Rodriguez & Sons Pty Limited v Queensland Bulk Water Supply Authority t/as Seqwater

Background and Decision

1. There are approximately 6870 group members in these representative proceedings. From sometime early in 2020, the plaintiff foreshadowed pursuing an application under s 177(1)(f) of the CPA, namely, seeking an "award of damages in an aggregate amount without specifying amounts awarded in respect of individual group members". This judgment concerns the referral for assessment of 264 claims that the plaintiff seeks to use as the sample base for the determination of that aggregate amount.
2. By a notice of motion filed on 4 September 2020, the plaintiff sought orders for the referral under Part 20 rule 14 of the Uniform Civil Procedure Rules 2005 ("UCPR") for enquiry and report of a question arising in the proceedings, namely, the "total value of the loss suffered by reason of the negligence of the defendants" for each of 264 group members listed in the schedule. On 27 August 2020, the first defendant, Queensland Bulk Water Supply Authority trading as Seqwater ("Seqwater"), filed a notice of motion seeking the referral of all group member claims for an amount less than $1 million to a referee with group members having claims above that amount being required to pursue their claims in separate proceedings "in the ordinary manner". On 14 September 2020, the second defendant, SunWater Ltd ("SunWater"), filed a notice of motion seeking similar orders to Seqwater in respect of claims of less than $1 million and for the Court to determine group members' claims for an amount above that. On 9 September 2020, the third defendant, the State of Queensland (the "State"), filed a notice of motion seeking, inter alia, orders for the referral of all group members' claims of more than $1 million and orders varying what the State understood to be the plaintiff's foreshadowed application under s 177(1)(f) of the CPA.
3. By the time of the resumed hearing commencing 26 October 2020, matters had progressed. Seqwater did not oppose the referral of the 264 claims but contended, inter alia, that there should be a direction under UCPR 20.20(1) that the rules of evidence apply to claims above $1 million (being the so‑called S4 and S5 categories explained below). SunWater agreed to the reference but only on condition that there be a direction applying the rules of evidence to all 264 claims and, if not, it opposed any referral. The State did not oppose the referral of the 264 claims but also sought the referral of the remaining claims in the S4 category, being for amounts between $1 million and $10 million.
4. After hearing submissions on this, and certain related issues that were debated between the parties, I advised the parties of my determination. In particular, I determined that: (i) the 264 matters nominated by the plaintiff should be referred; (ii) there should not be a direction requiring the referees to apply the rules of evidence; (iii) there should not be a direction requiring the referees to allow cross‑examination; (iv) there should not be a direction requiring the group members to plead or specify their claims in a particular form; (v) no reporting date should be specified at this stage but the reference should not be delayed on account of Seqwater and SunWater's appeal; (vi) at this point the reference will not extend to include the balance of the S4 claims; and (vi) the Court will appoint multiple referees and nominate a senior referee but otherwise allow the referees to determine whether more are required. At the time I advised the parties of those matters, I stated that reasons would follow and that in the interim the parties should prepare short minutes to reflect those determinations. This judgment constitutes those reasons.

The 264 Claims

1. At the hearing of the plaintiff's motion, it read an affidavit of Ian Gordon sworn 4 September 2020, [1] Irina Lubomirska sworn 4 September 2020 [2] and another affidavit of Ms Lubomirska sworn 22 October 2020. [3] Mr Gordon is a Professor of Statistics and the Director of the Statistical Consulting Centre at The University of Melbourne. Ms Lubomirska is a special counsel employed by the plaintiff's solicitors. Pursuant to s 136 of the Evidence Act 1995, I restricted the use to which the contents of these affidavits and their annexures could be put so that they are only proof of the explanation proffered by the plaintiff as to how and why the 264 claims that it seeks to refer have been selected. [4] As the evidence was so limited, none of the defendants sought to cross‑examine the deponents.
2. In broad summary, those affidavits reveal that the 264 claims have been selected by the plaintiff for it to later use the damages assessments that result as the sample base upon which it then seeks to extrapolate to obtain an "aggregate amount" of the total value of all group members' claims for the purposes of s 177(1)(f) of the CPA. It contends that the 264 claims have been randomly selected in accordance with Professor Gordon's advice, specifically his advice to the effect that a stratified sample of group members' claims should be determined so as to allow a more accurate estimate or determination of the aggregate amount. The stratified categories and the number of selected claims for referral in each category are as follows: [5] Stratum Self-assessed loss Number of claimants Suggested sample size S1 $10m 11 11

