Timms v Commonwealth Bank of Australia

[2003] NSWSC 576

CITATION:	Timms v Commonwealth Bank; Commonwealth Bank v Timms [2003] NSWSC 576
HEARING DATE(S):	17/06/03, 18/06/03
JUDGMENT DATE:	18 June 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Documents admitted into evidence
CATCHWORDS:	EVIDENCE - company financial statements and drafts thereof - whether prepared for purpose of, in connection with or in contemplation of proceedings - relevance of statutory provisions requiring financial statements to be prepared - whether defendant will suffer unfair preuudice if documents admitted when directors and accountant will be available for cross-examination - overriding effect of s.1305, Corporations Act
LEGISLATION CITED:	Corporations Act 2001 (Cth), s.1305 Evidence Act 1995, ss.69, 135
CASES CITED:	Lewis v Nortex Pty Ltd [2002] NSWSC 1083 Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd [2003] NSWSC 281 R v Turner [2002] TASSC 18
PARTIES :	Anastasia Timms - First Plaintiff Brian Timms - Second Plaintiff T W Holdings Pty Limited - Third Plaintiff BDA International Pty Limited - Fourth Plaintiff Commonswealth Bank of Australia - First Defendant Leslie Ludovic Rosenfeld and Alfred Kant t/as Rosenfeld, Kant & Co - Third Defendants
FILE NUMBER(S):	SC 2644/94; 3054/97
COUNSEL:	Mr A J Sullivan QC/Mr M Clarke - Plaintiffs Mr R G Forster SC/Mr N Manousaridis - First Defendant Mr R E Dubler - Third Defendants
SOLICITORS:	Browne & Co - Plaintiffs L E Taylor - First Defendant Phillips Fox - Third Defendants

- 9 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

WEDNESDAY 18 JUNE 2003

2644/94 - ANASTASIA TIMMS & ORS v COMMONWEALTH BANK OF AUSTRALIA & ORS
3054/97 - COMMONWEALTH BANK OF AUSTRALIA v ANASTASIA TIMMS & ORS

JUDGMENT - On admissibility of documents. See p.51 of transcript.

1 The defendants object to certain documents the plaintiffs seek to tender. The first at pages 588 to 601 of Ex B is what appears to be financial statements of the third plaintiff for the year ended 30 June 1992 which bear no handwritten signatures but on which there are typewritten, in the relevant signature spaces, the names of two of its directors and the name of the firm of accountants by which the accounts are stated to have been prepared.

2 The second document, pages 602 to 613, is what appears to be financial statements of the fourth plaintiff for the same period having characteristics corresponding with those I have mentioned, plus the word "draft" stamped on the front cover. It carries the date 16 December 1992 on the directors' statement.

3 The third document, pages 689 to 708, is purported financial statements of the third plaintiff for the year ended 30 June 1993 which carry handwritten signatures of the directors which, from the accompanying notice of the annual general meeting, appear to have been put there on or about 10 December 1993.

4 The fourth document, pages 742 to 801, is a circular to the creditors of the third plaintiff dated 15 February 1994, accompanying a notice of meeting of creditors of the third plaintiff convened under the voluntary administration provisions under Pt 5.3A of the Corporations Act or, as it then was, the Corporations Law. Forming part of the circular are a balance sheet as of 30 June 1993 and a profit and loss account for the year to that date, plus a balance sheet as at 21 January 1994 and a profit and loss account for the period 1 July 1993 to 21 January 1994. Each of these financial statements is accompanied by a signed statement of the firm of accountants by which it was prepared.

5 The fifth document, pages 817 to 834, is the financial statements for the third plaintiff for the year ended 30 June 1994 with a signed report of directors dated 10 December 1994.

6 The sixth document, pages 906 to 912 is the financial statements for the third plaintiff for the year ended 30 June 1993 without any accompanying statement or verification.

7 The seventh document, pages 997 to 1009, is the financial statements of the fourth plaintiff for the year ended 30 June 1992, apparently identical to the second document but with the directors' statement dated a day later and without the draft stamp on the front.

8 The eighth document, pages 1010 to 1026 is the financial statements of the fourth plaintiff for the year ended 30 June 1993 with a signed directors' statement dated 10 December 1993.

9 The ninth document, pages 1026 to 1040, is a corresponding set of financial statements for the year ended 30 June 1994 with a signed statement of directors dated 10 December 1994.

10 The objections of the first defendant, which are adopted by the third defendant, are put on two bases. First, although it is apparently accepted that each document is or forms part of the business records of the relevant company and otherwise falls within s.69(1) of the Evidence Act 1995, it is said that the admissibility of some of the documents under s.69(2) is precluded by s.69(3). Second, it is contended, in relation to all of the documents, that they are of such a nature that the court should exercise its discretion to reject under s.135 of the Evidence Act.

11 Two documents are said to be excluded by s.69(3) on the basis that the representations in them were prepared for the purpose of conducting or in connection with an Australian or overseas proceeding, being the proceeding I am now hearing. It was noted in that connection that the originating process in this case was filed on 8 June 1994. The two documents said to be within this class are the fifth and ninth, both of which were signed on 10 December 1994. A further four documents, being the third, fourth, sixth and eighth, are said to be excluded by s.69(3) on the basis that their content was prepared in contemplation of the present proceedings. Those documents were prepared in the period December 1993 to February 1994 and it is the defendant's contention that these proceedings were then in contemplation.

