Ramsay v Ausnet Electricity Services Pty Ltd
[2016] VSC 725
•2 December 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
COMMERCIAL COURT
S CI 2014 05162
| IRWIN JAMES RAMSAY | Plaintiff |
| v | |
| AUSNET ELECTRICITY SERVICES PTY LTD (ACN 064 651 118) & ORS | Defendant |
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JUDGE: | EMERTON J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 November 2016 |
DATE OF JUDGMENT: | 2 December 2016 |
CASE MAY BE CITED AS: | Ramsay v Ausnet Electricity Services Pty Ltd & Ors |
MEDIUM NEUTRAL CITATION: | [2016] VSC 725 |
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PRACTICE AND PROCEDURE – Application for approval of settlement of group proceeding – Supreme Court Act 1986 Part 4A – Whether terms of settlement fair and reasonable – Whether settlement distribution scheme fair and reasonable – Whether claim for legal fees and disbursements reasonable – Whether unregistered group member should have leave to participate in the settlement – Settlement approved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G Dalton QC | Maddens Lawyers |
| For the Defendants | No appearance | |
| For Mr and Mrs Boag | Mr P Donovan | Sullivan Braham |
HER HONOUR:
Introduction
The plaintiff has applied pursuant to s 33V of the Supreme Court 1986 for approval of a settlement of a group proceeding.
In the proceeding, the plaintiff has claimed damages for losses suffered as a result of a bushfire which started near Jack River in Gippsland on 9 February 2014 (‘Jack River bushfire’). The plaintiff alleges that the Jack River bushfire started as a result of contact between a powerline, owned and operated by the first defendant (‘AusNet’), and pine trees that had grown up underneath or in close proximity to the powerline. The plaintiff alleges that by failing to maintain a safe clearance space between the powerline and the trees, AusNet and its vegetation management contractor, the second defendant (‘BJ Murphy’), breached duties owed to the plaintiff and the group members.
The parties have agreed, subject to the Court’s approval, to settle the proceeding for $10,500,000 (‘Settlement Sum’). The agreement is recorded in a deed of settlement executed by the parties and their solicitors on 15 July 2016 (‘Deed’). The plaintiff also seeks an order pursuant to s 33V(2) of the Supreme Court Act for the Settlement Sum to be distributed in accordance with a proposed Settlement Distribution Scheme (‘SDS’).
The plaintiff relies on the confidential opinion of counsel dated 16 September 2016. He also relies on the following evidence:
(a)the affidavits of Brendan Francis Pendergast sworn 26 July 2016, 3 August 2016, 18 October 2016 and 26 October 2016, along with the exhibits thereto; and
(b)the confidential affidavits of Brendan Francis Pendergast sworn on 3 August 2016, 18 October 2016, 26 October 2016 and 7 November 2016 with their confidential exhibits.
For the reasons that follow, the settlement will be approved as fair and reasonable as between the parties and as between the members of the group.
The Court is also asked to give leave to a group member (a husband and wife) who failed to register their claim in order to be eligible for distributions from the settlement, as required by the orders of the Court, but did not ‘opt out’ of the proceeding to preserve their rights against the defendants. The group member, Colleen and Brian Boag (‘Boags’), therefore find themselves in the worst possible situation of being ineligible to benefit from the settlement at the same time as losing their rights against the defendants.
The proceeding
The plaintiff commenced the proceeding by writ endorsed with a statement of claim on 24 September 2014 naming AusNet as the sole defendant. On 8 December 2014, AusNet filed and served a defence and counterclaim, by which it joined BJ Murphy as a defendant to counterclaim.
By its defence, AusNet denies any liability to the plaintiff and to group members, and further alleges that, if it is liable, the claims are apportionable claims pursuant to Part IVAA of the Wrongs Act 1958 and that BJ Murphy is a concurrent wrongdoer, such that AusNet’s liability is limited to that amount reflecting the proportion of loss and damage that the Court considers just having regard to the extent of AusNet’s responsibility for the loss and damage.
By its counterclaim, AusNet claims contribution and/or indemnity from BJ Murphy pursuant to Part IVA of the Wrongs Act and/or the terms of its contract with BJ Murphy.
On 23 January 2015, the plaintiff filed and served an amended writ endorsed with the further amended statement of claim by which he joined BJ Murphy as a defendant.
The plaintiff’s principal claim against AusNet is in negligence, but he also pleads breach of statutory duty and nuisance. The case in negligence is that, on 11 February 2013, AusNet’s employee inspected the powerline beneath which it is alleged that the Jack River bushfire started, for the purpose of checking that the clearances between the powerline and vegetation complied with the Code of Practice for Electric Line Clearance (‘Code’) prescribed by s 7 of the Electricity Safety (Electric Line Clearance) Regulations 2010 and negligently failed to record the presence of trees either within the minimum clearance space or where they were likely to encroach upon it within the declared bushfire season, as a result of which AusNet failed to keep the trees clear of the powerline and failed to maintain the required clearances, thereby causing the Jack River bushfire and the losses suffered by the plaintiff and group members.
