NMFM Property Pty Ltd v Citibank Ltd

REASONS FOR JUDGMENT (No 8) (ruling on right to cross-examine and sequence of cross-examinations) 1 Yesterday afternoon, Mr Loxton of counsel called the first of his clients to give evidence. This was the fifteenth cross-respondent, Rommel Hacopian. His evidence in chief was in affidavit form. After the reading of his affidavit, questions arose as to whether Mr Kelly SC for the applicants (I will refer to them loosely, both individually and collectively, as "NM") should be allowed to cross-examine Mr Hacopian, and, if so, whether he should be required to cross-examine before Mr Rayment QC, senior counsel for the respondent ("Citibank"). 2 Citibank submitted that NM and Mr Hacopian were in the same interest and that Mr Kelly should be permitted only to lead evidence in chief from him. In the alternative, and for the same reason, Citibank submitted that Mr Kelly should be obliged to cross-examine first. 3 I ruled that Mr Kelly should be at liberty to cross-examine Mr Hacopian and to do so after Mr Rayment, but I reserved leave to Citibank to raise the matter again upon the resumption of the hearing this morning. Citibank has raised the matter again pursuant to that leave. 4 It is necessary to say a little about the background. NM paid $10,240,440 to 132 individuals or couples ("the Investors") who had invested in a "Negative Gearing Package". Citibank lent them money which constituted part of the funds they used for that purpose. They borrowed the remainder from NM. At an earlier stage NM and the Investors sued Citibank as first respondent, Lance Kelly Financial Management Pty Limited ("LKFM") as second respondent, its "principal" Lance Kelly ("Kelly") as third respondent, Dennis Jones & Company Pty Limited ("DJC") as fourth respondent, its principal Dennis Jones ("Jones") as fifth respondent and American Home Assurance Company ("AHA") as sixth respondent, for contribution or indemnity. NM claimed that LKFM, Kelly, DJC and Jones had, by their acts as agents for NM, caused NM to incur liability to the Investors in respect of which NM had, acting reasonably, settled with them by paying them the compensation money referred to earlier. NM claimed that AHA was the liability insurer of DJC and Jones and claimed against AHA under s 6 of the Law Reform (Miscellaneous) Provisions Act 1946 (NSW). 5 Citibank cross-claimed for contribution or indemnity against, relevantly, LKFM, Kelly, DJC, Jones, the present fifth, sixth, eighth to eleventh, fourteenth to eighteen and twentieth cross-respondents who had been associated at different times and in different ways with one or more of LKFM, Kelly, DJC, Jones (I have not been able to think of an entirely satisfactory expression to describe all those individuals and will use the expression "the Kelly/Jones Associates" without prejudging any of the relationships involved) and AHA. In their defences at that time to Citibank's cross-claim, relevantly the Kelly/Jones Associates (including Mr Hacopian) claimed that NM should fail against Citibank (and so Citibank should fail on its cross-claim against them) because, inter alia, NM had, in substance, been well aware of, and acquiesced in, the alleged making of representations by LKFM, Kelly, DJC, Jones and the Kelly/Jones Associates to induce the Investors to enter into the Negative Gearing Package. 6 I need not discuss the role of the present nineteenth cross-respondent or the present second and third cross-claims. 7 In November 1997, a deed of settlement was entered into between NM and AHA which led to a radical reconstitution of the proceeding. AHA agreed to pay $6,000,000 to NM. NM agreed, upon payment, to discontinue against LKFM, Kelly, DJC, Jones and AHA, leaving Citibank alone as respondent. NM and AHA agreed to bear their own respective costs of the proceeding and of the deed. AHA agreed to provide reasonable assistance to NM in the further conduct of the proceeding and to do other things to assist NM's cause. 8 Clauses 14 and 15 of the deed of settlement are of particular importance for present purposes. By cl 14, NM indemnified AHA: "and/or its insureds and/or alleged insureds against and in respect of: (a) any liability, demand or claim by any party against AHA or any of its insureds arising out of or in connection with" the Negative Gearing Package or the facts or issues or both the subject of the proceeding. By cl 15, NM indemnified AHA and any of its "insureds and/or alleged insureds" against, and in respect of, any amounts which AHA or any of its "insureds and/or alleged insureds" might be held liable on any cross-claim to pay to Citibank by way of contribution towards, or indemnity in respect of, any award obtained by NM against Citibank. 9 It was after the deed of settlement of November 1997 that NM ceased to pursue all respondents other than Citibank. Moreover, the defences to Citibank's cross-claims ceased to make positive allegations against NM of the kind referred to above, and, in substance, merely did not admit Citibank's liability to NM. 10 Moreover, NM's legal representatives appear for Kelly and Jones as, respectively, second and fourth cross-respondents and second and third cross-claimants. Although the Kelly/Jones Associates are independently represented, NM is paying their legal costs in defending Citibank's cross-claim. 11 Although it may appear on the face of the record that Mr Hacopian's hope is that NM will fail against Citibank, and, only as a secondary alternative, that Citibank will fail on its cross-claim against him, the substance of the matter is that since he enjoys a complete indemnity by NM and his costs are being paid by NM, he does not have a significant interest in the result of the proceeding. Perhaps he would prefer not to suffer a judgment against him on the cross-claim, but because of the deed, the reality is that even in such a case he would not have to pay a cent to anyone. 12 Sections 11(1), 26 and 42 of the Evidence Act 1995 (Cth) ("the Act") bear directly on the present two issues. They provide, relevantly, as follows: "11(1)The power of a court to control the conduct of a proceeding is not affected by this Act, except so far as this Act provides otherwise expressly or by necessary intendment. 