A leading law firm pursuing a class action against retailer Harvey Norman is seeking approval to take up to 30% of any damages awarded if the case succeeds, arguing the higher fee reflects the financial risk of running the litigation.

If the increased fee is not granted the case could be dropped.

Melbourne-based firms Maurice Blackburn and Echo Law are representing plaintiffs in the case, which alleges Harvey Norman misled customers into purchasing extended warranties known as “Product Care” that provided little or no additional protection beyond rights already guaranteed under Australian Consumer Law.

Barristers acting for the firms have applied to the Victorian Supreme Court for a group costs order (GCO) that would allow lawyers to take up to 30 per cent of any compensation recovered. The fee would be deducted from the total settlement or damages pool before payments are distributed to class members.

Typically, legal fees in Australian class actions are around 25% but the firms argue the higher percentage is justified given the risk of running the case on a “no win, no fee” basis.

During a hearing before Justice Claire Harris, barrister Dion Fahey said Maurice Blackburn was assuming a “significant amount of risk” in conducting the litigation and that the requested GCO was “not unreasonable”.

He told the court that in several recent class action settlements where group costs orders were approved, law firms ultimately received less compensation than they would have under traditional litigation funding arrangements.

Fahey also said Maurice Blackburn was currently running the case on a no-win, no-fee basis but would not continue doing so if the court refused the application.

“Maurice Blackburn has agreed to do no win, no fee and provide an indemnity to the plaintiffs until a reasonable time after determination of this application,” he said.

He added that there remained “a degree of uncertainty” about the case’s funding arrangements, noting there was also a costs-sharing agreement with litigation funders that remained subject to renegotiation.

The class action alleges Harvey Norman breached consumer law by engaging in misleading or deceptive conduct and failing to properly inform customers that similar protections already existed under statutory consumer guarantees.

Justice Harris adjourned the hearing and indicated she would seek further written responses regarding confidential material before making a decision on the application.

Harvey Norman is represented by Madeleine Salinger, instructed by Arnold Bloch Leibler.