Community Corporation 21561 v Pier Apartment Hotel Pty Ltd (No 5) - [2014] SADC 175

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
COMMUNITY CORPORATION 21561 & ANOR v PIER APARTMENT HOTEL PTY LTD & ORS (No 5)
[2014] SADC 175
Ruling of His Honour Judge Slattery
17 October 2014
PROCEDURE - COURTS AND JUDGES GENERALLY - COURTS - OTHER MATTERS
Application by the plaintiffs for the court to hear and to determine as between the plaintiffs and the first and second defendants "liability issues" separately from all other claims, issues or questions in the proceedings and that all of the remaining questions in the proceedings to be considered and decided upon following the determination of those "liability issues".
Held:
The plaintiffs' application refused: the plaintiffs failed to identify the relevant questions for determination by the court or the factual basis upon which the questions may be determined; leave to the plaintiffs to formulate questions for consideration by the court and the factual basis upon which those questions are to be determined by the court together with consequential directions.
District Court Civil Rules 2006 (SA) r 211; Supreme Court Rules 1987 (SA) r 75.02, referred to.
FAI General Insurance Co Limited (in liquidation) v Sherry & Ors [2002] SASC 431; City of Onkaparinga v Hassell [2007] SASC 163; Vass v Permanent Trustee Co Limited (1999) 198 CLR 334, applied.
Brookfield Multiplex Limited v The Owners Coroporation Strata Play 61288 & Anor [2014] HCA 36; Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, considered.

COMMUNITY CORPORATION 21561 & ANOR v PIER APARTMENT HOTEL PTY LTD & ORS (No 5)
[2014] SADC 175

In this matter the trial of the action is set to commence on 3 November, 2014. The action concerns claims made by strata corporations responsible, inter alia, for the maintenance of the common areas of a multi storey building in Glenelg. The strata corporation plaintiffs were only created at the same time as the strata plans for that building were registered by the developer, the first defendant. The claims of the strata corporations includes claims that the defendants owed a duty of care to them in the construction of the subject building to avoid the strata corporations suffering pure economic loss as a result of latent defects in the common property of the building. I have summarised the claims of the plaintiff parties in earlier judgements in this action.[1] One principal claim in this action involves an assessment of questions concerning the issue of vulnerability in tortious claims. The pleadings disclose a number of other claims both at common law and under statute, and what I have set out above is only a brief summary of matters that may be relevant to this application. I have also only focussed on the claims of the plaintiffs against the second defendant.
[1] [2014] SADC 111; [2014] SADC 130; [2014] SADC 137.
Following upon earlier orders that I have made, a conclave of experts is to be conducted and is to commence from 20 October, 2014. The current plan is for the conclave of experts to be conducted over four days in two separate weeks. Mr Phillip McNamara QC has been retained to convene and manage the conclave of experts.
On 8 October, 2014, the High Court delivered its decision in the case of Brookfield Mutiplex Limited v The Owners Corporation Strata Plan 61288 & Anor [2014] HCA 36. The High Court upheld the appeal of the builder and dismissed the claims of the strata corporations. In that case, the first respondent was called The Owners Corporation; it was created by a statute under the New South Wales equivalent of the South Australian legislation. In NSW, as in this state, The Owners Corporation is created under statute whenever a strata plan is registered in respect of a development to which it applies.
Under the New South Wales legislation the common property is vested in the strata corporation as manager of the strata scheme and as agents for the owners of the apartments. There may be a question for resolution in these proceedings of the difference, if any, between the New South Wales legislation and the South Australian legislation concerning that concept of agency. The Brookfield case concerned serviced apartments within a 22-storey development; the serviced apartments covered levels 1-9. The apartments had been built under a design and construct contract made in November, 1997 between the appellant builder, Brookfield Multiplex Limited (Brookfield), and the registered proprietor of the land called Chelsea Apartments Pty Ltd (Chelsea).
Chelsea gave leases of all of the serviced apartments to Park Hotel Management Pty Ltd which was a subsidiary of the Stockland Trust Group, which is part of a well known property developer in the Australian market. Park Hotel Management Pty Ltd was to operate the apartments collectively as a serviced apartment hotel under the Holiday Inn brand.
