HEATON v LUCZKA SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL COLE, BEAZLEY and STEIN JJA 3 March 1998, 3 March 1998 [1998] NSWCA 104 Evidence — Rule in Browne v Dunn — operation of rule in Browne v Dunn — Admissibility of evidence. Cole JA I will ask Beazley JA to give the first judgment. Beazley JA This is an appeal from a decision of Judge Christie of the District Court in which his Honour held that the terms of an agreement reached between the appellant and the respondent included a term for the payment of interest at 10 per cent. This finding is challenged and three main errors are alleged. One, that his Honour wrongly precluded a witness, Ben Heaton, the son of the appellant, from giving certain evidence because of an alleged breach of a rule in Browne v Dunn (1894) 6 R67; two, that his Honour's findings were against the weight of evidence; and three, that his Honour failed to draw certain inferences exculpatory of the appellant. It was submitted that given the fine balance which his Honour found between the evidence of the appellant and the respondent the wrongful rejection of Mr Heaton's evidence would or may well have tipped the balance in favour of the appellant. It is necessary to place these issues in their brief factual context. The appellant and the respondent had been involved in a relationship during which time they had become engaged and had cohabited at least for a short period. During the course of the relationship the appellant decided to build duplexes on land owned by her. She made a number of loan applications to financial institutions to enable her to do so. However, the respondent offered to build the home for the appellant and to lend her the moneys to do so. The appellant accepted this offer. There is no dispute about those aspects of the transaction. The respondent said it was a term of the loan agreement that interest would be payable at 10 per cent. The appellant denied that there was any conversation and, it follows, any agreement as to interest. During the trial the appellant called her son, Ben Heaton, to give evidence. At an early stage in his evidence he was asked by the solicitor for the appellant the following: "Q. Did he (the respondent) say anything to you in relation to his involvement with the construction of those villas? A. Yes. Q. What was said?" At this stage counsel for the respondent objected and his Honour asked the question "How can you have that?" The solicitor for the appellant argued it was a statement made in the presence of the respondent. The following exchange then occurred between his Honour and Mr Conditsis, solicitor for the appellant: "HIS HONOUR: Have you ever read Browne v Dunn? CONDITSIS: Yes I have, your Honour. 2 UNREPORTED JUDGMENTS HIS HONOUR: How could you possibly lead this evidence without having to put it to the plaintiff? CONDITSIS: Your Honour, my understanding of the amendment the evidence... Act is that a Browne and Dunn situation does not exclude. It is a matter for your Honour to weigh up at the end of the day but it does not exclude me quite frankly and with respect, your Honour, putting this to the witness in this case it is a matter for your Honour to weigh up at the end of the day. HIS HONOUR: Yes, do you want to say anything else? CONDITSIS: No, your Honour. HIS HONOUR: I disallow it. CONDITSIS: Your Honour pleases. I have no further questions, your Honour. The witness was then retired. In his judgment the trial judge said: "The defendant's contention was that nothing was ever said about interest, indeed on this crucial issue the only thing that was ever put to the plaintiff in terms of a compliance with the rule in Browne and Dunn was the following: 'The whole tenor of your conversation was to the effect that no interest rate would apply." Mr Conditsis submitted on the appeal that his Honour erred in precluding the hearing of any evidence from Mr Ben Heaton on the basis that he, as the appellant, had breached the rule in Browne v Dunn by not putting anything to the respondent in cross-examination as to the matters to be led from Mr Ben Heaton in his evidence. The evidence which it is submitted Mr Heaton would have given was the following: "When my mother's new duplex was being built on her property I commenced work as a labourer for (the respondent). I only worked on the site for a couple of days, however, during that time (the respondent) said things to me to the effect of: (a) 'Iam lending your mother the money to build this house so she didn't have to borrow from a bank'; (b) 'I am doing it for her to save money for her'; (c) 'I am looking after your mother'; (d) 'I am doing this for your mother cheap'; and (e) 'I am doing this for your mother for less than a builder could." In my opinion this ground of appeal must fail. Whilst the rule in Browne v Dunn remains alive and well under the regime of evidence law introduced by the Evidence Act 1995 (NSW), the circumstances of its application must be properly understood. As Hunt CJ at CL pointed out in Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1 at 16, the rule in Browne v Dunn is a rule of practice: "...That rule of practice follows from what I have always believed to be rules of conduct which are essential to fair play at the trial and which are generally regarded as being established by the decision of the House of Lords in Browne v Dunn. " In Archer v Richard Crookes Construction Pty Ltd (unreported, NSW Court of Appeal, 22 October 1997), the learned President and I, after referring to the juridical basis of the rule in Browne v Dunn by reference to Hunt CJ at CL's statement to which I have just referred, considered what ought to happen in a trial if a Browne v Dunn issue arises. We said at 7-8: URJ HEATON v LUCZKA (Beazley JA) 3 "\. [If it appears during the course of a trial that the rule has been offended and that unfairness