Hexiva Pty Ltd v Lederer

[2006] NSWSC 318

CITATION:	Hexiva Pty Ltd v Lederer [2006] NSWSC 318 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	23/03/2006
JUDGMENT DATE :	23 March 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	03/23/2006
DECISION:	Leave granted to D2 to file amended first cross-claim for contributions against D1. Leave granted to D1 to file amended defence raising limitation defence. Application by D1 to strike out P’s reply and defence to second cross-claim dismissed. Leave granted to Ps to further amend Statement of Claim and Reply. Order made for separate determination of liability before inquiry as to compensation. Order for further discovery by D2. Order setting aside Notice to Produce served by Ps on D2. Order for production of documents by Ps under D1’s Notion to Produce.
CATCHWORDS:	PROCEDURE – Amendment – where amendment will raise new claim against party who has died since proceedings commenced, but where claim could be brought against estate in separate proceedings without leave – where new defence raises only a question of law – Pleading – where reply raises allegations of fraud which had been disallowed in amended statement of claim, after death of defendant – where those allegations are properly made in reply, death does not preclude their being raised – Separate questions – whether there should be separate inquiry as to compensation – where plaintiff will have to elect between remedies – Evidence – Notices to Produce – where it appears from documents and admissions that not all documents caught have been produced – “excluded document”
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW), ss 56, 57(1), 62 Limitation Act 1969 (NSW), ss 14, 15(1), 55, Uniform Civil Procedure Rules 2005 (NSW), rr 1.1, 21.1(2), 21.3, 21.10, 21.11, 28.2
CASES CITED:	Acme Office Service Pty Ltd v Ludstrom [2002] NSWSC 277 Brugger v Medicaid [1996] FSR 362 Caterpillar Inc v Sun Forward Pty Ltd (1996) 37 IPR 41 De Vitre v Betts (1873) LR 6 HL 319 Dr Martens Australia Pty Ltd v Bata Shoe Company of Australia Pty Ltd 145 ALR 233 Gentry Homes Pty Ltd v Diamond Homes Pty Ltd (1993) AIPC 91–008 Island Records Ltd v Tring International Plc [1996] 1 WLR 1256 LED Builders Pty Ltd v Eagle Homes Pty Ltd (No 3) 36 IPR 293 Minnesota Mining & Manufacturing Co v C Jeffries Pty Ltd (1992) 37 FCR 294 Neilson v Betts (1871) LR 5 HL 1 Tallglen Pty Limited v Pay TV Holdings Pty Limited (1996) 22 ACSR 130 Tang Man Sit (Representatives of) v Capacious Investments Ltd [1996] 1 AC 514 United Australia Ltd v Barclays Bank Ltd [1941] AC 1 Weingarten Bros v Charles Bayer & Co (1905) 22 RPC 341
PARTIES:	Hexiva Pty Ltd (P1) Robert Wechsler (P2) Katie Wechsler (P3) Hexiva Pty Ltd as Trustee Katie Wechsler Family Trust (P4) Paul Lederer, Richard Slazenger & Douglas Hamiltom as Executors & Trustees of the late Andrew Lederer (D1) MIchael Du Maurier (D2)
FILE NUMBER(S):	SC 02626/2000
COUNSEL:	Robert Wechsler appearing in person (P) Ms NL Sharp (D1) Mr CD Wood (D2)
SOLICITORS:	Robert Wechsler appearing in person (P) Landerer & Co (D1) PWCoopers (D2)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Thursday 23 March 2006

2626/00 Hexiva Pty Ltd & 3 ors v Andrew Lederer & 1 ors

JUDGMENT (ex tempore – revised 20 April 2006) (On various motions returnable on Thursday 23 March 2006)

1 HIS HONOUR: The late Andrew Lederer, whose executors are the first defendants, and the late Gisela Fiala, whose executor Michel Du Maurier is the second defendant, carried on in partnership a property investment business called, for present purposes, the Lederer Fiala Partnership, in which each had an equal 50% entitlement.

2 Mr Lederer, as to 50 per cent, and Ms Fiala, as to 25 per cent, were also partners with a third partner in another partnership, known as the George Street Partnership. The precise identity of that third partner is in dispute in these proceedings, but it was either one or more of the first plaintiff Hexiva Pty Limited, the second plaintiff Robert Wechsler, and the third plaintiff Katie Wechsler.

