Wheelahan v City of Casey

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

VALUATION, COMPENSATION & PLANNING LIST

No. 9776 of 2008

MATTHEW JOHN WHEELAHAN AND THERESA WHEELAHAN	Plaintiffs
v
CITY OF CASEY AND ORS	Defendants

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JUDGE:	EMERTON J
WHERE HELD:	Melbourne
DATE OF HEARING:	29 April 2011
DATE OF RULING:	23 May 2011
CASE MAY BE CITED AS:	Wheelahan v City of Casey and Ors
MEDIUM NEUTRAL CITATION:	[2011] VSC 215	Revised 23 May 2011

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PRACTICE AND PROCEDURE – Application for approval of settlement of group proceeding – Supreme Court Act 1986 (Vic) s 33V.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J. Delany SC with Ms L. Nichols	Slater and Gordon
For the First Defendant	Mr C. Caleo SC with Mr M. Rush	Maddocks
For the Second Defendant (First Third Party)	Mr A. Finanzio	Norton Rose
For the Third Defendant (Second Third Party)	Mr P. Liondas	Baker & McKenzie
For the Fourth Defendant (Third Third Party)	Mr P. Cawthorn SC	Thomsons Lawyers
For the Fourth Third Party	Mr S. Parmenter	Mallesons
For the Fifth Defendant (Fifth Third Party)	No appearance
For the Sixth Defendant (Sixth Third Party)	Mr S. Anderson SC with Mr I. Percy	Holding Redlich
For the Seventh Defendant (Seventh Third Party)	Mr K.J.A. Lyons	Lander and Rogers
For the Eighth Defendant (Eighth Third Party)	No appearance
For the Ninth Defendant (Ninth Third Party)	No appearance
For the Tenth Defendant (Tenth Third Party)	Mr S. Goubran	Allens Arthur Robinson
For the Eleventh Defendant (Eleventh Third Party)	Mr M. Whitten	Minter Ellison
For the Twelfth Defendant	Mr R. Wilson	Macquarie Lawyers & Strategists

HER HONOUR:

Introduction and Summary

The proceeding is a group action brought under Part 4A of the Supreme Court Act 1986 (the ‘Act’) by residents and former residents of the Brookland Greens Estate (the ‘Estate’) who have been affected by the migration of landfill gas from an adjacent former municipal landfill. Application has been made to the Court to approve the settlement of the proceeding pursuant to s 33V(1) of the Act in the terms of deeds of settlement and a settlement scheme described in and exhibited to affidavits of Benedict Tobin Hardwick of the plaintiffs’ solicitors, Slater & Gordon.[1]
[1]Sworn 25 March 2011, and 4, 14, 21 and 28 April 2011. The settlement deeds are exhibits BTH-4 and BTH-10; the settlement scheme is set out in exhibit BTH-12.

Section 33V of the Act provides:

(1)A group proceeding may not be settled or discontinued without the approval of the Court.
(2)If the Court gives such approval, it may make such orders as it thinks fit with respect to the distribution of any money, including interest, paid under a settlement or paid into court.

In this case, the Court must consider whether approval should be given to both the overall settlement – a payment of $23.5m in return for the grant of the releases provided for in the settlement deed – and the proposed method of distributing the settlement sum between group members – the settlement scheme. This includes the payment of legal costs in relation to the proceeding and for the administration of the settlement scheme.

I have concluded that approval should be given to the settlement: both the overall settlement and the settlement scheme by which the settlement monies are to be distributed among the group members is in my view fair and reasonable, having regard to the amounts offered to group members, their prospects of success in the proceeding, the likelihood of the group members obtaining judgment for an amount significantly in excess of the settlement offer, the terms of confidential advice received from counsel and from independent experts concerning property prices, the results of environmental audits and related matters, the likely duration and cost of the proceeding if continued to judgment, and the attitude of group members to the settlement.

In reaching this conclusion, I have paid careful attention to the submissions made by the group members who objected to the settlement. Those group members questioned the fairness and reasonableness of the settlement and/or the settlement scheme, principally on the basis of the way it allocates compensation to group members on the basis of residential zones. However, in some cases group members expressed anger about the difficult position in which they find themselves living in what one objector described as an “infected estate”, and about what they perceive to be the defendants’ refusal to take responsibility for what has occurred and to keep them properly informed of what is going on. They regard the settlement as letting the defendants ‘off the hook’.

The gas migration was something that should not have occurred – it was preventable. Mistakes were apparently made in relation to the landfill. However, the limitations of civil proceedings have to be recognised. The fact that mistakes may have been made does not necessarily give rise to an entitlement to damages. Claimants must prove that they have suffered loss and damage of a kind that is compensable at law. The settlement reflects the way in which a court of law is likely to treat the claims of group members, having regard to the manner in which the law recognises and quantifies loss and damage resulting from nuisance and negligence. The focus of this proceeding is likely to be as much the position of the claimants as the alleged liability of the defendants.

The settlement also reflects the risk that is inherent in legal proceedings and the benefit to the group members of not having to wait years for the proceeding to be determined, with the substantial further legal costs that would be incurred.

There remains uncertainly as to whether remediation works have been effective and the problem of gas migration from the landfill has been solved. A number of group members advocated not giving up legal rights until they could be certain that they would suffer no further harm from gas migration. However, a line has to be drawn in the sand at some point, at least for the purposes of determining the compensation payable in respect of civil liability. If the proceeding went to judgment, even if there were a continuing nuisance, the Court would have to award damages on a ‘once and for all’ basis. There would be no scope to return to claim further damages as a result of the same alleged negligence or nuisance.

The proceeding

The group members on whose behalf the proceeding was brought are all persons who are or were prior to 10 September 2008 registered proprietors of land and/or holders of equitable interests in land (as purchasers pursuant to contracts of sale) in the Estate who claim to have suffered loss and damage because of the defendants’ conduct and the migration of gas from the adjacent former landfill.[2]
[2]Excluding Peet & Co Casey Land Syndicate Ltd, the 11^th defendant.

The Estate abuts the western boundary of what was previously known as the Stevensons Road landfill which accepted putrescible waste from municipalities including the City of Casey (‘Casey’) between March 1974 and 25 June 2005. The landfill was constructed and operated pursuant to a licence first issued in 1996 by the second defendant, the Environment Protection Authority (the ‘EPA’) to Casey and the Frankston City Council, and amended on seven subsequent occasions. The Court was informed that amendments to the licence progressively imposed requirements to monitor, manage and reduce the emission of landfill gas from the landfill, but did not require the landfill to be lined. It is alleged that during the period in which the landfill was operating and accepting waste, landfill gas was escaping from the landfill. In 2002, the EPA required as a condition of the licence that a gas extraction system be installed.

Following the closure of the landfill in June 2005, it was capped, but it is alleged that in 2006, bubbles were observed in storm water puddles on the Estate. In July 2006, Casey issued a media release and letter to residents referring to a proposal to install gas wells as the next stage of the restoration of the landfill. On 3 January 2007, the EPA issued a Pollution Abatement Notice (‘PAN’) against Casey pursuant to s 31A of the Environment Protection Act 1970 which required Casey to ensure, among other things, that landfill gas did not migrate laterally underground beyond the boundary of the landfill.

Matters reached a critical stage on 17 July 2008, when the EPA issued a public notice in relation to the risk of asphyxiation and explosion, and on 10 September 2008, the Country Fire Authority issued an evacuation warning to all residents of the Estate. On 18 September 2008, the EPA issued a Clean-up Notice against Casey. Since the evacuation notice, residents have returned to their homes, but extensive monitoring and remediation and other works have been carried out to houses on the Estate and to and on the landfill site in order to contain the landfill gases and to reduce the risk of harm to persons and damage to property on the Estate.

The plaintiffs’ claims are in respect of the consequences of the escape of landfill gas, essentially methane and carbon dioxide, from the landfill to the Estate and the public knowledge of it, namely:

(a)The need for residents to vacate their homes and take up short-term accommodation;
(b)The installation of in-home monitoring to detect the presence of landfill gas;
(c)The carrying out of physical works to houses on the Estate;
(d)The need for residents to permit Casey, the CFA and other authorities to enter their homes for the purposes of monitoring and carrying out physical works to their homes to mitigate against the migration of landfill gas;
(e)The construction of works on the Estate detracting from its amenity;
(f)The construction of a Bentonite diaphragm wall (the ‘Wall’) on the perimeter of the landfill, and the impact of works required to construct the Wall, including noise from heavy machinery and gas glares and vents, the accumulation of significant quantities of dust inside homes on the Estate, vibration in homes near to the landfill, damage to fences and gardens on the landfill boundary, loss of privacy and changed visual aspect as a result of the completion of the Wall;
(g)The need for residents to avoid being present in or using structures without floors or sufficient ventilation, including garden sheds and covered pergolas;
(h)The requirement that residents monitor, observe and be aware of the presence of landfill gas on the Estate, including by checking for the presence of unusual odours, not starting cars in closed garages until checking for odours, and turning off gas appliances and other sources of ignition such as heaters, candles and cigarettes;
(i)The effects of widespread publicity about the escape of landfill gas at the Estate;
(j)The invasion of privacy and disruption to the lives of residents caused by these circumstances;
(k)Diminution in the rental and capital value of land in the Estate, consequent upon these events.

