ACK Pty Ltd v Mercy Human Services Limited - [2023] WASC 448

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   ACK PTY LTD -v- MERCY HUMAN SERVICES LIMITED [2023] WASC 448
CORAM:   ARCHER J
HEARD:   10 NOVEMBER 2023
DELIVERED          :   24 NOVEMBER 2023
FILE NO/S:   CIV 2620 of 2019
BETWEEN:   ACK PTY LTD
First Plaintiff
JEFFREY MARKOFF
Second Plaintiff
AND
MERCY HUMAN SERVICES LIMITED
First Defendant
MERCYCARE LIMITED
Second Defendant

Catchwords:

Application for preliminary determination of issues - Complex expert evidence involving 14 experts in seven different fields to be obtained in four stages - Risk of overlap in lay witness evidence - Risk that a second judge would be required to preside over a second trial - Not presently clear that separate trials should be ordered - Application may be revisited

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

First Plaintiff	:	S K Dharmananda SC & R A Collins
Second Plaintiff	:	S K Dharmananda SC & R A Collins
First Defendant	:	P E Cahill SC & A L Spencer
Second Defendant	:	P E Cahill SC & A L Spencer

Solicitors:

First Plaintiff	:	King & Collins
Second Plaintiff	:	King & Collins
First Defendant	:	HWL Ebsworth Lawyers (Perth)
Second Defendant	:	HWL Ebsworth Lawyers (Perth)

Case(s) referred to in decision(s):

Building Corporation WA Pty Ltd v Marshall [2021] WASC 242
Carlo Nobili SpA Rubinetterie v Militaire Nominees Pty Ltd [2004] WASC 47
GMB Research & Development Pty Ltd v The Commonwealth [1997] FCA 934
Herridge v Electricity Networks Corporation t/as Western Power [No 2] [2017] WASC 204
Inpex Operations Australia Pty Ltd v AIG Australia Ltd [No 2] [2023] WASC 61
Instyle Contract Textiles v Good Environmental Choice Services (No 3) [2010] FCA 466
Jacobson v Ross & Jacobson [1995] 1 VR 337
Jinxin Inc v Aser Media Pte Ltd [2022] EWHC 2431
Landsdale Pty Ltd v Moore [2009] WASCA 176
Reading Australia v Australian Mutual Provident Society [1999] FCA 718; (1999) 217 ALR 495
Woodley v Woodley [2014] WASC 377

ARCHER J:

Overview

These proceedings involve the sale by the first plaintiff (ACK) to the first defendant (Mercy) of a residential aged care facility business. The second plaintiff, Mr Markoff, is and was at all material times a director and controlling mind of ACK. The second defendant is the parent company of Mercy and guaranteed Mercy's performance under the sale agreement. The plaintiffs commenced proceedings claiming that Mercy engaged in misleading and deceptive conduct prior to the completion of the sale agreement. They also claim that Mercy breached terms of the sale agreement.
The defendants have brought an application seeking that four questions be determined on a preliminary basis, prior to the balance of the issues being determined. The plaintiffs oppose this.
What follows are my reasons for dismissing, for the moment, the application.

Background

The background to the proceedings is set out in the parties' submissions. For present purposes, it is sufficient to reproduce[1] paragraphs 6 to 16 and 21 to 24 of the defendants' submissions.[2]
[1] Defined terms have been altered for consistency with these reasons.
[2] Defendants' Submissions in Support of Preliminary Trial filed 20 October 2023 (Defendants' Submissions), with footnotes in italics.
6.The plaintiffs' claims concern the Sale Agreement entered into, between ACK as vendor and Mercy as purchaser, on around 1 July 2016[3] for the sale and purchase of a residential aged care facility business conducted by ACK. The Business, known as Belrose Care,[4] comprised four facilities.[5] The associated Land Contract[6] was entered into contemporaneously by those parties, Markoff,[7] and the second defendant, MercyCare Limited.[8]
[3] Second Further Amended Statement of Claim filed 8 July 2022 (Statement of Claim), [5].
[4] Statement of Claim, [5(b)], particular (1).
[5] Statement of Claim, [5(b)], particular (2). Located in Rockingham, Kelmscott, Joondalup and Maddington respectively.
[6] Concerning where the Business Facilities were located.
[7] Statement of Claim, [6].
[8] MercyCare Limited is the parent company of Mercy and guarantee Mercy's performance of the Sale Agreement and Land Contract: Statement of Claim, [4(a)(ii)]; Amended Defence filed 20 October 2023 (Defence), [4(a)], Defence, [5(a)].
7.After payment of an initial deposit, upon Completion a certain price was payable by Mercy to ACK.[9] Thereafter, a Deferred Payment Fee may have been payable to ACK in accordance with a particular formula.[10]
[9] Statement of Claim, [7(a)]; Defence, [7(a)].
[10] Statement of Claim, [7(b)].
8.Broadly, the calculation of the amount of the Deferred Payment Fee depended on the Additional RAD Balance[11] held by Mercy at 27 September 2018, as compared to Completion (27 September 2016).[12] If it had increased by more than $2 million, 50% of the value of that increase was due to ACK, capped in the sum of $6 million.[13]
[11] A 'RAD' being a 'Refundable Accommodation Deposit' supplied by non‑supported residents for their accommodation costs in a residential aged care facility, which is refunded to residents (or their estate) upon departure from the facility: see generally Aged Care Act 1997 (Cth), Division 52E.
[12] Statement of Claim, [5], [7(c)].
[13] Statement of Claim, [7(c)(iii)].
9.It is not disputed that no Deferred Payment Fee was calculated as payable to ACK on 27 September 2018.[14] Why that is so, is part of the subject of these proceedings.
[14] Statement of Claim, [29(b)]; Defence, [29](b).
C.The context which supports the questions
What are the two misleading or deceptive conduct claims?
10.ACK and Markoff allege Mercy engaged in misleading or deceptive conduct prior to Completion.[15] They seek damages pursuant to s 236 of the Australian Consumer Law.[16] Both claims are denied by Mercy.[17]
[15] Statement of Claim, [20] ‑ [23]. The second claim advanced is in addition to, or in the alternative to, the first.
[16] Statement of Claim, prayer for relief [B].
[17] Defence, [20] ‑ [23], [31].
11.First,[18] it is alleged that Mercy did not communicate any, and all, of the Use of Shao Matter,[19] Future Admission Responsibility Matter[20] and the Change in Resident Mix Matter[21] prior to Completion. The entitlement to such communication is said to arise in the circumstances of:[22] the Deferred Payment Fee;[23] the No Significant Change Representation;[24] the Sale Agreement;[25] the Land Contract;[26] the Pre-existing Admission Responsibility;[27] the 7 July Conversation;[28] and the Pre-Completion Affirmation.[29]
[18] Statement of Claim, [20].
[19] Statement of Claim, [15].
[20] Statement of Claim, [17](a).
[21] Statement of Claim, [17](b).
[22] Statement of Claim, [19]. This is denied by the defendants: Defence, [19].
[23] Statement of Claim, [7(b)].
[24] Statement of Claim, [12].
[25] Statement of Claim, [5].
[26] Statement of Claim, [6].
[27] Statement of Claim, [18].
[28] Statement of Claim, [14].
[29] Statement of Claim, [16].
12.The alleged non‑disclosure is said to have led to ACK and Markoff's completion of the Sale Agreement and Land Contract, which ultimately caused loss and damage.[30]
[30] Statement of Claim, [21].
13.The second[31] misleading or deceptive conduct claim relates to an asserted prior representation, termed the No Significant Change Representation (which is denied by Mercy).[32] It is alleged that on a continuous basis from 19 January 2016 until Completion,[33] Mercy represented to ACK that, as the new proprietor, it did not intend to make any significant changes to the manner in which the Business operated.
[31] Statement of Claim, [22].
[32] Statement of Claim, [12] ‑ [13]; Defence, [12] ‑ [13].
[33] Completion being 27 September 2016: Statement of Claim, [5]; Defence, [5(b)].
14.The misleading or deceptive conduct is said to arise by the continuance of the No Significant Change Representation in the context of the existence of any, or all, of the Use of Shao Matter, Future Admission Responsibility Matter and Change in Resident Mix Matter. It is alleged that the Sale Agreement and Land Contract were completed by reason of that conduct, and loss and damage was suffered.[34]
[34] Statement of Claim, [22], [23(d)‑(e)].
How do proposed questions 1‑3 have utility in respect of the misleading or deceptive conduct claims?
15.Broadly speaking, the alleged loss and damage in respect of both misleading or deceptive conduct claims is described as ACK and Markoff's loss of opportunity to:
(a)obtain the 'true value' of the assets subject of the Sale Agreement and Land Contract;[35] or
[35] Statement of Claim, [21(c)], particulars c‑d.
(b)continue to run the Business (i.e. a multi-layer 'no contract' counterfactual) (Retention Counterfactual).[36]
[36] Statement of Claim, [21(c)], particulars e‑xii.
16.Importantly, to establish either alleged lost opportunity, the plaintiffs must first establish an entitlement to terminate the Sale Agreement.[37] ACK and Markoff allege, in substance, that the Use of Shao Matter, the Future Admission Responsibility Matter and the Change in Resident Mix Matter, separately or together, constituted or evidenced an anticipatory breach of clause 9.1.4.1 and (or) clause 9.1.4.2 of the Sale Agreement by Mercy, that would have entitled ACK and Markoff to terminate the Sale Agreement, which consequently would have enlivened a contractual right for them to terminate the Land Contract.[38]
[37] Statement of Claim, [21(c)], particular b.
[38] Statement of Claim, [21(c)], particular a.
…
What is the breach of contract claim?
21.ACK and Markoff also allege that Mercy breached the Sale Agreement, causing loss and damage (Breach of the Sale Agreement Claim).[39] That is denied by Mercy.[40]
[39] Statement of Claim, [28], [30].
[40] Defence, [28], [31].
22.ACK and Markoff allege an Alignment Term[41] and Express Good Faith Term[42] within the Sale Agreement, as well as a Duty to Co‑operate.[43]
23.They assert that Mercy took certain actions or steps after Completion which, on a proper construction of those terms and duty, constituted a breach of the Sale Agreement and caused ACK loss and damage.[44] In summary, those actions or steps, which are either denied or not admitted by Mercy,[45] included the following:
(a)moving Mr Shao into a role where he had no responsibility for developing and implementing strategies to maximise the Refundable Deposits;[46]
(b)failing to appoint staff members with specific and primary responsibility for advertising and admitting residents;[47] and
(c)implementing a policy to ensure that 40% of residents were concessional (i.e. were not contributing to the Refundable Deposits).[48]
How does proposed question 4 have utility in respect of the breach of contract claim?
24.The loss and damage arising from Mercy's alleged breach is described as the lost opportunity to derive the Deferred Payment Fee.[49] It is estimated that $6 million would have been payable to ACK had Mercy not breached the Sale Agreement as alleged.
[41] Statement of Claim, [7(c)](iv)A.
[42] Statement of Claim, [7](c)(iv)B.
[43] Statement of Claim, [8].
[44] Statement of Claim, [25] ‑ [28], [30].
[45] Defence, [25] ‑ [27].
[46] Statement of Claim, [26].
[47] Statement of Claim, [25].
[48] Statement of Claim, [24].
[49] Statement of Claim, [30], particulars.
I have annexed to these reasons the relevant parts of the pleading.
The plaintiffs appear to dispute the characterisation of the pleading in paragraph 16 of the defendants' submissions.[50] The plaintiffs did not explain why it was disputed. In my view, the defendants' characterisation is consistent with the Statement of Claim.[51]
[50] See the Plaintiffs' Submissions Opposing Application for Preliminary Trial filed 6 November 2023 (Plaintiffs' Submissions) [69].
[51] See the Annexure, in particular the extracts of the Statement of Claim [20] ‑ [23].
The plaintiffs have said that they intend to acquire expert evidence in support of the Retention Counterfactual in seven fields of expertise, in four stages:[52]
(a)first stage - quantity surveyor, planning expert and building expert;
(b)second stage - aged care industry expert;
(c)third stage - real estate valuer and aged care business valuation expert; and
(d)fourth stage - forensic accountant.
[52] ts 54 ‑ 57.
The defendants propose to adduce expert evidence on the same issues.
By this application, the defendants seek to have four questions determined before the parties are required to embark upon the task of acquiring that expert evidence. If answered in the defendants' favour, the plaintiffs' claims would fail. The defendants further submit that, even if the questions are not all answered in their favour, the answers will reduce the complexity of the issues remaining.
The application proposes that the following questions (Preliminary Questions) be answered:[53]
Question One:
Did [Mercy] engage in misleading or deceptive conduct by way of the alleged Non‑Disclosure Contraventions (as pleaded at [20] of the Statement of Claim)?
Question Two:
Did Mercy engage in misleading or deceptive conduct by way of the alleged No Significant Change Contravention (as pleaded at [22] of the Statement of Claim)?
Question Three:
If the answer to either question 1 or question 2 (or both) is yes, did either the Non‑Disclosure Contraventions or the No Significant Change Contravention (or both) entitle ACK and Markoff to terminate the Sale Agreement (as pleaded at [21(c)] particular b of the Statement of Claim)?
Question Four:
Did Mercy breach any of the Alignment Term, the Express Good Faith Term and the Duty to Co-operate (as pleaded at [28] of the Statement of Claim)?
[53] Chambers Summons filed 20 October 2023. The defined terms for the Statement of Claim and Sale Agreement have been altered for consistency with these reasons.
The plaintiffs' misleading and deceptive conduct claims would fail if questions 1 and 2 were answered 'no'. The defendants submit, and I accept, that the plaintiffs' misleading and deceptive conduct claims would also fail if question 3 was answered 'no'. The defendants point out that none of the questions would require an evaluation of the elements of reliance or loss.[54]
[54] See the Defendants' Submissions [16] ‑ [20]. See also ts 76 ‑ 81.
If question 4 were answered 'no', the plaintiffs' claim in contract would fail. Further, answering question 4 would not require an evaluation of loss.

