Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue; Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue

Judgment 1In these consolidated proceedings, the Chief Commissioner of State Revenue seeks an order that Leda Manorstead Pty Ltd provide verified discovery before evidence is served by the parties. 2There must be exceptional circumstances to justify such an order. Practice Note SC Eq 11 in [4] provides: "The Court will not make an order for disclosure of documents (disclosure) until the parties to the proceedings have served their evidence, unless there are exceptional circumstances necessitating disclosure." 3As Bergin CJ in Eq explained in Armstrong Strategic Management and Marketing Pty Ltd v Expense Reduction Analysts Group Pty Ltd [2012] NSWSC 393 at [66], the ambit of disclosure under the new Practice Note will, ordinarily, be confined to the real issues between the parties as defined not only by the pleadings but also by the evidence. Her Honour went on to say: "However it is envisaged that the process will engender a far more disciplined analysis of the need for disclosure by reference to those real issues, compared to the carte blanche gathering in of every document the respective clients have generated in their lengthy relationship for 'review' by teams of lawyers and students in the absence of any knowledge of the proposed evidence." 4In SkyMesh Pty Ltd v Ipstar Australia Pty Ltd [2012] NSWSC 696, Sackar J recently expanded upon this observation as follows: "7 The purpose and object of the Practice Note is an attempt to streamline the disclosure process and in changing the previous practice it is a recognition albeit, long overdue that a great deal of material was often discovered by parties prior to them filing their evidence which did not directly and in many cases even indirectly have any relevance to the ultimate issues before the Court. The scope and extent of discovery especially when it occurs before evidence has often had the tendency to delay the parties and the Court from clearly and hence effectively confronting the real issues for trial, and thereby in turn delay the cost effective case management of proceedings. 8Delay translates ultimately into cost with the filtering of often large volumes of materials much of which will never play a part in the ultimate forensic confrontation. On many occasions curiosity has been the culprit in perpetuating unnecessary and wasteful interlocutory confrontation over at best what are often tangential materials. 9 If a party is forced promptly to apply its mind not only what its real case is but how to prove it, this should have the benefit of not only exposing the strengths of the case but also its weaknesses. The unreliable or uncertain witness is earlier exposed as are documents which help or hinder the case on either side. This ought to cause practitioners to purposefully and immediately deal with core issues where if needs be case management can be more constructive. Hopefully this will also cause a timely appraisal of such critical notions as onus with a realistic assessment of prospects." 5In Leighton International v Hodges [2012] NSWSC 458, McDougall J at [4] described the Practice Note as an evolution of the court's attempts to deal with the burgeoning cost of litigation noting that it was notorious that the cost of discovery had become increasingly substantial and a very significant contributor towards the overall cost of litigation. 6There can be no doubt that the purpose of the Practice Note is to seek to reduce the costs of litigation by delaying disclosure until the real issues in dispute are identified by the evidence. 7There are two limiting concepts in the Practice Note, the exceptional circumstances that must exist if the ordinary operation of paragraph 4 is to be avoided and the necessity that paragraph 4 requires and paragraph 5 prescribes in any event. That paragraph is in the following terms: "There will be no order for disclosure in any proceedings in the Equity Division unless it is necessary for the resolution of the real issues in dispute in the proceedings." 8Of the first limitation, McDougall J in Leighton at [19] referred to R v Kelly (Edward) [2000] 1 QB 198 at 208 where the Court of Appeal considered the Crime (Sentences) Act 1997 (UK), s 2(2) of which provided that where a person was convicted of a serious offence and had been convicted of another serious offence, the court was to impose a life sentence unless it was of the opinion that there were exceptional circumstances relating to either of the offences or to the offender that justified its not doing so. In the judgment of the court handed down by Lord Bingham of Cornhill CJ this was said: "We must construe 'exceptional' as an ordinary, familiar English adjective, and not as a term of art. It describes a circumstance which is such as to form an exception, which is out of the ordinary course, or unusual, or special, or uncommon. To be exceptional a circumstance need not be unique, or unprecedented, or very rare; but it cannot be one that is regularly, or routinely, or normally encountered." 9McDougall J went on at [20] to give his own definition of what is exceptional: "As a matter of language, something is exceptional if it is out of the ordinary, or unusual. To my mind, the exceptional circumstances referred to in paragraph 4 of the practice note must be circumstances that are not normal, or usual; they must be something out of the ordinary; they need not be unique; but however one characterises them they are not 'exceptional' at large, but 'exceptional' because they necessitate disclosure." 10Stevenson J agreed with this passage in The Owners Strata Plan SP 69567 v Baseline Constructions Pty Ltd [2012] NSWSC 502 at [31]. 11The Uniform Civil Procedure Rules, Pt 31 r 31.28(3)(a) provides that except by leave of the court, or by consent of the parties, an expert's report or hospital report is not admissible unless it has been served in accordance with that rule. Rule 31.28(4)(a) provides that leave is not to be given unless the court is satisfied that there are exceptional circumstances that warrant the granting of leave. 