Lifeplan Australia Friendly Society Ltd v Woff

LEGAL PRINCIPLES 6 The power to order the separate determination of liability and quantum involves the exercise of a broad discretion: Liberty Financial Pty Ltd v Scott [2003] FCA 226 [41]. The proper test to be applied is whether it would be just and convenient to order a split trial: Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718, 217 ALR 495 (Reading Australia) at [9]. 7 The matters generally governing the Court's exercise of its discretion to order a split trial were summarised by Branson J in Reading Australia at [8]. In summarising the factors tending to support or tell against making an order under the former Federal Court Rules, Branson J stated: (f) factors which tend to support the making of an order under O29 r2 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 action; or (ii) contribute to the settlement of the litigation; (g) factors which tell against the making of an order under O29 r2 include that the separate determination of the question may - (i) give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of trial; (ii) result in 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. This factor will be of particular significance if the Court may be required to form a view as to the credibility of witnesses who may give evidence at both stages of the hearing of the proceeding; or (iii) prolong rather than shorten the litigation. (References omitted.) 8 Those principles are applicable to r 30.01: see Graham's Factree Pty Ltd v Oak Enterprises (No 1) [2012] FCA 1033 at [8]. 9 Lifeplan and FPM submitted that it is the usual practice to allow for the separate trial of quantum and liability in intellectual property cases. In Reading Australia Branson J at [9] relevantly stated: There are classes of proceedings in which it is commonly recognised that it is just and convenient for an order under O29 r2 to be made. One such class is proceedings concerning intellectual property rights where an applicant can not be compelled to make an election as between damages and an account of profits at least until all of the evidence has been received so that, if an order has not been made separating the determination of the issues of liability and relief, the parties will have to call evidence to deal with both damages and an account of profits. (References omitted.) 10 This does not displace the general rule that all issues of liability and quantum should be dealt with in a single trial but simply reflects the justice and convenience which may apply to many cases concerning intellectual property rights: Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130, 141-2. Caution regarding the ordering of split trials was expressed in Tepko Pty Ltd v Water Board (2001) 206 CLR 1 by Kirby and Callinan JJ at 55: "[s]ingle issue trials should, in our opinion, only be embarked upon when their utility, economy and fairness to the parties are beyond question." The onus is on the applicants to show why there should be a departure from conducting a single trial: Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215 [7]. Whether it is just and convenient to order the split trial will depend upon the nature of the case and the particular circumstances relevant to it: Fleming's Nurseries Pty Ltd v Hannaford [2008] FCA 591 at [17]. A matter should not be separated for preliminary hearing unless the matter is "ripe", namely "where it is a central issue in contention between the parties, the resolution of which will either obviate the necessity of litigation altogether or substantially narrow the field of controversy": CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 600 at 606 per Kirby P.

CONSIDERATION 11 Lifeplan and FPM submit that they are prepared to run their case on the question of liability, and that factually and legally, the question of liability will be straightforward and should be dealt with in less than five hearing days. They submit that questions of quantum and relief will require greatly expanded disclosure and expert and lay evidence, resulting in significant costs and delays. They say that if they cannot establish liability, the proceeding will be finalised without the need for such evidence. This will obviously result in a significant cost saving to the parties. 12 An additional reason put forward by Lifeplan and FPM is that they intend to seek public findings by the Court regarding Mr Woff and Mr Corby's breaches of their duties to the applicants, and that subsequent to the resolution of the issue of liability; the prospects of mediating the matter will be significantly improved. 13 The respondents submit that the principal problem with a split trial is that there is an inevitable overlap between the issues concerning any breach of duty and any loss that might flow from them. This, the respondents say, would result in an overlap between the evidence required to be adduced at each stage of the trial: see Liberty Financial Pty Ltd v Scott [2003] FCA 226 at [12]. 14 The respondents submit that, contrary to the applicants' submissions, all but one of the persons provisionally listed as proposed witnesses would be expected to give evidence which would bear on liability as well as on quantum. In addition to Mr Woff and Mr Corby, and also Ms Alisha Nee who was also an employee of Lifeplan, the respondents propose to rely upon evidence from five other witnesses who are either the proprietors, chief executive officers or owners of five separate funeral homes. The respondents say that these five witnesses will give evidence of their dissatisfaction with Lifeplan; that neither Mr Woff nor Mr Corby had approached them prior to the end of their employment with Lifeplan and/or that the text in the Forester/FPA product disclosure and marketing and administration documents did not influence their decision to support the products and services. 15 The respondents submit that the connection between the nature of any breach of duty and how (if at all) it has affected the applicants' businesses are inextricably entwined as an important part of the respondents' defence is that any loss which the applicants have suffered has been caused by the departure of clients of the applicants who were dissatisfied with the applicants' product and its performance. They say that this is demonstrated through the "prism of the allegations of breach of fiduciary and other duties" in that the respondents may resist a finding that they have breached their fiduciary duty if the contended fiduciary breaches had no operative part in the gaining of any benefit: Re Property Force Consultancy Pty Ltd (in liq) [1997] 1 Qd R 300. Any benefit had by the respondents, they submit, was as a result of Lifeplan's own inadequate performance and product. 