New South Wales Supreme Court CITATION : The Owners Strata Plan 50946 v Multiplex Constructions (NSW) Pty Ltd & Ors [2007] NSWSC 1308 HEARING DATE(S) : 16/11/07 JUDGMENT DATE : 19 November 2007 JURISDICTION : Equity Division Technology and Construction List JUDGMENT OF : Einstein J DECISION : Application for separate question order dismissed. CATCHWORDS : Practice and Procedure - Separate question orders - Principles - Application of principles LEGISLATION CITED : Civil Procedure Act 2005 (NSW) Trade Practices Act 1974 (Cth) ABB v Freight Rail [1999] NSWSC 1037 CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2006] HCA Trans 534 Energy Australia v Australian Energy Ltd [2001] FCA 1049 Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215; [2005] NSWSC 1273 Liberty Financial Pty Ltd v Scott [2003] FCA 226 CASES CITED : Olbers Co Ltd v Commonwealth of Australia (No 3) [2003] FCA 651 Perre v Apand Pty Ltd (1999) 198 CLR 180 Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718; (1999) 217 ALR 495 Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 Tepko Pty Ltd v Water Board (2001) 206 CLR 1 Tyrrell v The Owners Corporation Strata Scheme 40022 [2007] NSWCA 8 Waste Recycling and Processing Corporation v United Resource Management Pty Limited [2006] NSWSC 1140 The Owners Strata Plan 50946 (Plaintiff) Multiplex Constructions (NSW) Pty Limited (First Defendant) Jaguar Investments (NSW) Pty Limited (Second Defendant) PARTIES : Scott Wilson Irwin Johnston Pty Limited (Third Defendant) Strasser Poli Little & Associates Pty Limited (Fourth Defendant) Trevor R Howse & Associates Pty Limited (Fifth Defendant) Multiplex Limited (Sixth Defendant) FILE NUMBER(S) : SC 55046/02 Dr AS Bell (Plaintiff) COUNSEL : Mr M Rudge SC, Mr D Sibtain (First and Sixth Defendants) Ms C Sainsbury (Fifth Defendant) Blake Dawson Waldron (Plaintiff) SOLICITORS : Gilbert & Tobin (First and Sixth Defendants) Hunt & Hunt (Fifth Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST Einstein J Monday 19 November 2007 55046/02 The Owners Strata Plan No 50946 v Multiplex Constructions (NSW) Pty Limited & Ors JUDGMENT The notice of motion 1 The first and sixth defendants supported by the fifth defendant, seek an order for the separate hearing of the question of quantification of the amount of damages (if any) payable by the first and fifth defendants in respect of particular paragraphs of the Technology and Construction List Statement filed in November 2007 or by the cross-defendants in respect of the corresponding paragraphs of any cross-claims filed in the proceedings. The principles 2 There was no serious issue as to the principles which inform the exercise of the discretion to order a separate question. The following may be said: i. The Court may direct the order in which questions of fact are to be tried. Such direction should be consistent with the overriding purpose of the Civil Procedure Act and of the rules of the Court, namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings. In making directions as to the conduct of proceedings, the Court must give effect to that overriding purpose [CPA s 56(2); Tyrrell v The Owners Corporation Strata Scheme 40022 [2007] NSWCA 8 at [6] per Spigelman CJ]. ii. Pursuant to UCPR 28.2, the Court may order the determination of any question or questions separately from any other questions. The orders which a Court may make, following the determination of one or more separate questions are unlimited. Such orders may include the determination of the balance of the proceedings by the Court or by a referee, if appropriate. In making such determination, the Court will have regard to and must give effect to the overriding purpose: Idoport Pty Ltd v National Australia Bank Ltd [2005] NSWSC 1273 at [15]. iii. The fact that special caution (see Idoport at [12]) must be taken before ordering the separate determination of issues does not mean that the judicial discretion to order a separate trial is fettered: Idoport at [15]. What must be shown is that an order is appropriate, in that it is just and convenient [see, for example, Reading Australia Pty Ltd v Australian Mutual Provident Society (1999) 217 ALR 495 at [9]. 3 A relatively recent summary of the principles is to be found in Waste Recycling and Processing Corporation v United Resource Management Pty Limited [2006] NSWSC 1140, at [13]: "i. … ii. There have been many recent judicial statements cautioning against the making of an order splitting issues in the High Court, the Federal Court and this Court. iii. In Perre v Apand Pty Ltd (1999) 198 CLR 180 at 332 Callinan J identified the dangers in conducting separate trials of different issues. He stated (at p 332): Care does need to be taken in deciding whether to conduct separate trials of different issues. It sometimes happens that they may turn out to be productive of the disadvantages of delay, extra expense, appeals and uncertainty of outcome which they are intended to avoid. In tort cases in which damage is the gist of the action, it will generally be undesirable to accede to requests for them, or to order them, unless all parties accept that compensable damage has been sustained by the plaintiffs or applicants as the case may be. iv. In Tepko Pty Ltd v Water Board (2001) 206 CLR 1 Justice Kirby and Justice Callinan in the High Court of Australia reiterated those concerns at 55, [168–170] (Gaudron J agreeing at [52]): 168. The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap. 169. The second and related comment is this. A party whose whole case is knocked out on a trial of a preliminary or single issue, may suspect, however unjustifiably, that an abbreviated course was adopted and a decision reached in the courts, rather than in the parties', interests. 