Beattie & Sutherland v Osman (No 3)

[2009] NSWSC 824

CITATION:	Beattie & Sutherland v Osman (No. 3) [2009] NSWSC 824
HEARING DATE(S):	07/08/09
JUDGMENT DATE :	7 August 2009
JURISDICTION:	Equity
JUDGMENT OF:	White J
EX TEMPORE JUDGMENT DATE:	7 August 2009
DECISION:	Tender rejected.
CATCHWORDS:	EVIDENCE – admissibility - plaintiffs seek direction to allow them to tender a schedule as a summary of other documents under s 50 of the Evidence Act 1995 (NSW) – Court refuses to make direction as schedule is not a summary and defendants have not had a reasonable opportunity to examine the documents which are sought to be tendered to support it – plaintiffs seek to tender voluminous documents – application refused as defendants would be prejudiced by late tender
LEGISLATION CITED:	Corporations Act 2001 (Cth) Evidence Act 1995 (NSW)
CATEGORY:	Procedural and other rulings
PARTIES:	Graeme Robert Beattie and Roderick Mackay Sutherland in their capacity as joint and several administrators of PR Marketing and Media Group Pty Ltd v Rhonda Osman & 2 Ors (No. 3)
FILE NUMBER(S):	SC 3588/09
COUNSEL:	Plaintiff: C D Wood Defendants: B Katekar
SOLICITORS:	Plaintiff: Matthews Folbigg Defendants: Axis Legal

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

WHITE J

Friday, 7 August 2009

3588/09 Graeme Robert Beattie and Roderick Mackay Sutherland in their capacity as joint and several administrators of PR Marketing and Media Group Pty Ltd v Rhonda Osman & 2 Ors (No. 3)

JUDGMENT

1 HIS HONOUR: On 24 June 2009 Visiontek Pty Ltd (“Visiontek”) purportedly appointed the plaintiffs as administrators of the PR Marketing and Media Group Pty Ltd (“the company” or “PRM”). The appointment was purportedly made under s 436C of the Corporations Act 2001 (Cth). The plaintiffs have sought a declaration that their appointment as administrators was valid and have sought consequential relief. The question of the validity of the plaintiffs' appointment turns on whether a charge given by the company to Visiontek on 10 November 2005 is enforceable. That question in turn would appear to depend, at least in part, on whether or not PRM is actually or contingently liable to pay money now or in the future to Visiontek.

2 The plaintiffs read an affidavit of a Mr Hoon Fong Lee sworn on 14 July 2009. He deposes to being employed as the finance manager of Visiontek. He annexed to his affidavit a schedule which he describes as setting out a summary of "the estimated debt owing by the Company to Visiontek as at May 2009".

3 The schedule states that the estimated debt owing by PRM to Visiontek as at 31 May 2009 after "other adjustments" is $438,720.55. That amount is made up of 15 items. Against some, but not all, of the items there is a column headed "Supporting Evidences" (sic). The items stated on the schedule are as follows:

4 "Balances as of 31/10/05, $81,804.74.” The supporting evidence is described as "Past loan agreements signed".

5 Three items are stated on the schedule under the heading "Payment made by Inpho (Visiontek) on PRM behalf" (sic). They are "Advertising charges (from October '05 to May '09) $763,833.16; purchase of computer and mobile handsets $18,580.50; payment in relation to deed settlement, $44,775.27”. These three items are said to total $827,188.93. Against the total sum there is noted as the supporting evidence "Visiontek's Payment Vouchers".

6 The next item is described as "loan advanced to PRM" (From November 2005 to May 2009). The figure is stated to be $2,277,523.22. The supporting evidence is described as "loan application forms with approval and disbursement details". These items are said to total $3,186,516.89.

7 The schedule then provides for credit to be given to the company in respect of five items said to total $2,949,613.83. Two items are described as “IVR Revenue” and “SMS Revenue” for the period from November 2005 to May and April 2009 respectively, in the sums of $694,955.55 and $639,633.37 respectively. The supporting evidence is described as "IVR revenue statement" and "SMS revenue statement".

