Plaintiff v Defendant

2 Pursuant to Part 4A of the Supreme Court Act 1986, the plaintiff commenced a group proceeding, or class action, on behalf of all those who suffered loss of or damage to property as a result of the fire. The trial of this proceeding commenced on 3 September 2012 before J. Forrest J, and concluded on 13 November 2012. Judgment was due to be delivered by his Honour on 19 December 2012. However, on that date, terms of settlement (headed "Heads of Agreement") were executed by the plaintiff and the defendant. The essential terms of the settlement agreement provide for a payment of 100% of each claimant's loss, plus interest calculated in accordance with the Supreme Court Act from 1 January 2013 at the rate fixed under s 2 of the Penalty Interest Rates Act 1983 plus party/party costs. Section 33V of the Supreme Court Act provides that a group proceeding may not be settled without the approval of the Court. This is the application for the approval of the settlement of this proceeding.

3 The plaintiff's case was that the fire commenced as a result of the clashing of two or more conductors which emitted at least one hot aluminium particle, causing the grass on the southern side of the highway to catch fire. The plaintiff contended that the risk of conductors clashing with the potential to cause a fire was well known to Powercor both generally, and particularly, in relation to the Colac to Camperdown high voltage power line. The plaintiff's case was that, given the history of the line and the proximity of high and low voltage power lines, the conductors should have been placed on vertical pin insulators which would have increased the clearance or gap between conductors of the two different circuits (22kV and 66kV). Alternatively, the plaintiff contended that spreaders, which would secure a clearance between conductors on the same high voltage circuit, should have been utilised. Such steps, it was said, would have reduced or eliminated the risk of clashing.

4 Powercor disputed that the fire was ignited by particles from the clashing of conductors. Its case at trial was that it was impossible for the conductors to have caused the fire, despite two eye witnesses observing flare and sparks consistent with the clashing of conductors, and a fire then commencing 35 metres away within two minutes. Alternatively, Powercor contended that if the fire did commence as a result of a clashing of conductors then, in any event, its system of maintenance and repair to the line was reasonable. In particular, Powercor contended that it had responded adequately to previous incidents of clashing on the line.

5 At trial, the issues between the parties concerned questions of duty, breach of duty and causation. An examination of the transcript, written submissions and various documentary exhibits discloses that the proceeding was a difficult, hard fought proceeding involving some significant complexities.

6 The settlement agreement provides for a payment of 100% of each claimant's losses, together with interest calculated in accordance with the Supreme Court Act from 1 January 2013 at the rate fixed under s 2 of the Penalty Interest Rates Act plus party/party costs. These costs included the party/party costs of each assessment. In essence, the compromise reached between the parties involves the plaintiff and group members giving up any entitlement they might have had to interest from the date the proceeding commenced (April 2010) to 31 December 2012.

7 Unlike other Black Saturday bushfire class action settlements, the settlement agreement in this case does not contain any claims assessment principles.[1] The question of claims assessment is dealt with in clauses 5.1 and 5.2 of the settlement agreement. Those clauses provide:

"5.1 All issues regarding the assessment of losses will be determined by the Court or by agreement.

5.2 It is agreed that Maddens will provide proposed principles of assessment of damages by no later than 23 January 2013 to which Powercor will respond by 1 February 2013. In the event that agreement is not reached on principles of assessment within seven days thereafter, then any remaining points of principle are to be subject to mediation to occur as soon as possible thereafter with the mediator as Tim McFarlane."

8 While clause 5.1 of the settlement agreement does not present any problem on this application, clause 5.2 requires more detailed consideration. If the settlement agreement is approved, there can be no difficulty in individual group members reaching subsequent agreements with the defendant as to principles to be applied in the assessment of those individuals' claims. To that extent, clause 5.2 poses no problem. However, if it is contemplated that the plaintiff and/or Maddens might reach subsequent agreements binding upon all group members then it may well be that any such agreement will require the approval of the Court, following notice being given to group members.[2]

9 There are two further matters of substance dealt with in the settlement agreement. First, clause 3.1(b)(v) provides that, as part of the approval application, the plaintiff will apply for class closure orders.[3] Secondly, clause 3.1(b)(vii) provides that the plaintiff will apply for cost contribution orders in respect of costs incurred by him and not recovered from the defendant.[4] As part of this application, the plaintiff has applied for class closure orders and costs contribution orders as envisaged in clause 3.1(b)(v) and (vii). I will deal further with these issues below.

10 The principles to be applied in an application for the approval of a settlement of a group proceeding are well known.[5] Essentially, the Court is required to assess whether the settlement is fair and reasonable as between the parties and as between the plaintiff and individual group members. Specifically, so long as the settlement falls within the range of fair and reasonable outcomes, taking everything into account, it should be regarded as qualifying for approval under s 33V.

11 While this proceeding was hard fought (and particularly so on the question of causation), an examination of the evidence reveals that this was a strong plaintiff's case. That said, no case is ever a certainty. As was said by Megarry J in John v Rees:[6]

"As everybody who has anything to do with the law well knows, the path of the law is strewn with examples of open and shut cases which somehow, were not; of unanswerable charges which, in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change."

