Cheng v Lam [No 5] - [2021] WASC 129

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   CHENG -v- LAM [No 5] [2021] WASC 129
CORAM:   TOTTLE J
HEARD:   12 APRIL 2021
DELIVERED          :   3 MAY 2021
FILE NO/S:   CIV 1706 of 2015
BETWEEN:   MARY YUEN SHAN CHENG
Plaintiff
AND
FRANCIS HUNG LAM
First Defendant
ANDREA MAN YEE CHENG
Second Defendant
(BY ORIGINAL ACTION)
FRANCIS HUNG LAM
First Plaintiff by counterclaim
ANDREA MAN YEE CHENG
Second Plaintiff by counterclaim
AND
MARY YUEN SHAN CHENG
First Defendant by counterclaim
CHAN THANH LAM
Second Defendant by counterclaim
DAVID CUONG CHAN LAM
Third Defendant by counterclaim
TINH AU
Fourth Defendant by counterclaim
(BY COUNTERCLAIM)

Catchwords:

Practice and Procedure - Competing applications under liberty to apply provision - Turns on own facts

Legislation:

Nil

Result:

Orders made

Category: B

Representation:

Original Action

Counsel:

Plaintiff	:	Mr G A Lacerenza
First Defendant	:	Mr P G McGowan
Second Defendant	:	Mr P G McGowan

Solicitors:

Plaintiff	:	G A Lacerenza & Associates
First Defendant	:	Johnstone Crouse Lawyers
Second Defendant	:	Johnstone Crouse Lawyers

Counterclaim

Counsel:

First Plaintiff by counterclaim	:	Mr P G McGowan
Second Plaintiff by counterclaim	:	Mr P G McGowan
First Defendant by counterclaim	:	Mr G A Lacerenza
Second Defendant by counterclaim	:	No appearance
Third Defendant by counterclaim	:	No appearance
Fourth Defendant by counterclaim	:	No appearance

Solicitors:

First Plaintiff by counterclaim	:	Johnstone Crouse Lawyers
Second Plaintiff by counterclaim	:	Johnstone Crouse Lawyers
First Defendant by counterclaim	:	G A Lacerenza & Associates
Second Defendant by counterclaim	:	No appearance
Third Defendant by counterclaim	:	No appearance
Fourth Defendant by counterclaim	:	No appearance

Case(s) referred to in decision(s):

Cameron v Renouf [2008] WASC 60
Caratti v Mammoth Investments Pty Ltd [No 2] [2018] WASCA 6
Cheng v Lam [No 3] [2020] WASC 45
Cheng v Lam [No 4] [2020] WASC 175

TOTTLE J:

Introduction

On 15 May 2020 I made orders setting out a regime for the appointment of an independent accounting expert to undertake calculations specified in Registrar Whitbread's report[1] on the taking of an account between the parties. The orders were amended in minor respects on 27 May 2020. These reasons deal with competing applications of the plaintiff and the first and second defendant made necessary because the orders have not been complied with. Responsibility for this non‑compliance rests with the plaintiff.
[1] Cheng v Lam [No 3] [2020] WASC 45.
For ease of reference the amended orders are reproduced in the schedule to these reasons and I will refer to them as the May 2020 orders. These reasons assume familiarity with my reasons for adopting the Registrar's report and making the May 2020 orders.[2]
[2] Cheng v Lam [No 4] [2020] WASC 175.
To explain the competing applications it is necessary to refer to the procedural history in some detail.

