Plaintiff v Defendants

1 Roderick Liesfield is the plaintiff in a group proceeding brought pursuant to Pt 4A of the Supreme Court Act 1986. The claims in the proceeding arise from the fire that ignited near the Murrindindi Mill on Black Saturday in February 2009. Mr Liesfield claims on behalf of himself and group members who suffered injury, property damage or economic loss in the Murrindindi fire.

2 The plaintiff applied for orders substituting Anthony James Thompson for Mr Liesfield, but by leave amended the summons to seek substitution of Dr Katherine Rowe in lieu of Mr Thompson.

3 The court's power to substitute a party is found in r 9.06 of the Supreme Court (General Civil Procedure) Rules 2005.

At any stage of a proceeding the Court may order that -

(a) any person who is not a proper or necessary party, whether or not that person was one originally, cease to be a party;

(b) any of the following persons be added as a party, namely -

(i) a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon; or

(ii) a person between whom and any party to the proceeding there may exist a question arising out of, or relating to, or connected with, any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding;

(c) a person to whom paragraph (b) applies be substituted for one to whom paragraph (a) applies.

4 The application was supported by an affidavit sworn by the plaintiff's solicitor who deposed that Mr Liesfield wished to withdraw as plaintiff. No reason was given. The affidavit stated that Dr Rowe is willing to be the plaintiff, that she is a group member whose husband was killed in the Murrindindi bushfire, and who suffered psychiatric injury and property loss as a result of the fire.

5 The defendants oppose an unconditional substitution contending that any order be made subject to certain conditions as to costs. I will shortly come to the form of the conditions sought. The defendants did not suggest that the substitution in itself would be inappropriate and did not seek to 'maintain a plaintiff who seeks not to be a plaintiff', but only sought to protect their position in respect of the costs incurred up to the time of substitution (pre-substitution costs). The defendants contended there would be uncertainty as to who would be liable, as between Mr Liesfield and Dr Rowe, to pay pre-substitution costs and submitted that a condition was necessary to avoid the possibility that neither Mr Liesfield nor Dr Rowe was liable. The defendants do not seek determination of any actual liability for pre-substitution costs at present.

6 By their written submissions, the defendants contemplated a condition that Dr Rowe be liable for any costs order made in favour of the defendants in respect of pre-substitution costs. In oral argument, Ausnet drew my attention to a similar condition imposed in the Kilmore East bushfire group proceeding. In June 2010, in the Kilmore proceeding substitution of the plaintiff was sought. On 23 July 2010, J Forrest J substituted Carol Anne Matthews for the original plaintiff, Leo Keane. In 'Other Matters', the order ('the 2010 Kilmore orders') noted:

The Court notes that the order [for substitution] was not opposed by [the first defendant] on the basis of an assurance by the proposed substituted plaintiff Carol Anne Matthews through her counsel that:

(b) Mrs Matthews if substituted as plaintiff would be liable to pay any costs order that may be made in favour of [the first defendant] in this proceeding in respect of costs incurred before the date upon which Ms Matthews had been substituted as plaintiff.

In oral argument, Ausnet submitted that substitution should occur upon Dr Rowe proffering a like undertaking that she would be liable to pay any pre-substitution costs. The transcript relating to the 2010 Kilmore orders reveals that the orders and conditions in 'Other Matters' in question were made by consent.[1]

7 It was suggested that a ruling made by J Forrest J in the Kilmore East proceeding[2] related to the 2010 Kilmore orders. Following substitution of Mrs Matthews, it was belatedly discovered that Mr Keane had not in fact instructed or authorised the plaintiff's solicitors to commence the proceeding. Forrest J's ruling and orders regularised the proceeding and were not concerned with any application for substitution or any question of whether to impose costs conditions on a substitution order.

8 The defendants also sought a condition that preserved any liability in Mr Liesfield's for pre-substitution costs. The formulations contemplated that Mr Liesfield be considered to be the plaintiff up to the date of substitution, able to be found liable for any costs order made in favour of the defendants.

