Have GCO, won't travel: Group costs orders in class actions

Since our last update on this topic,^[1] the High Court has held that a group costs order (GCO) made by the Supreme Court of Victoria in a group proceeding would have no force if the proceeding were transferred to the Supreme Court of NSW. The fact of the GCO, and the considerable risk that the proceeding would not continue in NSW without the benefit of it, were factors weighing decisively in favour of the Court’s decision that the proceeding not be transferred.

Key takeaways

• On 12 March 2025, the High Court delivered its decision in Bogan v Estate of Peter John Smedley (Deceased) [2025] HCA 7 (Bogan). At issue was (i) whether a GCO made by the Supreme Court of Victoria in a group proceeding could be enforced if the proceeding were transferred to the Supreme Court of NSW, (ii) whether this was relevant to the Court’s consideration of whether the proceeding should be transferred, and (iii) whether the proceeding should be transferred.
• The majority held that the Victorian GCO would not travel with the proceeding if it were transferred, and that this was relevant in considering whether the proceeding should be transferred. Noting it was common ground between the parties that the NSW Supreme Court does not have power to make a GCO, the High Court decided that the existence of the Victorian GCO was a factor weighing decisively against the transfer as there was a considerable risk that the proceeding would not continue because it could not otherwise be viably funded.
• The decision reinforces the attractiveness of the Victorian GCO regime for plaintiff law firms, particularly for matters where alternative funding arrangements are not viable or available.
• We will be watching this space closely as the High Court’s pending decision in Kain v R&B Investments Pty Ltd Ors (S146/20240) (R&B Investments) is expected to provide further guidance in relation to the funding of class actions, most notably in relation to whether the Federal Court has the power to issue a solicitors’ common fund order.

GCOs

A GCO is an order that the legal costs payable to a law firm acting for a plaintiff in a group proceeding be calculated as a percentage of any award or settlement obtained in the proceeding. The GCO regime thereby allows plaintiff law firms to participate in the potential upside of a successful action. In exchange, the regime requires the plaintiff law firm to assume the risk of an adverse costs order and any order for security for costs.

Section 33ZDA of the Supreme Court Act 1986 (Vic), which came into force in July 2020, vests in the Supreme Court of Victoria the power to grant GCOs in group proceedings. The power to make such an order is therefore distinct from, and effectively operates as an exception to, the prohibition on contingency fee arrangements contained in the Legal Profession Uniform Law (Vic).^[2]

The Supreme Court of Victoria remains the only jurisdiction where GCOs are expressly permitted for group proceedings. Since the introduction of the Victorian GCO regime in 2020, there has been a substantial increase in the number of representative proceedings filed in the Supreme Court of Victoria and a corresponding decrease in other jurisdictions. The High Court’s decision in Bogan will do nothing to slow this trend.   

The proceedings below

Anthony Bogan and Michael Walton are the representative plaintiffs to a group proceeding commenced in the Supreme Court of Victoria under Part 4A of the Supreme Court Act. The group members are shareholders in an insolvent mining company, Arrium Corporation Ltd (In Liquidation), who claim loss and damage as a result of the conduct of Arrium’s former directors, and auditor (KPMG). KPMG is named as a defendant in the proceeding.

After the plaintiffs applied for a GCO of 40% under s 33ZDA of the Supreme Court Act, KPMG applied to transfer the proceeding to the Supreme Court of NSW on the basis that it was the more appropriate forum. The plaintiffs’ application was determined first, with the Court approving the requested GCO of 40%.^[3] The Court then reserved three questions for the Victorian Court of Appeal including, if the proceeding were transferred, whether the GCO made by the Supreme Court of Victoria would remain in force and be capable of being enforced by the Supreme Court of NSW.^[4]    

In Bogan v Estate of Peter John Smedley (Deceased) [2023] VSCA 256, the Victorian Court of Appeal held that:

• if the proceeding is transferred to the Supreme Court of NSW, the GCO would not remain in force because the laws of NSW (where federal jurisdiction is being exercised^[5]) would be picked up and applied to the proceeding and s 33ZDA of the Supreme Court Act would cease to apply^[6]
• while there were factors that connected the proceeding to NSW, the Supreme Court of NSW was not the more appropriate forum because the existence of the GCO ties the proceeding to Victoria and the evidence showed that, without this funding mechanism, the proceeding would likely not continue.^[7]

On application of KPMG, the Court of Appeal ordered that the whole of the cause pending in the Court of Appeal be removed to the High Court under s 40(2) of the Judiciary Act 1903 (Cth). 

