UTSG Pty Ltd v Sydney Metro

The evidence

1. The Respondent relied on the affidavit of Ms Kylie Wilson, a solicitor employed by its legal representatives, for the purposes of my costs determination. That affidavit, dated 22 August 2018, had been read on an application by the Company to vacate the then set hearing dates. This application was dealt with on 22 August 2018 by Pepper J.
2. No evidence was read on behalf of the Company prior to my reserving my decision on these costs' issues.

Events providing background to this costs determination

1. To understand the scope of the dispute between the parties, it is appropriate to note, first, that the Valuer General had determined, in May 2017, that the compensation to which the Company was entitled was $2,136,834.00 for disturbance. Second, the Applicant's claim, pressed on alternative bases and not requiring analysis for the purposes of this costs determination, was for either more than $20 million (on a relocation basis) or more than $48 million (on an extinguishment basis).
2. An expert report had been prepared for the Company by an accountant, Mr Mullins. This had had attached to it a spreadsheet which was described as setting out a revenue history of the Company. This revenue history was proposed to be the basis upon which the Company relied for its disturbance claim.
3. As is customary in these matters, the proceedings were referred to a conciliation conference pursuant to s 34 of the Land and Environment Court Act 1979 (the Court Act). That conciliation conference was unsuccessful, resulting in it being terminated on 16 May 2018. The following day, the Respondent issued a Notice to Produce. The Respondent's submissions for the purposes of this costs determination described the circumstances of issuing the Notice to Produce as follows: 18 The day after the s 34 conference between the parties was terminated, the respondent issued a Notice to Produce dated 17 May 2018 (NTP) which called for documents in 44 categories that were all, the respondent contends, directly relevant to an understanding of the applicant's actual revenues, beyond what has been asserted in a simple spreadsheet appended to the Mullins report. This includes documents that are required to exist by dint of Corporations legislation, documents likely to exist for taxation purpose, bank records, agreements with the medical service providers and many others. Such documents are critical to establishing the nature of the applicant's earnings, which were otherwise almost entirely absent from the material in the Mullins report.
4. The Respondent's submissions described the Company's defaults (by reference to relevant nominated paragraphs in Ms Wilson's affidavit): 19 Since the NTP was issued, the applicant's further defaults include: (a) failing to produce documents pursuant to the NTP by its return on 31 May 2018 and 12 June 2018 (Ms Wilson at [38], [40]); (b) failure to comply with orders made by Moore J on 25 June 2018 for the production of documents (including the general ledger of the business, the practice management system and bank statements) (Ms Wilson at [48] and [51]); (c) failure to comply with order 1A made by Moore J on 25 June 2018 in relation to specifically identifying documents sought under the NTP which had been produced by a non-party (Ms Wilson at [48] and [61]) and transcript of cross-examination of Digby Dunn at Tab 27 of Exhibit KEW-1, pages 9 line 26 to page 10 line 2); (d) failure to comply with order 2A made by Moore J on 25 June 2018 in relation to the service of an affidavit in respect of logistical difficulties with providing anonymised patient identifiers, which resulted in the applicant seeking (in Court on 26 July 2018) an undertaking from the respondent in relation to confidential patient information (Ms Wilson at [48] and [70]); (e) failure to comply with orders made by Moore J on 4 July 2018 for the production of documents (including the general ledger of the business, the practice management system and bank statements) (Ms Wilson at [64] and [65]); (f) failure to comply with orders 3(b), 7 and 8 made by Moore J on 4 July 2018 in relation to the preparation and verification of a list of steps taken to locate and identify documents, including the details of the searches and inquiries undertaken and the results of those inquiries, noting that Ms Singh was never made available to be cross-examined on her affidavit sworn on 25 July 2018, which, in the respondent's submission did not satisfy orders 3(b), 7 and 8 made on 4 July 2018 (as extended by orders made on 24 July 2018; and (g) failure to comply with orders made by Moore J on 24 July 2018 for the production of documents (Ms Wilson at [67] and [68]); (h) continued late service of documents referred to in the NTP (such as those dealt with by Pepper J on Monday 20 August 2018 when the application to vacate was made).
5. The Respondent's submissions then listed, in (20), nine dates upon which the parties had been required to attend in the LVC List as a consequence of the Company's failure to produce documents pursuant to the Notice to Produce or to orders which had been made requiring the production of documents.
6. The Respondent contended that, in exercising the discretion on costs available pursuant to s 98 of the Civil Procedure Act 2005 (the Civil Procedure Act), that the Company's dilatory/unreasonable behaviour meant that the Respondent should have its costs of the unnecessary attendances. The Respondent submitted: 25 The respondent contends that the discretion to award the costs of "the Notice to Produce and the hearings/attendances before the Court on 22 June 2018, 2, 3, 23 and 26 July 2018" ought be exercised in the respondent's favour. The applicant has acted unreasonably in the conduct of the litigation for the reasons explained in [19] above necessitating the appearance before the Court on the days listed in [20] above. No application to set aside the NTP was ultimately brought (although threatened). It required compliance and the manner of production initially given by the applicant was entirely unsatisfactory or non-existent (as described in [19] above). If proper and timely compliance with the NTP occurred, the respondent's motion would have been unnecessary as would the multiple appearances before the Court on the dates set out in [20]. For that reason, given that costs are compensatory and not punitive (Latoudis v Casey (1990) 170 CLR 534), the respondent ought be awarded its costs.

The scope of this costs determination

1. The Company's claim has not yet proceeded to determination, with the matter listed for hearing in 2019. This decision, however, does not relate to the substantive merits of the Company's claim, merely with respect to what costs order, if any, should be made with respect to various interlocutory attendances in the LVC List during the period up until the final procedural attendance before me on 18 September 2018.
2. This decision does not address any matters of merit requiring determination as part of the Company's compensation claim, it simply addresses whether or not (and, if so, against what entity) any costs order should be made for parts of the interlocutory processes dealt with in the LVC List attendances by the legal representatives of the parties.
3. Pre-trial progression of the matter in this Court was complicated for a number of reasons. First, there was separate litigation being conducted in the Supreme Court concerning a dispute between Ms Singh and Dr Baig, individuals who had both been directors of the Company in times past. Resolution of that litigation (resolution which has now taken place) impacted on preparation in these proceedings (it being unnecessary for the present purposes to analyse these impacts in detail). However, it is fair to observe that those proceedings, together with what might generally be described as deficiencies in the Company's record-keeping or record retention, were matters which had required a more time-consuming and complex consideration and determination of procedural issues during the pre-trial preparation managed through the LVC List.
4. The extensive, and somewhat complicated, nature of the pre-trial skirmishes and the fact that, based on then set original hearing dates, I was not to be the trial judge of the matter, caused me to reserve for myself determination of whether or not any costs order should be made concerning the LVC List attendances and, if so, in what terms. The parties were directed to provide short written submissions on the costs issue. The parties did so and this is my determination after consideration of them.

The Company's legal representation

1. It is to be observed that, when the Company commenced these proceedings, its solicitor was a sole practitioner based in Forster. In July 2018, he ceased acting for the Company. The Company had appointed Mills Oakley, a Sydney-based legal practice, to represent it. However, throughout the pre‑trial attendances in the LVC List, the Company was represented continuously by Ms Pearman of counsel.
2. Subsequently, on 25 October 2018, Ms Singh, the Company's sole director, filed a notice removing Mills Oakley as the Company's legal representative.
3. As a consequence, on 5 December 2018, I had an enquiry made of Ms Pearman's Clerk. It was in the following terms: His Honour is reserved on a costs application for interlocutory steps in these proceedings. Ms Pearman appeared for the Company on the relevant occasions. On 25 October 2018, the Company's sole director filed a Notice of Removal of Solicitor and indicated that she was now representing the company in her capacity as its sole director. As his Honour proposes to deliver his costs' decision prior to the end of term, can you please advise whether Ms Pearman continues to hold the brief on a direct-access basis or whether her retainer has also been terminated. If she continues to hold the brief, I will advise her, through you, when his Honour proposes to deliver his decision. If she does not continue to hold the brief, it will be necessary for me to advise Ms Singh of the proposed decision.
4. Later that day, I was advised, in response, that: Ms Pearman no longer acts for UTSG or Ms Singh on any basis.
5. The Company therefore is, currently, solely represented by Ms Singh. She has been given notice of my intention to deliver this judgment and of the location and timing of it.

