HP Mercantile Pty Ltd v Clements

Judgment 1I previously ruled as to the admissibility of certain paragraphs of, and exhibits to, an affidavit of Mr Ross Chapman dated 9 October 2013, and I indicated I would deliver more detailed reasons for that ruling. These are my reasons for that ruling. 2The Plaintiff ("HP Mercantile") seeks to read paragraphs 83 and 86 of the Mr Ross Chapman's affidavit and Exhibits RC 19 and RC 20 to that affidavit. Paragraphs 83 and 86 exhibit what are described in those paragraphs respectively as true copies of schedules of Treetop Pty Ltd ("TPL") setting out the Queensland harvesting and marketing costs for the years ended 30 June 1999 and the period commencing 1 July 1999 and ending 22 March 2000. That description involves a significant gloss on the relevant documents, which do not, on their face, indicate that they are schedules prepared by TPL, although they appear to relate to TPL's affairs. Mr Chapman does not indicate that he has any personal knowledge whether the schedules were or were not in fact prepared by TPL. 3Exhibits RC 19 and RC 20 in turn each contain a memorandum dated 19 September 2001 on the letterhead of Merilbah Investments Pty Ltd ("Merilbah") from Mr Andrew Purcell to HP Mercantile, signed by Mr Purcell "for and on behalf of" Merilbah. I was informed, in the course of submissions, that Mr Purcell was not a director of Merilbah and my attention has not been drawn to evidence of any other capacity in which he was involved with Merilbah. That memorandum provides that: "I refer to the schedules concerning the Harvesting and Marketing expenditure made by [TPL] as Manager of the Queensland Orchard project, in the 12 months to 30 June 1999 and from 1 July 1999 until 22 March 2000. We confirm that the schedules exactly reflect the data presented to and reviewed by CDH Hennessy & Co (now Stockford Accounting Services), the auditors of Australian Rural Group Limited. Suggestions or modifications made by the auditors in respect of the data have been incorporated into the schedules." I interpolate that Australian Rural Group Ltd ("ARG") was the grower's representative in respect of the relevant project. It will be noted that this memorandum also does not say that the schedules were prepared by TPL, but only that they concern the harvesting and marketing expenditure allegedly made by it. 4The schedules attached to the memoranda in RC 19 and RC 20 are in similar form, although the figures contained in them for the respective periods differ. None of the documents are on the letterhead of TPL or indicate the identity of the person who prepared them or when they were prepared. The first document in each exhibit is headed "Queensland Orchard Project Harvesting and Marketing Costs Calculations" for the relevant periods and records a total figure for harvesting and marketing costs; an allocation of those costs to a proportion of trees on the relevant property said to be attributable to the "Queensland project"; total harvesting and marketing costs attributed to that project; a number of allotments for that project; and harvesting and marketing costs per allotment. The second document in each exhibit is headed "Treetop Queensland Peach and Nectarine Orchard Marketing and Harvesting" in respect of the relevant period and records a series of expenses which in each case total to the total harvesting and marketing costs for the orchard for the relevant period. The third document in each exhibit records income and various forms of expenditure in respect of various projects, and the figure for harvesting and marketing for the Queensland project corresponds to the figure shown in the first document in each exhibit. That document also records a number of allotments referable to the Queensland project, which differs slightly from the number of allotments set out on the first document and a percentage allocation which also differs slightly from the percentage allocation on the first document. 5Mr Clements relies, on the voir dire, on several paragraphs of Mr Hennessy's affidavit dated 31 January 2014. Mr Hennessy gives evidence of his role as auditor for ARG (which, as I noted above, was the growers' representative in respect of the project); his involvement in an investigation, in early-mid 2000, as to whether money from the sale of fruit was being banked, and was being banked into the correct accounts, in respect of the Treetop schemes; and the manner in which he and his team undertook work in respect of that investigation, and his team's practice as to his review of documents and the giving of advice. Mr Hennessy also gives evidence that TPL requested that the financial statements of the project for the years ended 30 June 1999 and 2000 be completed, but that Mr Hennessy was not provided the source documents to complete those accounts, nor does he recall his team bringing such documents to his attention. Mr Hennessy also denies having been provided with, reviewed or made, suggestions or modifications as to the data referred to in Mr Purcell's memorandum dated 19 September 2001, and gives evidence, consistent with his earlier evidence of fact, of his expectation that his team would have brought those matters to his attention had they been provided to them. Mr Hennessy's evidence reflects a position that he has taken at least since January 2002, when he advised another interested party, by letter dated 29 January 2002, in respect of another project that: "We have not undertaken any review of the expenditure [Treetops] claim were for harvesting and marketing costs and we have not made any suggestions or modifications in respect of the data for incorporation into the schedule of expenses." Mr Hennessy was cross-examined at some length in the voir dire but it is not necessary or appropriate to comment on that cross-examination, which will also be relied upon in the substantive proceedings, since it has not been necessary to rely on Mr Hennessy's