Reece Pty Ltd v Jones & Jones Master Plumbers Pty Ltd
[2012] NSWDC 98
•25 June 2012
District Court
New South Wales
Medium Neutral Citation: Reece Pty Ltd v Jones & Jones Master Plumbers Pty Ltd [2012] NSWDC 98 Hearing dates: 21 June 2012 Decision date: 25 June 2012 Before: Gibson DCJ Decision: (1) Third cross-defendant's application to sever the cross-claimant's claim against it from these proceedings and heard separately is dismissed.
(2) Third cross-defendant pay the first defendant/cross-claimant's costs of this Notice of Motion.
(3) Third cross-defendant's Notice of Motion for summary judgment is stood over for further directions on 6 September 2012 in the Case Managed List.
Catchwords: PRACTICE AND PROCEDURE - motion for separate trial of proceedings by one cross-defendant against the cross-claimant - application dismissed Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56, 57 and 58
District Court Act 1973 (NSW), s 46
Insurance Contracts Act 1984 (Cth), ss 13, 14 and 54
Sale of Goods Act 1923 (NSW)
Trade Practices Act 1974 (Cth), ss 51A, 52 and 74G(1)
Uniform Civil Procedure Rules 2005 (NSW), rr 2.1, 6.22 and 6.29Cases Cited: AMP Fire & General Insurance Co Ltd v Dixon [1982] VR 833
AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
ASIC v Axis International Management Pty Ltd [2009] FCA 250
Beneficial Finance Corporation v Price Waterhouse (1996) 68 SASR 19
Bi v Mourad [2010] NSWCA 17
Bishop v Bridgelands Securities (1990) 25 FCR 311
Carter v Commissioner of Taxation (2001) 109 FCR 215
D G Madin Ltd v Gordon [1964] SASR 64
Dean-Willcocks v Air Transit International Pty Ltd (2002) 55 NSWLR 64
Fitzgerald v Parramatta Leagues Club Ltd [2010] NSWSC 1126
GPI Leisure Corp Ltd v Yuill (Supreme Court of New South Wales, Young J, 6 August 1997)
Hyder Consulting (Victoria) Pty Ltd v CGU Insurance Ltd [2001] VSC 449
Idoport Pty Ltd v National Australia Bank Ltd (No 15) [2000] NSWSC 1215
Mann v Board of Health (ACT) (1996) 67 FCR 383
Martin v Cassidy (1969) 90 WN (Pt 1) (NSW) 433
McCarthy v St Paul International Insurance Co Ltd (2007) 157 FCR 402
Owners SP 75903 v Dix [2011] NSWSC 245
Ramsay v Schiller [2012] NSWSC 596
Spirits International BV v Federal Treasury Enterprise (FKP) Sojuzplodoimport (2011) 91 IPR 438; [2011] FCAFC 69
Warragamba Winery Pty Ltd v State of New South Wales [2010] NSWSC 66
Waters v Smith [1969] 1 NSWR 151
Wood v Cross Television Centre Pty Ltd [1962] NSWR 528Texts Cited: Ritchies Uniform Civil Procedure NSW Category: Procedural and other rulings Parties: Cross-Claimant: Jones & Jones Master Plumbers Pty Ltd (ACN 096 654 581)Third Cross-Defendant: Wesfarmers General Insurance Ltd (ABN 24 000 036 279) Representation: Cross-Claimant: Mr C P Carter / Mr S LippThird Cross-Defendant: Mr M Sealey
Cross-Claimant: Doyles Construction LawyersThird Cross-Defendant: Sparke Helmore Lawyers
File Number(s): 2011/247763 Publication restriction: None
Judgment
The third cross-defendant (Wesfarmers General Insurance Ltd, hereafter "Wesfarmers") by notice of motion filed 4 May 2012 sought orders as follows:
(a) The cross-claim brought by the first defendant/cross-claimant (Jones & Jones Master Plumbers Pty Ltd, hereafter "Jones & Jones") be dismissed (notice of motion, orders 1 and 2);
(b) Alternatively, for paragraph 2(vi) to be struck out;
(c) Alternatively, for the cross-claim against Wesfarmers to be severed from these proceedings and heard separately;
(d) Costs.