Procedural history

For present purposes it is sufficient to state that the taking of an account was ordered in respect of eight property developments which were the subject of eight informal partnership agreements made between family members. The primary accounting parties were the first and second defendants, who are married to each other. The plaintiff and the second defendant by counterclaim were also ordered to account. The plaintiff and the second defendant by counterclaim were, but are no longer, married to each other. The second defendant by counterclaim is the brother of the first defendant and the third defendant by counterclaim, and is related to the fourth defendant by counterclaim.
In relation to the issues presently before the court the protagonists are the plaintiff on one side and the first and second defendants on the other.
Registrar Whitbread's report was published on 19 February 2020.
The plaintiff filed a chamber summons seeking an extension of 21 days within which to apply for orders consequent upon the Registrar's report and, at a hearing on 20 March 2020, time to make an application in respect of the report was extended to 2 April 2020.
Additionally on 20 March 2020 the parties were ordered to file minutes of the orders sought by them by 30 March 2020 and the matter was listed for directions on 2 April 2020. The plaintiff filed a minute of orders sought by her. In summary, the orders proposed by the plaintiff were to the effect that the Registrar's report should not be adopted and that Mr Charles Napoli, an accountant, should be appointed by the court to prepare accounts. The first and second defendants filed a minute of orders providing for the appointment of an independent accountant in terms the substance of which were repeated in the May 2020 orders. In an affidavit relied on in support of the orders sought by them,[3] the first and second defendants disclosed that their solicitors had approached two accountants to enquire whether they would act as the independent accountant. The accountants so approached were Ms Suzanne Delbridge and Mr Mark Collins.
[3] Affidavit of Louise Marie Sales sworn 30 March 2020.
At a directions hearing on 2 April 2020 orders were made for the parties to exchange submissions and the issue of whether the court should adopt the Registrar's report was listed for hearing on 8 May 2020. The hearing date of 8 May 2020 was subsequently changed to 14 May 2020. Both sides filed and served submissions as directed and argument was heard on the issue on 14 May 2020. Subsequently, the plaintiff's counsel has complained that the hearing that took place on 14 May 2020 was listed as a directions hearing, however, at that hearing there was no suggestion by counsel for the plaintiff that he was at any disadvantage because the hearing had been listed as 'directions hearing'. A decision was reserved until the following day, 15 May 2020, when short oral reasons were given for the decision that the court would adopt the Registrar's report with the exception of one matter.
At the hearing on 15 May 2020 the plaintiff's counsel opposed the making of orders in the terms of the first and second defendants' minute. Among the points raised by the plaintiff's counsel was that consideration should be given to the appointment of accountants other than Ms Delbridge and Mr Collins and that proposed order 7, which set out the calculations to be undertaken by the independent accountant, did not cover all of the calculations identified as being necessary in the Registrar's report. Although the first and second defendants' minute of orders had been filed and served on 30 March 2020, the plaintiff's counsel did not identify any particular calculations referred to in the Registrar's report which were omitted from proposed order. Parenthetically, I observe that at the hearing on 12 April 2021 the plaintiff's counsel contended, in effect, that at the hearing on 15 May 2020 he had not had time to consider the orders proposed by the first and second defendants. In fact, as just noted, the minute containing the orders sought by the first and second defendants on 15 May 2020 had been filed and served on 30 March 2020.[4] In any event, to allow for the possibility that the parties might agree on the appointment of an accountant other than Ms Delbridge or Mr Collins the words 'or such other accountant as may be agreed between the parties' were added to paragraph 2 of the orders and, to allow for the possibility that the orders might need some adjustment to cover all that was required by the Registrar's report, a liberty to apply provision was included as order number 11.
[4] ts, 12 April 2021, 939.
At the hearing on 15 May 2020 orders were made for the filing and service of submissions on costs of the application in respect of the Registrar's report and a hearing to determine the costs was listed for 27 May 2020.
The plaintiff filed and served an affidavit sworn by her on 26 May 2020 in support of her submissions in respect of the costs of the application concerning the adoption of the Registrar's report. The plaintiff deposed that she was an accountant employed by a public practice accounting firm and that she was capable of carrying out the task that the independent accountant should carry out once that person is selected. The plaintiff deposed that she had reviewed and read the Registrar's report thoroughly and read the orders made on 15 May 2020. The plaintiff deposed that she had, in effect, undertaken the exercise to be undertaken by the independent accountant and her evidence made it plain that she had looked at what was required to be done by the Registrar's report in detail and had calculated the potential outcome in dollar terms that she and her former husband should receive on the basis of the findings made by the Registrar. The plaintiff's affidavit of 26 May 2020 extended to 114 paragraphs over 22 pages of text. At no point in this lengthy affidavit did the plaintiff assert that the 15 May 2020 orders were not drawn in terms that covered all the calculations that the Registrar had identified.
