CoreStaff class action: Omni Bridgeway assists PNG mine workers to recover unpaid wages

A Federal Court of Australia judge has approved the A$6.4 million settlement of class action proceedings against Australian labour hire company, CoreStaff NT Pty Ltd. The action was brought on behalf of CoreStaff employees who were skilled mine workers from Papua New Guinea.

On 26 August 2022, Justice Bromwich held that, in all the circumstances, the settlement was fair and reasonable. The judge considered all aspects of the case, including the factual and legal complexity, considerable efforts taken to contain and minimise the legal costs of prosecuting the claims, and substantial litigation risk on both sides. His Honour also considered the net proportion of the settlement sum to be distributed to the group members. This amount was just over 41% of the total settlement, with the balance representing Omni Bridgeway’s 35% commission and legal costs and disbursements, including of the settlement approval process and the administration of the settlement distribution scheme.

Justice Bromwich said he was amply reassured that the amount of costs and commission was reasonable. In particular, a substantial proportion of the participating group members will receive “quite a high percentage” of the value of their individual claims and “could scarcely have done better”. Omni Bridgeway can confirm that some of the group members will receive approximately 80% of their individual claims.

Background

In 2011 and 2012, a number of employees accepted a 3-year fixed term employment contract with Corestaff. The employees were then on-hired to CoreStaff clients at mine sites in Western Australia. In November 2012, CoreStaff terminated the employment contracts of these employees.

In November 2018, the class action was commenced by Levitt Robinson Solicitors.  The class action alleged that CoreStaff had made misleading or deceptive representations in relation to employment and also breached employment contracts by underpayment of wages.

The case settled at a second mediation in November 2021, subject to court approval, with Corestaff to pay A$6.4 million, without any admission of liability.

A fair and reasonable settlement

Justice Bromwich considered two confidential opinions from senior and junior counsel for the class, which His Honour said thoroughly and properly assessed the fairness and reasonableness of the settlement from the perspective of the group members. Justice Bromwich was comfortably satisfied that the agreed settlement amount was a fair, reasonable and appropriate compromise. His Honour referred to the complexity and difficulty in the litigation and the real risk of success (or partial success) by CoreStaff.

While the legal costs incurred were substantial, Justice Bromwich said that the settlement took place at a very late stage of the proceedings and he was satisfied that considerable efforts had been taken to contain and minimise them. The judge noted that the membership of the group was not large. His Honour said this required the legal costs to be spread over a fewer number of beneficiaries than in many class actions and reduced the scope for substantial economies of scale.

Real returns to group members

The counsel opinions also provided a detailed analysis and explanation of the settlement distribution, including the payment of a 35% commission to the litigation funder (to be paid by a funding equalisation order), payment of legal costs and disbursements, and the gross and net distributions to each participating group member.

Justice Bromwich addressed in some detail the net proportion of the settlement moneys to be distributed to the group members. He had earlier raised this as a concern with the applicants and referred to the 2021 Federal Court decision of Evans v Davantage (No 3) [2021] FCA 70. In that case, Justice Beach discussed percentage returns to group members and said it was important not to confuse two types of percentages. That case involved a proposed return to group members of 37.4% of the gross settlement sum. However, the group members in that case were likely to get close to 100% of their individual claims plus interest. Beach J said it was “…a good example of the fallacious reasoning of those who take headline percentages of gross recoveries from settlement sums and seek to transmute them into the real returns of group members…” (at [64]-[65]).

Justice Bromwich had sought reassurance about the net distribution and said he been amply reassured. His Honour highlighted the following:

• the litigation risk on both sides was substantial. There was a live risk that the applicants might have had less success, or even outright failure, at trial. The funder’s commission of 35% was, in this case, a reasonable reflection of the litigation risk being taken in advancing funds.
• perhaps even more importantly, a substantial proportion of the group members will receive “quite a high percentage” of the value of their individual claims. Those group members “could scarcely have done better”.
• some other group members did not do as well, but that was not a function of any unfairness, but rather of their individual circumstances and the care taken to maintain fairness and reasonableness overall, including as between group members.

Viewed holistically, and having regard to the risks involved, including the real risk that was taken by the funder, the judge was satisfied that the final distribution was fair and reasonable to all group members.