Cassar v Cavanagh
[2022] VSC 423
•2 August 2022 (oral reasons) 4 August 2022 (written reasons)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2021 03240
IN THE MATTER OF AUSWIDE CHAUFFEUR SERVICES PTY LTD (ACN 125 366 832)
and
IN THE MATTER OF AUS WIDE PROPERTY DEVELOPMENT PTY LTD (ACN 160 448 644)
| RAYMOND PAUL CASSAR | Plaintiff |
| v | |
| ROBERT DAVID CAVANAGH | Defendant |
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JUDGE: | ATTIWILL J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 27 and 29 July 2022 |
DATE OF JUDGMENT: | 2 August 2022 (oral reasons) 4 August 2022 (written reasons) |
CASE MAY BE CITED AS: | Cassar v Cavanagh |
MEDIUM NEUTRAL CITATION: | [2022] VSC 423 |
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PRACTICE AND PROCEDURE - Application by defendant for leave to file and serve an expert report – Defendant did not file and serve expert report within the times set by the Court’s orders - Principles for resolving case management disputes – Civil Procedure Act 2010 (Vic) ss 7, 8, 9, 20, 25 and 51 – Northern Health v Kuipers [2015] VCSA 172 – Whether the defendant has given a satisfactory explanation for delay – Impact of the grant of leave – Prejudice to the plaintiff - Leave granted.
COSTS – Whether the Court should order costs in a gross sum – Supreme Court (General Civil Procedure ) Rules 2015 (Vic) r 63.07(2)(c), Civil Procedure Act 2010 ss 7, 8, 9 and 65C(2)(c) - Giurina v Greater Geelong City Council (No 2) [2021] VSCA 341 - Whether the approach taken to the estimate of costs is logical, fair and reasonable - Whether leave to file and serve the expert report should be conditional upon the payment of the costs - Whether the Court should stay any order for costs in a gross sum until the hearing and determination of the proceeding – No condition imposed on the grant of leave – Gross sum costs order made, stayed for 14 days.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Herskope | Ferraro and Singh Pty Ltd |
| For the Defendant | Mr J Petras | Ansell Lawyers |
HIS HONOUR:
INTRODUCTION
The defendant applies for leave to file and serve an expert report of a Mr McColl exhibited to an affidavit of Mr Ansell, the defendant’s solicitor, sworn 27 July 2022.
PARTIES MATERIAL
The plaintiff relied upon:
(a) affidavits of Mr Ferraro, the plaintiff’s solicitor, sworn 10 June 2022, 22 July 2022 and 26 July 2022;
(b) affidavits of Mr Ansell, the defendant’s solicitor, sworn 17 May 2022, 14 June 2022 and 26 July 2022; and
(c) submissions filed 26 July 2022.
The defendant relied upon:
(a) an affidavit of Mr Ansell sworn 26 July 2022 and two affidavits of Mr Ansell sworn 27 July 2022; and
(b) submissions filed 26 July 2022.
Counsel for the parties made submissions.
FACTS AND PROCEDURAL HISTORY
I refer to the chronology filed by the plaintiff dated 15 July 2022. This chronology is agreed by the defendant except for paragraphs [13], [14] and [16]. I have read and considered the affidavits.
The plaintiff commenced this proceeding on 6 September 2021.
The proceeding is set down for a two-day trial commencing on 3 August 2022. The sole issue to be determined at the trial is the fair value at which the plaintiff will purchase the shares held by the defendant in Auswide Chauffeur Services Pty Ltd (ACS). The parties have resolved the other disputes the subject of the plaintiff’s amended originating process.
There is significant acrimony and tensions between the parties. On 23 June 2022, the Magistrates’ Court of Victoria extended an interim intervention order obtained by the plaintiff against the defendant for 12 months.
In November 2021, Mr Ansell retained a Mr Kitchen of Mulcahy & Co to provide an expert opinion on the fair value of the defendant’s shares in ACS.
On 21 April 2022, the plaintiff filed two expert reports of a Mr Michael Schoenfeld. These assess the fair value of the defendant’s shares in ACS as at 30 June 2021 and 1 March 2022.
At a directions hearing on 22 April 2022, the defendant’s counsel informed the Court that the defendant sought an order that the defendant’s accountant be able to attend ACS’ premises to take copies of the electronic records. The plaintiff’s counsel informed the Court that the plaintiff would provide some electronic records of, inter alia, ACS, to the defendant by 29 April 2022.
On 13 May 2022, the defendant’s counsel informed the Court:
MR PETRAS: Yes. So the expert to whom we will most quickly see results from is Scott Kitchin, who’s an accountant, who will provide an expert report shortly it is hoped. There has been some difficulty in communicating with Mr Kitchen recently following having communicated the documents that we’ve recently received to him [sic] and it appears to be a matter of him having to adequately consider those documents before he can finalise his report.
HIS HONOUR: And what does he say? When is it going to be finalised?
MR PETRAS: Your Honour, he hasn’t given an estimate, but given that he has had instructions for some time now I wouldn’t consider it unreasonable for the report to come within two weeks.
…
MR PETRAS: Yes. As to the timing, my instructor has attempted to get an update from the expert, but hasn’t been successful. I’ve received some further instructions about the difficulty that that expert is having and it is indeed that his finding be documented and delivered by a Dropbox. Difficult to parse - - -
HIS HONOUR: To do what, to - - -
MR PETRAS: To parse – to make sense of.
