Johnson Tiles P/L v Esso Aust P/L [2003] VSC 212 | Case summary

Supreme Court of Victoria|2003-06-20|Before: GILLARD J.

GROUP PROCEEDING - Orders to be made to give effect to issues - Consolidation of transferred proceeding - Directions re future of proceeding - Costs orders - Effect of "No Win - No Fee" agreements where plaintiffs fail in proceeding - Costs of representing others.

This is a group proceeding brought pursuant to Part 4A of the ("the "). The proceeding was issued in this court on 26 April 2001. It bears the number 5538 of 2001.

There was a proceeding instituted in the Federal Court raising similar and additional issues on 28 September 1998. There were three applicants in the Federal Court proceeding, namely, the two plaintiffs in the present proceeding and Mr Douglas Chalmers. Merkel J, on 17 May 2001, transferred the proceeding to this court pursuant to s.5(4) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth). In fact, there were two proceedings transferred, namely, VG519 of 1998 and VG524 of 1998. On transfer they were given the Supreme Court number 5975 of 2001.

The applicants in the Federal Court pleaded claims based upon an alleged contravention of the Trade Practices Act 1974 and the Fair Trading Act 1984 (Vic). The respondents, the present defendants, brought a cross-claim against cross-respondents and raised the same issues under those Acts. These claims were struck out during the interlocutory steps in the Federal Court by Merkel J and affirmed on appeal. The Full Court held that the Federal Court had accrued jurisdiction to try the negligence claim - see Johnson Tiles Pty Ltd v Esso Australia Pty Ltd.[1] On 16 February 2001 the Esso respondents were granted leave to appeal by the High Court from the decision of the Full Federal Court that the court had accrued jurisdiction to hear the negligence claims.

It was in this background that Merkel J transferred the proceedings to this court.

The appeal to the High Court was not heard prior to this court publishing its reasons in the group proceeding.

Merkel J ordered that the applicants pay the respondents' costs of the claims made in both proceedings based on the contravention of the two Acts. He also ordered that the respondents pay the cross-respondents' costs to be taxed in relation to the same claims and ordered that the applicants indemnify the respondents against the respondents' liability for the cross-respondents' costs. He made orders in relation to other parties in respect of the same failed claims. The final order he made was in these terms -

"9. The taxed costs of all interlocutory steps taken by any party in these proceedings, other than steps taken in relation to appeals or steps that are subject to a specific costs order, be the parties' costs in the cause and abide the final determination of a justiciable controversy raised by these proceedings."

The proceeding in this court raised the same issues that were left in the Federal Court proceeding. Initially, the plaintiffs were the same three applicants as in the Federal Court proceedings but on 21 September 2001 I removed Mr Douglas Chalmers as a party.

On 8 June 2001, in proceeding No. 5975 of 2001 (the transferred proceeding), I ordered that the proceeding be stayed subject to further order. I made that order because I was of the opinion that the management of the litigation would be easier, more efficient and expeditious if the Supreme Court proceeding was progressed, rather than attempt to deal with the Federal Court proceedings and the many interlocutory skirmishes that occurred in that court. The decision was made on the understanding that the parties would co-operate and abide by the interlocutory decisions and directions made in the Federal Court proceedings, and more importantly, the parties would use the documents, including witness statements, delivered in the Federal Court. This was done. The parties co-operated, the proceeding was efficiently and expeditiously managed and the trial commenced some 15 months after the proceeding was instituted in this court.

The plaintiffs have filed a summons seeking orders that the stay of the Federal Court proceeding be lifted and that the proceeding be consolidated with the present proceeding. One of the questions that has to be addressed concerns the costs of the Federal Court proceedings.

During the interlocutory steps in this court, as had been done in the Federal Court proceedings, the defendants joined third parties who were divided into two groups. The first to sixteenth third parties constituted the first group and were described as "State entities". They comprise various State entities involved in the supply and distribution of gas. In addition, there were a number of individuals joined.

The second group comprised the seventeenth to twenty sixth third parties. They comprised companies responsible for the transmission and retail sale of gas. They were described as "retailers".

The third parties joined twenty four fourth parties and they comprised insurers and persons involved in insurance of the various third parties.

The third and fourth party proceedings have progressed through the interlocutory stages but the proceedings have not been heard.

On 5 October 2001, I made orders for the conduct of the proceeding. Being a group proceeding, the issues to be determined were issues which gave rise to substantial common questions of law and fact of the claims made by the plaintiffs and group members against the defendants. See s.33C of the Act. The questions to be considered and determined in the proceeding were the subject of the order made on 5 October 2001.

During the course of the interlocutory steps, many orders were made, and on some occasions orders were made for costs, but in the majority of instances the costs were reserved.

The trial of the common questions commenced on 4 September 2002. By the orders made 5 October 2001, as amended by orders of 17 December 2001, the third and fourth party proceedings were to be tried separately from the main proceeding and after the determination of the issues to be tried in that proceeding. The third parties and the fourth parties were, by order, permitted to attend and take part in the trial and it was further ordered that the parties would be bound in the third and fourth party proceedings by determinations made in the group proceeding.

Although the third and fourth party proceedings were not tried at the same time as the group proceeding, those parties were permitted to call evidence in the trial.

At the trial, the two groups of third parties and the fourth parties were represented by counsel. Counsel for the State entities third parties called substantial evidence in the trial and actively participated in it. The other group, the retailers, tendered a document in evidence, called no other evidence, took little part in the hearing and made submissions in closing address. The fourth parties did not call evidence, their counsel did not examine witnesses, but made short submissions at the end of the trial.

The hearing concluded on 20 November 2002. The trial was heard over 38 sitting days: thirty-one days of openings and evidence and seven days for addresses. The parties filed and relied upon lengthy written final submissions.

On 20 February 2003, I published my reasons with respect to the common questions.[2]

The questions and answers are set out in the reasons for judgment. I will briefly summarise the questions and the answers.

1. Did the defendants owe duties of care to avoid physical damage, economic loss resulting from damage to property and purely economic loss, to the first plaintiff, Johnson Tiles Pty Ltd and the business users it represented?

The court held that the defendants did owe a duty of care to avoid physical damage to property and economic loss consequent upon that damage, but did not owe a duty of care to avoid purely economic loss.

2. Did the defendants owe duties of care to avoid physical damage, economic loss resulting from damage to property and purely economic loss to the second plaintiff and the domestic users?

3. Did the defendants owe a duty of care to avoid purely economic loss to stood-down workers?

The court held that the defendants did not owe such a duty.

4. Was there negligence on the part of the defendants which caused the interruption to the gas supply?

This was admitted by the defendants prior to the commencement of the trial, so the answer was, yes.

5. Did the first and second plaintiffs and group members suffer loss as a result of the interruption?

The court held that the plaintiffs and other group members who gave evidence did not suffer compensable loss but Barrett Burston Malting Co Pty Ltd and Nando's Australia Pty Ltd suffered compensable loss arising out of property damage.

6. Did the plaintiffs or any group members who suffered damage, suffer damage as a result of the negligence of the defendants?

This raised the question of causation. The court held that the losses suffered by Barrett Burston and Nando's were caused by the negligence of the defendants.

In a group proceeding, the court deals with the substantial common questions of law or fact arising out of the same or similar or related circumstances where seven or more persons have claims against the same person. Once those common questions are answered in the absence of any judgment for a global sum of damages, the proceeding is in effect no longer a group proceeding because any persons or bodies entitled to claim damages must pursue their own claims thereafter. As a matter of law the group proceeding does continue as such, but in a practical sense, where all the elements of a cause of action by a party or group member are not determined as common questions it is necessary for each party and claimant to seek an order for the further hearing of their individual claims. As the plaintiffs failed in the proceeding, the court is now dealing with group members' claims.

The fact that the plaintiffs failed does not affect their right or authority to continue with the proceeding - see s.33D(2). None of the parties suggested that the proceeding could not continue or that a claimant should be added as a party.

