Francis v Powercor Australia Ltd and Lenehan v Powercor Australia Ltd
[2022] VSC 114
•21 February 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
MAJOR TORTS LIST
S CI 2018 01113
| ANDREW JOHN FRANCIS | Plaintiff |
| v | |
| POWERCOR AUSTRALIA LIMITED (ACN 064 651 109) | |
| and ELECTRIX PTY LTD (ACN 067 232 393) | Defendants |
S CI 2018 01290
| ANTHONY LENEHAN | Plaintiff |
| v | |
| POWERCOR AUSTRALIA LIMITED (ACN 064 651 109) | Defendant |
---
JUDGE: | Nichols J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF RULING: | 21 February 2022 |
CASE MAY BE CITED AS: | Francis v Powercor Australia Ltd and Lenehan v Powercor Australia Ltd |
MEDIUM NEUTRAL CITATION: | [2022] VSC 114 |
---
COSTS – Representative proceedings – Application for costs of administration of settlement distribution scheme – Allowance for skill and care – Distribution of liability for adverse costs.
---
HER HONOUR:
This ruling concerns the final claim for costs by the plaintiffs and the Settlement Administrator in respect of these proceedings, and the administration of the settlement distribution scheme which has now been completed for each proceeding in accordance with the Court’s earlier orders.[1]
[1]See Lenehan v Powercor Australia Limited (No 2) [2020] VSC 159; Francis v Powercor Australia Limited and Lenehan v Powercor Australia Limited (2020) 63 VR 109.
The plaintiffs applied for the total sum of $318,368.81 in respect of the costs of the proceedings and the administration of the settlement scheme, to be distributed between the two proceedings in the manner described in the supporting material filed in support of those applications.
For the reasons that follow, I approve the following costs:
Professional fees in respect of proceeding and the administration of the settlement scheme $202,681.52 (inc GST)
Disbursements – counsels’ fees $70,840.00 (inc GST) Other disbursements $1,648.59 (inc GST) Costs in respect of the third and fourth costs assessor’s reports $26,500.00 (inc GST)
LESS an adjustment to account for an inadvertent duplication of an allowance for the costs of the costs assessor’s report ($60,000)
Total $241.670.11
The plaintiffs and the Settlement Administrator (Ms Kathryn Emeny, a principal at Maddens, the plaintiffs’ solicitors) relied upon a report prepared by the costs assessor, Ms Debra Paver, of 3 June 2021 (the Fourth Paver Report) and affidavits of the Settlement Administrator of 30 July 2021, 13 December 2021 and 17 January 2022.
Ms Paver’s assessment of the reasonableness and proportionality of the costs and disbursements incurred was made consistently with the methodology set out in her earlier reports and described in my earlier rulings. I will not repeat the substance of the matters set out in my earlier rulings. I accept Ms Paver’s assessments subject to the following matters which require specific consideration.
Costs associated with the distribution of the proceeds of settlement between registered group members and their registered insurers
In an earlier ruling[2] I determined a substantive dispute between insured group members and certain of their insurers concerning the distribution of settlement moneys between them. In a subsequent ruling concerning the costs of that dispute I ordered that the insurer objectors pay the plaintiffs’ costs of that application. I noted in the costs ruling that the plaintiffs, on behalf of insured group members, said that whatever order was made in relation to costs, wholly uninsured group members should not bear any burden flowing from that order because the insurance dispute did not concern them.[3]
[2]Francis v Powercor Australia Limited and Lenehan v Powercor Australia Limited (2020) 63 VR 109.
[3][2020] VSC 877, [6].
It was apparent from the Fourth Paver Report that a significant proportion of the professional fees and disbursements now claimed relate to work undertaken in connection with the insurance dispute, but the Report did not differentiate between costs related to the insurance dispute and other costs. Upon receipt of the plaintiffs’ materials in support of the present application I sought clarification of the basis on which those costs were sought to be recovered, in order to address my concern that the burden of those costs not be borne by uninsured group members.
The need to differentiate between insurance-related costs and other costs had not been addressed in the material filed on the application for the Court’s approval of costs, until the Court required the Settlement Administrator to address the issue. It ought to have been addressed at the outset.
