Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited

[2003] NSWSC 1268

CITATION:	Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited & Ors [2003] NSWSC 1268
HEARING DATE(S):	5/12/03, 19/12/03
JUDGMENT DATE:	19 December 2003
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Orders made for determination of separate questions
CATCHWORDS:	Practice and Procedure - Part 31 Rule 2 Supreme Court Rules order for determination of separate questions - Rationale of Rule - Principles underpinning exercise of relevant discretion - Factors relevant - Orders made
LEGISLATION CITED:	Supreme Court Rules
CASES CITED:	CBS Productions Pty Limited v O'Neill (1985) 1 NSWLR 601 Idoport Pty Ltd v National Australia Bank Ltd (No 15) [2000] NSWSC 1215 March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 Tepko Pty Ltd v Water Board (2001) 206 CLR 1
PARTIES :	Lasermax Engineering Pty Limited (Plaintiff) QBE Insurance (Australia) Limited (First Defendant) Mercantile Mutual Insurance (Australia) Limited (Second Defendant) Integral Energy Australia (Third Defendant)
FILE NUMBER(S):	SC 50052/03
COUNSEL:	Mr J Sexton SC, Mr R Scruby (Plaintiff) Mr M McCulloch (First and Second Defendants) Mr S Finnane (Third Defendant)
SOLICITORS:	Maguire & McInerney (Plaintiff) Pricewaterhouse Legal (First and Second Defendant) Colin Biggers Paisley (Third Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Friday 19 December 2003 ex tempore
Revised 11 February 2004

50052/03 Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited & Ors

JUDGMENT

The proceedings

1 The plaintiff, Lasermax Pty Ltd ["Lasermax"] carries on the business of manufacturing and metal processing at premises located at 152-154 Shellharbour Rd, Kemblawarra (“the Premises”).

2 The proceedings concern damage to a Laser [“the laser”] used by Lasermax for the purposes of welding, cutting and treating materials. The laser was apparently the subject of a hire purchase agreement entered into between Lasermax and a finance company.

3 The material allegations made in the summons identify the damage as having occurred as follows:

· The laser was at all material times powered by electricity drawn from the Premises;

· Electrical power has at all material times been supplied to the Premises by way of electrical wires supported by poles (“Power Poles”) located outside the Premises;

· Each Power Pole has an upper horizontal arm supporting electrical wiring carrying approximately 11,000 volts (“the Upper Arm”), and a lower horizontal arm supporting electrical wiring carrying approximately 415 volts (“the Lower Arm”).

· On or about 11 November 2002 a fire occurred (“the Fire”) on a Power Pole in the vicinity of the Premises;

· As a direct result of the Fire, electrical wiring supported by the Upper Arm of the aforesaid Power Pole fell onto electrical wiring supported by its Lower Arm, and a power surge of approximately 11,000 volts of electricity passed to the Premises and through to the Laser (“the Power Surge”);

· The Fire, and through it the Power Surge, resulted directly in further fire, smoke, overheating and burning in and about the Laser, and by these means or otherwise, damaged the Laser.

4 The first and second defendants were the insurers under a contract of insurance with Lasermax and Chromax Hard Chrome Pty Ltd [which was the owner of the premises], apparently entered into in early February 2002 providing various forms of cover including accidental damage as defined by the policy with a limit of $50,000. Lasermax claims that upon the proper construction of the subject policy, each of the first and second defendants were liable to indemnify it for 50% of the damage caused to the Laser. Lasermax alleges that the policy, properly construed, responds because the insurers are liable to indemnify it in respect of physical loss or damage to the laser directly caused by fire, the allegation being that the fire on the power pole was a direct cause of the damage to the laser.

5 The Insurers have submitted that the Policy responds to damage caused to the laser by the power surge under the head of “Accidental damage” (see cl 3.11 of the “Property” section of the Policy). The maximum amount payable under that head, $50,000, has been paid to the plaintiff by the Insurers (see defence of first and second defendants, paragraph 14).

