Process & Mech Eng Services v BBH Eng & Anor No. Scgrg-97-1545 Judgment No. S6491

[1997] SASC 6491

PROCESS AND MECHANICAL ENGINEERING SERVICES PTY LTD v  BBH ENGINEERING PTY LTD and WHITELY

Magistrates Appeal:  Civil

DOYLE CJ

Introduction

In proceedings in the Magistrates’ Court BBH Engineering Pty Ltd ("BBH") obtained a consent judgment against Tool-Rite Co Pty Ltd ("TR").  The judgment was for $34000 inclusive of interest.  Not long after that, a warrant of sale was executed against real and personal property of TR.  Acting under the warrant of sale, a bailiff seized certain plant and equipment.

Notices of claim to much of that plant and equipment were given under s16(2) of the Enforcement of Judgments Act, 1991. Process and Mechanical Engineering Services Pty Ltd ("PME") claimed that it was the owner of four particular items of equipment seized by the bailiff.

In the judgment under appeal a magistrate dealt with the claim by PME that it was the owner of these four items of plant.  The dispute as to the ownership of these items, a dispute between BBH and PME, was heard in the Magistrates’ Court pursuant to r135 of the Magistrates’ Court Rules and r88A.07A of the Supreme Court Rules.

The issue before the magistrate was whether the plant in question had been purchased by PME from TR on 30 June 1994.  A minute of a meeting of directors of TR and PME recorded that, at a meeting on that date, the directors had agreed that PME would purchase all the plant and equipment of TR on 30 June 1994 at its written down value.

After hearing a lot of evidence (the transcript occupies 853 pages) the magistrate rejected the evidence led by PME in support of its claim.  She found, in effect, that it was proved that the minute was not a true record of what happened on 30 June 1994.  It does not seem to have been disputed that there was a meeting of the directors on that day.  The effect of her decision is that on that day the relevant resolution was not passed.  It may be that her Honour intended to find that there was talk about selling the plant and equipment, but no more than that.

Section 258 of the Corporations Law provides that production of a minute, duly entered in the records of a company and duly signed, is proof of proceedings recorded in the minutes "unless the contrary is proved." The effect of the magistrate’s decision is that she was satisfied that the contrary was proved. She did not accept that PME had an interest in the property seized.

On appeal, this conclusion was challenged.  In particular, it was argued that the magistrate had misunderstood an important piece of evidence, and had failed to give due weight to certain objective facts.

Neither in the Magistrates’ Court, nor on appeal before me, was there an argument that even if the alleged transfer took place, it was invalid or ineffective.  Before me, both parties agreed that any such challenge would have given rise to issues over which the Magistrates’ Court had no jurisdiction.  I therefore had to consider only the question of whether the plant and equipment had been transferred by TR to PME as alleged.

Background

Mr Sain was the central figure in the case.  He appears to have been the driving force behind, and to have controlled the business of, both TR and PME.

PME was incorporated in 1985.  The magistrate described its business as "instrumentation and general mechanical contracting in the oil and gas industries."  In the early stages the directors were Mr Sain and Mrs St Alban, Mr Sain’s sister.  In 1991 Mrs Sain, Mr Sain’s mother, replaced Mrs St Alban as a director.  She appears to have remained a director thereafter.  The magistrate found that Mrs Sain relied entirely on the advice of her son, in relation to her role as a director of PME.

TR was incorporated by Mr Sain in 1988.  According to the magistrate it operated "as a general engineering company specialising in toolmaking and specialty machines."  Mr Sain and a Mr Dona were directors of this company until 1995.  They were equal shareholders in TR.  The magistrate found that Mr Dona had invested $15000 in PME.

Mr Sain and Mr Dona were lifelong friends.  Mr Dona trusted Mr Sain implicitly.  He left the running of TR and PME to Mr Sain, although he helped out, particularly in relation to TR, in his spare time.  Mr Dona had full time employment elsewhere.

