FEDERAL COURT OF AUSTRALIA

McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd (No 2) [2019] FCA 215

ORDERS

THE COURT ORDERS THAT:

1.    The respondent’s interlocutory application relating to cost capping be dismissed.

2.    Costs reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The respondent’s interlocutory application relating to cost capping be dismissed.

2.    Costs reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BEACH J:

1    The respondent (Bellamy’s) by its interlocutory applications filed in proceeding VID 163 of 2017 (McKay proceeding) and proceeding VID 213 of 2017 (Basil proceeding) has essentially sought cost capping orders such that:

(a)    the costs that may be recovered by the McKay applicant and the Basil applicant (the applicants) pursuant to any costs orders made in their favour are to be agreed or assessed on the basis that the applicants are treated as having been represented by the same counsel and the same solicitors in the one proceeding, with the intent that they be allowed a single set of costs between them across both proceedings;

(b)    further to order (a), the maximum costs as between party and party that can be recovered in both proceedings is in total $4,456,550 such that the maximum costs as between party and party that can be recovered by the applicants is $4,456,550 across both proceedings and the maximum costs as between party and party that can be recovered by Bellamy’s is $4,456,550 across both proceedings; and

(c)    further to order (a) but alternatively to order (b), the maximum costs as between party and party that may be recovered in each proceeding is $2,228,275.

2    Bellamy’s seeks order 1(a) and order 1(b), alternatively order 1(a) and order 1(c), on the basis that order 1(a) and the costs capping orders in order 1(b) or 1(c) are complementary, and that both of them should be made in each proceeding.

3    Let me explain some of the context to the present applications.

4    On 20 March 2017, Bellamy’s applied to stay either the McKay proceeding or the Basil proceeding. But rather than staying either proceeding, on 18 August 2017 I decided to close the class in the Basil proceeding (McKay Super Solutions Pty Ltd v Bellamy’s Australia Ltd [2017] FCA 947), to leave the class open in the McKay proceeding, and to allow both class actions to go forward as so constituted. I did however observe that “but for the fact that in both proceedings more than 1000 group members in each case had committed themselves to litigation funding agreements and retainer agreements with their respective litigation funders and solicitors, I would have permanently stayed one of the proceedings” (at [8] and [96]).

5    I also noted (at [112] to [118]) that I would make case management orders to achieve efficiencies and reduce overall costs and said:

The above steps are designed to reduce the overall costs that may ultimately be borne by group members across both proceedings in respect of the applicants’ own costs in each action. But such steps may also reduce the potential overall adverse costs order burden of the respondent (and indeed its own costs) across both actions. Indeed, I expressed my view to counsel at the hearing of the stay applications that in relation to any potential exposure to an adverse costs order, I may consider making orders to achieve the result that the respondent be only exposed to one set of legal costs vis-à-vis the applicants as if there had been only one set of proceedings.

6    On 13 September 2017 I made case management orders in each proceeding to the following effect:

The Applicant and the [other applicant] negotiate as one with the Respondent on an electronic discovery protocol and categories for discovery.

The Applicant confer with the [other applicant] to agree a protocol for the efficient conduct of the proceedings [(the cooperation protocol)], including with respect to:

(a)    using reasonable endeavours to agree on the areas of expertise required for expert evidence, the identity of particular experts to be briefed and the contents of any briefs and letters of instructions to experts;

 (b)    consulting with each other before preparing, filing, and serving any evidence;

(c)    using reasonable endeavours to progress this proceeding and [the other proceeding] in a similar manner;

(d)    cooperating in the conduct of or response to any interlocutory application in either this proceeding or [the other proceeding];

(e)    notifying the [other applicant] in the event that an interlocutory application is deemed prudent or necessary within a reasonable time before such application is filed;

 (f)    conferring about key dates.

7    Pursuant to those orders a cooperation protocol was entered into and the applicants pursuant to that protocol have achieved significant efficiencies in reducing unnecessary duplication in the conduct of the proceedings. But notwithstanding those orders and the fact that they have been complied with, Bellamy’s still contends that it remains exposed to adverse costs orders that exceed its exposure had there been only one proceeding brought against it conducted by one law firm. Accordingly, it has sought costs capping orders.

8    Now I accept that it is a consequence of my rejection of Bellamy’s applications for a stay of one of the proceedings that the total costs incurred by the Basil group members, the McKay group members and Bellamy’s are likely to exceed the costs that would have been incurred if only one proceeding had been commenced or continued. This reality was not overlooked by me. Let me elaborate.

9    On the stay applications, various options were identified by me in response to the matters raised by the parties as potential ways to address the competing proceedings, being:

(a)    consolidation of the two proceedings

(b)    a permanent stay of one of the proceedings;

(c)    a ‘declassing order’ under s 33N(1) of the Federal Court of Australia Act 1976 (Cth) (the Act);

(d)    an order closing the class in one of the proceedings, but leaving the other proceeding as an open class proceeding, with a joint trial of both; or

(e)    a joint trial of both proceedings with each left as they were then constituted, as open class proceedings (the ‘do nothing’ approach or more kindly described as the ‘wait and see’ approach).

10    In the context of the competing proceedings before me, I identified options (a), (c) and (e) as options that could be readily eliminated. I then addressed Bellamy’s submissions in support of a permanent stay of one of the proceedings. Bellamy’s submissions were principally directed towards the topics of multiplicity and duplication, in terms of giving rise to additional costs exposure from its perspective, and if I might say so a well understandable concern.

11    In contending for a permanent stay of one of the proceedings, Bellamy’s relied on a submission concerning multiplicity to the effect that it ought not to be the subject of two or more representative proceedings with overlapping group members in respect of the same subject matter. I rejected this submission. And in doing so, I adverted to the reality that even if I determined to stay one of the proceedings, this would not immunise Bellamy’s against the possibility that there may nevertheless be multiple proceedings. I observed the following (at [34] to [37]):

First, Part IVA contemplates that there may be more than one proceeding against the same respondent in respect of the same subject matter and the same cause(s) of action. A claimant has a choice whether to bring representative proceedings on behalf of “some or all” persons. If that choice is not made, one or more claimants may bring separate proceedings against the one respondent in respect of the same claims. Hence a multiplicity of proceedings. Moreover, even if group proceedings are brought, one or more group members may opt out and bring their own proceedings, resulting in multiple proceedings against the same respondent. Indeed, such group members who have opted out may bring their own separate representative proceedings. Nothing in Part IVA precludes such an option. And to do so would neither be invalid (the US’ apparently contrary position notwithstanding) nor an abuse of process. In other words, the structure of Part IVA permits of multiple proceedings including multiple representative proceedings.

Second, although it is no doubt vexatious, oppressive and an abuse of process for the same applicant to bring multiple proceedings in respect of the same or similar claims against the same respondent, in form that is not the situation with which I am faced. The McKay applicant has brought its proceedings on behalf of its class using Slater & Gordon and IMF. The Basil applicant has brought his proceedings on behalf of his class using Maurice Blackburn, ICP Capital and ICP. The group members in either of the proceedings are not formally parties.

Third, as discussed in Johnson Tiles by Merkel J at [11] to [17], the commencement of a second bona fide set of representative proceedings prior to the Court giving substantive directions in existing but overlapping representative proceedings (ie with overlapping group members), does not of itself establish any vexation, oppression or an abuse of process. …

Fourth, no authority cited to me persuasively supports the proposition that in circumstances where the duplication of class membership is eliminated in respect of two group proceedings involving the same subject matter against the same respondent, that nevertheless there is still vexation, oppression or an abuse of process in both such proceedings as so modified to eliminate the duplication going forward. For example, take the situation where one has two closed classes that do not overlap or one open class and a closed class, but where the closed class is excluded from the open class. Alternatively, assume that such results can be achieved by case management directions. It is difficult to see how it could be said that to then allow the two group proceedings to go forward would be vexatious, oppressive or an abuse of process. …

12    I also referred to the presumptive entitlement of both proceedings to go forward in the following terms (at [54]):

[B]oth the Basil proceedings and the McKay proceedings are presumptively entitled to go forward, absent vexation, oppression or an abuse of power of which, as I have said, there is none. So, if one of the proceedings is to be stayed (ie something is to be taken away from, say, the Basil applicant and the Basil group members such that their otherwise entitlement to proceed is denied) some powerful and significant reason must be demonstrated. …

13    The other related contention that was advanced by Bellamy’s in support of its stay applications was a submission that it was in the interests of justice to stay one of the proceedings in order to eliminate the duplication of costs and expenses. Bellamy’s submitted that a permanent stay would ensure that it was not subjected to a ‘manifest injustice’, namely, meeting multiple representative proceedings with overlapping group members in respect of the same factual matters, causes of action and losses. It was said that the grant of a stay would ensure that it would not be exposed to two sets of adverse costs orders. But I did not accept that the duplication of work and costs justified the grant of a stay, saying (at [43] and [46]):

Now the respondent, even in the absence of establishing vexation, oppression or an abuse of process, contends that it would be in the interests of justice to stay one of the proceedings to eliminate the duplication of costs and expenses. I accept that this is an important consideration and indeed I have considered this under all limbs said to justify a stay. But the duplication can be minimised by less draconian measures as I later discuss.

…

Now I accept that there is likely to be some duplication and consequent additional expense. But I would make a number of other points. First, even if I permanently stay one of the proceedings, there may be multiple proceedings (with corresponding duplication) in any event for the reasons that I have explained. Second, I propose to put in place case management procedures to reduce such duplication of the type that I discuss later, without needing the blunt instrument of a permanent stay to address this concern. Third, even if there is some duplication with consequent expense, this is only a matter to weigh in the balance. And in the circumstances, it does not outweigh the corresponding detriment to over 1000 signed up group members who may be denied their choice of funder and lawyers if I were to stay, for example, the Basil proceedings; likewise there would be an analogous detriment by staying the McKay proceedings given the over 1500 signed up group members in those proceedings.

