Terravital Pty Ltd v O'ROURKE
[2016] WASC 428
•20 MAY 2016
TERRAVITAL PTY LTD -v- O'ROURKE [2016] WASC 428
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 428 | |
| Case No: | CIV:1840/2013 | 22 APRIL 2016 | |
| Coram: | REGISTRAR C BOYLE | 20/05/16 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Leave granted to rely on three of four reports Applicant to pay indemnity costs | ||
| B | |||
| PDF Version |
| Parties: | TERRAVITAL PTY LTD RORY JAMES O'ROURKE ROBYN MAVIS O'ROURKE JARRAD JAMES O'ROURKE TACIL PTY LTD ARCHDUKE HOLDINGS PTY LTD TOPGRADE PTY LTD |
Catchwords: | Case management Expert evidence Compliance with timetables Obligations of party in default Costs Turns on own facts |
Legislation: | Rules of the Supreme Court 1971 (WA), O 36A |
Case References: | Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 Tickell v Trifleska (1991) 25 NSWLR 353 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
RORY JAMES O'ROURKE
First Defendant
ROBYN MAVIS O'ROURKE
Second Defendant
JARRAD JAMES O'ROURKE
Third Defendant
TACIL PTY LTD
Fourth Defendant
ARCHDUKE HOLDINGS PTY LTD
First Third Party
TOPGRADE PTY LTD
Second Third Party
Catchwords:
Case management - Expert evidence - Compliance with timetables - Obligations of party in default - Costs - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 36A
Result:
Leave granted to rely on three of four reports
Applicant to pay indemnity costs
Category: B
Representation:
Counsel:
Plaintiff : Mr C S Williams
First Defendant : Mr D K Barker
Second Defendant : Mr D K Barker
Third Defendant : Mr D K Barker
Fourth Defendant : Mr D K Barker
First Third Party : Mr L Buchbinder
Second Third Party : Mr L Buchbinder
Solicitors:
Plaintiff : Solomon Brothers
First Defendant : Chalmers Legal Studio
Second Defendant : Chalmers Legal Studio
Third Defendant : Chalmers Legal Studio
Fourth Defendant : Chalmers Legal Studio
First Third Party : Bowen Buchbinder Vilensky
Second Third Party : Bowen Buchbinder Vilensky
Case(s) referred to in judgment(s):
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Tickell v Trifleska (1991) 25 NSWLR 353
1 REGISTRAR C BOYLE: The plaintiff was given leave to adduce expert evidence. That leave was conditioned on compliance with a timetable for the delivery of expert reports. The plaintiff did not comply. It now applies for leave to rely on four expert reports.
2 One of those reports responds to an amendment of the defence made since the expert evidence orders were made. There is only limited objection.
3 One of the other reports was only a day late. The defendants make no objection to that. The application is opposed so far as it relates to the other two reports.
4 The question is whether, and if so on what conditions, the plaintiff should be given leave to rely on those reports. As appears below, the question is not just lateness but whether one report in particular actually responds to the orders made.
5 Whether the plaintiff should be granted that indulgence cannot be considered except in the context of this action, including: the issues raised; the nature of the evidence necessary to the determination of those issues; and the conduct of the action to date.
The nature of the action
6 The plaintiff's claim is outlined in an amended statement of claim filed 3 September 2013. The action was commenced on 24 May in that year. That invites the immediate comment that this on the face of it is an action that has not been prosecuted timeously. In part, that may be explicable by the difficulty of the issues raised.
7 In June 2008 the plaintiff contracted to purchase an undivided quarter interest in a piece of land in Albany. The sellers of that interest were the fourth, fifth and sixth defendants. The purchase price was $2,500,000 plus GST. The purchase was settled in June 2008.
8 The first defendant is a director and shareholder of the fourth defendant, but also carried on the business of a real estate agency in partnership with the second and third defendants.
9 The core allegation the plaintiff makes against the defendants is of misleading and deceptive conduct contrary to the Fair Trading Act 2010 (WA), alternatively, the then Trade Practices Act 1974 (Cth). The misleading and deceptive conduct alleged is a number of representations pleaded to have been made to the directors and shareholders of the plaintiff prior to the contract for the purchase of the land.
