Ruschinek v Tiernan [2016] VSCA 7

PRACTICE AND PROCEDURE - Applicant filed affidavit deposing matters conflicting with binding report - Whether conflicting parts of affidavit properly struck out.

PRACTICE AND PROCEDURE - Procedural fairness - Whether pre-trial orders and rulings deny applicant opportunity for fair trial - Application for leave to appeal refused.

1 The applicant's father, Schaja Ruschinek, died on 31 January 2008. The respondent was named as executor and trustee under Mr Ruschinek's will, and was granted probate on 19 September 2008. By the will, certain flats and shops were to be held in trust by the applicant, primarily for his own benefit. Other real estate was to be held by his sister, Eva. The respondent, who is a licensed estate agent, has acted as managing agent for all the properties. The distribution of the estate is not finalised, but Eva has received her distribution of real estate. The applicant has received the flats, but not the shops.

2 The administration of the estate has been the subject of extensive litigation. On 17 November 2008, the applicant commenced proceedings seeking that probate be revoked on the grounds that Mr Ruschinek lacked testamentary capacity. On 3 June 2009, the applicant commenced proceedings seeking further provision for maintenance and support under pt IV of the Administration and Probate Act 1958. Both proceedings were settled in 2013 on terms which left the grant of probate and the operation of the will undisturbed.

3 On 26 September 2014, Eva commenced proceedings against the respondent seeking that he file an account for the administration of the estate. The respondent duly filed an account to 31 October 2014 in which the corpus account commenced on 12 September 2008 and the income account commenced on 17 October 2008.

4 The present proceeding was commenced by the applicant on 27 November 2014. Among other things, the applicant sought payment by the respondent of $524,377 to the estate, said to represent a shortfall in the account, and orders for transfer of the flats and shops. The applicant affirmed an affidavit in support of his claim, which among other things exhibited calculations showing the discrepancies he alleged in the respondent's administration of the estate.[1]

5 Orders were made by consent by a judge in the Trial Division on 5 December 2014 (but dated 16 December 2014).[2] The orders provided for the transfer of the flats to the applicant by 9 December 2014 and for various other payments to be made. They also made provision in respect of the claim that there was a shortfall in the administration account. The order on that aspect of the claim, while made by consent and not under challenge in the present application for leave to appeal, lies at the heart of the application. It provided:

The parties within 7 days appoint Sothertons Chartered Accountants to prepare a forensic report as to the Defendant's administration of the estate of Schaja Ruschinek deceased and the parties will make all relevant documents available to Sothertons Chartered Accountants for the purpose of preparing the forensic report, which shall be binding.

6 The application for leave to appeal is brought in respect of orders made on 9 October 2015. Those orders were the culmination of a series of hearings which followed the provision of a report commissioned by the parties in accordance with the order of 5 December 2014. In short, the applicant sought to file evidence that challenged the methodology and accuracy of the report and the judge refused to permit him to do so. But to understand the issues presented by the application for leave to appeal, it is necessary to set out the history of the proceeding since the making of the first order at greater length.

7 Pursuant to the order, on 12 and 16 December 2014 the parties respectively instructed Sothertons to prepare the forensic report as to the respondent's administration of the estate. By letter dated 14 January 2015, Mr Mark Lipson of Sothertons confirmed the terms of engagement by a letter to the parties. In that letter, Mr Lipson stated that he was bound by the expert code of conduct and O 44 of the Supreme Court (General Civil Procedure) Rules 2005 ('the Rules') and that he accepted instructions to act for both parties on the basis that he would act in accordance with the code. Under the heading 'Scope of the engagement', Mr Lipson stated:

I will perform the necessary investigation and make the appropriate enquiries to enable me to prepare a report that is consistent with any Court orders made and/or written instructions from you that provide for a forensic report concerning the administration of the estate of Schaja Ruschinek deceased.

I have undertaken a detailed review of the information and documents provided by Bruce M Cook & Associates. This includes a detailed Affidavit prepared and affirmed by the Plaintiff.

