SUPREME COURT OF QUEENSLAND CITATION: Tynan & Anor v Filmana Pty Ltd & Ors (No 2) [2015] QSC 367 PARTIES: DAVID PATRICK TYNAN and JUDITH GARCIA TYNAN (plaintiffs) v FILMANA PTY LTD ACN 080 055 429 (first defendant) AND ANNA-MARIA SCIACCA (second defendant) AND PHILIPPO SCIACCA (third defendant) FILE NO/S: BS No 5923 of 2012 DIVISION: PROCEEDING: Trial Application DELIVERED ON: 21 December 2015 DELIVERED AT: Brisbane HEARING DATE: 13 August 2015 JUDGE: ORDER: Burns J The orders of the court are that: 1. Save for any document that is the subject of a valid claim for legal professional privilege, the plaintiffs produce for the defendants inspection by 1 February 2016 any documents: (a) That are directly relevant to the allegations made in paragraphs 11 to 14 of the Defence and paragraphs 6 to 9 of the Reply; (b) Recording communications in the period from 16 November 2011 to 5 April 2012 between: i) The plaintiffs, their solicitors or their real estate agent and prospective purchasers of the property which is the subject of this proceeding, or between any of them; ii) The plaintiffs or their solicitors on the one hand and the real estate agent on the other hand concerning prospective
2 purchasers of the property which is the subject of this proceeding; or iii) The plaintiffs and their solicitors concerning prospective purchasers of the property which is the subject of this proceeding; that are directly relevant to the allegations made in paragraph 56 of the Fifth Further Amended Statement of Claim, paragraph 9 of the Defence and paragraph 4 of the Reply; 2. The application brought by the defendants and the cross-application brought by the plaintiffs be adjourned to a date to be fixed; and 3. Costs be reserved to the further hearing. CATCHWORDS: PROCEDURE DISCOVERY AND INTERROGATORIES DISCOVERY AND INSPECTION OF DOCUMENTS DISCOVERY OF DOCUMENTS ORDERS FOR FURTHER AND BETTER DISCOVERY whether orders for further disclosure should be made whether the disclosure sought was relevant to allegations in issue on the pleadings PROCEDURE JUDGMENTS AND ORDERS AMENDING, VARYING AND SETTING ASIDE OTHER CASES where the plaintiffs filed a cross-application to vary case flow orders where the defendants failed to comply with those orders in certain respects where the effect of the variation sought would be to vacate orders made for the mediation of the dispute where the plaintiffs also applied to have the matter set down for hearing whether there was utility in the parties attending a mediation in the circumstances whether the case flow orders should be varied Uniform Civil Procedure Rules 1999 (Qld) rr 149, 150, 211, 223. Banque Commerciale SA en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 Boz One Pty Ltd v McLellan (2015) 105 ACSR 325 Central Queensland Mining Supplies Pty Ltd v Colombia Steel Casting Co Ltd [2011] QSC 183 Filmana Pty Ltd & Ors v Tynan & Anor [2013] QCA 256 Filmana Pty Ltd & Ors v Tynan & Anor [2014] HCASL 131 Fuller v Toms & Ors [2010] QCA 283
3 COUNSEL: SOLICITORS: HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 Jowett v Federal Commissioner of Taxation (1926) 38 CLR 325 Mercantile Mutual Custodians Pty Ltd v Village/Nine Network Restaurants & Bars Pty Ltd [2001] 1 Qd R 276 Robson v REB Engineering Pty Ltd [1997] 2 Qd R 102 Thiess Pty Ltd v FFE Minerals Australia Pty Ltd [2007] QSC 209 Tynan & Anor v Filmana Pty Ltd & Ors [2013] QSC 32 UI International Pty Ltd v Interworks Architects Pty Ltd [2010] QSC 280 P Dunning QC with B Kidston for the plaintiffs B D O Donnell QC with M O Jones for the defendants Mahoneys for the plaintiffs Tucker & Cowen for the defendants [1] In October 2010, the plaintiffs agreed to sell their riverfront home at St Lucia to the first defendant for a purchase price of $7,000,000. Under the contract for sale, settlement was to take place 12 months later. By a separate deed, the second and third defendants guaranteed the performance by the first defendant of its obligations under the contract. [2] The first defendant failed to complete by the due date under the contract. In consequence, on 16 November 2011 the plaintiffs terminated the contract and reserved their rights. The property was subsequently marketed for resale and, after an unsuccessful public auction, it was sold by private treaty for $4,800,000. The resale contract was entered into on 5 April 2012 and completed on 30 May 2012. [3] The plaintiffs commenced this proceeding on 5 July 2012. On 26 February 2013, judgment was entered in their favour against the defendants with damages for breach of contract to be assessed. 