6 Lasermax has also joined Integral Energy Australia [“Integral”] as the defendant and pursues a cause of action in negligence against Integral. That claim is grounded upon the following allegations made in the summons:

· “At all material times Integral was the owner, and responsible for the care, control and maintenance, of power lines and Power Poles that provided electrical power to the Premises.

· At all material times Integral was the supplier of electrical power to the Premises.

· Initially in about 1998, Chromax and Integral discussed the provision of electricity to the Premises (“the Discussion”), and in particular the break-up of supply to tenants of the Premises.

· In approximately late 2001 or early 2002, Integral were made aware that Lasermax was from that time operating the Laser from the Premises and that new mains power had to be installed by a contractor on behalf of Lasermax to properly and adequately supply power to the Laser.

· In late October or early November 2002 Lasermax was experiencing low voltage supply from the power sources provided by Integral Energy and as a consequence of that defective supply, Integral inspected the electricity supply to the Premises and in particular to the Laser.

· As a consequence of the above, Integral was aware:

(a) That Lasermax conducted business from the Premises;

(b) That the aforesaid business involved the use of the Laser; and

(c) That the Laser was powered by electricity.

· As a result of the matters pleaded in paragraphs 23 to 30, above, Integral owed a duty to Lasermax to exercise all reasonable care in the provision of electricity to the Premises.

· The Fire, as pleaded in paragraphs 17 and 18, above, and the damage caused to the Laser, as particularised in paragraph 19, were caused by the negligence of Integral.

Particulars of Negligence

(a) Failure to exercise reasonable care in the maintenance of insulators on the Power Pole;

(b) Failure to wash insulators on the Power Pole;

(c) Failure to install adequate insulators on the Power Pole;

(d) Failure to exercise reasonable care in the prevention of current leakage on the Power Pole

(e) Failure to exercise reasonable care in the prevention of fire on the Power Pole;

(f) Failure to exercise reasonable care in the prevention of power surges.

· As a result of the aforesaid damage to the Laser, the Plaintiff:

(a) Has been unable to operate the Laser;

(b) Has been unable to carry on business;

(c) Has lost profits; and

(d) Has suffered a diminishment in the value of its goodwill.”

The notice of motion

7 There is before the court for hearing a notice of motion in which Lasermax seeks the following orders:

· That, pursuant to Pt 31 r 2 of the Supreme Court Rules, all issues as between the plaintiff and the first and second defendants be determined separately and before any issue as between the plaintiff and the third defendant;

· Further or alternatively, that, pursuant to Pt 31 r 2 of the Supreme Court Rules, the following question be determined separately and before the trial of any other issue in these proceedings:

“Was the damage referred to in paragraph 19 of the Summons “directly caused”, within the meaning of the Contract referred to in paragraph 10, by the fire referred to in paragraph 17?”

8 Following the first hearing, the parties have produced a proposed form of short minutes of order which include as part of the now proposed orders the question:

"Was the damage to the laser referred to in subparagraph 1(12) [of what are to be proposed agreed and/or assumed facts], directly caused within the meaning of the policy, by the fire referred to in subparagraph 1(a) of the proposed agreed facts."

9 Lasermax prays in aid the overriding purpose rule [Pt 31 r 2] which is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. The relevant principles are set out in Idoport Pty Ltd v National Australia Bank Ltd (No 15) [2000] NSWSC 1215 at [7] – [8], and the cases there cited.

10 Whilst there is no generalisation which will apply in respect of every case, the usual approach to Part 31 rule 2 applications is that the Court will exercise its discretion, conferred by the rule, when:

a) The questions are suitable for separate for separate determination;
b) The question is “ripe” for determination; and
c) The determination of the separate issue is likely to bring finality to the litigation.

· CBS Productions Pty Limited v O’Neill (1985) 1 NSWLR 601 at 606.

