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[2011] NSWCA 279
Court of Appeal (NSW)
2011-08-04
Beazley JA, Young JA, Einstein J
Original judgment source is linked above.
Judgment 1BEAZLEY JA : I agree with Young JA. 2YOUNG JA: This is an appeal from a decision of Einstein J sitting in the Commercial List of the Equity Division who found that the appellant, a valuer, was liable to the respondent, a mortgage insurance company for negligence and under the Trade Practices Act 1975 (Cth) in respect of two valuations of land, one of a property at Cabramatta and the other of a property at Ashcroft. 3The primary judge held the appellant liable to pay the respondent damages of $410,495.77 plus costs. 4The basal facts are that the appellant produced two valuations which were intended by all concerned to be relied on inter alios by the respondent in connection with a mortgage. The respondent did rely upon them and made a loss on each transaction. 5The first valuation was of real property at Cabramatta. The appellant valued the real property at $430,000. The respondent's expert valuer made a retrospective valuation as of the same date of $340,000. The expert put the acceptable range at $330,000 to $360,000, though later, at a joint conference with the appellant's expert, was prepared to extend the upper limit to $390,000. 6The primary judge said at [66] that the fact that the appellant's valuation exceeded the upper limit by more than 10% and the lower limit by 26% "is sufficient to allow the Court to conclude that the valuation was negligent". The primary judge does not clearly say that not only did that fact "allow" him to find negligence, but that he also did indeed find negligence. However, the following paragraph, in which he lists three matters which reinforce the "conclusion" that the valuation was negligent, seems to assume that he did so conclude. 7The three matters were, in brief: (a) The fact that the appellant's valuation did not refer to a sale of the same property less than a year earlier at $340,000. (b) The evidence of the respondent's valuer which the primary judge accepted showed that the market was slow or declining so that a valuation of more than $340,000 was difficult to justify. (c) The sale of a property which both valuers thought was truly comparable at $390,000 set the upper limit. 8As to Ashcroft, the appellant's valuation was $400,000. The respondent's expert, whom the primary judge accepted, valued the property as of the same date at $340,000 and put the range at $340,000 to $374,000. 9The primary judge said at [70] that the fact that the appellant's valuation exceeded the upper limit by a little under 10% and the lower limit by more than 17% "is sufficient to allow the Court to conclude that the valuation was negligent". Once more the primary judge does not clearly say that not only did that fact "allow" him to find negligence, but that he also did indeed find negligence. However, the following paragraph, in which he lists two matters which reinforce the "conclusion" that the valuation was negligent, seems to assume that he did so conclude. 10The two matters were: (a) Sales in Bonnyrigg relied on by the appellant were acknowledged by the opposing expert not to be truly comparable. (b) The respondent's expert's view that an Ashcroft property which was sold for $ 390,000 indicated the upper level of a fair valuation. 11The appellant appeared as the sole director of the appellant company both below and in this Court. He appeals on three or perhaps four grounds (the notice of appeal is a little confusing), viz: A. The respondent's expert witness did not comply with rule 31.23 and his evidence should not have been received. B. The primary judge ought not to have considered the evidence of the respondent's expert as having any weight. C. The primary judge erred in applying the "bracket principle" in the light of the unsatisfactory evidence. D. The primary judge erred in rejecting all the appellant's expert evidence. 12I should explain the reference to the "bracket principle". Valuation is not an exact science. The minds of different valuers may legitimately ascribe different weight to different factors. The court thus is accustomed to look at the range of permissible valuations and valuations within that range are said to be within the "bracket". As R Meagher JA said with the agreement of Mason P and Buddin J in Adwell Holdings Pty Ltd v Smith [2003] NSWCA 103 at [9], if a court finds that the relevant valuation is within the bracket then, prima facie, it was not negligently made. 13The appeal was heard on 4 August 2011, with Mr M Perera, the sole director of the appellant, acting as a litigant in person with respect to the appellant and Mr T Mehigan of counsel appearing for the respondent. 14As the respondent's counsel pointed out, the notice of appeal does not contain ground D, but the appellant's written submissions focus on it. 15However, the Court ruled that the point was fairly before the Court and the Court should deal with it. Indeed, it constitutes the most significant matter in this appeal. 16I should note here that, in oral argument, Mr Perera complained not only about the primary judge making his adjudication without taking account of any evidence from his side, but also about the inadequate analysis of the respondent's evidence and the failure of the judge to permit an adjournment to cure technical defects in the appellant's case. 17The matters tried by the primary judge were the rump of a series of complaints made by the respondent about the appellant's valuations. After mediations and other processes, a much wider dispute proceeded with respect to two valuations only. 18The original proceedings were commenced on 2 July 2008. However, it is only necessary to consider what occurred on and after 4 March 2010. 