Idoport Pty Limited & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Limited & Market Holdings Pty Ltd v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited - [2000] NSWSC 1250 - NSWSC 2000 case summary — Zoe

NSWNSWSC

Idoport Pty Limited & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Limited & Market Holdings Pty Ltd v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited

[2000] NSWSC 1250

Supreme Court of NSW|2000-12-04|Before: Einstein J

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Source facts

Court

Supreme Court of NSW

Decision date

2000-12-04

Before

Einstein J

Source

Original judgment source is linked above.

Judgment (64 paragraphs)

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CITATION : Idoport Pty Limited & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Limited & Market Holdings Pty Ltd v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited [16] [2000] NSWSC 1250 FILE NUMBER(S) : SC 50113/98; 50026/99; 3991/00 HEARING DATE(S) : 28/11/00, 29/11/00, 30/11/00 JUDGMENT DATE : 4 December 2000

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Idoport Pty Limited (Plaintiff) Market Holdings Pty Limited (Plaintiff) PARTIES : National Australia Bank Limited (Defendant) Donald Robert Argus (Defendant)

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COUNSEL : JJ Garnsey QC, RC Titterton, R Alkadamani (Plaintiffs) TF Bathurst QC, JR Sackar QC, JA Halley (Defendants) SOLICITORS : Withnell Hetherington (Plaintiffs) Freehill Hollingdale & Page (Defendants) CATCHWORDS : Practice and Procedure - Objections to admissibility of statements - Standard Directions given to be applied to all objections taken to statements of over 130 witnesses. LEGISLATION CITED : Evidence Act 1995 Ampolex Ltd v Perpetual Trustee Co. (Canberra) Ltd, Supreme Court of NSW, unreported, Ashington Piggeries v Christopher Hill [1972] AC 441 Australian Broadcasting Corporation v XIVth Birtchnell v Equity Trustees Executors and Agency Co Ltd [1929] 42 CLR 384 Commonwealth Games Ltd (1988) 18 NSWLR 540 Codelfa Construction Pty Ltd v State Rail Authority (1981) 149 CLR 337 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1977) 138 CLR 423 CASES CITED : Gissing v Gissing [1971] AC 886 Heimann v The Commonwealth (1938) 38 S.R.(NSW) 691 H G v The Queen (1999) HCA 2 Prenn v Simmonds [1971] 1 WLR 1381 Reardon Smith Line v Hansen-Tangen (1976) 1 WLR Secured Income Real Estate (Australia) Ltd v St. Martins Investments Pty Ltd (1979) 144 CLR 596 Trust Company of Australia Ltd v Perpetual Trustees WA Ltd Supreme Court of New South Wales [Supreme Court of New South Wales unreported 18 Sep 1996] DECISION : DIRECTIONS ON ADMISSIBILITY GIVEN IN STANDARD FORM

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3991/00 IDOPORT PTY LIMITED ("JMG") v NATIONAL AUSTRALIA BANK Directions on admissibility 1 It is common ground that the statements sought to be relied upon in these proceedings are voluminous spanning over 130 witnesses. There are numerous objections to sections of those statements. Unless a practicable regime was set in place dealing seriatim with those objections, those objections would literally take months to work through. 2 In those circumstances the parties originally agreed to endeavour to throw up a number of examples of the evidentiary materials to which objection is taken so that rulings in principle could be given. It was hoped that once those rulings would be given, the parties would be able to agree upon the application of those rulings to many of the objections taken across the statements. Unfortunately the parties, but more particularly the defendants, took blanket objections to enumerable sections of the first statements for examination in a manner which failed to differentiate between the serious and substantive objections and the insubstantial objections. This has the result that the court is simply not able to work through just which objections should be treated as serious requiring careful attention and which other objections should be disallowed as a matter of course, without expending an enormous amount of time. Hence the Court must of necessity become involved in a case management regime to permit the calling of evidence to proceed without the proceedings becoming bogged down for months in the objection ruling area, in many cases without proper justification. 3 The purpose of these directions is to furnish an overview of the general approach to be taken to admissibility questions. Plainly these directions cannot be exhaustive and there are likely to be a number of further questions of principle requiring determination and in a number of instances objections to specific sections of statements which will require to be adjudicated upon. The Court is not however obliged to hear the parties on all objections before ruling on objections. 4 To my mind the court is in a position at particular points in time through the hearing to accommodate difficulties which the parties may wish to raise relating to questions of admissibility. The first and generally preferable such point in time is when the relevant witness, whether a witness for the plaintiffs or a witness for the defendants, assumes the witness box. 5 The second such point in time is at the point where the plaintiffs propose to close their case. At that point the defendants, if uncertain as to whether any and if so which portions of the plaintiffs' statements are to be regarded as admitted on which bases, may seek clarification of that matter. The same position will obtain where the defendants propose to close their case. Whilst I would certainly trust that that form of clarification in the vast majority of situations would not require or permit the party which had called the witness to obtain leave recall a particular witness on a question of admissibility, nor permit the other party to seek to further cross-examine a particular witness, I can foresee that there may be some circumstances in which some such exercise may in fact be required. 6 The final such point in time is during final address when submissions may be put by both parties as to admissibility on any specifically identified areas expressly reserved for determination in the final judgment. 7 It is convenient to commence by identifying the issues.