I am satisfied by the materials filed in response to the Court’s inquiries, that the orders now sought will have the effect of ensuring that the burden of the costs related to the insurance dispute is not borne by uninsured group members. The manner in which that will be achieved is to distribute the remaining costs amount to the entire group in the first instance, and then to offset the proportion of that amount borne by uninsured group members that relates to the insurance issue, by a corresponding discount on costs that would otherwise be distributed to uninsured group members (costs not related to the insurance dispute). The insurance-related costs and the costs unrelated to the insurance dispute have been estimated by the Settlement Administrator for this purpose. That exercise was necessary because in making her assessment of the costs reasonably incurred in connection with the proceeding, Ms Paver did not distinguish legal work (and corresponding costs) related to the insurance dispute and other legal work and costs. It is regrettable that she did not do so and was not briefed to do so. Nevertheless, I am satisfied on the basis of the detailed explanation that Ms Emeny has provided, and by reference to her assessments based on her detailed understanding of the substance of the legal work undertaken, that an appropriate adjustment has been made to ensure an appropriate distribution of costs, and that it would be wasteful of costs to require any further assessment to be undertaken.
The insurance-related costs included in this distribution are only those that are not covered by the payment by the insurer objectors pursuant to my earlier orders.
Disbursements – adverse costs
The Fourth Paver Report itemises the disbursements that, in Ms Paver’s opinion, are properly claimable, such that once approved by the Court, they may be deducted from the remaining settlement moneys that would otherwise be distributed to group members. The disbursements considered in the Report include an amount of $50,000 (proposed to be distributed equally between the two proceedings) described as “Hall and Wilcox”. Ms Paver says in respect of that item:
One disbursement of particular note is the $50,000 paid to the second, third and fourth respondents in settlement of the costs entitlement in both proceedings pursuant to the orders made 3 December 2018 by the Honourable Justice Macaulay that the plaintiff pay the second, third and fourth respondents’ costs of the application on a standard basis. These respondents’ claimed costs totalling $54,751 ex GST. The parties agreed to settle those costs in both proceedings in the sum of $50,000 (with $25,000 allocated as payable in each proceeding)’.[4]
[4]Emphasis added.
Ms Paver goes on to opine that she regards the amount of $50,000 to have been reasonable in respect of the “costs of the defendants”. Nothing further is said in the Paver report in respect of that item.
It is apparent that the amount of $50,000 is the agreed sum that the plaintiff in proceeding S CI 2018 01290 (Mr Lenehan) is required to pay to the defendants, consequent upon the plaintiff making an unsuccessful application in respect of which the Court ordered that the defendants were entitled to be paid their costs. For completeness, the orders of Macaulay J of 3 December 2018 were as follows:
(1)The plaintiff’s application by summons filed on 27 November 2018 is refused.
(2)The plaintiff pay the second, third and fourth respondents’ costs of the application on a standard basis, to be taxed in default of agreement.
Upon receiving the Fourth Paver Report I directed the Settlement Administrator and the plaintiff to explain the basis on which they sought to obtain reimbursement for that amount, from settlement funds otherwise payable to group members. In response to that enquiry, Ms Emeny said the following, in substance:
(a) The plaintiff was responsible for adverse costs pursuant to the orders of the Court and it was therefore “appropriate that payment of those costs be made out of settlement funds”.
(b) Ms Paver has informed Maddens that, in her opinion, the defendants’ costs the subject of the December 2018 order should form part of the common benefit costs (meaning the costs distributed to group members), because “the orders of Macaulay J state that the costs are payable by the plaintiff”.
(c) Ms Paver included the amount because the costs were payable by the plaintiff pursuant to the Court’s order and therefore should be regarded as an expense or disbursement incurred in the process of the litigation. The application which gave rise to the Orders of December 2018 was made in respect of an issue affecting all group members’ claims. Ms Paver believes the amount of the costs (representing payment for work done by the defendants’ legal advisers on behalf of the defendants) to be “fair and reasonable”.
(d) It is Ms Paver’s opinion that those costs fall within the definition of “common benefit legal costs” to be recovered in the event of a successful outcome, under the costs agreements between Maddens and group members.
(e) Ms Emeny says that she defers to the opinion of Ms Paver on this issue. She also says that she considers that it would be consistent with the terms of the costs agreements to treat the costs in this way, and that it would be “contrary to the terms and intent of the [costs agreement] if the liability for those costs were to remain with Mr Lenehan in circumstances where those costs were incurred in respect of an application pertaining to an issue which affected the entirety of the group and the only reason Mr Lenehan incurred the liability was by reason of being the representative party”.
I reject the plaintiff’s application for reimbursement of the amount of $50,000 in respect of the costs liability assumed by the plaintiff in respect of the defendants’ costs. There is no basis on which group members ought pay those costs.
The plaintiff was, by the orders of 3 December 2018, ordered to pay those costs. Consistently with s 33ZD of the Supreme Court Act 1986 (Vic) (the Act), the orders were made against the plaintiff and not against group members.
