Crown International Consortium Pty Ltd v Bruce Lyon

CASES CITED : Phornpisutikul v Mileto {2006] NSWSC 57

Crown International Consortium Pty Ltd (Plaintiff) PARTIES : Bruce Lyon (Holdings) pty Limited (First Defendant) Cloudgard (No.240) Pty Limited (Second Defendant) Bruce Lyon Pty Limited (Third Defendant)

COUNSEL : I R Pike (Plaintiff) M A Ashhurst SC (Defendants)

SOLICITORS : Slater & Gordon Lawyers (Plaintiff) McCabe Terrill Lawyers (Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

5 December 2008 (ex tempore revised 5 December 2008)

50192/07 CROWN INTERNATIONAL CONSORTIUM PTY LTD AND ANOR v BRUCE LYON (HOLDINGS) PTY LTD & 2 ORS JUDGMENT 1 HIS HONOUR: The plaintiff (Crown) seeks orders:

(1) That the defendants (collectively, Bruce Lyon) provide further discovery within seven days; and (2) That Crown thereafter have further time for the service of expert evidence. 2 In very brief compass, Crown's claim in these proceedings is founded on a joint venture agreement made between it and Bruce Lyon. The joint venture was for the development of a property at Epping. The third defendant, presumably a licensed real estate agent, was to be the exclusive selling agent of the units to be brought into existence through the execution of the joint venture project. 3 Crown asserts that the third defendant was to be an exclusive agent for three years from 31 March 2004 until 31 March 2007. It says that the exclusive agency came to an end on the latter date and that the third defendant was thereafter (presumably, in default of some other action being taken) no more than a non-exclusive agent for the sale of the units. 4 Up until recently, Bruce Lyon seems to have taken the position that the third defendant's exclusive agency continued after 31 March 2007, presumably until some step was taken thereafter to terminate it. However, on 25 September 2008, Bruce Lyon's current solicitors notified Crown's current solicitors that Bruce Lyon would not oppose a declaration that the agency between Crown and the third defendant ceased to be exclusive on 31 March 2007, and continued as a non-exclusive agency thereafter until terminated. 5 Crown appears to assert that its damages are the loss of the opportunity to effect sales after 31 March 2007 because, through what it says was Bruce Lyon's intransigence, the joint venture was not able to appoint other non-exclusive selling agents - at least, presumably, until 25 September 2008. As I understand it, Crown wishes to argue that if other non-exclusive agents had been appointed, and had marketed the units in an appropriate and effective way, further sales would have been achieved than those (if any) that were achieved after 31 March 2007. 6 To that end, Crown wishes to put on evidence from an expert in the field of marketing real estate developments. It has identified someone whom it says is an appropriate expert, Mr David Viarella. Mr Viarella has agreed to provide an expert report. 7 The questions on which Mr Viarella has been asked to express an opinion are (paraphrased):

(1) What project marketing a reasonably competent agent should have performed from 31 March 2007 in order to maximise sales of units in the development? and

(2) If such proper marketing had been performed, what sales would have been achieved, by when they would have been achieved and at what prices they would have been achieved? 8 Presumably, if Mr Viarella expresses an opinion on those matters, the quantification of damages would involve a comparison of what ought to have been achieved with what in fact has been achieved. 9 Mr Viarella has said, in a letter of 25 November 2008 in which he confirmed the instructions that I have just paraphrased, that in order to prepare his report he requires further documents: (1) all marketing strategies and the like used by the third defendant from 31 March 2007 to date; (2) all marketing material used by the third defendant from 31 March 2007 to date; (3) any pricing reviews conducted by the third defendant from 31 March 2007 to date; (4) reports and recommendations on marketing made by the third defendant from 31 March 2007 to date; (5) sales files (including files relating to all attempts to effect sales) from 31 March 2007 to date; and (6) weekly sales and marketing reports prepared by the third defendant from 31 March 2007 to date. 10 Mr Ashhurst of Senior Counsel, who appeared for Bruce Lyon, objected to the tender of the letter in question and the affidavit evidence setting out the circumstances in which it was sent to Crown's solicitors. In substance, Mr Ashhurst submitted, the letter had been prepared in draft by Crown's solicitors, sent to the expert and engrossed, signed and returned by him. Mr Ashhurst wished to put the proposition that the letter did not represent the independent opinion of the expert, but that, in effect, the words in it had been put into his mouth by Crown's solicitors. 11 It is not necessary to express a concluded view on that submission. I do, however, note that:

