Eades v Endeavour Energy

Notices of Motion

1. On 25 January 2017, each of the defendants separately filed a Notice of Motion seeking orders in common form. For the purposes of this judgment, there is no need to differentiate between each of the Notices of Motion.
2. The Notice of Motion filed by the first defendant sought the following orders: "1 An order pursuant to s 175(5) of the Civil Procedure Act 2005 (NSW) that a notice be given to all group members containing: (a) a statement that the Court is considering an application to order the representative party to provide security for costs in favour of the third defendant (and any other defendant who seeks security for costs), and the amount sought by the third defendant (and any other defendant who seeks security for costs); (b) a statement that the Court may order all of the security sought be provided, part of the security sought be provided, or dismiss the application; (c) an explanation of what security for costs is and the effect of a stay if security is not provided; (d) a statement that the forms accompanying the notice seek to ascertain whether the group member is willing or able to contribute to a pool of funds for security for costs, the amount that the group member is willing to contribute and, if the group member is not willing or able to contribute to such a pool of funds, the reason or reasons why; (e) a statement confirming that group members will not be ordered to pay costs or provide security; (f) a statement that, if sufficient group members unreasonably refuse to contribute to a pool to meet the security ordered against the representative party, or if total contributions are considered to be inadequate in light of the anticipated costs of the first defendant (and any other defendant who seeks security for costs), then the proceedings may be stayed; and (g) a statement that individual group members who do not respond or unreasonably decline to contribute might be removed from the action. 2 An order that this application for security for costs be adjourned or stood over pending the group members' response to the notice in prayer 1 above. 3 Further, or in the alternative to the orders sought in prayers 1 and 2 above, an order pursuant to s 67 of the Civil Procedure Act 2005 (NSW) or, alternatively, pursuant to the Court's inherent jurisdiction, that on or before a specified date the plaintiff provide security for costs to the first defendant in an amount of $1.905 million or alternatively in some lesser amount on the basis that security may be ordered to be provided in tranches. 4 Costs of the third defendant's application for security for costs. 5 Such further or other order as the Court considers appropriate."
3. The only difference to be found in the Notices of Motion is that, in the orders sought by Endeavour Energy which have been set out above, a specific sum is specified as a sum for security for costs, whereas in the Notices of Motion of the other two defendants, orders are sought that security be provided in a sum to be determined by the Court.
4. The defendants made it clear at the hearing of the Motions that they were seeking, in the first instance, only Orders 1 and 2 to the Motions. That is, they sought only to poll the group members for the identified information, and then to return to consider the balance of the Motion.
5. However, the defendants accepted that the Court would need to consider whether an order for security for costs would be likely to be made. If it was not likely to be made, then there would be no point in embarking on the process called for in Order 1 of the Motions.
6. On 21 July 2017, the Court pronounced orders dismissing each of the defendant's Motions filed on 25 January 2017 with costs. It was said that reasons would be provided in due course. These are the reasons for the orders pronounced on 21 July 2017.

Applicable Legislation

1. Rule 42.21 of the Uniform Civil Procedure Rules 2005 ("the UCPR") provides for the making of orders for security for costs.
2. It is in the following form: "42.21 Security for costs (1) If, in any proceedings, it appears to the court on the application of a defendant: (a) that a plaintiff is ordinarily resident outside Australia, or …, (e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person, and there is no reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so. the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given. (1A) In determining whether it is appropriate to make an order that a plaintiff referred to in sub-rule (1) give security for costs, the court may have regard to the following matters and such other matters as it considers relevant: (a) the prospects of success or merits of the proceedings, (b) the genuineness of the proceedings, (c) the impecuniosity of the plaintiff, (d) whether the plaintiff's impecuniosity is attributable to the defendant's conduct, … …, (f) whether an order for security for costs would stifle the proceedings, (g) whether the proceedings involves a matter of public importance, …, (j) the costs of the proceedings, (k) whether the security sought is proportionate to the importance and complexity of the subject matter in dispute, (l) the timing of the application for security for costs, (m) whether an order for costs made against the plaintiff would be enforceable within Australia, (1B) If the plaintiff is a natural person, an order for security for costs cannot be made merely on account of his or her impecuniosity. (2) Security for costs is to be given in such manner, at such time and on such terms (if any) as the court may by order direct. (3) If the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed. (4) This rule does not affect the provisions of any Act under which the court may require security for costs to be given."
3. It is convenient to note here the provisions of s 181 of the Civil Procedure Act which prevents a Court awarding costs against a group member. It is in the following form: "181 Costs Despite s 98, in any representative proceedings, the Court may not award costs against a person on whose behalf the proceedings have been commenced (other than a representative party) except as authorised by ss 168 and 169."