3 In these proceedings, the plaintiffs' chief complaint is that the defendants, who were their partners in the George Street Partnership, owed them fiduciary obligations in that capacity, and in breach of those fiduciary obligations preferred their own interests to those of the plaintiffs by causing sums of money to be advanced by the George Street Partnership to the Lederer Fiala Partnership, which sums by about 1994 amounted to something in excess of $3m, on terms which favoured the borrower to the detriment of the lender. For those alleged breaches of fiduciary duty, the plaintiffs claim equitable compensation or an account of profits. There are other allegations, but for present purposes I need not detail them.

4 The defendants say that these advances were "authorised", which I take to be an allegation that they were made with the fully informed consent of the plaintiffs. Further, the defendants say that at a meeting which took place in December 1994 an agreement was reached, the effect of which was, in short, that Ms Fiala would repay, or would make her best endeavours to repay, about $529,000, and that $100,000 would be forgiven by the plaintiffs. This was on the basis that Mr Lederer's position as a 50 per cent partner in each of the partnerships was financially neutral.

5 The plaintiffs deny that any such agreement was made in December 1994. On some of the subsequent applications which are before the Court this morning, it may be necessary to return to these issues.

6 Ms Fiala had died before these proceedings were commenced, and the second defendant is her executor.

7 The proceedings have a long litigious history. They were commenced by statement of claim filed on 27 May 2000, and after requests for particulars and responses thereto an amended statement of claim was filed on 25 July 2001. The second defendant filed its defence on 14 August 2001, and the first defendant on 30 October 2001. As I understand it, other proceedings involving the parties were pending in the Probate Division and then the Court of Appeal at that stage.

8 On 1 May 2003, the plaintiffs obtained leave to file a further amended statement of claim, and defences to it were filed by both defendants on 8 July 2003. On 25 August 2003, the plaintiffs filed a reply to the defence of the first defendant to the further amended statement of claim. On 23 September 2003, the second defendant filed a cross claim, and on 12 March 2004, the first defendant filed a second cross claim.

9 Mr Andrew Lederer died on 20 April 2004. Consequent on Mr Lederer's death an order was made on 24 March 2005 substituting his executors for him as first defendant, though no such order has yet been made in respect of his capacity as fourth cross-defendant to the first cross-claim.

10 On 8 December 2004, the plaintiffs filed a motion seeking leave to file a second further amended statement of claim. That application came before Registrar Berecry in March 2005, when some but not all of the amendments which the plaintiffs sought to make were permitted. Again, it will be necessary to return to that at a later stage, in respect of some of the other applications which are before the court this morning.

11 Eventually, the matter came before me for pre-trial directions on 13 December 2005, when I made various directions, provisionally fixed the matter for hearing in or about September of this year, and appointed today for the hearing of various motions which were outstanding. Advantage has been taken of that opportunity to have still further motions made returnable today, so that all interlocutory issues can be resolved well before the final hearing.

12 As I understand it, the matters which are before the court for consideration today are, first, an application by the second defendant for leave to file an amended cross claim; secondly, an application by the first defendant for leave to file an amended defence; thirdly, an application by the first defendant to strike out the plaintiffs' reply to the first defendant's defence and the plaintiffs' defence to the second cross claim; fourthly, an application by the plaintiffs for leave to further amend the statement of claim and replies; fifthly, an application by the plaintiffs to split the hearing into separate liability and quantum hearings; sixthly, an application by the plaintiffs for further and better discovery against the second defendant, and, related to it seventhly, an application by the second defendant to set aside a notice to produce and a subpoena issued by the plaintiffs; eighthly, an application by the first defendant for further production of documents and examination of a witness who has been served with a subpoena to produce documents; and ninthly, the directions which should be made for the further conduct of the proceedings.

Application by the second defendant for leave to file an amended cross claim.

13 As I have foreshadowed, the first application before the court is the application of the second defendant for leave to file an amended cross claim, which application is brought pursuant to a notice of motion filed on 6 December 2004 (Motion 1). That motion has been pending since that date, and was to be heard by the Registrar on 24 March 2005, but was not reached on that occasion. The parties had agreed to leave its determination until the hearing, on the basis that the resolution of the issues which the amendments would raise would not require further evidence. As time has been set aside today to resolve all interlocutory issues and it is desirable that the parties and the court should know which issues are to be agitated at trial before the trial commences, I think it appropriate to resolve it now.

14 The plaintiffs, who are not really interested in this issue, do not oppose the second defendant's application. The first defendant consents to it in part, but opposes some of the amendments sought to be made.

15 On the first cross claim the second defendant, Michel Du Maurier, is the cross claimant; the first plaintiff, Hexiva, is the first cross defendant; the second and third plaintiffs Dr and Mrs Wechsler, are the second and third cross defendants; and the original first defendant, Andrew Lederer, now deceased, is the fourth cross defendant.