Legal framework

Under O 32 r 4 of the Rules of the Supreme Court 1971 (WA), the court
may order that any question or issue arising in a cause or matter whether of law or fact or partly of law and partly of fact, and whether raised by the pleadings or by agreement of the parties or otherwise be tried separately from any other question or issue whether before at or after the trial or further trial of the proceedings, and may direct that a case and the question or issue for decision be stated.
The starting point is that ordinarily all issues arising in an action will be dealt with together in the trial of an action. A decision to determine some issues prior to the trial should only be made where the utility, economy and fairness of doing so is clearly made out.[55]
[55] Landsdale Pty Ltd v Moore [2009] WASCA 176 [20] ‑ [22].
In Carlo Nobili SpA Rubinetterie v Militaire Nominees Pty Ltd,[56] McKechnie J considered a series of cases that dealt with applications for separate trials. His Honour said that he distilled the following principles from those cases:[57]
[56] Carlo Nobili SpA Rubinetterie v Militaire Nominees Pty Ltd [2004] WASC 47 [3].
[57] Carlo Nobili SpA Rubinetterie [4] (numbering added).
1.A separate trial of issues is only appropriate in clear and simple cases.
2.Separate trials of issues should only be embarked upon when the utility, economy and fairness are beyond question.
3.The fact that the resolution of a separate trial may determine the litigation is relevant.
4.Separate trials of issues may be appropriate where it is likely to save expense and inconvenience.
5.There is a focus in the Rules of the Supreme Court on the expedition of determination of matters before the Court and separate trials of issues may advance the expedition.
6.A possibility that the determination of issues tried separately may lead to settlement should be taken into account even though the issues may not finally dispose of the action.
7.In many cases the formulation of specific questions to be tried separately, from and in advance of other issues, will assist in the resolution of the matters in issue if the questions are capable of final answer in accordance with the judicial process.
8.Separate trials are inappropriate where the result depends on complex issues of fact or when a preliminary question is one of mixed fact and law.
9.The procedure should be confined generally to cases where facts are complicated and the legal issues short, otherwise it can be a treacherous shortcut.
10.Separate trials may be productive of delay, extra expense and uncertainty of outcome, which they are intended to avoid. Saving some time is often illusory when the parties have the necessity of making full preparation and factual matters relevant to one issue are relevant to others which overlap.
11.There is potential for further appeals.

Although describing them as 'principles', his Honour observed that these were 'guides to the exercise of discretion'. His Honour noted that the discretion must be exercised on a case‑by‑case basis, having regard to both the private interests of the parties and the public interest in the prompt and efficient resolution of litigation.[58]
[58] Carlo Nobili SpA Rubinetterie [5].
That these are not blanket rules is further confirmed by the statement in the eighth point in McKechnie J's summary that '[s]eparate trials are inappropriate … when a preliminary question is one of mixed fact and law'. Order 32 r 4 expressly provides that the court may order 'that any question or issue … whether of law or fact or partly of law and partly of fact [can] be tried separately'.[59]
[59] And see Building Corporation WA Pty Ltd v Marshall [2021] WASC 242 [26] ‑ [28].
That said, a preliminary trial to determine questions of mixed fact and law should not be conducted unless certain conditions are met. First, the questions must be precisely formulated.[60] Second, all of the facts that might be relevant to the determination of each question must be identified. Third, in relation to each relevant fact, it must be specified whether the fact is to be assumed to be correct for the purposes of the preliminary determination, or is a fact which both sides accept as correct, or is a fact which is to be judicially determined.[61]
[60] This requirement applies to all questions to be determined in a separate trial, regardless of whether the question is one of mixed fact and law - see Jacobson v Ross & Jacobson [1995] 1 VR 337, 340.
[61] See Building Corporation [26] ‑ [28], [72] and [74]. See also Herridge v Electricity Networks Corporation t/as Western Power [No 2][2017] WASC 204 [13].
In addition to the matters outlined by McKechnie J, a factor weighing against separate trials is any risk that the trial judge of the first trial would be unable to hear the second, due to apprehended bias. This may arise if the judge in the first trial makes credibility findings in relation to witnesses who are to give evidence in the second trial.
Even where credibility is not in issue, it is undesirable for witnesses to have to give evidence in two separate trials, for reasons of convenience and efficiency. Accordingly, if separate trials may have this effect, this would be a factor weighing against separate trials.[62]
[62] Instyle Contract Textiles v Good Environmental Choice Services (No 3) [2010] FCA 466 [42]. See also Jinxin Inc v Aser Media Pte Ltd [2022] EWHC 2431 [45].