4. The circumstances envisaged by ss 168 and 169 - being, generally speaking, issues specifically applicable to sub-groups or individual group members, have not yet arisen.
5. Section 183 of the Civil Procedure Act is a general power conferred on the Court to make any order that is appropriate or necessary "…to ensure that justice is done in the proceedings". If necessary, the Court could rely upon this section as a source of power to make an order for security for costs, and the other associated orders.
6. Section 67 of the Civil Procedure Act is also a source of power for the orders sought. It is a power expressed to be subject to the UCPR to order a permanent or temporary stay, on proceedings. Such a stay can be ordered with payment of security for costs: Phillips Electronic Australia Pty Ltd v Matthews [2002] NSWCA 157; (2002) 54 NSWLR 598 at [47] per Hodgson JA; De Jong v Carnival PLC [2016] NSWSC 347 at [45] per Beech‑Jones J.
7. As well, the Court retains an inherent jurisdiction to order security for costs where it thinks fit in the interests of justice. This inherent jurisdiction would also extend to making Order 1 of the Motions.
8. The plaintiff did not submit that the Court lacked power to make the orders which the defendants sought.

Representative Proceedings

1. As indicated earlier, the proceedings take the form of representative proceedings under Pt 10 of the Civil Procedure Act. For the purposes of this Motion, it is necessary to identify and describe the return of the group and the individuals who have been identified as forming part of it.
2. The solicitor for the plaintiff, Mr Brendan Pendergast, has deposed in an affidavit of 10 February 2017 to their various details.
3. In the Amended Statement of Claim, the plaintiff defines the group in the following way: "The group members ("group members") to whom this proceeding relate are: 4.1. all those persons who suffered personal injury (whether physical injury, or psychiatric injury as defined below) as a result of: 4.1.1. the Mount Victoria fire; and/or 4.1.2. the injury to another person as a result of the Mount Victoria fire, where "psychiatric injury" in this group definition means nervous shock or another psychiatric or psychological injury, disturbance, disorder or condition which has been diagnosed as such in a diagnosis given to the person by a medical practitioner prior to 30 June 2016; and 4.2 all those persons who suffered loss of or damage to property as a result of the Mount Victoria fire; and 4.3 all those persons who at the time of the Mount Victoria fire resided in, or had real or personal property in, the Mount Victoria fire area and who suffered economic loss, which loss was not consequent upon injury to that person or loss of or damage to their property; and 4.4 the legal personal representatives of the estates of any deceased persons in 4.2 and/or 4.3 who were group members at the date of commencement of this proceeding."
4. In his affidavit, Mr Pendergast informed the Court that initial reports collated by the Blue Mountains City Council, the local government authority for the area, indicated that approximately 80 properties were affected to some extent by the bushfire. The total number of individuals who may have suffered personal injury as defined in paragraph 4.1. of the group definition is unknown.
5. A total of 29 group members have registered with the plaintiff's lawyers. All of the registered group members are natural persons who have suffered personal injury and/or loss and damage to personal or real property. There is one exception to this, namely Guatemalan Traders, a business which has suffered damage to equipment and stock associated with a portable coffee business. It has also suffered consequential economic loss.
6. Of the 29 registered group members, 10 have been identified by Mr Pendergast as being associated with insurance companies. That is to say, subrogated insurers have notified Mr Pendergast's firm directly of the amount of an insured's loss and damage and have indicated that the individuals concerned do not claim any other property losses in addition to those for which they have been compensated by insurers. There has been no confirmation as yet by the individuals that they do not claim any additional financial loss. The total of these amounts was not disclosed. However, some of these individuals may have suffered personal injury.
7. Mr Pendergast deposed to the fact that of the remaining 19 registered group members, six suffered total loss and damage to their primary residence as a result of the bushfire. Of these six, three are the plaintiff and his two children. In his case, the plaintiff is a long-term resident in the house that was completely destroyed by the bushfire. After payment of insurance excess and mortgage discharge costs, he received a total payment of about $500,000 following the fire. He has purchased a property in the Blackheath area, having rented for a period of about 12 months. He intends to rebuild his primary residence in Mount Victoria, but is facing increased building costs as a result of any new construction having to comply with additional bushfire-related building codes. He has a claim for losses which exceeds his insurance reimbursement.
8. A fourth group member had resided at his property for 29 years at the time of the fire. In the year prior to the fire he had completed construction of a new dwelling on the property which was largely funded from his superannuation entitlement. He was uninsured at the time of the fire. Since the fire, he and his wife have been living in a garage on the property. Their financial situation is such that they are unable to afford to rebuild their destroyed home or purchase an alternative residence.
