Consideration
110 I am satisfied that in the circumstances of the case it is 'just' pursuant to s 33V(2) to make an order that Therium's reasonable litigation funding charges be deducted from the common fund of the group members' recoveries.
111 First, and most fundamentally, that is because Therium paid $2.716 million of the legal costs the applicant incurred in bringing the proceeding. In so doing, it assumed substantial costs from the outset, when the outcome was far from certain. It took on the risk that it would not recover the capital that it invested in the case (including its loss of opportunity to spend its capital on other investments), doing so in return for reimbursement of its costs and payment of a funding commission if the case was successful.
112 Therium also indemnified the applicant in respect of any adverse costs order made in the proceeding. It is likely that if the applicant's case was unsuccessful at trial an adverse costs order of approximately $7 million would have been made. Therium defrayed $4 million of that risk through ATE insurance, but it still had a risk for adverse costs above the policy limit.
113 In short, Therium provided the finance that enabled the class action to be run to a successful conclusion, doing so on the basis that it would seek a CFO. A common fund order will mean that the group members who share in the fruits of the settlement will pay a pro rata share of the litigation funding charges incurred in obtaining the settlement. Further, it would not be 'just' if Therium was not remunerated fairly for the costs and risks it took on from group members' recoveries.
114 Second, the applicant's alleged loss is modest, and I infer that she would not have agreed to be the representative party unless her legal costs were paid and she was indemnified in respect of the adverse costs risk. Although Therium funded the proceeding for its own commercial purposes, in doing so it facilitated access to justice for more than 70,000 group members. It is 'just' that Therium be fairly remunerated from the common fund of the recoveries of those who benefited from the proceeding.
115 Next, a CFO is a transparent mechanism for fairly apportioning funding charges across the class and it is straightforward for group members to understand. There is no good reason why the applicant should carry the litigation funding costs of the proceeding alone, and it is not fair or equitable that group members be permitted to take the benefit of the proposed settlement without paying a proportionate share of the funding costs of achieving that settlement.
116 Therium agreed to fund the proceeding on the basis that it would be conducted on an open class basis without undertaking any book-building, and in the expectation that a CFO was likely to be made. I infer that Funder would not have agreed to fund the proceeding on such a basis in the absence of the applicant's agreement to seek a CFO at an appropriate stage of the proceeding.
117 Only the applicant entered into an LFA with Therium. In those circumstances a funding equalisation order (FEO) is not the appropriate counterfactual or comparator. A FEO in the present case could only operate to share across the class the applicant's personal obligation to pay a funding commission. That result would be unfair because Therium would recover only a de minimis amount and it would not be fairly remunerated for the costs and risks it assumed. It would also unjustly enrich group members who, in that hypothetical, would have had a 'free ride' (financed by Therium) in achieving their recoveries: see Uren v RMBL at [64].
118 There was nothing inappropriate about structuring the funding arrangements so that only the applicant executed a LFA. Such an approach is entirely consistent with the opt out nature of the Part IVA regime and with the Court's exhortations to plaintiff law firms and funders not to engage in the wasted expense of book-building: see Perera v GetSwift Ltd [2018] FCAFC 202; (2018) 263 FCR 92 at [295] (Middleton, Murphy and Beach JJ); Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) v BHP Group Limited [2019] FCAFC 107; 369 ALR 583 at [69(2)] (Lee J with whom Middleton and Beach JJ agreed).
119 Because no book-building was undertaken, and no group members entered into an LFA, there can be no meaningful comparison between the amount that would be charged to group members under a putative FEO and the proposed CFO.
120 Finally, the Notice of Proposed Settlement informed group members that a CFO would be sought and that they had a right to object to any aspect of the proposed settlement. No group member objected on the basis that an FEO was fairer or preferable to a CFO.
121 That then leaves the question as to whether Therium's proposed litigation funding charges are reasonable and proportionate.
122 I can see no objection in principle to a funding commission being calculated as a multiple of capital invested, as Therium proposes, rather than as a percentage of a settlement or judgment in favour of the applicant and group members: Evans v Davantage Group Pty Ltd (No 3) [2021] FCA 70 at [58]-[73] (Beach J); Williamson at [51].