The application for summary judgment referred to in paragraph 1(a) above was adjourned as it was not ready to proceed. The application to strike out paragraph 2(vi) is to be revised to limit the relief sought to certain words only and, more importantly, extend the application to include the whole of paragraph 2(vii). As Jones & Jones were not in a position to lead evidence or make submissions about the application to strike out paragraph 2(vii) of the cross-claim, I acceded to their application for the relief sought in paragraph 3 both to be formalised in an amended notice of motion and made orders to stand this part of the application over to the next time these proceedings are in the Case Managed list (6 September 2012).
The sole remaining matter for determination before me is therefore the relief sought in prayer 4 of the notice of motion, namely the severing of the cross-claim against Wesfarmers (see paragraph 1(c) above).
I shall first set out a short history of these proceedings, and the circumstances in which the claim in relation to Jones & Jones' insurance policy is asserted to be unrelated to the claim brought by the plaintiff against Jones & Jones. This background material is important when considering an application of this nature, for the reasons explained by the Full Court of the Federal Court in McCarthy v St Paul International Insurance Co Ltd (2007) 157 FCR 402 at [75]:
"... it is generally necessary to focus on the underlying facts, not the legal form in which the matter is constructed or pleaded."
The background to this application
The plaintiff (Reece Pty Ltd, hereafter "Reece") sold plumbing supplies to Jones & Jones, a company which carries on business as a plumbing and gas fitter contractor. Jones & Jones were subcontractors to Watpac Constructions Pty Ltd (hereafter "Watpac") at a building project to construct the worldwide headquarters of Cochlear Australia ("Cochlear") at Macquarie University. Wesfarmers were the insurers of Jones & Jones at the relevant time, and had been since 2001. Over the whole of this period, Jones & Jones dealt with a particular representative of Wesfarmers including and its representatives had, it is pleaded, discussions with this representative concerning the nature and extent of Jones & Jones' insurance liability cover. In particular, it is asserted that the cover was provided for contracts in excess of the total contract value of $1 million over this long period of time, and that Wesfarmers had in fact indemnified Jones & Jones in respect of claims made for contracts in excess of $1 million. This is of relevance because the project which is the subject of these proceedings is such for over $1 million. The two bases upon which Wesfarmers deny liability is the value of the project, which is over $1 million, and the nature of the damage, which raises issues of product liability.
Jones & Jones obtained water meters from the plaintiff, Reece, to install in the construction of Cochlear's building in Macquarie University grounds. The plaintiff had in turn obtained these meters from a company named GSA Industries (Aust) Pty Ltd (hereafter "GSA"), the first cross-defendant in the Jones & Jones cross-claim. As soon as these goods were provided to Jones & Jones, they were installed. Very soon after installation, two water meters failed, resulting in significant water flooding damage to the building and consequential delay to its final completion. Reece, the plaintiff, now sue Jones & Jones for the cost of the materials provided.
The real substance of this action is not, however, the comparatively simple question of the non-payment for goods supplied by the plaintiff. The substantive issues for determination relate to the damage to the premises. Cochlear has claimed damages against Watpac for damage and delay under the head contract; Watpac has in turn claimed damages against Jones & Jones; Jones & Jones seeks relief against Wesfarmers, GSA and the plaintiff. As indicated above, Wesfarmers has declined indemnity to Jones & Jones on essentially two bases: that the contract value was in excess of $1 million, and on the basis that the policy of insurance does not include product liability.
The issues for determination on the pleadings may be summarised as follows:
(a) The plaintiff, Reece, brings proceedings for breach of contract for non-payment by Jones & Jones for supply of the water meters which leaked, thereby causing damage to the premises;
(b) As is often the case in proceedings where such relief is sought, Jones & Jones defends the claim of Reece essentially by reliance upon causes of action in a cross-claim, including claims for breach of contract, breaches of sections of the Trade Practices Act 1974 (Cth) and Sale of Goods Act 1923 (NSW) and a claim for equitable setoff. In addition, claims are brought against GSA in tort and for a breach of s 74G(1) Trade Practices Act. The claim Jones & Jones brings against Wesfarmers, which is the subject of this application for severance are as follows:
(i) Breach of contract;
(ii) Estoppel;
(iii) Breaches of ss 51A and 52 Trade Practices Act;
(iv) Breaches of ss 13 and 14 of the Insurance Contracts Act 1984 (Cth).