The Estate comprises 135.4 hectares of land subdivided into 819 lots. Three lots are owned by one of the defendants, Peet & Co Casey Land Syndicate, which is excluded from the plaintiffs’ claim, leaving 816 lots. Of those, the owners of 45 lots have opted out of the proceeding. The plaintiffs’ solicitors have been retained by 586 group members who between them own 600 lots in the Estate. The claim of one of those group members has separately been resolved. There remain 170 lots in the Estate, the owners of which are also group members.

Aside from the plaintiffs, Mr and Mrs Wheelahan, a sample of group members was selected to file affidavits in the proceeding deposing to the problems that they have experienced as a result of the gas migration to the Estate. The Court was informed that the sample was intended to represent a fair and broad cross-section of the class of persons on whose behalf the proceeding was brought. Sample group members were selected primarily on the basis of the location of their properties relative to the landfill, because it was thought that their circumstances would represent the sorts of experiences and difficulties that group members have experienced by reason of the escape of landfill gas and the matters for which compensation is sought.

The plaintiffs’ claim, when first issued, was brought only against Casey. Casey subsequently joined the EPA and the third and fourth defendants to the claim. Those parties then joined the remaining defendants. Casey contended that the plaintiffs’ claims were apportionable within the meaning of Part IVAA of the Wrongs Act 1958 (Vic) and that if it were liable to the plaintiffs, the parties it had joined (and ultimately, the remaining defendants later joined to the claim) were concurrent wrongdoers within the meaning of s 24AH(1) of the Wrongs Act, and that pursuant to s 24AI(1) of the Wrongs Act, Casey’s liability must be limited to a portion of the plaintiffs’ loss or damage, having regard to the extent of Casey’s responsibility for the loss. Each of the remaining defendants made like allegations in respect of Part IVAA of the Wrongs Act and their pleadings allege various duties owed to the plaintiffs and breach of those duties by the other defendants. As a result, the plaintiffs have claimed damages against each defendant who has been joined to the proceeding by another party as a concurrent wrongdoer in respect of the loss and damage claimed by the plaintiffs. Moreover, following the Ombudsman’s report (“Brookland Greens Estate – Investigation into Methane Gas Leaks, October 2009”) and discovery by other parties, additional allegations have been made by the plaintiffs against the EPA.

The proceeding is therefore a large and complex one. I deal with the significance of the size and complexity of the proceeding when considering the fairness and reasonableness of the proposed settlement below.

The Settlement
Deeds of Settlement

The settlement comprises an agreement between the plaintiffs, Casey and the EPA, and an agreement between the plaintiffs and each of the remaining defendants.[3] The agreement with the remaining defendants simply provides that, subject to the Court approving the settlement of the plaintiffs’ claims, the plaintiffs’ and the remaining defendants consent to judgment being entered pursuant to s 33ZB of the Act dismissing the proceeding against the remaining defendants with no order as to costs.[4]
[3]Apart from the 8^th defendant, Stuart Hercules and the 12^th defendant, the City of Frankston. The City of Frankston has not agreed to any terms in respect of the resolution of the proceeding.
[4]The remaining defendants reserve their rights in relation to contribution and/or indemnity claims, including the right to make submissions concerning the amount or amounts paid by Casey and/or the EPA under the settlement and the quantum of the liability of Casey and the EPA to the plaintiffs.

Pursuant to the deed of settlement between the plaintiffs, Casey and the EPA, Casey and the EPA have between them agreed to pay the plaintiffs $23.5m: the EPA is to pay $10m and Casey is to pay $13.5m. Of the $23.5m, it is proposed that $17.25m be allocated for the compensation of group members. $6m is to be allocated for the payment of the plaintiffs’ legal costs of the proceeding and $250,000 is to be allocated to a fund for the payment of legal costs incurred in the implementation of the settlement scheme.

It is also proposed that the interest earned on the principal amount during the period in which the settlement scheme is being implemented, estimated to be in the order of $42,000, be allocated to the payment of legal costs incurred in the administration of the settlement scheme.

In return for the payment, the deed of settlement provides for the plaintiffs to release Casey and the EPA from their claims and to agree not to bring or continue any other claim or proceeding which in any way arises out of or is directly or indirectly related to the proceeding or its subject matter and the circumstances or allegations giving rise to or referred to in the proceeding.

Importantly, the deed of settlement provides that the releases do not apply to certain claims that group members may wish to bring in the future:

(a) claims in nuisance made in respect of loss or damage suffered after entry into the deed as a consequence of a number of ‘excluded events’;

(b) claims in negligence in respect of loss and damage suffered subsequently as a direct consequence of an ‘excluded event’ where such claim relies only on an act or omission of Casey or the EPA occurring after the execution of the deed of settlement; and

(c) claims made under the Water Act 1989 (Vic)[5] in respect of water damage that might be suffered as a direct consequence of substantial subsidence of land in the Estate which is caused or contributed to by future works or in connection with the landfill or the migration of gas from the landfill.

[5]Or successor legislation.

The ‘excluded events’ include works undertaken in relation to the Wall or the construction of a new deep wall, the removal of substantial quantities of waste deposited at the landfill, substantial subsidence of land in the Estate caused or contributed to by future works or in connection with the landfill or the migration of gas from the landfill, the demolition of any house or houses on the Estate required as a result of future works or in connection with the landfill or the migration of gas from the landfill, the evacuation or relocation of residents of the Estate which occurs as a result of advice or a recommendation by Casey, the EPA or the CFA made as a result of the migration of gas from the landfill or an environmental hazard or works resulting from the same.

Counsel for the plaintiffs, Mr Delany SC, described these matters as significant ‘carve outs’ from the releases, which had been negotiated to protect group members’ rights in relation to a range of future events. The deed of settlement also prevents Casey from imposing differential rates on land within the Estate or rates declared to defray and repay to Casey expenses and costs incurred as a result of the gas migration.[6] To similar effect, the EPA agrees, to the extent that it is lawful for it to do so, not to impose on the plaintiffs any Clean-Up Notice or PAN relating to the management, rehabilitation and monitoring of landfill gas emitted by the landfill.
[6]As a result of rehabilitation or infrastructure works or expenses incurred by Casey in relation to the operation, rehabilitation and monitoring of the landfill or in compliance with any Clean‑Up Notice or PAN served on Casey by the EPA.

The Settlement Scheme

The agreement between the plaintiffs, Casey and the EPA does not deal with the distribution of the settlement amount between group members and between group members and the plaintiffs’ lawyers. The criteria and processes by which it is proposed to distribute the settlement amount are set out in the proposed settlement scheme devised by Slater & Gordon for which the Court’s approval is now also sought.

In his affidavit sworn on 25 March 2011 (his ‘first affidavit’), Mr Hardwick deposes that the method of distribution of compensation between group members under the proposed settlement scheme is intended to reflect the nature of the legal claims brought by the plaintiffs and the evidence available to the plaintiffs concerning the effect of the migration of gas from the landfill on the use and enjoyment of residents of their properties within the Estate. This is an important point. The distribution of compensation is related to the nature of the claims in the proceeding, the remedies available at law in respect of those claims and the prospects of group members, having regard to their particular circumstances and to the available evidence.

It is proposed that compensation be distributed in two tranches. The first tranche of $17m is proposed to be distributed by reference to ‘zones’ in the Estate, while a second tranche (in the amount of $250,000) is to be placed in a fund against which group members may make claims in respect of ‘exceptional circumstances’.

The first tranche of compensation is to be allocated notionally for what Mr Hardwick describes as ‘general damages’ (for loss of use and enjoyment of land) and for capital loss (diminution in property values). The allocations for both general damages and capital loss will be made having regard to the zone in which the property of the relevant group member or members is located.

