Fodare Pty Ltd v Shearn

[2010] NSWSC 737

Reported Decision: 240 FLR 187

New South Wales

Supreme Court

CITATION:	Fodare Pty Ltd v Shearn [2010] NSWSC 737
HEARING DATE(S):	24/06/10, 25/06/10
JUDGMENT DATE :	6 July 2010
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	I make the following directions: 1. If the defendants take specific and particular objection to any part of the affidavit of Mr Dennis of 13 August 2009, the affidavit of Mr Rowley of 14 August 2009 or the affidavit of Mr Clout of 10 August 2009, the defendants shall, within seven days, serve on the plaintiff a schedule containing: (a) the text of each passage objected to; (b) a statement in narrative form of the basis for objection; and (c) a statement in narrative form of the submissions in support of the objection. 2. Within seven days after service of any such schedule, counsel and solicitors for the defendants and counsel and solicitors for the plaintiff shall physically meet together and discuss in a constructive way each and every item in the schedule with a view to reaching agreement that the objection will not be pressed or the passage in question will not be read or the objection is conscientiously taken and conscientiously resisted so as to require a ruling by the court, it being the purpose of that meeting to have counsel identify an irreducible minimum of objections requiring a ruling and thereby to perform their duty to assist the court in identifying and determining real issues going to the admissibility of evidence. 3. Within seven days after that meeting has concluded, counsel for the parties shall jointly prepare and deliver to my Associate a written statement relating to the unresolved objections which is set out in columns as follows: (a) the first column shall identify the relevant affidavit and the relevant paragraph number; (b) the second column shall contain the text of the passage to which objection is take; (c) the third column shall contain in narrative form the basis for the objection and the defendants’ submissions in support of the objection; and (d) the fourth column shall contain in narrative form the plaintiff’s submissions against the objection and in support of the admissibility of the material objected to.
CATCHWORDS:	CORPORATIONS - examination of officers and others - written record of examination - to what extent admissible in evidence to prove facts stated - EVIDENCE - admissibility - hearsay - where deponent repeats in current affidavit statements made in an earlier affidavit - whether excluded by hearsay rule - EVIDENCE - admissibility - proceedings by company against director alleging breach of duty - whether defendant thereby exposed to penalty relevant to admissibility of evidence - EVIDENCE - admissibility - written record of examination - application of hearsay rule - statutory exception in Corporations Act
LEGISLATION CITED:	Corporations Act 2001 (Cth), Parts 2D1, 5.9, 9.4B, ss 597(12A), 597(13), 597(14), 1305, 1317E, 1317G, 1317H, 1317HA, 1317J, 1337B, 1337P(1)(a), 1337P(3) Evidence Act 1995 (Cth), s 4 Evidence Act 1995, ss 4, 56, 59, 69(1), 69(2), 69(3), 91, 135 Judiciary Act 1903 (Cth), s 79 Royal Commissions Act 1923, ss 4, 8, 9(1), 9(2)
CATEGORY:	Procedural and other rulings
CASES CITED:	Australian Securities and Investments Commission v Neolido Holdings Pty Ltd [2006] QCA 266 Australian Securities and Investments Commission v Rich [2005] NSWSC 417; (2005) 216 ALR 320 Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 Edenden v Bignell [2007] NSWSC 1122 Foyster v Foyster Holdings Pty Ltd [2002] NSWSC 768 Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2007] FCA 1621 Gordon v Tolcher [2006] HCA 62; (2006) 231 CLR 334 Griffin v Pantzer (2004) FCAFC 113; (2004) 137 FCR 209 Litmus Australia Pty Ltd v Canty [2007] NSWSC 670; (2007) 25 ACLC 1141 Meteyard v Love [2005] NSWCA 444; (2005) 56 ACSR 487 One.Tel Ltd v Rich [2005] NSWSC 226; (2005) 190 FLR 443 Primacy Underwriting Agency Pty Ltd v Kilborn [2007] NSWSC 158; (2007) 25 ACLC 160 Re Doran Constructions Pty Ltd [2002] NSWSC 215; (2002) 194 ALR 101 Re Interchase Corporation Ltd (1996) 68 FCR 481 Re Westgate Wool Co Pty Ltd [2006] SASC 372; (2006) 206 FLR 190 Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129 Scope Data Systems Pty Ltd v Goman [2007] NSWSC 278; (2007) 70 NSWLR 176 Strarch International Ltd v Loh [2005] NSWSC 583; (2005) 191 FLR 225 Strarch International Pty Ltd v Loh [2005] NSWSC 769; (2005) 54 ACSR 481 Supercar International Holdings Ltd v Sommers [2009] NSWSC 1488 Thomas v State of New South Wales [2008] NSWCA 316; (2008) 74 NSWLR 34
PARTIES:	Fodare Pty Limited - Plaintiff Doris Emily Elizabeth Shearn - First Defendant Kathleen Anne Hirtzell - Second Defendant
FILE NUMBER(S):	SC 2009/289108
COUNSEL:	Mr J T Johnson - Plaintiff Mr M J Cohen - First and Second Defendants
SOLICITORS:	Garland Hawthorn Brahe - Plaintiff Dognan & Hanrahan - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

