Kelly v Scenic Tours Pty Limited

1. [1]

   HER HONOUR: This is an application for preliminary discovery.

2. [2]

   By summons filed 27 March 2019, the plaintiffs seek an order pursuant to r 5.3(1) of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) that the defendant give discovery of all documents specified in the plaintiffs’ schedule (“the schedule”).

3. [3]

   The first plaintiff is Darran Kelly. The second plaintiff is Gavin Lawrence. The defendant is Scenic Tours Pty Limited (“Scenic”). The plaintiffs relied upon the affidavit of their solicitor Cameron Graham dated 27 March 2019. The defendant relied upon the affidavits of its guest and corporate affairs manager, Donna Willis, dated 15 May 2019 and 15 July 2019.

Overview of the plaintiff’s case

1. [4]

   The plaintiffs seek documents related to luxury European river cruise holidays provided by the defendant to Australian and non-Australian resident passengers. Each of the plaintiffs paid a significant sum of money for holiday tours for themselves and their partners. They say that their tours, along with those of another twelve known cruises and potentially many more of the over 300 operated by the defendant in 2018, were disrupted by severe drought conditions in Europe in that year.

2. [5]

   The plaintiffs’ solicitor in these proceedings, Mr Graham, builds on the work of his firm for the group members in another class action against the defendant brought under Part 10 of the Civil Procedure Act 2005 (NSW) in relation to cruises in 2013 (“the 2013 class action proceedings”). In 2013, high water levels impeded Scenic’s ability to operate cruises on affected rivers. Documents forming part of the evidence read or tendered in those proceedings have assisted the plaintiffs in their investigations of a possible representative proceeding they might make in respect of the defendant’s 2018 European cruising calendar, which was affected by low water levels, particularly in the Rhine and Danube rivers.

3. [6]

   In his affidavit, Mr Graham identifies the need for a litigation funder to fund a class action for the benefit of Australian paying passengers who may have claims under s 61 of the Australian Consumer Law. He identifies the need to build a class with a prospective total quantum that will be 10 times the likely cost of running proceedings for the class. Both the total and marginal costs, as well as the prospective quantum recoverable, vary as class size changes.

4. [7]

   Mr Graham identifies the documents sought from the defendant. These include passenger manifests to identify Australian passengers who undertook disrupted cruises in 2018, their booking advices, notes and other reports detailing the extent of disruption, compensation received including settlement agreements, and their cruises’ contractual terms and conditions.

5. [8]

   The schedule that specifies the documents that the plaintiffs seek is as follows:

6. [9]

   The defendant operates luxury cruises of European waterways under two brands, Scenic and Evergreen, which is also known as Emerald Waterways. These cruises mainly operate through major Western and Central European rivers such as the Danube, Main, Rhine and Seine rivers, as well as the Neva/Volga in Russia. They involve a great variety of itineraries, duration and departure dates, primarily during the spring to autumn months. These cruises are advertised as holidays of a lifetime, and many are directed at retirees. The cruises offer an extremely high quality of accommodation, service and experience.

7. [10]

   The defendant’s cruises service a large number of international and Australian passengers, who enter into contracts governed by both foreign and Australian laws. The defendant promotes its services through brochures which describe tour itineraries and contain terms and conditions.

8. [11]

   Mr Kelly and Mr Lawrence’s circumstances are summarised in the affidavit of Mr Graham.

9. [12]

   Mr Kelly and his wife (“the Kellys”) paid $37,007.89 for flights and a luxury river cruise on the “Jewels of Europe” cruise from Budapest to Amsterdam, which commenced on 30 July 2018 (“Cruise 3”). However, on 4 August 2018, while the cruise ship Scenic Pearl was docked in Engelhartszell, Austria, the cruise was suspended due to low water levels. Mr Kelly and his wife were given the option of returning home or continuing with the tour. If they elected to continue, they were to resume the river tour five days later on the cruise ship Scenic Jade in Andernach, Germany, with the option to either remain in the interim on the Scenic Pearl or take a bus tour.

10. [13]

    The Kellys decided to take the five day bus tour before joining the Scenic Jade in Andernach. On the bus tour, the couple were offered inferior substitute activities than those they would have enjoyed on the cruise, involving substantial bus travel. Where passengers did not participate in scheduled activities, the defendant did not provide them with food or drink.

11. [14]

    On one of the days of the bus tour, the defendant did not provide passengers with any scheduled activities or excursions. On another day of the bus tour, the cruise experience was substituted by a short ferry ride. As such, the Kellys did not receive the luxury cruise experience as advertised for at least 5 out of the 14 days. Mr Kelly was offered a $1,500 insurance payout, which was about 4% of the $37,007.89 he had spent.

12. [15]

    Mr Lawrence and his partner (“the Lawrences”) paid $17,280.00 for a luxury river cruise also on the “Jewels of Europe” cruise from Amsterdam to Budapest. Their trip was scheduled to commence on 7 November 2018 and conclude 14 days later on 21 November 2018 (“Cruise 13”).

13. [16]

    However, on 9 November 2018, passengers were informed that they were required to disembark the cruise ship Scenic Amber and resume their cruise on the Scenic Opal the next day. Passengers were given from 11pm to pack, and were required to have their luggage outside their cabin doors by 8:30am the next morning.

14. [17]

    On 10 November 2018, the cruise day was substituted with a bus tour day. The cruising experience was substituted with a public ferry ride. Mr Lawrence was given a substitute meal and 2 drinks vouchers. Service of the meal and drinks on the public ferry was slow.

15. [18]

    On resuming the cruise on the Scenic Opal, passengers discovered that the toilet vacuum system on the Scenic Opal was faulty. The cruise was suspended for the day until the toilets were fixed.

