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

Supreme Court of NSW|2001-06-27|Before: Einstein J, Mr J

CITATION : Idoport Pty Limited & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Ltd & Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited [28] [2001] NSWSC 529 FILE NUMBER(S) : SC 50113/98; 50026/99; 3991/00 HEARING DATE(S) : 22/06/01 JUDGMENT DATE : 27 June 2001

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

COUNSEL : Mr M Dicker, Mr R Titterton and Mr R Alkadamani (Plaintiffs) Mr J Halley and Ms K Williams (Defendants) SOLICITORS : Withnell Hetherington (Plaintiffs) Freehills (Defendants) CATCHWORDS : Practice and Procedure - Lay statements of opinion - S.78 Evidence Act - Principles - If a witness's "perception of a matter or event" is relevant, evidence of that perception is admissible - and if evidence of that person's opinion is necessary to obtain an adequate account or understanding of his or her perception, then an opinion based on what that person saw, heard or otherwise perceived about the matter or event is admissible as exception to the opinion rule - There is a clear difference between on the one hand, experts called who were not in earlier years, in any way involved as contemporaneous witnesses and on the other hand, persons not qualified as S.79 experts, but who can give S.78 evidence of a contemporaneous nature as to their then perceptions. - S.135 discretions LEGISLATION CITED : Evidence Act 1995 Trade Practices Act 1974 Allstate Life Insurance Company v Australia and New Zealand Banking Group Limited (No 5 ) (1996) 64 FCR 73; (No 32) (at FCR 75) Guide Dog Owners and Friends Association vs Guide Dog Association of New South Wales (1998) 154 ALR 527 Hughes Aircraft Systems International v Air Services Australia (1997) 80 FCR 276 CASES CITED : Hughes Aircraft Systems International v Airservices Australia (No 3) (1998) ATPR 41-612 Quick v Stoland Pty Ltd (1998) 157 ALR 615 R v Harvey (CCA (NSW), 11 December 1996, unreported) R v Leung and Wong (1999) 47 NSWLR 405 R v Panetta (CCA (NSW), 2 October 1997, unreported), DECISION : Rulings on admissibility given.

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION - COMMERCIAL LIST

50113/98 IDOPORT PTY LIMITED & ANOR v NATIONAL AUSTRALIA BANK LIMITED & 8 ORS

50026/99 IDOPORT PTY LIMITED & ANOR v DONALD ROBERT ARGUS

3991/00 IDOPORT PTY LIMITED ("JMG") v NATIONAL AUSTRALIA BANK LIMITED

JUDGMENT- on section 78 issues relating to evidence of Mr Ling 1 The defendants have taken a number of further objections to paragraphs in the two statements [6 July 2000; 25 May 2001] made by Mr Heino Eric Ling. 2 These are generally statements of Mr Ling's subjective state of mind at material times. 3 The paragraphs are not pressed by the plaintiffs as section 79 Evidence Act statements of opinion. Nevertheless the defendants submit that the subject paragraphs either fall outside the ambit of section 78 of the Act or should be rejected under one or other of the three sub-paragraphs of section 135 of the Act. 4 It is necessary to recall the principal provisions of the Act which are relevant to these objections: "Section 55 (1) The evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally and affect (directly or indirectly) the assessment of the existence of a fact in issue in the proceedings……..

Section 56 (1) Except as otherwise provided by this Act, evidence that is relevant in a proceeding is admissible in the proceeding

Section 56 (2) Evidence that is not relevant in the proceeding is not admissible……