26. The court may make such orders as it considers just in relation to: (a) the way in which witnesses are to be questioned; and (b) ..................................................................................... ; and (c) the order in which parties are to question a witness ; and (d) ........................................................................................... ." "42(1)A party may put a leading question to a witness in cross-examination unless the court disallows the question or directs the witness not to answer it. (2) Without limiting the matters that the court may take into account in deciding whether to disallow the question or give such a direction, it is to take into account the extent to which: (a) evidence that has been given by the witness in examination in chief is unfavourable to the party who called the witness; and (b) the witness has an interest consistent with an interest of the cross-examiner; and (c) the witness is sympathetic to the party conducting the cross-examination, either generally or about a particular matter; and (d) .................................................................................................. . (3) The court is to disallow the question, or direct the witness not to answer it, if the court is satisfied that the facts concerned would be better ascertained if leading questions were not used. (4) This section does not limit the court's power to control leading questions." (emphasis supplied) 13 The expression "cross-examination" is defined in Pt 2 of the Act's Dictionary as follows: "2(2) A reference in this Act to cross-examination of a witness is a reference to the questioning of a witness by a party other than the party who called the witness to give evidence." (emphasis in original) 14 The Dictionary defines "examination in chief" for the purposes of the Act as "the questioning of a witness by the party who called the witness to give evidence, not being questioning that is re-examination." I do not understand those definitions to mark a departure from the meanings of the terms as generally understood. 15 It is clear that any questioning of Mr Hacopian by Mr Kelly SC would be cross-examination since NM did not call Mr Hacopian to give evidence. NM's legal representatives do not appear for him. This makes Tedeschi v Singh [1948] 1 Ch 319 distinguishable. In that case, the plaintiff called one of two defendants to give evidence. It was held that counsel for that defendant was not entitled as of right to cross-examine him and that the matter was within the discretion of the trial judge in the conduct of the case. In the exercise of that discretion, Roxburgh J ruled that counsel for the witness-defendant should proceed at once with his examination in chief of his client after which counsel for the other defendant should cross-examine him, after which both counsel for the plaintiff and counsel for the witness-defendant would be at liberty to re-examine him. Sections 11(1), 26(a) of the Act and 42 would permit this Court to reach the same result in the same circumstances. 16 Does NM have a right to cross-examine Mr Hacopian at all? Young J considered the question of any "right to cross-examine", reviewed the relevant authorities and stated his conclusions in summary form in GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No 3) (1990) 20 NSWLR 15. I accept, by reference to his Honour's analysis, that NM does not have a "right" to cross-examine Mr Hacopian; that it does have a right to a fair trial; and that ordinarily, a trial judge's discretion will be properly exercised by allowing all parties other than the one who called a witness, to cross-examine him or her. His Honour also noted that ordinarily, where two or more parties are in the same interest, the trial judge's discretion will be properly exercised if not more than one counsel is permitted to cross-examine, at least on the same subject matter. But this guideline contemplates a situation in which two or more counsel would be cross-examining in the same interest and therefore does not bear on the issue before me. 17 I do not think that the ordinary practice according to which NM may, if it wishes, cross-examine Mr Hacopian, is rendered inappropriate in the interests of a fair trial by the circumstances of this case. Mr Hacopian's affidavit appears on its face to have been prepared by his legal representatives and, so far as I know, they prepared it in what they perceived to be his interests and NM's legal representatives did not participate in its preparation. While AHA undertook by the deed of settlement of November 1997 to assist NM, I do not know the extent to which, if at all, there has been cooperation between the legal representatives of NM and Mr Hacopian in relation to the course of the trial and, in particular, in relation to his evidence in chief and cross-examination. Finally, Citibank's position is adequately protected by the availability to me of the discretion under ss 26(a) and 42 of the Act. 18 NM may cross-examine Mr Hacopian. 19 In relation to the other issue, that of the sequence of cross-examinations, the parties accept that ordinarily Mr Rayment QC would cross-examine first and Mr Kelly SC second. It is not in dispute, however, that I may reverse this sequence. 20 Mr Rayment submits that Mr Kelly should not have the opportunity, by means of a later cross-examination sympathetic to Mr Hacopian, to set at nought advantages achieved by Mr Rayment in his own cross-examination. The risk of this occurrence would be reduced, however, if I were to disallow particular leading questions by Mr Kelly. 21 It seems to me that it may well prove to be more efficient, while causing no injustice to Citibank, if Mr Rayment, representing the party opposed to Mr Hacopian on the first cross-claim and his direct antagonist in the proceeding, cross-examines him first. In light of the answers given by Mr Hacopian, Mr Kelly may decide not to cross-examine at all or to do so only to a small extent. On the other hand, if Mr Kelly is required to cross-examine first, there is a real possibility that he will think it necessary to explore many matters in an attempt to pre-empt Mr Rayment, that is, there is a real possibility that there will be two substantial cross-examinations rather than one. 22 I will adhere to my ruling of yesterday afternoon that Mr Rayment cross-examine first, but I will reserve leave to him to apply to cross-examine further after Mr Kelly's cross-examination is concluded. Moreover, the issue of the sequence of cross-examinations can be reviewed in respect of other Kelly/Jones Associates in the light of the intervening experience in respect of Mr Hacopian. I certify that the preceding twenty two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.