Idoport Pty Limited v National Australia Bank Limited and 8 Ors.; Idoport Pty Limited and Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited and Ors. [38]

[2001] NSWSC 868

CITATION:	Idoport Pty Limited & Anor v National Australia Bank Limited & 8 Ors.; Idoport Pty Limited & Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited & Ors. [38] [2001] NSWSC 868
FILE NUMBER(S):	SC 50113/98; 50026/99; 3991/00
HEARING DATE(S):	28/09/01, 2/10/01
JUDGMENT DATE:	5 October 2001
PARTIES :	Idoport Pty Limited Market Holdings Pty Limited National Australia Bank Limited Donald Robert Argus
JUDGMENT OF:	Einstein J

COUNSEL :	Mr JJ Garnsey QC, Mr M Dicker, Mr R Titterton, Mr R Alkadamani (Plaintiffs) Mr T Bathurst QC, Mr R Smith SC, Mr H Insall SC, Mr J Halley (Defendants)
SOLICITORS:	Withnell Hetherington (Plaintiffs) Freehills (Defendants)
CATCHWORDS:	Practice and procedure - application for leave to amend - exercise of discretion to permit amendments - overriding purpose rule - just, quick and cheap resolution of the real issues - whether amendments involve additional questions of fact - application for leave to file further statements - whether statements respond to "new issues" raised by the plaintiffs - whether leave to file statements will cause prejudice to the plaintiffs - application by defendants by motion to adjourn proceedings for 12 months for "tidying up exercise" - application not ultimately pursued during submissions - case management procedures - large-scale litigation - substantial verdict sought - use of technology court - imposition of time limits on cross-examination - requirement of detailed statement of topics to be covered during cross-examination - appointment of an examiner to take cross-examination
LEGISLATION CITED:	Supreme Court Rules (NSW) 1970
CASES CITED:	Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187 Clough v Rogers (1974) 48 ALJR 481 Cropper v Smith (1884) 2 6 CH D 700 Idoport Pty Limited & Anor v National Australia Bank Limited [2001] NSWSC 744 State of Queensland v J L Holdings Pty Ltd (1996) 189 CLR 146
DECISION:	Orders made in accordance with short minutes of order.

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION - COMMERCIAL LIST

EINSTEIN J

5 October 2001

50113/98 IDOPORT PTY LIMITED & ANOR v NATIONAL AUSTRALIA BANK LIMITED & 8 ORS

50026/99 IDOPORT PTY LIMITED & ANOR v DONALD ROBERT ARGUS

3991/00 IDOPORT PTY LIMITED “JMG” v NATIONAL AUSTRALIA BANK LIMITED & ORS

JUDGMENT

The Notices of Motion

1    There are before the Court seven notices of motion being heard together.

2    The plaintiff Idoport Pty Ltd (“Idoport”):

· By notice of motion 46A filed in proceedings 50113 of 1998 [usually referred to together with proceedings 50026 of 1999 as "the main proceedings"], seeks leave to file and serve a Fourth Further Amended Statement of Claim in the form exhibited at pages 1-257 of exhibit SAD E1 to the affidavit of Mr D’Emilio of 25 September 2001. Effectively this notice of motion is filed separately from notice of motion 45 referred to below as it seeks leave to introduce allegations relying upon a cause of action pleading implied obligations of "good faith" into the Statement of Claim.

· By notice of motion 46B filed in proceedings 50026 of 1999 [“the Argus proceedings”], seeks leave to file and serve a Third Amended Statement of Claim in the form exhibited at pages 1-92 of exhibit SAD E2 to the affidavit of Mr D’Emilio of 25 September 2001. This notice of motion is likewise filed separately from notice of motion 45 referred to below as it also seeks leave to introduce allegations relying upon a cause of action pleading implied obligations of "good faith" into the Statement of Claim.

· By notice of motion 46C filed in proceedings 3991 of 2000 [“the MLC proceedings”], seeks leave to file and serve a Further Amended Statement of Claim in the form exhibited at pages 1-77 of exhibit SAD E3 to the affidavit of Mr D’Emilio of 25 September 2001. This notice of motion is likewise filed separately from notice of motion 45 referred to below as it also seeks leave to introduce allegations relying upon a cause of action pleading implied obligations of "good faith" into the Statement of Claim.

· By notice of motion 45 ["Idoport's case management notice of motion"], seeks a number of directions in respect of the case management of the main proceedings and the MLC proceedings. The precise directions sought appear in the proposed short minutes of order annexure "A" to the notice of motion and for convenience also appended to this judgment and marked "Appendix 1". Notice of motion 45 also seeks leave to file forms of amended statement of claim in the main proceedings and in the MLC proceedings.

3    The defendants:

· By notice of motion 41, seek leave to file statements from Messrs Russ (28 May 2001); McGoveran (31 July 2001 and 22 August 2001); Yancey (17 July 2001); Thomas (3 July 2001 and 22 August 2001) and Raab (29 July 2001). (“The defendants’ Technical Reports”)

· By notices of motion 44 and 43 ["the defendants case management notices of motion"], seek to have the main proceedings and the MLC proceedings adjourned until 7 October 2002 and for directions to be given in terms of proposed short minutes of order which appear in the annexures to these notices of motion and for convenience are appended to this judgment and marked "Appendix 2" [as to the proposed directions in relation to the main proceedings] and "Appendix 3" [as to the proposed directions in relation to the MLC proceedings].

