Blue Frame Buildings Pty. Ltd. v Raydox Pty. Ltd
[2011] VCC 1102
•2 June 2011
Th
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
Case No. CI 08-02250
and CI 08-02252
| Blue Frame Buildings Pty Ltd (In Liquidation) | Plaintiff |
| (ACN 081 641 983) | |
| v | |
| Raydox Pty. Ltd. (ACN 098 104 600) | Defendant in CI 08-02250 |
| Nazaire Pty. Ltd. (ACN 068 803 092) | Defendant in CI 08-02252 |
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| JUDGE: | Lewitan |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 25 November 2010 and 2, 3, 6, 7, 8, 9 and 10 December 2010 |
| DATE OF JUDGMENT: | 2 June 2011 |
| CASE MAY BE CITED AS: | Blue Frame Buildings Pty. Ltd. v Raydox Pty. Ltd. |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1102 |
REASONS FOR JUDGMENT
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Catchwords: Statute of Limitations, acknowledgment of debt
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr. M. Lapirow | Davies Moloney |
| For the Defendant | Mr. D. Turner | Chiodo Madafferi |
| HER HONOUR: |
1 Blue Frame Buildings Pty. Ltd. (in liquidation) (Blue Frame Buildings) conducted a business of erection of steel framed buildings. Blue Frame Buildings claims that each of Raydox Pty. Ltd. (Raydox) and Nazaire Pty. Ltd. (Nazaire) is indebted to it by way of loan accounts. Blue Frame Buildings claims that Raydox as trustee of the G.J. Brassil Family Trust[1] is indebted to it in the sum of $263,181. Blue Frame Buildings claims that Nazaire Pty Ltd (Nazaire) as trustee of the Brassil Property Unit Trust[2] is indebted to it in the sum of $827,328.
[1] Exhibit 54.
[2] Exhibit 53.
2 The issues in dispute in the Raydox matter are whether the alleged sum of $263,181 was advanced to Raydox by Blue Frame Buildings by way of loan and whether the claim by Blue Frame Buildings is statute barred. Raydox claims that the money was transferred to Raydox from funds contributed to Blue Frame Buildings as directors loans.
3 The issues in dispute in the Nazaire matter are whether the claim by Blue Frame Buildings is statute barred or whether Nazaire acknowledged the claim or made any payments in respect thereof.
Background
4 Gregory James Brassil (Greg Brassil) was appointed a director of Blue Frame Buildings on 13 December 1998 and ceased being a director on 29 March 2006.[3]
[3] Exhibit 42.
5 Greg Brassil was appointed as a director of Nazaire on 3 April 1995 and continued as director until 29 September 2005. Heather Jean Brassil (Heather Brassil) was appointed as secretary and director of Nazaire on 3 April 1995.[4]
[4] Exhibit 40.
6 Greg Brassil was appointed a director of Raydox on 14 November 2001 and continued as a director until 26 September 2005. Heather Brassil was appointed as a director of Raydox on 26 September 2005 and secretary on 31 August 2006.[5]
[5] Exhibit 41.
7 By virtue of the definition of related entity contained in s 9 of the Corporations Act 2001, Blue Frame Buildings, Raydox and Nazaire were at all relevant times related entities.[6]
[6] Conceded by the defendant in para 13 of the defendant’s written submissions dated 10 December 2010.
8 Keith Llewellyn Jones (Jones), chartered accountant, is currently a consultant to Hughes McPhail Jones Pty. Ltd. trading as OHM Australia at 77 Station Street Malvern. Jones was a director of Hughes McPhail Jones Pty. Ltd. in 2004. He has been an accountant for 28 years.
9 In cross-examination Jones said that his business relationship with Greg and Heather Brassil commenced around 1999. He said that he attended Blue Frame Buildings in Shepparton on a monthly basis and met with Greg Brassil and sometimes with Heather Brassil.[7]
[7] Transcript pp 392- 393.
10 In cross-examination Jones agreed that when Raydox was incorporated in 2001 it had no assets nor cash flow.[8]
[8] Transcript p 443.
11 Jones said that the last accounts OHM Australia (OHM) prepared for Blue Frame Buildings were in relation to the 2002 financial year ending 30 June 2002.[9]
The evidence of Paul Andrew Burness (liquidator)
[9] Transcript p 352.
12 Paul Andrew Burness (Burness) was appointed liquidator of Blue Frame Buildings Pty. Ltd. by the Supreme Court of Queensland on 7 August 2003.[10]
[10] Transcript p 148.
13 Burness is an official liquidator, a certified practicing accountant, a certified fraud examiner, a member of the Insolvency Practitioners Association of Australia and a member of CPA Australia. He has specialised in insolvency for 20 years. He is a director of the Melbourne Partnership of Worrells.
14 In 2003 Burness had been appointed the liquidator of XBFB Pty. Ltd. XBFB Pty. Ltd. (XBFB) was a company controlled by Greg and Heather Brassil and formerly known as Blue Frame Buildings Pty. Ltd.[11] The assets and liabilities of XBFB had been effectively assigned to Blue Frame Buildings.[12] Burness issued a standard form of questionnaire to the directors and officers of Blue Frame Buildings (the questionnaire). The completed questionnaire was signed by Greg Brassil. Greg Brassil stated that Blue Frame Buildings acquired the assets of XBFB on 13 February 1998 for $2,468,088 and took over the liabilities of XBFB for the same amount. He said that the goodwill paid or payable to XBFB was nil.[13] Burness ceased acting as liquidator of XBFB on 25 July 2003.
[11] Exhibit 73.
[12] Transcript p 149, exhibit 1.
[13] Transcript p 151.
15 Burness stated that he had had very little cooperation from Greg Brassil during the course of the liquidation of Blue Frame Buildings. Burness had to resort to the documents held by the company and to information obtained from third parties.
16 Burness stated that Blue Frame Buildings was hopelessly insolvent when it was placed into liquidation. The liabilities that the company owed to third parties were significantly understated in the books and records of the company. No records had been entered into the computer system maintained by Blue Frame Buildings after 30 June 2003.
A. THE RAYDOX CLAIM
The existence of the debt
17 Blue Frame Buildings claims that Raydox as trustee of the G.J. Brassil Family Trust is indebted to it in the sum of $263,181. The particulars to paragraph 8 of the plaintiff’s amended statement of claim allege that “[d]etails of the loans are contained, inter alia, in the financial accounts for the G J Brassil Family Trust for the year ended June 2002.”
18 On 9 December 2010 the plaintiff gave notice to the defendant that it will not seek judgment against Raydox for the payment of $267,000 referred to in paragraph 6 of the plaintiff’s amended statement of claim which was made by the plaintiff to Raydox on 8 February 2002. The plaintiff will limit its claim to the payment of $256,997 to Raydox in December 2001 together with capitalised interest.
19 Burness stated that the financial report for the G.J. Brassil Family Trust for the year ended 30 June 2002 was prepared by Blue Frame Building’s accountant, Jones, who signed the document on 23 April 2003.[14] That report indicates that the G.J. Brassil Family Trust received profits of $6184 for that year and incurred expenses of $6184. The expenses were recorded as interest of $6184. Burness stated that the only liability in the accounts was a loan of $263,181 to Blue Frame Buildings Pty. Ltd. Raydox had cash at hand of $100. Raydox did not have a bank account.[15]
[14] Exhibit 39.
[15] Transcript p 272.
20 The internal general ledger printouts for Blue Frame Buildings[16] record a series of entries under “Loan-Raydox Pty Ltd”. The first is a payment on 31 December 2001 which is shown as a loan to Raydox of $256,997. There is then a debit entry dated 8 February 2002 in the amount of $267,000. On 8 October 2002 there is a credit entry of $267,000. That leaves a balance outstanding of $256,997.
[16] Exhibit 35.
21 The loan to Raydox is also reflected in a journal entry prepared by Oglesby Hughes McPhail as accountants for Blue Frame Buildings. The journal entry records a loan of $256,997 to Raydox on 31 December 2001.[17]
[17] Exhibit 38, transcript p 261.
22 The National Australia Bank statements for Blue Frame Buildings record an internet Bpay transfer of $256,997 to Camerons trust account on 19 December 2001.[18] The cheque was paid to Camerons (solicitors) on behalf of Raydox. The money was used as payment for half of the price of 19 acres of land at Old Dookie Road Shepparton (the SPC property).[19]
[18] Defendants written submissions page 2 paragraph 3.
[19] Transcript p 447.
23 In a letter dated 26 October 2004 by Keith Jones, director of OHM Australia Chartered Accountants (the OHM letter), Jones states:[20]
[20] Exhibit D.
SPC Project Reconciliation
We are the accountants and advisors to all entities associated with this project – including the investment partnership. We have sought and received consent from the unrelated parties to provide general information regarding this project.
The parties to the project are as follows:
Blue Frame Buildings Pty Ltd – The builder
Raydox Pty Ltd – Investment partner (50%) representing Greg Brassil
Jared Pty Ltd – Investment partner (25%) representing unrelated party
Brogan Pty Ltd – Investment partner (25%) representing unrelated party
The Raydox, Jared, and Brogan partnership – owner of SPC project.
The partnership was formed with a view to purchase commercial land and construct a warehouse suitable for renting. The partnership acquired the land on the 20th December 2001. For the purchase of the land, Jared and Brogan contributed $256,997, as did Raydox. Our records indicate that Raydox borrowed this deposit from BFB on the 6th December 2001. The profit allocation against this loan ($6184.83) on 30th June 2002 was in fact a charge for interest by BFB on the advance made to Raydox. The amounts were matched for tax planning purposes. After the interest charge, our records indicate that Raydox was advanced $263,181.83 from BFB during the 2002 financial year.