There was plenty of evidence to support the magistrate’s finding that the records and accounts of TR and PME were not well kept or particularly reliable.  Problems with the accounts were said by Mr Sain to have been one of the reasons for the disputed transfer of plant and equipment.  Like many family companies, the two companies appear to have been managed without a great deal of regard, from time to time, for the fact that they were separate entities.

Mr Sain produced minutes of a meeting of directors of TR and PME.  They purport to be minutes of a meeting at the business premises of the companies, but it is clear that the meeting was at Mr Sain’s home.  After recording that those present were Mr Sain, Mr Dona and Mrs Sain, the minutes are as follows:

"REASONS FOR  MEETING:       The Directors of both companies unanimously agreed that the inter company relationship between both companies could potentially have an adverse financial effect on P.M.E.S. Pty Ltd.P.M.E.S. Pty Ltd held tangible assets in the form of land and buildings while Tool-Rite Co Pty Ltd had no tangible fixed assets.Any law suit directed to Tool-Rite Co Pty Ltd, because of its trading activities, would invariably result in P.M.E.S. Pty Ltd having to liquidate its land and buildings.Therefore, in the best interests of both companies the following is proposed.

1)     P.M.E.S. Pty Ltd to pay Tool-Rite Co Pty Ltd 10% interest on ($117676) for the financial year 1993/94.

2)     P.M.E.S. Pty Ltd to purchase all the plant and equipment as per the WDV on the depreciation schedule of Tool-Rite Co Pty Ltd as at 30th June 1994.

3)     It was agreed that upon the payment of $10,000 by P.M.E.S. Pty Ltd to Tool-Rite Co Pty Ltd - the latter would relinquish all outstanding amounts, and no further claims would be made by Tool-Rite Co Pty Ltd in the future.

4)     In future, all financial transactions between the two companies will be undertaken by an exchange of cheques.
  RESOLUTION The meeting unanimously agreed to accept the above proposal.
  CLOSURE       There being no further business the meeting was declared closed."

At the foot of the minutes appear the signatures of Mr Sain, Mr Dona, and Mrs Sain.

Having regard to the terms of s258 of the Corporations Law, the issue before the magistrate was whether it was proved that the second of the minuted resolutions had not been passed. It does not appear to have been disputed that there was a meeting at the time and place claimed. The dispute was as to the business transacted at the meeting.

Much of the evidence, and some of the argument on appeal, centred on the suggested reasons for the resolution.

Because of his dominant position in TR and PME, Mr Sain was a key witness.  In her judgment the magistrate rejects his evidence that the minutes record resolutions passed at the meeting.  That rejection was not decisive of the issue before her, but was very significant.  Because of the significance of Mr Sain’s evidence, I begin with his evidence and the magistrate’s approach to his evidence.

Mr Sain’s evidence

Mr Sain gave two reasons for the sale.

First of all, he said that TR was not going well, and had lost a lot of money on a recent undertaking (T27).  He said that TR was "going nowhere" and he was sick of working for nothing (T146).  Secondly, when TR was established PME had advanced to TR about $115000 for the purchase of plant and equipment.  As well, TR had been occupying premises of PME but had not been charged rent.  The books of TR recorded PME as indebted to TR for an amount of $117676, but this was inappropriate because it did not reflect the start-up advance by PME nor the occupancy of PME’s premises.  Mr Sain said that he was unhappy with the state of the accounts (T28).  This was linked to the fact that there was a court case against TR and, were TR to lose, the inappropriate recording of money owed by PME to TR could cause problems (T146-147).

In evidence Mr Sain said that he was unhappy because the accountants had not made the appropriate adjustments, as between the two companies, to the accounts.

He said that in that context it was decided to "square off" the books and sort things out.

