FEDERAL COURT OF AUSTRALIA Australian Competition & Consumer Commission v World Netsafe [2002] FCA 517 AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v WORLD NETSAFE PTY LTD and ANOR No Q 297 of 1999 SPENDER J BRISBANE 30 APRIL 2002 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY Q 297 OF 1999 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: WORLD NETSAFE PTY LTD FIRST RESPONDENT TERENCE BUTLER SECOND RESPONDENT JUDGE: SPENDER J DATE OF ORDER: 30 APRIL 2002 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The sentence in par 11 of the affidavit of Daniel Christopher Webb, "I am looking after the interests of World Netsafe in Australia" be excluded as hearsay. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY Q 297 OF 1999 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: WORLD NETSAFE PTY LTD FIRST RESPONDENT TERENCE BUTLER SECOND RESPONDENT JUDGE: SPENDER J DATE: 30 APRIL 2002 PLACE: BRISBANE REASONS FOR RULING ON EVIDENCE – NO. 5 1 The Australian Competition and Consumer Commission (the ACCC) seeks to admit into evidence a statement heard by Daniel Christopher Webb concerning the World Netsafe card allegedly made by Lindsay Birch, an officer of World Netsafe, who promoted the purchase of that card. It is alleged that Mr Birch commenced a World Netsafe meeting by stating: "I am looking after the interests of World Netsafe in Australia." The reason that this statement is sought to be admitted into evidence is to prove that World Netsafe contravened orders of the Court, and that Mr Terence Butler was guilty of contraventions of the Court's orders by failing to take reasonable steps to prevent World Netsafe from breaching those orders. 2 In other words, the ACCC is seeking to establish that World Netsafe is vicariously liable for the conduct of Mr Birch, that that conduct amounts to contraventions by World Netsafe of the Court's orders, and that Butler is also guilty of contravening the Court's orders by failing to take reasonable steps to prevent World Netsafe from contravening those orders. The statement, "I am looking after the interests of World Netsafe in Australia", is a previous representation made by Mr Birch. It is a statement of fact, and one which the maker intended to assert by that representation. Consequently, it is not an unintended implied assertion which is not hearsay for the purposes of the Evidence Act 1995 (Cth) (the Act). 3 Section 59 of the Act provides: "(1) Evidence of a previous representation made by a person is not admissible to prove the existence of a fact that the person intended to assert by the representation. (2) Such a fact is in this Part referred to as an asserted fact." On this basis, the statement in issue is hearsay unless it can be brought within one of the exceptions to the hearsay rule. In this respect, the ACCC relies on s 60 as one basis for admitting the evidence. Section 60 provides: "The hearsay rule does not apply to evidence of a previous representation that is admitted because it is relevant for a purpose other than proof of the fact intended to be asserted by the representation." It is important to note that s 60 reverses the rule of evidence at common law, rendering hearsay statements admissible as evidence of the existence of the asserted fact where that evidence has been admitted for a non-hearsay purpose. 4 The ACCC also seeks to rely on s 87(1)(a) and s 87(1)(c), alleging that the statement is an admission made with the authority of World Netsafe. There is a certain boot-straps aspect to this part of the submission - what is sought to be relied on is a hearsay statement about authority as a basis for authority to make admissions of agency. 5 Section 87 provides: "(1) 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. (2) For the purposes of this section, the hearsay rule does not apply to a previous representation made by a person that tends to prove: (a) that the person had authority to make statements on behalf of another person in relation to a matter; or (b) that the person was an employee of another person or had authority otherwise to act for another person; or (c) the scope of the person's employment or authority." 6 It is clear from s 87(2) that, for the purposes of s 87, the hearsay rule does not apply to the statement in issue in that the representation tends to prove that the person had authority to make statements on behalf of World Netsafe in relation to aspects of World Netsafe's business. The admission which s 87(1) permits is an admission of a previous representation which amounts to an admission by that party. Here, the admission which is sought to be established by the making of the statement is the representation that the maker of the statement, Mr Birch, was an agent of World Netsafe. 7 What that means is that, by s 87(2), one is entitled to have regard to the hearsay representation to establish that Mr Birch had authority to make statements on behalf of World Netsafe and then, relying on s 87(1)(a), to admit the representation that he had authority to make statements on behalf of World Netsafe to find that Mr Birch had authority to make statements on behalf of World Netsafe. That is to say, s 87 directs the Court to admit the statement that Mr Birch is entitled to make representations on behalf of World Netsafe if it is reasonably open to find that he had authority to make statements on behalf of World Netsafe. The statement, at least prima facie, is hearsay. 8 There is a passage in the judgment of Lord Parker CJ in Edwards v Brookes (Milk) Ltd [1963] 1 WLR 795 which suggests that the statement in question is admissible at least as evidence of what Birch said. In dealing with a question of whether statements made by one Norman Jones were statements by an agent of the company who had authority to make admissions on behalf of the company, his Lordship said (at 798): "I am satisfied there was prima facie evidence. It is true that the case stated, when dealing with the visit of the inspector to the depot manager, does not go into great detail, but I am prepared to assume, and indeed I think the inference is that, when an inspector goes to the depot of a company such as the defendant company, he does not speak to the office boy and he does not accept a statement from the office boy that he is the depot manager. In the ordinary way an inspector would go to the depot and say: 'I want to speak to somebody in authority,' and he then speaks to someone who he has no reason to believe is not a person in authority, and that person tells him he is the depot manager. In my judgment, prima facie, he is the depot manager, and as such an agent of the company. Mr Rankin objects that that evidence is inadmissible under the hearsay rule. In my judgment it is evidence of what the man who called himself Norman Jones said. It is not evidence by itself of the truth of that matter, but when you get, as here, the full circumstances of going to the depot, trying to speak to someone in authority, finding someone who appears to be in authority, and then being told by him that he is the depot manager, that must in my judgment be evidence on which the justices can, if they so wish, infer that the man Norman Jones was an agent of the company." 