Fortescue Metals Group Ltd v Underwriting Members of XL Syndicate 1209 At Lloyd's for the 2004 and 2005 Underwriting Years of Account - [2014] WASC 422

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: FORTESCUE METALS GROUP LTD -v- UNDERWRITING MEMBERS OF XL SYNDICATE 1209 AT LLOYD'S FOR THE 2004 AND 2005 UNDERWRITING YEARS OF ACCOUNT [2014] WASC 422

CORAM: ACTING MASTER GETHING

HEARD: 23 OCTOBER 2014

DELIVERED : 14 NOVEMBER 2014

FILE NO/S: CIV 3393 of 2011

BETWEEN: FORTESCUE METALS GROUP LTD
First Plaintiff
JOHN ANDREW HENRY FORREST
Second Plaintiff
AND
UNDERWRITING MEMBERS OF XL SYNDICATE 1209 AT LLOYD'S FOR THE 2004 AND 2005 UNDERWRITING YEARS OF ACCOUNT
Defendant

Catchwords:

Practice and procedure - Application for separate trials - Unfairness to defendants if not provided with opportunity to mediate all issues prior to trial of separate issues

Legislation:

Rules of the Supreme Court 1971 (WA), O 32 r 4

Result:

Application allowed, with case management orders to facilitate a mediation on all issues prior to the trial

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr G R Hancy
Second Plaintiff            :     Mr G R Hancy
Defendant:     Mr A J Musikanth

Solicitors:

First Plaintiff                :     Allen & Overy
Second Plaintiff            :     Allen & Overy
Defendant:     Winter Hilditch & Fotheringham Lawyers

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

Carlo Nobili SpA Rubinetterie v Militaire Nominees Pty Ltd [2004] WASC 47
Landsdale Pty Ltd v Moore [2009] WASCA 176
St Barbara Ltd v Hockley [2010] WASC 283
Starbrake Holdings Pty Ltd As Trustee For the Starbrake Holdings Trust v Pollock [2014] WASC 385
Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1
Woodley v Woodley [2014] WASC 377