9. A fifth group member, whose property was totally destroyed, had resided at that property for about 24 years prior to the fire. Following the destruction of her property, she was diagnosed with psychiatric injury and consequential disabilities and took an extended period of time off from work. She has purchased a property in a rural town some hours away from Mt Victoria since the fire.
10. Another registered group member (of whom details are known) suffered the total loss of his primary residence and the entirety of its contents including business equipment which was on the property and used by him for his business. He has instructed Mr Pendergast that he cannot afford to rebuild his home and has relied upon the charity of friends for temporary accommodation in the months following the fire. He has subsequently purchased a property in another rural town over 200km from Mount Victoria. This particular group member has suffered a psychological injury and consequential disabilities as a result of the fire.
11. The remaining 13 registered group members suffered partial loss and damage to their residential properties. None of these properties were insured. Many of these group members have mortgages over their properties. Some have been unable to work as a consequence of injuries or psychiatric harm sustained in the fire. Five of them have instructed Mr Pendergast to bring claims for personal injury arising from the fire.
12. Mr Pendergast deposed to the fact that five individuals who fell within the group description have filed Opt Out Notices with the Court in accordance with the timetable. Separate proceedings have not been commenced by these five individuals.
13. Mr Pendergast gave evidence that there is no litigation funding for the claims being made by the plaintiff or the group members. In particular, he said that he has not entered into any understanding, arrangement, or agreement with CommInsure which partially insured the plaintiff, or with any insurer of any registered group member to indemnify him with respect to legal costs or to contribute in any way to the legal costs. Mr Pendergast (or his firm) is presently funding the litigation for the plaintiff and the group members.

Estimated Legal Costs of the Defendants

1. Endeavour Energy adduced evidence that, in the opinion of their solicitor, Mr Jonathon Hunt, a reasonable estimate of the legal costs and expenses (excluding GST) which are likely to be incurred on its behalf from December 2016 until the conclusion of any hearing, is about $3M.
2. Mr Hunt drew a comparison between that sum and the costs expended by Endeavour Energy in two previous bushfire claims involving actions by the same legal firm as presently represents the plaintiff, and in which the legal costs incurred by Endeavour Energy exceeded $5.45M in one case and $1.8M in the other.
3. Mr Hunt anticipates that a total of 11 lay witnesses will give evidence in the case of Endeavour Energy - six of those were or are employees of Endeavour Energy, and five who are not employees.
4. It is apparent that there will be a significant issue about the cause and origin of the bushfire, the condition of the tree which is alleged by the plaintiff to be implicated in the cause of the bushfire and its state prior to the fire commencing.
5. As well, Mr Hunt anticipates that there will be nine expert witnesses called on behalf of Endeavour Energy.
6. Mr Hunt estimated, particularly having regard to his experience in the previous bushfire matters, that a hearing of these proceedings if all matters are in issue could occupy more than 30 hearing days and up to 40 hearing days.
7. Endeavour Energy, having assessed their likely costs at a little over $3M, claim a sum of $1.9M by way of security for costs which they calculate at about 60% of the likely costs and expenses of the proceedings.
8. At the hearing, Endeavour Energy relied upon the affidavit of an expert costs assessor, Ms Lydia Fogl, in support of the reasonableness of its assessment of the costs which it is likely to incur in defending the proceedings. Ms Fogl expressed the view that a costs assessor, making reductions on an ordinary basis in respect of the estimated fees provided by Mr Hunt in his affidavit, would be likely to allow a sum of about $2.4M for Endeavour Energy's legal costs. For the reasons which she expressed, she thought that such reduction would not exceed 30% with respect to professional fees estimated by Mr Hunt, and no more than 15% for counsel's fees and other disbursements.
9. Ms Melissa Fenton, a solicitor acting for Asplundh and who has the day to day carriage of the defence of the claim brought by the plaintiff, swore an affidavit as to the costs likely to be incurred by Asplundh in defending the proceedings. Ms Fenton expressed the view that it was likely that her client would incur costs if the proceedings continued through to the end of a defended hearing of about $2.2M.
10. Ms Fenton noted that Asplundh's claim was based on about 60% of their costs estimate and sought an order for security for costs in the sum of $1.76M.
11. The solicitor for Pinnacle, Mr Sean O'Connor, who is responsible for the day to day conduct of the proceedings, also swore an affidavit in which he estimated that Pinnacle's costs to the conclusion of a contested trial would be in the order of $2.05M. Pinnacle sought an order for security in the sum of $1.23M.
