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Supreme Court of Victoria |
Last Updated: 31 October 2017
AT MELBOURNE
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JUDGE:
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WHERE HELD:
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Melbourne
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DATE OF HEARING:
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CASE MAY BE CITED AS:
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MEDIUM NEUTRAL CITATION:
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PRACTICE AND PROCEDURE – Group proceedings – Application for approval of settlement – Court approval of settlement of claim on walk away basis - Should judgment bind all group members – Only registered group members bound by settlement - Supreme Court Act 1986 (Vic), ss 33V and 33X.
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APPEARANCES:
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Counsel
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Solicitors
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For the Plaintiff
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Maddens Lawyers
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For the Defendants
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Turks Legal
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Introduction
1 Valerie Jackson, the representative plaintiff in this class action, alleges that on 8 January 2013 JP & JM Bruty Pty Ltd and Darren Bruty, the first and second defendants in this proceeding, negligently caused a fire (‘the fire’) which destroyed properties at Snake Valley, near Ballarat. The trial of the proceeding was due to commence on 25 September 2017.
2 Ms Jackson brought the claim pursuant to s 33C of the Supreme Court Act 1986 (Vic) (‘the Act’) on behalf of all property owners who suffered loss and damage as a result of the fire. Maddens Lawyers (‘Maddens’) acted on behalf of Ms Jackson and a number of group members are ‘registered’ with that firm.
3 In August 2017, the Court was advised that an in-principle settlement had been reached on a ‘walk away’ basis from the proceeding, with each party bearing their own costs.[1]
(a) whether the settlement of the proceeding should be approved; and
(b) whether it should bind the entire class or only those registered with Maddens.
5 For the reasons set out below, I have concluded that the Court should approve the settlement, but only on the basis that it binds the registered group members.
Background
6 The proceeding was issued on 7 July 2015.
7 In an earlier ruling on 2 December 2016,[2] I refused an application to close the class. I considered that it was inappropriate as the group members who did not register were shut out from the ability to participate in the distribution of the proceeds of any settlement, and relevantly, could be precluded from bringing any subsequent claim against the defendants on their own behalf.[3] In addition, there was no evidence of any prospective settlement offer to encourage the making of such an order.
8 The trial (on liability) was due to commence in Ballarat on 25 September 2017, with a two to three week estimate. A number of expert witness reports were filed. The experts subsequently conferred and produced two joint reports.
9 On 16 August 2017, the Court was advised that the parties had reached an in-principle agreement to settle the case, subject to Court approval, on the basis that each side would bear its own costs with an order that the claims of all group members be dismissed.
10 At a directions hearing on 7 September 2017, I expressed concern as to the effect of orders that might bind members of the class who had not registered with Maddens. I discussed two settlement models: first, that proposed by the parties to the effect that the judgment dismissing the proceeding would expressly bind all group members (including those who were not registered); and second, that the judgment would only bind registered group members with the imposition of certain conditions relating to notice to those persons.
11 At that hearing, I indicated that it was unlikely that I would approve the first model as all group members whether registered or otherwise, would be bound by the settlement. Without resolving the issue, I gave the parties the opportunity to return to Court and make further submissions concerning the basis upon which the compromise would be concluded and approval sought.
12 At a subsequent mention on 28 September 2017, there was further discussion of the form in which the compromise might take. Ultimately, and as far as I could tell with no apparent reluctance, the proposed compromise was submitted jointly by the parties on the basis that only group members registered with Maddens would be bound by the compromise (the second model). The settlement deed, a draft of which was provided to the Court, and which reflects these items will form part of the judgment.
