Lewis v Nortex Pty Ltd (in liq)

[2002] NSWSC 337

CITATION:	Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2002] NSWSC 337
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 3081/97; 1750/02
HEARING DATE(S):	18 & 19 April 2002
JUDGMENT DATE:	19 April 2002
PARTIES :	3081/97 Peter Lawrence Lewis (P) Lamru Pty Ltd (Applicant) Kation Pty Ltd (Respondent) Brian Raymond Silvia (Liquidator) 1750/02 Lamru Pty Limited (P) Kation Pty Limited (D1) Peter Lawrence Lewis (D2) Mark Lewis (D3) Nortex Pty Ltd (In Liq) (D4)
JUDGMENT OF:	Hamilton J

COUNSEL :	J T Johnson (Kation P/L & P L Lewis) S J Motbey (Lamru P/L) P A Somerset, Solicitor (Liquidator & Nortex P/L) No appearance (M Lewis)
SOLICITORS:	Kemp Strang (P L Lewis & Kation P/L) Lyons & Lyons (Lamru P/L) Abbott Tout (Liquidator & Nortex P/L) Corrs Chambers Westgarth (M Lewis)
CATCHWORDS:	EVIDENCE [130] - Documentary evidence - Secondary evidence - In general - Computer hard disk containing a copy of a copy of a copy of a relevant computer file.
LEGISLATION CITED:	Evidence Act 1995 ss 48(4), 57, 142 Supreme Court Rules 1970
CASES CITED:	Banque Commerciale SA en liquidation v Akhil Holdings Limited (1990) 169 CLR 279 Nodnara Pty Limited v Deputy Commissioner of Taxation (1997) 38 ATR 527
DECISION:	Computer hard disk admitted.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

FRIDAY, 19 APRIL 2002

3081/97 PETER LAWRENCE LEWIS v NORTEX PTY LIMITED (In Liq)
1750/02 LAMRU PTY LIMITED v KATION PTY LIMITED

JUDGMENT

1 HIS HONOUR: The subject matter with which this judgment deals is the tender of a document being a hard disk in a computer which is MFI8 and is in the custody of the Court as on subpoena, insofar as it contains a computer file which has come to be called file number 22. The hard disk is a document as defined in Part 1 of the Dictionary in the Evidence Act 1995 (“the EA”) as being “anything from which … writings can be reproduced with or without the aid of anything else.”

2 Even the way in which this came to be an issue that I am now determining after a voir dire hearing of some days is somewhat complex. The history as to how the issue arose in its present form I set out in some remarks this morning. I have not directed those remarks to be taken out separately in the form of a judgment but they are correctly recorded in the transcript on p 414. The development and argument of this issue has not proceeded in an entirely orderly way, owing to the fact that the preparation of this case has not been entirely thorough or orderly. This is not the time and place to explore the reasons or attribute any blame for that. But a result of the situation is that there are many computer records, and some printouts of some of them, that relate in a fairly central way to an important issue in this case, and those documents have not been investigated by the parties or presented to the Court in a very orderly fashion.

3 The document is tendered under s 48(4) of the EA as being a document that is a copy of the document in question. Its history is as follows. The plaintiff seeks to make a claim of fraud against the first, second and fourth defendants in proceedings 1750/02. The questions that arise on that claim are also material to an issue in the other set of proceedings (3081/97) that is also before me, namely, a statutory appeal against a decision of the liquidator of the fourth defendant. The controller of the plaintiff company, Mr Lamb, left the premises of and employment with the fourth defendant about the end of the financial year which terminated on 30 June 1996. The claim involves proving that the stock of the fourth defendant at that time was greater by some 1.15 million items and some $423,000 in value than the stock that was recorded as at 30 June 1996 in the accounts of the company, which at the time of the preparation of the accounts was in the sole day to day control of the second defendant. The expression "fons et origo" has been bandied about, but it is probably correct to say that the fons et origo of this claim is the computer stock list of the fourth defendant as it stood in the fourth defendant's computer on 28 June 1996.