9 As neither Mr Liesfield nor Dr Rowe had offered an undertaking or other assurance to the effect of the conditions sought, Ausnet submitted that such conditions were warranted to avoid uncertainty as to who, of Mr Liesfield and Dr Rowe, could be liable to pay pre-substitution costs, as that uncertainty only arose from the fact of substitution. Ausnet submitted that each of Mr Liesfield and Dr Rowe could argue that they might not have responsibility for costs. It submitted that, if an unconditional substitution was made, Mr Liesfield could argue that by reason of the substitution he had no liability for such costs. Dr Rowe could contend that she had no liability for costs incurred before she was substituted.

10 Ausnet did not develop how these contentions might be put. Ausnet submitted it was incumbent on the plaintiff to explain why Dr Rowe should not have to give an undertaking or submit to a condition, because it was the fact of substitution that created or crystallised this uncertainty. Ausnet submitted that uncertainty prejudiced the defendants. Ausnet contended achieving clarity in the potential responsibility for pre-substitution costs was relevant to the discretion whether to order the substitution.

11 I am not persuaded that I should impose a costs condition because Mr Liesfield and Dr Rowe could contend respectively that their liability for pre-substitution costs was released or not engaged by reason of the substitution order, as opposed to contending that the court lacked power to hold either of them liable for those costs. First, the availability to the plaintiff of a meritorious argument going to the court's discretion as to costs would not constitute a relevant form of prejudice. In any event, the defendants might put contentions for exercise of a costs discretion in their favour based on the substitution, such as a contention that both Mr Liesfield and Dr Rowe should pay pre-substitution costs. Secondly, the defendants did not suggest some relevant form of prejudice following a substitution of Dr Rowe, for instance, her impecuniosity when compared Mr Liesfield's wealth.

12 The State Parties supported the submission that Mr Liesfield might argue that he had no liability for costs due to the fact of substitution, and that Dr Rowe might argue that she had no liability for costs up to the time of substitution. They submitted that this consequence followed from the approach taken in respect of the 2010 Kilmore orders and from the legislative scheme for group proceedings. Although r 9.06 is silent as to the costs implications of substitution, s 33ZD of the Supreme Court Act 1986 provides:

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

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

13 The State Parties argued that after substitution Mr Liesfield would then be a mere group member and immune from paying costs, except as authorised by s 33Q or 33R, neither of which are relevant here. Section 33ZD(b) would preclude the court making a costs orders against a former plaintiff. Neither Mr Liesfield nor Dr Rowe could be prejudiced by imposing the condition sought, which was preferable for the sake of clarity.

14 UAM adopted the submissions of Ausnet and the State Parties.

15 The plaintiff submitted that a costs condition should not be imposed, as it would be premature. In the ordinary course, a costs condition of the type sought is not imposed on a substitution but the rule involves a discretionary judgment. The question was whether there is any necessity to impose such a condition in the particular case. Mr Liesfield did not offer any undertaking in respect of pre-substitution costs, and the plaintiff's counsel submitted that each of Mr Liesfield and Dr Rowe could potentially be liable for such costs. The plaintiff's counsel stated that Mr Liesfield and Dr Rowe accept that they are each at risk in respect of pre-substitution costs. There was no uncertainty in a relevant sense. The appropriate course was to determine the issue of costs at the conclusion of the proceeding in the usual way.

16 The plaintiff refuted the submission that the court lacked power to order pre-substitution costs against either or both of Mr Liesfield and Dr Rowe. Section 24 of the Supreme Court Act empowered the court to determine how responsibility for pre-substitution costs should be divided between Mr Liesfield and Dr Rowe (if at all) at the conclusion of the matter. Section 24 provides:

(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.

(2) Nothing in this section alters the practice in any criminal proceeding.

17 In Revian v Dasford Holdings Pty Ltd,[3] which concerned a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 ('Federal Court Act'), French J (as he then was) held that:[4]

Of course, any group member who is substituted as an applicant will become liable to pay the costs of the proceeding thereafter if unsuccessful.

18 In Tongue v Council of the City of Tamworth,[5] the proposed new plaintiff, Reganam Pty Ltd, sought assurance that it would not be liable for pre-substitution costs by a condition to that effect imposed on the substitution.[6] It contended that a class member who is substituted into the role of plaintiff should not thereby become liable for costs incurred prior to substitution when, as a class member, it would otherwise have been immune from liability for those costs, citing French J's observation in Revian. Jacobson J was not persuaded that French J meant that a newly substituted plaintiff would be liable only to pay the costs of the proceeding after the point of substitution. His Honour said:[7]

I do not consider that French J was stating a general rule that in all cases the substituted party will only be liable for costs from the date of the substitution. ... in my view, all that his Honour intended to say by the use of the word 'thereafter' was that, from then on, the substituted party would be liable to a costs order which may include costs incurred before the date of the order.

Jacobson J found no general rule as to what was appropriate: the question of whether such a condition should be imposed must be considered on the particular facts of each case.[8]

19 In Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Ltd,[9] Tracey J considered the same issue. In Auskay, two new plaintiffs applied for substitution for the existing plaintiff. One of the respondents sought a conditional substitution; first, that the outgoing plaintiff would remain liable for pre-substitution costs, and secondly that the two new plaintiffs would be liable for all costs ordered against the plaintiff, whether incurred before or after the date of substitution. The respondent's concern arose from French J's aforementioned remark in Revian. Tracey J said:[10]

I do not consider that French J's dictum carries with it any negative implication which would operate to the detriment of [the respondents].

After discussing the decision of Jacobson J in Tongue, he continued:[11]

... The court has a broad discretionary power, in a representative proceeding, to award costs against a person who was acting as a representative party: see s 43 of the Act. In particular, a successful respondent would not be precluded from seeking an order that a substituted applicant should be liable for costs in the cause incurred prior to the substitution.

I do not, therefore, consider that it is necessary to make the additional orders sought by [the respondent].

20 Section 43(1) of the Federal Court Act, like s 24 of the Supreme Court Act, confers on the Federal Court a broad jurisdiction to award costs in all proceedings before the court and against both parties and non-parties.[12] Section 43(2) provides that in a representative proceeding, the Court may not award costs against a person on whose behalf the proceeding has been commenced, other than a party to the proceeding who is representing such a person. The operative effect of s 43(2) is similar to that of s 33ZD of the Supreme Court Act.

21 The plaintiff submitted that Auskay is authority for the proposition that it is unnecessary to impose the costs conditions sought by the defendants as the court has broad powers to make costs orders under s 24, and I ought follow and apply Tracey J's remarks in the context of the provisions of the Supreme Court Act.

22 I agree, with respect, with Tracey J's observations in Auskay and I accept that those observations are apposite when evaluating the discretionary considerations affecting the making of a substitution order in a group proceeding under Pt 4A of the Supreme Court Act. They make clear that a new plaintiff is not immune from costs incurred prior to substitution.

23 The imposition of a condition concerning liability for pre-substitution costs is unnecessary in respect of the substituted plaintiff Dr Rowe because:

(a) the court has a broad discretionary power in a group proceeding, to award costs against the plaintiff in a group proceeding: see ss 24 and 33ZD of the Act. Although it is not presently necessary to determine the point, I incline to the view that a successful defendant would not be precluded from seeking an order that a substituted plaintiff should be liable for pre-substitution costs.

(b) the court has a broad discretionary power to award costs against persons other than parties to the proceeding: see s 24 of the Act and Knight v FP Special Assets Ltd.[13] Where the non-party is a group member, there is a question raised by the prohibition in s 33ZD against ordering a group member to pay costs that might be thought to affect the amenability of Mr Liesfield to an order for pre-substitution costs that I will come to shortly.

I am not persuaded that the defendants suffer any prejudice in respect of any later application by them for pre-substitution costs against the incoming plaintiff Dr Rowe and that the condition sought by the defendants serves no useful purpose. The court's jurisdiction to award costs should remain unfettered to be exercised at the proper time.

24 The State Parties submitted that, in Tongue, Jacobson J refused to substitute Reganam Pty Ltd as plaintiff because it was only willing to so act subject to a condition that it would not be liable for pre-substitution costs. Instead, Jacobson J gave it leave to apply to be substituted unconditionally. The State Parties found support in this outcome for their argument for a conditional substitution order. But there is no force in that contention. Jacobson J's view,[14] endorsed by Tracey J,[15] and which I find apposite within the context of the Supreme Court Act, was that in the absence of a condition to the contrary, a substituted plaintiff could be held liable for costs whether incurred before or after substitution. The fact that Jacobson J declined to impose a condition that would immunise the new plaintiff from pre-substitution costs does not support the State Parties' argument.

25 I return to the question raised by the prohibition in s 33ZD against ordering a group member to pay costs. The issue is whether a former plaintiff who has been substituted out but who remains a group member might no longer be liable for pre-substitution costs.

26 Plainly, a plaintiff who is substituted out is no longer a party. Although the court has broad powers to order costs against a non-party, arguably the effect of s 33ZD is to immunise a former plaintiff from adverse costs orders, as he is no longer a plaintiff for the purposes of s 33ZD(a) but rather a group member whose liability is determined under s 33ZD(b).

27 In Tongue, Jacobson J stated that a former plaintiff is immune from costs, whereas Tracey J in Auskay finds that a former plaintiff is potentially liable for pre-substitution costs. However, those statements can be reconciled. In my view, the group member's immunity only relates to costs incurred when the group member was not a party to the proceeding. It does not apply to a plaintiff group member.

28 In Tongue, Jacobson J found that s 43(1A) immunised a former plaintiff from liability for costs, despite the general power of the court to order costs against non-parties:[16]

Central to any consideration of costs questions in representative proceedings under Pt IVA of the Act is the principle stated in s 43(1A). This section provides that, in proceedings under Pt IVA subject to two exceptions, the Court may not award costs against a person on whose behalf the proceeding has been commenced 'other than a party to the proceeding who is representing such a person'.

Thus, the rule stated by the High Court in Knight v FP Special Assets Ltd that there is a category of cases in which costs may be ordered against a non-party who has an interest in the subject matter, is not applicable to Pt IVA proceedings. Instead, s 43(1A) makes it clear that costs are to be borne by a representative applicant and not by group members. This provision was inserted in response to a decision of the Full Court of the Supreme Court of Victoria in Burns Philip & Co Ltd v Bhagat in which it was held that the Court had power to order costs against a represented party.

29 However, there were material differences between the circumstances of Mr Tongue and Mr Liesfield. Jacobson J permitted Mr Tongue to withdraw as plaintiff under s 33W, which allows a plaintiff to withdraw where he has settled his individual claim and Mr Tongue had settled his claim. By the settlement, Mr Tongue had agreed not to pursue his individual claim against the respondent and the respondent had agreed not to pursue Mr Tongue for costs and not oppose his substitution as plaintiff.[17] Further, his Honour found that there were particular compelling reasons to allow Mr Tongue to withdraw. He was suffering ill health[18] and he had lost the confidence of the class members.[19] The class had divided over an earlier proposed settlement which the court did not approve, primarily because of the extent of opposition within the class members.[20] In these circumstances the question of a costs liability in the former plaintiff for the defendant's costs did not arise and Jacobson J's observations about the costs liability of the former plaintiff are obiter. Further, Jacobson J is not confining his remarks to pre-substitution costs.

30 In Auskay, Tracey J found that it was unnecessary to impose a condition that the outgoing plaintiff remained liable for costs up to the time of substitution, as the court had power to order such costs against a former plaintiff in any case,[21] as set out above. Although his Honour approved of Jacobson J's analysis of Revian, he did not advert to Jacobson J observations about the liability of the former plaintiff.

31 Although it is unnecessary for me to construe s 33ZD on this application, the section does not specifically allude to the circumstances of a substituted plaintiff. It is trite to state that a plaintiff will always be a group member but, by definition, the members of the group extend beyond the plaintiff. It is only status as a group member that attracts the immunity. My tentative view is that s 33ZD(a) is not limited in its application to current plaintiffs, but may cast a costs liability on former plaintiffs that is limited to costs incurred by that person 'as a plaintiff'. The point was not fully argued before me and I am not determining any question of costs. The intention of the legislature in respect of liability for costs expressed in s 33ZD requires that a group member who acts as a plaintiff is amenable to a costs order in respect of costs incurred as a plaintiff but is not amenable to an order for costs incurred after he ceases to be plaintiff and is merely a group member. When liability for costs is determined, the plaintiff, on the other hand, may be caught by the unconfined extent of his or her exposure to costs under s 33ZD(a) and may be liable for all costs incurred in the proceeding. The extent of the plaintiff's costs liability will be a matter for the court's discretion.

32 I incline to the view that s 33ZD does not curtail that the general power of the court to order costs against non-parties, save that group members who are not parties to group proceedings under Pt 4A of the Supreme Court Act are immune from costs orders. The effect of s 33ZD(b) is that the court cannot order group members to pay costs by reason of the fact that they are group members. There are important reasons for this exemption, arising from the opt-out nature of Pt 4A proceedings. The 1988 Australian Law Report Commission ('ALRC') report identifies the underlying policy considerations. It recommended that group members be immune from costs orders, largely because group members might not know of the litigation or it might be impractical to order costs against group members if their identity is unknown and difficult to ascertain:[22]

Theoretically group members, as parties to their own proceedings, could be ordered to pay their share of the respondent's party-party costs if the case was successful. It would be impracticable for them to be made to contribute to the respondent's costs, especially if they had received no personal notification. It would also be extremely difficult to apportion costs in an unsuccessful case because no assessment of the number of group members involved would have been made. The time and expense involved in identifying group members and extracting a contribution for costs would not be justified.

33 Merkel J in Johnson Tiles Pty Ltd v Esso Australia Ltd[23] considered that it would be unfair to impose costs liability on class members who were not adequately aware of the potential costs liability:

Justice would not be done in a representative proceeding if group members, as such, were exposed to a potential liability for legal costs in respect of which they had not been adequately informed when exercising their right not to opt out of the representative proceeding as a group member.

34 This logic does not apply to a plaintiff who withdraws from that role. Nor does it entail that the court cannot order group members to pay costs for some reason other than their status as a group member, just as the court might hold any non-party liable for costs if there was cause to do so. Group members are not in a better position than any other non-party against whom there is reason to order costs. Clearly, the position of a wealthy group member who funded and controlled the litigation under a commercial arrangement for profit but without being the plaintiff would warrant careful consideration.

35 An application for substitution of a party under r 9.06 requires an exercise of the court's discretion in the circumstances of the case. I am not persuaded that there is any justification to exercise a discretion to require that the substitution of Dr Rowe for Mr Liesfield be conditional. Moreover, I see no reason to presently impose any constraint on the court's jurisdiction to award costs.

(a) Dr Rowe be unconditionally substituted for Mr Liesfield as plaintiff and I direct that the plaintiff's solicitors submit a minute of the orders and directions necessary to give effect to my decision.

(b) The costs of the application be the plaintiff's costs in the cause, unless any party, if so advised, exchanges and submits an outline of contentions for an alternative costs order no later than 10 October 2014. Should that occur, any outline of contentions in opposition shall be submitted and exchanged by 15 October 2014.

AUSNET ELECTRICITY SERVICES PTY LTD (ACN 064 651 118) First Defendant

SECRETARY TO THE DEPARTMENT OF ENVIRONMENT AND PRIMARY INDUSTRIES

AUSNET ELECTRICITY SERVICES PTY LTD (ACN 064 651 118) Plaintiff by Counterclaim

SECRETARY TO THE DEPARTMENT OF ENVIRONMENT AND PRIMARY INDUSTRIES

[1] Transcript of 23 July 2010 before J Forrest J in the Kilmore East proceeding.

[2] Matthews v SPI Electricity Pty Ltd (Ruling No 1) [2011] VSC 167; (2011) 34 VR 560.

[3] [2002] FCA 1119 ('Revian').

[5] [2004] FCA 1702; (2004) 141 FCR 233 ('Tongue').

[9] [2010] FCA 1302.

[12] Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd [1993] 45 FCR 224, 229.

[13] (1992) 174 CLR 178, 192-3.

[16] Tongue, [15]-[16] (citations omitted).

[22] Australian Law Reform Commission, Grouped Proceedings in the Federal Court - Summary of Report and Draft Legislation, Report No 46 (1988), [258].

[23] [1999] FCA 1363; (1999) 94 FCR 167, [36] (emphasis added).