CMA Corporation Limited v Rowe (No 1)

[2010] FCA 1340

FEDERAL COURT OF AUSTRALIA

CMA Corporation Limited v Rowe (No 1) [2010] FCA 1340

Citation:		CMA Corporation Limited v Rowe (No 1) [2010] FCA 1340
Parties:		CMA CORPORATION LIMITED (ACN 113 329 016), CMA RECYCLING PTY LIMITED (ACN 107 209 503) and CMA RECYCLING VICTORIA PTY LIMITED (ACN 005 667 103) v DOUGLAS TREVOR ROWE and WMR INVESTMENTS PTY LIMITED
File number:		NSD 920 of 2010
Judge:		FOSTER J
Date of judgment:		1 December 2010
Catchwords:		PRACTICE AND PROCEDURE – case management – whether the respondents ought to be allowed to rely upon expert valuation evidence served late – outline of the evidence brought forward for the first time on day three of a ten day trial – application to rely upon late evidence rejected
Date of hearing:	1 December 2010
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	27
Counsel for the Applicants:	Mr NC Hutley SC, Mr JC Giles
Solicitor for the Applicants:	Minter Ellison
Counsel for the Respondents:	Mr P Tree SC, Mr CG Juebner
Solicitor for the Respondents:	Madgwicks Lawyers

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 920 of 2010

BETWEEN:

CMA CORPORATION LIMITED (ACN 113 329 016)
First Applicant

CMA RECYCLING PTY LIMITED (ACN 107 209 503)
Second Applicant

CMA RECYCLING VICTORIA PTY LIMITED (ACN 005 667 103)
Third Applicant

AND:

DOUGLAS TREVOR ROWE
First Respondent

WMR INVESTMENTS PTY LIMITED
Second Respondent

JUDGE:	FOSTER J
DATE OF ORDER:	1 DECEMBER 2010
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

The application by the respondents to be permitted to rely upon expert evidence substantially in accordance with the three letters from CB Richard Ellis to Madgwicks dated 25, 26 and 29 November 2010 respectively which comprise MFI‑1 be refused.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 920 of 2010

BETWEEN:

CMA CORPORATION LIMITED (ACN 113 329 016)
First Applicant

CMA RECYCLING PTY LIMITED (ACN 107 209 503)
Second Applicant

CMA RECYCLING VICTORIA PTY LIMITED (ACN 005 667 103)
Third Applicant

AND:

DOUGLAS TREVOR ROWE
First Respondent

WMR INVESTMENTS PTY LIMITED
Second Respondent

JUDGE:	FOSTER J
DATE:	1 DECEMBER 2010
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. Yesterday afternoon (30 November 2010), Senior Counsel for the respondents informed me that he was expecting to receive later that day certain evidentiary material from valuers retained on behalf of the respondents which he would then be seeking to deploy at this trial. 

2. At the commencement of the hearing this morning, I was informed that three valuer’s reports had been served upon the legal representatives of the applicants last evening and that the legal representatives of the respondents had informed the applicants’ lawyers that the respondents intended to have those reports verified by affidavit as soon as possible with a view to seeking to read the foreshadowed affidavits in the respondents’ case and to rely upon all three valuation reports in that case.

3. The trial commenced on Monday of this week (29 November 2010).  The trial date was fixed on 4 August 2010, almost four months ago.  

4. The letters which were served upon the lawyers for the applicants last evening have been handed up to me today.  I have marked those letters as “MFI‑1”. 

5. In very brief terms, it is the applicants’ case that, in respect of four properties owned by the second respondent and leased to one or other of the applicants, the applicants are paying inflated rents to the second respondent as a result of breaches of duty alleged against the first respondent.  The four properties are:

   (i)42–46 Charles Street, St Marys NSW;

   (ii)16–20 Johansson Road, Wingfield SA;

   (iii)338 Gnangara Road, Landsdale WA; and

   (iv)25 Massey Green Drive, Emu Heights (Burnie) Tas.

