HM&O v Ingram

Judgment - EX TEMPORE (revised 20 april 2012) 1HIS HONOUR: The plaintiffs seek leave to read the affidavit of Mr Mark Anthony Abood sworn on 12 April 2012. That affidavit seeks to prove increases in the cost of production of various items of playground equipment manufactured by the plaintiffs, which increase is said to be the result of the defendants' misleading or deceptive conduct. I accept that this is not a particularly transparent way of stating the issue, but it is sufficient for present purposes. 2The business which manufactures the products in question was sold by the defendants to the plaintiffs. The plaintiffs say that the defendants made misrepresentations, as to the compliance and ability to comply of their products with the relevant Australian Standard, which were wrong, and misleading or deceptive. The plaintiffs' primary claim is for recovery of all amounts paid by them in respect of the business, together with appropriate consequential losses. 3The plaintiffs did flag what has been called "the alternative claim". As opened by counsel who then appeared for the plaintiffs on 6 June 2011, that is a claim "for costs unexpectedly incurred, and which will be incurred by reason of the misleading and deceptive conduct (T51.46 -.47). 4The unfortunate procedural history of this case has been summarised in a number of interlocutory judgments that I have given and I will not repeat what I said earlier. It is sufficient to note that the hearing did not complete (as in my view it should have completed) in the time originally allotted for it, commencing on 6 June 2011. Accordingly, when that hearing concluded, it was fixed for further hearing in November 2011. At that stage, although the case for the plaintiffs had not formally closed, it was abundantly clear that the only matters remaining to be addressed in their case in chief were matters of a minor or procedural nature (for example, identification of further documentary tenders and the like). See, generally, T297 (10 June 2011). 5The case for the defendants then commenced. The defendants and some of their witnesses were called and cross-examined. 6The further hearing in November did not proceed, for reasons which need not be recounted, but for which the plaintiffs are, in my view, entirely responsible. Accordingly, the matter was refixed for further hearing in February 2012. Again, that hearing did not proceed, and again for reasons that in my view are entirely attributable to the plaintiffs. 7The matter has now been fixed for further hearing in August of this year. 8One thing that was achieved, through that sorry history, was the reference out to Mr Peter Taylor of Senior Counsel of questions of non-compliance of the products with the relevant Australian Standard. Mr Taylor found that some seven of the 31 allegedly non-compliant products were, in some circumstances, in fact non-compliant. His report has been adopted by consent. 9It occurred to me that the adoption of Mr Taylor's report might have an impact on the way that the plaintiffs put their case on damages. Accordingly, I gave leave for further evidence to be adduced dealing with that question. The plaintiffs have indicated that they will rely on a further expert report prepared by their accountant, Mr Lynch. The defendants do not oppose that (I assume, subject to any proper objection to the contents of that report). 10The plaintiffs also seek to rely on Mr Abood's further affidavit, to which I referred at the outset of these reasons. That affidavit does not, on its face, seek to address the difficulties caused by the consequence of adoption of Mr Taylor's report. In other words, it does not seek to accommodate the fact that seven only of the 31 allegedly non-compliant products were in fact non-compliant. 11On analysis, what Mr Abood's affidavit seeks to do is to adduce further evidence to plug gaps in the plaintiffs' case, particularly in relation to the "alternative claim". 12Mr Abood was called on 8 June 2011. I dealt with the objections to his then affidavit evidence on that day. One of the documents to which objection was taken was a spreadsheet which purported to set out increases in costs of production and average (or overall) percentage cost increase. That document was entirely unsubstantiated, in the sense that there was no hint of the underlying source documents or material on which the calculations contained in it were based. It was not a business record. Accordingly, it was rejected. Counsel then appearing for the plaintiffs indicated that he "would seek to lead evidence on the voir dire as to the elements" (T173.26). 13No application was in fact made to lead evidence on the voir dire and no such evidence was led. In those circumstances, understandably enough, there was no cross-examination on the topic. 14It is also relevant to note that the defendants sought to call further evidence from their expert, Mr Dodd, on a matter to do with quantification of the alternative claim. Objection was taken to that evidence and I rejected it. 15When the matter was before the Court on 15 March 2012, to deal with the question of further evidence, I indicated (see page 3 of the transcript for that day at lines 4 and following) that the further evidence was intended to enable the plaintiffs to accommodate their case to what, by reason of the adoption of Mr Taylor's report, had become the established state of affairs between the parties as to non-compliance. I said that I did not have it in mind that the plaintiffs should have an opportunity to rectify gaps in their evidence emerging from the course of the hearing to date. 16That did not appear to be a controversial position. Nonetheless, it is precisely what the plaintiffs are now seeking to do, through the affidavit of Mr Abood with which I am concerned. 