Cordosa v SA Power Networks - [2022] SASC 48

Supreme Court of South Australia

(Civil)

CORDOSA v SA POWER NETWORKS

[2022] SASC 48

Reasons for Decision of Judge Bochner a Master of the Supreme Court

13 May 2022

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - CLASS ACTIONS OR GROUP PROCEEDINGS

Reasons for approval of settlement of representative action
Williams v FAI Home Security Pty Ltd (No 4) [2000] FCA 1925; Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663; Rowe v AusNet Electricity Services Pty Ltd [2015] VSC 232; Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) [2006] FCA 1388, considered.

CORDOSA v SA POWER NETWORKS

[2022] SASC 48

CIVIL

On 23 November 2021, I made orders approving the settlement of the representative action brought by the applicant on behalf of a group against the respondent following a bushfire on the Yorke Peninsula in November 2019. These are my reasons for doing so.

The Fire

On 20 November 2019, a bushfire commenced near a water tower at 132 Stansbury Road, Yorketown, in South Australia. Before it was contained, the fire burnt over 5,000 hectares, destroying eleven houses, fencing, livestock and farming infrastructure. On the day, the South Australian Country Fire Service had determined that the weather conditions were in the “Catastrophic” range, with temperatures expected to exceed 40°C, with mean wind speeds of 52 km/h, gusting to over 70km/h. Relative humidity was 7%.
There is no disagreement between the parties that the fire was caused by the failure of a lug which connected the centre phase bridging conductor to the transformer terminal on a stobie pole, which forms part of the Yorketown feeder 11kV three-phase distribution line. Arcing between the conductor and the transformer terminal caused the emission of molten particles, which ignited dry grass at the base of the pole. The fire spread quickly.

The applicant’s case

The applicant’s claim relies on negligence, breach of statutory duty and nuisance. He alleges that the respondent owed a duty of care to the applicant to ensure that all parts of the powerline were safe and operated safely in the foreseeable weather conditions so as to avoid causing personal injury, property damage or economic loss. He further alleges that the fire unreasonably interfered with the use or enjoyment by the applicant of his interest in land and that he suffered a nuisance created by the respondent. In particular, the applicant says that the respondent failed to:
•              Design and/or install the lug correctly;
•              Inspect or maintain the powerline to ensure that the lug and/or its connection to the transformer did not fail;
•              Have adequate systems for the replacement of infrastructure at risk of failure; and
•              To adjust the operating settings on the automatic circuit recloser on the powerline to reduce the fault clearance time and/or to disable the reclose function.
While the respondent accepts that its assets caused the fire, it denies that the fire was caused by its negligence. Issues in respect of the respondent’s system of inspection and maintenance are very much in dispute, including what methods of inspection a reasonable system should include, and whether such methods would have revealed the fault in any event. There is no doubt that the factual and legal issues in this matter are complex. Any trial would in all likelihood be lengthy and require oral evidence from many witnesses, both lay and expert.

The action

This action was commenced on 11 June 2020. Group members are defined in the statement of claim in the following way:
5. The group members to whom this proceeding relates are:
5.1. all those persons who suffered personal injury (whether physical injury, or psychiatric injury as defined below) as a result of the Yorketown bushfire (including without limitation, any injury suffered as a result of burns, inhalation of smoke, attempts to escape the Yorketown bushfire or other emergency action taken by the person in response to the Yorketown bushfire); where “psychiatric injury” in this group means nervous shock or another psychiatric or psychological injury, disturbance, disorder or condition which has been diagnosed as such in a diagnosis given to the person by a medical practitioner prior to 31 May 2021; and
5.2. all those persons who suffered loss or damage to property as a result of the Yorketown bushfire (including, without limitation, loss or damage resulting from emergency action taken by any person in response to the Yorketown bushfire); and
5.3. all those persons who at the time of the Yorketown bushfire resided in, or had real or personal property in the Yorketown bushfire area alternatively in the immediate vicinity of the Yorketown bushfire area and who suffered economic loss, which loss was not consequent upon injury to that person or loss or damage to their property as a result of the Yorketown bushfire;
5.4. the legal personal representatives of the estates of any deceased persons who came within paragraphs 5.1, 5.2 and/or 5.3 at the time of the Yorketown bushfire (group members).
At the time that the proceeding was instituted, the applicant’s lawyers believed that there were approximately thirty-five property owners affected by the fire, and that damages extended to approximately $10 million.
On 23 September 2020, I made orders to allow victims of the fire to opt in to the proceedings. On the final date for opting in, twenty individuals had opted in, or were deemed to have opted in. Shortly after the final date for opting in, three separate actions were commenced by three insurers in respect of loss and damage caused by the fire. On 15 December 2020, I made orders in respect of an opt out procedure to deal with the overlap between group members in this action and the three actions commenced by the insurers. Thirteen group members elected to opt out, with the result that seven group members remain registered in this action. The matter was referred to mediation.
Prior to mediation, the respondent agreed to make discovery in respect of a limited set of categories. The parties also agreed to exchange expert reports prior to mediation, to give the mediation the best chance of success. The parties attended mediation on 3 June 2021; resolution was not achieved. Following mediation, an in principle settlement was reached between the parties on 20 August 2021 and a settlement agreement was executed by 17 September 2021.

