Hunt Leather Pty Ltd v Transport for NSW

The plaintiffs' contentions

1. It is accepted by the plaintiffs that this is a novel claim, in the sense that they acknowledge that there is no prior decision in which a court has awarded such a sum as damages. It seems that it has never been claimed previously, although it might be more accurate to say that it has not been claimed in any case which has proceeded to a court determination.
2. The plaintiffs say that they have suffered loss as a result of the tortious conduct of the defendant and that they are entitled to be put back into the position they would have been but for that tortious conduct. Their loss includes the funder's commission. The plaintiffs submit that they are entitled to recover such losses as are the reasonably foreseeable consequence of the tortious conduct (Overseas Tankship (UK) Ltd v Miller Steamship Co Pty Ltd (The Wagon Mound (No 2)) [1967] 1 AC 617). Recoverability of such losses is subject to the losses being not too remote.
3. It is accepted by the plaintiffs that damages must be assessed by reference to the circumstances of each case and must be assessed according to what is reasonable in all the circumstances (Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5 at [92]-[93] per Kirk JA and Griffiths AJA).
4. Further, the plaintiffs submit that it is not necessary for them to establish that the particular harm or loss was foreseeable but losses of the kind they seek must have been reasonably foreseeable. They submit that there is no reason in principle why "reasonable litigation funding costs" expended for the purpose of an action to recover damages such as this should not be recoverable, suggesting that costs of litigation that are reasonably incurred in an attempt to reduce losses caused by a wrongdoing are a head of loss (Talacko v Talacko (2021) 272 CLR 478 at [60]).
5. It is a feature of the plaintiffs' submissions that they describe the funder's commission as "reasonable litigation funding costs", albeit it is really a straight commission. They also suggest that costs incurred to reduce their losses should be recoverable, but they disavow any suggestion that they were attempting to mitigate their losses by agreeing to pay the funder's commission.
6. Whilst they accept that there has been no case decided in support of the proposition they advance, they point to the decision of the Queensland Court of Appeal of Landoro (Qld) Pty Ltd v Jensen International Pty Ltd [1999] QCA 318 ("Landoro"), in which the Queensland Court of Appeal allowed an amendment to a statement of claim to recover the costs of litigation finance.
7. Specifically, they submit that the Court (per Davies JA) did not find that it was necessary for the plaintiffs to prove that they had been rendered impecunious by reason of the defendant's wrongful conduct. Having said that, the plaintiffs accept that the Court in Landoro was considering a strikeout application rather than determining the matter on a final basis.
8. The plaintiffs submit that "the litigation funding costs" incurred by the plaintiffs were caused by the nuisance and that they form part of the reasonably foreseeable consequences of a nuisance for the following reasons: 1. it was reasonably foreseeable that any nuisance for which the defendant was responsible would impact a range of persons and entities along the light rail route; 2. it was reasonably foreseeable that it would be uneconomic for individuals and businesses impacted by the nuisance to bring claims against the defendant individually; 3. it was reasonably foreseeable that individuals and businesses likely to be impacted by the nuisance would be unwilling to take on the substantial adverse costs and risks involved in bringing proceedings against the defendant; 4. it was thus reasonably foreseeable that any proceedings would likely be brought by way of a class action and that the proceedings would be likely to be funded proceedings; 5. the defendant actually foresaw and anticipated the risk of a class-action pointing to the statements in the defendant's risk register; 6. the funding agreement would not have been entered into without the nuisance for which the defendant has been found to be responsible; and 7. in the circumstances of the present case, in the absence of litigation funding, the case would not have been brought.
9. The plaintiffs submit that the litigation funding costs should not be considered too remote as they were a kind of loss which was reasonably foreseeable at the time of commission of the tort.
10. Further, the plaintiffs submit that acceptance of their claim in this matter does not mean that a funder's commission will be recoverable in every funded class-action or that funding costs will always be recoverable. They point to the specific, unique and individual circumstances of this matter as supporting their claim, accepting that such circumstances would not always exist, even in class actions.
11. They submit that the Court should not stifle recovery in a case such as this and the plaintiffs should not be penalised because their only means of pursuing litigation was through a litigation funder. Further, they reject any suggestion that a finding that the funder's commission is recoverable as a head of damage would 'open the floodgates'.
12. Finally, the plaintiffs submit that it is not necessary to establish: "(a) that it was the nuisance of the defendant which rendered them impecunious so as to be unable to pursue the claims without the benefit of litigation funding; (b) that they would have pursued their claims against the defendant without litigation funding had they had the means to do so; or (c) that they negotiated over the terms of the litigation funding agreement."
13. The plaintiffs say that their failure to establish these matters does not preclude them from recovering the funder's commission.