Under the settlement scheme, subject to some limited exceptions, each group member whose property is located within a particular zone will receive:

(a)The same allocation for ‘general damages’ (if any) as every other group member in that zone; and
(b)An amount for capital loss (if any) based on the value of the group member’s particular property as assessed in accordance with the scheme and, if a sale has occurred, the price achieved. Group members in any given zone will be allowed the same proportion of the total amount of their assessed capital loss.

The scheme makes provision for eight zones, six of which (zones A1, A2, B1, B2, B3 and B4) are on the eastern side of the Estate which borders the landfill, and two of which (C and D) are on the western side of the Estate, which is separated from the landfill by part of the Estate to the east and an easement for electricity transmission lines. Zone A1 comprises only those properties that actually abut the landfill. Zone A2 comprises properties within approximately 100 metres of the landfill, with zones B1, B2, B3 and B4 located at increasing distances from the landfill, radiating from the boundary with the landfill on the eastern side of the Estate. Zones C and D are on the western side of the Estate, generally further removed from the landfill, with the properties in zone C located closer to the landfill than those in zone D.

Mr Hardwick deposes that the division of the Estate into zones was initially undertaken by Mr Les Brown of M3property Strategists (Vic) Pty Ltd (‘M3’), an independent valuer retained by the plaintiffs to provide an opinion as to the diminution in capital and rental value of properties on the Estate caused by the gas migration and its consequences. Mr Hardwick deposes that the way in which the zones have been delineated reflects the proximity of properties to the landfill and the degree to which they have been affected by noise, odour and dust from remediation works on the landfill, the occurrence of works and monitoring activities in homes and on the Estate, and any stigma associated with the events the subject of the claim. He deposes that some adjustments have been made to the designation of the zones described by Mr Brown to account for events that have occurred after Mr Brown’s report, in particular, remediation works. On-site remediation work continued intensively until the end of 2010 and resulted in the height of the landfill being raised by approximately three metres. The Court was shown photographs of the landfill during remediation works from one of the properties abutting the landfill (in zone A1), which gave it some idea of the extent of the works undertaken and the ensuing disturbance suffered by residents living close to the landfill.

According to Mr Hardwick, it was intended that the characteristics on which distinctions are made between zones be relatively readily ascertainable and reasonably objective.

Compensation in the form of ‘general damages’ is intended to be for the loss of use and enjoyment of properties since September 2008 and into the future, having particular regard in the calculation of damages to the period to July 2012, which is the date on which the third PAN requires specified reductions in the presence of methane or carbon dioxide in landfill gas to have been achieved. According to Mr Hardwick, the assessment of general damages is intended to reflect the evidence available to the plaintiffs concerning the impact of the migration of landfill gas to the Estate and the public knowledge of it, including noise, dust, vibration and other interference from works on the landfill, works conducted in homes to mitigate gas migration, monitoring in homes, alarm events and inspections, the stress and anxiety associated with health and safety risks of the presence of landfill gas, the physical blights of the landfill site infrastructure, the presence of works, trucks and monitoring equipment on the Estate (including “snorkels”), and the loss of amenity associated with group members’ inability to use and enjoy their homes in the way they otherwise would have. These damages will be reduced in each case where the group member has not occupied his or her property for the entirety of the period up until the date of the approval of the settlement scheme. No general damages are allowed for investors.

An additional amount of $7,000 is available in respect of each property in which gas detections occurred on seven or more days, and an amount of $2,000 is allowed in respect of properties in which gas detections occurred on between three and six days. This allowance is not predicated on the gas detections occurring in any particular zone.

The amounts allowed for ‘general damages’ in each zone are as follows:

Allowance per zone

A1 $70,000.00

A2 $35,000.00

B1 $26,000.00

B2 $17,000.00

B3 $15,000.00

B4 $8,000.00

C $0.00

D $0.00

It will be observed that this distribution significantly favours the relatively small number of households in properties immediately abutting the landfill (zone A1). By contrast, households in properties on the western side of the Estate (zones C and D) receive no allowance of this kind at all. This is one of the principal grounds for objection to the settlement scheme.

Capital loss is treated differently depending on whether the property in question has been sold and any loss on it has crystallised. For group members who have sold their properties, loss is measured by the difference between the sale price achieved and the unaffected value of the property as assessed by M3. For group members who have not sold their properties, the allowance is measured by the difference between the affected and unaffected value as assessed by M3. In each case, only a proportion of the loss is allowed, as calculated by M3. Again, the proportion of loss allowed is the same for members in the same zone. However, the proportion is higher (significantly) for properties that have been sold. Again, objection to the scheme was made on the basis that residents who could not afford to sell up and move were being penalised for remaining on the Estate.

The capital loss assessed by M3 for each zone where the property has not been sold is as follows:

M3 Starting figures –
Loss as % of CIV % of M3 Recovered Actual
Recovery – % of CIV

A1 25.00% 50.00% 12.50%

A2 20.00% 40.00% 8.00%

B1 10.00% 40.00% 4.00%

B2 9.00% 40.00% 3.60%

B3 9.00% 40.00% 3.60%

B4 9.00% 40.00% 3.60%

C 9.00% 35.00% 3.15%

D 6.00% 25.00% 1.50%

If the property has been sold, the proportion of the assessed loss that is recoverable is 85% for zone A1 and 80% for the remaining zones.

Importantly, the settlement scheme provides for a minimum payment to each group member. If the notional allocation for any property falls below $6,000, the allocation will be adjusted upwards to $6,000 and the allocations to all other group members will be reduced accordingly in proportion to their respective shares of the settlement sum. After all allocations have been made notionally, individual allocations will be adjusted proportionately so that the aggregate of all allocations equals $17m. In his first affidavit, Mr Hardwick deposes that he expects that this adjustment will require a reduction of approximately 0.8% to each group member’s allocation. Such adjustments will not reduce any group member’s entitlement below $6,000.

The Court has been provided with Confidential Exhibit BTH‑6 to Mr Hardwick’s first affidavit. This is a spreadsheet prepared by Slater & Gordon which shows for each property, its zone, whether the land is improved, the capital improved value of the property, the allocations for ‘general damages’ and for capital loss in accordance with the M3 assessment reduced as per the settlement compromise and then adjusted for the $17m cap and the $6,000 minimum payment. The spreadsheet has enabled the amounts of compensation that will be received by individual group members to be predicted with reasonable accuracy. Group members have been sent a notice informing them of the estimated payment that they will receive under the settlement.

Slater & Gordon has prepared a summary of the estimated minimum and maximum amounts of compensation to be paid by reference to each zone (taking into account the $17m cap and the $6,000 minimum payment) as follows:

Min Max

A1 $21,877.10 $136,127.42

A2 $ 6,473.44 $ 80,861.81

B1 $ 6,331.49 $ 58,610.91

B2 $ 7,000.67 $ 42,053.95

B3 $ 6,845.15 $ 95,603.93

B4 $ 6,000.00 $ 43,933.42

C $ 6,000.00 $ 41,492.40

D $ 6,000.00 $ 46,795.93

The settlement scheme allows for adjustments to be made in the course of the distribution of settlement monies if it becomes apparent that the effect of the migration of landfill gas on a particular property and its inhabitants is such that the property ought properly to be regarded as if it were located within a different zone. The settlement scheme provides that such adjustments may be made upwards, but not downwards.

As to the administration of the settlement scheme, it provides that on the receipt of claim forms from group members, Slater & Gordon will distribute the settlement sum in accordance with the rules and criteria described. It is intended that under the scheme, a member (or members) of the Victorian Bar will be appointed to assess any ‘exceptional circumstances’ that are claimed. The scheme also provides for a limited right of review to independent counsel (again, a member or members of the Victorian Bar) and group members may seek a review essentially on the grounds that the provisions of the settlement scheme have not been applied in accordance with their terms. Group members will be required to pay the costs of the review (limited to $1,000), but if a review is allowed, those costs will be refunded from the legal costs fund.

Expert Advice

For the purposes of settlement, Slater & Gordon obtained advice from M3 on matters related to the impact of the migration of landfill gas, and the public knowledge of this, on property values in the Estate. On 22 February 2010, Mr Brown provided a detailed report containing his opinion of the impact of the events which are the subject of the proceeding on property values within the Estate. Mr Brown’s opinion was provided on the basis of different scenarios reflecting different levels of risk that the environmental problems which existed in September 2008 have not been solved. The impact on property values is different in each of the scenarios. The environmental scenario that has been used for the purposes of the settlement scheme is that there is a 10% risk that the environmental problem which existed in September 2008 has not been solved.