170. Thirdly, there is an additional potential for further appeals to which the course of the trial on separate issues may give rise. Indeed, that could occur here were this appeal to be allowed and a retrial had in which the remaining issues of causation and damages were decided. Single-issue trials should, in our opinion, only be embarked upon when their utility, economy, and fairness to the parties are beyond question. v. Their Honours restated those concerns during submissions in CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2006] HCA Trans 534 (29 September 2006). Kirby J said "… I have learned the danger of separated issues". Callinan J said in the High Court of Australia "… it nearly always creates a disaster. I do not know why judges persist in doing it when facts of any kind are in issue." vi The issue is whether the making of the order is "just and convenient": Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718 Branson J at [9]. vii. It is ordinarily appropriate that all issues in a proceeding be disposed of at the one time: Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 141-2; Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718 Branson J at [7]. viii. Orders for separate determination should only be embarked upon when their utility, economy, and fairness to the parties are beyond question : Tepko ibid, applied in Liberty Financial Pty Ltd v Scott [2003] FCA 226 by Weinberg J at [25–26]. ix. The supposed benefits of splitting often prove to be illusory: … In ABB v Freight Rail [1999] NSWSC 1037 Rolfe J stated at [4] … 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 … 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. In Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215 I observed at [7]. Experience suggests that the separation of proceedings often does not result in the quicker and cheaper resolution of proceedings as anticipated but often has the reverse effect merely causing added delay and expense to the resolution of the litigation. Thus, before an issue is to be separately determined, it must be possible to clearly see that it will facilitate the quicker and cheaper resolution of the proceedings. 4 In ABB the reasons why in general such orders are not appropriate were set out: (1) Where certain witnesses will give evidence on liability and quantum this gives rise to difficulties in cross-examination and the assessment of credit by the Court: at [15] (2) If the applicant does not succeed on the issue of liability there is a strong likelihood that an application will be made for leave to appeal and, possibly to further appeal: at [17]. (3) In the event of appeal, additional delay and expense will be incurred in respect of any further hearing: at [17]. (4) Assuming the applicant is successful, the costs of proving damages will be incurred in any event: at [18]. (5) Until the case on damages is made the parties are unable to give meaningful consideration to appropriate commercial settlement: at [19]. (6) In most cases, the trial judge should determine as many issues as possible to enable the Court of Appeal to dispose of the matter finally on appeal: at [20]. [See similarly Liberty Financial Pty Ltd v Scott [2003] FCA 226 Weinberg J at [35]–[38].] 5 Generally, splitting of issues is not appropriate in actions for tort or actions seeking relief under ss 82 or 87 the Trade Practices Act 1974. In actions where relief is sought under ss 82 or 87 of Trade Practices Act 1974 it "is not possible to separate liability and damage completely": Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718 Branson J at [11–12], Energy Australia v Australian Energy Ltd [2001] FCA 1049 at [6] Stone J. The proceedings 6 These proceedings were commenced on 3 October 2001 and concern the redevelopment of a residential and commercial building in 1994 and 1995. 7 The plaintiff alleges a failure of either of two Multiplex companies to manage the design and construction of the works undertaken so as to ensure that the building had adequate measures to suppress or prevent fire and the spread of fire. 8 Multiplex's negligence is said to be evidenced by a number of defects in respect of the fire safety systems installed in the building, and is said to arise from failings on the part of Multiplex in the retention of and/or reliance upon the fifth defendant ["Trevor Howse"] in connection with the design and certification of the fire safety works. 9 The claim against Trevor Howse is founded upon the manner of inspection, assessment and certification of the building, and its design and construction, and the inadequacy of those functions. The essential basis put forward in support of the application 10 In essence, the applicant's submission is as follows: i. The plaintiff has identified in its evidence a number of contended defects in the fire safety system works. ii. The rectification of those defects is addressed by the plaintiff's witnesses, in effect, by the production of a specification. iii. The plaintiff contends that the works should be rectified in accordance with that specification and costed accordingly. iv. The defendants have joined issue on the presence of defects, the extent of defects and the need for rectification work. v. The commonsense practical course would be to determine whether the works are defective, whether they are in need of rectification, and to determine the method of rectification before costing that exercise and before launching into an enquiry into consequential losses associated with that rectification process (namely, the disruption of tenants and the losses associated with that disruption). vi. It is a benefit which will enure to both parties, in terms of hearing and preparation time, and will result in a saving of court resources. 