Richards v Macquarie Bank Ltd (No 3)

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FEDERAL COURT OF AUSTRALIA

Richards v Macquarie Bank Limited (No 3) [2012] FCA 1523

Citation: Richards v Macquarie Bank Limited (No 3) [2012] FCA 1523
Parties: TRACEY RICHARDS v MACQUARIE BANK LIMITED AND STORM FINANCIAL LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 064 804 691
File number: QUD 590 of 2010
Judge: REEVES J
Date of Ruling: 5 December 2012
Catchwords:

EVIDENCE – agreed statement of facts – relevance – where fact in issue is whether investors were “consumers” within the meaning of s 4B of the Trade Practices Act 1974 (Cth) and s 12BC of the Australian Securities and Investments Commission Act 2001 (Cth) – whether personal circumstances of investors relevant to whether margin loans obtained were “of a kind ordinarily acquired for personal, domestic or household use”

EVIDENCE – relevance – whether witness’ evidence-in-chief relevant to pleaded program or plan of action – hearsay – whether Court has general discretion to admit evidence that is hearsay – application of s 64 of the Evidence Act 1995 (Cth) – where no evidence that witnesses that made representations unable to testify or their testimony would cause undue expense or delay – application of admissions exception s 81 Evidence Act 1995 (Cth) – whether evidence admitted under s 81 against one party can be used as evidence against another – application of s 83 Evidence Act 1995 (Cth)

Legislation: Australian Securities and Investments Commission Act 2001 (Cth)
Corporations Act 2001 (Cth)
Evidence Act 1995 (Cth)
Federal Court of Australia Act 1976 (Cth)
Trade Practices Act 1974 (Cth)
Cases cited:

Australian Securities and Investments Commission v Macdonald (2008) 68 ACSR 126; [2008] NSWSC 995
Australian Securities and Investments Commission v Rich (2005) 54 ACSR 28; [2005] NSWSC 471
Australian Securities and Investments Commission v Vines (2003) 48 ACSR 282; [2003] NSWSC 995
Carbotech-Australia Pty Ltd v Yates [2008] NSWSC 1046
Jacara Pty Ltd v Perpetual Trustees WA Ltd (2000) 106 FCR 51; [2000] FCA 1886
Leveraged Equities Ltd v Goodridge (2011) 191 FCR 71; [2011] FCAFC 3
Lym International Pty Ltd v Marcolongo [2011] NSWCA 303

Australian Law Reform Commission, Evidence, Report No 26 (Interim), 1985, vol 1, para 641

Date of hearing: 1 November and 5 December 2012
Date of publication of reasons: 12 March 2013
Place: Brisbane
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 45
Counsel for the Applicant: Mr D Campbell SC with Mr B Jones
Solicitor for the Applicant: Levitt Robinson
Counsel for the First Respondent: Mr J Sheahan SC with Mr A Pomerenke
Solicitor for the Second Respondent: Allens
Counsel for the Second Respondent: The Second Respondent did not appear

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

QUD 590 of 2010
BETWEEN:

TRACEY RICHARDS
Applicant
AND:

MACQUARIE BANK LIMITED
First Respondent

STORM FINANCIAL LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)
ACN 064 804 691
Second Respondent

JUDGE:

REEVES J

DATE:

5 DECEMBER 2012

PLACE:

BRISBANE

REASONS FOR RULING
(Corrected from transcript)

  1. These proceedings are representative…

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Details
Case
[2012] FCA 1523
Decision Date

CaseChat Overview and Summary

The case of Richards v Macquarie Bank Ltd (No 3) involved a dispute between the plaintiffs, Mrs. Richards and others, and the defendant, Macquarie Bank Ltd. The core of the issue was whether the plaintiffs were "consumers" under the Trade Practices Act 1974 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) in relation to margin loans they obtained. The Federal Court was tasked with determining the relevance of the personal circumstances of the plaintiffs in establishing whether the margin loans were "of a kind ordinarily acquired for personal, domestic or household use." Additionally, the court had to decide on the admissibility of certain evidence, including an email, under the Evidence Act 1995 (Cth), particularly regarding the hearsay rule and its exceptions.

The key legal issues revolved around the interpretation of "consumer" under the relevant statutes and the application of the Evidence Act to the facts of the case. Specifically, the court had to consider whether the personal circumstances of the plaintiffs were relevant to determining the nature of their transactions and whether certain evidence, particularly an email, could be admitted despite being hearsay. Macquarie Bank argued that the evidence regarding the plaintiffs' personal circumstances was not relevant and objected to the email on the grounds of relevance and hearsay. The plaintiffs, on the other hand, contended that the personal circumstances were relevant and that the email was admissible under the exceptions to the hearsay rule.

The court, after considering the arguments, ruled that the 14 paragraphs of the Ensors' agreed statement of facts were relevant to the issue of whether the plaintiffs were consumers. It was held that the evidence of the Ensors' personal circumstances had a sufficient logical connection to the fact in issue, even if it was not conclusive. Regarding the email, the court found that it was relevant to the plaintiffs' case and that it fell within the admissions exception under the Evidence Act. Consequently, the email was admitted as evidence. The court also noted that the evidence admitted against one party could be used against another, provided it was relevant and admissible under the Act.