14    I did not regard Bellamy’s as being entitled to avoid exposure to more than one proceeding. Nor did I accept the proposition that the risk of multiplicity of proceedings would be entirely eliminated, whatever course I adopted. Further, I recognised that a consequence of the decision not to stay one or other of the proceedings was that some work would be duplicated, with attendant costs, but that this was something that could be significantly reduced through case management and cooperation between the applicants and their advisers, as in my view it has been. So much for the background. Let me return to the present applications.

15    In summary, I would reject Bellamy’s applications for the following reasons, even though I do not doubt that I have power to grant the orders sought notwithstanding the applicants’ submissions to the contrary.

16    First, in my view the case management directions I have put in place are working reasonably well to substantially reduce any duplication in costs. Indeed, at no stage has Bellamy’s approached me to tighten or strengthen these directions. And nor has it established any substantial non-compliance therewith to date.

17    Second, if there is any unjustified duplication in costs I can retrospectively and adequately deal with such questions including retrospectively limiting Bellamy’s adverse costs exposure at a later stage. All of these steps can be taken in the then “known world”. No compelling reason has been advanced by Bellamy’s to deal with these matters prospectively and now. Its principal argument concerning the advantages of dealing with the matter prospectively in relation to a potential settlement was somewhat overstated.

18    Third, I am in no position at this stage to forensically make any adequate assessment of the suitability of the quantum caps sought in orders 1(b) and (c). I have insufficient information particularly given the complexity of the proceedings to make any adequate assessment. Moreover, I do not consider that any “subject to further order” rider is an answer to this point.

19    Fourth, and flowing from the third point, only order 1(a) has any apparent allure, and even this allure is superficial. Moreover, if I was to entertain an order of the type of order 1(a) it would only be of a type where:

(a)    there was an element of mutuality such that Bellamy’s would be subject to a correlative constraint; and

(b)    it operated only in relation to costs incurred by the parties subsequent to my judgment on the stay applications.

20    Fifth, I accept that to make an order of the type of order 1(a) modified as I have just suggested might seem an attractive solution to accommodate the interests of all concerned, but it may disadvantage group members. If I were to make such an order and the applicants were to win at trial, to the extent that I have capped the costs that could be recovered against Bellamy’s, the differential between the applicants’ solicitor/client costs and the cap on costs that could be recovered from Bellamy’s is likely to come out of any damages award. But who would ultimately wear that? The applicants personally? Group members? The applicants’ lawyers? The external litigation funders? I could not say at this stage. But more importantly, if one or more of these interests are to bear that deficit, why should I trouble myself with such questions at this stage given that I could make the equivalent of order 1(a) at a later stage with the modifications referred to in the preceding paragraph? Again this all suggests that it is better to deal with these costs questions retrospectively rather than prospectively, but in the meantime to leave in place a protocol to minimise or eliminate costs duplication to the extent feasible. In other words, the practical solution to the present problem is not to now impose on insufficient material and with insufficient justification a crude costs cap, but rather to take steps designed to reduce or minimise any duplication or inefficiency based upon the foundation (as I have already ruled) that there are two actions going forward, which I might say have now been set down for trial before me.

21    As I say, I am not satisfied that I should make the orders sought by Bellamy’s. Therefore its applications will be dismissed for the reasons that I will now elaborate on.

LEGAL PRINCIPLES

22    At this point it is convenient to discuss some aspects of the applicable legal principles debated before me.

(a)    Section 33ZF

23    I have power under s 33ZF(1) of the Act to make order 1(a) as sought in the interlocutory applications. Alternatively, I have power to make such an order pursuant to the Court’s implied power or pursuant to the Federal Court Rules 2011 (Cth) (the Rules).

24    Section 33ZF(1) of the Act provides:

In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.

25    In Earglow Pty Ltd v Newcrest Mining Ltd (2015) 230 FCR 469 at [33] I said the following:

…[A]lthough in a general sense s 33ZF(1) has been described as a plenary power, nevertheless it is not unlimited. It is in one sense both trite and question begging to assert that the power must be exercised judicially. But let me pass to the language of s 33ZF(1) itself. It uses the language “make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding”. Grammatically, “thinks” is to be applied distributively, so that it reads “thinks appropriate” or “thinks necessary”; there is no “is” before “necessary”. But as applied distributively, “thinks appropriate” has a lower threshold than “thinks necessary”. But in the composite phrase, the concept is “thinks appropriate … to ensure that justice is done in the proceeding” (emphasis added). In other words, although the words “thinks appropriate” have a lower threshold than “thinks necessary”, nevertheless the relevant element of necessity in another guise is enshrined in the coupling of the words “to ensure that”. In summary, the question becomes whether I think it is appropriate, to ensure that justice is done in the proceeding, to make the orders sought by Newcrest. It is not whether I think it to be merely convenient or useful per se. Section 33ZF(1) is not a licence for me to impose my own expansive case management philosophy. Rather, I must be satisfied that any order that is made satisfies the statutory test. Now I accept that s 33ZF(1) is a very wide power and ought not to be construed narrowly (McMullin v ICI Australia Operations Pty Ltd (1998) 84 FCR 1 at 4 and Owners of Shin Kobe Maru v Empire Shipping Company Inc (1994) 181 CLR 404 at 421). Nevertheless, any exercise of power has to fit within the statutory formulation.

26    The operation and scope of that section has been further illuminated in the following terms in Money Max Int Pty Ltd v QBE Insurance Group Ltd (2016) 245 FCR 191 at [165] per Murphy, Gleeson and Beach JJ:

In our view, in context, there is less of a difference between “appropriate to ensure justice” and “necessary to ensure justice” than might initially appear. In s 33ZF “necessary” identifies a connection between the proposed order and an identified purpose as to which the Court must be satisfied before making an order. The expression “necessary to ensure that justice is done” has shades of meaning and admits of degrees of comparisons and in context the expression should not be given a narrow construction. The requirement that a proposed order be “necessary to ensure that justice is done in the proceeding” does not require that the Court be satisfied that unless the order is made the administration of justice will collapse or that justice in the proceeding will not be “ensured” in the sense of being certain. Section 33ZF provides a wide power directed at enabling the Court to make orders to deal with the novel problems that might arise through a new statutory procedure for representative proceedings, and the expression “necessary to ensure that justice is done” requires that the proposed order be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding.

27    Now the applicants accept that the power under s 33ZF(1) is a broad one. But they say that here the occasion for its use is not enlivened. They contend that the orders proposed by Bellamy’s seek to achieve a result which will have effect across two proceedings. But they say that it cannot be said that an order in the form sought by Bellamy’s is “appropriate or necessary to ensure that justice is done in the proceeding”. Their contention is said to derive some support by analogy from the observation in my earlier ruling (at [41]) that s 33ZF(1) was:

not directly applicable. It uses the language “…to ensure that justice is done in the proceeding…”. But a permanent stay of a group proceeding could hardly be said to ensure that justice is done “in the proceeding”.

28    Similarly, it is contended that denying an applicant its costs or reducing the costs to which an applicant would otherwise be entitled in a proceeding because of the existence of another proceeding, cannot sensibly be described as appropriate to ensure that justice is done in the proceeding.

29    Indeed, it is contended that making orders in the form sought risks unfairly prejudicing the applicants. It is said that the orders sought by Bellamy’s function in a manner which would operate prospectively so as to restrict the applicants’ recovery of costs (whether after trial or on the occasion of a court approved settlement) which might otherwise have been considered to have been reasonably incurred. Proposed order 1(a) imposes a restriction on the costs that the applicants can recover under any cost order. It is also said that initially Bellamy’s did not suggest that any similar restriction be imposed with respect to the costs that Bellamy’s could recover, but I would note at this point that that situation has now changed.

30    Further, although proposed orders 1(b) and (c) impose a reciprocal cap, the applicants contend that it cannot be assumed that Bellamy’s and the applicants are or will be in the same position. First, it cannot be assumed that the same legal costs are required to be incurred for the applicants to prove their case as might be necessary for Bellamy’s to conduct its defence. Second, Bellamy’s costs are not subject to Court approval in the event that the proceedings are settled. Third, a cap may impact differently and disproportionately upon funders, when compared with a respondent or its insurer. Let me say now that I reject this last point. Litigation funders who are well resourced would not be prevented by the proposed cap from incurring additional costs over and above the cap should they consider it desirable to do so in the same way as a respondent or its insurer would not be so prevented. There is no relevant distinction in this regard between an applicant’s litigation funder and a respondent’s insurer.

31    Further, the applicants say that Bellamy’s offer to cap its party/party costs recovery is illusory. Securities class actions are likely to settle before judgment. As a result, Bellamy’s offer to cap its costs will therefore only bite in circumstances where the applicants’ claims are heard at trial and are unsuccessful. But it is said that this is unlikely. The applicants contend that a facially neutral bilateral cap of the type proposed in orders 1(b) and 1(c) will affect the applicants disproportionately.

32    Now I should say at this point that I do not accept the applicants’ contention that I do not have the power to make the orders sought under s 33ZF(1). The real question is whether I should exercise the power to make the orders sought in the proceedings.

33    In my view, the orders sought by Bellamy’s in each proceeding are prima facie reasonably adapted to the purpose of seeking or obtaining justice in that proceeding. This is so notwithstanding that proposed order 1(a) (and also order 1(b)) in each proceeding is made by reference to that proceeding and another proceeding. In determining whether an order is reasonably adapted to the purpose of seeking or obtaining justice in a proceeding, I am not necessarily confined to a consideration of the circumstances within the boundaries of that proceeding only, but may look to other circumstances outside such boundaries to the extent that they bear upon or are relevant to a consideration of whether the order sought is reasonably adapted to the purpose of seeking or obtaining justice in the proceeding. In my view order 1(a) in each proceeding is prima facie reasonably adapted to the purpose of seeking or obtaining justice in that proceeding, both for group members if it is imposed on a bilateral basis and also Bellamy’s.

