Bathurst Regional Council v Local Government Financial Services Pty Ltd [2011] FCA 1181 | Case summary | Zoe

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Bathurst Regional Council v Local Government Financial Services Pty Ltd [2011] FCA 1181 | Case summary | Zoe

[52]

REASONS FOR JUDGMENT 1 These reasons for judgment relate to my ruling on 13 October 2011 that a cross-claimant and cross-respondent, Chartis Australia Insurance Ltd (formerly known as American Home Assurance Corporation) (AHAC), be permitted to cross-examine witnesses insofar as its cross-examination does not relate to any matter in which the interests of AHAC are the same as the interests of Local Government Financial Services Pty Ltd (LGFS), except with leave first sought and obtained. 2 The relevant circumstances are as follows (albeit in an abbreviated form). LGFS, McGraw-Hill International (UK) Limited (known, for the purpose of these proceedings, as Standard and Poor's or S&P) and ABN Amro Bank NV (ABN Amro) are respondents to claims by a number of local councils. There are also various cross-claims in all three proceedings as between LGFS, S&P and ABN Amro. In addition, LGFS (again in all three proceedings) has cross-claimed against AHAC, LGFS's insurer, in respect of AHAC's denial of indemnity to LGFS. For its part, AHAC has cross-claimed against LGFS for the recovery of certain defence costs paid to LGFS. Accordingly, if LGFS is found liable in respect of any of the claims by the councils and LGFS (contrary to AHAC's claims) is entitled to indemnity under the contract of insurance, AHAC will thereby be exposed to liability. 3 Accordingly, AHAC contended that it should be permitted to cross-examine witnesses in the proceedings not only in respect of the issues in dispute between AHAC and LGFS but also in respect of the liability of LGFS to the councils. AHAC submitted that this approach would be consistent with principle on the basis that it would not duplicate any part of the cross-examination of LGFS. As it would be bound by any finding that LGFS was liable to any of the councils, and might thereby become liable to LGFS (if LGFS is held to be entitled to indemnity under the contract of insurance), AHAC submitted that the dictates of fairness required that it be permitted to cross-examine on the issue of LGFS's liability in the manner proposed. 4 Each of the other parties (excluding LGFS, which did not wish to be heard on the issue) submitted that AHAC should not be permitted to cross-examine any witness about matters relevant only to the liability of LGFS to the councils. In other words, their position was that AHAC's cross-examination should be limited to the issues as between AHAC and LGFS. 5 It is true that AHAC, in common with all of the parties, will be bound by the decision made in the proceedings as between the councils, LGFS, ABN Amro and S&P. Although no formal order has been made under Rule 15.13(d) of the Federal Court Rules 2011, AHAC acknowledged that the proceedings are being conducted on the common basis that all parties will be bound by the decision in respect of all claims and cross-claims. Rule 15.13(d) of the Federal Court Rules 2011 provides that a party to a cross-claim may apply to the Court for an order "determining the extent to which the cross-claimant, and a cross-respondent, are to be bound as between each other by an order or a decision made in relation to the principal proceeding or any other cross-claim in the proceeding". As AHAC noted, it follows from this that the question is the extent of AHAC's permitted participation in the "principal proceeding" (relevantly, for present purposes, as between the councils and LGFS) (see Rule 15.13(b) and (c)). This involves a question of discretion, albeit a discretion which is to be exercised in accordance with established principle. 6 The first observation that should be made is that I do not accept AHAC's characterisation of its interests, insofar as it might be liable as LGFS's insurer, as being similar to those of LGFS. Insofar as AHAC might be liable by reason of LGFS's liability, AHAC's interests are the same as those of LGFS. 7 In GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No 3) (1990) 20 NSWLR 15, Young J discussed the control of cross-examination. At 22-23 his Honour summarised his analysis of the state of authority in the following guidelines: (1) The only actual "right" is the right to have a fair trial. (2) It is the duty of the trial judge to ensure that all parties have a fair trial. (3) In carrying out his [or her] duties the trial judge must so exercise his [or her] discretion in and about the examination and cross-examination of witnesses that a fair trial is assured. (4) Ordinarily, a judge in carrying out his [or her] duty will see that the trial is conducted in the manner that is commonly used throughout the State, namely that witnesses are examined, cross-examined and re-examined. (5) Where there is more than one counsel for the same party, then ordinarily the judge will not permit any more than one counsel to cross-examine the same witness. (6) Where there are parties in the same interest, the judge will apply the same rule as stated in (5). (7) Where the issues are complex and there is no overlapping of cross-examination and the proposal is outlined before cross-examination begins, it may be proper for the judge to permit cross-examination of one or more witnesses by more than one counsel in the same interest notwithstanding prima facie rules (5) and (6). 8 In Canberra Residential Developments Pty Ltd v Brendas (2010) 188 FCR 140; [2010] FCAFC 125 the Full Court of the Federal Court at [44]-[46] observed that: [44] To understand how we have arrived at the view that the judge erred it is necessary to examine the rationale for the rule of practice preventing two counsel from cross-examining one witness. It can be traced back to the decision of Doe v Roe (1809) 2 Camp 280; 170 ER 1155. As Lord Ellenborough made clear, the rule is for the protection of the witness. He said (at 1156): "If this rule were not adhered to, a witness might be subject to the examination or cross-examination of as many barristers as were retained for the plaintiff or defendant, much time would be wasted, and great confusion would be introduced into proceedings at Nisi Prius". Put another way, the common law frowns upon cross-examination by multiple counsel because of the possibility of oppression: JD Heydon, Cross on Evidence (8th ed, Butterworths, 2010) p 627. [45] Naturally the common law rule is subject to reasonable exceptions. One exception arises from the changing nature of litigation. A common feature of modern commercial litigation is for counsel on one side of the record to split their trial preparation on a topic by topic basis. The conduct of the trial often follows this split with the judge permitting both cross-examination and submissions to be divided so that counsel can deal with his/her assigned topic: see eg Eva Pty Ltd v Charles Davis Ltd [1982] VR 515. This can be an extremely efficient way in which to conduct complex litigation. All the judge need do in such circumstances is ensure there is no unfairness to the witness: GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No 3) (1990) 20 NSWLR 15 at 22-23. [46] In this case, junior counsel said he would not ask questions on any topic already dealt with. That was sufficient to ensure that Mr Brendas was not burdened by unfair cross-examination. Indeed, at the trial the respondents conceded that if junior counsel were to continue the cross-examination it would cause no injustice. 9 The Full Court also noted that it was an error in that matter for the relevant provisions of the Evidence Act 1995 (Cth) not to have been considered. As explained at [48]-[50]: [48] One final point should be noted. Neither at trial nor on the appeal did the parties consider the cross-examination issue by reference to the Evidence Act 1995 (Cth). This was a mistake. The Evidence Act makes provision for cross-examination and imposes restrictions on the ability of a party to cross-examine an opposing party's witnesses. [49] Section 27 provides that a party may question any witness, except as provided by the Act. There are several restrictions on the right to cross-examine. For example, s 29(1) assumes that the court can direct a witness not to answer a question put in chief or under cross-examination. Further, s 41 relevantly provides in subs (1)(b) that the court must disallow a question if it is unduly annoying, harassing, intimidating, offensive, oppressive, humiliating or repetitive. Presumably the common law rule we have been discussing would fall under this head. [50] If the question whether junior counsel should be permitted to continue with the cross-examination of Mr Brendas had been argued by reference to the statute rather than the common law rules, it is possible that a different approach would have been called for. Under either s 29(1) or s 41 it may be that the party calling the witness bears the onus of showing that cross-examination is unfair or otherwise should not be allowed, which is in contrast to the common law where the onus is the other way. However, that is not an issue which need be disposed of in this appeal. 10 Insofar as the councils might have borne the onus of proving that the course proposed by AHAC was unfair and contrary to the interests of justice, they submitted that: - (i) LGFS is represented by senior and junior counsel and is fully contesting the councils' claims against it, (ii) any cross-examination by AHAC, accordingly, would necessarily involve duplication, if not in respect of the precise question, at least in respect of the issue of LGFS's liability, (iii) counsel for LGFS may be assumed to have made forensic decisions about cross-examination of witnesses on the basis of the issues as pleaded between LGFS and the councils, (iv) AHAC ought not to be permitted to cross-examine in the same interest as LGFS and, thereby, potentially to cut across the forensic decisions made by LGFS's counsel and with which the councils are prepared to contend, (v) there are no common issues as between AHAC and LGFS (on the one hand) and the councils and LGFS (on the other hand) and, as such, AHAC's right to a fair trial is secured by its capacity to cross-examine all witnesses on any issue relevant to the dispute as between AHAC and LGFS, and (vi) AHAC's proposed course is inconsistent with the overarching purpose of the civil practice and procedure provisions, which is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible (s 37M(1) of the Federal Court of Australia Act 1976 (Cth)). 11 Having regard to these matters, I do not accept AHAC's submission that the objection of the other parties (excluding LGFS) to the course it proposed was based only on considerations of efficiency, in circumstances where it has not been demonstrated that cross-examination by AHAC would materially increase the length of the hearing or otherwise be oppressive of any individual witness. It may be assumed that AHAC's proposed cross-examination would not involve any undue waste of time. Nevertheless, certain facts, as the submissions made by the other parties disclosed, weigh heavily against the course of action AHAC has proposed. First, LGFS is fully contesting any liability on its part to the councils. Second, LGFS is represented by senior and junior counsel. Third, insofar as LGFS might be liable to the councils, AHAC's interests (as noted above) are identical to those of LGFS. Fourth, each of the council witnesses is subject to cross-examination not only by LGFS but also by ABN Amro and S&P (in circumstances where cross-examination by each of the latter parties relates to its own direct interests as a respondent to the councils' claims and a cross-respondent to LGFS's claims). Once these circumstances are taken into account it is apparent that to adopt the course proposed by AHAC would be contrary to the interests of justice and unfair to the councils and the witnesses they wish to call. The interests of justice and fairness to all parties require that AHAC be permitted to cross-examine all witnesses insofar as that cross-examination relates to any matter in issue as between AHAC and LGFS but not otherwise except with leave being first sought and obtained. If there is any matter about which AHAC considers it should be permitted to cross-examine despite the matter relating only to the liability of LGFS to the councils then AHAC may apply for leave to do so on an issue-by-issue basis. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.