Schepis v Esanda Finance Corporation Ltd

[2000] NSWSC 41

CITATION:	Schepis & Ors v Esanda Finance Corporation Ltd [2000] NSWSC 41
CURRENT JURISDICTION:	Supreme Court
FILE NUMBER(S):	SC 11907/99
HEARING DATE(S):	9 February 2000
JUDGMENT DATE:	14 February 2000
PARTIES :	Anthony Schepis & Ors v Esanda Finance Corporation Ltd
JUDGMENT OF:	Brownie AJ at 1

LOWER COURT JURISDICTION :	Local Court
LOWER COURT FILE NUMBER(S) :
LOWER COURT JUDICIAL OFFICER :

COUNSEL :	Mr D Allen (plaintiffs) Mr J J Priestley (defendant)
SOLICITORS:	Hancocks Solicitors (plaintiffs) Kemp Strang (defendant)
CATCHWORDS:	Evidence - admissibility - no question of general principle
LEGISLATION CITED:	Evidence Act 1995 s64(2), 67(4), 68(1), 192(2) Local Courts (Civil Claims) Rules, Pt 25 r7
DECISION:	Summons dismissed with costs

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

BROWNIE AJ

Monday 14 February 2000

11907/99: SCHEPIS & ORS v ESANDA FINANCE CORPORATION LTD
REASONS FOR JUDGMENT

1    HIS HONOUR: By their amended summons the plaintiffs (“the guarantors”) seek an order for leave to appeal from a decision of the Local Court, an order setting aside that decision, and an order for the matter to be reheard. They had guaranteed the liability of Anthony’s Stainless Steel Fabrications Pty Ltd (“the lessee”) under a contract made between the lessee and the defendant (the plaintiff below, “the lessor”) for the lease of certain goods.

2    The lessor sued the guarantors, asserting that on 5 November 1992, during the term of the lease, the lessee offered to return the goods to the lessor; that the lessor agreed to accept the return; that the goods were returned on or about 12 November 1992; that the lessor then sold them; and that the lessee had failed to pay to the lessor the sum then payable under the terms of the lease. Alternatively, it asserted that in breach of the lease, the lessee had failed to keep the goods under its control, but had purported or attempted to sell them; so that the lessor was entitled to repossess them, and sell them; it did so, and the same sum of money was then payable.

3    The guarantors put these allegations in issue, and asserted that on 13 November 1992 the lessor repossessed the goods, in breach of the lease. They said (and the lessor agreed) that in October 1992 the lessee was up to date with its obligations to make payments under the lease.

4    The lease was in a fairly conventional form. It contained a number of promises by the lessee, including one to keep the goods under its personal control, and not to attempt to sell or dispose of them without the consent of the lessor. It also provided that, in the event of certain breaches by the lessee, or upon the happening of certain other events the lessor might repossess the goods. One of those events was the passing of a resolution for the winding up of the lessee.

5    The case did not come on for hearing until 1999, although it had been commenced in 1993; and then the hearing was not a smooth one. There were directions given in January 1999 for the exchange of witness statements. There was then an interlocutory application heard on 30 April, and the hearing of the action commenced on 10 May, when the matter was adjourned, part heard, until 30 June. At that stage, the lessor’s case had been closed, and the evidence of the first witness for the guarantors completed. Further interlocutory applications were heard on 18 June, and the hearing resumed, on 30 June, when judgment was reserved. The lessor attempted on two occasions to obtain leave to amend its claim, by raising another basis for liability: that a resolution had been passed for the winding up of the lessee, so as to justify the lessor in repossessing the goods. These applications were successfully resisted by the guarantors, because of their lateness, and the risk that if either application was granted, an adjournment might result. The evidence later led, going to other issues, established the factual basis for this alternative claim.

6    On the hearing the plaintiff led evidence of a request made on behalf of the lessee by Mr Schepis, the first named guarantor and an officer of the lessee, that the lessor take back the goods. Mr Colontonio, an employee of the lessor, gave evidence about a telephone conversation with Mr Schepis on 5 November 1992. He had an independent recollection of the conversation, but also had access to a contemporary computer record, referred to as a scratch pad, of that conversation. This record is brief, but on its face it records that Mr Schepis rang, said that the lessee had ceased trading due to its inability to collect a debt, and that some of the leased goods had been stolen. I interpolate that other evidence shows that in fact the lessee had then recently ceased trading, due - it was said - to its inability to collect a debt, and that some of the leased goods had been stolen.