In addition to dealing with costs, at the hearing on 27 May 2020, the 15 May 2020 orders were amended to correct a referencing error in paragraph 7(d) of the orders.
In May 2020 correspondence was exchanged between the plaintiffs' solicitors and the first and second defendants' solicitors in which the identity of the person to be appointed as the independent accountant was discussed but no agreement was reached.
On 5 June 2020 the plaintiff filed and served a notice of appeal in respect of the May 2020 orders. On the same day the first and second defendants' solicitors wrote to the plaintiff's solicitors and asked them to provide their client's instructions in relation to the appointment of Ms Delbridge as the independent accounting expert.
On 2 July 2020 the plaintiff's solicitor sent an email to the solicitors for the first and second defendants in which he referred to the existence of the appeal and stated:
I refer to your prior intention to appoint Ms. Delbridge as the IAE. As you are aware the proceedings are subject to an Appeal process.
Please advise whether your client notwithstanding the Appeal Notice seeks to continue to appoint Ms. Delbridge as the IAE. We seek your client's legal opinion on this matter and whether such an appointment will conflict with the Appeal process.
As you are aware the Orders made by His Honour J. Tottle are subject to Appeal.
Should your client's advice be that it will not conflict with the Appeal process, please advise us forthwith and we will give further consideration to this matter.
It does not appear that the first and second defendants' solicitors replied to the plaintiff's solicitors' email of 2 July 2020. In any event, at a directions hearing held on 3 November 2020 counsel for the plaintiff said that the appointment of an independent accounting expert had not been progressed because of the appeal.
On 16 November 2020 the first and second defendants' solicitors wrote to the plaintiff's solicitor and sought the plaintiff's solicitor's consent to the appointment of Ms Delbridge as the independent accounting expert so that the account could be finalised between the parties. This letter was sent following remarks made by the Registrar (at a hearing before her in relation to costs held on 4 November 2020) about the desirability of the timely appointment of an independent accounting expert.
On 18 November 2020 the plaintiff's solicitor responded to the first and second defendants' solicitors' correspondence of 16 November 2020 and stated that he was seeking counsel's advice and (among several other points) raised the possibility that Ms Delbridge may have a conflict of interest or 'a real perception of a conflict of interest' by reason of an asserted prior association with the first defendant. The plaintiff's solicitor concluded his letter with the following observation:
The ultimate aim is to comply with the Orders of Tottle J.
We look forward to a prompt response. The matters we raise are pertinent to the issues. The selection of an IAE is a matter of His Honour Tottle J. once fully informed.
The plaintiff's solicitor did not raise any concern about the adequacy of the May 2020 orders in his letter dated 18 November 2020.
The first and second defendants' solicitors responded to the plaintiff's solicitors' letter of 18 November 2020 by letter dated 30 November 2020 in which they stated:
It is arrant nonsense to suggest that Ms Delbridge has any sort of conflict whether perceived or otherwise. As to Ms Delbridge's qualifications, the affidavit of Ms L Sales of 25 May 2020 identifies Ms Delbridge's website on which her relevant expertise and qualifications are set out.
The task that the independent expert is to undertake is framed by the Orders now made by Justice Tottle. To the extent to which there has been an amendment, i.e. by the further Order of 27 May 2020 this will be advised to Ms Delbrdige. It is a matter of no moment.
As to your client's supposed incapacity to make contribution either she is prepared to pay one half of the fees for the engagement of Ms Delbridge or not. If she is not then you leave our client with little alternative but to engage Ms Delbridge at his cost.
You will also note we intend to relist the matter before Justice Tottle in order that the engagement of Ms Delbridge can be formalised.
On 30 November 2020 the first and second defendants' solicitors sent instructions to Ms Delbridge to undertake the tasks set out in paragraph 7 of the May 2020 orders.
On 15 December 2020 the first and second defendants' solicitors filed a minute of orders proposed by them that contained an order approving Ms Delbridge as the independent accounting expert.
On 16 December 2020 Ms Sales of the first and second defendants' solicitors swore an affidavit in support of the orders sought by the minute of 15 December 2020. Unfortunately the first and second defendants' solicitors did not take any steps to bring the minute of 15 December 2020 before the court for hearing.
On 17 February 2021 the first and second defendants' solicitors filed an affidavit affirmed by Ms Delbridge to which she attached the instructions she had received to undertake the calculations referred to in the May 2020 orders and a report prepared by her in accordance with those instructions.
On 2 March 2021 the plaintiff's solicitor filed a minute proposing various orders including an order for a stay of the May 2020 orders pending the outcome of the appellant's appeal and, in the alternative, certain variations to the May 2020 orders. I set out the full text of the orders sought by the plaintiff later in these reasons.
At a directions hearing held on 3 March 2021 orders programming the hearing of the plaintiff's application for the orders in her minute filed on 2 March 2021 and for the hearing of the first and second defendants' application in the terms of their minute of orders of 15 December 2020 were made and the applications were heard together on 12 April 2021.