19On 4 March 2010, the Commercial List Judge ordered by consent that the appellant serve its lay and expert evidence by 23 April 2010 and the respondent its lay and expert evidence in reply by 21 May 2010. At this stage the appellant was represented by solicitors. The matter was adjourned for further directions on 28 May 2010. The date for the appellant's evidence was subsequently extended. 20At this stage Mr Perera says that his company's legal bills exceeded $400,000 and it could no longer afford legal representation. This assertion, of course, has not been tested. Thereafter, Mr Perera represented the company on a litigant in person basis. 21The appellant filed two expert reports, one by Con Ersotelos dated 19 March 2010 and served 21 May 2010 and the other by Chris Smith with respect to Ashcroft dated 4 June 2010 and served no later than 10 June 2010. 22On 11 June, the Commercial List Judge set the proceedings down for hearing with an estimate of four days. Mr Cameron, solicitor, appeared for the respondent and Mr Perera represented the appellant. The only way that a four day estimate could be justified was if there was to be full evidence from both sides to be properly tested. 23The Commercial List Judge made additional orders on 11 June, one was that the appellant not be permitted to rely on any evidence filed after 18 June unless, on notice of motion supported by affidavit, leave was given. He also made the Usual Order for Hearing. The terms of this "Usual Order" are set out as Schedule 3 to the Commercial List Practice Note and appear at pp 55,464-5 of Ritchie's Uniform Civil Procedure NSW. 24By about 20 June 2010, the respondent advised the appellant that it would object to the tender of its expert reports on the basis that there had been no compliance with the Expert Code of Conduct. 25Under UCPR r31.23, unless the court otherwise orders, an expert's report shall not be admitted in evidence unless the report contains an acknowledgment by the expert that he or she has read the Code of Conduct and agrees to be bound by it. 26On receipt of this objection, Mr Perera set about obtaining a supplementary report from each of the experts and serving these on the respondent. 27The Court was interested as to what occurred in the directions hearings and case management after May. After lunch, Mr Mehigan produced a bundle of papers covering this matter. Those papers were, unfortunately, of little assistance. They did show, however, that on 19 August, the respondent's solicitors applied to the Associate to the List Judge by fax pointing out that the appellant had expert witnesses and seeking guidance as to the required joint conference. 28The bundle also included page 23 which was a graph showing that prices for houses in Cabramatta peaked in 2004. 29Shortly before the commencement of the hearing, two conferences were held in an endeavour to limit the area of dispute on the expert valuation evidence. 30Mr Looby (the respondent's valuer) and Mr Ersotelos met and each signed a statement as to their agreements and disagreements regarding the valuation of Cabramatta. This joint statement was admitted into evidence as Ex P11 31Mr Looby and Mr Smith, similarly met and did the same with respect to Ashcroft and this joint statement was admitted into evidence as Ex P12. 32The trial commenced on 6 September. Mr Mehigan opened and tendered documents during his opening. The transcript does not contain any reference to the primary judge reading the initiating process or any reply to it or any affidavits. At 12:20pm, the primary judge invited Mr Mehigan to call his evidence. A lady went into the witness box, confirmed her affidavit and Mr Perera was invited to cross examine. The case continued until the end of that day. 33When the appellant opened its case, counsel for the respondent objected to the tender of the expert valuation evidence for the appellant on the ground that neither valuer had read the Code of Conduct before giving his report. I will deal with this matter in more detail later in these reasons. 34It would seem that this contention was tested on the voir dire though the transcript makes no mention of those words. 35Indeed, it is clear that the appellant's experts had not read the Code before giving their reports. However, they had subsequently read the Code and had given a further report to the effect that their view remained the same. 36The primary judge rejected the reports on the basis that r31.23(3) prohibited the admission of those reports without the court's leave, which he was not prepared to grant. 37The primary judge said at Black 218: "Mr Perera, you've heard what your opponent has said. The Court does have, as you appreciate no doubt-strict compliance of orders is required ... you were permitted to serve any further evidence on which you wished to rely by 18 June 2010 and there was an order made that you not be permitted to rely on any evidence not served by then without first obtaining leave to rely on any such evidence. What you have done is to endeavour to produce of course your experts and that has been objected to and so they are no longer able to be called. And as well you have sought to put forward an affidavit which is rejected for reasons of form as well as the other matters that I've treated with. Why should the Court in your particular case permit you to now go into the witness box and give evidence orally which would probably take quite a while and be difficult for you as well as the Court?" 