Papandony and Another v Citibank

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

50148/01 STEVEN PAPANDONY AND ANOTHER v CITIBANK LIMITED JUDGMENT

Application to re-open 1 I published my reasons for judgment in this matter on 14 May 2002. Judgment has not been entered. Central to my reasons were findings that the drawing of the cheques in question were procured by the fraud of Brachmanis and there were no concluded contracts with the companies Brachmanis purported to represent. The applicant/defendant has retained different solicitors and counsel from those representing it at the trial. On 27 June 2002, I gave leave to the applicant to file in court a notice of motion seeking leave to re-open the issues of fraud and concluded contracts in order to recall or supplement the judgment. To that end, the applicant seeks leave to tender a number of documents, to cross-examine the first respondent on the issues of fraud and concluded contracts and seeks an order that the respondents serve a verified list of documents confined to those issues. 2 The Supreme Court Rules 1970, Pt 40 r 9(1) enables me to set aside or vary a judgment when notice of motion is filed before entry of judgment. However, the public interest in maintaining the finality of litigation means that it is only in the extremely rare case that the power will be exercised and then, usually, only where the applicant can show that by accident without fault on its part it has not been heard (Wentworth v Woollahra Municipal Council (1981-1982) 149 CLR 672 at 684, Autodesk Inc v Dyason (No 2) (1992-1993) 176 CLR 300 at 301-302, 308, 317). 3 Where the basis for re-opening is the reception of further evidence, a number of considerations are relevant: the reasons why the evidence was not led in the first place (Urban Transport Authority v Nweiser (1992) 28 NSWLR 471 at 478), whether there was a deliberate decision not to call the evidence which, ordinarily, will tell decisively against the application (Smith v NSW Bar Association (1992) 176 CLR 256 at 266, Urban Transport Authority at 478), whether the decision not to call the evidence was based on a tactical ground which, ordinarily, will be fatal to the application (Urban Transport Authority at 478), whether the decision is based on a mistaken apprehension of the law or the facts resulting from an error by counsel (Urban Transport Authority at 478), whether, where the hearing is complete but reasons for judgment have not been delivered, the other side will suffer prejudice or embarrassment (Smith at 267), whether, where reasons for judgment have been delivered, the appeal rules relating to further evidence would permit the evidence to be called (Smith at 267). 4 Under the Supreme Court Act 1970, s 75A(8), further evidence will only be received, on appeal from a judgment after a trial or hearing on the merits, on special grounds. In Wollongong Corporation v Cowan (1955) 93 CLR 435 at 444, Dixon CJ stated the common law rule for the admission of further evidence as requiring that, if the evidence had been available at trial, it is reasonably clear that an opposite outcome would have resulted and that the evidence could not, with reasonable diligence, have been obtained for use at the trial. (See, also, McCann v Parsons (1954) 93 CLR 418 and Orr v Holmes (1948) 76 CLR 632). 5 In CDJ v VAJ (1998) 197 CLR 172 it was held that common law principles do not apply to the exercise of a general statutory power to admit further evidence. The Supreme Court Act 1970, s 75A(8), however, is not a general power. It requires the existence of special grounds and the normal practice of the Court of Appeal of New South Wales has been to find special grounds only where three requirements are satisfied: first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial, secondly, the evidence must be such that there is a high degree of probability that there would be a different verdict and, thirdly, the evidence must be credible (Wall v Timbertown Community Enterprises Ltd (in liq) [2002] NSWCA 162 at par 24). 6 Mr Wood, who now appears for the applicant, points out that while the above matters are relevant, the principle which should guide the court in determining whether to grant an application for leave to re-open is whether the interests of justice are better served by allowing or rejecting the application as the case may be (Urban Transport Authority at 478). In Autodesk at 302, Mason CJ, after stating the general proposition that jurisdiction to re-open a judgment will not be exercised unless the applicant can show that by accident without fault on his part he has not been heard, went on to say: "But these statements do not exclude the exercise of jurisdiction to reopen a judgment which has apparently miscarried for other reasons, at least when the orders pronounced have not been perfected by the taking out of formal orders. So much was acknowledged by Brennan, Dawson, Toohey and Gaudron JJ. In Smith v NSW Bar Association (1992) 176 CLR 256 at 264-266, when their Honours said: "if reasons for judgment have been given, the power is only exercised if there is some matter calling for review." It is sufficient to give three examples. In In reHarrison's Share under a Settlement [1955] Ch 260, orders were set aside following a decision of the House of Lords which overruled authorities on the basis of which the orders had been made. In New South Wales Bar Association v Smith , unreported, 4 July 1991, the New South Wales Court of Appeal reconsidered orders previously made in view of an argument that the Court had mistakenly assumed that particular evidence had not been given at earlier hearings. And, in Pittalis v Sherefettin [1986] QB 868, a judge recalled orders the day after they were made upon determining that he had "erred in a material matter in his approach to the case". These examples indicate that the public interest in the finality of litigation will not preclude the exceptional step of reviewing or rehearing an issue when a court has good reason to consider that, in its earlier judgment, it has proceeded on a misapprehension as to the facts or the law. As this Court is a final court of appeal, there is no reason for it to confine the exercise of its jurisdiction in a way that would inhibit its capacity to rectify what it perceives to be an apparent error arising from some miscarriage in its judgment."