The group proceeding continues and the procedure adopted by the claimants, being members of a group, was to apply for an order pursuant to s.33R that each be permitted to take part in the proceeding for the purpose of determining their claim for damages. I made orders in respect of two members of the business users' group. By reason of s.33R(2), the costs of the permitted participation in the proceeding are between the group member claimants and the defendants. It follows that it is appropriate to draw a line in the group proceeding at this stage and determine the issues of costs to date of the group proceeding.

On the day after I delivered judgment, a directions hearing was held and directions were given concerning the steps to be taken hereafter to progress the proceeding. The proceeding was adjourned to 16 May 2003 to enable the parties to consider their positions and file submissions. I further ordered that the costs be reserved and that the time to appeal, including time for leave to appeal, be extended to 30 June 2003.

As a result of the determination of the issues in the group proceeding, the only organisations which gave evidence that were entitled to recover damages were Barrett Burston Malting Pty Ltd ("Barrett Burston") which conducts the business of manufacturing malt, and the company Nando's Australia Pty Ltd ("Nandos") which sells cooked poultry.

As a result of the group proceeding, neither plaintiff was entitled to recover any damages.

On 15 April 2003 I made an order that pursuant to s.33R(1) of the Act, Barrett Burston may take part in the proceeding for the purpose of determining those questions which relate to any claim by it for recovery of loss and damage to property and economic loss consequent upon the interruption to the gas supply. On 16 June 2003 I made an order in respect of Nando's.

"(1) In giving directions under s.33Q the court may permit an individual group member to take part in the proceeding for the purpose of determining a question that relates only to the claim of that member.

(2) In such a case, the individual group member, and not the plaintiff, is liable for costs associated with the determination of the question."

Under s.33Q the court is authorised to give directions in relation to determination of any claim made by a group member.

Upon each individual group member being permitted to take part in the proceeding, each claimant, in a sense, becomes a party because of the liability for costs associated with its claim. I encourage the parties to make offers of compromise either under the Rules of Court, see Order 26, or by a Calderbank-type letter. As I have said on prior occasions, in this day and age, no party to litigation should commence the hearing where the claim is for compensation without putting the other party at risk as to costs in respect of the outcome of the litigation. The obligation not only rests on the defendants but also the claimant. Severe costs consequences will flow against a party that chooses to ignore an offer, and recovers less or is obliged to pay more than the offer.

On 13 April 2003 I made orders that Barrett Burston file and serve particulars of its claim and required the defendants to file and serve particulars of their defence to the claim. Further, I required the filing and delivery of witness statements. I fixed the hearing for Monday 16 June 2003. I ordered Barrett Burston to make discovery of the documents relevant to its claim.

The Finalisation of the Common Questions Proceeding

The issues for consideration to finalise the common questions part of the proceeding are -

(A) the declarations or orders that should be made in consequence of the determination of the common questions;

(B) the fate of the transferred Federal Court proceeding;

(C) the regime for assessment of damages suffered by Barrett Burston and Nando's;

(D) the regime for identifying the business users who suffered damage to property as a result of the gas stoppage;

(E) the regime for assessment of loss suffered by business users who suffered damage to property and consequential economic loss;

(F) whether any claimant should be joined as a party to the proceeding or some other order be made;

(G) costs of transferred Federal Court proceeding;

(H) costs of admissions;

(I) costs of third and fourth parties;

(J) orders for costs.

The parties filed written submissions concerning the issues and made oral submissions.

The plaintiffs filed two summonses seeking orders for consolidation of the transferred Federal Court proceeding.

The court, in determining the common questions, decided questions of law and fact. See s.33Z(1)(a) and (b). The court is required when giving judgment in a group proceeding to describe or otherwise identify the group members who will be affected by it. See s.33ZB. A judgment given in a group proceeding binds all persons who are the identified group members other than those who ceased to be or were not a group member by reason of a court order - see s.33ZB(2) and s.33KA. There is no dispute between the parties as to the appropriateness of making orders at this stage and the dispute comes down to the form of the orders. The plaintiffs have prepared orders in the form of declarations which number 28. The proposed declarations cover every finding that is made by the court with particular reference to each plaintiff and each claimant who gave evidence. The plaintiffs referred to what Wilcox J did in McMullin v ICI Australia.[3] What his Honour did in that case, a group proceeding in the Federal Court, was to summarise his conclusions in a step by step summary. He then made certain orders in respect of those claims which had failed. He then referred the matter for directions.

The court is empowered by s.33Z(1) to make a range of orders and judgments. It may make "a declaration of liability" - see s.33Z(c). Further, the court is given a wide power to "make such order as is just" - see s.33Z(g). The court in the group proceeding determined questions of law and fact. In those circumstances, I think the most appropriate orders are orders which give effect to the answers given to the questions.

Orders should be made giving effect to the findings made by the court as a matter of law and in compliance with s.33ZB(a). In my view the defendants, being successful against some parties, are entitled to a judgment against those parties; that is, parties to the litigation and not claimants. Some of the claimants who gave evidence have failed to establish a case. But in my view, the orders must relate to the present parties to the proceeding. No orders are to be made against specific claimants. The answers to the questions which form part of the judgment and the order pursuant to s.33ZB(a) of the Act will bind the members of the groups who gave evidence and whose claims failed. The successful defendants will have the benefit of those orders and will be protected against a claim being made by those who gave evidence and failed and members of groups who by reason of the determination of the issues do not have a claim.

The defendants have submitted that the court should make orders which give effect to the questions asked and the answers given, an order that the judgment affects the interests of the business users, domestic users and stood-down workers, save for those who have opted out of the representative proceedings, and that there be judgment for the defendants in respect of the claims made by the plaintiffs on their own behalf. I agree those orders should be made. They also submitted there be judgment for the defendants against the plaintiffs as representative parties in respect of claims made on behalf of the group members which were purely economic loss. In my opinion, the judgment sought is unnecessary. The proposed orders protect the defendants' interests. When this was pointed out in argument, defendants' counsel abandoned the submission.

In Graham Barclay Oysters Pty Ltd v Ryan,[4] Gummow and Hayne JJ referred to the making of declaratory orders of an interlocutory nature in a group proceeding. See paras 127 and 128. Their Honours said that an "interlocutory declaration" is a form of order not yet known to the law, and that making an order in that form was not only wrong but may obscure some of the questions which the claims made in the proceeding inevitably presented. In this regard I refer to s.33Z(g) which may justify such an approach.[5]

It is not unusual to make orders in court proceedings answering questions of law and fact. In my opinion, what is proposed by the defendants is the appropriate order. Where possible the court should make final orders involving the parties and I propose to do that. So far as the answers to common questions are concerned it is appropriate to make an order specifying the questions and the answers.

As the defendants have had success against both plaintiffs it is appropriate that the orders should reflect that success and judgment entered in their favour against those plaintiffs in respect of their personal claims. It will be necessary to make an order pursuant to s.33ZB describing the group members who will be affected by the orders made.

The course that I propose to adopt is very similar to what the court would do where it orders that an issue be tried in a proceeding. See Rules 47.04 and 47.05. When a court answers a question an order is made to give effect to the question and answer. In Seton's Judgments and Orders[6] is the type of order that should be made with a pre-amble that the matter proceeded to trial on certain issues and goes on to provide that the court makes an order in effect answering the questions. In my opinion, that is appropriate in the present proceeding.

I propose to make an order to that effect, an order pursuant to s.33ZB(a) of the Act which deals with the group members affected by the terms of the order, and an order that there be judgment for the defendants in respect of claims made by the plaintiffs on their own behalf.

Counsel for the plaintiffs raised the question of whether the orders would give effect to the fact that although it was pleaded by the defendants in their third amended defence that the chain of causation was broken by novus actus interveniens, they did not at trial seek to litigate that issue. In my opinion, the question and answer to question 6 covers that point.

