Contingency Fees vs Group Cost Orders in Victoria
The Supreme Court of Victoria declined to allow a 25% contingency fee. The decision represents the first time the court has used its power to make a Group Cost Order—which the court determined was preferable to a “no win, no fee” arrangement. Ashurst details that an exception to the prohibition against contingency fees, the power to make a Group Costs Order in class actions, was introduced in Victoria in June of 2020. Thus far, Victoria is the only jurisdiction in Australia to allow this. A Group Costs Order is a type of contingency fee that requires approval from the court. It necessitates that claimants will pay a portion of the contingency fee out of an award or settlement. This new legislation came about to allow plaintiff law firms to compete on level ground with third-party legal funders. In the first application since Group Costs Orders became law, courts had to determine whether the lawyer’s request for a 25% contingency fee was in the best interests of group members and whether it would be an improvement for claimants over the funding agreement already in place. Lawyers for the plaintiffs compared the Group Costs Order to a TPF agreement, saying it would be better for claimants. The court determined that because of the ‘no win, no fee’ agreement, the comparison should be between the agreement versus the Group Costs Order. Ultimately, the court ruled that the plaintiffs would not be better off with a Group Costs Order. After the decision, the court allowed the parties to take time to reconsider and reapply if desired. While it’s unclear whether courts will grow more welcoming to Group Costs Orders in the future, it seems that plaintiff law firms still find these orders attractive.