The principal question in the appeal was described by French CJ in his Honour's decision at paragraph 2 which reads as follows:
The principal question raised on this appeal from the decision of the Court of Appeal is whether Brookfield owed the Corporation a duty to exercise reasonable care in the construction of the building to avoid causing the Corporation to suffer pure economic loss resulting from latent defects in the common property. The Corporation has filed a notice of contention asserting, contrary to the conclusion of the Court of Appeal, that the duty owed to it was not contingent upon the existence of a similar duty of care owed to Chelsea. The Corporation also seeks special leave to cross-appeal in relation to the limited ambit of the duty as defined by the Court of Appeal.
On one view, the factual circumstances as they pertain in the Brookfield decision are largely “on all fours” with the factual circumstances of the case at bar. I am told by Mr Jenner, counsel for the plaintiffs, that there are some discernible factual differences, and that there are points of distinction between this case and the Brookfield case. Mr Jenner also submits that there are further points of distinction to be made about the contractual relationships between the parties in the Brookfield case and in this case.
Mr Jenner submits that there are also other points of distinction in relation to the statutory framework applicable to the parties’ positions. I will assume that by their very nature, these matters raised with me by Mr Jenner involve, questions of fact and of mixed questions of fact and law.
A review of the pleadings in the case at bar also discloses that there are other questions of mixed fact and law that arise; for example there are allegations that the second defendant is vicariously liable for the breaches of its contractors, eg: Aurecon, the third party. I have dealt with those pleadings in an earlier judgment.[2]
[2] Community Corporation 21561 & Anor v Pier Apartment Hotel Pty Ltd & Ors (No 2) [2014] SADC 130.
I am also conscious that there are significant factual controversies between the parties in the case at bar. An example is the allegations by the plaintiffs of joint venture arrangements, and I refer to paragraphs 3.6, 4, and 7 of the statement of claim. All of those matters are challenged factually by the first and second defendants; they also form one of the bases of subsequent pleaded causes of action, and are in controversy between the parties.
There is a common interest amongst all of the parties to this litigation to resolve it as expeditiously as possible following the High Court decision in Brookfield. The first and second defendants contend that the decision in Brookfield is the complete answer to the plaintiffs' case. The plaintiffs in turn point to the matters of distinction that I have set out above but also concede that if they are wrong about those matters of distinction, then three of the four causes of action pleaded by them against at least against the second defendant will fall away. The future of the fourth cause of action is not clear in the event that the first three causes of action fall away. As matters stand, the second defendant is the only substantive defendant in the proceedings.
A review of the pleadings discloses that a number of the plaintiffs' allegations are admitted and a larger number are denied by the first and second defendants. A common sense review of some of these denials indicates that some of them turn on the interpretation or application of a number of statutes. Others turn on the interpretation of contractual documents. There is no suggestion in the pleadings concerning the contractual documents of any need for the court to resort to the application of the principles described in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 per Mason J.
The least number of the first and second defendants denials appear to turn on what may be described as contested facts. This survey of the pleadings does not include the Scott schedules, that largely depend on the support or otherwise of the experts. However, I bear closely in mind the orders of this court that facilitated the provision of information between the parties that might otherwise find its way into the pleadings through the use of the Scott schedules.
In my opinion it takes no particular foresight here to identify the factual matters that are in contest between the parties arising out of the pleaded paragraphs described in the plaintiffs' application that I set out below. Those matters may be easily identified by the application of plain common sense.
By interlocutory application dated 15 October 2014, FDN 233, the plaintiffs' seek the following orders under rule 211 of the District Court Civil Rules 2006 (SA):
The First & Second Plaintiffs, Community Corporation No. 21561 Inc & Community Corporation No. 21562 Inc apply for the following orders or directions:
1.     ….
2. The hearing of the trial of the within action for determination on the matters pleaded in the Fifth Statement of Claim, the Third Defences of the First and Second Defendants and the Replies to those Third Defences being the paragraphs identified in the Schedule below (“the liability issues”), separately from, and before the determination of, all other questions in the proceedings, including the Third Party proceedings.
