Black Saturday bonanza for law firm as victims forced to wait

Top partners in a leading law firm have pocketed more than $16m, but the victims are yet to receive a cent.

09/02/2009 NEWS: Victorian Fires resulting in massive loss of life and property - Strathewen on the fringe of Kinglake has all but been wiped from the map.

Top partners in a leading law firm have pocketed record dividends totalling more than $16 million in one year arising from huge settlements in class actions for the 2009 Black Saturday bushfires in Victoria — but the victims are yet to receive anything.

Several thousand survivors of the fires who signed up with law firm Maurice Blackburn are still waiting for compensation, with many in severe financial distress before, and since, a huge financial settlement in 2014 and a second one last year were entrusted to the firm to administer.

Some survivors of the fires were told two months ago they would not see any funds until next year.

While the survivors wait, the richest dividend stream in Maur­ice Blackburn’s history began to flow to the firm’s equity-owning senior partners just days before a public announcement in July 2014 of a $494m settlement, the largest in Australia’s class-action history.

That settlement for the Kilmore East-­Kinglake class action, which was approved by a Supreme Court judge on December 23, 2014, was followed by a $300m payout for the Murrindindi-Marysville class action, which settled­ in February last year, and was approved three months later.

The Weekend Australian can reveal­ that the dividends paid to equity partners were $200,000 on July 1, 2014, followed by $3,938,368 on July 9, $1.364m on October 31, $22,000 on November 7, $687,500 on December 23, $7,828,250 on February 18 last year, and $2,029,500 on April 28 last year.

The windfall dividend payouts to the partners are disclosed in financi­al documents filed by Maur­ice Blackburn Pty Ltd with the Australian Securities & Investments Commission.

More dividends paid to the equity­-owning partners in the 2015-16 financial year will be disclosed to ASIC later this year.

The firm, which employs more than 460 staff, reported a loss after tax of about $7.5m, which it said was “driven by increased share-based payment expenses and exit retirement benefits”.

The $16,069,618 in dividends was not disclosed to most of the firm’s staff and it did not need to be disclosed to clients, who knew that Maurice Blackburn would receive a lump sum of $60m from the first class action to cover costs of running the risky case in Victoria’s ­Supreme Court.

A lump sum of $20.1m was also paid to the firm for the second class-action settlement of $300m.

In addition to the $80m in lump-sum payments, Maurice Blackburn, which is marketed with the motto “We Fight For Fair”, is continuing to earn millions of dollars­ in ongoing fees for managing a ­lucrative scheme to determine payments to the victims who signed up for the bushfires class action­s.

The time taken to determine the sums has now surpassed the forecast made by the firm in July 2014 that it would take 12-18 months to release the funds to the fire’s victims and their families.

Andrew Watson, who is in charge of Maurice Blackburn’s class-actions department, was appointe­d administrator of the Settlement Distribution Scheme. Other class-action schemes run by other firms make interim payments to clients, but Maurice Blackburn did not respond to questions about its policy.

The $16.069m in dividends in the last financial year compares with $2.589m paid to the firm’s senior equity partners in the previous year, according to the firm’s accounts with ASIC.

As the partner with the most shares in the firm, its chairman Steve Walsh has been the biggest beneficiary from the dividends, which are paid in addition to salar­ies and other benefits.

The firm’s profits increase as the time taken to process the indivi­dual claims drags on. Documents based on orders by the Supreme­ Court indicate that it is costing about $1m a month in administrati­on fees for clients of the first class action, and legal sources estimate a similar sum for the second class action.

The Weekend Australian submitted 10 questions to Maurice Blackburn. The firm, which did not answer the questions, replied: “Our sole focus since the start of the case and still to this day has been to get the best outcome for clients as soon as possible — that is where all our energy is directed still to this day. The court has put on the record­ its satisfaction that we are doing everything possible to expedit­e payments on the 10,000-plus claims we are processing. There has never been a class action in Australia of this size and complexity and we will continue doing everything we can to get this record settlement distributed as quickly and as fairly as possible to our bushfire clients.”

The lucrative case has its roots in the ignition of a bushfire shortly before noon on February 7, 2009, as a result of a section of power line at Kilmore East breaking and falling to the ground during extreme weather conditions. In December 2014, after the first class action was settled, Suprem­e Court judge Robert Osborn­ found: “In the course of the conflagration, 119 people died, more than 1000 suffered serious injury, and approximately 1772 homes and properties were destroye­d or damaged.”

The second class action arises from the Murrindindi-Marysville blaze in northeast Victoria on the same day, which killed 40 people, damaged and destroyed more than 500 homes, schools, community facilities, government buildings, businesses, livestock and plantations and caused millions of dollars damage.

In a judgment in May approving the $300m settlement for the second class action, judge Karin Emerton said: “There is plainly a material advantage in the early receipt of funds pursuant to the settlement, even if there were a possibility of obtaining greater compensation at some uncertain time in the future.”

The dividend sums pocketed by the partners who held the more lucrative ordin­ary shares in the firm in the last financial year — Mr Walsh, Josh Bornstein, Kathryn Booth, John Voyage (since resigned), Rod Hodgson, John Salanitri, Bennett Slade, Liberty Sanger, Mr Watson and Peter Koutsoukis — are not disclosed in the financial accounts.

The first bushfires class-action claim, brought by the firm against the owner and operator of the power line, a maintenance contractor, and the state of Victoria, led to a trial lasting 208 days and settlement for just less than $500m. In his judgment approving the settlement, Justice Osborn­ said the survivors of the fire had suffered­ immensely and needed the funds to pick up the pieces of their lives.

“The experiences of the fire and its consequences have been horrific for many group members,’’ he found. “The settlement will materially reduce the stress and anxiety otherwise inherent in the continuation of the proceedings and the need to establish the extent of individual claims in an adversarial context.”

In a subsequent ruling last May, judge Jack Forrest said that “given the unprecedented size of the settlement sum, and the vast number of claimants”, it was important for the court to ensure the settlement distrib­ution “is undertaken in a timely, efficient and cost-effective fashion”.

Justice Forrest added: “Time­liness of distribution is particularly significant in ensuring that claimants can get on with their lives with some financial assistance and, inasmuch as it is possible to do so, to put the events of Black Saturday behind them.”

The ongoing settlement scheme run by Maurice Blackburn provides that “all costs, expenses­, taxes, levies, duties, charges, fees or other imposts or obligations arising in connection with the administration of the scheme … shall be paid from the (lump sum) held by the scheme administrator from time to time”.

Senior legal sources said schemes such as this were highly lucrative, as law firms could charge fees of about $600 an hour for essentially an administrative role, not a challenging legal role.

A Maurice Blackburn spokesman said yesterday that “all administrative costs of ­conducting the distribution are subject to assessment by an ­independent costs assessor and court approval”. He said Justice Forrest had indicated­ on March 31 his “endorsement of our activit­y in this complex matter to date”, and cited the judge’s comment the court was “satisfied that everything is being done”.

Editor’s note: Comments have been switched off for legal reasons.