Application for approval of the settlement

Rule 134.1 of the Uniform Civil Rules 2020 provides that a resolution of a representative action by a representative party is not binding unless the terms of the resolution are approved by the Court. Once its terms have been approved, the settlement is binding on a represented party.
In support of his application for approval, the applicant relies on the affidavit of Kathryn Amy Emeny, sworn on 18 November 2021. Ms Emeny is a principal at Maddens Lawyers, the solicitors for the applicant and group members. Exhibited to Ms Emeny’s affidavit is the confidential written opinion of counsel (“the Confidential Opinion”) addressing the question of whether the settlement is fair and reasonable and in the best interests of the group members. This material has been filed in accordance with UCR 134.4, on a court access basis only, as it contains an analysis of the merits of the applicant’s claim and the opinion of counsel of his risks should he proceed to trial. It is appropriate that this opinion remains confidential. In addition to Ms Emeny’s affidavit, comprehensive submissions of counsel were filed in support of the application for approval. Oral submissions were also made by senior counsel, Mr Tobin SC in support of the application.

The settlement

Under the settlement agreement, the respondent has agreed to pay to the applicant the sum of $2,250,000 inclusive of legal costs and interest, on the basis of a denial of liability. Shortly after the settlement agreement was signed, group members were notified of the proposed settlement. They were subsequently provided with an estimate of the likely range of their recovery, and of their ability to object to the settlement if they wished to do so. Similar correspondence was sent to the relevant insurers where group members were insured for their losses (or part of their losses). Following receipt of this correspondence, one group member contacted Ms Emeny’s office; after she was provided with further information she did not raise any objection to the settlement. Each group member was then contacted individually to ensure that the correspondence outlining the settlement had been received and to obtain their instructions in respect of it. No objections were raised.
The agreement provides for a proposed settlement distribution scheme (SDS), which details a mechanism for assessing claims for personal injury (PI) and economic loss and property damage (ELPD). Ms Emeny will be appointed the Administrator of the SDS.
Assessment of the ELPD claims will rely on the detailed and comprehensive assessments that occurred for the purpose of formulation and mediation. For this purpose, group members were given a data workbook to record their loss and damage in as much detail as possible. They were then asked to return the completed workbook to Maddens Lawyers with any available supporting documents such as photographs, invoices and quotes. They were also asked to provide details of any claims made on their insurance in respect of the fire, following which Maddens Lawyers obtained the insurance claim files from the insurer. Group members were then contacted, often on multiple occasions, to seek further instructions in respect of their loss. Maddens Lawyers then engaged independent loss assessors to carry out comprehensive and detailed assessments in respect of each claim. The loss assessors visited each property to undertake site inspections and to verify the nature and scope of the loss. The completed loss assessment reports were provided to group members for review. Because of this detailed assessment of each group member’s claim, group members will not be permitted to provide further information, unless specifically requested by the SDS Administrator. Group members will then receive a compensation payment on a pro rata basis. Once an assessment has been made by the Administrator, no appeal or review process is open to the group member, except in the case of error, slip or omission.
PI claims will be assessed by Assessing Counsel appointed by the Administrator. The Assessing Counsel will assess whether each PI claimant satisfied the relevant threshold requirements to establish an entitlement to compensation, and if so, the likely value of the PI claim. Assessing Counsel has the power to refer a group member for medico-legal assessment and to confer with a group member if considered necessary. This has, in fact, already occurred in preparation for mediation.

