Rickard Constructions v Rickard Hails Moretti & Ors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST

15 October 2004 Ex tempore (revised 19 October 2004)

55027/00 RICKARD CONSTRUCTIONS PTY LTD v RICKARD HAILS MORETTI PTY LTD & ORS JUDGMENT (On admissibility of evidence) 1 HIS HONOUR: The plaintiff sues to enforce, among other things, rights said to have been assigned to it by Mayne Nickless Limited ("Mayne") and MPG Logistics Pty Ltd ("MPG") relating to a container park at 55 Friendship Road, Port Botany ("the park"). 2 The plaintiff constructed a pavement at the park under a contract originally made between it and Port Botany Container Park Pty Ltd and subsequently assigned to Mayne. 3 As part of the proof of its assigned claims, the plaintiff tenders the following documents: an e-mail from Mr Thanh Truong to Mr John Klepec dated 19 October 2000, and having the subject "Re: Damage Claims"; a proof of debt made by Mayne against the plaintiff and verified by a Mr Hinchen on 5 December 2000; and a proof of debt made by MPG against the plaintiff and likewise verified by Mr Hinchen on 5 December 2000. 4 The plaintiff asserts that the documents in question are business records and that therefore, notwithstanding that they contain hearsay assertions, the hearsay rule does not apply by virtue of s 69 of the Evidence Act 1995. 5 The first and second defendants, against whom the documents are tendered, say that the requirements of subs (2) of s 69 are not met and that, by reason of subs (3), the hearsay rule in effect continues to apply. 6 The failure of the pavement gave rise to a number of consequences. One of those consequences was that Mayne sought to reoccupy premises that it had earlier occupied, but that, upon taking up occupation of the park, it had leased to Smith Brothers Investment Properties Pty Ltd ("SBIP"). 7 Disputes arose between SBIP and, among others, Mayne and MPG, and on 12 April 2000 SBIP commenced proceedings 50048 of 2000 in this Court. It will be observed that the proceedings were commenced six months before the Truong e-mail was created. 8 Mr Klepec gave evidence of the circumstances in which the Truong e-mail was created. He said that he instructed Mr Truong to prepare it for the purpose of quantifying items of damage claimed by Mayne as a result of the pavement failure (T 319.20). 9 He gave evidence, without objection, of the persons from whom, it might be supposed, Mr Truong had had discussions that enabled him to gather the information contained in the e-mail. Those persons included Mr Robert Harvey and Mr Claude Varnier. Mr Harvey was the general manager of Mayne's New South Wales Ports Division. Mr Varnier was the operations manager of the port business. Mr Truong was the operations manager of Mayne's New South Wales ports operation. Those gentlemen, I think, each worked at Port Botany, either at or near the park. 10 In cross-examination, Mr Klepec agreed that he used the facts set out in the Truong e-mail to assist in the preparation of the proof of debt (T 327.40). He agreed that, at the time the e-mail was sent, the SBIP litigation had been commenced, and he said that one of the matters he was considering in the context of that litigation was possible rights of recovery that Mayne might have if it were held liable to SBIP (T 327.50). He agreed that this, presumably among other rights of recovery, was considered as a possibility from the date the SBIP proceedings were commenced (T 328.5). 11 He was asked whether Mr Truong had been working to assess the reasonable quality of some of the claims made by SBIP against Mayne (T 328.25), and said that Mr Truong prepared financial material "based on Mayne operating the area of dispute with Smiths" and that the purpose of this was "to form a reasonable check against Smith Brothers' assertions" (T 328.35-40). 12 Further, when referred to the heading of the e-mail (Damage Claims), Mr Klepec said that the e-mail was put together "on the basis of calculating the cost of the pavement failure" in circumstances where he had it in mind that, if necessary, Mayne would enforce its rights against the plaintiff by litigation (T 239.10.15). 13 It is necessary to consider the three documents separately. 14 As the Truong e-mail sets out a number of items of cost said to have been incurred by Mayne as a result of the failure of the pavement at the park, and the consequent loss of storage capacity for containers, it is, I think, a reasonable inference from Mr Truong's position, and the fact that he worked at or near the park, that he would have had personal knowledge of at least some of the matters set out in that e-mail. It is apparent that he would not have had personal knowledge of all of those matters - if only because, as Mr Parker (who with Mr Corsaro SC appeared for the plaintiff) submitted, it was necessary for Mr Truong to make inquiries of other persons who might themselves be supposed to have personal knowledge. 15 Although, as I have noted, Mr Klepec agreed that the Truong e-mail had been used to assist in the preparation of the proofs of debt, that is something of an oversimplification. On analysis of the proofs of debt (which appear at PX 4 vol 9, pp 277 and 280 respectively), it is apparent that nothing in the Truong e-mail (which appears in PX 4 vol 8, p 292) would have been incorporated into the Mayne proof of debt. 16 Further, in relation to the MPG proof of debt, I think the better view is that the information in the Truong e-mail would have been used for the preparation of the schedule referred to in that proof of debt. That schedule appears to have included (the photocopy is obscured in part) "a breakdown of the amounts claimed". 