GLI-DON v NOMINAL DEFENDANT [2002] NSWCA 305 | Case summary

3 BROWNIE AJA: On 8 August 1994 there was a collision between a motor cycle and some equipment attached to a tractor. The motor cyclist, Mr Perfrement, was seriously injured. The tractor was an uninsured motor vehicle, so that Mr Perfrement sued the Nominal Defendant for damages, and recovered a judgment. The Nominal Defendant brought a cross-claim against each of the second respondent, Mr Todd Finlay, as the driver of the tractor, and the appellant, Gli-Don Pty Ltd, as the owner of the tractor: see the Motor Accidents Act 1988. At trial the Nominal Defendant succeeded as against both the appellant and the second respondent. On appeal, the second respondent filed a submitting appearance, and the only questions argued related to the ownership of the tractor, and to the proof of that ownership. 4 Todd Finlay is the son of Donald Allan Finlay, known as "Don", and his former wife Linda (sometimes referred to as Lynda or Lyn). The appellant's counsel informed the Court, without objection, that for practical purposes the appellant could be equated with Don Finlay. Since the death of Don Finlay's mother, Beatrice, on 25 November 1994 Don Finlay appears to have made all significant decisions on behalf of the appellant, but until about the time of his mother's death, she and he controlled its affairs together. 5 Through the appellant and other entities the Finlay family owned some 7,000 acres (there are varying figures in evidence) of farmland in the Gunnedah district. Broadly speaking, the Finlays were farming people who left the accounting and taxation aspects of their business to their accountant, Mr Austin, and he compiled all relevant records, relying on information provided to him orally, upon cheque butts and entries made in an exercise book, as well as documents (such as statements, invoices and bank statements) produced by others. It seems that, upon the advice of Mr Austin, the farming activities were conducted during the period 1 July 1992 to 30 June 1994 by Gli-Don Investments Pty Ltd ("Investments") as the trustee of the Finlay Family Settlement Trust. Just how this arrangement was first made is not established by the evidence, but according to minutes of meetings of the appellants and of Investments, both dated 1 July 1994, the business was on that date transferred back from the trust to the appellant. The minutes refer to a schedule listing the assets that were transferred back to the appellant with the business, but that schedule is not in evidence. 6 There is no doubt that the appellant bought the tractor involved in the accident, in July 1990. It was then a second hand Allis Chalmers tractor, suitable for use in cotton growing activities, and thereafter it was used from time to time upon the farmland controlled by the Finlay family. One area of this land was known as Lin-don (spelt in various other ways from time to time). This area was itself divided into three smaller areas, known respectively as L150, L300 and L500, the numerals representing the approximate number of acres in each of these three smaller areas of land. 7 In 1992-93 Todd Finlay grew cotton on the area called L150. Whilst there was some dispute about it, and about the appropriate terminology, it seems clear that, loosely speaking, he acted as a share farmer in relation to this activity, growing cotton on L150, whilst he also worked as a farm hand during this financial year. There was apparently no written record made of the agreement between Todd Finlay and either the appellant or Investments, but his taxation return records that during that financial year, he earned the nett income of $3137 from his farming activities. 8 The case made out for the appellant, supported by Todd Finlay, was that Todd Finlay wanted to grow a greater area of cotton during the 1993-94 year; since Don and Beatrice Finlay thought it better to allow the area L150 to remain fallow for that year, the arrangement made was that Todd Finlay would grow cotton on approximately one half of the area L500, whilst the appellant (or Investments) grew cotton on the balance of L500, as well as elsewhere; that there was an agreement made on 1 February 1994 to the general effect that the appellant, or alternatively Investments, would sell the Allis Chalmers tractor to Todd Finlay for $20,000; and that since Todd Finlay did not have the money to pay for the tractor, his liability to pay that sum would be satisfied by his allocating or assigning to the appellant two modules of cotton, expected to be worth about $20,000. That is, the tractor became Todd Finlay's tractor on 1 February 1994, and remained his until (and after) the date of the accident, 8 August 1994. 