Reimbursement payment to the applicant

The SDS provides for a payment of $30,000 to the applicant to reimburse him for his time and effort and incidental disbursements incurred by him in relation to the action. It is also to acknowledge the burden that he carried as lead applicant and which was for the benefit of all group members.

Agreement with insurers

The SDS provides for an entitlement on the part of an insurer to recover a portion of a group member’s entitlement, where the group member’s loss includes an insured loss. At the date of making the orders, an agreement has been reached with one of the two insurers concerned; negotiations are continuing with the other.

Legal Costs

The SDS provides for the deduction of the applicant’s costs and disbursements from the settlement sum once the settlement has been approved. At the time of making the orders, Maddens Lawyers was in the process of obtaining an assessment of the applicant’s costs from an independent costs assessor. Further orders will be sought in this regard in due course.

Outcome for group members

It is anticipated that, once approval has been granted, there will be immediate distribution to group members of between 55% to 60% of their assessed losses.

Applicable legal principles

In Williams v FAI Home Security Pty Ltd (No 4), Goldberg J examined the role of the Court when asked to approve a settlement of a representative action. He said:
Ordinarily the task of a court upon an application such as this, is to determine whether the proposed settlement or compromise is fair and reasonable, having regard to the claims made on behalf of the group members who will be bound by the settlement. Ordinarily in such circumstances the Court will take into account the amount offered to each group member, the prospects of success in the proceeding, the likelihood of the group members obtaining judgment for an amount significantly in excess of the settlement offer, the terms of any advice received from counsel and from any independent expert in relation to the issues which arise in the proceeding, the likely duration and cost of the proceeding if continued to judgment, and the attitude of the group members to the settlement. In In re General Motors Corporation Pick‑Up Truck Fuel Tank Products Liability Litigation 55 F.3d 768 (3rd Cir. 1995) at 785 the United States Court of Appeals for the Third Circuit referred to the nine‑factor test it had adopted:
“… to help district courts structure their final decisions to approve settlements as fair, reasonable and adequate as required by Rule 23(e) [which requires court approval for settlement of class actions]. See Girsh v Jepson 521 F.2d 153, 157 (3d Cir. 1975). Those factors are: (1) the complexity and duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining a class action; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement in light of the best recovery; and (9) the range of reasonableness of the settlement in light of all the attendant risks of litigation.”
(See also County of Suffolk v Long Island Lighting Co 907 F.2d 1295 (2nd Cir. 1990) at 1323, 5 Moore’s Federal Practice 3^rd ed at p 23‑348). This nine‑factor test is equally helpful in the Australian jurisdiction and I find it a useful guide in considering the present proposed settlement.
Osborn JA, in Matthews v AusNet Electricity Services Pty Ltd, articulated the questions to be dealt by the Court in approving such settlements in the following way:
The critical questions raised by the application for approval of the settlement are:
(a) whether the proposed settlement is fair and reasonable as between the parties having regard to the claims of the group members; and
(b) whether the proposed settlement is in the interests of group members as a whole and not just in the interests of the plaintiff and the defendants.
(citation omitted)
He then referred to the decision of Goldberg J in Williams and his reference to the nine factor test, and said:
Nevertheless, it is also well accepted that there is no checklist which necessarily identifies the indicia of fairness or its absence in a particular case.
Potentially relevant factors include the following:
(a)        the complexity and duration of the litigation;
(b)        the reaction of the group to the settlement;
