[2017] NSWCA 295
Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd [2018] NSWSC 1284
Source
Original judgment source is linked above.
Catchwords
[2017] NSWCA 295
Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd [2018] NSWSC 1284
Judgment (2 paragraphs)
[1]
Judgment
These proceedings commenced on 20 December 2018. The plaintiff sought possession of land in two folios situated at Sapphire Road, Gunning. The statement of claim also sought an order that the defendant pay to the plaintiff the sum of $293,643.87.
The basis for the claim was liability under a General Deed of Indemnity and a Deed of Variation entered into by the defendant with the plaintiff. In addition, the amounts said to be owing under the deeds were secured by a mortgage given by the defendant to the plaintiffs.
The plaintiffs were liquidators of a company called RB Hospitality Holdings Pty Ltd. The defendant was the sole director and a 50% shareholder of the company. On 20 February 2015 the plaintiff was wound up and the plaintiffs were appointed liquidators.
The defendant objected to the winding up and asked the plaintiffs to allow the company to continue to trade. To that end, a General Deed of Indemnity was entered into between the plaintiffs and the defendant on 5 March 2015. The Deed was varied by a Deed of Variation on 23 April 2015. The operative deed is principally the Deed of Variation.
The recitals to the Deed of Variation set out the background to the entry into the Deeds as follows:
A. The Indemnifier is a director of RB Hospitality Holdings Pty Ltd (In Liquidation) ACN 168980534 ("The Company").
B. The company carries on a hotel business under the names and style of "O'Neill's of Dickson" ("the Business").
C. On or about 20 February 2015 the Indemnified Party was appointed as joint and several Official Liquidators of the company pursuant to an Order made in the Supreme Court of Queensland on that date.
D. The Indemnifier objects to the winding up of the company and asserts that the company is solvent.
E. The Indemnifier has requested that the Indemnified Party continue trading the business with a view to facilitating the consideration by creditors of a Deed of Company Arrangement.
F. The Indemnified Party is willing to facilitate the continued trading of the Business with a view to creditors considering a Deed of Company Arrangement upon the basis, amongst other things, that the Indemnifier enter into this Deed.
Clause 2 of the Deed provided indemnity from the defendant. The wording of the indemnity was changed in the Deed of Variation. The defendant relies on the change of wording to support a construction argument he wishes to raise. The indemnity clause from the original Deed provides:
The Indemnifier unconditionally and irrevocably indemnifies the Indemnified Party against any and all costs, expenses, liabilities, claims and losses, howsoever generated, arising from the continued trading of the Business activity and in respect of which the Indemnified Party would otherwise bear personal liability. In addition to the Indemnified Party's remuneration and costs arising from the continued trading of the Business which must be paid to the Indemnified Party immediately on demand.
This indemnity continues until the activity generating the risk to the Indemnified Party comes to an end and thereafter until all claims arising under the indemnity are paid.
The Indemnifier's obligation is a primary obligation and the Indemnified Party is not obliged to proceed against any other person before making a demand for payment hereunder.
The indemnity clause in the Deed of Variation reads in this way:
The Indemnifier unconditionally and irrevocably agrees to indemnify and keep indemnified the Indemnified Party and their legal representatives, partners, staff and/or agents from and against all Claims and Liabilities of every description incurred by the Indemnified Party arising out of or in connection with, or as a direct or indirect result of:
(a) The company,
(b) The business, including but not limited to the trading of the business;
(c) The winding up and administration of the company, including the administration of the company subject to any deed of company arrangement;
(d) The Lease; and/or
(e) Any and all other matters in respect of which the Indemnified Party would otherwise have personal liability in addition to the Indemnified Party's remuneration arising from the matters referred to in sub-clauses (a) - (d) above.
The Indemnifier must pay the Indemnified Party immediately upon demand any amounts due to the Indemnified Party under this deed as a liquidated debt without any setoff, counterclaim or (unless required by law) deduction or other withholding.
