Kurray v Brinkworth

[2023] SASC 16

Supreme Court of South Australia

(Civil: Application)

KURRAY v BRINKWORTH & ORS

[2023] SASC 16

Judgment of the Honourable Chief Justice Kourakis  

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - POWER TO ORDER

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - PLAINTIFF OR APPLICANT - NOMINAL OR REPRESENTATIVE PLAINTIFF OR APPLICANT

This is an application for security for costs brought by the respondents in a representative proceeding in which damages are claimed for losses suffered as a result of a bushfire allegedly ignited by burning activity on the respondents’ farm.

The applicant brings this proceeding by way of an opt out representative proceeding pursuant to r 24.4 of the Uniform Civil Rules 2020 (SA) (the UCR) on behalf of persons who have suffered personal injury, property damage or loss, or economic loss as a result of the fire.

The solicitor for the applicant has deposed that the applicant would be unable to meet any order for security for costs and that, should such an order be made, his application would be stultified. Likewise, the solicitor for the applicant has deposed that the other group members are unable to fund legal costs, including an order for security for costs.

Held:

1.      The respondent's application for security for costs is dismissed.

2.The power of the Court to award costs is not limited by r 24.10 of the UCR to exempting the representative party from the liability to pay costs; it extends to ordering that a represented party bear all or part of those costs.

3.Rule 115.1(a) of the UCR extends to a representative proceeding brought under Part 4 of Chapter 3 of the UCR.

Federal Court Act 1976 (Cth) s 43; Supreme Court Civil Rules 2006 (SA) rr 194, 194(1)(a); Uniform Civil Rules 2020 (SA) rr 24, 24.1, 24.2, 24.4, 24.5, 24.7, 24.8, 24.9, 24.10, 115.1, 115.1(1)(a), referred to.
Indoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744; Reschke v Trevor Reschke Nominees Pty Ltd [2020] SASC 60, considered.

KURRAY v BRINKWORTH & ORS
[2023] SASC 16

Civil

1. KOURAKIS CJ:     This is an application for security for costs brought by the fourth respondent, Patricia Ann Brinkworth, and the executors of the estate of Thomas Kenneth Brinkworth (the Brinkworth parties) in an action in which Peter Roderick Kurray claims damages for personal injury and losses suffered as a result of a bushfire (the Lucindale fire) allegedly ignited by burning operations on the farm of Ms Brinkworth and her husband, the deceased.

2. Mr Kurray alleges that the Lucindale fire originated in piles of vegetation on the Brinkworths’ property which had been set alight as part of a burning off operation.  Mr Kurray alleges that the fires were not properly extinguished, and that they subsequently reignited on 11 January 2021 in adverse weather conditions.  On the applicant’s case the Lucindale fire burnt over an area of approximately 14,000 hectares and destroyed or damaged approximately 70 properties.

3. Mr Kurray brings the proceeding by way of an opt out representative proceeding pursuant to r 24.4 of the Uniform Civil Rules 2020 (SA) (the UCR) on behalf of persons who have suffered personal injury, property damage or loss, or economic loss as a result of the Lucindale fire.  The solicitors for Mr Kurray, Maddens Lawyers (Maddens), held community meetings to provide information to members of the public who might benefit from the action.  Even though the proceedings were brought on an opt out basis, Maddens took steps to identify and register those persons who fell within the class.

4. On 28 January 2022, a judge of this Court ordered a split opt out process allowing group members to opt out of the action in respect of economic loss and property damage or in respect of personal injury or both.

5. The Judge also ordered for the provision of an approved information notice to each person in Maddens’ database of group members and to the addresses of any fire-impacted person identified by local government authorities or the Country Fire Service.  The Judge also ordered that the approved information notice be published in a local newspaper and on certain websites. 

6. Maddens has kept in communication with those members of the group known not to have opted out.  Maddens is aware of 10 registered group members who are advancing claims involving six fire-impacted properties.  One of the members is a corporation.  One group member is a trustee and holds a fire-impacted property on behalf of other natural persons.

7. A solicitor for Maddens has deposed that on discussing the application for security for costs with Mr Kurray, he instructed her, and she believes, that he would not be able to meet an order should it be made and that his action would thereby be stultified.  The solicitor has deposed that the other group members are unable to fund legal costs including any order for security for costs.  Instructions to that effect have been obtained from all the group members associated with a fire‑impacted property.  However, details of the assets and equity of other group members have not been revealed.

8. Maddens is acting on behalf of Mr Kurray on a no win, no fee basis.  No litigation funder is supporting his action.

9. The Kurray action was commenced by way of statement of claim on 20 August 2021 which was served on 1 September 2021.  Proceedings have been brought by other applicants claiming damages for property loss and damage and consequential economic loss caused by the Lucindale fire.  The Higgins action was served on 13 October 2021[1].  The Justin action was served on 26 October 2021[2].  The Trimboli action, was served on 18 November 2021[3].  The Copping claim was served on 27 May 2022[4].

