Christopher Michael Williamson as Liquidator of Merlino Construction Services Pty Ltd (in Liq) v Hawkwood Holdings Pty Ltd - [2002] WASC 25

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: CHRISTOPHER MICHAEL WILLIAMSON as Liquidator of MERLINO CONSTRUCTION SERVICES PTY LTD (IN LIQ) -v- HAWKWOOD HOLDINGS PTY LTD [2002] WASC 25

CORAM: MASTER SANDERSON

HEARD: 13 DECEMBER 2001

DELIVERED : 21 FEBRUARY 2002

FILE NO/S: COR 233 of 2001

BETWEEN: CHRISTOPHER MICHAEL WILLIAMSON as Liquidator of MERLINO CONSTRUCTION SERVICES PTY LTD (IN LIQ) (ACN 080 182 994)
Plaintiff
AND
HAWKWOOD HOLDINGS PTY LTD (ACN 009 356 503)
Defendant

Catchwords:

Practice and procedure - Admissibility of certain parts of affidavits - Turns on own facts

Legislation:

Evidence Act1906, s 79C, s 79C(1), s 79C(2), s 79C(2a), s 79C(3)

Result:

Parts of affidavits struck out

Category: B

Representation:

Counsel:

Plaintiff: Mr K L Christensen
Defendant: Mr M C Hotchkin

Solicitors:

Plaintiff: Tottle Christensen
Defendant: Hotchkin Hanly

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Brooks v Heritage Hotel Adelaide Pty Ltd (1996) 20 ACSR 61
Calzaturificio Zenith Pty Ltd (In Liq) v NSW Leather & Trading Co Pty Ltd [1970] VR 605
Caratti v The Queen [2000] WASCA 279
Demondrille Nominees Pty Ltd v Shirlaw (1997) 25 ACSR 535
Halse v Norton (1997) 76 FCR 389
Leslie v Howship Holdings Pty Ltd (1997) 15 ACLC 459
Levi v Guerlini (1997) 24 ACSR 159
Melbase Corporation Pty Ltd v Segenhoe Ltd (1995) 13 ACLC 823
Minister for Transport v Francis & Woodings [2000] WASCA 149
Olifent v Australian Wine Industry Pty Ltd (1996) 19 ACSR 285
Olsson v Dyson (1969) 120 CLR 365
Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266
R v Connell (1996) 14 ACLC 32
Ramsay v Watson (1961) 108 CLR 642
Re The Walker Group Pty Ltd (1995) 13 ACLC 434
Rothmans Export Pty Ltd v Mistmorn Pty Ltd (In Liq) (1994) 15 ACSR 139
Sands & McDougall (Wholesale) Pty Ltd (In Liq) v FCT (1996) 22 ACSR 383
Smith v DCT (1997) 23 ACSR 611
Switz Pty Ltd v Globind Pty Ltd (2000) 18 ACLC 343
Taylor v ANZ Banking Group Ltd (1988) 6 ACLC 808
Toikan International Insurance Broking Pty Ltd v Plasteel Windows Australia Pty Ltd (1988) 15 NSWLR 641
Tourprint v Bott [1999] NSW SC 581

