FEDERAL COURT OF AUSTRALIA

Scandolera v State of Victoria [2015] FCA 1451

THE COURT ORDERS THAT:

1.    On or before 4.00pm on 24 December 2015 each of the parties is to either:

(a)    notify the Court in writing of their agreement with the orders as proposed in the Court’s reasons for judgment; or

(b)    file and serve short submissions on any amendments to those proposed orders.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth).

REASONS FOR JUDGMENT

1    Before the Court is an application for approval of a settlement for the applicants, who are minors and persons under a legal incapacity under r 9.61 of the Federal Court Rules 2011 (Cth). For the reasons set out below, I am satisfied the settlement should be approved. The form of orders to be made requires further attention, for the reasons I set out below.

Background

2    The applicants Matthew and Harley Scandolera are twin boys now aged eleven. They attended Marnebek School from 27 January 2010 until 19 July 2012. Marnebek School is operated by the respondent, the State of Victoria, who is agreed to be an “educational authority” and “educational provider” for the purposes of ss 4 and 22 of the Disability Discrimination Act 1992 (Cth). There is no dispute between the parties that both Matthew and Harley have, and the respondent and those employed at Marnebek School were aware that they each had, an intellectual disability. It is unnecessary to describe the applicants’ disabilities in any more detail given this matter is subject to an agreed settlement.

3    This proceeding was first commenced in December 2014 by the filing of an originating application under s 46PO of the Australian Human Rights Commission Act 1986 (Cth) together with a complaint lodged with the Australian Human Rights Commission on 22 January 2014 and terminated by the Commission on 9 October 2014. At that time, the application was brought by the applicants’ father Mr Christopher Scandolera, who had also lodged the complaint to the Commission on behalf of his sons, as their next friend.

4    Shortly after this proceeding had commenced, the Court was informed that the applicants’ father had passed away in January 2015. Without a next friend, by reason of r 9.66(1) the proceeding could not continue. The proceeding was effectively held in abeyance for some time until a new litigation guardian could be identified. On 15 April 2015, an application was filed seeking an order appointing the applicants’ mother Ms Christine Robinson as litigation representative. On 17 April 2015, the Court made orders to that effect. Orders were also made for the filing and service of an amended originating application and a statement of claim and otherwise timetabling the matter and referring it to mediation.

5    Through their litigation guardian, the applicants contended that over the period 1 February 2011 to 19 July 2012 (a period of approximately 18 months) the respondent breached ss 5 and 22 of the Disability Discrimination Act. Those sections relevantly provide:

5    Direct disability discrimination

(1)      For the purposes of this Act, a person (the discriminator) discriminates against another person (the aggrieved person) on the ground of a disability of the aggrieved person if, because of the disability, the discriminator treats, or proposes to treat, the aggrieved person less favourably than the discriminator would treat a person without the disability in circumstances that are not materially different.

(2)      For the purposes of this Act, a person (the discriminator) also discriminates against another person (the aggrieved person) on the ground of a disability of the aggrieved person if:

(a)      the discriminator does not make, or proposes not to make, reasonable adjustments for the person; and

(b)      the failure to make the reasonable adjustments has, or would have, the effect that the aggrieved person is, because of the disability, treated less favourably than a person without the disability would be treated in circumstances that are not materially different.

(3)      For the purposes of this section, circumstances are not materially different because of the fact that, because of the disability, the aggrieved person requires adjustments.

22    Education

(1)    …

(2)      It is unlawful for an educational authority to discriminate against a student on the ground of the student’s disability:

(a)      by denying the student access, or limiting the student’s access, to any benefit provided by the educational authority; or

(b)    …

(c)      by subjecting the student to any other detriment.

