Barfly's Nominees Pty Ltd v Kliger Partners (a firm) (Remitter issues ruling)
[2020] VSC 277
•18 May 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROFESSIONAL LIABILITIES LIST
S CI 2013 02618
| BARFLY’S NOMINEES PTY LTD (ACN 080 123 057) | Plaintiff |
| v | |
| KLIGER PARTNERS (A FIRM) (ABN 27 251 281 216) | Defendant |
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JUDGE: | MACAULAY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF RULING: | 18 May 2020 |
CASE MAY BE CITED AS: | Barfly’s Nominees Pty Ltd v Kliger Partners (a firm) (Remitter issues ruling) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 277 |
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CIVIL PROCEDURE – Evidence to be adduced on remitter for the assessment of damages –
Whether the defendant can adduce further evidence - What findings of the trial judge are to be considered binding - Which documents form part of the record - Supreme Court (General Civil Procedure) Rules2015 (Vic) - Rule 64.37 - Civil Procedure Act2010 (Vic) – Section 7 - Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | No appearance, determined on the papers. | JPM Law |
| For the Defendant | No appearance, determined on the papers. | Obst Legal |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Background......................................................................................................................................... 1
Should the defendant be permitted to adduce further evidence?............................................ 7
Legal principles............................................................................................................................. 8
Category 1 documents (rental demands)................................................................................ 11
Category 5 documents (insurance payouts)............................................................................ 11
Category 2, 3 and 6 (plaintiff’s legal costs of VCAT and McMahon proceedings)........... 13
Category 4 (costs spent by McMahon’s professional indemnity insurer).......................... 15
Which documents form part of the record for the remitter?.................................................... 16
Which findings of the trial judge are binding on the remitter?............................................. 17
Conclusion......................................................................................................................................... 19
HIS HONOUR:
Introduction
Upon its remitter from the Court of Appeal there is only one issue that remains to be tried in this proceeding — that is, the assessment of damage caused by the plaintiff’s reliance upon the defendant’s negligent advice as found by the Court of Appeal, reversing findings of the trial judge. But, because the nature of the loss caused by the defendant’s negligence was the plaintiff’s loss of a chance to pursue to judgment a proceeding at the Victorian Civil and Administrative Tribunal (‘VCAT’), the assessment of damages caused by the defendant’s negligence involves a dual enquiry, namely —
(a) the prospects of the plaintiff’s success on liability at the VCAT proceeding; and
(b) the award of damages which would have been obtained had the VCAT proceeding continued to judgment.[1]
[1]Barfly’s Nominees Pty Ltd v Kliger Partners [2019] VSCA 256 (CoA Reasons) [7], [212].
I will refer to these two elements comprising the assessment of damages as the prospects of success issue and the quantum issue.
In preparation for the hearing of the remitted trial the parties identified three questions requiring the Court’s ruling.[2] These three questions are whether the defendant can adduce further evidence on the remitter; which findings of the trial judge are to be relied upon on the remitter; and which documents form part of the record for the purposes of the remitter.[3]
[2]‘Joint Position of the Parties on the Conduct of the Remitter’ filed 4 March 2020 pursuant to an order of the Court made 7 February 2020.
[3]On these questions, the parties filed their respective written submissions: ‘Defendant’s outline of submissions on contested issues relating to the conduct of the remitter’ filed 20 March 2020; ‘Plaintiff’s outline of submissions on contested issues arising from the joint position document filed 4 March 2020’ filed 3 April 2020; and ‘Defendant’s submissions in reply’ filed 8 April 2020.
Background
The plaintiff ran a bar and café in Bourke Street in the centre of Melbourne under leases for two adjoining retail buildings that operated as a single premises. It suffered loss and damage arising from persistent flooding on the premises and closed its business in or about early November 2003. It brought a proceeding against its landlords in the VCAT on 6 November 2003 initially for an injunction and subsequently for damages in the sum of about $2 million based upon breaches of express terms under the leases and breaches of terms implied by statute.[4]
[4]CoA Reasons at [1].
In 2006 to 2007, the plaintiff was advised by the defendant, its solicitors, that legislative changes made in 2005 in respect of retail leases had the effect that its position against the landlords at VCAT had been materially disadvantaged. The defendant advised the plaintiff that it should settle the VCAT proceeding. The VCAT proceeding settled with the plaintiff being paid $341,500 inclusive of costs.[5]
[5]Ibid.