The plaintiffs have issued two summonses, one in the Supreme Court group proceeding and one in the Supreme Court proceeding being the transferred Federal Court proceeding. The summonses seek orders that both proceedings be consolidated and continue as one proceeding pursuant to Rule 9.12. As I have stayed the proceeding No. 5975 of 2001 it is necessary to lift that stay and I do so. All parties agreed to the lifting of the stay. In respect of the consolidation question defendants' counsel referred to a number of cases which show that the general rule is that consolidation orders are not usually made. See Cameron v McBain[7] and Bolwell Fibreglass Pty Ltd v Foley.[8] The rationale for this general approach is that it is not usually convenient and it may complicate, delay and make more expensive the litigation. But that is not the position here. It is not inconvenient nor would it make the group proceeding complicated. Indeed, it is too late to do that. Both proceedings involved the same parties and the same issues. The reason why the transferred proceeding was not progressed was because the court took the view that it would be easier and less complicated to commence afresh. Case management dictated that course.

Counsel for the plaintiffs frankly admitted that the reason why they wanted the proceedings consolidated was to enable any successful claimant to claim damages in the nature of interest on judgment back to 28 September 1998 when the Federal Court proceeding was instituted. The claim for interest is made pursuant to s.60 of the Act. Mr Burnside QC referred to s.60 and s.3 which defined "party" and submitted that there was power under the Supreme Court Act to award damages in the nature of interest to a person or thing not a party to the proceeding. When the claim of Barrett Burston proceeds, it does so on the basis of an order pursuant to s.33R and the claimant does not become a party. It was pointed out that at the time when the Federal Court proceeding was instituted it was not possible to bring a group proceeding in this court. Accordingly, damages for interest would not have been available. A group proceeding could be issued in this court on and after 1 January 2000.[9]

Counsel on behalf of the defendants opposed the consolidation. They put a number of arguments in opposition. First of all, they drew attention to the authorities which said that it was only in rare cases that consolidation was appropriate. It was submitted this proceeding was not a rare case. Secondly, it was submitted that there was doubt about the validity of the Federal Court proceeding. The Federal Court proceeding, when instituted, included a Federal matter, namely, an alleged breach of s.52 of the Trade Practices Act 1976. That cause of action was ultimately struck out by the Full Court of the Federal Court. The question then arose whether the common law proceeding could continue in the Federal Court and the Full Court held that it could. Application was made by Esso to the High Court and leave was granted on 16 February 2001. On 7 March 2003, Esso filed a notice of discontinuance. This was after I had published my reasons in the group proceeding. It was submitted that there were grave doubts about the jurisdiction of the Federal Court proceeding and accordingly it could not be consolidated. Thirdly, it was submitted that the plaintiffs at one point did consider consolidation but did not press it. In my view, the conduct of the Bench cannot be overlooked. Pressure was brought to bear from the Bench that the Supreme Court proceeding should be kept separate from the Federal Court proceeding because it was easier to manage.

Mr Middleton QC finally submitted that there was a form of estoppel brought about by the conduct of the plaintiffs in not seeking to consolidate in the past, and relying upon that, Esso had withdrawn its appeal to test the Federal Court jurisdiction in the High Court.

Whilst it is accepted that the general rule is against consolidation, for the reasons which I have already stated, in my view it would not be inappropriate. Whether or not in the end any claimant can take advantage of the provisions as to interest on judgment remains to be seen. There may be difficulties facing each claimant, especially where interest is sought back to the date of the institution of the Federal Court proceeding, namely, 28 September 1998. However, in my opinion, each claimant should not be denied the opportunity to claim interest back to the earliest date possible. A resolution of the interest question can wait until the claim is made and heard.

The Esso parties were of the view that there was doubt about the jurisdiction of the Federal Court once the trade practices claim was dismissed, but nevertheless the Full Federal Court held that it did have jurisdiction. The mere fact that the High Court granted leave to challenge that decision is beside the point. Esso has discontinued the appeal and accordingly the decision of the Full Federal Court stands. I give effect to it. The Federal Court proceeding was within jurisdiction.

Mr Middleton QC referred to the decision of The Commonwealth of Australia v Verwayen.[10] He submitted that the plaintiffs were estopped from obtaining an order to consolidate the proceeding because the matter had been adverted to in the past, no application was made to consolidate and Esso, relying upon those matters, withdrew its appeal in the High Court. There is no evidence of any representation made by the plaintiffs or their advisers upon which Esso relied prior to filing the notice of discontinuance. But in any event, the mere fact that a party contemplated making application to consolidate proceedings, and did not question a stay of the Federal Court proceeding, does not amount to any representation that it would not make an application to consolidate in the future. In any event, before the High Court proceeding was abandoned, I would have expected the defendants and their advisers to carefully weigh up the pros and cons of withdrawing the appeal before making a decision to do so. In my opinion, there is no basis for an estoppel against the plaintiffs or their advisers.

Further, Esso is running hot and cold in relation to this matter. Esso have in their favour orders for costs in the Federal Court. No doubt they wish to enforce them. To that extent, they seek to rely upon the Federal Court proceedings and in particular, the orders made for costs. Consolidation will not prejudice their rights to costs' orders made in their favour.

In my opinion, Esso would not be prejudiced by the consolidation of the proceeding and accordingly I am prepared to make orders that the transferred proceeding be consolidated with the present proceeding.

In proceeding No. 5975, Douglas Chalmers is still a second plaintiff and an order is sought that he cease to be a party in that proceeding and that the third plaintiff become the second plaintiff. I am prepared to make an order regularising that position. He was earlier removed as a party in the group proceeding in this court. I will grant him leave to make application if he is prejudiced by the order being made.

C. Regime for assessment of damages suffered by Barrett Burston and Nando's

Directions have been given in respect of their claims. The court heard the claims of both claimants on Monday 16 June 2003.

Evidence was given by Barrett Burston and Nando's in the group proceeding in respect of their claims. They were the only two successful claimants in the group proceeding. The plaintiffs and other group members who gave evidence failed. The court made the decision to complete the proceeding in relation to their claims. This was a convenient course to adopt. However, when and how the court hears the claims of future claimants is a matter for discussion.

D. Identification of business users suffering damage to property and those who suffered property damage claiming consequential economic loss

Section 33ZF gives general power to the court to make orders it considers appropriate or necessary to ensure that justice is done in the proceeding. There is a similar provision in the Federal Court Act. See s.33ZF. In McMullin v ICI Australia Operations Pty Ltd (No. 6),[11] Wilcox J held that the provision was to give the widest power to the court to do whatever is appropriate or necessary in the interests of justice. This power enables the court to close the class of claimants. In the Victorian legislation there is express power. Under s.33ZG of the Act, the court does have power to make orders which would have the effect of closing the class of claimants and this can be done by a certain date.

The defendants do not oppose the making of an order. In order to give effect to closing the class it is necessary for an advertisement to be placed in newspapers sold in this State. A form was forwarded by the plaintiffs to the defendants and there was substantial agreement as to its form.

The parties had discussions concerning the form of the advertisement. Fortunately, most of their disagreements were resolved save for the last three lines of the advertisement. It was submitted by plaintiffs' counsel that the words were too harsh and may have the effect of deterring would-be claimants. The words were -

"However, you should be aware that those procedures may not be undertaken until all appeals are exhausted. In the event that all appeals are pursued, it is possible that the determination of claims will not be undertaken for some time."

In my view, those provisions would not deter a would-be claimant. I think it is important that would-be claimants are warned that it may take some time before their claims are determined.

However, I have slightly altered the last two sentences to soften their impact.

I have settled the form of advertisement, which is attached hereto and marked "A". It is to be published on two occasions in the form of quarter page advertisements in each of "The Age" and "The Herald Sun" newspapers, with at least 14 days between the two advertisements, and be published by 15 July 2003.

The defendants are to pay the costs of the advertisements.

Notice must be given by any claimant to the court by 1 September 2003. The class will close after 8 September 2003.

