Giacci v Giacci Holdings Pty Ltd - [2009] WADC 166

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: GIACCI -v- GIACCI HOLDINGS PTY LTD [2009] WADC 166

CORAM: SCHOOMBEE DCJ

HEARD: 6 OCTOBER 2009

DELIVERED : 6 NOVEMBER 2009

FILE NO/S: CIV 1066 of 2008

BETWEEN: ANTONIO CARMINO GIACCI
Plaintiff
AND
GIACCI HOLDINGS PTY LTD (ACN 008 708 370)
Defendant

Catchwords:

Statutory limitation - S 44(3) of Limitation Act 1935 (WA) - Acknowledgement of debt - Whether reconciliation of payments made to directors by independent accountant constitutes an acknowledgment of a debt to a director by the company - Whether a valuation report of the company prepared by an independent valuer dealing with remuneration outstanding to a director was acknowledgment of debt by the company - Whether documents expressed company's intention to admit the debt and to have the document produced and used for that purpose - Whether independent accountant and valuer were authorised to acknowledge the debt to a director

Legislation:

Limitation Act 1935 (WA), s 44(3)

Result:

Plaintiff's claim allowed in the amount of $2,948.66

Representation:

Counsel:

Plaintiff: Mr M L Bennett
Defendant: Mr J L Sher

Solicitors:

Plaintiff: Lavan Legal
Defendant: Taylor Smart

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

Baker v Taylor (1906) 6 SR (NSW) 500
Beach Petroleum NL v Johnson (1993) 115 ALR 411
Blackstone v Wilson (1857) 26 LJ Ex 229
Bowring-Hanbury's Trustee v Bowring-Hanbury [1943] Ch 104
Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234
Eden Productions Pty Ltd v Southern Star Group Limited [2002] NSWSC 1166
Finance and Guarantee Co Ltd v Commissioner of Taxation of the Commonwealth (1970) 44 ALJR 368
Giacci Holdings Pty Ltd v Giacci [2007] WASC 187
Good v Parry [1963] 2 WLR 846
Guarnaccia v Rocla Concrete Pipes Ltd [1976] VR 302
Hipworth v Mahar (1952) 87 CLR 335
Jones v Dunkel (1959) 101 CLR 298
Lustre Hosiery Ltd v York (1935) 54 CLR 134
McLaughlin v Daily Telegraph Newspaper Co Ltd (1904) 1 CLR 243
Re Devala Provident Gold Mining Company (1883) 22 Ch D 593
Re Flynn, Deceased (No 2) [1969] 2 Ch 403
Re Transplanters (Holding Company) Ltd [1958] 1 WLR 822
RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1991) 32 NSWLR 152
VL Finance Pty Ltd v Legudi (2003) 54 ATR 221
Willoughby v Clayton Utz [No 2] [2009] WASCA 29

SCHOOMBEE DCJ: Mr Antonio Giacci, the plaintiff, claims the amount of $193,562.85 in outstanding directors' remuneration and superannuation from Giacci Holdings Pty Ltd ("the company"). The company says that any claim for outstanding director's fees and superannuation is statute barred, but Mr Giacci avers that the company acknowledged the existence of this debt in writing and that this acknowledgment caused the statutory limitation period to run afresh.

