New South Wales Supreme Court CITATION : Hardy Bros (Earthmoving) Pty Ltd (in liq) & anor v Hardy Bros Civil Constructions Pty Ltd & ors [2008] NSWSC 1313 HEARING DATE(S) : 24 November 2008 JURISDICTION : Equity Division JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 24 November 2008 DECISION : Leave granted to rely on affidavits. CATCHWORDS : EVIDENCE – affidavits and statutory declarations – affidavits – application for leave to rely on several affidavits served out of time – relevant considerations – expert evidence – Uniform Civil Procedure Rules, r 31.28 LEGISLATION CITED : (NSW) Uniform Civil Procedure Rules, r 31.28 CATEGORY : Procedural and other rulings Hardy Bros (Earthmoving) Pty Ltd (first plaintiff) Alan Richard Nicholls (second plaintiff) Hardy Bros Civil Constructions Pty Ltd (first defendant) Hardy Bros Nominees Pty Ltd (second defendant) Robert Leslie Hardy (third defendant) Danny John Hardy (fourth defendant) PARTIES : Evelyn Hardy (fifth defendant) Lynette Hardy (sixth defendant) Leslie Angus Holmes (seventh defendant) John Keenan (eighth defendant) Holmes Keenan Turnell Pty Ltd (ninth defendant) LA Holmes Nominees Pty Ltd (tenth defendant) JP Keenan Nominees Pty Ltd (eleventh defendant) HKT Class Nominees Pty Ltd (twelfth defendant) FILE NUMBER(S) : SC 6867/04 COUNSEL : Mr P R Whitford SC w Mr J S McLeod (first-sixth defendants) Mr D R Pritchard SC w Mr D J Barnett (seventh-twelfth defendants) SOLICITORS : HWL Ebsworth (first-sixth defendants) TressCox (seventh-twelfth defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRERETON J Monday, 24 November 2008 6867/04 Hardy Bros (Earthmoving) Pty Ltd (in liq) v Hardy Bros Civil Constructions Pty Ltd & Ors JUDGMENT (ex tempore; application to rely on various affidavits; see transcript p 38) 1 HIS HONOUR: On 27 March 2008, the Court made directions limiting the time by which the first to sixth defendants ("the Hardys") were to serve all further evidence to 10 April 2008, and – subject to any application to restore the matter to the list with respect to the extent of the evidence of the seventh to twelfth defendants (the Accountants) – that the Accountants serve any further evidence by 21 May 2008. On 29 May 2008, I extended time for the Accountants' evidence to 16 June 2008. Ultimately, in the pre-trial directions made by consent in chambers on 11 November 2008, I directed that no party may read at the hearing without the leave of the Court any affidavit which had not been served by 18 September 2008. 2 At some time prior to 11 November 2008, the proceedings as between the plaintiffs and the Hardys on the one hand, and as between the plaintiffs and the Accountants on the other, were settled, and I have made orders this morning reflecting that settlement. What remains to be decided is the Hardys' cross-claim against the Accountants, whereby they seek contribution or indemnity in respect of the judgment in favour of the plaintiffs against them and, independently of that judgment, damages for loss said to have been suffered by them as a result of the Accountants' alleged breach of retainer, negligence and/or misleading and deceptive conduct. 3 The Hardys now seek leave to rely at the hearing on a number of affidavits, notwithstanding that they are served outside the time limited by the direction made on 11 November 2008. 4 The first three affidavits in that category are those of Dr Rodney Ferrier sworn 19 July 2007, 4 September 2008 and 19 November 2008. Dr Ferrier is an expert accountant who was qualified by the plaintiffs to give evidence of accounting practice to establish a case of breach of standards against the Accountants. The Hardys have themselves qualified an expert accountant, Mr Vince, to give evidence on the same subject matter. They now wish to rely on Dr Ferrier's evidence, rather than that of Mr Vince. Although initially it was objected that the Hardys ought not be permitted to call two experts on the same subject matter – and I should note that I would not necessarily have acceded to that objection, had it remained relevant – it is unnecessary to consider it because Mr Whitford SC for the Hardys has now made clear that, if leave is granted to rely on Dr Ferrier's affidavits then he will not seek to adduce the evidence of Mr Vince, so there will in fact only be one expert on the topic. Mr Pritchard SC, for the Accountants, has indicated that in that event he can point to no prejudice from the Hardys being permitted to rely on Dr Ferrier's affidavits of 19 July 2007 and 4 September 2008. 5 Accordingly, in so far as leave is necessary – and I am not to be taken as holding that leave is necessary in this respect – I would grant leave to the Hardys to rely on the affidavits of Dr Ferrier sworn 19 July 2007 and 4 September 2008, notwithstanding that they were served (if they were) outside the time permitted by the directions previously made. 6 That leaves Dr Ferrier's affidavit sworn 19 November 2008. It was not obtained by the plaintiffs, but has recently been obtained at the request of the Hardys. It addresses primarily the "solvency advice", being advice allegedly given by the Accountants to Messrs Baker & McKenzie in connection with an action brought by CGU for the winding up of the first plaintiff. It contains an expression of opinion as to what an accountant requested to provide advice in those circumstances ought to have done, and that in some respects the advice given by the Accountants in those circumstances departed from the appropriate standards. 