Thrower v SA Power Networks

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
THROWER v SA POWER NETWORKS & ORS
[2023] SASC 117
Decision of Judge Bochner a Master of the Supreme Court
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - POWER TO ORDER
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - PLAINTIFF OR APPLICANT - NOMINAL OR REPRESENTATIVE PLAINTIFF OR APPLICANT
This is an application for security for costs brought by the second and third respondents in a representative proceeding in which damages are claimed for losses suffered as a result of a bushfire.
Held:
1. The second and third respondents' application for security for costs is dismissed.
Uniform Civil Rules 2020 (SA), referred to.
Kurray v Brinkworth & Ors [2023] SASC 16; Proude v Visic (No 3) (2012) 118 SASR 444; Its Eco Pty Ltd v BPS Financial Ltd [2022] FCA 842; Eades v Endeavour Energy [2018] NSWSC 801; De Jong v Carnival PLC [2016] NSWSC 347, considered.

THROWER v SA POWER NETWORKS & ORS
[2023] SASC 117
CIVIL

This is a representative action commenced by the applicant on 10 March 2021. The subject of the action is a bushfire which commenced on land owned by the second and third respondents, when a tree fell and struck a powerline belonging to the first respondent. The powerline made contact with a metal fence which resulted in arcing, and the consequent ignition of dry grass near the fence. Approximately 23,000 hectares of private land were burnt, including the destruction of 86 houses, 552 sheds and 325 vehicles.
The applicant has brought this claim in negligence against the respondents, in respect of loss and damage to personal property and personal injury. It is not in dispute that, at the time of the bushfire, the applicant was the occupier of a property which was destroyed by the fire. All of his personal belongings were destroyed and he alleges that he developed a post-traumatic stress disorder and major depression as a result. The property in which he was living was owned by his fiancé. She is a member of the representative group.
Liability in this matter is contested by all respondents. Expert reports have been exchanged between the parties.
The applicant brings this action on behalf of those persons who suffered loss or damage to property as a result of the bushfire, all those who suffered personal injury as a result of the bushfire, and all of those who suffered economic loss as a result of the bushfire. Class closure has now occurred; 1,119 parties have registered as group members, including members whose interests have been registered by their subrogated underwriters. The group includes individuals, unincorporated businesses and corporate entities.
It is not in dispute that the applicant does not have the ability to meet an adverse costs order. Nor is it in dispute that there is no third party funder funding the litigation. The applicant’s lawyers, Maddens, are acting on a no win no fee basis, but say that they are unable to accept the risk of funding an adverse costs order.[1]
[1] FDN 98, [23] – [25].
The first respondent filed an application for security for costs on 7 October 2022.[2] On 28 October 2022, the second and third respondents filed their application for security.[3] The applications were listed for argument on 7 February 2023. On 3 February 2023, however, the Honourable Chief Justice delivered a judgment in the matter of Kurray v Brinkworth & Ors,[4] in which his Honour considered the operation of the Rule 115 of the Uniform Civil Rules 2020 (SA) (“the UCR”), dealing with security for costs, in relation to representative actions. This was the first time that the interaction between UCR 115 (which differs substantially from its predecessor rule) and UCR 24 (dealing with representative actions) had been considered. The argument on 7 February 2023 was adjourned by consent to allow the parties to consider the decision. The first respondent subsequently indicated that it did not press its application for security for costs. The second and third respondents continue to press their application.
[2] FDN 86.
[3] FDN 90.
[4] [2023] SASC 16.
Kurray v Brinkworth
In relation to the power of the Court to make costs orders in representative actions, the Chief Justice said this:
Importantly r 24.10 provides that unless the Court otherwise orders, any right or liability to receive or pay costs in a representative proceeding under Part 4 vests in the representative party and not in the represented parties. The rule may be regarded as an incident of the inherent power to award costs against non-parties or as a rule regulating the practice and procedure of the Court in representative actions. From either perspective the power of the Court to otherwise order is not limited to exempting the representative party from the liability to pay costs; it extends to ordering that a represented party bear all or part of those costs. It follows that represented parties who have opted in, or who have not opted out, as the case may be, are vulnerable to an adverse exercise of the discretion conferred by r 24.10.[5]
[5] Ibid, [15].
