Craig v Johnson (No 6)

1. [1]

   These proceedings, commenced in November 2016, concern allegations of negligence on the part of the defendants who are partners in a firm of solicitors, Johnson Winter Slattery (JWS). The allegations arise out of litigation conducted for the plaintiffs by JWS in the Commercial Division of this Court in 2011 and 2012 (the Commercial Proceedings). In issue was the rights to and ownership of printing technology called the Memjet technology. Those proceedings ended with a judgment against the plaintiffs and an order that they pay the defendants’ costs. The plaintiffs allege that JWS failed to give them proper advice in relation to an offer of settlement made by the defendants in the Commercial Proceedings and as a result the plaintiffs lost the opportunity to settle the case on more favourable terms than those that ensued.

2. [2]

   In May 2020 these proceedings were listed for a five-week hearing to commence on 21 June 2021. On day eight of the days set aside for trial, the plaintiffs seek leave to rely on further affidavit evidence of Mr Dowart.

3. [3]

   This application has been made against a background of many failures by the plaintiffs to comply with timetables for service of evidence, a whole scale repleading of the case in December 2018 and a number of failed applications and failed attempts to obtain leave to appeal those failed applications. There have been 37 directions hearings and other procedural and interlocutory hearings between early 2017 and June 2021. A number of these were necessitated by delay, disorganisation and sometimes vacillation on the part of the plaintiffs.

4. [4]

   The week of 21 June 2021 was set aside for the parties to finalise tender bundles and deal with objections to evidence because orders made requiring the plaintiffs to do this before the trial had not been complied with. There were many valid and conceded objections taken by the defendants to the evidence sought to be relied upon by the plaintiffs.

5. [5]

   Included in the evidence relied upon by the plaintiffs was an August 2018 affidavit of a New York solicitor, Frederick Dowart, regarding certain aspects of the Commercial Proceedings. Mr Dowart had a role in the Commercial Proceedings as a director of various entities (“the Kaiser Parties”) which were defendants to those proceedings and held a large share of the Memjet technology and with whom the plaintiffs settled before the final hearing of the Commercial Proceedings.

6. [6]

   On the evening of 27 June 2021, the day before the plaintiffs were to open their case before me, the further affidavit of Mr Dowart was forwarded to the solicitors for JWS with the proposal that leave would be sought to rely upon that further affidavit. That affidavit would introduce material in the form of unattributed American tax documents obtained from the internet purporting, in some unclear way, to “value” the companies associated with the Memjet technology.

7. [7]

   Mr Archibald on behalf of the plaintiffs argued that I should grant leave to rely on the late affidavit and adjourn the proceedings if necessary to provide the defendants with an opportunity to meet the evidence. The defendants opposed leave being granted and opposed any adjournment of the proceedings.

8. [8]

   On 1 July I refused leave and refused to adjourn the proceedings. These are my reasons.

Procedural History

1. [9]

   Proceedings were commenced on 3 November 2016 and initial case management was conducted by the Registrar during 2017 and early 2018.

2. [10]

   The matter was referred to me in May 2018 to deal with various notices of motion filed by the plaintiffs. One was seeking access to privileged documents produced on subpoena by the solicitor for some of the defendants in the Commercial Proceedings, (the “Silverbrook Parties”). That application was heard by me in June 2018 and dismissed: Loretta Craig & Ors v Anthony Johnson & Ors [2018] NSWSC 1539. An application for leave to appeal was filed in respect of that decision, but in May 2019 that application was withdrawn on the morning of the hearing, with indemnity costs.

3. [11]

   The plaintiffs then, just a few weeks after withdrawing their appeal, filed another subpoena seeking in effect the same documents that had already been ruled by me to be privileged. The defendants filed a notice of motion to set aside that subpoena. The subpoena was set aside as an abuse of process with an order that the plaintiffs pay the defendants costs forthwith: Loretta Craig & Ors v Anthony Johnson & Ors [2020] NSWSC 423. My decision to set aside the subpoena was also the subject of an application for leave to appeal. This was dismissed with costs payable forthwith on 5 November 2020: Craig v Johnson [2020] NSWCA 278.