E. Regime for Assessment of Damages Suffered by Claimants

The parties have put forward different regimes to deal with different size claims. An affidavit by a solicitor, Ari Abrahams, affirmed 3 April 2003, reveals the possible number of claimants. Many claims were made on insurers as a result of the gas stoppage and by reference to insurance files, some idea is given as to the likely number of claims and their size.

Mr Abrahams stated that there were approximately 340 insurance claims.

288 claimants with losses estimated at less than $5,000

36 claimants with losses estimated between $5,000 and $100,000

10 claimants with losses estimated between $100,000 and $1,000,000

6 claimants where the estimated loss is more than $1,000,000.

It is anticipated that the total property damage and economic loss claims which were the subject of insurance claims will total approximately $36,200,000.

In addition, approximately 346 claimant business users have reported to the plaintiffs' solicitors that they suffered damage to property and economic loss consequential thereon and that the total claims are in the vicinity of $1,800,000.

The plaintiffs propose a regime be put in place whereby the claims can be determined.

It is proposed that the large claims, that is, claims which exceed $250,000, should be decided by the court. Directions would be given with respect to particulars of claim and defence and orders made for discovery. Such claims would be referred in the first place to mediation and if this fails, to be heard by a judge. The judge would have power under Rule 50.01 to refer assessment to a court appointed referee. In respect of medium claims, which are defined as between $50,000 to $250,000, the proposal is that the claim should be referred to mediation and if that fails then the matter could be referred to court, and be referred to referees.

Small claims, which are defined as under $50,000, should follow the same route, namely, mediation, and failing that, reference to referees.

On any view, such regimes for determination of claims could not take place prior to the closing of the class of claimants.

The defendants raised the question of whether a special court appointed referee hearing the matter is appropriate because it is open to the court to decline to adopt a report in whole or in part. Sometimes that occurs which proves to be an expensive and prolonged procedure.

In my view, the parties should seriously consider a regime whereby the claims are referred to an arbitration pursuant to Rule 50.08. This procedure is only available if the parties consent. However, it has the advantage that usually arbitration awards are final and the avenues open to dispute the findings are limited, whereas references to special referees are sometimes bogged down by the application of a party seeking an order that the court decline to adopt the report under Rule 50.04.

All the parties submitted that the court should not give any directions at this stage concerning the hearing and determination of claims until the class of claimants is closed.

I agree with that course and I will not give any directions at this stage. I expect that when the claimants are identified and the sizes of their claims are verified, that many of the claims will be settled. I reiterate what I said earlier, namely, that I would expect both the claimant and the defendants to make offers to compromise putting the other party at risk on the question of costs. If the claims cannot be compromised, unless there is some point of principle, my provisional view is that the assessment of damages should be referred by consent to an experienced barrister as arbitrator. I prefer that course to referring the matter to a court appointed referee. Experience shows that the latter course often produces more disputes than it settles, whereas leave to appeal from arbitrators' awards is not common.

The question arose as to whether or not a stay of the proceeding should be granted pending the outcome of any appeals. I propose to grant to all parties leave to appeal to the Court of Appeal. I do so because some of the issues in the case are novel in an area of uncertain evolving law and the amount involved in the case is indeed substantial. Mr Burnside QC informed the court that the plaintiffs would be opposing any application for a stay, and Mr Middleton QC informed the court that it was most likely an application would be made for a stay. In my opinion, consideration of the question of stay can be deferred until the class of claimants is closed.

F. Whether any Claimanat Should be Joined as a Party

All the parties agreed that the most appropriate course to follow was to leave the plaintiffs as parties to the proceeding and to permit each individual group member who makes a claim hereafter to take part in the proceeding for the purpose of determining his, her or its claim pursuant to s.33R of the Act. I will follow that procedure unless application is made for good cause to adopt some other procedure.

G. Costs of Transferred Federal Court Proceeding

I propose to lift the stay concerning the transferred Federal Court proceeding and to make an order consolidating the transferred proceeding and the group proceeding. Orders were made in the Federal Court when the proceeding was in that court, and those orders continue and are enforceable. Merkel J, when he transferred the proceeding, made an order that the parties' costs be costs in the cause. By reason of s.12 of the Jurisdiction of Courts (Cross-Vesting) Act (1987) (Cth), when a proceeding is transferred to a court, the transferring court may make an order as to the costs that relate to the proceeding up to the date of transfer. Merkel J has made an order in respect of costs, namely, "costs in the cause" and that means that the costs so ordered will follow the event in accordance with the determination of the issues in the group proceeding. I will make orders that the stay be lifted, the proceeding be consolidated with the group proceeding, and that the claims, together with the cross-claims in the transferred proceeding, be dismissed. The orders I make with respect to the costs in the group proceeding will apply to the transferred proceeding.

The defendant sought orders in relation to costs of admissions. A list of notices to admit identified the various notices and the submission of the plaintiffs was that all parties should bear their own costs of and incidental to establishing the proof of the facts referred to in the notices to admit. This was put on the basis that that would be a fair and equitable order because all parties delivered approximately the same number of notices and the cost consequences would even themselves out. I am prepared to do that. I will make an order to that effect.

Counsel for the third parties sought orders that they were entitled to their costs of the third party proceedings brought against them by Esso in relation to the issue of the duty of care to avoid purely economic loss. Esso having been successful at trial, the issue was no longer alive in the third party proceedings. They submitted that the issue was discrete and separate, that it was an issue in the third party proceedings, that as a result of the findings made that would no longer be an issue in the third party proceedings and accordingly it would be appropriate at this stage to make an order in their favour in relation to that issue. Any question in relation to costs in the third party proceedings is most likely to also include the issue of whether the unsuccessful plaintiff in respect of a particular issue is liable to contribute towards the costs payable by the defendants, to the third parties, or indeed indemnify the defendants. Counsel for the third parties accepted that at this stage the court could not possibly address the latter question. Counsel for the fourth parties was prepared to reserve their entitlement to costs as against the third parties.

Mr Beach QC emphasised that in the Federal Court proceeding, when the Trade Practices cause of action was struck out, Merkel J in fact made orders in favour of the third parties against the defendants in respect of that issue and the defendants obtained an order against the plaintiffs.

My only concern at this stage is whether or not I have a sufficient understanding of the various issues to make an order. Mr Burnside QC pointed out that in the third party proceedings the issues were not that clear or discrete.

In my opinion, it is premature to make an order in favour of the third parties and the court will be in a far better position to do justice between the parties when the court is apprised of all the issues in the third party proceedings and has made some determination in relation to them.

Accordingly, I do not propose at this stage to make any decision on the third parties' costs and reserve to them and the fourth parties the right to bring the application later.

This court should now make costs orders in respect of the group proceeding to date which also apply to the transferred proceeding.

The costs question is indeed difficult and complex. The hearing occupied 38 days, comprising 31 days of opening and evidence and seven days in final submissions. There were many legal practitioners involved and that, of course, includes instructing solicitors. It was apparent there was a substantial amount of time spent on investigation and preparation and I have little doubt that the costs will be many millions of dollars. In addition, there were many interlocutory proceedings in the Federal Court, as there were in this court, and much work was done in the Federal Court although the results of that work were used in the proceeding.

(a) may order the plaintiff or the defendant to pay costs;

(b) except as authorised by s.33Q or 33R may not order a group member or sub-group member to pay costs."

Save for an order under s.33R which relates to Barrett Burston, whose claim will be determined in June, no directions or orders were made pursuant to sections 33Q and 33R, so in this proceeding the court is confined to making orders involving the plaintiffs and the defendants. I do not read that section as precluding the court from making an order in respect of the third party and fourth party proceedings. What the section does is to confine costs orders to parties to the proceeding and the third and fourth parties are parties.

The power to order costs is found in s.24(1) of the Supreme Court Act 1986. It is an additional power to s.33ZD and provides -

"24(1) Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the court, including the administration of estates and trusts, is in the discretion of the court and the court has full power to determine by whom and to what extent the costs are to be paid."

