Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd

[2003] NSWSC 335

CITATION:	Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2003] NSWSC 335
HEARING DATE(S):	15 April 2003
JUDGMENT DATE:	16 April 2003
JURISDICTION:	Equity
JUDGMENT OF:	Hamilton J
DECISION:	Leave granted to party to question witness as though cross examining.
CATCHWORDS:	EVIDENCE [230] - Witnesses - Hostile witness - Whether witness has made prior inconsistent statement - Matters to be taken into account on application to cross examine own witness.
LEGISLATION CITED:	Evidence Act 1995 s 38(1)
CASES CITED:	Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2002] NSWSC 319 R v Le (2002) 54 NSWLR 474 Stanoevski v The Queen (1999) 202 CLR 215 Odgers, Uniform Evidence Law (5th ed, 2000) 82 - 88
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)
FILE NUMBER(S):	SC 3081/97; 1750/02
COUNSEL:	N A Cotman SC & J T Johnson (P L Lewis & Kation P/L) S J Motbey (Lamru P/L) V R Gray (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)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

WEDNESDAY, 16 APRIL 2003

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

JUDGMENT

1 HIS HONOUR: This judgment concerns an application made on behalf of Lamru under s 38(1) of the Evidence Act 1995 ("the EA") to question as though cross examining Mr Michael Potter, a witness called on behalf of Lamru. When I say that Mr Potter is a witness called on behalf of Lamru, he has not yet entered the witness box but he has sworn an affidavit which has been read in Lamru's case. In that affidavit he deposed as follows:

"3. I have a recollection of having a telephone conversation with Mr Lewis prior to January 2000 with regard to allegations by Mr Lamb of missing stock.

4. To the best of my recollection, Mr Lewis said words to the effect:

'If there is any stock missing Lamb took it, not me'."

Earlier there had been tendered on behalf of Lamru in an affidavit of Mr Lamb sworn 19 June 2000 a version of a conversation which Mr Potter was said to have had with Mr Lamb concerning what Mr Lewis had said. That paragraph was rejected by me on 17 April 2002: Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2002] NSWSC 319 (“my judgment”). However, it has been admitted into evidence before me on the application under s 38. The relevant paragraph is as follows:

"15 I was informed by Mr Michael Potter, an accountant in the employ of the liquidator's firm, in or around November last year, that when he asked Mr Lewis to give his views to him on Lamru's claim in respect of the missing stock that Mr Lewis said words to the effect 'Lamb took the stock'. Mr Potter confirmed this statement in the presence of myself, Mr Silvia, Mr Frost and others at a meeting on 21 January 2000."

These two passages from affidavits are the subject matter that is central to the application made to me. The application in the events which have happened is made under s 38(1)(c) of the EA.

2 Section 38 of the EA is, so far as is material, as follows:

“(1) A party who called a witness may, with the leave of the court, question the witness, as though the party were cross-examining the witness, about:

(a) evidence given by the witness that is unfavourable to the party, or
(b) a matter of which the witness may reasonably be supposed to have knowledge and about which it appears to the court the witness is not, in examination in chief, making a genuine attempt to give evidence, or
(c) whether the witness has, at any time, made a prior inconsistent statement.


(2) Questioning a witness under this section is taken to be cross-examination for the purposes of this Act (other than section 39).

(3) The party questioning the witness under this section may, with the leave of the court, question the witness about matters relevant only to the witness’s credibility.

……

(6) Without limiting the matters that the court may take into account in determining whether to give leave or a direction under this section, it is to take into account:

(a) whether the party gave notice at the earliest opportunity of his or her intention to seek leave, and
(b) the matters on which, and the extent to which, the witness has been, or is likely to be, questioned by another party.”

The Court, in exercising its discretion to grant leave, must take into account the considerations set out in s 192(2) of the EA: see the decision of the High Court in Stanoevski v The Queen (1999) 202 CLR 215 and the decision of the Court of Criminal Appeal in R v Le (2002) 54 NSWLR 474. It may exercise the power given by s 192(1). In addition, of course, the Court must take into account the considerations set out in s 38(6).

3 Section 192 of the EA is as follows:

“(1) If, because of this Act, a court may give any leave, permission or direction, the leave, permission or direction may be given on such terms as the court thinks fit.

