Macquarie International Health Clinic Pty Ltd v Sydney Local Health District; Sydney Local Health District v Macquarie Health Corporation Ltd (No 10)

[2016] NSWSC 1587

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Macquarie International Health Clinic Pty Ltd v Sydney Local Health District; Sydney Local Health District v Macquarie Health Corporation Ltd (No 10) [2016] NSWSC 1587

Hearing dates:

10 – 12 February 2014, 14 – 16 May 2014, 20 – 22 May 2014, 26 May 2014, 30 May 2014, 2 – 6 June 2014, 10 – 12 June 2014, 16 June 2014, 18 – 20 June 2014, 15 July 2014, 5 – 6 August 2014, 8 August 2014, 11 August 2014, 13 – 14 August 2014, 18 – 21 August 2014, 25 – 26 August 2014, 28 August 2014, 4 September 2014, 8 September 2014, 12 September 2014, 19 September 2014, 25 – 26 September 2014, 2 October 2014, 8 – 9 October 2014, 12 November 2014, 17 – 20 November 2014, 1 – 2 December 2014, 4 – 5 December 2014, 8 – 12 December 2014, 15 – 16 December 2014, 18 – 19 December 2014, 9 February 2015, 23 – 25 March 2015, 27 March 2015, 1 April 2015, 13 April 2015, 4 May 2015, 7 May 2015, 11 – 13 May 2015, 15 May 2015, 20 – 22 May 2015, 27 – 29 May 2015, 2 – 4 June 2015, 15 – 17 June 2015, 1 July 2015, 20 – 23 July 2015, 27 – 31 July 2015, 26 August 2015, 28 October 2015, 19 November 2015, 1 December 2015, 2 February 2016, 23 February 2016, 1 March 2016

Decision date:

10 November 2016

Jurisdiction:

Equity

Before:

Kunc J

Decision:

Plaintiff’s damages to be calculated in accordance with these reasons

Catchwords:

DAMAGES – Trespass – Calculation of mesne profits – User principle – Defendant wrongfully terminated plaintiff’s 103 year lease to build private hospital and car park – At time of dispossession car park operational but private hospital not yet built – 15 year dispossession

EVIDENCE – Admissibility – Expert opinion – Expert A “adopts” and is “fortified by” opinions of Expert B without disclosing how Expert A applied Expert B’s opinion in Expert A’s reasoning – Whether sufficient to make Expert B’s opinions admissible – Evidence Act 1995 (NSW), ss 55, 56(2), 60, 79, 135, 136

Legislation Cited:

Civil Procedure Act 2005 (NSW)
Conveyancing Act 1919 (NSW)
Environmental Planning and Assessment Act 1979 (NSW)
Evidence Act 1995 (NSW)
Health Services Act 1997 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Adler v ASIC (2003) 46 ASCR 504; [2003] NSWCA 131; (2003) 179 FLR 1
Allandale Blue Metal Pty Ltd v Roads and Maritime Services (2013) 195 LGERA 182; [2013] NSWCA 103
ASIC v Rich [2005] NSWSC 706
Australian Energy Limited v Lennard Oil NL (No 2) [1988] 2 Qd R 230
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
Bunnings Group Ltd v CHEP Australia Ltd (2011) 82 NSWLR 420; [2011] NSWCA 342
Butler v Egg & Egg Pulp Marketing Board (1966) 114 CLR 185; [1966] HCA 38
Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Fatimi Pty Ltd v Bryant & Ors (2002) Aust Torts Reports 2002; [2002] NSWSC 750
Field Common Limited v Elmbridge Borough Council (2008) All ER (D) 141; [2008] EWHC 2079 (Ch)
Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd (1991) 32 NSWLR 175
Hackett v Inverugie Investments Ltd [1993] BHS J. No. 126
Honeysett v The Queen (2014) 253 CLR 122; [2014] HCA 29
Initiate School of the Canadian Rocky Mountains Ltd. v. Wolfenden Ventures Ltd., 2013 BCSC 257
Inverugie Investments Ltd v Hackett [1995] 1 WLR 713
Klewer v Official Trustee in Bankruptcy (No 2) [2010] NSWCA 258
Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409
Macquarie International Health Clinic Pty Ltd v Central Sydney Area Health Service (Supreme Court (NSW), Windeyer J; 28 March 2000, unrep)
Macquarie International Health Clinic Pty Ltd v Sydney Local Health Network [2011] NSWCA 231
Macquarie International Health Clinic Pty Ltd v Sydney Local Health District [2013] NSWSC 764
Macquarie International Health Clinic Pty Ltd v Sydney Local Health District; Sydney Local Health District v Macquarie Health Corporation Ltd (No 6) [2014] NSWSC 1549
Macquarie International Health Clinic Pty Ltd v Sydney Local Health District; Sydney Local Health District v Macquarie Health Corporation Ltd; Macquarie International Health Clinic Pty Ltd v City of Sydney Council (No 9) [2016] NSWSC 155
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2008] NSWSC 738
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2009] NSWSC 629
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (2010) 15 BPR 28,564; [2010] NSWCA 268
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 348
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2015] NSWCA 323
Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72
MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451
Pace Property Management Services Pty Limited v South Sydney Council (Land and Environment Court (NSW), Dr J Roseth, 19 June 1997, unrep)
Palmer Bruyn & Parker Pty Ltd v Parsons (2001) 208 CLR 388; [2001] HCA 69
Port Stephens Shire Council v Tellamist Pty Ltd (2004) 135 LGERA 98; [2004] NSWCA 353
PQ v Australian Red Cross Society [1992] 1 VR 19
Strand Electric and Engineering Company Limited v Brisford Entertainments Limited [1952] 2 QB 246
Sydney South West Area Health Service v Macquarie International Health Clinic Pty Ltd [2011] HCATrans 155
Whitwham v Westminster Brymbo Coal and Coke Company [1896] 2 Ch 538
Willis v The Commonwealth (1946) 73 CLR 105; [1946] HCA 22

Texts Cited:

R. Mahoney, “Overcompensation and the ‘User Principle’ ”, (1996) 24 ABLR 59

Category:

Principal judgment

Parties:

Proceedings 2000/34949
Macquarie International Health Clinic Pty Ltd (Plaintiff)
Sydney Local Health District (Defendant)

  Proceedings 2010/90340
Sydney Local Health District (Plaintiff)
Macquarie Health Corporation Ltd (Defendant)

Representation:

Counsel:

 

R. Dubler SC, S. Phillips, A. Harding, S. Kanagaratnam (Plaintiff)
G.K. Burton SC, P. Bruckner, H. Stowe, G. Antipas (Defendant)

  Solicitors:
S Moran & Co (Plaintiff 2000/34949, Defendant 2010/90340, Plaintiff 2015/348137)
Bolzan & Dimitri (Plaintiff 2010/90340, Defendant 2000/34949)

File Number(s):

2000/34949 and 2010/90340

Publication restriction:

No

index

Introduction - paragraph 1

Summary - paragraph 5

Procedural History - paragraph 22

Consideration of the parties’ submissions - paragraph 78

Macquarie’s “core case” — an overview - paragraph 81

The Car Park - paragraph 85

The Private Hospital - paragraph 89

Dramatis Personae - paragraph 96

Issues for determination and the user principle - paragraph 111

Issue 1 — What is the period over which damages are to be assessed?

Issue 1 — The parties’ submissions - paragraph 119

Issue 1 — The facts - paragraph 131

Issue 1 — Legal principles - paragraph 137

Issue 1 — Resolution - paragraph 140

Issue 2 — What is the nature of trespass damages and mesne profits, including compensatory and restitutionary aspects?

Issue 2 — The parties’ submissions - paragraph 151

Issue 2 — Resolution - paragraph 160

The Car Park - Overview - paragraph 183

The facts - paragraph 188

Issue 4 — Should damages be awarded by reference to the “entire” car park or the 1,026 spaces? - paragraph 225

Issue 4 — Should damages reflect a mix of users and, if so, in what numbers? - paragraph 228

Issues 8 and 21 — What is the appropriate rate for staff parking? — Summary - paragraph 234

What is the appropriate rate for staff parking? — The question - paragraph 238

What is the appropriate rate for staff parking? — Additional facts - paragraph 252

What is the appropriate rate for staff parking? — The expert evidence - paragraph 255

What is the appropriate rate for staff parking? — Resolution - paragraph 271

What is the appropriate rate for staff parking? — Arguments rejected - paragraph 287

Issue 11 — The “increase in supply threat” - paragraph 288

Issue 19 — Legal restrictions on pricing in the Development Consent - paragraph 289

Issue 8 — Union response - paragraph 292

Issue 8 — The Liverpool Rate - paragraph 324

Issue 8 — Differential parking - paragraph 331

Issue 8 — Scott Wenkart Agreement - paragraph 332

Issue 8 — What is the appropriate turnover rate for staff parking? - paragraph 342

Issue 20 — What expenses are to be taken into account in favour of the Health District? - paragraph 343

Issues unnecessary to decide - paragraph 347

What further steps are required to calculate damages? - paragraph 348

The Private Hospital - Overview - paragraph 349

Issue 26 — Cost of PAPH construction (excluding fixtures, fittings and equipment (FFE))

Issue 26 — The Experts - paragraph 357

Issue 26 — Summary - paragraph 362

Issue 26 - Fit out costs - paragraph 367

Issue 26 - Form of construction contract - paragraph 369

Issue 26 - Construction period - paragraph 373

Issue 26 — Resolution of issues

Issue 26 — The type of construction contract - paragraph 376

Issue 26 — Determining the total construction costs - paragraph 395

Issue 26 — Work already done by Macquarie - paragraph 396

Issue 26 — A reduction in fit out for shell only areas? - paragraph 398

Issue 26 — Matters of agreement under a D&C Contract - paragraph 405

Issue 26 — Construction period - paragraph 406

Issue 26 — Contingencies and escalation - paragraph 414

Issue 26 — Determining the total cost as at 2014 - paragraph 415

Issue 27 — Hospital Revenue — Overview - paragraph 416

Issue 27 — Expertise of Mr Palassis and Mr Anderson - paragraph 421

Issue 27 — Day beds - paragraph 423

Issue 27 — Margin (or EBIT or EBITDA) - paragraph 426

Issue 27 — Hospital revenue — Resolution - paragraph 434

Issue 28 — FFE for initial construction — Overview - paragraph 449

Issue 28 — Phasing of procurement - paragraph 451

Issue 28 — Costs - paragraph 454

Issue 28 — Equipment discounts - paragraph 459

Issue 28 — FFE — Resolution - paragraph 462

Issue 29 — Hospital lease discount rate - paragraph 482

Issue 29 — Discount rate — Resolution - paragraph 489

Issue 30 — Depreciation and replacement cost

Issue 30 — Overview - paragraph 504

Issue 30 — Capital expenditure - paragraph 508

Issue 30 — FFE lifecycle - paragraph 513

Issue 30 — Depreciation and replacement costs — The experts — Resolution - paragraph 517

Issue 30 — Building expenditure — Resolution - paragraph 530

Issue 30 — Building capital expenditure — Escalation — Resolution - paragraph 533

Issue 30 — FFE life cycle replacement costs — Resolution - paragraph 537

Issue 30 — FFE life cycle replacement escalation — Resolution - paragraph 539

Issue 31 — Valuation of market rental of the Hospital Site - paragraph 543

Issue 34 — Risk of termination - paragraph 551

Issues 35 to 41 — Hypothetical assignment and compensation for termination - paragraph 555

Issue 42 — Adjustments to avoid double compensation - paragraph 556

Issue 43 and Issue 44 — Has the plaintiff suffered loss, and what amount of compensatory damages (if any) is just and fair? - paragraph 559

Issue 45 — How is the benefit received by the Health District relevant to damages (in a restitutionary sense, as opposed to any significance it may have to the probabilities of what a putative tenant may have done)? - paragraph 562

Issue 46 — Position at the end of the trespass — Overview

Issue 46 — Effect of Macquarie’s position at the conclusion of the trespass - paragraph 564

Issue 46 — Statutory approval costs - paragraph 567

Issue 46 — Entitlement to damages for wasted statutory approval costs - paragraph 569

Issue 46 — Quantification of damages for statutory approval costs - paragraph 571

Issue 46 — Wasted and future excavation costs - paragraph 573

Issue 46 — Entitlement to excavation costs - paragraph 575

Issue 46 — Quantification of damages for excavation costs - paragraph 577

Issue 46 — Statutory approval costs — Resolution - paragraph 578

Issue 46 — Excavation costs — Resolution - paragraph 586

Issue 47 — Issues arising out of proceedings 2010/90340 - paragraph 595

The Lynn Report — Reasons for interlocutory ruling - paragraph 599

The Lynn Report — Background - paragraph 602

The Lynn Report — Resolution - paragraph 612

The Lynn Report — Leave - paragraph 614

The Lynn Report — The admissibility of “source materials” - paragraph 624

The Lynn Report — Discretionary exclusions and limitations - paragraph 637

The Lynn Report — pp 57–58 - paragraph 640

Next steps - paragraph 645

Judgment

Introduction

1. On 13 December 2010 the Court of Appeal declared that the defendant, Sydney South West Area Health Service (now the Sydney Local Health District) (the “Health District”) was precluded, as lessor, from taking possession of two adjacent sites (the “Car Park Site” and the “Hospital Site”) at the Royal Prince Alfred Hospital (“RPAH”) in Camperdown on 17 March 2000 and that its eviction of Macquarie International Health Clinic Pty Ltd (“Macquarie”), the plaintiff lessee, constituted a trespass against Macquarie. The Court of Appeal made consequential orders including that there be an enquiry as to the amount of damages, if any, payable by the Health District to Macquarie in respect of Macquarie being kept out of possession “between 17 March 2000 and the date of being restored to possession”.