17The alternative claim was always an aspect of the plaintiffs' case. It was thus always something that the plaintiffs needed to address in their evidence in chief. That extends not only to the "liability" aspect of the claim, but also to the quantification aspect, in the event that the Court concluded that the alternative claim was made good. 18On the face of things, it does not seem to me to be appropriate that the plaintiffs should be permitted, in effect, to take advantage of delay flowing from problems that they themselves have caused, because of the need to vacate the two dates for further hearing in November 2011 and February 2012, to patch up their case in chief. Nonetheless, the question is to be addressed not by consideration only of questions of culpability, but by seeing where the interests of justice lie. 19If the evidence is admitted, then (subject to what remains of it after objections are dealt with and after Mr Abood is cross-examined on it), the further evidence given by Mr Lynch, and his existing evidence on the damages attributable to the alternative claim, might be supported. That, clearly enough, is a significant advantage to the plaintiffs. Equally, in the present state of the evidence, it is a significant disadvantage to the defendants. 20However, it is necessary to observe that Mr Abood's evidence traverses many aspects of the plaintiffs' production process. For example, in relation to the labelling of the products that is necessary to comply with the Standard, he identifies some nine steps required, and derives a labour cost of $5.21 for the taking of those steps, and a material cost of a further 41 cents. 21In relation to other products, Mr Abood derives figures relating to the cost of changes necessitated by redesign said to have been necessary to make the products compliant. 22However, even now, Mr Abood's tables go well beyond the seven products that are in fact non-compliant. It is said that this was necessary because the plaintiffs thought, on the basis of the expert advice available to them, that there were more than seven non-compliant products. Accordingly, it is said, the costs incurred by the plaintiffs in modifying products which were thought to be, but which have now been established not to be, non-compliant, is a cost reasonably incurred in the course of litigation. 23If that evidence had been put on at an earlier time it would have been open to the defendants to examine, or to have their expert, Mr Dodd, examine, the changes made to the method of production. It may also have been possible for the defendants to have those changes examined by other experts. That examination might have given the defendants the opportunity of challenging the changes, on the basis that they were, in any event, unnecessary, or that they were inefficient, or that they do not represent the most economical way of making the products compliant (to the extent that they were non-compliant). 24If the evidence is now admitted, and again as I have said subject to any particular objections, then the defendants will either need to try and get expert evidence now or be left to conduct the balance of the hearing in the absence of that evidence. If some further evidence is obtained, it is likely that the five days presently allotted for the further (and final) hearing will prove to be insufficient. That may well necessitate yet another adjournment. 25There are other problems with Mr Abood's evidence. One is that the percentage cost increase that he derives is an average percentage cost increase over some 94 products. For each product, a cost of compliance is calculated and a percentage increase in the original cost is calculated. Those averages are apparently accumulated and then divided by 94 to produce the average of 7.08 percent. But it is apparent, when one looks at the table, that the costs vary widely. For one product, there has been a drop of 12.4 percent. For another product, there has been an increase of 17.33 percent. The variances in percentages between these figures are numerous. 26It does not appear that the average percentage cost increase that has been calculated is a weighted average. That is to say, it does not seem that what has been done is taken the overall increased cost of compliance, produced by considering the contribution of all the products according to their quantities produced and the cost of production, so as to derive a final figure. That is a matter which may have a significant impact. 27Mr Loewenstein of counsel submitted that this was a matter that could be dealt with in cross-examination of Mr Lynch. I have no doubt that Mr Lynch would agree that, in looking at the question of increased costs, the weighted average percentage cost increase was more significant than some arithmetical average. But that would not take the matter any further, because Mr Lynch presumably does not have available to him the weighted average percentage cost increase. 28Thus, although the defendants might make the point in principle, the practical application of it would remain up in the air. 29In all the circumstances, I do not think that the interests of justice require that the plaintiffs should have the opportunity now to plug gaps in their case. I take into account the procedural history, including the fact that the plaintiffs claimed that entitlement as long ago as 8 June 2011, and did not avail themselves of it either in the hearing at that time or subsequently, before the further hearing for November 2011. I take into account also that it was always the purpose of the hearing, that has now been put off to August this year, to wrap up the case on the basis of the evidence that has been taken, subject only to the expert evidence on loss, including such additional evidence as is needed to accommodate the fact that the referee's report has been adopted, and that this has diminished the question of non-compliance in a substantial way. 30There comes a time in litigation when parties should be held to the case that they have sought to propound. Taking into account the procedural history to which I have referred, I do think that this time has come in this case. 31For those reasons I refuse leave to the plaintiffs to rely on the affidavit of Mr Abood sworn on 12 April 2012. I order the plaintiffs to pay the defendants' costs of today.