Resolution of Class Actions Involving State Government Entities

A judgment delivered last week, on 27 May 2015, and an earlier judgment delivered on 23 December 2014 concerning the approval of settlement of the 'Black Saturday' bushfire class actions show that State government entities are increasingly being targeted in Australian representative proceedings, commonly known as "class actions." The judgments also demonstrate the arguments being made against State government entities and the factors relevant to Court approval of class action settlements.
 
Class actions have been able to be brought in the Federal Court of Australia since 1992, Victoria since 2000 and in New South Wales since 2011. Other state and territory jurisdictions in Australia do not have similar mechanisms. Court approval of settlements and discontinuances is required in all relevant jurisdictions.
 
Matthews v AusNet Electricity Services Pty Ltd & Ors [2014] VSC 663 (Kilmore Proceedings) were complex proceedings and involved 40 expert and 60 lay witnesses before settlement of the matter after 16 months of hearing was approved on 23 December 2014. Settlement of Rowe v AusNet Electricity Services Pty Ltd & Ors [2015] VSC 232 (Murrindindi Proceedings) was reached before the hearing commenced and was approved last week on 27 May 2015. Both proceedings related to power lines failing and igniting bushfires which resulted in the deaths of over 100 people, significant injuries suffered by over 1,000 people and extensive property damage.
 
The substantive claims by group members in both proceedings were brought against the owner and operator of the power line and a maintenance contractor charged with carrying out a periodic inspection of the power line. In essence it was alleged that the defendants owed group members a duty of care at common law and statute to take reasonable care in the operation and maintenance of the power lines and that the defendants breached that duty causing loss to group members.
 
Claims were also brought against State government entities, relevantly the Country Fire Authority, the Victoria Police and the Department of Sustainability and Environment (State Parties). The claims were principally based upon the existence of an alleged common law duty to provide warnings and information relating to the fire together with alleged statutory duties to take reasonable care in the performance of their duties.
 
The court in the Kilmore proceedings considered that the statutory claim against the State Parties was fundamentally problematic in light of the Victorian equivalent to section 42 of the Civil Liability Act 2002 (NSW), which requires that in determining whether a public authority owes or has breached a duty of care, resource limitations must be recognised and the functions required to be exercised by the authority are to be determined by reference to the broad range of its activities. Ultimately the Court did not have to consider this provision in any detail nor conclude whether the alleged common law or statutory duties of care existed. However, his Honour in particular described the common law duty postulated against the State Parties as a novel one and opined that it was at least arguable that such a duty was owed. The provision was not referenced in the reasons for approval given in the Murrindindi Proceedings but an assessment of that provision may have formed part of the confidential and frank assessment by the plaintiff of its own case tendered on the application for approval of the settlement.
 
Ultimately, the State Parties contributed sums of $103.6 million and $29.1 million for compensation in respect of personal injury and dependency claims out of total settlement funds of $378.6 million and $260.9 million in the Kilmore and Murrindindi proceedings respectively.
 
The relevant principles concerning court approval do not differ between jurisdictions. The Court is required to consider whether the proposed settlement:
 
(a) is fair and reasonable as between the parties having regard to the claims of group members; and
 
(b) is in the interests of group members as a whole and not just in the interests of the plaintiff and the defendants.
 
These principles are usefully set out and considered in the Kilmore Proceedings judgment and Emerton J followed that analysis in the Murrindindi Proceedings judgment (see in particular paragraphs 47 to 71).
 
For the Court to assess the settlement, the plaintiff itself is ordinarily required to provide an assessment of its own case which it may, in part, tender on a confidential basis.
 
These judgments are a timely reminder about the continued growth of class actions in Australia, the way plaintiffs are framing some actions against state government entities, and the factors likely to be considered by the Court in approving resolution of class actions. These recent decisions also demonstrate the entrepreneurial spirit of group members and their legal advisors and that plaintiffs are not deterred by the statutory limitations in the Civil Liability Act 2002 (NSW) (and equivalents elsewhere).
 
Henry Davis York has expertise in class actions and continues to monitor ongoing and future trends in Australia and internationally. There are more than 29 current class actions and a further 51 have been threatened across Australia.
 
Kathy Merrick

Having the trust of my clients means we work together to achieve the best outcome.

Kathy Merrick Partner

Kathy has been called upon to advise on many of Australia's major corporate disputes, collapses and investigations. Her clients include major corporations and financial institutions, directors, officers, accounting and professional services firms, administrators, liquidators, other corporate entities and individuals.

Kathy has extensive experience in the areas of insolvency, directors and officers duties, professional negligence claims, and regulatory and other investigations, representing parties whether as plaintiffs, defendants, investigators or the subject of investigation.

Kathy is a strong advocate for pro bono work and has played a lead role in developing our community and pro bono program.

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Michael Sullivan

I don't shy away from challenge or ambition or difficulty in order to get the right outcome, and always with integrity.

Michael Sullivan Partner

Michael has been focusing on the government sector for over 10 years, which gives him a critical understanding of the environment in which our government clients operate. He has assisted his clients with prosecutions, investigations, statutory inquiries and enforcement.

Michael has also had significant experience in acting for private sector clients in relation to commercial disputes. His particular focus has been fraud related matters and complex contractual  disputes. He brings a wealth of litigation experience to all his clients, including general conduct of litigation: preparing proceedings, obtaining witness statements, liaising with counsel and the management of discovery and production obligations in answer to subpoenas.

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Andrew von Konigsmark Senior Associate

Andrew's practice involves all forms of commercial litigation and dispute resolution and has assisted clients in matters concerning contractual disputes, professional negligence, class actions, directors' duties and defamation.

He has also assisted his clients to prepare for Parliamentary Inquiries, Special Commissions of Inquiry, ASIC examinations, ATO investigations and ICAC hearings. Andrew has particular expertise in regulatory investigations and disputes, including ASIC investigations and associated litigation. He has acted for both regulators and entities subject to regulatory investigations and advises on strategies to effectively deal with regulators and enforcement action.

Clients value Andrew's strategic thinking and ability to quickly recognise and understand highly technical issues.

Andrew has acted for clients in hearings in the Federal Court of Australia, Supreme Courts of New South Wales, Queensland and Western Australia, as well as arbitral proceedings, mediation and other alternative dispute resolution processes.

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