Les & Zelda Investments Pty Ltd (as Trustee for Les & Zelda Family Trust) v Whitehaven Coal Ltd

Supreme Court of NSW|2024-08-16|Before: McGrath J

INTRODUCTION

The plaintiff, Les & Zelda Investments Pty Ltd (as Trustee for the Les & Zelda Family Trust) (LZI), has applied pursuant to r 31.28 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) for leave to rely on the expert report of Brad Mullard dated 29 July 2024 (Mullard report) and served on 30 July 2024. The Mullard report replies to the expert report of Stephen O'Connor dated 1 December 2023 (O'Connor report) which has been served on behalf of the defendant, Whitehaven Coal Ltd. In the application before me, LZI also seeks a direction that Messrs Mullard and O'Connor confer and produce a joint expert report no later than 26 August 2024 or such date as directed by the court. Whitehaven opposes the grant of leave to LZI to rely on the Mullard report.
These proceedings are representative proceedings on behalf of group members who were shareholders in Boardwalk Resources Ltd and were issued with shares in Whitehaven, as a result of its acquisition of Aston Resources Ltd and Boardwalk in May 2012.
LZI makes claims for breach of contract, estoppel and oppressive conduct based on allegations concerning Whitehaven's conduct in relation to "triggers" for the release of certain restrictions on the Milestone Shares contained in a Restriction Deed between Whitehaven and group members. Those "triggers" relate to obtaining various approvals for the development of five prospective coal mining projects owned by Boardwalk prior to being acquired by Whitehaven. For two of the prospective projects in New South Wales, known as Ferndale and Oaklands North, the "triggers" include the granting of a mining lease, the granting of planning approval and the granting of environmental approval.
The trial of these proceedings to be heard by me is now just over two weeks away, commencing on 3 September 2024 and ending on 20 September 2024. Very significant preparations are under way by all parties to meet the requirements of the usual order for hearing for a trial occurring in the Commercial List, bringing with it substantial burdens in time and costs for the parties and their legal representatives. The pressures on all parties, particularly their legal representatives, immediately before trial cannot be overstated.

Commencement of proceedings and the role of Mr Tinkler

On 21 December 2018, these proceedings were commenced in the Supreme Court of Queensland. Before the substitution of LZI as plaintiff, Nathan Tinkler was the representative plaintiff in the proceedings. Mr Tinkler was the major shareholder in Boardwalk prior to its acquisition by Whitehaven. LZI is a company controlled by Mr Tinkler's father, a number of the group members in the proceedings are related or associated with Mr Tinkler and the funder of the proceedings is a company associated with Mr Tinkler. Mr Tinkler will be one of the principal lay witnesses for LZI at the trial in support of its case.
On 7 May 2019, these proceedings were transferred to this court.
On 12 July 2019, LZI was substituted as plaintiff in the proceedings in place of Mr Tinkler.

Legal representation

In the proceedings, SMB Law act as solicitors for LZI and Allens act as solicitors for Whitehaven.

Evidence timetabling orders, service of evidence and inquiries of potential experts

