FEATURE ARTICLE -
Advocacy, Issue 93: Sep 2023
In Gan v Xie [2023] NSWCA 163 (17 July 2023), the NSW Court of Appeal addressed the admissibility of tendency evidence, in particular as to its form, in a statutory misleading or deceptive conduct claim. To prove the claim, the plaintiff sought to adduce evidence from other investors who deposed that the defendant had made similar misrepresentations in an endeavour to attract their investment. The trial judge found that the inability of the witnesses to recall the words spoken to them by the defendant – as opposed to the effect of what was said – undermined the reliability and probative value of their evidence.
Allowing the appeal, and remitting the matter to the Trial Division, the NSW Court of Appeal wrote (per White JA, Simpson and Basten AJJA) wrote:
[103] There are strong similarities between Ms Gan’s evidence as to what Ms Xie said to her in August 2016, and what Ms Di Si and Ms Wills said Ms Xie said to them in November and December 2017. In particular, all deponents said that Ms Xie represented that:
- there would be no risk;
- they would double their money;
- they would get their principal back within one year (and would double their principal within a year (or get it back sooner) if they invested more);
- the value of GRC always increased and never decreased; and
- if you invest more money you get your principal back sooner.
(see [55], [100], [101].)
[104] Not all of the above were in the same terms as the pleaded representations (see [3]). But they provided the context in which the pleaded representations were said to have been made and, if accepted, supported the likelihood that the pleaded representations referred to at [3(a), (c) and (d)] were made.
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[113] The significance of the temporal connection between tendency evidence sought to be relied upon and the conduct in issue will depend upon the subject matter of that conduct and the tendency evidence. If the conduct in issue is alleged sexual abuse, tendency evidence of abuse at later times than the charged offence may be of less probative value than evidence of earlier abuse, but this is not necessarily so (R v Dann [2000] NSWCCA 185 at [36] ; RH v R [2014] NSWCCA 71 at [89] –[129]; (2014) 241 A Crim R 1 ). If the conduct in issue is the making of representations about the takings or profitability of a business, which change over time, a close temporal connection between the conduct in issue and the tendency evidence may be required for the tendency evidence to be of significant probative value. But there is no suggestion in this case that the features of MFC changed between 2016 and 2017.
[114] There is a striking similarity between the evidence of Ms Di Si and Ms Wills as to some of the representations made by Ms Xie to them and the evidence of Ms Gan as to the representations made by Ms Xie to her.
[115] Their evidence that they were told that the price of GRC will only increase and not decrease and the amount of GRC that they would hold would be based on a multiplier set by the company, usually 1.5 to 2, is consistent with Ms Xie’s notes of the GRC characteristics extracted at par [59]. They deposed that Ms Xie said “This means you will be able to double your principal within a year”. The primary judge made no reference to the notes in assessing the reliability of their evidence.
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[118] The primary judge erred in rejecting the evidence of Ms Wills and Ms Di Si on the ground that they had no separate and specific recollection of particular words said by Ms Xie in any specific conversation such that their evidence was unreliable and had no probative value.
[119] The fact that precise words used, and the specific occasion on which words were used, are not recalled, does not mean that a person’s memory of the substance or “gist” of what was said must be rejected. I agree with the following observations of Jackman J in Kane’s Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381 at [121] –[129]:
[121] Mr Kane’s frankness on the issue exposes the flaws in what has continued to be the usual practice in New South Wales. It is impossible to ascertain from his evidence which words (if any) have been recalled by him as the exact words used in conversations some years ago, and which elements are the product of reconstruction. The appearance of a vivid memory of the conversation which is conveyed by the use of direct speech bears no resemblance to the state of Mr Kane’s actual memory.
[122] The respondents, by contrast, have not used direct speech in their evidence of conversations. Their evidence is clearly evidence of memories of the substance or gist of conversations. There is no use of quotation marks, which ordinarily in English grammar are used to indicate the actual words spoken. It may well be that the fact that the respondents’ lawyers are based in Victoria, with a different tradition in this regard, is one of the reasons why the respondents’ evidence took the form that it did.