(2) Without limiting the matters that the court may take into account in deciding whether to give the leave, permission or direction, it is to take into account:

(a) the extent to which to do so would be likely to add unduly to, or to shorten, the length of the hearing, and
(b) the extent to which to do so would be unfair to a party or to a witness, and
(c) the importance of the evidence in relation to which the leave, permission or direction is sought, and
(d) the nature of the proceeding, and
(e) the power (if any) of the court to adjourn the hearing or to make another order or to give a direction in relation to the evidence.”

The Court must also bear in mind and act as appropriate in a civil case in accordance with the provisions of s 135 of the EA which are as follows:

“135 The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might:

(a) be unfairly prejudicial to a party, or
(b) be misleading or confusing, or
(c) cause or result in undue waste of time.”

4 A reading of s 38 in the light of the above authorities (and see generally Odgers, Uniform Evidence Law (5th ed, 2000) 82 – 88) leads to the following conclusions:

1 The ambit of s 38 is in a sense wider than the common law principles as to cross examination of "hostile" witnesses which it replaces. No common law notion of “hostility” need be demonstrated. Simply, one of the criteria set out in s 38(1) must be fulfilled.

2 However, upon establishment of one or more of the criteria, the application will be granted only in the discretion of the Court and subject, if appropriate, to the imposition of terms. The factors in s 192(2) and s 38(6) must be taken into account upon the exercise of the discretion, although those subsections do not provide an exhaustive list of the matters to be taken into account.

3 Under s 38(1)(c), which is the provision invoked in this case, it does not have to be established before leave is granted that a prior inconsistent statement was made. Part of the very subject matter of the cross examination which may be permitted is as to whether or not a prior inconsistent statement was made.

4 The cross examination for which leave is granted is not to be cross examination or questioning of the witness at large. It is to be limited in the order granting leave to the particular subject matter established within s 38(1). However, it is to be noted that it is not to be limited in a narrow fashion solely to the subject matter of the criteria laid down in s 38(1). On this subject Heydon JA said in R v Le supra at [66], [67]:


“[66] One purpose of a s 38 examination must be to enable counsel calling the witness to demonstrate that the evidence in chief which led to the s 38 order is false. Another must be to enable counsel to demonstrate that any prior statement inconsistent with it is true. That latter purpose is assisted by s 60, which permits a prior inconsistent statement to be considered as evidence of what is represented, not merely as a matter affecting credibility. But s 60 by itself is not wholly effectual unless the questioner is able to interrogate with a view to demonstrating the truth of the prior inconsistent statement. There would be little point in permitting s 38 examinations otherwise and no point in the existence of s 38(3). The purposes described can be assisted by obtaining concessions from the witness about matters tending to indicate the falsity of the impugned evidence. One of these is the lateness with which the impugned story is advanced. Another is the inherent improbability of the impugned story. These purposes must also be capable of being assisted by the eliciting of evidence tending to show the truthfulness of prior statements inconsistent with the impugned evidence, such as the fact that they were made under conditions conducive to accurate recollection and expression and conducive to sincerity.

[67] In my opinion, on the true construction of s 38, leave may be granted under s 38 to conduct questioning not only if the questioning is specifically directed to one of the three subjects described in s 38(1), but also if it is directed to establishing the probability of the factual state of affairs in relation to those subjects contended for by the party conducting the questioning or the improbability of the witness's evidence on those subjects. In establishing the probability or improbability of one or other state of affairs, the questioner is entitled to ask questions about matters going only to credibility with a view to shaking the witness's credibility on the s 38(1) subjects.”

5 There has already been a deal of debate concerning what Mr Potter said and the circumstances in which he said it. This has taken place upon the argument as to admissibility which was resolved by my judgment and also upon the argument regarding the s 38 application with which I am dealing. On this application, evidence has been laid before me that suggests that a statement inconsistent with the statement by Mr Potter in his affidavit as read was made to Mr Lamb: see par 15 set out in [1] above. What was said by Mr Lewis to Mr Potter on the occasion reported was further debated at a meeting that took place in January 2000 at which there is evidence that Mr Potter confirmed his statement to Mr Lamb. Furthermore, there is before me on the application a transcript of a conference that was held between Mr Potter and, among others, Mr Motbey, of counsel for Lamru, in December 2002 traversing the same subject matter.