12Its forerunner, r 31.18(4), was considered by the Court of Appeal in Yacoub v Pilkington (Australia) Ltd [2007] NSWCA 290. Campbell JA, with whom Tobias JA and Handley AJA agreed, referred to his consideration of the expression "exceptional circumstances" in a different statutory context in San v Rumble (No 2) [2007] NSWCA 259 and drew the following conclusions from it that his Honour thought were applicable in the construction of r 31.18(4). At [66] his Honour said: "(a) Exceptional circumstances are out of the ordinary course or unusual, or special, or uncommon. They need not be unique, or unprecedented, or very rare, but they cannot be circumstances that are regularly, routinely or normally encountered: R v Kelly (Edward) [2000] 1 QB 198 (at 208). (b) Exceptional circumstances can exist not only by reference to quantitative matters concerning relative frequency of occurrence, but also by reference to qualitative factors: R v Buckland [2000] 1 WLR 1262; [2000] 1 All ER 907 (at 1268; 912-913). (c) Exceptional circumstances can include a single exceptional matter, a combination of exceptional factors, or a combination of ordinary factors which, although individually of no particular significance, when taken together are seen as exceptional: Ho v Professional Services Review Committee No 295 [2007] FCA 388 (at [26]). (d)In deciding whether circumstances are exceptional within the meaning of a particular statutory provision, one must keep in mind the rationale of that particular statutory provision: R v Buckland (at 1268; 912-913). (e) Beyond these general guidelines, whether exceptional circumstances exist depends upon a careful consideration of the facts of the individual case: Awa v Independent News Auckland [1996] 2 NZLR 184 (at 186)." 13His Honour went on to say that any decision about whether there were exceptional circumstances would need to bear in mind the explicit statement of objectives of a court in the management of litigation in sections 56-59 of the Civil Procedure Act 2005. 14This analysis has been followed by McDougall J in CJD Equipment v A & C Construction [2009] NSWSC 1085, by Barrett J in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009] NSWSC 49, by the Court of Appeal in State of NSW v Tyszyk [2008] NSWCA 107 and by Black J in Barescape Pty Ltd v Bacchus Holdings Pty Ltd (No 6) [2012] NSWSC 257. 15In Danihel v Manning [2012] NSWSC 556 at [16], Bergin CJ in Eq put it this way: "In applications under Practice Note SC Eq 11 to show 'exceptional circumstances', it would be necessary to demonstrate the necessity to obtain documents to fairly prepare a case for trial. That is, that the party is unable to serve its evidence without certain documents." 16In Naiman Clarke Pty Ltd atf Naiman Clarke Trust v Marianna Tuccia [2012] NSWSC 314 at [26], Ball J suggested the requirement of exceptional circumstances might be met where information necessary to a party's case was solely within the knowledge of the party from whom disclosure was sought. 17I do not dissent from any of these observations but caution against setting the bar too high. As was said in Kelly (Edward), to be exceptional the circumstance need not be unique or unprecedented or very rare. What is needed is an appraisal of all the circumstances and the context in which the expression must be satisfied. Are there circumstances necessitating disclosure before evidence in the sense that the party's case cannot be put without the disclosure? Are those circumstances exceptional? 18The application in this case is brought before any evidence is served. The plaintiff has not served any evidence as yet and it is the defendant's application. 19The issue in the proceedings is whether in the 2010 and 2011 land tax years the dominant use of the land in question was for cattle grazing and if so, whether that use had the requisite significant and substantial commercial purpose or character as required by the Land Tax Management Act 1956, s 10AA(2)(a) and was engaged in for the purpose of profit on a continuous or repetitive basis as required by s 10AA(2)(b). 20Similar proceedings were brought with respect to earlier land tax years. The Court of Appeal upheld my judgment at first instance in Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2011] NSWCA 366. 21In the previous proceedings I made orders for discovery. In these proceedings the Chief Commissioner seeks disclosure of similar documents. It is said that the documents in large measure update the documents and information provided in the earlier proceedings. 22The documents are said to relate to the issues under the Land Tax Management Act explained above, the dominant use and commerciality tests. 23The documents sought include financial reports, cattle trading reports, accounts from stock and station agents and auctioneers. 24The Chief Commissioner intends to seek leave to retain experts to address the two issues. The documents sought are said to be for the purpose of briefing those experts. 25The documents are said to be solely within the knowledge of Leda Manorstead and its related companies. It provided some information and documents to the Chief Commissioner during the objection process about the cattle operation and residential subdivision use carried out on the land during the relevant period. 26It is said that the experts will require all documentary evidence relating to the uses of the land and the proposed categories of disclosure to ensure that all necessary documents are provided to them. 27It was said that Leda Manorstead did not intend to call expert evidence and without disclosure there was some risk that the Chief Commissioner's experts might not have all the necessary documents. But in written submissions Leda Manorstead said it did not seek disclosure by the Chief Commissioner prior to the service of its evidence which it expected to be expert evidence only. 28The application is premature. If Leda Manorstead calls expert evidence it will, no doubt, put in evidence some of the material disclosure of which the Chief Commissioner seeks. The Chief Commissioner will know when that evidence is tendered the case being advanced by Leda Manorstead and it will allow him to refine his claim to disclosure of additional documents, if any. 29Leda Manorstead does not oppose an order for disclosure in specified and limited categories of documents prior to the service of affidavit evidence. It agrees to certain categories. It objects to others. But its non-opposition does not affect the fate of the present application. It is dismissed with costs.