123 In Money Max at [71] the Full Court said that there is no reason in principle for the Court to treat litigation funding costs incurred to achieve a settlement differently from legal costs incurred to achieve a settlement. I accept that one difference is that, unlike lawyers, litigation funders are not amenable to regulation of their fees via taxation. But litigation funding charges have become a standard cost for group members in funded class actions and against that backdrop the Full Court explained (at [72]):
It is appropriate that the Court exercise some oversight over litigation funding charges to class members when:
(a) the largest single deduction from the recoveries of class members in funded class actions is usually the funding commission (or an equivalent amount under a funding equalisation order);
(b) there is often a significant information asymmetry between the funder and the class members in relation to the costs and risks associated with the action;
(c) at least for some claimants the only opportunity they have to recover losses suffered through alleged breaches of the law is through the funded class action; and
(d) for small shareholders the opportunity for negotiation of the funding commission is limited or non-existent.
Since then the courts regularly supervise the reasonableness of litigation funding charges in class actions.
124 The Full Court went on to state (at [80]):
We do not seek to and cannot predetermine the relevant considerations for the approval of a reasonable funding commission rate. They will be a matter for the judge hearing the approval application and it will depend upon the circumstances. However, it seems likely that the relevant considerations would include the following:
(a) the funding commission rate agreed by sophisticated class members and the number of such class members who agreed. That can be said to show acceptance of a particular rate by astute class members;
(b) the information provided to class members as to the funding commission. That may be important to understand the extent to which class members were informed when agreeing to the funding commission rate;
(c) a comparison of the funding commission with funding commissions in other Pt IVA proceedings and/or what is available or common in the market. It will be relevant to know the broad parameters of the funding commission rates available in the market;
(d) the litigation risks of providing funding in the proceeding. This is a critical factor and the assessment must avoid the risk of hindsight bias and recognise that the funder took on those risks at the commencement of the proceeding;
(e) the quantum of adverse costs exposure that the funder assumed. This is another important factor and the assessment must recognise that the funder assumed that risk at the commencement of the proceeding;
(f) the legal costs expended and to be expended, and the security for costs provided, by the funder;
(g) the amount of any settlement or judgment. This could be of particular significance when a very large or very small settlement or judgment is obtained. The aggregate commission received will be a product of the commission rate and the amount of settlement or judgment. It will be important to ensure that the aggregate commission received is proportionate to the amount sought and recovered in the proceeding and the risks assumed by the funder;
(h) any substantial objections made by class members in relation to any litigation funding charges. This may reveal concerns not otherwise apparent to the Court; and
(i) class members' likely recovery "in hand" under any pre-existing funding arrangements.
125 The Full Court's approach to the determination of a reasonable funding commission rate has been followed or cited with approval in numerous single judge decisions and in intermediate appellate decisions.
126 In BMW Australia Ltd v Brewster [2019] HCA 45; 269 CLR 574 the High Court held that s 33ZF of the Act does not provide power to make a CFO. That does not, however, reduce the weight of the remarks in Money Max in relation to the relevant factors when considering making a CFO under another power.
127 In Money Max (at [82]) the Full Court said that it expected that the courts:
…will approve funding commission rates that avoid excessive or disproportionate charges to class members but which recognise the important role of litigation funding in providing access to justice, are commercially realistic and properly reflect the costs and risks taken by the funder, and which avoid hindsight bias.
128 It is important that the approval of funding commission rates does not become a "race to the bottom" and funding rates should provide an appropriate reward for the risk undertaken by a litigation funder: Kuterba v Sirtex Medical Limited (No 3) [2019] FCA 1374 at [12] (Beach J); Endeavour River Pty Ltd v MG Responsible Entity Limited [2019] FCA 1719 at [29] (Murphy J).
129 Turning, first, to the consideration in Money Max at [80(a)], here only the applicant signed an LFA and therefore, the funding commission rate agreed by sophisticated group members is not a relevant comparator. Similarly, in relation to the consideration in Money Max at [80(b)], the evidence does not explain what information the applicant was provided in relation to an appropriate funding rate. These factors are neutral.
