District Court New South Wales Medium Neutral Citation: Frangie bht Frangie v Takchi [2014] NSWDC 58 Hearing dates: 17-18 July 2013, 7-8 November 2013 Decision date: 10 April 2014 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: Stood over for further hearing to determine whether order for separate trial should be revoked. Catchwords: PRACTICE AND PROCEDURE - limitation period - disability - whether plaintiff substantially impeded by reason of impairment of mental condition - separate trial - whether appropriate Legislation Cited: Civil Procedure Act 2005, s 56 Limitation Act 1969, s 11, s 14, s 52 Uniform Civil Procedure Rules 2005, r 28.2 Cases Cited: Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411 Bailey and Bailey v Director-General Department of Energy Climate Change and Water and 2 Ors [2010] NSWSC 979 CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 Commonwealth Bank of Australia v Clune and Anor [2008] NSWSC 1125 Dunstan v Simmie and Co Pty Ltd [1978] VR 669 Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 Ford v Greer [2008] NSWSC 1181 Hoban v New South Wales Land and Housing Corporation [2008] NSWSC 1121 Langley v AMP Capital Investors Limited [2007] NSWSC 937 Neumann Contractors Pty Ltd v Wyong Shire Council [2011] NSWSC 481 O'Toole v Charles David Pty Ltd (1990) 171 CLR 232 Piercy v Young (1880) 15 Ch D 475 Street v Luna Park Sydney Pty Ltd [2007] NSWSC 697 Tepko Pty Ltd v Water Board (2001) 206 CLR 1 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 Warragamba Winery Pty Ltd v State of New South Wales [2010] NSWSC 66 Texts Cited: Ritchie's Uniform Civil Procedure NSW Category: Separate question Parties: Solomon Frangie by his tutor Joseph Frangie (plaintiff) Edward J Takchi trading as Takchi & Associates (defendant) Representation: Mr J Turnbull (plaintiff) Ms K Stern SC (defendant) Blackstone Waterhouse Lawyers (plaintiff) Colin Biggers & Paisley (defendant) File Number(s): 2011/260473 Publication restriction: None Judgment Introduction 1On 25 June 2003 Solomon Frangie purchased a property. In around 2006 it was sold at a loss. Edward Takchi had been his solicitor. On 12 August 2011 Mr Frangie sued Mr Takchi for negligently completing the purchase. Mr Takchi pleaded that the claim of Mr Frangie was out-of-time. Mr Frangie says he was under a disability and so time did not run against him. 2The question of whether Mr Frangie was under a disability has been ordered to be tried separately. The question is stated in the following terms: "Has the Plaintiff suffered from a disability within the meaning of sections 11(3) and 52 of the Limitation Act, 1969 (NSW) during the period since 17 September 2003, and, if so, for what period was the Plaintiff under such disability?" Background 3The following matters appear from the evidence. They should not be taken as final determinations or exhaustive findings on the matter for reasons that will become apparent. 4Mr Frangie and Harry Frome, his business partner, proposed to run a restaurant or cafe business. They agreed in a written contract to purchase premises where an Indian restaurant was conducted. 5The written contract noted improvements as "HOUSE" and "Shop and Residence". According to the s 149(2) Planning Certificate under the Environment Planning & Assessment Act 1979 ("s 149 certificate") annexed to the contract, the prohibited usages under the zoning included "shops", "commercial premises", "refreshment rooms" and "advertising structures". Non-listed usages were permitted, but only with development consent. 6Mr Takchi corresponded with the vendor's solicitor about the zoning and the present use, seeking an assurance that the current use was permitted. He wrote: "... 2. We note that on the second page of the 149(2) certificate that three of the prohibited activities on the subject property are: advertising structures, commercial premises, and the shops. Kindly advise whether the vendor has obtained the necessary approval from the council for current usage. 3. We are instructed that there is a advertising sign which is leased to Australia Post. Kindly confirm whether the usage has been approved by the council. If so, kindly forward a copy of the approval together with the lease agreement. ..." 7Mr Takchi received an assurance, which became a special condition of the contract, that the property would be zoned commercial use. The contract as executed included a special condition 44 that required the provision of a new s 149 certificate "to indicate that the zoning for the shop located on the premises is zoned commercial use". 8Mr Takchi provided requisitions to the vendor's solicitor on 26 June 2003 that included the question "Is there any currently applicable development approval or consent to the use of the premises". In the reply dated 12 September 2003 the vendor's solicitor did not respond to that question. 9An insurance certificate dated 15 September 2003 listing Mr Frome and Mr Frangie as the insured indicates that the business at the site, presumably the intended business, was "owner occupied by cafe/pastry shop". 10On 15 August 2003 the LEP applicable to the property was amended by gazettal "to allow with the consent of Holroyd City Council, the carrying out of development on the [premises] for the purpose of a refreshment room". There was evidence that on 17 September 2003, the council indicated orally and in writing that "refreshment room" means "restaurant or cafe". 