· Tepko Pty Ltd v Water Board (2001) 206 CLR 1 at [168] - [170].

The issues

11 The plaintiff puts its case on two bases:

(1) that there was a fire on an electricity power pole outside the premises in which the laser was kept which caused electricity lines supported by that pole to cross and sent a power surge into the laser, thereby causing damage to it; and

(2) that the power surge resulted in a fire inside the laser, thereby causing damage to it.

12 The plaintiff’s written submissions in support of the motion continue:

Fire on the Power Pole
1. There is no issue that there was a fire on a power pole outside the premises in which the Laser was kept on the day on which the damage is alleged to have been caused to the Laser (see paragraph 10 of the Defence of the first and second defendants, admitting paragraph 17 of the Summons).


2. In circumstances where the Insurers have admitted the Policy responds under the head of “Accidental damage”, there can also be no issue that the power surge caused damage to the Laser.

3. It has not been suggested at any stage that the power surge was caused by any event other than the fire on the power pole in question.

4 Accordingly, the only issue as between the Insurers and the plaintiff in respect of the fire on the power pole is whether that fire was a “direct cause” within the meaning of the Policy or merely an indirect cause (see paragraph 2 of the Defence).

Fire in Rectifiers

5. The plaintiff has served two reports of Dr Walter Stern which indicate that there was a fire inside one or more rectifiers, which are components of the Laser. The defendants have served two reports which say, in effect, that there was no fire in the rectifiers, or that even if there was, it was not causative of any damage in the Laser (see Affidavit of Mark McDonald, paragraph 3).

6. As a result, factual issues, which will require expert evidence to resolve, arise in relation to this question that do not arise in relation to the question of whether the fire on the power pole was a “direct cause” of damage to the Laser – namely, whether there was a fire inside the Laser at all and, if so, whether it was causative of any damage.

7 Inquiries made by the plaintiff demonstrate that in order to obtain an expert opinion on the latter issue, it will be necessary to have the Laser transported to the United Kingdom at a cost of about $80,000 (Affidavit of Mark McDonald, paragraph 5(f), (g)).

8. If the plaintiff is successful on the question of whether the fire on the power pole “directly caused” damage to the Laser, then, first, there will be no need to send the Laser back to the United Kingdom in order to determine liability and considerable time and expense will be saved and, secondly, there will be no need to determine the issues relating to the alleged fire in the rectifiers so that the time, including court.

9 Further, at this stage of the proceedings it is unclear whether there will be any issue as to quantum in the event that the first and second defendants lose on the issue of indemnity. If indemnity is determined as a preliminary issue the first and second defendants may choose to proceed to assess the quantum of indemnity under the policy without the need for the plaintiff to prove loss and damage by admissible evidence, including expert evidence, in this Court. Whilst the assessment process may ultimately prove not be satisfactory to the parties with the result that the Court is required to determine all or some issues of quantum, nevertheless the Court, at least in the first instance, will not be troubled by questions of quantum if liability is determined as a preliminary question.

Proceedings Against Integral

13 The third defendant (“Integral”) is sued in negligence, essentially for failing to adequately maintain and inspect the power pole on which the fire occurred.

14 The case against Integral is different from the case against the Insurers:

(1) The test of causation with respect to the damage to the Laser is different: as against the Insurers, the question is whether the damage was “directly caused” by fire within the meaning of the Policy; as against Integral, the question is whether Integral’s alleged breaches of duty materially contributed to the damage: March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 at 512-514.

(2) The cause of the fire on the power pole is irrelevant to the proceedings against the Insurers. On the other hand, the cause of and responsibility for that fire is a central issue in the proceedings against Integral and is one which is likely to require extensive preparation and hearing time.

(3) Questions concerning Integral’s responsibility for maintaining and inspecting the power poles are irrelevant to the case against the Insurer, but are likely to involve extensive preparation and hearing time in the case against Integral.