The orders sought by the plaintiff

By her minute of 2 March 2021 the plaintiff sought orders as follows:
1The Orders of the 15th May, 2020 as amended the 27th May, 2020 be stayed pending the outcome of CACV 63/2020 regarding methodology and other Grounds of Appeal.
2.In the alternative to paragraph 1 above, the Orders made by the Honourable Justice Tottle made the 15th May, 2020 as amended on the 27th May, 2020 ("the Orders of the 15th May, 2020 as Amended") varied pursuant to Order 11 of the 27th May, 2020 "be liberty to apply" as follows:-
(a)That the Orders made by Chaney J. the 28th June, 2018 be provided to the nominated IAE in any event;
(b)That the First and Second Defendant do comply with Order 6(d) of the said Orders by providing to the nominated IAE a copy of the Orders of Tottle J. the 15th May, 2020.
3.That Order 7 be discharged and/or varied as follows:-
(a)The appointed IAE is to read and review the Registrars Report of the 19th February, 2020 and to comply with all of the Registrars Instructions in Schedule A.
(b)The IAE be given liberty to apply to the Court in respect of any request or matter, or query arising from the Registrars Instructions upon giving 10 days notice.
4.The Plaintiff have fourteen (14) days to file its Response Minute of Proposed Orders and Affidavits to the Defendants Proposed Orders and to the Affidavit and Report of S. Delbridge filed the 17th February, 2021.
5.All costs of the Application to be stayed in any event pending the outcome of the Appeal CACV 63/2020.
In support of her application the plaintiff relied on an affidavit sworn by her on 17 March 2021 and a lengthy outline of submissions. Both the affidavit and the submissions were drawn in terms that were difficult to follow. Whilst I appreciate that the plaintiff is an accountant, my impression is that the presentation of her case would benefit from input from an independent accountant.

Plaintiff's application for a stay

The plaintiff did not identify the principles she contended governed her application for a stay nor the provision under which the application was brought. The plaintiff's counsel argued that the May 2020 orders should be stayed for two reasons: first, because (so the plaintiff contended) Ms Delbridge's report is 'grossly deficient',[5] and second, because if the plaintiff succeeds in her appeal whatever work the independent accounting expert has done will have to be redone.[6] Assuming this court has jurisdiction to grant a stay, neither of these grounds constitute an adequate basis upon which to stay the May 2020 orders. First, I am not persuaded by the plaintiff's outline of submissions nor by her affidavit of 16 March 2021 that Ms Delbridge's report is grossly deficient. In any event, as I explain later, the plaintiff will have the opportunity to adduce evidence to identify any errors or omissions in Ms Delbridge's in calculations which might persuade the court that her report should not be adopted. Second, the plaintiff can be compensated by appropriate costs orders for any work that has to be redone in the event the plaintiff's appeal succeeds. Further, the plaintiff has not provided any explanation for the delay in applying for a stay. Of itself, this constitutes a reason why the court should not grant a stay.

Application to vary the May 2020 orders

[5] ts, 12 April 2021, 937.

[6] ts, 12 April 2021, 343.

The essential point made by the plaintiff in relation to the terms of the May 2020 orders is that they were incomplete, that is, the terms of order 7 did not encompass all of the calculations the Registrar had identified in her report.[7] In the course of oral submissions the plaintiff's counsel said that the plaintiff had realised within several days after the May 2020 orders that the orders did not cover all the calculations that had to be undertaken. This is difficult to reconcile with the failure by the plaintiff's solicitor to raise the issue either with the court or with the first and second defendants' solicitors before 2 March 2021.
[7] ts, 12 April 2021, 941.
In any event, having reviewed order 7 of the May 2020 orders and the Registrar's report in the light of the plaintiff's criticisms of the terms of the May 2020 order, I am satisfied that, with the exception of one set of calculations, order 7 does encompass all the calculations identified in the report. The exception relates to items 324 - 329 in the Registrar's report. These are not covered by order 7 but they are, however, dealt with in Ms Delbridge's report.[8]
[8] See Appendix C/7 'Schedule B - Recast' page 27 of Ms Delbridge's affidavit of 2 February 2021.

The plaintiff's contention that order 7 of the May 2020 orders do not encompass all of the items in the Registrar's report requiring calculation may be attributable to the way certain items are grouped together in the Registrar's report. For example, items 116 to 122 are dealt with in [251] and [252] of the report. In [251] the Registrar comments that, '[T]he calculation, in items 116 to 112 (sic) must be redone ...'. Order 7(a) does not include a reference to items 116 to 120 and refers only to 121 and 122 but items 121 and 122 include the calculation of allowances made in respect of items 116 to 120. With the exception of the items 324 to 329, which appear to have been omitted from the orders, the same explanation applies to the other items the plaintiff contends were omitted from order 7 of the May 2020 orders.
The only calculations arising from the Registrar's report that were omitted from Ms Delbridge's report were those relating to item 363, which included items 377, 404 and 439 to 443. These calculations were omitted on the basis that order 1 of the May 2020 orders provided for the Registrar's finding in relation to item 363 to be replaced with the finding that item 363 of the first and second defendant's account be allowed.
Other than in the limited respect mentioned I do not accept that the May 2020 orders are deficient and, as noted, Ms Delbridge's report addresses the items requiring recalculation that were omitted from the orders.
The orders of Chaney J which the plaintiff contends should have been provided to the independent accounting expert are set out in the Registrar's report and so there is no need to amend the orders to achieve the plaintiff's aim of putting those orders before the independent accounting expert. There was no need to provide for the Independent Accounting Expert to read the Registrar's report. Reference to the Registrar's report was required by order 7.
The plaintiff's application to vary the May 2020 orders will be dismissed.

