Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia - [2005] WASC 132

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: ROSEBRIDGE NOMINEES PTY LTD -v- COMMONWEALTH BANK OF AUSTRALIA & ORS [2005] WASC 132

CORAM: MASTER SANDERSON

HEARD: 13 MAY 2005

DELIVERED : 17 JUNE 2005

FILE NO/S: CIV 1235 of 1999

BETWEEN: ROSEBRIDGE NOMINEES PTY LTD
Plaintiff
AND
COMMONWEALTH BANK OF AUSTRALIA
First Defendant
CORRS CHAMBERS WESTGARTH (A FIRM)
Second Defendant
WFB PTY LTD
Third Defendant

Catchwords:

Practice and procedure - Application for trial of preliminary issue - Turns on own facts

Legislation:

Town Planning and Development Act 1928 (WA)

Trade Practices Act 1972 (Cth), s 51AA

Result:

Trial of preliminary issue ordered

Category: B

Representation:

Counsel:

Plaintiff:     Mr R I Viner QC
First Defendant             :     Mr P A Sheiner
Second Defendant         :     Mr A T Macknay
Third Defendant           :     Mr P K Walton

Solicitors:

Plaintiff:     Gebarski & Associates
First Defendant             :     Christensen Vaughan
Second Defendant         :     Deacons
Third Defendant           :     Jackson McDonald

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

Carlo Nobili SpA Rubinetteri v Militaire Nominees Pty Ltd [2004] WASC 47
Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215
Smith v Maloney (1998) 19 WAR 209
Tepko Pty Ltd v Water Board (2001) 206 CLR 1

Case(s) also cited:

Allen v Gulf Oil Refining Ltd [1981] AC 1001
Bass v Permanent Trustee (1999) 198 CLR 334
Dunstan v Simmie & Co [1978] VR 669
Energy Australia v Australian Energy Ltd [2001] FCA 1049
Farleigh Investments Pty Ltd v Reefking Pty Ltd [2002] WASC 115
Forsyth QC v Commonwealth of Australia, unreported; SCt of Vic; 22 June 1994
Hyder Consulting (Victoria) Pty Ltd v CGU Insurance Ltd [2001] VSC 449
Independent Automatic Sales Ltd v Knowles & Foster [1962] 1 WLR 974
Jacobson v Ross & Jacobson [1995] 1 VR 337
Kelton v Evergreen Pastoral Improvement Services Pty Ltd, unreported; SCt of Vic Court of Appeal; 26 October 1994
Novartis AG v FH Faulding & Co Ltd (2004) 62 IPR 530
Rocklea Spinning Mills Pty Ltd v Anti-Dumping Authority & Fraser (1995) 56 FCR 406
Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ASCR 130
Tilling v Whiteman [1980] AC 1
Wilsmore v Court [1983] WAR 190

MASTER SANDERSON: This is the plaintiff's application made pursuant to O 32 r 4 seeking trial of a preliminary question of law. Before dealing with the question as formulated by the plaintiff, it is necessary to look at the matters in issue between the parties in this case.
The plaintiff is a nightclub owner and operator and the lessee of premises known as Metropolis Concert Club Fremantle ("MCC"). The first and second defendants need no introduction. The third defendant is said to be the plaintiff's finance broker and agent and to carry on the trade as a finance broker and agent. Paragraphs 5 and 6 of the statement of claim are important in the context of this application. They are in the following terms:
"5.By a registered lease ('the lease') dated 4 May 1988 one Gubgub ('the owner') leased to the plaintiff a defined part of the ground floor and the whole of the first and second floors constituting the premises known as Metropolis Concert Club Fremantle ('MCC') in a building ('the building') at 52‑62 South Terrace, Fremantle, for a term of 12 years from 1 June 1988 and thereafter the plaintiff carried on the business of a nightclub in those premises.
6.By an undated deed stamped 5 December 1990 ('the deed') the owner granted to the plaintiff from the date of execution thereof (which occurred in or about November 1990) until 31 May 2011 a new lease (incorporating the terms of the lease) of the demised premises referred to above plus a further defined area on the ground floor of the building at a new annual rental of $71,340.00 payable in equal monthly installments [sic] of $5,945.00 on the twenty‑fifth day of each month commencing on 25 November 1990."
It is thereafter pleaded that it was a term of the deed (read with the lease) that at each successive annual rental review (at current open market rental value for the demised premises) the reviewed rent was not to exceed the existing annual rent by more than 15 per cent. It is also pleaded that the building was constructed in accordance with an approval pursuant to s 20(1)(d)(i) of the Town Planning and Development Act 1928 (WA). It is also pleaded that the demised premises did not include any area outside the building beyond the areas described in s 20(1)(da) of the Act.
It is then pleaded that the plaintiff engaged the third defendant for the purpose of obtaining finance on behalf of the plaintiff for the construction of a nightclub and entertainment complex in Northbridge. Consequent upon this engagement it is said that certain duties were owed by the third defendant to the plaintiff both in tort and contract. By par 11, it is pleaded that in April and May of 1995 the third defendant represented to the plaintiff that finance had been secured to enable the construction of the Northbridge premises. The plaintiff says that the third defendant advised that the plaintiff would be required to contribute "about $1,000,000" to the development. It is pleaded that the first defendant was the party lending funds to the plaintiff. There then follows par 15 of the statement of claim which, again because of its importance, I will quote in full. It is in the following terms:
"15.By letter dated 7 February 1996, the third defendant represented to and advised the plaintiff that the consent of the Western Australian Planning Commission ('WAPC') should have been obtained when the deed was entered into, that a lease entered into in breach of the Act was illegal and void and that the first defendant required evidence that the consent to the making of the deed had been obtained prior to the execution of the deed."
It is then said that the plaintiff provided to the third defendant and to the first defendant a letter dated 28 February 1996 from the Western Australian Planning Commission ("WAPC") to the plaintiff to the effect that approval of the WAPC to the deed was not required. It is pleaded that on or about 1 March 1996 the third defendant advised the plaintiff that the first defendant required a new lease approved by both the WAPC and the second defendant (the first defendant's solicitors), failing which finance would be withheld by the first defendant.
The plaintiff approached the owner who proved difficult. He declined to obtain the approval of the WAPC to the deed and re‑execute it but indicated he was willing to enter into a new lease, one of the terms of which was that the limit on reviews of rental was removed. The plaintiff informed the third defendant that the owner's proposed terms were unfavourable and that the plaintiff did not wish to enter into the new lease unless it was absolutely necessary to do so. The third defendant, it is pleaded, advised that without the new lease the first defendant would not advance the funds. Consequently, says the plaintiff, it entered into the new lease which did not include the limitation on increases of rental. There then follows par 21 which is in the following terms:
"These representations [as to the validity of the lease] were false since by reason of the matters pleaded in paragraph 8 above and the fact that the new term was less than 21 years, the deed embodied a valid and enforceable lease or agreement for a lease, and there was no need for the new lease to be entered into and the first defendant was not justified in refusing to advance the finance."
The plaintiff then says that it has suffered loss and damage and that such loss and damage had been occasioned by the negligence or breach of contract of the third defendant. There is also a claim raised for misleading and deceptive conduct.
