Practice and procedure - Inspection of documents - Claims of conversion and breach of confidence against defendant newspaper proprietor in respect of information belonging to plaintiff - Information allegedly used for newspaper article - Whether inspection of documents revealing newspaper's source of information necessary in interests of justice - Application of 'newspaper rule' - Operation of O 26 r 11 - Turns on own facts

Practice and procedure - Application for separate trial on liability - Principles to be applied - Turns on own facts

First Defendant : Mr J B Blackburn SC & Ms C Galati

Second Defendant : Mr J B Blackburn SC & Ms C Galati

Third Defendant : Mr J B Blackburn SC & Ms C Galati

1 NEWNES J: I have before me two applications. One is an application by the plaintiff for an order that the defendants produce for inspection two audiotapes of telephone conversations between the third defendant and an unnamed person, the first telephone conversation occurring on 16 December 2005 and the second on 20 December 2005. The other application is by the defendants for an order that there be a trial of the issue of liability separately from the issue of quantum. I will deal first with the plaintiff's application for production of the audiotapes.

2 The action, as it was then pleaded, was described in my earlier judgment on the plaintiff's application for the production for inspection of a hard drive of a computer: Bond v West Australian Newspapers Ltd [2008] WASC 121. The current application, however, was argued on the basis of a somewhat different case being put on behalf of the plaintiff. In particular, the plaintiff now complains that, rather than a file of documents, the defendants obtained possession of five used thermal facsimile rolls from the plaintiff's private facsimile machine (the facsimile rolls).

3 After argument on the application, on 26 September 2008 the plaintiff filed an amended statement of claim to plead a case to that effect. An amended defence was filed on 10 October 2008. It is appropriate to canvass the matters now in issue on the pleadings before turning to the specific issues which arise on this application.

4 The plaintiff's case is that he was at all material times the owner and entitled to possession of the facsimile rolls, upon which were imprinted images of private correspondence and other confidential documents (the plaintiff's documents) which he had received by facsimile. The plaintiff alleges that, on or about 1 or 2 December 2006, the facsimile rolls were removed from one or other of his two residences in Cottesloe, or in the course of transit between them.

5 The plaintiff says that, on 17 December 2006, the first defendant published an article in The West Australian referring in detail to some of the plaintiff's documents and in particular to a memorandum of 11 November 2005 from one Robert Nelson to the plaintiff.

6 The plaintiff first pleads a cause of action in conversion. He alleges in par 7 of the statement of claim that the defendants obtained the facsimile rolls without his consent, permission or authorisation and, despite request, have refused to return them. He alleges that by accessing the facsimile rolls and creating copies of the plaintiff's documents, the defendants converted the facsimile rolls to their own use. He further pleads that by printing copies of the plaintiff's documents and by publishing them, the defendants dealt with the plaintiff's documents in a manner inconsistent with the ownership and rights of the plaintiff and thereby converted them to their own use.

7 It is alleged in par 8 of the statement of claim that by reason of the defendants' conversion of the facsimile rolls, the plaintiff has suffered loss and damage. The plaintiff pleads in par 9, on the question of damages only, that the article published by the defendants was defamatory of him in that it meant that his reputation in business was so bad that it was unsalvageable. The plaintiff alleges in par 10, again only in respect of damages, that in converting the facsimile rolls and the plaintiff's documents to their own use and publishing the defamatory article, the defendants demonstrated a contumelious disregard of the plaintiff's ownership of and rights in the facsimile rolls and the plaintiff's documents, giving rise to, among others, claims for aggravated and exemplary damages.

8 The plaintiff also pleads a claim for breach of a duty of confidence. It is alleged in par 12 of the statement of claim that the contents of the facsimile rolls and the plaintiff's documents were 'plainly and obviously private and confidential correspondence received by the plaintiff'. The plaintiff pleads in par 13 that the defendants came into possession of the facsimile rolls and the plaintiff's documents otherwise than from the plaintiff and otherwise than with the permission, consent or authorisation of the plaintiff.

