Cada Formwork Pty Ltd (in liq) v De Almeida
[2016] QDC 250
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Cada Formwork Pty Ltd (in liq) v De Almeida[2016] QDC 250
Cada Formwork Pty Ltd (in liq) v De Almeida[2016] QDC 250
[2016] QDC 250
DISTRICT COURT OF QUEENSLAND
CIVIL JURISDICTION
JUDGE DORNEY QC
No 4932 of 2015
CADA FORMWORK PTY LTD Plaintiff
(IN LIQUIDATION) and OTHERS
and
CARLOS MANUEL PEREIRA DE ALMEIDADefendant
BRISBANE
11.00 AM, THURSDAY, 29 SEPTEMBER 2016
JUDGMENT
HIS HONOUR: In this proceeding the defendant has not appeared at trial. I caused the defendant’s name to be called three times outside the Court and no appearance ensued. The Court was satisfied the defendant was notified and served with evidence, as I have already ordered. The trial of this proceeding will then proceed according to the Uniform Civil Procedure Rules 1999, and in particular, r 476.
Applying r 476(1), I directed that the affidavits, which were the subject of an order that I made several months ago before this trial, be taken to be the evidence. The orders I made were on the 26th of August 2016 and referred to, in particular, both the plaintiffs’ and the defendant’s evidence-in-chief be given by way of an affidavit. It is primarily to those affidavits filed that reference has been made by counsel for the plaintiffs in this particular case.
The action is brought by the plaintiffs pursuant to the Corporations Act 2001 (Commonwealth). That Act permits the plaintiffs to rely upon provisions of that Act to seek to recover loans that the company made, and in particular, made to its director, the defendant (Carlos Manuel Pereira de Almeida). Section 477(2)(a) of the Corporations Act 2001, which as noted is a Commonwealth Act, specifically empowers liquidators to bring or defend any legal proceeding into the name of and on behalf of the company. It will be observed, of course, that not only has the company in liquidation been made a party to the proceeding but also the liquidators themselves. Whatever concerns that might be had about both parties being parties to this proceeding, it seems to be a common way of proceeding. An example of that is shown in the case referred to in the submissions of the plaintiffs of Lindholm as joint and several liquidators of ACN 103 220 776 Proprietary Limited (in liquidation) v Swindells [2016] VSC 275.
The plaintiffs, in seeking to prove their case, have relied upon two separate provisions – two separate sets of provisions. One is pursuant to the Commonwealth Corporations Act (that I’ve just mentioned), and the other is pursuant to Queensland legislation, being the Evidence Act 1977. I’ll come to the latter in a moment.
The concern I had with the effect, in particular, of ss 1305 and 1306 of the Corporations Act was whether, given the absence of original documents, it was appropriate to proceed on the basis of those provisions. A supplementary concern was that, as a result of the Full Court of the Federal Court decision of Whitton (as trustee of the estate of John Emmanuel Rose) v Regis Towers Real Estate Proprietary Limited (in administration) [2007] FCAFC 125, that appellate authority in the Federal sphere had indicated some limitation as to the use of that provision. In particular, it referred to the effect that those provisions would not elevate the entry of records to “evidence of transactions or a series of transactions”. That’s referred to in paragraph [59] of that decision.
There would appear to be at least some massaging of that particular view in a more recent decision of the Full Court of the Federal Court in McAdam v Chylos Proprietary Limited [2015] FCAFC 161, where, particularly at paragraph [48], the Court was of the view that it was appropriate in that case, despite the decision that I’ve just mentioned of Whitton, that the Court could use the particular entries in the 2000 accounts (as they have referred to in that case), which contained a director signed declaration, as evidence at least of the existence – in a prima facie way – of the particular loan recorded.
Because of those concerns I have, and because I am of the view that the Queensland provisions are both wider and cover the circumstances in question, I won’t delay further in any further consideration of the Commonwealth provisions.
It’s consequently necessary to turn to the Queensland provisions. They are contained in Division 6 of Part 5 of the Evidence Act. In particular, s 84 allows, in all proceedings, an entry in a book of account to be evidence of the matters, transactions (and I stress that word) and accounts therein recorded. And it further refers to the fact that a copy of an entry in a book of account shall be evidence of the entry of the matters – again, I stress the word transactions – and accounts therein recorded.
Section 83 contains the relevant definition of “book of account”. And I’m satisfied that the documents which have been relied upon in the various affidavits relied upon on behalf of the plaintiffs in this case and so relied upon in this proceeding are sufficient to satisfy the fact that they are books of account.
It’s necessary of course to also turn to ss 85 and 86 of the State Act. Section 85 refers to copies of entries, or original entries, not being admissible unless it is first proved that the book was, at the time of making of the entry, an ordinary book of account of the undertaking to which it is purported to relate and that the entry was made in the usual ordinary course of the undertaking.