16 The motion seeks, first, an order that Mr Lederer's executors be substituted for him as fourth cross defendant. That order is not opposed. It is clearly one which should be made, to place the record in order, and I will make an order in accordance with paragraph 1 of the First Motion. However, the contentious part of the application is for leave to amend the cross claim. The proposed amendments are recorded in a document entitled "Amended Cross Claim", which was handed up this morning which I shall initial, date this day, and place with the papers.

17 Amendments proposed in paragraphs 5, 8, 8A, 9, 10, 12 and 12A of that amended cross claim are not opposed and will be permitted.

18 The amendments of substance and contention are those proposed in paragraphs 29 to 31, which seek to add a claim by the estate of Ms Fiala for indemnity against the estate of Mr Lederer, and in paragraphs 32 to 35, which seek to add a claim by the estate of Ms Fiala against that of Mr Lederer for damages for alleged breach of fiduciary duty said to be owed by Mr Lederer to Ms Fiala. Objection is also taken to the relief sought consequent upon those amendments and referred to in paragraphs 6A, 7, 8 and 9 of the claims for relief.

19 The first defendant opposes those amendments on three grounds. The first is that the pleadings are said to be defective in form and arguably not to disclose a cause of action, but, in any event, to fail to plead material facts and thus to be liable to be struck out. The second is that they are said to cause incurable prejudice, having regard to the death of Mr Lederer in April 2004, with the consequence that he is no longer available to give instructions to answer the allegations made against him. The third is that no sufficient, or any, explanation has been offered for what is said to be the inordinate delay in seeking to make these amendments.

20 So far as the claim for indemnity in paragraphs 29 to 31 is concerned, I understand it to be no more than an allegation that if the plaintiffs succeed against the defendants on any of the bases alleged in the statement of claim, as amended from time to time, then any breach of duty by the defendants to the plaintiffs was primarily committed by Mr Lederer, who, it is said, in equity, should bear the liability to the plaintiffs as between the defendants. In other words, it is in substance a claim for equitable contribution.

21 Whether in such circumstances there is a right of indemnity or contribution in equity is not a straightforward question, but, it seems to me, it is not unarguable. The material facts which underlie the claim for indemnity are those which the plaintiffs have pleaded against the defendants, and which are incorporated and repeated in paragraph 29 of the proposed amended cross claim. The basis upon which it is said that Mr Lederer's estate should bear the responsibility is identified in paragraph 30 of the cross claim; namely, that the liability arises by reason of his actions and his breaches. I think the claim for indemnity is sufficiently pleaded in paragraphs 29 to 31 of the proposed amended cross claim.

22 So far as the claim for damages for breach of fiduciary duty is concerned, paragraph 33 alleges that Mr Lederer owed Ms Fiala a fiduciary duty to properly manage the affairs of the partnerships, and paragraph 34 alleges that he failed to properly manage the affairs of those partnerships. Although that is characterised as a breach of a fiduciary obligation, Mr C D Wood, who appears for the second defendant, accepted, in my opinion correctly, that that is neither a fiduciary obligation nor a breach of a fiduciary obligation at all. The obligation of one partner who might be a managing partner to manage the affairs of a partnership is not a fiduciary one, and is distinct from the fiduciary character of some partnership obligations. In my opinion therefore, paragraphs 33 and 34 and, with them paragraph 35, of the proposed cross claim, do not disclose an arguable or viable cause of action.

23 So far as prejudice is concerned, Ms Sharp has pressed the argument that irremediable and incurable prejudice is occasioned by the death of Mr Lederer and the impossibility of obtaining instructions from him. At first sight that seems a compelling argument and, on the application for leave to amend the statement of claim, it persuaded the Registrar. But such claims of prejudice must viewed be seen in the context of the particular application and the alternatives. If there is a valid claim for contribution by the second defendant against the first defendant, then such a claim could legitimately be brought in fresh proceedings, after final judgment is given in these proceedings. Such a claim would be brought by Ms Fiala's estate against Mr Lederer's estate. (I interpose that it might well be that as, prima facie, it seems that Ms Fiala has been the sole beneficiary of any breach of fiduciary duty, Mr Lederer's estate might equally assert that Ms Fiala's estate should exclusively bear, as between them, any liability to the plaintiffs). That claim, and any cross claim by Ms Fiala’s estate, could legitimately be brought, after judgment is given in these proceedings as between the plaintiffs and the defendants, in fresh proceedings, and the death of either or both of Mr Lederer and Ms Fiala would be no answer to the bringing of those proceedings. I do not accept that such proceedings could not practically be brought for inability to prove material facts, because many of the material facts which would bear on how any liability should be borne as between the defendants will emerge, in any event, in the course of these present proceedings.