34    Moreover, if it is accepted that I have power presumably under s 33ZF(1) to make relevant orders retrospectively, as the applicants contend that I do and indeed advance this as a reason why I should not make the relevant orders prospectively, then there is a tension in their position with saying that I cannot prospectively invoke s 33ZF(1) due to an absence of power.

35    Bellamy’s also invokes the implied power of the Court in support of its applications for order 1(a). The implied power is that which is necessary to the effective exercise of the jurisdiction granted to the Court. Now the applicants contend that the same considerations which demonstrate that the orders sought by Bellamy’s cannot properly be made under s 33ZF(1) also necessitate the conclusion that order 1(a) cannot properly be made in the exercise of the Court’s implied or incidental power. They contend that such an order is not necessary for the effective exercise of the Court’s jurisdiction to determine the substantive proceedings. I reject that submission for analogous reasons to those discussed above. Let me turn to another aspect of principle.

(b)    Double representation

36    Bellamy’s contends that courts do not usually award costs in a way which accepts double representation. It is said that this is because courts are concerned about costs being incurred unnecessarily by the over-representation of parties with common interests. In its generality, Bellamy’s contentions are unremarkable. But let me elaborate further.

37    The general rule is that separate representation of applicants is not permitted without leave. And where multiple applicants with the same interest are separately represented, it will generally be proper for the unsuccessful respondent to be burdened with only one set of adverse costs.

38    And if successful parties with the same interests elect to be separately represented, they bear the onus of demonstrating that a sufficient reason exists for the unsuccessful party to be burdened with more than one set of costs. The burden may be discharged, and multiple applicants will be permitted separate representation, where they have a conflict of interest. But once there is no conflict and if there is separate representation, only one set of costs may be recoverable.

39    In Ex parte McCay; Re Consolidated Press Ltd (1936) 36 SR (NSW) 592 when considering costs in contempt proceedings, Jordan CJ said (at 595):

There are two applications before us, both arising out of the same paragraph, by two of the persons whose actions may be prejudicially affected. Each of these persons was, of course, entitled to bring the matter to the notice of the Court. But it does not follow that, if an order for costs should be made against the respondent, it should necessarily include the costs of both applications. … In the present case, it must have been manifest by the time that the rules nisi were granted that there was no possible cleavage between the two applicants, and no reason why they should not thenceforth join forces in presenting their applications to the Court, apart, of course, from a natural desire to be represented each by counsel of his own choice. But this is a desire that they are not entitled to indulge at another person's expense, in the absence of some good reason.

40    Ex parte McCay involved the question of costs where two applications for contempt of court had been brought by two separate applicants in two libel actions arising out of the same publication. Jordan CJ accepted that both applicants were entitled to bring their own application but noted that “it is most important that contempt applications not be used … as instruments of oppression” (at 595). He further noted that it was manifest by the time the rules nisi were granted in the proceedings that there was “was no possible cleavage between the two applicants”. Accordingly, there was no reason why they should not from that time onwards have joined forces. As a result, the order made was that the respondent pay the costs of both applicants in full up to and including the time of the grant of the rules nisi, but that from that time onwards the respondent pay one half of the subsequent costs of each applicant. What is also of note is that a retrospective analysis was made, once the court was appraised of all the relevant facts, of the costs question to deal with an instance of over representation or unnecessary duplication.

41    Now both parties accept that the rule against double representation does not apply where separate representation is necessary because of an actual or potential conflict of interest.

42    Moreover, the applicants seek to characterise the circumstances of the present proceedings as ones where there is such a conflict of interest or potential conflict of interest justifying the separate representation of the McKay applicant and the Basil applicant.

43    But in my view this characterisation is wrong. It is apparent from the latest form of statement of claim filed in each proceeding that the Basil applicant and the McKay applicant are advancing identical claims and seeking identical relief against Bellamy’s. There does not appear to be a potential conflict of interest between them. Now the applicants identify certain so-called divergences of interest which to the extent that they can be properly characterised as divergences of interest have resulted from their separate representation. But it is arguable that none of such concerns would exist if the common claims made against Bellamy’s were advanced in the one proceeding brought by the one law firm.

44    Perhaps there are divergences such that the two applicants will give different discovery, will have different lay evidence and will have different particulars of loss and damage. Further, there may be other divergences, for example, issues in relation to the opt-out process and class closure, the resolution of the residual overlap of group members in the two proceedings, the content of notices to group members and the common fund application made by the McKay applicant. In addition, there will be separate issues which arise on any settlement, given the dynamics of compromising the McKay open class proceeding, as opposed to the closed Basil class. But these are not divergences of interest, let alone questions of actual conflict of interest. In a sense these divergences are an artefact of having two proceedings. If there had been only one group proceeding, such divergences may have been minimised, eliminated or indeed may have been easily handled in the one proceeding.

45    But to reject the applicants’ conflict of interest argument does not entail that I should make the orders sought by Bellamy’s. I will return to this later, but for the moment let me delve further into the cases.

46    Ex parte McCay dealt with co-applicants but the principles have been more developed in a line of cases involving multiple defendants in relation to disentitling over representation, although there exists no inflexible rule. In Statham v Shephard and Anor (No 2) (1974) 23 FLR 244 Woodward J said (at 246 to 247):

[T]he court will not normally allow two sets of costs to defendants where there is no possible conflict of interest between them in the presentation of their cases. I would add to this basic proposition three provisos. In the first place, if a conflict of interest appears possible but unlikely, the defendants should make any necessary inquiries from the plaintiff as to the way in which his case is to be put if this would resolve the possibility of conflict between defendants.

Secondly, there could be circumstances in which, although the defendants were united in their opposition to the plaintiff, their relationship to each other might be such that they would be acting reasonably in remaining at arm’s length during the general course of litigation.

Thirdly, even if defendants are acting reasonably in maintaining separate representation for some time or for some purposes, they may still be deprived of part of their costs if they act unreasonably by duplicating costs on any particular matter or at any particular time.

47    Woodward J concluded that it was reasonable for the two defendants to maintain separate representation (at 248). Again, an important aspect of Statham was whether there was any possible conflict of interest.

48    In Taylor v Owners - Strata Plan No 11564 (No 2) [2013] NSWCA 153, an appellant was ordered to pay only one set of costs with respect to some of the respondents. The application by the appellant was made in reliance upon UCPR rule 51.4(5), which expressly provided that an applicant who considered that respondents need not be separately represented could notify them that objection would be taken to more than one set of costs being allowed between them. The circumstances in that case included that the requisite notice under rule 51.4(5) had been given and there was no conflict between the respondents. It was said by McColl, Basten and Hoeben JJA at [6]:

In Statham v Shephard (No 2) (1974) 23 FLR 244 at 246, Woodward J stated the general principle that, subject to three provisos, “the court will not normally allow two sets of costs to defendants where there is no possible conflict of interest between them in the presentation of their cases”. The first proviso reduced the severity of the “no possible conflict” test, saying that the defendants should make enquiries from the plaintiff if a conflict appeared possible but unlikely. The second proviso was that the defendants might be acting reasonably in remaining at arm's length despite their united opposition to the plaintiff, even, apparently, in the case of “no possible conflict of interest”. Whether that proviso was added from an abundance of caution and would generally have no operation need not be determined. It was limited by the third proviso which stated that even if the defendants were acting reasonably in maintaining separate representation “for some time or for some purposes, they may still be deprived of part of their costs if they act unreasonably by duplicating costs on any particular matter or at any particular time”. It might be added that, even if they did not duplicate costs, they would not necessarily obtain separate costs orders if the expense incurred was not one which should reasonably have been borne by the plaintiff.

49    In HP Mercantile Pty Ltd v Hartnett [2017] NSWCA 79 an application was also made in reliance upon UCPR rule 51.4(5). In that case multiple respondents were not permitted to recover all the costs associated with two sets of legal representatives. It was noted that by reason of the fact that the only question before the court was a narrow one of construction, there arose no possible risk of conflict between the respondents (at [13] and [16(2)]). In those circumstances, it was found to be unreasonable that the appellant bear the costs of both sets of representation (at [14] to [16] per Bathurst CJ, Leeming and Payne JJA).

50    Both Taylor and HP Mercantile concerned respondents with common interests on the relevant appeal and with respect to which no possible conflict arose. But I would note that in those cases orders were made retrospectively and on the basis of evidence which demonstrated over representation and unnecessary duplication in the past conduct of the proceedings. Accordingly, those cases do not address the making of a forward looking cost capping order against two lead applicants in class actions in which I have already permitted separate representation.

51    At this point it is convenient to refer to Bristol-Myers Squibb Co v Baker Norton Pharmaceuticals Inc [2001] RPC 1. The English Court of Appeal overturned the primary judge’s order that from a specified date “the first and second defendants shall recover only 1 set of costs between them, to be taxed as if only one firm of solicitors were acting for both parties and the parties were represented by one leading and one junior counsel”. Aldous LJ observed that the governing principle was that the losing party should only be required to pay the costs reasonably incurred by the other party. Aldous LJ said (at [72]):

… A losing claimant should ordinarily pay the costs reasonably incurred by the parties that he takes proceedings against. What costs are reasonably incurred by one or more defendants should be ascertained by the costs judge who carries out the assessment. Upon such an assessment duplication and failure to co-operate can be seen and adjustments made accordingly. To decide what costs were reasonably incurred by defendants by considering what costs a losing client should pay, amounts to pre-judging the results of a detailed assessment without considering the facts.

52    Holman J added (at [116]):

… The proper target of the judge should not have been separate representation as such, but any unreasonable duplication of expense by the two sets of representatives. The proper point at which to consider that is on detailed assessment by the costs officer, and not by the arbitrary order which the judge made.

53    Now the observations in Bristol-Myers Squibb support the notion that the relevant inquiry on costs is whether there are unreasonably duplicated costs. But I agree with Bellamy’s that one must be careful in how one approaches Bristol-Myers Squibb.