Section 85(2) states that such proof may be given by a “responsible person” familiar with the books of account of the undertaking and may be given orally or by affidavit sworn or by declaration made before commissioner or a person authorised to take affidavits and statutory declarations. I shall move in a moment to the particular facts of the case which to my mind satisfy those particular provisions.
Section 86 then goes on to state that a copy of an entry in a book of account shall not be admissible in evidence under this Division unless there’s further proof the copy has been examined with the original entry and it’s correct. And s 86(2) states that such proof may be given by some person who has examined the copy of the original entry and it may be given orally or by affidavit, again referring to the particular matters in question.
In a general sense I accept, subject to those specifics that I will turn to in a moment, that what has been proved in this case are relevant copies of entries in books of account and therefore are evidence not only of the matters in those accounts but of the transactions so recorded.
Counsel for the plaintiffs have given me a very comprehensive written outline. I shall refer to parts of that in giving this particular decision. As those submissions note, the key issue for determination today is whether the loan moneys paid by the first plaintiff to the defendant were loans (which of course is the allegation of the plaintiffs) or remuneration (as alleged by the defendant in paragraph 2(d) of his defence). It’s appropriate, in considering matters under r 476, that pleadings be brought into account in that consideration. And the plaintiffs have rightly conceded that that is a matter that I must consider. Again, as the submissions note, it is not part of the defendant’s defence that the loan moneys were not paid to him.
Since I’ve dealt with the issues of notice of trial given to the defendant and the application for judgment under r 476, I’ll then turn to the matters of the evidentiary issues.
But before I do that, it is noted that paragraphs 1 to 4 of the statement of claim have been admitted by the defendant. That is apparent from paragraph 1 of the defence. And, again, there is no dispute about the appointment of the liquidators to the first plaintiff; or the power of the liquidators to bring this type of claim, on behalf of Cada, being disputed.
There is clear authority that this wide definition of books of account extends to the bank records of the company which are relied upon in this case. It’s also clear from the decision of Hanson Construction Materials P/L v Davey [2010] QCA 246 that invoices are relevant business records of the respondent and come within the definition of books of account as defined in s 83 of the Evidence Act.
In terms of persons being familiar with the books of account, I accept the submissions of the plaintiffs that the liquidators, now having control of the first plaintiff and being obliged under s 474(1) of the Corporations Act to take into their custody all property of Cada, and that – as they have asserted – now they have been provided with all such books, particularly pursuant to notices issued under s 530B of that Act, are so familiar.
Dealing with that aspect, it is clear from the affidavit of Kelly-Anne Lavina Trenfield, filed 14 September 2016 – particularly from paragraphs 4 to 8 and 20 and 21 – that the liquidators, or persons to whom they have delegated the relevant responsibility for investigation, have reviewed the particular books and have reached the conclusions that they are, relevantly, books of account. In terms of the extent of that documentation, it’s clear also from letters sent by the defendant’s then solicitors to the liquidators dated 5 August 2014 - there being three such letters - that relevant documents which are described as “all” the relevant documents (in the second of those particular letters) have been sent to the liquidators, as well, of course, as a laptop computer that itself contains records. I’m therefore satisfied that the requirements, in particular, of s 85 of the Evidence Act have been satisfied.
The other aspect of that which is noted in the submissions, of course, is that the defendant himself, as a result of the liquidation, cannot exercise a functional power as an officer of the first plaintiff. Accordingly, I am satisfied to the required extent that Ms Trenfield and Ms Packer are identified “responsible persons” within the meaning of s 85.
I then turn (as the outline of the plaintiffs has done) to the various paragraphs of the statement of claim following paragraphs 1 to 4 (which as I’ve indicated are not in dispute).
Paragraph 5 of the statement of claim refers to an allegation that, as at 30 June 2012, the defendant owed the first plaintiff the amount of $159,051.70. I accept that that forms the baseline for the overall debt calculation. There are a number of reasons why it is asserted by the plaintiffs that that allegation should be found to be true by the Court. The first is that that particular sum appears in the Financial Report ended 30 June 2012 of the first plaintiff. The particular entry relevant to that amount states that it’s a “Shareholders Loan – (Unsecured) at Call” and is referable to a “Shareholder Loan Account”. The entry, as the submissions indicate, appears as part of “Trade and Other Receivables” for the first plaintiff and, therefore, it can be established that it’s an asset of the first plaintiff.
Additionally, the defendant has signed the director’s declaration for that particular report. The terms of the declaration indicate that the defendant “declared” - and therefore, I find, accepted - the financial statements and notes as representing the company’s financial position and performance. I therefore accept that that is a relevant admission. If authority be needed for that proposition, it’s provided by Ambridge Investments Proprietary Limited v Baker and Ors [2010] VSC 59.