24 As the death of the party against whom indemnity or contribution may be claimed would not be a defence to fresh proceedings for contribution commenced after judgment in the principal proceedings, I do not see why the death of that party is relevant prejudice in the context of an amendment to introduce such a claim against that party in the principal proceedings.

25 So far as delay is concerned, it is true, as Ms Sharp points out, that the second defendant has not really offered an explanation for the delay, such as it is, until December 2004 in applying for leave to amend in this respect. But delay has to be seen in the light of the proximity of a hearing date, or the remoteness thereof, and in that sense this is not in any way a “late” amendment. The proposed amendment was notified in 2004, albeit at the end of that year, and the first defendant will have had notice of it for almost two years when the hearing commences. Moreover, it cannot be overlooked that the first defendant was content to deal with the matter on the basis that the application for leave to amend in this respect would not be dealt with until the hearing and, if permitted, would require no further evidence. I do not think that the absence of explanation for why this claim was not included in the original cross claim is entitled to significant weight in those circumstances.

26 Accordingly, I would propose to allow leave to file the amended cross claim insofar as it adds paragraphs 29 to 31 and claims 6A, 8 and 9. My orders are:

1. Order in accordance with paragraph 1 of the notice of motion filed 6 December 2004;

2. Order that the cross claimant have leave to file an amended cross claim in the form initialled by me dated this day and placed with the papers, subject to the deletion therefrom of paragraphs 32 to 35 inclusive and claim for relief 7;

3. Order that the cross claimant/second defendant pay the respondent's costs of that notice of motion.

Application by the first defendant for leave to file an amended defence

27 The first defendant, by notice of motion filed on 17 March 2006 (Motion 2), seeks leave to file and serve an amended defence to the second further amended statement of claim. Although there are various formal amendments, and some amendments which withdraw denials or substitute more specific pleadings for extant non-admissions, the only amendments of substance are in paragraph 38(a), which withdraws a denial that Mr Lederer owed any fiduciary duties to the so-called third partner – to which there could be no reasonable objection; and paragraph 57A, which seeks to introduce the following:

Insofar as the plaintiffs claim any equitable relief, the claims made by the plaintiffs are time barred including by reason of an analogy with section 15(1) of the Limitation Act of 1969.

28 This motion was not filed until 17 March this year, and was made returnable today. Dr Wechsler informs me, and I accept, that he received it only on Tuesday of this week. Nonetheless, he had been notified some weeks in advance, by letter dated 9 February 2006, of the amendments which were being sought, and his attention was specifically drawn in that letter of 9 February to the insertion of clause 57A.

29 Dr Wechsler says, and I accept, that he did not advert to the potential significance of that amendment until this morning, and submits that he is not in a position to meet the matter now. But bearing in mind that what is presently in issue is not whether the defence so raised should succeed, but whether it ought be permitted to be pleaded, the real question is not whether there is an opportunity to consider in any detail the significance of paragraph 57A but what, if any, prejudice will be occasioned by permitting it to be pleaded at this stage. Despite Dr Wechsler's submissions to the contrary, and having regard to the notice he was given by the letter of 9 February, I think that that can and should fairly be dealt with now.

30 The defence already contains, in paragraph 52, a plea of s 14 of the Limitation Act 1969 (NSW). In paragraph 54, it contains a defence of laches in respect of any equitable relief. In other words, questions of delay, and where relevant explanations for delay, were always going to be issues at the trial.

31 Proposed paragraph 57A will make those issues relevant in a different legal way, but it raises what is, in essence, a legal defence which will not depend on the facts. Whether in fact s 15(1) is capable of application by analogy at all will be a matter for debate at the trial.

32 In terms of prejudice, Dr Wechsler argues that if indeed the new defence is fatal, the plaintiffs may have wasted a great deal of time and costs which could have been avoided had it been pleaded earlier. If that turns out to be the case - and indeed, if having considered paragraph 57A over the next week or so, Dr Wechsler decides that it is appropriate to discontinue the proceedings (and I am not suggesting that he should) - but if he were to decide that 57A appeared fatal to the plaintiffs' case, then he might have a strong argument on questions of costs arising upon any such discontinuance. But I do not see how the introduction of this essentially legal defence at this stage occasions prejudice which cannot be met by an appropriate costs order.

33 I make an order in accordance with paragraph 1 of Motion 2. I order that the applicant/first defendant pay the costs of the plaintiffs of that motion.

Application by the first defendant to strike out plaintiffs' reply and defence to second cross-claim.