7   The guarantors’ case was that there had been no such telephone conversation on or about 5 November. In the period leading up to late October there were negotiations in train for a German entity to acquire the lessee company (or perhaps its business, or its assets: the evidence as to this is neither consistent nor precise, and the doubt about this detail apparently led to the lessor formulating its alternative claim, mentioned in paragraph 2 above). These negotiations were conducted by Mr Schepis on behalf of the lessee, and Messrs Gegenheimer and Sorenson on behalf of the German entity. Mr Schepis said that on 20 October he telephoned the lessor, and was then told that the lessor was going to repossess the goods by reason of some supposed breach by the lessee; and the negotiations with the German entity then came to an end because the lessee could not deliver the goods the subject of the lease.

8    The lessor’s records show no reference to a telephone call on 20 October, but do record a telephone conversation on 23 October when the lessor quoted the lessee a “pay out” figure. Further, they contain no record of a proposed or threatened repossession of the goods at that time, or of any then current breach by the lessee of its obligations under the lease.

9    The learned magistrate preferred the evidence of the lessor to that of the guarantors, and found for the lessor on the basis that the goods had been voluntarily returned. The present application is based upon the rejection by his Worship of three pieces of evidence that the guarantors sought to adduce before him. They say that this evidence tended to support their case that there had been negotiations current with the German entity, and that those negotiations fell through because of the repossession or threatened repossession of the goods by the lessor. The rejected evidence consisted of two affidavits, by Messrs Gegenheimer and Sorenson, and a bundle of four letters, from those men to the lessee.

10    The lessor does not challenge the proposition that there were negotiations, or that they fell through, but does dispute that it threatened to repossess the goods on or about 20 October. It points to evidence that the lessee was in considerable financial difficulties, that it ceased to carry on business on 20 October, and laid off its employees on that day; and it submits that the proper inference to draw from the evidence is that on 23 October Mr Schepis telephoned to ask for the pay out figure, and was given it, and that this is all that happened until 5 November, when he telephoned again, to ask that the goods be taken back by the lessor.

11    In this context, the lessor also pointed to the fact that it was some years before any of the witnesses committed themselves to any precise version of the events, to the scratch pad, completed contemporaneously, to various matters going to the acceptability of the evidence of Mr Schepis, and to the fact that all that Messrs Gegenheimer and Sorenson ever knew about the lessor and its conduct was what Mr Schepis had told them.

12 The present application depends upon a series of arguments about the admissibility of the evidence that was rejected. As to the affidavit of Mr Sorenson, the position was that as at 18 June 1999, he was in Malaysia. He had sworn an affidavit in 1995, when resident in Australia. On 18 June the lessors sought to read that affidavit on the hearing on 30 June, without his being available for cross-examination. This was opposed by the lessor, and in the course of the debate, the then counsel for the guarantors said that Mr Sorenson had been contacted, and that “if we need to bring him out [to Australia] there will be cost”. The learned magistrate ruled against the admission of the affidavit in the absence of the deponent, leaving open the possibility that it might be admitted if Mr Sorenson was present when the hearing resumed on 30 June 1999. On that day nothing further was done to attempt to rely on his affidavit; and there was no direct evidence put forward such as would make his affidavit admissible under the provisions of section 64(2) or section 68(1) of the Evidence Act 1995 (“the Act”). The learned magistrate did not overlook that Mr Sorenson was then in Malaysia (or perhaps Singapore - both names were mentioned, and it hardly matters which one was correct), and was prepared to draw appropriate inferences as to the expense likely to be involved.

13 The decision to reject the evidence was attacked in part on the basis that his Worship failed to consider the matters mentioned in section 67(4) and 192(2) of the Act, but the guarantors gave notice of their intention to rely on the affidavit by letter of 13 May 1999, so that section 67(4) is not to the point. I do not consider that the learned magistrate erred in provisionally refusing to admit the affidavit into evidence, but, in any event, the affidavit does not help the guarantors at this stage, because it says nothing that might lead to a different result: Mr Sorenson referred to negotiations to buy shares in the lessee company, and said that when he arrived in Australia “in November 1992” Mr Schepis told him that the lessor had repossessed the goods, but nothing as to why that repossession came to take place.

14 As to the affidavit of Mr Gegenheimer, a different question was argued. He was a German citizen who was resident in Nigeria, when he swore an affidavit in March 1999, before the Australian consul in Kenya. How this came about is unexplained. The guarantors did not serve a copy of this affidavit, in accordance with the pre-trial directions, and did not explain this failure. The lessor submitted that this must have been the result of a deliberate forensic decision, the guarantors did not respond to this, and the inference that the lessor contended for seems inescapable. The affidavit was not served together with the other statements and/or affidavits served before the trial began; it was not mentioned on any of the hearings of 30 April, 10 May or 18 June, although on 18 June the use of Mr Sorenson’s affidavit was debated. It was not served until 22 June, and objection was promptly taken to its proposed use. On 30 June 1999 the guarantors sought leave to read the affidavit (see the Local Courts (Civil Claims) Rules, Part 25 rule 7), and said that Mr Gegenheimer was then present for cross-examination. The learned magistrate rejected the evidence, and the guarantors now contend he erred, in that he should have considered each of seven matters listed in paragraph 24 of their written submissions.