The plaintiff’s submissions and for that matter, Ms Paver’s opinion, failed to engage in any sensible way with the terms of the relevant costs agreements.
The costs agreements between Maddens and group members have been described in an earlier ruling.[5] As remarked earlier, not all of the group members executed fee agreements with Maddens but many of them did. On this issue, although there were two different iterations of the costs agreements, all forms of the agreements in each proceeding are the same. The agreements provide as follows:
[5]See Lenehan v Powercor Australia Ltd (2020) VSC 82.
5. Legal costs
5.2Legal costs associated with litigation fall into two main categories:
5.2.1Costs between the parties to the litigation, that is, costs between the plaintiff and the defendant(s); and
5.2.2Costs between a party and its legal representatives or other parties on the same side in the litigation (for instance, costs as between a representative party and the group members).
6. Costs as between ‘plaintiff’s side’ and the ‘defendant’s side’
6.1The ordinary rule in court proceedings in Australia is that the losing side in an litigation should pay some or all of the legal costs that were incurred by the other side in running the litigation. In other words, ‘costs follow the event’.
6.2This rule is modified when the litigation is a class action. In a class action, the people who are group members in a class action cannot be ordered to pay any of the defendant’s costs, even if the class action is unsuccessful. (emphasis added)
7. Costs as between you, the lawyers, and other persons making claims
7.1 …In this section of the agreement we will explain:
7.1.1when you will become liable to pay legal costs to us, or in respect of work done by us.
Conditional costs agreement – ‘No win no charge’
7.2We will only charge you professional fees and disbursements under this agreement in the event of a successful outcome. In this agreement ‘successful outcome’ [includes] an award or judgment or order for money or other compensation to be paid or provided to you in respect of your claim or claims. (emphasis added)
If costs become payable, how are they calculated?
7.3Our professional fees will be calculated in accordance with [the Supreme Court scale with allowances and uplift].
7.4Our disbursements will be charged in the amount(s) claimed by the party or parties entitled to payment, plus GST at the applicable rate, but less any input tax credit to which we are entitled. In this agreement ‘disbursements’ means expense (not being professional fees) payable to third parties on your behalf including (but not limited to) court fees, barristers fees, interstate lawyer agencies fees, photocopying fees, process servers fees, expert report fees, travel and accommodation fees, bank charges and STD/ISD charges.
7.5In the event of a successful outcome your legal costs will be calculated as:
7.5.1our professional fees calculated in accordance with clause 7.3
7.5.2 plus unpaid disbursements.
For what work will you be charged if there is a successful outcome?
7.6Because your claim is one of a group of claims arising out of the same events and raising similar issues of fact and law, the work done by the Lawyers is likely to fall into two categories.
7.7First is the work done (and disbursements incurred) in relation to issues which affect everyone’s claims or at least the claims of a significant subset of group members. This ‘common benefit work’ is likely to include…the work done and disbursements incurred [in respect of the matters listed].
7.8The second category of work done in finalising your Claims is the work done (and disbursements incurred) in relation to issues which are ‘individual’ to your claim.
7.9.2For the common benefit work – you will pay a proportional share of the total professional fees and disbursements incurred in common benefit work plus interest on the fees and disbursements. The ‘proportional share’ will be calculated as the percentage which your claim recovery bears to the total amount of claimed recovery of all the group members who agree or are ordered by the Court to make a similarly calculated contribution.
7.9.3The costs referred to in 7.9.2 above will have been, and are to be treated as, costs incurred by the representative party (or subgroup representative party as the case may be). By making this agreement you irrevocably agree to pay your proportional share of those costs. You further irrevocably agree that this obligation may be enforced by the lawyers, or by the representative party as the person for whose benefit the obligation is assumed by you.
7.10.Note, in the event of a successful outcome a large portion of the total professional fees and disbursements incurred in respect of either common benefit work or individual benefit are likely (but not guaranteed) to be paid by the defendant. It is unlikely that such a costs order would cover the whole amount of fees and disbursements, or the uplift component calculated on the fees, or the interest that will have accrued, so although costs paid by the defendant will effectively reimburse you for a proportion of the legal costs you will be required to pay, any excess will remain payable by you.