(c)        the stage of the proceedings at which settlement is proposed;
(d)        the relative risks of establishing liability;
(e)        the relative risks of establishing loss and damage;
(f)        the risks of continuing a group proceeding;
(g) the ability of the defendants to withstand a greater judgment and the range of reasonable outcomes governing the settlement in light of the best feasible recovery;
(h) the range of reasonableness governing the settlement in light of all the attendant risks of litigation on the one hand and all the advantages of settlement on the other; and
(i) the terms of any advice received from counsel and/or from any independent expert in relation to the issues which arise in the proceeding.
Lastly, it is necessary to keep in mind the observation of Jessup J in Darwalla Milling Co Pty Ltd v F Hoffman La Roche Limited (No 2) that it is not the Court’s function to attempt to second guess the plaintiff’s advisors as to whether the plaintiff ought to have accepted the offer of the defendants.
[T]he court’s function is, relevantly, confined to the question whether the settlement was fair and reasonable. There will rarely, if ever, be a case in which there is a unique outcome which should be regarded as the only fair and reasonable one. In settlement negotiations, some parties, and some advisers, tend to be more risk-averse than others. There is nothing unreasonable involved in either such position and, under s 33V, the court should, up to a point at least, take the [plaintiffs] and their advisers as it finds them. Neither should the court consider that it always knows more about the group members’ businesses than the [plaintiffs], or more about the actual risks of the litigation than their advisers. So long as the agreed settlement falls within the range of fair and reasonable outcomes, taking everything into account, it should be regarded as qualifying for approval under s 33V.
(citations omitted)
In Rowe v AusNet Electricity Services Pty Ltd, Emerton J said:
The court must be independently satisfied of the fairness and reasonableness of the proposed settlement. It will not be sufficient to simply assess whether the opinions expressed by the plaintiff’s legal advisers appear on their face to be reasonable. Furthermore, the almost complete absence of substantive objections to the settlement cannot relieve the court of its obligations. Nevertheless, the assessment which the court is able to make can ultimately be no more than one which confirms whether or not the proposed settlement is within the range of fair and reasonable outcomes. Importantly, in making such an assessment, the relative prospects of success can only be broadly gauged.
In considering whether the proposed settlement of a class action falls within the range of fair and reasonable outcomes, a court will consider the following matters:
(a)        the complexity and duration of the litigation;
(b)        the reaction of the group to the settlement;
(c)        the stage of the proceedings at which settlement is proposed;
(d)        the relative risks of establishing liability;
(e)        the relative risks of establishing loss and damage;
(f)        the risks of continuing a group proceeding;
(g) the ability of the defendants to withstand a greater judgment and the range of reasonable outcomes governing the settlement in light of the best feasible recovery;
(h)          the range of reasonableness governing the settlement in light of all the attendant risks of litigation on the one hand and all the advantages of settlement on the other; and
(i) the terms of any advice received from counsel and/or from any independent expert in relation to the issues that arise in the proceeding.
These considerations provide guidance to the court rather than representing some kind of a checklist. There is no checklist of considerations that necessarily identifies fairness or its absence in any particular case.
(citations omitted)
I accept that I must make my own independent assessment of the settlement reached between the parties, in order to come to view that the settlement is fair and reasonable taking into account the claims made by the group members, and that it is in the best interests of the group members as a whole.