16. [19]

    On 14 November 2018, the cruise was suspended and substituted with a bus tour for the remaining eight days. The Lawrences were put up in hotels of inferior quality to the accommodation advertised by the defendant on board its cruise ships. The couple’s hotel in Budapest did not have effective ventilation or air-conditioning. They were unable to enjoy the all-inclusive food and drinks package for which they had paid. Mr Lawrence’s drinks vouchers could only be redeemed for beer or wine, which he does not drink.

17. [20]

    Mr Lawrence intended to purchase, but did not receive, an all-inclusive cruise package in a Deluxe Balcony Suite without need to pack, repack or transit from one place of accommodation to another.

18. [21]

    Mr Lawrence was offered a $1,750 insurance payout, which was about 10% of the $17,280 he had spent.

19. [22]

    The plaintiffs’ solicitors have investigated the circumstances of a total of 14 cruises within the 2018 year, including the two taken by the plaintiffs (Aff Graham, [148]-[418]). Their investigations of the 14 cruises have revealed that they were disrupted in the following ways:

20. [23]

    Investigations conducted on behalf of the plaintiffs indicated that in 2018, the defendant offered about 379 European river cruises. However, Ms Willis in her affidavit deposes that the defendant ran only 304 cruises. At the hearing of these proceedings, the plaintiffs accepted that Ms Willis’ number is accurate.

21. [24]

    The plaintiffs’ investigations revealed that safe navigation of major European waterways in 2018 was generally imperilled by extreme drought conditions which produced low river water levels. The plaintiffs stated that those conditions were widely reported in news media, which noted their impact on the ability of the defendant and other tour operators to successfully provide the experience customers paid for.

22. [25]

    In addition to those news reports, the plaintiffs’ solicitors have obtained some very limited and indirect evidence of other cruises being disrupted. This evidence includes information from passengers and from “Cruise Critic Reviews” published online in relation to various cruises run by the defendant (Aff Graham, [419]-[462]). Of those reviews, Mr Graham has identified a further 18 cruises that he would describe as “probably” disrupted and 15 cruises “possibly” disrupted.

23. [26]

    The plaintiffs submitted that it is not attractive for them to incur the costs of litigating individually to seek to recover their own loss and damage. They argued that their position is unsurprising, as consumer claims are rarely of significant value and the high costs of litigation make the bringing of such claims economically unviable.

24. [27]

    The plaintiffs argued that it may be economical to commence representative proceedings with the appropriate backing of a funder. However, the plaintiffs do not currently know whether those proceedings would be viable. Their lack of knowledge has a significant bearing on the plaintiffs’ chances of bringing a representative proceeding because the availability of funding will depend upon several factors. The first is the likely cost of such proceedings, about which the plaintiffs’ solicitors can currently give advice. The second is the likely quantum of the claim that could be brought by Australian and/or international resident group members, which require documents from the defendant in order to be established to any degree of reasonable probability. The third is whether there is a funder willing to fund litigation at a sufficient level to cover those costs, given the quantum of damages that may be expected.

25. [28]

    The plaintiffs’ application is funded and indemnified by Litigation Lending Services (“the funder”). The funder has been described by its senior litigation manager and summarised in the affidavit of Mr Graham at [490]-[528]. There are a range of factors that the funder will consider in accordance with its usual practice in determining whether or not to fund litigation. If a claim is determined to have good prospects of success, the funder will fund the costs of litigation up to 10% of the quantum of a claim.

26. [29]

    Mr Graham and his employer firm have estimated the costs of a representative proceeding based on the range of possible numbers of Australian paying passengers estimated at 400 to 1200, taking only Cruises 1-14 as a starting point. Their estimation puts the costs of a representative proceeding at $549,900 to $709,900 (Aff Graham, [478]).

27. [30]

    The plaintiffs argue that when calculations allow for an increasing number of passengers from among the approximately 304 other cruises in 2018, scale benefits are likely to apply, such that after 800 passengers, each additional 100 passengers will require only declining additional costs (Aff Graham, [483]-[486]). By way of illustration, the total cost will be $713,307.25 for 1,000 passengers; $834,111.88 for 1,500 passengers; $887,713.54 for 2,000 passengers and $911,496.88 for 2,500 passengers.

28. [31]

    Given the cost calculations, representative proceedings are likely to become viable if the class size reaches approximately just over 1,500 group members. (Aff Graham, [525]). At 2,000 passengers, assuming a 50% refund per passenger, costs would be about 8% of the total quantum of $11,055,000.

29. [32]

    The plaintiffs acknowledge that there is real variability in cost estimates, especially in quantum of return. The plaintiffs argue that the more information is obtained, the greater efficiency can be achieved, as the plaintiffs’ solicitors can choose cruises which were most disrupted, had the largest proportion of Australian paying customers, and had the highest likely ticket cost. However, as the class grows significantly in size, the likelihood is that litigation costs will fall well below 10% of likely quantum (Aff Graham, [540]-[545]). Mr Graham has conducted a sensitivity analysis that indicates that representative proceedings with a class size of 3,600 members, which is only 16% of his estimate of likely Australian passengers, will be viable at a 50% refund entitlement per passenger, assuming that costs are 50% higher than estimated and scale benefits are cut by two-thirds.

30. [33]

    At present, the funder considers there is not sufficient information available to determine whether it is viable to fund this litigation.

