Taxi Apps Pty Ltd v Uber Technologies Inc & Ors
[2024] VSC 63
•23 February 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
MAJOR TORTS LIST
S ECI 2020 01585
| TAXI APPS PTY LTD ACN 149 538 616 | Plaintiff |
| v | |
| UBER TECHNOLOGIES INCORPORATED & ORS (according to the attached Schedule) | Defendant |
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JUDGE: | Nichols J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 13 February 2024 |
DATE OF RULING: | 23 February 2024 |
CASE MAY BE CITED AS: | Taxi Apps Pty Ltd v Uber Technologies Inc & Ors |
MEDIUM NEUTRAL CITATION: | [2024] VSC 63 |
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PRACTICE AND PROCEDURE — Expert evidence — Application to admit late expert evidence — Whether expert evidence properly characterised as evidence in reply — Whether expert evidence permitted to amend case in chief — Whether late service of expert evidence causes prejudice — Whether in interest of justice to admit late expert evidence — Northern Health v Robert Kuipers [2015] VSCA 172, referred to — Thomas v Powercor Australia (Ruling No 3) [2011] VSC 391, referred to — Ultra Thoroughbred Racing Pty Ltd v Those Certain Underwriters at Lloyds, London [2011] VSC 370, referred to — Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, referred to.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Hodge KC with | Corrs Chambers Westgarth |
| Mr K Loxley & | ||
| Ms C Mintz | ||
| For the Defendant | Mr D Sulan SC with | Herbert Smith Freehills |
| Ms M Ellicott |
HER HONOUR:
Introduction
The issue for decision is whether the Plaintiff (Taxi Apps) should be permitted to rely on the expert report of Jessica Olivier filed on 16 January 2024 (Olivier Report).
Taxi Apps’ case (relevantly) is that but for Uber’s alleged wrongful conduct,[1] Taxi Apps’ GoCar product would have had a greater share of the ‘rideshare’ market than the share it in fact held in circumstances in which Uber entered the market unlawfully (before ridesharing services were legally permitted in the Australian states), gaining the competitive advantages of early entry. The posited market share in the counter‑factual world is described under three scenarios. The disputed evidence concerns the Australian government research and development (R&D) tax incentive scheme. Ms Olivier has been asked to estimate the tax offset entitlement that Taxi Apps would have been entitled to claim in the prevailing counter‑factual scenarios. On Taxi‑Apps’ case, the availability of tax offset entitlement would constitute a source of capital (among other sources) to fund the scaling up of its business which would have required more capital under the counter‑factual scenarios that it did in the factual world.
[1]It is unnecessary to describe the liability case for the purposes of this ruling.
The Defendants (Uber) object to that permission. Uber says that the Olivier Report is necessarily part of Taxi Apps’ case in chief and accordingly it should have been filed some months ago. Uber says that if the evidence is allowed, it must fairly be permitted the opportunity to prepare, file and rely on responding evidence. Requiring it to do so at this time, very close to the commencement of the trial of these proceedings, would be prejudicial because it would entail the diversion of resources when they ought be concentrated on preparation for trial.
Taxi Apps submits that the evidence is in fact responsive to the evidence of Professor Shai Bernstein on which Uber relies. Professor Bernstein’s evidence concerns the sources of capital that would have been available to a company in the position of Taxi Apps to commence a ridesharing business at the relevant time. Uber’s case (briefly) is that Taxi Apps would not have had sufficient resources including capital, to operate its business at the scale for which it contends at the relevant time. Taxi Apps says that Uber did not raise the issue of insufficient capital until the filing of the Bernstein report in October 2023. It accepts evidence responding to the Olivier Report ought be permitted and says that it can be prepared within time and without any real prejudice.
Chronology of events
For context, it is necessary to set out the events in the litigation leading to present objection, which were as follows:
(a) On 10 June 2022, I made timetabling orders requiring Taxi Apps to file any expert evidence by 11 November 2022, and Uber to file any expert evidence in reply by 3 March 2023. At the case management conference on that day I made clear that given the expert evidence in the case was likely to be complex, the parties would be required to inform each other about the kind of expert evidence that that they expected to call, in advance of calling it.
(b) On 13 September 2022, Taxi Apps’ solicitors by letter asked Uber to identify the specific fields and issues in respect of which Uber intended to obtain expert evidence. On 14 September 2022, Uber’s solicitors said in response that they intended to lead expert evidence (relevantly) concerning:
(i) the relevant market, including to respond to Taxi Apps’ expert economist; and
(ii) loss, including to respond to evidence from Taxi Apps’ expert forensic accountant and to address the reasons why Taxi Apps’ business failed to thrive.
(c) On 15 September 2022 an in‑person conferral on the subject of expert evidence between the parties’ solicitors and counsel occurred, pursuant to the Court’s directions.
(d) On 26 September 2022, I extended the time by which Taxi Apps was to file any expert reports to 28 April 2023, and the time by which Uber were to file any expert reports to 15 September 2023. Taxi Apps was to file any reply expert reports by 20 October 2023. The experts in each discipline were required to confer and deliver joint reports by 17 November 2023.
