Williams v AusNet (Ruling No 4)
[2017] VSC 619
•18 October 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2014 5296
| STEVEN ELLIOT WILLIAMS & ORS | Plaintiffs |
| v | |
| AUSNET ELECTRICITY SERVICES PTY LTD (ACN 064 651 118) & ORS (ACCORDING TO THE SCHEDULE) | Defendants |
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JUDGE: | J FORREST J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers (submissions dated 6 September 2017) |
DATE OF RULING: | 18 October 2017 |
CASE MAY BE CITED AS: | Williams & Ors v AusNet & Ors (Ruling No 4) |
MEDIUM NEUTRAL CITATION: | [2017] VSC 619 |
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PRACTICE AND PROCEDURE – Settlement of a group proceeding approved but quantum of legal costs referred to an Associate Justice – Quantum of legal costs – Supreme Court Act 1986 (Vic) Part 4A, ss 33ZF and 33ZJ – Williams v AusNet Electricity Services Pty Ltd [2017] VSC 474.
COSTS - Relationship between rr 63.34(3) and 63.48 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Class action legal costs – What is fair and reasonable in the circumstances – Williams v AusNet Electricity Services (Ruling No 3) [2017] VSC 528.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr G Dalton QC with Ms C Nicholson | Maddens |
| For the Defendants | No appearance |
HIS HONOUR:
Introduction
This class action was settled for $16 million inclusive of costs. The settlement was approved by a Judge of the Court in August 2017.
The Judge referred a question relating to a portion of the costs payable to the lawyers for the representative plaintiff, Steven Williams, to an Associate Justice in the Costs Court. The Associate Justice swiftly provided the answer, and this ruling sets out why I made an order of $6.6 million for costs to be paid to the lawyers for Mr Williams.
Background
Steven Williams issued this class action under Part 4A of the Supreme Court Act1986 (Vic) (the Act) on behalf of all group members[1] who suffered injury, loss or damage as a result of a bushfire which occurred on 9 February 2014 at Mickleham. Maddens Lawyers (the lawyers) acted on his behalf and on behalf of the class.
[1]Williams v AusNet Electricity Services Pty Ltd [2017] VSC 474 (28 August 2017) [71] (‘Reasons’).
The fire started when a large gum tree fell onto overhead powerlines on a total fire ban day. Mr Williams alleged a breach of statutory duties and nuisance due to a failure to implement reasonable systems to identify and remove hazardous trees near the overhead powerlines.[2] The fire burned for four days and destroyed 17 houses and 22,590 hectares within a 221-kilometre perimeter.[3]
[2]Ibid [1]-[3].
[3]Ibid [4] and [5].
The proceeding was originally issued as an ‘open’ class. Pursuant to orders of the Court in May 2015, the class was closed and there are now 372 registered group members (and their insurers).[4]
[4]Ibid [13]-[15].
In February 2017, the defendants, AusNet Electricity Services Pty Ltd, Hume City Council, Active Tree Services Pty Ltd and Homewood Consulting Pty Ltd settled the proceeding (subject to Court approval) by agreeing to pay $16 million to Mr Williams and the group members with a denial of liability.
On 28 August 2017 Emerton J approved the settlement.
On 21 September 2017, I made orders approving the payment of legal costs of $6,620,000.00 out of the settlement sum.
The decision of Emerton J as to approval of the settlement
Section 33V of the Act requires a Court to approve the settlement or discontinuance of a group proceeding.
On 4 July 2017, Emerton J heard submissions concerning the approval of the settlement and any objections to that settlement by group members. There was one group member who objected to the terms of the settlement.[5]
[5]Reasons [26].
On 28 August 2017, her Honour approved the settlement (including most, but not all of the lawyers’ costs),[6] but reserved the resolution of a discreet costs issue. Her Honour ordered that pursuant to r 77.05 of the Supreme Court (General Civil Procedure) Rules 2015 (the Rules) a question be referred to an Associate Judge in the Costs Court.[7]
[6]Orders of Emerton J made 29 August 2017 and of 31 August 2017.