Background

Mr Giacci started a trucking business in 1953 in Bunbury, Western Australia. The company was incorporated in about 1968 and thereafter conducted the business. Mr Giacci was a director of the company from 1969 to November 2006 when his shareholding in the company was purchased by his two younger brothers, Mario and Peter, and Mr Giacci resigned as a director.
After the incorporation of the company, Mr Giacci gave his two brothers shares in the company and both were appointed directors. Unfortunately, the relationship between the three brothers became acrimonious, and in January 1997 the two younger brothers passed a resolution removing Mr Giacci as managing director of the company. In December 2005 the two younger brothers also attempted to remove Mr Giacci as a director of the company and as a result Mr Giacci commenced an action for oppression in the Supreme Court against his two brothers. The case was heard by the Honourable Chief Justice, Wayne Martin, and after several hearings and protracted negotiations, Martin CJ made an order that the two younger brothers purchase Mr Giacci's shareholding in the company for $8,000,000.
The purchase price was arrived at on the basis of the evidence of an independent expert, Mr Calder of KPMG Corporate Finance (Aust) Pty Ltd ("KPMG") and a valuation report of the company prepared by him, dated June 2006 ("the KPMG report"). KPMG had earlier produced a draft valuation report in respect of the company, which was dated November 2005 ("the draft KPMG report"). When the earlier report was commissioned the intention was that Mr Giacci purchase the shareholding of his two younger brothers. By the time that the KPMG report was obtained it was contemplated that the two brothers would buy Mr Giacci's shares.
One of the matters that was taken into consideration by Mr Calder in the KPMG report in determining a going concern value of the company was a liability of $197,000 which was stated to be an "amount owing to directors". The amount was shown to include outstanding remuneration and superannuation to Mr Giacci, as well as a small amount to Mr Peter Giacci.
At one of the hearings before Martin CJ, Mr Giacci contended that the debt of $197,000 was not, in fact, due and owing by the company with the consequence that the assets of the company should be increased by an amount of $197,000. The Chief Justice asked counsel for Mr Giacci whether he wished to press that contention as it might be contrary to Mr Giacci's interest, because, as a one‑third shareholder, he would only recover a third of the outstanding debt if the value of the company was increased by $197,000. In response, counsel replied that his instructions were to withdraw the assertion that the debt of $197,000 was not due and owing by the company and that Mr Giacci would take steps in due course to recover the full amount from the company. As a result the amount of $197,000 remained a liability in the assessment of the value of the company and no order was made by the court in respect of Mr Giacci's right to recover that amount.
On 3 August 2006 the Chief Justice ordered that the two younger brothers purchase Mr Giacci's shares for a third of $8,000,000. On 30 August 2006 Mr Giacci served a statutory demand on the company in the amount of $193,562.85 in respect of the outstanding directors' remuneration and superannuation owed to him for the financial years 1998 to 2002. The company applied to have the statutory demand set aside on the basis, inter alia, that the claim, or at least part of it, was statute barred.
In response to the contention that the claim was statute barred, Mr Giacci asserted that the statement in the KPMG report that $197,000 was owing to directors was an acknowledgment by the company that the debt was due and owing and that pursuant to s 44 of the Limitation Act 1935 (WA) ("the Act") an acknowledgment of a debt interrupted the time running under the statutory limitation provisions.
The company also relied on a memorandum, dated 15 March 2006, prepared by Mr John Fordham, an accountant with an independent accounting firm ("the Fordham memorandum"). This memorandum summarised the results of a reconciliation of all payments made to the directors for the period 1 July 1996 to 30 June 2002 and came to the conclusion that an amount of $193,562.85 was owing to Mr Giacci. The Fordham memorandum together with a number of supporting spreadsheets and other documents had been supplied to KPMG prior to Mr Calder producing the KPMG report in June 2006.
In making a decision whether the statutory demand should be set aside, the Chief Justice did not have to come to a final conclusion on whether the claim by Mr Giacci was valid. The court only needed to make a finding that there was a genuine dispute and that the grounds for alleging the dispute were real and not spurious, hypothetical, illusionary or misconceived. The Chief Justice came to the conclusion in Giacci Holdings Pty Ltd v Giacci [2007] WASC 187 at [39] that there was an arguable case that the KPMG report and the Fordham memorandum constituted an acknowledgment of the debt to Mr Giacci and that there was therefore a genuine dispute as a result of which the statutory demand should not be set aside. However, the Chief Justice also noted that it was arguable whether or not the documents could constitute an acknowledgment of debt in light of the fact that the company documents were "entirely internal" and the report by KPMG a document of a third party.
The claim for $193,562.85 is now before this Court for a final decision. There is no dispute between the parties that this amount would be due to Mr Giacci but for the issue of statutory limitation. The case before me is therefore entirely based on the question whether Mr Fordham's memorandum and the KPMG report each, or read together, constitute an acknowledgment of the debt by the company which, pursuant to s 44 of the Act would have interrupted the running of the limitation period.

Section 44 of the Limitation Act 1935

The parties agreed that Mr Giacci's claim was an action founded on simple contract. The Act is applicable to Mr Giacci's claim, as the cause of action arose before the commencement day of the Limitation Act 2005 (WA), that is, before 15 November 2005. Section 4(2) of the Limitation Legalisation Amendment and Repeal Act 2005 (WA) provides that the Act continues to apply to causes of action that accrued before the commencement day of the later Act.
Pursuant to s 38(1)(c) of the Act an action founded on simple contract must be commenced within a period of six years after the course of action arose. The writ in this matter was issued on 9 May 2008. A cause of action is the combination of facts which gives a person the right to sue: Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234 at 245.
Although it was not in dispute that Mr Giacci was entitled to outstanding remuneration and superannuation benefits in respect of the financial years 1998 to 2002, the parties could not agree whether a cause of action in respect of such benefits had accrued on a weekly, monthly or yearly basis. This issue is only relevant with regard to the question whether there is any portion of the claim of $193,562.85 which is not statute barred. As the writ was issued approximately one month before all payments would have become statute barred, it is necessary to decide whether Mr Giacci was entitled to his directors' remuneration and superannuation benefits on a weekly, monthly or yearly basis.
The amount of $193,562.85 claimed was based on the memorandum by Mr Fordham which calculated that the following amounts were owing to Mr Giacci:
Director's remuneration   $186,931.00
Superannuation  $ 14,711.60
Less: Land Tax   $   5,158.66
Rates  $    2,921.09
Total  $193,562.85
For purposes of the trial the parties agreed that the outstanding amounts of directors' remuneration were based on the fact that Mr Giacci's two brothers were paid higher amounts of remuneration, whereas the payments should have been equal. The respective payments to each director for the financial years 1998 to 2002 were set out in a table in an annexure to Mr Fordham's memorandum as follows:

Director	June 98 ($)	June 99 ($)	June 00 ($)	June 01 ($)	June 02($)
Plaintiff	$94,784	$101.923	$100,000	$100,000	$140,383
Mario Michele Giacci	$107,565	$123,836	$171,500	$170,259	$150,825
Peter Louis Giacci	$94,748	$101,923	$171,443	$194,925	$158,075

The parties agreed that Mr Giacci was entitled to $17,692 in respect of the 2002 financial year, being the difference in his remuneration and that of Mr Peter Giacci. However, if the cause of action for remuneration accrued on a monthly basis, then at best, only two months' payment would not be statute barred. Counsel for the defendant conceded that an amount of $2,948.66 (the remuneration for May and June 2002) was not statute barred.
The only evidence regarding the interval at which directors' remuneration was payable is in the witness statement by Mr Giacci where he says that he and Mr Mario Giacci were drawing the same salary after 8 December 2002, when Mr Giacci again took over the day to day management of the company, and that the remuneration was then $2,000 per week plus a fuel allowance of $350 per month. Also, amongst the documents attached to the Fordham memorandum was a PAYG payment summary for the financial year 2003 which showed that payments were made weekly to Mr Giacci. However, similar PAYG payment summaries for the financial years 2001 and 2002 did not include the reference to "weekly".
Counsel for Mr Giacci submitted that in the absence of any evidence that Mr Giacci was entitled to weekly or monthly payments and the amount thereof, the court could only assume that the cause of action for payment of the remuneration for 2002 accrued on the last day of June 2002. However, such a submission is likely to be contrary to reality. It is very likely that Mr Giacci was entitled to draw a particular amount per week or per month. The burden is on Mr Giacci to prove to the court what part of the amount claimed is not statute barred. As Mr Giacci was unable to do so, he can only rely on the amount conceded by counsel for the company, that is, $2,948.66.
Except for the amount of $2,948.66, Mr Giacci's claim would thus be statute barred, unless there was an acknowledgment of the debt by the company which interrupted the running of the limitation period. Section 44(1) and (3) of the Act provide as follows:
"(1) Except as expressly provided in this Act, nothing in section 38 contained shall take away or lessen the effect of any acknowledgment or promise, or of any acknowledgment by part payment or satisfaction on account of principal or interest due, and except as aforesaid any such acknowledgment or promise shall have the same effect as if this Act had not been passed.
…
(3) In actions in the nature of actions founded upon simple contract, no acknowledgment or promise by words shall be deemed sufficient evidence of any new or continuing contract whereby to take any case out of the operation of section 38, or to deprive any party of the benefit thereof, unless such acknowledgment or promise is made or contained by or in some writing signed by the party chargeable, or by his agent duly authorised; and where there are 2 or more joint contractors, or executors or administrators of any contractor, no such joint contractor, executor or administrator shall lose the benefit of section 38 so as to be chargeable in respect or by reason only of any written acknowledgment or promise made and signed by any other or others of them: Provided that nothing herein contained shall alter or take away or lessen the effect of any payment of any principal or interest made by any person. "
In Willoughby v Clayton Utz [No 2] [2009] WASCA 29 at [63] Pullin JA, with whom Wheeler and Miller JJA agreed, held that the words "shall have the same effect as if this Act had not been passed" in s 44(1) meant that time begins to run again from the date of the acknowledgment.