1 The determination of the market value of the property at the date of termination is central to the assessment of those damages because the principal component of the loss claimed by the plaintiffs is the difference between the purchase price under the sale contract ($7,000,000) and the market value of the property as at that date. 2 To that end, registered valuers were retained on both sides to report their opinions. [4] On 1 May 2015, Atkinson J made various case flow orders. These relevantly required: 1 Tynan & Anor v Filmana Pty Ltd & Ors [2013] QSC 32. An appeal from this order was unsuccessful. (Filmana Pty Ltd & Ors v Tynan & Anor [2013] QCA 256) and an application for special leave was refused by the High Court of Australia on 6 August 2014 (Filmana Pty Ltd & Ors v Tynan & Anor [2014] HCASL 131). 2 The other components of relevance to this application are marketing expenses and legal costs.
4 The defendants to file an amended defence or any application for further disclosure by 21 May 2015; The registered valuers to meet in conclave by 11 June 2015 and then provide a Joint Experts Report by 10 July 2015; The plaintiffs to put forward a panel of mediators for the defendants selection by 24 July 2015; The defendants to agree to a mediator from that panel or, alternatively, put forward a panel of mediators to the plaintiffs for their selection by 31 July 2015; and The filing of a consent order for mediation by 6 August 2015. Her Honour also ordered that the mediation be completed by 30 August 2015 and, if unsuccessful, that a Request for Trial Date be filed by 30 October 2015. [5] On the same day that the case flow orders were made, the plaintiffs forwarded a panel of mediators to the defendants for their consideration. The defendants failed to respond, whether by selection of a mediator from that panel or by the provision of an alternative panel, by the date ordered (31 July 2015). As a result, the mediation ordered by Atkinson J did not take place and a consent order for mediation was not filed by 6 August 2015. The defendants also failed to file an amended defence or bring an application for further disclosure by 21 May 2015. [6] In the meantime, the valuers retained by the parties met in conclave on 7 June 2015 and finalised their joint report on 10 August 2015. The plaintiffs also filed an amended statement of claim on 15 June 2015. 3 [7] Although the defendants did not file an application for further disclosure by the date ordered by Atkinson J, they did file such an application on 23 July 2015. By it, the defendants seek disclosure of certain documents recording communications concerning prospective purchasers in respect of the resale of the property. In response, the plaintiffs filed a cross-application to vary the case flow orders in respects that, if allowed, will vacate the orders made by Atkinson J for a mediation of the dispute and instead bring about the setting down of the assessment of damages for trial. It is these applications that the court is asked to decide. Disclosure [8] Rule 211 of the Uniform Civil Procedure Rules 1999 (Qld) ( UCPR ) provides that a party to a proceeding has a duty to disclose to each other party every document in the possession or under the control of the first party that is directly relevant to an allegation in issue in the pleadings. 4 The defendants complain that the plaintiffs have not done so 3 The Fifth Further Amended Statement of Claim ( 5FASOC ). 4 UCPR r 211(1)(b).