On no sensible construction of the costs agreements can it be concluded that group members assumed liability in respect of any adverse costs. In particular:
(a)The agreements make plain that the basis on which Maddens will act in the proceeding is that in a class action group members cannot be ordered to pay any of the defendant’s costs even if the class action is unsuccessful;
(b)The agreements make plain that costs will only be charged in the event of a successful outcome as set out agreement, namely costs in respect of common benefit work, individual work and disbursements. On no sensible reading do adverse costs (payment of the defendants’ costs) fall within disbursements or common benefit work as defined in the agreements.
The plaintiff’s submission to the effect that the plaintiff has borne those costs only because he is the plaintiff misconceives the plaintiff’s role. A person who becomes a plaintiff in a group proceeding accepts the responsibilities of conducting the action as a party to it, which responsibilities include potential exposure to adverse costs liabilities, whereas group members do not.
I reject the submission that an order distributing liability for payment of the defendant’s costs the subject of the December 2018 Order in present circumstances, finds support in s 33ZJ of the Act, which provides that:
33ZJ Reimbursement of plaintiff’s costs
(1) If the Court has made an award of damages in a group proceeding, the plaintiff or a sub-group representative party, or a person who has been a plaintiff or such a party, may apply to the Court for an order under this section.
(2) If, on an application under this section, the Court is satisfied that the costs reasonably incurred in relation to the group proceeding by the person making the application are likely to exceed the costs recoverable by the person from the defendant, the Court may order that an amount equal to the whole or a part of the excess be paid to that person out of the damages awarded.
Section 33ZJ applies where the Court has made an award of damages (which is to be distinguished from the Court approving a settlement under s 33V of the Act), and is concerned with the reimbursement of the plaintiff’s costs. The plaintiff advanced no submissions as to how his reading, which requires the plaintiff’s costs to be understood as including the plaintiff’s personal liability for adverse costs, could sit consistently with the intention of Part 4A that group members not be liable for the defendant’s costs (save in specifically defined circumstances), as evident in s 33ZD of the Act. It is unnecessary to say anything further about the operation and effect of these provisions. Given the explicit contractual provisions in this case (to which I have referred above) it would not be a proper exercise of discretion to order that the group members assume responsibility for the defendant’s costs in this case. That is not to say that in a group proceeding a plaintiff could not reach a contractual arrangement with group members for the sharing of any adverse costs liability. It is unnecessary to consider that general proposition further. I need only say that I do not consider that in this case the plaintiff and group members or Maddens and group members entered into such an arrangement, as is apparent from the terms of the agreements set out above. I note that in response to the Court’s inquiries Maddens advised that group members had not, in any separate communications, been informed that they would or might be exposed to adverse costs.
The approach taken to this issue by Ms Paver does her no credit. As a practitioner who professes expertise in costs associated with group proceedings, she ought to have been aware that a liability to pay the defendants’ costs was not, on its face, an amount for which group members should be assumed to be responsible, subject only to considering whether the amount of the costs was reasonable. The issue ought to have been considered carefully. The analysis of the costs agreements set out in Ms Paver’s opinion was lacking in rigour.
That the Settlement Administrator sought to claim these costs purportedly in reliance on Ms Paver’s opinion and in reliance on parts of the costs agreement without drawing the Court’s attention to the principal provision in the agreements to the effect that group members cannot be made liable for adverse costs was inconsistent with the Settlement Administrator’s obligations.
Loading for skill and care – professional fees
Ms Paver calculated the professional fees claimable on a reasonable and proportional basis calculated on scale, and then applied or allowed for a loading under r 63.48 of the Supreme Court (General Civil Procedure) Rules 2015 assessed at 30 per cent. The principles applicable to the question of loading for skill and care are set out in an earlier ruling in this proceeding.[6] I do not consider it appropriate to allow a 30% loading. Some (although not all) of the work undertaken at this stage of the proceeding has entailed routine administration. I accept that some of it involved complexity and the consideration of novel legal issues. However, Ms Paver sought to apply a 30% loading for complexity and like factors to all of the work undertaken. That part of her Report too, was lacking in rigour. Because of the way the Report was prepared, it is not practically possible to distinguish those parts of the work that would otherwise attract a loading (which would have been calculated at 30 per cent consistently with my earlier rulings) and those which would not attract any loading or a lesser loading. It is regrettable that the Report has been prepared in this way. Having regard to the description of the work undertaken (which I will not set out here), I consider that a reasonable assessment is that the whole of work should be the subject of a 15% loading.
[6]See Lenehan v Powercor Australia Ltd (2020) VSC 82.
Disposition
The above-mentioned considerations are reflected in the orders approving the costs as set out at the commencement of these Reasons, which discuss the substantive matters on which I take issue with the Fourth Paver Report and the Settlement Administrator’s application.
0
3
0