Another factor weighing against separate trials is where there would be significant contested factual issues in both trials.[63]
[63] Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718; (1999) 217 ALR 495 [8(g)], citing GMB Research & Development Pty Ltd v The Commonwealth [1997] FCA 934.
In Landsdale Pty Ltd v Moore,[64] the Court of Appeal reviewed a decision by the learned Master to order that there be separate trials of liability and damages in an action for negligence. Newnes JA, with whom Buss JA[65] agreed, said that separate trials 'will generally only be appropriate in cases where there is a clear line of demarcation between those issues, and the determination of one in isolation from the other is likely to result in a substantial saving in time, inconvenience and expense'.
[64] Landsdale [22].
[65] As his Honour then was.
After noting this statement, Lundberg J in Inpex Operations Australia Pty Ltd v AIG Australia (No 2) said (citations omitted):[66]
Conformably with this 'clear line of demarcation' proposition, there is nothing unusual in allowing questions of liability to be determined separately from questions of quantum of damages. This is particularly appropriate in circumstances where the resolution of the assessment of damages is likely to be particularly complex, or where uncertainties and difficulties in making an assessment of quantum in the course of a single trial are anticipated, such as to favour a separate trial on quantum. The plaintiff observes in its submissions that separate trials are common in intellectual property cases, particularly where the financial aspects of the remedy sought are complex.
[66] Inpex Operations Australia Pty Ltd v AIG Australia Ltd [No 2] [2023] WASC 61 [62].
Although the remarks of Newnes JA and Lundberg J were directed to the separate determination of liability and quantum, their force is not limited to such cases. The reasoning underlying the remarks depends upon the clear demarcation of issues and the potential benefits, not upon the fact that the clear demarcation is between liability and quantum.
The discretion is to be exercised having regard to the objectives set out in O 1 r 4A and r 4B of the Rules of the Supreme Court.[67] The exercise of the discretion 'requires a proper foundation. There must be probative evidence before the court which justifies a departure from the usual position. That evidence should be more than conclusionary and not expressed at too high a level of generality'.[68]
[67] Inpex [64].
[68] Inpex [70].

The issue

The ultimate issue is whether the court is satisfied that it is 'just and convenient' for an order for a separate trial to be made.[69] Determining this will require an analysis of the potential benefits and risks of separate trials.
[69] Woodley v Woodley [2014] WASC 377 [11].

The potential benefits

If there is no need for a second trial

There would be significant savings

If the answers to the first and second Preliminary Questions are no (and any appeal fails), the plaintiffs' misleading and deceptive conduct claims would fail. Further, if the answer to the third Preliminary Question is no (and any appeal fails), the plaintiffs' misleading and deceptive conduct claims would fail. If the answer to the fourth Preliminary Question is no (and any appeal fails), the plaintiffs' contract claim would fail. Accordingly, if the answers to questions 1, 2 and 4 are 'no', or the answers to questions 3 and 4 are no, there would be no need for a second trial. The defendants submit that, if there were no need for a second trial, this would save a great deal of time and cost.
I accept this. In particular, there would be no need for expert evidence. If all issues are required to be determined, there will be expert evidence from as many as 14 experts in seven different fields of expertise. The plaintiffs propose to obtain the evidence in four stages, as the evidence of some experts will depend upon the evidence of other experts. Some of that expert evidence will be complex.[70]
[70] This was not disputed by the plaintiffs. For a discussion of some of the complexities, see the Defendants' Submissions [32] ‑ [37].
If the expert evidence did not need to be obtained and adduced, this would significantly reduce the cost to the parties and the required number of hearing days.
The defendants' solicitor Ms Vasic estimates the cost saving to the defendants would be $811,845.[71] Ms Vasic estimates 15 hearing days would be saved.[72]
[71] 19‑page Affidavit of Ivana Vasic filed 20 October 2023 (First Vasic Affidavit) [35] ‑ [42].
[72] First Vasic Affidavit [30] ‑ [33].
The saving of time to the court would go well beyond the lower number of hearing days required. If there were no expert evidence, there would be no need for the court to be involved in resolving disputes as to the questions for the experts and the agreed facts, assumptions and materials. There would be no need for the court to conduct conclaves with up to seven groups of experts prior to the trial.
The plaintiffs do not dispute that, if the answers to the Preliminary Questions are no (and any appeal fails), a great deal of time and cost will be saved. However, they submit that a mere chance of resolving the proceedings at an earlier stage is not sufficient to establish that the necessary, utility, economy, and fairness are beyond question.[73] I would interpret this as a submission that the chance in this case would not be sufficient on its own to justify separate trials.[74]
[73] Plaintiffs' Submissions [27].
[74] If the plaintiffs intended to submit that there should never be separate trials if there is only a chance of resolving the proceedings at an earlier stage, I would reject such a submission as being inconsistent with the scope and purpose of the rule and with decided cases.
I accept that the chance is not sufficient on its own. All of the relevant factors must be taken into account. The defendants do not contend otherwise.[75] Nevertheless, the chance that significant savings would flow is a factor weighing in favour of granting the application.
[75] ts 99.
I earlier referred to the remarks of Newnes JA and Lundberg J as to the proper approach to an application for separate trials of liability and quantum. I noted that the force of their remarks is not limited to such cases. The reasoning underlying the remarks depends upon the clear demarcation of issues and the potential benefits, not upon the fact that the clear demarcation is between liability and quantum.
The defendants contend that there is a clear demarcation between the issues that would be determined in each trial, if separate trials were ordered. They contend that the resolution of the issues that would be determined in the second trial is likely to be particularly complex. They further contend that it could be difficult to determine all of the issues in a single trial.[76]
[76] ts 74 ‑ 75.
I accept that, if there is a clear demarcation between the issues to be determined in each trial, and if the resolution of the issues proposed to be determined in the second trial is likely to be particularly complex, this would be a strong factor in favour of separate trials. Similarly, if there is a clear demarcation between the issues, and if it could be difficult to determine all of the issues in a single trial, this too would be a strong factor in favour of separate trials.
I have some concerns as to whether the demarcation between the proposed issues in this case is clear. However, I otherwise accept the defendants' submissions. If I was satisfied that the demarcation was clear, the potential savings would be a strong factor in favour of separate trials.

The matter would be resolved far earlier

The defendants submit that, if there was no need for a second trial, the matter would be resolved far earlier.
The defendants contend that the Preliminary Questions could be ready for hearing in six to eight months.[77] The defendants contend that, if the issues are not separated, a trial of all the issues may not be until 2026.[78]
[77] First Vasic Affidavit [31].
[78] First Vasic Affidavit [34] and Defendants' Submissions [38].
The plaintiffs contend that answering the questions in a preliminary trial may save only six months.[79] The plaintiffs assert that a preliminary trial could be heard in mid‑July 2024,[80] while a trial of all of the issues could be heard in late February or March of 2025.[81]
[79] Plaintiffs' Submissions [37]
[80] Affidavit of Alexander William King filed 6 November 2023 (King Affidavit) [42].
[81] King Affidavit [44].
Both sides have tendered affidavits from solicitors, seeking to justify the respective estimates. Both sides submit that their estimates are more accurate.
The main point of difference between them is the date on which the expert evidence could be obtained. The defendants' solicitor estimates that, if separate trials were not ordered, the expert evidence would not be obtained for another two years, even assuming there are no delays or difficulty with expert availability.[82] The plaintiffs' solicitor estimates that the plaintiffs' expert evidence could be finalised by the end of July 2024.[83] He says that, if the defendants' expert evidence is then filed by no later than October 2024 and any conclave occurs by the end of the year, the parties could reasonably be ready for trial on all issues by late February or early March 2025.[84]
[82] See the First Vasic Affidavit [34].
[83] See the King Affidavit [29].
[84] King Affidavit [30] and [44].
I consider that the plaintiffs' estimate is flawed.
First, as the plaintiffs' solicitor acknowledges, his estimate as to when a trial of all issues could take place assumes that the expert evidence 'can occur contemporaneously with, or (as necessary) immediately following, the finalisation of lay evidence'.[85]
[85] King Affidavit [44].
On the material currently available to me, that assumption does not appear to be open.
The plaintiffs' evidence is that four potential lay witnesses have been proofed 'on a preliminary basis', including Mr Markoff, and that Mr Markoff's proof is 'significantly advanced'.[86] There appear to be another 11 witnesses that the plaintiffs propose to call.[87] It appears that the plaintiffs have not begun to commence proofing any of those 11.[88] There is no express statement as to when the plaintiffs expect the lay witness evidence to be finalised.
[86] King Affidavit [42(a)].
[87] King Affidavit [21] and [23].
[88] King Affidavit [21] ‑ [23] and [42].
The evidence indicates that the expert opinions of each of the experts in the first stage will depend on, among other things, factual allegations that are expected to be proved by lay witnesses.[89]
[89] See the affidavit of Tara Monique Privitelli filed 6 November 2023 (Privitelli Affidavit) [4] and attachments TMP‑1, TMP‑2 and TMP‑3, where draft lists of assumptions for the three experts in the proposed first stage refer to as yet unidentified facts to come from the lay witness evidence of two witnesses.
Therefore, unless the experts are to be briefed piecemeal, there will be a delay before the first stage of experts can be briefed.
Second, even if all of the necessary witness proofs had been finalised, I consider it would still be highly unlikely that the plaintiffs' expert evidence would be ready by the end of July 2024.
The plaintiffs have not yet secured experts in four of the seven fields.[90] The plaintiffs did not explain why that was so.[91] Further, the plaintiffs do not appear to have yet identified, with the necessary specificity, the assumptions they propose the experts to make. Finally, the plaintiffs estimate that the time between the provision of the individual reports in one stage to the provision of the individual reports in the next stage is one month.[92] That seems optimistic.
[90] ts 122 ‑ 123.
[91] ts 122 ‑ 123.
[92] See the King Affidavit [29].
Third, I do not accept that the expert evidence would or should be obtained in the manner outlined by the plaintiffs' solicitor. Instead, I would expect there to be conferral and joint reports from the experts of each side in each field of expertise, in the course of each stage.[93]
[93] The plaintiffs did not dispute that this would be an appropriate way of dealing with the expert evidence - see ts 120 (and ts 88 ‑ 89).
That is, I expect that, once the list of questions, assumptions and facts have been settled:
(a)the experts in each of the three fields in the first stage would provide reports, confer with each other (which, subject to hearing from the parties, would likely be best managed by a conclave with a registrar) and produce a joint report;
(b)those reports would be provided to the experts in the field involved in the second stage, who would then provide reports, confer with each other (likely in a conclave with a registrar) and produce a joint report; and
(c)this would be repeated in relation to the third and fourth stages of experts.
Having regard to these matters, the nature of the proposed expert evidence and the proceedings as a whole, I consider it unlikely that the expert evidence would be obtained before mid‑2025.
I am satisfied that the matter would be resolved far earlier if there was no need for a second trial. This is a factor weighing in favour of granting the application.
Before leaving this topic, I note that the plaintiffs submit:[94]
Given that the conferral process in relation to the Plaintiffs' expert notes has not been particularly smooth or speedy, the Plaintiffs' solicitors are considering adopting a streamlined approach whereby the total number of experts required may be reduced by way of one expert opining on various matters. For example, it may also be possible for the plaintiffs' forensic accounting expert to opine about the aged care valuation. Similarly, rather than having a quantity surveyor and a separate building expert, one expert may be able to opine on all building-related matters. In this way, the likely time required for expert evidence at trial (and associated costs) will be reduced.
[94] Plaintiffs' Submissions [58].
At this stage, this is purely speculative, and there is no explanation as to why this is something still under consideration, rather than decided. I have disregarded this submission.[95]
[95] And see ts 128 ‑ 129.
Finally, it seems likely that the plaintiffs will seek to amend their pleading. This may cause further delay (or even a whole new approach). As this is currently an unknown, I have not taken it into account in considering the application.