[7]Orders of Emerton J also made on 29 August 2017 (separate orders referring a question to Wood AsJ).
The settlement distribution scheme (SDS) approved by her Honour provided for the distribution of:
(a)the lawyers approved legal costs, including the costs of administering the Scheme;
(b)$25,000.00 to Mr Williams to compensate him for undertaking the role of lead plaintiff; and
(c)the balance of the settlement sum, together with any accrued interest, to group members and registered insurers on a pro rata basis based on assessments of loss.[8]
[8]Reasons [29].
In approving the settlement, her Honour noted:
The consequences of the Mickleham bushfire were not as severe as the major class actions which arose out of the Black Saturday bushfires, particularly the Kilmore East and Murrindindi fires. However, a number of group members did suffer personal injury and significant property loss, and suffered stress, fear and anxiety as a result of the damage wrought by the bushfire. There is a clear benefit to those group members, in particular, in not having to relive the experience of the bushfire by litigating to recover their loss and damage. All litigation involves a measure of stress and anxiety, and the proposed settlement provides the advantage of avoiding that experience for the plaintiff and all registered group members.[9]
[9]Reasons [46].
Part of the material provided by the lawyers in support of the approval included a report from an independent costs assessor, Graeme Arnold,[10] who assessed Mr Williams’ legal costs at $7,300,000.00. This figure included allowances for three separate increases to be applied in addition to the costs assessed under the Supreme Court scale:[11]
(a)a loading under r 63.48 of the Rules of 25% that enables the Costs Court to exercise a discretion at the time of taxation on the scale by the Costs Court (the first loading);[12]
(b)a loading under r 63.34(3) of the Rules, permitting a 30% loading increase and provided for in the Conditional Costs Agreement between Mr Williams and Maddens (the second loading). Effectively, in a situation where the Court considers there are ‘special grounds’ arising out of the nature, importance, difficulty or urgency of the case, a ‘premium’ loading may be allowed;[13] and
(c)an uplift fee of 25% which was approved by Emerton J and was considered uncontroversial. Wood AsJ noted that the uplift fee had no nexus to the first and second loadings (the uplift fee).[14]
[10]Confidential affidavit of Graeme Arnold filed 11 September 2017 (Arnold Report).
[11]Williams v Ausnet Electricity Services Pty Ltd (No.3) [2017] VSC 528 (4 September 2017) [1] - [3] (‘Costs Ruling’).
[12]Ibid [6] and [7].
[13]Ibid [8] and [9].
[14]Ibid [3] and [17].
Pausing here, the end result of these increases (if Mr Arnold’s analysis was to be accepted) was that the fees provided under the Supreme Court scale were to be increased by 80% (30% + 25% + 25%).
The Arnold report did not go unchallenged. IAG, the insurer of a number of the group members, obtained a report from Gavin Wood of Grace Costs Consultants. Although Mr Wood had not inspected Madden’s file, he reviewed the records and figures set out in the Arnold report. He concluded that the total legal costs ought be around $5.8 million (compared to the Arnold report’s $7.65 million)[15]. Emerton J noted the following as to the costs reports:
The principal point of difference between Mr Wood and Mr Arnold lies in the 30 per cent premium that Mr Arnold has allowed to be applied to all professional charges in addition to the 25 per cent loading on scale items and the further 25 per cent conditional uplift for a successful outcome.
Mr Wood observes that the 30 per cent premium was a term of the Costs Agreement and that it appeared in the disclosure statement. Nonetheless, he opines that it is neither fair nor reasonable to include a 30 per cent premium in addition to the 25 per cent loading and the 25 per cent uplift. Rule 63.34(3) of the Supreme Court (General Civil Procedure) Rules 2015 requires the identification of ‘special grounds’ before the Court will allow an increase ‘not exceeding 30 per cent’. He opines that, while the matter has a degree of importance and difficulty, the proceeding is not so exceptional as to warrant the maximum surcharge of 30 per cent. According to Mr Wood, the premium should be 10 per cent, which would recognise that Maddens deserved ‘something extra for their commendable work’. [16]
[15]Reasons [99].
