Barescape Pty Ltd & Anor v Bacchus Holdings Pty Ltd & Anor

Judgment 1These proceedings were heard for 27 days before me, over an extended period between August 2011 and April 2012. Following the conclusion of evidence in the proceedings on 13 April 2012, the matter was listed before me to deal with several remaining issues as to the admissibility of documentary evidence which had arisen during the last week of the hearing. This judgment addresses those issues. Admissibility of paragraph 36 of Mr Vella's 15 August report 2The Cross-Claimant, Bacchus Holdings Pty Limited ("Bacchus") objected to paragraph 36 of the report dated 15 August 2011 of Mr Vella, the accounting expert called by the Cross-Defendants, Barescape Pty Limited, Anthony Ventura and Midfielder Pty Limited (to whom I will refer, for convenience, as "Barescape") on the basis that Mr Vella had no expertise in the comparison of market rents. That paragraph compares the rents provided in the leases for the Bacchus Restaurant and Longworth House, as the basis for a possible inference that the rent for the Bacchus Restaurant is concessional. The leases for the relevant restaurants are in evidence and I will admit the paragraph. I note that the weight to be given to the comparison is a matter for submissions. Barescape's tender of Mr Carpenter's report 3A report of David Carpenter of Cutcher & Neale has previously been tendered by Barescape and admitted in evidence, subject to a limitation under s 136 of the Evidence Act 1995 (NSW) that it is admitted as evidence of the report received for the purposes of the Sale Agreement (T109-111). 4Barescape now seeks to tender Mr Carpenter's report on a wider basis. Bacchus contends that it has sought to call Mr Carpenter to give evidence to verify that report but Mr Carpenter is unavailable to give evidence through no fault on its part. Barescape issued a subpoena to give evidence to Mr Carpenter (Ex P60) which was initially made returnable on 6 September 2011 and then stood over to the recommencement of this hearing on 2 April 2012. On 20 March 2012, Mr Ventura advised Mr Carpenter that the proceedings were scheduled to resume in the week commencing 2 April 2012 and sought Mr Carpenter's availability to attend a conference (and if necessary to give evidence) during that week. Mr Carpenter responded on 21 March 2012 that he would be overseas that week and unable to attend the conference and that he was not back in the office until 23 April 2012. Bacchus criticises the adequacy of the steps taken to secure Mr Carpenter's compliance with the subpoena and there is some basis for that criticism. 5However, there seem to me to be more fundamental difficulties with the tender of Mr Carpenter's report. First, there is no evidence before me as to Mr Carpenter's views, other than his report dated 17 December 2009, and in particular there is no evidence whether Mr Carpenter still holds the views in April 2012 that he expressed in that report or would wish to qualify those views in any way. Mr Carpenter has not, for example, given a proof of evidence or signed a witness statement which would indicate that, if called, he would adhere to the views expressed in that report. 6Second, Mr Wood, who appears for Barescape, fairly accepts that Mr Carpenter's report would only be admissible on a wider basis as expert evidence within the meaning of s 79 of the Evidence Act and Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 31.18. However, Mr Carpenter was not provided with the Code of Conduct set out in Sch 7 of the UCPR and did not comply with that Code as required by UCPR r 31.23. Nor has Mr Carpenter subsequently been provided with the Code or acknowledged that he had in fact conducted himself in accordance with it. Mr Carpenter's report therefore has the same difficulties as the report rejected by McDougall J in Investmentsource v Knox St Apartments [2007] NSWSC 1128 at [50], where his Honour observed that: "I have come to the conclusion that I should not "otherwise order" so as to admit into evidence so much of the [report] as expresses [the expert's] opinions. My reasons may be expressed briefly: (1) [The expert] did not prepare his report with a conscious appreciation of the obligations imposed by Schedule K (which was applicable at the time it was prepared) or Schedule 7 (which is applicable now). (2) There is a real difference between the role of an expert retained to advise a client and the role of an expert engaged to give evidence. The former owes his or her primary obligation to the client; the latter owes his or her primary obligation to the Court. It cannot be assumed that those obligations are identical, or that in any given case performance of them would lead to the same outcome in terms of opinion. (3) For the reasons given by Einstein J in Cassegrain and Campbell J in United Rural Enterprises, there is a real risk that an expert who has not prepared a report under the discipline of the applicable schedule will form an opinion from which, thereafter, he or she would find it difficult to retreat, even if circumstances arise that might raise this as a possibility. (4) An expert retained to advise a client is not usually confronted with alternative expert evidence. An expert retained to give evidence usually is. In the latter case, the expert's obligations under the applicable schedule require that he or she consider the alternative material, and reconsider his or her position in its light ..." 