The High Court’s decision

The High Court agreed with the Court of Appeal, with the majority (Gaegler CJ, Gordon, Gleeson, Jagot and Beech-Jones JJ) holding that:

• the fact the Supreme Court of Victoria had made the GCO was relevant in exercising the discretion to transfer the proceeding to another court
• if the proceeding were transferred, the GCO would not remain in force and would not be capable of being enforced by the Supreme Court of NSW
• the proceeding should not be transferred as there is a considerable risk that it would not continue as it could not be viably funded without the GCO.^[8]

Edelman J agreed with the majority in a separate judgment. Steward J dissented, finding that, in circumstances where NSW is the more appropriate forum, the fact of the GCO is not relevant in exercising the discretion to transfer the proceeding. In doing so, his Honour noted that ‘[l]urking in the background of this matter… is that it is well recognised that forum shopping is “an evil”’^[9] and that ‘the law has long eschewed contingency fee arrangements’ because of the clear conflict of interest that such arrangements pose for instructing solicitors.

The Court’s power to transfer proceedings: a key distinction

Importantly, KPMG’s attempt to transfer Bogan to the NSW Supreme Court relied on s 1337H(2) of the Corporations Act 2001 (Cth) and not the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) (Cross-vesting Act).^[10] As the majority pointed out:

• s 5(2)(b)(iii) of the Cross-vesting Act and its equivalent state provisions are designed to guarantee that ‘if a proceeding is instituted in a court that is not the appropriate court… the proceeding will be transferred to the appropriate court’^[11] – its operation requires the Supreme Court in which the proceeding is pending ‘to ensure’  that the proceeding is ‘heard in the forum dictated by the interests of justice’^[12] (our emphasis)
• in contrast, s 1337H(2) of the Corporations Act is ‘both more narrowly focused and more flexible’. It provides that, if it appears to the court in which the proceeding is pending that, ‘having regard to the interests of justice, it is more appropriate for… the relevant proceeding… to be determined by another court’ then ‘the transferor court may transfer the relevant proceeding or application to that other court’. It therefore confers a discretion (connoted by the expression ‘may transfer’ in contrast to the expression ‘shall transfer’ in s 5(2)(b)(iii) of the Cross-vesting Act).

Leaving aside the existence of the GCO, the majority evaluated the interests of justice (informed by factors that connected the proceeding to NSW) as neutral or equivocal, but said the likelihood that the transfer would stultify or frustrate the proceeding (because the GCO would have no force) weighed decisively against the transfer.

The High Court appears to have left open the question of whether, if an application to transfer from the Victorian Supreme Court was based on s 5(2)(b)(iii) of the Cross-vesting Act, the existence of a GCO (or the entitlement to apply for one) would be relevant to a consideration of whether another Supreme Court was the more appropriate forum. As such, we may see future attempts to transfer group proceedings out of Victoria if (i) there is little that connects them to Victoria, and (ii) if
s 5(2)(b)(iii) of the Cross-vesting Act (or a state equivalent) applies to the application (for example in claims based on common law torts).

Implications

The High Court’s decision in Bogan clarifies the circumstances in which plaintiffs may be able to resist a transfer application. The Court recognised that both the grant of a GCO, and evidence that the proceeding would be unlikely to continue in an alternative jurisdiction, are relevant factors in exercising the discretionary transfer power under the Corporations Act. A proceeding may be unlikely to continue in an alternative jurisdiction because alternative funding arrangements (such as third-party litigation funding or no-win no-fee) are not viable or available to the plaintiff.

The High Court’s decision in Bogan must be considered in the context of class action funding more broadly. Currently, the Victorian GCO regime is attractive to plaintiff law firms as it provides a funding model (legal costs calculated as a proportion of the amount ultimately recovered) that is not available in other jurisdictions.

There is a pending question, however, as to whether the Federal Court has the statutory power, upon settlement or judgment, to make what is known as a ‘solicitors’ common fund order’ (Solicitors’ CFO). The High Court heard oral argument on this question earlier this month in R&B Investments. Judgment is reserved.

A key difference between a Solicitors’ CFO and a GCO is that a GCO can be sought shortly after commencement of the proceeding. If the High Court determines that the making of a Solicitors’ CFO is a licit exercise of the Federal Court’s power, it may nevertheless limit its analysis to the making of a Solicitors’ CFO upon settlement or judgment.

This temporal distinction may prove to be a decisive factor when a plaintiff law firm is considering the most appropriate jurisdiction in which to file. The relative certainty of a GCO being made at an early stage in the proceeding will no doubt continue to remain attractive.

If the High Court determines that the Court is not empowered to make a Solicitors’ CFO at all, this will likely bolster the attraction of the Victorian Supreme Court to plaintiff law firms.