Material in support of the application
13 The material provided to the Court on the application included:
(a) an ’open affidavit’ of Brendan Pendergast, litigation principal of Maddens; and
(b) a ’confidential affidavit’ of Mr Pendergast containing, inter alia, the opinion of counsel.[4]
14 The open affidavit relevantly dealt with the proceeding’s history, the composition of the class (both registered and unregistered group members) and the insurance interests and steps taken to notify group members of the proposed settlement.[5]
15 The confidential affidavit includes:
(a) the date of the settlement and notification to registered group members[6] and insurer interests;[7] and
(b) the opinion of counsel as to the adequacy of the settlement.[8]
16 The proposed settlement deed provided to the Court includes the following:
4. Court Approval and Discontinuance(a) The parties agreed that they will undertake all reasonable steps to ensure that the Approval Orders provide for the following orders:
(1) all costs orders are to be vacated;
(2) the Proceeding against GP & JM Bruty and Bruty be dismissed with no order as to costs;
(3) that the persons affected and bound by these orders are Jackson, GP & JM Bruty, Bruty and the Group Members; and
(4) pursuant to section 33ZF of the Act or otherwise the Court authorises Jackson nunc pro tunc on behalf of the Group Members to enter into and give effect to this Deed and the transactions and steps contemplated by it for and on behalf of the Group Members.
(b) Jackson is responsible for tendering such evidence (including expert or other evidence) to the Court as may reasonably be required to facilitate obtainment of the Approval Order.
(c) GP & JM Bruty and Bruty will, and will instruct their respective legal representatives to, take such steps as are reasonable and appropriate to support Jackson to obtain an Approval Order.
17 In addition, Ms Jackson and the group members release the defendants’ from any claims arising out of the fire.
18 There are 16 individual group members (and 19 subrogated insurance claimants) described in the Deed as group members and who are bound by the judgment which will be entered as part of the Court orders.
19 In addition, the parties filed expert reports pursuant to O.44 of the Supreme Court (General Civil Procedure) Rules 2015 and joint reports which were produced after expert conferences. Although the reports had not been adduced in a court proceeding, I have relied upon them and referred to parts of these reports so that group members can understand why I have approved the settlement.
What parts of the confidential affidavit should be kept confidential?
20 I have some concerns regarding the material sought to be kept confidential, similar to those I expressed in my approval of the settlement of Downie v Spiral Foods Pty Ltd[9] (‘Bonsoy’).
21 My primary concern as to the confidential affidavit remaining sealed is that the group members are entitled to know as much as is practicable about why the settlement has been approved. I mentioned this in Bonsoy:
Third, once the material is filed with the court for the purpose of approving a compromise there is an implied waiver of any claim for privilege – at least in terms of disclosure to the court. The usual practice in the approval of a compromise under Order 15 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (Rules) is for the materials relevant to the settlement to be retained on the file but to be the subject of a confidentiality order. The purpose behind this, as I have understood it, is that there is no true public interest in why a compromise has been effected. Absent the need for approval, the basis upon which a party decides to settle a case is a matter solely for that party and his or her legal adviser.Having said that, the settlement of a class action raises different issues. I accept, on the one hand, that there is no need for the general public, or the defendants and their lawyers, to know why the claim was settled. On the other hand, the group members are entitled to know exactly why the case has been resolved and, if so minded, the basis for the approval; and it is necessary to enter into this material to some extent in setting out adequate reasons for approval (or refusal) of the compromise.
Often (and this is so in this case) the judgment dealing with approval of a settlement will indicate to the group members, at least in outline, the matters that persuaded the judge to approve the settlement. But it will not tell the whole story.[10]
22 In my view, although the confidential affidavit is relatively sparse, it should not be sealed and must be available for inspection as part of the Court file, subject to the exclusion of counsel’s opinion – which I would consider releasing to any interested group member bound by the judgment.
Should the compromise by approved
Legislation
23 Section 33V the Act requires that a group proceeding not be settled or discontinued without the approval of the Court.
24 Section 33ZB deals with the effect of a judgment:
A judgment given in a group proceeding—
(a) must describe or otherwise identify the group members who will be affected by it; and(b) subject to section 33KA, binds all persons who are such group members at the time the judgment is given.