24 In cross-examination Jones confirmed that Raydox had borrowed money from Blue Frame Buildings to put its equity into the SPC property. The SPC property was purchased in December 2001. The $256,997 which represented half the value of the SPC property was matched by the interests of the other parties to the project, Jared Pty. Ltd. (Jared) and Brogan Pty. Ltd. (Brogan). All the money that was contributed by Raydox came from Blue Frame Buildings.[21] Jones said that Raydox borrowed this money from Blue Frame Buildings.[22]
[21] Transcript pp 447- 448.
[22] Transcript p 370.
25 The partnership then obtained a loan from the National Australia Bank for the purpose of constructing a building on the SPC property.
26 However despite the substantial nature of the SPC property, Raydox did not discover, and the liquidator was not able to find, any documentation which demonstrated the commercial arrangements made between Raydox and Blue Frame Buildings or between Raydox, Jared and Brogan.
27 Blue Frame Buildings charged interest for 6 months to 30 June 2002 and Raydox accepted liability for it. The financial report for the G.J. Brassil Family Trust dated 30 June 2002 records the sum of $6184 as “partnership profits received” and then lists the sum of $6184 for interest paid. The interest was calculated at the rate of 5%.[23]
[23] Transcript p 467.
28 The interest of $6184 was then capitalised in the financial report for the G.J. Brassil Family Trust dated 30 June 2002 which listed as a current liability “Loans-Blue Frame Buildings Pty. Ltd. - $263,181”[24]. The sum of $263,181 is made up of the initial sum of $256,997 which was advanced to Raydox together with the interest which was charged on that amount.
[24] Exhibit 39.
29 This is admitted by the defendant in paragraph 6B of its revised further amended defence (and set off) dated 3 December 2010 (the revised further amended defence). Paragraph 6B(b) refers to the “ [a]lleged Raydox Loan of $256,997” and states that the plaintiff transferred to the defendant the sum of $256,997 on or about 6 December 2001. Paragraph 6B(d) states that:
(d) On 30 June 2002, the sum of $6184.83 was allocated in the Plaintiff’s unaudited internal management accounts as profit against the sum of $256,997 as a charge for interest.
30 The tax return for the G.J. Brassil Family Trust which was prepared by Oglesby Hughes McPhail Pty. Ltd. (Oglesby Hughes McPhail) for the financial year ending 30 June 2002 also records that the trust incurred “total interest expenses” of $6184 and that the current liabilities of the G.J. Brassil Family Trust were $263,181.
31 This money has not been repaid to the plaintiff. This was admitted by Jones by his reference to the payment of $256,997 as a “one way transaction” meaning that it was money going from Blue Frame Buildings to Raydox that had not come back.[25]
[25] Transcript p 428.
32 The defendant asserts that the loan was wrongly characterised as a loan and should have been later amended by adjustment as it was the redrawing of funds contributed by Greg and Heather Brassil to Blue Frame Buildings. In paragraph 6B(b) of the revised further amended defence the defendant claims that Greg Brassil as director of the plaintiff transferred the sum of $256,997 to Raydox from funds that he contributed to the plaintiff between 1999 to 2003 as directors loans.
33 Greg Brassil’s evidence is that the payment to Raydox of $256,997 in December 2001 represented his 50 per cent contribution to the partnership for the acquisition of the SPC property. “Heather and I were owed money by Blue Frame Buildings through a directors loan account and that was the money we used to make our contribution to the partnership.”[26]
[26] Transcript p 517.
34 Jones said that the sum of $263,181 was first allocated by the bookkeepers as being an unsecured loan to Raydox.[27] Greg Brassil and Brian Hoskin (the internal accountant) subsequently advised Jones verbally that Greg Brassil was withdrawing this money which he had previously contributed to Blue Frame Buildings.
[27] Transcript p 370 - 371.
35 To substantiate the defendant’s claim that Greg and Heather Brassil had contributed funds to Blue Frame Buildings, Jones referred to the document headed “Blue Frame Buildings Pty Ltd Unsecured Loan – Directors” which was attached to the OHM letter.[28] That document contains, inter alia, the following entries:
[28] Exhibit D.
Date Details Debit Credit Balance 1/07/1999 Opening Balance (46,218) Business assets sold to BFB 200,000 153,782 Funds contributed 207,376 361,158
1/07/2000 Transfer from V2 common fund 10,412 28/08/2001 Funds contributed 2,430 23/10/2001 Funds contributed 600
19/12/2001 Funds contributed 30,000 26/05/2002 Funds contributed 42,400 12/06/2002 Expenses treated as drawings 44,315
12/06/2002 Transfer of stock & expenses 104,801 30/06/2002 Drawing to fund Raydox invest 263,182 (39,067) Business assets sold to Blue Frame Buildings
36 Looking at that document, Jones said that there were a series of credit items.[29]
The first one being business assets sold to Blue Frame Buildings which is referred there on 1 July 1999. Greg had the right to a building contract for a named branded steel sheds which he owned in his own right. He sold that to Blue Frame Buildings. So the first entry in there is a representative of that business sold to Blue Frame Buildings.
[29] Transcript p 373.
37 Jones said that he could not recall whether he had seen any documentation that might have supported that entry.
38 In cross-examination Jones said that he had never seen the licence that Greg Brassil held. Jones said that he had not seen any documents evidencing the transfer of the licence or the consent of the licensor. He could not remember seeing anything that supported the calculation of the value of the licence. Jones could not remember the name of the business or brand that Brassil sold to Blue Frame Buildings.[30]
[30] Transcript p 405.
39 The defendants called Greg Brassil to give evidence. Greg Brassil was declared a bankrupt on 29 March 2006.
40 Greg Brassil said that he was director of Blue Frame Buildings, Nazaire and Raydox.
41 Greg Brassil said that he commenced conducting a garage construction business from that property in 1996 or 1997. That business is now advertised as the Fair Dinkum Sheds franchise. Heather and Greg Brassil purchased the franchise and had the distribution rights for the whole of Victoria. Greg Brassil said that he and Heather Brassil were owed money by Blue Frame Buildings for the goodwill component of the garage construction business.[31] No documents were produced. Jones did not give any evidence about Fair Dinkum sheds.
[31] Transcript p 518.
42 In cross-examination Jones agreed that the balance sheet for Blue Frame Buildings as at 30 June 2000[32] did not reflect the $200,000 for the sale of assets from Greg Brassil to Blue Frame Buildings on 1 July 1999.[33] Jones also agreed that the business assets sold to Blue Frame Buildings were not reflected in the trading statement for Blue Frame Buildings for the year ended 30 June 2000.[34] Jones said that the documents prepared by OHM would have reflected the $200,000 entry for the sale of the licence to use a brand name of a shed.[35] Greg Brassil was shown the journal prepared by OHM for the year ended 30 June 2000[36] which related to the same period of time that the entry was made for the sale or transfer of the licence to manufacture or market the sheds. That journal did not contain an entry reflecting the assignment of a licence by Greg Brassil to Blue Frame Buildings.
Funds contributed - $207,376
[32] Exhibit 8 p 170.
[33] Transcript p 397.
[34] Transcript p 397.
[35] Transcript p 412.
[36] Exhibit 68.
43 Jones said that the second entry in the document headed “Blue Frame Buildings Pty Ltd Unsecured Loan – Directors” [37] was $207,376 for funds contributed by Greg Brassil personally. Jones said that that must have been physical funds that were deposited into the account of Blue Frame Buildings.[38]
[37] Exhibit D ; see above paragraph 35.
[38] Transcript p 373.
44 When asked about the journal entry of $207,376 in examination in chief, Jones said that he did not know what those payments were. He said that he was acting on instructions; on what he was told by Greg Brassil.
45 In cross-examination Jones was asked:[39]
…when a person tells you a certain transaction is entered for a certain purpose, you listen carefully, and maybe not in the first instance take as many notes, but when they change you take a lot more notes because you want to make certain that you’ve fully understood the change. Would that be right?...My notes would usually record such notes in the narration of a journal entry that would do the correction.
There were no narrations in the journal entry to cover those expenses that are shown in the adjustments to the directors’ loan accounts about the goodwill aspect? …One of them would have been the letter which you didn’t have. Is there anything else? Not that I can recall.
[39] Transcript p 493-494.
46 Greg Brassil said that the source of the moneys contributed to Blue Frame Buildings was predominantly from the garage business he and his wife were conducting.[40] Greg Brassil said that apart from the goodwill component of $200,000, he could not recall any specific loan amounts he contributed to Blue Frame Buildings.[41]
[40] Transcript p 518.
[41] Transcript p 518.
47 Burness stated that he did not find any evidence of a credit balance in the books of account of Blue Frame Buildings of directors loans of moneys owed to Greg Brassil up until 2003. He said that it is more likely that there is a debit balance owed by Greg Brassil to Blue Frame Buildings. Burness stated that he had examined at some length the transactions in the directors loan account which indicated that Greg Brassil had drawn out considerable amounts to fund personal expenses. There was no evidence of any moneys contributed by the director in the year ended 30 June 1999 as claimed by Raydox in paragraph 6B(b) of its defence.[42] The balance sheet for Blue Frame Buildings indicates that in the financial year ended 30 June 2000 the indebtedness of the directors had increased from the starting amount of $41,000 to $332,101.23.[43] The increase in the indebtedness of Greg Brassil to Blue Frame Buildings was supported by entries in pages 172 to 175 of the general ledger printout of Blue Frame Buildings. Greg Brassil was using the company’s funds as if they were his own personal funds. He was paying his personal home loan repayments from Blue Frame Buildings.[44]
[42] Transcript p 247.
[43] Exhibit 8, p 170.
[44] Transcript p 248.
