New South Wales Supreme Court CITATION : Halloran v Harwood Nominees Pty Ltd & Anor [2006] NSWSC 1355 HEARING DATE(S) : 04/10/06 JURISDICTION : Equity JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 10/04/2006 DECISION : Application for determination of preliminary question declined CATCHWORDS : PROCEDURE – Preliminary or separate questions – total and permanent disablement claim – whether order should be made for determination of validity of trustee's decision as separate question – relevance of Civil Procedure Act 2005 (NSW) principles LEGISLATION CITED : Civil Procedure Act 2005 (NSW), s 57 Edwards v Hunter Valley Co-operative Dairy Limited (1992) 7 ANZ Ins Cas 61-113 House v The King (1936) 55 CLR 499 Nile v Club Plus Superannuation Pty Ltd [2005] NSWSC 55 CASES CITED : Rapa v Patience (NSWSC, McLelland J, unreported, 4 April 1985, BC8500888) Re Hannover Life of Australasia Ltd v Sayseng (2005) 13 ANZ Ins Cas 90-123; [2005] NSWCA 214 Sheldon v MLC Nominees Pty Ltd [2006] NSWSC 700 Tepko Pty Ltd v The Water Board (2001) 206 CLR 1 Mark Halloran (P) PARTIES : Harwood Nominees Pty Ltd ACN 001 216 208 (D1) The National Mutual Life Association of Australasia Ltd ACN 004 020 437 (D2) FILE NUMBER(S) : SC 6149/05 COUNSEL : M Bleasel (P) B Kelleher (D2 & mentioned appearance of D1) Firths - The Compensation Lawyers (P) SOLICITORS : Mallesons Stephen Jaques (D1) Deacons (D2) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRERETON J Wednesday 4 October 2006 6149/05 Mark Halloran v Harwood Nominees Pty Limited & Anor JUDGMENT (ex tempore) 1 HIS HONOUR: The plaintiff Mark Halloran is a member of a superannuation fund of which the first defendant Harwood Nominees Pty Ltd is the trustee and the second defendant National Mutual Life Association of Australasia Limited is its insurer. Mr Halloran claims to be entitled to a benefit, of about $65,000, for total and permanent disablement. The trustee has rejected the claim, the insurer having declined indemnity in respect of it; they do not accept that Mr Halloran is "totally and permanently disabled" within the meaning of the superannuation fund deed nor the relevant insurance policy. In these proceedings, Mr Halloran sues to recover that benefit. The present application is brought by the insurer, supported by the trustee, for an order for the separate determination of certain questions which arise in the proceedings, to the intent that the issue of the validity of the trustee's decision be determined separately and before the question of whether, in fact, Mr Halloran was totally and permanently disabled within the meaning of the relevant policy and, if so, whether he should have been entitled to a benefit under the relevant fund. 2 In proceedings of this type, two main issues typically arise. 3 The first issue is the validity of the trustee's decision, and in that respect the proceedings are substantially in the nature of judicial review proceedings, in which the ultimate issue is whether the trustee's discretion has miscarried on one of the grounds upon which an exercise of discretion may be attacked. While in general terms those grounds are well-known [House v The King (1936) 55 CLR 499], in this particular context they have been explained by McLelland J, as he then was, in Rapa v Patience (NSWSC, McLelland J, unreported, 4 April 1985, BC8500888) and Edwards v Hunter Valley Co-operative Dairy Limited (1992) 7 ANZ Ins Cas 61-113. More recently, in a closely analogous context, they have been discussed by Santow J in the Court of Appeal in Re Hannover Life of Australasia Ltd v Sayseng (2005) 13 ANZ Ins Cas 90-123; [2005] NSWCA 214. 4 If that first issue is resolved in favour of the claimant, then the second issue may arise: whether, in fact, the claimant fell within the definition of total and permanent disablement in the insurance policy. On that issue, evidence other than the evidence that was before the trustee may be admissible. 5 In recent years, the issue has arisen on several occasions in the context of claims of the present type. In the first instance proceedings in Sayseng [2003] NSWSC 945, Bryson J, apparently on the insurer's application, ordered the determination of the first issue a separate question. However, that order was made at the commencement of a final hearing, which had been set down for only three days, after it was indicated to his Honour that, if the whole matter proceeded, it would occupy some two weeks. 6 That course has not attracted universal support. In Nile v Club Plus Superannuation Pty Ltd [2005] NSWSC 55, Brownie AJ observed (at [70]) that this was an unattractive way for the business of the Court to be conducted, there really being no reason why the matter could not be dealt with in one hearing. 7 In Sheldon v MLC Nominees Pty Ltd [2006] NSWSC 700 (at [11] to [14]), Palmer J said that to split the issues was by no means an established role of practice and procedure:- [11] There has been no application made by anyone for the determination of separate questions in these proceedings so that, as matters presently stand, all issues fall for final determination at the trial, including the issue whether, if appropriate, the Court should substitute its own finding as to the Plaintiff's disablement for the opinion of Nominees. As I have said, the assessment may be admissible as evidence on that issue. [12] The Plaintiff's claim for a total and permanent disablement benefit is a relatively small one and it has remained unresolved since it was first rejected by the Defendants in April 2002. As matters presently appear to me, it would not be conducive to the just, quick and cheap resolution of the real issues between the parties to determine that the trial be split into two stages. The trial is not likely to be a long one. It may come on for hearing fairly soon if the parties bestir themselves, and it is in the interests of the Plaintiff to have a final determination of all issues sooner rather than later. [13] While in some insurance and superannuation cases of this type splitting the issues in the way which the Plaintiff suggests may be appropriate (see, for example, the course followed by Bryson J (as he then was) in Sayseng v Kellogg Superannuation Pty Limited [2003] NSWSC 945), to proceed in this way is by no means an established rule of practice and procedure: see, for example, Nile v Club Plus Superannuation Pty Limited [2005] NSWSC 55 at para 70. [14] The Plaintiff has adduced no evidence that the conduct of the assessment at this time would cause him undue expense, inconvenience or distress. I am not persuaded that I should, by refusing the Defendants' application, in effect bring about the splitting of issues for trial. 