4 On that day Mr Lamb says that he saw the stock list open on the screen of a company computer which was being used by the third defendant, who was then in charge of keeping the list. This in effect being his last day there, he put a floppy disk in the floppy disk drive of the computer and copied the stock list on to the floppy disk and took the floppy disk away with him. He says he took it and kept it at home and did not open it until about March 1997. The reason for this was that it was at about this time that accounting figures of the company for the previous year started coming through, so that he desired to look at that document with a view to making comparisons with the stock figures as they were to be presented in the accounts. He was unable to read the document because it contained Xs or hashes in place of figures in a number of places, but he caused the obscured figures to become visible, at least in some or many instances, by widening the columns in the document. His evidence to his best recollection is that he does not know how many times he did this. The first time he did it was on first opening the floppy disk, which I shall call “the 28 June floppy disk” and which he had placed into the company computer to copy the stock list. Subsequently he placed the 28 June floppy disk into the floppy disk drive of a computer that he had at home and copied the contents of that floppy disk to the hard drive of that computer. He says that he had not up to that time altered any figures in the copy he had of the document on the 28 June floppy disk and he did not thereafter alter any figures in the original copy that he made on to the hard disk. He said that, from 1 June 1997, knowing that the stock list needed to be kept unaltered for record purposes, he ensured that he did nothing on the hard disk that would alter or modify the file that he had copied there.

5 One of the difficulties that the plaintiff faces is that Mr Lamb, I am afraid, has taken less than meticulous care of the computer records which are said to form such an important part of the plaintiff’s case. After the use described, he put the 28 June floppy disk in a drawer in his home, not in isolation, but, as the evidence goes, in a drawer with other floppy disks. The 28 June floppy disk cannot now be found or certainly cannot now be identified. To take but another example, the computer containing the vital hard drive he gave to a now business partner with permission to take it away, reformat it and use it for children's games, while there was on it, on his account, the hard disk copy which was the next made and next best copy of the fourth defendant’s computer file, which it is so important from the plaintiff's point of view to tender. He has been subject to heavy criticism concerning this by Mr Rares, of Senior Counsel for the first and second defendants, and not unnaturally so. The criticism is redoubled by the fact that Mr Lamb is not merely a layman, who may have no grasp at all of the importance of a chain of possession or a history of particular documents or records, but an accountant with some audit experience, who ought appreciate the importance of these things.

6 The other difficulty is that, during the voir dire concerning this document, unfortunately, rather than before it, the first and second defendants brought into the equation a highly qualified computer expert. Mr Thompson seems to me on the evidence to be one of the best qualified people in this country in document examination of the contents of computers. I am not going to go into all the detail, but even Mr Thompson's preliminary examinations show that there exist 14 or 15 copies in one form or another with or without alterations of the computer file originally taken from the defendant's computer. I should say that Mr Rares has at this stage of the case not put to Mr Lamb in the witness box, and did not put in submissions, that the document or documents now available are a total fabrication on Mr Lamb's part. However, he does very strongly submit that it is not established in any requisite way that computer file number 22 on the hard disk of the computer is a copy of the document sought to be proved, which is ultimately the fourth defendant's computer stock file kept in its computer as at 28 June 1996.

7 File number 22 is of 238,780 bytes. It is the first in time of three copies of what appears to be the same document on that hard disk. The copies were made on 30 March 2002, but indicate a last modification date of 1 June 1997. The circumstances in which Mr Lamb parted, as I have said, somewhat carelessly with the computer to his partner are as follows. Mr Lamb says that prior to Good Friday 2002 he had told his partner, Mr Ower, that he might take the computer for his children to play games on. On Good Friday 2002 (29 March) he was telephoned by Mr Ower, who said that he had taken the computer from the office, was about to reformat it and was there anything on it that Mr Lamb wanted saved. Mr Lamb indicated there were files that he might want to have saved and the computer was, on Mr Lamb's evidence, passed by Mr Ower to a Mr Fisher who did the copying of the files. The date 30 March 2002 on the copies of which I have spoken suggests that they were copied from other files in the computer by Mr Fisher on that day but one would infer from the fact that the last modified date recorded in relation to them was 1 June 1997 that they were in existence in that form on that day. There were no earlier versions than that remaining on the hard disk when it was recovered. The circumstances of its recovery were that Mr Ower was telephoned from the Court when the importance of the hard disk became apparent. Mr Ower directly brought the computer to town where it was handed without intervention to the first and second defendants' computer expert for examination to be made. Mr Lamb did say that he had made other copies of the original computer stock file, on which he worked. That work it seems, at some stage, at the very least included him inserting additional material obtained from records of the company in the possession of the liquidator showing stock movements between 28 and 30 June 1996. His evidence is fairly unclear as to when this occurred. However, he swears that he kept the 28 June floppy disk and the original copy from that disk on the hard disk of the computer unaltered save for column widening and altered no figures in those documents. Mr Rares suggests that it is at least possible, bearing in mind the poor record keeping, that what has got into the computer and is now recorded in the hard disk is not the original computer stock list but one in which the figures had been altered by Mr Lamb in the course of his working on the document.

8 The document must be established by the person who tenders it in order to be received into evidence. The onus of proof is that set out in s 142 of the EA. I bear in mind subs (2) of that section. I bear in mind that the claim on which this evidence is tendered is a charge of fraud against the company in liquidation, the first defendant company (which was a shareholder of the company in liquidation), and Mr Peter Lewis, the second defendant, who is the controller of the first defendant and who controlled the company in liquidation at relevant times. I bear in mind that this evidence is important in establishing that claim.

9 Mr Rares has pointed to some inconsistencies in Mr Lamb's evidence. He has pointed to an overreadiness to identify a document, which has been referred to as RL1, as containing an unaltered version of the fourth defendant's computer stock list without exposing the basis on which it is said to be unaltered. He has referred to a third way (in addition to those mentioned in [5]) in which the plaintiff's record keeping has been very lax. When RL1 was first identified as being exhibited to Mr Lamb at the time of his swearing an affidavit, it was not properly identified by having attached to it an exhibit certificate signed by the witness to the affidavit, as is required by the Rules. That is an additional matter which has added greatly to the confusion here. He has pointed to Mr Lamb's considerable interest in having this material admitted into evidence. But, however Mr Lamb's credit may appear by the end of this long case, when there will no doubt have been lengthy cross examination of him about the proceedings and his conduct in the business of the entities involved, in the comparatively short cross examination he has undergone before me on the voir dire, there has been some diffuseness in the answering of questions, but nothing which would lead me at this stage, as I make this judgment, to regard Mr Lamb overall as a witness lacking veracity or accuracy.

10 Even bearing in mind the matters mentioned in [8], I accept that on the balance of probabilities the hard disk contains in file 22 a copy made from another copy on the same hard disk in turn made from a copy on the 28 June floppy disk, which was made in a computer of the fourth defendant, of the stock list kept there on 28 June 1996.

11 It has not been specifically put to me that the fact that a copy has been recopied prevents it from being a copy within the meaning of s 48(4) of the EA. In my view the fact that it is a copy of a copy of a copy does not prevent it from being a copy for the purposes of that section.

12 That is not the end of the matter, because Mr Rares has made other submissions. The first is that in effect the tender of this piece of evidence is outside the particulars of the case of fraud as pleaded and formally particularised in these proceedings and therefore ought not be admitted so long as that pleading and those particulars remain in their present form. He reminds me in connection with this submission of what was said on this subject matter in the High Court in Banque Commerciale SA en liquidation v Akhil Holdings Limited (1990) 169 CLR 279 at 285. That principle is undoubted. The reason that he says this is that both in affidavits that have been incorporated by reference in particulars and in affidavit evidence that has already been tendered in the case, the plaintiff has put its evidence forward as depending on RL1, which has been sworn by Mr Lamb to contain a copy of the fourth defendant's computer record and which has been said by Mr Lamb to be the basis of calculations that he subsequently made. By those calculations, first of all he produced a computer stock list as at 30 June 1996 rather than 28 June 1996 and then he compared that with the stock data as subsequently brought forward by the fourth defendant, thereby showing a deficiency in the latter. This, Mr Rares says, is the whole basis of the plaintiff’s case and, while the particulars remain centred on RL1 as the document containing a copy of the stock list and as the basis of calculation, some other document containing the stock list cannot be tendered because this would be inconsistent with the particulars.

