Nichols Constructions Pty Limited v Elphick

Grounds on which the order is opposed

Mrs Elphick opposed the making of an order for the decision of any separate question.
By way of general submission, she noted that the usual position is that all issues should be determined in the one trial and that the ordering of questions for a separate determination remains "an exceptional course", citing Commonwealth Bank of Australia v Clune [2008] NSWSC 1125 per Johnson J at [6]. If is informative to consider the relevant passage in full: It has been observed that, since the Civil Procedure Act 2005, the Court should take a more interventionist role in identifying and separating important issues which can resolve significant parts of litigation expeditiously: Integral Home Loans Pty Limited v Interstar Wholesale Finance Pty Limited [2006] NSWSC 1464 at [6]. Although trial courts will probably be more disposed nowadays to order separate questions than they might have been in the past, it remains the case that separate determination is an exceptional course to be contrasted with the ordinary course of deciding a case in its totality: Street v Luna Park Sydney Pty Limited [2007] NSWSC 697 at [5].
Importantly, it is clear that his Honour was not purporting to state a qualification on the broad discretionary power conferred by r 28.2, but only to observe that the separate decision of questions is the exceptional case rather than the norm. In the portion of the decision in Integral Home Loans Pty Limited v Interstar Wholesale Finance Pty Limited [2006] NSWSC 1464 cited, Brereton J said at [6]: While much has been said against the resolution of separate questions in Courts of high authority, nonetheless, since the (NSW) Civil Procedure Act 2005, it is my view that the Court should take a more interventionist role in identifying and separating important issues which can resolve significant parts of the litigation expeditiously.
I would respectfully share that view.
Mrs Elphick further submitted (with underlining) that a separation of questions should only occur in the "clearest of cases" or "when their utility, economy, and fairness to the parties are beyond question". The submission was put as a statement of the law on the authority of the decisions of the High Court in, respectively, Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 533 and Tepco Pty Ltd v The Water Board (2001) 206 CLR 1 at [170] per Kirby and Callinan JJ.
Wardley was not concerned with the circumstances in which the decision of separate questions should be ordered. The decision under appeal was an interlocutory judgment in respect of an amendment to a statement of claim. The amendment had been struck out on the basis that it pleaded a cause of action outside the limitation period. In the remarks of the plurality cited by Mrs Elphick, their Honours expressed the strong view that it is undesirable to decide limitation questions of the kind there under consideration in interlocutory proceedings, "except in the clearest of cases".
Mrs Elphick's reference to that decision in the present context was explained by a footnote citation of the decision of Button J in CH v Bermingham [2013] NSWSC 1218. That was a case in which the defendants sought the decision of a limitation question as a separate question. His Honour said at [26]: "in Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 533, the High Court emphasised that limitation questions should not be decided in interlocutory proceedings, "except in the clearest of cases". Although the cause of action and subject matter in that case were markedly different from those here, the principle is one of general application".
The burden of the submission was that, taken together, Wardley and CH v Bermingham provide authority for the existence of a principle that the decision of a separate question should only be ordered in the "clearest of cases". That is not what those cases say; the submission overlooks the distinction between an interlocutory decision and the decision of a separate question, not to mention the fact that each case was concerned specifically with limitation questions. With great respect to the author of the submission, whose argument was earnest and comprehensive, it is dangerous to treat a descriptive phrase used in a specific context as a statement of principle of general application. It is not even clear to me what "the clearest of cases" means. Rule 28.2 does not articulate any such qualification of the power to order the separate decision of any question.
Tepko was a case involving the determination of a separate question as to whether the Water Board owed a duty of care to the plaintiffs. The remarks in the dissenting judgment of Kirby and Callinan JJ cited by Mrs Elphick emphasise "the difficulties that can be caused when that course is adopted". Their Honours would have held that a duty of care was owed; the majority held that the Water Board owed no duty (arguably vindicating the approach taken). I would nonetheless accept that great care must be taken when an application seeks to separate questions of duty and breach, or breach and damages; the risk that the issues will prove inappropriate for separation is manifest and must be considered closely: New South Wales v Lepore [2003] HCA 4; 212 CLR 511 at 575, [177] per Gummow and Hayne JJ.