Preliminary discovery

1. [34]

   Rule 5.3(1) of the UCPR reads as follows:

2. [35]

   An order may be made against a prospective defendant where certain things appear to the court to be true: see O’Connor v O’Connor [2018] NSWCA 214 (“O’Connor”) at [21]. In O’Connor, Simpson AJA, with whom McColl and Macfarlan JJA agreed, stated at [21]-[22] that those things include the following:

3. [36]

   Importantly, the requirement in UCPR 5.3(1)(a) that the plaintiff has “sufficient information to decide whether or not to commence proceedings against the prospective defendant” is not constrained by the words in the foot to UCPR 5.3(1) as to the kind of documents that are to be produced, such that only documents going to whether a person is entitled to relief can be ordered to be produced. For this reason, even documents going only to the quantum of relief that potentially may be ordered can be sought, if that is a matter bearing on the determination of whether or not to commence proceedings. As Simpson AJA stated in O’Connor at [89]-[90]:

4. [37]

   As a matter of interpretation, UCPR 5.3 is to be construed beneficially: see St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360 per Hely J at [26]; O’Connor at [27]. In Hatfield v TCN Channel 9 Pty Ltd (2010) 77 NSWLR 506; [2010] NSWCA 69 (“Hatfield”), McColl JA stated the relevant principles as follows:

5. [38]

   In O’Connor at [29], Simpson AJA described these comments as “uncontroversial”.

6. [39]

   The parties made submissions addressing each of the facts described in O’Connor at [21] and reproduced above at [35] of this judgment. As the relevant issues within those submissions overlap, I have combined them to consider (i) first, followed by (ii) and (iii) together, and finally (iv) and (v) together.

(i) That the plaintiffs may be entitled to make a claim for relief against the prospective defendant

1. [40]

   The records are sought to assist the plaintiffs in deciding whether to bring representative proceedings under s 157 of the Civil Procedure Act against the defendant. The plaintiffs seek documents under UCPR 5.3 relating to their “claim for relief”. “Claim for relief” is defined in s 3 of the Civil Procedure Act broadly and inclusively, so as to include a claim as a representative plaintiff under s 157 of the Civil Procedure Act:

2. [41]

   Thus, for the purposes of UCPR 5.3, it is no issue that the proceedings proposed to be brought are representative in nature, such that that the documents sought relate to other group members’ causes of action.

3. [42]

   The plaintiffs argued that their prospective claim is similar to that of the successful plaintiff in the 2013 class action proceedings, Moore v Scenic Tours Pty Limited (No 2) [2017] NSWSC 733 (“Moore”). As previously stated, those proceedings concerned the disruption of a series of cruises operated by the defendant on European waterways in 2013 due to heavy rains. Whereas other tour operators chose to operate cruises and refunded fares in full, the defendant elected to continue with its cruises. Many passengers found their luxury cruise holidays had been replaced significantly or partially by a bus tour of Europe, often out of sight of the river, moving from city to city and accommodation to accommodation, packing and unpacking each day, involving extensive walking, lower quality food and accommodation. Some limited days were spent on water, but others were spent moored alongside other ships for days in unsightly riverside docklands. Customers were given an option of departing early at their own expense. Only limited insurance claims could be made for disrupted days, at a fraction of the cruise cost per day.

4. [43]

   In Moore, Garling J held that the defendant breached the consumer guarantees under ss 60-61 Australian Consumer Law in various ways, including its failure to have cancelled some cruises before they commenced or at least to have advised customers of likely serious disruption, as well as its broader failure to deliver a luxury river cruise of a kind consistent with the purpose of customers enjoying a very luxurious river cruise, the guarantee of delivering that experience, and the guarantee of due care and skill in providing the cruise holidays.

5. [44]

   Moore was appealed by both parties on certain grounds in the case of Scenic Tours Pty Ltd v Moore [2018] NSWCA 238. That decision is now the subject of extant special leave applications. However, as matters presently stand, the 2013 cruise group members remain entitled to claim the lost economic value of their holidays arising from breach by the defendant of consumer guarantees.

6. [45]

   The plaintiffs argued that they “may” have a claim for relief for the purpose of UCPR 5.3 for the defendant’s breach of the consumer guarantees in s 61(1)-(2) of the Australian Consumer Law. That section provides:

7. [46]

   The plaintiffs argued that the fact that they and at least twelve other paying passengers have similar claims to be made indicates that they may bring a representative action.

8. [47]

   The plaintiffs argued that the only apparent difference between the 2013 class action proceedings and the present one, generally speaking, is the cause of disruption which made the rivers unnavigable, which in these proceedings is a drought rather than a flood. The plaintiffs argued that the disruption, inconvenience, distress, disappointment and, accordingly, the loss of economic value of the expensive tickets purchased for luxury cruise holidays in these proceedings is of the same nature as the 2013 class action proceedings. Unlike the 2013 class action proceedings, no claim is currently brought under the “care” guarantee in s 60 of the Australian Consumer Law. However, the plaintiffs stated that they might add that cause of action at a later date.

9. [48]

   The defendant noted that it is unsurprising that the plaintiffs argue they have a viable cause of action against Scenic for breach of ss 61(1)-(2) of the Australian Consumer Law, given that both the NSW Supreme Court and the NSW Court of Appeal held that Scenic was, in substance, strictly liable in the 2013 class action proceedings.

10. [49]

    The defendant took issue with the plaintiffs’ reliance on Steffen v ANZ Banking Group [2009] NSWSC 666 at [110]-[117] (“Steffen”). In Steffen, the Court was concerned with a cause of action brought by the plaintiffs and 24 other individuals who invested money in a fraudulent Ponzi scheme operated by a company, each of whom invested by payments in bank accounts with the ANZ. At [112], McDougall J held that the claims of the investors were in respect of, or arose out of, similar or related circumstances. The defendant argued that in these proceedings, a cruise which commenced in June 2018 cannot be said to have arisen out of the same circumstances as a cruise which commenced in November 2018.