10 The land is in the centre of Albany. It is a redevelopment site, now vacant. As at May 2008, the local authority had granted planning scheme consent for the construction on the land of 40 units or apartments. That approval, in the usual way, was subject to various conditions. One was that development had to be substantially commenced by 19 December 2008. No development could commence without the issue of a building licence. It is pleaded, although somewhat in dispute, that no specifications or plans had been prepared. The notifiable information that would be required to be given to prospective purchasers pursuant to the Strata Titles Act 1985 (WA) had not been prepared.
11 Against that background, [10] of the statement of claim pleads that the first defendant represented to the plaintiff (among other things) that:
(a) the development would be completed within two years (statement of claim [10.3];
(b) construction would take 18 months [10.4];
(c) the presale of 12 to 15 units would be sufficient to cover building and borrowing costs [10.5];
(d) there would be no trouble in preselling 10 to 15 units [10.6];
(e) presales could be obtained within 6 months [10.7];
(f) the cost of undertaking the development would be between $15,500,000 and $16,500,000 [10.10];
(g) the units would be sold for prices totalling $49,050,000 [10.11]; and
(h) the land had been valued and the value of the land was $10,000,000 [10.12].
12 There are other representations pleaded, but it is those above to which expert evidence is relevant.
13 The plaintiff remains the owner of a one-quarter interest in the land. The development has not proceeded. In those circumstances, if the plaintiff were to succeed at trial in establishing that it purchased in reliance on representations that were deceptive and misleading, the quantification of loss is a difficult matter.
The expert evidence orders
14 On 21 November 2014, I made case management directions for expert evidence. The presently relevant directions were:
1. Subject to compliance with the following directions, the parties have leave to adduce expert evidence at the trial.
2. By 6 March 2015 the Plaintiff provide the Defendants with a copy of the report or the substance of the evidence of any expert witness whose evidence is to be adduced by the plaintiff as to:
(i) the value as at May/June 2008 and at the date of the valuation of the land referred to in paragraph 5.2 of the Amended Statement of Claim;
(ii) the anticipated total selling price off the plan as at May/June 2008 of the 40 units referred to in paragraph 9.1 of the Amended Statement of Claim;
(iii) the time it would take to sell off the plan 12-15 of the units referred to in the paragraph 9.1 of the Amended Statement of Claim;
(iv) the cost as estimated at May/June 2008 of constructing the 40 units referred to in paragraph 9.1 of the Amended Statement of Claim;
(v) the time as estimated at May/June 2008 it would take to construct the 40 units referred to in paragraph 9.1 of the Amended Statement of Claim.
7. The question of valuation of the land at any date other than as provided above be reserved for further direction.
15 Those orders were not made without consideration. The parties agreed that expert evidence would be required, but there were differences as to the issues properly the subject of expert evidence, whether evidence should be provided by the parties sequentially or simultaneously, and the timing of delivery. These issues were touched on at a series of conferences in October and November 2014. The parties provided competing minutes of proposed orders. Having considered those, I caused a form of draft orders to be provided to the parties on 14 November in anticipation of the conference listed for 21 November. As recited already, the orders were made then.
16 The point of that recital is that there was nothing in the orders for expert evidence that could have come as a surprise to the plaintiff. The timetables for the delivery of expert reports as ordered were no more stringent than had been discussed and proposed.
17 On 27 February 2015 (in other words, within the time limited for compliance with the orders) consent orders were made extending the time for the plaintiff to serve expert reports to 6 April 2015.
The delivery of reports
18 On 7 April 2015, the day after the expiry of the time limited for the plaintiff to deliver its reports, the plaintiff's solicitors served on the defendants' solicitors a copy of an expert report prepared by Mr Ian Dunlop. This report (the first Dunlop report) did not deal with all of the matters on which expert evidence was to be required. It was in fact limited to the represented construction costs (item (iv) in case management direction 2 of 21 November 2014) and the time it would take to construct the development (item (v)).
19 That report was served under cover of a letter dated 7 April the last paragraph of which read:
Our client has also engaged an expert to opine as to the value of the land, anticipated sales prices of the units and anticipated sale times for units, but the expert has not yet completed his report. We will provide you with a copy of the report once it is received by us.