11 In giving more adjectival information in support of its submissions, the defendant contended that the separate determination of questions of liability and (if found), the method of rectification would obviate the need for preparation by the defendants of lengthy evidence on the cost of rectification. The proposition was that in preparing that evidence, the defendants would be required to address a range of permutations as to: i. the extent of the defective works (if any); ii. the extent of rectification work which might ultimately be found to be required; iii. the order in which that work would be done, cost effectively and efficiently; iv. the manner in which that work would be done so as to ensure minimum disruption; v. the extent of disruption which may arise as a consequence of such work; vi. the consequences of that disruption; vii. the extent to which those consequences may be compensable; and viii. the quantification of those more remote losses found to be compensable. 12 Further the defendants submitted that the application falls to be resolved by an examination of the following contingencies: i. If the plaintiff is successful (wholly or in part) against all defendants, the issues the subject of further determination will, at the very least, be carefully defined and, most probably, be the subject of an inter partes resolution. ii. If the defendants are wholly successful, the cost of the determination of the further issues will have been saved. If the plaintiff is successful against one or more defendants, but not others, those defendants which have escaped liability should not be held to the obligation of having to prepare evidence on a question which no longer concerns them. Decision 13 There is little doubt but that the making of the separate question order has real potential for delay. Whilst it has not yet been the subject of a case management decision, there is an obvious possibility that all or some parts of the issues would be referred out. Whether that does or does not take place, it is clear that a separation order resulting in a decision in favour of the plaintiff will then lead to a further hearing with all the consequential delay usually involved in that circumstance. [It is appropriate to acknowledge that during the hearing of the motion the first, fifth and sixth defendants obtained instructions that in the event that a bifurcated hearing led to a decision in the plaintiff's favour on liability, none of those parties would seek to appeal the decision until the conclusion of the quantum tranche – this undertaking removing the poignancy of one of the plaintiff's arguments in support of the proposition that there would be delay in the event of such an appeal]. 14 There is also an integer involving the extent to which fire safety issues which will have to be addressed, at least if the plaintiff's case is accepted. For whatever reason it happens to be the case that these proceedings were commenced in 2001. Where issues such as these still separate the parties the Court should strain to ensure that a determination of all issues as soon as practicable occur. 15 It is true that the Court encourages mediation wherever possible: cf Civil Procedure Act 2005 Part 4. Mr Voss, a solicitor with the plaintiff's firm of solicitors, gave evidence that based upon his experience the instant proceedings lend themselves to mediation prior to any hearing. In his experience the prospect of obtaining a favourable outcome at a mediation, or in any settlement discussions outside a mediation are enhanced where both parties have provided evidence of quantum, any issues of quantum have been joined and all parties are aware of one another's evidence. His further evidence was that in his experience, hiving off the issue of quantum would in the ordinary course of events, delay the conclusion of the proceedings at first instance by 12 to 18 months. 16 It seems to me that there is real substance in the plaintiffs submission that mediation is only likely to be successful where the parties have been able to reach an informed decision on the amounts likely payable by the defendants to the plaintiffs should the plaintiffs succeed. 17 One must not lose sight of the fact that Multiplex Constructions is enormous company almost certainly likely, as part and parcel of its everyday business activities [albeit to some extent reliant upon outside expert advice], to be in a position to assess rectification costs as well as business disruption costs 18 Then there is the evidence before the court that the instant situation, even in the event of the plaintiffs succeeding on liability, may not involve a massive building claim: the evidence given by Mr Voss is that the plaintiff obtained a report from its quantity surveyor at a cost of no more than $11,640. His further evidence was that in his experience, if the quantity surveyors retained by each party could not agree on the cost of rectification work, it would ordinarily take no more than one hearing day to cross-examine the quantity surveyors as to the areas of disagreement. In making this assessment he had assumed that in accordance with clause 55 of Practice Note SC Eq 3, the quantity surveyors would confer prior to hearing and the matters in dispute between them, if any, would be separately identified. 19 Ultimately the principled exercise of the discretion is seen to favour the disposal of all issues at the same time. The present is an example the wisdom of the following statement by French J at [31] in Olbers Co Ltd v Commonwealth of Australia (No 3) [2003] FCA 651: "Experience in the courts over many years has demonstrated that fragmentation of proceedings rarely result in any saving of time in the long run and that projections as to costs savings are likely at best to be speculative." 20 In my view the application for the separate question order should be dismissed. Orders 21 The notice of motion is dismissed with the plaintiff's costs to be paid by the first, fifth and sixth defendants. ************** 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. 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