9 It is pleaded in par 14 that by failing to disclose to the plaintiff that they had obtained the facsimile rolls, the defendants knew, or the court should infer that they knew, that the plaintiff did not authorise the defendants' receipt or use of the facsimile rolls or the plaintiff's documents.

10 It is alleged in par 15 that the defendants knew that publication of the article would destroy the confidentiality of the plaintiff's documents. The plaintiff says by way of particulars that he will rely on the nature and content of the plaintiff's documents and the publication of the article for the defendants' knowledge pleaded in par 14 and par 15 respectively.

11 The plaintiff pleads in pars 16 and 17 that by reason of those matters, upon their receipt of the facsimile rolls the defendants owed a duty of confidence to the plaintiff in respect of them, alternatively in respect of the plaintiff's documents and the information contained in them, and a duty not to use them contrary to that duty. It is alleged that the defendants breached those duties by publishing the contents of the plaintiff's documents in the newspaper article.

12 It is unnecessary for present purposes to canvass the defence in its entirety. The defence consists largely of denials and non-admissions, which unfortunately leads to some uncertainty about precisely what matters are in fact in issue in the action.

13 The defendants do not admit the plaintiff was the owner of the facsimile rolls and deny that the facsimile rolls were removed from either of his residences or in transit between them.

14 In relation to the plaintiff's plea in conversion, the defendants admit they have possession of five used thermal facsimile rolls and that they have made copies of documents on those rolls, but otherwise expressly deny the allegations in par 7 of the statement of claim. That is, on the face of the pleading they deny:

• they obtained the five used thermal facsimile rolls without the consent, permission or authorisation of the plaintiff;
• that, despite request, they have refused to return them;
• that by accessing the facsimile rolls and creating copies of the documents on them they converted the facsimile rolls to their own use; and
• that by creating copies of the documents and publishing them they converted the documents to their own use.

15 It also appears that the defendants do not admit that the five used thermal facsimile rolls in their possession are the facsimile rolls which the plaintiff says are his property.

16 I would note in passing that the defendants do not admit that the newspaper article was defamatory of the plaintiff and also plead defences of justification and fair comment in relation to the alleged defamation. It is unnecessary to consider the terms of those pleas.

17 As to the plaintiff's plea of a breach of a duty of confidence, the defendants deny the allegation in par 12 of the statement of claim that the contents of the facsimile rolls were obviously private and confidential correspondence and deny that any material published by the defendants possessed the quality of confidence. The defendants also deny the allegation in par 13 of the statement of claim that they came into possession of the facsimile rolls and the plaintiff's documents otherwise than from the plaintiff or with the permission, consent or authorisation of the plaintiff.

18 The defendants deny the allegation in par 14 of the statement of claim that they knew the plaintiff did not authorise the defendants' receipt or use of the facsimile rolls or the plaintiff's documents, and also deny that the publication of any material possessed by them required the authorisation of the plaintiff. The defendants further deny the allegation in par 15 of the statement of claim that they were aware that publication of the plaintiff's documents would destroy the confidentiality of those documents.

19 The defendants deny that they owed any duty of confidence to the plaintiff but say that if such a duty was owed, the publication of the article was in the public interest in that it disclosed a dishonest scheme. The material did not, therefore, have the quality of confidence or, if it did, equitable relief should be refused.

20 On 12 March 2008, the first defendant gave discovery in the action. Its list of discoverable documents included what were described as 'facsimile rolls 1, 2, 3, 4, 5'.

21 On 13 March 2008, the third defendant gave discovery. In his list of documents, the third defendant itemised, but objected to produce for inspection, two audiotapes of telephone conversations, one audiotape being of a telephone conversation he had with an unnamed person on 16 December 2005 and the other being of a telephone conversation he had with an unnamed person on 20 December 2005. The objection to production was expressed to be on the basis of the 'newspaper rule'; that is, the rule of practice that a newspaper proprietor and its journalists will not be required to reveal the newspaper's source of information in a defamation or related action unless that is necessary in order to do justice between the parties: John Fairfax & Sons Ltd v Cojuangco [1988] HCA 54; (1988) 165 CLR 346.