1. In broad terms, the affidavits of Ms Lubomirska seek to explain the process by which the 264 claims were, according to the plaintiff, randomly selected in accordance with Professor Gordon's advice.
2. At this stage, both Seqwater and SunWater resolutely oppose the foreshadowed application by the plaintiff under s 177(1)(f). As I understand it, the State does not oppose it insofar as it concerns claims in categories S1 to S3, but it does so far as it concerns category S4. (All claims in category S5 are to be individually assessed.) From the correspondence and the submissions, it is apparent that Seqwater and SunWater do not accept that s 177(1)(f) is capable of being applied to this case. They also do not accept that the process of selection of the 264 claims was in accordance with Professor Gordon's advice, that it was random, or that it is otherwise a suitable sample.
3. On this application, a fragile détente was reached to the effect that it was not necessary to determine at this point whether an order under s 177(1)(f) should be made and that it was also not necessary to determine whether the 264 claims represented a suitable or random sample and were selected in accordance with Professor Gordon's advice. Instead, it was accepted that all such questions could be raised at the time the plaintiff sought an order under s 177(1)(f). This agreement was reflected in the limitation imposed on the use of Professor Gordon's and Ms Lubomirska's affidavits. It meant that the plaintiff was assuming the risk of having the 264 cases referred for assessment, assessed and the assessments adopted by the Court, but not obtaining an aggregate award under s 177(1)(f). However, if that was to transpire then the assessments would still be of utility for the 264 claimants and presumably of assistance as a guide to the resolution of the remaining claims.
4. Not much is known about each of the individual claims, other than the identity of the claimants and the breakdown of the claimed amounts set out above. However, given that breakdown, what is known about the widespread flooding and the identity of the claimants, it seems clear they involve a mixture of claims by large commercial enterprises, small businesses and residents. Further, the Court has already determined a number of common questions concerning quantum (Rodriguez (No 22), Chapter 14) and has determined a claim for property damage and consequential economic loss made by the lead plaintiff which operated a retail shop in a suburban shopping centre (Rodriguez (No 23)). The Court has reserved judgment on a damages assessment for two residential properties which would be likely to raise similar issues to other residents.
5. A referral of an assessment of the damages payable to "total value of the loss suffered by reason of the negligence of the defendants" will require a referee to determine causation in relation to the relevant item or head of damage (Rodriguez (No 22), Chapter 12 at [12] and [256]) and quantum. The complexity of the causation and quantum assessment will vary between claims and within each claim, especially in cases involving "greater flooding" under Sim C as opposed to no flooding under Sim C. Many of the issues of principle affecting the quantification of residential claims, and some affecting commercial claims, have been or shortly will be resolved, but no doubt others will arise.

The Reference Proposal

1. Uniform Civil Procedure Rule 20.16 provides: (1) If the court appoints 2 referees and a decision to be made in the course of proceedings under the reference is not agreed, the decision that is binding is - (a) if a judicial officer is a referee, the decision of the judicial officer, or (b) in any other case, the decision of the referee appointed by the court to be senior referee. (2) If the court appoints 3 or more referees, any decision to be made in the course of proceedings under the reference may be made by a majority of the referees and, failing a majority, the decision that is binding is - (a) if a judicial officer is a referee, the decision of the judicial officer, or (b) in any other case, the decision of the referee appointed by the court to be senior referee.
2. It is proposed to appoint three referees initially, all of whom will be ex‑judicial officers. It is also proposed to designate one of them as the "senior referee" for the purposes of UCPR 20.16(2)(b). Otherwise, it is proposed that the three referees will decide amongst themselves whether they will hear some or all of the claims together or separately as well as determine any further issue of principle that may arise. Further, it will be a matter for them whether they request the appointment of additional referees or have others assist them in making their determination, such as counsel or solicitors. It is accepted that as much as possible the references should be undertaken in Queensland.

Should there be a Reference and Should the Rules of Evidence apply?

