FEDERAL COURT OF AUSTRALIA Nunagin Holdings Pty Ltd v Evertop Investments Pty Ltd (No 2) [2010] FCA 1228 Citation: Nunagin Holdings Pty Ltd v Evertop Investments Pty Ltd (No 2) [2010] FCA 1228 Parties: NUNAGIN HOLDINGS PTY LTD v EVERTOP INVESTMENTS PTY LTD ACN 091 291 and JAMES ALEXANDER KIDD File number: WAD 308 of 2006 Judge: MCKERRACHER J Date of judgment: 10 November 2010 Catchwords: PRACTICE AND PROCEDURE - application for separate determination of liability and damages - general principles - no clear demarcation between liability and quantum on the pleaded case-overlap of evidence Held: application dismissed Legislation: Trade Practices Act 1974 (Cth) ss 51AC, 51AD, 52, 82 Fair Trading Act 1987 (Cth) ss 10, 79(1) Federal Court Rules O 29 r 2 Cases cited: Arnold v Attorney-General (Vic) [1995] FCA 727 CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 EnergyAustralia v Australian Energy Ltd [2001] FCA 1049 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1988) ATPR 40-853 Landsdale Pty Ltd v Moore [2009] WASCA 176 Perre v Apand Pty Ltd (1999) 198 CLR 180 Reading Australia Pty Ltd v Australian Mutual Provident Society (1999) 217 ALR 495 TVW Enterprises Ltd v Duffy & Ors [1985] FCA 109 Date of last submissions: 3 September 2010 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 35 Solicitor for the Applicant: T Carmady of Williams & Hughes Solicitor for the Respondents: A Davidson of Downings Legal IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 308 of 2006 BETWEEN: NUNAGIN HOLDINGS PTY LTD Applicant AND: EVERTOP INVESTMENTS PTY LTD ACN 091 291 First Respondent JAMES ALEXANDER KIDD Second Respondent JUDGE: MCKERRACHER J DATE OF ORDER: 10 November 2010 WHERE MADE: PERTH THE COURT ORDERS THAT: The respondents' motion for separate determination of issues of liability and damages be dismissed. The applicant do re-list the proceeding for directions as to the remaining procedural steps with a view to achieving an early trial date. Costs of the respondents' motion be in the cause. There be liberty to any party to file submissions within 14 days seeking to vary Order No.3, failing which it will stand. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 308 of 2006 BETWEEN: NUNAGIN HOLDINGS PTY LTD Applicant AND: EVERTOP INVESTMENTS PTY LTD ACN 091 291 First Respondent JAMES ALEXANDER KIDD Second Respondent JUDGE: MCKERRACHER J DATE: 10 November 2010 PLACE: PERTH REASONS FOR JUDGMENT INTRODUCTION 1 The respondents seek, with other orders, an order pursuant to O 29 r 2 of the Federal Court Rules (FCR) that issues of liability and quantum be determined separately from and after all other issues in these proceedings. 2 The parties have filed detailed written submissions and affidavits. An unseparated trial on the respondents' estimate could last two weeks on quantum alone, in addition to liability and on the applicant's estimate, in total, as to liability and quantum, eight days. 3 The initial events and alleged breaches are over ten years old. There are, therefore, limitation defences raised. The respondents contend that on the basis of the proposed pleading itself, it is clear that the applicant is out of time and thus liability alone should first be addressed. The applicant, however, proposes to amend to contend that the initial breaches have continued into the period when it is beyond doubt that the claim is brought within time. BACKGROUND 4 In broad terms the applicant pleads in its statement of claim (SOC) the following causes of action: (a) Breach of the Trade Practices Act 1974 (Cth) (TPA) and/or the Fair Trading Act 1987 (Cth) (FTA) in relation to representations said to have been made to the applicant in about January or February and in or about April 1999; (b) Breach of s 51AD of the TPA; (c) Breach of contract; (d) Breach of fiduciary duty and trust; (e) Breach of s 51AC of the TPA 5 The respondents deny breaches but also plead that all of the applicant's claims are statute barred. LEGAL PRINCIPLES 6 Order 29 r 2 FCR enables the Court to make an order, as is sought here, that the issues of liability be heard before, and separately to, the issues of quantum. It provides as follows: 2 Order for decision The Court may make orders for: (a) the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings; and (b) the statement of a case and the question for decision. 7 The test is whether it is 'just and convenient to do so' (Arnold v Attorney-General (Vic) [1995] FCA 727). 