7I do not consider that exceptional circumstances are established here such that the Court should grant leave for that report to be admitted under r 31.23 where Mr Carpenter has not acknowledged either that he read the Code or that he agreed to be bound by it. 8Mr Carpenter's report was also not served in accordance with UCPR r 31.28. Rule 31.28(3) provides that, except by leave of the Court or by the parties' consent, an expert's report is not admissible unless it has been served in accordance with the rule. Rule 31.28(4) in turn provides that leave is not to be given unless the Court is satisfied that there are exceptional circumstances that warrant the grant of leave; or the report merely updates an earlier version of a report that has been served in accordance with r 31.28(1). Mr Carpenter's report is not an updating of any earlier expert evidence report. Nor, in my view, are "exceptional circumstances" established within the scope of r 31.28(4) and bearing in mind the statement of objectives of a Court in the management of litigation contained in ss 56-59 of the Civil Procedure Act 2005 (NSW): Yacoub v Pilkington (Australia) Ltd [2007] NSWCA 290 at [66]-[67]; State of New South Wales v Tyszyk [2008] NSWCA 107. 9Accordingly, I do not consider that Mr Carpenter's report dated 17 December 2009 should be admitted on any wider basis than it has previously been admitted in the proceedings. The result is that it has the status to which Palmer J referred in Lagerbar Balmain Pty Ltd v Riverview Hotel Balmain Pty Ltd [2006] NSWSC 1433, that it has been admitted as a report for the purposes of the private arrangement between the parties constituted by the Sale Agreement (as reflected in the current limiting order) but is not an expert's report for the purposes of s 79 of the Evidence Act. Bacchus' tender of additional function documents 10Bacchus seeks to tender a further volume of documents (which I have marked as "MFI 40") which were shown to a witness called by Barescape, Mrs Ventura, on 11 April 2012, the third last day of evidence in the proceedings. Barescape objects to the tender of several pages of that bundle which relate to functions held at Longworth House on the basis that the bundle was served during the last two weeks of the hearing without prior notice; the documents were not put to Mr Pelosi, a witness called by Barescape who had familiarity with functions held at Longworth House; and the lateness of service of the documents and their use in cross-examination at the end of the trial meant that there was no opportunity for Barescape to investigate or respond to the documents. 11I should note that Bergin CJ in Eq had previously made directions on 16 February 2011 as to the service of Court Books by 3 August 2011; Bacchus had served one folder of documents on 5 August 2011 and Bacchus then served a further 13 folders of documents shortly before the recommencement of the hearing on 5 September 2011, which were subsequently reduced to a single volume of documents. I granted leave to Bacchus to tender that additional folder of documents for the reasons set out in my judgment delivered on 2 November 2011 ([2011] NSWSC 1307), primarily that Barescape would have sufficient time to address those documents prior to the recommencement of the hearing in April 2012 and that the documents were tendered in Bacchus' case in its Cross-Claim and Barescape was able to call evidence in response to them as of right. 12In my view, Bacchus requires leave in order to tender the additional function documents contained in MFI 40, where these documents could readily have been included in the Court Books which were required to be served by 3 August 2011 or in the additional folder of documents which Bacchus was granted leave to tender in accordance with my judgment of 2 November 2011. In Beattie & Sutherland v Osman (No 3) [2009] NSWSC 824, White J observed that: "[w]here a party has not complied with the order of service of evidence-in-chief, that party will often be precluded from relying upon evidence which is served late if the opposite party would thereby be prejudiced." Although Bacchus points out that that case involved the tender of documents which were not available to the other party until late in the proceedings, his Honour's reference to prejudice is plainly not limited to that situation. 