Hegemann v Tannous & Ors

[2024] NSWSC 39

Supreme Court

New South Wales

Medium Neutral Citation:

Hegemann v Tannous & Ors [2024] NSWSC 39

Hearing dates:

11 December 2023; further submissions (and evidence) filed 15 December 2023

Date of orders:

2 February 2024

Decision date:

02 February 2024

Jurisdiction:

Common Law

Before:

Chen J

Decision:

See [77]

Catchwords:

CIVIL PROCEDURE – representative proceedings – settlement or discontinuance – court approval – whether the proposed settlement is fair and reasonable in the interests of group members as a whole – where approval turns on defendant’s inability to satisfy judgment debt – assessment of settlement distribution scheme – where settlement figure modest compared to amounts claimed to cover legal costs and settlement administration expenses

Legislation Cited:

Civil Liability Act 2002 (NSW)

Civil Procedure Act 2005 (NSW)

Coroners Act 2009 (NSW)

Corporations Act 2001 (Cth)

Court Suppression and Non-publication Orders Act 2010 (NSW)

Rural Fire Regulations 2013 (NSW)

Cases Cited:

Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd(No 2) (2006) 236 ALR 322; [2006] FCA 1388

Ellis v Commonwealth of Australia (2023) 411 ALR 578; [2023] NSWSC 550

Findlay v DSHE Holdings Ltd; Mastoris v DSHE Holdings Ltd; Mastoris v Allianz Australia Insurance Ltd (2021) 150 ACSR 535; [2021] NSWSC 249

Johnston v Endeavour Energy [2016] NSWSC 1132

Ritchie v Advanced Plumbing and Drains Pty Ltd [2022] NSWSC 330

Ritchie v Insurance Australia Ltd [2022] NSWCA 278

Smith v Australian Executor Trustees Limited; Creighton v Australian Executor Trustees Limited (No. 4) [2018] NSWSC 1584

Williams v AusNet Electricity Services Pty Ltd [2017] VSC 474

Category:

Principal judgment

Parties:

Jason Hegemann (plaintiff)
Joseph Tannous (first defendant)
Moussa Tannous (second defendant)
Charbel Tannous (third defendant)
Kwik Flo Pty Ltd (fourth defendant)

Representation:

Counsel:
A H Edwards (plaintiff)
P Wiggins (defendants)

Solicitors:
Maddens Lawyers (plaintiff)
Paramonte Legal (defendants)

File Number(s):

2021/358501

Publication restriction:

Nil

JUDGMENT

Introduction

1. The Palmers Oaky Fire Class Action relates to a fire that started in consequence of welding work being conducted on a property at Palmers Oaky, NSW on 4 December 2019 – a fire that continued to burn for a period of around three weeks, and extended over an area of approximately 17,400 hectares, before it was brought under control (‘the Palmers Oaky Fire’). The damages sought are for economic loss/property damage, and for personal (specifically, psychiatric) injury.

2. By notice of motion filed 20 October 2023, the plaintiff seeks a range of orders, including an order pursuant to s 173 of the Civil Procedure Act 2005 (NSW) (‘the CPA’) for the approval of the settlement reached in the proceedings. These reasons deal with the application for approval, and the other orders that are sought.

Background facts

3. I will deal with the background facts across four parts: first, the circumstances giving rise to the fire; secondly, a short description of the representative proceedings in this Court; thirdly, the nature of the claims; and, fourthly, an explanation of the settlement reached, and the orders made once the Court was notified of that settlement.

The fire on 4 December 2019

4. By the statement of claim filed 17 December 2021, it was alleged, in essence, that the Palmers Oaky Fire was caused by molten metal particles emitted from a welder used by fencing contractors performing works at a property owned by Joseph Tannous (‘the first defendant’), Moussa Tannous (‘the second defendant’) and Charbel Tannous (‘the third defendant’). That property was located at 1620 Upper Turon Road, Palmers Oaky, NSW (‘the property’).

5. Kwik Flo Pty Ltd (‘the fourth defendant’) was a plumbing company of which the first and second defendants were appointed directors. The third defendant was alleged to be a director of the fourth defendant by reason of s 9 of the Corporations Act 2001 (Cth). The fourth defendant was alleged to have had some role in the management of the property – either directly, or through its subsidiaries.

6. In 2018, the third defendant engaged Jason Edwards and Jamie Edwards (who were local fencing contractors) to remove existing, and construct new, fencing at the property. That work continued into 2019. At a point during 2019, Jason Edwards was no longer involved in the work: thereafter, the work was performed by Jamie Edwards and a contractor engaged by him, Mark Turner.

7. On 4 December 2019, Jamie Edwards and Mark Turner were undertaking the fencing work at the property near the adjoining property, ‘Bingletree’. At around 11:30 am, at the direction of Jamie Edwards, Mr Turner was performing welding work. That work was being performed in an area surrounded by dry grass and vegetation: the risk of fire ignition by the welding processes was plainly high, and neither Mr Edwards, nor Mr Turner, undertook any precaution against the risk of fire.