By way of statement of claim dated 3 September 2015, the plaintiff brought claims in negligence and breach of contract against the defendant. The conduct complained of, included, the giving of erroneous advice by the defendant to the plaintiff concerning the plaintiff’s prospects of success in the VCAT proceeding (‘the Advice’). The plaintiff sought damages as a result of the defendant’s negligence and breaches.
By way of amended defence dated 30 October 2015, the defendant admitted providing the Advice and maintained that it was correct.[6] The defendant denied the plaintiff suffered loss and damage.[7] The defendant did not plead as to the rights of action which were lost by the plaintiff as a result of relying on the defendant’s advice. The defendant pleaded a bare denial, and put the plaintiff to its proof in all respects.
[6]Amended Defence dated 30 October 2015, at [12]. The defendant filed a further amended defence dated 29 May 2017. According to the further amended defence, the defendant maintained that the Advice was correct (at [12]), and denied that the plaintiff suffered any loss and damage (at [13]).
[7]See Amended Defence at [13] and Further Amended Defence at [13].
In the trial judge’s view, there were three main issues for determination:
(a) was the defendant negligent, as assessed by reference to a qualified, competent and careful lawyer in the circumstances in the practice of his or her profession?
(b) if the defendant was negligent, did its negligent conduct cause the plaintiff to suffer loss or damage?
(c) if the defendant’s negligence caused loss or damage, what is the quantum of the loss or damage suffered by the plaintiff?[8]
[8]CoA Reasons at [93].
On 15 June 2015, the trial judge delivered judgment. The trial judge found that the defendant did not breach its retainer, and was not negligent, by giving the plaintiff the Advice.[9] The trial judge further held that the plaintiff did not rely on the Advice to settle the VCAT proceeding.[10]
[9]Ibid [94].
[10]Ibid [121].
On 6 September 2018, the plaintiff filed a notice of appeal. The plaintiff relied on seven grounds of appeal. The relevant ground of appeal, in respect of the current issues for determination, is ground 7: the trial judge erred in failing to evaluate the prospects of success of the VCAT proceeding.
On 11 November 2019, the Court of Appeal delivered judgment on the appeal. The Court of Appeal granted leave to appeal and allowed all grounds of appeal. The Court of Appeal held that the defendant was negligent in providing the Advice, and that the plaintiff relied on that advice in settling the VCAT proceeding.[11] The Court of Appeal set aside the orders made by the trial judge, and remitted the matter to the Trial Division for the issue of the damages flowing from the defendants’ negligence to be assessed according to law, which would require the hearing and determination of the prospects of success issue and the quantum issue.[12]
[11]Ibid [211].
[12]Ibid [7] and [212].
The precise terms of the two material orders of the Court of Appeal were:
(a) the orders made by [the trial judge] on 25 July 2018 are set aside and in their place the Court orders that there be judgment for the plaintiff; and
(b) the matter be remitted to a different judge of the Trial Division for the assessment of damages caused by the respondent’s negligent advice.
Relevantly, and importantly, the Court of Appeal gave particular guidance to the remitter judge about how the determination of the remitted questions should be approached. The first concerned the dual enquiry necessary to undertake the assessment of damages to which reference has already been made.
The second concerned the manner in which the trial of the assessment of damages should be undertaken. Argument was heard on the appeal about this issue. The first of the two rival positions was that the assessment damages requires the judge to undertake a trial-within-a-trial; that is to say, to undertake the trial which VCAT itself would have undertaken. The second was that the process of assessment involves a ‘broad-brush approach’ on the understanding that the Court is necessarily carrying out a hypothetical exercise; one that allows for a ‘general consideration’ of what the state of the evidence would have been at the hypothetical hearing.[13] Having considered the matter, the Court directed that the remitter would require the remitter judge to engage in the broad-brush approach the Court had described.[14]
[13]CoA Reasons [202]–[204].
[14]Ibid [214].
The third area of guidance involved the question of what further evidence would form the subject matter of the remitter. In giving this guidance the Court of Appeal differentiated between the prospects of success issue and the quantum issue. In relation to the prospects of success issue the Court said:
The parties will need to address, in general terms, what the prospects of success would have been on the issue of liability. It will be a matter for the remitter judge, after hearing the parties, to determine what evidence should form the subject-matter of the remitter hearing, including, for example, the building inspection reports and reports from structural experts that were before the judge.[15]
No express limitation was placed on the evidence which the remitter judge might take into account on the ‘prospect of success’ issue. Nevertheless, Barfly’s argued that the final words of that paragraph, ‘that were before the judge’, indicated that the Court was intending that the judge be confined to documents already in evidence. Given how the Court clearly expressed itself in relation to the quantum issue (see next), I do not accept that the Court was intending to stipulate that limitation.
[15]Ibid [215].
In relation to the quantum issue, the Court said:
With respect to the expert evidence on quantum, this Court was told by senior counsel for both parties that they seek no further opportunity to put on expert evidence. Given the protracted nature of this proceeding, and given the availability of the transcript of expert evidence about which the judge made no observations, the evidence before the remitter judge with respect to the quantum of loss that would have been established had the VCAT proceeding continued to judgment should be confined to the transcript of the evidence of the expert witnesses, together with the expert reports the parties relied upon before the judge.[16]
[16]CoA Reasons [216] (emphasis added).
The direction that the evidence before the remitter judge with respect to the quantum element be confined in the way described, is explained by what the Court was told during the hearing of the appeal. Reference is made to that in the first sentence of the last extract. The Court had been informed that, on the question of quantum, the judge had a number of pieces evidence available to him: the written reports of a Mr Rockliffe whose evidence would have been available at VCAT; written expert reports of two independent accountants who also gave evidence in conclave before the trial judge; a calculation of Barfly’s net financial position after the settlements; and various building inspection reports.[17]
[17]Ibid [205], [206].
Rejecting the conclusion reached by the trial judge that the evidence suffered from too much complexity and uncertainty to enable him to draw any safe conclusions, the Court stated that the judge ought to have properly evaluated the expert evidence on quantum relied upon by each party.[18]
[18]Ibid [207].
In summary, the Court of Appeal directed the remitter judge to carry out a broad-brush evaluation of both the plaintiff’s prospects of success on liability, and the award of damages that it would have obtained (quantum). However, while the Court left it to the remitter judge to determine what evidence should form the subject matter on the remitter hearing so far as prospects of success was concerned (without limitation), it expressly confined the evidence which would form the subject matter of the remitter hearing so far as quantum was concerned.
Helpfully, the parties agreed on the issues of fact that will be involved in each of the two elements upon the remitter.
On the question of prospects of success, the parties agree that the issues to be explored are, in short form–
(a) the validity of the exercise of options to renew the leases;
(b) the construction of the repair covenants;
(c) the effect of Retail Tenancies Reform Act 1998 (Vic) amendments;
(d) the landlord’s repair liability under s 26 of the Retail Tenancies Reform Act 1998 (Vic);
(e) the landlord’s agent’s negligence in failing to pass on the plaintiff’s complaints;
(f) the alleged misleading/deceptive/unconscionable conduct on the part of the landlord or the agent;
(g) and, finally, related to all of these, the scope and nature of the evidence that would have been put forward on the abovementioned subjects.
On the likely award of damages (quantum issue), the parties agreed that the issues to be explored are, in short form–
(a) the business loss suffered by the plaintiff by not having the premises for whatever duration of lease it was entitled to;
(b) less —
(i) insurance payments already received;
(ii) net amounts received from the VCAT settlement and the McMahon settlement; and
(iii) amounts payable by the plaintiff to the landlords for rent, etc.
It is the evidence that is to form the subject matter of the factual exploration of some these issues which divides the parties. Essentially, the plaintiff contends that the remitter judge should only hear argument on evidence that was adduced before the trial judge: that is, documents tendered as exhibits and witness testimony as recorded on transcript. The defendant has nominated six categories of additional evidence it wishes to adduce.[19] As well, it wishes to rely upon certain documents that were within the court book available at trial but not actually tendered. It has identified them by reference to colour coding placed on the index to the original court book.[20]
[19]‘Defendant’s particulars of further evidence sought to be led on remittal’ filed 25 February 2020.
[20]The entire court book index had 3 parts: the court book index (documents 1 – 141); the supplementary court book index (documents 142 – 332); and the further supplementary court book index (documents 333 – 355). In addition 19 other documents were tendered independently of the court book ATD 1 - ATD 19.
Should the defendant be permitted to adduce further evidence?
The defendant now seeks to adduce further evidence of the following:
(a) Category 1 - documents evincing or recording requests, demands and statements of account in respect of arrears of rental payable by the plaintiff for the properties known as 14 Bourke Street and 16 Bourke Street, Melbourne, 3000 at any time from the commencement of the lease of each property up to and including 30 October 2002.
(b) Category 2 - documents including (without limitation) invoices, receipts and statements of account evincing expenditure by the plaintiff on legal costs and disbursements in the VCAT proceeding of approximately $980,000;
(c) Category 3 - documents including invoices, receipts and statements of account evincing expenditure by the plaintiff on legal costs and disbursements in the County Court proceeding it brought against Mr McMahon.
(d) Category 4 - documents recording or evincing the total costs incurred by the Legal Professional Liability Committee (LPLC) on behalf of Mr McMahon in the County Court proceeding in its defence of the plaintiff’s claims against Mr McMahon in that proceeding prior to the date of its settlement.
(e) Category 5 - records of all payments received by the plaintiff in settlement of insurance claims it made in relation to damage to the premises.
(f) Category 6 – a report which the defendant proposes be obtained from a costs consultant to estimate the plaintiff’s likely costs and disbursements of the VCAT proceeding from the date of settlement to the conclusion of a hearing of all of the claims in that proceeding.
The plaintiff opposes the defendant having leave to rely on any additional evidence, save in respect of some limited documents in relation to Category 5.
Legal principles
The parties did not agree on the principles applicable to whether, and if so when, the remitter judge should permit new evidence to be adduced on the remitter.
Before turning to what has been said in some previous cases, it is important to observe the statutory provisions which would apply.
Rule 64.37 of the Supreme Court (General Civil Procedure) Rules2015 (Vic) (‘the Rules’) provides that the Court of Appeal, on the hearing of an appeal, may order the judgment be set aside and that there be a new trial. Sub-rule (3) provides that if the Court of Appeal considers a substantial wrong or miscarriage affected only part of the matter in controversy, it can give final judgment as to part and direct a new trial as to the other part. It seems clear enough that the Court of Appeal’s orders involve an exercise of that power.
Importantly, r 64.37 (7) provides that in granting a new trial, the Court of Appeal ‘may give all necessary directions for the further conduct of the proceeding’. Accordingly, the directions which the Court of Appeal has given with respect to the dual enquiry for determining the assessment of the damages caused in reliance upon the defendant’s negligent advice; the approach which the remitter judge is to apply in the trial of that issue (that is, a broad-brush approach); and the evidence that is to form the subject matter on each of the twin elements of the dual enquiry, must be followed.
In addition, in exercising my powers to determine the interlocutory questions posed for my ruling, pursuant to r 1.14(a) of the Rules I should ‘endeavour to ensure that all questions in the proceeding are effectively, completely, promptly and economically determined’. Further, in the exercise of my powers on this application and, ultimately, in the hearing of the matter on remitter, I must seek to give effect to the overarching purpose under s 7 of the Civil Procedure Act2010 (Vic) (‘the CPA’), namely to facilitate the ‘just, efficient, timely and cost-effective resolution of the real issues in dispute’.
The parties referred to various cases in which different analogies have been used to describe the nature of the task which a remitter judge performs when determining whether or not to receive new evidence upon the remitter. One analogy is that the task is akin to determining whether new evidence should be allowed upon an appeal in the nature of a rehearing: McCarthy v McIntyre [2000] FCA 1250, [30], applying the principles in Smith v NSW Bar Association (1992) 176 CLR 256, 266-7. As summarised elsewhere[21] the principles which guide that consideration are –
… that, in general, three conditions must be met before fresh evidence can be admitted on appeal: (1) it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; (2) the evidence must be such that there must be a high degree of probability that there would be a different verdict; and (3) the evidence must be credible.
[21]Akins v National Australia Bank (1994) 34 NSWLR 155 at 160 per Clarke JA (Sheller JA agreeing).
Another analogy is to the situation where a party applies to re-open the case and adduce further evidence after judgment has been delivered: Mosca v Roads and Traffic Authorityof NSW [2007] NSWLEC 79. Still further, although not having to decide, the New South Wales Court of Appeal in Walker Corporation Propriety Limited v Sydney Harbour Foreshore Authority [2009] NSWCA 178 expressed some doubts about the aptness of that analogy, saying at [92]–[93]:
… once the initial judgment has been set aside as erroneous, the more obvious analogy is with reopening prior to delivery of judgment. Alternatively, that may be seen as the appropriate analogy in so far as the proposed further evidence relates to matters which have not been properly decided, as opposed to those findings which are apparently unaffected by the appellate reversal. Secondly, the circumstances of remittal may involve a degree of complexity not found in an application to reopen a trial. The danger of relying upon analogy is that it will distract attention from the specific circumstances of the particular case. Appropriate guidelines promote uniformity of approach and are desirable; guidelines adopted by analogy may be helpful in some situations, but not in others.
Nevertheless, the approach in Mosca has support in the Full Court of the Federal Court: McCarthy v McIntyre [2000] FCA 1250 (Whitlam, Emmett and Hely JJ) at [30]. This Court would not decline to follow that judgment unless convinced that it might be distinguished or was clearly wrong. As the trial judge decided the application before him on another basis, no reconsideration of McCarthy is warranted. (emphasis added)
The decision is a discretionary one. That discretion is to be exercised judicially. Guided by the approach illustrated in these authorities, and without attempting to be exhaustive, relevant factors to take into account in the particular circumstances of this case include:
·the overarching purpose set out in s 7 of the CPA;
·the directions given by the Court of Appeal pursuant to its powers under r 64.37 (7) of the Rules;
·the nature of the matter which has been remitted and the manner in which the task of determining the remitted matter is to be undertaken;
·the public interest in the finality of litigation;
·fairness to all parties, including a fair opportunity to be heard and to present evidence to the Court on the issues which need to be decided, tempered by the values of timeliness, efficiency and cost effectiveness in resolving the issues in dispute;
·the extent to which the new evidence may expand the dimension of the dispute; and
·the opportunities which the applicant party has had to adduce the evidence in the past and its reasons for not having done so.
Category 1 documents (rental demands)
To the extent that the documents sought in this category are relevant to the prospects of success issue, and were already in the court book used at trial (even if not tendered), I would allow the defendant to adduce them in evidence on the remitter. As the defendant has explained (at paragraphs 25-29 of its principal submission) the documents in Annexure A and CB items 310 to 314, 317, 318 are relevant to the liability questions of what compelled the plaintiff to close its business and the allegations of misleading and deceptive conduct on the part of the plaintiff’s agent.
Being matters concerning the prospect of success, there is no explicit limitation by the Court of Appeal which would prevent this evidence being adduced on the remitter. Although they were not tendered at the trial, the limited number of documents identified in the previous paragraph were, at least, selected as provisionally relevant to the issues and unlikely in my view to add greatly to the dimension of the dispute on the remitter. Allowing them to be adduced results from an appropriate balancing of fairness to the parties in putting forward relevant evidence on the dispute, tempered by considerations of timeliness, efficiency and cost effectiveness.
I would not permit the defendant to pursue a further process of discovery, as it seeks to do, for yet further documents which may be relevant to whether statements of arrears of rental and copies of demands were sent by the landlord or its agent to the plaintiff. Such an exercise would raise the prospect of enlarging the dimension of the dispute after an already protracted process of litigation, and after the defendant has had fair opportunity in the past to pursue discovery and adduce evidence of this type of material.
Category 5 documents (insurance payouts)
There is a limited agreement between the parties in respect of the defendant being able to adduce some further documents in this category. It appears that the defendant had requested the plaintiff to discover documents relating to payments in relation to the losses claimed in the VCAT proceeding made under any insurance policies held by the plaintiff. None were forthcoming, so no payments were taken into account by the plaintiff’s expert, Mr Lavelle, in calculating the plaintiff’s total business loss.
Recently, after the defendant brought to the plaintiff’s attention an industry newsletter which revealed it had received an insurance payout in relation to its losses sustained in 2003, the plaintiff admitted that it was paid $35,775 which it concedes ought to be deducted from the total which Mr Lavelle calculated.
Nevertheless, it also appears that the plaintiff received a greater sum than the amount it concedes is relevant to this claim. In its submissions, the defendant refers to having seen evidence of a claim made on behalf of the plaintiff for $94,031.09, with a total settlement payout of $86,185. The plaintiff asserts that any documents relating to the larger sum are irrelevant. Unsurprisingly, the defendant wishes to make that assessment for itself. Accordingly, the heads of additional documents the defendant seeks under this category are:
(a) documents submitted by the plaintiff to Loss Management International Pty Ltd (or any entity associated with it) trading as LMI Group for the purposes of the preparation of the plaintiff's claim for damage and business interruption losses resulting from fire and water damage at 14 and 16 Bourke Street, Melbourne, 3000;
(b) correspondence between the plaintiff and Loss Management International Pty Ltd (or any entity associated with it) trading as LMI Group relating to the plaintiff’s claim for damage and business interruption losses resulting from fire and water damage at 14 and 16 Bourke Street, Melbourne;
(c) documents recording or explaining the difference between the amount paid to the plaintiff by SGIO Insurance Australia Limited in settlement of insurance claims made by it in the amount of $86,185.00 and the amount of $35,775 paid to the plaintiff by SGIO Insurance Australia Limited in settlement of insurance claims made by it and which are said to reflect loss and damage in respect of capital expenditure;
(d) documents recording instructions from Mr Graeme Lavelle to the effect that only the amount of $35,775 paid in settlement of insurance claims made by the plaintiff reflects loss and damage in respect of capital expenditure, other than Mr Lavelle's letter to JPM Law dated 16 February 2020;
(e) documents, including invoices, receipts and reports reflecting claims made by the plaintiff said by the plaintiff to reflect loss and damage in respect of capital expenditure in the amount of $35,775.
Given the way in which this matter has evolved, and that the defendant was active in pursuing documents of this kind before the trial of the action, I consider it is fair to allow the defendant to pursue, and to require the plaintiff to provide, the documents which the defendant has listed. This is despite the fact that these documents are relevant only to the issue of quantum. Although the Court of Appeal confined the documents going to quantum in the way set out above, I take into account that the plaintiff has conceded that it should provide some documents relevant to the insurance payouts, presumably because it has realised that it incorrectly answered the enquiry made by the defendant leading up to the trial. In my view, that concession is correctly made. In the circumstances that now exist, to be fair to the defendant I will give it leave to adduce further evidence extending to the all the heads of documents which it has sought in this category.
Category 2, 3 and 6 (plaintiff’s legal costs of VCAT and McMahon proceedings)
There is no doubt that the quantum of legal costs spent by the plaintiff is relevant to the assessment of the net award of damages it would have obtained had it pursued its claim at VCAT to judgment. It is equally apparent that, for the purpose of deducting the recovery it made by pursuing and settling the McMahon proceeding, the amount it spent on legal costs in obtaining that settlement is also relevant for calculating its net recoveries. These costs are the subject of Categories 2 and 3.
However, both of these categories relate to documents which are relevant to the issue of quantum. In each case, the defendant had the opportunity at trial to pursue or test evidence about those costs. The Court of Appeal has made it clear, and at the appeal the defendant was happy to accept, that there should be no more evidence led on the question of quantum. The evidence on the question of quantum is to be confined to the transcript of oral evidence already given and the expert reports already in evidence. The documents which the defendant now seeks fall outside of this area.
There is no unfairness to the defendant in not having access to the detailed invoices, receipts and statements of account justifying the plaintiff’s claimed costs given that it was prepared to contest the issues at the trial on the basis of the evidence that had been led, and has assured the Court of Appeal that no further evidence going to quantum would be required on the remitter.
Furthermore, a detailed invoice-by-invoice analysis of the claimed costs is likely to open up a field of dispute which would be time-consuming and inefficient given the nature of the task the Court of Appeal has directed be undertaken. Since the Court of Appeal has directed that the remitted trial be conducted on a broad-brush approach, I take that to mean that the Court is encouraged, where possible, to engage more in the process of informed estimation than in a granular analysis of the detailed evidence.
The same considerations apply to Category 3, namely documents which go to the question of the costs spent by the plaintiff in pursuing its claim against McMahon in the County Court.
Finally, the defendant wishes (for the first time) to call evidence from an expert about the plaintiff’s likely costs and disbursements of the VCAT proceeding from the time of settlement until the projected conclusion of the hypothetical hearing. This it could have done, but failed to do, for the hearing before the trial judge. Evidently, upon the remitter it wishes to take a different approach. Once again, it meets the Court of Appeal’s direction that evidence as to quantum be confined to evidence already given. And again, permitting the defendant now to obtain expert evidence of this nature is only likely to expand the scope of the dispute with accompanying additional cost and time.
Even aside from the Court of Appeal’s direction about evidence on the question of quantum, the various other guidelines for the exercise of my discretion lead me to conclude that adopting the broad-brush approach of hearing submissions from the parties on the evidence as it stands, and then doing the best I can to estimate the further costs in the hypothetical scenario that is presented, will adequately meet the requirements of justice.
It follows that I would not allow any of the additional evidence described in these three categories.
Category 4 (costs spent by McMahon’s professional indemnity insurer)
This final category again goes to the question of quantum. The defendant wants to explore whether the plaintiff unreasonably failed to obtain more money by way of settlement with McMahon (a solicitor who had also given it advice and whom it sued). That enquiry, in turn, depends upon the limit of that solicitor’s professional indemnity insurance (costs inclusive) and how much he had already spent in defending the claim brought against him by the plaintiff. The plaintiff submits that the Court should not allow this issue to be raised and pursed at this stage.
First, the defendant runs up against the same problem as with the other quantum categories, namely that it is outside of the type of evidence which the Court of Appeal directed should be allowed.
Moreover, it has other problems. It is evidence sought in relation to an un-pleaded defence. The evidence is sought on the premise that it might reveal some scope for the plaintiff to have obtained more money from McMahon. That alone would not establish unreasonableness. Thus, permitting this evidence is likely to raise a new contentious issue which would give rise to the need for other oral evidence. It will expand the field of dispute from that which was before the trial judge. This is in the context of a dispute which, as already remarked, has been described by the Court of Appeal as ‘protracted’ in nature and involves events more than a decade old.
I refuse permission to the defendant to pursue this category.
Which documents form part of the record for the remitter?
The parties have provided me with the index of documents that formed the court book at trial. It is made up of three parts: the original index of documents, a supplementary index and a further supplementary index. In total, there were 355 documents running to 4047 pages. On top of that, 19 additional exhibits were tendered independently of the court book, namely exhibits ATD 1 - ATD 19.
The court book index has been marked up in such a way as to show which documents were tendered and which were not. Documents not tendered have been struck through. That is, the struck-through documents did not form part of the evidence at the trial.
In addition, the marked up index has some documents shaded in red, some shaded in yellow and some not shaded at all. Those which are not shaded at all and are not struck through are documents which the parties agree may be the subject matter of the remitter. Documents marked in yellow are those which the defendant considers ought to form the subject matter of the remitter, but the plaintiff disagrees. The documents marked in red are those which (generally speaking) the parties agree are no longer relevant to the issues on the remitter.
In general terms, the plaintiff considers that the only documents relevant to the remitter are those contained within the Schedule of Reports and Assessments, Schedule of Notices and Schedule of Costs appended to the plaintiff’s Amended Outline of Closing Submissions dated 14 November 2017, and some specific documents pertaining to the McMahon proceeding.
The area of contest about documents essentially concerns those in the marked up court book which are highlighted yellow. To the extent that they are struck-through, and thus were not evidence at the trial, I do not propose to allow them except for those documents in Category 1 which I said I will allow to be adduced.
I do not intend, at this point, to analyse item-by-item the other documents which formed part of the evidence before the trial judge (that is, those marked yellow but not struck through) to ascertain their nature and work out to what extent they may be relevant to the issues on remitter. If they were documents in evidence before the trial judge and one party wants to rely upon them, then subject to any other argument on the hearing of the remitter they may form part of the subject matter of the remitter.
Which findings of the trial judge are binding on the remitter?
The only area of disagreement between the plaintiff and the defendant on this topic relates to ‘findings’ said to have been made by the trial judge in certain sub-paragraphs of paragraph [319] of the trial judgment. The parts of that paragraph which the defendant submits should bind the judge hearing the remitter are these:
Impossible in this Proceeding to Evaluate Prospects of Success
In any event, in this proceeding, it is not possible to sufficiently, accurately or safely evaluate the plaintiff’s prospects of success at VCAT because:
(a) it is likely the bulk of the determinative evidence at VCAT would have comprised expert evidence exchanged by both the claimant and the respondents, but by mid-2007 no such evidence had been exchanged or filed at VCAT;
…
(c) the content and probative effectiveness of expert evidence from most of the potential experts referred to in the last preceding paragraph cannot be evaluated because their reports had not been finalised nor filed in the VCAT Proceeding by the time those proceedings were settled;
(d) the respondents at VCAT would in all probability also have engaged numerous experts to respond to the applicant’s technical case. However, by the time the plaintiff’s VCAT Proceeding was settled in about early June 2007, the respondent’s expert evidence had not been finalised and were therefore not exchanged or filed;
(e) similarly, at the end of January 2007, the plaintiff had only just filed its Eighth Amended Points of Claim in the VCAT Proceeding. This amended pleading contained a number of substantial amendments. At the time the plaintiff settled the VCAT Proceeding, the respondents at VCAT had not pleaded their responses to the claimant’s Eighth Amended Points of Claim. The pleaded case, it appears, was not closed at the time the plaintiff’s VCAT Proceeding was settled in early June 2007;
(f) the claimant and the respondents’ lay evidence at VCAT was also, in my view, unlikely to be finalised at early June 2007, particularly in light of the plaintiff’s recent extensive amendments filed 19 January 2007 and the absence of the lay evidence to be relied on at trial at VCAT and the very incomplete body of expert evidence filed at VCAT at the point of settlement which impeded evaluation of the parties’ prospects at trial;
…
(l) at the date of settlement at VCAT no trial date was imminent and a number of interlocutory steps were to be completed before a trial would be listed…
The Court of Appeal scrutinised his Honour’s reasoning in paragraph [319] and the conclusion which followed, specifically, that it would be unsafe to evaluate the contest at VCAT or predict the likely outcome because of the vagaries, uncertainties and complexities of the remaining interlocutory processes associated with the proceeding.[22] The Court of Appeal rejected that conclusion and remitted the matter to another judge to determine the issue which his Honour, for the reasons stated in paragraph [319], had declined to evaluate. The Court of Appeals rejection of the conclusion must cast some doubt on the foundation for it. On remitter, the remitter judge will be required to look afresh at the evidence and likely make a determination on some if not all of the same matters outlined in paragraph [319]. None of those matters seem to depend upon any view taken of conflicting testimony but, rather, consist of observations or inferences drawn from other facts which another judge can equally make.
[22]CoA [124]–[130].
The principles to be applied in determining which findings of the primary judge the remitter judge should adopt or feel bound by was canvassed in Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141.
The situation in this case is not dissimilar to that which faced Sloss J who was the remitter judge in Marriner before it again went to the Court of Appeal. At [142] in Marriner, the Court of Appeal noted with approval Sloss J’s approach to the findings of the primary judge in the matter, remitted to her Honour ‘because of an absence of consideration by’ the primary judge of certain issues. Her Honour concluded it was appropriate to regard the findings reached by the primary judge ‘as tentative or provisional’ and, although not binding, available as part of the ‘analytical framework’ for determining the issues as raised and argued by the parties on the remitter. In my view, that aptly describes how I should approach the ‘findings’ set out in the various sub-paragraphs of paragraph [319] to which the defendant has drawn attention.
Conclusion
In conclusion, I answer the three questions which are raised for my determination as follows:
(a) the defendant may have leave to adduce fresh evidence in the form of documents described under Category 1 (limited to the documents in Annexure A and court book items 310 to 314, 317 and 318) and the documents described in Category 5;
(b) either party may rely on any document that was tendered in evidence at the trial (that is, any document that is not struck through in the marked up court book index); and
(c) the findings of the trial judge at paragraph [319] of the trial judgment are not binding on the remitter but may be treated as tentative or provisional and as part of the analytical framework for determining the issues raised and argued by the parties.
Although the plaintiff did not seek to adduce any fresh evidence itself, and opposed the defendant having leave to do so, given my decision it is appropriate that it should have leave to adduce fresh evidence (if it so wishes) in response to the evidence the defendant has been given leave to adduce.
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5
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