(4) The questions of whether the damage to the Laser was a foreseeable consequence of the alleged negligence of Integral, and whether that damage was too remote to be recoverable, are likely to be important in the proceedings against Integral, but do not arise in the proceedings against the Insurers.

(5) In broad terms the plaintiff’s damages case against the Insurers is similar to its case against Integral in that in each case damages are sought in relation to physical damage to the Laser and consequential economic loss. However, there are a number of differences in the way the value of such damages would be assessed:


(i) An issue may arise under the cl 5.1 of the Policy as to whether the Insurer is obliged to provide the cost of repair to the Laser or to provide a replacement Laser;

(ii) The obligation of the Insurers to provide “Business Interruption” cover, under that section of the Policy has the result that the plaintiff’s loss as a result of the breach of this obligation would be assessed by different principles to those involved in the assessment of consequential economic loss in tort.

(iii) Further, the Business Interruption section of the Policy indemnifies the plaintiff with respect to economic loss only for a one year period from the date of loss.

15 Accordingly, first, there is little overlap in the issues between the two cases; secondly, to the extent that there is any overlap in issues, the hearing time required for those issues will be short and would not justify the two causes of action being heard together; thirdly, the case against the first and second defendants is likely to require a much shorter hearing and less preparation than that required for the case against the third defendant, so that it would be more expeditious in terms of expense and court time to hear that case first; and, fourthly, if the whole proceedings are heard at once, unnecessary costs will be incurred by the first and second defendants on the one hand and the third defendant on the other whilst issues which are not relevant to the respective cases against them are dealt with.

16 Further, if the plaintiff succeeds against the first and second defendants then the proceedings against the third defendant will essentially become a subrogated claim by the first and second defendants in the name of the plaintiff against the third defendant. If the whole of the proceedings are heard at the one time then the plaintiff will bear the burden of preparing and running a case against the third defendant which may ultimately be largely for the benefit of the first and second defendants. (The claim against the third defendant may not be entirely for the benefit of the first and second defendants because the common law damages against the third defendant may be larger than the indemnity under the policy).

General Considerations

17 In relation to order 1, a separate determination of the proceedings against the first and second defendants offers a better prospect of disposing of the proceedings entirely. Although there is the potential for the plaintiff to recover more damages from the third defendant than from the first and second defendants, as a matter of practicality there would be a better prospect of settlement of the entire proceedings if the plaintiff were successful on a separate determination of the proceedings against the first and second defendants, even if they take over the proceedings against the third defendant by way of a subrogated claim.

18 In relation to order 2, a separate determination of the “directly caused” question would facilitate a just, cheap and quick resolution of the proceedings whether or not order 1 is made. There is a clear demarcation between the question of whether the fire on the power pole “directly caused” damage to the Laser and all other questions in the proceedings. The hearing of that question alone would be quicker not only in terms of hearing time but the hearing of that question could be brought on much more quickly than if the issues involving the alleged fire in the rectifiers and/or quantum were also heard. If the plaintiff was successful in a hearing of the question of whether the fire on the power pole “directly caused” damage to the Laser, there is a better prospect that the parties thereafter will be able to resolve the dispute between themselves and thus avoid further expense themselves as well as the use of this court’s time. Further, if the plaintiff is successful on the determination of the “directly caused” question, the field of controversy between the parties would be substantially narrowed because the issues relating to the alleged fire in the rectifiers would not have to be determined. Finally, in terms of the just resolution of the proceedings, it is unreasonable to put a plaintiff to the time and expense of running issues which will be irrelevant, if a preliminary question is determined favourably to the plaintiff, on the basis only that to determine that question separately to and before the other issues in the proceedings may not finally determine the proceedings if decided adversely to the plaintiff.