The indemnity referred to in this clause is a continuing indemnity and continues until any and all claims made and/or amounts due to the Indemnified Party under the deed are paid.
The obligation of the Indemnifier to indemnify the Indemnified Party under this deed is a primary obligation. The Indemnified Party is not obliged to proceed against any other person or property, demand payment from any other person, make any payment and/or incur any expenses before enforcing that right of indemnity.
Clause 4 of the original Deed was the provision of security by the defendant. In its amended form from the Deed of Variation it provides:
As security for performance of the Indemnifier's obligations under this deed, the Indemnifier grants to the Indemnified Party:
(a) A real property mortgage over the Indemnifier's interest in land contained in:
(i) …
(ii) Certificates of title volume 84/187058 and 84/665064 situated at Sapphire Road, Gunning in the State of New South Wales ("The Gunning Property").
Clause 5 of the original Deed dealt with default. It was amended in the Deed of Variation to read as follows:
1. It is an event of default under this deed if the Indemnifier:
(a) Fails to strictly comply with any of his obligations under this deed, including but not limited to paying any amount to the Indemnified Party in accordance with the terms of this deed; and/or
(b) Acts in a manner which, in the sole opinion of Indemnified Party:
(i) is contrary to the proper and orderly winding up and/or administration of the company and/or the business; or
(ii) is prejudicial to and/or not in the interests of the creditors of the company.
2. If any event of default occurs under this deed the Indemnified Party may, without limitation and at their absolute discretion, require the Indemnifier to remedy the default and/or exercise any of their rights and remedies under this deed or at law or in equity.
Liabilities is defined in the Deed of Variation as meaning:
all Remuneration, liabilities, losses, damages, interest, costs, fees, penalties, fines, assessments, forfeitures, expenses and/or disbursements (including legal costs on a full indemnity basis) of whatever description.
Remuneration is defined as including:
the professional fees of the Indemnified Party calculated in accordance with the rates of charge issued from time to time by the Indemnified Party in respect of the time spent by them and/or their partners, staff and agents, together with all other costs, outlays, disbursements and expenses properly incurred by the Indemnified Party in connection with or arising out of:
(a) The company;
(b) The business, including but not limited to the trading of the business;
(c) The winding up and/or administration of the company. Including the administration of the company subject to any deed of company arrangement; and/or
(d) The Lease.
Paragraphs 11-14 of the statement of claim provided:
11. During the period between on or about 20 February 2015 to 24 August 2015 inclusive, the Plaintiff, at the request of the Defendant, traded the Company by carrying on the Business.
12. As at on or about 25 August 2015, the sum of $293,643.87 was owing by the Defendant to the Plaintiff pursuant to the Deed (as varied by the Variation) and the Mortgage, being;
(a) the Plaintiffs unpaid professional fees and expenses as liquidators of the Company (including the staff to whom the Plaintiff delegated aspects of the external administration of the Company) for the period from 20 February 2015 to 24 August 2015 inclusive in the sum of $183,019,64; and
(b) a missing and/or unpaid cash surplus in the sum of $110,624.33 generated from the trading of the Company during the period from 20 February 2015 to 5 August 2015 inclusive,
13. On or about 30 October 2015, a resolution was passed by creditors of the Company that inter alia the remuneration of the Plaintiff, their partners and staff be approved from 2 April 2015 to 9 October 2015 in the sum of $251,544.40 (plus GST), which sum included the amount of $183,019.54 referred to in subparagraph 12(a) above.
Particulars
The said remuneration was calculated by reference to the hourly rates applicable to the grades or classifications set out in Vincents Scale of Insolvency Fees.