22 The defendants have since produced to the plaintiff copies of certain documents which were contained on the five used thermal facsimile rolls in the defendants' possession and from which the substance of the article published in The West Australian on 17 December 2005 was apparently derived.

23 The plaintiff now seeks an order that the third defendant produce for inspection the audiotapes referred to in the third defendant's list of documents. The plaintiff says disclosure of the audiotapes is relevant to the circumstances in which the defendants came into possession of the facsimile rolls. That is said to be an important element in the case because the plaintiff alleges that the circumstances in which the defendants came into possession of the facsimile rolls, and thereby the plaintiff's documents, gave rise to a duty of confidence to the plaintiff in respect of the information they contained.

24 In an affidavit filed in support of this application, a solicitor acting for the plaintiff deposes to instructions that at the relevant time, first, the plaintiff had a private residential facsimile machine and he retained the facsimile rolls from that machine in a box in his office at his home; secondly, none of the plaintiff's employees or associates was authorised to deal with the facsimile rolls; and, thirdly, the facsimile rolls appear to have disappeared at the time the plaintiff moved from his Warnham Road address to his Hawkestone Street address.

25 The plaintiff also put into evidence on this application a list of the documents contained on the facsimile rolls in order to demonstrate that they were of a private or personal nature to the plaintiff. I did not understand the defendants to contend that they were not of such a nature. In my view, on the basis of the list of the documents contained on the facsimile rolls, it is clear that most, if not all, of the information was of a personal or private nature. However, whether, at least in respect of the information referred to in the article in The West Australian, it was information of a nature which attracted a duty of confidence is one of the issues in the action.

26 It was not disputed that the material on the audiotapes is relevant to the issues in the action and that the audiotapes are discoverable. Indeed, their inclusion in the third defendant's list of documents is itself an acknowledgement by the third defendant of their relevance: Middleton v The State of Western Australia (1996) 17 WAR 201, 203, 215.

27 It was submitted on behalf of the defendants that the newspaper rule applied to the current proceedings for breach of confidence and conversion. The High Court had pointed out in Cojuangco that the rule applies to 'defamation actions and related actions'. Senior counsel for the defendants argued that it is not necessary that a 'related action' bear some resemblance to a defamation action; the newspaper rule would serve no useful purpose if it could be circumvented by a plaintiff by the simple device of tacking some other cause of action onto a defamation action. A 'related action' is an action in which a newspaper or journalist is sued for publication of matter in a newspaper, be the cause of action for defamation or otherwise, such as in this case for breach of confidence or for conversion of a chattel which contained the relevant information. That it is not limited to actions in the nature of a defamation action is illustrated by the fact it has been held to apply to malicious falsehood: Broadcasting Corporation of New Zealand v Alex Harvey Industries Ltd [1980] 1 NZLR 163.

28 Senior counsel for the defendants argued that that was consistent with the policy consideration which underlies the existence of the newspaper rule; namely, the public interest in the free flow of information. He submitted that it was difficult to conceive of a case in which the public interest in the free flow of information has been more comprehensively engaged than in this one. What was exposed by the defendants in the newspaper article was a dishonest scheme, so that this was the very kind of case in which the defendant newspaper should not be compelled to reveal its source except on grounds of demonstrated necessity.

29 It was submitted that no such necessity had been established by the plaintiff in the present case. The identity of the source of the information was not necessary in order for the plaintiff to establish his case for breach of confidence. Whether or not information possesses the necessary quality of confidence is an objective question to be determined from the information itself. Proving that the information was imparted in circumstances importing an obligation of confidence can be proved by the plaintiff giving evidence that he did not authorise the publication of the contents of the material and what instructions he gave in respect of the safekeeping of the document containing the information.

30 It was submitted that while the identity of the defendants' source of the information might be relevant to the issue of whether there was an obligation of confidence owed by the defendants, that was insufficient. The plaintiff must demonstrate not merely that the identity of the source is relevant to an issue in the action, but that disclosure of the identity at this stage is necessary in the interests of justice. That had not been demonstrated.

31 The defendants also relied upon O 26 r 11, which provides that an order for inspection shall not be made unless it is necessary either for disposing fairly of the cause or matter or for saving costs. The defendants contended that the plaintiff had not shown that at this stage an order for inspection was necessary for either purpose and the order sought should therefore be declined under O 26 r 11.

