Henderikus Zandstra v Peter Samuel Smith
[2011] NSWSC 855
•17 June 2011
Supreme Court
New South Wales
Medium Neutral Citation: Henderikus Zandstra v Peter Samuel Smith [2011] NSWSC 855 Hearing dates: 17/06/2011 Decision date: 17 June 2011 Jurisdiction: Equity Division Before: Brereton J Decision: Cross-claimants permitted to adduce evidence from expert witness at hearing.
Catchwords: PRACTICE AND PROCEDURE - Expert evidence - cross-claimant seeks direction to adduce expert evidence at trial - cross-defendant contends expert evidence is suboptimal - not impossible that evidence will be of use at trial - no evidence that evidence caught cross-defendant by surprise - obligation of cross-defendant as much as cross-claimant to seek direction - report served almost concurrently with joinder of cross-defendants - no evidence of prejudice - direction made. Legislation Cited: (NSW) Uniform Civil Procedure Rules, r 31.19 Category: Interlocutory applications Parties: Henderikus Zandstra (plaintiff/first cross-defendant)
Peter Samuel Smith (first defendant/cross-claimant)
Wayne Smith (second defendant/cross-claimant)
John Smith (third defendant/cross-claimant)
Street Quinn P/L (second cross-defendant)
Phillip Abner Balding (third cross-defendant)Representation: Counsel:
Mr Rickard (plaintiff/first cross-defendant)
Mr Sleight (defendants/cross-claimants)
Mr Maroya (second & third cross-defendants)
Solicitors:
Lees Lawyers (plaintiff/first cross-defendant)
Neville & Hourn Legal (defendants/cross-claimants)
Colin Biggers & Paisley (second & third cross-defendant)
File Number(s): 2008/282311
Judgment (ex tempore)
In the substantive proceedings the plaintiff Henderikus Zandstra sues three defendants, his former partners, for contribution of about $25,000 each towards a tax liability which the plaintiff claims to have discharged of just under $100,000, including penalties and costs. The defendants cross-claim against accountants who had acted for them, alleging that had those accountants used reasonable professional skill and care the partnership tax liability would have been managed under the so-called "margin scheme", with the result that the tax payable would have been, so far as I can tell, about half which was ultimately levied.
By May 2009, the pleadings on the plaintiff's claim had closed. The defendants were granted leave to file a cross-claim on 30 September 2009, and did so on 20 October 2009. Prior to obtaining leave to file the cross-claim, the defendants had on 16 September 2009 served on the solicitors who act for the first cross-defendant a document described as an expert report of Mr Frank Taylor of Financial Dynamics dated 30 June 2009. On 5 November 2009, they served on those solicitors a further report of Mr Taylor of 16 September, which appears to be his final report and includes the requisite acknowledgement of the expert witness code of conduct. On 17 November 2009, the cross-claimants' solicitors served on the solicitors for the cross-defendants, under cover of a letter of that date, copies of the statement of claim, defences of the first defendant and the second and third defendants, affidavits filed in the proceedings to date, and the report of Financial Dynamics of 16 September 2009.
Thereafter, various directions were made for provision of particulars of and filing of defences to the cross-claim and discovery. Such directions were made on 18 November 2009, 3 February 2010, 23 March 2010 (including on that occasion that the cross-claimants serve any evidence in respect of the cross-claim, and that the plaintiff and cross-defendants serve any evidence in response). The second and third cross-defendants - the accountants - filed a defence to the cross-claim on 23 March 2010. On 25 June 2010, a direction was made that the plaintiff and cross-defendants serve any evidence in response, on which they intended to rely. On 27 August 2010, a further direction was made that the plaintiff and cross-defendants serve any evidence in response, this time by 8 October 2010.
On 29 October 2010, a direction was made, by consent, in the following terms:
The plaintiff and cross-defendants to complete service of lay and expert evidence on which they intend to rely by 26 November 2010.
On 16 December 2010, a further direction was made that the plaintiff and cross-defendant serve any evidence upon which they rely by 28 January 2011. On 15 February 2011, yet another direction was made that the cross-defendants serve the evidence upon which they rely by 25 February 2011.
By notice of motion filed on 10 June 2011, the cross-claimant now moves the court for a direction, in substance, that it be permitted to adduce expert evidence from Mr Taylor, presumably being the report of 16 September 2005 to which I have referred.
