Bicheno Investments Pty Ltd v Winterbottom (No 2)
[2017] NSWSC 413
•12 April 2017
Supreme Court
New South Wales
Medium Neutral Citation: Bicheno Investments Pty Ltd v Winterbottom (No 2) [2017] NSWSC 413 Hearing dates: 12 April 2017 Decision date: 12 April 2017 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Application for evidence to be taken by audio visual link refused
Catchwords: PRACTICE AND PROCEDURE – imminent hearing – whether evidence of witness living in London should be taken by audio visual link – document heavy case – evidence of witness likely to be closely tested Legislation Cited: Evidence (Audio and Audio Visual Links) Act 1998 (NSW) Cases Cited: Bicheno Investments Pty Ltd v Winterbottom [2017] NSWSC 402 Category: Procedural and other rulings Parties: Bicheno Investments Pty Ltd (First Plaintiff)
Stock Suppliers Australia Pty Limited (Second Plaintiff)
David John Winterbottom (First Defendant)
Rahul Goyal (Second Defendant)Representation: Counsel:
Solicitors:
P Reynolds (Plaintiffs)
J Williams with J S Burnett (Defendants)
Kemp Strang Lawyers (Plaintiffs)
Quinn Emanuel Urquhart & Sullivan (Defendants)
File Number(s): SC 2015/163627
EX TEMPORE Judgment (REVISED)
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These proceedings are fixed for hearing for 8 days commencing 1 May 2017.
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The background to the proceedings is set out in the judgment I delivered yesterday: Bicheno Investments Pty Ltd v Winterbottom [2017] NSWSC 402. These reasons assume familiarity with that judgment.
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By notice of motion filed in Court today, the defendants seek to have the evidence of one of their former employees, Mr Tyson Gundersen, given by audio visual link from London, where he now lives and works.
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The plaintiffs oppose the application.
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In those circumstances, and in any event, it is necessary for the defendants to establish that it is in the interests of justice that the order be made: Evidence (Audio and Audio Visual Links) Act 1998 (NSW) s 5B(3).
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Mr Gundersen was the manager of the restructuring team at the time of the DSG receivership and did much of the work on the receivership.
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Mr Gundersen's position is that it would be "extremely difficult" for him to travel to Australia in early May because of "significant work commitments in the UK" which require his presence in London and participation in various meetings in connection with two confidential projects in which he is engaged.
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The evidence about Mr Gundersen's position is given at some level of generality, and on information and belief from the solicitors for the defendants.
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However, there is no reason to doubt that it would be very inconvenient to Mr Gundersen, and possibly disadvantageous to those for whom he works, for him to get here.
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The difficulty has been compounded because, for reasons that it is not necessary for me now to recount, the defendants' solicitors had every reason to think that the plaintiffs would consent to Mr Gundersen's evidence being given by audio visual link. That led them to tell Mr Gundersen in late March that his presence in Australia would probably not be required.
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It may be that Mr Gundersen took that into account in arranging his work schedule for the first few weeks of May.
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If Mr Gundersen is to travel to Australia to give evidence, he would be away from London for the better part of a week. That would no doubt be a significant imposition on him.
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What must also be considered, however, is whether it would be unfair to the plaintiffs to insist that they test Mr Gundersen's evidence in cross-examination by audio visual link. Any such cross-examination would have to take place at around 4pm Sydney time (7am London time) and continue into the evening.
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The resolution of the issue directs attention to the issues in the proceedings.
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The first issue is whether the defendants are, as they contend, entitled to a "success fee" or "incentive fee".
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On the pleadings, that is said to be a question of the construction of what the parties refer to as the "Fee Deed".
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One element of the relevant formula in the Fee Deed is "Stock Difference". An element of that expression involves consideration of the value of "Appointment Stock".
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According to the Further Amended Commercial List Statement, the plaintiffs' case is:
“15. It was a further term of the Fee Deed that ‘Appointment Stock’ would mean DSG’s stock on hand as at the Appointment Date of 30 June 2014 as determined by a stock take undertaken by the defendants.
16. On a proper construction of the Fee Deed, it was an essential pre-condition to the defendants’ entitlement to payment of the Incentive Fee the defendants had to undertake a stock take of DSG’s stock on hand as at 30 June 2014.
17. The defendants did not undertake a stock take of DSG’s stock on hand as at 30 June 2014.”
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In their Commercial List Response, the defendants admit that they did not physically count the stock. The defendants say that they "counted the stock by utilising DSG's records" and contend that, on the proper construction of the Fee Deed, a physical counting of the stock was not necessary and that it was sufficient if access were made to DSG's records.
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Mr Gundersen gives some evidence touching on that matter, including evidence of a conversation he had with an employee of DSG about the rigour of its stocktaking procedures and his state of satisfaction about those procedures.
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It is hard, at this remove, for me to see what relevance those observations would have to the question of construction or why the cross-examiner would wish to spend much time on it.
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However, Mr Reynolds, who appears for the plaintiffs, submitted, and I must accept, that the plaintiff will wish to, at least to some extent, test Mr Gundersen's evidence about that matter.
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The second issue is whether the defendants engaged in misleading or deceptive conduct by (allegedly) representing that the likely recoveries on the receivership would be in the order of $6 million.
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That representation is said to be misleading or deceptive because the modelling that the defendants carried out to provide the basis for that representation assumed that sale of stock would be at a margin of 3.41 per cent (or 12.70 per cent) but should have assumed a margin of 30 per cent.
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The defendants' response is that the forecast was based upon a document referred to in the pleadings as the "Receivership Model" and that that model, and thus their opinion, reflected their "reasonably and genuinely held belief as to the estimated range of returns to secured creditors in a receivership scenario" (see par 26A of the Response).
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Mr Gundersen prepared that receivership model. In his affidavit, he sets out his reasons for various assumptions about stock mark-up that found their way into the model.
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An issue in the proceedings will be whether the model was reasonable. The plaintiffs have adduced expert evidence to the effect that it was not.
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Mr Reynolds submitted, and I accept, that the plaintiffs will wish to test Mr Gundersen, the author of the model, on the question of whether or not it was reasonable. Mr Reynolds said Mr Gundersen's credit would not be in issue, but that his "reliability" would be. Certainly, the reasonableness of his conclusions on this question seems to be a matter which will be closely tested.
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There was debate before me as to how long cross-examination would take. Mr Reynolds said that cross-examination could well take up to a day. Mr Williams submitted that it was likely to be nothing like that. I am not able to form any reliable view on that matter; although it does seem likely that cross-examination will be for at least a number of hours.
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There was also debate about what volume of documents would be required for the purpose of the cross-examination.
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I am told that the court book will comprise six volumes. It is common ground that Mr Gundersen will need to have those volumes before him during the cross-examination.
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Apparently, there are a very large number of further documents in electronic form (said to be some 90,000 pages). It does not seem likely that Mr Gundersen would be taken to many of those, but that is not a matter that I can reliably predict.
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No doubt, were the cross-examination to take place in London, Mr Gundersen could, between now and then, be provided with a copy of the court book and perhaps the other documents in electronic form.
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However, it is notoriously hard for a cross-examination to gain momentum when conducted by audio visual link, especially where, as here, the cross-examination is likely to be document heavy.
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In circumstances where Mr Gundersen's evidence is to be tested in respect to a technical and, it may turn out, vital aspect of the case, I fear that it may well be unfair to the plaintiffs to deprive them of the subtle, but often very real, advantage of having Mr Gundersen in the witness box and in the same room as the cross-examiner.
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For those reasons, although I have found the matter to be finely balanced, the conclusion to which I have come is that the justice of the case requires that the defendants procure Mr Gundersen’s attendance in Sydney for the hearing.
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The defendants’ notice of motion of 12 April 2017 is dismissed.
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I order that the costs of that motion be costs in the cause.
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Decision last updated: 13 April 2017
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