Canturi Corporation Pty Limited v Gagner Pty Limited

District Court of NSW|2008-08-25

These proceedings were listed for hearing before me for three days on Monday 18 August 2008. The plaintiff called all its witnesses. On the afternoon of the third day of the hearing, as cross-examination of the last of the plaintiff's witnesses drew to a close, counsel for the plaintiff made an application to read and rely upon further affidavit evidence in chief, from Mr Stefano Canturi, a director of the plaintiff. The matter was stood over to the following day and, when further amendments to Mr Canturi's affidavit were foreshadowed, to Friday 22 August 2008.

Mr Canturi's revised affidavit was served on Friday afternoon. It is 25 pages long and comes with a large folder of annexures, all of which are documents not seen before by the defendant. Counsel for the defendant then informed the court that he intended to oppose the application of the plaintiff to read and rely upon this further affidavit evidence in chief. The plaintiff's contested application was argued on 25 August 2008.

While the plaintiff discovered the lease which contained the refit clause, none of these documents about the proposals for a refit had been discovered. The plaintiff's explanation for this is that the defendant only sought discovery of such documents for the period June 2004 onwards and these documents preceded that date. However, as a result of the concessions (and documents) of Mr Vitogiannis, and the use to which documents produced by the plaintiff (in answer to a Notice to Produce) have been put, the plaintiff wants to change its position and call Mr Stefano Canturi to give evidence which in part contradicts the evidence of Mr Vitogiannis.

Applications to call witnesses who have not sworn affidavits and to tender documents not produced in discovery are not uncommon in the District Court. However, there are no decisions of this court available on Caselaw to guide me in resolving the tension between the need for just, quick and cheap resolution of the real issues in proceedings (s 56 Civil Procedure Act 2005 (NSW)) and the attainment of justice, a principle which should not be surpassed by any principle of case management or efficiency in the procedures of the court.

There are, however, a number of helpful Supreme Court decisions explaining the impact of the Civil Procedure Act and how it should be applied to applications of this kind. In particular, the Court of Appeal in Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 has stressed that the provisions of the Civil Procedure Act 2005 (NSW) mean that there is "a significant qualification" (at [29]) on the power of the court to grant leave to amend pleadings multiple times. Although this judgment related to defamation pleadings, Dennis has been applied more widely: Davis v CTTT [2008] NSWSC 491; Michael Wilson and Partners Limited v Robert Colin Nicholls [2008] NSWSC 501.

This is not a case where there is an application to amend pleadings but to lead further evidence on the pleadings as they currently exist. What should happen when as a result of a change of tactics (the assertions made by the plaintiff about the defendant in these proceedings) or playing one's cards too close to the chest (the assertions made by the defendant about the plaintiff) a party seeks to lead further evidence in relation to the case as already pleaded? When does failure to call a witness, or to disclose a line of defence, cross the line between legitimate trial tactics and become trial by ambush?

There is a fine line between "trial by ambush" and "trial tactics". While trial by ambush is deplored by the courts, trial tactics are recognized by the courts as being a legitimate way in which the case for a party can be put in its best possible light before the court. In Vale v Vale [2001] NSWCA 245 at [92] Mason P commented (when rejecting a complaint concerning failure to call a witness) that while the goddess of justice may be wearing a blindfold she is not blinded to "the realities of trial tactics".

Many parties prepare their case using what Mason P calls "trial tactics". This involves putting evidence before the court designed to put the case in its best light. Decisions about how to plead and present a case and whether or not to call a particular witness are decisions made after careful consideration, and in the knowledge of the inferences that may be drawn if a witness of relevance is not called. The problem is that if the tactics misfire, this may lead to what the courts have called "trial by ambush": Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116.

The Court of Appeal has stated on a number of occasions, notably in Nowlan, that the days of "trial by ambush" in the District Court are over. Parties preparing for hearing are expected to take the "cards on the table" approach: Glover v Australian Ultra Concrete Floors Pty Ltd [2003] NSWCA 80 at [60]; Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208 at [205]; Zisis v Knighton [2008] NSWCA 42 at [50]. A party complaining of "ambush" must lead evidence of being misled or disadvantaged (Seltsam at [225]). The appropriate step to take is either an adjournment or a new trial, unless a new trial would be a futility: Seltsam at [226].

These principles have been applied more rigorously in specialist lists such as the commercial and defamation lists, where case management, discovery and the requirement for precision in pleading play a much bigger role than personal injury or negligence proceedings.

The provisions of the Civil Procedure Act 2005 (NSW) are designed to ensure that parties do not conduct "trial by ambush". However, this does not tie a party inflexibility to a particular course of conduct at the trial. If a party changes its tactics part way through the trial and seeks to lead new evidence from a witness whose evidence has not previously been served, whether this can be categorized as a change in "trial tactics" which can be accommodated (subject to appropriate costs or other orders), or whether it amounts to "trial by ambush", and should not be permitted, will depend on the facts in each case.

I now turn to a consideration of these factual issues.