11. [50]

    The defendant further argued that these proceedings are distinguishable from Steffen. The plaintiffs in this case seek documents relevant to cruises operated during “the period” defined in the summons as between 1 June 2018 and 31 December 2018. Unlike in Steffen, the plaintiffs do not identify any purported class of persons whom they represent. Instead, they have adduced evidence from less than 5% of the cruises operated during the period, and seek orders for discovery of documents relating to the remaining 95% despite there being no direct evidence to suggest that other passengers may have an entitlement to make a claim.

12. [51]

    Finally, the defendant also argued that the Court’s decision in Steffen was based upon UCPR 7.4-7.5 as they existed 10 years ago. Rule 7.4 as it now exists is written in entirely different terms, and concerns proceedings concerning child abuse against an unincorporated organisation. Rule 7.5 has been repealed. However, I note that the substance of UCPR 7.4-7.5 as it applied in Steffen has been incorporated into Part 10, s 157 of the Civil Procedure Act, which governs representative proceedings under the same terms.

13. [52]

    That the plaintiffs in these proceedings “may” have a claim for relief is a low threshold. In O’Connor, Simpson AJA remarked at [30]:

14. [53]

    In Steffen, McDougall J discussed the breadth of the application of UCPR 5.3 as follows at [24]:

15. [54]

    At the hearing of these proceedings, counsel for the defendant submitted that in relation to the 14 cruises identified, the plaintiffs “know they have a good cause of action on their own evidence” (T 32.9-10). It is in relation to the additional 290 cruises which Scenic ran in 2018 that the defendant resists production of documents.

16. [55]

    The defendant’s submissions addressed two key issues: firstly, whether there is sufficient evidence to suggest that additional cruises were affected by the drought conditions; and secondly, if so, whether those passengers’ claims could be said to have arisen out of sufficiently “similar or related circumstances”.

17. [56]

    As to the first issue, the plaintiffs’ evidence suggesting that additional cruises may have been disrupted is set out in the affidavit of Mr Graham and summarised at [26]-[27] of this judgment. As at 27 March 2019, the plaintiffs’ solicitors had been contacted by 80 passengers from the 14 cruises known to have been disrupted, of whom 53 were Australian. Those cruises ran from 18 July through 21 November 2018 across a variety of European river ways, primarily between Budapest and Amsterdam.

18. [57]

    The plaintiffs have ascertained what their solicitor described as “very limited and indirect evidence” that cruises in addition to the known 14 were also disrupted by the drought conditions. This evidence seems to originate primarily from anecdotes posted to an open forum “Cruise Critic” review website. In his affidavit, Mr Graham estimated that 18 additional cruises were “probably” disrupted, and that another 15 were “possibly” disrupted. The plaintiffs provide no direct evidence that the approximately 250 further cruises operated by the defendant during the period were disrupted, other than inferentially by reason of the persistent drought conditions.

19. [58]

    As stated earlier, it is not necessary for the purposes of UCPR 5.3 that the plaintiffs establish a prima facie case for relief: see O’Connor at [30]. They are required to provide merely “some particularisation of the nature of the relief in contemplation”: see Hatfield, above at [37]. Their application is sufficient so long as it “appears to the court” that they may have a cause of action. The only relevant qualification to the width of UCPR 5.3(1) is to be exercised in my discretion, once the conditions in the rule have been satisfied: see Steffen at [24], excerpted above at [53].

20. [59]

    Bearing in mind that UCPR 5.3 is to be beneficially construed, it is my view that the plaintiffs’ evidence that multiple known cruises over the period of July to November 2018 were disrupted by drought indicates that further applicants on the other 290 cruises may also have been affected, such that they too have a right of action against the defendant in the plaintiffs’ proposed representative proceedings.

21. [60]

    The second issue raised by the defendant concerns whether cruises during the period can be said to have been disrupted by “similar or related circumstances”. Although the defendant did not refer specifically to s 157 of the Civil Procedure Act, it is that section which governs the substance of the defendant’s submissions.

22. [61]

    Section 157 relevantly states:

23. [62]

    The defendant submitted that unlike in Steffen, where the claimants’ claims arose out of “similar or related circumstances” such that they could bring representative proceedings, the prospective plaintiffs in these proceedings are related only by (potentially) disrupted cruises between June and November 2018. The defendant argued that a claim in respect of a cruise which commenced in June 2018 cannot be said to have arisen out of the same circumstances as a claim in respect of a cruise which commenced in November 2018 for the purposes of s 157(1)(b).

24. [63]

    Although the circumstances of the drought conditions have yet to be fully explored, it is my view that claims in respect of Scenic cruises disrupted by drought during the period can be said to have arisen out of “similar or related circumstances”, especially in light of the fact that the flooding of rivers was held to be so in Moore.

25. [64]

    For these reasons, I am satisfied for the purposes of UCPR 5.3 that the plaintiffs may be entitled to a claim for relief against the defendant.

(ii)-(iii) That the applicant has made reasonable enquiries to obtain sufficient information to decide whether or not to commence proceedings, and that having made those enquiries, the applicant is unable to obtain sufficient information to make that decision

1. [65]

   The nature and extent of the plaintiffs’ enquiries to date are set out at [22]-[25] of this judgment.

2. [66]

   In his affidavit, Mr Graham sets out the investigations he has made on behalf of the plaintiffs, of the plaintiffs’ cruises, of passengers on twelve other cruises, of the climatic conditions in Europe in 2018, and of the experience of the defendant and other tour operators across the cruising seasons, identifying over 30 other possibly disrupted cruises. It is the plaintiffs’ case that at present, the funder considers that there is insufficient information available to determine whether it is viable to fund this litigation.

