Mark Elliott’s firm has fees cut by ’embarrassing’ $2M as Murray Goulburn settlement approved

Agriculture 2020-04-07 4:42 pm By Miklos Bolza | Sydney

A judge has signed off on a $37.5 million Murray Goulburn class action settlement but slashed $2 million in legal costs sought by Mark Elliott’s law firm, which is running the case.

The funder behind the lawsuit, William Crothers, has also had his commission cut from 28 per cent to 23 per cent, with Federal Court Justice Bernard Murphy saying in a virtual hearing on Tuesday that Crothers was either “imprudent” or a “victim of poor behaviour or poor conduct” by Elliott Legal.

The court heard Crothers, who is founder of Melbourne-based natural medicine company BioRevive, had been covering disbursements in the case despite there being no obligation to do so in a retainer and costs agreement between Elliott Legal and lead plaintiff John Webster.

Elliott Legal did not alert Crothers to the unnecessary payments, but instead amended the costs agreement to include them in May 2019, three years after the litigation was commenced in May 2016. Crothers admitted he never sought a copy of the original agreement.

“One part of me thinks that a funder that embarks on funding a case … without even getting a copy of a solicitor’s retainer is being imprudent. But putting that to one side, even if that’s not the case, then Mr Crothers is a victim of poor behaviour or poor conduct by Mr Elliott — that is entering into an agreement with his client on terms other than agreed by the funder to fund the proceeding,” Justice Murphy said.

The court also heard on Tuesday that class action barrister Norman O’Bryan SC and junior counsel Michael Symons had not sent invoices for the majority of their work on the case until October 2019, almost three and a half years after it was launched.

“I didn’t render bills in those years because I didn’t desire to be paid in those years,” O’Bryan told Justice Murphy on Tuesday.

Justice Murphy noted that, while O’Bryan was a senior barrister who could afford not to be paid for such a long time, he questioned whether this would also apply to Symons.

“Mr Symons is a young barrister. He presumably hasn’t had a lifetime in the law to afford not to be paid in such a large case for many years,” the judge said.

Both Elliott Legal and Slater & Gordon filed class actions against Murray Goulburn on behalf of investors alleging they lost money following a 2016 profit upgrade by the dairy cooperative.

Murray Goulburn settled the Slater & Gordon case for $42 million in June last year, followed by the Elliott Legal case in November. A month later, Justice Murphy noted thatissues in approving the settlement in the Slater & Gordon case, which was backed by Omni Bridgeway, would likely be “vanilla”, while Elliott Legal’s action would be “messier”. He appointed contradictor Jeremy Slattery SC to scrutinise the fees and commission in the case.

Elliott died in a vehicle accident in February. Two firms associated with Elliott, Portfolio Law and Australian Funding Partners Limited, as well as O’Bryan and Symons are now being investigated for alleged professional misconduct in the Victorian Supreme Court, which is assessing costs and commission in a separate class action against Banksia Securities.

Justice Murphy on Tuesday gave approval to Elliott Legal to administer the Murray Goulburn settlement distribution scheme, but after an “embarrassing” costs report that saw the law firm’s fees cut from around $7 million to $5 million, the judge told O’Bryan that improvements would have to be made if the firm wanted more than $75,000 for running the scheme.

“A shot across the bow to Elliott Legal, Mr O’Bryan. They will need to do a much better job at recording their time and setting out to the court why they should be paid more,” Justice Murphy said.

‘Have you ever known him to lie?’

Under cross-examination by contradictor Jeremy Slattery SC, Crothers explained why he had not bothered asking for the original costs agreement between Elliott Legal and Webster.

“Unfortunately in the law, what I get quoted and what ends up happening is often vastly different, and I was prepared for the fight so to speak. And I trusted Elliott [that] they would keep their costs to a level that was reasonable.”

Slattery noted that Crothers had described Elliott as a “friend and colleague” in his affidavits, and got straight to the point about his character.

“Have you ever known him to lie? Have you ever known Mr Elliott, Mr Mark Elliott, to lie?” Slattery asked Crothers.

“No, I don’t think I’ve known him to lie,” Crothers replied.

While Crothers said he had discussed a funding commission of around 25-30 per cent with Elliott in April or May 2016, he was shocked when told about a discussion between Elliott and Neil Scott from Skyfield Capital, an investor and group member, about a 25 per cent commission in a formal side letter.

“It also strikes me that this was maybe a negotiating tool that [Elliott] was using with Mr Scott to have to go back to and get permission because I was, I wasn’t, well I may have been in phone range but I certainly don’t recall any such conversation,” Crothers said.

“I have no recollection of why [Skyfield] would be treated any differently. It’s against my sort of principles and against my sense of what is right. So I think because of that, I would have remembered.”

Disincentives and costs

In approving a 23 per cent commission, Justice Murphy rejected arguments from Crother’s barrister Robert Craig SC that the lower rate would disincentivise smaller funders from backing class actions.

“I’d be surprised if Mr Crothers wasn’t already disincentivised in this case. On his account, he’s paid well more than he was required to in costs… He’s spent substantial money on this fight… It feels to me the circumstances that have evolved in this case are the very reasons why someone wouldn’t fund a case again,” he said.

Slattery said that despite Crothers spending $7.4 million on legal costs, a 23 per cent commission would still provide a “pretty good pay day” of $8.625 million, being an annualised return of about 165 per cent.

Justice Murphy dismissed Slattery’s bid to have Crothers pay the costs of the contradictor, saying he had already “taken a pretty fair whack” with the funding commission, and pointing out that the contradictor’s role was beneficial to group members.

“You’ve provided useful assistance to the court. The funding fee is one part of that… What you’ve done is affected class members’ interests. Why shouldn’t the class members pay for that?” he said.

However, the judge was less sympathetic to Crothers’ attempt to shoulder group members with $160,000 in his own costs of pursuing a higher funding rate.

“You claim an entitlement to a funding commission. I agree you have an entitlement. The only debate is the rate. How you’ve managed to spend $160,000 on that is a mystery to me but that’s what’s happened. Why should those costs of pursing those costs to you be carried by the class?” the judge said.

In addition to paying out a total of $79.5 million to settle the two class actions, Murray Goulburn also paid a $650,000 fine in November 2017 after facing regulatory action by the Australian Securities and Investments Commission alleging continuous disclosure breaches related to the 2016 profit forecast.

Former directors Gary Helou and Bradley Hingle faced civil penalty proceedings by the Australian Competition and Consumer Commission, and agreed to fines and three-year disqualification orders. The pair are now defending disqualification proceedings by ASIC.

Murray Goulburn is represented by Wendy Harris QC and Fleur Shand, instructed by Herbert Smith Freehills. Webster is represented by Norman O’Bryan SC, Michael Symons and Christopher Hibbard. The contradictor was Jeremy Slattery SC and Edward Gisonda. Crothers was represented by Robert Craig SC, instructed by Johnson Winter & Slattery. Helou is represented by Corrs Chambers Westgarth.

The Elliott Legal class action is John William Cruse Webster as Trustee for the Elcar Pty Ltd Super Fund Trust v Murray Goulburn Cooperative Co. Ltd & Ors.

The Slater & Gordon class action is Endeavour River Pty Ltd v MG Responsible Entity Limited & Anor.