Wily v Terra Cresta Business Solutions Pty Ltd

[2006] NSWSC 949

CITATION:	Wily v Terra Cresta Business Solutions Pty Ltd & Ors [2006] NSWSC 949
HEARING DATE(S):	30 and 31 August 2006
JUDGMENT DATE :	31 August 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
EX TEMPORE JUDGMENT DATE:	08/31/2006
DECISION:	Evidence rejected.
CATCHWORDS:	EVIDENCE – INTERLOCUTORY APPLICATION – whether source of evidence on information and belief disclosed by description of source merely as “our client” – s.75 Evidence Act discussed.
LEGISLATION CITED:	Evidence Act 1995 (NSW) – s.75, s.87, s.135
PARTIES:	Andrew Hugh Jenner Wily (in his capacity as Liquidator of Business Australia Capital Mortgage Pty Ltd and Business Australia Capital Finance Pty Ltd) – Plaintiff/Cross Defendant Terra Cresta Business Solutions Pty Ltd – First Defendant Richard Albarran & Geoffrey McDonald t/as Hall Chadwick – Second Defendants/Cross Claimants
FILE NUMBER(S):	SC 4200/06
COUNSEL:	T.S. Hale SC – Plaintiff J. O’Sullivan – Defendants
SOLICITORS:	M.D. Nikolaidis & Co – Plaintiff Etienne Lawyers – Defendants

On admissibility of letter dated 31 August 2006

1 Mr Wily, through his Counsel, tenders in evidence a letter dated 31 August 2006 from McMahons solicitors addressed to Mr Wily's solicitors, M.D. Nikolaidis & Co. The letter is annexed to an affidavit of Mr Wily sworn today. 2 Mr O'Sullivan of Counsel, who appears for the Defendants, opposes admission of the letter, at least as to such part of it as is hearsay evidence which, he says, does not comply with s.75 of the Evidence Act 1995 (NSW). 3 The letter contains statements of two kinds. The first and second paragraphs and the first two sentences of the third paragraph are statements made by McMahons of their own understanding of advice received by them from Mr Nikolaidis or from Mr Wily as to the position of the liquidator. I do not think that those sentences are open to objection on the ground of hearsay. 4 The substance of Mr O’Sullivan’s objection, however, is directed to statements of the second kind, which appear in the third sentence of the third paragraph and in the fourth paragraph of the letter. There McMahons state the position of the alleged litigation funder in these proceedings. Those statements were conveyed by McMahons to Mr Nikolaidis for the purpose of being conveyed to the Court. 5 This is an interlocutory application so that s.75 applies to permit hearsay evidence provided that the party who adduces that evidence – in this case Mr Wily – adduces evidence of its source. 6 Mr Hale SC, who appears for Mr Wily, says that the source of the statements made as to the litigation funder's position is revealed because in McMahons' letter, the source is identified as "our client" or "the funder". This submission must be understood in the context of the tender yesterday of a letter which has become Exhibit P1. That letter was tendered by the Plaintiff. In that letter McMahons state in the heading the name of what might be supposed to be its client, the alleged funder of the litigation in question. The name was given as "International Litigation Support Pty Ltd". McMahons in that letter stated the views of its client in relation to the prospect of continuing litigation funding while the liquidator and the Receivers and Managers were debating in this Court who should have the conduct of the Federal Court litigation. 7 Searches of the name International Litigation Support Pty Ltd have revealed that there does not appear to be any such company incorporated in this country, nor is there any business name of that description, nor is there any entry in telephone books indicating that such an organisation is carrying on business here. 8 Confronted with this evidence this morning, Mr Hale told me from the Bar table that the name "International Litigation Support Pty Ltd" was a "mistake" and was not in fact the name of the litigation funder. How McMahons could have mistaken the name of their own client and how Mr Nikolaidis as solicitor for the liquidator who of necessity must know the true name of the litigation funder could in those circumstances have tendered this "mistake" to the Court has not been explained. I regard that circumstance as highly unsatisfactory. 9 Probably the reason for the "mistake" is the desire on the part of the liquidator to keep secret from the Defendants in these proceedings the true identity of the litigation funder, if there is a litigation funder. Mr Hale says that that information is confidential because a litigant seeking litigation funding should not be exposed to the risk of the adversary approaching the litigation funder directly and making representations as to the strength of its own case against the litigant or the weakness of the litigant’s case against it. 10 I may put aside for the moment the question whether the identity of a litigation funder is truly of a confidential character or whether the Court, in its discretion, should give some protection against disclosure of the name. What is important for the purposes of this issue is that the liquidator has proffered evidence as to the identity of the litigation funder which one must assume the liquidator and his legal advisors would have known was incorrect. He now seeks to tender evidence as to the position and intention of the litigation funder while still endeavouring to keep the identity of the funder secret. 11 The purpose of s.75 of the Evidence Act is to facilitate the conduct of interlocutory proceedings in circumstances where it is often difficult, at short notice, to adduce evidence in direct and admissible form. For that reason, evidence on information and belief is accepted. However, the requirement of the section that the source of the information be revealed goes some way to assisting the Court in assessing the reliability of that evidence. Without any indication of the source of the evidence proffered on information and belief, the Court is unable to assess its weight nor can the opponent test the evidence or make any sensible submission as to its weight. 12 In the present case, as I have said, the endeavours on the part of the liquidator to keep secret the identity of the litigation funder – if there is a funder – has caused me great concern. I do not think that the requirement of s.75 is fulfilled by identifying "the source" of evidence on information and belief by the sole description "our client". 13 Mr Hale says that the subject statements are also admissible under s.87 of the Evidence Act. Section 87(1) provides as follows:

“For the purpose of determining whether a previous representation made by a person is also taken to be an admission by a party, the court is to admit the representation if it is reasonably open to find that:
(a) when the representation was made, the person had authority to make statements on behalf of the party in relation to the matter with respect to which the representation was made, or

(b) when the representation was made, the person was an employee of the party, or had authority otherwise to act for the party, and the representation related to a matter within the scope of the person’s employment or authority, or

(c) the representation was made by the person in furtherance of a common purpose (whether lawful or not) that the person had with the party or one or more persons including the party.”
14    It is highly doubtful that the statement in McMahons' letter of 31 August of this funder’s position is a "previous representation by a person" within the meaning and scope of the section rather than a current statement of the position of an unnamed person who is in an ongoing commercial dealing with the liquidator. 15 However, more importantly, s.87 determines whether or not a statement made by another person is "an admission by a party" . I cannot see how a representation by a litigation funder, who is not a party to these proceedings, to the liquidator, who is a party, can be taken as "an admission by" the liquidator. For that reason, s.87 has no bearing on the issue which I have to decide. 16 For the reasons that I have given, I do not think that the identification of the source of evidence contained in the McMahons' letter of 31 August 2006 complies with the requirements of s.75 so as to provide an exclusion from the operation of the hearsay rule. 17 In my view the subject statements are not admissible either under s.75 or s.87 Evidence Act . In any event, having regard to the concerns which I have earlier expressed as to the manner in which exhibit P1 was tendered, I would refuse to admit the evidence under s.135 of the Evidence Act because I regard the probative value of the statements as to the litigation funder's position as being substantially outweighed by the danger that the evidence might be unfairly prejudicial to the Defendants in this case, as they cannot test it in any way, or might be misleading or confusing or cause or result in undue waste of time. 18    Accordingly, the third sentence of the third paragraph in Annexure A to Mr Wily's affidavit of today's date and the fourth paragraph of that letter will not form part of the tender of that letter, which is otherwise admitted.
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