Discussion
43 The principles governing the grant of interlocutory relief are well established and were not in dispute.
44 As the applicant's submissions stated:
10. The principles to be applied in an application for interlocutory relief are:
(a) Whether the applicant has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief.
(b) A prima facie case means that the applicant must show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending trial. It does not mean that the applicant must show that it is more probable than not, or in excess of 50% chance, that the applicant will succeed at trial.
(c) How strong the probability needs to be depends upon the nature of the rights the applicant asserts and the practical consequences likely to flow from the order it seeks.
(d) The second inquiry is whether the inconvenience or injury which the applicant would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the respondent would suffer if an injunction were granted.
11. In considering disputed factual and legal matters in order to determine whether a prima facie case exists, Young J described the proper approach in Smith v University of Ballarat as follows:
"[26] One final and perhaps obvious point that bears repeating is that the court does not embark on anything resembling a trial of the action when it deals with an application for interlocutory relief. Ordinarily, the court will not attempt to reach any conclusion as to the facts or matters in dispute, beyond satisfying itself as to whether there is a serious question to be tried, or about other matters that may bear on the balance of convenience or discretionary considerations."
45 Section 59(1) of the Evidence Act provides for a general exclusion of hearsay evidence as follows:
Evidence of a previous representation made by a person is not admissible to prove the existence of a fact that it can reasonably be supposed that the person intended to assert by the representation.
46 Part 3.2 Division 2 of the Evidence Act sets out exceptions to the general exclusion in s 59 in relation to first hand hearsay.
47 Part 3.2 Division 3 of the Evidence Act provides for "Other exceptions to the hearsay rule". Within this division, section 75 provides:
In an interlocutory proceeding, the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source.
48 The respondent objected to the admissibility of many paragraphs of the first Esposito affidavit, submitting that the s 75 exception did not apply, as it did not render admissible hearsay on hearsay or unsourced hearsay.
49 However, in my opinion, the exception in s 75 to the general exclusion of hearsay in s 59 does not apply only to first hand hearsay, as opposed to the exceptions to the general exclusion contained in Part 3.2 Division 2.
50 Section 62(1) of the Evidence Act expressly provides that "in this Division" (that is, Part 3.2 Division 2), other than in s 62(2), "[a] reference… to a previous representation is a reference to a previous representation that was made by a person who had personal knowledge of an asserted fact". That is, the exceptions in Part 3.2 Division 2 are restricted to first hand hearsay.
51 However, the Dictionary to the Evidence Act states that "previous representation" means "a representation made otherwise than in the course of giving evidence in the proceeding in which evidence of the representation is sought to be adduced".
52 The Dictionary definition of "previous representation" is thus not limited to one made by a person who had personal knowledge of an asserted fact and, in contrast to Part 3.2 Division 2 (in which a narrower definition generally applies), there is no indication that the wider Dictionary definition does not apply in Part 3.2 Division 3, where s 75 appears. That conclusion is, in my view, consistent with the High Court's express acknowledgement in Lee v The Queen set out above, that in Division 2 the exceptions are confined to first hand hearsay. Their Honours set out a quotation from the Law Reform Commission Report which recognised the general unreliability of second hand hearsay but acknowledged that exceptions to its inadmissibility were justified where some guarantees of its reliability can be shown, together with a need for its admissibility.
53 In my opinion, the nature of interlocutory applications in such that there may be a need for the admission of second hand hearsay. In the absence of an express limitation, such as that applicable to the exceptions in Division 2, I conclude that the exception in s 75 is not confined to first hand hearsay. Therefore, provided that the source is stated, second hand (or more remote) hearsay is, in my view, admissible, although, due to its relative frailty, may be accorded less weight.
54 At the conclusion of the hearing of the application, and after the preparation of these reasons, counsel for the respondent, with the applicant's consent, forwarded to chambers two authorities supportive of the view expressed above. In Liu v The Age Company & Ors [2010] NSWSC 1176, McCallum J stated at [38] and [39]:
As I have already noted, Mr Bartlett's evidence is, in large measure, double hearsay. Such evidence is not in itself necessarily inadmissible in an interlocutory proceeding: see Bray v F Hoffman-La Roche Ltd [2002] FCA 243; 118 FCR 1 at [117].
In my view, however, s 75 applies in that circumstance to both levels of hearsay. The section creates an exception to the hearsay rule subject to a condition, namely, that the party adducing the evidence also adduces evidence of its source. Mr Bartlett has identified the source of his information (the second defendant) but the second defendant has not, in turn, identified the source or sources of his.
55 In Bray v F Hoffman-La Roche Ltd & Ors (2002) 118 FCR 1 at 117, Merkel J stated at 36:
There was some dispute between the parties as to whether s 75 only made admissible in an interlocutory proceeding first hand hearsay, and not second hand or more remote hearsay.
Section 75 is to be construed in the context of Pt 3.2 of the Evidence Act. The structure of Pt 3.2 is for Div 1 to set out the class of evidence excluded under the hearsay rule and for subsequent Divisions of the Part to set out exceptions to that exclusionary rule. The Australian Law Reform Commission, on whose report (ALRC 26) the Evidence Act was based, explained the exceptions to the hearsay rule as being based on the premise that the best evidence available to a party should be received (ALRC 26, vol 1 para 678).
Division 1 of Pt 3.2 defines the hearsay rule, the key provision of which is in s 59(1):
"Evidence of a previous representation made by a person is not admissible to prove the existence of a fact that the person intended to assert by the representation."
Divisions 2 and 3 of Pt 3.2 distinguish between first hand hearsay and secondhand and more remote hearsay. Division 2 provides for certain exceptions to the hearsay rule in respect of "first hand hearsay" which is defined as a previous representation made by a person who has personal knowledge of an asserted fact. Division 3 is entitled "Other exceptions to the hearsay rule". One of those "other" exceptions is provided for in s75.
The distinction between the category of exception contained in Div 2 and the category of exception contained in Div 3 appears to be based on the view of the Australian Law Reform Commission (ALRC 26, vol 1, para 678) that second hand hearsay is generally so unreliable that it should be inadmissible except where some guarantees of reliability can be shown together with a need for its admissibility. Division 3 creates exceptions to the hearsay rule in respect of a number of categories of second hand and more remote hearsay which fall within those criteria.
It is consistent with the meaning, structure, and purpose of Pt 3.2 to construe s75 as creating a further exception to the hearsay rule in respect of hearsay evidence adduced in an interlocutory proceeding that is not admissible under Div 1 and not within an exception to the hearsay rule contained in Div 2. In my view, there is no proper basis for importing a requirement that s 75 is limited to first hand hearsay as defined in s 62 for the purposes of Div 2. The safeguard against reliance on hearsay evidence, where its prejudice outweighs its probative value, is s 135 which confers upon the Court a discretion to exclude such evidence.
56 On the basis of the above reasoning, paragraph 9 of the first Esposito affidavit includes and is based on unsourced hearsay and thus the first two sentences at least are inadmissible.
57 In paragraph 10 of the first Esposito affidavit, as the respondent submitted, the evidence of the first 2009 incident was not first hand hearsay but at least, hearsay upon hearsay upon hearsay. Mr Crae's brother was, however, apparently advanced as the person with personal knowledge of the instructions to drivers, and despite the imprecision of Mr Esposito's account, in my view, sufficiently identified him as an MGC tanker driver to constitute a source for the purposes of s 75. As the respondent submitted, however, the evidence, although admissible, was weak. No basis was given for Mr Crae's brother's assertion that the instructions had come from "MGC's senior management". The person or persons directing the drivers was identified only as "MGC". Further, the allegation related to 2009.
58 Paragraph 11 of the first Esposito affidavit relating to the first recent incident was, in my view admissible, because Mr Seidel was ultimately identified as the source. The reference to "MGC employees" nevertheless lacked specificity, and the last sentence did not give any basis for the deponent's knowledge of who typically attended MGC meetings.
59 Paragraph 12 of the first Esposito affidavit, relating to the second recent incident, was, in my view, admissible, as it clearly stated the source of the hearsay. The allegation was nevertheless expressly denied by Mr Clarke.
60 Paragraph 15 of the first Esposito affidavit, which related to Rob Robertson's report to Mr Esposito of Mr Clarke's alleged words, again provided the source and was not the subject of an objection, but was expressly denied by Mr Clarke.
61 Paragraph 16 of the first Esposito affidavit was, in my view, inadmissible as the source was not given. I did not, in that context, accept the applicant's submission that Mr Esposito's earlier generalised assertion that he has made all due enquiries of UDP staff amounted to the requisite evidence of the source.