6. The three letters served last evening relate to the St Marys NSW property (letter dated 29 November 2010), the Wingfield SA property (letter dated 25 November 2010) and the Landsdale WA property (letter dated 26 November 2010).  Each letter is written by a valuer employed by CB Richard Ellis (CBRE)

7. Tomorrow has been set aside for the cross-examination of the four valuers who have provided expert evidence on behalf of the applicants. Those valuers have assessed the fair market rental for each of the four properties referred to at [5] above. The evidence of those valuers was filed in the period early to mid October 2010. When the cross-examinations of the applicants’ valuers have concluded, subject to any further tenders of documents, the applicants’ case will be closed. I anticipate, therefore, that the respondents will commence their evidentiary case on Friday of this week. I have been told that there are approximately 10 or 11 witnesses to be called in the respondents’ case, eight or nine of whom will be relatively short, but two of whom may be more lengthy. The two witnesses, as I presently understand the position, who will take some time are the first respondent and Ms Rojo. The time allocated by the Court for the hearing is this week and next week. The Court has only one or two additional days remaining in 2010 which could be allocated to the matter.

   THE PROCEDURAL HISTORY

8. This proceeding was commenced on 26 July 2010.  On 28 July 2010, the proceeding was listed before the duty judge for the disposition of the applicants’ claim for urgent interlocutory relief.  That application was not pursued on that occasion. 

9. The matter first came before me on 4 August 2010 when I made directions designed to ready the matter for an early final hearing. As I have already mentioned at [3] above, the final hearing was fixed on that day to commence on 29 November 2010. It was in light of the fact that the Court could provide that early fixture that the applicants decided not to press for interlocutory relief. The applicants have at all times urged upon the Court that the matter was urgent.

10. Included within the directions which I made on 4 August 2010 was a direction that the respondents file and serve all evidence upon which they proposed to rely by 22 October 2010.  That was not done. 

11. On 20 October 2010, the matter was again before me.  On this occasion I extended the time within which the respondents were to file their evidence to 28 October 2010.  A good deal of evidence was subsequently filed by the respondents within that timeframe.

12. On 5 November 2010, the matter was again listed before me.  On that occasion it was apparent that the respondents had not filed any expert evidence.  I was told on that occasion that the respondents had the possibility of filing expert evidence then under consideration.  I reminded the legal representative of the respondents who appeared on that occasion that, if the respondents attempted to file and to rely upon expert evidence too close to the trial date, the respondents would run a significant risk that that evidence might not be able to be relied upon at the trial.  I was informed on 5 November 2010 that it was likely that the legal representatives for the respondents would finally decide by no later than Wednesday 10 November 2010 whether the respondents intended to seek to file expert evidence.  It was in light of those remarks that I granted yet a further indulgence to the respondents by allowing them until 12 November 2010 as the deadline by which all expert valuation reports verified by affidavit in the usual way needed to be filed.

13. 12 November 2010 was the latest date which could, as a practical matter, be allowed to the respondents for the filing and service of the respondents’ experts’ reports, given that I also intended that the valuers on both sides should meet and attempt to narrow the issues that might arise as between them.  On 5 November 2010, I made the following directions designed to achieve that object:

    THE COURT:

    8.DIRECTS the respondents to file and serve by 12 November 2010 all Valuation Expert Reports verified by affidavit upon which they intend to rely at the final hearing of the proceeding.

    9.DIRECTS the applicants to file and serve by 19 November 2010 any evidence in reply, including any Expert Reports.

    10.DIRECTS that the expert valuers retained by the parties confer on a bona fide basis without the presence or involvement of any lawyers in the period 22‑24 November 2010 and produce, as a result of such meeting, the following:

    (a)A Statement of matters in respect of which the valuers agree, including ultimate valuation amounts or figures; and

    (b)A Statement approved by both valuers which sets out in precise detail those matters upon which they disagree and, in respect of any matters of disagreement, which contains references in brief form to the evidence supporting their respective positions.

    11.DIRECTS that the Statements referred to in par 10 above be filed and served by no later than 26 November 2010.

    …

    15.GRANTS to all parties general liberty to apply on short notice.

14. The matter came before me again on 19 November 2010 on the application of the applicants because certain tasks had not been completed by the respondents in accordance with other directions which I had made on 5 November 2010.  It was clear to me on that occasion that there were difficulties in the respondents’ camp in maintaining the legal representation that they had hitherto had, although those difficulties were not explained in detail. 

15. The last occasion upon which the matter came before me before the trial commenced was 19 November 2010.  I was not told on 19 November 2010 that the respondents intended to attempt to procure and subsequently to rely upon expert valuation evidence at the trial nor was I told that attempts were then already underway directed to that end.  At the conclusion of the directions hearing held on 19 November 2010, I was left with the impression that the respondents had made a decision not to call expert valuation evidence.