20 Nothing further was delivered to the defendants by way of expert evidence until 18 December 2015. On that day three further reports were delivered. They were a supplementary report by Mr Dunlop (the second Dunlop report), a report of Mr Richard Machell, and a report of Mr Nick Walls. Mr Walls is a valuer.
21 Before turning to the detail of the second Dunlop report and the Walls report, and the reasons proffered for the late delivery of those reports, it would be as well to turn to the case management principles applicable.
Expert evidence orders
22 Save only for a limited class of medical evidence in actions for damages for personal injuries, the principle embodied in O 36A is that no party may adduce expert evidence at trial without having obtained leave of the court. From just after the dawn of the court's modern systems of case management, registrars have had the delegated authority of the court to make directions under O 36A.
23 The experience of case managers is that, where it is apparent that expert evidence will be required, it is inadequate simply to make what might be called a blank cheque order giving leave without more. The consequences of an order of that kind tend to range from the unsatisfactory to the calamitous. Parties may take differing views of what issues require or permit expert evidence, and brief their respective experts accordingly. Parties may instruct experts (or the experts may decide for themselves) to proceed on the basis of assumptions that differ, or are simply not adequately identified. The result is often ostensibly competing expert reports that, on examination, are neither on the same field of play nor playing the same game.
24 Experience shows that it is essential to frame orders for expert evidence in a way that ensures that the issues on which expert evidence is to be led are clearly identified, and that reports be delivered in a timely way. That is hardly a complete code of good case management practice in relation to expert evidence, but it is the beginning.
Case management and the role of lawyers
25 The time has surely passed when 'case management' can be treated as a synonym for 'programming for trial': see Tickell v Trifleska (1991) 25 NSWLR 353, 353 - 354 (Rogers CJCD). Given that trial is a statistically unlikely mode of resolution, even when an action has reached apparently quite an advanced stage, directions for expert evidence should, like other case management directions, always be framed bearing in mind the effect directions will have on whether and how an action may be resolved other than by trial. Here, the experience is that, properly used, exchanges of expert evidence can make issues disappear. That is more than just 'narrowing the issues' for the purposes of trial. It can lead to a resolution, as parties find solutions to problems (whether they are of building standards, engineering or town planning) that had been pleaded as if susceptible only to resolution by judicial determination.
26 It is also necessary to take into account the principles applicable to the sometimes competing interests on the one hand in allowing each party to develop its own case as it sees fit and thus allow a case to be determined on fully developed material, and on the other hand the interest of other parties in litigation not to be oppressed or vexed by delay or other inappropriate conduct, together with the public interest in ensuring the resolution of matters in a way that is as prompt and as economical as is reasonable. The principles set out in O 1 r 4A and 4B and developed by the courts in such cases as Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 are set out in Civil Procedure WA at [1.4A.0] - [1.4B.1A]. I bear those in mind, and will return to them in explaining the disposition of the application so far as it relates to the four reports the subject of it.
The chronology of compliance
27 What the plaintiff did to comply with the orders for expert evidence is set out in the affidavit of Mr Slack-Smith affirmed 17 March and filed in support of the application. The affidavit annexes correspondence and expert reports.
28 The first document attached, as attachment JSS1, is the brief from the plaintiff's solicitors to the valuer. It is dated 20 January 2015.
29 The expert evidence orders were made two months before, and had been the subject of discussion in case management conferences for months before that. It was always obvious that the plaintiff's case would depend heavily on expert evidence. It may well be that the brief of 20 January 2015 was the culmination or confirmation of preceding discussions with the valuer. Even so, the requested date for delivery of the report of 2 March 2015 to allow compliance with the orders was becoming very tight. This was not a straightforward valuation exercise.
30 If in fact the letter of 20 January was the first instruction to the valuer, or followed initial discussions shortly preceding it, that was leaving things far too late to give the valuer a fair chance of doing the work properly. That is not necessarily a criticism of the solicitors, because it would be reasonable for them not to confirm instructions to the valuer until they were assured by their client of the funds to pay for the report.