6    As set out in the amended statement of claim filed on 15 June 2015, the applicants’ main allegations were that:

(1)    the respondent subjected the applicants to seclusion in a designated “time out room” and in courtyards adjoined to classrooms. That seclusion was said to be less favourable treatment than the way the respondent would treat a person without the applicants’ disabilities, and to constitute direct discrimination against the applicants in breach of s 5(1). Although the pleading is not entirely clear, a separate part of the pleading appears to pick up the seclusion as a denial of a benefit in breach of s 22(2)(a) and a detriment in breach of s 22(2)(c);

(2)    the respondent failed to make the reasonable adjustment of arranging speech pathology assessments for the applicants to enable them to access the curriculum and reach their educational potential in breach of s 5(2). The failure was also said to be a failure to give a benefit in breach of s 22(2)(a) and a detriment in breach of s 22(2)(c);

(3)    the respondent failed to make the reasonable adjustment of arranging functional behaviour assessments for the applicants to enable them to access the curriculum and reach their educational potential in breach of s 5(2). This failure was also said to be a failure to give a benefit in breach of s 22(2)(a) and a detriment in breach of s 22(2)(c);

(4)    the respondent failed to make the reasonable adjustment of establishing a student support group (as set out in guidelines prepared by the respondent) to enable the applicants to access the curriculum and reach their educational and social potential in breach of s 5(2). As with the other two alleged failures to make reasonable adjustments, this failure was also said to be a failure to give a benefit in breach of s 22(2)(a) and a detriment in breach of s 22(2)(c).

7    In each case, the relevant detriments to which the applicants were subjected were said to include the restrictive practices of seclusion as well as frustration and distress in the classroom, which were said to be manifested through the applicants’ challenging behaviours.

8    In its statement of defence, the respondent denied that any unlawful discrimination occurred and contended relevant adjustments were made when and where required. The respondent disputed the characterisation of “seclusion”, and contended the applicants were under supervision while held in the “time out” room and the courtyards.

9    As to the asserted failure to make the reasonable adjustment of arranging speech pathology assessments, the respondent contended the articulation screening conducted in 2011 by a qualified speech pathologist was sufficient, and stated that the articulation screening assessment was used by the speech pathologist to assist the applicants to develop their speech skills in 2011 and 2012 through small group therapy for both Matthew and Harley, as well as one-to-one speech therapy for Harley.

10    As to the alleged failure to make the reasonable adjustment of arranging functional behaviour assessments, the respondent contended the behaviour monitoring performed by school staff served substantially the same purpose and that the respondent created individual behaviour plans or positive behaviour plans for the applicants. The respondent denied that the applicants’ behaviours were not effectively addressed by teaching staff.

11    As to the alleged failure to make the reasonable adjustment of establishing a student support group, the respondent contended such groups were a procedural mechanism established to facilitate communication with the families of students with disabilities, that student support group meetings for the applicants were offered once per term during the relevant period and were attended by their father on at least one occasion, that additional support for the applicants was provided in care team meetings or therapy meetings, and that the applicants’ challenging behaviours were being effectively addressed.

12    In respect of each asserted failure to make the reasonable adjustments of arranging speech pathology assessments and functional behaviour assessments and establishing student support groups, the respondent also disputed they could properly be characterised as reasonable adjustments for the purposes of the Disability Discrimination Act. The respondent contended that at best such measures were a means through which reasonable adjustments might be identified.

The course of the present application

13    In August 2015, the Court was informed that this proceeding had settled at mediation and a deed of release was signed by the parties on or around 21 August 2015. By that time, the applicants had filed and served their outlines of evidence and the respondent was due to file its outlines of evidence later in that month. The matter had also been listed for trial from 7 March 2016 to 8 April 2016.

14    The present application for settlement approval was expressed to be brought by an interested person under r 7.11. Ms Robinson is in any event the applicants’ litigation representative and therefore the terms of rr 9.70 and 9.71 are also applicable, and indeed were relied upon in other documents put before the Court on the application. The settlement approval application was filed on 13 October 2015, accompanied by an affidavit of the applicants’ solicitor Mr Joseph Ridley. Pursuant to r 7.11(2)(b), Mr Ridley’s affidavit exhibited the settlement deed and the opinion of an independent lawyer dated 7 October 2015. Counsel’s opinion is that the settlement is in the best interests of the applicants. The settlement includes payment of a settlement sum to the applicants by the respondent.