11There may be differences between permission for "current use", "zoned commercial use" and a zoning change allowing, with consent, a "refreshment room". In any event, settlement of the purchase proceeded on 17 September 2003. 12After settlement Mr Frangie and Mr Frome commenced some building works but the works were suspended by Council in October 2003. Council directed Mr Frangie about the need for development approval. A development application was lodged and on 11 February 2004 Council wrote to Mr Frome regarding "deficiencies" in that application. 13Mr Takchi appears to have ceased acting for Mr Frangie on 25 March 2004 when Mr Frangie collected from Mr Takchi the file including the contract. 14Ultimately development consent was obtained although the process took approximately two years. By this stage, Mr Frangie says that he had run out of money and, for that reason, was not able to set up the business, as he wanted. The premises were leased, but the tenant left after the rent-free period and Mr Frangie says he felt "badly let down by the legal profession", "angry and hurt", and subsequently "very depressed". 15Mr Frangie seeks an order that he was under a disability from 2005 until 2011 when he commenced proceedings. The proceedings allege that Mr Takchi "failed and neglected to satisfy himself that the use of the premises was authorised as a restaurant...prior to completing the purchase", and that Mr Takchi negligently completed the purchase knowing that the s 149 certificate showed that "use of the premises as a restaurant was not within the permitted use for the property". Legal analysis 16Mr Takchi submits that the claim is statute barred. "[H]aving been filed well after the expiry of 6 years after the contract of sale was entered into. The alleged breach of the defendant's retainer clearly predates 25 June 2003. The alleged loss was caused by the plaintiff with his business partner, Mr Frome, having entered into the contract on 25 June 2003. The six-year limitation period therefore expired on 24 June 2009." 17This submission was not the subject of debate, perhaps because the issue before me was not whether the limitation period had expired but whether Mr Frangie was under a disability after 2003. The Reply does not admit the expiry of the limitation period, but does refer to 17 September 2009 rather than 24 June 2009. Paragraph 3 of the Reply states: "In further answer to paragraph 8 of the Defence, the Plaintiff says that his action is not time barred pursuant to s14 of the Limitation Act, 1969, because the Plaintiff; (a) was under a disability from 2005 onwards; (b) the disability was continuing as at 17 September 2009; (c) the limitation period has been extended by reason of s52(1) of the Limitation Act, 1969, to at least 17 September 2012; and the proceedings have been brought within the time fixed by the Limitation Act, 1969." 18The statement of claim alleges a cause of action in both contract and tort. If the negligent act constituting a breach of retainer is Mr Takchi completing the purchase, as is alleged, then the action in contract may have accrued on 17 September 2003, the date of completion. An action in tort, which depends upon the suffering of damage, would have accrued on that or some later date. I shall return to this matter later in the judgment. 19Adopting 17 September 2003, the six-year limitation period under s 14(1)(a) of the Limitation Act 1969 would expire on 16 September 2009. However, s 52(1)(d) of the Limitation Act 1969 provides that if Mr Frangie was under a disability, the "running of the limitation period is suspended for the duration of the disability". 20Further, s 52(1)(e) has the effect that if the limitation period has not expired prior to the onset of the disability, it does not expire until three years after the date the person ceases to be under a disability. 21In the result, if Mr Frangie was under a disability for any period of time in the period 13 August 2008 to 16 September 2009, then the limitation period is extended up to the date the statement of claim was filed. If the disability ceased before 13 August 2008, then the claim will not be statute barred only if the period of disability exceeds the period between the expiration of the six-year period (17 September 2009) and the date of commencement of the proceedings (12 August 2011), approximately a two-year period. 22However, neither party submitted that there was a disability that ceased before 13 August 2008. Accordingly, on the assumption that the cause of action accrued on 17 September 2003 the question raised by the application is whether Mr Frangie was under a disability for any time during the period 13 August 2008 to 16 September 2009. I shall refer to this period as "the relevant period". 23Section 11(3) of the Limitation Act 1969 defines when a person is under a disability. It relevantly provides that: "(3) For the purposes of this Act a person is under a disability: ... (b) while the person is, for a continuous period of twenty-eight days or upwards, incapable of, or substantially impeded in, the management of his or her affairs in relation to the cause of action in respect of the limitation period for which the question arises, by reason of: (i) any ... impairment of his ... mental condition, ..." 