[16]Reasons [100]-[101].
In her reasons, her Honour referred to the potential overlap between the first and second loadings:
A further confidential affidavit filed on the eve of judgment being delivered raised further possible justifications for the 30 per cent premium.
However, while it is not specifically discussed in the Arnold Costs Report, the appendices to that Report reveal that, in addition to the 30 per cent loading allowed pursuant to r 63.34, a further loading of 25 per cent on professional fees incurred in connection with common cause liability work up until 8 February 2017 has been allowed, apparently pursuant to r 63.48. Rule 63.48 gives the Costs Court a discretion to allow fees and allowances having regard to such matters as the complexity of the matter, the difficulty or novelty of the questions involved in the matter and the skill, specialised knowledge and responsibility involved.
I am concerned that two percentage increases or loadings may have been included for costs incurred in connection with common cause liability work for much the same reasons. The plaintiff was asked to address the Court specifically on this question at a brief hearing on 18 August 2017. Subject to any further submissions the plaintiff may wish to make and having regard to submissions already made on this issue, I have formed the view a question of the following kind should be referred for determination to an Associate Judge who sits in the Costs Court:
Should the legal costs allowed by the Court include both the increase allowed under r 63.34 and an increase for discretionary costs under r 63.48 and, if so, what should the percentages be? [17]
[17]Reasons [104]-[106].
The referral was, as I understand it, an attempt to obtain a speedy determination from the Costs Court so that the settlement sum could be distributed as soon as practicable to group members in accordance with the SDS.[18]
[18]Orders of Emerton J made 28 August 2017.
The decision of Associate Justice Wood
Associate Justice Wood heard the parties’ submissions on 30 August 2017 and delivered his reply and reasons with commendable, indeed exemplary, speed on 4 September 2017.
I pause here to note the incongruity of the submissions being made by counsel nominally on behalf of Mr Williams as to the amount of costs to be extracted by the lawyers out of the settlement sum. The reality is that these submissions to the Costs Court were made by, and for the benefit of, the lawyers.[19]
[19]Plaintiff’s Submissions as to Final Orders filed 6 September 2017 (Submissions).
The first point to note is that Wood AsJ was not required to determine whether the 25% ‘uplift fee’ was appropriate.[20] Emerton J had not referred that issue. Helpfully, Wood AsJ did, however, observe that Mr Williams had entered a ‘no win-no fee’ arrangement with the lawyers who assumed a degree of risk in running the litigation and were not to be paid unless a successful outcome was achieved. This fee, his Honour noted, is legitimised on the basis that it provides access to justice enabling parties to exercise their rights, where they otherwise could not afford to bring legal proceedings.[21]
[20]Costs Ruling [18].
[21]Costs Ruling [4].
The controversy before his Honour (and between the experts) was therefore confined to the allowances (and potential duplication) in respect of the first and second loadings under the two costs rules identified in the referral,[22] which read as follows:
[22]Costs Ruling [19].
63.34 Charges of legal practitioner
…
(3)The Court may, on special grounds arising out of the nature and importance or the difficulty or urgency of the case, allow an increase not exceeding 30 per cent of the legal practitioner's charges allowed on the taxation of costs with respect to—
(a) the proceeding generally; or
(b) to any application, step or other matter in the proceeding.
…
63.48Discretionary costs
(1)Except where these Rules or any order of the Court otherwise provides, the fees and allowances which are discretionary that are referred to in Appendix A shall be allowed at the discretion of the Costs Court.
(2)In exercising the discretion under paragraph (1), the Costs Court shall have regard to—
(a) the complexity of the matter;
(b)the difficulty or novelty of the questions involved in the matter;
(c)the skill, specialised knowledge and responsibility involved and the time and labour expended by the legal practitioner;
(d)the number and importance of the documents prepared and perused, regardless of length;
(e) the amount or value of money or property involved;
(f) research and consideration of questions of law and fact;
(g)the general care and conduct of the legal practitioner, having regard to the instructions and all relevant circumstances;
(h) the time within which the work was required to be done;
(i)allowances otherwise made in accordance with the scale in Appendix A;
(j) any other relevant matter.