The flood in the plaintiff's shop was discovered early in the morning on 29 October 2005 and the landlord immediately sent a plumber to turn off the taps that were leaking in the restaurant. The shop did some, but not much, trading on that day, and continued to trade notwithstanding the damage until June 2007, when a major fitout of the premises, which included replacing both damaged and undamaged fittings and fixtures, took place. This delay in the fitout is a matter much relied upon by the defendant on issues of quantum.

The plaintiff commenced proceedings by way of Statement of Claim filed on 6 July 2006 for $360,000 for damages to its premises after water flooded into its shop from the defendant's upstairs restaurant. The particulars of damage in the Statement of Claim were for repairs totaling $55,811.25, loss of profits of $194,939.20 and recovery after the repairs ($108,003.72) plus an additional amount for loss of profit on the day of the flooding (29 October 2005). By the time the hearing commenced this sum had been reduced considerably to the cost of repairs (either $44,113 or $62,935, according to the respective experts for the parties), business interruption on the day of the flood (less than $5,000) and business interruption of $4,923.50 per day during the fitout, which according to the parties' respective experts was 10 or 21 days. There is an addition claim of $110,093 for a water damaged computer. The modest amount of damages, even on the plaintiff's case at its highest, is relevant by reason of the provisions of s 60 Civil Procedure Act, which requires that the conduct of the litigation be proportionate to the sum involved.

At all times these proceedings were case managed in the Commercial List by the Commercial List Judge, Judge Rolfe. The parties entered into a series of 10 consent timetables and there were further directions made by Judge Rolfe concerning the late filing of experts' reports. The parties served affidavits for their experts and witnesses, prepared a three-volume tender bundle (later reduced to one bundle) and after a flurry of final affidavits on the Friday before, came before me on Monday ready for a three-day hearing.

Each of the parties provided me with a Statement of Issues, a chronology and an outline. One of the items identified by the plaintiff as an issue was:

"Did the Plaintiff suffer no damage because all the work for repairs or replacement would have to be done anyway when the plaintiff did its new fitout as required by its lease?"

It was undisputed that the plaintiff, which operated its business at the premises from 1995,entered into a new lease on 1 March 2004 containing a provision requiring the plaintiff to refit the premises in the following two years. The refit that did take place was done about eight months after the flooding damage.

This issue of the requirement for the refit was identified by the defendant in paragraph 11 of its outline concerning damages.

Having regard to the outlines from both counsel and the factual material in paragraph 20 above, it was evident from the first that a major issue in the case would be whether in theory repair work was necessary, how much repair work was required and whether this was as a result of the lease refit requirement, or was betterment work. In addition, given the repair work was not done for nearly nine months and the plaintiff was able to trade during that time, the defendant raised the issue of whether any claim for loss of profit could be made for any period other than the few hours when the plaintiff's shop was shut on 29 October 2006.

The plaintiff never served any affidavit from Mr Stefano Canturi. Mr Canturi is the alter ego of the plaintiff and was at all times the person who made decisions for the plaintiff, including decisions about repair work and fitouts.

Counsel for the plaintiff and defendant agreed, on the first day of the hearing, that certain witnesses who had provided affidavits would not be required for cross-examination and made a number of admissions and concessions to finish the trial within the three day estimate. Although half a day was lost because the plaintiff ran out of witnesses on the first day, the plaintiff's last witness was nearing the end of cross-examination on the third day. There was still the defendant's evidence to be heard, and the plaintiff's case in reply concerning the two alleged concurrent tortfeasors. It looked as though the case might not be completed in four or five days, which was a matter of concern to me due to other court commitments.

In response to an inquiry I made on Wednesday afternoon about the likelihood of the case finishing that week, counsel for the plaintiff advised that he intended to rely upon evidence from Mr Canturi. As that affidavit had not yet been prepared, the case had to be adjourned after cross-examination of what would otherwise have been the plaintiff's last witness.

On Thursday 21 August, the plaintiff served an affidavit of Mr Canturi and provided me with a copy. In the course of dealing with proposed objections to this affidavit, and in response to inquiries from me as to the impact this new evidence would have on the case, counsel for the plaintiff indicated he proposed to redraft the affidavit. I stood the matter over to 2:00 pm on Friday 22 August. It was hoped that the cross-examination could start that afternoon and that the case could be completed during the following week.

The revised affidavit was made available just before 2:00 pm. It now consisted of 25 pages and many annexures that the defendant had not seen before, and counsel for the defendant said he was not in a position to deal with this material that afternoon. He also foreshadowed an application to refuse the plaintiff leave to rely on the affidavit or, if the plaintiff sought to rely upon the affidavit, that the hearing either be adjourned to a later date to enable his client to meet the new evidence or that the hearing be aborted and a fresh hearing of the entire matter take place. That is the application I am now heard on 25 August. Due to other commitments of counsel, it was not possible for the case to proceed on 26 August.

The evidence of Mr Canturi is conceded by the defendant to be relevant to issues concerning damages (but not liability) in these proceedings. Counsel for the defendant referred repeatedly, in the days beforehand, to his failure to give evidence, and to the inferences that I would be asked to draw. It was asserted by counsel for the plaintiff that it was only as a result of how the case was run that it became necessary for Mr Canturi to be called.