8 The principles relevant to the application of O 29 r 2 were set out by Branson J in Reading Australia Pty Ltd v Australian Mutual Provident Society (1999) 217 ALR 495 (at [7]- [9]) where her Honour said: [7] Ordinarily all issues of fact and law in a proceeding will be determined at the one time by the Court following a trial (O32). However, the authorities show that O29 r2 has been relied on to support the making of orders that have modified this general rule in the following ways: (a) by requiring that certain questions, formulated by the order, be decided separately from (and presumably, before) any other questions in the proceeding on the basis of a special case stated in accordance with O50 r1 (see, for example, Chippendale Printing Co Pty Ltd v Commonwealth (1995) 17 ACSR 328); (b) by requiring the determination of a preliminary issue of law in circumstances in which it was unnecessary for any facts to be stated or evidence to be adduced (see, for example, Blurton v Minister for Aboriginal Affairs (1991) 29 FCR 442); (c) by requiring the determination of certain preliminary questions of law as to the competence of the case of the applicant on the basis of certain agreed facts (see, for example, Pritchard v Racecage Pty Ltd (1996) 64 FCR 96 and on appeal, (1997) 72 FCR 203; South Pacific Air Motive Pty Ltd v Magnus (1998) 87 FCR 301); (d) by requiring the separate trial "as a preliminary issue" of certain of the claims made by the applicant (see, for example, Comite Interprofessionnel des Vins des Cotes de Provence v Bryce (1996) 69 FCR 450); (e) by requiring that the question of the respondents' liability be tried separately, and that any question as to the quantum of any damages to be paid by the respondents, or any of them, to the applicants, or as to the taking of any account of the respondents' profits, be tried separately and at a dated (sic-date) to be fixed after the determination of the question of liability (see, for example, Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1985) 10 FCR 567). [8] The principles that govern the circumstances in which an order will be made under O29 r2 are relatively well established. They may be summarised as follows: (a) the term "question" in O29 r1 includes any question or issue of fact or law in a proceeding. The distinction in the rule between an "issue" and a "question" is the distinction between that which, when resolved, will result in an adjudication in favour of one party or the other, being an "issue", and less decisive matters of dispute being "questions" (Landsal Pty Ltd (in liq) v REI Building Society (1993) 4 FCR 421 at 425); (b) a question can be the subject of an order for a separate decision under O29 r2 even though a decision on such a question will not determine any of the parties' rights (Landsal Pty Ltd (in liq) v REI Building Society at 425); (c) however, the judicial determination of a question under O29 r2 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) 198 CLR 334); (d) where the preliminary question is one of mixed fact and law, it is necessary that the question can be precisely formulated and that all of the facts that are on any fairly arguable view relevant to the determination of the question are ascertainable either as facts assumed to be correct for the purposes of the preliminary determination, or as agreed facts or as facts to be judicially determined (Jacobson v Ross [1995] 1 VR 337 at 341, referring to Nissan v Attorney-General [1970] AC 179 at 242-243 per Lord Pearson; Bass v Perpetual Trustee at [53]); (e) care must be taken in utilising the procedure provided for in O29 r1 to avoid the determination of issues not "ripe" for separate and preliminary determination. An issue may not be "ripe" for separate and preliminary determination in this sense where it is simply one of two or more alternative ways in which an applicant frames its case and determination of the issue would leave significant other issues unresolved (CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 per Kirby P at 606); (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 (CBS Productions Pty Ltd v O'Neill per Kirby P at 607); (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 (GMB Research & Development Pty Ltd v The Commonwealth [1997] FCA 934; (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 (GMB Research & Development Pty Ltd v The Commonwealth; Arnold v Attorney-General for Victoria [1995] FCA 727). 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 (GMB Research & Development Pty Ltd v The Commonwealth). [9] Ultimately the issue for the Court to determine when consideration is being given to the making of an order under O29 r2 is whether it is "just and convenient" for the order to be made: Arnold v Attorney-General for the State of Victoria. 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: Dr Martens Australia Pty Ltd v Bata Shoe Company of Australia Pty Ltd (1997) 75 FCR 230. Another class is proceedings in which an application in the nature of a demurrer is appropriately made. An application of this kind assumes the truth of the pleaded facts. In a case in which it is clear that the pleadings contain all of the relevant facts but one party contends that the pleading does not disclose a cause of action, or a defence or a matter of reply, as the case may be, an application in the nature of a demurrer will have obvious utility (Bass v Permanent Trustee Co Ltd at [50]). 9 In EnergyAustralia v Australian Energy Ltd [2001] FCA 1049 (at [7]) Stone J said: I am not convinced that this is a case where separation would have such a benefit. I have a number of concerns but chief among them is that, where there are claims of misleading and deceptive conduct and relief is sought under ss 82 and 87 of the Trade Practices Act 1974 (Cth), it is not possible to separate liability and damage completely; see Reading Australia Pty Ltd v Australian Mutual Provident Society (above) at [12]. 