14. As at on or about 23 February 2018, the sum of $293,643.87 remained owing by the Defendant to the Plaintiff pursuant to the Deed (as varied by the Deed of Variation) and the Mortgage,
The defendant admitted paragraph 11, denied paragraphs 12 and 14, and did not admit paragraph 13. The defendant provided particulars of its denial of paragraph 12(a) as follows:
PARTICULARS
a. Clause 2 of the Deed (as defined at paragraph 3 of the SOC) was amended by clause 2.4 of the Deed of Variation (as defined at paragraph 4 of the SOC) to remove the first paragraph of clause 2 and substitute it with a new first paragraph. The effect of that amendment was to change the Defendant's potential liability to indemnify the Plaintiffs' remuneration and costs arising from the continued trading of the Business to a very different potential liability to only indemnify the Plaintiffs and their agents from all claims and liabilities in respect of the Plaintiffs' remuneration arising from certain limited matters.
b. The amount of $183,019.54 which is said to be unpaid remuneration of the Plaintiffs and their staff is not:
i. a claim and liability in respect of the Plaintiffs' remuneration arising from those certain limited matters,
ii. an amount which is covered or caught by the terms of clause 2 of the Deed, as amended or the Mortgage, or
iii. an amount or thing which is capable of being indemnified against.
c. The amount of $183,019.54 which is said to be unpaid remuneration of the Plaintiffs and their staff is excessive and unreasonable.
d. The determination of the issue of the amount of $183,019.54 which is said to be unpaid remuneration of the Plaintiffs and their staff is a matter for the exclusive jurisdiction of the Courts of the state of Queensland (clause 10.2 of the Mortgage).
The defendant also provided particulars of its denial of paragraph 12(b) as follows:
PARTICULARS
a. There is no requirement under the Deed, as amended to account to the Plaintiffs for any cash surpluses.
b. The amount of $110,624.33 which is said to be an unpaid cash surplus (or any other similar amount) is not:
i. an amount which is covered or caught by the terms of clause 2 of the deed, as amended or the Mortgage, or
ii an amount or thing which is capable of being indemnified against.
c. The failure to account for an amount of $110,624.33 which is said to be an unpaid cash surplus (or any other similar amount) is denied.
d. The determination of the issue of the amount of $110,624.33 which is said to be an unpaid cash surplus (or any other similar amount) is a matter for the exclusive jurisdiction of the Court of the state of Queensland (clause3 10.2 of the Mortgage).
Subsequently, the defendant's solicitor indicated that paragraph (d) (in each case) of the Particulars was no longer relied upon.
By a notice of motion filed 10 June 2020 the defendant sought, pursuant to r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW), that the Court make orders for the hearing of threshold issues in the matter as follows:
a. Whether the amount of $183,019.54, being the amount claimed at paragraph 12(a) of the Statement of Claim, is an amount which is covered or caught by the terms of clause 2 of the Deed as amended by the Variation, or the Mortgage;
b. Whether the amount of $183,019.54, being the amount claimed at paragraph 12(a) of the Statement of Claim, is an amount which is capable of being indemnified against;
c. Whether there is any requirement under the Deed, as amended by the Variation, for the Defendant to account to the Plaintiffs for any cash surpluses;
d. Whether the amount of $110,624.33, being the amount claimed at paragraph 12(b) of the Statement of Claim, is an amount which is covered or caught by the terms of clause 2 of the Deed as amended by the Variation, or the Mortgage;
e. Whether the amount of $110,624.33, being the amount claimed at paragraph 12(b) of the Statement of Claim, is an amount or thing which is capable of being indemnified against; and
f. Whether there can be an inquiry into the reasonableness of the liquidator's fees in circumstances where the remuneration has already been approved by the creditors pursuant to section 473(3) of the Corporations Act 2001 (Cth).
