Hague Plant Ltd v Hague& Ors

In complex litigation, the court may order a preliminary issue to be tried before the remaining issues where the parties agree that it is likely to have a significant, potentially determinative, effect on the action. The issue must be clearly defined, tied to the pleadings, confined in time and scope, and assessed against the practical consequences of deciding it first. The court must remain alert to the danger that a preliminary issue may expand into an effective trial of the whole action or prove irrelevant after other issues are determined.

Hague Plant Limited brought proceedings concerning alleged breaches of fiduciary duty by Martin Hague, who had been a director of both Hague Plant Limited and MHH Contracting Limited. The claim concerned transfers and supplies between the companies, including alleged unjustified or inflated payments and a cross-invoicing arrangement. The pleadings also raised dishonesty, limitation and related issues.

The parties agreed that cross-invoicing should be addressed as a preliminary issue because it might substantially affect, or determine, the action. The court was asked to settle the appropriate order and directions for that preliminary trial.

1. The court approved the parties’ agreed approach to a preliminary trial, but settled its own order rather than choosing between the rival draft orders.
2. A preliminary issue should be selected with caution. Before ordering it, the court must ensure that the issue is sufficiently defined, related to the case as presently pleaded, confined in time, and capable of producing consequences that have been considered in advance.
3. The preliminary issues were confined to specified financial years and addressed whether unjustified payments formed part of a cross-invoicing arrangement, whether payments broadly balanced, whether the arrangement was known, authorised or participated in by the relevant parties, and what consequences followed for reliance on inter-company invoices.
4. The order also required the parties to identify the payments, material facts, documents, relevant pleadings, relied-on findings or admissions from the earlier Hague litigation, and their proposed heads of argument. Disclosure, factual witness evidence, expert evidence and a case management conference were addressed by consequential directions.
5. The questions of Martin Hague’s honesty and Jean Angela Hague’s alleged ignorance of any dishonesty were reserved for the trial of the action if the specified balancing conditions were not satisfied. Costs were reserved.