evidence to determine the issues of admissibility of the relevant documents. Whether the documents are admissible under s 69 of the Evidence Act 6Mr Clements objects to the tender of the relevant documents on the basis, first, that they are hearsay in character and not admissible under s 69 of the Evidence Act 1995 (NSW) as business records. It seems to me that it is necessary to treat the relevant documents as falling in two categories for the purposes of dealing with that objection, first, the memorandum dated 19 September 2001 and, second, the schedules attached to that memorandum. The memorandum dated 19 September 2001 7Mr Newlinds, who appears with Mr d'Arville for Mr Clements, accepts that the memorandum dated 19 September 2001 falls within s 69(1)(a)(i) of the Evidence Act so far as it previously formed part of the records of Merilbah or HP Mercantile. It appears that the memorandum also contains previous representations made or recorded for the purposes of Merilbah's business for the purposes of s 69(1)(b) of the Evidence Act. Those representations include at least that the relevant schedules concern harvesting and marketing expenditures by TPL; that those harvesting and marketing expenditures were in fact made by TPL; that they were made in its capacity as manager of the Queensland Orchard Project; that they were made in the specified periods; that the schedules "exactly reflect" the data presented to and reviewed by CDH Hennessy & Co; and, possibly inconsistently, that "suggestions or modifications" made by that firm have been incorporated into the schedules. 8Mr Newlinds contends that the requirements of s 69(2) of the Evidence Act are not satisfied in respect of the memorandum, in that it is not established that the relevant representations were made by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, or on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, and that the Court could not infer that Mr Purcell, so far as he purported to represent Merilbah, had personal knowledge of the facts asserted in the memorandum dated 19 September 2001. 9It was common ground that Mr Purcell had been a director of TPL at the relevant time, but Mr Newlinds contends that there is no basis for inferring that a director of that entity would necessarily have knowledge of specific matters such as the allocation of harvesting and marketing costs to particular allotments. In my view, it can reasonably be supposed, based on Mr Purcell's role as a director of TPL, that he had knowledge of the matters asserted in the memorandum, and this is sufficient to satisfy s 69(2) of the Evidence Act. It does not, of course, follow that the asserted information is necessarily correct, because the fact that Mr Purcell can be inferred to have knowledge of those matters does not establish that he accurately stated them. However, that seems to me to be a question of the weight to be given to the memorandum rather than a matter as to its admissibility. 10In these circumstances, it seems to me that the memorandum dated 19 September 2001 is admissible as a business record under s 69 of the Evidence Act and should be admitted on that basis. The documents referred to by the memorandum 11HP Mercantile has not identified the particular representations for which it tenders the documents referred to by the memorandum dated 19 September 2001, although I infer that they would include at least some of the financial information stated in those schedules to which I referred above. 12It appears that those documents also form or formed part of the records kept by Merilbah or HP Mercantile. However, it has not been established that those documents contain a previous representation made or recorded in the course of, or for the purposes of, the business of either entity for the purposes of 69(1)(b) of the Evidence Act. Those documents do not identify when or by whom they were prepared. It is possible that they were prepared by TPL for the purposes of its business but, if so, there is no evidence that they were retained in the records of that business. It is also possible that the records were prepared by Merilbah, or Mr Purcell, or a third party, but in that case it is not apparent whether they contained representations made or recorded in the course of, or for the purposes of, Merilbah's business as distinct from TPL's business. It does not seem to me that the requirements of s 69(1)(b) of the Evidence Act are satisfied in respect of those schedules. 13Mr Newlinds contends that the requirements of s 69(2) of the Evidence Act are not satisfied in respect of the documents referred to in the memorandum, in that it is not established that the relevant representations were made by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, or on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact. It has not been established as a matter of fact that the representations contained in the documents referred to in the memorandum were made by a person who had personal knowledge of the asserted fact or on the basis of information directly or indirectly supplied by such a person, since there is no evidence as to who prepared those documents or the circumstances in which they were prepared. 14Mr Knowles, who appears for HP Mercantile, primarily relies on the extension in this provision to deal with a person who "might reasonably be supposed" to have had personal knowledge of the asserted fact. I accept that, as McDougall J noted in Rickard Constructions v Rickard Hales Moretti [2004] NSWSC 984 (at [19]): "The words 'or might reasonably be supposed to have had personal knowledge' indicate that the Court is allowed to draw inferences not just from the form of the document, but from the nature of the information contained in it." I note that s 183 of the Evidence Act in turn 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. I also accept that, in some circumstances, information recorded in a document may be such as to support an inference or reasonable supposition that the person who recorded it had personal knowledge of the asserted fact, or was recording it on the basis of information provided by such a person, because it otherwise could not have been recorded. I do not consider that the information contained in the schedules included in RC 19 and RC 20 is of that character. It is, no doubt, possible that that information was prepared by an employee of TPL who had personal knowledge of the asserted fact or was recording it on the basis of information provided by such a person; it is also possible that it was prepared by a person, whether an employee of TPL or of Merilbah or a third party, who wished to allocate expenses to particular projects without having such knowledge or having been informed of the relevant matters by a person who had such knowledge, or by accounting staff or other persons on instructions as to what it should contain given by persons who did not have personal knowledge of all or some of the asserted facts. The nature of the information contained in the documents does not, in my view, provide a reasonable basis for the first inference as distinct from the alternate inferences that are also available. 15I do not consider that the other documents referred to in the memorandum and contained in Exhibits RC 19 and RC 20 are admissible as a business record under s 69 of the Evidence Act, so far as the entity which prepared them, the person who prepared them, and his or her state of knowledge and the time at which they were prepared, has not been established. I will therefore admit those documents, but subject to a limitation under s 136 of the Evidence Act that they are admitted only to identify the documents to which the memorandum refers and not proof of the facts asserted in them. Exclusion under s 135 of the Evidence Act 16Mr Clements also contended that the documents should be excluded under s 135 of the Evidence Act, on the basis that they would be unfairly prejudicial and misleading. Mr Knowles contends, and I accept, that there is no significant risk that the memorandum would be either unfairly prejudicial or misleading, even if it has little probative value, where a trial judge sitting without a jury is well able to assess the weight to be given to that evidence. I have had regard to the fact that Mr Clements will not have the opportunity to cross-examine Mr Purcell in respect of the assertions made in the memorandum, where HP Mercantile does not lead evidence from him and Mr Clements does not call him in his own case; however, it seems to me that that is a matter to which the Court may have regard in assessing the weight to be given to the memorandum, combined with any issues arising from the conclusory character of the statements made in the memorandum and Mr Hennessy's evidence. I also do not consider that those schedules are capable of being unfairly prejudicial or misleading, where they are admitted subject to the limitation under s 136 of the Evidence Act to which I have referred above. Direction under s 169 of the Evidence Act 17Mr Clements seeks a direction under s 169(1)(c) of the Evidence Act that the evidence should not be admitted because HP Mercantile failed to comply with a request to call Mr Purcell without reasonable cause. I have set out the background to that request in my earlier judgment dated 6 March 2014 ([2014] NSWSC 213). On 24 January 2014, Mr Clements requested HP Mercantile to call Mr Purcell under s 167 of the Evidence Act. On 30 January 2014, HP Mercantile's solicitors responded identifying several reasons why they did not propose to call Mr Purcell, namely that: "1. We are not aware of Mr Purcell's current address; 2. Mr Purcell has been hostile to our client and had previously refused to attend Court; 3. His Honour White J, in the matter of HP Mercantile Pty [sic] v Dierick x Anors, found Mr Purcell to be "wholly without credit". 4. The documents RC 19 and RC 20 are business records and we intend to rely on the relevance sections of the Evidence Act including sections 59, 69 and 171 at the hearing." The first matter noted was thereafter addressed by Mr Clements' solicitors advising HP Mercantile's solicitors of an address which appeared to be Mr Purcell's address as recorded in records of the Australian Securities and Investments Commission. 18I summarised the scope of s 169 of the Evidence Act in my earlier judgment as follows (at [24]-[25]): "Section 169(1) of the Evidence Act provides that, if a party has, without reasonable cause, failed or refused to comply with the notice, the Court may make one or more of specified orders, one of which is an order directing that party to comply with the request, and another of which is an order that the evidence in relation to which the request was made is not to be admitted in evidence. Section 169(4) provides, inclusively, several matters that may constitute reasonable cause to comply with such a request, none of which is established in the present case. Section 169(5) specifies matters relevant to the exercise of a power under s 169(1); however, those matters would only arise if HP Mercantile did not have reasonable cause to fail or refuse to comply with that request so that the Court's power under the section was enlivened. At first instance in Deputy Commissioner of Taxation v Trimcoll Pty Limited [2005] NSWSC 1324 at [55], Hall J observed that the categories of circumstances that may constitute reasonable cause are not closed and might include the position where the existence or contents of the documents are not in issue in the proceedings. That is plainly not the case here. On appeal ([2007] NSWCA 307), Basten JA (with whom Spigelman CJ and Ipp JA agreed) noted that a request under s 167 of the Evidence Act may be made in respect of matters going to admissibility and potentially also to the accuracy of evidence. In the present case, Mr Purcell's evidence would very likely go to the former, so far as there may be an open issue whether the documents are properly admissible as business records, as well as the latter so far as Mr Clements seeks to lead evidence contesting their accuracy. Basten JA also noted that where the documents were created by a third party may be relevant; here, the documents were created by a third party, but it appears that HP Mercantile is a successor in title to that third party, and relies on the documents in order to establish its claim." 19In the application which was the subject of my earlier judgment, HP Mercantile relied on an affidavit of its solicitor, Mr Versace, dated 4 March 2014, which elaborated the reasons why HP Mercantile resisted such an order, identifying issues as to Mr Purcell's credit and an apprehension that he would seek to avoid service of a subpoena or not comply with it. That affidavit was not read in the voir dire in respect of the admissibility of these documents. I noted in my earlier judgment, without expressing a final view, that it was arguable that HP Mercantile had reasonable cause not to call Mr Purcell, so far as it had doubts as to his credit for the reasons set out in Mr Versace's affidavit and could reasonably have anticipated that its resources would be diverted, not long before a trial, to the process of seeking to procure his attendance on subpoena. Those matters are not established on the voir dire because Mr Versace's affidavit has not been read in it. 20As I noted in my earlier judgment, the factors identified, without limitation, in s 169(4) of the Evidence Act as giving rise to reasonable cause not to call Mr Purcell to give evidence are not present in this case. On balance, it seems to me that HP Mercantile's failure to call Mr Purcell did not have reasonable cause. Issues arising as to Mr Purcell's credit do not seem to me to provide reasonable cause not to call him, where HP Mercantile has not sought to lead Mr Versace's evidence and has relied on no more than an adverse comment concerning Mr Purcell's credit in a different judgment involving different parties, and where HP Mercantile itself initially sought to deploy hearsay evidence in Mr Chapman's affidavit based on information derived from Mr Purcell. I recognise that, in submissions, Mr Knowles sought to distinguish those matters as to which Mr Purcell is claimed to be reliable, prior to his falling out in some way with HP Mercantile, with those matters in which he is asserted not to be reliable, but that submission was not supported by any evidence led on the voir dire. 21It seems to me that HP Mercantile would have had sufficient time to call Mr Purcell had it acted promptly when Mr Clements made the request. While I noted the possibility in my earlier judgment that calling Mr Purcell would involve undue expense for HP Mercantile, the costs of its doing so need to be weighed against the significance of the evidence to which I will refer below and the costs of the wider proceedings. 22So far as the matters relevant to the exercise of the Court's powers under s 169(1) of the Evidence Act are concerned, it is plain that Mr Purcell's memorandum and schedules referred to in it are of significant importance in the proceedings, so far as they are relied upon both to establish a substantial monetary claim against Mr Clements and also to found an event of default which it is said converted a non-recourse loan by TPL to him into a loan as to which recourse was available against him personally. It was also plain that there was likely to be a dispute about the matter to which the evidence relates, at least from the point that Mr Hennessy's evidence was served, and there was also reasonable doubt as to the accuracy of Mr Purcell's evidence at least from that point. While Mr Knowles contends that Mr Hennessy's evidence only controverts the representations made by Mr Purcell in that memorandum as to the fact that the relevant information was provided to Mr Hennessy's firm and that it was modified in accordance with his firm's suggestions, if it is established that those two representations are false, then a significant issue must arise as to the reliability of the other statements made in that memorandum. 23Having regard to the matters which I have noted above relevant to the expense involved in compliance with the request, the fact that there was likely time to do so had HP Mercantile acted promptly and the nature of the proceedings, I am satisfied that the factors specified in s 169(5) generally support an order made under s 169 that the evidence in relation to which the request was made not be admitted in evidence. Had I not held that the documents referred to in the memorandum were not admissible as business records, and made an order under s 136 of the Evidence Act in respect of those documents, I would have made an order that they not be admitted in evidence under s 169(1)(c) of the Evidence Act. I do not consider it necessary to make such an order where only the memorandum is to be admitted as a business record, because it seems to me that the Court will be able to assess the weight to be attributed to that memorandum, in circumstances that Mr Purcell has not been called to allow the statements made in it to be tested. 24For these reason, I ruled that paragraphs 83 and 86 of Mr Chapman's affidavit should be admitted, with a limitation under s 136 of the Evidence Act that they rise no higher than the documents referred to in exhibits RC 19 and RC 20 respectively. I admitted the memorandum dated 19 September 2001 from Merilbah to HP Mercantile contained in exhibits RC 19 and RC 20, on the basis that it was properly admissible under s 69 of the Evidence Act. I admitted the other documents contained in RC 19 and RC 20 and referred to in that memorandum, with a limitation under s 136 of the Evidence Act that they were only to identify the documents to which the memorandum refers and not as proof of the facts asserted in them.