The costs agreement entered into between the lawyers and Mr Williams provided for a 30% loading under r 63.34(3) of the Rules. This allowance was accepted by Wood AsJ and therefore the second loading provided for by Mr Arnold passed muster, as noted by his Honour:
The maximum loading of 30 per cent under r.63.34(3) on all work (including clerical or administrative) is a reasonable allowance particularly given it was flagged in the costs agreement.[23]
[23]Costs Ruling [37].
So, it boiled down to whether there was a duplication, double dipping or over claiming of costs by the lawyers of 25% in the form of the first loading sought under r 63.48 of the Rules.
Wood AsJ examined this issue and then said:
There are two other comments that can be made. First, it was clear on the face of the Costs Agreement that a 30% loading under r 63.34 was the basis of Maddens taking on the matter and this was accepted by the client at the outset. Secondly, a further loading under r 63.48 is not immediately apparent to the client from the Costs Agreement as it is buried in Appendix A. It is not apparent to the client that an additional unspecified loading over and above the 30% and 25% uplift fee was potentially in play. For that reason restricting the loading to 30% with an uplift of 25% could be concluded to be a fair and reasonable result.
However, in view of the volume of documents, being a consideration absent from r 63.34 and specifically referred to in r 63.48, I am prepared to allow 5% under r 63.48.
Conclusion
The maximum loading of 30% under r 63.34(3) on all work (including clerical or administrative) is a reasonable allowance particularly given it was flagged in the Costs Agreement. The overlap of factors in rr 63.48 and 63.34(4) make it inappropriate to allow a significant loading under r 63.48. A loading of 5% is appropriate given the volume of documents. The application of loadings under both rr 63.48 and 63.34(3) is appropriate in this matter. The loading of 30% under r 63.34(3) to all the proceeding is appropriate and a loading of 5% under r 63.48 is appropriate.[24]
[24]Costs Ruling [35]-[37].
Then, his Honour held that the total loading of the legal fees under both rules was 35% (allowing an extra 5% under r 63.48).[25]
[25]Costs Ruling [36].
On 4 September 2017, in a costs ruling, Wood AsJ answered the question referred to him by Emerton J:
Yes, there should be a percentage loading under Rule 63.48 of the Supreme Court (General Civil Procedure) Rules 2015 of 5% in addition to a 30% loading under Rule 63.34(3) as provided for in the Costs Agreement.
Events after the answer of Wood AsJ
Following the Costs Ruling, the lawyers filed submissions (the submissions) as to the appropriate costs allowance in light of the answer of Wood AsJ.
A schedule was attached to the submissions, detailing Mr Arnold’s calculations in reducing the first loading from 25% to 5%[26], and thus arriving at a final figure of $6,963,987.70. However, the submissions addressed what was said to be a remaining issue: whether this allowance should be further reduced by 5% on the basis that this was a reasonable allowance to reflect the amount likely to be taxed off if a solicitor-client bill was submitted for taxation – as Mr Arnold had allowed in his report.
[26]Submissions [8].
The lawyers, in their submission, contended that this deduction was incorporated within the 20% reduction to the first loading made by Wood AsJ.[27] So the amount of $6.96 million should not be the subject of any further reduction.
[27]Submissions [10].
Acceptance of this figure, i.e of $6.96 million, it was said, was fortified by several other considerations:
(a)the notice of settlement indicated that the total costs would not exceed $9 million;
(b)only one group member opposed the approval of the legal fees;
(c)the legal fees were not calculated on standard hourly rates for general litigation work;
(d)the total legal costs are not disproportionate to the likely gain from the litigation;
(e)the legal fees were a similar amount to other bushfire group actions; and
(f)Mr Arnold was of the opinion that the initial figure of $7.3 million is fair and reasonable for legal fees.[28]
[28]Submissions [10] and [11].