8 The next two items are described as “IVR operator service revenue” and “SMS operator service revenue” for the period from December 2005 to April 2009. The amounts of this revenue are stated to be $213,062.76 and $1,396,099.14 respectively. The supporting evidence is described as "PRM's tax invoice to clients".

9 The fifth item for which credit is given is in the sum of $5,863 for what is described as “advertising management fee” from January 2006 to June 2006. Again, the supporting evidence is described as "PRM's tax invoice to clients".

10 After this credit, the schedule states that there is a total debt position as at 31 May 2009 of $236,903.06. The schedule then provides for five further items of adjustments described as "other adjustments of revenue due to Inpho". The first is described as "PRM/SMS operator service fee failed to recover from some clients” in the sum of $17,407.90. No supporting evidence is identified in respect of that item.

11 The next is a sum of $2,680.54 credited to PRM described as "IVR debt reconciliation (May '05 to Feb '08)”, the supporting evidence for which is described as "carrier clawback statements".

12 The remaining three items are all debit items. That is to say, they are added to the debt claimed to be owed by the company. One is described as “Inpho management fee during administration (23/12/05-01/03/07)” in the sum of $30,800. The supporting evidence is described as "as per agreement for company management".

13 The next is described as "loan interest payable to Inpho" in the sum of $52,776.37. Again, the supporting evidence is said to be "as per agreement for company management".

14 The last item is described as "Inpho commission of PRM operator services (December '05 to February '09) - consumer first (IVR and SMS) $103,513.75”. The supporting evidence is described as "agreement signed by by [sic] directors".

15 After these adjustments of $201,817.49, the schedule describes the total debt position as being $438,720.55.

16 In his affidavit, Mr Lee described this calculation as set out in the schedule without adding to what is there set out. I rejected the schedule and the paragraph describing the schedule. The statements in the schedule and in Mr Lee's affidavit are statements of opinion in relation to each of the items of debt. No basis was laid for the opinions expressed. The evidence was inadmissible under s 76 and was not admissible as expert opinion evidence under s 79. The evidence would also have been liable to be excluded under s 135.

17 Mr Wood, counsel for the plaintiffs, now seeks to re-tender annexure F to Mr Lee's affidavit pursuant to s 50 of the Evidence Act 1995 (NSW) and, in addition, or alternatively if that tender is rejected, he seeks to tender the documents which provide the basis for the summary in the schedule.

18 There is no doubt that the documents which are sought to be tendered would be relevant to determining whether the company owes a debt to Visiontek, and I think it can be assumed that those documents would be admissible as business records. However, orders were made for the service of the parties' evidence-in-chief, and the documents now sought to be tendered were not served as proposed evidence-in-chief. I will come back to that matter shortly.

19 Where evidence is adduced under s 50, the opinion rule does not apply. A direction for the adducing of evidence under that section may now be given, notwithstanding that the application for the direction was not made prior to the hearing. Subsection 50(1) provides that:

“ The Court may on the application of a party direct that the party may adduce evidence of the contents of two or more documents in question in the form of a summary if the Court is satisfied that it would not otherwise be possible conveniently to examine the evidence because of the volume or complexity of the documents in question. ”

20 The documents in question stand over a foot high, to use the old measure, and evidently contain voluminous records of an accounting nature such as invoices, revenue statements and the like. Subsection 50(2)(b) provides that the Court may only make a direction under subs (1) if the party seeking to adduce the evidence in the form of a summary has given each other party a reasonable opportunity to examine or copy the documents in question.

21 As I have said, the documents the subject of the tender, and which are said to be summarised by annexure F to Mr Lee's affidavit, were not served at the time Mr Lee's affidavit was served, namely, on 14 July. On 17 July 2009 the defendant on the plaintiffs served a notice to produce requiring production of the documents in question. As a result of the notice, the documents were produced to the Court and orders for access were made in favour of the defendants. The defendants obtained access on 30 July. I am told, and it is not disputed, that the documents were sent to a company or firm that provides litigation support to be photocopied. The photocopies of the documents were made available to the defendants and to an accountant retained by the defendants on 31 July. That is, this day last week.