9 On the appellant's case, Don Finlay had contemplated trading in the Allis Chalmers tractor on the purchase of a new tractor, from about late 1993, and a dealer offered him about $20,000 as a trade-in allowance on the Allis Chalmers tractor, if he bought a new Case tractor. Then Todd Finlay offered to buy the Allis Chalmers tractor for the same sum, $20,000, as part of his ambition to improve his financial standing generally. Don Finlay agreed to the request, and he acquired the new Case tractor on lease, without any "trade-in", and the Allis Chalmers tractor was sold to Todd Finlay on the terms just mentioned. On the appellant's case, all this was done before the accident. The Nominal Defendant asserts however that the tractor was owned by the appellant, and the learned trial judge, Sorby DCJ, accepted that this was so. 10 There is no question but that, shortly after the accident, the Finlay family took professional advice about the possible consequences to them and their interests flowing from the accident. They consulted both Mr Austin, and Messrs Everingham Solomons, solicitors. According to Mr Austin's diary, which in this respect must be in error, he spent one and a half hours speaking to Don Finlay on 7 August 1994 (the day before the accident), discussing the "accident and repercussions thereof". A diary note made by Mr Sorrenson of Everingham Solomons, is in these terms:- "6 October [1994] conference with Todd, his father Don and accountant Brian Austin. Todd has a possible/likely exposure in relation to a recent serious motor vehicle accident. On about 8 August a motor cyclist struck a piece of ag equipment owned by Todd and was seriously injured. The motor cyclist will sue the Nominal Defendant and it is likely the Nominal Defendant would seek to recover from Todd. There would appear to be a serious contributory negligence argument. It is likely however that there would be a significant verdict in due course for the Plaintiff and in perhaps 2½ or 3 years the Nominal defendant come looking for Todd. As a matter of business structuring the objectives were - 1. get whatever assets presently owned by Todd out of his personal name and hereafter not accumulate assets in his personal name; and 2. until his exposure to the claim is finalised in some way any future business activities should not be conducted by him personally. Basically he should be a wage earner only. Prior to the accident occurring Brian Austin had purchased a shelf company for him that was called Fincot. Don and Todd are directors and Don and Todd are each shareholders. Originally it was proposed to be 'Todd's company'. From this point on it will actually be Don's company with Todd only having a minority interest. Further shares will be issued to Don so that the shareholding of Todd will be diminished. Todd will be an employee of Fincot. He'll be paid for all work he does for the company on a normal commercial basis. It is likely that Fincot could earn substantial profits over the period of perhaps $500,000. These profits would be retained after tax. Retaining the profits is not a problem according to Brian Austin. The only thing they might seek to do with the money would be to buy a property. I discussed with Brian the relative merits of buying real estate in a company versus a trust and in particular discussed the capital gains tax drawbacks of purchasing an appreciating asset in a company structure. It had originally been proposed that Todd would purchase property in the near future and he had been negotiating on one. That's apparently fallen through and there's nothing on the horizon at the moment. In terms of purchasing a property we left it on the basis that the purchasing entity could be subject of a specific consideration when the need arose. In terms of Todd's current assets they comprise money in the bank and some plant and equipment and the ill fated tractor. The money in the bank can be diminished considerably and quite legitimately according to Brian Austin by charging through some additional expenses from Glidon. The plant and equipment, with the exception of the tractor, will be transferred across to Fincot at market value. A debt in favour of Todd would then arise. That debt would be repaid out of the company's profits over the next few years and the monies used by Todd to defray his living expenses. The likely debt amount would be $50,000 to $60,000 initially. The tractor would be kept in Todd's name. To the extent it was used by Fincot in its business it would be hired at a commercial rate by Todd to Fincot. The desired scenario in three years time is to have reduced Todd's assets legitimately to the extent possible. To the extent that that means that other family members will legally control entities such as Fincot and he therefore must rely upon their continuing good grace he is prepared to run that risk. Don should amend his Will to specifically deal with the shares in Fincot. Consideration could be given to establishing a trust to receive the shares as it would be unwise to gift them direct to Todd should Don die before Todd's exposure is finalised. That's really an issue of general application in that the Will should be reviewed to check that any gifts of other assets passing to Todd at the moment were similarly protected. Todd certainly doesn't want to go bankrupt if that can be avoided. His preference and I think the preference of the family would be to be able to approach the Nominal Defendant in due course with a proposal along the lines that the judgment against him was for X dollars, his assets were only Y and that upon payment of Y by Todd with the assistance of his family all claims would be released. From this point Brian Austin will formalise the proposal and put it to me in writing. He'll also provide me with a copy of the company's Articles." 