Acknowledgment

The main issue in this case is what qualifies as an acknowledgment pursuant to s 44(1) of the Act and whether the Fordham memorandum or the KPMG report, or both together, contained an acknowledgment by the company of a debt due and owing to Mr Giacci. Although the parties agreed for purposes of the trial that, if the company was not entitled to rely on statutory limitation, a debt of $193,562.85 was owing by the company to Mr Giacci, this concession was only made by counsel for the defendant on the first day of the trial. In the defence the company still pleaded that all amounts paid to the company's three directors by way of remuneration over and above their pre 1 July 1997 salary, which was $86,996 per annum, were not authorised in accordance with Article 64 of the company's Constitution, as they were not payments determined by the company in a general meeting. The fact that a debt in the amount $193,562.85 was due and payable to Mr Giacci was therefore in dispute in the past.
In Lustre Hosiery Ltd v York (1935) 54 CLR 134 at 143 the High Court held that words or conduct could amount to an admission receivable in evidence against a party if they disclosed an intention to affirm or acknowledge the existence of a fact whatever the party's source of information or belief might be. In VL Finance Pty Ltd v Legudi (2003) 54 ATR 221 at [53] Nettle J held that the position in Australia was that a document did not constitute an acknowledgment unless it was in substance expressive of the debtor's intention to admit the debt and to have the document produced and used for that purpose. Nettle J found that an annual return of a company showing debts owed by certain directors of the company to the company did not constitute an acknowledgment by the directors of the company, because the annual report was not prepared with the intention on the part of the directors to admit their debts to the company and to have the return produced to the company for that purpose. His Honour held that the annual return may have been an acknowledgment by the company and that it may have been intended for use by the company's creditors, but there was no intention on the part of the directors to admit their debts to the company even though the annual return was signed by one of them on behalf of the company.
These two cases indicate that it is necessary to direct one's mind to the question with what intention the document said to contain an acknowledgment was prepared. In considering whether a document does in fact contain an acknowledgment, the document has to be read as a whole and construed in accordance with the ordinary rules of construction "to see what its language means": In Re Flynn, Deceased (No 2) [1969] 2 Ch 403 at 411.
Because each document has to be construed in light of the circumstances applying to that document other decided cases are of little value as precedents: VL Finance Pty Ltd v Legudi (supra) at [60]. Despite this observation it is helpful to refer to Good v Parry [1963] 2 WLR 846 at 849 – 850 where the Court of Appeal held that the words "outstanding rent" did not necessarily indicate that there was an acknowledgment that some rent was due and payable. In that case the agent of a lessee had written to the lessor saying "the question of outstanding rent can be settled by a separate agreement as soon as you present your account". The court found that this statement meant that there might be some rent outstanding and that this could be made the subject of an agreement as soon as an account was presented. It was an admission that there might be some justified claim, not that there was in fact a debt that was due and payable.
A number of documents read together may constitute an acknowledgment: VL Finance Pty Ltd v Legudi at [60]. It is also accepted that the trend of authority is in favour of a liberal, but just and fair, construction of a document in order to determine whether it contained an acknowledgment: Hipworth v Mahar (1952) 87 CLR 335 at 343 and VL Finance Pty Ltd v Legudi at [63].
Counsel for the plaintiff submitted that the Fordham memorandum and the KPMG report, particularly if both were read together, constituted an acknowledgment by the company that directors' remuneration and superannuation payments for the financial years 1998 to 2002 were due and owing to Mr Giacci. Counsel for the plaintiff relied upon the following statements in the Fordham memorandum:
"We have been requested to complete a reconciliation of payments made to the Directors and calculate any variances or outstanding in (sic) payments made for the period 1 July 2001 (which was meant to read 1996) to 30 June 2002.
…
Attached is a detailed reconciliation of payments made to each of the Directors and the amounts outstanding together with supporting documentation. In summary the amounts owing to the Directors are: …
(Mr Giacci $193,562.85 and Mr Peter Giacci $3061.12)."
Counsel for the plaintiff submitted that the Fordham memorandum clearly indicated that these amounts were "outstanding" and "owing" and that these statements therefore amounted to an acknowledgment of the debt. However, in order to determine the intention with which the document was prepared and whether the company intended to acknowledge the debt to Mr Giacci, the circumstances under which the Fordham memorandum was prepared need to be taken into account.