3. [67]

   The defendant conceded that the plaintiffs’ evidence records the disruption claimed to have been suffered by passengers on each of the named 14 cruises. However, the defendant argued that the plaintiffs’ evidence of disruption to additional cruises during the period is “very limited” and “indirect”. The plaintiffs’ evidence discloses that not a single passenger on any cruises in addition to the 14 identified cruises has contacted the plaintiffs’ solicitors (Aff Graham, [419]). The defendants argued that without sufficient evidence, the plaintiffs seek to embark upon a “fishing expedition” on the pretext that a number of other cruises in 2018 may have been disrupted.

4. [68]

   In O’Connor, the Court determined that it may order preliminary discovery of documents which are relevant to the likely quantum of damages of a proceeding ([84]-[88]). The defendant argued that in these proceedings, the likely quantum is readily ascertainable. It is a percentage of the amount each plaintiff paid for his or her respective cruises. Mr and Mrs Kelly paid $37,000, and Mr Lawrence and his partner paid $17,000. The same can be said for the putative group members.

5. [69]

   The defendant noted that Mr Graham does not yet know whether international passengers may have claims which can be pursued in an Australian court (Aff Graham, [134]). The defendant argued that there is no reason why that question has not yet been determined, or, at the very least a view formed, particularly as Mr Graham has been in contact with a number of passengers who are Canadian, British and American and who would likely have a copy of the terms and conditions applicable to their cruises.

6. [70]

   The defendant further noted that the plaintiffs’ solicitors have made enquiries into to the nationality of the passengers on only 6 of the 14 identified cruises (Aff Graham, [136]-[141]). The defendant noted that it is not apparent why this is the case, in circumstances where the plaintiffs’ solicitors have been in contact with multiple passengers on all 14 cruises.

7. [71]

   Mr Graham deposes that the above matters are said to be relevant to the calculations of the litigation funder. The plaintiff argues that the size of the class of Australian passengers on cruises 1-14 cannot be quantified with greater precision than a range of 400 to 1200 passengers. From that estimate, the plaintiff has approximated that the cost is likely to be approximately $550,000-$710,000 plus GST. However, the defendant argued that the Court should not take that calculation at face value. A number of the allowances appear to have been estimated leniently. For example:

8. [72]

   The plaintiff claims that the funder has a practice of not providing funding beyond approximately 10% of the quantum of the claim. Apparently, the funder is unable or unwilling to make a decision on the present analysis conducted by Mr Graham. That analysis, which has been adopted by the funder, includes that there were 400 to 1200 Australian passengers on the 14 cruises, that the average claim for each group member will be between 33% and 67% of the amount paid for any particular cruise, and that the average amount paid is about $11,055 (Aff Graham, [512]-[515], [518], [471]-[473]).

9. [73]

   It follows that a reasonable estimate is that there are 800 Australian passengers on board cruises 1-14, each of whom paid an average of $11,055 (for a total of $8,844,000), and who are likely to recover on the plaintiffs’ analysis 50% of that sum (or $4,422,000). In accordance with the funder’s practice, the funder is willing to provide funding for no more than 10%, or $442,000, of that sum (Aff Graham, [519]). Even if it were instead 13% of the likely cost and in excess of the funder’s 10% threshold, whether to fund the project will be a commercial decision for the funder to make.

10. [74]

    Furthermore, the defendant argued that there is no evidence that the funder is inflexible in its unwillingness to fund above a 10% threshold. For these reasons, the defendant argued that the Court should not vex Scenic with an order requiring it to produce documents of a significant magnitude simply because a particular funder only willing to fund an estimated $442,000, in circumstances where the cost estimate of $630,000 was calculated the basis of an assumed linear increase in costs per group member (Aff Graham, [482]).

11. [75]

    For these reasons, the defendant argued that the plaintiffs have more than “sufficient information” in order to determine whether to commence proceedings under UCPR 5.3(1)(a).

12. [76]

    The first consideration under this heading is whether the plaintiffs have made reasonable enquiries to obtain information to decide whether or not to commence proceedings. The affidavit of Mr Graham sets out the extent of the plaintiffs’ enquiries. I have already summarised that evidence at [56]-[57] of this judgment. It involves detailed investigations into 14 disrupted cruises, as well as several dozen more through anecdotal evidence on a cruise critic website. The plaintiffs infer that the known drought conditions during the period are likely to have affected additional cruises, and give rise to potential causes of action for numerous further passengers.

13. [77]

    The defendant disputes that the plaintiffs’ investigations can be considered “reasonable enquiries” entitling them to preliminary discovery under this application. Counsel for the defendant noted that tellingly, not a single passenger on a cruise outside of the 14 known has contacted the plaintiffs’ solicitors (T 31).

14. [78]

    I agree that the plaintiffs’ evidence gleaned from its enquiries is speculative and circumstantial. However, the affidavit of Mr Graham evinces the plaintiffs’ substantial efforts to gather evidence from passengers, as well as inquire (given few available resources) into further affected cruises and general drought conditions in the affected region. Bearing in mind that I am to beneficially interpret UCPR 5.3 for the purposes of the plaintiffs’ application, I am satisfied that their enquiries were reasonable under the circumstances.

15. [79]

    The primary dispute between the parties under this heading is whether, having made its enquiries, the plaintiffs have insufficient information to decide whether or not to commence proceedings.

16. [80]

    It is the plaintiffs’ case that it is not economical to commence representative proceedings without the backing of a funder. The plaintiffs argue that until they can more accurately estimate the number and nationality of passengers affected, and the extent of the disruptions, they cannot provide the funder with a prospective quantum sufficient to secure funding.

