Evidence - Matters relating to proof - Order made under O 29 r 2(1)(c) and (d) concerning cartage dockets - Dockets to stand as evidence of tonnages carted without authors being called - Whether tonnages peripheral or central issue in action - Extent of discretion under O 29

Supreme Court Act 1935, s 167(1)(g)

Evidence Act 1906, s 79C

1 JUDGMENT OF THE COURT: This is an application for leave to appeal against an interlocutory order of a Master made under O 29 r 2 that when the action comes to trial copies of certain nominated documents be treated as evidence of certain stipulated facts. The substantive appeal against the decision was heard at the same time.

2 The first applicant ("Bristile") is a company that carries on business under the name "Metro Bricks". The second applicants ("Emmett" and "Clark" respectively) are the principal executive officer and the company secretary, respectively, of Bristile. A company called International Brick & Tile Pty Ltd ("IBT") carried on business as a brick manufacturer. Bristile holds some of the issued capital of IBT and had entered into a management agreement with, and was the manager of, the business activities of IBT. Emmett and Clark were also the directors of IBT.

3 The respondent is a company engaged in cartage contracting. In the period 1988 to 1992 it had business dealings with IBT which, it alleges, were conducted with Bristile as manager of IBT's business activities. The respondent entered into a contract with IBT to cart clay from various sites to IBT's plant. There was a separate contract for the respondent to extract and stockpile clay for IBT at various sites.

4 On 6 May 1992 a receiver and manager was appointed to the property and business of IBT. At the time the respondent was owed approximately $254,000 under the cartage and stockpiling contracts. At some time in 1993 IBT entered into a scheme of arrangement with its creditors as a result of which the respondent received approximately $52,000 against the debt owed to it by IBT. Initially, the respondent had declined to accept the cheque sent to it by the Scheme Administrator. However, it seems from the pleadings (par 13 of the statement of claim) that the respondent altered its position in that respect and accepted the cheque. The Scheme document is not before the Court but assuming it takes the conventional form the payment would have been in full satisfaction of the respondent's claim against IBT. This leaves a shortfall of around $202,000, which is the subject of the claim made by the respondent against the applicants in the action.

5 It is common ground that, because of the receivership, IBT is a company to which s 592 of the Corporations Law applies. This brings into play the insolvent trading provisions of the Law. The respondent alleges that Emmett and Clark (as directors of IBT) and Bristile (because it took part in the management of IBT) are responsible for the debts incurred by IBT to the respondent. Specifically, it is alleged that at the time the debts were incurred there were reasonable grounds to believe that IBT would not be able to pay all its debts as and when they fell due.

6 The applicants have denied that at any material time there were reasonable grounds to expect that IBT would be unable to pay all its debts as they became due. But they have gone further and have either denied or not admitted that the debts were incurred by IBT at all, or on the dates alleged.

7 In par 5(2) of the statement of claim the respondent pleads that the debt under the cartage contract was incurred by IBT when an instruction was given by IBT to carry out the work to which each invoice relates or alternatively when the work was carried out. The particulars of the invoices detailing the dates when the work was performed and the amount of clay (by tonnage or expressed as cubic metres) to which the invoice relates are contained in a schedule to the statement of claim. The respondent alleges that in accordance with the terms of the cartage contract the debt became due and payable not more than 14 days from the date of each invoice. A similar plea is made in par 7 in relation to the debt allegedly incurred under the stockpiling contract, except that there are only three invoices and they are said to have become due for payment not more than 30 days after the dates that they respectively bear. Although it is not clear from the statement of claim, we think the stockpiling contract must also have involved the hire of equipment by the respondent to IBT.

8 Other defences are raised in the defence but they are not relevant to the issues the subject of this appeal.

9 The respondent served on the applicants a notice to admit facts. The notice had attached to it copies of carbon copies of various invoices. The notice called on the applicants to admit, among other things, that:

(a) the material carted was as stated in the docket;

(b) the material was carted on the date stated in the docket;

(c) the tonnage of material carted was as stated in the docket;

(d) the material was carted from the place stated in the docket;

(e) the material was carted to the premises of IBT.

10 There is a similar notice relating to invoices for equipment said to have been hired by the respondent to IBT. The applicants were asked to admit that:

(a) the machine stated in the docket was hired by the respondent to IBT;

(b) the machine was hired on the date stated in the docket;

(c) the machine was hired for the time stated in the docket.

11 The applicants declined to admit the facts the subject of the notice. The respondent then administered interrogatories. In answering the interrogatories the applicants admitted that, to the best of their knowledge:

(a) the material was carted on the date stated in the dockets;

(b) the material carted was as stated in the dockets (that is, clay); and

12 However, the applicants said that in the absence of weighbridge dockets for each load they did not know the tonnages of the material carted as stated in the dockets. They had made inquiries of staff and there was no evidence that a reconciliation of invoices to weighbridge dockets was carried out and, in the absence of weighbridge dockets, it was now impossible to complete a reconciliation. It seems that some weighbridge dockets are available and have been discovered but they do not cover all of the deliveries. The other part or aspect of the invoices that is not admitted is the source from which the clay originated and from where it was carted.

13 The respondent was not satisfied with the answers to interrogatories. It therefore took out a summons for directions under O 29 r 1 dealing, among other things, with the matters the subject of the notice to admit facts. Specifically, the respondent sought orders that at trial carbon copies of the dockets annexed as bundles to the notice to admit facts be evidence of the facts to which we have already referred. The Master made orders in the terms sought. It is common ground that the reasons announced by the Master for so doing were:

"I agree with the [respondent's] submissions. Orders 1 and 2 (as asked) will lead to the efficient and timely disposal of this evidence and I think it is not unjust to do so. If all the drivers were called they are likely to confirm what is stated in the dockets."

14 There is no transcript of the proceedings before the Master and the Court was not presented with any materials outlining the course that oral argument took before him. Accordingly, we think the only way this Court can view the Master's reasons is that he adopted and effectively incorporated the respondent's written submissions that were then before him. They are not lengthy and we will set them out in full:

"1. The Court has the power to make such orders or give such directions to lead to the efficient and timely disposal of proceedings as it may consider just and expedient including:

- directing the mode by which particular facts may be proved at trial;

- ordering that evidence of any particular fact, to be specified in the order, shall be given at the trial by statements on oath of information and belief, or by production of documents or entries in books or by copies of documents or entries or otherwise as the Court may direct,

2. In order to prove part of the debt the [respondent] needs to prove the various deliveries of clay to IBT.

3. The debt has been "not admitted" rather than "denied", e.g. Paragraph 5(1) Statement of Claim, Paragraph 7 Defence.

4. The truck dockets are contained in the notices to admit facts.

5. The truck dockets have been the subject of interrogatories.

The answers to interrogatories effectively admit the truck dockets save for the tonnage of the material carted and where the material was carted from.

6. [Emmett and Clark] have consistently admitted the debt in other proceedings in this court and in documents filed under the Corporations Law.

7. If it is necessary to call the drivers who completed the truck dockets it will be necessary to call 15 drivers whose evidence will simply be that they filled in the truck dockets."

15 There are three grounds of appeal. The first two describe an error of law and the third alleges an erroneous exercise of discretion. They are:

1. No order should have been made under O 29 r 2(1)(c) or (d) in respect of an issue that was critical to the outcome of the proceedings, namely, the quantum of the debt truly owing by IBT to the respondent.

2. The circumstances did not fall to be considered under O 29 r 1 in the absence of a supporting affidavit by the respondent.

3. The Master should not have exercised his discretion under O 29 r 2(1)(c) or (d) without the respondent filing in respect of each prospective witness an affidavit comprising their evidence in chief. The Master merely accepted the respondent's submission that it would be convenient and would save time if the 15 drivers were not called. But in so doing the applicants were deprived of the opportunity to test the respondent's case.

16 The gravamen of the applicants' case on appeal is that the question of tonnages carted by the respondent is critical. In actions under s 592 of the Corporations Law the existence of the debt, both as to liability and quantum, is a relevant issue. Without knowledge of the tonnages carted the extent of the debt, certainly as to quantum, cannot be identified. The applicants say they are entitled to put the respondent to proof on this important issue and they should not be forced to face the documents without having the opportunity to test the case which rests on those documents.

17 Order 29 r 2 bears the heading "Court may review case". Order 29 r 2(1) is, relevantly, in these terms:

"In any proceedings the Court may at any time of its own motion on notice to the parties or upon the hearing of a summons for directions or other application review the progress of the proceedings and make such orders or give such directions to lead to their efficient and timely disposal as it may consider just and expedient and, without limiting the generality of that power, may -

(c) direct the mode by which particular facts may be proved at trial;

(d) order that evidence of any particular fact, to be specified in the order, shall be given at the trial by statement on oath of information and belief, or by production of documents or entries in books or by copies of documents or entries or otherwise as the Court may direct;

18 Order 29 r 2(1) (c) and (d) are made pursuant to the rule making power in the Supreme Court Act 1935 particularly s 167(1)(g) and s 167(1)(o), which are in these terms:

"(1) Rules of Court may be made under this Act, by the Judges of the Supreme Court, for the following purposes

(g) for regulating the means by which particular facts may be proved and the mode in which evidence thereof may be given, in any proceedings or on any application in connection with or at any stage of proceedings.

(o) For prescribing matters relating to evidence, including rules -

(i) requiring the disclosure (by the furnishing of copies of statements, reports, plans, photographs, models, or otherwise) of the nature and substance of evidence to be given; and

(ii) that depart from the law of evidence and provide for the admission as evidence, and the exclusion from evidence, of any matter the disclosure of which is required by a rule made pursuant to subparagraph (ii).

19 Counsel for the applicants submitted that the rule was not authorised by the rule making power in so far as it purported to authorise a departure from the rules of evidence prescribed by statute or by the common law. In some jurisdictions the courts have interpreted the rule making power as extending to rules which authorise the making of an order of the type here in issue. The Federal Court is an example. However, the comparative rule of court, namely O 33 r 3 of the Federal Court Rules, is in significantly broader terms than is the provision that applies in this State. We are not sure that it is a question of validity. Rather, we think the issue is whether O 29 r 2(1) would need to be read down so as not to authorise the making of an order that had the effect of abrogating one of the rules of evidence. Counsel for the respondent submitted that this question did not arise squarely from the grounds of appeal and he was prejudiced. Not having had notice of the issue in the terms in which it was raised he had not come prepared to argue it.

20 There is authority that might be seen as justifying a broader view of the rule making power: Murine Eye Remedy Co v Eldred [1926] VLR 425 at 426. Even if s 167(1)(g) is seen to be of limited operation, there is clear power in s 167(1)(o) to make a rule departing from the rules of evidence in the circumstances there nominated. We do not think it is necessary to reach a concluded view on the question. We think the merits of the application can be decided on other grounds. Given the prejudice pointed to by counsel for the respondent we think arguments about the validity of O 29 r 2(1)(c) and (d) should be left for another day. For the purposes of this application, we will assume that the order was authorised by a valid rule.

21 There is, though, an associated matter that we think does need to be addressed. It is whether an order under the rule can be made other than in relation to proof of purely peripheral matters.

22 The English rule making power is (or was in 1983) in identical terms to s 167(1)(g). The English equivalent to O 29 r 2(1) is in rather more specific terms but is generally to the same effect. In H v Schering Chemicals Ltd [1983] 1 WLR 143 at 147 Bingham J said, of the equivalent English rule:

"I think that the object of the rule is to permit the proof of matters, or to facilitate the proof of matters, which although in issue are largely peripheral to the major issue in the action, that is to facilitate the proof of matters which are largely, although not completely, formal."

23 In Downs Irrigation Co-operative Association Ltd v The National Bank of Australasia Ltd (No 2) [1983] 1 Qd R 475 at 480 Andrews SPJ indicated his assent to this proposition. The Queensland rule is in similar terms to the English provision.

24 In Pearce v Button [1986] FCA 51; (1986) 8 FCR 408 Lockhart J was called on to consider O 33 r 3 the Federal Court Rules. His Honour said, at 422:

"In my opinion although it is for the judge to determine in each case whether the rule may be applied, its essential object is to facilitate the proof of matters which are not central to the principal issues in the case. The rule is not confined to dispensing with the rules of evidence to facilitate the proof of merely formal matters, but a judge should be slow to invoke it where there is a real dispute about matters that go to the heart of the case."

25 In Pearce, at 416, Fox J made comments to much the same effect. His Honour emphasised that it was, in the end, a matter for the exercise of judicial discretion.

26 In the course of reaching his conclusion Lockhart J cited, with apparent approval, all of Murine Eye Remedy, Schering and Downs. We think his Honour's statement can be taken to apply generally to O 29 r 2(1). It is essentially a matter for the exercise of discretion based on the facts of each individual case. The fact that an issue goes to the heart of a case will not necessarily be a bar to the application of the rule. The nature of the facts sought to be proved and other issues going to the proper and efficient administration of justice may compel a conclusion to the contrary. But, generally speaking, unless the matter is peripheral to the central issues, it will not usually attract the operation of the rule.

27 Whether or not to make an order under O 29 r 2(1)(c) or (d) lies in the discretion of the judicial officer. Like all similar discretions it must be exercised judicially. One aspect of exercising a discretion judicially is that it must proceed on the basis of evidence. However, this does not mean that specific affidavit evidence must be filed in support of the application. Here, there had been prior applications for summary judgment and for further and better answers to interrogatories that touched on some of these matters. Provided the parties were aware of the material on which reliance was being placed, we can see no reason to impeach a decision on the grounds that the decision maker relied on evidence prepared for other purposes. The applicants did not argue that there had been a breach of the rules of procedural fairness in that regard.

28 But that is not an end to the matter. The question still remains whether the quantum of the debt is a central or peripheral issue and whether there are other matters that affect the exercise of discretion.

29 Counsel for the applicants contended that the quantum of the debts was a central issue. The respondent, on the other hand, disputed this contention. Counsel for the respondent pointed out that the essential plea of the debts in par 5(1) and par 7 of the statement of claim are not denied, they are simply not admitted. Counsel also referred to the fact that the debts had been admitted by Emmett and Clark in a Report as to the Affairs of IBT submitted to them by the Receiver and Manager in accordance with their statutory obligations.

30 We are not sure that either of those arguments avail the respondent. Given the applicants' explanation for its stance on the invoices, namely that it has not been able to reconcile the dockets to weighbridge tickets, it is not surprising that the information in par 5(1) and par 7 is not admitted rather than denied. There is another thing. We note that the copy of the statement of claim which is in the Application Book is entitled "minute of further amended statement of claim" and both par 5 and par 7 are the subject of amendments. This minute postdates the version of the defence that is in the Application Book. It is conceivable, therefore, that the battle-lines on those issues have not finally been drawn.

31 Counsel for the applicants submitted that while the statements in the report as to affairs might have evidentiary effect at trial in the sense that they would have to be explained and may make excellent cross-examination material they are not binding in these proceedings. We think that must be so. This is not, for example, a summary judgment application where the relative merits of the case play a role. It is a procedural step concerned with facilitating proof of certain facts. The apparent admission may be capable of rational explanation.

32 This was, in effect, a running account. The debit balance was building up as invoices were rendered. The accumulating debt therefore arises because of the delivery of certain quantities of materials on certain days. The dollar value of the delivery depends, of course, on the quantity of material delivered on the day in question. According to the statement of claim the debt was incurred, at the latest, on the day the work was carried out and the amount of the debt fell due for payment 14 or 30 days after the date of the relevant invoice. The size of the individual debts when accumulated with the debt previously owing may be a factor in deciding whether, at the relevant time, there were reasonable grounds to believe that IBT could not pay its debts as and when they became due.

33 For these reasons we accept the submission made on behalf of the applicants that the quantum of the debt is a principal issue in the action. It is not merely formal or peripheral. Should, then, the Master have moved away from the general rule so as to make the order that he did?

34 The fundamental issue surrounding any attempts to effect proof of these facts other than by calling the drivers or those responsible for the hiring of the machines lies in s 79C of the Evidence Act 1906. It might also come under s 1305 of the Corporations Law depending on the business practices of the respondent and the use to which the invoices and dockets were kept and put as documents of prime entry. In our opinion s 79C is hopelessly inadequate for modern commercial litigation. In the absence of a legislative solution perhaps O 29 r 2(1) provides a mechanism for overcoming some of the deficiencies in the section. But it cannot be ignored. We think this application should have been approached as if it were an application for orders ahead of trial to facilitate proof of matters under the section. That this course is open is clear on the authorities: Downs at 480.

35 It is in this area that the absence of affidavit material becomes critical. On one view of it the dockets or invoices are secondary evidence of the tonnages carted. That information could only have come from the weighbridge records. Accordingly, if there is to be a primary documentary source of the information it would lie in the weighbridge tickets. Nonetheless, the invoices might still be admissible under s 79C provided all of the preconditions of the section are satisfied. There is no evidence whether the drivers are "qualified persons" for the purposes of the section or as to how the records came to be made as a matter of the business practice of this company. It is only in the light of information of this type that we think the considerations in s 79C(2) could properly be assessed.

36 We think grounds 1 and 3 have been made out. We would therefore grant leave to appeal and allow the appeal. We do not believe that this Court can do any more than that. There is an obvious need to resolve this matter before trial and to keep to a minimum the cost of proving the tonnages carted and the source from which the clay was derived. The respondent will have to consider whether the answer does lie in s 79C of the Evidence Act 1906, in which case it could seek directions ahead of trial for orders under the section, or whether some other process under O 29 r 2(1) can be utilised.