Supreme Court New South Wales Medium Neutral Citation: Peter Vitek & Anor v Estate Homes Pty Ltd & Ors [2013] NSWSC 1805 Hearing dates: 29 and 30 October 2013 Decision date: 30 October 2013 Jurisdiction: Equity Division Before: Rein J Decision: Admit the portions in paragraphs 29-100 of Mr O'Donnell's affidavit to which objection was taken Catchwords: EVIDENCE - whether evidence of a witness for the plaintiffs about what was said between himself and the first defendant in the presence of the third defendant is admissible against the third defendant given the fact that the plaintiffs did not intend to call the first defendant in their case Legislation Cited: Evidence Act 1995 (NSW) Cases Cited: Lustre Hosiery Limited v York (1935) 54 CLR 134, [1935] HCA A71 Texts Cited: Stephen Odgers' Uniform Evidence Law, 10th ed, (2012) Lawbook Co Category: Interlocutory applications Parties: Peter Vitek (first plaintiff) Shoshanna Vitek (second plaintiff) Veeda Taheri (third defendant) Representation: Counsel: Counsel: Mr Pritchard SC and Mr B. Zipser (first and second plaintiff) Mr Coles and Mr Sneddon (third defendant) Solicitors: Farrar Lawyers (first and second plaintiff) McLaughlin & Riordan (third defendant) File Number(s): 2005/258339 ex tempore Judgment 1REIN J: These proceedings involve a claim by the plaintiffs against the third defendant, Mrs Taheri, that she gave, along with her husband, a guarantee to the plaintiffs of obligations of Estate Homes Pty Ltd ("Estate Homes") under a contract for the sale of land entered into by Estate Homes with the plaintiffs. Estate Homes and Mr Taheri have long ago been held liable to the plaintiff and the plaintiffs seek to recover a judgment in the same amount against Mrs Taheri. Mrs Taheri denies that she signed the guarantee. The plaintiffs claim that Mrs Taheri did sign the guarantee or, alternatively, that Mr Taheri signed the guarantee exercising a power of attorney given by Mrs Taheri to her husband, or that she subsequently ratified the execution of the guarantee by Mr Taheri, or is estopped from denying that the guarantee was executed by her or with her authority. 2The plaintiffs in their case rely, inter alia, on the evidence of Mr Bernard O'Donnell who was, at the time of the contract of sale, acting for Estate Homes, Mr Taheri and, on one view of the evidence, Mrs Taheri as well, and who has deposed to conversations which he had with Mr and Mrs Taheri about the contract for sale. The question of whether Mr Taheri was empowered to execute the guarantee on behalf of Mrs Taheri, if she did not sign it herself, involves, or may involve, depending on the outcome of a separate legal issue, the question of what Mrs Taheri knew about the transaction and her involvement and interest in that transaction. Mrs Taheri's knowledge and involvement may also be relevant to the question of ratification and possibly also, too, the estoppel. 3Mr Sneddon, junior counsel for the third defendant, who has the conduct of argument in relation to objections to evidence, contends that the evidence of Mr O'Donnell about what was said between himself and Mr Taheri in the presence of Mrs Taheri is not admissible against Mrs Taheri, given the fact that the plaintiffs do not intend to call Mr Taheri in their case. 4Mr Sneddon relies on the hearsay sections of the Evidence Act and points to s 64(3) of the Evidence Act 1995 (NSW) which provides that the hearsay rule will not apply if the person who made the representation has been or is to be called to give evidence. Mr Sneddon submits that whatever Mr Taheri has said is hearsay and excluded by the Evidence Act since he will not be called as a witness. 5Alternatively, Mr Sneddon contends that if the evidence is not excluded on that basis, it ought to be excluded by virtue of s 135 of the Act or limited by s 136 of the Act, both of which sections use the words "evidence unfairly prejudicial to a party". 6Mr Pritchard, SC, who appears with Mr Zipser for the plaintiffs, contends that the evidence is admissible. He submitted that evidence of what was said by Mr Taheri in the presence of Mrs Taheri to her solicitor does not infringe the hearsay rule, and he submitted that it would be a most surprising matter for a party not to be able to rely on the evidence of a conversation between a witness and two defendants, where one of the of the defendants makes statements about his and the others defendants' knowledge, beliefs and intentions, and that other defendant says nothing. Mr Pritchard submitted that the statements made by Mr Taheri about his and his wife's knowledge and other matters in the presence of his wife which were not contradicted by her, amount to admissions by her. 7The objections in question concern paragraphs 29-99 of the affidavit of Mr O'Donnell. There were objections to other paragraphs, namely 10, 14, 15, 16, 18, 24 and paragraphs between 101 and 180 but those paragraphs, it was indicated, were read only as evidence of the fact that they were said and the focus of the dispute between the parties relates to paragraphs 29-99. I shall take the passage from Mr O'Donnell's affidavit, paragraph 29, as an example of the issue that is thrown up. Mr O'Donnell gives evidence of the following conversation ("BOD" stands for Mr O'Donnell and "ST" stands Siamac Taheri, that is Mr Taheri) : BOD: "We should go through the terms of the contract and I can briefly explain those terms and if you have any questions then we can discuss them. The front page of the contract appears to correctly refer to the right property and all of the other details appear to be in order. Is there anything