Cummings, J.B. v Hancock, G
[1990] FCA 268
•14 May 1990
IN FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NO NG 668 of 1989
)
GENERAL DIVISION )
BETWEEN: JAMES BARTHOLOMEW CUMMINGS
Applicant
AND : GRANT HANCOCK and OTHERS
Respondents
CORAM: HILL J PLACE: SYDNEY
DATED: 14 MAY 1990
22 JUN1990
EXTEMPORE REASONS FOR JUDGMENT FEDERAL COURT OF AUSTRALIA PRINCIPAL REGISTRY
HILL J
The applicant, James Bartholomew Cummings, seeks the leave of the court to administer interrogatories to the first, second and third respondents and to the fourth and fifth respondents pursuant to the provisions of Order 16 Rule 1 of the Federal Court Rules. Applications have also been made by the respondents for leave under the same rule to administer interrogatories to the applicant.
propose to give leave in respect of them.
The applicant does not oppose the application of the respondents. However, the respondents oppose the applicant's application and say that leave should not be given to administer any or at least most of the interrogatories which are before the court in draft form. As the respondent's draft interrogatories are not opposed, I do not propose to deal with them in this judgment. On their face, they are proper interrogatories, and I
To understand the way the issues have arisen between the parties, it is necessary to summarise the pleadings filed. The applicant claims to be entitled to damages from the the first, second and third respondents, who, collectively, are all of the partners in the firm KPMG Peat Marwick Hungerfords ("Peats")
between 1 February 1989 and 28 March 1989, and they are hereafter referred to in the judgment as the "Peat's partners"; and from the fourth and fifth respondents who, collectively, are all of the partners of the firm Coopers and Lybrand, between 1 May 1988 and 30 June 1989 who are hereafter referred to as the "Cooper and Lybrand partners".
Each of the firms KPMG Peat Marwick Hungerfords and Coopers and Lybrand carry on the practice of chartered accountants in Australia. The applicant's statement of claim insofar as it relates to the Peat's partners, alleges that there were telephone discussions (a) between the applicant and the first respondent, Mr Lewis; and (b) between the applicant and
the second respondent, Mr Rundle, which conversations took place
between 1 March 1989 and 28 March 1989 pursuant to which the
first or second respondent, as the case may be, instructed the applicant to purchase at his discretion on behalf of Peats, top quality yearly bloodstock to a total value of approximately $10 million.
It is further alleged that the applicant purchased approximately $10 million of top quality yearling bloodstock at the Sydney Easter sales, commencing on 28 March 1989, but that the Peat's partners refused to indemnify the applicant in respect of the purchase money and other expenditure incurred by him as a result of which the applicant suffyeed loss and damage. The particulars in the statement of claim refer to two specified conversations said to have taken place on or about 1 and 2 March 1989.
Paragraphs 8 and 9, 21 and 22 of the Statement of Claim refer to unspecified telephone conversations said to have taken place between 1 March 1989 and 28 March 1989. The statement of claim alleges that the applicant's purchase related to the promotion of syndicates to purchase such bloodstock to which a member of Peats would be appointed as investors' representative. Units in these syndicates would then be available for purchase or subscription by clients of Peats prior to 30 June 1989.
It is also alleged that (i) the applicant had been a client of Peats for many years prior to 1 March 1989 and had dealt with the first and second respondents in relation to the possibility of establishing a syndicate; (ii) that the firm was aware of his financial affairs and knew that the applicant would not be in a position to undertake a personal liability of approximately $10 million without indemnity; and (iii) that the applicant had promoted a syndicate or syndicates (Cups King Syndicates Numbers 2 and 3) for which, presumably, the bloodstock was purchased.
The claim is pleaded as an action for breach of the contract to indemnify the applicant. In the alternative, the applicant pleads:
(a)
an action in damages for breach of a warranty on behalf of Peats that the syndicate would be filled on or before 30 June 1989;
(b)
an action in negligence for a breach of a duty of care said to be owed by the Peats partners to the applicant and breached by the giving of negligent advice, as well as for false and misleading representations said to contravene s.52 of the Trade Practices Act 1974 and s.42 of the Fair Tradina Act (NSW) 1987;
(C) unconscionable conduct under s.52A and 6.43, respectively of the Trade Practices Act and the Fair Tradina Act and representations by the Peat's partners said to contravene ss.53(c) and 44(e); ss.53(£) and 44(j), ss.53(g) and 44(k), ss.59(2) and 54(2) of the respective Acts.
Apart from the claim that he was a long-standing client of Peats, as a result of which the partners were aware of his financial affairs, the factual matrix of the claim is set firmly in the conversations said to have taken place between 1 March and 28 March 1989. The defence filed by the first, second and third respondents consists, in essence, of a denial of the applicant's allegations. Other defences of illegality are also sought to be made out arising from alleged breaches of the securities industries codes of New South Wales and South Australia and the companies codes of those states.
Generally, it can be seen that, apart from the defences of illegality, the applicant's case and the defence to it both turn substantially upon the terms of the conversations alleged to have taken place between the applicant on the one hand and the first and second respondents on the other. I was told from the bar table by counsel for the respondents that the case will turn substantially upon the terms of those conversations, and that the credit of the applicant will be a substantial issue in the trial.
For this reason, I formed the view that the case was not an appropriate one for the taking of evidence on affidavit, but rather, in the interests of justice, viva voce evidence should be taken and the parties cross-examined upon their evidence. I declined also to order the filing and serving of witness statements for to do so seems to me to present most of the disadvantages of affidavit evidence in a case such as the present without any of the concomitant advantages. Such statements are generally unsworn and while they provide ammunition for cross-examination on inconsistencies said to exist between the oral evidence and the pre-prepared witness statements, they do little to shorten the trial. This is particularly so when the factual evidence going to liability appears to be confined to a quite small compass.
The case against the Coopers and Lybrand partners bears some similarity to that against the Peats partners. It too, is pleaded in contract for breach of warranty, for breach of the various provisions of the Trade Practices Act and Fair Tradinq
(NSW) including ss.52 and 42, respectively, of those acts, in respect of what are alleged to be some misleading representations made by and on behalf of the Coopers and Lybrand partners. Also pleaded is a claim for a breach of fiduciary duty said to have been owed by the fourth respondent and through him, by the Coopers and Lybrand partners. The applicant also asserts negligence on behalf of these respondents.
From the particulars supplied in the statement of claim, it would seem that it is alleged that conversations took place between 1 May 1988 and 29 October 1988, and specific conversations are particularised between the fourth respondent and the applicant concerning the promotion of a syndicate, units in which were to be fully subscribed on or before 30 June 1989. It is alleged that pursuant to these conversations, the applicant purchased in his own name approximately $10 million worth of top quality yearly bloodstock, yet the fourth respondent failed to ensure that the units in the syndicate which is apparently called the Cups King Syndicate Number 1 were not fully subscribed for on or before 30 June 1989. In the alternative, it is alleged that representations were made between 10 January 1989 and 1 March 1989 (specific occasions are particularised, see clause 39) relating to the establishment of the syndicate.
An agreement is also alleged to have been formed between the Coopers and Lybrand partners and the applicant during the period 1 May 1988 and 30 June 1989 relating to the establishment, financing and promotion of three syndicates, the Cups King Syndicates Numbers 1, 2 and 3. These representations appear from the statement of claim to have been made, it is alleged, in the conversations referred to in paragraph 29.
The defence filed by the fourth and fifth respondents
generally denies the allegations save that it is admitted in
answer to various paragraphs of the statement of claim that the
yearly bloodstock but that the syndicate was structured in applicant purchased in his own name a quantity of top quality accordance with Mr Leckiefs advice, Mr Leckie was to be appointed the investors' representative to the syndicate, and that units in the syndicate were to be available for investment by the public, including the principals and clients of Coopers and Lybrand, prior to 30 June 1989.
It is also admitted that Mr Leckie did not on or before
30 June 1989 secure the placement to investors of units in the
syndicate although it is denied that he was under a liability so to do. A further admission is that Mr Leckie, on behalf of Coopers and Lybrand, agreed to assist with the establishing, financing and promotion of the three syndicates, namely, the Cups King Syndicates numbers 1, 2 and 3.
It is in this state of the pleadings that the application to administer the two sets of interrogatories is made by the applicant. Discovery has been given by both parties. It is convenient to deal first with the application for leave to administer interrogatories to the first, second and third respondents.
The interrogatories sought to be administered comprised 27 pages. By number, there are 52 questions, but each has a number of sub-questions. I have not sought to do the calculations, but there would conservatively be at least 150
interrogatories and probably more.
The interrogatories fall into a number of categories. Apart from a general submission that no interrogatories should be permitted, having regard to the oppressive nature of the inquiries and the very large number of interrogatories sought to be administered, the Peats respondents admit, with some qualifications, that, with some changes to which I will later refer, interrogatories 3, 6, 22, 42, 44, 45, and 50(a) and (b) are, in the circumstances, proper interrogatories.
THE CATEGORIES OF OBJECTION
Obiection was taken to the interroaatories on the followinq
bases :
1. Some interrogatories ask about conversations between 1 February 1989 and 28 March 1989, whereas the conversations particularised in the Statement of Claim are said to have occurred specifically on 1 March and 2 March 1989, and between 1 March and 28 March 1989.
The applicant submits that he should not be confined to the conversations particularised in the statement of claim and that, in any event, the dates are described in the Statement of Claim as being "on or about...". Secondly, the applicant submits that he does not wish to be confined to a precise date by reference to conversations commencing on 1 March 1989 when the
conversations could have taken place a short time before that. In my view, in principle, the applicant should be allowed some leeway in selecting the period, and I would propose that the last two weeks of February be included in the relevant period.
2. The subject matter of the conversations described in the interrogatories is wider than that alleged in the pleadings. Some of the interrogatories seek information beyond the issues alleged in the pleadings.
3 . The questions asked go to matters of evidence. Hence, for example, the respondents are asked questions such as who was present at certain conversations. Generally the names of witnesses to be called cannot be required by interrogatories, yet if the name is a relevant fact, that
name can be required; see KnaDD v Harvev r 1 9 1 1 1 2 KB 725
at 7 3 0 . 4 . The interrogatories require not only the material substance of conversations, but also that conversations be expressed in the first person. The question whether it is permissible for interrogatories to require conversations to be expressed in the first person does not, so far as the researches of counsel, or so far as time has permitted my researches show, appear to have been the subject of decision.
In principle, however, I am of the view that interrogatories requiring conversations to be expressed in the first person should not be permitted. The general rule as to interrogatories directed at conversations is that it is the substance or effect of material conversations that are required,
not the actual words used; see West v Conwav ( 1 9 2 3 ) 2 3 SR 344
at 3 4 6 .
In form, interrogatories in this category fall somewhere in between the two principles. The actual words used are not specifically required, merely the material substance. On the other hand, the requirement that the answer be expressed in the first person comes close to seeking the evidence relied upon by the respondents.
The applicants make no secret of the fact that interrogatories of this kind are required because of my reluctance to order the respondents to file witness statements. They are seeking, in effect, through the use of interrogatories, to achieve the same result. As a matter of discretion, I am not prepared to require the respondents to express the substance of conversations in the first person.
The applicants may, however, interrogate within the limits of the case pleaded and require the substance of conversations to be expressed. Some interrogatories, for example, Interrogatory 7, interrogate concerning documents that
have presumably been discovered. The author of the document is sought and questions are put, that attempt in essence to cross-examine upon it. That raises a general question as to the attitude of the court to interrogatories and in particular as to how I should exercise the judicial discretion conferred upon me by the Federal Court Rules in granting leave to interrogate. The present rule, Order 16 Rule 1, was substituted by statutory rule 61 of 1986. Prior thereto, leave to interrogate was not required, although the Court could order either that answers to particular interrogatories be not required, or limit the extent to which an answer should be required; see Order 16 Rule 3(2). This was in accord with the general principle that the Court would limit interrogatories to such as were necessary; see Order 16 Rule 3(3).
The 1986 amendment represents a policy (not unique to this Court) to scrutinise carefully the circumstances in which interrogatories can be ordered to be given. That policy is reflected in the rules of other courts; see, e.g., Part 24, Rules 1 and 2 of the rules of the Supreme Court of New South Wales where the number of interrogatories permitted is limited to 30, treating sub-interrogatories, in effect, as separate interrogatories.