Dealing with the matter

19 The essential burden of the plaintiff's application, at least on the first occasion when the matter was before the court, was that there was no real issue which can be taken with any of the following propositions:

· the fire on the power pole caused the power surge;

· the power surge caused damage to the laser;

· whether and if so how the power surge may have caused a fire inside the rectifiers of the laser has no relevance whatever to the plaintiff’s case against the insurers;

· the critical and relevantly for present purposes sole material issue which arises between the plaintiff and the insurers is as to whether or not the fire on the power pole was a direct cause of the damage to the laser within the meaning of the Policy or was merely an indirect cause of that damage.

20 It must be said that the insurers’ proposition was that in terms of the construction of the Policy and its relevant application, the central issue is whether the damage to the laser was "accidental damage" as defined in the Policy and whether it occurred directly as the result of a fire. Hence will arise the question of proximate cause as that applies to the interpretation of contracts of insurance.

21 Ultimately, and bearing in mind the events of the second occasion when the matter was before the court today, the motion requires to be determined in a pragmatic fashion with a careful eye to the application of the overriding purpose rule.

22 Up until the events of today, it seemed to me clearly important to understand precisely why Integral seeks to investigate whether or not and, if so, how a fire in the rectifiers occurred. As I indicated on the last occasion when the matter was before the court, it seemed to me that when one looks at causation and remoteness in terms of the common law principles of negligence, whatever be the relevant test, it must be that where the policy uses the term "directly caused", the causation/remoteness issues raised by the policy are more confined than those raised by dint of the common law issues.

23 On the last occasion I made the point that if it be the case that the insurers accept that there is no occasion on the issues which separate them from the plaintiff, for any examination of precisely how the damage to the laser occurred [that is to say it be accepted that the only material matters are, 1, that the fire on the power pole took place; 2, that the fire caused the power surge; 3, that damage to the laser the subject of the claim therefore took place and, 4, that the only real issue concerns the proper construction of the policy in its application to these matters which are taken as a given] then, but not otherwise, it seemed to me that there may be a real point in a separate set of orders being made.

24 On the last occasion the insurers raised particular difficulties as follows.

· The submission was advanced that even if it be found that the policy responded, there would remain an issue as to which portion of the damage the policy may cover under condition 3.1 [transcript 12.15].

· It was likely that this issue would raise questions requiring the determination of the extent to which the laser was damaged, for example, by a fire within the rectifiers [transcript 12.20]. This meant that there would still be the spectre of disagreement between the plaintiff and the insurers in respect of the extent of damage being an issue common to the issues raised in the proceedings as between the plaintiff on the one hand and Integral on the other hand [transcript 12.27].

· Hence the making of the separate orders would not determine the suit between the insurers and the plaintiff.

25 Mr Sexton of senior counsel made the following observations on the first occasion when the matter was before the Court:

"We say if the fire in the power pole did not directly cause the damage there is an alternative case which is that the fire in the rectifiers caused the damage. Now, as I have been endeavouring to say, that is a much bigger case because firstly the insurers don't accept that there was a fire in the rectifiers and secondly they don't accept that the fire caused any other damage because what they say is that the power surge caused that fire and other damage. It is not that the power surge caused that fire and that fire caused other damage." [Transcript 17.19].

26 The events of today have essentially involved the three parties all accepting that, as I have understood it, there is no objection to the court making a separate determination order upon nine agreed facts and three agreed assumptions to be made in relation to facts. The proposed nine agreed facts are as follows:

(1) The plaintiff has an insurable interest in a Lumonics AM 356 Laser ("the Laser").

(2) The Laser was, at all relevant times, located in premises occupied by the plaintiff and known as 152-154 Shellharbour Rd, Kemblawarra ("the Premises").

(3) By a policy of insurance number 31A233731BPK ("the Policy") the first and second defendants agreed, subject to the terms of the Policy, to indemnify the plaintiff, up to the limit specified in the Policy, in respect of damage to machinery, plant and equipment, where such damage was directly caused by fire.

(4) The Laser was machinery, plant or equipment within the meaning of the Policy.

(5) At all relevance times, the Laser was connected to and powered by electricity supplied by the third defendant to the Premises.

