Hassid v Queensland Bulk Water Supply Authority t/as Seqwater

[2017] NSWSC 599

Supreme Court

New South Wales

Medium Neutral Citation:

Hassid v Queensland Bulk Water Supply Authority t/as Seqwater [2017] NSWSC 599

Hearing dates:

5 May 2017

Date of orders:

09 May 2017

Decision date:

17 May 2017

Jurisdiction:

Common Law

Before:

Beech-Jones J

Decision:

1.   In respect of the notice of motion filed for Rodriguez & Sons Pty Limited (Rodriguez) on 20 April 2017:
   (a)   Order that paragraph 6(e) of the Statement of Claim filed 9 January 2017 be struck out.
   (b)   Otherwise, motion dismissed; and
   (c)   The plaintiffs pay the costs of Rodriguez of the motion.

 

2.   In respect of the plaintiffs’ notice of motion filed on 4 May 2017:
   (a)   Motion dismissed;
   (b)   The plaintiffs pay the defendants’ costs of the motion.

 

3.   On or before 10 May 2017, the plaintiffs to serve any proposed Amended Statement of Claim (proposed ASOC) on the defendants and the solicitor for Rodriguez. Any proposed ASOC is to be limited to proposed amendments to paragraph 6(c) and associated paragraphs in the Statement of Claim.

 

4.   On or before 17 May 2017, the defendants and Rodriguez are to notify the plaintiffs as to whether each consents to an order for leave to file the proposed Amended Statement of Claim.

 

5.   On or before 19 May 2017, the plaintiffs are to file and serve any application for leave to file the proposed ASOC (in the form provided in accordance with order 3 above), such motion to be returnable on 24 May 2017, together with their evidence in support and written submissions relied upon.

 

6.   On or before 23 May 2017 the defendants and Rodriguez are to file and serve submissions in respect of the plaintiffs’ motion for leave.

 

7.   The plaintiffs’ notice of motion is to be listed for hearing on 24 May 2017 with an estimated duration of one day.

 8.   The plaintiffs are to prepare two separate sets of draft opt out notices and orders reflecting:
   (a)   paragraph 6(c) as included in the Statement of Claim; and
   (b)   the proposed amendments to paragraph 6(c) in the proposed ASOC.

Catchwords:

REPRESENTATIVE PROCEEDINGS – competing class actions – Queensland Flood – first class action commenced in 2014 – second class action commenced just prior to expiry of limitation period – first class action already set down for trial – overlapping group members – plaintiff in first action applied to strike out part of group definition in second action – maintenance of overlapping groups creates conflict of duty for legal representatives – inhibits progress of proceedings and likelihood of settlement – parts of group definition that create overlap struck out – leave to amend group definition in second action otherwise refused

Legislation Cited:

Civil Procedure Act 2005 (NSW)
Limitation of Actions Act 1974 (Qld)

Cases Cited:

Branir Pty Ltd v Wallco Pastoral Company Pty Ltd [2006] NTSC 70; (2006) 203 FLR 115
Bryan v Moloney (1995) 182 CLR 609
Commissioner of State Revenue v Aidlaw Pty Ltd [2010] VSC 405
Elphick v Westfield Shopping Centre Management Company Pty Ltd [2011] NSWCA 356
Johnston v Endeavour Energy [2015] NSWSC 1117
Lam v Rolls Royce PLC (No 3) [2015] NSWSC 83
Lewis v Daily Telegraph Ltd (No 2) [1964] 2 QB 601
Lidden v Composite Buyers Ltd (1996) 139 ALR 549
Moore v Inglis (1976) 9 ALR 509
Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater [2014] NSWSC 1565
Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 3) [2015] NSWSC 838
Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 4) [2015] NSWSC 1352
Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 5) [2015] NSWSC 1771
Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 6) [2016] NSWSC 1279
Smith v Australian Executor Trustees Limited; Creighton v Australian Executor Trustees Limited [2016] NSWCS 17
Tindle v Ansett Transport Industries (Operations) Pty Ltd (1990) 21 NSWLR 492

Texts Cited:

S Degeling and M Legg, “Fiduciary Obligations of Lawyers in Australian Class Actions: Conflicts Between Duties”, (2013) 37 UNSW Law Journal 914

Category:

Procedural and other rulings

Parties:

Philip Thomas Hassid (First Plaintiff)
Koula Hassid (Second Plaintiff)
Rodriguez & Sons Pty Ltd (Applicant on Notice of Motion)
Queensland Bulk Water t/as Seqwater (First Defendant)
Sun Water (Second Defendant)
State of Queensland (Third Defendant)

Representation:

Counsel:
A Martin SC; T Bagley (Plaintiffs)
A Bannon SC; N Owens SC; JE Taylor (Applicant on Notice of Motion)
D Klineberg (First Defendant)
DL Williams SC; H Neal (Second Defendant)
JM Horton QC; E Morzone (Third Defendant)

    Solicitors:
Gillis Delaney Lawyers (Plaintiffs)
Maurice Blackburn (Applicant on Notice of Motion)
King & Wood Mallesons (First Defendant)
Norton Rose Fulbright (Second Defendant)
Crown Solicitor for State of Queensland (Third Defendant)

File Number(s):

2017/7321

Judgment

1. HIS HONOUR: On 9 January 2017 the lead plaintiff, Philip Thomas Hassid, commenced these proceedings as representative proceedings under Part 10 of the Civil Procedure Act 2005 (“CPA”) (the “Hassid proceedings”). Mr Hassid seeks damages and alleges negligence by three defendants in respect of their operation of the Wivenhoe and Somerset dams west of Brisbane. Their negligence is alleged to have caused or exacerbated the flooding of land in the greater Brisbane area during the period 10 to 11 January 2011.