1. UCPR 20.14 and 20.20 provides as follows: 20.14 Orders for referral (1) At any stage of the proceedings, the court may make orders for reference to a referee appointed by the court for inquiry and report by the referee on the whole of the proceedings or on any question arising in the proceedings. (2) The court must not make an order under subrule (1) in respect of a question to be tried with a jury. 20.20 Conduct of proceedings under the reference (1) The court may give directions with respect to the conduct of proceedings under the reference. (2) Subject to any direction under subrule (1) - (a) the referee may conduct the proceedings under the reference in such manner as the referee thinks fit, and (b) in conducting proceedings under the reference, the referee is not bound by the rules of evidence but may inform himself or herself in relation to any matter in such manner as the referee thinks fit. (3) Evidence before the referee - (a) may be given orally or in writing, and (b) if the referee so requires, must, be given on oath or by affidavit. (4) A referee may take the examination of any person. (5) Each party must, within a time fixed by the referee but in any event before the conclusion of evidence on the inquiry, give to the referee and each other party a brief statement of the findings of fact and law for which the party contends. (6) The parties must at all times do all things which the referee requires to enable a just opinion to be reached and no party may wilfully do or cause to be done any act to delay or prevent an opinion being reached.
2. The discretion to make an order for a reference under UCPR 20.14 must be exercised in accordance with the dictates of s 56(1) of the CPA, namely, the facilitation of the just, quick and cheap resolution of the real issues in the proceedings. There is no entitlement or right conferred on a party to have all issues of fact and law decided by a judge of the Court (Super Pty Ltd v SJP Formwork (1992) 29 NSWLR 549 at 558 per Gleeson CJ). A decision to appoint a referee is essentially a case management decision. The purpose of appointing a referee is to obtain a determination on the relevant question in the "most efficient, expeditious and least expensive method available" (Xuereb v Viola (1989) 18 NSWLR 453 at 468 to 469).
3. I have no doubt that the most appropriate course to facilitate the just, quick and cheap resolution of the remaining issues in the proceedings, for at least the 264 nominated group members, is to refer their claims to a referee. If their claims were to remain with the Court and proceed in the ordinary way for determination then there are likely to be significant delays in their determination with consequent cost and distress. All the parties have devoted gargantuan resources to the proceedings and none of them are guilty of causing unwarranted delay. Despite this, it is now almost a decade since the flood and seven years since the proceedings were commenced. The interest of the litigants and the public interest warrant their resolution as early as possible. In terms of the options available to the Court at this point, it means that the 264 claims should be referred.
4. The most significant issue debated on the application concerns whether a direction should be given that the rules of evidence apply to the assessment of all or some of the claims.
5. Senior Counsel for SunWater, Mr Williams SC, raised a concern that, having secured a reference of these claims and with the referees not being bound by the rules of evidence, the plaintiff will seek to tender loss assessor reports "with some sort of inquisitorial role for the referee" [6] or use "damages curves" as an alternative to proving causation. Mr Williams SC also noted the large quantum of some of the claims, especially the eleven category S5 claims which exceed $10 million. One of them is said to be $55 million and many are said to involve substantial economic loss claims. [7] Senior Counsel for Seqwater, Mr Stoljar SC, referred to the jurisdictional limits applicable to different size claims in the court system and noted that claims in the S4 and S5 categories are reserved for this Court. [8] He also submitted that the concerns about delay from the application of the rules of evidence were overstated. He gave as an example the absence of objection taken by the defendants to the evidence adduced at the hearing of the causation and quantum issues affecting sample group members that I have reserved on.
6. In considering this issue it is necessary to note that the referee is bound to afford the parties procedural fairness (Beveridge v Dontan Pty Ltd (1991) 23 NSWLR 13 at 20; "Beveridge") and what that requires will depend "very much on the nature of the issues posed by the referee" (Beveridge at 21G) which in this case will be an ex-judicial officer. In Eko Investments Pty Limited v Austruc Constructions Limited & Ors; The Owners Strata Plan No 64970 v Austruc Constructions Limited & Ors [2009] NSWSC 208, Bergin CJ in Eq observed that an "advantage of [the] practice [in appointing former judicial officers] is the expertise of the former judicial officer in controlling the efficient hearing of the reference combined with the freedom to conduct it without the constraints that would be imposed on a trial judge, should the matter stay with the Court" (at [40]).
7. The fact that many of the claims are for large amounts and a defendant may have a genuine concern about being exposed to scanty or fuzzy proofs of large loss figures can be accepted. However, I do not accept that imposing a requirement on a referee to apply the rules of evidence to all aspects of all claims or a category of claims is justified to guard against such an outcome, given that a reference will be conducted by an ex‑judicial officer who is bound to afford the parties procedural fairness. A claim for a large amount does not necessarily equate to complexity but, even if it did, that is just another factor warranting flexibility in the reference process. The best course is to leave the matter to the referee to make a judgement as to what issues, if any, might be determined by reference to more exact proofs akin to admissible evidence and what issues can be dealt with by a more informal assessment. It may be that the referee determines with a particular large claim that a determination of one of the components of the loss, albeit large, can be undertaken by a relatively informal process. It may be that the referee determines that the assessment of a different head of damage warrants a stricter approach. The multitude of claims and their potential differences means that the achievement of the objectives stated in s 56 of the CPA point overwhelmingly to retaining flexibility in the process adopted by the referee to determine the best means of determining a particular claim. To impose a requirement to apply the rules of evidence on the referee applicable to all claims, or even all claims in a particular category, would undermine the very flexibility that is one of the principal advantages of the reference process. As was observed by McDougall J in Baulderstone v QIC [2012] NSWSC 235, "to require a referee to be bound by the rules of evidence is to undo one of the major benefits of the process" (at [27]). This is reflected in UCPR 20.20(2)(b) which has, as the starting point for a reference, a prescription that the rules of evidence will not apply.
8. Mr Williams SC also submitted that this issue should be considered in the context of the foreshadowed application for a damages award in an aggregate amount. He contended that, if the plaintiff seeks to extrapolate the result of the reference through the entirety of the whole group, then "the rules of evidence provide an important protection", [9] presumably against an unreliable sample of results producing an unreliable aggregate. This submission overlooks the circumstance that there is "not one exclusive method of dispute resolution" (Beveridge at 24). It is otherwise incorrect to assume that a damages assessment made by a referee yields a result that is any more or less superior, reliable or exact than that resulting from an assessment by the Court made in accordance with the rules of evidence.

