Cardoso v SA Power Networks (No 2)

[2023] SASC 104

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

CARDOSO v SA POWER NETWORKS (No 2)

[2023] SASC 104

Decision of Judge Bochner a Master of the Supreme Court  

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS

Costs of representative action

Supreme Court Act 1986; Legal Profession Uniform Law 2014 (Vic); Legal Practitioners Act 1981 (SA), referred to.
Lenehan v Powercor Australia Ltd [2020] VSC 82; Taplin v Amaca Pty Ltd [2020] SADC 3; BHP Billiton Limited v Parker (No 2) [2014] SASC 6; Francis v Powercor Australia Limited & Anor [2020] VSC 405; Matthews v Ausnet Electricity Services Pty Ltd & Ors [2014] VSC 663, applied.

CARDOSO v SA POWER NETWORKS (No 2)
[2023] SASC 104

CIVIL

1. On 12 May 2022, I published reasons for approving the settlement of a representative action, on terms that, on the basis of a denial of liability, the respondent paid to the applicant the sum of $2,250,000 inclusive of legal costs, disbursements and interest.[1] My reasons also included reasons for approving a proposed settlement distribution scheme. My approval was on the basis that, once legal costs and disbursements had been deducted, each member of the group would receive a sum equivalent to between 55% to 60% of their assessed losses. I considered that it was appropriate to approve such a settlement, given that the group members faced significant hurdles with respect to both liability and quantum.

   [1] [2022] SASC 48.

2. After the granting of approval, each group member received 57% of their assessed loss. A sum was retained by the applicant’s lawyer, Maddens Lawyers (“Maddens”), on account of their costs, while they undertook the steps necessary to allow them to seek further Court approval of their costs. Maddens now seeks approval of the payment of $780,000 for legal costs and disbursements. These costs relate both to the conduct of the action and the administration of the settlement distribution scheme. Approval of Maddens’ costs in the sum of $780,000 would result in each group member receiving a sum equivalent to 60% of their assessed losses.

3. Because the settlement sum was paid on an all-inclusive basis, Court approval is required for the amount of Maddens’ costs and disbursements. This is because approval of the settlement was based on my conclusion that the settlement sum was fair and reasonable as between the parties, taking into account the claims made by the group members, the risks in involved in continuing the litigation and the likely costs of ongoing litigation. It is incumbent on me to ensure that the settlement remains fair and reasonable, once Maddens’ costs and disbursements have been paid.

   The principles to be applied

4. Rule 134.1 of the Uniform Civil Rules 2020 (“the UCR”) requires Court approval of the terms of resolution of any representative action. There appears to be no South Australian authority dealing with the approval of the quantum of costs pursuant to r 134.1 of the UCR. I am satisfied, however, that the authorities from other jurisdictions, in particular, the federal jurisdiction and Victoria, are apposite.

5. In Lenehan v Powercor Australia Ltd,[2] Nichols J said this about the relevant Victorian legislation:

   [2] [2020] VSC 82.

   Section 33V of the Supreme Court Act 1986 provides that a group proceeding may not be settled without the approval of the court. In giving approval the Court may make such orders as it thinks fit with respect to the distribution of any money paid under the settlement.

   The principles governing the approval of the costs of a representative proceeding are well understood.

   The Court’s function in scrutinising a claim for costs by the plaintiff and his solicitors is protective. Group members ordinarily benefit from the legal work undertaken by the plaintiff’s solicitors in conducting and settling the proceeding and are typically required to pay a proportionate share of the plaintiff’s costs. However, they have no control over the costs incurred during the conduct of proceeding and the information available to them about costs (including information that would allow them to effectively scrutinise a claim for costs) is generally limited. As Murphy J put it in Petersen, group members suffer a significant information asymmetry in this regard.

   The Court must be satisfied that the costs claimed are reasonable in all of the circumstances and proportionately incurred.

   The proportionality measure looks to the relationship between the costs incurred and the value and importance of the subject matter in issue. The requirement for proportionality as it concerns legal costs generally is expressed in s 172 of the Legal Profession Uniform Law (Vic) (the Uniform Law) and in s 24 of the Civil Procedure Act 2010 (Vic). It is a forward looking assessment which compares the cost of the work with the benefit that could reasonably be expected from the work, at the time at which the work was performed.

   The Court may be satisfied as to the amount of costs that is reasonable and proportionate, in any one of a number of ways.

   As Moshinsky J observed in Camilleri, the precision with which a court will require a plaintiff to justify the quantum of costs incurred for the benefit of group members will vary according to the circumstances of the case. Thus, “a very large costs sum might readily be approved in a settlement following a lengthy trial, while an apparently modest costs sum might require more exacting validation if it is associated with a modest sized proceeding and represents a significant proportion of the overall settlement sum”.