Principles
25 Emerton J set out the principles relevant to an approval in proceedings under Part 4A of the Act in Williams v AusNet Electricity Services Pty Ltd:[11]
The principles that govern the exercise of the Court’s power to approve a proposed settlement are well established. The Court must consider whether the proposed settlement:
(a) is fair and reasonable as between the parties having regard to the claims of the group members; and(b) is in the interests of group members as a whole and not just in the interests of the plaintiff and the defendants.
Whether a proposed settlement is fair and reasonable depends, among other things, on whether the Settlement Sum is fair and reasonable, and on whether the distribution of the Settlement Sum among group members pursuant to the Scheme is fair and reasonable.The Court must be independently satisfied of the fairness and reasonableness of the proposed settlement. It will not be sufficient to simply assess whether the opinions expressed by the plaintiff’s legal advisers appear, on their face, to be reasonable.
The almost complete absence of substantive objections to the settlement cannot relieve the Court of its obligations. Nevertheless, the assessment which the Court is able to make can ultimately be no more than one which confirms whether or not the proposed settlement is within the range of fair and reasonable outcomes. Importantly, in making such an assessment, the relative prospects of success can only be broadly gauged.
In considering whether the proposed settlement of a class action falls within the range of fair and reasonable outcomes, the Court will consider the following:
(a) the complexity and duration of the litigation;(b) the reaction of the group to the settlement;
(c) the stage of the proceeding at which the settlement is proposed;
(d) the relative risks of establishing liability;
(e) the relative risks of establishing loss and damage;
(f) the risks of continuing a group proceeding;
(g) the ability of the defendants to withstand a greater judgment and the range of reasonable outcomes governing the settlement in light of the best feasible recovery;
(h) the range of reasonableness governing the settlement in light of all the attendant risks of litigation on the one hand, and the advantages of a settlement on the other; and
(i) the terms of any advice received from counsel and/or from any independent expert in relation to the issues that arise in the proceeding.[12]
The risks associated with the prosecution of the claim
26 Two fundamental liability issues were highly contentious. In reverse jurisprudential order, they were:
(a) whether the fire was caused by the operation of the tractor; and(b) if it was, whether there was any negligence on the part of the defendants in the operation of the tractor.
27 The evidence as to the cause of the fire is problematic. Although there is no argument as to where the fire broke out[13] and that the tractor was operating in the vicinity of the fire, those factors alone could not satisfy a court that the tractor caused the fire.
28 There was considerable conflict between the experts as to the cause of the fire.[14] Seven experts provided opinions as to whether the tractor could have started the fire.[15] The central thesis advanced by the experts engaged on behalf of Ms Jackson (Dr Casey, Associate Professor Sullman and Mr Demar) was that the fire started as a result of the accumulation of wheat, dust, straw, ears or chaff in the area of the exhaust of the tractor, which became sufficiently hot to ignite and then fall from the tractor and cause the fire. The defendant’s experts, Mr Le Guier, Mr Quick, Mr Murrihy and Mr Gent rejected this proposition.
29 As is apparent from the Joint Experts Report, the only thing that they agreed upon was that the tractor was involved in the harvesting of wheat on the day of the fire.[16] The experts could not agree on the means by which crop particles could come into contact with the heated parts of the tractor in open paddock conditions.[17] Whilst they did agree that crop particles and other debris could enter via means other than through the filter, radiator and fan they disagreed as to the likelihood of this occurring.[18] Despite the fact that there was no agreement that any dust particles could be ignited by the tractor’s exhaust system,[19] the experts agreed that the particles would need to be dust and less than 2mm in diameter.[20]
30 Each of the experts agreed that there was no overheating defect present in the engine or in the exhaust defect – alleged as an alternative cause of the fire by Ms Jackson.[21]
31 There was, to use an apt expression, heated disagreement between the experts on the following issues:
(a) what was the ignition temperature of wheat, dust, straw, ears or chaff;[22]
(b) at what temperature could hot parts of a tractor have operated at;[23]
(c) by what means could crop particles contact heated parts of the tractor;[24]
(d) what was the form of the crop particles if they entered the engine space;[25]
(e) at what points in and around the heated parts of the tractor could drop particles accumulate;[26]
(f) could the accumulation of sufficient volume of particles, if heated, ignite a fire;[27] and
(g) would there be residual evidence of the ignition if (f) was accepted?[28]
32 If Ms Jackson failed on this point, then the case was lost, even if she established any breach of duty.
33 The second issue of controversy was that of breach of duty: if the fire was caused by an accumulation of dust or debris in a particular part of the engine (of sufficient size to fall to the ground and ignite), then what precautions should have been taken by a reasonable tractor operator?