The orders sought by the first and second defendants

By their minute filed on 15 December 2020 the first and second defendants applied for the following orders:
1.Suzanne Delbridge be approved as Independent Accounting Expert (IAE) pursuant to ‘Orders of the Honourable Justice Tottle made 15 May 2020 as amended on 27 May 2020 pursuant to the slip rule’ (Orders).
2.Order 5 of the Orders be discharged.
It is unfortunate that the first and second defendants instructed Ms Delbridge before applying for orders in these terms. It would have been preferable for the first and second defendants to have pursued their application to the court before appointing Ms Delbridge. That said, it is clear that the first and second defendants took the step of instructing Ms Delbridge because the plaintiff had refused to engage in a constructive manner with the simple task of securing the appointment of an independent accounting expert in accordance with the May 2020 orders. I infer from what was said by the plaintiff's counsel at the directions hearing on 3 November 2020 and from the plaintiff's failure to take any positive step to implement the May 2020 orders that the plaintiff hoped that she might achieve a de facto stay of the orders.
In considering whether the fact Ms Delbridge was instructed and paid by the first and second defendants affects her capacity to discharge the role of the Independent Accounting Expert it is important to appreciate that the role is one which is limited to undertaking the mathematical calculations referred to in the May 2020 orders. Notwithstanding that the orders use the term 'Independent Accounting Expert' to describe the person to be appointed to perform the calculations, the orders do not require the appointee to express opinions or form evaluative judgments.
Within the context of this case and bearing in mind the limited nature of the task to be undertaken pursuant to the orders I am not persuaded that the fact that the first and second defendants appointed Ms Delbridge and paid her affects Ms Delbridge's capacity to assist the court as an independent accounting expert.
In reaching this conclusion I have taken into account that Ms Delbridge recites in her report (attached to her affidavit of 2 February 2021) that her fees are not contingent on the conclusion, content or future use of the report, that she has read and agrees to be bound by the District Court of Western Australia's 'Code of Conduct for Expert Witnesses' and that she has complied with the requirements of applicable accounting standards.
As noted earlier, in correspondence the plaintiff's solicitor questioned whether there was some previous association between the first defendant and Ms Delbridge that amounted to a real or perceived conflict of interest. No evidence was adduced to establish the existence of any such conflict and the asserted conflict is not a reason for refusing to appoint Ms Delbridge as the Independent Accounting Expert.
An additional matter that favours the approval of Ms Delbridge as the Independent Accounting Expert is that her appointment is consistent with the elimination of unnecessary delay and the achievement of the case management objectives set out in the Rules of the Supreme Court 1971 (WA) O 1 r 4A and 4B without compromising the fair and just determination of the issues between the parties.
I am satisfied that the first and second defendants' application is properly brought before the court under the liberty to apply provision.[9] It is an application necessary for the working out of the May 2020 orders.
[9] Cameron v Renouf [2008] WASC 60 [28] - [31] (Newnes J), Caratti v Mammoth Investments Pty Ltd [No 2] [2018] WASCA 6 [88] (Buss P & Murphy JA).
I will hear from the parties as to the terms of the orders to be made in light of these reasons and costs. The orders should address the omission from order 7 of the May 2020 orders of the necessity to undertake the calculations referred to in items 324 to 329 of the Registrar's report. In addition, the orders should address orders 3 and 4 of the May 2020 orders. Finally, the orders should provide for the plaintiff to have an opportunity to adduce evidence in opposition to the adoption of Ms Delbridge's calculations. In this respect, the plaintiff should have the opportunity to adduce independent accounting evidence to identify any errors or omissions in Ms Delbridge's calculations. I stress the importance of any evidence adduced by the plaintiff being from an independent accountant.

ANNEXURE A

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AS
Associate to the Honourable Justice Tottle
3 MAY 2021