54    That case concerned the position of co-defendants and not co-plaintiffs. So in that context Aldous LJ said (at [71]):

The complaint upheld by the judge was that sometime in February, before the trial in July 1998, that position changed and it became unreasonable for the defendants to be represented by their own solicitors and counsel. That being so, it was not reasonable for the appellants to pay both sets of costs. What was it that meant that it was unreasonable for one of the parties to continue to be separately represented? The judge did not answer that question, except to say that he was not saying that the solicitors acted improperly. His conclusion depended upon what he thought was reasonable for the losing party to pay, not upon an assessment as to whether one of the respondents had acted unreasonably.

55    Aldous LJ went on to say (at [72]) that a “losing claimant should ordinarily pay the costs reasonably incurred by the parties that he takes proceedings against” (my emphasis).

56    Holman J said (at [116]):

Further, I applaud the judge’s aim which was to discourage multiple representation by parties fighting, as he put it, a common enemy on a common cause… Further, I was persuaded by Mr Whittle, on behalf of Baker Norton, that in heavy pharmaceutical patent actions of this kind the fact that two large drug companies are facing a common enemy does not, as he put it, “make them friends.” Many important commercial decisions, and the consequential effect upon other potential litigation, may lurk just below the surface of a case like this, thereby justifying that each party has its own legal advisers in the fray. The proper target of the judge should not have been separate representation as such, but any unreasonable duplication of expense by the two sets of representatives.

57    Further, in that case the co-defendants with double representation were commercial competitors and “[m]any important commercial decisions, and the consequential effect upon other potential litigation, may lurk just below the surface of a case like this, thereby justifying that each party has its own legal advisers in the fray”. So the existence of trade rivalry between co-defendants or co-plaintiffs may justify separate representation. But that is not the present case.

58    In Ong v Ping [2015] EWHC 3258 (Ch), Morgan J said that “if the court considers that the costs of separate representation exceeded what was reasonably necessary to present the Claimants’ case and protect their interests, then the court will conclude that the additional costs (in excess of the costs that would have been incurred if the Claimants had instructed a single set of solicitors) were not reasonably incurred and those costs will be disallowed” (at [60(5)]). He held that after a certain point in the litigation before him, it was not reasonably necessary for the two Claimants to have separate representation, and ordered that as and from that point in time the unsuccessful defendant was only liable for the costs which would have been incurred if the Claimants had used one firm of solicitors rather than two. So he focused on whether the costs of multiple parties bringing (or defending) claims against a single defendant (or plaintiff) were reasonably incurred.

59    Bellamy’s contends that to the extent that Bristol-Myers Squibb and Ong stand for the proposition that where there is double representation the relevant inquiry on costs is whether there is unreasonable duplication of costs or whether successful litigants have acted unreasonably, such an approach is inconsistent with Australian authority. It prays in aid what Bathurst CJ, Leeming and Payne JJA explained in analogous circumstances that “the ultimate question is not … whether [successful litigants with double representation] … have acted reasonably, nor whether there has shown to be duplication” but rather “whether it is reasonable for the unsuccessful litigant to bear more than one set of costs” (HP Mercantile Pty Ltd at [14]).

60    So, according to Bellamy’s, the prism to be looked through from the perspective of the unsuccessful litigant (on this hypothesis, Bellamy’s) is whether it is reasonable for it to bear more than one set of costs, rather than whether the co-plaintiffs (on this hypothesis, the applicants before me) had unnecessarily or unreasonably duplicated costs.

61    Alternatively, Bellamy’s says that even if the relevant inquiry is whether there is an unreasonable duplication of costs and whether successful litigants have acted reasonably, where there are two or more applicants making the same claims and seeking the same relief against a respondent and there is no conflict or possible conflict of interest between them, separate representation giving rise to duplication of costs is not justified, and the respondent (if unsuccessful) should only be liable for one set of costs. It is said that this is because in those circumstances the duplicated costs are necessarily unreasonable irrespective of the standpoint.

62    Given that I have allowed both proceedings to go forward, in my view the English approach is more suitable in the present context. Further, the practical differences between the formulations may be more perceived than real. It may be reasonable for Bellamy’s to pay more than one set of costs in circumstances where I have allowed two class actions to go forward, as a result Bellamy’s is not at great risk of yet further fragmentation and multiplicity, and where there has been no unnecessary or unreasonable duplication of costs from the applicants’ perspective.

63    Now Bellamy’s says that the applicants, not Bellamy’s and the unfunded group members in the McKay proceeding, should in any event bear the financial burden of the duplicated costs inevitably arising as a result of the exercise of their “presumptive entitlement”, whether those costs are necessary or unnecessary. It says that to the extent they are labelled “necessary”, the so-called necessity only arises as a result of the decision by the applicants (or perhaps their respective litigation funders) to have separate representation. It says that once this is appreciated, the necessary/unnecessary duplicated costs distinction relied upon by the applicants is a diversion.

64    I disagree. Even accepting the general proposition consistent with the s 37M over-arching purpose that co-applicants or applicants in separate proceedings raising the same issues where there is no actual or potential conflict of interest ought not be entitled to two sets of costs (for example, the approach that has long applied to co-trustees), nevertheless on the foundation where I have allowed two class actions to go forward, in my view the necessary/unnecessary discriminant is appropriate. Moreover, this can only be properly assessed retrospectively rather than prospectively. But I would say that the co-operation protocol that I have ordered be put in place is designed to minimise any so called duplicated work and expenditure.

65    At all events, on any view Bellamy’s will have an opportunity if needed one day to deal with the matter retrospectively. But perhaps such an occasion may never arise. Bellamy’s may win at trial or the proceedings may settle such that Bellamy’s exposure to an adverse costs order may never arise.

(c)    Rule 40.51

66    I have power to make the cost capping orders sought in orders 1(b) and 1(c) of the interlocutory applications particularly under r 40.51 of the Rules. Rule 40.51 provides:

(1)    A party may apply to the Court for an order specifying the maximum costs as between party and party that may be recovered for the proceeding.

(2)    An order made under subrule (1) will not include an amount that a party is ordered to pay because the party:

(a)     has failed to comply with an order or with these Rules; or

(b)     has sought leave to amend pleadings or particulars; or

(c)     has sought an extension of time for complying with an order or with any of these Rules; or

(d)     has not conducted the proceeding in a manner to facilitate a just resolution as quickly, inexpensively and efficiently as possible, and another party has been caused to incur costs as a result.

67    The following principles are relevant to costs capping orders under r 40.51.

68    In considering whether to make a costs capping order, various factors have been identified as being of potential relevance, but whilst those factors may provide useful guidance they are not fixed criteria. The discretion is a broad one and must be exercised judicially having regard to all the relevant circumstances.

69    More generally, a costs capping order provides incentives to the parties to litigate in accordance with ss 37M and 37N and to focus on the substantive issues in dispute.

70    Consistently therewith, a number of first instance decisions of this Court have held that r 40.51 does not permit a unilateral costs capping order. Accordingly, bi-directional costs capping orders have been sought by Bellamy’s in orders 1(b) and 1(c). In essence, Bellamy’s seeks an order that the maximum costs as between party and party that either the applicants (combined) or Bellamy’s can recover is in total $4,456,550.

71    Now before proceeding further I would note that the genesis and purpose of the Court’s powers under r 40.51(1) are not irrelevant, although of course my analysis must begin and end with the text itself. The principal purpose of r 40.51 and its predecessor order 62A would seem to be not so much a desire to limit the exposure of a respondent to an adverse costs order in complex and lengthy commercial litigation, but rather with concerns relating to access to justice, public interest, and a desire to limit the costs of all parties in less complex and shorter cases. The rule was adopted following the expression of concerns by a former Chief Justice of this Court. In his Honour’s letter dated 6 November 1991 to the President of the Law Council of Australia, he relevantly wrote (see Sacks v Permanent Trustee Australia Ltd (1993) 45 FCR 509 at 511 per Beazley J):

… There is concern within the Court, reflecting that within the wider community and the legal profession, that the cost of litigation, particularly for persons of ordinary means, places access to the civil courts beyond their reach and thus effectively denies them justice.

A deterrent to the assertion or defence of rights in civil litigation is a fear of the ultimate exposure in terms of the legal costs to which an unsuccessful party may be subjected.

… [T]he object of such a rule would be to define a budget so that the management of the case might be tailored according to its economic limits. It is anticipated that such a rule, if introduced, would be applied principally to commercial litigation at the lower end of the scale in terms of complexity and the amount in dispute, although it could be applied in other cases as appropriate.

72    In Hanisch v Strive Pty Ltd (1997) 74 FCR 384, Drummond J said (at 387) that:

The principal object of O62A is to arm the Court with power to limit the exposure to costs of parties engaged in litigation in the Federal Court which involves less complex issues and is concerned with the recovery of moderate amounts of money, although it may be appropriate for an order to be made under O62A in other cases…

73    But in some cases a costs capping order may work injustice or inconvenience. As Mann J said in Knight v Beyond Properties Pty Ltd [2006] EWHC 1242 (Ch); [2007] 1 All ER 91 at [23]:

Capping costs in advance does indeed involve a degree of speculation which, though it can be carried out when necessary (just as the courts have to assess proper sums for the purposes of security for costs applications) is not easy and has its dangers. The consequences of getting it wrong are in fact more serious that getting the sum wrong in a security application because costs outside the cap are irrecoverable. Costs outside the amount of the security remain recoverable. It is only a partial answer to say that insufficiencies can be dealt with under a liberty to apply. It is possible to remedy insufficiencies at that stage, but it is likely to increase costs if it has to happen (the costs of the defendants in relation to this present application should be noted in this respect - £14,000), and to require a party to explain and justify its future conduct in the litigation to the counter-party, which it would not normally wish or be required to do. If such matters can properly, fairly and reliably be left to detailed assessment post-trial then, on the whole, they should be. Retrospective judgments about such things are likely to be more reliable than prospective judgments.