8. In the course of Mr Turner performing the welding work, a fire started in an area of grass outside the boundary fence caused by the molten particles and sparks emitted by the welding process. Once this was noticed by Mr Turner and Mr Edwards, they “jumped the fence”, and tried to put it out by “stomping on it” with their feet – unsuccessfully. Efforts were also made to extinguish the fire using a weed spraying unit (that had been half filled with water) – but those efforts were also unsuccessful.

9. The fire quickly developed and spread out of control, causing significant and widespread damage to land and property over a vast area.

The representative proceedings commenced in this Court

10. On 17 December 2021, Jason Hegemann (‘the plaintiff’) commenced representative proceedings on his own behalf and on behalf of the group members identified to be affected by the fire, pursuant to Part 10 of the CPA. The group members are identified to be all persons who suffered personal injury as a result of the Palmers Oaky Fire, all persons who suffered loss of or damage to property as a result of the Palmers Oaky Fire, and legal personal representatives of the estates of any deceased persons who either suffered personal injury or loss or damage to property as a consequence of the Palmers Oaky Fire: statement of claim (‘SOC’), par 3.

11. The defendants to the proceedings were the four defendants earlier identified. Neither Jamie Edwards, nor Mark Turner, were joined to the proceedings (I add: nor were either of them suggested to be a concurrent wrongdoer within ss 34(1) and (2) of the Civil Liability Act 2002 (NSW) in any of the defences filed by the first to fourth defendants).

12. The case for the plaintiff essentially alleged that Jamie Edwards and Mark Turner took insufficient fire precautions when constructing and welding new fence lines on the property. Although it appears to have been accepted that one of them acted as a ‘spotter’ during the welding process, the plaintiff alleged that no steps were undertaken to clear the area (which was surrounded by dry grass and vegetation), wet it down, or undertake any other fire precautions. Nor did those individuals have any firefighting equipment available in the event that a fire did alight. Further, the defendants’ property was located in the Central Ranges Fire District, as defined in Sch 1 of the Rural Fires Regulation 2013 (NSW) (SOC par 8). On the day that the fire ignited, the fire danger rating was assessed by the Rural Fire Service to be “very high” with weather conditions – namely, low humidity and strong dry winds – and drought conditions more generally informing that risk.

13. Put simply, the plaintiff sought to bring that liability home to one or more defendants in the following ways: in relation to the owners (the first to third defendants), either by reason of a breach of a non-delegable duty owed by them as owners of the property or, alternatively, by direct liability; in relation to the fourth defendant, assuming it had engaged with the contractors, they were argued to have a similar risk exposure (albeit not based upon a non-delegable duty) for failing to take reasonable care in connection with the methods of work that the contractors proposed to take when performing the fencing work, and the welding in particular.

14. As at 1 December 2023, there were estimated to be approximately 70 group members, of which 52 group members had registered with the solicitors for the plaintiff (Emeny affidavit 1 December 2023, par 66). In relation to the claims by group members who had registered: there were 50 claims for economic loss/property damage and 12 personal injury claims – that is, there are two claims which are solely for personal injury (Emeny affidavit 1 December 2023, par 71). The personal injury claims were all claims for alleged psychiatric injury.

15. In order to contain costs, and to save time, and given the experience that the plaintiff’s solicitors had with “bushfire class action proceedings of this nature”, the solicitors for the plaintiff undertook an analysis of each of the group member’s claims for economic loss/property damage (Emeny affidavit 1 December 2023, par 107).

16. The solicitor for the plaintiff then set out, in considerable detail, the method that was adopted in order to arrive at an assessment of the value of each of these claims (Emeny affidavit 1 December 2023, pars 108-147). The “Gross Quantum of the assessments undertaken” by the solicitors for the plaintiff was $23,129,347.08 (Emeny affidavit 1 December 2023, pars 148 and 177). However, recognising that group members “would most likely encounter” difficulties in proving all elements of their loss, the solicitor for the plaintiff considered that a “more realistic figure” was $18,049,077.66 (Emeny affidavit 1 December 2023, par 149). And, later, the solicitor for the plaintiff accepted that the “Gross Quantum” assessments undertaken had overstated the losses and that a more “realistic assessment” of the claims was around $18,500,000.00 (Emeny affidavit 1 December 2023, par 191).

17. Unlike the claims by the group members, the plaintiff’s claim was however subject to an assessment by an expert valuer: the plaintiff’s claim, including a claim for physical inconvenience, was assessed at $113,521.00 (Emeny affidavit 1 December 2023, pars 154-159).

18. In relation to the personal injury claims – there were 12 in total – these were subject to assessment by senior counsel. That assessment valued the individual claims between $28,000.00 and $106,000.00, and the total of those assessments was $555,000.00 (Emeny affidavit 1 December 2023, pars 173-175). In relation to two of those claims, the advice from senior counsel is that they were unlikely “to meet the necessary thresholds” in order to be awarded damages for non-economic loss (Emeny affidavit 1 December 2023, par 174).