The prejudice caused by the application to rely on Mr Canturi's affidavit

The defendant relies upon the affidavit of Mr Toogood and in particular to the matters set out in paragraph 105 thereof as being the matters going to the issue of prejudice. As this application took a day to hear, and I have limited time in which to prepare this judgment, I set out paragraph 105 in full:

105.1. Canturi seeks to adduce further evidence in chief against a background of repeated timetable breaches, and the provision of misconceived evidence that has lead to the defendant incurring significantly more in legal expenses (and wasting time) than it would otherwise have had to do.

105.2. That background of unacceptable evidence preparation on the plaintiff's part began as early as March 2007.

105.3. Canturi now seeks leave to read the affidavit of Mr Stefano Canturi sworn 22 August 2008 in this proceeding after Mr Canturi has personally sat in court and heard the evidence, including cross-examination, of all Canturi's witnesses in chief, and has heard all of the exchanges in argument between counsel in connection with submissions and the like.

105.4. Whilst Mr Stefano Canturi as the principal of the plaintiff was entitled to have sat in court during that time, he seeks in his affidavit to advance for the first time aspects of Canturi's claim on new bases, and to provide new evidence (both narrative and documentary) in chief as to many of the issues upon which the parties had exchanged evidence going back to early 2007;

105.5. That is, Mr Canturi's affidavit relies in a number of respects to seek to make good the points that he raises or addresses by reference to new bundles of records (such as lease negotiation records, and documents showing the state of the premises and fitout prior to 29 October 2005), which had previously expressly and clearly fallen within the ambit of the discovery categories identified by my client in late 2006, but which Canturi had failed or refused to previously produce;

105.6. Canturi seeks to do this in the absence of any explanation at all from Mr Canturi as to why the business records annexed to his affidavit were not produced earlier (in accordance with numerous court orders), and to explain why his affidavit was not produced and provided until mid-way through day 5 of the trial on 21 August 2008;

105.7. The apparent "issues" that the proposed new Mr Canturi affidavit addresses appear to concern firstly the obligation to undertake work in any evident under the lease as an "essential term", secondly Canturi's preparations in that respect before the water leak, and thirdly the state of the fitout in the first place prior to the water leak. All of those issues were to my knowledge (and in my opinion) all issues that were the subject of express calls for the production of relevant underlying business records held by Canturi, were also the subject of pre-trial discussions between the legal representatives, and were apparent from the defendant's evidence.

105.8. In my opinion, the relevance of the essential term requirements of cl 18 the lease - and the decisions that Canturi took as a corporate entity against that background or otherwise - is apparent from Mr Makin's comments at paragraph 52 and following of his 10 July 2007 report to the effect that the Canturi re-fit in June / July 2006 rendered any theoretical water ingress repair work redundant. That the plaintiff's legal representatives did not appreciate the significance of their client's pre-29 October 2005 discovery records (limited as they are) to its fitout in accordance with cl 18 of its 2002 lease, or even regardless of that lease obligation, is not a matter that should now prejudice the defendant at this stage in the trial.

105.9. Further, those matters were clearly and obviously foreshadowed, in my opinion, in;

(a) The discovery requests that were expressly directed to these matters as set out in paragraphs 5.5, and 11 above, and the plaintiff's response referred to in paragraph 13 above;

(b) The course of the events that I have described in paragraphs 66 and 67 above which record events that occurred in March 2008;

(d) The contents of my notice to produce dated 6 August 2008 (a copy being AT46, and see paragraph 91 above) which I only issued because of my concerns about whether proper discovery of these documents had in fact been made;

(e) The contents of the plaintiff's own discovery records such as its 2002 lease and its August 2005 refit plans (being tabs 13, 14 and 15 in Exhibit A in the trial) which themselves canvassed the issue of the preparations for the refit of the premises as required by the lease as an essential term (cl 18 thereof);

(f) The contents of the Tanert and Inset subpoened records which addressed, amongst other things, that refit obligation and the plans in respect thereof;

(g) The contents of counsel's written opening which was provided to the plaintiff's counsel on Friday 15 August 2008; and

(h) Mr Makin's first report, and also his second report.

105.10. In my opinion, if Canturi is permitted to read and rely upon Mr Stefano Canturi's proposed affidavit, Gagner will need to undertake fresh investigations arising out of the factual evidence alleged by Mr Stefano Canturi which will include new subpoenas and notices to produce, will likely need to obtain further expert evidence from Mr Makin and possibly a new building expert, and may need to recall witnesses who have already been cross-examined;

105.11. I have read the transcript of the trial each day. I have also received regular advices as to its progress from my employed solicitor, Mr Swan, who has been in court each day instructing my client's counsel. In my opinion, the attempt to adduce this evidence at this late stage should also not be permitted as to allow the evidence to be introduced at this stage of the trial will cause Gagner significant forensic prejudice. For example:

