New South Wales Supreme Court CITATION : Hyhonie Holdings Pty Ltd v Leroy [2003] NSWSC 520 HEARING DATE(S) : 12/06/03 JUDGMENT DATE : 12 June 2003 JURISDICTION: Equity Division JUDGMENT OF : Young CJ in Eq DECISION : Reject parts of the affidavit and the associated evidence. CATCHWORDS : EVIDENCE [83]- Admissibility- Communications between parties settling dispute- Dispute settled- Subsequent litigation between different parties- What said during such negotiations relevant- Whether admissible- Equitable evidence, whether prevented by Evidence Act 1995- Whether inferences available from refusal to disclose- "Consent" to admission of evidence- Implied consent- Does implied consent arise if a person only objects on a ground that is overruled by the Judge?- Evidence Act ss 131(2), 134. LEGISLATION CITED : Evidence Act 1995, ss 122(1), 131(2), 134 Causley v Savins (Giles J, 11.4.97) Garratt's Ltd v Thanga Thangathurai [2002] NSWSC 39 Henley v Philips (1740) 2 Ath 48; 26 ER 426 CASES CITED : Lock v Lock [1966] SASR 246 Martin v The Great Northern Railway Corporation (1855) 16 CB 179; 139 ER 724 Perpetual Trustees (WA) Ltd v Equuscorp Pty Ltd [1999] 1 FCA 925 Sunstate Airlines (Queensland) Pty Ltd v First Chicago Australia Securities Ltd (Giles J, 26.3.97) Hyhonie Holdings Pty Limited (P1) PARTIES : Leila Marie Yazbek (P2) Paul Leroy as Trustee of the Bankrupt Estate of Robert Lewis Yazbek (D) FILE NUMBER(S) : SC 2663/03 COUNSEL : A J L Bannon SC and R J Powell (P) B A M Connell (D) SOLICITORS : Bowring Stone (P) Clinch Neville Long (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in EQ Thursday 12 June 2003 2663/03 – HYHONIE HOLDINGS PTY LTD v PAUL LEROY AS TRUSTEE OF THE BANKRUPT ESTATE OF ROBERT LEWIS YAZBEK JUDGMENT (Re admissibility of evidence – see p 7 of transcript) 1 HIS HONOUR: An objection has been taken to parts of the evidence of the solicitor Mr Snelgrove. It is unfortunate in one sense that I have to rule on the admissibility because the matter has come before the court fairly quickly and although counsel have tried their best, they have obviously not had time to consider all the possible submissions that could be made on the question of admissibility. 2 The central issue in the case is whether certain shares are held beneficially by Robert Lewis Yazbek, which have passed to the defendant as his trustee in bankruptcy, or whether those shares are beneficially held by an entity that can be loosely described as the Yazbek Family Trust. 3 There are six defences to the claim which the plaintiffs make that the shares are assets of the trust. These include defences that there was no intention to create a trust when one looks at all the surrounding circumstances, but if there was a declaration of trust it was never carried into effect, or, alternatively, that the transaction was abandoned, or disclaimed, or that it was a complete sham. For these purposes it is necessary to explore all the surrounding circumstances. 4 Some of the surrounding circumstances occurred during negotiations for settlement of a dispute between Robert Yazbek and his father, in which settlement negotiations the solicitor, Mr Snelgrove, took part. As I understand it, the evidence is said to do two things, (a) to convince me that at no stage during those settlement negotiations was anything said, other than that these assets were held by Robert Yazbek personally; and (b) the circumstances were such that a tribunal of fact would readily infer that a reasonable person under such circumstances would have made that disclosure had it been true. 5 Section 131 of the Evidence Act 1995 makes it clear that evidence is not to be adduced of a communication made between parties in a dispute, subject to the exceptions set out in subs 2; and s 134 makes it clear that evidence which is not to be adduced is not admissible. 6 Subsection 2 deals with a series of situations, including (b) that "the substance of the evidence has been disclosed with the expressed or implied consent of all the persons in dispute". 7 There were previous proceedings between some of these parties before Austin J earlier this year, proceedings 1128/03, and the judgment and certain of the evidence before his Honour was before me on the voir dire. 8 The question was in the area of oppressive conduct in a corporation, and whether a curative order should be made under s 1322 of the Corporations Act 2001. 9 In the course of those proceedings, some of the material now being put forward by Mr Snelgrove was put in an affidavit, which was read by what I might loosely call "his side" to Austin J. Counsel for the present plaintiffs, or their privies, objected to the admissibility of this evidence on the ground of relevance. His Honour admitted it, subject to relevance. It would appear that his Honour later considered that it was relevant because he referred to it in his judgment. 