Leyden Catering Consultants Pty Ltd (in liq) v Leyden - [2021] WADC 51

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   LEYDEN CATERING CONSULTANTS PTY LTD (in liq) -v- LEYDEN [2021] WADC 51
CORAM:   DEPUTY REGISTRAR HEWITT
HEARD:   21 MAY 2021
DELIVERED          :   3 JUNE 2021
FILE NO/S:   CIV 3686 of 2020
BETWEEN:   LEYDEN CATERING CONSULTANTS PTY LTD (in liq)
Plaintiff

AND

BRIAN TIMOTHY LEYDEN
Defendant

Catchwords:

Practice and procedure - Summary judgment application - Claim for monies shown in the plaintiff's books as a loan - Whether there is any evidence that the plaintiff was entitled to the monies said to have been loaned - Turns on its own facts

Legislation:

Corporations Act 2001 (Cth)

Result:

Application dismissed
Defendant given unconditional leave to defend

Representation:

Counsel:

Plaintiff	:	Ms C Spencer
Defendant	:	In person

Solicitors:

Plaintiff	:	Tottle Partners
Defendant	:	Not applicable

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

Nil

DEPUTY REGISTRAR HEWITT:

In this matter the plaintiff is a company in liquidation and the action brought by the liquidators is to recover monies said to be due to the plaintiff company from the defendant.
In essence, the plaintiff's claim is that there are outstanding monies which were loaned by the plaintiff to the defendant which it is entitled to recover as an asset in the liquidation and the application with which I must deal is a chamber summons seeking summary judgment of the amount said to be outstanding.
A vast amount of material has been presented primarily to support the claim but some materials have also been filed by the defendant. The gist of the plaintiff's claim is that the books of account maintained by the company (to the extent that they are available to the liquidator) disclose the existence of a loan account and an amount due to the company from the defendant in the sum of $218,933.13. The evidence clearly establishes that the books of the company refer to the debt to which I have referred. The applicant plaintiff relies upon the provisions of s 1305 of the Corporations Act 2001 (Cth) which provides:
A book kept by a body corporate under a requirement of this Act is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book.
The materials relied upon by the plaintiff satisfy those requirements and accordingly establish a prima facie entitlement to the judgment which is sought.
Since the application is a summary judgment application it is necessary to establish the entitlement to a higher standard than simply prima facie proof and it is necessary to take into account any matters which are raised in opposition to the application to determine whether the defendant has raised issues which may, not must, displace the prima facie presumption. It is only in the clearest of cases that a summary judgment is allowed and it is necessary for the plaintiff to establish to a very high standard that there is no issue to be tried.
With that said I now turn to the materials and arguments advanced by the defendant and that requires me to turn to and explain the circumstances which led to the creation of the plaintiff's company and the conduct of its business thereafter. By an agreement dated 11 November 2015 Irvine Point Pty Ltd, the defendant and Leyden Catering Consultants Pty Ltd entered an agreement the essence of which was that the defendant and Leydon Catering Consultants Pty Ltd would sell an existing business to a company to be created and named Beaumonde Hospitality Australia Pty Ltd (Beaumonde) for an agreed price to be paid by Irvine Point Pty Ltd. The heads of agreement also contained a requirement that the defendant would provide the operations management catering and marketing services for all functions and events held at a leasehold property to be assigned to Beaumonde. In return for the services to be provided cl 2.26.2 provided as follows:
Payment for the operations, management, catering and marketing services will be $200,000 per annum (including superannuation entitlements plus the use of a motor vehicle) plus agreed bonuses and other allowances.
No services agreement was ever entered between the defendant and Beaumonde but the parties conducted themselves in accordance with that outlined in the heads of agreement. The payment of the $200,000 was by way of lesser payments, most frequently but not in every case paid weekly, which together would achieve the $200,000 per annum target. Payments were made into an account with the Westpac Bank in an account named Mr Brian Timothy Leydon trading as Leydon Hospitality Services. Each of the payments was made in satisfaction of an invoice which was issued by Beaumonde although it is not clear what arrangement led to the invoice being forwarded by the company rather than by the defendant. It is also not clear exactly how these monies were recorded in the company's income tax returns but what is clear is the company recognised these monies as loans to the defendant. That is significant because the defendant was the one and only director of the plaintiff and in that capacity would be responsible for the information supplied to the Australian Taxation Office. One obvious possibility is that whilst income is taxable, monies received by way of loan are not, so that may have had an influence on the manner in which the accounts were maintained.
It is also clear that most of the plaintiff's income passed through bank accounts other than that described above. I reach that conclusion by noting that the total declared income of the plaintiff for 2015 and 2016 was $6,554,461 and $4,011,621 respectively.
The deposits to the account the defendant claims as his own were very much smaller and on the income side were dominated by payments by Beaumonde in regard to his consultancy, some large amounts which appear to have been loans from family members, together with one larger amount of $322,672 which was paid out about five days later. The latter amount appears to have been held for a short while as part of some security arrangement. On the debit side the payments were mostly drawings by the defendant, payments of hire purchase or lease amounts which the defendant had guaranteed and miscellaneous personal expenses.
Stepping back, it appears that the money to which the defendant would have been entitled under his agreement with Beaumonde was paid pursuant to an invoice issued by the plaintiff but paid into an account in the name of the defendant, the processes being recorded in the books of account of the company as a loan, and said to create a debt recoverable in the present action. In order for the company to have loaned the money to the defendant it must have had an entitlement to receive the monies. That entitlement as far as I can see could arise by the defendant assigning his rights to receive payment to the company. If that were the case then the diversion of the money from the company to the defendant would undoubtedly create a recoverable loan. Unfortunately there is very little evidence available on this area of the matter. There is certainly nothing that suggests that there was any assignment by the defendant to the company of his entitlement to receive the monies forwarded from Beaumonde. The question then becomes whether the provisions of s 1305 of the Corporations Act have sufficient power to displace the matters I have mentioned to be a potential defence.
As I have earlier said the mere book entry does not create an entitlement to the money passing through the hands of the company. What is required is some contractual arrangement such as an assignment and none has been shown to exist.
In the final analysis the plaintiff has advanced a prima facie case which in my opinion is undermined by the lack of any clear evidence that the plaintiff was ever entitled to the money it claims. In those circumstances I propose to dismiss the application and give the defendant unconditional leave to defend.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
EW
Court Officer
3 JUNE 2021