High Court says no to travelling group costs orders

Impact on class action landscape: Victoria’s magnet effect 7 min read

In the first of a string of upcoming decisions about the class action landscape, the High Court of Australia handed down judgment in Bogan v Smedley on 12 March 2025.¹ The Court held that a group costs order (GCO) made in a class action commenced in the Supreme Court of Victoria could not travel to the Supreme Court of New South Wales and that, consequently, neither could the proceeding.

Key takeaways 

• GCOs will anchor proceedings to Victoria. Proceedings commenced in the Supreme Court of Victoria are likely to remain there once a GCO has been made—irrespective of whether another jurisdiction is the more appropriate forum, and particularly where the survival of the proceeding depends on the GCO.
• Timing of challenge is critical. Businesses facing a class action in the Supreme Court of Victoria should give early consideration, prior to any GCO being made, to whether it is appropriate to make an application to transfer the proceeding to another jurisdiction.
• The evolving funding landscape. While the decision consolidates Victoria's position as a magnet for class action activity, the Federal Court is likely to remain the preferred jurisdiction for class action filings, a trend that can be seen in our recent report on class action risk.

Background

The legislative regime

Group costs orders

In every state and territory across Australia, legislation prohibits a law practice from charging contingency fees. Since July 2020, however, Victorian legislation has contained an exception for GCOs—orders allowing the representatives of plaintiffs in a class action to recover as costs a specified percentage of any award or settlement obtained in the proceeding.

To make a GCO, the Supreme Court of Victoria must be satisfied that it is 'appropriate or necessary to ensure that justice is done in the proceeding'.²

Transfer of proceedings

At the heart of this proceeding was s1337H(2) of the Corporations Act 2001 (Cth), which allows a court to transfer a proceeding to another court if it appears to the first court that, 'having regard to the interests of justice', it is more appropriate for the second court to determine the matter.

Notably, this provision only applies to a proceeding with respect to a civil matter arising under, relevantly, the Corporations Act or the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

The Arrium proceeding

On 14 August 2020, a class action was commenced in the Supreme Court of Victoria against the directors of Arrium Ltd (Arrium) and its auditor, alleging contraventions of the Corporations Act, the ASIC Act and the Australian Consumer Law. There was evidence that the proceeding was originally intended to be filed in the Supreme Court of New South Wales, where Arrium had its principal place of business and where the relevant events had largely taken place. The High Court inferred that the ultimate choice to file in Victoria rather than NSW was to take advantage of the availability of GCOs.

The plaintiffs applied for a GCO on 2 February 2021. On 26 February 2021, one of the defendants applied to transfer the proceeding to the Supreme Court of New South Wales.

The Supreme Court of Victoria made orders that the GCO application be determined first, before the transfer application. As noted by the High Court, no objection was taken to that order at the time. A GCO was then made in favour of the plaintiffs' solicitors entitling them to 40% of any award or settlement (the Arrium GCO).

The transfer application was not ultimately dealt with by the Supreme Court of Victoria. Instead, three questions arising on that application were removed to the Victorian Court of Appeal:

1. whether the Arrium GCO would remain in force if the proceeding were transferred to the Supreme Court of New South Wales;
2. if not, whether the absence of the Arrium GCO in the Supreme Court of New South Wales was a relevant factor to the transfer application; and
3. whether the proceeding should be transferred.

Decision of the Victorian Court of Appeal

In respect of those questions, the Victorian Court of Appeal unanimously held that:

1. the Arrium GCO would not remain in force if the proceeding were transferred to the Supreme Court of New South Wales;
2. this was relevant to (and decisive of) the transfer application; and
3. the proceeding should not be transferred.

The same questions were subsequently removed to the High Court for determination.

Summary of findings

A majority of the High Court (Chief Justice Gageler, Justices Gordon, Gleeson, Jagot and Beech-Jones ) and Justice Edelman (in separate reasons) reached the same conclusion on each question as the Court of Appeal. Justice Steward disagreed on the second question, holding that the availability or not of a GCO in the Supreme Court of New South Wales was not relevant to the transfer application.

Would the Arrium GCO remain in force in NSW?

The parties agreed that the Supreme Court of New South Wales had no power to make an order in the nature of the Arrium GCO. The issue for the High Court instead turned on whether a provision of the Corporations Act would give legal force to the Arrium GCO if the proceeding were transferred.

The High Court held that it would not. To the contrary, the provision could only apply if the Supreme Court of New South Wales had power to make an order providing for at least 'similar steps' to the Arrium GCO. The parties agreed it did not have that power and, accordingly, the Arrium GCO could not be carried into NSW. 

Was the absence of the Arrium GCO relevant to the transfer application?

The majority held that the absence of the Arrium GCO could not be ignored in considering whether transfer to NSW was in 'the interests of justice'. Importantly, it was agreed between the parties that there was not a realistic prospect of alternative funding being obtained in the absence of the Arrium GCO. In this regard the majority stated that the capacity of the plaintiffs and class members to obtain access to justice 'bear[s] vitally' on the interests of justice,⁴ a sentiment echoed by Justice Edelman.⁵ In the views of the majority and Justice Edelman, these matters were decisive of the transfer application because, on the facts of the case, there was a 'considerable risk' that the proceeding would not be able to continue without the GCO.⁶

By contrast, Justice Steward held that the Arrium GCO was not relevant to, and so not determinative of, the transfer application. His Honour disagreed with the majority on the basis that a GCO offers a plaintiff an advantage (a way of ensuring the financial viability of a proceeding) and imposes on a defendant a corresponding disadvantage (being subjected to a proceeding which would not be viable in any other jurisdiction). To consider the Arrium GCO a relevant factor would, in his Honour's view, be for the court to 'play favourites'.⁷ As his Honour noted, NSW did not cease to be a place where the plaintiffs could obtain justice merely because Victoria introduced laws introducing an exception to an otherwise national ban on contingency fees, and nor did those laws mean NSW was not a suitable forum in which to litigate class actions.

Will a GCO always anchor proceedings to Victoria?

The majority also noted that common factors bear on the determination of GCO applications and transfer applications. As noted above, the former involves consideration of whether the GCO is appropriate or necessary to ensure that justice is done, while the latter involves an inquiry into 'the interests of justice'. While the High Court stopped short of articulating a general rule, its reasoning suggests that where a GCO has been made (because the court is satisfied that it is appropriate or necessary to ensure that justice is done), that will tend in favour of it being in the interests of justice that the proceeding remains in Victoria.

Looking ahead

One route not taken by the parties in this case was to challenge the sequence in which the Supreme Court of Victoria dealt with the GCO and transfer applications. If the transfer application was heard before the making of the GCO, the transfer application would have been decided by reference only to the connections the proceeding had to Victoria and NSW respectively. It remains to be seen what the attitude of the courts will be to that kind of challenge, however, it may be one strategy open to parties faced with similar circumstances in future.

The majority's reasoning also suggests a potential shift in the High Court's approach to considering factors relevant to the 'interests of justice' and similar assessments. The High Court previously held that whether an action can proceed is not relevant to that inquiry.⁸ By contrast, in Bogan v Smedley, the majority and Justice Edelman held that whether the action could proceed was relevant to an inquiry into whether the transfer was 'in the interests of justice'. As further matters come before the High Court which require a similar analysis, it will be interesting to monitor the extent to which the Court considers the survival of a proceeding to be relevant to 'ensuring justice is done'.