Counsel for Jones & Jones has provided me with a spreadsheet setting out the relevant paragraphs of the cross-claim with extracts of the defences for each of the three defendants, in order to demonstrate the common issues of disputed facts which required resolution in all the claims, as well as the issues in relation to each of the causes of action pleaded.
The UCPR provisions relied upon by Wesfarmers
Wesfarmers, which was joined as a cross-defendant on 12 December 2011, states that it brings this notice of motion pursuant to rr 2.1, 6.22 and 6.29 Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), each of which provides as follows:
"2.1 Directions and orders
The court may, at any time and from time to time, give such directions and make such orders for the conduct of any proceedings as appear convenient (whether or not inconsistent with these rules or any other rules of court) for the just, quick and cheap disposal of the proceedings.
6.22 Court may order separate trials if joinder of party or cause of action inconvenient
If the court considers that the joinder of parties or causes of action in any proceedings may embarrass, inconvenience or delay the conduct of the proceedings, the court:
(a) may order separate trials, or
(b) may make such other order as it thinks fit.
6.29 Removal of parties by order
The court may order that a person:
(a) who has been improperly or unnecessarily joined, or
(b) who has ceased to be a proper or necessary party,
be removed as a party."
Wesfarmers also relies upon ss 56, 57 and 58 Civil Procedure Act 2005 (NSW).
Joinder and severance of defendants
The basic principle for joinder of relevant parties is that "the court should take whatever course seems to be most conducive to a just resolution of the disputes between the parties, but having regard to the desirability of limiting, so far as practicable, the costs and delay of the litigation": Bishop v Bridgelands Securities (1990) 25 FCR 311 at 314. If inconvenience is claimed, it must be shown that there are factors which make it inconvenient for there to be a joint trial, rather than that a separate trial is more convenient: Mann v Board of Health (ACT) (1996) 67 FCR 383 at 399F. Disadvantages to a defendant seeking a separate trial, including the possibility of unfairness, must be weighed against identified advantages to the parties as a whole, and to the efficient use of the court's resources, having regard to the commonality of issues raised by each claim: Dean-Willcocks v Air Transit International Pty Ltd (2002) 55 NSWLR 64 at [34]. The court should be concerned to determine what is the most efficient use of the resources of the parties and also of the court: Carter v Commissioner of Taxation (2001) 109 FCR 215 at [23].
In ASIC v Axis International Management Pty Ltd [2009] FCA 250 at [12] -[13], Gilmour J summarized the relevant factors as follows:
"[12] Factors which have been held to weigh in favour of exercising the discretion to order separate trials include:
(a) the issues concerning the party seeking the separate trial are distinct and discrete: Bishop v Bridgeland Securities at 314;
(b) a joint trial will involve the respondent in the expense of being present at the trial of questions with which they are not concerned and it would be unfair for the respondent to be compelled to participate in a large and costly proceeding where it has only marginal involvement: Hinze v Zed [1926] SASR 77 at 84; Knight v Beyond Properties Pty Ltd (No 2) [2006] FCA 192 at [30] and Newman v Hold Pty Ltd [2001] VSC 282 at [17].
[13] Factors which have been held to militate against making such an order include:
(a) the potential overlap of evidence and argument, including the need for the same witnesses to be called at both trials: National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd [1996] FCA 1228 at [17]; Dean-Willcocks v Cmr of Taxation 2003 45 ACSR 298 at [18];
(b) the interrelationship between issues which are not capable of being resolved independently of each other: Mann v Board of Health (ACT) at 400F;
(c) the potential disqualification of the judge that hears the first trial, if adverse findings are made as to the creditability of witnesses: National Mutual Property Services (Australia) Pty Ltd v Citbank Savings Ltd at [16]; Dean-Willcocks v Cmr of Taxation at [18]; and
(d) the undesirability of inconsistent findings as to the same transactions: Henschel v Brittany Crepe Co Pty Ltd [1981] Qd r 173 at 175-176."
The principles applicable to applications for severing a party and for a separate hearing of a legal issue between the parties are not dissimilar. The relevant legal principles for determining separate questions have been helpfully summarised by Rares J in Spirits International BV v Federal Treasury Enterprise (FKP) Sojuzplodoimport (2011) 91 IPR 438; [2011] FCAFC 69 at [42] as follows:
"[42] In AWB Ltd v Cole (No 2) (2006) 233 ALR 453; [2006] FCA 913 at [26]-[40], Young J reviewed the authorities from which (without reciting the authorities to which his Honour referred) the following principles can be distilled:
(1) As a general rule the starting point is that all issues of fact and law should be determined at the one time.