   [1]    CIV-21-011444 - Keith Charles Higgins, Karena Rose Higgins & Ors v Patricia Ann Brinkworth, Benjamin Ronald John Brinkworth as Executor of the Estate of Thomas Kenneth Brinkworth & Ors.

   [2]    CIV-21-011906 - Michelle Catherine Justin, Peter Raymond Justin & Ors v Patricia Ann Brinkworth, Benjamin Ronald John Brinkworth as Executor of the Estate of Thomas Kenneth Brinkworth & Ors.

   [3]    CIV-21-012765 - Terena Trimboli, Ian Elsden & Ors v Benjamin Ronald John Brinkworth as Executor of the Estate of Thomas Kenneth Brinkworth & Ors.

   [4]    CIV-22-003113 - David Copping, Katrina Copping & Ors v Benjamin Ronald John Brinkworth as Executor of the Estate of Thomas Kenneth Brinkworth & Ors.

10. The insurer, IAG, has indemnified the applicants in the Justin proceedings for any costs order made against them.  The insurer Allianz has indemnified the applicants in the Higgins proceedings.  The insurer QBE has indemnified the applicants in the Trimboli proceedings.

11. Part 4 of the UCR deals with representative parties.  Rule 24.1 defines a ‘representative party’ to mean a person named as a party to a proceeding under the Part and defines a ‘represented party’ to mean a person who is a member of a group represented in proceedings under that Part.  Rule 24.2 provides that if a group of two or more persons has a common interest in the subject matter of a proceeding, the proceeding may be brought by a member of the group as a ‘representative party representing some or all members of the group (including the representative)’.  In such a proceeding, the statement of claim must identify the name and address of each represented party and the common interest which the represented parties have in the subject matter of the proceedings. 

12. Rule 24.4 provides that if a group of two or more persons each have a cause of action, and those causes of action arise out of or are in respect of the same or similar or related circumstances, and the causes of action give rise to a substantial common question of law or fact, then the action may be brought by a person who is a member of the group ‘as a representative party representing some or all members of the group (including the representative)’.  Again, the represented parties must be identified.

13. Rule 24.5 provides that an applicant who institutes an action under Division 3 of Part 4 must, at least seven days before the first directions hearing, apply for an order setting out a process for persons to opt out or opt in as represented parties.  Pursuant to r 24.5(3), the Court must make an order as to the provision of an information notice to group members explaining the right to opt out or opt in.

14. Rule 24.7 provides that the Court may make orders in relation to the constitution of a proceeding instituted under Part 4 on such conditions and with such consequential orders as it thinks fit.  Those orders include reconstituting a representative proceeding as an ordinary action by joining the represented parties as ordinary parties.  The Court may also make such orders, as it thinks fit, in relation to the conduct of representative proceedings in accordance with r 24.8.  Rule 24.9 provides that any orders made in the action for or against, or affecting, a representative party bind each represented party. 

15. Importantly r 24.10 provides that unless the Court otherwise orders, any right or liability to receive or pay costs in a representative proceeding under Part 4 vests in the representative party and not in the represented parties.  The rule may be regarded as an incident of the inherent power to award costs against non-parties or as a rule regulating the practice and procedure of the Court in representative actions.  From either perspective the power of the Court to otherwise order is not limited to exempting the representative party from the liability to pay costs; it extends to ordering that a represented party bear all or part of those costs.  It follows that represented parties who have opted in, or who have not opted out, as the case may be, are vulnerable to an adverse exercise of the discretion conferred by r 24.10. 

16. Part 5 of Chapter 10 of the UCR deals with security for costs.  Rule 115.1 provides:

    115.1—Security for costs

    (1)The Court may order that an applicant in an action provide security for costs if—

    (a)     the applicant is bringing the claim or application for someone else’s benefit;

    (b)     the applicant is ordinarily resident outside Australia;

    (c)     there are reasonable grounds to suspect that the action has been brought for an ulterior purpose;

    (d)     the order is authorised by statute; or

    (e)     the order is necessary in the interests of justice.

    Note—

    Section 1335 of the Corporations Act 2001 (Cth), section 19 of the Service and Execution of Process Act 1992 (Cth) and section 15 of the Trans-Tasman Proceedings Act 2010 (Cth) empower the Court to order security for costs in defined circumstances.

    (2)The Court may order a stay of the action until security is given.

    (3)The Court may vary or revoke an order for security for costs and may order further security.

    (4)If security is not given, the Court may dismiss the action.

    (5)If the action has been stayed under subrule (2) for 6 months without security having been given, the action is automatically dismissed for want of prosecution.

    (6)If the action is dismissed under subrule (4) or (5), the Court may, for special reasons, reinstate the action.