Section 76 (1) Evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed

Section 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

………. Section 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

(c) cause or result in undue waste of time" 5 The expression "probative value", used in section 135, is defined in the dictionary to the Act as follows: "Probative value of evidence means the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue." 6 It is important to note that the word "opinion" is not defined in the Act. In an address delivered in February 1999 [(1999) 18 Australian By Review 1 to 2], Heydon QC [now Heydon JA] identified several decisions of the Federal Court which applied the common law definition as stated by Wigmore: "… an inference from observed and communicable data" [see for example Lindgren J. in Allstate Life Insurance Company v Australia and New Zealand Banking Group Limited (No 5 ) (1996) 64 FCR 73; (No 32) (at FCR 75). 7 Allstate relevantly concerned reliance evidence that had the witness known of certain facts (which had not been known at the time - which non disclosure formed the basis of a Trade Practices Act section 52 count), the witness would not have acted in a particular way. Allstate [No 5] involved the admissibility of a statement by an employee of Colonial Management Associates Inc. He had recommended that certain funds managed by Colonial be invested in debentures owned by Linter Textile. The Court admitted evidence that had the witness known that it was intended that Linter Textiles was to give certain guarantees to banks, he would not have given the recommendation. 8 The point about the admission of this statement into evidence is Lindgren J's holding that it was not 'opinion' evidence. It was rather 'direct' evidence from the person uniquely placed to give it of what that person would have done in a hypothetical situation. As Heydon QC pointed out: "[Lindgren J.] admitted the evidence….. He said that the aversion of the common law to evidence of opinion is based on the concern of the common law to receive the most reliable evidence. Reliance evidence of the type under consideration was reliable in the sense that where the issue is what a person would have done in a situation different from that which actually occurred, the person in question is better qualified than all others to give evidence on the matter." 9 Three cases which applied the common law definition of "opinion evidence" are Hughes Aircraft Systems International v Air Services Australia (1997) 80 FCR 276; Guide Dog Owners and Friends Association vs Guide Dog Association of New South Wales (1998) 154 ALR 527 and Quick v Stoland Pty Ltd (1998) 157 ALR 615 at 617 per Branson J. 10 In Guide Dog Owners Sackville J. made the point that: "As the Law Reform Commission acknowledged, the distinction between evidence of fact and evidence of opinion is often artificial, albeit one that is unavoidable: ALRC 26, Vol 1, paragraph 738" 11 The Australian Law Reform Commission gave this explanation for the proposal which led to the enactment of section 78 [Law Reform Commission, Evidence (Report No 26, 1985) paragraphs 739-740]: "739. Exception-Lay Opinion Evidence . At present lay opinion evidence is conventionally said to be inadmissible unless it fits within an apparently anomalous miscellany of "exceptions". The main factors that these share are that they can be said to be short hand expressions of fact based on the witness perceptions and that it has been seen by the courts as convenient to allow the expression of opinion in their case rather than to insist upon a lengthy, and possibly not particularly helpful, recitation of facts. The ultimate criterion for admission of opinion evidence should be whether it will assist the trier of fact in understanding the testimony, or determining a fact in the issue . To be of the requisite assistance, the lay opinion evidence must be based on the witness' personal perception of a matter or event. Against the admission of such evidence must be balanced time and cost factors, the danger of the evidence misleading or confusing the tribunal of fact and the possibility of being more prejudicial than probative . Thus, it is proposed to admit lay opinion testimony where it is based upon the personal perception of the witness and it is necessary to obtain an adequate account of his perceptions . 740. The proposal, therefore, revives the original rationale based on the distinction between opinion based on the witness' perception and mere uninformed speculation. Consideration was given to including the express requirement that the opinion be rationally based. Arguably, however, this is the way the clause would be interpreted. If it is not, the second requirement - that it be necessary to obtain an adequate account of the witness' perception of the relevant event - should provide sufficient protection. It has been suggested to the Commission that the Canadian Task Force provision be followed-that the test be that the giving of evidence of opinion "be helpful either to the eyewitness in giving a clear statement or to the trier of fact in determining an issue". It is thought, though, that the standard of "helpfulness" is too low. It is important that witnesses give evidence as closely connected to their original perception as is possible to minimise inaccuracy and encourage honesty. In addition, the term "helpful" said such a low threshold and is so flexible that it would be impossible for appellate courts to exercise any real control over the exercise of the power" [footnotes omitted] [emphasis added] 12 In Guide Dog Owners Sackville J expressed the view with which I agree, that the above passage suggests that section 78 should not be given a narrow meaning, founded as it is on the distinction between opinion based on the witness' perception and "mere uninformed speculation". His Honour also observed that although the few authorities on the scope of the section were consistent with this view, they had not been slow to invoke the exclusionary rules or powers contained in the Act. 13 The judgment of Sackville J. in Guide Dog Owners continues at 531 as follows: "The following propositions appear to have been adopted in relation to section 78: (1) Section 78 is concerned only with the non-application of the opinion rule. If evidence cannot be characterised as opinion evidence, neither section 76 nor section 78 of the Act applies: All State Life Insurance Co v Australian & New Zealand Banking Group Limited (No 32) (1996) 64 FCR 73 at 75; Hughes Aircraft Systems International v Airservices Australia (No 3) (1998) ATPR 41-612 (Federal Court, Finn J) at 40, 712-40, 713 (a case in which the exclusionary power in section 135 of the Act was exercised) (2) Section 78 substantially alters the common law, by permitting lay opinion to be given by a person whose opinion is based on what the person saw, heard or otherwise perceived about a matter or event. While lay opinion evidence was admissible in certain classes of cases under the common law (see Cross on Evidence (5th Australian edition, 1996) para 29090), section 78 expands the scope for such evidence: R v Panetta (CCA (NSW), 2 October 1997, unreported), at 4, per Hunt CJ at CL

