I am dealing with an argument about costs in respect of which it is said by the defendants, who are the applicants for a costs order:
"The issue for the Court is the proper administration of justice in the Technology and Construction List and ensuring that parties do not take a cavalier approach to the management of matters and, in doing so, wasting the valuable resources of the Court."
What the circumstances do show is how unhelpful and productive of unnecessary legal costs it is for the solicitors experienced in the manner in which this List works, and who should understand what expectation the Court has concerning resolution of disputes in this List, to engage in heated correspondence, rather than calmly considering and discussing an orderly resolution of the issue at hand.
The plaintiff is the Owners Corporation of a residential development in Woolloomooloo. The development was constructed by the second defendant on behalf of the first defendant.
The Owners Corporation alleges that there are substantial defects in the building.
On 11 July 2024, Ball J directed that the defendants serve their evidence by 27 September 2024.
Issues have arisen in respect of the Owners Corporation's maintenance of the building, and in particular its roof, performance by the third parties of rectification works, the Owners Corporation's obligation to mitigate its loss and the defendants' entitlement to be given an opportunity to minimise the damages they must pay by rectifying the defects themselves.
They led the defendants' solicitors to write to the plaintiff's solicitors on 22 August 2024:
"Failure to maintain
Our clients' response to your client's claims in respect of defective works will canvass the lack of maintenance on the roof which your client was obliged to perform. Given you have escalated this matter on the premise that rectification of the allege[d] defect is now 'urgent', we bring forward our request for documents relevant to this issue.
Therefore, we ask that you provide us with the following, as a matter of urgency:
a. Any document recording or evidencing inspection, repairs or maintenance of the roof waterproofing, drainage pipework or ancillary areas described in the Advice as requiring rectification.
b. Any document recording or evidencing the costs incurred in association with the inspection, repairs or maintenance described above.
c. Any documents recording or evidencing any communications addressing the roof with Sure Seal Australia Pty Ltd, the subcontractor responsible for the installation of the waterproofing element on the roof as identified in the operation and maintenance manual for the Property.
d. Any documents recording or evidencing the affixing, installation and/or placement of any additional plant, equipment, anchor point, walkway, apparatus or structure on the roof.
e. Any documents recording or evidencing installation of waterproofing to any additional element or structure referred to in … d.
This document request relates to the entire life of the roof since it has been under the control of the [Owners Corporation], namely from August 2014."
On 30 August 2024, the Owners Corporation's solicitors responded to that letter without referring to the defendants' request for documents.
That led to the defendants' solicitors writing, on 4 September 2024:
"Notably absent from your latest letter is any response to our reasonable request for documents that describe the maintenance activities which have been performed on the roof during the time your client has been responsible for that maintenance (being a period of 10 years).
We put you on notice that our preliminary investigations reveal to us a wholesale failure on behalf of your client to perform, or even attempt to perform, any maintenance on the roof (and, for that matter, multiple other areas of the building), which any competent owners' corporation would have performed over the lengthy period since our clients completed their obligations in respect of the building.
Since the two weeks we first made this request, we repeat that it is of some urgency that your client assemble those documents for our clients to review, so that this matter can be considered as part of the evidence that ultimately will be served on your client."
On 12 September 2024, the defendants' solicitors referred to expert reports served by the Owners Corporation, being the "Jones Report" and the "Keato Report" and, referring to the work evidently effected at the property by third parties, expanded its request for documents as follows:
"Third Party Works
The physical state of the Luxe Apartments (Property) indicates that various works have been performed by third parties, and those works affect those parts of the Property which are the subject of your client's claims (Third Party Works). For example, fire dampers, which form part of various exhaust systems, appear to have been recently modified.
Without adequate details of the timing, nature and extent of the Third Party Works, our clients are unable to progress their responsive evidence in relation to the alleged mechanical and fire services defects outline in your client's evidence, namely within the expert report of Paul Jones dated 13 March 2024 (Jones Report) and the expert report of Daniel Keato dated 13 March 2024 (Keato Report).
