Murillo v SKM Services Pty Ltd
[2019] VSC 663
•7 October 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
MAJOR TORTS LIST
S CI 2017 02779
| CASTOR MURILLO | Plaintiff |
| v | |
| SKM SERVICES PTY LTD (ABN 55 130 867 220) | Defendant |
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JUDGE: | John Dixon J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 1 August 2019 |
DATE OF JUDGMENT: | 7 October 2019 |
CASE MAY BE CITED AS: | Murillo v SKM Services Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2019] VSC 663 |
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PRACTICE AND PROCEDURE – Group proceeding – Application for approval of settlement of group proceeding – Whether proposed settlement is fair and reasonable – Relevant considerations – Approval for payment of legal costs from settlement sum – Coolaroo recycling plant class action – Supreme Court Act 1986 (Vic) Part 4A, s 33V.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G D Dalton QC with Ms C Nicholson | Maddens Lawyers |
| For the Defendant | No appearance | Meridian Lawyers |
HIS HONOUR:
Introduction
The plaintiff in this group proceeding applied for approval of a proposed settlement of the proceeding pursuant to s 33V of the Supreme Court Act 1986 (Vic). On 1 August 2019, I authorised the plaintiff nunc pro tunc on behalf of the Participating Group Members (‘PGMs’) to enter into and give effect to the document titled ‘Settlement deed – Coolaroo Recycling Plant Class Action’ (‘Deed’) executed by the parties, and the transactions contemplated by the Deed, for and on behalf of the PGMs and each of them.
The settlement of the proceeding was approved on the terms set out in the Deed, and the Settlement Distribution Scheme (‘SDS’) exhibited at pages 131 to 146 of exhibit KAE-1 to the affidavit of Kathryn Amy Emeny sworn 9 July 2019. Ms Emeny, a partner of the plaintiff’s solicitors Maddens Lawyers (‘Maddens’), was appointed as administrator of the SDS. Maddens’ legal costs were fixed in the sum of $725,000 (inclusive of GST), and are to be paid in accordance with the SDS. A reimbursement payment to the plaintiff of $5,000 was also approved.
I made consequential directions and orders. What follows are my reasons for doing so.
Background
In the proceeding, Mr Murillo claims damages for himself and group members for losses suffered as a result of a fire in 2017 at the Coolaroo recycling plant operated by the defendant and located at Maffra Street, Coolaroo (‘Plant’), which emitted smoke and soot into neighbouring areas.
The plaintiff contended that, on 13 July 2017, a fire started in waste that was stockpiled at the Plant. The fire spread rapidly within bays containing stacked bales of co‑mingled recycling waste (paper, plastics and cardboard). Within minutes a large, black smoke plume developed and spread out over the suburbs to the south of the Plant.
During the first few hours after the fire started, air quality monitoring, including spot measurements taken inside neighbouring homes, showed very high levels of airborne particles. As the fire continued to produce thick black smoke, the Environment Protection Authority issued ‘watch and act’ advices to residents and businesses in affected suburbs, including Broadmeadows, Campbellfield, Coolaroo, Dallas and Jacana. By the middle of the day, the Melbourne Fire Brigade HAZMAT unit recommended evacuation and, in the evening, an ‘evacuate now’ advice was issued for the residents of Dallas and approximately 150 residents were ordered to evacuate.
For a number of days, the unextinguished fire poured smoke and ash into the neighbouring suburbs. On 14 July 2017, EPA air monitoring recorded that the average levels of particulate matter in a nearby Dallas residential area were in the ‘hazardous-extreme’ range. The fire was not brought under control until 15 July 2017and was not finally extinguished for many days.
On 21 July 2017, this proceeding was commenced.
The plaintiff and group members were residents and businesses neighbouring the Plant. The plaintiff alleged that the fire started as a result of the defendant’s failure to take reasonable care in its stockpiling of recycling waste and in its fire management and prevention practices, particularly in the context of numerous previous fires at the Coolaroo Plant. The plaintiff and group members suffered loss from the effect of the smoke, soot, dust, ash, debris and toxins from the fire that spread across the suburbs of Coolaroo and Dallas. The plaintiff and a sub-group of group members also alleged nuisance.
The defendant admitted it was the sole occupier and operator of the plant, but denied liability in negligence or nuisance to the plaintiff or group members. It alleged that it had a risk management plan in place that included a fire risk management plan.
The group members were defined as an open class, being all those who suffered personal injury, loss of or damage to property, and/or pure economic loss, as a result of the fire, including the legal personal representatives of any deceased person who had suffered any such loss in the fire.
On 14 September 2018, I ordered publication of notices to group members regarding their right to opt out of the proceeding, and fixed 31 October 2018 as the date by which group members were entitled to opt out. A total of 11 opt-out notices were received by Maddens or the court. Class closure orders have not been made in the proceeding.
Application for settlement approval
Section 33V of the Supreme Court Act 1986 provides that a group proceeding ‘may not be settled or discontinued without the approval of the court’. Mr Murillo sought that approval for the proceeding by a summons dated 8 May 2019.
Mr Murillo relied on affidavits including:
(a) an affidavit of Ms Emeny sworn 12 September 2019;
(b) an affidavit of Ms Emeny sworn 8 May 2019; and
(c) a confidential affidavit of Ms Emeny sworn 9 July 2019.
These affidavits exhibited copies of key documents including the executed Deed, the proposed SDS, and a confidential opinion of counsel. Mr Murillo also relied on a supplementary confidential opinion from counsel and written submissions.
Ms Emeny’s affidavits exhibited two notices of proposed settlement, which were distributed pursuant to orders made on 9 May 2019: one to group members generally (‘GM Notice’), and one to group members participating in the settlement (‘PGM Notice’). The GM Notice advised that court approval was being sought for a settlement of the proceeding and that only PGMs would be entitled to participate in the settlement. It directed group members to contact Maddens if they were unsure whether they were entitled to participate and explained how to object to the settlement. The PGM Notice also included that information but additionally specified the settlement sum, the legal costs sought, the plaintiff’s proposed reimbursement payment, and information on how group members’ loss would be assessed and the settlement sum distributed. It informed PGMs that they could request a copy of the full SDS from Maddens and six PGMs requested and received access to the document. The PGM Notice requested that PGMs notify any person who was not a PGM whom they believed may have been affected by the fire of the settlement and provide them with a copy of the notice.
The PGM Notice was distributed to group members by post and, where available, email, and the GM Notice was distributed by post, email and letterbox drop within a prescribed area. Further, a copy was published on the Maddens and Supreme Court websites.
Ms Emeny confirmed compliance with the orders of 9 May 2019.
One group member gave notice of objection to Maddens. That objector neither provided written submissions in support of the objection nor sought to be heard at the hearing of the settlement approval application. Ms Emeny deposed to her firm having made unsuccessful attempts to contact the objector after receipt of the objection. The objector had previously requested a copy of the SDS from Maddens, indicated to Maddens that she was unhappy about the proposed plaintiff reimbursement payment, and inquired about an additional claim for relocation costs. There was no material before the court as to the reasons for her objection.
Ms Emeny’s confidential affidavit was filed pursuant to court orders. The Deed, SDS, and counsel’s opinion concerning the plaintiff’s prospects in the proceeding were some of a number of exhibits to this affidavit.