32 It was submitted on behalf of the plaintiff that the newspaper rule has no application. The rule is limited to a defamation action or a related action. This is not such an action. In this action, the plaintiff pleads causes of action for breach of confidence and conversion, with the plea of defamation limited to the question of damages. Neither cause of action is a 'related action' for the purposes of the newspaper rule.

33 It was submitted in the alternative that even if the newspaper rule applies, it is in the interests of justice for the plaintiff's application to be granted. The circumstances in which the defendants obtained the information is directly relevant to the plaintiff being able to establish his causes of action for breach of confidence and conversion. Counsel referred to South Suburban Co-operative Society Ltd v Orum [1937] 3 All ER 133. It was argued that the defendants' source of the information is relevant, among other things, to the plaintiff's ownership or right to immediate possession of the information on the facsimile rolls, to the confidentiality of the information and the defendants' knowledge that it was confidential, and to the obligation of confidence that was imparted to the defendants upon their receipt of it.

34 The plaintiff has no other reasonably practicable way of obtaining the name of the defendants' source of the information and no other reasonably practicable way of ascertaining the circumstances in which the defendants obtained the information. The making of the order is therefore necessary to provide the plaintiff with an effective remedy in respect of the wrongs complained of.

35 I will turn first to the defendants' contention that the plaintiff's application for production of the audiotapes should be refused on the basis of the newspaper rule.

36 The newspaper rule was considered in some detail by the High Court in Cojuangco. In that case, the High Court observed that the precise area of operation of the newspaper rule is shrouded in uncertainty. Initially, it applied to newspaper defendants and was regarded as creating an exceptional immunity in favour of newspapers and journalists employed by them on a full-time basis. The court pointed out that it has been held that the rule does not apply in favour of the author of a defamatory letter published in a newspaper and there is great uncertainty about the possible application of the rule to freelance journalists and others who publish information to the public.

37 The court noted that while the rule had been applied to an action for slander of title (referring to Alex Harvey Industries Ltd), the view of Starke J in McGuinness v The Attorney-General of Victoria [1940] HCA 6; (1940) 63 CLR 73, 92, that the rule was not confined to newspapers and defamation actions but was of general application, had otherwise not been accepted.

It is a fundamental principle of our law, repeatedly affirmed by Australian and English courts, that the media and journalists have no public interest immunity from being required to disclose their sources of information when such disclosure is necessary in the interests of justice: see McGuinness; [British Steel Corporation v Granada Television Ltd [1981] AC 1096]. The point is that there is a paramount interest in the administration of justice which requires that cases be tried by courts on the relevant and admissible evidence. This paramount public interest yields only to a superior public interest, such as the public interest in the national security. The role of the media in collecting and disseminating information to the public does not give rise to a public interest which can be allowed to prevail over the public interest of a litigant in securing a trial of his action on the basis of the relevant and admissible evidence. No doubt the free flow of information is a vital ingredient in the investigative journalism which is such an important feature of our society. Information is more readily supplied to journalists when they undertake to preserve confidentiality in relation to their sources of information. It stands to reason that the free flow of information would be reinforced, to some extent at least, if the courts were to confer absolute protection on that confidentiality. But this would set such a high value on a free press and on freedom of information as to leave the individual without an effective remedy in respect of defamatory imputations published in the media.

That is why the courts have refused to accord absolute protection on the confidentiality of the journalist's source of information, whilst at the same time imposing some restraints on the entitlement of a litigant to compel disclosure of the identity of the source. In effect, the courts have acted according to the principle that disclosure of the source will not be required unless it is necessary in the interests of justice. So, generally speaking, disclosure will not be compelled at an interlocutory stage of a defamation or related action and even at the trial the court will not compel disclosure unless it is necessary to do justice between the parties (354 - 355).

39 The court pointed out that the rule is not a rule of law or evidence, but a rule of practice which guides or informs the exercise of the judicial discretion in interlocutory proceedings in defamation and related actions.

