The plaintiffs' motion - submissions and analysis
9 This statement of the background facts is by way of preliminary to a consideration of the plaintiffs' claim for an order that the proceedings on the amended summons be tried separately from and before the proceedings on the cross-claim. That claim is advanced by reference to rules 9.8, 28.2 and 6.22 of the Uniform Civil Procedure Rules, with each being put forward as a separate basis on which the order may (and should) be made. The underlying question is, however, the same, whichever provision is relied upon: is there such a degree of separateness as between the two claims that there is no real reason of procedure or efficiency for them to be dealt with by way of a single hearing?
10 The plaintiffs say, in support of their motion for a separate and earlier trial, that there is, in reality, no element of commonality between the claims in the amended summons and the claims in the cross-claim. The plaintiffs say that no common questions of fact are involved. They recognise that two persons associated with the project on behalf of the plaintiffs (Mr Lifschitz and Mr Pratt) played a part in the events relevant to the plaintiffs' claims and the events relevant to the defendant's claims. But, they point out, those events (or sets of events) were separated by more than two years, so that each represented a discrete episode having a meaning and significance quite separate from the meaning and significance of the other. The plaintiffs also say that there is no indication at this point that there is any dispute as to the facts pertinent to the two individuals or that the credit of either of them is likely to be attacked; but, even if it were to emerge that some such attack was made in the first proceeding heard, there is no reason why the second should not then be heard by a different judge.
11 It is also submitted on behalf of the plaintiffs that their claims possess a degree of urgency that does not attend the defendant's claims. The utility of the remaining Commonwealth Bank undertaking will, the plaintiffs apprehend, come to an end at the clause 42.6 date in July 2006. As the plaintiffs view matters, if they are not, at the clause 42.6 date, physically in possession of the undertaking they will be denied the ability to present it to the Commonwealth Bank to make recovery in respect of anything for which it then stands as security - assuming, of course, that they are successful in their contention that the undertaking is meant to operate as security for them for that length of time. The plaintiffs say that, based on the estimates made by the solicitors on both sides (and not surprisingly), the litigation will be more protracted if the amended summons and the cross-claim proceed together; also that the hearing may well occur after the period relevant to the security has expired.
12 On the last matter, the defendant says that it will make no difference whether or not the plaintiffs obtain actual possession of the undertaking document before the clause 42.6 date, even if the plaintiffs are found ultimately to be entitled to it. The undertaking of the Commonwealth Bank is unlimited as to time. The bank is bound to honour it whenever it is presented. Thus, if the defendant should be found, in, say, late 2006, to be liable to deliver up the undertaking to the plaintiffs, the plaintiffs will then be in a position where they can enforce it for such moneys (including interest or other compensation for delay) as may be secured by it by reason of defects rectification or other relevant matters.
13 The plaintiffs do not agree. The security is at present affected by the interlocutory order made by consent on 27 July 2005. That order is to the effect that the defendant will not return the undertaking to the bank until the earliest of (a) the expiration of the period referred to in clause 42.6 of the contract; (b) the expiration of seven days from the giving to the plaintiffs of notice of the defendant's intention to return the undertaking to the bank; and (c) "further order of the court" (no doubt an order allowing return of the undertaking to the bank). It follows that, if the clause 42.6 date arrives and neither event (b) nor event (c) has by then occurred so as to free the defendant from the constraint imposed by the order, that constraint will cease to apply on the clause 42.6 date, whereupon the plaintiffs will be exposed to the risk of seeing the security evaporate. And, of course, there will be no reason why the defendant would not, in those circumstances, cause it to evaporate immediately.
14 In my opinion, the defendant is right when it says, in abstract terms, that it makes no difference to the plaintiffs whether or not they have physical possession of the undertaking before the clause 42.6 date - assuming that there is in place some measure to ensure that the form of evaporation to which I have just referred is avoided if the proceedings are not then determined. At the same time, the plaintiffs are right when they say that, under the current regime, the evaporation possibility and risk are real and point to a need for their rights in respect of the undertaking to be defined before the clause 42.6 date. But this, it seems to me, is a product of the interlocutory regime rather than anything else. The plaintiffs gave an undertaking as to damages as the price for obtaining the interlocutory restraint binding on the defendant. They did so in circumstances where the proceedings they had commenced were related to the single issue of rights to the undertaking. It might be said that the concern of the plaintiffs to have the matter determined before the clause 42.6 date will be alleviated by a new interlocutory order extending the restraint until the determination of the proceedings as a whole (that is, both the claims in the summons and the cross-claim). But that would no doubt entail a new undertaking as to damages on the part of the plaintiffs, being an undertaking likely to be in place for a longer time and to entail, in case of failure by the plaintiffs in their claims, damages greater than those they envisaged as possible when they gave the original undertaking as to damages.
