Are Group Costs Orders Becoming the New Norm?

A recent Victorian Supreme Court decision represents the first Australian ruling for an application seeking a group costs order. The case, Fox v Westpac Banking Corporation, Crawford v Australia, and New Zealand Banking Group Limited, relied on the provision of “the Act” which permits solicitors to be paid with a percentage of a court-ordered settlement or award.

Lexology explains that the group costs order application was adjourned, rather than dismissed. This means the plaintiffs could reapply at a later time. Plaintiffs sought group costs plus 25% of an award or settlement be paid to the plaintiffs’ legal team.

Concerns over ‘flex commission’ arrangements arose in the case with regard to consumers purchasing cars. Because of this, plaintiffs alleged that car dealers had the power to set their own interest rates. Plaintiffs argued that these undisclosed arrangements (there was no legal requirement for disclosure) encouraged dealers to set higher interest rates than those of traditional bank loans.

The Court ultimately determined that there are multiple factors to consider when deciding the necessity of a group costs order. In this instance, the plaintiffs did not establish that a group costs order was an improvement over the funding agreement already in place. The best interests of the group members is the standard by which the courts determine group costs orders.

This case punctuates the importance of plaintiffs taking the time to closely vet funding agreements and assess whether class members would be better off with a group costs order.

The issue of group costs orders isn’t going away. Relevant legislation is almost certainly on the horizon and will present new challenges to plaintiffs and the funders that support them.