40 In Hodder v Queensland Newspapers Pty Ltd [1994] 1 Qd R 49, Davies JA and Byrne J observed in their joint judgment:

With necessity in the interests of justice as the guiding criterion, mere relevance is not a sufficient justification for compelling disclosure. Some tenuous relationship between the issues and the source's identity cannot suffice to overreach the public interest advanced by preserving the anonymity of sources (57).

41 If the newspaper rule applies, the plaintiff must, then, establish that production of the audiotapes for inspection is necessary to do justice between the parties. In that respect, similar issues arise to those raised by the stipulation in O 26 r 11 that an order for inspection shall not be made unless it is necessary for disposing fairly of the cause or matter.

42 It is convenient to turn to a consideration of the grounds upon which the plaintiff contends that production of the audiotapes is necessary.

43 I did not understand the essential elements of either of the causes of action, as they are pleaded by the plaintiff, to be in issue between the parties. In the conversion claim, the plaintiff must establish that he was the owner, and entitled to immediate possession, of the facsimile rolls and that the defendants dealt with them in a manner inconsistent with his ownership and rights.

44 In the breach of confidence claim, the plaintiff must establish that he was the owner of the information on the facsimile rolls and:

• the information has the necessary quality of confidentiality;
• the information was received by the defendants in such circumstances as to import an obligation of confidence; and
• there has been an actual or threatened misuse of that information by the defendants.

45 See Coco v A N Clark (Engineers) Ltd [1969] RPC 41, 47; The Commonwealth of Australia v John Fairfax & Sons Ltd [1980] HCA 44; (1980) 147 CLR 39, 50 - 51; Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266; (1987) 14 FCR 434, 443.

46 The essence of the breach of duty is using the confidential information without the consent of the plaintiff. In Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203, Lord Greene MR said:

If a defendant is proved to have used confidential information, directly or indirectly obtained from a plaintiff, without the consent, expressed or implied, of the plaintiff, he will be guilty of an infringement of the plaintiff's rights (213).

47 The audiotapes are accepted as being relevant to the identity of the defendants' source of the facsimile rolls in their possession and it is reasonable therefore to infer that they will cast some light upon the circumstances in which the facsimile rolls, and the documents imprinted on them, came into the defendants' possession. The question, then, is whether it is necessary to do justice between the parties that the plaintiff should have access to the audiotapes at this stage. In my view, it is.

48 There is, in the first place, an issue in each of the claims for conversion and breach of confidence as to whether the defendants obtained the documents without the authority of the plaintiff. In relation to the claim for conversion, it arises from par 6A of the defence which denies the allegation in par 7 of the statement of claim that the defendants obtained the facsimile rolls without the consent, permission or authorisation of the plaintiff. In relation to the claim for breach of confidence, it arises from par 14 of the defence, which denies the allegation in par 13 of the statement of claim that the defendants came into possession of the facsimile rolls and the plaintiff's documents otherwise than from the plaintiff or with the permission, consent or authorisation of the plaintiff.

49 Those denials would appear to imply a positive case that the defendants' possession was in fact obtained with the permission, consent or authorisation of the plaintiff. However, in the course of argument, senior counsel for the defendants disavowed such a case and acknowledged that if such a case were sought to be run at trial, it would have to be (and it was not) specifically pleaded.

50 Nevertheless, it remains the position that in respect of both the conversion and breach of confidence claims the defendants have put the plaintiff to proof that they obtained the facsimile rolls in their possession without the permission, consent or authorisation (express or implied) of the plaintiff.

51 More significantly, there is also, in respect of the breach of confidence claim, an issue as to whether the defendants obtained the information in circumstances giving rise to a duty of confidence. The defendants deny that they were under any duty of confidence. The defendants also deny that the plaintiff's documents were obviously confidential. They do not, however, plead the circumstances in which they say they obtained the information. The effect of the defence is to put the plaintiff to proof that the circumstances in which the defendants obtained the information gave rise to an obligation of confidence.

52 I do not accept the defendants' contention that it is not necessary in order to do justice between the parties for there to be disclosure of the defendants' source of the facsimile rolls and the information on them, because the plaintiff could prove his case on those issues by reference to the nature of the documents themselves and by giving evidence that he gave no authorisation for their possession or use by the defendants.