15 For that reason, I accept that prolongation of the proceedings by addition of the cross-claim (something which, on both sides, is accepted as entailing delay) is a legitimate concern of the plaintiffs and a matter to be taken into account in addressing the application to separate the hearing of the claims in the amended summons from the hearing of the cross claim.
16 I turn therefore to the contentions regarding commonality or overlap. There can be no doubt that the claims in the amended summons and those in the cross-claim overlap to the extent that it will be necessary to prove, in each case, the terms of the formal building contract. But that will be a straightforward and uncontentious matter. Thereafter, however, the tasks will diverge. The claims in the amended summons depend upon proof of matters relevant to the allegation that the original contract terms were varied in certain ways as a result of the discussions and correspondence in the period November 2002 to January 2003. The claims in the cross-claim depend upon proof of matters relevant to, first, the defendant's performance of the contract (as to both work done and the timing and quality of that work) and, second, whether and, if so, how a new agreement made in the period April to July 2005 varied the contractual rights and obligations in respect of quality and timing of work. The defendant does not contend that there is commonality of factual substratum. What it does say is that it is inappropriate to order separate trials where both proceedings involve issues of fact which may call for findings on the credit of a witness or witnesses common to both proceedings. The defendant points out that the amended summons and the defence to it make it clear that Mr Pratt and Mr Lifschitz will be key witnesses in the dispute centred on events of November 2002 to January 2003. The defendant also points out that conduct of Mr Pratt and Mr Lifschitz are relied upon by it in advancing its cross-claim, with the result that, in the absence of relevant admissions in the defence to cross-claim filed by the plaintiffs on 26 October 2005, the evidence of those two persons will also play a key part in the litigation of the dispute involving events of April to July 2005. The credit of these two persons is thus likely to be in issue in relation to both disputes.
17 In resisting the plaintiffs' motion, the defendant relies upon judicial statements about the general undesirability of a bifurcation of proceedings so that the issue of liability and the issue of damages are tried separately. In Tepko Pty Ltd v Water Board (2001) 206 CLR 1 at p.55, Kirby and Callinan JJ observed that "[t]he attractions of trials of issues rather than of cases in their totality, are often more chimerical than real". Their Honours continued:
"Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap."
18 The defendant also relies upon observations of Rolfe J in ABB Engineering Construction Pty Ltd v Rail Freight Corporation [1999] NSWSC 1037. His Honour said at [15]:
"In my view, it would require an exceptional case for the Court to order a separate hearing of liability and damages when any witness is likely to give evidence on both issues. The reasons are obvious. A case should be conducted on the basis that the witness is cross-examined on all issues at the same time and in the context of all issues, because his or her evidence on one issue may impact on the acceptability of his or her evidence on the other. If there is not adherence to this practice difficult questions arise for the Court as to the extent to which cross-examination on the matter not being litigated should be allowed, and for the cross-examiner as to how far matters not in issue can and/or should be pursued, and how that evidence should be treated in the overall assessment of the witness. In my opinion, the cross-examiner should not be precluded, particularly where credit is in issue, from cross-examining on the issue of damages merely because the only matter being litigated is liability. That not only causes difficulties for the cross-examiner, but also for the Court. The Court may be prevented from making a fully informed assessment of the credibility of the witness if the cross-examination is truncated, or if certain contradictory material cannot be led because the cross-examination goes only to credit and not to an issue."
19 These principles are firmly established in relation to separation of the issues of liability and damages (see also the recent decision of Einstein J in Pioneer Park Pty Ltd v Australia and New Zealand Banking Group Ltd [2005] NSWSC 832).
