Deloitte, as Noumi’s auditor, is alleged to have engaged in misleading conduct by certifying as correct, incorrect accounts, which is said to have affected the value of Noumi’s shares and to have caused loss to the group member investors.

In November of last year, Victorian Supreme Court Justice Lisa Nichols consolidated separate actions being brought, with Mr Gehrke and Mr Buch being appointed as joint plaintiffs and their solicitors, Slater and Gordon Lawyers and Phi Finney McDonald, being granted leave to be jointly named as solicitors in a consolidated proceeding.

The plaintiffs and their solicitors sought a group costs order (GCO), in accordance with s33ZDA of the Supreme Court Act 1986 (Victoria), under which costs payable be calculated as a percentage of whatever award or settlement may be recoverable.

The percentage sought for the solicitors to recover was 22 per cent, inclusive of GST, with liability for payment to be shared among the plaintiffs and group members.

Under the proposed GCO, it was also requested that the plaintiff firms be equally and severally liable to pay costs to the defendants and to give any security for costs of the defendants, if the court so ordered.

In order to grant a GCO, Her Honour noted, the court must, under s33ZDA of the act, be “satisfied that it is appropriate or necessary to ensure that justice is done in the proceeding”.

Nichols J accepted that GCOs engender “simplicity and transparency about funding and legal costs from the time at which a GCO is made”.

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“Making costs liability transparent and simple is in the interests of group members. It must be recalled that solicitors acting for a plaintiff in a class action are expected, in discharge of their professional obligations, to give sufficient and comprehensible information to group members regardless of the funding model in place, which objective is assisted by court-ordered processes involving notice to group members,” Her Honour explained.

“Simplicity and transparency are likely more readily obtainable, however, by the fixing of a GCO than by disclosures addressing time-based legal costs plus funding commission.”

On the question of reasonableness and proportionality of the proposed percentage rate, Nichols J was ultimately satisfied there was a sufficient basis to make a GCO fixed at 22 per cent plus GST, at this point of the proceedings, as it appears “prima facie appropriate”.

“At least upon any settlement or award of damages, the appropriateness of the rate ought be reviewed. I accept that the proposed percentage (22 per cent) could give rise to a disproportionate return to the solicitors and funder,” Her Honour said.

“However, in this case, that speaks to the necessity of a review at a time at which facts capable of informing the necessary evaluation can be put in evidence.”

The plaintiffs had argued it was unnecessary for them to give an undertaking that they would not seek to amend the GCO, and Her Honour decided that certainty as to legal costs and recoveries would not be “substantially undermined” without such an undertaking.

“The rate fixed for the GCO will remain as fixed, subject only to court order. In exercising its power under s 33ZDA(3), any future court will, of necessity, have regard to its role in protecting the interests of group members,” Nichols J said.

“Furthermore, any party (and that party’s solicitors) applying for an upwards variation in a GCO rate would have to confront the basis on which the GCO was first sought and made.”

Her Honour determined to grant the application, determining that such a costs order is appropriate for these proceedings.

Nichols J accepted that the making of the GCO will “provide the plaintiffs and group members with the certainty that, subject only to any further order of the court, they will recover no less than 78 per cent of any amount recovered on settlement or judgment”.

“This is a real and substantive benefit that is specifically sought by the plaintiffs in each proceeding and is protective of group members’ interests,” Her Honour determined.

“I am satisfied that there is a real prospect of group members obtaining a better financial outcome should I make a GCO at the rate of 22 per cent, than would be achievable should the plaintiffs obtain third-party funding without a GCO, which is the likely alternative means of funding should a GCO be refused.”

Further, Nichols J noted that the court feels there is “sufficient evidence” of the appropriateness of the proposed rate at this point in time and that the plaintiff firms have “sufficiently demonstrated its ability to marshal the financial resources to meet the commitments it must assume” by virtue of the GCO.

The case citation is Gehrke v Noumi Ltd [2022] VSC 672. The plaintiffs are represented by Slater and Gordon Lawyers and Phi Finney McDonald (funded by Omni Bridgeway). Noumi is being represented by Arnold Bloch Leibler, and Deloitte is being represented by Corrs Chambers Westgarth.