74    In the exercise of the discretion to make such an order, relevant factors include the damages sought to be recovered, the complexity of the case, whether the applicant’s claims are reasonably arguable, whether a party would otherwise be forced to abandon a proceeding if such an order was not made, whether there is a public interest element to the case (see for example Woodlands v Permanent Trustee Company Ltd (1995) 58 FCR 139 at 146 to 148 per Wilcox J involving a preliminary question) and the costs likely to be incurred in the proceedings. Relevantly to the present context it should be noted that if the proceeding is complex forensically and also lengthy then this may militate against the making of such an order. I would note at this point, although I will return to these matters later, that the two class actions before me are not the usual type of case that might warrant a costs capping order.

75    Now I accept that the applicants’ submissions focus almost exclusively on the origins of r 40.51 with little regard paid to its text. So much is clear in the applicants’ conclusion that r 40.51 could not be used as a means of regulating or managing costs generally. But such an approach to construction displaces the plain meaning of the text and is contrary to the applicable principles of construction. Moreover, the applicants do not point to any ambiguity in the text of r 40.51. And they do not identify any aspect of the statutory text whose meaning might be resolved by reference to the origins of the rule. Rather, they gloss over the words and rely upon purpose and context as ends in themselves. Such an approach is impermissible.

76    In my view, there are no fixed criteria or constraints for the making of a cost capping order under r 40.51 save that it should be bilateral. The discretion to exercise the power is a broad one that must be exercised judicially having regard to all the circumstances of the case.

77    But having said all of that, for reasons that I will explain later I do not propose to make order 1(b) or order 1(c).

A QUINTET OF FALLACIES?

78    The applicants contend that Bellamy’s applications proceed on the basis of five “fallacies”. I won’t dwell on the applicants’ idiosyncratic idea of a “fallacy” that would be unrecognisable to a logician.

79    First, in what has been described as the “no multiplicity” fallacy, it is said that Bellamy’s submissions assume that it ought not to be exposed to more than one proceeding in respect of the same event or claim. And as I have said, there is no legislative presumption enshrined in Pt IVA in favour of such an outcome. Indeed there is nothing in Part IVA which says that this is the preferred let alone the ideal outcome. Moreover, the opt out regime has the effect that no respondent could ever assume that it would only be exposed to one proceeding with respect to a particular matter. I referred to this reality in my earlier judgment (at [34] to [37]).

80    But as to the “no multiplicity” fallacy, Bellamy’s is not now submitting that it ought not be exposed to more than one proceeding in respect of the same event or claim. Rather, what it now submits is that in circumstances where it is exposed to more than one proceeding in respect of the same event or claim, and where those proceedings make identical claims and seek identical relief in circumstances where there is and can be no conflict of interest or cleavage between the two applicants, it should be exposed to only one set of costs as if only one proceeding was brought against it by one set of lawyers. I reject the applicants’ argument that Bellamy’s has committed the “no multiplicity” fallacy.

81    Second, in what has been described as “the indulgence” fallacy, the applicants contend that Bellamy’s treats and describes it as an indulgence to permit the applicants separate representation in the two proceedings. But it is said that I have already ruled that there was nothing vexatious or abusive in the two proceedings being pursued by two applicants on behalf of two cohorts of group members.

82    But as to “the indulgence” fallacy, the applicants’ chain of reasoning said to expose this so-called fallacy is flawed.

83    The applicants refer to my judgment where I said that both the Basil proceeding and the McKay proceeding were presumptively entitled to go forward, absent vexation, oppression or abuse of process. Next, the applicants say that I ruled in my judgment that there was nothing vexatious or abusive in the two proceedings being pursued by two applicants on behalf of two cohorts of group members. From these two propositions, which are not disputed by Bellamy’s, the applicants conclude that it is a fallacy to characterise as an indulgence the applicants having separate representation to pursue identical claims against Bellamy’s. But I agree with Bellamy’s that such a process of reasoning does not follow. The question whether duplication of costs justified a stay is different from the question now before me as to who should bear the burden of the additional costs that flow from the applicants having separate representation to prosecute two identical proceedings against Bellamy’s. Equating the two questions is erroneous, as the latter question was not answered in my earlier judgment.

84    Bellamy’s is not now contending that permitting the applicants to have separate representation to pursue identical claims against Bellamy’s in separate proceedings is impermissible. Rather, it says that the additional costs that flow from an indulgence being granted to the applicants should be borne by the applicants in any event. So when Jordan CJ in Ex parte McCay described the desire of two applicants, making the same application against the defendant, to be separately represented by counsel of their own choice as an indulgence, his Honour was not holding that their separate representation was an abuse of process. Rather, it was, to adopt my language in my earlier reasons, their presumptive entitlement. Moreover, the presumptive entitlement to bring separate proceedings and have separate representation is not an absolute and unfettered right. Indeed, but for the fact that in both the Basil proceeding and the McKay proceeding more than 1,000 group members had committed themselves in each proceeding to litigation funding agreements and retainer agreements with their preferred funders and solicitors, I would have permanently stayed one of the proceedings. Accordingly, any presumptive entitlement is not an absolute right and may be overridden. I reject the applicants’ submission concerning Bellamy’s having committed “the indulgence” fallacy.

85    Third, the applicants have contended that Bellamy’s has committed the “no duplication” fallacy by asserting that the interests of justice require that Bellamy’s not be exposed to any costs which would not be incurred if there was only one proceeding with one set of lawyers. But the applicants contend that this cannot be so. They say that the outcome of my judgment dictates that Bellamy’s is exposed to two proceedings, with the caveat that I have advertised my intention to monitor and if necessary supervise the question of unnecessary duplication and excessive charges in the event that the applicants fail to implement the relevant cooperation protocol. But although my judgment dictates that Bellamy’s is exposed to two proceedings, it does not dictate that it must be exposed to all the costs of those two separate proceedings. Indeed, the costs limitation order Bellamy’s seeks in order 1(a) was expressly contemplated by me as a possible incident of my decision allowing both proceedings to go ahead. I reject the applicants’ “no duplication” fallacy.

86    Fourth, the applicants say that Bellamy’s has committed the “impediment to settlement” fallacy by suggesting that the fact that it is exposed to the risk of ‘duplicated costs’ will have a chilling effect on settlement prospects. But the applicants say that even assuming that the additional costs involved in the two proceedings is $1.5 million as Bellamy’s asserts, the suggestion by Bellamy’s that additional costs of this type will represent an impediment to the settlement of claims one or two orders of magnitude greater is fallacious.

87    But Bellamy’s says that this so-called fallacy is merely asserted without any reasoning to support it. Further, it says that even if I concluded that duplicated costs might, as distinct from will, present an impediment to settlement, that would be sufficient to justify making the orders sought by Bellamy’s now. It is said that such an approach is consistent with the overarching purpose set out in s 37M.

88    Now I do not think that Bellamy’s has committed any fallacy in this respect but I do consider that its point is over-stated. Moreover, it does not persuade me to make the orders sought. I will return to this question later.

89    Fifth, the applicants submit that Bellamy’s has committed “the interests of the unfunded group members” fallacy. The applicants contend that Bellamy’s propounds another fallacy concerning what it asserts are the interests of the unfunded McKay group members. Bellamy’s asserts that it is unfair that unfunded McKay group members should suffer because of the indulgence afforded to the applicant and the funded group members. The assertion is that unfunded McKay group members will suffer a greater reduction from any settlement by reason of the additional costs referable to the fact that two proceedings with separate representation have been pursued. But the applicants say that this is not so. The McKay group members are only affected by any recovery of costs referable to the McKay proceeding. They are not subsidising the running of the Basil proceeding. Further, certain of the costs common to both proceedings are now being shared across the two proceedings.

90    But Bellamy’s says that this argument ignores the commercial reality that any settlement agreed to by Bellamy’s will most likely be in respect of both proceedings. And if there is a settlement, then absent the orders now sought by Bellamy’s, any amount Bellamy’s agrees to pay by way of settlement will inevitably be reduced by the duplicated costs of the two applicants, to the detriment of all group members, including the unfunded group members in the McKay proceeding.

91    Further, it is said that even if there was a separate settlement of the McKay proceeding, the applicants’ argument assumes that if the order sought by Bellamy’s in order 1(a) is made, the result would be that the McKay applicant’s recoverable costs would not be affected, but the Basil applicant’s recoverable costs would (exclusively) be reduced, so that as regards the unfunded group members in the McKay proceeding, there would be no greater reduction of any settlement sum without Bellamy’s proposed order than with it. But that assumption is invalid. If the order sought in order 1(a) is made, the result would be that both the McKay applicant’s recoverable costs and the Basil applicant’s recoverable costs would be reduced such that in total they represented the costs of one law firm pursuing the claims in one proceeding, rather than two firms in two separate proceedings. Accordingly, if that order is made, and there is a settlement of the McKay proceeding, the unfunded group members in the McKay proceeding will receive a greater share of the settlement sum than they would receive if that order is not made. It follows that the unfunded group members in the McKay proceeding are adversely affected by the duplicated costs arising by the separate representation of the McKay applicant and the Basil applicant.

92    I reject this last so-called fallacy asserted by the applicants. Bellamy’s submissions on this aspect have some force and I will return to this later.

ORDER 1(A)

(a)    Bellamy’s arguments

93    It is said that order 1(a) should be made because it is clear that Bellamy’s costs exposure is greater than it would have been if Bellamy’s was defending only one proceeding conducted by one law firm. It is said that the following matters are relevant.

94    First, order 1(a) will only cause detriment to the applicants if the conduct of the two proceedings has resulted in and will in the future result in duplication of costs. In those circumstances, the order should be made. Further, it is said that past duplication of costs is relevant to the question whether order 1(a) should be made because if the applicants’ actions are ultimately successful, Bellamy’s is exposed to an adverse costs order which will include those past duplicated costs. It is said that the evidence before me showing past duplicated costs provides a proper basis for me to infer that there will likely be future duplicated costs in addition to other evidence before me which demonstrates that there will be such costs.