5 and, accordingly, seek orders pursuant to r 223 UCPR requiring the plaintiffs to meet their obligation under the rules. In particular, the defendants seek disclosure of any documents recording communications in the period from 1 November 2011 to 30 May 2012 between: (a) (b) (c) The plaintiffs, their solicitors or their real estate agent and prospective purchasers of the property, or between any of them ; The plaintiffs or their solicitors on the one hand and the real estate agent on the other hand concerning prospective purchasers of the property or its resale or its sale price ; and The plaintiffs and their solicitors concerning prospective purchasers of the property or its sale price. [9] By r 223(4) UCPR the court may only order a party to a proceeding to disclose to another party a document or class of documents if (1) there are special circumstances and the interests of justice require it or (2) there appears to be an objective likelihood that the duty of disclosure has not been complied with. It is not submitted on behalf of the defendants that the classes of documents sought by them should be disclosed by reason of any special circumstances. Rather, it is submitted that the documents are directly relevant to allegations in issue on the pleadings and that, because they have not already been disclosed, there is an objective likelihood that the plaintiffs have not complied with their duty of disclosure. [10] It is also not submitted on behalf of the plaintiffs that there are no documents falling within one or other of the classes of documents sought by the defendants, and it is likely from the content of non-party disclosure obtained from the plaintiffs real estate agent that some such documents were brought into existence over the relevant period. Rather, save for one exception, the plaintiffs contend that none of the documents that are sought by the defendants could have any direct relevance to an allegation in issue on the pleadings. The exception concerns what are described as Refusal of Defendants Offer Documents. 5 These are documents relating to the allegations in paragraphs 11 to 14 of the defence which are responded to in paragraphs 6 to 9 of the reply regarding the making of an offer by the defendants on 16 March 2012 to purchase the property for $6,500,000, which offer was not accepted by the plaintiffs. [11] The defendants do not seek the disclosure of any documents recording or comprising communications between the plaintiffs and their solicitors that are the subject of a valid claim for legal professional privilege. In that regard, it is difficult to imagine that there will be any documents falling within the third category of documents sought by the defendants that are not the subject of a valid claim to legal professional privilege, particularly given the feature that litigation was anticipated during the period over which the disclosure is sought. But, for the purposes of this application, I proceed on the basis that it is possible that there are. 5 Plaintiffs Outline of Argument [7(a)].
6 [12] A document will be directly relevant to an allegation in issue if it tends to prove or disprove that allegation. 6 Here, the defendants contend that the documents which they seek are directly relevant to the following issues: A contention on the part of the defendants that certain aspects of the marketing process contributed to the low sale result with the consequence that the price achieved on resale is not a reliable measure of the true market value of the property at the date of termination ; 7 The reasonableness of the amount claimed by the plaintiffs as part of their damages for marketing costs; 8 and The reasonableness of the amount claimed by the plaintiffs as part of their damages for legal costs. The relevance of the resale price [13] Paragraph 53A of the 5FASOC alleges that, as at the date of termination (16 November 2011), the property had a fair market value of $4,800,000. The plaintiffs then go on to plead, in paragraph 60, that the property was resold for that precise amount on 5 April 2012. By paragraph 6 of the defence, the defendants deny the allegations contained in paragraph 53A of the 5FASOC and plead that the market value of the property was not $4,800,000 but, rather, $6,665,000 at the date of termination. The defendants also plead that the market value of the property at 5 April 2012 is of no relevance in assessing damages consequent upon the termination of the contract on 16 November 2011 but say, in the alternative, that the market value at that date was $6,665,000. By paragraph 3 of the reply, the plaintiffs join issue with the defendants on these allegations. [14] The defendants argue that, because the market value of the property is an issue in dispute on the pleadings, it follows that any documents which are directly relevant to that issue ought to be disclosed. 9 They contend that, to the extent that the price obtained on resale is to be relied on as an indicator of the market value of the property at the date of termination, that price was adversely affected by a number of factors. These are said to include shortcomings in the marketing process as well as, it is hypothesised, advice given to prospective purchasers about this litigation. 10 As such, they seek disclosure going to those matters. 6 Robson v REB Engineering Pty Ltd [1997] 2 Qd R 102, 105 (a decision which was concerned with the meaning to be ascribed to the direct relevance test prior to the commencement of the UCPR); Mercantile Mutual Custodians Pty Ltd v Village/Nine Network Restaurants & Bars Pty Ltd [2001] 1 Qd R 276, 282-3 [7]-[8] (Pincus JA); Central Queensland Mining Supplies Pty Ltd v Colombia Steel Casting Co Ltd [2011] QSC 183, [16]-[17] (Applegarth J). 7 Defendants Outline of Argument [5], [12]-[26]. 8 Ibid [8], [27]-[31]. 9 Ibid [14]. 10 Ibid [26].