The defendant's position

1. The defendant disputes that the plaintiffs are entitled to recover the funder's commission as damages. It does so for two principal reasons, submitting that: 1. the plaintiffs have not established that the funder's commission is a loss caused by the defendant's tortious conduct, particularly having regard to remoteness, foreseeability and normative considerations. 2. the funder's commission should be viewed as costs, rather than damages, particularly having regard to the statutory regulations which govern the awarding of costs.
2. Further, the defendant submits that the plaintiffs have not established that the commission is reasonable as the assumptions on which Mr Walker relied to form his opinion have not been established.

Evidence

1. Ms Hunt says in her affidavit of 25 October 2022 that she registered as a group member on 15 June 2018 and signed a funding agreement with International Litigation Partners No. 16 Pte Ltd ("ILP") in her own capacity and on behalf of Hunt Leather.
2. On 9 September 2019 she was approached by her lawyers and asked whether she and Hunt Leather would be willing to be appointed as lead plaintiffs. She agreed to this request. She says that, at the time, she was aware that the legal costs of running the proceedings would likely be several million dollars.
3. In his evidentiary statement dated 25 October 2022, Mr Zisti comments to a similar effect. He understood that because of the ILP agreement, Ancio and he would not have to pay the costs associated with the proceedings because those costs would be paid by ILP.
4. Had it not been for the ILP agreement, he would not have been willing for Ancio or himself to be appointed as lead plaintiffs because he did not have the financial resources to pay any costs. At the time, that is October 2022, Mr Ancio worked as an uber diver and was struggling with debt. He did not have any ability to borrow funds through traditional finance options.

Mr Lindholm (the funder)

1. Paul Lindholm describes himself as a financial consultant. He is the authorised representative of ILP. ILP is the litigation funder in these proceedings. ILP has paid the plaintiffs' costs. He is also the agent for several other funding entities which fund litigation in Australia under what is loosely described as the International Litigation Partners or ILP group. ILP is part of the group of companies which acquire capital from several funding participants around the world. That capital is then invested in the funding of litigation for reward.
2. Part of Mr Lindholm's role is to assess potential claims for their suitability as funded litigation projects and to monitor the conduct of those claims. There are particular stages in class action litigation when a funder is required to consider the financial impact of the different courses of action available.
3. The first stage is the commencement of the proceedings. He says that it is a significant decision to commence proceedings because, in his experience, the cost of class-action proceedings typically range from $10 to 20 million. In the absence of a common fund order, unless a significant number of group members sign a funding agreement, the reward that the funder might expect to obtain upon a successful resolution of the proceedings may be minimal.
4. Indeed, the funder's return could be negative in the event that the aggregate commission earned was less than the cost of capital over the duration of litigation.
5. Mr Lindholm says that there are a number of factors that must be considered prior to agreeing to provide funding for a claim, including the merits of the claim; the nature and extent of the evidence required, including expert evidence; the volume of documentation; the make-up of the class of people; the estimated damages; the likelihood that another law firm might file a competing claim; and potential adverse costs orders.
6. After proceedings have commenced, the litigation funder must consider the ongoing financial impacts and viability of the claim. Mr Lindholm says that ILP was able to assess the financial impacts of these proceedings whilst they were on foot because, pursuant to clause 13.1 of the funding agreement, ILP could terminate the funding agreement at any time at its own discretion.
7. He says it was the general practice of ILP to offer funding for cases that other funders do not wish to fund and, in doing so, this allows ILP to seek a greater funder's commission and avoid having to compete with multiple funders.
8. In around May 2018, Mr Lindholm was introduced to Rick Mitry (the solicitor for the plaintiffs) regarding these proceedings (at that stage potential). After considering the material available, he identified that these proceedings had a high degree of risk relative to other class actions generally, particularly because: 1. only 50 to 70 potential group members had been signed up; 2. Mr Mitry had not conducted any damages modelling for the class or engaged a quantum expert; 3. the proceedings had been commenced against a New South Wales State government entity and he considered that the government may not wish to set a precedent by settling such an action; 4. there would be limited common issues; 5. the prospect of early settlement was low; 6. the defendant would offer financial assistance to some group members; 7. a portion of the class may not want their accounts to be scrutinised; 8. the claim was novel and precedent setting; and 9. it may be difficult for the plaintiffs to engage experts to give evidence against the government on a large infrastructure project.
9. At the time, Mr Lindholm thought there was a possibility that a common fund order could be obtained but he was aware of the risk that it would not occur.
10. Following his viability assessment, he caused ILP to fund the proceedings based on the funder's commission rates included in the funding agreement. He does not know whether Mr Mitry sought funding from anyone else.