34 By notice of motion filed on 17 March 2006 (Motion 3) the first defendant moves to have struck out parts of the reply of the plaintiffs to the defence of the first defendant to the further amended statement of claim, and all and alternatively parts of their defence to the second cross claim.

35 The original reply was filed on 25 August 2003. As has become apparent in the course of discussion, in fact, the amended reply does not in substance change what was put forward in the relevant respects in the original reply. Indeed, in the Registrar's judgment of 24 March 2005, he referred to the reply and observed that it had raised allegations similar to those which the plaintiff then sought unsuccessfully to have incorporated in an amended statement of claim.

36 The fact that the Registrar found that it was inappropriate to permit an amendment to raise those allegations in the statement of claim does not determine whether or not it is proper to permit them to stand in a reply.

37 Paragraph 12 of the reply replies to paragraph 52 of the statement of claim, which pleads s 14 of the Limitation Act. The substance of the reply in August 2003, and of the amended reply, is to raise a reply of fraudulent concealment, based on s 55 of the Limitation Act. Such a pleading may only properly be pleaded in reply, and not in chief.

38 Paragraphs 17 and 21 of the amended reply do not differ in substance from the corresponding paragraphs in the original reply. In their defence, the first defendants have contended that the December 1994 meeting had the consequence that any claim by the plaintiffs against the defendants was compromised or released, and they rely upon minutes said to record what took place at that meeting to prove it. The plaintiffs deny that any such agreement was reached at that meeting. On any view, the defendants by their defence have put in issue the existence and content of what took place at that meeting and the plaintiffs are going to dispute the defendants' version. If, as part of that dispute, the plaintiffs are going to contend, as they do, that the minutes are not an accurate record and were fraudulently prepared, then it is proper that that should be raised on the pleadings. Because the meeting is raised as part of the defendants' case, it is proper that that issue be raised in reply.

39 Whatever may be the position about amending a statement of claim to raise new allegations of fraud after death of the person against whom those allegations are made, which is the situation with which the Registrar dealt on 24 March 2005, that is quite a different matter from whether a pleading should be permitted to stand which makes those same allegations but in reply to affirmative defences set up by the defendants.

40 Where an executor pleads a limitation period, it is not a valid objection to the plaintiff pleading a reply of fraudulent concealment that the alleged fraudster is dead and not available to give instructions. Nor, where an executor pleads that the deceased was released or compromised, is any valid objection to the plaintiff pleading in reply that the release or compromise was obtained by or evidenced by fraud.

41 The defence to the second cross-claim is objected to on the same grounds, to which the same reasoning applies. It is objected to on the further ground that it was filed without leave, out of time. While that is true, and while objection was taken at an early stage, the issues which it raised will be raised in any event, by the replies. No relevant prejudice is apparent from its late filing.

42 I extend time for filing the plaintiff’s defence to the second cross-claim up to and including the date on which it was filed.

43 Motion 3 is dismissed with costs.

Application by plaintiffs to further amend the statement of claim and replies.

44 By notice of motion filed on 3 February 2006 (Motion 4), the plaintiffs claim, inter alia, leave to amend their pleadings in the forms attached to that notice of motion. That involves amendments, in particular to paragraph 41B of the Statement of Claim, which comprises a claim for exemplary damages, and some minor amendments to the replies to the defence of the first defendant and the defence of the second defendant.

45 Neither defendant opposes the application for leave to amend the replies.

46 So far as the application for leave to amend the Statement of Claim is concerned, the first defendant, with the support of the second defendant, opposes so much as seeks to add paragraph 41B(v).

47 However, it is apparent on examination of the preceding version of the pleading that, in substance, all that is involved is the elevation from the status of a particular to the status of a pleaded material fact of what is already contained in paragraph 41B, and the insertion of a new particular C. It is true that the new particular C, which alleges that Mr Lederer made representations to Ms Fiala calculated to influence her against the plaintiffs, is novel. Dr Wechsler informs me that there is documentary evidence available and capable of proving that particular.

48 In circumstances where the Registrar decided that the plaintiffs should be permitted to amend to claim exemplary damages, apparently based on conduct at and around or related to the December 1994 meeting, it does not seem to me that any additional prejudice is occasioned by permitting particular C, which has not already been occasioned by the Registrar’s grant of leave to amend to claim exemplary damages in the first place.

49 I grant leave to the plaintiffs to further amend their statement of claim by filing a Third Further Amended Statement of Claim in the form annexed to the notice of motion numbered 4 filed on 3 February 2006.

50 I grant leave to the plaintiffs to further amend their reply to the defence of the first defendant by filing a further Amended Reply to Defence of First Defendant in the form annexed to that notice of motion. I grant leave to the plaintiffs to further amend their reply to the defence of the second defendant by filing a further Amended Reply to Defence of Second Defendant in the form annexed to that motion.