   Sufficient evidence must be tendered so as to enable the Court to make an assessment as to whether the costs were reasonably and proportionately incurred.

   Evidence on this question commonly comes from an independent solicitor or costs consultant or from an independent referee on a formal reference under the rules of Court; and at times with assistance from a contradictor. Even where an independent expert is appointed it is, however, the Court and not the expert who is required to determine whether the costs are reasonable.

   In Matthews, Osborn JA observed (citing Re Medforce) that the principles approving solicitor and client costs in this context are similar to those relevant to fixing a liquidator’s remuneration. There, at minimum, what is required is a statement of the work undertaken, together with an expenditure account sufficiently itemised to enable the charges made to be related to the work done.

   It is recognised that a balance should be struck, affording the Court sufficient information to discharge its function, without the assessment itself significantly diminishing the corpus of the settlement funds.

   What is reasonable and proportionate will vary from case to case. Factors commonly considered in this assessment include:

   (a)the reasonableness of the terms of the fee agreements and whether the costs actually charged have been calculated in accordance with those agreements;

   (c)whether any significant portion of the fees charged have been inappropriately or unnecessarily incurred;

   (d)whether the work in a particular area or in relation to a particular issue was undertaken efficiently and appropriately;

   (e)whether the work was undertaken by a person of an appropriate level of seniority and whether the charge out rates were appropriate having regard to the seniority of the practitioners and the nature of the work undertaken;

   (g)whether the tasks and associated charges were appropriate having regard to the nature of the work and the time taken to complete the work.

   Considerations of this kind might be characterised as broadly reflecting the requirements of s 172 of the Uniform Law which applies to costs generally.

   Ordinarily, the plaintiff’s costs of the proceeding will have been incurred and charged pursuant to an agreement between the plaintiff and his or her solicitors. Often, the plaintiff’s solicitors will also have entered costs agreements with at least some group members. Accordingly, those agreements will inform the assessment to be made by the Court on an application for approval of the costs of a representative proceeding, on settlement. A logical starting point for assessing the reasonableness of the costs claimed is to establish what costs have actually been incurred and pursuant to what terms.

   However, costs agreements inform rather than determine the Court’s assessment of the quantum and nature of costs to be approved. The Court may consider the reasonableness of the terms of the costs agreements. The considerations relevant to an exercise of the power to approve costs on a settlement of a representative proceeding are not limited to what is permitted by the costs agreement. The question remains whether in the Court’s assessment the costs are reasonable and proportionate. The costs agreement may itself assist in evidencing reasonableness.[3]

   (footnotes omitted)

   [3] Ibid, [7] – [22].

6. In making these remarks, Nichols J undertook a review of authorities from the Supreme Courts of Victoria and New South Wales and the Federal Court of Australia. With respect, I consider that this is a principled and reasoned approach to the quantification of costs in a representative action.

   The retainer agreement

7. Brendan Prendergast, a principal of Maddens, met with the applicant on 24 January 2020. He explained to the applicant the meaning and effect of the retainer agreement, including the cooling off provisions, exposure to an adverse costs order in the event that the action was unsuccessful, and the responsibilities of being the named applicant. The applicant signed the retainer agreement at this meeting.

8. On 2 March 2020, the applicant signed a second costs agreement. This agreement changed the basis of charging, from use of the Victorian Supreme Court Scale, to charging on the basis of hourly rates. A copy of this agreement was provided to all of the members of the group. I will refer to this document as “the costs agreement”.

9. The scope of the work to be undertaken by Maddens is set out in clause 4 of the costs agreement. It limited the work to claims against the entity or entities responsible for the operation of the electrical assets which caused the fire, including their insurers or related third parties. It included claims relating to both property damage and personal injury. It identified common benefit work and individual benefit work and explained the meaning of those terms.

10. A “successful outcome” was defined in clause 7.2 and includes:

    The recovery of money or money’s worth by you or any person on your behalf as a result of or in connection with any settlement (as defined) of you Claims…

11. Clause 7.3 of the costs agreement provides that professional fees would be calculated on the basis of hourly rates charged in 6 minute units. The following rates were specified:

PERSON/POSITION	HOURLY RATE
Partner	$715
Special Counsel	$680
Senior Solicitor	$565
Solicitor	$490
Clerk/Paralegal	$320

1. Clause 7.8 provides that the applicant would only become liable to pay Maddens’ professional costs and disbursements if a successful outcome was achieved. Clause 7.8.2 provides that, in the event of a successful outcome, a 25% uplift on the professional fees would be applied to take into account Maddens’ risk in taking on the action on a conditional basis with respect to both legal fees and disbursements. It provides an estimate of $250,000 for the likely uplift fee for the common benefit work and an estimate of $11,000 for the individual benefit work. 