TUESDAY 6 JULY 2010

2009/289108 FODARE PTY LIMITED v DORIS EMILY ELIZABETH SHEARN & ANOR

JUDGMENT

1 The plaintiff alleges that the first defendant, Ms Shearn, breached duties owed by her as a director of the plaintiff (including statutory duties under Part 2D.1 of the Corporations Act 2001 (Cth)) by causing certain moneys to be paid to or for the benefit of the second defendant, Ms Hirtzell; and that Ms Hirtzell was complicit in Ms Shearn’s breach of duty.

2 These proceedings were commenced by the plaintiff on 1 June 2009 at the instigation of its liquidator, Mr Clout. The hearing commenced on 24 June 2010.

3 After briefly opening his client’s case, Mr Johnson, counsel for the plaintiff, indicated his intention of reading four affidavits, being affidavits of Mr Clout sworn on 22 May 2009 and 10 August 2009, an affidavit of Mr Dennis sworn on 13 August 2009 and an affidavit of Mr Rowley sworn on 14 August 2009.

4 The defendants, through their counsel, Mr Cohen, objected to the whole of this evidence, with the exception of the first affidavit of Mr Clout. That affidavit is of a formal kind and does little beyond annexing documents. The defendants’ objections thus affect a very large part of the evidence the plaintiff seeks to tender.

5 Detailed submissions were made on both sides in relation to the admissibility of the remaining affidavit material. The defendants’ objections to each affidavit applied to the whole (or substantially the whole) of the affidavit’s content, including annexures or exhibits. Mr Cohen foreshadowed the possibility of further objections on a paragraph-by-paragraph basis, depending on the result of what might be termed the “global” objection in each case. Having heard detailed argument on the “global” objections, I found it necessary to reserve my decision.

6 It is necessary to consider the affidavits one by one. In approaching them, I should record that, although the case the plaintiff seeks to advance on the basis of non-compliance with the Corporations Act of the Commonwealth causes this court to be exercising Federal jurisdiction in these proceedings, the general evidence legislation to be applied is the Evidence Act 1995 of New South Wales. This is the effect of s 79 of the Judiciary Act 1903 (Cth); and see Gordon v Tolcher [2006] HCA 62; (2006) 231 CLR 334; Scope Data Systems Pty Ltd v Goman [2007] NSWSC 278; (2007) 70 NSWLR 176. Both Mr Johnson and Mr Cohen accepted this. References to “the Evidence Act” in the discussion that follows are therefore to be understood as references to the New South Wales Act.

Mr Dennis’s affidavit – first objection

7 The first affidavit to be considered is the affidavit of Mr Dennis sworn on 13 August 2009. A particular feature of that affidavit that excites the defendants’ objection is that a very large part of its substantive content is identical, virtually word for word, with the content of an affidavit sworn by Mr Dennis in 2005 for the purposes of certain District Court proceedings. The parties to those earlier proceedings were the parties to the present proceedings plus Mr Dennis himself and a Mr Tubb (who is the husband of Ms Hirtzell and the son of Ms Shearn). Mr Dennis, a solicitor, sued (unsuccessfully, as it transpired) for professional fees and disbursements he considered to be due to him. All three parties to the present proceedings were defendants in the 2005 proceedings, along with Mr Tubb.

8 The defendants say that each paragraph of Mr Dennis’s 2009 affidavit filed in these proceedings that contains words identical or virtually identical with those of a paragraph of Mr Dennis’s 2005 affidavit (being all but a few paragraphs) is inadmissible because of the hearsay rule in s 59 of the Evidence Act 1995; added to which s 69(2) does not displace the operation of the hearsay rule because it is made inapplicable by s 69(3).

9 Section 59(1) of the Evidence Act is in these terms:

“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.”

10 The Act defines “previous representation” as follows:

“’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.”

11 Mr Dennis’s 2009 affidavit embodies statements he has made, caused to be recorded in written form and then authenticated by the oath administered to him upon his swearing the affidavit. By reading that affidavit in these proceedings, the plaintiff will adduce evidence from Mr Dennis. The content of the affidavit, being sworn statements made by Mr Dennis, will stand as his evidence, together with any oral testimony he gives upon cross-examination (or, exceptionally and if leave is granted, by way of oral supplement in chief to what he says in his affidavit).

