CATCHWORDS
EVIDENCE - opinion - evidence of reliance in case of non-disclosure - evidence of what person reading prospectus would have done if disclosure had been made - whether such evidence is "opinion evidence" - whether excluded by "opinion rule" in s 76 of Evidence Act 1995.
Evidence Act 1995 ss 76, 77, 78.
Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471 (FC).
Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 (CA).
Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389.
ALLSTATE LIFE INSURANCE CO & ORS v AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED & ORS (No 32)
Nos NG 381 of 1994, NG 523 of 1991, NG 622 of 1991, NG 635 of 1991 and NG 193 of 1996.
Lindgren J
Sydney
22 March 1996
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY)
GENERAL DIVISION )
No NG 381 of 1994
BETWEEN:
ALLSTATE LIFE INSURANCE CO and the parties listed in Annexure A to the third further amended statement of claim.
Applicants
AND:
AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 and the parties listed in Annexure B to the third further amended statement of claim.
Respondents
No NG 523 of 1991
BETWEEN:
ALLSTATE LIFE INSURANCE CO and the parties listed in Annexure A to the third further amended statement of claim.
Applicants
AND:
AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 and the parties listed in Annexure B to the third further amended statement of claim.
Respondents
No NG 622 of 1991
BETWEEN:
ALLSTATE LIFE INSURANCE CO and the parties listed in Annexure A to the third further amended statement of claim.
Applicants
AND:
AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 and the parties listed in Annexure B to the third further amended statement of claim.
Respondents
No NG 635 of 1991
BETWEEN:
ALLSTATE LIFE INSURANCE CO and the parties listed in Annexure A to the third further amended statement of claim.
Applicants
AND:
AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 and the parties listed in Annexure B to the third further amended statement of claim.
Respondents
No NG 193 of 1996
BETWEEN:
PROSPECT STREET HIGH INCOME FUND PORTFOLIO INC and the parties listed in Annexure A to the statement of claim.
Applicants
AND:
AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 and the parties listed in Annexure B to the statement of claim.
Respondents
CORAM: Lindgren J
PLACE: Sydney
DATE: 22 March 1996
REASONS FOR JUDGMENT (No 32)
(Ruling on evidence relating to reliance)
Objection is taken by the 1st, 7th, 8th, 9th and 11th respondents
("the Allens Banks") to para 27 of the statement of Carl C Ericson
dated 23 October 1995. There are
particular objections to the last three sentences within the paragraph, but
this ruling relates to a general objection to the remainder of it. That
objection is that Mr Ericson gives "opinion evidence" which is not of
the limited kind able to be given by a non-expert witness.
According to Mr Ericson's statement, in late 1988, he was employed by Colonial Management Associates Incorporated ("Colonial Management") which managed funds of other entities ("the Managed Entities") including Colonial Intermediate High Income ("Colonial High Income") and Colonial Income Plus Fund ("Colonial Plus"). Apparently, he read the preliminary prospectus and the final prospectus associated with the issue by Linter Textiles Corporation Ltd ("Linter Textiles") of the debentures with which these proceedings are concerned and recommended investment in them, in consequence of which Colonial High Income and Colonial Plus purchased some of the debentures.
Paragraph 27 of Mr Ericson's statement begins as follows:
"If I had known that it was intended that Linter Textiles guarantee to various banks indebtedness of Linter Group Limited in excess of US$100m and that, in turn, it was intended that the subsidiaries of Linter Textiles would guarantee to the same banks the obligations of Linter Textiles then I would not have made My Recommendation nor allowed the purchase by Colonial Management, on behalf of any of the Managed Entities, of any Linter Textiles Debenture Issue because: ..."
There follow subparagraphs (a) to (d) in which Mr Ericson sets out the considerations which would have caused him not to recommend acquisition of the debentures.
Mr Pembroke SC, for the Allens Banks, submits that upon analysis, para 27 amounts to an expression of the opinion which Mr Ericson holds today as to how he would have acted in late 1988 if the intention to give the guarantees had been disclosed. Mr Pembroke has taken me to statements of the general rule against the admissibility of opinion evidence of non-experts; cf Cross on Evidence (5th Aust'n ed, Butterworths, 1996) at paras 29001 and 29085-29100; Australian Law Reform Commission, Interim Report on Evidence (ALRC 26, 1985), vol 1, paras 739, 740 at pp 410-411.