The contest over the application has been a warm one, yet has been conducted in an extraordinary void of evidence. There is absolutely no evidence before the court as to why the plaintiff did not make this application in a timely manner, nor why it has been prompted to make it now. On the other hand, despite the fact that the hearing date is imminent, being next Wednesday 22 June 2011, there is no evidence of any intention or desire on the part of the cross-defendants to adduce expert evidence in response if the plaintiff is permitted to adduce Mr Taylor's evidence, nor of any prejudice that would be occasioned to the cross-defendants by permitting Mr Taylor's evidence to be adduced. It seems almost inescapable that something must have happened between the parties, not long before the motion was filed, that brought this to a head; or, perhaps, when reviewing and preparing the matter for trial, those advising the plaintiff wondered whether it was necessary to seek a direction; but I have been left entirely in the dark as a matter of evidence as to how this situation has come about. In those circumstances, I can put to one side considerations on which the evidence does not touch.
The guiding principles in these circumstances are that it is in the interests of justice that parties should be able to adduce at trial relevant evidence that they wish to adduce. Against that, that where a procedural or other default deprives an opposing party of a reasonable opportunity to respond to evidence that is served late, then ordinarily justice to that party would require that such material be excluded.
In this case, counsel for the cross-defendants has sought to persuade me that nothing would be gained by permitting this report to be relied on, because it would be of no assistance to the trial judge. I readily accept that the report is suboptimal in many respects, including that the expert is prima facie not entirely independent, but may be partial, and that his opinions are not expressed in the manner in which good practice and sound adherence to the rules about expert evidence dictates. But it is not uncommon for expert witnesses, particularly those not experienced in giving evidence - and for that matter those whose reports are not settled by solicitors or counsel but are expressed in their own words - to do what Mr Taylor has done in expressing conclusions of the type that appear in paragraph 77 of his report. And it seems to me that an opinion such as that is capable of being read as an opinion that an accountant in the position of the relevant cross-defendant, acting with due skill care and competence, would have registered the partnership for GST earlier, and a similar approach can be taken to other aspects of the report.
To my mind, it is not impossible that the report could be of some use at trial. In reaching that conclusion, one must also bear in mind that this is a case in relatively small financial scope and the retaining of the more expensive experts versed in giving evidence in the courts would be disproportionate to what is in dispute in this case.
It seems to me, given that the report was served almost concurrently with the joinder of the cross-defendants to the proceedings accompanied by an acknowledgment of the obligations of the code of conduct, the cross-defendants could not objectively have been under any reasonable misapprehension as to the cross-claimant's intention to rely on the report. If they were in any doubt, it was their obligation as much as it was of the cross-claimant to move the court for directions. The direction about service of expert evidence on the part of the cross-defendants, to which I have referred, shows that they must have turned their mind to the question of expert evidence. It cannot reasonably come as a surprise now that the cross-claimants seek to rely on this report. Of course, evidence might well have convinced me to the contrary, but in the absence of evidence, that appears to me the appropriate inference from the limited material before me.
While the utility of the report is, no doubt, affected by the defects to which I have referred and the potential partiality of the witness, partiality of an expert witness is not a complete disqualification. Again, in a small case, considerations of cost and proportionality might sometimes warrant use of an expert affiliated with the party, who can give evidence much more economically than an independent expert.
It is quite true that, had the application been made in a timely manner, the court might not have been inclined to authorise the adducing of evidence from an associate of one of the parties, if that be a correct description of Mr Taylor, and might have been inclined to appoint a single expert. But I think one must deal with the situation as it is, rather than as it might have been. In circumstances where a report has been obtained from an expert and served about 18 months ago and the case is in relatively small scope, it would be disproportionate in terms of costs to suggest that some different expert should now be engaged.
The absence of any, let alone a satisfactory, explanation for the belated application would have been of great relevance had there been any evidence of prejudice arising from late service, or a desire to adduce responsive expert evidence; but in the absence of evidence making good any such claim, and in the absence of any such claim really even being articulated, I do not see that the absence of explanation for the late application counts for much.
The ability of the cross-defendants to object on usual grounds to the admissibility of any part of the report will be preserved at the substantive hearing of the proceedings.
Pursuant to (NSW) Uniform Civil Procedure Rules (2005), r 31.19, I direct that the cross-claimants may adduce at the hearing, subject to all just objections and exceptions, expert evidence of Mr Frank Taylor to the extent that it is covered by his report of 16 September 2009.
As the present application has been necessitated primarily by the tardiness of the cross-claimants, I think they must pay the costs. The cross-claimants needed an indulgence from the court. In those circumstances, the party seeking an indulgence normally pays the costs. That position may be departed from if the indulgence is unreasonably opposed. Although I think in many cases, in circumstances where the cross-defendants had been on notice of this report for as long as they had, one would have assumed that consent would have been forthcoming, in this case, opposition based on the partiality of the witness and the defects in the report was not unreasonable.
In those circumstances, I do not think there is sufficient warrant for departing from the view that the cross-claimants must pay the costs of obtaining the court's indulgence.
I order that the cross-claimants pay the cross-defendants' costs of the motion. The plaintiff's costs of today will be costs in the proceedings.
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Decision last updated: 10 August 2011
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