On splitting liability and quantum

In this post, I reproduce an extract from Justice Hoeben’s recent decision in Johnson v Trustees of the Roman Catholic Church [2009] NSWSC 309 which discusses the increasing willingness of courts (in NSW at least) to determine preliminary issues before the main trial. In this case, everything except for quantum was ordered to be determined in a first trial, with a second trial on quantum only if necessitated by the outcome of the first trial. It was a kind of professional negligence case in a sense: a pupil was suing her school for her teacher’s negligence while she was on school camp.

The only reform of civil justice I seem to hear about these days is an increasing emphasis on mediation. Well, that’s an exaggeration, since Victoria is about to join the uniform evidence legislation jurisdictions, and its Attorney-General proposes to unify the rules for all the courts (excellent idea), but I will put aside these promising developments for a moment. I suggest that rather than increasing the amount of mediation, civil justice reform should concentrate on increasing the level of judicial adjudication, which does not necessarily mean increasing the number of once and for all oral trials of all issues.  What there should be more mediation of is not the final outcome of cases, but the things which litigants at the moment typically go to court for: interlocutory battles.  Far better to outsource the adjudication of disputes about discovery and the parties’ articulation of their respective cases so that the trial is prepared quickly than to outsource the resolution of complaints.

As if judges did not already have enough to do judging cases, the plan seems to be to introduce judicial mediation. In my experience, retired judges make bad mediators because they act too much like judges. A mediation where a retired judge acts like a judge is not in fact a mediation, but something more like private adjudication which is only available to the wealthy. It will be interesting to see how current judges go.

All this talk of mediation makes me uncomfortable. It is in practice very expensive even though it should not be. The mediator charges several thousand dollars (unless the mediator is provided by the Court, as in a Magistrates’ Court pre-hearing conference).  Each party’s barrister typically charges several thousand dollars, being their daily fee.  There are large preparation fees for the parties’ lawyers which do not come directly off the trial preparation fees which would otherwise be charged. The instructing solicitor sits there for a day charging several hundred dollars an hour.  If it fails, it contributes to toxic costs syndrome whereby the costs tail starts to wag the dispute dog.

Furthermore, many people want (and many others need) judicial catharsis, and those who don’t want it do not necessarily need a mediation to settle their case.  Mediation actually inhibits the much cheaper mode of settling cases between solicitors over the phone. What there is way too little of in our system is adjudicated outcomes.  Negotiations in litigation have always been conducted against the backdrop of the spectre of a trial and an adjudicated outcome. That prospect propels negotiants to an outcome sufficiently close to an adjudicated outcome as still to be relatively fair.  But when the spectre of a trial fades to something barely visible, something which is intolerable because of the delay and expense in getting there, mediation becomes nothing more than a haggle which could probably be achieved far more effectively without the intervention of lawyers. (What’s more, when there are too few trials in a sector of the profession, there are too few advocates who actually know how to run a trial, which carries its own problems, one of which is that the comparatively few advocates who actually know how to run a trial get more of the work than is socially desirable.)

I once read an article by a free-thinking and outspoken experienced Australian superior court judge whose thesis was that a very substantial problem with our system of civil procedure is the conception of the once and for all oral trial held on consecutive days until it is finished.  I could not agree more, and, having put it aside, I have ever since been looking for it unsuccessfully (anyone?).

There are many cases which would benefit from judicial decision making of preliminary issues.  In those cases, settlement would be promoted, and the litigants would probably feel more comfortable that someone had actually prepared their case adequately for a hearing (nothing sharpens a litigator’s attention like a hearing) and that they have had the mini-catharsis of some kind of judicial determination.  Settlement would be promoted either because the collapse of resolve which is so often a feature of trial eve would come sooner and the hearing would prompt the settlement, or because the issues would be attenuated by the decision in the hearing.  Hopefully, one or more of the critical issues standing between the parties would be removed.  Of course settlement in the realm of 50/50 would not be promoted by such attenuation.  One side would usually lose out on the preliminary determination.  Settlement which better reflected the likely outcome if the whole matter were tried would be promoted, rather than the kind of settlement the present system often promotes — settlement which reflects the diligence and skill of the opposed lawyers and the comparative financial resources and bloody mindedness of the litigants.

What Justice Hoeben said was:

’17 UCPR 28.2 provides:

“28.2 The Court may make orders for the decision of any question separately from any other question, whether before, at or after any trial or further trial on the proceedings.”

There is no issue that the Court has power to make the order sought by the defendants.

18 Under the common law, courts have been reluctant to order separate hearings on liability unless there is a clear line of demarcation between that issue and damages. A clear example of that reluctance can be seen in Tepko Pty Limited & Ors v Water Board (2001) 206 CLR 1 at [168] – [170] where Kirby and Callinan JJ said:

“[168] The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap.

[169] The second and related comment is this. A party whose whole case is knocked out on a trial of a preliminary or single issue, may suspect, however unjustifiably, that an abbreviated course was adopted and a decision reached in the court’s, rather than the parties’, interests.

[170] Thirdly, there is an additional potential for further appeals to which the course of the trial on separate issues may give rise. Indeed, that could occur here were this appeal to be allowed and a retrial had in which the remaining issues of causation and damages were decided. Single-issue trials should, in our opinion, only be embarked upon when their utility, economy, and fairness to the parties are beyond question. “

19 As the defendants have pointed out, since those observations in Tepko, the Civil Procedure Act 2005 has come into force in New South Wales. Sections 56 – 62 of the Act make it clear that considerations of justice have to be tempered by the objectives of case management and the need for proportionality of costs.

20 This change in emphasis was succinctly summarised by Brereton J in Integral Home Loans Pty Limited & Anor v Interstar Wholesale Finance Pty Limited & Anor [2006] NSWSC 1464:

“[6] While much has been said against the resolution of separate questions in Courts of high authority, nonetheless, since the (NSW) Civil Procedure Act 2005, it is my view that the Court should take a more interventionist role in identifying and separating important issues which can resolve significant parts of the litigation expeditiously.”

21 His Honour’s comments have been adopted and applied in a number of other first instance decisions: Commonwealth Bank of Australia v Clune & Anor [2008] NSWSC 1125 per Johnson J; Barbara O’Sullivan v Challenger Managed Investments Limited [2008] NSWSC 602 per Einstein J; and Vero Insurance Limited v Tran [2008] NSWSC 166 per Hamilton J.’

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2 Replies to “On splitting liability and quantum”

  1. I'd need to check a few references, but my recollection is that justices of the HCA, in particular Kirby, but not only Kirby, have spent the past 5-10 years railing against trial-splitting. Invariably, they complain that it leads to abstraction and to the presentation to appellate courts of insufficiently developed problems.

  2. I'd need to check a few references, but my recollection is that justices of the HCA, in particular Kirby, but not only Kirby, have spent the past 5-10 years railing against trial-splitting. Invariably, they complain that it leads to abstraction and to the presentation to appellate courts of insufficiently developed problems.

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