On 13 May 2022, the Court relevantly ordered:
1.By 4:00pm on 17 May 2022, the defendant’s solicitors file and serve an affidavit addressing the following matters:
a.The name of the expert retained by the defendant to provide a report on the fair value of the shares held by the second defendant in Auswide Chauffeur Services Pty Ltd (the expert);
b. when the expert was retained;
c.a list of any further documents or information required by the expert to provide the report;
d.whether the expert can provide the report by 4pm on 26 May 2022 and, if not, when the expert can provide the report and precisely why the expert requires that time.
2.The proceeding is set down for trial and fixed for hearing on 19 July 2022 on an estimated duration of 3 days.
Mr Ansell gave evidence in his affidavit made 17 May 2022:
5.Mr Kitchen has advised me that a potential conflict has arisen in respect of finalising the valuation report on Auswide Chauffeur Services Pty Ltd, in that his firm had previously acted for the defendant in preparing a taxation return for him.
6.In case a conflict did exist, I contacted Mr Lochie McColl of Value Ade, and asked him if he would be able to finalise a valuation report on Auswide Chauffer Services Pty Ltd, no later than 2nd June 2022.
7.Mr McColl told me that he would be able to finalise a valuation report on or before 2nd June 2022.
8.At the time of swearing this affidavit I was still awaiting confirmation from Mr Kitchen of the position of his firm in providing the valuation report.
The proceeding was listed for mention on 18 May 2022. The Court ordered, inter alia, the defendant file and serve any expert report by 26 May 2022.
On 19 May 2022, the plaintiff filed an amended originating process.
On 24 May 2022, Mr McColl sent a valuation proposal to Mr Ansell. The proposal refers to, inter alia: ‘50% of my fee will be invoiced on commencement and the remainder on completion’.
On 27 May 2022, Mr Ansell sent a letter to Mr Ferraro in which he stated, inter alia: ‘Unfortunately the report that we sought from Mr Lachie McColl has not been completed. I am presently investigating the reason for the delay and hope to provide further information in due course.’
Mr Ansell gave evidence in his affidavit made 14 June 2022:
…
5.My client, Mr Cavanagh had told me previously, that his uncle Mr Tony Farrugia is assisting him with the payment of his legal costs in this matter. However, my client told me there was a delay in those funds being available from his uncle. This delay in receiving these funds has delayed the preparation of Mr McColl’s valuation report.
6.My client has confirmed today that he is able to pay Mr McColl’s fee and I will make arrangements for that payment of Mr McColl’s, fee so that the valuation report can be prepared.
7.My client was unable to pay the valuation fee due to his uncle waiting on funds to become available and was not deliberately ignoring His Honour’s Orders in this matter.
At a directions hearing on 14 June 2022, the defendant’s counsel informed the Court that the defendant’s expert report could be provided within 14 days but it ‘would be prudent if 21 days could be allowed’. The Court vacated the trial listed for 19 July 2022 and relisted it for trial on 3 August 2022. The Court also ordered that the defendant file and serve any expert reports by 24 June 2022.
On 11 July 2022, Mr Ferraro provided a draft trial plan and chronology to Mr Ansell for his review and comment. By 15 July 2022, Mr Ansell had not responded.
Mr Ferraro gave evidence in his affidavit made 22 July 2022:
15.There has been no communication from the defendant’s legal practitioners to me since 14 June 2022 either confirming the retainer of Mr McColl or the status of any report to be provided by him (if at all).
…
20.I am instructed by the plaintiff that he is very concerned about any last-minute application to vacate the existing trial date, especially in circumstances where it is likely that the application will be founded on alleged prejudice that the defendant will suffer unless he has his own expert report to rely upon.
21.The plaintiff instructs me that he wants the defendant out of his life as soon as possible and that he has reached a stage in his life where he feels that he should be able to freely go about his personal and business life without Mr Cavanagh or the need to seek protection of the Court through the Intervention Order procedure.
22.The Plaintiff further instructs me that the strain of this litigation is causing him stress and concern which can only be alleviated by the matter being dealt with once and for all.
Mr Ansell gave evidence in his affidavit made 26 July 2022:
5.Mr McColl had confirmed with me on 14 June that he could prepare a valuation report on the company within that time frame ordered by the Court.
6.The defendant was unable to pay Mr McColl until late afternoon Wednesday 22 June 2022, which did not give Mr McColl sufficient time to prepare his report before he went on holiday after Friday 25 June 2022.
7.Mr McColl returned to work on 6 July 2022 and started work on the valuation. He had other commitments after his holiday, so the report took longer to finalise.
8.I received his draft report on 22 July 2022 and discussed with him some amendments to his report.
9.On 25 July 2022, I received an amended report from Mr McColl. I became aware of further amendments that needed to be made to the report and requested that Mr McColl provide a further amended report. Mr McColl has told me that the further amended report will be available by 11am or earlier on 26th July 2022.
10.The major delay in the report was caused by the defendant’s financial position. He has found it challenging to provide funds as and when required.
11.The report from Mr McColl is a pivotal document in these proceedings and its unavailability has been an issue for both us and the plaintiff.