(e) On 19 December 2022, my chambers informed the parties by email that I would make orders for the purpose of ensuring that the factual basis for the expert evidence was clear and that the parties’ respective experts in the one discipline engaged with the same sets of facts and assumptions and address the same questions, to the extent possible. Orders to that effect were made on 21 December 2022, including orders requiring the parties to confer for the purposes of agreeing the materials and assumptions for the experts. Orders were also made for the filing of a list of documents the parties intend to tender at trial and a list of propositions that the parties contend would be established by those documents.
(f) From 10 March 2023, the parties’ counsel conferred in respect of the questions, assumptions and materials to be provided to the economists. On 29 March 2023, the matter was listed for mention to provide the Court with an update on the conferral. During the hearing, I emphasised to the parties that there should be as far as possible as much common ground between the experts in terms of questions that were asked and the factual basis on which their evidence will be given, and that any legitimate differences are very clearly identified.
(g) On 19 May 2023, Taxi Apps filed a report of its expert economist Mr James Mellsop (Mellsop Report), which is described further below.
(h) On 26 May 2023, Taxi Apps served on Uber a report of its expert forensic accountant Mr Owain Stone (Stone Report), which is described further below.
(i) On 11 July 2023, Uber’s solicitors advised Taxi Apps’ solicitors that having received Taxi Apps’ evidence, Uber was considering obtaining evidence from additional experts opining (relevantly) on Taxi Apps’ ‘financial and business performance and the matters that contributed to it (including through a strategic business review)’. Throughout July and August 2023, the solicitors exchanged correspondence about the expert evidence that Uber was proposing to lead. Uber’s solicitors said, amongst other things, that the assumption (relevant to the loss assessment) that Taxi Apps would have had a similar market share to Uber, had not been exposed in the conferrals or in the process of agreeing assumptions that had occurred between September and December 2022. Taxi Apps’ solicitor pursued details of what it was that Uber proposed to rely upon and expressed concern that the prospect of additional expert evidence had not been raised sooner. On 21 July 2023 Taxi Apps sought further information include the precise areas of expertise and the questions proposed for each expert witness. It was not until 14 August 2023 that Uber’s solicitors provided further information, saying (on the subject in issue) only that Uber was considering experts who have expertise in venture capital and/or conducting strategic business reviews, and that they anticipated that the questions would cover questions including the business factors relevant to Taxi Apps’ ability to compete in the ride‑sharing market and the potential sources of capital available to it.
(j) In view of the uncertainty about Uber’s intentions concerning expert evidence, the matter was re‑listed for mention at Taxi Apps’ request, on 25 August 2023. Uber’s counsel informed the Court that Uber was ‘still thinking about’ whether it would call the evidence that had been discussed in the solicitors’ correspondence. On that day, I ordered that Uber notify Taxi Apps of the area of expertise of any expert other than economic or forensic accounting experts (Additional Experts) that they were intending to call, and to file and serve the questions, assumptions and material Uber intend to provide to the experts by 1 September 2023. Separately, the date by which Uber was required to file and serve any expert and lay evidence in response to Taxi Apps’ expert reports was extended to 4 October 2023.
(k) On 1 September 2023, Uber provided Taxi Apps with details of the qualifications and expertise of the Additional Experts and the list of questions, assumptions and material proposed to be provided to them, but did not confirm whether it would in fact call evidence from those witnesses.
(l) On 4 October 2023, Uber filed the Additional Expert reports of capital markets expert Professor Shai Bernstein (Bernstein Report), together with an unrelated expert report from Dr Greenfield. It also filed its economist reports and report of its expert forensic accountant Ms Jennifer Exner (Exner Report).
(m) On 20 October 2023, the matter was listed for a case management conference before Gitsham JR, at which consent orders were made for the filing of further expert evidence in reply to the Additional Expert Reports, and the relevant conferral of experts and delivery of joint reports. Taxi Apps was directed to file ‘any other expert report(s) in answer to Uber’s Additional Expert Reports (being the Bernstein Report and Greenfield Report)’ by 13 December 2023.
(n) On 3 November 2023, Taxi Apps filed a report of its expert forensic accountant Mr Stone in reply to the Exner Report.
(o) On 27 November 2023, Taxi Apps filed a report of its expert economist Mr Mellsop in reply to the Bernstein Report.
(p) On 28 November 2023, the parties’ respective expert forensic accountants Mr Stone and Ms Exner produced a joint report following an expert conclave (Stone‑Exner Joint Report).
(q) On 5 December 2023, Uber filed an Amended Statement of Propositions which included a new proposition that, ‘the Plaintiff did not have sufficient access to capital, financial resources, personnel (including engineering personnel) and/or brand awareness to successfully launch, develop and/or scale the GoCar product’.
(r) On 13 December 2023, Taxi Apps filed a further report of its expert forensic accountant Mr Stone in reply to the Bernstein Report.
(s) On 14 December 2023, Taxi Apps’ solicitors by letter advised Uber’s solicitors that Taxi Apps intended to adduce expert evidence from an Australian capital markets expert, and from an accountant with expertise in relation to the Australian Government’s Research and Development Tax Incentive scheme (R&D Expert) in relation to amounts that would have been available to Taxi Apps’ GoCatch business through that scheme in the counter‑factual. It said that the R&D Expert evidence was to respond to the opinions expressed in the Bernsten Report in relation to the sources and amount of capital that would have been available to Taxi Apps in the counter‑factual.