10 More recently, in Landsdale Pty Ltd v Moore [2009] WASCA 176 the Court of Appeal of Western Australia per Newnes JA, with whom Buss JA agreed, (dealing with O 29 which is substantially the same as O 32 r 4 of the Rules of the Supreme Court of Western Australia) stated at [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 at 55. 11 Of particular relevance to the present motion are the following principles: (a) An important consideration is whether 'there is a prospect of saving much more time and expense' by determining a preliminary issue or issues (see TVW Enterprises Ltd v Duffy & Ors [1985] FCA 109 per Toohey J and CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 per Kirby P (at 607)). (b) A further consideration is whether a decision on a preliminary issue or issues may contribute to the settlement of the litigation (see CBS Productions and Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1988) ATPR 40-853). (c) The authorities indicate that courts will be cautious in ordering a split-trial but each case must be considered on its merits, rather than under a blanket approval. The overarching purpose of O 29 and other procedural rules set out in s 37M of Federal Court of Australia Act 1976 (Cth) (FCA) drive the primary objective which is 'to facilitate the just resolution of disputes … as quickly, inexpensively and efficiently as possible'. Basis of the respondents' motion 12 The respondents have adduced affidavit evidence that a trial on liability and quantum would occupy two weeks of hearing time and would be likely to incur costs of $350,000. They contend that if the limited issue of liability were to be determined in their favour, a much longer trial on quantum would be avoided, and there would be no need for any further discovery or for the parties to obtain expert evidence on quantum. 13 A determination of the following questions on liability, on the respondents' argument, have the potential of fulfilling the purpose and objectives of the procedural rules identified in s 37M FCA: (a) Whether the representations were made, and if they were, whether the applicant relied on them in entering into the Agreement. The respondents submit this is a straightforward factual question which directly bears on the claims based on s 52 TPA and s 10 FTA. (b) Whether, if the representations were made, they were 'made in trade or commerce between Australia and places outside Australia or among the States' (the federal features). The respondents submit that this is a short, discrete question which could be decided on the pleadings or with very little evidence. It would determine whether the s 52 TPA claim, the 'Unconscionable Conduct claim', and the Franchise Code of Conduct claim against the second respondent are maintainable at all in respect of the second respondent (Mr Kidd). That is because the applicant relies on the federal features (under s 6(2) TPA) to extend the claim to Mr Kidd, a natural person, not a corporation. (c) Whether all or any part of the claims based on s 52 TPA or s 79(1) FTA are statute barred. The respondents submit that this is an important liability issue. At the very least, the respondents contend that any claim based on damage alleged to have been suffered before 31 October 2010 for the TPA claim and before 31 October 2003 for the FTA claim would be statute barred. To determine that question, the respondents say that it is not necessary for the applicant to give evidence of the loss. It would be sufficient at this stage, the respondents appear to support, for the applicant to identify rather than prove the date or dates on which the loss was suffered so that the Court could rule on the 'limitation issue'. This could substantially limit the issue of quantum, and could in turn 'contribute to a settlement'. 14 The respondents argue that having regard to: (a) The real prospect of a substantial saving in time and cost, if there is a trial on liability alone; (b) The likelihood that a comparatively short trial on liability alone could take place much earlier than a much longer trial on both liability and quantum, and the desirability that litigation on matters alleged to have occurred over 10 years ago be resolved as soon as possible; (c) The lack of any identified support for the applicant's assertion of a 'significant overlap'; (d) The fact that, apart from the factual question of whether the alleged misrepresentations were made, the other issues to be determined - in particular the limitation issue - are essentially questions of law, it is 'just and convenient' to make the separation orders sought. 15 This application is made in the context of further discovery sought by the applicant. The applicant states it has restricted the ambit of discoverable documents for the purposes of the quantum claim to secondary accounting records. The respondents say it is difficult to accurately assess the total costs of providing further discovery of primary records, but it is extremely unlikely that the evidence to prove quantum would be ascertainable from the secondary documents. The respondents say that the primary documents, of which the applicant has reserved the right to request discovery, will be required and will only be available at considerable expense. 