Market Holdings Pty Ltd (in liquidation)

4    The position of Market Holdings is that judicial advice has been sought from the Equity Division by the liquidator in terms of the appropriate steps to be taken by the liquidator following his investigations in relation to this litigation. In those circumstances Idoport alone has pursued the directions sought in notices of motion 45 and 46 A,B, and C. Counsel for both parties as well as myself have generally adopted the practice of referring to "the plaintiffs" on hearing of these motions when it has been accepted by all sides that Idoport alone has sought the above described directions. In those circumstances and simply as a matter of convenience, I have not sought in this judgment or in the judgment relating to the examiner procedure being published together with this judgment, to differentiate as between Idoport and Market Holdings. A number of general matters relating to the conduct of the proceedings up to this point in time require a reference to both plaintiffs. Presumably the position of Market Holdings in relation to the litigation will soon be clarified by a formal report by the liquidator to the court in that regard.

Leave to amend the sundry Statements of Claim

Dealing with Notices of Motion 46A, 46B and 46C [Leave to plead implied obligations of 'good faith']

5    As Mr Bathurst QC pointed out during the argument on these notices of motion [transcript 13493.12], when questions in relation to an implied obligation of good faith were previously raised during opening addresses and/or during argument on pleadings, the defendants conceded that this cause of action was arguably open to be raised in these proceedings and did not now propose to resile from that concession.

6    Idoport having on more than one occasion eschewed any reliance upon this cause of action, has now reconsidered its position and determined to seek leave to pursue the cause of action. An explanation is advanced which includes reference to the recent decision of the Court of Appeal in Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187 where the good faith concept was carefully discussed in a commercial/contractual setting [cf paragraphs 169 et seq].

The Principles

7    The principles upon which the court proceeds on any application for leave to amend have been previously referred to in more than one interlocutory judgment in these proceedings. They bear repeating.

8    In State of Queensland v J L Holdings Pty Ltd (1996) 189 CLR 146 the High Court carefully analysed the development of approaches taken to the exercise of the discretion to permit amendments to pleadings. That judgment of the High Court, without purporting to be exhaustive, generally serves to set out the types of consideration which ought to direct the mind of the decision maker on such applications. The Court accepted however that the trial judge is afforded a large discretion in relation to the exercise and that it would be unwise and contrary to principle to seek to fetter that discretion with rigid rules. The special significance of the decision is to direct the mind of the decision maker to many of the considerations which may be taken into account in exercising the discretion and to emphasise, if need be, that justice is the paramount consideration in determining such an application.

dealt, of course, with the particular circumstances before the Court. Whilst the general statements to be found in the joint judgment of Dawson, Gaudron and McHugh JJ and in the judgment of Kirby J assist a decision maker considerably, the obvious fact is that each and every case in which an application for leave to amend is pursued requires the Court to deal with the special and peculiar matrix of circumstances which obtain at the material point in time in the litigation in respect of which such application is pursued.

10    To my mind, the following statements of principle affirmed in JL Holdings are fundamental and clearly and succinctly express the general approach to be taken:

(a) "Now, I think it is a well established principle that the object of Courts is to decide the right of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights. Speaking for myself, and in conformity with what I have heard laid down by the other division of the Court of Appeal and by myself as a member of it, I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy, and I do not regard such amendment as a matter of favour or of grace"
[ Cropper v Smith (1884) 2 6 CH D 700 per Bowen LJ at 710]
(b) "As the defence, if established, would be a complete answer in the either action, the amendments sought should have been allowed unless it appeared that injustice would thereby have been occasioned to the respondent, there being nothing to suggest fraud or improper concealment of the defence on the part of the appellants. With the exception of the suggestion of prejudice arising in respect of the loss of the possible claim against the nominal defendant, the matters relied upon by the respondent in opposition to the amendments sought go at the most to delay and irregularity only, matters which are relevant to costs but do not constitute injustice to the respondent in the sense in which that expression is used"
[ Clough v Rogers (1974) 48 ALJR 481 at 482]

11    A recent development in this State, which the Court is also entitled and indeed required to take closely into account, relates to Part 1 of the Supreme Court Rules (NSW) 1970 as modified by Amendment No 337, which elucidates the overall objectives of the practices and procedures specified in the Rules. The overriding purpose of the Rules is to facilitate the “just, quick and cheap resolution of the real issues” in civil proceedings. The overriding purpose clause imposes an obligation on the Court to give effect to the overriding purpose when it exercises any of its powers.

Applying the principles

12    The plaintiffs have asserted in oral submissions [Transcript 13491.16 et seq.] and in the particulars furnished in relation to the cases sought to be pleaded by way of implied terms of good faith [MFI P234], that the amendments only involve additional questions of law and that they rely only upon the facts, matters and circumstances presently being litigated on the existing pleadings.

13    The defendants generally seek protection in terms of their obvious entitlement to require that any grant of leave to plead the good faith cases be conditioned upon them being permitted to adduce such further evidence, if any, as they see as appropriate to meet the good faith cases. By reason of my present understanding of the existing pleadings, I would venture to suggest that it is perhaps extremely unlikely that the defendants would in relation to meeting the good faith cases, produce any or any substantial further evidence going outside the defendants’ presently very substantial statements already served in meeting the good faith cases. The matter is of course one for the defendants and I stand to be corrected in this regard.