130 Second, Money Max at [80(c)] provides that in assessing a fair and reasonable return for a funder it is appropriate to take into account the funding commission allowed in other class actions and/or the broad parameters of the funding rates available or common in the market.
131 I accept that a funding rate of 25.7% of the gross settlement is within the broad parameters of the litigation funding market at the time the proceeding was commenced, but that does not take things very far. Professor Morabito's research in relation to the available funding rates shows that there is a great range in the funding rates available in the market or approved by the Court, with some examples well below 25% of the gross settlement. Further, and more fundamentally, the necessary analysis of what constitutes a reasonable litigation funding charge does not stop at the headline funding rate. Indeed, it is erroneous to place too much emphasis on a comparison of the headline funding rate under the relevant LFA with the headline funding rates available in the market. Doing so assumes all other things about the funding arrangements are equal, when commonly they are not.
132 In Earglow Pty Ltd v Newcrest Mining Limited [2016] FCA 1433 at [179] I explained as follows:
The funding arrangements reached may be structured in a variety of ways which can affect the costs and risk taken on by the funder and therefore affect the reasonableness of the funding commission rate. For example, a funder might agree:
(a) to provide funding to cover adverse costs but not to meet the applicant's legal costs and disbursements, with the case being conducted by the applicant's solicitors on a conditional fee basis to be paid by class members from any settlement conditional on success;
(b) to pay disbursements only, with the case being conducted by the applicant's solicitors on a conditional fee basis;
(c) to only pay costs and disbursements up to a fixed cap or to pay a fixed percentage of the costs and disbursements, with the remainder left to the applicant's solicitors to be paid by class members conditional on success; or
(d) to cover the risk of adverse costs liability through After the Event Insurance with the premium to be paid by class members from the settlement sum upon success.
And the reasonableness of a funding rate will also commonly depend upon the size of the settlement or judgment, which is again case specific: Money Max at [80(g)].
133 The proper analysis of the reasonableness of a proposed litigation funding charge is multifactorial and the relevant considerations and the weight to be given to them in any particular case will depend upon all of the circumstances, rather than just by comparison to funding rates available in the market. I agree with the remarks of Dixon J in Bolitho v Banksia Securities Ltd (No 18) (remitter) [2021] VSC 666 at [1966], where his Honour said:
It is fundamental that the assessment by a court of a fair and reasonable return for a litigation funder more naturally emerges from the inputs specific to the litigation funder - primarily the level of funding, and promise of funding, that it provides and the period of exposure to risk - than a denominator applied to the settlement or judgment sum.
134 Therium's reliance on the decisions in Clarke, Caason, Bradgate and Sanda is overstated. Those decisions merely go to show that what constitutes a reasonable funding rate depends on case specific factors such as the size of the case and the other funding terms. For example:
(a) in Clarke Lee J allowed a funding rate of 30% of the gross settlement, doing so in the context that the settlement was low ($16.85 million inclusive of costs) and the LFA required payment of 40% of the gross settlement sum (at [3]) and entitled the funder to a sizeable management fee. The funder submitted that the Court had no power to vary the LFA, but given the amount of the proposed deductions for legal costs and litigation funding charges only pressed for a 30% funding rate and also agreed to forego its management fee (at [26]);
(b) in Caason the settlement was again low ($19.25 million inclusive of costs), and the LFA required payment of either 35% or 40% of the gross settlement sum plus payment of a $756,402 Project Management Fee. I approved a 30% funding rate on the gross settlement in circumstances where: (i) the funder went into evidence to say that, in the circumstances of the case, a 30% funding rate would mean that the funder received an annualised return on investment of negative 3% and a total return on investment of negative 20%; (ii) a 30% funding rate was a better result for group members than the funding rate allowed by the LFAs; and (iii) I did not allow the Project Management Fee provided for in the LFA;
(c) in Bradgate Middleton J allowed a funding rate of 33.18% of the gross settlement in circumstances where: (i) the settlement was low (only $14.6 million); (ii) the LFAs entered into by group members had an average funding rate of 40.77% and sophisticated institutional investors made up the bulk of the claim value such that the agreed funding rate was the product of negotiation between well represented parties in equal bargaining positions; and (iii) the funder did not seek a common fund order, and instead sought an FEO at a 30% funding rate;
(d) in Sanda Lee J allowed a funding rate of 30% of the gross settlement in the context that the case had settled after a lengthy trial and after an appeal had been filed. The LFAs between the funder and 15,482 group members provided for a 40% funding rate, but the funder undertook not to seek to recover more than 30% and also agreed not to seek to recover its ATE costs (at [24]).