Mr Walker (the expert on funding)

1. Mr Walker was retained by the plaintiff to offer an expert opinion on the arrangements. Mr Walker has extensive experience in litigation funding and management. He has been involved in over 500 litigated disputes since 1996.
2. Mr Walker explains the creation and development of the market, and comments on the number of litigation funders in the market and their funding rates. He then deposes to the relevant characteristics of the risks associated with these proceedings, referring to generic liability risks, mass tort liability risks and damages risks.
3. He says that there would have only been a limited number of funders who would have been prepared to fund these proceedings. He refers to the range of contractual funder's commission rates in the market as of 1 January 2014, and the changes in the market between 1 January 2014 and 15 January 2018. He concludes that the contractual funding rates included in the Funding Agreement in June 2018 were reasonable. He also considers that the rates would have been reasonable if the Funding Agreement was entered into in October 2023.
4. It is not necessary that I say anything further about his report at this time as the report is relied on for the purposes of establishing that the funder's commission rate was reasonable. The defendant did not call any evidence in response to Mr Walker. Mr McLure did not cross-examine Mr Walker. He merely challenged the validity of the assumptions that he made.

The litigation funding agreement ("the Funding Agreement")

1. Ms Hunt entered into the Funding Agreement of 15 June 2018. For the purposes of the agreement, she is described as the claimant, as is any other person who entered into the agreement. The recitals to the agreement are in the following terms: A. The Claimant has or may have claims against the Respondent(s) arising out of the Matter described in Schedule 2. B. The Claimant wishes to make its claims against the Respondent(s), and to the extent practicable wishes to make its claims concurrently with the similar or related claims of other persons. The Claimant is or will be a Group Member in the Proceedings which may be brought in respect of the Claims. C. The Claimant wishes to manage its risks of litigating or otherwise pressing its claims against the Respondent(s) by obtaining financial assistance from the Funder as a commercial claim funder. D. The Claimant and the Funder intend in good faith to make an arrangement under which the Funder provides financial assistance to the Claimant in connection with the Investigation of contemplated proceedings and if proceedings are instituted, for the prosecution of claims by the Claimant and the other persons described in paragraph B above against the Respondent(s) and such other persons as may be determined in accordance with the terms set out below, in return for the remuneration to the Funder identified in this Agreement. E. To give effect to the mutual objective described in paragraph D, the Claimant and the Funder have agreed upon the terms set out below and agree that the said terms supersede and replace any prior agreement between them in respect of any matter described in this Agreement.
2. As set out in clause 5.1, the funder agreed to pay: 1. all legal costs and disbursements of the claimant reasonably incurred; and 2. any adverse costs order or other costs order which the court makes against any funded person.
3. As set out in clause 5.8, in addition to the funding assistance offered, the funder agreed to provide management services during the term of the agreement.
4. Clause 7.1 is in the following terms: Upon Resolution, the Claimant will pay to the Funder or its nominee, from the Resolution Sum: (a) Claimant's Common Costs Share - being the Claimant's Pro Rata share of the Legal Costs incurred in respect of Common Benefit Work; (b) Claimant's Individual Costs - being the Legal Costs incurred in respect of Individual Benefit Work in respect of the Claimant's Claims; (c) Claimant's Appeal Costs Share - being the Claimant's Pro Rata share of Appeal Costs; (d) Funder's Commission - being the Claimant's Pro Rata share of the Funder's Commission; (such amounts being the Deductions), plus any GST in accordance with Section 17 below.
5. Resolution costs and resolution sum are defined as follows: Resolution Costs means the total amount of any costs payable to or to the benefit of the Claimant or any Representative representing Claims including the Claimant's Claims, whether by an order of a court, tribunal or arbitrator pursuant to any agreement with any Respondent. Resolution Sum means the amount or amounts, or the value of any goods or services, to which the Claimant, or any part of the Group including the Claimant, becomes entitled in connection with or satisfaction or part satisfaction of the Claims, including (without limitation) as a result of a settlement, judgment or arbitration and whether the said amount or value is provided by the Respondent (or if more than one, any of them) or any other person, and for the avoidance of doubt includes any amount or value to be provided by or in respect of a person against whom any Respondent claims any indemnity, apportionment or contribution.
6. Schedule 4 sets out the funder's remuneration. The funder's commission scale is as follows: Resolution on or before 31 March 2019 Resolution after 31 March 2019 and on or before 31 December 2019 Resolution after 31 December 2019 In the event that there is a Common Fund Order 30% 35% 40% 25%

1. There was no common fund order. The matter proceeded to a full hearing after 31 December 2019 and the funder's commission is thus 40%.
2. It can be seen that the benefit that a claimant, such as the plaintiffs, obtain from the funding agreement is: 1. payment of their ongoing costs and disbursements, thereby enabling them to pursue the claims against the defendant; 2. indemnity in respect of costs orders made against them, thereby ensuring that they bore no costs risks in pursuing the claims; and 3. litigation management services, thereby adding another layer of benefit to them, in terms of expert management of the litigation.
3. The benefit that the litigation funder obtains from the funding agreement is the funder's commission if the claims are successful.