24It may be noted that the cause of an impaired mental condition is not directly relevant to the issues before me. The effect of that mental condition is a matter of significance, for if it is to impact on the limitation period it must substantially impede Mr Frangie in managing his affairs relating to the cause of action. However, the cause of the mental condition, if related to the purchase of the property, might, indirectly, bear upon when Mr Frangie was impeded in managing his affairs relating to the cause of action arising from the purchase of the property. 25Accordingly, whether Mr Frangie was under a disability in the relevant period depends upon whether Mr Frangie had an impairment of his mental condition that impeded management of his affairs relating to the cause of action for at least 28 continuous days during the relevant period. 26This is not a matter where I am asked to decide an issue on a summary basis, taking a party's case at its highest. Rather, I am required to give a final decision on the disability question, deciding it on the balance of probabilities. It is the occasion for the parties to bring forward all relevant evidence in the matter, even if that evidence might also be relevant to other issues in the proceedings. 27The need to bring forward all relevant evidence, including evidence relevant to other issues in the proceedings, raises a concern as to whether an order for a separate determination of this issue was the appropriate course. The separate trial 28The circumstances of this order were not fully ventilated before me, save that both parties consented to the order, and neither party sought to resile from it. 29The power to order the trial of a separate question exercised in this case, is found in Uniform Civil Procedure Rule 28.2. In exercising that power the court must give effect to the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in the proceedings: Civil Procedure Act 2005, s 56, Ford v Greer [2008] NSWSC 1181 at [25], Commonwealth Bank of Australia v Clune and Anor [2008] NSWSC 1125 at [4]. 30The power to order issues to be tried separately is a power often considered, but less commonly exercised. Separate determination remains an exceptional course, to be contrasted with the usual course of deciding a case in its totality: Street v Luna Park Sydney Pty Ltd [2007] NSWSC 697 at [5], Bailey and Bailey v Director-General Department of Energy Climate Change and Water and 2 Ors [2010] NSWSC 979 at [4]-[12]. However, it is not limited to "special circumstances": Dunstan v Simmie and Co Pty Ltd [1978] VR 669 at 670 but see Tepko Pty Ltd v Water Board (2001) 206 CLR 1 at [52], [90], [168]-[171]. Care needs to be taken to ensure the issues are suitable for separate decision: Piercy v Young (1880) 15 Ch D 475 at 479. 31The general practice is that all issues should be tried at the same time. Judicial reluctance for separate trials arises from the likelihood that evidence will often be relevant to more than one issue. There is a risk that the formulation of discrete issues for separate determination may fail to anticipate the full range of relevant evidence, with the result that there is no saving in time or cost. 32In Tepko at [168]-[170] (accepted also at [52] and [90]) four members of the High Court agreed that: "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. 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 court's, rather than the parties', interests. 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." 33A separate trial may be appropriate if there is a preliminary question that is critical to the disposition of proceedings, so that if it is decided one way it will necessarily dispose of the proceedings: CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 at 606C. It may also be appropriate where the resolution of the particular question is of particular significance and cannot be affected by the determination of the remaining issues. But it is not appropriate if the question involves alternative defences; or if it requires findings of fact on contentious matters or requires determination of the remaining issues in the proceedings: CBS Productions Pty Ltd at 606D; or if the question involves the credibility of witnesses material to the remaining issues in the proceedings: Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411, Langley v AMP Capital Investors Limited [2007] NSWSC 937 at [27]; or where there is a possibility that the resolution of the separate issue will not finally determine the issue but has the capacity to result in multiple trials and fragmentation of proceedings: Neumann Contractors Pty Ltd v Wyong Shire Council [2011] NSWSC 481 at [22]-[26], [30]-[33] (see also Ritchie's Uniform Civil Procedure NSW at pp7,560-7,562). 34Several of these problems arise in the present case. Mr Frangie's credit has been challenged, and a finding about his evidence, and the evidence of other witnesses, is necessary to determine the separate question. Such a finding has the potential to impact on the possible future conduct of the proceedings. It may require future proceedings to be dealt with by another judge (Langley at [27]) to ensure the appearance of impartiality at any future hearing is not compromised. 