Re Nautical Finance Group Pty Ltd (In Liq)
[2015] VSC 633
•12 November 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2014 06419
IN THE MATTER of NAUTICAL FINANCE GROUP PTY LTD (In Liq)
(ACN 007 164 285)
BETWEEN:
| JEREMY ROBERT ABEYRATNE (AS LIQUIDATOR OF NAUTICAL FINANCIAL GROUP PTY LTD (IN LIQ)) (ACN 007 164 285)) | First Plaintiff |
| - and - | |
| NAUTICAL FINANCIAL GROUP PTY LTD (IN LIQ) (ACN 007 164 285) | Second Plaintiff |
| v | |
| ROBERT JOHN GUY | Defendant |
AND
S CI 2014 6602
IN THE MATTER of NAUTICAL FINANCIAL GROUP PTY LTD
(In Liquidation) (ACN 007 164 285)
BETWEEN:
| LOTUS SECURITIES LIMITED (ACN 121 418 317) | Plaintiff |
| - and - | |
| NAUTICAL FINANCIAL GROUP PTY LTD (In Liq) (ACN 007 164 285) and ROBERT JOHN GUY | Defendants |
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JUDGE: | RANDALL AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 14 & 17 December 2014, 4 February 2015 and 23 March 2015 |
DATE OF JUDGMENT: | 12 November 2015 |
CASE MAY BE CITED AS: | Re Nautical Finance Group Pty Ltd (In Liq) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 633 |
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CORPORATIONS — Corporations Act 2001 (Cth) — Application by liquidator pursuant to s 1324 of the Corporations Act for delivery up of assets of the company — preliminary question as to ownership of assets — turns on facts.
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APPEARANCES: | Counsel | Solicitors |
| For Mr Abeyratne and Nautical Financial Group Pty Ltd | Mr S Rubenstein | Marsh & Maher |
| For Lotus Securities Ltd | Mr B P Devanny | M & K Lawyers |
| For Mr Robert John Guy | Mr A Scriva | Lillian Nativ & Associates |
HIS HONOUR:
Introduction
By originating process filed 3 December 2014, Mr Abeyratne as liquidator of Nautical Financial Group Pty Ltd (In Liquidation) (‘Nautical’) sought orders for the delivery of 25 motor vehicles and one watercraft in the possession or control of the defendant. The originating process was amended with respect to the description of the vehicles included.
By originating process filed 12 December 2014, Lotus Securities Ltd (‘Lotus’) relevantly seeks orders with respect to the rectification of a fixed and floating charged dated 10 August 2012.
The parties have agreed that ownership of the vehicles and watercraft should be determined as a preliminary point before dealing with the issues raised in each of the originating processes.
Motor vehicles and watercraft
In general terms Nautical’s position is that the motor vehicles and watercraft are and were at all material times the property of Nautical. That position is supported by Lotus Securities. Mr Guy’s position is that the vehicles are his personally or, in the alternative, are assets of his superannuation fund. The background facts can be stated in short compass as there is no area of great dispute between the parties. It is more a matter of consideration of what ensues from the facts.
Background
On 13 October 2014, Mr Abeyratne was appointed liquidator of Nautical pursuant to a resolution of company shareholders in accordance with provisions of s 491 of the Corporations Act 2001 (Cth) (‘the Act’).
At the time of liquidation, Mr Guy was the sole director and one of two shareholders of Nautical.
One of the tasks undertaken by the liquidator was to carry out a search of the Personal Property Securities Register (‘PPSR’). That search disclosed that Nautical was the grantor of a security interest in 44 classic cars and one watercraft.
Following the search of the PPSR, the liquidator made further enquiries, interviewed Mr Guy and considered documentation filed in proceeding S CI 2014 02615, which was an application by Nautical to set aside a creditor’s statutory demand dated 29 April 2014 and served by Lotus (‘the statutory demand proceeding’).
Documents to which the liquidator had regard
In addition to the PPSR search, the liquidator had regard to the following documents:
(a) Nautical’s 2011 financial report;
(b) Nautical’s 2013 financial statement;
(c) Nautical’s tax return for the 2013 financial year signed by Mr Guy;
(d) A letter from Armstrong Dubois Chartered Accountants, the former accountants of Nautical, dated 12 December 2012; and
(e) A letter from Armstrong Dubois Chartered Accountants dated 28 November 2014.