The transfer of the plant and equipment was apparently intended to deal with that problem, presumably by vesting it in PME because PME had advanced the money with which to purchase the plant and equipment.  Presumably, the payment of $10000 was meant to "square off" the books in respect of that transaction.  The fourth resolution appears to reflect some intent that henceforth all transactions between the two companies would be correctly recorded and debited and credited appropriately.  The agreement by PME to pay interest on the moneys recorded as owing to TR presumably was entered into in the same spirit.

Mr Sain also gave evidence that the intention was that TR would, thereafter, pay rent to PME.

It appears that the minute of the meeting in question was prepared by Mr Rugari, the accountant for TR and for PME.  In evidence, he said that he was not sure whether he prepared the minute before 30 June or after 30 June (T778).  There was no suggestion that he attended the meeting.  He appears to have accepted that the minute could have been prepared quite some time after the meeting (T776).  As I understand his evidence, it was to the effect that he had no memory of when he prepared the minute.  He gave evidence about the preparation of the minute, but was quite vague about any advice that he might have given in relation to the transaction (T736).  When asked if it was possible that the minute was "sent out" (I take this to mean prepared) when he sent an account in December 1994, he said that he could not recall (T737).  He said that while the wording of the minute was his, he tried to reflect what the directors wanted to happen (T737).

Clearly enough, his relatively independent evidence did not provide her Honour with much of a basis upon which to reach a conclusion about what happened at the meeting.  Moreover, her Honour found, (p26) that Mr Rugari was not aware of the reasons for the transaction, as given by Mr Sain in evidence (pp26-27).

In relation to Mr Sain’s expressed concern about the non-payment of rent by TR, her Honour pointed to other evidence by Mr Sain that suggested that he had not been concerned about the matter.  He said, which is readily understandable, that there was not much to be gained by financial transfers from one company to the other (T100 and p28).  It appears from Mr Rugari’s evidence that Mr Sain did not express his concerns about the accounts to Mr Rugari, when he took over the preparation of the company accounts (T648 and T649).  That is surprising, in view of the evidence before her Honour.

The evidence about the payment of rent after 30 June 1994 was unclear.  Her Honour appears to have found that no payment was actually made by TR to PME before February 1995 (p28).  (Mr Rugari gave evidence that certain payments by TR in the second half of 1994 were later attributed to payments of rent.  The actual payments (of other things) were for the benefit of PME, although not actually as rent (T720-T721).  The attribution was made, or could have been made, after the close of the year ending 30 June 1995 (T725).)  This material does not sit comfortably with Mr Sain’s evidence about getting everything in order.

Mr Sain agreed that no steps were taken in relation to the payment of interest by PME on the $117676 that it was recorded as owing to TR (T196 and p26).

As to the payment of $10000 for plant and equipment, her Honour referred to a cheque butt apparently recording a payment of that amount by PME on 6 July 1994 (p23).  However, the banking records of TR showed that that cheque was not deposited until 8 February 1995.  Mr Sain explained the delay as just one of those things that happen.  The magistrate says that "this suggestion is of little weight" (p23).  Although her judgment is not completely clear in this respect, my impression is that she is intending to find that the cheque was not drawn when claimed.  I draw that inference from her finding, on the same page, that arrangements as between the two companies were changed by Mr Sain early in 1995.

Her Honour dealt with a number of other transactions recorded in the books of the companies.  She made a strong finding that the documents produced by Mr Sain "showed a consistent pattern of falsification and fabrication of records" (p24).  She found that Mr Sain condoned this practice.

It is clear that her Honour was not prepared to accept the records of TR and PME at face value.

Her Honour also found that Mr Sain’s evidence was unsatisfactory in a number of respects.  For example, she found that he gave false evidence about his financial position and about the ability of TR to pay him an income (pp34-35).  She said that she rejected Mr Sain’s evidence about TR’s ability to support him.  She said "Mr Sain cannot be relied on" (p35).

Her Honour commented adversely upon his manner of giving evidence.  She was not satisfied that he was attempting to give accurate and truthful evidence.  Her conclusion appears to have been that he was prepared to tailor his evidence to the needs of the situation.  She said (p36):

"I am unable to rely on Mr Sain’s evidence as I consider it is a contrivance to suit his own purposes."