On 2 September 2021, Registrar Walton made timetabling orders requiring LZI to serve any lay evidence upon which it intended to rely in the proceedings by 2 December 2021, noting that those timetabling orders would be suspended or revised if an amended claim was filed or an application to amend made by LZI.
On 7 December 2021, Ward CJ in Eq (as the President then was) directed LZI to serve any amended statement of claim by 21 January 2022, and ordered that if LZI failed to serve any amended statement of claim by that date, it was to serve all lay and expert evidence on which it intended to rely in the proceedings by 31 January 2022.
On 13 April 2022, Ball J granted LZI leave to amend its statement of claim and ordered LZI to serve any lay and expert evidence in chief by 23 September 2022.
On 20 May 2022, Ball J vacated the order of 13 April 2022 requiring LZI to serve its lay and expert evidence in chief by 23 September 2022 and ordered that LZI serve its lay and expert evidence in chief by 7 October 2022.
On 14 June 2022, Ball J vacated the order of 20 May 2022 requiring LZI to serve its lay and expert evidence in chief by 7 October 2022 and ordered that LZI serve its lay and expert evidence in chief by 21 October 2022.
On 24 February 2023, Ball J made orders by consent extending the time for LZI to serve any lay evidence (order 1) and expert evidence (order 2) on which it intended to rely to 6 April 2023, subject to a guillotine order as follows: 4. The Plaintiff not be permitted to rely on any lay affidavit evidence or expert evidence not served in accordance with orders 1 and 2 without leave of the Court.
During March 2023, SMB Law made enquiries of 13 people in an effort to identify a suitable expert to provide evidence on the process for obtaining mining leases and any relevant environmental and planning approvals for a coal mining development in New South Wales. None of those enquiries were successful for a variety of reasons, including the previous links that potential experts had with Whitehaven and their unavailability to complete the work within time, which at that stage was an evidence deadline of 6 April 2023.
On 21 March 2023, SMB Law sent a letter by email to Allens seeking their consent for an extension of time to serve expert evidence, citing the difficulties they had experienced in identifying an expert who was not conflicted, who was proposed to answer issues which LZI's primary mining expert did not have the expertise to address.
On 21 March 2023, Allens sent an email to SMB Law stating that Whitehaven did not consent to the proposed extension of the expert evidence deadline.
It appears that LZI then ceased all efforts to serve expert evidence in chief in relation to the coal mine planning and approval issues.
On 14 April 2023, Ball J made orders by consent extending the time for LZI to serve any expert evidence to 14 April 2023 (order 1), subject to a guillotine order as follows: 2 The Plaintiff not be permitted to rely on any expert evidence not served in accordance with order 1 without leave of the Court.
On 6 and 14 April 2023, LZI served its lay evidence and also its expert evidence in the form of a geology expert report of Barry Saunders dated 14 April 2023 and an accounting expert report of Dawna Kathleen Wright dated 6 April 2023. No other expert evidence was served by LZI.
On 30 November 2023, Whitehaven served its lay and expert evidence in the form of affidavits from four lay witnesses and three experts' reports and indicated that a further expert report would be served the following day.
On 1 December 2023, Whitehaven served the initial form of the O'Connor report. The O'Connor report addresses coal mine planning and approval issues in the proceedings.
On 6 December 2023, Whitehaven served the amended form of the O'Connor report, correcting a minor numbering error.
On 8 December 2023, Stevenson J made orders requiring LZI to serve any evidence in reply by 8 March 2024 and to serve a list of those documents on which it intended to rely at the hearing by 8 April 2024.
In late February 2024, SMB Law made enquiries of two further people in an effort to identify an appropriate expert to provide evidence on the coal mine planning and approval issues.
On 15 March 2024, Ball J made orders extending the time for LZI to serve its lay and expert evidence in reply as well as a guillotine order. Those orders were in the following terms: 1 The time for [LZI] to serve any expert forensic accounting report in reply be extended to 22 March 2024. 2 The time for [LZI] to serve any lay evidence in reply be extended to 5 April 2024. … 4 The time for [LZI] to serve any expert geology report in reply be extended to 19 April 2024. 4A [LZI] not be entitled to serve evidence after those dates without leave of the Court. 5 The time for the Plaintiff to serve a list of those documents upon which it intends to rely at the hearing of this matter be extended to 19 April 2024.
On 22 March 2024, LZI served the forensic accounting expert report of Dawna Wright.
On 19 April 2024, LZI served the geology expert report of Barry Saunders.
On 22 April 2024, Allens sent an email to SMB Law which stated, amongst other things, that they assumed that LZI's lay and expert evidence was now complete and asked for urgent confirmation if that was not the case.
On 22 April 2024, SMB Law sent a letter by email to Allens confirming, amongst other things, that LZI's lay and expert evidence was now complete.
On 26 April 2024, Ball J fixed the matter for hearing commencing 2 September 2024 with an estimate of 15 days and made the usual order for hearing.

