Patrick v Capital Finance Pty Ltd

REASONS FOR JUDGMENT 1 On 18 December 2002 after the applicant had closed his case I refused an application by the respondents to dismiss the proceedings on the basis that there was no case to answer. Evidence was then led by the respondents in the period 10-14 February 2003 and the evidence closed. The matter is currently listed for final address in late April 2003. 2 Subsequently an application was made to make extensive amendments to the Statement of Claim and this was refused, with one exception, on the basis that undue and irremediable prejudice would be caused to the respondents. I delivered reasons for judgment on that application on 18 March 2003. 3 The further evidence now sought to be led by the applicant concerns the ascertainment of the flow of investors' funds in relation to the "Crazy For You" Investment Scheme. There are two affidavits which are the subject of the application. The first affidavit is that of John Frost who is a director of The Gordon Frost Organisation Pty Ltd ("GFO"), which is not a party to the proceeding. Mr Frost has previously given evidence for the applicant and was cross-examined prior to the no-case submission. The affidavit sought to be filed relates to the circumstances in which Gordon Frost interests received and acted in relation to the movement of funds in a Commonwealth Bank account held at the Sydney University branch in the period July to September 1996 and it contains statements as to the assets and liquidity position of GFO and another company in the Gordon Frost group. The affidavit refers to a "banking" arrangement with Phillip Emanuel, whose company is the seventh respondent which, although a party to the proceeding, has not appeared or participated in the case. 4 The second affidavit sought to be filed is that of Walter Van Nieuwkuyk who, at the relevant time in 1996, was employed by GFO as executive producer. He was involved in the production of the "Crazy For You" production and had dealings with Phillip Emanuel in relation to it. He attended two loan settlements and his evidence is to the effect that GFO did not have funds in its account to pay for any term bonds purchased, nor did it have any assets to secure any payment that it was required to make. He refers to a conversation with Phillip Emanuel in relation to the deposit of funds. He also makes reference to an invoice in respect of bank charges levied on GFO. 5 In this case the application to re-open and lead further evidence is made before submissions and judgment. Order 35 r 1 of the Federal Court Rules ("FCR") confers power on the Court at any stage to make such order as the nature of the case requires. The question is whether the power should be exercised in favour of the applicant. There is no dispute between the parties as to the relevant, well-settled principles which apply in respect of an application to adduce further evidence after the close of evidence from all parties. The principal considerations are the likely prejudice to the parties resisting the application, the reason why the evidence was not led in the first place, and whether the interests of justice would be better served by the rejection of the application: see Urban Transport Authority of NSW v Nweiser (1991) 28 NSWLR 471, at 478-9; Smith v NSW Bar Association (1992) 176 CLR 256 at 267. 6 The submissions made by the respondents are that consideration may have been given to calling other evidence if the two affidavits now sought to be filed had been filed at the outset or during the course of the proceedings prior to the close of the evidence. It is also said that the case would have been conducted differently if this evidence had been addressed at the outset or at an earlier stage by the possibility of calling further evidence or cross-examining differently. Because the case has been conducted without this evidence having been adduced the respondents say that they would suffer detriment in now meeting the evidence, particularly having regard to the duration of the hearing over many days and the substantial number of witnesses called and cross-examined at a point in time when this evidence had not been called in what can properly be described as complex multi-party litigation. 7 It has been submitted that there was a deliberate tactical choice on the part of the applicant and his legal advisers not to bring this evidence forward, but I am not persuaded, having regard to the affidavit of Ms Susan Phillips of 27 February 2003 and the cross-examination thereon, that any deliberate choice was made to that effect and I do not consider that this ground for refusing the application has been made out. It does appear that there was some tardiness in advancing the material which had been obtained but I do not consider that it is a sufficient basis to exclude the evidence. 8 It is also submitted by the respondents that the additional evidence from Mr Frost was only forthcoming after an undertaking had been given to Gordon Frost interests that there would be no action taken against them. I do not think that any substantial weight ought to be given to this consideration on the application. 9 Determination of the importance and weight to be assigned to the evidence is not to be resolved at this point but it could not be said to be so insubstantial, immaterial or futile as to warrant rejection. The evidence is directly concerned with the question as to the flow of funds. 10 In a lengthy hearing such as the present, involving a class action, it is important that the true facts are exposed, provided this can be done without injustice or undue prejudice to affected parties. To proceed to judgment where the facts in issue can be clarified without injustice to the parties without allowing that evidence to be put before the Court would be detrimental to public confidence in the administration of justice and the case could be seen to have proceeded on a false basis. In the present circumstances it is inappropriate to proceed to submissions and judgment in this matter on the basis that relevant circumstances sought to be placed before the Court which may assist in determining the true position are shut out. 11 The evidence sought to be adduced is directly relevant to the case advanced by the applicant on the pleadings as currently amended which is directed to the way in which funds flowed in the relevant loan transactions. It is a relatively short compass and I am not persuaded that any suggested prejudice to the respondents would be incapable of remedy. I do not think that it would be unjust to allow the evidence to be adduced subject to, of course, cross-examination. I am not persuaded that additional evidence would have been called if the new affidavits had in fact been filed at the outset or in the course of the proceedings or that the case would have been conducted differently. The assertions to this effect from the Bar table are for the most part cast in tentative and provisional terms. 12 It has been the contention of the applicant from an early stage in the presentation of the case that the investors' funds were channelled through GFO to purchase the securities, and it is the issue which lies at the centre of the dispute between the parties. 13 From very early in the proceedings it was evident from Exhibit D that the contention of the applicant was that monies flowed through GFO to the bank account of Capital in order to purchase the investment securities. The evidence was put forward on this basis. 14 The affidavits now sought to be read are closely linked to earlier evidence advanced in this case prior to the determination of the no-case submission. In particular, the material is linked to the evidence of Mr Frost in his affidavit of 27 November 2002, to the flow charts in Exhibit D concerning the loan settlements of 19 July, 6 and 21 August 1996, and to the diagrams in the Report of Findings produced by the Australian Taxation Office concerning the Investment Scheme. Because of this close link to earlier evidence it does not raise a matter which can be said to take the respondents by surprise. It is in the nature of confirmatory evidence, in respect of an issue earlier canvassed. 15 Accordingly, for the above reasons, I grant the application to re-open for the limited purpose of adducing the further evidence in these affidavits. This does not mean of course that the material is admissible, although I consider that it is relevant to the issues for decision. There may be need for provision for cross-examination. 16 Because a substantial indulgence is now sought in respect of this application, in the circumstances I consider that the costs of the application to re-open and any costs flowing from the admission of the further evidence should be paid by the applicant. The order of the Court is that the application to adduce the further evidence is granted and the applicant is to pay the respondents' costs.