22 The first question is whether annexure F is a summary of the contents of two or more documents in question. At least in some respects, the annexure is not of that kind. For example, the item of $17,407.90 for PRM/SMS operator service fee not recovered from some clients does not purport to be a summary of documents. The items for management fee of $30,800 and loan interest are not a summary of the document described as “agreement for company management”. That document is in evidence. It includes a term that the charge would only be released after all outstanding dues, plus interest at eight percent per annum after a net adjustment of revenues had been paid to Visiontek, and that PRM would pay $2,000 per month as management fees for services to be provided to (scil. by) Visiontek. The items in question are not a summary of that document, but rather a calculation of amounts claimed to be due under it.

23 I consider most of the other items in the annexure not to be summaries of documents. Thus the item $763,833.16 was for advertising charges from October 2005 to May 2009. It appears from the documents which were sought to be tendered that this is the sum of charges in numerous individual invoices for that period.

24 By way of example, the sum of $763,833.16 appears from other documents to include an amount of $28,162.21, which is the subject of an invoice dated 10 November 2005 from Visiontek to PRN for advertising charges for the month of October in the amount of $25,602.01 plus GST. That, in turn, appears from another document sought to be tendered to be the same as the charge made by Barclays Advertising Agency Pty Limited to Visiontek on 31 October 2005.

25 A summary of the contents of two or more documents to fall within s 50 should, I think, be an abstract or compendium or epitome or a brief statement of the facts or matters set out in the documents.

26 The statement that there were advertising charges of $763,833.16 for that period is rather a calculation of the total sum stated in each of the invoices rather than a brief statement of the contents of the invoices.

27 Likewise the item $44,775.27 described as "Payment in relation to deed settlement" is not a summary of the documents which are sought to be tendered. These include a letter from Mr Ngan the administrator under a deed of company arrangement which the company entered into on 14 December 2005. He wrote to Visiontek requesting payment of the sum $44,775.27 and said that these were funds required to set aside the deed of company arrangement. He provided a breakdown of the figure between the administrator's fees, expenses, deed expenses, and dividend expenses to be paid to unsecured creditors. The statement in annexure F does not seek to summarise the contents of the correspondence, but rather is a statement that $44,775.27 was paid.

28 I do not propose to go through each of the items, but I think the same comment can be made in relation to at least a majority of them.

29 If, contrary to the view I formed about subs 50(1), I had been of the view that the annexure is a summary of the contents of voluminous and complex documents, then the question would still have arisen under paragraph 50(2)(b) as to whether the defendants had a reasonable opportunity to examine or copy the documents in question. That issue is closely aligned with the question whether the plaintiffs should in any event have leave to tender the documents. I will deal with both of those questions together.

30 These proceedings were commenced on 7 July 2009. On 13 July 2009, the Chief Judge in Equity made orders by consent, which included orders that the plaintiffs file and serve any further evidence by 14 July 2009. On that day, her Honour set the proceedings down for hearing today. Mr Lee's affidavit was sworn on 14 July 2009 and I assume served on that day. On 17 July 2009, as I have said, the defendants served the Notice to Produce and documents in question, save for one, became available for the defendants’ inspection on 31 July. The exception is a compact disk which I am told contains emails and statements provided by the carriers to Visiontek. The defendants retained a Mr Cravero, an accountant, to prepare a report on the alleged level of indebtedness of PRM's Visiontek.

31 Mr Cravero prepared a report dated 5 August 2009. It appears that his report is substantially based on documents provided to him by the defendants. He deposed that the documents produced by the plaintiffs were provided to him on 31 July and he had not had sufficient time to go through all the materials produced.

32 He deposed that he had not been provided with what he called certain important source records "that are in the possession or under the control of Visiontek and which would have assisted me in my review of the PRM accounts including: a) copies of the carrier revenue statements which show the actual traffic generated for PRM’s short codes and upon which recipient created tax invoices are based. RCTIs are the invoices created by Visiontek on behalf of PRM and forms the basis of payment to PRM."

33 It would appear that those carrier revenue statements are contained on the compact disk to which neither the defendants nor Mr Cravero have had access.