(2) A party seeking the determination of separate questions must satisfy the court that it is "just and convenient" for the order to be made. The order must be made on concrete facts, either established or agreed, for the purpose of quelling a controversy between the parties so as to produce a conclusive or final judicial decision on the issue, which is of a real, not hypothetical, importance to the determination of the controversy.
(3) There are special problems where the separate issue involves a mixed question of fact and law, although it may still be able to be decided as a separate issue. However, care must be taken in precisely formulating the question and specifying the facts upon which it is to be decided.
(4) The court must have all relevant matters before it as a precondition of it being asked to exercise its discretion if the separate question involves the grant or refusal of declaratory relief.
(5) It may still be appropriate to determine a separate question even if it will not resolve all the issues, provided that there is a strong prospect that the parties will agree upon the result when the core of the dispute has been decided or if the decision will obviate unnecessary and expensive hearings of other questions.
(6) Generally speaking an issue will not be appropriate for separate determination if it is simply one of two or more alternative ways in which an applicant or plaintiff frames its case and its determination would leave other significant issues unresolved.
(7) It is relevant to consider whether:
· the separate questions will contribute to the saving of time and cost by substantially narrowing the issues for trial or even lead to the disposal of the proceedings;
· they will contribute to the settlement of the proceedings;
· they will give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of the trial;
· there will be any significant overlap between the evidence adduced on the hearing of the separate question and a trial;
· the questions will prolong, rather than shorten, the proceedings: see too City of Swan v Lehman Brothers Australia Ltd (2009) 73 ACSR 86 ; [2009] FCA 784 at [26]-[27] per myself."
A similar list was set out by Einstein J in Idoport Pty Ltd v National Australia Bank Ltd (No 15) [2000] NSWSC 1215 at [7] as follows:
"[7] Without examining specific cases in relation to the power conferred on the Court in Pt 31, r 2, I proceed on the basis of the following principles.
(1) The power of the Court to order the separate determination of an issue is a discretionary power which must be exercised judicially, but cannot otherwise be fettered: Dunstan v Simmie & Co Pty Ltd [1978] VR 699 at 670 per Young CJ and Jenkinson J.
(2) In exercising the power under Pt 31, r 2, the Court is now enjoined to give effect to the overriding purpose of the Supreme Court Rules; namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings and cannot be stated in a more confined way: Pt 1, r 3(1), r 3(2) Supreme Court Rules.
(3) The Court begins with the proposition that it is ordinarily appropriate that all issues in a proceeding should be disposed of at the one time: Tallglen v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 141 per Giles CJ in Comm D, Hadid v Australis Media Ltd (unreported, Supreme Court of NSW, 29 March 1996 per Rolfe J). Accordingly, it is for the party who wishes to have a question separately determined to show that it is desirable for that to occur.
(4) Without being exhaustive, the separate determination of an issue may prove to be an appropriate procedure in at least the following sets of circumstances:
(a) where the resolution of that separate issue will have the effect of resolving the entirety of the litigious controversies or of substantially narrowing the field of litigious controversy: CBS Productions Pty Ltd v O'Neil [1985] 1 NSWLR 601 at 606 per Kirby P, Dunstan v Simmie & Co Pty Ltd (supra, at 671 per Young CJ and Jenkinson J);
(b) where the resolution of that separate issue carries with it a strong prospect that the parties will thereafter be able to resolve their dispute themselves and thus avoid further litigation: Tallglen v Pay TV Holdings (supra, at 141 - 142 per Giles CJ in Comm D);
(c) where there is a clear demarcation between that issue and all other issues in the case, including issues going to the credit of witnesses: CBS Productions Pty Ltd v O'Neil (supra, at 606 per Kirby P), Tallglen v Pay TV Pty Ltd (supra, at 142 per Giles CJ in Comm D), Rajski v Carson (1988) 15 NSWLR 84 at 88 per Kirby P and Hope JA.
(5) Conversely, the separate determination of an issue will rarely be an appropriate procedure where:
(a) there are intertwined issues of fact or law between the separated question and the other questions such that the determination of the separate question will not have any substantial effect upon the width of the field of litigious controversy or the prospect of the settlement of the balance of the litigation: Law Society of NSW v Bruce (unreported, Supreme Court of NSW, 23 April 1996, per Rolfe J), Parramatta Stadium Trust v Civil and Civic Pty Ltd (unreported, Supreme Court of NSW, 27 August 1996, per Hunter J).
