Youssef Taouk and Najibi Taouk v Najib Louis

Introduction 1The hearing of this matter took place over six days between 1 April 2014 and 8 April 2014. Judgment is reserved. On 17 April 2014, the plaintiffs' solicitor sent a letter to my chambers which attached a Notice of Motion dated that day, and an affidavit sworn on that day by the solicitor, Mr Peter Baker. By that Notice of Motion, the plaintiffs seek to re-open their case to read an affidavit sworn by Mr Trevor Ward on 15 April 2014. 2The parties agreed that the matter could be dealt with on the papers. Directions were then made for the filing and service of written submissions. The plaintiffs provided submissions on 2 May 2014 and the defendants provided submissions in response on 9 May 2014. 3The evidence sought to be adduced concerned certain taxation returns that, taken at face value, appear to be taxation returns of the plaintiffs prepared by Mr Ward. These taxation returns were relied upon by the second and third defendants (a mortgage originator and a lender, respectively) in relation to the approval of the loan and mortgage transaction which is the subject of these proceedings. The evidence that Mr Ward would give essentially goes to two related matters. First, Mr Ward deposes that he did not prepare the taxation returns. Secondly, Mr Ward deposes that he neither prepared nor signed a letter dated 25 October 2004 which was, ostensibly, a letter from Mr Ward of Ward Moussa & Co to Fay Baker concerning the taxation returns. Mr Ward further deposes that he was no longer involved in Ward Moussa & Co in October 2004 and that he does not know a person called Fay Baker. 4At the hearing, the second and third defendants called Fay Baker as a witness. She was the Operations Manager for Sky Home Loans Pty Ltd ("Sky") which acted as a loan introducer to the second defendant in respect of the loan and mortgage transaction. Amongst other matters, Ms Baker gave evidence in relation to the taxation returns and the letter dated 25 October 2004. 5The second and third defendants also called evidence from Mr Bernard Moussa. Mr Moussa gave evidence that he prepared the taxation returns on the instructions of the plaintiffs, and under the supervision of Mr Ward. Mr Moussa also gave some evidence concerning the letter of 25 October 2004. He denied that it was he who signed it. 6The brief summary given above is sufficient to demonstrate that the evidence proposed to be adduced by Mr Ward is relevant to the issues in the proceedings. However, on this application for leave to re-open, the parties are in dispute concerning the importance of Mr Ward's evidence to the case. The parties are also in dispute concerning the circumstances which led to the situation where it is only now that evidence from Mr Ward is sought to be advanced, and as to the extent of prejudice which would be suffered if the application for leave to re-open is granted. 7The applicable principles are not themselves in dispute. I was referred to Smith v NSW Bar Association [1992] HCA 36; (1992) 176 CLR 256, particularly in the joint judgment at 266 - 267 where their Honours stated: "If an application is made to re-open on the basis that new or additional evidence is available, it may be relevant, at that stage, to inquire why the evidence was not called at the hearing. If there was a deliberate decision not to call it, ordinarily that will tell decisively against the application. But assuming that that hurdle is passed, different considerations may apply depending on whether the case is simply one in which the hearing is complete, or one in which reasons for judgment have been delivered. It is difficult to see why, in the former situation, the primary consideration should not be that of embarrassment or prejudice to the other side. In the latter situation the appeal rules relating to fresh evidence may provide a useful guide as to the manner in which the discretion to re-open should be exercised." 8I was also referred to the observations made by Clarke JA (with whom Mahoney and Meagher JJA agreed) in Urban Transport Authority of NSW v Nweiser (1992) 28 NSWLR 471 at 476 where his Honour stated: "The primary purpose for the rules pursuant to which cases are contested in this State is the furtherance of the interests of justice. For this reason the exercise of the discretion to allow an application to re-open depends essentially upon the trial judge's view as to whether the interests of justice are served better by granting than refusing the application. Of course, there needs to be finality in litigation and a limit upon the number of issues which it is open to the parties to contest at a hearing. For this reason, evidence contradicting a witness' testimony in cross-examination on matters going to credit is, generally, excluded. But that is because it is seen as desirable to confine the ambit of the inquiry within reasonable limits in the overall interests of justice." 9Section 56(1) of the Civil Procedure Act 2005 (NSW) now provides that the overriding purpose of that Act and of rules of court is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. 10Finally, I was referred to the decision of Austin J in Australian Securities and Investments Commission v Rich [2006] NSWSC 826 at [18] where his Honour set out some of the factors which may be relevant to a consideration of whether to permit the re-opening of a case. The factors so identified by Austin J are: (a)the nature of the proceeding; (b)whether the occasion for calling the further evidence ought reasonably to have been foreseen; (c)the consideration of fairness that the defendant is entitled to know all of the evidence he has to meet in taking forensic decisions as to cross-examination and the nature and extent of the evidence he will himself adduce on the matters in question; (d)the extent to which the plaintiff has embarked upon calling evidence on the issue in question in its case in chief; (e)the importance of the issue on which the further evidence is sought to be adduced to the pleaded issues in the case; (f)the degree of relevance and probative value of the further evidence sought to be adduced and its potential to involve an undue waste of time; (g)the prejudice to the defendant in terms of delay in the completion of the proceedings and the consequential costs; (h)the public interest in the timely conclusion of litigation; and (i)what explanation is offered by the plaintiff for not having called the evidence in chief." 11It was emphasised in the submissions for the plaintiffs that such a list ought not be regarded as a checklist, as ultimately the discretion needs to be exercised having regard to the particular circumstances of the case at hand. 12The plaintiffs' submissions advance three main contentions. These are: (a)that the issue of the taxation returns only arose upon the service by the second and third defendants of affidavits sworn by Bernard Moussa and his brother Pierre Moussa on the day before the commencement of the trial; (b)that Mr Ward's evidence is extremely significant in the case; and (c)that any prejudice to the defendants is of their own making due to the late service of affidavits, and in any event such prejudice can be cured by giving the defendants the opportunity to cross-examine Mr Ward. 13The submissions of the second and third defendants (which were adopted and repeated as part of the submissions of the first defendant) opposed the grant of leave to re-open for three main reasons. These were: (a)that the delay in bringing forward the evidence of Mr Ward cannot be explained on the grounds of inadvertence, but was rather the product of delays in case preparation; (b)that Mr Ward's evidence goes to matters which are not of central significance to the case; and (c)that the evidence would cause the defendants embarrassment and prejudice. 14It is necessary to consider the circumstances in which the issue concerning the taxation returns arose. 15The affidavit sworn by Mr Baker in support of the Notice of Motion establishes that in July 2013 the plaintiffs were served with affidavits sworn by Mr Colin Whybourne and Mr Michael Connolly. Exhibited to those affidavits were various documents including extracts from an electronic recording system maintained by the second defendant. That system recorded various communications with the second defendant, including during the period when the plaintiffs' loan and mortgage transaction was under consideration. Mr Baker considered those extracts, and on 25 September 2013 wrote to the solicitors for the second defendant seeking production of various documents which were referred to in the extracts. Amongst the documents sought by Mr Baker were copies of the taxation returns for each of the plaintiffs. Mr Baker also sought the name of the accountant referred to in an entry dated 25 October 2004. That entry concerned a communication, apparently between Fay Baker and "the accountant", in relation to the taxation returns of the plaintiffs. The entry suggests that a request was made for a letter of explanation in relation to an error in one of the taxation returns. 16On 5 November 2013, Mr Baker made a further request of the second defendant's solicitors. Mr Baker requested the "accountant's letter" referred to in an entry in the electronic recording system dated 28 October 2004. It is clear that, by that time, Mr Baker was undertaking investigations in relation to the taxation returns which had been considered as part of the loan approval process, and the accountant who had prepared such returns. 17In the meantime, on 9 October 2013, the matter had been set down for hearing for four days commencing on 1 April 2014. 18On 10 December 2013, the solicitor for the second defendant informed Mr Baker that he required a formal discovery application to be made. Accordingly, on 19 December 2013, Mr Baker served a Notice to Produce which sought the documents which had earlier been requested in correspondence. Documents were produced in answer to the Notice to Produce on 8 January 2014. Amongst the documents produced on that day were the taxation returns, and the letter of 25 October 2004, which are now dealt with in Mr Ward's affidavit. 19By 19 March 2014, both of the plaintiffs had sworn affidavits to the effect that they did not give instructions for the preparation of the taxation returns and had never met a person called Trevor Ward. 20Mr Baker deposes that he was on medical leave between 5 and 12 March 2014, and was working only part-time until about 19 March 2014. From about 19 March 2014 until the commencement of the hearing on 1 April 2014, he made various attempts to locate Trevor Ward. Those efforts proved unsuccessful. Mr Baker swore an affidavit on 28 March 2014, which was read at the hearing, in which he deposed that Mr Ward did not appear to be currently listed as an accountant. 21On 31 March 2014, the day before the commencement of the hearing, the second and third defendants served the affidavits of Bernard Moussa and Pierre Moussa. As mentioned earlier, Bernard Moussa claims that he prepared the taxation returns upon the plaintiffs' instructions. The affidavit sworn by Pierre Moussa concerns other matters. 22On the first day of the hearing, counsel for the plaintiffs sought an adjournment of the hearing, essentially on the basis that the recently served affidavits contained new material. That application was refused. One of the matters taken into account in refusing the adjournment application was that it was in fact the plaintiffs who had raised issues concerning the taxation returns, by the affidavits sworn on 19 March 2014 and 28 March 2014, and that it would be unfair to the defendants to not permit them to adduce evidence in response. 23On 1 April 2014 Mr Baker sought electoral roll information in relation to Trevor Ward, and he obtained such information on the following day. On 3 April 2014, the third day of the hearing, an application was made by counsel for the plaintiffs for short service of a subpoena to give evidence addressed to Trevor Ward at an address in Pelican. The application was not supported by any material which explained why it was appropriate for short service to be granted at that stage of the trial. It was submitted, however, that it was justified because matters had only become clear following the service of the affidavit of Bernard Moussa. I was further informed that no contact had yet been made with Trevor Ward. In those circumstances, I rejected the application for short service. The hearing continued. No further application was made in relation to Mr Ward. The cases of the plaintiffs were closed without reservation. 24Later on 3 April 2014, Mr Baker sent a letter to Mr Ward. He requested that Mr Ward telephone him as a matter of urgency. Mr Ward did call Mr Baker, but this was not until about lunchtime on 8 April 2014, which was the final day of the hearing. 25On 9 April 2014, Mr Baker telephoned Mr Ward who then agreed to swear an affidavit. Mr Baker prepared an affidavit for Mr Ward and the affidavit was sworn on 15 April 2014. 26The above account makes clear, in my view, that the plaintiffs' submission that the issue concerning the taxation returns only arose on the day before the trial following the service by the defendants of affidavits, cannot be accepted. The issue had been under investigation since September 2013 and the relevant documents had been produced to Mr Baker by 8 January 2014. There is every reason to think that, had inquiries been made promptly, an affidavit sworn by Mr Ward could have been obtained and served many weeks prior to the hearing. 27It is not correct to assert that the importance of obtaining evidence from Mr Ward only became apparent when the affidavit of Bernard Moussa had been served. The plaintiffs deny that they gave instructions for the preparation of the taxation returns, whether those returns were prepared by Mr Ward or by someone else. Once the taxation returns had been obtained, specific instructions should have been obtained from the plaintiffs, and inquiries concerning Mr Ward should have been undertaken, as a matter of some urgency. After all, the matter had already been set down for hearing. Mr Baker offers no explanation as to why no attempts were made to speak to Mr Ward during the almost two month period from about 8 January 2014 to 5 March 2014. The submission made by the plaintiffs that, at the earliest opportunity, Mr Baker took instructions from Mr Ward as a result of which an affidavit was filed, cannot be accepted. 28It is not a case of a deliberate decision on the part of the plaintiffs to not bring forward Mr Ward's evidence at the time of the hearing. Nevertheless, the failure to obtain timely evidence from Mr Ward cannot be put down to mere inadvertence. In my view, the failure must be put down to dilatory conduct on the part of the plaintiffs' solicitor in relation to an issue which he was investigating, presumably on the basis that it might be important. This factor, although not itself decisive, is of some significance. 29I turn now to consider the importance of Mr Ward's evidence. The plaintiffs submit that it is of great importance. It is put that the evidence shows that incorrect information went from Sky to the second defendant, and from the second defendant to the third defendant, and that there was a failure on the part of those defendants to take care to ensure that they were dealing with accurate information. In essence, it is put that Mr Ward's evidence would establish that, had the second and third defendants exercised greater care, the plaintiffs' inability to service the loan would have become apparent and the loan would not have been approved. 