This is a strong conclusion.

In brief, it is clear that her Honour rejected most of Mr Sain’s explanations for the state of the company records.  She rejected his evidence about the reasons for the transaction.  She appears to have found that transactions identified as flowing from the agreement of 30 June 1994 did not do so.  She found that he untruthfully attempted to blame his accountants for the state of the companies’ books (pp32-33).

As I have said, her Honour rejected Mr Sain’s evidence in strong terms and on a number of grounds.

On looking through the evidence, although I was taken to only a small part of it, I must say that at times I thought that her Honour’s conclusions were a little too critical of the state of records of the companies.  Some of what I read was consistent with a casual approach to accounting as between closely related companies, and a failure to attend to formalities, which are not uncommon in small companies.

But the fact remains that Mr Sain chose to make a series of assertions, and to give explanations, that her Honour found to be false.  As counsel for the respondent submitted in argument, if the meeting truly happened as recorded, there was no need or reason to lie about what lead up to it or what followed it.  Although at times I thought that her Honour had been unduly critical, as I have already said, I do not consider that, consistently with my role on appeal, I can reject the finding that her Honour made in relation to Mr Sain’s credit.  Nor was I asked to do so.  The thrust of the argument, on appeal, was that non-acceptance of Mr Sain’s evidence did not lead to a conclusion that the transfer of plant and equipment had not occurred in accordance with the minute of 30 June.  It was pointed out that the accountant who dealt with the companies’ books before Mr Rugari, had agreed in evidence that he had not troubled himself about loan accounts as between the companies.  It was said that it had never been denied that the company records were poor, and indeed dissatisfaction with the state of the accounts was one of the reasons given by Mr Sain for the relevant transaction.  It was also pointed out that Mr Sain had good reason to be concerned about the impact of a judgment against TR.  It was also clear that PME had advanced substantial funds to TR to purchase plant and equipment, and that rent had not been paid by TR to PME, before 30 June 1994.

All of those submissions are sound.  Nevertheless, the adverse finding in relation to Mr Sain puts a real cloud over PME’s case.  The magistrate has found that he was falsely putting forward matters in support of the minute.  Mr Sain was the moving spirit behind both companies, and the originator of the relevant transaction.  The rejection of his evidence about the genesis of the transaction, and its execution, makes it difficult to accept the accuracy of the minute in question.

Of course, it is not impossible to do so.  One could discard his evidence, as being quite unreliable, and come to a conclusion upon other evidence supporting the accuracy of the minute.  But one has to bear in mind that the findings of the magistrate have eroded what might be called the foundations and superstructure of the transaction.

I turn now to the other evidence.

Mrs St Alban’s evidence

Mrs St Alban is Mr Sain’s sister.  She was a director of PME until 1991.  In August 1995 she became a director of TR.  At all relevant times she acted as office manager for TR, and the magistrate found that she attended to some of the personal affairs of Mr Sain.

She was present at the meeting in question, and signed the minute.  She had no recall of item 1 (p16).  She could give no real reason why the minutes did not record the fact that the start-up loan to TR, and the non-payment of rent, were important reasons for the transfer of the plant and equipment.  The magistrate found that Mrs St Alban was in part responsible for what the magistrate regarded as unreliable and false records.  In particular (p24) the magistrate found that Mrs St Alban recorded a payment of $15000 to Mr Dona which entry the magistrate found to be "fictitious" (p24).  I take the magistrate to mean that the payment was never made.  The magistrate appears to have regarded Mrs St Alban’s evidence about the payment of rent by TR after the meeting in question as unsatisfactory (p28).  Her Honour also rejected some of Mrs St Alban’s evidence about the business of TR and PME, saying that their evidence on these matters "was contradicted as soon as company records were called for" (p31).

