Maurice Blackburn wins “Boral” carriage dispute with no win no fee model
In this decision, Lee J was required to consider a carriage dispute between three respective law firms that had each filed open class representative proceedings against Boral Ltd (Boral). The competing proceedings included (in order of commencement):
- CJMCG Pty Ltd as trustee for the CJMCG Superannuation Fund (NSD 340 of 2020), represented by Quinn Emanuel and funded by Regency IV Funding (Regency) (CJMcG Proceeding).
- Andrew Parkin (NSD 602 of 2020), represented by Maurice Blackburn and unfunded (Parkin Proceeding).
- Martini Family Investments Pty Ltd as trustee for Martini Family Investments Super Fund (NSD 935 of 2020), represented by Phi Finney McDonald (PFM) and funded by Therium Litigation Finance Atlas AFP IC (Therium) (Martini Proceeding).
As the first decision since the important judgment in Wigmans v AMP Ltd  HCA 7 (Wigmans), his Honour was given the opportunity to exercise the ‘multifactorial approach’ adopted and endorsed by the High Court. As stressed by the majority of the High Court in Wigmans at  (and cited by Lee J at ):
In matters involving competing open class representative proceedings with several firms of solicitors and different funding models, where the interests of the defendant are not differentially affected, it is necessary for the court to determine which proceeding going ahead would be in the best interests of group members. The factors that might be relevant cannot be exhaustively listed and will vary from case to case.
In considering which factors may be relevant to the Court’s assessment of competing proceedings, his Honour emphasised that a comprehensive list could not be exhaustively stated given the need to consider the best interests of class members in each particular case (at ). Despite this, his Honour did point to a number of factors that have been considered relevant in recent cases (and were recently summarised in Wigmans at ). These factors included:
- the competing funding proposals, cost estimates and net hypothetical return to class members;
- proposals for security;
- the nature and scope of the causes of action advanced (and relevant case theories);
- the size of the respective classes;
- the extend of any book build;
- the experience of the legal practitioners (and funders) and availability of resources;
- the state of progress of the proceedings; and
- the conduct of the representative applicants to date.
Before considering each of these factors in reference to the current competing proceedings, his Honour also outlined an additional three factors that were said to be relevant to the present assessment of which proceeding should be allowed to proceed:
- the choice made by some class members and how opt-out might operate in the proceedings;
- the position of Quinn Emanuel as a United States law firm; and
- the possibility of conflict arising in a no win no fee proceeding.
As set out below, despite the large number of factors considered by his Honour, the vast majority of these issues were seen to have a neutral or minimal impact on the Court’s assessment of the competing claims. The most compelling and determinative factor was clearly the assessment of the “net return to group members” (at ) supported by the no-win / no-fee funding model offered in the Parkin Proceeding.
A. Proposals for security
Both Maurice Blackburn in the Parkin Proceeding and the funder in the CJMcG Proceeding had agreed to provide security for costs. In the Martini Proceeding, the applicant had opted to obtain security under an ATE insurance policy. While the respondent had attempted to argue that the more ‘orthodox’ approaches to security in the Parkin Proceeding and the CJMcG Proceeding should be “a matter that weighs in favour of those proceedings being an appropriate vehicle for advancing the claims of group members” (at ), his Honour held that the different ways in which security might be provided was not a consideration that weighed heavily in the balance of the competing claims (at ).
B. Nature and scope of causes of action & size of the respective class
In considering the nature and scope of the competing claims as well as the size of the respective classes, his Honour concluded that in the present case, these factors were neutral in determining which claim should be advanced (at , ).
C. The experience of the legal practitioners (and funders)
In weighing up the relative experience of the solicitors, his Honour held that he had “little doubt that, if carriage was awarded to any of the highly experienced solicitors … then the interests of group members would be appropriately advanced” (at ). Similar comments were also made by his Honour in relation to the resources available to the two funders. Accordingly, the experience of the lawyers and funders was held by his Honour to be a further neutral factor in this particular case. A similar approach was taken in relation to the issue of Quinn Emanuel having an office in the United States, where the respondent was headquartered.
D. State of progress of the proceedings
In response to CJMcG’s submissions that steps taken in relation to discovery and preliminary pleadings orders should weigh in favour of Quinn Emanuel being awarded carriage of the claims, his Honour held that the work conducted to date could be “undertaken very quickly by the other applicants” and any sunk costs were “part of the rough and tumble of conducting a business in the commercialising of litigation” (at -).
Despite being found to have a ‘slight advantage’ in respect of the state of the proceedings, his Honour found that the factor was, again, ultimately neutral.
E. Competing funding models, cost estimates and hypothetical returns to class members
The funding models proposed in the competing proceedings included:
- a no-win / no-fee arrangement in the Parkin Proceeding;
- a funding model utilising a funding equalisation order in the Martini Proceeding; and
- an innovative funding model in the CJMcG Proceeding which allowed the Court to determine the appropriate level of remuneration provided to the funder and Quinn Emanuel (capped at 32.5%) at the conclusion of the proceeding having regard to how the proceeding developed.