It would be fairer to the defendants

The defendants submit, in effect, that because the plaintiffs' case is so weak (they say), the defendants should not be put through an exceedingly lengthy and onerous process of having to deal with the complex loss and damage argument pleaded in paragraph 21(e) of the Statement of Claim.[96]
[96] ts 79.
The defendants point out that the first misleading and deceptive conduct claim is based on an allegation that, after the Sale Agreement had been entered into, Mercy failed to disclose particular matters. For this reason, the defendants say that the plaintiffs will need to prove (as they allege in the Statement of Claim) that the failure to disclose entitled them to terminate the Sale Agreement for repudiatory breach.[97]
[97] ts 78 ‑ 79.
The defendants acknowledge that the second misleading and deceptive conduct claim is based on a representation said to have been made prior to the Sale Agreement being entered into. However, they note that it is pleaded to have been a continuing representation and is said to have been falsified by the same post‑contract conduct relied upon in relation to the first misleading and deceptive conduct claim.[98]
[98] ts 79.
It is not possible, nor would it be appropriate, for me to reach a firm view about the strength of the plaintiffs' case. For the purposes of this application, however, I do accept that the plaintiffs are likely to face challenges in establishing their misleading and deceptive conduct claims.
This is a factor weighing in favour of granting the application.

If there were a need for a second trial, would there still be a benefit?

The policy

The defendants submit that, even if the answers to the Preliminary Questions did not eliminate the need for a second trial, the answers are still likely to be beneficial. They submit that the preliminary trial will likely give rise to at least one factual finding of central relevance to the plaintiffs' case in respect of the Retention Counterfactual and will therefore assist the preparation of expert evidence.[99]
[99] Defendants' Submissions [19].
The 'factual finding of central relevance' referred to in the defendants' submission relates to the policy the plaintiffs allege the business had historically adopted (Bonded Resident Policy) and would have adopted if the sale had not proceeded. The plaintiffs allege that Mercy had represented that it would not make any change to the way in which the business was run (the No Significant Change Representation)[100] and had confirmed in the 7 July Conversation (after the Sale Agreement had been entered into) that the Bonded Resident Policy would be continued.[101]
[100] Statement of Claim [12] ‑ [13].
[101] Statement of Claim [14].
The plaintiffs propose to ask at least five of the experts to express opinions based on the assumption that ACK would have operated the business in accordance with the Bonded Resident Policy if the sale had not proceeded.[102] The plaintiffs propose to ask at least two of those experts to make an additional assumption that ACK had operated the business in accordance with the Bonded Resident Policy prior to the sale.[103]
[102] See the Privitelli Affidavit [4] and assumption (b) in attachments TMP‑1, TMP‑2 and TMP‑3, and assumption (d) in attachments TMP‑4 and TMP‑5.
[103] See the Privitelli Affidavit [4] and assumption (a) in attachments TMP‑4 and TMP‑5.
The Bonded Resident Policy is pleaded to have been a policy of ensuring that 'the vast majority' of residents accommodated at the business facilities were required to make payments by way of specified bonds or deposits (Bonded Residents), as distinct from residents entitled to concessional rates (Concessional Residents).[104]
[104] Statement of Claim [9] ‑ [10].
The plaintiffs have particularised 'vast majority' as meaning significantly more than 50%, but less than 100%.[105]
[105] Plaintiffs' Response to Defendants' Request for Further and Better Particulars of Amended Statement of Claim filed 20 December 2019 [2(b)].
The defendants submit that an expert opinion based on a policy expressed in such broad terms would be unlikely to be helpful. The defendants submit that, in addition to determining whether there was such a policy, the court would need to determine what it actually was. The defendants submit that the court may find, for example, that it was a policy to make best endeavours, or to maximise refundable deposits, or to have no less than a specific number of Bonded Residents.[106]
[106] ts 84.
The defendants submit that the alleged Bonded Resident Policy is 'integral to the retention counterfactual which drives the alleged profitability of the business historically and going forward'.[107] The plaintiffs do not contend otherwise.
[107] ts 91.
The defendants submit that a finding that the policy existed (or did not) and what it entailed would be of considerable assistance to the experts and, consequently, to the court.[108]
[108] ts 84.
The plaintiffs did not engage with the defendants' submissions as to the value of determining the existence and scope of the alleged policy. The plaintiffs said only that, if there was much to be gained from a finding in respect of the policy, why not have a trial just on the policy?[109] When asked how, if separate trials were not ordered, the plaintiffs would deal with the vagueness of the alleged policy when briefing the experts, the plaintiffs intimated that the pleading may be refined.[110] Senior counsel appearing for the plaintiffs in the hearing had only recently been briefed, and did not sign the Statement of Claim.[111]
[109] ts 126.
[110] ts 128.
[111] See ts 101.

I accept the defendants' submissions on this point. The alleged Bonded Resident Policy does appear to be integral to the Retention Counterfactual. It would reduce the complexity of the expert evidence if it were known whether there was a policy relating to the proportion of Bonded Residents and, if there was such a policy, what it was.
It will be recalled that the defendants submit that the preliminary trial will likely give rise to at least one factual finding of central relevance to the plaintiffs' case in respect of the Retention Counterfactual (being the existence and scope of the alleged Bonded Resident Policy) and will therefore assist the preparation of expert evidence. During the hearing, senior counsel for the defendants explained that the possibility of further helpful findings was left open, as the findings about the alleged Bonded Resident Policy might inform a second integral aspect of the Retention Counterfactual. This was, if ACK was going to continue running the business on the basis of the policy, how it would have been run.[112]
[112] ts 99.
I accept this.

Are the plaintiffs unable to deal with their claimed loss?