ACTING MASTER GETHING: The plaintiffs, Fortescue Metals Group Ltd and one of its directors, John Andrew Henry Forrest, are suing their directors' and officers' liability insurer for the period 24 September 2004 to 24 September 2005. The defendants are more specifically referred to as 'Underwriting Members of XL Syndicate 1209 at Lloyds for the 2004 and 2005 Underwriting Years of Account'. The defendants have denied any liability to indemnify the plaintiffs.
The plaintiffs' claim is in relation to costs incurred as a result of proceedings brought against them by the Australian Securities and Investments Commission (ASIC) between 2006 and 2012. They assert that under the relevant policy of insurance they are entitled to claim their 'defence costs' incurred in defending the proceedings brought against them by ASIC. These costs are alleged to total $6.1 million. On 2 October 2012, the High Court determined the proceedings commenced by ASIC in favour of the plaintiffs and ordered ASIC to pay the plaintiffs' first instance and appellate costs. The process to itemise, tax and recover those costs has been commenced. It is estimated that this process will take a further 18 months to complete.
The plaintiffs seek an order pursuant to Rules of the Supreme Court 1971 (WA) (RSC) O 32 r 4 that the action proceed to trial on all of the issues in dispute other than, in effect, the issue of quantum. That rule provides:
4.Time of trial of questions or issues
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.
There is no limit imposed in RSC O 32 r 4 on the discretion given to the court: Starbrake Holdings Pty Ltd As Trustee For the Starbrake Holdings Trust v Pollock [2014] WASC 385 [23] (Allanson J). In deciding whether to separate the issues to be tried, the court must have regard to RSC O 1 r 4A and r 4B, and follow the course that best ensures the attainment of the objects set out in those rules: Starbrake [23]. The starting point is that ordinarily the trial of an action should include all issues arising in the action: Landsdale Pty Ltd v Moore [2009] WASCA 176 [21] (Newnes JA, with whom Buss JA agreed); Woodley v Woodley [2014] WASC 377 [5] (Beech J). The onus is on the party seeking to move the court to exercise the discretion in O 32 r 4 to satisfy the court that it is appropriate to do so. Single issue or separate trials should only be ordered where their 'utility, economy and fairness to the parties is clearly made out': Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1 [170] (Kirby & Callinan JJ); Landsdale [21]; Woodley [21].
In Landsdale, Newnes JA outlined the framework for exercise of the discretionary power in RSC O 32 r 4 in the following terms [19] ‑ [21]:
The respondents' application for separate trials of liability and damages was founded on the proposition that such a course would result in a more efficient and cost-effective resolution of the proceedings. There is no doubt that at a time when the time and cost involved in litigation is a matter of legitimate public concern, it behoves the court to approach each case which comes before it with the object of eliminating any unnecessary delay or cost, and ensuring the efficient and timely resolution of the case, consistent with doing justice to both sides. That is reflected in O 1 r 4A and r 4B of the Rules of the Supreme Court 1971 (WA). But while that will often require a more flexible approach than might have been taken in the past, at the same time it is important that the lessons of the past are not forgotten, and that the court and the parties do not succumb to the immediate attraction of apparently more efficient but less conventional procedures without careful regard to past experience with such procedures.
In relation to the present case, experience has shown that the attraction of the separate trial of issues is often illusory; it is a course that often causes the very delay, additional expense and uncertainty of outcome it was intended to avoid. It is self‑evident that generally a trial on liability alone will be shorter and less costly than a trial on both liability and damages. But it is equally self‑evident that separate trials will not necessarily lead to the overall action being resolved sooner or at a lesser cost. If the plaintiff is successful on liability and it is necessary to have a further trial on the issue of damages, the contrary may well be the case. Separate trials also raise the prospect of separate appeals on the findings on liability and quantum, which, if it occurs, will increase the time and expense involved in the overall action. The vagaries of litigation are such that its course often does not run smoothly, or predictably. An application for the separation of issues is therefore to be approached with some caution. See generally Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1, 55.
The starting point is that ordinarily the trial of an action should include all issues arising in the action. The determination of an application for separate trials requires a careful balancing of the prospective advantages and disadvantages involved in separating the issues, bearing in mind the uncertainties inherent in litigation, and that, once embarked upon, it is a course from which it may be difficult and even impossible to retreat. It should only be embarked upon where its utility, economy and fairness to the parties is clearly made out: Tepko (55).
It is impossible to provide a comprehensive description of the circumstances in which it is appropriate for there to be separate trials of liability and damages. The exercise of the discretion to make such an order will depend upon what is in the interests of justice in the particular case. However, the separate trial of issues 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: Allen v Gulf Oil Refining Ltd [1981] AC 1001; Smith v Maloney (1998) 19 WAR 209, 223.
In Carlo Nobili SpA Rubinetterie v Militaire Nominees Pty Ltd [2004] WASC 47, McKechnie J set out a useful distillation of the principles:
•A separate trial of issues is only appropriate in clear and simple cases.
•Separate trials of issues should only be embarked upon when the utility, economy and fairness are beyond question.
•The fact that the resolution of a separate trial may determine the litigation is relevant.
•Separate trials of issues may be appropriate where it is likely to save expense and inconvenience.
•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.
•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.
•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.
•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.
•The procedure should be confined generally to cases where facts are complicated and the legal issues short, otherwise it can be a treacherous shortcut.
•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.
•There is potential for further appeals.
His Honour's distillation of the principles has been adopted in a number of other decisions, see for example: Woodley [10]; Starbrake [24]; St Barbara Ltd v Hockley [2010] WASC 283 [10] (Beech J).
Another relevant consideration is whether trying the issues separately is likely to assist in leading to a settlement of the action: Landsdale [28]; Woodley [8].
In the context of the present application, and the submissions made, the following issues arise for determination:
•Is there a clear demarcation of the issues sought to be separated?
•What expense and inconvenience is likely to be saved by a separation of the issues?
•What is the impact of the separation of the issues on potential settlement of the action?
•Is this a case in which the potential for multiple appeals is a factor?
•What final orders are appropriate?