51 I direct that, when filed, the further amended replies each be entitled "Further Amended Reply". I order that the plaintiffs pay the defendants' costs of so much of notice of motion 4 as relates to the application for leave to amend.

Application by plaintiffs to split the hearing into separate liability and quantum hearings.

52 Included in motion 4 is an application by the plaintiffs for an order that the hearing be separated into a first hearing on liability, and a second on damages or compensation.

53 There are, of course, many authorities which urge against the determination of separate questions, but it must be said that there is some distinction between the identification and determination of a single separate question, on the one hand, and the separation of liability and quantum on the other. More particularly, in equity, as distinct from at common law, traditionally inquiries as to damages or the taking of accounts of profits have been undertaken separately by a Master, after the determination of liability by a Judge. (insert)

54 I do not take the urgings of high authorities, to the effect that the determination of separate issues is to be avoided, as being directed to changing the traditional practice of equity courts of, where appropriate, first deciding issues of liability, and then ordering inquiries or accounts.

55 My attention has been drawn to what was said by Giles CJ CommD, as his Honour then was, in Tallglen Pty Limited v Pay TV Holdings Pty Limited (1996) 22 ACSR 130, as follows:

In the ordinary course all issues in proceedings should be decided at the one time, but separate decision of a question may be appropriate where, for example, the decision of the question is critical to the outcome of the proceedings and (at least if decided in one way) will bring the proceedings to an end. In particular circumstances the separate decision of a question may be appropriate even if it will not bring the proceedings to an end, such as where there is a strong prospect that the parties will agree upon the result when the core of their dispute is decided or where the decision will obviate unnecessary and expensive hearing of other questions, but such occasions must be carefully controlled less fragmentation of proceedings (particularly when the exercise of right of appeal is borne in mind) brings delay, expense and hardship greater than that which the making of an order is intended to avoid.

56 The Civil Procedure Act 2005 (NSW), sections 56 and 62, are relevant to the present application and I have taken them into account.

57 In support of the application for separate hearings Dr Wechsler, for the plaintiffs, argues: first, that there may well result a considerable saving of time and costs to the parties; secondly, that it will permit the plaintiffs to elect as to their remedy, knowing of the factual basis of any findings which might be made in their favour; and, thirdly, that there is a real prospect of compromise once the rights and liabilities of the parties are determined in a liability hearing.

58 In respect of the saving of time, Dr Weschler points out that the voluminous evidence of the defendant's accountant assumes that the defendants would succeed on the issue about the December 1994 meeting, and will be irrelevant if that issue is resolved against them; counsel for the defendants, I think, acknowledges that that is so. The defendants point out that the plaintiff's expert, Mr Hurwitz, gives some evidence of fact as well as opinion evidence, and I accept that that is so; but his extensive expert opinion evidence would not be taken at the liability hearing if it were to proceed separately, so that there would be a saving in that respect also. Thus if, at the liability hearing, the defendants were to succeed, none of the accounting evidence from either side would ever have to be taken; whereas, if the plaintiffs succeed, the evidence of the defendants' accountant would be irrelevant and would not have to be taken. That is a factor which tends to favour a severance of the questions of liability and quantum.

59 A further factor which significantly favours that course is that it would enable the plaintiffs to make an election as to their remedy at an appropriate time, and limit the evidence on any inquiry to that which is relevant to the particular remedy for which the plaintiffs might elect. The plaintiffs claim accounts, equitable compensation, and damages (including aggravated and exemplary damages). Damages and an account of profits are alternative remedies, and although a plaintiff can apply for damages and an account of profits in the alternative, it can obtain judgment only for one or the other: a double inquiry as to profits and damages is not maintainable, and once judgment has been given for one, any right to elect for the other is lost [Neilson v Betts (1871) LR 5 HL 1; De Vitre v Betts (1873) LR 6 HL 319; Weingarten Bros v Charles Bayer & Co (1905) 22 RPC 341; United Australia Ltd v Barclays Bank Ltd [1941] AC 1; LED Builders Pty Ltd v Eagle Homes Pty Ltd (No 3) 36 IPR 293; Acme Office Service Pty Ltd v Ludstrom [2002] NSWSC 277]. For this reason, a plaintiff is required to elect between remedies.