4. [12]

   In late 2017 the plaintiffs filed a notice of motion seeking “separate determination of liability and quantum”. The order sought was amended on 24 May 2018 to more accurately describe the order sought as:

5. [13]

   On 28 May 2018 after hearing some of the argument I took the view that in the absence of affidavits and/or statements of the evidence that was to be called at trial, it was not possible to make an informed decision about the appropriateness of granting the separate question application. The notice of motion was adjourned part heard with detailed orders regarding service of evidence. The plaintiffs were required to file and serve their lay witness statements on liability by 5 July 2018 and the notice of motion was stood over part heard to 6 September 2018.

6. [14]

   The plaintiffs did not comply with that order and on 31 July 2018 application was made for extension of time to comply. I extended time to 10 September 2018 with an associated guillotine order and adjourned the hearing on the separate question to December 2018.

7. [15]

   Amongst the material filed and served by the plaintiffs in that period was an affidavit sworn Frederick Dowart of 22 August 2018.

8. [16]

   The plaintiffs’ case was substantially repleaded in the Further Amended Statement of Claim filed in December 2018.

9. [17]

   On 22 February 2019 I made directions vacating the order that the defendants file their evidence by 22 February 2019 because the plaintiffs’ position with service of their evidence was still not complete. The defendants’ evidence was served later in 2019 in compliance with my orders.

10. [18]

    On 20 December 2019, I made case management orders that included that the plaintiffs were to file and serve lay witness statements in reply addressing issues of liability by 24 February 2020.

11. [19]

    On 3 April 2020 the separate question hearing was resumed and judgment reserved. On 22 April 2020 the application was dismissed: Loretta Craig & Ors v Anthony Johnson & Ors [2020] NSWSC 430.

12. [20]

    At the directions hearing before me on 13 May 2020 Mr Lalji of Shine Lawyers appeared for the plaintiffs, I made a series of final orders regarding the filing and service of evidence and fixing the date for hearing including:

13. [21]

    In July 2020 Mr Lalji ceased to act for the plaintiffs.

14. [22]

    On 27 October 2020 the plaintiffs filed a notice of motion seeking a variation of the May 2020 orders to allow service of evidence by the plaintiffs up to February 2021, to permit service of overseas subpoenas and to grant leave to issue subpoenas to Optus and Telstra.

15. [23]

    Only the third proposed order was pressed and that was decided on the papers in February 2021: Craig v Johnson (No.4) [2021] NSWSC 81.

16. [24]

    On 23 November 2020, because of the plaintiffs attempts to file various affidavits and other documents in breach of the timetable and without leave, I made the following order in Chambers:

17. [25]

    On 8 March 2021, in the context of hearing and determining an application for the plaintiffs to be permitted to issue subpoenas, (given they no longer had a solicitor acting, leave was required) I made the following order:

18. [26]

    No such approach or application was made. The liberty to apply order remained in place throughout 2020 and 2021 but was not utilised.

19. [27]

    Between 8 March 2021 and 21 June 2021, counsel for the parties appeared before me on three occasions, 17 March 2021, 7 June 2021 and 15 June 2021 at directions hearings convened by the Court. Nothing was raised by counsel for the plaintiffs regarding any need for further affidavit evidence from Mr Dowart.

Principles

1. [28]

   Obviously I must, in deciding whether to allow the plaintiffs to rely upon the very late further evidence of Mr Dowart, determine that application bearing in mind s 56 of the Civil Procedure Act 2005 (NSW):

2. [29]

   Section 57 of the Civil Procedure Act is also a relevant consideration, particularly given the extensive management this case has had between 2017 and June 2021.

3. [30]

   It is now four and a half years after the proceedings were commenced which concern legal advice given in 2013, over seven years ago.

4. [31]

   I must of course always follow the dictates of justice:

5. [32]

   Section 59 of the Civil Procedure Act is also pertinent:

6. [33]

   On the question of whether the Court should grant an adjournment to allow the new material to be addressed, reliance was placed by counsel for the plaintiffs, Mr Archibald, upon the decision of the High Court in Sali v SPC Ltd 116 ALR 625; 67 ALJR 841; [1993] HCA 47 (“Sali”) and Frugtniet v State Bank of New South Wales [1999] NSWCA 458 (“Frugtniet”).