In conclusion, the court allowed the relevant paragraphs of the Ensors' agreed statement of facts to be admitted in evidence, finding them pertinent to the issue of whether the plaintiffs were consumers. Additionally, the court admitted the email as evidence under the admissions exception of the Evidence Act, ruling that it was relevant to the plaintiffs' case and did not violate the hearsay rule. The decision underscored the importance of relevance and the applicability of statutory exceptions in the admissibility of evidence in court proceedings.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

For these reasons, I allowed paras 1 to 14 of the Ensors’ agreed statement of facts to be admitted in evidence.OBJECTION DURING EVIDENCE-IN-CHIEF OF MR MCCULLOCH Macquarie objected to a question that was asked during evidence-in-chief of Mr David Robert McCulloch by Mr Campbell SC, counsel for Mrs Richards. Mr McCulloch was employed by Storm from March 1999 to January 2009. Initially, Mr McCulloch was employed as Storm’s sole group accountant. Later, he became one of Storm’s senior financial advisers and was appointed to its executive committee. Throughout his employment, Mr McCulloch negotiated with various banks and other financial institutions on behalf of Storm and Storm’s clients. During the course of his evidence-in-chief, Mr Campbell took Mr McCulloch to an email dated 14 July 2005. That email was sent by Mr McCulloch to Mr Emmanuel Cassimatis and other personnel within Storm. Mr Emmanuel Cassimatis and his wife Julie Cassimatis (the Cassimatises) were the founders of Storm and were its sole directors. As Storm’s corporate structure developed, they became its sole executive directors and joint chief executive officers. The email to which Mr McCulloch was taken included the following statement:As you may be aware, we are endeavouring to achieve a target of $200M in FUM with Challenger by 07 Sept 2005. Currently, FUM is about $90M – ie $90M has been input in the 7.5 months from inception, 19/10/04 to 30/06/05. That means we have to write a similar amount for the next two months so it is all systems go.I was informed by counsel that “FUM” is an acronym for “funds under management”. Having been taken to this email, the following exchange occurred between Mr Campbell and Mr McCulloch:MR CAMPBELL: Do you have any knowledge as to why a target of $200 million was set with Challenger to be completed by that date?MR MCCULLOCH: To the best of my recollection, that was, I believe, the 12-month anniversary date of the inception of the fund and to the best of my recollection, I recall a meeting whereby Emmanuel told us, as advisers, that we were going with a new fund and they had promised that new fund manager – in this case Challenger – they would give them $200 million in business by a set date.MR CAMPBELL: Were you told any other reason as to why this amount was to be invested with Challenger?MR MCCULLOCH: Yes.MR CAMPBELL: Who told you that?MR MCCULLOCH: Mr and Mrs Cassimatis.MR CAMPBELL: When did they tell you this?MR MCCULLOCH: Prior to inception of the fund in the first instance.MR CAMPBELL: Some time prior to writing this email?MR MCCULLOCH: Some time prior to the writing of this email, yes.MR CAMPBELL: What did they tell you?I interpolate that Challenger was an associated entity of Macquarie through which it provided margin loans to certain Storm clients. Mr Sheahan SC, counsel for Macquarie, objected to Mr McCulloch answering the final question (above) on the grounds of relevance and hearsay.CONTENTIONS AND RELEVANT LEGISLATIVE PROVISIONS

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Mr Pomerenke, for Macquarie, submitted that the 14 paragraphs concerned did not bear on the purpose for which the Ensors acquired their margin loans, much less the use commonly made of such margin loans. He submitted, this evidence was therefore too remote from the “consumer” fact in issue. However, Mr Pomerenke did not submit that the subjective purpose of the Ensors, or the other Storm investors, could not be relevant to the “consumer” fact in issue: cf Leveraged Equities Ltd v Goodridge (2011) 191 FCR 71; [2011] FCAFC 3 at [416].CONSIDERATION – THE 14 PARAGRAPHS OF THE ENSORS’ STATEMENT ARE RELEVANT The definition of relevance in s 55 of the Evidence Act (outlined at [8] above) does, as Mr Jones submitted, set a relatively low threshold for the admissibility of evidence. This point was highlighted by Sackville J in Jacara Pty Ltd v Perpetual Trustees WA Ltd (2000) 106 FCR 51; [2000] FCA 1886 at [47], where his Honour quoted the observations of the Australian Law Reform Commission on the definition of relevance (that later became s 55 of the Evidence Act) as follows:The definition requires a minimal logical connection between the evidence and the “fact in issue”. In terms of probability, relevant evidence need not render a “fact in issue” probable, or “sufficiently probable” - it is enough if it only makes the fact in issue more probable or less probable than it would be without the evidence - ie, it “affects the probability”. The definition requires the judge to ask “could” the evidence, if accepted, affect the probabilities.(Australian Law Reform Commission, Evidence, Report No 26 (Interim), 1985, vol 1, para 641) In my view, the 14 paragraphs of the Ensors’ statement meet this relatively low threshold. Specifically, I consider there is sufficient logical connection between, on the one hand, the evidence of the Ensors’ personal circumstances, including their lack of experience with matters of business and investment and interrelated factors such as their education and, on the other hand, the probability of the existence of the “consumer” fact in issue. Of course, the question whether the Ensors’ evidence ultimately assists to establish that fact must await determination after the conclusion of this trial. In this respect, I should make it clear that the remarks I have made above should not be taken as expressing any concluded view on that issue. For these reasons, I allowed paras 1 to 14 of the Ensors’ agreed statement of facts to be admitted in evidence.OBJECTION DURING EVIDENCE-IN-CHIEF OF MR MCCULLOCH Macquarie objected to a question that was asked during evidence-in-chief of Mr David Robert McCulloch by Mr Campbell SC, counsel for Mrs Richards. Mr McCulloch was employed by Storm from March 1999 to January 2009. Initially, Mr McCulloch was employed as Storm’s sole group accountant. Later, he became one of Storm’s senior financial advisers and was appointed to its executive committee. Throughout his employment, Mr McCulloch negotiated with various banks and other financial institutions on behalf of Storm and Storm’s clients.