7 [15] It is uncontroversial that the price obtained on resale may be taken into account in the determination of the market value of the property at the date of termination. 11 However, the defendants have pleaded that the resale is irrelevant to an assessment of the value of the property at the date of termination, 12 and such a pleading is perhaps unsurprising given what they contend to have been a low sale result. That, of course, does not mean that the plaintiffs are precluded from placing some reliance on the resale price to assist in the determination of the market value at the date of termination. However they, too, have disavowed any intention to do so. As against that, though, the defendants point to passages from the plaintiffs valuer in the Joint Experts Report that would seem to indicate that some reliance was placed by him on the resale price in the formation of his opinions. 13 Although the valuer stated with respect to the sales history for the property (including the resale) that he had put these sums aside, he proceeded to discuss the potential significance of that data, including an observation made by Rich J in Jowett v Federal Commissioner of Taxation 14 that [a] sale of the subject land, or of comparable land, affords the best means of arriving at the fee simple value of any land. I am therefore prepared to accept for the purposes of this application that the price obtained on resale might be relied on by the plaintiffs valuer, and thus the plaintiffs, in the determination of the market value at the date of termination. [16] But that does not determine the point. If it is to be contended that factors external to the physical or other attributes of the property had a deleterious effect on the price obtained on resale, such as shortcomings in the marketing process or the spectre of this litigation, then those allegations must be expressly pleaded. It is not enough in my view to say that, because the market value of the property is in issue, the presence or otherwise of all such external factors is in issue on the pleadings. To the contrary, if the defendants intend to run such a case on the assessment of damages, the plaintiffs are entitled to proper notice of the nature and degree of influence of the external factors that the defendants allege had a reducing effect on the resale price. [17] For the defendants, it was submitted that there was no need to plead such factors because they are evidence. I do not agree. They are material facts that must be pleaded if the defendants intend to run the case they identified on the hearing of this application. Moreover they are facts that, if not pleaded specifically, may take the other party by surprise. Both r 149(c) and r 150(4)(c) UCPR make the obligation to plead such facts abundantly clear. Those rules are an important part of the pleading regime under the UCPR. Not only do they aid the efficient disposition of proceedings, they ensure that procedural fairness is extended to an opposing party. 15 That will not be achieved unless a party advancing a positive case in circumstances such as these is required to plead it. As White J said in Thiess Pty Ltd v FFE Minerals Australia Pty Ltd, 16 a party cannot be expected to intuit what the [opposing party] intends to convey in its pleadings by its own understanding of the facts and circumstances giving rise to the litigation. Indeed, the fulfilment of the obligation to ensure procedural fairness may require a pleader to go 11 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640, 658-9 [39]; Boz One Pty Ltd v McLellan (2015) 105 ACSR 325, [164]-[166]. 12 Defence [6(c)]. 13 Ibid [126]-[129]. 14 (1926) 38 CLR 325, 329. 15 Banque Commerciale SA en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279, 286 (Mason CJ and Gaudron J); Fuller v Toms & Ors [2010] QCA 283, [19] (Fraser JA). 16 [2007] QSC 209, [38].
