FEDERAL COURT OF AUSTRALIA

Meadow Springs Fairway Resort Ltd (In liquidation) v Colliers International Consultancy and Valuation Pty Ltd [2007] FCA 531

PRACTICE AND PROCEDURE – application under O 29 r 2 of the Federal Court Rules 1979 (Cth) – proposal to split trial in relation to second applicants only – whether just and convenient – whether savings in time and expense – no significant savings in time and expense demonstrated – application dismissed

Australian Securities and Investments Commission Act 2001 (Cth)

Trade Practices Act 1974 (Cth) 

Federal Court Rules 1979 (Cth), O 29 r 2

Council of the City of Sydney v Goldspar Australia Pty Ltd [2006] FCA 641, cited

Dovuro Pty Limited v Wilkins (2003) 215 CLR 317, applied

Liberty Financial Pty Ltd v Scott [2003] FCA 226, followed

Reading Australia Pty Ltd v Australian Mutual Provident Society (1999) 217 ALR 495, followed

Save the Ridge Inc v Commonwealth (2005) 147 FCR 97, cited

Tepko Pty Limited v Water Board (2001) 206 CLR 1, applied

Unity Insurance Brokers Pty Limited v Rocco Pezzano Pty Limited (1998) 193 CLR 603, cited

MEADOW SPRINGS FAIRWAY RESORT LTD (IN LIQUIDATION) (ACN 084 358 592) AND JENNIFER AMER AND OTHERS v COLLIERS INTERNATIONAL CONSULTANCY AND VALUATION PTY LTD (ACN 076 848 112)

WAD 126 OF 2004

MARSHALL J

12 APRIL 2007

MELBOURNE (BY VIDEOLINK TO pERTH)

THE COURT ORDERS THAT:

1.                  The application by the first applicant and the second applicants (other than Kids Holdings Pty Ltd) under O 29 r 2 of the Federal Court Rules 1979 (Cth) is dismissed. 

2.                  The applicants referred to in the preceding paragraph of this order pay the respondent’s costs of, and incidental to, that application. 

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                                             The first applicant, Meadow Springs Fairway Resort Ltd (in liquidation), and the second applicants (other than Kids Holdings Pty Ltd), apply under O 29 r 2 of the Federal Court Rules 1979 (Cth) for an order splitting the trial of this proceeding.  The first applicant and the second applicants (other than Kids Holdings Pty Ltd) wish to have the quantum of the second applicants’ claims, if they succeed on liability, determined after all other issues and questions in the proceeding (being all applicants’ claims on liability and the quantum of the first applicant’s claim, if it succeeds on liability) have been determined.  The respondent, Colliers International Consultancy and Valuation Pty Ltd, opposes the application. 

2                                             The substantive application in the proceeding is made under the Trade Practices Act 1974 (Cth), the Australian Securities and Investments Commission Act 2001 (Cth) and the accrued jurisdiction of the Court.  Put simply, the critical issue is whether the respondent provided false and misleading valuations which caused the first applicant and certain of its shareholders (the second applicants) to suffer considerable financial loss with respect to a failed resort development.

3                                             The course proposed by the first applicant and the second applicants (other than Kids Holdings Pty Ltd) is unusual.  It is not uncommon for a trial to be split so that liability is determined before quantum, damages or compensation.  But it is unusual for a trial to be split so that one applicant does not have the trial split with respect to its claim, while splitting the trial with respect to the other applicants’ claims. These circumstances alone do not dictate that the trial should not be split.  However, the Court must tread warily in this area. As Black CJ and Moore J said in Save the Ridge Inc v Commonwealth (2005) 147 FCR 97 at [15]:

            ‘The formulation of separate or preliminary questions is authorised by        O 29, r 2 of the Federal Court Rules 1979 (Cth). But it is a procedure            that should be adopted with caution and can be fraught with    difficulties.’