Without derogating from those observations, the position is different with respect to a single judge of the Supreme Court of New South Wales in so far as an appeal lies from his or her judgment to the Court of Appeal and, upon the grant of special leave, to the High Court. 7 Likewise, with respect to the general proposition that the Court of Appeal will not regard special grounds to exist for the reception of further evidence unless the common law rules in that respect are satisfied, Mr Wood points out that this general statement is not an exhaustive principle. In Tamas v Streimer, unreported, Court of Appeal, 10 July 1981, Moffitt P said that the grounds on which a new trial would be granted have never been completely stereotyped. 8 Mr Wood also relies upon the practice in the Equity Division of the Supreme Court of receiving further submissions, uninvited, after the close of a case (Twenty-First Australia Inc v Shade [1998] NSWSC 325, Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 2) [1998] NSWSC 578). I do not think that practice should be encouraged. If it be an accepted feature of the Equity Division, however, it does not seem to me to bear upon the question of the reception of further evidence. 9 In Commonwealth Bank of Australia v Quade (1991) 178 CLR 134 the High Court held that where the further evidence was unavailable at trial because of a significant failure by the successful party to comply with an order for discovery, the common law general rule with respect to the reception of further evidence, that it must be almost certain or reasonably clear that the opposite result would have been produced, does not apply. Mr Wood relies upon this authority in so far as his application to produce in evidence documents, which he submits ought to have been discovered by the respondents, is concerned. 10 The documents sought to be adduced in evidence fall into two categories: documents which were available at the trial and documents obtained on third party subpoenas which, in the absence of objection from the respondents, I gave leave the applicant to issue. 11 There are two lots of documents which were available at trial. The first were exhibited to an affidavit of the first respondent. They were described in general terms in that affidavit. At the conclusion of the hearing, I pointed out to counsel that neither side had tendered the agreed bundle of documents which contained those exhibits. Counsel for the respondents said he did not propose to do so on the basis that the documents were covered by the affidavit. Mr Epstein SC, who then appeared for the applicant, had the opportunity to tender the documents but refrained from doing so. 12 It is submitted that the descriptions of the documents in the affidavit are insufficient and that, if I had had access to the documents at trial, I might have come to a different conclusion with respect to my findings that no concluded contracts existed between the respondents and the companies Brachmanis purported to represent. 13 If the applicant considered that the description of the documents in the affidavit of the first respondent were defective, the opportunity existed to cross-examine the first respondent with respect to them. The applicant made a deliberate decision not to cross-examine the first respondent. If the applicant considered that the description of the documents in the affidavit was defective, it had the opportunity to tender the exhibits and allow them to speak for themselves. I inferred from Mr Epstein's silence when the issue was raised at the conclusion of the hearing, that a deliberate decision had been made not to tender the documents. 14 It was submitted that Mr Epstein was under the false impression that the documents in the bundle were before me, because he referred to the contents of one of the documents in his address. In preparing my reasons for judgment, I ignored that reference on the basis that there had been a deliberate decision by both sides to exclude the documents from the evidence before me. 15 The decisions not to cross-examine the first respondent and not to tender the exhibits are consistent with the lack of serious challenge of the allegation, made by a late amendment of the pleadings, that the drawing of the cheques was induced by the fraud of Brachmanis. While there was no concession in this regard, neither was there any serious challenge of the evidence of fraud. There was filed on behalf of the applicant and tendered at the hearing by the respondents, an affidavit of Mitchell Mathas, the then solicitor on the record for the applicant, expressing the opinion that Brachmanis had no interest in the land at Parramatta and the land at Duffy's Forest when he purported to sell interests therein to the first respondent and the lack of any interest would have been obvious to any one conducting a search of the records of Land and Property Information NSW. That evidence supports the finding of fraud on the part of Brachmanis. 