7. [34]

   In Sali, the majority comprising Brennan, Deane and McHugh JJ said:

8. [35]

   I note also the relevant observations of Toohey and Gaudron JJ at pp 848-849:

9. [36]

   The decision of the New South Wales Court of Appeal in Frugtniet is an application of those principles in a case where the applicants for the adjournment had sought a number of earlier adjournments and the trial judge had taken the view that the matter should proceed and no further adjournment permitted. The majority, Handley JA with whom Mason P agreed, decided the trial judge was correct:

10. [37]

    Beazley JA, (as she then was), in dissent but broadly agreeing as to principles said this at [85] – [89]:

Submissions

1. [38]

   Mr Archibald argued that the material was not new to the defendants, it having been appended to the affidavit of Mrs Craig served in August 2018. The affidavit annexed material comprising business records already disclosed to the defendants so there was no prejudice.

2. [39]

   Second, the plaintiffs were self-represented from July 2020 and still made conscientious efforts to obtain the relevant evidence and some latitude, he implied, should be extended.

3. [40]

   Third, until the Court determined the separate question issue in April 2020, the plaintiffs were entitled to refrain from spending money on obtaining evidence on the question of assessment of damages which may not have been necessary to obtain, emphasising that the plaintiffs, as pensioners did not have the necessary financial resources to pursue that kind of material or to retain an expert.

4. [41]

   Fourth, the material sought to be tendered is “the most cogent evidence of the book value of the Memjet companies as at the date of the offer” and if it is not allowed to be admitted into evidence, the plaintiffs will have “virtually no evidence” to present to the court regarding quantum or assessment of damages.

5. [42]

   Fifth, any prejudice to the defendants could be addressed by an adjournment to allow the defendants time to address the material and the Court should grant an adjournment so that can occur. This is the type of extraordinary case where the Court ought to consider that the interests of justice will not be served if it refuses an adjournment.

6. [43]

   In response, Mr Lloyd SC pointed out that first, it was not correct to assert that if Mr Dowart’s affidavit is excluded, the plaintiffs do not have evidence to lead on the question of assessment of damages. The plaintiffs’ Summary of Heads of Damage document sets out multiple different methods of calculation of loss, at least three of which did not rely on any of the material from the June 2021 Dowart affidavit.

7. [44]

   Second, the Court has made guillotine orders on two occasions requiring evidence of this type be served by the plaintiffs. The first was made on 24 May 2018, requiring evidence be served by 31 July (extended on 31 July 2018 to September 2018) requiring the plaintiffs to file and serve “all lay witness statements upon which they intend to rely addressing the issues on liability” and providing that if evidence is not served in accordance with that order, leave to rely upon it will be required and will only be granted if exceptional circumstances are demonstrated. Mr Dowart’s June 2021 evidence goes to the liability of the defendants and so should have been served in 2018.

8. [45]

   Even if it was correct to argue that Mr Dowart’s evidence is limited to “damages assessment” only, there was a further guillotine order made on 13 May 2020 which applied clearly to liability evidence and to both lay and expert affidavit evidence as to damages, and required that material to be served by 30 October 2020.

9. [46]

   The June 2021 affidavit of Mr Dowart seeks to establish the provenance of documents exhibited to Mrs Craig’s 2018 affidavit that was the subject of valid objection by the defendants, and also purports to give new evidence about matters only partly referred to in Mr Dowart’s 2018 affidavit.

10. [47]

    The plaintiffs need to establish exceptional circumstances warranting a grant of leave in order to be allowed to rely on the affidavit. The matters raised in oral and written submissions do not establish exceptional circumstances.

11. [48]

    As a matter of principle the court should bear in mind what the High Court said in Aon Risk Services Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [94] in the context of late amendment to pleadings that a matter to bear in mind was whether a party has “had a sufficient opportunity to plead his or her case”. Applying that principle to the circumstances here, the question is whether the plaintiffs have had sufficient opportunity to prepare and file and serve their evidence. Clearly, they have.

12. [49]

    Third, and importantly, the material in the late affidavit is likely to cause prejudice to the defendants particularly in regard to the matters raised in paragraphs 4(e), 6, 9, 13 and 14 all of which introduce matters the defendants have had no opportunity to investigate, as well as the new material set out in paragraph 15.

13. [50]

    Further prejudice arises from the very late basis upon which the material seeks to establish the provenance of documents, which although circulated in the proceedings, were not the subject of proof and therefore not on the footing of evidence that was admissible in the proceedings.