2. I heard the enquiry as to damages over the course of 100 hearing days commencing on 10 February 2014 and ending on 26 August 2015. Further hearings, which took place upon Macquarie retaking possession of the two sites, took the total number of hearing days to 106.

3. The issues that the parties posed for the Court’s determination are set out in Schedule A to these reasons. 

4. In these reasons all monetary amounts (unless stated otherwise) are inclusive of GST insofar as they relate to the period after the introduction of GST on 1 July 2000. In the case of amounts to be calculated from before that date (e.g. staff car parking rates), I have proceeded on the basis that there was or is not to be allowed any increase in the price of something solely due to the introduction of that tax. If it cost $2.00 on 30 June 2000, then it still did so on 1 July 2000, but inclusive of GST from that date.

Summary

5. The commercial relationship and litigious history between the parties dating back to Heads of Agreement signed in 1989 are complex and the materials voluminous. As I observed in an earlier judgment, the dispute between the parties has now been running longer than the Trojan War. To put these proceedings into their complete context, the reader will need to refer to (and I incorporate herein by reference) these judgments:

1. Windeyer J’s refusal of Macquarie’s application for the return of the Car Park Site: Macquarie International Health Clinic Pty Ltd v Central Sydney Area Health Service (Supreme Court (NSW), Windeyer J; 28 March 2000, unrep);

2. Nicholas J’s rejection of Macquarie’s case at first instance: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2008] NSWSC 738 (23 July 2008);

3. Nicholas J’s determination of the Health District’s cross-claim in its favour: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2009] NSWSC 629 (7 July 2009);

4. The Court of Appeal’s decision upholding Macquarie’s appeal in part: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (2010) 15 BPR 28,564; [2010] NSWCA 268 (14 October 2010);

5. The Court of Appeal’s orders including for this enquiry and the stay of the orders for possession: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 348 (13 December 2010);

6. The High Court’s rejection of the Health District’s application for special leave to appeal from the Court of Appeal’s decision of October 2010: Sydney South West Area Health Service v Macquarie International Health Clinic Pty Ltd [2011] HCATrans 155 (10 June 2011);

7. The Court of Appeal’s further observations on the possible procedure to be applied in this enquiry: Macquarie International Health Clinic Pty Ltd v Sydney Local Health Network [2011] NSWCA 231 (1 August 2011);

8. My judgment allowing Macquarie’s second contested application to amend its pleadings: Macquarie International Health Clinic Pty Ltd v Sydney Local Health District; Sydney Local Health District v Macquarie Health Corporation Ltd (No 6) [2014] NSWSC 1549 (6 November 2014);

9. The Court of Appeal lifting the stay of its orders for possession in favour of Macquarie: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2015] NSWCA 323 (15 October 2015).

6. On 30 June 1988 the Minster for Health announced approval for the development of a private hospital and a car park on adjacent sites at RPAH. RPAH is owned by the Health District. Macquarie was the successful tenderer.

7. At all relevant times Macquarie was a subsidiary of Macquarie Health Corporation Ltd (“MHC”). Through its subsidiaries, MHC developed and operated a number of private hospitals and health care facilities on a large scale. The principal of Macquarie is Dr Thomas Wenkart.

8. On 18 September 1989 Heads of Agreement were signed by Macquarie, MHC as guarantor and the Health District for the development of the car park and private hospital. It was not long before the parties fell into dispute and it took several years before the Heads of Agreement were translated into something more.

9. On 2 December 1996 Macquarie and the Health District executed six agreements (the “Transaction Documents”). These included a deed for the design and construction by Macquarie of a car park and a 200-bed private hospital (the “Construction Deed”), two leases (the “Hospital Lease” and the “Car Park Lease”), and a sub-lease (the “Car Park Sub-Lease”).

10. Under the Hospital Lease, the Health District granted a lease to Macquarie over the Hospital Site for the proposed private hospital for a term of 103 years. Under the Car Park Lease, the Health District granted a lease over the Car Park Site for the proposed car park to Macquarie and itself as tenants in common in equal shares for a term of 103 years. Under the Car Park Sub-Lease, the Health District let its interest as co-lessee under the Car Park Lease to Macquarie for a term of 28 years.

11. Within a year of executing the six agreements the Health District became concerned that Macquarie had not got on with fulfilling its obligations in a timely fashion. On 20 November 1997 the Health District gave notice to Macquarie of defaults under the Construction Deed for failure to comply with various timetabling requirements for building approvals, excavation works and the commencement of construction of the car park.

12. On 16 March 1998 the Health District served a notice of default on Macquarie for failing to have commenced substantial bulk excavation works.

13. By November 1998 excavation of the Hospital Site had begun and construction of the car park had commenced.

14. On 13 September 1999 the Health District served notice of default on Macquarie under the various leases and the Construction Deed and, on 15 September 1999, an amended notice of default under the Car Park Lease.

15. On 24 September 1999 the car park was opened by Macquarie. The private hospital was never built.

16. On 1 November 1999 South Sydney Council ordered Macquarie to cease operation of the car park on the grounds that it was being operated unlawfully without an occupation certificate as well as in breach of certain conditions of consent.

17. On 17 March 2000, the Health District served notices of termination on Macquarie under each of the Construction Deed, Car Park Lease, Car Park Sub-Lease and Hospital Lease and it re-entered and took possession of the two sites. It locked Macquarie out of the car park. At the time, the car park had 1,026 car spaces.

18. Macquarie sued the Health District in relation to the Transaction Documents. Macquarie lost at first instance but was successful in part on appeal. The Court of Appeal found that the notices of default issued by the Health District did not comply with the requirements of s 129 of the Conveyancing Act 1919 (NSW) (the “Conveyancing Act”) rendering its re-entry and continued possession of the two sites a trespass against Macquarie. The issue which fell for determination before me is the amount of damages (if any) payable by the Health District to Macquarie for this trespass.

6. In relation to the Car Park Site, the Court has concluded that Macquarie is entitled to mesne profits calculated by reference to the “user principle” (see paragraphs 111 to 118 below) on the basis of the following integers:

1. Period of damage: 17 March 2000 up to 9 am on 2 November 2015

2. Number of car spaces: 1,026

3. Users:   Staff only

4. Rate: Staff rate of $3.00 per day as at 17 March 2000 adjusted annually for CPI with effect on and from 1 July in each year.

5. Daily turnover per space to reflect “100%” occupancy: 1.45 times per day.

6. Deductions in favour of the Health District: All proven expenses incurred by the Health District in each year in relation to the maintenance and operation of the car park and the annual rental that would have been payable by Macquarie to the Health District.

7. Interest: At Court rates on the annual net amount, assuming that amount is positive.

20. In relation to the Hospital Site the Court has concluded that Macquarie is entitled to damages in the form of mesne profits calculated by the residual land value method and by reference to the user principle by the application of the following integers:

1. The cost of building the hypothetical private hospital (excluding fixtures, fittings and equipment) (“FFE”) is to be calculated as follows:

1. Net construction costs of $48,000,000 (June 2001 prices);

2. Subtract $1,737,000 for work already done;

3. Add $6,289,000 for preliminaries;

4. Add $4,138,470 for contingencies;

5. Add 5% builder’s allowance;

6. Add $6,524,988 for design fees and subtract $2,000,000 for fees already incurred;

7. Add $1,053,410 for costs escalations; and

8. Insofar as amounts have to be escalated to present day values, such costs escalations should be done using the published NSW Building Price Index.

2. An Earnings Before Interest and Taxes (“EBIT”) margin of 15%.

3. For the purposes of determining the revenue rate for the hypothetical private hospital, the Court adopts expert witness Mr Greg Anderson’s approach, however he should recalculate his figures on the assumption of there being two catheterisation laboratories.

4. FFE costs for the initial construction period of the hypothetical private hospital of $19,000,000 (in 2003 dollars).

5. A discount rate when valuing the Private Hospital Lease as at 17 March 2000 of 8.94% (after tax).

6. No capital replacement in relation to the hypothetical private hospital building in years 1 to 5.

7. A factor of 0.5% of total capital value should be applied for capital replacement in years 6 to 10.

8. A factor of 1.5% of total capital value should be applied for capital replacement in years 11-20.

9. For the first 20 years, building capital expenditure should be escalated at 1.5% each year, compounding. Thereafter the full inflation rate should be applied.

10. FFE life cycle replacement costs should be calculated by reference to expert witness Mr Tim Staker’s life cycle period for replacement. Furthermore, the calculation should be made in accordance with the annual costs set out in Mr Staker’s report pro-rated upwards by a figure of 1.2257.

11. FFE replacement costs should be escalated by 1% simple interest in years 1 to 20 and thereafter a value of 2.5% for inflation should be applied.

12. For the purpose of determining the market rental of the Hospital Site, what must be considered is the period of the trespass (approximately 15 years) out of the 103 year life of the Hospital Lease and not a notional 15 year lease or sub-lease.

21. In addition to damages in the form of mesne profits, Macquarie is entitled to additional damages of:

1. $1,048,800 for additional building and consultancy costs that it would not be incurring but for the Health District’s trespass; and

2. $301,990 (excluding GST) for remediation and excavation work to restore the Hospital Site to the condition it was in on 17 March 2000.

Procedural History

22. By amended summons filed on 27 March 2000, Macquarie commenced proceedings seeking declarations that the notices of default and notices of termination upon which the Health District acted were void and should be set aside. It also sought by notice of motion an interlocutory order for the return of the Car Park Site to its possession. This motion was dismissed by Windeyer J on 28 March 2000 (Supreme Court (NSW), Windeyer J; 28 March 2000, unrep) on the basis, inter alia, that damages would be an adequate remedy. His Honour was of the view that if Macquarie had been improperly locked out of the Car Park Site, damages “would be reasonably easily quantified”: Macquarie International Health Clinic Pty Ltd v Central Sydney Area Health Service (Supreme Court (NSW), Windeyer J; 28 March 2000, unrep) at 10. Unfortunately the complexity and duration of the present enquiry have belied the optimism of that interlocutory assessment by a judge of great experience.

23. It should be noted that although counsel for Macquarie before Windeyer J mentioned in opening an argument about the Health District’s failure to comply with s 129 of the Conveyancing Act, the argument was not pressed as a basis for interlocutory relief. It was also accepted, at least before Windeyer J in March 2000, that at that time Macquarie had no intention of building the private hospital.

24. The matter came on for trial before Nicholas J on 6 February 2006 and occupied 86 hearing days through to 28 May 2008. The trial was conducted on the basis of Macquarie’s Fifth Further Amended Statement of Claim (the “Fifth Claim”) filed on 2 May 2007. Macquarie relied on various bases to support the declaratory relief sought, including that it was not in default as alleged in the default notices, that the notices were invalid under s 129 of the Conveyancing Act, and that the notices were issued contrary to express terms in both the Construction Deed and the various leases which required the parties to act in utmost good faith in the performance of their duties and dealings with one another. Nicholas J resolved each of these substantive issues in favour of the Health District: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2008] NSWSC 738 (the “Principal Judgment”).

25. The Health District was also partially successful on its cross-claim against Macquarie which was heard over seven days between 1 August 2008 and 20 April 2009: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2009] NSWSC 629 (the “Cross-Claim Judgment”).

26. Macquarie appealed from the whole of Nicholas J’s decisions and the Health District cross-appealed from certain parts of those decisions.

27. The appeal was heard over nine days between 7 and 18 June 2010. The Court of Appeal (Hodgson JA, Allsop P and Macfarlan JA agreeing) found that the notices of default issued by the Health District in September 1999 did not comply with s 129 of the Conveyancing Act: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (2010) 15 BPR 28,564; [2010] NSWCA 268 (the “Principal Appeal Judgment”). The Court of Appeal held that this finding entitled Macquarie to the legal remedy of a judgment giving it possession of the Car Park Site and the Hospital Site. Put another way, the Court held that s 129 operated to preclude the Health District from re-entering and taking possession of the two sites on 17 March 2000 and that the Health District’s action in so doing constituted a trespass against Macquarie.

28. A declaration to this effect was made by the Court of Appeal in a separate judgment: Macquarie International Health Clinic Pty Ltd v Sydney South West Area HealthService [2010] NSWCA 348 (the “Orders Judgment”). The relevant orders and declarations (the “CA Orders”) are found in order 4 (at [10]):

“4.   … (1) Judgment and an order for possession by [Macquarie] of Lot 11 in DP 809663 (“the Car Park Site”) and Lot 12 in DP 809663 (“the Hospital Site”);

…

(11) A declaration that by virtue of s 129 of the Conveyancing Act 1919 (NSW) [the Health District] was precluded from taking possession of the hospital and car park sites on 17 March 2000 and [the Health District’s] eviction of [Macquarie] was a trespass against [Macquarie].

(12) A declaration that the Car Park Lease, Hospital Lease, Sub-Lease and Construction Deed continue to operate and bind both the appellant and the respondent.

(13) Order that there be an enquiry before a Judge or Associate Judge other than Nicholas J as to the amount of damages which are payable by the [Health District] to [Macquarie], or an account of moneys received by the [Health District] (which account would include both revenue received and reasonable expenses incurred and rental from 1 December 1999), at [Macquarie’s] election, in respect of being kept out of possession of the Car Park Site and the Hospital Site between 17 March 2000 and the date of being restored to possession.”

29. On 10 June 2011 the Health District’s application for special leave to appeal to the High Court was refused: Sydney South West Area Health Service v Macquarie International Health Clinic Pty Ltd [2011] HCATrans 155 (Gummow and Hayne JJ).

30. Certain further questions then arose as to the effect of Order 4(13) of the CA Orders. The matter was re-listed before Hodgson JA. On 28 June 2011 in Macquarie International Health Clinic Pty Ltd v Sydney Local Health Network [2011] NSWCA 231 at [17] his Honour directed that Macquarie:

1. Make the election referred to in Order 4(13) between an enquiry as to damages or an account of moneys received promptly on being given accounting material kept by the Health District up to 22 February 2010 and similar material up to the then present; and

2. That if an election was made for an enquiry as to damages, the matter be listed before a judge of the Equity Division to determine the scope of discovery.

31. In the course of this judgment, Hodgson JA considered the evidence upon which the enquiry as to damages should proceed, should Macquarie so elect:

“11.   Assuming [Macquarie] elects for an inquiry as to damages, [the Health District] contends that the inquiry should proceed on evidence before the primary judge, supplemented only by evidence of events occurring since the trial before the primary judge, and that discovery should be limited to events occurring since the trial.

12.    Mr Burton pointed out that the trial before the primary judge was not a separate trial of liability. The relevant statement of claim sought damages, not an inquiry as to damages, and no order was made splitting the trial.

13.    However, since the Court of Appeal has ordered an inquiry as to damages before a judge other than the primary judge, I do not think the evidence is necessarily limited in this way.

14.    I think it will be a matter for the judge hearing the inquiry to determine what procedure would be just, quick and cheap.

15.    In my opinion, it would be a reasonable approach to determine that the inquiry be on the basis of the evidence before the primary judge and evidence of events occurring since the trial, with other evidence of events occurring up to the end of the trial being permitted only if substantial grounds are made out for permitting such evidence.

16.    Similarly, I think it would be a reasonable approach to have discovery on a similar basis; that is, to order discovery going to matters occurring before the end of the trial only if substantial grounds are made out for ordering such discovery, taking account of the circumstance that there has already been a full hearing on the question of damages, in which both parties have had discovery and have led the evidence they wished to rely on in relation to that question.”

32. His Honour also ordered that the costs of those proceedings — i.e. arising from the clarification sought as to the meaning of Order 4(13) — be costs in the enquiry.

33. Macquarie elected for an enquiry as to damages.

34. At a directions hearing before the Chief Judge in Equity on 24 July 2012, counsel indicated that the “best guess” for the likely duration of the hearing would be “over a week”. In the events that happened, that estimate proved to be literally correct. The enquiry was originally fixed for hearing by the Chief Judge in Equity for ten days commencing on 17 June 2013. On 26 April 2013 the Chief Judge vacated these hearing dates and refixed the matter for final hearing for three weeks commencing on 14 October 2013.

35. The matter first came before me for case management on 22 May 2013 at which time Macquarie indicated that it wished to amend its pleadings. By notice of motion filed on 28 May 2013, Macquarie sought leave to amend the Fifth Claim to include an allegation of breach of Macquarie’s right to quiet enjoyment under the leases. The Court refused that application: Macquarie International Health Clinic Pty Ltd v Sydney Local Health District [2013] NSWSC 764 (the “First Amendment Application”).

36. At the hearing of the First Amendment Application the parties indicated that between them they expected to call 14 lay witnesses and 11 experts (two of whom were appointed jointly by the parties) on the enquiry. The week commencing 2 December 2013 was fixed for the enquiry’s closing submissions.

37. On 6 August 2013 the hearing dates commencing 14 October 2013 were vacated when it became apparent that the matter would not be ready to proceed. The proceedings were refixed for hearing for eight weeks commencing on 10 February 2014. The Court ordered that the proceedings be the subject of a private mediation to be conducted by 23 December 2013.

38. At a pre-trial directions hearing on 15 November 2013, the date for the private mediation was extended to 3 February 2014. The Court also directed the parties to work co-operatively on a trial plan to have the hearing commence in February 2014. Counsel for Macquarie provided the Court with a document entitled “Draft trial plan” dated 11 December 2013. It put the best estimate for the duration of the hearing, as at 12 December 2013, at a maximum of 30 days with closing oral submissions to be completed by 30 May 2014.

39. On 17 December 2013, I indicated to the parties (without apportioning blame) that in light of the ambulatory pace at which the matter was progressing with regard to the filing of evidence, and in accordance with the principles of case management, there were really only two possible ways forward. The first, the traditional way, was not to fix a hearing date until the evidence was closed from all parties. At the time, my view was that were that course taken, the trial might not have commenced for another twelve to eighteen months. The second was to proceed to trial on 10 February 2014 at least to the point of Macquarie’s case being finalised and openings having taken place. The latter course was taken. My reasons for doing so are to be found elsewhere: Macquarie International Health Clinic Pty Ltd v Sydney Local Health District; Sydney Local Health District v Macquarie Health Corporation Ltd (No 6) [2014] NSWSC 1549 at [17].

40. The hearing of the enquiry as to damages commenced on 10 February 2014 when Mr RE Dubler of Senior Counsel, leading Mr S Phillips and Mr A Harding of Counsel, appeared for Macquarie and later in the proceedings with Mr S Kanagaratnam of Counsel, and Mr GK Burton of Senior Counsel, leading Mr P Bruckner, Mr H Stowe, Mr G Antipas and Miss N Shaw of Counsel, appeared for the Health District. A view of the relevant parts of RPAH, including the Car Park Site and the Hospital Site, was conducted that morning.

41. At the conclusion of opening submissions on 12 February 2014, orders were made by consent vacating the hearing dates from 13 February 2014 to 20 March 2014 and listing the recommencement of the hearing for six weeks commencing on 12 May 2014, with final oral submissions listed for two weeks commencing on 11 August 2014. Orders were made by consent that Macquarie could not rely on further affidavits or expert reports in chief without leave of the Court and requiring the parties to file a draft trial plan by 7 May 2014. This plan proposed to complete the evidence of the lay witnesses by 30 May 2014 and the expert witnesses by 20 June 2014.

42. Further difficulties were encountered with the preparation of evidence and an extended directions hearing was held on 1 May 2014. I indicated to the parties that the enquiry was beginning to take on a process whereby new issue after new issue seemed to emerge which each party then wanted to explore to finality. I indicated that the procedures of this Court would not facilitate that process where it was becoming disproportionate to the expense, delay and real issues in dispute. The Court confirmed the hearing date of 12 May 2014 and the parties were directed to provide a further trial plan by 9 May 2014.

43. During the course of the hearing on 1 May 2014 the Court also rejected the Health District’s application to rely on a late expert report from Ms Christina Lynn (the “Lynn Report”) in relation to the Car Park Site, dated 14 April 2014. The fate of the Lynn Report is further explained in paragraph 63 below and the judgment in paragraphs 599 to 646 below.

44. On 8 May 2014 the Health District submitted a further draft trial plan indicating that the totality of the evidence would spill beyond the May–June hearing dates. It proposed that the balance of the hearing could be taken in the two weeks allocated for final submissions commencing on 11 August 2014 and that further time would need to be found for those submissions.

45. On 12 May 2014 the hearing recommenced as scheduled. On 15 May the Court formally reallocated the weeks commencing 11 and 18 August 2014 from final submissions to the hearing of further evidence. The week commencing 25 August 2014 was also allocated to complete the hearing of evidence.

46. On 16 May 2014 the Court fixed a further two weeks for the hearing of closing submissions commencing on 10 November 2014. This took the time allocated for the trial to a total of eleven weeks.

47. On 16 June 2014 the Court directed that the hearing of evidence continue for four more days from 1 to 4 September 2014. These days were vacated on 18 June 2014 and substituted for 2 and 7 to 9 October 2014.

48. Evidence was heard throughout May and June and then over two further days on 5 and 6 August 2014 before the scheduled resumption on 11 August 2014. On 5 August 2014 Mr Dubler SC indicated that the three weeks allocated in August had become “a black hole” for some of the experts scheduled to give their evidence in this period: T 1360. The Court expressed its dissatisfaction with the sudden unavailability of these experts.

49. On 8 August 2014 I indicated to the parties that the Court’s expectation was for the enquiry, with the parties acting co-operatively and sensibly, to finish by the end of the year: T 1518. This necessitated reallocating the two weeks in November set down for closing submissions for the further hearing of evidence, in addition to the time previously set aside in December for judgment writing. On 13 August 2014 the Court confirmed these arrangements and indicated that it was doing so on the basis that the hearing finish no later than the last day of term in 2014: T 1585.

50. However, further difficulties arose with the timely provision of expert evidence. Through no fault of Macquarie’s, the hospital valuation report of Mr Lister, being the first of Macquarie’s export reports which were to be provided in sequence and on which it sought to rely in support of its mesne profits case in respect of the private hospital, was not provided to Macquarie until 29 August 2014. This was some five weeks after the date originally advised by Mr Lister. When the report was provided, a contest arose in respect of the methodology adopted by Mr Lister in the preparation of his report. This led to a second application by Macquarie to amend its pleadings by notice of motion filed on 21 August 2014 (the “Second Amendment Application”).

51. The critical amendment to Macquarie’s case in respect of both sites related to the abandonment of its claim for “loss of profits”, to which the Hospital District had demurred. The proposed amendments introduced a mesne profits claim in respect of the Hospital Site and an amendment to the mesne profits claim in respect of the Car Park Site introducing an alternative method of calculation.

32. The Second Amendment Application was heard over the course of four days in September 2014 together with an application by the Health District which sought leave to rely on two expert reports that had been served late. The Court allowed both applications. Orders were made setting out the formal resolution of the two applications on 26 September 2014. The Court’s reasons were published on 6 November 2014: Macquarie International Health Clinic Pty Ltd v Sydney Local Health District; Sydney Local Health District v Macquarie Health Corporation Ltd (No 6) [2014] NSWSC 1549.

33. Part of the Court’s reasons for allowing the Second Amendment Application considered the case management implications of the proposed amendments. The Court indicated that there was capacity for the proceedings with the proposed amendments to be completed in the first half of 2015 without undue delay and without having to disrupt the Court’s existing schedule.

34. The Health District filed and served an application in the Court of Appeal for leave to appeal against the contested parts of the grant of leave to Macquarie to amend its pleadings together with a notice of motion for expedition. It was given an early return date of 13 October 2014 for the expedition application. The motion was ultimately stood over to 17 November 2014.

35. The hearing of the enquiry proceeded and on 26 August 2014 the Court fixed an additional hearing date on 25 September 2014.