The confidential affidavit, its exhibits, and the supplementary opinion[1] are confidential because they contain matters that would be prejudicial to the plaintiff’s claim if the court does not approve the proposed settlement. They also contain matters that were communicated to Maddens in circumstances protected by legal professional privilege, and Maddens’ assessment of the prospects of aspects of group members’ claims for damages. The opinions of counsel deal in detail with counsels’ assessment of the merits and prospects of the plaintiff succeeding in the action, and of the merits of the defences relied upon.
[1]I made orders preserving the confidentiality of the supplementary opinion of counsel on 1 August 2019.
As the settlement was approved on 1 August 2019, no need remains for the Deed, SDS or notices to be kept confidential and I have made orders that they be made available on the court file.[2]
[2]A copy of the SDS will be published on the Supreme Court website.
The court appointed Ms Debra Paver as a special referee pursuant to r 50.01 of the Supreme Court (General Civil Procedure) Rules 2015 for the purpose of reporting to the court on the reasonableness of the plaintiff’s legal costs. Ms Paver provided her report dated 15 July 2019 to the court and gave evidence at the hearing of the settlement approval application on 1 August 2019.
Proposed settlement
The settlement only compromises the claims of a closed sub-group of group members, referred to as ‘participating group members’ or ‘PGMs’, who are listed in the schedule to the Deed. The PGMs are those group members who had registered with Maddens before the mediation on 28 March 2019.
The court has ordered that the 210 group members named in Annexure A to the plaintiff’s summons of 8 May 2019 be the PGMs and that any other group members remain as group members in the proceeding without participating in, or being bound by, the settlement. The list of PGMs attached to the Deed reflects the list that was the subject of the earlier order, save for the addition of one further group member who contacted Maddens after the mediation and was included as a PGM for the purpose of the settlement.
The settlement sum is $1.2 million. The critical terms of the Deed are:
(a) the settlement of the proceeding is conditional on court approval;
(b) on the 28th business day after the making of the settlement approval orders, the defendant will pay the settlement sum into a settlement distribution fund opened by Maddens;
(c) the settlement distribution fund is to be allocated in accordance with the settlement distribution scheme;
(d) the settlement distribution scheme will be administered by a principal of Maddens as a court-appointed fund administrator;
(e) upon the making of the orders approving the settlement, and subject to the defendant’s payment of the settlement sum:
(i) the proceeding is fully and finally settled;
(ii) the plaintiff, on his own behalf and on behalf of PGMs, releases the defendant from all claims that he or any PGM has or may have arising out of or in respect of the matters the subject of, or anything related to, the proceeding;
(iii) the defendant may plead the Deed as a complete defence to any such claim;
(f) group members who are not PGMs are not bound by the Deed, releases, or the plea in bar.
The SDS provides for the settlement sum to be distributed on receipt as follows:
(a) prior to any final distribution:
(iv) payment of the plaintiff’s approved legal costs, capped in an amount of $725,000;
(v) payment of $5,000 to the plaintiff (to compensate him for undertaking the role of lead plaintiff);
(b) distribution of the balance of the settlement sum ($470,000), together with any accrued interest, to PGMs on a pro rata basis.
Under the SDS, the PGMs’ claims will be assessed based on the information and documentation provided to Maddens, subject to a discretion of the scheme administrator to request further information or documentation and to reject any aspect of any claim.
Applicable legal principles
When determining whether to approve a settlement, the court must consider whether the proposed settlement:
(a) is a fair and reasonable compromise having regard to the claims made on behalf of the group members who will be bound by the settlement; and
(b) is in the interests of group members as a whole (not just the plaintiff and defendant).[3]
[3]Williams v AusNet Electricity Services Pty Ltd [2017] VSC 474 [31]; Rowe v AusNet Electricity Services Pty Ltd [2015] VSC 232 [49]–[51]. See Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 16) [2013] VSC 74 (‘Matthews’) [35]–[36].
In Australian Securities and Investments Commission v Richards,[4] the Full Court of the Federal Court stated the applicable principle:
Justice will be satisfied where a settlement is ‘fair and reasonable having regard to the claims made by group members who will be bound by it’.
The role of the Court is important and onerous. It is protective. It assumes a role akin to that of a guardian, not unlike the role a court assumes when approving infant compromises. In the current context, the Court’s role is to protect those group members who are not represented by Levitt Robinson and whose interests may be prejudiced by their absence.[5]
[4][2013] FCAFC 89.
[5]Ibid [7]–[8] (citations omitted). Approved in Botsman v Bolitho (2018) 57 VR 68, 111 [202].
Whether a proposed settlement is fair and reasonable depends, among other things, on whether the overall settlement sum is fair and reasonable and on whether the distribution of the settlement sum among group members is fair and reasonable.[6] Reasonableness is a range. The question is whether the proposed settlement is within that range. [7]
[6]Darwalla Milling Co Pty Ltd v F Hoffman-La Roshe Ltd [No 2] (2006) 236 ALR 322, 336 [41] (‘Darwalla’).
[7]Ibid [40], [50].
The practical approach to resolution of whether a settlement is ‘fair and reasonable’ involves identifying ‘any features of a settlement that are obviously unreasonable or unfair.’[8] The court does not ‘second-guess’[9] or go behind the plaintiff’s legal representative’s tactical or other decisions, but satisfies itself that the decisions are within the range of reasonable decisions in the known circumstances and the reasonably perceived risks of the litigation.[10]
[8]Darwalla (2006) 236 ALR 322, 335 [39].
[9]Matthews [2013] VSC 74 [36]; Darwalla (2006) 236 ALR 322, 339 [50]; Jarra Creek Central Packing Shed Pty Ltd v Amcor Ltd [2011] FCA 671 [119].
[10]Matthews [2013] VSC 74 [36]; Darwalla (2006) 236 ALR 322, 339 [50]; Pharm-a-Care Laboratories Pty Ltd v Commonwealth[No 6] [2011] FCA 277 [22]; Modtech Engineering Pty Ltd v GPT Management Holdings Ltd [2013] FCA 626 [12] (‘Modtech’).
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.[11]
[11]Rod Investments (Vic) Pty Ltd v Abeyratne [2010] VSC 457 [11], [18]; Thomas v Powercor [2011] VSC 614 [18].
Some cases list relevant factors that may guide (but not dictate) the court’s assessment of whether a proposed settlement is fair and reasonable. For example, in Williams v FAI Home Security Pty Ltd [No 4][12] Goldberg J identified the following considerations as typically relevant to an assessment of an application for approval:
[12](2000) 180 ALR 459 (‘Williams v FAI’).
(a) the amount offered to each group member;
(b) the prospects of success in the proceeding;
(c) the likelihood of the group members obtaining judgment for an amount significantly in excess of the settlement offer;
(d) the terms of any advice received from counsel and from any independent expert in relation the issues which arise in the proceeding;
(e) the likely duration and cost of the proceeding if continued to judgment; and
(f) the attitude of the group members to the settlement.[13]
[13]Ibid [19].
Goldberg J adopted the nine-factor test identified by the United States Court of Appeals for the Third Circuit in In re General Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litigation[14] as a helpful and useful guide to assessing the reasonableness of the proposed settlement before him:
Those factors are: (1) the complexity and duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining class action; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement in light of the best recovery; and (9) the range of reasonableness of the settlement in light of all the attendant risks of litigation.[15]
[14]55 F.3d 768 (3rd Cir. 1995), 785.