The nature of the settlement reached

19. On 25 September 2023, following mediation, the plaintiff reached a proposed settlement agreement with the defendants.

20. On 17 October 2023, the parties executed a proposed settlement agreement comprising a Deed of Settlement. The plaintiff separately proposes a Settlement Distribution Scheme that deals with how the settlement fund is to be applied and distributed between group members, and the deductions proposed to be made from that fund.

21. By that settlement, the parties have (subject to the Court’s approval) agreed to resolve the proceedings broadly upon the following terms:

1. the defendants making a lump sum payment of $4.5 million;

2. the settlement sum being paid in three tranches over 12 months, secured by mortgages over four properties, which are protected by a separate deed of priority between the plaintiff and other interest holders;

3. the settlement sum being applied:

1. towards the reimbursement of legal costs (spread over the first two tranches);

2. to making a reimbursement payment to the representative plaintiff ($20,000.00); and

3. thereafter to the group members according to a methodology for the assessment of property damage and personal injury; and,

4. the plaintiff and group members giving releases to the defendants from all claims made in, or arising out of, the subject matter of the proceedings.

22. In relation to the first tranche ($1.5 million), this amount has already been paid into the trust account of the solicitors for the plaintiff. The second and third tranches are due in May and October 2024.

23. Upon being notified of the resolution, a number of orders were made on 25 October 2023, approving the form and manner of distribution of a settlement notice to group members, as well as a range of other orders dealing with steps required to be taken prior to the Court hearing any application for approval of the settlement. The evidence of the solicitor for the plaintiff is that the notice regime has been complied with: the notice has been provided to registered group members, to all “unregistered group members”, and advertisement was published in the Lithgow Mercury newspaper.

Approval: the statutory provisions and the relevant principles

24. Section 173 of the CPA relevantly provides:

173   Approval of Court required for settlement and discontinuance

(1)  Representative proceedings may not be settled or discontinued without the approval of the Court.

(2)  If the Court gives such approval, it may make such orders as are just with respect to the distribution of any money, including interest, paid under a settlement or paid into the Court.

25. On an application for approval of a settlement of representative proceedings, the fundamental question posited by s 173 of the CPA is whether the proposed settlement is “fair and reasonable in the interests of the group members considered as a whole. The Court’s role in relation to group members is supervisory and protective”: Findlay v DSHE Holdings Ltd; Mastoris v DSHE Holdings Ltd; Mastoris v Allianz Australia Insurance Ltd (2021) 150 ACSR 535; [2021] NSWSC 249 at [12] (‘Findlay’).

26. The various principles that have developed that inform the Court’s response to this fundamental question are both well-established and well-known. They were (relevantly) set out in Johnston v Endeavour Energy [2016] NSWSC 1132 at [22] (‘Endeavour Energy’) as follows (citations omitted):

1.   The central question for the Court is whether the proposed settlement is fair and reasonable in the interests of the group members as a whole.

2.   There will rarely be one single or obvious way in which a settlement should be framed, either between group members and the defendants (inter partes aspects) or in relation to sharing the compensation among group members (inter se aspects) – reasonableness is a range and the question is whether the proposed settlement is within that range.

3.   It is not the task of the Court to “second-guess” or go behind the tactical or other decisions made by the plaintiff’s legal representatives, but rather to satisfy itself that the decisions are within the range of reasonable decisions according to the known circumstances and the reasonably perceived risks of the litigation.

4.   In assessing the fairness and reasonableness of a proposed settlement the court relies heavily upon the candid, frank and confidential opinions provided to it by the plaintiff’s legal representatives requiring them to disclose the factors which were material to the decision to accept the settlement.

5.   … some of the considerations typically relevant to an assessment of an application for approval… are:

(a)   The complexity and duration of the litigation.

(b)   The reaction of the class to the settlement.

(c)   The stage of the proceedings.

(d)   The risks of establishing liability.

(e)   The risks of establishing damages.

(f)   The risks of maintaining a class action.

(g)   The ability of the defendants to withstand a greater judgment.

(h)   The range of reasonableness of the settlement in light of the best recovery; and

(i)   The range of reasonableness of the settlement in light of all of the attendant risks of litigation.

Approval of the overall settlement: consideration

27. I propose to approve the settlement: it is fair and reasonable in the interests of the group members considered as a whole. I explain, in what follows, my reasons for making orders giving effect to that conclusion and I do this largely through specific consideration of the respective parts of the settlement – in particular: the amount to be paid by the defendants to the plaintiff (or the plaintiff’s behalf), and the objections to it; the settlement distribution scheme; and the deductions (particularly legal costs and settlement distribution and reimbursement costs).

28. In approving the settlement, I have heavily relied upon the confidential joint opinion from senior and junior counsel (Mr Dalton KC and Mr Edwards). Upon an application for approval, “the Court is entitled to and should place considerable weight on those opinions”: Smith v Australian Executor Trustees Limited; Creighton v Australian Executor Trustees Limited (No. 4) [2018] NSWSC 1584 at [48].