31 Attachment JSS2 to the affidavit of Mr Slack-Smith is the brief to Mr Ian Dunlop of Turner and Townsend. He was the quantity surveyor required to give evidence as to the estimated costs looking prospectively from May/June 2008 of constructing the anticipated development, and the time it would take to do so.
32 Attachment JSS3 is the report of Mr Dunlop. It is dated 2 April. This is the report that was delivered on 7 April.
33 Attachment JSS5 is an email from the valuer, Mr Nick Walls, to Mr Slack-Smith. It is dated 27 March. This offers reasons why the report has not been completed and then, with a jarring disregard for the proper use of the adverb, goes on:
I am back Monday and will hopefully have a draft for you by the end of next week.
34 There was a further email from Mr Walls dated 1 April (JSS6) saying that he was still waiting for information from town planners and also sales evidence. He foreshadowed a slightly longer delay than first thought.
35 On 17 April and 4 May Mr Walls sent further emails to Mr Slack-Smith, continuing to complain of difficulties in obtaining the information he needed.
36 By the later of those two dates, the valuer's report was nearly a month overdue. A properly sanguine view would have been that it was still several weeks away.
37 At that point at the latest there was a pressing obligation on the solicitors for the plaintiff to explain to the solicitors for the defendants why the report was late, and to seek consent to an enlargement of time for its delivery. If that consent (whether reflected in formal consent orders or not) could not be obtained, then it was equally clearly the obligation of the plaintiff as the party in default to approach the court to seek an enlargement of time.
38 The plaintiff's solicitors did not do that. In fact, according to the affidavit of Mr Slack-Smith, the next communication from the plaintiff's solicitors to the defendants was dated 22 May. It was a request for discovery of documents made relevant by the amendment to the defence that has already been mentioned.
39 The report by Mr Machell commissioned by the plaintiff's solicitors as a result of the amendment to the defence, but without any authorisation in the existing expert evidence orders, was delivered to Solomon Brothers on 9 December. As already indicated, it was forwarded to the solicitors for the defendants nine days later.
40 On 10 June 2015, Mr Walls emailed to the plaintiff's solicitors copies of plans and specifications apparently for the proposed development. These had not been discovered by any party, but were apparently found in the possession of a non-party. While the specifications were undated, the plans were dated September and October 2011. Significantly, those dates are much later than the date of the representations the plaintiff alleges.
41 As a result of receiving that information, the plaintiff's solicitors asked Mr Dunlop to prepare a supplementary expert report. That brief for a supplementary report (JSS12) effectively asks Mr Dunlop whether the material provided alters any of the conclusions in his earlier report, and asks him to comment on 'the quality of the finishes disclosed on the plans and specifications, and how that compares with the quality of finishes you assumed for your expert report'.
42 Mr Dunlop replied by a letter dated 15 October 2015. That is what I have referred to as the second Dunlop report. Put shortly, Mr Dunlop concluded that the additional material did not alter his earlier opinion.
43 While all this was going on, the valuer's report had still not been obtained. Nor had the solicitors for the plaintiff made any effort to inform the defendants of the reasons for the delay and what they were doing about it and to seek their forbearance.
44 Mr Slack-Smith deposes at [24] of his affidavit that on a date which is not identified but which must be after 25 June 2015, the solicitors for the plaintiff asked Mr Walls not to finalise his expert report until he had received the supplementary report from Mr Dunlop. That was because the report from Mr Walls necessarily had to make assumptions about the cost of undertaking the proposed development. That was a blank to be filled in by the second Dunlop report.
45 As already related, the solicitors for the plaintiff served the supplementary report of Mr Dunlop, the report of Mr Machell, and the report of Mr Walls, under cover of a letter dated 18 December 2015.
46 That letter conceded that the report of Mr Machell fell outside the scope of the topics for which leave to adduce expert evidence had been granted. It explained that the report was obtained because of the amendment to the defence.
47 The letter goes on to give only the most cursory of explanations for the considerable delay in the delivery of all reports. It foreshadows an application for orders for leave to adduce expert evidence on the topics addressed in Mr Machell's report, and to extend the time for compliance.
48 The holiday season intervened. By letter dated 12 January, the solicitors for the defendants advised that the requested consent was not forthcoming. After an exchange of further correspondence in a wounded tone, the present application was eventually made.