Slater & Gordon subsequently retained Mr Brown, together with his co‑director, Ms Luana Kenny, to provide assessments of individual sales of properties which have occurred within the estate since September 2008 for the purpose of assessing whether there was any deficiency between the unaffected value of the property, and the price secured on the sale of the property. M3 provided a supplementary report on 11 October 2010 and further advice in letters dated 18 October 2010, 7 March 2011 and 30 March 2011.

Slater & Gordon also obtained the advice of environmental engineering experts, Mr Anthony Lane of Lane Piper and Mr Roger Parker of Golder & Associates, in relation to the environmental scenario that should apply for the purposes of implementing the scheme. The environmental audit report prepared by Mr Lane dated 18 February 2011 and the review of Casey’s ‘Report on Effectiveness of On-Site Remediation Actions in Preventing Gas Leaving the Premises of the Stevensons Road Closed landfill’ prepared by Mr Parker and dated March 2011 were provided to the Court.

Mr Lane was requested to carry out an audit under s 53V of the Environment Protection Act in relation to the risk of any possible harm or detriment from landfill gas caused by the activities conducted at the landfill. The main components of landfill gas of interest to the audit were methane and carbon dioxide. The audit scope was limited to consideration of risks potentially arising from landfill gas in the ground at and from the landfill site.[7]
[7]The methodology of landfill gas risk assessment used followed the UK Environment Agency landfill Gas Guidelines (proposed by EPA publication 1323.1).

Mr Lane’s principal conclusions are set out at page (v) of his report and include the following:

·     The assessed risk level for uncontrolled event of exposure of workers (on and off site) in a trench or pit to explosive or asphyxiating levels of landfill gas is “acceptable”.
·     The assessed risk level for an uncontrolled event of exposure of the occupants of nearby houses to explosive or asphyxiating levels of landfill gas is “insignificant” and “acceptable”, respectively. A Fault Tree analysis confirms that, assuming the rate of gas entry in ventilation is as assessed, the explosion risk would be negligible.
·     The assessed risk level of asphyxiation of an occupant of a house is higher than that for an explosion due to the greater susceptibility due the presence of a basement. This risk would be largely avoided by the absence of basements where landfill gas could accumulate.
·     In-home monitoring provides the only currently available objective evidence or indicator of risk of an explosive event and should be continued until a better assessment of risk, based on measurements of house ventilation and gas occurrence in the ground, determines otherwise.
·     The emission of methane from leachate contaminated groundwater is a possible but unlikely pathway for migration of methane long distances off site. The risks arising from this pathway are conservatively assessed as “acceptable”.
·     The auditor’s estimated indoor methane concentration (using the Johnson & Ettinger equation in the Risc4 model) for diffusive ingress to a house, under a range of assumed and representative conditions, indicates a build-up of methane above the LEL of methane (providing a key precondition for an explosion) is not likely to occur.
·     The underground infrastructure on and off site are potentially affected by the corrosive effects of typically acidic landfill gas and its condensate.

A landfill gas risk analysis summary set out in tabular form shows all identified risks, having regard to the potential impacts and the existing controls, to be either ‘acceptable’ or ‘insignificant’.

The report by Mr Parker comprising a review of Casey’s report on the effectiveness of on-site remediation actions concludes that the remediation actions implemented by Casey have been effective in causing substantial reduction in the emission of landfill gas from the landfill. However, it is not possible, based on current information, to conclude that the remediation actions have been fully effective in preventing landfill gas from leaving the landfill. Mr Parker concludes that there is insufficient information to conclude whether landfill gas is prevented from leaving the landfill.

The Third PAN

Counsel for the plaintiffs, Mr Delany, submitted that the reasonableness of the settlement must be considered having regard to the third PAN and the comfort it provides that problems of gas migration from the landfill will have been effectively eliminated by July 2012.

The third PAN is the product of a mediated agreement reached in review proceedings in the Victorian Civil and Administrative Tribunal. Group members Natalie and Russell Jenkins, who reside at 4 Powerscout Retreat on the Estate, were joined to the review proceeding and their advisors participated in formulating the terms of the third PAN.

The third PAN seeks to ensure that no more than specified levels of methane and carbon dioxide are measurable at certain points on the Estate by 29 July 2012. It imposes requirements on Casey in relation to landfill gas levels and remediation measures at the landfill and requires steps and measures taken to be the subject of approval by a person who is an environmental auditor under the Environment Protection Act and to be approved by the EPA.

The third PAN is exhibited to Mr Hardwick’s first affidavit and he usefully has summarised its key elements. Among other things, the third PAN provides that:

(a)Casey must take all practicable measures to achieve the objective that, by 29 July 2012, landfill gas measured at specified monitoring point locations in the Management Plan do not exceed 1% v/v methane and 1.5% v/v carbon dioxide;
(b)Casey must submit to the EPA by 30 April 2011 a Clean-Up Plan endorsed by a person who is an environmental auditor under the Environment Protection Act with time bound milestones to reduce risks to the environment from landfill gas to acceptable levels;
(c)By 31 August 2012, Casey must submit to the EPA a report prepared by an environmental auditor under the Environment Protection Act confirming the extent and quality of the measures taken by Casey under the Clean‑Up Plan. The Clean‑Up Plan is required to be reviewed by a person who is an environmental auditor under the Environment Protection Act every year and updated to incorporate any recommendations of the auditor;
(d)The landfill must be managed in accordance with the ‘Stevensons Road Closed Landfill Management Plan’, which is required to be revised and submitted to the EPA by 1 March each year and endorsed by a person who is an environmental auditor under the Environment Protection Act;
(e)Casey is required to operate the landfill gas extraction system and leachate extraction system such that the objectives for levels of methane and carbon dioxide are not diminished by additional landfill gas leaving the landfill;
(f)If landfill gas migrates beyond the boundary of the landfill at concentrations which exceed 1% v/v methane and 1.5% v/v carbon dioxide, then Casey is required to extract leachate from the landfill at the optimum rate that can be achieved until such time as landfill gas ceases to migrate beyond the boundary of the landfill or until a leachate level is reached beyond which a person who is an environmental auditor under the Environment Protection Act has certified that there would be an unacceptable risk of damage to neighbouring homes;
(g)Casey is required to implement a monitoring program which will enable it to demonstrate to the EPA that there has been compliance with the third PAN. This program is required to be endorsed by a person who is an environmental auditor under the Environment Protection Act and must include the monitoring the landfill gas, leachate and ground water on and beyond the boundary of the landfill. The ‘in home’ monitoring program is also required to be reviewed for adequacy and endorsed by the relevant environmental auditor;
(h)Casey is required to notify the CFA and the EPA if methane gas at or above the maximum levels is detected in any home and to follow the CFA approved procedures in responding to the detection of methane or carbon dioxide in any home. An incident report must be provided within 24 hours and a remediation action plan acceptable to the EPA must be implemented;

(i)Casey is required to provide a status report to the EPA by the last day of the month outlining progress in meeting all requirements, the results of all monitoring, analysis of gas trends and details of any non‑compliance. Casey is required to make all final plans and reports available to the public at no cost and to give all residents with in-home monitoring ready access to results obtained from their residences.

Should the compromise be approved?
What is the role of the Court under s 33V?

I would respectfully adopt what has been said about the role of the Court in a number of cases to which I was referred.

In Australian Competition and Consumer Commission v Chats House Investments Pty Ltd,[8] Branson J said that the purpose intended to be served by s 33V was “obvious”:

It is appropriate for the Court to be satisfied that any settlement or discontinuance of representative proceedings has been undertaken in the interests of the group members as a whole, and not just in the interests of the applicant and the respondent.

[8](1996) 71 FCR 250, 258.

In this case, the Court must be satisfied that the settlement (including the settlement scheme) is in the interests not only of Mr and Mrs Wheelahan and the other sample group members, but of all group members who will be bound by the settlement, including those who are not represented by Slater & Gordon.

In Williams v FAI Home Security Pty Ltd,[9] Goldberg J described in general terms the task of the Court on an approval application:

Ordinarily the task of a court upon an application such as this, is to determine whether the proposed settlement or compromise is fair and reasonable, having regard to the claims made on behalf of the group members who will be bound by the settlement.[10]

[9](2000) 180 ALR 459 (‘Willliams’).

[10]Ibid 465.

Goldberg J referred to a number of matters that the Court will take into account in determining what is fair and reasonable. The matters referred to by his Honour were the amount offered to each group member, the prospects of success in the proceeding, the likelihood of the group members obtaining judgment for an amount significantly in excess of the settlement offer, the terms of any advice received from counsel and from any independent expert in relation to the issues which arise in the proceeding, the likely duration and cost of the proceeding if continued to judgment, and the attitude of group members to the settlement.[11]
[11]Ibid 465-6.