60 However, a plaintiff should in general not be required to elect, or be found to have elected, between remedies, unless and until it is able to make an informed choice, which involves the right to receive reasonable information as to its potential entitlement in the case of both alternative remedies [LED Builders Pty Ltd v Eagle Homes Pty Ltd (No 3)]. Thus, a plaintiff should not be required to elect, at least until all the evidence is complete, and if the trial is not split, the parties will have to call evidence addressing both damages and an account of profits, as would the respondents; whereas if the trial is split, so that there is a separate inquiry as to the quantum of compensation, then the issue does not arise until after liability has been determined, and the election is made before the inquiry as to quantum is embarked upon [Minnesota Mining & Manufacturing Co v C Jeffries Pty Ltd (1992) 37 FCR 294; Caterpillar Inc v Sun Forward Pty Ltd (1996) 37 IPR 41; LED Builders Pty Ltd v Eagle Homes Pty Ltd (No 3); Gentry Homes Pty Ltd v Diamond Homes Pty Ltd (1993) AIPC 91–008; Island Records Ltd v Tring International Plc [1996] 1 WLR 1256; Tang Man Sit (Representatives of) v Capacious Investments Ltd [1996] 1 AC 514; Brugger v Medicaid [1996] FSR 362; Dr Martens Australia Pty Ltd v Bata Shoe Company of Australia Pty Ltd 145 ALR 233; Acme Office Service Pty Ltd v Ludstrom].

61 It follows that in this case, if the inquiry as to quantum is not separated, then the evidence at the trial will have to cover both possibilities - an account of profits and damages - and not just one of them.

62 Together, the foregoing matters favour the application in this case of the traditional approach in equity of determining the amount of compensation after liability has first been determined, enabling the plaintiff to make an informed election.

63 One factor which weighs against severance is that the parties have already prepared their expert evidence, filed and served it, and no doubt considered it, and, so it is said, the evidence of all parties is now complete and ready for trial. I fear that severing the question of quantum may practically invite further evidence on any inquiry as to damages, and would avoid the finality which the final hearing so far on all issues would offer.

64 Nonetheless, on balance, I think that the just determination of the proceedings, the efficient disposal of the business of the court, and the efficient use of available judicial and administrative resources, as referred to in the Civil Procedure Act, s 57(1), tend to favour the prior determination of the issues of liability, as equity ordinarily would. In particular, that will have the result that the evidence as to compensation is limited to the particular remedy the plaintiffs elect, if they succeed, and will not be required at all, if they fail.

65 I therefore order, pursuant to Uniform Civil Procedure Rules 2005 (NSW), r 28.2, that any question of the quantum of any compensation or damages which might be payable by the defendants, or either of them, to the plaintiffs, be determined separately and after the trial of the proceedings on liability.

66 I order that costs of motion 4, insofar as it relates to this application, be costs in the proceedings.

Application by plaintiffs for further and better discovery against the second defendant, and application by second defendant to set aside notice to produce and subpoena issued by the plaintiffs.

67 [Motion 4 also includes an application by the plaintiffs for an order that the second defendant give “better and complete discovery” in accord with orders made by Registrar Berecry on 1 November 2001. Related to it is an application by the second defendant by motion filed on 3 November 2005 (Motion 6) to have set aside a notice to produce given to it, and a subpoena addressed to its solicitors PricewaterhouseCoopers Legal, by the plaintiffs. The position which the second defendant has adopted is that, without admission that it has not complied with its discovery obligations, it will submit to an order that it give discovery of documents in the classes identified in the schedule to the subpoena addressed to PricewaterhouseCoopers, except for those in paragraph 3 of that schedule. Paragraph 3 calls for “documents relating to correspondence between Mr & Mrs Du Maurier and Mr Hamilton between August 1994 and December 1998.

68 Dr Weschler submits that correspondence between the Du Mauriers and Mr Hamilton of PricewaterhouseCoopers during that period may contain documents which cast light on the disputed December 1994 agreement. Mr Wood objects that such a class of documents would catch many which are not relevant to the proceedings. In my opinion that objection can be met by framing the order in a way which limits the discovery obligation to documents which are relevant to facts in issue in the proceedings.]

69 I order that by 10 May 2006 the second defendant give discovery to the plaintiffs of documents within the classes described in paragraphs 1 to 9 inclusive of the schedule to the subpoena issued on 12 September 2005 and addressed to the managing partner PricewaterhouseCoopers Legal, a copy of which is annexure A to the affidavit of Paul Robert Hargrave, sworn 3 November 2005 herein, provided that the obligation to give discovery is limited to such documents in those nine categories as are relevant to a fact in issue in the proceedings within the meaning of UCPR r 21.1(2).

70 Having made that order, I propose to set aside the subpoena and the notice to produce. As each party has had a measure of success, I will make no order as to costs.