36. On 2 October 2014 the Court required the parties to prepare a revised trial plan for the balance of the proceedings including dates to be allocated for 2015: T 2320. On 7 October 2014 a draft plan was received with alternate “scenario analysis” with and without Macquarie’s contested amendments for the balance of the hearing.

37. On 9 October 2014 the Court fixed the dates of 1 to 5 and 8 to 12 December 2014 as well as 4 May to 4 June 2015 for the hearing of further lay and expert evidence. Closing submissions were fixed for 20 to 23 and 27 to 31 July 2015 (see T 2423 and “Trial Plan as determined by Court 9 October 2014”).

38. On 6 November 2014 the Court formally vacated the hearing dates fixed for 10, 11 and 14 November 2014.

39. On 17 November the hearing before me continued while the Health District’s application for leave to appeal was mentioned before the Registrar of the Court of Appeal. I was asked to consider the possibility of vacating one of the December hearing days for the leave to appeal application and any appeal to be heard simultaneously. However, later that day the Health District discontinued its application for leave to appeal from the Court’s decision in the Second Amendment Application. I was informed that it was possible the Court’s decision could be the subject of an appeal as part of an appeal from the Court’s ultimate determination of the damages enquiry.

40. At a directions hearing on 26 November 2014, further hearing dates were allocated for 15, 18 and 19 December 2014.

41. On 18 December 2014 the Court fixed 9 February 2015 for argument in relation to the tender of additional expert evidence and a further five hearing days for the week commencing 23 March 2015.

42. On 19 December 2014 the Court indicated to the parties that the time fixed for proceedings would have to conclude within the hearing of the balance of the matter in 2015: T 3452. The Court reiterated that this was not to attribute blame to either party but rather to impress upon them that when dates are scheduled to accommodate experts giving evidence it was simply not acceptable for the experts later to turn around and say they were not available.

43. On 9 February 2015 the Court heard a further application by the Health District to rely on the Lynn Report. Macquarie consented to the tender of a redacted version of the report but opposed the tender of the complete version. The Court refused to grant leave to rely on the disputed parts of the report. The parties agreed not to trouble the Court for reasons on that occasion and were content for the Court’s reasons to be included in this final judgment. Those reasons are given in paragraphs 599 to 646 below.

44. The trial continued as planned through the March hearing dates. At a directions hearing on 1 April 2015 a revised draft trial plan was provided to the Court indicating a further “slippage” in the provision of expert reports, this time on the Health District’s side. I indicated that by this stage the Court’s tolerance was exhausted in relation to these matters: T 3776. Completion of all outstanding expert conclave reports was scheduled to be completed by 8 May 2015 with the concurrent evidence of the hospital financial experts to be completed by 28 May 2015.

45. On 13 April 2015 the Court again ordered the parties to mediation on either or both of 10 and 11 June 2015.

46. By 22 May 2015 it became apparent that Macquarie’s hospital financial expert, Ms Josephine Maprock, would not be able to comply with the envisaged timeframe due to ill health and that a replacement would be needed. On 27 May 2015 the Court directed that Macquarie serve any report to be relied upon from Mr Tim Staker, who was to stand in the shoes of Ms Maprock, by 1 June 2015.

47. The hearing of expert evidence in conclave continued through June 2015.

48. On 17 June 2015, Day 89 of the hearing, the evidence on the enquiry came to a close. Counsel for the Health District indicated that a mediation was scheduled before a former Federal Court judge “without the lawyers being present” prior to closing addresses: T 4936.50.

49. On 20 July 2015 a further view was conducted at RPAH.

50. Following the view, closing oral submissions commenced and were heard over the course of nine days. On 31 July 2015 the Court formally reserved judgment.

51. On 26 August 2015, which was to become the 100th and final hearing day on the enquiry, the Court heard argument about the admissibility of a bundle of notes that were handed up by counsel for Macquarie on 31 July 2015. Leave was formally granted, nunc pro tunc, in respect of those notes in addition to leave to the Health District to file further confined submissions in reply. These directions brought the process of submissions to an end.

52. In total there were 100 days of hearing on the enquiry. Sixty-two lay and expert witnesses gave evidence (including concurrent evidence). Forty lay and expert witnesses gave evidence in person, while affidavit evidence was received for a further twenty-two witnesses. The transcript ran to 5,886 pages.

53. However, that was not the end of the matter. During the course of the hearing the Court was told by Macquarie’s counsel and by Dr Wenkart himself that Macquarie was still determined to build the private hospital. This led the Court on several occasions to raise the question of why Macquarie had not retaken possession of the two sites. The history of why that had not occurred is set out in relation to Issue 1 in paragraphs [131] to [136] below. Ultimately, the Court received evidence demonstrating that Macquarie had written to the Health District to request an orderly retaking of possession. This necessitated some planning and co-operation in relation to the car park, which the Health District had been operating in the interim as a going concern. The Hospital Site had remained undeveloped during the litigation but had been used by the Hospital District to provide additional parking.

54. Following a tender process, Macquarie entered into a contract with Secure Parking Pty Ltd to manage the car park. That company, on behalf of Macquarie, took possession of the Car Park Site on and from 9 am on 2 November 2015. Until that time the Health District had operated the car park and had collected all revenues it generated. Macquarie had not been in possession of the Car Park Site since 17 March 2000.

55. There was no dispute that, for the purposes of these proceedings, Macquarie also retook possession of the Hospital Site on 2 November 2015. However, Macquarie’s retaking of possession made real an issue that had been addressed as part of the hypothetical or counterfactual world that had been advanced during the damages enquiry. That issue was whether or not development consent D1997/154 granted by the NSW Land and Environment Court on 19 June 1997 (the “Consent”) for construction and other works on the Private Hospital Site had lapsed.

56. While the Court’s judgment on the damages enquiry was reserved, a further hearing was held on the status of the Consent. For the reasons set out in Macquarie International Health Clinic Pty Ltd v Sydney Local Health District; Sydney Local Health District v Macquarie Health Corporation Ltd; Macquarie International Health Clinic Pty Ltd v City of Sydney Council (No 9) [2016] NSWSC 155 (Macquarie (No 9)), the Court held that the Consent had not lapsed.

57. Before leaving this account of the procedural history of the enquiry, I should record that, contrary to the impression that history might give, there was much practical co-operation between the parties. It would not do justice to what occurred if the Court did not acknowledge the many occasions during a long and complex hearing when solicitors and counsel, without resiling from the vigorous advocacy of their client’s respective positions, found sensible ways to accommodate disagreements and save time and, it is to be hoped, costs.

Consideration of the parties’ submissions

78. The length of the trial and the complexity of the issues presented by the parties was reflected in the parties’ submissions. The combined written closing submissions (not including further notes and other parting shots) were 2,453 pages long and covered 47 major issues, many of which included numerous sub-issues. Every possible factual and legal question of which the industrious lawyers for the parties could conceive was exhaustively explored.

79. To draw these matters to attention is not to criticise the parties. However, they do have an impact on the Court’s reasons. I have carefully reviewed the parties’ submissions, most parts of them several times. It would be impractical, if not impossible, to resolve the minutiae of every dispute between the parties and to record consideration of every authority relied upon and the arguments made about them. These reasons — which of necessity cannot be short — only canvas those matters, which, by specific acceptance or rejection, have informed the Court’s conclusions on the issues presented for determination. The fact that particular arguments or authorities are not addressed does not mean they have been overlooked. Their omission means they were not determinative in the Court’s analysis.

80. I should also observe that because of the view I have taken as to the application of the user principle in calculating mesne profits in the, in some respects, unusual facts of this case, it has been unnecessary for me to consider a number of the issues that were presented in argument. I have retained the numbering of issues which I have decided. The impact of the user principle is more fully explained in paragraphs [111] to [118] below. Because of the length and complexity of the issues which I consider it is unnecessary for me to decide, I have not attempted to resolve those matters in case the view I have taken of the user principle is found to be wrong. Those issues would involve consideration of a very different case.

Macquarie’s “core case” — an overview

81. Macquarie’s case on the enquiry is divided into claims concerning its position as a wrongfully dispossessed lessee of the Car Park Site and the Hospital Site. Each claim corresponds to a separate lease in respect of a distinct lot of land and thus a separate trespass by the Health District as lessor. Macquarie put its two claims cumulatively in the sense that failure on one does not necessarily infect the other: T 12.20. The Health District accepted that the sites are separate parcels of land as a matter of conveyancing but put its case on the basis of an “overall outcome”, emphasising that the relevant leases are “cross-linked in terms of the[ir] provisions”: T 5198.27.

82. It should also be noted that the precise basis upon which Macquarie formulates its entitlement to an award of damages in trespass has undergone a number of iterations.

83. One of the complexities thrown up by the facts of this case is the quite different circumstances surrounding the state of the two sites at the time the Health District re-entered and took possession in March 2000. On the one hand, the car park was operational and functioning as such with 1,026 available car spaces. There is a reasonably clear proposition to be made as a matter of precedent that the case of Inverugie InvestmentsLtd v Hackett [1995] 1 WLR 713 (“Inverugie”) is on all fours with, or at the very least provides a ready basis for comparison with, Macquarie’s case in being wrongfully dispossessed of its leasehold interest in, and use of, the Car Park Site: T 4985.5.

84. The private hospital, on the other hand, was never built (putting to one side certain excavation works). This engages a different set of considerations vis-à-vis the car park: T 4987.17. Macquarie submitted that the question of the appropriate measure of damages in trespass in these circumstances was to be considered in relation to a tenant who has been put out of an asset which, as it were, had not yet come into existence. The asset in this sense is not the land itself (from which the tenant has been excluded) but a particular use to which the land was to be put in the future but for the intervening ejectment.

The Car Park

85. Macquarie’s principal case in opening submissions was that it was entitled, by way of damages, to the lost profits from its wrongful eviction from the Car Park Site in March 2000 on the basis that it would have continued operating the car park and collecting rents as it had done from September 1999. It said that these profits correspond to a 1,026 space car park, with 465 spaces allocated for staff parking (increasing to 1,225 and 600 respectively by July 2002). Macquarie also said that it would have enjoyed the increased patronage corresponding to the completed adjacent private hospital by July 2004.

86. The Health District was content to join issue in respect of this claim by way of general demurrer on the basis that a claim for damages for the lost opportunity to earn profits was not a claim for damages in trespass known to the law. Macquarie eventually abandoned its claim for “lost profits”.

87. The alternative heads of damages referred to in Macquarie’s outline of opening submissions were for an assessment of damages on the basis of a market rent, said to be the traditional method of assessing mesne profits in a trespass case, or on the basis of a reasonable rent calculated in accordance with what is referred to as the user principle. Following judgment on the Second Amendment Application, these alternate bases became the primary way in which Macquarie put its car park case.

88. As set out in Macquarie’s Fourth Further Amended Points of Claim (“FFAPC”) filed on 17 April 2015, Macquarie claimed damages for trespass, being “a claim for mesne profits”, measured by:

(1)   the difference between the market rent for the car park and the rent and outgoings payable to the Health District under the Car Park Sub-Lease over the period 17 March 2000 to the date possession is restored; or alternatively

(2)   applying a reasonable rate of return per annum on the market value of the Car Park Lease and/or Car Park Sub-Lease over the same period; or alternatively

(3)   on the premises that the Health District would have served a fresh Notice of Default (and sought to terminate) and Macquarie would have exercised its rights to assign the various leases or alternatively would have been paid a premium on reletting on a lawful termination pursuant to cls 17.9 and 16.9 of the Hospital Lease and Car Park Lease respectively:

(i)   the loss suffered by being kept out of the use of the payment Macquarie would have received upon an assignment or reletting on termination for the period of the dispossession, by Macquarie’s mesne profits claim remaining or being assessed from the dates of the hypothetical assignment or reletting on termination until judgment or repossession; or alternatively

(ii)   by applying a reasonable rate of return per annum on the market value of the various leases from the date that Macquarie would or could have received such capital sum in consequence of any alleged hypothetical further Notice of Default that could not have been remedied or in consequence of any hypothetical termination until judgment or repossession.

The Private Hospital

89. In opening Macquarie put its claim in respect of the Hospital Site as being for “damages for loss of profit or loss of the commercial benefit as a whole that has arisen from the trespass”: T 12.25. In summary form, it described its “core case” as seeking to prove “the greatest likelihood [on the evidence] of what would have happened but for the tort”: T 12.28.