(3) As foreshadowed by the Law Reform Commission, section 78 should be construed as requiring a rational basis for the opinion before it becomes admissible: R v Panetta, at 5. Such a requirement is imposed through sections 55 and 56 of the Evidence Act. (4) Section 78 permits the opinion to be admitted without there being evidence of the primary facts upon which the opinion is based, although the absence of such evidence may accept the weight to be given to the opinion: R v Harvey (CCA (NSW), 11 December 1996, unreported) at 5, per Beazley J (another case in which the evidence was excluded on the ground that its probative value was outweighed by its prejudicial effect)" 14 The plaintiffs also drew attention to the judgment of Simpson J in R v Leung and Wong (1999) 47 NSWLR 405 at paragraphs 27 to 33 where the following appears: "27 "The opinion rule" referred to in the opening words of the section is contained in s 76 , by which, subject to exceptions provided in the ensuing sections, opinion evidence is generally declared inadmissible.

28 The purpose of s 78 is, in my view, limited. The section must be read in the light of s 56 , by virtue of which evidence that is relevant in a proceeding is admissible and evidence that is not relevant is inadmissible. The focus of s 78 is (relevant) evidence of "a matter or event" as perceived by "a person" (the witness). Where (but only where): (i) evidence of that person's opinion is necessary to obtain an adequate account or understanding of his or her perception of that matter or event; and

(ii) the opinion is based on what he or she saw, heard or otherwise perceived about the matter or event;

29 S 78 has no application unless: (i) there is a "matter or event" relevant to the proceeding;

(ii) the matter or event is perceived by the witness;

(iii) the witness has formed an opinion based on what he or she saw, heard or otherwise perceived about the matter or event; and

(iv) evidence of the opinion is necessary to obtain an adequate account or understanding of the witness's perception of the matter or event. 30 Put another way, if a witness's "perception of a matter or event" is relevant, evidence of that perception is admissible; and if evidence of that person's opinion is necessary to obtain an adequate account or understanding of his or her perception, then an opinion based on what that person saw, heard or otherwise perceived about the matter or event is admissible as exception to the opinion rule .

31 Necessarily implicit in the section is the requirement that evidence of the witness's "perception of a matter or event" be admissible; to be admissible it must, inter alia, be relevant (s56); if, in order to obtain an adequate account or understanding of the witness's perception of the matter or event, evidence of the witness's opinion is necessary; and if that opinion is based on the witness's visual, aural or other perception: then the opinion rule does not operate to exclude evidence of the opinion. The starting point is identification of the "matter or event" which must be relevant to the proceeding. The questions are:- (i) what is the "matter or event" relevant to the proceeding?

(ii) has the witness seen, heard or otherwise perceived something about the "matter or event"?

(iii) has the witness formed an opinion based on what he/she saw, heard or otherwise perceived about the matter or event?

(iv) is evidence of that opinion necessary to obtain an adequate account or understanding of the witness's perception of "the matter or event"?

32 Only if questions (ii), (iii) and (iv) are all answered affirmatively does the opinion rule not operate to exclude the evidence of opinion. 33 Put more simply, s 78 is designed to permit evidence of opinion that would facilitate the understanding of evidence otherwise relevant and admissible. The section assumes that the matter or event as perceived by the witness is relevant to the proceeding. That is the primary evidence. The opinion evidence is admissible as incidental to an understanding of the primary evidence." [emphasis added] 15 These general propositions of principle to which the defendants assented, are also to be noted in seeking to delineate the proper approach to section 78 of the Act.