Fair and reasonable and in the interests of the group members as a whole

29. Although I have, on the current application, limited material upon which to assess the plaintiff’s prospects on liability other than in a broad manner, I do have the benefit of a thorough and considered advice from senior and junior counsel for the plaintiff that has outlined their view. It is sufficient, in this respect, merely to note that their assessment of the issues relating to “liability” – that is, essentially, the prospects of the plaintiff establishing breach of duty and negligence were strong – accord with my own: those performing the work took not even the most basic precautions against the well-known risks associated with performing welding work, particularly given the surrounding dry grass and vegetation and the prevailing weather conditions.

30. Senior and junior counsel considered, giving due recognition to the fact that “no case is free from risk”, that for the purposes of assessing the prospects of the claim only a modest discount should be applied for “liability risks”. I respectfully agree.

31. Whilst assessing the prospects of establishing breach of duty and negligence is a highly relevant consideration into whether the settlement is fair and reasonable in the interests of the group members as a whole, in this case, that overarching question also requires assessment of a further material consideration which has loomed large: the ability of the defendants to meet any judgment entered against them. Put simply, the issues about recoverability significantly informed the approach of the plaintiff, and why the plaintiff has compromised the action and agreed to accept the amount offered. The point made by the plaintiff is that the plaintiff was faced with something of a dilemma: although the case itself was a strong one, no defendant had any insurance cover available to meet any judgment that might be entered against them, and each defendant only had a limited asset pool in the event that one was.

32. In relation to “recoverability”, there are three aspects that require discussion: first, the ability of the first to fourth defendants to meet any judgment; secondly, the position of the insurer of the fourth defendant; and, thirdly, the position of the contractors (Jamie Edwards and Mark Turner).

Recoverability: the first to fourth defendants

33. When it became known (on 17 June 2022) that the insurer for the fourth defendant had declined to indemnify the fourth defendant, the solicitors for the plaintiff took steps to determine the insurance status of the defendants. Those representing the plaintiff sought confirmation from those representing the defendants that there were no other available policies of insurance and, having been advised that there were “no other responsive insurance policies”, steps were taken to determine the financial status of each defendant.

34. The steps taken by the solicitor for the plaintiff to determine the financial position of each defendant are set out in considerable detail in her affidavit (Emeny affidavit 1 December 2023, pars 208-265). Those steps extended to seeking specialist forensic accounting advice on the financial affairs of the defendants based upon the records that had been provided and the results of the investigations undertaken. The upshot was that, based upon those investigations, the defendants were unlikely to have any assets available to satisfy any judgment debt exceeding $3 million (Emeny affidavit 1 December 2023, par 264). That was the assessment of senior and junior counsel.

33. To sum up: those representing the plaintiff (and group members) considered that recovery of any amount over $3 million was a better result than the amount the group could hope to recover in bankruptcy or liquidation proceedings against the defendants.

Recoverability: the insurance position of the fourth defendant

36. The fourth defendant had secured a public liability policy of insurance that was current at the time of the fire.

37. During the course of the proceedings, that insurer declined to indemnify the fourth defendant in relation to the fire based upon two terms of that policy of insurance: those terms were described as a “welding endorsement” (which essentially provided that liability from welding was not covered unless that activity was carried out in accordance with the relevant Australian Standard) and a “business term” (which essentially required that any liability in the fourth defendant must be in connection with its identified business – being, plumbing).

38. Those terms were in a materially identical form to those the subject of decision in Ritchie v Advanced Plumbing and Drains Pty Ltd [2022] NSWSC 330 (and on appeal: Ritchie v Insurance Australia Ltd [2022] NSWCA 278) and were considered by senior and junior counsel to have been properly raised, and a complete answer to the insurer’s obligation to indemnify the fourth defendant. I add: that was also the view reached at that time by the solicitor for the plaintiff (Emeny affidavit 1 December 2023, par 218). To sum up: based on the above, I am satisfied that the liability insurer was not liable to indemnify the fourth defendant, but also that investigations undertaken established that the fourth defendant did not hold any other policy of insurance that might respond to any liability that it might have to the plaintiff’s claim.

Recoverability: the position of the contractors

39. During the course of the hearing of the application for approval of the settlement, I raised an issue about the absence of evidence concerning the financial position of the contractors. Although they had not been joined, there was no evidence to explain their non-joinder: specifically, whether that had been informed by investigations which had disclosed that each had no insurance to cover the events giving rise to the fire and that each had limited means to meet any liability that they might be determined to have.

40. Subsequently, the plaintiff filed additional evidence (an affidavit of Kathryn Emeny sworn 15 December 2023) and submissions (dated 15 December 2023) directed to addressing these matters. I am satisfied (and find), based upon that evidence and those submissions, that the potential joinder of those parties as defendants was considered but not pursued, given that each of them were of limited means and without public liability insurance cover.