To that end, we are instructed to request the following documents, in so far as they relate to the defects alleged in the Jones Report and the Keato Report:
a. records of all approved works to the Property, including to individual units, from September 2014;
b. records of all maintenance and repair work undertaken at the Property from September 2014; and
c. details of all works performed at the Property by third parties from September 2014, including any / all correspondence relating to the scope and timing of such works.
Further records
In addition to the above, we are also instructed to request:
a. details of all strata managers engaged by your client since September 2014, including the company name and the duration of the engagement;
b. the CCTV footage referred to in paragraph 20.1 of the expert report of Simon Ingegneri dated 11 March 2024 (Ingegneri Report); and
c. records of all maintenance and repair work undertaken at the Property from September 2014, in so far as they relate to the defects alleged in the Ingegneri Report.
Roof works
We refer to our letters identified … above. [1]
Those letters include a request for documents regarding maintenance and other works performed on the roof of the Property, to which we are yet to receive a response from you.
Progression of our clients' evidence
Without the documents requested above, our clients are presently unable to progress their responsive evidence in relation to the alleged defects.
We request these documents as a matter of urgency, and by no later than Friday, 20 September 2024." (Emphasis in original.)
Although the letter stated that the defendants' responsive expert evidence could not be completed without the documents called for, other than at a high level of generality, no explanation was given as to why that was so.
That letter prompted the following response from the Owners Corporation's solicitors on 19 September 2024:
"In respect of the documentation requested in your letters (Request), we consider that the Request is a veiled attempt of discovery and is premature given that evidence has yet to conclude.
As you are no doubt aware, Practice Note SC Eq 11 - Disclosure in the Equity Division (Practice Note) applies to these proceedings as they fall within the Equity Division. Notably, paragraph 4 of the Practice Note provides that '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.'
In anticipation that the Request may give rise to a subpoena and/or notice to produce we note the case of Owners SP 76902 v RMS [2] where Ball J found in respect to a subpoena that:
'It will also be an abuse of process where the subpoena is used as a means of obtaining disclosure of documents which, in accordance with para 4 of SC Eq 11, could only be obtained before the service of evidence in exceptional circumstances necessitating disclosure.' [3]
No exceptional circumstances necessitating disclosure are available to your clients. The Request is therefore an abuse of process.
Your clients have no entitlement to pause the progression of their evidence to embark on a process of discovery. Your client's evidence in chief remains to be filed by 27 September 2024 pursuant to orders made by Justice Ball on 11 July 2024." (Emphasis in original.)
The defendants' solicitors responded on 24 September 2024:
"Your client's position set out in your most recent letter in relation to the request for documents in our letters referred to [above] [4] is unreasonable.
As you identify in your most recent letter, paragraph 4 of Practice Note SC Eq 11 - Disclosure in the Equity Division (Practice Note) 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.
(our emphasis)
The circumstances articulated in our letters referred to [above] constitute exceptional circumstances which necessitate disclosure. Our letters referred to [above] make plain that our clients' experts are unable to finalise their responsive evidence, which is due to be served on 27 September 2024, without the requested documents.
In Skyscanner Ltd v Hotels Combined Pty Ltd, [5] Slattery J observed:
If an expert engaged by one of the parties reasonably and genuinely holds the belief that the documents sought to be disclosed are necessary for the expert to complete his or her report, that is sufficient to establish the relevance of the documents and, in that sense, the necessity for their disclosure. [6]
We reasonably and genuinely hold the belief that the documents sought to be disclosed are necessary for our clients' experts to complete their report.
In the circumstances, production is not precluded by the Practice Note.