12 It is clear that Mr Dennis makes in his 2009 affidavit many statements in precisely the same terms as statements in his 2005 affidavit. What follows? The phenomenon of persons saying the same thing more than once is commonplace. Imagine the following conversation:

“Brown: When did you leave home on 1 January 2010?
Black: On 1 January 2010, I left home at 11.30am.
Brown: What did you say?
Black: On 1 January 2010, I left home at 11.30am.
Brown: Are you sure it wasn’t earlier?
Black: On 1 January 2010, I left home at 11.30am.”

13 At the end of this exchange, the words, “On 1 January 2010, I left home at 11.30am” had, on three separate occasions, attained the status of a “previous representation” of Black. On the case Mr Cohen seeks to make, Black is precluded by s 59 of the Evidence Act from testifying in any future legal proceedings by speaking (or including in an affidavit) the words, “On 1 January 2010, I left home at 11.30am”. Indeed, he was so precluded after he spoke those words to Brown on the first of the three occasions.

14 The proposition is quite unsupportable. What s 59 precludes is “evidence of” the “previous representation” to prove the existence of a fact that it can reasonably be supposed that the relevant person intended to assert by the representation. Thus, one cannot seek to prove that, on 1 January 2010, Black left home at 11.30am by adducing evidence of the statement of Black to that effect made on any of the three occasions on which Black spoke the relevant words to Brown.

15 In the present case, there is no attempt to give evidence of any previous representation made by Mr Dennis. The 2009 affidavit is not a vehicle for the giving by him of “evidence of” the “previous representations” he made and recorded in his 2005 affidavit. It is the vehicle by which he makes, at first hand, representations in the same terms as those previous representations.

16 It follows that the submission based on s 59 is ill-conceived and that the occasion to consider the exception to the hearsay rule created by s 69 simply does not arise.

Mr Dennis’s affidavit – second objection

17 Mr Cohen’s next submission in relation to the repetition in Mr Dennis’s 2009 affidavit of statements contained in his 2005 affidavit is that “the material has merged into the judgment in the District Court and ought to be rejected upon the basis established by s 135 of the Act, on the footing that the probative value of such evidence is substantially outweighed by the unfair prejudice to the first and second defendants having to contend with such material on a second occasion, when it has already been rejected as a basis for the recovery of the alleged fees against them, and which was the sole purpose for the evidence of Mr Dennis being adduced”. The submission continues:

“That is to say, there having been a determination by the District Court upon this material adverse to the proposition that the first and second Defendants are not liable for the fees in the fashion alleged by the Dennis affidavit, it should not be open to the Plaintiff in this proceeding to rely on the self-same evidence, and vex the first and second Defendants as to the same facts. Such facts ought to be taken to have been dealt with by the District Court and not be permitted to be allowed into evidence in this proceeding in a fashion in which the prejudice to the Defendants manifestly outweighs its very slight probative value.”

18 The concept of the “merger” of evidence in a judgment in the proceedings in which the evidence was given is not one that is meaningful. Upon a judgment being given, the right or cause of action asserted ceases to exist and is merged in the judgment; and everything legally indispensable to the court’s conclusion is thereafter precluded. These matters are discussed in the judgment of Dixon J in Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 at 531 – 532. But preclusion of this kind operates only between the parties to the litigation and only as to the assertion of rights and obligations.

19 The parties to the District Court litigation determined in 2005 were Mr Dennis as plaintiff and the present plaintiff, Ms Sheard, Ms Hirtzell and Mr Tubb as defendants. Mr Dennis is not a party to the present proceedings. The proposition Mr Cohen seeks to advance is thus, in effect, that evidence given by A in proceedings brought by A against B and C cannot later be given again by A in proceedings brought by B against C. That proposition cannot be sustained on the basis of any form of res judicata or otherwise. Nor can it be said, as Mr Cohen seeks to submit, that the fact that the evidence was given in the earlier proceedings makes it “misleading or confusing” within the meaning of s 135.

Mr Dennis’s affidavit - third objection

20 The next submission made by Mr Cohen in relation to Mr Dennis’s 2009 affidavit is advanced on the footing that the plaintiff seeks a “declaration of contravention” under s 1317E of the Corporations Act. From that point, several propositions are advanced on the basis that the application for a “declaration of contravention” means that the defendants are, in these proceedings, exposed to penalty, with consequent implications for the admissibility of evidence.

21 Whatever the plaintiff might say or claim in its originating process, and whatever it might ultimately prove, the simple reality is that the court will not make a s 1317E “declaration of contravention” in these proceedings.

22 Section 1317E appears in Part 9.4B of the Corporations Act headed “Civil consequences of contravening civil penalty provisions”. Within Part 9.4B, s 1317E empowers the court to make a “declaration of contravention”, s 1317G empowers the court to order a person to pay a “pecuniary penalty” and each of s 1317H and 1317HA empowers the court to order a person to compensate another person for damage suffered. Section 1317J then provides, so far as relevant, as follows:

“Application by ASIC
(1) ASIC may apply for a declaration of contravention, a pecuniary penalty order or a compensation order.