48 The Nazaire balance sheet for the year ending 1999 indicates that the loan to Greg Brassil increased from $21,900 in the year ended 30 June 1998 to $42,490.34 in the year ended 30 June 1999.[45]
[45] Exhibit 7.
49 The balance sheet for Blue Frame Buildings for the year ended 30 June 2001 showed that the indebtedness of the directors was $335,207.30[46] The balance sheet for Blue Frame Buildings for the year ended 30 June 2002 showed that the loan to directors had increased from $381,271.50 for the year ending June 2001 to $484,801.14 in the year ended 30 June 2002.[47]
[46] Exhibit 9 p 184.
[47] Exhibit 10, p 193.
50 The balance sheet for Blue Frame Buildings as at 30 June 2003 shows that Blue Frame Buildings owes Greg Brassil the sum of $229,614.70. This entry which appears in the books of account seems to have brought about a change of more than $700,000.[48] Blue Frame Buildings went into liquidation in August 2003. The effect of that change reduced the assets available to Blue Frame Buildings to pay its creditors.
[48] Exhibit 36, p 227; transcript p 253.
51 Burness was taken to the document which formed part of the OHM letter which showed that Greg Brassil had contributed funds of $200,000 for “Business assets sold to BFB” on 1 July 1999 and $207,376 being “Funds contributed”. At the bottom of the page an amount of $263,182 was debited to the account being “Drawing to fund Raydox invest.” Burness said that “I would say it is a subsequent invention”[49]. Burness said that he has had a good look at the company records and the entry “business assets sold to BFB” does not appear in the ledger of Blue Frame Buildings.
[49] Transcript p 329.
52 Burness also stated that a submission for funding made by the National Australia Bank on 24 April 2003 states: [50]
Equity contribution towards the joint venture deal has been funded out of cashflow from Blue Frame Buildings Pty Ltd represented by intercompany asset loan of $263,182 as at 30 June 2002 on Blue Frame Building’s balance sheet.
[50] Exhibit 66, p 181.
Goodwill
53 The Blue Frame Buildings accounts for the year ended 2002 values the goodwill of Blue Frame Buildings at $155,000.
54 Jones said that he had no idea as to the basis for the entry of goodwill of $155,000 in the balance sheet for Blue Frame Buildings for the year ended 1999.[51]
[51] Exhibit 7.
55 Jones said that he was aware that XBFB formerly owned the Blue Frame Buildings business. Jones said that he was also aware that there was a transaction whereby Blue Frame Buildings Pty. Ltd. acquired the assets of XBFB.
56 In cross-examination Jones agreed that he was familiar with XBFB, that it had previously traded as Blue Frame Buildings, that Greg Brassil was its director, and that the business that was being conducted was the construction of metal frame buildings which was the same business that was conducted thereafter by Blue Frame Buildings. Jones said that he did not have knowledge of Greg or Heather Brassil conducting a business for the purposes of sale of steel sheds other than through Blue Frame Buildings Pty. Ltd. Jones was aware that Blue Frame Buildings Pty. Ltd., the original company, changed its name so that the new company could continue to use and trade under the name Blue Frame Buildings. Blue Frame Buildings Pty. Ltd. (ACN 081641983) registered the business name of Blue Frame Buildings on 24 October 2001. The registration of the business name commenced on 1 October 2001 and expired on 24 October 2004.[52]
[52] Exhibit 74.
57 In cross-examination Jones agreed that in 1998 Blue Frame Buildings Pty. Ltd. which had assets of $2.4 million and had liabilities of $2.4 million transferred those to a new company. That new company became the plaintiff, Blue Frame Buildings Pty. Ltd. and the old company changed its name to XBFB Pty. Ltd. From that point onwards Blue Frame Buildings Pty. Ltd. continued to trade.
58 Jones agreed in cross-examination that the right to use the name “Blue Frame Buildings” belonged to Blue Frame Buildings Pty. Ltd.
59 Yet on 1 July 1999 Jones, as director of Oglesby Hughes McPhail, wrote a letter to Greg Brassil as director of Blue Frame Buildings Pty. Ltd.[53]
[53] Exhibit 75.
Dear Greg,
Re: Sale of “Blue Frame Buildings” Business Name
As per previous discussions we confirm the sale of the business name “Blue Frame Buildings” and the goodwill associated with the business name. The business name is currently held by Greg Brassil who wishes to transfer all rights and benefits to Blue Frame Buildings Pty Ltd. Based on the reputation and time that the name has been associated with the construction industry the value attached to the name is $200,000.
Further we understand that you had acquired these rights to the business name and associated goodwill prior to 20 September 1985 and that the resultant capital gain is therefore not subject to Capital Gains Tax.
Should you agree with the sale of the business name on the terms discussed could you please sign this statement to confirm that the transaction be recorded.
60 Greg Brassil signed that document as director of Blue Frame Buildings.
61 Jones did not agree that he advised Greg Brassil to do what was contained in the letter although he could not remember the details of the conversation that prompted him to write the letter.
62 In cross-examination Jones agreed that at the time he wrote the letter the transfer of the business from XBFB to Blue Frame Buildings had already taken place.
63 In re-examination Jones was shown a journal report prepared by Oglesby Hughes McPhail which recorded a journal entry for the year ended 2000 for “Goodwill”, “being purchase of goodwill associated with naming rights to ‘Blue Frame’ ”.[54]
[54] Exhibit K.
64 Greg Brassil was taken to the Questionnaire for Directors and Officers which he had signed (the questionnaire).[55] At the time of signing that document, Greg Brassil certified that the answers furnished to the questions contained in the questionnaire were true and complete to the best of his knowledge, information and belief. In response to the question of whether Blue Frame Buildings “took over any pre-existing business”, Greg Brassil provided the following details:
[55] Exhibit 1.
Vendor’s Date Acquired Price Paid Assets and Liabilities Goodwill Paid
| Name & Address | $ | Taken over by the | or Payable |
Company
| XBFB Pty Ltd | 13/02/98 | NIL | A = $2,468,088 | NIL |
| L = $2,468,088 |
65 In response to question 8 of the questionnaire, Greg Brassil stated that the date of commencement of the business was 13 February 1998.
66 However, despite the assertion in the questionnaire that Blue Frame Buildings did not pay any money for goodwill, Greg Brassil signed a letter dated 1 July 1999 stating that he was going to sell the business name of Blue Frame Buildings to Blue Frame Buildings Pty. Ltd. for $200,000.[56] This was 16 months after Blue Frame Buildings Pty. Ltd. acquired the business from XBFB. The proposal in the letter was that Blue Frame Buildings should pay Greg Brassil the sum of $200,000 for an asset that Greg Brassil did not have.
[56] Exhibit 75.
67 On 29 March 2006 Greg Brassil signed a Statement of Affairs (the Statement of Affairs) which was filed pursuant to the provisions of the Bankruptcy Act 1966 (the Bankruptcy Act).[57] At page 50 of that document Greg Brassil declared that the particulars set out in the statement were correct. In response to the question “moneys owed to you” Greg Brassil stated that he did not have any debts owed to him.
[57] Exhibit 51.
68 However paragraph 6B(b) of the revised further amended defence alleges that:
On or about 6 December 2001, the Plaintiff at the direction of Gregory James Brassil as director of the Plaintiff, transferred to the Defendant the sum of $256,997.000 from funds that he contributed to the Plaintiff between 1999 to 2003 as director’s loans. This was a loan by Brassil personally to the defendant and reduced the sum owed by the plaintiff to Brassil. Any sum in excess of the present entitlements of Brassil became a loan from the plaintiff to Brassil.
69 When Greg Brassil completed the statement of affairs, he did not disclose what would have been a debt owed to him by Raydox.
70 Contrary to the document attached to the OHM letter[58] and referred to in the above paragraph 35, Greg Brassil did not declare in the statement of affairs that he had sold, transferred or given away any assets worth more than $1000 in the last 5 years.[59] The document attached to the OHM letter states that Greg and Heather Brassil transferred funds totalling $184,546 to Blue Frame Buildings. In the Statement of Affairs which was filed pursuant to the provisions of the Bankruptcy Act 1966 Greg Brassil also said that he had not contributed to or otherwise assisted in the purchase or improvement of any asset valued over $1000 which was held by someone else.[60]
Did Greg and Heather Brassil contribute $263,181 to Blue Frame Buildings?
[58] Exhibit D.
[59] Question 33, exhibit 51.
[60] Question 35, exhibit 51.
71 I do not accept Greg Brassil’s evidence that he and his wife were owed money by Blue Frame Buildings through a directors loan account. I do not accept Greg Brassil’s evidence that he and his wife had been putting money into Blue Frame Buildings. I do not accept Greg Brassil’s evidence that the source of that money was the garage business that they were conducting.
72 The evidence given by Greg Brassil was unsatisfactory. The evidence he gave in this Court was contradicted by earlier statements he had made in the Statement of Affairs filed pursuant to the provisions of the Bankruptcy Act[61] and the answers he certified as correct in the Questionnaire for directors and officers of Blue Frame Buildings Pty. Ltd (In Liquidation)[62]. He was prepared to say what he thought would assist his case as opposed to a witness who was endeavouring at all times to give a truthful and accurate account of the facts.
[61] Exhibit 51
[62] Exhibit 1.
73 I am not satisfied on a balance of probabilities that business assets of $200,000 were sold to Blue Frame Buildings on 1 July 1999. Mr. Jones could not give any details about the identity of the licensor; nor could he give any details of the license agreement. The alleged transaction was not supported by any journal entries internal or otherwise which were made or evidenced by Oglesby Hughes McPhail. The defendant did not produce any document or other evidence of the transaction.
