New South Wales Supreme Court CITATION : KEANE v CARAVAN CITY COWRA PTY LTD & ANOR [2006] NSWSC 942 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 29/05/06 - 09/06/06; 14/08/06/17/08/06; 21/08/06 - 25/08/06; 11/09/06- 13/09/06 JUDGMENT DATE : 14 September 2006 JURISDICTION : Common Law JUDGMENT OF : Rothman J at 1 DECISION : a the First Representation is admitted but its use is confined to the proof of the state of mind and/or intention of the defendants; b the Second Representation is admitted to prove only the state of the contract documents prepared and/or received by Mr Casey or in his office; c the Third Representation is admitted except for the words "for his future residence"; d the document, subject to those conditions, is admitted. CATCHWORDS : Common Law - civil - evidence - section 69 - business records - representation about state of mind of another party - personal knowledge - whether document prepared or obtained in contemplation of proceedings LEGISLATION CITED : Evidence Act 1995 (NSW) R v Dudko (2002) 132A Crim R 371 Waterwell Shipping Inc v HIH Causualty & GIO Limited (Unreported, NSWSC, Giles CJ Comm D, 8/9/97) Feltafield Pty Ltd v Heidelbergh Graphic (1995) 56 FCR 281 CASES CITED : ACCC v AMI [2005] FCA 1357 Creighton v Barnes (Unreported, NSWSC, Cohen J, 18/9/06 Lewis v Nortex Pty Ltd [2002] NSWSC 1083 Vitali v Stachnick [2001] NSWSC 303 A - Patrick Joseph KEANE PARTIES : R1 - Caravan City Cowra Pty Ltd R2 - Ronald Horsfall FILE NUMBER(S) : SC 20171/2001 COUNSEL : A - Mr David Campbell SC with Mr Dominic Toomey & Mr Tom Jones R1&2 - Mr Stephen Campbell SC with Mr Allen Parker - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ROTHMAN J 14 September 2006 PATRICK JOSEPH KEANE v CARAVAN CITY COWRA PTY LTD & ANOR 20171/2001 JUDGMENT 1 His Honour: This is one in a series of interlocutory judgments in this matter concerning the admissibility of evidence. The ruling on this evidence has already been given. This judgment records the reason for that ruling and the extent to which representations in a document, now Exhibit 36, and originally MFI 10, are admissible and the limitations on their use . 2 The controversy generally before the Court is a claim for damages arising from the personal injury to the plaintiff. That injury is said to arise from the defendants' negligence, in circumstances where the defendants owed a duty of care to the plaintiff. The duty of care is said to arise because the defendants owned and operated the business of the caravan park at Cowra. 3 The defendants, for their part, deny liability on a number of bases, one of which is that ownership of the business, and its operation, had passed to the plaintiff or his and his wife's company. The defendants also argue that the work being performed when the accident occurred was a frolic of the plaintiff, not part of, or performed for the purpose of, the business, even if owned and operated by the defendants. There are other matters raised in defence, including contributory negligence, but the above two matters are sufficient to enable an understanding of the evidentiary issue raised presently. 4 Because the passing of ownership of the business is a crucial issue, the Court has previously allowed evidence of the terms of any conversation between the plaintiff, his wife and the personal defendants which goes to their relationship, or the formation of any contract. I have also allowed evidence, subject to argument as to how it may be used, on the intention of the parties to form such a contract and, therefore, their understanding of the relationship, and/or the formation of a concluded agreement. 5 Shortly after the accident in question occurred, the defendants spoke with a solicitor who contacted the defendants' insurance broker. The defendants, their solicitor and the insurance broker inspected the premises and the insurance broker interviewed the defendants and a Mr Slattery, and perhaps others. 6 A report prepared by the insurance broker Mr Anthony Petersen, not before 22 March 1999 (i.e. after the accident) is sought to be tendered, as a business record, by Mr S Campbell SC, who appears for the defendants. It is conceded that the document forms part of the business records of Aradlay Insurance Brokers Pty Ltd, it having been produced in answer to a subpoena. It was originally marked MFI 10 and later admitted as Exhibit 36. 7 The issues turn on the proper construction and use of s.69 of the Evidence Act 1995 (NSW) ("the Act"). As earlier recorded, it is conceded that the document sought to be tendered is a business record that contains previous representations at least recorded for the purpose of the insurance business. Therefore, it is a document which s.69(1) describes and to which s.69 applies. 8 It is the representations in the document, rather than the document itself, on which the section focuses and such representations must be identified with precision: R v Dudko (2002) 132 A Crim R 371. Mr D Campbell SC, who appears for the plaintiff, identifies 24 representations in the document, and most of these are uncontentious. Three of them are said to be particularly problematic. The plaintiffs also object to the whole of the document. 9 There is no doubt that, but for the provisions of s.69(2), the representations contained in the document would be treated as hearsay and would be inadmissible pursuant to s.59 of the Act. The representations are within different general categories. 