Application by corporation
(2) The corporation, or the responsible entity for the registered scheme, may apply for a compensation order.
Note: An application for a compensation order may be made whether or not a declaration of contravention has been made under section 1317E.

. . .

No one else may apply
(4) No person may apply for a declaration of contravention, a pecuniary penalty order or a compensation order unless permitted by this section.

(5) Subsection (4) does not exclude the operation of the Director of Public Prosecutions Act 1983 .”

23 Given s 1317J(1) and (4) and the axiomatic principle that the court can and will make a particular order only upon application made by a person with standing to seek the order, it is obvious that the court will not – indeed, cannot – make a “declaration of contravention” in these present proceedings: see Foyster v Foyster Holdings Pty Ltd [2002] NSWSC 768; One.Tel Ltd v Rich [2005] NSWSC 226; (2005) 190 FLR 443; Australian Securities and Investments Commission v Neolido Holdings Pty Ltd [2006] QCA 266; Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2007] FCA 1621; Edenden v Bignell [2007] NSWSC 1122; Litmus Australia Pty Ltd v Canty [2007] NSWSC 670; (2007) 25 ACLC 1141; Primacy Underwriting Agency Pty Ltd v Kilborn [2007] NSWSC 158; (2007) 25 ACLC 160; Supercar International Holdings Ltd v Sommers [2009] NSWSC 1488.

24 This conclusion removes the basis for the objection based on perceived exposure to a penalty. I nevertheless address the submission based on that proposition. The submission is that, if the proceedings are of that character, the plaintiff must prove the allegations it makes. So much may be accepted. But the submission goes further. It is said that discovery and inspection would not be ordered against the defendants exposed to a penalty and that therefore the plaintiff cannot put into evidence materials obtained by its liquidator through deployment of Part 5.9 compulsion, being material that the defendants’ privilege against exposure to a penalty would have entitled the defendants to withhold in the face of an order for discovery.

25 It may be accepted that, where ASIC proceeds for punitive orders under Part 9.4B and related provisions, the defendant may rely on the privilege against exposure to a penalty to avoid discovery: Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129. By the same token, a defendant in proceedings for a compensation order under s 1317H or s 1317HA ought not be required to file evidence or otherwise to provide information which might be used to establish the defendant’s liability to a penalty in other proceedings: see One.Tel Ltd v Rich (above).

26 It is one thing to ensure that pre-trial processes and processes within a proceeding itself are not deployed against a defendant in a way that compromises the defendant’s privilege against exposure to a penalty. It is quite another to seek to preclude a company in liquidation from using in evidence material lawfully obtained by its liquidator by compulsory process.

27 It is, in any event, instructive to look at the several annexures or exhibits. There are copies of two judgments in Federal Court proceedings determined in 2000 to which the present parties (and others) were party. These have medium neutral citations and are freely available through the Internet. There are copies of correspondence between Mr Dennis and the plaintiff (then his client) and its officers and between Mr Dennis and other lawyers involved in the earlier litigation, correspondence between Mr Dennis’s firm and service providers relating to that litigation and copies of bills for services relating to that litigation. To the extent that letters to (or file copies of letters from) the plaintiff are involved, these are now directly within the custody and control of its liquidator at whose instigation it brings these proceedings. To the extent that there are letters or other communications to Mr Dennis or his firm (or file copies of letters from Mr Dennis or his firm), these are directly within the custody and control of Mr Dennis who can thus give evidence about them. The remaining documents are a copy of each of two registered Real Property Act transfers, a copy of a Land Titles Office filed memorandum and a copy of an ASIC extract, all of which are freely available on search.

28 There is simply no basis for any finding or even suspicion that the liquidator of the plaintiff obtained any of these documents under compulsion – even if that were somehow relevant to their admissibility.

29 The third objection to Mr Dennis’s affidavit and its annexures or exhibits has no substance.

Mr Dennis’s affidavit – fourth objection

30 It is necessary to make special reference, however, to those of the annexures or exhibits that are copies of Federal Court judgments. Mr Cohen points out that, having regard to s 91 of the Evidence Act, those documents and their content cannot be used to prove a fact that was in issue in the Federal Court proceedings. Mr Johnson does not seek to argue otherwise. The judgments will be received into evidence on that basis.

Mr Rowley’s affidavit – first objection

31 I turn now to the affidavit of Mr Rowley, an accountant retained by Mr Clout, the plaintiff’s liquidator. The first objection here is to the exhibits RR1 and RR2. These contain a copy of the transcript of a Part 5.9 examination of Ms Shearn, a copy of the transcript of a Part 5.9 examination of Ms Hirtzell and a copy of the transcript of a Part 5.9 examination of Mr Tubb, all of which occurred in May 2008.

32 Mr Cohen’s objection to this material is that each statement of an examinee recorded in the transcript is a previous representation of that examinee and that, having regard to s 59 of the Evidence Act, the transcripts cannot be used to prove the existence of any fact that it can reasonably be supposed that examinee intended to assert by the statement – unless an exception to the hearsay rule applies. Mr Cohen accepts that the documents in question (that is, the examination transcripts) are within s 69(1) and that, by virtue of s 69(2), the hearsay rule does not apply to them so far as they contain the previous representations of the examinees – subject, however, to s 69(3). It is the submission of Mr Cohen that s 69(3) displaces the operation that s 69(2) would otherwise have. This, he says, is because the statements of the examinees recorded in the transcripts were, in the words of s 69(3)(a), “prepared or obtained for the purpose of conducting, or for or in contemplation or in connection with, an Australian or overseas proceeding”.

33 Having said that, I should set out the relevant part of s 69 of the Evidence Act:

“(1) This section applies to a document that:
(a) either:
(i) is or forms part of the records belonging to or kept by a person, body or organisation in the course of, or for the purposes of, a business, or
(ii) at any time was or formed part of such a record, and
(b) contains a previous representation made or recorded in the document in the course of, or for the purposes of, the business.

(2) The hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made:
(a) by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, or
(b) on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact.

(3) Subsection (2) does not apply if the representation:
(a) was prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding, or
(b) was made in connection with an investigation relating or leading to a criminal proceeding.

. . . “

34 Mr Johnson pointed out that, in relation to the examination transcripts of Ms Shearn and Ms Hirtzell (but not Mr Tubb), the question of admissibility is affected by s 597(14) of the Corporations Act, it being accepted that the examination transcript is, in each case, a written record made pursuant to a s 597(13) order and signed by the examinee in conformity with a direction of the court: see generally Strarch International Pty Ltd v Loh [2005] NSWSC 769; (2005) 54 ACSR 481. Section 597(14) provides:

“Subject to subsection (12A), any written record of an examination so signed by a person, or any transcript of an examination of a person that is authenticated as provided by the rules, may be used in evidence in any legal proceedings against the person.”

35 The qualification related to s 597(12A) is relevant only to criminal proceedings and may be ignored for present purposes.

36 The statement that a written record of the kind represented by the transcripts of Ms Shearn and Ms Hirtzell “may be used in evidence” is a statement about admissibility and, of necessity, about the admissibility of what the Evidence Act would characterise as the “previous representations” on the part of the examinee contained in the record (plus, no doubt, the questions giving content to those representations). The admissibility created by the provision of Commonwealth Law in respect of previous representations made in the particular examination context in accordance with the particular recording procedure must prevail over any denial of admissibility by reason of the general provisions with respect to hearsay contained in the New South Wales enactment. The approach, in that respect, taken by Austin J in Australian Securities and Investments Commission v Rich [2005] NSWSC 417; (2005) 216 ALR 320 to the analogous operation and effect of s 1305 of the Corporations Act is also required here. As His Honour said at [227]:

“Where it applies, s 1305 allows a document properly tendered to become prima facie evidence of any matter stated in it, regardless of whether the stated matter offends an exclusionary rule of the Evidence Act , such as the hearsay rule or the opinion rule. Subsection (2), where applicable, avoids the need to prove the authenticity of the document, unless the presumption is rebutted.”

(The reference to “prima facie” evidence merely reflects the terms of s 1305.)

37 As Austin J also observed, the discretion to “refuse to admit” under s 135 of the Evidence Act is available in relation to evidence rendered admissible by a provision such as s 597(14) of the Corporations Act. This is because s 135 assumes, at the outset, inherent admissibility. If the particular evidence were not of its nature admissible, there would be no occasion for the court to “refuse to admit” it. The circumstance that it was not admitted would arise by operation of law as a consequence of its inadmissible quality, not because of any discretionary refusal of the court to admit it.

38 Mr Cohen submitted that s 597(14) is cut down by s 1337P(1)(a) of the Corporations Act in such a way as to make it subordinate to provisions of the Evidence Act. I do not accept that submission. Section 1337P is quite irrelevant. There is no need to explain the reasons in detail. It is sufficient to point to the reference, in s 1337P(1) to “relevant jurisdiction” and to the definition of that term in s 1337P(3). The jurisdiction this court is exercising in these proceedings is not “relevant jurisdiction” as so defined. It is jurisdiction conferred on it directly by s 1337B. The force of s 597(14) is in no way blunted by s 1337P(1)(a), which forms part of a body of provisions about transfer of proceedings between courts.

39 The admissibility created by s 597(14) is admissibility “in any legal proceedings against the person”, that is, the examinee. That means, in my opinion, that where, as here, there are several defendants, statements in a record of the examination of one defendant is admissible, by force of s 597(14), only against that defendant. This is the approach taken by Debelle J in Re Westgate Wool Co Pty Ltd [2006] SASC 372; (2006) 206 FLR 190. His Honour said (at [22]) that the effect of the section is to make the record of a person’s examination “admissible only against that person and not against third parties”, that is, no doubt, “third parties” to the examination.

40 On this basis, the effect of s 597(14) is that, by force of that section and notwithstanding the hearsay rule in the Evidence Act, the signed record of Ms Shearn’s examination is admissible against Ms Shearn but not against Ms Hirtzell, that the signed record of Ms Hirtzell’s examination is admissible against Ms Hirtzell but not against Ms Shearn and that the signed record of Mr Tubb’s examination is not admissible against either Ms Shearn or Ms Hirtzell.

41 Given the limited affect of s 597(14) of the Corporations Act, it is necessary to go back to the Evidence Act and to see whether it creates any greater degree of admissibility in relation to the signed records of the examinations. I frame the question in that way because I am satisfied that s 597(14) does not, as it were, make an exhaustive statement on the question of admissibility or, putting this another way, contain at the end the invisible words, “but may not otherwise be used in evidence”.

42 The starting point in relation to the Evidence Act is that the statements of the examinees in the respective records of examination are clearly “previous representations” within s 56. Only if some exception to the hearsay rule applies will it be possible for the records of the examinations of Ms Hirtzell and Mr Tubb to be used in the case against Ms Shearn and for the record of the examinations of Ms Shearn and Mr Tubb to be used in the case against Ms Hirtzell. The exception that may apply is that created by s 69 in relation to business records.

43 The defendants accept that each signed record of examination is a document within s 69(1) and that, leaving to one side the effect of s 69(3), the conditions for the application of s 69(2) are satisfied. The defendants also say, however, that the exclusionary rule in s 69(3)(a) applies because each statement in each transcript was “obtained … in connection with … an Australian or overseas proceeding”, being the Part 5.9 examination itself.

44 The expression “Australian or overseas proceeding” is defined by the Evidence Act as follows:

“’Australian or overseas proceeding’ means a proceeding (however described) in an Australian court or a foreign court.”

45 The definition of “Australian court” is:

“(a) the High Court, or
(b) a court exercising federal jurisdiction, or
(c) a court of a State or Territory, or
(d) a judge, justice or arbitrator under an Australian law, or
(e) a person or body authorised by an Australian law, or by consent of parties, to hear, receive and examine evidence, or
(f) a person or body that, in exercising a function under an Australian law, is required to apply the laws of evidence.”

46 Two questions arise: first, are the statements made by an examinee at a Part 5.9 examination obtained “in connection with” that examination and, if so, second, whether the examination is an “Australian or overseas proceeding”.

47 As to the first matter, Mr Cohen placed reliance on the decision of the Court of Appeal in Thomas v State of New South Wales [2008] NSWCA 316; (2008) 74 NSWLR 34. Hodgson JA and Campbell JA there held that a statement recorded in a transcript of evidence taken at a Royal Commission was “obtained … in connection with” the proceeding constituted by the Royal Commission itself. The fact that the statement was elicited by questioning in circumstances where a legal compulsion to answer applied meant that they were “obtained”. Given the nature of the Royal Commission, the proceeding was within paragraph (e) of the definition of “Australian court”. That left the question posed by the words “in connection with”.

48 Both Hodgson JA and Campbell JA held that the fact that the statement was made at the Royal Commission in response to questions there asked meant that the relationship contemplated by the words “in connection with” – words of very wide import - existed between the obtaining of the statement and the Royal Commission proceeding. Campbell JA put the matter thus at [49] (Eastwood was the person examined):

“Applying the words of s 69(3) to the present facts, it was Eastwood and the counsel who examined him who ‘prepared or obtained’ the representation, and the representation was prepared or obtained in connection with the Royal Commission because it was part of the evidence before the Commissioner and, one would infer, given for the purpose of advancing the investigative task the
Commission was charged with. Thus it falls within s 69(3)(a).”

49 The reasoning of Hodgson JA (at [7] to [9]) was essentially the same. It is relevant to quote the reasons expressed by Hodgson JA for rejecting the alternative proposition (at [10] – [11]):

“[10] The alternative view would, in my opinion, be contrary to the rationale of the business records exception to the hearsay rule, which is based on the likely reliability of entries made in the ordinary course of business or government activities, when there is no reason to suspect ulterior purposes.