By reason of section 56 of the [Civil Procedure Act 1995 (NSW)], the court expects parties to provide documents even where parties consider that there may not be a strict legal entitlement to production. As Kunc J observed:
[F]aced with a reasonable request, the recipient should not automatically respond with an unthinking denial of legal entitlement to the information. The obligation to facilitate the overriding purpose will sometimes require information or an explanation to be given to which the party may not be 'legally' entitled. [7]
This observation is consistent with the following paragraphs of the Practice Note:
a. Paragraph 3, which states the purpose of the Practice Note is to guide practitioners with the aim of achieving the just, quick and cheap resolution of the real issues in dispute in the proceedings; and
b. Paragraph 5, which provides that an order for disclosure can be made when it is necessary for the resolution of the real issues in dispute in the proceedings.
In the circumstances, it goes without saying that the request is reasonable. Our letters identified … above also identify the precise categories of documents which are sought.
We put you on notice that we have instructions to:
a. file a notice to produce; and
b. seek an order for costs on an indemnity basis." (Emphasis in original.)
The letter continued in the same tone.
Again, the defendants' solicitors did not explain, otherwise than at a high level of generality, what difficulty the defendants' experts had, absent the documents called for.
In circumstances where a party's expert states that he or she requires documents within the other party's possession in order to complete his or her reports, the appropriate course is for the first party to explain to the other why such documents are needed by the expert and, absent agreement, to file a motion seeking disclosure before evidence and explaining why there are "exceptional circumstances" of the kind to which Practice Note SC Eq 11 speaks. I referred to this circumstance as one often arising in this list in Blacktown City Council v Allen Jack + Cottier Architects Pty Ltd. [8]
As the Court has explained on a number of occasions now, it is not appropriate in those circumstances for a defendant to serve a Notice to Produce seeking production of those documents. [9]
However, in this case, on 27 September 2024 the defendants' solicitors served a Notice to Produce seeking the following documents:
"1 Any document recording or evidencing works (including inspection, maintenance and repair, rectification or enhancement, all of which are collectively defined as Works) to any exhaust system or fire safety measure at the [Woolloomooloo property] (Property) from September 2014;
2 Any document recording or evidencing Works to any hydraulic system at the Property from September 2014;
3 Any document recording or evidencing Works to any waterproofing system on the roof of the Property from September 2014;
4 Any document recording or evidencing Works to the skylight to Unit 76 at the Property from September 2014;
5 Any document recording or evidencing the costs incurred by the plaintiff in association with the Works described in 1, 2, 3 and 4 above;
6 Any document which describes and/or identifies any and all of the strata managers engaged by the plaintiff since September 2014; and
7 The CCTV footage referred to in paragraph 20.1 of the expert report of Simon Ingegneri dated 11 March 2024." (Emphasis in original.)
As can be seen, the scope of the documents sought was extremely broad.
Mr Le Plastrier, who appeared for the defendants, submitted that:
"…implicit in that Notice to Produce was a carve-out for production of material which was already in the possession of the defendants. The Notice to Produce could not have been read otherwise."
That is not obvious to me from the terms of the Notice to Produce.
On 10 October 2024, the defendants' solicitors wrote to the Owners Corporation's solicitors noting that the Owners Corporation had not moved to set aside the Notice to Produce and enquiring as to when production would be given.
It would have been open to the Owners Corporation to move to set aside the Notice to Produce.
It did not do so.
Instead, on 11 October 2024, the Owners Corporation's solicitors wrote to the defendants' solicitors contending that the Notice to Produce was "broad and oppressive" and lacked a "legitimate forensic purpose", and concluding:
"No exceptional circumstances provided
Notwithstanding the above, your clients have not established the exceptional circumstances required to satisfy the disclosure carve out applicable to Practice Note SC Eq 11.
We note that paragraph 6 of Practice Note SC Eq 11 requires a supporting affidavit irrespective of whether the application for an order for disclosure is made 'consensual or otherwise'.
Our client requires that your clients provide such a supporting affidavit so that it can be satisfied that exceptional circumstances have been established before it can consider consenting to any application for early disclosure.
The only attempt to establish exceptional circumstances for disclosure to date was an unsubstantiated statement made at paragraph 6 of your Letter:
We reasonably and genuinely hold the belief that the documents sought to be disclosed are necessary for our clients' experts to complete their report. (our emphasis)
This reasoning falls markedly short of what the Court have considered to be necessary.