The approach adopted by this Court is rather that adopted Wales and the practice of the Commercial Court in the United
by the Commercial Division of the Supreme Court of New South
Kingdom. There, it is recognised that interrogatories may greatly increase the cost of litigation and lead to delays which impede the policy of the court in commercial matters which is to expedite hearings in the interests of justice.
Hence, in these courts and in this court, it is recognised that interrogatories will not be ordered as of right, and that it will only be where, in the interests of justice, an interrogatory is seen as being really necessary for the proper conduct of a case, that an order granting leave will be made.
Interrogatories that seek to cross-examine, particularly
in respect of documents produced on discovery do not, in my view- at least in the present case - fall within this category. The applicant will not be unduly prejudiced by waiting until the trial to cross-examine in respect of these documents. Such prejudice as there may be must be weighed against the prejudice not only in terms of time and cost to the respondents, but to the interests of the administration of justice in the speedy resolution of conflicts. I am not prepared to allow the applicant to administer interrogatories of this kind.
Another category of interrogatories objected to may be
illustrated by interrogatory 20. That required an answer to the
following question:
As at 1 March 1989, did Rundle know or believe that Cummings had or possibly had purchased ten million (dollars worth of) bloodstock for a syndicate to be promoted by or in conjunction with Coopers and Lybrand.
This interrogatory which, of course, involves a number of rolled up questions is in essence directed towards the cross-examination of Mr Rundle. It is well-established law that a party cannot be asked interrogatories that go to credit. However, it is no objection as such to an interrogatory that it is in the nature of cross-examination - see Kennedv v Dodson [l9851 1 Ch at 341.
But, notwithstanding these principles, I would not, in the exercise of discretion and in all the circumstances of the present case, permit interrogatory 20 to be asked. Cross-examination of this type can well await the trial.
Other interrogatories are criticised on the basis of vagueness or ambiguity. For example, interrogatory 21 asks whether Mr Rundle, "on the basis of his knowledge of Cummings' financial affairs as at 1 March 1989" believed that Cummings could before 31 March 1989 prudently accept a personal liability for approximately $10 million if he was to promote a non
underwritten syndicate.
In this form, the interrogatory has a number of vices. It assumes that Mr Rundle did have a knowledge of the applicant's financial affairs and that he understood what was intended to be comprehended by the expression, "financial affairs". I was told from the bar table that an attempt had been made, unsuccessfully, by the Peats respondents, to ascertain what "financial affairs" the Peats respondents were said to know. In my view, in these circumstances, such an interrogatory would be embarrassing.
Other interrogatories seek to ask questions directed at the state of mind of either Mr Rundle or Mr Lewis. It is not an objection as such to an interrogatory that it is directed to the state of mind of a person. What matters is that that state of mind is material to an issue in dispute between the parties; cf Navair Ptv Limited v TranSDOrt Workers Union of Australia (1980-1) 52 FLR 177, per Evatt J at 195.
I have said sufficient to make it clear that I would not grant leave for the applicant to administer the interrogatories sought. I would indicate that I would permit the applicant to administer interrogatories in the form of items 22, 42, 43, 44, 45, and 50(a) and (b). I would also permit interrogatories 3 and 6 to be administered with the following amendments. The period referred to in both should be changed to 1 March 1989 to
28 March 1989. I would, in addition, permit interrogatories 1,
2, 4, and 5 to be asked provided that the form of the interrogatory is changed so that it does not ask who was present when the conversation occurred, and omits the reference to "expressed in the first person."
Subject thereto, I would refuse the applicant leave to administer the remaining interrogatories. I will reserve the question of costs for argument at a later date.
The interrogatories which the applicant seeks leave to administer to the Coopers and Lybrand respondents were the subject of similar criticisms. The respondents agreed that interrogatories 35, 36, 37, 38, 39 47, 48, 49, 50, and 51, which were directed at conversations particularised in the Statement of Claim were proper and that at least while the issue of authority remained open, interrogatories 53, 54, and 55 would be proper.
It was said that the Coopers and Lybrand respondents were considering admitting the issue of authority and amending their defence accordingly so that I should not at this stage consider those particular interrogatories. Again, there are some 57 interrogatories, some containing as many as 8 sub-questions. Prima facie, the attempt to interrogate could thus be said to be oppressive.
Interrogatories 1 through 46 sought to interrogate in respect of documents produced on discovery.
These
interrogatories fell into two main classes; first,
interrogatories concerning diary entries or telephone message book entries of Mr Leckie. Second, interrogatories seeking to cross-examine in respect of documents produced on discovery.
Those interrogatories directed at the diary entries of Mr Leckie or entries made by him in respect of telephone messages sought inter alia details of conversations between Mr Leckie and the applicant and between Mr Leckie and third persons. They asked what certain entries related to and sought to cross-examine upon these entries.
During argument, I was inclined to the view that to the extent that these questions were directed at establishing the material substance of conversations that took place between the applicant and Mr Leckie, at least within the ambit of time covered by the statement of claim, they should be permitted.
The problem associated with that course is that it is impossible to determine, on the face of the draft interrogatories, which of the interrogatories really fall within this category. It is a difficulty which the applicant has perhaps brought upon himself by the mere bulk of the interrogatories and by the attempt to use interrogatories as a substitute for cross-examination which could as well be left to the trial.
Accordingly, I do not propose to assay the task of separating out those interrogatories of this class which might be the proper subject of leave from those which are not. In these circumstances, I would give leave to the applicant to administer interrogatories 35, 36, 37, 38, 39, 47, 48, 49, 50, and 51. I will not permit interrogatory 52 which goes to an expectation that Mr Leckie might or might not have had. I will defer consideration of interrogatories 53 to 55 pending the filing within 10 days by the respondent of an amended defence admitting authority if this course is to be adopted.
Interrogatory 56 appears to deal with a former syndicate, Leilani Number 1 Syndicate, not the subject of any allegation in the statement of claim. Accordingly, I would reject it. Interrogatory 57 deals with the period 1 July 1988 to 31 March 1989 and seeks to ascertain details of every conversation between Mr Leckie and the applicant on the subject of the purchase of bloodstock to be syndicated on or before 30 June
1989. The period sought to be explored extends well beyond the period 1 May 1988 to 29 October 1988 the period in which the relevant conversations are said in the statement of claim to have occurred.
This interrogatory could thus conceivably require the respondent to detail conversations relating to other syndicates not the subject of the allegations in the statement of claim. I see no reason why the court should permit an interrogatory that could be properly asked and hence assist in the ultimate conduct of the trial. I reject, therefore, at this stage interrogatory
Again I would reserve the question of costs for later
argument.
I would accordingly direct the applicant to prepare a further draft of the interrogatories, which I am prepared, in accordance with these reasons, to grant leave to administer. Such draft should be prepared and filed on or before 24 May, following which I will relist the matter to make orders giving leave to administer the interrogatories contained in that document.
Should the applicant desire, after considering these reasons, to administer a small number of further interrogatories directed at relevant conversations, I will consider an application for leave so to do. I direct the first, second and third respondents to file and serve any amended defence upon which they propose to rely on or before 24 May.
I grant leave to the first, second and third respondents to administer the interrogatories which, in draft form, I will initial, and to the fourth and fifth respondents to administer the interrogatories which, in draft form, I will initial. I will relist the matter for further directions on 2 8 May at
4.15 pm and give liberty to either side to restore the matter to
the list on 4 8 hours notice.
I certify that this and the
preceding eighteen (18) pages
are a true copy of the Extempore
Reasons for Judgment herein of his
Honour Mr Justice Hill.
Associate: R - a d .
Dated: 14 May 1990
Counsel and Solicitors Mr V Gray instructed by for Applicant: Messrs Malcolm Johns & CO Counsel and Solicitors Mr B Walker instructed by for Second and Third Messrs Freehill Hollingdale & Respondents: Page Counsel and Solicitors Mr P Jacobson instructed by for Fourth and Fifth Messrs Norton Smith Respondents: Date of hearing: 14 May 1990 Date Judgment Delivered: 14 May 1990
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