TWE claws back costs from MCI over failed class action

Australia's 'loser pays' or adverse costs system is largely credited as being a major deterrent to the spate of spurious class actions maligned in other jurisdictions. While Treasury Wine Estates was held accountable by one shareholder class action (run by Maurice Blackburn), here we look at whether the terms of a Deed of Settlement in the overlapping Maurice Blackburn class action preclude the respondent from claiming its costs in relation to the case that had been brought on by Melbourne City

This was a shareholder class action brought by Melbourne City Investments Pty Ltd (MCI), against Treasury Wine Estates Ltd (TWE) (MCI Proceeding). On 5 July 2016 Foster J ordered that the MCI Proceeding be permanently stayed as an abuse of process of the Court.

Subsequently, on 10 November 2017, his Honour approved the settlement of an overlapping class action brought by Mr Brian Jones against TWE (Jones Proceeding). MCI was a class member in the Jones Proceeding and was bound by the Settlement Deed executed by Mr Jones, TWE, Maurice Blackburn and IMF Bentham Ltd to give effect to that settlement.

This judgment concerned an interlocutory application filed by TWE for orders that MCI pay all of its costs of and incidental to the MCI Proceeding.

MCI opposed the application on the sole ground that TWE was precluded from maintaining its claim for costs because that claim was released by the operation of cl 6.1(c) of the Settlement Deed in the Jones Proceeding and/or because MCI was entitled to plead the Settlement Deed in bar to TWE's claim for costs.

Clause 6.1(c) of the Settlement Deed provides that 'TWE releases Jones and the Group Members jointly and severally from':

  • 'any claim in relation to matters which are as at the date of [the Settlement Deed] [12 September 2017] or were at any time the subject of [the Jones Proceeding] or… which are raised in [the Jones Proceeding]'
  • 'any claim… that TWE and/or any of its Related Parties has or may have against [Mr Jones and the Group Members] in relation to the matters the subject of [the Jones Proceeding]… or which are raised in [the Jones Proceeding] …' howsoever arising.

Justice Foster held that TWE was not precluded from maintaining its claim for costs by operation of cl 6.1(c) of the Settlement Deed. His Honour observed that:

  • The costs of the Jones Proceeding are specifically dealt with in other clauses of the Settlement Deed, and the Recitals of the Settlement Deed confine the subject matter of the Deed to the settlement of the Jones Proceeding.
  • The evidence suggested that neither Mr Jones nor TWE contemplated that the releases given by TWE in cl 6.1(c) would cover a future claim against MCI for costs in the MCI Proceeding.
  • TWE's claim for costs did not 'have a sufficient connection to the subject matter of the Jones proceeding to bring it within the scope of the releases provided by TWE in cl 6.1(c) of the Settlement Deed' because it did not follow from any claim made by TWE in the Jones Proceeding or 'arise from any adjudication by the Court in relation to the substantive claims made by Mr Jones in the Jones proceeding or from any agreement made between the parties to that proceeding' (at [98]).

His Honour also held that MCI was not entitled to plead cl 6.2 of the Settlement Deed in bar to TWE’s application for costs. Clause 6.2 authorises a plea in bar to '… any claim… by any other Party bound by this Deed [including, for example, TWE] in respect of any claim arising out of or related in any way to the matters…' the subject of the Jones Proceeding. His Honour held that '[a]ll that cl 6.2 was intended to do was to make clear that, in circumstances where the cl 6.1 releases had become operative, a party to the Settlement Deed (and certain others, including group members) could plead the releases in bar to such claims' (at [101]).

His Honour therefore ordered that MCI pay TWE’s costs to date of and incidental to the MCI Proceeding, including reserved costs, and the costs of TWE's interlocutory application.

Case details

Melbourne City Investments Pty Ltd (now called ACN 161 046 304 Pty Ltd) v Treasury Wine Estates Ltd (No 4) [2019] FCA 804

  • Federal Court of Australia, Foster J, 30 May 2019
  • Applicant's Solicitors: Elliott Legal Pty Ltd
    Respondent’s Solicitors: Herbert Smith Freehills
  • Applicant's Funder: N/A

Read more on Austlii: Melbourne City Investments Pty Ltd (now called ACN 161 046 304 Pty Ltd) v Treasury Wine Estates Ltd (No 4) [2019] FCA 804

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