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Construction 14 A principal primary issue in the proceedings concerns the proper construction of the Consultancy Agreement and the Restructuring Agreement. 15 Both parties have addressed detailed submissions in the course of their opening addresses going to the principles which inform the circumstances in which and the reasons why the court may examine material extrinsic to written contracts for the purpose of construing those contracts. 16 It does seem to be tolerably clear from the authorities and accepted by the parties that extrinsic evidence is admissible to establish the subject matter with which a contract is concerned. It has been said that in a commercial contract it is right that the court should know the commercial purpose of the contract and that this in turn presupposes knowledge of the genesis of the transaction, the background, the context, and the market in which the parties are operating. The court is to place itself in thought in the same factual matrix as that in which the parties were. Hence evidence of the factual background known to the parties at or before the date of the subject contracts including evidence of the genesis and objectively the aim of the transaction may be admitted. [ Reardon Smith Line v Hansen-Tangen (1976) 1 WLR at 995-997 per Lord Wilberforce; Prenn v Simmonds [1971] 1 WLR 1381 at 1384-1385 per Lord Wilberforce; Secured Income Real Estate (Australia) Ltd v St. Martins Investments Pty Ltd (1979) 144 CLR 596 per Mason J at 606; Codelfa Construction Pty Ltd v State Rail Authority (1981) 149 CLR 337 per Mason J at 348; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1977) 138 CLR 423 at 429 per Mason, Stephen and Jacobs JJ] 17 The particular problem which requires to be treated with in these proceedings goes to evidence of prior negotiations. In this regard it must be borne in mind that the general test of objectivity is pervasive in the law of contract. The relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that parties words or conduct notwithstanding that he/she did not consciously formulate that intention in his/her own mind or even acted with some different intention which he/she did not communicate to the other party. [ Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549 per Gleeson CJ; Gissing v Gissing [1971] AC 886 per Lord Diplock; Ashington Piggeries v Christopher Hill [1972] AC 441 at 502 per Lord Diplock] 18 The particular focus here has been on whether and if so to what extent and upon the basis of what principle the court may admit into evidence: (1) communications passing between the parties prior to the entry into of the subject contracts or