Mr Fordham gave evidence during the trial. He said that he was a director of an independent accounting firm and had provided services in the nature of preparation of financial documents, tax returns and general financial advice to the company. In early 2006 he was requested by Mr Giacci to complete a reconciliation to identify any difference in payments made to the three directors. Mr Fordham asked Ms Casey Milroy, the internal accountant of the company, to trace the payments made to the directors from internal records and to verify a previous reconciliation entitled "Group Certificate Reports" which was for the financial years 1997 to 2002. Mr Fordham said that he came to the conclusion that the Group Certificate Reports accurately showed the amounts that had been paid to the directors for the relevant financial years.
Mr Fordham then prepared his memorandum which is addressed to the directors of the company. Mr Fordham said that he used the term "amounts outstanding" in the memorandum as this was the terminology that had been employed by Mr Giacci in instructing him. Mr Fordham gave evidence that because he was an external accountant he was not privy to any arrangements regarding payments to the directors during the relevant period and had not discussed the discrepancy in the amounts paid to the directors with either Mr Peter Giacci or Mr Mario Giacci.
If the circumstances under which the Fordham memorandum was prepared are taken into account, it is clear that the memorandum does not reflect any intention by the company to acknowledge a debt to Mr Giacci. The memorandum contains what it says it does, namely a reconciliation of payments, setting out, by reference to the attached documents, what payments were made to each of the directors and to what extent they differed. It was a summary of the factual position disclosed by the company's books. The memorandum did not purport to express any opinion as to whether Mr Giacci was entitled to receive the same remuneration and superannuation as his two brothers and whether the difference in amounts paid was due and owing to Mr Giacci.
In fact, counsel for the company pointed out that the Fordham memorandum concluded with the words: "Please advise Casey if these accounts are to be reimbursed and if any allowance for interest is to be included". Counsel for the company submitted that these words clearly indicated that Mr Fordham had not intended to make any acknowledgment that Mr Giacci was in law entitled to receive the amount of $193,562.85, but had requested further instructions from the company as to whether this amount was due and owing and should be reimbursed.
I agree with this submission. There is no indication that Mr Fordham was asked to act as an arbiter and that it had been agreed between the company and Mr Giacci that Mr Fordham's conclusions would constitute a result binding on the company. Further, Mr Fordham was instructed by Mr Giacci to prepare the reconciliation of payments and there is no evidence that Mr Giacci was representing the company in this regard rather than looking after his personal interests.
Accordingly, the Fordham memorandum does not contain an acknowledgment by the company of a debt due to Mr Giacci.
Counsel for Mr Giacci also relied on the KPMG report as containing an acknowledgment of the debt by the company. The KPMG report stated in section 1.1 that KPMG had been "engaged to prepare an independent valuation of Giacci Holdings, on a consolidated basis to assist in ascertaining an appropriate price to buy out one of the shareholders" (Mr Giacci). The report further said in section 1.2 that it had been based on the information made available to KPMG as detailed in appendix A to the report and had been prepared for the "sole purpose set out in section 1.1". Appendix A recorded that in preparing the report KPMG had considered various sources of information, including amongst others, "information provided by Giacci Management via Mr Colin Webb, including details in relation to the Group's tax position, litigation, liabilities and assets and details as to the shareholders in Giacci Holdings and the rights attached to each share".
The KPMG report valued the company, amongst other approaches, on a going concern basis. In arriving at this value the report made allowance for liabilities arising from legal actions and set out what instructions had been received by the directors of Giacci Holdings with regard to how these liabilities should be assessed. The report further made allowance for "provisions and other liabilities". This column included matters such as employee entitlements, loans by other Giacci companies, provision for redundancy and the amount of $197,000 which was described as "amount owing to director". In a note to the "provisions and other liabilities" the KPMG report stated the following:
"We have been instructed to provide for amounts of underpaid salary and superannuation to Mr Antonio Giacci and Mr Peter Giacci³."
The footnote at the bottom of the page read as follows:
"³We are instructed that Mr Antonio Giacci and Mr Peter Giacci have claims for unpaid salary and superannuation less expenses totally $196,624."
Counsel for Mr Giacci submitted that these statements clearly indicated that the company had instructed KPMG that the rounded up amount of $197,000 was owing to Mr Giacci and Mr Peter Giacci and that this meant that the company had acknowledged a debt which was due and payable.
I do not agree with that submission. The KPMG report indicates that KPMG was instructed by a representative of the company that Mr Giacci and Mr Peter Giacci had a claim for unpaid salary and superannuation and that for purposes of the valuation of the company KPMG should provide for the relevant amounts as a liability. The KPMG report specifically records that KPMG was instructed that Mr Giacci had a claim, and the fact that this was allowed for under "provisions and other liabilities" must be seen in light of the purpose of the KPMG report. The purpose of this report was not to arrive at an opinion on what payments were due and owing to Mr Giacci but to arrive at a value of the company which would allow the two brothers to buy out Mr Giacci. The company had a choice whether to treat the claim by Mr Giacci for purposes of establishing the value of the company as a liability or not. The company instructed KPMG for reasons unknown to allow for this claim as part of the liabilities. This does not, however, mean that the company made any acknowledgment that an amount was due and payable to Mr Giacci. The fact that the words "amount owing to director" appear next to the amount of $197,000 are neutralised by the footnote indicating that KPMG was instructed that Mr Giacci had a claim in that regard.
Counsel for Mr Giacci also relied on the fact that in the draft KPMG report no allowance had been made for the amount of $197,000 under the heading "provisions and other liabilities". In fact the draft KPMG report contained a note under that heading stating that Mr Giacci claimed that he was owed an amount for outstanding remuneration and superannuation but that management had instructed KPMG to exclude this matter from consideration. Counsel for Mr Giacci submitted that this indicated that the company had a change of heart after the draft KPMG report had been prepared and agreed to acknowledge the amount owing to Mr Giacci prior to the KPMG report being finalised.
The fact that the company instructed KPMG to take the amount claimed by Mr Giacci into account as a liability when the KPMG report was finalised indicates nothing more than that the company, for whatever reason, changed its view on how the claim by Mr Giacci should be dealt with. The mere fact that the claim was shown as a liability in the KPMG report for purposes of arriving at a value of the company does not mean that the company acknowledged it as due and payable.
Accordingly, the KPMG report also did not contain any acknowledgment by the company that an amount was due and payable to Mr Giacci.