17. [81]

    The defendant argues that the plaintiffs have sufficient information to make a decision without the need for further documents. To begin with, the defendant disputes the plaintiffs’ calculations outlined in Mr Graham’s affidavit. The defendant argues that a number of the allowances have been “estimated leniently”, including for communications with group members, three interlocutory applications, the preparation of excessive witness statements, and a lengthy trial despite many of the issues already having been determined in the 2013 class action proceedings. The defendant also submitted that more generally, the Court should hesitate to accept that the funder’s “usual practice” of requiring a 10 times return is an invariable practice. The defendant argued that if the costs slightly exceed the funder’s preferred threshold, whether to risk its investment on those terms is merely a commercial decision it must make.

18. [82]

    When considering whether the plaintiffs are unable to obtain “sufficient” information to decide whether or not to commence proceedings, I am to construe UCPR 5.3(1)(a) beneficially and with “the fullest scope that its language will reasonably allow”: see O’Connor at [90].

19. [83]

    In his affidavit, Mr Graham has based his calculations of cost and quantum on estimates of class size extrapolated from a limited data set which includes the 14 named cruises and other indirect evidence of disruption to further cruises. It is the plaintiffs’ case that the variability of their current costs estimates is unsatisfactory to the funder. There is no evidence that another funder is willing to fund the proceedings on the information available. As such, construing UCPR 5.3(1)(a) beneficially, I am satisfied that the plaintiffs are unable to obtain sufficient information to determine whether to commence proceedings, as functionally they cannot make such a determination without funding.

(iv)-(v) That the prospective defendant may have or have had possession of a document or thing that could assist in determining whether the applicant is entitled to make a claim for relief, and that inspection of such a document would assist the applicant to make the decision whether or not to commence proceedings

1. [84]

   The plaintiffs submitted that the documents sought are ultimately directed at quantum. An assessment of the likely quantum of representative proceedings requires a consideration of a number of variables, such as the extent of the disruption on each cruise and the price paid by each passenger. As explained by Mr Graham, the documents provide information which will assist in gauguing the viability of representative proceedings. Those assessments are explained in the affidavit of Mr Graham at [550]:

2. [85]

   As to (a), the plaintiff argued that it is important to identify the size of relevant group members, including whether passengers are Australian residents. Australian passengers can be grouped for the purposes of identifying common questions of fact and law. As explained by Mr Graham in his affidavit at [564]:

3. [86]

   As to (b)-(f), these matters all go to the likely quantum of prospective representative proceedings, which will in turn inform the decision of the funder to fund representative proceedings by the plaintiffs.

4. [87]

   Mr Graham extensively canvasses the need for each category of document in his affidavit at [546]-[646]. He has considered each of the categories sought, its purpose, and the evidence of the defendant.

5. [88]

   The defendant stated that the plaintiff’s application seeks the production of 130,000 documents and will take an employee of Scenic about 7 weeks to retrieve.

6. [89]

   The defendant addressed the specific categories contained in the schedule as follows:

   1. (1)

      Passenger manifests – the defendant argued that there is no reasonable basis to require the production of documents which detail the number of passengers on each cruise. There is no evidence that this is not ascertainable or that it has not been ascertained already. This category will require the production of over 3,000 pages of documents.

   2. (2)

      Contact details of every passenger – the defendant argued that if the purpose of these documents is to differentiate between the Australian and international passengers on each cruise, then there is no need to produce contact details of the international passengers. Still further, there is no need to provide their names, addresses and contact details. If a passenger is an American resident, their contact details will be of no assistance. This category will require the production of over 1,800 documents.

   3. (3)

      Documents recording disruptions to the itineraries – the defendant argued that the plaintiffs already have detailed instructions from the 80 passengers who, as at March 2019, contacted the firm concerning disruptions to their itineraries. This category will require the production of over 2,700 documents.

   4. (4)

      Email communications providing cruise update – the defendant argued that this category of documents this overlaps with category 3, and appears to be sought because category 3 documents may be incomplete. These documents will take about a week to assemble.

   5. (5)

      Booking advices –these documents are sought to ascertain the price paid by each passenger. The defendant argued that this evidence is already substantially in the possession of the plaintiffs’ solicitors. There are about 100,000 pages of documents falling within this category, and will take one individual two weeks to assemble.

   6. (6)

      Correspondence declaring disrupted days – the defendants argued that the plaintiffs already have this information, but that even if they do not, it isn’t necessary for them to have because the passengers who have contacted the plaintiffs’ solicitors can provide the information. These documents will take about four hours to assemble.

   7. (7)

      List disclosing compensation paid – these documents are required for the funder to determine whether funding is commercially viable. This will take an hour to complete.

   8. (8)

      Settlement agreements – these documents are said to be required for the same purpose as category 7. They will take about four hours to assemble.

   9. (9)

      Terms and conditions – these are said to be required for funding purposes, and will require about two hours to assemble.

   10. (10)

       Contract formation date – these documents are said to be for the same purpose as category 9. They will require the production of 25,000 pages of documents and will approximately take three weeks to complete.

7. [90]

   The first consideration under this heading is whether the defendant may have possession of documents which would assist the plaintiffs in determining whether they are entitled to make a claim for relief. The nature of the 10 categories of document sought is set out in the plaintiffs’ schedule at [9] of this judgment. The first two, passenger manifests and contact details, could assist the plaintiffs in determining which passengers were Australian and thus potentially entitled to make a claim under the Australian Consumer Law. Categories 3, 4 and 6 include records of cruise disruptions. Categories 5, 7 and 8 disclose the final price paid by passengers, and any compensation they may have already received. Finally, categories 9 and 10 concern passenger contracts with Scenic during the period.

8. [91]

   Considering that any combination of the factors in the above list may establish, affect or negate a passenger’s entitlement to make a claim in respect of his or her cruise during the period, it is my view that UCPR 5.3(1)(b) is satisfied.