12. None of the deponents of these affidavits were required for cross-examination on their estimates of the likely costs to be incurred. Nor in submissions did counsel for the plaintiff challenge these estimates. Accordingly, it is appropriate to accept these figures as being estimates of the costs likely to be incurred by the defendants prior to the end of the contested hearing.
13. No suggestion was advanced that one defendant's claim ought to be considered as having priority over any other defendant's claim for security. Thus the total of security being claimed by the defendants was $4.89m. The defendants anticipated that if security was ultimately ordered, this total would be paid in various tranches.

Legal Principles

1. Beech-Jones J in De Jong set out a number of principles with respect to the ordering of security for costs in representative proceedings. At [6], his Honour said: "6. For the reasons that follow, I conclude that this Court has the power to order security for costs against the representative party in representative proceedings, but not against group members. I also find that it can stay the proceedings in the event that security is not provided, although the Court might order that the proceedings no longer continue as representative proceedings before ordering a stay. The power to order security for costs is to be exercised in the manner stated by Carr J in Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 ('Bray') at [141] namely by balancing the policy reflected in s 181 of the CPA against the risk of injustice to a defendant. In circumstances where the representative party is impecunious, but is neither suing on behalf of a person with assets who seeks to avoid a costs liability nor supported by an external funder, then a determination of whether security will be ordered and, in particular, whether an order for security will stifle the proceedings requires that consideration be given to the financial circumstances of group members. If a reasonably strong case for security is made out then it may, and often will, be appropriate to ascertain the capacity and willingness of group members to contribute to a fund to meet any order for security that is made against the representative party."
2. His Honour further considered the effect of the decision in Bray which dealt with the provisions of the Federal Court of Australia Act 1976 (Cth) and at [26] said: "26. Bray either is, or has come to be treated as, authority for at least the five following propositions. First, that an order for security against the representative party does not affect the immunity conferred by s 43(1A) (Bray at [141] per Carr J; Madgwick v Kelly at [81] and [87] per Allsop CJ and Middleton J and at [141] per Jessup J). Second, the fact that an impecunious plaintiff brings proceedings for the benefit of represented persons may be a significant factor in favour of an order for security (Madgwick v Kelly at [21] to [23] per Allsop CJ and Middleton J). Third, that to obtain an order for security it is not necessary to demonstrate that the representative party had been deliberately selected to shield group members with substantial means for whose benefit the proceedings were brought (Bray at [144] per Carr J; Madgwick v Kelly at [21] to [23] per Allsop CJ and Middleton J). Fourth, that the party resisting security on the basis that it will stultify the proceedings bears the onus of proof of that fact (Bray at [142], [144], [214] and [250]; Madgwick v Kelly at [80] and [87] per Allsop CJ and Middleton J and at [141] per Jessup J). Fifth, that the financial circumstances of group members are relevant to an application for security especially the contention that an order for security would stultify the proceedings (Bray at [142] per Carr J; Madgwick v Kelly at [80] to [88] per Allsop CJ and Middleton J and at [141] per Jessup J)."
3. It is important to note for the purpose of considering these Motions that the mere fact that Mr Pendergast's firm is conducting the proceedings for the plaintiff, and on behalf of the group members, on the basis that it will only be paid in the event of a successful judgment or settlement, does not mean that Mr Pendergast or his firm is to be equated with a litigation funder: Madgwick v Kelly [2013] FCAFC 61; (2013) 212 FCR 1 at [44]-[48] per Allsop CJ and Middleton J and at [148]ff per Jessup J.
4. The particular factors mentioned in De Jong are not the only potentially relevant ones.
5. As Madgwick notes, factors which may be potentially relevant include not just whether a plaintiff is impecunious, but whether that impecuniosity was caused by conduct which is the foundation for the action; the promptness of the application, including the stage of the proceedings at which the application was made; whether the plaintiff had been deliberately selected as a "man of straw" so as to preclude the defendants recovering costs if ultimately successful; the characteristics of the group members, including whether security would have been ordered if the action was a separate stand-alone proceeding; and the strength of the plaintiff's case.
6. The matters to which I have earlier referred are not mandatory considerations in each case, nor are they the only considerations which it is open to the Court to take into account. The Court is obliged to take all relevant factors into account. In addition to these factors, in the particular circumstances of this case, it seems to me that one other matter which is relevant is the nature and content of the issues that are to be considered at the initial, and principal, hearing of the proceedings in 2018. Another is the nature and type of damages being sought.