The affidavit in support of the motion said that the threshold issues were questions of law and would not require witnesses to be called or issues of credit to be determined. The affidavit said that if findings were made in the defendant's favour on the threshold issue, such findings would bring the proceedings to an end. It was said that settlement would be more likely to be achieved if the threshold issues were determined first. It was said that the cost of expensive expert evidence could be avoided completely if the threshold questions were determined in the defendant's favour. The last matter was an indirect reference to the fact that the defendant had, in a notice of motion filed 13 March 2020, sought a reference to a referee for enquiry and report on the questions of the reasonableness and proportionality of the liquidators' fees of $183,019.54 claimed in the statement of claim, and the amount of $110,624.33 being the unpaid surplus claimed in the statement of claim. During the hearing of that earlier notice of motion, the defendant sought to amend to seek the relief in the present motion. I adjourned the hearing of the earlier motion so that a new motion seeking a separate hearing under r 28.2 could be filed.
During the hearing of the present notice of motion, the defendant suggested that the only evidence the Court would need to look at were the deeds themselves. However, Ms Gall of counsel for the plaintiff drew attention to what was said by Leeming JA in Cherry v Steele-Park (20170 96 NSWLR 548; [2017] NSWCA 295 at [76]:
There is now a deal of authority for the proposition that whether there is in truth a constructional choice available to a written contract cannot be determined without first at least considering evidence of surrounding circumstances.
The plaintiffs submitted that evidence of the surrounding circumstances ought to be provided to the Court. This included evidence pertaining to the appointment of the liquidator, the defendant's various requests that the liquidator continue trading the company, the termination of winding up proceedings brought by the defendant and, more generally, the surrounding circumstances to which the Court would need to have regard in order to engage in construction of the deeds. That evidence would include the fact that the defendant had paid some of the liquidator's remuneration. That was said to be a reliance by the plaintiff on some form of estoppel and acknowledgment of liability.
The plaintiff submitted, and the defendant agreed, that if question 2(f) was altered, so that after the words "liquidator's fees" the words "in these proceedings" were inserted to confine the enquiry to the circumstances of this case only, that would be an appropriate question for a separate determination.
At the conclusion of the parties' submissions at the hearing of the notice of motion on 25 June 2020 I said:
What I am not prepared to do is to order separate questions if there is going to be oral evidence and cross‑examination because that is a significant factor the authorities say should lead to the refusal of a separate question. The authorities also emphasise that generally speaking the parties put up agreed facts upon which the questions are to be decided.
What can happen in these matters is the parties can accept evidence for the purposes of the separate question that might otherwise want to challenge if the matter went to a full hearing and they would still be free to do so if that is the end result.
I then adjourned the proceedings to 24 July 2020 so that the parties could consider what evidence or facts could be agreed for the purpose of the separate questions.
On 23 July my Associate was provided, after request by me, of the correspondence that had passed between the parties in relation to the evidence proposed to be led at the hearing of the separate questions. A letter had been sent by the plaintiff's solicitors on 9 July 2020 identifying a large number of paragraphs in an affidavit of Steven Neville Staatz sworn 3 May 2019, some 28 annexures to an exhibit to that affidavit, a large number of paragraphs of a further affidavit of Mr Staatz sworn 28 February 2020 and two documents annexed to an exhibit to that affidavit. That evidence was extensive.
The defendant's solicitors replied suggesting that much of the evidence the plaintiff would seek to rely on went beyond the questions for determination at the hearing of the separate question. As Mr Andrews, solicitor for the defendant, made clear in submissions, the defendant's position was that the questions of construction could be decided on an examination of the Deed of Indemnity and the Deed of Variation. He identified in his correspondence certain parts of the affidavits which would provide the evidence of surrounding circumstances.
Short Minutes of Order were forwarded to my Associate shortly before the hearing resumed on 24 July. These orders, which were agreed between the parties, provided for the hearing of the separate questions on the basis of the evidence identified in the letter from the plaintiffs' solicitors dated 9 July 2020 reserving to the defendant the right at that hearing to object to any of that evidence.
I reserved my decision and requested that a copy of the affidavit of Mr Staatz of 3 May 2019 be forwarded to my Associate. Later that same day, my Associate received a further email from the plaintiffs' solicitors saying that the plaintiff now agreed to have the separate questions determined on the basis of considering only the Deed of indemnity, the Deed of Variation and the mortgage.
In Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd [2018] NSWSC 1284; (2018) 360 ALR 782, I set out the principles governing the making of orders under r 28.2 from three other cases, as follows:
[11] In Southwell v Bennett [2010] NSWSC 1372, Hallen AsJ (as his Honour then was) said at [15]:
I take the principles that apply in determining whether to make an order for the separate determination of a question under the rule to be:
(a) The rule speaks of "questions" and not "issues" and does not differentiate between questions of fact, or law, or partly of fact and partly of law.
(b) The judicial determination of a "question" must involve a conclusive, or final, decision based on concrete and established, or agreed, facts, for the purpose of quelling a controversy between the parties: Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334, at [45] and [51].
(c) The rule permits the Court to hear and determine the separate question at any point before, at, or after, any trial or further trial in the proceedings, rather than only as a preliminary question.
(d) Whether such an order should be made is a matter for the court's discretion, which discretion must be exercised judicially, but cannot otherwise be fettered: Dunstan v Simmie & Co Pty Ltd [1978] VR 669, at 670; Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215 at [7].
(e) As a general rule, the discretionary power to order separate determination of a question should be approached with caution: Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180 at [436], per Callinan J; Tepko Pty Limited v The Water Board [2001] HCA 19; (2001) 206 CLR 1, at [168]-[170] per Kirby and Callinan JJ: Commonwealth Bank v Clune [2008] NSWSC 1125 at [6], per Johnson J; Bailey and Bailey v Director-General Department of Energy Climate Change and Water and Ors [2010] NSWSC 979 at [4] per Studdert AJ.
(f) In exercising its discretion, the overriding purpose of the Civil Procedure Act 2005, namely the just, quick and cheap resolution of the real issues in the proceedings (s 56) must be given effect.
(g) Generally, all questions of fact and law should be determined at the one time: Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 141-42; SPI Spirits (Cyprus) Ltd v Diageo Australia Ltd [2006] FCA 14. If the Court is to depart from that position, the party seeking the separate determination of a question must satisfy the Court that it would be 'just and convenient' for that order to be made: Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718 at [8]-[9], see also Energy Australia v Australian Energy Limited [2001] FCA 1049.
(h) While it may appear attractive, superficially, to order the trial of a separate question, experience often shows that it will not be so, for example, because of the complications that can arise in relation to appeals, or to overlapping factual issues, or to questions of credit, if the same witnesses have to give evidence in relation to a question that is separated and those questions that are not: Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215 at [7(6)] per Einstein J.; Owners Corporation Sp 70672 v Trustees of Roman Catholic Church [2010] NSWSC 946 at [16] per Ball J.
(i) The experience of courts suggests that the separation of proceedings often does not result in the quicker and cheaper resolution of proceedings, but often has the reverse effect. It sometimes happens that it turns out to be productive of the disadvantages of delay, extra expense, appeals and uncertainty of outcome which it is intended to avoid: Idoport Pty Ltd v National Australia Bank Ltd; Tepko Pty Limited v The Water Board at [168].
(j) Before a question is to be separately determined, it must be possible to clearly see that it will facilitate the quicker and cheaper resolution of the proceedings: Tallglen v Pay TV Pty Ltd at 142, per Giles CJ in Comm D; Parramatta Stadium Trust v Civil and Civic Pty Ltd; Century Medical v THLD (NSWSC, 27 August 1996, unreported).
(k) Where findings as to the credit of a witness is, or of witnesses are, or may be, involved in the consideration of the evidence relevant to the question, it is inappropriate to order a separate trial: ABB v Freight Rail [1999] NSWSC 1037.
(l) Often, a separate question is heard on the basis of:
(i) agreed statements of fact;
(ii) a narrow point to be determined; and
(iii) a hearing that is able to be conducted within a short time (or a short time relative to the total length if the hearing of the separate question were not to be dealt with).