16 The respondents accept that one factor that may tell against an order for a separation is where separate trials of liability and quantum may result in 'significant overlap' of the evidence adduced at each of the hearings, as a consequence of calling the same witnesses at both hearings, especially if the credibility of a significant witness for both hearings may be in issue: Reading Australia at [10]. 17 The respondents complain, however, that the applicant does not explain what the significant overlap would be or what witnesses would be required to give evidence at both hearings, apart from the general submission that the issue of damages 'will depend on the evidence of the Applicant'. 18 The respondents contend that the applicant's alleged cause of action accrued at the date of entry into the License Agreement (April 1999) which is therefore the date from which the limitation period runs. In any event, the respondents submit the question of when the alleged losses occurred can be determined without evidence of quantification. In relation to the limitation issue, the respondents submit that whether the claims are statute barred depends on when the cause of action accrued. That is a question of law, determinable on the basis of facts pleaded by the applicant. The respondents say it is not the case that there will be an overlap between the evidence of loss and damage led at the trial of liability, to enable the limitation issues to be determined, and the evidence of loss and damage led at the trial on quantum. It is for the applicant to identify the dates on which the loss was allegedly suffered, and a decision can then be made by the Court whether, as a matter of law, assuming that some loss or damage was in fact suffered on the dates alleged, the applicant's claims (or some of them) are statute barred. 19 The respondents claim that determination of those issues first would assist in narrowing the issues and scope of the evidence, even if there were to be a later trial on quantum. Once the applicant has given evidence of the acts of reliance, based on the 'continuing representations', it would be clear which claims are statute barred and which are not. Applicant's contentions 20 The applicant opposes the order sought. It contends that the determination of the limitation issues raised by the respondents in their defence is likely to involve a significant overlap between the evidence in relation to the issues of quantum and liability. 21 The applicant does not agree with the respondents' estimates of the length of a trial on liability and quantum or the costs likely to be incurred. The applicant is of the opinion that a trial on both issues would last no more than eight days. It argues that the issues raised in relation to quantum have not been demonstrated to be more time consuming than 'would ordinarily be expected in a matter of this nature'. Additionally, the issues in dispute in relation to quantum have not yet been crystallised, and there is no reason why the parties cannot confer generally but particularly in relation to expert evidence. 22 It is the causes of action under the TPA and the FTA where overlap is most likely to occur. In relation to these claims the cause of action accrues when loss or damage is suffered as a result of the contravention. 23 The applicant contends that where, as here, there are claims of misleading and deceptive conduct under the TPA and relief sought under s 82 and s 87, it is not possible to separate liability and damage completely, which tends against the making of an order under O 29 r 2 FCR (see Reading Australia (at [8] to [9]). 24 More specifically, addressing the respondents' limitation point, by the substituted statement of claim, the applicant alleges that it paid sums of money into an advertising fund on an ongoing basis by reason of it being misled into believing (on an ongoing basis) that: (a) All stores contributed equally to the advertising fund; and (b) The second respondent contributed an amount equal to the sum contributed by all the stores. 25 The applicant submits that the questions of: (a) Whether the applicant has suffered loss or damage as a result of the ongoing representations; (b) If so, what is the loss or damage; (c) When the applicant suffered loss or damage as a result of the ongoing representations; (d) Whether such loss or damage is statute barred or not; and (e) Are all questions so integrally connected to the issue of liability that it is not possible to segregate the issue of liability from the issue of loss or damage completely? The Court will need to scrutinise each alleged ongoing representation and its causal connection with loses occasioned to the applicant on an ongoing basis. They are matters that cannot be ignored when determining whether the claims are statute barred. 