Ben Butler, The Australian
Boutique law firm Phi Finney McDonald has beaten two other law firms vying for the right to run a shareholder class action against BHP over the Samarco dam disaster. Federal Court judge Mark Moshinsky this morning ruled that Phi Finney McDonald’s case should go ahead and stayed proceedings helmed by labour law powerhouse Maurice Blackburn and national firm Johnson Winter & Slattery.
The cases revolve around BHP’s (BHP) 20 per cent share price collapse in November 2015 after a tailings dam at the Samarco mine in Brazil operated by the company and Vale collapsed, releasing a torrent of mud that killed 19 people and devastated the environment. Justice Moshinsky said he preferred the Phi Finney McDonald case’s funding model, which provides that its US-based backer G&E KTMC Funding will get up to 18 per cent of any winnings, but leaves the final proportion in the hands of the court. This compared to a 15 per cent take by Maurice Blackburn, which was self-funding its action and a complex sliding scale allowing up to 21.5 per cent to flow to the funders behind the JWS claim, Harbour Fund IV and US law firm Robbins Geller Rudman & Dowd.
He said another factor in Phi Finney McDonald favour was that its case, which was filed first, was also the “most advanced in terms of preparation”. Phi Finney’s funding model, “based upon a maximum percentage commission inclusive of costs and expenses, means that the Court can be reasonably certain about the minimum amount (as a percentage) of any settlement or judgment sum that would be available for distribution to group members, regardless of the amount of legal fees and expenses ultimately incurred,” he said. “On a range of realistic scenarios, the LACERA funding arrangement is likely to result in a higher total amount being paid in respect of commission and costs and, consequently, a lower percentage of any settlement or judgment sum being available for distribution to group members.”
Meanwhile, Maurice Blackburn’s no-win no-fee deal “is likely to result in a higher percentage of any settlement or judgment sum being available for distribution to group members, as the arrangement does not require a commission to be paid to a funder”. He said the interests of group members would be best served under Phi Finney McDonald’s structure. “The Court retains full discretion as to the appropriate fee,” he said. Justice Moshinsky said he placed little weight on the fact Phi Finney McDonald signed up the most clients — 29,610, including 219 institutions, against 197, including 68 institutions signed by Maurice Blackburn and the single investor, giant US pension fund Los Angeles County Employees Retirement Association, backing the JWS case. But he did give some weight to the work already done by Phi Finney McDonald, which incudes signing up “a significant number of experts”.
“Given the early stage of the proceeding, it is unlikely to matter very much whether one proceeding is more or less advanced in its preparation,” he said. “Nevertheless, the work that has been undertaken by Phi Finney McDonald, as described in detail in the affidavit material, does give me confidence in the quality of the legal representation of the applicant and group members.” He said the JWS proceeding was potentially more attractive because it provided a longer period of time for investors to claim losses — back to August 2012, compared to October 2013 in the Phi Finney McDonald claim and August 2014 in the one run by Maurice Blackburn. “In the circumstances, it is not possible for the Court to assess at this stage whether there is substantive merit in the additional period covered by the LACERA proceeding,” he said. “While the longer claim period is a factor weighing in favour of the LACERA proceeding, on balance I am not inclined to depart from my view that the Impiombato [Phi Finney McDonald] proceeding is the most appropriate proceeding to go forward as the open class proceeding.” He said he would give Phi Finney McDonald time to decide whether to amend its statement of claim to take in a longer period, and if this application was granted would permanently stay the JWS case.
Phi Finney McDonald managing director Ben Phi, who formerly led the class action team at Slater & Gordon, told The Australian he was “very pleased” with the win. He said the case would return to court next year. “In the meantime we can see whether or not there are going to be any appeals,” he said.