As you identify in your Letter, Skyscanner Ltd v Hotels Combined Pty Ltd confirms that the necessity for disclosure arises from the reasonable and genuine belief held by the relevant expert - not the belief of his or her instructing solicitors.
In Blacktown City Council v Allen Jack + Cottier Architects Pty Ltd, Stevenson J held:
There are often cases in this list where a party seeking pre-evidence disclosure adduces evidence from a prospective expert who states that he or she needs the documents sought for an identified purpose and opines that it is likely that he or she might need to produce a second report were he or she obliged to produce a report in the first instance absent the documents sought.
His Honour then went on to dismiss such application due [to] a failure to adduce such evidence.
Your clients must adduce such evidence from each of its respective experts in the fields relevant to the documents requested in the Notice before our client can consider consenting to any such application for early disclosure." (Emphasis in original.)
On 17 October 2024, the solicitor for the defendants made an affidavit which set out, in detail, the documents that each of the defendants' experts contended they needed to be produced by the Owners Corporation in order that they complete their reports and why those documents were needed.
Thus, in relation to the defendant's mechanical services expert, Mr Ross Warner, the defendants' solicitor deposed:
"12. I was told by Mr Warner, and I believe him, that during his inspection of the Building carried out on 14 August 2024:
a) Mr Warner inspected:
i. 12 individual units at the Building, being units 1, 2, 3, 5, 7, 8, 12, 13, 16, 17, 18 and 19; and
ii. The common property at the Building, including levels 1, 2 and 3 of the basement, the main entry area, the building manager's office, the level 3 garbage room and the lift lobby area of level 2 adjacent to lift 3.
b) Mr Warner observed that apparent work had been undertaken to fire dampers and surrounding works that include the ductwork systems that make up the exhaust systems and the lift lobby supply systems in the Building, as the associated works looked newer as compared to the remainder of the work; and
c) the building manager (whose first name is Mark) said to Mr Warner words to the effect:
'Works were done to the fire dampers around March 2024.'
13. I was also told [by] Mr Warner, and I believe him, that the works undertaken on the fire dampers prevent him from testing the veracity of the plaintiff's evidence in relation to the claims that:
a) the garbage room exhaust air ventilation system, which is said to have been provided by the first defendant, is inadequate (expert report of Mr Jones served by the plaintiff on the defendants on 15 March 2024 - alleged defect M5 - Garbage Room Exhaust and Air Balance - extracted at Tab 1 of Exhibit MWE-3);
b) the lobby supply air ventilation system, which is said to have been provided by the first defendant, is inadequate (expert report of Mr Jones served by the plaintiff on the defendants on 15 March 2024 - alleged defect M6 - Lobby Supply and Air Balance - extracted at Tab 2 of Exhibit MWE-3);
c) the wet areas (bathrooms and laundry rooms) exhaust air ventilation system, which is said to have been provided by the first defendant, is inadequate (expert report of Mr Jones served by the plaintiff on the defendants on 15 March 2024 - alleged defect M10 - Wet area exhaust volumes - extracted at Tab 3 of Exhibit MWE-3).
14. I was told by Mr Warner, and I believe him, that he requires the following documents to enable the finalisation of his expert report (the Warner Documents):
a) any document recording or evidencing works approved by the plaintiff to any exhaust system, supply system and/or fire safety system at the Building since the serve of the plaintiff's evidence referred to in paragraph 13 above;
b) any document recording or evidencing inspection and repair work approved by the plaintiff and undertaken to any exhaust system, supply system and/or fire safety system at the Building since the service of the plaintiff's evidence referred to in paragraph 13 above; and
c) any correspondence between the plaintiff and third parties relating to the scope, timing and certification of the works referred to in the subparagraphs above.