38With respect, that passage indicates that the primary judge completely overlooked the basic principle that the rules of the court are to be the servant of justice, not its master. No matter how inconvenient it may be, a judge must never lose sight of his or her primary duty and that is to ensure a fair trial. This is now made statutory by s 56(2) of the Civil Procedure Act 2005. 39In Dietrich v The Queen [1992] HCA 57; 177 CLR 292, the High Court made it clear that the right to receive a fair trial according to law is a fundamental right and it is the overriding duty of a trial judge to ensure that the trial is fair. A fortiori is this so where a litigant in person is involved. This may be difficult for the judge and may mean that the trial will take longer than he or she would like, but the overriding duty must be observed. In Edwards v Allmen Engineering Pty Ltd [1995] NSWCA 138, Kirby P (with whom Sheller JA agreed) said: "Courts ... must be specially vigilant that they perform their functions correctly, including in cases presented by a litigant in person. Concealed in the lay rhetoric and inefficient presentation may be a just case." 40In particular, there have been many occasions where senior judges have said that trial judges must be particularly careful to ensure that, as much as possible, litigants in person are given the opportunity to put before the court the material which they consider should be before the court in order for a fair adjudication of the dispute to be made; see eg Ramton v Cassin (1995) 38 NSWLR 89, 91, per Kirby P. 41Of course, there are limits. A litigant who deliberately seeks to postpone litigation by refusing to abide by time limits may properly be shown no sympathy. That is not to say that a litigant in person has a licence not to comply with the directions made by the court or with the court's rules and processes and a court is entitled to make appropriate orders and directions when a litigant merely trifles with its directions: see Galea v Galea (1990) 19 NSWLR 263 at 283. 42However, in ensuring that the parties have a fair trial, a court will be required to balance non-compliance with a particular direction or rule with the prejudice to the other party and the impact such non-compliance is likely to have on the particular proceedings and on the court. In this case, the appellant sought to correct its error in relation to non-compliance with the rules of court relating to expert reports, when it became aware of the error. The matter then proceeded to trial without the respondent raising any further issue in relation to the initial non-compliance. On the contrary, the respondent activated a court direction relating to the meeting of the experts of the opposing parties, following which the experts produced a joint report, which was tendered in the respondent's case. It was not until the appellant commenced its case that the respondent raised any issue as to the appellant's experts. In the result, the judge not only refused to hear the evidence of the appellant's experts, he refused to consider the appellant's own affidavit or allowed him to give oral evidence, and he refused an adjournment. 43In the course of Mr Mehigan's opening (Black 3) the judge, who was aware of the respondent's formal objection to the original reports of the appellant's experts, initiated the following discussion (Black 118-9): "HIS HONOUR: You have an objection to the witnesses, or some of them, on the basis that expert opinion evidence, the experts code of conduct, I think you indicated has not been complied with. MEHIGAN: Yes. Since I took that objection there's been the service of supplementary reports which now expressly say the code of conduct has been observed. I don't need to take you to that. HIS HONOUR: When you say the code of conduct has been observed, I would need to be satisfied of what you're talking about. There are cases in relation to codes of conduct, and what do you mean the code of conduct has been [ob]served? MEHIGAN: In each case the two witnesses who have served reports which didn't expressly say they'd been taken to the code of conduct, understood it and have prepared their opinion in accordance with it, now say in their supplementary reports, and it's the only change from the earlier versions of the report, that they were aware of it and they have complied with it. HIS HONOUR: There are still some problems with that on the authorities. MEHIGAN: Yes, I accept that. HIS HONOUR: We'll get to all of that. ..." 