Jessup J, in Darwalla Milling Co Pty Ltd v Hoffman‑La Roche Ltd,[12] observed that his review of subsequent judgments of the Court under s 33V did not disclose any pattern of systematic consideration of these matters in the way, for example, of a checklist,[13] and that the case before him involved specific problems and issues which no predetermined list could ever hope to anticipate. He also commented that those factors threw little light on the proper resolution of the rather difficult inter se issues that arose in the proceeding before him.[14]
[12](2006) 236 ALR 322 (‘Darwalla’).
[13]Ibid 333.
[14]Ibid 335.

It is true that in practice every case must be dealt with on its own merits, and by reference to specific factors which might raise serious doubts as to fairness and the like.[15] However, although in the present matter the ‘inter se issues’ – that is, the way in which the settlement sum is to be distributed among group members – is one of the principal issues of concern, the Williams factors provide useful guidance, and I propose to assess the reasonableness and fairness of the settlement by reference to those factors, although I do not propose to use them as a checklist.
[15]Ibid.

Indeed, in Darwalla, Jessup J described the “practical judicial approach” by the Court to be to identify any features of a settlement that are obviously unreasonable or unfair, a task which would come more easily to a court than the obverse one of assessing the reasonableness and fairness of the settlement in an environment generally devoid of negative indications. Hence, where some group members object to a settlement and state their reasons therefore, their reasons will provide a convenient focus by reference to which the Court will decide matters of fairness and reasonableness.

In this case, the objections do provide a convenient focus, and careful consideration will be given to them. However, this should not distract the Court from its task of critically evaluating the settlement in all respects.[16]
[16]Ibid.

Objections

The Court received 37 notices objecting to the settlement out of the more than 600 claimants. A number of the objectors (approximately five) gave no grounds for objection. By contrast, a small number included an attachment setting out detailed reasons why the settlement should not be approved. A significant number of the 37 objections included a pro forma attachment in the following form:

I consider the proposed settlement to be unfair and unreasonable in that
1.The environmental impact of the methane gas migration has not been fully finalized and no responsible authority is willing to declare that the problem has been solved. Or if the defendants believe it has been solved then at very least a section 32 statement or attachment should be included stating this, and should be included as part of the settlement Proposal.
2.That from a health and safety point of view, there is no official point of view as whether the methane or leachate has been stopped and what affect it may have in the future on the estate and its residents.
3.I have no confidence in the Council to be any more honest in relation to problems that may arise in the estate in the future than they have displayed with their actions and denial of problems in the past. (refer Ombudsman’s Report).
4.I consider that the non payment of any general compensation to residents on what has been declared the western part of the estate to be unfair and discriminatory. In effect it means that no residents in this area were subject to any noise, dust, odours, inconvenience or stress throughout the emergency situation or the subsequent remedial construction period.
5.Giving away ones legal rights to take legal action in the future, in light of my above reasons does not seem like what a reasonable person would do.

Mr Scott Watson submitted a detailed written objection and was given leave to make oral submissions. Mr Watson told the Court that he believes there is an ongoing problem on the Estate with the landfill gas and that it is premature and unwise to waive legal rights at this stage. He has been in contact with the EPA and has met with EPA officers who have provided him with a number of environmental audits and a copy of the latest PAN. He said that what he has read has caused him grave concern for residents’ health and safety. He asks the following questions:

·     Why does the proposed settlement not even carry an apology to the residents?
· Why does the settlement not address the issue of s 32 vendor statements [statements under s 32 of the Sale of Land Act] and why, if the defendants are confident that the landfill is safe and poses no threat to health and safety, they have not issued a clear statement to that effect to attach to the s 32 notices?
·     Why does the settlement not fairly address the issue of property price decline and why is there no strategy to address this?
·     Why does the proposed settlement not address the issue of potential earnings from the growing equity that residents should have had in their properties?
·     Why did Slater & Gordon not give group members the opportunity to review the proposed settlement before making a statement to the media?
·     Why does the settlement not address the fact that banks are still “selecting against” the residents?
·     Why do there have to be releases to the Council and the EPA when the problems are their responsibility?
·     Why is it so difficult to get information and reports from agencies and organisations that are allegedly there to help the residents?

Ms Melissa Dillon also lodged a detailed written objection and was given leave to make oral submissions. She told the Court that she is concerned that the settlement does not require ongoing testing for methane gas throughout the Estate until the problem has been rectified or ensure that the remedial measures taken by Casey – such as the Wall – have stopped gas from entering the Estate. She remains concerned about the current level of gas migration and does not believe sufficient research has been undertaken to determine the long term consequences of exposure. She is concerned, for instance, about the effect on her son of methane gas and leachate chemicals in the ground when he is digging in the garden and about its effects on her fruit and vegetable garden. She highlighted the unfortunate position of residents who, like her, are not in a financial position to sell and move to another location and who must stay and endure living in “an infected estate”. In her view, adequate terms of settlement would include:

· Long term plans for ongoing methane gas testing and working with the EPA to ensure that 100% of the gas has stopped entering the Estate;

· a clause in the settlement that states that as the City of Casey is responsible for the situation, it remains liable for any health issues that arise from methane gas exposure;

· recognition that the west side of the Estate has sustained an effect and that residents there should be adequately compensated whether they sell their homes or not.

Ms Dillon also complained that many of the gas monitors installed throughout the Estate were faulty and sounded alarms when there was in fact no gas present. She argues that the settlement scheme’s allocation of compensation on the basis of gas readings is therefore unfair.

Ms Judith Menzies lodged a detailed written objection and her partner, Mr Paterson, was given leave to support her objection by making oral submissions. Ms Menzies expressed concern that she was being required to waive her rights when there was very little information available about whether the remedial works had solved the gas migration problem and as to the dangers of future gas migration. She is concerned about whether the methane gas situation needs to be disclosed in notices given under s 32 of the Sale of Land Act. In this context, she complains that Casey has not been open and transparent in providing documents about the gas migration and as to the prognosis for the future. As to the deed of settlement, Ms Menzies is concerned about the way in which the ‘carve outs’ from the releases are described, in particular the use of the word “substantial” to describe excluded events, which she argues will make it very difficult to bring any legal action in the future. She told the Court that she has no confidence that Casey would inform residents of the full extent of problems that might arise. Finally, and importantly, Ms Menzies complains about the treatment of the residents on the western side of the Estate. In her view, they ought to qualify for ‘general damages’ under the settlement scheme because it is not correct that they were not affected by the emergency declaration in September 2008 or by dust, noise, odour, stress, nuisance and loss of enjoyment of their properties. She points out that a number of properties on the western side of the Estate are closer to the landfill than some properties on the eastern side of the Estate.

The Court received oral submissions from two further objectors, Mr Matthew Mepstead and Mr Richard Carrott. Mr Mepstead told the Court that Casey and the EPA should be held accountable and should be required to increase the offer of settlement to ensure that each amount of compensation would be a more suitable and appropriate figure. Mr Carrott expressed his concern that at this point in time the Estate is not 100% safe. He said that he is not prepared to sign his rights away at this stage.

Mr Troy Donnelly lodged a detailed written objection after the conclusion of the hearing of the approval application, with the leave of the Court. Mr Donnelly found himself in the very unfortunate position of being informed less than 48 hours before the hearing of the approval application that his property had been incorrectly given an A1 zoning when it should have been zoned A2. This resulted in his estimated allocation under the settlement scheme being reduced by $35,000. Mr Donnelly now objects to the settlement scheme on the ground that the criteria for zoning properties as A1 or A2 are not fair and reasonable so far as the allocation for general damages is concerned. He points out that the zones were developed with capital loss in mind, not the allocation of general damages. He submits that noise, odour and dust, vibrations caused by machinery working on the landfill and loss of privacy were experienced to the same extent by all properties within the same proximity to the landfill, regardless of whether they faced north-south or east-west. There are 8-12 properties within the same proximity to the landfill as those properties actually bordering the landfill, yet those properties receive 50% less in general damages than the properties that border the landfill.

Slater & Gordon has prepared an analysis of the objections to the settlement approval, based on 30 of the objections received. 28 of the 30 objections analysed by Slater & Gordon came from group members who have properties in zones C and D. Two objections came from zone B3 and none from any of the more proximate zones. Of course, the Court has now received the objection from Mr Donnelly, whose property was erroneously placed in zone A1 but has now been placed in zone A2. As discussed, his complaint relates to the extent of differentiation between those zones for the purposes of assessing disturbance and therefore ‘general damages’.