41. I am, therefore, satisfied, as was submitted, that the non-joinder of the contractors was a reasonable decision made in the course of the proceedings and, importantly, is not a factor leaving a potential for material recovery which would otherwise be forgone by the approval of the settlement.

Summary: the problem with recovery

42. In my view, once the limited means to recover from the defendants is recognised (which, to be clear, I have found to be the case), then the ultimate issue (subject to the inter se considerations, including the settlement distribution scheme and the deductions – these are addressed later in these reasons: see [44]ff below) essentially reduces to a question about whether accepting the settlement amount achieves a better result than what could be expected to be achieved by pursuing the action and seeking to enforce any judgment secured through bankruptcy and/or liquidation proceedings against the defendants.

43. I am comfortably satisfied that the settlement does achieve a better result for the group members. One need only pause to consider the alternative: to refuse to approve the settlement would simply compel the group members to litigate the claim, take steps to prove the individual losses, all in the hope that, at the end of what would be a lengthy process, they would clearly achieve a better outcome. There is nothing to suggest that would occur. In fact, the evidence is to the opposite effect. Thus, if I was to refuse to approve the settlement, the group members would undoubtedly, in the end result, be worse off. A consideration into the reasonableness of the settlement must take this alternative into account, which I have.

The settlement distribution scheme and its cost

44. An assessment of the fairness and reasonableness of the proposed settlement requires consideration of the fairness between group members. In this case, this principally involves a consideration of the settlement distribution scheme. Before doing so, I will briefly mention the releases.

45. As I have earlier noted, the settlement deed (cl 8) provides for the plaintiff and group members giving releases to the defendants from all claims made in or arising out of the subject matter of the proceedings. The terms of the release are not broad, and do not extend beyond the subject matter of the proceeding. I consider it fair and reasonable for the plaintiff and group members to give those releases in order to secure the settlement offered.

46. I turn now to the settlement distribution scheme. The manner in which the settlement funds are to be applied and distributed between group members, and the nature of the deductions proposed to be made from the settlement sum, are set out in the settlement distribution scheme (‘the SDS’ or ‘the scheme’). Put simply, distributions to the group members from the SDS will be made pro rata – that is, in the proportion which the final assessed value of the group member’s claim bears to the aggregate of all final assessed claims within the group (Schedule A of the SDS). I am satisfied that method will ensure a fair distribution of the settlement funds.

47. The scheme is administered by the scheme administrator (cll 1.1 and 2) – which is to be the solicitor for the plaintiff. The solicitor for the plaintiff has explained, again in considerable detail, the reasons why she (or her delegate) are to act as the administrator (rather than appoint a specific loss assessor to undertake that task): essentially, she is the most suitable appointee, given the work she (or her firm) has already performed in assessing the matters; her overall experience in dealing with claims of this kind; and the cost savings in having her undertake this task. I agree. As a legal practitioner, she is, of course, subject to ethical obligations and the Court’s supervision, which I regard as an extra safeguard.

48. The SDS makes provision for the method to be adopted to determine the economic loss/property damage assessments. In relation to the claims for economic loss/property damage, there is a process for group members to register and provide information so as to enable the settlement administrator to verify that information and assess their entitlements: cll 3, 4 and 5. There is to be a uniform discounting of each claim by 20% (this is to reflect the “inherent difficulties” in proving the claimed losses: Emeny affidavit 1 December 2023, pars 319 and 329): cl 5.6.2.2. The scheme administrator also retains a discretion to make appropriate reductions when assessing individual claims. The plaintiff’s claim is to be assessed in line with a loss assessment report from 2023: cl 5.6.1.

49. A formula (Schedule A – ‘Assessment and Distribution Formula’) is to be applied following that assessment and calculation of each group member’s compensation entitlements under the scheme: the result, according to the solicitor for the plaintiff, is that group members will receive approximately 14% of their total loss (Emeny affidavit 1 December 2023, pars 278 and 328).

50. In relation to the claims for personal (psychiatric) injury, the scheme makes provision for their assessment. To the extent that these have already been the subject of an assessment by senior counsel, the scheme administrator proposes to utilise that assessment, but discount that amount by 20% “to reflect the risk that the claim may fail upon review” (Emeny affidavit 1 December 2023, par 354). Personal injury claims that have not been (to this point) assessed by senior counsel who undertook the earlier assessment for the purposes of the matter including the mediation, would otherwise be assessed in accordance with cl 5.7 of the SDS.

51. In respect of claims generally, there is no right of review or appeal. All that can be corrected are administrative errors, slips or omissions: cll 6.2-6.3. Given the size of the settlement, I consider it to be fair and reasonable that the determination by the administrator be binding in the way that I have described. In the context of this case, rights of review or appeal would not only be costly and disadvantage other group members (particularly given the likely distribution), it would also be productive of significant delay in the scheme administration and the distribution of payments to members.