(t) On 21 December 2023, Uber’s solicitors informed Taxi Apps’ solicitors that Uber did not consent to Taxi Apps filing evidence from a R&D Expert, saying that Taxi Apps was raising a new field of expertise for the first time. Uber’s solicitors further sought the qualifications of the expert and the questions, assumptions and materials to be given to the expert. Taxi Apps’ solicitors responded on the same day, saying that the evidence of the R&D Expert was evidence in reply directly responsive to the Bernstein Report.
(u) On 12 January 2024, Taxi Apps’ solicitors provided Uber’s solicitors with the questions and assumptions provided to the R&D Expert, to enable Uber to consider what, if any, evidence Uber may wish to adduce in response to the evidence of the R&D Expert.
(v) On 16 January 2024, Taxi Apps filed the Olivier Report.
(w)On 19 January 2024, Uber’s solicitors reiterated that Uber did not consent to Taxi Apps filing evidence from a R&D Expert, and that the R&D Expert evidence is not properly reply evidence to the Bernstein Report.
(x) On 22 January 2024, Taxi Apps filed a report of its capital markets expert Professor Jason Zein (Zein Report).
(y) During January 2024, the parties continued to debate whether Taxi Apps was entitled to rely on the Olivier Report in reply to the Bernstein Report. Uber maintained that Taxi Apps required leave to rely on the report. Taxi Apps proposed that the matter be raised at the case management conference that had been scheduled for 13 February 2024. Uber filed a summons dated 6 February 2024, seeking an order that Taxi Apps is not to be permitted to rely upon the Olivier Report.
Expert evidence
The relevant expert evidence, briefly summarised, is as follows.
Mellsop Report
Mr James Mellsop is an expert economist and Managing Director of NERA Economic Consulting engaged by Taxi Apps. Mr Mellsop relevantly opines on what effect (if any) the launch of UberX had on the businesses of GoCatch and GoCar, and how GoCatch and GoCar would have performed (by reference to trip numbers and average value per trip to Taxi Apps) in the counter‑factual scenarios. According to Mr Mellsop’s analysis, the launch and operation of UberX in the relevant period had a materially negative effect on the business of GoCatch Taxi and GoGar. He concludes that it is more likely than not that each of GoCatch Taxi and GoCar would have made a materially higher number of trips under the counter‑factual scenario than under the factual. He identifies a number of advantages GoCar would have had under the Counterfactual Scenario in relation to UberX conducive to GoCar obtaining a greater plausible market share.
In that context, Mr Mellsop very briefly opines as to the ability of Taxi Apps to draw on capital in the counter‑factual scenario. He observes that whilst the capital raisings of GoCar and GoCatch Taxi were not on the same scale as that of Uber’s, it has to be taken into account that Uber operates in many countries. Meanwhile, small local ride sharing operators have received material capital investors and have gone on to be very successful. Accordingly, Mr Mellsop expresses that view that ‘GoCar would have been able to raise sufficient capital under the Counterfactual Scenario if its prospects were good’.
Stone Report
Mr Owain Stone is an expert forensic accountant and Partner at Korda Mentha engaged by Taxi Apps. Mr Stone relevantly estimates the loss and damage (if any) as at 1 April 2014 suffered by Taxi Apps as a result of Uber’s alleged conduct, having regard to the estimated performance of Taxi Apps’ GoCatch Taxi and GoCar Rideshare businesses in the counter‑factual scenario and the actual performance of the GoCatch Taxi and GoCar Rideshare business as they occurred in fact. Mr Stone identifies then compares the financial outcomes associated with the historical and estimated future position in which Taxi Apps is as a result of the alleged conduct (Actual Position) and the resulting cash flows (Actual Cash Flows) and the historical and estimated future position in which Taxi Apps would have been had the alleged conduct not occurred (Counterfactual Position) and the cash flows that would have resulted (Counterfactual Cash Flows). At a high level, the loss and damage may be estimated by calculating the difference between the Actual Cashflows and Counterfactual Cash Flows (Lost Cash Flows).
In his estimation, Mr Stone considers it necessary to assess the impact of taxation on any Lost Cash Flows, such that the loss and damage should be based on post‑tax cash flows since that is what Taxi Apps have lost. Specifically in relation to R&D tax benefits, Mr Stone made the following assumptions:
(a) the expenditure of Taxi Apps in the counter‑factual scenarios would have included elements of R&D, for example in relation to the continued development and improvement of its platform; and
(b) Taxi Apps would have been able to claim taxation benefits in relation to that R&D expenditure, which would, in turn, have either resulted in income to Taxi Apps (when turnover was less than $20 million) or in later years (when turnover was greater than $20 million), would have reduced the amount of taxation Taxi Apps was required to pay.
Mr Stone makes those assumptions in relation to R&D on the basis that Taxi Apps received R&D tax incentive in each of the financial years from FY2015 to FY2021. However, Mr Stone stipulates that he is not a tax or R&D expert, and that he is not able to determine with any certainty the value of R&D taxation benefits that would be obtained in each year. He accordingly assumes that all product and engineering costs would be deductible in his derivation of R&D tax incentive income (when turnover was less than $20 million), and provides a sensitivity analysis of the effect on his estimate of loss and damage of a change in the effective tax rate to 29% or 28% (i.e. a reduction of 1% or 2% from the corporate tax rate).