135 Further, in response to competition, litigation funders are often prepared to "sharpen their pencils" by reducing the proposed funding rate. To provide just examples:
(a) in 2018 in the GetSwift class action, in a carriage motion involving three competing litigation funders, Therium proposed a funding rate of the lesser of:
(i) a multiple of 2.2 times its expenses if a settlement was reached on or before 12 April 2019, or 2.8 times if there was a successful resolution after that date; and
(ii) 20% of the net litigation proceeds (that is, the settlement sum less the Court approved legal costs).
Therium's tender was successful. The other two litigation funders proposed to fund the proceeding at: (a) the lesser of 25% of the net litigation proceeds or 22.5% of gross proceeds; (b) 10% of gross litigation proceeds before an early date, 20% of gross litigation proceeds until 42 days prior to the initial trial and 30% of gross litigation proceeds thereafter: see Perera v GetSwift Limited [2018] FCA 732; 263 FCR 1 at [68], [72] (Lee J) (GetSwift first instance). All of the rates offered were below those commonly available in the market; and
(b) earlier this year, in the Star Casino class action, in a carriage motion involving four competing law firms, the successful tenderer, Slater & Gordon, proposed a funding rate of just 14% of the gross litigation proceeds; and the other three made the following proposals:
(i) Phi Finney McDonald, which was backed by a litigation funder, sought a funding rate of 17% of the gross litigation proceeds;
(ii) Maurice Blackburn sought a group costs order incorporating an "upwards rachet" mechanism being 10% of the gross litigation proceeds up to $50 million; 20% on that portion which exceeded $50 million and up to $100 million; and 25% on that portion which exceeded $100 million; and
(iii) Shine sought to conduct the case on a no win-no fee basis, with a 25% uplift on its professional fees payable upon a successful outcome.
See DA Lynch v Star Entertainment Group; Drake v Star Entertainment Group; Huang v Star Entertainment Group; Jowene v Star Entertainment Group [2023] VSC 561 at [45] (Nichols J). Again, those rates (particularly the rate of 14%) are significantly below the funding rates commonly available.
136 Here, there is nothing to show that Slater & Gordon approached other funders , and I cannot know whether Therium would have offered a lower funding commission had there been some competition to fund the case. But it is worth noting that Therium commenced to fund GetSwift about a year earlier than this case, and it agreed to a funding commission of no more than 20% of the net proceeds of the litigation. The same funding rate in this case would have resulted in litigation funding charges of approximately $4.4 million. But not too much should be made of that when GetSwift and the present case are quite different.
137 Third, Money Max at [80(d)] provides that the litigation risks associated with the case are critical in assessing the reasonableness of proposed funding charges, and the assessment of those risks must avoid hindsight bias and recognise that the funder took on those risks at the commencement of the proceeding. As I have said, while this case had some real risks on liability it had reasonable prospects of success, and (assuming success) it had reasonable prospects of establishing causally related loss (although the range of possible outcomes on quantum is significant). I do not consider it to be a high risk case.