He also held that, even though an applicant in a representative action was bringing the action on their own behalf, they were also bringing the claim for someone else’s benefit, that is, the represented parties. As a result, by bringing a representative action, an applicant brings themselves within one of the criteria which must be established by a respondent who seeks an order for security for costs.[6] He went on to say this about representative actions and security for costs:
In actions brought by an applicant in a representative capacity, there is a risk that an impecunious applicant may have been selected to protect the financial position of other represented parties who have assets. However, that risk is ameliorated substantially by r 24.10 which extends the power to award costs to making orders against represented parties. That rule stands in stark contrast to s 43 of the Federal Court Act 1976 (Cth) (the FCA) which precludes orders against represented parties.
Rule 24.10 potentially assimilates the position of other group members with the applicants as if they had brought their own actions as natural persons. In the ordinary course, applicants who are natural persons are not required to provide security for costs. Rule 24.10 therefore provides good reason not to make a security for costs order in these proceedings. That there is one corporation amongst the group members does not significantly alter that position.
Notwithstanding the potential liability of group members for costs pursuant to r 24.10 a security for costs order might still be made in representative proceedings brought pursuant to Part 4 of Chapter 3 of the UCR. The critical consideration is whether the making of the order is necessary to preserve the efficacy of the costs order. For example, a security for costs order may be necessary in circumstances in which disagreements between the representative party and the represented parties might arise and may result in the exercise of the power conferred by r 24.10 adversely to the respondent in order not to unfairly burden a representative party. No such circumstance is evident in the material put forward in support of this application. A great disparity in the circumstances of members of the group in respect of such matters as the control of the proceedings, the strengths of their respective cases on liability, and the extent of their likely damages, if successful, may support the making of an order for security for costs.[7]
[6] UCR 115.1(1)(a).
[7] [2023] SASC 16, [22] – [24].
The Honourable Chief Justice reached the conclusion it was within the power of the Court to make costs orders against represented parties in representative actions, as well as the named applicant. He found, however, that this power would not prevent the Court from making an order for security for costs in a representative action if it is otherwise appropriate to do so.
The submissions of the second and third respondents
For ease of reference, I will refer to the second and third respondents simply as “the respondents”.
Mr Williams, who appeared on behalf of the respondents, submitted that they relied on UCR 115.1(1)(a) and (e), that is, that the applicant was bringing the action for someone else’s benefit, and an order for security for costs was necessary in the interests of justice. He submitted that the applicant was without the financial means to meet an adverse costs order and postulated that the applicant would not have brought this action purely on his own account. He further submitted that, if the individual group members had commenced separate actions for their losses occasioned by the bushfire, they would each be liable for adverse cost orders and the corporate entities would be liable to pay an amount for security for the respondents’ costs. He submitted that the interests of justice require an order for security for costs to be made in this action because the group members are currently shielded from an adverse costs order, while the respondents face a real risk that, in the event that they are successful at trial, any costs order made in their favour would be unenforceable.
Mr Williams submitted that it is generally accepted, as a result of decisions such as that of Blue J in Proude v Visic (No 3)[8] and Its Eco Pty Ltd v BPS Financial Ltd,[9] that in a representative action, the represented party acts in a dual capacity: that is, in a personal capacity and on behalf of the group members. As a result, UCR 115.1(a) is engaged.
[8] (2012) 118 SASR 444.
[9] [2022] FCA 842.
