Court considers costs orders in consolidation of cases against a2 Milk

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This decision concerned a carriage dispute between Slater & Gordon (S&G) (acting for the plaintiff in the Thomas proceeding) and Shine Lawyers (Shine) (acting for the plaintiff in the Xiao proceeding) against the defendant (a2) regarding representations made by a2 to the share market. The two proceedings share the same relevant period (19 August 2020 to 9 May 2021), but have the following differences:

• the Xiao proceeding includes, in addition to claims for persons who acquired a2 shares during the relevant period (Acquisition Claimants), claims for persons who acquired shares before 19 August 2020 and retained their shares until after 28 September 2020 (Retention Claimants); and
• the Thomas proceeding includes (in addition to persons who acquired a2 shares on the ASX) persons who acquired a2 shares on the New Zealand Stock Exchange.

The plaintiffs were ordered to confer regarding consolidation of the proceedings by 4 February 2022, failing which, they were to file an application for consolidation or a carriage motion by 18 February 2022. S&G initially opposed consolidation on the basis that S&G were concerned there would be a conflict between the presentation of the claims on behalf of the Acquisition Claimants and the Retention Claimants if the two proceedings were to be consolidated (set out in an affidavit of Kaitlin Ferris). There was a subsequent period of negotiation between Shine and S&G (in April 2022), following which both firms agreed to consolidate the proceedings. The proposed mechanism included a number of (now common) features including a litigation committee, a consolidation agreement setting out the distribution of work between the firms, one set of counsel being retained, appointment of a costs referee (Cate Dealehr) and costs capping orders. Ms Ferris deposed that her view about consolidation changed in light of the risk of conflict already being present in the Xiao proceeding and on the basis that, with the benefit of discussions with Shine, the documentary and expert evidence adduced for the Acquisition Claimants and Retention Claimants would differ, as the Retention Claimants did not rely on market-based causation. a2 did not oppose the consolidation.

Justice Button approved the consolidation of the two proceedings, noting that:

• the claims of all class members would be advanced (as opposed to the risk of certain claims being stayed/abandoned if only one proceeding was allowed to proceed); and
• there would be reduced costs for a2 in defending a single consolidated proceeding.

Her Honour also held that the potential for conflict was not a reason not to consolidate the proceedings, stating that:

• the conflict was presently only theoretical (at [37]);
• the risk of conflict was not created by the consolidation, as it already existed in the Xiao proceeding (at [38]);
• group proceedings, by their nature, involve the inevitable risk of potential or apparent conflicts (at [39]- [40]); and
• any conflicts could be managed as and when they arise (at [41]).

Although it supported the consolidation, a2 sought that its costs in relation to the application be paid forthwith. a2 claimed that the fact that the plaintiffs (and the law firms) did not initially agree to consolidate the proceedings put a2 to extra costs and that the plaintiffs had acted unreasonably in not agreeing to consolidate when given the opportunity to do so. Her Honour did not find in favour of a2, but described S&G’s change in position in early April an “about-face” (at [69]). Her Honour found that the evidence showed that Xiao and Shine had consistently entertained consolidation and that it wasn’t the case that a2 had “set the ball rolling” for consolidation (at [67]), also noting that it served a2’s interest for consolidation to occur (at [70]). Her Honour reserved costs in the Xiao proceeding. In relation to the Thomas proceeding, her Honour stated that “[t]here was no reason why the engagement which occurred in April 2022 could not have occurred earlier, in December 2021 and January 2022”, and accordingly only reserved costs for the plaintiff in the Thomas proceeding from 6 April 2022, when S&G “changed course and engaged with Shine regarding consolidation” (at [75]).

Thomas v The a2 Milk Company Ltd [2022] VSC 319

Supreme Court of Victoria, Button J,
14 June 2022

Thomas’ Solicitors: Slater & Gordon
Xiao’s Solicitors: Shine Lawyers
Defendant’s Solicitors: Herbert Smith Freehills
Funder: N/A

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