8 beyond an expression of the material facts that are strictly necessary for the claim, or defence. 17 [18] Here, none of the external factors on which the defendants, in part, base this application are pleaded. True it is that shortcomings in the marketing process are pleaded in response to the plaintiffs claim for reimbursement of the costs incurred in that process, but those allegations are not advanced in response to paragraph 53A of the 5FASOC. It follows that I am not satisfied on the first basis advanced by the defendants that the disclosure sought is directly relevant to an allegation in issue on the pleadings. Marketing costs [19] By paragraph 56 of the 5FASOC the plaintiffs allege that, in the period from 16 November 2011 to 5 April 2012, they incurred costs in the sum of $39,204 in relation to marketing the property for resale. Those costs then form part of the overall claim for damages expressed in paragraph 68 of the 5FASOC. [20] In their defence, 18 the defendants do not admit that the plaintiffs incurred $39,204 in marketing the property. 19 In the alternative, they plead that the expenditure of that money was not reasonably incurred. 20 Particulars are then provided in the pleading for the allegation that the expenditure was not reasonably incurred. These include that the marketing campaign was inadequate both as to the duration and extent of advertising for a property of the value and quality of the subject property, that the manner of advertising was inadequate in its duration, timing, content and reach, and that marketing the property for auction was an inappropriate method to sell the property. Furthermore, it is alleged that the appropriate method of marketing the property would have been to first attempt to market for sale by tender and then, after a reasonable time had elapsed, to attempt to market the property for sale with a listing price. [21] By paragraph 4 of the reply, 21 the plaintiffs deny that the marketing costs were not reasonably incurred. Further, the plaintiffs plead that it was unnecessary to market the property by tender in the first instance and otherwise by listing the property in order to have acted reasonably to mitigate their loss, that they put the property to auction in accordance with the advice of their real estate agent, that they undertook a substantial marketing and advertising campaign, that they incurred the marketing costs in undertaking that campaign, that the campaign was initially devised by their real estate agent, that the real estate agent had specialised skill and experience in the sale of riverfront property in Brisbane, that the campaign was reviewed by a reputable property valuation firm and then altered in consequence, that they thereafter conducted the campaign in accordance with the advice of that firm as well as their real estate agent and that they acted reasonably in incurring the marketing costs. 17 UI International Pty Ltd v Interworks Architects Pty Ltd [2010] QSC 280, [14]-[15]. 18 Filed on 16 October 2013. 19 Defence [9(a)]. 20 Ibid [9(b)]. 21 Filed on 6 January 2014.
9 [22] Thus, by the defence, the plaintiffs are put to proof of the amount claimed for marketing costs and, in the alternative, the defendants allege that those costs were not reasonably incurred for the reasons particularised. By their reply, the plaintiffs put those reasons squarely in issue. [23] For the defendants, it is submitted that the disclosure sought goes to the proof and reasonableness of the amount claimed by the plaintiffs for marketing costs. The plaintiffs, however, submit that the gist of the pleaded issue is that too little was spent, not too much 22 and that the disclosure sought is not likely to tend to prove that fact. To my mind, the allegations to which I have made reference are not so confined. They take in, not only the question whether the marketing campaign was expansive enough for the particular property, but also the manner in which it was conducted and the sales strategies that were employed. In addition, the over-arching allegation made by the defendants goes to the proof or, in the alternative, the reasonableness of the pleaded expenditure. As such they are entitled to disclosure which concerns that expenditure, including the nature of the marketing campaign that was conducted and whether the costs claimed were reasonably incurred. [24] I am satisfied after a review of the fruits of the non-party disclosure obtained from the plaintiffs real estate agent that there is an objective likelihood that documents in one or more of the categories set out in the defendants application, and which tend to prove or disprove the allegations that are put in issue by paragraph 56 of the 5FASOC, paragraph 9 of the defence and paragraph 4 of the reply, do exist. The plaintiffs will be ordered to make disclosure accordingly, subject to any valid claim to legal professional privilege over any such documents. The order will be limited to the period from the date of termination 16 November 2011 to the date on which the resale contract was entered into 5 April 2012. It will also be limited to disclosure that is directly relevant to the allegations I have just identified; it is not to take in the documents that were sought under the first basis advanced by the defendants, that is, with reference to paragraph 53A of the 5FASOC. Legal costs [25] The last basis on which disclosure is sought by the defendants is that it goes to the proof of the legal fees that the plaintiffs seek to incorporate in their damages claim. The difficulty is that the only legal fees which the plaintiffs seek to so incorporate have nothing to do with the resale. [26] By paragraph 55 of the 5FASOC, the plaintiffs allege that they incurred legal fees in the sum of $1,500 in relation to the Agreement. That Agreement is defined in paragraph 5 of the 5FASOC as the sale contract between the plaintiffs and the first defendant. Those fees then form part of the overall claim for damages expressed in paragraph 68 of the 5FASOC. So far as the resale is concerned, there had been a claim for legal fees in the sum of $4,500 but, by paragraph 62 of the 5FASOC, that claim has been abandoned. [27] It follows that because the disclosure sought cannot have any bearing on the legal fees that were incurred with respect to the original sale, this basis cannot be supported. 22 Transcript of hearing 1-24.