44The admissibility of the appellant's reports was again mentioned at the end of the first day (Black 196): "MEHIGAN: Yes, your Honour could I indicate before you do adjourn, that there is an objection to all of the affidavit of Mr Perera. HIS HONOUR: Yes, fine. MEHIGAN: And we will be pressing the code of conduct point in relation to the two experts. HIS HONOUR: Yes, I have tried to explain to both parties this is a matter of significance: I can't do much more." 45It is true that the appellant's affidavit was defective as to form, but, without being guilty of unduly favouring the appellant, an experienced trial judge should have been able to have the appellant in the witness box give at least some of the evidence he wished to give in proper form. 46The rejection of the application for adjournment was also unusual. I will set out the transcript (Black 243): "PERERA: Your Honour, with reference to this trial defence have forwarded a case and forwarded evidence, affidavits, and documents, statements, reports that was all relied upon by the Court. Defence has provided its evidence in form of affidavits or statements, reports and a single document of this has not been accepted by the Court for certain reasons. Therefore I request the defence did not have a fair trial in this matter. Therefore I request adjournment of this matter for a further date and allow the defence to resubmit its evidence to be heard on a further date that is determined by you, your Honour. HIS HONOUR: Your request is denied and you are invited, if you seek to, to now address the Court in aid of your case." 47There is no conversation with the appellant as to why the judge had difficulty in accepting the application. The judge did not call on the respondent's counsel for his submissions (he may have wished to avoid a mistrial by acceding to the application) and he gave no reasons for his decision. 48Returning to the matter of the rejected expert evidence, it must be noted that there were two occasions where the matter was raised, first when the objection to the revised reports should have been upheld, the second when the court was considering whether it should "otherwise order" under UCPR 31.23(3). 49The primary judge did not take into account when determining to refuse leave to adduce the expert evidence that, pursuant to directions, not only had the material been in the opponent's hands for 3 to 5 months, the reports had been the subject of comment by the respondent's own expert and, there had been joint conferences of experts. 50Pre-trial directions are not to be treated as a farce. When directions are made for evidence and evidence is produced and a trial is set down for four days (obviously on the basis that conflicting experts will all be cross-examined) it is no longer open for a party, at the first day of the hearing to take a technical objection to the opponent's evidence. If an objection is taken, the trial judge should normally disallow it or make such order as is appropriate for there to be a fair trial. 51An illustration is provided by the manner in which this Court dealt with a similar problem in RCA Corporation v Custom Cleared Sales Pty Ltd (1978) 19 ALR 123. There, at pre-trial, the defendant's solicitor indicated to the Master and the opponent that the defendant would be reading an affidavit by S. On that basis, the plaintiff did not prepare evidence to cover a point as the affidavit of S would have admitted the point. At the trial, after the plaintiff closed its case, counsel announced that he would not be calling evidence and the plaintiff failed for lack of evidence. This Court admitted S's affidavit and granted the injunction. 52It is not clear from the report whether the decision to admit S's affidavit on appeal was because the conduct of the defendant at the directions hearing meant that it had irrevocably elected to read S's affidavit at the trial or because, in the circumstances, plaintiff's counsel, who had then only recently been called to the bar, had not realised that he could have applied to reopen and read S's affidavit himself. Probably both grounds applied. 53In the present case, it was clear on the face of the appellant's expert reports that there was no reference to the Code of Conduct. The List Judge should either have been told that objection would be taken to the evidence at that point or, at the very least, before there were joint conferences and the reports of those conferences were tendered in evidence. 54In my view, no later than the holding of the joint conferences, the respondent had elected to waive the objection to the supplementary reports. As the election had already been made not to take the point, it should not have been taken. And when taken, should not have been upheld. 55It may be that "waiver" and "election" are not the technically correct terms to use to describe the situation where a litigant faced with the choice of either relying on an objection or waiving the objection, pursues the course of acting towards the court and the opponent as if the objection had been waived without expressly reserving its rights. However, I am unable to think of alternatives. 56At the second stage, when the judge was asked to "otherwise order", the primary judge ruled, on the basis of various unreported decisions of single judges sitting in the Commercial List (which appear not to be wholly in accord with the cases digested in Ritchie's Uniform Civil Procedure) that it was insufficient that the witnesses had since read the Code and acknowledged that they had complied with it. 57In his procedural judgment of 8 September 2010, the primary judge noted what he considered to be the relevant principles as follows: i. Unless the Court "otherwise orders", the reports not containing the acknowledgement that the expert agrees to be bound by the expert code of conduct should not be admitted into evidence (UCPR 31.23(3)); ii. The Court must be satisfied that there are "exceptional circumstances" justifying the admission of the reports [Authorities group 1 cited]; iii. In preparing reports without having agreed to be bound by the code of conduct, there is a real risk that the expert will have committed to a particular form of opinion which an ex post facto adoption of the code cannot cure [Authorities group 2 cited]... The judge then gave examples from the cases as to when the Court had been prepared to "otherwise order". 