53 The audiotapes bear upon substantive matters in issue in the action upon which the plaintiff bears the onus of proof, including whether the defendants obtained the information in circumstances which imposed upon them an obligation of confidence. Currently, the particular circumstances in which the defendants came into possession of that material is apparently known (or at least best known) only to the defendants, and, as I have said, their pleading is silent on that question. The defendants are entitled to adopt that stance but I do not think that at the same time they can deny the plaintiff access to material which will cast some light on those circumstances. The audiotapes are plainly important to the plaintiff's case, and also for the purposes of a mediation which, in the normal course of events, would now be imminent in the interlocutory process. In that connection, I should note that the action is at a reasonably advanced stage, having reached the point where the pleadings are closed and discovery and inspection (save for the audiotapes) has been completed.

54 In the circumstances, if the newspaper rule does apply, I am satisfied that disclosure of the audiotapes is necessary to do justice between the parties.

55 Having reached that view, it is unnecessary to decide whether or not the newspaper rule does in fact apply in a case of this nature. That issue can appropriately be left to an occasion when the point is required to be decided.

56 Apart from the newspaper rule, it was contended by the defendants that the application should be refused under O 26 r 11. That rule provides that an order for inspection will not be made 'unless it is necessary either for disposing fairly of the cause or matter or for saving costs'. The rule is to be construed and applied so as best to ensure the just, timely and efficient determination of litigation at a cost affordable to the parties: O 1 r 4B.

57 The effect of O 26 r 11 is that the court has a discretion which enables it to take into account the particular circumstances or exigencies of the case and, in particular, to prevent the insistence by a party on its strict right of discovery or inspection in circumstances where, at the time the order is sought, that discovery or inspection is not necessary for a fair trial and the fair disposal of the case: see Kimberley Mineral Holdings Ltd (in liq) v McEwan [1980] 1 NSWLR 210, 213, 215; Holmes v Deputy Commissioner of Taxation (NSW) (1987) 88 ATC 4010, 4018; Gray v Associated Book Publishers (Australia) Pty Ltd [2002] FCA 1045 [9].

58 In the present case, I consider it is necessary for the fair disposal of the action that an order for production of the audiotapes be made, for the reasons I have expressed above. Essential elements of the plaintiff's causes of action are that the facsimile rolls were obtained by the defendants without his permission, consent or authorisation and in circumstances imposing a duty of confidentiality. Those are live issues in the case. The audiotapes are relevant to the circumstances in which the defendants obtained the facsimile rolls in their possession. The action has reached the point where the pleadings are closed and discovery has been given. It is appropriate in the interests of justice that the plaintiff now be able to inspect the audiotapes.

59 I would order that the third defendant produce the audiotapes for inspection.

The defendants' application for the separate trial of issues

60 It was submitted on behalf of the defendants that the prompt and efficient disposal of this action would be facilitated by the separate trial of the issue of liability. There was likely to be little, if any, overlap between the evidence on liability and that on damages. If the plaintiff failed on liability, it would be unnecessary to prepare for and have a trial on the issue of damages.

61 Senior counsel for the defendants argued that the plaintiff was unlikely to be able to make good his claim for breach of confidence or for conversion. But the scope of the first defendant's discovery on damages would be significant and time consuming, and would involve commercially sensitive documents relating to its financial affairs which are otherwise irrelevant to the action. In addition, it is also likely that the parties would be put to significant cost to obtain expert evidence in order to calculate the profit to be attributed to one article in the newspaper.

62 It was submitted that the separation of the issues of liability and damages could result in a saving of two to three days of trial, apart from the saving in time and cost of the parties' preparation for trial and of any interlocutory disputes in relation to damages.

63 Counsel for the plaintiff argued that the separation of issues often led to an increase in the time and cost of proceedings rather than any saving, particularly when appeal rights are taken into consideration. The defendants have not demonstrated that the separate trial of liability and damages would save time and costs. The defendants' contention that the first defendant's discovery on damages would be time consuming had not been made out. The ambit of that discovery was a matter that could be resolved by conferral between the parties or, if necessary, by appropriate orders of the court so as to avoid undue cost or delay.