7 (NSW) Uniform Civil Procedure Rules ("UCPR"), r 31.28(1), requires each party to serve expert reports on each other active party in accordance with any order of the Court; or, if no such order is in force, in accordance with any relevant practice note; or, if no such order or practice note is in force, not later than 28 days before the date of the hearing. An order was in force. On any view, it expired by 18 September 2008. The report was not served in accordance with that order. 8 UCPR, r 31.28(3), provides that except by leave of the Court or consent of the parties, an expert's report is not admissible unless served in accordance with that rule, and r 31.28(4) provides that leave is not to be given unless the Court is satisfied either that there are exceptional circumstances that warrant the granting of leave, or that the report concerned merely updates an earlier version of a report which has been served in accordance with r 31.28(1). 9 A report of Mr Vince dated 27 April 2007 was served on or about that time. Paragraphs 208 and following address issues surrounding the solvency advice. Paragraph 219 expresses an opinion not dissimilar from that expressed in Mr Ferrier's recent report. Paragraph 227 also expresses an opinion not dissimilar from that in Mr Ferrier's recent report. If leave is not granted to rely on Mr Ferrier's recent report, then the Court will be required to entertain two expert accounting witnesses in the Hardys' case, namely Mr Ferrier and, in so far as the territory is not covered by Mr Ferrier, Mr Vince. 10 The Accountants have available to them an expert accountant, Mr Ivey, who has, at least to some extent, already addressed this subject matter. It will be open to the Accountants to obtain further advice and opinion from Mr Ivy. 11 The question of the appropriateness of the solvency advice has for some considerable time plainly been an issue in these proceedings. I cannot accept that its recent articulation by Mr Ferrier is such as to give rise for the first time to the necessity to give realistic consideration to whether Baker & McKenzie should be joined as cross defendants to a cross claim for contribution. The possibility of claiming contribution from Baker & McKenzie will not be foreclosed if the issue is litigated in these proceedings – as it will be in any event. 12 As to whether or not the evidence of Dr Ferrier is admitted on this question, in my view, the circumstance that there is some – although I readily accept not complete – overlap of opinion between Mr Vince and Mr Ferrier; that Mr Vince has foreshadowed some of the opinions expressed by Mr Ferrier; that Mr Ferrier will be giving evidence in any event; and that giving leave will avoid the requirement for a second expert in this territory, supports the conclusion there are sufficient exceptional circumstances to warrant a granting of leave under the Rule. If it transpires, unlikely as I think it is, that Mr Ivey is unable to answer the relevant material, then the Accountants' position will be protected and I will in this respect, as in other respects to which I shall come, give due consideration to any adjournment that they might require to meet that evidence. 13 Accordingly, I grant leave to the cross claimant to rely on the affidavit of Dr Ferrier sworn 19 November 2008, notwithstanding that affidavit was served outside of the time limited by previous directions. 14 The second group of affidavits are those of Mr Alan Weeks sworn 7 April 2006, 23 July 2007 and 24 October 2008. Again, Mr Weeks is an expert valuer qualified by the plaintiff to express an opinion as to the value of the assets of the plaintiff and thus to inform the calculation of the "under-value" at which it was alleged that the assets were transferred by the plaintiff to the first defendant. The Hardys qualified Mr Vince for the purposes of giving a contradictory opinion. The Hardys now wish to rely, for the purposes of the cross-claim, on the evidence of Mr Weeks, and do not propose to call Mr Vince. 15 The Accountants did not qualify any expert on these issues, being content to rely on Mr Vince, to be called by the Hardys, to answer the plaintiff's claim. Unsurprisingly, they do not now wish themselves to call Mr Vince, a position readily understandable by his views on the liability aspect of the case, on which he expresses opinions favourable to the Hardys and unfavourable to the Accountants; moreover, he was, after all, retained in the first instance by the Hardys. In those circumstances I think it is quite reasonable that the Accountants do not themselves wish to rely on Mr Vince. 16 On the other hand, I do not consider that permitting the Hardys to rely on Mr Weeks prejudices the Accountants. The Hardys settled with the plaintiff, and now claim contribution in respect of that settlement. In those circumstances, it is a necessary part of their claim for contribution to establish the case the plaintiff might have established against them. For those purposes, they are plainly entitled to adduce against the Accountants evidence that the plaintiff would have adduced against themselves. Thus it is quite legitimate that they would want to rely on Mr Weeks. 