90. As with its original case on the Car Park Site, Macquarie’s principal claim pressed in opening submissions was that it was entitled to its loss of profits corresponding to the difference between the position it would have been in today had it remained in possession of the Hospital Site and built the private hospital — it would now be the owner of a profitable business of significant value — and the position it is in now: being required to build the hospital after judgment.

91. Again Macquarie put forward various other heads of damage and possible alternative contingencies (referred to in the sense of a sensitivity analysis) in support of its claim. It claimed, for example, to be entitled to damages to compensate it for its loss of opportunity to earn profits by having been kept out of its land.

92. Following the abandonment of its “lost profits” claim, Macquarie’s primary claim for damages in trespass in respect of the Hospital Site crystallised as being a claim for mesne profits measured by the market rental or the letting value of the site: T 5029.36; 5037.36. That is, Macquarie said in the FFAPC that its damages should be assessed by:

1. Applying a reasonable rate of return per annum on the market value of the Hospital Site over the period 17 March 2000 to the date possession is restored; or alternatively

2. The market rent for the Hospital Site over the same period; or alternatively

3. The method described in [paragraph 2(2)(c)(ii) of the Amended Reply to the Defendant’s Points of Response to the Second Further Amended Points of Claim on the Enquiry].

93. It was ultimately accepted as common ground between the parties in closing oral submissions that the correct method of calculating Macquarie’s loss on its mesne profits case in respect of the Hospital Site was through a discounted cash flow analysis of the site’s “residual land value”: T 5030.40-50; 5031.35. Where the parties differ is on the appropriateness of various inputs and parameter values which are to be fed into the relevant discounted cash flow model: T 5031.1.

94. When pressed on the precise nature of the loss that it had suffered, no hospital having been built on the site, Macquarie submitted that its case fitted within the classic test of any trespass to a piece of land: T 5038.44. It said that it should be compensated for the lost rental (being the letting value or market rental of the site per annum) that in the market the site, at the time a development site, would have yielded per annum for the period of the trespass: T 5038.35; 5039.28.

95. Independent of and in addition to its claim for mesne profits, Macquarie claimed that it is entitled by way of damages to what it referred to as Private Hospital Approval Costs and Excavation Costs. Estimates of these amounts are said to represent costs that Macquarie will incur in the future, it being obliged to build the private hospital upon being put back into possession, and which would not have been incurred but for its wrongful eviction. Briefly stated, these damages related to the cost of re-applying for statutory approvals which have lapsed and the cost of re-performing some of the excavation works that Macquarie had already completed. An additional claim for damages pleaded under the head of “Escalation Costs” (said to measure the escalated costs of building the hospital in the future rather than in the period 2000–2004) was abandoned in closing oral submissions: T 5167.7.

Dramatis Personae

96. It is necessary at this point to identify the key participants who, or which, played a role in the events forming the subject matter of this enquiry.

97. As set out above, Macquarie is a company within the Macquarie Group, the ultimate holding company of which is MHC. The principal witness for Macquarie on the enquiry was Dr Wenkart.

98. Dr Wenkart is the chief executive officer and a director of Macquarie. He describes himself as a medical practitioner but with his main daily activity being his chief executive role in the corporation: T 2954.11. Nicholas J, in a passage adopted by the Court of Appeal in paragraph [36] of the Principal Appeal Judgment, described Macquarie and its related companies as effectively the alter ego of Dr Wenkart.

99. A sequestration order was made against Dr Wenkart on 28 October 1999 in relation to a judgment debt in the amount of approximately $1,300,000. This was subsequently annulled on 15 March 2002.

100. During the period October 1999 to June 2002, Dr Wenkart was not a director of Macquarie or MHC. However, he was employed by MHC in this period as a medical administrator and “corporate manager”.

101. Dr Wenkart’s cross-examination spanned nine hearing days on the enquiry (10, 11, 12, 15, 16, 19 December 2014 and 20, 21, 22 May 2015).

102. Mrs Christine Wenkart is the wife of Dr Wenkart. She gave evidence in Macquarie’s case and was cross-examined. She is and has been a director of MHC since 11 July 1996.

103. The eldest son of Dr and Mrs Wenkart is Mr David Wenkart. He gave evidence in Macquarie’s case and was cross-examined. He is a director of Macquarie and various other companies, including MHC, within the Macquarie Group. He has been a director of both Macquarie and MHC since 1 March 1999.

104. During the period October 1999 to June 2002 (i.e. during the period of Dr Wenkart’s bankruptcy), the only directors of Macquarie were David Wenkart and Mr Geoffrey Holden. The only directors of MHC were Christine Wenkart, David Wenkart and Mr Holden. Mr Holden died in August 2005.

105. Another of Dr Wenkart’s sons, Mr Scott Wenkart, gave evidence in Macquarie’s case and was cross-examined. During the period 1998 to 2000, Scott Wenkart was employed by Pace Property Management Services Pty Ltd (“Pace”), a company associated with Macquarie, to assist with the maintenance of some of the properties held by the Macquarie Group. He described his position as a “runner role” across a few of Pace’s projects: T 3726.6. One of these projects was co-ordinating the car park development at RPAH.

106. The Health District is a body corporate constituted by s 17 of the Health Services Act 1997 (NSW) (the “Health Services Act”). Its corporate name has changed several times since the commencement of this matter in 2000. The Health District’s current corporate name is the Sydney Local Health District as specified in Sch 1, column 1 of the Health Services Act.

107. The principal witnesses for the Health District on the enquiry were Dr Diana Horvath AO, Mr Michael Wallace and Mr Christopher Puplick AM.

108. Dr Horvath was appointed Chief Executive Officer (“CEO”) of the Health District in December 1992 and held the position until early 2006. At that time the Health District’s governance structure included a CEO and a board of directors of which the CEO was a member. The board of directors answered to the Minster for Health and there was a separate line of accountability directly between the CEO and the Director of Health: T 665–6. Changes in early 2005 removed the board of directors and refashioned CEOs as Chief Executives with the management and control of the Health District answerable to the Director General.

109. Mr Wallace was the Deputy CEO of the Health District from February 1993 to 2005. He succeeded Dr Horvath as Chief Executive in early 2006 and remained in that position until 2011.

110. Mr Puplick was a member of the Health District’s board between July 1993 and June 2003 and was the board’s Chairman between August 1996 and June 2003.

Issues for determination and the user principle

111. By 1 July 2015, the parties had reduced the total number of issues in dispute to 47, albeit broken down into even more sub-issues. I indicated that the Court would be most assisted by the parties adhering to an issue by issue analysis with the parties compiling their submissions jointly in a fashion that carved out the 47 discrete areas of dispute: T 4941.

112. The issues — more fully set out in Schedule A — were grouped under a number of sub-headings:

1. Preliminary legal issues (Issues 1–5)

2. Project definition (Issue 6)

3. Specific issues relating to the Car Park Site (Issues 7–25)

4. Specific issues relating to the Hospital Site (Issues 26–33)

5. Risk of termination (Issue 34)

6. Hypothetical assignment (Issues 35–38)

7. Compensation for termination (Issues 39–41)

8. Adjustments to avoid double compensation (Issue 42)

9. Compensatory damages (Issues 43–44)

10. Benefit to defendant (Issue 45)

11. Position at the end of the trespass (Issue 46)

12. Issues arising out of the Health District’s cross-claim (2010/90340) (Issue 47)

113. The Court’s analysis of the user principle is in paragraphs [160] to [182] below. However, because the Court’s understanding of the user principle has a significant impact on what issues the Court has ultimately had to consider, it is appropriate to summarise its effect at this early point in these reasons. It will also avoid unnecessary repetition in relation to particular issues.

114. The user principle requires mesne profits to be calculated by reference to the trespasser’s actual use of the land. It is a backward looking exercise, so the Court can take into account events which took place during the trespass.

115. Insofar as the user principle has an effect on the issues presented for determination, two related matters are critical. First, it means that whether the plaintiff could have, would have or ever did or did not want to do what constituted the trespass (or anything else) is irrelevant. The plaintiff is to be compensated for the wrongful use which occurred. Second, the defendant trespasser cannot seek to establish hypothetical counterfactuals to demonstrate that, if the trespass had not occurred, the plaintiff would have suffered no loss.

116. In this case the user principle means that the Court rejects as irrelevant submissions that:

1. Notwithstanding that during the period of the trespass only staff used the Car Park Site, damages in respect of the 1,026 spaces in the Car Park Site should take into account use by the general public of 426 spaces because Macquarie only had to provide 600 spaces for staff.

2. Macquarie cannot claim increased patronage in the car park from completion of the private hospital because the private hospital was not built during the period of the trespass.

3. At the commencement of the trespass, Macquarie did not intend to build the private hospital.

4. Macquarie had no financial capacity to build, and therefore would never have built, the private hospital.

5. If Macquarie had built the private hospital it would have been a financial disaster, from which it has been saved by the Health District’s trespass.

6. The Health District would have built the multi-storey Susan Street Car Park which would have had an adverse, competitive effect on Macquarie’s car park.

7. The possibility of industrial action if Macquarie charged staff more than what was referred to as the Liverpool Rate to park in its car park.

8. No third party would have considered the private hospital feasible with the specified existing design (described by the Health District as “unviable, unprofitable and inefficient”) and the other contractual constraints under the Transaction Documents.

9. Damages should be assessed on the fact that at the time of its dispossession, Macquarie had been prepared to part with the Hospital Site for no value.

10. There was a risk the Transaction Documents would be validly terminated.

11. More than the risk just referred to, the Transaction Documents remained liable to termination as at 17 March 2000 and the Health District would have validly terminated them by at least late 2000.

117. A number of issues turned on the Court accepting submissions such as those set out in the preceding paragraph. For this reason the Court does not need to consider those issues or has considered them in a more limited way. They are issues 8, 11, 32, 33, 34, 39, 40 and 41.

118. However, it is important to note that while the Court’s view of the proper application of the user principle means that the Health District cannot set up alternative, hypothetical “no loss” scenarios, that does not preclude the possibility of a negative value being the result of the agreed valuation methodology in relation to the Hospital Site when applied with the inputs determined by the Court in these reasons.

Issue 1 — What is the period over which damages are to be assessed?

Issue 1 — The parties’ submissions

119. The first of the preliminary legal issues is the question of the period over which damages are to be assessed. It is agreed that 17 March 2000 is the appropriate commencement date. In issue is the appropriate end point, that is the terminal date up to and including which damages may be said to run. Macquarie submits that it is entitled to damages up until the date of it being restored to possession of the two sites — 2 November 2015 (see paragraphs [73] to [74] above). This submission does no more than replicate the last sentence of Order 4(13) of the CA Orders (see paragraph [28] above).

120. In its written closing submissions, the Health District submitted that the period of trespass for the assessment of damages should be taken to have ended either on 13 December 2010 (the date of the CA Orders) or 10 June 2011 (the date of dismissal of the High Court special leave application). It says that it is open to the Court to infer from Macquarie’s “failure to take possession” from either of these dates that Macquarie “did not take possession because [Macquarie] realised it was not in [its] interests to do so”.

121. This raises the question of whether or not the stay of the order for possession of the two sites in favour of Macquarie contemplated by Order 7 of the CA Orders remained on foot (Order 4(1) — see paragraph [28] above).

122. Order 7 of the CA Orders provides:

“7.    Stay the operation of the balance of the orders:

(1)    for 28 days after date of making of these orders unless within that time an application for special leave to appeal to the High Court of Australia is filed;

(2)    until further order, but subject to any order of the High Court of Australia, if within 28 days after the date of making of these orders an application for special leave to the High Court of Australia is filed;

provided that, for the purposes of the enquiry, the date of being restored to possession shall not operate until any stay of the order for possession in order 3(1) [sic 4(1)] above has been lifted.”

123. The substance of Macquarie’s submission is that the date of it being restored to possession, in accordance with the CA Orders, cannot be taken to have occurred until the stay is lifted. It says that the effect of the CA Orders is that the Health District “may keep the benefit of possession in return for the plaintiff’s damages at the enquiry being assessed as if the trespass was continuing until possession is restored”. It argued that the Health District had elected to remain in possession and “to derive the ongoing benefits from that possession”, and that it had relied upon the CA Orders as giving rise to an entitlement to damages up to the date of it being restored to possession.

124. The Health District did not accept this interpretation of the CA Orders. First, it said that the stay contemplated by Order 7 ended when the High Court refused special leave on 10 June 2011: T 5208.30. Second, even if there is a stay in place, the proviso in Order 7 is that the stay “does not affect the foreshortening by any of the evidence in the case of the trespass period, for the purposes of the assessment of quantum”: T 5224.44; 5213.14. In this regard the Health District submitted that Macquarie has had the opportunity to re-take possession of the two sites since the date of entry of the CA Orders but has chosen not to do so (adding that Macquarie’s reasons for so choosing are irrelevant).

