The cost of objecting to a class action settlement

The Australian class action process ensures the Court retains excellent safeguards for group members, one of which is the ability to object to proposed settlement terms. Extra work, however, incurs extra risk and costs and this issue looks at an objection by a class member to approval of settlement and the application by that class member for payment of costs of objecting – Application dismissed

In an earlier judgment in this matter, Murphy J declined to approve a proposed settlement of the proceedings (Kelly v Willmott Forests Ltd (in liq) (No 4) (2016) 335 ALR 439; [2016] FCA 323) – however, his Honour subsequently approved a revised settlement of the proceedings (Kelly v Willmott Forests Ltd (in liq) (No 5) [2017] FCA 689).

At the hearing to approve the original settlement, one of the class members, a Mr Simon Braham, engaged solicitors as well as senior and junior counsel to appear on his behalf and object to the proposed settlement. Mr Braham subsequently applied for an order that the costs which he incurred in doing so be paid out of the settlement sum, or alternatively be paid by the applicants and/or by the respondents. In this judgment, his Honour found that although the Court undoubtedly had power to make such orders under ss 33ZF and 43 of the Federal Court of Australia Act 1976 (Cth), it was not appropriate to do so in this case. In summary, his Honour considered that:

  • In circumstances where the Court had already appointed a contradictor (Mr Lachlan Armstrong QC) to represent the interests of class members on the settlement approval application, it was not strictly necessary for Mr Braham to engage his own solicitors and counsel – and as the costs of the contradictor were borne by the applicants and the respondents, it was not appropriate that the applicants and the respondents also be visited with Mr Braham’s costs.
  • Mr Braham's submissions on the key issue which resulted in approval of the settlement being refused did not take the matter any further than the contradictor's submissions.
  • Otherwise, Mr Braham's submissions at the settlement approval hearing were not central to the decision, and in some respects were rejected.
  • As the settlement did not result in any settlement fund for distribution to class members, and only resulted in about half of the applicants' solicitors' costs being paid, any order for costs against the applicants would have to be paid by them personally, or by their solicitors (Macpherson and Kelley), which was not warranted.
  • Nor was it appropriate to impose any costs order on the respondents, in circumstances where they owed no fiduciary obligations to the class members and were entitled to enter into the most advantageous settlement they were able to negotiate from their perspective (even though that settlement was not ultimately approved by the Court).

Case details

Kelly v Willmott Forests Ltd (in liq) (No 6) [2019] FCA 745

  • Federal Court of Australia, Murphy J, 28 May 2019
  • Applicants' Solicitors: Macpherson and Kelley
  • Respondents' Solicitors: Arnold Bloch Leibler / Brian Ward & Partners / Herbert Smith Freehills
  • Objector's Solicitors: Rigby Cooke Lawyers
  • Applicants' Funder: N/A

Read more on Austlii: Kelly v Willmott Forests Ltd (in liq) (No 6) [2019] FCA 745

Read more on Austlii: Kelly v Willmott Forests Ltd (in liq) (No 6) [2019] FCA 745

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