EVIDENCE - Discretionary exclusion - Misleading and confusing - Breach of... [1997] FCA 1537 | Case summary

REASONS FOR RULING These reasons relate to rulings I previously have made. In the first instalment of what, inaccurately, I will call the Hughes litigation, I was asked to hear and determine (amongst other things) whether the Civil Aviation Authority ("the CAA") either committed breaches of a tender process contract ("the RFT") with Hughes Aircraft Systems International ("Hughes") or engaged in conduct in contravention of s 52 of the Trade Practices Act 1974 in the circumstances both leading to, and (in the case of certain of the s 52 claims) subsequent to, the decision to award the TAAATS contract. I found that such did occur. The contractual findings which alone I need note are put in précis form at pp 118 of the report of my decision in (1997) 146 ALR 1. They were that: the CAA acted in breach of its contract with Hughes in that: (i) it failed to evaluate the tenders in accordance with the priorities and methodology prescribed in the RFT (paras 16.1 and 16.2); (ii) it failed to ensure that measures designed to achieve strict confidentiality of information contained in tenderers' proposals, were maintained (RFT para 16.2.7); and (iii) it accepted an out of time change to Thomson's proposed deed of AII commitment. Trade Practices Act claim findings of similar effect were also made. In this, the second instalment of the Hughes litigation, I am again being asked to hear and determine specific questions of law and fact. Though the precise formulation of those questions has not as yet been agreed, it is adequate for present purposes to mention such of present relevance as have been propounded by Hughes. These are: 1. Did the respondent's breaches of contract and contravention of the Trade Practices Act as found by the Court, cause the applicant to lose a prospect of winning the TAAATS contract? 2. If yes, how great was that prospect? Put crudely I am being asked to determine a question of causation in relation to the alleged loss by Hughes of the opportunity to win the TAAATS contract: cf Sellars v Adelaide Petroleum NL (1994) 197 CLR 332. Hughes has elected not to put on any further evidence on this issue and is content to rely upon the evidence previously admitted in what I have called the first instalment. The respondent, Airservices Australia (the successor body to the CAA), for its part seeks to adduce further evidence. That evidence is first and foremost that of the members of the board of the CAA and is directed to what individually they consider would have been their decision on the award of the TAAATS contract if none of the breaches of contract/Trade Practices Act contraventions had occurred. The board decision on the TAAATS contract was influenced significantly by two reports provided by the Department of Industry, Technology and Regional Development ("DITRD"). Those reports were tainted by breaches/contraventions I found. The respondent now seeks as well to lead evidence from a Ms Clarke who has prepared revised versions of the reports, and to tender those reports. They were prepared on the basis of specified assumptions that, it is said, would have nullified the tainting effects of the breaches/contraventions. And they are advanced as representing what the "untainted reports" would have contained in 1993. The proposed evidence of the directors, I should add, is premissed upon those reports. Mr Gyles QC for Hughes objects to the admissibility of any of this evidence. The principal basis for his objection is that it is all opinion evidence and is for that reason rendered inadmissible by s 76 of the Evidence Act, 1995 (Cth) but is not saved by the exceptions in sections 77-79. These sections provide: The opinion rule 76. Evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. Exception: evidence relevant otherwise than as opinion evidence 77. The opinion rule does not apply to evidence of an opinion that is admitted because it is relevant for a purpose other than proof of the existence of a fact about the existence of which the opinion was expressed. Exception: lay opinions 78. The opinion rule does not apply to evidence of an opinion expressed by a person if: (a) the opinion is based on what the person saw, heard or otherwise perceived about a matter or event; and (b) evidence of the opinion is necessary to obtain an adequate account or understanding of the person's perception of the matter or event. Exception: opinions based on specialised knowledge 79. If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge. It is said that evidence to be given now by the board members as to how they would have decided the award of the tender in a hypothetical situation where the RFT contract was being complied with, amounted to no more than an expression of an opinion which individually they now hold as to how they would have decided the matter in December 1993. A corresponding submission was put in relation to Ms Clarke's evidence. Consequential, ancillary, and alternative submissions were made to the effect that - (a) while there are cases where a party has been allowed to give evidence as to how he or she would have acted in a hypothetical situation, those cases are ones in which that evidence was admissible because the issue to be determined related to that party's state of mind at the time (and so was within the s 77 exception of the Evidence Act) and such was not the case here; (b) to allow the evidence would be to allow self-serving statements to be advanced by proven wrongdoers; and (c) the evidence should in any event be excluded under s 135(a) or (c) of the Evidence Act. I note here that s 135 provides: General discretion to exclude evidence 135. The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party; or (b) be misleading or confusing; or (c) cause or result in undue waste of time. Before turning to consider these submissions I emphasise that I am not being asked at this stage to rule on the relevance, let alone to give an indication as to the weight to be accorded, this evidence: on weight see eg Hosmer Holdings Pty Ltd v CAJ Investments Pty Ltd (1995) ATPR 41-442; Tanna v Deutsche Bank (Asia) AG, unreported S.C. of NSW, Hodgson J, 5 September 1996 at pp 19, 31 and 32 concerning the evidence of Mrs Saad. In consequence I need not here enter upon a consideration of the significant range of factors that could limit the weight to be given this evidence without necessarily depriving it entirely of relevance (cf the Evidence Act, s 55(i)) if it were not otherwise rendered inadmissible. I should, perhaps, emphasise perhaps somewhat uninformatively that I am not referring simply to discounting weight for reasons of reconstruction or of the evidence being possibly self-serving. The question of admissibility in fact raises two distinct questions. The first is a question of principle. It is whether the board members can properly give evidence at all as to how they would have acted but for the breaches/contraventions. The issue in this is whether the Evidence Act itself excludes the admission of the evidence. The second is whether the actual evidence to be adduced (including that of Ms Clarke) is nonetheless objectionable. I will consider each of these in turn. The Question of Principle Mr Gyles QC's primary submission that the evidence is opinion evidence is not one that I should, or would, accept. I say "should accept" because the precise issue of principle it raises has been decided by Lindgren J in Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No 32) (1996), 136 ALR 627. As I do not consider his Honour there to have been "clearly wrong" I should as a matter of comity follow that decision: on "comity" see Bank of Western Australia Ltd v FCT (1994) 55 FCR 233 at 255 and the cases referred to therein. In Allstate objection was taken to a paragraph ("para 27") in a witness statement prepared in 1995 in which an investment adviser indicated that he would not in 1988 have made an investment recommendation or have allowed a purchase to occur if he had known certain non-disclosed facts. The basis of the objection was identical to that taken here. Having referred to the exclusionary rule of s 76 of the Evidence Act, Lindgren J advanced two grounds for rejecting the submission: I do not think that par 27 is caught by the opinion rule in the first place because the paragraph does not express an "opinion" to which that rule applies, but if it does, I think that the opinion is not tendered for the purpose referred to in s 76 and therefore, as s 77 makes plain, the opinion rule is inapplicable. The first of these two grounds is the one of present significance. His Honour elaborated it in the following way: The expression "opinion" is not defined in the Act. In the context of the general law of evidence, "opinion" has been defined as "an inference from observed and communicable data": JH Chadbourn (ed), Wigmore on Evidence (1978), Vol 7, par 1917; and see Cross on Evidence (5th Aust ed, 1996), p 782 par 29010; Australian Law Reform Commission, Interim Report on Evidence (ALRC 26, 1985), Vol 2, pp 168-169, par 96. The origin of the court's aversion to evidence of opinion is in the common law's concern to receive the most reliable evidence: cf Cross, p 781, par 29001. One might be excused for thinking that often the most reliable evidence, and certainly the most obvious evidence, of what a person would have done if facts had been different from what they were, would be that person's own evidence on the matter. Paragraph 27 does not state an inference drawn or to be drawn from observed and communicable data. It purports to be "direct" evidence from the person uniquely placed to give it, of what that person would have done in a hypothetical situation. This is not "opinion" of the kind against which the general rule against the admissibility of evidence of opinion is directed. In one sense there can never be "direct" evidence of what a person would have done in a situation different from that which occurred. But where that is what is to be proved, the person in question is better qualified than all others to give evidence on the matter. To exclude his or her evidence would be to exclude the "most direct" evidence available. While the evidence in the present case is less direct than that in Allstate for the reason that it amounts to no more than the individual views of the directors as to how they would act, expressed in circumstances unrelated to the context in which their actual decision would have had to have been made - ie after discussion and deliberation and in light of a Tender Evaluation Committee ("TEC") recommendation on the matter that was itself unaffected by the TEC having to deal with tainted DITRD reports - it nonetheless can properly be said to be evidence of the type to which Lindgren J referred and is admissible for that reason. I said as well that Mr Gyles QC's submission was not one that I "would accept" and this because that evidence ought not, for admissibility purposes, to be treated merely as opinion evidence even if it be said that for the purposes of s 76 of the Evidence Act, it contains expressions of opinion insofar as board members indicate how they would have acted in the circumstances on which the evidence is premised. It is important to identify the issue to be determined in a Sellars type case such as this where the question is one of loss of an opportunity. I can put it compendiously in this way: if the CAA had not acted in breach of the RFT contract and had not engaged in contravening conduct, but nonetheless proceeded to award the TAAATS tender what were Hughes' prospects of being awarded that contract? How, given this hypothesis, the CAA would have acted is, for practical purposes, a question as to how the appropriate organ - the board - would have acted. That question would have to be answered in a setting where a multi-member, deliberative body would in any event have been required to make some discretionary judgments consequent upon a recommendation made to it by the TEC. In all likelihood one would in this have to consider some number of possibilities and probabilities. But it would be important and relevant to know the state of mind that the individual board members would have brought to the question even if there be some level of uncertainty (possibly large) as to whether that state of mind would in the hypothetical situation have been likely to have been translated into the decision suggested by that state of mind. To the extent that by evidence presently given the board members are able to illuminate their then state of mind in the sense referred to by Hodgson J in Tanna's case, above, (explained below), that evidence is clearly admissible. And it is admissible notwithstanding that the evidence may be said to embody the expression of a board member's opinion as to how he would have decided the hypothetical question. It is so admissible because an expression of such an opinion relates to the doing of an intentional act and such an act presupposes relevantly an "actual past state of mind, which in turn bears on the probabilities of what that [board member] would have [decided]". It is in this sense that Hodgson J referred to state of mind in Tanna's case, above, at pp 26-28. On both of the above bases, then, I reject Mr Gyles QC's submissions on the question of principle that the board members' evidence as to how they would have acted in the hypothetical situation, was inadmissible. 2. Admitting the Actual Evidence Adduced It is important to note the nature of this evidence. First Ms Clarke's evidence. On the basis of six assumptions (the alleged effect of which would have been to render DITRD's performance of its function under the RFT unobjectionable) Ms Clarke prepared revised versions of the two reports that were sent to the board of the CAA evaluating the Australian Industry Involvement ("AII") components of Hughes' and Thomson's bids. The revisions so made (a) excised those observations, etc tainted by breaches of contract/Trade Practices Act contraventions; and (b) added matters (for the most part relating to the issue of "broad" and "narrow" AII: on which see (1997) 146 ALR 1 at 51 and 61) that ought or, it is said, would have been included had DITRD properly performed its function. In Ms Clarke's opinion the revised reports are in the form she would have adopted in 1993 if she had then acted on the assumptions she acted on in making the revisions. The evidence of the board members. For their part the board members were (i) asked to make fourteen assumptions (all relating in differing ways to what was permissible to or required of the CAA in the proper performance of the RFT contract); and (ii) provided with copies of the two revised DITRD reports. Each was then asked to take into account those assumptions and reports and, in the words of the boiler-plate clause in their witness statements, "to state what I would have decided at the 23 December 1993 meeting on that basis": emphasis added. Each board member proceeded to express a view insofar as he felt able on how he would have decided the matter. I raised with the parties a difficulty I had with this evidence. It was this. Though DITRD's original report went to the board at the two December 1993 meetings along with the TEC's recommendations and accompanying documentation, those reports were not prepared for the board. They were prepared for the TEC as a consultant to it and for the TEC's evaluation of the tenderer's bids for the purpose of making a recommendation of preferred tenderer to the board. In my earlier reasons I made express findings on this matter, though noting that there was nothing impermissible in DITRD's reports subsequently being transmitted to, and considered by, the board. My concern with the revised reports and the use made of them was this. To attempt to recreate the information base on which the board decision could properly have been taken, but to do so only by revising reports prepared for the TEC, was to contrive the basis on which the board members were to be asked to indicate how they would have decided - a basis that was at variance with that envisaged by the RFT contract itself: cf (1997) 146 ALR at 50. The board decision was, and was to be expected to be, taken in light of a TEC recommendation based on the considered professional judgments of the TEC's members on the rival bids (including on AII and DITRD's views). In the 1993 process there was a sharp division between the TEC and DITRD - a division in which the TEC's (but not DITRD's) views of the contractual significance to be attributed to AII and of the varying significance of broad and narrow AII, had reasonable contractual justification: on the TEC's views see (1997) 146 ALR at 57-58. The question I raised was whether for the purposes of the "hypothetical", a revised DITRD view could be put to board members without first following the course of its being subjected to the scrutiny and comment of the members of the TEC. Mr Gyles QC objected to the admission of Ms Clarke's statement and reports and to the board members' statements insofar as they relied upon the reports on the following bases. First, given the hypothetical situation being recreated - a recreation to which Hughes took general objection in any event - it was impermissible to place DITRD's revised reports before the board members without a corresponding TEC recommendation thereon. If the matter was to be "decided again" this could not be done on an improperly contrived basis. Secondly, as judgments had to be made about broad and narrow AII and, in particular, on the benefit of the latter to the CAA, it was for the TEC and not DITRD to advise the board on that matter. The board was being asked to make a "decision" on the basis of DITRD's advice but not the TEC's. Thirdly, the evidence in these circumstances should be excluded under s 135 of the Evidence Act. Mr Macfarlan QC for the respondent submitted that the evidence was relevant to a matter to be determined and hence was admissible, and that if it was not counterbalanced by evidence from TEC members that was a matter, possibly, for a Jones v Dunkel inference (though this was not conceded). In any event it was said, given the views put by the TEC in 1993, its members' views now could reasonably be inferred. Further there would be some difficulty in obtaining their individual views today on the revised reports. In short it was submitted that, being relevant, these reports were admissible, the factors referred to by Mr Gyles QC merely going to the weight to be given the evidence. My own view is that I should not admit Ms Clarke's statement and the revised reports, absent evidence from the then members of the TEC on those reports or else - though I express no concluded view on this - convincing explanation now as to why that evidence cannot be given together with appropriate instruction to the board members as to how they should deal with the reports in its absence. The respondent had several courses open to it in dealing with the issue raised by what I will call the Sellars inquiry. As with the applicant, it could have elected to call no evidence in which case the Sellars question would have to be answered by me on the basis of the actual evidence at the time of the board decision, disregarding what was impermissible and considering the possibilities and probabilities in light of what ought to have been considered but was not. Such, doubtless, would have been a difficult but by no means an impossible process. Instead the respondent has gone into evidence and has sought partially to recreate the information base of the decision. The manner in which it has done so is, in my view, inadequate, and incomplete. Moreover it has asked the board members to express their views on a contrived information base; a base not envisaged by the RFT processes. I consider it quite inappropriate to rely simply upon Jones v Dunkel inferences to supplement the absence of evidence from TEC members when the purpose of the original reports was to inform TEC decision making, and where the purpose of the revised reports is to simulate the information flow in the now hypothetical decision-making process. While I am prepared to agree with Mr Macfarlan QC's submission that the revised reports are relevant (I express no view in this as to the totality of their contents), I nonetheless am of the view that, because they represent only one part of the "information mosaic" that would have led to a decision, I ought not to admit them without the TEC's judgment thereon (or else, possibly, of the convincing explanation and instruction to which I earlier referred). Given the "significant destabilising effect [DITRD had] on the proper performance of the RFT contract": (1997) 146 ALR at 110; the dispute between the TEC and DITRD over AII; my previous rulings on the need to differentiate between broad and narrow AII and the TEC's likely superior competence to express an informed view on the latter of these, it would be dangerous to allow the reports to be used in the bald fashion that is proposed for them. The circumstances are unusual, but the case is one in which I consider that s 135 of the Evidence Act should be applied and in particular s 135(b). The use to be made of the reports - as evidenced in the boiler-plate clauses in the witness statements to which I have referred - involves a distortion of the decision-making processes envisaged by the RFT contract. Whatever the effect on the board members, it is evidence that has a significant potential to mislead because its probative value is itself affected by the lack of the very scrutiny to which it would have been exposed if the decision was the real - and not a hypothetical - one. Accordingly, I refuse to allow Ms Clarke's evidence to be admitted at this stage. Likewise I refuse to admit the board members' evidence to the extent that such is based upon those reports. I should emphasise in this that those reports may, when supplemented in the fashion I have indicated, later be admitted in whole or in part. For the moment, though, they should be excluded. I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.

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