12 In support of this last proposition, I was taken to various records of meetings with officers of the first defendant in which the first and second plaintiffs expressed strong dissatisfaction with the first defendant for having, as they saw it, led them into a serious financial predicament associated with their purchase of the relevant business. But those statements were made in the context of attempts to persuade or perhaps force or shame the first defendant into making amends by providing further financial accommodation and otherwise assisting in putting the business on to a viable footing. I say this in particular of a record of a meeting on 16 December 1993 (page 1448 of Ex B.)

13 Having regard to the material of this kind to which Mr Forster took me, I regard 7 February 1994 as the earliest date at which it can safely be said that litigation was in contemplation. Documents prepared before that day are therefore, in my judgment, too remote, in a temporal sense, from the genesis of these proceedings to be regarded in any sense as having been prepared in contemplation of them. But temporal matters are not the only ones with which s.69(3) is concerned.

14 As to the general purpose of effect of s.69(3) I adopt what was said by Hamilton J in Lewis v Nortex Pty Ltd [2002] NSWSC 1083:

“I have had an opportunity overnight to read what cases I can find concerning the construction of s 69. These include: Creighton v Barnes NSWSC Cohen J unreported 18 September 1995; Waterwell Shipping Inc v HIH Casualty and General Insurance Ltd NSWSC Giles CJ Comm D unreported 8 September 1997; Schipp v Cameron (No 3) NSWSC Einstein J unreported 9 October 1997; Vitali v Stachnik [2001] NSWSC 303 (Barrett J); R v Rondo [2001] NSWCCA 540; ASIC v Whitlam (2002) 42 ACSR 407 (Gzell J).

In my view, the following relevant propositions flow from the section considered in the light of that authority:

(1) It is important, as is general in exercises of statutory construction, to construe words in s 69 in the context of the section and of the EA generally. In doing this, it should be borne in mind that the EA supersedes not only the common law but the provisions as to admissibility of business records previously contained in Part IIC of the Evidence Act 1898. What must be concentrated on are the words of this section in the context of the EA.
(2) It is important always to bear in mind that what may be tendered as evidence which evades the hearsay rule under the provisions of s 69 is not documents but representations in documents. In this regard, it is only in relation to the penultimate paragraph of the letter, to which I have referred, that tender is made by Mr Motbey under s 69.
(3) The cases in general terms indicate that the inclusive provisions of subss (1) and (2) of s 69 should be regarded as being of wide import and construed accordingly: Schipp v Cameron (No 3) ; ASIC v Whitlam at [155], both supra. Equally, the exclusory provisions of s 69 ought be construed as sections of wide import. In particular, it should be borne in mind that the expression contained in s 69(3)(a), "in contemplation of" and the expression contained in both s 69(3)(a) and (b) "in connection with" should be regarded as words of wide meaning: R v Rondo supra at [96] per Smart AJ.
(4) It should also be noted that what is referred to in subss (3)(a) and (b) respectively is not the proceeding in which the tender of material is sought to be made, or a proceeding to which the investigation referred to in (b) has led, but simply a proceeding or an investigation.
(5) This links with what Barrett J has said to be the policy of the section in Vitali v Stachnik supra at [12]:
‘The purpose of the exclusion is, as I see it, to prevent the introduction through this exception to the hearsay rule of hearsay material which is prepared in an atmosphere or context which may cause it to be self-serving in the sense of possibly being prepared to assist the proof of something known or at least apprehended to be relevant to the outcome of identifiable legal proceedings.’
(6) The point, as I apprehend it, is that the contemplation or existence of any proceedings may lead even persons of good intent to make purely self serving statements that may, without the exclusory provisions of subs (3), be admissible through the scheme of s 69. From this natural tendency to make self serving statements springs the policy that statements made in those circumstances ought be excluded from the ambit of s 69 which is, in general terms, generous towards the admission of statements contained in documents that meet the criteria of the section.
(7) It is not, as Mr Motbey has suggested to me, a requirement of subs (3) that a conclusion be reached that the creator of the document had the purpose of making self serving statements, whether true or false. It is, rather, that the possibility, bearing in mind human nature, to make self serving statements in such circumstances, leads the Act to exclude all statements made in such circumstances as a precaution against purely, and particularly false, self serving statements being taken into evidence.
(8) Whilst, as was said by Hope J in Albrighton v Royal Prince Alfred Hospital [1980] 2 NSWLR 542 at 548 – 549 (cited by Einstein J in Schipp v Cameron (No 3) supra), the business records provisions have the tendency to make the law of evidence approach reality, it is in the interests of reality that the old rule against self serving statements is preserved to the extent that I have indicated, even when such statements are made in business records.”