138 Fifth, the quantum of legal costs expended and to be expended in the litigation is an important consideration: Money Max at [80(f)]. In submissions Therium accepted that the "principal risk" it assumed was the risk of non-recovery of the legal costs it had paid. In the Claim Budget for the litigation Slater & Gordon estimated total legal costs at $3,743,966 comprising $1,846,900 in professional fees and $1,897,066 in disbursements, and Therium was only obliged to pay 50% of professional fees and 100% of disbursements. Thus, Therium's liability for legal costs was capped at $2,820,516 (incl GST). Any further legal costs were to be carried by Slater & Gordon on a 'conditional' basis (ie, "no win-no fee") and met by the applicant and group members from any settlement or judgment in their favour, together with an "uplift" on the conditional fees. And Therium actually paid $2.716 million before it ceased funding
139 The estimate of total legal costs in the Claim Budget was ridiculously low. Unless the case could be speedily settled (which could not be guaranteed) legal costs were always going to exceed that. Slater & Gordon should not have conducted the case on the basis of such an unrealistic Claim Budget and Therium should not have been either so naïve or so focussed on its own interests to have funded the case on such a basis. I infer that the driver behind such a low budget was Therium rather than Slater & Gordon, as it was not in the firm's interests to propose such a low budget. And the low Claim Budget was not in group members' interests because it meant that, upon achieving some success in the litigation (which in my view was the most likely outcome) group members would be obliged to pay an uplift fee of up to 25% of the conditional fees. As it eventuated, and as should have been expected by both Slater & Gordon and Therium, reasonable legal costs totalled $7.364 million. This meant that Therium only assumed an obligation to pay 37% of the legal costs reasonably incurred in prosecuting the case. Thus, the great majority of what Therium accepts was its principal risk in the case was not taken by it; instead it was taken by Slater & Gordon.
140 The fact that the great bulk of the principal risk in the case was not taken by Therium is material to my view that it would not be 'just' to allow it the total litigation funding charges that it seeks.
141 In this context it is also worth noting that the evidence does not show that the substantial cost overrun occurred because of unforeseen or unforeseeable events in the litigation. As I have said, I consider the estimate of total legal costs in the Claim Budget was exceedingly low and almost impossible to achieve unless the case could be speedily settled. And obtaining a speedy yet adequate offer of settlement from the respondents was not within the control of Slater & Gordon or Therium. As I said in Webb at [55]:
Unless there is a good reason to think this will eventuate (and that is expressed as an assumption) a realistic case budget should not be based on a prediction that the opposing party will make a reasonable settlement proposal at an early stage, and it should include a significant buffer for costs that may arise from unforeseen events in the litigation. Such costs are "known unknowns"; they commonly arise in strenuously contested class action litigation and they are often substantial.
There is an unfortunate trend developing in which plaintiff law firms and litigation funders put forward unrealistic case budgets, and legal costs then substantially overrun the budget. Absent exceptional circumstances, a law firm or funder which succeeds in winning a carriage motion on the basis of its estimate of legal costs or litigation funding charges should not expect to receive more than that.
142 Fifth, the quantum of adverse costs exposure the funder assumes is another important consideration (Money Max at [80(e)]).
143 Under the LFA Therium agreed to indemnify the applicant against any adverse costs order and to pay any security for costs. Therium took out ATE insurance to defray the adverse costs risk up to the $4 million limit on the ATE policy. But it accepted that its principal risk was the risk that it would not recover the legal costs it paid rather than any risk of liability for an adverse costs order above the insured limit. Most likely that is because Therium understood that the case had reasonable prospects of some success, and that it is rare that a competent funder is required to pay adverse costs. The overwhelming majority of funded class actions settle, and even where the funder reaches the view that the case is likely to fail it is often possible to agree on a costs only or a walk away settlement. In my view the risk that Therium would be called on to pay substantial adverse costs was low.
144 Therium obtained ATE insurance at the commencement of the proceeding and later increased the level of cover. It paid upfront premiums totalling $528,000, which was at its risk because, if the case was unsuccessful, it would not recover them. The LFA provided for ATE costs to be passed on to the applicant and group members by deduction from the gross settlement, on a multiple of 2.4 times. Therium does not now seek a multiple of its ATE costs, but that was the basis on which it took on the risk of the case.