In June of 2014 Nautical retained Pasha Legal as its solicitors. By letter dated 4 June 2014 Pasha Legal wrote to Lotus. That letter relevantly set out as follows:
Further to our letters dated 7 May 2014 and 13 May 2014, it appears that Lotus Securities Ltd persists with the assertion that it has a charge over the classic car collection of Nautical Financial Group Pty Ltd.
… Our client acknowledges a debt but rejects that the debt is secured against the car collection or any other asset of Nautical. …
We have advised you that Nautical urgently needs to sell part of the car collection in order to meet the legitimate demands of its current creditors. Despite its assets, Nautical is unable to satisfy any debt owed to Lotus, or any other creditor for that matter, until the car collection is removed from the Personal Property Securities Register … Nautical was not insolvent but vehicles need to be sold urgently if Nautical is to avoid insolvency proceedings.
By further letter dated 17 July 2014 addressed to Lotus’ solicitors, Pasha Legal relevantly set out as follows:
· What assets should be held in security for the loan by Lotus so as to not unreasonably interfere with Nautical’s ability to trade.
…
Evidence of Nautical’s solvency has been provided to Lotus’ previous director, Mr Ludekens in 2012. That evidence was by way of a Slattery valuation of the classic car collection, which at that time ranged between $900,000 as auction-realised value and $1,200,000 as market value. Lotus is well aware that Nautical retains title to the car collection given that Lotus in 2014 placed almost the entire car collection on the Personal Property Securities Register.
…
In addition, we are instructed to institute proceedings with the Federal Circuit Court to have the car collection removed from the PPSR on the ground, inter alia, that no charge or security document was ever executed by Nautical that is referrable to the loan and/or loan variation agreement.
By letter dated 12 December 2012 from Armstrong Dubois to Mr Guy Armstrong Dubois relevantly attached financial statements and set out as follows:
Would you please ascertain that all information contained in the income tax returns are correct and that all taxable income derived by you has been included. …
In relation to the Motor Vehicle collection, we have recognised ownership attribution to [Nautical]. We are aware the motor vehicle purchase transactions have been made variously from Robert Guy’s personal account, Nautical Financial Group account and an account styled RGR Motor Sports. We have treated these transactions to reflect convenience of international dealings, credit card with personal accounts used to pay deposits and finalised payments along with other accounts being used as funds w[h]ere available.
As all funds emanated originally from [Nautical] and its financial services business, we have recognised these assets purchased as being beneficially for and on behalf of [Nautical].
The transfer to Nautical was effected by
(a) Debiting the historic vehicle asset account named RGR Investment[1] in the balance sheet in the sum of $1,157,599; and
(b) Crediting a shareholders loan account in favour of the defendant and his wife, in the same amount; and
(c) The RGR Investment account was increased by the amount in the advertising and promotions account and that account was decreased accordingly.
[1]The RGR Investment account is not RGR Motorsport which is a business name operated by Mr Guy.
The initial reversing of the cars as an investment was because at that stage no trading activities had been undertaken and Mr Armstrong used ‘RGR Investment’ rather than say ‘classic/heritage cars’ as that heading had been used previously in the accounts.
In the statutory demand proceeding Mr Guy affirmed an affidavit on 10 July 2014. That affidavit referred to his earlier affidavit of 28 May 2014. That affidavit relevantly set out:
Up until December 2013, Nautical had been in the business of providing financial advice to the public. That was its main source of income. Nautical was also the company through which I operated a classic car collection and restoration business. Since the commencement of 2014, Nautical has not operated as a financial planner and has been solely in the business of importing, restoring and trading in classic cars. It currently owns more than 50 classic vehicles. … the business of Nautical is still in transition from financial planning advice to motor vehicle restoration and sales …
…
As noted in the letter to Lotus dated 13 May 2014 (exhibited as ‘RG–5’ to my previous affidavit), the placement of the car collection on the PPSR has prejudiced the ability of Nautical to trade. In that letter, Lotus is requested to consent [to] a sale of cars to allow Nautical to meet its genuine debts. Lotus is aware that the car collection, in Australia alone, has been valued by Slattery in 2012 at between $1,032,200 and $1,267,000 … Now produced and shown to me and marked ‘RG-3’ is a true copy of the summary of the Slattery valuation. Mr Ludekens, the previous director for Lotus was provided a complete copy of the Slattery valuations and the Shannon’s Insurance policies for the vehicle, in 2013. Lotus has declined to consent to removing any vehicles from the PPSR to permit Nautical to realise its assets … I have therefore instructed the solicitors to institute proceedings to have the classic car collection removed from the PPSR.