95    Second, it is said, correctly, that but for the fact that in each of the Basil proceeding and the McKay proceeding more than 1,000 group members had committed themselves to litigation funding agreements and retainer agreements with their respective litigation funders and solicitors, I would have permanently stayed one of the proceedings. Had there been a lesser number of funded group members in one or other of the proceedings such that it would have been uneconomic for that proceeding to continue as a closed class action, that proceeding would likely have been permanently stayed and would not have been re-commenced as a closed class action. In such circumstances, it is said that Bellamy’s would now be facing only one class action and be exposed only to one set of legal costs if an adverse costs order were made against it. Now whilst in the circumstances of the present case the applicants and funded group members were held by me to be entitled to their choice of solicitor and funder, it is said that such election should not come at the expense of Bellamy’s. The applicants and each funded group member have a common interest. Accordingly, insofar as Bellamy’s exposure to costs is concerned, it is said that no justification exists for the applicants and funded group members to engage separate solicitors. Accordingly, it is said that unless the orders sought are made in each proceeding, Bellamy’s will be unfairly exposed to the additional costs occasioned by this indulgence, and those additional costs will also be incurred to the detriment of all unfunded group members in the McKay proceeding.

96    Third, Bellamy’s has made reference to the evidence concerning duplicated costs.

97    It says that the McKay applicant has adduced in evidence two litigation budgets. The first was filed on 12 May 2017 (2017 budget) and estimated the costs of the McKay proceeding on the basis that one law firm prosecuted one class action against Bellamy’s. The second was filed on 12 February 2018 (2018 budget). The 2018 budget was prepared on the basis that the Basil proceeding and the McKay proceeding would be heard together and conducted by two law firms in accordance with the case management orders made by me on 13 September 2017. The disbursements estimated in each budget are substantially the same. But Slater & Gordon’s total solicitor costs in the 2018 budget ($2,285,676.95) are only approximately 24% lower than Slater & Gordon’s total solicitor costs in the 2017 budget ($3,017,980), notwithstanding that that work is now being shared by Slater & Gordon and Maurice Blackburn. Bellamy’s says that it appears that the total solicitor costs to which Bellamy’s is now exposed, being the total costs of Slater & Gordon and Maurice Blackburn, is $4,571,354 which is about $1.5 million more than if Bellamy’s had been exposed to only one proceeding. Put differently, Bellamy’s says that on the McKay applicant’s own evidence, Bellamy’s is exposed to a significantly larger adverse costs order by reason of there being two proceedings with two law firms acting as compared to one proceeding with one law firm acting.

98    Further, it is said that duplication of costs is established not only by a comparison of the 2017 and 2018 budgets and the unchallenged evidence of Mr Phi, but also by the cooperation protocol between the applicants, their lawyers and their funders. Under that protocol:

(a)    the goal is to reduce any duplication, which of course implicitly concedes that there will be duplication;

(b)    representatives of both Maurice Blackburn and Slater & Gordon must attend all interviews with potential expert witnesses, in addition to some other conferences, which involves costs that would not be incurred if Bellamy’s was facing only one proceeding being conducted by one law firm;

(c)    Maurice Blackburn and Slater & Gordon must, in respect of various matters, confer with each other, cooperate with each other, consult with each other, exercise best endeavours to agree with each other, give notifications to each other, coordinate tasks with each other, and negotiate as one with Bellamy’s, which involves work that would not be required if Bellamy’s was facing only one proceeding being conducted by one law firm;

(d)    Maurice Blackburn must have a significant degree of oversight of work performed by Slater & Gordon and Slater & Gordon must have a significant degree of oversight of work performed by Maurice Blackburn, which involves work that would not be required if Bellamy’s was facing only one proceeding being conducted by one law firm;

(e)    Maurice Blackburn and Slater & Gordon must review each other’s professional fees, which involves work that would not be required if Bellamy’s was facing only one proceeding being conducted by one law firm; and

(f)    the applicants have jointly retained multiple counsel, such that, according to Bellamy’s, each of those counsel and other counsel retained by the applicants must maintain ongoing familiarity with the proceedings thereby increasing the cost of the proceedings.

99    Bellamy’s says that this is unfair to it. Further, it says that it is also not in the interests of group members and particularly not in the interest of unfunded group members in the McKay proceeding. If the McKay proceeding and the Basil proceeding settle, and orders are not made as sought in the interlocutory applications, this will likely mean that additional costs will need to be recovered from the settlement thus likely reducing the amount available to all group members. Further, Bellamy’s says that although it might be said that insofar as funded group members in both proceedings are concerned it is not ‘unfair’ that they suffer this reduction as it is a consequence of their own choice to retain separate lawyers, such a contention cannot be maintained in respect of the unfunded group members in the McKay proceeding. They have made no such choice. It is said that they should not suffer because of an indulgence afforded to the applicants and the funded group members in both proceedings.

100    Fourth, Bellamy’s contends that the order sought is consistent with and is framed using the language of my observations in my earlier judgment at [118]. On this point the applicants submit that Bellamy’s is seeking to re-agitate matters considered in my principal judgment, but I disagree. The question in the earlier judgment was whether inter-alia duplication of costs justified a stay of one or other of the two competing open class actions. But the question now before me is who should bear the burden of the additional costs that flow from the applicants, who are separately represented, prosecuting two identical proceedings against Bellamy’s. In my earlier judgment, I held that each applicant was entitled to maintain a separate proceeding against Bellamy’s with the class in the Basil proceeding ordered to be closed. But in so doing, I did not answer the separate question of costs. So much was made clear by what I said (at [118]):

Indeed, I expressed my view to counsel at the hearing of the stay applications that in relation to any potential exposure to an adverse costs order, I may consider making orders to achieve the result that the respondent be only exposed to one set of legal costs vis-à-vis the applicants as if there had been only one set of proceedings.

101    Fifth, Bellamy’s says that more generally if parties with a common interest seek the indulgence of their own separate representation, it is both necessary and appropriate that they bear the costs of that indulgence. That is especially so where those costs will inevitably represent an impediment to settlement, particularly where settlement is the mechanism by which class actions are generally resolved. It is said that the evidence of the McKay applicant referred to earlier shows that in the present case the cost of the indulgence is around $1.5 million.

(b)    Analysis

102    Before I analyse the main arguments let me deal with some introductory matters.

103    Let me say at the outset that when I refused Bellamy’s stay application(s), I did not impose as a precondition of the two proceedings being permitted to continue that the applicants conduct the proceedings in a manner guaranteed to produce the outcome that Bellamy’s would be exposed to only one set of costs as if there had been only one proceeding. Rather, I contemplated that if the respective applicants and their legal teams did not co-operate in a manner designed to reduce duplicated work, it might be necessary to adopt additional measures designed to control costs. I indicated an intention to consider Bellamy’s exposure to adverse costs if it were demonstrated that the applicants had failed to implement cooperation measures designed to reduce that exposure. So what I had in mind was that additional costs control mechanisms might be necessary if there was shown to be unnecessary duplicated costs by reason of the absence of cooperation between both applicants and between their advisers to achieve the objectives of minimising duplicated work and costs.

104    Now there is no evidence before me that causes me concern in this regard. There has for some time been a cooperation protocol that encapsulates my proposed directions in order to reduce the overall costs. And the applicants’ lawyers have successfully cooperated in accordance with this protocol and my directions. Moreover, there is no reason to conclude that this will not continue.

105    Indeed the evidence before me concerning the past conduct of both proceedings demonstrates that the cooperation protocol is operating as I intended and is meeting my objectives. There has not been unnecessary duplication of work between the applicants’ legal teams. It is evident from the affidavits of Mr Chuk and Mr Slade that the respective applicants and their legal teams have co-operated in the conduct of the two proceedings since my judgment on the stay question. This has not only included the adoption of a largely unified approach to the two proceedings as between the applicants and Bellamy’s that has minimised the expense occasioned to Bellamy’s by the existence of the two proceedings, but it has also involved the adoption of measures calculated to minimise the internal duplication of work thereby minimising the expense occasioned to group members by the existence of the two proceedings. Under the cooperation protocol, tasks arising from issues common to the proceedings are divided between the firms, so that group members in each proceeding taken together are not exposed to the costs of each firm undertaking the same work.

106    In light of the cooperation that has occurred to date, the existence of the cooperation protocol and the contemplated next steps in the proceedings, I am not able to conclude that there is likely to be any unnecessary duplicative work and expense in the future. The experience of the practitioners involved and their approach to cooperation to date gives me confidence that there will not be unnecessary duplicative work in the future.

107    Further, the number of matters which have needed to be attended to which have been unique to either of the two proceedings has declined since the completion of the class closure process. As a consequence, the requirement to brief separate counsel has been reducing over time, and will reduce still further.

108    Now Bellamy’s interlocutory applications appear to have been initially premised on a perception that more counsel than was reasonable had been engaged on behalf of the applicants to undertake various tasks. But it now appears that all but two of its initial complaints of this type have fallen away. Of the circumstances that were initially identified, the two upon which Bellamy’s appears to maintain its reliance are the apparent involvement of five counsel on two occasions in the preparation of various amended versions of the statements of claim. But as Mr Chuk has explained, Bellamy’s criticisms have proceeded on a misapprehension.