(m) Factors that tend to support the making of an order, include that the separate determination of the question may:
(i) contribute to the saving of time and cost by substantially narrowing the issues for trial, or even lead to disposal of the proceedings: Tallglen v Pay TV Holdings;
(ii) contribute to the settlement of the litigation (CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 602 per Kirby P at 607).
(n) It may be appropriate to determine a separate question, even if it will not resolve all the issues, provided that there is a strong prospect that the parties will agree upon the result when the core of the dispute has been decided, or if the decision will obviate unnecessary and expensive hearings of other questions: City of Swan v Lehman Brothers Australia Ltd [2009] FCA 784; (2009) 73 ACSR 86 at [27] per Rares J. The determination of the one question should enable a sensible reassessment of litigation risks, which is generally likely to encourage some form of settlement discussions.
(o) Relevantly, one factor that may tell against the making of an order would be where there is likely to be a significant overlap between the evidence adduced on the hearing of the separate question and at trial - possibly involving the calling of the same witnesses at both stages of the hearing of the proceeding: Reading Australia Pty Ltd v Australian Mutual Provident Society at [8]. There is always a risk of inconsistent findings arising from determination of separate questions.
(p) Whilst the decision is ultimately one for the court to determine, it will have regard to the attitude of the parties: TVW Enterprises Limited v Duffy (Federal Court of Australia, 28 March 1985, unreported) Toohey J.
(q) It is a relevant consideration to weigh the time likely to be taken in the hearing of a separate question and the availability of hearing dates for that purpose, against the time and expense of a substantive hearing and the length of time likely to elapse before such a hearing will take place: TVW Enterprises Limited v Duffy at pp 4-5.
(r) Each case will have its own dynamics that dictate the relative importance of various factors to be considered in exercising the discretion conferred.
(s) It is necessary that there be precision, both in formulating the question, and in specifying the facts upon which it is to be decided: Jacobson v Ross [1995] 1 VR 337 at 341.
[12] In Crawley v Vero Insurance Ltd & Ors [2012] NSWSC 593, Beech-Jones J adopted those principles and made five further points as follows:
[16] First it is trite to observe that the power conferred by rule 28.2 is to be exercised by reference to the overriding purpose of the Civil Procedure Act 2005 "to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings" (s 56). One aspect of that command which my analysis below seeks to emphasise is the desirability of the proceedings being "cheap". I am under no illusion that these proceedings will be anything other than expensive for the parties, but that is not an excuse to let considerations of cost fall away. The system of litigation in this State expects that counsel appearing will be across all issues in the case and that the legal representatives will marshall all relevant evidence concerning those issues. Experience demonstrates that those steps in turn require a much larger body of material to be considered. All of this effort involves cost. Sometimes it is rendered futile because the focus of all this attention is rendered otiose by the Courts' determination of some other issue.
[17] Second, an interlocutory order for the separate determination of issues is an exceptional measure, distinct from the ordinary course taken of determining the issues in their totality: Street v Luna Park Sydney Pty Ltd [2007] NSWSC 697 at [5]. Consequently, the applicant bears the burden of demonstrating the appropriateness of the order, but it may be appropriate for the judge to take a more "interventionist role" in crafting the precise scope of the question: Intergral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd [2006] NSWSC 1464 per Brereton J at [6]; Commonwealth Bank of Australia v Clune [2008] NSWSC 1125. The counter to the observations in [16] is that sometimes issues are separated in the expectation that their resolution will determine the balance of the proceedings but that proves illusory. On other occasions a matter determinative of, and fatal to, the proceedings is decided but then appealed and overturned with the outcome that the parties find themselves back in the same position they were prior to a trial but with years having passed. Kirby and Callinan JJ noted in Tepko Pty Ltd v The Water Board [2001] HCA 19; (2001) 206 CLR 1 at [168] that the benefits of a separate question order "are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory...".