58The group 1 authorities cited by the primary judge were CJD Equipment v A & C Construction [2009] NSWSC 1085 at [11] allegedly applying the principles set out by Campbell JA in Yacoub v Pilkington (Australia) [2007] NSWCA 290 at [66]-[67]. It is not necessary to refer to the group 2 authorities. 59The Yacoub case (and also a subsequent judgment of Campbell JA in State of NSW v Tszsykl [2008] NSWCA 107 at [206]-[201]) was concerned with a rule identical to UCPR 31.28(4) which specifically requires exceptional circumstances before the court gives leave for evidence to be adduced where there has been non-compliance with that rule. 60In the CJD case, McDougall J purported to follow the decision of Barrett J in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009] NSWSC 49; 75 NSWLR 380. McDougall J seems to have read that decision as if the words "exceptional circumstances" applied to the consideration of whether the court could otherwise order under UCPR 31.23. As I read the Tim Barr case , Barrett J was careful not to say this and indeed differentiated between otherwise ordering under sub-rule 23 on the one hand and sub-rule 28 on the other. 61There is no reason in logic or in law for reading the words "exceptional circumstances" into UCPR 31.23(3). The Rule Committee has put them in sub-rule 28 and not in sub-rule 23. CJD should be overruled insofar as it deals with sub-rule 23. 62Accordingly, the primary judge applied the wrong test with respect to the application to "otherwise" order under sub-rule 23. 63Principle iii enunciated by the primary judge has some validity, but it must not be elevated into a general rule. Each case must be considered on its merits. The Court may consider that the assumed "real risk" is non-existent or minor. If so, in the case where an expert makes an initial report without having the Code in mind and then is shown the Code and swears that in fact he or she did abide by it and now affirms the original report, the evidence should be admitted. Again, if the court can see that he or she is not just rubber stamping the original report, the later report should be admitted into evidence. 64I should add that, even if the test applied by the primary judge was correct, there is considerable force in the view that in all the circumstances of this case, exceptional circumstances should have been held to exist. 65It also must be said that the primary judge did not address the fact that the respondent had not advised the appellant that the supplementary reports of its experts would be the subject of objection. Nor did the primary judge consider the difficulty that the opposing experts had held two joint conferences or that the court had been advised that it was a four day hearing. 66The effect of the judge's ruling was that the case was turned into a hearing which only considered the evidence of the respondent plus some cross-examination and addresses. 67Of course, the fact that the report of the joint conferences was in evidence and the original reports of the appellant's experts were not, meant that the primary judge was faced with the dilemma that he had already admitted into evidence Ex P11 and Ex P12. He asked counsel for the respondent what he should do. 68Counsel for the respondent submitted that the judge should accept that Mr Looby had slightly modified his views as a result of the joint conferences with Messrs Ersotelos and Smith, but otherwise just disregard what those gentlemen had signed in the joint statement. The primary judge appears to have proceeded on that basis. I find it difficult to see how logically this can be correct. 69The contrary view was that the statements of Messrs Ersotelos and Smith were in evidence in Ex P11 and Ex P12 and had not been challenged in cross-examination. 70So in Evans v Bartlam [1937] AC 473, 489 Lord Wright said (albeit with reference to setting aside a default judgment): "if merits are shown the Court will not prima facie desire to let pass a judgment on which there has been no proper adjudication." 71My view is that the problems referred to above demonstrate that there was not a fair trial in the present case, there were not the materials before the court for a proper adjudication. 72Unless it is clear that there is no doubt at all that the result reached by the primary judge was inevitable ( Stead v State Government Insurance Commission [1986] HCA 54; 161 CLR 141), the matter must go back to the Commercial List for a new trial. I am not convinced that a different result might occur if the court considered all the available evidence, indeed, the more I delve into the details, the less sure I am of the result of a retrial. 73This being so, it would not be appropriate to review the other grounds of appeal. However, I should make the observation that there is danger in applying mathematical formulae to decide cases of negligence and that, where there is a fluctuating market, great care must be used when considering valuations just outside the bracket. 74One further matter must be mentioned. After the argument was concluded, the Court was informed that the appellant has been wound up. It would seem appropriate in the circumstances to make an order nunc pro tunc as at the date of the hearing giving leave for the appeal to proceed to finality. 75I would thus propose the following orders:
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Hodder Rook & Associates Pty Ltd
Genworth Financial Mortgage Insurance Pty Ltd
(1990) 19 NSWLR 263
(1995) 38 NSWLR 89
(1978) 19 ALR 123