Mr Pembroke submits that para 27 is "opinion evidence" caught by the general rule; that the Evidence Act 1995 ("the Act") produces no different result; that Mr Ericson's evidence in para 27 is rendered inadmissible by s 76 of the Act; and that it is not saved from that fate by s 78 of the Act. Sections 76, 77 and 78 are as follows:
"76 Evidence of an opinion is not admissible to prove the existence of the fact about the existence of which the opinion was expressed.
77 The opinion rule [the rule expressed in s 76 - see the definition of 'opinion rule' in the Act's 'Dictionary'] does not apply to evidence of an opinion that is admitted because it is relevant for a purpose other than proof of the existence of a fact about the existence of which the opinion was expressed.
78 The opinion rule does not apply to evidence of an opinion expressed by a person if:
(a) the opinion is based on what the person saw, heard of otherwise perceived about a matter or event; and
(b) evidence of the opinion is necessary to obtain an adequate account or understanding of the person's perception of the matter or event."
I agree that if "the opinion rule" excludes para 27 of Mr Ericson's statement, the operation of that rule is not displaced by s 78. As will appear below, I do not think that para 27 is caught by the opinion rule in the first place because the paragraph does not express an "opinion" to which that rule applies, but if it does, I think that the opinion is not tendered for the purpose referred to in s 76 and therefore, as s 77 makes plain, the opinion rule is inapplicable.
Mr Emmett QC for the applicants submits that para 27 is not of the nature of opinion evidence. He submits that opinion evidence is evidence of an inference drawn from perceived facts and that para 27 cannot be so characterised.
The expression "opinion" is not defined in the Act. In the context of the general law of evidence, "opinion" has been defined as "an inference from observed and communicable data": Wigmore on Evidence (J H Chadbourn (ed), Little, Brown & Co, 1978) vol 7, § 1917; and see J D Heydon, Cross on Evidence (5th Aust'n ed, Butterworths, 1996) para [29010] at p 782; Australian Law Reform Commission, Interim Report on Evidence (ALRC 26, 1985), vol 2, para 96 at pp 168-169. The origin of the courts' aversion to evidence of opinion is in the common law's concern to receive the most reliable evidence; cf Cross, supra, para [29001] at p 781. One might be excused for thinking that often the most reliable evidence, and certainly the most obvious evidence, of what a person would have done if facts had been different from what they were, would be that person's own evidence on the matter.
Paragraph 27 does not state an inference drawn or to be drawn from observed and communicable data. It purports to be "direct" evidence from the person uniquely placed to give it, of what that person would have done in a hypothetical situation. This is not "opinion" of the kind against which the general rule against the admissibility of evidence of opinion is directed.
In one sense there can never be "direct" evidence of what a person would have done in a situation different from that which occurred. But where that is what is to be proved, the person in question is better qualified than all others to give evidence on the matter. To exclude his or her evidence would be to exclude the "most direct" evidence available.
Mr Pembroke SC submits that Mr Ericson is entitled to give evidence of what his practice was, of what disclosures he habitually looked for when reading prospectuses and what disclosures he looked for on the occasion in question, and, no doubt, of other aspects of his relevant mental framework in late 1988 when he read the Linter Textiles prospectus, but that he must stop short of saying what he would have done if there had been disclosure. According to the submission, to take this last step is to trespass into the prohibited territory of opinion evidence. I do not accept the submission. To exclude such evidence would be contrary to the "most reliable evidence" objective of the opinion rule. In my view, such evidence belongs to a different area of discourse from that with which the opinion rule is concerned.
Mr Ericson's evidence in para 27 is tendered to prove reliance and inducement. A witness may say that he read or heard a positive representation, relied on it as true and was induced to act in a certain way. The weight of such evidence may be increased or lessened by evidence of relevant surrounding circumstances rendering the evidence more or less persuasive. By parity of reasoning, it must be permissible for a witness, as here, to give evidence of inducement arising from a non-disclosure by saying how he or she would have acted differently if disclosure had been made. Again, it is a different matter that the weight of such evidence will be increased or lessened according to evidence of relevant surrounding circumstances making the witness's evidence more or less persuasive. In particular, the self-serving nature of the evidence and the "benefit of hindsight" factor must be taken into account.
It is pertinent to note that even evidence of inducement by a positive representation is also evidence that the witness would not have acted in precisely the same way in a hypothetical situation, namely one in which the positive representation had not been made.