15    Beyond describing the application as an application seeking an order for the approval of the settlement, the application did not articulate the precise form of order sought by the applicants. However, in counsel’s written opinion there was some discussion of possible orders in relation to the disbursement of the settlement sum.

16    The application was listed for hearing on 20 November 2015. Prior to the hearing, my Associate informed the parties by email that I had some preliminary concerns about some of the proposed arrangements.

17    At the hearing, I informed the parties that having reviewed the materials, I was satisfied the settlement was in the best interests of the applicants. However I told the parties I had some concerns about the way in which the settlement funds were to be preserved for the interests of the applicants, given their ongoing future educational needs, and in light of their young age. My concerns related especially to the proposal mentioned in counsel’s written opinion concerning the disbursement of a not insignificant portion of the settlement monies. It is unnecessary and inappropriate in these reasons to set out the details of that proposal. At the hearing counsel for the applicants also advised the Court of Ms Robinson’s own somewhat strained financial circumstances.

18    I advised the parties I wished to receive further evidence about a firm proposal for the settlement fund trust arrangements, as well as an articulation of the form of order sought. After further consideration and exchanges, counsel for the applicants submitted one option might be for the settlement monies to be paid into the Supreme Court of Victoria’s Senior Master’s (Funds in Court) Office, which administers funds paid into court for and on behalf of persons under a disability.

19    I adjourned the matter until 26 November 2015 so that the applicants’ legal representatives could make inquiries and prepare the necessary materials. Counsel for the applicants undertook to have the relevant affidavit material filed before that date.

20    Senior counsel for the respondent sought leave for the respondent to be excused from further participation in the settlement approval process. He confirmed the respondent would perform the settlement if and once approved but did not seek to be heard, or further participate in, the Court’s approval process. Although in my opinion the respondent would have been entitled to continue to participate in the approval process, I was prepared to grant leave for it to be excused.

21    On 25 November 2015, a further affidavit affirmed by Mr Ridley was filed on behalf of the applicants. In it, Mr Ridley described enquiries he had made as to whether the Senior Master of the Supreme Court of Victoria might receive settlement funds from a proceeding in this Court. He deposed that the Senior Master’s Office informed him the Supreme Court could receive funds from this Court, and in order for this to occur this Court must make a specifically worded order to the effect that those funds be paid to the Senior Master, and the Senior Master must make an order mirroring that order, with both orders to be served upon the respondent. Mr Ridley set out the form of order which the Senior Master’s Office had informed him was required for such an arrangement to occur.

22    Mr Ridley then deposed that since 20 November he had been unable to contact Ms Robinson, but nevertheless sought that the Court approve the settlement and make final orders accordingly.

23    Given Mr Ridley plainly had no instructions from Ms Robinson about the orders he sought, I vacated the listing on 26 November 2015 on the basis the applicants’ solicitors were to contact my chambers when they had instructions from Ms Robinson to seek the orders Mr Ridley had proposed.

24    On 7 December 2015, the applicants filed a further affidavit affirmed by Mr Ridley. Mr Ridley deposed he had now spoken to Ms Robinson and had instructions that she wished the settlement monies in this matter to be forwarded to the Senior Master of the Supreme Court of Victoria for the benefit of the applicants. His affidavit otherwise appeared to move into matters of legal advice given by him to Ms Robinson and I have neither read nor had regard to that part of his affidavit.

Resolution

25    Rule 7.11 of the Federal Court Rules provides:

(1)      If a claim that is enforceable by a proceeding in the Court is made by, for or against a person under a legal incapacity, an interested person may apply to the Court for an order:

(a)      approving an agreement made by or for the person for compromise or settlement of the claim before any proceeding is started; and

(b)      enforcing the claim.

Note 1:    Interested person, for a person under legal incapacity, and person under a legal incapacity are defined in the Dictionary.

Note 2: Division 9.6 deals with a proceeding by or against a person under a legal incapacity.