49 I now consider the reports in more detail, and whether the plaintiff should be allowed to rely on each.
The reports considered: the first Dunlop report
50 This was the quantity surveyor's report dealing with the represented construction costs and time to complete the development. It was delivered a day late. As already indicated, the defendants make no point of this delay.
51 The application will be allowed so far as it relates to the first Dunlop report.
The reports considered: the second Dunlop report
52 This was the report by which Mr Dunlop responded to the request to consider whether the conclusions in his first report would have been altered by consideration of the 2011 plans that the plaintiff had subsequently obtained.
53 The plaintiff should not be allowed to adduce this report. That is for several reasons.
54 First, the conclusion of the second Dunlop report was that the later material Mr Dunlop was asked to consider would not have altered his previously expressed view. It is thus a nil report. It would add nothing to the evidence and should be excluded for that reason alone.
55 Secondly, even if the 2011 material had altered Mr Dunlop's view, I would still have refused the application in respect of that report. That conclusion, in turn, is supported by two further reasons.
56 First, the whole exercise was utterly misconceived. The plaintiff has provided no evidence whatever to link the defendants (other than speculatively) with these documents, or the documents with the pleaded representations. There is absolutely nothing to suggest that the detail and quality of finish shown in the 2011 plans and accompanying specifications had anything to do with the pleaded 2008 representations as to building costs. In other words, the instructions that resulted in the 2011 plans might well have been for a style of building or quality of finish quite different from whatever (if anything) formed the basis for the pleaded 2008 representation.
57 Secondly, the way the plaintiff by its solicitors dealt with the whole question was completely antithetical to the way lawyers should properly conduct themselves in the discharge of their obligations to the court to comply with case management directions, to other practitioners, and to the public interest in the efficient resolution of disputes.
58 The proper course for the plaintiff's solicitors, on coming into possession of the 2011 plans and if they (mistakenly) thought they had any bearing on the action, would have been first to confer with the solicitors for the defendants to advise them of those facts and the plaintiff's view that the plans required a further report. That is, they should have conferred with a view to obtaining consent to a variation of the expert evidence orders to allow for a further report, with concomitant adjustments to timetables. I f that agreement had not been reached and the plaintiff's lawyers persisted in the view that further reports were required, they should then have applied for variations to the expert evidence directions.
59 They did none of those things. Instead, they ignored the case management orders and took it upon themselves not only to commission a further report, but also to ask Mr Walls the valuer not to finish his report until Mr Dunlop had provided a supplementary report. That was a high-handedness bordering on arrogance.
60 Even had Mr Dunlop changed his view, the way in which the additional material had been handled by the plaintiff's solicitors would have fully justified a refusal to allow reliance on it.
The reports considered: the Machell report
61 The Machell report stands somewhat apart. It was prepared because the defence was amended in May 2015. The statement of claim consistently asserted that at a relevant time no specifications or plan of the development capable of being approved by the local authority had been prepared. The defence as originally framed denied that plea. It was thus a negative pregnant. The amended defence was that the plans upon which planning approval had been granted were in a form that could have been submitted for the purpose of obtaining a building licence: further amended defence [6.4].
62 This amendment introduced a new issue likely to require expert evidence. The objection of the defendants is that the plaintiff has no entitlement to adduce that expert evidence without leave under O 36A. The objection seems pressed as a matter of form. It seems to me that justice requires that leave be given to rely on the Machell report. However, I have more to say about the circumstances.
63 While the application is therefore allowed so far as it relates to the Machell report, the way in which this report was produced and delivered again provides reason to be critical of the plaintiff's solicitors.
64 When it became apparent that the amendment to the defence had raised an issue that would require expert evidence not covered by the existing directions, the plaintiff's solicitors should have conferred with the defendants' solicitors about the need for a further expert report.
65 Rather than doing so, it is characteristic of their approach that the only communication that the plaintiff's solicitors addressed to the defendants' lawyers about the amendment was the letter of 22 May, which was effectively a demand for particular discovery. That was met by a prompt and courteous reply pointing out that the relevant document had already been discovered, and identifying it.