125. At the commencement of closing oral submissions on 20 July 2015 the Court indicated to counsel for Macquarie that there was a certain incongruity between, on the one hand, Macquarie’s protestations through Dr Wenkart of its present and continuing wish to build the private hospital and, on the other, remaining out of possession and arguing about whether or not the stay described above had been lifted: T 4975.23.

126. On 31 July 2015 counsel for both parties indicated that a meeting was to occur “in two weeks’ time” between the principals of Macquarie and the Health District to facilitate the orderly process of the Health District giving Macquarie possession of both sites.

127. Macquarie insisted that the stay be lifted by the Court of Appeal before the Health District give up possession. Accordingly, on 1 October 2015, the Health District filed a notice of motion in the Court of Appeal seeking an order that the stay, “to the extent that it is still on foot”, be dissolved or lifted.

128. On 15 October 2015 Gleeson JA made orders that the stay be discharged with effect from 9 am on 2 November 2015: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2015] NSWCA 323. His Honour ordered that Macquarie pay the Health District’s costs of the motion on the basis that Macquarie initially sought an adjournment to prepare material to oppose the relief sought and that the position it ultimately adopted on the motion was a significant departure from the position it had taken in correspondence with the Health District.

129. On 28 October 2015, the 101st day of hearing, the Court heard further argument, this time concerning the meaning of the orders of Gleeson JA. Macquarie submitted that the CA “implicitly accepted that their stay was still on foot”: T 5563.41. The Health District pointed to passages of the transcript of proceedings before Gleeson JA suggesting that such a reading of his Honour’s reasons was not open: T 5565. In subsequent correspondence, counsel for Macquarie resiled from this submission, having had the opportunity to consider the references made to the transcript before Gleeson JA “which were not previously reviewed by us” (it is not clear why any “review” of the transcript was necessary given that counsel for Macquarie appeared on the motion before Gleeson JA).

130. In any event, in correspondence dated 28 October 2015, Macquarie confirmed its agreement with the Health District that the alternative dates for the resolution of Issue 1 (being the terminal date of the trespass) were 13 December 2010 (the date of the CA Orders), 10 June 2011 (the date of dismissal of the High Court special leave application) or 2 November 2015 (the date possession of the sites was physically re-taken).

Issue 1 — The facts

131. To resolve this issue it is convenient to start by setting out in one place the short facts that are relevant.

132. The Court of Appeal delivered its judgment in the appeal from Nicholas J on 14 October 2010. An order was made directing Macquarie to bring in either agreed short minutes or for the parties to bring in competing versions of the short minutes and any submissions in support.

133. The CA Orders were not made until 13 December 2010: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 348. The Court of Appeal was provided with short minutes of order that were largely agreed. The areas of disagreement which it was required to resolve did not include any of the paragraphs which are relevant to the resolution of the present issue. The relevant orders are:

“…

4.    In lieu of the orders of Nicholas J set aside by this Court in order 2 above, the Court makes the following judgments, orders, declarations, notations and directions:

(1) Judgment and an order for possession by the appellant of Lot 11 in DP 809663 ("the car park site") and Lot 12 in DP 809663 ("the hospital site");

(2) Judgment for the cross-appellant (the cross-claimant) against the cross- respondent (the cross-defendant) for $389,207.34 plus interest.

…

(11) A declaration that by virtue of s 129 of the Conveyancing Act 1919 (NSW) the respondent was precluded from taking possession of the hospital and car park sites on 17 March 2000 and the respondent's eviction of the appellant was a trespass against the appellant.

(12) A declaration that the Car Park Lease, Hospital Lease, Sub-Lease and Construction Deed continue to operate and bind both the appellant and the respondent.

(13) Order that there be an enquiry before a Judge or Associate Judge other than Nicholas J as to the amount of damages which are payable by the respondent to the appellant, or an account of moneys received by the respondent (which account would include both revenue received and reasonable expenses incurred and rental from 1 December 1999), at the appellant's election, in respect of being kept out of possession of the car park site and the hospital site between 17 March 2000 and the date of being restored to possession.

(14) The Cross Claim is otherwise dismissed.

…

6. Stay the operation of the judgment in 3(2) above (sic), including any form of enforcement of such judgment, until the conclusion of the enquiry or further order of the Court.

7. Stay the operation of the balance of the orders:

(1) for 28 days after date of making of these orders unless within that time an application for special leave to appeal to the High Court of Australia is filed;

(2) until further order, but subject to any order of the High Court of Australia, if within 28 days after the date of making of these orders an application for special leave to the High Court of Australia is filed;

provided that, for the purposes of the enquiry, the date of being restored to possession shall not operate until any stay of the order for possession in order 3(1) above (sic) has been lifted.”

134. On 10 January 2011 (i.e. within 28 days of the CA Orders), the Health District filed an application for special leave to appeal to the High Court.

135. The Health District’s special leave application was refused on 10 June 2011: Sydney South West Area Health Service v Macquarie International Health Clinic Pty Ltd [2011] HCATrans 155. The only orders made by the High Court were (at line 525) that “Special leave is refused with costs”.

136. No further order was made in relation to the CA Orders until 15 October 2015 when Gleeson JA ordered that the “Stay ordered by this Court by order 7(2) made on 13 December 2010, be discharged with effect from 9.00am on Monday 2 November 2015”: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2015] NSWCA 323.

Issue 1 — Legal principles

137. In construing the meaning of an order, and unless the meaning is clear from the actual terms of the judgment or order, the Court may have regard to the reasons given for that order, surrounding circumstances and extrinsic evidence relied upon by the Court so as to place the order in the context of the matter to arrive at its true construction: Australian Energy Limited v Lennard Oil NL (No 2) [1988] 2 Qd R 230 at 232.

138. The words “until further order” generally mean that an order is intended to have interlocutory operation only, i.e. intended to operate only until the first to occur of some further order verifying or vacating that order or final judgment in the suit. The principles in relation to construing “until further order” were set out by JC Campbell J (as his Honour then was) in Fatimi Pty Ltd v Bryant & Ors (2002) Aust Torts Reports 2002; [2002] NSWSC 750 (“Fatimi”) in terms which I respectfully adopt:

“226 When Hodgson J made the Mareva Order on 9 August 1993 (paragraph 13 above) it was in proceedings 4703 of 1992. It was an order expressed to be made, “until further order”. The suit in proceedings 4703 of 1992 was disposed of by Master Macready on 20 May 1994. The orders then pronounced are set out at paragraph 15 above. Thus, apart from the money judgment and the foreshadowed costs order, the Summons (including the prayer for Mareva relief) was dismissed.

Issue 47 — Issues arising out of proceedings 2010/90340

595. By an amended statement of claim filed on 3 February 2012 (the “ASOC”), the Health District sues Macquarie and its parent, MIHC, for relief under various guarantee and indemnity provisions in the Transaction Documents. The ASOC asserts several different types of liability, including a claim by the Health District for damages for “in excess of $130,000,000” said to have been caused by Macquarie’s breaches of the Transaction Documents. Macquarie’s defences include claims of Anshun estoppel, res judicata and lack of causation as well as substantive factual answers to the claim. By orders made in 2012 the ASOC was ordered to be heard with the damages enquiry.

596. Each party opened its case in relation to the ASOC as part of their openings in the enquiry generally. However, little was thereafter heard of it for the entirety of the proceedings and no substantive oral arguments were addressed in relation to it during nine days of final submissions. The parties invited the Court to deal with the ASOC on the papers.

597. For the following reasons I have come to the view that it is inappropriate for the Court to accept that invitation. The proper course is for there to be a further hearing in relation to the ASOC so that the Court may have the benefit of the assistance of the parties in oral argument. My reasons for this are:

1. The possibility that the scope of the matters in dispute in the ASOC may be narrowed as a consequence of other determinations in this judgment;

2. The very large sum of money claimed; and

3. The complexity of the legal arguments raised.

598. As part of the directions that will be made consequent upon the delivery of these reasons, the Court will make directions for the parties to identify what issues raised by the ASOC remain genuinely in dispute and to attempt to agree on further preparatory steps to enable the just, quick and cheap determination of those issues.

The Lynn Report — Reasons for interlocutory ruling

599. This final section of the Court’s reasons concerns the admissibility of parts of the Lynn Report. Ms Lynn is a qualified chartered accountant and the managing partner of Parking & Traffic Consultants. It was said her expertise included conducting demand and feasibility studies relating to hospital car parks. The Health District sought to tender the Lynn Report in the proceedings.

600. As I will explain further below, I rejected the tender of the Lynn Report prior to the commencement of the hearing proper. On the 65th day of the hearing, I heard a fresh application by the Health District to tender some parts of the Lynn Report. Macquarie consented to the tender of some parts of the report but not to others. After receiving lengthy written submissions and hearing argument, I said (T3618:3–13):

“HIS HONOUR: Gentlemen, the view I have come to is that the proper analysis of procedurally where we are at is that I need to start from the application of the UCPRs and I would not be disposed under the UCPRs to grant leave to rely on the disputed parts of the report. If that be wrong and the disputed parts were admissible under s 60, then I would exercise the Court’s discretion under s 135 to exclude the disputed parts as being unfairly prejudicial.”

601. The parties indicated that they were content that I should give my reasons for that conclusion in this judgment. What follows are those reasons.

The Lynn Report — Background

602. As I have set out elsewhere (see paragraph [41] above), after the openings in 2014, the hearing proper was fixed to recommence on 12 May 2014. On 1 May 2014 I heard an application by the Health District for leave to rely on the Lynn Report. To understand the application which is the subject of these reasons, it is necessary to say something about the application made on 1 May 2014.

603. On page 5 of the Lynn Report, Ms Lynn set out what she had been asked to do and what she had done (emphasis in original):

“I have been asked to provide an opinion on the car parking demand assumptions and car parking demand opinions of Mr Christopher Milou and Mr Alan O’Sullivan, as referred to in, or which underlie, their respective reports.

Following a review of these reports I determined that the best way to evaluate the car parking demand assumptions and car parking demand opinions expressed by Mr Milou and Mr O’Sullivan was to test those assumptions by independently carrying out surveys and analysing the current parking demand at the site. I then extrapolated those outcomes to assess the potential net profit that MIHC would have realised from the year 2000 (start of claim) to 2099 being the end of the Head Lease. I applied PTC’s standard methodology for estimating parking demand and revenues at hospital sites by reference to the results of surveys and, where this was not possible or available, by reference to work done at other similar hospitals.”

604. At the centre of the Health District’s argument in support of its initial application was that the Lynn Report filled a gap in the expertise of each of the experts in relation to the operation of the car park, being Mr O’Sullivan for Macquarie and Mr Milou for the Health District. That gap was said to be that neither of those experts had done, nor was qualified to do, a demand study in relation to the car park. It was put to me that Ms Lynn had done such a study based on data which she had obtained from surveys of the actual operation of the car park.

605. The results of her surveys and other relevant data were contained in sections 8 and 9 of the Lynn Report. So much was confirmed by this exchange which I had with Mr Burton SC for the Health District (1 May 2014: T19:30–38):

“HIS HONOUR: Mr Burton, can I stop you there? Where does she actually answer the question you asked her? Where do I find, yes, no, here is why, or why not?

BURTON: She does not give that in one place because the way these demand studies are done leads to the net present value analysis she has done. The conclusion is, in a sense, scattered through the report, but the core material is in sections 8 and 9.”

606. I disposed of the application on that occasion in this way (1 May 2014: T20:22–T21:5) (emphasis added):

“HIS HONOUR: … I am presently not disposed to grant leave for Miss Lynn's report to be relied on as a report in the proceedings, that is to say, something that might be formally read and that she is cross‑examined.

I think there is considerable force in Mr Dubler's submission that, in a sense, it is all a bit late. I am not criticising your side for the motive in putting it on. I understand that. Mr O'Sullivan and Mr Milou have been engaging on a particular basis, recognising they didn't have a demand study, whatever that happens to be, but they were doing the best they could.

I don't think it would be consistent with proper case management at this point to allow that to be disrupted by formally introducing a report such as Miss Lynn's.

It seems to me however there is a middle ground and that is that they continue engaging but I would certainly not stop them and I think if any party wanted a direction to this effect I would make it. Nor should they be stopped from taking into account her report as they would take into account any reference work or any other piece of material they thought was relevant.”