52. In the event the scheme administrator believes that a group member is or may be a person under a disability, the SDS requires the administrator to provide notices, correspondence, requests for information etc required under the SDS to the personal representative or litigation guardian of the group member: cl 13. (I add: there is no suggestion that any group member is under a disability; nevertheless the SDS makes provision to deal with any claim in that situation).

53. The evidence from the solicitor for the plaintiff estimates the cost of administering the SDS to be up to an amount of $90,000.00. That is an amount that I consider to be fair and reasonably reflective of the overall responsibility cast upon the solicitor to manage, administer and implement the settlement. The detail of what would be involved by the “administrative costs” was set out in the affidavit of the solicitor for the plaintiff (Emeny affidavit 1 December 2023, pars 467-478). It will be payable following receipt of the second instalment: cl 9.7.2.

54. It is important to emphasise that this amount is a ceiling: if the costs are less, only so much of the costs that are incurred will be deducted from the settlement sum; and if the costs are in excess of this, then they need to be borne by the solicitor for the plaintiff.

Legal costs

55. The legal costs (including disbursements) that are sought by the solicitors for the plaintiff are $1,914,498.32 (inclusive of GST). Those costs are approximately 43% of the gross amount of the settlement, and are a high proportion of the settlement sum.

56. Although the ultimate determination about whether the costs incurred are proportionate, and fair and reasonable, is a matter for the Court, it is often the case that evidence is adduced from an independent costs assessor dealing with (and addressing the fairness and reasonableness of) the costs incurred. There was no evidence of that kind, but there were sound reasons advanced for why that is so: to secure an expert report would be expensive (estimated to be in the vicinity of $50,000.00-$70,000.00) and having regard to the size of the matter, would be productive of some delay (a report would likely take around four to six months): Emeny affidavit 1 December 2023, par 370.

57. Given these matters, and the inevitable impact upon the settlement sum and the distribution of compensation to group members, the solicitor for the plaintiff undertook a detailed and comprehensive review of the costs incurred. In her affidavit, she provided a detailed breakdown of the tasks undertaken across the various phases of the litigation (the investigative phase; the pleadings phase; the coronial inquest phase; the discovery and opt out phase; the lay and expert evidence phase; the mediation phase; the trial preparation phase; and the settlement approval phase), as well as identifying the person or persons who undertook those tasks. It should be observed that, so far as the solicitors’ work is concerned, a significant amount of the work was delegated to a lawyer, with oversight and input by the solicitor for the plaintiff and some limited oversight by another senior lawyer. Approximately 52% of the work was performed by the lawyer and, wherever, possible, administrative tasks and group member communications were ordinarily dealt with by legal secretaries.

58. For each phase, the solicitor for the plaintiff provided a summary of the professional fees and disbursements, and a detailed breakdown of those disbursements. Largely, the disbursements relate to expert evidence, and fees for senior and junior counsel. For those rendering fees, the solicitor for the plaintiff has annexed copies of the respective fee agreements and any fee notes rendered (or provided details). I have reviewed the daily and hourly costs (of senior and junior counsel), as well as the charge out rates by the solicitors for the plaintiff, and am satisfied that they are fair and reasonable.

59. The assessment of the legal costs incurred by the solicitors for the plaintiff have been reduced by 15% – an amount that the solicitor for the plaintiff considered was “likely to exceed any discount that may be applied in the event the file were to be taxed or reviewed by a specialist costs solicitor” (Emeny affidavit 1 December 2023, par 460).

60. I pause to address one “costs” phase that was raised by an objector – the coronial phase. To the extent that it was suggested that the attendance and participation in the coronial inquest was unnecessary (with the consequence that the legal costs and disbursements incurred in connection with that phase were unreasonably incurred), I do not accept that complaint. In my respectful view, it would have been quite remiss not to participate in the coronial inquest into the Palmers Oaky Fire. That is essentially for the following reasons. First, in my view, it was an entirely appropriate, and prudent, step to be involved in those proceedings: considerable forensic benefits undoubtedly accrued by reason of the participation in those proceedings given they ran during the currency of these proceedings. Secondly, those costs are reasonably confined – they are approximately $100,000.00 (ex-GST) – and even if it be thought that there should not have been any participation at the hearing, or attendance at it, inevitably in order to prepare this matter for hearing, the transcript of those proceedings would need to be reviewed and analysed which again would be reflected in reasonably significant costs.

61. Although, as I earlier noted, the amount of costs that are claimed are a considerable portion of the settlement sum, that is not a basis to conclude that there is an absence of proportionality: rather, this issue is to be assessed having regard to “whether, at the time the work was being performed, that work was not justified having regard to the complexity or importance of the issues in dispute or the amount in dispute”: Williams v AusNet Electricity Services Pty Ltd [2017] VSC 474 at [111]. I am satisfied that the work being performed was justified having regard to the complexity and importance of the issues.

62. I am further satisfied, based upon the evidence from the solicitor for the plaintiff, and guided by the view expressed by senior and junior counsel in the confidential advice, that the costs claimed are both reasonable and proportionate.