2. On 5 May 2017, I heard argument in respect of prayer 1 of a notice of motion filed in these proceedings by the lead plaintiff, Rodriguez and Sons Pty Ltd (“Rodriguez”), in another representative proceedings (the “Rodriguez proceedings”). In those proceedings Rodriguez also seeks damages against the same three defendants in respect of their operation of the Wivenhoe and Somerset dams. There are no material differences between the allegations of breach made by Rodriguez in its Further Amended Statement of Claim (the “RFASOC”) and Mr Hassid in his Statement of Claim (the “HSOC”). The Rodriguez proceedings were commenced in July 2014 (see Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater [2014] NSWSC 1565; “Rodriguez (No 1)”).

3. By prayer 1 of its notice of motion (the “Rodriguez motion”), Rodriguez sought to strike out that part of the group definition in the Hassid proceedings that has the effect of creating an overlap between the group members for the two representative proceedings (the “Hassid group” and the “Rodriguez group”).

4. At the conclusion of argument I announced that I would make the order sought by prayer 1 of the Rodriguez motion and also dismiss a notice of motion brought by Mr Hassid seeking to amend the definition of the Hassid group in the manner outlined below (the “Hassid motion”). I directed the parties to prepare orders that gave effect to those rulings and certain other matters. On 9 May 2017, the parties provided orders which were made on that day. On 5 May 2017, I also stated that I would provide reasons as soon as possible. This judgment constitutes those reasons.

The Rodriguez Proceedings

5. As noted, the Rodriguez proceedings were commenced in 2014. In late 2014, the proceedings were set down for hearing on 18 July 2016. However, on 14 September 2015 the hearing date was vacated for the reasons explained in Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 4) [2015] NSWSC 1352.

6. Later in 2015, I granted an application to file a further version of the RFASOC (Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 5) [2015] NSWSC 1771; “Rodriguez (No 5)”). In Rodriguez (No 5) at [4] to [8], I described the definition of the group in the then version of the RFASOC as follows:

“It is necessary to note the definition of group members set out in [6] of the Further Amended Statement of Claim (“FASOC”). Four overlapping subclasses of group members are identified. The first is those who held an “interest in land (whether in the nature of freehold title, lease or otherwise)” and who “suffered loss and damage … by reason of the inundation of that land” by flood water from the Brisbane or Bremer rivers in the period 9 January 2011 to 24 January 2011 (FASOC, [6(a)(i)]).

The second is those who held an interest in land and whose use or enjoyment of that interest was interfered with by reason of the inundation of that land or other land located downstream of Wivenhoe Dam by flood water from the Brisbane or Bremer Rivers in that period such that they suffered loss or damage (FASOC, [6(a)(ii)]). The FASOC pleads this sub-group as having a cause of action in nuisance and, in some cases, trespass.

The third is those who “owned personal property” in the period 9 January 2011 to 24 January 2011 which was damaged or destroyed by the inundation of land on which that property was located by flood water from either of the two rivers in that period (FASOC, [6(b)]).

The fourth is those who regularly conducted a business or enterprise downstream of Wivenhoe Dam and “who suffered economic loss by reason of the inundation by flood water” from either of the two rivers in the period 9 January 2011 to 24 January 2011 (FASOC, [6(c)]).

Further, each of these four categories is limited to persons who either entered into a litigation funding agreement with a particular litigation funder by a particular date in respect of any claim for loss or damage (excluding any claim for personal injury) arising out of the factual matters pleaded in the FASOC (FASOC, [6(d)(i)]) or have been indemnified for that loss by an insurer who has entered into such a funding agreement by a certain date (FASOC [(6(d)(ii)]).” (emphasis added)

7. As this description makes clear, the Rodriguez group is “closed” in the sense that all of its members or their insurers have signed a litigation funding agreement. Each of them is identified and Rodriguez’s solicitors have communicated with them directly.

8. On 22 February 2016 the Court granted leave to Rodriguez to file an amended pleading which excluded group members who fell within the emphasised portions of the above description; ie persons who suffered an interference with the use and enjoyment of their land because of the inundation of other land and persons who conducted businesses downstream of Wivenhoe Dam and suffered “economic loss” by reason of the inundation by flood water of land downstream of Wivenhoe Dam. Paragraph 8 of the pleading was amended to specifically state that group members’ claims “do not include claims for loss or damage for …. pure economic loss”.

9. The solicitor for Rodriguez, Rebecca Gilsenan, swore an affidavit in support of the Rodriguez motion. She stated that on and from 24 February 2016 her firm specifically advised group members of the effect of these changes. In particular, group members were advised that persons who only had a claim for “pure economic loss” were no longer group members and that group members who suffered property damage and (unrelated) pure economic loss were not able to claim the latter. [1]

   1. Affidavit of Rebecca Gilsenan sworn 3 May 2017 (the “Gilsenan Affidavit”) at [12].

10. On 22 February 2016 orders were made in the Rodriguez proceedings approving the form and content of opt out notices. The opt out notice specifically advised recipients that claims for pure economic loss were excluded. The initial opt out period was due to expire on Friday, 27 May 2016. By 10 June 2016, 46 group members opted out. Since that time a number of other members have opted out. The opt out period has been extended to allow that to occur.

11. Later in 2016 the hearing of certain common questions in the Rodriguez proceedings was fixed to commence on 3 October 2017. The various interlocutory skirmishes reveal that the level of resources devoted by the parties to the preparation of their evidence for that hearing, especially the expert evidence, is vast (Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 3) [2015] NSWSC 838 at [7] and [43] to [46]; “Rodriguez (No 3)”). A conservative estimate of the length of the hearing is that it will be completed by the end of term in 2017. On one estimate, it may run well into 2018.