64 It was submitted that the separate trial of liability and damages was only appropriate in clear and simple cases where there was an obvious demarcation of the issues. This was not such a case. The issues of fact were intertwined. The prospect of savings in time and costs was likely to be illusory and no good reason had been shown for the fragmentation of the action.

65 The starting point is that ordinarily all issues in an action should be disposed of at the same time. But there is not the same reluctance nowadays to permit the trial of a separate issue as there once was. The increasing time, complexity and cost associated with litigation has led to a recognition that the interests of justice demand a greater flexibility of approach if the objectives set out in O 1 r 4B are to be achieved - that is, the just, timely and efficient determination of the litigation, at a cost affordable to the parties. Nevertheless, generally the party seeking the trial of a separate issue will have to demonstrate that such a course will more readily facilitate those objectives than a single trial of all the issues. And, of course, experience has shown that in litigation, as in life, the 'shortcut' often turns out to be the longest way. The touchstone, however, must always be the interests of justice in the particular case.

66 It is impossible to describe all of the circumstances in which it would be appropriate to order the trial of a separate issue and it would be unwise to attempt to do so. Everything will turn on the particular circumstances of the case. But I would respectfully agree with the general approach described by Giles CJ in Comm D in Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130:

In the ordinary course, all issues in proceedings should be decided at the one time, but separate decision of a question may be appropriate where, for example, the decision of the question is critical to the outcome of the proceedings and (at least if decided in one way) will bring the proceedings to an end. In particular circumstances the separate decision of a question may be appropriate even if it will not bring the proceedings to an end, such as where there is a strong prospect that the parties will agree upon the result when the core of their dispute is decided or where the decision will obviate unnecessary and expensive hearing of other questions, but such occasions must be carefully controlled lest fragmentation of the proceedings (particularly when the exercise of right of appeal is borne in mind) brings delay, expense and hardship - that which the making of an order was intended to avoid. It is often the case that the need to make findings of fact for a decision of the separate question, especially findings which may involve issues of credit, tells strongly against the making of an order because related facts, and renewed issues of credit, will or may arise at a later stage in the proceedings. Experience teaches that it should be able to be seen with clarity that decision of a separate question will be beneficial in the conduct of the proceedings and the resolution of the parties' dispute (142).

67 In the present case, I am not satisfied as matters stand that the separate trial of the issue of liability is an appropriate course.

68 It was submitted on behalf of the defendants that, in particular, the plaintiff's claim for an account of profits would involve difficult issues of expert evidence and extensive discovery, including discovery of confidential financial records of the first defendant. There was, however, no evidence which indicated the scope of those tasks or their likely cost, or the nature of the financial information that the first defendant would be required to discover. Reference was also made to what were described as the time and cost that would be involved in 'the inevitable interlocutory skirmishes on issues surrounding the damages claim'. It is, of course, incumbent on both sides to endeavour to avoid such skirmishing.

69 While a separate trial on liability would undoubtedly lead to some saving in time and costs if the plaintiff were to be unsuccessful on liability, the potential savings appear to be comparatively modest. When weighed against the additional time and cost that would inevitably be involved in separate trials of liability and quantum should the plaintiff be successful on liability, I do not consider that the case for a separation of issues has been made out. In that connection, I should say that although senior counsel for the defendants submitted that the plaintiff's case on liability was weak, I do not think I am in a position to reach a considered view on the plaintiff's prospects of success on the necessarily limited material before me.

70 It is the case, however, that discovery and expert evidence in relation to the issue of quantum are capable of leading to difficulties of the sort referred to by senior counsel for the defendants. Were such difficulties to eventuate, despite the reasonable endeavours of the parties, that might affect the merits of having a separate trial on liability. I would have thought, however, that they are matters which ought to be capable of being resolved by conferral between the parties.

71 I consider, on the basis of what is currently before me, that a separate trial on liability is not warranted. I would therefore refuse the defendants' application. If circumstances change, the application can be renewed.