The proceeding was listed for mention on 26 July 2022. At the mention, the defendant’s counsel informed the Court that the defendant sought leave to file and serve an expert report of Mr McColl. The report was provided to the Court and to the plaintiff.
Mr Ferraro gave evidence that his searches disclose that the defendant owns a number of properties. Mr Ansell gave evidence, in summary, that he had spoken to the defendant and that the defendant owns three properties that are subject to loans by mortgages, that the defendant is in ‘arrears’ on those loans and that since 2020 he has only been employed on a part time or casual basis and that he has found it difficult meeting his living expenses.
SUBMISSIONS
The defendant made the following primary submissions in favour of the grant of leave:
(a) Mr McColl’s report is the ‘crucial foundation’ of the defendant’s case;
(b) the defendant has provided a frank explanation of the reasons for the delay in seeking the report. The problem has continually been a difficulty in securing funding;
(c) the expert report has now been belatedly produced and the Court can be confident that there is no further uncertainty as to the fact that the report exists;
(d) the waste of public finding entailed by the extended use of court resources, while regrettable is not a determinative factor;
(e) there is no significant extent of irreparable prejudice caused by the adjournment. Any significant prejudice is ameliorated by an order that the defendant pay the plaintiff’s costs thrown away by reason of the adjournment.
The plaintiff made the following primary submissions against the grant of leave:
(a) the application should be refused. The interests of justice and the administration of justice require that outcome. That is so, even if the consequence is to shut out the defendant. By his conduct, the defendant has brought this outcome upon himself;
(b) the report is too late and it is too late against a background of shocking behaviour;
(c) if leave is given then the trial will be vacated and this will be ‘third trial date set by reason only of the continued non-compliance by the Defendant with orders of the Court’;
(d) there is no satisfactory explanation for delay;
(e) in this case there has been a sad history of non-compliance coupled with a complete lack of candour as to the reasons of persistent non-compliance;
(f) the defendant owns a number of properties and at no stage has the defendant or Mr Ansell gone on oath to disclose his financial position or any attempts made by the defendant to raise the necessary funding for this proceeding;
(g) there have been wholesale breaches of case management orders. The defendant has not had any regard to the Civil Procedure Act 2010 (Vic) (Civil Procedure Act) or his obligations under it. Granting leave in those circumstances would be inconsistent with the operation and very purpose of the Civil Procedure Act. The defendant has behaved so badly that he ought not be rewarded by being granted leave at the ‘eleventh hour’ to rely upon the report:
(i) Mr Ansell, in his affidavit made 17 May 2022, was ‘completely silent on any issue of funding or lack of funding’ from the defendant;
(ii) the defendant did not comply with the orders made 18 May 2022 and 24 June 2022 for the filing and service of an expert report;
(iii) Mr Ansell’s letter to Mr Ferraro dated 27 May 2022 conveyed the false assertion that Mr McColl had already commenced drafting his report;
(iv) there was no input by the defendant to the joint chronology until the Court intervened on 18 July 2022;
(v) the plaintiff continued to prepare for the case after 24 June 2022 on the assumption that the defendant would not call an expert, until the defendant notified the plaintiff on 26 July 2022 that he wished to call an expert;
(h) what has been provided to the Court and the plaintiff is a series of affidavits from Mr Ansell that can only be described as completely unsatisfactory and lacking in candour. This together with the history of non-compliance and lack of cooperation weighs heavily against the grant of leave;
(i) there will be substantial wasted costs if leave is granted;
(j) the prejudice referred to by Mr Ferraro in the affidavit of 22 July 2022 is uncontradicted; and
(k) there is a strong public interest in the timely resolution of disputes.
APPLICABLE LAW AND PRINCIPLES
The applicable law and principles are well established and not in dispute.
The Civil Procedure Act is applicable to this proceeding and to the defendant’s application.
Part 2.1 of the Civil Procedure Act concerns the ‘Overarching Purpose’ of the Civil Procedure Act and ss 7-9 relevantly provide:
7 Overarching purpose
(1)The overarching purpose of this Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute.
…
8 Court to give effect to overarching purpose
(1)A court must seek to give effect to the overarching purpose in the exercise of any of its powers, or in the interpretation of those powers, whether those powers—
(a)in the case of the Supreme Court, are part of the Court's inherent jurisdiction, implied jurisdiction or statutory jurisdiction; or
(b)in the case of a court other than the Supreme Court are part of the court's implied jurisdiction or statutory jurisdiction; or
(c)arise from or are derived from the common law or any procedural rules or practices of the court.
…
9 Court's powers to further the overarching purpose
(1)In making any order or giving any direction in a civil proceeding, a court shall further the overarching purpose by having regard to the following objects—
(a) the just determination of the civil proceeding;
(b)the public interest in the early settlement of disputes by agreement between parties;
(c) the efficient conduct of the business of the court;
(d)the efficient use of judicial and administrative resources;
(e)minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required for any interlocutory steps that are necessary for—
(i)the fair and just determination of the real issues in dispute; and
(ii) the preparation of the case for trial;
(f) the timely determination of the civil proceeding;
(g)dealing with a civil proceeding in a manner proportionate to—
(i)the complexity or importance of the issues in dispute; and
(ii) the amount in dispute.