By order made by the Honourable Justice Ferguson (as her Honour then was) on 4 December 2014 the hearing and determination of the originating process was referred to an Associate Judge.
Affidavit of David Anthony Armstrong sworn 12 March 2015
David Armstrong had been retained by Nautical in or about December 2011. It was proposed that David Armstrong’s firm provide accounting services and, in particular, to prepare the financial statements for the years ended 2007 through to 2011. Upon completion of that task, the 2012 financial statements would be prepared.
Following the review of the accounting software provided to Mr Armstrong he noted that since about 2002/2003 Mr Guy had started to purchase classic cars as a plan for his retirement. Mr Armstrong
understood his original plan was to invest in the cars for his retirement and that Robert J Guy Holdings Pty Ltd as trustee for the Robert J Guy Trust was set up for this purpose… this structure was not properly established with the result that [Mr Guy] purchased all vehicles in his own name instead of the Trust.
After noting inappropriate transfers of Nautical’s funds to the bank account of Mr Guy as not being legitimate expenses and forming the opinion that the ATO would not accept the expense amounts as tax deductible, Mr Armstrong said:
I would not support such claim being made in the Company’s accounts, as the payments were not expenses of the Company. The transactions were simply a reflection of transfers of cash from the Company to the Defendant for the Defendant’s personal use in the purchase of cars. They did not reflect a business expense incurred in pursuit of earning accessible income for the Company.
At paragraph 24 Mr Armstrong set out:
I spoke with the Defendant on a number of occasions about this issue, including on the telephone and at meetings at his premises and advised him that he had two options:
24.1As he had primarily used the Company’s money to purchase the classic car collection, the entire portfolio of cars could be transferred to the Company and recognised as assets of the Company. I explained that the cars were good assets for the Company to have in its books and a legitimate investment for the Company to make. Furthermore, if the cars were recognised as assets of the Company, it was more tax efficient, as the company could offset holding and period expenses such as insurance and repairs as deductions pursuant to section 51 of the Income Tax Assessment Act 1936; or
24.2The expenses in the Advertising and Promotion ledger plus any other funds of the Company used by the Defendant to acquire the classic cars could simultaneously be reclassified as loan advances to the Defendant and recorded as such in his director or shareholder loan account. The effect of this would be that the Defendant would further owe the Company a sum equal to all the funds of the Company used by the Defendant personally to fund the car purchases.
Mr Armstrong had advised Mr Guy that the first option set out at paragraph 24.1 of the affidavit was the ‘most pragmatic option’.
Subsequently, Mr Guy instructed Mr Armstrong to go ahead pursuant to what is set out in paragraph 24.1 of the affidavit. Mr Guy:
orally instructed me to account for the classic car portfolio as an asset of the Company for all cars other than certain cars which were transferred as an asset for his superannuation fund (the ‘Super Fund’). The Defendant instructed me that he wished to transfer the value of as many cars as allowable each year, according to superannuation legislation, across to the Super Fund.
In order to transfer the initial portfolio of classic cars to Nautical, Mr Armstrong was provided with details of the classic car portfolio together with the independent valuations of the portfolios. Mr Armstrong prepared a schedule to reconcile the ownership of the classic cars.
A summary of the schedule is set out at paragraph 29 of Mr Armstrong’s affidavit. I will not repeat what is set out save that in the main from 22 June 2006, Nautical was designated the owner of the majority of the classic car portfolio. That portfolio did not include a 1968 Bentley T Type Coupe, 1973 Aston Martin AMV8 Coupe or 1963 Jaguar E Type 3.8 Series 1 Coupe, which were subsequently sold. Six cars were purchased in the year ending 30 June 2007.