Consideration

When considering whether the settlement is fair and reasonable between the parties, I have taken into consideration the pleadings, the description of the investigations carried out by Maddens Lawyers and their method of taking instructions, the opt in and opt out procedures that were adopted and the Confidential Opinion, which sets out in some detail the expert evidence relied on by the parties, with an analysis of the risks faced by the applicant in proceeding to trial.
The Confidential Opinion describes the risks faced by the applicant at trial, both in relation to liability and to quantum. I accept counsel’s assessment that this matter is of significant factual and technical complexity and carries with it the attendant risks in respect of establishing liability on the part of the respondent. It is clear that, should the matter proceed to trial, the applicant (and therefore the group members) faces a risk of an adverse outcome at trial, including loss of the claim in its entirety, with consequential cost orders. Further, the applicant and group members will face various hurdles in establishing the entirety of the quantum claimed in respect of their loss. The settlement clearly avoids these risks. I note that the cost estimate of proceeding to trial is extremely (although, in my view, not unrealistically) high.
The settlement in this matter has been reached at a relatively early stage of the proceedings. Only limited discovery has been by the parties and final expert reports have not been commissioned. The parties have sought to limit the legal fees incurred to those essential to allowing them to assess the prospects of success of the litigation and to negotiate effectively at mediation. There is no doubt that, should the settlement not be approved, the parties will begin to incur substantial legal costs almost immediately.
Further trial preparation will take significant time, and it is unlikely that the parties would be ready for trial before late 2022 at the earliest. Thus, there would be substantial delay in the applicant and group members receiving any benefit from a successful trial, by the time that trial preparation is complete, the matter is listed and heard, judgment is received and all appeal periods have lapsed.
If the settlement is approved, it is anticipated that the applicant and each group member will receive between 55% and 60% of their assessed losses within thirty days. I am satisfied that a reasonable and sensible method of assessing loss has been adopted and conscientiously applied, and that the assessed losses of each group member approximate as far as is possible, the actual losses suffered. Recovery of 55% to 60% of assessed losses is significant and, having regard to the risks in respect of both liability and quantum, I am satisfied that this is a factor that militates towards a finding that the settlement is a fair and reasonable one.
I consider that early resolution is a significant factor to be taken into account. Other than avoiding the inevitable delay in obtaining a judgment, it also gives the applicant and group members finality and certainty and brings to an end the anxiety that is undoubtedly caused by being involved in litigation.
I am satisfied that the settlement is fair and reasonable as between the parties.
I am satisfied that the method of distribution of the settlement monies between group members proposed by the SDS is fair, and that it ensures that group members are treated equally. There has been substantial consultation and investigation with each group member and with relevant insurers. No group member or insurer will be treated more or less favourably than any other.
I note that the settlement includes a payment of $30,000 to the applicant to reimburse him for the time, inconvenience and burden occasioned by carrying out the functions and obligations of applicant in this matter. In Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2), Jessup J approved the payment of sum of money to the lead applicant in a class action to compensate him for the time spent and expenses incurred in taking on those responsibilities on behalf of all group members. He said:
I consider it prima facie reasonable that particular parties who have sacrificed valuable time and incurred expenses in the interests of prosecuting this proceeding on behalf of group members as a whole should be able to look to the corpus of the settlement sum for some degree of compensation and reimbursement. More importantly, perhaps, I would hold that group members who have benefited from the proceeding could not be heard to deny the reasonableness of such a proposition.
Despite allowing such payments, Jessup J adopted a conservative approach in assessing the quantum of such a claim.
In this matter, the applicant was not asked to keep time records of his attendances. Maddens Lawyers made an estimate of the number of hours that he spent in attendances on its staff and other related matters. While some of this time was related to his personal claim, it also dealt with issues common to some or all of the group members, as a result of which there was an overlap between common benefit, and individual benefit. Having regard to the interests of the group members and the modest size of the payment (it amounts to less than 1.5% of the settlement sum) I consider that it is a fair and reasonable amount to compensate the applicant for taking on the burden of lead applicant for the benefit of all group members.
I am satisfied that the settlement is fair and reasonable as between the group members.
The settlement agreement provides for the applicant’s approved legal costs to be paid from the settlement sum. The effect of this is that the approved costs will be shared equally by the group members.
Prior to the commencement of the action, each group member signed a Conditional Costs Agreement with Maddens Lawyers, a term of which was that the applicant’s legal costs would be paid from any settlement sum. In any event, I consider that it is reasonable for each group member to share equally in the cost burden incurred in arriving at a settlement for all of them. As each of them will benefit from the costs being incurred, each should share the burden of them. Ultimately, an independent costs consultant will assess the legal costs incurred by Maddens Lawyers, and further Court approval will be required before they can be paid. I note that the Administration Costs of the SDS also require assessment by an independent costs consultant before being approved by the Court for payment. I am satisfied that this is appropriate.

Conclusion

I consider that the settlement reached between the parties falls within the range of outcomes that is fair and reasonable. Given the risks facing the applicant in respect of establishing liability, and the hurdles that the group members will facing in establishing quantum, I consider that it is appropriate to approve the settlement. I note that all group members and relevant insurers have been consulted in respect of the settlement and no objections have been received.
It is appropriate that I make the orders sought by the applicant.