(2)      An application must be:

(a)      in accordance with Form 13; and

(b)      accompanied by the following:

(i)      an affidavit stating the material facts on which the application relies;

(ii)      the agreement that is sought to be approved;

(iii)      an opinion of an independent lawyer that the agreement is in the best interests of the person under a legal incapacity.

(3)      The Court may, as a condition of an approval, require that any money or other property payable for the benefit of a person under a legal incapacity be dealt with by way of a settlement or in any other way that the Court considers appropriate.

Note:     The Court may give approval subject to conditions—see rule 1.33.

(4)      If the Court does not approve the agreement, the agreement is not binding on the person under a legal incapacity.

26    As I noted in my reasons for approving settlement in Butler v Djerriwarrh Employment & Education Services Inc [2015] FCA 296, in determining whether or not to approve the settlement, for the purpose of rendering it binding on the applicants, the Court must be satisfied the settlement is in their best interests, or beneficial to their interests. That is not a requirement of the Rules themselves but stems from the nature of the jurisdiction exercised by the Court where a party is under a disability and unable to conduct a proceeding himself or herself.

27    It is the Court’s responsibility to determine, for itself, whether the settlement is beneficial to the interests of the person under a disability: see Somerset v Ley [1964] 1 WLR 640 sub nom Re Ley’s Trusts [1964] 2 All ER 326; Permanent Trustee v Mills [2007] NSWSC 336; 71 NSWLR 1 at [29] per Hammerschlag J; Fisher v Marin [2008] NSWSC 1357 at [29] per Rothman J; Button v CSL Ltd [2014] FCA 601 at [31] per Barker J.

28    The Court is assisted in that determination by the provision of an opinion by an independent lawyer who has been briefed fully on the facts and relevant evidence, and may have access to more material than the Court. However the Court is not bound by the independent opinion, and indeed there have been situations where the Court has not approved a settlement despite the advice of an independent lawyer: see for example Rothman J’s decision in Fisher disapproving settlement (under equivalent NSW legislation). The circumstances of that case were somewhat particular, because the plaintiff’s litigation guardian had changed her mind and sought that the settlement not be approved. Rothman J ultimately agreed the settlement should not be approved.

29    The determination whether the proposed settlement is in the best interests of, or beneficial to the interests of, a person under a disability requires the Court to weigh, at least as an important consideration, the prospects of the applicants if the proceeding were continue: see Fisher at [35]-[37]. Since the approval of a settlement will bind the party under the disability and bring the litigation to an end, the Court should consider the advantages and disadvantages of the litigation continuing not only in terms of whether the applicants might secure a more advantageous award from the Court at trial, but also issues such as the prospects of an appeal and the costs and pressures imposed on Matthew and Harley if the litigation were to continue to what is estimated to be a five-week trial.

30    In the present circumstances, the applicants have now left Marnebek School, so if the proceeding were to continue there would be no risk of ongoing discrimination of the kind alleged in the pleadings. The proceeding has thus become one about historical discrimination, and in that sense a settlement of the kind proposed is capable of bringing real finality to the dispute. Further, the opportunity for Matthew and Harley to focus on their education, personal and social development with the additional assistance the settlement monies can procure is a significant benefit.

31    In his independent opinion, counsel has identified as factors relevant to his conclusion that the settlement is in the best interests of the applicants the stage the proceeding has reached, the relative strengths and weaknesses of the cases for both parties, the vagaries of litigation, the possible exposure of Ms Robinson to an adverse costs order, and his assessment of the damages likely to be recovered by the applicants if they were to succeed. That assessment includes a comparison of the awards of compensation made in other decisions where children with disabilities have succeeded in establishing a claim of unlawful discrimination against public or private education providers. I accept his opinion about the range of compensation orders made in the past and his opinion that the settlement sum proposed in this proceeding is reasonable.

32    As I observed in Butler v Djerriwarrh Employment & Education Services Inc, the emotional and psychological strain of litigation is an important factor in considering the risks attending the full litigation of a proceeding. It is apparent the litigation has caused the applicants’ family a great deal of stress in circumstances where Matthew and Harley must also deal with the tragic and unexpected death of their father. Ms Robinson’s willingness to reach a resolution of this proceeding supports the likelihood that a settlement approval will bring this aspect of the applicants’ educational experiences to a resolution, and help them, and Ms Robinson, to look forwards rather than backwards about their educational opportunities.