35Further, the evidence relevant to the issue of Mr Frangie's disability is not clearly discrete from the evidence relevant to the matter generally. At the outset, part of Mr Takchi's argument was that Mr Frangie's case was weak and that this was a relevant matter to consider in determining whether Mr Frangie's failure to commence proceedings within the limitation period was due to poor prospects rather than being impeded by a mental condition sufficient to constitute a disability. Mr Frangie took a different view on the relevance of his prospects, whatever those prospects might be. In the result, the defendant gave more attention in the separate trial to the merits of the cause of action than did the plaintiff. 36As a general rule, the decision on a separate question of law or fact will bind the parties in the further conduct of the proceeding: Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 at p 642, O'Toole v Charles David Pty Ltd (1990) 171 CLR 232 at 245, 259, 295. In my opinion, matters essential to the determination of the separate question are also binding on the parties. Thus, any findings on the matters relevant to the residual cause of action could give rise to estoppels that impact adversely on one party or another in any subsequent hearing, even though the parties appear to have intended that a decision on the disability issue, and matters ancillary to it, would have no impact upon other issues. 37The primary justification for determination of a separate question is to remove the need for a further hearing. In this case, it is obvious that if the plaintiff establishes the relevant disability there will be a separate hearing on the merits of the claim and perhaps other matters. The defendant's submissions and pleadings manifest many contested issues. If a disability is established, there will be no saving of time and costs in the separate trial. 38But if the plaintiff is unsuccessful on the separate trial must the proceedings fail? This is not apparent. It requires a concession by the plaintiff that, subject to the disability issue, the plaintiff has commenced the proceedings outside the limitation period. I have noted that the pleadings do not contain such an unequivocal admission. That the parties may have accepted the limitations defence (subject to disability) for the purpose of this application only underlines the problem in respect of the future conduct of the proceedings. 39I mentioned earlier that a cause of action in tort accrues on the suffering of damage. Ordinarily a breach of a duty of care resulting in the purchase of an asset at a price exceeding its proper value is regarded as accruing on the date when the contract is unconditional, which in the present case may be as late as the date of settlement. But it is not apparent on the evidence before me that the asset was purchased at an excessive price. All that is apparent is that the asset purchased in 2003 appears to have been sold at a loss in 2006. Whether that was because it was not worth the price paid, either because of the zoning or the lack of permission for current use or for other reasons, or that the property lost value because of the works done by Mr Frangie in 2004, or the terms of the development consent in 2005, or the works done by Mr Frangie in 2006, or because of a general decline in the market in the period or any part of the period from 2003 to 2007 or for other reasons, or that the property was sold at an undervalue, is not apparent. These matters at least have the potential to impact upon the day on which the cause of action accrued. 40In Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at p 533, the majority of the High Court stated: "We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question." 41Although the damages in that case were of a different type to those in this case, the passage in instructive. The uncertainty about the damages suffered provides a further reason why a separate hearing may be inappropriate. 42As I have wrestled with the issues in this aspect of the dispute between the parties in the course of preparing various drafts of a judgment, my concern about the wisdom and equity of a separate trial has increased. The court has the power to order that the separate issue be rejoined and that all issues in the proceedings be tried at the same time: Hoban v New South Wales Land and Housing Corporation [2008] NSWSC 1121 at [7]-[18], Warragamba Winery Pty Ltd v State of New South Wales [2010] NSWSC 66 at [22]. An alternative to the present order for a separate trial may be to consider the matter part heard, and proceed to hear all the evidence in the matter. However, I have not heard the parties on this specific proposal, and I propose to stand the matter over to a date to be fixed convenient to the parties for this issue to be addressed: namely, whether I should revoke the order for a separate trial or, notwithstanding the difficulties I have mentioned, whether I should nevertheless proceed to give judgment on the 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. Decision last updated: 27 May 2014