109    Further, order 1(a) may be inappropriate because it may deprive the applicants of costs to which there can be no proper objection. By way of example, if order 1(a) was made the applicants would not be able to recover some of their otherwise party/party costs in respect of the appearance at the case management hearing on 8 December 2017 of their respective counsel and the attendance of their respective solicitors, notwithstanding the fact that there remained applicant-specific issues including the content of the opt-out notice in the Basil proceeding, and the fact that the orders made on that date required various tasks to be undertaken that were unique to each applicant and class. Further, there were a number of applicant specific tasks which arose out of the orders made on 8 December 2017 including discovery, provision of full particulars of the applicants’ cases on causation, loss and damage and the distribution of opt-out notices, which required each firm and funder to manage the respective group members’ responses to the relevant notice(s) including the collection of trade data. Order 1(a), if made, would have the effect that the applicants would not be entitled to recover the costs of those exercises undertaken on behalf of both applicants and the group members each of them represents. And this is despite the fact that such work was not in one sense duplicative, and was required to be undertaken in order to properly advance and represent the interests of the McKay group members and the Basil group members.

110    Further and more generally, it may be accepted that the relevant duplicated costs are principally the additional costs incurred by reason of having two sets of lawyers, rather than one set of lawyers, dealing with the issues common to both proceedings and the additional costs incurred by reason of the need for each of the McKay applicant’s lawyers and the Basil applicant’s lawyers to deal with matters unique to each proceeding. Both of these categories of additional costs are duplicated costs in the sense that they are costs that would not be incurred if there was only one proceeding with one set of lawyers acting for one applicant. And moreover, even if there were unique costs, there would be only one set of costs and not two sets of costs if there was only one proceeding.

111    In this regard much of the evidence led by the applicants is directed to establishing that the additional costs in these two categories have been and will continue to be reasonably incurred, in the context of and in light of there being two proceedings. But although these additional costs may have been and may be reasonably incurred from the standpoint of the two applicants and the funded group members in both proceedings who have retained Slater & Gordon or Maurice Blackburn to act on their behalf, Bellamy’s says that the question for the purposes of the present applications is not whether these additional costs have been and will continue to be reasonably incurred from the standpoint of the applicants, the funded group members, Slater & Gordon and Maurice Blackburn. Rather, it says that the question is whether it is reasonable for Bellamy’s and the unfunded group members in the McKay proceeding to be exposed to the burden of these additional costs, rather than these additional costs being borne by the applicants and the funded group members or their respective litigation funders.

112    Now I accept the force of what Bellamy’s puts to some extent, particularly when considered solely from its perspective. But as I have said, in the present context and where I have determined to permit both actions to go forward, I prefer the English approach. In that circumstance, I am not satisfied that it has been demonstrated that there has been or will be any unnecessary or unreasonably duplicated work or costs performed by the applicants when taken together. Moreover given that I have allowed both cases to go forward with separate representation where justified on specific separate questions, it is not necessary to now demonstrate any actual or potential conflict of interest for the relevant costs recovery. And in that context, rules developed more generally against double representation are not of great assistance.

113    But there is another problem with Bellamy’s position, and it concerns the matter of timing.

114    Bellamy’s says that costs capping orders should be made now. It says that costs capping orders are generally made at an early stage of proceedings. It says that the benefit of such orders being made at this stage of the proceedings is that it will facilitate the disciplined and cost-effective conduct of the proceedings and focus the parties on the real issues in dispute and facilitate settlement. It says that large claims for legal costs by class action applicants are significant impediments to settlement and therefore not in the interests of group members, because applicants’ solicitors usually require payment of their legal costs in full out of any proposed settlement sum before any portion of that proposed settlement sum is allocated to group members’ claims.

115    But I do not see the pressing need to now make the orders sought by Bellamy’s.

116    First, and as I have already set out, I have made directions designed to reduce any duplication of work, inefficiencies from two proceedings and any costs flowing therefrom. Of course what I have put in place is not a perfect solution, but it is proportionate and has some advantages in achieving the said reductions. Further, I can make orders later designed to further reduce such problems if the need arises.

117    Second, let me deal with Bellamy’s settlement point. Bellamy’s says that it is not in the interests of justice to defer making costs capping orders and to deal with the matter retrospectively as this would result in uncertainty for all parties going forward and be inimical to and may frustrate any possible future negotiated settlement. It is said that the parties need to know now whether and which of the orders sought by Bellamy’s will be made. It is said that if the matter is left undetermined, any further negotiations between the parties with a view to settlement will be undertaken without the benefit of them having clarity on the important question of the level of costs the applicants will be entitled to if they are ultimately successful at trial. It is asserted that this would be a significant impediment to any further settlement negotiations.

118    Now if order 1(a) was to be made it would only bite in relation to adverse costs orders. In other words it could not attach on the occasion of any settlement. In that scenario there would by definition be no adverse costs order, or at most only one made by consent anyway which would not be material to the present debate. But Bellamy’s responded that order 1(a) would have utility even in the context of a settlement. It submitted that if order 1(a) was made, then on an approval application under s 33V the Court in assessing the reasonableness of the amount of the costs to be paid out of the settlement would have regard to that order. Frankly, I found Bellamy’s settlement arguments to be a stretch in terms of the utility of making order 1(a) as being advantageous to a settlement negotiation. Moreover, the sums likely to be discussed at a mediation for an overall settlement are likely to be one or two orders of magnitude above the delta costs amount calculated from the difference in the applicants’ total costs with and without order 1(a).

119    Third, Bellamy’s says that making order 1(a) now rather than deferring the question is consistent with the authorities on costs capping orders of the type sought in order 1(b) or order 1(c). It is said that the same considerations militate in favour of order 1(a) being made promptly, so that the parties know sooner rather than later where they stand on these costs issues, and can ensure that their ongoing conduct and management of the proceedings is informed by the effect of that order. But in my view the directions that I have already made are adequate and designed to reduce the duplication and inefficiency difficulties. Moreover, I can further modify those directions and tighten them if necessary.

120    Fourth, the applicants in each proceeding, the funded and unfunded group members in both proceedings, and of course Bellamy’s all enjoy the benefit and protection of the Court’s supervisory role in respect of costs. Now this supervisory role is made more explicit in relation to group members under Part IVA of the Act. But Bellamy’s is also a beneficiary of the necessary role that the Court can play in the overall supervision and regulation of the question of costs. Bellamy’s has benefited from, and will continue to benefit from, the directions made by me regarding the applicants’ cooperation in the conduct of the proceedings. To make the orders in the prospective and blunt form now sought by Bellamy’s would be to unnecessarily fetter the informed exercise of discretion which is properly to be undertaken by me in relation to costs, either on the occasion of an application for approval of a settlement pursuant to s 33V, or on a taxation of costs after trial. It is in that context that any unnecessary duplicated work or any excessive costs charged by any party including Bellamy’s can most appropriately be assessed.

121    In summary I consider that any further costs liability question is best dealt with retrospectively rather than prospectively.

122    Let me make three other points.

123    First, it should be noted that two sets of legal representatives with different approaches may in some cases facilitate an increased settlement sum over and above what one set of legal representatives might achieve, and well over the additional costs involved. Such an outcome would be advantageous to the applicants and group members. No doubt this is speculation to some extent, but such a scenario (‘two heads better than one’) is not unrealistic. Bellamy’s professed altruism on behalf of group members particularly unfunded McKay group members did not take this into consideration, unsurprisingly, when considering what was in the best interests of group members. Now I raise this only to demonstrate that Bellamy’s professed concern for group members was imperfect to say the least. It put more attractive arguments when focused on its own position and its own self-interest.

124    Second, the applicants contend that order 1(a) risks unfairly prejudicing the applicants because no similar restriction is imposed with respect to the costs that Bellamy’s can recover. But Bellamy’s says that it has only retained one law firm to represent it in this dispute, and so if Bellamy’s is successful at trial, the applicants will only be exposed to an adverse costs order in respect of the costs of one legal team, not two. Of course, what Bellamy’s says is true in one sense. But the one legal team could duplicate some work defending both proceedings. To deal with this possibility (if necessary) I consider that if I had otherwise been persuaded to make order 1(a), I would have made it bilateral. I note that orders 1(b) and (c) are bilateral.

125    Third and for completeness, in terms of the timing of order 1(a) if I had been otherwise persuaded to make it, it seems to me that it would not have been appropriate to make it operate from any earlier than the time I resolved the competition between the two proceedings at the time I delivered my judgment on the stay applications. At that time I can be certain that there was no potential for conflict between the applicants, between their lawyers, and between the litigation funders. Now Bellamy’s says that the only relevant conflict to consider is that between the applicants, and moreover that there was no such conflict at the time of filing the second proceeding. But I am not so convinced that only the conflict, if any, between the applicants needs to be considered. Indeed, each applicant represents its own group members and would be concerned about the legal resources and funding resources for their own proceeding. The applicant in each case had an interest in maintaining its proceeding as the open class action. A broader lens needs to be considered. In any event, even if the narrower lens is looked at, I am not certain that I could say that there was no possible potential for conflict before I ruled on the stay application(s). Given that I am not making order 1(a) I do not need to discuss this further.

126    For all the above reasons I refuse to make order 1(a).

ORDERS 1(B) AND 1(C)

(a)    Bellamy’s arguments

127    In addition to order 1(a), Bellamy’s contends that the costs capping orders sought in order 1(b) or order 1(c) should be made. It says there is probative evidence before me of what Bellamy’s costs exposure would have been in the hypothetical situation that it had been defending one proceeding conducted by one law firm. It says that this evidence provides a proper basis to make a bidirectional costs capping order. Let me elaborate on its arguments.

128    First, it says that its arguments advanced concerning order 1(a) strongly militate in favour of making cost capping orders in both proceedings.

129    Second, it says that the cost capping orders sought in order 1(b), alternatively order 1(c), fix a bi-directional costs cap by reference to specific sums that are based on evidence filed by the McKay applicant. The McKay applicant has previously filed evidence and made submissions as to its budgeted costs, assuming that only one proceeding was conducted by one law firm against Bellamy’s (i.e. the 2017 budget). According to Bellamy’s, the McKay applicant did so to obtain a benefit on the stay applications made by Bellamy’s. But having done so, Bellamy’s contends that it is not now open to the McKay applicant on the present costs capping applications to adopt a different position and to say that its budgeted costs on the now hypothetical scenario of Bellamy’s defending one proceeding conducted by one law firm would have been materially higher than the 2017 budget. Moreover, so Bellamy’s contends, the affidavit of Mr Chuk dated 5 October 2018 filed on behalf of the McKay applicant does not seek to say that there are changed circumstances unforeseen at the time the 2017 budget was prepared which now warrant any uplift in that budget.