As to the interests of justice, Mr Williams noted that the Information Notice sent by Maddens to the group members advised that group members will not become liable for any legal costs as a result of mere participation in the representative proceeding. He submitted that the combined circumstances of the applicant’s impecuniosity, the absence of a litigation funder, the fact that the applicant was not the owner of the property he occupied at the time of the fire, he was now the joint owner of a house of modest value subject to a mortgage and he had limited savings, should lead to the conclusion that an order for security for costs is in the interests of justice.
Mr Williams contended that registered group members included wineries, primary producers and businesses, none of which have provided evidence of their financial position. He said that it was reasonable to assume that some of these group members have substantial assets including real property. There has been, however, no suggestion that any member of the group is prepared to provide security for the respondents’ costs. The only evidence that the group members have no capacity to meet an order for security for costs comes in the affidavit of Ms Emery of Maddens, who says there is a high level of financial stress amongst group members.[10]
[10] FDN98, [22].
Mr Williams submitted that there can be no doubt that the costs of this action will be extremely high. The first respondent says that it has already incurred legal costs of at least $1.5 million with trial costs of at least $2 million. While the costs of the second and third respondents are significantly less than those incurred by the first respondent, it is expected that their costs would exceed $1.1 million to the end of trial. There is no doubt these are well beyond the applicant’s capacity to pay.
Mr Williams contended that the Court should take into consideration the fact that the costs of this action are substantially increased because of its being a representative action, not least because of the substantial work that was required to identify and communicate with group members. He further invited me to find that the applicant had been chosen as the represented party because he had limited assets. Not only would he have fewer assets than many other group members, he would also have suffered significantly less loss, simply because he did not own any real property that was affected by the fire. He contended that I should also find that the applicant would not pursue this action if he was required to fund it himself.
Mr Williams submitted the applicant’s case against the respondents is not a strong one. In making this submissions, he took me to various sections of the relevant legislation and the expert reports that have been exchanged between the parties.
Mr Williams submitted that the case of the applicant’s impecuniosity is not a factor of any great significance in determining whether an order for security for costs should be made. Whilst it is accepted that the applicant lost personal property in the bushfire, there is no evidence to suggest that the property was worth the equivalent or near equivalent of the costs likely to be spent by the respondents in defence of this action.
The respondents contend that there has been no significant delay in bringing their application for security for costs. Discovery is not yet complete, lay evidence has not been exchanged and the matter has not been listed for trial. Further, there is no evidence of any prejudice to the applicant as a result of the respondents’ failure to bring this application earlier. Further there is no evidence to support any contention that the action would be stultified if any order for security was made. There is almost no evidence of the financial position of any group members; thus, not only is it impossible to determine whether an order for security would stultify the action, it is impossible to determine if orders for security would be made against them if each had brought a separate action on their own account.
Mr Williams submitted that the circumstances of this action can be distinguished from those in Kurray v Brinkworth. In that action, the group was a small one with only one company as a member. In this matter, there is a significant number of companies in the group. Further, the respondents have not been advised how many of the group members are making claims for personal injury; as a result, there is no evidence to support the applicant’s claim of prejudice on the basis of delay, because personal injuries claims would now be statute barred.
Mr Williams further contended that the Honourable Chief Justice made a number of errors in his reasoning in Kurray v Brinkworth. I will not outline here the errors that the respondents contend were made, for reasons that I will set out below. He further submitted that I should not feel bound to follow the decision in Kurray v Brinkworth.
The applicant’s position
Mr Dalton KC, on behalf of the applicant, submitted that, in light of the decision in Kurray v Brinkworth the respondents’ application for security for costs cannot succeed; in any event, however, he submitted that significant discretionary factors required the dismissal of the application. He further submitted that it was beyond my power to find that the learned Chief Justice had erred in Kurray v Brinkworth, and that I was bound to follow that decision.
Mr Dalton submitted that Kurray v Brinkworth stands for the proposition that the Court has the power to order a represented party to bear all or some of the costs of a representative action.[11] This is a relevant, although not overriding, factor to take into consideration when determining whether an order for security for costs should be made against a representative party.