(2)For the purposes of subsection (1), the court may have regard to the following matters—
(a)the extent to which the parties have complied with any mandatory or voluntary pre‑litigation processes;
(b)the extent to which the parties have used reasonable endeavours to resolve the dispute by agreement or to limit the issues in dispute;
(c)the degree of promptness with which the parties have conducted the proceeding, including the degree to which each party has been timely in undertaking interlocutory steps in relation to the proceeding;
(d)the degree to which any lack of promptness by a party in undertaking the proceeding has arisen from circumstances beyond the control of that party;
(e)the degree to which each person to whom the overarching obligations apply has complied with the overarching obligations in relation to the proceeding;
(f)any prejudice that may be suffered by a party as a consequence of any order proposed to be made or direction proposed to be given by the court;
…
(3) This section does not—
(a)limit any other power of a court to make orders or give directions; or
(b)preclude the court from considering any other matters when making any order or giving any direction.
Part 2.3 of the Civil Procedure Act concerns the ‘Overarching Obligations’ of persons to whom the Overarching Obligations apply. Sections 20 and 25 provide:
20Overarching obligation to cooperate in the conduct of civil proceeding
A person to whom the overarching obligations apply must cooperate with the parties to a civil proceeding and the court in connection with the conduct of that proceeding.
25 Overarching obligation to minimise delay
For the purpose of ensuring the prompt conduct of a civil proceeding, a person to whom the overarching obligations apply must use reasonable endeavours in connection with the civil proceeding to—
(a) act promptly; and
(b) minimise delay.
Part 4.2 of the Civil Procedure Act concerns case management and s 51 provides:
51 Contravention of orders or directions under this Part
If a person to whom a direction has been given or to whom an order made under this Part applies contravenes the direction or order, the court may do any one or more of the following—
(a) dismiss the civil proceeding, whether—
(i) generally; or
(ii) in relation to a particular cause of action; or
(iii) in relation to the whole or part of a particular claim;
(b) strike out or limit any claim made by a plaintiff;
(c)strike out or limit any defence or part of a defence filed by a defendant, and give judgment accordingly;
(d)strike out or amend any document filed by the person, either in whole or in part;
(e)disallow or reject any evidence that the person has adduced or seeks to adduce;
(f)direct the person to pay the whole or part of the costs of another party or person;
(g)make any other order or give any other direction that the court considers appropriate.
Part 4.6 of the Civil Procedure Act concerns expert witnesses and expert evidence and ss 65H and 65Q relevantly provide:
65H Court may give directions in relation to expert evidence
(1)A court may give any directions it considers appropriate in relation to expert evidence in a proceeding.
(2)A direction under subsection (1) may include, but is not limited to—
…
(b) the time for service of an expert’s report;
…
65Q Interaction with other powers of court
(1) Nothing in this Part limits any other power a court may have—
(a)in relation to case management, evidence or witnesses, including expert witnesses; or
(b)to take any action that the court is empowered to take in relation to a contravention of a direction given or an order made by the court.
(2) Nothing in this Part limits—
(a)in the case of the Supreme Court, the Court's inherent jurisdiction, implied jurisdiction or statutory jurisdiction; or
(b)in the case of a court other than the Supreme Court, the court's implied jurisdiction or statutory jurisdiction; or
(c)any other powers of a court arising or derived from the common law or under any other Act (including any Commonwealth Act), rule of court, practice note or practice direction.
As observed by the Court of Appeal in Northern Health v Kuipers:[1] ‘The Civil Procedure Act 2010 (‘Act’) is pivotal to the resolution of disputes about case management issues in civil proceedings to which this Act applies’.
[1][2015] VSCA 172, [22] (Kyrou and McLeish JJA) (citations omitted).
The Court of Appeal also observed:[2]
[2]Ibid [28]-[33], [119]-[120] (citations omitted).
28.The principles pertaining to an application to amend a pleading were explained in Aon Risk Services Australia Ltd v Australian National University. As set out in the reasons of J Forrest J in Ultra Thoroughbred Racing Pty Ltd v Those Certain Underwriters at Lloyd’s, London, the factors that the High Court in Aon considered as relevant to an application to amend a pleading include:
(b)whether there will be a substantial delay caused by the amendment;
(c) the extent of any wasted costs;
(d)whether there is an irreparable element of unfair prejudice caused by the amendment;
(e)concerns of case management arising from the stage in the proceeding when the amendment is sought;
(f)whether the grant of the amendment will lessen public confidence in the judicial system; and
(g)whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought.
29.In Thomas v Powercor Australia Ltd (Ruling No 3), J Forrest J stated that the principles set out in Aon, as summarised in Ultra, were applicable, in a general sense, to the late service of an expert report. In that case, he refused an application to allow the representative plaintiff in a class action to rely on an expert report which had been served on the third day of the trial. He had previously ordered that all expert reports were to be served and filed a number of months before the commencement of the trial. The trial concerned damage to the plaintiff’s property caused by the Black Saturday Horsham bushfire, which had commenced as the result of a conductor falling from a pole on a power line. The relevant expert report related to the manner in which a coach screw had been used to secure a pole top assembly to the pole from which the conductor fell. J Forrest J refused the application on the following four bases:
(h)First, he rejected the plaintiff’s explanation for the late service of the report. The plaintiff contended that his legal team only turned its mind to questions relating to the coach screw after receiving other expert reports from the defendant. J Forrest J observed that the issue had been ventilated two years earlier at the Victorian Bushfire Royal Commission and raised at the outset of the proceeding in the plaintiff’s statement of claim. He concluded that the plaintiff’s legal team had known for approximately two years that there may be a potential issue relating to the manner in which coach screws were affixed to the pole and stated ‘[f]or reasons that I cannot fathom, it was determined to do nothing about it until the eve of the trial’.