4                                             Order 29 r 2 is most commonly used to allow the Court to resolve preliminary issues or questions, which, once resolved, mean it is unnecessary for the Court to resolve other issues or questions in the proceeding.  In such circumstances, splitting the trial can save the Court and the parties the time and expense of dealing with ultimately redundant issues.  Here, the respondent’s liability for all applicants’ claims and quantum of the first applicant’s claim could not be described as preliminary issues or questions.  However, that does not mean they cannot be determined separately from the quantum of the second applicants’ claims.  Indeed, it is even possible for an order under O 29 r 2 to be made ‘after the event’ of the trial, where the Court has only, at that stage, dealt with issues of liability; see Council of the City of Sydney v Goldspar Australia Pty Ltd [2006] FCA 641 at [5] to [6] per Gyles J. 

5                                             The premise which underlies the general course of not splitting trials is that ‘it is ordinarily appropriate that all issues in a proceeding be disposed of at the one time’; see Liberty Financial Pty Ltd v Scott [2003] FCA 226 (‘Liberty Financial’) at [35].  ‘It is incumbent upon the applicant [for the O 29 r 2 order] to show why there should be a departure from that course’; see Liberty Financial [2003] FCA 226 at [35] per Weinberg J.

6                                             The critical consideration when determining an application to split a trial is whether splitting the trial will result in ‘savings in time and expense’ (see Tepko Pty Limited v Water Board (2001) 206 CLR 1 at [168] per Kirby and Callinan JJ and Dovuro Pty Limited v Wilkins (2003) 215 CLR 317 (‘Dovuro’) at [142] per Hayne and Callinan JJ) such that it is ‘just and convenient’ for the order to be made; see also Reading Australia Pty Ltd v Australian Mutual Provident Society (1999) 217 ALR 495 at [9] per Branson J.

7                                             Counsel for the first applicant and the second applicants (other than Kids Holdings Pty Ltd), Mr Solomon, contends that the assessment of the quantum of the second applicants’ claims will depend on working out the amount, if any, each second applicant will receive from the liquidation of Meadow Springs.  He says that such amounts will need to be deducted from the amount each second applicant invested in acquiring shares in Meadow Springs, plus interest, to quantify their losses.  Mr Solomon contends that it is appropriate to make this calculation after an assessment of the damages, if any, payable to Meadow Springs and concurrently with any directions the Court may give concerning the application of damages awarded to Meadow Springs. 

8                                             Mr Solomon submits that any additional issues surrounding the quantum of the second applicants’ claims will not require much evidence.  If that is the case, it appears to me that little time and expense will be saved by splitting the trial. 

9                                             The primary reason for this application concerns an agreement between the liquidator of Meadow Springs and a receiver and manager (Mr G Carrello) purportedly  appointed by a creditor about the representation of Meadow Springs at the trial.  That agreement is conditional on this application being granted. Dismissal of this application, in the absence of successful mediation of that issue, would require the Court to determine the competing claims of the liquidator and the receiver to represent Meadow Springs.  Mr Solomon points to authorities, such as Unity Insurance Brokers Pty Limited v Rocco Pezzano Pty Limited (1998) 193 CLR 603 at [55], [97] and [124], which refer to the public interest in disputes being settled.  However, the public interest does not require a Court to give effect to a settlement where it would not be appropriate to do so.  A Court should not act otherwise than judicially and in good conscience simply to rubber stamp an agreement between those with an interest in litigation. 

10                                          This is not an appropriate case to split the trial in the manner proposed by the first applicant and the second applicants (other than Kids Holdings Pty Ltd). There is no evidence that any significant time and expense will be saved by the Court granting the application.  The first applicant and the second applicants (other than Kids Holdings Pty Ltd) have not discharged the onus of proving that the course proposed is just or convenient so as to displace the usual position that all issues and questions in a trial should be dealt with at the same time.  Further, as counsel for Colliers submitted, in cases such as this, where claims in the accrued jurisdiction include negligence, it is not desirable to split the question of liability from the question of quantum; see Dovuro 215 CLR 317 at [142]. 

11                                          The first applicant and the second applicants (other than Kids Holdings Pty Ltd) and Colliers have each raised competing claims about the utility of determining separately the quantum of the second applicants’ claims, if they succeed on liability.  It is not necessary to resolve that debate now because I do not consider that there would be any significant saving of time and expense in the course proposed by Mr Solomon’s clients. 

12                                          The application for an order under O 29 r 2 is dismissed.  The respondent should have its costs of, and incidental to, that application. 

Associate:

Dated:         12 April 2007