12. A mediation is scheduled for the Rodriguez proceeding in August 2017.

The Lynch Proceedings

13. In late 2016 a proceeding was commenced which named as plaintiffs all the individual members of the Rodriguez group other than Rodriguez itself and named the same defendants as the Rodriguez proceeding (the “Lynch proceeding”). The substantive allegations against the three defendants in the Lynch proceeding are identical to the Rodriguez proceeding. These proceedings were commenced out of a concern that s 182 of the CPA might not have the effect of suspending the “running” of the relevant limitation period in the Limitation of Actions Act 1974 (Qld) in any application it has to group members’ claims. At present, the Lynch proceeding has been stayed but orders have been made that have the effect that the parties to that proceeding are bound by the answers to common questions given in the Rodriguez proceedings.

The Hassid Proceedings

14. The Hassid proceeding was commenced on 9 January 2017. It seems likely that the six-year period provided by s 10(1) of the Limitation of Actions Act in respect of claims arising out of the Queensland flooding expired the next day.

15. As noted, the HSOC is almost identical to the RFASOC. For present purposes, two relevant differences between the two pleadings are the group definition and the formulation of the relevant duty of care and risk of harm. These are addressed below. The HSOC was given an initial return date of 18 April 2017. Upon becoming aware of the proceeding I ordered the proceedings be made first returnable on 24 March 2017 which was the next return date for the Rodriguez proceeding. Copies of the HSOC were provided to the defendants.

16. On 24 March 2017, I fixed the Hassid proceeding for hearing at the same time as the Rodriguez proceeding. I also ordered that it be mediated at the same time as the Rodriguez hearing. I extended the time for Mr Hassid to opt out of the Rodriguez proceeding, an opportunity he exercised. He also discontinued his participation in the Lynch proceeding. The Hassid proceedings was stood over to 3 to 5 May 2017 with directions made for the service of evidence by him in the meantime.

17. When the matter returned on 3  and 4 May 2017 the parties agreed on orders in the Hassid proceeding which resolved various applications made by the defendants and clarified the nature of Mr Hassid’s participation in the final hearing. The effect of those orders was as follows.

18. First, leaving aside any evidence concerning the loss said to have been suffered by Mr Hassid and certain group members, Mr Hassid will be relying on the evidence adduced by Rodriguez to prove his case on breach of duty and causation. As I will explain, there may still be differences in the manner in which they conduct their cases.

19. Second, Mr Hassid agreed to provide an amount for security for costs in favour of each defendant.

20. Third, orders were made which had the effect of providing for a limited form of “class closure” in relation to the Hassid proceeding but only in relation to the mediation (Lam v Rolls Royce PLC (No 3) [2015] NSWSC 83 at [17]). The orders provided that, as part of the issuing of opt out notices, group members will be advised that, if they wish to participate in any settlement that arises out of the mediation, they must register their claims and provide some details of their losses. The orders provided that, unless group members do so, they cannot participate in any settlement without the leave of the Court.

The Group Definition in the Hassid Proceeding and the Hassid Motion

21. As noted, the Hassid motion sought to amend the group definition in the Hassid proceeding (whereas the Rodriguez motion sought to strike out part of the definition). It is necessary to set out the entirety of the proposed new paragraph, namely HSOC [6], in marked up format to illustrate the scope of the amendments and the extent of the overlap between the current and proposed group definition in the Hassid proceeding on the one hand and the group definition in the Rodriguez proceeding on the other:

“D   Group Members and Common Questions

6   The Group Members for purposes of this proceeding are, subject to paragraph 7 below, all persons who:

a)   held an interest in land (whether in the nature of freehold title, lease or otherwise) and:

i)   who suffered loss or damage (whenever occurring) by reason of the inundation of that land by flood water from the Brisbane River or Bremer River (and their tributaries) in the period 9 January 2011 to 24 January 2011; and, or alternatively,

ii)   whose use or enjoyment of that interest was interfered with by reason of the inundation of that land, or of other land located downstream of Wivenhoe Dam, by flood water from the Brisbane River or Bremer River (and their tributaries) in the period 9 January 2011 to 24 January 2011 such that they suffered loss or damage; or

b)   owned personal property in the period 9 January 2011 to 24 January 2011 which was damaged or destroyed by reason of the inundation of land on which that property was located by flood water from the Brisbane River or Bremer River (and their tributaries) in the period 9 January 2011 to 24 January 2011; or

c)   conducted a business, enterprise or undertaking, in whole or in part, at one or more locations located downstream of Wivenhoe Dam and who suffered pure economic loss (being economic loss not consequential on property damage) by reason of the inundation by flood water from the Brisbane River or Bremer River (and their tributaries) of areas located downstream of Wivenhoe Dam in the period 9 January 2011 to 24 January 2011;

AND

d)   are not group members as that term is defined in the proceedings Rodriguez & Sons Pty Limited v Queensland Bulk Water Supply Authority trading as Seqwater in the Supreme Court of New South Wales being proceedings number 2014/200854 (the Rodriguez proceedings); or

(e)   are group members as that term is defined in the Rodriguez proceedings but only to the extent of any that they have a claim or claims they have for pure economic loss within sub-paragraph c) above; or

(f)   have opted out of the Rodriguez proceedings.”

22. Sub-paragraphs [6(a)(ii)] and [6(c)] of the unamended version of this group definition include the two categories of persons who were removed from the Rodriguez group in February 2016, namely, persons whose only loss or damage was interference with the use or enjoyment of land by reason of the inundation of other land by flood water and economic loss from downstream businesses (see [6] and [8]).

