McAdam v Chylos Pty Ltd

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FEDERAL COURT OF AUSTRALIA

McAdam v Chylos Pty Ltd [2015] FCAFC 161

Citation: McAdam v Chylos Pty Ltd [2015] FCAFC 161
Appeal from: Executors of the Estate of Bruce James McAdam v Chylos Pty Limited [2015] FCA 423
Parties: ANTHONY BRUCE MCADAM AND MARCUS DOMINIC MCADAM AS EXECUTORS OF THE ESTATE OF BRUCE JAMES MCADAM and SHIRLEY MARLENE MCADAM v CHYLOS PTY LIMITED (ACN 001 402 562)
File number(s): NSD 607 of 2015
Judge(s): GRIFFITHS, FARRELL AND GLEESON JJ
Date of judgment: 16 November 2015
Catchwords: CORPORATIONS – set off by respondent of disputed loans against dividends declared and payable to the appellants – whether primary judge erred in finding that disputed loans existed – whether primary judge erred in finding that the appellants bore the onus of proving the non-existence of the loans
Legislation:

Corporations Act 2001 (Cth) s 1305

Evidence Act 1995 (Cth) s 140

Federal Court of Australia Act 1976 (Cth) s 24

Income Tax Assessment Act 1936 (Cth) Div 7A

Cases cited:

Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172

Amalgamated Television Services Pty Limited v Marsden [2002] NSWCA 419

Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424

Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336

CDJ v VAJ [1998] HCA 67; (1998) 197 CLR 172

Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1

Executors of the Estate of Bruce James McAdam v Chylos Pty Limited [2015] FCA 423

Haritos & Ors v Commissioner of Taxation & Ors [2015] VSCA 79

Hume v Monro (No 2) [1943] HCA 7; (1943) 67 CLR

Hung v Warner, in the matter of Bellpac Pty Ltd (Receivers and Managers Appointed) (In Liquidation) [2013] FCAFC 48

Livingspring Pty Ltd v Klivger Partners [2008] VSCA 93; (2008) 20 VR 377

Massoud v NRMA Insurance Limited (1995) 8 ANZ Ins Cas 61-257

Neat Holdings Pty Limited v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170

Warner v Hung, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (In Liquidation) (No 2) [2011] FCA 1123

Whitton as Trustee of the Estate of Rose v Regis Towers Real Estate Pty Ltd (In Administration) [2007] FCAFC 125; (2007) 161 FCR 20
Date of hearing: 2 November 2015
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 59
Counsel for the Appellants: Mr J S Emmett with Mr M Fernandes
Solicitor for the Appellants: Garland Hawthorn Brahe Solicitors
Counsel for the Respondent: Mr B Katekar with Mr P Sharp
Solicitor for the Respondent: Cheney & Wilson

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 607 of 2015
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN:

ANTHONY BRUCE MCADAM AND MARCUS DOMINIC MCADAM AS EXECUTORS OF THE ESTATE OF BRUCE JAMES MCADAM
First Appellant

SHIRLEY MARLENE MCADAM
Second Appellant
AND:

CHYLOS PTY LIMITED (ACN 001 402 562)
Respondent

JUDGES:

GRIFFITHS, FARRELL…

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Details
Case
[2015] FCAFC 161
Decision Date

CaseChat Overview and Summary

McAdam v Chylos Pty Ltd involved a dispute between the appellants, Mr and Mrs McAdam, and the respondent, Chylos Pty Ltd. The appellants challenged the primary judge’s findings that disputed loans existed and that they bore the onus of proving the non-existence of these loans. The dispute centred around whether the appellants owed money to Chylos, which the respondent sought to set off against dividends declared and payable to the appellants.

The legal issues before the court were whether the primary judge erred in finding that the disputed loans existed and whether the primary judge erred in finding that the appellants bore the onus of proving the non-existence of the loans. The court examined the admissibility of the Chylos accounts under s 1305 of the Corporations Act 2001 (Cth) and the implications of various documents and events that suggested the existence of the disputed loans. The primary judge considered the 2000 accounts, a Shareholders and Associated Parties Deed executed in 2003, and an email from 2005 that made no mention of any dispute over the loans. The court assessed whether these pieces of evidence were sufficient to establish the existence of the loans and whether the appellants had the burden of proving otherwise.

The court upheld the primary judge’s findings, concluding that the appellants had failed to establish any of their grounds of appeal. The court found that the 2000 accounts, the Deed, and the 2005 email provided prima facie evidence that the disputed loans existed and were not disputed by the appellants. The court also held that the appellants bore the onus of proving the non-existence of the loans. Given the appellants' failure to meet this onus, the appeal was dismissed.

The court ordered that the appeal be dismissed, the notice of contention also be dismissed, and the appellants pay the respondent's costs of the proceeding as agreed or assessed. The entry of orders was governed by Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

1. The appeal be dismissed.

2. The notice of contention be dismissed.

3. The appellants pay the respondent’s costs of the proceeding, as agreed or assessed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

His Honour then referred to s 1305 of the Corporations Act 2001 (Cth) (the Act), which provided:1305 Admissibility of books in evidence(1)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.(2)A document purporting to be a book kept by a body corporate is, unless the contrary is proved, taken to be a book kept as mentioned in subsection (1). His Honour stated that s 1305 did not have the effect of elevating a book entry to the status of prima facie evidence of the transaction which it recorded, citing Whitton as Trustee of the Estate of Rose v Regis Towers Real Estate Pty Ltd (In Administration) [2007] FCAFC 125; (2007) 161 FCR 20 at [59] and Livingspring Pty Ltd v Klivger Partners [2008] VSCA 93; (2008) 20 VR 377 at [37]. His Honour suggested that the 2000 accounts provided prima facie evidence that a director of Chylos, probably Mr Smedley (who signed those accounts), believed that Mr and Mrs McAdam owed money to Chylos. After stating that he was satisfied that the evidence demonstrated that Mr McAdam was provided with copies of the Chylos accounts as they became available, including that he had received a copy of the 2000 accounts by at least 2003, the primary judge viewed the following two matters as being inconsistent with the appellants’ claim that the loans did not exist. First, even though Mr Bruce McAdam could not recall the loans when he wrote the 15 March 2009 file note, on 24 September 2003 a deed entitled “Shareholders and Associated Parties Deed” (the Deed) was executed between various parties who had had an interest in a group of companies (broadly, the Jax Group) which it was thought at the time would be acquired by Coles. The Deed recorded that Mr and Mrs McAdam would receive 16.67 per cent of the eventual sale price received from Coles in respect of Chylos and that Mr Hurrell was obliged under the Deed to provide the 2003 accounts to Mr and Mrs McAdam within four weeks. As noted above, the primary judge accepted that the 2000 accounts, which recorded the disputed loans, had already been provided to Mr McAdam. Accordingly, the primary judge reasoned that he would have expected that if the loans had been in dispute this would have appeared in the Deed as a matter requiring resolution in some way. In those circumstances, an inference could be drawn that there was no such dispute. The second matter which his Honour relied on in inferring that there was no dispute about the existence of the loans was an email dated 25 July 2005, which was authored by an accountant for the Jax Group called Mr Skyring (the Skyring email). The email, which was sent to Mr Marcus McAdam and copied to Mr Hurrell, broadly described the components of a further proposed deed to settle the parties’ long-running commercial disputes. There was no mention in the email of any mechanism to resolve any dispute between the parties about the disputed loans from Chylos. His Honour acknowledged his earlier finding that Mr Bruce McAdam had forgotten about the loans by 2009 when he made his 15 March 2009 file note, but this was not inconsistent with the conclusion that the loans existed and were not disputed. His Honour described the wider commercial dispute between the Hurrells and the McAdams as an “Icelandic saga”. The fact that Mr McAdam had forgotten about the loans was described by his Honour as a “minor point of detail” in that context and was readily explicable, particularly also given the passage of time.

Decision

Reasons for decision

BRUCE J
In view of the appellants’ failure to establish any of their three grounds of appeal, the appeal must be dismissed. It is not necessary, therefore, to determine the notice of contention. Conclusion For these reasons, the appeal should be dismissed and the notice of contention also dismissed. The appellants should pay the respondent’s costs of the proceeding as agreed or assessed.

Ratio Decidendi

Legal Principle Established

Established by: BRUCE J

Full text does not contain this section.