Porter v Mulcahy and Co Accounting Services Pty Ltd (Ruling)
[2020] VSC 430
•15 July 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S ECI 2019 02810
| TIMOTHY PORTER | First Plaintiff |
| - and - | |
| CHRISTOPHER CONHEADY | Second Plaintiff |
| - v - | |
| MULCAHY & CO ACCOUNTING SERVICES PTY LTD (ACN 105 360 325) & Ors (according to the Schedule) | Defendants |
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JUDGE: | DELANY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 29 June 2020 |
DATE OF RULING: | 15 July 2020 |
CASE MAY BE CITED AS: | Porter v Mulcahy & Co Accounting Services Pty Ltd (Ruling) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 430 |
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PRACTICE AND PROCEDURE – Application to adjourn civil trial – Where emergency power directions under Public Health and Wellbeing Act 2008 (Vic) – Where serious risk to public health from pandemic – In-person trial impermissible – Audio-visual trial opposed – Overarching purpose in civil litigation – Communication between legal practitioner and party impracticable – Application allowed – Trial adjourned – Rooney v AGL Energy Ltd (No 2) [2020] FCA 942 considered – Evidence (Miscellaneous Provisions) Act 1958 (Vic) s 42E – Civil Procedure Act 2010 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr P G Cawthorn QC with | Nevetts Lawyers |
| Mr P H Caillard | ||
| For the First and Second Defendants | Ms K J D Anderson | Clyde & Co |
| For the Third Defendant | Mr S D Hay SC with Mr L Molesworth | Holding Redlich |
HIS HONOUR:
Background
This proceeding is listed to commence as a trial on liability only on 27 July 2020 on an estimate of 10 days. The trial plan prepared jointly by the parties indicates that 12 sitting days may be required.
The listing on 27 July 2020 is the second occasion on which this proceeding has been fixed for trial. On 10 March 2020, the Court fixed the matter for trial on 2 April 2020 on an estimate of eight days. That trial date was vacated on 27 March 2020.
The proceeding came on for pre-trial directions on 29 June 2020. On that occasion, the plaintiffs expressed a clear preference for the evidence of three witnesses of fact, Timothy Porter and Christopher Conheady, the first and second plaintiffs, and Mr James Mulcahy, the second defendant, to be given in person in the conventional manner rather than by audio visual means. I informed the parties that inquiries would be made to ascertain whether or not a trial of the proceeding where the evidence of those witnesses could be given in person, whether in Melbourne or in Ballarat, proximate to where the events in question took place and broadly where those witnesses are located, could be accommodated. Further, that if the trial date were to be vacated, the earliest that a fresh trial date could be accommodated would be 2021.
Following inquiries, the parties were informed on 3 July 2020 that, due to the then current COVID-19 circumstances, the Court was not in a position to proceed with the trial on 27 July 2020, other than as a trial solely conducted by audio visual means.
On 7 July 2020, the plaintiffs applied to vacate the trial date so as to provide a greater likelihood of a conventional hearing. On 10 July 2020 the Court was informed that the defendants do not oppose the plaintiffs’ application. The plaintiffs and the first and second defendants filed submissions in support of the application.
The issues in the proceeding
The proceeding was commenced on 21 June 2019. It concerns events that occurred in 2017 and early 2018.
Mr Porter and Mr Conheady are involved in a machinery hire, utilities construction and civil contracting business. Mulcahy & Co Accounting Services Pty Ltd, of which Mr James Mulcahy is a director, provided accountancy services over some years to them and to the excavation business in which they are both involved. It is alleged that from June 2017, the accounting practice was retained to advise the plaintiffs concerning the purchase of a 70% interest in Chris’s Body Builders – a manufacturer of truck tipping bodies and trailers, a business conducted and controlled by Mr Chris Debono.
The plaintiffs allege that in the course of the retainer Mr Mulcahy learned confidential information about Chris’s Body Builders. It is alleged that by 4 December 2017, Mr Conheady and Mr Porter agreed that both would be purchasers of the interest in the business and both engaged Mr Mulcahy in connection with the transaction. It is alleged that after applications to various banks for funding that bank finance was secured by the plaintiffs in around February 2018 to fund the purchase of a 70% interest in the business , based on an overall value of the business of $12 million.
The plaintiffs plead that on 28 February 2018, the vendor, Mr Debono said the business was off the market and that he would come back to them in the next six months.
BFMM Investments Pty Ltd was incorporated on 27 March 2018. Mr James Mulcahy is a director of that company, together with Mr Stephen Broadbent and Mr Brad Matthews. Mr Matthews is a solicitor at the firm, Mulcahy Legal, which, according to the witness statements, is located in the same building as Mulcahy & Co Accounting Services Pty Ltd. In around July 2018 BFMM Investments purchased a 70% interest in Chris’s Body Builders.
The plaintiffs’ claim against Mr Mulcahy and the accounting practice is for breach of fiduciary duty owed to the plaintiffs pursuant to retainer or otherwise. It is alleged that Mr Mulcahy usurped the plaintiffs’ opportunity to acquire the 70% interest. There are claims against BFMM Investments for knowing involvement in breach of fiduciary duty.
