BRIAN STEPHEN BOWLEY As Trustee For THE BOWLEY FAMILY TRUST

QUENBY VITICULTURAL SERVICES PTY LTD (ACN 009 283 943)

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Practice and procedure - Application for separate trials of liability and damages - Relevant principles - Need to show clear demarcation of issues and substantial saving in time, inconvenience and expense likely - Particular caution necessary in claim in negligence

Allen v Gulf Oil Refining Ltd [1980] UKHL 9; [1981] AC 1001

Chenery v Conti [1999] WASCA 258

Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317

Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180

Smith v Maloney (1998) 19 WAR 209

Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1

1 BUSS JA: On 22 September 2009, I joined with Newnes JA in ordering that leave to appeal be granted and the appeal be allowed for the reasons now published by his Honour.

2 NEWNES JA: On 22 September 2009 we allowed an appeal against a decision of Master Sanderson in which he ordered that there be separate trials of the issues of liability and the quantum of damages in an action for negligence by the respondents against the appellants. We said we would give reasons for our decision later. These are my reasons.

3 The appellants and the respondents own adjoining properties at Mount Barker in the south-west of the state. Since about 1977 the respondents have operated a marron farm and a cattle stud on their property. The marron farm has from about 1996 had 46 marron ponds. The appellants operate a vineyard on their adjoining property.

4 The operation of the vineyard has involved the periodic spraying of chemicals to control weeds, fungus and insect pests. The respondents allege that, between 12 December 2002 and 26 February 2003, while the spraying of chemicals was being carried out on the vineyard, prevailing winds carried the spray to the respondents' property causing the death of a large number of marron in 36 of the marron ponds. The respondents claim that the loss of the marron was caused by the breach by the appellants of their duty to exercise reasonable care to prevent the spray escaping from their property to the respondents' property. They claim that as a result of the appellants' negligence they suffered losses totalling $3.1 million. Those losses are said to consist of $1.6 million for the lost marron stock, $500,000 for the cost of pond rehabilitation and $1 million from loss of future sales for a period of seven years.

5 The respondents further claim that, between 13 October 2004 and 2 March 2005, the appellants again negligently allowed chemical spray to drift to the respondents' marron ponds, causing further losses amounting to $4.8 million. The losses are said to consist of $300,000 for the lost marron stock, $500,000 for the cost of pond rehabilitation, and $4 million from loss of future sales for a period of five to seven years.

6 The appellants deny they were negligent. They admit that they owed to the respondents a duty to exercise reasonable care to prevent the chemicals reaching the respondents' marron ponds in sufficient concentrations to cause the respondents to suffer loss and damage, but deny that they were in breach of that duty. They say that the spraying of

the chemicals was done in the ordinary course of the management of the vineyard and in accordance with the guidelines published by the manufacturers of the chemicals. The appellants say that they exercised reasonable care by appointing a skilled manager to operate the vineyards and following reasonable processes to avoid the spray reaching the marron ponds.

7 The appellants admit that the chemicals used in the spraying can be toxic to marron but only at certain concentrations. The appellants do not admit that the prevailing winds carried any of the chemicals to the marron ponds but say that if the chemicals did carry to the marron ponds, the level of chemicals involved was not sufficient to cause harm to the marron.

8 The appellants say that if any loss or damage was caused to the marron farm then it was caused or contributed to by the failure of the respondents to properly manage the marron ponds. They also say that if the loss of the marron was caused or contributed to by a chemical spray drift, the source of that chemical spray drift was not from their property or, alternatively, not solely from their property.

9 The writ of summons in the action was issued on 25 November 2008. The appellants' defence was filed on 18 February 2009. The application for separate trials of liability and quantum was filed by the respondents on 24 March 2009 and listed for hearing before the Master on 26 May 2009.

10 It is not apparent what stage the interlocutory processes had reached by the time the application was heard. It appears from the appeal books that the appellants had served a request for further and better particulars of the statement of claim. All of the requests were directed to the respondents' claims of loss and damage. A response to that request was served by the respondents on 20 April 2009. The response to each of the requests was to the effect that the respondents were not in a position to provide the particulars requested.

11 In support of the application, the respondents filed an affidavit of the second-named respondent, Mr Warren Moore. In that affidavit, Mr Moore identified a number of matters which he said he expected would arise in relation to damages but which were separate and distinct from issues of liability. They included the number of marron in the ponds at the time of each spraying and their value; the world market and prospective growth of the market for marron for human consumption and ornamental purposes, respectively, from 2002; the prices achievable for such marron; the cost to the respondents of replacing the breeding stock and recommencing production (which had not recommenced); and issues in relation to mitigation of damages. It appears from Mr Moore's affidavit that the sale of ornamental marron was likely to be much more profitable than the sale of marron for consumption but depended upon the prospects of genetically modifying the marron.

