A v Schulberg (No 2)

[2014] VSC 258

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION
MAJOR TORTS LIST

S CI 2012 2791

A	Plaintiff
v
DR MARK SCHULBERG & ORS	Defendants

---

JUDGE:	BEACH JA
WHERE HELD:	Melbourne
DATE OF HEARING:	5 June 2014
DATE OF JUDGMENT:	5 June 2014
CASE MAY BE CITED AS:	A v Schulberg & Ors (No 2)
MEDIUM NEUTRAL CITATION:	[2014] VSC 258

---

PRACTICE AND PROCEDURE – Group proceeding – Application for approval of settlement of group proceeding – Whether Court should approve settlement of group proceeding – Supreme Court Act 1986, Part 4A.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D E Curtain QC with Dr M J Collins QC and Mr D B Bongiorno	Slater & Gordon Limited
For Dr Mark Schulberg, Croydon Hospital Pty Ltd and Ms Carol Richards	Mr M D Wilson QC with Mr D J Wallis	Tress Cox Lawyers
For the Australian Health Practitioner Regulation Agency	Mr S A O’Meara QC with Mr C M Archibald	Norton Rose Fulbright Australia

HIS HONOUR:

1. This is the proceeding that has become known as the Hepatitis C Class Action. Pursuant to Part 4A of the Supreme Court Act 1986, the plaintiff commenced this proceeding on behalf of group members, defined to be the plaintiff and all other women who:

(a)between January 2008 and mid December 2009 (‘the period’) underwent a procedure for termination of pregnancy (‘termination procedure’) at the Croydon Day Surgery located at 411-415 Dorset Road, Croydon, in the State of Victoria (‘the surgery’);  and

(b)for the purposes of the termination procedure at the surgery were administered anaesthetics by Dr James Latham Peters;  and

(c)since undergoing the termination procedure at the surgery have for the first time been diagnosed as having hepatitis C or found to be carrying hepatitis C antibodies.

1. A deed of settlement has now been entered into between the plaintiff and her solicitors, Dr Mark Schulberg (the second defendant and second third party in the proceeding), AHPRA[1] (the third defendant), Croydon Hospital Pty Ltd (the fourth defendant and fourth third party) and Carol Ann Richards (the third third party).[2] Under the deed of settlement, the second, third and fourth defendants have agreed to pay $13.75 million, inclusive of costs, to the plaintiff and group members in full and final settlement of the proceeding. Pursuant to s 33V of the SupremeCourtAct, the settlement requires the approval of the Court.  This is the application for the appovement of the settlement of this proceeding.

   [1]Australian Health Practitioner Regulation Authority.

   [2]Exhibit JC-C3 to the affidavit of Julie Clayton affirmed 30 May 2014 headed ‘Cofidential Affidavit as to Merits and Advice’.

1. The first point to be noted on this application is that, while Dr Peters was originally the first defendant in this proceeding, the plaintiff discontinued against him when it became apparent that he did not have sufficient means to pay the damages that might be ordered should the plaintiff’s claim have succeeded.  Dr Peters is currently serving a term of imprisonment in respect of the conduct which brought about this litigation.  He is not a party to the settlement agreement.

1. In support of the application for approval, the plaintiff relies upon:

(a)       a confidential affidavit affirmed by Andrew John Baker on 12 May 2014;

(b)      an open affidavit affirmed by Julie Clayton on 30 May 2014;

(c)       a confidential affidavit as to group members affirmed by Julie Clayton on 30 May 2014;

(d)      a confidential affidavit as to merits and advice affirmed by Julie Clayton on 30 May 2014;

(e)       a confidential affidavit as to costs sworn by Catherine Mary Dealehr on 3 June 2014; and

(f)       a further confidential affidavit as to group members affirmed by Julie Clayton on 4 June 2014.[3]

[3]The reason for confidentiality in respect of the confidential affidavits is, in conformity with previous orders of the Court, to protect the identities of the plaintiff and group members. The publication of the identities of the plaintiff and group members, and any report of the proceeding that might tend to identify the plaintiff or any other group member, has been prohibited by orders made in this proceeding (see in particular the orders of Almond J made on 23 September 2011).

1. The affidavit material discloses that there has been extensive investigation, advertising and publicity in relation to this proceeding.  As a result, the number of group members has been ascertained with a high degree of certainty.  The number of group members is, on the material, at least 60, and at most 62.  All of these group members have been identified and are aware of this proceeding and the proposed settlement.

1. If the settlement is approved, the settlement monies will be allocated in accordance with a detailed settlement distribution scheme.[4]  The settlement distribution scheme provides for each group member’s entitlement to be calculated in accordance with a formula and process that takes into account the various factors by which the strength of an individual group member’s claim might be assessed.  These include whether or not a group member has been diagnosed with hepatitis C antibodies only (‘only’ in the sense of not having been diagnosed with live hepatitis C virus);  whether or not a group member has been diagnosed with live hepatitis C virus;  matters of past history;  level of past symptoms (physical and psychiatric);  duration of treatment;  likelihood of future symptoms;  and extent of future treatment.  The settlement distribution scheme is a 19 page document.  The terms of the settlement distribution scheme demonstrate that a high degree of sophisticated thought has gone into the way in which the settlement monies should be allocated fairly across group members.

   [4]Exhibit JC-O1 to the affidavit of Julie Clayton affirmed 30 May 2014 headed ‘Open Affidavit’.