The submission also foreshadowed a potential future application regarding further claims for costs by the lawyers, should the estimate of future administration work not accord with the work actually performed by the lawyers in completing the settlement of the claim, or, should the work actually performed in securing the settlement exceed Mr Arnold’s estimate.[29]
[29]Submissions [13] - [15].
Analysis
Before I go to the specifics of the appropriate allowance for costs, I make the following observations.
First and foremost, the Court’s role under s 33V of the Act is to ensure that the settlement, including the allowance of costs for the lawyers acting for the representative plaintiff and the group members, is fair and reasonable.[30] In a common fund settlement where there is no separate allowance for costs (or to use the legal jargon in this state, an ‘all in settlement’) there is inherent tension between the claim of the lawyers for costs as against ensuring that an appropriate sum is available for distribution to the group members under the SDS.
[30]Rowe v AusNet Electricity Services Pty Ltd[2015] VSC 232 (27 May 2015) [49]-[51]; Matthews v SPI Electricity (Ruling No 16)[2013] VSC 74 (27 February 2013) [35]; Wheelahan v City of Casey[2011] VSC 215 (23 May 2011) [57]; Downie v Spiral Foods Pty Ltd[2015] VSC 190 (7 May 2015) [35].
In Kelly v Willmott Forests,[31] Murphy J said as follows:
The Court’s task in a settlement approval application under s 33V of the Act is to decide if it is satisfied that the settlement is fair and reasonable having regard to the interests of the class members who will be bound by it (including as between class members). The Court assumes a protective role in undertaking this task.
The Court should be alive to the possibility that a settlement may reflect conflicts of interest, for example, between the applicant and class members, between client and non-client class members or between subgroups within the class, or between the duty of the applicant’s lawyers to client class members and the lawyers’ duty to non-client class members. It should be kept in mind that the Court assumes its onerous burden at a stage of the proceeding when the interests of the applicant and the respondent have merged in the settlement and neither side seeks to critique the settlement from the perspective of class members. Both sides have become “friends of the deal”.[32]
[31](2016) 335 ALR 439; [2016] FCA 323 (5 April 2016).
[32]Kelly v Willmott Forests Ltd (in liquidation)(No 4) (2016) 335 ALR 439, 454; [2016] FCA 323 [62]-[63].
Second, and notwithstanding that the determination by Wood AsJ is based upon the application of Order 63 of the Rules, there is nothing in Part 4A of the Act which obliges the Court to apply those rules in determining the quantum of costs by the lawyers acting for a representative plaintiff. Indeed, s 33V of the Act requires the Court to approve the settlement. Section 33ZF provides as follows:
General power of court to make orders
In any proceeding (including an appeal) conducted under this Part the Court may, of its own motion or on application by a party, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.
This is consistent with the general principle contained in s 24 of the Act that costs are in the discretion of the Court which ‘has full power to determine by whom and to what extent costs are paid’.
As Emerton J said in approving the compromise:
It is the Court’s role to satisfy itself that the legal costs to be deducted from the settlement sum are reasonable in all the circumstances.[33]
[33]Reasons [79].
It follows that if a court perceives that the allowance claimed by the lawyers in acting for the class is either disproportionate or excessive in relation to the distribution of the settlement sum to the group members then it should (and indeed, must) put to one side claims for uplifts, and loadings upon loadings – even if they fall within the ambit of the costs rules.
The same goes for the relevance of the costs agreement entered into between the representative plaintiff and the lawyers. If the Court perceives that its terms are unreasonable and provide a windfall for the lawyers or is contrary to the interests of the group members then it can be ignored. The Court’s role is to protect the interests of the group members.
Third, it is to be remembered that the Supreme Court scale of fees, was amended in 2012 (and operative from 1 April 2013) so as to provide for taxation on a standard basis – i.e. all costs reasonably incurred and of reasonable amount - effectively means that an order for costs on the Supreme Court scale has a built in allowance of solicitor/client costs.[34]
[34]Rule 63.30.