3.The hearing and determination of all other questions in the proceedings, including the Third Party proceedings, other than the liability issues, be adjourned for further consideration by the trial judge after his decision on the liability issues and any appeal in relation to the decision has been heard and determined.
Schedule
1.   Fifth Claim Statement of Claim: Paragraphs 1 to 7H, 7L to 7N, 8 to 13F, 13M to 18, 21A, 22 to 29, 33A to 33H, 39 to 46 and 49B to 49I.
2.   First Defendant’s Third Defence: Paragraphs 1 to 2D, 2F, 3, 3.1, 3A, 4 to 4.2, 4A to 5.2, 5A and 6.
3.   Plaintiffs’ Reply to the First Defendant’s Third Defence: Paragraphs 1 to 6.
4.   Second Defendant’s Third Defence: Paragraphs 1 to 7H, 7L to 7N, 8, 39 to 46, 49B to 49I and 106.
5.   Plaintiffs’ Reply to the Second Defendant’s Third Defence: Paragraphs 1 to 6.
Rule 211 of the District Court Civil Rules 2006 (SA) read as follows:
The Court may order the separate trial of an issue of fact or law (or an issue involving mixed questions of fact and law) involved in an action.
The rules of this nature have a long history. The authorities dealing with both the application of this rule and its antecedents, appear to be populated by many disappointed applicant litigants.
Before canvassing a very limited number of authorities, some general observations may be made. First, for an application to proceed, it must be possible to draw some boundaries around the matters with which the court is required to deal. They are both factual matters and matters of law. In particular, there must be a firm factual foundation.
Second, the application needs to satisfy what may generally be called a utility test. There is no point running an application on matters that cannot substantively resolve important issues in a case. Third, the more complex and broadly based the issues of fact or of mixed fact and law, the more likely it is that the matter will languish in unforeseen and unchartered territory that requires an inquiry into matters and issues not properly anticipated, and in respect of which the process becomes slightly ad hoc. The court is and is likely required to be flexible but some well thought out and careful limits must be set.
Finally, the authorities involve many cases that commence with good intentions about costs and then achieve the opposite result. I intend to refer to only two of these authorities.
The case of FAI General Insurance Co Limited (in liquidation) v Sherry & Ors [2002] SASC 431 was decided by the appeal court under rule 75.02 of the 1987 rules. That rule reads as follows, 75.02:
Subject to the proceedings sub-rules the court may at any time, or from time to time in any proceedings, order:
(a)     ….
(b)     That one or more questions of fact be tried before the others.
(c)     That any point or points of law arising on the pleadings be disposed of before proceeding to trial on the facts and may appoint the place or places of such trials.
It may be seen that rule 211 of the 2006 rules is a hybrid of those rules. In the decision of the Full Court the relevant discussion commences at paragraph [36]:
As will appear, I consider with some hesitation that some questions as to the meaning of the insurance contract can properly be dealt with under r75.02. To do so is conducive to the efficient determination of the case, because these questions can be answered in a final manner, and the answer is likely to shorten the proceedings. But most of the questions answered by the Judge cannot, in my respectful opinion, be answered at this stage. They cannot be answered because the answers depend on factual matters that are in dispute, or because the answers cannot be applied to resolve or decide any issue at this stage of the case.
With some sensible cooperation the parties might be able to establish a basis on which significant questions of fact and law could be answered. That might well shorten the trial, and that is a result to be encouraged. But as will appear, as things stand most of the questions cannot be answered.
In Jacobson v Ross [1995] 1 VR 337 the Appeal Division of the Supreme Court of Victoria considered the appropriateness of an order for the determination of a preliminary question. The majority of the Court held that the Judge should have declined to answer the preliminary question as there was no proper factual foundation laid for answering it. Smith J took the contrary view. He said (at 351):
"Courts are now expected to take an active role in the management of long and complex litigation and this requires trial judges to respond positively to reasonable proposals from parties which may expedite such litigation. It is also important that when such attempts are reviewed by the Full Court, the Full Court should not fetter unnecessarily the powers and discretions of trial judges. It is also important that, within proper limits, it should support such attempts at case management."
