Re Edelsten, G.W. Ex parte Donnelly, M.C. v Edelsten, G.W. & ors

[1992] FCA 406

a2

IN THE FEDERAL COURT OF AUSTRALIA	JUDGMENT NO. ..e,	-	.	.	,	-&
EXERCISING FEDERAL JURISDICTION IN BANKRUPTCY

BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN

CAPITAL TERRITORY

RE :  GEOFFREY WALTER EDELSTEN

Bankrupt

EX PARTE:  MAX CHRISTOPHER DONNELLY

AS TRUSTEE FOR THE ESTATE OF
GEOFFREY WALTER EDELSTEN

Applicant

AND:  GEOFFREY WALTER EDELSTEN AND OTHERS

Respondents

COURT :	NORTHROP J
PLACE :	MELBOURNE
DATE :	3 JUNE 1992

EX TEMF'ORE REASONS FOR JUDGMENT

Probably the most difficult task of any court

determine and find what are the true facts which give rise to

the claim and the defence to the claim.	In Australia the
process is able and allowed to ask leading questions of the

legal system has adopted the adversarial method by which
disputed questions of fact are determined by the Court. Rules

and principles have been developed over many centuries to

enable that course to be followed. For present purposes the

most important aspect of those principles is that at the
hearing a party may call a witness and lead evidence from that
witness by evidence-in-chief and is not allowed to ask leading
questions or to cross-examine that witness. The opposing
party is entitled to cross-examine the witness and in the

witness. Thereafter the person calling the witness is

entitled to re-examine the witness on matters arising in
cross-examination, but again is not allowed to ask leading
questions.

There are exceptions to those general principles, one of which relates to what has been called a hostile witness or an adverse witness. The principle behind the rules applied in

the calling of evidence and the giving of evidence is that I
have indicated. A witness called by a party who, in cross-

examination, gives evidence adverse to the person calling that

witness, does not become a hostile witness. If that was the

case there would be many, many cases where you would have
applications for an order that a party be allowed to cross-
examine what might be said to be a witness who gives answers
inconsistent with the interests of the person calling that

witness.

In the present case there is an application that the

witness, Ruth Rowena Davoren, be declared hostile. In the

course of the hearing yesterday a question arose as to
whether, in support of that application, counsel for the
applicant who had called the witness should be permitted to

put to her an affidavit which had been sworn at a later stage

to the affidavit relied upon as evidence-in-chief. For

reasons then given I allowed the affidavit to be put to the
witness and this morning after further evidence and argument I
allowed the affidavit to be read and the affidavit is before
me.

The real problem in this case arises from the fact that the evidence-in-chief was given not by way of oral evidence, but by way of affidavit, and as far as I can ascertain at the

moment none of the principles which have been enunciated apply
directly to a case of that kind and so it is necessary to go
back to general principles in order to determine the issue
involved here.

The general principle behind the whole of the procedures

in the Court is to enable the Court to determine what is the
true position, what is the whole truth for the purposes of the
advancement of justice between the parties. The principles to
be applied basically in relation to a hostile witness are
whether on the particular facts of any particular case it can
be shown that a witness is not prepared to tell the whole
truth for the advancement of justice and this can be done by a
number of ways. Or, putting it another way, and I quote from
what appears in Cross on Evidence, the Australian edition,
Fourth Edition, paragraph 17375 as follows:

"Hence a witness can, but need not, be declared hostile

on the basis of prior inconsistent statements which he
denies, including oral statements. It is customary for
the witness under challenge to be stood down and for .
another witness to be called to prove the inconsistent
statement.

A witness is not hostile merely because his testimony is against the party calling him; for a party in a civil case may call his opponent, and such a witness is not necessarily hostile. In Bassett v Ferauson [l9521 VLR 481 at 482 Sholl 3 approved statements that a hostile witness is one who "shows that he is not desirous of telling the court the truth" and that a hostlle witness "bears a hostile animus to the party calling him and so does not give his evidence fairly and with a desire to tell the truth to the court". The latter proposition is too narrow: the correct test does not depend on hostility or any other particular motive, but on the incapacity of the party calling the witness to elicit the truth by non-leading questions since the witness is deliberately withholding material evidence by reason of an unwillingness to tell the whole truth."