Fourth, notwithstanding what I have just said, it is clear that the application of the costs rules was appropriate in this case - namely an allowance of a 25% uplift fee for the lawyers taking on the case on a no win-no fee basis, with all the attendant risks and expenses involved in that exercise. Wood AsJ considered that a further allowance for extra skill, expertise and work (eventually rounded out at 30%) for a case of considerable scale and complexity[35] – well above that of the standard tort liability case in this Court - was warranted. This Court is fortunate to have a skilled body of costs professionals headed by an experienced Associate Justice who can provide advice, assistance and answers – as occurred in this case. That demonstrates the difference between this Court and the Federal Court (which lacks this facility), in which Beach J (of the Federal Court) stated regarding expert opinions on costs:
...if unchallenged expert opinion is put before the Court which sets out a commercial and reasonable methodology consistent with the terms of any retainer and which demonstrates that it has been accurately and thoroughly applied to sufficient and probative source records of the solicitors, then it is no part of a judge’s function to:
(a)reject that evidence as to whole or part without very good reason; or
(b)apply one’s own subjective view of what the legal work is “really worth”, divorced from the reality of the current marketplace and the commercial context within which the work was carried out and the expenses incurred.[36]
[35]Costs Ruling [34] and [36].
[36]Foley v Gay (2016) FCA 273 (21 March 2016) [23].
In my view, a costs Judge, with all his or her expertise, is perfectly placed to assess the reasonableness of a claim for costs by the solicitor. Indeed, this is the primary function of such an officer of the Court and the very reason for the referral by Emerton J.
Finally, it is now established that the Court must exercise particular care in its examination of the legal costs claimed by lawyers acting for representative plaintiffs in class actions, especially with an “all in” or costs inclusive settlement. As Gordon J observed in Modtech Engineering Pty Ltd v GPT Management Holdings Ltd:[37]
[37][2013] FCA 626 (21 June 2013) [25]-[29] (citations omitted).
That leads to the second issue – the quantum of the professional costs and disbursements incurred by Slater & Gordon. Slater & Gordon seek the quantum to be approved by the Court.
The rationale for the court’s “surveillance” over costs as between solicitor and client was explained by Tadgell J in Redfern v Mineral Engineers Pty Ltd in the context of a taxation:
The court’s surveillance over costs as between solicitor and client is assumed with a view to preventing any unfair advantage by solicitors in their charges to their clients. It stems, it seems, from the notion that ordinarily a solicitor is presumed to be in a position of dominance in relation to [a] client as a result of [their] presumed knowledge of the law and of what may and may not be properly charged by way of fees. Were a strict view not taken it might be open to a solicitor to overreach his client or otherwise act oppressively towards [the client] on the matter of costs.
This is not a taxation. But it is unique. The solicitor is acting for itself – it seeks an order that its costs be approved by the Court and paid to it. There is no contradictor. The group members who are to share the liability for the fees and disbursements are unable to oppose the application. They are unable to oppose the application because although four group members obtained access, on a confidential basis, to the Settlement Distribution Scheme, that document did not record the amount of fees and disbursements the subject of the approval application or the how the sums were quantified. In addition, no group member has had access to the confidential affidavit of the costs consultant retained by Slater & Gordon that was filed in support of the application and set out the amount of fees and disbursements Slater & Gordon sought to have approved by the Court. The inability of the group members to act as a contradictor provides a further example of the “position of dominance” referred to by Tadgell J. Indeed, given the increasing number of class actions, it may be time for there to be a requirement that any LCA, or equivalent, between group members and a firm of solicitors should be approved by the Court before it is binding on the group members. Such requirement would be consistent with the Court’s ability to approve or supervise the form of costs agreements entered into between solicitors acting for a representative party and group members in relation to a representative proceeding commenced under Pt IVA of the Act: see s 33ZF of the Act and Johnson Tiles Pty Ltd v Esso Australia Ltd.
The Court, and the solicitors, have important, and distinct, tasks where the court’s approval is sought for fees and disbursements to be deducted from a settlement sum.
