CITY OF BAYSWATER -v- VIVA ENERGY AUSTRALIA PTY LTD [2021] WASC 373 (27 October 2021)

3 There was no dispute between the parties as to the relevant principles. They were recently summarised by Le Miere J in Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd (No 15) [2021] WASC 307 at [30 - 33]:

Order 32 r 4 of the Rules of the Supreme Court 1971 (WA) (RSC) provides that the court may order that any question or issue whether of law or fact or partly of law and partly of fact and whether raised by the pleadings or by agreement of the parties or otherwise may be tried separately from any other question or issue.

The starting point is that ordinarily the trial of an action should include all issues arising in the action. The determination of an application for separate trials requires a careful balancing of the prospective advantages and disadvantages involved in separating the issues, bearing in mind the uncertainties inherent in litigation, and that, once embarked upon, it is a course from which it may be difficult and even impossible to retreat. It should only be embarked upon where its utility, economy and fairness to the parties is clearly made out.

The separate trial of issues is a procedure which frequently adds to the difficulties of courts of appeal and tends to increase the cost and time of legal proceedings and is not an appropriate procedure when the findings of fact could only be made after trial.

In deciding whether to order the trial of a preliminary issue the court must have regard to RSC O 1 r 4A and 4B and follow the course that best ensures the attainment of the object set out in those rules.

4 His Honour's decision references the Court of Appeal decision in Landsdale Pty Ltd v Moore [2009] WASCA 176. Newnes JA with whom Buss JA agreed said at [22]:

It is impossible to provide a comprehensive description of the circumstances in which it is appropriate for there to be separate trials of liability and damages. The exercise of the discretion to make such an order will depend upon what is in the interests of justice in the particular case. However, the separate trial of issues will generally only be appropriate in cases where there is a clear line of demarcation between those issues, and the determination of one in isolation from the other is likely to result in a substantial saving in time, inconvenience and expense: Allen v Gulf Oil Refining Ltd [1980] UKHL 9; [1981] AC 1001; Smith v Maloney (1998) 19 WAR 209, 223. Particular caution needs to be exercised in cases in tort. As Owen and Steytler JJ explained in Chenery v Conti [1999] WASCA 258:

The practice of splitting issues often leads to unforeseen and unfortunate results. It is trite to say that a tort is not complete until damage has ensued. Matters of liability will, therefore, almost inevitably involve a consideration of damage. The question usually arises as to the wrong that a plaintiff says it has suffered (liability in the strictest sense), whether damage has ensued and whether the damage found to have been suffered was caused by the wrong done by the defendant (liability in an extended sense). The question that then follows is whether the damage found to have been suffered and to have been caused by the defendant can be quantified and compensated for in monetary terms. That is a question of remedy, not liability [64].

5 This passage very much reflects the attitude adopted by appeal courts. It is fair to say that courts of appeal have maintained a healthy scepticism as to whether separate trials actually provide any real benefit. Of course, it is the plaintiff's application and it is for the plaintiff to establish that in the interests of justice there should be a separate trial of liability and quantum. But it is with a healthy scepticism that the plaintiff's proposal ought be viewed.

6 The starting point in this case is to look at the issues raised by the pleadings. In its amended statement of claim, the plaintiff identifies itself as a local government municipality and the defendant as a company which was formally known as the Shell Company of Australia Ltd. It is pleaded that between 1 November 1994 and 11 February 1997 a company named ACN 065 643 343 Pty Ltd (the owner) was the registered proprietor of land situated at the corner of Walter Road and Russell Street, Morley. In October 1995, the owner of the land submitted an application for approval to commence development with the intention of building commercial premises on the land which included a service station. On 28 November 1995, the plaintiff resolved to approve an application. The approval was subject to a number of conditions including condition 34 which stated:

34. Land required for road widening to contain a Slip Lane abutting Walter Road to be ceded free of cost to the City of Bayswater and the Slip Lane to be extended eastwards to the Council car park area and the full length of the Slip Lane being constructed at the developer's cost to the satisfaction of the Director of Technical Services.

7 On 12 December 1996, the defendant contracted with the owner to carry out construction works on the land pursuant to development approval. This required the defendant to comply with condition 34 in the construction of the slip lane (Slip Lane). On 15 January 1997, the defendant, the owner and the plaintiff executed a deed (the Deed). A copy of the Deed appears as an attachment DP 2 to the affidavit of Douglas Haig Pearson sworn 11 October 2021. The Deed is relatively short and central to this dispute. Relevantly it reads as follows:

1. The Owner is the owner of Lot 1146, 52-66 Russel Street, Cnr Walter Road, Morley being the land in Certificate of Title Volume 2019 Folio 856 (the "Land").
2. Shell has or will contemporaneously with this Deed enter into an Agreement for Lease to take a lease of part of the Land. The Agreement for Lease provides that Shell will as part of the Lessee's Further Works listed in Item 2 of the Schedule to the) Agreement for Lease a copy of which is annexed and marked "A" construct the Slip Lane ("Slip Lane") to Walter Road as shown in the plans and specifications approved by the City, copies of which are annexed and marked "B" (the "Plans and Specifications") and as approved by the City (pursuant to the planning approval dated 31/1/96 and specifically condition 34) from the adjoining carpark into Russell Street for the fuU Walter Road frontage of the Leased Premises and the relocation of the existing cross over to Walter Road and the installation of 2 new cross overs from the· Leased Premises to Walter Road.

1. There are two Telstra communications pits (the "Communications Pit") located where the Slip Lane will be. Telstra have agreed to relocate the Telstra Communications Pits, Shell will as soon as possible request Telstra to relocate the Communications Pits.

1. Shell have requested The City to issue a Classification Certificate (the " Classification Certificate") to Shell in respect of its development on the Land in accordance with the planning approval granted by Council dated 31 January 1996 The interim cross over positions are shown in the plans and specifications approved by the city, copies of which are annexed marked "B".
2. Condition 3("Condition 34") of the planning approval issued to Shell provides:

'Land required for road widening to contain a Slip Lane abutting Walter Road to be ceded free of cost to the City of Bayswater and the Slip Lane to be extended eastwards to the council carpark area and the full length of the Slip Lane being constructed at the developer's cost to the satisfaction of the Director of Technical Services.'

NOW THIS DEED witnesseth:

1. In consideration of Shell executing this Deed and agreeing to cause the Communications Pits to.be moved and the Slip Lane to be constructed; the City agrees to issue a Classification Certificate to Shell in respect of the construction of buildings on the land by Shell.

Shell agrees, to construct the Slip Lane within 60 days following the relocation of the Communications Pits, in accordance with the plans and specifications approved by the City, copies of which are annexed and marked 'B'.

3, The Owner agrees with the City and Shell to ensure Condition 34 is complied with.

8 The plaintiff pleads the defendant (and presumably the owner) constructed the service station and other commercial premises on the land but failed to construct the Slip Lane. The plaintiff says the defendant is in breach of the Deed and it seeks damages for breach of contract.

9 Although it is not entirely clear from the statement of claim, it seems the plaintiff says that the defendant has breached the contract and in doing so has repudiated the contract. That repudiation has been accepted by the plaintiff and the plaintiff has now sued for damages. During the course of the hearing, I asked senior counsel for the plaintiff whether that was the plaintiff's case. By reference to the declarations sought in par 1 of the prayer for relief, counsel indicated that it was. Clearly that has to be the case. This is not a case where the remedy of specific performance would be available. So, assuming the plaintiff was successful on liability, it would have to establish the cost of complying with the requirements of the Deed - that is to say, the costs of putting in the Slip Lane. The plaintiff says on its amended statement of claim there are two quite distinct issues. First, is the defendant liable under the terms of the Deed? Second, what would be the costs of constructing the Slip Lane; put another way, what would be the cost of putting the plaintiff in the position it would have been in had the defendant complied with the terms of the Deed? The plaintiff says there is no overlap between these two issues.

10 By its amended defence, the defendant answers the plaintiff's plea of the development approval, the lease of the premises and the entry into the Deed. Further facts and matters are pleaded which, on the defendant's case, are material to the contractual relationship. For instance, par 8 of the amended defence deals with the Deed and emphasises certain clauses. But there is no dispute between the parties they entered into the Deed. Nor can it be suggested that any of the first eight paragraphs of the amended defence which deal with the gravamen of the plaintiff's claim draw in the question of damage.

11 Paragraph 14 in the amended defence sets out a series of headings - reasons why the defendant says the plaintiff cannot enforce the Deed. By way of example, the first of these subheadings reads as follows:

The Defendant had no obligation during the term of the Agreement for Lease and, in any case, any obligation was owed by the lessor.

12 There are nine of these subheadings and material facts are pleaded under each one. Only one of these subheadings, paragraph 14(m) appears to involve any assessment of the work that needs to be undertaken pursuant to the Deed. Drawing on the period of time which has passed since the parties entered into the Deed, the defendant says the scope of the work required to be done in order to perform the Slip Lane works has materially and radically varied. The defendant would need to produce evidence to support that plea. That is confirmed by par 9(j) of the plaintiff's amended reply - the parties joint issue on the question. However, the defendant's plea is not directed at the increased costs of any works to be undertaken rather the scope of the work.