(6) Electricity is supplied to the Premises by wires supported by a series of power poles located in the street outside the Premises ("the Power Poles").

(7) The Power Poles are made of wood and have an upper horizontal wooden arm supporting insulators for electrical wiring carrying approximately 11,000 volts ("the Upper Arm") and a lower horizontal wooden arm supporting insulators for electrical wiring carrying approximately 415 volts ("the Lower Arm").

(8) On 11 November 2002 there was a fire, within the meaning of the Policy, on one of the Power Poles which was located two power pole spans away from the Premises at a distance of approximately 55 metres ("the Burnt Pole").

(9) The fire caused the Upper Arm on the Burnt Pole to fail.

27 The proposed agreement to assumed facts are as follows:

(10) The wiring supported by the Upper Arm on the Burnt Pole came into contact with the wiring supported by the Lower Arm, causing a high voltage/low voltage intermix ("the Intermix").

(11) The Intermix caused a power surge to the Premises and the Laser.

(12) The power surge caused damage to the Laser, the extent of which has not yet been determined.

28 The proposal put to the court by principally the plaintiff and the first two defendants, but in respect of which, importantly, the third defendant has put up no opposition at all, is that the separation order be that the following question be determined separately and before the determination of any other issue in the proceedings on the basis of the agreed facts and the assumed facts set out above:

“Was the damage to the Laser referred to in sub-paragraph 1(12) directly caused, within the meaning of the Policy, by the fire referred to in sub-paragraph 1(8).”

29 The proposed short minutes include a note -

"...that if the separate question is answered affirmatively, that affirmative answer will be without prejudice to the right of any defendant to litigate:

(a) the correctness of the assumed facts in 1(10), 1(11) and 1(12); and/or
(b) the further issues of the extent of the damage to the Laser and the quantum of the indemnity to the plaintiff for which the first and second defendants are liable under the Policy."

30 The plaintiff has prepared submissions setting out the suggested effect of the making of the orders. It seems to me that each of those submissions, together with what I propose to mention below, does substantiate that in this particular case the making of the separate orders would be a proper exercise of the court's discretion. The plaintiff's submissions in that regard were that the effect of the making of the orders would be:

"1. If the plaintiff is successful, the field of controversy in the litigation will be narrowed substantially because it will be unnecessary to consider:


(i) the issue of whether there was a fire in the rectifiers in the Laser; and

(ii) whether any fire in the rectifiers in the Laser was causative of other damage to the Laser; and

(iii) whether there is any difference between any damage caused by any fire inside the rectifiers and the damage caused by the fire on the Power Pole.


2. However, if the plaintiff is successful, it may be necessary, as between the plaintiff and the first and second defendants, to determine the correctness of the assumed facts.

3. Further, if the plaintiff is successful on the hearing of the separate question, there is a reasonable prospect that the insurer will investigate fully the extent of the damage caused to the Laser, and that agreement will be reached between the plaintiff and the first and second defendants, either wholly or partly, on the extent and quantum of the damage, thus obviating, or reducing, the need for those parties to prepare for, and the court to decide, those issues: See Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 141.45 per Giles J:

'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...'


4. If the plaintiff is unsuccessful on the hearing of the separate question, then little comparative detriment in terms of time or cost will be caused by having the question determined separately. (There is, of course, no rule to the effect that the determination of a separate question will not be ordered unless there would be a saving of time and money whatever the result of that determination: See Tallglen at 141.45).

5. However, if the plaintiff is unsuccessful, the plaintiff and the first and second defendants will need to litigate the balance of the issues between them, which would include some issues common to the proceedings against the third defendant. The common issues are:


a. the extent of the damage to the Laser

b. the cost of repairs/replacement of the Laser

The issues which are relevant only to the first and second defendants are:

c. whether there was a 'fire' within the meaning of the Policy in the rectifiers

d. if so, whether that 'fire' caused damage to any components of the Laser other than the rectifiers

e. the measure of the contractual indemnity under the Policy.