[11] The alternative view would also mean that a transcript of evidence given in other proceedings would always be admissible in both civil and criminal proceedings, subject only to the discretion to exclude it under s 135 or s 137 of the Evidence Act ; since in my opinion, the proceedings of a court fall within
par (d), and perhaps also par (b), of cl 1(1) of Pt 2 of the Evidence Act Dictionary. This admissibility would not sit well with other statutory provisions, which closely restrict circumstances in which transcripts of evidence in other proceedings are admissible.”

50 I turn, therefore, to the question whether a Part 5.9 examination is a “proceeding (however described) in an Australian court”, with “Australian court” understood in the way required by the definition set out above.

51 Differing views have been expressed on this question and the analogous question relating to examination under s 81 of the Bankruptcy Act 1966. In each of Re Interchase Corporation Ltd (1996) 68 FCR 481, Re Doran Constructions Pty Ltd [2002] NSWSC 215; (2002) 194 ALR 101 and Strarch International Ltd v Loh [2005] NSWSC 583; (2005) 191 FLR 225 the view was taken that a Part 5.9 examination is a “proceeding” in or of the court by which the examinee has been summoned. That proposition was doubted by Allsop J (Ryan J and Heerey J agreeing) in Griffin v Pantzer (2004) FCAFC 113; (2004) 137 FCR 209, a case concerning an examination under s 81 of the Bankruptcy Act. The meaning of “proceeding” arose in the context of s 4 of the Evidence Act 1995 (Cth) and its specification of the “proceedings” to which that Act applies. The view was taken that the inquisitorial process under the Bankruptcy Act was not within the relevant concept of “proceedings” as the provision in question was concerned to identify the context in which the Act’s rules with respect to the adducing of evidence applied.

52 These differing approaches were noted by the Court of Appeal in Meteyard v Love [2005] NSWCA 444; (2005) 56 ACSR 487 but there was no need for any attempt at resolution of the conflict.

53 The question here is not whether a Part 5.9 examination is, in terms of s 4 of the Evidence Act of New South Wales, within the description “proceedings in a NSW court”. It is, rather, whether it is an “Australian or overseas legal proceeding” as referred to in s 69(3)(a). The parallel with a Royal Commission is pronounced. The Royal Commissions Act 1923 is concerned with a “commission of inquiry” (s 4, definition of “Commission”) to which a person may be summoned “to attend … and then and there to give evidence …” (s 8). The Act also speaks of a person’s “appearing as a witness before the commission” (s 9(1)) and being “examined before the commission” (s 9(2)). The process envisaged by the Act is clearly inquisitorial and is aimed at eliciting information (called “evidence”) from persons by means of examination of those persons. It is, in that way, of the same nature as the process at a Part 5.9 examination.

54 In Thomas v State of New South Wales (above) Hodgson JA said (at [8]):

“The Royal Commission was plainly a proceeding in an ‘Australian court’, defined in the Dictionary to mean, among other things, ‘a person or body authorised by Australian law … to hear, receive and examine evidence’.”

55 Campbell JA expressed agreement with Hodgson JA and simply referred to “the proceeding constituted by the Royal Commission, within the meaning of s 69(3) of the Evidence Act 1995”.

56 I see no difference, for present purposes, between examination under compulsion pursuant to the Royal Commissions Act and examination under compulsion pursuant to Part 5.9 of the Corporations Act. The result preferred by the majority in Thomas v State of New South Wales (above) as to admissibility of previous representations, in the form of questions asked and answers given, as recorded in the Royal Commission transcript should therefore be preferred by me as to admissibility of the previous representations recorded in the transcripts of the Part 5.9 examinations of Ms Shearn, Ms Hirtzell and Mr Tubb. It follows that those previous representations must be regarded as caught by s 69(3)(a) of the Evidence Act and that s 69(2) does not save them from the operation of s 59, with the result that none of the transcripts can be tendered to prove the existence of a fact that it can reasonably be supposed that the examinee intended to assert by any of those previous representations – but this, for reasons stated, is subject, in the case of the transcripts of Ms Shearn and Ms Hirtzell, to the contrary effect of s 597(14) of the Corporations Act.

Mr Rowley’s affidavit – second objection

57 The next objection taken to Mr Rowley’s affidavit concerns a series of annexures or exhibits (referred to as “RR3” to “RR16”) consisting of documents that were produced by Ms Shearn, Ms Hirtzell and Mr Tubb in the course of their Part 5.9 examinations. The documents are thus, without exception, documents that came into existence before the examinations in August 2008. They include letters, company documents, ASIC returns, a trust deed, tax returns, a contract for the sale of land and a “deed of agreement”.