The need for a careful approach is recognised in many authorities. A thorough and helpful survey is contained in Southwell v Bennett at [15], as follows: 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: 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. 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]. 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. 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]. 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. 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. 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. 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. 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]. 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). 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. Often, a separate question is heard on the basis of: agreed statements of fact; a narrow point to be determined; and 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). Factors that tend to support the making of an order, include that the separate determination of the question may: 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; contribute to the settlement of the litigation (CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 602 per Kirby P at 607). 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. 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. 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. 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. Each case will have its own dynamics that dictate the relative importance of various factors to be considered in exercising the discretion conferred. 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.
Mrs Elphick identified three specific factors militating against the making of an order. First, it was submitted that there is a real possibility of different assessments of credibility by different judicial officers, since Mr Nichols, Mr Elphick and Mrs Elphick are all likely to be required to give evidence on the questions proposed for separate decision and on the earthworks issues. Secondly, it was submitted that there is a real possibility of overlapping issues and evidence in the two proceedings. The third was the submission which I have already addressed as to whether the hearing will be delayed or involve significant cost if the order is not made.
I have given close consideration to the specific concerns outlined in the plaintiff's written submissions. Two issues are of particular concern. The first is that it does seem likely that, if the order is made, Mr Nichols, Mr Elphick and Mrs Elphick will each have to give evidence twice. While that is undoubtedly a factor militating against making the order, I do not think it is necessarily determinative. Courts can and sometimes do deal with such complexities, perhaps more commonly in criminal proceedings (such as when trials of multiple offences or multiple offenders are split or an offender gives evidence at trial and again on sentence) but not exclusively. There is a logical division in the issues to which the witnesses' evidence would be addressed in the present case; the issues for the proposed expedited hearing are concerned with events leading up to the making of the loan; the earthworks issues concern the period after the loan was made.
The appropriateness of ordering a course which could see the three principal witnesses give evidence twice must be assessed having due regard to the unique circumstances of this case. The earthworks issues raised in the cross claim introduce what is, in effect, a large building case relating to a development in another state. This is not a case like Lepore where the content of any duty of care was uncertain and the issues of duty, breach and damage were inherently likely to inform each other. The duty alleged in the present case ("to use all reasonable endeavours to carry out the subdivision work with reasonable care and skill and in a proper and workmanlike manner to ensure that the sales and construction amounts identified in the spreadsheet were achieved") is one of relatively straightforward content; the complexity lies, rather, in determining whether such a duty arose (by agreement or at common law) in the case of a lender/mortgagee so as to qualify the operation of a clear written loan agreement.
The second issue that concerns me is the risk adverted to in a number of the cases summarised in Southwell v Bennett that the apparent attraction of the course proposed may prove illusory and that the issues may be more complex than they were made to sound by the compelling submissions put on behalf of Nichols Constructions.
Whilst these words may return to haunt me, a careful consideration of the pleadings has persuaded me that this is a case which warrants the "interventionist approach" commended by Brereton J in Integral Home Loans of "identifying and separating important issues which can resolve significant parts of the litigation expeditiously". The prospect of an ambitious claim in tort being litigated on the purse of the mortgagee as alleged tortfeasor did not arise in Tepko or Lepore. As noted by senior counsel for Nichols Constructions, there is no perfect course; the mandate of the Civil Procedure Act is to seek to achieve the least unhappy course in the face of difficult, competing considerations. In my view, the course proposed by Nichols Constructions accords with the dictates of justice in this case.
For those reasons, I have determined that the order sought by Nichols Constructions should be made.
As to the application for expedition, the degree of expedition that may be appropriate will turn, to an extent, on the estimate for the hearing. A tentative estimate was suggested during argument but it was one which may warrant closer examination. It will be necessary to hear the parties further on that question.

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