2. At clause 8, the costs agreement provides an estimate of the costs likely to be incurred, with common benefit work likely to be in the region of $1,750,000, comprising $1,250,000 in legal fees and $500,000 in disbursements, and individual benefit work likely to be approximately $60,000.  It sets out the different variables which might have an effect on the quantum of the costs incurred. It does not break down the estimate for disbursements to specify a likely amount for barristers’ fees.

3. Finally, I note that the costs agreement provided the disclosures required by the Legal Profession Uniform Law 2014 (Vic).

   The barristers’ retainers

4. Over the course of the matter, four barristers were briefed by Maddens. The core team of barristers consisted of Tim Tobin SC and Andrew Fraatz. Ben Doyle SC was retained to provide advice on a number of discrete issues. At the time that he carried out work on this claim he had not yet attained the position of senior counsel. Claire Nicholson was retained to provide assistance to Mr Fraatz on a discrete issue.

5. Mr Tobin was retained on the basis that his fees would become payable only in the event of a successful outcome. His costs agreement disclosed an hourly rate of $1,210 and a daily rate of $12,100. In the event, he actually charged $1,100 per hour and a daily rate of $11,000.

6. Mr Fraatz’s retainer was on the basis that his fees to mediation would only be paid on achieving a successful outcome; after that time, he would charge 50% of his usual fee if a successful outcome was not obtained. He disclosed an hourly rate of $600 and a daily rate of $6000. The vast majority of the work of counsel was carried out by Mr Fraatz.

7. Mr Doyle was retained on a conditional basis, in that his fees would only become payable in the event of successful outcome. He disclosed an hourly rate of $473 and a daily rate of $4,730.

8. Ms Nicholson did not provide a disclosure statement as to her fees or a costs agreement.

   The evidence

9. Maddens obtained reports from two costs consultants. The first report, dated 18 November 2021, was obtained from Mr Graeme Arnold of Arnold Costs Solicitors. Mr Arnold assessed Maddens’ reasonable costs and disbursements as being in a range of $507,922.76 and $620,794.48, including uplift. This is substantially less than the amount sought by Maddens. Maddens submits that there is a number of problems with Mr Arnold’s report, and it should not be relied on.

10. Maddens’ second report was prepared by Ms Catherine Dealehr of the Australian Legal Costing Group. In her report, dated 13 April 2022, Ms Dealehr assessed Maddens’ recoverable costs in the sum of $945,293.50, and on this basis, concluded that the costs and disbursements sought by Maddens, in the sum of $780,000 including uplift were fair, reasonable and proportionate. It is on this report that Maddens seeks to rely.

    Mr Arnold’s report

11. Mr Arnold did not have access to Maddens’ file for the purpose of preparing his report. He was of the view, however, that he had access to sufficient documents to form an opinion.

12. Mr Arnold reviewed the costs agreements and disclosure statements provided by solicitors and counsel to determine if they complied with the relevant legislation and were otherwise fair and reasonable. He considered the rates charged against the background of the issues raised in the litigation. He also cross-checked the fees actually charged against the disclosed rates.

13. Mr Arnold then reviewed the time based professional charges and deleted entries that he considered to be non-chargeable. He then applied a global reduction, based on the size and nature of discovery, the pleadings, expert evidence and the relative time spent by various professionals based on qualifications and experience. He also sought to obtain a sense of the efficiency and productivity of the individuals working on the file. Where possible, he examined the time recorded to review particular documents and compared that with what he considered was a reasonable time for such review.

14. Mr Arnold reached the view that, while the hourly rates charged by Maddens are typical of law firms in the eastern states, they are approximately 15% more than the fees charged by comparable firms in South Australia. He considered that there was nothing about this matter that justified the use of interstate lawyers and concluded that a discount of 15% should be applied to the fees charged by Maddens.

15. He considered that the professional fees charged were inflated by approximately one third as a result of dealing with the insurance issues. He also formed the view that the percentage of work done by senior lawyers was high compared to other, less expensive, staff and that there was heavy, ongoing reliance on junior counsel, in circumstances where Maddens should have been able to carry out the work without counsel’s involvement.