The identification of Mr Mullard as an expert and service of the Mullard report

On 25 June 2024, a conference took place between Mr Tinkler, counsel for LZI (David Pritchard SC and Angus Macauley), Matthew Davis and Armany Chaouk at which Mr Mullard was identified by Mr Tinkler as being a possible expert to provide evidence on the coal mine planning and approval issues. Mr Mullard had not been previously identified or approached when SMB Law had been making enquiries in March 2023 and February 2024.
On 26 June 2024, SMB Law obtained contact details for Mr Mullard.
On 27 June 2024, Mr Briggs of SMB Law spoke to Mr Mullard for the first time about his expertise and availability to provide an expert report.
On 28 June 2024, SMB Law sent an email to Mr Mullard with an outline of the scope of the expert report and a copy of the O'Connor report.
On 11 July 2024, SMB Law sent a letter of instruction to Mr Mullard.
On 18 July 2024, SMB Law sent a letter by email to Allens providing them with a copy of the letter of instruction to Mr Mullard.
On 25 July 2024, Allens sent a letter by email to SMB Law stating that Whitehaven did not consent to the report of Mr Mullard being relied upon.
On 30 July 2024, SMB Law sent a letter by email to Allens attaching a copy of the Mullard report.
On 30 July 2024, Allens sent an email to SMB Law stating that Whitehaven did not consent to LZI being granted leave to rely upon the Mullard report.
On 6 August 2024, LZI filed the notice of motion making this application.

LEGAL PRINCIPLES

Rule 31.28 of the UCPR is in the following form: 31.28 Disclosure of experts' reports and hospital reports (1) Each party must serve experts' reports and hospital reports on each other active party - (a) in accordance with any order of the court, or (b) if no such order is in force, in accordance with any relevant practice note, or (c) if no such order or practice note is in force, not later than 28 days before the date of the hearing at which the report is to be used. (2) An application to the court for an order under subrule (1) (other than an order solely for abridgment or extension of time) may be made without serving notice of motion. (3) Except by leave of the court, or by consent of the parties - (a) an expert's report or hospital report is not admissible unless it has been served in accordance with this rule, and (b) without limiting paragraph (a), an expert's report or hospital report, when tendered under section 63, 64 or 69 of the Evidence Act 1995, is not admissible unless it has been served in accordance with this rule, and (c) the oral expert evidence in chief of any expert is not admissible unless an expert's report or hospital report served in accordance with this rule contains the substance of the matters sought to be adduced in evidence. (4) Leave is not to be given as referred to in subrule (3) unless the court is satisfied - (a) that there are exceptional circumstances that warrant the granting of leave, or (b) that the report concerned merely updates an earlier version of a report that has been served in accordance with subrule (1).
Practice Note SC Eq 3 Commercial List and Construction and Technology List is relevant for me to consider, as the usual order for hearing referred to in [49] of the Practice Note and contained in Annexure 3 provides, relevantly, as follows: USUAL ORDER FOR HEARING Experts' Reports 1. In any case in which there is expert evidence to be relied upon by the parties, the experts are to meet no later than three weeks before trial for the purpose of reaching agreement on as many issues as possible and producing: 1.1 a joint report; and 1.2 any separate report(s) dealing with those matters that are unable to be agreed. 2. The joint report and any separate report(s) are to be filed and served no later than five working days before trial. 3. In cases in which expert evidence is to be given concurrently, the experts are to meet no later than three weeks prior to trial for the purpose of producing: 3.1 a joint report; 3.2 any separate report(s) dealing with those matters that are unable to be agreed; and 3.3 a draft agenda for discussion of the contested issues in the concurrent evidence session at trial. 4. The joint report and any separate report(s) and the draft agenda are to be filed and served no later than 5 working days before trial. …
In exercising my discretion I must also have regard to the requirements of ss 56, 57 and 58 of the Civil Procedure Act 2005 (NSW) (CPA).
The overriding purpose of the CPA and the UCPR in their application to civil proceedings in this court is to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56(1) of the CPA. I must seek to give effect to that overriding purpose when I exercise any power in the CPA or the UCPR: s 56(2) of the CPA.
In seeking to give effect to the overriding purpose, I must have regard to the objects of the just determination of the proceedings, the efficient disposal of the business of the court, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings at a cost affordable by the respective parties: s 57(1) of the CPA.
The principles relevant to the exercise of the discretion in r 31.28 of the UCPR are conveniently summarised in Dolores Correa and The Spanish Club Limited (subject to Deed of Company Arrangement) v Kenneth Michael Whittingham [2012] NSWSC 266, Black J at [10]-[13] saying as follows: [10] I 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). [11] It 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." [12] In 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. [13] There 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.
Correa was cited with approval in Commonwealth Bank v Iinvest (No 7) [2017] NSWSC 440 by Campbell J at [10].
In Kelly v Thorn [2020] NSWSC 1933, Cavanagh J at [27] considered the notion of exceptional circumstances, stating: In my view, exceptional circumstances may be grounded by one powerful factor or a combination of factors. A combination of factors will include in a particular case the explanation afforded by the party for the failure to comply with the rules and whether there are available ameliorating conditions. By that, I mean that if the prejudice to the other party can be cured, that is a factor that can be taken into account in making a finding of exceptional circumstances.
Recently, in Owners Strata Plan 9784 v Mirvac Projects Pty Ltd [2024] NSWSC 741, Stevenson J refused to grant leave to rely upon an expert report served after a guillotine order, stating at [14] and [21]: [14] In order to obtain leave to rely on evidence served in the face of a guillotine order, especially one that was consented to, what is required is an adequate, comprehensive, and candid explanation for the failure to comply with the order. … [21] But there is a wider question at play here. Parties in this List should not expect to be granted leave to rely on evidence served late and in the face of a guillotine order, especially one to which they had consented, without an explanation having the characteristics that I have described, namely one that is adequate, comprehensive and, most importantly, candid.
In relation to granting leave to extend a deadline for the service of evidence, the principle of exceptional circumstances has also been applied, even where a hearing is not imminent: Pesec v Zivko (No 2) [2022] ACTSC 270.
In Pesec, Elkaim J at [15] declined to extend a deadline to serve expert evidence to 7 October 2022, one week after the date of the hearing of the application, for a trial due to commence on 6 March 2023 stating: This is not only an oppression suit, but also a commercial matter, which is supposed to proceed with efficiency and expedition. The limit to the extension of orders was reached before McCallum CJ. I am not prepared to yet again allow an extension. It will be unfortunate if the plaintiff is prejudiced by the lack of the expert reports. However this result will be a product arising from the plaintiff's own camp, in particular the plaintiff's failure to provide instructions to his solicitor to engage experts until 6 June 2022, some three days before the then existing deadline.
The parties before me agreed that I must find exceptional circumstances to grant leave to LZI to rely on the Mullard report.