(1) When asked to give an expert report, Mr Viarella was asked to state why the documents that I have summarised were required for the preparation of his report. I have to say that I do not regard that as an appropriate form of question to put to an expert. In the first instance it should be for the expert to say what he or she needs although that may be guided or modified in discussions with legal advisers to the party retaining the expert. (2) Mr Viarella indicated that in the time available he could not prepare such a letter. (3) Crown's solicitors prepared a draft of the letter and sent it to him inviting him "to change it around, put it in into [his] own words or add anything as required". The draft letter that was sent expressed some justification for requiring those documents and enquired, "David, is this correct? Please feel free to change this if necessary". (4) In fact, Mr Viarella did make some changes to the draft letter. Some of those may not be changes of substance. However, it is apparent that he amended the first paragraph, dealing with his experience; he amended the description of the second category of documents sought (by expanding it); and he amended (by adding further reasons) the justification for requiring those documents. (5) Thus, notwithstanding what I have said is the unsatisfactory nature of the practice adopted, it is open to infer that Mr Viarella did turn his mind to the substance of the letter and did accept the invitations given to him to which I have referred. 12 However, as I have said, it is not necessary to express a concluded view. The reason for that may be stated very shortly, and it is sufficient to dispose of the application for further discovery. 13 It will be seen that the questions on which Mr Viarella's opinion is sought go to identification of the kind of marketing that should have been carried out and the outcome of that hypothetical marketing. It does not seem to me that an examination of the marketing actually carried out is of sufficient (if any) relevance to those questions to justify production of the documents sought. Mr Viarella's task is to say what should have been done. It is not to comment on the adequacy or otherwise of what was in fact done. The quantification of damages will turn on comparing the outcome (in terms of sales) of what has been done with the outcome (in terms of sales) of what should have been done. 14 On that basis, I do not think that the documents sought are likely to assist in the production of an expert opinion on the real issues in dispute. In this context, I note that there is presently no complaint that the third defendant performed its duties inadequately after 31 March 2007, and no claim for damages based on any such (hypothetical) inadequate performance. 15 Although I accept that Mr Viarella has changed the wording of the justification offered for those documents, the reason that he gives does not seem to me to state any necessary logical or reasonable connection between the questions on which his advice is sought and the documents that he says he needs. 16 Accordingly, I do not propose to order the further discovery sought. In my view, if there is any relevance it is so limited that the overriding purpose set out in section 56 of the Civil Procedure Act 2004, and the obligations of the Court in framing directions and making interlocutory orders to give effect to that overriding purpose, require that Bruce Lyon should not be put to the expense of providing that further discovery. 17 That leaves the application for extension of time. I have to say that the history of these proceedings reveals a somewhat less than diligent approach, on the part of Crown, to the preparation of its case. The matter was commenced by summons filed on 1 November 2007. Directions were given on 23 November 2007 for particulars, list response, cross-claim and the like. The matter came back before the court on 1 February 2008. Directions were then given for a list response to the cross-claim, the exchange of categories of documents and lists of documents and, crucially, for Crown to file its evidence by 14 March 2008. 18 There was apparently some delay in Bruce Lyon's provision of discovery. On 11 April 2008, the time for it to do so was extended. 19 On 16 May 2008 Crown was ordered to serve its evidence by 13 June 2008. 20 On 18 July 2008, Crown being in default in relation to its evidence, an order was made that Crown serve its evidence by 25 July 2008 and that if it did not do so it not be permitted to rely on any further evidence except by leave of the court. 21 Crown did not comply with the order that it serve its evidence by 25 July 2008. 22 On any view, there was disruption in about August 2008 because Crown changed solicitors. Mr Pike of counsel for Crown suggested that some of the responsibility for the delay up until then might be laid at the feet of the previous solicitors. In circumstances where there is no evidence to suggest any lack of attention on the part of those solicitors, I do not propose to make any such finding. 