74 I am also not satisfied on a balance of probabilities that Greg and Heather Brassil contributed funds of $207,376 to Blue Frame Buildings as set out in the OHM letter.[63] Jones said that he did not know what those payments were. He said that he was acting on instructions, on what he was told by Greg Brassil. In cross-examination Jones also said that the Brassils maintained books of account of sorts but he was never satisfied with the quality of the records.[64]
[63] Exhibit D p 307.
[64] Transcript p 393.
75 Jones said that in his role as an external accountant he had an obligation to his client. Jones said that he would have accepted the majority of the statements made by Greg Brassil as truthful.[65] Jones said that he did not have an obligation to people who might be relying upon the accounts to whom those are published.[66] Jones said that he did not have an obligation to the bank. He did not have an obligation to the Taxation Department. “No, our obligation is to our client” [67]. This attitude is reflected in the letter he wrote to Greg Brassil on 1 July 1999 which confirmed the sale by Greg Brassil of the business name “Blue Frame Buildings” and the goodwill associated with that name. Jones agreed in cross-examination that the right to use the name “Blue Frame Buildings” belonged to Blue Frame Buildings Pty. Ltd. My overall assessment of Jones was that he was an unreliable witness.
[65] Transcript p 395.
[66] Transcript p 423.
[67] Transcript p 423.
76 The entries in the books of account of Raydox demonstrate a loan between the plaintiff and Raydox.[68] The trust tax return in the name of the G.J. Brassil Family Trust for the year ended 30 June 2002 acknowledges current liabilities of $263,181 and interest expenses of $6184.[69]
[68] Financial report for the G.J. Brassil Family Trust for the year ended 30 June 2002, Exhibit 39 pp 115- 117.
[69] Exhibit 46.
77 In this case Blue Frame Buildings charged interest to Raydox for 6 months and Raydox accepted liability to the plaintiff for that interest. That is entirely inconsistent with Greg Brassil’s claim that the moneys were advanced by Greg and Heather Brassil. It is entirely inconsistent with the statement of affairs signed by Greg Brassil and filed pursuant to the provisions of the Bankruptcy Act ; it is inconsistent with Greg Brassil’s evidence.
78 Greg Brassil claims that he was the one who lent the money to Raydox thereby signifying that there was a debt that would be owed from Raydox to Greg Brassil. However Greg Brassil denied that he had any debts owing to him in the statement of affairs which he signed on 29 March 2006. [70] Greg Brassil also stated that he had not contributed towards or otherwise assisted in the purchase or improvement of any asset valued over $1000 which is held by someone else.[71] Further in response to a specific question, Greg Brassil stated that the company did not owe him any wages, loans or any other money.[72]
[70] Exhibit 51.
[71] Question 35, exhibit 51.
[72] Exhibit 51.
79 The Court had before it in evidence that Raydox is a 50 per cent partner in a large commercial enterprise with gross assets valued in the range of $9 million and with net assets in the range of $3 million from which it earns income. Jones, who is and was the accountant of the partnership from 2001 through to the present time, stated that the books of account and records of the Jared, Brogan and Raydox partnership are kept properly and in a business-like fashion. They record the financial affairs of the partnership which include its obligations to file partnership tax returns, and are up to date. No records with respect to the partnership were produced. In the circumstances of this case, the Court is entitled to draw an inference that the failure by Raydox to produce the books of account of the partnership means that the books do not contain any information that would assist Raydox or support its claim that Raydox does not owe the money to the plaintiff and that Raydox owes or owed the money to the bankrupt Greg Brassil.
Statute of limitations
80 The plaintiff claims that the loan by Blue Frame Buildings to Raydox is evidenced by the journal entry contained in the financial report of the G.J. Brassil Family Trust for the year ended 30 June 2002.[73] The defendant conceded that loans can be made by journal entry.[74]
[73] Exhibit 39.
[74] Paragraph 7, defendant’s written submissions dated 10 December 2010.
81 In VL Finance Pty Ltd v Legudi[75] Nettle J stated that in the absence of any suggestion of sham there is no reason why loans agreed to be made by a company cannot be created orally or by conduct, and be sufficiently evidenced by book entry. In Hancock Family v Porteous[76] Anderson J held that a company’s books and accounts are admissible as prima facie evidence of the transactions recorded in them.
[75] [2003] VSC 57, para 30.
[76] (1999) 151 FLR 191, para 49.
82 The defendant referred to Ogilvie v Adams[77] and submitted that the time of the loan runs from the date of the loan where there are no terms. I accept the defendant’s submission. In Ogilvie v Adams Fullagar J expressed the common law principle in the following terms [78] :
The common law has always regarded the fact of indebtedness as a continuing detention by the debtor of the creditor’s money, and this whether the creditor brought an action of debt or an action in indebitatis assumpsit. Therefore if A lends money to B, then instantly B is detaining A’s money. In order to prevent a cause of action for recovery arising in A instantaneously on paying the money, the parties must expressly contract out of that situation by words clearly inconsistent with that situation.[79]
[77] [1981] VR 1041, 1043.
[78] [1981] VR 1041, 1043.
[79] See VL Finance Pty Ltd v Legudi [2003] VSC 57, para 40.
83 The defendant submitted that the National Australia Bank statement for the plaintiff shows that the sum of $256,997 was transferred by the plaintiff to Camerons’ Trust Account on 19 December 2001 by way of internet Bpay transfer.[80]
[80] Defendants written submissions paragraph 3, Raydox Court Book p106.
84 Section 5(1)(a) of the Limitation of Actions Act 1958 provides that actions founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.
85 Raydox contends that the plaintiff’s claim is statute barred. The defendant submitted that the cause of action accrued on 19 December 2001 and that the limitation period expired on 19 December 2007. As the writ was filed on 6 June 2008, more than 6 years have expired from the date the loans were made.
86 The Limitation of Actions Act 1958 provides that where a person liable for the debt acknowledges the claim, the right shall be deemed to have accrued on and not before the date of the acknowledgment. The plaintiff contends that Raydox acknowledged its debt to Blue Frame Buildings in the tax return for the G.J. Brassil Family Trust for the period from 1 July 2001 to 30 June 2002.[81]
[81] Exhibit 46.
87 Counsel for Raydox, Mr. Turner, referred to Stage Club Ltd. v Millers Hotels Pty. Ltd.[82] and submitted that the date of acknowledgment is the date to which the acknowledgment refers, not the date of signature. In the case of a balance sheet, it speaks from the end of the relevant financial period.[83] By analogy, the tax return also speaks from the end of the relevant financial period which in this case is 30 June 2002. Counsel for the plaintiff, Mr. Lapirow, submitted that the plaintiff’s right of action is deemed to have accrued on and not before 30 June 2002.
[82] [1981] 150 CLR 535.
[83] In re Brookers (Aust) Ltd (in Liquidation) v Pridham (1986) 41 SASR 380.
88 The defendant also contends that the plaintiff cannot prove that the tax return for the G.J. Brassil Family Trust for the period from 1 July 2001 to 30 June 2002[84] has been signed by a director of Raydox. A signed tax return for 2002 was not produced.
[84] Exhibit 46.
89 In VL Finance Pty Ltd v Legudi [85] Nettle J concluded that what amounts to an acknowledgment is a question of construction but that it need not specify the amount of the debt precisely, provided it is ascertainable from extrinsic evidence and, as with the Statute of Frauds, it is permissible to combine a number of instruments in order to make up the one acknowledgment.[86]
Was the tax return signed by the person making the acknowledgment?
[85] [2003] VSC 57, para 60.
[86] See also McGuffie v Burleigh (1898) 78 LT 264; Jones v Bellgrove Properties Ltd [1949] 2 KB 700 and Dungate v Dungate [1965] 1 WLR 1477.
90 In cross-examination Jones was referred to the “Copy Trust Account Tax Return prepared for GJ Brassil Family Trust” dated 30 June 2002 which was listed OHM-16 in the list of documents inspected at OHM accountants.[87] Jones was asked the following questions:[88]
[87] Exhibit 60
[88] Transcript pp 460 – 461.
There is a document there OHM16 and that indicates copy trust account tax return prepared for the GJ Brassil family trust?...Yes
That document was your copy of the original tax return, is that correct?...That’s correct.
That document was lodged by your firm on behalf of Raydox, is that correct?...I would think so.
And in order for that to be lodged with the tax department the person who knew about it which would be the director would have had to have signed something or authorised you to sign it on his behalf?...If it’s been lodged that would be correct, yes.
If it was lodged by electronic lodgement would you retain in your files the executed document with all the pages signed by the taxpayer?...It should be there, yes.
It would be inconsistent with the ordinary arrangements of any documents prepared by your office for the tax return not to have been executed and lodged?...It’s not followed through with but the majority of returns prepared are lodged.
And there’s no reason for you to suspect that in fact this 2002 return was not lodged?...No.
In that 2002 return do you recall that there was an income allocation to the GJ Brassil family trust of about $6000 and a corresponding deduction for interest payable for the same amount?...No, I’m not familiar with that.
If the tax return demonstrates that and the tax return also demonstrates that the loan was obtained from Blue Frame Building, that would have to be truthful, would it not?...The funds came from Blue Frame Buildings, yes.
91 Jones was then cross-examined[89] about the G.J. Brassil Family Trust tax return for the period from 1 July 2001 to 30 June 2002[90] which was discovered by Raydox.[91]
[89] Transcript p 462-463.
[90] Exhibit 46.
[91] Defendant’s discovered documents 5.
Would you look at page 2 of that tax return and there’s a claim in that tax return in reduction of assessable income of a payment of interest of $6,100 odd?...Yes.
Which offsets what would otherwise be a taxable income in that particular year?...Correct.
