New South Wales Supreme Court CITATION : ABB v Freight Rail [1999] NSWSC 1037 CURRENT JURISDICTION : Equity Division Commercial List FILE NUMBER(S) : 50076/1998 HEARING DATE(S) : 15/10/99 JUDGMENT DATE : 22 October 1999 PARTIES : ABB Engineering Construction Pty Limited - Plaintiff Freight Rail Corporation - Defendant JUDGMENT OF : Rolfe J COUNSEL : Mr E. Lazarakis (Solicitor) - Plaintiff Mr M.J. Heath - Defendant SOLICITORS : Clayton Utz - Plaintiff Andersen Legal - Defendant CATCHWORDS : Consent application, pursuant to Part 31 rule 2, to have issue of liability heard separately and in advance of the issue of damages refused.; Reasons why, in the general run of cases, such applications should, in the exercise of discretion, be refused, explained.; Australian National Industries Limited v Spedley Securities Limited (in liq) (1992) 26 NSWLR considered. DECISION : Application refused. THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST ROLFE J FRIDAY, 22 OCTOBER 1999 50076/1998 - ABB ENGINEERING CONSTRUCTION PTY LIMITED v FREIGHT RAIL CORPORATION JUDGMENT HIS HONOUR: Introduction 1 These proceedings were commenced by a Summons filed on 29 June 1998, which was amended by an Amended Summons filed on 18 December 1998 to which the defendant filed a Defence on 22 January 1999. By a Notice of Motion filed in Court on 24 September 1999 the defendant sought an order, pursuant to Part 31 rule 2, that the hearing of the issue of liability be heard separately from and in advance of that of quantum, to which order the plaintiff consented. The question is whether I should make the order. 2 Part 31 rule 2, provides:- "2. 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) …." 3 In relation to such an application, the authors of Ritchie's "Supreme Court Procedure", at paragraph 31.2.5, state:- "It is a relatively frequent occurrence for questions of liability and damages to be tried separately. This will be appropriate in various instances. For example, separate determination may be ordered where there is a clear line of demarcation between liability and damages issues … . If the assessment of damages is particularly complex separate determination may be appropriate … and this may be the case in personal injury matters where there is an element of uncertainty about the plaintiff's prognosis, which is best resolved by delaying the damages assessment until medical conditions have stabilised … . Even aside from these instances the Court may order separate trial of liability and damages whenever it considers that it is appropriate to do so …." The authors then note that leave is required to appeal from any separate determination of liability issues. 4 Whilst such applications were reasonably frequent in the Commercial Division and the Commercial List in the past, they have become less so because, I am sure, of the Court's reluctance to accede to them, a reluctance stemming from the view that the making of such an order usually results in litigation becoming more and more time consuming, costly and inefficient. My experience has been that the ordering of separate questions is only appropriate and only has a beneficial effect, when there is a discrete question, which will be determinative of the litigation, and the parties agree what judgment will follow from the answering of that question. 5 At the conclusion of submissions I stated that I did not propose to accede to the application, but I reserved my decision so that I could state, I hope, with more precision than an ex tempore judgment delivered in a busy Friday list may have allowed, my reasons for refusing the application. The Issues 6 By its Amended Summons the plaintiff states the "Nature of Dispute" to be:- "In 1995 State Rail Authority of New South Wales ('SRA') called for tenders in relation to the manufacture of coal vehicles. The plaintiff entered into a contract with SRA for the tender process ('the Tender Process Contract'). The plaintiff alleges that SRA, by its conduct, breached the terms of the Tender Process Contract thus causing loss and damage to the plaintiff. The benefit and burden of the Tender Process Contract were transferred from SRA to the defendant with effect from 1 July 1996. The plaintiff alleges that the defendant is liable to compensate the plaintiff for the loss and damage caused by the breaches of the Tender Process Contract." 