[15]Williams v FAI (2000) 180 ALR 459, 465 [19].
In other cases, courts have noted that the nine factors may be employed in appropriate cases as a useful guide but are not to be adopted as rigid tests.[16]
[16]Kelly v Willmott Forests Ltd (in liq) [No 4] (2016) 335 ALR 439, 455 [66] (Murphy J); Fowler v Airservices Australia [2009] FCA 1189 [21] (Bennett J); Haslam v Money for Living (Aust) Pty Ltd (admin apptd) [2007] FCA 897 [20] (Gordon J).
The various relevant factors identified in Williams v FAI are largely directed at the reasonableness of the proposed compromise as between the parties. Where, as in this case, a procedure is proposed for distributing a settlement sum among group members, the distribution scheme proposed should also be fair and reasonable as between group members.
Is the proposed settlement fair and reasonable?
A.As between the parties
Turning firstly to the settlement sum, the plaintiff’s solicitors estimated the total quantum of the damages claims of the plaintiff and PGMs to be approximately $876,905.00.
The plaintiff’s solicitors commenced registering potential group members with a view to initiating this proceeding from about 14 July 2017 and took active steps to identify affected residents and businesses by canvassing the area on foot on 15, 16, 17, 19 and 27 July 2017, talking with residents and distributing a flyer about a potential class action. Eighty-five people attended a community meeting on 27 July 2017 at the Coolaroo Hotel to discuss potential compensation and a class action. The solicitors directly telephoned residents and businesses known to have been affected by the Fire, and on 23 January 2018, corresponded to 2,071 addresses within the affected area, encouraging the addressees to register their interest in the proceeding. The solicitors followed up with 110 residences and businesses in the affected suburbs of Coolaroo and Dallas on 9, 10 and 11 May 2018. In accordance with the opt-out procedure orders,[17] Maddens conducted a mail out to all known impacted addresses, published the court-approved notice in the Hume Leader newspaper, uploaded it to the Maddens Facebook, and provided it to the Court to be uploaded on the Supreme Court website.
[17]Orders made by John Dixon J on 14 September 2018
By the time of mediation, the plaintiff’s solicitors had taken reasonable and appropriate steps to identify potential group members and had identified and registered the 209 group members who are the PGMs.
Next the plaintiff’s solicitors sent targeted questionnaires to the PGMs to assist them to record their loss and damage in as much detail as possible. Individual PGMs were provided with two questionnaires: a household questionnaire for each registered address to capture damage caused to residence and/or chattels and an individual questionnaire for each PGM, including each member of a household, to capture the impact of the Fire on each individual, such as physical or psychological symptoms, medical expenses and inconvenience. A different questionnaire to business PGMs captured expected business losses, such as wasted costs due to forced closure, damage to stock, cleaning costs and damage to premises. The plaintiff’s solicitors assisted many PGMs to complete their questionnaires and reviewed, audited and followed up on completed questionnaires.
During this process, 33 PGMs withdrew their instructions and advised that they no longer wished to pursue claims for compensation, and 39 PGMs failed to provide sufficient instructions regarding their loss and damage to progress a claim for compensation (‘nil assessment PGMs’). I am satisfied that the plaintiff’s solicitors made appropriate efforts to follow up on nil assessment PGMs to encourage them to provide sufficient information to support a claim and to explain that, unless they provided such information, their claim would be put forward to mediation with a nil assessment. Each PGM was given a summary of their loss assessment for review and acceptance or further clarification.
Finally, the plaintiff’s solicitors quantified the identified heads of loss based on the information gathered in relation to each PGM and provided assessments of the quantum of loss and damage, and the basis for them, for all PGMs in advance of the mediation.
The plaintiff’s counsel submitted that the assessments advanced at mediation were within the range of potential damages awards for PGMs, noting that many PGMs could have difficulty proving the full extent of their claimed losses at trial. The submission was illustrated, in respect of individual claims, by reference to the plaintiff's claim that was typical for many individual PGMs.
The plaintiff lived with his pregnant wife and four children at a rented house at 20 King Street, Dallas, which is a little over a kilometre directly south of the Plant. He was at home on 13 July 2017. He noticed the smoke coming from the Plant during the morning and that conditions deteriorated. By the afternoon, there was a very strong, toxic smell of burning plastic. There was dust, soot and smoke, inside and out. He and his family began to get sore throats and eyes. He decided that they should leave. He went to a doctor complaining of difficulty breathing and feeling unwell. He took his family to an evacuation centre established by the Hume City Council, where he registered but could get no accommodation. He and his wife and children slept in their car for two nights.
The plaintiff obtained emergency accommodation for his family for 15 to 17 July 2017. During the days, he returned to his home to check the air quality and to start cleaning the ash and the burnt-plastic smoke smell from his home. His family returned on 18 July 2017 but the smell persisted for weeks and the plaintiff had to throw out furniture that had absorbed it.
The plaintiff suffered no long term physical or psychological effects from his exposure to the emissions. He claimed $382.80 for medical expenses, being his estimate of the cost of antibiotics prescribed for him on 14 July 2017 and a chest x-ray, as he paid cash and kept no receipt.
The total medical expenses claimed by PGMs, including the plaintiff, is $3,939. The majority of claims for medical expenses were under $200. Most are unsupported by documents and involve estimates.
The plaintiff claimed $520 for the cost of four nights’ temporary accommodation for his family at the Hume Villa Motor Inn. Although the cost of the accommodation was paid by the Hume City Council, the plaintiff is able to recover that expense from the defendant in accordance with established principles.[18] There were 48 PGMs who either voluntarily evacuated or were ordered to evacuate their homes as a result of the emissions. Almost all of these individuals lived in the streets immediately to the south of the Plant, particularly Barry Road, Washington and King Streets, and Dallas Drive. A total of 23 PGMs claim the cost of reasonable temporary accommodation, ranging from $50 to $700, and totalling $7,450.
[18]Thomas v Powercor Australia Ltd (Damages Ruling) [2011] VSC 586 [34]–[55] (upheld on appeal in Powercor Australia Ltd v Thomas (2012) 43 VR 220, 237–41 [74]–[89]).
The plaintiff claimed $61 for hiring an air purifier. This payment was supported by a receipt. The smoke from the Fire badly affected the homes of many individual PGMs, particularly those closest to the Plant. It got into the carpets and soft furnishings and left soot, ash and a terrible smell. Twenty-seven individual PGMs incurred out of pocket expenses in cleaning up the effects. The expenses ranged from a low of $10 for the purchase of cleaning products to a high of $3,520. The total is $11,662. Many of the claimed out of pocket clean-up costs are not supported by receipts or other documentation and are round figure estimates. Not all would be proved at trial.
Many individual PGMs spent considerable time trying to return their homes to the condition that they were in before they were affected by the emissions. This involved many hours of cleaning. Some PGMs were helped by neighbours and family friends without charge. The commercial cost of this rectification work is recoverable as damages.[19] The plaintiff and his wife estimated that they spent 16 hours cleaning their home after the fire. He claimed $1,747 based on a commercial quote to clean and deodorise his home.