CONSIDERATION

While having to find exceptional circumstances in the exercise of the discretion under r 31.28 of the UCPR, I also need to weigh up a number of different factors, conscious that I should to give effect to facilitating the just, quick and cheap resolution of the real issues in the proceedings, while having regard to the objects of the just determination of the proceedings, the efficient disposal of the business of the court, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings at a cost affordable by the respective parties.

Nature of the evidence

The Mullard report and the O'Connor report address questions that are relevant to an important issue in the proceedings, which is the process for achieving "triggers" in relation to Ferndale and Oaklands North.
The Mullard report responds to the O'Connor report. Much of the Mullard report agrees with the contents of the O'Connor report. The Mullard report also identifies the issues in the O'Connor report with which Mr Mullard does not agree.
Whitehaven has, however, identified particular parts of the Mullard report involving disagreement between the respective experts to which it cannot adequately respond within the short space of time before the trial is due to commence. These parts relate to the reasons which are identified by Mr Mullard in [3.5.3.10] of the Mullard report for his conclusion that he does not agree with Mr O'Connor "that it is very unlikely that a development consent could not have been granted under the NSW Mining Act 1992 over the Ferndale Site", which refer back to the detail provided in section 3.3.3 of the Mullard report.

Injustice to LZI

If I do not give leave to LZI to rely on the Mullard report, LZI will be without any expert evidence in opposition to the O'Connor report from a person (Mr Mullard) who would appear to be qualified to give that evidence. I am conscious that this would cause injustice to LZI.