That document was accepted by the director of Raydox, is that correct?...I think so.
And on the tax return by itself it doesn’t identify who the money is owed to, is that correct?...On the tax return no, that’s correct.
It doesn’t identify if the money was actually paid either, is that correct?...That’s correct.
And to your knowledge the money was never paid although it was claimed as a deduction?...Correct.
And what then follows is that in support of that you had prepared financial reports for the family trust for the year ended 2002, would that be correct?...Correct.
When you look at that at p117, this financial report prepared by your office identifies that the liability is a loan to Blue Frame Buildings?...Correct.
And if you have a look at page 119 you prepared this for Mr Brassil’s signature on 30 April 2003, is that correct?...That’s correct, yes.
92 Jones referred to the financial report for the G.J. Brassil Family Trust for the year ended 30 June 2002[92] and said that the accounts attached to that report were prepared by OHM. Jones reviewed the final product.[93] Jones agreed that he signed the compilation report which formed part of the financial report.[94]
TO THE G.J. BRASSIL FAMILY TRUST
Scope
On the basis of information provided by the trustee of The G.J. Brassil Family
Trust, we have compiled in accordance with APS 9 ‘Statement on Compilation
of Financial Reports’ the special purpose financial report of The G.J. Brassil
Family Trust for the period ended 30 June 2002, as set out in the attachedProfit and Loss Statement, Balance Sheet and Notes to Financial Statements.[92] Exhibit 39.
[93] Transcript p 376-377.
[94] Exhibit 39.
93 The document was then sent to the director, Greg Brassil.[95]
[95] Transcript p 378.
94 The profit and loss statement included in that financial report indicates that the interest paid included a payment of $6184 and that the current liabilities included a loan to Blue Frame Buildings of $263,181.[96]
[96] Exhibit 39.
95 The financial statements for Blue Frame Buildings for the year ended 30 June 2002 were prepared by OHM. [97] Jones agreed that when Greg Brassil was provided with these reports by OHM, the information contained within these statements came to the knowledge of not only Blue Frame Buildings but also to the knowledge of Raydox and Nazaire, given that Greg Brassil was the director of all three companies.[98] Jones said that the financial statements for Blue Frame Buildings for the year ended 30 June 2002 would have been bound because they were final reports.[99]
[97] Exhibit 10.
[98] Transcript p 419.
[99] Transcript p 420.
96 Jones was then asked about the work sheet prepared by OHM Chartered Accountants on 6 December 2002:[100]
[100] Exhibit 38.
Could you look in the supplementary court book, the one that has the figures
2201, is that not a working sheet of your firm? …2201?
Yes?...Yes, it is.
Is it not prepared on 6 December 2002?...Yes
Does it purport to be an entry for the financial year 30 June 2002?...It does.
Does it identify that on 31 December 2001 a loan was made by Blue Frame
Buildings to Raydox?...It does.
And then does it indicate on 30 June 2002 that there is a profit distribution from
the Brogan, Jared Raydox partnership of $6184?... that is what it says, yes.
And $6184 is interest of 5 per cent on that money?...Yes.So what this records as at December 2002 immediately before the financial returns that you prepared for the trust in 2003 was that the family trust received a loan from Blue Frame and paid interest to Blue Frame?...Correct.
All those matters of course are post-dating 8 October 2002?...Post dating.
Post-dating means done after?...The work paper was done after, yes.[101][101] Transcript pp 467 – 468.
97 Mr Turner conceded that the evidence suggests that the tax returns have been signed, if you accept that the taxation returns have been lodged.[102]
[102] Transcript p 594; paragraph 31 defendant’s written submissions dated 10 December 2010.
98 A similar fact situation arose in Tapiolas v Tapiolas[103]. In the course of his judgment Thomas J stated:
A considerable number of documents have been referred to as acknowledgments and these fall into three categories. Firstly, there are taxation returns of the partnership from 1973/74 up to and including 1983/84. The returns up to and including that for 1978/79 recognize the loan in the annexed balance sheets. The copies presented in evidence are those retained by the accountants who were the taxation agents of the partnership at all material times. They do not contain the signatures of the person who signed them on behalf of the partnership, but the evidence of the accountant, Mr. Menzies, included his office practice whereunder he duly forwarded the original to the client and whereunder the signed original from the client was returned to his office before lodgment with the Commissioner of Taxation.
This evidence satisfies me that the original of each of these returns was signed by a partner or person duly authorized to sign same on behalf of the partners. Of course, it is impossible to find by whom any particular return was signed, but I do not think that a specific finding identifying a particular signatory is necessary under the Act. In short, although there is no primary evidence of the signature relied on, there is sufficient secondary evidence of the fact that there was written acknowledgment by some duly authorized person. That, I think, is sufficient to constitute an acknowledgment. Of course, the original document is in the possession of the Commissioner for Taxation and cannot be subpoenaed or otherwise obtained. No submission was made to me on the effect of the Income Tax Assessment Act on this aspect. There was no submission that reliance may not be made upon secondary evidence of the content of the original tax return.
[103] [1985] 2 Qd R 310, 315.
99 In Braema Pastoral Company Ltd. & Anor v Hutchison[104] it was submitted that the court should draw an inference that the deceased was not paying income tax. In the course of his judgment Handley JA stated:
In my opinion no such inference should be drawn. The presumption in the absence of evidence is one of legality and regularity. In my opinion the same presumption should be applied in the present case as is applied where secondary evidence is given of a lost document which is liable to stamp duty. In the absence of evidence to the contrary the presumption is that the lost document was duly stamped and the evidentiary onus of establishing a case to the contrary lies upon the party who asserts it. See Marine Investment Company v Haviside [1872] LR 5 HL 624 at 631.
I conclude, therefore, that in the absence of evidence to the contrary this Court should proceed on the presumption of legality and regularity and this means that this Court should infer that the deceased was lodging tax returns and paying income tax. There is the widow’s evidence earlier referred to and no evidence to the contrary. Such other evidence as does exist is consistent with tax having been paid.
[104] [1993] NSWCA 33 (Unreported, Meagher, Handley and Powell JJA, 9 November 1993).
100 In this case Jones gave evidence that a tax return was prepared for the G.J. Brassil Family Trust for the financial year ended 30 June 2002, that he retained a copy of the original tax return and that in the ordinary course the tax returns which OHM prepared were signed by the client and lodged. I am satisfied that the G.J. Brassil Family Trust tax return prepared by OHM for the financial year ended 30 June 2002 was lodged at the Taxation Office.
101 The defendant called Greg Brassil to give evidence. He did not assert that the G.J. Brassil Family Trust tax return prepared by OHM for the period from 1 July 2001 to 30 June 2002 was not signed nor lodged.
102 Having considered the whole of the evidence, I am satisfied on a balance of probabilities that the original of the tax return for the G.J. Brassil Family Trust for the year ended 30 June 2002 was signed by Greg Brassil who was the sole director of Raydox at that time. In that return there is a claim that for the tax year ended 30 June 2002, there were interest expenses of $6184. The key financial information at items 28, 29 and 30 of that return state that there was a current liability of $263,181. The evidence given by Jones and the financial report for the G.J. Brassil Family Trust which Jones prepared and signed clearly indicates that the current liability of $263,181 was a loan by Blue Frame Buildings.
Was the acknowledgment made to the creditor?
103 The defendant contends that the acknowledgment was not made to the
26
person whose claim was being acknowledged as required by s.25(2) of the
Limitation of Actions Act 1958.104 In Stage Club Ltd. v Millers Hotels Pty. Ltd.[105] Wilson J referred to the following passage from the judgment of Slade J in In re Compania de
Electricidad: [106]
In my judgment, though no authority has been cited to me which either confirms or rejects such proposition, a written acknowledgment cannot be said to be ‘made to’ a creditor or his agent, within the meaning of s.24(2) unless either (a) it is delivered to the creditor or his agent by or with the authority of the debtor or his agent or (b) it is expressly or implicitly addressed to and is actually received by the creditor or his agent.
In my judgment, in case (a) it would not matter that the acknowledgment was not, according to its terms, expressly or implicitly addressed to the recipient. In case (b) it would not matter that the acknowledgment reached the hands of the creditor otherwise than by or with the authority of the debtor. In either case, however, it would be necessary that the creditor should actually receive the acknowledgment before he could rely on it.
A company’s balance sheet must in my judgment be regarded as implicitly addressed to (among other persons) those creditors whose debts are referred to in it. It follows that …an effective ‘acknowledgment’ of a debt must be said to have been ‘made’ by the company to any creditor who can establish by appropriate evidence that (i) he has actually received, from whatever source, a copy of a balance sheet of the company, signed by the directors of the company and referring to ‘sundry creditors’, (ii) he is one of the ‘sundry creditors’ so referred to. In such circumstances the balance sheet of the company would constitute an effective acknowledgment of the relevant debt, not as at the date on which it was actually signed by the directors or received by the creditor, but as at the date of the balance sheet, being the date to which the signature of the directors related; and the cause of action would be deemed to have accrued at that date…
[105] [1981] 150 CLR 535, 559-560.
[106] [1980] 1 Ch. 146.
105 In Hipworth v Mahar[107] the appellant signed documents in connection with a proposal for adjustment of debts under the Farmers Debts Adjustment Act 1935 (Vic). The document referred to a debt owed by the respondent and was forwarded to the proper authority under the Farmers Debts Adjustment Act. The court held that[108] :
There is thus seen, we think, to be a substantial body of authority in favour of the view that an admission by a bankrupt in his statement of his affairs that a debt is owing to a particular creditor must …be regarded as a sufficient acknowledgment “given to” the creditor concerned, and available as such in subsequent proceedings in which the debtor claims that His debt is barred by a statute which makes time run anew from the date of an acknowledgment given by him to the creditor…..The admission is not made directly to the creditor, but it is made with the intention that it shall be communicated to the creditor and for the purpose of enabling a compromise of rights as between all creditors.