7 Under the heading "Issues Likely to Arise", it was stated that they were whether SRA breached the terms of the Tender Process Contract; whether the defendant is liable to the plaintiff in respect of any such breaches; and the measure of the plaintiff's loss. 8 It was pleaded that:- (a) SRA called for tenders for the design, manufacture, supply, testing, delivery and placing into service for up to 800 coal vehicles on or about 1 February 1995 and that, prior to the tender closing, the plaintiff lodged a tender in accordance with the specifications; (b) on 12 April 1995 the plaintiff and SRA entered into a contract for the tender; (c) it was a term of that contract that SRA would comply with the New South Wales Government Code of Tendering for the construction industry; with the requirements of the New South Wales Government Code of Practice for the construction industry; and that SRA would be fair to all tenderers and only consider tenders complete in all respects and lodged by the tender closing time, and would engage in the highest standards of ethical behaviour and fair dealing; (d) on or about 24 November 1995 SRA informed the plaintiff that its tender had been unsuccessful and, shortly thereafter, awarded a contract to another party; and (e) SRA breached the Tender Process Contract by entertaining and ultimately accepting a revised proposal from the other tenderer that did not comply with the requirements pleaded; by allowing significant revision of that tender after it was submitted; by inviting the other tenderer, in or about May 1995, to make a further submission for the specification which contained a revised and more favourable door alignment arrangement; by accepting from the other tenderer, in or about June 1995, a major revision to the original tender; and by further accepting from the other tenderer a more detailed design of transfer stores for the coal vehicles the subject of the specification in or about November 1995. 9 It was pleaded that there were a number of implied terms and that the various terms pleaded were breached, whereby the plaintiff lost the opportunity of obtaining the contract for the specification work, that if successful the plaintiff would have made substantial cost savings and profits "further particulars of which will be provided", and that the plaintiff has wasted the costs incurred in tendering for the specification. 10 The Defence, essentially, alleges that there was no contract, but rather, as I infer, an invitation to enter into a contract, and, alternatively, that if there was a contract none of its terms were breached. It was also pleaded that the plaintiff suffered no loss or damage. 11 The issues thus propounded raise an unexceptional case of an allegation by the plaintiff that it entered into a contract with the defendant, which contract the defendant breached in consequence of which the plaintiff suffered damage. The Basis On Which The Order Was Sought 12 It was submitted that the advantages of having liability heard separately from and in advance of damages were, firstly, that in the event of a determination in favour of the defendant, there would be no need for the parties and, more particularly the defendant, to incur the expense of the preparation of a hearing on damages. Secondly, it was submitted that a finding in favour of the plaintiff would allow for any technical matters on damages, such as engineering and/or accounting questions, to be referred to a referee; and that the question of damages could focus with greater precision on the appropriate questions for any expert as to the measure of any damages. The plaintiff, although consenting to the order, maintained that it would be pursuing the claim for damages and, if unsuccessful on the question of liability, would, in all probability, be seeking leave to appeal to the Court of Appeal. 13 It was further submitted that on the face of the evidence served by the plaintiff there did not appear to be any overlapping of witnesses on the issues of liability and damages, such that there may be a prospect of inconsistent findings or difficulty in cross-examining if those issues were heard separately; and that in the event of an appeal, assuming that leave to appeal was granted, the appeal would be limited to the issue of liability "and not complicated by any issues of quantum". 14 The final submission, in paragraph 20, referred to an affidavit of Ms Hayes, which was said to deal with the estimated length and costs of a hearing on liability and quantum. No such affidavit was furnished and, accordingly, the submission was not pressed. Reasons For Refusing The Application 15 The first reason why, in my opinion, the application should be refused is that, as was conceded in argument, there is no guarantee that certain witnesses will not give evidence on the issues of liability and damages. Whilst the plaintiff stated it had filed all its evidence in chief, it did not rule out the possibility that evidence in reply may be filed from a witness going to both issues. In my view, it would require an exceptional case for the Court to order a separate hearing of liability and damages when any witness is likely to give evidence on both issues. The reasons are obvious. A case should be conducted on the basis that the witness is cross-examined on all issues at the same time and in the context of all issues, because his or her evidence on one issue may impact on the acceptability of his or her evidence on the other. If there is not adherence to this practice difficult questions arise for the Court as to the extent to which cross-examination on the matter not being litigated should be allowed, and for the cross-examiner as to how far matters not in issue can and/or should be pursued, and how that evidence should be treated in the overall assessment of the witness. In my opinion, the cross-examiner should not be precluded, particularly where credit is in issue, from cross-examining on the issue of damages merely because the only matter being litigated is liability. That not only causes difficulties for the cross-examiner, but also for the Court. The Court may be prevented from making a fully informed assessment of the credibility of the witness if the cross-examination is truncated, or if certain contradictory material cannot be led because the cross-examination goes only to credit and not to an issue. 