Section 33ZD, however, confines the costs to a cost order involving the parties and not others in a group proceeding in the absence of a special order.

It is clear that the court has a wide discretion. The discretion is to be exercised in accordance with Order 63 of the Rules.

I propose to make costs orders in relation to the following:

* the costs of the transferred Federal Court proceedings as between plaintiffs and the defendants;

* the costs of this proceeding to date as between the plaintiffs and the defendants;

Whilst the parties agreed that the court should address the question of costs of the group proceeding to date, the defendants first of all submitted that the plaintiffs were not entitled to any costs at all because each had entered into a "No Win No Fee" agreement. It is necessary to consider that submission before turning to the question of what orders the court should make.

It was submitted that s.33ZD(a) makes clear that the court's power to award costs was costs as between the parties on the record. Unless special orders were made in relation to any other claimant, that is, as a group member or as a sub-group member, the court was confined to making orders between the parties. The only order relating to a claimant has been made under s.33R in relation to Barrett Burston. That order does not make Barrett Burston a party to the proceeding, but nevertheless makes the company liable for costs associated with the determination of its claim.

Mr Middleton QC submitted that the general rule was that a party was not entitled to its costs of the litigation unless the party was liable to pay costs to its lawyer actually incurred in the litigation. In Cachia v Hanes,[12] the High Court was concerned with the provisions of the Supreme Court Act of New South Wales. The provisions of the Act and the NSW Rules are similar to the Victorian Act and Rules. In that case, the successful party was the defendant who appeared for himself. He claimed costs. That is, costs relating to preparation and conduct of the case and for the out of pocket expenses, namely, travelling expenses associated with preparation and conduct of the case. It was held by the High Court by a majority that he was not entitled to his costs. At p.410 the majority said this -

"To use the Rules to compensate a litigant in person for time lost would cut across their clear intent. Costs, within the meaning of the Rules, are reimbursement for work done or expenses incurred by a practitioner or a practitioner's employee. Compensation for the loss of time of a litigant in person cannot be said to constitute costs within the meaning of the Rules. This is hardly surprising. It has not been doubted since 1278 when the State of Gloucester introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation. They were never intended to be comprehensive compensation for any loss suffered by a litigant." (Emphasis added).

"They (costs) are intended to reimburse a litigant for costs actually incurred; they are not intended to compensate for some other disadvantage or inconvenience suffered by the litigant."

Reference was also made to the English case of Gundry v Sainsbury.[13] In that case, a solicitor agreed to act for a plaintiff and agreed that he would not be liable to pay the solicitor any costs. The plaintiff was successful. The plaintiff was refused his costs.

The Court of Appeal affirmed the decision. At p.659, Cozens-Hardy MR said -

"What are party party costs? They are not a complete indemnity, but they are only given in the character of an indemnity. I cannot do better than read the opinion expressed by Bramwell B in Harold v Smith; `Costs as between party and party are given by the law as an indemnity to the person entitled to them; they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them. Therefore, if the extent of the damnification can be found out, the extent to which costs ought to be allowed is also ascertained'."

The Gundry case established that if there was an agreement between the client and the solicitor that in no circumstances would the client be liable for costs whatever be the outcome of the proceeding, then there is no liability to the solicitor by the client, and if successful in the litigation, the unsuccessful party is not obliged to pay any costs. Other cases have established that a successful litigant is entitled to his costs where the primary responsibility to pay costs was undertaken by a union or a legal aid body.

The parties in this proceeding have filed affidavits with respect to this question.

John Edward Kelly, a solicitor acting for the defendants, has sworn an affidavit on 2 May 2003 and exhibited a number of agreements relating to costs.

Two of the agreements concerned were "No Win No Fee" agreements between the first plaintiff, Johnson Tiles Pty Ltd, and Slater & Gordon, a firm of solicitors, and a "No Win No Fee" agreement between the second plaintiff, Gregory A. Dean, with Morris Blackburn & Co, Solicitors. As the terms of each agreement are practically the same, it is only necessary to concentrate on the agreement between the first plaintiff and Slater & Gordon. In addition, Mr Kelly exhibited a copy of an affidavit which had been filed in the Federal Court proceeding by Michael Proud on 7 September 1999. Mr Proud is a partner of Phillips Fox Lawyers who were also acting for the plaintiffs in this proceeding. They were acting representing the interests of various insurers as was another firm, Messrs Lander and Rogers. Mr Proud stated that there were claims made on insurance companies as a result of the gas stoppage totalling over $300,000,000 and he produced an agreement between the four firms of solicitors who acted for the plaintiff. The agreement set out the proportions of costs that were to be paid by various interested parties, for the work undertaken by the various solicitors in the class action.

The plaintiffs also adduced evidence on this matter. Lisa Michelle Nichols, a partner of Slater & Gordon, swore an affidavit on 14 May 2003 and annexed thereto a letter signed by the finance director, Mr George Pappas, of Johnson Tiles Pty Ltd dated 12 May 2003 addressed to Ms Nichols. Mr Pappas wrote that the submissions put by Esso that Johnson Tiles cannot recover costs from Esso were wrong because "the agreement was quite contrary to our position in this matter". He went on to say, "For Johnson Tiles this outcome was never the intention of the retainer agreement."

Objection was taken to the letter on the ground that it was irrelevant. It was submitted that the subjective thoughts of a party to the agreement as to what it means is irrelevant to a construction of any agreement. In my opinion, the letter is inadmissible. The test is an objective one. The court is not concerned with looking into the mind of a party to the agreement. It is confined to the objective manifestations of the common intention of the parties. See Codelfa Construction Pty Ltd v State Rail Authority of New South Wales.[14]

It is necessary to construe the agreements. The agreement entered into with Slater & Gordon is dated 29 September 1998. It contains on the first page a summary of the terms. Two terms are important. The first relates to group litigation. The agreement provided -

"We (defined as Slater & Gordon) expect to act for other people or organisations who have been effected (sic) by the incident. The fact that we act for other people or organisations with similar claims, means that the cost of the work can be shared amongst many claimants. This type of litigation is referred to by Slater & Gordon as `group litigation'. In our experience there is initially a concentration of group work in group litigation projects."

Immediately below that term was typed, in bold type -

"YOU WILL NOT PAY ANY FEES, DISBURSEMENTS, CHARGES OR EXPENSES TO US UNLESS YOUR CLAIM FOR COMPENSATION IS SUCCESSFUL AND YOU RECEIVE COMPENSATION."

It was submitted on behalf of the defendants that as a result of that agreement, Johnson Tiles could not possibly be liable for any costs because it has failed in the proceeding. In other words, Johnson Tiles was not successful and did not receive any compensation.

The agreement relating to Mr Dean contains a similar clause.

It is said that in those circumstances there is no liability on Johnson Tiles to pay any costs. Since the Act only permits costs orders in relation to parties and not claimants, it is submitted that both plaintiffs are not entitled to costs. It is submitted that that is a just result because under the Act, a successful party has no right to claim costs against any group member unless specific orders are made during the course of the litigation which would make those members parties to the proceeding.

The submission of the defendants is superficially attractive. Especially bearing in mind that solicitors who advertise on a "No Win No Fee" basis for conducting litigation do so very much aware that if the litigation fails they will not be paid. In other words, they are prepared to take the risk of that happening. To compensate them for that risk, which may be substantial in some cases, the agreement invariably contains a success fee. In the present agreement there is such a term which provides -

"If you are successful, we are entitled to charge a premium of 25% on the individual fees, group fees and disbursements. Note: this is not a percentage of compensation, it is a premium added to fees and disbursements."

In addition, Slater & Gordon gave a guarantee as follows -

"Your Legal Costs - Our Guarantee In the event of successful outcome, we guarantee that your legal fees will under no circumstances exceed 30% of the compensation you recover."