(a) In the absence of any affidavit from Mr Stefano Canturi, the defendant determined to forensically examine with the witnesses that had put on affidavit evidence on behalf of Canturi (such as Ms Mallia and Mr Vitogiannis), and whose presence at the trial had been foreshadowed beforehand, issues going to Canturi's obligations under its Lease, and its related business strategies concerning its corporate image generally in all of its stores. Those matters have obvious significance as far as Canturi's damages claim is concerned. Had Mr Canturi provided an affidavit the cross-examination of those matters would have been reserved for him. I would have instructed my counsel to run the matter at trial in such a way so that Mr Canturi would not have had the benefit of observing the development of the evidence with other witnesses and then crafting an affidavit with the aim of putting a counter proposition supported by documents selected by him from records that had previously not been discovered. The timing of the provision of Mr Canturi's evidence in this way clearly has the potential to impact on the cross-examination of him as regards disputed factual matters.

(b) The cross-examination of Mr Vitogiannis was prepared conscious of the evidence (such as there was) and discovered documents produced by Canturi (again, such as there were) pertaining amongst other things to the state of the fitout prior to the 29 October 2005 water ingress, and the objective (ie, discovered) records to that point (and after) as regards preparations by Canturi to replace that fitout. That cross-examination may well have been different had Canturi's disclosed the additional records (and descriptions) of the pre-existing fitout that it now seeks to do through Mr Canturi's proposed affidavit. The court will be placed with a clear choice in a number of respects in preferring either the evidence of Mr Vitogiannis and Mr Makin (for Gagner). Matters of factual dispute exist that this court needs to resolve. That task would be further complicated by the late introduction of the Stefano Canturi evidence (if permitted) at a point in the trial essentially after the conclusion of Mr Vitogiannis' evidence. That supposed independent account is now to be coloured by Mr Canturi's "spin" on matters introduced after having had the luxury of seeing his contractor (Mr Vitogiannis) quizzed and put to proof as to the substance of matters concerning the extent of damages, defect rectification, business interruption, and refit objectives and needs that Mr Canturi was previously content to rely upon.

(c) Canturi has steadfastly refused or failed to discover all of its business records concerning such matters. That much is obvious from an examination of the annexures and exhibits to Mr Canturi's proposed affidavit of 21 August 2008. That position has not changed even with the production of Mr Canturi's proposed affidavit. Minutes of Board meetings are not discovered or annexed by him. Nor has any indication been provided that any search has been made of records in Mr Michael Canturi's possession. No where in his affidavit does he depose to the extent of his searches for all lease negotiation documents. No subpoenas been issued on the company or persons who undertook the 2003 / 2004 lease negotiations on Canturi's part. Given the piecemeal and unacceptable manner by which relevant documents have been discovered by Canturi till now, I for my part, am unable to rely on any assurances (if any were provided) that no more documents exist - particularly documents that may be in the possession of third-parties previously retained by Canturi.

(d) On any view the receipt into evidence of this affidavit at this late stage will cause the defendant, and its legal representatives, to deal with the new evidence "on the run".

105.12. The trial has been prepared and run by the defendant based on the documents that Canturi has seen fit to discover, and on the affidavit evidence that it has adduced. Equally, the defendant has adopted a commercial position with respect to the trial against that background.

105.13. If the proposed affidavit of Mr Canturi is permitted, the defendant will be put to financial prejudice. Not only will the case likely be delayed or extended, but it will need to spend more money on the search for relevant documents and in obtaining supplementary expert advice, and possibly evidence.

105.14. In my opinion, if the plaintiff were permitted to rely on the said proposed affidavit of Mr Canturi dated 21 August 2008, it will suffer indirect commercial prejudice as a consequence to a degree that might never be precisely calculable. A mediation has taken place under court direction. The documents discovered by the plaintiff up to the start of that mediation or the start of the trial were clearly not the full bundle of those that were relevant and were available to Canturi. I am unable to say if all have now been discovered. However, it is entirely possible that the commercial positions of either party (or both) may have been different at that mediation (and later) had all of the relevant documents (now known and others possibly existing but not yet discovered) been produced.

105.15. In my opinion the aborting of the trial (with an order that Canturi pay the costs thrown away) will not necessarily cure the prejudice that I have discussed above. Certainly the prejudice arising from the way in which the cross-examination was advanced on the false premise that the plaintiff would not seek to call evidence from Mr Canturi would not be cured.

105.16. I am instructed that my client would prefer that this court order that Canturi not be permitted to rely on the evidence of Mr S Canturi as per his proposed 21 August 2008 affidavit, or otherwise, and that the trial otherwise proceed to a conclusion in this week beginning 25 August 2008.