Categorisation of the loss

1. It is important to consider the loss in the context in which it arises and in the context of the whole of the funding agreement.
2. This is so for a number of reasons, including that: 1. the amount of the funder's commission bears no relationship to any legal work undertaken; 2. the amount is not payable to or on behalf of legal professionals; 3. the agreement to pay is between the plaintiffs and the litigation funder; 4. the Court has no supervisory power in respect of the funder's commission, other than should it be necessary to approve a settlement; and 5. the funder's commission is calculated as a percentage of the sum recovered.
3. The plaintiffs do not assert that every amount payable by them or the funder pursuant to the funding agreement is recoverable as part of their damages claim. They submit only that the agreed percentage (that is, 40%) which each plaintiff must pay on resolution is recoverable as part of their damages claim.
4. As such, they do not seek to recover as damages the other sums referred to in the funding agreement, which might more readily be identified as costs.
5. There was some uncertainty about this point during the hearing (perhaps caused by the plaintiffs' description of their loss as being litigation funding costs rather than the funder's commission) but, in response to the defendant's submissions on the issue, Mr Bannon clarified that the plaintiffs were only seeking to include the funder's commission as damages.
6. The plaintiffs submit that this sum is not "costs" irrespective of how costs are broadly defined in the Civil Procedure Act 2005 (NSW) ("CPA").
7. I do not consider that the funder's commission could be described as costs for the following reasons: 1. there is a clear distinction between the costs and the funder's commission in the funding agreement; 2. the amount of the commission is not calculated with reference to the amount of work undertaken by the legal representatives, albeit the commission varies depending upon at what stage of the proceedings there is resolution; 3. the amount of the funder's commission has been determined by way of a commercial agreement entered into between the plaintiffs and the litigation funder; 4. the commission is the funder's consideration for providing the benefits to the plaintiffs which I have already outlined; 5. the funders commission is not a contingency fee as that term might be commonly understood, in the sense that the commission is not a percentage fee charged by the lawyers in lieu of costs; 6. solicitors and barristers still charge fees and issued invoices in the usual way. It is just that those fees are paid by the litigation funder; 7. similarly, any adverse costs order obtained against the plaintiffs would be made against the plaintiffs personally. It is just that the funder has agreed to pay those costs; 8. the Court has no supervisory jurisdiction over the funder's commission in the sense that, at least in these proceedings, the Court does not have the power to set aside or vary it or even assess its reasonableness (subject to the plaintiffs seeking to claim it as damages). The amount of commission may be wholly unreasonable (assessed objectively for the purposes of the damages claim) but the plaintiffs entered into the agreement on those terms; 9. I do not consider that the funder's commission falls within the meaning of costs in s 19 of the CPA. Costs is defined in s 3(1) of the CPA as follows: costs, in relation to proceedings, means costs payable in or in relation to the proceedings, and includes fees, disbursements, expenses, and remuneration. 1. The court's power in respect of costs is limited to those sums which fall within the meaning of costs set out in s 3(1). The definition is intended to refer to fees, disbursements, expenses, and remuneration paid or payable to legally qualified persons or other persons retained in the proceedings, such as experts.
8. As such, in my view, the funder's commission is not "costs".
9. Nor could the funder's commission be aptly described as finance to fund the litigation. There was no loan agreement between the funder and the plaintiffs. The amount claimed is not interest (compound or otherwise) on money borrowed to pay legal costs. Describing the arrangement as litigation finance would not be accurate. Similarly, the plaintiffs' description of the funder's commission as being litigation funding costs is not an apt description.
10. Further, the commission is not being claimed as a business expense, in the sense that it represents amounts paid as part of the operation of the plaintiffs' businesses for the purposes of deriving income.
11. The lead plaintiffs did not include the funder's commission in their calculation of loss of profits, which has already been agreed and determined.
12. Nor do the plaintiffs submit that the commission is a sum which they paid in mitigation of their losses. I raised that with Mr Bannon and he specifically denied the proposition that the funder's commission should be viewed as a sum paid in mitigation of other losses.
13. To the extent that the funder's commission might be assessed as a loss of a sum capable of being the subject of an award of damages, it could only be viewed as a loss arising from a contingent liability.
14. At the time of the assessment of damages and entry of judgment, the plaintiffs had not paid any amount to the litigation funder. Indeed, they did not become liable to pay any amount to the litigation funder at the time that the nuisance occurred. Whilst liability to pay might be viewed as a loss capable of being subject to an award of damages, it is a feature of this aspect of the claim that the liability to pay (which is said to be the loss) did not crystalise until after a judgment was otherwise entered in favour of the plaintiffs (whether by Court determination or agreement) for a sum of money. The plaintiffs only become liable to pay the funder's commission after they become entitled to receive a sum from the defendant by way of a judgment (either determined or by consent).
15. The plaintiffs are thus seeking to recover "a loss" which does not crystalise until after the defendant has been ordered, or has agreed, to compensate the plaintiffs in respect of their economic loss. It is a loss which the plaintiffs are not even obliged to tell the defendant about until a time of their choosing.
16. It is an amount payable which arises because of, and is determined by reference to, a contractual arrangement between the plaintiffs and a third party, that is, an entity which is not a party to the litigation, which played no role in the circumstances leading to the other losses sustained by the plaintiffs and had nothing to do with any attempt by the plaintiffs to mitigate their other losses.
17. It is difficult to accept that the funder's commission is a "loss" in the compensatory sense. Of course, the liability to pay only arises after the plaintiffs have won but that is not the point. Yet, it is significant that the obligation to pay the funder's commission arises out of the funding agreement. All of the terms of the funding agreement must be considered. When doing so, the contention that the funder's commission is a loss for the purposes of a damages claim becomes even less clear. I will return to this.
18. However, on the plaintiffs' case, it is a sum which they are required to pay and which, on their case, will have the consequence that they will not be put back in the position they would have been but for the tortfeasor's (i.e. defendant's) conduct. This is despite damages being compensatory and despite the tortious measure of damages being the amount that is necessary to put the party back in the position that it would have been but for the tortious conduct.
19. In the end it is only necessary to say that the amount claimed is an amount which the plaintiffs become liable to pay pursuant to their agreement with the litigation funder after the entry of judgment in their favour for a specified sum.