13The question whether to grant leave to tender those documents is to be determined by reference to the principles indicated in ss 56-58 of the Civil Procedure Act. In determining whether to make any order for the management of proceedings, including any order of a procedural nature, and the terms in which any such order or direction is to be made, the Court must seek to act in accordance with the dictates of justice. The Court must have regard to the provisions of s 56 of the Civil Procedure Act, which identify the overriding purpose of the Act as to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings. The Court may also have regard to other matters, which include the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction. In my view, the prejudice that Barescape suffers from the late tender of these documents is real. The orders for service of a Court Book made by the Court were intended, inter alia, to allow the parties to know the substance of the documentary evidence which would be relied on in the proceedings and to lead any necessary evidence in response and cross-examine as to that evidence. In this case, Bacchus was allowed an opportunity to supplement the evidence contained in the Court Book by tender of an additional folder of documents relating to functions in accordance with my earlier judgment. 14In my view, the tender of further documents of this kind in cross-examination of Barescape's witnesses at the end of the proceedings deprives Barescape of the opportunity to investigate in an orderly way whether other evidence might be available to qualify or displace inferences which might otherwise be drawn from those documents and to lead any evidence of Mr Pelosi which might address those documents. In doing so, it is inconsistent with the need for "fundamental forensic fairness" in proceedings and for parties to be permitted to reach forensic decisions in an informed manner, to which Einstein J referred in Mobile Innovations Ltd v Vodafone Pacific Ltd [2003] NSWSC 309, in the context of considering potential prejudice arising from the late service of affidavits. 15It is no answer to this prejudice that the documents originated with Mr Pelosi or relate to Longworth House, because Barescape was not required to engage in an exercise of anticipating what documents Bacchus had not included in the Court Books or the additional folder which it was granted leave to tender in late 2011 and prepare evidence against the contingency that those documents might be tendered in cross-examination in the closing stages of the hearing. 16It is possible that the exclusion of these documents may affect Bacchus' ability to quantify damages in respect of particular functions, where other documents relating to the revenue derived by Longworth House may not have been discovered or produced on subpoena, and to that extent Barescape may be disadvantaged by the exclusion of these documents. However, s 58(2) of the Civil Procedure Act allows the Court to have regard to the use that any party has made, or could have made, of any opportunity that has been made available to it in the course of the proceedings, and in this case Bacchus has already had two opportunities to introduce function documents in evidence in the proceedings, initially in the Court Book and then in the further bundle of documents which I granted leave to tender in my judgment delivered on 2 November 2011. 17I should add, for completeness, that Mr Henskens, who appears with Mr Furlan for Bacchus, contends that each party has tendered numerous documents in these proceedings which were not included in the Court Books. While that proposition is correct, no question as to whether leave should be granted to tender those documents arose where no objection was taken to them. The position in respect of the additional function documents included in MFI 40 is different, because Barescape does take objection to their tender on the basis of prejudice; because the prejudice arises from the inability to lead evidence which might qualify those documents to which I have referred above; and because that prejudice could have been avoided by including those documents in the Court Book or in the bundle of documents tendered pursuant to the leave which I granted in November 2011, rather than tendering them in cross-examination at the end of the hearing. 