Discernment

1. At the outset, it is appropriate to identify the fact that when the Motions were heard, each of the defendants pressed for the relief in paragraphs 1 and 2 of the Motion, with the balance of the Motion to be adjourned for a sufficient period to enable that process to occur.
2. However, the process of interrogating the group members as proposed would not be appropriate to be instigated unless the defendants first established a realistic and not merely theoretical prospect that the Court would be likely to make an order for security for costs having regard to the available evidence. Otherwise, to make the orders sought permitting the interrogation of the group members would be a futile exercise.
3. Accordingly, it is first appropriate to consider whether the evidence establishes that the defendants are likely to establish an entitlement to security for costs.
4. It necessarily follows that the question of stultification of the proceedings by the making of an order for security cannot, on the evidence presented, be determined favourably to the plaintiff (who bears the onus).
5. It is appropriate to consider the relevant factors individually and in combination to determine whether the Court's discretion ought to be exercised to make the orders sought.
6. The first matter relevant for consideration is the plaintiff's prospect of success in the proceedings.
7. Senior counsel for Endeavour Energy submitted that the plaintiff did not have a strong case, and that Endeavour Energy's defence of the proceedings was likely to succeed.
8. In seeking to make good this submission, counsel relied upon remarks made by Hoeben CJ at CL in Johnston v Endeavour Energy [2016] NSWSC 1132, where, when considering whether or not to approve a proposed settlement scheme, Hoeben CJ at CL said at [81] after a review of a number of legal issues identified in that matter: "The conclusion I have reached is that had the trial proceeded to judgment, it is unlikely that Mr Johnston would have succeeded in establishing liability."
9. Counsel for Endeavour Energy pointed to the fact that, as had been the case in Johnston, the provisions of s 43A of the Civil Liability Act 2002 would apply to the claims made against his client (although not to the other two defendants). He went on to submit that a similar conclusion ought be reached with respect to the plaintiff's prospects of success in this claim as was reached by Hoeben CJ at CL in Johnston.
10. Counsel for the other defendants joined in with this submission, although they accepted that s 43A was not applicable to them.
11. I am not prepared to apply the conclusion reached about liability in Johnston which dealt with a separate and distinct fire from that involved in these proceedings to this matter, although I accept that there may be some similarities. In particular, Hoeben CJ at CL had available to him, as his judgment discloses, legal advice on the plaintiff's prospects of success in the proceedings which was written by senior and junior counsel for the plaintiff after the proceedings had been heard for a period of about 17 hearing days. Evidence had been taken from the plaintiff's lay witnesses, and the lay witnesses from Endeavour. The Court was about to embark upon the hearing of expert evidence. In that respect, extensive reports had been served from all experts who had been retained. Some joint reports had been obtained. Accordingly, by that stage in the Johnston matter, reasonably firm views were able to be formed on the material available, and in light of the opening statements and outline submissions as to the prospects of success of the plaintiff.
12. This case presents a very different position. Expert reports have not yet been obtained. If they have been, they have not been exchanged. They have not yet been tendered in Court. I have not been asked to read them for the purposes of this application. I accept that the very nature of the proceedings is such that the Court cannot, at this stage, conclude that this case is such that the plaintiff must obviously win. There is an argument about the basic underlying facts as to how the fire started and as to when the implicated tree fell on the relevant electricity lines. There are also legitimate arguments concerning causation and the extent of the duty of care owed, at least by Endeavour Energy, to the plaintiff. Equally, I cannot conclude that the plaintiff must obviously lose, or that he is unlikely to win.
13. But beyond those very general comments, it is simply not possible for the Court at this stage to form any realistic view about the prospects of success of either the plaintiff in bringing the proceedings, or any of the defendants in defending the proceedings.
14. There is certainly no reason to doubt the genuineness of the proceedings, and that the plaintiff and each of the registered group members have suffered loss as a consequence of the bushfire. They genuinely believe the cause of that bushfire to be the conduct of the defendants. Whether or not that is so will need to be determined, but it does not reduce in any sense the genuineness of the proceedings.
15. I am not persuaded that the plaintiff is unlikely to succeed in the proceedings, nor that he has a very weak case.
16. The second matter which is relevant to consider is the personal situation of the plaintiff. There is no debate between the parties about the fact that the plaintiff is impecunious (as that term is used with respect to security for costs), and that he does not have sufficient financial assets to meet the whole of any adverse costs order in favour of all three defendants if the claim is unsuccessful.