17 With the exception of his report of 24 October 2008, Mr Weeks' evidence was served, though not by the Hardys, within the relevant time limits. I do not understand r 31.28 to have the effect of making inadmissible a report which has been served in accordance with that section if a party other than the party who has served it wishes to rely on it. In my view, there is nothing in r 31.28 which would render inadmissible the first two affidavits of Mr Weeks in Hardys' case. So far as the third affidavit, sworn 24 October 2008, is concerned it is a supplementary report arising out of the conclave of experts, and is apparently covered by r 31.28(4) as a supplementary or updating report. 18 There remains the question of prejudice to the Accountants arising from not having qualified their own expert. A party who makes a forensic decision not to qualify their own expert and to rely on a witness to be called by another party necessarily takes the risk that the other party, for one reason or another might not call that witness. That is a forensic judgment with which the party must live. In this case, the consequences of that are not likely to be far-reaching, as the Accountants have now retained an expert, one Mr Coleman, to provide a report in response to Mr Weeks, which is anticipated will be available, if not this week, then some time next week. Again, if that proves impossible, I will give due consideration to any application for an adjournment that the Accountants might require in order to be in a position to meet Mr Weeks' evidence. 19 In my view, leave should be given in respect of Mr Weeks' affidavits. I grant leave to the cross claimants to rely on the affidavits of Mr Weeks sworn 7 April 2006, 23 July 2007 and 24 October 2008, notwithstanding that the last of them was served outside the time limited by directions previously made in these proceedings for the service of evidence. 20 The next relevant affidavit is that of George Nowak, sworn 20 October 2008. Mr Nowak's affidavit was served on 22 October 2008. It is manifest that Mr Nowak is a material witness in the case, and that his evidence is relevant. On the one hand, it is notable that no satisfactory explanation has been given as to why evidence was not sought or obtained from him at any earlier stage. On the other hand, it is significant that the Accountants themselves apparently issued a subpoena to give evidence to Mr Nowak on 19 October 2008. It may well be that all parties assumed, until relatively recently, that Mr Nowak would not co-operate in providing an affidavit and would have to be subpoenaed. I do not know. 21 The question now is whether evidence which is plainly relevant from a material witness should be excluded on the basis that it would occasion prejudice. It seems that such evidence as Mr Nowak can give will be answered, if at all, by evidence from persons who are already witnesses in the Accountants' case in the proceedings. It is also of some significance on this issue that his evidence was served on 22 October 2008, some five weeks ago, which has provided a reasonable opportunity for the Accountants to position themselves to answer it. In those circumstances, I cannot see that any prejudice of significance is occasioned to the Accountants by the reception of Mr Nowak's belated evidence. 22 I grant leave to the cross claimant to rely on the affidavit of George Nowak sworn 20 October 2008, notwithstanding that it was served outside the time limited for service of evidence by directions made earlier in these proceedings. 23 The next affidavit is that of Sidarth Sondhi, sworn 11 November 2008, which was served on 14 November 2008. This affidavit suffers from the difficulty that it was served considerably later than Mr Nowak's affidavit, but from the relative advantage that it does little if anything more than explain notes and records of Mr Sondhi which will in any event be in evidence and admissible as business records. As the file notes that this witness will be in evidence in any event, it seems to me that his affidavit evidence occasions no significant prejudice and, indeed, at least gives the Accountants an opportunity to test evidence which might otherwise not have been able to be tested, if only in the form of business records. Mr Pritchard responsibly acknowledged that Mr Sondhi's affidavit evidence did not present a problem in itself, but only in so far as it underpinned Mr Ferrier's opinion evidence in respect of insolvency advice. 24 I grant leave to the cross claimants to rely on the affidavit of Sidarth Sondhi sworn 11 November 2008 notwithstanding that it was served outside the time limited for service as evidence previously made in these proceedings. 25 The final affidavit the subject of this application is that of Robert John Hardy of 21 November 2008. It is said to deal with the recent settlement between the Hardys and the liquidator, and to update the costs position presumably for the purposes of quantifying the claim for damages, at least in part. Mr Pritchard said that it was not prejudicial, although there was doubt as to its relevance. 26 In those circumstances, I will grant leave to the cross claimant to rely on the affidavit of Robert John Hardy sworn 21 November 2008, notwithstanding that it was served outside the time limited by earlier directions for the service of evidence, and I reserve to the appropriate time any argument as to the relevance of all or any part of it. ********** 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. 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