105.17. Importantly, in that respect, it appears from what counsel for the plaintiff has submitted to the court up until now that the plaintiff does not see this evidence from Mr Canturi as being crucial to it succeeding in its case. It has certainly now said that much on the transcript in any place that I can locate. Rather, as I understand its submissions to have been, it sees the proposed late Stefano Canturi affidavit;

(a) as being somehow needed because the plaintiff was "goaded into it" (at T191.26),

(b) as being due to the way the "cross examination progressed" (at T192.22),

(c) as being strictly unnecessary because the refurbishment required by the lease was always "discretionary" (at T192.35), and

(d) as dealing with what it describes as "false premises" raised in the cross-examination (see, T194.1, T232.42) - a matter that it presumably felt content during its preparations of the trial, and during the first 3-days of the trial to address by way of submissions.

105.18. In my opinion it should have been obvious to the plaintiff and its legal advisors prior to the trial commencing that clear evidence in chief was needed by the plaintiff (presumably from Mr Stefano Canturi) to explain why a wholesale refit was undertaken by his company as opposed to it undertaking repair works necessary (if any) by reason of the water leak, and that this need should have been seen as being obvious regardless of the content of cl 18 of the Lease. The plaintiff has always had the onus of providing its loss, and needed to do this in the face of material in its own discovered records of an 8-month delay after the water ingress (in which little or no repair work was done and the business continued to trade with normal income returns) followed by a wholesale replacement of a new fitout under an entirely new layout and to an entirely different design that appears wholly unconnected with the water ingress of October 2005 (and at a $300,000 cost against quotations from November 2005 in the amount of $62,000).

105.19. In my opinion the matters of prejudice that I have addressed above cannot be cured simply by an adjournment and an order that the plaintiff pay the defendant's costs thrown away by that adjournment. Rather, the requirement for the just, quick and cheap determination of these proceedings in the manner mandated by s 56 of the Civil Procedure Act 2002 is in my opinion best achieved by this Court determining to not permit the plaintiff to rely on Mr Canturi's proposed 21 August 2008 affidavit, and to otherwise direct that the trial proceed to a conclusion forthwith. The court presumably does not have unlimited time to devote to this matter. In my opinion further lengthy adjournments would lead to the parties incurring both costs, and devoting time and resources, to the resolution of the dispute that are disproportionate to the amounts in issue."

(a) None of these documents were discovered. They are produced very late in the case in circumstances where Mr Toogood complains that proper discovery was never given, and by inference, these may not be all of the relevant documents. Accordingly, there would need to be discovery given of all of the records the plaintiff holds in relation to the pre-June 2004 refit plans, and not merely those documents attached to Mr Canturi's affidavit. However, Mr Toogood never asked for these documents in the categories of discovery, nor did he complain to the court if he thought the discovery inadequate. Instead, he issued a Notice to Produce to the plaintiff, which is not the appropriate step to take when there has been discovery.

(b) The defendant will need to undertake fresh investigations including issuing new subpoenas and notices to produce to Mr Michael Canturi, the architect who prepared the plans. It took four subpoenas to obtain the documents from Mr Vitogiannis and by inference there is concern that there will be difficulty in ensuring that all of the documents had been obtained. I accept Mr Toogood's complaints about this.

(c) It will be necessary to obtain further expert evidence from Mr Makin, the defendant's expert, and possibly a new building expert. I agree that this must be done.

(d) It will be necessary to recall witnesses who have already been cross-examined. The plaintiff's counsel has agreed that they will be made available.

(e) Mr Canturi has had the advantage of sitting in court while Mr Vitogiannis was cross-examined. This is asserted to be an unfair advantage.

(f) The defendant has forensic tactic as "shown its hand" by putting questions to Mr Vitogiannis which it might not have put had it had the opportunity to cross-examine Mr Vitogiannis first. I have dealt with this, and with the "unfair advantage" point, in more detail below. It is, in my view, a significant issue, as is the question of unfair advantage.

(g) In addition, the defendant complained of incurable forensic prejudice of the kind explained in ASIC v Rich [2006] NSWSC 712. Although this decision predates the enactment of the Civil Procedure Act many of the issues discussed by Austin J at [56] - [70] concerning the attitude the court should take to the late adducing of evidence are of considerable assistance. This includes the matters of prejudice which could not be cured simply by an adjournment.

As to the operation of the Civil Procedure Act , the defendant draw my attention to the comparatively modest sum claimed and the significant legal costs already incurred.

The plaintiff relied upon the affidavit of Mr Craig Higginbotham, the solicitor for the plaintiff, who gave evidence it was not until he received the defendant's outline of submissions at the commencement of the hearing that he realized that two "new" (paragraph 21 of his affidavit) matters. The first of these was that a refit was required by the lease, contemplated by the plaintiff and actually intended to be done and the second was that the water leak happened at the end of the working life of the old fitout, and that that old fitout was redundant. Mr Higginbotham goes on to state that this is contrary to his instructions. The plaintiff did not always intend to do the refit that was in fact done, and the old fitout was not at the end of its working life.

I have read the correspondence between the parties, which I note include numerous complaints of failure to give proper discovery. The defendant sought documents relating to the fitout, but restricted these to documents after June 2004.