1. This proceeding is well-described as complex and difficult litigation.  While it might be thought that a claim against Dr Peters (if he had assets) would be relatively straight forward, the claims made against the defendants who are parties to the deed of settlement are anything but straight forward.  Difficult questions of duty and causation are involved.[5]

   [5]Cf Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254, 265 [26] (Gleeson CJ) and 292 [111] (Hayne J); Sullivan v Moody (2001) 207 CLR 562, 581-582 [55]-[61] (Gleeson CJ, Gaudron, McHugh, Hayne and Callinan JJ); Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540, 555 [9]-[10] (Gleeson CJ) and 575-6 [81]-[82] (McHugh J); Stuart v Kirkland-Veenstra (2009) 237 CLR 215, 254 [112] (Gummow, Hayne and Heydon JJ); Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420, 441 [48] (French CJ, Gummow, Hayne, Heydon and Crennan JJ).

1. The plaintiff’s solicitors and counsel are all practitioners of considerable experience in catastrophic tort and class action litigation.  Each of them recommends the approval of the proposed settlement.  The affidavits filed, and the advice tendered, demonstrates that each of them has given detailed consideration to the complexities and difficulties associated with this litigation.  With respect, I accept their opinions and the correctness of their advice.

1. Fundamentally, the approval of the proposed settlement falls to be determined by whether it is fair between the parties and fair between the plaintiff and group members.[6]  I have no doubt that the settlement is fair between the parties.  Equally, I have no doubt that it is fair between the plaintiff and group members.

   [6]See the authorities referred to by Dixon J in In re Timbercorp Securities Ltd (Applications for the approval of compromises)(No 2) [2014] VSC 246, [20].

1. In preparing the application for approval, the solicitors for the plaintiff have advised each of the group members of their likely shares in the settlement monies.  The group members have been advised of indicative ranges.  At one end of the spectrum, one group member has been advised that her distribution estimate ranges between $32,536.25 and $42,032.13.  At the other end of the spectrum, another has been advised that her distribution estimate ranges between $299,435 and $326,835.50.  Additionally, group members have been advised that there may be a further deduction for costs in respect of their individual claims in an amount of between $5,000 and $10,000.

1. The indicative range figures for group members’ shares of the proposed settlement have been calculated after allowing for costs and disbursements that have been incurred to date by the plaintiff and group members.[7]  While those costs and disbursements may appear high to some, it is to be remembered that this proceeding will determine at least 60 significant and complex claims.  Undoubtedly, total costs and disbursements would have been much greater if, instead of a group proceeding, individual claims had been issued by each group member.

   [7]$3,059,981.77

1. The affidavit material discloses that the response from the majority of participating group members who have contacted the plaintiff’s solicitors has been supportive and positive in relation to the proposed settlement.  That said, a small number of group members had expressed varying degrees of concerns about their individual assessments.  One could debate the extent to which the application of the settlement distribution scheme provides a good proxy for the amount an individual group member might recover if she was to issue an individual proceeding.  However, that is not the job of this Court.  The job of this Court is to determine whether or not the settlement is fair between the parties and between the plaintiff and group members.  While, in making that assessment, it is necessary to form a view as to the correlation between the amount individual group members will recover under the settlement distribution scheme and the amount they might recover after a trial, necessarily any such comparison can only be performed in a broad manner.

1. It is possible that the application of the settlement distribution scheme will produce relatively greater or lesser entitlements to compensation as between group members.  To someone who asserts that they are getting a smaller share of the settlement, relative to other group members, than would be the case if conventional calculations of common law damages were undertaken, this may seem unfair.  However, remembering that the settlement is inclusive of costs, I am persuaded that it is not in the interests of the group as a whole (or any individual group member) that there be any further inroad into the money available for distribution by requiring the costs of common law assessments of damages to be undertaken in individual cases.

1. Having considered all of the evidence tendered on this application, I am of the view that the settlement is conspicuously fair between the parties and between group members.

1. There are two final matters that needs to be addressed.  First, the effect of orders approving the settlement will be that any group member, who has not opted-out[8] and who has not registered an intention to pursue an individual claim, will lose her rights to make a claim.  While I am satisfied that it is very unlikely that such a person exists, the possibility needs to be considered in determining whether the settlement is fair between group members.  Having regard to the extensive work that has been undertaken in identifying group members, the extensive publicity this and related proceedings have been given, the need for finality so far as this litigation is concerned and the fairness of the proposed compromise, I am persuaded that it is appropriate to make the orders sought.  However, I propose to allow a further 14 days for any group member bound by these orders to come forward and seek leave to register  their intention to participate in the settlement.

   [8]Cf Supreme Court Act 1986 s 33J(5).

1. Secondly, there is the question of costs to date and the proposed costs of the administration of the settlement.  The plaintiff’s solicitors have undertaken that, if they are appointed administrators, their costs of the administration will be no more than $150,000.  I accept this undertaking.  Further, it seems to me that, if different solicitors were now appointed, the costs of the scheme’s administration would likely be greater than they would be in the hands of solicitors familiar with the issues and the facts concerning each of the group members.  Additionally, I am not persuaded that there is any relevant conflict involved in the appointment of the plaintiff’s solicitors as administrators of the scheme.  However, should any conflict emerge, this may be dealt with under the liberty to apply which I propose to reserve generally.

1. As to costs to date, I accept the evidence of Ms Dealehr as to the reasonableness of the costs and disbursements incurred by the plaintiff’s solicitors.  That said, it is not possible for me to have formed other than a general view as to reasonableness.  While I do not wish to encourage the incurring of further expense by saying anything that might provoke an application for taxation, if a significant number of group members wish to go down that track (at the risk of eroding settlement moneys) then I would entertain such an application, within the next 14 days, pursuant to the liberty to apply which I am about to reserve.  I will do the same in relation to an individual group member’s costs incurred to date.

1. For these reasons there will be an order approving the settlement of this proceeding as effected by the deed of settlement and the settlement distribution scheme.

- - -