This question is stimulated by a story appearing in The Australian (Pia Akerman, ‘Black Saturday bushfire victims demand inquiry into law firm’ The Australian (online) 22 May 2017).
The Australian operates behind a paywall so you may not be able to access the story. The gist of the story is that plaintiffs in the Murrindindi-Marysville are upset over the conduct of law firm Maurice Blackburn with one of the plaintiffs, Mr Don Brown, calling for a Royal Commission into the firm’s behaviour. Mr Brown suffered losses of $7 million but the story does not report how much he finally received. He is quoted as saying:
“I believe both the federal and state governments should involve themselves in this financial disaster created by an unfunded class action which had no possibility of achieving a fair and factual settlement for claimants of both fires, and (they should) ensure that claimants are not left to the totally unjust settlements proposed by Maurice Blackburn.”
The story goes onto say:
Other Murrindindi-Marysville class action group members have similarly called for a government or judicial review, with one man sending back his $120,000 settlement in protest against the firm.
This begs the question which I posed, at the start, of what can you expect from litigation?
The starting point of the law is that losses fall where they lie. Property owners own the risk that their property will be damaged by fire, storm or other hazards. To manage that risk, we can take steps to mitigate the risk and buy insurance to off-set the financial risk. If the losses are caused by, or contributed to by the failure of someone who owes a duty to take care to protect us then we may seek damages. To obtain those damages the plaintiff has to prove their case on the balance of probabilities. People being sued are likely to have a different view of what happened (otherwise the case wouldn’t be defended). The defendant may deny that they caused the loss, or deny that they owed the plaintiff a duty of care, or deny that the plaintiff’s losses are as much as the plaintiff claims. Whatever defence is raised, the plaintiff has to meet it.
Australian tort litigation is a ‘winner take all’ system. The plaintiff either wins or loses so you may prove most of the case but unless you meet all the legal thresholds, you lose. Equally the damages that a defendant has to pay are based on the plaintiff’s proved losses, not on the degree of negligence. So the plaintiff may claim that the defendant did five things wrong and may lose on four them, but if the defendant was negligent, even if the negligence was only slight, then they are liable for all the plaintiff’s losses (subject to any claim for contributory negligence which I shall skip over).
Let us assume a plaintiff can prove their damages of $1m. They commence legal action. If they win on every point they’ll get $1m plus interest and costs. If they lose, they get nothing but have to pay the defendants costs. The defendant faces a similar reality. So everyone assess the value of their case- every case has its weakness and can be lost. A defendant my offer something less than the plaintiff claims because paying out that amount early is cheaper and less stressful than running it to the end. The plaintiff may accept that because money today is worth more than money that may be received in the future and a guaranteed outcome is better than running the gamble that may lead to more, but may also lead to nothing.
A realist would never believe that they will receive compensation that actually equals their losses or that the court will see the facts the way they do. Australian governments do intervene in some ways. Whether you claim or not some medical expenses are met through Medicare and some income protection through Centrelink but the governments are not responsible for making good private losses.
This then brings me to the article First ‘“I believe both the federal and state governments should involve themselves in this financial disaster created by an unfunded class action which had no possibility of achieving a fair and factual settlement for claimants …’
It begs the question of why would the federal and state governments get involved? The relevant law is state law not federal law so it’s hard to see what the federal government’s interest in the matter would be (save that the Commonwealth is empowered to make laws with respect to insurance – Australian Constitution s 51(xiv)). The States actually run the courts and in this case were one of the defendants. It also begs the question of what is ‘a fair and factual settlement’ given that the defendants consistently denied liability?
A class action settlement must be approved by a judge. I discuss the decision of Emerton J who approved this settlement in my earlier post, Marysville/Murrindindi ‘Black Saturday’ settlement approved (May 29, 2015). In the course of his judgment, Emerton J said (at ) ‘I have considered the liability risks … Those risks are not to be lightly dismissed, as the proceeding raises complex issues of law and fact. The plaintiff and group members face some risk of an adverse result at trial, including the risk of a nil outcome.’ So the claimant quoted in the Australian wants a settlement that is ‘fair and factual’ but the judge did note that there was a risk that the findings may well have gone in favour of the defendant. As he said at  ‘The defendants deny the claims made by the plaintiff…’ If the defendant denies the plaintiffs’ claims there was a real risk the plaintiffs would lose and get nothing. So a settlement in favour of the defendants, even if it did not equate to compensation for 100% of claimed losses, may well be described as ‘fair’ based on the disputed facts.
When approving the settlement His Honour was aware that the expectation was that those claiming for injury or death would receive about 70% of their assessed losses and those claiming property only would receive about 60% of their assessed losses. His Honour understood people were not getting 100% of their losses, but it was better than getting nothing.
The advantage of class actions is that a representative plaintiff brings the action. Other members of the class do not face the same exposure to costs or the need to conduct the litigation. The downside is that people are not in control of their own destiny, the plaintiff and the lawyers can settle the claim despite objections by members of the class. Emerton J noted that Mr Brown objected to the settlement approval. His Honour said (at -):
The Court has received four notices of objection to the settlement.
Three of those notices are in identical form. They are from Mr Don Brown, Bloodstock Breeder Services Pty Ltd, and DGB Builders Pty Ltd. Mr Brown is the owner of the two companies. Other than a high level submission set out in the notice itself, no material has been put before the Court in support of these objections. The objection appears to be that the allocation to business losses is too low and that the terms of the settlement are unfair to group members who are business owners. There is also a complaint that the terms of settlement are materially uncertain.
What then raises, in my mind, is what is a ‘judicial review’? These proceedings were subject to judicial review. Class actions are subject to case management by the court (Supreme Court Act 1986 (Vic) Part 4A and Practice Note SC GEN 10 Conduct of Group Proceedings (Class Actions)). Further, the final settlement must be approved by a judge who must be satisfied that the proposed settlement ‘… is fair and reasonable as between the parties having regard to the claims of group members’ and ‘… is in the interests of group members as a whole and not just in the interests of the plaintiff and the defendants’ (Rowe v AusNet Electricity Services Pty Ltd & Ors  VSC 232,  (Emerton J)).
Mr Brown is dissatisfied with the outcome of this case and clearly was at the time when the settlement was proposed. It does make one wonder what he expected – no plaintiff should ever expect to recover all their losses from litigation. Litigation is a ‘win-lose’ procedure (not win-win) but to avoid that outcome parties are encouraged to, and do, compromise their claims. This compromise must always reflect the risk. Compensation after an event, including a disaster depends upon proof of fault. Many who suffered in the Black Saturday fires may be convinced that the electrical supply authorities and the state defendants (the CFA and Victoria Police) were negligent but that is, and was, a defended claim. An assertion that this was not a ‘fair and factual’ settlement suggests faith that the ‘facts’ supported the claim but according to Emerton J this was not certain.
As noted class actions bring benefits but also costs. Plaintiffs with significant losses (like $7m) may well be better off opting out of the class and bringing their own action. They may not get any more in settlement but at least they’d be in control of their own affairs.
Regardless of the merits however I find it hard to believe that a government would consider that this is a matter that warrants an inquiry. The matter has been subject to close judicial review and no doubt has achieved the efficiencies that were hoped for were group or class actions were created. One can make significant criticism of fault based litigation (again see my post, Marysville/Murrindindi ‘Black Saturday’ settlement approved (May 29, 2015)) but given that Australian compensation does depend upon proof of fault, these compromises are inevitable.