17. The affidavit of Mr Pendergast discloses that the plaintiff's house was completely destroyed by the fire and that he desires to, but has not yet, been able to reconstruct that house. He cannot afford to do so. The plaintiff has invested, effectively, the entirety of the insurance proceeds obtained as a consequence of the destruction of his house, in purchasing another property in the Blackheath area, so that he has somewhere to live, pending rebuilding his house.
18. I am satisfied that the plaintiff is impecunious. However, the plaintiff's impecuniosity is attributable to the events which underlie the proceedings, and which are the foundation for them. It is unnecessary to determine, when considering this relevant issue, whether or not the plaintiff is going to succeed in his claim. That would be to put the cart before the horse. However, what this relevant feature considers is whether the position in which the plaintiff finds himself is relevantly connected to the foundational events, as opposed to being impecunious by reason of facts, matters and circumstances entirely separate from and unconnected with those events.
19. Clearly the plaintiff's impecuniosity does not derive from anything other than the occurrence of the fire. It is also important to note, and it was not suggested that this was so, that this is not a case in which the plaintiff has sought to conceal assets, or put them beyond the reach of the defendants, or in any other way to act so as to deliberately deprive the defendants of an opportunity of collecting their costs. On the contrary, the claim which is made is one which is designed to obtain from the defendants compensation for the plaintiff's loss which it is said they brought about.
20. It is not suggested by the defendants that the plaintiff is a "man of straw" chosen in such a way as to deliberately deny the defendants any chance of recovery of their costs.
21. A further matter which needs to be considered is whether an order for security for costs would stifle the proceedings. Counsel for the plaintiff submits that that is so.
22. One of the initial orders sought by the defendants was to engage in a process, pursuant to s 175(5) of the Civil Procedure Act, of interrogating the group members to establish whether any of them were willing to contribute to a pool of funds for security for costs and, if they were not so willing to do, the reason or reasons why that was so. The plaintiff opposed the making of such an order, and indicated that he was not willing to undertake such enquiry voluntarily.
23. If these were proceedings brought solely by the plaintiff in his own name, then having regard to his financial state, he would have easily discharged any obligation to demonstrate that an order for security for costs would stifle the proceedings. However, in the absence of any indication of the willingness of members of the group to contribute to a fund for security for costs, and identifying what that sum would be, whether or not an order for security would stifle the proceedings is more complex.
24. The onus of proving that a costs security order would stifle the proceedings falls onto the plaintiff: De Jong at [26]; Madgwick at [80], [87]. As I have already concluded, I am well satisfied that the plaintiff cannot personally fund any order for costs. First, his asset position does not enable him so to do. Secondly, there is no funder engaged for the litigation. Thirdly, the plaintiff's income position does not approach a capacity to fund a costs order. Fourthly, the orders sought by the defendants, in the first instance, to obtain information from the group members about their willingness to contribute to a costs security order recognises that the plaintiff cannot fund the action and it will not continue if a costs security order is made against him.
25. The absence of a capacity to meet any costs security order is ordinarily sufficient for a conclusion that such an order would stifle the proceedings. However, authority in the Federal Court in class action proceedings concerning commercial dealings suggests that this is not adequate on its own, and that what is required is a consideration by the Court of the capacity of class members to contribute to a fund which can be used by the plaintiff to provide security for costs: Bray at [141]-[142].
26. None of the group members who have been identified, and whose individual financial positions have been discussed above, has the financial capacity to fund any adverse costs order.
27. Indeed, but for the involvement of one or more insurance companies as indemnifiers for the loss of a small number of group members, it might have been reasonably open to the Court to conclude that a costs security order would stifle these proceedings.
28. At this stage of the proceedings, and in the absence of any poll of the group members, I accept that the plaintiff has not demonstrated that an order for security for costs will stifle the action.
29. A further matter to be considered is the nature of the group members in this case, and the claims which are made. This case and the registered members of this group fall into a rather different category than the classes being considered in Bray and Madgwick, and also in De Jong. In De Jong there were a large number of members of the group (580) who had contacted the plaintiff's solicitors. The claim for damages would have been unlikely to exceed by much, if all, the sum of $5,000 per passenger, which was the total of the cruise fare. Although the claims were for "personal injury damages" as that phrase is used in the Civil Liability Act, what the group members experienced was disappointment and distress over a ruined holiday. They were not physically or psychiatrically injured. No claims for permanent or ongoing personal injury by way of physical or mental harm were being made.
30. Bray was a class action arising from an alleged price fixing cartel amongst vitamin manufacturers and suppliers. Its members were, after amendment, defined to include manufacturers, distributors and suppliers of vitamins and producers of livestock who spent more than $2,000 on relevant products. These were all consumers who suffered losses in their businesses or their commercial undertakings. The number of class members is not readily ascertainable from the various judgments, although it seems that at one stage about 285 group members had been identified through representatives or registration. This was a commercial proceeding which related to losses incurred, or economic damages sustained, in a business context.
