Finlay v Silcon Industrial Pty Ltd

FINLAY & ORS v
 SILCON INDUSTRIES PTY LTD & ANOR
[2003] SASC 236

Full Court:  Doyle CJ, Nyland and Lander JJ

1. DOYLE CJ           This is an appeal by defendants against a judgment entered against them by the District Court.  The judgments were for the payment of money found to be owing to the plaintiff companies.

   Background

2. The proceedings in the District Court have a long and tangled history, stretching back to 1998.  The events in question began in about 1990.  To understand the issues, it is necessary to summarise the history.  I will be as brief as I can, and where possible will omit details that are not particularly important.

3. Silcon Industries Pty Ltd (“Silcon”) is a company that supplied and installed suspended ceilings and partitions in commercial properties.  Mr Donnelly was the principal shareholder of Silcon, and also a director.

4. In 1990 Mr Finlay agreed with Mr Donnelly to keep the books and records of Silcon, and to provide administrative support, for payment at the rate of $20 per hour.  It appears that over time he gradually assumed responsibility for an increasing range of work.  He became a signatory to Silcon’s bank accounts.  During that year he also agreed with Mr Donelly that if Silcon undertook work involving the installation of air-conditioning, he (Mr Finlay) would manage that work, and that the profits from it would be shared between Mr Finlay and Silcon.  These arrangements were informal.

5. The other shareholder of Silcon was wanting to retire.  During 1992 Findon Developments Pty Ltd (“Findon”) was formed with a view to Findon gradually taking over the business of Silcon.  The other shareholder did not have an interest in Findon.

6. During 1992 Mr Donnelly and Mr Finlay agreed that Mr Finlay would maintain the records and accounts for Findon, on the same basis as for Silcon.

7. At some time during 1992 it was agreed that Mrs Finlay would assist Mr Finlay in relation to the work to be done for Findon.  It seems that gradually she also assumed greater responsibilities.  She became a signatory to the cheque accounts of Findon.

8. It was also agreed during 1992 that if Findon undertook air-conditioning work, Mr Finlay would handle that work and that the profits of that work would be shared between Mr Finlay and Findon.  It was agreed that the air-conditioning business would be kept separate from the other work of Findon.  The business name “Findon Air” was registered for that purpose, the intention being to conduct the air-conditioning business under that business name. I will refer to Findon Air as if it were a separate entity.   Mrs Finlay was the sole signatory to the Findon Air cheque accounts.

9. In late 1993 Mr Donnelly became concerned about the financial affairs of Silcon and of Findon.  The company bankers wanted financial statements, and apparently they were not available.  Tax returns had not been prepared in due time.  The bank accounts of Findon were short of funds, when, presumably, Mr Donnelly thought that they should not…