Dolores Correa and The Spanish Club Limited (subject to Deed of Company Arrangement) v Kenneth Michael Whittingham

Judgment - EX TEMPORE 1The plaintiffs, Ms Dolores Correa and The Spanish Club Limited (Subject to Deed of Company Arrangement) ("Club") (which has recently been joined to the proceedings as Second Plaintiff), seek to read an affidavit of Mr Gavin Lloyd, a licensed real estate agent and auctioneer, dated 5 March 2012 and tender his report which I infer was prepared about that date. 2By way of background, it appears that orders were previously made by the Court, and not complied with, for the filing of the plaintiff's evidence on 29 November 2010 and specifically for the filing of the plaintiff's expert evidence on 28 February 2011 and 2 May 2011. The Court made a further order, by consent, on 13 May 2011 for service of the plaintiff's expert evidence by 23 May 2011 and directed that the plaintiff not be entitled to file or rely on expert evidence not served by that date without further order of the Court. The plaintiff filed an expert report of Mr Brian Silvia, an accountant, on that date. 3I note that the Court's decision whether to admit or not to admit the further expert report of Mr Lloyd is not to be exercised in a punitive manner and non-compliance with the earlier directions is not in itself a reason not to permit the tender of Mr Lloyd's report. The orders made by consent on 13 May 2011 require the leave of the Court for reliance on further expert evidence, the application which is before me is an application for that leave and the question before me is whether that leave should be granted. That question is to be determined by reference to the matters identified in ss 56 through 58 of the Civil Procedure Act 2005 (NSW), including the need to conduct the proceedings in a manner leading to the just, quick and cheap resolution of the matters in dispute. 4I return to the chronology of events. It appears the plaintiffs retained Mr Lloyd to provide an expert report by letter dated 21 January 2012. Some five weeks later, and two weeks before this hearing commenced, the plaintiffs' solicitors sent an email to the defendant's solicitors indicating that they expected they would shortly serve an expert report from a real estate agent. About a week later, and a little more than a week before the commencement of this hearing, Mr Lloyd's expert report was served. The question now arises whether the Court should grant leave to rely on that report for the purpose of the directions made on 13 May 2011 and under r 31.28 of the Uniform Civil Procedure Rules 2005 (NSW). 5It is necessary to say something as to the scope of Mr Lloyd's report and also refer to the affidavit dated 20 March 2012 of the plaintiffs' solicitor, Mr Marc Ryckmans, on which the plaintiffs rely in the application for leave to rely upon Mr Lloyd's report. 6Mr Lloyd's report addresses two questions. The first is whether, if the administrator of the Club had instructed a selling agent in February 2009 to only sell a property situated at 88 Liverpool Street, a reasonably competent selling agent could have sold the property within a reasonable period of time and for a price around the market value determined by an earlier valuation. Mr Lloyd expresses the view that a reasonably competent selling agent could have done so because, in summary, Sydney office sales exceeded $1 billion during 2009 and, second, because there were other sales of other properties in Liverpool Street, Haymarket and elsewhere in the city of Sydney at various prices in 2009. The first reason articulated by Mr Lloyd is plainly not freestanding, because the proposition that there are many sales of many office properties in Sydney cannot demonstrate that any particular property will be sold at a particular price. The second reason, namely the sale of comparable properties, is the core of Mr Lloyd's reasoning, but plainly depends upon the circumstances of the particular sales to which Mr Lloyd refers. The defendant is therefore, in my view, justified in complaining that it would be prejudiced in having to obtain an expert to seek to review those comparable sales given the very late service of Mr Lloyd's report. Mr Gray, who appears for the plaintiffs, emphasises that there is no evidence of such prejudice from the defendant. In my view, no such evidence is required. It is self-evident that an analysis of comparable property sales can only be undertaken by a properly qualified real estate agent given proper instructions and proper assumptions. It is also self-evident that it would be virtually impossible for the defendant to undertake that task within the time available when served with Mr Lloyd's report a week prior to a hearing. 7Mr Lloyd also briefly addresses a second question, whether the effect of the sale process adopted by the administrator was to exclude offers to purchase 88 Liverpool Street. Mr Lloyd's analysis of that question does not seem to me to raise similarly substantial issues of prejudice, although there may be a degree of speculation in that reasoning in the absence of any analysis of the circumstances of the particular property in Mr Lloyd's report. 8I should turn now to Mr Ryckmans' affidavit dated 20 March 2012 in support of the application. Mr Ryckmans gives evidence, which I have no reason to doubt, that there were also delays in the filing of the defendant's evidence. I bear that matter in mind, but as I have noted above, the decision whether to grant or withhold leave to rely on Mr Lloyd's report is not to be exercised in a punitive manner, so there is little benefit in assessing the relative degree of fault or delay in respect of either party in respect of other matters. 