607. In reaching that conclusion, I was focusing on material I had been specifically taken to in the Lynn Report in which she had set out the results of her various studies. In fairness to the parties, it is to be acknowledged that my observations in disposing of the application did not confine the use of the Lynn Report as a reference work merely to those parts of the report. The application which is the subject of these reasons centred on whether or not some of those other parts should be admitted into evidence.

608. On 9 February 2015, the 65th day of the hearing, the Health District applied for a number of parts of the Lynn Report to be admitted into evidence. Commendably, there was agreement between the parties in relation to most parts of the Lynn Report as to what should be admitted and what was not pressed. The three main areas of dispute — the resolution of which is also determinative of the fate of a few other sentences sought to be relied on — were Ms Lynn’s curriculum vitae; a short section on pages 57 and 58 expressing an opinion that the car park would only get the excess demand from when other car parking areas around RPA had been utilised; and, most significantly, sections 12.1 (staff pricing) and 12.3 (price elasticity).

609. The argument was primarily devoted to the two parts of section 12, in which Ms Lynn said (at page 67 of her report) that she had “been asked to consider what price for staff pricing would be set by a commercial operator seeking to maximise profits”. In those sections Ms Lynn clearly assumed the role of an expert rather than just the gatherer of data. Her key conclusions were that if Macquarie “increased staff prices to $35 or $50 a week, the consequences would be exactly the opposite of those mentioned above and therefore not sustainable or commercially viable” (Lynn Report, p 71) and “having reviewed Mr. O’Sullivan’s price elasticity considerations in Section 10 of his report as referenced above, I concur with his observations and conclusions” (Lynn Report, p 75).

610. By the time of the Health District’s further application, the hearing was well advanced. Mr O’Sullivan and Mr Milou had prepared a number of reports and had participated in conclaves. On many issues they had either come to agreement or had more clearly refined the scope of any disagreements. Insofar as any reliance on the Lynn Report was concerned, Mr Milou had not taken any account of it. However, in his sixth supplementary report dated 3 December 2014, Mr O’Sullivan said in relation to section 12 of the Lynn Report (citations omitted):

“I relied on Section 12 in the following respects:

●   Based on my general experience in the industry, I consider CL (& her business — Parking & Traffic Consultants) is one fo the leading parking consultants in Australia, including in respect of demand & revenue projections. In that context, CL has produced numerous car parking studies in respect of major hospital car parks, several of which I have had the opportunity to review;

●   This includes several reports written for NSW Health Infrastructure in the context of its current hospital car park development program;

●   As a result, I have substantial respect for CL’s expertise in relevant aspects of hospital car businesses;

●   In my Final Report and in the Joint Report, I expressed certain views about RPA staff pricing, which is critical to the assessment of CSCP;

●   I consider that the opinions that I formed in relation to staff pricing were significantly reinforced (in my mind) by the opinions and observations of CL in Section 12.1 of her Report. In that respect, Section 12.1 is significantly relevant to my own opinion in relation to price;

●   I adopt and acknowledge the reasonableness, of the opinions set out in Section 12.1 of CL’s report.

●   I consider that Section 12.1 should be accepted by the Court;

●   In my First Report & Final Report I expressed certain views as to the relevance of price elasticity in respect of staff pricing in the evaluation of CSCP;

●   I consider that the opinions that I formed in relation to staff pricing were reinforced (in my mind) by the opinions and observations of CL in Section 12.3 of her Report. In that respect, Section 12.3 is significantly relevant to my own opinion in relation to price elasticity;

●   I adopt and acknowledge the reasonableness, of the opinions set out in Section 12.3 of CL’s report.

●   I consider that Section 12.3 should also be accepted by the Court.”

611. The passage from Mr O’Sullivan’s report which I have just quoted must, however, also be considered in the light of the exchange I had with Mr Stowe of Counsel (for the Health District) during the course of argument (T3586:1–13) (emphasis added):

“HIS HONOUR: … Mr Stowe is there anywhere else in Mr O’Sullivan’s material where he expressly adopts part of Ms Lynn’s report?

STOWE: No your Honour. But I would simply make the observation that in that sixth supplementary report he explicitly adopts two particular sections unconditionally. So in my submission there can be no real doubt as to the express adoption by Mr O’Sullivan of particular sections in that report.

HIS HONOUR: Is there anywhere in his report where he then expressly exposes in his reasoning, in his chain of reasoning, how he uses her report?

STOWE: No your Honour there is not.”

The Lynn Report — Resolution

612. The argument in relation to sections 12.1 and 12.3 of the Lynn Report (and the other contested sections more generally) proceeded, correctly in my view, on the assumption that prima facie Ms Lynn was suitably qualified to express the views set out in her report and that they would, therefore, be admissible pursuant to s 79 of the EA. The argument turned on three issues:

1. Whether there were exceptional circumstances warranting the grant of leave under UCPR Pt 31 r 31.28;

2. Whether, in any event, those sections were admissible by reason of the fact that they had been relied upon by Mr O’Sullivan and, once admitted, were proof of the facts set out therein pursuant to s 60 of EA;

3. The role of the discretions under ss 135 and 136 of the EA.

613. The Court will deal with each of these in turn.

The Lynn Report — Leave

614. UCPR r 31.28 provides (emphasis added):

“31.28 Disclosure of experts’ reports and hospital reports

(1) Each party must serve experts’ reports and hospital reports on each other active party:

(a) in accordance with any order of the court, or

(b) if no such order is in force, in accordance with any relevant practice note, or

(c) if no such order or practice note is in force, not later than 28 days before the date of the hearing at which the report is to be used.

(2) An application to the court for an order under subrule (1) (other than an order solely for abridgment or extension of time) may be made without serving notice of motion.

(3) Except by leave of the court, or by consent of the parties:

(a) an expert’s report or hospital report is not admissible unless it has been served in accordance with this rule, and

(b) without limiting paragraph (a), an expert’s report or hospital report, when tendered under section 63, 64 or 69 of the Evidence Act 1995 , is not admissible unless it has been served in accordance with this rule, and

(c) the oral expert evidence in chief of any expert is not admissible unless an expert’s report or hospital report served in accordance with this rule contains the substance of the matters sought to be adduced in evidence.

(4) Leave is not to be given as referred to in subrule (3) unless the court is satisfied:

(a) that there are exceptional circumstances that warrant the granting of leave, or

(b) that the report concerned merely updates an earlier version of a report that has been served in accordance with subrule (1).”

615. Three other aspects of the rules are relevant.

616. First, UCPR r 31.19 provides:

“31.19 Parties to seek directions before calling expert witnesses

(1) Any party:

(a) intending to adduce expert evidence at trial, or

(b) to whom it becomes apparent that he or she, or any other party, may adduce expert evidence at trial,

must promptly seek directions from the court in that regard.

(2) Directions under this rule may be sought at any directions hearing or case management conference or, if no such hearing or conference has been fixed or is imminent, by notice of motion or pursuant to liberty to restore.

(3) Unless the court otherwise orders, expert evidence may not be adduced at trial:

(a) unless directions have been sought in accordance with this rule, and

(b) if any such directions have been given by the court, otherwise than in accordance with those directions.

(4) This rule does not apply to proceedings with respect to a professional negligence claim.”

617. Second, Practice Note SC Eq 5 provides:

“Restrictions on the number of experts

9. Generally, and in accordance with UCPR 31.20 (2), only one expert per specified issue will be allowed to:

the plaintiff, and

any one of multiple defendants. Defendants who have the same interest in the expert evidence will be treated as one, and should confer at an early stage to agree on a single expert.

10. More than one expert per specified issue may be allowed if good reason is shown in a particular case.11. Generally, the experts engaged in relation to a specified issue should confer before the trial and produce a joint report in accordance with UCPR 31.24 to include (where relevant):

a statement as to their agreed conclusions, and

a statement of their differences and of the apparent reasons thereof.

Directions regarding experts

12. Under UCPR 31.19, a party considering or intending to adduce expert evidence at trial must promptly seek directions from the court in that regard. A party must seek those directions in accordance with paragraphs 13, 14 and 15 of this Practice Note.”

618. Third, s 56 of the Civil Procedure Act 2005 (NSW) (the “CPA”) includes:

“(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.

(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.”

619. There was no dispute between the parties that the Health District had not complied with UCPR r 31.28 in relation to the Lynn Report. It could only be admissible if leave was granted under UCPR r 31.28(4)(a), which required the Health District to demonstrate that there were “exceptional circumstances that warrant the granting of leave”. The power to grant leave must itself be exercised in accordance with the overriding purpose identified in s 56 of the CPA.

620. The rules do not specify what constitutes “exceptional circumstances”. It depends on the facts of each case. The fundamental consideration must be the just determination of the proceedings: see ASIC v Rich [2005] NSWSC 706 at [56]–[58].

621. The Health District submitted that the following justified a finding of “exceptional circumstances”:

“(a)   The fact that the general law provides that “reference works” may be relied on by experts despite the fact that they are hearsay, and that any such reference works relied upon are prima facie unconditionally admissible (subject to discretionary exclusion);

(b)   The fact that the Court expressly authorized the experts to use the Lynn report as a potential “reference work” in the conventional way, and the Plaintiff expressly acquiesced in that course. By implication that course included the tender of those sections relied upon by the experts;

(c)   The Plaintiff has had notice of the Lynn report since May 2014;

(d)   The expertise of Ms Lynn is not challenged. Indeed, Mr Milou adopts substantial sections of her report;

(e) The fact that “considerable care should be exercise before s136 of the Evidence Act is invoked to limit the use of evidence on the ground that its use might be unfairly prejudicial”. The policy underlying section 60 “should not be undercut by the making of orders under s 136 as a matter of course”. Directions under section 136 “should not be made as a matter of course”: see Defendant 1, [40(a)]

(f)   The fact that the Defendant does not object to tender being conditional on Ms Lynn being made available for cross-examination (thereby eliminating any forensic prejudice otherwise arising from the inability to cross-examine);

(g) The fact that “prejudice” must be unfair to justify discretionary exclusion of evidence under section 135-6: Defendant1, [40(c)]; and the absence of any basis for finding that material “unfair prejudice” would be caused by the tender of the Contested Sections: see paragraph 37 to 40 above;

(h)   The fact that Ms Lynn has agreed to be bound by the Expert Code, and there is no basis to infer that her opinion has been compromised (consciously or unconsciously) by adversarial bias: see paragraph 28 above;

(i)   The candidly conceded limitation of expertise of Mr Milou and Mr O’Sullivan in relation to pricing, by reason of which the evidence of Ms Lynn on pricing would form a useful and relevant part of the evidentiary matrix relating to pricing.”

622. I do not accept that any of those matters, taken either severally or cumulatively, constitute “exceptional circumstances” in this case to warrant the admission of the Lynn Report to which objection had been taken. In relation to sections 12.1 and 12.3, I develop in paragraphs [628] to [636] below why I do not consider those sections to be “reference works” of the kind admissible under the general law and why they do not appear to have been used by Mr O’Sullivan in a legally significant way.

623. In any event, to the extent that any or all of the matters identified in paragraph [621] above may be such circumstances, their quality as such is negatived, or it would be contrary to the overriding purpose to grant leave, by reason of the following matters:

1. Each of Messrs O’Sullivan and Milou had grappled with the pricing in question and with each other’s views on the topic. No need to introduce an additional expert was made out. In particular, the Health District had failed to demonstrate any satisfactory reason as to why it should be permitted to have a second expert on these topics contrary to the general position set out in the applicable practice note (see paragraph [617] above) that each party should only have one expert on any particular issue.

2. Insofar as it was suggested that either or both of those gentlemen lacked expertise in relation to pricing, the case had been conducted with them as the experts on the question, notwithstanding that alleged limitation. If the Lynn Report was to be admitted by reason of that alleged limitation of expertise, then it followed as a matter of procedural fairness that Macquarie would be entitled to call a suitably qualified expert to meet Ms Lynn’s views (because this approach assumes Mr O’Sullivan’s lack of expertise). The Court would not permit that to happen because, on the 65th day of the hearing, it would not be consistent with the overriding purpose to bring about a situation where delay and expense would be incurred to enable the briefing of a further expert by Macquarie. Macquarie had approached a possible expert and, through its solicitor, had tendered evidence that the costs associated with that expert could be as high as $240,000 and that four months would be required to prepare the responsive report. Even if those figures were an overestimate (by reason of the fact that a responsive report might only be required in relation to more limited matters, such as section 12 of the Lynn Report), it was clear that delay and additional expense would be incurred. Without being critical, the behaviour of the parties to date left me with no doubt that any new avenue would be fully explored and that compliance with timetables could not be assumed with confidence. Once the evidence was on, Ms Lynn and Macquarie’s new expert would need to conclave and be cross-examined. If all of this was allowed to happen, there was no way the proceedings would be completed within the time then allocated for their completion.