Is there a clear demarcation of the issues sought to be separated?

The specific order which the plaintiffs seek is that the action proceed to trial on all of the issues in dispute other than:
(a)the amounts the plaintiffs have:
(i)incurred and paid as Defence Costs of defending the ASIC Proceedings; and
(ii)not paid or reimbursed by the defendants; and
(b)the interest payable by the defendants on any sum of damages awarded, pursuant to section 57 of the Insurance Contracts Act 1984 (Cth) and regulation 32 of the Insurance Contracts Regulations 1985 (Cth), calculated from the date when each item of Defence Costs was incurred to the date of judgment at a rate of interest determined by reference to the 10 year treasury bond yield plus 3%.
The reference to 'Defence Costs' is a cross‑reference to this term as defined in the statement of claim, par 5(ix), which in turn refers to cl 5.4 of the relevant policy. Clause 5.4 defines 'Defence Costs' in the following terms:
DEFENCE COSTS means that part of LOSS consisting of reasonable costs, charges, fees (including but not limited to legal counsels' fees) and expenses incurred with the prior written consent of US in investigating or defending a CLAIM but does not include regular or overtime wages, salaries or fees of the directors, officers or employees of the INSURED ENTITY incurred in attending, defending, investigating or monitoring CLAIMS and official investigations (clause 5.4).
The defendants propose that, if there is to be separate trials, the following form of order is more appropriate:
The action proceed to a trial of all issues in dispute, other than as to:
(a)the amounts that the plaintiffs have incurred and paid in defending the ASIC Proceedings and that constitute Defence Costs within the meaning of the Policy (if any); and
(b)the amount of interest to which the plaintiffs are entitled to pursuant to section 57 of the Insurance Contracts Act 1984 (Cth) (if any).
The present application is thus not one in which a discrete question or issue is sought to be separated out from the bulk of the issues that would otherwise need to be determined at trial. Rather, the bulk of the issues that need to be determined at trial, essentially the liability issues, are to be determined first, leaving only what is in effect the issue of quantum as a residue. In more generic terms, the residual issues are:
•Do the items of costs claimed fall within the scope of Defence Costs?
•If so, were they reasonable?
•What, if any, interest is payable on any money ordered to be paid to the plaintiffs?
In their supplementary submissions filed 3 November 2014, the defendants state that they accept that 'they are not entitled to withhold indemnity by reason only of the ASIC taxation having not been concluded' (original emphasis). In other words, the trial of the liability issues does not have to await the taxation of the bills of costs against ASIC so as to determine the amount of costs able to be recovered from ASIC and the net amount of costs paid by the plaintiffs.
The proposed demarcation does not give rise to the kinds of issues which arise in actions for tort in which the tort is not complete until damage has ensued - see generally Landsdale [22] ‑ [24].
Counsel for the defendants appeared to accept that there was a clear demarcation of the issues sought to be separated. I agree.

What expense and inconvenience would be saved by a separation of the issues?