The position of Mr Ling 16 As must be plain, questions such as those dealt with in the above authorities must ultimately be considered in the light of the particular facts and circumstances which obtain in respect of any given piece of evidence sought to be given in particular proceedings. 17 Mr Ling is a witness who had a particular involvement in the financial planning industry during a number of the years which are of relevance to the issues in these proceedings. His interest in the Ausmaq Service appears to have been generated whilst he was initially employed by a subsidiary of Pembroke Financial Planning Ltd and later Group General Manager of Godfrey Pembroke, an executive director of Godfrey Pembroke Financial Services Ltd, managing director of Heritage Management Ltd and director and General Manager of Godfrey Pembroke Ltd. 18 Mr Ling seeks to give evidence that he was present at a presentation of the Ausmaq Service in late 1995 or early 1996 and on a number of occasions had conversations with various persons in relation to the Ausmaq Service. At one stage the possibility of a joint venture between OneSource and Ausmaq is said to have been the subject of discussions and Mr Ling also seems to give evidence of a number of conversations which he is said to have had with Messrs Matthews, McKinnon and Moore. 19 Generally Mr Ling seeks to give evidence of his perceptions when he first encountered the Ausmaq Service and as to the extent to which, to his mind, with the inception of OneSource, it became attractive to Godfrey Pembroke. Mr Ling also apparently carried out private consulting work with Ausmaq at a particular point in time. 20 The point is, as Mr Dicker submitted, that one of the issues which is relevant to the plaintiffs' case concerns the perception of persons in the market as to the importance of a number of sub-parameters now in focus and going to the Ausmaq value proposition. An example of one of those factors concerns the then perception of persons in the market as to the importance of partial units in terms of the Ausmaq value proposition. 21 Whether there were ways around this perceived inability of Ausmaq to deal in partial units is a clear issue in the case. And it simply cannot be gainsaid that there is a clear difference between on the one hand, experts now called on both sides of the record dealing with parameters of the Ausmaq value proposition, but who were not in earlier years, in any way involved as contemporaneous witnesses and on the other hand, persons not qualified as s.79 experts, but: (a) who participated in those earlier years in the industry; and (b) who can give evidence of a contemporaneous nature as to their then perceptions and, subject to admissibility issues, as to the perceptions of others which were then communicated to them. 22 This is not to say that no lay opinion may ever be admitted save as expressed in terms of a contemporaneous opinion. The question must be addressed on an instant specific basis and as appropriate the ruling must take into account any applications for section 135 rulings. 23 As to the admissibility of evidence of a contemporaneous nature as to the perceptions of other persons communicated at the time of the subject events to the witness now giving evidence, the words "matter or event" in section 78 are sufficiently wide to embrace such evidence. A particular contemporaneous statement by a third party to the witness may have led to the witness then forming an opinion as to the point of view/opinion of the third party. If that third party's statement is appropriately defined as " a matter or event relevant to the proceeding", and if (a) the witness heard that matter or event, and (b) the witness formed an opinion based on what the witness heard or otherwise perceived about the matter or event and (c) evidence of the witness's opinion is necessary to obtain an adequate account or understanding of the witness's perception of the matter or event, section 78 is satisfied and the opinion rule is excluded. It becomes clear from this line of reasoning that as one moves away from contemporaneous subjective opinions formed by the witness about matters or events concerning tangible factual issues and into the realm of contemporaneous subjective opinions as to the contemporaneous subjective opinions of third parties, the danger of uninformed speculation increases dramatically. The handmaiden of that increased danger would appear to be each of the section 135 (a), (b) and (c) discretions. 24 The hearsay rule would not appear to apply to exclude the evidence of the third party's statement because the evidence of that statement is relevant for a purpose (to prove that the third party had the relevant point of view/opinion) other than proof of the fact intended to be asserted by the representation-section 60.

The principal topics in respect of which the defendants object to the evidence of Mr Ling 25 The principal topics in respect of which the defendants take their present objections are as follows: (a) technical and expert issues concerning superannuation and systems development; (b) "partial" units and their impact on the liability of the Ausmaq System; (c) the value proposition to key participants of the Ausmaq System; and (d) a broad collection of issues described as pricing and fees issues, transaction processing and the nature of the Ausmaq System as a trading service.

Relevance 26 Generally, I reject the defendants' submissions to the effect that the opinions in respect of which the defendants have taken objection could not rationally affect (directly or indirectly) the assessment of the probability of the evidence of a fact in issue in the proceedings and hence should be ruled inadmissible.

Admissibility under section 78 27 Generally I reject the defendants' submissions that: "even if the opinions sought to be expressed by Mr Ling are relevant, they are not admissible under section 78 of the Act because either they are not based on what Mr Ling saw, heard or perceived about matters at the relevant time and/or they are not necessary for the court to obtain an adequate understanding of Mr Ling's perception of events (to the extent that his perception is relevant)."

To my mind, it is particularly in the area of whether the Court should refuse to admit evidence in the exercise of a section 135 discretion, that special attention requires to be given to an attempt by a lay witness to express an opinion which had not been formed contemporaneously with the events in question but which appears to have been formed as at the time of the making of the witness statement. Whilst depending always of course on context, it may commonly be the case that opinions of the first type reached contemporaneously with the events in question may not be rejected by application of a section 135 discretion, there is generally far more scope for utilising such discretions in rejecting opinions apparently formed at the time when the evidence is filed for the purpose of the proceedings. 28 This is not to suggest that the anterior question of admissibility under Section 78 should not also take into account the contemporaneity of opinions sought to be expressed by lay witnesses.