Reimbursement costs

63. The SDS provides for a payment (described in the SDS as a ‘Reimbursement Payment’: cl 1.1) to the plaintiff following “receipt of the first instalment of the Settlement Sum”, in the amount of $30,000.00 (cl 9.8 and Schedule B).

64. I note, however, that the proposed orders make provision for the reimbursement payment to be $20,000.00 (proposed order 8(a)), and the written submissions similarly make provision for this lower amount (plaintiff’s submissions at [50]). The explanation for the lower amount is set out in the affidavit of the solicitor for the plaintiff (Emeny affidavit 1 December 2023, pars 356-366): there it was essentially said that this amount better reflected the overall settlement.

65. The basis for making the payment to the plaintiff was also explained in those paragraphs of the affidavit of the solicitor for the plaintiff. The payment is to recognise the fact that the plaintiff has been obliged to expend time and effort in pursuing the action, and has personally been exposed to the risk of adverse costs consequences in doing so. Orders making provision for payments of this kind (and the general amount) are commonly made to reflect the time and burden of being the lead plaintiff: Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd(No 2) (2006) 236 ALR 322; [2006] FCA 1388 at [76]; Endeavour Energy at [51]-[53].

66. I am satisfied, based upon the evidence from the solicitor for the plaintiff (which I accept), that the amount proposed to be paid to the plaintiff is a modest and reasonable one that fairly reflects his obligations as the lead plaintiff. I note, as well, that in the notice of settlement that was ordered to be provided to group members, specific notification was given about this proposed payment (albeit in the (higher) amount expressed in Schedule B to the SDS, rather than the lower amount proposed), and no objection was made by any of the group members to that payment.

Objections to the proposed settlement

67. Five objections from group members to the proposed settlement were received. Those objections were received from:

1. Blair Leslie and Helen Leslie,

2. Fiona Leslie,

3. Jeff Fuller,

4. Richard Anderson, and

5. Stephen Potts.

68. A number attended and participated in the hearing. It should be recorded that it took commitment and courage for them to do so. Each of them – notably Fiona Leslie – gave heartfelt and moving accounts of the devastation that the fire has had upon them, and their lives, both financially and emotionally. They are, as I have explained elsewhere, on the horns of a dilemma: they are group members in proceedings designed, as best the law can, to make good their losses. Unfortunately, the value of any judgment to them can only be measured by what can be recovered and that, in the present case, is significantly constrained.

69. There are, in essence, four classes of objections. First, that the proposed settlement sum of $4.5 million is insufficient and will not cover the liabilities and losses incurred by the group members, particularly because “once legal fees are deducted [the settlement sum] will yield a net outcome to the members of the Class of less than 10% of their claim”. Secondly, and closely connected, is that some members of the group who oppose the proposed settlement are of the belief that the directors of the fourth defendant hold a “large personal property portfolio” which would justify a larger settlement sum. Thirdly, two objectors believe that they should have been informed earlier that the insurance of the defendants had been “declined”. Fourthly, those objecting believe that a settlement should not be entered into prior to the release of findings by the NSW Bushfires Coronial Inquiry. I will address each of these grounds.

Settlement sum insufficient

70. I accept, of course, that the settlement sum will not cover the liability and losses incurred by all group members. That would be the position irrespective of whether any legal costs were deducted, or not.

71. In terms of “insufficiency” generally, as I have explained elsewhere, the most significant consideration that informs my assessment of whether the settlement is fair and reasonable in the interests of the group members is the fact that I consider there is next to no prospect of the group members securing a better result if I were to refuse the approval and direct the matter proceed to trial. Put slightly differently, and by way of emphasis, there is an overwhelming issue concerning the ability of the defendants to satisfy any judgment. Refusing to approve the settlement does not solve this dilemma; in fact, in my respectful view, it would only exacerbate it.

The directors having undisclosed greater wealth

72. This matter was raised, but there are no details (nor evidence) to support this ground of opposition. As I have noted in connection with the earlier discussion on the ability to recover against the first to fourth defendants (see [33]ff above), I am satisfied that all proper enquiries to determine the financial standing of each defendant has been undertaken by those representing the plaintiff. It follows that I do not accept there is a basis to find that the first to third defendants have, in effect, “hidden” wealth.

Late notification about insurance

73. I am not persuaded that – even if it be assumed that there had been a measure of late notification about insurance – this would be a reason to conclude that the settlement was not fair and reasonable – in the interests of all group members.

The release of the coronial report

74. There was, following the fire, a coronial inquest. That inquest was conducted on 21-23 June 2023, with submissions on 14 September 2023. The findings and recommendations of the Coroner are yet to be delivered.