11 The reference to "Fincot" should be a reference to Fincott Pty Ltd. This company was, coincidentally, incorporated on the day of the accident, 8 August 1994. On 28 October 1994 Mr Austin wrote to Everingham Solomons in these terms:- "We take this opportunity to report to you on our proposal to limit the exposure of Todd Finlay to any possible compensation claim. Let us in the first instance summarise the present position of Todd - name : Todd Allan Finlay address : 'Gli-Don' Mullaley NSW 2379 d. of b . 15.10.70 marital status : Single occupation : Farmer as a sole proprietor Subcontractor to 'Gli-Don' Pty Limited, a family company controlled by his parents. At this point of time Fincott Pty Limited has not engaged in any trading or other activities. It would be our recommendation to divest Todd of all possible assets by the use of Fincott Pty Limited and we list below the steps we believe could achieve this purpose. - 1. Fincott Pty Limited has an authorised share capital of one million dollars divided into one million (1,000,000) shares of one dollar ($1.00) each. The capital of the company is divided into the class of shares as illustrated in annexure A. If we maintain the usage of ordinary shares we then allot a further 74,998 ordinary shares to the company Gli-Don Pty Limited and that company actually pays $74,998 into the bank account of Fincott Pty Limited. 2. Fincott Pty Limited purchases the plant and equipment from Todd Allan Finlay at market value (or cost if applicable). In effect Fincott would purchase all of the equipment except the Allis Chalmers Tractor for $73,060. In summary form Fincott would purchase:- Rifle 750 Disc Planter 28,000 Interow Cultivator 6,600 Toyota Landcruiser 32,390 Honda Pump 500 Water Pump 2,950 Tool Box 870 Mobile Phone 1,000 73,060 3. Todd Allan Finlay reimburses Gli-Don Limited for the 1993/94 season costs including rental of the land, the contract work performed thereon and outlays on chemical, sprays, cotton picking and other expenses. This amounts to $84,165 and each cost can be substantiated either by way of documentary evidence or justified because of commercial reality. The amount of $84,135 is made up as follows:- Land Rental 10,000 Land Preparation 20,000 Chemicals, Spraying etc. 54,135 84,135 4. Todd Allan Finlay from now on contracts to Gli-Don Pty Limited and Fincott Pty Limited for hours worked on the activities of each company. He submits regular invoices for work performed and, in the main, Fincott Pty Limited will pay him sufficient funds to survive. In other words he may work 80 hours one week and submit an account to both entities. However, perhaps only Fincott Pty Limited pays him, for say, 25 hours. The remaining hours are left unpaid and no apparent record is maintained. Our concern here is to ensure Todd receives a regular 'income' of approximately $300-$400 per week so that he can show a means of subsistence. The amounts invoiced to Gli-Don Pty Limited can stay with that entity as a recorded debt but not shown in the accounts of Gli-Don Pty Limited, Fincott Pty Limited or Todd Allan Finlay. 5. The Allis Chalmers Tractor is now registered in the name of Todd Allan Finlay and will remain the property of Todd Allan Finlay. We will strike a hire rate which is acceptable within the farming community and Todd will invoice Gli-Don Pty Limited and Fincott Pty Limited for hours at regular intervals throughout the year. Todd will pay all expenses associated with the tractor and will actually receive payment for hours of hire. 6. Minutes of meeting of Directors of Gli-Don Pty Limited are enclosed to record the sale of the Allis Chalmers Tractor on February 1, 1994 and payment on 15 June 1994. We believe the foregoing is an arrangement in broad terms that will effectively minimise the exposure of Todd Allan Finlay to any compensation claim. In summary - a) Gli-Don Pty Ltd receives $84,165 for reimbursement of expenditure and pays $74,998 for shares in Fincott Pty Limited; b) Fincott Pty Limited receives $74,998 plus $2 for share allotments and purchases the plant and machinery from Todd Allan Finlay for the consideration of $73,060. In addition the present office holders in Fincott Pty Limited remains as recorded on 8 August 1994; and c) Todd Allan Finlay receives $73,060 from Fincott Pty Limited for sale of plant and machinery and pays Gli-Don Pty Limited the sum of $84,135 for rental and property costs. We ask for your comments and guidance." 12 At this stage, the appellant stresses that, on the face of these two documents, Don and Todd Finlay had told Mr Austin and Mr Sorrenson, in October 1994, that Todd Finlay was the owner of the Allis Chalmers tractor, and that the apparent purpose of the four men involved in the October 1994 discussion was to protect the family assets, generally speaking, in the sense of reducing the assets held in Todd Finlay's name (so far as Everingham Solomons were concerned, to the extent legitimately possible), and not to record any "sham" transaction, purporting to divest the appellant of its ownership of the tractor, so as to enable the appellant to escape what would otherwise have been its liability to indemnify the Nominal Defendant. 