The Slater & Gordon analysis shows that the bulk of the opposition to the settlement comes from group members treated as not having experienced the same level of disturbance from the gas migration (as a result of works to houses and on the Estate, as well as the works on the landfill itself, and monitoring) as group members living closer to the landfill. In fact, they are not eligible under the scheme for any compensation for such disturbance. They understand this to mean that they are considered to have suffered no disturbance at all, which they say is not the case.

Analysis

The Court has been urged to approve the settlement on the grounds that:

(a)The damages entitlements of group members reflect a fair and reasonable compromise of the claims. They are within the range of damages that could reasonably have been expected to be achieved at trial. The discounts allowed are relatively modest;
(b)The settlement monies are distributed equitably between group members;
(c)The process by which the settlement is proposed to be administered is both fair and efficient;
(d)The nuisance that is the subject of the claim is regulated by the mitigation requirements imposed on Casey by the third PAN. While the requirements of the third PAN are not themselves contractual obligations assumed under the settlement, they are statutory obligations and they have the effect that the Council must abate the nuisance by taking defined steps on which it must regularly report to the EPA;
(e)The terms of the releases permit future claims against Casey and the EPA in the circumstances defined;
(f)Achieving settlement now, on the terms agreed, is in the interests of group members when compared with the costs and uncertainty of proceeding to trial;
(g)It is unlikely that a better settlement (meaning a higher settlement sum or a narrower release) could have been reached; and
(h)The settlement makes allowance for the plaintiffs’ and group members’ costs.

Slater & Gordon has obtained a detailed opinion from the barristers briefed in the proceeding as to the appropriateness of the proposed settlement having regard to the risks of the litigation and the prospects of success, as well as what would be involved if the proceeding were to go to trial. A further opinion has been obtained from senior and junior counsel on the range of damages that may be payable to claimants assuming the claim in nuisance succeeded on liability. That opinion considers the particular claims of the sample group members. Both opinions have been provided to the Court on a confidential basis and I have taken them into account in reaching the conclusion that the settlement ought to be approved.

Ongoing presence of landfill gas

Mr Delany for the plaintiffs readily accepted that there was a real issue as to whether the proceeding ought to be settled when questions about the presence of landfill gas on the Estate remained. However, he submitted that it is and will remain difficult to know whether the environmental issue has been finally resolved – even if it looks to have been resolved, it might recur in the future. He pointed out that if the matter were to proceed to trial, the Court would also have to deal with this difficulty, and that it could do so by allowing damages and, in assessing damages, take into account damages in lieu of injunctive relief in the future; or it could do so by assessing damages up to trial and granting some form of mandatory injunctive relief. The settlement deals with this issue by assessing damages having regard to what is known about the present and likely future environmental scenario. In that context, Mr Delany argues that the third PAN is very important.

Mr Delany submitted that because of the third PAN, claimants could have some degree of certainty that risks would be reduced and certain levels of atmospheric gas would be achieved by July 2012. So long as the gas was at acceptable levels and the risks were insignificant, as was the evidence, then it was appropriate to settle the case.

Mr Delany submitted that the third PAN and the qualified releases provided comfort about the ‘signing away of rights’: given the criticism that the EPA has been subjected to as a result of the events on the Estate, it is likely to be vigilant in relation to the enforcement of the third PAN; in the unhappy event that there should be further problems as a result of gas migration, then the ‘excluded events’ in the settlement deed are intended to protect the rights of group members to bring further claims.

While it is impossible to guarantee that the third PAN will be enforced so as to eliminate the possibility of any further gas migration, and while some uncertainty attaches to the environmental situation into the future, I accept Mr Delany’s submission that it is reasonable to settle on the basis of what is currently known and in the light of the relative comfort provided by the third PAN. Given the nature of the problem, it may be many years before claimants can feel completely confident the problem has been resolved (one objector mentioned 500 years). Meanwhile, the proceeding will move inexorably forward to trial and the Court will have to make its determination on a ‘once and for all’ basis in any event.

A number of objectors argued that releases should not be given to Casey and the EPA until the problem of gas migration had been solved. As Mr Delany observed, the difficulty with this objection is that releases are inevitably required by defendants in return for monetary settlements. In this case, the alternative would be no settlement and the running of a trial.

Appropriateness of zones

As compensation is sought for interference in the use and enjoyment of land and for reductions in the value of properties on the Estate as a result of the gas migration and its consequences, I consider the allocation of compensation under the settlement scheme by reference to the zones in which properties are located is fair and reasonable. It is not practicable to assess the position of each group member individually, and their grouping by zones is conceptually a fair and reasonable way in which to proceed in a case such as the present.

I have read and considered the reports and letters of advice provided by M3 upon which the division of the Estate into zones was based. I have also considered Mr Hardwick’s confidential affidavit of 21 April 2011 in which he explains why and how some of the zones proposed by M3 were modified. Although M3 was concerned with assessing capital loss, and the zones were delineated for that purpose, I am satisfied they also generally reflect the loss of use and enjoyment of their properties experienced by residents as a result of dust, noise, odour and other disturbance arising from the presence of landfill gas, and consequential works and monitoring.

I have considered the amounts that have been allowed for general damages for interference in the use and enjoyment of their properties by group members and, on the basis of the confidential legal advice provided to the Court, I am satisfied that they are within the range of damages likely to be achieved at trial. It is appropriate that no compensation of this kind be allowed for investors and that there should be reduction in compensation for group members who have not occupied their properties for the entire period. The allowance should reflect the legal basis for an award of damages for interference in the use and enjoyment of land. In assessing whether this aspect of the compromise is fair and reasonable I have also taken into account the existence of the exceptional circumstances fund, which will be available in particular personal circumstances, such as a disability that has exacerbated the impact of the gas migration on the use and enjoyment of the property of any particular person.

As discussed, many of the objectors questioned the fairness and reasonableness of the lack of an allowance for general damages in respect of properties in zones C and D. Some of the objectors, as they point out, live in closer proximity to the landfill than residents in the other zones, and they say that they did suffer disturbance or interference of the relevant kind.

Mr Delany submitted that group members residing in properties on the western side of the Estate in zones C and D generally experienced a different level of disturbance and interference in the use and enjoyment of their land from those living on the eastern side of the Estate. This emerged from the affidavits of the sample group members. As an example, Mr Delany referred the Court to the affidavit of Mr Cramer, a group member in zone D, who describes the attempts that he made to sell his property and other difficulties arising from the publicity associated with the September 2008 evacuation notice. Mr Cramer does not complain of odour, noise, dust or disturbance from monitoring or from works in his home or on the Estate. He is concerned with the effects of the stigma associated with the gas migration on house prices. Mr Delany submitted that stigma was a matter to which Mr Brown directed attention in the M3 report.[17]
[17]Amongst the expert advice that was available to the plaintiffs and provided to Mr Brown was an expert opinion from Professor Syms, an English academic who has specialised in the impacts of stigma on property values. Mr Brown took into account these views when he looked at the impact of stigma and concluded that there should be a differentiation in terms of impact for stigma. In Mr Brown’s view, the stigma impact is much higher closer to the landfill than it is further away.

Given the nature and extent of the remediation works on the landfill site itself, it is unsurprising that residents living closer to the landfill have a much better prospect of making out a claim for compensation for interference with the use and enjoyment of land. This would be much harder for residents in zones C and D. That is not to say that those residents were not affected by some of the things experienced by the residents who live closer to the landfill. Rather, it is to recognise the difficulties that they may have establishing the interference and loss of enjoyment in a court of law and what a court might award them in damages. While the damages for zones C and D are modest, if regard is had to the risks of establishing any actual loss or damage, and what group members with homes in those areas could realistically expect might be awarded in their favour at trial, the allocations that have been made seem to me to be fair and reasonable. Mr Brown took into account in his assessment of the diminution in value of houses in those zones the stigma associated with the houses forming part of the Estate. The quantification of stigma is a difficult exercise and the residents could face arguments at trial that stigma per se is not a compensable nuisance. Moreover, the properties in zones C and D do not suffer any visual blight from the landfill, and, as a general rule, did not suffer the level of noise, dust and privacy intrusions suffered by residents in properties on the eastern side of the Estate.

A further issue as to the fairness of the zoning is raised by Mr Donnelly’s objection. Mr Donnelly does not have any difficulty with compensation being awarded on the basis of zones and or with level of compensation being based on proximity to the landfill, but says that zones A and B have been delineated on a basis that does not truly reflect the proximity of properties to the landfill. I agree that there may be anomalies with respect to proximity, as well as in respect of other matters, such as the actual presence of landfill gas at particular properties. However, it is necessary to define the boundaries of zones based on rational criteria. Zone A1 includes only those properties that actually share a border with the landfill. That seems to me to be a clear and reasonable point of differentiation.