In the year ended 30 June 2008 two cars were purchased by the Super Fund. The 1968 Bentley T Type Coupe was transferred from the portfolio to the Super Fund for $49,350.
In the year ended 30 June 2009 two cars are recorded as being purchased. In the same period a 1973 Aston Martin AMV8 Coupe, 1963 Jaguar E Type 3.8 Series 1 Coupe and 1975 Rolls Royce Silver Shadow Saloon were recorded as transferred from the portfolio to the Super Fund.
In the year ended 30 June 2010 a 1951 Bentley MK VI Roadster was purchased. No cars were transferred or sold in that period.
In the year ended 30 June 2011 five further cars were purchased. A 1998 BMW 750i E38 F1 Sedan was transferred from the portfolio to the Super Fund.
In the year ended 30 June 2012 a 1997 BMW 750i F1 Sedan was purchased. No cars were sold or transferred.
Mr Armstrong’s firm prepared all the appropriate financial returns and on 12 December 2012 lodged tax returns based upon the financial statements.
In 2012, Mr Guy advised Mr Armstrong that:
39.1 He was in the process of a marital breakdown;
39.2 The Company was struggling; and
39.3The financial advisory business was in the process of being sold and the Defendant needed money;
as such, he decided to commence selling the classic cars.
In accordance with advice accepted by Mr Guy, to enable Nautical to trade the vehicles:
40.1[Armstrong] debited the Opening Stock of Heritage Vehicles account in the Balance Sheet in the sum of $1,644,249 and credited the RGR Motorsport account in the sum of $1,644,249. This effected the reclassification of the car portfolio as trading stock; and
40.2In recognition of the lower of the cost and the net market value of the classic cars on hand at 30 June 2012 and using the Slattery Valuation [Armstrong] effected a journal entry to reduce the stock on hand by debiting the cost of sales and crediting the closing stock of heritage vehicles to the figure of $1,227,100 as provided for in the Slattery Valuation.
Armstrong then prepared financial statements and tax returns for the years ended 2012 and 2013 on this basis.
On 8 May 2014 Mr Guy signed off on the 2012 and 2013 accounts.
On 10 April 2014 Mr Armstrong received an email from Mr Guy’s email address but was signed off by Mr Kennedy, Mr Guy’s business manager. That email attached a list of questions addressed to Mr Armstrong which included:
11. Would there be any advantage to extract the Cars from [Nautical]?
11.1 In the Family Law situation this may be irrelevant.
Guy confirmed that Mr Kennedy was authorised to use his email account and to ask questions on his behalf.
On 9 September 2014 Mr Armstrong received an email from Mr Guy’s email address which again had been signed off by Mr Kennedy. Mr Guy wished to arrange a meeting to discuss among other things:
4.1Immediate transfer of ALL cars from [Nautical] into Robert’s Superannuation Fund [I think this is the Nautical Executive Superannuation Fund].[2]
4.1.1[PPSR] will NOT be an issue as advised by Barrister Antonio Scriva.
[2]Second set of square brackets in original.
Subsequent to the meeting with Mr Guy and Mr Kennedy, Mr Armstrong proceded to set up the RGR Motor Sport Superannuation Fund. Apart from the establishment of the Fund, Mr Armstrong did not carry out further work for Mr Guy.
Lotus’ position
Mr Ludekens filed two affidavits. In his affidavit sworn 26 February 2015 Mr Ludekens set out a number of dealings with Mr Guy. In or about July 2012 Mr Ludekens had several discussions with Mr Guy regarding the provision of a loan and services from Lotus to Nautical ‘in order to deal with outstanding business issues and liabilities of Nautical and for Nautical to obtain cover as a financial planner under Lotus ‘Australian Securities Services Licence’. He then sets out that Mr Guy represented that Nautical owned a classic car collection which had been valued by Slattery Valuations and would be offered as security for the loan.
Mr Ludekens relied upon the representations to proceed with the loan and to register Lotus’ interests on the PPSR.
Mr Guy’s position
Mr Guy deposed in an affidavit sworn 23 January 2015 that he had been a collector of classic and collectible cars all his adult life:
That collection commenced well before the company was incorporated. Most of the vehicles that are the subject of these proceedings were purchased by me in my personal capacity and not as director of the company or otherwise on behalf of the company.