The defendants point out that the current drafts of assumptions for the experts are inadequate.[113] For example, the drafts themselves note that they are incomplete and that further assumptions will need to be added from the lay evidence of particular witnesses or documents.[114] Further, the drafts do not specify the scope of the documentation to be provided to each expert, and the documents that are listed are described in very broad terms.[115]
[113] ts 85.
[114] See the Second Vasic Affidavit pages 21 (assumptions (b) and (g)) and 25 ‑ 26 (assumptions (b), (g), (j), (o) and (p)). See also ts 85 ‑ 86 and ts 89 ‑ 91.
[115] ts 89 ‑ 90.
The defendants submit that it appears that the plaintiffs are unable to grapple with the prosecution of the Retention Counterfactual.[116]
[116] ts 71 ‑ 73, 87 and 138 ‑ 139.
The plaintiffs point out that the programming orders require the parties only to 'confer as to the approach to, and extent of, expert evidence and complete such conferral' by a particular time. This was certainly the position up until 10 August 2023. On that date, an order was made by consent that the plaintiffs provide 'their revised proposed facts, issues, assumptions, and questions for each expert' to the defendants by 18 August 2023. The plaintiffs provided draft expert documents to the defendants on 18 August 2023, 6 September 2023, and 19 September 2023.[117]
[117] Second Vasic Affidavit [10] ‑ [12] and attachments IV‑2, IV‑3 and IV‑4 and the Privitelli Affidavit [4] and attachments TMP‑1, TMP‑2, TMP‑3, TMP‑4, and TMP‑5.
I accept that, up until August 2023, the orders did not require the plaintiffs to prepare a comprehensive draft list of assumptions for the experts. Nevertheless, parties are expected to attend to the efficient progress of litigation in which they are involved. If matters arise that cannot be resolved by conferral, parties are expected to promptly seek the court's assistance. The plaintiffs in this case instituted the proceedings in September 2019. They amended the statement of claim in July 2022 to plead the Retention Counterfactual. They still have not completed proofing their lay witnesses.[118] From this, I would infer that they are not yet in a position to identify the specific factual assertions from the lay evidence and documents that they want the experts to assume. Even the most recent versions of the draft assumptions for the first stage experts refer to unspecified evidence to come from lay witnesses.[119]
[118] King Affidavit [22].
[119] Privitelli Affidavit [4] and attachments TMP‑1 (see the foot of pages 4 and 5), TMP‑2 (see the foot of pages 6 and 7) and TMP‑3 (see the foot of pages 8 and 9).
I further note that it appears that the plaintiffs are still 'considering' whether five experts could be called instead of seven.[120]
[120] See the King Affidavit [26].
I understand the defendants' concerns as to the way in which the matter has been progressed. However, I consider it is too soon to conclude that the plaintiffs will be unable to grapple with the complexities of their pleaded case. This application serves to highlight the defendants' concerns. I expect it will prompt the plaintiffs to address those concerns promptly and fully. If they fail to do so, I would expect the defendants to bring the matter back before me. Should that occur, it may then be appropriate to reconsider whether separate trials should be ordered. Even if the defendants did not get the answers they seek in a preliminary trial, the answers may serve to make the task of obtaining the expert evidence more manageable and the evidence itself less complex.

Conclusion as to benefit even with a second trial

For these reasons, I accept that the determination of the Preliminary Questions would reduce the complexity of the expert evidence to the extent of the existence and content of the alleged Bonded Resident Policy, and possibly beyond that.
This is a factor in favour of separate trials.

The risks

Risk of fragmentation and delay in ultimate resolution

The plaintiffs raise the risks of fragmentation arising from appeals. This is a real risk. A party may appeal the outcome of a preliminary trial. It will often be appropriate to await the outcome of the appeal before dealing with the balance of the issues. If, following the appeal, there is a need for the balance of the issues to be resolved, the determination of those issues may also be appealed.
I note that the defendants estimate that the preliminary trial would require about three hearing weeks. The defendants do not provide an estimate for the length of the second trial, but accept the plaintiffs' estimate that it would be approximately 14 days.[121] A trial of that length cannot usually be listed immediately. Then, there would be a delay while the judgment was written. Then, if the judgment were appealed, the Court of Appeal would need to find a date to hear an appeal against a three‑week trial, and then resolve the appeal. Then, if the second trial were required, it would be necessary to find a 14‑day window for the second trial.
[121] ts 93.
The defendants acknowledge that there is a risk that an appeal of the preliminary trial could delay the matter even further. However, they submit that, given the delays to date in these proceedings, which were commenced in 2019, such an issue should not weigh heavily in the balance.[122]
[122] Defendants' Submissions [45].
There has been delay. Some of the delay has been caused by the complexity of the proceedings and of discovery in particular. Some, however, appears to be attributable to the plaintiffs' decision to amend the Statement of Claim to allege the Retention Counterfactual. In particular, on 18 June 2021, conferral as to the expert evidence was deferred when the plaintiffs foreshadowed making this amendment. It appears that conferral did not recommence until May 2022, nearly a year later.[123] The amendment was not made until July 2022.
[123] First Vasic Affidavit [18] ‑ [19]. See also ts 115 ‑ 116.
However, I do not accept that the delay in this case means that I should reduce the weight to be given to the risk that a preliminary trial (if it did not go the defendants' way) would further delay the ultimate resolution of the proceedings. Even if the plaintiffs were entirely responsible for the delay (which I do not find), the impact of further delay is not limited to the impact on the parties to the particular litigation.
Accordingly, the fact that separate trials may cause further delay is a factor weighing against separate trials. That said, separate trials inherently risk fragmentation and delay if a second trial is required. The risks are, no doubt, one of the reasons why separate trials should only be ordered where the benefit is clearly made out.
On the topic of delay, I note that the plaintiffs submit that Mr Markoff's age, of 75, is relevant to the assessment. In the absence of any evidence of mental or physical infirmity, I do not accept that.

Risk of increase in costs and burden

If a second trial were required, there is a risk that the two trials would be more costly, less efficient, and require more of the court's time. Whether or not the risks materialised, and to what degree, would depend on the extent to which, if any, the preliminary trial reduced the parameters of the remaining issues.
To maximise the potential savings of determining the Preliminary Questions early, it would be reasonable for the parties to focus on preparing only those questions. Indeed, it is to be expected that, if an order for separate trials were made now, the parties would agree programming orders requiring the filing of witness outlines, submissions, and trial bundles limited to those topics. If the preliminary trial did not resolve the proceedings, the parties would be required to produce the same products in relation to the remaining topics. In my view, it is reasonable to infer that this would be more costly and less efficient than had all the topics been dealt with at once.
Similarly, I expect that there would be an increase in the time required by the court. If nothing else, the court would need to familiarise itself with the background context prior to each trial.
I do not accept that the re‑familiarisation that would be required of the lawyers and the court would be limited to simply reading the judgment from the preliminary trial,[124] particularly in a case of this size and complexity.
[124] See ts 98.
The fact that separate trials may be overall more costly, less efficient, and require more of the court's time is a factor weighing against separate trials.

Risk of apprehended bias due to credibility findings

I earlier noted that a factor weighing against separate trials is any risk that the trial judge of the first trial would be unable to hear the second, due to apprehended bias. This may arise if the judge in the first trial makes credibility findings in relation to witnesses who will be required to give evidence in the second trial.[125]
[125] See under the heading 'Legal framework'.
In my view, the risk cannot be excluded in this case, at this stage.
As noted earlier, each of the misleading and deceptive conduct claims refers to the Use of Shao Matter, the Pre‑Completion Affirmation, the Future Admission Responsibility Matter, and the Change in Resident Mix Matter. These are pleaded as follows:[126]
[126] Statement of Claim [15] ‑ [17].
15.At a meeting of Mercy staff on a date presently unknown to ACK, but on or prior to 12 September 2016, Bert Campbell, the Chief Financial Officer of Mercy, stated that Mercy would only use Mr Shao until they obtained all of the information they needed from him and would then terminate his employment (Use of Shao Matter).
16.On 27 July 2016 Mr Markoff attended each of the Business Facilities with management staff of Mercy and was expressly assured by those staff that there would be no changes to the operation of the Business following Completion (Pre‑Completion Affirmation).
Particulars
The assurances were verbal and made by persons whom attended the meeting and held themselves out to be management staff of Mercy. The Plaintiffs are presently unable to name those persons. The identity of those persons will be particularised prior to trial.
17.At a meeting of the management staff of Mercy held 6 days prior to Completion, on 21 September 2016, Mercy's Director of Residential Care, Margaret Ingleton, advised all present that:
(a)she was responsible for reviewing the admission of future residents into the Business's Facilities (Future Admission Responsibility Matter); and
(b)when Mercy took over the Business Facilities, 40% of future residents admitted would be Concessional Residents (Change in Resident Mix Matter).
Particulars
The attendees at the meeting included Margaret Draper and Nicholas Shao.
As is apparent, each is alleged to have been said orally. I will refer to them collectively as the alleged 'Oral Statements'.
The defendants deny the Oral Statements were made.
The first misleading and deceptive conduct claim also refers to the 7 July Conversation. This is an allegation that Mercy representatives told Mr Markoff in a telephone conversation on 7 July 2016 that, in effect, Mercy would continue to run the business in accordance with the Bonded Resident Policy. The plaintiffs assert, in effect, that the failure of Mercy to follow the policy caused them not to be entitled to the Deferred Payment Fee.
The defendants do not admit the alleged contents of the 7 July Conversation.
Further, the plaintiffs plead that the Bonded Resident Policy was communicated to the defendants in various ways, including by Mr Markoff.[127] The defendants deny this.[128] While the Statement of Claim does not say so expressly, it seems likely that the plaintiffs will allege this was done orally.
[127] Statement of Claim [11].
[128] Defence [11].
The defendants submit that, at best, there is nothing more than a theoretical risk that credibility findings would be made in relation to a witness in the preliminary trial who would also be required to give evidence in the second trial.[129] The defendants do not contend that the Oral Statements are of complete irrelevance, but submit that they are of 'subordinate relevance'.[130] The defendants do not suggest that there is 'no prospect whatsoever of any cross‑fertilisation of credibility issues'. However, they submit that this is not a material concern sufficient to weigh against the granting of the application.[131] The defendants further submit that the proposed preliminary questions could be determined without making any findings as to Mr Markoff's credibility.[132]
[129] ts 82.
[130] ts 75. See also ts 134 ‑ 137.
[131] ts 82.
[132] ts 136.
I accept that the relevance of the Oral Statements is limited. I accept that they are only small pieces of the puzzle. However, the defendants do not contend that the Oral Statements were of no relevance. Further, the Statement of Claim alleges misleading and deceptive conduct by silence, and that that silence entitled the plaintiffs to terminate the Sale Agreement for repudiatory breach. Determining each of those allegations will require consideration of all of the relevant circumstances. In addition, the defendants do not contend that the preliminary trial could be conducted in a way that did not involve the determination of the factual issues.[133]
[133] ts 80.
Mr Markoff would be a central witness in the second trial. His credibility and reliability are likely to be challenged in the second trial, particularly in relation to the question of reliance. If I were to reject, in the preliminary trial, Mr Markoff's evidence of what was said to him on 7 July and 27 July 2016, an application may be made that I recuse myself from the second trial on the grounds of apprehended bias. If that application were successful, a second judge would be required to hear the second trial. Self‑evidently, this would be undesirable.
I accept that, at this stage, the risk is theoretical. I further accept that a risk that a second trial may need to be conducted by a second judge does not mean, of itself, that the application should be refused. Nevertheless, the undesirability of that occurring is such that even this theoretical risk is a factor weighing against the application.
Given this finding, it is unnecessary to consider whether there is more than a purely speculative risk that the credibility of any other witness may be in issue in both trials. Other risks that may arise if witnesses have to give evidence twice is discussed in the next section.