These matters led Her Honour to reject Mr St Alban’s evidence.  Again, the finding is a strong one.  Her Honour says that (p36):

"A rejection of Mr Sain’s evidence also confirms my previous reservations of the veracity of Mrs St Alban’s testimony and she was his corroborating witness."

The magistrate goes on to say that this affects her view as to the genuineness of various entries in the records of the companies.

Once again, in some respects I think that her Honour may have been unduly critical of Mrs St Alban on the basis of the state of the records of these two companies.  But there can be no escaping the finding that the evidence of this witness was unreliable.  The magistrate referred to the fact that she had good reason to support the evidence of her brother.  The rejection of the evidence of Mrs St Alban has further significance, because she was responsible for many of the records of the companies that were relied upon.

Other evidence

Counsel for PME argued that the annual returns of PME and TR, lodged with the Australian Securities Commission in January 1995, were consistent with a transfer of plant and equipment from TR to PME having taken place before the lodgement of those annual returns.

I accept that submission.  Exhibit A31, the annual return of TR, records that that company has no "non-current tangible assets".  That suggests that the plant and equipment has been disposed of.  But exhibit A23, the balance sheet of TR at 30/2/1994, muddies the waters.  It shows that in a previous year the company held plant and equipment valued, at cost, at $173645.  There was a provision for depreciation of $122999, leaving a total value for non-current assets of $50646.  For the year ended 30 June 1994 the provision for depreciation was shown as $173645, resulting in a nil value for non-current assets.  It was not suggested to me that there was any evidence explaining this, and I proceed on the basis that the balance-sheet is consistent with the provision for depreciation having simply accumulated to an amount equal to the original cost of the plant and equipment.  There is the further complication that the minute does not reflect the fact that the written down value of the plant and equipment is nil.

Exhibit R15, the balance-sheet for PME to 30 June 1994, does show plant and equipment valued at cost at $34987.  That is the written down value of the plant and equipment in what appears to be the depreciation schedule for income tax purposes prepared in relation to TR.  That schedule is also part of exhibit A23.

The annual return of PME, exhibit A31, is consistent with the plant and equipment now being the property of PME.

These records do suggest that, by January 1995, and indeed by December 1994 when the accounts were signed, that someone has made a decision that the plant and equipment of TR should be transferred to PME.

This is not material that, of itself, points to a resolution having been passed by the directors at the meeting on 30 June 1994.  Absent evidence, other than the minute, it would lead to that conclusion.  But the magistrate’s findings about Mr Sain, and Mrs St Alban, and about the unreliability of the company records, makes it more difficult to treat this material as objective evidence supporting the veracity of the minute A13.

The material now under consideration is equally consistent with the decision having been made by Mr Sain, at some stage before December 1994, that the transfer should take place, and with him having given instructions to the accountants accordingly.

Her Honour referred to these documents.  She was not persuaded by them.  She found that probably the documents reflected a decision made early in 1995 to transfer plant and equipment, and to rearrange matters between the companies, in the light of some difficulties that TR was then facing.  She was not prepared to accept that these documents supported the reliability of the minute A13.

There is a difficulty about her Honour’s finding in this respect. Mr Hordacre gave evidence that he signed a letter of resignation from TR on 6 March 1995 (A28).  He said that he resigned from his employment with TR because Mr Sain told him that there were problems with a court case in which TR was involved, and he was going to "convert the company to process and mechanical engineering so that these parties couldn’t get hold of any of the cash or assets of the company" (T595).  Her Honour also linked the company records to a letter of 8 February 1995 which Mr Sain wrote to solicitors for a company that was making claims against TR.  In that letter Mr Sain said quite openly that "the company may no longer exist or have assets beyond the next few months."

There is a difficulty in making a link between things done in December 1994 and January 1995, and letters of February and March 1995.  The events the subject of those letters could have prompted what is recorded in the accounts of the companies and in their annual return only if Mr Sain had anticipated those events and is found to have been acting in December and January in anticipation of them.