[11] [2023] SASC 16, [15].
Mr Dalton made submissions dealing with the errors which the respondents contend were made by the learned Chief Justice. For the reasons that I will set out below, I do not deal with those submissions further.
As to the facts of Kurray v Brinkworth, Mr Dalton contended that they were indistinguishable from those before me. There is a clear disparity in the financial circumstances of individual group members, with great disparity likely to be revealed in the losses incurred by group members. This was a factor that the learned Chief Justice referred to, as one that might support an order for security for costs.[12] Nonetheless, he determined not to make an order for security in that matter.
[12] Ibid, [24].
Mr Dalton submitted that while there is a number of discretionary factors which indicate that an order for security for costs should not be made, the most persuasive of these is the significant period of delay between the commencement of the action and the filing of the application for security for costs. He contended that the application for security was filed in October 2022, 19 months after the action was commenced and more than 12 months after the opt-out date for group members. Furthermore, the second and third respondents gave no notice of the application, unlike the first respondent who gave early notice of its intention to bring an application for security.
Mr Dalton says that the applicant and group members will be prejudiced if an order for security is made so late in the proceedings. If the application had been brought earlier it could have been addressed as part of the opt-out process. Further, any personal injury claims are now statute barred. In this regard, Mr Dalton relied on the case of Eades v Endeavour Energy,[13] where Garling J said:
Another matter which is of significance in the circumstances here is the timing of the applications. The applications were first brought at a time significantly after the opt out process had concluded. One of the features of the orders that are sought, and which involve an interrogation of the group members, is that if the Court determines that it is appropriate for group members to make a contribution or, alternatively, if group members do not wish to so contribute or even respond to the interrogation process, a question arises as to the necessity for the opt out process to be revisited.
In De Jong the application for security for costs was made and the Court was asked to determine it at a time where pleadings had closed and where the Court was being asked to approve the form of an opt out notice and an accompanying circular to be sent to group members (De Jong at [2]). The significance of that timing was that each of the group members was entitled to consider providing information relevant to the issue of security for costs at a time before they were required to opt out of the group proceedings. I regard the timing of the hearing of these applications as being a significant factor to be taken into account.
Where the group consists of a relatively small number (here less than 30 have registered), the impact of seeking an order for costs upon the composition of the group may be significant. For example, those who are making claims for personal injury, cases where traditionally security for costs are rarely, if ever, ordered, may have taken the view that they were better to opt out and proceed individually. Perhaps an application could then have been made to the Court for those cases to have common issues of fact with respect to liability determined jointly, and perhaps in advance of all other issues in the proceedings. That mechanism would not have resulted in any plaintiff representing any other person, which is a significant factor in weighing up, at least on the authorities, an order for security for costs.
Here, the application for security for costs has been brought on at a time well after the opt out procedure was concluded. One issue which the Court would need to consider is whether, if an order for security for costs was made, group members should be given an opportunity to opt out of the group proceedings.
Having regard to all of these facts and, in particular, the nature of the class, its composition and the nature of the claims being made, including personal injury claims, and the stage at which the application was brought on for determination, I was not satisfied that this was a case in which the Court ought make an order for security for costs.[14]
[13] [2018] NSWSC 801.
[14] Ibid, [107] – [111].

This may be contrasted with the decision of Proude, where security for costs was sought in the very early stages of the action.
Mr Dalton further noted that the respondents were not seeking an order that notice by given to group members of the consequences of an order for security for costs; indeed, they do not ask that the matter be stayed until an order for security is complied with, as is ordinarily the case.
Mr Dalton submitted that significant costs would be wasted if an order for security was made now. Group members would need to be given a further opportunity to opt-out, and the costs already expended on the information notice to group members and the opt-out process would be wasted, as the process would need to be repeated. Thus, he submitted that delay was sufficient to enable me to exercise my discretion against making an order for security for costs.