34 He also identified five other classes of documents which he had said he had not been provided with, which he believed would be in the possession of Visiontek.

35 I do not consider that the defendants have had a reasonable opportunity to examine the documents which are now sought to be tendered to support the schedule annexure F. On that ground also I would refuse to make a direction under s 50.

36 For these reasons I maintain my ruling that annexure F to Mr Lee's affidavit is inadmissible. The question remains whether or not the documents themselves should now be admitted into evidence. It is accepted that if the documents are permitted into evidence that Mr Cravero's affidavit sworn 5 August 2009 and his report of that date should also be admitted. That is so notwithstanding that on the morning of 5 August I refused the defendant leave to adduce further expert evidence, observing that any application for leave to adduce that evidence should have been made promptly.

37 The question seems to me to be whether the defendants have been prejudiced by the fact that the documents now sought to be tendered were not served on 14 July as they should have been in accordance with the earlier timetable. I have no reason to doubt that the documents are relevant and, although I have not heard detailed argument in relation to them, it would appear to me that prima facie they are admissible. Nonetheless, where a party has not complied with the order of service of evidence-in-chief, that party will often be precluded from relying upon evidence which is served late if the opposite party would thereby be prejudiced.

38 It was submitted for the plaintiff that there was no relevant prejudice. As I understand it, that submission is primarily based on four matters. First, it can be said that the defendants should know themselves and from their own records the truth of the matter as to what debt, if any, PRM owes Visiontek. Secondly, on 28 April 2009 Visiontek forwarded to the defendants a summary of what was described as the estimated debt position as at 31 March 2009. It was in a similar format to annexure F to Mr Lee's affidavit but contained a supporting schedule summarising monthly invoices. Thirdly, it was pointed out that counsel for the defendants has provided an outline of submissions in which particular items were challenged and reasons for the challenge were given. Fourthly, he said that the main prejudice would be cured by the defendants being able to rely on Mr Cravero's affidavit.

39 The difficulty with the first and second contentions is that, in this case, it appears that to a large extent PRM is dependent upon the information provided to it by Visiontek to ascertain its debt position with Visiontek. Thus, the source of PRM's revenue is, it seems to a large extent, derived from revenue which Visiontek receives from carriers, which is then divided, or would, but for the finance arrangements, be divided between Visiontek and PRM.

40 Pursuant to the agreement for company management made on 23 December 2005, Visiontek was to adjust net PRM revenues received from carriers against outstanding loan amounts advanced by it to PRM and against payments which it made directly to suppliers and other agents on behalf of PRM. Thus Visiontek is the primary source of information as to the amounts of revenues received from carriers and as to the payments made to suppliers and other agencies which are said to be payments on behalf of PRM.

41 It is true that the defendants' counsel has identified a number of items from the schedule which are said to be disputed and given reasons for such disputes. For example, it is submitted that some parts of the debt were discharged by operation of the deed of company arrangement. It is submitted that some parts of the debt includes amounts for GST which, it is said, cannot be passed on to PRM. It is said that some claims, for example for management fees, have not been accurately calculated. But the fact that the defendants are able to raise some challenges to the asserted debt does not mean that they are not prejudiced by the late provision of the documents. Nor does Mr Cravero's report and affidavit remove such prejudice. His report appears to be substantially based upon the documents of PRM, but he says that he does not have important source records which would be needed to complete the review, including the copies of the carrier revenue statements and documents relevant to the question of whether third party expenses paid by Visiontek and claimed to have been paid on behalf of PRM were made for PRM's benefit.

42 The proceedings have been expedited because the validity of the plaintiffs’ appointment as administrators is an urgent issue. The Corporations Act lays down a stringent timetable for the calling of meetings of creditors and for the making of decisions under Pt 5.3A .

43 Had the documents now sought to have been tendered been served, as I think they should have been, with Mr Lee's affidavit, then there should have been sufficient time for the defendants both to analyse the documents and to seek the production of any further documents which they might have been entitled to seek from Visiontek. As it is, they are deprived of that opportunity and I think that they would be prejudiced by the late tender of the voluminous documentation.

44 For these reasons I reject the tender.

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