The indemnity principle stated in Gundry v Sainsbury, supra, has been applied in a number of cases in England. See R v Miller[15] and in Australia, see recent example Wentworth v Rogers.[16] There are cases which establish exceptions to the rule. In R v Archbishop of Canterbury[17], the Archbishop of Canterbury was represented by the Treasury solicitor and was not obliged to pay any costs, but it was held that as the successful litigant he was entitled to his costs by virtue of the interest that the Crown had in the subject matter of the litigation. See Lenthall v Hillson[18] and Blackall v Trotter (No. 1).[19] The cases also establish that a legal practitioner employed by a department who acted for a successful informant was not a ground for refusing a costs order in favour of the informant. The principle also extends to solicitors employed by litigant corporations. See Commonwealth Bank of Australia v Hattersley.[20] Costs have also been allowed to the successful litigant who was legally aided. See Latoudis v Casey.[21]

The indemnity principle has not been applied to deny a successful litigant costs in cases where it was not established that the successful litigant would not have to pay costs under any circumstances.

In Adams v London Improved Motor Coach Builders Ltd,[22] the plaintiff brought an action against his employers for wrongful dismissal. He was successful and was awarded costs. It was argued that he was not entitled to recover anything by way of costs as his union had retained the solicitors in the case and it was the union to which the solicitors looked for payment of the costs. The Court of Appeal rejected the argument. The principle was stated by Banks LJ at p.501:

"When once it is established that the solicitors were acting for the plaintiff with his knowledge and assent, it seems to me that he became liable to the solicitors for costs, and that liability would not be excluded merely because the union also undertook to pay the costs. It is necessary to go a step further and prove that there was a bargain, either between the union and the solicitors, or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs." (Emphasis added)

I also refer to what Atkin LJ said at p.504 to the same effect. Both judgments were cited with approval by Viscount Dilhorne in Davies v Taylor (No. 2).[23]

In the present case, the "No Win No Fee" agreement dealt with the claims brought by the plaintiffs in their own name. The agreements did not deal with their obligation in relation to the proceedings overall in which they also represented members of particular groups of gas customers and stood-down workers. The relationship between the plaintiffs and their solicitors is a client-solicitor retainer. The evidence satisfies the court that in relation to their personal claims they would not be liable for any costs if they failed in respect to their claims. But the agreements did not address their liability for costs in relation to the representative aspect of the proceeding. It cannot be said, therefore, that under no circumstances was either plaintiff not liable for costs.

In my opinion, the plaintiffs are entitled to recover those costs which are attributable to issues which related to the claims of the business users. Strictly, the only plaintiff entitled to costs is Johnson Tiles because Mr Dean did not represent the interests of business users. However, no party has sought to distinguish between the plaintiffs and as the proceeding was prosecuted by both plaintiffs and the orders that I will make specifically deal with issues, it is unnecessary to distinguish between them.

This conclusion, in my view, gives effect to the object of group proceedings.

The group proceeding is instituted and conducted on the basis that there will be a limited number of parties who will represent the interests of others, usually many potential claimants. This is clear from s.33C. It relates to the commencement of the proceeding and provides that if seven or more persons have claims against the same person then a proceeding may be commenced by one or more of those as representing "some or all of them".

Section 33D(1) concerns standing. The person who has a sufficient interest to commence the proceeding has "a sufficient interest to commence a group proceeding against that other person on behalf of other persons referred to in that paragraph". (Emphasis added).

More importantly, s.33D(2) enables the person who commenced the group proceeding to continue with it even though he ceases to have a claim. It provides -

"(2) If a person has commenced a group proceeding, that person retains a sufficient interest -

(a) to continue the proceeding; and

(b) to bring an appeal from a judgment in the proceeding;

(c) even though the person ceases to have a claim against the defendant."

The group procedure does not require the consent of any claimant save for a very select group (s.33E(2)) and proceeds on the basis that all persons who may have a claim in relation to the common questions of law and fact will be bound by the result of the litigation unless they have opted out.

There is a degree of unreality about the defendants' submissions, bearing in mind that the two plaintiffs represent a substantial number of unidentified claimants at this stage. Of course, some of the claimants have already been identified and some gave evidence in the proceeding. It would indeed be a strange result if the plaintiffs who are representing this large body of claimants and who, by prosecuting the proceeding and obtaining answers to the common questions of law and fact in their favour which will benefit other claimants, could not get their costs in relation to the successful part of the proceeding which benefits the group members.

The "No Win No Fee" agreement clearly relates on the face of it to the personal claim brought by Johnson Tiles. The agreement clearly contemplates that there may be other parties involved in group proceedings. In my view, the agreement deals with the situation of Johnson Tiles' claim only. It has failed in the proceeding and indeed will not recover any costs against the defendants in respect of its claim and, further, will be obliged to pay costs to the defendants in respect to its claim. It will not be liable to pay its solicitors for the costs incurred in bringing and prosecuting its claims.

But the plaintiffs represent the interests of others.

It would defeat the purpose of group proceedings if the unsuccessful plaintiff, although obliged to pay costs in respect of its or his own personal claims, nevertheless is not entitled to recover costs in relation to the representative aspect of the proceeding which has been in part successful. That would be a nonsense. In this case, the plaintiffs have failed. They are not entitled to their own costs. But nevertheless, they are entitled to recover costs in so far as there has been success on behalf of the other group members. There is no evidence that under no circumstances would they be liable for costs in relation to legal services performed in respect of the issues relating to members of the business users groups. The "No Win No Fee" agreements are concerned only with the liability for costs for the plaintiffs' personal claims.

It follows that they are entitled to recover costs on behalf of the group proceeding as a whole in relation to those issues which they have successfully prosecuted.

That now brings me to the question of what costs orders should be made. The parties, in their submissions, have requested the court to make orders in their favour on a proportional basis. The plaintiffs seek an order that they receive 50% of their costs and that there be no order in favour of the defendants. The defendants, for their part, seek 90% of their costs. The approaches made proceed on the assumption that the court can and should make some assessment of the success of each party as a proportion of the whole of the litigation, which of course includes preparation as well as the hearing and then by what might be described as a debit-credit approach, work out what is a fair and just end result in the form of a percentage order.

This is a big case. I expect the costs to be many, many millions of dollars. Affidavits have been filed on behalf of the plaintiffs and the defendants in relation to the question of determining their costs on a proportional basis and it is clear from the affidavits that there is a real dispute as to the amount of work involved. There is no way that the court can resolve the dispute. Resolution of such disputes is the work of the Taxing Master. If the court tried to make a determination of the percentages based upon the observations that I have made of the trial and the success of the parties in relation to issues, aided by those affidavits, I would have no faith in the end result being a fair and just one as between the parties. In my view, the exercise is impossible. I would be in the realm of conjecture and speculation.

In my opinion, the only fair and just way to determine the costs issues is to go down what I will call the "issue path". In other words, the party who has been successful in relation to an issue is entitled to its costs in relation to that issue. Having made orders to that effect, the court would then order that the costs be set off.

Rule 63.04(1) empowers the court to make an order for costs in relation to a particular question or to a particular part of a proceeding. Defendants' counsel relied upon Rule 63.04(2) which requires the court to fix "the proportion of the total costs of the proceeding which is attributable to the particular question in or the particular part of the proceeding".

The object of paragraph 2 is to give as much assistance as possible to the Taxing Master.[24] Although the paragraph is expressed in mandatory terms, in my view the court is not bound to fix the proportions where it makes orders in relation to particular questions. The mandatory provision is to be treated as discretionary or directory - see In re Davis.[25] I agree that making orders in relation to particular issues often leads to complicated and expensive taxations and that paragraph 2 should be complied with to avoid that situation arising and to give as much assistance to the Taxing Master as possible. However, there are some cases, and this is one of them, where it is not possible for the court to comply with Rule 63.04(2). I do not propose to do so. Although the task will indeed be forbidding, there are costs consultants who, if properly instructed, should be able to make some assessment of the costs attributable to issues and the Taxing Master is indeed a very experienced judicial officer. I am confident he will be able to determine the costs attributable to the issues.