I have been unable to resolve this point to my satisfaction.  However, in my opinion the difficulty for the appellant is that in light of her Honour’s other findings these company records do no more than indicate that Mr Sain had decided, by December 1994, that the plant and equipment of TR should be transferred to PME.  They provide limited, if any, support for the conclusion that the transfer took place at the alleged meeting on 30 June 1994.

The same point applies to the sale of a piece of equipment in February 1995.  The records of PME and TR indicate that PME sold the relevant piece of equipment to TR, which then on-sold it to the purchaser.  These records are consistent with a decision having been made before then that the plant and equipment was to be treated as belonging to PME.  However, it is another question whether that decision is a decision made by the directors of the two companies as alleged.

Counsel for the appellant also pointed to a payment of rent in February 1995 made by TR to PME.  It was submitted that this was consistent with the resolution recorded in A13.  However, my impression from the magistrate’s judgment is that her finding is that this was the only payment actually made.  The failure to make payments before then, if anything, tells against the submission for the appellant.  The timing of the first payment rather supports the magistrate’s conclusion that early in 1995 Mr Sain decided to reorganise the affairs of the company.

I do not consider that these pieces of evidence are sufficient to overcome the strong adverse findings made by the magistrate.

Evidence of Mr Dona

Mr Dona gave evidence, and was cross-examined about the meeting.  He gave evidence (T379-T384) that supported Mr Sain’s evidence that there was a plan to transfer plant and equipment from TR to PME.  He gave, as the reason for this decision, a decision to wind TR down.  However, the magistrate found, and this was open to her on the evidence, that in fact TR appeared to have carried on quite normally after 30 June 1994, maintaining similar operations and continuing to use the relevant plant and equipment (p29).

Mr Dona gave evidence that a meeting did take place about 30 June 1994.  Despite a submission to the contrary, by counsel for the respondent, my reading of his evidence is that he does confirm that the resolution relating to the plant and equipment was passed (T383.24 and T384.23).

In cross-examination, Mr Sain said that they "got over the bulk of the meeting" (T412) within about half an hour, but the whole meeting lasted three or four hours and was a mix of business and social matters.  The meeting was at Mr Sain’s home, and I get the impression that it took place in a casual setting.

Mr Dona said that there were "other aspects" that occupied the balance of the time spent.  The following evidence then occurs (T412-T413):

"Q.    What were the other parts that were dealt with over the remaining 3 to 4 hours.

A.     The other parts were essentially what were we going to do with Tool-Rite, were we going to gradually wind the company down, were we going to sell off plant and equipment, were we going to lease the building.  These were all sorts of questions that were thrown around.  We really wanted to find a direction where we were going to go and what we were going to do.

Q.     And who was saying that you should sell off the plant and equipment.

A.     That was only a suggestion that Eddy had brought up.  It was only one of the options involved and it was an option if only we could get a bit more than what we had paid for it.

Q.     Did he say that he had a buyer in mind for the plant and equipment.

A.     No, not at the time.  It was only, as I recall, it was only just tossing up options to see which one was the most viable way to go if we could do it.

Q.     At the end of the meeting was that left up in the air, that issue as to whether you would sell it off.

A.     It was.  Some time after, now I can’t exactly recall when, Eddy did start making some enquiries to some land agents and things like that to get an estimate of how much the land and the business, the building, was worth.  We still didn’t know then whether we were going to pull the equipment out and do something with it, sell it or scrap it, it was still all up in the air."

In re-examination (T425-T426) he said that "we" meant Mr Sain and himself.

In her judgment the magistrate treated this evidence as meaning that the transfer of the plant and equipment had been "left up in the air".  She said that she preferred Mr Dona’s evidence to that effect (p36).