66 I mention the way in which the Machell report was commissioned because it is relevant to the question of costs.
The reports considered: the Walls report
67 This is the report of the valuer. It was delivered more than eight months late. Save for the most cursory reference to the prospect of delay in a letter written only the day after it should have been delivered, the solicitors for the plaintiff made no attempt to provide any explanation to the defendants' solicitors of why the Walls report was delayed. Much less was there any hint of the apology that was called for, or even any expression of regret.
68 As noted already, some of the delay may be attributable to the fact that the instructions probably went to Mr Walls too late for it reasonably to be expected that he could comply with the procedural timetable. Again as I have noted, that may not be the fault of the plaintiff's solicitors as distinct from the plaintiff, but what happened later certainly was.
69 The subsequent delays in the delivery of the Walls report were caused in part by the fact that the plaintiff's solicitors took it upon themselves to instruct Mr Walls not to deliver his report until the second Dunlop report was available. As noted already, that was something they did without telling the defendants' solicitors what they were doing and conferring about obtaining the appropriate adjustments to the case management orders, whether by consent or on an opposed application.
70 It is perhaps fortunate for the plaintiff that because the second Dunlop report was a null report it would appear to have had no impact on the conclusions of Mr Walls.
71 Had Mr Walls relied on the 2011 plans in forming his opinion, that in my view would have irretrievably tainted his report and I would have refused to allow the plaintiff to rely on it. I do not foreclose the possibility (which is obviously a matter for the trial Judge) that cross-examination may show that Mr Walls relied in forming his opinion on material that was not relevant.
72 Bearing in mind the principles of case management to which I have adverted, I can also say that had the defendants identified by evidence any significant particular prejudice arising from the extravagantly late delivery of the Walls report, I would have precluded the plaintiff from relying on it. However, I have concluded that the delay alone would not justify excluding the plaintiff from relying on the Walls report. It does appear to be directed to the task required by the case management directions: there was no suggestion otherwise. It is clearly critical to a large part of the plaintiff's case. While Mr Williams for the plaintiff properly put it in oral submissions (and it is a point he had made previously in case management) that the plaintiffs could succeed at trial even if they fail on the question of the representations as to the value of the property in 2008 obviously the path to success overall is much clearer if the plaintiff succeeds on that point. To refuse to allow the plaintiff to rely on the Walls report would effectively require the plaintiff at this stage of the proceedings to abandon the claims based on the alleged representations as to the value of the land. Even if the plaintiff succeeded on other grounds, valuations evidence would be critical to quantify loss.
73 The application will therefore be allowed so far as it relates to the Walls report.
Consequential costs
74 The plaintiff has thus succeeded as to three of the four reports on which it seeks to rely. There was one effective concession, and no great argument about the Machell report.
75 That is a long way from justifying a conclusion that costs should follow a presumed event.
76 First, the plaintiff seeks an indulgence. A party seeking the indulgence of the court will usually be required to pay costs. The defendants had no obligation to consent. The obligation was squarely on the plaintiffs to do what they should have done nearly a year before, and seek variations of the expert evidence orders.
77 On that basis, the plaintiff should pay the costs of the application and any costs thrown away or otherwise incurred by reason of the non-compliance with the orders of 21 November 2014 as varied by consent in February 2015.
78 Further, the plaintiff should pay those costs on a full indemnity basis. That is because the history as related above shows that the conduct attributable to the plaintiff through its solicitors was of a kind that is simply unacceptable to the court in light of current approaches to case management.
79 Case management directions are not made for no reason. These case management directions were not just made for a reason, they were framed in a way that balanced the various competing interests. It now appears that at the time the orders were made the plaintiff's solicitors were not in a position to be confident that they could in fact obtain the required expert reports in the various times limited. When it became apparent that they were not going to comply, their response was inadequate. Above all other factors, they showed a continuous disregard of the obligation to confer. That is particularly incumbent on lawyers acting for a party in default of case management directions. It is not for the innocent party to enquire as to the reason for non-compliance and offer forgiveness: it is for the offending party to explain and seek forgiveness.
80 Conduct of that kind in my view clearly justifies an indemnity costs order. Where the burden of that falls, as between the plaintiff and its solicitors, is a matter for discussion between them.
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