33    The key issue in this proceeding is not the amount of the settlement sum, nor the fact of a conclusion to this proceeding, nor (subject to one issue which I deal with at [44] below) any of the other terms of settlement which are all straightforward. Those matters are all in my opinion clearly beneficial to Matthew and Harley’s interests. The key issue is how the settlement sum is to be properly preserved for the benefit of Matthew and Harley. Unless that is achieved, then it cannot be said, in my opinion, that the settlement proposal overall is beneficial to their interests. The settlement sum is of a size whereby, if it is not carefully managed and applied, it could easily be dissipated.

34    I consider that to avoid the possibility of any such dissipation, even if well meant, the settlement sum should be held securely in trust, and applied towards the educational, developmental or health interests as a proper assessment of the boys’ ongoing needs may dictate from time to time.

35    Rule 79.10 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) provides:

Proceeding in another court

(1)     This Rule applies where—

(a)     money is held for the benefit of a person in respect of a claim by or on behalf of that person in another court, whether that court is within or out of Victoria; and

(b)     if the claim were made in a proceeding in the Court, that person would be a person under disability.

(2)     Where—

(a)     the money is held in Victoria; or

(b)     the person for whose benefit the money is held is or is about to become domiciled or ordinarily resident within Victoria—

the Senior Master may order that if the money is paid to the Court it be held in court for the benefit of that person.

(3)     Money held in court pursuant to an order made under paragraph (2) shall be taken to have been paid into court pursuant to an order in a proceeding in the Court that money be paid into court for the benefit of a person under disability.

36    Under s 113B(1) of the Supreme Court Act 1986 (Vic), where the Senior Master holds money on behalf of a person under disability and no administrator has been appointed under the Guardianship and Administration Act 1986 (Vic), the Senior Master has the same powers under s 58B(2) of that Act that she or he would have if appointed administrator.

37    In Re Erdogan’s Application [2012] VSC 256; 36 VR 579, Dixon J noted the inherent jurisdiction of the Supreme Court included its parens patriae jurisdiction to make orders for the control and administration of funds in court for the benefit of a person incapable of managing her or his own property: at [46], citing Diver v Diver [2007] VSC 146; 16 VR 318 at [36]. His Honour observed at [9]:

The Senior Master manages funds in excess of $1 billion for more than 5,000 beneficiaries. Asset preservation is the key investment principle and the Senior Master has an established record in providing consistently good returns for beneficiaries. Further, the SMO provides other services beyond investment, including administration and welfare services for beneficiaries. It is relevant on this application to acknowledge the impressive record of the Senior Master in management and administration, to appropriate prudential standards, of the funds of persons under disability.

38    There are no competing considerations of the kind Hargrave J considered in Diver. There is no equivalent of the administrator who administered the plaintiff’s affairs in Diver. There is no evidence which would render it appropriate for the monies simply to be paid directly to Ms Robinson, even as trustee. I note in any event there is no evidence of the establishment of such a trust.

39    As counsel for the applicants submitted, the fees which commercial trustee companies would charge to administer the settlement sum would be prohibitive.

40    The Federal Court does not currently have any scheme equivalent to the scheme administered by the Senior Master of the Supreme Court of Victoria. However, it is clear in my opinion that if the settlement sum could be paid into such a scheme, that arrangement is the one most likely to produce stable and enduring benefits to Matthew and Harley.

41    I am satisfied that, although they are somewhat novel, orders of the kind now proposed are appropriate to ensure the settlement sum is preserved for the applicants’ benefit, especially in circumstances where the settlement sum is otherwise likely to be dissipated by fees and charges levied by a commercially run trust company, and Ms Robinson has no financial means to pay such charges.