[19]Ibid.
For remaining PGMs, the assessments for own and volunteer labour were made on the basis of the PGM’s estimate of hours worked multiplied by an assumed labour rate of $35 per hour. I consider this to be within the range of fair and reasonable assessments for this head of loss and damage. The hourly rate might be a little low (some invoices for commercial cleaning of PGMs’ homes have a rate of $60 per hour) but many individual PGM’s estimates of the hours worked may be inflated.
Many individual PGMs had personal property that was effectively destroyed by the emissions because of the smell taint. Typically, the items were fabrics that absorb smells, such as clothing, couches and soft furnishings. Most PGMs provided an estimate of the value of the items that they claim were effectively destroyed. Most of the estimates are round figures and are not supported by any documents or other information. Many PGMs would not be able to prove their estimate at trial.
For example, the plaintiff had to throw out a two-seater fabric couch and a three-seater futon couch due to the persistent smell. He could not prove the age, make or market value of these items at the time of the fire. He claimed $165, being the price he paid to buy a second-hand replacement couch from Gumtree. He did not retain a receipt from that purchase. Notwithstanding the modesty of that price, I doubt that it can be used as a measure of the loss of the two couches.
Physical inconvenience is a compensable form of damage where there is a strong evidentiary foundation that the tortious act led to a genuine inconvenience of some significance (be that in terms of impact or duration).[20] Where inconvenience as a result of the tort is substantial, the measure of damages should reflect that.[21] Put another way, damages for inconvenience ‘need not be modest’.[22]
[20][2011] VSC 586 [132]; Thorpe v Lochel (2005) 31 WAR 500; Dunn v Electricity Trust of South Australia (1985) 122 LSJS 201, 217; Campbelltown City Council v Mackay (1989) 15 NSWLR 501, 511 (McHugh JA).
[21]Campbelltown City Council v Mackay (1989) 15 NSWLR 501, 504 (Kirby P), 505 (Samuels JA).
[22]Ibid.
Loss of accommodation and the physical inconvenience associated with obtaining and living in alternative accommodation has been recognised in a number of authorities as compensable.[23] This includes living in less convenient accommodation or living in alternative accommodation with a level of discomfort, which has been held to constitute compensable inconvenience.[24]
[23]See, eg. Mafo v Adams [1970] 1 QB 548, CA.
[24]Ward v Cannock Chase District Council [1986] Ch 546; Bailey v Bullock [1950] 2 All ER 1167.
Recent bushfire class actions indicate that damages for physical inconvenience for exposure to the effects of a fire are not readily awarded. In Thomas v Powercor Australia Ltd (Damages Ruling), the plaintiff’s evidence of his preparations to fight the Horsham bushfire and of cleaning up after the fire were insufficient to support a claim for physical inconvenience damages.[25] In Herridge v Electricity Networks Corp [No 4],[26] the plaintiffs were not awarded damages for physical inconvenience alleged to have been suffered as a result of exposure to the effects of fire, but were allowed recovery for personal labour and having to clean up after the fire. Le Miere J said:
The Elwoods’ characterisation of their claim for inconvenience contains elements which are essentially claims for mental distress. Damages are not recoverable for such distress. A further element of their claims is for clean up required in the aftermath of the fire. I have allowed Mr and Mrs Elwood damages for personal labour in respect of the salvage and clean up after the fire. It would be to double compensate them to give them damages in respect of that clean up under the heading of loss of amenity or inconvenience.[27]
[25][2011] VSC 586 [132]–[135].
[26][2019] WASC 94.
[27]Ibid [601].
In this case, the plaintiff claimed $2,000 for his physical inconvenience, which included suffering from sore eyes and throat and breathing difficulties requiring a visit to the doctor, two nights sleeping in the car with his family, a further four nights in motel accommodation, and many hours of physically cleaning the discomforting effect of the emissions from his home. Counsel opined that there is a real risk that the plaintiff would not recover damages for physical inconvenience but that, if he were to, the amount of $2,000 would be within the range of potential awards.
It may be that, rather than being entitled to damages for physical inconvenience, the plaintiff would be entitled to general damages for nuisance based on loss of the amenity of his interest in the rental property. The assessment of $2,000 would also be within the range of such damages.
The claims of individual PGMs for physical inconvenience have been assessed based on their individual circumstances ranging from $0 to $2,000, depending on the degree of physical inconvenience.
Turning to the business claims, a number of neighbouring businesses suffered significant losses as a result of the effects of the fire and emissions. Almost all of the business PGMs were direct neighbours of the Plant, located in Maffra Street, Lisa Place or Barry Road.
The plaintiff’s solicitors engaged Sinclair Wilson, a firm of business advisers and accountants, to assess a number of the larger claims for loss by business PGMs. Sinclair Wilson reviewed profit and loss statements, tax returns and other supporting documents provided by the business PGMs. Counsel suggested that they adopted a reasonably favourable approach for the business PGMs by accepting some claims without the standard of proof that would be required by a court. For example, where a business PGM did not have a receipt for a small claim of cleaning costs, Sinclair Wilson included such claims in the assessment. Another example was where a business PGM did not provide employment contracts or payslips to substantiate payment of wages during the shutdown. In such cases, Sinclair Wilson included such claims in the assessment by relying on other evidence such as the profit and loss statements. In counsel’s view, the business PGMs would not receive such favourable assessments in an assessment process at the end of a successful trial, particularly in relation to lost revenue.
The total losses claimed by business PGMs are divided into heads of loss reflecting the nature of the losses claimed. Loss of stock was by far the largest claim. The evidence supporting these claims was predominantly invoices and photographs of damaged stock. Next, Sinclair Wilson assessed the head of loss for lost revenue by extrapolating from prior yearly tax returns. Counsel anticipated that it would be difficult for some of the business PGMs to prove 100% of their claims for lost revenue.
Counsel opined that from experience in class actions, many small businesses have inadequate record-keeping practices and will not have the evidence to prove lost revenue without assistance from external assessors and in some cases expert evidence. Even where such third party assistance is provided, there is almost always some compromise of the initial amount. Further, the costs of this third party assistance would not be completely recoverable and would eat into the modest amounts claimed by the business PGMs. On the other hand, subject to proof of actual payment of the wages to employees, the business PGMs should be able to establish a head of loss for wage expenses.
Amounts claimed for cleaning expenses were either payments made to external cleaning companies or costs of cleaning products. Most business PGMs could produce receipts, although there were some claims accepted by Sinclair Wilson for which no receipt was provided. Most of the claims for own labour were for cleaning carried out by employees and quantified on the same basis as the individual PGMs.
There are only two claims for loss of business equipment. For both of those claims, the PGM’s insurer has made a payment to the PGM.
I am satisfied that the processes adopted by the plaintiff’s solicitors to identify group members, register them as PGMs, and to obtain information to support PGMs’ claims were appropriate and reasonable. I also consider that the assessments of the PGMs’ claims were within the range of reasonable estimates of potential damages awards for the PGMs.
In counsel’s opinion, even if the plaintiff were to proceed to trial and obtain judgment, it is most unlikely that he and the PGMs would ultimately recover a higher proportion of their losses than if the settlement were approved. Counsel advanced five reasons for this opinion.