6. Whether the plaintiff is successful or unsuccessful, the plaintiff will have to litigate all issues against the third defendant. The issues relevant only to the third defendant are:


a. the cause of the fire on the power pole;

b the existence, nature and scope of a duty of care;

c. the nature, extent and reasonableness of the third defendants inspection and maintenance regime of the power pole;

d. the measure of damage in tort."

31 The real question concerns, it seems to me, the utility of the making of the separate orders in a circumstance where as all parties accept ,the making of the separate orders will not necessarily lead to a decision of material facts as between the plaintiff and at least one or other of the groups of defendants. The fact is that if the insurer was to succeed on the separate questions, that is to say, the court held that the fire on the pole was not a direct cause of the damage to the laser, then as I have understood the parties' submissions the insurer would logically disappear from the proceedings, simplifying the proceedings considerably, because the plaintiff and the third defendant only then would be locked in battle until the ultimate decision.

32 On the other hand, as I understand it, it is accepted by all parties that if the plaintiff wins on the separate questions then there will be certain issues left live as between the plaintiff and the insurers, including what damage, if any, was caused.

33 The other matter which would then arise would be that a question for the insurer would require decision as to the further approach to be taken in relation to the litigation. There must be at least a high chance that the insurer might elect to take over conduct of the proceedings, in which case the plaintiff would be presumably no longer a litigating party. Alternatively, the insurer may then determine to approach the extent of damage to laser issue in a manner which may be reasonably efficient and expedite that question being decided.

34 It is the case, as I accept, that if the proceedings were simply to go on and receive the usual directions to a final hearing, they would be expensive in the extreme. Questions of the overseas shipment of the laser, expert evidence in relation to damage to the laser and the other matters which are thrown up by the pleadings make that clear. As I understand it, essentially the making of these orders will not be a matter which interests in any particular way the third defendant, Integral. There may be some real substance in the proposition that it should not be required to be party to the hearing of the separate question decision at all because there could be no form of res judicata in that regard which will bind it. Notwithstanding that such an approach may indeed on analysis be the correct approach, it does seem to me that the court in the circumstances in which the decision in relation to the separate question may very well not ultimately determine the proceedings as between the plaintiff and the second defendant, and because the third defendant is a party to the proceedings, there should be no doubt whatever but that the making of the separate question order and the trial of the separate question not in any fashion cause the whole of the proceedings to miscarry or abort, even for reasons not presently understood by the parties or myself.

35 For those reasons I propose to order the separate question but to also direct that the separate question be decided as between the plaintiff on the one hand and the first and second defendants on the other hand, and also as between the plaintiff, the first and second defendants and the third defendant. The reason is simple. The court usually will not order a separate question determination unless being certain that the result will terminate the proceedings or be particularly efficient. In this case there are a number of cross questions of contention in relation to damage and other matters which will be litigated ultimately as between either the plaintiff and the third defendant or the insurers and the third defendant or perhaps all three. The proper exercise of the court's discretion is to require the third defendants to be parties to the whole of the separate question issue. Having said that, it is a matter for them, of course, whether they participate in any real fashion and it is quite open to the third defendants to arrive on the hearing of the separate trial and to announce that they submit to any orders the court may wish to make and do not wish to be heard. Of course they will be bound as if they were here throughout and they may take whatever part they wish in relation to the issues.

36 For those reasons, to my mind the appropriate exercise of the court's discretion is to note order 1 in the short minutes of order, which I initial and date 19 December 2003, and to make order 2 in the short minutes of order and to note the matters referred to in paragraph 3 of the short minutes of order.

37 Costs of the first occasion in relation to the separate order and of today will be reserved to be determined after the hearing of the separate order question.

I certify that paragraphs 1 - 37
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on 19 December 2003 ex tempore
and revised on 11February 2004

___________________
Susan Piggott
Associate

Last Modified: 02/19/2004