16. Mr Arnold wholly excluded the following items:

    ·Costs agreement and disclosure work, including obtaining this information from counsel;

    ·Reviewing basic procedural rules;

    ·More than 2 lawyers or paralegals at mediation and other key events;

    ·Entries with little meaningful or no description;

    ·Time spent travelling between Victoria and South Australia, except for some limited travel between Adelaide and Yorketown and the surrounding areas; and

    ·File administration and maintenance.

17. Even after the exclusion of these items, Mr Arnold considered that the total number of hours was very high, taking into account that discovery was modest, limited interlocutory steps were required and resolution was reached shortly after mediation. He expressed the view that the amount of time spent reviewing the respondent’s discovery was excessive, and that only the relevant portions of the documents discovered by the respondent should have been considered in detail. He also considered that the amount of time spent considering the expert reports was excessive. He considered that there was a “general impression of inefficiency”.[4] He considered that the amounts claimed for the approval process and the administration process were unreasonably large. As a result, he applied a further reduction of 40%, on top of the 15% reduction already made.

    [4] FDN 93, KAE-2, p40

18. As to counsel fees, Mr Arnold considered that the fees charged by Mr Tobin were “exorbitant” when compared to that of a South Australian experienced senior counsel. He formed the view that there was no justification for the use of interstate counsel and accordingly, he allowed a rate of $880 per hour or $8,800 per day for senior counsel. He did not consider that the number of hours claimed by Mr Tobin was excessive.

19. Mr Arnold formed a similar view with respect to Mr Fraatz’s fees. He allowed $440 per hour or $4,400 per day for junior counsel; he did not seek to reduce the number of hours for which charges were made to the time of settlement. He did, however, reduce the allowance made for work carried out on the approval application.

20. Mr Arnold made no reductions to the fees charged by Mr Doyle and Ms Nicholson.

21. Mr Arnold considered that the fees of the expert witnesses were high; he did not, however, consider that they were unreasonable or excessive and so allowed them in full.

22. Mr Arnold assessed the total of Maddens’ costs and disbursements at $564,358.62. He considered, however, that it was appropriate to allow range rather than one amount because of the various uncertainties arising as a result of the way that the assessment was undertaken. He considered that the reasonable range for costs and disbursements was between $507,922.76 and $620,794.48.

    Ms Dealehr’ report

23. Ms Dealehr has developed a system for assessing costs in large litigious matters by coding the lawyers’ time recording systems into various categories of work, which allows her to understand that nature of the work undertaken, to identify non-claimable work, and to identify charges which should be discounted. This system allows an examination of both the reasonableness of the work done and the reasonableness of the amount charged for it.

1. Ms Dealehr formed the view that it was reasonable for the applicant to instruct Victorian lawyers, because of Maddens’ extensive experience in bushfire class action litigation. She considered that the rates charged for a partner, special counsel and senior solicitor were within the market range of the rates charged by comparable firms in Victoria and, therefore, were reasonable. She considered that the undifferentiated rate for solicitors, regardless of their experience, was unreasonable. She allowed as reasonable the amount of $490 per hour for solicitors admitted in 2015, but reduced the rate for solicitors admitted in 2017 and 2019 to $350 and $300 respectively. She considered that the rate charged for a senior law clerk was reasonable. As to the rate for law graduates and legal assistants, she considered that they were unreasonable at $320 per hour, but noted that they were only charged at $280, which she considered reasonable. She considered that charging on the basis of 6 minute units was reasonable.

2. Ms Dealehr considered that the 25% uplift on professional fees was fair and reasonable given that no charge for either costs or disbursements would be made to the applicant if a successful outcome was not achieved.

3. With respect to counsel fees, Ms Dealehr noted that no disclosure of counsel fees was made to the applicant until 27 October 2020. While this disclosure was made promptly after Maddens received the information from counsel, it occurred some six months after the costs agreement was signed; as a result, it is arguable that this was in breach of s 178(1) of the Uniform Law, as a result of which the costs agreement would be void. She further noted that the Court had the power to overlook this breach, if satisfied that Maddens took reasonable steps to comply with their disclosure obligations and it would be reasonably expected that the client would not have made a different decision as to the litigation in any relevant respect. She expressed the view that she would be surprised if the applicant had changed his decision about any relevant aspect of retaining counsel. Because of the conditional nature of the costs agreement and the retainers of each counsel, the applicant was protected from incurring counsel fees in the event of an unsuccessful outcome. She expressed the view that she considered that it was unlikely that the costs agreement would be considered void and unenforceable. She also did not consider that the failure by the applicant to sign the barristers’ conditional costs agreements until after settlement would result in their being considered void.