Statement of Mr Ling - 6 July 2000 29 I allow the second third and fourth sentences of paragraph 13. The sentences are allowed as expressions of opinion contemporaneously held. In my view it is inappropriate to refused to admit any of this evidence on any of the grounds to be found in section 135 of the Act. 30 I allow the word "trading". I reject the words "although it could have been used in superannuation" in paragraph 20. The lack of detail to my mind makes the probative value of the evidence substantially outweighed by the danger that the evidence might be unfairly prejudicial to the defendants. 31 As to paragraph 25, I allow the second and third sentences. 32 As to paragraph 35, I allow the third and fourth sentences. 33 As to paragraph 39, I allow the third and fourth sentences. 34 As to paragraph 42, I allow the words from "for the reasons…39" 35 As to paragraph 43, I reject the second sentence. 36 As to paragraph 44, I read the expressions of opinion in the second sentence as a contemporaneous expression of opinion. The problem and alternative solutions to it appear to have been considered at the time. A first blush reaction is to the absence of specificity of the reasoning underlying the expression of opinion. That matter is now corrected in paragraph 16 of the second statement of Mr Ling. But for that further paragraph I would have been disposed to reject the second sentence of the first statement on the basis that its probative value was substantially outweighed by the danger that the evidence might be unfairly prejudicial to the defendants. I would however have held that if the plaintiffs could mobilise evidence by way of procuring that detail, this could have been adduced from Mr Ling in the witness box. I am satisfied that the matter has now been sufficiently addressed by paragraph 16 in the second statement. The second sentence of paragraph 44 of the first statement is therefore allowed. 37 In the same paragraph, I allow the words "as an observer…..in Australia" 38 As to paragraph 45, I allow the first and second sentences. 39 As to paragraph 45, I allow the penultimate sentence.

Statement of Mr Ling - 25 May 2001 40 As to paragraph 12, I reject this paragraph. As a matter of form, the opinion appears to be one reached as at the date of making the statement. And in any event, the probative value of the evidence sought to be adduced by the paragraph is substantially outweighed by the danger that the evidence might be unfairly prejudicial to the defendants. 41 As to paragraph 13, I reject this paragraph. 42 I allow paragraph 16. 43 As to paragraphs 21, I allow the last sentence. "It was" suggests a contemporaneous opinion. 44 As to paragraph 31, I allow the word "perceived" which is now explained by paragraphs 44 and 45 of the first statement. 45 As to paragraph 56, I allow the words "which I have previously explained at paragraph 16". 46 As to paragraph 95, I allow the second sentence. 47 As to paragraph 98, I reject the words "of Mr Nelson" and allow the balance.

Formal marking of the above rulings 48 Insofar as the above rulings deal with statements of opinion the approach being taken is to use the expression "Sub/Op".

Section 135 Discretions 49 I have taken into account all of the defendants' submissions seeking to invoke the Court's exercise of the section 135 discretions and seeking orders refusing to admit the sentences which were objected to. Save to the extent expressly acceded to above, the Court's decision on s.135 discretions is to decline to refuse to admit the relevant sentences on any of these bases.

Oral Evidence - 22 June 2001 - transcript 10691.50-10692.05 50 A ruling was reserved in relation to the admissibility of oral evidence of Mr Ling given on 22 June 2001 at transcript 10689.28-.30 supplementing paragraph 61 of the statement dated 25 May 2001. The objection was taken to part of the answer namely the words: "… it should be reasonably simple to incorporate one system into the other where they're using the same underlying system" 51 The following question and answer made it clear that the answer to the previous question represented the view held at the time by Mr Ling. 52 I allow the above described part of the answer which will stand as part of the transcript.

Admissibility of hearsay evidence 53 The Court has not yet ruled on the admissibility of paragraph 16 of Mr Ling's statement of 6 July 2000. The paragraph is objected to as inadmissible hearsay evidence. The defendants have submitted that a close reading of paragraph 16 confirms that Mr Matthews had resigned from the NAB prior to the conversation with Mr Ling which is referred to. The defendants submission is that the paragraphs should be admitted as " A Conv" only against all defendants and that the plaintiffs be granted leave to revisit this ruling if they adduce evidence to establish that Mr Matthews was still employed by the Bank at the time of the conversation. The submission is of substance and the court ruling is that suggested by the defendants.

I certify that paragraphs 1 - 53 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 27 June 2001

  Susan Piggott
  Associate

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Judgment (41 paragraphs)

Cases Cited (5)