17 However, the proof of debt itself, which contains a commentary on what appears to be the schedule, does not include amounts that can be related to the Truong e-mail. The copy of the proof of debt that is tendered does not include the schedule that is referred to in it. 18 Mr Truong was not called to give evidence of the inquiries that he made to enable him to prepare the information contained in his e-mail. This enabled the first and second defendants to submit that the requirements of s 69(2) had not been made out in respect of that document because it was not proved that the representations contained in it were made either by a person who had, or might reasonably be supposed to have had, personal knowledge of the facts asserted in those representations, or on the basis of information directly or indirectly supplied by such a person. 19 Although the question is somewhat difficult, and its resolution is not aided by the scarcity of the evidence on the point, I think that the better inference from the form of the e-mail, supplemented by the description that Mr Klepec gave of its preparation processes, is that it does fall within either paragraph (a) or paragraph (b) of s 69(2): that is to say, to the extent that the e-mail contains representations of facts (as to outgoings, extra operational costs, loss of storage capacity and the like), that Mr Truong either knew of those matters because of his position, or ascertained them from persons who themselves knew of them because of their positions. In this context, I think, the words "or might reasonably be supposed to have had personal knowledge" indicate that the Court is allowed to draw inferences not just from the form of the document, but from the nature of the information contained in it. In this case, I think, the precision of the information enables me to conclude, on balance, that, as I have said, it was at the very least obtained within the means contemplated by s 69(2)(b). 20 The position is somewhat clearer in relation to the proofs of debt. I am satisfied, from the evidence that Mr Klepec gave as to the preparation of those documents, that the statements of fact contained in them were either within his personal knowledge, or were made by him on the basis of information directly or indirectly supplied by people who did have, or who might reasonably be supposed to have had, such personal knowledge. I therefore conclude that each of the documents in question falls within s 69(2). 21 That leaves the question of the application of s 69(3). That subsection, in effect, excludes from the dispensation given by s 69 representations, that, relevantly, were prepared or obtained for the purpose of conducting or for or in contemplation of, or in connection with, an Australian proceeding. 22 Counsel referred me to a number of decisions bearing on the construction and application of s 69(3.) It is convenient to start, not where counsel started (and I mean no disrespect in saying that), but with the decision of Barrett J in Vitali v Stachnik [2001] NSWSC 303. In that case, his Honour described the purpose of the exclusion in subs (3) as being to prevent the introduction of hearsay material prepared in an atmosphere or context which might cause it to be self-serving (para [12]). 23 His Honour's observation on that point was adopted with approval and applied by Hamilton J in Lewis v Nortex Pty Ltd [2002] NSWSC 1083 and by Santow J in Kang v Kwan [2002] NSWSC 187. With respect, I think that what Barrett J said exposes the underlying purpose of s 69(3) and I propose to adopt what his Honour said. 24 However, what is required is the construction and application of the section, not of a gloss on it by reference to the underlying purpose; although in construing the section it is legitimate to have regard to the purpose sought to be achieved and to seek, if the words permit, to give the section a construction and application consistent with that purpose. 25 The question of application of the section does not require that the material in question should have been prepared only for the purpose, or with the contemplation or connection set out in it. That was made clear by Barrett J in Timms v Commonwealth Bank of Australia [2003] NSWSC 576, where his Honour said at para [15] that "a legal proceeding or possibility of it must represent, in whole or in part, the pretext or motive or reason for the creation of the document, or, at least, must play some part in the decision to prepare it". 26 Some question arose as to whether subs (3) should properly be construed as an exception to the operation of subs (2) (in which case, it was said, those opposing admissibility bore the onus of showing that the exception was made out), or as a further condition of admissibility (in which case, it was said, those tendering the document bore the onus of showing that the condition had been satisfied). 27 Mr Parker relied upon the decision of Maurice J in S & Y Investments [No 2] Pty Ltd v Commercial Union Assurance Company of Australia Limited (1986) 82 FLR 130, in particular at 152-153. That case did not concern s 69 of the Evidence Act, but antecedent legislation in the Northern Territory, the Evidence (Business Records) Interim Arrangements Act (NT). 28 In that Act, s 5 provided for the admissibility of business records in some circumstances, notwithstanding that they were, or included, hearsay material; but subs 6(1) provided that "a statement made or obtained for the purpose of, or in contemplation of, a legal proceeding ... arising out of the same or substantially the same facts" fell outside the permission granted by s 5. 29 It is clear, in the case before Maurice J, that s 6 expressed an exception or exclusion from the permission given by s 5. That appears from its opening words: "Notwithstanding section 5". It was, therefore, clear that a party seeking to rely on s 6 bore the onus of proof. 30 Although, as Mr Dempsey SC (who appeared with Ms Steele of Counsel for the second defendant) submitted, the wording of s 69(3) does not stand on all fours with the wording considered by Maurice J in S & Y Investments, I think the better view is that subs (3) does create an exception to the permission given by subs (2). That is because, as subs (3) says, the earlier subsection "does not apply" if the matters set out in subs (3) are proved. 31 In any event, I think, a resolution of this question is not necessary because, on the facts, I am able to reach an affirmative view in relation to each of the documents that is tendered as to whether or not subs (3) applies. 32 The evidence in relation to the Truong e-mail shows, in my judgment, that a purpose of its creation was to enable Mayne to assess its position in relation to litigation commenced six months earlier by SBIP. That is so because, as Mr Klepec agreed, the preparation of the e-mail was required to enable Mayne (perhaps among other things) to consider and form a view on its prospects of recovery in the event that it was held liable to SBIP. 33 In this context it is, I think, relevant to note that there were cross-claims in the SBIP proceedings, including a second cross-claim brought by Mayne relating to recovery of rent, and a third cross-claim brought by Mayne relating to recovery of damages. Both of those cross-claims were filed on 19 July 2000. 34 Although neither of them relates, in terms, to a cross-claim to which the Truong e-mail would have been relevant, their existence - in particular the third cross-claim - does confirm to my mind that the possibility to which Mr Klepec referred in his evidence was a real, and not just an insubstantial or chimerical, possibility. 35 I therefore conclude that the Truong e-mail was prepared or obtained for the purpose of conducting, or for or in contemplation of, or in connection with, the proceedings between SBIP and Mayne. That conclusion renders it unnecessary for me to consider whether the view expressed by Rolfe J in Sellers Fabrics Pty Ltd & Anor v Hapag-Lloyd AG [1998] NSWSC 644, that the proceeding referred to in s 69(3) must be a proceeding to which the party entitled to the document is party, is correct. 36 However, I do not think that the conclusion that I have reached necessarily means that the proofs of debt are, likewise, affected by the operation of s 69(3). That is because, when one looks at them, as I have said, carefully, they do not (despite Mr Klepec's evidence) of themselves incorporate material that could be seen to come from the Truong e-mail. Indeed, the representations of fact on which the plaintiff relies contained in those proofs of debt are quite separate to the matters contained in the Truong e-mail (although it may be conceded that the e-mail might have related to the quantification of the amounts claimed in respect of some of those matters). 37 I do not think that it follows, simply from the circumstance that Mayne was considering (among other things) cross-claiming against Rickard in the SBIP proceedings, that a proof of debt prepared by Mayne against the plaintiff (which by then was in administration) is affected by that possibility. The proof of debt, in a sense, in each case stands alone. Indeed, if the proof of debt were accepted, then there would not be any necessity to commence proceedings (even if the leave of the Court were sought and obtained). 38 It does not seem to me that the fact that Mayne was prepared, if necessary, to enforce its rights against the plaintiff by litigation, leads to the conclusion that s 69(3) must apply. Firstly, it could not be assumed that the administrator of the plaintiff would not admit the proofs of debt. Secondly, if the administrator did not, Mayne then would be put to a decision whether to prosecute its claim or whether, in substance, to decide not to throw good money after bad. Thirdly, if Mayne did decide to commence proceedings, then any proceedings involving the substance of the claim rather than the rejection of the proof of debt would, as I have indicated, require the permission of the Court. 39 For those reasons I do not think that s 69(3) applies to the proofs of debt. 40 The consequence is that I reject the tender of the Truong e-mail, but I admit the two proofs of debt into evidence. 41 I should make it clear that, in admitting the proofs debt into evidence, I do not intend that it would follow that if (for example) the schedule attached to the MPG proof of debt were located, it too would form part of the evidence in these proceedings.

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