[107] [1952] 87 CLR 335.
[108] [1952 87 CLR 335, 344.
106 In this case Greg Brassil was the sole director of each of the plaintiff and Raydox in 2002 and 2003. The income tax return for the G.J. Brassil Family Trust for the period from 1 July 2001 to 30 June 2002 records that Raydox had a current liability of $263,181 to Blue Frame Buildings. When Greg Brassil signed the income tax return, the liability of Raydox to Blue Frame Buildings came to the knowledge of Blue Frame Buildings where Greg Brassil was the sole director. The acknowledgment of the indebtedness of Raydox was received by Greg Brassil as the sole director of the plaintiff. Therefore Raydox acknowledged its indebtedness to Blue Fame Buildings in the tax return for the G.J. Brassil Family Trust for the period from 1 July 2001 to 30 June 2002.
Conclusion
107 Accordingly the limitation period would be extended to run from 30 June 2002 being the date when the indebtedness of Raydox was acknowledged in the income tax return of the G.J. Brassil Family Trust for the year ended 30 June 2002. As the writ was filed on 6 June 2008, the plaintiff is not barred from bringing these proceedings against Raydox.
108 For the reasons given, I am satisfied that Blue Frame Buildings advanced the sum of $256,997 to Raydox and that Blue Frame Buildings is entitled to payment of that amount together with interest. The plaintiff is entitled to judgment for the sum of $263,181 which includes interest which has been capitalised.
Nazaire claim
109 The plaintiff does not pursue the claim for $180,513.44 against Nazaire in its
28
own right.[109] The plaintiff claims $827,328 against Nazaire as trustee of the Brassil Property Unit Trust. The claim is based on the financial accounts of the Brassil Property Unit Trust for the year ended 2003.[110] On the defendant’s own material, the Brassil Property Unit trust has acknowledged that an indebtedness exists of $827,328 to the plaintiff.[111] This figure is the same as at 30 June 2004.[112]
[109] The claim against Nazaire in its own right was asserted in paragraph 6 of the plaintiff’s amended statement of claim.
[110] Exhibit 15.
[111] Exhibit H.
[112] Exhibit 16.
110 Nazaire as trustee of the Brassil Property Unit Trust was the owner of a commercial property at 92 Benalla Road, Shepparton (the Shepparton property). The Shepparton property consisted of a relatively large commercial building and out-buildings and was leased and occupied by Blue Frame Buildings. It was from the Shepparton property that Blue Frame Buildings conducted most of its work. There were a number of discrete rooms on the first floor level. A number of the other companies of the Brassil Group also conducted their businesses from these premises.
111 Nazaire did not conduct business. It acquired a property at 47 Stenhouse Drive, Estelville New South Wales (the New South Wales property). There is no clear explanation as to the reason for Nazaire’s acquisition of the Shepparton property or the New South Wales property. After the New South Wales property was acquired, Nazaire received payment of rent. The actual moneys that were used for the acquisition of those properties and the moneys that were used for the construction of facilities upon those properties does not appear to have come from Nazaire’s own trading.
The debt owed by Nazaire Pty. Ltd. to Blue Frame Buildings – Evidence of Paul Burness
112 The financial statements of Blue Frame Buildings for the year ended 30 June 1998 record that the Brassil Property Trust was indebted to Blue Frame Buildings in the sum of $474,772.34 for the year ended 30 June 1998 and $478,207.30 in the year ended 30 June 1999.[113] I accept Burness’ evidence that these statements were prepared from the image data obtained from the computers of Blue Frame Buildings and are the records maintained by Blue Frame Buildings for the financial year ended 30 June 1999.
[113] Exhibit 7.
113 Burness stated that in the course of looking at the affairs of Blue Frame Buildings as liquidator, he was aware of construction work done by Blue Frame Buildings on behalf of other entities within the Brassil group including Raydox and Nazaire. He conducted extensive investigations to locate building contracts or any documents which could have quantified and identified the amounts that Blue Frame Buildings was charging for the work that was done. He said that it is clear that Blue Frame Buildings was paying significant expenses on behalf of Nazaire as trustee for the Brassil Property Unit Trust.
114 In the financial statements for Blue Frame Buildings for the year ended 30 June 2000[114] the loan to the Brassil Property Unit Trust is shown as $473,371.42. The balance sheet of Blue Frame Buildings for the year ended 30 June 2001 shows that the loan to the Brassil Property Unit Trust is $473,371.12. [115] The balance sheet for the year ended 30 June 2002 shows a loan of $474,391.12 to the Brassil Property Trust.[116]
Plaintiff’s financials for the year ended 30 June 2002 prepared by OHM[117] in relation to the 2002 financial position of Blue Frame Buildings.
[114] Exhibit 8.
[115] Exhibit 9.
[116] Exhibit 10, p193.
[117] Exhibit 10; transcript p 175.
115 Under the heading “Loan – Brassil Property Trust”, the ledger of Blue Frame Buildings, taken from the records of Blue Frame Buildings for the period 1 July 2001 to 30 June 2002[118], indicates an opening balance of $473,371.2 and a closing balance of $737,444.17.[119]
[118] Exhibit 10, p 215.
[119] Transcript p 175 -176. The figure of $473,371.12 is also reflected in the Balance Sheet of Blue Frame Buildings as the opening and closing balance for the same period – exhibit 9 p184, transcript p 176.
116 Burness prepared the following forensic reconstruction of the movements in the loan account of the Brassil Property Unit Trust.[120]
Brassil
Property Unit
[120] Transcript p 178, exhibit 55.
reconstruction
Details Debit Credit Balance Re
1/07/1998 Acquisition from XBFX P/L $ 474,772 $ 474,772 20 30/06/1999 Net Amount of Rent & Interest $ 9,575 $ 465,197 Pg 30/06/1999 Expenses paid by BFB per ledger of BFB $ 1,000 $ 466,197 Pg 30/06/1999 Expenses paid by BFB per ledger of BFB $ 709 $ 466,906 Pg 30/06/1999 Expenses paid by BFB per ledger of BFB $ 0 $ 466,906 Pg 30/06/1999 Expenses paid by BFB per ledger of BFB $ 1,726 $ 468,632 Pg 30/06/2000 Rent $ 180,000 $ 288,632 Pg 30/06/2000 Interest $ 24,774 $ 313,406 Pg 30/06/2000 Expenses paid by BFB per ledger of BFB $ 20 $ 313,426 Pg 30/06/2000 Expenses paid by BFB per ledger of BFB $ 310 $ 313,736 Pg 30/06/2000 Expenses paid by BFB per ledger of BFB $ 274 $ 314,010 Pg 30/06/2000 Expenses paid by BFB per ledger of BFB $ 135 $ 314,145 Pg 30/06/2000 Expenses paid by BFB per ledger of BFB $ 4,000 $ 318,145 Pg 30/06/2000 Expenses paid by BFB per ledger of BFB $ 0 $ 318,146 Pg 30/06/2000 Rates $ 9,298 $ 327,444 20 30/06/2000 Re‐allocate expenses $ 4,739 $ 322,705 20 30/06/2000 Re‐allocate rates to super contribution $ 9,298 $ 313,407 20 30/06/2000 Adjust rental charge $ 5,000 $ 318,407 20 30/06/2001
Rent
$ 57,200
$ 261,207
Pg Ad
30/06/2001 Interest $ 28,342 $ 289,549 Pg 30/06/2001 Credit per BFB Ledger $ 10,000 $ 279,549 Pg 30/06/2001 Expenses paid by BFB per ledger of BFB $ 3,630 $ 283,179 Pg 30/06/2001 Expenses paid by BFB per ledger of BFB $ 10,000 $ 293,179 Pg 30/06/2001 Expenses paid by BFB per ledger of BFB $ 4,444 $ 297,623 Pg 30/06/2001
Expenses paid by BFB per ledger of BFB
$ 21,192
$ 318,814
Pg Pg
30/06/2001 Fully Drawn Advance $ 150,000 $ 468,814 Ad 30/06/2001 Year end journal # 2 $ 10,611 $ 479,425 Pg 30/06/2001 Year end journal # 15 $ 7,000 $ 486,425 Pg 30/06/2002 Rent $ 198,000 $ 288,425 Pg 30/06/2002 Interest $ 36,699 $ 325,124 Pg 30/06/2002 Expenses paid by BFB per ledger of BFB $ 700 $ 325,824 Pg 30/06/2002 Expenses paid by BFB per ledger of BFB $ 320 $ 326,144 Pg 30/06/2002 Expenses paid by BFB per ledger of BFB $ 13,053 $ 339,197 Pg 30/06/2002 Expenses paid by BFB per ledger of BFB $ 250,000 $ 589,197 Pg 30/06/2002 Expenses paid by BFB per ledger of BFB $ 233 $ 589,430 Pg 30/06/2002 Expenses paid by BFB per ledger of BFB $ 200 $ 589,630 Pg 30/06/2002 Expenses paid by BFB per ledger of BFB $ 291 $ 589,921 Pg 30/06/2002 Expenses paid by BFB per ledger of BFB $ 233 $ 590,154 Pg 30/06/2002 Expenses paid by BFB per ledger of BFB $ 291 $ 590.445 Pg 30/06/2002 Unknown $ 13,819 $ 629,666 30/06/2003 Transfer of Bank account to Blue Frame $ 1,040 $ 628,626 Pg 30/06/2003 Construction Costs Paid by BFB $ 198,000 $ 826,626 Pg 30/06/2003 Expense paid by BFB $ 703 $ 827,329 Pg 30/06/2004 $ 827,329 Pg 117 The analysis is taken from the books of Nazaire made available to the plaintiff and cross-referenced to the books of Blue Frame Buildings. I accept Burness’ evidence that he had regard to all the books of account of Blue Frame Buildings and the ledgers of Nazaire which he had available to him.