Exner Report
Ms Jennifer Exner is an expert forensic accountant and Partner at Deloitte engaged by Uber. Ms Exner was instructed to provide her opinion in relation to the loss and damage allegedly suffered by Taxi Apps as calculated in the Stone Report. Ms Exner agrees with Mr Stone’s overarching methodology, but has different opinions in respect of the assumptions that underpin Mr Stone’s loss and damage estimations. Relevantly, Ms Exner acknowledges Mr Stone’s workings in relation to the impact of R&D tax incentives on loss calculation, but does not expressly offer any opinions of her own on this issue.
Stone Reply Report – Exner
In his Reply Report to Ms Exner, Mr Stone reviews the Exner report and considers whether the matters set out in the Exner Report causes him to change his opinion of any matters in the Stone Report. Noting that ‘Ms Exner appears to agree with [his] approach to estimating tax, including [his] approach to R&D income’, Mr Stone again sets out his approach to calculating R&D tax benefits, which may be summarised as follows:
(a) Before FY2017, when the turnover of $20 million threshold was not met, Mr Stone assumed that a 45% refundable tax offset would be allowed on all product and engineering expenses. Mr Stone makes this assumption on the basis of his review of FY2016 documents which recorded that all product and engineering expenses were treated as relating to R&D. Mr Stone notes that those documents suggested an allocation of other costs (staff and head office) to R&D based on their assessed individual contribution to certain projects.
(b) However, Mr Stone reiterates that he is not an R&D expert and is not able to make an assessment of staff contribution to projects, either on a historical basis or to estimate this for future projects. Accordingly, Mr Stone includes only product and engineering costs (and not product and engineering staff costs) as part of the R&D incentive. Mr Stone then recognises the tax offset as an income item on the assumption that a cash refund amount would be received.
(c) After FY2017, when the turnover of $20 million threshold is met, an allowance for product and engineering may continue to be allowed, which would result in a 40% non‑refundable tax offset.
(d) To the extent that any of the product and engineering staff costs may give rise to R&D incentive claims, this would reduce the tax cost of the business in the counter‑factual scenarios, and hence cause his estimates of loss and damage to be understated.
Stone-Exner Joint Report
The Stone‑Exner Joint Report sets out the agreements and disagreements between Mr Stone and Ms Exner following their conferral in expert conclave, and attaches a further joint loss assessment model (OS3 Model). Relevantly, with respect to the method for calculation of Counterfactual Cashflows post tax, the report indicates the experts to be in agreement. The report makes no express reference to the calculation of R&D incentives. The joint report further qualifies that the fact that any point is not discussed or commented upon should not be taken to indicate agreement between the experts on that point.
Bernstein Report
Professor Shai Bernstein is a capital markets expert engaged by Uber to answer questions including, ‘what were the sources of capital available to a company in the position of Taxi Apps to enable it to commence and operate a ridesharing business in Australia.’ Professor Bernstein’s opinion is that a company in the position of Taxi Apps would have available to it predominantly venture capital. He says that there would have been considerable risk that a company with similar characteristics might not have been able to raise sufficient venture capital funding to ultimately capture a large share of the ridesharing market. Professor Bernstein opines that Mr Stone’s loss calculations underestimate the amount of capital required by Taxi Apps in each counterfactual scenario, which consequently leads to an overestimation of cash flows in those scenarios. Professor Bernstein does not have qualifications relevant to R&D tax incentives and his report does not make reference to any such incentives to which a start‑up company in Taxi Apps’ position would have been entitled.
Zein Report
Professor Jason Zein is a capital markets expert engaged by Taxi Apps. Professor Zein was instructed to provide his views in relation to the opinions expressed in the Bernstein Report, and to opine as to the sources of capital available to a company in the position of Taxi Apps. He was asked whether he agreed with Mr Mellsop’s statement that GoCar ‘would have been able to raise sufficient capital in the counter‑factual scenarios if its prospects were good’. Professor Zein says that in addition to venture capital, two additional sources of capital (strategic corporate investors and an initial public offering on the Australian Strock Exchange) would have been potentially available to a company in Taxi Apps’ position. His opinion is that Taxi Apps had a reasonably good chance of raising a large amount of venture capital financing. Professor Zein does not address the impact of R&D incentives on the availability of capital to Taxi Apps. He does not have expertise in taxation law or its application.
Olivier Report
Ms Jessica Olivier is a R&D incentives expert and Partner at RSM Australia engaged by Taxi Apps. Ms Olivier was instructed to answer these questions:
(a) provide an overview of the R&D tax incentive in Australia during the relevant period from 1 April 2014 to present;
(b) based on the pre‑tax cash flows set out in the OS3 Model (the model at Appendix 3 of the Stone‑Exner Joint Report), calculate an estimate of the tax offset entitlement that Taxi Apps would have been able to claim in each relevant financial year pursuant to the R&D incentive for each of the counter‑factual scenarios;
(c) based on her response to the question above, calculate an estimate of the After‑Tax Benefit under the R&D tax incentive for each relevant financial year for each of the counter‑factual scenarios in the OS3 Model. After Tax Benefit is defined to mean:
(iii) where Taxi Apps is entitled to the refundable tax offset, the amount of that refundable tax offset; and
(iv) where Taxi Apps is entitled to a non‑refundable tax offset, the difference between the amount of the non‑refundable tax offset and the amount of the income tax deductions that Taxi Apps otherwise would be entitled to in respect of notional R&D deductions.