23. The effect of HSOC [6(d)] is that members of the Rodriguez group are excluded except if they fall within HSOC [6(e)] or [6(f)]. However, HSOC [6(e)] is curious. It appears to wrongly assume that a person can be a group member in a representative proceeding but only “to..[an]..extent”. A person is either a group member or not. The effect of HSOC [6(e)] in its current form is to render persons who fall within the definition of the Rodriguez group, who have not opted out and who also operated a business downstream of Wivenhoe dam and suffered economic loss by reason of the inundation of flood water, group members in the Hassid proceeding. Senior Counsel for Mr Hassid, Mr Martin SC, accepted this was the case. Further nothing else in the HSOC limits such group members’ claims in the Hassid proceeding to only seeking recovery of the kind of loss referred to in HSOC [6(c)]. Instead, its effect is that these dual group members currently make claims for damage to real and personal property and consequential loss in the Rodriguez proceedings and also make claims for damage to real and personal property and consequential loss as well as economic loss for downstream businesses in the Hassid proceeding. That said, I understand the intention in the Hassid proceeding was to only seek recovery of such a dual group member’s claim as are not being pursued in the Rodriguez proceeding. The reasoning below proceeds on that basis but the same result follows if HSOC [6(c)] is construed in the manner I have stated.

22. To reflect the claim for economic loss for businesses downstream of the Wivenhoe Dam, the HSOC differs from the RFASOC by pleading a “risk of harm to businesses” (HSOC [142A]) in addition to a risk of harm to property and interference with the use and enjoyment of property resulting from the failure to conduct flood operations at the two dams. The HSOC pleads a duty of care to avoid or minimise each of these risks (HSOC [144]).

23. One of the proposed amendments to HSOC [6(c)] sought to introduce the words “(being economic loss not consequential on property damage)”. These words were included to confirm that the economic loss referred to in HSOC [6(c)] does not cover persons who fall within HSOC [6(a)] by reason of having suffered loss because of the inundation of their own land. Even though leave to amend was refused I expect that this proposed amendment will be sought again. It is unlikely to be opposed.

24. The other proposed amendment to HSOC [6(c)] sought to expand the form of pure economic loss referred to from economic loss incurred by downstream businesses to all persons who suffered “pure economic loss” by reason of the flooding. This clearly has the potential to vastly expand the number of persons who are group members of the Hassid proceeding. In turn, by the operation of the HSOC [6(e)], this proposed amendment to the HSOC [6(c)] has the potential to greatly increase the number of persons who are members of both groups.

25. Otherwise, the proposed amendments to HSOC [6(e)] appear to be intended to address the point noted in [23]. For the reasons there stated, they do not have that effect.

26. One difficulty with the proposed amendments to HSOC [6(c)] is that there are no corresponding amendments to the pleading of the risk of harm and the duty of care so as to embrace the wider form of economic loss sought to be recovered.

Rodriguez Motion: Overlap Between Group Members

29. Prayer 1 of the Rodriguez motion sought to strike out HSOC [6(e)] in both its amended and unamended forms. If HSOC [6(e)] was removed, that would ensure that no person could be a member of both groups. It was not disputed that Rodriguez had a sufficient interest in the Hassid proceedings to give it standing to apply for prayer 1. Given the potential effect of the group definition in the Hassid proceedings on the Rodriguez proceedings, Rodriguez is clearly entitled to bring this application (see Johnston v Endeavour Energy [2015] NSWSC 1117 at [94] to [125]). It was also not disputed that s 183 of the CPA enables the Court to grant the relief sought by prayer 1 of the Rodriguez motion. It provides:

“In any proceedings (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order that the Court thinks appropriate or necessary to ensure that justice is done in the proceedings.”

30. In seeking to strike out HSOC [6(e)] Senior Counsel for Rodriguez, Mr Bannon SC, did not contend that it was either an abuse of process or oppressive per se for two actions to be maintained on behalf of the same group members against the same defendants in respect of the same events. However, he submitted that it was unnecessary for Rodriguez to establish that given that the threshold for making an order under s 183 is only the necessity to “ensure that justice is done in the proceedings”. Thus, in Smith v Australian Executor Trustees Limited; Creighton v Australian Executor Trustees Limited [2016] NSWCS 17 at [49] (“Smith”), Ball J proposed making orders that deemed various persons to have opted out of a representative action to avoid overlapping claims because to do so was “in the interests of justice” (at [25]). His Honour did not make any finding that the maintenance of the two actions amounted to an abuse of process.

31. Some of the matters that were said to warrant the striking out of HSOC [6(e)] reflect the concerns that underlie the Court’s reluctance to allow two sets of legal representatives to act for the same party in litigation (see Elphick v Westfield Shopping Centre Management Company Pty Ltd [2011] NSWCA 356 at [3] to [11]), as well as its reluctance to allow plaintiffs to be separately represented (Lewis v Daily Telegraph Ltd (No 2) [1964] 2 QB 601 at 619, 623 and 624; “Lewis”) and to allow a defendant to be exposed to multiple proceedings brought by the same plaintiff in respect of the same subject matter in the same or different courts (Moore v Inglis (1976) 9 ALR 509; Commissioner of State Revenue v Aidlaw Pty Ltd [2010] VSC 405 at [9]; Lidden v Composite Buyers Ltd (1996) 139 ALR 549 at 559). In such cases, the Court seeks to avoid the occasioning of prejudice or unfairness to a defendant (see Tindle v Ansett Transport Industries (Operations) Pty Ltd (1990) 21 NSWLR 492, 500; Lewis at 623; Branir Pty Ltd v Wallco Pastoral Company Pty Ltd [2006] NTSC 70; (2006) 203 FLR 115 at [24] per Mildren J). However, the principal basis for the application appears to be relatively unique to representative actions, namely, the basis for one representative proceeding to significantly prejudice the other even though the lead plaintiffs and legal representative in both proceedings are different.

