Falls Festival Class Action Claimants Lawyers win contingency fees

On 20 November 2020, her Honour Justice Rita Incerti of the Supreme Court of Victoria approved nearly $3.4m in costs in a $5.7m settlement in a class action against the Falls Music and Arts Festival in Victoria involving a stampede which injured revellers in December 2016.

Her Honour approved the $3,369,478 costs claim of the plaintiffs’ lawyers Maddens on Friday, which included a 25% contingency fee uplift totalling $389,374.

Whilst accepting the opinion of independently appointed costs referee Ms Elizabeth Harris that Maddens’ conditional costs agreement and disclosure statement sent to group members was void for failure to provide realistic cost estimates or updates for counsel’s fees, falling short of the requirements under the Legal Professional Uniform Law, Justice Incerti deemed the costs incurred were nevertheless fair and reasonable.

The Judge found that Maddens’ costs were proportionate to the action, cemented by the fact group members would likely receive 77% of their assessed damages. The initial estimated recovery prospects of the action were 60 to 65% of the group members’ assessed damages.

Background

On 30 December 2016, almost 80 music festival revellers were trampled in a crowd crush following a stampede after a set by rock band DMA.

On 6 May 2020, Falls Festival agreed to pay approx. $7million to the injured 77 music fans.

On 4 September 2020, Justice Incerti approved the settlement of the class action, but reserved her position on the plaintiffs costs claim.

Maddens Lawyers, solicitors for the plaintiffs, sought approval of $3,369,478, which had been referred by the Court to reputable cost referee Ms Elizabeth Harris for assessment.

In preparing her referee reports, Ms Harris found, after reviewing the court documents, gaining an understanding of the complexities in the case, reviewing the Maddens Lawyers’ and their counsel’s time entries, and sampling Maddens Lawyers files, that the costs claimed were generally well supported. Whilst Maddens Lawyers had updated their cost agreements, which were issued to the group members on a ‘conditional’ basis (CCA), including a contingency uplift of 25% to Maddens’ fees should the case succeed, complying with s 182 of the Uniform Law, Ms Harris found that counsel for the plaintiffs had not complied with their equivalent requirement under s 175 of the Uniform Law.

The consequence of such non-compliance is that the relevant costs agreement is void, by operation of s 178(1)(a). Ms Harris determined that there was a failure by counsel to provide a realistic cost estimate or updates and that it was therefore void due to non-compliance with the disclosure obligations. The effect of the failure to comply with s 175 of the Uniform Law, therefore, was that the CCA and all updates to the CCA by Maddens were void.

Legal Principles

In the above circumstance, Her Honour looked to s 172(2) of the Uniform Law to determine whether the Maddens costs overall were fair and reasonable. Ms Harris had formed the view that the hourly rates of Maddens staff were fair and reasonable, considering that they were generally lower than the market rates of nine other law firms who regularly conduct group proceedings, and in light of the complex nature of this proceeding.

However, her Honour was required to determine whether the 25% uplift by Maddens was fair and reasonable given the CCA was effectively void.

Rule 72A of the Legal Profession Uniform General Rules 2015 relevantly provides that rule 178(1) of the Uniform Law (voiding provisions) do not apply in circumstances where:

… the relevant authority, a costs assessor, a court or a tribunal is satisfied that:

1. 1.  the law practice took reasonable steps to comply with the disclosure obligations of Part 4.3 of the Uniform Law before becoming aware of the contravention, and
   2. the law practice, no later than 14 days after the date on which it became aware of the contravention, rectified the contravention, as far as practicable, by providing the client with the necessary information required to be disclosed under Division 3 of Part 4.3 of the Uniform Law (including, where relevant, an estimate or revised estimate of the costs), and
   3. the contravention was not substantial and it would be reasonable to expect that the client would not have made a different decision in any relevant respect.

Her Honour followed the authority in Schmid v Skimming [2020] VSC 493 [68], which said that:

the court should be satisfied that the law practice took reasonable steps to comply with disclosure obligations before being aware of the contravention and then prompt remedial action upon becoming aware of the contravention. It would also have to be satisfied that the contravention is not ‘substantial’ and of any likely different decision of the plaintiff had the disclosure been made.

In Schmid, Forbes J found that:

• 1. once counsel had made disclosure, the solicitor promptly disclosed the relevant information;
  2. the obligation to disclose the estimate of counsel’s fees was dependent upon receiving that information from counsel;
  3. it was unlikely that the plaintiff would have made a different decision to enter into the costs agreement given that it was a conditional costs agreement it would have been the law firm who was liable for counsel’s fees if the action was not successful; and
  4. the estimates disclosed by the solicitors had included counsel’s fees, despite counsel not making the required disclosures and the fees sought were less than those disclosed.

Critically, Justice Incerti deemed in this instance, that[1]:

1. based on the evidence provided by Maddens Lawyers, it was confirmed that the firm had discussed counsel’s fees with the lead plaintiff Ms Burke on 2 February 2017, that the CCA and CCA updates were formulated by Maddens experience in this field and with this particular counsel, and that no concerns by any of the group members had been raised on the issue of legal costs[2];
2. the group members would not have made a different decision to enter into the CCA if disclosure had been made in accordance with the Uniform Law[3];
3. it was relevant that this was a proceeding conducted on a conditional basis and it would have been Maddens Lawyers who would have borne counsel’s fees in the event that the proceeding was not successful. In addition, the non-disclosure was not flagrant and her Honour was satisfied that Maddens Lawyers took appropriate steps[4] to rectify the issues; and
4. the lack of disclosure did not cause any disadvantage to the group members, as the estimates disclosed in each of the CCA and Updated CCA were higher than the fees being sought to be charged[5].

Justice Incerti awarded Maddens the uplift fee of $389,374.50 as fair and reasonable costs. As to proportionality, her Honour deemed the costs claimed to be reasonable and proportionate to the 77% recovery rate group members would be likely to receive in respect of their assessed damages, which was significantly greater than the 60% to 65% range contained in the CCA.

Key Takeaways

Whilst there should be strict compliance by Lawyers and Counsel with the Uniform Law in providing cost estimates to be valid and recoverable, the court can be satisfied, failing such compliance, that costs incurred without disclosure are fair and reasonable, if:

1. reasonable steps are taken to quickly rectify any legal cost oversights;
2. the error is not substantial enough to influence a group member’s decision not to enter into the relevant cost agreement; and
3. the costs are proportionate to the amount recoverable.

Authored by:

Glenn McGowan QC, Partner
Rebecca Di Rago, Associate

[1] Burke v Ash Sounds Pty Ltd (No 5) [2020] VSC 772 , at [42].

[2] Ibid, at [43].

[3] Above No.1, [44].

[4] Ibid.

[5] Above No 1, [45].