Ms Olivier describes the R&D tax incentive scheme contained for the most part in Division 355 of the Income Tax Assessment Act 1997 (Cth) (ITAA). In short, the R&D tax offset is refundable (i.e. cash benefit) where the R&D entity’s aggregated turnover is less than $20 million for a given income year, and non‑refundable (i.e. reduce income tax liability to zero) in all other cases. The non‑refundable R&D tax offset can be carried forward indefinitely and used to reduce income tax liability in future years. The R&D tax offset is computed as a percentage of eligible R&D expenditures.
Ms Olivier calculated the quantum of Taxi Apps’ estimated total Counterfactual R&D Tax Offset entitlement and After Tax Benefit from April 2014 to December 2030 in each of the counter‑factual scenarios as follows:
| Counterfactual R&D Tax Offset | After Tax Benefit | |
| Scenario 1 | $111,975,451 | $37,659,159 |
| Scenario 2 | $75,513,899 | $26,156,383 |
| Scenario 3 | $56,496,076 | $20,074,013 |
| Western Australia Scenario 1 | $108,943,119 | $36,760,188 |
| WA Scenario 2 | $74,513,899 | $25,780,923 |
| WA Scenario 3 | $56,051,239 | $19,945,879 |
For each of the counter‑factual scenarios, Ms Olivier applied these steps for each income year within the relevant period: calculate the notional R&D deduction (i.e. the eligible R&D expenditures); determine the R&D tax offset rate; calculate the Counterfactual R&D Tax Offset (R&D tax offset rate x notional R&D deductions); and calculate the After Tax Benefit. Ms Olivier calculated Taxi Apps’ R&D expenditures from source material set out in the Stone Report, the Exner Report and the Stone‑Exner Joint Report including the OS3 Model. The Counterfactual R&D Tax Offset is then obtained by multiplying the notional R&D deduction by the R&D tax offset rate as set out in the Olivier Report. The After Tax Benefits are calculated accordingly.
Ms Olivier makes several assumptions for the purposes of her opinion, including that Taxi Apps conducts eligible core and supporting R&D activities as set out in ss 355‑25 and 355‑30 of the ITAA, throughout the R&D Model Period. Her opinion is that that assumption is reasonable for the reasons set out in her report.
Responding Evidence if Olivier Report is permitted
The evidence of Uber’s solicitor, Ms Gray, was that if Taxi Apps was given leave to rely on the Olivier Report, Uber would wish to prepare evidence from an R&D tax expert. For that purpose, Uber’s solicitors had made inquiries and expected to be in a position shortly to have retained a suitably qualified expert. Any reply from Uber involves, amongst other things, testing the assumptions made by Ms Olivier including the assumption that Taxi Apps conducts eligible core and supporting R&D activities as set out in ss 355‑25 and 355‑30 of the ITAA. Ms Gray’s evidence was that discovery from Taxi Apps would be required that that purpose. Whilst the scope of discovery would need to be confirmed with Uber’s expert, the documents required would in part reflect the categories of supporting evidence for the eligibility criteria described in the Australian government’s guide to software‑related activities and the R&D tax incentive.
Taxi Apps accepted that if it is permitted to rely on the Olivier Report, Uber is entitled to discovery of the kind it has described. I was informed that Taxi Apps could produce that discovery by 27 February 2024.
Permitting the Olivier evidence will necessitate a conferral between the R&D tax experts for the preparation of a joint report and that the parties’ forensic accountants (Stone and Exner) revise their loss calculation in light of the R&D tax evidence.
At my request, the parties asked Ms Exner and Mr Stone to confer with one another and to advise as to what would be entailed in revising their calculations. Mr Stone and Ms Exner agreed that in order to take into account the new R&D tax calculations (by Ms Olivier and by Uber’s expert) ‘mechanical’ changes OS3 Model would be required. They agreed that the changes would be straightforward and largely confined to one step set out in their joint report. Ms Exner estimated that it would take 1 week following receipt of Uber’s R&D expert calculations or any calculations agreed in the conclave report, to produce a further report with Mr Stone, assuming they would in the meantime have agreed upon the appropriate methodology for doing so.
Ms Gray has estimated that Uber’s R&D expert report can be filed by 9 April 2024, noting that it may take longer than 6 weeks to properly test the assumptions made by Ms Olivier. The R&D experts could then participate in a conclave and produce a joint report by 30 April 2024 The forensic accounting experts could then update their loss models and produce a joint report by 7 May 2024. Ms Gordon, Taxi Apps’ solicitor, said in her evidence that if Uber files a responsive expert report by 9 April 2024 and a joint report is completed by 23 April, Mr Stone and Ms Exner agreed that they could produce a further joint report by 1 May 2024. If there were conceptual differences between the R&D experts that might require additional work in adjusting the existing damages model.
Parties’ Submissions
Uber submitted that the Olivier evidence was not evidence in reply. Taxi Apps was in truth seeking to mend its hand having been served with Uber’s evidence. So much was evident from the manner in which the question of capital and the R&D tax incentives had been treated in the evidence filed before the Olivier Report was served:
(a) Taxi Apps introduced the question of whether it would have been able to raise capital sufficient to reach a market share as significant as the counter‑factual scenarios suggest. It did so by the Mellsop evidence. The question whether Taxi Apps would have been sufficiently capitalised is part of its case in chief.