14    Subject only to one question of detail which is apparently not controversial, leave to amend to plead the good faith cases is to be granted on terms that the defendants be given an appropriate opportunity to revisit their evidence and to supplement their evidence should they see fit to do so. It is quite plain that consistently with the principles set out above, this amendment must be allowed in these proceedings even at this late stage.

15    One question of detail was raised at transcript 13524.35-.55. This matter requires to be attended to by agreement or is to be referred back to the Court.

Notice of Motion 45 – insofar as dealing with leave to amend

16    So far as the orders sought in notice of motion 45 deals with the applications for leave to amend the subject statements of claim, these orders are to be made. This is the result of previous judgments granting leave to amend.

Notice of Motion 41 – Leave to file additional defendants’ statements

Background to this application

17    The defendants point out that the plaintiffs did not file any expert witness reports in chief on technical issues. They submit that the first expert technical evidence was adduced by the defendants in the form of the statements of Mr Hodgkinson dated 6 October 2000 and Professor Thomas dated 22 September 2000.

18    The evidence adduced from these witnesses was confined to specific systems development issues that had been raised by the plaintiffs by way of assumptions provided to their offshore commercialisation expert witnesses. The first assumption has been described as the “Technical Imperatives Assumption” and is in the following terms:

“…the technical imperatives set out in paragraph 9.0 of the report by JMG entitled ‘Global Commercialisation of the AUSMAQ Service’ [in substance identical to the developments identified in the 1996 System Development Plan except for the addition of internet functionality] had been achieved by JMG by June 1998 and were at a state of operational readiness to support the description of the AUSMAQ Service given in paragraph 4.1 above.”

19    The other assumption has been described as the “System Development Assumption” and is in the following terms:

“EUROMAQ would, in system terms, have effectively been an extension of the AUSMAQ Service in Australia. Whilst local customisation would have been necessary, it would also have benefited from any enhancements to the shared core functionality. This would have included such enhancements as multi-currency capability, dealing in partial units and access via the internet.”

20    The defendants say that these assumptions, together with the indicative business volumes projected by virtue of the enormous revenues anticipated from the overseas market (and in particular, the revenue estimates for the US from Mr Mack, the plaintiffs’ US market expert) put the issue of the scalability of the Ausmaq Service to handle large business volumes into sharp focus.

21    As a result of these assumptions, the defendants’ adduced expert technical evidence in the form of the statements of Professor Thomas dated 22 September 2000 and Mr Hodgkinson dated 6 October 2000. Professor Thomas analysed whether the developments identified in the System Development Plan and the Global Commercialisation Document could be completed by mid-1998. Mr Hodgkinson analysed the ability of the Ausmaq System to scale to meet the system loads suggested in the US offshore commercialisation effort estimates.

22    The defendants submit that the technical issues dealt with by Professor Thomas and Mr Hodgkinson are of “fundamental importance” to the plaintiffs’ case. They submit that much of the plaintiffs’ offshore customisation evidence is sought to be advanced on the following basis:

“a) successful electronic commerce initiatives launched in 2000 and 2001 in the relevant regional and product markets considered by the experts identified;

b) an assertion is made that such electronic commerce initiatives could have been addressed by the Ausmaq System;

c) it is then asserted that had the Ausmaq System been launched in the relevant regional and product markets in 1998, it would have been successful and obtained a first mover advantage which would have led to a mass market share being achieved;

d) it is alleged, at least by Dianna Mackay, one of the Plaintiffs’ UK/Europe customisation experts, that any attempted entry after 1998 would have been impracticable, in 1999 due to Y2K and Euro conversion issues; and

e) any entry in 2000 or 2001 would have been unlikely to succeed as Ausmaq would have lost its first mover advantage and further its ability to successfully challenge the status quo would have been substantially diminished or eliminated.”
[Defendants’ Submissions, 25 September 2001, MFI D199, paragraph 17]

23    Their submissions continue:

“18. Ms Diana Mackay explains in paragraph 6.4.6 of her report dated 15 June 2000 that:

‘In mid-1998, there were no true competitors to the EUROMAQ proposition. The UK industry was preparing itself for the introduction of the Euro in January 1999 and all additional technical resources were focussed on dealing with the millennium bug. Whilst in mid-1998 it might have been possible to launch the EUROMAQ System, by 1999, and certainly in the last six months of the year, most financial service companies had imposed a closed-door policy for the introduction of any new technology. Once the Y2K issues were resolved, a new confidence entered the UK market, supported in part by the rise of the technology market bubble.’

19. It can therefore be seen that the elapsed time in which the initiatives identified in the System Development Plan and the Global Commercialisation Document and the ability of the system acquired by the Bank in November 1996 to scale to meet the suggested volumes of transactions are fundamental matters for the Court to consider and determine.”
[Defendants’ Submissions, 25 September 2001, MFI D199, paragraphs 18, 19]

24    On 16 November 2000, the plaintiffs filed an Amended Notice of Motion which (amongst other things) sought orders that the statements of Mr Hodgkinson and Professor Thomas be withdrawn and removed from the Court file. By judgment dated 7 December 2000, the Court permitted the defendants to rely upon these statements subject to “appropriate conditions”. Paragraph 36 of the judgment stated:

“It seems to me particularly important to note that the content of the evidence which the Defendants seek to rely upon over the Plaintiffs’ strenuous opposition, upon examination, is shown to be a core issue in terms of the plaintiff’ claim to damages in respect of the loss of opportunity to exploit the Ausmaq System overseas. This is not an area in which the proper approach to the plaintiffs initial statements, the defendants response to those initial statements and the plaintiffs second tranche of statements could or should be measured or examined with coffee spoons. It is exceptionally difficult, as it seems to me, for the plaintiffs who wish in their second tranche of statements to put new assumptions to experts, for whatever reasons, to then deny to the defendants an entitlement to treat and to treat carefully and properly with matters thrown up by those new assumptions.”