The third aspect relied upon by the plaintiffs is that that Financial Report was prepared by the firm of accountants, Modderno and Company. While I accept it as giving reliability to the report, I think it’s more important that the defendant signed the particular declaration with the effect that that has.
Attention is then paid by the plaintiffs as to the existence of the 2013 “unsigned” Financial Reports. I am, at the most, sceptical of that, particularly because it is asserted by the defendant, at least in correspondence that’s sent, that his assertion is that his accountants didn’t properly prepare those particular entries.
But the aspects upon which the plaintiffs rely are that that particular loan account mention of the $159,051.70 appears as the entry for the preceding year in the 2013 account as appropriate and that the shareholder loan account for the 2013 year was a figure that was at least that (and slightly higher). My attention has been drawn by the plaintiffs’ counsel, nevertheless, to matters that might alleviate any great concern I might otherwise have, at least, in taking those accounts as indicative of that particular amount still being owing at the end of the 2013 financial year. That is shown by reference, in particular, to the 2013 tax return by the first plaintiff. By reference to the current assets contained in that return, and then by reference back to the notes to the financial statements for the year ended the 30 June 2013, it can be seen that the shareholders loan of that slightly greater amount forms part of the total assets reflected in the company tax return of 2013. I therefore, do draw comfort from that fact about what can be accepted by the Court about continuation of that particular loan.
The next matter upon which the plaintiffs rely, for the matters set out in paragraph 5, is the supports also derivable from the 2012 tax return of the first plaintiff. That, unsurprisingly, supports the sum of approximately $159,000 referred to earlier.
The next argument is that it’s not part of the defendant’s defence that the amount of approximately $159,000 was advanced to someone other than him.
And finally, it’s submitted that, if the defendant was to attempt to successfully challenge the accuracy of that particular report in 2012, he needed to lead evidence; and, in the absence of that evidence, the Court’s entitled to be wary of his assertions.
Reference is then made to the case I referred to earlier of Lindholm, at paragraph [19], to the effect that the plaintiff in that case stated – Swindells was the ‑ ‑ ‑
MR GOODWIN: He was the defendant, your Honour.
HIS HONOUR: He was the defendant. I thought so. Mr Swindells was the defendant in that case. He stated in his affidavit that the transactions made on the company AMEX were all part of the normal case of day-to-day business of the company. As observed by Gardiner AsJ, in light of the very specific identification of the transaction in the journal as a shareholders loan, the defendant did not, in the court’s view, rebut the prima facie presumption provided in that case by s 1305 of the Corporations Act. Obviously, the same kind of conclusion can be reached with respect to the Evidence Act of this State.
It’s also referred to in the written submissions - and I accept it as a valid submission - that the defendant has not disclosed his personal income tax returns to support any of his allegations and that no documents have been disclosed which would undermine the conclusions that I’ve just stated.
The written submissions then turn to the matters of paragraphs 5 and 6 of the statement of claim. The submissions refer to the fact that, given that after 2012 the report for 2013 was not signed off and none was prepared for the year ended June 2014, it was necessary for the liquidators to reconstruct the accounts of the first plaintiff for those periods.
As is noted in the outline, the liquidators having been appointed on 9 July 2014, no more loans or payments were made thereafter to the defendant. A number of points are then set out in the written submissions and I’ll briefly deal with them. As I’ve indicated, I accept that the particular persons who deposed to the affidavits in question were, relevantly, responsible persons. As indicated in the relatively old decision in Queensland of The Queen v Hally [1962] Qd R 214, a decision of the eminent judge of that time, Gibbs J (as he then was):
When a person’s books of accounts have been produced, an expert witness who has examined them may give evidence of the result of the examination, or in other words, as to the effect of their contents.
It was open therefore, as Gibbs J indicated, for the Crown in that case to call a particular person to give evidence as to the state of the relevant accounts in so far as it was relevant to an issue before the jury.
I accept in this case that these particular persons are appropriate experts to give relevant evidence about the accounts’ meaning.
The submissions then refer to the fact that both Ms Packer and Ms Trenfield are independent of both the first plaintiff and the defendant. Reference is then further made to, in performing the analysis, that Ms Packer, in particular, had access to the contemporaneous books and records which included the first plaintiff’s bank statements and transaction records; and I’ve generally referred to that earlier.
The fourth point is also important. On those particular bank statements, there were handwritten notations. I accept that it was appropriate for Ms Packer to form a conclusion that such notations were made as an accurate part of the record for the purposes of determining the nature of the transaction.