In a letter dated 11 October 2007 the solicitors for the defendant noted as a significant issue the question of whether the plaintiff suffered any loss due to the water leak given that its premises were "scheduled for refurbishment in any event and any damaged property was to be removed as part of that refurbishment". It is clear from the request they made for the lease and from the repeated statements made in correspondence about the impact of the refit that this would be one of the bases upon which quantum would be disputed, and any doubts that the plaintiff had in this regard would had been entirely removed by the defendant's outline served on the first day of the trial.

Having regard to the correspondence tendered, and the facts in the case, Mr Higginbotham's belief that these were new issues must be seen as the result of oversight on his part.

The plaintiff submitted that the defendant should have either pleaded or particularized that the refit would be relied upon. In my view this misconceives the issue. The defendant sought documents on discovery and on subpoena and then obtained some admissions from Mr Vitogiannis, the interior designer consulted about this proposed fitout. It is essentially Mr Vitogiannis' answers and the documents he has produced under subpoena that has created this problem.

Mr Canturi has been sitting in court for the three days of the hearing. He has had the opportunity of hearing Mr Vitogiannis and the salon manager cross-examined. Questions that have been put to them have put him on notice. The defendant submits, and I accept, that forensic advantage of the "trial tactic" kind has been lost as a result.

Having noted the factual background I set out the relevant provisions of the Civil Procedure Act to apply.

Sections 56 - 62 contain a series of case management principles designed to ensure justice is not only done but seen to be done. The main provision, section 56, provides:

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

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

(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court.

(4) A solicitor or barrister must not, by his or her conduct, cause his or her client to be put in breach of the duty identified in subsection (3).

(5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs."

Section 60 provides that the costs must be proportionate to the amount in dispute. This section appears to have been modeled on s 48A Defamation Act 1974 (NSW), a section introduced as part of the 2003 amendments to this Act following a private Member's Bill and articles in the Manly Daily about a trivial defamation action resulting in crippling legal costs. Most of the cases referred to in the footnotes to s 60 in Ritchie's Uniform Civil Procedure (NSW) are defamation cases involving publications to a handful of persons. The applicability of such a section in a commercial dispute where the damages claimed are of some substance is less persuasive, but it is still of some importance as a guideline to the approach to take to the conduct of litigation in courts such as the District Court.

In addition, there are powers given to the court to ensure the speedy determination of "the real issues between the parties" in s 61:

" 61 Directions as to practice and procedure generally

(1) The court may, by order, give such directions as it thinks fit (whether or not inconsistent with rules of court) for the speedy determination of the real issues between the parties to the proceedings.

(2) In particular, the court may, by order, do any one or more of the following:

(a) it may direct any party to proceedings to take specified steps in relation to the proceedings,

(b) it may direct the parties to proceedings as to the time within which specified steps in the proceedings must be completed,

(3) If a party to whom such a direction has been given fails to comply with the direction, the court may, by order, do any one or more of the following:

(a) it may dismiss the proceedings, whether generally, in relation to a particular cause of action or in relation to the whole or part of a particular claim,

(b) it may strike out or limit any claim made by a plaintiff,

(d) it may strike out or amend any document filed by the party, either in whole or in part,

(e) it may strike out, disallow or reject any evidence that the party has adduced or seeks to adduce,

(f) it may direct the party to pay the whole or part of the costs of another party,

(g) it may make such other order or give such other direction as it considers appropriate.

(4) Subsection (3) does not limit any other power the court may have to take action of the kind referred to in that subsection or to take any other action that the court is empowered to take in relation to a failure to comply with a direction given by the court."

Section 66 contains a specific provision relating to applications for adjournment:

(1) Subject to rules of court, the court may at any time and from time to time, by order, adjourn to a specified day any proceedings before it or any aspect of any such proceedings.

(2) If a judicial officer is not available at the time appointed for the hearing of any proceedings, a registrar may adjourn, to a later time on the same day or to a later specified day, any matters listed for hearing by the judicial officer at the appointed time."

The Court of Appeal in City of Sydney Council v Satara [2007] NSWCA 148 at [17] explained the operation of s 66 as follows:

" [17] Section 66 of the Civil Procedure Act 2005 empowers the Court, subject to the Rules of Court, at any time and from time to time to adjourn to a specified day any proceedings before it or any aspect of such proceedings. This is a "wide and ample" power to adjourn the hearing of any matter, the principal consideration being what is necessary to do justice between the parties: Sydney City Council v Ke-Su Investments Pty Ltd [1985] 1 NSWLR 246 at 252 per Kirby P; Hinckley & South Leicestershire Permanent Benefit Building Society v Freeman [1941] Ch 32 (at 39) Farwell J ("the court has an inherent power to direct that any matter which comes before it should stand over for a period if the court thinks that that is the proper way to deal with the matter")."

It was clear, at the time this application was first raised, that the estimated hearing time for these proceedings (three days) was going to be exceeded. Even if this application had not been made, the likelihood was that the defendant's case and the plaintiff's case in reply would not be able to be completed in four or even five days, and due to my other commitments the case could be likely to go part heard. When the application to lead further evidence was made, I indicated to the parties that whatever the result, the time taken for this application meant that the matter would have to be adjourned part-heard to the last week in September.