Based on the witness statements, there are material differences in the evidence to be given at trial in relation to the advice sought and received from Mr Mulcahy. It is submitted on behalf of the plaintiffs, and may be accepted, that cross-examination of Mr Mulcahy will be important in determining the nature of the relationship between the plaintiffs and Mr Mulcahy and his accounting practice, what the details of that relationship were and the existence of fiduciary duty. The submissions attach a table illustrating some of the key differences between two of the principal witnesses, Mr Conheady and Mr Mulcahy, based upon their witness statements.
On behalf of Mr Mulcahy and the accounting practice, a witness statement has been filed from Mr Debono.
The witness statements contain evidence about attempts by Mr Conheady and Mr Porter to secure finance from various banking institutions. One important aspect of Mr Debono’s evidence is to the effect that he became unhappy with the apparent inability of Mr Porter and Mr Conheady to secure finance to fund the purchase of the 70% interest in his business. That is, to the point that he was unwilling, by early 2018, to sell a 70% interest in the business to them — noting that he was to retain the remaining 30% interest in the business.
Whilst the order made on 29 June 2020 did not refer to the desirability of Mr Debono’s evidence being given in person, the submissions on behalf of the plaintiffs add the desirability of his evidence being given in person to that of Mr Porter, Mr Conheady and Mr Mulcahy.
The submissions for the plaintiffs refer to the likelihood that the defendants may seek to place considerable reliance on Mr Debono’s evidence and his assertion that at some time he changed his mind about selling an interest in his company to the plaintiffs. It is submitted the demeanour of Mr Debono in giving evidence will be important.
The plaintiffs submit that they wish to be satisfied there has been a just and a proper opportunity to present their case in the conventional manner. They express concern that this will not be achieved unless Mr Mulcahy, Mr Conheady and Mr Debono give viva voce evidence. By that they mean, evidence in person rather than by audio visual means as would ordinarily occur absent restrictions on gatherings and travel due to the COVID-19 pandemic.
Should the trial proceed as an audio visual trial?
Pursuant to s 42E of the Evidence (Miscellaneous Provisions) Act 1958 (Vic), provided the Court is satisfied that the technical requirements in s 42G of that Act are met the Court has power on its own initiative or on the application of a party to the proceeding to direct that the trial proceed by audio visual link.
Other than to require satisfaction that the technical requirements in s 42G are, or can reasonably be met, s 42E(1) does not specify criteria to be considered when determining whether or not a direction should be made. Here, the basis for the application to vacate the trial date is because the only means by which the trial might otherwise proceed is purely by audio visual means.
In New South Wales, different legislative provisions apply. The legislation in that State identifies specific criteria to be considered by the Court on an application in the circumstances of the current COVID-19 pandemic.[1] Section 22C of the Evidence (Audio and Audio Visual Links) Act 1998 (NSW), relevantly provides:
[1]See Haiye Developments Pty Ltd v The Commercial Business Centre Pty Ltd [2020] NSWSC 732 at [48]-[52].
(1)This section has effect for the prescribed period and prevails to the extent of any inconsistency with any other provision of this Act or any rules of court.
…
(4)The appearance in any proceedings (other than proceedings prescribed by the regulations) of a witness or legal practitioner representing a party may take place by way of audio visual link if the court directs.
(5)A direction under subsection (2A), (3), (3A) or (4) may be made on the court’s own motion or following the application of a party but only after the parties have had an opportunity to be heard on the matter.
(6)The court is to make a direction under this section only if it is in the interests of justice, having regard to the following—
(a)the public health risk posed by the COVID-19 pandemic,
(b)the efficient use of available judicial and administrative resources,
(c)any relevant matter raised by a party to the proceedings,
(d)any other matter that the court considers relevant.
(7)If an audio visual link is used the court must be satisfied that a party is able to have private communication with the legal representative of the party and has had a reasonable opportunity to do so.
(8)Nothing in this section requires or permits the use of an audio visual link if the necessary audio visual facilities are unavailable or cannot reasonably be made available.
…
When exercising the discretion in s 42E(1) of the Evidence (Miscellaneous Provisions) Act 1958 (Vic) the Court must give effect to the overarching purpose in s 7(1) of the Civil Procedure Act2010 (Vic). Namely, to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.
Section 9 (1) of the Civil Procedure Act 2010 (Vic)relevantly provides:
Court’s powers to further the overarching purpose
(1)In making any order or giving any direction in a civil proceeding, a court shall further the overarching purpose by having regard to the following objects—
(a) the just determination of the civil proceeding;
(b)the public interest in the early settlement of disputes by agreement between parties;
(c)the efficient conduct of the business of the court;
(d)the efficient use of judicial and administrative resources;
(e)minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required for any interlocutory steps that are necessary for—
(i)the fair and just determination of the real issues in dispute; and
(ii)the preparation of the case for trial;
(f)the timely determination of the civil proceeding;
(g)dealing with a civil proceeding in a manner proportionate to—
(i)the complexity or importance of the issues in dispute; and
(ii)the amount in dispute.