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(c) that extrinsic evidence is admissible to show that the words which have one common English meaning were used in a sense peculiar to a particular business or industry. 23 There is then a question as to the principle which informs the extent of admissibility of evidence extrinsic to the written contract when a party pleads the existence of an implied term. In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981) 149 CLR 337 Mason J.(with whose judgment in this regard Stephen J. agreed) at 353 asserted that "in making the inquiry whether a term is to be implied the court is no more confined that it is when it construes the contract. For the implication of a term is an illustration of the process of construction, though differing from the more orthodox ascertainment of the meaning of a contractual provision". In expressing this view His Honour rejected the more restrictive approach to construction exemplified by the following statement of Jordan C.J. in Heimann v The Commonwealth (1938) 38 S.R.(NSW) 691 at 695: "In order to justify the importation into a contract of an implied term which is not to be found in the express language of the contract when properly construed, and is not annexed by some recognised usage, or by statute or otherwise, it is essential that the express terms of the contract should be such that it is clearly necessary to imply the term in order to make the contract operative according to the intention of the parties as indicated by the express terms. It is not sufficient that it would be reasonable to imply the term: Bell v Lever Brothers Ltd…It must be clearly necessary. And the test of whether it is clearly necessary is whether the express terms of the contract are such that both parties, treating them as reasonable men-and they cannot be heard to say that they are not-must clearly have intended the term, or, if they have not adverted to it, would certainly have included it, if the contingency involving the term had suggested itself to their minds…" [per contra Brennan J at 406 expressing the view that the above passage from the judgment of Jordan C.J. should be accepted as a correct statement of the principle] 24 The defendants in opening address have accepted that the plaintiffs have a legitimate entitlement to adduce evidence seeking to prove 'objective facts' known to the parties said to have had a bearing upon the implied term case sought to be propounded by the plaintiffs. 25 The plaintiffs however apparently seek to go further in having submitted in their opening address inter alia that they are entitled to adduce evidence of pre-contractual communications by the following route: "As containing statements or admissions as to the factual matrix of the Consulting Agreement and the Restructuring Agreement, including the subject matter of the Consulting Agreement and the Restructuring Agreement and the common assumptions of the parties to those agreements, and the background, object, context and commercial purpose of the Agreements, in the objective sense of what reasonable persons in the position of the parties would have had in mind to found the implications of terms implied in fact in the Consulting Agreement " [MFI P29 paragraph 3.5] 26 There may well be a tangible divide between on the one hand, the emphasis of the defendants upon the admissibility only of 'objective facts' known to the parties and on the other hand, the emphasis of the plaintiffs upon the admissibility of so-called 'common assumptions of the parties'. To give some tangible examples, (a) a question may arise as to whether or not the perceived value of the shares and intellectual property rights assigned under the Restructuring Agreement (assuming there to have been such perceived value) may be said to have been a matter of fact objectively known to the parties or a so called 'common assumption of the parties'. (b) a question may arise as to whether or not matters such as the importance of and/or ease of adding additional modules to the Ausmaq Service may be said to have been matters of fact objectively known to the parties or to have been common assumptions of the parties. 27 If, as I doubt, the plaintiffs have in mind an argument that the Court ought regard as admissible, evidence of the privately reached [in the sense of non communicated] subjective states of mind of the parties as to hoped for benefits to be obtained following the entry into of a contract, I make plain that at this stage in this interlocutory judgment I find difficulty with this proposition. A close question may however arise as to the admissibility of evidence, as for example a contemporaneous note, which is relevant to the issue of whether or not the parties in fact had a communication about such a matter. These are however the very type of admissible issues which in my view are appropriate for adjudication only on the occasion of the handing down of a final judgment. 28 In the result it will be necessary in the final judgment for the court to identify in respect of particular documents and conversations, the extent to which, if at all, this evidence is to be admitted on areas going to contractual construction. To my mind it is not presently necessary that this decision be made at this early stage in the proceedings particularly as later evidence may arguably bear upon the admissibility questions.