First, the additional legal costs of proceeding with interlocutory steps and to trial would erode the funds available for ultimate distribution. A reasonable estimate of the likely duration of the trial was five to ten days. The additional legal costs would be likely to run into the many hundreds of thousands of dollars.
Secondly, there was no reason to expect that the defendant would offer to settle the proceeding for more than the settlement sum should the plaintiff succeed at trial. The settlement sum exceeded the total loss assessments provided by the plaintiff.
Thirdly, the extent of the compromise in the settlement sum was in the compromise of the claims to interest and costs. Many PGMs will not have a substantial interest claim. I will come to the issue of legal costs in due course.
Fourthly, if each PGM were required to prove their loss at a subsequent trial, the cost of doing so would further erode the amount that they ultimately receive. That cost will be incurred and borne by individual group members. In the case of some of the business claims, the trial on damages would take many weeks and would involve detailed expert evidence. The cost of preparation and trial of the claims would be significant.
Finally, there was no guarantee that PGMs would be able to prove all of their claimed losses. Experience indicates that proof of loss is difficult and that when subjected to challenge, few claims are proved in full.
Broadly speaking, counsel’s opinions may be accepted. I would not characterise the settlement as payment of the assessed claims in full and compromise on the claims for interest and costs, given that it is an ‘all-in’ settlement, and the costs will be deducted from the settlement sum.
Next, counsel’s opinion was that this was a strong plaintiff’s case and the proposed settlement appropriately reflected its strength. I calculate that group members will receive approximately 54% of their assessed claims after payment of legal costs and expenses, although there are some savings in respect of those expenses.
In respect of the plaintiff’s prospects on liability, the plaintiff’s counsel submitted that the evidence at trial could support the following findings. The defendant had serious problems with fires at the Plant for many years. Prior to 2017, it had at least eight fires in seven years. During 2017, its appalling fire record got even worse. Before the fire on 13 July 2017, the defendant had fires start at the Plant on 20 February 2017, 28 February 2017, 4 June 2017, 9 July 2017 and 12 July 2017.
The fire on 28 February 2017 started within a building at the Plant. It burned for days because of the massive fuel load provided by inappropriately stockpiled waste. The fire produced thick black smoke, causing the Melbourne Fire Brigade (‘MFB’) to issue smoke health warnings to the local community.
The 28 February 2017 fire damaged the defendant’s production capacity, yet it continued to receive recycling waste over the next few months. As a result, its waste stockpiles increased even further, overflowing into the adjoining Glass Recovery Services site so that loose piles of flammable, household waste came into direct contact with a large pile of granulated glass containing decomposing food waste.
During May and June 2017, the EPA, MFB and local councils worked with the defendant to provide it with advice in relation to waste management and fire prevention at its facilities.
There was a further fire at the Plant on 4 June 2017, which again produced significant smoke resulting in Victoria Police issuing a warning to local residents to stay indoors with windows and doors closed. Arrangements were made for a joint inspection of the Plant by the EPA, MFB and Hume City Council to take place on 13 July 2017 to assess the continuing fire risks. Further fires prevented this assessment.
On Sunday 9 July 2017, a fire started at the juncture of the piles of organic glass sand and household waste (the ‘Sunday Fire’). The MFB were called and extinguished the fire. Then, at about 8.30pm on Wednesday 12 July 2017, another fire started in the same general area of the household recycle waste but further east than the Sunday Fire. Again, the MFB were called to extinguish that fire.
The following morning, Thursday 13 July 2017, an employee of the defendant, Chris Hilbert, was operating a front-end loader in the area of the Sunday Fire to remove a portion of the burned pile to go to landfill. He saw what he first thought was steam but then realised was dark, grey smoke. He tried to smother it with the bucket of the front‑end loader to contain the fire. He tried to call the site manager, Tim Masters, to tell him of the fire but couldn’t get through. He saw more smoke and lifted the bucket, exposing the fire to the air and to wind gusts. The fire then took off, spreading rapidly under strong northerly winds.
It is well established that an occupier of a rubbish tip or waste deposit site owes a duty to take reasonable care to prevent physical damage to neighbours or their property as a result of a fire at the site.[28] This is an instance of an established category of relationship which the law recognises as giving rise to a duty of care.[29]
[28]FS Evans & Sons Pty Ltd v Delaney (1985) 58 LGRA 405; Casley-Smith v FS Evans & Sons Pty Ltd [No 5] (1988) 67 LGRA 108; Brechin v Shire of Brookton [2002] WASC 228 [61]; Shire of Brookton v Water Corporation (2003) 133 LGERA 119, 126 [27].
[29]Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520; Weber v Greater Hume Shire Council [2018] NSWSC 667 [175].
Whether the defendant also owed a duty of care in relation to pure economic loss would be determined by application of the ‘salient features’ approach.[30] Counsel submitted that the salient features of this case that favoured the imposition of such a duty included foreseeability, control over the circumstances that created the risk of fire and the discharge of harmful emissions, vulnerability of the residents and businesses in the vicinity of the Plant, physical proximity of a narrow and readily ascertainable class of persons who could be foreseen to suffer interruption to their economic interests, and that the potential liability for pure economic loss caused by the negligent ignition and spread of fire at the Plant was not indeterminate.
[30]Roo Roofing Pty Ltd v Commonwealth [2019] VSC 331 [458]–[464].
Counsel submitted that the extent of the foreseeability of the harm and the physical proximity of the relatively small number of businesses that could potentially be affected by the consequences of a fire at the Plant made the circumstances of this case analogous to Perre v Apand Pty Ltd,[31] and distinguishable from cases such as Johnson Tiles Pty Ltd v Esso Australia Pty Ltd,[32] in which physical remoteness and potential indeterminacy of liability were significant factors telling against the imposition of a duty of care for pure economic loss.
[31](1999) 198 CLR 180.
[32](2003) Aust Torts Reports 81-692.
In the months leading up to 13 July 2017, the risk of fire at the Plant was ever present and obvious to the defendant and it knew or should have known that a failure to properly store the waste deposited at the Plant would increase the risk of a fire starting and significantly increase the risk that any fire that did start would spread uncontrollably. It knew that the granular glass piles contained organic matter and that they, ‘get warm and steam’. Despite this, it had piled up loose household waste against the glass piles.
Given the Sunday Fire and the fire the previous night, on 13 July 2017, the defendant knew that there was a serious and immediate risk of fire in the area of the loose stacks of household waste near the granular glass piles. Those previous fires ‘should have stood as the clearest possible warning of the continuing danger involved’.[33] Yet the defendant instructed a front-end loader operator to remove piles of that waste for landfill on a windy day, without any risk analysis, without giving him training or warnings in relation to fire prevention or suppression, without giving him any supervision, and without giving him any fire suppression equipment. Counsel’s opinion was that these circumstances established plain breach of the defendant’s duty to its neighbours.
[33]Casley-Smith v FS Evans & Sons Pty Ltd [No 5] (1988) 67 LGRA 108, 141.
The emissions that caused the plaintiff and group members to suffer the claimed losses were caused by the Fire. The Fire was reported by Mr Hilbert at about 8.44am on 13 July 2017. It is clear that there was a fire within the pile before he started digging and his actions exposed it to the air and wind, causing it to spread.