Other risks of witnesses giving evidence twice

I earlier noted that, even where credibility is not in issue, it is undesirable for witnesses to have to give evidence in two separate trials, for reasons of convenience and efficiency. Accordingly, if separate trials may have this effect, this would be a factor weighing against separate trials.[134] The defendants do not dispute this.
[134] See under the heading 'Legal framework'.
The plaintiffs assert that, apart from Mr Markoff, five other witnesses may have to give evidence twice.[135] The plaintiffs did not contend that this would cause any forensic difficulties. Rather, the plaintiffs contend that this would involve some overlap in the evidence, causing inefficiencies.[136] Further, it appears that the plaintiffs' submissions were based, at least in part, on a theoretical consideration of the issues arising on the pleading rather than on knowledge of what the witnesses would actually say.[137]
[135] King Affidavit [31] ‑ [36].
[136] ts 113 ‑ 114, 124 ‑ 125.
[137] See, for example, ts 130 ‑ 131.
I am willing to accept, for present purposes, that these witnesses may have to give evidence twice. It is not, however, apparent to me why there would be any overlap in their evidence in each trial so as to cause inefficiencies. In particular, the plaintiffs' own evidence is that the number of hearing days would not increase if separate trials were ordered.[138]
[138] See the King Affidavit [38], [40] and [41].
Nevertheless, the fact that some witnesses would[139] have to give evidence twice if the preliminary trial (and any appeal) did not resolve the proceedings is a factor weighing against the defendants' application. If nothing else, it would be inconvenient to the witnesses.

Significant contested factual issues in both trials

[139] At the very least, Mr Markoff would have to give evidence twice. The defendants also conceded Mr Shao may have to give evidence twice - see ts 135.

Another factor weighing against separate trials is where there would be significant contested factual issues in both trials.[140] That would undoubtedly be so in this case. The preliminary trial is estimated to take at least three weeks.[141] The second trial is estimated to take 14 days.[142]

Risk of an inadequate foundation for questions of mixed fact and law

[140] See under the heading 'Legal framework'.

[141] First Vasic Affidavit [30] and King Affidavit [38].

[142] First Vasic Affidavit [33(d)] and King Affidavit [40].

As noted earlier, special care must be taken before determining questions of mixed fact and law in a separate trial. It is necessary that the questions be precisely formulated. It is necessary that all of the facts that might be relevant to the determination of the question be identified. In relation to each relevant fact, it must be specified whether the fact is to be assumed to be correct for the purposes of the preliminary determination, or is a fact which both sides accept as correct, or is a fact which is to be judicially determined.
The questions that the defendants seek to be answered are precisely formulated. The defendants have not yet identified the facts that might be relevant and whether each such fact is agreed, to be assumed, or to be determined. In the circumstances of this application, it was reasonable not to attempt to do so.
If I had concluded that, subject to the identification of these matters, the questions should be determined separately, orders could have been made to ensure that those matters were identified well in advance of the separate trial. I would have directed the parties to identify those matters through conferral (with the court's assistance if necessary).

Reducing the chance of settlement?

The plaintiffs submit that separate trials would reduce the chances of settlement. The defendants submit it would increase the chances.
The plaintiffs submit that an order for separate trials would leave no role for a mediation or a resolution without any trial.[143] I do not accept that a commercial litigant would never settle a matter before all of the evidence has been assembled, including formal expert evidence as to quantum.
[143] Plaintiffs' Submissions [35].

The defendants submit that, as a preliminary trial could be heard more quickly than a trial of all of the issues, the parties would be forced to focus their attention on their prospects sooner than they otherwise would. The defendants submit that, even if the preliminary trial did not put an end to the proceedings, the parties would have additional motivation to settle before the second trial for two reasons. First, the defendants submit that the parties would be more motivated to settle once they knew the answers to the Preliminary Questions. Second, the defendants submit that simply the experience of the preliminary trial would make the parties more motivated to settle or to at least narrow the issues.[144]
[144] ts 92 ‑ 93.
In my view, it is impossible to predict the effect of separate trials on the prospects of settlement in this case. I could only speculate. I consider that this potential factor is neutral.

Conclusion

I am not satisfied that the Preliminary Questions should be determined separately. Despite the defendants' thoughtful and articulate submissions, I am not satisfied that the utility, economy, and fairness of doing so is clearly made out.
This decision does not foreclose a further application on different terms. It may be possible to separate issues that could reduce the complexity of the expert evidence, perhaps on the basis of assumed facts, without requiring, for example, credibility findings to be made or any (or many) witnesses to give evidence twice.
Nor does this decision foreclose a further application on the same terms, should developments in the progress of the matter make a separate trial more attractive. For example, once lay witness outlines or statements are exchanged, it may become apparent that, if the issues were separated, there would be no realistic risk that credibility findings would be required in relation to the same witness in both trials. Alternatively, once a full list of issues arising in the proceedings has been created, it may become clear that a preliminary determination would clearly be useful, economical, and fair.

Orders

For these reasons, I would dismiss the application. I will hear from the parties as to costs and further programming of the matter.

ANNEXURE - EXTRACTS OF PLEADING

Statement of Claim paragraphs 9 and 12-28

9.In the seven years prior to Completion, the Business adopted a policy of ensuring that the vast majority of residents accommodated at the Business Facilities were required to make payments by way of:
(a)'Accommodation Bonds' (in the period up to 30 June 2014); or
(b)'Refundable Accommodation Deposits' (in the period from 1 July 2014 to 27 September 2016),

(Bonded Residents).
…
12.On 19 January 2016 Mercy made a non-binding indicative offer to ACK for the purchase of the Business and Business Assets and represented to ACK that Mercy did not intend to make any significant changes to the manner in which the Business was operated in the event that Mercy was the purchaser of the Business (No Significant Change Representation).

Particulars
Letter dated 19 January 2016 from Chris Hall (CEO of Mercy) to Mr Tocknell.

13.At all times from 19 January 2016 until Completion of the [Sale Agreement] on 27 September 2016, the No Significant Change Representation was a continuing representation.
14.On 7 July 2016 Mr Markoff of ACK participated in a telephone conference with Mr Holden, Mr Hall, Mr Ross, Ms Porter and Mr Calagero on behalf of Mercy, in which:
(a)Mr Markoff stated that the 'bond issue [being maintenance of the Bonded Resident Policy] was the other major issue for me so I was happy to have you agree things would continue as they have in the past under Nicholas Shao. It is in both our interests that this policy continue'; and
(b)Mr Holden replied with words to the effect that 'We signed off on this so we are happy',

(7 July Conversation).
15.At a meeting of Mercy staff on a date presently unknown to ACK, but on or prior to 12 September 2016, Bert Campbell, the Chief Financial Officer of Mercy, stated that Mercy would only use Mr Shao until they obtained all of the information they needed from him and would then terminate his employment (Use of Shao Matter).
16.On 27 July 2016 Mr Markoff attended each of the Business Facilities with management staff of Mercy and was expressly assured by those staff that there would be no changes to the operation of the Business following Completion (Pre‑Completion Affirmation).

Particulars
The assurances were verbal and made by persons whom attended the meeting and held themselves out to be management staff of Mercy. The Plaintiffs are presently unable to name those persons. The identity of those persons will be particularised prior to trial.

17.At a meeting of the management staff of Mercy held 6 days prior to Completion, on 21 September 2016, Mercy's Director of Residential Care, Margaret Ingleton, advised all present that:
(a)she was responsible for reviewing the admission of future residents into the Business's Facilities (Future Admission Responsibility Matter); and
(b)when Mercy took over the Business Facilities, 40% of future residents admitted would be Concessional Residents (Change in Resident Mix Matter).

Particulars
The attendees at the meeting included Margaret Draper and Nicholas Shao.

18.At all material times prior to Completion, Mr Shao had been responsible for reviewing the admission of future residents into the Business Facilities (Pre-existing Admission Responsibility).
19.In the circumstances of the Deferred Payment Fee, No Significant Change Representation, [Sale Agreement], Land Contract, Pre‑existing Admission Responsibility, 7 July Conversation and Pre‑Completion Affirmation, ACK and Markoff were entitled to believe that if any of the following matters existed prior to Completion, they would be communicated to ACK and Markoff:
(a)the Use of Shao Matter;
(b)the Future Admission Responsibility Matter; and
(c)the Change in Resident Mix Matter.