10 The document contains three particular statements: a "At 12.20 pm I met with the above mentioned people to inspect the site and discuss the incident with all concerned. It seemed that Mr Horsfall knew little or nothing about the incident and that he was learning about the matter at the same time I was. When I asked Mr Horsfall why this was the case, he told me that he had sold the business of Caravan City Cowra to the Third Party and had not been operating the business since 12 March 1999. He also indicated that he intended to keep the land and lease it to the Third Party on 20 year lease." ("the First Representation"); b "Mr Casey then advised me that negotiations had been going on for some time about the sale and that both parties had come to an agreement on the details of sale. He then told me that his client (Horsfalls) and the Third Party had grown tired of the delays caused by both solicitors and had decided to broker a deal between themselves until settlement could take place (expected to be late in March 1999)." ("the Second Representation"); c "I am of the opinion that Mr Slattery is a permanent resident of the park and was helping Mr Keane clear away a site for his future residence." ("the Third Representation"). 11 The penultimate sentence of the first of the paragraphs cited above is subject to objection on three bases: firstly, it is said that s.69(3) of the Act applies; secondly, it is said to be a subjective opinion as to the existence of a contract of sale; thirdly, it is a representation, it is said, of the state of mind and/or intention of the plaintiff. 12 The Second Representation which I have recited is said to be a representation of the state of mind of others. The Third Representation recited, it is said, is a representation by Mr Slattery of the state of mind of the plaintiff, and/or his wife, and therefore inadmissible. 13 The admissibility of the document, insofar as it contains certain representations, must be determined pursuant to the Act. The Act renders all relevant evidence admissible: s.56 of the Act. Relevance is defined as that which could rationally affect (directly or indirectly) the likelihood of the existence of a fact in issue: s.55 of the Act. There are then a number of exceptions, one of which is hearsay: s.59 of the Act. To the hearsay exceptions, there are certain exclusions, including relevantly, business records: s.69 of the Act. Once a document fits the description in s.69(1) of the Act, it is a document to which s.69 applies and, as such, one capable of being excluded from the operation of s.59 of the Act the effect of which, despite the relevance of the representation, would preclude it from being admitted into evidence. The First Representation 14 For the document (insofar as it contains representations) to be excluded from the rule governing hearsay, it must satisfy s.69(2) of the Act. In order so to do, the document must not be one which is described in s.69(3) of the Act. In other words, for a party to tender successfully a business record for the purpose of proving a fact the subject of a representation therein, the party must satisfy the Court that it is a document to which s.69(2) of the Act applies. The party must demonstrate that the document is a business record: s.69(1); and must demonstrate that it was not prepared or obtained for the purpose of conducting or for, or in contemplation of, or in connection with proceedings: s.69(3) of the Act. (Irrelevantly, for current purposes, it must also not be prepared in connection with an investigation relating or leading to a criminal proceedings). It is only then that s.69(2) can apply and be relied upon by the party seeking to adduce the document into evidence. 15 It has been said that proceedings must be likely or reasonably probable in order for s.69(3) to apply and that a mere possibility of proceedings is insufficient: Waterwell Shipping Inc v HIH Casualty & GIO Limited (Unreported, NSWSC, Giles CJ Comm D, 08.09.97); see also Feltafield Pty Ltd v Heidelbergh Graphic (1995) 56 FCR 481; ACCC v AMI [2005] FCA 1357. The provisions of s.69(3) were inserted to deal with the mischief that, otherwise, self-serving statements could be made, or that mere rumour would be admissible to prove the truth of the rumour: Creighton v Barnes (unreported, NSWSC, Cohen J, 18.09.95); Lewis v Nortex Pty Ltd [2002] NSWSC 1083; Vitali v Stachnick [2001] NSWSC 303. Taking a purposive approach to the provisions of s.69(3) of the Act, it is appropriate that the "likelihood" or "reasonable probability" of the proceedings need be only to the extent that there would be a real risk of the mischief, to which s.69(3) is directed, arising. 16 In this case, the defendants had already conferred with their solicitor, had visited the hospital and were aware of the serious nature of the plaintiff's injuries, and had conferred with their insurance broker about coverage for a personal injury claim if one arose. Given those circumstances, there is a real risk that a person or persons in the situation in which the defendants found themselves would be minded to make self-serving statements as to their legal position and/or their intention and, therefore, the statement was prepared by the defendants in contemplation of proceedings. I hasten to add that I do not say, as a matter of fact, the representations made are untrue. The contemplation or likelihood is subjective (see Feltafield, supra; ACCC v AMI, supra), so all that is required for proceedings to be in contemplation is that the representor has such proceedings sufficiently in mind when the representation is made that there is a real risk of self-serving statements. In this case, the sole purpose of contacting the insurance broker and the preparation for him and obtaining by him of the representation was to defend proceedings for personal injury damages and, therefore, the representation must have been prepared or obtained in contemplation of those proceedings. 17 Nevertheless, I will deal with the issue on other bases as well. 18 To the extent that this representation adduces material on the subjective intention of the defendant as to the existence of a contract for sale and/or the relationship of the defendants and plaintiff, I will allow the evidence on the same basis as other evidence of that kind has been admitted. It is admitted, subject to submissions on what, if any, use can be made of it and, in any event, only to the extent that it goes to the defendants' intention to enter into a contract and their understanding of their relationship. 