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48 As a matter of case management the notion that the court must at this stage in the proceedings separately, in relation to the numerous paragraphs of the statements of Mr Maconochie which are objected to, identify precisely how the evidence sought to be adduced in each such paragraph may or may not be admissible against each of the six individual defendants, and for what reason and related to what particular position which was occupied by that defendant, is to my mind misconceived. This is not however to say that at the end of the day these paragraphs are all necessarily to be admitted against each of the individual defendants or taken to prove that those defendants had knowledge of particular events or knew or believed that their actions involved inducing corporate defendants to breach contract or that they were recklessly indifferent in that regard or that they were party to particular strategy or course of conduct by way of participating in breaches of fiduciary obligation. Here again to my mind the common sense approach and arguably the only practicable approach to dealing with admissibility matters presently is to reserve on the question of admissibility of this material until at an appropriate point in the case, particular admissibility questions can be further argued. This may well occur in final address. It may occur prior to final address. My preference would be for the rulings to be given when the witness assumes the witness box because on this date both sets of counsel are focussed on the significance of the particular witnesses proposed evidence and the cross examiner may be expected to be in a position to withdraw a number of objections and to be in a position to point to the substantive objections which are to be pressed and require immediate rulings. The fact that each of the individual defendants has now filed and served a detailed statement setting out that person's involvement and knowledge of material matters simply means that, as a matter of reality, the plaintiffs have the means of proving certain parts of their case by tendering parts of those statements as necessary. And where the vital questions of the plaintiffs making good as part of their case, the knowledge of facts or states of mind of individual defendants or motivation of and intent of individual defendants, come to be dealt with, it will clearly be necessary for the plaintiffs during the proceedings to prove those matters on admissible grounds as against the individual defendants.

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Challenges to the expertise of particular witnesses 51 I intend to follow the approach taken by McLelland CJ in Eq., in Trust Company of Australia Ltd v Perpetual Trustees WA Ltd Supreme Court of New South Wales [Supreme Court of New South Wales unreported 18 Sep 1996], which was as follows: · To first examine the training, study or experience of the witness ; · To next examine whether the witness has been shown to have specialised knowledge based upon that training, study or experience · To then outline the extent to which the witness has been shown to be entitled to express opinions based wholly or substantially on the specialised knowledge which has in turn been shown to have been based on his or her training, study or experience. Hence His Honour said: "I consider that [the witness], has been shown to have specialised knowledge based on his training and experience... which qualifies him to express opinions on matters of the following descriptions which do appear in his report [and his Honour then set out the particular areas in respect of which the expert evidence was to be admitted]. 52 In so far as any particular witness may have expressed opinions in any report : (a) on matters going beyond those descriptions those opinions not having satisfied the criteria set out in section 79 of the Act, will not be admitted into evidence. (b) which are arguably borderline in terms of whether or not they are opinions on matters going beyond those descriptions, I intend to determine whether it is appropriate to refuse to admit them in the exercise of the court's power under section 135 or 136 of the Act, assuming for the purposes of that exercise, that they are opinions which do not go beyond those descriptions. 53 As a general matter the court remains entitled: (a) even if ruling that a witness has expressed opinions on matters which fall within the descriptions and has therefore satisfied the criteria set out in section 79, utilise its powers under section 135 or 136 of the Act to refuse to admit the evidence (b) even if ruling that a witness has expressed opinions on matters going beyond those descriptions, those opinions not having satisfied the section 79 criteria, to hold that should such ruling be incorrect, the court would have utilised its powers under section 135 or 136 of the Act to refuse to admit the evidence 54 I note in this regard that in H G v The Queen (1999) HCA 2, Gleeson CJ said: 'By directing attention to whether an opinion is wholly or substantially based on specialised knowledge based on training, study or experience, the section requires that the opinion is presented in a form which makes it possible to answer that question.' [at para 39] [citing the approach by McLelland CJ in Eq. taken in Trust Company of Australia Ltd] 55 Gleeson CJ pointed out that in trials before judges alone, as well as in trials by jury, it is important that the opinions of expert witnesses be confined, in accordance with section 79, to opinions which are wholly or substantially based on their specialised knowledge. As his Honour said at paragraph 44: 'Experts who venture "opinions", (sometimes merely their own inference of fact), outside their field of specialised knowledge, may invest those opinions with a spurious appearance of authority, and legitimate processes of fact finding may be subverted.'] 56 In so far as any particular witness may have expressed opinions in any report on matters going beyond those descriptions, I intend to determine whether it is appropriate to refuse to admit them in the exercise of the court's power under section 135 or 136 of the Act, assuming, without deciding, that they would be admissible under section 79 of the Evidence Act. 57 Subject to the above considerations which are intended to protect both parties from any unfairness in relation to a blanket approach taken to admissibility, it seems to me that the following may be the most convenient and practicable approach to conversations, documents and statements of the subjective state of mind or opinions of witnesses.