16 The documents are not put forward on the basis that the decision is likely to be reversed. They are put forward on the basis that they would have some impact upon the respondents' burden of proof. I do not consider that reception of the above exhibits is likely to change my findings. True it is that the documents would have revealed that the cheque for $25,000 was with respect to a right of first refusal to enter into a dealer agreement and the $225,000 was paid with respect to an allotment of shares with credit being given for the $25,000. The uncontradicted evidence of the first respondent, however, was that he did not attend any meeting of the company at which shares were alleged to be allotted to him, contrary to a statement in minutes sent to him for his signature and he refused to sign the minutes. The exhibits contained documents with respect to the properties at Parramatta and Duffy's Forest, but there was no evidence that Brachmanis had any interest in either property. The exhibits also contained a shareholders' agreement with respect to the cheque for $250,000 written by the first respondent for a 49% interest in the Prospect Sears store. However, there was no evidence that any shares were issued. 17 My findings of fraud on the part of Brachmanis are not affected by the reception of this additional evidence. The lines of inquiry which led to the application, arose when Brachmanis contacted the applicant. It is not, however, proposed that Brachmanis be called to controvert any of the evidence of the first respondent upon which my findings of fraud are based. 18 The second category of document which was available at trial were two documents exhibited to an affidavit of Scott Muir, read on behalf of the applicant, but which were not tendered. Again, it is submitted that this was a matter of inadvertence on Mr Epstein's part because he referred to the exhibits in portion of his address. It was submitted that if those documents were in evidence before me they would have demonstrated that the moneys deposited to Brachmanis' account with the applicant were not dissipated for some months, that four cheques were drawn in favour of Deloitte Touche Tohmatsu and a letter of credit in favour of Sears was established. It was submitted that such evidence is hardly consistent with the frauds alleged by the respondents. In the absence of any cross-examination of the first respondent or the calling of any evidence controverting his assertions, the reception of the documents exhibited to Mr Muir's affidavit would not cause me to depart from my findings of fraud. 19 The second category of documents, being those obtained under subpoenas, included correspondence on the file of Middletons Moore & Bevins, the then solicitors of the respondents. There was correspondence with Lane & Lane, the solicitors for Brachmanis, between January and March 1999 requiring information with respect to the $250,000 paid for the interest in the Prospect Sears store and Brachmanis' answers. There was a letter of the first respondent addressed to Brachmanis of January 1999 setting out his history of events. And there was a summary of events prepared by the first respondent for the purposes of a report to the police. It is argued that these documents should have been discovered and if they had been they would have given rise to an avenue of inquiry of the respondents' former solicitors. 20 That Middletons Moore & Bevins were the former solicitors of the respondents was known to the applicant when the first respondent's affidavit of 15 April 2002 was served on it because the police report annexed to that affidavit identified the solicitors. The line of inquiry was apparent and the course ultimately taken, of issuing a subpoena to the solicitors, could equally have been done at the hearing, or an adjournment sought for that purpose. 21 There was no general order for discovery in this matter. Lists of categories of documents for discovery were ordered to be exchanged and the applicant sought documents evidencing, recording, or referring to correspondence or any other communications between the respondents and Brachmanis in relation to the purchase of the franchise and the purchase of the interest in the Parramatta property. There was no request for documentation with respect to the purchase of an interest in the Prospect Sears store nor, after the amendment of the pleadings, was there any further request for discovery by category. 22 In Quade at 142-143, the High Court indicated that a number of considerations will be taken into account in determining whether a new trial should be ordered where misconduct on the part of the successful party has had the result that relevant evidence in its possession has remained undisclosed until after the verdict. The court must take account of a variety of possibly competing factors including, in addition to general considerations relating to the administration of justice, the degree of culpability of the successful party, any lack of diligence on the part of the unsuccessful party and the extent of any likelihood that the result would have been different if an order for discovery had been complied with and the non-disclosed material had been made available. The court went on to say: "While it is not necessary that the appellate court be persuaded in such a case that it is "almost certain" or "reasonably clear" that an opposite result would have been produced, the question whether the verdict should be set aside will almost inevitably be answered in the negative if it does not appear that there is at least a real possibility that that would have been so."