In order to complete the scope of the engagement, the following procedures will be undertaken:

• A detailed analysis of the primary financial and non financial documents that have been listed in the Administration Account for the estate of Schaja Ruschinek deceased.
• A detailed review and analysis of the financial calculations exhibited at 'BR - 8' of the Affidavit affirmed by the Plaintiff dated 27 November 2014.
• Conduct interviews with both the Plaintiff and Defendant regarding the administration account of the estate of the deceased and the calculation of the alleged discrepancy.
• Preparation of an expert forensic report with regard to my finding regarding the administration of the deceased estate.
• Unless advised to the contrary, fees will be invoiced to the estate of Schaja Ruschinek deceased c/- Bruce M Cook & Associates.

8 Sothertons delivered its report on 9 April 2015. By letters dated 27 and 28 April 2015, the solicitors for the respective parties wrote to Mr Lipson making submissions about the contents of the report. Mr Lipson responded to the solicitors by letters dated 12 and 15 May 2015 and on 15 May 2015 delivered an amended report.

9 The amended report found that there were no major substantiations to the allegations made by the applicant and no material errors in the administration account. In relation to the repayment claim, it found that $310,297 of the allegations made by the applicant concerned matters prior to June 2008 and therefore fell outside the scope of the Court's order. Of the balance of $208,478, the report found that there was no merit to allegations having a value of $171,038 and that allegations with a value of $34,954 could not be determined. The report found that there was a valid claim in relation to allegations with a value of $2,486. The report further found that the estate was not, but should have been, registered for GST.

10 In July 2015, the applicant consulted Deloitte Touche Tohmatsu ('Deloitte') with a view to obtaining a review of the Sothertons report. The proceeding was listed for directions on 31 July 2015. On that date, counsel for the applicant sought six weeks in order to engage Deloitte and file affidavit material challenging the report. Counsel for the applicant submitted that the Sothertons report did not comply with the order made on 5 December 2014 and that it was 'not a forensic report'. He stated that the applicant was in the process of engaging Deloitte to look at the Sothertons report and to prepare a report as to how it did not comply with the order. The judge refused the application for time to prepare an affidavit for those purposes. It appears from the transcript that the judge regarded the proposal that a report be prepared by Deloitte as inconsistent with the consent orders that were made, pursuant to which a single joint report was to be prepared. In relation to the submission that the Sothertons report was 'not a forensic report', the judge said that such a submission could be made at the trial. She further suggested that the matters that were raised would be issues for cross-examination. Counsel for the applicant submitted that the report was needed for these purposes. The effect of the ruling made by the judge on 31 July 2015 was that the applicant could not file and serve an affidavit exhibiting a report prepared by Deloitte.

11 The judge ordered on 31 July 2015 that the respondent file and serve any affidavit material upon which he intended to rely, and file a copy of the Sothertons report, by 14 August 2015, and that the applicant file and serve any material in response by 28 August 2015. The respondent duly swore and filed an affidavit exhibiting the Sothertons report in both its initial and amended forms.

12 On 11 September 2015, the matter was listed for trial directions. Counsel for the applicant again sought leave to obtain and file material from Deloitte. The judge stated that she had refused submissions to the same effect on the previous occasion. She again stated that an application to cross-examine Mr Lipson could be made at the trial. The judge refused to adjourn the pre-trial directions and ordered that the time for the applicant to file any material in response be extended to 25 September 2015. The matter was set down for trial directions on 9 October 2015 and the judge indicated that the court would then deal with objections to the evidence filed by the applicant, if any.

13 The applicant duly filed an affidavit affirmed by him on 25 September 2015. Among other things, that affidavit deposed to the applicant's concerns and analysis regarding aspects of the Sothertons report as well as the conduct of the administration of the estate by the respondent.

14 On 9 October 2015, counsel for the respondent provided counsel for the applicant with a list of 38 paragraphs or parts of paragraphs which the respondent sought to have struck from the applicant's affidavit on the grounds of relevance, hearsay, opinion, speculation, submission and the binding nature of the order made on 5 December 2014. The judge heard argument on each objection and allowed all of them. Her reasons for allowing the objections included that the parties had consented to and were bound by the orders of 5 December 2014 to the effect that the Sothertons report would be binding, and that the impugned parts of the affidavit represented the applicant's opinion or were in the nature of submissions. It is not now contested that the objections were correctly upheld on the basis that they constituted inadmissible opinion evidence or were in the nature of submissions.