Determination of question 10

1. As identified by the plaintiffs, common question 10 raises two questions being: 1. as a matter of principle, are the plaintiffs entitled to claim reasonable litigation funding costs as a head of damages in nuisance? and 2. in order to do so, must the plaintiffs demonstrate the matters set out in subparagraphs (a), (b) and (c).
2. I will deal with subparagraphs (a), (b) and (c) at the outset.
3. I agree with the plaintiffs' submissions that, if the funder's commission is otherwise recoverable as a head of damages, it would not be necessary for each individual plaintiff who seeks to recover the funder's commission as a separate head of damages to establish each of the matters set out in subparagraphs (a), (b) and (c).
4. The ultimate question in assessing any amount claimed by way of damages is whether the amount claimed is reasonable in all the circumstances. Whether the amount claimed is reasonable must be assessed objectively, such that whether the parties to the funding agreement negotiated and achieved the result that they wished to achieve could not be determinative of whether the amount claimed is recoverable. The amount would be recoverable if it was objectively reasonable, whether or not the plaintiffs negotiated for the best deal or shopped around for the best funder.
5. In a claim such as this, it would be a matter of assessing a range of factors to determine whether the amount claimed is reasonable, including whether the percentage falls within the range generally available in the particular market; whether there are factors about the particular matter which meant that, although the percentage claimed was higher than in other matters, it remained within an appropriate range, and whether on a consideration of the likely available funding the agreed figure represented a reasonable rate in all circumstances.
6. In respect of subparagraphs (a) and (b), it must be remembered that the real benefit to litigation funding is that the persons who enter into such agreements do not have to pay their own legal fees and are also not exposed to payment of the defendant's legal fees should they be unsuccessful.
7. The idea that the entitlement to recover the funder's commission as damages would be limited with reference to whether the person so claiming was impecunious seems rather contrary to the whole point of litigation funding.
8. In Money Max Int Pty Ltd v QBE Insurance Group Ltd (2016) 245 FCR 191 ("Money Max"), the Full Federal Court (per Murphy, Gleeson and Beach JJ) considered whether it had power to make a common fund order. In doing so, the court made a number of observations about class actions and litigation funding under the heading 'policy considerations', specifically in relation to the scope and intent of representative proceedings as contained in part IVA of the Federal Court of Australia Act 1976 (Cth).
9. The Court observed at [180] that: "Despite the intent of the legislature, the costs and risks associated with class action proceedings have placed such litigation beyond the resources of ordinary and even most wealthy Australians."
10. The Court went on to note at [182] that, "these costs and risks posed (and continue to pose) a serious obstacle to the enhancement of access to justice envisaged by the legislature."
11. Further, at [183], the court observed: "Litigation funders stepped in to fill this gap and the High Court endorsed their role in doing so. In [Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386], Gummow, Hayne and Crennan JJ at [65] (with Gleeson CJ at [1] and Kirby J at [147]-[148] agreeing) endorsed the views of Mason P in Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 63 NSWLR 203 at [105] where his Honour said: 'The law now looks favourably on funding arrangements that offer access to justice so long as any tendency to abuse of process is controlled. (citations omitted). As I explain below, the present litigation attracts the following principle recently stated by Lord Phillips MR giving the judgment of the English Court of Appeal in Gulf Azov Shipping Co Ltd v Idisi [2004] EWCA Civ 292 at [52]: '… Public policy now recognises that it is desirable, in order to facilitate access to justice, that third parties should provide assistance designed to ensure that those who are involved in litigation have the benefit of legal representation'."
12. Those observations were made in the context of considering whether to make a common fund order. The question arising in these proceedings was not addressed but the court's observations rather detract from any suggestion that it would always be necessary for a member of a class to establish that he or she was impecunious and would not have embarked upon the litigation without litigation funding, in order to recover the funder's commission as damages.
13. It does not seem to me that it must be necessary for the court to engage in an enquiry into the financial status of each plaintiff who enters into a litigation funding agreement prior to allowing the claims. This is evident in this matter as the persons who have suffered the losses, whether they be corporate entities or individuals, operate businesses. The idea that only those businesses that went broke could obtain the benefit of the funder's commission (in the sense of a damages claim) cannot be accepted.
14. This view is perhaps consistent with or analogous to the approach of the High Court in Arsalan v Rixon (2021) 274 CLR 606 ("Arsalan"). Arsalan involved the question of whether the cost of hiring a replacement vehicle following a motor vehicle accident was recoverable. Specifically, the question arose as to whether it was necessary for the plaintiff to establish that he had a need for the replacement vehicle and whether the hiring of a prestige vehicle was unreasonable.
15. The Court distinguished between the needs-based test which may be applicable in claims for personal injury relating to care gratuitously rendered (see Griffiths v Kerkemeyer (1977) 139 CLR 161 then Van Gervan v Fenton (1992) 175 CLR 327) and the consideration of the real loss suffered as a result of damage to a chattel, including the actual cost of hiring a replacement vehicle.
16. The Court did not accept that it was necessary that the claimant demonstrate a need for the replacement vehicle as a pre-condition to recovery of the cost of the replacement vehicle.
17. The question of whether the plaintiffs can recover the funder's commission must be assessed having regard to conventional principles and having regard to whether the amount claimed is objectively reasonable, rather than a subjective assessment of the financial position of each plaintiff and a consideration of what each plaintiff might have done should a litigation funding arrangement not have been available or if they had the financial capacity to pursue the claim without such funding.

