…whether ‘no win, no fee’ model more likely to be in group members’ interests
In Kosen-Rufu Pty Ltd v Dixon Advisory and Superannuation Services Ltd  FCA 573 (18 May 2022), the court considered applications from solicitors acting in two class actions that had been commenced, raising overlapping (but not identical) claims against overlapping (but not identical) respondents.
The proceedings concern retail clients of the financial advisory business, Dixon Advisory and Superannuation Services Ltd, and investments in the property investment fund known as the US Masters Residential Property Fund.
Piper Alderman, acting for applicants in the Kosen-rufu class action, sought orders consolidating the two proceedings. Shine Lawyers, acting for applicants in the Watson class action, sought orders staying the Kosen-rufu proceeding or, if no stay was to be ordered, consolidating the two proceedings.
The court was required to determine what would be in the best interests of group members, specifically whether consolidating the proceedings or staying the Kosen-rufu proceedings would be in the best interests of group members.
The Watson proceeding was funded by Shine Lawyers on a ‘no win, no fee’ basis, with a 25% uplift on costs in the event of success. The Kosen-rufu proceeding was funded by a litigation funder, which proposed charging commission at a rate of 12.5% or 15%.
Shine Lawyers proposed that, in the event of consolidation, a cooperation protocol be put in place that quarantined to Piper Alderman’s signed-up group members any obligation to contribute to a funder’s commission. Piper Alderman’s position was that all group members should contribute to the litigation funder’s commission.
Thawley J accepted submissions for Watson that the ‘no win, no fee’ structure with 25% uplift on costs is likely to be lower than the litigation funder’s 12.5% to 15% commission on damages. That arrangement was, on balance, more likely to result in a greater recovery to group members.
Shine Lawyers’ funding model was, therefore, in the best interests of group members. The court was not persuaded that supervision by a litigation funder can lead to better overall supervision of cost, and ensures that the proceedings are conducted expeditiously. Other factors considered by the court were neutral or not significant.
His Honour concluded that it was in the better interests of group members to stay the Kosen-rufu proceeding, rather than consolidate the two proceedings, because:
- most importantly, the ‘no win, no fee’ model was likely to result in a better return to all group members, and likely to be less expensive than the payment of a commission on damages
- less significantly, if the proceedings were consolidated, group members would be likely to nominate, participating on the terms offered by Shine Lawyers
- the complexity and additional cost and delay which was likely to result from a consolidated proceeding on the basis proposed by Piper Alderman.
Shanta Martin is a barrister at the Victorian Bar, ph 03 9225 7222 or email email@example.com. The full version of these judgments can be found at www.austlii.edu.au. Numbers in square brackets refer to a paragraph number in the judgment.