118 Burness stated that some documents that appear to have some effect on some of these figures were produced by Nazaire for the first time on the first day of the trial.[121] Burness said that he took into account the journal entries prepared by the external accountant. I accept Burness’ evidence that he took a conservative approach for the purpose of this forensic reconstruction.[122]
Statute of Limitations
[121] Transcript p 166.
[122] Transcript p 201.
119 The defendant referred to the balance sheet in the tax return for the Brassil Property Unit Trust for 30 June 1999 which shows an unsecured loan liability of $468,632.[123] The defendant referred to the evidence of Burness and submitted that as at 12 January 2002 the liability of Nazaire to Blue Frame Buildings was $629,665.[124] The defendant referred to Ogilvie v Adams[125] and submitted that where there is a loan of money and nothing is said as to repayment, the money is repayable instanter. The defendant submitted that Blue Frame Buildings’ claim for the sum of $629,665 is statute barred because the Writ in this proceeding was filed on 6 June 2008, which is more than six years after the debt became due. The plaintiff contends that Nazaire has acknowledged the plaintiff’s claim and has made payments in respect thereof thereby extending the limitation period pursuant to s24(3)(b) of the Limitations of Actions Act 1958.
Signed acknowledgment of debt
[123] Exhibit E.
[124] Transcript p338.
[125] [1981] VR 1041 at 1043.
120 The defendant submitted that an acknowledgment of debt must be signed by the person making the acknowledgment. The defendant submitted that there is no signed balance sheet within the limitation period signed by a director of Nazaire. However the defendant conceded that the evidence suggests that tax returns acknowledging the debt were probably signed and lodged.[126]
[126] Paragraph 31, defendant’s written submissions dated 10 December 2010.
121 The tax return for the year ended 30 June 2003 indicates that the total indebtedness of the Brassil Property Unit Trust was $827,328.[127] A document prepared by OHM headed “Brassil Property Unit Trust Annual General Ledger” indicates that the opening balance of the loan to Blue Frame Buildings on 30 June 2003 was $629,664.87. The closing balance was $827,327.87[128]. This is the same figure reflected in the income tax return prepared for the 2003 tax year. Further documents headed “Loan – Blue Frame Buildings Pty. Ltd.”[129] and “Loan Account Movements – Brassil Property Unit Trust” [130] respectively indicate that the closing balance of the loan account was $827,327.87.
[127] Exhibit 15, p 287.
[128] Exhibit 15, p296.
[129] Exhibit 15, p 296.
[130] Exhibit 15, p298.
122 The 2004 tax return for the Brassil Property Unit Trust also indicates that the current liability of the Brassil Property Unit Trust was $827,328.[131] Burness identified that liability as the loan owed to Blue Frame Buildings.[132] A further document prepared by OHM and headed “Statement of financial position for the year ended 30th June 2004” also lists the same amount of $827,328 as current liabilities “loans – Unsecured”.[133]
[131] Exhibit 16, p306.
[132] Transcript p 224.
[133] Exhibit 16, p 313.
123 In the tax return prepared by OHM for the Brassil Property Unit Trust for the period 1 July 2004 to 30 July 2005, the trustee is stated to be Nazaire Pty. Ltd. and the current postal address “OHM Australia, 77 Station Street, Malvern”.[134] That return indicates that the New South Wales property was sold and that the consideration received for the sale of that property (after adjustments) was $617,311.62. Under the heading of “current liabilities” in the statement of financial position prepared by OHM for the year ended 30th June 2005, the “Loans – Unsecured” figures was reduced from $827,328 (2004) to $210,016 (2005).[135]
[134] Exhibit 17.
[135] Exhibit 17, p330.
124 Jones agreed that OHM prepared the tax returns for the Brassil Property Unit Trust for the year ended 30 June 2005[136], for the year ended 30 June 2004, for the year ended 30 June 2003 and the year ended 30 June 2002. Jones agreed that those returns would have been shown to, and accepted, and executed by a director of Nazaire. Jones said that his office does not lodge tax returns without seeing a signed copy. Jones agreed that bearing in mind that OHM was doing the work for this trust for a number of years, it would be unusual to have lodged the 2005 return, without having previously lodged the returns for 2004, 2003 and 2002.[137] In cross-examination Jones agreed that if there were documents in his files which had been provided to Nazaire, the overwhelming inference is that they were signed and accepted.[138]
[136] Exhibit 18.
[137] Transcript p 496.
[138] Transcript p 496.
125 The financial report prepared for the Brassil Property Unit Trust for the year ended 30 June 2005[139] indicates that the amounts listed for the “Loans- Unsecured” by the Brassil Property Unit Trust were reduced in 2005 from $827,328 (2004) to $210,016 (2005).[140] That document was signed by Mr. Keith Jones.[141] That document was also signed by Heather Brassil on 23 October 2006.[142] Mr Turner conceded that Heather Brassil’s signature is an acknowledgment that that amount of money is owed to Blue Frame Buildings. “$210,000 is all we will be haggling about and costs.”[143]
[139] Exhibit 18.
[140] Exhibit 18, p346.
[141] Exhibit 18, p349.
[142] Exhibit 18 p 352.
[143] Transcript p 229.
126 In paragraph 9B of its further amended defence, the defendant alleges that if there were any loan by the plaintiff to Nazaire, the alleged loan was repaid in full upon settlement of the sale of the New South Wales property. Nazaire made the following allegations in the particulars to paragraph 6B of the further amended defence dated 19 October 2010:
(a) In or about 2001, the Defendant purchased a property at Stenhouse Drive, Newcastle in the State of New South Wales (The Newcastle Property). The funds for the purchase were derived from a loan acquired by the Plaintiff through the National Australia Bank in the sum of approximately $500,000 (The NAB loan). (b) In or about January 2005, the Newcastle property was sold at which stage the proceeds of sale in the sum of approximately $600,000 were repaid to the Plaintiff. (c) The said repayment was made by the sum in question being paid in reduction of the National Australia Bank loan referred to in (a) above. (d) The repayment was made on or about 21 January 2005 at settlement by the purchaser’s funds being applied in reduction of the relevant loan facility with the NAB.
127 I do not accept the defendant’s claim that the payment of $600,000 to the National Australia Bank constituted a payment by Nazaire to the plaintiff.
128 On 1 May 2003 Nazaire executed a Guarantee and Indemnity (the guarantee and indemnity) to secure the obligations of Blue Frame Buildings to the National Australia Bank.[144] It would appear from documents which the defendant tendered from the National Australia Bank, that Nazaire provided a first mortage over the New South Wales property to the National Australia Bank.[145]
[144] Exhibit L.
[145] Exhibit B, p 210.
129 The Vendors settlement statement for the New South Wales property states that the balance paid to the National Australia Bank on the sale of the New South Wales property on 21 January 2005 (after adjustment for rates,rent and interest) was $572,679.49.[146] In the Statement of Financial Position for the Brassil Property Unit Trust for the year ended 30 June 2005, OHM deducted the sum of $617,312 from the unsecured loans listed beneath the heading of current liabilities.[147] Nazaire was not entitled to set off the moneys it paid to the National Australia Bank against its indebtedness to Blue Frame Buildings.
[146] Exhibit 20, p394.
[147] Exhibit 20, p380.
130 The right to an indemnity which a surety has against the principal debtor does not arise at law until the surety has discharged its debt.[148]
[148] Abigroup Ltd. v Abignano (1992) 39 FCR 74, 81.
131 In re Bruce David Realty Pty Ltd (in liquidation)[149] the Court considered whether a right of set-off could be claimed by a guarantor after the principal debtor had been made bankrupt. The Court said that the set-off, if allowable, would mean that the guarantor company would be recouped in full out of the bankrupt’s estate the amount of its liability under the gurantee, instead of being entitled pari passu with other creditors of the bankrupt to a dividend from such estate. At page 243 Adam J held that:
…until the surety had discharged his liability, wholly or in part, to the principal creditor, the bankrupt is not indebted to him. The principle of mutual dealings does not permit of a surety setting off his claim to be indemnified by the bankrupt principal debtor, save to the extent that at the commencement of the bankruptcy the surety has paid the guaranteed debt to the principal creditor.
[149] [1969] VR 240.
132 The payment by Nazaire to the National Australia Bank was made after the plaintiff was placed into liquidation in August 2003. Nazaire’s entitlement to indemnity for the amount paid under the guarantee did not arise until January 2005.
133 Accordingly Nazaire is not entitled to set off the amount it paid to the National Australia Bank, being the proceeds of the sale of the New South Wales property, from the sum of $827,327.87.
134 Clause 14.1 of the guarantee and indemnity provides that until the National Australia Bank receives all amounts which the customer owes to the National Australia Bank, Nazaire could not take over any of the bank’s rights as creditor (known as subrogation) in respect of any amount paid by Nazaire to the bank. As the terms of the guarantee did not allow Nazaire to stand in the shoes of the National Australia Bank in respect of the payment of the proceeds of the sale of the New South Wales property, the payment by Nazaire to the National Australia Bank did not discharge any liability which Nazaire owed to Blue Frame Buildings.
135 Having paid the National Australia Bank, Nazaire has a claim against Blue Frame Buildings (in liquidation). However Nazaire is not entitled to stand in the shoes of the secured creditor. In this case Nazaire stands as an unsecured creditor. Nazaire does not gain the priority of a secured creditor.