If in any individual case the application of the zoning methodology produces unfairness, that unfairness can be relieved on the basis that the settlement scheme expressly allows for adjustments to be made in the course of the distribution of settlement monies if it becomes apparent that the effect of the migration of landfill gas on a particular property and its inhabitants is such that the property ought properly to be regarded as if it were located within a different zone.

In this case, difficult decisions have had to be made about the distribution of the settlement monies, given the nature of the claim in nuisance and the fact that residents in different parts of the Estate had different experiences of the effects of the gas migration and the lengthy and disruptive measures that were taken to remedy and to prevent further problems. It may be that a settlement scheme could have been devised that would produce better results for some group members, but this would be at a cost to other group members (who might then have cause to complain that the scheme should have done more for them). A scheme such as the present is amenable to hundreds of different permutations. The Court must give credit to the extensive work that has been done by the plaintiffs and their advisers faced with a large number of competing claims and a fixed amount of money. A complex and comprehensive settlement scheme has been devised that attempts to match allocations with the legal realities faced by group members in different parts of the Estate. The Court is in a poor position to ‘second guess’ the plaintiffs and their advisers as to the detail of the settlement scheme, and it should decline to approve the settlement only if there is particularly acute unfairness to any particular group of claimants or unfairness or unreasonableness overall.

In the circumstances, I consider that the zone methodology, particularly in conjunction with the availability of the exceptional circumstances fund, produces an equitable distribution of settlement monies between group members. Given the number of claims to be assessed, individual assessment of damages entitlements would be onerous and costly. The minimum payment of $6,000 protects those residents who might not be able to make out any entitlement in a court of law because they cannot show that they have suffered interference with the use and enjoyment of their land or because the value of their (unsold) property has in fact diminished. This is a positive benefit for such group members, which will not apply should the claim proceed to judgment.

Capital loss on unsold properties

I consider that the allowance of a higher proportion of assessed loss allowed for properties that have been sold is fair and reasonable given the legal risks faced by group members who have not crystallised their losses by selling their properties.

Likely course of the proceeding if no settlement

The proceeding (encompassing the plaintiffs’ claim, the defences thereto and the allegations concerning proportionate liability) is a highly complex one, particularly having regard to the number of parties involved in the construction, operation and management of the landfill, the need to call extensive expert evidence on technical questions, the length of time to which facts relevant to the claim relate and the application of the proportionate liability regime.

In his affidavit sworn on 14 April 2011, Mr Hardwick deposes to his belief that if the proceeding is not settled but proceeds to trial and is successful, then most group members are unlikely to have their individual claims finally determined until 2013 or possibly 2014. He sets out the following reasoning for this conclusion:

(a)The proceeding was commenced in 2008;
(b)The plaintiffs originally limited their claims to a claim against the council. Since then, 12 further defendants have been joined to the proceeding;
(c)Pursuant to paragraph 13 of the orders of Justice Osborn dated 17 December 2010, the proceeding is fixed for trial for a period of nine weeks commencing on 18 July 2011. By reason of the plaintiffs’ application for approval of the proposed settlement, the orders facilitating the parties being ready for the trial were stayed on 25 March 2011. The proceeding has been listed for a further case management conference on 10 June 2011;
(d)A case management conference was held before Justice Osborn for three days in February 2011. During the course of that conference his Honour made statements to the effect that, in the event that nine weeks was insufficient time for the trial, he would be available to extend the trial until December 2011 save for a short period in September 2011;
(e)During the course of the case management conference and in material served between the parties in advance of the conference, it became clear that considerable expert evidence was likely to be called at the trial along with lay witness evidence that would include approximately 12 sample group members. Mr Hardwick believes there is a real prospect that the trial could have a duration of 18 weeks notwithstanding the Court making orders in relation to joint expert conferences and reports in advance of trial;
(f)The factual matters relevant to the proceeding span the period approximately 1992 to the present. Given the volume of documentary evidence and lay evidence required to be tendered, the length of the history of the landfill will inevitably involve a lengthy period of lay evidence;
(g)Given the number of claims and cross-claims advanced in the proceeding as well as the proportionate liability issues, it would be reasonable to anticipate that some months would need to be allowed for the Court to consider and deliver judgment;
(h)Given the number of parties in the proceeding and the costs invested in the trial, the prospect of a judgment being appealed could not lightly be discounted;
(i)The judgment would determine the plaintiffs’ and sample group members’ claims and determine ‘common issues’ in the proceeding. The individual entitlements of the remaining 762 group members would not be determined by the judgment delivered following the first trial. Thereafter, it would be necessary for a process to be established for the determination of those claims.

Mr Hardwick’s opinion that the trial of the proceeding will be lengthy and that it might take a further two to three years for the claimants to receive any amounts of compensation if they are successful, particularly if the decision at first instance were to be appealed, is well founded, in my view.

The Court was also informed that the proceeding has settled at a stage at which significant work is still to be undertaken and that the extent of the work that remains to be done is evidenced by the terms of orders made by Justice Osborn on 3 March 2001.

In the light of the foregoing, there must be a real risk that any increase in damages that might be obtained at trial would be cancelled out by the increased costs of the proceeding.

Moreover, there is a clear benefit to group members in receiving compensation now, compared with waiting a considerable period until an outcome is achieved at trial resulting in group members receiving compensation. Following a judgment in favour of the plaintiffs, the entitlement of each of the group members to damages would need to be established, whether by an agreed process, a series of court determinations, or both. That process would take time and most likely require significant further costs to be incurred.

The protracted and difficult nature of the trial and its likely cost is a factor that weighs heavily in favour of the settlement, in my view.

Settlement administration

I am satisfied that the settlement scheme will be administered fairly and efficiently because the rules by which the monies are to be distributed are clearly stated and the criteria to be applied are reasonably objective. The facts and assumptions on which distributions are proposed to be made have been made known to group members and there is a provision for review by independent counsel to guard against errors in processing. The exceptional circumstances fund is a very important part of the scheme and the scheme makes provision for it to be properly administered. Finally, I note that it is proposed to distribute settlement monies within a reasonably short time frame.

Legal Costs

The settlement makes provision for the plaintiffs’ costs of the proceeding to date so as to ensure that the plaintiffs will not be out of pocket in respect of legal costs. Legal costs to date are high: they will consume $6m of the $23.5m settlement. However, Mr Hardwick has explained how they are made up and on what basis they have been incurred.

In his first affidavit, Mr Hardwick sets out the plaintiffs’ actual legal costs incurred up until 28 February 2001. Those costs are $7,060,372 comprising approximately $4.9m in solicitors’ fees, $495,000 in GST on solicitors’ fees, $1.458m in disbursements and $139,000 of GST on disbursements. Of the $1.5m in disbursements, $967,066 is for counsels’ fees. Mr Hardwick deposes that of the $4.9m in solicitors’ fees, approximately $991,000 is an uplift of 25% on those fees. However, in the interests of reaching a resolution of the matter, Slater & Gordon has agreed with the plaintiffs to limit the uplift on its fees to an amount of $27,443.00 so that the total legal costs including GST and disbursements do not exceed $6m.

In his affidavit sworn on 14 April 2011, Mr Hardwick exhibits the legal costs agreement executed by the plaintiffs in the proceeding, together with a copy of the disclosure statement provided to the plaintiffs. He deposes that the legal costs agreement and disclosure statements provided to each group member who has retained Slater & Gordon are substantially the same.

It is not the role of the Court on an approval of a settlement to go behind the agreements that have been made regarding legal costs or to engage in a costing exercise of any kind. It is fair and reasonable, in my view, that the settlement scheme provide for the payment of the plaintiffs’ legal costs in accordance with the relevant costs agreements.

Costs of administering settlement scheme

The settlement scheme also provides for an allowance of up to $250,000 for the payment of the plaintiffs’ solicitors’ costs incurred in administering the settlement scheme, including applying to the Court for notification to group members, the approval of the scheme and the preparation of materials in support of those applications.