I agree with what he said, as a general proposition. I agree also with the general remarks of Bleby J in Rivers v Rivers [2002] SASC 197; (2002) 220 LSJS 74. It is sufficient to justify the hearing and determination of a preliminary issue if to do so will dispose of some substantial issue in the action, or will at least substantially narrow the area of dispute. But it remains the case that when the question in issue is one of law and fact, the question of the factual basis upon which the question is to be answered will necessarily be critical. In some cases it may be appropriate to answer a question on the basis of the facts alleged by the plaintiff, even though they are not admitted by the defendant. It may be appropriate to determine whether, even if the plaintiff makes out the facts alleged, the plaintiff's claim can succeed. But subject to that, when the facts are in dispute it will rarely be appropriate to answer a mixed question of law and fact. The reason for this is that even if a satisfactorily precise question can be formulated, the application of the answer to the case will depend upon the facts as ultimately found. Accordingly, answering the question before the facts are found will usually be of no benefit, because the trial will still proceed. Moreover, in all probability it will be necessary to revisit the question and the answer once the facts are found, because the facts as found may raise issues as yet unconsidered.
In short, although I agree with the sentiment expressed by Smith J, it remains necessary to identify a satisfactory factual basis before preliminary questions are determined.
In summary, Doyle CJ was of the opinion that it is always necessary to identify a satisfactory factual basis before preliminary questions are determined. Second, it will rarely be appropriate to answer a question of mixed fact and law, because however sound and precise the question, the case will turn on the facts as ultimately found. If no finding of fact is or can be made there is no utility in answering the question.
In the City of Onkaparinga v Hassell [2007] SASC 163 at [26] and [27] White J, inter alia, emphasised the requirement for a precise definition of the questions when determining matters of law and of fact in order to obviate advisory opinions on hypothetical facts. This is especially necessary in order to ensure conformance with judicial process; see: Vass v Permanent Trustee Co Limited (1999) 198 CLR 334 at 358.
The current application seeks to have a separate trial about the issues of facts, and of mixed fact and law, arising from the nominated paragraphs of the statement of claim. This necessarily also requires the canvassing of the matters raised in the defences which involve issues of fact and of mixed fact and law.
Mr Jenner for the plaintiffs submits that these matters can be canvassed in a very short space of time and by reference to a limited number of documents and facts. Even though I am prepared to accept that submission at face value, I am not informed of the facts or the documents in respect of these questions.
Another aspect is to identify other evidence that may also be led in support of the issues for decision, and how that evidence might be managed. In my view there is much work yet to be done on those aspects.
The decisions of the superior court of this State also require that on most occasions, specific questions be formulated for consideration by the trial judge, so that the limits of the decision are very well understood. Currently there are no formulated questions before me for consideration. I am therefore in a position where there are two extremes operating upon my process of decision making.
The first is that I join with all of the parties in expressing agreement with the obvious; there is an overwhelming utility in formulating an approach to deal with what are fundamental issues here, in light of the High Court decision in Brookfield. The other extreme is that in order to do so, further work needs to be done, and more information needs to be supplied to me before the matter could sensibly proceed in the way that is contemplated by the plaintiffs.
I am very aware of the proximity of the start of the experts conclave and the costs associated with that have caused me particular anguish. At the same time I am not prepared to require parties to incur costs in a process that is inutile. That is the position that I must obviate.

In light of the fact that I am not satisfied that all necessary information is before me to enable me to make the final decision on this application, I have decided not to presently grant the application and to make the order that the plaintiffs seek. I have also decided to adjourn this matter until next week for three purposes.
The first is that I require the parties to convene and prepare a list of questions that are to be considered on any application under rule 211. That list of questions is to be filed at the court on or before 4.30pm on Monday, 20 October, 2014.
Second, I require the parties to convene, and in respect of the list of questions submitted, to prepare a list of agreed facts and documents forming the factual basis on which the list of questions is to be determined. That is to be filed with the court on or before 4.30pm on Tuesday 21 October, 2014.
Third, I require the parties to file with the court by 4.30pm on Wednesday 22 October 2014, a list of questions and of the facts or facts and documents that are proposed by them and about which the parties have been unable to agree.
I adjourn the application to 4.45 p.m. on Wednesday 22 October 2014, for further hearing and directions.