75. Generally speaking, where an inquest has been held, parties to civil proceedings arising out of the subject matter of that inquest are invariably assisted by the Coroner’s report. In this case, however, I consider that the release of that report will be of limited use. That is because: (a) the predominant consideration in the present case – that supports a finding that the settlement is fair and reasonable in all the circumstances – is the inability of the named defendants to meet any substantial judgment entered against them: the release of the Coroner’s report adds nothing to that consideration; and (b) the issues that are to be the subject of specific findings by the Coroner – essentially the cause and origin of the fire (s 30(1) of the Coroners Act 2009 (NSW)) – are, in my respectful view, plain – and, to the extent that the Coroner considers it “necessary or desirable” to make recommendations about the fire (ss 82(1) and (2) of the Coroners Act), it is, again in my respectful view, difficult to see how (even assuming the admissibility of any such recommendations) that would meaningfully add to what I consider to be a relatively straightforward liability case.

The proposed orders

76. The settlement involves the payment of compensation to group members who register. A class closure order is sought – an order to the effect that any person who fits the class definition, but who does not register to participate in the settlement, will: (a) nevertheless remain a group member, but lose their rights to sue the defendants for the claims covered by the proceedings; and (b) not be permitted to claim any compensation under the settlement. Put simply, those who do not register will lose their rights, and receive no compensation. Section 173 of the CPA permits the making of a class closure order at the completion of the proceedings: Findlay at [93]-[95]; Ellis v Commonwealth of Australia (2023) 411 ALR 578; [2023] NSWSC 550 at [34]-[36].

Orders

77. For the above reasons, I make the following orders:

Confidentiality

1. Pursuant to ss 7 and 8(1)(a) of the Court Suppression and Non-publication Orders Act 2010, and subject to any further order of the Court, in order to prevent prejudice to the proper administration of justice the following evidence filed by the Plaintiff is not to be disclosed to any person or entity unless and until the Court makes orders approving the settlement:

1. the unredacted affidavit of Kathryn Emeny dated 1 December 2023; and

2. exhibit KAE-7.

2. Pursuant to ss 7 and 8(1)(a) of the Court Suppression and Non-publication Orders Act 2010, and subject to any further order of the Court, in order to prevent prejudice to the proper administration of justice the following evidence filed by the Plaintiff is not to be disclosed to any person or entity for the period of 30 years from the date of this order:

1. section D and paragraphs 482, 483 and the second sentence of paragraph 492 of section H of the affidavit of Kathryn Emeny dated 1 December 2023; and

2. the Joint Opinion contained in exhibit KAE-7.

Settlement Approval Orders

3. Pursuant to s 183 of the Act, the Plaintiff is authorised, nunc pro tunc, to enter into the Deed and to give effect to the settlement and all transactions contemplated by it for and on behalf of the Group Members.

4. Pursuant to ss 173 and 183 of the Civil Procedure Act 2005 (the Act), the Court approves:

1. the settlement of this proceeding upon the terms set out in the Deed of Settlement dated 17 October 2023 between the Plaintiff and the Defendants (Deed); and

2. the distribution of the Settlement Sum among Group Members in accordance with the Settlement Distribution Scheme.

5. Pursuant to s 179 of the Act, the persons affected and bound by the settlement of the proceeding are the Plaintiff, the Respondents and any Group Members as defined in paragraph 3 of the Statement of Claim (save for any person who has opted out of the proceeding).

6. Ms Kathryn Emeny of Maddens Lawyers be appointed Administrator of the Settlement Distribution Scheme.

Deductions

7. Pursuant to ss 173(2) and 183 of the Act, the following amounts are approved for the purposes of the SDS (utilising defined terms from it):

1. the sum of $1,914,498.32 (inclusive of GST) as the Common Benefit Legal Costs;

2. the sum of up to $90,000.00 (inclusive of GST) as the Administration Costs; and

3. the sum of $20,000.00 as the Reimbursement Payment.

8. The approved amounts be paid from the Settlement Sum as follows:

1. an amount of $20,000.00 paid to the Plaintiff as the Reimbursement Payment prior to distribution of the first instalment of the Compensation Pool to Group Members;

2. an amount of $500,000.00 (inclusive of GST) as part of the Common Benefit Legal Costs prior to distribution of the first instalment of the Compensation Pool to Group Members; and

3. an amount of up to $1,504,498.32 (inclusive of GST) as the balance of the Common Benefit Legal Costs and the Administration Costs (up to the cap of $90,000.00) prior to distribution of the second instalment of the Compensation Pool to Group Members.

9. All costs orders made in the proceeding between the Plaintiff and Defendants be vacated.

Completion of Administration

10. Within 14 days of the Administrator disbursing from their trust account, the final balance of compensation entitlements to Group Members, the Administrator shall file and serve an affidavit as to the completion of the claims assessment procedure set out in the Settlement Distribution Scheme.

11. The proceeding is dismissed 7 days after the Administrator notifies the Court and the parties in writing that the distribution under the SDS is complete.

Liberty to Apply

12. The Plaintiff and the Defendants have liberty to apply, upon not less than 24 hours’ notice to each other party, by correspondence addressed to the Associate to the Honourable Justice Chen.

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Decision last updated: 02 February 2024