The Fire may have been left over from the Sunday Fire or independently started by spontaneous combustion from the contaminated glass piles against which the loose waste was stored. The specific cause may not affect the assessment of causation. The Fire would not have ignited had the defendant had in place reasonable waste management practices that kept piles of loose flammable waste away from the organic glass piles which were known to heat up. The Fire, once ignited, would not have spread to produce the emissions had the defendant ensured that Mr Hilbert had reasonable assistance, supervision, training, or fire suppression means available to him.
Nuisance is an unreasonable interference with the use and enjoyment of land; an ‘invasion of the common law rights of an owner or occupier of land’.[34] It may be based on an indirect physical injury to land, or a substantial interference with rights over land, including its enjoyment or amenity. Whether or not an occupier has, by the use of its land, wrongfully interfered with another’s enjoyment of their land, depends on what is reasonable in the circumstances, having regard to the ordinary uses of a particular society.[35] An occupier who directly uses premises in a manner which, inherently, involves a special danger of nuisance, is liable for any nuisance caused by the use.[36]
[34]Hargrave v Goldman (1963) 110 CLR 40, 60 (Windeyer J).
[35]Elston v Dore (1982) 149 CLR 480, 487–8.
[36]Dejager v Payneham & Magill Lodges Hall Inc (1984) 36 SASR 498.
Counsel’s opinion was that the defendant’s use of the Plant, at least from February 2017, involved a special danger of fire and the emission of toxic smoke into neighbouring properties. It was not a reasonable use of the Plant to stockpile flammable waste without complying with established practices of waste management to minimise the risk of the ignition and spread of fire.
Economic loss consequent on interference with the use and enjoyment of property rights is recoverable in nuisance without the need for the loss to be connected with any physical damage to property. As Dixon J said in Victoria Park Racing & Recreation Grounds Co Ltd v Taylor:
Diversion of custom from a business carried on upon the land may be brought about by noise, fumes, obstruction of the frontage or any other interference with the enjoyment of recognized rights arising from the occupation of property and, if so, it forms a legitimate head of damage recoverable for the wrong; but it is not the wrong itself.[37]
[37](1937) 58 CLR 479, 507
Counsel contended that irrespective of whether the defendant owed a duty of care to group members in negligence to avoid economic loss, pure economic losses are recoverable in nuisance.
Counsel’s opinion was that the plaintiff was likely to succeed at trial. However, the observations of Rares J in Clark v ING Life Ltd are relevant:
Anything can happen in litigation. Often the experience of the courts, and those who practise in them, is that the unlosable case can be lost and the unwinnable case can be won.[38]
[38][2007] FCA 1960 [29].
Counsel considered that the settlement sum appropriately reflected the litigation risks in this case.
There was a real risk that, if the settlement was not approved and the matter proceeded to trial, the costs of this proceeding would become disproportionate to the amount in dispute, which for two reasons supports the conclusion that the proposed settlement is fair and reasonable.
First, approval of the proposed settlement will advance the overarching purpose of the Civil Procedure Act 2010 ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’, which purpose the court is obliged to effect in the exercise of the power to approve a settlement of a group proceeding under s 33V of the Supreme Court Act1986.[39]
[39]Civil Procedure Act 2010 ss 7–8.
In making any order, the court is obliged to further the overarching purpose by having regard to certain objects, which relevantly include:
(a) the public interest in the early settlement of disputes by agreement between parties;[40] and
(b) dealing with a civil proceeding in a manner proportionate to the amount in dispute.[41]
[40]Ibid s 9(1)(b).
[41]Ibid s 9(1)(g)(ii).
Secondly, the settlement is consistent with the overarching obligation of the parties and their legal representatives to ‘use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to…the amount in dispute’.[42]
[42]Ibid s 24(b).
It is clear that already in this case the plaintiff’s legal costs are approaching the total value of the known damages claims. If the claims are resolved by judicial determination rather than settlement, the total costs will far exceed the damages. Such a result would be contrary to the overarching purpose and inconsistent with the overarching obligation to keep costs proportionate.
There are consequential advantages to the proposed settlement that I have regard to in assessing whether the proposed settlement is fair and reasonable and in the interests of group members as a whole. Osborn JA in Matthews v AusNet Electricity Services Pty Ltd identified, ‘considerations of finalisation; avoidance of continuing personal anxiety, stress and suffering; advancement of payment; and containment of costs’.[43]
[43]Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663 [308].
The proposed settlement will, if approved, achieve the significant advantage of finality.
The consequences of the Fire were not as severe for group members as a number of recent class actions in this court, such as those which arose out of the Black Saturday bushfires. However, all litigation involves a measure of stress and anxiety and the proposed settlement provides the advantage of avoiding that experience for the plaintiff and all PGMs.
If the proposed settlement is approved, the plaintiff and PGMs will receive distribution under the SDS promptly. Under the Deed, the defendant is required to pay the settlement sum within 28 business days of approval. The deed administrator predicted that the distributions would be made within weeks of that receipt, principally because the claims of all PGMs have already been assessed for the purpose of mediation. Subject to the deed administrator’s entitlement to request further information from PGMs, those assessments will be the final assessments for the purpose of distribution under the SDS.
Receipt of a timely distribution is a significant advantage to PGMs as delay associated with the assessment of individual claims following settlement of group proceedings can be a matter of concern for group members.[44]
[44]Cf Matthews v AusNet (Ruling No 42) [2016] VSC 394 [9]; Rowe v AusNet Electricity Services Pty Ltd (Ruling No 6) [2016] VSC 166.
In the event that the plaintiff failed in his claim, he would be ordered to pay the defendant’s costs. He has some assets but stands to lose everything if he loses the case and the costs order is enforced. The plaintiff agrees with the proposed settlement and, in light of it, is unwilling to risk proceeding to trial and judgment.
Taking all of these considerations into account, I agree with counsel’s opinion that the proposed settlement is fair and reasonable as between the plaintiff and group members and the defendant and is in the interests of group members as a whole. I next turn to the question of whether the proposed settlement is fair and reasonable as between group members.
B As between group members
Counsel opined that the SDS establishes a fair and reasonable mechanism for distributing the settlement funds. I agree.
The plaintiff’s legal costs are to be paid prior to any distribution. The Deed provides:
After receipt into the Settlement Distribution Fund of the Settlement Sum, and prior to any final distribution from the Settlement Distribution Fund pursuant to this Scheme, the Administrator will cause:
(a)Common Benefit Legal Costs as approved by the Court to be paid to Maddens;
The Common Benefit Legal Costs are defined by the SDS as the ‘professional fees and disbursements incurred by the plaintiff in relation to the proceeding and the assessment of Participating Group Member claims for the purposes of mediation and which have been assessed by an Independent Costs Consultant and approved by the Supreme Court. Common Benefit Legal Costs, including Administration Costs, shall not exceed $725,000’.
Under the SDS, the Administration Costs that form part of the Common Benefit Legal Costs, as approved, are defined as:
the disbursements (including the costs of any expert advisers and barristers) and costs incurred by the Administrator in connection with the administration of this Scheme, including but not limited to, assessing Participating Group member claims and administering the Scheme. These costs shall form part of the Common Benefit Legal Costs will be assessed [sic] by an Independent Costs Consultant and approved by the Supreme Court of Victoria.