The parties filed affidavit evidence in support of their respective submissions. From the plaintiffs' perspective, David Jenaway, a solicitor employed by the plaintiffs' lawyers, filed two affidavits sworn 18 August 2014 and 17 October 2014. For the defendants, William Conor, a solicitor employed by the defendants' lawyers, filed an affidavit sworn 8 October 2014.
Mr Jenaway deposes that he has been advised by counsel that:
(a)the issue of whether the defendants are liable to indemnify or pay damages to one or both of the plaintiffs should be capable of being determined by argument, reference to perhaps two documents, and possibly calling up to two witnesses to give evidence;
(b)the estimated length of the trial is one to two days; and
(c)the issue of liability should be capable of proceeding to trial immediately.
By contrast, Mr Conor gives evidence that:
(a)the length of a trial on liability alone will be approximately four to five days;
(b)the preparation for a trial on liability alone will be a time consuming and expensive process;
(c)a determination on liability alone is likely to involve complex issues of law providing fertile appeal grounds;
(d)expert evidence in relation to liability alone will need to be obtained before the matter can proceed to trial; and
(e)the parties have not attempted to mediate the dispute.
It is difficult to conclusively assess from the papers before me how long the trial on liability will take. Ultimately, the trial length will depend on the tactical litigation decisions made by the parties. It seems to me that I should proceed on the basis of accepting the estimate made by the party who asserts that its interests would be adversely affected by a separation of the issues, being the defendants. In any event, this view accords with my assessment; my sense is that the plaintiffs' assessment is overly optimistic. Accordingly, I proceed on the basis that the trial on liability will be likely to take five days, and involve expert evidence.
If the plaintiffs are not successful at the trial on liability, and the defendants are not liable to indemnify the plaintiffs, then there will be no need for the second trial on quantum.
If the plaintiffs are successful at the trial on liability, then, in my view, there would be good prospects of a commercial settlement on the quantum issues. This is in part because there is a $5 million limit on the amount which the plaintiffs are entitled to recover under the policy. The plaintiffs assert that their actual costs are $6.1 million. Given the policy limit, if liability is established, then in order to reduce the amount for which they are liable, the defendants will have to show that in excess of $1.1 million of the amounts claimed are not Defence Costs within the terms of the policy.
The question then becomes how much additional time would be required to deal with the residual issues going to quantum. As I have observed [13], the residual issues are:
•Do the items of costs claimed fall within the scope of Defence Costs?
•If so, were they reasonable?
•What, if any, interest is payable on any money ordered to be paid to the plaintiffs?
Counsel for the defendants asserted there was no evidence before me as to the length of time these issues will take to determine at trial. He said that any estimate would be purely hypothetical.
Counsel for the plaintiffs identified the following relevant factors in Mr Jenaway's affidavit evidence:
(a)the costs claimed by the plaintiffs are specified in approximately 132 invoices;
(b)the invoices span a time period of more than six years (from 29 May 2006 to 31 October 2012);
(c)the plaintiffs have engaged three costs consultants to prepare bills of costs for the taxation process in the proceedings brought by ASIC;
(d)the preparation of those draft bills of costs will take approximately 12 months in total; and
(e)the overall costs recovery process will not be finalised within the next 18 months.
Counsel for the plaintiffs submitted that an analogous exercise will be required in the present action in order to prove the detail and the magnitude of reasonable Defence Costs.
I agree with the tenor of these submissions. Even with tight case management, there is a real risk that the trial on quantum will take a minimum of two or three weeks to hear, with the possibility of the trial taking much, much longer.
Counsel for the plaintiffs further submitted that it may not even be necessary for me to make a determination as to the length of time likely to be required to deal with the issues of quantum. This is because, if it transpires that the issues of quantum are relatively straightforward, the parties, in effect, will not have been prejudiced by a separation of the trials. The issues of quantum can then be efficiently determined following the findings on liability. If, on the other hand, the determination of the trial of quantum requires a significant amount of preparation and trial time, then any decision to separate the trials of liability and quantum would have been vindicated. There is both logic and merit in this submission.
For present purposes, it is sufficient for me to find that by dealing first with the issues of liability, and deferring the issues of quantum as proposed, the parties are likely to save a considerable amount of preparation time, and the parties and the court are likely to save a considerable amount of trial time.

What is the impact of the separation of the issues on potential settlement of the action?