34 Whilst the operating manual did not specify that particular cleaning should be undertaken, all experts agreed that it was best practice to clean the radiator and intake screens to ensure higher cooling efficiency.[29] However, the extent to which action should be taken to ensure there was no accumulation of crops or particles in areas potentially close to parts of the tractor engine, was a matter of debate. All experts agreed that the cleaning of the radiator and intake screens promotes higher cooling, and otherwise, the engine can overheat.[30]
35 Ultimately, this issue, if it reached this point, would have been a question for the trial judge, namely, what were the reasonable practicable measures available to reduce the risk of a particle igniting.
36 It is important in this context to note that the defendants asserted that Mr Bruty would have testified at trial that he cleaned the tractor with an ‘air broom’ daily prior to using the tractor and did so on the day of the fire.
37 This was a truly live issue – the outcome of which could not be predicted with any confidence.
38 The end result is that a favourable judgment for the class was problematic.
Costs of the proceeding
39 Although estimated by the lawyers to be a two to three week trial, it would likely have proceeded for four weeks. Experience dictates that such estimates are normally conservative and that the case may have proceeded for a little longer, with judgment reserved for a number of months.
40 The settlement terms require each party to bear its own costs. Maddens will not ask Ms Jackson or the group members to contribute any amount to the costs incurred in running the case to trial.
No opposition by group members
41 Notice of the terms of the settlement was given in August and October 2017 to registered group members. No registered group member opposed the approval of the settlement.
Negotiations
42 On the basis of counsel’s advice, I am satisfied that every reasonable attempt has been made to extract a settlement for the benefit of the class.
43 Suffice to say that this was an appropriate time for the offer to be accepted subject to the approval of the Court.
Advice of counsel
44 An opinion of counsel (Mr Tobin SC and Mr Guo as junior counsel) was annexed to Mr Pendergast’s confidential affidavit. Counsel, having taken into account a number of the matters that I have discussed, concluded that the settlement was fair and reasonable. It is to be remembered that in reaching this opinion, counsel owed a duty not only to Ms Jackson but also to the group members, as well as the Court. I am fortified in my conclusion that the settlement is fair and reasonable as the opinion comes from two counsel with great experience in this area and familiar with the issues in this type of litigation.
Conclusion – is the settlement fair and reasonable?
45 To not approve this settlement would be sheer folly. I infer that Ms Jackson does not wish to prosecute the claim. It is not an easy case, as counsels' opinion makes clear. Ms Jackson, presumably, wishes to avoid the unenviable position of being on the wrong end of a massive costs order. I also assume that the lawyers do not want to pursue the claim and are prepared to absorb the substantial costs of litigating the case to the door of the Court. There is no suggestion of anyone else being brave enough to put his or her hand up to take on the mantle of representative plaintiff. To not approve the settlement and permit Ms Jackson to vacate her role would produce a result much the same as that which was encountered in Cohen v State of Victoria (No 2)[31] - a leaderless and difficult class action. I propose to approve the settlement.
Should the settlement bind all group members?
46 Given the terms of the agreement reached by the parties, it is only necessary to say a few things about the scope of the judgment to be entered.
47 As I indicated earlier, I was reluctant to sanction a judgment that would bind all group members (model 1) – including those who were not registered and would, by default, have their rights to sue extinguished. The reality is that the only benefit from that form of settlement is to the representative plaintiff herself, who has a potential costs liability[32] and to her lawyers, who may have been exposed to a non-party claim for the defendants’ costs.[33] The group members receive nothing.