25    The appropriate conditions dealt with the period of time to be afforded to the plaintiffs to file statements in reply to those of Mr Hodgkinson and Professor Thomas. As a result of this, orders were made on 15 December 2000 which required that Mr Martin file any statements in reply by 7 February 2001 and that statements from any other witnesses on technical matters be filed and served by 28 February 2001.

26    As a result of these orders, the plaintiffs responded to the independent expert reports of Professor Thomas and Mr Hodgkinson with the following statements of Mr Martin, Mr Coleman (a former Star Systems’ project manager on the Ausmaq development) and Professor Aitken:

a) Statement of Mr Martin dated 8 February 2001 (Comment on report of Professor Thomas dated 22 September 2000) [P14];

b) Statement of Mr Martin dated 8 February 2001 (Comment on the report of Mr Hodgkinson dated 6 October 2000) [P16];

c) Statement of Professor Aitken dated 1 March 2001;

d) Statement of Mr Stephen Coleman dated 13 March 2001;

e) Statement of Mr Martin dated 15 March 2001 [P17];

f) Statement of Mr Martin dated 12 April 2001 (Response to defendants’ (form) objections to Statement in reply to Professor Thomas) [P15];

g) Statement of Mr Martin dated 12 April 2001 (Response to defendants’ (form) objections to Statement in reply to Mr Hodgkinson) [P18]; and

h) Statement of Mr Martin dated 2 May 2001 (relating to statements in reply to Professor Thomas and Mr Hodgkinson) [P19].

27    The defendants submit that it was not until they had served the expert reports from Professor Thomas and Mr Hodgkinson that the plaintiffs chose to prepare this technical evidence in relation to system development effort estimates and scalability.

28    After receiving the statements of Mr Martin and Mr Coleman, the defendants formed the view that a number of significant new issues had been raised which required a response. The defendants therefore took steps to retain independent experts to respond to the alleged new issues. The responses generated by these experts comprise the 7 Technical Reports sought to be filed by the defendants that are the subject of this application.

The defendants’ expert witnesses

Professor Thomas

29    Professor Thomas is put forward as an independent expert in software development and engineering. He is one of the defendants’ existing expert witnesses.

30    Professor Thomas’ statement of 3 July 2001 responds to the reliance placed by Mr Martin and Mr Coleman on the New Zealand customisation of the Ausmaq System.

31    Professor Thomas’ statement of 22 August 2001 focuses on the “proven team” theory and its implications for the successful implementation of the developments to the Ausmaq System. The defendants submit that Professor Thomas was unable to consider this theory before because it had not been advanced by the plaintiffs prior to Mr Martin’s responses to the statements of Professor Thomas.

32    The defendants submit that the proven team theory identifies Mr Martin as the “technical authority” for all development of the Ausmaq System and Star Systems as the only external software contractor.

33    The defendants submit that the December 1996 System Development Plan:

a) proposed software developers other than Star Systems for a number of significant enhancements (including the Ausmaq Internet Worldwide Website, the GUI/third party software integration and the Ausmaq internal information systems);

b) did not identify Mr Martin as the “Technical Authority” or as having responsibility for the development of each of the new developments; and

c) provided for Mr Martin to be responsible for System Technical Operations and not to become involved in System Development until at least June 1997.

34    They submit that the proven team theory is a “novel proposition” which is not supported by contemporaneous documents. They further submit that prior to Mr Martin’s latest responses to Professor Thomas, the plaintiffs had not suggested that the track record of the team identified by Mr Martin was to be relied upon to justify the validity estimates contained in the System Development Plan and to assert that the developments could be completed in a timely and effective fashion. In light of this, the defendants say that they could not have foreseen that the plaintiffs would seek to establish causation on this issue in the manner in which they now attempt to do so.

Mr Yancey

35    Mr Yancey is put forward as an independent expert specialising in the design, development and implementation of medium and large scale technical systems; secure applications software; real time high volume transaction processing and communication systems.

36    Mr Yancey’s statement of 17 July 2001 is principally in response to the analysis of Mr Coleman in relation to Progress related database design and performance issues. Mr Yancey’s statement also responds to Mr Martin’s statement of 15 March 2001 (which is only 4 paragraphs long) and to 3 pages of Mr Martin’s oral evidence in chief at T9530-T9531 and T9540.

37    The defendants submit that Mr Yancey’s statement includes:

“36.
a) the validity of the analysis of Progress performance and capabilities undertaken by Mr Coleman in paragraphs 6.3-6.16 of his report;

b) the alternative database architectures suggested by Mr Coleman;

c) Mr Coleman’s suggestions concerning the addressing of performance and scalability issues after the AUSMAQ System had been designed, developed and implemented; and

d) Mr Coleman’s analysis of Progress Version 9.1 benchmarking.” [Defendants’ Submissions, 25 September 2001, MFI D199, paragraph 36]

38    The defendants submit that Progress Version 9.1 was not relied upon by the plaintiffs to address deficiencies and limitations in the Ausmaq System until the service of the Coleman statement in March 2001.

Mr Raab

39    Mr Raab is put forward as an independent expert in benchmarking and was the main technical contributor of the design of a number of industry standard benchmarks in relation to online transactions processing, data warehousing and decision support and electronic commerce.

40    Mr Raab’s statement of 29 July 2001 responds to Mr Coleman’s reliance on an extract from the Progress website suggesting that Progress version 9.1 had been benchmarked at a sustained speed of 622,080 ATM transactions per minute. His statement also responds to Mr Martin’s statement of 15 March 2001 and to Mr Martin’s oral evidence at T9529-T953 and T9538.

Mr McGoveran

41    Mr McGoveran is put forward as an independent consultant having particular expertise in designing the architecture of large applications, investigating database benchmarks and providing clients with database industry analyst services including competitive analysis, market share analysis and DBMS product evaluations.

42    Mr McGoveran’s statement of 31 July 2001 responds to a number of issues raised in Mr Coleman’s report relating to the use of a Progress relational database and the performance and capability of Progress. Mr McGoveran also responds to Mr Martin’s statement of 15 March 2001.

43    Mr McGoveran’s supplementary statement of 22 August 2001 responds to one page of Mr Martin’s oral evidence at T9542.

Mr Russ

44    Mr Russ is put forward as a professional registered engineer who has been retained by Ausmaq New Zealand as a technical development consultant. He has been involved in all significant developments of the Ausmaq System in New Zealand.

45    In briefing Professor Thomas in relation to the performance of Star Systems in the development of Ausmaq in New Zealand and the significance of New Zealand customisation, it was necessary for the defendants to provide him with a number of assumptions concerning the development of Ausmaq in New Zealand.

46    The defendants will endeavour to prove these factual assumptions through the statement of Mr Russ of 28 May 2001. Mr Russ has also commented on aspects of Mr Martin’s statements of July 2000 to the extent that they deal with New Zealand Ausmaq System development issues.

New matters raised

47    The defendants submit and I accept that a number of significant new issues were raised by Mr Martin and Mr Coleman in the course of their responses to the statements of Professor Thomas and Mr Hodgkinson. The defendants summarise these new issues in the following terms (see paragraph 21 of Mr Johnson’s affidavit, 18 September 2001 for more detail):

“21.
a) the performance of Star Systems Pty Limited in customising the Ausmaq Service for use in New Zealand and the significance of the New Zealand customisation to any other potential offshore customisations of the Ausmaq Service;

b) the identity and track record of the team that would undertake the enhancements to the Ausmaq Service, including extension to foreign markets;

c) the performance of Star Systems and the JMG consultants in relation to the development of Instaclear;

d) the benchmarking of Progress Database Version 9.1 to have a speed of 622,080 ATM transactions per minute;

e) development techniques to cater for “high update rates”;

f) a claim that, in a worse case scenario, the Ausmaq System could be converted to another platform within 6-12 months;

g) (comparisons of DBNS computer languages;

h) the architectural advantages of Progress Version 9.”
[Defendants’ Submissions, 25 September 2001, MFI D199, paragraph 21]

48    The defendants submit and I accept that these issues trespass into the following areas of expertise:

“ 23.

a) software development;

b) the architecture and design of real time securities trading systems;

c) benchmark tests of system performance;

[Defendants’ Submissions, 25 September 2001, MFI D199, paragraph 23]

49    The defendants submit and I accept that up until this time, the plaintiffs:

“…made no attempt to deal with what must be a critical element in their causation case, namely the manner in which they assert the Ausmaq System could, as a matter of fact, have been brought to a state of readiness sufficient to enable it to take advantage of the alleged commercial opportunities.”
[Defendants’ Submissions, 25 September 2001, MFI D199, paragraph 22]

50    The defendants submit and I accept that this was a matter which should have been raised in chief, but was instead raised in a manner which was manifestly unfair to them in that they:

“…have had to consider the issue immediately prior to and during the time that a principal (if not the principal) witness for the Plaintiffs on this issue is being cross-examined.”
[Defendants’ Submissions, 25 September 2001, MFI D199, paragraph 22]

51    The defendants submit that the Court should exercise its discretion in allowing them to rely upon the Technical Reports in order to respond to the plaintiffs’ new technical case on causation. The defendants submit that if leave were not granted, this unfairness would be compounded and severe prejudice to them would result.

52    In reply, the plaintiffs submit that on a proper analysis of the evidence, the matters identified by the defendants as giving rise to the need for the Technical Reports are not in fact new matters. They submit that these issues have, in substance and in fact, always been issues of significance in the proceedings and accordingly, that the defendants should not be granted leave to rely on the Technical Reports.

53    The plaintiffs further submit that the alleged “new matters” are really attempts by the defendants to further reply to the plaintiffs’ reply to matters raised by the defendants, essentially by way of “confession and avoidance” to the plaintiffs’ claim. They submit that these were not matters which the plaintiffs raised or were obliged to raise in their case in chief.

Lengthening of the hearing

54    The plaintiffs submit that the grant of leave would substantially lengthen the hearing of the trial. They submit that the defendants’ Technical Reports as a whole are lengthy, will have to be considered and properly addressed by the plaintiffs and will necessitate further detailed cross examination. The plaintiffs submit that all of these matters will add to the complexity of issues to be considered by the Court and will lengthen the duration of the hearing.

55    The plaintiffs submit that such a substantial addition to the material to be considered by the Court is unwarranted and that this alone is a sufficient reason for refusing leave at this late stage. They further point out that in light of the Court’s recent consideration of various options to ensure the efficient conduct of the proceedings, reliance upon the defendants’ Technical Reports is opposed to the interests of justice. In particular, the plaintiffs submit that the late service of these statements shows that leave to rely on them is inappropriate.

Prejudice to the plaintiffs

56    The defendants submit that the grant of leave would not materially prejudice the plaintiffs as the evidence is responsive and they did not oppose a reasonable period of time being given to the plaintiffs in order to reply.

57    The defendants submit and I accept that Mr Coleman’s alleged unavailability to review new material cannot be relied upon by the plaintiffs as a basis to reject evidence to be sought to be filed from the defendants in response to new issues that were raised by Mr Coleman.

58    The plaintiffs submit that they will be obliged to carefully consider the new statements and deal with them as thought appropriate. They say that this will involve forwarding the statements to Mr Martin and Mr Coleman for their consideration. The plaintiffs submit that in circumstances where Mr Coleman may well be called as the next witness, the grant of leave could cause disruption to the roll-out of their case and therefore cause prejudice to the plaintiffs.

Burden placed on Mr Martin

59    The defendants submit and I accept that because the plaintiffs rely on Mr Martin as a lay and expert witness, they cannot object to this course as placing a burden on Mr Martin in relation to the need for him to review these reports. They further submit and I accept that the defendants’ Technical Reports (with the exception of Professor Thomas’ two further statements and the statement of Mr Russ) are primarily concerned with Mr Coleman’s evidence and only deal with Mr Martin’s 4-paragraph statement and 5 pages of transcript of his evidence in chief.

60    The defendants further submit and I accept that the evidence presented in Mr D'Emilio’s affidavit of 21 September 2001 is inconclusive as to:

“i) what steps Mr Martin, a witness who has signed the Experts Code of Conduct, has taken to familiarise himself with the Defendants’ Technical Reports which were served on the Plaintiffs in the period between 28 May 2001 and 23 August 2001 (other than the short supplementary report of McGoveran served on 30 August 2001);

ii) what, if any, response Mr Martin can make to the Defendants’ Technical Reports;

iii) the length of time it would take Mr Martin to review and respond to the Defendants’ Technical Reports.”
[Defendants’ Submissions, 25 September 2001, MFI D199, paragraph 44]

61    In reply, the plaintiffs submit that the grant of leave will place a significant further burden on Mr Martin who will be needed to reply to many of the matters raised. The plaintiffs say this is particularly burdensome in circumstances where Mr Martin is a witness and not a party and where he has been significantly involved in the preparation of statements, oral evidence in reply and cross-examination. The plaintiffs submit that the Court should be very hesitant in imposing further heavy burdens on Mr Martin.

Dealing with this application

62    It appears to me that the defendants’ above submissions in relation to notice of motion 41 are generally of substance. Mr Martin’s position is to be accommodated by the directions to be given. He will have some months in which to familiarise himself with the new materials. In these circumstances, an appropriate exercise of the Court’s discretion is to grant leave to the defendants to file these Technical Reports. But for the plaintiffs indication that they will not adduce oral evidence in chief nor file evidence in reply to the defendants technical reports [see paragraphs 27 and 28 of the short minutes of order, Appendix “4” to this judgment], the court would have conditioned the grant of leave to rely on these reports upon the plaintiffs being given a reasonable period of time in which to reply to this new material.

Case Management Directions - Idoport's Notice of Motion 45/Defendants Notices of Motion 44 and 43

63    There is no doubt that there are significant case management difficulties in relation to the present stage of the proceedings. It is now a matter of documented history that there have been significant case management difficulties at every stage of the period starting from the interlocutory receivership injunctive proceedings heard and determined in mid 1999 up until the commencement of the final hearing in late July 2000 and ever since. Further, there is no doubt that the proceedings are of a “one off” nature; and this has been the subject of observations in past interlocutory judgments (most recently the [2001] NSWSC 744 judgment dealing with the security for costs applications). It cannot be gainsaid that the capacity of the curial process to deal with the scale of these proceedings is stretched to the limit. Moreover, further factors to be considered in relation to the case management of the proceedings concern the respective positions of each of the parties to the proceedings. The position of the plaintiffs and the pressing significance and urgency attaching to the proceedings, was generally outlined in the interlocutory judgment [1999] NSWSC 828, where reference was made in paragraph 355 to "JMG's claims of an ongoing and radical undermining of its contractual rights". The position of the defendants is that a very substantial verdict against the National Australia Bank which is probably the largest bank and one of the largest corporations in this country, would potentially have a marked effect upon the value of shares held by numerous shareholders and a potential flow on effect upon the economy of this country. The other corporate and individual defendants are also facing very substantial damages claims indeed. It cannot be gainsaid that the plaintiffs have every entitlement to pursue the defendants in terms of an attempt to prove their pleaded cases to the hilt, and that the defendants have a concomitant entitlement to defend the proceedings and to take every step necessary to firstly understand and then to be permitted to deal with the cases pursued against them. The proceedings simply have to be determined at the earliest practicable time in the interests of all parties to the proceedings

64    The task of the Court to administer justice in hearing and determining the proceedings is beyond doubt, and notwithstanding the nature and scale of the proceedings, the Court requires to take into account and to tailor proper case management procedures so as to give effect to the overriding purpose of the Rules.

65    In all of those circumstances and notwithstanding the many loose ends which are pointed up by the defendants’ evidence on these motions, it is very plain to me that there being no particular matter raised by any of the defendants’ submissions which mandates a hiatus/adjournment of 12 months, the final hearing of the proceedings which has now run for over a year must continue.

66    The fact that sundry amendments to the plaintiffs’ pleadings and presumably the raising of the patent case/regulatory issues [see 7 December 2000 judgments], have led to a requirement for the filing of further evidence by the plaintiffs and evidence in answer by the defendants, which evidence in part remains outstanding, [whether from either side of the bar table], is simply a matter which requires to be accommodated by case management directions. Further, the fact that particular witnesses may conceivably be required to be recalled from time to time for reasons related to the reading of late statements is also a matter which requires to be accommodated by case management directions.

67    If one uses the forensic approaches taken by both parties up until this point as a yardstick, I would have absolutely no difficulty in making a calculated guess that even if the 12 months adjournment was granted, there would be any number of continued and continuing loose ends and complaints from each side of the bar table about any number of issues upon the resumption of the final hearing. Hence, although the directions for which the defendants (by their motions) contend, may on paper and if complied with, suggest a considerable “tidying up” exercise in terms of housekeeping and completion of the preparation and service outstanding statements by each party, in the real world the approaches to this litigation taken by the parties up until this point give me no real assurance that further major problems would not continue to be the order of the day. To accede to the defendants’ application as sought in the motion would therefore simply relocate the emergence of such problems forward some 12 months, during which period the final hearing would have been interrupted with the logistical and other difficulties that this course would involve.

68    Another relevant parameter in adjudicating upon the proper exercise of the Court's discretion in relation to the defendants’ application as sought in the motion concerns the position of the Court. The Technology Courtroom has been made available to the parties who to this extent, enjoy a number of very special facilities generally intended to be made available to all litigants in cases requiring use of those facilities. Very importantly, it could not be denied that that there is a huge burden placed upon a single judge required to absorb all of the detail and hopefully within a reasonable period of time following final address, to produce a reasoned judgment dealing with the legal principles as well as applying these principles to the evidence, on present estimate, of 166 witnesses [285 statements] as well as voluminous documentation. To my mind, the suggestion that the regular continuation of the final hearing should now be interrupted by a 12 month period would make what is already an exceptionally difficult task for one judge hearing these proceedings all the more difficult. Whilst I accept that:

(1) the Court has up to date received and clearly requires to continue to receive, very special assistance in terms of the careful preparation of statements and submissions from both parties;
(2) a 12 month adjournment may permit a great deal of that preparation to take place; and
(3) the day-to-day continuation of the final hearing means that this form of assistance becomes somewhat more difficult for the parties,

the exercise of weighing this downside of a rejection of the application for an adjournment, against the very clear upside of permitting the final hearing to continue (so that the momentum already achieved in the case is maintained and the case moves towards a completion at some date in the future), results in the proper exercise of the Court's discretion clearly requiring the continuation of the final hearing without any break.

69    In this regard, I do not accept as correct Mr Bathurst's thumbnail sketch of the present position as a “logjam”. Whilst in some respects some logs may be tangled and others are or will be in production to join the river, the river (already of vast proportions) is in fact presently flowing towards what presently seems to be a distant destination.

70    It seems to me that during the course of the argument which took place on the second day of the hearing of the motions it became reasonably clear to both parties that the adjournment being sought by the defendants had little chance of success and that the courts specific interest was in endeavouring to closely examine the best use of hearing time so as to permit the continued final hearing to go forward and at the same time, to give directions as to the filing and service of further evidence, which directions would then permit a particular future order of witnesses to be identified. Also on the second day of the hearing of the motions Mr Garnsey produced MFI P237 outlining a particular approach to witness order, directions generally and the suggested way forward. This document and the submissions resulting from a close examination of the document led to a large measure of consensus. Most of the proposed directions were in this way 'brokered' on the second day of the hearing of the motions, this brokering being possible and practicable in the light of

(1) the indications given by the court as to its likely decision, which indications also made plain that the orders sought by the defendants notice of motion 41 would be acceded to; and

(2) the debate in relation to MFI P237.

71    In this context and at a particular point in time during the second day of argument, the defendants made plain that in the light of the plaintiffs’ proposals as varied during further submissions, they no longer pressed their application for the adjournment which had been the subject of very extensive evidence and submissions on the first day of the hearing of the motions.

72    It will be apparent from the directions which are to be given following this 'brokering' exercise that the final hearing may now continue unabated. The directions contemplate Mr Martin’s cross-examination continuing for a period in November of this year and resuming in early 2002 following the taking of evidence form Messrs Coleman and Hume. Other witnesses will be called this year. Other issues will be dealt with this year. Even had the defendants continued to press for their adjournment, the application would have been rejected and the reasons for that rejection would have included an identification of all of the matters which the continued hearing could conveniently deal with, including the calling of witnesses, dealing with objections to statements, dealing with supplementation of evidence where admissibility issues require that course, and with dealing with sundry other matters. In short the continued rollout of the plaintiffs case on the final hearing would have been required in any event.

Further case management measures

73    It remains to refer to further case management measures which I intend to set in place.

74    There are two particular areas which I have concentrated upon in terms of the practicability of giving directions by way of an attempt to achieve a measure of efficiency in the ongoing hearing. The first relates to imposing time limits upon cross-examination. The second relates to the appointment of an examiner to hear the cross-examination of certain witnesses.

Time limits on cross-examination

75    As to the imposition of cross-examination time limits, this can only be dealt with on an instant specific basis and is, for obvious reasons, a highly sensitive area. The matter will be dealt with as and when it arises and Mr Smith's ongoing cross-examination of Mr Martin is likely to involve the first of such directions. The case management requires to deal with approximately 160 plus witnesses (one of whom, Mr Martin, is presently being cross-examined), for this reason, who have between them produced some approximately 280 plus statements. For this reason, a general regime is likely whereunder, prior to commencing cross-examination of any particular witness and at appropriate periods during such cross-examination, the Court will require a detailed statement of the topics/further topics proposed to be covered and a detailed estimate of the time anticipated (all other things being equal) for cross-examination on those topics. Having heard such statements and estimates, the Court will then identify a period of time which it sees as appropriate for that cross-examination. In the absence of a special case made on an appropriate occasion by formal application, no cross-examination in excess of the Court-imposed period of time will be permitted in respect of any witness.

76    The need for this form of discipline becomes very clear when one considers the parameters of the litigation. Assuming that an average court year includes forty-two working weeks (making due allowance for variable and end of term leave) and assuming that each of the 160 witnesses was to be cross-examined for say five days, then allowing only for the cross-examination, 3.8 court years would be required. Naturally, this does not take into account any time for supplementation of evidence in chief, where rulings on objections may permit such supplementation. Nor does this take into account any time for re-examination.

77    When one adds time for the taking of objections to the tender of documents, the taking of addresses and the need to deal with a multitude of interlocutory matters such as subpoena, notice to produce, confidentiality, further discovery, legal professional privilege issues, the amount of court time potentially required for these proceedings becomes apparent. Natural justice is one thing, however special efficiency in cross-examination in order to move the hearing along is another thing. It simply cannot be the case that such efficiency is inconsistent with the according of natural justice to both parties.

78    A very strict discipline to be generally applied across the board, is calculated to ensure that very great care indeed is taken to identification of particularly important areas for cross-examination and to avoid meticulous cross-examination of every piece of paper ever written or seen by a witness. Whilst this form of cross-examination in relation to early witnesses has assisted the Court in becoming familiar with background issues, it can no longer be the order of the day. I do not propose to repeat the public interest considerations dealing with the availability of the court to other litigants (see the judgment being delivered today on the appointment of an examiner).

79    In light of the efficiency being so terribly important even in litigation of this scale, the Court may be expected to play a particularly proactive role in monitoring the continued conduct by both parties in these proceedings. Cross-examination is presently in focus for special treatment, but all aspects of the proceedings may be expected to be treated in the same way. Naturally the rules of natural justice will continue to be the lodestar for the administration of justice in the case.

Appointment of an examiner to take cross-examination

80    In light of the special significance of any appointment of an examiner to take the cross-examination of certain witnesses, this matter is proposed to be dealt with by a separate judgment also delivered today. Although the reasons given in that judgment are generally directed at the examiner proposition, for obvious reasons there are many overlapping background issues dealt with in both of the judgments. Hence, both judgments should be read together as a combined attempt to identify the types of problems which have arisen in the ongoing final hearing and the case management approaches to dealing with these problems.

Reference out under Part 72 of the Rules/Joint conferences of expert witnesses in accordance with Practice Note 121

81    In his affidavit of 26 September 2001 Mr Lovell has briefly dealt with the possibilities that (1) a Part 72 reference out may become appropriate and/or (2) joint conferences of expert witnesses in accordance with Practice Note 121 may become appropriate.

82    Whilst I do not presently discount the utility of either of such possibilities it seems to me clear (and I generally see paragraph 199 of Mr Lovell's affidavit as suggesting this course), that before the court would consider the application of joint conferences of expert witnesses, the parties should attempt to agree terms of reference and specific questions for determination within a specified time. Once such a framework would be established it may be practicable and possible for the court to effectively consider the potential application of the practice note. In that spirit I would seek to receive detailed submissions from both parties following their reading of this judgment as to the practicability of approaching specific questions in terms of the manner suggested by paragraph 199 of Mr Lovell's said affidavit.

Short minutes of order

83    The parties have generally now accepted that the directions which should be given are those set out in the short minutes Appendix "4" to this judgment. Orders are now made in accordance with:

(1) paragraphs 1 – 26 of those short minutes in the main proceedings (paragraphs 27 and 28 of those short minutes are noted); and

(2) paragraphs 1 – 6 of those short minutes in the MLC proceedings.

84    The matter referred to in paragraph 15 also requires to be attended to.

I certify that paragraphs 1 - 84
and appendices 1 – 4 inclusive
are a true copy of the reasons
for judgment herein of the
Hon. Justice Einstein
given on 5 October 2001

___________________
Susan Piggott
Associate

The appendices are not included in the internet version.

Last Modified: 06/13/2002