be able to bring on their own."
Kimi NishimuraPrincipal Lawyer, Class actions, Melbourne
"I'm committed to fighting for the rights of victims of corporate misconduct as well as pursuing compensation on behalf of my clients."
Rebecca GilsenanPrincipal Lawyer, Class actions, Sydney
"I have extensive experience in running complex and novel litigation, including class actions in the areas of price fixing, failed investment schemes, product liability and securities."
Miranda NagyPrincipal Lawyer, Class actions, Sydney
"I have a strong conviction that the community should be able to expect our governments and the companies we deal with to comply with the law."
Julian SchimmelPrincipal Lawyer, Class actions, Sydney
"Class actions are a unique legal mechanism that have helped hundreds of thousands of people receive compensation after mistreatment at the hands of powerful companies, and it’s gratifying to help people get access to justice when otherwise it would’ve been difficult for them."
Vavaa MawuliPrincipal, Class actions, Brisbane
"The most rewarding thing about my work is the change in scale of what we are able to accomplish."