[123] There is ample authority for the proposition that there is no rule of the law of evidence in Australia that evidence of conversations must be given in direct speech: Commonwealth v Riley (1984) 5 FCR 8 at 34 (Smithers, Sheppard and Wilcox JJ); R v Wright (1985) 19 A Crim R 17 at 19 (Mathews, McPherson and Vasta JJ); R v Noble [2000] QCA 523; [2002] 1 QdR 432 at [20] (Pincus JA, with whom McMurdo P and Mackenzie J agreed); LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2001] NSWSC 688; (2001) 53 NSWLR 31 at [8] (Barrett J); Hamilton‐Smith v George [2006] FCA 1551; (2006) 247 FCR 238 at [79] –[83] (Besanko J). Even as long ago as 1984, the Full Court said in Commonwealth v Riley at 34 that the practice of adducing evidence of conversations in direct speech was probably disregarded as often as it was followed. Evidence should be given in direct speech only if the witness can remember the actual words used: Noble at [20]; LMI Australasia at [8]; Hamilton‐Smith at [83].
[124] The following passage from the judgment of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318 –319 , a case dealing with alleged misleading conduct arising from oral statements (which the plaintiff endeavoured unsuccessfully to prove in direct speech) pursuant to the former s 52 of the Trade Practices Act 1974 (Cth), has often been cited with approval:
Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether the spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self‐interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
[125] The passage is characteristically pithy and insightful. I would respectfully add the following observations relevant to the present issue. Whether the evidence of spoken words is sufficiently precise to enable the court to be reasonably satisfied that the words spoken were in fact misleading is plainly a question of degree, not a demand for unattainable perfection. In some cases, that may depend upon the use of a specific word or phrase, but in many cases the court can be reasonably satisfied of the misleading nature of an oral statement from evidence of the substance of what was said. The statement towards the end of the quoted passage, as to what is actually remembered being little more than an impression from which plausible details are then constructed, is particularly pertinent to the present issue, although many would find his Honour’s reference to that often occurring “subconsciously” to be overly charitable.
[126] The primary duty of a witness is one of honesty. The oath or affirmation binds the witness to tell the truth, the whole truth and nothing but the truth. Witnesses should not be compelled or encouraged into uttering untruths on oath by giving a form of words in direct speech with which they are not happy and which they cannot actually recollect in preference to their own words in indirect speech: J.D. Heydon, Cross on Evidence (11th ed, 2017) at [17145], cited with apparent approval by Besanko J in Hamilton‐Smith at [81]; and see to the same effect Noble at [4] and [19].
[127] The practice of witnesses and lawyers working up a version of a conversation in direct speech (whether or not prefaced by the phrase “in words to the following effect”) from the witness’s actual memory merely of the substance or gist of what was said is logically, ethically and grammatically wrong. It is logically wrong because it reverses the logical process of deriving the meaning or substance of what was said from the actual words which were spoken; one cannot derive (as distinct from guess at) the actual words spoken simply from their gist. It is ethically wrong because the evidence given as a result of that process conceals the true nature and quality of the witness’s memory, and conveys a false impression of that memory. It is grammatically wrong because the use of quotation marks indicates as a matter of conventional usage that the relevant expression is a quotation of the exact words which were spoken. It could not be said that this practice is allied to an iron sense of principle.
[128] The form in which evidence of conversations is given should reflect the difference between verbatim memory and gist memory. While in general terms gist memory tends to be more stable and durable over time than verbatim memory, possibly because it has engaged with higher reasoning processes which interpret and give meaning to what has been heard superficially, it will often be the case that certain words or phrases can actually be remembered verbatim. It would appear that verbatim memory and gist memory of conversations are not merely different in degree, but are also different in kind: see C J Brainerd and V F Reyna, “Fuzzy‐Trace Theory and False Memory”, (2002) 11(5) Current Directions in Psychological Science, pp 164–169.
[129] Applying that reasoning, the following general principles apply to the form of evidence of conversations:
(1) The form of the evidence should correspond to the nature of the actual memory the witness has of the conversation: Wright at 19; Noble at [4] and [20]; LMI Australasia at [8]; Hamilton‐Smith at [83]. There is no reason in the abstract to think that evidence in direct speech is more reliable or credible than evidence in indirect speech, or vice versa.