17. It follows from the institution of Mr Kurray’s action as a representative proceeding which is brought ‘on behalf of a group’, and in which orders may bind the represented parties, that Mr Kurray makes his claim for someone else’s benefit, even though he has also brought the action for his own benefit.  He need not have brought his action as a representative proceeding, in which case, he would not have brought it for someone else’s benefit.  Mr Kurray, however, chose to bring his action pursuant to Part 4 of Chapter 3 with the potentially beneficial consequences for others.  There is no reason to construe r 115.1(1)(a) so that it reads, in effect, ‘is bringing the claim or application only for someone else’s benefit’.  Moreover, there is no context which reveals a purpose for departing so dramatically from the Supreme Court Civil Rules 2006 (SA) (the 2006 Rules).  Rule 194(1)(a) of the 2006 Rules, the predecessor to r 115.1(1)(a), applied to actions brought in a ‘representative capacity’ by a plaintiff who had insufficient resources to meet an order for costs.  Mr Kurray’s action would have fallen within r 194(1)(a) of the 2006 Rules. 

18. The construction I give to r 115.1(1)(a) is strengthened when one has regard to the very purpose and nature of an order for security for costs.  In Idoport Pty Ltd v National Australia Bank Ltd[5]  Einstein J explained that the ‘jurisdiction to award security for costs should thus be seen as protecting the efficacy of the exercise of the jurisdiction to award costs’.[6]  I respectfully agree.  The efficacy of the costs power is undermined if represented parties join or remain in representative proceeding to reap the benefits of success but without exposing themselves to the risk of an adverse cost order.

    [5] [2001] NSWSC 744.

    [6] [2001] NSWSC 744 at [33].

19. The change of wording in subparagraph (1)(a) appears calculated to extend its application to better cover actions brought by trustees, or brought in the name of a nominal party pursuant to rights of subrogation, or actions brought by a party at the instigation of a creditor.  It is not surprising therefore that insurers standing behind the applicants in the other actions have agreed to indemnify the applicants in those actions. 

20. I also respectfully adopt the explanation given by Blue J in Reschke v Trevor Reschke Nominees Pty Ltd[7] of the relationship between the various subparagraphs of r 194 of the 2006 Rules.  In particular, if it is necessary in the interests of justice to order security for costs, there is no discretion not to grant the order. That is because subparagraph (e) is premised on a conclusion that the relevant considerations properly weighed support an exercise of the judicial discretion to order security for costs.  It expresses the result of a broad judicial discretion exercised to protect the efficacy of the power to award costs. 

    [7] [2020] SASC 60 at [29]-[47].

21. In the exercise of the broad discretion conferred by subparagraph (e) of r 115.1 there is no predisposition or presumption as to whether the order should or should not be made, other than that the person seeking the order has the persuasive burden to show that it should be made.  Subparagraphs (a), (b) and (c) on the other hand, do establish preconditions which enliven the discretion.  Those preconditions all entail a risk to the efficacy of the costs power. On establishing those pre‑conditions an evidentiary burden shifts to the respondent to identify reasons why the order should not be made. 

22. In actions brought by an applicant in a representative capacity, there is a risk that an impecunious applicant may have been selected to protect the financial position of other represented parties who have assets.  However, that risk is ameliorated substantially by r 24.10 which extends the power to award costs to making orders against represented parties.  That rule stands in stark contrast to s 43 of the Federal Court Act 1976 (Cth) (the FCA) which precludes orders against represented parties.

23. Rule 24.10 potentially assimilates the position of other group members with the applicants as if they had brought their own actions as natural persons.  In the ordinary course, applicants who are natural persons are not required to provide security for costs.   Rule 24.10 therefore provides good reason not to make a security for costs order in these proceedings. That there is one corporation amongst the group members does not significantly alter that position. 

24. Notwithstanding the potential liability of group members for costs pursuant to r 24.10 a security for costs order might still be made in representative proceedings brought pursuant to Part 4 of Chapter 3 of the UCR.  The critical consideration is whether the making of the order is necessary to preserve the efficacy of the costs order.  For example, a security for costs order may be necessary in circumstances in which disagreements between the representative party and the represented parties might arise and may result in the exercise of the power conferred by r 24.10 adversely to the respondent in order not to unfairly burden a representative party.  No such circumstance is evident in the material put forward in support of this application.  A great disparity in the circumstances of members of the group in respect of such matters as the control of the proceedings, the strengths of their respective cases on liability, and the extent of their likely damages, if successful, may support the making of an order for security for costs.

25. I indicate that, but for the significance I have attached to r 24.10, I would have ordered security for costs.  In this case the bringing of representative proceedings would, but for the operation of r 24.10, have shielded the other group members from the ordinary consequences which fall on natural persons whose actions are dismissed.  Such assets as they may have are liable to be seized and if there is a shortfall they are vulnerable to bankruptcy proceedings.  In the absence of an absolute statutory immunity against costs orders like that conferred by s 43 of the FCA it is not necessary to make a security for costs order to preserve the efficacy of the costs power.

26. I acknowledge that the application is brought late but that is only because recent expert reports cast much doubt on Mr Kurray’s case as to the source of the Lucindale fire which in itself heightens the risk of an unsatisfied adverse costs order.  Those group members who do not opt out are not substantially prejudiced because they were always vulnerable to an adverse costs order.  The lateness of the application would not have been reason enough in itself to decline to make the order.

    Conclusion

27. I dismiss the Brinkworth parties’ application for security for costs.