4. In assessing the quantum of reasonably incurred professional fees, Ms Dealehr adopted a six step approach. The steps are summarised in the following table:

STEP	DESCRIPTION OF STEP
1	Calculate the time spent by each of the operators, verify accuracy of time recorded
2	Apply the claimable rates for operators pursuant to the Costs Agreement and adjusted including GST
3	Classify time spent by Phase – Task – Activity to provide information on the nature of the work undertaken
4	Identify and excise non-recoverable work by reference to costs not claimable
5	Apply any discounts after considering the nature of the work claimed or the way that work was done
6	Calculate and add 25% uplift fee

1. She broke the litigation into the following phases:

   ·Initial and pre-action work;

   ·Pleadings;

   ·Directions hearings;

   ·Discovery;

   ·Expert evidence;

   ·Interlocutory applications;

   ·Lay witnesses;

   ·ADR/settlement;

   ·Quantum/loss assessment;

   ·Post settlement including approval application;

   ·Large scale litigation management; and

   ·Miscellaneous.

2. Similarly, activities were broken down into fourteen different categories:

   ·Plan, prepare, drafting;

   ·Review, analysis;

   ·Communication with counsel;

   ·Communication with internal team;

   ·Communication with client;

   ·Communication with group members;

   ·Communication with experts;

   ·Communication with other side;

   ·Communication with other externals;

   ·Travel time;

   ·Multiple activities;

   ·Instructing at court/mediation;

   ·Non-skilled; and

   ·Research.

3. Ms Dealehr discounted by 100% any work where the time recording entries were too ambiguous, too brief or lacked description, work which was akin to general file management rather than work relating to the case itself, and work on the costs agreement, including work by Maddens to ensure that it complied with its professional obligations. A total of $37,688.20 was discounted as a result of this process.

4. When it came to other discounts, Ms Dealehr took into account the practitioner undertaking the work and nature of the work. She discounted by 25% entries where multiple activities were present in a single time entry and so were difficult to categorise as particular activity.  She discounted by 15% communications within the internal team. She also discounted work that was claimed at lawyers’ rates, but should have been done by a non-lawyer.

5. Ms Dealehr discounted by 50% the amount charged for travel time, on the basis that, while the travel was necessary, the fee-earner was not actually working at the time. She allowed the attendance of only the partner and special counsel at the mediation. A number of reductions were made for obvious time keeping errors.

6. In total, $43,176.05 was deducted during this process.

7. In respect of the uplift, Ms Dealehr did not apply the uplift to work relating to the administration of the settlement distribution scheme. Her conclusion on the reasonable quantum of legal fees can be summarised in the following way:

46             Description	47             Amount/Reduction
48    Professional fees in accordance with costs agreement	49             $609,962.10
50    Less first round of deductions	51             - $37,688.20
52    Less second round of deductions	53             - $43,176.05
54    Subtotal of professional fees	55             $529,097.85
56    Professional fees subject to uplift (excludes work relating to administration of settlement distribution scheme)	57             $510,272.54
58    Uplift fee	59             $127,568.13
60    Total fees	61             $656, 665.98

1. With respect to counsel fees, Ms Dealehr considered that, while Mr Tobin’s fees were at the higher end of the market range, they were fair and reasonable, given his extensive experience in bush fire class action litigation. She also considered that all of the rates of junior counsel were fair and reasonable. To assist her in determining whether the quantum of the fees charged was fair and reasonable, she examined each fee slip and separated the work undertaken into five categories:

   1.Settling/drawing;

   2.Prep/reading;

   3.Appearances;

   4.Conferring with team; and

   5.Multiple activities.

2. The majority of the work (78%) carried out by counsel was performed by Mr Fraatz.

3. Ms Dealehr discounted the work charged for by Mr Tobin, where he claimed 15 minute units for all work completed. As a result, she reduced his 15 minute unit and 30 minute entries by 50%. After breaking down the work done by counsel into phases, the only reduction that she considered was required was in relation to the “multiple activities” category, which she reduced by 25%.

4. Ms Dealehr’s conclusion with respect to counsel fees is summarised below:

NAME	AMOUNT INVOICED	REDUCTIONS	AMOUNT ALLOWED
Tim Tobin SC	$41,250.00	$6,325.00	$34,925.00
Sub-Total Senior Counsel	$41,250.00	$6,325.00	$34,925.00
Andrew Fraatz	$100,130.00	$450.00	$99,680.00
Ben Doyle (now SC)	$3,074.50	$3,074.50
Claire Nicholson	$1,031.25	$1,031.25
Sub-Total Junior Counsel	$104,235.75	$450.00	$103,785.75
TOTAL	$145,485.75	$6,775.00	$138,710.75

1. After considering the other disbursements paid by Maddens, Ms Dealehr did not consider that any further reductions were warranted. Her summary in relation to disbursements is set out below:

DESCRIPTION	AMOUNT CLAIMED	REDUCTION	AMOUNT ALLOWED
Counsel’s Fees	Senior Counsel	$41,250.00	$6,325.00	$34,925.00
	Junior Counsel	$104,235.75	$450.00	$103,785.75
	Sub-total	$145,485.75	$6,775.00	$138,710.75
Expert’s Fees	Dr Simon Barter	$12,980.00	$12,980.00
	Trevor Blackburn	$6,864.00	$6,864.00
	Sub-total	$19,844.00	$19,844.00
Loss Assessment	Loss Assessors	$75,203.58	$75,203.58
	Medical Reports	$3,880.18	$3,880.18
	Sub-total	$79,083.76	$79,083.76
Court Related Expenses	Mediator’s Fees	$2,475.00	$2,475.00
	Filing Fees	$2,652.00	$2,652.00
	Sub-total	$5,127.00	$5,127.00
Travel	Flights	$2,441.84	$2,441.84
	Accommodation	$953.58	$953.58
	Transport	$873.03	$873.03
	Miscellaneous	$642.48	$642.48
	Sub-total	$4,910.93	$4,910.93
Miscellaneous	Advertising	$3,421.26	$3,421.26
Searches	$944.73	$944.73
Food & Catering	$38.90	$38.90
Agent’s Fees	$1,751.75	$1,751.75
Weather Data	$99.83	$99.83
FOI	$294.00	$294.00
Costs Consultant	$2,057.00	$2,057.00
Venue Hire	$162	$162
Sub-total	$8,769.47	$2,095.90	$6,673.57
TOTAL	TOTAL	$263,220.91	$8,870.90	$254,350.01

1. Ms Dealehr considered reasonable Maddens’ estimate of professional fees of $13,992.00 plus an uplift of 25% and disbursements of $16,787.50 for the preparation and hearing for approval of the settlement.

2. In total, Ms Dealehr assessed Maddens’ reasonable costs and disbursements as follows:

DESCRIPTION	AMOUNT CLAIMED	AMOUNT REDUCED	AMOUNT ALLOWABLE
PART A – UP TO MARCH 2022
Professional Fees	$609,962.10	$80,864.25	$529,097.85
Uplift on Professional Fees	N/A	N/A	$127,568.13
Disbursements	$263,220.91	$8,870.90	$254,350.01
SUB-TOTAL PROFESSIONAL FEES & DISBURSEMENTS	$873,183.01	$89,735.15	$911,015.99
PART B – UP TO APPROVAL HEARING
Professional Fees	$13,992.00	$13,992.00
Uplift on Professional Fees	N/A	N/A	$3,498.00
Disbursements	$16,787.50	$16,787.50
SUB-TOTAL PROFESSIONAL FEES & DISBURSEMENTS	$30,779.50	$34,277.50
TOTAL A & B PROFESSIONAL FEES & DISBURSEMENTS	$945,293.49

1. In the circumstances, she considers that Maddens’ intention to cap their fees and disbursements at $780,000 is fair and reasonable. She also considers that the amount of $780,000 is proportionate.

   Maddens’ submissions

2. Each member of the group has received advice about the reports from Mr Arnold and Ms Dealehr and has been advised that Maddens will cap its costs and disbursements at $780,000. No objections or concerns have been raised by any group members about quantum or about either of the reports.[5]

   [5]    FDN 93, [17].

3. Maddens submits that it is the role of the Court to satisfy itself that the costs to be deducted from the settlement sum are reasonable in all of the circumstances. In circumstances where the group members themselves have limited information to allow them to act as contradictors, the Court’s role is to ensure that costs and disbursements claimed are fair and reasonable. Ultimately, it is for the Court to determine the reasonableness of the costs sought, taking into account the evidence provided by the applicant’s lawyers, including evidence from a specialist costs consultant.

4. Maddens submits that Ms Dealehr’s report provides a sufficient basis for the Court to reach a determination that the quantum of costs and disbursements sought by Maddens is fair and reasonable. Sufficient evidence has also been adduced to lead to the conclusion that the applicant and group members were appropriately informed of the position as to costs and disbursements, that each entered into a retainer agreement with Maddens which disclosed the rates to be charged, including the uplift and the likely quantum of costs, and that they have had a sufficient opportunity to obtain further information from Maddens about costs if they wished to do so.