(b) Uber addressed Mr Mellsop’s evidence by serving the Bernstein evidence, to which Taxi Apps responded by serving the Zein Report. Both Bernstein and Zein are experts in corporate finance. Neither opines about R&D tax incentives, neither possesses relevant expertise.
(c) Taxi Apps accepts that Ms Olivier’s calculations will have to be incorporated into Mr Stone’s calculations. The amount calculated by Mr Stone on the basis of his assumptions is different from the amount now sought to be calculated by Ms Olivier, and materially so. What Taxi Apps now wishes to do is to have Ms Olivier’s evidence form new inputs to Mr Stone’s model. That is evidence in chief, not evidence in reply. Had Taxi Apps wished to rely on the R&D tax benefit as a source of cash, it was incumbent upon it to serve that evidence at the time at which the Mellsop Report was served. Taxi Apps made the forensic decision to rely in its case in chief, upon the evidence of Mr Mellsop and Mr Stone. Ms Olivier’s evidence is the first occasion on which Taxi Apps has served evidence from a witness with expertise in R&D tax incentives.
(d) The only explanation that Taxi Apps has given for the lateness of the evidence is that it is evidence in reply to Professor Bernstein, which is incorrect.
(e) Introducing this evidence now has the potential to lead to a complex ‘quasi R&D tax trial’ on the question whether Taxi Apps would have qualified under the relevant legislation. The present timetable does not permit sufficient time to have such issues to be ventilated.
(f) Uber did not, as Taxi Apps suggest, ‘ignore’ directions of the Court or create the current situation by failing to inform Taxi Apps about the evidence it was intending to lead. Uber relies on the correspondence from its solicitors (dated 14 September 2022, set out earlier in these Reasons) that Uber intended to lead expert evidence concerning loss, to respond to Taxi Apps’ forensic accountant, and ‘to address the reasons why Taxi Apps’ business failed to thrive’.
(g) Furthermore, Uber was first notified that Taxi Apps was intending to call evidence from a witness with R&D expertise on 14 December 2023, with no forewarning.
(h) Responsive evidence cannot be prepared prior to trial. Allowing the Olivier evidence now would be prejudicial to Uber because it would require additional work to be performed in a period in which Uber’s legal team is heavily engaged in pre‑trial tasks that must be completed under the existing timetable.
Taxi Apps submitted in substance that:
(a) In circumstances in which the parties were required to confer about the topics and areas of expertise in respect of which they would call evidence, Uber was ‘silent, for over a year’ as to its intention to call expert evidence on Taxi Apps’ access to capital and financial resources.
(b) Uber first committed to calling evidence on the question of Taxi Apps’ access to capital in October 2023 when the Bernstein Report was filed.
(c) Uber had not otherwise put Taxi Apps’ access to capital in issue in the proceeding. It was not until 5 December 2023 that Uber added to its court‑ordered statement of propositions that Taxi Apps did not have sufficient capital or resources to successfully launch, develop and scale the GoCar product. Its letter of 14 September that it was contemplating evidence going to why Taxi Apps’ business failed to thrive, was not fair notice of the intention to challenge the capital adequacy of Taxi Apps’s business.
(d) Professor Bernstein was asked to give an opinion in response to the question, ‘what were the sources of capital available to a company in the position of Taxi Apps to enable it to commence and operate a ridesharing business in Australia? By the Court’s orders of 20 October 2023, Taxi Apps was ordered to file any other expert reports in answer Uber’s expert reports (i.e., the category of reports including Professor Bernstein) by 13 December 2023. Taxi Apps was, as the Court’s orders contemplate, entitled to call all relevant, responsive evidence to address Uber’s contention that Taxi Apps would not have had access to sufficient capital. Taxi Apps has done so by the evidence of Professor Zein and now, Ms Olivier. That Ms Olivier’s area of expertise is different to that of Professor Bernstein is irrelevant. Ms Olivier’s evidence plainly falls within the orders of 20 October 2023.
(e) Uber has made plain that what it will seek to do in response to the Olivier evidence is to challenge Taxi Apps’ entitlement to any R&D tax offset, not merely to engage with the calculations performed by Ms Olivier. That issue has never previously been in dispute, as is apparent from the Exner Report and the Stone‑Exner Joint report. Had Uber been wanting to take issue with Taxi Apps’ eligibility for the R&D concession it ought to have done so by engaging an R&D expert to challenge that assumption that formed the basis of the relevant parts of Mr Stone’s report.
(f) Taxi Apps accepted that if received, Ms Olivier’s evidence would form part of its case in chief. That was so, notwithstanding that it was also responsive to the Bernstein evidence.
(g) Even if the Court considers that the Olivier evidence does not fall within the evidence permitted by the 20 October 2023 orders, Uber has not shown the degree of prejudice required to deprive it of evidence that goes to a significant issue in the case. Uber has had Ms Olivier’s evidence since 16 January 2024, with the trial to commence on 18 March 2024. Taxi Apps does not resist Uber being allowed the amount of time it seeks in order to prepare responsive evidence. Ms Olivier’s evidence and any responsive evidence would not be called until late in the trial, which will run for some 10‑12 weeks. There is no real prejudice to Uber if Ms Olivier is called as a witness at trial. There is ample time for the necessary steps to occur.