The plaintiff’s claim against BJ Murphy is also in negligence. Pursuant to a written agreement dated 2 August 2012, BJ Murphy was engaged by AusNet to perform vegetation management services in specific parts of AusNet’s network, including the relevant powerline. The services included undertaking electric line clearance work and conducting pre-summer inspections of spans in high bushfire risk areas to ensure AusNet’s compliance with the Code. It was a term of the agreement, among others, that BJ Murphy perform the services to that standard of care and skill to be expected of the service provider who regularly acts in the capacity in which BJ Murphy was engaged.
On 15 August 2013, BJ Murphy carried out a clearance assessment of the relevant part of the powerline. The plaintiff alleges that this was done negligently by failing to assess that there were trees within the required clearance space under the Code or, alternatively, that trees that would encroach upon the required clearance space within the declared bushfire season. The plaintiff further alleges that, had the inspection not been carried out negligently, AusNet would have ensured that the trees were pruned so as to maintain the clearance space such that the Jack River bushfire would not have occurred.
Group members
The group membership in the proceeding is defined by way of an ‘open class’. The group members are all of those who suffered personal injury, loss of or damage to property and/or pure economic loss as a result of the Jack River bushfire.
On 3 March 2015, orders were made in the proceeding:
(a)setting the date by which any group member (or group member’s insurer) could opt out of the proceeding as 17 April 2015;
(b)requiring any group member who wished to claim compensation for property loss, damage or economic loss which was uninsured or not fully insured in any settlement of property or economic loss claims in the proceeding, to register with the plaintiff’s solicitors, Maddens Lawyers (‘Maddens’), by 17 April 2015;
(c)requiring any insurer who wished to claim compensation in respect of any indemnity provided to a client of the insurer in respect of property loss or damage or economic loss caused by the Jack River bushfire to register with Maddens by 17 April 2015; and
(d)approving the form and mode of advertising to group members and insurers, notifying them of the proceeding, their right to opt out of the proceeding and the requirement to register should they wish to participate in any settlement of the proceeding.
(‘3 March 2015 orders’)
The 3 March 2015 orders therefore provided for group members to register their claims in order to participate in any settlement. Group members who did not wish to register their claims were invited to ‘opt out’.
On 4 August 2016, following settlement, Zammit J made orders for the identification of registered group members (‘RGMs’), deeming any group member who was recorded on the Maddens Lawyers database of RGMs as at that date to be a RGM for the purposes of participation in the proposed settlement and providing that any group member who was not so registered would not, without the leave of the Court, be permitted to participate in the settlement.
Three individuals with potential claims for damages have filed ‘opt out’ notices. Thirty two group members (apart from the plaintiff) registered their claims with Maddens and became RGMs. Of these, six are insurance only claims registered by the insurers claiming rights of subrogation in respect of the RGMs’ claim.
Maddens is aware of three group members who have neither ‘opted out’ nor registered as group members, including the Boags. Upon approval of the settlement, these group members will be bound by the settlement, but will not be entitled to participate in the settlement.
The settlement
The settlement comprises the Deed and the SDS.
The Deed
The Deed records the settlement between the defendants and the plaintiff and all group members. The critical terms of the Deed are as follows:
(a)The settlement of the proceeding is conditional on Court approval (cl 7(a));
(b)On the fifth business day after the expiration of the 28 day appeal period from the making of the settlement approval orders, the defendants will pay their (equal) share of the Settlement Sum into a Settlement Distribution Fund opened by Maddens Lawyers (cl 2(c));
(c)The Settlement Distribution Fund is to be allocated in accordance with a settlement distribution scheme (cl 8(b));
(d)Upon the making of the approval orders, and subject to the defendants’ payment of the Settlement Sum:
(i)the proceeding is fully and finally settled (cl 4(a));
(ii)the plaintiff, on his own behalf and on behalf of group members, releases the defendants and their related entities from all claims that he or any group member has or may have arising out of or in respect of the matters the subject of, or anything related to, the proceeding (cl 4(b));
(iii)the Deed may be pleaded as a bar to any claim arising out of or related in any way to the matters the subject of the proceeding (cl 5).
Settlement Distribution Scheme
The SDS provides for the Settlement Sum to be distributed as follows:
(a)payment of the plaintiff’s approved legal costs, including the costs of administering the SDS (cl 1.1 and 8.4(a));
(b)payment of $10,000 to the plaintiff to compensate him for undertaking the role of lead plaintiff (referred to as the ‘Reimbursement Payment’) (cl 1.1 and 8.4(b)); and
(c)distribution of the balance of the Settlement Sum, together with any accrued interest, to the RGMs and registered insurers on a pro rata basis (cl 8.1).
The proposed SDS identifies the RGMs in a schedule. The purpose of this is to remove any potential ambiguity as to the entitlement of those who were registered but who subsequently instructed the plaintiff’s solicitors that they did not wish to participate in the proceeding.
Applicable legal principles
This settlement follows a number of other settlements in bushfire class actions, including those brought in respect of the bushfires that started at Kilmore and Murrindindi on Black Saturday.[1]
[1]Matthews v AusNet Electricity Services Pty Ltd [2014] VSC 663 (‘Matthews’); Rowe v AusNet Electricity Services Pty Ltd [2015] VSC 232.