Mr Guy deposed that ‘the company was not the purchaser of the listed vehicles with the exception of one of those vehicles’. Further, he contended that there was ‘no valid transfer of ownership to the company of any of those listed vehicles’, and that the company did not have an ‘interest [in] or legitimate claim [to] any of the vehicles listed whatsoever’.
Mr Guy provided the purchase documents with respect to various vehicles. I note that the documents support initial purchases by Mr Guy. They are not documents of title as such.
Mr Guy conceded that one vehicle being a Karinn Mercedes 4WD was the property of the company. He deposed:
I have no knowledge of any transaction by which ownership of these vehicles has ever been transferred to the company. I do understand that as from about 2011 an unspecified quantity of unidentified vehicles appear on the books of the company. However, my understanding why or how these vehicles became listed on the books of the company is incomplete. A proper explanation has never been provided to me by the accountant who was responsible for composing the financial statements of the company. At the time the vehicles were placed on the books of the company, that decision to do so was taken by me on the advice and the opinion of the then new accountant for the company, Armstrong Dubois.[3]
[3]Emphasis added.
Mr Guy deposed that he accepted Armstrong’s advice in December 2012 and proceeded on the basis that the vehicles were in fact the property of the company. Mr Guy sets out that he acted on Mr Armstrong’s advice and ‘in the ordinary course of my affairs, made disclosures to the effect that the vehicles were assets of the company’.
Mr Guy also deposed:
I commenced to make representations in the course of my affairs, to the effect that the listed vehicles were the property of the company. I made such representations to the Family Court during property proceedings with my former wife. I also made such representations to work colleagues and employees, to a number of solicitors firms acting for the company, to the Australian Taxation Office and most importantly to the Supreme Court of Victoria.
With respect to the representation made to this Court, I note that in the application before me to set aside the statutory demand served by Lotus on Nautical, Mr Guy deposed that Nautical was solvent as it had a readily realisable asset being the classic car collection. I refer to paragraph 13 of these reasons where the relevant passage is set out.
Mr Guy now questions the advice provided by Mr Armstrong and refers to advice subsequently provided by Mr Simmons. Mr Guy also questioned the liquidator’s reliance upon the PPSR and contended that the listed vehicles included on the PPSR by Lotus was being challenged. No proceeding was issued to amount such challenge which Mr Guy said was due to lack of funds.
Mr Simmons swore two affidavits on behalf of Mr Guy purporting to set out opinion as to accounting treatment. Rule 44 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) was not complied with and, by consent, I ruled that the affidavits would not be read.
The submissions on behalf of Mr Guy
The submissions for Mr Guy deal with issues relating to the PPSR registration by Lotus which I will disregard for the time being. In relation to the ownership, the platform of the submission is that ‘… the vehicles have never been the property of Nautical despite the fact that in 2012 they were entered retrospectively as a journal entry on the books of Nautical from 2006 onwards’.
At paragraph 10 of the submissions it is set out:
It must be noted that Armstrong is not contending that the 2012 journal entry of the vehicles as property of Nautical was a factual record of a decision of Guy in 2012 to transfer to his ownership of the vehicles to Nautical as of that date. It is conceivable that such a journal entry can be good evidence for a transfer and conveyance of ownership of the vehicles from Guy to Nautical in 2012 if this is in fact what occurred. However, Armstrong leaves no doubt that this is not what in fact happened. His 2012 journal entries of the vehicles onto the books of Nautical are not, even according to Armstrong, a record of a decision of Guy in 2012 to transfer his 2012 ownership of the vehicles to Nautical in 2012. Rather, Armstrong admits that the journal entries merely record the fact that in 2012 Guy took the decision to treat the vehicles as having been the property of Nautical since 2006.
At paragraphs 12 to 14 it was contended that:
[the] journal entries are not effective in causing a transfer of ownership to Nautical in 2012, or at any other time, because they fictitiously record beneficial ownership of the vehicles by Nautical as of 2006 being a time when, as admitted by Armstrong, Guy was in fact both the legal and beneficial owner of the vehicles.