71 On the motion filed by the second defendant on 3 November 2005 (motion 6), I order that the subpoena issued at the request of the second plaintiff addressed to PricewaterhouseCoopers Legal dated 12 September 2005 be set aside.

72 I order that the notice to produce given by the second plaintiff to the second defendant dated 12 September 2005 be set aside.

73 I make no order as to the costs of motion 6. I make no order as to the costs of motion 4, insofar as that motion relates to the claim for further and better discovery.

Application by first defendant for further production of documents and examination of witness subpoenaed to produce documents.

74 [By motion filed on 17 March 2006, the first defendants seek orders that Mr Graham Hurwitz, who has been subpoenaed to produce documents, appear before the court to be examined on oath or affirmation as to the extent of his compliance, and that the plaintiffs produce all documents falling within a notice to produce dated 19 October 2005 given by the first defendants to the plaintiffs (Motion 5).

75 In circumstances where Mr Hurwitz had not been served with the motion and supporting affidavit until yesterday, Ms Sharpe properly and responsibly did not press to proceed on so much of the motion as sought an order in respect of him today, and sought that it be adjourned.

76 The balance of the motion seeks to compel production of documents, already called for by a notice to produce, comprising the plaintiffs’ instructions to their expert Mr Hurwitz, and other documents briefed to Mr Hurwitz, instructions to him, and communications between the plaintiffs and him. Up to this point, the plaintiffs have said that they have no such documents to produce which have not already been produced. The notice to produce calls for “all letters of instruction and other documents provided to Graham Hurwitz for the purpose of preparing any reports in these proceedings”. The first defendant has repeatedly raised with the plaintiffs, through Dr Weschler, concerns that there has not been full production. Dr Weschler has asserted that there are no relevant documents in the possession, custody or power of the plaintiffs other than those exempted from discovery by virtue of the fact that they are already in the possession of the first defendant.

77 No instructions or other documents briefed to Mr Hurwitz have been produced. Ms Sharpe fairly observes that it would be a most unusual circumstance if the plaintiffs could not produce a single letter of instruction to their expert. She adds that having regard to some of the documents so far produced by Mr Hurwitz, there is evidence of correspondence from Dr Weschler to Mr Hurwitz.

78 Before me, Dr Weschler repeated that “there are no documents that are not already in the possession of the defendant”. When pressed as to whether he was asserting that he had not sent any written letter of instruction to Mr Hurwitz, he answered, “Correct, other than whatever is in the file”, which was a reference to the bundle of documents which Mr Hurwitz had produced on subpoena to him. Dr Weschler said, “I do not have any other documents but what he has produced, or what is in the accounts of the Lederer Fiala Partnership, or what is in the accounts of the George Street Partnership which are already in their [the defendants’] possession and I believe on file in affidavits …”. He explained that most communications with Mr Hurwitz took place on the telephone.

79 Ms Sharpe then identified, from documents produced by Mr Hurwitz to date, documents which were letters of instruction to him from Dr Weschler. Dr Weschler ultimately accepted that these fell within the description of documents in the notice to produce, but maintained that the plaintiffs were excused from producing them because they had already been produced by Mr Hurwitz.

80 This contention was based on a misapprehension of the effect of UCPR r 1.1. The concept of an “excluded document” referred to in that rule is relevant for the purpose of deciding what documents have to be included in a list of documents by way of discovery for the purposes of r 21.3. However, that definition is not relevant to production under a notice to produce referred to in r 21.10 and r 21.11. It is not a ground for refusing to produce a document under a notice to produce that the document falls within the definition of “excluded document”. When this was pointed out to Dr Wechsler, he said that if that was the requirement, the plaintiffs were happy to produce any documents they have which are the documents which are within Mr Hurwitz’s bundle. It was then pointed out to Dr Weschler that the plaintiffs’ obligation was not simply to select such documents from Mr Hurwitz’s bundle, but to search through their own records and find their own copies of correspondence that had been sent to Mr Hurwitz.]

81 On motion 5, I order that within 14 days, the plaintiffs produce to the first defendant all documents falling within the notice to produce dated 19 October 2005 and served upon the plaintiffs on the same date.

82 I order that the plaintiffs pay the first defendant's costs of the motion, to the extent that it relates to that application.

83 Motion 5 is otherwise adjourned to Thursday 1 June 2006 at 9.30am.

84 The subpoena addressed to Mr Hurwitz is adjourned to the same time and date.

Directions Generally

85 I make orders in accordance with the document entitled Short Minutes, initialled by me, dated this day and placed with the papers, subject to the deletion of paragraphs 5 and 6.

86 I will extend time for the tender bundle to 9 June. I stand the proceedings over to 1 June 2006 at 9.30am for further pre trial directions.

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