Conveyancing - Boundaries between properties - Existence of binding agreement - Damages - Specific performance - Equitable damages

Rules of the Supreme Court 1971 (WA), O 1 r 4B, O 32 r 4

The trial should deal with all issues except damages

City of Swan v Lehman Brothers Australia Ltd [2009] FCA 784; (2009) 73 ACSR 86

Landsdale Pty Ltd v Moore [2009] WASCA 176

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

1 LE MIERE J: Seven Cranford Avenue (Lot 1) and 61 Beamish Avenue (Lot 2) are units forming a duplex on the corner of Beamish and Cranford Avenues, Brentwood. The defendant is the registered proprietor of Lot 1. Biagio Secola and Antonino Secola are directors of the second plaintiff, Prima Homes, a building company.

2 The plaintiffs allege that on or about 1 February 2007 Biagio Secola on behalf of the first plaintiff, Karina Secola, and Prima Homes made an oral agreement with the defendant that upon Karina Secola acquiring Lot 2, the defendant and Prima Homes would do all things required to realign the boundary between the two blocks so that the realigned boundary was a straight line between two specified points (Realigned Boundary). The defendant admits that there were discussions between her and Biagio Secola and Antonino Secola but denies that any binding agreement was made.

3 The plaintiffs say that Karina Secola and Prima Homes, by its director Antonino Secola, orally agreed on 1 February 2007 that Karina Secola would offer to purchase Lot 2 on trust for Prima Homes and that she would deal with Lot 2 as directed by Prima Homes. The plaintiffs say, but the defendant denies, that the plaintiffs and the defendant agreed on or around 9 February 2007 that the titles to Lots 1 and 2 would be converted from built strata to strata survey. Karina Secola purchased Lot 2.

4 The plaintiffs say that the defendant purported to repudiate the agreement but the plaintiffs did not accept the repudiation and elected to treat the agreement as being on foot. The defendant says there was no agreement to repudiate. The plaintiffs claim specific performance of the alleged agreement together with damages or alternatively damages in equity in lieu of orders for specific performance.

5 On 14 April 2009 Karina Secola lodged a caveat that prevents dealings with Lot 1 except for dealings which are expressed to be subject to Ms Secola's claim that she is entitled to obtain specific performance of the alleged agreement. The defendant says that Biagio Secola engaged in conduct on behalf of Prima Homes or alternatively as agent of Ms Secola and engaged in misleading or deceptive conduct. The defendant alleges that Biagio Secola represented to the defendant that the boundary Prima Homes was proposing would not impinge on, or pass through, the defendant's residence whereas the Realigned Boundary, which the plaintiffs seek to enforce by the alleged agreement, would impinge on or pass through the defendant's residence. The defendant says that she participated in the discussions with Biagio Secola and Antonino Secola in reliance on Biagio Secola's misleading conduct. The defendant further says that she would not have engaged in the conduct relied upon by the plaintiffs as demonstrating her entering into the alleged agreement (if, which she denies, she engaged in such conduct) but for her reliance upon Biagio Secola's representations. The defendant says that she has suffered loss and damage arising from the restriction in her ability to use and enjoy, develop, refinance or sell Lot 1 which was exacerbated by the lodgement of the caveat and she has suffered loss in the form of legal costs and out of pocket expenses. The defendant claims a declaration that there is no contract between her and the plaintiffs or alternatively a declaration that there is no enforceable contract. Further, or alternatively, she claims damages. The defendant seeks the removal of the caveat.

6 The defendant now applies for a separate trial of the issues of liability.

7 Order 32 r 4 of the Rules of the Supreme Court 1971 (WA) provides that the court may order that any question or issue arising in a matter be tried separately from any other question or issue whether before or after the trial or further trial of the proceedings.

8 Whether an order for the separate trial of issues of liability should be ordered is a matter for the court's discretion. The court should approach the separate trial of issues with caution: Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1. As a general rule the starting point is that all issues of fact and law should be determined at the one time: City of Swan v Lehman Brothers Australia Ltd [2009] FCA 784; (2009) 73 ACSR 86 (Rares J) [27].