13 Paragraph 17 of the amended defence is directed to a limitation issue. In fact, there are a number of other paragraphs which focus on the time that has passed since the defendant's obligation to construct the Slip Lane arose. The defendant clearly anticipates that the plaintiff's delay in seeking to enforce the obligations under the Deed will have adverse consequences on the plaintiff's attempt to now enforce the Deed. Be that as it may, it is difficult to see how any of those arguments on what I might broadly turn, limitation questions involve the issue of damages.

14 In par 6 and 7 of his written submissions, counsel provides a summary of what he says is the nature of the defendant's defence. In broad terms, it is consistent with what I have set out above. Counsel then says in par 8:

The defences stated in [7(a)-(c)] above put into issue each and every element of the entirety of the work that must be done in order to perform the Slip Lane Works, at all points in time during the period when the City alleges that Viva was obliged to perform those works.

15 With respect, I see no basis upon which any of the lines of defence can be said to interrelate to the issue of damages. I have dealt with the question of the change to the scope of works and I can say nothing more on that issue. I can see no other defence upon which it can be said that the question of liability and quantum are so intermingled, as to make it impractical to separate one from the other.

16 There are two further matters which deserve attention. The first is the potential saving in time by separating the issues of liability and quantum. The plaintiff relied on an affidavit of Dennis William McLeod sworn 11 June 2021 in support of its application. Mr McLeod is the plaintiff's solicitor. He offers the view that the trial of liability in this matter would occupy 1 1/2 days. The question of quantum would occupy 6 days. I think those assessments are inaccurate. The fact the amended defence raises as many issues as it does, would probably mean the issue of liability would occupy 4 or 5 days. It is difficult to see that when dealing with liability, there would be a need to call many witnesses. Perhaps, as the question of change in the scope of works is live, evidence might be needed on that. It might also be needed on other aspects of the case. However, the documents would be crucial. During the course of his submissions, I asked senior counsel for the plaintiff his view on the matter. He thought 4 days. Counsel for the defendant indicated he had not turned his mind to the matter. The difficulties of estimating a time frame are compounded because discovery has not yet been completed. But an estimate of 4 days is, I think, reasonable in all the circumstances.

17 This is a case where the question of quantum could take some time. The plans presently available for the Slip Lane are a little more then sketches. If issue is to be joined on quantum, both parties would need to instruct experts, including experts who would offer their opinion as to how this Slip Lane ought be designed. Then there are engineers, the evidence of road builders and so on. There is probably little room for argument as to the cost of moving the communications pit - Telstra will provide a price, as they are the only party that can undertake that work. Nonetheless, there is considerable scope for disagreement and considerable evidence would need to be led. I suggested to senior counsel for the plaintiff the quantum aspect of the case may take 10 days to hear and he did not disagree. I would see that as a minimum.

18 The reduction of the length of trial from a minimum of 3 weeks, if there were no separate hearings, as against less than one week if liability was the only issue, is a compelling factor in ordering separate trials. Further, once liability is determined (assuming the plaintiff is successful in liability) there is the possibility of the parties reaching agreement. The Court of Appeal in the Moore decision cautioned against assuming separate trials might lead to a settlement of the matter when only scant evidence on that issue is available.[1] So while I would mention the possibility of settlement after hearing on liability as a factor in favour of ordering separate trials, I would not see it as in anyway definitive of the outcome.

19 The second point relates to Mr Mcleod's evidence as to the financial position of the plaintiff. Essentially, he says that as a local authority the plaintiff needs to know the likely costs of this action for budgeting purposes. A full trial and the attendant costs associated with that trial could mean a higher rate being set than if there was a trial of liability alone. While I appreciate the concerns of the plaintiff and its counsel, I would not see the financial imposition on the plaintiff of a full trial as being in anyway determinative of the issue. All litigants have to budget for their legal costs and while a local authority is in a different position to an individual or a company, that fact cannot stand in the way of the interests of justice.

20 There are two overwhelming factors in this case which favour the ordering of a split trial. The first is the prospect of dealing with liability in a relatively short space of time and bringing the matter on for hearing sooner rather than later. While case management principles cannot trump the interest of justice, in this case the two coincide. The second point is that the costs associated with just dealing with liability, rather than liability and quantum, are such that a split trial is warranted.

21 Accordingly, I will make orders largely in terms of the plaintiff's chamber summons. The actual orders may need further consideration and the parties should be conferred on that question in an attempt to agree a form of orders. If no agreement can be reached, the parties should file competing minutes within 7 days of the publication of these reasons. Subject to hearing from the parties, the costs of this application should be costs in the cause. If any party wishes to make submissions on costs, they should do so within 7 days.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Landsdale Pty Ltd v Moore [2009] WASCA 176 [28].