Mr Hardwick deposes that at the time of swearing his affidavit of 14 April 2011, the legal costs incurred in connection with the proposed settlement were $303,000.[18] He concludes on that basis that the costs of administering the settlement scheme are likely to be significantly more than $250,000. The extent to which the costs will exceed the original provision will depend on the number of claims for review and exceptional circumstances claims lodged. It is therefore proposed, subject to the Court’s approval, that interest earned on the investment of the settlement monies during the administration of the settlement scheme be available to meet additional costs. In the event that the interest earned is greater than the amount by which the legal costs exceed $250,000, then the balance of the interest will be distributed to group members in the final distribution.
[18]The work to that time included notification to group members of the proposed settlement, responding to group member queries regarding the settlement and preparing material for the application to approve the settlement. A significant amount of time had been devoted to responding to approximately 250 individual group member queries. Significant time was also given to the preparation of material for a presentation to the group member information session held on 6 April 2011.

Mr Hardwick deposes that if the settlement scheme is approved, a sum of $17.25m will be held in Slater & Gordon’s account for a period of approximately six weeks, and the exceptional circumstances fund will be held for a period of approximately 13 weeks. The plaintiffs seek an order from the Court that during these periods the settlement sum be invested in an interest bearing trust account. Although withholding tax will be payable to the Australian Taxation Office, interest at the rate of 5.25% will generate earnings of approximately $42,000.

In his affidavit sworn on 21 April 2011, Mr Hardwick exhibits a report from Mr Paul Linsdell of Blackstone Legal Costing dated 20 April 2011 regarding the likely costs of administering the settlement scheme. Mr Linsdell confirms that the hourly rates proposed to be charged by Slater & Gordon are reasonable and within the range of costs currently allowed in the Costs Court on a taxation of costs on a solicitor/client basis and that the rates proposed to be charged by counsel do not exceed the range usually allowed on a taxation. Having regard to the legal complexities involved, the number of parties and group members and the volume of material, he concludes that the hourly rates are reasonable and that the proposed basis for charging for the work to be undertaken in administering the settlement scheme is reasonable. As to the costs likely to be incurred, Mr Linsdell considers the specific tasks which will need to be undertaken and concludes that $290,625 is the minimum cost likely to be incurred in the implementation of the settlement scheme. This is in addition to the actual professional costs and disbursements to 18 April 2011 of $311,076. As to the administration of the exceptional circumstances claims, he concludes that it is apparent that a minimum of $60,000 will be incurred with respect to the costs of this final stage of the administration process. In summary, therefore, the minimum solicitor/client costs involved in administering the settlement scheme are between $560,000 and $620,000.

On the basis of this evidence, I am satisfied that the allocation of $250,000 for the costs of administering the settlement is fair and reasonable and that orders should be made to enable interest earned on the settlement sum to be used to defray any costs of administering the settlement scheme over and above this amount.

Conclusion

I am satisfied on the basis of the matters deposed to by Mr Hardwick in his affidavit sworn on 14 April 2011 that there has been compliance with the orders of Justice Osborn made on 25 March 2011 and that notices required to be given have duly been given. Additional time was allowed for Mr Donnelly to make an objection because of the peculiar circumstances in which he found himself.

I am also satisfied that the settlement and the settlement scheme are fair and reasonable, having regard to the foregoing analysis. In Darwalla, Jessup J expressed the view, with which I agree, that it is not the Court’s function to second-guess the plaintiffs’ advisers as to the answer to the question whether the plaintiffs ought to have accepted the defendants’ offer; the Court’s function is, relevantly, confined to the question whether the settlement is fair and reasonable. This is because –

[t]here will rarely, if ever, be a case in which there is a unique outcome which should be regarded as the only fair and reasonable one. In settlement negotiations, some parties, and some advisers, tend to be more risk-averse than others. There is nothing unreasonable involved in either such position and, under s 33V, the court should, up to a point at least, take the applicants and their advisers as it finds them. Neither should the court consider that it knows more about the group members’ businesses than the applicants, or more about the actual risks of the litigation than their advisers. So long as the agreed settlement falls within the range of fair and reasonable outcomes, taking everything into account, it should be regarded as qualifying for approval under s 33V.[19]

[19](2006) 236 ALR 322, 339.

In my view, the settlement falls within the range of fair and reasonable outcomes.

A number of the objectors expressed dissatisfaction with Casey and what was perceived to be its failure to take responsibility for what had happened and to deal with the problems identified in an open and transparent way. The objections revealed, it must be said, feelings of mistrust towards Casey which have clearly (and understandably) affected the attitude of some group members to the settlement. It may be that a full-blown trial of the plaintiffs’ claims would further expose the actions of Casey (and/or the EPA and the other defendants) and serve to clear the air. However, that is not the purpose of civil litigation, and objectors should not imagine that the trial of the proceeding will be conducted in the manner of a royal commission so as to satisfy their need for answers and for accountability. It could well be a very prolonged, expensive and ultimately unsatisfactory way of exposing the alleged failures of Casey and/or any of the other defendants and result in limited if any financial benefit to group members.

Orders

The Court will make the following orders:

1.Pursuant to Section 33V(1) of the Supreme Court Act 1986 (Vic) (‘the Act’) the Court approves the settlement of this proceeding in the terms of the Deeds of Settlement and Settlement Scheme contained in exhibit BTH-4 to the affidavit of Benedict Tobin Hardwick sworn 25 March 2011, exhibit BTH-10 to the affidavit of Benedict Tobin Hardwick sworn 4 April 2011 and exhibit BTH12 to the affidavit of Benedict Tobin Hardwick sworn 14 April 2011.
2.The Settlement Sum, as described in exhibit BTH12 to the affidavit of Benedict Tobin Hardwick sworn 14 April 2011 (‘Settlement Sum’) be distributed in accordance with the terms thereof.
3.Pursuant to Section 33ZB of the Act the Court declares that the persons affected and bound by these orders are the plaintiffs, the defendants and the group members as defined in the plaintiffs’ fourth Further Amended Statement of Claim.
4.Pursuant to sections 33X and 33Y of the Act notice of the Court’s approval of the settlement of the proceeding be given to group members by:
(a)the plaintiffs’ solicitors sending by ordinary post to each group member for whom an address is known, a notice substantially in the form of exhibit BTH26 to the affidavit of Benedict Tobin Hardwick sworn 21 April 2011 (‘Notice of Settlement’), on or before 25 May 2011; and
(b)the plaintiffs’ solicitors causing the Notice of Settlement to be published in each of the following newspapers, on one occasion, on or before 1 June 2011:
(i)The Cranbourne Leader;
(ii)Casey Weekly Cranbourne (formerly the Cranbourne Journal).

5.The affidavit of Benedict Tobin Hardwick sworn 21 April 2011 (entitled ‘confidential affidavit’) and the exhibits thereto, and the affidavit of Benedict Tobin Hardwick sworn 28 April 2011 and the exhibits thereto, be kept confidential and retained on the court file in an envelope marked with the words ‘confidential – not to be opened without leave of a Justice of the Court’.
6.The Settlement Sum (or part thereof) be deposited in a Controlled Money Account within the meaning of sections 3.3.2 and 3.3.15 of the Legal Profession Act 2004 (Vic).
7.Any interest earned on the Settlement Sum shall, while invested in accordance with order 6, be applied by the plaintiffs’ solicitors to the costs of administering the settlement scheme described in exhibit BTH12 to the affidavit of Benedict Tobin Hardwick sworn 14 April 2011.
8.There be no order as to the costs of the proceeding in respect of the plaintiffs’ claims against the defendants.
9.All costs orders made to date in the proceeding in respect of the Plaintiffs’ claims against the Defendants are hereby vacated.
10.The plaintiffs’ claims in the proceeding be dismissed.

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Allowance per zone
A1	$70,000.00
A2	$35,000.00
B1	$26,000.00
B2	$17,000.00
B3	$15,000.00
B4	$8,000.00
C	$0.00
D	$0.00

M3 Starting figures – Loss as % of CIV		% of M3 Recovered	Actual Recovery – % of CIV
A1	25.00%	50.00%	12.50%
A2	20.00%	40.00%	8.00%
B1	10.00%	40.00%	4.00%
B2	9.00%	40.00%	3.60%
B3	9.00%	40.00%	3.60%
B4	9.00%	40.00%	3.60%
C	9.00%	35.00%	3.15%
D	6.00%	25.00%	1.50%

Min	Max
A1	$21,877.10	$136,127.42
A2	$ 6,473.44	$ 80,861.81
B1	$ 6,331.49	$ 58,610.91
B2	$ 7,000.67	$ 42,053.95
B3	$ 6,845.15	$ 95,603.93
B4	$ 6,000.00	$ 43,933.42
C	$ 6,000.00	$ 41,492.40
D	$ 6,000.00	$ 46,795.93

[2011] VSC 215

23 May 2011