10 The question is if a person objects to evidence on the ground of relevance, but does not take any other objection, such as an action under s 131 of the Evidence Act, and the judge overrules the objection as to evidence, or alternatively provisionally admits the material under s 58 of the Evidence Act, can that be said to be evidence disclosed with the implied consent of the plaintiffs' privies? 11 There is no definition of "consent" in s 131 and, as far as I am aware, there has been no decision of a superior court, in the parts of Australia where this Act is in force, on the ambit of the term "consent". The term is, however, used in other parts of the Act, notably s 122 (1) and in decisions under that section the word appears to have the flavour of a deliberate informed waiver of the statutory rights; see eg Sunstate Airlines (Queensland) Pty Ltd v First Chicago Australia Securities Ltd, Giles CJ CommD, 26 March 1997; Causley v Savins Giles CJ CommD, 11 April 1997 and Perpetual Trustees (WA) Ltd v Equuscorp Pty Ltd [1999] 1 FCA 925, but cf Garratt's Ltd v Thanga Thangathurai [2002] NSWSC 39. 12 I have received the material before Austin J on the voir dire. It seems to me that what occurred before his Honour was not sufficient to show that there was consent. I realise that often a person who is silent is deemed to have consented, and it seems that the silence of counsel has often been held to consent to the course adopted by the presiding judge as "a man who does not speak when he ought, shall not be heard when he desires to speak" Martin v The Great Northern Railway Corporation (1855) 16 CB 179 (139 ER 724) and see my book on Consent pp 33-34. 13 However, in view of the flavour that the word "consent" has been given, it does not seem to me that it qualifies to bring this case within the exception of s 131(2)(b) or (c). I have also considered para (i), but again it does not seem to me that this case comes within it. 14 There was some learning under the previous law that despite the general prohibition, what one observed during the course of settlement negotiations of the physical behaviour of another person present was admissible; see Cross on Evidence, 5th edition para [25375] and Lock v Lock [1966] SASR 246. 15 This does not appear to be an exception that has been retained under the present law but, in any event, it would not cover the field of what is objected to. 16 It seems to me that there may be some ground for saying that the defendant might be able to commence separate equity proceedings for an order that it would be unconscionable for the plaintiffs to rely on s 131 of the Evidence Act. 17 It must be remembered that whilst traditionally the laws of evidence applied equally to actions at law and suits in equity (Henley v Philips (1740) 2 Ath 48; 26 ER 426), in cases of fraud and trusts (and rectification) special rules called by Maddock Treatise on the Principles and Practice of the High Court of Chancery 2nd ed, 1820, Vol 2 "Equity Evidence" were invoked. Maddock says at 436-7: "The Rules of Evidence at Law and in Equity, Lord Hardwicke observes, does not differ in general, but only in particular, cases, where Fraud is charged by a Bill, or in cases of Trusts, as to which Courts of Equity do not confine themselves within such strict Rules as they do at Law, but for the sake of Justice and Equity will enter into the merits of the case, in order to come at Fraud, or to know the true and real Intention of a Trust or Use declared under Deeds." 18 How far Equity Evidence has survived the Evidence Act 1995 is unclear. Probably the position is that the rules of Equity Evidence are enforced by making an in personam order against the opponent to prevent the opponent from objecting to the admissibility of the evidence. This is the way traditionally Equity lawyers were able to get to the real truth in matters concerning trusts and not be fobbed off by the old Common Law technical rules of proof. That, however, is not a matter before me in this suit, as that can only be done in a separate new suit. 19 It also seems to me that when a plaintiff is seeking an order that the defendant hold the property on trust for that person, if the plaintiff objects to all the circumstances of the transaction going into evidence, it may well be appropriate for the tribunal of fact to take that matter into account when assessing the evidentiary material before the tribunal. 20 Accordingly, in my view, I should reject the part of the affidavit of Mr Snelgrove referred to and associated pieces of evidence. 21 There was one other evidentiary problem. The first plaintiff's accountant, when asked questions in the witness box as to whether a certain event happened, said "No, it didn't. I forgot"". The defendant's counsel asked the words "I forgot" to be struck out as non-responsive. I think the matter is on the borderline, but, in my view, "I forgot" is giving evidence of an action or inaction of the witness and was sufficiently closely connected with the question for it to be on the borderline of responsiveness. 22 Accordingly, I admit that evidence. ******************** Last Modified: 06/18/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.