Acknowledgment by an agent

Section 44(3) of the Act requires that an acknowledgment has to be in writing and signed by the party chargeable or by his duly authorised agent. Neither the Fordham memorandum nor the KPMG report was signed by any of the directors on behalf of the company. In order for the acknowledgement to comply with s 44(3) Mr Giacci would therefore have to prove that these two documents were signed by Mr Fordham as an agent of the company and by Mr Calder as an agent of the company respectively. This raises the question whether Mr Fordham and Mr Calder were agents of the company and whether they had the authority to make an acknowledgment on behalf of the company.
An agent can make an acknowledgment of a debt or make other admissions on behalf of his principal if this is within the agent's scope of authority. In Re Devala Provident Gold Mining Company (1883) 22 Ch D 593 at 595 – 6 Fry J held that where a statement was made in the course of a transaction with a third party in which the agent was acting on behalf of the company, and it was within the scope of the agent's authority to do so, the statement would be admissible against the company. Although the finding of fact in Re Devala Provident Gold Mining Company (supra) that the address by the chairman of a company to a meeting of shareholders was confidential and not a report to a third party was questioned in Finance and Guarantee Co Ltd v Commissioner of Taxation of the Commonwealth (1970) 44 ALJR 368 at 370, the basic principle was not placed in doubt.
It is essential that the agent act within the scope of his authority, and an agent may be authorised to make an admission with regard to one matter, but not with regard to another: Blackstone v Wilson (1857) 26 LJ Ex 229 at 231. The party relying on the agency carries the burden of establishing that the agent had authority and the scope of that authority: McLaughlin v Daily Telegraph Newspaper Co Ltd (1904) 1 CLR 243 at 276 and Baker v Taylor (1906) 6 SR (NSW) 500 at 502 – 503. In Bowring-Hanbury's Trustee v Bowring-Hanbury [1943] Ch 104 at 109 it was held that in the absence of any evidence of authority given to the solicitors by the executor to make an acknowledgment of the debt on his behalf, a finding that the acknowledgment was made on behalf of the executor could not be made.
Counsel for the company referred the court to various other decisions in which it was held that a representative or employee of a company did not have the authority to make an admission on behalf of the company. For example, in Eden Productions Pty Ltd v Southern Star Group Limited [2002] NSWSC 1166 at [258] Gzell J held that there was no evidence that the financial controller of a company was authorised to waive the company's legal professional privilege. In Guarnaccia v Rocla Concrete Pipes Ltd [1976] VR 302 at 304 Gowans J came to the conclusion that a foreman's report on an incident in which he made an admission regarding the dangerous nature of a certain practice involved, did not bind the company, because there was no evidence that the foreman had authority to make an admission on behalf of the company. There are numerous other examples which could be cited, but there is little purpose in doing so, because each depends on its own facts.
Mr Giacci pleaded in his amended reply to the company's defence that Mr Fordham was "acting on behalf of" the company when he completed the reconciliation of payments and that KPMG were "engaged by" the company to prepare an independent valuation of the company. Mr Giacci gave evidence that the company requested Mr Fordham to complete a reconciliation of payments made to the directors and engaged KPMG to prepare an independent consolidated valuation of the company. However, it was not pleaded that it was within Mr Fordham's and Mr Calder's scope of authority to make an acknowledgment of a debt on behalf of the company and no evidence was led in this regard.
Counsel for Mr Giacci submitted that the company should have called Mr Mario Giacci and Mr Peter Giacci to give evidence that they did not authorise Mr Fordham and Mr Calder to acknowledge any debt owing by it to Mr Giacci and that the court should draw an inference under the rule in Jones v Dunkel (1959) 101 CLR 298 against the company by reason of its failure to do so. However, the burden of proof is on Mr Giacci to prove that Mr Fordham and Mr Calder had the authority to make an acknowledgment of a debt owed by the company on the company's behalf.
As stated earlier, Mr Fordham, who gave evidence on behalf of the company, said that he had been instructed to prepare the reconciliation of payments by Mr Giacci and had not received any instructions from either Mr Mario Giacci or Mr Peter Giacci. Mr Fordham also stated that he had not discussed the discrepancy in the amounts paid with Mr Peter Giacci or Mr Mario Giacci, that he was not privy to any arrangements regarding payments to directors and that he used the words "amounts outstanding", because this was the terminology used by Mr Giacci.
Accordingly, there is no evidence that Mr Fordham had any authority to make an acknowledgment of a debt on behalf of the company. Even if his memorandum could be said to contain an acknowledgment of a debt owing to Mr Giacci, Mr Fordham had no authority to make such an acknowledgment. Mr Fordham was only instructed to prepare a reconciliation of payments and would have acted outside the scope of his authority if he had tried to make any admission on behalf of the company that Mr Giacci had a legal right to payment of the difference in remuneration and superannuation.
Mr Giacci also presented no evidence that KPMG had any authority to make admissions on behalf of the company. Counsel for the company conceded at the start of the trial that the company had engaged KPMG to prepare the valuation and had paid for the KPMG report. Counsel for Mr Giacci placed much value on this concession. However, this only means that the company asked for the valuation report. There was no evidence that the company authorised KPMG to make admissions to third parties, such as a director of the company in his personal capacity.
It is doubtful whether KPMG can even be described as an agent of the company. Auditors who audited a company's books and signed off on the balance sheet were held not to have acted as an agent of the company and not to have had authority to bind the company by statements made in the balance sheet: In Re Transplanters (Holding Company) Ltd [1958] 1 WLR 822 at 825‑826.
Counsel for the company submitted that Mr Calder, on behalf of KPMG, was engaged as an independent expert to present his opinion on the value of the company to the court in the litigation between Mr Giacci and his two brothers and that Mr Calder or KPMG did not act as agent for the company in any respect. I agree with this submission. It is one thing to engage a person or firm to perform a particular task; it is quite another to give that person authority to represent the company in making an admission which is not necessary in the performance of the required task. KPMG were engaged by the company to produce a valuation of the company. They were not engaged as an arbiter to make a binding assessment or an acknowledgment on behalf of the company as to any amounts due and owing to Mr Giacci. It is generally not the role of an independent expert to resolve factual disputes: Beach Petroleum NL v Johnson (1993) 115 ALR 411 at 442.
Accordingly, there is also no evidence that KPMG had any authority to make an acknowledgment of a debt on behalf of the company.

