Lenehan v Powercor Australia Ltd (No 3)

[2020] VSC 404

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

MAJOR TORTS LIST

S CI 2018 01290

ANTHONY LENEHAN	Plaintiff
v
POWERCOR AUSTRALIA LIMITED (ACN 064 651 109)	Defendant

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JUDGE:	Nichols J
WHERE HELD:	Melbourne
DATE OF HEARING:	16 December 2019; further directions 2 March 2020; further expert report filed 31 March 2020
DATE OF JUDGMENT:	3 July 2020
CASE MAY BE CITED AS:	Lenehan v Powercor Australia Ltd (No 3)
MEDIUM NEUTRAL CITATION:	[2020] VSC 404

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PRACTICE AND PROCEDURE – Court approval of costs of a representative proceeding – Supreme Court Act 1986 (Vic) s 33V – Whether costs claimed are reasonable in all the circumstances and proportionately incurred – Modtech Engineering Australia Pty Ltd v GPT Management Holdings Ltd [2013] FCA 626 – Whether an additional loading for skill care and attention can be approved – Legal Profession Uniform Law (Vic) s 172 – Supreme Court General (Civil Procedure) Rules 2015 (Vic) r 63.48.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr T P Tobin SC with Mr A Fraatz	Maddens Lawyers
For the Defendant	No appearance

HER HONOUR:

1. On 20 December 2019, I approved the plaintiff’s entry into an agreement to settle this proceeding.  On 6 April 2020, I approved a scheme for the distribution of settlement moneys between group members.[1]  The background to this proceeding is set out in my reasons published on that date.

   [1]Lenehan v Powercor Australia Ltd (No 2) [2020] VSC 159 (Lenehan (No 2)).

1. On 2 March 2020, I approved certain costs claimed by the plaintiff’s solicitors in this proceeding (see [2020] VSC 82 - Lenehan Costs No 1).[2]

   [2]Lenehan v Powercor Australia Ltd [2020] VSC 82 (Lenehan Costs (No 1)).

1. In approving costs for professional fees on that occasion, I declined to include an allowance for “skill, care and attention” (described in the relevant rule as a discretionary allowance for “skill, care and responsibility”).  The plaintiff and his solicitors, Maddens, had claimed such an allowance, to be calculated as a percentage “loading” on their professional fees.

1. While I found that such an allowance ought be made, and that the appropriate rule by reference to which it should be considered was r 63.48, I requested a supplementary expert report to assist me to determine the correct quantification of such an allowance.[3]  Ms Paver, the costs specialist appointed by the Court to assess whether the plaintiff’s claimed legal costs were fair and reasonable as to work done and the amounts claimed, had provided reports dated 6 December 2019 and 17 February 2020 (first and second reports) and provided a further report responding to my request dated 31 March 2020 (third report).

   [3]Lenehan Costs (No 2), [71].

1. In this judgment I deal with the allowance for skill, care and  responsibility, calculated on the plaintiff’s professional fees already assessed and approved in respect of the conduct of the proceeding and in connection with the approval of the settlement and the administration of the settlement scheme up until 4 February 2020.[4]

   [4]Past or actual costs were calculated by Ms Paver to 4 February 2020.  I declined, in Lenehan Costs No 1, to approve future costs on the basis of estimates.  Those costs will be considered for approval after they have been incurred.

1. The principles governing the approval of the costs of the representative proceeding by the Court are well understood and are described in Lenehan Costs No 1.

1. As explained in that judgment, the Supreme Court Scale of Costs[5] contains items which are discretionary and which, accordingly, may be allowed by the Costs Court on a taxation of costs.  Item 17 is one such item.  Entitled, “Skill, Care and Responsibility”, it allows an amount for professional fees in addition to the amounts calculated on the Scale.  In calculating such an allowance regard is to be had to the circumstances of the particular case, and to the factors enumerated in the item.  They include the skill, specialised knowledge and responsibility involved and the time and labour expended by the legal practitioner; research and consideration of questions of law and fact; and the complexity of the matter.  That the Scale provides for such an allowance is reflected in the Court’s Rules, in particular r 63.48 which deals with discretionary items allowed under the Scale.  It provides that in exercising its discretion, the Costs Court shall have regard to the matters set out in that rule, which are the same factors enumerated under item 17.  The allowance is typically calculated as a percentage of the total amount otherwise allowed for professional fees, and is often described as a “loading”.

   [5]Supreme Court (General Civil Procedure Rules) 2015 (Vic) (Rules), appendix A.

1. Although the allowance under r 63.48 applies on a taxation of costs and this is not a taxation of costs, reference to the rule and what it allows provides a basis (among other bases) on which fair and reasonable costs may be assessed on an application of this kind.

1. In her first and second reports Ms Paver allowed an amount of 30% calculated on the assessed amount of the plaintiff’s professional fees, meaning the amount that Ms Paver assessed as being fair and reasonable (as to the work done and the amounts claimed) and proportionate.  In concluding that that allowance should be made, Ms Paver had regard to a  number of factors including those described in Lenehan Costs No 1.  In that judgment I accepted that factors such as those identified were appropriate as a basis on which to make such an allowance.