At the hearing of the application for approval of the settlement, the plaintiff’s solicitors accepted the cap of $725,000 on the Common Benefit Legal Costs. The proposal to deduct legal costs from the settlement sum raises two considerations. First, should an order be made requiring the PGMs to contribute to payment of the plaintiff’s costs on a pro rata basis. Secondly, were the costs reasonably incurred and reasonable in amount.[45]
[45]Modtech [2013] FCA 626 [24]–[25].
On the first issue, it is fair and reasonable that the costs be shared by PGMs (and insurers) on a pro rata basis and that the costs be paid from the settlement sum for the following reasons.
First, the plaintiff and 124 of the PGMs signed conditional costs agreement with the plaintiff’s solicitors under which each agreed that the plaintiff’s costs would be deducted from any settlement sum received in priority to the distribution of payments to group members.
Secondly, the SDS will effectively require insurers of PGMs who receive a distribution to contribute to the plaintiff’s legal costs on a pro rata basis. There is no costs agreement between insurers and the plaintiff’s solicitors. If the insurers were not included in the SDS but were left to separately pursue their rights of subrogation against PGMs, the PGMs could, arguably, bear the full cost of the recovery of their claims, including that portion that they would be required to disgorge to satisfy the insurers’ subrogation rights. The inclusion of the insurers provides a means of fairly spreading the cost of the legal work among those who will benefit from it.
Thirdly, as Gordon J said in Modtech Engineering Pty Ltd v GPT Management Holdings Ltd (‘Modtech’):
That proposal is not of concern. The legal costs were incurred and achieved a settlement for all group members. The group members who did not sign a [Legal Costs Agreement] with Slater & Gordon should not be entitled to receive a windfall by reason of their refusal to sign a LCA. To put the matter another way, the legal costs are fixed. Those legal costs should be borne by those who benefitted from those legal costs being incurred — the group members as a whole. [46]
[46]Ibid [24].
It is fair and reasonable that the Common Benefit Legal Costs be paid by those who will benefit from those costs having been incurred, namely the PGMs and their insurers. It is also fair that they do so in the same proportion as their claim bears to the settlement sum, which the SDS achieves.
Turning to the second issue, the conditional costs agreement provided that professional fees be calculated in accordance with the Supreme Court scale, increased by a complexity loading of 30% and subject to an uplift fee of 25%.
Ms Debra Paver, an accredited costs law specialist who has practiced solely as a costs lawyer for 14 years reported as a special referee to the court stating her opinion with reasons in answer to the following questions:
1.Are the plaintiff’s total legal costs claimed fair and reasonable in relation to the work done and amount claimed?
2.If not, in what amount should the costs be disallowed?
In her report, Ms Paver considered and adapted the methodology accepted in Matthews v Ausnet Electricity Services Pty Ltd.[47] Ms Paver has:
[47][2014] VSC 663 [381].
(a) calculated the time spent on the proceeding by each of the lawyers and non-lawyers;
(b) reviewed Maddens’ electronic time records and identified time spent on work that is not claimable under the cost agreements or Supreme Court scales, or that is not fairly or reasonably incurred or fair and reasonable in amount, and excluded that time from the calculation;
(c) considered the nature of the claimable work undertaken by the lawyers and non-lawyers, and identified attendances undertaken by a lawyers that did not require legal skill or knowledge, or a non-lawyer that required legal skill or knowledge;
(d) applied the relevant Supreme Court scale attendance rates to time spent on claimable work done by lawyers and non-lawyers and to lawyer clerical work and non-lawyer skilled work;
(e) applied any discounts to the costs on scale attendance rates after considering whether the costs were proportionate and reasonable in amount and considering the effect of the non-attendance allowances under the Supreme Court scale. Ms Paver informed this by:
(vi) engaging in a sampling process of the file to determine whether the file substantiated the claimed attendances and time spent;
(vii) calculated in accordance with other scale allowances easily quantifiable work such as review of discovery and subpoenaed documents, the court documents prepared and read, letters prepared and received; and
(viii) considered the ratio of claimable work between each type of fee earner;
(f) applied any factor for loading for skill, care and attention as claimable under item 17 of the Supreme Court scale and rule 63.48; and
(g) applied the complexity loading and the uplift fee as provided for under the costs agreement.
Ms Paver obtained the hours worked from Maddens’ practice management software, ‘Law Master’. She compared a sample of documents on the file against the time recorded to determine the level of accuracy in time recording, which she considered to be high. Ms Paver identified a number of non-recoverable or non-claimable time recordings, for matters such as work completed before entry into the costs agreement, non-common work, department meetings and administrative work, which she excluded.
Taking into account non-lawyer skilled work and lawyer clerical work, Ms Paver applied the scale attendance rates. The total amount of professional fees on scale rates was $419,247.15.
In determining any applicable discounts to the costs on scale attendance rates, Ms Paver undertook sampling of the file, calculated the easily quantifiable work in accordance with the applicable scale rate, and considered the number of fee earners that worked on the file and the ratio of claimable work between fee earners and each type of fee earner. Ms Paver considered that the documents she reviewed largely substantiated the time claimed, and only a minor discount was required to take into account the small proportion of time not substantiated or involving errors. Ms Paver calculated the scale allowance for easily quantifiable work as $349,077.70, noting this did not include a significant amount of other work that would be claimable under the various court scales. She accordingly considered that the likely total under the various scale allowances would be of an amount approaching the total costs on scale attendance rates determined previously. Ms Paver also considered the division of work between lawyers and non-lawyers to be appropriate. A discount of 5% to the total costs on scale attendance rates was appropriate, reducing the amount of professional fees for claimable work to $398,284.79.
As the costs agreement provided for a complexity loading of 30% on scale costs, Ms Paver did not consider it appropriate to also apply a skill, care and attention loading under item 17 of the scales. Once the complexity loading was applied the plaintiff’s costs were increased to $517,770.23.
Considering the nature and complexity of the litigation, the ratio of work undertaken by the categories of fee earners, and the seniority of Ms Emeny, who undertook the majority of legal work, Ms Paver considered the application of the complexity loading fair and reasonable.
The costs agreement also provided for an uplift fee of 25%. As there was no litigation funder and the plaintiff’s solicitors funded the litigation and bore the risk, the uplift fee was fair and reasonable. The addition of the uplift fee increased the plaintiff’s costs to $647,212.79.
With the addition of the complexity loading, uplift fee and GST, the total legal costs were $711,934.07.
Ms Paver considered the hourly rates, time spent and division of labour for counsel acting in the proceeding, and determined their fees to be fair and reasonable. Ms Paver made deductions for disbursements relating to media and facilities and accommodation and travel expenses, otherwise allowing claims for disbursements. In her view, disbursements, including counsel’s fees, of $157,774.17 were fair and reasonable.
The proposed costs associated with the approval ($53,378) and the proposed costs of administering the SDS ($48,792.70) were considered by Ms Paver to be fair and reasonable. These costs, when added to her assessment of the proper sum to be allowed for disbursements and costs in the proceeding, totalled $971,878.94, exceeding the agreed cap on legal costs of $725,000.
I calculate that the settlement represents, approximately, a one-third discount on the assessed value of the claims of group members together with the costs and disbursements as assessed by Ms Paver.