(b) where there is a commonality of witnesses and issues of credit as between the separate issue and other issues in the case which will or may necessitate a ruling on the credit of one or more of the common witness, thus possibly precluding that same judicial officer from again dealing with the matters going to the credit of the common witness in accordance with the decision of the Court of Appeal in Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 441: Story of Sydney Pty Ltd v Ling (unreported, Supreme Court of NSW 15 November 1994, per Rolfe J), Century Medical v THLD [2000] NSWSC 5; (unreported, Supreme Court of NSW, 3 February 2000, per Rolfe J).
(c) there is a possibility that the resolution of the separate issue will not finally determine the issue but will merely result in an appeal from that decision in relation to that separate issue, creating a multiplicity of proceedings, interruption to the court and undesirable fragmentation of the proceedings: Story of Sydney Pty Ltd v Ling (supra), Century Medical v THLD (supra).
(6) The experience of courts suggests that the separation of proceedings often does not result in the quicker and cheaper resolution of proceedings as anticipated, but often has the reverse effect, merely causing added delay and expense to the resolution of the litigation. Thus, before an issue is to be separately determined, it must be possible to clearly see that it will facilitate the quicker and cheaper resolution of the proceedings: Tallglen v Pay TV Pty Ltd (supra, at 142 per Giles CJ in Comm D), Parramatta Stadium Trust v Civil and Civic Pty Ltd (supra), Century Medical v THLD (supra)."
The principles set out in Idoport Pty Ltd v National Australia Bank Ltd (No 15) have been endorsed and followed in judgments following the introduction of the Civil Procedure Act and in particular the following:
(a) In Fitzgerald v Parramatta Leagues Club Ltd [2010] NSWSC 1126 at [16], Barrett J said:
"[16] Counsel on both sides agreed that the question whether separate determination should be ordered is to be approached in the manner stated by Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215 at [7] in a passage which has been quoted with approval in a number of later cases and identifies several propositions of particular relevance to the present motion:
1. The power of the court to order the separate determination of an issue is a discretionary power which must be exercised judicially, but cannot otherwise be fettered.
2. In exercising the power, the court must give effect to the overriding purpose of the rules of court which is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
3. The court begins from the position that it is ordinarily appropriate that all issues in a proceeding should be disposed of at the one time, so that it is for the party who wishes to have a question separately determined to show that it is desirable for that to occur.
4. The separate determination of an issue may prove to be an appropriate procedure in at least the following sets of circumstances:
(a) where the resolution of that separate issue will have the effect of resolving the entirety of the litigious controversies or of substantially narrowing the field of litigious controversy;
(b) where the resolution of that separate issue carries with it a strong prospect that the parties will thereafter be able to resolve their dispute themselves and thus avoid further litigation;
(c) where there is a clear demarcation between that issue and all other issues in the case, including issues going to the credit of witnesses."
(b) In Warragamba Winery Pty Ltd v State of New South Wales [2010] NSWSC 66 at [4], Harrison J referred to Einstein J in Idoport Pty Ltd v National Australia Bank Ltd (No 15) at [7].
(c) In Owners SP 75903 v Dix [2011] NSWSC 245 at [10], Hall J referred to Barrett J's observations in Fitzgerald v Parramatta Leagues Club Ltd [2010] NSWSC 1126 at [16].
(d) In Ramsay v Schiller [2012] NSWSC 596 at [33], Hallen AsJ said:
"The power of the Court to order the separate determination of a question is discretionary and must be exercised judicially, but is otherwise not fettered. In determining whether to make an order, the Court is under an obligation to seek to give effect to the overriding purpose of the Civil Procedure Act 2005 and of rules of court to facilitate the just, quick and cheap resolution of the real issues in the proceedings: Civil Procedure Act s 56(2)."