1. There was one aspect of Ms Paver’s reasoning that required clarification.  It was not clear from Ms Paver’s first and second reports whether in fact her calculation of a 30% loading had included an allowance for the costs or risk borne by the plaintiff’s solicitors, Maddens, when undertaking this proceeding on a conditional or “no win, no fee” basis.  I considered that that was a possibility and that Ms Paver’s language was ambiguous.  For the reasons set out in Lenehan Costs No 1 it was impermissible to allow the recovery of any payment or premium of this kind, in this case.  Maddens was only entitled to recover an uplift fee pursuant to a conditional fee agreement that complied with the Legal Profession Uniform Law,[6] and Maddens’ fee agreement was not compliant. I directed that that matter be addressed in a supplementary report from Ms Paver.

   [6]Legal Profession Uniform Law Application Act 2014, schedule 1.

1. In her third report Ms Paver re-states her opinion that an allowance for “skill, care and responsibility”, calculated at 30% of the assessed amount of professional fees, is appropriate.  Ms Paver states that the loading does not include any provision for the risk assumed by Maddens in acting on a conditional basis, and nor did it include such an allowance when calculated in her first report.

1. In her third report Ms Paver repeats and elaborates on a number of matters that, in her opinion, support her quantification of the allowance, as follows:

(a)Group members claimed diverse injury and loss, which extended to personal injury including psychiatric injury, property damage and economic loss.

(b)Many group members were vulnerable because of their personal circumstances or the effect of the bushfire, which made dealing with them to advise and take instructions complex, and necessitated a high degree of skill and care.  Some group members were traumatised which made establishing their instructions more difficult.

(c)There were difficulties in assessing and establishing quantum because many group members’ records had been destroyed by the fire.

(d)The liability questions were technical and required both technical lay evidence and a detailed analysis of expert evidence and related material.

(e)There were a number of complex legal issues, including in connection with the scope of the alleged duty of care and the interaction between the regulatory framework and common law duties.

(f)Three separate insurer proceedings were issued arising out of the same circumstances, about a year after this proceeding commenced.  The insurer proceedings were case managed with this proceeding and trial of the class action and the insurer proceedings were listed together.  Evidence in one proceeding was to be evidence in all proceedings.  Although that undoubtedly created efficiencies, it also required careful consideration about the appropriate strategic and forensic steps required to ensure that the plaintiffs in each of the insurer proceedings and the class actions would not undermine each other.

(g)The matter was strongly contested and proceeded to trial, although it settled six days into the trial.  In this respect, Ms Paver observes that in her experience the later the stage of the proceeding at which a matter settles the greater the loading that is typically attracted.

(h)Maddens’ care and conduct of the litigation was appropriately and proportionately pursued in a cost effective manner, in the interests of a diverse group of class action members, each requiring individualised attention.

1. Further, in relation to r 63.48, Ms Paver’s third report addressed these matters:

(a)The Supreme Court of Victoria Practice Note SC Gen 11 provides a guide to discretionary items in a bill of costs, including in respect of the care, skill and attention loading at item 17 of the Scale.  The guide provides that the percentage applied is commonly within the range of 0 to 15%.

(b)This case required a significantly higher degree of care, skill and responsibility than the kind of case that would typically attract a loading within the range suggested by the guide.  In her opinion, and based on her experience, a taxing officer would allow a significantly larger loading in this proceeding.

(c)In her experience, the percentage for a skill, care and responsibility loading is ordinarily calculated globally, and not broken down into individual amounts attributed to particular factors or particular items of work.

(d)An allowance on taxation of a loading of 30% or a similar amount is certainly not commonplace.

(e)Ms Paver’s opinion was that a loading of 30% is fair, reasonable and appropriate and, with the loading taken into account, the plaintiff’s costs, as assessed, are fair, reasonable and proportionate.

1. As explained in Lenehan Costs No 1, sufficient evidence must be tendered so as to enable the Court to make an assessment as to whether the costs were reasonably and proportionately incurred, and evidence on this question commonly comes from an independent costs consultant or other expert.  However, even where an independent expert is appointed, it is the Court and not the expert who is required to determine whether the costs are reasonable.[7]

   [7]Modtech Engineering Australia Pty Ltd v GPT Management Holdings Ltd [2013] FCA 626.

1. Assisted by Ms Paver’s analysis, I consider that the allowance for skill, care and responsibility that she has identified is fair, reasonable and proportionate in all of the circumstances.

1. In Lenehan Costs No 1, I approved costs of the proceedings in the sum of $2,051,521.49 inclusive of GST and costs in connection with the approval of the settlement and the administration of the settlement scheme, up until 4 February 2020, in the sum of $63,838.85.

1. Accordingly, I approve further costs of $615,456.44 and $19,151.65, a total of $634,608.09.