The plaintiff's claim against the first defendant is put on a somewhat different basis. It is said that by letter dated 5 January 1996 the first defendant offered to advance funds to the plaintiff on certain terms and conditions. The plaintiff pleads that it accepted that offer. It is then said that on 7 February 1996 the first defendant made a demand for a new lease approved by the WAPC. The plaintiff says that this demand amounted to a breach of contract on the part of the first defendant. Further, it is said that the first defendant owed a duty of care to the plaintiff, that the first defendant's actions were intended to induce the plaintiff to enter into a new lease in substitution for the deed and that its actions generally breached the first defendant's duty of care. There is also a claim made by the plaintiff against the first defendant for misleading and deceptive conduct and for unconscionable conduct under s 51AA of the Trade Practices Act 1972 (Cth).
So far as the second defendant is concerned, the claim is that the first defendant referred the plaintiff to the second defendant who had been instructed by and was acting for the first defendant. It is alleged that the second defendant represented to the plaintiff that the deed was illegal and void and that a new lease had to be entered into. The plaintiff says that the second defendant owed it a duty of care and, furthermore, that its advice was misleading and deceptive under the provisions of the Trade Practices Act.
It is worth pausing at this point to point out that it is central to the plaintiff's case that the deed (read with the lease) was a valid and enforceable document. If it was not, then in large measure the plaintiff's claim would fall away. However, it is also relevant to note that the claim would not fall away entirely. I will have more to say on this issue below.
It is appropriate at this point to deal briefly with the defence of each of the defendants. The issue of the validity of the lease is only obliquely referred to in the first defendant's defence. What is put against the first defendant is that it demanded of the plaintiff that a new lease be entered into before finance was released. Understandably, it is not directly put against the first defendant that it advised the plaintiff that the lease was ineffective. However, it is clearly an issue between the parties as to whether or not the lease was effective or not - albeit that resolution of that issue will not necessarily bring the litigation to an end. There are other matters put by each party against the other which would still be left to be resolved if the validity of the lease were determined.
So far as the second defendant is concerned, the main allegation put against it is that it represented to the plaintiff that the deed was illegal and void and that a new lease approved by the WAPC had to be entered into: see par 43 of the statement of claim. The second defendant admits that a conversation took place between a representative of the plaintiff and a solicitor in the office of the second defendant. As I understand the second defendant's position, it does not admit that the plaintiff was told that the deed was illegal and void. But clearly if the deed is illegal and void, then almost the entire case put against the second defendant will fall away.
So far as the third defendant is concerned, the problem is complicated to an extent because the third defendant intends to seek leave to amend its defence. A copy of the minute of proposed amended defence is annexed to the submissions filed on behalf of the third defendant. I think it is fair to say that by this amended pleading the third defendant seeks to raise every possible defence to the plaintiff's claim, no matter how obscure the defence might be. The third defendant does not admit that any advice was given to the plaintiff that a new lease was required. However, it is clear from the pleading that if such advice was given, the question of whether or not the advice was correct and the lease was invalid is central to the issues between the plaintiff and the third defendant. It is difficult to imagine that if the lease is found to be void, the plaintiff's claim against the third defendant could be maintained.
Against that background, the plaintiff applies for the following question to be tried separately:
"Was the deed referred to in par 6 the substituted statement of claim dated 23 January 2002 a valid enforceable lease or was it illegal and void as being granted without the approval of the Western Australian Planning Commission contrary to the provisions of s 20(1)(a) of the Town Planning and Development Act 1928?"
Although the chamber summons refers to the question posed as being one of law, it is really a mixed question of law and fact. None of the parties appear to challenge the basis of the lease, it is a matter which would necessarily have to be proved before a determination could be made as to its validity under the Act. However, it is difficult to see that too much evidence would need to be led by the plaintiff as to the lease itself and other related matters to establish the evidentiary basis upon which a determination of the validity of the lease could be made. Nonetheless, it must be acknowledged that there is here a mixed question of law and fact and that it will be necessary for some evidence to be led.
The principles governing the ordering of a separate trial were considered by the Full Court of this Court in Smith v Maloney (1998) 19 WAR 209. Malcolm CJ (with whom Kennedy and Ipp JJ agreed) put the position in this way (at [222] ‑ [223]):
"… the considerations which are relevant to the question whether there should be a determination of the issue originally raised on the originating summons separately from any other issue are the same as those which arise upon an application for an order that any question or issue be tried separately from any other question or issue between the parties under O 32 r 4 or an order for the trial of a preliminary point of law under O 31 r 2. The usual course is to deal with all questions of law and fact before a Judge, alone, at the trial of an action: Independent Automatic Sales Ltd v Knowles & Foster [1962] 1 WLR 974 at 981. The preliminary determination of a point of law is an exceptional way of proceeding and should be reserved for the exceptional case and the question should be formulated in the order with precision: Wilsmore v Court [1983] WAR 190 at 194. Preliminary questions of law should generally only be isolated for separate decision in circumstances where there will be no need for the matter to go back to the primary court whichever way the point of law is decided: Rocklea Spinning Mills Pty Ltd v Anti-Dumping Authority (1995) 56 FCR 406 at 423. This is not such a case.