6 Mr Cotman, of Senior Counsel for the Lewis interests, has suggested among other things that there is not really any inconsistency in what Mr Potter has said on the subject matter. However, it seems to me that there is a very important inconsistency alleged. If what Mr Lewis said in the first instance was qualified by a conditional clause, namely, "if any stock is missing", it could not amount to an admission that stock was missing. If the statement was not qualified by such a conditional clause, then there is inherent in it an admission that stock was missing. It is this alleged inconsistency in Mr Potter’s statements (and the subjacent question of what it was that Mr Lewis said to Mr Potter on the subject matter) that attracts s 38.

7 Of course, as I have already indicated, it does not have to be established on the s 38 application in a positive way that there was a prior inconsistent statement. But Mr Lamb's evidence, admitted on the s 38 application, tends to establish for the purposes of the application that the inconsistent statement was made. Mr Cotman did not seek to cross examine Mr Lamb on his affidavit evidence admitted on the s 38 application. I fully understand Mr Cotman’s statement that it seemed to him futile to cross examine on the instructions that he has. In other words, all he could have done was simply to have challenged Mr Lamb as to his version of the conversation with Potter, no doubt to receive a reaffirmation of Mr Lamb's version. Nonetheless, the situation is that on this application Mr Lamb's sworn version must be regarded as a possible version of the truth of what occurred and a basis is made out for cross examination as to whether Mr Potter has made a prior inconsistent statement.

8 The leave, if I grant it, should be leave in terms of the section to cross examine about whether or not Mr Potter made a prior statement inconsistent with the statements in pars 3 and 4 of his affidavit. However, whilst I shall not expand upon the subject matter of the cross examination in the form of order, if I make it, what Heydon JA has said in pars [66] and [67] of his judgment in R v Le must be borne in mind, that is, that the cross examination may extend to the truth or falsehood of the subjacent fact. Although the impact of s 60 of the EA is discussed by Heydon JA in that passage from his Honour's judgment, it must be borne in mind that a factor in this case is that the statement made by Mr Lewis is potentially admissible, whatever the impact of the hearsay rule, as an admission made by a party to the proceedings.

9 I have taken into account, so far as they are material, the matters laid down for consideration under ss 192(2) and 38(6) of the EA. It was pressed upon me by Mr Cotman that the cross examination would in some manner be unfair or prejudicial to both the witness and to Mr Cotman's clients. I cannot see that this is so. As to other considerations, the ambit of the cross examination, it is apparent from what I have set out above, will be small, turning upon the conversation that Mr Potter had with Mr Lamb concerning one conversation that Mr Potter had with Mr Lewis and matters closely associated with those conversations. Bearing in mind that this is the 32nd day of the hearing, it cannot be suggested that any addition to the length of this trial will be undue. The evidence, although in some ways it may be regarded as inconclusive, goes to a matter absolutely central to one of the largest and most hotly contested issues in this trial, namely, whether stock was missing or whether it was not missing in the financial year ended 30 June 1997. It cannot be suggested that it goes to a peripheral issue.

10 It should be added that, whilst I do not discuss in this judgment the ambit of these powers, I bear in mind the provisions of the Rules and the inherent powers of this Court as to the control the Court can exercise over the cross examination even after leave has been given for it. Without going into that, I should state that Mr Motbey has stated that, for the purposes of these proceedings, he does not and will not contest that the Court continues to have power to govern the ambit of that cross examination once permitted.

11 So far as concerns the stage of the proceedings at which the intention to seek leave was announced, it has been quite clear during the course of the proceedings that Lamru desired to pursue this subject matter and it has been specifically indicated quite some time ago that, once Mr Potter indicated a willingness to give evidence, if it were appropriate, depending upon the evidence that he gave, leave would be sought under s 38.

12 The order of the Court will therefore be that Lamru may have leave to question Mr Potter as though it were cross examining him about whether or not he made a prior statement inconsistent with the statements in pars 3 and 4 of his affidavit.

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Last Modified: 05/02/2003