9 The court must manage and supervise this action in accordance with the system of positive case flow management with the object, amongst other things, of:

(a) promoting the just determination of litigation;

(b) disposing efficiently of the business of the court;

(d) facilitating the timely disposal of business;

(e) ensuring the procedure applicable and the costs of the procedure to the parties are proportionate to the value, importance and complexity of the subject matter in dispute; and

(f) that the procedure applicable, and the costs of the procedure to the parties, are proportionate to the financial position of each party: O 1 r 4B(1).

10 The factual issues in the liability case relate to the events of January 2007 to late February or early March 2007. They involve what was said in, and done in relation to, conversations principally involving the defendant and her husband, and Biagio Secola and Antonino Secola. The witnesses who would be likely to be called in relation to the factual issues include those people together with Ms Secola, a real estate agent who arranged the sale of Lot 2, the plaintiffs' solicitor, the plaintiffs' accountant who arranged the trust and a surveyor. Having regard to the parties' estimates, the evidence of these matters is likely to take six to seven trial days.

11 The defendant says, and I accept, that there are notionally three damages cases in addition to the liability issues. The defendant says that it is practical to save all or most of the eight to thirteen trial days that would otherwise be spent hearing the three damages' cases when only one case at most needs to be determined. The parties will not know which damages case must be determined until the court has determined the liability issues and whether it will exercise the specific performance remedy.

12 Counsel for the defendant says the action comprises of three different damages cases depending on which scenario or finding is made in the main action and counterclaim. The first is the plaintiff's claim for damages in addition to specific performance, in the event that the plaintiffs are successful in establishing that there was an agreement and that it was enforceable despite the lack of writing and the court is prepared to compel the defendant to participate in the proposed development including demolishing her house (the specific performance supplementary damages case). The second is the plaintiff's claim for damages in lieu of specific performance in the event that the plaintiffs are successful in establishing that there was an agreement and that it was enforceable despite the lack of writing but the court is not prepared to compel the defendant to participate in the proposed development (no specific performance damages case). The third is the defendant's counterclaim for compensation and damages for loss of the ability to sell Lot 1 or to use it to raise finance until the proceedings were resolved in her favour and the caveat withdrawn (counterclaim damages case). The defendant says, and I accept, it is likely that only one of the above three damages cases will need to be tried once the court makes its findings on whether the plaintiffs' case on liability succeeds and if so whether the court should award specific performance or whether the counterclaim succeeds.

13 The defendant submits that time and costs can be saved by splitting the trial between liability and damages. Splitting the trial will save both the preparation time and trial time and cost of one or two assessments of damages. The defendant estimates that the preparation and trial time for each of the damages cases will be:

Counsel for the defendant, who is also the solicitor with the conduct of the matter, has sworn that she has considered whether to reduce the total for any overlap between the damages cases but considers that the saving from overlap would be minimal due to different assumptions involved in the different cases.

14 The defendant submits that it is in the interests of justice that there be a separate trial on the issue of liability. Counsel submits that the amount in issue represents all or a substantial part of the defendant's life savings from her work as a primary school teacher and given this she will need to defend the action with the utmost thoroughness. The defendant has modest means and her counsel submits that she should not be expected to deal with a complicated loss of profits and valuation case, among other issues, before it is established that there is any liability to the plaintiffs. The defendant has the means to defend a liability trial with the assistance of her solicitors not charging except out of any costs orders made in her favour but the position is uncertain if all issues are tried together. The defendant submits it is unfair to require her to incur costs that she cannot afford when a suitable option is available which enables the issues to be more efficiently dealt with. The defendant submits that splitting the trial saves trial time of up to 8 to 13 days.

15 The plaintiff opposes the splitting of the trial on a number of grounds. First, the plaintiff says that the preparation time and trial time that would be saved by trying one of the damages cases rather than all three is not as great as the defendant estimates. There is room for argument about that. However, I am satisfied that a significant amount of preparation time and trial time, and therefore costs, would be saved by trying liability and damages separately.