As I have mentioned, Mr Jenaway, in his affidavit, refers to advice from counsel that the issue of liability can proceed to trial 'immediately'. There is nothing in the materials before me suggesting that there is any particular need for expedition in this case. However, I gather that the primary concern of the plaintiffs is that the listing of this action for trial not be delayed by the 18 or so months required to complete the taxation process in relation to the costs to be paid by ASIC.
As to the defendants' position, Mr Conor in his affidavit states:
Quite apart from the matters identified above, I believe that holding a trial on liability alone would also be premature for the following reasons:
26.1the Defendants have not yet been afforded the opportunity to consider the quantum of the Plaintiffs' claim; and
26.2were the Defendants to be afforded such an opportunity, it would enable the Defendants to explore the prospect of a commercial resolution of the whole of the proceeding and potentially avoid the need for any trial or appeal process (par 26).
The defendants' position is that they are committed to engaging in mediation once the quantum of the plaintiffs' claim can be established. They are prepared to attempt to resolve the proceeding commercially following either the conclusion of the ASIC taxation process or the provision by the plaintiffs of the full tax invoices and associated schedules of fees for the costs the subject of their claim. The defendants' position is that until they are provided with an opportunity to consider the quantum of the plaintiffs' claim, quite apart from any issues of utility and economy, it would not be fair to separate the issues in the trial as proposed.
The plaintiffs assert a claim for legal professional privilege in relation to the detailed narrative in the invoices for the costs the subject of their claim against the defendants. The concern about providing the narratives is that this information may contain references to legal advice provided to Mr Forrest in the course of the relevant proceedings, and there is a concern that disclosure could have the effect of waiving privilege. This claim appears to have first been made in the plaintiffs' discovery filed 9 March 2012.
In a letter dated 5 December 2013, the plaintiffs' lawyers expressed the view that they did 'not consider there is any real benefit in holding a mediation', commenting that as the Defence Costs claimed far exceeded the policy limit 'there seems limited scope for negotiation at any mediation'. Shortly afterwards, the plaintiffs provided the defendants with copies of the invoices, having redacted the detailed narratives to the entries on the invoices.
By letter dated 11 December 2013, the defendants' lawyers requested the unredacted invoices. The author stated that the redacted invoices did not allow any assessment as to whether the invoices relate to 'Defence Costs', nor the reasonableness of those costs. The author of this letter also stated that:
Given your client has claimed privilege over the schedule of fees associated with the invoices, our client is not in a position to make any meaningful or informed comments as to the issues which may be raised at trial on quantum.
In his second affidavit, Mr Jenaway observes that it was not until Mr Conor's affidavit (filed in October 2014 some nine months after the amended defence) that the defendants suggested that the provision of the unredacted invoices would motivate them to agree to proceed to mediation in the short term. Rather, the position said to be expressed by the defendants to the plaintiffs was that mediation could not meaningfully take place until the plaintiffs' cost recovery process against ASIC had been completed. Mr Jenaway goes on to observe that the defendants have 'not at any time made a constructive suggestion on how they can be better informed on quantum of the indemnity without compromising the plaintiffs interest in preserving a claim for legal professional privilege over documents' (par 8).
From my summary of the letter from the defendants' lawyers dated 11 December 2013 above [35], my sense is that Mr Jenaway has overstated the position. The 11 December 2013 letter makes it clear that the provision of the unredacted invoices is important to the defendants' assessment of quantum, an important consideration for a mediation conference. Further, it seems that the reluctance to mediate was then coming from the plaintiffs.
The general practice in this court is that a matter will not go to trial unless and until the parties have participated in a mediation conference pursuant to Supreme Court Act 1935 (WA) pt VI. This is not only for the benefit of the parties, but is essential in ensuring that the scarce resources of the court are efficiently deployed. I accept the defendants' submission that it would be unfair for them to be required to incur the expense and risk of a trial on liability without being in a position to make a meaningful commercial offer to settle and meaningfully participate in a mediation conference. The trial of the liability issues should not take place until the parties have participated in a mediation conference
The mediation conference should not occur until the parties, in particular the defendants, are in a position to meaningfully participate. In my view, this does not require the amount of the costs recovered from ASIC to be determined. It does, however, require the defendants to be given access to the invoices relied on by the plaintiffs to substantiate their claim in an unredacted format. It is only with this information that the invoices can be reviewed in a level of detail that would allow the defendants to form a view as to whether or not the amounts claimed fall within the definition of Defence Costs and are reasonable, and the likely prospects of recovery from ASIC.
Further, the mediation conference should not take place until the defendants have been given an adequate opportunity to review the unredacted invoices. The invoices substantiate a claim for $6.1 million. As I have summarised above [25], Mr Jenaway goes into some detail as to the extensive work being undertaken by the plaintiffs in order to tax those costs. Accepting what Mr Jenaway says, (which I have for the purposes of considering cost savings), the length of time which the defendants will require to analyse the invoices is to be measured in months, not weeks.
There is another reason why the provision of the unredacted invoices is sufficient to mitigate the unfairness that the defendants would otherwise be subject to if separate trials are ordered. This is the $5 million limit on the amount which the plaintiffs are entitled to recover under the policy, which I have discussed above [22]. This context reinforces my view the provision of the unredacted invoices will provide the defendants with sufficient information to formulate a commercial settlement position.