13 To this submission I do not accede. The consolidated points of claim, which set out the plaintiff's claim in the matter, allege in par 42 that in breach of trust the fourth defendant wrongfully failed to include in its closing stock for the accounting period ending on the income vesting day in 1996 some 1,151,198 units of stock having a value (for the purposes of valuing closing stock) of $423,851.40. The particulars appended to that paragraph are as follows:

"a Scott Schedule claim 17 and evidence there referred to.

b Request for particulars and answers thereto 28/7/00 and 3/8/00."

The Scott Schedule claim 17 contains the vice that Mr Rares complains of by referring to the stock list only by reference to RL1. RL1 has not yet been proved. The attempt to tender in the proceedings what was alleged to be RL1 in the form of MFI1 has been withdrawn and the tender that I am at present determining made in its place.

14 However, the problem with Mr Rares' submission is that, in my view, the particulars referred to in b, the relevant parts of which appear at pp 54 - 55 of what has in this case been referred to as the Little White Book, make it plain that what is sought to be proved by the floppy disk identified as RL1 is the fourth defendant’s stock record as at 28 June 1996. As is said in those particulars:

"As sworn to by Mr Lamb in the Lamb affidavit the file in that floppy disk contains Nortex's stock record as at 28 June 1996."

Although it was not referred to in the particulars appended to par 42 of the consolidated points of claim, Mr Rares referred to particulars that were earlier given in sworn form and which appear at p 81 of the Little White Book. But they contain, in my view, the same problem from Mr Rares' point of view as the later particulars. Whilst the floppy disk RL1 is again referred to, again it is made plain that what is sought to be proved by it is the following:

"Lamb says ... that as at June 1996 there was within Nortex's computerised accounting system a spreadsheet designed by him (but entered up from time to time by Mark Lewis) keeping up-to-date records of the Nortex stock quantities and values. Just before Lamb was excluded from the business he went into the computer system and copied onto a floppy disk the stock spreadsheet as it appeared very shortly before the end of the 96 financial year."

In other words, it has been made plain for a long time in the plaintiff's pleaded and particularised case that what it sought to prove as the basis of its claim of a fraud in relation to stock was the computerised stock records of the fourth defendant as they stood just before the end of financial year 1996, and which it was made plain from the start that Mr Lamb claimed he had copied from the fourth defendant's computer at the time.

15 Mr Rares' point is that, although the source of RL1 was set out in these ways, as the plaintiff had chosen to pitch its whole case upon a copy embodied in RL1, it could not prove the stock list by other routes, at least without amendment of particulars. But, in my view, that is not correct. The plaintiff has particularised that it is the computerised stock list it seeks to prove. It may prove the computerised stock list, the reliance upon which is clear from the particulars, by means other than the tender of RL1 without amendment of the particulars.

16 The other point that Mr Rares takes is that this document is a piece of metal or plastic - I know not which - contained inside a computer, that it cannot be read and at the moment no hard printed copy of it is available.

17 Mr Motbey, of counsel for the plaintiff, has sought to persuade me that there is in evidence on the voir dire as annexure B to an affidavit of Mr Lamb sworn 15 April 2002 what may be taken to be a copy of file 22. However, there is a conflict in the evidence, as it stands at the moment, of Mr Lamb and of Mr Thompson, the computer expert, concerning this. Mr Motbey tendered a handwritten list of computer files on a CD which is MFI11. I did not determine that tender before delivering this judgment and it is not in evidence. However, I am aware of its contents, and, if it were in evidence on this tender, it would not solve the problem. I shall not go into more detail. It may not be necessary to add, in light of what I have said about my provisional view to date of Mr Lamb's credit, that it is not by reason of my non acceptance of Mr Lamb as a witness that I say what follows. The problem is that I cannot reconcile what Mr Lamb says about the identification of certain files on the CD with evidence that is in from Mr Thompson concerning what can or cannot be discerned on the CD. Mr Thompson's expertise in this regard is obviously very much greater than Mr Lamb's, although Mr Lamb is no stranger to computers and their operation. I am not prepared, that conflict not having being resolved, to find at this stage that annexure B is directly or indirectly a hard copy of the substance of computer file 22, which the evidence shows is contained in the hard disk.