32. Mr Bannon SC identified three matters that were said to warrant the striking out of HSOC [6(e)], namely, that the maintenance of overlapping group members: creates conflicting duties for the legal representatives; will cause uncertainty and the incurring of excessive costs for Rodriguez during the opt out process of the Hassid proceeding; and is likely to adversely affect the prospects of the Rodriguez proceeding settling. He submitted this was exacerbated by the difficulty in identifying persons who were members of both groups. Each of the defendants supported prayer 1 of Rodriguez’s motion and made submissions consistent with those points.

33. Senior Counsel for Mr Hassid, Mr Martin SC, opposed prayer 1 of the Rodriguez motion. His principal contention was that its effect would be to shut out the pure economic loss claims of some members of the Rodriguez group without them having been given notice of any intention to do so. He otherwise submitted that the various issues raised by Mr Bannon SC are either addressed by the orders made on 4 May 2017 for notification by those Hassid group members who wish to participate in any settlement that arises out of the mediation (see [20]) or could otherwise be addressed by cooperation and discussions between Mr Rodriguez’s and Mr Hassid’s legal representatives.

34. Prayer 1 of the Rodriguez motion raises two separate but related issues namely whether the existing overlap between membership of the Rodriguez group and the Hassid group should be allowed to continue and, if not, how it should be removed. The points raised by each of Mr Bannon SC and Mr Martin SC concerned both issues. I will address their points in turn.

Overlap Creates Conflicting Duties

35. I accept that to maintain the overlap between members of the Rodriguez group and the Hassid group would create a significant risk of a conflict of duty for the legal representatives for each of the lead plaintiffs in the Rodriguez and Hassid proceedings in the presentation of their client’s respective cases. As a matter of practicality this conflict is insurmountable.

36. It was accepted that, assuming the Court permitted overlapping claims, if a person was a group member of both proceedings then each set of legal advisors would assume an obligation to act in that member’s best interests which would include proffering advice as to settlement and conducting the proceedings to further their interests (see S Degeling and M Legg, “Fiduciary Obligations of Lawyers in Australian Class Actions: Conflicts Between Duties”, (2013) 37 UNSW Law Journal 914). Prima facie, in doing so they would have to consider the interest that such group members have in the other representative action.

37. During the course of argument, a number of matters were raised that illustrate the scope for the inconsistent, and potentially mutually detrimental, presentation of the two cases even though they might be made on behalf of overlapping group members and based largely on the same evidence. Thus, in the Rodriguez proceedings, Rodriguez’s representatives would or might seek to demonstrate that some particular form of economic loss suffered by a group member, or set of group members, in the Rodriguez proceeding was consequential on property damage so as to maximise the prospects of other Rodriguez group members recovering similar amounts in those proceedings. However, Mr Hassid’s representatives would or might be concerned to demonstrate that such a loss was “pure economic loss” so as to maximise the prospects of Hassid group members recovering such amounts in the Hassid proceeding. The discussion below illustrates the scope for argument over these issues (see [48]).

38. Further, in an effort to persuade the Court to find that there was a duty of care owed by the defendants in the form pleaded in the RFASOC, Rodriguez’s representatives might seek to contrast that form of duty with the wider duty pleaded in HSOC. It may be submitted that the duty pleaded in the RFASOC is relatively conventional but the duty pleaded in the HSOC is untenable. However, Mr Hassid may wish to contend that the pleading of a duty to prevent some form (or all forms) of pure economic loss as set out in the HSOC is only a short extension of the duty pleaded in Rodriguez.

39. Similarly, in the Rodriguez proceeding it appears to be crucial to the success of each individual group members’ claim that it be established that their own real property was inundated by flood water or their personal property was damaged by flood water and the negligence of the defendants caused or exacerbated that inundation or damage. However, insofar as a group member in the Hassid proceeding seeks recovery of pure economic loss, then they do not need to establish that. Instead, they need only establish that there was flooding downstream of Wivenhoe dam that was caused or exacerbated by the defendants’ negligence (although it would still need to be demonstrated that flooding or exacerbation of flooding caused their loss). This has the potential to lead to differing submissions being made concerning the reliability of the hydrological modelling of the effect of the output from the two dams on flooding in the greater Brisbane area (see Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 4) at [4]; Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 6) [2016] NSWSC 1279 at [16]). Thus, in the Rodriguez proceedings it appears that relative exactness in the hydrological modelling must be shown. In Hassid it appears that it need not.

40. If there are overlapping claims then the obligation Rodriguez’s legal representatives owe to the Rodriguez group members who are also members of the Hassid group may preclude, or at least deter, them from making any or all of these arguments as well as others because they are potentially detrimental to those group members’ interest in the Hassid proceeding. However, Rodriguez’s legal representatives are also obliged to present the case of those group members who are not members of the Hassid proceedings to the best of their ability. Thus, if Rodriguez’s legal representatives formed the view that the proper conduct of the Rodriguez proceeding warranted the adoption of the above points or other matters that may be directly or indirectly detrimental to the Hassid proceeding, then they would be placed in a position of conflict between the interests of overlapping group members and the balance of the Rodriguez group. In practical terms the conflict would be irreconcilable as the logistics of obtaining independent advice and then consent for such a large group on such a complex matter in the appropriate time frame are so daunting that they can be put aside as unrealistic.