23 It is clear that Crown was considering applying for separate determination of issues of liability and quantum. Once it received the notification of 25 September 2008 to which I have referred, it decided not to press for that. Accordingly, on 17 October 2008, orders were made including that Crown serve its further evidence by 21 November 2008. The evidence of Crown's solicitor, Mr Lewis, is that at that time Crown seemed to think it required some eight weeks to serve its evidence. There is no basis in the evidence to support that estimate. 24 After 17 October 2008, Crown made attempts to find an expert. I accept that it was delayed for a time because one expert initially agreed to accept instructions and then, either discovering or fearing conflict of interest, "returned the brief". 25 That is an extremely unhappy saga. There is no adequate explanation of the delays in the preparation of Crown's case. Given that Crown's present solicitor, Mr Lewis, formed the opinion back in about August 2008 that Crown would need to rely on expert evidence, it is quite inexplicable as to why that evidence was not obtained, or sought to be obtained, until October 2008. 26 At the end of the day, it is inappropriate that the Court should continue to make orders of the kind that have been made already, and countenance parties in default coming back and asking for extensions of time. A point must be reached where the Court says: "You have had sufficient time. You should not have any more." 27 It is no doubt correct to say that one matter to be considered is the question of prejudice to the opposing side. It is certainly correct to say that a party to litigation is entitled to a fair hearing and a reasonable opportunity to put its case (see, in the context of a hearing on the merits, section 62(4) of the Civil Procedure Act). But, as Campbell J pointed out in Phornpisutikul v Mileto [2006] NSWSC 57 at [9], "a reasonable opportunity does not mean multiple repeated opportunities". 28 Given the absence of specific prejudice on the part of Bruce Lyon, and accepting the change of solicitors as something of a mitigating factor, I have concluded that it is appropriate to give Crown the opportunity that it seeks to put on expert evidence. Further, I have concluded that it is appropriate that the opportunity should afford it the full time sought. However, I have concluded also that it is time for the Court to assert its authority. Thus, acknowledging the mitigating factors to which I have referred, and being prepared to afford all the time that is now sought, I propose to make a self-executing order in relation to the service of Crown's further evidence. 29 I have not overlooked that Mr Pike submitted that Crown wished to rely on expert evidence from an accountant as well as from Mr Viarella. I do not understand what the expert evidence from an accountant would be. The quantification of damages will involve a comparison of the hypothetical returns with the actual returns. It does not require an accountant to add up columns of figures and subtract one from the other. 30 Mr Viarella has said that he needs until "at least the end of February 2009" to prepare his report. That assessment presumably allowed for receipt, perusal and consideration of the six categories of document that he said he required, and that I have said he does not require having regard to the nature of the questions asked. It would seem to me that if he is not burdened by those documents the time taken will be considerably less than his estimate. Nonetheless, having regard to the admittedly draconian nature of the order that I am about to make, I think it appropriate to seek to accommodate Mr Viarella in full. 31 In the course of argument, I flagged 2 March 2009 as the date by which the further evidence should be put on. On reflection, and acknowledging that I have not given Mr Ashhurst the opportunity to be heard on this, I think that it is appropriate to allow a further fortnight. ORDERS 32 (1) Order that the plaintiff's proceedings stand dismissed unless by 5pm on 16 March 2009 the plaintiff: (i) serves on the defendants any further evidence, including expert evidence, on which the plaintiff intends to rely in chief at the hearing; or (ii) notifies the defendants in writing that the plaintiff proposes to proceed to hearing on all issues on the basis of the statements and affidavits served by that date. (2) Order that otherwise the plaintiff's notice of motion be dismissed.

(3) Order the plaintiff to pay the defendant's costs of and incidental to the plaintiff's notice of motion filed on 26 November 2008 and the defendant's costs of 28 November 2008.

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