[18] Third, one real problem with ordering separate hearings is the potential for credibility findings to be made in one hearing in respect of a witness who may have to give evidence at the second hearing. This can create significant difficulties including, but not restricted to, the potential for the trial judge to disqualify themselves (see Warragamba Winery Pty Ltd v New South Wales [2010] NSWSC 66 at [10] to [14] per Harrison J).
[19] Fourth, the power conferred by rule 28.2 is not one that enables the severing of "issues" but instead the isolation of "questions". The question needs to be identified with precision. One advantage of doing that in advance of hearing a motion such as this one is that the various considerations for and against exercising the power can be considered against the precise question that is proposed to be determined separately. Many of the cases involving applications of this kind involve attempts to undertake a Solomon style severing of all issues of liability and quantum without any precise identification of what the "question" to be determined separately is. For the reasons discussed below I reject that approach here although I consider it appropriate to sever a relatively narrow question of quantum which might occupy a disproportionately large portion of the litigation battlefield.
[20] Fifth, one aspect of rule 28.2 that is not discussed in many of the cases is that it includes the power to order a question be decided after all other issues in the proceedings. Many of the cases where severance is sought involve an attempt to isolate some preliminary question which one of the parties hopes will give them a Hail Mary pass to the end zone of success. This approach runs the risk of promoting delay because of the potential for appeals from any adverse preliminary determination and the difficulties in isolating some discrete facts that enable the preliminary question to be resolved without overlapping with the balance of the proceedings. These adverse consequences are less likely where the separate question is relatively narrow and will be decided after all other issues in the proceedings. In addition it is always to be borne in mind that an order under rule 28.2 can be revoked if appropriate (see Warragamba). Thus if it appears to a trial judge who is completely cognisant of all the issues and the material that a hearing of the separate question is not warranted they may revoke it or, if appropriate, hear and determine it immediately. There is far less scope to change course for a trial judge who embarks upon a hearing of a question posed prior to the hearing of all other issues in the proceedings.
[13] In Allandale Blue Metal Pty Ltd v Roads and Maritime Services [2013] NSWCA 103 Ward JA made reference to a number of cases that set out principles governing the separate determination questions and said:
[89] … [I]t was not suggested in the above cases that it is necessary (for the power to state a separate question to be exercised) that the determination of the separate question be finally dispositive of the litigation or of one or more issues in the litigation; rather, it was contemplated that it might be sufficient if it would substantially narrow the field of litigious controversy (requiring a quantitative assessment to be made). Disposition of a step necessary for the determination of one or more issues in the proceedings might well have the effect in a particular case of substantially narrowing the field of litigious controversy. Thus, while it is submitted for Allandale that, at most, the separate question would resolve a potential step in the determination of the relevant issue in the compensation proceedings, that of itself does not preclude the exercise of the power under Rule 28.2.)
[90] Einstein J also set out various circumstances in which he considered that the separate determination of an issue would rarely be seen to be an appropriate procedure (to some of which reference was made by Mr Lancaster SC, Senior Counsel for Allandale), those including where there are intertwined issues of fact or law (such that the determination of the separate question would not have any substantial effect on the width of the field of litigious controversy or the prospect of the settlement of the balance of the litigation) and where there is a possibility that the resolution of the separate issue will not finally determine the issue but merely result in an appeal from that decision in relation to that separate issue creating what his Honour referred to as a multiplicity of proceedings, interruptions to the court and undesirable fragmentation of the proceedings.