16 The plaintiff submits that the division of issues between liability issues and damages issues is not straightforward. In estimating the time to be taken on the trying of different issues the defendant's solicitor does not list as a liability issue the question of whether the Realigned Boundary could have been put in place. Counsel for the plaintiff says that the defence gives rise to two distinct issues concerning planning approvals. One is as to whether or not the approvals could have been obtained and the second is how long would it have taken. Counsel for the plaintiff says that if the approvals could not have been obtained then the plaintiff's claim fails at the outset - the whole scheme could never have succeeded. However, the second aspect of this matter is how long it would have taken to obtain the approvals. Counsel for the plaintiff says that is really a damages issue. Counsel for the plaintiffs concedes that if the issue concerning planning approvals is tried as part of their liability issues then that would not add significantly to the length of trial estimated by the defendant.

17 The defendant says, and I accept, that the case should not proceed in the way outlined by the plaintiffs. The statement of claim pleads relevantly that the alleged agreement was that Ms Secola and the defendant would take all such steps as were necessary to convert the existing built strata and passing all necessary strata company resolutions so that the new titles for the defendant's land and the adjoining land would include the Realigned Boundary. It is that alleged agreement of which the plaintiffs seek specific performance. Both parties accept that for the existing built strata to be converted to strata survey and for new titles to issue then the requisite planning approvals would have to be obtained and that they might have been able to be obtained. However, the probability of them being obtained is not relevant to determining liability.

18 Counsel for the plaintiffs submitted that the issues of liability and damages should not be tried separately because questions of credibility will arise in the trial of each and splitting the trial will give rise to undesirable features. First, the trial judge may make findings of credibility in relation to a witness giving evidence on the liability issues and then form a different view of the credibility of the same witness after that witness has given evidence on the damages issues. Secondly, there would inevitably be a delay between the trial of liability issues and damages issues and the trial judge's recollection of his or her impressions of the credibility of a witness who gave evidence on liability issues will have faded when the same witness gives evidence in relation to the damages issues.

19 The defendant makes two answers to the plaintiffs' submissions concerning credibility. First, the defendant submits that it is probable that if the plaintiffs succeeded on liability it is likely that only Biagio Secola and Antonino Secola would give evidence on both liability and damages issues. Secondly, if the defendants succeeded on the issue of liability then it is likely that only the defendant and her husband would be witnesses on both the liability and damages issues. Further, counsel submitted it is 'a stretch to say that because the defendant has brought a counterclaim, the plaintiff should be entitled to have any findings on credit in the counterclaim affect its own liability case'. In the end, I do not place any great weight on the plaintiffs' submissions concerning witnesses who would have to give evidence twice and any credibility issues that arise. So far as inconvenience is concerned, the witnesses who are likely to have to give evidence twice are Biagio Secola and Antonino Secola, who are directors of the second plaintiff, and the defendant and her husband. Those persons all have an interest in the action. I do not place any significant weight on the plaintiffs' submissions concerning findings on credibility.

20 As I have said, the court must approach the separate trial of issues with caution. The court must approach each case 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: O 1 r 4A. The court must also consider the prospect of the final resolution of the action being delayed by separate trials and also the prospect of separate appeals on the findings of liability and quantum, which, if it occurs, will increase the time and expense involved in the action: Landsdale Pty Ltd v Moore [2009] WASCA 176. 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: Landsdale Pty Ltd v Moore [22].

21 I find that splitting the trial is likely to produce significant savings in the preparation and trial time and therefore the costs to the parties. There are no substantial practical problems to the splitting of the trial. This is not, for example, a tort case where damages are an element of the cause of action. In this case there is a clear line of demarcation between liability issues and damages issues and the determination of liability separate from damages is likely to result in a substantial saving in time, inconvenience and expense. I find that it is just and convenient for the issues of liability and damages to be tried separately. The trial of the action should deal with all issues except damages in the claim and counterclaim which should be assessed separately after determination of the other issues.