16 A further difficulty, in these circumstances, is that if a Judge hearing the issue of liability makes any finding as to the credit of a witness, who is subsequently to give evidence in the event of the question of damages being litigated, that Judge will, in all probability, be disqualified from hearing the matter and, accordingly, the store of knowledge he or she has obtained from the initial hearing is lost, as is the impact of the evidence upon him or her: Australian National Industries Limited v Spedley Securities Limited (In Liquidation) (1992) 26 NSWLR 411. The finding may not necessarily have to be an adverse one to have this result. This is but one consequence, which leads to an inefficient use of the Court's and the parties' time and resources. 17 The next reason why I do not consider it appropriate to make the order is that I proceed on the assumption that the plaintiff, in bringing the litigation, believes it is entitled to damages. In the present case that has been confirmed. Two matters flow from that. Firstly, if the plaintiff does not succeed on the issue of liability there is a strong likelihood that an application will be made for leave to appeal and, if that application and the appeal are successful, the issue of damages will have to be addressed, possibly, in this case, but probably in most, by another Judge. Once the issue of damages is decided another application can be made for leave to appeal, thus prolonging the litigation even further. I have left out of this equation any application for special leave to appeal to the High Court. I see nothing efficient, in the administration of justice, in the sense of bringing about finality to litigation, or in the utilisation of the time and resources available to the Court and the parties, to have, in the general run of case, four potential hearings. In fact it seems to me an entirely inefficient use of such time and resources. It also means that the time during which the litigation is on foot is lengthened to a substantial extent. This is not in the interests of the Court or the parties. A real objective of the Commercial List is to have cases resolved quickly, so that parties will know what their respective financial positions are. The presently suggested approach thwarts that aim, with the resulting financial detriment to the parties. 18 Secondly, the costs of proving damages, on the assumption that the defendant is liable, will have to be incurred in any event. A plaintiff, bringing forward a case bona fide, must confront that, as must a defendant facing such a case. To suggest that the costs will be saved if the issue of liability is determined first is to make the pessimistic assumption that the plaintiff will not succeed on it at first instance or on appeal. 19 My next reason is that until there has been an assessment by the parties of the amount to which each says the plaintiff, if successful on the issue of liability, would be entitled, there can be no meaningful consideration by the parties of what the financial stake in issue is. In those circumstances, the parties are unable to give proper thought to an appropriate commercial settlement, consideration of which will be dependent not only on the amount involved, but also on the risk inherent in the issue of liability. In my opinion, it is highly desirable for parties involved in commercial litigation to focus on the whole case in determining how it can best be resolved. 20 Finally, I consider that in most cases, (and this does not seem an exceptional one), a Judge at first instance should decide as many issues as possible, so that in the event of an appeal the Court of Appeal will be in a position to dispose of the matter finally, if it seems appropriate to that Court to do so. 21 All of these matters, taken in isolation or in the aggregate, constitute compelling reasons why, at least in the normal run of case of which I think this is one, there should be no separation of issues. I have expressed similar views on a number of previous occasions: e.g. McLernon Group (Insurances) v Kelly & Ors (1 October 1999, unreported). Conclusions 22 As the plaintiff consented to the making of the order, the fact that the defendant has failed should not mean, in my opinion, that the proper exercise of discretion demands that the defendant pays the plaintiff's costs. Rather there should be no order as to costs. Orders 23 I order that the Notice of Motion filed on 24 September 1999 be dismissed. I make no order as to costs. ********** Last Modified: 10/25/1999 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.