(i)Secondly, the coach screw had been in the possession of the plaintiff’s solicitors for over a year prior to the trial and had been available for examination by an expert throughout that time.
(j)Thirdly, the introduction of the expert report raised the risk of derailing a conclave of experts which was scheduled one month after the expert report was filed, and in respect of which a joint expert report had already been prepared.
(k)Fourthly, although there was no demonstrable prejudice to the defendant in permitting the plaintiff to file the expert report, this was not determinative. The orders of the court prescribing dates for service of expert witness reports were designed to facilitate a joint expert report and the giving of concurrent evidence and, consequently, ‘[t]o permit a further expert to join that debate simply because [the plaintiff’s] lawyers last week thought it was a good idea is not good enough.’
30.Subsequently, in Matthews v SPI Electricity Pty Ltd (Ruling No 20), J Forrest J permitted a plaintiff to rely on a supplementary expert report which was filed and served at the beginning of week five of the trial and many months after the deadline for the filing of supplementary expert reports had passed. Relevantly, in reaching this conclusion, J Forrest J considered an argument by the defendant that permitting the plaintiff to rely upon the expert report would be contrary to the overarching purpose in the Act. In rejecting this submission, J Forrest J observed that s 9(1)(a) of the Act required the ‘just determination of the civil proceeding’ as a means of furthering the overarching purpose and that refusing the application of the plaintiff would therefore be contrary to the overarching purpose.
31. In Aon, Gummow, Hayne, Crennan, Kiefel and Bell JJ relevantly stated:
An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in JL Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court’s earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future.
…
In the past it has been left largely to the parties to prepare for trial and to seek the court’s assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings.
32. Similarly, French CJ stated:
Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system.
33.It has been said by this Court that Aon may have ‘re-invigorated the procedural paradigm’ insofar as time, costs and limited judicial resources are relevant considerations in the determination of whether to allow certain interlocutory processes. However, as J Forrest J observed in Ultra, ‘the primary question still remains: what do the interests of justice dictate?’; Aon reminds courts that ‘the prism through which these interests are viewed is wider than just that of the moving party’.
…
119.Parties to civil proceedings in the courts of this State must comply with the overarching obligations in the Act. Case management procedures that are adopted by courts seek to give effect to the overarching purpose in the Act in a manner that is fair to all parties while simultaneously advancing the administration of justice. The importance of compliance with case management procedures is reflected in the extensive sanctions that courts can impose under the Act in cases of non-compliance.
120.Parties conducting proceedings in a managed list, such as the List, must do all they can to comply with the Court’s timetabling orders. If they do not, they face the risk that orders will be made which may affect the manner in which, and the extent to which, they can conduct their case. For example, as appears from [26] above, under s 51 of the Act, the Court may order that a party be precluded from relying on particular evidence. Parties should not seek to avoid compliance with an order by adopting an artificial interpretation of the order or by taking advantage of any ambiguity. Rather, they should endeavour to comply with the intended purpose of the order.
ANALYSIS
I am of the view that, in all of the circumstances, the interests of justice dictate that the Court should grant leave to the defendant to file and serve the report of Mr McColl.
First, I accept that granting the application will result in the trial being be vacated. This will result in delay in the determination of this proceeding. The Court is able to relist the matter on 14 to 16 September 2022 and these dates are convenient to the parties. In these circumstances, I am satisfied that there will not be substantial delay caused by granting the application.
Secondly, I accept that granting the application will prejudice the plaintiff. The delay itself will prejudice the plaintiff as the determination of the dispute will be delayed. Further, the relationship between the parties is acrimonious and is the subject of an intervention order. I accept that a further delay is likely to cause some stress and anxiety to the plaintiff. As the Court is able to relist the matter on 14 to 16 September 2022, I am satisfied that there will not be substantial prejudice caused by granting the application.
Thirdly, I accept that the defendant has provided a satisfactory explanation for seeking leave to file and serve the expert report at this late stage of the proceeding. I refer to the following:
(a) The defendant engaged Mr Kitchen in November 2021.
(b) The defendant provided further electronic records of ACS to Mr Kitchen no later than 13 May 2022 which appear to have been provided by the plaintiff on 29 April 2022.
(c) Mr Kitchen subsequently advised the defendant’s solicitor that he had a potential conflict of interest.
(d) By 17 May 2022, the defendant had contacted Mr McColl to provide a report.
(e) On 24 May 2022, Mr McColl provided a valuation proposal to the defendant’s solicitors. It required payment of 50% of the fee on ‘commencement’.
(f) The report of Mr McColl was then delayed as a result of the defendant’s delay in paying 50% of Mr McColl’s fee and the availability of Mr McColl to complete the report once the fee was paid. The delay in paying the fee was caused by a delay in the defendant obtaining the funds from his uncle to pay them.