30The difficulty with that submission is that it concerns issues which are beyond the scope of the pleadings and the manner in which the plaintiffs' case was conducted. Negligence is pleaded against both the second and third defendants. However, the duties of care alleged are in their terms confined to a duty to ensure that any loan application, contract or mortgage had in fact been consented to and executed by the plaintiffs (see paragraphs 37-39 and 56 of the Statement of Claim). It is true that some of the particulars of breach touch upon questions of verification of the income, assets and liabilities of the plaintiffs. However, the case, as particularised and as conducted, did not involve a complaint that the taxation returns themselves should not have been relied upon by the second defendant or the third defendant. It was not suggested to any of the witnesses called by the second and third defendants that it was unreasonable to place reliance upon the taxation returns. 31The plaintiffs further submit that Mr Ward's evidence is important because it throws doubt upon the credit of some of the witnesses called by the defendants, notably Bernard Moussa and Fay Baker. It is said, for example, that it casts doubt upon Mr Moussa's evidence that he prepared the taxation returns under the supervision of Mr Ward, and did not sign the letter of 25 October 2004. It is further said that the evidence casts doubt upon the evidence given by Fay Baker concerning the letter of 25 October 2004. It is then said that such an impact upon the credit of the defendants' witnesses is significant given the central role that credibility will play in the resolution of the matters in dispute. 32I agree that Mr Ward's evidence, if allowed to be introduced, and if accepted, might have some significance in relation to the credit of Bernard Moussa and Fay Baker. Nevertheless, the importance of those credit issues in the context of the case as a whole should not be overstated. The central question is whether the plaintiffs in fact executed the loan contract and mortgage documents, and other documents following the establishment of the facility authorising drawdowns or transfers of funds. Bernard Moussa is, to some extent, remote from those matters. Fay Baker is more closely involved. She gave evidence that she had a number of meetings with the plaintiffs and in effect arranged the loan application on their behalf. She was not, however, the witness to the signatures, which are purportedly those of the plaintiffs, which appear on the loan contract and the mortgage. The witness to those signatures, Mr Manafikhi, gave evidence at the hearing. He is Fay Baker's husband, and had some involvement with Sky in 2004. Despite those connections, it is difficult to see how Mr Ward's evidence could impugn his evidence in any significant way. The central question will depend upon an assessment of all the oral and documentary evidence adduced at the hearing. Mr Ward's evidence does not seem to me to be of cardinal significance to that assessment. 33I turn now to consider the question of prejudice. It follows from what I have said above that I do not accept the plaintiffs' submission that any prejudice to the defendants is of their own making due to their late filing of affidavits. I also do not accept the suggestion that there is no prejudice that cannot be cured by permitting cross-examination of Mr Ward. It seems to me that if the case was re-opened to permit Mr Ward's evidence to be adduced, given the significance which the plaintiffs themselves attribute to such evidence, it is likely that it would be necessary to have at least Bernard Moussa and Fay Baker recalled as witnesses. These witnesses were called by the second and third defendants but are not employed by either of those defendants. I note also that there was evidence adduced on the adjournment application on the first day of the hearing to the effect that Fay Baker is facing significant health problems. 34A further day of hearing would be required for the additional evidence, and submissions as to the effect of such evidence. It will be no simple matter to find a day which is suitable to all parties (and not unduly inconvenient to witnesses) in the not too distant future. 35It is clear that if the case was now to be re-opened, considerable additional expense would be incurred by all parties, and the finalisation of the matter will be further delayed. It would also cause some unfairness to the defendants who have conducted the hearing, and likely made forensic decisions, on the basis that the hearing was concerned with the evidence given by the deponents of the affidavits which had been served prior to the hearing. 36Viewing the circumstances overall, I have come to the conclusion that it is not in the interests of justice for the case to be now re-opened. Whilst the evidence which is sought to be adduced is clearly relevant, I do not think that it is of such importance that the hearing should be re-opened at this late stage, having regard to the considerable additional expense and inconvenience which would be brought about, coupled with the fact that the problem was created by lack of action on the part of the plaintiffs' solicitor. Accordingly, the plaintiffs' Notice of Motion dated 17 April 2014 is dismissed with costs.