Consideration
As the Court of Appeal observed in Northern Health,[2] the well‑understood principles in Aon, as summarised in Ultra Thoroughbred Racing,[3] are applicable in a general sense to the late service of an expert report.[4] While the primary question on the service of a late report remains what do the interests of justice dictate, those principles are often expressed in the following questions:
[2]Northern Health v Robert Kuipers [2015] VSCA 172, [29] (Northern Health) adopting J Forrest J in Thomas v Powercor Australia (Ruling No 3) [2011] VSC 391, [12].
[3]Ultra Thoroughbred Racing Pty Ltd v Those Certain Underwriters at Lloyds, London [2011] VSC 370, [7]–[9].
[4]Northern Health [2015] VSCA 172, [29], citing Thomas v Powercor Australia Ltd (Ruling No 3) [2011] VSC 391 [12].
(a) whether there will be a substantial delay caused by the amendments;
(b) what is the extent of any wasted costs;
(c) is there any irreparable element of unfair prejudice caused by the amendments?
(d) what are the concerns of case management arising from the stage in the proceeding at which the amendment is sought; will the grant of leave lessen public confidence in the administration of justice? and
(e) has a satisfactory explanation been given for seeking the amendment at the stage at which it is sought?
Furthermore, interests wider than those of the moving party — the expenditure of time, costs and limited judicial resources — are relevant considerations in the determination of whether to allow interlocutory processes.[5]
[5]Northern Health [2015] VSCA 172, [33]; Aon (2009) 239 CLR 175, 217 [111]–[113].
Balancing those considerations, it is my view that Taxi Apps ought be permitted to rely on the Olivier Report.
Having set out the relevant history of the proceeding and the nature of the expert evidence, my Reasons can be shortly stated.
I accept that the question whether Taxi Apps would have sufficient capital in its counter‑factual world goes to its case in chief. Taxi Apps intends to prove that under the prevailing counter‑factual scenario it would have obtained a greater market share than it obtained in the factual and, to express the point simply, that it would have had a much more substantial business that it in fact built in an environment in which it was competing with UberX. As recognised in the Mellsop Report, a necessary part of that proposition is that Taxi Apps would have had sufficient capital to scale and successfully operate such a business. I accept that at the point at which it filed the Mellsop report, Taxi Apps had made a forensic judgment that the evidence given by Mr Mellsop would sufficiently address that issue. The evidence of Ms Olivier ultimately goes to the sufficiency of capital issue. Ms Olivier’s evidence will, as Taxi Apps accepted, become part of its case in chief. Her calculations will replace those of Mr Stone, for his purposes. By the Olivier Report, Taxi Apps is seeking to rely upon different evidence concerning its R&D tax incentive entitlements to that which it originally intended to call through Mr Stone.
However, I also accept that the evidence is properly described as responsive to the Bernstein evidence. It is not ‘reply evidence’ in the ordinary sense but it is responsive to the essential point to which the Bernstein evidence is directed. By the Bernstein evidence, Uber is affirmatively contesting the sufficiency of Taxi Apps’ capital and will seek ultimately to submit that Taxi Apps could not have gained the market share for which it contends in its counter‑factuals, including because of a lack of capital. Although Ms Olivier and Professor Bernstein express opinions on the basis of completely different expertise, Professor Bernstein was asked the broad question as to what sources of capital would have been available, and Ms Olivier’s evidence addresses an additional source of capital (and a significant source at that). Her evidence is plainly relevant to the question whether Taxi Apps would have had sufficient capital to operate as it contends, under the counter‑factual scenarios.
The Olivier evidence is then, an additional part of Taxi Apps’ case in chief and a change to the case in chief, which has been prepared in response to the decision by Uber to challenge the proposition originally advanced in the Mellsop evidence. Ultimately, because it is a change of case, taken in light of the Bernstein evidence, I consider that it is for Taxi Apps to persuade me that it ought have leave to rely on the Olivier Report.
I accept that Taxi Apps could have decided at a much earlier point in time to prepare the Olivier Report. However, characterising the evidence of a party as evidence in chief or evidence in reply, does not assist to answer the whole of the relevant inquiry in determining whether to allow a party to supplement its evidence late in the day. In a case of this complexity, it is reasonable to allow that parties will make forensic judgments about the evidence required for proof of their cases but will calibrate those judgments as preparation for a trial progresses. That may legitimately occur (within reasonable limits) in response to the positions taken and the evidence filed by the opposing party. Uber’s acceptance that Taxi Apps was entitled to file evidence in response to the Bernstein Report, demonstrates that point. The Zein evidence is both responsive to Bernstein (in that case, directly so) and forms part of Taxi Apps’ case in chief.