15. Mr Warner told me, and I believe him, that he holds a reasonable and genuine belief that the Warner Documents are necessary to complete his Incomplete Report for the following reasons:
a) it will assist in confirming whether works were undertaken to fire dampers and surrounding works since service of the plaintiff's evidence identified in paragraph 13 above;
b) to the extent that works have indeed been undertaken to fire dampers and surrounding works, it will inform the type and extent of the works and whether they included the alteration of parts of ductwork, fire dampers and surrounding works which are relevant to the plaintiff's claims identified in paragraph 13 above; and
c) whether it would be useful to conduct appropriate testing of the ventilation systems identified in paragraph 13 above, for the purpose of determining the cause of the inadequacy of the ventilation systems.
16. Mr Warner told me, and I believe him, that it is likely that he would need to produce a second report were he to produce a report in the first instance absent the Expert Documents that he told me that he requires." (Emphasis in original.)
Similar detail was provided in relation to two further expert witnesses, a waterproofing expert and a fire engineer.
This was the first time the defendants' solicitors had communicated this information to the Owners Corporation's solicitors.
The matter came before me in the directions list on 25 October 2024.
Orders were then made, by consent, as follows:
"3. By 1 November 2024, the plaintiff is to produce documents responsive to the notice to produce served by the defendants / cross-claimants on the plaintiff on 27 September 2024 amended as follows:
a. Categories 2, 5 and 6 are deleted;
b. The production only relates to documents arising out of or in relation to Works carried out by or on behalf of the plaintiff and excludes any document which would reasonably be within the custody, possession or control of the defendants."
Further, the time for the defendants to serve their evidence was extended to 15 November 2024.
[3]
Costs application
It is in those circumstances that the defendants seek an order that the Owners Corporation pay the defendants' costs of the preparation of their solicitor's letters of 24 September 2024 and 10 October 2024, as well as the costs of the defendants' solicitor's affidavit of 17 October 2024.
This is said to be necessary to afford the defendants "some measure of justice". [10]
I see no justification for such an order in this case.
Faced with instructions from their experts that further documents were needed to finalise their reports, rather than explain in detail to the Owners Corporation what such documents were and why they were needed, the defendant's solicitor engaged in the combative correspondence I have set out.
And then, faced with the equally combative correspondence from the Owners Corporation's solicitors, rather than adopt the appropriate course of seeking pre-evidence disclosure and showing, by evidence, the existence of exceptional circumstances for the purposes of Practice Note SC Eq 11, the defendants' solicitors served the Notice to Produce, the effect of which was to cause further intemperate correspondence to be exchanged.
I do not propose to make orders that might be seen to encourage parties to conduct litigation in this List in the manner I have set out in these reasons.
I propose to make no order as to costs.
[4]
Endnotes
Letters dated 22 August 2024 and 4 September 2024.
The Owners - Strata Plan No 76902 v Roads and Maritime Services [2017] NSWSC 528.
At [20].
Letters dated 22 August 2024, 4 September 2024 and 12 September 2024.
[2016] NSWSC 183.
At [68].
Referring to Ken Tugrul v Tarrants Financial Consultants Pty Limited (No 5) [2014] NSWSC 437 at [73].
[2023] NSWSC 1305 at [8]: referred to in the Owners Corporation's solicitor's letter of 11 October 2024: see [26] below.
See my decision in The Owners - Strata Plan 69567 v Baseline Constructions Pty Ltd [2012] NSWSC 502 at [32] and that of Ball J in The Owners - Strata Plan No 76902 v Roads and Maritime Services at [20]: referred to in the Owners Corporation's Solicitor's letter of 19 September 2024 at [13] above: dealing with a subpoena, but the same point arises.
Adopting the language of Kunc J in Ken Tugrul v Tarrants Financial Consultants Pty Limited (No 5) (supra at f/n 7) at [77] when considering, in the circumstances of that case, whether "delay or unnecessary expense has been caused by conduct which is contrary to the obligations of parties and their lawyers under s 56 [of the Civil Procedure Act 2005] and its related provisions".
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Decision last updated: 11 November 2024