there that you want explained?" ST: "No, we have looked at many contracts and bought and sold property often. We've seen contracts like this before." BOD: "You should look at the second page which identifies what documents are attached to the contract, for example, the section 149 certificate, the title search, the sewerage connection diagram and the mains diagram. Have you looked at those?" ST: "Yes, I have done a lot of research on the property and I know that the property was once a petrol station. We don't care much about what is there now, we're intending to demolish it to construct new units." BOD: "It's still important to look at the 149 certificate because it tells you what uses are permitted and gives other information about the property." ST: "Alright Bernie, we can go through it if you like." 8The statements by Mr Taheri: (1)"we have looked at many contracts and bought and sold properties often"; (2)"we have seen contracts like this before"; and (3)"No, (we don't want anything explained)" are expressed to include Mrs Taheri. 9It is true that Mr Taheri's statement taken alone is not admissible against Mrs Taheri to prove Mrs Taheri's knowledge, but the context is that the statements, were made in Mrs Taheri's presence and were not corrected by her. If Mrs Taheri had said what Mr Taheri had said, it would be admissible against her and an admission. The question is whether the combined effect of Mr Taheri saying "we know X", and it being said in Mrs Taheri's presence amounts to an admission by her that what was said by her husband was true. Counsel were not able to refer to any authority relating to the question of the application of the hearsay rule in this context, but it is clear from the legislation that to the extent that the statements are admissions, they are not caught by sections dealing with hearsay because of the terms of s 81(2). Mention was made of s 82 but was not relied on by either party in relation to the matter. 10Mr Sneddon did refer to s 83 and pointed out that evidence of admissions by one party cannot be used in respect of the case of the third party. That is not this case. The plaintiffs are not seeking to use the admissions of Mrs Taheri in a case against Mr Taheri. 11In Stephen Odgers' Uniform Evidence Law, 10th ed, (2012) Lawbook Co there is a passage cited from the High Court's decision in Lustre Hosiery Limited v York (1935) 54 CLR 134, [1935] HCA A71, in the following terms, at page 400 of the text: a person who fails to contradict a statement concerning matters within his own knowledge may be understood as acquiescing in the statement if the circumstances are such that as to make it unlikely that he would allow an erroneous statement passed unchallenged. These words seem apt to deal with the present problem. Mrs Taheri did not correct the statements made as to her knowledge and the lack of need for explanation of the contract (which included the guarantee) and it would be unlikely that she would allow an erroneous statement made by Mr Taheri to the solicitor acting on the purchase to pass unchallenged. Hence, in my view Mrs Taheri can be understood to acquiesce in the statements made by her husband. 12It follows, in my view, that statements made by Mr Taheri in her presence are admissible as admissions against Mrs Taheri which by the terms of s 81(2) of the Act are not the subject of the hearsay rule. 13I would add that there are additional words appearing in the judgment in Lustre Hosiery to which regard needs to be had and which follow shortly after the passage to which I have just referred: When admitted in evidence, however, its probative force must be determined by reference to the circumstances in which it is made and may depend altogether upon the party's source of knowledge. If it appears that he had no knowledge, or that, although he had some means of knowledge, he had formed no certain or considered belief and indicated nothing amounting to a personal judgment or conclusion of his own, the probative force of the admission may be so small that a jury ought not to be allowed to act upon it alone, or in preference to opposing evidence. 14To the extent it might be suggested Mrs Taheri did not need to say anything because she was not the client and that the context did not call for her to say anything, I should note it had originally been intended, according to the documentary evidence that she and her husband would be the purchasers and she herself asserted in a cross-claim against Mr O'Donnell that he owed her a duty of care in advising her about the contract, including the guarantee (see paragraph 27 of the cross-claim, sub paragraphs (a) to (f) and particularly (b) and special condition 51, which is referred to in subclause is the clause containing the guarantee. 15Mr Sneddon also, as I indicated, contended that evidence should be excluded under s 135 or limited on the basis of s 136 as "unfairly prejudicial" to Mrs Taheri. I am unable to accept that by the admission of the evidence there is any unfair prejudice to Mrs Taheri, particularly having regard to the fact that Mrs Taheri was free to put on an affidavit setting out her involvement with the development and she has not done so. If she wanted to assert Mr Taheri did not say the words attributed to him by Mr O'Donnell in her presence or that if he did say those words, that what he said was untrue, it was open for her to do so. 16I admit the portions in paragraphs 29-100 of Mr O'Donnell's affidavit to which objection was taken. ********** 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. Decision last updated: 05 December 2013