15 The orders made on 9 October 2015 struck the impugned parts from the applicant's affidavit, on the basis that they were inadmissible, ordered that any further objections to evidence by either party be filed and served by 30 October 2015 and set the proceeding down for trial on an estimate of 1 to 2 days on 16 March 2016.

16 At the conclusion of the hearing, there was the following exchange between counsel for the respondent and the judge:

MR SMITH: Your Honour, just to be clear, the way the Sothertons report has been dealt with is that it was exhibited by Mr Tiernan.

HER HONOUR: Yes.

MR SMITH: So it's gone in that way.

HER HONOUR: Yes.

MR SMITH: And that seems suitable to me that it goes in that way and that's the end of it.

HER HONOUR: Well it's agreed to - the parties have agreed to be bound by it and that is the end of it.

MR SMITH: So there's no further order required in that respect.

HER HONOUR: No.

17 The application for leave to appeal is directed to what are described as the 'Prohibitory Orders' made on 9 October 2015. The applicant's written case makes it clear that the orders referred to are orders and rulings which are said to have been made on that day, having the following three aspects:

(a) that the Sothertons report be admitted into evidence, as an exhibit to the affidavit of the respondent sworn on 14 August 2015;

(b) that the applicant was bound by the Sothertons report and was not permitted to adduce any evidence that conflicted with or otherwise traversed matters that formed the subject matter of and findings made in the Sothertons report; and

(c) that the relevant paragraphs in the applicant's affidavit affirmed on 25 September 2015 were inadmissible and were struck out.

18 The application seeks orders that these orders and rulings be set aside and that there be in their place an order that the applicant be permitted to lead admissible evidence including expert evidence, and that the Sothertons report be excluded in its entirety.

19 In support of the application for leave, the applicant contends that the effect of the 'Prohibitory Orders' is to deny him natural justice because the Sothertons report, which he has been prevented from questioning, will ultimately be dispositive of some of the issues between the parties at trial.[3] He also advances four substantive grounds. Grounds 2 and 3 contend that the judge's discretion in making the 'Prohibitory Orders' miscarried in various respects. Grounds 4 and 5 address specifically the admissibility of the Sothertons report.

First aspect - admission into evidence of the Sothertons report - grounds 4 and 5

20 It is convenient to deal first with the applicant's arguments relating to the admission of the Sothertons report into evidence, which is the subject of the first aspect of the 'Prohibitory Orders'. In support of that ground, counsel for the applicant submitted that the report was not admissible under ss 76 to 79 of the Evidence Act 2008, and that the report should have been excluded, or its use limited, in exercise of the discretions under ss 135 and 136 of that Act.[4]

21 This aspect of the application for leave depends on the significance to be attached to the exchange between the judge and counsel for the respondent set out earlier in these reasons. The applicant contends that, by agreeing that the Sothertons report was 'in' as an exhibit to the affidavit of the respondent, the judge had ruled that it was admitted into evidence at the trial. Strictly speaking, that cannot be so. The trial had not commenced and the affidavit and the report had not been tendered. In truth, all that the judge did on 9 October 2015 was to confirm that it was not necessary for a further affidavit to be filed exhibiting the Sothertons report. In doing so, she also reaffirmed that the report was binding.

22 Plainly, the judge envisaged that the report would be admitted into evidence, and that this would happen through the evidence of the respondent. However, she made no order or ruling to that effect. Nor was any application made for its exclusion, or any argument heard in relation to the admissibility of the report under the Evidence Act. That matter awaits the trial.

23 Nor did the judge rule that, if the report went into evidence, it would do so only as hearsay through the evidence of the respondent. As appears from earlier observations, the judge was not foreclosing the possibility that cross-examination of Mr Lipson might be permitted.

24 In the absence of any relevant order or ruling from which leave to appeal is sought, the application for leave in respect of the first aspect of the 'Prohibitory Orders' is misconceived.

25 In the circumstances, there is no basis for the Court to make any orders on appeal in respect of the admissibility of the Sothertons report.

