Bathurst Regional Council v Local Government Financial Services Pty Ltd [2011] FCA 309 | Case summary

DISCUSSION 18 I am not persuaded that S&P's notices of motion should be heard and determined in advance of and separately from all other issues in the proceedings. 19 Although this was not apparently in dispute, it is appropriate that I record my view that the mere filing of the notices of motion does not mean that I am bound to hear and determine them in advance of and separately from all other issues in the proceedings. The decision whether to do so or not is discretionary. Section 31A does not limit any powers that the Court has otherwise (s 31A(4)). The Court otherwise has power to control the course of proceedings before it, including by deciding whether or not to hear and dispose of a proceeding or part of a proceeding on a summary basis. Accordingly, in the present case, the issue is not whether the question of duty of care can be resolved on a summary basis but whether, in all the circumstances of these proceedings, it should be resolved in that way. This question is not answered by identifying the existence of a duty of care as a question of law. Nor is it able to be answered at the level of general principle as regards the function of s 31A. Section 31A enhances the Court's capacity to deal with matters on a summary basis. The discretionary considerations generally applicable to the summary dismissal process nevertheless remain relevant. In particular, the discretionary considerations of timing, utility, and risk to the balance of the proceedings are material factors (see the observations in Telecom Vanuatu Ltd v Optus Networks Pty Ltd [2005] NSWSC 951 (Telecom Vanuatu) at [21]-[25]). 20 In the present case, there is a timing issue. It is true that s 31A has no time limit. But that is not the point. All three proceedings have been fixed for hearing in respect of all issues between 4 October and 9 December 2011. These hearing dates were allocated on 28 September 2010, and a timetable for completed pleadings and evidence was resolved on the basis of the allocated dates. By the time this timetable was put in place, S&P had been a party to the proceedings for over three months (after LGFS filed and served a cross-claim against it in June 2010). On 28 September 2010 there was no suggestion by any party that an application for summary judgment might be made. S&P has not explained why such applications are being made nearly six months later. The applications, if determined now, have substantial potential to disrupt the allocated hearing dates. In brief, if these applications had been made in or about 28 September 2010 then it may well have been possible for them and any associated appeal by leave to be determined without interfering with the allocated hearing dates. As it is, if the notices of motion are determined now, there is a real prospect that the unsuccessful party would obtain leave to appeal and that any such appeal would not be determined before the allocated hearing dates. If this occurred, the options would be either to vacate the hearing or to proceed with the hearing with the risk that the appeal may yield a different result, thereby necessitating a second separate hearing on the issue of negligence. Neither option, at this late stage in the proceedings, is attractive. This observation is reinforced by the fact that this is a court of first instance, and negligence for economic loss is an area where further development of legal principle at the appellate level is likely (see Telecom Vanuatu at [25]). 21 S&P's submission that these difficulties are ameliorated by the fact that leave would be required to appeal from any decision on the application for summary judgment is unpersuasive. The issues relating to the negligence claim are of obvious importance both to the parties and generally, making a grant of leave more than likely. All of the difficulties which the other parties identified will accordingly ensue. These considerations are relevant to the case management of the present notices of motion. It is not appropriate to defer management of important procedural issues until the almost inevitable application for leave to appeal, should S&P be successful. 22 In addition, it is difficult to see any material utility in the course S&P proposes, whilst the risks to the Court's ability to deal with the balance of the proceedings in an orderly and efficient manner are obvious. The following factors reinforce this assessment: (1) The negligence claims are not the only claims against S&P. Similar factual issues are raised by the misleading and deceptive conduct claims, which will remain regardless of the outcome of the applications for summary dismissal. LGFS's proportionate liability defence, in which S&P is said to be a concurrent wrongdoer, will also remain. So too will ABN Amro's cross-claim against S&P. Accordingly, S&P will remain a party to the proceedings and will be involved in the hearing on 4 October to 9 December 2011 even if it succeeds on the notices of motion. Similarly, even if S&P succeeds, similar factual issues will need to be explored and resolved at trial in the context of the misleading and deceptive conduct claims. The purported saving of time if S&P is successful - in relieving the Court of the need to deal with questions of breach of the alleged duty of care - is thus marginal at best in the context of the overall claims against S&P. If S&P fails, there will be no such saving of time and cost. (2) S&P can put precisely the same substantive case in relation to the existence of a duty of care at the hearing as it puts now. Deferral of consideration of the question of the duty of care until the hearing proper will not deprive S&P of that capacity. (3) S&P's position - that all of the facts pleaded in the negligence claims against it may be assumed to be true - is limited to the context of determining the notices of motion. In other words, if S&P fails on the notices of motion it reserves to itself the right to prepare evidence and dispute the facts pleaded against it which are said to found the alleged duty of care. When this is considered together with the likelihood of leave to appeal being granted to any unsuccessful party on the notices of motion, the prospect of the entire hearing (or a large part of it) miscarrying if the hearing proceeds whilst an appeal remains undetermined becomes real. This is one of the considerations underpinning the basic principle that all issues should generally be tried together, and issues for separate determination must be able to be determined on the basis of facts either agreed for all purposes or found, and not on the basis of mere assumed facts (which raises the spectre of a hypothetical determination). 