The plaintiffs have succeeded in relation to some common questions of law and fact and in my view, in accordance with the usual order, they are entitled to their costs. On the other hand, they have failed in respect to a number of issues, some of which are of substance, and the defendants in my opinion are entitled to their costs against the plaintiffs in respect to those issues. It is my opinion that a general provision for costs in favour of the plaintiffs should be made, subject to exceptions concerning issues, and the defendants are entitled to their costs of the issues which they succeeded on. That is the only fair way to proceed.

I prepared a draft of proposed orders giving effect to that scheme and invited the parties to consider the approach. Whilst the parties, and in particular the solicitors, would much prefer a percentage approach, in my opinion it was an impossible task for the court to fairly and justly reach such a result. The effect of the first order is that the plaintiffs are entitled to the costs reserved. There were many directions hearings and unless the hearings were solely referrable to a particular issue the plaintiffs are to get their costs of the directions hearings. Mr Middleton QC, on behalf of the defendants, submitted that this is unfair and the orders should be reversed. Mr Middleton QC submitted that the reality was the defendants had had more success than the plaintiffs and therefore the defendants should have the general order for costs in their favour. He submitted the general order in favour of the plaintiffs was unfair and unjust. In the end result, the costs orders may result in a payment to the defendants. But the submission overlooks the important fact that the plaintiffs had to institute and prosecute the proceedings to obtain relief. They have had success in respect of members of the business users group.

They had the carriage of the proceeding. They had to come to court to prosecute the claims, vindicate rights and obtain relief. The various interlocutory hearings were necessary along the path of the litigation. In my opinion, the plaintiffs are entitled to their costs of prosecuting the litigation and nothing put by the defendants persuades me to apply a different rule.

I am prepared to grant leave to appeal in this proceeding. The issues involve areas of the law which are in a state of evolution. The size of the claims could be as high as nearly one billion dollars. The bulk of the claims have failed. It is most appropriate that I should grant leave to appeal to the Court of Appeal. I proposed only to grant leave to appeal to the plaintiffs and the defendants, but the third and fourth parties sought that right also, and since the other parties have not objected to that course I am prepared to grant leave to appeal to all parties.

Subject to any further submissions by counsel I am prepared to make the following orders.

In proceeding No. 5975 of 2001 being the transferred Federal Court proceeding -

(1) That the order made 8 June 2001 staying the proceeding be lifted.

(2) That the second applicant, Douglas Chalmers, cease to be a party to that proceeding other than as one of the group members on whose behalf the proceeding was brought.

(3) That the third applicant, Gregory Alan Dean, become the second applicant in the transferred proceeding.

(4) That the proceeding, No. 5975 of 2001, be consolidated with proceeding No. 5538 of 2001 and continue as one proceeding.

(5) That the consolidated proceeding continue as proceeding No. 5538 of 2001 and all pleadings in that proceeding be the pleadings in the consolidated proceeding.

(6) That leave be granted to Douglas Chalmers to make application in respect of the order removing him as a party.

(7) That the plaintiffs' costs of their summons filed 12 May 2003 seeking consolidation be paid by the defendants.

(1) That proceedings No. 5538 of 2001, and No. 5975 of 2001 be consolidated and continue as one proceeding.

(2) That the consolidated proceedings continue as proceeding No. 5538 of 2001 and all pleadings in that proceeding be the pleadings in the consolidated proceeding.

(3) That the plaintiff's costs of their summons filed 12 May 2003 seeking consolidation be paid by the defendants.

(4) Without prejudice to any orders for costs made by the Federal Court in the transferred proceedings, that the claims, cross-claims and claims in the proceedings brought against cross-respondents be dismissed.

(5) The parties having proceeded to trial in respect of the questions of fact and law pursuant to paragraph 4 of the order of the court made on 5 October 2001, the court answered the said questions as follows:

(I) Did the defendants owe a duty to exercise reasonable skill and care in designing, installing, operating and maintaining the Longford Plant to avoid -

(i) physical damage to property of; and/or

(ii) economic loss resulting from damage to property of; and/or

(iii) economic loss which did not result from damage to property of -

(a) the first plaintiff;

(b) business users who were supplied with gas -

leaving aside any fact relevant to the issues which are peculiar to the said plaintiff or a particular group member?

Answer: (a) and (b) (i) Yes.

(ii) Yes.

(iii) No.

(II) Did the defendants owe a duty to exercise reasonable skill and care in designing, installing, operating and maintaining the Longford Plant to avoid -

(i) physical damage to property of; and/or

(ii) economic loss resulting from damage to property of; and/or

(iii) economic loss which did not result from damage to property of -

domestic users leaving aside any fact relevant to the issues which are peculiar to a particular group member?

Answer: (i) No.

(ii) No.

(iii) No.

(III) Did the defendants owe a duty to exercise reasonable skill and care in designing, installing, operating and maintaining the Longford Plant to avoid stood down workers losing wages or annual leave entitlements as a result of being stood down from their employment by reason of the September stoppage, leaving aside any fact relevant to the issues which are peculiar to the second plaintiff or a particular group member?

Answer: No.

(IV) Was the interruption to the gas supply from the Longford Plant on or after 25 September 1998 caused by the negligence of the defendants, their employees and/or agents?

Answer: Yes.

(V) Did the first and second plaintiffs and any group members who give evidence as sample group members, suffer some loss as a result of the interruption or cessation of the gas supply on or after 25 September 1998 (unquantified)?

Barrett Burston Malting Co Pty Ltd and Nando's Australia Pty Ltd suffered compensable loss, the plaintiffs and other group members who gave evidence did not suffer compensable loss.

(VI) If the defendants or either of them breached any duty of care to the plaintiffs and any group members who suffered damage from the interruption or cessation of the supply, was the negligence a cause of the damage suffered by -

(i) the first plaintiff and/or the business user group members who are permitted to give evidence as sample group members;

(ii) the second plaintiff and/or the domestic user group members who are permitted to give evidence as sample group members;

(iii) the second plaintiff and/or any stood down worker group members who are permitted to give evidence as sample group members -

or was the chain of causation broken by the act or omission of someone other than the defendants, leaving aside any fact relevant to the issues which are peculiar to any plaintiff or a particular group member?

Save that the defendants' negligence was a cause of damage suffered by Barrett Burston and Nando's, no.

(6) Pursuant to s.33ZB(a) of the Supreme Court Act 1985 (Vic) ("the Act"), declare that the persons affected by the judgment, including the orders made in respect of the claims in the Federal Court which were transferred to this Court, are the parties herein, together with the group members who are defined in the fourth further amended statement of claim dated 11 June 2002 as follows:

(a) "Business users", being persons including corporations (but excluding the defendants) who on 25 September 1998 were gas users for the purpose of operating a business (including a manufacturing business) and who suffered damage to property and/or pecuniary loss as a result of the interruption or cessation of supply of gas from the Longford Plant commencing on and from 25 September 1998 ("the September stoppage");

(b) "Domestic users", being persons who on 25 September 1998 were gas users for domestic purposes and who suffered damage to property and/or pecuniary loss as a result of the September stoppage;

(c) "Stood-down workers", being persons who were stood down from their employment as a result of the September stoppage and suffered pecuniary loss as a consequence,

save for those group members who have opted out of the representative proceeding pursuant to notices filed with the court pursuant to s.33J of the Act.

(7) There be judgment for the defendants in respect of the claims made by the plaintiffs on their own behalf.

(8) That the plaintiffs, defendants and third parties shall bear their own costs of and incidental to establishing the proof of the facts, and the authenticity of the documents, referred to in the notices to admit described in the attachment to this order headed "Notices to Admit".