9. [92]

   The final consideration under UCPR 5.3(1) is whether inspection of the documents sought will assist the plaintiffs in making the decision of whether or not to commence proceedings. If the plaintiffs are able to inspect the documents sought, they can determine which passengers of Scenic cruises during the period have the potential to make a claim, the potential quantum of the award in representative proceedings, and whether the funder is willing to fund the litigation. As such, it is my view that UCPR 5.3(1)(c) is also satisfied.

Discretionary factors

1. [93]

   As stated, UCPR 5.3(1) is to be generously construed. The only relevant qualification to the width of the rule is to be exercised in my discretion once the conditions in the rule have been satisfied: see Steffen at [24], excerpted above at [53]. As such, I now turn to consider whether I should exercise my discretion to limit an order for discovery of the documents sought in the plaintiffs’ schedule.

2. [94]

   The plaintiffs submitted that an order for the documents sought would not be oppressive to the defendant. They submitted that after certain compromises, the production of the documents would require about 6-7 weeks of work by one person. Some of the tasks could likely be undertaken by relatively junior staff, properly instructed by Ms Willis. There is no evidence from the defendant as to cost, but on a labour-cost basis, assuming a salary of $80,000 per annum, the plaintiff estimated the cost to Scenic of the discovery to be around $10-15,000. From a discovery perspective, the plaintiff argued that this sum is not significant.

3. [95]

   The plaintiffs further referred to a recent Australian Law Reform Commission report on class action proceedings and third party litigation funding, titled Integrity, Fairness and Efficiency – An Inquiry into Class Action Proceedings and Third-Party Litigation Funders (Final Report, ALRC Rep 134, December 2018). In its report, the Australian Law Reform Commission noted at [1.23]:

4. [96]

   The plaintiffs submitted that the same policy underpins the New South Wales regime.

5. [97]

   The plaintiffs further referred to Wileypark Pty Ltd v AMP Limited [2018] FCAFC 143 (“Wileypark”), in which the Court stated at [18]:

6. [98]

   I note that the defendant also referred to Wileypark, but argued that in these proceedings, there is no stable of funders lining up to fund competing class actions against Scenic.

7. [99]

   In Perera v GetSwift Ltd [2018] FCAFC 202 (“Perera”), the Full Court stated at [279]:

8. [100]

   The above passage at [279] was quoted by Ward CJ in Eq in Wigmans v AMP Ltd [2019] NSWSC 603 at [53], who adopted what she described as the “admonition” in Perera at [105], in the context of Part 10 of the Civil Procedure Act.

9. [101]

   In the plaintiffs’ submission, to the extent that the Court’s discretion is engaged, that the Court should encourage informed pre-action assessments of prospective representative proceedings by taking a liberal approach to preliminary discovery. The alternative available to the plaintiffs, namely the premature commencement of representative proceedings followed by a broader process of discovery, is anathema to relevant case management imperatives. It would potentially be far more expensive than the alternative provided by these proceedings.

10. [102]

    The defendant argued that the starting point to assessing the plaintiffs’ claim is a plain reading of UCPR 5.3(1). The defendant submitted that there is no authority which supports the proposition that a litigation funder with an economic interest in litigation is entitled to use a potential plaintiff as a vehicle to explore the commercial viability of any funding arrangement which it might enter into. The application therefore is one which masquerades as being directed towards the issue of quantum. In substance, it is an attempt by a litigation funder to conduct a feasibility study.

11. [103]

    The defendant argued that if the power to order discovery on such terms exists, the Court should exercise its discretion to refuse it.

12. [104]

    Further, the defendant submitted that any feasibility study which the funder may conduct will be an entirely hypothetical process, as it requires the funder to make assumptions which are presently unstated about the number of group members who are likely to opt-out pursuant to s 162 of the Civil Procedure Act. It also requires the funder to make assumptions which are also presently unstated about “class closure”. In Moore v Scenic Tours Pty Ltd [2015] NSWSC 1777, Beech-Jones J stated at [49]-[50]:

13. [105]

    The defendant argued that the comments of Gleeson J in McFarlane (as Trustee for the S McFarlane Superannuation Fund) v IOOF Holdings Ltd [2018] FCA 692 in respect of the Federal Court analogue to UCPR 5.3 should be borne in mind:

14. [106]

    Finally, the defendant argued that representative proceedings are not the best and only option for the plaintiffs.

15. [107]

    The defendants noted that the plaintiffs’ evidence was that Mr Kelly would have difficulty prosecuting proceedings without legal assistance (Aff Graham [23], [52(a)]), and that Mr Lawrence, who is medically retired, would prefer not to commence proceedings on his own (Aff Graham, [88(b)]). The defendants noted that in Scenic, the Court of Appeal stated at [405]:

16. [108]

    The defendant submitted that proceedings in NCAT would be comparatively cheap and quick, as they were in Harold and Aileen Childs v Scenic Tours Pty Ltd [2014] NSWCATCD 128 (“Harold”), which the defendant identified as the decision referred to in the passage set out in Scenic at [405] above. Harold was commenced on 13 September 2013, heard on 13 December 2013 and judgment was delivered on 30 January 2014. The judgment contained only 20 paragraphs. The defendant argued that for such proceedings, legal representation is not required and the process is not complex. The defendant argued that the evidence that Mr Kelly and Mr Lawrence would have difficulty or would prefer not to bring proceedings should be treated with a degree of caution, since there is no evidence that the plaintiffs have been advised of the ease and expediency of commencing a proceeding in NCAT and their attitude to proceeding in that forum.

17. [109]

    The defendant argued that I should exercise my discretion to limit an order for discovery because the plaintiffs have the option to pursue their claims in NCAT at a fraction of the time and cost.