41. Other potential instances of conflict can be envisaged. The most obvious is if, during the mediation, the defendants make a settlement offer to resolve the Rodriguez proceeding that has a condition which has the practical effect of inhibiting the pursuit of Mr Hassid’s case. This is not unrealistic given that the conduct of the Hassid proceeding appears to be almost completely dependent on the evidence adduced in the Rodriguez proceeding. The duty owed by Rodriguez’ legal representatives to group members who are also members of the Hassid group may warrant their recommending a rejection of such an offer whereas their duty to the balance of the group may warrant their recommending acceptance.

42. To a large extent the maintenance of the overlap between the Rodriguez group and the Hassid group creates a counterpart conflict for Mr Hassid’s legal representatives, namely, a conflict between the interests of those members of the Hassid group who are group members in the Rodriguez proceedings and the balance of the Hassid group.

43. In his written submissions Mr Martin SC denied that there was any conflict. He also contended that “[i]f Rodriguez’s solicitors can discharge their duty in respect of group members with an interest in land and those who owned personal property, then they can also discharge their duties where those group members have claims in another proceeding for pure economic loss”. [2] The nature of any conflict in acting for both real property owners and personal property owners in the Rodriguez proceeding was not expanded upon. If it was correct then it would also apply to the Hassid proceedings as well given the terms of HSOC [6(a)(i)] and [6(a)(ii)] (see [21]). In any event, to point to a latent conflict that may lurk in the group definition in the Rodriguez proceeding is no answer to the conflict that arises from overlapping claims created by the filing of the HSOC which seeks to include members of the Rodriguez group in the Hassid group.

    2. Plaintiffs’ Submissions – Overlapping Claims at [16].

44. In and of itself, the above means that the existence of overlapping group members cannot be countenanced in this case. As noted, the remaining issue is how that overlap should be removed. Before I address that question I will address the other matters raised by the parties which bear upon this issue.

Cost and Uncertainty Arising from Opt Out in Hassid Proceeding

45. One matter raised by Rodriguez concerned the uncertainty and cost that the maintenance of an overlap between members of the Rodriguez group and the Hassid group will generate when opt out notices are issued in the Hassid proceedings which is likely to occur in June 2017. If an overlap between group members is maintained, each member of the Rodriguez proceeding who is also a member of the Hassid proceedings will receive such a notice. In her affidavit Ms Gilsenan states that she is concerned about the uncertainty and cost that may result in that there may be “hundreds if not thousands” of enquiries by group members in the Rodriguez proceedings upon their receipt of those notices. Ms Gilsenan expects that such inquiries will concern “the nature of the [Rodriguez group member’s] individual losses and whether they meet the Hassid group definition, what they ought to do in respect of the Hassid Proceeding, how one proceeding relates to the other and what their obligations are under their funding agreements if they wished to participate in the Hassid Proceeding”. [3] Ms Gilsenan states that to address that uncertainty would require her to allocate further professional staff in circumstances where there are no more lawyers available in her firms’ “national class actions practice”. This would occur in circumstances where, as explained, Rodriguez group members were placed on notice of the deletion of claims for loss of business profits that were not consequential on property damage during 2016.

    3. Gilsenan Affidavit at [22].

46. These contentions concern both whether overlap should be maintained and, if not, how it should it be addressed. At this point it suffices to state that a diversion of the resources of Rodriguez’s legal representatives in this period has the real potential to significantly affect the interest that the entire Rodriguez group has in the proper conduct of the Rodriguez proceeding. The hearing date of October 2017 was allocated well before the Hassid proceeding was filed. It was always envisaged that mediation would take place sometime during the middle of the 2017. It follows that the current period was always likely to be the most intensive period of preparation for the Rodriguez proceeding.

Difficulties in Identifying Overlapping Group Members

47. If an overlap between the Rodriguez group and the Hassid group persists, then there is a further and related difficulty for the opt out process in the Hassid proceedings and the progress of the matter generally, namely, the reference to “pure economic loss” in proposed HSOC [6(c)]. During the course of argument, Mr Martin SC submitted that this concept was well known to the law and referred to the description of “mere economic loss” given by Mason CJ, Deane and Gaudron JJ in Bryan v Moloney (1995) 182 CLR 609 at 617 namely loss or damage that was “distinct from, and not consequent upon, ordinary physical injury to person or property”. However the application of that description to all the forms of loss suffered as a result of the flooding downstream from Wivenhoe Dam is not so straightforward. It requires the identification of the head of damage, and then an inquiry into whether or not that damage results from inundation and consequently damage to that person’s real or personal property or other property.

48. An illustration of the difficulty in determining whether a head of damage is consequential loss or “pure economic loss” as referred to in proposed HSOC [6(c)] is raised by an affidavit sworn by a partner of the solicitor for Mr Hassid, Mr Gillis. He stated that he was contacted by a member of the Rodriguez group whose home was inundated by flood water and suffered damage that was repaired at a cost of $100,000.00. This person told Mr Gillis that in April 2010 his property was valued at $790,000.00 but only sold for $670,000.00 in 2014 being $120,000 less than its value before the flood. Without further information it is not possible to determine whether the loss in value of the home is consequential or pure economic loss. Assuming that the loss in value was somehow related to the January 2011 flood, it maybe that the loss in value was attributable to market knowledge that the particular home was inundated by water and damaged. In that case the loss in value is, at least, arguably, consequential loss. Alternatively it maybe that the loss in value was attributable to market knowledge that other homes in that area, suburb or Brisbane generally, but not that particular home, were inundated. If that were the case, the drop in value would appear to be “pure economic loss” as contemplated by proposed HSOC [6(c)].

