First Group Costs Order in Australia approved in historic Court decision

In an historic decision, the Supreme Court of Victoria today approved the first settlement in an Australian class action where the plaintiffs’ legal costs were calculated as a percentage of the settlement sum.

The first-ever decision was made in the shareholder class action commenced by Slater and Gordon against G8 Education Ltd, following a $46.5 million settlement reached by the parties in March 2024 without any admission of liability by the defendant.

In the Court’s reasons for judgment published today, the Honourable Justice Watson confirmed a Group Costs Order (or GCO) made by the Court in November 2021, which provided that Slater and Gordon’s legal costs be calculated as 27.5% of any award or settlement reached in the proceeding.

Under the terms of the GCO, Slater and Gordon was required to meet all expenses associated with conducting the case, and would have been liable for the defendant’s legal costs if the class action had been unsuccessful.

As a result of today’s decision, group members in the class action will receive 72% of the settlement sum of $46.5m. (There are some costs also deducted to administratively enable group members to be paid).

Slater and Gordon Head of Class Actions, Emma Pelka-Caven, said the judgment was an excellent outcome for group members.

"This judgment is a watershed moment in the Australian class action landscape and confirms that the GCO regime provides an affordable alternative to more expensive legal fee structures traditionally used by plaintiffs previously.

“Instead of separate deductions for legal costs and litigation funding commission typically borne by group members before GCOs were available, the regime provides for a single percentage deduction if a case is successful.

“In addition to simplicity and certainty to group members, evidence before the Court demonstrated that the GCO made in the G8 class action would put a significantly greater proportion of the settlement sum into the pockets of group members than class actions supported by third-party litigation funders had on average in recent years.

“Today’s decision makes clear that the introduction of GCOs in Victoria has made it easier for Australians to access our legal system and seek redress for wrongs they have suffered.

When the GCO was made in 2021, lead plaintiff Paul Allen said he would take great comfort from the GCO.

“It provides group members with much greater certainty and transparency regarding the deductions from any resolution sum and eliminates the risks that legal costs and funding costs might consume the majority of any return to group members,”

Mr Allen said in his evidence.

Relevantly, no group member objected to the amount of the settlement, or the legal costs being paid as a GCO.

Slater and Gordon filed the class action against G8 in late 2020 on behalf of thousands of shareholders, alleging the company had engaged in misleading or deceptive conduct and breached its continuous disclosure obligations concerning announcements it had made about its likely earnings in 2017. G8 denied any liability arising from these allegations. In his judgment, Justice Watson observed that

under the GCO Slater and Gordon effectively receives approximately 7.9% of the settlement sum for the provision of those services which would have been provided by a third party litigation funder. This compares favourably with average litigation funding commissions which, both at the time the GCO was made and since, are in the 23% to 24% range. Group members in the proceeding have had the benefit of litigation funding from Slater and Gordon at about one third of the rate of a third party litigation funder.