It was submitted, on appeal, that her Honour had misunderstood Mr Dona’s evidence.  The submission was to the effect that all he was saying was that, having passed the relevant resolutions, there was then a discussion about what they would do with the business of TR and with the plant and equipment that PME had now acquired.  Counsel for the respondent argued that as Mr Dona had given evidence that he was not involved in PME (T394.25), he could not be speaking in his capacity as a director or shareholder of PME, must have been speaking in his capacity as a director of TR, and therefore was speaking in a manner inconsistent with a transfer of the plant and equipment having taken place.  I do not accept that submission.  All the indications are that none of the parties paid a lot of attention to the fact that there were two separate entities involved.

On my reading of the evidence, it does appear to me that her Honour has misunderstood the evidence.  I can well understand Mr Sain and Mr Dona discussing, once they had passed the relevant resolution, what would now be done with the business of TR and with the plant and equipment that PME had acquired.  I do not find any inconsistency between what Mr Dona said and between the minute A13.

On the other hand, her Honour had the benefit of hearing Mr Dona give evidence.  Her Honour has been left with the impression that he was saying that the whole thing was left up in the air.  However, no doubt for good tactical reasons, it was not put to Mr Dona in terms that the relevant resolution had not been passed and that the directors had never advanced beyond a general discussion about what should be done with TR’s plant and equipment, as the plant and equipment would have remained on that hypothesis.

After making all allowances for the advantages that her Honour had, I cannot escape the conclusion that her Honour has erred in this respect.

Conclusions

What is the consequence of that?

Her Honour refers to Mr Dona’s evidence on this topic on two occasions.  Early in her judgment (p14) she says that Mr Dona’s evidence about the possibility of selling the plant and equipment is inconsistent with Mr Sain’s evidence that the transfer was to take effect from 1 July 1994.  In the concluding part of her judgment (p36), which appears to be the critical part of the judgment, she records her rejection of the evidence of Mr Sain and of Mrs St Alban on the matters that I have dealt with earlier.  She then says that the company records do not persuade her of the authenticity of the minute A13.  She then says:

"I prefer Mr Dona’s evidence which suggests that at a meeting on 30 June 1994 the transaction that the applicants rely on, did not effect an agreed transfer of plant and equipment."

She then goes on to say that the annual reports lodged with the ASC do not assist PME, and to find that this material was probably generated early in 1995 for the reasons already referred to by me.

I have given careful consideration to the question of whether this error in relation to Mr Dona’s evidence, coupled with such weight as should be given to the returns lodged with the ASC, lead to the conclusion that her Honour has erred and that the judgment cannot stand.

In the light of her Honour’s rejection of the evidence of Mr Sain and Mrs St Alban, and bearing in mind the important matters upon which they gave evidence, I consider that it is not open to me to conclude that, upon the basis of a correct understanding of Mr Dona’s evidence, her Honour would or should have found that the resolutions recorded in A13 were passed.  I have come to the conclusion that the rejection of the evidence of those witnesses, and the basis upon which it was rejected, make it impossible to say that a correct understanding of Mr Dona’s evidence would or should have led to the conclusion for which PME contends.  If her Honour had correctly appreciated Mr Dona’s evidence she might well have rejected it.  In particular, having regard to the manner in which his evidence reads, she might have concluded that she was not prepared to accept the reliability of his memory about the meeting in question, bearing in mind that Mr Sain was the dominant party in this transaction.

I have therefore come to the conclusion that it is not appropriate to set aside her Honour’s decision and substitute a determination that the items in question are the property of PME.

Should I, however, order that the matter be retried?

I have concluded that I should not.  I am left with the firm impression that her Honour was satisfied that the claimed resolution had not been passed at a meeting on 30 June 1994.  In my opinion the tenor of her judgment indicates that that was a conclusion to which she had come independently of her misunderstanding of Mr Dona’s evidence.  I am satisfied that her Honour’s conclusion can rest upon the other matters upon which she relied, and does not depend upon her conclusion in relation to Mr Dona’s evidence.

For those reasons, I would dismiss the appeal.