12 Mr Moore referred in general terms to the nature of the documentary evidence and the expert and other evidence which he considered the respondents would need to adduce in respect of the various issues involved in the quantification of the damages. In some instances, Mr Moore says that the relevant information is contained in the respondents' records. A number of the matters he describes simply as being matters for 'expert and market evidence'. There was no reference to the number of witnesses likely to be called or any description of the likely extent of their evidence, nor was there any indication of the volume of discovered documents which would have to be produced. There was nothing from which any reasonable conclusion could be drawn as to the length of time the case on quantum of damages was likely to take or the cost (including the cost of market and expert evidence) that was likely to be involved. There is also nothing to indicate the time or cost likely to be involved in the case on liability.

13 In opposition to the application, an affidavit was sworn by Mr Clune, a solicitor employed by the appellants' solicitors. Objection was taken at the hearing before the Master to the paragraph of Mr Clune's affidavit in which he deposed that he did not believe there would be any significant saving in time and costs if there was an order for separate trials and in which he described the material which he said led him to that view. The Master declined to strike out that paragraph of the affidavit but clearly attached little weight to it. It is unnecessary on this appeal to determine whether the evidence was inadmissible. If it was admissible, by reason of its generality it was of no real assistance.

14 The Master concluded that there should be separate trials. He delivered very short ex tempore reasons. The Master acknowledged that there was a risk involved in separating the issues but considered that the action was a 'fairly straight forward case' and that 'the loss suffered, at least on one level, is the death of certain marron'. The Master concluded that 'once that point is reached it seems to me that the question of what damage, if any, flows from a finding on liability can be treated separately from the question of liability'.

15 The Master observed that 'a lot of evidence in relation to liability' would be required and that the question as to liability was not straight-forward. He considered that the damages 'would take some proving' as they anticipated losses in the future depending, among other things, on the possibility of genetically modifying the marron and of other markets becoming available. The Master concluded that the expert evidence on damages would delay the trial taking place and lengthen it considerably. He held that the issue as to liability should be tried separately.

16 The appellants appeal against that decision. As the Master's decision was interlocutory, the appellants require leave to appeal. On 26 June 2009, I ordered that the application for leave to appeal be heard with the appeal.

17 The appellants relied on the following grounds of appeal:

1. The Learned Master erred in fact in finding that expert evidence relevant to damage would delay the time to trial and lengthen the trial considerably. That finding was not open on the evidence before the court. The Learned Master should have held that:

(a) there was insufficient evidence to make any finding on the extent to which the time to trial might be delayed, if at all, by determining liability and damages together;

(b) on the evidence before the court, determining liability and damages together would not lengthen the trial considerably.

1. The Learned Master erred in law in failing to accept, further or alternatively, failing to consider or apply, the principle that in negligence cases:

(a) where both liability and quantum is in issue, it will usually be desirable that all of the issues be tried together;

(b) proof of damage is essential to establishing liability, it being the gist of the action, and there is in any case an overlap between damages, on the one hand, and duty of care, standard of care and remoteness, on the other.

18 The appeal raised two issues in substance, namely whether the Master erred in finding that expert evidence as to damages would delay the action getting to trial and lengthen the trial considerably, and whether he erred in the approach he took to whether there should be separate trials on the issues of liability and damages.

19 The respondents' application for separate trials of liability and damages was founded on the proposition that such a course would result in a more efficient and cost-effective resolution of the proceedings. There is no doubt that at a time when the time and cost involved in litigation is a matter of legitimate public concern, it behoves the court to approach each case which comes before it with the object of eliminating any unnecessary delay or cost, and ensuring the efficient and timely resolution of the case, consistent with doing justice to both sides. That is reflected in O 1 r 4A and r 4B of the Rules of the Supreme Court 1971 (WA). But while that will often require a more flexible approach than might have been taken in the past, at the same time it is important that the lessons of the past are not forgotten, and that the court and the parties do not succumb to the immediate attraction of apparently more efficient but less conventional procedures without careful regard to past experience with such procedures.