The pre-trial attendances covered

1. The costs' elements with which I am dealing in this decision are for the matters specified in the orders made by Pepper J on 30 August 2018. The costs encompassed by the direction were the "costs of the Notice to Produce filed 12 May 2018 and the hearings/attendances before the Court on 22 June 2018, 2, 3, 23 and 26 July 2018".

Reliance on Ms Singh's affidavits

1. In her written submissions, Ms Pearman proposed that I should have regard to the range of matters set out in affidavits that had been deposed by Ms Singh. None of those affidavits, however, had been read at any stage during the interlocutory proceedings before me. Indeed, the Respondent had indicated that it wished to cross-examine Ms Singh about a number of matters that were traversed in some of her affidavit material, cross-examination which had been set down to take place before Pepper J on 20 August 2018 (although it was subsequently deferred until mid-October 2018). At the time I dealt with the various matters that are the subject of this costs determination, it is sufficient to note that none of the material from Ms Singh had been admitted as evidence. Under the circumstances, it is not appropriate for me to have regard to it.

Other explanations

1. Ms Pearman also referred to a number of other matters which she submitted provided an explanation for the non-compliance by the Company with the obligations to produce material adequately responding to either the original Notice to Produce or subsequent orders made by me during the course the various interlocutory hearings, subject to this costs' application. Amongst the matters advanced by Ms Pearman were: 1. The solicitor initially instructed by the Company, was a sole practitioner whose practice was located at a regional location; 2. Ms Singh was engaged in collateral litigation with Dr Baig in the Supreme Court; 3. Ms Singh was said to be unavailable for a period and her mother was also said to be ill requiring Ms Singh's attention. I have no evidence of these events (although this may have been the subject of material in Ms Singh's affidavits, affidavits to which I do not have regard for the reasons earlier outlined); and 4. When Ms Singh terminated the retainer of her initial legal representative, the new legal representatives required time to understand the nature of the litigation and to get across such material as may have been provided to them for the purposes of the litigation.

The Respondent's position on costs

1. The Respondent submitted that the necessity for the Notice to Produce arose out of an expert report of a Mr Mullins, dated 29 March 2018, which had been commissioned by the Company. This expert accounting report had attached to it a spreadsheet which was said to reflect the Company's historic revenue positions. This report provided a basis for the Company's position prior to the undertaking of the conciliation conference pursuant to s34 of the Court Act. The Respondent's submission was that the documents that potentially fell within the various categories in the Notice to Produce were: … directly relevant to an understanding of the Applicant's actual revenues, beyond what has been asserted in a simple spreadsheet appended to the Mullins report. This includes documents that are required to exist by dint of corporations legislation, documents likely to exist for taxation purpose [sic], bank records, agreements with the medical service providers and many others. Such documents are critical to establishing the nature of the Applicant's earnings, which were otherwise almost entirely absent from the material in the Mullins report.
2. Although these documents were not formally in evidence, I was given a folder of the medical records during the course of the hearing on 26 July 2018. There is no doubt that the request for the provision of documents (or an explanation as to why the documents were not available, despite a reasonable expectation that they existed) was fundamental to the Respondent having a proper appreciation of the nature of the Company's claims - particularly given the very great difference between not only the Valuer General's determination and the Company's claims, but also the very great difference between the two alternative claims then proposed to be pressed by the Company. Provision of the material, or the explanations for its absence, was a not unreasonable pre-trial expectation held by the Respondent.

Introduction

1. Whilst all of these reasons (other than those personal to Ms Singh about which I have no proper evidence) may be ones which explain the failure of the Company to meet its obligations for the provision of documents which it had been required produce, they do not comprise valid excuses for not doing so.