26 In relation to the claims for unconscionable conduct, the applicant contends that the following issues arise within the context of the pleaded claim, having regard to the statutory criteria enumerated in s 51AC TPA: (a) Whether the applicant was treated by the respondents in any manner inconsistent with the manner in which the respondents treated other 'business consumers'; (b) The extent to which the respondents failed to disclose to the applicant any intended conduct; and (c) The extent to which the respondents acted in good faith. 27 Questions of whether there existed continuing breaches of section s 51AC TPA and whether the applicant suffered loss or damage as a result cannot be determined, the applicant says, in a vacuum without an assessment of the context of 'all the circumstances' including the extent of any disparity in treatment between the applicant and other Jim Kidd stores. Assessment of that disparity necessarily involves scrutiny of what contributions were made to the advertising fund, when such contributions were made, who made them, and why there existed any such disparity. The ambit of that inquiry extends into evidence pertaining to quantum. 28 In short, the applicant submits that is impossible to separate liability and damage completely, particularly where limitation issues are expressly raised. This is therefore not an appropriate case for an order under O 29 FCR. DETERMINATION 29 I am not persuaded that this is a suitable case for separating quantum from liability in this instance. One may readily understand the concern and potential frustration on the part of the respondents in being required to address issues concerning quantum in circumstances where they are confident they can succeed on liability. However, it is not possible to form a view on those matters at this stage and the weight of authority certainly tends to suggest that misrepresentation cases, be they under the TPA, the FTA or even at common law, are not good vehicles for separating liability and quantum. (As to tort, see Perre v Apand Pty Ltd (1999) 198 CLR 180 (at [436] per Callinan J). I do not understand this to be a case in which the respondents are willing to accept that compensable damage has been sustained at a particular date. Indeed, their position is to the contrary. The mere identification of a date for hypothetical purposes would not be sufficient for the purpose of a cause of action under s 52 in order to sustain loss and damage under s 82 TPA. 30 It cannot be said that there is a clear line of demarcation between liability and quantum on the pleaded case. The point of time at which a misrepresentee has suffered compensable loss and damage is often the subject of considerable debate. 31 On the amended pleading, it is asserted that loss and damage as a result of the original misrepresentation has continued to be sustained on an ongoing basis bringing the time at which the cause of action was complete closer to the time of commencement of the proceeding. As observed in EnergyAustralia and in Reading Australia, it is not possible in such claims to separate liability and damage completely. 32 It seems highly likely that, at least to some extent, considering the evidence which would need to be adduced by the parties, there would be an overlap of witnesses and documentary evidence going to liability and quantum. Over and above the additional cost and delay involved in that overlap, there would be further concerns if there were appeals on liability, potentially at least creating a multiplicity of ongoing proceedings and achieving exactly the opposite objective of the statutory purpose underlying s 37M FCA. 33 In all those circumstances, I am not persuaded that I should accede to the respondents' motion to have separate trials on liability and damage. 34 However, again in recognition of the objectives, I would be willing to accommodate early trial dates of the proceedings. Any directions which can, either by consent or by other resolution be fashioned to achieve that objective will be encouraged. I have in mind, as examples, specific directions limiting the amount of discovery which would be required, facilitating conferral in relation to expert evidence on quantum, firming up on a timetable and on procedures to limit the time and cost of trial and orders as to mediation. 35 As to the costs of the motion, although the parties have exchanged quite detailed written submissions and although ultimately the respondents' motion has not succeeded, that, at least, in part was due to a late amendment made by the applicant to plead ongoing damage. In the circumstances, it appears to me that the appropriate costs disposition is that costs be in the cause. The following orders will be made: 1 The respondents' motion for separate determination of issues of liability and damages be dismissed. The applicant do re-list the proceeding for directions as to the remaining procedural steps with a view to achieving an early trial date. Costs of the respondents' motion be in the cause. There be liberty to any party to file submissions within 14 days seeking to vary Order No.3, failing which it will stand. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. Associate: Dated: 10 November 2010