18For these reasons, I do not grant leave to tender pages 15-17, 19, 22-23, 26-48, 152-159 and 175-205 of MFI 40. I would also have excluded these pages on the basis that their tender in this manner was unfairly prejudicial to Barescape under s 135 of the Evidence Act. There are several cases in which a party's failure to disclose or lead evidence in a timely way so as to enable the other party properly to consider and respond to it has been treated as warranting the exclusion of that evidence under s 135 of the Evidence Act: Barrett Property Group Pty Ltd v Metricon Homes Pty Ltd [2007] FCA 1509 at [161]; Dyldam Developments Pty Ltd v Jones [2008] NSWCA 56. 19I will otherwise mark MFI 40 as Exhibit "D98", noting that I have previously made limiting orders under s 136 of the Evidence Act on the application of Bacchus in respect of paragraph 1 at the bottom of page 110 and paragraphs 1 and 3 of page 116 of MFI 40. Bacchus' tender of Later POS Records (MFI 44) 20In my ex tempore judgment delivered on 13 April 2012 ([2012] NSWSC 384), I had rejected, inter alia on the basis of s 135 of the Evidence Act, the tender of 877 pages of documents extracted from the Bacchus Restaurant's current Point of Sale ("POS") system and covering the period 17 November 2009 to 27 June 2010 ("Later POS Records"), which Bacchus sought to tender in Mr Vella's cross-examination on the last day of evidence in the proceedings. 21In that judgment, I noted an issue which had previously arisen in the proceedings in that Bacchus had not made available the Bacchus Restaurant's POS system for the period prior to 17 November 2009 in a form which was functional so as to allow information to be extracted from it. I also noted that the late tender of the Later POS Records would prevent Barescape from exploring their authenticity or admissibility as business records or completeness in an orderly way and that the conclusions to be drawn from those documents had not been the subject of expert evidence led by Bacchus. I noted that, in the circumstances of these proceedings, it was not possible to avoid that prejudice to Barescape by a further adjournment, which would impose further costs and delays on it (and the community) in circumstances that the costs of these proceedings was already likely to be significantly disproportionate to the amounts likely to be recoverable in them. I similarly ruled in respect of an application by Bacchus to tender extracts from the Later POS Records. 22I have now heard further argument as to the tender of the Later POS Records, because the issue may ultimately be of importance to Bacchus' ability to establish some aspects of its damages case in the proceedings and the matter was dealt with under some time pressure by both Counsel and the Court when it was argued before me late in the afternoon of the last day of evidence in the proceedings. These matters suggest that it was open to Bacchus to make a further application to tender the relevant documents: Nominal Defendant v Manning [2000] NSWCA 80; (2000) 50 NSWLR 139 at [71]-[72], [122]-[124]. Bacchus also contends that the Court proceeded on two bases which were incorrect and that, if established, would also warrant the reconsideration of this application. I will deal with Bacchus' submissions as to those matters below. 23Bacchus' first submission is that the Court was in error in proceeding on 13 April 2012 on the basis that there was no evidence as to the authenticity of the POS documents and it would be unfair to the Plaintiffs to deal with their authenticity at the conclusion of the hearing, and Bacchus refers to evidence which it contends establishes the authenticity of the POS records. The observation which I made in paragraph [5] of my judgment delivered on 13 April 2012 was as follows: "It appears that copies of these records for the later period, which originate with the Bacchus Restaurant, were provided by the Cross-Defendants to Mr Vella to allow him to undertake analysis based upon them. These documents may well be authentic and they may well be business records, but both of those matters are matters which the Cross-Defendants would be entitled to explore in an orderly way. I have no doubt that it would be unfairly prejudicial to the Cross-Defendants, for the purposes of s 135 of the Evidence Act, to place them in a position where, on the last day of evidence in the hearing, 877 pages of POS records for the later part of the relevant period are tendered without either Bacchus Holdings leading evidence of authenticity or the manner in which they have been prepared and without the conclusions sought to be drawn from these documents having been dealt with in the expert evidence led by Bacchus Holdings so as to allow counsel for the Cross-Defendants to cross-examine that expert witness. Mr Wood puts, and I accept, that he could not deal with this information in the circumstances that it is now tendered." 24My observation as to the lack of evidence of authenticity of the Later POS Records requires qualification, since Bacchus draws attention to matters which it contends are evidence which support the authenticity of those records, as follows: