New South Wales Supreme Court CITATION : Cathy Joy McAuliffe v Commonwealth of Australia [2007] NSWSC 178 HEARING DATE(S) : 05/03/07 JURISDICTION : Equity Division Commercial List JUDGMENT OF : Einstein J EX TEMPORE JUDGMENT DATE : 5 March 2007 DECISION : Hearing dates vacated. Plaintiffs to pay indemnity costs of and occasioned by vacated hearing. CATCHWORDS : Practice and Procedure - Commercial List - Vacation of final hearing dates - Costs - Indemnity costs LEGISLATION CITED : Civil Procedure Act 2005 (NSW) Cathy Joy McAuliffe (First Plaintiff) PARTIES : Michael John McAuliffe (Second Plaintiff) Commonwealth of Australia (Defendant) FILE NUMBER(S) : SC 50150/04 COUNSEL : Mr R Newell (Plaintiffs) Mr J Stevenson SC, Mr E Muston (Defendant) SOLICITORS : Robert Tricca & Associates (Plaintiffs) Minter Ellison (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST Einstein J Monday 5 March 2007 ex tempore Revised 6 March 2007 50150/04 Cathy Joy McAuliffe v Commonwealth of Australia JUDGMENT AM 1 These proceedings have some history, having been commenced in late 2004. The final hearing was fixed on 4 August 2006 to commence today. 2 It is unnecessary to repeat the record. Suffice it to say that the proceedings are brought by the plaintiffs against the Commonwealth of Australia. 3 The plaintiffs seek to recover damages by reason of the wrongful termination of a contract between the parties for the provision of dog training services by the plaintiffs to the defendant. 4 An important development in relation to this litigation was the 15 December 2006 statement of the defendant's position on liability whereunder the following appears: "(1) The defendant does not contest the question of its liability in relation to its obligations under the consultancy agreement dated 7 September 2001 (referred to in paragraph C3 of the amended summons) ("the agreement") regarding dog and handler active response training courses 4 and 6 to 10 and two dog only active response courses. (2) The defendant will not assert in these proceedings that it was entitled to terminate the agreement. (3) The defendant accepts that the plaintiffs are entitled to such damages as will place them in the position they would have been in had the defendant not terminated the agreement and had the plaintiffs and the defendant performed the agreement in accordance with its terms (which terms, the defendant contends, included an agreement that the plaintiffs would not be obliged to provide and the defendant would not be obliged to pay for course 5)." 5 In consequence, subject only to some isolated issues, the vast bulk of the hearing today would have concerned what is the appropriate amount of the plaintiffs' damages, often called quantum. It is not necessary to presently refer to the one or two areas in respect of which the parties had a continuance of an issue, generally referred to as liability, which have been referred to in the transcript of counsel's address this morning. 6 At the commencement of the hearing Mr Stevenson SC applied from the Bar table for orders that the plaintiff not be entitled to rely upon certain very recent materials served upon the defendant or in the alternative, for orders vacating the final hearing and seeking indemnity costs of and occasioned by any such vacated hearing. 7 The gravamen of the application concerned the service upon the defendant on Friday morning of a report by Mr Katehos of Furzer Crestani Services, the author being a person with accounting qualifications, and on Friday evening at 5.27pm, of an affidavit of Mrs Cathy Joy McAuliffe dated 2 March 2007. 8 The gravamen of the application has been that the late affidavit and report represent materials which, as is clearly the case, fall outside directions previously given for service of evidence, and further, in a fashion which is intertwined with one another, purport as part of the plaintiffs' case, to present evidence on the critical issue in the case, namely what is the proper measure and quantification of damages. 9 Mr Stevenson has, from the Bar table, made plain that both in the view of counsel as well as their instructing solicitor, it is simply impossible for the defendant to commence with their main cross-examination, which will be of Mrs McAuliffe, without themselves having a proper opportunity to deal with the additional material, assisted by having their own expert, Mr Grieves, prepare an affidavit/report in response and by having an opportunity by notice to produce, to require that the plaintiff produce a number of documents of relevance to matters to be found in the new report and the new affidavit. Most particularly those matters are to be found in the new accountant's report in the assumptions regarding AQIS expenses, as well as in some other areas of that report, and in the new affidavit in the schedule of facts said to be relevant to the assessment of AQIS related business expenses. 10 The Court accepts that on Mr Stevenson's instructions, Mr Grieves has indicated that he will not be in a position to prepare an affidavit in response to these materials until Thursday of this week, which would be, had the case been to proceed this week, the fourth of the estimated five days for hearing. 11 The Court further accepts Mr Stevenson's statement that he should not be placed in the invidious position of being required to cross-examine Mrs McAuliffe prior to being able to have to hand as ammunition during his cross-examination, the net result of Mr Grieves' further report and an appropriate response to a notice to produce which is proposed to be served in relation to the new materials. 12 Mr Newell, in seeking to defend the application, has essentially submitted that the character of the new materials to be found in the report and in the affidavit are not of otherwise than a 'de minimis' nature, bearing in mind the materials which would otherwise be before the Court. [use of the words 'de minimis' is only my own]. Notwithstanding that submission Mr Newell, on being asked several times why, in that event, it is necessary or seen to be necessary by the plaintiffs to rely upon the additional material, has made clear that the plaintiffs do seek to rely upon that material. This is of course the acid test of the forensic significance of the new materials for present purposes. 13 During the morning the Court has closely examined with both sides of the Bar table all the possibilities open to the Court, for the simple reason that the Court is obviously disinclined in the extreme, to vacate the final hearing unless it is absolutely necessary to do so in the interests of fairness to one of the parties. It is unnecessary, it seems to me, to do otherwise than to refer to the provisions of Pt 6 of the Civil Procedure Act 2005 which now enshrine the overriding purpose of the Act and the rules of the Court as being to facilitate the just, quick and cheap resolution of the real issues in the proceedings. 14 Sections 56 through to 58 inclusive set out the objects of case management and the requirement that in deciding whether to make any order or direction for the management of proceedings, including an order granting an adjournment, the Court must act in accordance with the dictates of justice. 15 Subsection (2) of section 58 makes clear that for the purpose of determining what are the dictates of justice in a particular case, the Court must, inter alia, have regard to the provisions of sections 56 and 57 and may have regard, inter alia, to the degree of injustice which would be suffered by either or both of the respective parties as a consequence of any order or direction and to the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities as well as the degree of difficulty or complexity to which the issues in the proceedings give rise. 16 The annotation to section 58 to be found in Ritchie's Uniform Civil Procedure NSW at 58.35, includes the relevance of the consideration as to the intangible prejudice that may arise from a party being exposed, inter alia, to unanticipated changes in the nature of the claim, to which I would add the materiality of new evidence to be called at the last minute. 17 Notwithstanding Mr Newell's submissions directed to suggestions as to the manner in which the defendant's senior counsel could proceed in his cross-examination of Mrs McAuliffe, it is clearly the call and the call only of the cross-examining party to determine what are the steps to be taken through the cross-examination. In the present environment Mr Stevenson has submitted, and I accept, that on his instructions and on his own preparation for the cross-examination, it would be invidious and unfair to require him to proceed with the cross-examination of Mrs McAuliffe in the present situation. 18 That being the case, the principled exercise of the Court's discretion is quite clearly to accede to the application that the hearing should be vacated. In acceding to that limb of the application, it is to be taken as read that as part and parcel of the vacated hearing, the plaintiffs will indeed be entitled to rely upon this new material, but the hearing date will be vacated subject to such orders as to costs as will follow further submissions to be made this afternoon. 19 Sometimes a Court faced with the application made today may take the view that the strictures of the Act and the way in which the Commercial List is operated and the fact that there are other long lines of litigants awaiting court hearing time, should really mandate that the Court simply not grant the leave to rely upon the additional evidence. Whether the Court does or does not grant leave to rely upon late evidence, but on condition, is always itself conditioned by the interests of justice. 20 Notwithstanding the time that it has taken for this matter to come before the Court my own view is that the principled exercise of the discretion and the requirement that justice be afforded to both parties mandates the plaintiffs being entitled to rely upon this further evidence subject, as I say, to whatever regime with respect to costs will come forward after the Court hears submissions from counsel. 21 For those reasons the hearing date will be vacated and the Court stands down until 3 p.m. today the hearing of further submissions as to what costs regime should accompany the vacation of the hearing date. 3 PM On costs 22 For reasons given this morning, the final hearing of these proceedings has been vacated. The matter remaining for decision concerns the application by the defendant for an order that the defendant's costs of and occasioned by the vacated hearing date be paid on an indemnity basis by the plaintiffs. The principled exercise of the Court's discretion is clearly to accede to the defendant's application in that regard. The reasons follow. 23 The materials before the Court on the application have included an affidavit by Mr Robert Tricca of 5 March 2007, Mr Tricca being the solicitor for the plaintiffs in the proceedings. Mr Stevenson SC has briefly cross-examined Mr Tricca on that affidavit. 24 The context in which the application for indemnity costs has to be considered is the case management approach taken by the Commercial List judge in the management of Commercial List proceedings. As is well known and recorded by practice notes and the practice, the Court proceeds in case managing proceedings up to and including a final hearing date nomination on the basis of carefully prepared directions for the taking of the next steps by the material parties. The profession, certainly wherever solicitors and barristers are concerned and retained, are expected to well understand the significance of paying the closest of attention to the directions which are to be given, whether by consent, or after argument on occasion by direction outside of the consent of one or even of both parties. It is of the essence to the system that parties be held accountable for a failure to comply with directions. A failure to comply with a direction, which in due course, for reasons such as presently face the Court, leads to a hearing date being vacated, is no small matter. What is at issue is the loss of the time suffered by other litigants awaiting the Courts attention. 25 In the present circumstances it is clear from the materials before the Court that from time to time during the period of the giving of case management directions in these proceedings, there have been communications between the parties concerning the possibilities that the appropriate course at some level may be to have an expert appointed or a referee appointed to hear certain matters. What is however quite clear from all of the evidence before the Court on the costs application, is that the parties have never agreed, and certainly and critically did not agree at the time when the proceedings were fixed for hearing on all issues on 4 August 2006, that there be any separate regimes for the treatment of any of the issues and in particular for the treatment of so much of quantum as may have at times seemed appropriate for reference out.. 26 On the 4 August date the directions given obliged the defendant to serve any affidavit and expert evidence on which it intended to rely on or before 18 August 2006 and obliged the plaintiffs to serve any evidence in reply on or before 1 September 2006. On a later occasion, namely 29 September 2006, the direction extended the time by which the plaintiffs could serve their expert evidence to 20 October 2006. 27 Although as at 29 September, the parties had exchanged draft short minutes of order, one of which forms of short minutes of order did anticipate an order being made by way of a reference to Mr Rodney Ferrier of Ferrier & Associates for inquiry and report of matters concerning issues as to net profits set out in a schedule, that proposal was not furthered on that day. 28 In the circumstances, the lead up to this final hearing has involved the service by the defendants of its lay and expert evidence and the service by the plaintiffs of the materials which they proposed to rely upon. 29 The occasion for the application to vacate the hearing date was referred to in the judgment given this morning and it is unnecessary to repeat it. The salient fact is that the position facing the Court this morning has been that the plaintiffs pursued a suggested entitlement to rely upon Mrs McAuliffe's latest affidavit and the latest expert's report of Mr Chais Katehos of Furzer Crestani Services, Forensic Accountants. It is common ground that no leave has ever been given to the plaintiff to rely upon these materials out of time in terms of the directions. 30 Mr Newell of Counsel has endeavoured to submit that in some manner of looking at the case management procedures and the correspondence leading up to the final hearing, the Court should infer that there has been a common understanding that materials of an expert nature could be, even at this late stage, referred out to a referee or dealt with otherwise than in a first tranche hearing. 31 It is as clear as clear can be that any application for any such form of bifurcated final hearing must require a formal decision by the Court, usually such decision to be sought prior to the commencement of the final hearing. 32 The notion that parties can prepare for a final hearing expecting at the final hearing to learn, for the first time, that the hearing is to deal with certain issues only and not with other issues, and that one can justify that form of approach by a reference to various communications from some time anterior, where the party seeking to have that form of accommodation has never formally and before the final hearing pressed its application to conclusion, is totally misconceived. 33 The Courts orders are as follows: Orders made in Court: 1. Order that the plaintiffs pay on an indemnity basis all costs of the defendant of and occasioned by the vacated hearing date. 2. Order that the proceedings be before the list judge on Friday, 9 March 2007 for the purpose of her Honour giving directions and if practicable giving a new hearing date. Orders made in Chambers 3. Grant leave to the plaintiffs to file in court the affidavit of Cathy Joy McAuliffe sworn on 2 March 2007 and the report of Mr Katehos date 2 March 2007. 4. Order that the plaintiffs pay the costs of the external transcription of the hearing of the application on 5 March 2007. 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.