The sole practitioner issue

1. At (14) of Ms Pearman's submissions, she wrote concerning the Company's representation by its then solicitor. She said: In Monti v Roads and Maritime Services a vacation application caused by the Respondent serving a critical report late and well outside business hours and close to the hearing, and in which the relevant solicitor was the same solicitor, as in the current proceedings, prior to a change in solicitor, his Honour accepted at [29]: there was an inconsiderate element in the Respondent's conduct in the context of the Applicant's solicitor being a sole practitioner based in a regional town, whereas the Respondent's solicitors are one of the Nation's largest legal firms, a Sydney based "big city law firm", as Ms Pearman put it, with a far greater capacity to allocate human resources to the demands of case management.
2. The circumstances here are significantly different. The need for relevant documents to be made available to support the Company's case was obviously evident from the commencement of the proceedings. If it was not evident to the Company's then solicitor at that time, it certainly would have been from the time of finalisation of Mr Mullins' report and the necessity to provide proper and accurate documentary information in support of assertions made in it (in the spreadsheet in Appendix 15 to the report).
3. The above comments by Molesworth AJ were in the context of a decision (Monti v Roads and Maritime Services [2018] NSWLEC 34) concerning an application to vacate hearing dates. That application was made necessary because of the late service of material by the respondent in those proceedings, very close to the date set down for the commencement of the trial.
4. No such circumstances arise here. The Company's then sole practitioner representative had charge of the evidentiary process leading up to and after finalisation of Mr Mullins' report. Nothing in the Respondent's behaviour triggered adverse consequences; the trigger was simply the inadequacy of the Company's preparation.
5. The Company had been provided with the statutory advance payment on or about 9 February 2018 and the Company, thereafter, would have been in a position to ensure that additional human resources were allocated to preparing for its case had it chosen to do so.
6. This is a significantly different position to that which had been dealt with by Molesworth AJ, where the Monti interests were reacting to the conduct of the respondent in those proceedings, rather than the position, here, where the chain of events needing the Notice to Produce and the subsequent interlocutory hearings were matters which fell entirely within the Company's control.
7. All of the matters concerning limitations arising from the initial choice of (or subsequent change of) legal adviser were matters entirely within the Company's control.

Other issues

1. Any matters which might have arisen because of the Company's inability to access its records that had been in the possession of its accountant in February 2018, because of unpaid accounting fees, did not, for the purposes of the non-compliances with which I am dealing, arise from any failure of the Respondent (caused by the Supreme Court litigation) to make the initial compensation advance payment founded on the Valuer General's determination. Any payment delay occasioned by this, by the time of the matters arising with respect to the non-compliances with the Notice to Produce and directions subsequent to that time, had been cured well before then.
2. Although, as a general presumption, a party dispossessed of an interest in land for a public purpose (including a leasehold interest, as is the case in these proceedings) will be entitled to its legal costs, and would not ordinarily be faced with costs orders against them, that is not an immutable position.
3. In the circumstances of these proceedings, although there were reasons, as advanced by Ms Pearman, as to why the Company did not meet its obligations for the provision of material validly requested of it, there are no acceptable excuses for having failed to do so. It is the unreasonableness and dilatory nature of the Company's responses (or lack of responses) that causes its conduct to fall outside what would reasonably be expected of an applicant in proceedings such as these seeking to establish a valid basis for a compensation claim.
4. That is particularly so when, during the interlocutory stages, the Company's claim was advanced on two separate and significantly different bases, in the alternative, with each of the bases proposed involving claimed amounts that were, on the lower basis, very significantly higher than the compensation determination by the Valuer General and, on the other basis, what could only be regarded as radically higher than the compensation basis determined by the Valuer General.
5. In circumstances such as these, the Respondent was entitled, reasonably, to access documents that might be expected to enable it to understand what might be the validity or otherwise of either of the compensation bases advanced by the Company.
6. As a consequence (with the exception of the hearing of 26 July 2018 dealt with separately below), it is appropriate that the Company be required to pay the Respondent's costs of the Notice to Produce and the subsequent attendances prior to but excluding that of 26 July 2018.