18. [110]

    Leaving aside the plaintiffs’ evidence that they would prefer not to run their own cases, which I accept, it would not be efficient for every passenger with a potential claim against the defendant in these proposed proceedings to seek redress in NCAT – even if only a fraction of the plaintiffs’ estimated claimants are eligible. This is the purpose of representative proceedings: to enable claimants to seek compensation whose claims would be singularly too insignificant to justify even the inconvenience and effort, if not the cost and expense, of commencing proceedings alone. I note that the passage to which the defendants referred in Scenic at [405], in which Sackeville AJ noted the comparative expediency of NCAT to representative proceedings in this court, was made in the context of admonishing the parties in Scenic for failing to identify common questions at an early stage. The defendant in these proceedings acknowledged that the common questions from the 2013 class action proceedings may be used as a guide to expedite this case. For these reasons, I do not consider NCAT to be a comparable alternative to representative proceedings.

19. [111]

    As to class closure, counsel for the plaintiff called it an “outmoded approach”, as the funder may instead apply for the Court to make a common fund order under s 183 of the Civil Procedure Act: see Brewster v BMW Australia Pty Ltd (2019) 366 ALR 171; [2019] NSWCA 35. Such an order obliges all group members to pay their proportionate share of the funder’s commission out of the proceeds of the judgment, whether or not they previously entered into an agreement directly with the funder. A common fund order would ensure that all members of the class are liable to pay the funder its commission should any proceeds be recovered.

20. [112]

    The defendant’s primary submission with regards to this Court’s discretion is that the plaintiffs’ application masquerades as being the inquiry of plaintiffs into potential quantum, when really it is the inquiry of a funder investigating an investment opportunity. However, at the hearing of these proceedings, counsel for the plaintiffs noted that it was the plaintiffs themselves, not the funder, who first approached the plaintiffs’ solicitors in respect of their potential claims against Scenic. Moreover, counsel for the plaintiffs argued that any plaintiff considering the commencement of proceedings will engage in a process of weighing the costs of litigation against the expected benefits of a successful outcome. Larger plaintiffs with greater sophistication, such as those in the representative proceedings with a corporate funder contemplated in this case, will engage in feasibility studies to determine whether or not funding should be made available for risky litigation. Counsel argued that there is no need to “disparage” this kind of enterprise (T 27.41-47). It is simply a process which is sophisticated in proportion to the size of the claim and claimants.

21. [113]

    I note that neither party could point to any rule, legislation, or precedent in case law to suggest that it is not an appropriate use of material, such as quantum, to make a decision about commencing proceedings based on the ability to obtain funding. I would therefore not limit an order for discovery on such terms.

22. [114]

    However, I am not inclined to grant the plaintiffs discovery of documents in relation to all 304 Scenic cruises which ran during the period. The evidence is that only cruises 1-14, as set out in paragraph [22] of this judgment, are known to have been disrupted. There is evidence that a further 18 cruises were “probably” disrupted and that 15 cruises were “possibly” disrupted, in respect of which the plaintiffs may be entitled to make a claim for relief (Aff Graham, [463]; [464]). Hence, I would allow preliminary discovery in relation to those 47 cruises. Without further evidence of interruption, I am not satisfied that the plaintiffs may be entitled to make a claim for relief in relation to further Scenic cruises during the period. Under these circumstances, and in the exercise of my discretion, I would not order preliminary discovery the remaining 247 cruises at this stage.

23. [115]

    The affected group of passengers on cruises 1-14, which ran mainly to and from Amsterdam and Budapest, likely comprise between 400-1,200 Australian passengers. The plaintiffs estimate the costs of representative proceedings to be $550,000-$710,000. To engage the services of the litigation funder, it would appear that the class action only becomes viable if the class size reaches approximately 1,500 group members. If preliminary discovery is granted, the plaintiffs’ solicitors will be in a position to choose cruises that were most disrupted, had the largest proportion of Australian paying customers and had the highest likely ticket cost.

24. [116]

    The plaintiffs have proposed that preliminary discovery be undertaken in two stages, with documents under categories 3, 4, 6, and 9 being discovered first, followed by production of the documents in the remaining categories restricted to specific cruises identified by the plaintiffs.

25. [117]

    The plaintiffs say that the documents in categories 3, 4, 6, and 9 will identify the extent of the disruption for each cruise operated by Scenic during the relevant period, as well as relevant contractual terms. The plaintiffs argue that after viewing the first category of documents, they will then be able to identify the specific cruises for which the remaining categories of documents are sought. It is in the mutual interest of the plaintiffs and defendant that documents in the remaining categories are only discovered in relation to those cruises which may conceivably form part of prospective representative proceedings. By proceeding in this manner, the plaintiffs argue that any burden placed on Scenic in complying with an order for discovery may be substantially reduced.

26. [118]

    I note that category 9 of the documents seeks the standard form terms and conditions from contracts entered into by passengers on the 2018 cruises, the terms of which are not too dissimilar to those in the 2013 class action proceedings. In respect of those similar contracts in Moore, Garling J held that affected group members were entitled to claim lost economic value of their holidays arising from the breach of consumer guarantees in s 61(1) and (2) of the Australian Consumer Law.

27. [119]

    I agree that granting discovery of categories 3, 4, 6 and 9 first is a sensible approach. Thus I would grant discovery of documents within categories 3, 4, 6 and 9 of the schedule in relation to the 47 Scenic cruises during the period of which there is evidence of disruption.

The result

1. [120]

   I make an order that the defendant give the plaintiffs’ solicitor preliminary discovery of the documents in categories 3, 4, 6 and 9 of the schedule in respect of the 14 cruises set out in the affidavit of Mr Graham at [91], the 18 “probably” disrupted cruises set out at [463], and the 15 “possibly” disrupted cruises set out at [464], at this stage by 25 November 2019.

2. [121]

   These documents are:

3. [122]

   Costs are discretionary. The appropriate order for costs is that costs be reserved.