MASTER SANDERSON: This is the plaintiff's originating process seeking orders against the defendant for what are said to be unfair preferences or, in the alternative, uncommercial transactions. The amended originating process sought the following orders:
"1.a declaration that the payments totalling $500,688.00 made to the defendant between 8 February 1998 and 15 May 1998 are unfair preferences, or alternatively, a declaration that the payments totalling $620,688.00 made to the defendant between 5 December 1997 and 15 May 1998 are uncommercial transactions and are void as against the plaintiff;
2.an order that the defendant pay the sum of $500,688.00, or alternatively, the sum of $620,688.00 to the plaintiff, together with interest on that sum at the rate of 6% per annum pursuant to section 32 of the Supreme Court Act 1935 (as amended) from 4 February 1999 until payment or judgment herein, whichever is the earlier;
3.an order that the defendant do pay the plaintiff's costs of the originating process to be taxed."
At the commencement of the hearing, counsel for the plaintiff sought leave to further amend the originating process. The effect of the proposed amendment was to increase the amount said to comprise the uncommercial transaction by $120,000. Counsel for the defendant took objection to the amendment in large measure because the application was made so late in the proceedings. Counsel for the defendant pointed out that the amendment had been foreshadowed at a directions hearing a month or so prior to the return date of the originating process. At that time he had invited counsel for the plaintiff to seek any amendment prior to the hearing. That had not been done. Counsel for the plaintiff submitted that the late application in no way affected the defendant's position. It was not intended to adduce any more evidence to support the amended application and the defendant was not disadvantaged.
I indicated to the parties that I would refuse to allow the amendment. In my view the application was made too late. A defendant is entitled to know well before the hearing of an originating process the nature of the claim that it has to meet and the amount of that claim. In this case there was no reason offered for the late amendment. There was no dispute that the amendment had been foreshadowed some time prior to the hearing and it was simply the case no action had been taken. In the circumstances it was unfair and unreasonable to allow the amendment and it would have resulted in significant injustice to the defendant.
Prior to dealing with the merits of the application, both parties raised objections to the contents of the other party's affidavits. As the matter was argued, counsel for the plaintiff voiced his objections to which counsel for the defendant responded. The process was then reversed. Some of the objections were of no great moment - that is to say, a ruling one way or the other was not likely to have a significant effect on the outcome of the application. However, there was one objection taken by counsel for the defendant to an affidavit of the plaintiff which was, by mutual agreement, a matter of some significance. It is convenient if I deal with this objection first.
The objection related to the affidavit of the plaintiff sworn 6 July 2001. This is the main affidavit of the plaintiff in support of the application. Mr Williamson, the deponent, identifies himself as the liquidator of Merlino Construction Services Pty Ltd ("Merlino") and recounts the history of his appointment. He then states (in par 5) that having examined the books of Merlino he has identified the payments in an amount of $500,688 made by Merlino to the defendant between 8 February and 15 May 1998. By par 7 through to par 10 of his affidavit, Mr Williamson refers to and seeks to introduce into evidence certain financial records in his possession. Because of the significance of these paragraphs, I will quote them in full:
"7.Merlino's balance sheet as at 28 November 1997 generated internally, and based on Merlino's general ledger, debtors ledger, creditors ledger, cash book, wage records, asset register/depreciation schedule and contract files in respect of work in progress, shows that it had a net deficiency of assets of $73,826. Annexed hereto and marked 'CMW4' is a copy of Merlino's balance sheet as at 28 November 1997.
8.Based on Merlino's creditors ledger, a schedule of the creditors as at 31 March 1998 was compiled. The schedule shows that as at that date, Merlino owed creditors a total sum of $2,612,654.72. Of this amount, $991,612.21 had been owed for 90 days, and $440,764.22 for 60 days. Annexed hereto and marked 'CMW5' is a copy of Merlino's schedule of creditors as at 31 March 1998.
9.Merlino's profit and loss account which had been generated internally, and based on Merlino's sales records, purchase records, inventory records, contract files in respect of work in progress, and cash book, also shows that in the nine month period ending 31 March 1998, Merlino had net losses totalling $145,092. Annexed hereto and marked 'CMW6' is a true copy of Merlino's profit and loss statement for the period 1 July 1997 to 31 March 1998."
10.Merlino's balance sheet as at 31 March 1998 generated internally, and based on its general ledger, debtors ledger, creditors ledger, cash book, wage records, asset register/depreciation schedule and contract files in respect of work in progress, shows that as at that date, Merlino had a net asset deficiency of $144,992 (at book value) and $56,002 (at realisable going concern value) and a working capital deficiency of $104,405 (at book value) and $7,998 (at realisable going concern value). Realisable going concern value is the value which an asset or business has whilst an entity continues to trade as an operating venture. Book value is the value at which an asset is carried on a balance sheet, and it is its cost less its accumulated depreciation. Annexed hereto and marked 'CMW7' is a copy of Merlino's balance sheet as at 31 March 1998."
The defendant objects to each of these paragraphs of Mr Williamson's affidavit on the basis that he is seeking to introduce into evidence documents which are not properly admissible in proceedings such as these. For the purposes of the argument, attention was focussed on the document referred to in par 7 of Mr Williamson's affidavit. That is exhibit "CMW4" described as "Merlino's Balance Sheet as at 28 November 1997". Reference to the document itself shows that it is headed "Merlino - Balance Sheet". There then appears a list of assets and liabilities. It is clear from a reading of the documents that it in fact takes into account three separate corporations - Merlino and two other companies described as "Penta" and "Carlino". It then shows the value of various assets for the five months from December 1997 to April 1998. The document itself gives no indication who was the author, when it was drawn, the material used in its compilation and its status within the financial records of Merlino.