10 Directions [28] By the cross-application, the plaintiffs seek to vacate the directions made by Atkinson J on 1 May 2015 which had the effect of referring the dispute to mediation. At the time those orders were made, the plaintiffs opposed the referral but her Honour obviously considered that the dispute should be mediated, and there was no appeal. The plaintiffs also cross-apply for an order that the Request for Trial Date be dispensed with and that, in lieu thereof, the assessment of damages be set down for hearing. [29] So far as the mediation is concerned, the solicitor for the plaintiffs has sworn that his clients consider any further mediation to be a waste of time and money and that, for this reason, they do not wish to participate in a mediation and are, instead, desirous of the proceeding being listed for trial. 23 Although they do not seek to re-agitate the discretion which Atkinson J exercised on 1 May 2015, they point to the defendants failure to comply with the case flow orders concerning the selection of a mediator from the panel submitted to them by the plaintiffs on the day those orders were made in support of the submission that the defendants are, in effect, not genuinely interested in mediating the dispute. [30] On the other hand, the defendants maintain that there is still utility in a mediation, and submit that the prospects of that being a useful exercise have been enhanced by the finalisation of the Joint Experts Report. They submit that the plaintiffs have not identified any circumstance that has changed since Atkinson J referred the dispute to mediation as would justify vacating the orders made by her Honour. Although accepting that they had not complied with the case flow orders that were made to facilitate a mediation, they did (on the morning of the hearing) select a mediator from the panel submitted to them by the plaintiffs. [31] On balance, I am not persuaded that the orders referring this dispute to mediation should be vacated. Despite the plaintiffs protestations, this proceeding has evolved into a pure money claim. The Joint Experts Report may well have served to better define, if not narrow, the issues that stand between the parties. Although the failure of the defendants to comply with the case flow orders is concerning, without more I am not convinced that this is sufficient reason to vacate the orders. [32] At the hearing of these applications, the parties agreed that any decision regarding the order sought by the plaintiffs dispensing with a Request for Trial Date be deferred until the outcome of the defendants application for further disclosure was known. For the reasons I am about to express, that can conveniently be done when the further hearing of the applications comes before the court. Disposition [33] It will be ordered that, save for any document that is the subject of a valid claim to legal professional privilege, the plaintiffs make disclosure of any documents falling within one or more of the categories set out in the defendants application, which were brought into 23 Affidavit of John Forde filed on 10 August 2015, [17].
11 existence between 16 November 2011 and 5 April 2012 and which are directly relevant to the allegations made in: Paragraphs 11 to 14 of the defence and paragraphs 6 to 9 of the reply regarding the making of an offer by the defendants to purchase the property on 16 March 2012; or Paragraphs 56 of the 5FASOC, paragraph 9 of the defence and paragraph 4 of the reply regarding the marketing costs incurred with respect to the resale. [34] Directions will also need to be made for the filing by the defendants of an Amended Defence to the Fifth Further Amended Statement of Claim as well as the filing by the plaintiffs of an Amended Reply to that pleading. However, I shall hear the parties regarding a suitable timetable for the filing of those pleadings. At the same time, the applications will be set down for further hearing on the question of whether a Request for Trial Date should be dispensed with and also on the question of costs.