31. Madgwick is a case in which the class members were investors in a number of forestry plantation schemes which failed. The forestry schemes were attractive to those interested in planning their taxation affairs. What were in issue were claims for economic loss as a consequence of lost investment funds. By the time that the funds were lost, individual investors had taken advantage of some tax benefits. There were no claims for physical injury or mental harm.
32. These cases, by the nature, are all readily distinguishable from the facts here. The group here consists primarily of individuals whose houses have been totally destroyed or else damaged by a bushfire. In addition to losing their homes and all of their belongings (in some cases), some of the group have received insurance payments. Some members of the group have claims for personal injury. Even those who have received insurance payments may have claims to which the insurance company's policies did not respond or else for which the proceeds were inadequate. Whilst insurance companies may be entitled to the proceeds of any judgment insofar as they relate to insured individuals, insurance companies are not members of the group in their own right. The adjustment of the financial entitlements between insurance companies and individuals is a matter of contract, or to be derived from the principle of law relating to subrogation. Whether the insurance companies are entitled to conduct litigation on behalf of the insured is unexplored in the evidence.
33. The group here, and the claims made, are a complex mix. They are quite unlike the homogenous mix to be seen in the cases discussed. This leads to a consideration, even after polling the group as to the basis upon which group members may be asked to contribute to an order for security for costs. Should the contribution sought to be made be calculated equally amongst the group members, or else equitably by reference to the amount of this claim? But what value is to be attributed to a claim for personal injury in which damages are at large? Indeed, should a claim for damages for personal injury be included at all in any calculations?
34. These questions throw up significant difficulties in how any order for security for costs amongst the group may be determined. Such difficulties in making a security for costs order which is fair and equitable, which may lead to members who are unable to contribute to opt out and not access relief, provides a reason not to order security for costs.
35. As well, the nature of these claims is such that it would be unusual for a Court to order security for costs in any event. It is an exceptional case only where a Court would order security for costs where a claim for damages for physical or mental injury is being made: see Daniel Rory de Groot (an infant by his tutor Arlena Van Oosten) v The Nominal Defendant [2004] NSWCA 88 at [29]-[30] per Handley JA. As well, it would be a most unusual case for security for costs to be ordered against a person whose claim reflects that brought by the plaintiff in these proceedings and who is impecunious by reason of the events upon which the claim is being brought. The same conclusion would apply to other group members making similar claims.
36. Here, there is no suggestion that the proceedings are not properly constituted, and no application has been made under s 166 of the Civil Procedure Act for the proceedings not to continue as group proceedings. In such circumstances, there is an absence of a principled approach for the determination of a security for costs application when such an order would not ordinarily be made in individual proceedings.
37. The mere fact that the proceedings are representative proceedings does not on its own seem to be an adequate reason. The nature of the claims is not changed by virtue of their being brought as part of a group. Perhaps the principal difference is the existence of s 181 of the Civil Procedure Act and the policy which underlies it, which precludes the Court from making a costs order against a group member. But it would be curious that such a provision would, as a matter of principle, have the consequence that an order for security for costs would be more readily made than in individual proceedings. This is more so when one considers that a costs order in favour of the defendant in the individual proceedings would be likely to be unpaid whilst ever the individual claimant remained impecunious.
38. It is even more curious in circumstances such as these, where significant benefits to the defendants arise as a result of the action being constituted as representative proceedings. Those benefits include, but are not limited to, having to defend the claims on liability issues on one occasion only rather than in each individual proceeding on multiple occasions, and concomitant savings of time, effort and expense.
39. In all the circumstances, the defendants have accordingly not demonstrated a compelling reason why the Court should accord significant weight to the fact that these proceedings are constituted as representative proceedings in the determination of this application for security for costs. It is merely one factor in the Court's consideration.
40. Another factor which is important to be considered in these applications is the shape of the principal hearing. As has earlier been noted, at a time before these applications were made, the first stage of the group proceedings had been fixed for hearing. It is important to identify what issues the first hearing will address. After all, the various estimates of costs relate only to the preparation for, and conduct of, that hearing.
41. At that hearing, the entirety of the plaintiff's claim will be heard and determined. In that respect, the evidence being led in the plaintiff's individual case on all issues of liability will be the same as that which gives rise to findings of fact which are binding on the group members, except for some quite brief and, it can be reasonably anticipated, uncontroversial evidence about the spread of the fire and the geographical outline of the damage related to the bushfire.