8 The circumstances in which it may or may not be appropriate to order the determination of a preliminary question have been considered in many cases. Generally speaking, the Court is reluctant to order determination of a separate question except where it is clear that its resolution is likely to be determinative of the proceedings as a whole. Other considerations relate to the economical and efficient conduct of the proceedings, and include whether the determination of the preliminary question may result in the earlier determination of the outstanding issues by reducing the remaining issues between the parties and facilitating the consensual resolution of remaining issues, whether there will be a saving of costs, and whether there will be duplication of evidence and issues if there are multiple hearings. It is plainly the case that costs can often be saved by the early determination of some questions, but as Kirby and Callinan JJ said in Tepko Pty Ltd v The Water Board (2001) 206 CLR 1 (at 55): Single-issue trials should, in our opinion, only be embarked upon when their utility, economy, and fairness to the parties [of that course] are beyond question. 9 The principal factors, then, which bear on the exercise of the discretion whether or not to order determination of the first issue as a separate question in this case are, first, whether the separate determination of that question is likely to be determinative of the proceedings; and, secondly, whether a saving of time and costs will be achieved by that course. 10 The plaintiff is ready to proceed to a final hearing on all issues now. The defendants say that they wish to issue subpoenas, obtain authorities from the plaintiff to gain information from Centrelink, and then brief an expert. Why they have not done any of this before the matter was referred to the call-over list is unexplained and does not attract sympathetic consideration, but even assuming that the defendants are to be permitted to embark on that course, that is something which presumably can be attended to in a month or two, so that the matter would be ready for hearing at least early in the New Year on a final basis. 11 If a determination of separate question is ordered, it is unlikely to be heard before the New Year, given the current state of the lists. In those circumstances, even if there is not an application for leave to appeal, the final hearing of the matter, if the plaintiff succeeds on the first issue, is unlikely to take place much before the end of 2007. There is at least a possibility that this would be further delayed by an application for leave to appeal. While I accept that one does not look at the history between two firms of solicitors which have litigated this type of case in the past and deduce from that that there will inevitably be an application for leave to appeal, nonetheless the prospect cannot be overlooked. I sought, but was not proffered, an undertaking from the defendants that, without prejudice to their rights to appeal on a final basis, they would not seek leave to appeal on an interlocutory basis from determination of the separate question. 12 On the second issue, the plaintiff proposes to rely only on the medical evidence that was before the trustee when the trustee made its decision. That is evidence which will be tendered on the first issue in any event. There will therefore be a substantial overlap of relevant evidence. The significant difference seems to be that on the second issue there will be cross-examination of some or all of medical experts, and possibly a further expert to be called by the defendant. However, a proper appreciation of that cross-examination and any further expert evidence will require an understanding of the evidence adduced before the trustee, and therefore on the first issue. 13 If the first issue is resolved in favour of the defendants, it will be determinative of the proceedings, but if it is resolved in favour of the plaintiff, it will not. In that sense, as the plaintiff submits, ordering a separate question is almost entirely for the benefit of the defendants. It is not absolutely entirely so, because the plaintiff's costs of the second question, if he fails on the first, might be saved; but if the plaintiff is to succeed, then there is no benefit to him in the determination of the first issue as a separate question. If he succeeds on the first issue, the plaintiff will effectively have to prepare for, and fund, not one, but two trials. This is not fairness to both parties, in the sense in which Kirby and Callinan JJ spoke in Tepko. 14 Generally speaking, as in this case, applications for determination of the first issue relating to the validity of the trustee's determination as a preliminary question have been propounded on the basis that, whereas on that issue the evidence and issues are confined, on the second issue, there will be a lengthy trial involving cross-examination of medical witnesses. However, and also generally speaking, in my view this considerably overstates the position and wrongly assumes that lengthy trials on the second issue will be permitted. The amounts at issue in proceedings of this type (as in this case) are not large. I am informed that in Sayseng, the benefit was in the order of $180,000. In the present case, the claim is for $65,000. Commanded as the Court now is, by Civil Procedure Act 2005 (NSW), s 57, to manage proceedings having regard to the objects of the just determination of the proceedings, the efficient disposal of the business of the Court, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings, and also, by s 60, that the practice and procedure of the Court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute, I do not consider that, generally speaking, a hearing of five to seven days, as has been foreshadowed in this case by the defendants on the second issue, would be tolerated by the Court, which would invoke its powers to limit the duration of cross-examination so as to confine the hearing to not more than two or three days. 15 Given (1) that considerable delay will be involved in the matter coming to finality if determination of the first issue as a separate question is ordered and the plaintiff succeeds on it, (2) the overlap of the evidence between the first and second issues, (3) my view that the Court will not permit the second issue, relating as it does to a claim for $64,000, to be litigated at the length and with the luxury that the defendants' submissions contemplate, and (4) the circumstance that an order for separate determination is essentially for the benefit of the defendants alone, I am of the view that justice is not served by ordering determination of the first issue as a separate question. To the contrary, the interests of all parties ultimately will best be served by bringing the whole matter to an early, final determination. 16 I therefore decline to make an order for determination of a separate question. ********** 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.