In considering the costs estimates provided in each proceeding, his Honour noted that it was likely that each firm would charge “a relatively similar amount for the conduct of the case” (at ). In this context, his Honour also provided additional commentary on the work conducted by solicitors which could, in his Honour’s view, be more efficiently completed by junior members of the bar. At  his Honour also reflected on the role of independent costs experts and the need to consider the reasonable allocation of work (as well as the reasonableness of the costs themselves) (at ):
… there has been no or little examination as to whether tasks could have been completed less expensively if done by junior barristers rather than employees … When it comes to assessments of reasonableness of costs in class actions, it seems to me the Court should be giving consideration as to whether work has been allocated between lawyers (be they solicitors or barristers) in an optimal way in the interests of group members.
F. Net hypothetical return to class members
In preparation for the hearing, the Court was provided with a summary document, modelling the hypothetical results to class members under the various funding models.
While there were some complexities in the modelling presented in the CJMcG Proceeding and the Martini Proceeding, his Honour concluded that he did not need to resolve these issues as it was “tolerably clear … that in the very significant majority of conceivable scenarios, the likely return to group members on a no win/no fee model is superior, sometimes by a significant amount, to the alternative models” (at ).
G. Possibility of conflict under a no-win/no-fee model
Counsel for the applicant in the Martini Proceeding raised the possibility of a conflict of interest on behalf of the applicant’s legal representative under a no-win/no-fee model. This conflict was said to arise in two ways:
- first, there was a potential conflict in conducting the proceeding on a speculative basis because there may be incentive not to allocate time and resources that would have been so allocated had a funder been paying the firm’s fees from time to time; and
- secondly, there may be an incentive for legal representatives acting on a speculative basis to settle the proceedings where the work in progress funded by the firm increases (see ).
In rejecting these arguments, his Honour accepted the evidence filed by Maurice Blackburn in relation to prior class action settlements and returns to class members. His Honour further noted that there was “no reason to consider that highly experienced solicitors will not act in a conscientious way to advance the interests of group members” (at ).
H. The extent of any book-build and choice of certain class members
Counsel for the applicant in the Martini Proceeding argued that a relevant factor for the Court to consider included the number of class members who had signed up with PFM. Relevantly, funding agreements signed by retained class members included a clause that provided PFM with an irrevocable authority to opt class members out of any competing proceeding.
In determining that the extent of any bookbuild was not “of particular importance”, his Honour concluded (at ):
Any applicant granted carriage of this class action and conducting the case on behalf of an open class is going to be conducting the case for every group member, other than group members who take a step to opt out. This is not to deny the choice of any group member of a solicitor or funder, but reflects the reality that Pt IVA gives group members the opportunity to exercise their choice at a particular time, being the time of opt out.
His Honour further noted that it may not be appropriate for a solicitor to seek to exercise an irrevocable authority to opt out a class member from a proceeding that a Court has found to be the best vehicle in which the interests of class members will be advanced (at ).
I. Conduct of the representative parties to date
While some criticism was directed at the applicants in the Parkin Proceeding and the Martini Proceeding regarding the timing at which the Court was notified of the possibility of competing proceedings being filed, his Honour ultimately found that this conduct “should not distract the Court from the overarching consideration as to what is in the interests of group members as a whole” (at ).
Evaluation and orders made
In setting out his ultimate endorsement of the Parkin Proceeding, his Honour noted (at ):
If one is to take into account all the matters raised by the parties in their respective submissions, it is consistent with the requirement to take into account the best interests of group members and, incidentally, the overarching purpose, to allow the open class proceeding to be conducted on a no win/no fee basis to proceed.
While his Honour concluded that the CJMcG Proceeding should be permanently stayed, his Honour stopped short from making similar orders in the Martini Proceeding. In allowing the proceeding to continue temporarily as a closed class, his Honour re-listed the Martini Proceeding for case management so that the Court could consider the approval of opt-out notices to be sent to class members who fell within both the Parkin Proceeding and the Martini Proceeding.
CJMcG Pty Ltd as Trustee for the CJMcG Superannuation Fund v Boral Ltd (No 2)  FCA 350
Federal Court of Australia, Lee J,
31 March 2021 (orders) and 14 April 2021 (reasons)
Applicant’s Solicitors NSD340: Quinn Emanuel;
Applicant’s Solicitors NSD602: Maurice Blackburn;
Applicant’s Solicitors NSD935: Phi Finney McDonald;
Respondent’s Solicitors: Herbert Smith Freehills;
Applicant’s Funder NSD340: Regency IV Funding;
Applicant’s Funder NSD935: Therium Litigation Finance Atlas AFP IC
Austlii link: Accessible here
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