Metcalfe, P.W. v NZI Securities (Australia) Ltd & Ors [1995] FCA 103

NOT FOR DISTRIBUTION FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES REGISTRY ) No NG 397 of 1992 GENERAL DIVISION ) BETWEEN: PETER WILLIAM METCALFE Applicant AND: NZI SECURITIES (AUSTRALIA) LIMITED and OTHERS Respondents SACKVILLE J. SYDNEY 10 MARCH 1995 RULING Mr Hamilton QC has objected to Mr Coles QC reading five affidavits in the respondents' case. The objection is taken on the ground that the affidavits were served late and that the applicant has been, or will be, prejudiced in the conduct of its case if forced to respond to these affidavits. Both counsel agreed that the principles to be applied are those stated in GSA Industries Pty Ltd v NT Gas Ltd (1990) 24 NSWLR 710 (NSW CA); Bomanite Pty Ltd v Slatex Corp Aust Pty Ltd (1991) 32 FCR 379 (FCA/FC); State Pollution Control Commission v Australian Iron & Steel Pty Ltd (1993) 29 NSWLR 486 (NSW CCA); and Sali v SPC Ltd (1993) 67 ALJR 841. In the course of argument it became clear that much of the prejudice initially asserted by Mr Hamilton was not irremediable. Mr Hamilton accepted that some matters of which he complained were capable of being dealt with, albeit by some consideration being accorded to him in relation to the timing of witnesses. The six affidavits in respect of which complaint is made are the following: (i) affidavit sworn by Mr Wayland on 11 December 1992; (ii) affidavit sworn by Mr Langan on 22 February 1995; (iii) affidavit sworn by Mr Taylor on 23 February 1995; (iv) affidavit sworn by Mr Hampshire on 23 February 1995; (v) affidavit sworn by Mr Wayland on 23 February 1995; and (vi) affidavit sworn by Mr Wayland on 9 March 1995. Mr Wayland's affidavits of 11 December 1992 and 9 March 1995 I have delivered a judgment on evidentiary objections to the admissibility of the major portion of Mr Wayland's affidavit of 11 December 1992. In that judgment, delivered on 9 March 1995, I ruled that Mr Wayland's affidavit, which addresses questions relating to the alleged insolvency of Ripoll Pty Ltd as at 16 March 1992, could be read. I ruled, however, that this was subject to Mr Coles producing the books and records relied upon by Mr Wayland and to those books and records being identified by Mr Wayland. Mr Coles has now filed in court a further affidavit of Mr Wayland, sworn on 9 March 1995, identifying the books and records examined by him in the course of preparing his affidavit. He has indicated his intention to read that affidavit, thereby (in accordance with my ruling) rendering the affidavit of 11 December 1992 admissible. At the first trial Wilcox J. declined to permit the affidavit of 11 December 1992 to be read, in part because the relevant books of account and other records had not been identified by the deponent. The respondents made no attempt to identify those books and records before filing Mr Wayland's affidavit of 9 March 1995. On the other hand, the applicant, although repeatedly complaining to the respondents that their discovery was incomplete, did not specifically require production of the books and records referred to in Mr Wayland's December 1992 affidavit until service of a notice to produce shortly before the trial. Naturally, each side blames the other for any difficulty created by the late identification of the books of account. Mr Hamilton says that the respondents were on notice in the proceedings before Wilcox J. that production of the underlying books of account was required and they failed to take the necessary steps until required to do so. Furthermore, as Mr Hamilton points out, a direction was made that all the respondents' affidavits in chief be filed by 2 December 1994 and Mr Wayland's later affidavit was not filed until after the trial had commenced. For his part, Mr Coles says that the applicant could have required identification of the relevant books of account at any time in the past two years: see FCR, O.15, r.10(1). Until the applicant served the notice to produce on the respondents, just before the trial, they took no steps to secure the documents. Moreover, he says that the respondents technically did not need to file an affidavit identifying the books of account; on the authorities, production of the documents upon request (which request was only made at the trial) is all that is required. Mr Coles also points to the fact that the applicant in the representative proceedings, prior to the first hearing, filed a detailed reply by Mr Poignand, who is a chartered accountant, to Mr Wayland's affidavit of 11 December 1992. Of course, Mr Poignand's affidavit did not have to be read in the proceedings before Wilcox J. But, says Mr Cole, that does not alter the fact that the applicant was aware that Mr Wayland's affidavit might be admitted into evidence and had chosen Mr Poignand as the vehicle for replying. Mr Hamilton answers by saying that Mr Poignand's credit is (and was) under attack and it is essential, forensically, to obtain an independent expert (Mr Humphreys) to examine Mr Wayland's analysis. Mr Hamilton claims that until the books of account are identified and produced by the respondents, no occasion arises for the applicants to incur the expense of causing Mr Humphreys to undertake the detailed work necessary to rebut Mr Wayland's analysis. I should add that at one point Mr Hamilton suggested that not all the documents identified by Mr Wayland in his affidavit of 9 March 1995 have been discovered by the respondents, although he was careful to say that this suggestion would require checking. However, Mr Coles states on instructions that in fact all the documents now identified in Mr Wayland's affidavit of 9 March 1995 have been discovered by the respondents and that discovery was given no later than June 1993. I proceed on that assumption. I am inclined to the view that both parties bear responsibility for the court time that has been spent - I think "wasted" is a fair description - in debating the issue of the admissibility of Mr Wayland's affidavits of December 1992 and March 1995 on the ground to which I have referred. The respondents were on notice at the first trial that production of the books of account and records examined by Mr Wayland was necessary to render the affidavit admissible. They did nothing in advance of the trial to identify the books and records or to produce them (otherwise than as part of general discovery). A prudent and sensible course would have been to prepare an affidavit at an early stage, in the form of Mr Wayland's affidavit of 9 March 1995, identifying the relevant books of account. The applicant for his part made a forensic calculation that his best interests lay in not raising the issue directly. This course was adopted in the hope and, perhaps, expectation that Mr Wayland's December 1992 affidavit would be rejected at the second trial. A prudent and sensible course would have been to make known at an early stage the applicant's requirement that the relevant documents be produced, as a condition of admissibility of Mr Wayland's December 1992 affidavit. That course would have involved the respondents requiring production of the documents in advance of the trial, as provided for in the Federal Court Rules. I am prepared to assume - although it is not necessarily my view - that the respondents bear the primary responsibility for failing to identify and produce the books of account at an earlier stage. Mr Hamilton has conceded that, as the books of account have now been identified, Mr Humphreys is able to prepare a response to Mr Wayland's affidavit of 11 December 1992, although several days may be required for the task to be completed. In my view, Mr Humphreys can complete the task in a manner that will not involve substantial disruption to the applicant's preparation for and conduct of the trial. In this respect I bear in mind that Mr Humphreys has some other work to complete in relation to Mr Taylor's affidavit, and that some time will be required for counsel to confer with Mr Humphreys. I also bear in mind that this is not the first time the applicant's representatives have had to consider a response to Mr Wayland's December 1992 affidavit. As will be seen, it may be necessary to ensure that the applicant and his representatives have some time away from court to consider Mr Humphrey's response, but the course of the trial will permit this to be done, if necessary. I think that it is preferable for Mr Wayland's affidavits to be read (subject to any proper evidentiary objections), primarily because they go to an issue squarely raised in the pleadings and the applicant will incur no irremediable prejudice in responding to the affidavits. In reaching this conclusion, I have not overlooked the additional costs that may have to be borne, in the first instance at least, by the applicant. Nor have I overlooked the additional difficulties in preparation, especially in a case where the applicant faces financial strains in conducting complex and lengthy proceedings, already delayed by the necessity for a retrial. I think that the legitimate interests of the applicant can be protected, if necessary, by allowing a short adjournment for counsel to confer with Mr Humphreys and, if appropriate, ultimately by costs orders to compensate for additional costs (if any) attributable in the default of the respondents. Mr Langan's Affidavit As events transpired, Mr Hamilton accepts that no significant prejudice will be occasioned to the applicant by the reading of Mr Langan's affidavit, except in relation to two paragraphs (10 and 11). Mr Coles states that he will not read those paragraphs. The only prejudice that remains is that Mr Hamilton will require instructions from Mr Poignand on certain conversations said to have occurred and this will take some preparation time. It is true that the affidavit was filed and served late and that is not a course to be condoned or encouraged. If significant prejudice were to be occasioned to the applicant, or the course of the trial disrupted, I would be inclined to reject the affidavit. However, it seems clear that neither of those consequences will ensue. I propose to allow this affidavit to be read, subject to any proper objections. Mr Taylor's Affidavit A witness statement prepared by Mr Taylor was filed on behalf of the respondents on 24 November 1993. It purported to reconstruct Ripoll Pty Ltd's statement of account with NZI Capital Corporation Ltd. This prompted the applicant, on 1 February 1995, to file an affidavit in response, sworn by Mr Humphreys. In this affidavit, Mr Humphreys expressed the opinion that, on the documentation available to Mr Taylor, it was not possible to calculate the principal sum outstanding under the Facility Agreement except at the first drawdown date. Mr Humphreys also expressed the view that calculations relied on by Mr Taylor were "fundamentally and manifestly erroneous". This prompted the respondents to cause Mr Taylor to prepare a further affidavit, which was filed on 23 February 1995. In that affidavit Mr Taylor referred to the criticisms of Mr Humphrey's affidavit of 1 February 1995 and stated that he had recalculated the Ripoll account on the basis of different assumptions. Mr Hamilton contends that the respondents should not have a further opportunity by filing an affidavit out of time, to address the deficiencies apparently now acknowledged by Mr Taylor. Mr Hamilton argues that prejudice would be caused to the applicant, because Mr Humphreys will have to spend further time responding to Mr Taylor's revised calculations. This will also involve the legal representatives in conferring with Mr Humphreys and additional expense to the applicant. While making these submissions, Mr Hamilton accepts that Mr Humphreys has already undertaken the bulk of the work necessary to prepare a further response to Mr Taylor's revised calculations. Indeed, a draft report by Mr Humphreys, replying to Mr Taylor's revised calculations, was admitted into evidence on Mr Hamilton's application that the affidavits not be read. It is only fair to record that the preparation of that draft report by Mr Humphreys reflects a swift and diligent response, once it became known to the applicant (before the trial commenced) that Mr Taylor had revised his calculations. Mr Hamilton suggests, on the basis of an estimate made by his instructing solicitor, that Mr Humphreys will have to spend another day or two to finalise his draft report. If this estimate is correct, it is clear enough that Mr Humphreys can complete his report well before he will be required to give evidence and well before any cross-examination of Mr Taylor takes place. I should add that, although Mr Coles appears to have suggested to the contrary, I think that Mr Humphreys' affidavit of 1 February 1995 and his later draft report serve a legitimate forensic purpose. In my view, it is regrettable that Mr Taylor's initial report apparently contained defects that, once pointed out by Mr Humphreys, required belated correction. To the extent that additional costs have been incurred by the applicant in having to meet the revised report, my present view is that there is a case for the respondents meeting those costs, regardless of the outcome of the proceedings. But the issues canvassed in Mr Taylor's affidavit of 23 February 1995 were raised in his earlier affidavit. They in turn relate to matters clearly in issue between the parties. While the revised calculations doubtless demand a response, they do not raise novel questions in the proceedings. It remains to be seen whether the revisions by Mr Taylor have overcome the deficiencies apparently identified by Mr Humphreys in relation to the original report. However, I think that, subject to any appropriate costs order and ensuring that the applicant's legal representatives have a reasonable opportunity to confer with Mr Humphreys, it is preferable that the respondents have the opportunity to present revised calculations. Mr Hampshire's Affidavit Mr Hamilton complains about Mr Hampshire's affidavit. At this stage the relevance of portions of Mr Hampshire's affidavit is not clear. But the affidavit relates to damages. The revised directions of the Court, given on 12 December 1994, required the respondents' affidavits on damages to be filed and served by 22 February 1995. In fact Mr Hampshire's affidavit was filed and served one day late. No complaint was made about that affidavit, so far as I am aware, until the third day of the trial. I do not think that the delay of one day in meeting the directions of the Court justifies a decision that Mr Hampshire's affidavit should not be read. There has been no suggestion that the delay of one day has caused any prejudice to the applicant. Accordingly, I propose to allow the affidavit to be read, subject to any proper objections on evidentiary grounds. Mr Wayland's Affidavit of 23 February 1995 Mr Wayland's affidavit of 23 February 1995 was filed out of time. Part of it covers ground already traversed in the affidavit of 11 December 1992 and appears to be an attempt to overcome possible evidentiary deficiencies in the earlier affidavit. The affidavit annexes a number of accounting and business records of Ripoll and certain other documents including some received by Mr Wayland in his capacity as receiver. With two minor exceptions, all these documents, so Mr Coles informs me, have been discovered. While it is regrettable that this affidavit was not filed and served in accordance with the timetable, I do not think it should be excluded. Many of the annexed documents could have been tendered in the trial in any event. Mr Hamilton accepts that, to the extent that a response is required by Mr Humphreys, the work can be undertaken as part of his report responding to Mr Wayland's affidavit of 11 December 1992. Accordingly, I propose to allow this affidavit to be read, subject to any proper objections on evidentiary grounds. Related Matters At one point Mr Hamilton did suggest the possibility of a peremptory order for costs against the respondents. To the extent that the respondents' failure to comply with court directions has increased the costs that otherwise would have been incurred by the applicant, my present view is that the respondents should meet those costs. However, there is insufficient evidence to quantify the additional costs (if any). While I appreciate that the applicant is labouring under a financial burden in the conduct of these proceedings, I think the question of costs is best dealt with at a later stage. I have indicated that there may be a need for the applicant's legal representatives to confer, in particular, with Mr Humphreys, as well as take further instructions from Mr Poignand. The course of the trial is such that Mr Humphreys will not be required to give evidence until at least Wednesday 22 March 1995. I shall not be sitting in this matter, because of other court commitments, on Tuesday 21 March 1995. If Mr Hamilton considers it necessary, I would be prepared to consider an application not to sit on Monday 20 March 1995. This should provide sufficient time to confer with Mr Humphreys, or to make up for any time required to deal with the matters to which I have referred earlier in these reasons. Finally, in reaching the conclusions I have, I have taken into account the fact that these proceedings are of critical importance to the group represented in these proceedings. As Mr Hamilton has said, some may face financial ruin if they fail. Moreover, they have incurred an additional financial burden by the necessity for a retrial. (In saying this, I do not minimise the significance and cost of the proceedings to the respondents.) I am also conscious that, as French J. observed in Bomanite Pty Ltd v Slatex Corp Aust, at 392, "[n]on-compensable inconvenience and stress on individuals are significant elements of modern litigation". Costs orders do not necessarily compensate for increased pressures or anxiety created by a failure to adhere to court directions. It is necessary to balance the procedural requirements attending the preparation and conduct of litigation with the need for flexibility to take account of human error and the exigencies of complex litigation: Bomanite Pty Ltd v Slatex Corp Aust, at 392. The conclusions I have reached reflect the balancing process. Conclusion For the reasons I have given, and subject to the opportunity for Mr Hamilton to apply for a short adjournment of the proceedings to overcome possible difficulties in preparation. I propose to allow the six affidavits to be read. Mr Hamilton will have the opportunity to make any proper objections on evidentiary grounds. I certify that this and the preceding 12 pages are a true copy of the Ruling of the Honourable Justice Sackville. Associate: Dated: 13 March, 1995 Heard: 9 March, 1995 Place: Sydney Decision: 10 March, 1995 Appearances: Mr J. Hamilton QC and Mr N. Francey, instructed by Blessington Judd, Solicitors, appeared for the applicant. Mr B. Coles QC with Mr D. Robinson and Mr M. Ashhurst, instructed by Holmes & Bevan, Solicitors, appeared for the respondents.