Similar considerations apply to the making of an order that any question or issue arising in a cause or matter whether of law or fact or partly law and fact be tried separately from any other question or issue under O 32 r 4. The power to order the trial of a preliminary issue of fact will generally only be appropriate when its outcome will put an end to the action, or where there is a clear line of demarcation between the issues and the determination of one issue in isolation from the others is likely to save inconvenience and expense … It has also been held that the separate trial of issues is only appropriate in clear and simple cases where a single question could be isolated from other questions in the proceedings and its decision may finally determine the proceedings as a whole or where facts can be agreed and the sole question is one of law… It has been commented that it is a procedure which frequently adds to the difficulties of courts of appeal and tends to increase the cost and time of legal proceedings and is not an appropriate procedure when the findings of fact could only be made after trial … It should be noted that all of these cases were decided before the advent of case management, which commenced in the civil jurisdiction on a pilot basis in this Court in 1990 and which has been in full operation since 1 November 1996. Experience has shown that the existence of a significant possibility that the determination of one or more issues tried separately may lead to a settlement is a practical consideration which should also be taken into account."
There are numerous other cases where the utility of trial of a separate or preliminary issue has been discovered. Recently in this Court McKechnie J dealt with the issue in Carlo Nobili SpA Rubinetteri v Militaire Nominees Pty Ltd [2004] WASC 47 at [3] and [4]. In New South Wales Einstein J gave careful consideration to the question in Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215 at [7]. There is also the cautious note sounded by the High Court in Tepko Pty Ltd v Water Board (2001) 206 CLR 1 per Kirby and Callinan JJ at [168] and [170]. While all of these cases are of interest, none really differ so far as the principles are concerned. The difficulty is to determine whether in each particular case a trial of a preliminary issue will be to the advantage of the parties by leading to a more speedy and cost‑effective outcome to the litigation.
All three defendants in this case were resolutely opposed to the orders sought by the plaintiff. Each took the view that the question posed was not formulated with such precision as to allow the Court to reach a proper conclusion. Each defendant pointed to the fact that resolution of the question one way or the other would not necessarily bring the proceedings to an end. That was a matter which was conceded by the plaintiff. Although it is very difficult to see how the plaintiff could maintain any action against the second and third defendants if the lease was invalid, counsel was not prepared to concede that in the event of an unfavourable outcome to the plaintiff the claims against these two defendants would fall away. Each of the defendants took the view that some evidence would have to be led, at least by the plaintiff and possibly by the defendants, to allow the question posed to be answered.
On balance, I have reached the conclusion that this is a case where there should be a trial of a preliminary issue largely in the terms proposed by the plaintiff. I have reached this conclusion for three reasons. First, although answering the question posed one way or the other may not bring the action to an end, it would certainly resolve one of the main differences between the parties. Second, it is a matter which can be disposed of relatively quickly and therefore to adopt this course would be cost effective. The plaintiff thought that the preliminary question could be disposed of in a day. Each of the defendants thought it might occupy two days. None of the parties was well placed to assess how long a full trial of the action might take. However, looking at the pleadings, and in particular the proposed defence of the third defendant, it is difficult to imagine that a full trial could be heard in under 10 days. Moreover, the fact that the quantum of any damages is a live issue between the parties would mean extensive and time‑consuming discovery and in all probability the preparation of expert reports. Both in terms of time and in terms of cost, resolution of this preliminary issue is an appealing option.
Finally, there is the question of mediation. Once this question is resolved, there is, in my view, a real prospect of any outstanding issues being settled by negotiation or mediation. While there is a prospect that the whole of the action might be resolved by mediation, it is my assessment that a negotiated outcome is much less likely if the proposed preliminary question is not resolved prior to those negotiations taking place.
Although comprehensive written submissions were filed by all of the parties, none of those submissions addressed the actual terms of the question proposed by the plaintiff. Nor was this a matter addressed in oral submissions. That being so, upon publishing these reasons I will give counsel for the defendants the opportunity to consider the terms of the question posed by the plaintiff and whether ancillary orders need to be made to allow the matter to go to trial. I will also hear the parties as to the question of costs.