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Costs central to class actions, conference told

Costs central to class actions, conference told

By Karin Derkley


Cost considerations are central to class actions practice, Slater and Gordon class actions group leader Andrew Paull told the LIV National Costs Law Conference last week.

Class actions were recommended by the Australian Law Reform Commission in 1988 as a way of making the legal cost of compensation claims of those who had suffered significant but relatively small losses less prohibitive, Mr Paull told the conference.

“By grouping together those claims, the commission noted that the total value of claims may be increased to the point where legal costs are no longer prohibitive and proceedings can be commenced.

“What this means is that cost efficiency and cost-effectiveness are issues that are central to the purpose of the class action regime,” he said.

Courts play a key role in ensuring this, he said, in the form of court supervision which ensures that a plaintiff's solicitors will not be paid from any settlement sum unless their costs have been approved by the court.

The court also provides the opportunity for group members not happy with the payment arrangements of their legal team the option to opt out and, if they wish, seek different legal representation on different terms or alternatively choose not to pursue their claim.

To facilitate this, courts have resorted to novel ways of notifying group members, Mr Paull said, including requiring companies to send out notices through the shareholder registry, or posting notices on Facebook or in newspapers.

In the Manus Island class action, in which Mr Paull was involved, the court ordered that the Commonwealth of Australia post notices in the common areas of the Manus Island Detention Centre in 12 different languages for those detained there to read.

Another way in which costs arise as a central consideration in class actions are as a determinant of multiplicity issues "or, as they sometimes described 'beauty contests'", Mr Paull said.

"The issue of multiplicity arises because of the fact that a single person can commence a proceeding on behalf of a wider group." This has been around since at least 1999 when Slater and Gordon, Maurice Blackburn and Harry Nowicki and Co all issued class actions on behalf of all those who suffered an injury, loss or damage by reason of the explosions that occurred at the Esso Longford gas plant.

In that case the Federal Court ordered that the proceedings be consolidated and conducted by two of the firms with a single set of counsel, Mr Paull said.

Courts struggled to deal with increasingly common overlapping class actions until Judge Lee, who also spoke at the conference, made a decision in the case of Perera v Get Swift to only allow a single claimant, a single set of lawyers and a single litigation funder to go ahead, on the basis that the solicitors for the selected plaintiff had proposed innovative ways to reduce legal costs, such as the appointment of a cost referee to scrutinise ongoing expenditure throughout the proceeding.

His decision was upheld in the full court on appeal, although the court did warn against becoming overly focused on costs in these circumstances, Mr Paull pointed out, noting that the biggest determinant of the amount returned to group members will be the overall outcome that can be achieved and so there should be care taken not to just simply have a race to the bottom on costs.

Mr Paull also spoke about the proposed introduction of group costs orders, otherwise known as contingency fees, as a third funding method alongside conditional fee arrangements and litigation funding.

If this legislation is passed, it will give rise to "all manner of interesting considerations for costs lawyers", Mr Paull said. "It will also provide a third model by which class actions can be conducted, meaning that some claims which don't fit into the existing mould for either conditional fee or litigation funded arrangements are able to be run and the group members will in some cases be able to see a higher portion of any settlements returned to their pockets."

Mr Paull said that lawyers should be encouraged to spend time and effort negotiating the most favourable funding terms available for a particular matter. "If funding can be obtained say at 20 per cent rather than 25 per cent, this is likely to save group members millions of dollars."

However, plaintiff lawyers are being told that time spent seeking to obtain better funding terms is not recoverable, which may act as a disincentive to spending time on the issue, he said. "And as any good economist will tell you, incentives do matter."

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