The SDS provides for $5,000 to be paid to the plaintiff as the ‘Reimbursement Payment’ prior to distribution of the balance of the settlement sum. This payment is intended to compensate the plaintiff for the time, inconvenience and burden associated with taking on and discharging the obligations of lead plaintiff in attending to matters on behalf of group members.
The appropriateness of compensating class representatives was established in Darwalla Milling Co Pty Ltd v F Hoffman-La Roshe Ltd [No 2].[48] Jessup J recognised that he was dealing with a then-novel request for payments outside the normal categories allowed in litigation. His Honour held it was:
prima facie reasonable that particular parties who have sacrificed valuable time and incurred expenses in the interests of prosecuting [a] proceeding on behalf of group members as a whole should be able to look to the corpus of the settlement sum for some degree of compensation and reimbursement. More importantly, perhaps, I would hold that group members who have benefited from the proceeding could not be heard to deny the reasonableness of such a proposition.[49]
[48](2006) 236 ALR 322, 346 [74]. More recently, see Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663 [423]–[426]; Rowe v AusNet Electricity Services Pty Ltd [2015] VSC 232 [138]–[142].
[49]Darwalla (2006) 236 ALR 322, 347 [76]. His Honour’s reference to ‘particular parties’ extended beyond the three named applicants in Darwalla to include three group members who during pre-trial loss-modelling work had assisted the plaintiff’s solicitors.
Jessup J emphasised that the absence of a ‘scale’ governing such payments required a conservative approach to their quantification,[50] and that consideration should be given to whether some of the time or expense in question related to issues that were specific to the representative’s personal claim rather than issues raised for the benefit of the group overall.[51] Gordon J in Modtech restated the need for a conservative approach, proper evidence, and delineation between common-benefit and individual-issue attendances. [52]
[50]Ibid 348 [80].
[51]Ibid 348–55 [81]–[93].
[52][2013] FCA 626 [64]–[71] (expense claim referred to Registrar with other costs); Modtech [2013] FCA 1163 [6]–[11] (claim allowed but quantum reduced).
The proposed payment to the plaintiff is not said to be an exact valuation of his time or expenses. The plaintiff’s lawyers have nominated a fixed sum, based on an estimate of the number of hours that the plaintiff spent in attendances on Maddens staff, and related attendances. Some of the plaintiff’s attendances related to his personal claim, but distinction between common-benefit and individual-benefit work overlaps in this case. None of the other group members undertook the burden assumed by the plaintiff. The payment proposed for the plaintiff is modest.
Moreover, the proposal for that payment to the plaintiff was notified to PGMs in the approved notice. One PGM notified an objection to the payment but has not filed submissions in support of that objection. No insurer has objected to the payment.
I am persuaded that the payment is fair and reasonable having regard to the interests of the group members as a whole.
It might be thought unusual in this case that under the SDS, only PGMs are entitled to receive distributions from the settlement sum. I accept counsel’s opinion that this is fair and reasonable in the circumstances for two reasons.
First, the PGMs that have participated in the claim and who will not receive a nil settlement, provided information to the plaintiff’s solicitors supporting their claims. The claim was settled at mediation on the basis of those assessments. If unknown group members seek to benefit from the pool of damages, the proportion of loss recovered by the PGMs will decrease. The consequence would be that the quantum settled is unfair for those group members on whose behalf the claim was settled.
Secondly, any group member who is not a PGM is not bound by the settlement and any rights that they may have against the defendant arising out of the Fire will not be affected by the settlement.
In determining the distribution of the balance of the settlement sum, the Administrator must assess the individual claims of the plaintiff and each PGM. The SDS provides that the distribution entitlement of each PGM will be based upon the information held by the plaintiff’s solicitors in relation to that PGM’s claim. The Administrator may require a PGM to provide further information, if in the Administrator’s opinion, the existing information insufficiently substantiates any claim.
PGMs will be advised of their assessed entitlement and will have 10 days to notify the Administrator of any error, failing which the assessment will be deemed to be accepted. The Administrator may correct any error, slip or omission occurring in the course of administering the SDS. PGMs with economic loss and property damage (‘ELPD’) claims in excess of $5,000 or personal injury (‘PI’) claims will be entitled to request a review to be conducted by independent counsel.
Counsel submitted, and I agree, that it is fair and reasonable that the assessment of individual claims should be based upon the information that is currently held by the plaintiff’s solicitors in relation to that claim, subject to the Administrator’s limited discretion to seek further information and to correct errors for four reasons.
First, it is fair that, as far as possible, PGMs be held to the claims that they made prior to and for the purposes of mediation. The parties relied upon those claims in reaching the proposed settlement.
Secondly, the PGMs have been provided with a fair and reasonable opportunity to set out their claims and to provide supporting information.
Thirdly, the administration of any scheme which provides an opportunity for PGMs or their insurers to provide additional information in support of greater or additional claims will increase the cost and cause delay in the administration of the settlement.
Finally, all PGMs have been provided with their preliminary assessments based on the current information held by the plaintiff’s solicitors, including the PGM questionnaires and loss assessment reports by Sinclair Wilson, and were given an opportunity to comment on them. Additionally, the right of review provided for larger ELPD claims and PI claims is appropriate in the circumstances.
The SDS provides for a pro rata distribution to the plaintiff and PGMs. That is, the plaintiff and each PGM will receive the same proportion of their assessed loss. It is currently estimated to be about 66%. The assessed entitlement of each PGM is to be determined by the Administrator in accordance with the SDS and each PGM’s entitlement is to be calculated by dividing the PGM’s assessed loss by the aggregate loss of all PGM’s assessed losses (group quantum) and multiplying by 100 to give an assessed entitlement percentage which is applied as a multiple of the compensation pool.
That is a fair and reasonable basis for the distribution of the compensation pool. It treats the plaintiff and each PGM equally. There is no reason for them not to be treated equally. Each has the same claim against the defendant. If the plaintiff were to succeed in establishing liability against the defendant, each PGM would be able to rely on the answers to the common questions to establish liability and would need only prove their individual loss caused by the fire.
Insurers who have made payments to PGMs will receive reimbursement of those payments on the same proportion as all PGMs. This is fair and reasonable as there is no reason why an insurer ought to be treated differently than PGMs with uninsured claims for loss.
Conclusion
For these reasons, I was satisfied that the settlement was fair and reasonable, and in the interests of group members when on 1 August 2019 I made orders, inter alia, that:
(a) The Court adopts the special referee report of Ms Debra Paver dated 15 July 2019.
(b) The Court authorises the plantiff nunc pro tunc on behalf of the PGMs to enter into and give effect to the Deed executed by the parties and the transactions contemplated by the Deed, for and on behalf of the PGMs and each of them.
(c) The settlement of the proceeding is approved by the Court upon the terms set out in:
(ix) the Deed; and
(x) the SDS exhibited at pages 131 to 146 of exhibit KAE-1 to the affidavit of Ms Emeny sworn 9 July 2019.
(d) Ms Emeny is appointed as the Administrator of the SDS.
(e) The Common Benefit Legal Costs for the purposes of the Settlement Distribution Scheme:
(i) are fixed in the sum of $725,000 (inclusive of GST); and
(ii) are to be paid in accordance with the SDS.
(f) The amount of $5,000 is approved as the Reimbursement Payment for the purposes of the SDS.
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