42    In the absence of Ms Robinson being in a position to propose any other arrangements which will have the effect of preserving the settlement sum for the future needs of Matthew and Harley, and in the absence of any evidence that the funds could otherwise be held so as to ensure they are spent only in a way which is beneficial to the interests of Matthew and Harley, I consider orders designed to enable the settlement sum to be paid into the Victorian Supreme Court under the administration of the Senior Master to be the most appropriate orders. I consider I have power to make those orders under s 23 of the Federal Court of Australia Act 1976 (Cth), and under r 7.11(3) of the Federal Court Rules.

43    In determining these orders to be appropriate, and in rejecting some earlier suggestions as to how some of the settlement sum might be disbursed, I make no criticism of Ms Robinson, nor any findings that she would act otherwise than in a way she considered would help Matthew and Harley. However, she has no financial means of her own, and currently survives on social security payments. Raising Matthew and Harley on her own is no doubt challenging. It is more appropriate that the management of the settlement sum, and its appropriate disbursement, be undertaken by the Senior Master of the Victorian Supreme Court, who is well experienced and regarded in this task.

44    One final matter should be mentioned. In cl. 2.1 of the settlement deed there is a clause about payment of the settlement sum. It is clear the obligation in that clause cannot be performed according to its literal terms if this settlement is to be approved in the way I have outlined. The parties may need to consider what should be done about that clause. Given the attitude of the parties I do not apprehend that will cause any difficulty and I do not propose to delay any further the finalisation of this proceeding, or of the settlement.

45    However given the novelty of the proposed orders, the fact that the respondent has not actively participated in the last part of this process, and the need, it would seem to me, to reconsider the precise terms of cl 2.1 of the settlement deed, I have not pronounced the orders I consider should be made. The parties will be given five working days to consider the orders I propose, and to indicate whether they agree the orders are appropriate, alternatively to make submissions on any amendments which should be made. At the expiration of that time, final orders will be made.

46    The form of orders I propose to make is as follows:

1.     Subject to the order of the Senior Master of the Supreme Court of Victoria described in paragraph 2 of these orders being made, the settlement of this proceeding set out in the settlement deed dated 21 August 2015 marked as Annexure JR-2 to the affidavit of Joseph Thomas Ridley dated 9 October 2015 be approved.

2.     If under r 79.10(2) of Ch 1 of the Rules of the Supreme Court of Victoria, the Senior Master of the Supreme Court orders that if the settlement monies as set out in the settlement deed are paid to the Supreme Court they be held in court for the benefit of the applicants in this proceeding, the respondent to this proceeding shall pay the settlement monies to the Senior Master for the benefit of the applicants.

3.     If the Senior Master of the Supreme Court makes the order described in paragraph 2, the applicants have leave to file a notice of discontinuance of this proceeding with no order as to costs.

4.     If the Senior Master of the Supreme Court does not make the order described in paragraph 2 by 8 January 2016, the matter be listed for directions on a date to be fixed.

5.     For the purposes of s 37AG(2) of the Federal Court of Australia Act 1976 (Cth), to prevent any prejudice to the proper administration of justice, Annexure JR-2 to the affidavit of Joseph Thomas Ridley dated 9 October 2015 be treated as confidential to the parties in this proceeding and until further order:

(a)    may be used only for the purposes of this proceeding;

(b)    may be disclosed only to the parties, the applicants’ litigation representative and their legal representatives; and

(c)    will not be open to public inspection, disclosed in open court or disclosed in the open part of any court transcript.

6.     For the purposes of s 37AG(2) of the Federal Court of Australia Act 1976 (Cth), to prevent any prejudice to the proper administration of justice, Annexure JR-3 to the affidavit of Joseph Thomas Ridley dated 9 October 2015 be treated as confidential to the applicants in this proceeding and until further order:

(a)    may be used only for the purposes of this proceeding;

(b)    may be disclosed only to the applicants, the applicants’ litigation representative and their legal representatives; and

(c)    will not be available for inspection by the respondent, open to public inspection, disclosed in open court or disclosed in the open part of any court transcript.

Associate:     

Dated:    17 December 2015