9Mr Ryckmans also gives evidence that Mr Lloyd's evidence is in reply to the evidence of a lay witness called by the defendant, Mr Kovacs, who is a real estate agent who gives evidence as to the factual circumstances of the sale of the relevant property. Regrettably, I cannot accept Mr Ryckmans' characterisation of Mr Lloyd's evidence as evidence in reply. First, Mr Lloyd's evidence goes to the sale process adopted for 86 and 88 Liverpool Street, and an attack on that sale process is part of the plaintiffs' case in chief and evidence-in-chief is led by Mr Silvia criticising that sale process. The first question which was asked of Mr Lloyd, to which I have referred above, also goes well beyond a reply to Mr Kovacs' affidavit. Mr Kovacs gives evidence as to the sale process which was in fact adopted, including that that process would not have excluded potential offers for 88 Liverpool Street. It appears that the second question addressed by Mr Lloyd deals with that matter. The first question addressed by Mr Lloyd, whether the selling agent could have marketed only 88 Liverpool Street within a reasonable period for the value determined by Valuecorp, deals not with the effect of the sale process which was in fact adopted (which was the subject of Mr Kovacs' evidence), but instead whether a different sale process was feasible and desirable. That evidence is not, in my view, evidence in reply to Mr Kovacs. 10I turn now to r 31.28(3) of the Uniform Civil Procedure Rules which 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: (a) there are exceptional circumstances that warrant the grant of leave; or (b) the report merely updates an earlier version of a report that has been served in accordance with sub-rule (1). 11It is not suggested that Mr Lloyd's report is an updating of any earlier expert evidence report. The plaintiffs therefore seek to establish "exceptional circumstances" within the scope of r 31.28(4). That concept was considered in Yacoub v Pilkington (Australia) Ltd [2007] NSWCA 290 at [66]-[67] where Campbell JA referred to his judgment in San v Rumble (No 2) [2007] NSWCA 259 at [59]-[69] and observed that, inter alia, exceptional circumstances are out of the ordinary course or unusual, special or uncommon and cannot be circumstances that are regularly, routinely or normally encountered, and can exist by reference to quantitative or qualitative factors. His Honour noted that whether circumstances are exceptional for the purposes of a particular provision depended on the rationale of that provision and required consideration of the particular facts. His Honour also observed that: "In the context of r 31.18(4) [the predecessor of UCPR r 31.28(4)], any decision about whether there are exceptional circumstances would need to bear in mind the explicit statement of objectives of a Court in the management of litigation contained in ss 56-59 Civil Procedure Act 2005." 12In State of New South Wales v Tyszyk [2008] NSWCA 107, to which Mr Gray referred in submissions, Campbell JA quoted that passage and held that exceptional circumstances were in that case established where the reports had already been cross-examined on, had been in the plaintiff's possession for over a year, a reasonable time for the plaintiff to deal with the tender of the reports had elapsed and there was a lack of any identifiable prejudice to the plaintiff. It does not seem to me that the present case is comparable to State of New South Wales v Tyszyk. Mr Lloyd's expert report has not been cross-examined on and had been in the defendant's possession for a week, not a year, prior to the commencement of the hearing, and there seems to me to be a real prejudice in placing the defendant in a position where it has no practical alternative to leading expert evidence in response with insufficient time to prepare it, or seeking to vacate the hearing date. 13There also seems to me to be a lack of exceptionality in the present circumstances which are, in substance, a case of late retainer of an expert and late service of his report. That is, regrettably, not out of the ordinary course or special, although it is perhaps less common in recent years than in earlier years where the Courts and the parties were less conscious of the need of the parties and the community for the just, quick and cheap resolution of matters in dispute. 14In these circumstances, and bearing in mind the lateness of service of the report and the real prejudice which it appears to me would be occasioned to the defendant by reliance on that report, I consider that I am unable to grant leave to the plaintiff to read Mr Lloyd's affidavit or rely on the associated report for the purpose of the Court's orders made on 13 May 2011 and UCPR r 31.28. I accept that this is a regrettable result, because it is never desirable that evidence which might have been led in a case is not permitted to be led. However, r 31.28 reflects the community's recognition of the need for litigation to be conducted in a manner which promotes the just, quick and cheap resolution of the matters in dispute and the recognition that the community and the parties to litigation bear significant costs where expert evidence is served late and cases are adjourned, hearing time is lost and costs are thrown away. I should act consistently with the policy reflected in Civil Procedure Act ss 56-58 and that rule and I do not consider that exceptional circumstances are established in this case that warrant departing from it by granting the leave sought. 15Accordingly, I decline to grant leave to read Mr Lloyd's affidavit or tender his report for the purposes of the Court's orders made on 13 May and UCPR r 31.28.