Common to the overarching purpose, expressly mentioned in s 9(1)(a)of the Civil Procedure Act (Vic) and also in s 22C(6) of the NSW Act, is the requirement for a just determination of the proceeding. One of the specific criteria mentioned in the NSW legislation is whether, if an audio visual link is to be used, the court is satisfied that the party is able to have private communication with the legal representative of that party and has had a reasonable opportunity to do so.
In the present case there are essentially three bases for the application to vacate the trial. Each is said to go to the issue of a just trial.
The first basis concerns cross examination involving credit issues by video link. It is agreed between the parties that the trial involves viva voce evidence from the named witnesses whose credibility is likely to be determinative of key issues in dispute in the proceeding. The parties are agreed that cross-examination by video-link where the witness is in a remote location is unsatisfactory and likely to be productive of inefficiency, delay and unfairness.
The parties have helpfully identified a number of recent decision which deal with applications to adjourn or vacate trial dates in the current the COVID-19 circumstances based on credit being a critical issue at trial. In one of the most recent decisions to which I have been referred, Rooney v AGL Energy Ltd (No 2),[2] Snaden J referred to earlier decisions of the Federal Court where views had been expressed that assessments of credit can be made as well by remote means as by traditional in-court examination.[3] Whilst it is unnecessary to give detailed consideration to those competing views on this application, for my part I am not convinced that there are material disadvantages in proceeding with a trial by audio visual means where there are contested issues of credit. That is so, provided the technical requirements are satisfied which, when they are satisfied, provide the witness with suitable access to documents and materials and enable a very close–up view of the witness, a much closer view than would typically be the case in a conventional trial conducted in a traditional court room.
[2][2020] FCA 942.
[3]Ibid [18] citing ASIC v Wilson [2020] FCA 873, [35], Tetley v Goldmate Group Pty Ltd [2020] FCA 913, [16] and Capick v Ford Motor Company of Australia Ltd [2020] FCA 486, [19]). See also Gatto v Australian Broadcasting Corp (No 1) [2010] VSC 420.
The second and third matters relied upon arise following the publication on 8 July 2020 by the Deputy Chief Health Officer for Victoria of a ‘stay at home directions (restricted areas) direction’ (‘Direction’) pursuant to s 199(2)(a) of the Public Health and Wellbeing Act 2008 (Vic).
Turning to the second matter, the submissions on behalf of Mr Mulcahy and the accounting practice refer to health issues which would prevent Mr Debono from giving evidence other than from his office in Ballan. They submit that Mr Debono has limited technical computer skills. It is said that such limited skills, in combination with the social distancing rules and the Direction are likely to affect Mr Debono’s ability to give evidence remotely due to the difficulty in providing him with an appropriate level of technical support.
The third matter relied upon both arises in consequence of the recent Direction and also aligns with the specific statutory consideration in s 22C(7) of the NSW legislation.
Each of the four witnesses to whom I have referred are located in the Ballarat district. Whilst the plaintiffs’ solicitors are located in Ballarat, the solicitors for each of the defendants are located in Melbourne, and counsel for all parties are located in Melbourne. Pursuant to clause 8(2) of the directions, a person in any one of the ‘restricted areas’, which includes metropolitan Melbourne, can only leave their residential premises for four reasons. One of those reasons is to attend work, but ‘only if it is not reasonably practicable for the person to work from the premises’.
Understandably, the witnesses and those who are involved who reside in the Ballarat region do not wish to travel to Melbourne in the present circumstances. In the case of Mr Conheady, I am told that the risk of him doing so is particularly acute because of a past history of respiratory issues and malfunctioning kidneys, and a compromised immune system.
When the matter was last before the Court, it was anticipated that in the case of an audio visual trial, counsel, solicitors and clients/witnesses would be present in one or more locations together. In that way the parties would be able to conduct an audio visual trial in a convenient and efficient manner. As well as being able to so as to facilitate the cross examination of witnesses using multiple devices with suitable social distancing measures in place, it was expected that the parties would be able to readily provide instructions and to confer with solicitors and counsel. As a result of the Direction, in the particular geographic circumstances that apply to the parties, witnesses and practitioners in this case, that is no longer feasible.
Disposition
In light of the Direction and the submissions by the parties as to the likely impact of the Direction on the conduct of the trial, I accept that interests of justice require that the 27 July trial date should be vacated. That is so, even though to do so will inevitably impact upon the efficient conduct of the business of the Court.
I accept that in the circumstances of this case, in particular having regard to the location of the parties and their legal advisers and the particular difficulties that have been explained concerning Mr Debono that to vacate in the trial date is consistent with both the overarching purpose and the objects set out in s 9(1) of the Civil Procedure Act (Vic).
I will reserve the costs of the parties in relation to the application to vacate the trial date.
SCHEDULE OF PARTIES
BETWEEN:
TIMOTHY PORTER
First Plaintiff
and
CHRISTOPHER CONHEADY
Second Plaintiff
and
MULCAHY & CO ACCOUNTING SERVICES PTY LTD (ACN 105 360 325)
First Defendant
and
JAMES EDWARD MULCAHY
Second Defendant
and
BFMM INVESTMENTS PTY LTD (ACN 625 266 891)
Third Defendant
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