Funder’s cut of S&P class action settlement to go under microscope
Class Actions July 5, 2018 11:25 pm By Christine Caulfield | Melbourne

The judge overseeing seven class actions against S&P Global Ratings over toxic financial products has appointed a barrister to advise him on whether to approve a confidential global settlement, which would give funder Litigation Capital Partners about half the payout.

David Thomas of Sixth Floor Selborne Wentworth will act as amicus to Federal Court Justice Michael Lee ahead of a two-day hearing to approve the deal on July 24, advising the judge on the reasonableness of LCP’s funding arrangement, under which it is set to receive a 45 percent commission on the gross settlement sum, plus a 12.5 percent project management fee on the net settlement.

Thomas, who has represented Multiplex in a massive shareholder class action and the National Australia Bank in an enforcement action by the corporate watchdog, will also advise on whether to sign off on the $25 million legal fees incurred by class action law firm Squire Patton Boggs, which led the proceedings against S&P.

Judge Lee also wants to know if he should approve costs and funding “equalisation” orders, which would spread out the fees by the firm and funder so that all participating group members pay a portion from their cut of the settlement. Whether the judge can make orders varying LCP’s commission is also a question for the barrister.

The class actions, the first of which was launched in October 2014, alleged on behalf of a group of city councils and investors that S&P’s healthy ratings on collateralised debt obligations (CDOs) led to hundreds of millions of dollars in losses.

ANZ Banking Group was named as a co-respondent in the only case that went to trial. The bank, which was accused of breaching its duty of care as a financial service licence holder when it recommended the toxic CDOs, is a party to the global settlement, reached mid-trial.

The terms of the settlement have not been disclosed on the request of both S&P and the bank.

Last month Judge Lee raised the prospect of appointing an independent referee to audit SPG’s costs, a proposal firm partner Amanda Banton opposed at a hearing on June 13.

“We’ve been through the referee process before and it wasn’t ideal. It wasn’t cost saving at all,” she told the judge that day.

Judge Lee said he was also considering appointing an independent settlement distribution company, he told the parties. Thomas will advise the judge on what orders should be made for the administration of the settlement, including the identity of the administrator, according to a court order Wednesday.

“In the event that the amicus considers it appropriate to do so, the amicus has leave to cross-examine any deponent of any affidavit read by a party supporting the Approval Application,” Judge Lee ordered.

The settlement comes after the trial proceedings were adjourned part-heard on May 18.

It also follows a February settlement by S&P in a separate class action launched by Australian Unity’s Lifeplan and Big Sky over CDOs. While the final settlement figure was confidential, that deal included over $4.6 million in legal fees.

S&P and ANZ are represented by Clifford Chance.

The cases are MDA National Insurance Pty Ltd ABN 56 058 271 417 V McGraw-Hill Financial Inc (formerly McGraw-Hill Companies Inc) & AnorCoffs Harbour City Council ABN 79 126 214 487 v Australia and New Zealand Banking Group Ltd (trading as ANZ Investment Bank) ABN 11 005 357 522Ceramic Fuel Cells Ltd ACN 055 736 671 v McGraw-Hill Financial, Inc (formerly McGraw-Hill Companies, Inc) (a company incorporated in New York) & OrsClurname Pty Ltd ABN 66 002 898 231 & Anor v McGraw-Hill Financial Inc (formerly McGraw-Hill Companies, Inc)(a company incorporated in New York) & AnorCoffs Harbour City Council ABN 79 126 214 487 v McGraw-Hill Financial, Inc (now known as S&P Global Inc.) & AnorLiverpool City Council ABN 84 181 182 471 v McGraw-Hill Financial, Inc (now known as S&P Global Inc.) & Anor, and Ceramic Fuel Cells Limited (in liquidation) ACN 055 736 671 v McGraw-Hill Financial, Inc. (formerly McGraw-Hill Companies, Inc) & Anor.

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Christine Caulfield

Christine Caulfield has been a journalist for 18 years. She was most recently the Co-Managing Editor at US legal news publication Law360. Prior to that she worked as the County Court reporter for The Herald Sun. She is Co-Founder and Editor of Lawyerly.