23 Further, while S&P may be proved correct in asserting that it owed no duty of care to the councils, StateCover or LGFS, the apparent strength of its case is by no means such as to outweigh the real risks to the proceedings as a whole identified above. There is a real debate between the parties about S&P's characterisation of the pleadings against it in the context of the reasoning in Esanda. For example, the councils in proceeding NSD 1073 of 2009 observe that: The difference between this [case] and Esanda is that the plaintiffs in [Esanda] did not plead that the auditor knew that the relevant representation would be communicated to Esanda or any other finance provider with respect to the obtaining of finance or for any other purpose… By contrast, the Applicants plead that S&P knew the rating would be published to the class of prospective purchasers of the Rembrandt Notes and it would be relied upon by them in deciding whether to purchase the Notes. 24 It is also apparent that while S&P is content to assert a lack of vulnerability to harm on the part of the claimants in reliance upon the pleadings, the parties claiming against S&P in negligence are not so content. They contend that the critical issue of vulnerability can only be determined on the evidence and not merely by reference to LGFS's function as a financial services provider. For example, the councils in proceeding NSD 1073 of 2009 submit that: …extensive evidence from the Applicants' witnesses… establishes that LGFS did not provide the Applicants with reliable advice about the Rembrandt product, did not disclose to the Applicants the risks associated with the Rembrandt Notes and endorsed S&P's AAA rating of the Rembrandt Notes. If that factual assertion [i.e. lack of vulnerability to harm] is pressed by S&P, the Applicants should be entitled to read all of their affidavit evidence in chief which contradicts it. The proper time and place for that to happen is at the trial of the proceedings. 25 Despite S&P's submission that the question of vulnerability to harm is not apt for evidentiary, as opposed to analytical, resolution, I am not satisfied that the contentions about the need for evidence can be dismissed. It is not necessary to factor in the outstanding discovery issues which have recently emerged between the parties to support this conclusion. I do not share S&P's view that evidentiary considerations may be put to one side. Accordingly, for the assessment of the discretionary considerations relevant to the question whether the notices of motion should be determined separately and in advance of all other issues, it cannot be assumed that resolution on the pleadings alone is possible. Once this is accepted, the marginal utility which the course proposed by S&P entails is further eroded. It also becomes apparent that S&P's estimate of time for the hearing of the notices of motion (one day) is a gross underestimate. This too undermines the submission of S&P that the notices of motion can be disposed of quickly and without delaying the progress of the proceedings. It also lends support to the relevance of the observation of the Full Court in Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2009) 178 FCR 401; [2009] FCAFC 117 that: [31] It remains a matter for a judge hearing a summary dismissal application to exercise some discretion as to whether questions of law that have been raised are so difficult that they ought not to be decided summarily. 26 S&P's submissions about the difficulties inherent in recognition of the alleged duty of care expose the scope and significance of the dispute at the levels of both principle and fact (at least in respect of vulnerability to harm). Resolution of these issues is likely to be materially assisted by considering the claims and defences in the context of the overall relationships between the parties, rather than by isolating one aspect of those relationships for separate assessment. This conclusion is reinforced by the submission of LGFS, which I accept, that: …although determining whether a duty of care is owed is a question of law, the decision whether a duty of care is owed usually turns wholly on findings of fact (as is required by the multi-factorial approach to determining the existence of a duty) [citing Western Districts Developments Pty Ltd v Baulkham Hills Shire Council (2009) 75 NSWLR 706; [2009] NSWCA 283 at [3]-[10] and [101]-[108]]. 27 Insofar as S&P submitted that there is specific and particular utility in determining before trial whether S&P should continue to be exposed to the risk of liability for negligence, the potential advantage of avoiding the burdens of non-viable causes of action at the hearing is theoretical only. In the present case, that potential advantage to S&P is far outweighed by the prejudice to the orderly and efficient conduct of the overall proceedings which is likely to be occasioned if I hear and determine the motions in advance of and separately from the remainder of the proceedings. 28 In Tepko Pty Limited v Water Board (2001) 206 CLR 1; [2001] HCA 19 at [170], Kirby and Callinan JJ stated that "single-issue trials should… only be embarked upon when their utility, economy, and fairness to the parties are beyond question". This statement applies equally to the separation of particular claims from an overall proceeding by way of the hearing of a motion for summary dismissal. In the present case, the "utility, economy, and fairness" of the course S&P proposes to all parties is neither "beyond question" nor, indeed, apparent at all. The course of action, on the analysis above, has no real utility, will not promote any greater economy (and to the contrary creates a real risk of increased time and costs for all), and thus would be unfair to the other parties who have obtained a hearing date and will make themselves ready for trial in an orderly manner on the expectation that all issues will be resolved (at first instance at least) together in the ordinary course. 29 For these reasons I propose to adjourn the notices of motion for mention on the first day of the hearing, being 4 October 2011. I recognise that this is equivalent of not determining the notices of motion at all, but that is the necessary and appropriate course in all of the circumstances. Alternatively, the notices of motion may be dismissed. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.

Bathurst Regional Council v Local Government Financial Services Pty Ltd

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