(g) I do not accept that this delay was deliberate or calculated to frustrate the Court’s processes. I accept that it was caused by a delay in the defendant obtaining funds from his uncle to pay it. This delay was unfortunate.
Fourthly, the defendant has now obtained an expert report and provided it to the Court and to the plaintiff. I accept that the defendant will suffer significant prejudice if the application is refused and he is not permitted to call Mr McColl at the trial. The only issue remaining to be determined concerns the fair value at which the plaintiff must purchase the shares held by the defendant in ACS. Mr McColl’s report concerns this issue.
Fifthly, I accept that there has been non-compliance of Court orders by the defendant, including orders for the filing of experts reports, a trial plan and chronology. I also accept that the defendant’s solicitors’ conduct has, in some respects been ‘poor’ and unsatisfactory. This includes:
(a) the defendant’s solicitors not communicating to the plaintiff’s solicitor in the period from 24 June 2022 until 26 July 2022 that the defendant was in the process of obtaining the report of Mr McColl. The defendant accepted that the defendant’s solicitor should have communicated this to the plaintiff. The defendant accepted that this was poor and unsatisfactory conduct. This resulted in the plaintiff incurring costs in preparing for trial on the basis that the defendant would not be calling any expert evidence; and
(b) the defendant also did not comply with the orders concerning the trial plan and agreed chronology. No explanation was provided to the Court for this non-compliance.
The plaintiff submitted that Mr Ansell’s conduct was deliberate. The plaintiff submitted that, absent any explanation from Mr Ansell, that it is open to the Court to find that the conduct was deliberate. The defendant was seeking to obtain expert evidence and the delays appear to be, at least in substantial part, caused by difficulties in the defendant obtaining the funds to pay for it. I do not accept Mr Ansell’s reference in his letter of 27 May 2022 to Mr Ferraro to ‘Unfortunately the report that we sought from Mr Lachie McColl has not been completed’ was drafted by him to be deliberately misleading. The report was not completed at that time. I accept that it also had not been commenced. Mr Ansell was not cross-examined and I am not satisfied that Mr Ansell engaged in poor and unsatisfactory conduct that was intentionally misleading or deliberate. I do not consider that this non-compliance and poor conduct is of such a nature and extent as to warrant the refusal of leave.
Sixthly, I accept that granting the application will mean that there will be wasted costs. The extent of these wasted costs is relatively significant. These costs may, at least to some extent, be addressed by an appropriate costs order. I address this later in these reasons.
Finally, I am not satisfied that there are other discretionary considerations that warrant the refusal of the application:
(a) I do not consider that a short delay in the commencement of the trial (i.e. from 3 August 2022 to 14 September 2022) is such that this will undermine public confidence in the judicial system.
(b) I accept that granting the application will result in inefficiencies in the use of the Court’s time. However, I do not consider that this is a significant factor in this case.
COSTS
Background and submissions
The defendant does not oppose an order that he pay the costs incurred by the plaintiff by reason of the late filing of the report and the vacation of the trial to be taxed on a standard basis in default of agreement.
The issue is whether the Court should make a gross costs order and whether, if it does, whether the payment of those costs should be a condition of the defendant being given leave to rely upon the report of Mr McColl or those costs should otherwise be stayed.
Mr Ferraro gave evidence in his affidavit made 26 July 2022 at [6] that, inter alia, ‘[i]n the event that the Defendant is granted leave to rely upon the Report, I have prepared a schedule of the costs thrown away. I have done so by reference to the file maintained by me in this matter and by reference to the costs agreement that Mr Cassar has with my firm’.
The schedule of the costs sets out the total costs thrown away at $39,235.05, including counsel’s fees in the sum of $24,500. It is a very detailed schedule.
The plaintiff submits that in the event that leave is granted then the price for that leave at this late stage must be an order that the defendant pay the plaintiff’s costs fixed in the sum of $39,235.05. The plaintiff also submits that, given the defendant’s conduct, the price for obtaining leave should be a condition that the defendant is not permitted to rely upon the McColl report without first making payment in full of the plaintiff’s costs thrown away. The plaintiff submitted that the public confidence in the justice system would also be ‘significantly lessened’ unless there is a consequence for non-payment of the costs being the condition.
The defendant made the following primary submissions on costs:
(a) he accepts that he will be liable to pay the standard costs of the plaintiff thrown away by reason of the late filing of Mr McColl’s report and the adjournment of the trial;
(b) he does not ‘cavil’ with the solicitors’ fees in the schedule and accepts that those costs are reasonable and payable by the defendant on a standard basis;
(c) he accepts the disbursements for search fees and transcript fees are reasonable and payable by the defendant on a standard basis;
(d) he disputes the quantum of a number of items of counsel’s fees;
(e) it is appropriate for the costs to be taxed in the usual way;
(f) the Court should not impose any condition in relation to costs as that would be extremely oppressive;
(g) Mr Ansell’s lack of communication in the period from 24 June 2022 concerning Mr McColl constituted ‘poor conduct’ but this should not overwhelm the other factors; and
(h) the Court should not order that the costs be paid immediately, but be stayed pending the hearing and determination of the matter, as this would be ‘unduly harsh’ as the defendant is in a difficult financial position. The defendant is also able to pay the costs, in effect, out of the sum to be paid for the shares, being the matter the subject of the final hearing. The defendant submitted that this was the appropriate course.
