Barescape Pty Ltd & Anor v Bacchus Holdings Pty Ltd & Anor

Judgment 1Two questions are before me, the first whether the Defendants should be permitted to amend their Defence and the second whether the Cross-Claimant should be granted leave to tender additional documents. If such leave is granted, it is also necessary to deal with a number of objections raised by the Cross-Defendants to the tender of particular documents. Cross-Defendants' amendment application 2The Cross-Defendants seek leave to amend their Defence to the Amended Cross-Claim to plead ratification. The Amended Defence to the Amended Cross-Claim would include a further paragraph 34 as follows: 34. In further answer to paragraph 28-30, the Cross-Defendants say: (a) At all material times, since February 2009 Bacchus Holdings Pty Limited and Mr Higgins knew that the Longworth House business (as that term is defined in the Amended Cross Claim) would: (i) operate in the market for functions; and (ii)operate as a tapas bar. (b) Mr Higgins and Bacchus Holdings Pty Limited consented to the second cross defendant, Mr Ventura, operating and having a financial interest in, the Longworth House business as a function centre and tapas bar; (c) Mr Higgins gave that consent when he was fully informed of the material facts concerning the operation of the Longworth House business; and (d) By giving that consent, Mr Higgins and Bacchus Holdings Pty Limited have ratified, waived and/or excused any fiduciary breach by Mr Ventura or Barescape Pty Limited in relation to setting up or operating the Longworth House business up to the time of consent. 3That paragraph is more expansive than the Defence to the Amended Cross-Claim previously served on 13 June 2011, which relevantly pleads specific assistance to Longworth House in respect of a single function and pleads that Mr Ventura: "having discussed the matter with the sole director of the cross claimant and having obtained his approval, sought to foster a working relationship of mutual co-operation and referral with Longworth as part of a strategy to reduce the operating costs of the partnership business". 4The Cross-Defendants contend that the amendment is not strictly necessary because the material facts have already been pleaded, and seek to rely on particulars of the Amended Defence to the Amended Cross-Claim provided on 16 September 2009. The Cross-Defendants also contend that the question of ratification, or at least informed consent, has been in issue at least since the Plaintiffs' Outline of Submissions was served with the Court Book. Paragraph 11(f) of that outline identifies the issues for determination in the Cross-Claim as "the extent of Mr Higgins' consent" and paragraph 12(a) refers to the principle that a partner may operate a competing business with the consent of his or her partners as "central to the determination" of the issues raised by the Cross-Claim. 5The Cross-Claimant vigorously opposes the proposed amendment and relies on the principles in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27. The Cross-Claimant contends that the application is brought on the 16 th day of the hearing after principal witnesses had already given evidence; submits that the cross-examination of Mr Ventura and the evidence of Mr Higgins has been conducted on the basis that the pleaded defence set out in paragraph 3 above was the only answer to the breach of fiduciary duty claims; and contends that the Cross-Claimant would be prejudiced if the Cross-Defendants are now permitted to amend their Defence to raise fully informed consent, ratification, waiver and/or excuse. 6The Cross-Claimant contends that the question of consent was not made known in advance so that Mr Ventura could have been tested on the veracity of the alleged "disclosure" and the case has been conducted "on a completely different basis". I cannot accept this submission since, in my view, both parties had treated informed consent as a significant issue in the proceedings. I note that: The particulars on which the Cross-Defendants rely to support the allegation of informed consent refer to documents already in evidence and to evidence given in Mr Ventura's and Mr Higgins' affidavits and Mr Ventura's cross-examination. The Cross-Claimant itself treated the question of informed consent as in issue in its Outline of Submissions filed prior to the hearing, identifying the fact that the Cross-Defendants "say that they obtained the informed consent of the Cross-Claimant to their actions", identifying a factual dispute as to the extent of information disclosed by Mr Ventura to Mr Higgins and submitting that information was not in any event sufficient to establish fully informed consent. The key witnesses for the respective parties, Mr Ventura and Mr Higgins, each gave affidavit evidence going to the issue of informed consent. Mr Ventura was examined in chief and extensively cross-examined as to the conversations said to give rise to informed consent, for example, T 133.5-133.29 (Mr Higgins' inspection of Longworth House); T 134 (conversations with Mr Higgins as to Longworth House); T 190-193 (what Mr Ventura told Mr Higgins as to use of Longworth House); T 196 (whether Mr Ventura told Mr Higgins Longworth House would not compete with Bacchus restaurant); T 241 (what Mr Ventura disclosed as to size of functions to be held at Longworth House); T 242-243 (discussions as to Mr Higgins taking interest in Longworth House); T 251-252 (whether Mr Ventura had Mr Higgins' authority to refer functions to Longworth House in anticipation of opening of upstairs bar at Bacchus Restaurant); T 264 (discussions as to Mr Higgins involvement at Longworth House). In my view, this cross-examination was directed to the wider issues raised by the opening submissions and the affidavit evidence, and the Cross-Claimant has not been deprived of an opportunity to cross-examine as to those issues and have done so. 7I am required to exercise my discretion whether to allow the amendment having regard to the provisions of ss 56-58 and 64 of the Civil Procedure Act 2005 (NSW). Section 58 requires the Court to have regard to the dictates of justice when considering an order for the amendment of a document and requires the Court to have regard to the provisions of ss 56 and 57. Section 56 identifies the overriding purpose of the just, quick and cheap resolution of the real issues in dispute in the proceedings and s 57 requires proceedings to be managed having regard, inter alia, to the just determination of the proceedings. Section 64(2) provides, subject to s 58, for all necessary amendments to be made for the purpose of determining the real questions raised by the proceedings. 8I am satisfied that it would be in the interests of justice, having regard to those provisions, to permit the amendment which reflects the factual basis on which the parties have put submissions, affidavit evidence and conducted cross-examination, namely that the extent of the information disclosed by Mr Ventura to Mr Higgins and Mr Higgins' alleged consent to Mr Ventura's involvement in Longworth House have always been in issue: see, for example, Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 90 at 517 - 518; Dare v Pulham (1982) 148 CLR 658 at 664; Banque Commerciale SA, en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286-287; ASIC v Sydney Investment House Equities Pty Ltd [2008] NSWSC 1224 at 1697ff. 9Accordingly, I grant leave to the Cross-Defendants to file an Amended Defence to the Amended Statement of Cross-Claim in the form marked MFI 23, on the basis of the usual order that the Cross-Defendants pay any costs thrown away by the amendment. Grant of leave in respect of additional documents for tender 10As noted above, the Cross-Claimant seeks leave to tender additional documents that were not included in the original Court Book. The discretion whether to grant that leave is to be exercised by reference to s 56-58 of the Civil Procedure Act to which I have referred above: see, for example, Beattie & Sutherland v Osman (No 3) [2009] NSWSC 824 for a case in which the late tender of documents was not permitted. 11First, the Cross-Claimant seeks leave to tender an additional volume of documents contained in Court Book Volume 12. Those documents were served on 5 August 2011 in circumstances that Bergin CJ in Eq's direction as to service of Court Books had required their service by 3 August 2011 and the first two days of the hearing had been taken up by interlocutory argument rather than oral evidence. I cannot see any prejudice to the Cross-Defendants from the slight delay in service of this folder and, to the extent that leave is necessary for tender of this volume notwithstanding its late service, I grant this leave. 12Even if there had been a longer delay in service of this folder, I do not consider the Cross-Defendants would have established substantive prejudice from the tender of these documents where the relevant functions were listed in Appendix C to the report prepared by the accounting expert retained by the Cross-Claimant which, on the evidence before me, had been considered by Mr Ventura when received and where the relevant documents largely originated from the First Cross-Defendant's discovery or from documents produced by Mr Pelosi, who is involved in the management of Longworth House, on subpoena. 13Second, the Cross-Claimant seeks leave to tender a second volume of documents which have been extracted from thirteen folders of documents which had been provided shortly before the recommencement of this hearing on 5 September 2011. The reduction in the volume of documents sought to be tendered reflects a process of review undertaken by the Cross-Claimant which has substantially reduced the volume of documents to be tendered and has also substantially addressed concerns which I had previously expressed as to duplication in the documents to be tendered and the volume of those documents and the consequent risk of prejudice to the Cross-Defendants. 14The Cross-Defendants resist the tender of the additional documents on the basis that the documents were not served in accordance with the Court's orders for service of the Court Book. Bergin CJ in Eq made orders on 16 February 2011 requiring the delivery of a Court Book containing the evidence by 3 August 2011. The thirteen volumes of documents initially proposed for tender, and the single volume now proposed for tender, were not included in the Court Book in compliance with that order. 15The Cross-Defendants also resist the tender of the additional documents on the basis that the documents were not put to Mr Ventura or Mr Pelosi and they have been given no opportunity to analyse the documents. However, many of the documents were produced by the Cross-Defendants on discovery or by Mr Pelosi on subpoena; the reduction of the volume of documents sought to be tendered from thirteen volumes to one significantly reduces any difficulty in analysis of them; and the Cross-Defendants will have sufficient time to investigate the documents since the hearing will not now recommence until the New Year. 16The Cross-Defendants also contend they have difficulties with the documents because the Cross-Claimant's discovery is incomplete. I do not think it necessary or appropriate for me to reach a finding as to whether that complaint is justified because, in any event, additional documents have been produced on subpoena and notice to produce throughout the hearing and the Cross-Defendants will have sufficient time to assess them prior to the recommencement of the trial. 17The Cross-Defendants contend they are prejudiced because the documents sought to be tendered show the revenue earned at Longworth House on particular nights but not the revenue earned by Bacchus Restaurant on the corresponding night, which the Cross-Defendants contend should be set-off in calculating any equitable compensation recoverable against them. That is a matter which will need to be addressed in a final judgment, but I do not understand it to give rise to prejudice to the Cross-Defendants because, if they are correct in this proposition, the likely result is that the Cross-Claimant will fail to establish a claim for equitable compensation having failed to provide an evidentiary basis for a critical integer in the calculation of that compensation. To the extent that relevant documents are held by Mr Siderovski or Ms Bender, the Cross-Defendants have also had and continue to have the opportunity to require their production by subpoena or notice to produce which they have exercised. 18The Cross-Defendants also contend that issues arise from the need to authenticate documents and prove they are business records. I do not consider this provides a reason to reject the documents in their entirety. I address specific objections to the tender of these documents below. 19The Cross-Defendants contend that they should not be required to possibly reopen their case to meet a late documentary tender and that their witnesses should not be subject to further cross-examination after the Cross-Claimant's witnesses have been cross-examined. However, any disadvantage arising from this possibility is mitigated by the fact that the documents are sought to be tendered in the Cross-Claimant's case in chief and the Cross-Defendants have the ability to call evidence in reply as of right and by the fact that the documents sought to be tendered (from which the documents now sought to be tendered is a much smaller selection) were served prior to the recommencement of the hearing on 6 September. 20I consider that it is in the interests of justice that I grant leave to tender the additional documents, subject to the particular objections which I will address below, so as to allow a determination of the Cross-Claim on its merits having regard to relevant evidence, and I do not consider the matters to which I have referred above establish prejudice to the Cross-Defendants by the course which cannot be addressed by an appropriate order as to costs. 21Accordingly, I grant leave to tender Volume 12 of the Court Book and the folder labelled Cross-Claimant's Documents from Court Book Volumes 18-30, subject to the rulings as to particular objections noted below, and on terms that the Cross-Claimant pay any additional costs incurred by reason of the lateness of the tender, including the Cross-Defendants' costs of review of the thirteen folders of documents to which I referred in paragraph 13 above. That order as to costs was, properly, not opposed by the Cross-Claimant. Particular objections 22The Cross-Defendants also object to the tender of particular documents. As a matter of convenience, I directed the Cross-Defendants to articulate those identifications by filing written submissions to which the Cross-Claimant has responded. The Cross-Claimant criticised the scope of the Cross-Defendants' submissions as outside the scope of the leave given by the Court on 12 October 2011. I did not consider that leave to be limited to the question of authenticity only, as distinct from associated issues of relevance or discretionary exclusion under s 135 of the Evidence Act 1995 (NSW) and, in any event, I consider it preferable to address the objections which have been raised on their merits. The Cross-Defendants also rightly point out that the Cross-Claimant bears the onus of establishing that the documents which it seeks to tender are admissible and the Cross-Defendants need not positively establish that the document is inadmissible. I proceed on that basis, although I note that the question of onus would rarely be of any practical significance in respect of questions of admissibility of documentary tenders. 23I should first make some brief comments in respect of the question of authenticity, which has been raised in objections to several of the documents tendered before me. Section 48 of the Evidence Act permits a party to adduce evidence of the contents of a document by, inter alia, tendering the document. Section 51 of the Evidence Act abolishes the principles and rules of the common law that relate to the means of proving the contents of documents. Section 57 of the Evidence Act in turn provides that, whether evidence is relevant depends on the court making another finding (including a finding that the evidence is what the party claims it to be), the court may find that the evidence is relevant if, inter alia, it is reasonably open to make that finding. Section 183 of the Evidence Act provides that, if a question arises about the application of a provision of the Evidence Act in relation to a document, the court may examine the document and draw any reasonable inferences from it as well as from other matters from which inferences may properly be drawn. 24In National Australia Bank Ltd v Rusu (1999) 47 NSWLR 309; [1999] NSWSC 539 at [26], Bryson J observed that Evidence Act s 51 does not abolish the need to prove that a document tendered is the document which it purports to be and Evidence Act s 41 does not authorise adducing evidence merely by tendering a document in the absence of any evidence establishing what the document is. In NSW Crime Commission v Trinh [2003] NSWSC 811 at [14], Hidden J pointed to the distinction between authenticity of documents and accuracy of documents and distinguished Rusu on the basis that the argument relating to casino records sought to be tendered before him was concerned with accuracy rather than authenticity. 25The position was helpfully summarised by Austin J in Australian Securities & Investments Commission v Rich (2005) 216 ALR 320 as follows: [116] It would be absurd, according to Bryson J in Rusu (at 315), for the law to dispense on a general basis with the need to prove the authenticity of a document, for that would "put the court entirely in the hands of whatever a document which a party chose to tender purported to be, subject to whatever opportunity another party had of overcoming its apparent effect". On the other hand, it is important not to set the bar too high for the authentication of documents, because if too much is demanded, the authentication requirement will fight against the policy underlying the business records provisions which, as Hope JA remarked in Albrighton (at 548), is "of great importance in the search for truth". That policy recognises that any significant organisation depends for its efficiency upon the keeping of proper records, to be used and relied upon in the everyday carrying on of the activities of the business and therefore likely to be accurate, and "likely to be a far more reliable source of truth than memory": Albrighton at 548-9 per Hope JA; see also Australian Law Reform Commission, Interim Report on Evidence , Report No 26, vol 1, at [709]. It is reflected in the terms of s 69, which makes hearsay representations in business records admissible without requiring evidence from their authors. [117] The law responds to these competing concerns in a commonsense way, bearing in mind the distinction between authentication and the weight or probative value of the documents. In Rusu , Bryson J did not deny that inferences may be drawn from the document itself, relevant to the question of authenticity. Apart from s 58(1), there is express statutory authority to do so in s 183, when a question arises about the applicability of a provision of the Evidence Act. But Rusu insists on the need for authenticity to be established, and asserts that authentication cannot be achieved solely by drawing inferences from the face of the document where there is no other evidence to indicate provenance. The other cases do not deny these propositions, in my opinion. [118] Hidden J's reasoning in Rinh , distinguishing between authenticity and accuracy, identifies part of a wider distinction, between matters of authenticity going to the adducing of evidence, and matters going to the credibility and weight of documentary evidence once it has been authenticated and judged admissible. Authentication is about showing that the document is what it is claimed to be, not about assessing, at the point of the adducing of the evidence, whether the document proves what the tendering party claims it proves. As I shall explain, some of the defendants' criticisms of the tendered documents, made under the rubric of authentication, are better seen, upon analysis, as going to credibility and weight. [119] Although a simple way of authenticating a document is by evidence from its creator, or someone who superintends the maintenance of business records that include it, Rusu does not lay down that authentication by such means is necessary. On the other hand, Rusu establishes that there must be something more than the mere tender of the document itself, where the tender is contested. I respectfully adopt his Honour's approach and will apply it below in respect of particular categories of documents. 26The Cross-Defendants object to the tender of compact discs which are said to contain MYOB data from Longworth House and from Bacchus Restaurant. I did not understand the Cross-Claimant to press the tender of the MYOB data from Bacchus Restaurant at this point, although I understood that they may seek to tender that data when expert evidence is led in the proceedings. At this stage, without clearer evidence as to the source of the information contained on the compact discs in respect of Longworth House and the manner in which they have been prepared, I consider that the authenticity of the information contained on those discs has not been established, notwithstanding Mr Ventura's involvement with Longworth House. I do not admit those discs in the absence of further evidence to establish the authenticity of the information contained in them. 27Objection is taken to handwritten documents contained in Court Book Volume 27 pp 3278-3280 which relate to the Berriman/Milgate wedding, and similar objections are taken in respect of other documents of a similar character. These document contained an event booking details form for a function and handwritten notes which seem to have been prepared in preparation for the function. It appears those documents have been produced either by the Cross-Defendants on discovery or by Mr Pelosi on subpoena. I consider that the documents are business records of Longworth House on their face and are admissible under s 69 of the Evidence Act . 28The Cross-Defendants contend that these documents are not relevant because the Court does not know what they are, the point in time at which they were prepared or what ultimately happened in respect of the event, and cannot draw any inference of what transpired in respect of the event, or alternatively that they should be rejected under s 135 of the Evidence Act . I do not consider that these matters warrant the rejection of the evidence, although I accept that they may be material to whether the evidence should be given any substantial weight. In particular, it may be difficult to draw any inference that a function had proceeded in a particular manner or a particular number of persons had attended it merely because there is an event booking form which indicates that a function had initially been booked for a particular number of persons, because common experience would suggest that functions could be cancelled or modified and the number of persons who attend them could be reduced or increased. Nonetheless, I consider that the documents should be admitted, on the basis that any issue as to what inferences can properly be drawn from them is a matter for final submissions. 29Objection is taken to Court Book Volume 27 pp 3281-3290 and 3292-3294 which also relate to the Berriman/Milgate function in substantially the same basis. It appears those documents have been produced by the Cross-Defendants on discovery and by Mr Pelosi on subpoena. The Cross-Defendants additionally submit that it would be unfair to admit the documents as proof that 66 people rather than 70 people or some other number, attended the function when they had not been "authenticated" or put to any witness. 30So far as the question of authenticity is concerned, I consider that it is reasonably open to make a finding of authenticity (i.e. that documents are what they purport to be) where those documents appear to be booking or function records of Longworth House and appear to have been maintained by Longworth House in the ordinary course of its business; those documents have been produced by the Cross-Defendants on discovery or Mr Pelosi on subpoena; and there has been no suggestion in any evidence filed in the proceedings, including that of Mr Ventura and Mr Pelosi, that such documents are not created and maintained in a regular and appropriate fashion. In my view, these documents have the character of business records and are admissible under s 69 of the Evidence Act ; and the fact that they are or may be draft documents does not warrant their exclusion under s 135 of the Evidence Act , although it may prevent an inference ultimately being drawn from them as to the number of persons who ultimately attended a function, as distinct from the number of persons who were expected to attend the function when the documents were prepared. I consider these documents are otherwise admissible as business records and I do not consider the matters raised warrant their exclusion under s 135 of the Evidence Act , although they may be relevant to the weight to be given to them if the ultimate question were the number of persons who attended the function. 31Objection is taken to Court Book Volume 27 p 3297 on the basis that, even if the Court infers that it is a file note of a booking conversation, it has no relevance to the question of what actually occurred at the function. This document was produced by Mr Pelosi on subpoena. I consider that the preferable course is to admit the document subject to relevance, recognising that the question of the inferences which may properly be drawn from it is a matter for submission. 32Objection is taken to Court Book Volume 30 pp 3643-3646 (Linda and Clint's function, produced by the Cross-Defendants on discovery or by Mr Pelosi on subpoena); 3668-3670, 3676-3677, 3679-3680, 3681-3683 (Brooke and Michael's function); 3686-3689, 3696-3704, 3727-3722, 3734-3736 (Jessica and Radley's function, produced by Mr Pelosi on subpoena); 3751-3752 (Yolanda and Ian's function, produced by the Cross-Defendants on discovery and by Mr Pelosi on subpoena); 3792-3794, 3783-3787, 3801-3802, 3809-3813 (Ashlee and John's wedding, produced by Mr Pelosi on subpoena); 3929-3932, 3955-3956 and 3959-3962 on essentially the same bases of authenticity, relevance and that the relevant documents are draft in character or at least that their final character has not been established. I consider that it is reasonably open to find that the documents are authentic and relevant for the reasons noted above, that they are admissible as business records and that the basis for discretionary exclusion under s 135 of the Evidence Act is not established. Accordingly, those documents should also be admitted. 33Objection is taken to documents in Court Book Volume 12 pp 2-7, 30, 36- 39, 44-50, 63, 66-68, 77-80, 110-113, 116 and 121 on essentially the same basis. I consider that these documents should be admitted on the same basis, although again there may be an issue as to the extent to which inferences as to what ultimately occurred at a function can properly be drawn from them, which is a matter for submissions. Orders 34Each party has had a measure of success and costs of the argument should be costs in the cause. I direct the parties to bring in Short Minutes of Order to give effect to this judgment.