15    I see no profit in setting out all this detail. It is plainly correct that, in an appropriate case, one should consider the matters mentioned, but every case needs to be decided by reference to its factual context, and the submissions then advanced. In this case, the guarantors had on two prior occasions successfully resisted an application for leave to amend, lest an adjournment result. They had apparently made a deliberate tactical decision not to serve the affidavit of Mr Gegenheimer. When objection was properly taken, amongst other things, to the form of the affidavit, they said that they would seek to cure this by giving oral evidence, but the evidence before me does not show, beyond generalities, what this proposed evidence was expected to be.

16 One objection taken related to certain correspondence. Some of this was later admitted into evidence, and nothing more need be said about this. However, four letters were rejected. These are the subject of the third point now argued, and I will deal with this question now. They were letters from Messrs Gegenheimer and Sorenson to the lessee. They were tendered as being business records, admissible under section 69 of the Act, but the tender was rejected, in my respectful view, correctly. All that is in them, that is relevant, is material that does not answer the description in section 69(2)(a): with the one exception, dealt with in paragraphs 17 - 18 below, the authors did not have personal knowledge, as distinct from knowing what Mr Schepis had told them, about anything relevant. (The letter from Mr Sorenson of 19 September spoke of his coming to Australia on 25 October to finalise the purchase, but Mr Sorenson’s affidavit shows that there must have been some later change in plans, in that he did not arrive until some date in November.)

17    Returning to Mr Gegenheimer’s affidavit, he spoke of advice from Mr Schepis about the repossession or proposed repossession of the goods by the lessor - a matter about which he had no personal knowledge - and dated this conversation as being in late October. Arguably, this dating of the conversation then, rather than in November, might have assisted the guarantors’ case. The learned magistrate preferred the evidence of the lessor to the evidence of the guarantors generally, and one of the issues was when it was that Mr Schepis might have first known that the lessor might repossess the goods (using the word “repossess” word neutrally, as meaning retake, whether consensually or by way of termination of the lease after breach by the lessee).

18   According to Mr Schepis, he was told on 20 October that the lessor intended to retake possession. On the lessor’s case, he asked for a pay out figure on 23 October, in the context where, upon the advice of its accountant, the lessee had ceased trading on 20 October, and terminated the employment of its employees. The lessor submitted that the appropriate inference was that he might well have wanted to know what the pay out figure was, and might well have telephoned on 23 October to ask that question, as its records showed he did. On 11 November, on the advice of its accountants, a resolution was passed that the lessee company be wound up.

19   It seems almost inconceivable that the dating of Mr Gegenheimer’s conversation with Mr Schepis in late October would have resulted in a different outcome, but in any event, I do not think his Worship erred, in the peculiar circumstances of this case, in rejecting the affidavit. Justice requires an even handed approach, and if it was good enough for the guarantors to object to a proposed amendment to the lessor’s claim, on grounds that do not look persuasive now, lest that amendment result in an adjournment, and to choose to conduct their defence in the way I have discussed, they can hardly be heard to complain if their deliberate decision not to serve the affidavit in the time directed, or on any subsequent occasion before 22 June, resulted in the lessor then objecting, and speaking of the possible need for an adjournment if the affidavit was allowed to be read.

20    During the debate as to whether the affidavit of Mr Gegenheimer might be read, the then counsel for the guarantors spoke of an intention to adduce additional oral evidence in chief from Mr Gegenheimer, calculated to cure the objectionable form of part of the affidavit. Counsel for the lessor said that he understood, from discussion with counsel for the guarantors, that this would involve “a recasting of the statement itself where we’re going to be told the names of the people this man spoke to, when they were spoken to, [and] what was actually said”; and this is as far as the evidence now before me goes, as to what oral evidence Mr Gegenheimer might have given.

21   He was not in Australia in October 1992, so that any (relevant) evidence he might have given would have been hearsay, relating what he had been told by Mr Schepis or, perhaps, others. It is very difficult, if not impossible, to imagine how this might have influenced the outcome.

22    I conclude that each of the challenges to the rulings on evidence fails. However, even if one or more of them succeeded, the application should be dismissed. As I have said, the guarantors successfully resisted the lessor’s applications for leave to amend, so as to be able to rely upon the passing of the resolution to wind up the lessee company. They conceded, correctly, that if the matter were sent back to the Local Court for rehearing, that application must now be granted, and they could suggest no basis upon which the lessor would then fail.

23    I dismiss the summons with costs.

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Last Modified: 09/25/2000