It is contended that Guy, as director of Nautical, has since 2012 signed off on the journal entries contained in the financial statements and tax returns prepared by Armstrong. Guy thereby represented to a public authority that Nautical and not he was the owner of the vehicles not in the super fund. Further, from late 2012 onwards, Guy represented that Nautical was the owner of those vehicles to not only the tax office but also to the courts and to creditors. While such representations may cause a presumption that Nautical and not Guy was the owner of the vehicles, such representations do not exclude evidence to allow the rebuttal of such a presumption; Nelson v Nelson.[4]
Evidence sufficient to effect a rebuttal of the presumption, that those vehicles belonged to Nautical and not Guy, is found in the fact that Armstrong’s journal entries run entirely counter to the principles of implied trust and are not based on accepting accounting practice.
[4](1995) 184 CLR 538 (‘Nelson’). In Nelson, the presumption of advancement in the case of a gift by a mother to a child was rebutted by evidence of the mother’s intention to hold the beneficial interest for herself.
Paragraph 15 sets out:
Armstrong does not rely as a factual assertion that any sort of transaction, such as a sale or gift, occurred since 2006 that could have changed the ownership of the vehicles from Guy to Nautical. Rather Armstrong maintains it is legitimate accounting practice to rely on the fiction that, in 2012, a director of the company made a ‘pragmatic’ decision to retrospectively ‘allocate’, ‘attribute’, ‘recognise’, ‘reclassify’ and/or ‘treat’ the vehicles as ‘purchases by the company’. Further, there is reason to suggest that the resulting journal entries were a tax minimisation scheme, not least Armstrong’s own admission at paragraph 53.1 of his affidavit, that the strategy ‘avoided a significant Division 7A company liability’ of Nautical.
However, when pressed, counsel for Mr Guy did not develop the argument. In the end, it was not put how the accounting entries were invalid. Nor was there any attempt to set out why the accounting entries were void against public policy. It was put that the effect of the entries was to ‘minimise tax’ which was contrary to public policy. To the contrary, I note that the adjustments effected a regularisation of the position and deleted the potential claim for a deduction which was not maintainable and if such deductions had been propounded that may have led to dire ramifications for Nautical and, perhaps, Mr Guy as an officer of Nautical I note that much of the submission dealt with why Mr Armstrong’s opining of a resulting trust was incorrect or displaced by Mr Guy’s initial intention to hold the cars in his own name or in the superannuation fund’s name. The submission also dealt with why the representations or admissions as to ownership should not be determinative. Albeit, that each of those two matters were raised, they are not critical to this determination. I will deal briefly with the same later.
The transactions
In 2012, Mr Guy was presented with two options. The first involved the transfer of the classic car collection to Nautical and recognition as assets of Nautical. The second option was to record loan accounts for funds used by Mr Guy derived from the company to purchase the vehicles. Each involved their re-characterisation of funds recorded as expenses in the advertising and promotion ledger which Mr Armstrong would not support as a deduction.
Faced with these two options, Mr Guy instructed Mr Armstrong to go ahead to account for the classic car portfolio as an asset of the company other than those cars which were transferred to his superannuation fund. That involved the reclassification of the classic car portfolio as an asset (initially a non-current asset prior to Mr Guy advising that the cars would be traded) and creating a corresponding liability of Nautical in favour of the shareholders in the loan account. In other words the transfer was supported by consideration. Given the way the transactions are recorded, it is not open to attack the transfer as at 2012 and deemed to have occurred since 2006 on the basis that such treatment is invalid.
Further, given Mr Guy’s instruction to record the transfer, it follows that there is acceptance of the underlying transaction being the transfer in consideration of the adjustment to the loan account. In any event, that treatment was accepted, adopted or ratified by signing the annual financial statement, requiring the filing of the tax returns and, perhaps, by the admissions and representations made thereafter. I do not accept that the treatment is a mere unsupported accounting entry and ought to be disregarded. To the extent that is necessary to decide the question, I determine that the entries record the underlying transactions being the transfer in 2012 deemed to have occurred at various prior dates as appropriate which was agreed to by Mr Guy by his instructions and by the adoption of such treatment.