(2) If the witness remembers only the gist or substance of what was said, and not the precise words, then the evidence should be given in indirect speech (also known as reported speech), in terms which reflect the witness’s actual memory: Wright at 19; Noble at [4], [20]; LMI Australasia at [8]; Hamilton‐Smith at [83].
(3) If the witness claims to remember particular words or phrases being used, then those words or phrases should be put in quotation marks to indicate that they are verbatim quotations, even if the evidence is otherwise given in indirect speech: see Wright at 19; LMI Australasia at [10].
(4) If the witness genuinely claims to recall the actual words used in a conversation, then the evidence should be given in direct speech; that is, quoting the words as actually spoken: LMI Australasia at [8]; Hamilton‐Smith at [83]. Apart from rare cases of photographic memory, this may well be the case where the witness has made a detailed contemporaneous note of the conversation, and has refreshed his or her memory from the note (in which case this should be expressly stated along with the tender of the note).
(5) Evidence given in direct speech should not be prefaced by the phrase that the conversation occurred “in words to the following effect”. That expression blurs the important distinction between verbatim memory and gist memory, and leaves the Court unable to ascertain which kind of recollection is being claimed by the witness. This is a different point from the one considered by Bromwich J in Director of Public Prosecutions (Cth) v Country Care Group Pty Ltd (Ruling No 1) [2020] FCA 1670 at [11] , where the only argument against admissibility was the erroneous contention that evidence of conversations can only be given in direct speech of what was actually said.
(6) Evidence of a witness who claims to remember the exact words of a conversation, but who is found after cross‐examination to have exaggerated the nature and quality of his or her memory, may well suffer an adverse effect on his or her credibility (the weight of which will depend on all the circumstances). However, the inability to cross‐examine in that manner a witness who gives evidence in indirect speech is not unfairly prejudicial within the meaning of s 135 of the Evidence Act 1995 (Cth): LMI Australasia at [9].
[120] Any objection that evidence in indirect speech of the substance or gist of what was said is inadmissible as opinion evidence, being the witness’ inference drawn from observed and communicable data, is met by s 78 of the Evidence Act (Connex Group Australia Pty Ltd v Butt [2004] NSWSC 379 at [12] –[27]; Lithgow City Council v Jackson (2011) 244 CLR 352; [2011] HCA 36 at fn 40; Australian Competition and Consumer Commission v Yazaki Corp (No 2) [2015] FCA 1304 at [54] –[63] ; (2015) 332 ALR 396 ; Australian Competition and Consumer Commission v BlueScope Steel Ltd (No 3) [2021] FCA 1147 at [66] –[68] ; (2021) 157 ACSR 77 ).
[121] The primary judge reasoned that, because the witnesses only professed a recollection of the gist of what they were told and could not say when and in which particular conversation or conversations the statements were made or where the conversations took place, their evidence was unreliable. It has been recognised for at least 90 years that memory is not a literal reproduction of the past (Schacter et al, ‘The Cognitive Neuroscience of Constructive Memory’ (1998) 49 Annual Review of Psychology 289 at 290). Because memory is constructive it is prone to errors. It is not merely on that account to be rejected.
[122] As Jackman J observed at [125] of Kane’s Hire Pty Ltd v Anderson Aviation Australia Pty Ltd , the observations of McLelland CJ in Eq in Watson v Foxman are not a demand for unattainable perfection. The primary judge did not engage with the question of whether Ms Gan, Ms Di Si, and Ms Wills should be accepted as having accurately recounted the gist, rather than the actual words, of Ms Xie. Her Honour did not consider whether Ms Xie’s notes, that she said were notes of discussions with Ms Gan on 28 August 2016, corroborated material parts of the conversation which Ms Gan deposed took place on 29 August. Her Honour considered that, because Ms Gan had no recollection of anything said on 28 August 2016, she did not rely on anything said on that day, without considering whether Ms Gan may have been mistaken as to date and place, but not as to the substance of what was said. This affects her Honour’s finding that Ms Gan did not rely on anything said by Ms Xie because Ms Gan transferred money from one of her accounts to another on 29 August 2016 and her Honour found that the meeting at which Ms Gan said that representations were made to her to invest did not take place until 31 August 2016. But her Honour failed to consider the significance of the fact that Ms Gan’s investment was made on 31 August and was made through Ms Xie.
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(emphasis added)