Applicable principles
Pursuant to s 24(1) of the Supreme Court Act 1986 (Vic), the costs are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid. This discretion must be exercised judicially.
The Court must also seek to give effect to the overarching purpose in the Civil Procedure Act. I refer to ss 7-9 of the Civil Procedure Act which I have set out earlier in these reasons.
Rule 63.03 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the Rules) provides:
Time for costs order and payment
(1)The Court may, in any proceeding, exercise its power and discretion as to costs—
(a) at any stage of the proceeding; or
(b) after the conclusion of the proceeding.
(2)Costs which a party is required to pay under any of these Rules or an order of the Court shall, unless the Court otherwise orders, be paid forthwith.
(2.1)Costs which a party is required to pay under an order of the Costs Court shall, unless the Costs Court otherwise orders, be paid forthwith.
(3)Where the Court makes an interlocutory order for costs, the Court may then or thereafter order that if the party liable to pay the costs fails to do so—
(a)if that party is the plaintiff, the proceeding shall be stayed or dismissed;
(b)if that party is a defendant, the defendant's defence shall be struck out.
(4) In paragraph (3)—
defendant includes any person against whom a claim is made in a proceeding;
plaintiff includes any person who makes a claim in a proceeding.
Rule 63.07 of the Rules relevantly provides:
Taxed or other costs provision
(1)Subject to this Order, where by or under these Rules or any order of the Court costs are to be paid to a party, that party shall be entitled to taxed costs.
(2)Where the Court orders that costs be paid to a party, the Court may then or thereafter order that as to the whole or any part of the costs specified in the order, instead of taxed costs, that party shall be entitled to—
…
(c) a gross sum specified in the order instead of taxed costs.
Rule 63.20.1 of the Rules provides:
Taxation of costs on interlocutory application or hearing
If an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that the costs may be taxed immediately.
Section 65C of the Civil Procedure Act provides:
Other costs orders
(1)In addition to any other power a court may have in relation to costs, a court may make any order as to costs it considers appropriate to further the overarching purpose.
(2) Without limiting subsection (1), the order may—
…
(c) award a party costs in a specified sum or amount;
In Angelevska v State of Victoria (No 4),[3] Lansdowne AsJ held that it is not necessary that the ‘conditions’ for an order that interlocutory costs be taxed immediately be found before a gross costs order can be made in respect of those costs.[4] This was referred to with approval by J Forrest J on appeal in Angelevska v State of Victoria & ors (No. 5).[5] I agree with this approach for the reasons stated by Lansdowne AsJ.
[3][2016] VSC 720, [20].
[4]With respect to r 63.20.1 of the Rules and whether an order that interlocutory costs should be taxed immediately see Abbott v Setka (No 2) [2013] VSCA 376 at [27] (Warren CJ, Ashely and Whelan JJ).
[5][2017] VSC 238, [36] and [40]. In Aura Energy Ltd v ASEAN Deep Value Fund (No 2) [2020] VSC 732 Delany J at [50]-[68], in the context of an application for a gross costs order concerning an interlocutory application applied r 63.20.1, then r 63.07(2)(c).
The applicable principles concerning the making of gross-sum costs orders are well established and have been set out by John Dixon J in Wilson v Bauer Media Pty Ltd (Costs)[6] and Sheehan v Brett-Young & Ors (No. 4).[7] In Giurina v Greater Geelong City Council (No 2)[8] the Court of Appeal said of a gross-sum costs order:
This involves a broad brush approach, without the rigour and precision of the process of taxation, however, the Court should be confident that the approach taken to the estimate of costs is logical, fair and reasonable.
I also refer to Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3).[9]
[6][2018] VSC 161, [8]-[13].
[7][2016] VSC 53, [68]-[74].
[8][2021] VSCA 341, [16] (Kennedy and Walker JJA and Macaulay AJA) (citations omitted).
[9][2012] VSC 399, [84] (Croft J).
A gross-sum costs order is ‘rare event’, except in particular circumstances, to the usual process that gives a party the opportunity to participate in the taxation process.[10]
[10]See Aura Energy Ltd v ASEAN Deep Value Fund (No 2), at [54]-[57].
Immediate assessment of costs
In the event that I am incorrect and it is necessary that the conditions for an order that interlocutory costs be taxed immediately be found before a gross costs order can be made in respect of those costs, I am of the firm view that an immediate assessment of costs is appropriate and just. The defendant’s conduct has been poor and unsatisfactory. I refer to my earlier reasons above.[11] The defendant accepted it was. It is this conduct that has resulted in the plaintiff incurring costs as a result of the late filing of the expert report and the vacation of the trial.
[11]See above [41].
Gross costs order
I am also of the view that a gross costs order is appropriate and just. The defendant’s conduct has been poor and unsatisfactory. As submitted by the defendant in the context of the application for a gross costs order: ‘It’s not a factor that assists the defendant.’
Further, I am confident that a proper gross sum can be assessed on the material available to me. The approach taken to the estimate of costs is logical, fair and reasonable.