9 The Lord Chief Justice apparently regarded the statement as a species of original evidence, being evidence of what Norman Jones said. That is not evidence by itself of the truth of that matter but his Lordship seemed to regard it as a piece of circumstantial evidence which, combined with the other matters referred to, permitted the Court to infer that Norman Jones was an agent of the company. 10 A passage which also seems to support the submission on behalf of ACCC is found in Walplan Pty Ltd v Wallace (1985) 8 FCR 27. Dealing with the question of the admissibility of a statement made by a person and whether that statement was evidence of the company, Lockhart J said (at 34): "A person's authority to act on behalf of a company may be proved by direct evidence of the grant of authority, for example, a resolution of the board of directors or in some instances the articles of association themselves. But the authority may be established otherwise than by direct evidence: it may be inferred from circumstances. Once the circumstances have been proved a prima facie case of the existence of the authority may be established, but the other party to the proceeding may lead evidence to negate the prima facie case. It is impossible to define exhaustively the relevant circumstances, but they may include evidence of the office held by the person whose authority is in question, statements made by him, the time when and the place where the statements were made and the acquiescence of others who govern the company's affairs in the statements made. Of course, care must be taken before admitting the person's own statements that he had authority to act on behalf of the company. Those statements are inadmissible unless accompanied by other evidence supporting the existence of his authority. Particular care must be exercised by a trial judge on this question when hearing a criminal charge, especially if there is a jury. Sometimes for convenience and the orderly conduct of a trial the presiding judge may admit statements of this kind provisionally, leaving it to be established later in the case whether the requisite connection exists between the person and the company, especially if counsel for the plaintiff or the prosecution undertakes to complete the chain of evidence: see Fraser Henleins Pty Ltd v Cody (1945) 70 CLR 100; Ex parte Gerard & Co Pty Ltd; Re Craig (1944) 44 SR (NSW) 370; Barrett v Steel Products Co Pty Ltd [1962] NSWR 981; Edwards v Brookes (Milk) Ltd [1963] 1 WLR 795; Chappell v Ross & Sons Pty Ltd [1969] VR 376." 11 The passage in that statement, "… care must be taken before admitting the person's own statements that he had authority to act on behalf of the company. Those statements are inadmissible unless accompanied by other evidence supporting the existence of his authority" is directed to the same factual circumstances considered by Lord Parker CJ in Edwards v Brookes, namely that the fact of the statement is admissible as a circumstance which, if accompanied by other evidence that supports the existence of a person's authority to act on behalf of a company, is not admissible as truth of that statement but as a piece of evidence which, combined with others, might lead to the conclusion that the person was the agent of the company and authorised to make admissions on its behalf. 12 These observations precede the reversal of the common law rule as to the purpose for which evidence is admitted that is affected by s 60 of the Act. That, my opinion, is a telling circumstance and if effect was to be given to the tenor of these observations, there would be very little room for the prohibition on hearsay evidence being relied on as truth of the asserted fact in the hearsay statement. 13 If the statement could be admitted as original evidence, not of the truth of the statement but of the fact it was made, the effect of s 60 is to permit the statement to be used as proof of the truth of what is asserted in the statement. In my opinion the statement cannot be admitted under s 60 because the statement is not relevant for a purpose other than proof of the fact intended to be asserted by the representation. 14 As far as the basis relied on under s 87 is concerned, it seems to me that the representation in question is not a previous representation made by a party to the proceeding. Whether World Netsafe breached the orders of the Court is an ingredient of the charge of contempt which is sought to be made against Butler, yet notwithstanding that Butler is said to be liable for failing to take steps to ensure that World Netsafe comply with the orders of the Court, World Netsafe is not a party to the contempt said to be constituted by that failure. 15 Section 87(1)(a) is concerned with whether a person has authority to make admissions. It seems to me to be wrong to conclude that a person has authority to make admissions because the person asserts that he has authority to make admissions, and that is what is sought to be established in the present instance. In my opinion it is also not reasonably open to find that the representation was made by Mr Birch in furtherance of a common purpose that Mr Birch had with Mr Butler. 16 In my judgment, the statement is hearsay pursuant to s 59 of the Act, and is inadmissible to prove the existence of the fact asserted in the statement. The exceptions on which the ACCC wish to rely do not apply in the present factual circumstances. On this basis, I will exclude the sentence in par 11 of Mr Webb's affidavit: "I am looking after the interests of World Netsafe in Australia." I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender. Associate: Dated: 27 May 2002 Counsel for the Applicant: Mr P.L. O'Shea SC, with Mr A.M. Pomerenke Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the Respondent: Mr M.M. Stewart SC, with Mr G.A. Wilkins Solicitor for the Respondent: Redmond van de Graff Date of Hearing: 30 April 2002 Date of Judgment: 30 April 2002