[91] In various authorities, caution has been advocated in the exercise of such a power (such as Perre v Apand Pty Ltd (1999) 198 CLR 180 at [436] per Callinan J; Allstate Explorations NL v Beaconsfield Gold NL [1999] NSWSC 832 at [24] per Santow J, as his Honour then was; Tepko Pty Ltd v Water Board (2001) 206 CLR 1 at [168] per Kirby and Callinan JJ; Strathfield Municipal Council v Poynting (2001) 116 LGERA 319 at [112] - [113] per Young CJ in Eq, as his Honour then was). In Idoport, Einstein J noted the reason for such caution in the following passage:
The experience of courts suggests that the separation of proceedings often does not result in the quicker and cheaper resolution of proceedings as anticipated, but often has the reverse effect, merely causing added delay and expense to the resolution of the litigation. Thus, before an issue is to be separately determined, it must be possible to clearly see that it will facilitate the quicker and cheaper resolution of the proceedings [his Honour there citing Tallglen v Pay TV Holdings Pty Limited; Parramatta Stadium Trust v Civil and Civic Pty Ltd (unreported, Supreme Court of NSW, 27 August 1996, per Hunter J) and Century Medical v THLD [2000] NSWSC 5 (unreported, Supreme Court of NSW, 3 February 2000, per Rolfe J)]. (my emphasis)
[92] However, it has also been recognised that if the separate determination of particular discrete issues may achieve economies in time and expense in the resolution of the proceedings or obviate the necessity for a trial on all issues then it may be both appropriate and desirable for there to be such an order (Flore v NSW Department of Education and Training [2006] NSWSC 1227 at [32]; Street & 7 ors v Luna Park Sydney Pty Limited & 3 ors [2007] NSWSC 697 at [6]; Stewart v Ronalds [2009] NSWSC 455; Hubertus Schuetzenverein Liverpool Rifle Club Limited v Commonwealth of Australia (1994) 51 FCR 213, (1994) 85 LGERA 37 - though in the last case the order for separate determination was by consent).
In circumstances where the only evidence to be put before the court at any separate determination are the three identified documents, I am satisfied that it is appropriate to order that the six questions identified in the defendant's notice of motion be determined separately from, and prior to, the final hearing of the proceedings, with an amendment being made to question (f), by inserting the words "in these proceedings" after the words "liquidator's fees".
My reasons are these. First, there are only two heads of claim made in the statement of claim. If neither of them is indemnified, there will be judgment for the defendant. If only one is indemnified, the plaintiffs will be entitled to judgment for possession of land because the mortgage makes it an event of default if the defendant fails to pay any money that must be paid under any agreement made between the plaintiffs and the defendant. Secondly, and relatedly, if the defendant is unsuccessful in demonstrating that the claimed amounts do not fall within the indemnity, there is a strong likelihood of a settlement of the amounts owing. This is because, as I have said, the mortgage secures any amount owing to the plaintiffs.
Thirdly, if the answer to question (f) is in the negative, the plaintiffs will be entitled to judgment for possession of the land. Further, the question is a question of law only. Fourthly, the parties agree that a final hearing will take three days. The hearing on the separate questions will take no more than one day and probably less, with consequent costs saving. If a reference to a referee is required to deal with the quantum of any claims at any final hearing, particularly in relation to the reasonableness of the liquidator's fees, further costs will be incurred. Finally, the plaintiff now accepts that the construction argument can be dealt with by reference only to the three documents identified. In any event, the essential surrounding circumstances would appear to be made clear by the recitals to the Deed of Indemnity and the Deed of Variation.
Accordingly, I make the following orders:
Order pursuant to r 28.2 Uniform Civil Procedure Rules 2005 (NSW) that the questions referred to in the defendant's notice of motion filed 10 June 2020 (subject to order 2 below) be determined separately and prior to the final hearing of the proceedings.
The parties to provide to the Court the agreed form of the separate questions by 31 July 2020.
The evidence to be relied upon at the hearing of the separate questions is limited to the Deed of Indemnity, Deed of Variation, and Mortgage.
The Defendant file and serve an outline of submissions by 14 August 2020.
The Plaintiff file and serve an outline of submissions by 4 September 2020.
Costs of the Defendant's motion filed 10 June 2020 be reserved.
Liberty to apply on the two days' written notice.
[2]
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Decision last updated: 29 July 2020
Parties
Applicant/Plaintiff:
Combis & Staatz as joint and several liquidators of RB Hospitality Holdings Pty Ltd (In Liquidation)