20 In relation to the present case, experience has shown that the attraction of the separate trial of issues is often illusory; it is a course that often causes the very delay, additional expense and uncertainty of outcome it was intended to avoid. It is self-evident that generally a trial on liability alone will be shorter and less costly than a trial on both liability and damages. But it is equally self-evident that separate trials will not necessarily lead to the overall action being resolved sooner or at a lesser cost. If the plaintiff is successful on liability and it is necessary to have a further trial on the issue of damages, the contrary may well be the case. Separate trials also raise the prospect of separate appeals on the findings on liability and quantum, which, if it occurs, will increase the time and expense involved in the overall action. The vagaries of litigation are such that its course often does not run smoothly, or predictably. An application for the separation of issues is therefore to be approached with some caution. See generally Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1, 55.

21 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: Tepko (55).

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 unforseen 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].

23 Similar views were expressed by Hayne and Callinan JJ in Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317 as follows:

The difficulties of separating questions of liability for negligence from questions of damages are evident. Damage is an essential element of the tort of negligence. Proof of damage is essential to establishing liability. Further, assessing the standard of care to be met, by reference to the degree of probability of damage occurring, and the expense, difficulty and inconvenience of taking alleviating action, will often be assisted by knowing what happened as a result of the alleged negligence. In a case like the present, where the negligence is said to have had financial consequences, knowing the extent of those consequences may be particularly important. Splitting trial of the issues of liability and damage may, therefore, achieve little real saving in time or expense. More significantly, by truncating or abbreviating the evidence led about, and attention given to, questions of damage at the trial of questions of liability, separation of the trial of the issues may distort the determination of questions of liability [142]. (footnotes omitted)

24 In Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180 [436], Callinan J expressed the view that in tort cases in which damage is the gist of the action it will generally be undesirable to order separate trials of liability and damages unless all parties accept that compensable damage has been sustained.

25 In my respectful opinion, the Master erred in the exercise of his discretion in ordering separate trials of the issues of liability and the quantum of damages in the present case. The material before the Master was not capable of establishing that it would be a practical and more efficient and cost-effective course than a trial on all issues.

26 The affidavit of Mr Moore did not provide a basis upon which a proper assessment could be made of the likely length and cost of the trial if both issues were tried together or the time or cost that might be saved if there were separate trials. There was also no evidence upon which any assessment could be made as to the extent, if any, to which the trial of the action might be delayed if the action were to proceed to a trial of all issues. There was not, in my respectful opinion, sufficient before him to enable the Master to conclude that the damages 'would take some proving' or that expert evidence on damages would delay the hearing of the trial and lengthen the trial considerably. While there is certainly some intimation in the affidavit that, at least in Mr Moore's view, proving the quantum of damages will be a substantial undertaking, the high level of generality of Mr Moore's statements simply did not permit any proper assessment to be made of what was likely to be involved.

27 In addition, on the basis of the pleadings it is not at all apparent that the issues of liability and quantum of damages can readily be separated. Proof of damage is an essential element of the tort of negligence, so proof of compensable damage will be necessary to establish liability. The appellants do not admit that their conduct caused any of the damage claimed. On the face of it, there is no clear demarcation between what the respondents must prove on liability and what they must prove on damages. The Master's conclusion that 'the question of what damage, if any, flows from a finding of liability can be treated separately from the question of liability' [emphasis added] overlooks, with respect, the need for the respondents to prove damage as an essential element of their cause of action.

28 I would add that there is a further factor which tends to militate against the order made by the Master. It is a relevant consideration in determining whether or not issues should be tried separately that one course or another may assist in leading to a settlement of the action. In the present case it is not apparent that a settlement of the action is likely to be advanced if the preparation of the case on damages is deferred until some time after a trial on the issue of liability. Given that the damages claim depends to a substantial extent upon expert evidence and documents in the respondents' possession which would only become available to the appellants in the course of the preparation of the damages case, separate trials could have the opposite effect.

29 It is appropriate that there be a grant of leave to appeal. I accept the appellants' contention that there would be substantial injustice if the decision were not reversed. The appellants would be committed to separate trials on liability and damages at a point where it has not been shown that that will result in any significant overall savings in time and costs and where the reverse might well be the case. And as time goes on, it will be a course from which it will be increasingly difficult to shift, or at least to shift without substantial additional cost.

30 It would, of course, be open to either party to apply in the future for separate trials of liability and the quantum of damages if, as the matter has by then unfolded, the clear benefit of taking that course can be demonstrated.

31 It was for those reasons that I considered the appellants should be granted leave to appeal and the appeal should be allowed.