3. As is developed further below (see paragraphs [630] to [636]), Mr O’Sullivan’s cross referencing of the Lynn Report was neither to the extent nor of the kind that made it necessary for it to be in evidence to understand Mr O’Sullivan’s conclusions.

4. I accept Macquarie’s submission that there was very significant overlap between the Lynn Report and Mr O’Sullivan’s reports as follows:

LYNN REPORT	O’SULLIVAN REPORTS
Section 12.1 (staff pricing)	Expert Report dated 18.11.13 [Ex. 15P Tab 38 INQ-BD-4766-4938] — section 9.1
	Supplementary Expert Report dated 23.12.13 [Ex 15P – Tab 40 INQ-B – 4996] section 3.8
	Third Supplementary Expert Report dated 23.1.14 [Ex. 17P Tab 45 INQ-A-6447-6450] — section 2
	Fourth Supplementary Expert Report dated 09.04.14 [Ex. 35P-36P Tab 18 INQ-BD-4768-5463] — section 9
	Joint Expert Report dated 27.06.14 [Ex 59P INQ-BD-9106-9165] — sections 2.4, 2.6.2
	Final Expert Report dated 27.06.14 Ex 59P Tab 1 INQ-BD-9166-9382] — section 2.2.8
Section 12.3 (price elasticity)	Expert Report dated 18.11.13 [Ex. 15P Tab 38 INQ-BD-4766-4938] — sections 9.1
	Supplementary Expert Report dated 23.12.13 [Ex 15P — Tab 40] section 3.4.3
	Fourth Supplementary Expert Report dated 09.04.14 [Ex. 35P-36P Tab 18 INQ-BD-4768-5463] — section 10
	Joint Expert Report dated 27.06.14 [Ex 59P INQ-BD-9106-9165] — section 2.4
	Final Expert Report dated 27.06.14 Ex 59P Tab 1 INQ-BD-9166-9382] — section 2.8

The Lynn Report — The admissibility of “source materials”

624. Section 60 of the EA provides:

“60 Exception: evidence relevant for a non-hearsay purpose

(1) The hearsay rule does not apply to evidence of a previous representation that is admitted because it is relevant for a purpose other than proof of an asserted fact.

(2) This section applies whether or not the person who made the representation had personal knowledge of the asserted fact (within the meaning of section 62 (2)).

(3) However, this section does not apply in a criminal proceeding to evidence of an admission.”

625. To obtain the benefit of s 60, the evidence must have already been admitted for some other purpose. The Health District submitted that it was uncontroversial that an expert is permitted to ground his or her opinion on articles, reports and publications in their field of expertise (“source materials”), notwithstanding the source materials are strictly hearsay. However, that proposition begs the question of the evidentiary status of the source materials themselves. The Health District submitted that there are two lines of authority concerning that question which meant that Mr O’Sullivan’s stated reliance on the Lynn Report made it admissible.

626. The first line of authority was described as supporting the “broad tender principle”. This was that source material is admissible to prove the truth of the facts or opinions set out in the source material.

627. The second line of authority was referred to as the “restricted tender principle”. This was said to be that while the source material is not admitted as independent proof of facts and opinions expressed in it, it is admitted as:

1. Testimonial evidence of the expert witness if the expert witness adopts or acknowledges the correctness of the source material; or

2. Evidence of what was in fact the basis for the expert’s opinion (without being evidence of the truth of the facts and opinions contained in the source materials).

628. Macquarie responded that the opinions of another expert about the very matters that were the subject of the proceedings were not “source materials” as the authorities understood them. The latter materials were in the nature of professional, scientific literature or data which was published or otherwise widely available in the expert’s field of expertise and which formed part of the body of discourse among the relevant expert community. This included research, articles and letters in refereed journals and other authoritative professional literature. Macquarie submitted that there was a distinction between data of general application, which might qualify as source materials, and facts and opinions which are unique to the facts of the case at bar which must be proved by ordinary rules of evidence. Macquarie relied on the dictum of McGarvie J in PQ v Australian Red Cross Society [1992] 1 VR 19 at 36:

“So far I have been dealing with the entitlement of an expert witness to give evidence of facts of general application. Facts peculiar to the particular case are in a different position. They have to be proved by evidence admissible under the ordinary rules: R v Fizzell (1987) 31 A Crim R 131 and R v Turner [1975] QB 834, at p. 840. These are facts of the type which in R v Abadom [1983] 1 WLR 126, at p. 131 were treated as the facts basic to the question on which the expert was asked to express an opinion. That case draws the distinction between an expert's reliance on facts peculiar to the particular case, which require proof according to the ordinary rules of evidence and reliance on scientific data of general application, which may be derived from sources usually relied on by experts such as the witness.”

629. I accept Macquarie’s submission and the distinction drawn by McGarvie J. Ms Lynn’s opinion as to staff pricing and her concurrence with Mr O’Sullivan’s approach to the question of price elasticity are not source materials of the kind that would be admissible under either of the lines of authority identified by the Health District.

630. However, in addition to my acceptance of Macquarie’s submission on this point, in my view there is a more fundamental reason why, in the circumstances of this case, Sections 12.1 and 12.3 of the Lynn Report are not admissible and therefore, not having been admitted, do not obtain the benefit of s 60 of the EA. That fundamental reason derives from the proposition that the touchstone of admissibility is relevance. As s 56(2) of the EA provides, “evidence that is not relevant in the proceedings is not admissible”.

631. I have set out in paragraph [610] above that section of Mr O’Sullivan’s report in which he sets out how he relied on Section 12 of the Lynn Report. In summary, he asserts his view (and assuming he is qualified to express it) that Ms Lynn is one of the leading parking consultants in Australia and that he has “substantial respect” for her expertise. He then goes on to say that the opinions he formed in relation to staff pricing and price elasticity were “significantly reinforced” by her opinions and observations, which he regarded as “significantly relevant” to his own opinions. He also says that he adopted and acknowledged the reasonableness of her opinions.

632. Accepting, as I do, the truth of those statements, they do not make the Lynn Report relevant. As counsel for the Health District acknowledged, it is nowhere apparent in Mr O’Sullivan’s report how he relied upon or otherwise used the Report in his own processes of reasoning to arrive at the opinions expressed in his report.

633. Section 55 of the EA provides:

“55 Relevant evidence

(1) The evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding.

(2) In particular, evidence is not taken to be irrelevant only because it relates only to:

(a) the credibility of a witness, or

(b) the admissibility of other evidence, or

(c) a failure to adduce evidence.”

634. The purpose of opinion evidence is to enable the Court to find facts. In the absence of it being apparent how the material in the Lynn Report affected Mr O’Sullivan’s process of reasoning, that material cannot be said to “rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding”, that fact being the fact which the Court is being asked to infer or find from Mr O’Sullivan’s opinion.

635. In the absence of an exposed, reasoned connection between the material in the Lynn Report and Mr O’Sullivan’s process of reasoning, his references to being reinforced in his views or his adoption and acknowledgement of the reasonableness of Ms Lynn’s opinions are no more or less than a modern form of oath helping. I intend no disrespect to Mr O’Sullivan in making that comment. Nevertheless, the opinion of expert A will not be made relevant if expert B does no more than acknowledge expert A’s expertise and adopts or is fortified by the opinions of expert A.

636. For the reasons expressed in paragraphs [630] to [635] above, it is therefore my view that the inquiry into the admissibility of Sections 12.1 and 12.3 of the Lynn Report never even reaches the point where the authorities concerning the admissibility of “source materials” need to be considered.

The Lynn Report — Discretionary exclusions and limitations

637. Sections 135 and 136 of the EA provide:

“135 General discretion to exclude evidence

The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might:

(a) be unfairly prejudicial to a party, or

(b) be misleading or confusing, or

(c) cause or result in undue waste of time.

136 General discretion to limit use of evidence

The court may limit the use to be made of evidence if there is a danger that a particular use of the evidence might:

(a) be unfairly prejudicial to a party, or

(b) be misleading or confusing.”

638. If, contrary to the views I have thus far expressed about the relevance and admissibility of the evidence, the material was admissible on some basis, I would nevertheless have excluded it under s 136 of the EA. Its “probative value” is determined by two matters. First, there is the way in which material was used as Mr O’Sullivan explained it in his report (set out in paragraph [610] above). Second, to that must be added the complete absence of any explanation in Mr O’Sullivan’s report as to how the material was used by him as part of his reasoning. When these two matters are taken together, the probative value of the evidence is very small. It is outweighed by the considerations set out in paragraph [623] above such that, in my view, each of the sub-sections of s 135 is made out and I would have exercised the Court’s discretion to exclude the evidence pursuant to that section.

639. Both parties, but for quite different reasons, raised the possibility of Sections 12.1 and 12.3 (and the other contested parts of the Lynn Report) being admitted subject to a limitation under s 136 of the EA. Given the view I have formed about the admissibility of the material (including its exclusion under s 135 of the EA), it is not necessary for me to consider the possibility of limited admission under s 136 of the EA.

The Lynn Report — pp 57–58

640. This is the other substantial section to which objection was taken. The objected passage is short enough to be conveniently reproduced:

“As mentioned on page 51 of this report I concur with Mr O’Sullivan’s assessment that CSCP would be the least likely parking choice for RPAH staff, outpatients and visitors due to its relatively inconvenient location.

…

In other words, Susan Street Car Park, St John’s Car Park and relevant on-street spaces will be utilised by parkers in preference to CSCP, so that demand will only flow into CSCP if those other spaces are full. CSP only gets the excess demand when the other spaces are full.

In appropriate scenarios, I have also undertaken a similar process in relation to parking demand at MIHCPH, assuming that it was built (which in reality it wasn’t), except that first priority for parking is given to MIHCPH with any surplus being allocated to RPAH, as CSCP would have been the primary source of parking supply for MIHCPH. Outpatients and visitors to RPAH would be more likely to use Susan Street Car Park and on-street parking close to RPAH in preference to CSCP, due to the distance from CSCP to RPAH (approximately 300m).”

641. As will be apparent, this section expresses agreement with Mr O’Sullivan’s report. It is not a section that Mr O’Sullivan says he relied upon. Therefore, the second aspect of the arguments dealt with above as to why this passage should be admissible does not apply.

642. The reasons given in paragraph [623] above as to why the Court declined to grant leave for the other contested sections of the Lynn Report to be admitted apply equally to this passage. In particular, given the full engagement on this aspect of the matter between the existing experts, there is no case for an essentially duplicating or concurring expert opinion to be admitted.

643. In any event, for the reasons given in paragraphs [623] and [641] above, including the element of unnecessary duplication, I would otherwise have excluded the passage under s 135 of the EA because its probative value is, in my view, substantially outweighed by the danger that the material is either unfairly prejudicial to Macquarie or would cause or result in undue wasted time.

644. In light of my rejection of Sections 12.1 and 12.3 of the Lynn Report and the passage set out in paragraph [645] above, I also rejected as irrelevant Ms Lynn’s curriculum vitae and the other few sentences about which the parties were in dispute.

Next steps

645. The Court will appoint a further directions hearing in these proceedings at a mutually convenient time after the parties have had an opportunity to consider these reasons. Without limiting the matters which the Court expects the parties to have considered for the purposes of that directions hearing, those matters include:

1. Without inviting re-argument, the identification of any obvious factual errors or omissions in these reasons;

2. Whether any issue which the Court has considered it unnecessary to determine needs to be answered to enable the final damages calculations to be made;

3. Whether there are any additional matters which, because of these reasons, the experts say they require the Court to answer to enable the final damages calculations to be made;

4. What aspects (if any) of the Health District’s cross-claim are still to be pressed and further steps required to facilitate the efficient hearing of those matters; and

5. The most timely and cost effective way in which arguments as to the costs of the enquiry can be determined.

646. Consistently with the parties’ obligations under s 56 of the CPA, to the extent issues emerge from these reasons which require resolution to enable the final damages calculations to be made, the Court urges the parties to exhaust all avenues of compromise before matters are presented to the Court on a contested basis. So far as possible, the Court expects the parties to work towards all outstanding matters being dealt with at one further substantive hearing.

     Schedule A - issues posed by the parties for identification (43.4 KB, docx)

Amendments

14 February 2017 - Changes to calculations in paragraph 20(1)(d), (f) and (g)

Decision last updated: 14 February 2017