Even if it be assumed that the respondents were obliged to discover the above correspondence, its reception is unlikely to have produced a different result. The correspondence constitute complaints after the events in question with answers by Brachmanis. They do not alter the conclusions reached on the uncontroverted evidence of the first respondent. In the absence of a proposal to call Brachmanis to contradict that evidence, I see no reason to upset my findings. 23 Included in the documents sought to be tendered are a number of searches of Brachmanis companies from the records of Australian Securities and Industries Commission. There is no explanation why those searches were not available for tendering at the hearing. 24 Documents were obtained from Anthony Macdermott whom Brachmanis arranged to give independent advice to the guarantors under some of the documentation. The first respondent was not present at this meeting and did not receive any such advice. There is no indication that this documentation was under the control of the respondents and liable to be discovered by them. Even if such an obligation existed and the documents were available for tender at the hearing, they would not have had any effect upon my conclusions as to fraud and lack of concluded contracts. 25 In the material obtained under subpoena was a file with respect to Brac Dealer Store - Parramatta Pty Ltd. It contained the minutes of the meeting that the first respondent swore he did not attend and for that reason he would not sign the proffered minutes. I admitted the original of this folder which Ms Traill, junior counsel for the respondents, stated, without contradiction from Mr Wood, was inspected by the then solicitors for the applicant at the hearing. The applicant had the opportunity to adduce the evidence at trial and decided not to do so. 26 Smith Monti & Costa were the solicitors for Brachmanis interests with respect to the Parramatta property. Heads of agreement and an option to purchase the property were produced in response to a subpoena directed to that firm. These documents were unlikely to have been under the control of the respondent and discoverable. Furthermore, the line of inquiry was available to the applicant at the time of the hearing. The annexures to the affidavit of Mr Mathas revealed the solicitors for the then owners of the Parramatta property and inquiry could have been made of them as to any contact with Brachmanis or solicitors acting for him. Indeed, Brachmanis was a client of the applicant and there is no explanation as to whether the information he gave following publication of the reasons for judgment was not also available to the applicant from the exercise of reasonable diligence. An affidavit of David John Prince of 17 April 2002 was filed, but not read on behalf of the respondents at the hearing. It revealed that Mr Pat Costa was said to be a member of the board of directors of Brac Imports Ltd. Mr Costa responded to an inquiry from Mr Prince directed to a number of persons said in an information memorandum to be directors. Like the others, Mr Costa denied that he was or ever had been a director. Another line of inquiry with respect to Mr Costa was available to the applicant at the time of the hearing. 27 Cutler Hughes & Harris acted for Brachmanis in drawing up documentation with respect to the distribution agreement held with Sears International Marketing Inc. Again, that documentation was not within the control of the respondents and not liable to be produced on discovery. Furthermore, the documentation preceded the dealings with the respondent by some 15-16 months. The evidence at the hearing showed that in July 1999, Deloitte Touche Tohmatsu, whose name appeared on the information memorandum, regarded it as but a draft and were concerned at the use being made of it by Brachmanis. In September 1999 they instructed counsel to arrange for the return of all draft documents. Without explanation from Brachmanis, I would not regard early drafts of documentation as having any weight in contradicting the testimony of the first respondent. 28 Finally, with respect to the application for leave to cross-examine the respondent, the applicant had its opportunity to do so at the hearing and made a deliberate decision not to do so. 29 I do not regard the interests of the applicant in seeking to re-open this matter as outweighing the public interest in finality of litigation. In my view the interests of justice are best served by refusing to re-open the matter. I dismiss the motion. I will hear the parties on costs.

Last Modified: 08/07/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.