5. Maddens submits that Ms Dealehr’s report should be preferred over Mr Arnold’s. She has significant expertise in assessing costs in class actions and has explained comprehensively the process that she used to assess the appropriate quantum of costs in this matter. It submits that Ms Dealehr was correct to conclude that it was appropriate for the applicant to instruct Victorian solicitors, given Maddens’ experience in bushfire class action claims and its willingness to act on a conditional basis, and the difficult issues of both liability and quantum that presented in this case.

6. Maddens notes that there was no external litigation funder to assist the applicant in this matter and that the only option for representation for the applicant and group members was for a law firm to accept a retainer on a no win no fee basis. There has been no suggestion that another firm was available or prepared to offer this service. In the circumstances, it was appropriate for Maddens to charge its standard rates, even though they are higher than the standard rates in South Australia. Maddens further submits that the uplift of 25%, on achieving a successful outcome, is reasonable, given that it was prepared to take on the risk of funding both legal costs and disbursements in the event that a successful outcome was not achieved.

7. Maddens submits that, compared to Ms Dealehr’s report, Mr Arnold’s report lacks cogent reasoning and is imprecise. Mr Arnold’s imposition of a 40% reduction to all professional fees is indiscriminate and the reasoning for it is unclear. There is no explanation of why the work related to dealing with insurance interests should be discounted completely; dealing with insurers is a standard aspect of class action proceedings and should be (and usually is) recoverable. The basis for his criticism of the amount of work done by senior solicitors and junior counsel is unclear.

8. Maddens submits that Mr Arnold’s criticism of the amount of time spent reviewing discovery and reading the expert reports is unjustified. The matter was a complex one with difficult questions of liability and quantum. The criticism that Maddens should only have read the relevant parts of the respondent’s discovery can only be made in hindsight; until they had read the material in full, they were unable to determine which were the relevant parts.

9. Mr Arnold does not otherwise explain how he obtained the “general impression of inefficiency” on the part of Maddens, which led to his 40% reduction. In the circumstance, this cannot be justified.

10. Maddens further submits that Mr Arnold’s 15% reduction for the “interstate” element also lacks justification. No South Australian firm prepared to take on the matter on a conditional basis and with the same degree of experience as Maddens in bushfire class actions has been identified. Even if a South Australian firm had been prepared to take on the matter on a conditional basis, their lack of experience in bushfire class action litigation would have led to increased legal costs overall. Moreover, the respondent and its insurers also retained interstate lawyers who have significant experience in bushfire class action litigation. In the circumstances, it was not unreasonable for Victorian lawyers to be retained by the applicant and group members.

11. Maddens makes a similar criticism in relation to Mr Arnold’s approach to counsel fees. It submits that, in discounting the fees incurred on the basis that South Australian counsel should have been used, Mr Arnold failed to take into consideration the experience of Mr Tobin and Mr Fraatz in this type of litigation and the availability and willingness of South Australian counsel to accept the retainer on a fully conditional basis.

12. Maddens submits Mr Arnold’s reliance on authorities such as Taplin v Amaca Pty Ltd[6] and BHP Billiton Limited v Parker (No 2)[7]is erroneous.  

    [6] [2020] SADC 3.

    [7] [2014] SASC 6.

13. Taplin deals with the assessment of party/party costs, a matter which is very different to the assessment task currently before the Court. In Parker, the Court dealt with another question entirely and did not address the question of whether it was appropriate to use interstate counsel.

14. The reduction applied by Mr Arnold to the travel costs incurred by Maddens is also based on the acceptance of the position that interstate lawyers should not have been used. Maddens submits that once his reasoning is accepted as ­­­erroneous, this reduction should fall away.

    Consideration

15. I will deal first with the question of the use of interstate solicitors and counsel. A decision on this question will inform the answers to a number of the differences between the assessments of Mr Arnold and Ms Dealehr.

16. In the context of an assessment of party/party costs, it is unusual, in South Australia, to allow the rates charged by interstate counsel where they are significantly greater than the rates charged by similarly qualified barristers based in South Australia. This is not, however, the case where the Court is dealing with the question of solicitor and own client costs. In such a situation, the retainer between the solicitor and client takes on a crucial role in determining the total quantum of the costs and disbursements payable by the client.

17. In assessing costs in a matter such as this one, the Court’s role is different again. The principles that come into play when assessing costs on a party/party basis carry little or no relevance in a matter such as this one. Nor are the principles that are applied in a taxation between solicitor and client directly relevant, although the existence of a written retainer is fundamental, as is an examination of its terms. The terms of the retainer, however, are not the end of the matter.

18. As Nichols J said in Francis v Powercor Australia Limited & Anor:[8]

    …on an assessment of this kind the terms of a valid costs agreement will inform, rather than determine, the outcome.[9]

    [8] [2020] VSC 405.

