Evidence in December 2003
23 Mr Phillip Lyon, the General Manager of the respondent, filed an affidavit sworn 30 October 2003. He was not cross-examined. I accept his evidence. He has been since 21 November 1999 the person responsible for giving instructions to the respondent's legal representatives. He was familiar with the evidence filed in the case and has been kept apprised of the issues. He indicated that it was his understanding that the damages in the case were confined to those particularised in paragraph 27.1 of the applicant's solicitors' letter dated 30 June 1998 and the statements of the applicant Mr Hayworth, Mr Gooch, Mr Bligh, Mr Kelleher and Mr Smith referred to above.
24 In relation to Mr Kelleher's statement of 3 February 1999, he said that he had read Mr Kelleher's complaints about his decision not to rent his property from 1994, purportedly resulting in a loss of income to his company in addition to Mr Kelleher's claim for loss of property value. Mr Lyon says that he dismissed these claims as inconsistent with the general subject matter of the class members' claims. He says that he considered Mr Kelleher to be an "agitator" within the class, having read his considerable correspondence to the respondent. Mr Lyons said that he believed that this was the unrealistic claim of one member of the class represented by the applicant.
25 At this point, a number of things should be noted. First, that the particulars provided by paragraph 27.1 of the applicant's solicitors' letter did not include damage of the kind referred to by Mr Kelleher in his statement of February 1999. However, in modern litigation with the exchange of statements such as that of Mr Kelleher there could be little force in an assertion that these matters could not be argued to be a form of particulars bounding the case. Secondly, Mr Lyon recognised that Mr Kelleher was, to use his words, an "agitator". However, thirdly, Mr Lyon (who was not cross-examined on the affidavit) formed his own view as to the atypical status of Mr Kelleher.
26 Mr Lyon also says that he dismissed as inconsistent with the subject matter of the class members claims the complaints by Mr Gooch, the dairy farmer, of sediment problems in his milk. Mr Lyon believed that Mr Gooch's claim for commercial losses was an unrealistic claim of one member of the class.
27 Mr Lyon's evidence of his understanding of the limited nature of the class members' claims for damages was said to be reinforced by joint field inspection reports which were documents created by participants in joint visits to all properties of the complaining members of the class as well as others. Mr Lyon said that understood from these field inspection reports that the claims for damages were limited to staining of clothes, staining of tiles and bathroom facilities, alleged damage to plumbing, to dishwashers, to sinks, to showers and to like equipment.
28 A mediation took place in 2002. I do not propose to deal with aspects of it, save as are essential for the disposition of this matter.
29 Mr Lyons said that the respondent's representatives were instructed by the respondent Council to agree to settlement only on the basis that the terms of settlement, amongst other things, resulted in a full and final disposal of the proceedings as well as being financially and socially responsible and were not only for the benefit of the applicant and class members but also equally for residents of the Dungowan Valley not party to the action.
30 Mr Lyon's said that as at 17 July 2002 (the date of the entry into the settlement agreement) he believed that Mr Kelleher might object to a settlement of the proceedings. He also believed that it was possible that John Hunt, Geoffrey Vere Reed and William Frederick Colin Hoad may support Mr Kelleher if he chose to object to the terms of settlement. Mr Lyon said that he otherwise did not suspect nor was he advised by the applicant that there would be any significant objections to a settlement of the proceedings. I conclude that Mr Lyon anticipated the real possibility of objection by more than one member of the class, one of whom (Mr Kelleher) he characterised as an "agitator".
31 On 17 July 2002, the parties held the mediation and reached an agreement. A draft settlement agreement was prepared which Mr Lyon read and which he understood to be no wider than the pleadings, particulars and evidence on damages detailed in the various statements filed (having, as he said, the view that some of those damages claims were unrealistic and unrepresentative).
32 As a consequence of his understanding he supported the respondent's representatives' recommendation to the Council that he be authorised to sign the settlement agreement. He later approved the settlement agreement on behalf of the respondent.
33 The agreement of July 2002 was short. The recitals to the agreement included recital E which was in the following terms:
The Council and Class subject to the approval of the Court, agreed to settle the claims made in the Statement of Claim on the terms set out in this agreement.
[underlining added]
34 The settlement was of the pleaded case. The terms of the settlement agreement included the payment of not negligible sums of money to the class and to the solicitors for the applicant. It is unnecessary to identify the amount of money lest the hearing of the case proceed in due course. The agreement in terms (clause 1.1.2) purported to bind the Council and the Class to a release in terms set out in an annexure (clause 1.1.3). The agreement also purported to bind the Council and the Class to terms and conditions of water supply set out in an annexure. Clause 1.3 provided that the legal advisers for the Council and the applicant would use their best endeavours to obtain the approval of the Court to the proposed settlement as soon as possible. Clauses 3.2 and 3.3 entitled "Entire Agreement" and "Further Acts", respectively were in the following terms:
3.2 This document contains everything the parties have agreed on in relation to the matters it deals with. No party can rely on an earlier document, or anything said or done by another party, or by a director, officer, agent or employee of that party, before this document was executed, save as permitted by law.
…
3.3 The parties will promptly do and perform all acts and things and execute all documents as may from time to time be required, and at all times will act in good faith, for the purposes of or to give effect to this document.