First, the solicitors have responsibilities that apply before, during and after, the approval process. As Allsop CJ and Middleton J most recently said in Madgwick v Kelly:
Solicitors are entitled to charge professional fees for undertaking the professional responsibilities of running the case, as officers of the Court, with all the attendant responsibilities (including duties to the Court) that that entails. No one, the solicitors included, should ever lose sight of those responsibilities.
And then in Downie v Spiral Foods Pty Ltd[38] I said:
The proceeding has been settled on an ‘all in’ or ‘inclusive’ of costs basis. Given that the group members as a whole benefit from the legal costs incurred, Ms Downie’s solicitor, Maurice Blackburn, is entitled to its costs out of the settlement amount. However the Court, in the exercise of its protective role under s 33V of the Supreme Court Act will scrutinise, at times closely, the quantum of those costs and any other deductions from the amount available to group members.
This is important for two reasons. First, as the costs are deducted from the settlement sum, it has the potential to affect the reasonableness of the settlement. Secondly, the group members lack detailed information about the legal costs incurred so as to be able to challenge the plaintiff’s solicitor’s claimed costs.
In determining whether to approve the deduction of costs from the settlement sum, courts must be satisfied that the costs claimed are ‘reasonable in the circumstances’. This does not necessarily require a taxation of the costs claimed (although it may), but rather the tendering of ‘sufficient’ evidence so as to enable the court to make an assessment as to whether the costs were reasonably incurred. In group proceedings, usually this evidence will come from an independent solicitor or costs consultant.
As noted by Gordon J in Modtech (No 1), and Osborn JA in Matthews, it is the Court, and not the independent costs expert who must determine whether fees and disbursements are reasonable. In this application, it is particularly important to be satisfied that the costs are reasonable because, as in Matthews the net amount available for distribution to group members will be affected by the amount deducted to pay Maurice Blackburn.[39]
[38][2015] VSC 190 (7 May 2015) (‘Downie’).
[39]Ibid [177]-[180] (citations omitted).
Returning now to this case, and in light of these observations, I have reached the following conclusions.
First, the answers of Wood AsJ (and accompanying reasons) to the questions posed by Emerton J do not, either in terms or by implication, mean that the 5% reduction should not apply to Mr Arnold’s revised calculation of $6.9 million for costs[40] which was based on the figure of $7.65 million contained in the Arnold report and then discounted by the reduction in the loading. There is no reference to this issue in his Honour’s reasons – which were directed solely to determining the extent of the overlap between allowances under the two rules. If anything is to be implied, it is that this discount should be made once the quantum is fixed .
[40]See [9] of the Submissions.
Moreover, it is implicit from Emerton J’s reasons that this discount was to be applied once the questions had been answered, as the discount reflects the proposition that even with an order for indemnity costs some items will be disallowed when the bill is taxed.[41]
[41]Reasons [94].
Second, the matters said by counsel in the submissions to substantiate an allowance of $6.9 million do not assist in resolving this issue:[42]
(a)The provision of a notional amount in the Notice of Settlement of $9 million is irrelevant;
(b)The fact that there was only one group member who opposed the settlement is also irrelevant. The real issue is what is a fair and reasonable allowance for the lawyers’ costs taking into account the provisions of the Rules, but remembering as I have said repeatedly that it is ultimately for the Court to determine the figure. Indeed, it is noteworthy that the two costs experts, although agreed on most items, were approximately $1.8 million apart on the appropriate allowance. That, I would have thought, was a far better indicator of the parameters of the recoverable costs rather than endeavouring to gauge the level of opposition of the group members;
(c)The reference to the standard hourly rate for lawyers for ‘general litigation work’ also misses the point. Of course, the fees could have been higher if the lawyers charged at that rate; but the fact is that the costs agreement entered into by Mr Williams provided for scale (which is at a solicitor client rate) with provision for a significant uplift in the event of a successful outcome. In any event, given the Court’s overall supervisory role in determining costs, this consideration goes nowhere;
(d)The question of proportionality is also irrelevant. Emerton J dealt with this in her reasons.[43] The question is: what is a reasonable allowance for costs;
(e)The costs allowed in other bushfire cases, or for that matter other class actions, are necessarily case–specific as each turns on its own facts. It is now apparent to this Court that when managing class actions real scrutiny is required of the costs claimed by lawyers, as I noted in Downie. I do not suggest that there is any systemic or endemic overcharging but rather that where there is a large settlement sum and a large group membership, it is imperative that the fund be preserved as far as is practicable to provide for the group members for whose benefit the proceeding is brought – allowing for a reasonable recovery of costs by the lawyers. The uplift, of course, separately rewards the lawyers for taking the risk in “punting” the litigation for the benefit of the group members; and
(f)Mr Arnold’s initial calculation is a starting point and no more.