12 Having considered all of the evidence led and tendered in this proceeding, I accept that there was only a relatively small risk of the plaintiff failing to establish a cause of action against the defendant.

13 The settlement agreement involves the plaintiff and group members foregoing any entitlement to interest they might have had between the commencement of the proceeding and 31 December 2012.[7] However, under the settlement agreement, the plaintiff and group members are entitled to interest calculated in accordance with the Supreme Court Act from 1 January 2013 at the rate fixed under s 2 of the Penalty Interest Rates Act. If the Court was to take the approach taken by Gillard J in Johnson Tiles Pty Ltd & Ors v Esso Australia Pty Ltd & Ors (No 3),[8] then interest at penalty interest rates might not necessarily have been awarded to the plaintiff or group members in respect of any period. The approach taken in Johnson Tiles would see the plaintiff and group members being entitled to interest at compensatory rates (without a penalty component) from the commencement of the proceeding. Further, the inability to recover any compensatory interest before 1 January 2013 falls to be considered against an entitlement to recover interest calculated in accordance with the Supreme Court Act at the more generous penalty interest rates from 1 January 2013.

14 Additionally, it is to be remembered that not all group members would necessarily be entitled to interest on the total of their respective claims from the commencement of the proceeding. There are likely to be some amounts allowed for claims in respect of expenses or amounts not yet incurred. When one considers this issue and the question of whether any interest awarded would have been awarded at penalty interest rates, one can see that the concession made by the plaintiff in the settlement agreement is quite modest.[9] In the circumstances, I have no doubt that the settlement agreement is fair and reasonable as between the parties. It remains to consider the position between the plaintiff and group members and the application for class closure orders and costs contribution orders.

15 So far as the position between the plaintiff and group members is concerned, the only possible relevant difference between any of them concerns the possibility that a particular group member (or class of group members) may have had a better claim to interest for the period from the commencement of the proceeding until 31 December 2012 than the plaintiff or other group members. However, it should be noted that no group member has come forward to make any such claim - and there is no material to suggest that the point is of anything other than theoretical significance. In the end I have concluded that having regard to the possible compensatory interest rates that might have applied to parts of particular claims, it is unlikely that any real injustice is done by the giving up of interest for the period prior to 1 January 2013. Any such interest would likely have been a relatively small fraction of the relevant claim (which it is to be remembered is being allowed at 100 percent). Further, during the approval application, I was told that the group member with the best claim for interest, for the period from the commencement of the proceeding until 31 December 2012, was content with the proposed settlement, and in particular the terms of the agreement as to the payment of interest. Additionally, the fact that no group member has complained of any unfairness in this regard (or at all) is a matter properly taken into account in considering whether the settlement agreement should be approved.

16 I turn now to the application for class closure orders and costs contribution orders. The orders applied for are in the same terms as have been approved in other Black Saturday bushfire class action approvals.[10] For the same reasons as those given in Thomas v Powercor[11] I am prepared to make the class closure orders and costs contribution orders sought on this application.

17 Finally I turn to clause 5.2 of the settlement agreement. This clause falls to be applied in the context that the class will be closed. Clearly it is within the competence of each group member to expressly enter into an agreement with Powercor as to any principles upon which his, her or its claim might be assessed. The same might be said of any group of group members. It seems to me that a difficulty might only arise if one or some group members purport to enter into an agreement that is said to be binding upon all group members - and particularly so if such an agreement involves assessment principles that might (at least arguably) operate preferentially in relation to one or some group members.

18 The defendant suggests that any problem that might be caused by any group member being dissatisfied with an agreement reached in relation to principles of assessment might be obviated by the granting of liberty to apply. Having regard to the existence of clause 5.2, I propose to grant liberty to apply as suggested by the defendant. However, and subject to hearing further argument (if it becomes necessary), I would have thought that it is not permissible for the parties to enter into an agreement under clause 5.2 that purports to bind a group member who does not wish to be a party to (or bound by) that agreement. All of that said, I do not propose to let clause 5.2 stand in the way of the approval of this settlement.

19 The settlement of this proceeding entered into between the plaintiff and the defendant will be approved: it is both fair and reasonable as between the parties and as between the plaintiff and group members.

(1) Pursuant to sections 33V, 33ZF, 33ZG and 33ZJ of the Supreme Court Act, 1958 ("the Act"), settlement of the proceeding upon the terms set out in the document titled "Heads of Agreement" signed by the parties ("Settlement Agreement") is approved.

(2) Pursuant to section 33ZF of the Act, persons who filed Notices of Opting Out in the proceeding have leave to withdraw the said Notices and resume group membership by registering with the plaintiff's solicitors in accordance with paragraph 3 below.

(3) Pursuant to section 33ZG of the Act, group members (including persons referred to in paragraph 2 above) who wish to claim compensation in respect of the claims made on their behalf in the proceeding must register their claims with Maddens Lawyers ("Maddens") by 30 April 2013, in default of which the group member shall not, without further order of the Court or the consent of the defendant, be entitled to participate in or obtain any payment pursuant to the claims assessment procedure set out in the Settlement Agreement.

(4) Pursuant to sections 33X and 33Y of the Act, the form and content of the notice to group members, informing them of the making of Orders (1), (2) and (3) above, set out in Annexure A to these Orders ("Settlement Approval Notice") is approved.

(5) Pursuant to section 33X of the Act, by 4:00pm on 19 February 2013, notice of the approval of the settlement of the proceeding upon the terms set out in the Settlement Agreement be given to group members by the plaintiff, by his solicitors, causing the Settlement Approval Notice to be:

(a) published in two weekday editions of the Warrnambool Standard and Colac Herald newspapers;

(b) where the database of registered group members maintained by the plaintiff's solicitors contains:

• (i) an e-mail address for a group member - emailed to that email address;
• (ii) a postal address for a group member - sent by ordinary pre-paid post to that postal address;

(c) uploaded to the website of the plaintiff's solicitors; and

(d) uploaded to the Court's website.

(6) By 4:00pm on 27 February 2013, the plaintiff by his solicitors file and serve an affidavit as to compliance with Order ( 5) above.

(7) Pursuant to section 33ZF, alternatively the inherent jurisdiction of the Court:

(a) each group member who becomes entitled to a payment of compensation in consequence of the Settlement Agreement shall apply the compensation entitlement first in reimbursement of the plaintiff for the difference between those costs incurred by the plaintiff in respect of the common questions in the proceeding and recovered from Powercor ("recovered costs") and the total costs incurred by the plaintiff in respect of the common questions in the proceeding (that difference being the plaintiff's "unrecovered costs"); and

(b) the reimbursement amount payable by each group member referred to in (a) be calculated by multiplying the total amount of the plaintiff's unrecovered costs by the proportion which the individual group member's compensation entitlement bears to the total value of all compensation entitlements assessed in favour of the plaintiff and group members.

(8) The reimbursements ordered pursuant to Order (7) above be payable and paid to the plaintiff's solicitors, and the said solicitors have leave to calculate and deduct the reimbursement payment of each group member prior to disbursing from their trust account the balance of the compensation entitlement of the group member.

(9) Pursuant to section 33ZF of the Act, Maddens and Powercor each have leave to apply to the Court for orders in respect of any issue arising in relation to the administration of the Settlement Agreement.

(10) The further conduct of the proceeding, including the hearing of any application for orders pursuant to Order (9) above, be referred to the trial judge.

(11) Within 14 days of Maddens disbursing from their trust account the final balance of compensation entitlements to the plaintiff and group members, the plaintiff by his solicitors file and serve an affidavit as to the completion of the claims assessment procedure set out in the Settlement Agreement.

(12) Following the filing of the affidavit referred to in Order (11) above, the proceeding be dismissed with no order as to costs, save for orders made pursuant to taxation of costs in accordance with the Settlement Agreement or in connection with orders made pursuant to Order (9) above.

[1] Cf Thomas v Powercor [2011] VSC 614 [6]-[7]; Perry v Powercor [2012] VSC 113 [6]-[7]; and Mercieca v SPI Electricity Pty Ltd [2012] VSC 204 [25].

[2] Although if the settlement agreement is approved and the class is closed (about which I will say more below) then it may be possible to enter into subsequent agreements to which all relevant group members expressly consent, without the need for an application under s 33V.

[3] See generally, Thomas v Powercor [2011] VSC 614 [31]-[35].

[4] See generally, Thomas v Powercor [2011] VSC 614 [30].

[5] See generally Wheelahan v City of Casey [2011] VSC 215 [59]-[61]; Perry v Powercor [2012] VSC 113 [9]-[16]; In re Timbercorp Securities Limited (applications for the approval of compromises) [2012] VSC 590 [64]-[68]; and Pathway Investments Pty Ltd & Anor v National Australia Bank Limited (No 3) [2012] VSC 625 [2].

[6] [1970] 1 Ch 345, 402.

[7] For the sake of completeness, I should also say that there was a theoretical prospect that the plaintiff might have obtained a more favourable order for costs than a party/party order, if the matter had proceeded to judgment. However, ultimately, I have been persuaded that this was doubtful, and that little (if anything) was given up by an agreement to settle on terms requiring the defendant to pay party/party costs.

[8] [2003] VSC 244 [59]-[75].

[9] For the sake of completeness, I should say that any compensatory interest that might have been awarded for the period prior to 1 January 2013 would likely have been assessed at lower rates than those used in Johnson Tiles Pty Ltd & Ors v Esso Australia Pty Ltd & Ors (No 3) [2003] VSC 244, having regard to interest rates being lower during the period April 2010 to December 2012 than they were for the period September 1998 to July 2003 (being the relevant period in the Johnson Tiles decision).

[10] See Thomas v Powercor Australia Ltd [2011] VSC 614; Perry v Powercor [2012] VSC 113; and Mercieca v SPI Electricity Pty Ltd [2012] VSC 204.

[11] [2011] VSC 614 [30]-[35].