The severing of an entire case against one of a group of defendants who has already been joined (albeit in their absence) requires a careful examination of the whole of the proceedings. Counsel for Wesfarmers drew my attention to four relevant decisions:
(a) In D G Madin Ltd v Gordon [1964] SASR 64 at 66, Bright J noted the test required that the cross-claim and the principal claim should "overlap";
(b) In Wood v Cross Television Centre Pty Ltd [1962] NSWR 528 at 532, Walsh J held that a cross-claim for defamation should not be permitted in a claim for a liquidated debt on the basis that this was "in accordance with the trend of authority". I pause to note that this was at the time a standard response of courts to cross-actions for defamation generally, not least because of the requirements for jury trials in defamation proceedings;
(c) In Waters v Smith [1969] 1 NSWR 151 at 152, Macfarlan J held that the determination of liability as between an insurer under a policy between the insurer and an employer should be determined in a separate trial on the basis that the plaintiff's action and the action by the defendants were "distinct and separate";
(d) In Martin v Cassidy (1969) 90 WN (Pt 1) (NSW) 433 at 436, Macfarlan J made a similar order on the basis that the third party proceedings raised matters of insurance law unconnected with the issues in a negligence action between the plaintiff and defendant.
As to the last two authorities cited by Wesfarmers, it has historically been the case that joinder of an insurer required there to be some connection between the insurer and the insured in relation to the proceedings (Beneficial Finance Corporation v Price Waterhouse (1996) 68 SASR 19 at 35). Even where there was a justiciable issue between the insured and insurer, there was a reluctance to permit an insurer to be joined as third party, particularly in personal injury proceedings where a jury trial was involved. As the footnote at [6.19.30] of the Ritchies Uniform Civil Procedure NSW point out, these cases need to be read with caution because the reluctance sprang from use of jury trials in personal injury actions. The learned authors go on to note:
"The more contemporary position is illustrated by JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432; BC9304569 where a plaintiff was permitted to join an insurer as a defendant in order to bind the insurer on the determination of facts which were relevant both to the plaintiff's claim against the principal defendant and to that defendant's entitlement to indemnity from the insurer."
This is particularly the case where the insurer has denied liability to indemnify the insured, as the Full Court of the Supreme Court of South Australia noted in Beneficial Finance Corporation v Price Waterhouse at 54-56 per Lander J (discussed on this point in Hyder Consulting (Victoria) Pty Ltd v CGU Insurance Ltd [2001] VSC 449 at [44]-[45] per Byrne J).
It is nevertheless the case that, if the liability of the insured and the insurer involve different issues, this may require a separate trial either before or after the hearing of the principal proceedings, although the authorities are not united on this point (compare GPI Leisure Corp Ltd v Yuill (Supreme Court of New South Wales, Young J, 6 August 1997) and AMP Fire & General Insurance Co Ltd v Dixon [1982] VR 833). The question is generally one of fact in each case, and it is the factual matrix of the case, and not merely the pleadings, which must be examined in relation to this question.
The provisions of the UCPR relied upon by Wesfarmers are drafted in general terms, in order to permit the facts of the case to be the dominant feature of any application. UCPR r 2.1 refers to the "just, quick and cheap" principles enunciated by s 56 Civil Procedure Act, but does not provide specific guidelines for applications such as the present. Rule 6.22 UCPR provides that the court may order separate trials if the joinder of a party or cause of action is "inconvenient". This was the basis upon which the libel cross-action was severed from the plaintiff's debt claim in Wood v Cross Television Centre Pty Ltd. However, the principal matter that is put to me as being matter which "may embarrass, inconvenience or delay the conduct of the proceedings" is that the insurer would be required to be present and represented in court proceedings where other parties would be present, as being the sole defendant if the portion of the cross-claim relating to Wesfarmers were severed.
The convenience of all parties must be considered, and not merely the inconvenience to Wesfarmers. This requires a consideration of the prejudice caused to Jones & Jones by separate proceedings in which a number of matters would have to be proved for the second time, a list of these being set out below. The position of the other parties is also of importance. The other parties to the litigation have made no complaint about the joinder of Wesfarmers, and they do not support Wesfarmers' motion, although it was open to them to join in (or merely support) this application if there was concern that there would be embarrassment, inconvenience or delay by reason of the Wesfarmer joinder.
Rule 6.29 UCPR entitles the court to remove a person who has been "improperly or unnecessarily joined" or "who has ceased to be a proper or necessary party". This provision is aimed at the removal of parties who should not be there at all, and is not appropriate for the making of orders for a separate trial of contested issues of fact between an insured and an insurer.