15 One element brought out there is that the "in contemplation of" and "in connection with" tests imply that a legal proceeding or possibility of it must represent, in whole or in part, the pretext or motive or reason for the creation of the document or, at least, must play some part in the decision to prepare it. I am unable to find a connection of that kind between any of the documents to which objection is taken on the basis of s.69(3) and these proceedings (or, for that matter, any other proceedings).

16 With the exception of the circular notice of meeting and associated documents produced for the purposes of Pt 5.3A, each of the relevant documents is a signed or unsigned set of financial statements prepared by a company in what must be regarded as the ordinary and ongoing course of the accounting and reporting functions that companies habitually undertake. The evidence does not disclose whether the companies concerned are or are not “large proprietary companies” for the purposes of the present Corporations Act and its immediate predecessor. That concept was introduced by amending legislation that became effective in December 1995. Before that, there was a requirement applying to all companies that the directors cause to be a made out a profit and loss account for each accounting period and a balance sheet as at the end of each such period. This requirement arose from ss.292 and 293 of the Corporations Law as it existed from the inception of that law on 1 January 1991 until the December 1995 amendments to which I have referred.

17 Having regard to the form and content of all the documents concerned, with the exception of the fourth, I readily conclude that the impetus for the preparation of those documents and the occasion and need for their preparation lay in a combination of compliance with the statutory requirements and ordinary and prudent corporate procedures. I say this in relation to not only financial statements that are in what I might call a final, formal and signed state but also those that do not bear handwritten signatures and the one stamped "draft." Documents produced along the way to completion of final signed accounts are nonetheless a relevant part of the business records of the relevant company.

18 The same reasoning holds good in relation to the fourth document consisting of the circular and other materials forwarded by the administrator to the creditors of the third plaintiff. This document was produced and dispatched in compliance with the specific statutory requirements contained in Pt 5.3A.

19 These factors of statutory compulsion cause me to conclude, in relation to all of the third, fourth, fifth, sixth, eighth and ninth documents, that they should not be regarded as prepared in contemplation of or in connection with these proceedings, much less for the purpose of these proceedings. They were prepared, in the ordinary course of events, to satisfy reporting and disclosure requirements of general application, regardless of legal proceedings.

20 Mr Forster next says that his client will be unfairly prejudiced if the nine documents in question are admitted and that under unfair prejudice substantially outweighs their probative value. He therefore calls in aid s.135 and the discretion of the court to reject. Mr Sullivan says, quite rightly, that Mr Forster has not sought to lead any evidence of prejudice. Mr Forster says that he has no way of testing the content of the documents. I do not accept this. He will have the opportunity to cross-examine the first and second plaintiffs, who are the two directors whose signatures, whether written or typed, are on the various sets of accounts. He will also have the opportunity to cross-examine Mr Rosenfeld, the accountant by whom the accounts purport to have been prepared. That will provide a meaningful opportunity to test the documents by close questioning of the three persons who have accepted responsibility for them.

21 It is true that Mr Forster does not have available to him the source records from which the accounts were compiled. But then he has never sought them, whether through discovery or by notice to produce, at least until very recently. Mr Forster notes that by letter dated 5 June 2003 his instructing solicitors put the solicitors for the plaintiffs on notice that the s.135 objection would be taken unless source documents were made available. But that cannot be regarded as the equivalent of direct action to obtain the documents.

22 I am not satisfied that the defendants will suffer unfair prejudice if all of the documents in question are admitted. This extends to those without signatures or with typewritten signatures only. Those aspects can be explored in cross-examination. Nor is it to the point, so far as prejudice is concerned, that some of the documents are not referred to in any affidavit. The apparent authors will be available for cross-examination. Any prejudice, and I am not sure there is any, cannot be regarded as unfair prejudice.

23 There can be no doubt that the probative value of some of the documents is questionable. I am particularly conscious of the fact that one of them is marked "Draft" and that some appear to be contradictory. Again, however, the authors will be available for questioning and the uncertainties will, in the long run, remain or be resolved or be made more acute.

24 I refer finally to s.1305 of the Corporations Act 2001 (Cth). That section makes admissible, in any legal proceedings, a “book” kept by a body corporate under a requirement of that Act. Such a book is made prima facie evidence of any matters stated or recorded in it. I am satisfied that those of the documents with which I am presently concerned that are copies of signed original accounts are “books” that fall within this section. It is true that all of them were created before the Corporations Act commenced on 14 July 2001 and that the statutory provisions by reference to which they were produced are no longer in force and cannot, in direct terms, be characterised as the source of "a requirement of this Act." But as is explained at paragraph 6 of the judgment of Blow J in R v Turner [2002] TASSC 18, the transitional provisions of the Corporations Act cause requirements arising from the earlier relevant enactments to be equivalent to the requirements of the Corporations Act for these purposes.

25 The elements of s.1305 are discussed in the judgment of Brownie AJ in Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd [2003] NSWSC 281. Having regard to the analysis in that case, I consider s.1305 to be applicable to the signed accounts to which I have referred. The position in relation to them is that a provision of Commonwealth legislation makes the documents admissible and causes their content to be prima facie evidence of the matters stated, apart altogether from provisions of the Evidence Act of this State.

26 In the result, therefore, all nine documents I have identified will be admitted.

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Last Modified: 07/01/2003