The principles for the approval of group proceedings of this kind are now well established. In Matthews, Osborn JA identified the following two questions as critical in an application for court approval under s 33V of the Supreme Court Act: [2]
(a)whether the proposed settlement is fair and reasonable as between the parties having regard to the claims of group members; and
(b)whether the proposed settlement is in the interests of group members as a whole and not just in the interests of the plaintiff and the defendants.
[2]Matthews [34].
The Court has the benefit of the confidential opinion prepared by counsel. However, it must be independently satisfied of the fairness and reasonableness of the proposed settlement. It will not be sufficient to simply assess whether the opinions expressed by the plaintiff’s legal advisers appear on their face to be reasonable. Furthermore, not even the complete absence of objections to the settlement relieves the Court of its obligations.[3]
[3]Ibid [38].
Nevertheless, the assessment which the Court is required to make can ultimately be no more than one which establishes whether or not the proposed settlement is within the range of fair and reasonable outcomes.[4] It is not the task of the Court to ‘second guess’ or go behind the tactical or other decisions made by the plaintiff’s legal representatives, but rather to satisfy itself that the decisions are within the range of reasonable decisions according to the known circumstances and the reasonably-perceived risks of the litigation.[5]
[4]Ibid [39].
[5]Ibid [44].
In considering whether the proposed settlement falls within the range of fair and reasonable outcomes, the Court will consider the following matters:[6]
[6]Williams v FAI Home Security Pty Ltd (2000) 180 ALR 459.
(a)the complexity and duration of the litigation;
(b)the reaction of the group to the settlement;
(c)the stage of the proceeding at which settlement is proposed;
(d)the relative risks of establishing liability;
(e)the relative risks of establishing loss and damage;
(f)the risks of continuing a group proceeding;
(g)the ability of the defendants to withstand a greater judgment and the range of reasonable outcomes governing the settlement in light of the best feasible recovery;
(h)the range of reasonableness governing the settlement in light of all the attendant risks of litigation on the one hand, and all the advantages of settlement on the other; and
(i)the terms of any advice received from counsel and/or from any independent expert in relation to the issues that arise in the proceeding.
Is the settlement fair and reasonable?
As between the parties
An assessment of the RGM claims was made by an independent loss assessor prior to settlement. The Settlement Sum of $10.5 million represents a very high proportion of total RGM claims. If the settlement is approved, each RGM will receive about 78% of their claim, after deduction of approved costs and the Reimbursement Payment.
This seems to me to be a reasonable compromise, provided that the assessment of the total RGM claims can be relied upon.
In this regard, I am satisfied that all RGMs were given a reasonable opportunity to bring forward and provide information in support of their claims against the defendants. Broadly described, the damages assessment process involved the provision to each RGM of a workbook by which instructions were sought as to losses suffered as a result of the fire, together with supporting documents. The workbooks were reviewed by Maddens, who sought further instructions when necessary, and collated the instructions and documentation. The plaintiff and BJ Murphy jointly engaged an independent expert rural loss assessor to prepare loss assessment reports for each RGM, other than the plaintiff and the largest individual claimant, a subsidiary of Hancock Victorian Plantations Pty Ltd. The loss assessor applied a set of assessment principles developed with Maddens and senior counsel for the conduct of the assessments.
Each RGM was provided with a copy of the Notice of Assessment prepared by the loss assessor for their claim and was asked to notify Maddens of any concerns, errors or omissions in the assessment. A number of responses were received, all of them supporting the proposed settlement and the assessment, with one member notifying Maddens of a mathematical error which has been corrected.
I have carefully considered the paragraphs of the confidential opinion that set out the damages assessment process, including the manner in which the assessment principles were devised and applied. I am satisfied that the process of obtaining instructions from RGMs as to their losses was fair and reasonable, that the principles that were applied in the assessment of each RGM’s claim were fair and reasonable, and that the simplified process of assessment used was both appropriate and fair and reasonable in the circumstances. The process and method of assessment of the claims of the RGMs for property damage and consequential loss appears to have been both thorough and professional.
I have considered the liability risks as they are described and analysed in the confidential opinion. As in all litigation, the plaintiff faces some risk of an adverse result at trial. The proposed settlement avoids that risk, and this is an important factor in favour of its approval. In considering the impact of liability risk on the fairness and reasonableness of the settlement, it is relevant that the estimated recovery rate for the RGMs is high. Any larger amount awarded to RGMs upon judgment at the end of a lengthy trial would most likely be significantly eroded by unrecoverable costs in any event.
As to the consequential benefits of settlement, Osborn JA identified a number of incidental advantages of settlement in Matthews, including early finalisation of the proceeding, the avoidance of continuing personal anxiety, stress and suffering, the advancement of payment and the containment of legal costs. Such incidental advantages are also relevant to the reasonableness of the proposed settlement in this case.
Finally, the RGMs and their insurers have been given notice of the proposed settlement and no RGM or insurer opposes the settlement as between the parties. Each RGM was given an opportunity to read the confidential opinion. The fact that no RGM or insurer opposes the settlement with the defendants supports the conclusion that the settlement is fair and reasonable and in the interests of group members as a whole. The insurers are sophisticated litigants who have apparently been kept informed of the progress of the proceeding and are well placed to assess whether the settlement is fair and reasonable as between the parties.