35 Mr Lyon then proceeded to describe what he observed after signing the settlement agreement. In particular, he referred to exhibits behind tabs 21-69 in exhibit PLL 1 to his affidavit. These are further affidavits, statements, letters of claim and supplementary letters of claim from various people within the class. Mr Lyon summarised those further claims (to which he referred as the Documentation) as claims for amongst other things:
(i) loss of income as a result of alleged destocking;
(ii) loss of rental income on properties; and/or
(iii) diminution of property values.
36 Mr Lyon said that the Documentation included claims that he never considered or that he was never made aware of prior to the mediation. He claimed that the Documentation contained claims which exceeded the extent and nature of damages that were represented to be owing to the class members prior to entering into the settlement agreement. By that he meant, I would understand it, that the Documentation contained claims exceeding what he understood to be the nature of the damages from the evidence then present at the time of the entry into the settlement agreement. He said that had he been made aware of the extent and nature of the damages claimed in the Documentation he would not have recommended to the respondent that it enter into the settlement agreement and he said that the respondent would not have authorised him to do it. He said that the Documentation contained claims for damages that exceeded anything he was anticipating or expected as a result of his reading the material available up to the mediation and considering the discussions with the applicant and his legal advisers prior to the mediation.
37 On or about 29 August 2003, Mr Lyon read a letter of that date from the applicant's solicitors which indicated that they were going to file with the Court documentation in support of claims made on behalf of fifty-two group members (counting apparent husband and wife or other groups parties as individual claimants). Of those fifty-two claimants some twenty-two were objectors. Mr Lyon said that this exceeded his expectations as to the level of opposition to the settlement.
38 The respondent tendered correspondence which included letters from the solicitors for the applicant which indicated that as early as January 2001, when a hearing of the matter was contemplated, the witnesses that the applicant proposed to call were only eight in number, including two experts. This reinforces the basis for Mr Lyon's view that the large number of witnesses in 2003, many of whom have become objectors was a significant change from the position that had obtained up to the entry into the settlement agreement in July 2002.
39 It is convenient at this point to identify what some of the evidence shows as to the extent of loss now claimed. There is now evidence filed on behalf of the class which reveals loss of income as a result of destocking cattle in the order of $1.9 million. Further, there is material claiming loss of rental income in the order of somewhat over $400,000 and evidence of some diminution in property value (with not all evidence complete), in the order of over $50,000.
40 The claim now appears to be one in which damages in the sum of over $2 million are claimed. These claims can be fairly said to dwarf the claims previously made as to financial loss.
41 Continuing with the evidence, an affidavit of the applicant sworn 25 November 2003 was read. Little of this affidavit was relevant. None needs to be referred to at this point.
42 The applicant also relied on the affidavit of Peter John Long, the solicitor for the applicant, sworn 26 November 2003. The affidavit is partly submission and partly evidence. However, it helpfully points out some pertinent matters. First, that the claim in the statement of claim was for damages, amongst other things. Secondly, that in the affidavit of a Mr Reynolds sworn 7 January 2000 and filed on 3 February 2000 Mr Reynolds stated that, amongst other things, to provide totally potable water to the consumers connected to the pipeline it would be necessary to install a full water treatment plant at the dam costing $15-$20 million. Thirdly, Mr Long pointed out that the joint inspections which led to the joint inspection reports were not carried out solely to limit and quantify damages.
43 Consequent upon the amendment which I allowed in January 2004, Mr Rowe, of counsel, indicated that his client wished to rely upon the affidavits of the applicant and Mr Long sworn on 15 January 2004 and 17 January 2004, respectively. Mr Hennessey indicated at a directions hearing that no cross-examination was required of these gentlemen on these further affidavits. I therefore take these further affidavits as read. In them, Mr Tongue, the applicant, said that on 17 July 2002 he did contemplate and assume that the pleadings and particulars filed and served before 17 July identified the nature and extent of the dispute. However, he said that as at 17 July 2002 he did not contemplate and assume the matters set out in sub-paragraphs 26(b)(ii), (iii) and (iv), those matters being that the proposed settlement would finalise the dispute with the respondent once and for all without the prospect of any further litigation between any member of the Class and the respondent concerning quality of water, that the respondent would only be bound to settle the proceedings in the manner agreed if the dispute between the parties to the controversy remained as identified by the pleadings, particulars and evidence filed before 17 July 2002 and there was no significant or substantial opposition to the settlement agreement, and that if the dispute extended beyond the identified controversy or there was any significant or substantial opposition to the settlement agreement the respondent would not be bound to settle the proceedings. Mr Tongue then described some conversations at the mediation which included one in which Mr Rowe said that there were group members led by Mr Kelleher who would oppose the mediation and who would oppose any agreement reached and that there would be problems having everyone sign the water supply agreements. It is this conversation one assumes which led to recital G in the settlement agreement to the following effect:
The Council asserts that the legal representatives of the Class have authority to enter into this agreement so far as it relates to the Water Supply Agreement. Mr Tongue says that at no time at the mediation did he say or imply what opposition there would be to the settlement. He says that there was definitely some discussion that there would be opposition.
44 The affidavit of Mr Long sworn 17 January 2004 was to the effect that he did contemplate and assume on 17 July that the pleadings and particulars filed and served identified the nature and extent of the dispute but he did not contemplate and assume the matters set out in sub-paragraphs 26(b)(ii), (iii) and (iv) of the amended defence.