136 In VL Finance Pty Ltd v Legudi Nettle J. stated: [150]
It is plain, however that an acknowledgment needs to be in writing and it needs to be signed by the debtor or his agent and it needs to be “given to the creditor”. On the other hand, it need not specify the amount of the debt precisely, provided it is ascertainable from extrinsic evidence and, as with the Statute of Frauds, it is permissible to combine a number of instruments in order to make up the one acknowledgment.
[150] [2003] VSC 57 at para 60.
137 In Jones v Bellgrove Properties Ld[151] the plaintiff’s claim was for the repayment of £1,807 being the balance of moneys lent by the plaintiff to the defendant between 1936 and May 1937. A writ was issued on October 20, 1947. By its defence the defendant pleaded that the debt did not accrue within six years before the action was brought and that the claim was barred by the Limitation Act, 1939. It was proved that at its annual general meeting held on December 31, 1946, the plaintiff presented to the shareholders the balance sheets of the company as at May 21, 1939,1940, 1941, 1942, 1943 and 1945. Contained in the balance sheets was the figure: “To sundry creditors £7,638”. No particular creditors were named in the accounts. Evidence was given by an accountant. His evidence was that the figure of £7,638 “to sundry creditors” included the debt of £1807 due and owing to the plaintiff. The plaintiff contended that the balance sheet constituted an acknowledgment of the debt within the meaning of the Limitation Act 1939.
[151] [1949] 2 KB 700.
138 Lord Goddard CJ held: [152]
I can see no reason why a balance sheet should not contain a good acknowledgment within the meaning of the Act. The acknowledgment was only of a sum due to a number of unmade persons; but the plaintiff established by evidence that he was one of the sundry creditors and that by his debt of 1,807l was included in the total sum acknowledged to be due to those creditors. In my view, therefore, the claim was not barred.
[152] [1949] 2 KB 700, 705.
139 Similarly in Dungate v Dungate[153] Diplock LJ held:
There is clear authority that an acknowledgment under this Act [Limitation Act, 1939] need not identify the amount of the debt and may acknowledge a general indebtedness, provided that the amount of the debt can be ascertained by extraneous evidence.
[153] [1965] 1 WLR 1477, 1487.
140 Russell LJ agreed with Diplock LJ and stated: [154]
The letter of February 23, 1962, is in my view equivalent to the deceased acknowledging to the plaintiff: “I owe you money.” This is a sufficient acknowledgment of the then indebtedness, and the quantum can be established, as it has been, by extrinsic evidence.
[154] [1965] 1 WLR 1477, 1488.
141 In this case the defendant conceded that Nazaire has acknowledged that it is indebted to Blue Frame Buildings in the Statement of Financial Position for the Brassil Property Unit Trust for the year ended 30 June 2005.[155] That statement was exhibited to the affidavit of Heather Jean Brassil on 27 October 2009 which was filed in the Supreme Court of Victoria. That statement contains an entry that the amount of the loans unsecured for the Brassil Property Unit Trust was $827,328 in 2004. This figure is confirmed in the annual general ledger of the Brassil Property Unit Trust headed “Loan – Blue Frame Buildings Pty Ltd” which confirms that the closing balance of the loan as at 30 June 2003 was $827,327.87.[156]
[155] Exhibit 20, p 380.
[156] Exhibit 20, p397.
142 Burness also gave evidence that Nazaire is indebted to Blue Frame Buildings in the sum of $827,328. As I have stated in the above paragraphs 126 to 135, Nazaire is not entitled to set off the amount it paid to the National Australia Bank against the amount it owes to Blue Frame Buildings. Nazaire acknowledged its indebtedness to Blue Frame Buildings when Heather Brassil signed the financial report for the Brassil Property Unit Trust as director of Nazaire on 23 October 2006. Accordingly I am satisfied that the plaintiff has established that Nazaire has acknowledged that it is indebted to Blue Frame Buildings in the sum of $827,328.
The acknowledgment must be made to the creditor
143 Although the defendant conceded that the tax returns were probably signed by a director of Nazaire, the defendant contends that the tax returns do not constitute an acknowledgment of Nazaire’s debt to Blue Frame Buildings because they were not made to the creditor, Blue Frame Buildings, as required by s.25(2) of the Limitation of Actions Act 1958.
144 In the course of other proceedings initiated by Nazaire in the Supreme Court, Heather Brassil swore an affidavit on 27 October 2009 in support of an application to pay moneys owed to the plaintiff by instalments under the provisions of the Judgment Debt Recovery Act (Heather Brassil’s affidavit). The parties to the proceeding in the Supreme Court were Blue Frame Buildings (plaintiff), Nazaire (first defendant) and Australian Securities and Investments Commission (second defendant). Heather Brassil produced the trust tax return for the Brassil Property Unit Trust for 2005.[157]
[157] Exhibits 19 and 20.
145 Copies of the last financial statements for Nazaire were exhibited to Heather Brassil’s affidavit.[158] Those financial statements contain a copy of the annual general ledger of Blue Frame Buildings from 1 July 2002 to 30 June 2003.[159] The opening balance of the loan to Blue Frame Buildings is $629,664.87. The closing balance is $827,327.87. The statement of financial position for the year ended 30 June 2005 records that the unsecured loans of Blue Frame Buildings were $827,328 for the 2004 year and the sum of $210,016 as “Loans- Unsecured” as a current liability.[160] Mr. Turner accepted that the Statement of Financial Position for the year ended 30 June 2005 is a true copy of that statement and did not object to the tender of that document as an exhibit.
[158] Marked with the letters HB1.
[159] Exhibit 20, p397.
[160] Exhibit 20, p 380.
146 The defendant Nazaire conceded that the sum of $210,016 shown in the accounts of Nazaire, which are attached to the affidavit of Heather Brassil and filed in the Supreme Court Proceedings, is an acknowledgment of debt for the purposes of s.25 of the Limitations of Actions Act 1958. In Stage Club Ltd v Millers Hotels Pty. Ltd.[161] Aitken J cited with approval the following passage of Sir Edward Sugden L.C. in Blair v Nugent : [162]
The next question is whether it is an acknowledgment to the person entitled thereto or his agent. The cases show that the Court has not, in that respect, restricted itself within narrow limits. If it be made in a schedule, affidavit or answer, it is sufficient, althought it may be said that in these cases it is made to the Court and not to the party. The decisions are, I think, right. They proceed upon a liberal, but yet a fair and just construction of the statute.
[161] [1981] 150 CLR 535, 561.
[162] (1846) 3 Jo. & Lat.668 at p. 677.
147 In VL Finance Pty. Ltd. v Legudi[163] Nettle J stated at paragraph 61:
later English authority is to the effect that facts stated in pleadings and affidavits in previous proceedings between debtor and creditor can constitute an acknowledgment (because, although they are made to the court, they are implicitly addressed to the creditor).[164]
[163] [2003] VSC 57.
[164] Flyn v Flyn [1969] 2 Ch 403, 411.
148 In Tapiolas v Tapiolas[165] Thomas J held that documents filed and used by the husband in a property settlement claim was a sufficient acknowledgment under s.35(3) of the Limitation of Actions Act 1974-1975 (Qd). In the course of his judgment Thomas J expressed the view that:
A liberal construction is afforded to the requirements of an acknowledgment. This is easy to understand when it is remembered that a statute of limitation merely suspends a remedy in contrast to extinguishing the debt.
[165] [1985] 2 Qd R 310.
149 Similarly in this case although Heather Brassil’s affidavit was filed in proceedings instituted by Blue Frame Buildings against Nazaire in the Supreme Court, the admissions contained in that affidavit were communicated to Blue Frame Buildings as plaintiff in that proceeding.
150 In my view Nazaire acknowledged the plaintiff’s claim when Heather Brassil signed the financial report prepared for the Brassil Property Unit Trust for the year ended 30 June 2005 on 23 October 2006[166]. For the reasons set out in the above paragraphs 120 to 142, Nazaire was not entitled to set off the sum of $617,328 from the amount of its indebtedness to the plaintiff. Accordingly the plaintiff’s claim against Nazaire is deemed to have accrued on 23 October 2006.[167]
Part payment
[166] Exhibit 18.
[167] Limitations of Actions Act 1958, s24 (3)(b).
151 Mr. Lapirow referred to the various statements and reports for Blue Frame Buildings for the year ended 30 June 2003 which were tendered as exhibit 36 and submitted that payments made by Nazaire in reduction of the loan to the Brassil Property Unit Trust are recorded in the plaintiff’s books of account.[168] The payments recorded under the heading “Loan –Brassil Property Trust” are as follows:
14/11/02 $10,000 5/12/02 $15,000 31/01/03 $ 6,600
1/ 03/03 $ 6,500 3/ 05/03 $ 6,771.50.
[168] Exhibit 36, p 230.
152 Mr. Lapirow submitted that at no stage was the liquidator challenged in cross- examination as to the accuracy or inaccuracy of the figures of the Nazaire debt. Mr Lapirow submitted that at no stage did the defendant call evidence from Jones or Greg Brassil about the accuracy of the Nazaire debt.
153 I am not satisfied on a balance of probabilities that the payments referred to Mr. Lapirow and recorded at page 360 of exhibit 36 are payments made by Nazaire to Blue Frame Buildings. These payments are not reflected in the reconstruction prepared by Burness.[169]
Conclusion
[169] See above paragraph 116.
154 For the reasons given, I am satisfied that Blue Frame Buildings advanced the sum of $827,328 to Nazaire and that Blue Frame Buildings is entitled to payment of that amount together with interest.
155 There should be judgment for the plaintiff for $827,328 in the Nazaire claim.
156 I will hear counsel on the form of the orders and costs.
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