Mr Guy, by his conduct, also accepted the advice and the transfer of the vehicles. Not only did he represent Nautical’s ownership to this Court in the statutory demand proceeding, and to Lotus Securities, he also readily conceded that to be the position in cross-examination. The caveat he sought to place upon his acceptance was that he did not have a full list of the cars so transferred. I reject that explanation.
It is clear that Mr Guy was aware of what vehicles were involved, having provided Mr Armstrong with the valuations, and having instructed Mr Armstrong as to the vehicles which were not to be included. Mr Guy subsequently, in his capacity as director of Nautical, signed off on the financial statement and tax returns were filed based upon such financial statements. Although Mr Guy conceded signing off on the financial statements since 2012, I conclude that he would have signed off on the earlier financial statements prepared by Mr Armstrong even though he did not return signed copies to Mr Armstrong. The tax returns for those relevant years were filed.
In addition to the signing off of the financial statements, Mr Guy also instructed his former solicitors, Pasha Legal, to treat on the basis that the vehicles were the assets of Nautical.[5]
[5]See paragraphs 10 to 12 of these reasons.
Further evidence of the acceptance of Mr Guy’s acceptance of Nautical being the owner of the classic car collection can also be gleaned from (a) his direction as to the transfer of specific vehicles to the Super Fund as undeducted contributions, and (b) by the 9 September 2014 email request to transfer all the cars from Nautical to the Super Fund.
As Mr Guy conceded that he gave instructions for the transfer of the vehicles to Nautical to Mr Armstrong, I do not need to consider s 1305(1) of the Corporations Act (Cth), nor do I need to have regard to his subsequent conduct of affirmation and representation that the classic car collection was an asset of Nautical. In passing I note that the Full Federal Court said in Whitton as Trustee of Estate of Rose v Regis Towers Real Estate Pty Ltd (in administration):
The particular entry (and many others) is not a direct record of an actual transaction. Section 1305 of the Corporations Act does not elevate the entry to prima facie evidence that any such transaction (or series of transactions) exists. It can be no more than prima facie evidence that an unknown person formed an opinion on an undisclosed basis that, in the absence of any directly recordable transaction nevertheless, as a balancing entry, such a figure should appear in the accounts. Mr Harris took the matter no further and, indeed, eroded any weight the entry may have had.
[60] It was accepted in argument on the appeal that there was no evidence Mr Rose had ever accepted the reliability of the entry or that the accounts in question were ever filed with a relevant authority or relied upon outside the counsels of Regis Towers. Neither was he asked to accept that the balance of $7,875.46 showing as a debt in the directors’ loan account … was correct.[6]
[6](2007) 161 FCR 20, [59]–[60].
The distinguishing feature in this proceeding is that Mr Guy acted in his capacity as an officer of Nautical, signed off on the accounts. Further, Mr Guy, as director, declared: ‘The financial statements and notes present fairly the company’s financial position as at … and its performance for the year ended on that date in accordance with the accounting policies described in Note 1 to the financial statements’.
Such accounts were used for the basis of filing the taxation returns. In those circumstances, I would have more readily accepted the accounts as prima facie evidence of what is recorded therein in relation to the proprietorship of the classic car collection.
Admissions
Counsel for the liquidator submitted that the admissions by Mr Guy as to ownership of the classic car portfolio by Nautical ought to be given ‘great probative value’. Reliance was placed upon Voulis v Kozary.[7]It was submitted that Mr Guy’s explanation that Armstrong’s advice was wrong and should not have been followed was a self-serving attempt to disavow his earlier decision to record and treat the vehicles as assets of Nautical. However, the admissions relied upon in the statutory demand proceeding and as constituted by the representations to Lotus might be actionable in other circumstances do not elevate the position beyond the instructions to Mr Armstrong, the acceptance of Mr Armstrong’s treatment at the time and the concession during the course of cross-examination that such instructions were given by him. Accordingly, I do not need to make use of the admissions in the affidavit or the representations, other than to note that the same are consistent with Mr Guy’s acceptance that Nautical was the holder of the classic car collection as recorded in 2012.
[7](1975) 180 CLR 177, 193.
I determine that the classic car collection as referred to in Attachment A to the amended originating process filed 25 March 2015 is property of Nautical. That leaves the further issues set out in each of the originating motions to be ventilated. Directions will be made.
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