Having regard to these factors, I am satisfied that the settlement is reasonable and fair as between the parties.
As between group members
The question of whether the settlement is fair as between group members draws attention to the SDS.
For the purposes of this approval application, the critical elements of the SDS are:
(a)The deduction of legal costs from the Settlement Sum prior to distribution to the RGMs;
(b)The quantum of the relevant legal costs, known as ‘Common Benefit Legal Costs’;
(c)The Reimbursement Payment;
(d)The identification of the group members entitled to participate in the settlement; and
(e)The process and manner of distribution of the balance of the Settlement Sum to the RGMs.
Deduction of legal costs from the Settlement Sum
Under the SDS, the plaintiff’s approved legal costs (‘Common Benefit Legal Costs’) are to be paid from the Settlement Sum prior to its distribution.
Each RGM has signed a conditional costs agreement with Maddens under which they agree that the plaintiff’s costs will be deducted from any Settlement Sum received in priority to the distribution of payments to group members. There is no costs agreement between the registered insurers and Maddens. However, the inclusion of the insurers in the SDS means that the insurers will share the costs of the legal work.
As defined in the SDS, the Common Benefit Legal Costs to be paid in this manner are ‘the professional fees and disbursements incurred by the plaintiff in relation to the proceeding and the assessment of Group Member claims for the purposes of mediation and which have been assessed by an Independent Costs Consultant and approved by the Supreme Court’.
Administration costs of and incidental to the SDS are also to form part of the Common Benefit Legal Costs as approved by the Court. These are defined as:
The disbursements (including the costs of any expert advisers and barristers) and costs incurred by Maddens in connection with the administration of this Scheme, including but not limited to, the identification of Group Members, assessing Group Members’ claims and administering the Scheme. These costs will be assessed by an Independent Costs Consultant and approved by the Supreme Court.
I consider it to be reasonable as a matter of principle that the Common Benefit Legal Costs be deducted from the Settlement Sum before distributions to RGMs and insurers.
As to the quantum of those Costs, the plaintiff seeks an order that the Court approve the sum of $2.3 million as Common Benefit Legal Costs.
The plaintiff has obtained a costs report dated 19 October 2016 and a second costs report dated 7 November 2016 from Mr Graeme Arnold, solicitor and director of Arnold Costs Solicitors Pty Ltd. Mr Arnold is an experienced legal costs consultant who has experience in class actions, including the Horsham and Coleraine bushfire actions.
Mr Arnold was provided with Maddens’ entire paper file for the common liability dispute, computer records of time ledgers and disbursements associated with the paper file, and an electronic copy of the discovery. He was asked to assess the total legal costs incurred by the plaintiff in the proceeding in accordance with the costs agreement and to express an opinion as to whether the amount is fair and reasonable in the circumstances.
The methodology adopted by Mr Arnold to assess the legal costs was to categorise each item of work by reference to the items in the Supreme Court Scale and to apply the Scale rates, being the base fee rates agreed under the relevant costs agreement. He calculated the costs incurred to 4 October 2016, together with the anticipated disbursements of the settlement approval process and costs of the claim roll-out process to be $2,443,872.60.
In considering the reasonableness of the costs, Mr Arnold expressed the opinion that the costs agreements were fair and reasonable, including the 30% premium on the Supreme Court Scale and the 25% conditional uplift fee. However, he considered that total costs should be reduced to $2,300,000, a reduction of approximately 6%, to reflect the fact that solicitor and own client taxation always results in some items being taxed off.
The RGMs and registered insurers have been given notice of the legal costs. On 8 August 2016, the plaintiff’s solicitors gave notice of the settlement to RGMs and registered insurers in accordance with the orders made by Zammit J on 4 August 2016. The approved letters and notice provided costs estimates, including that total costs were expected to be $2.37 million and would not exceed $2.5 million. On 25 October 2016, Maddens wrote to each RGM, advising that the costs consultant had assessed costs at $2.25 million and that the costs report was available on request.
No RGM or registered insurer has opposed the approval of the plaintiff’s costs and disbursements. The fact that no registered insurer has objected is significant, in my view. The subrogated claims comprise approximately 47% of all claims, which means that the registered insurers will bear almost half of the approved legal costs. Insurers are sophisticated litigants, and the fact that they have not objected supports the conclusion that the legal costs are reasonable.
Having considered Mr Arnold’s reports and the manner in which the question of costs in group proceedings has been dealt with by this Court in the past, I am satisfied that the legal costs of $2.3 million are reasonable and that the payment of the Common Benefit Legal Costs from the Settlement Sum before distributions are made to RGMs is fair and reasonable having regard to the interests of group members as a whole.
The Reimbursement Payment
The SDS provides for $10,000 to be paid to the plaintiff prior to the 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 and in attending to matters on behalf of group members.
A payment of this kind to the lead plaintiff has been made in many other class actions, and I consider it to be uncontroversial. The proposed payment is modest, and the RGMs and registered insurers have been notified of it. None has objected to the payment.