13 Thereafter, broadly speaking, documents were produced showing or purporting to show that the proposals outlined in Mr Austin's letter were put into effect, and on the face of the records, as shown to the Nominal Defendant, Todd Finlay had purchased the tractor on 1 February 1994. 14 After the accident, the Nominal Defendant apparently allocated the handling of Mr Perfrement's claim to NRMA Insurance Limited ("NRMA"): see now s 38 of the Motor Accidents Compensation Act 1999. Mr Austin had some communications with NRMA during November 1994, but the detail of that is not established by the evidence. It presumably had some connection with the matters discussed at the conference of 6 October 1994 and the subsequent events. On 17 January 1995 NRMA wrote to the appellant, referring to a claim made by Mr Perfrement against the Nominal Defendant, advising that enquiries made with the Roads and Traffic Authority indicated that Don Finlay owned the tractor on behalf of the appellant, but that NRMA had been advised that the tractor may have been sold prior to the accident to Todd Finlay. NRMA asked the appellant to provide it with "copies of any documentary evidence you have substantiating the sale of this property including copies of minutes from any meetings in which the sale of this tractor was dealt with". 15 Everingham Solomons replied by letter dated 14 February 1995, advising that on their instructions Todd Finlay was the owner of the tractor, and they enclosed a copy of the minutes of a meeting of directors of the appellant dated 1 February 1994, reading:- " sale of tractor : It was resolved to accept the offer of purchase made by Todd Allan Finlay of the Allis Chalmers 7060 Tractor Engine No 70-16140 for a consideration of approximately $20,000. It was further resolved that payment of the purchase consideration would be by way of two (2) modules of cotton equating to an amount of approximately $20,000. Allocation of the modules so selected would be made immediately prior to ginning of the modules. However title to the tractor will pass immediately on close of this meeting." 16 Thereafter, matters were apparently allowed to lie dormant for a time, apparently encouraging those associated with the Finlays to think that the Nominal Defendant had accepted that the position was as just stated. In particular, taxation returns on behalf of each of Todd Finlay and Investments were lodged with the Australian Taxation Office. Later, however, the Nominal Defendant caused a number of subpoenas to be issued, and there followed a good deal of interlocutory fighting. For a long time the appellant and those associated with it maintained that the position was as I have set it out above, and they produced, whether on subpoena or otherwise, only documents consistent with that version of events. Ultimately, however, they were compelled to produce other documents, which painted quite a different picture. 17 During the period of interlocutory fighting, it seems that the Nominal Defendant made an application for summary judgment, and that the appellant filed various affidavits in opposition to that application, which in the event did not proceed. At trial, the Nominal Defendant took the course of tendering these affidavits in its case, and then setting out to prove that the supposed transaction, spoken about in the affidavits of Mr Austin, Don Finlay and Todd Finlay, and in the supporting documents annexed to those affidavits, were "a sham". The Nominal Defendant attacked the supposed records in a variety of ways. Forensic document examiners, Ms Winter and Mr Anderson, prepared reports, to which Mr Anderson spoke in the absence overseas of Ms Winter. In substance, this evidence was not contentious. 18 To state matters shortly, the evidence established that there were two sets of taxation returns and supporting financial statements brought into existence. One set contained information, which supported the appellant's case, and this set of documents was produced to the Nominal Defendant in and just after 1995. The other set contained information, which was inconsistent with the appellant's case, and the Nominal Defendant only succeeded in obtaining this set of documents, after considerable delay and difficulty, and in circumstances, which reflect no credit at all upon the Finlay family or upon Mr Austin. 19 Within each of these sets of documents, there were copies of income tax returns and of financial statements supporting the information contained in the returns, for both Todd Finlay and Investments. The set supporting the appellant's case purported to record that the tractor was sold to Todd Finlay on 1 February 1994 for $20,000. The other set contained no record of such a sale. It was the second set that contained copies of the taxation returns actually lodged with the Australian Taxation Office. 