The approach for the court to take, in applying the case management provisions of the Civil Procedure Act , is to strike a balance between the competing needs of the parties and decide whether or not on balance justice demands that a party should be given an indulgence: Kane v Wyllie [2006] NSWSC 710; Chandra v Perpetual Trustee Victoria Limited [2006] NSWSC 1046. The ultimate aim of the court is the attainment of justice, and the Civil Procedure Act does not alter this ( Chandra at [28]). To the contrary, ss 56 - 62 continue to give primacy to the dictates of justice.

The effect of declining the application would mean that the plaintiff would be precluded from adducing substantial evidence on quantum which could result in the case being decided otherwise than on the merits. As Brereton J noted in Chandra , it will only be in exceptional cases that procedural defaults would warrant permitting the injustice of a case being decided otherwise than on its merits.

However, in literal terms, the plaintiff did comply with the procedural step of discovery, in that it discovered documentation over the period stipulated by the defendant. The defendant did not challenge the plaintiff's discovery (although at one stage notice was given of the intention to cross-examine Mr Canturi on his affidavit concerning the contents of the List of Documents) and obtained part of the material upon which it has cross-examined from a Notice to Produce to the plaintiff returnable at the trial, a procedure which should not be used as a substitute for discovery: Azzi & Ors v Volvo [2006] NSWSC 283 at [9] - [11] ; Douglas Corporation Pty Ltd v Currico Nominees Pty Ltd [2007] NSWSC 113 at [28]; Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 305 at [13].

The defendant certainly made it clear that submissions would be made about the fact that this work was done at a time when there were refit obligations under the lease. The plaintiff complains that this was never pleaded or particularized. The plaintiff was, however, content to commence the case and call its witnesses notwithstanding the raising of this issue in the outline of counsel for the defendant. The plaintiff's legal advisers only changed their position after the concessions made by Mr Vitogiannis in his evidence, the production of documents by him under subpoena and their realization of the impact of the documents the plaintiff had produced in answer to the Notice to Produce.

The matters raised by Mr Toogood in his affidavit are compelling. There is no problem about the recall of witnesses who have already given evidence, however, and as the matter must be adjourned in any event there should be time to issue subpoenae to Mr Michael Canturi, the landlord and any other person who may have documents relating to the refit. There should also be enough time for the defendant's expert either to prepare another report or, if there is insufficient time for a written document, to give evidence as to any additional matters relevant to the fitout. In addition, it may be appropriate for the court to order further and better discovery from the plaintiff to enable the defendant to satisfy itself, if it wished, that there are no additional documents relating to the history of the plaintiff's plans to revise the fitout of the shop.

Clearly, if there is actual prejudice, that would carry great weight. The defendant has set out the matters going to prejudice, but Mr Miller has conceded that this is not a case where a witness cannot be recalled, or vital documents lost. The defendant does, however, rely on "forensic prejudice" of the kind set out above .

The nature of the proceedings in ASIC v Rich makes it of limited use to the consideration of forensic prejudice in an otherwise straightforward case about liability for a flood in a shop. Issues such as public interest (discussed by Austin J at [59] are of greater significance in criminal proceedings or proceedings commenced by statutory bodies such as ASIC, for the reasons explained by the High Court of Australia in R v Taufahema (2007) 234 ALR 1 at [181] - [182]. The approach taken by the Supreme Court in applications to lead further evidence or to amend pleadings to enlarge a case are of more assistance.

Factors considered relevant by the Supreme Court on such applications have included:

(a) The existence of urgency of some kind, or an expedited hearing date has been granted: Hunter Valley Skydiving Centre Pty Ltd v Central Coast Aero Club Limited & Anor [2008] NSWSC 83. That is not the case here.

(b) The disadvantaged party is a personal litigant, rather than a business corporation, suffering the anxieties occasioned by facing new issues or the raising of false hopes: Ketteman v Hansel Properties [1987] AC 189 at 220; Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 at 153. Again, that is not the case here.

(c) There has been a failure to comply with the Rules to particularize and plead these matters and it would be impossible for the defendant to know the case to meet: Rebolledo v Royal Sun Alliance Financial Services Ltd [2002] NSWSC 104 at [21]. Each of the parties accuses the other of this. However, the degree of failure to comply would have to be a very high one for this to be a reason to refuse a party leave to lead fresh evidence, for the reasons explained by Brereton J in Chandra at [28], and that is not the case here.

(d) The new evidence results in an adjournment requiring the case to go part-heard for a lengthy period because of judicial or other commitments: Rebolledo v Royal Sun Alliance Financial Services Ltd, at [32]. An adjournment was already possible when the application was raised, and the time taken for this application means the case must go part heard in any event. Fortunately it looks as though it would be possible to complete the evidence in another three days in September so any adjournment will be short. This was the deciding factor for Brereton J in Hunter Valley Skydiving Centre Pty Ltd (at [28] - [29]).

(e) The issue in the case to which the evidence goes. The evidence of Mr Canturi is either corroborative of, or contradictory of, the interior designer, and its precise ambit is clear from the affidavit and annexures. I also consider it to be of relevance that this evidence goes to damages only.