Mr Dalton submitted that the applicant is, personally, impecunious and would be unable to meet an adverse costs order, or to contribute to any sum required to satisfy an order for security for costs. Traditionally, he submitted, a natural person who brings an action on his own account will not be subject to an order for security for costs, simply because they are impecunious. There should be no basis for departing from this ordinary rule here. He further submitted that the characteristics and financial circumstances of other group members are not relevant to the exercise of my discretion, particularly with respect to the question of stultification.
Mr Dalton contended that it cannot be asserted that the applicant is not a bone fide applicant or that he does not have a bone fide claim. While he may not have been the owner of real property, he lost all his personal property in the bushfire, and suffered a personal injury. Further, he submitted that the question of liability is a complex one, and not one which can be assessed in an application such as this. As a result, the strength or otherwise of the applicant’s claim should be regarded as a neutral factor in the exercise of my discretion.
The applicant rejects the respondents’ contention that he was deliberately chosen because he was a “man of straw”, as a result of which he would bear no risk in the event of an adverse costs order. He is clearly not a “nominal” applicant as he suffered both loss of property and personal injury as a result of the bushfire, for which he is entitled to sue.
Consideration
I have already set out the salient findings in Kurray v Brinkworth. They can be summarised as follows:
·A represented party in a representative action may be subject to an adverse costs order in the event that the action is unsuccessful.
·The applicant in the representative action brings the action in two capacities: his personal capacity on his own behalf; and for the benefit of others, the represented parties.
·The risk that an impecunious applicant may have been selected to defeat an adverse costs order is ameliorated by the ability of the Court to make a costs order against represented parties.
·In determining whether an order for security for costs should be made in a representative action, the critical question is whether “it is necessary to preserve the efficacy of the costs order”.[15]
[15] [2023] SASC 16, [24].
Contrary to the submission of Mr Williams, I am bound by this decision, and do not have the power to depart from the principles set out therein. As a result, I have not addressed the submissions relating to alleged errors by the Honourable Chief Justice. I do, of course, retain a discretion, based on the usual factors in determining whether to make an order for security for costs.
In Its Eco Pty Ltd v BPS Financial Ltd[16] Derrington J summarised the factors to be taken into consideration when dealing with an application for security for costs in a class action. Derrington J said:
[16] Supra.
The Full Court also approved of the primary judge’s identification of a number of criteria which may be useful in the exercise of the Court’s discretion on such applications in class actions. They were identified by his Honour (at [13]) in the following manner:
13     The considerations relevant to the exercise of my discretion under s 56 in the context of a class action can be distilled from the various authorities I detail below. They were usefully summarised by Hollingworth J in Hall v FinanceDirect Ltd [2005] VSC 306 (“Hall”) at [107] and they include the following:
(a) Whether there is reason to believe that the applicants will be unable to pay the respondents’ costs if so ordered, that is, whether the applicants are impecunious?
(b) Whether the applicants’ insufficiency of means is caused by the conduct which is the foundation for the action?
(c) The promptness of the application and the stage of the proceedings at which an application for security is brought.
(d) Whether the proceeding has become bogged down with “interminable and expensive interlocutory applications” for which the applicants bear responsibility?
(e) The strength and bona fides of the applicants’ claim for relief from the respondents.
(f) Whether the applicants have been deliberately selected as “persons of straw”, in order to immunise from costs orders group members of substantial means?
(g)     Whether the proceeding is essentially defensive in nature?
(h)     Whether the applicants are suing for someone else’s benefit?
(i) The characteristics of the group members. For example do they include corporations or natural persons, and are they rich or poor?
(j) Whether someone who stands to benefit from the litigation is funding the applicants?
(k) Whether security would have been ordered if separate actions had been brought by the group members?
(l) Whether an order for security would stifle the action and shut the applicants out from pursuing an arguable claim?[17]
[17] Supra, [9].