Is the funder's commission recoverable as damages in these proceedings?

1. The outcome of this case must depend on the application of conventional principles.
2. As described in Hungerfords v Walker (1989) 171 CLR 125 at 143 per Mason CJ and Wilson J: "… a plaintiff is entitled to restitutio in integrum. According to that principle, the plaintiff is entitled to full compensation for the loss which he sustains in consequence of the defendant's wrong, subject to the rules as to remoteness of damage and to the plaintiff's duty to mitigate his loss."
3. The Court allowed a claim for loss of use of money observing at 144: "Incurred expense and opportunity cost arising from paying money away or the withholding of moneys due to the defendant's wrong are something more than the late payment of damages. They are pecuniary losses suffered by the plaintiff as a result of the defendant's wrong and therefore constitute an integral element of the loss for which he is entitled to be compensated by an award of damages."
4. In Nominal Defendant v Gardikiotis (1996) 186 CLR 49 at 54 McHugh J observed: [W]hen a plaintiff asserts that, but for the defendant's negligence, he or she would not have incurred a particular expense, questions of causation and reasonable foreseeability arise. Is the particular expense causally connected to the defendant's negligence? If so, ought the defendant to have reasonably foreseen that an expense of that kind might be incurred?
5. As was said in Arsalan at [25], the basic goal of the compensatory principle is to "undo, by monetary equivalent, the consequences of the wrong experienced by the plaintiff so far as is reasonable".
6. There is no case in which the funder's commission has been allowed as a component of the damages awarded.
7. The only similar case the plaintiffs could point to was the decision of the Queensland Court of Appeal in Landoro.
8. In Landoro, the Court allowed the plaintiff to file a proposed amendment to the statement of claim including a claim based on a litigation finance agreement. The claim in Landoro included a claim for the additional costs of litigation finance which came at a higher price than ordinary business loans. Davies JA (with whom McMurdo P agreed on this point), allowed the claim to proceed, that is allowed the amendment. As his Honour said at [12]: "To allow these claims to proceed is not, by any means, to assert their correctness. It is no more than, as mentioned earlier, to deny that they are so obviously untenable that they cannot possibly succeed."
9. Demack J would not have allowed the amendment to include the litigation finance cost. His Honour found at [22] that: "Just as a litigant cannot recover compensation for the loss of time spent in the preparation and conduct of the case (Cachia v Hanes (1994) 179 CLR 403), so a party cannot recover loss which consists of "expenditure on litigation": Berry v British Transport Commission [1962] 1 QB 306, per Devlin LJ at 328. The reason for that latter rule was examined in detail by Devlin LJ, and although it could not be said that taxed costs provided a full indemnity, His Lordship found a justification for the stringent standards which prevail in a taxation of party and party costs: "it helps to keep down extravagance in litigation and that is a benefit to all those who resort to the law" (p 322). As long as this rule remains, the necessity to borrow money and to insure against an adverse result is properly categorised as expenditure on litigation and is not recoverable. The amendment to claim this amount should not be allowed."
10. The plaintiffs also referred to Essar Oilfields Services Ltd v Norscot Rig Management Pvt Ltd [2016] EWHC 2361. That case involved an application under s 68 of the Arbitration Act 1996 (UK) to set aside the award of an arbitrator that included an allowance of the costs of litigation funding. The arbitrator's decision was based on an interpretation of s 59(1)(c) of the Arbitration Act 1996 (UK) and the meaning of "other costs". As the outcome of the case depended upon the construction of the words in an English statute, it is of no relevance to these proceedings.