    THE THREE LETTERS SOUGHT TO BE RELIED UPON

16. The first letter with which I will deal is that which relates to the Wingfield SA property.  That letter reveals that final written instructions were given in writing by Madgwicks to CBRE on 22 November 2010 in relation to this property.  The letter also makes clear that correspondence had previously passed between Madgwicks and CBRE concerning the possibility that CBRE might provide expert valuation evidence at the hearing of this proceeding on behalf of the respondents.  That correspondence was not tendered in evidence before me.  The author of this letter on behalf of CBRE describes the letter as “a brief letter of advice in the first instance”.  In the letter, the author lists 22 comparable properties and then proceeds to express his conclusions in respect of what he describes as a “restricted rental assessment” for this property.  The range of rents at the various dates at which an assessment was sought is assessed to be between $1.1 million and $1.2 million and, in the latter period, between $1.2 million and $1.25 million. 

17. The letter does not disclose any process of reasoning whatsoever by which the author related the comparable data set out in the letter to the Wingfield SA property nor does it reveal any process of reasoning by which the author reached the assessments to which I have referred.  In order to address the subject matter of this letter, the applicants will be required to obtain more detail from the author relating to the comparables chosen by him and then to discuss with their valuation expert the implications of those comparables in an endeavour to ascertain exactly how the assessments set out in the letter were arrived at.  That exercise will take some time.  As matters stand at the moment, the lawyers for the applicants are unable to give a precise indication of the time that will be required to secure appropriate expert assistance from the valuer which they have retained, but it is obvious it will take some days, at the very least. 

18. As far as the Landsdale WA property is concerned, a similar approach has been taken.  It appears that instructions for this letter were given on 22 November 2010.  What the author of that letter provides, according to its terms, is “a restrictive rental assessment” or what is called in another part of the letter “a restricted rental assessment”. This letter lists some 33 properties by way of comparables. The observations which I have made at [17] above in respect of the Wingfield SA property are equally applicable to the CBRE letter in respect of the Landsdale WA property.

19. The third report relates to the St Marys NSW property and addresses a different task.  There is no indication in this letter as to when the valuer was asked to do the task which he performed.  In this letter, the valuer expresses an opinion as to the appropriate rate of return on the capital spent on the St Marys NSW property as at the various dates of assessment which he was asked to consider.  Senior Counsel for the respondents accepted during argument that the exercise undertaken by the author of this letter was not a valuation of the fair market rent for this property but was something quite different. 

20. The conclusions reached by each of the authors of the three letters to which I have referred suggest that the rental values attributed to the three properties in question by the valuers retained by the applicants are too low.  Therefore, the evidence is both relevant and important to the respondents’ case.

21. Two of the letters were furnished to the respondents’ lawyers last week and one was provided on Monday of this week.  They were not provided to the applicants’ lawyers immediately upon their receipt.  No explanation for the delay in providing these letters was given by the respondents. 

    THE RESPONDENTS’ EXPLANATION FOR DELAY

22. In support of their application to rely upon the three letters to which I have referred, the respondents read an affidavit sworn by the first respondent today.  This affidavit only came to hand this afternoon and was only provided to the Court and to Senior Counsel for the applicants this afternoon.  I was pressed by Senior Counsel for the respondents to allow the affidavit to be read because, amongst other things, he submitted that not to do so would cause significant injustice to the respondents.

23. The applicants objected to several paragraphs in the affidavit.  I allowed the passages to which objection was taken.  I declined to allow Senior Counsel for the applicants to cross-examine the deponent.  The affidavit contains the following paragraphs: 

    10.In October 2010, I commenced to have significant difficulty in funding the costs of this litigation. It was my expectation that my legal costs were to be paid under my director and officer insurance policy. To date, the insurer has not agreed to make the payments. I had insufficient funds to pay my legal bills. I had various discussions about my financial circumstances with David Galbally QC and Peter Crawford, both of whom are partners of Madgwicks. In the course of those discussions, I was told that I needed to either pay all outstanding accounts and pay money into trust for the future work or provide sufficient security so as for Madgwicks to continue to act for me. Since I did not have money to pay the bills or pay into trust, Madgwicks took a mortgage over a property which the Second Respondent owns at 24 Palmerston Road, Ringwood. That second mortgage was signed on about 16 November 2010. I have left it to Madgwicks to register.

    …

    12.In order to find the money to pay the barristers, I asked my partner, Vicki Zorzut (Vicki), to lend it to me. Vicki arranged for a loan over her property and borrowed $200,000 from the ANZ bank. That money became available to me on about 19 November 2010. I then paid the money to Madgwicks.