145 Sixth, I accept that the LFA provides that Therium is entitled to be paid a multiple of 2.4 times of legal costs and ATE costs. But allowing a 2.4 times multiple on legal costs and ATE costs would result in litigation funding charges of $9.351 million, which would equate to 31.2% of the gross litigation proceeds. It would also mean that:
(a) legal costs and litigation funding charges would consume $17 million of the $29.95 million settlement; and
(b) litigation funding charges would exceed legal costs, in circumstances where Slater & Gordon took on the majority of the principal risk in the case.
In my view it would be neither reasonable nor proportionate to allow litigation funding charges of $9.351 million, which I consider Therium recognised.
146 Seventh, under the ATE policy Therium is required to pay a contingent premium of $352,000 upon a successful resolution of the case. This cost was not a risk that Therium assumed. Whether paid to Therium on a multiple of 2.4 times, or reimbursed on a dollar for dollar basis as Therium now seeks, that cost was always going to be borne by the applicant and group members by deduction from the gross settlement.
147 Eighth, the question as to whether it is reasonable to allow a litigation funder to be paid a funding commission in return for the risks it takes on, plus be reimbursed the ATE costs it has paid, has been considered in a number of cases:
(a) in GetSwift first instance at [193] Lee J observed that one way or another, upon success in litigation, the applicant and group members pay for the cost of any indemnity against an adverse costs order. They either pay it by way of a direct reimbursement of the funder's ATE costs from the gross settlement or judgment, or they pay it because the cost of the indemnity is absorbed by the funder into its funding rate.
(b) in Petersen (at [202]-[203]) I held that because the funder took out ATE insurance it mitigated its risk of exposure to an adverse costs order through the indemnity it provided the applicant. And because the ATE costs were ultimately to be met by the applicant and group members by deduction from any gross settlement, the risk the funder took on were lower and a lower funding commission was appropriate;
(c) in Spotless at [96] I observed in the course of the hearing that the funder should not be permitted to separately charge for its ATE costs, and at the same time point to its exposure to the risk of an adverse costs order to justify the funding rate that it sought. In response the funder withdrew its application for reimbursement of its ATE costs;
(d) in Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 3) [2020] FCA 1885; 385 ALR 625 at [32] Lee J referred to his remarks in GetSwift first instance, and in the context of an application for a common fund order said that a funder should not be permitted to recover:
…the costs of the funder performing its central obligation to provide an indemnity against adverse costs. If a funder wishes to defray their risk of performing that obligation it is matter for the funder but, in my view, it is not a cost that ought be passed on separately to group members when the Court controls the remuneration.
(e) in Davantage at [84] Beach J allowed the recovery of ATE costs in addition to a funding commission, but said that:
Now I have some sympathy for the view that if I was considering the first option, then allowing the ATE premiums, whether as a direct recovery or within the base, would have its difficulties. After all, the 25% first option would reflect the relevant remuneration or reward for all risks assumed by the funder. So, if it sought to enter into ATE insurance to defray or minimise risk, that would be on its own coin. It could not have both the relevant premiums and insist on the 25%. But I do not have that scenario.
(f) in Bradshaw v BSA Limited (No 2) [2022] FCA 1440 at [161]-[162] Bromberg J said:
Where a funder defrays its risk of providing an indemnity to an applicant in relation to an adverse costs order which may be made against an applicant, the funder cannot charge for both taking the risk and defraying the risk. Only one or the other can be justified. To claim both would be to double-dip or as Murphy J said in Spotless at [96] "to have it both ways": see further Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 3) (2020) 385 ALR 625; [2020] FCA 1885 at [32] (Lee J) and [Davantage] at [84] (Beach J).
Here, the Funder has sought to justify "the commission component of the deductions in favour of the Funder for which approval is sought" on, inter alia, the risk of "exposure to adverse costs". Having done that, the Funder cannot legitimately seek either the reimbursements of the costs of defraying that risk or seek that those costs be counted as part of the capital which the Funder put at risk.