Adoption by company of acknowledgment

Another matter that needs to be considered is whether the company ratified or adopted, either expressly or impliedly, any acknowledgment made by Mr Fordham or Mr Calder. A party may adopt a third person's statements, whether those statements are contained in a report of an agent to his principal or in a report of a stranger. The question to be asked is whether the party, by words or conduct, has disclosed an intention to affirm or acknowledge whatever is stated by the third person: RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1991) 32 NSWLR 152 at 155.
Mr Giacci pleaded in the reply that the Fordham memorandum was provided by the company to KPMG together with instructions to allow for the underpaid salary and superannuation to Mr Giacci in the valuation, and that the company also authorised Mr Peter Giacci and Mr Mario Giacci to tender the KPMG report in evidence in the Supreme Court proceedings between them and Mr Giacci. The question is whether this conduct can be said to constitute a ratification or adoption by the company of what was set out in the Fordham memorandum and the KPMG report.
I accept that this conduct by the company demonstrates that the company was prepared to rely on the contents of the Fordham memorandum and the KPMG report and to allow these documents to be used for certain purposes. However, the issue is: for what purposes? As indicated earlier, neither document constituted an acknowledgment that the company was legally obliged to pay Mr Giacci the difference in remuneration and superannuation as identified in these documents. The documents were prepared for the purposes of arriving at a reconciliation of directors' payments and making an assessment of the value of the company, and the statements that certain amounts were "owing" or "outstanding" to Mr Giacci were not made by their authors with the intention of acknowledging that the "outstanding" amounts were due and payable. The acceptance by the company of the Fordham memorandum and the KPMG report can only be an acceptance of the statements for the purpose for which they were made.
The fact that Mr Giacci contended at one of the hearings before Martin CJ that the debt of $197,000 was not, in fact, due and owing by the company, and thereafter changed his mind and asked that the debt remain as a liability in the KPMG report, also does not assist Mr Giacci's case. The fact that he wished the amount to be treated as a liability, does not mean that the company acknowledged that it was due and owing.