42. As well, the Court will be called upon to determine whether the issues and findings of fact which have been identified by the parties as forming part of the plaintiff's individual claim will also ultimately bind all of the group members. To that extent, there will be additional submissions, but these are unlikely to be overly lengthy.
43. The hearing will not embark upon the determination of damages for any group member. The only claim for damages that will be determined is that of the plaintiff. Whether there is any legal principle or common issue of fact with respect to damages may be doubted.
44. However, issues of fact and law affecting liability for the plaintiff will be likely to be common with other group members. To that extent the parties have identified those questions, and the Court will be asked to answer them. It remains an open question until such determination whether the answers which are produced by the evidence will apply to some or all of the group members. It is anticipated that the answers will be common, but the Court reserves the final determination of that issue until after the conclusion of the evidence.
45. This procedure is one which benefits both the group members, and also the defendants. As discussed above, but for the representative proceedings procedure, the defendants would in all likelihood be confronted by a series of individual cases in which the same or similar issues of liability are raised. Questions such as: how the fire started; what preventative measures, if any, had been taken by the defendants with respect to preventing or limiting the spread of bushfires; and what reasonable precautions a person (or organisation) in the position of the defendants would have taken to prevent the relevant risk of harm from occurring, would all fall to be determined in a multiplicity of proceedings.
46. Disposing of these issues, which are likely to affect all potential plaintiffs if proceedings are brought as individual proceedings, is, through the representative proceedings procedure, of manifest benefit to the defendants. I am unable to detect any real increase in the hearing time of these issues by reason of the fact that the plaintiff is representing the group members. Put differently, if this proceeding was an individual one, the defendants would be facing a substantially similar, if not identical, hearing. The fact that it is a representative proceeding will not, in my opinion, affect the number of witnesses to be called, or the likely length of the evidence of those witnesses to any real extent. At most, the parties will need to attend to some additional submissions with respect to particular answers and the commonality of those answers at the same time as other submissions.
47. Even though these are proceedings brought under Part 10 of the Civil Procedure Act, the provisions of s 56 of that Act still apply to the determination of this application, which is interlocutory in nature. Having regard to the matters just discussed, it is difficult to see why an order for security for costs would advance the overriding purpose of the Civil Procedure Act to facilitate the just, quick and cheap resolution of the real issues in the proceedings. It does not seem to me that an order for security for costs being made in these proceedings would facilitate that overriding purpose. It would only be likely to result in a number of individual proceedings being brought where such an issue would be likely to be litigated. As well, this would be likely to have an impact on judicial resources in a way which would adversely affect other litigants with proceedings in the Court.
48. Another matter which is of significance in the circumstances here is the timing of the applications. The applications were first brought at a time significantly after the opt out process had concluded. One of the features of the orders that are sought, and which involve an interrogation of the group members, is that if the Court determines that it is appropriate for group members to make a contribution or, alternatively, if group members do not wish to so contribute or even respond to the interrogation process, a question arises as to the necessity for the opt out process to be revisited.
49. In De Jong the application for security for costs was made and the Court was asked to determine it at a time where pleadings had closed and where the Court was being asked to approve the form of an opt out notice and an accompanying circular to be sent to group members (De Jong at [2]). The significance of that timing was that each of the group members was entitled to consider providing information relevant to the issue of security for costs at a time before they were required to opt out of the group proceedings. I regard the timing of the hearing of these applications as being a significant factor to be taken into account.
50. Where the group consists of a relatively small number (here less than 30 have registered), the impact of seeking an order for costs upon the composition of the group may be significant. For example, those who are making claims for personal injury, cases where traditionally security for costs are rarely, if ever, ordered, may have taken the view that they were better to opt out and proceed individually. Perhaps an application could then have been made to the Court for those cases to have common issues of fact with respect to liability determined jointly, and perhaps in advance of all other issues in the proceedings. That mechanism would not have resulted in any plaintiff representing any other person, which is a significant factor in weighing up, at least on the authorities, an order for security for costs.
51. Here, the application for security for costs has been brought on at a time well after the opt out procedure was concluded. One issue which the Court would need to consider is whether, if an order for security for costs was made, group members should be given an opportunity to opt out of the group proceedings.
52. Having regard to all of these facts and, in particular, the nature of the class, its composition and the nature of the claims being made, including personal injury claims, and the stage at which the application was brought on for determination, I was not satisfied that this was a case in which the Court ought make an order for security for costs.
53. Accordingly, for all of these reasons, the application, which in the first instance sought interrogation of the group, is dismissed. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 May 2018