Is this a case in which the potential for multiple appeals is a factor?

The defendants' submission is to the effect that, if the trial is split, there may be the potential for a multiplicity of appeals. Mr Conor's evidence is to the effect that the appeal process from a trial on liability alone would take up to three years.
In the supplementary submissions filed, the parties went into some detail as to whether the interaction of Insurance Contracts Act 1984 (Cth) s 13 and s 54 would be productive of issues of law especially susceptible to appeal because of divergences already existing in the way in which judges have approached the issue. For the reasons which follow, I do not need to consider this issue in detail.
For the potential for appeals to have weight in the discretionary process, it seems to me that the splitting of the trial must carry with it the risk of multiple or additional appeals: that is, the enhanced potential for an appeal from the questions initially determined, together with the enhanced potential for appeal from remaining questions. In that scenario, the splitting of the trial would seem to give rise to a real risk that the case will take much longer to resolve, and give rise to more costs, than if all issues were tried together.
In the present case, whilst there may well be issues that are particularly susceptible to appeal in relation to liability, there does not seem to be any issues of this kind in relation to the remaining issues going to quantum. The residual quantum issues appear to be reasonably straight‑forward legal and factual questions (see [13] above).
Accordingly, I do not consider that this is a case in which the prospect of multiple appeals is a significant factor weighing against the exercise of discretion in favour of separating the trials as proposed.

What final orders are appropriate?