20.In the circumstances referred to in paragraph 19, the failure of Mercy to communicate to ACK and Markoff any and all of the:
(a)the Use of Shao Matter;
(b)the Future Admission Responsibility Matter; and
(c)the Change in Resident Mix Matter,

prior to Completion, constituted misleading or deceptive conduct in contravention of s.18 of Schedule 2 to the CCA (Australian Consumer Law),
(together, separately and in any combination, the Non‑Disclosure Contraventions).
21.By reason of Mercy's silence as set out in paragraph 20 above and the Non‑Disclosure Contraventions:
(a)ACK and Markoff were entitled to and did infer that no danger or detriment existed;
(b)ACK and Markoff completed the [Sale Agreement] and Land Contract; and
(c)thereby suffered loss and damage.

Particulars
Had any or all of the Use of Shao Matter, the Future Admission Responsibility Matter and the Change in Resident Mix Matter been disclosed:
a.they would have revealed to ACK and Markoff that Mercy were unwilling to perform clauses 9.1.4.1 and/or 9.1.4.2 of the [Sale Agreement];
b.ACK and Markoff would thereby have been entitled to terminate the [Sale Agreement] for repudiation and to terminate the Land Contract pursuant to clause 8(g) of the Land Contract;
c.ACK and Markoff would have refused to complete the [Sale Agreement] and Land Contract (together, the 'Contracts') inclusive of a Deferred Payment Fee and instead would have required payment of a Purchase Price under the Contracts commensurate with the true value of the assets being acquired under the Contracts (around the time that it would have been revealed to ACK and Markoff that Mercy were unwilling to perform clauses 9.1.4.1 and/or 9.1.4.2 of the [Sale Agreement]); and
d.in the circumstances set out in paragraphs a. to c. above, the loss and damage suffered by ACK and Markoff in completing the Contracts is the total of, alternatively, the value of the lost opportunity to derive the total of:
i.the true value of the assets acquired under the Contracts;
ii.less the total purchase price under the Contracts excluding the amount of the Deferred Payment.

e.Alternatively to paragraphs c. and d. above, in the circumstances set out in paragraphs a. and b. above and in the event that ACK and Markoff would have been unable to secure payment of a Purchase Price under the Contracts commensurate with the true value of the assets being acquired under the Contracts, then:
i.ACK would have retained the Properties (other than the Markoff Property) and Markoff would have retained the Markoff Property;
ii.ACK would have retained the Business and the Business Assets and would have continued to operate the Business;
iii.ACK would have continued to operate the Business in accordance with the policy identified in paragraphs 9 and 10 above;
iv.ACK would have engaged Lou Pascuzzi, a professional aged care manager, or a similarly qualified manager, to manage the Business;
v.ACK and Markoff would have extended and improved the Properties, the Markoff Property and the Facilities by about 2018 at an approximate cost of $25,000,000, as follows:
i.in respect of the facility known as Tanby Hall, by about 70 beds:
ii.in respect of the facility known as Grandview, by about 55 beds;
iii.in respect of the facility known as River Gardens, by about 100 beds; and
iv.in respect of the facility known as Orange Grove, by about 50 beds;

vi.by reason of sub-paragraphs i. to v. above, ACK would have:
i.continued to derive income from the Business;
ii.increased the total amount of the 'Refundable Accommodation Deposits' paid by residents at the Facilities (Bonds); and
iii.obtained the benefit of the increase in the capital value of the Properties (other than the Markoff Property), the Business and the Business Assets in the period from June 2016;

vii.by reason of sub-paragraphs i. to vi. above, Markoff would have obtained the benefit of the increase in the capital value of the Markoff Property in the period from June 2016;
viii.ACK would have invested some of the net profits derived from the income derived from the Business in the period from September 2016;
ix.ACK would have invested the Bonds in the period from September 2016;
x.ACK would have paid out the applicable Bond to each exiting resident in the period from September 2016;
xi.ACK would have achieved various rates of return (both income and capital) on the investments referred to in sub-paragraphs viii. and ix. above);
xii.the loss and damage suffered by ACK and Markoff in completing the Contracts is the difference between:
i.the total of, alternatively, the value of the lost opportunity to derive the total of:
1.the increased value of the Properties, the Markoff Property, the Business and the Business Assets (as extended and improved);
2.the income earned from the operation of the Business from September 2016 (other than that invested as referred to in sub-paragraphs viii. and ix. above);
3.the total value of the investments referred to in sub-paragraphs viii. and ix.;
4.the income earned from the investments referred to in sub-paragraphs viii. and ix.;
5.less the expenses incurred in generating the income and increased values referred to in subparagraphs 1. to 4. above; and

ii.the total purchase price under the Contracts (less the amount of the Deferred Payment), the capital value of any investments made with the net proceeds of that purchase price and the income generated by use of the net proceeds of that purchase price, less the expenses incurred in generating the income and increased values referred to in this subparagraph.

Further particulars will be provided following the exchange of expert reports and prior to trial.

22.Further or alternatively, the existence of any or all of:
(a)the Use of Shao Matter;
(b)the Future Admission Responsibility Matter; and
(c)the Change in Resident Mix Matter,

prior to Completion, meant that the No Significant Change Representation constituted misleading or deceptive conduct in contravention of s.18 of the Australian Consumer Law,
(No Significant Change Representation Contravention).
23.By reason of the No Significant Change Representation Contravention:
(d)ACK and Markoff entered into and/or completed the [Sale Agreement] and Land Contract; and
(e)thereby suffered loss and damage.

Particulars
The plaintiffs repeat the particulars to paragraph 21 above.

24.Following Completion, Mercy sought to and did implement a policy of ensuring that at least 40% of residents admitted at the Business Facilities were Concessional Residents.
25.By 2017 Mercy had failed to appoint staff members with specific and primary responsibility for advertising for and admitting residents.
26.Following Completion, and by no later than 7 November 2016, Mercy had provided Mr Shao with a job description which did not allocate Mr Shao with any role in, or responsibility for:
(f)pursuing Refundable Deposits in respect of Residents who enter into Resident and Accommodation Agreements with Mercy after the Completion Date; and/or
(g)strategies to maximise Refundable Deposits.

Particulars
A copy of the Job Description provided by Mercy to Mr Shao is available for inspection.

27.From Completion Mercy:
(a)failed to give Mr Shao any, or any proper, role in or responsibility for:
(i)pursuing Refundable Deposits in respect of Residents who enter into Resident and Accommodation Agreements with Mercy after the Completion Date; and/or
(ii)strategies to maximise Refundable Deposits; and

(b)moved Mr Shao from his historic role in the Business of overseeing admissions, and through that process of advertising to and ensuring the admission of Bonded Residents.

28.Each of the matters referred to in paragraphs 25 to 27 above constituted breaches of the following terms of the [Sale Agreement]:
(a)the Alignment Term;
(b)the Express Good Faith Term; and
(c)the Duty to Co-Operate,

(together, separately and in any combination, Breaches of the [Sale Agreement]).

Defence paragraphs 9 and 12-28

9.As to paragraph 9, the Defendants:
(a)do not understand how the 'Business' as defined in paragraph 5(a) of the [Statement of Claim] could adopt the policy as alleged;
(b)assume that 'vast majority' means at least 80%;
(c)do not know whether the alleged policy was adopted;
(ca)say that:
(i)after 1 July 2014, residents (other than concessional residents) admitted to the Business Facilities were entitled to choose to pay for accommodation in the following ways:
(A)Refundable Deposit; or
(B)Daily Accommodation Deposits; or
(C)a combination of a Refundable Deposit and Daily Accommodation Payments (Partially Bonded Residents);
and

Particulars
The Defendants rely on legislation (but not limited to) Chapter 3A, Part 3A.2, Division 52F, section 52F‑3 of the Aged Care Act 1997 (Cth).
(ii)with respect to the Rockingham facility, in or around 1 July 2014, the Plaintiffs sought to maintain a 40% concessional resident ratio to receive the maximum Significant Refurbishment Supplement; and

Particulars
(A)Email from Tanby DON to Tanby Office dated 1 July 2014;
(B)Email from Nicholas Shao to Jeffrey Markoff dated 27 August 2014; and
(C)Email from Nicholas Shao to Jeffrey Markoff dated 13 October 2014.

(d)otherwise do not admit the paragraph.

…
12.As to paragraph 12, the Defendants:
(a)admit that a letter dated 19 January 2016 was sent by the Second Defendant to Mr Tocknell and contained an offer for the acquisition of the Business and Belrose Assets as defined in an Information Memorandum dated November 2015 (Non‑Binding Indicative Offer Letter);
(b)deny that the Non‑Binding Indicative Offer Letter made, or otherwise contained, the alleged No Significant Change Representation; and
(ba)say that:
(i)the contents of the Non-Binding Indicative Offer Letter which related to the operation of the Business in the event the Second Defendant (or its subsidiaries) was the purchaser, was made in the following context:
(A)the requirements of a non‑binding indicative offer to purchase the Business and Business Assets included a requirement to provide an overview of the proposed operational structure post completion, including key executives initially slated to form part of the continuing operations; and
Particulars
Letter from Liverpool Partners (Mr Tocknell) to the Second Defendant dated 18 December 2015.

(B)as at that date, the Second Defendant did not intend to make any significant changes to the manner of operation of the Business if it was the purchaser of the Business, in particular that it would keep the First Plaintiff's employees and management as well as continue to operate the Business from the Business Facilities. The only intended change to the operational structure was to integrate the operations with the Second Defendant's aged care facility led by Mr Calogero.
Particulars
Letter from the Second Defendant to Liverpool Partners (Mr Tocknell) dated 19 January 2016.