The hearing on 26 July 2018

1. In addition to the broader bases upon which the Company's submissions resist the making of any costs order in favour of the Respondent, Ms Pearman expressly raises a separate objection concerning the attendance for the return of a subpoena on 26 July 2018. Her submission was in the following terms: The proceedings were listed for return of subpoena on 26 July 2018 in respect of the subpoena to produce issued by the Respondent to Dr Baig, a process unrelated to and independent from the Applicant. The Respondent, without notice to the Applicant, raised additional issues in the course of that appearance, about alleged non-compliances. That appearance was also protracted by the Respondent's refusal to enter into confidentiality undertakings in respect of confidential patient medical records which were produced on behalf of the Applicant, see Ms Singh 25 July 2018, [9] and transcript of 26 July 2018, 164:20-28.
2. I have carefully read the entirety of the ten-and-a-half-page transcript of the attendance before me on 26 July 2018. In part, it dealt with the necessity for consideration of the terms of a confidentiality undertaking concerning the voluminous documentary patient records which were proposed to be provided for the Company. The documents were proposed to be provided in paper form because the Company had not been able to access them using a computer program known as BPS, although there had been an earlier assumption that the Company would be able to access the records through that electronic means and, therefore, be able to produce records with no patient identifying information (Transcript, 26 July 2018, page 161, lines 38 to 45).
3. The necessity for discussion concerning a confidentiality agreement was that the records proposed to be provided in hard copy contained the patient information which was expected to have been able to be deleted if the records had been available electronically.
4. Although the necessity to consider the terms of a confidentiality agreement arose through no fault of the Respondent, I accept that the Company did use its best endeavours to produce the information in a form which was available to it. Therefore, to that extent, I am prepared to accept that there was no conduct on that point by the Company that could trigger a costs order arising with respect to the confidentiality agreement aspect of that day's hearing.
5. However, the necessity for that hearing, in the first instance, arose as a consequence of the non-compliance by the Company with the requirements for production of material.
6. To that extent, I am satisfied that it is appropriate that the Respondent be awarded a significant portion of its costs for that day, consistent with the reasoning earlier applied concerning the earlier attendances. On the other hand, I am not satisfied that it is appropriate to order the Company to pay the entirety of the Respondent's costs on that occasion. Doing as best I can, after a reading of the transcript of 26 July 2018, it would seem to me that the Company should only be required to pay 75% of the Respondent's costs of that attendance but also to pay the entirety of the costs incurred in preparation for that attendance.

Crystallisation of the costs' obligation

1. Ms Pearman made a specific submission concerning the timing of any obligation for the Company to make any payment to the Respondent for any costs which I might order. Ms Pearman wrote: Alternatively, if the court requires the Applicant to pay the Respondent's costs of the NTP and various of the attendances, so as not to compromise the Applicant's ability to pursue the claim, the Applicant submits any such costs should be payable only at the conclusion of the hearing.
2. Whilst I do not have to hand any information concerning the Company's financial position, it is appropriate to have regard to the fact that, as a general proposition, if a compensation claimant is successful in proceedings such as these, and has not otherwise acted unreasonably, a costs order is likely to be made in their favour as part of the final determination. Whether or not that occurs in these proceedings, it is not unreasonable, in my view, to make the Company's costs' liability arising from this decision being a liability that does not crystallise until the determination of the substantive proceedings.
3. As a consequence, it seems to me that, to the extent that I am going to award costs in favour of the Respondent, I should make those costs the Respondent's costs in the cause rather than requiring the Company to meet them at the present time.

Orders

1. It follows from that which I have earlier set out, that the orders of the Court are: 1. UTSG Pty Ltd (the Company) is to pay the costs of Sydney Metro (the Respondent) of the Notice to Produce filed on 17 May 2018 and the attendances before the Court on 22 June 2018, 2, 3 and 23 July 2018 and the Respondent's costs for preparation of the attendance on 26 July 2018; 2. The Company is to pay 75% of the costs of the Respondent of the hearing of 26 July 2018; and 3. The costs ordered to be paid by the Company to the Respondent as a consequence of (1) and (2) are to be the Respondent's costs in the cause.

Amendments 10 April 2019 - Amendment to coversheet 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: 10 April 2019