Communication of acknowledgment to Mr Giacci

The last issue that arises is whether the Fordham memorandum and the KPMG report were adequately communicated to Mr Giacci. As I have come to the conclusion that neither the Fordham memorandum nor the KPMG report contained an acknowledgment, this issue is no longer relevant, but I shall briefly deal with it because it was argued before me. Counsel for Mr Giacci submitted that the Fordham memorandum and the KPMG report were both impliedly communicated by the company to Mr Giacci because the company had paid for the KPMG report which relied on Mr Fordham's memorandum and the company allowed Mr Peter Giacci and Mr Mario Giacci to make use of the KPMG report in the Supreme Court proceedings where it would necessarily have come to the attention of Mr Giacci. The Fordham memorandum was also addressed to the directors of the company and Mr Giacci would have become aware of its contents.
It is not clear to what extent an acknowledgment must be communicated to the creditor in terms of s 44(3) of the Act. Section 44(3) does not specifically require that the acknowledgment be communicated to the creditor, in contrast with s 25 of the Limitation of Actions Act 1958 (Vic) which provides that the acknowledgment shall be "made to the person, or to an agent of the person, whose title or claim is being acknowledged". In VL Finance Pty Ltd v Legudi at [60] – [61] s 24 of the Limitation of Actions Act 1958 (Vic) was under consideration and Nettle J referred to the requirement that the acknowledgment needs to be "given to the creditor", which arises from the wording that I have quoted. Nettle J came to the conclusion that it was not necessary that an acknowledgment be sent or delivered to the creditor, but it must have been expressly or implicitly "addressed to the creditor".

His Honour relied on the decision in Hipworth v Mahar (supra) at 344 where Dixon CJ, Webb and Fullagar JJ came to the conclusion that an acknowledgment made in a proposal for adjustment of debts under the Farmers Debts Adjustment Act 1935 (Vict) was communicated to the creditor, although it was not made directly to the creditor but made with the intention that it be communicated to the creditor and for the purpose of enabling a compromise of rights as between all creditors. In Hipworth v Mahar the issue was whether the acknowledgment complied with the requirements of s 304 of the Property Law Act 1928 which required an acknowledgment given in writing and signed by the person by whom the money was payable or his agent "to the person entitled thereto or his agent".
In both Hipworth v Mahar and VL Finance Pty Ltd vLegudi the decision by the court was based on a provision in a statute which required that the acknowledgment be made to the person entitled to it. This is not the case in respect of s 44(3) of the Act. Nevertheless, it seems to me that the finding made by Nettle J in VL Finance Pty Ltd vLegudi that a document does not constitute an acknowledgment unless it is in substance expressive of the debtor's intention to admit the debt and to have the document produced and used for that purpose is also applicable to s 44(3). This is because in order to qualify as an acknowledgment there needs to be an intention by the debtor that the statement in the document serve as an acknowledgment of the debt and without the intention to have the document produced and used for that purpose any intention to have the document serve as an acknowledgment would be fruitless.
On the other hand, it seems that if a debtor intended to acknowledge a debt but not to communicate that acknowledgment to the creditor, the statement in the document can nevertheless serve as an acknowledgment if the document unintentionally reached the creditor. In The Stage Club Ltd v Millers Hotel Pty Ltd (supra) at 566 Wilson J came to the conclusion that the absence of an intention on the party of the debtor to communicate to the creditor an acknowledgment of the debt was immaterial where the document had actually been delivered to the creditor.
It is not necessary for purposes of this case to decide whether a document containing an acknowledgment of a debt by the debtor or his agent complies with s 44 (3), if it is unintentionally communicated to the creditor. If the Fordham memorandum or the KPMG report had contained an acknowledgment by the company or an acknowledgment made with authority by its agent, I would have been satisfied that such an acknowledgment was intentionally communicated by the company to Mr Giacci. Mr Giacci received a copy of the Fordham memorandum in his capacity as one of the directors of the company and there was no attempt by the company to hide the memorandum from Mr Giacci. The Fordham memorandum was also supplied by the company to KPMG to be used in the preparation of the valuation report. Further, the KPMG report was made available by the company to Mr Peter Giacci and Mr Mario Giacci to be used in the course of the litigation with Mr Giacci where it would necessarily have come to the attention of Mr Giacci.
However, the problem remains that the documents did not contain any acknowledgment of an existing legal liability and were not prepared with the authority to make an acknowledgment on behalf of the Company. Any finding regarding the communication of the documents is therefore of no import.

Conclusions

In summary, I have come to the following conclusions:
1.Neither the Fordham memorandum nor the KPMG report contained an acknowledgment that the short-fall in remuneration and superannuation paid to Mr Giacci in comparison to the other two directors was a legal liability which was then due and owing by the company to Mr Giacci.
2.Neither Mr Fordham nor Mr Calder had any authority to make such an acknowledgment on behalf of the company and the statements which could be considered to be an acknowledgment were contained in documents prepared and signed by them.
3.The company did not ratify or adopt any acknowledgment made by Mr Fordham or Mr Calder without the company's authority.
4.The Fordham memorandum and the KPMG report were communicated to Mr Giacci, but as they did not contain any acknowledgment, this is of no import.
5.The plaintiff's claim is statute barred except for the amount of $2,948.66.
6.The plaintiff's claim succeeds in the amount of $2,948.66.