[42]See [31] and adopting the numbering in the Submissions [11].
[43]Reasons [108]-[114].
Finally, I reject the submission of the lawyers that there should be provision in the orders made by the Court entitling them to apply to the Court for a further allowance for any administrative work not covered by the costs award. This is said to arise from matters not considered by Mr Arnold is his report.[44]
[44]See [15] of the submissions.
When Emerton J approved the settlement this potential claim for additional costs was not mentioned. I think it is clear that her Honour approved the figure of $16 million on the basis that all costs had been allowed in the Arnold report at $7.65 million (which included a figure for common benefit legal costs)[45] and there was no potential for further deductions from the settlement sum – save for the adjustment in relation to the costs issue referred to Wood AsJ.[46] That is the end of it.
[45]Reasons [38].
[46]Reasons [121].
It is, I think, beyond the pale, at the last moment, to suggest that a prospective unquantified additional amount be paid to the lawyers by group members out of the settlement sum thus diminishing their payment – particularly so when a portion of this putative claim relates to the costs claimed by the lawyers, who have already obtained an increase on the standard scale (which includes solicitor-client costs) - of 60%.
It is no answer to assert that a draft minute of an order flagged this claim. It does not rate a mention in the formal orders or her Honour’s reasons, and it was not referred to in the summons seeking approval. I reject the application.
Conclusion and orders
On my calculations, the appropriate allowance for costs is as follows:
Costs allowed after adjustment pursuant to orders of Wood AsJ: $6,963,987.70
Further Reduction of 5% ‘taxed off’ ($348,199.38)
Approved amount of costs $6,615,788.31
(rounded up to $6,620,000)
Accordingly the following orders are appropriate and have been made:[47]
[47]Orders of 21 September 2017.
1. Pursuant to section 33ZF and 33ZJ of the Act, or alternatively, the inherent jurisdiction of the Court, the sum of $6,620,000.00 be approved toward payment of the plaintiff’s legal costs.
2. The legal costs approved in order 1 of these orders shall be paid from the settlement sum to Maddens Lawyers, lawyers for the plaintiff.
3. The plaintiff’s summons filed 24 March 2017 otherwise is dismissed.
SCHEDULE OF PARTIES
| S CI 2014 5296 | |
| BETWEEN: | |
| STEVEN ELLIOT WILLIAMS | Plaintiff |
| - v - | |
| AUSNET ELECTRICITY SERVICES PTY LTD (ACN 064 651 118) | First Defendant |
| HUME CITY COUNCIL | Second Defendant |
| ACTIVE TREE SERVICES PTY LTD (ACN 002 919 299) | Third Defendant |
| HOMEWOOD CONSULTING PTY LTD (ACN 113 595 430) | Fourth Defendant |
| AND BETWEEN: | |
| AUSNET ELECTRICITY SERVICES PTY LTD (ACN 064 651 118) | Plaintiff by Counterclaim |
| - v - | |
| STEVEN ELLIOT WILLIAMS | First Defendant to Counterclaim |
| HUME CITY COUNCIL | Second Defendant to Counterclaim |
| ACTIVE TREE SERVICES PTY LTD (ACN 002 919 299) | Third Defendant to Counterclaim |
| HOMEWOOD CONSULTING PTY LTD (ACN 113 595 430) | Fourth Defendant to Counterclaim |
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