(f) Costs issues, particularly in circumstances where the costs are out of proportion to the sum claimed, are relevant: s 60 Civil Procedure Act . This can be cured by an appropriate order as to costs.

(g) While there is reference in ASIC v Rich to forensic prejudice from the manner of presentation of a case when changes are made to the evidence, the plaintiff could call its witnesses in whatever order it liked. While the defendant may have run its case differently if Mr Canturi gave evidence, these are matters that can be addressed upon when the defendant makes submissions about whether Mr Canturi's evidence should be accepted. To give greater weight to this forensic advantage, either alone or in combination with any of the other factors put forward, than to the need for both parties to be able to adduce relevant evidence on one of the main issues in the hearing, namely damages, would be contrary to the ultimate aim of a court, namely the attainment of justice.

Any delay involves prejudice and costs. However, the prejudice of a short adjournment, if remedied by an appropriate costs order, can be kept to a minimum. In these circumstances, the balance of justice and prejudice favours, although only slightly, the hearing of the case on its merits by permitting the late evidence to be adduced, and by permitting the defendant to answer it with material obtained under subpoena and/or evidence from witnesses in reply (including expert witnesses), over insisting that when the hearing resumes in September it should do so in circumstances where the plaintiff was not permitted to lead evidence on an issue central to the damages claim.

I accordingly grant leave to the plaintiff to rely at the hearing on the affidavit of Mr Stefano Canturi notwithstanding the fact that it was not served in accordance with orders for the service of affidavits and the lateness of the application "at the heel of the hunt" on the third day of the trial.

In addition to the week at the end of September becoming available, I now have another week available (commencing 8 September) due to the hearing having settled before me this morning. I received a communication from the solicitors for the defendant indicating some witness problems in late September, so this will resolve those problems, particularly if the orders in relation to further discovery by the plaintiff is self-executing and short service given for subpoenae to the landlord and to Mr Michael Canturi.

As to the issue of costs, the plaintiff is asking for an indulgence, in circumstances where the plaintiff's legal advisers had this issue squarely before them, on the first day of the trial, and where there were references in the opening and during the evidence concerning the failure of Mr Canturi (who was in court at all times) to serve an affidavit and to present himself for cross-examination. Had this point been taken at that time, the course of the hearing would have been entirely different. It may well have been adjourned, but if so, it would most likely have been adjourned at the plaintiff's cost.

Counsel for the plaintiff asked me to reserve costs, on the basis that the costs were best determined by how the hearing progressed. I do not accept that proposition. The defendant was entitled to take objection to this late evidence, and in fact the solicitors for the defendant did their best to meet this new evidence before bringing this application when the affidavit they endeavoured to meet was considerably enlarged. Accordingly I order that the plaintiff pay the defendant's costs thrown away by reason of this application. If other matters arise during the adjourned hearing which throw fresh light on costs issues, the parties have liberty to apply and this would include any application by the defendant for costs on an indemnity basis.

Grant leave to the plaintiff to rely at the hearing on the affidavit of Mr Stefano Canturi notwithstanding service outside the time limited by directions previously made in these proceedings. 2. Plaintiff pay defendant's costs of and incidental to the application, including the affidavit of Mr Toogood read on the application and the costs of these proceedings for 21, 22, 25 and 27 August 2008. 3. Liberty to apply in relation to costs. 4. The parties to bring in Short Minutes of Order for the service of further affidavits (including an any affidavit of further and better discovery by the plaintiff and experts' reports), return of subpoenae and agreed hearing date.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Defamation Act 1974(NSW)

CITATION: Canturi Corporation Pty Limited v Gagner Pty Limited [2008] NSWDC 151

ASIC v Rich [2006] NSWSC 712 Azzi & Ors v Volvo [2006] NSWSC 283 Chandra v Perpetual Trustee Victoria Limited [2006] NSWSC 1046 City of Sydney Council v Satara [2007] NSWCA 148 Davis v CTTT [2008] NSWSC 491 Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 Douglas Corporation Pty Ltd v Currico Nominees Pty Ltd [2007] NSWSC 113 Glover v Australian Ultra Concrete Floors Pty Ltd [2003] NSWCA 80 Hinckley & South Leicestershire Permanent Benefit Building Society v Freeman [1941] Ch 32 Hunter Valley Skydiving Centre Pty Ltd v Central Coast Aero Club Limited & Anor [2008] NSWSC 83 CASES CITED: Kane v Wyllie [2006] NSWSC 710 Ketteman v Hansel Properties [1987] AC 189 Michael Wilson and Partners Limited v Robert Colin Nicholls [2008] NSWSC 501 Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 R v Taufahema (2007) 234 ALR 1 Rebolledo v Royal Sun Alliance Financial Services Ltd [2002] NSWSC 104 Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 305 Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208 Sydney City Council v Ke-Su Investments Pty Ltd [1985] 1 NSWLR 246 Vale v Vale [2001] NSWCA 245 Zisis v Knighton [2008] NSWCA 42

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