First, the schedule prepared by Mr Ferraro of the costs is very detailed and I have reviewed it.
Secondly, the defendant accepted that the costs in the schedule concerning the solicitors’ costs and for the search and transcript disbursements (i.e. the costs excluding counsel fees) constitute standard costs and that there would be ‘little point’ in having those costs taxed. I have also reviewed the solicitors’ costs and the search fee and transcript disbursements and consider them appropriate and reasonable.
Thirdly, I am very familiar with the proceeding as the judicial officer managing it. With respect to counsel’s fees, I have reviewed counsel fees and consider them to be appropriate and reasonable. Those fees relate to costs that were incurred as a result of the defendant’s late filing of an expert report and the vacation of the trial. I consider that the rate of counsel of $550 per hour and $5,500 appropriate and reasonable. Counsel is a very experienced senior junior at the Victorian Bar. At the hearing it was clarified that the fee for ‘Brief to appear at Leave Application’ was incorrectly dated 26 July 2022 and related to the application for leave on 27 July 2022. I accept this. I also accept that it was appropriate and reasonable for counsel to spend 3 hours drafting and settling the chronology.
Fourthly, I have taken into account that a gross-sum costs order will mean that the defendant will not have the opportunity to participate in a taxation process. This factor, in the present circumstances, does not warrant refusal of a gross costs order.
Fifthly, in my view, a taxation of the costs would impose an unnecessary burden and expense upon the parties, especially given the submissions made by the defendant concerning the solicitors’ costs and the search and transcript disbursements and that as the judicial officer managing the proceeding I am able to review and determine the appropriate costs now.
Finally, the application for leave did not concern an interlocutory application with a discreet subject matter. The subject matter of the present application, namely expert evidence, concerns the subject matter of the proceeding. In the context, I accept that it would be a ‘rare event’ to order costs on a gross sum. However, for the reasons I have just given it is warranted in the circumstances of this case.
Stay
I am not satisfied that it is appropriate to stay the costs until the hearing and determination of the matter. I refer to r 63.03(2) of the Rules.
First, I am not satisfied, on the present evidence, that if I make the costs payable immediately, or within the next two weeks, that the defendant will not be able to pay those costs. The defendant relies upon paragraph 10 of Mr Ansell’s affidavit sworn 26 June 2022 which refers to the defendant finding ‘it challenging to provide funds as when required.’ This evidence is vague. The defendant also relies upon Mr Ansell’s affidavit sworn 27 June 2022. This refers to the defendant’s ownership of three residential properties and provides details concerning the mortgages, including that the loans are in arrears. There is no evidence of the value of the properties. Mr Ansell also deposes in that affidavit at [8]: ‘Since 2020 he has only been employed on a part time or casual basis and that he has found it difficult meeting his living expenses.’ This evidence lacks detail. No evidence is provided of his income. The nature and extent of the difficulties are not identified. Further, Mr Ansell gave evidence that the defendant’s uncle is assisting the defendant to pay his legal costs. There was no evidence of the financial circumstances of the defendant’s uncle, including of his ability to pay the gross sum costs order sought by the plaintiff.
Secondly, I do not accept that the defendant’s submission that ‘having an order that costs be paid immediately would effectively deprive the defendant of the opportunity to properly put his case’. In the event of non-payment of the gross costs order, the defendant’s defence is not automatically struck out. The plaintiff is able to apply for such an order under r 63.03(3)(b). The principles to be applied upon any such application are set out by the Court of Appeal in Gao v Zhang.[12]
[12](2005) 14 VR 380 (Ormiston and Vincent JJA).
Thirdly, I do not accept that it is appropriate to order a stay on the basis that the defendant should be given the opportunity to, in effect, deduct the costs from any judgment made in favour of the plaintiff. The plaintiff has incurred the costs and they should be paid.
Finally, I am presently minded, in all of the all circumstances, to grant a short stay of two weeks to enable the defendant to pay the costs, but will hear the parties on this.
Condition
I am not satisfied that it is appropriate to order that the defendant is not permitted to rely upon the report of Mr McColl without first making payment of the plaintiff’s costs. I am not satisfied that the defendant’s conduct warrants such an order. I refer to my earlier reasons concerning that conduct.[13] I also do not consider that the public confidence in the judicial system will be affected if I do not make that order. The defendant has provided a satisfactory explanation for the delay. The plaintiff is also able to take further action as a result of any non-payment under r 63.03(3)(b).
[13]See above [41] and [42].
CONCLUSION
In conclusion, I will:
(a) give leave to the defendant to file and serve the expert report of Mr McColl exhibited to the affidavit of Mr Ansell sworn 27 July 2022;
(b) vacate the trial listed to commence on 3 August 2022;
(c) set the matter down for trial to commence on 14 September 2022; and
(d) order the defendant pay the defendant’s costs incurred by the plaintiff by reason of and incidental to the defendant’s application for leave to file and serve the report of Mr McColl, the late filing and service of the report of Mr McColl and the vacation of trial and that those costs be fixed in the sum of $39,235.05.
I will hear the parties on the precise form of the orders, including on a short stay of those costs. The proceeding is being mediated by a judicial registrar today. In those circumstances, the proceeding should be listed for mention for further trial directions if the matter does not resolve at the mediation.
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