I am satisfied that the Reimbursement Payment is fair and reasonable having regard to the interests of the group members as a whole.
Group member registration
Under the SDS (cl 1.1), only the RGMs listed in the schedule to the SDS are entitled to receive distributions from the Settlement Sum. While only RGMs are entitled receive compensation under the SDS, all group members will release the defendants from any liability that they may have arising from the Jack River bushfire.
The 3 March 2015 orders were made on the basis that the right to claim compensation in any settlement would be limited to group members whose claims were registered either directly, or through their insurer. Following settlement, Zammit J made orders governing participation in the settlement on the same basis.
The group proceeding has been conducted on the basis that group members must register claims in order to benefit from any settlement. This has allowed the settlement to be negotiated on the basis of a known quantum of total claims, and it will facilitate the making of distributions following approval of the settlement. This has had obvious benefits for group members.
I am satisfied that group members and their insurers were given reasonable notice of the requirement to register their claims if they wished to claim compensation in any settlement and that they have been provided with a fair opportunity to register, having regard to the extensive advertising, promotion and consultation engaged in by Maddens. There is no evidence that there are any group members other than the RGMs and the Boags who have claims arising from the Jack River bushfire which they or their insurers wish to pursue and be compensated for.
In any event, the orders made by Zammit J provide for group members in the position of the Boags to seek leave of the Court to participate in the settlement. This enables any injustice in the exclusion of group members to be remedied by court order.
Basis for assessments
In determining the distribution of the balance of the Settlement Sum, the administrator of the SDS must assess the individual claims of the plaintiff and each RGM. RGMs will be advised of their assessment entitlement and will have ten working days in which to notify the administrator of any error.
Under the SDS, the distribution entitlement of each RGM will be based upon the information already held by Maddens in relation to that person’s claim, referred to as the ‘Claimant Records’. Clause 3 of the SDS provides that each RGM is deemed to have accepted the accuracy of the information in the Claimant Records and no RGM is entitled to amend the information contained in the Claimant Records after the Settlement Approval Date. However, the administrator may require a RGM to provide further information if, in the administrator’s opinion, the existing information insufficiently substantiates a claim or part of a claim.
Each RGM has been provided with a preliminary assessment based on the current information held by Maddens, including the professional loss assessment reports. No RGM or registered insurer has complained about the assessment.[7]
[7]Except in relation to the mathematical error referred to above.
The reliance on the Claimant Records in assessing individual claims and the restriction on the provision of new information seems to me to be reasonable in the circumstances.
As to the distribution of the funds, the SDS provides for a pro rata distribution to the plaintiff and the RGMs.
Under Schedule A to the SDS (Schedule A, cl 4.1), each RGM’s ‘Assessed Entitlement’ is to be calculated:
(a) by dividing the RGM’s assessed loss by the aggregate of all assessed losses (group quantum) and multiplying by 100 to give an ‘Assessed Entitlement %’; and then
(b) by multiplying the Settlement Pool by the Assessed Entitlement %.
This formula treats the plaintiff and each RGM equally. It is unobjectionable.
However, there is the further matter of direct distributions to insurers. Of the 33 claims in the proceeding, 15 are wholly uninsured, 12 are partly insured and 6 are insurance-only claims. The SDS provides for the entitlements of the 12 partly insured RGMs to be distributed between the member and the relevant registered insurer on a pro rata basis, also calculated in accordance with the formula in Schedule A (cl 4.2 of Schedule A). The intention of the formula is to provide for the RGM and the registered insurer to receive the same proportion of their loss where the RGM’s loss is the uninsured or underinsured loss and the registered insurer’s loss is the amount paid to the RGM under the policy of indemnity insurance.
The pro rata distribution between insured RGMs and their insurers has been approved as fair and reasonable in previous bushfire class actions. The proposal for partially insured RGMs and their registered insurers to share distributions on a pro rata basis was approved by Osborn JA in Matthews for the following reason:[8]
The scheme adopts this approach because the plaintiff’s legal advisers have taken the view that there is considerable legal uncertainty in the circumstances of this proceeding regarding the appropriate order of priority as between insurer and insured in the distribution of the settlement sum.
[8]Matthews [395].
The pro rata distribution to insurers will mean that the insurers will contribute to the payment of the plaintiff’s costs in the same proportion as the RGMs, and the SDS therefore provides certainty and finality to RGMs and avoids the potential for disputes and possibly litigation between insured RGMs and the registered insurers.
Conclusion
For the foregoing reasons, I am satisfied that the settlement is fair and reasonable and in the interests of group members as a whole. The settlement will be approved.
Before making final orders, however, it is necessary to consider whether an additional group member should be able to participate in the settlement.
Application by group member to participate in the settlement
The Boags seek the leave of the Court to participate in the proposed settlement pursuant to Order 1(a) of the orders made by Zammit J on 4 August 2016. In the alternative, the Boags submit that the Court ought to refuse to approve the settlement as not being fair and reasonable.
The Court has power to order that the Boags be entitled to participate in the settlement under s 33ZF of the Supreme Court Act, which provides that the Court may, of its own motion or on an application by a party, make any order that the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.