The issues common to the cross-defendants
The issues to be determined between these parties at the final hearing have been listed by counsel for Jones & Jones in his written submissions as follows:
(a) The construction of the policy wording;
(b) Whether Jones & Jones is entitled to indemnity for the cost of the failed water meters under the policy;
(c) The operation of the product exclusion, if at all;
(d) The operation of the construction exclusion, if at all;
(e) The effect of Jones & Jones' claim under the Trade Practices Act;
(f) The effect of Jones & Jones' claim under the Insurance Contracts Act;
(g) The effect of Wesfarmers' prejudice, if any, that may be remedied by s 54 Insurance Contracts Act; and,
(h) The effect of Jones & Jones' claim for equitable relief pursuant to s 46 of the District Court Act 1973 (NSW).
In oral submissions, counsel for Jones & Jones drew my attention to one particular problem requiring there to be one trial, namely the obtaining of expert evidence concerning water meter defects. Two water meters were asserted to be defective. The process of examining the water meter to determine whether it is defective or not requires a procedure which results in the effective destruction of the water meter. After the first flood, the first defective water meter was examined, in the course of which was destroyed prior to this litigation. Only one water meter remains for the purpose of examination by the experts in these proceedings. Counsel for Jones & Jones told me that his client has proposed the taking of concurrent expert evidence, so that all experts may participate in the examination of the remaining water meter, because the effective result will be that the examination process will result in the meter's destruction.
While Wesfarmers could rely upon the report produced as a result of these experts' findings, difficulties may arise if Wesfarmers seeks to challenge those findings, or if the proceedings between Jones & Jones and the other parties settles without findings on the issue, or on terms of confidentiality. Issues of product liability, claims of negligent installation and argument as to causation of the damage are relevant to the product liability argument between Wesfarmers and Jones & Jones. Counsel for Jones & Jones submitted that this was one of many factual issues upon which his client would suffer prejudice, delay and expense if Wesfarmers was not a party to the proceedings.
Counsel for Wesfarmers pressed the lack of connection between the construction exclusion clause and the subject matter of this litigation, particularly in relation to the Trade Practices Act claims. However, questions of what was said, when and by whom will contribute to the findings on this issue; issues as to credit may be complicated where there is an adverse credit finding (or, for that matter, a finding that a witness is truthful) in other proceedings on issues which overlap (see the cases cited by Gilmour J on this problem in ASIC v Axis International Management Pty Ltd at [13]).
The question of what is meant by "just" in the "just, quick and cheap" requirement in s 56 Civil Procedure Act means what is just for both (or, in fact, all) parties: AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [94] per Gummow, Hayne, Crennan, Kiefel and Bell JJ (see also Bi v Mourad [2010] NSWCA 17 at [47] per Allsop P).
The additional cost of litigating the same, or highly similar, sets of facts before a second tribunal of fact would be a costs burden for the cross-claimant. Orders would have to be sought permitting the use of discovered material from the other proceedings, and witnesses called a second time, some to give the same evidence. The severed action would have to be heard after the main proceedings were over, and this would add to the delay, an undesirable fact where the factual matrix underlining the construction exclusion argument goes back for more than a decade.
The issues raised by Wesfarmers in relation to cost and delay, namely being obliged to participate in a trial in which it plays a minor role, are matters which can be dealt with by seeking appropriate orders from the trial judge. However, I suspect that the resolution of disputed issues of fact concerning the product liability exclusion would see Wesfarmers actively participating for the duration of the trial.
Conclusions
The overlap of issues and undesirability of inconsistent findings as to the same transactions are clearly problems if the Jones & Jones cross-claim against Wesfarmers is severed. The asserted inconvenience and expense complained of by Wesfarmers have been outlined only in the most general way, and are largely forensic. Conformably with the principles in s 56 Civil Procedure Act, Wesfarmers' application to sever the proceedings between it and Jones & Jones is dismissed with costs.
Wesfarmers' summary judgment application will require a fresh hearing date. This can be given by the court when the matter is listed in the Case Managed List on 6 September 2012.
Orders
(1) Third cross-defendant's application to sever the cross-claimant's claim against it from these proceedings and heard separately is dismissed.
(2) Third cross-defendant pay the first defendant/cross-claimant's costs of this Notice of Motion.
(3) Third cross-defendant's Notice of Motion for summary judgment is stood over for further directions on 6 September 2012 in the Case Managed List.
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Decision last updated: 17 July 2012
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