One relevant consideration is that having been served with the Taxi Apps evidence of Mellsop and Stone on 19 and 26 May 2023, it was not until 14 August 2023 that Uber’s solicitors provided any relevantly meaningful information about its proposed evidence, saying only that Uber was considering experts who have expertise in venture capital ‘and/or’ conducting strategic business reviews, and that they anticipated that the questions would cover questions including the business factors relevant to Taxi Apps’ ability to compete in the ride‑sharing market and the potential sources of capital available to it. Uber did so only after Taxi Apps pursued that information. Uber provided the questions for its experts to Taxi Apps only when required to do so by the Court. I do not consider that Uber’s statements by letter of 13 September 2022 (that it was intending to adduce evidence as to the reasons why Taxi Apps business failed to thrive) or by letter of 11 July 2023 (that it was considering evidence on Taxi Apps’ financial and business performance and the matters that contributed to it) were fair notice of the matters ultimately raised in the Bernstein Report.
I do not consider it to have been unreasonable for Uber to have considered whether it should call evidence on the source of capital available to Taxi Apps until it saw the Mellsop and Stone reports. However, Uber took what was in relative terms a considerable amount of time to inform Taxi Apps in concrete terms of what it was intending to do, having regard to the timetable for evidence and the approaching trial date. Had it acted sooner, Taxi Apps would have been in a position to respond sooner, with knowledge of the evidence that Uber was intending to rely upon. The orders requiring conferral and the exchange of information were not intended to exclude parties deciding to seek to add to their written evidence ahead of trial, but the importance of early communication with the opposing party had been explicitly and repeatedly emphasised by the Court. Uber was ‘still thinking’ about its evidence when the matter was mentioned in late August 2023 and the Bernstein Report was not served until 5 October 2023.
Taking those factors into account, it is appropriate to return to the considerations set out earlier as discussed in the cases concerning the late service of reports.
The trial in this matter will commence on 18 March 2024. As at the date on which the application was heard, Uber had had the Olivier Report for a month. The parties have prepared an agreed trial plan, which has the Court’s approval. Ms Olivier and any responsive expert will not give evidence until 14 May 2024, according to the trial plan. On the timetable agreed by the parties on the basis of the assumptions described earlier in relation to the R&D evidence, Uber’s report can be filed by 9 April 2024 and a joint report (after a conferral) by 30 April 2024. The joint report can then be provided to the parties’ forensic accounting experts who can prepare an amended joint report by 7 May (taking the more conservative dates proposed by Uber). It is intended that those experts will give evidence on 15 May 2024. On the estimates given in evidence by the parties on this application about the preparation of responding evidence and a joint report, the admission of the Olivier evidence will not disrupt the trial. If the conduct of the trial does not exactly keep pace with the trial plan, experience suggests that it will not be because the evidence progresses significantly more quickly than projected.
As to the prejudice point, I accept that it is less than ideal that Uber will be required to prepare expert evidence in the immediate lead up to trial and during the trial. However, its ability to attend to that evidence needs to be put in context. As I have said, it has had the Olivier evidence since 16 January 2024. It was told on 14 December 2023 that Taxi Apps was intending to call evidence from an R&D expert. Its solicitors have, acting diligently, taken steps to retain an expert. I was informed on 13 February 2024 that they were in the final stages of that process. Uber’s solicitors will need to review Taxi Apps’ discovery, confer with the expert and brief the expert to prepare a report. The conferral and joint report is a matter that will not involve the legal team, save for any limited communications necessary to advice of logistics and the like. As of 23 February 2024 Uber’s written opening submissions will have been filed. Objections to evidence and openings are the only remaining pre‑trial steps to occur. I accept that Uber’s legal team, counsel in particular, will be preparing for oral opening submissions and the conduct of the trial more generally. Uber has not said that it lacks resources to prepare the responsive evidence in the circumstances. In the circumstances I do not consider that the work required to produce a responsive report in the time required has been shown to amount to unfair prejudice.
The evidence is important and goes to a central issue on the loss case.
I consider that the circumstances have been sufficiently explained. It is true that Taxi App’s solicitors made a judgment about the approach that they would take to the question of capital available to Taxi Apps which they have now revised, but why they have done that has been plainly exposed. There has been no lack of candour.
On the evidence before me on the application it is appropriate to order (in substance) that:
(a) Taxi Apps be permitted to rely on the Olivier Report;
(b) Uber file any responsive evidence by 9 April 2024;
(c) The ‘R&D’ experts confer and produce a joint report by 30 April 2024;
(d) The forensic accounting experts confer upon the receipt of the joint R&D experts report and produce a further joint report by 7 May 2024.
Among the assumptions on which the evidence on this application rests is that Taxi Apps will produce the necessary discovery within the time. The parties have liberty to apply, and any issue relevant to the expert evidence on this subject ought be brought to the Court’s attention without delay.
SCHEDULE OF PARTIES
TAXI APPS PTY LTD (ACN 149 538 616)
Plaintiff
and
UBER TECHNOLOGIES INCORPORATED (4849283)
First defendant
and
UBER INTERNATIONAL HOLDING B.V. (RSIN 851 929 357)
Second defendant
and
UBER B.V. (RSIN 852 071 589)
Third defendant
and
UBER AUSTRALIA PTY LTD (ACN 160 299 865)
Fourth defendant
and
RASIER OPERATIONS B.V. (RSIN 853 682 318)
Fifth defendant
and
UBER PACIFIC HOLDINGS B.V. (RSIN 855 779 330)
Sixth defendant
and
UBER PACIFIC HOLDINGS PTY LTD (ACN 609 590 463)
Seventh defendant
0
4
0