For the reasons set out above, I am satisfied that:
(a)there is a clear demarcation between the issues proposed to be the subject of the trial on liability and the trial of the residue of the case;
(b)separation of the trials is likely to save the parties a considerable amount of time and cost in preparation;
(c)separation of the trials is likely to save the parties and the court a considerable amount of time in trial time; and
(d)this is not a case in which the prospect of multiple appeals is a significant factor weighing against the exercise of discretion in favour of separating the trials as proposed.
There are, however, issues of fairness to the defendants which need to be mitigated.
Balancing the prospective advantages and disadvantages, I am only prepared to make the orders sought by the plaintiffs if the defendants are provided with unredacted copies of the invoices. In my view, the potential waiver of any claim for legal professional privilege is necessary in order to mitigate the injustice that the defendants would otherwise suffer by reason of the order for separate trials. I observe that there would seem to be an inevitability that the unredacted invoices would be provided to the defendants at some stage: it is not presently apparent to me how the plaintiffs could establish their claim for quantum without the trial judge, and thus the defendants, having access to the unredacted invoices.
With this caveat, I am satisfied that an order for separate trials as proposed by the plaintiffs is likely to lead to the overall action being resolved sooner and/or at a lesser cost than to defer the trial of all issues until both liability and quantum can be heard: Landsdale [20]. With some case management measures to mitigate the unfairness to the defendants which I have identified, I am satisfied that the utility, economy and fairness of separate trials is clearly demonstrated: Tepko (55); Landsdale [21]; Woodley [21].
As to the case management measures, this case is not in the CMC list. As the master, when hearing an application in the case, I may make any case management direction that I consider just: RSC O 4A r 5(1)(b) and r 5(1)(d). A case management direction is 'any procedural direction that in the Court's opinion it is just to make in a case to facilitate the attainment of the objects referred to in Order 1 rule 4B(1)': O 4A r 2(1). In the present case, the just outcome, or perhaps more accurately the outcome that best balances the risks of injustice, is arrived at by a combination of an order for separate trials as sought by the plaintiffs and case management orders.
As set out above:
(a)I consider it unfair to the defendants to require them to proceed to a trial on liability without being in a position to make a meaningful commercial offer to settle and meaningfully participate in a mediation conference;
(b)the trial of the liability issues should not take place until the parties have participated in a mediation conference;
(c)in order to place the defendants in a position to do (a), they should be given access to the invoices relied on by the plaintiffs to substantiate their claim in an unredacted format; and
(d)the defendants should also be given sufficient time to review the invoices before the mediation.
The final orders should give effect to these considerations. One way of doing so would be to only make the order for the separate trials on the undertaking of the plaintiffs to provide the defendants with unredacted copies of the invoices. There may well be other ways to achieve this end.
There is a further aspect of the case management orders. It may be that there are particular questions of principle which are likely to arise in relation to the residual issues, for example, whether a particular type of cost is within the definition of Defence Costs. It may make sense for these issues to be determined with the liability issues. This could be done by identifying a number of representative invoices or claims. It seems to me that this is a cost effective way to minimise the issues to be determined at the trial of the residue of the action. The parties should have liberty to seek an order that these issues be included in the trial on liability.
Finally, in terms of the orders for separate trials sought, my preliminary view is that the more generic expression favoured by the defendants is the appropriate form for the order.
I am therefore of the preliminary view that orders in the following terms appropriately reflect the reasons I have set out above:
UPON THE UNDERTAKING of the plaintiffs to provide the defendants with unredacted copies of the documents in items 16 to 77 of Part 1B to the List of Discoverable Documents filed 9 March 2012 (the cost of provision of which is to be in the cause) IT IS ORDERED THAT:
1.The action proceed to a trial ('First Trial') of all issues in dispute, other than as to:
(a)the amounts that the plaintiffs have incurred and paid in defending the ASIC Proceedings and that constitute Defence Costs within the meaning of the Policy (if any); and
(b)the amount of interest to which the plaintiffs are entitled to pursuant to Insurance Contracts Act 1984 (Cth) s 57 (if any).
2.The parties have liberty to apply to have specific questions arising out of the issues in par 1(a) and (b) determined at the First Trial.
3.The trial of the issues in par 1(a) and (b) be listed on a date to be fixed after the conclusion of the First Trial.
4.The matter be referred to mediation pursuant to Pt VI of the Supreme Court Act 1935 on a date to be fixed after [date].
5. The second plaintiff is to attend the mediation in person.
6.The first plaintiff and the defendants are to attend the mediation by a representative of that party familiar with the substance of the litigation and with authority to compromise it.
7.By at least 14 days prior to the mediation conference the solicitors for the parties give their client a memorandum setting out:
(a) the exact costs and disbursements to the date of the memorandum;
(b) the estimated future costs and disbursements up to and including a mediation conference lasting no more than one day;
(c) the estimated future costs and disbursements to and including trial, and the length of trial assumed in making that estimate; and
(d) the estimated party and party costs recoverable by, or payable by, the party in the respective cases of success or failure at trial.
8. The case be listed for a status conference on [date].
The defendants appear to be a London‑based insurer. I have presided over a number of mediations in which a party has been represented by a London‑based insurer. The decision‑making process seemed to me to involve a Perth based lawyer telephoning a Sydney‑based lawyer who telephoned a Sydney‑based insurance agent who telephoned the relevant person in London (typically in the very early hours of the morning). Self‑evidently, this is not an optimal manner in which to conduct a mediation conference. In order for the defendants' representative to have authority to compromise the action in terms of the usual Supreme Court order, the representative will, in my view, need to have the authority to compromise the action on the basis that the plaintiffs' claim is paid to the fullest extent permitted under the policy; whether the representative chooses to exercise that authority is a different issue. It should not be necessary for the attending representative to seek the instructions of a person not present at the mediation conference. This may mean that a London‑based representative needs to attend the mediation conference in person.
I will hear from counsel as to the final form of the orders and costs.