130    Bellamy’s says that the uncontested evidence establishes that because Bellamy’s is facing two identical proceedings conducted by two law firms, it will be exposed to a much larger adverse costs order than if Bellamy’s was facing one proceeding being conducted by one law firm making those same claims. It says that the uncontested evidence of the McKay applicant quantifies the costs to which Bellamy’s would have been exposed in the hypothetical situation that it had been defending one proceeding conducted by one law firm. It says that the McKay applicant’s evidence on that issue is probative and also represents the best evidence of the likely costs to which Bellamy’s would have been exposed in the hypothetical situation that it had been defending one proceeding conducted by one law firm. And it says that as a matter of principle, the McKay applicant cannot now adopt a different position as to its budgeted costs in that hypothetical situation. It cannot approbate and reprobate in the context of this litigation. Therefore it says that I should rely on the McKay applicant’s evidence to fix the quantum of the costs cap.

131    Now I accept that a party cannot both approbate and reprobate. Such a “principle” originally arose in the context of wills and estates. Equity fastened “upon the conscience of a party taking under a deed or will” and required that the party “choose between taking the benefit and accepting the burden of any stipulated conditions or rejecting the benefit” (Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at [57] per Gummow, Hayne and Kiefel JJ). Indeed, the formulation of the “principle” that you cannot both approbate and reprobate is synonymous with the doctrine of equitable election. I would note that equitable election differs from the common law principle of election, the latter of which puts a person to an election between inconsistent rights. Contrastingly, equitable election raises the question of intention based on knowledge. Now the “principle” that one cannot both approbate and reprobate has extended beyond wills and has been applied in other contexts, including the conduct of litigation (see In Express Newspapers plc v News (UK) Ltd [1990] 1 WLR 1320 at 1329 per Browne-Wilkinson VC). But in any event I do not consider that the “principle” has application in the present context as I will explain in a moment.

132    Third, it is said that there would be no utility in my now ascertaining the applicants’ likely budget for the conduct of the proceedings, as such a budget would necessarily be based on two law firms conducting two proceedings against Bellamy’s. Now Bellamy’s accepts that such a budget would be relevant on the question of duplication, but it says that such a budget would have little relevance on the question of what Bellamy’s costs exposure would have been in the hypothetical situation that it was defending one proceeding conducted by one law firm. This is the relevant question that Bellamy’s says that I must consider when fixing a costs cap.

133    Fourth, Bellamy’s brazenly contends that there is something at least analogous to a public interest element in its application insofar as the position of unfunded group members is concerned. It is said that the Court has a supervisory and protective role towards group members and should be concerned to ensure that the interests of those who are absent, but represented, are not prejudiced by the conduct of the litigation on their behalf. In this regard it says that unfunded group members in the McKay proceeding have not sought the indulgence of a preferred law firm and funder. It says that there is no reason why any settlement sum they receive should be reduced by reason of the additional costs associated with two proceedings, conducted by two law firms, being prosecuted against Bellamy’s in circumstances where all group members and both applicants have a common interest.

134    Fifth, Bellamy’s says that because the costs cap sought by Bellamy’s is bi-directional, there is no risk of any party conducting litigation in a manner that enables it to take any tactical advantage of the costs cap.

135    Sixth, Bellamy’s says that the orders sought by it can be made without reference to Bellamy’s costs budget. If Bellamy’s budget is more than the costs cap that is ordered, then Bellamy’s will suffer detriment. But if Bellamy’s budget is less than the costs cap that is ordered, then Bellamy’s does not seek a lower costs cap as that would prejudice the applicants. Importantly, so it says, costs capping orders must apply equally to the parties such that under r 40.51 a different dollar cap is not applied to each party.

136    Seventh, notwithstanding that costs capping applications are generally forward looking, Bellamy’s contends that past duplication is also relevant and that this is especially so in this case. When these applications were first raised with me, I noted that there ought to be no prejudice to Bellamy’s by reason of it making its costs capping applications at a later time. Accordingly, it says that the orders now sought should address both past and future duplication of costs so as to avoid any prejudice otherwise flowing from the delay in making the applications.

(b)    Analysis

137    Generally speaking I reject Bellamy’s submissions.

138    First, it may be doubted that order 1(b) or order 1(c) adds substantially to order 1(a). On Bellamy’s arguments sufficient protection would be achieved by merely making order 1(a) rather than additionally orders 1(b) or 1(c) based upon preliminary and unreliable budgets. But as I have said, not even order 1(a) is necessary at this stage.

139    Second, Bellamy’s has relied on a comparison of the budget prepared in the McKay proceeding on or around 12 May 2017 with one prepared some nine months later on 12 February 2018, which it says shows that it is exposed to $1.5 million more in solicitor costs than if it had been exposed to only one proceeding. That figure is the result of an analysis undertaken by Ms Beverley Newbold, solicitor for Bellamy’s. She has fixed upon what she says represents “the likely approximate total recoverable taxed costs (as between party and party) if there was one proceeding brought against Bellamy’s”. But I reject Bellamy’s submissions which would require me to impose costs caps on unsatisfactory and out of date estimates.

140    As I have indicated to the parties, it is only in the circumstance where I have determined to contemplate the imposition of any species of costs cap that the parties will then be invited or directed to undertake the time consuming and expensive task of preparing up to date litigation budgets with respect to the proceedings. Moreover, it would be expected that in such a phase, the parties would provide detailed budgets and expert cost consultant reports to assist my assessment.

141    Third, the applicants have not “approbated and reprobated” with respect to the 2017 and 2018 budgets previously submitted by them. Rather, they have sought only to explain the context including the foundation upon which those budgets were prepared. In my view those budgets were opinions and forecasts then diligently and honestly prepared and given in the light of the circumstances then pertaining.

142    The 2017 and 2018 budgets were prepared nine months apart. And obviously more was known about the proceedings by the time the 2018 budget was prepared. For example by that time there had been developments in relation to the pleadings. The applicants had on 13 October 2017 filed amended statements of claim. On 1 December 2017, the respondent filed an application to strike out the amended statements of claim in whole or in part. The applicants filed a further amended statement of claim on 18 December 2017. Further, there had also been developments in relation to matters including the opt out regime and registration for class closure. In addition, by the time the 2018 budget was prepared, pursuant to the cooperation protocol and from the date of the common fund order the allocation of work as between the applicants’ legal representatives commenced to be split on the basis that the percentage allocation would reflect the percentage of aggregate assessed losses of group members in each proceeding. In those circumstances, Bellamy’s assumption that the McKay parties’ budget ought to have fallen by something in the order of 50% after my primary judgment is unsound. Moreover, consistently with the cooperation protocol, Maurice Blackburn has had significantly reduced involvement in the conduct of legal work in relation to common issues. Of course the 2017 and 2018 budgets are not irrelevant. But as I have said, if I were otherwise minded to give consideration to litigation budgets at all in the context of costs supervision, the parties including Bellamy’s would in that event and at that time be required to prepare current litigation budgets.

143    Fourth, there is another problem with Bellamy’s approach. Let it be assumed that I should now take some additional measure to supervise or manage costs. It seems to me that for any sensible method of costs supervision to be adopted, it ought proceed on the basis that it is relevant to have regard both to what the applicants’ lawyers predict will happen in the litigation and to what Bellamy’s lawyers predict will happen in the litigation, as well as what is in fact occurring in the progress of the litigation. Indeed I reject any approach which did not require Bellamy’s to put forward its own budget estimates for my consideration on the quantum of any costs gap.

144    Now Bellamy’s has strenuously resisted any suggestion that I or the applicants should be privy to its litigation budget. But the refusal by Bellamy’s to permit perusal of its litigation budget potentially suggests that Bellamy’s invites a situation in which if proposed order 1(b) or order 1(c) are made it may enjoy a tactical advantage. It will have the advantage of the applicants revealing their hand but not its own. Further, it may be in a better position to wear any burden of the additional costs incurred over and above the cap, as compared with the applicants’ appetite and their funders’ appetite to wear such a burden. I need not speculate further as I do not propose to make the orders sought.

145    Fifth, a budget costs regime is inapt to these proceedings. The litigants are not persons of ordinary means and these proceedings could not be described as commercial litigation at the lower end of the scale in terms of either the complexity of the dispute, its size or the amount in issue.

146    Sixth, the nature of these proceedings and the relief sought by the applicants takes the proceedings outside the usual types of cases in which orders under r 40.51 have been made.

147    Seventh and relatedly, no public interest point arises of the type with which applications under r 40.51 are sometimes concerned. Now Bellamy’s submissions appear to suggest that something analogous with a public interest element arises with respect to the interests of unfunded group members in the McKay proceeding. But the position of unfunded group members falls to be governed by my supervision, including in the context of a common fund order and in the future with respect to any application for approval of a settlement under s 33V.

148    Eighth, unlike some other cases there is no question here of any of the applicants or Bellamy’s being forced to abandon the proceedings or its defence if a cost capping order were not to be made.

149    In summary I am not presently satisfied that any costs capping order should be made, and certainly not on the limited material before me. Moreover, given the cooperation protocol in place, I would prefer to deal with these further questions retrospectively.

CONCLUSION

150    For the foregoing reasons I will dismiss each of Bellamy’s interlocutory applications.

151    I will reserve the question of costs for the moment, although my preliminary view is that it is appropriate to treat the applicants’ costs of these applications as their costs in the cause, but to otherwise make no order for costs. I will hear further from the parties on this question.

Associate:

Dated:    25 February 2019