Delays

The proceedings have been punctuated by repeated delays by LZI in serving its evidence in proceedings which have already taken over five years to come to trial in the Commercial List of this court. Such a delay is highly unusual in the Commercial List which operates to give parties the efficient disposal of commercial causes.
While I consider that LZI has given a comprehensive and candid explanation of its efforts to identify a potential expert witness in March 2023, February 2024 and June 2024, the explanation is not adequate because those efforts have not been undertaken in a timely fashion. The delay has been very significant. Either the expert report should have been served in chief by 14 April 2023 (in which case the delay could be seen as being in excess of 15 months) or in reply by 8 March 2024 (in which case the delay can be seen as being in excess of 4 months).
The late searches which occurred in March 2023 took place under the spectre of a looming date of 6 April 2023 for the service of expert evidence in chief, combined with a guillotine order made by consent. No explanation was given as to why LZI was so dilatory in undertaking its task.
The searches which occurred at the end of February 2024 were also late, with the evidence in reply required to be served by 8 March 2024. No attempt was made to explain why it took from the beginning of December 2023, when the O'Connor report was served, until late February 2024 to commence the search for an expert to provide expert evidence in reply.
No evidence has been given about any enquiries made of Mr Tinkler (the person who identified Mr Mullard) before 25 June 2024 in an effort to locate a potential expert.
In my assessment, the delays by LZI are not adequately explained.

Prejudice to Whitehaven

I am conscious that Whitehaven has identified areas of the Mullard report to which it cannot adequately respond before the trial is due to commence. I have stated those matters above.
Whitehaven submits that Mr O'Connor will not have sufficient time to properly consider the issues raised by, and respond to, the Mullard report in the time available before the trial, meaning that Whitehaven will not have a fair opportunity to test the Mullard report with Mr O'Connor prior to the hearing.
LZI only informed Whitehaven of its proposal to obtain an expert report from Mr Mullard on 18 July 2024. Prior to this time, Whitehaven had been proceeding on the assumption unequivocally confirmed by SMB Law's letter of 22 April 2024 that LZI's lay and expert evidence was complete.
On 31 July 2024, one day after the Mullard report was served on Whitehaven, Mr O'Connor was on leave at a remote location and was not able to review the Mullard report until after his return on 8 August 2024. Whitehaven had previously made LZI aware of Mr O'Connor's absence.
As at 13 August 2024, Mr O'Connor has confirmed that he has commenced reading the Mullard report but has not yet reviewed it in detail.
Mr O'Connor has also advised that he is unable to participate in an expert conclave with Mr Mullard on multiple days in August and early September 2024 due to prior commitments. Whitehaven says that another reason why an expert conclave between Mr O'Connor and Mr Mullard should not occur is that it is likely to take some time given that the expert conclave between the geologists lasted five days.
I consider that Whitehaven would suffer significant prejudice as there is no proper time available between now and the trial for Mr O'Connor to sufficiently familiarise himself with the Mullard report, prepare and participate in a conclave, for the conclave to occur and a joint report to be prepared.
Such an outcome would be unjust to Whitehaven.

Efficient disposal, efficient use of resources and timely disposal at cost affordable

The trial is fixed to occur between 3 and 20 September 2024. This is a long trial in the Commercial List. Those dates have been fixed since 26 April 2024. There are no other trial dates available for the proceedings to be heard until well into 2025. LZI submits that it wishes the trial to remain as fixed. As a result, any prejudice to Whitehaven cannot be cured by the vacation of the trial and an order for wasted costs.

Conclusion

I have not been able to identify any exceptional circumstances which could form the basis on which I would grant leave to LZI to rely on the Mullard report. This is a case in which LZI is seeking to visit the consequences of its own inadequately explained delay to the prejudice of Whitehaven. Parties bringing proceedings in the Commercial List of this court must understand that they need to proceed efficiently and without delay. Inexplicably, these proceedings have taken over five years to come to trial. The justice of the circumstances are such that the consequences of LZI's conduct should fall upon it alone.

ORDERS

For the reasons stated above, I propose to make the following orders: 1. Order pursuant to r 31.28 of the Uniform Civil Procedure Rules 2005 (NSW) refusing leave for the plaintiff to rely on the expert report of Brad Mullard dated 29 July 2024. 2. Otherwise dismiss the notice of motion filed 6 August 2024 by the plaintiff (Motion). 3. Order that the plaintiff pay the costs of the defendant of the Motion.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 August 2024

Civil Procedure Act 2005(NSW)ss 56, 57, 58

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