In order to grant leave to the Boags to participate in the settlement, the Court must therefore be satisfied that leave is ‘appropriate or necessary to ensure that justice is done in the proceeding’, having regard to the interests of the Boags and the interests of the group members as a whole. As the plaintiff submits, this requires a synthesis of relevant facts, rather than a weighing of competing interests or prejudices.
The Boags are group members and will be bound by the settlement, which includes the releases. Their exclusion from the settlement arises from the following circumstances:
(a) The Boags did not register their claim with Maddens pursuant to the 3 March 2015 orders.
(b) Nonetheless, Maddens initially understood them to be deemed registrants by the operation of Order 13(a) of the 3 March 2015 orders, because they had had contact with Maddens early in the process and had been included in the Maddens database.
(c) As a result, the Boags received ongoing correspondence from Maddens in relation to the proceeding, including a notice advising them of the need to register or ‘opt out’ that was sent to group members following the 3 March 2015 orders.
(d) On 21 October 2015, Mrs Boag told Maddens that they did not wish to be involved in the case. However, no ‘opt out’ form was completed.
(e) As a result of the conversation on 21 October 2015, Maddens treated the Boags as no longer being registered under the 3 March 2015 orders and removed them from the updated list of RGMs provided to the defendants in advance of the mediation.
(f) The Boags provided no information about their claim to Maddens and none was available for the purposes of the mediation.
(g) On 4 August 2016, following the settlement, Zammit J ordered that any group member who was not recorded on the Maddens database of RGMs on that date would remain a group member for all purposes, but would not, without leave of the Court, be permitted to participate in the settlement.
(h) After receiving notice of the proposed settlement, the Boags expressed a desire to participate in the settlement. They have now provided information which, according to Maddens, supports a claim of approximately $150,000.
(i) As the Boags were not recorded on Maddens’ database of RGMs as at 4 August 2016, they cannot participate in the settlement without the leave of the Court.
The Boags now seek the necessary leave, relying on the affidavits of Colleen Mary Boag and Brian Arthur Boag, both sworn on 15 November 2016, which set out their difficult personal circumstances throughout 2014 and 2015, along with their dealings with Maddens, which they say resulted in them not properly understanding their status in the proceeding.
The plaintiff submits that leave for the Boags to participate in the settlement should be refused on the ground that the Boags had ample opportunity to participate in the settlement and provide Maddens with information necessary to support their claim prior to mediation. He submits that the Boags made a deliberate and informed decision not to participate in the settlement.
The plaintiff submits further that the grant of leave would operate an injustice on the plaintiff, each RGM and the registered insurers by reducing their distribution entitlement under the settlement. Maddens has estimated that if leave is granted, the reimbursement entitlement of each of the others will be reduced by approximately 1.13%.
The plaintiff also submits that it is unfair to allow the Boags an opportunity to put forward a claim for assessment after settlement, when the claims of every other RGM will be assessed based on the information already held by Maddens and the RGM has no right to alter that information.
Generally, the plaintiff submits that the settlement registration orders made by the Court on 3 March 2015 were intended to assist and promote settlement between the parties. To permit a group member to participate in a settlement in circumstances where they declined to assist the plaintiff by bringing forward their claim to be part of the settlement would not advance the public interest in the early settlement of disputes and the efficient conduct of the Court’s business. The grant of leave will cause likely delay in the administration of the SDS and the payment of distributions and will not give effect to or further 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.
In his third confidential affidavit made on 18 October 2016, Brendan Pendergast deposes to Maddens’ contact with the Boags and steps taken to obtain instructions from them. The significant parts of that chronology are as follows:
(a)Maddens became aware that the Boags may be group members on or about 4 April 2014, when the plaintiff provided Maddens with details of potential group members.
(b)Maddens made telephone contact on 10 April 2014, when initial instructions were taken from Mr Boag, who was advised that a conditional costs agreement and fire loss data workbook would be sent to the Boags for their attention.
(c)A conditional costs agreement and fire loss databook, along with a circular letter, were sent to the Boags on 16 April 2014.
(d)Follow-up letters were sent in August, October and November 2014, and the Boags were invited to a meeting on 3 December 2014, which they did not attend. Further follow-up letters were sent on 28 November 2014, 7 January 2015 and 2 February 2015, and Maddens left a voice message with the Boags on 23 February 2015. None of these elicited any response from the Boags.
(e)Following the 3 March 2015 orders, Maddens sent out a circular letter enclosing a copy of the approved opt-out and registration notices. The letter described what it meant to be a group member and specified what group members needed to do by setting out three options: (i) register to participate in any settlement; (ii) cease to be a group member by ‘opting out’; and (iii) do nothing ‘and lose your rights in settlement (but not judgment)’.
(f)Follow-up phone calls were made and emails were sent to the Boags in March and April 2015.
(g)The Boags did not file an opt-out notice or register with Maddens by the date specified in the 3 March 2015 orders (as extended on 15 April 2015).
(h)However, Maddens had a record of the Boags and their potential claim prior to 3 March 2015 and therefore took the view that the Boags were deemed to have registered in accordance with the 3 March 2015 orders. The Boags were included in the confidential list of group members filed and served on 20 May 2015 in accordance with the 3 March 2015 orders.
(i)Maddens left further voicemail messages and sent circular letters to the Boags in June, July and August 2015.
(j)In September 2015, when Maddens provided to the independent loss assessor a list of the RGMs whose claims would need to be assessed, that list included the Boags.
(k)Further attempts to contact the Boags were made in September and October 2015. On 7 October 2015, Maddens made contact with Mrs Boag at her place of employment. Mrs Boag told Maddens that Mr Boag had reservations about the litigation and that she would arrange for Mr Boag to phone Maddens in the morning to discuss. Mr Boag did not make contact with Maddens.
(l)On 21 October 2015, Mrs Boag phoned Maddens and explained that Mr Boag had experienced difficulty coping after the bushfire and was not willing to participate in the class action. Maddens said that it would close the Boags’ file, but if the Boags subsequently decided they would like to participate, then they should contact Maddens to discuss.
(m)Because of the Boags’ instructions that they did not wish to participate in the proceeding, the independent loss assessor did not assess their loss and damage. Accordingly, their claim did not form part of the plaintiff’s assessment of the gross quantum of loss and damage suffered by group members for the purpose of the mediation and settlement.
(n)On 9 June 2016, Maddens sent the Boags a circular letter advising of the mediation of the proceeding.
(o)Following the successful mediation on 4 July 2016, a Proposed Settlement Notice was sent to RGMs and published on relevant websites. Maddens also sent the Proposed Notice of Settlement to the three group members who had either given instructions that they did not wish to participate in the proceeding or had failed to respond to attempts to contact them, but had not opted out of the proceeding, including the Boags.
(p)On 18 August 2016, Mrs Boag contacted Maddens in relation to the Notice of Proposed Settlement. Mrs Boag asked whether the Boags could participate in the class action. She was told that there was a possibility, as they had not opted out. Maddens phoned Mrs Boag the following day in relation to the completion of the workbook. Mrs Boag was to think about her position over the weekend.
(q)On 29 August 2016, Mrs Boag emailed Maddens to say that she had found the workbook and would complete the information during the week.
There can be little doubt that Maddens made concerted efforts to contact the Boags, obtain instructions from them and include them in the settlement.
The Boags accept that Maddens made efforts to contact them regarding the proceeding, but submit that they were practically incapable of dealing with the proceeding. Furthermore, they say that the communications with Maddens left them confused about their status in the proceeding.
Mr and Mrs Boag have deposed to their circumstances in 2014, 2015 and beyond, which they say explains why they did not register with Maddens or seek to participate in the proceeding until August 2016.
Mr Boag is a dairy farmer. Mrs Boag has at all relevant times been the CEO at Yarram and District Health Service. Mrs Boag also handles the financial aspects of the dairy farm business. From time to time, she assists Mr Boag in the day-to-day operations of the dairy farm.
Mr Boag received an injury to his left eye when he was 17 years old and has had very limited sight in his left eye since then. In October 2012, he was found to have a tumour on the pituitary gland in his brain, requiring surgery. After the surgery, Mr Boag was informed that the tumour could not be completely removed because part of it was entangled with the optic nerve of his right eye.
Following the surgery in October 2012, Mr Boag commenced a staged return to work in March 2013. Mrs Boag observed that, due to the medication Mr Boag was taking, his mood was erratic and he could not complete some tasks.
In June 2014, following the fire, Mr Boag had a routine MRI scan that showed that the tumour had increased in size. Mr Boag was told that he required further surgery or radiation oncology treatment. He elected to undergo radiation treatment, which took place on or about 5 February 2015.
Following the radiation treatment, Mr Boag’s health deteriorated even further. The treatment initially caused the tumour to swell, which may have put pressure on parts of his brain. Mr Boag could not concentrate, and Mrs Boag observed him to lose his ability to cope with any kind of stress. Whenever she confronted him with the need to make a decision, he would sit there with his head in his hands, rocking back and forth.
Mrs Boag deposes that she was aware in 2014 and 2015 that Maddens were attempting to make contact about participating in the proceeding. However, Mr Boag would not talk to her about anything. She could not bring herself to read the letters from Maddens because the issues raised by them were so entwined with the fire and Mr Boag’s health that every time she picked up a letter from Maddens, she would get ‘a wave of nausea’.
As to the discussion with Maddens on 21 October 2015, Mrs Boag deposes that after that phone call, she believed that she and Mr Boag were no longer involved in the proceeding at all. She was not told that they could be prevented from bringing their own claim against the defendants. She also believed they could become involved in the class action if they changed their minds. She spoke to Mr Boag about the conversation at the time and he said he did not want any involvement in the proceeding.
Mr and Mrs Boag gave evidence at the hearing. Mrs Boag’s evidence was to the effect that her husband’s illness was tumultuous for them both. There was a lengthy period when Mr Boag was not engaged with the world, and it was impossible for her to have any real discussion with him about matters of importance. She described Mr Boag as ‘lacking tolerance’ and as having ‘disordered’ thoughts. About six to twelve months ago, things changed and, although Mr Boag is still ‘not wonderful’, she is able to talk to him about some things. Previously, when she tried to discuss the class action with him he became very angry and she ‘really just did not want to go there’. She felt they did not need any more pressure in their lives.
Mrs Boag gave evidence that she did not read much of the correspondence that came in from Maddens because she did not think they were affected by it. She also said that Mr Boag had a habit of making correspondence disappear.
Mrs Boag gave evidence that when she spoke to Maddens in October 2015, she did not understand the difference between opting out of the proceeding and not registering for the purpose of a settlement. She thought that they were not part of the class action. She did not appreciate what their position meant for any potential claim that they might have had against the defendants.
For his part, Mr Boag gave evidence that he picked up and threw the correspondence received from Maddens in the bin. He said he believed he did not have to read anything that came into the house if he decided he did not want to. He described himself as having ‘shut up the shop’. It was only in February this year that he started reading things again and accepting what was going on around him. He confirmed that he and Mrs Boag had ‘lots of blues’ over the relevant period. He could not face things, but now he was coming back to reality after his problem, knowing that he was going to live.
The Boags submit that the likely impact on other group members of the grant of leave to them to participate in the settlement will be small. Even if their claim is as high as $150,000, the reduction in the distributions to other group members will be only 1.13%, and this has to be viewed in the light of the fact that there remains an assessment process under the SDS which is subject to a discretion by the administrator to request further information and to reject any aspect of any claim. Furthermore, the initial estimate of legal/administration costs has been reduced. This shows there to be some flexibility in the numbers and savings have already been made. The impact of the Boags’ inclusion in the settlement will not be significant in this context.
Against this, in my view, is the importance of certainty for the plaintiff and RGMs, and the ease and speed with which distributions can be made to them, given that the they have done the hard work and put themselves in a position to receive a quick and certain distribution. The management of the proceeding and the steps taken since the settlement have been tidy and tightly controlled, resulting in a clear path to final resolution of the matter. The RGMs agreed to register their claims, to provide information in the form requested, to limit the information used for the assessments to the information already provided and so on, in order to facilitate the efficient resolution of the matter. For a group member to refuse or neglect to participate in this process but then to seek to benefit from the settlement secured by these means would, prima facie, be unjust to those who had taken the time and trouble to comply with the rules. The Court should be slow to permit persons who have not registered and provided the necessary information and instructions to participate in the settlement in these circumstances.
However, in this case there are special circumstances explaining the refusal or neglect. Although there is no expert medical evidence about the effects on his behaviour of the condition from which Mr Boag suffered, I am satisfied that his mental health was affected by his illness. His evidence and that of Mrs Boag was that he coped poorly with his illness from around the middle of 2014 until recently, and that his behaviour was erratic and often irrational. He lacked the ability not only to make important decisions but to follow through with decisions taken, and to conduct himself with consistency of purpose and in his own best interests. This compromised his ability to make ‘a deliberate and informed decision’ about participating in the group proceeding.
Mrs Boag, on the other hand, was not ill and was well capable of making important decisions, at least in her professional life. She was also able to draw together the documents and information relevant to the damages claim for the purpose of filing tax returns and claiming tax losses as a result of the fire. However, Mrs Boag’s evidence was that she was unable to manage matters as well on the domestic front. Mr Boag’s erratic and, I infer, obstreperous behaviour caused distress and tension in the household and his illness clearly placed considerable strains on the relationship between Mr and Mrs Boag. This made it difficult for the Boags, as a couple, to focus on matters that were peripheral to his health, but nonetheless important, such as the group proceeding. Mrs Boag gave evidence that she was unable to engage in constructive discussions with Mr Boag and their joint decision-making was impaired.
I consider that the Boags have given a plausible explanation as to why they did not respond to the communications from Maddens, except to the extent of wanting out. Mr Boag’s illness was very serious, and it affected not only his ability to make deliberate and informed decisions, but what Mrs Boag could do as well.
As a result, I am not persuaded that the Boags made a ‘deliberate and informed decision’ not to participate in the proceeding and any settlement. Furthermore, I accept their evidence that they did not understand that they would be excluded from participating in the proceeding if they changed their minds, and that they would lose their rights against the defendants. I attribute no blame for this misunderstanding – it arose from the Boag’s particular circumstances and the complexity of the rules in group proceedings. However, I observe that the position in which the Boags unwittingly found themselves, being neither entitled to participate in the settlement but forfeiting their rights against the defendants, is the worst of all possible worlds and is not a position likely to be chosen by a group member making a deliberate and informed decision.
As to the position of the plaintiff and RGMs, I consider that the prejudice to them from allowing the Boags to participate in the settlement is small. There will be little if any delay in making the distributions, especially given the likely delay caused by the holiday period in any event. The Boags have completed the paperwork and submitted it to Maddens. Their claims are for agricultural losses of a kind that are common to many group members and are not especially difficult to assess. The reduction in the amount of distributions that the other group members will experience is also quite small.
I have therefore concluded that it is appropriate to ensure that justice is done in the proceeding that the Boags participate in the settlement and I will so order.
However, the Boags will be ordered to pay the costs of the assessment of their claim, having regard to the fact that they have been given an indulgence and in order to keep the reduction in distributions to other group members to a minimum.
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