20 The plaintiffs submit that these approaches are not applicable here. In the present circumstances, they say, the case is not one of the same witnesses being involved in the same events, being events potentially relevant to both findings on liability for legal wrong and findings on the measure of damages flowing from the legal wrong. It is, rather, a matter of the same witnesses being involved in quite distinct sets of events separated by several years, where each set of events is relevant to a distinct range of factual findings going to both liability and damages (or other relief) for a distinct legal wrong.
21 The plaintiffs also point to two other matters. First, their parent company has been made a defendant to the cross-claim but is a stranger to the proceedings on the amended summons. Second, the defendant itself says in the cross-claim that the subject matter of it is suitable for reference out to a referee (in the way that is often appropriate where technical matters of adherence to construction contracts and specifications are in issue).
22 I do not think that the objections of principle to the separate trial of issues in a single case apply here. The present situation is really one in which two cases are to be run - one concentrating on the events of November 2002 to January 2003 and their significance to the contractual relationship of the plaintiffs and the defendant concerning the unconditional undertakings; and the other centred on events of April to July 2005 coupled with the extent of the defendant's compliance with contract provisions as to actual building work. There will be overlap only to the very minor extent of proof of the uncontroversial matters concerning the formation and terms of the original building contract and to the extent that Mr Pratt and Mr Lifschitz are likely to be witnesses of fact in relation to the events of the two widely separated periods.
23 There cannot be, in my view, any apprehension that these two witnesses will give evidence that produces a risk of inconsistent factual findings in the two proceedings that will result if the plaintiffs' motion is granted. But there is a risk that there could be inconsistent findings regarding the credit of one or both of them. The plaintiffs submit that, if the two cases are separated, that risk will be no more or less than the risk that arises where a judge who has made adverse credit findings in respect of a witness in one proceeding is later rostered to hear another proceeding in which that person is again to be a witness. As a matter of general principle (and absent some matter of necessity), a judge in that position might be expected to recognise the existence of an apprehension of bias and to decline to sit in the second case: Livesey v New South Wales Bar Association (1983) 151 CLR 288 at p.300. The plaintiffs pointed to Australian National Industries Ltd v Spedley Securities Pty Ltd (1992) 26 NSWLR 411 as showing how this general principle might work in a situation where one judge was scheduled to hear successive cases involving common (or substantially overlapping) parties and witnesses. The Livesey principle was there held, by a majority of the Court of Appeal, to require that the judge who had made substantial adverse credit findings in one proceeding not sit in a later proceeding, even though considerations of efficient case management related to familiarity with substantial matters of background would have made it desirable that he do so.
24 For reasons I have stated, such considerations of case management do not apply here. There is also the point in the present case that the claims in the cross-claim might well, in the first instance, go before a referee for decision in any event; added to which the cross-claim involves an additional party, being the plaintiffs' parent company.
Decision on the plaintiffs' motion
25 In my judgment, this is a case in which the claims upon the amended summons and the claims in the cross-claim can safely and appropriately be separated. I accept the plaintiffs' submissions generally on that matter. In particular, I accept that, in light of the interlocutory order now in place, the plaintiffs will be prejudiced if the questions concerning the remaining unconditional undertaking are not resolved by the clause 42.6 date (I do not accept the defendant's submission that it will be prejudiced if the undertaking is restored to the plaintiffs while wider contractual disputes remain unresolved: restoration to the plaintiffs would not alter or widen the rights of the plaintiffs as to reliance upon and enforcement of the undertaking). Linking of the questions about the undertaking with the defendant's claims will produce a distinct possibility of that prejudice becoming real. I also accept the plaintiffs' submission that the apt analogy is not with separation of issues (such as separation of liability and damages) but with the situation in which there will be witnesses common to what are really two proceedings and the only real risk of intersection is in the area of credit findings. That risk will be substantially reduced if the defendant's claims in relation to the events of April to July 2005 are, in their entirety, referred out to a referee. And if the risk should, in the fullness of time, turn out to be real, it will be possible to deal with it by ensuring that another judge hears the second case. Considerations of efficiency do not indicate any need for one judge to hear both.
26 These factors, coupled with the fact that the cross-claim may well be referred to a referee and, in any event, involves an additional party, lead to the conclusion that the order the plaintiff seeks for separate trial of the claims on the amended summons and the cross-claim should be made.
The defendant's motion - submissions and analysis
27 In contending that the proceedings on the amended summons should be stayed, the defendant relies on clause 47 of the building contract: