ICM Investments Pty Ltd v San Miguel Corporation & Anor [Ruling No. 1] [2013] VSC 463

**1 Evidentiary questions have arisen in the trial of the proceeding.

2 The trial arises from the acquisition by the First Defendant, San Miguel Corporation ("San Miguel"), of shares owned the Plaintiff, ICM Investments Pty Ltd ("ICM"), in Berri Ltd ("Berri").

3 Berri was at all relevant times a public company and the successor of Berri Fruit Juices Co-operative. The principal activity of Berri in 2005 and preceding years was the manufacturing and marketing of fruit juices and other beverages.

4 In August 2004, the shares in Berri were owned by ICM and its associates and various institutional investors.

5 To effect the transaction, on 5 August 2004, ICM and San Miguel and others entered into a Share Sale Agreement pursuant to which San Miguel (through a wholly owned subsidiary) acquired a 50% interest in Berri. ICM and companies associated with it continued to hold the remaining 50% of the shares.

6 At the same time, San Miguel, Berri, ICM and its associates entered into a Shareholders Agreement.

7 As part of the transaction, ICM and others also entered into a Put and call Option Deed (the "Option Deed") with San Miguel dated 5 August 2004 under which:

(a) ICM and its associates granted San Miguel the right to acquire a further 1% of their shares in Berri (the "First Call Option");

(b) ICM and its associates granted San Miguel the right to acquire the balance of their shares in Berri (the "Second Call Option"); and

(c) San Miguel granted ICM and its associates the right to require San Miguel to acquire the balance of their chares in Berri (the "Put Option").

8 The Option Deed was subsequently amended by an amending deed dated 18 July 2005 (the "Amended Option Deed").

9 On or about 5 November 2004, San Miguel exercised the First Call Option and by this means acquired a further 1% of the shares in Berri, thereby taking its holding (through a wholly owned subsidiary) to 51%.

10 On or about 11 April 2005, ICM's associates transferred all their remaining shares in Berri to ICM.

11 On or about 11 November 2005, ICM exercised its Put Option so as to require San Miguel to acquire its remaining shares in Berri. The effect of the exercise of the Put Option was that San Miguel was obliged to complete the purchase of ICM's shares on 5 December 2005. However, following discussions between ICM and San Miguel, San Miguel agreed to complete the purchase of the shares on 16 December 2005.

12 However, San Miguel failed to complete the acquisition of ICM's shares on 16 December 2005.

13 Further discussions took place between the parties regarding completion of the transaction and payment of a dividend to ICM.

14 No dividend was declared or paid by Berri before the transfer of ICM's shares to San Miguel, or subsequently.

15 Completion of the acquisition by San Miguel of ICM's remaining 49% interest in Berri took place on 28 December 2005. Thereafter, ICM held no further shares in Berri.

16 ICM's claim in the proceeding is that, pursuant to the transaction documents, a dividend became due and payable to ICM in the amount of $3,472,198.04 (which in turn was required to be franked at the tax rate of 30% , which would have distributed $1,488,084.87 in franking credits to ICM). Whether the transaction documents as a matter of construction, properly gave rise to this entitlement, as against one or other or both of San Miguel and Berri, is a matter in dispute.

17 The claim is further grounded in the factual allegation that Berri had available sufficient distributable profits to pay ICM its dividend in the amount alleged (or at all) as at each of 16 and 28 December 2005. This too is a matter in dispute.**

**18 By way of summary, the following principal issues present themselves for determination:

(a) Was Berri required to pay, and San Miguel required to procure that Berri pay, a contractually specified dividend to ICM?

(b) If so, did Berri have sufficient distributable profits in December 2005 to allow it to pay the dividend?

(c) Did Berri and San Miguel breach their respective obligations in December 2005 by not paying, or not doing everything reasonably necessary to pay, the required dividend?

19 Berri and San Miguel contend, and ICM disputes, that in December 2005 the directors of Berri could and would have taken into account a number of adjustments and possible provisions, had the board been asked to determine whether Berri was able to declare and pay the required dividend in December 2005.

20 One of the adjustments and provisions contended for by Berri and San Miguel arises from claims made by ACI Operations Pty Ltd ("ACI") against Berri. ACI was Berri's contracted bottle supplier from May 2001 to May 2006.

21 The background to these claims is that ACI, after May 2006, had a contractual right to match a bona fide arms length offer from an alternative supplier under a "Meeting Competition Provision". Despite this contractual provision, Berri contracted with Brickwood Holdings Pty Ltd (Brickwood) in January 2004 for the supply of bottles. Between January 2004 and September 2005, ACI instituted and succeeded in a number of proceedings against Berri (the "ACI/Brickwoods dispute").**

**22 In the course of the trial, Ms P Thiagarajan, who appeared with Mr N Hopkins SC for San Miguel, sought to tender two documents through a witness, Ms Cecile de Ocampo. Ms de Ocampo at the relevant time was an executive occupying the position of Vice President of Corporate Planning of San Miguel.

23 Objection was taken to the admission of the documents into evidence by Mr D Gration, who appeared with Mr N Young QC for ICM.**

**24 The first document sought to be tendered at trial was a spreadsheet which appears to have been produced prior to 26 September 2005 (the "Spreadsheet"). The Spreadsheet appears to comprise various calculations as to estimated damages potentially payable by Berri to settle legal proceedings in respect of the ACI/Brickwoods dispute. The Spreadsheet comprises 5 pages of estimates and identifies no author.

25 The evidence given during the trial and taken in a voir dire discloses that the estimates were prepared by Mr Kop, the Chief Financial Officer of Berri. Mr Kop submitted the Spreadsheet to San Miguel for its consideration. However, other evidence discloses that some of the information contained in the estimates had its origin in a third party and was passed on to San Miguel which in turn passed it on to Mr Kop, after Ms de Ocampo adjusted some of the information, and that Mr Kop in turn made some further changes to the Spreadsheet and retuned it in its present state to San Miguel.

26 Consequently, the evidence discloses that the document was produced as a synthesis from various inputs from various persons who are as yet not fully identified.

27 The Spreadsheet was not put to Mr Kop. He was not asked where he obtained the information contained in the estimates, or how they were calculated or arrived at, or on whose opinions they were based, if not his own.

28 The parties did not dispute the proposition that the Spreadsheet was a business record for the purposes of s 69 of the Evidence Act 2008 (Vic) ("the Act).[1] I accept that the Spreadsheet is a business record of both San Miguel and Berri. I also accept the potential relevance of the Spreadsheet to the issues in dispute. However, these factors alone do not render it admissible.

29 Two provisions of the Act are referred to on the question of relevance.

30 Section 55(1) provides:**

The evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding.[2]

31 Section 56(1) provides:

Except as otherwise provided by this Act, evidence that is relevant in a proceeding is admissible in the proceeding.[3]

[Emphasis added]

**32 In this case, there are other provisions of the Act which can operate to exclude otherwise relevant evidence. Their purpose is to establish standards for the reliability of the evidence which have to be met before it is admitted. The onus of demonstrating the conditions of admissibility of evidence under the Act lies on the tendering party.[4]

33 The Spreadsheet was in part objected to because it offended the hearsay rule in the Act.

34 The "hearsay rule" is defined in s 59(1) of the Act as meaning:**

Evidence of a previous representation made by a person is not admissible to prove the existence of a fact that it can reasonably be supposed that the person intended to assert by the representation.[5]

35 Section 59(2) in turn provides:

Such a fact is in this Part [Pt 3.2] referred to as an asserted fact ...[6]

[Emphasis in added]

**36 However, s 69 of the Act creates an exception to the hearsay rule in relation to business records.[7] The spreadsheet was a business record of both San Miguel and Berri for the purposes of s 69.

37 But s 69 does not render business records as such admissible.[8] It concerns representations in a document which is or forms part of a business record within the meaning of s 69(1).[9] Although as a matter of convenient practice it is customary to apply an exhibit number to the whole of a document comprising a business record, a practice which may also serve to provide the context in which the representation was made, it is only the defined representations containing an asserted fact (or facts) which may be admitted into evidence. The representations are admissible if s 69(2) is satisfied.[10]

38 Section 69(2) provides:**

The hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made:

(a) by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, or

(b) 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.

[11]

**39 What here is the "asserted fact" relied upon by San Miguel in seeking to tender the Spreadsheet?

40 No representation in the nature of an "asserted fact" has been identified by San Miguel. The Spreadsheet on its face, together with its accompanying notes, consists of many calculations and explanations of those calculations. In the absence of any identification of the "asserted fact" or "facts" sought to be relied upon, the Court is not in a position to apply s 69(2)(a) or (b).[12]

41 Further, the evidence is unsatisfactory in identifying which person or persons had what involvement in the making of the "asserted fact" or "facts" contained in the Spreadsheet. For this reason too , the Court is not in a position to apply s 69(2)(a) or (b).[13]

42 The failure to define what representation was in fact relied upon, make it not possible to determine whether or not the representation was a statement of fact or opinion.

43 If it was in fact an opinion, the question also arises as to whether a statement of opinion in a business record must further comply with and pass through the gateway of ss 76-79 to be admissible.[14]

44 The Act distinguishes between evidence of an opinion and evidence of a fact about which the existence of an opinion is expressed. A suitably qualified medical practitioner may express an opinion that a person suffered from a rare form of dementia. Save for the case where evidence of an opinion is admitted because the existence of an opinion is relevant for other purposes, [15] the opinion in such a case may be admitted to prove, not that the medical practitioner held the opinion, but to prove as a fact that the person suffered from dementia.

45 So much is made clear by s 76(1) of the Act which provides:**

Evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed.[16]

**46 Thus s 76(1) creates an exclusionary rule. However, s 78 creates an exception to it.

47 Section 78 provides in respect of persons who are lay persons (in the sense of being non-experts):**

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.[17]

48 The purpose of s 78 in a practical sense is to permit the admission of non-expert opinion evidence which will have probative value. A detailed analysis of s 78 and its operation is contained in the judgment of Basten JA in Jackson v Lithgow City Council ("Jackson"), [18] where his Honour concluded:

Bearing in mind that the Evidence Act provides a separate mechanism for regulating evidence which is unfairly prejudicial, misleading or confusing, or which could result in time wasting (ss 135, 136 and 137), that which is 'necessary' should be understood as subject to a purposive interpretation, so that it will be effective, in practical terms, to permit the admission of non-expert opinion evidence which will have probative value.[19]

**49 Section 79 creates another exception in respect of expert opinion evidence. This exception is immaterial since it was not submitted that Mr Kop or any of the persons who contributed to the creation of the document were experts as defined in s 79(1).[20]

50 A question which arises is whether a statement of opinion in a business record also has to comply with ss 76-79.[21]

51 There is authority that it does not have to, ie that ss 76-79 apply only to evidence of opinions given by witnesses in court.[22] In ASIC v Rich[23] Austin J held that financial records of a corporation, admitted pursuant to the business records exception to the hearsay rule, were not subject to the opinion rule, which only operated with respect to opinion evidence given by a witness in court.

52 If this is so, a representation containing an asserted fact may be admissible if it is a business record and satisfies s 69.[24]

53 However, Basten JA in Jackson[25]doubted the statutory basis for the conclusion that ss 76-79 apply only to evidence of opinions given by witnesses in court.

54 The argument was considered, although not finally decided, in Lithgow City Council v Jackson ("Lithgow") where the High Court observed in powerful statement of obiter dicta:**

There are strong textual reasons supporting Basten JA's doubts and indicating that the conclusion is not merely to be doubted, but is wrong. Section 69 is in Pt 3.2 of the Act. Sections 76-79 are in Pt 3.3. Section 56(1) contemplates that relevant, ie otherwise admissible, evidence may be excluded by more than one exclusionary rule in Pts 3.2-3.11. One exclusionary rule is the hearsay rule. If evidence satisfies s 69, then by s 69(2) the hearsay rule does not apply. But s 69(2) does not provide that the evidence is admissible. It is only admissible if no other exclusionary rule applies. Section 76 excludes "[e]vidence of an opinion" - not "evidence by a witness of an opinion". There is no indication in any other provision in Pt 3.3 that it operates only in relation to the opinions of witnesses.[26]

[Emphasis added]

**55 Although the question was not decided in Lithgow because it was found that the representation in issue was not an opinion for the purposes of the Act, in my view, the doubt expressed by Basten JA as noted with approval by the High Court was correct and should be followed.

56 If it is assumed that any representation relied upon in the Spreadsheet did express an opinion, and a relevant one, the next question is whether the gateway considerations in s 78 have been satisfied.

57 In applying s 78(a) it must be possible to extract from what the person stating the opinion said, construed in context, that the opinion is about a "matter or event", and that it is "based" on what the person stating the opinion "saw, heard or otherwise perceived" about that matter or event. Without any definition of the representation relied upon, it is not possible to characterise the relevant "matter or event" about which the opinion is being expressed. If that is so, it is not possible to move the consider the second element of admissibility of a lay opinion found in s 78(b).

58 In this case, there is no basis to find that s 78 has been complied with to render any opinion evidence admissible as an exception to the exclusionary rule comprised in s 76.

59 For these reasons, the Spreadsheet which has been marked exhibit "1D6 for identification" cannot be admitted into evidence absolutely.**

**60 The second document in issue comprises notes of a meeting attended by Ms de Ocampo, on 12 November 2005, which notes were taken by her of the meeting (the "Notes").

61 Ms de Ocampo gave evidence of one element of the meeting that was recorded in the Notes. This concerned the composition of the proposed amount to be offered, namely a total of $8 million, of which $5 million was for the proposed acquisition of the Roxy plant, and $3 million was for the settlement of the ACI/ Brickwoods dispute.

62 I admitted the Notes of the meeting taken by Ms de Ocampo as "1D7 for identification". Objection was taken as to the opinions contained in what was apparently a business record.

63 The only apparent relevance of the document to San Miguel's case, and upon which it apparently seeks to rely, is the representation contained in the second bullet point on page three under the heading "Valuation", which was put to Ms de Ocampo to explain. This appears to record Ms de Ocampo's evidence as to the composition of the proposed amount to be offered, namely a total of $8 million, of which $5 million was for the proposed acquisition of the Roxy plant, and $3 million was for the ACI settlement and the basis of the latter calculation.

64 I will admit the Notes absolutely for this purpose, but confined to this purpose. To the extent that this part of the Notes records the meeting, and contains an opinion, I am satisfied it was an opinion based on what Ms de Ocampo saw, heard or otherwise perceived about the relevant matter or event, and evidence of the opinion is necessary to obtain an adequate account or understanding of her perception of the matter or event.

65 Should San Miguel seek to rely upon the Notes for any other purpose in the trial, in the light of the objection, it will be necessary for it to clearly identify the representation it seeks to rely upon contained in the notes and the evidentiary basis under the Act upon which it seeks to render any such further representation admissible.**

[1] Evidence Act 2008 (Vic) s 69.

[2] Evidence Act 2008 (Vic) s 55(1).

[3] Evidence Act 2008 (Vic) s 56(1).

[4] See: Lithgow City Council v Jackson [2011] HCA 36 [17] (French CJ, Heydon and Bell JJ).

[5] Evidence Act 2008 (Vic) s 59(1).

[6] Evidence Act 2008 (Vic) s 59(2).

[7] Evidence Act 2008 (Vic) s 69.

[8] Evidence Act 2008 (Vic) s 69.

[9] Evidence Act 2008 (Vic) s 69(1).

[10] Evidence Act 2008 (Vic) s 69(2).

[11] Evidence Act 2008 (Vic) s 69(2).

[12] Evidence Act 2008 (Vic) s 69(2)(a), (b).

[13] Evidence Act 2008 (Vic) ss 69(2)(a), (b).

[14] Evidence Act 2008 (Vic) ss 76-79.

[15] See: s 77 Evidence Act 2008.

[16] Evidence Act 2008 (Vic) s 76(1).

[17] Evidence Act 2008 (Vic) s 78.

[18] Jackson v Lithgow City Council [2010] NSWCA 136 [60]-[76].

[19] Jackson v Lithgow City Council [2010] NSWCA 136 [73].

[20] Evidence Act 2008 (Vic) s.79.1

[21] Evidence Act 2008 (Vic) ss. 76 - 79.

[22] Australian Securities and Investments Commission v Rich [2005] NSWSC 417; (2005) 216 ALR 320, 367-369 [208]-[218]; leave to appeal refused in Rich v Australian Securities and Investments Commission [2005] NSWCA 233; (2005) 54 ACSR 365, 367 [17].

[23] ASIC v Rich [2005] NSWSC 417; 191 FLR 385 [215]-[216].

[24] Evidence Act 2008 (Vic) s 69.

[25] Jackson v Lithgow City Council [2010] NSWCA 136 [59].

[26] Lithgow City Council v Jackson [2011] HCA 36 [19] (French CJ, Heydon and Bell JJ).