This can be done by a variety of ways, not only giving

wrong answers, untruthful answers, but also withholding
matters which might be thought to be against the interest of

that witness or another person and thereby not allowing the

true facts to be brought into evidence. It is a case of

presenting false or misleading evidence either by overt words
or by refusing to answer or by concealing particular aspects

of the facts.

In the past the question has normally arisen in the

course of evidence-in-chief where a witness called departs

from a previous or prior statement either written or oral.	It
is in those circumstances that the general principle I have just referred to clearly applies. In my opinion that is not
the only way in which the general principles apply. Evidence

can be given as to facts or material which supports the view
that a witness should be declared hostile or adverse to enable
that witness to be cross-examined by the person calling the
witness. As indicated yesterday, in the present case there
are the two affidavits, the second one of which to a large
extent does not necessarily disagree with what appears in the
first, but attempts to explain away what has been said in the
first to the extent of suggesting the contents of the first
affidavit are not necessarily true. In this context it must
be remembered that the issue before the court is whether,
during the relevant period, Dr Edelsten was in truth and in
fact the controlling hand of, in this case, the respondent VIP
Management Pty Ltd, the sixth respondent. That is a company
which came into being in 1989, and it appears that the witness
is the major shareholder in that company and was a director of
that company. These are factors which could be established
quite simply by a reference to the records of the company
required to be kept by the appropriate statutory authorities.
The issue before the Court is, despite the outward signs, who
in substance controlled that company? Who gave the orders,
who directed what should be done? The first affidavit
suggests that this was all being done by Dr Edelsten. The
second affidavit detracts from that and suggests that it was
done by the witness herself. In these circumstances there
immediately arises a conflict in the position of the witness.
The second affidavit suggests that, for various reasons, the
evidence given in the first affidavit was tainted by the fact
of loss of memory. For the reasons given yesterday and

expanded in the second affidavit, and also by a realisation

that in order to support her claim to an interest in VIP
Management Pty Limited, the witness seems intent to establish
her control of that company. Anything which, in effect,
suggests that she was merely a tool of Dr Edelsten would
destroy her position and would make it impossible for her to
maintain her position, which she now claims, as being the
owner of the majority of the shares in that company.

It is in these circumstances that I must decide whether I should make an order that she be declared a hostile witness. Yesterday I made comments about the demeanour of the witness at a time that I had not read the second affidavit. Including

in the demeanour I refer to the other matters referred to
yesterday as to the nature of the questions, the answers given
and the apparent lack of knowledge of what had occurred, in
that the witness was unable to give evidence to a general
question as to what occurred but always was able to give a yes
or no answer.

In my opinion although it might be difficult to say this

comes within the classic case of a prior inconsistent
statement, that is not the only test to be applied. The test
to be applied is that referred to as to whether there is an
incapacity in the party calling the witness to elicit the
truth by non leading questions since the witness is
deliberately withholding material evidence by reason of an
unwillingness to tell the whole truth. In my opinion, on the
facts of this case, that test has been established to support

the making of the order now being sought by the applicant.

This arises from a combination of the two affidavits, the

demeanour of the witness during cross examination and having
in mind what is the real issue to be tried in these
proceedings. At the present time the Court forms the view
that as far as this witness is concerned she is not able or
not prepared to tell the whole truth for the advancement of
justice. In these circumstances I propose, and I do make an
order, that she be cross examined by the applicant by way of
re-examination, but at the same time there will be a limit to
the extent of that cross examination. It may be necessary to

draw that to an end at some appropriate time. I do not know

when that will be, but it should be kept in mind.

I indicate also that this is a case, because of the

unusual way in which it has arisen, that prima facie there
ought to be leave for further cross examination in relation to
any matter arising out of the further examination, but not

cross examination at large. To some extent I have pre-empted

submissions on that. I did raise it yesterday but I have a

fairly firm view on that matter.

I certify that this and the preceding six (6) pages are a true
copy of the Ex Tempore Reasons for Judgment of the Honourable

Mr Justice R.M. Northrop.

Associate:	&	H . LL,,,%AA
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