It must be remembered, however, that this is a decision of the Federal Court of Australia, where represented parties are expressly shielded from adverse costs orders in representative actions. Thus, while I consider that the facts set out are the relevant ones, the weight to be given to them in a jurisdiction such as South Australia may be different to that given in the federal jurisdiction.
There is no doubt that the applicant is this matter, would be unable to meet an adverse costs order; he is, in that sense, impecunious. As much has been conceded by his lawyers. I consider that his impecuniosity may be, at least in part, attributed to the subject matter of this action: he lost all of his personal possession in and suffered a personal injury as a result of the subject bushfire. If the applicant was bringing this action only on his own account, the first factor would not be determinative of an application for security, and the second would weigh against the making of the order.
In the context of a representative action, the impecuniosity of the applicant must be considered against the background of the other factors in the case. In relation to those other factors, I find as follows:
·I do not consider that the applicant is a “man of straw” in that he has been deliberately selected as applicant, as opposed to another, better resourced, person affected by the bushfire. The losses suffered by the applicant are real losses: all of his personal possessions were destroyed and he suffered a personal injury. It is impossible at this stage of the action to compare the loss that he has suffered against the losses suffered by others. There is no doubt that some members of the represented group suffered more loss, in monetary terms, than he did; no doubt others suffered less. Nonetheless, his losses are real, and he is entitled to bring this action on account of them.
·Of the 1,119 group members, 81 are companies, and there is no doubt that other members are unincorporated members. The group is not homogeneous; it is reasonable to assume that there will be substantial differences in the quantum claimed between group members, just as there will be substantial difference in the ability of group members to meet an adverse costs order, or to fund a security amount. There is no evidence before me of the financial circumstances of group members, except for Ms Emery’s somewhat broad statement that members are suffering significant financial stress.[18]
·I accept, on the basis of Ms Emery’s affidavit, that a significant number of group members have suffered a personal injury, in the form of a psychological illness, as a result of the bushfire.[19] It would be most unusual to make an order for security for costs if these group members brought an action on their own account.
·While Maddens acts for the applicant on a no win no fee basis, they have not assumed any liability for an adverse costs order against him. No third party funder is funding the action.
·It has not been put to me that an order for security for costs would stifle the action, and prevent the applicant from pursuing the claim, save that there is evidence that the applicant himself is not in a position to provide security.
·I consider that the facts of this matter differ sufficiently to allow De Jong v Carnival PLC[20] to be distinguished. In that case, no group member expected the quantum of their loss to exceed $5,000; here, the losses of group members are on a much more significant scale and are estimated to be in the millions of dollars.
[18] FDN 98, [22].
[19] Ibid.
[20] [2016] NSWSC 347.
These facts, taken together, are equivocal on the question of security for costs. In my view, the determinative factor is the delay between the commencement of the action and the filing of the respondents’ application for security for costs.
The opt-out process for this action concluded on 10 September 2021, almost two years ago. That process would need to be revisited, and significant prejudice would be caused to any group member who sought to opt-out now and bring their own action, because any action for personal injury is out of time. It is no answer to this prejudice to say that such an applicant may seek an extension of time to bring the action; this in itself is a prejudice, and the granting of an extension of time is never guaranteed.
I reject the respondents’ submission that there was no relevant delay in bringing the application, because it was brought promptly once all of the expert evidence was available. All of the parties have incurred significant costs already and these significant costs would be wasted if an order for security was made now which resulted in the revisiting of the opt-out process and the reconfiguration of the group.
I consider that all of the relevant factors in this case are finely balanced on the question of the appropriateness of an order for security for costs; however, delay firmly tips the balance against the making of such an order. I consider that the making of an order for security for costs almost two years after the conclusion of the opt-out process, and well after the expiration of the limitation period for personal injury claims would cause significant, and possible irremediable prejudice to the applicant and the group members.
The respondents’ application for security for costs must be dismissed.

[2023] SASC 117

8 August 2023