In a shareholder class action against BHP over the collapse of a Brazilian dam, two law firms were allowed by the Federal Court to increase their fee share from a promised 15% to 50%. They ultimately received $48 million from the $110 million settlement. This decision has raised concerns regarding transparency, public trust and oversight in Australia's class action regime.
The case originated from the 2015 disaster involving a tailings dam operated by BHP's joint venture in Brazil, widely regarded as one of the most devastating industrial accidents. Three law firms initially competed to represent shareholders, each offering low legal costs to gain court approval. The dispute continued for seven years and included appeals through Australia’s highest courts before the matter was settled shortly before a UK judgment that would have held BHP liable.
Although legal costs were initially capped at $150 million and fees limited to 15%, the court ultimately approved the higher payout following a request from the legal representatives. No group members objected to the amendment. The presiding judge criticised certain features of the cost arrangement but accepted the increase, noting the firms had taken on complex legal issues and prolonged litigation without proceeding to a trial.
The litigation funder received $2.4 million as commission, with the bulk of its approved portion used to cover legal expenses. Critics argue the total legal fees were excessive, especially compared to other settlements of similar size. For example, legal fees amounted to $11.5 million in Crown Resorts’ $125 million claim and $26.2 million in AMP’s $110 million settlement.
Experts have warned that rising legal costs in class actions could encourage lawyers to extend proceedings unnecessarily. They also pointed out that the current system, which bases allowed costs on market rates, does little to protect group members when those market rates are already inflated.