Second aspect - preclusion of evidence conflicting with the Sothertons report

26 The applicant next challenged the judge's suggested ruling to the effect that evidence could not be adduced which conflicted with or otherwise traversed matters forming the subject matter of, and findings made in, the Sothertons report.

27 It is plain that the judge declined to permit the filing of evidence of the kind described. On 9 October 2015, that emerged from the reasons given for ruling parts of the applicant's affidavit inadmissible. It was apparent also from the fact that the orders made did not allow for the filing of any further affidavits. But in those respects the orders of 9 October 2015 merely reflected the effect of orders made previously. As early as 31 July 2015, the judge had refused the applicant time in which to obtain and file evidence from Deloitte. She had refused a further application to the same effect on 11 September 2015. No application for leave to appeal was sought in respect of the rulings made on those occasions.

28 The applicant did not seek an extension of time in which to appeal against the judge's rulings refusing him permission to file a report of Deloitte. In light of the time that had elapsed since the making of the orders, the time since Mr Ruschinek died and the interlocutory nature of the orders in question, any such application would have encountered considerable difficulty. Instead, the applicant sought to rely on r 64.36 of the Rules.[5]

29 Rule 64.36(6) provides that, on an appeal, the powers of the Court of Appeal are not limited by reason of any order made on an interlocutory application from which there has been no appeal. Rule 64.36(7)(a) relevantly provides that the powers of the Court of Appeal under r 64.36 may be exercised notwithstanding that no application for leave to appeal has been commenced in respect of any particular part of the decision the subject of the application for leave to appeal, or appeal.

30 These rules do not avail the applicant. Each of them operates in aid of the Court of Appeal's jurisdiction to hear and determine an application for leave to appeal, and an appeal, in circumstances where the orders made on the application for leave, or the appeal, would conflict with orders made on an interlocutory application, or other parts of the decision in question in respect of which no application for leave, and no appeal, has been brought. Neither rule enables the Court to hear and determine an application for leave to appeal, or appeal, in respect of the conflicting orders or parts of the decision, in the absence of any application to that effect having been made. They simply provide that such conflicting orders or parts of the decision do not stand in the way of determining the application, or appeal, which is properly before the Court.

31 Since no application to file evidence conflicting with the Sothertons report was before the Court on 9 October 2015, and no order or ruling on that subject was made on that date, the application for leave to appeal is also misconceived in respect of that aspect of the 'Prohibitory Orders'. The orders or rulings about which the applicant seeks to complain were instead made on 31 July 2015 and affirmed on 11 September 2015. No application for leave to appeal has been made in respect of those orders or rulings, and r 64.36 does not enable the Court to interfere with them in the course of determining the present application.

32 It is true that the judge stated on a number of occasions during the 9 October 2015 hearing, and on previous directions hearings, that the Sothertons report was binding and that the parties had agreed to it. It is also true that the applicant had, in the course of seeking unsuccessfully to persuade the judge to permit him to obtain and file the Deloitte report, submitted that the Sothertons report was not a 'forensic report' within the meaning of the order of 5 December 2014. However, the applicant has never made an application for any order to the effect that the Sothertons report failed to satisfy the terms of the 5 December 2014 order. Nor has the judge ruled on any such application. At one point, to the contrary, she indicated that such an application could be made at the trial.

33 The applicant has instead sought to file a report conflicting with a report which, on the face of an order of the Court made by consent, is binding. To allow such a report to be filed, for the purpose of being admitted into evidence, would undermine that order. It is readily understandable why the judge declined to allow an adjournment for that purpose. Filing such evidence would have been calculated to lead to a situation where, contrary to the order made on 5 December 2014, the Court at trial would be faced with competing expert reports.

34 In the circumstances, the question whether the Sothertons report is a 'forensic report' has not yet been agitated or decided. That issue may therefore arise when it is sought to have the report admitted into evidence at trial as the 'forensic report' contemplated by the 5 December 2014 order. How any such argument proceeds, whether evidence is permitted to be admitted on any application to exclude the report from evidence and whether the parties will be permitted to lead their own expert evidence if the report is not admitted as the 'forensic report' will be matters for the trial judge. In the meantime, and in the absence of such an application at the interlocutory stage, the report was prima facie binding and this is clearly the basis upon which the judge proceeded in refusing to permit evidence conflicting with it to be filed.