(ii)the nature of the Non‑Binding Indicative Offer Letter was that it was conditional and did not bind the Defendants to the contents of it, nor was it intended to create any legal relationship;
Particulars
Non-Binding Indicative Offer Letter (page 4 - 'Principal Terms and Conditions of NBO')

(c)repeat paragraphs 8(a)(i) and 11 above; and
(d)otherwise deny the paragraph.

13.The Defendants deny paragraph 13 and repeat paragraphs 7, 8 and 12 above.
14.In relation to paragraph 14, the Defendants:
(a)admit that a telephone conference took place which was attended by Mr Holden, Mr Hall, Mr Ross, Ms Porter and Mr Calogero for the First Defendant; and
(b)otherwise do not admit the paragraph.

15.The Defendants deny paragraph 15 and say further that:
(a)Mr Bret Campbell performed the role of chief financial officer from 27 April 2011 to 1 July 2016;
(b)Mr Campbell ceased to perform that role on 1 July 2016; and
(c)the alleged statement was not made.

16.The Defendants deny paragraph 16.
17.As to paragraph 17, the Defendants:
(a)admit that a meeting took place which Margaret Ingleton attended;
(b)otherwise deny the paragraph.

18.The Defendants do not admit paragraph 18.
19.The Defendants deny paragraph 19 and repeat paragraphs 6, 7, 8, 12, 14, 15, 16, 17 and 18 above.
20.The Defendants deny paragraph 20 and repeat paragraph 19 above.
21.The Defendants deny paragraph 21 and repeat paragraphs 15, 17 and 20 above.
22.As to paragraph 22, the Defendants:
(a)repeat those matters pleaded at paragraphs 6, 7, 8, 12, 13, 15 and 17 above;
(b)deny paragraph 22; and
(c)say further that if (which is denied) the No Significant Change Representation was made and was of continuing effect, it cannot constitute misleading or deceptive, as alleged or at all, because the alleged Use of Shao Matter, the alleged Future Admission Responsibility Matter and alleged Change in Resident Mix Matter if they existed (which is denied) do not bear upon the characterisation or accuracy of the alleged No Significant Change Representation in light of the context pleaded in paragraph 8(ba) above.

23.The Defendants deny paragraph 23, repeat paragraphs 5, 6, 21 and 22 above, and say that the Plaintiffs entered into the [Sale Agreement] and Land Contract before the alleged No Significant Change Representation Contravention.
24.The Defendants deny paragraph 24 and say further that:
(a)at Completion, the proportion of solely Bonded Residents and the proportion of solely Concessional Residents (as at 28 September 2016) at each of the Business Facilities was:

Joondalup

44.23% Bonded Residents

35.57% Concessional Residents

Kelmscott

71.73% Bonded Residents

8.69% Concessional Residents

Maddington

38% Bonded Residents

44% Concessional Residents

Rockingham

38.29% Bonded Residents

48.93% Concessional Residents

Particulars
Email from Ramon Falzon to Margaret Ingleton dated 21 November 2016.

(b)in relation to the proportion of Concessional Residents at each Business Facility:
(i)it was a statutory requirement that the following percentage of residents at each of the Business Facilities were Concessional Residents:

Joondalup

21.5% Concessional Residents

Kelmscott

23.10% Concessional Residents

Maddington

23.10% Concessional Residents

Rockingham

22.6% Concessional Residents

Particulars
The Defendants rely on legislation including (but not limited to) Chapter 2, Division 12-5 and 12 - 6 of the Aged Care Act 1997 (Cth).
(ii)in relation to the Kelmscott facility:
(A)at Completion, the proportion of Concessional Residents:
(1)was required to be 23.10%; and
(2)was in fact 8.69%;

(B)by reason of the statutory requirement (pleaded at paragraph 24(b)(i) above), the Defendants were required to increase the number of Concessional Residents from 8.69% to 23.10%;
(C)between February 2017 and February 2018, the number of Concessional Residents accommodated at the Kelmscott facility was increased in order to comply with the statutory requirement;

(iii)in relation to Joondalup, Maddington and Rockingham facilities, from Completion until about June 2017, the First Defendant sought to maintain the mix of Bonded and Concessional Residents as at Completion; and
(iv)in relation to the Rockingham facility, the First Defendant sought to maintain the First Plaintiff's Concessional Resident ratio of 40% to continue to receive the maximum Significant Refurbishment Supplement.

Particulars
(A)Executive Leadership Team Briefing Paper dated 29 December 2017;
(B)Email from Ramon Falzon to Joanne Penman dated 6 February 2018; and
(C)Email from Ramon Falzon to Martin Vorster dated 6 March 2018.

(v)from at least October 2017, the First Defendant sought to prioritise residents in the following order:
(A)Bonded Residents;
(B)Partially Bonded Residents;
(C)residents that pay for accommodation in Daily Accommodation Payments; and
(D)Concessional Residents.
Particulars
(A)Email from Ramon Falzon to Colin Ross dated 17 October 2017; and
(B)Email from Ramon Falzon to Martin Vorster dated 6 March 2018.

25.The Defendants deny paragraph 25 and say further that:
(a)on or about 13 November 2016, Ms Samantha Spiro was appointed as Business Development Manager with a specific role of marketing aged care services, with a view to increasing occupancy and admissions.

Particulars
MercyCare, Position Description, Position title Business Development Manager, signed by Ms Spiro and dated 13 November 2016.

(aa)on or about August 2017, Ms Miika Lowery was appointed as Admissions Administrator with a specific role of marketing the aged care services, with a view to maintaining optimum occupancy (at the Joondalup Facility) for the viability of the Business;

Particulars
MercyCare, Position Description, title Admissions Administrator, signed by Miika Lowery dated 8 August 2017.

(ab)on or about 9 January 2018, Ms Lowery was appointed as Admissions Administrator with a specific role of marketing aged care services, with a view to maintaining optimum occupancy (taking into account the balance between non-concessional residents and Concessional Residents) for the viability of the Business;

Particulars
MercyCare, Position Description title Admissions Administrator, signed by Ms Lowery and dated 9 January 2018

(ac)Ms Spiro and Ms Lowery, with assistance from the Facility Managers, engaged in various advertising and marketing initiatives to promote the Business Facilities and attract Bonded Residents, including but not limited to:
(i)contacting social workers and agents via email and phone to advise of vacant rooms at the Business Facilities including the type of room, whether a Bonded Resident or Concessional Resident is eligible for admission, and the price of the required Refundable Deposit (if applicable);
(ii)hosting open days at the Business Facilities;
(iii)advertising the Business Facilities on MercyCare's website, local newspapers, radio stations, on buses and at shopping centres;
(iv)circulating brochures advertising the Business Facilities to the neighbouring suburbs via a letterbox drop;
(v)hosting tours at the Business Facilities for potential residents and their families;
(vi)attending community events, including Seniors Expos; and
(vii)maintaining waiting lists for potential residents at the Business Facilities;

Particulars
(A)Email from Sam Spiro to Rebecca Tomkinson on 14 February 2017;
(B)Email from Sam Spiro to [email protected] and [email protected] dated 7 July 2017;
(C)Email from Jenny Grant to Sam Spiro dated 11 July 2017;
(D)Email from Naomi Hirsch to Miika Lowery dated 22 August 2017;
(E)Email from Miika Lowery to Nicola Farrell dated 23 August 2017;
(F)Email from Miika Lowery to Ciane Brown and Daniel Cain dated 6 September 2017;
(G)Email from Desiree De Graaf to Miika Lowery dated 19 September 2017;
(H)Email from Annalisa Chin to Sam Spiro dated 19 September 2017;
(I)Email from Susan Powell to Sam Spiro dated 27 September 2017;
(J)Email from Miika Lowery to Cathy Viandante dated 9 October 2017;
(K)Email from Hoa Ngo to Annalisa Chin dated 19 October 2017;
(L)Email from Sam Spiro to Jenny Grant dated 28 February 2018; and
(M)Undated brochures for the Business Facilities.

(b)admission of residents was the responsibility of staff across several areas of the business including:
(i)Business Development;
(ii)Aged Care Administration;
(iii)Finance; and
(iv)Aged Care Facilities Management.

26.As to paragraph 26, the Defendants:
(a)admit that a job description was provided to Mr Nicholas Shao;

Particulars
MercyCare, Position Description, Position title Finance Manager - Mercy Human Services.
(b)repeat those matters pleaded at paragraph 25 above;
(c)say further that the job description was not an exhaustive list of responsibilities to be allocated to Mr Shao and as a member of the finance term, his responsibilities included those matters alleged at paragraphs 26 (a) and (b) of the [Statement of Claim]; and
(d)otherwise do not admit paragraph 26.

27.The Defendants deny paragraph 27.
28.The Defendants deny paragraph 28 and repeat paragraphs 6, 7, 24 ‑ 27 pleaded above.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
NL
Associate to the Judge
24 NOVEMBER 2023

Joondalup	44.23% Bonded Residents	35.57% Concessional Residents
Kelmscott	71.73% Bonded Residents	8.69% Concessional Residents
Maddington	38% Bonded Residents	44% Concessional Residents
Rockingham	38.29% Bonded Residents	48.93% Concessional Residents

Joondalup	21.5% Concessional Residents
Kelmscott	23.10% Concessional Residents
Maddington	23.10% Concessional Residents
Rockingham	22.6% Concessional Residents