It was submitted on behalf of the defendant that the exhibits marked "CMW4" through to "CMW7" were hearsay and therefore inadmissible. (It is unnecessary for me to detail the contents of the other three documents in question. "CMW4" is representative of the documents sought to be tendered and the same arguments apply to each.) Counsel submitted that these documents, not being drawn by Mr Williamson personally, were inadmissible. He submitted that they could not be tendered pursuant to the provisions of the Corporations Act. The Act requires a corporation to keep written financial records: see s 286. The term "financial records" is defined by s 9 of the Act but does not include any of the documents in these exhibits. They are therefore not covered by the provisions of s 1305 of the Act.
The answer to the defendant's complaints is, I think, to be found in s 79C of the Evidence Act 1906. Relevantly, that section reads as follows.
"79C.Documentary evidence, admissibility of
(1)Subject to subsection (2), in any proceedings where direct oral evidence of a fact or opinion would be admissible, any statement in a document and tending to establish the fact or opinion shall, on production of the document, be admissible as evidence of that fact or opinion if the statement ¾
(a)was made by a qualified person; or
(b)directly or indirectly reproduces or is derived from one or other or both of the following ¾
(i)information in one or more statements, each made by a qualified person;
(ii)information from one or more devices designed for, and used for the purpose of, recording, measuring, counting or identifying information, not being information based on a statement made by any person.
(2)Where a statement referred to in subsection (1) is made by a qualified person or reproduces or is derived from information in a statement made by a qualified person, that person must be called as a witness unless ¾
(a)he is dead;
(b)he is unfit by reason of his bodily or mental condition to attend or give evidence as a witness;
(c)he is out of the State and it is not reasonably practicable to secure his attendance;
(d)all reasonable efforts to identify or find him have been made without success;
(e)no party to the proceedings who would have the right to cross-examine him requires him to be called as a witness;
(f)having regard to the time which has elapsed since he made the statement and to all the circumstances, he cannot reasonably be expected to have any recollection of the matters dealt with in the statement;
(g)having regard to all the circumstances of the case, undue delay, inconvenience or expense would be caused by calling him as a witness; or
(h)he refuses to give evidence.
(2a)Notwithstanding subsections (1) and (2), in any proceedings where direct oral evidence of a fact or opinion would be admissible, any statement in a document and tending to establish the fact or opinion shall, on production of the document, be admissible as evidence of that fact or opinion if ¾
(a)the statement is, or directly or indirectly reproduces, or is derived from, a business record; and
(b)the court is satisfied that the business record is a genuine business record.
(2b)Where a statement referred to in subsection (2a) is made by a qualified person that person shall not be called as a witness unless the court orders otherwise.
(3)This section makes a statement admissible notwithstanding ¾
(a)the rules against hearsay;
(b)the rules against secondary evidence of the contents of a document;
(c)that the person who made the statement or the person who made a statement from which the information in the statement is reproduced or derived is a witness in the proceedings, whether or not he gives evidence consistent or inconsistent with the statement; or
(d)that the statement is in such a form that it would not be admissible if given as oral evidence,
but does not make admissible a statement which is otherwise inadmissible."
Of these sections it is s 79C(2a) that is of particular importance. In this case, direct oral evidence of the balance sheet position of Merlino would be admissible. Evidence of that fact is to be found in exhibit "CMW4". The evidence of Mr Williamson is that he discovered this document among the business records of Merlino and it is therefore reasonable to assume that the information is derived from a business record, as is required by subs (2a)(a). On the facts in this case there is no reason to doubt that the business records upon which the exhibit is based is anything other than genuine. Certainly there is no evidence to the opposite effect. That being so, the balance sheet would, in my view, be admissible standing alone - without the need for any verification by Mr Williamson. Consequently it must be admissible as an exhibit to his affidavit.
The remaining objections to the evidence can be dealt with quite shortly. Remaining with Mr Williamson's affidavit, objection was taken to par 11 and that was conceded by the plaintiff. Paragraph 11 of Mr Williamson's affidavit will be struck out.
In relation to the affidavit of Marco Luigi Taddei, sworn 31 August 2001, objection was taken to the fourth sentence of par 15. The words in that sentence after the word "meeting" should be struck out. Objection was taken to the first sentence in par 17 and that was struck out without objection by the defendant. Otherwise Mr Taddei's affidavit will be admitted into evidence.
Turning to the affidavit of Paolo Pietro Antonelli, sworn 12 September 2001, the prefix "sub" which appears as the last word in the fourth line of the second paragraph will be struck out, as will the second sentence in par 4. Both these matters were conceded by counsel for the defendant. Counsel also conceded that the second and third sentences of par 8 should be struck out. I am satisfied that the rest of the affidavit can stand. It is true that Mr Antonelli offers his subjective view in relation to a number of matters. Whether or not this evidence is relevant is a matter which can be determined in the context of the hearing. If it is not, it will be put to one side. However, as the affidavit is framed, I am satisfied that apart from the paragraphs I have mentioned, it should stand.
Objection was then taken to certain paragraphs of the affidavit of Mr Taddei sworn 10 December 2001. Objection was taken to par 1 and the deponent's explanation of the whereabouts of Mr Baumgartel. I am satisfied that this material is unexceptional. The evidence merely indicates what has become of Mr Baumgartel and is not, as I read it, in any sense attempting to say what his evidence might have been. Certain other objections were taken to various paragraphs of this affidavit, but after clarification, those objections were withdrawn. However, the final sentence of par 6 is, I think, irrelevant and ought be struck out.
Finally, there is the affidavit sworn by Michael Charles Hotchkin on 11 December 2001. Objection is taken to par 6 of that affidavit and to the inclusion of exhibits "MCH5" through to "MCH10". It is said that the paragraph is hearsay and that on the final hearing of an application such as this, statements of information and belief are not permitted. In my view the objection is properly taken. It can easily be cured by having an affidavit sworn by Ms Robyn Amey and no objection could be raised to such an affidavit being admitted into evidence. The objection is technical.
Once objections were raised to the contents of affidavits, particularly that of Mr Williamson, a ruling was needed before the action could proceed. It now stands part‑heard. Consequent upon the publication of these reasons, one or other of the parties may seek leave to file further affidavit evidence. I will hear the parties as to the need for further programming orders.