14. [51]

    In all the circumstances the Court should not permit reliance upon this new material at this very late stage. The defendants would be seriously prejudiced by any adjournment of the proceedings, given they have been on foot for four and a half years and involve allegations of negligence against a firm of solicitors where the defendants have prepared for and are ready for a trial that was set down over 12 months ago.

Consideration

1. [52]

   As I have noted, Part 6 of the Civil Procedure Act requires me to make orders to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56. The dictates of justice must also be considered and s 58(2) of the Civil Procedure Act sets out the relevant considerations. This is not a particularly difficult or complicated case. Although there is some complexity associated with the necessary preparation of evidence to support the counterfactuals the plaintiffs needs to prove to show they have lost a chance of some value, this has been an obvious requirement from the beginning. Also obvious is that any affidavit evidence must be in admissible form. It is no answer to say that some of the material was known to the defendants from prior litigation or from earlier deployment of the material in this case when it was put to the defendants in a form that was inadmissible.

2. [53]

   The purview of Mr Dowart’s potential evidence was obvious in 2018. If an appropriate way to place the Memjet companies’ American tax and financial information before the Court was via Mr Dowart, that should have been done in 2018, although I draw no conclusion that that would necessarily have been an appropriate way for that material to have been proved.

3. [54]

   The plaintiffs have not prosecuted these proceedings with expedition. Their conduct has caused many delays. The opportunity to obtain the material has been long. There have been multiple further opportunities to raise any issue about the completeness or otherwise of the evidence at the many directions hearings, or to avail themselves of the liberty to apply order that remained in place for the last 18 months in circumstances where there has been judicial case management since early 2018.

4. [55]

   Mr Archibald suggests that injustice has been caused to the plaintiffs because the material is necessary to advance the damages case. In my view, and based on my understanding of the evidence thus far, the plaintiffs’ case on damages can and does rely upon other methods of calculation set out in the Further Amended Statement of Claim, as articulated in the opening submissions and as set out in the Schedule of Loss and Damage provided to the Court on 29 June 2021. Those other methods do not rely upon the material appended to Mr Dowart’s affidavit. In no way does a refusal to allow the June 2021 affidavit of Mr Dowart mean that the plaintiffs cannot proceed with their case. Even if it did, the plaintiffs have had four and a half years to obtain, collate, file and serve the relevant evidence. I do not consider a refusal to allow reliance upon this further affidavit, this late, to be unjust.

5. [56]

   On the other hand, to allow the late service would cause significant injustice to the defendants. They have waited some years for the plaintiffs to at last complete service of their evidence so that they could file and serve their own evidence in response. It would be unfair to now have to re-prepare the case based on this last-minute material. To adjourn the proceedings to allow time for that to be done simply visits an injustice on top of that unfairness.

6. [57]

   These five weeks were set aside for the trial in March 2020 after many hours of judicial case management. It concerns allegations of negligence and misrepresentation made against a firm of solicitors where the partners have been separately named and the proceedings have been before the Court for over four and a half years.

7. [58]

   The defendants’ legal representatives have cooperated with the Court processes. There has been timely compliance with orders on all occasions. They have assisted with the provision of evidentiary bundles and Court books in an orderly and helpful fashion, including when, on occasion, it became evident that the plaintiffs were not in a position to prepare such material. They have provided helpful submissions at all stages. They have supplied helpful pre-trial documents such as schedules of objections and a well-indexed and chronologically presented tender bundle of some 13 volumes as well as a detailed trial plan. They have behaved as model litigants.

8. [59]

   Whilst there is no doubt that the defendants had at their disposal more litigation support resources than the plaintiffs, and at times the plaintiffs were without a solicitor to assist, it is still the case that the defendants did everything within their power, to my observation, to facilitate a just, quick and cheap disposal of the proceedings. The plaintiffs did not.

9. [60]

   It would in my view be unfair to the defendants to allow late service of material and then add to that the prejudice by adjourning the long-awaited trial, in all likelihood for at least another 12 months. Justice would not be served by permitting that to occur.

10. [61]

    Nor would justice be served by wasting the five-week hearing date set aside on the basis that the trial can simply be adjourned to occupy another five weeks of Court time next year. This would be a waste of Court resources now, and then impinge on the available Court resources for other litigants next year. The dictates of justice tell strongly against admission into evidence of the 28 June 2021 affidavit of Mr Dowart and the plaintiffs are not permitted to rely upon it.