(g) in Wetdal Pty Ltd as Trustee for the BlueCo Two Superannuation Fund v Estia Health Limited [2021] FCA 475 at [125] Beach J allowed a funder to recover both a funding commission and the amounts paid under the ATE policy. His Honour was, though, at pains to say that the funder was only seeking to recover its contractual entitlements under the LFA and he was not able "to consider afresh what commission rate would reflect the relevant remuneration and reward for all risks assumed by the funders, and how such a rate ought reflect the mitigation of risk effected by the ATE policy."
148 There are also some cases in which judges have allowed the funder to receive both a funding commission and reimbursement of its ATE costs:
(a) in Williamson at [83] Black J said that the appropriate question to be asked was whether the combined sum of the funder's commission and the ATE costs are unreasonably high. His Honour concluded that the combination of the proposed funding rate and ATE costs in that case resulted in unreasonable litigation funding charges, and he therefore fixed a lower funding rate; and
(b) in Eckardt v Sims Ltd [2022] FCA 1609 at [40]-[43] Wigney J cited Williamson with approval and approved the payment to the funder of both a funding commission and the funder's ATE costs. His Honour did so on the basis that the total funding charges were within a reasonable range.
149 In Kemp v Westpac (No 4) [2023) FCA 830 at [91] and in Fordham v Commonwealth Bank of Australia [2023] FCA 1106 at [96], both no win-no fee class actions, O'Bryan J held that the lawyers should be able to recover their ATE costs on top of the 25% uplift for conducting the case on a conditional basis. Those decisions are not, however, on all fours with the present case. In both cases O'Bryan J was satisfied that there could be no expectation that the risk of an adverse costs order had been factored into and was effectively absorbed by the uplift fee to which the lawyers may be entitled upon success in the litigation.
150 In my view there is no real difficulty with approaching the issue on the basis proposed in Williamson. The question can be boiled down to whether the combined amount of the proposed funding commission and ATE costs is reasonable and proportionate. Indeed, that was the effect of the approach I took in Petersen and in Spotless.
151 Having said that, it is undesirable to permit litigation funders to charge a funding rate based in part on the indemnity it provides to the applicant in relation to the risk of an adverse costs order, and then to allow the funder to be reimbursed the cost of providing that indemnity from the proceeds of the litigation. As Bromberg J put it in Bradshaw, the funder should not be allowed to charge for both taking the risk and for defraying the risk. Arrangements under which litigation funders separately charge for ATE costs on top of the headline funding rate are not transparent for group members, are not easily understandable, and such charges are often large. There is no good reason for funders to separately charge such amounts when the approximate exposure to adverse costs risk is known from the outset of the case and can be built into the funding rate. And the separate imposition of such charges has a tendency to mislead group members, who are primarily focused upon the headline funding rate.
152 Those matters too are material to my view that it would not be 'just' to allow Therium the total litigation funding charges that it seeks.
153 Eighth, after all of the proposed deductions are made the applicant and group members will receive only approximately half of the proposed settlement. That is an undesirable outcome which requires close attention to the legal costs and litigation funding charges. As I said in Caason (at [148]):
Class actions are to be conducted for the benefit of the applicants and class members rather than for service providers such as lawyers (or funders) and the costs should be proportionate.
154 Turning then to determine the total litigation funding charges that I consider to be reasonable and proportionate in the circumstances of the case, allowing a funding commission of $6.52 million plus reimbursement of $1.180 million in ATE costs means that total funding charges would be $7.699 million, which equates to 25.7% of the gross settlement. In my view the legal costs paid by Therium, and the low risk it assumed of an adverse costs order above the ATE policy limit, do not justify allowing total litigation funding charges of $7.699 million. As against that, if I allow a funding commission of $6.52 million, but do not allow Therium to be separately reimbursed its ATE costs, after paying the ATE costs Therium would receive an effective funding commission of $5.339 million, which equates to 17.8% of the gross settlement. In my view an effective funding commission of $5.339 million, would not fairly remunerate Therium for the costs and risks it assumed.
155 I consider it appropriate to order the deduction of total funding charges of $6,888,500 which equates to 23% of the gross settlement. Such an amount is in my view reasonable and proportionate in the circumstances of the case.