16 The relief claimed by the applicants includes declaratory orders that Mr Woff and Mr Corby have breached their duties, injunctive relief restraining the use of the confidential information and copyright information, and compensatory relief either by an account of profits or by equitable and/or statutory compensation, and/or by an order that the business of FPA is held on trust for the applicants. 17 I can understand why the applicants contend that there should be a separate hearing on the issue of liability only. However, in this particular matter, I do not think that that is appropriate. On the material there is a real prospect that the credibility of certain participants in the process, in particular Mr Woff and Mr Corby, will need to be addressed. If liability and relief are separately heard, an adverse finding against them or either of them on credibility in a hearing on the issue of liability only would make it very difficult to then fairly determine the reliability of any evidence they give on the issues of relief. Moreover, in this particular matter, the respondents have indicated that they propose to dispute that any breaches of duties on the part of either Mr Woff or Mr Corby have caused any detriment at all to the applicants. That is a high position to take (assuming that there is or are any breach or breaches of duty) but it is spelled out in the submissions on behalf of the respondents. The fact that that position has been taken, however, further indicates the desirability of not separating the issues of liability and relief. I am not to be taken as accepting the proposition of law, even if the respondents ultimately can prove that any and all detriment to the applicants' businesses following the departure of Mr Woff and Mr Corby was unrelated to their (alleged) breaches of duty. But, the proposition having been made, it seems to me that it would not be just and convenient to separate the issue of liability from the issue of remedies (if liability is established) in a way which precludes the respondents from attempting to prove the proposition referred to, and if their evidence on that proposition is adduced there is then such an overlap between liability and causation of loss that - at least putting aside any matters of detailed calculation - the issue of the entitlement of the applicants to the declaratory and injunctive relief they seek and in general terms to either damages or an account of profits (at a sufficient level of detail for the applicants to make an informed choice about the preferred remedy) should be heard at the same time. 18 I have had regard to the efficiency of the conduct of the hearing in that light. I suspect that the applicants' evidence on relief will, in the first place, be relatively straightforward. However, there is likely to be an overlap of the evidence which the respondents adduce, particularly through Mr Woff and Mr Corby, on matters of liability and relief. The hearing of issues of both liability and the nature of relief will avoid risk of duplication of evidence and so the potential prolongation of the ultimate hearing and consequential expense. In this matter, I think there are also some potential efficiencies to be achieved by hearing the issues of liability and relief together. Contrary to the applicant's expectation, in view of the position taken by the respondents in their submissions, a hearing of the issue of liability only would not be as likely to result in resolution of the issues of relief (assuming the applicants succeed) as in other cases. In fact, findings (if they are made) that the respondents have breached their duties as alleged, and that the breaches have caused detriment to the applicants and as to the general nature of that detriment would be more likely to result in an outcome which might then be amenable to informal qualification by agreement. Such findings would include those relating to the respondents' assertion that in fact any breaches of duty by Mr Woff and Mr Corby have not caused any detriment to the applicants. The findings on those matters would also indicate whether the declaratory and injunctive relief sought should be granted. 19 I have endeavoured to leave open the question whether the hearing should proceed to the fully detailed evidence as to any losses referred by the applicants if they succeed generally in their claim. I do not understand sufficiently the nature of the evidence to determine whether there is any scope for that type of issue to be isolated and addressed later. Sometimes, such quantification is made by an inquiry and account or by an independent report to the Court. It may not be practicable to adopt any such option. As I have indicated, I think the evidence should extend at least to the point where the applicants, if they generally succeed, should be required to decide whether to seek damages or an account of profits. To make that point, there may be no merit then in stopping short of calling all the evidence proposed by the parties on the issue of relief generally. I simply leave open that possible option in case the applicants (or the respondents) wish later to pursue it. 20 For those reasons, I do not propose to make an order in the terms sought by the applicants. 21 Regrettably, the reasons for this ruling have been somewhat delayed. In the meantime, no doubt the parties have progressed their preparation for trial, and the Court is in a position to conduct a hearing early in the proximate future. I decline to make an order for the separate hearing of the issues of liability and relief. As I have foreshadowed, there may be particular issues as to the quantification of any compensation which might separately be referred for enquiry, or deferred for further evidence. 22 I will hear the parties in the light of this ruling to set a timetable for the hearing and determination of the issues generally. I indicate that, presently in my view, the issues are now sufficiently explained by the documents to date that I anticipate the future course of the proceeding will be for there to be an exchange of proposed evidence on all issues and an early hearing date. The parties should be able to agree on the preparation of a common book of documents (with issues as to admissibility of documents being addressed during the hearing). 23 The costs of this application are reserved and will be further considered when the result of the hearing is known. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.