49. Most representative proceedings identify group members by reference to some criteria the satisfaction of which will not be definitively known until the outcome of a contested hearing or agreement with the defendants. The terms of [6(a)(i)] and [6(a)(ii)] of the RFASOC illustrate that. However the present issue is not concerned with the difficulties in definitively determining whether a person is ultimately a member of a group but the immediate problem of identifying whether a person is a member of two groups and, if so, whether they need to opt out of one or the other or neither. Proposed [6(c)] of HSOC makes that task particularly difficult.

Difficulties Faced by Overlapping Members at any Mediation

50. Even if the conflict identified above was overcome, overlapping groups were permitted and the opt out process for the Hassid proceeding was undertaken, those persons who were members of both the Rodriguez group and the Hassid group would be placed in a difficult position at any mediation given that two sets of legal representatives would be advising and acting on their behalf.

50. There is a strong likelihood that there are differing views between Rodriguez’s lawyers and Mr Hassid’s lawyers concerning the strength of the claim for “pure economic loss”. After all, a claim for loss of profits by businesses downstream of Wivenhoe Dam was deleted from the RFASOC in February 2016 whereas the Hassid motion seeks to expand the claim in the Hassid proceeding from loss of business profits to all forms of “pure economic loss” arising from the flooding. This difference of opinion has a significant potential to result in those persons who are group members of both proceedings receiving differing advice from their representatives as to the likely strength of their claims for pure economic loss. An assessment of the relative strength of that claim may be significant to any decision they may make to opt out of the Hassid proceedings or to agree or reject a settlement of their claim in either proceeding.

51. This position is further complicated if a funding agreement is put in place for the Hassid proceeding. If there are different funding agreements for separate components of a group member’s claim then there is a real potential for different fees to be paid to each funder on the components of any settlement. In those circumstances the receipt by a group member of differing advice about the relative strength of their economic loss claim would place the group member in an even more difficult position in assessing any settlement proposal. It also raises the spectre of overlapping group members being caught in a dispute between funders about the characterisation of an amount that might be paid to settle all their claims or a dispute of the kind noted above at [48] as to whether a particular form of economic loss is consequential on property damage and thus claimable in the Rodriguez proceedings or pure economic loss and only claimable in the Hassid proceedings.

52. It is always open to any litigant to seek further advice concerning the conduct of proceedings including the appropriateness of a settlement offer. However, the circumstances of a litigant choosing to seek different legal advice are very different to a litigant having imposed on them two different sets of legal representatives each with an obligation to advise them on their respective claims and each likely to have differing views on the strength of the competing claims. It is one thing to allow a group member choice. It is another thing to force disputation on them.

53. Mr Martin SC submitted that these difficulties were overstated. He pointed to the orders made by the Court on 4 May 2017 which require Hassid group members to register their claim for compensation failing which they cannot participate in any settlement of the Hassid proceeding without the leave of the Court. He contended that this would limit the number of group members in the Hassid proceedings participating in the mediation. He submitted that any difficulties about competing advice could be addressed by cooperation between the respective legal teams. It can be accepted that the orders made in the Hassid proceeding on 4 May 2017 are likely to reduce the number of overlapping group members who face this difficulty. However, the problem still remains for those members of the Rodriguez proceeding who do not opt out of the Hassid proceeding but instead register in accordance with the orders made in the Hassid proceeding. While I have no reason to doubt that the legal teams will cooperate in respect of those persons’ claims, each has an irreducible duty to provide their honest opinion to overlapping group members about the relative strength of their claims. The present indications are that the differences on that score are likely to be irreconcilable.

Effect on Likelihood of Settlement

55. A related difficulty with overlapping claims is the effect on the likelihood of the proceedings settling. In Smith at [25] Ball J noted that:

“A notable feature of representative proceedings is that they frequently settle before the common issues are determined and well before it becomes necessary to deal with issues which are specific to the claims of individual class members (such as, where they arise, questions of causation and the assessment of damages). Settlements are to be encouraged because they often produce the most satisfactory outcome for the parties and free up judicial resources for other cases. However, if the same class members are represented by different lawyers propounding different cases, it is difficult to see how any settlement could be reached unless both representative proceedings were settled at the same time. That could only happen if the lawyers in both proceedings reached a common position in relation to settlement. The prospects of that happening in this case seem remote.” (emphasis added)

56. The discussion in [50] to [54] bears out these observations. When one considers the nature of the losses sought and the composition of each group, the existence of overlap between group members is especially likely to adversely affect the prospects of the Rodriguez proceeding settling. As noted, the Rodriguez group is a closed class and the losses are relatively well defined. The Hassid group is open. It is potentially vast. If HSOC [6(c)] was amended in the manner proposed, the group definition could catch millions of members including persons who do not reside in Brisbane. If it is not amended HSOC [6(c)] is still capable of extending to every business conducted downstream of Wivenhoe Dam. Given that “pure economic loss” is said to be loss that is not loss consequential on damage to the property of the group member then the losses sought to be recovered are potentially unlimited.

57. When the topic of the potential for settlement of these proceedings arose at the hearing of these motions, the defendants were understandably quiet although they all strongly resisted any maintenance of overlap between the Rodriguez group and Hassid group. That said it can be expected that a defendant would approach settlement of two such proceedings in very different manner. Mr Martin SC contended that the defendants are unlikely to settle either proceeding with the “other remaining on foot”. [4] To the extent that submission assumed there was still overlap between the Rodriguez group and Hassid group then I disagree. Absent overlap there is a real potential for the Rodriguez proceeding to settle without the Hassid proceeding settling although the prospects of the latter settling are much enhanced by the registration process that was ordered on 4 May 2017. However, the prospects of the Rodriguez proceeding settling would be adversely affected if there was overlap between the two groups. In those circumstances a defendant may be less inclined to engage with settlement of the Rodriguez proceeding if there was a prospect of a further claim being made by the same group member in the Hassid proceedings. Otherwise, the matters noted at [47] to [54] also affect the likelihood of the Rodriguez proceeding settling at mediation. These obstacles to settlement of the Rodriguez proceeding would be removed if the overlap between the Rodriguez group and the Hassid group was removed. Although these observations apply to the Rodriguez proceeding they are also applicable to the circumstance of an attempt to settle the Hassid proceeding without the Rodriguez proceeding.