    [9] Ibid, [19].

19. It is clear from the costs agreement that the applicant and group members agreed to the use of solicitors and counsel based in Victoria, and to the rates set out in the agreement. It is not apparent whether they were advised that the fees charged by lawyers based in Victoria are generally higher than their South Australian counterparts.

20. Nonetheless, I consider that it was reasonable for Victorian lawyers to be engaged by the applicant in this matter and no reduction should be imposed on this basis alone. While it is true that solicitors’ and counsel fees in South Australia are generally less than those charged by Maddens, Mr Tobin and Mr Fraatz, the likelihood of a South Australian legal team being prepared to take on this matter on a no win no fee basis in respect of both costs and disbursements is unknown. Further, there is no doubt that Maddens has had significant experience in this type of litigation, and while I am unable to say that no firm in South Australia has not had similar experience, I consider that it is understandable that the applicant would choose to retain lawyers with a clear and significant body of experience in bushfire class action litigation.

21. I am also satisfied that the applicant and group members were sufficiently informed about the nature of the costs agreement and the rates set out therein.

22. On the basis of these conclusions, I do not consider that any reduction in the costs and disbursements claimed should be made on the basis that the rates charged by Maddens, Mr Tobin and Mr Fraatz are higher than their counterparts in South Australia. Nor do I consider that the discount applied by Mr Arnold in relation to travel is warranted.  

1. I do not understand the basis for Mr Arnold’s disallowance of any work in relation to the insurance interests. I consider that this work is part and parcel of the work required for the ongoing management of claims of this nature and that it is not inappropriate to charge the client for it.

2. I note Mr Arnold’s comment that he had a general impression of inefficiency. I do not consider that this statement is supported by the balance of his report. I do not accept the criticisms that he made with respect to the time spent by Maddens on reviewing discovery and expert reports; until they have been properly reviewed, it is impossible to know which parts are relevant and which are not. Furthermore, the question of liability in this matter was a difficult one; as a result, I do not consider that it was unreasonable to spend considerable time reviewing the expert reports to allow conclusions to be drawn and appropriate advice given.

3. On the whole, I have found Mr Arnold’s report unhelpful in determining the reasonableness of the costs and disbursements claimed by Maddens. His methodology was not clear and the conclusions that he reached were not sufficiently explained.

4. By contrast, I consider that the methodology employed by Ms Dealehr was clearly explained and demonstrated a detailed examination of the costs claim made by Maddens, including the terms of the costs agreement, its compliance with relevant legislation and the work actually undertaken by solicitors, counsel and non-legal team members. I am satisfied that the methodology used by her allowed a rigorous assessment of the costs claim with appropriate allowances and deductions recognised.  

5. I am satisfied that the costs agreement complied with the relevant rules and legislation in Victoria, as well as with the relevant provisions in Schedule 3 of the Legal Practitioners Act 1981 (SA).

6. I note that in Matthews v Ausnet Electricity Services Pty Ltd & Ors,[10] Osborn JA said the following in relation to the uplift of 25%:

   Where there is a conditional costs agreement in place, it is proper and usual practice pursuant to the Legal Profession Act 2004 to allow a 25 per cent uplift on the fees payable. This uplift component of the overall costs is regularly approved in representative and other proceedings, and I see no reason not to consider it appropriate in this case. This is particularly the case because the proceeding was not subject to litigation funding. Had the proceeding been funded by a commercial litigation funder, the group members would have been liable to pay a funding premium in the order of at least 30 per cent of the settlement proceeds, being $148,400,000, or possibly significantly more. The entirety of the core financial risk of this proceeding was borne by Maurice Blackburn.[11]

   [10] [2014] VSC 663.

   [11] Ibid, [382].

7. I note that no external litigation funder funded this litigation and that all of the financial risk was borne by Maddens, in relation to both costs and disbursements. I note, too, that the question of liability in this matter was a difficult one and success at trial was by no means assured. In the circumstances, I consider that it is appropriate to allow the uplift of 25% on the professional fees, as the risk assumed by Maddens was significant.

8. Given the rigorous and principled approach taken by Ms Dealehr to the costs claim made by Maddens, I am prepared to accept her opinion that costs capped in the sum of $780,000 is fair and reasonable, particularly in light of her conclusion  that the total of reasonable costs and disbursements incurred by Maddens is $945,293.50. I consider that the sum of $780,000 is also proportionate. Each group member received compensation equal to 60% of their assessed losses. Given the difficulties with the question of liability, I am of the view that this remains a fair and reasonable outcome for the group members.

9. The applicant is to submit minutes of order to my chambers so that orders can be made accordingly.