    13. Although I would like to have had the ability to pay my lawyers and engage experts at the same time, the reality for me was that I needed to secure the services of my legal team before I could engage experts.

    14. In late October or early November 2010, I discussed the need to engage expert witnesses with Stan Marinis (Stan). Stan recommended to me that I should engage Colliers International (Colliers) to provide expert valuations. I explained to Stan my financial circumstances and Stan said to me that he was prepared to pay for the valuations on the basis that I pay him back as soon as I could.

24. In his affidavit sworn today, the first respondent went on to say that Madgwicks had engaged Colliers on or about 11 November 2010 to provide valuations but that Colliers never produced any valuations pursuant to that engagement.

    DECISION

25. For the purposes of the present application, I propose to accept at face value the material to which the first respondent has sworn in his affidavit of today. 

26. Nonetheless, there are several reasons why it would be wrong of me to allow the respondents to rely upon the three letters which are the subject of the present application.  Because of the urgency of the matter and the imminent cross-examination of the expert witnesses to be called on behalf of the applicants, I will briefly set out my reasons now:

    (1)The respondents have known since 4 August 2010 that this trial would commence on 29 November 2010.  From 4 August 2010 until 20 October 2010, the respondents were aware that they were obliged to file and serve all of their evidence (including expert evidence) by 22 October 2010.  The respondents must have appreciated that, if they were to seek to rely upon expert evidence, action needed to be taken soon after 4 August 2010.  Whilst it is true that the initial deadline of 22 October 2010 was extended on two occasions, the respondents should have taken steps to retain expert valuers long before late November 2010.  They did not do so.

    (2)The affidavit sworn by the first respondent contains a statement that the difficulties which he experienced in funding the cost of the litigation commenced in October 2010.  That is a long time after 4 August 2010.  The difficulties were not raised with me at all until 19 November 2010.  On 19 November 2010, I was not told that there was any expectation or intention on the part of the respondents to seek to obtain and to rely upon expert evidence.  Indeed, in the context in which that directions hearing took place, it must have been apparent to the respondents that I was proceeding upon the basis that no expert evidence would be sought to be relied upon by the respondents.  I say this because of the terms of the final indulgence which I had extended to the respondents on 5 November 2010.  The proper course for the respondents to have taken was to raise their difficulties with the Court at the earliest opportunity but this was not done.

    (3)The three letters are inadmissible and would require a great deal of work to put them into a form that would allow them to be admitted into evidence.  The main difficulty with each of the reports is the fact that there is no exposition of the author’s reasoning in arriving at the conclusions which he expresses.  These reports are also said to be preliminary and will inevitably be embellished before final presentation to the Court.  Were that to happen, there would be further delays visited upon the applicants and the proceeding would inevitably have to be adjourned.

    (4)There is no evidence before me as to the complete financial position of the first respondent.  There is no evidence before me at all as to the financial position of the second respondent.  Nor is there any evidence as to what is likely to happen in the immediate future and over the next few months in terms of the respondents’ capacity to continue the defence of the litigation and, perhaps, meet any obligations that might arise from the litigation.

    (5)It seems to me that there is a very real possibility that substantial prejudice might be caused to the applicants were I to allow the respondents to rely upon this new material.  As I have mentioned at (3) above, there would need to be an adjournment of the current hearing.  That adjournment would need to accommodate the fact that the applicants’ solicitors would require time to confer with and properly brief their own experts in relation to the proposed new material and would need to accommodate the Court’s commitments.  The reality is that the proceedings would have to be adjourned to a date in mid 2011.  Given that the first respondent has told me that he has financial difficulties at the moment, an adjournment of that duration might cause significant prejudice to the applicants because, if they are successful, there will need to be a substantial accounting on the part of the respondents to the applicants, the utility of which may be put into doubt by further delay. 

    (6)It seems to me that, in considering the reasons for delay, I should also take into account the fact that there is no evidence from the second respondent as to its capacity to pay legal fees or, indeed, as to the reasons why it was not in a position to ensure that the evidence now sought to be brought forward was not prepared long before now.  The evidence already led at the hearing suggests that the second respondent has substantial assets, although it appears also to have substantial liabilities. 

    (7)It seems to me that the respondents made a tactical decision that they did not need to adduce expert valuation evidence.  The wisdom of that decision appears to have been reconsidered very recently.  But that is not a reason for allowing evidence of this type so late in the piece. 

1. For all of the above reasons, I will not allow the respondents to rely upon any of the three letters to which I have referred.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.

Associate:

Dated:        15 December 2010