    4. Plaintiffs’ Submissions – Overlapping Claims at [17].

Mr Hassid’s Objections and Appropriate Relief

58. The principal objection raised by Mr Martin SC to the removal of HSOC [6(e)] is that to grant that relief “has the potential to shut out claims of group members [when] no notice has been provided to those members”. [5] In particular, he contended that to narrow the group definition in the Hassid proceeding would be to shut out any “claims for pure economic loss held by group members of the Rodriguez proceeding” without them having received notice. [6]

    5. Plaintiffs’ Submissions – Overlapping Claims at [1].

    6. Plaintiffs’ Submissions – Overlapping Claims at [3].

59. I do not accept that the effect of striking out HSOC [6(e)] is to “shut out” claims for economic loss of Rodriguez group members without notice to them. I have already summarised Ms Gilsenan’s evidence concerning the advice given to Rodriguez group members from February 2016 to May 2016 concerning the deletion of certain claims for pure economic loss ([9] to [10]). Ms Gilsenan states that during that period a number of group members sought her firm’s advice on this topic. She estimates that the professional costs of responding to these inquires was $200,000.00. [7] Ms Gilsenan’s evidence demonstrates that members of the Rodriguez group were clearly advised that claims for pure economic loss were not being pursued on their behalf.

    7. Gilsenan Affidavit at [19].

60. Despite this, there is no evidence of any dissatisfaction within the Rodriguez group arising from the deletion of the claim for pure economic loss in the form of lost business profits much less from the failure to seek recovery of other forms of pure economic loss. There is no evidence that the Hassid proceeding was commenced in order to address any such dissatisfaction. On this application, the only evidence of any contact between Mr Hassid’s solicitors and any member of the Rodriguez group is that noted in [48]. As explained, the loss in value of that person’s home might be recoverable in the Rodriguez proceeding.

61. In substance the contention that striking out HSOC [6(e)] would “shut out” Rodriguez members from making claims for pure economic loss without notice is more directed to the question of the appropriate relief to be granted if the maintenance of overlap between the Rodriguez group and the Hassid group is not permitted rather than whether the overlap should be maintained. It seems preferable for overlap to be removed as part of the opt out process so that group members can determine which proceeding, if any, they participate in. Thus, for example, in Smith, Ball J removed an overlap between the members of two representative actions. One of the actions was brought on behalf of an open class and the other on behalf of a closed class in that it was limited to persons who had signed a particular funding agreement. His Honour did so by ordering an opt out process which enabled a member of both groups to opt out of one or other or both but, if they opted out of neither, then they were deemed to have opted out of the representative proceeding brought on behalf of the open class (at [45]).

62. However, other than one matter the circumstances of Smith were very different to the present. The two proceedings in Smith had been commenced only six months apart (at [4] and [10]), neither had undertaken an opt out process and no hearing date had been set. As noted, in this case, before the Hassid proceeding was commenced, Rodriguez had completed an extensive opt out process that informed Rodriguez group members that pure economic loss would not be claimed and had obtained a hearing date. The one matter of exception is that like Smith this matter concerns an open class and a closed class. In Smith, the fact that group members had already made a choice to join the closed class by signing a funding agreement was significant to the making of the orders deeming persons who had not opted out of either proceedings to have opted out of the open class. In this case the timing and expense is such that the form of relief granted in Smith or similar relief that enables overlap to be removed as part of the opt out process cannot be pursued here. However, like Smith, the grant of relief of striking out HSOC [6(e)] reflects that Rodriguez members have already had a choice in this respect in that many individual members had signed funding agreements and all received notification of the deletion of claims for downstream profits in 2016 as part of the opt out process.

63. It would be a gross waste of resources and jeopardise both the mediation and the hearing to require the undertaking of a further opt out process in the Rodriguez proceedings simply because the Hassid proceeding was filed. Nevertheless, if on becoming aware of the publicity surrounding the Hassid proceeding, any member of the Rodriguez group considers they have been “shut out” it will be open to them to file a late opt out notice to enable them to join the Hassid group, although that may have consequences for their participation in the Lynch proceeding.

Conclusion on Rodriguez Motion

64. For these reasons I concluded that HSOC [6(e)] should be struck out.

Hassid: Amendment of HSOC [6(c)]

65. I have described the proposed amendments to HSOC [6(c)] above. During argument on these motions it emerged that the defendants opposed the proposed amendment to HSOC [6(c)] not just because of the extent of the overlap it would create between the two representative groups but also because of its width generally. The defendants foreshadowed resisting the amendment on the basis that any duty that corresponded with the amended definition was so wide it was untenable and on what was referred to as “discretionary grounds”.

66. However, these objections were premature because of the disparity between the proposed amendment and the existing pleading of the risk of harm and duty of care (see [28]). Until that is addressed the substantive issues sought to be raised by the defendants cannot be debated. Accordingly, I refused the amendment sought by Mr Hassid and directed the parties bring in orders to enable this issue to be agitated on 24 May 2017.

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Endnotes

Decision last updated: 17 May 2017