18 Mr Rares says that, without a printout being available, we do not know whether the material in file 22 is relevant to the case, and that it should not be received until its relevance is plain. There has been some debate as to whether there could or should be use of the provisions of s 57 of the EA enabling a finding that evidentiary material is provisionally relevant. The general effect of that provision was discussed by Young J (as his Honour then was) in Nodnara Pty Limited v Deputy Commissioner of Taxation (1997) 38 ATR 527 at 530 where his Honour said:

"Reverting to the text of the Evidence Act 1995, it is unfortunate that the statute does not explicitly state whether the court is to admit all evidence which is actually, on an objective test, relevant or whether it may admit evidence if it seems to it at the time to be relevant. Section 57 only partly covers the problem by permitting a court to say evidence is provisionally relevant where the relevance of any particular piece in the jigsaw cannot be determined conclusively until the court has completed the jigsaw. In my view, the Evidence Act 1995 should be approached in a purposive manner to aid the court process and not to delay it. The only construction which fulfils this purpose is to hold that evidence is relevant if it appears to the court to be relevant at the time it is tendered. If it were necessary to have a voir dire examination to examine the objective facts underlying relevance each time an objection arose, trials would never finish."

Mr Rares draws attention to the fact that computer files sometimes are garbled or do not open. At least one file that has been discussed in the evidence in this case declined to open.

19 However, what we are dealing with here is an allegation that the closing stock of the fourth defendant at the end of an accounting period omitted more than one million items of stock of a value of almost half a million dollars. It is plain from the particulars given that the way in which the real stock level is sought to be established is by the tender of a stock list of the fourth defendant up to date to 28 June 1996, which it is said can be adjusted on other evidence to 30 June. It seems clear on the evidence that the list as at 28 June 1996 does not continue to exist in the form in which it once existed in the fourth defendant’s computer and, indeed, there is no suggestion even that the relevant computer is still available. It is sought through a chain of copies to put a copy of that list into evidence. The original computer is, as I have said, unavailable and, even if it were available, it is unlikely that the stock list would still be in it in the relevant form. The next best copy is on the 28 June floppy disk, which cannot be found. Mr Rares has submitted that it has not been established to be unavailable in the sense required by the EA (see Dictionary Part 2 clause 5) but I am against him on that submission; in my view a reasonably exhaustive search has been made for that floppy disk and has failed. I have found on the balance of probabilities that file number 22 is a copy on a hard disk in computer MFI8 of a copy made on 30 March 2002 of the earlier copy made on the hard disk. I accept Mr Lamb’s evidence that he made a copy from the 28 June floppy disk to the hard disk in the earlier part of 1997 but the evidence shows that that copy is no longer on the hard disk. The evidence at present available indicates that, although not readable by the naked eye, a copy of the computerised stock list as at 28 June 1996 is lodged in that hard disk.

20 This case is hard fought and in no area more so than the establishment of this document. The placing into evidence of the copy of the file in that computer hard disk tends to prove the contents of the fourth defendant's computer stock list as at 28 June 1996. Obviously, before it can be read other than things will have to be done and other matters put into evidence, but only one thing can be proved at a time, and that unreadable document is something which, although other things have to be done to read it, is relevant in that it tends to that proof. That proof, if effected, will be of a relevant document. As the hard disk is being tendered as part of that chain of proof and is not without more equipment readable, I do not think it appropriate to admit it provisionally. In other words, if the establishment of a copy of the stock computer list is achieved through a series of documents, of which this is one, the document will be relevant. If it is not, this document, unreadable without aid, will not prejudice the defendants. There is no need for its admission to be provisional. For those reasons I rule that the hard disk containing computer file number 22 should be admitted into evidence.

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Last Modified: 09/03/2002