Foreseeability and remoteness

1. Whilst it may have been foreseeable on the part of the defendant that the business owners along the route may take action against it (the defendant's own risk register identifies that risk) and that they might join together to do so, mere foreseeability is insufficient.
2. The loss must not be too remote. Remoteness is a question of fact. This requires an evaluative judgment having regard to all of the circumstances of the case.
3. The plaintiffs are entitled to be put back in the position they would have been but for the tortious conduct but they are only entitled to recover their actual loss. The funder's commission arises because, once they found themselves in the position of having suffered a loss of profit, they entered into an agreement with a third party to enable them to recover their loss of profit. In that sense, the loss is removed or remote from the tortious conduct. It arises from measures which the plaintiffs chose to take after they had suffered a loss of profit, not in mitigation of their losses (the plaintiffs disavow this) but to reduce their risks associated with recovery of their loss of profits. It may be more properly viewed as expenditure on litigation, a step removed from the actual losses sustained by the plaintiffs caused by the defendant's tortious conduct. In that sense remoteness is intertwined with causation.

Causation

1. I have already determined that part 1A of the Civil Liability Act 2002 (NSW) ("CLA") does not apply, contrary to the contention of the plaintiffs. As such, I am not bound to apply ss 5D and 5E. Having said that, at common law, the plaintiff bears the onus of proving each fact that he or she relies on to succeed in a cause of action. Causation is a question of fact.
2. Section 5E of the CLA merely adopts the common law position. Similarly, whilst s 5D introduces the concepts of factual causation and scope of liability causation, as two separate matters which the plaintiffs must establish, the common law recognises that causation involves a normative question, not just a factual question: see, for example, Henville v Walker (2001) 206 CLR 459 at [98] per McHugh J. The result will be the same whether or not the CLA applies.
3. Unlike the question of breach, which is considered prospectively or in a forward-looking manner, causation is considered looking backwards at what has actually happened. It is not applying hindsight but merely considering the facts as they are known and determining the relationship between those facts. On this issue, the Court is considering the relationship between the tortious interference with the plaintiffs' businesses and the agreement to pay a commission to a litigation funder as part of a mutually beneficial commercial agreement supporting the plaintiffs' maintenance of the litigation against the defendant.
4. It is known that the defendant was guilty of tortious conduct in the nature of a nuisance. It is known that, having regard to my judgment, the defendant's tortious conduct caused the plaintiffs to suffer economic loss in the nature of loss of profits. It is known that the lead plaintiffs have been awarded a sum by way of damages representing their loss of profits. It is known that the defendant is liable to pay those sums to the plaintiffs. It is also known that the plaintiffs will be liable to pay 40% of those sums to the litigation funder on receipt of the damages sums, having regard to the agreement they entered into with the litigation funder.
5. The chronological course of events I have just identified does not include the two further steps which must be considered a necessary condition of the loss, being the taking of proceedings by the plaintiffs and their entry into the litigation funding agreement pursuant to which they agreed to pay the funder's commission. Both of those steps were taken by the plaintiffs independently of anything done by the defendant. They were taken by the plaintiffs well after the defendant's tortious conduct ended and at a time either when the individual plaintiffs had resumed their businesses or ceased to trade at all (in the case of Ancio). The litigation was commenced to recover the losses sustained by the plaintiffs. The funding agreement was entered into by the plaintiffs, both as a means of enabling them to pursue the litigation and to eliminate the burden of any legal costs and expenditure or other financial risks which would otherwise fall on them consequent on pursuit of the litigation.
6. That is, if the funder's commission should be considered a properly compensable head of damages, in the sense that it is a "loss", then it is a loss deliberately incurred by the plaintiffs which has the effect of breaking any chain of causation between the defendant's conduct and that loss.
7. What the plaintiffs have really done is enter into a bargain with a third party, by which they agreed to give the third party an amount of money in return for the third party taking the risk on the litigation. The loss arises from the plaintiffs' own conduct or decision to pursue the litigation on a risk free basis. Without reference to the defendant, the plaintiffs have increased "their loss" by 40% so as to ensure that they did not bear any costs associated with the litigation. They have not otherwise reduced their loss of profits flowing from the defendant's conduct. They have agreed to "take a loss" on the amount they actually recover from the defendant by way of actual losses caused by the defendant, so as to enable them to not only pursue the litigation but to do so on a risk free basis.