I have been referred to authorities. Apparently there are none dealing squarely with the objection raised. However, in a case in which a person did not give evidence of what he would have done if disclosure had been made and it was contended that in the absence of such evidence causation was not proved, although that contention was rejected the Full Court of this Court accepted in obiter dicta that the evidence could have been given. The case is Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471 (FC) ("Dominelli Ford"). The trial judge drew the inference that if the seller of a business had disclosed that its overseas supplier was unreliable, the purchaser would not have entered into the transaction. On that basis, he set aside the contract and ordered return of the purchase price. The appellants submitted that in the absence of direct evidence from the purchaser's managing director of what he would have done if the supplier's unreliability had been disclosed, the trial judge was not entitled to infer reliance. The joint judgment of the Full Court includes this passage (at 483):
"Although direct evidence of reliance might have been obtained by the appropriate questioning of Hutchins [the managing director], we do not regard the absence of this evidence as fatal in the sense that it necessarily precludes the finding of reliance." (emphasis supplied)
In Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 (CA) ("Huntsman") what was alleged was the making of positive representations and reliance on them. A ground of appeal was that the trial judge had erred in finding that loss or damage had resulted from the making of the representations. In particular, it was submitted that in the absence of direct evidence of reliance from those who could have given it, the trial judge had not been entitled to infer it. Rolfe A-JA, with whom Kirby P and Mahoney JA agreed, found that Dominelli Ford provided guidance in the resolution of the appeal. There is nothing in his Honour's judgment to suggest that if the person concerned had given evidence that he relied on the representations, the evidence would not have been admissible, or to cast doubt on the statement in Dominelli Ford that evidence of a course which would have been followed if something not disclosed had been disclosed is admissible.
In both Dominelli Ford and Huntsman, the earlier case in the New South Wales Court of Appeal, Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389, was referred to. In that case, Handley JA addressed a failure of the principal of an insured company to give evidence of a course which he asked the Court to accept he would have followed if events had been different from what they in fact were. The relevant passage from Handley JA's judgment is follows (at 418):
"As I have already said the insured made no attempt to prove that it could and would have obtained cover for this mobile crane without the endorsement by pursuing the course that Mr Hughes said would alone have achieved that result.
In my opinion, the Court should not draw inferences favourable to the insured on these matters when no attempt was made to prove them by direct evidence and in particular when no relevant questions were asked of Mr Ferrarese [the principal of the insured]. Rather, it seems appropriate to apply the principles of Jones v Dunkel (1959) 101 CLR 298."
Dominelli Ford and Huntsman suggest that this passage should perhaps be treated with some caution. Nonetheless, it is a further illustration of acceptance of the proposition that evidence of what a person would have done in a hypothetical situation is admissible.
I have referred earlier to the distinction between the admissibility and weight of the evidence in the present context. The witness is giving evidence with the benefit of hindsight and knows where his or her interest lies at the time of giving the evidence. Problems of the kind to which I have just referred are acknowledged in the following passage from Dominelli Ford which immediately follows the passage from that case quoted earlier:
"Indeed, as the information as to the prior problems with the supplier had been withheld from Hutchins, any question as to what he would have done had it been disclosed to him, would necessarily be hypothetical. As such, the answer, in itself, might well be regarded as carrying little weight and being essentially self-serving. In this regard the case appears to be essentially different from that considered in Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389. In any event, we are satisfied that [Gould v Vaggelas (1985) 157 CLR 215] provides clear authority for the course taken by the trial judge. We concur in the inference that he drew." (at 483)
If, contrary to the view expressed earlier, it be appropriate to describe and conceive of Mr Ericson's evidence in para 27 as "opinion" for the purpose of the opinion rule, it is not tendered here to prove the existence of a fact about which the opinion is expressed. Accordingly, the opinion rule found in s 76 of the Act does not apply, as s 77 makes clear.
In the present case, there are allegations in the third further amended statement of claim of omission to disclose, in substance, the intention which is referred to in para 27 of Mr Ericson's statement. It is admissible evidence for Mr Ericson to say what he would have thought and done if disclosure had been made. Subject to the objections to the last three sentences, I allow para 27. [The objections to the last three sentences of para 27 were the subject of separate rulings.]
I certify that this and the preceding 10 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.
Associate:
Dated: 4 April 1996
Heard: 22 March 1996
Place: Sydney
Decision: 22 March 1996
Appearances: Mr A R Emmett QC with Mr W G Muddle and Mr D R Stack of counsel instructed by Deacons Graham & James appeared for the applicants.
Mr M A Pembroke SC of counsel instructed by Allen Allen & Hemsley appeared for the 1st, 7th, 8th, 9th and 11th respondents ("the Allens Banks").