62 The respondent's written submissions asserted that the statement in paragraph 17 of the first Esposito affidavit that UDP is not under financial strain and not at risk of inability to pay suppliers or creditors was inadmissible, as it was based on inadmissible material. That submission was not pressed in oral argument and, indeed, the respondent did not dispute that the alleged representations would, if made, be misleading and deceptive. Further, while there were a number of other objections, it was unnecessary to determine them all, particularly in the context of an interlocutory application.
63 In the present case, in my view, the applicant adduced admissible evidence of two recent incidents (the first and second) in which representations denying or casting doubt on the applicant's solvency, continuity, liquidity and ability to pay its milk suppliers were made by an employee or employees of the respondent.
64 The applicant also adduced admissible evidence of two 2009 incidents in which such representations were made.
65 As the respondent submitted, the representations allegedly made in incidents in which the relevant MGC employee (Mr Clarke) was named have been denied by that employee, and one of those incidents was in 2009.
66 I was not, however, persuaded that the evidence of incidents in which the MGC employee was not specifically identified should be excluded pursuant to s 135 of the Evidence Act in the preliminary context of an application for an interlocutory injunction, particularly given that a number of other identifying features, such as the approximate time and place, were provided.
67 The evidence of the representations was hearsay and, although admissible in the present context, would not be admissible at trial. Notwithstanding the relatively weak probative value of hearsay evidence and various other deficiencies, including the lack of precise identification of MGC personnel in some incidents, the fact that the only identified MGC employee denied making the representations and the fact that two of the four incidents occurred in 2009, in my opinion, the applicant's evidence "crossed the line", albeit not by a wide margin, and sufficed to raise a serious question to be tried.
68 As French J stated in State Government Insurance Corporation and Anor v Government Insurance Office of NSW (1990) 19 IPR 232 (at 242):
Proceedings for interlocutory relief frequently involve the reception of evidence which might not ordinarily be admissible. Or the parties may, for reasons of time or economy, not present the full range of evidence that would be relied upon at trial. For these reasons and the nature of the proceedings, findings of fact are generally of a provisional character. The object is to determine whether there is a serious case to be tried in fact and law, not to finally decide the facts or resolve controverted issues of law.
69 Similarly, in Panasales Clearance Centre Pty Ltd v J B Hi Fi Brighton Pty Ltd [1999] FCA 1227, Ryan J, on injoining the respondent from making representations which were, broadly, disparaging of the applicant's rival products, relevantly observed (at [14] and [16]):
It is undesirable at this early stage of this litigation that I attempt to make concluded findings of fact based on this necessarily incomplete evidence, as to which there has been no cross-examination. However, the evidence as it stands, even with the qualifications which I have earlier indicated, creates the impression that on some occasions when a prospective purchaser has mentioned Panasales, a sales representative of J B Hi Fi Brighton or J B Hi Fi Camberwell, has taken the opportunity to point out that Panasales is not an authorised retailer of the brand of brown goods enquired after.
…
I accept… that the evidence does not support a finding of a concerted campaign by the respondents to make unsolicited disparaging remarks with a view to diminishing Panasales as a significant competitor in the brown goods market. However, I have been persuaded on balance that a serious question to be tried has been raised by the evidence, going to what I have called extravagant representations by employees of J B Hi Fi. If injunctions were framed to restrain the respondents from repeating those representations or representations to the same effect, I do not consider that the balance of convenience would be against allowing them to go.
70 In the present case, in my opinion, the balance of convenience favours the grant of an appropriately tailored form of interlocutory relief, in circumstances where the applicant is embarking on and has invested in expansion to a new adjacent region; the loss of a single milk supplier represents a significant pecuniary loss to the applicant; the applicant's managing director credibly deposed that in his experience, farmers are greatly concerned about the solvency and liquidity of the company to which they supply milk; and the respondent denies that it has made or authorised its employees to make the representations alleged; does not dispute that the representations, if made, would be misleading; and asserts no prejudice other than its possible subjection to contempt proceedings should a member of its large workforce make a representation in breach of the court's order.
71 In my view, an injunction directing the restraint to the respondent's field staff would, on the basis of the present material before the court, be appropriate. I shall invite further submissions on the precise terms of the order.
I certify that the preceding seventy-one (71) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dodds-Streeton.