58 Objection is taken to the RR3 to RR16 documents on the basis that, since the documents were gathered in the context of the examination process, they bear such a relationship to the examinations (or, perhaps, to these present proceedings) as to activate the s 69(3)(a) exception to the business records exception to the hearsay rule. I reject that submission. Each document was created in what appears, on the surface at least, to have been the ordinary course of commercial dealing and entirely without reference to the possibility of legal proceedings. The fact that a document with some established and independent existence is produced under compulsion at a Part 5.9 examination does not cause it to take on a character of the kind contemplated by s 69(3).

Mr Rowley’s affidavit – third objection

59 The next objection taken by the defendants to the RR3 to RR16 documents is that outlined above by reference to s 1317E. For the reasons already stated (see paragraphs [20] to [26] above), the objection is not well founded.

Mr Rowley’s affidavit – fourth objection

60 The next objection to RR3 to RR16 is that the documents were obtained by the plaintiff’s liquidator under compulsion. That does not make them inadmissible. If the exertion of compulsion destroyed admissibility, there would be no point in the issue of subpoenas or the making of orders for discovery.

Mr Clout’s second affidavit - objections

61 I consider finally the second affidavit of Mr Clout, that is, the affidavit of 10 August 2009.

62 The first objection taken is that virtually the whole of the content of Mr Clout’s affidavit contains “a recitation of facts obtained from materials in other litigation on a purely self-serving basis” and evidently prepared or obtained for the purpose of conducting these proceedings. This is not something that makes the content of the affidavit inadmissible. Witnesses in proceedings – particularly where they are parties or officers of parties – habitually make self-serving statements in the evidence they volunteer; and they do so, of necessity, for the purposes of the proceedings in which the evidence is given.

63 The other objection is that based on s 1317E of the Corporations Act with which I have already dealt.

Result

64 The “global” objections taken by Mr Cohen on behalf of the defendants will result in rulings to the following effect:

1. The Federal Court judgments annexed or exhibited to Mr Dennis’s affidavit will be admitted but, consistently with s 91 of the Evidence Act , may not be used to prove any fact that was in issue in the relevant Federal Court proceedings.
2. The transcript of Ms Shearn’s Part 5.9 examination exhibited to Mr Rowley’s affidavit (being a written and signed record as referred to in s 597(14) of the Corporations Act ) will be admitted against Ms Shearn only as evidence of the previous representations in that transcript.
3. The transcript of Ms Hirtzell’s Part 5.9 examination exhibited to Mr Rowley’s affidavit (being a written and signed record as referred to in s 597(14) of the Corporations Act ) will be admitted against Ms Hirtzell only as evidence of the previous representations in that transcript.
4. The transcript of Mr Tubb’s Part 5.9 examination exhibited to Mr Rowley’s affidavit (being a written and signed record as referred to in s 597(14) of the Corporations Act ) will be rejected.
5. The affidavits of Mr Dennis, Mr Rowley and Mr Clout (10 August 2009) and the respective annexures and exhibits will otherwise be admitted, subject to rulings on such particular objections to particular passages as may be made by the defendants and determined adversely to the plaintiff.

65 As I have said, Mr Cohen foreshadowed objections to the affidavits on a paragraph-by-paragraph basis if his “global” objections were not wholly successful. I do not intend to take up valuable court time hearing and determining these separate objections. There will be directions as follows:

1. If the defendants take specific and particular objection to any part of the affidavit of Mr Dennis of 13 August 2009, the affidavit of Mr Rowley of 14 August 2009 or the affidavit of Mr Clout of 10 August 2009, the defendants shall, within seven days, serve on the plaintiff a schedule containing:
(a) the text of each passage objected to;
(b) a statement in narrative form of the basis for objection; and
(c) a statement in narrative form of the submissions in support of the objection.
2. Within seven days after service of any such schedule, counsel and solicitors for the defendants and counsel and solicitors for the plaintiff shall physically meet together and discuss in a constructive way each and every item in the schedule with a view to reaching agreement that the objection will not be pressed or the passage in question will not be read or the objection is conscientiously taken and conscientiously resisted so as to require a ruling by the court, it being the purpose of that meeting to have counsel identify an irreducible minimum of objections requiring a ruling and thereby to perform their duty to assist the court in identifying and determining real issues going to the admissibility of evidence.
3. Within seven days after that meeting has concluded, counsel for the parties shall jointly prepare and deliver to my Associate a written statement relating to the unresolved objections which is set out in columns as follows:
(a) the first column shall identify the relevant affidavit and the relevant paragraph number;
(b) the second column shall contain the text of the passage to which objection is take;
(c) the third column shall contain in narrative form the basis for the objection and the defendants’ submissions in support of the objection; and
(d) the fourth column shall contain in narrative form the plaintiff’s submissions against the objection and in support of the admissibility of the material objected to.

66 After these directions have been fully performed, I shall decide the most appropriate way forward and the parties will be informed.

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