(9) On or before 15 July 2003, the plaintiffs' representatives cause to be published on two occasions, at least 14 days apart, quarter page advertisements in the form of Annexure A attached to the judgment in each of The Age and The Herald Sun newspapers.

(10) That the defendants pay the costs of the advertisements.

(11) On or before 8 September 2003, the plaintiffs' representatives file and serve a list of the names and addresses of each person who has engaged them to seek compensation in these proceedings, and also file and serve in respect of each claimant, particulars of the claim.

(12) Direct that until further order no person have access to:

(a) the notices filed by group members in accordance with these orders;

(b) the lists filed by the plaintiffs' representatives in accordance with these orders;

other than the legal representatives of the parties

(13) For the purposes of the remainder of this proceeding the group is constituted by:

(a) The persons who identify themselves to the Supreme Court by opting in by responding to the notice published in accordance with these orders; and

(b) the persons identified in the lists by the plaintiffs' representative in accordance with these orders,

and, subject to further order, no other person is entitled to seek compensation from the defendants in respect to the matters alleged in the statement of claim.

(14) That the defendants pay the plaintiffs' costs of the proceeding, including the transferred proceeding, including reserved costs and the costs of and incidental to the issues pleaded by the defendants in paragraphs 13.3 to 13.11 of their third further amended defence dated 4 September 2002 ("defence") and the presentation of the economic evidence, save and except for the costs solely referrable to the following issues

(a) the defendants' duty of care to avoid purely economic loss save for the issues raised by paragraphs 9.7 to 9.27 (inclusive) of the defence;

(b) the claims by or on behalf of domestic users and stood down workers to recover compensation;

(c) the claims by the first plaintiff, Johnson Tiles Pty Ltd, that it suffered loss and damages;

(d) the claims by the second plaintiff, Gregory Alan Dean, that he suffered loss and damages;

(e) the claims by Regency Hotels Pty Ltd and Wilke and Company Pty Ltd that they suffered loss and damage;

(f) the claims by Mr Iain MacLennan and Ms Marianne Chesterfield that they suffered loss and damages;

(g) the claim by Miss Lynette Barbara Gladwin that she suffered loss and damage;

(15) That the plaintiffs pay the defendants' costs solely referrable to the following issues, save and except for the presentation of the economic evidence -

(a) the defendants' duty of care to avoid purely economic loss save for the issues raised by paragraphs 9.7 - 9.27 of the defence;

(b) the claims made on behalf of the domestic users and stood down workers to recover compensation;

(c) the claims by the first plaintiff, Johnson Tiles Pty Ltd that it suffered loss and damage;

(d) the claims by the second plaintiff, Gregory Alan Dean, that he suffered loss and damage;

(e) the claims by Regency Hotels Pty Ltd and Wilke and Company Pty Ltd that they suffered loss and damage;

(f) the claims by Mr Iain MacLennan and Ms Marianne Chesterfield that they suffered loss and damages;

(g) the claim by Miss Lynette Barbara Gladwin that she suffered loss and damage.

(16) That the costs be set off.

(17) That the questions of costs of the third and fourth parties be reserved.

(18) That liberty be reserved to the defendants to apply to make application for any order that their costs or any part thereof, including any liability to pay the costs of any other party or to indemnify any other party for costs, be paid by a non-party.

(19) The orders for costs shall not derogate from the rights and obligations of the parties in relation to costs payable,

(a) pursuant to any orders made in the Federal Court of Australia in the proceeding cross-vested and now consolidated;

(b) pursuant to any agreement made between the parties with respect to the costs of or incidental to particular issues in the proceeding, which costs are payable by operation of Rule 63.10(f) upon the filing of the agreement;

(c) in respect to the costs of proof of a particular fact or the authenticity of a particular document by operation of Rule 63.18(a) and (b).

(20) That to the extent necessary, leave is granted to all parties to appeal this judgment.

(21) That any party appealing, file and serve their notice of appeal by 4.00 p.m. on 31 July 2003.

(22) That liberty is reserved to all parties to apply generally.

"A"

CLASS ACTION - LONGFORD GAS SUPPLY INTERRUPTION

COURT NOTICE

IF YOU DO NOT COMPLY WITH THIS NOTICE YOU MAY LOSE YOUR RIGHT TO COMPENSATION

A Supreme Court representative proceeding was commenced by the named Plaintiffs (Johnson Tiles Pty Ltd and Gregory Allan Dean) on behalf of the group members against Esso. The Plaintiffs claim, on behalf of the group members, compensation for loss caused by the interruption to the supply of gas between 28 September and 8 October 1998 following the fire at the Longford Gas Plant No. 1 on 25 September 1998 ("the September stoppage").

Judgment in the Supreme Court proceeding was delivered on 20 February 2003. The judgment can be viewed at http://www.austlii.edu.au/au/casesNICNSC/2003/27.html.

The Supreme Court decided that the only group members who are entitled to compensation are business users of gas who:

(a) suffered physical damage to property (such as damage to equipment, machinery, tools or raw materials; spoilage of stock or food, etc) caused by the interruption of the supply of gas following the September stoppage; and

(b) suffered economic loss resulting from that damage to property (such as the loss of profit on the sale of spoiled stock or food etc; the cost of disposing of spoiled stock etc).

You can make a claim if, in September 1998, you had a gas supply contract for the purposes of conducting a business and you suffered physical damage to property of the business.

All other group members (including domestic users of gas and stood down workers) have no recoverable claim against Esso.

If you are a business user of gas who wishes to claim compensation, you are required to give notice of your claim. Notice is hereby given to persons who believe that they are entitled to claim compensation that:

1. The Court has fixed Monday 1 September 2003 as the date by which you must give notice that you wish to pursue compensation. You must give such notice in writing to the Prothonotary of the Supreme Court of Victoria, 210 William St, Melbourne, Vic 3000.

2. You should use the form set out below.

3. In the notice you should state your name and address and that you seek compensation in the case of Johnson Tiles v Esso.

4. IF YOU DO NOT GIVE NOTICE BY 1 SEPTEMBER 2003 YOU WILL LOSE ALL YOUR RIGHTS TO COMPENSATION FOR LOSSES YOU SUFFERED AS A RESULT OF THE INTERRUPTION TO THE GAS SUPPLY BETWEEN 28 SEPTEMBER 1998 AND 8 OCTOBER 1998.

This notice does not apply to any person who previously filed an opt out notice.

The Supreme Court will make further orders detailing the procedures for the final determination of claims at a later date.

However, you should be aware that the Court may order that those procedures cannot be undertaken until all appeals are exhausted and this may take some time.

SCHEDULE

Notice of Claim by Business User Group Members

To: The Prothonotary

Supreme Court of Victoria

210 William St,

Melbourne,

Vic, 3000

No. 5538 of 2001

Johnson Tiles Pty Ltd (ACN 004 576 103) and Anor

v

Esso Australia Pty Ltd (ACN 000 018 566) and Anor

Particulars of Claim by business user of gas which suffered property damage (including consequential economic loss resulting from damage to property) as a result of the September Stoppage:

Name of business:

Address:

Contact Person:

Phone:

Nature of Claim: (please provide a brief description of the claim and the circumstances giving rise to the claim) .................................................................................................................................................................................................................................................................................................................................................................................

The claim is made up as follows:

Property Damage $...........................

(Nature of property damaged)

.................................................................................................................................................................................................................................................................................................................................................................................

Consequential economic loss $..............................

(Nature of Consequential economic loss)

.................................................................................................................................................................................................................................................................................................................................................................................

Total Claim: $...............................

If legal practitioner has been retained, name, address and telephone number of practitioner.

.................................................................................................................................................................................................................................................................................................................................................................................

Signed ......................................................

Name and Position: .........................................................................................................................

Date: ..............................................

[5] See observations of Kirby J at paras 263-268.

Johnson Tiles P/L v Esso Aust P/L

At a glance

Court

Decision date

Before

Source

Judgment (216 paragraphs)

Parties

Cases Cited (9)

Cited By (1)