8. The funder's commission is different from litigation finance provide by a third party to a plaintiff to enable the plaintiff to pay its legal costs. The funder's commission represents the funder's return on its investment. The funder did not lend money to the plaintiffs. It agreed to pay the plaintiffs' expenses in return for a slice of the damages.
9. In those circumstances, the causal chain between the defendant 's conduct and the loss has been broken. The plaintiffs' conduct in entering into such an agreement was an intervening act which broke the causal chain between the tortious conduct and the so called loss. I do not accept that the defendant caused the claimed loss, being the funder's commission.
10. Further, even if I be wrong on that assessment, I do not accept that it is appropriate, in all of the circumstances, for the defendant to be responsible for such a loss for similar reasons (the normative or s 5D(1)(b) CLA question). The matters to which I have already referred are also relevant to this question.
11. In assessing whether a defendant's tortious conduct caused the loss, it is necessary to have regard not only to whether, but for the defendant's conduct, the loss would have been sustained, but also whether it is appropriate in all the circumstances for the defendant to be responsible for such a loss. That approach is enshrined in s 5D of the CLA - that is, factual causation and scope of liability causation.
12. There is no prescription of the circumstances which a court might consider in undertaking that normative assessment. Each case must depend on its own facts and circumstances. I must consider whether or not and why responsibility should be imposed on the defendant for the funder's commission. The normative or scope of liability evaluation provides a basis for limiting the liability of a defendant even when the "but for" test is satisfied.
13. In Wallace v Kam (2013) 250 CLR 375, when referring to s 5D(4) of the CLA, the Court said at [23]-[24]: "In a novel case, however, s 5D(4) makes it incumbent on a court answering the normative question posed by s 5D(1)(b) explicitly to consider and to explain in terms of legal policy whether or not, and if so why, responsibility for the harm should be imposed on the negligent party. What is required in such a case is the identification and articulation of an evaluative judgment by reference to "the purposes and policy of the relevant part of the law". Language of "directness", "reality", "effectiveness" or "proximity" will rarely be adequate to that task. Resort to "common sense" will ordinarily be of limited utility unless the perceptions or experience informing the sense that is common can be unpacked and explained. A limiting principle of the common law is that the scope of liability in negligence normally does not extend beyond liability for the occurrence of such harm the risk of which it was the duty of the negligent party to exercise reasonable care and skill to avoid…"
14. At the heart of the law of tort and the principle of damages is the idea of compensation. The common law recognises that persons should be compensated in respect of conduct towards them which is tortious. Yet there must be limits.
15. As I said in the principal judgment (at [579]) the law of torts is concerned with the allocation of losses which arise incidental to the activities of people in modern society. The plaintiffs sustained substantial business losses as a result of the conduct of the defendant. In my judgment, it is appropriate that they be compensated for such losses by the defendant.
16. However, I do not consider it appropriate for the scope of such a liability to extend to amounts which the plaintiffs have to pay a third party, not in mitigation of such losses, but as a means of enabling them to pursue litigation against the defendant on a cost and risk free basis.
17. That would be to visit upon the defendant not just the consequences of its own conduct but the consequences of a decision taken by the plaintiffs, freely and willingly, to share the proceeds of the litigation in return for a benefit to them, being the payment and indemnification of costs (as well as the oversight and management of the litigation).
18. Further, it does not seem to me that this case is so different or unique that the principle which would arise could only ever be applied to this case. As was observed in Money Max, litigation funders now fill a gap in that they allow access to justice in circumstances in which the costs of such access are beyond the means of ordinary people. The old rules preventing third party support of litigation thus no longer apply.
19. However, that does not mean that the commercial arrangements entered into between plaintiffs and litigation funders should all be visited upon the tortfeasor. To do so in this case would be to extend the compensatory principle to expenditure on litigation. It would be to not merely compensate the plaintiffs but advantage them and others who might adopt the same course by making the defendant responsible to reimburse the plaintiffs for the consequences of their own bargain which at the time of entry into the bargain provided a substantial benefit to them.
20. I do not consider it appropriate that the defendant's liability extend that far.
21. For the reasons set out above, the answer to question 10 is thus: No - the plaintiffs are not entitled to recover the funder's commission as damages.
22. Question 11 does not arise and I do not consider it appropriate to offer a hypothetical opinion on whether a 40% commission is reasonable.
23. I list this matter for further directions on 13 March 2024. 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: 22 February 2024