19 I will deal with the third basis of the objection to this passage at the same time as I deal with the Third Representation. 20 Because the representation in the document from the personal defendants as to their own belief and/or subjective intention is a representation by persons who have been, or are to be, called to give evidence on these issues, it is admissible under s.64(3) of the Act. The Second Representation 21 This is a representation of Mr Casey, the defendants' then solicitor, as to the state of negotiations for, or completion of, the contract. To the extent that it goes only to the documents prepared by Mr Casey, or his office, I would allow the representation. To the extent that it goes beyond that, it is in the same category as the representation that I deal with next. Personal Knowledge: The Third Representation 22 The Third Representation, together with any remaining issue in the first and second representations, depends upon the proper construction of s.69(2) of the Act. 23 In each case the representation repeats a representation made by another person. This is not personal knowledge. It is not material that would be admissible even if given in the witness box. Mr S Campbell SC submits that the only basis upon which such a representation could have been made was if the person making it was told by the plaintiff or his wife of his or her state of mind. That is not a basis upon which the representation can be admitted. There are two reasons for that: firstly, it is not, under first principles, a matter within the personal knowledge of the maker; and secondly, it is inconsistent with the Act. 24 If a person observes (sees, hears, or perceives) something, such an observation may, subject to other rules, be the subject of a representation in a relevant document. The conclusion, or opinion, as to the state of mind of another is not something seen, heard or perceived. If a maker of a representation observes acts which lead the maker to a conclusion as to the state of mind of the actor, it is the acts which are within the representor's personal knowledge; not the conclusion as to state of mind that derives from the acts. Likewise, if a statement is made by a person (the "maker") and is heard by another person (the "representor"), the representor may represent in a business document the statement he/she has heard. That statement, and its terms, are within the personal knowledge of the representor because he heard them. The state of mind of the maker may be evidenced by the statement but the state of mind itself is not within the personal knowledge of the representor. 25 Second, this above approach on first principles is confirmed by the terms of s.62(2) of the Act, which excludes from personal knowledge a previous representation of another. If, as is submitted by Mr S Campbell SC, the representor, in each case, has "personal knowledge" of the state of mind of the plaintiff, and/or his wife, because each representor was told that by the plaintiff and/or his wife, then the terms of s.62(2) of the Act preclude that previous representation from the relevant personal knowledge of the representor in the document. "Personal knowledge" under s.62(2) as is the case from first principles outlined above, excludes the representation of a conclusion derived from earlier representations of others as proof of the truth of those earlier representations. Such "truth" is not within the personal knowledge of the maker of the representation contained in the document. 26 I do not deal with, and have not dealt with, the effect of s.62(2) on a representation of another where that representation is an admission, because the terms of any representation made by the plaintiff (and, although less arguably, his wife), which gave rise to the view seemingly expressed to Mr Petersen by one or more of Mr or Mrs Horsfall or Mr Slattery, are not the subject of any representations in the document. In other circumstances it may be that the statement (the admission) is admissible because its making is relevant and proof of its terms is a matter relevant within s.55 and s.56 of the Act. 27 As a matter of abundant caution and lest I be wrong on any of the above, I make it clear that I would exercise my residual discretion under s.135 of the Act to exclude that which I have otherwise determined I would not admit. 28 I do so because each such representation is of another's state of mind in circumstances where: a the basis of the opinion is not disclosed; b it is incapable of being tested; c the substance of the assertion (or its basis) is, subject to admissibility, capable of being adduced directly from the person who made the representation and, in that respect, capable of being tested in cross-examination; d the representation, in the circumstance, has little, if any, probative value independent of the direct evidence from the representor; and e to admit the representations as independent evidence of the state of mind of the plaintiff would be unfairly prejudicial to the plaintiff. That unfair prejudice would substantially outweigh the probative value of the representation in the document. Conclusion 29 For the above reasons I determine as follows: a the First Representation is admitted but its use is confined to the proof of the state of mind and/or intention of the defendants; b the Second Representation is admitted to prove only the state of the contract documents prepared and/or received by Mr Casey or in his office; c the Third Representation is admitted except for the words "for his future residence"; d the document, subject to those conditions, is admitted. In relation to evidence of state of mind and/or intention, its use is subject to submissions on what use, if any, may be made of the evidence. ********** 19/09/2006 - Incorrect spelling of surnames - Paragraph(s) coversheet DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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