Other Procedural Steps

1. Seqwater and SunWater sought a direction to the effect that the referees be required to allow witnesses to be cross‑examined. The above reasoning concerning the application of the rules of evidence also applies to this issue. Natural justice does not necessarily require that witnesses be cross‑examined (Beveridge at 24). That said, nothing in UCPR 20 (or this judgment) precludes the referee from determining that a particular witness can be cross‑examined if the referee considers that is appropriate for the resolution of a particular issue, bearing in mind the objects of s 56 of the CPA. Whether that should occur will be left to the judgment of the referees.
2. Similarly, Seqwater sought a direction requiring that each group member complete a (relatively simple) claim form identified by it. I accept the sense in the use of such a form, but again I consider that whether to require it in all cases is a matter best left to the judgment of the referees.

Timing of Reference

1. The plaintiff's notice of motion included a proposed order directing the referees report by 9 April 2021. This appears to be relatively ambitious given the number of claims and the necessity to afford the parties procedural fairness. I declined to set a report date at this stage. Instead, I considered it appropriate to allow the referees to first review the process with a view to the Court specifying a report date at a later time.
2. Both Mr Williams SC and Mr Stoljar SC submitted that, given that their clients' appeals are listed for hearing in May 2021, it is appropriate that the conduct of the reference should await its outcome. Mr Williams SC contended that if his client's appeal was successful in part or in whole "that would render all the references determining causation and quantum of loss otiose". [10] Without addressing any issue concerning the merits of the appeal which were not referred to, it can be accepted that a possible outcome of the appeal would be to render the referral process nugatory or at least compromised so far as Seqwater and SunWater are concerned in that they may either succeed completely or obtain some intermediate result. [11] However, even if that were to occur, the references would not be otiose because the State has not appealed. It follows that, irrespective of the outcome of the appeal, the State will still retain a 20% proportion of a liability based on the findings in Rodriguez (No 22) and that will have to be assessed (or agreed upon). Otherwise, and although it cannot be stated with certainty, it seems very likely that a costs order that would follow at least complete success on appeal for Seqwater and SunWater would embrace their costs thrown away from participating in a reference.

Balance of S4 Claims

1. Senior Counsel for the State, Mr Horton QC, submitted that the Court should refer out the 83 category S4 claims that the plaintiff does not propose to refer. He submitted that if that were to occur then all of the claims in categories S4 and S5 will have been assessed and there will no reason to attempt to extrapolate the value of the total claims in both of those categories as it will have been determined. [12] There is considerable force in this submission. It may be that at some point it will be appropriate to refer the balance of the category S4 claims given their potential size and to focus on any aggregate loss application for the claims in categories S1 to S3. However, I declined to do so at this stage for the essentially pragmatic reason that the plaintiff advised that it was not ready to adduce evidence in support of those claims and the significant amount of work confronting the referees as a result of the referral of 264 claims. Any later application to refer the balance of the category S4 claims can be considered with the benefit of hindsight about the experience of assessing the 161 category S4 claims that are being referred now.

Endnotes

1. CRT.010.007.0001.
2. CRT.010.008.0001.
3. CRT.010.016.0001.
4. T 11088.39.
5. SBM.010.036.0001 at [18].
6. T 11108.28.
7. T 11110 to T 1111.
8. T 11117.11.
9. T 11112.34.
10. SBM.030.025.0001 at [24].
11. See Rodriguez (No 22), Chapter 10 at [56].
12. T 11125.

Amendments 16 December 2020 - Counsel's name corrected. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 December 2020