48 I accept that the reality in this relatively small class action is that there is little prospect of an unregistered group member wishing to pursue a claim against the defendants. Group members have had the opportunity to opt out and pursue individual claims – none have done so. Despite extensive communications to those in the areas affected by the fire, no one else has come forward as either wishing to maintain the class action as the representative plaintiff or seeking to pursue his or her own claim. That said, I see no reason for any unregistered group member to be prevented from exercising his or her right to sue – if so minded.
49 The settlement should be approved as set out in the settlement deed.
50 Subsequent to the hearing on 28 September 2017, I approved the circulation of a letter to registered group members informing them of the terms of the proposed settlement and the binding nature of the orders that I proposed to make, and giving any member the opportunity to object to the mailing of the orders.
51 On 6 October 2017, Maddens sent the letter to all registered group members and the insurer. As of 25 October 2017, the Court was informed by Maddens that no member had objected to the making of the orders. Subsequently the Court was informed that the proposed settlement deed provided to the Court would be executed by the parties subject to one minor consequential amendment.
52 I will therefore make the following orders:
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VALERIE ELLEN JACKSON
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Plaintiff
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GP & JM BRUTY PTY LTD (ACN 108 581 111)
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First Defendant
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DARREN BRUTY
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Second Defendant
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JENNIFER MARY BRUTY, JASON MATTHEW BRUTY AND TANIA MARIE KEHOE (as
executors of GEOFFREY PHILIP BRUTY)
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Third Defendant
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[1] Following a mediation held on 16 August 2017.
[2] Jackson v GP & JM Bruty Pty Ltd (Ruling No 1) [2016] VSC 717 [2016] VSC 717 (‘Ruling’).
[3] Ruling [28] and [34], see also Matthews v SPI Electricity Pty Ltd (Ruling No 13) [2013] VSC 17; (2013) 39 VR 255, 258 [3]-[6].
[4] Both affidavits of Mr Pendergast were sworn 25 September 2017.
[5] Affidavit of Brendan Francis Pendergast, filed 28 September 2017 [7], [17] and [18].
[6] Confidential Affidavit of Brendan Francis Pendergast, filed 28 September 2017 [3]-[5].
[7] Above n 7, [6]-[7].
[8] Above n 7 [8].
[9] [2015] VSC 190 (‘Bonsoy’).
[10] Bonsoy, [36]-[38].
[12] Ibid, [31] – [35] (citations omitted); See also Bonsoy [42]-[54].
[13] Report of Experts Conclave, 28 June 2017, Fabian Crowe and Paul Murrihy (‘First Report’) [1.1] and [2.1]. The experts agree that the general area of the fire origin can be defined.
[14] First Report [4.1]. Mr Crowe and Mr Murrihy were not prepared to specify a point of origin.
[15] Joint Experts Report, 21 July 2017, Robert Casey, Paul De Mar, Trevor Gent, Robert Le Guier, Duncan Quick, Don Quick and Richard Sulman (‘Joint Experts Report’).
[16] Joint Experts Report [1.46].
[17] Ibid [1.71]-[1.112].
[18] Ibid [1.113]-[1.114].
[19] Ibid [1.132].
[20] Ibid [1.131].
[21] Ibid [4.1]-[4.3].
[22] Ibid [1.47]-[1.50].
[23] Ibid [1.51]-[1.70].
[24] Joint Experts Report [1.71]-[1.112].
[25] Ibid [1.131]-[1.137].
[26] Ibid [1.135]-[1.170].
[27] Ibid [1.171]-[1.196].
[28] Ibid [1.197]-[1.203].
[29] Ibid [5.1].
[30] Ibid [5.12].
[31] [2011] VSC 165, [50]-52].
[32] S 33ZD of the Act.
[33] See Knight v F.P Special Assets Ltd (1992) 174 CLR 178, 192; Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75, 94 [31].
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URL: http://www.austlii.edu.au/au/cases/vic/VSC/2017/622.html