may result, the trial judge has a discretion as how to best remedy the unfairness so that the trial does not miscarry. The steps available to the trial judge include permitting witnesses to be recalled so that they may have the opportunity to explain their evidence which is the subject of contradiction... " In the present case it is possible that the trial judge did not understand the proper approach to be taken if a Browne v Dunn question arose during the course of the trial. But the rule in Browne v Dunn does not operate in respect of all evidence which is sought to be adduced. It only operates in respect of relevant and admissible evidence. In this case the evidence of Ben Heaton was not relevant to the matter in issue which was whether there was a term of the agreement that interest was payable. Ben Heaton's evidence was not relevant for at least two reasons: one, it was evidence of conversations after the agreement had been entered into and two, it did not contain any admission. Mr Conditsis argued that the evidence was admissible under s106 of the Evidence Act 1995 (NSW). I reject that submission. $106 appears in that part of the Evidence Act relating to the credibility rule in Pt3.7. The basis as to evidence as to credit, which this evidence might have gone to, is contained in s102. It provides: "...Evidence that is relevant only to a witness' credibility is not admissible... ". This evidence was, therefore, not admissible under that rule unless it came within one of the exceptions. The only relevant exception may have been one of those provided for by s106. Two possibilities suggest themselves. One, under para(a) which provides that the credibility does not apply to evidence that seeks to prove that a witness has a motive for being untruthful. Or secondly, under para(c) that a witness has made a prior inconsistent statement. The former, for which Mr Conditsis contended, in my opinion does not apply. The evidence of Mr Heaton did not go to establish that the respondent had a motive for being untruthful. The other possibility under para(c) would not apply in this case as the foundation for the admissibility of a prior inconsistent statement had not been properly laid even if it was available. The second and third issues raised in the appeal must also fail. The trial judge weighed the evidence on both sides. There were factors which could have caused him to make a finding either way. His Honour was clearly conscious of that in describing the case in his judgment as a borderline one. Mr Conditsis in his detailed argument to the court, as well as in his written statement, pointed to those factors which he said supported the appellant's case. It is not necessary to repeat them. Just as there were factors which supported the appellant's case there were likewise factors which supported the respondent's case. To mention one of those: the respondent gave evidence that when he was in the process of reaching the agreement with the appellant as to the payment of interest and there was a discussion as to whether it should have been 9.5 per cent or 10 per cent, he said to her: "...Look, don't be silly, 10 per cent, I am going to do the work for you at no cost for my labour..." This evidence supports his case that even though the appellant may have been offered a lower rate by financial institutions she was receiving a benefit from the respondent even at 10 per cent. 4 UNREPORTED JUDGMENTS These competing aspects of the evidence merely demonstrate that no one particular factor dictated a result one way or the other. His Honour was obliged to weigh up the whole of the evidence and reach his conclusion. He properly applied the civil onus and came to a view in favour of the respondent. In my opinion no appealable error has been shown and the appeal should be dismissed with costs. Cole JA I agree. I would only add this: the true question in the case was whether or not there was an agreement regarding the payment of interest. The agreement was said to be made orally between the appellant and the respondent. They were the only two persons present when it is said the agreement was made. They were the only two persons, accordingly, who could give evidence concerning that topic. It is permissible to call evidence of conversations which either might have had with some other person if those conversations could constitute an admission regarding whether or not there was such an agreement concerning the payment of interest. However, the evidence of Mr Heaton did not and could not constitute such an admission. It was, therefore, irrelevant. In my view whilst I agree with the remarks of Beazley JA no true question of the application of the rule in Browne v Dunn arose and it seems to me that the trial judge and the appellant may have strayed a little from the true question in issue. I agree with her Honour's reasons and with the orders which she proposes. Stein JA I also agree with Beazley JA and wish only to add a few brief remarks on the first issue. As to the evidence of Mr Ben Heaton, I am unable to appreciate its relevance. It goes nowhere. In any event, it is very difficult to understand how it could have had any effect on the determination of the issue faced by his Honour. In addition, I am unable to see how Mr Heaton's evidence could be admissible as evidence going to the credit of the respondent. This is assuming that the appellant's solicitor had sought and was granted leave to recall the respondent to put further questions to him regarding his conversation with Mr Heaton. I agree with the orders proposed by Beazley JA. Cole JA The orders of the court are those proposed by Beazley JA. Appeal dismissed with costs. Counsel for the appellant: E Conditsis (sol) Solicitors for the appellant: Conditsis & Associates Counsel for the respondent: JJ Loofs Solicitors for the respondent: Aubrey Brown Partners