Cape Byron Power 1 Pty Ltd & Ors v Downer Energy Systems Pty Limited & Ors [2022] QSC 182

• [1] The plaintiffs claim damages for alleged breach of contract, negligence, and misleading or deceptive conduct in relation to a boiler at a sugar mill. Part of their claim relates to the costs of repairs. The repairs were supervised by the mill's then chief engineer, Mr Sawatzki. He explains his role in working out what needed to be repaired, obtaining quotes for materials, supervising repairs, and in organising for repairs to be carried out in accordance with an approved budget. He gives detailed evidence about how the third plaintiff ordered items such as grate clips. He explains that documents described as Major Items Reports were created as "transactional report[s]" that showed the details of orders made and invoices received by the third plaintiff.
• [2] These reports were prepared by the company's accountants and Mr Sawatzki received them in his role as chief engineer at the mill.
• [3] The plaintiffs sought to introduce various Major Item Reports as evidence and submitted that they were admissible pursuant to either s 1305 of the Corporations Act 2001 (Cth) ("the Act"), or as books of account pursuant to s 84 of the Evidence Act 1977 (Qld). The defendants opposed the documents being admitted on either basis. I heard argument on the matter and indicated that my provisional view was that the documents fell within at least s 1305, based on the decision in Australian Securities & Investments Commission v Rich[1]. I indicated that I would provide brief reasons for my decision. I confirm the provisional view I took that the documents fall within at least s 1305.
• [4] Section 1305 provides for the admissibility of certain books in evidence. It states:

"(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)."

• [5] There is no doubt that each Major Items Report is a "book" since it is a document. The defendants do not dispute that the document was kept by the third plaintiff. The issue is whether it was kept under a requirement of the Act.
• [6] Section 286(1) of the Act obliges a company to keep written "financial records" that:

"(a) correctly record and explain its transactions and financial position and performance; and

(b) would enable true and fair financial statements to be prepared and audited."

• [7] This provision directs attention to the definition of "financial records". Section 9 of the Act defines "financial records" to include:

"(a) invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers; and

(b) documents of prime entry; and

(c) working papers and other documents needed to explain:

(i) the methods by which financial statements are made up; and

(ii) adjustments to be made in preparing financial statements."

• [8] The defendants accept that Rich authoritatively states the meaning of "financial records" and that I should follow it. In that case Austin J stated:[2]

"The inclusive nature of the definition permits the concept of "financial records" to be shaped by reference to the legislative purpose of s 286. Section 286 requires the company to keep written financial records that correctly record or explain its transactions, financial position and performance, and would enable true and fair financial statements to be prepared and audited. It seems to me that the financial records necessary to achieve these matters will go beyond the records expressly identified in paragraphs (a), (b) and (c) of the definition, in the case of any large business enterprise. The farm books in Caratti and the monthly sales reports in Linfox Transport are examples. Documents of these kinds are "financial records" because they are documents created as part of the process by which the company discharges its statutory obligation under s 286. On this view, a document is a financial record if the company uses it for any of the purposes identified by s 286: for example, to record the company's financial position or to facilitate the preparation or auditing of annual or half-yearly financial statements."

• [9] The s 1305 issue that arises in the case of each Major Item Report is whether it is a document that the company used for a s 286 purpose. For example, is it a document that would help explain the company's transactions and financial position, and enable true and fair financial statements to be prepared and audited?
• [10] The Major Items Report that I was shown for the purpose of ruling on this issue concerned the supply of grate chain links and grate clips in accordance with quotations. It concerned supplies of items associated with repairs necessitated by major damage being sustained to the boiler grate on 5 July 2010. This, and similar Major Items Reports, did not concern ordinary repair costs associated with repairs and replacements of parts that had worn out through ordinary wear and tear.
• [11] The transactions recorded in the Major Items Reports recorded the costs of repairs undertaken in relation to that damage. The repairs that they recorded were likely to be the subject of an insurance claim or a claim of the kind made in these proceedings.
• [12] The documents were created as part of a process by which the company identified repair costs in respect of which the company would seek reimbursement. Such repair costs were in a different category to ordinary repair costs. The documents that recorded transactions in relation to those repairs, together with similar documents, would enable the company to identify costs which it hoped to defray. Identifying such costs would enable the company to understand its financial position, particularly the costs which it had incurred on repairs that it hoped to recover by an insurance claim, legal proceedings or both. It would enable financial statements to be prepared which differentiated between those costs and other repair costs that were not the subject of any potential claim. It would enable the company and its auditors to better understand the company's financial position, including the quantum of any insurance claim recovery and the quantum of a significant component of a claim of the kind which subsequently came to be made in these proceedings.
• [13] I conclude that the Major Item Reports are documents that the company used for a s 286 purpose and that they are admissible pursuant to s 1305 of the Act.
• [14] This makes it unnecessary to decide whether, in addition, each document is admissible as a book of account pursuant to of the (Qld).

[1] (2005) 191 FLR 385; [2005] NSWSC 417 ("Rich").