Third aspect - striking out of parts of the applicant's affidavit

35 The judge did make the orders sought to be challenged under the final aspect of the 'Prohibitory Orders'. Significant parts of the applicant's affidavit of 25 September 2015 were excluded, on the grounds that they conflicted with the Sothertons report, constituted opinion evidence from a person not qualified in the field and were in the nature of submissions. The applicant now accepts that the second and third of those grounds were made out in respect of the challenged evidence. That concession is rightly made. The judge was also correct to rely on the binding nature of the Sothertons report in this regard. As explained above and elaborated further below, the report is binding unless and until the Court rules to the contrary.[6]

36 This conclusion is sufficient to dispose of the application for leave to appeal. However, because of the overlapping nature of the three aspects of the 'Prohibitory Orders', it is desirable to address directly the remaining grounds of appeal.

Grounds 1-3 of the application for leave to appeal

37 The first proposed ground of appeal asserts that the applicant was denied natural justice.[7] It follows from the above that the applicant's natural justice ground is without foundation. The applicant is not shut out from arguing at trial that the Sothertons report is not a forensic report so as to be binding on the parties pursuant to the order of 5 December 2014.

38 The second and third grounds contend that the judge's discretion miscarried. It is submitted that it was unreasonable and plainly unjust for the Sothertons report to be relied on, in light of the significant prejudice to the applicant and the alleged manifest irregularities, deficiencies and unreliability of the opinion evidence contained in it, and the fact that the report is not shown to be based on specialised knowledge, so that Mr Lipson has usurped the function of the trier of fact. It is further submitted that the judge failed to take account of the prejudice to the applicant in not being permitted to adduce evidence to impugn the admissibility or reliability of, or the weight to be attributed to, the Sothertons report, and that she wrongly proceeded on the premise that she was not shutting the applicant out from being able to deal with the respondent's case.

39 It should be apparent that these grounds too must fail. First, for the reasons given, to the extent that they seek to impugn the first two aspects of the 'Prohibitory Orders', they are not directed to any order or ruling of the Court made on 9 October 2015. Secondly, in any event, the question of admissibility of the Sothertons report is yet to be determined at trial. In the circumstances, the applicant has not been shut out from being in a position to deal with the respondent's case.

40 On the other hand, if the applicant is unsuccessful at trial in excluding the Sothertons report from evidence, and it is held to be binding in accordance with the order made on 5 December 2014, any 'shutting out' of the applicant will be the result, not of the making of any unjust order or miscarriage of discretion of the Court, but the applicant's own actions in consenting to the making of the order and joining, pursuant to that order, in the instructing of Sothertons in accordance with the terms of the joint engagement.

41 The only order in respect of which leave to appeal is properly sought is the order as to striking out of parts of the applicant's affidavit, which was plainly correct. The proposed appeal in respect of the other aspects of the 'Prohibitory Orders' is misconceived. Each of the applicant's substantive grounds of appeal has no prospect of success. For the reasons given, there is also no substance in the applicant's natural justice ground.

42 The application for leave to appeal must therefore be refused.

[2] This Court was informed that after discussion the parties, represented by counsel, handed-up proposed minutes of consent orders to the judge.

[5] Now the Supreme Court (General Civil Procedure) Rules 2015, but in which r 64.36 remains unchanged.

[6] The applicant sought to draw an analogy between the order made on 5 December 2014 and an order for the engagement of a single joint expert under s 65L of the Civil Procedure Act 2010. A submission was made that the judge had failed to have regard to the matters mandated under that provision. There was no merit in this argument. No reference was made to s 65L at the hearing on 5 December 2014 and the order does not purport to have been made pursuant to the section. Nor would an order that a joint expert's report be 'binding' appear to be consistent with the provisions of s 65O, which preserves the power of the Court, where a single joint expert has been engaged under s 65L, to give leave for other expert evidence to be adduced. (It may well be that an agreement between the parties, as distinct from an order of the Court, to the effect that a report would be binding could be taken into account as 'any other relevant consideration' under s 65O(2)(e), bearing on the discretion to grant leave to adduce other expert evidence, but that is not the present case.)

[7] See paragraph 19 above.