The reasons that I conclude that that conclusion was appropriate are for the very three reasons that are then stated by the plaintiffs to support that proposition. First is that, under s 286(1) of the Corporations Act, the first plaintiff was required to keep written financial records that correctly recorded and explained its transactions, financial position and performance that would enable true and fair financial statements to be prepared and audited. Secondly, s 344(1) of the Corporations Act renders a director, such as the defendant, personally liable for a civil penalty if, in this instance, he fails to take all reasonable steps to secure compliance with s 286. And the third reason is that the courts will usually assume that people act honestly.
The next arguments are raised with respect to those paragraphs where the notations indicate the term “wages”. For them Ms Packer has given the defendant credit for that. In addition, as the affidavits show, Ms Packer has also given the defendant credit for what appears to be possible loan repayments made by him to the first plaintiff. And the final point made, of course, is that if the defendant had wished to contend that further individual transactions were not a loan, then he had a chance to put that in evidence - which he has not done.
The submissions then turn to paragraph 8 of the statement of claim. It alleges that the loan moneys were “on call loans”, repayable on demand. The arguments in support of this are then set out and I’ll go through them again briefly. First, that 2012 financial report that I’ve referred to recorded the shareholder loan account as being “on call”. Secondly, that report indicated that the shareholder loan account was a current asset, there being no suggestion in that report that the liability was contingent in any way. Thirdly, the following year’s financial report reported the share loan account still as being “on call” and as a current asset. And, though I have some concerns about that report, I accept that that really supports the 2012 approach. Fourthly, as Keane JA (as he then was) stated in Haller v Ayre [2005] 2 Qd R 410 (with relevant citation):
In truth, a loan repayable on request (or on demand, or on call) is a loan simpliciter. It’s quite different if the parties choose to say ‘being a loan upon terms that the money shall be repayable on three days’ notice’ or (which is the same thing) ‘upon terms that the money shall be repayable three days after demand made’. The law is settled that where a loan is said to be of that kind which is recoverable on request, or on demand, it means that species which is continuously recoverable at all times from the moment of the creation of the relationship of debtor and creditor.
And again, with this point made, is the important reference to no evidence being proffered by the defendant to the contrary.
Before I turn to paragraph 11 of the statement of claim, which refers to the moneys remaining as due and owing, it’s important, I think, to note that the amount that’s sought to be recovered can be sustained by the affidavits which depose to the outstanding money. The defendant, in his report to the liquidators about the affairs of the company, asserted that during the three years prior to liquidation he was paid a salary of approximately $360,000. That, in general terms spread over three years, is the order of $120,000 per year. As I’ve already indicated, there is nothing in the documentation which gives support to that and, in particular, it ought be noted that there are particular references to documents of the first plaintiff which are totally inconsistent with that assertion. I’ve been taken to a number. But is sufficient to refer to one and that is the July 13 to September 13 wages reconciliation of the first plaintiff. Giving the defendant all the benefit that can be obtained from that particular wages reconciliation - that is, taking into account not only what is deemed to be his normal wages, but also travel and meal allowances - for that quarterly period, the sum of $11,220 is able to be stated to be an appropriate reconciliation of all matters connected with wages and associated remuneration. As can be seen - and where multiplying that by four for a full year is to reach the sum of approximately $45,000 - it is well short of the $120,000 a year. I am therefore satisfied that any assertion by the defendant that he was paid sums substantially in excess of those which have been calculated by the liquidators (through the persons designated to make the inquiries) is wrong. It is wrong.
I then turn to paragraph 11 of the statement of claim. That is an allegation by the plaintiffs that the loan monies remain due and owing. The grounds relied upon by the plaintiffs for that are three in total.
The first is that the defendant’s defence is not that he repaid the loan monies but, rather, that it was paid to him by way of remuneration (as I’ve just analysed). I do not accept that particular assertion. Secondly, it’s relied upon by the plaintiffs that, once the Court is satisfied that the loan has been made, the onus shifts to a person such as the defendant if he or she wishes to prove a discharge by way of payment or by some other method. I accept the relevant authority referable to that is Julong Proprietary Limited v Fenn and Anor [2002] QCA 529. The third argument in support of the plaintiffs with respect to the monies remaining owing is that both Ms Packer and Ms Trenfield have sworn that on their analysis of the books loan monies continue to be outstanding.
I therefore accept in its entirety the case presented by the first and second plaintiffs that the total monies outstanding by way of loan monies amount to $456,920.63.
And, so, then to address the issue of interest. Section 58 of the Civil Proceedings Act 2011 permits interest to be awarded. There is a restriction arising from s 58(2)(b): that is, where there is an agreement that might restrict the power of the court to award such interest. But there is no evidence of such agreement in this particular case and, accordingly, I accept that it is appropriate that interest be awarded pursuant to that provision.
...
HIS HONOUR: I make orders then, after the reasons that I have given, in terms of the draft judgment as amended by me which I now initial and I place with the papers.
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