20 It is instructive to note briefly what changes were made between the two sets of documents. In the case of Investments, rent received was increased by $10,000, reflecting the arrangement proposed in Mr Austin's letter of 28 October 1994. Similarly, there was recorded as income the sum of $20,000 being "profit on sale of plant", being a reference to the sale of the Allis Chalmers tractor. (The reference to $20,000 being a profit is technically incorrect, but nothing turns on this.) The documents were then altered, by increasing the amount paid out by Investments to "contractors" by $10,000, so that the nett income disclosed by the two sets of documents remained the same. On the whole of the evidence, it seems impossible not to infer that these changes were made, quite deliberately, after the lodgement of the original documents with the Australian Taxation Office, and after the issue of the subpoenas, for a wholly improper purpose. Further, one can see from the depreciation schedule produced with a copy of the Investments' 1993 taxation return that the ownership of the Allis Chalmers tractor was not recorded for the 1992-1993 year, but that the 1994 depreciation schedule was altered, at some stage, by adding a reference to this tractor. 21 The Nominal Defendant pointed to other evidence. Mr Austin kept a journal for Investments, apparently written up in pencil, and apparently mostly undated, and someone, it seems Mr Austin, altered this journal at some stage. I will mention only what seem to have been the most significant of the changes. One entry now purports to record an advance by Investments to Todd Finlay of $10,000 for unpaid land rental. However, the original journal entry, now erased, but the detail of which was recovered by Ms Winter, dealt with a debit for accountancy fees for $1,375. Similarly, a purported record of a further advance of $20,000 to Todd Finlay, in respect of land preparation costs not yet then paid, replaced an erased entry concerning, perhaps, interest, and a different sum of money. Further, a purported entry concerning the sale of the tractor to Todd Finlay replaced some other erased entry, apparently dealing with a different topic, and concerning a different sum of money. There is simply no explanation for all this: Don Finlay and Todd Finlay said that they left all this type of recording to Mr Austin, and he did not give evidence. 22 On the other hand, letters written by Mr Austin to the Commonwealth Bank of Australia recorded in February 1995 that Don Finlay had been discussing the then draft financial statements for the family interests, and in May 1995 that Mr Austin forwarded to the bank copies of the statements in final form, that is, in the form consistent with the Nominal Defendant's case. Further, in September 1995 he wrote to the bank again, speaking of "a number of subpoenas issued against Don, Todd and associated companies", and of the need to prepare "relevant Minutes of Meetings" and other documents, and asking the bank for information so as assist him "to comply with the Court Orders". 23 A further blow to the appellant's case lies in the purported implementation of the proposal made by Mr Austin in his letter of 28 October 1994. The proposal was that Todd Finlay actually pay $84,165 (sometimes recorded as $84,135) for land rent, land preparation costs, and such matters as spraying. On the appellant's case, Todd Finlay actually wrote out (in the presence of Mr Austin) a cheque for $84,165, payable to the appellant, on 29 November 1994, and this cheque was met on presentation. 24 However, another strand to the appellant's case is that Todd Finlay paid the appellant for these matters (rent, land preparation, spraying etc), not by making this payment, but by allocating or assigning modules of cotton from the 1993-1994 crop to the appellant, in satisfaction for his debt for $84,165; and the inconsistency between these two strands of the appellant's case remains unexplained. Perhaps the payment, or purported payment of $84,165 on 29 November 1994 was later overlooked, but the records called into existence later on purported to show that Todd Finlay paid for these items, out of what would otherwise have been his income from cotton growing activities on L500 during the 1993-94 season, by allocating eight modules of cotton to the appellant. 25 There are other unsatisfactory aspects concerning these records. As I read Mr Austin's letter of 28 October 1994, and the other evidence, on that day he sent to Everingham Solomons drafts of minutes of meeting purportedly held on 1 February 1994 and 16 June 1994. It is not clear that this is so, but if it were not, one would expect to find something more definitely pointing to the contrary. In all the circumstances I see little profit in exploring the detail of the evidence of what Ms Winter and Mr Anderson said about the various fonts apparently used in printers in Mr Austin's office, producing the various documents that are in evidence, except to note that what was said called for some explanation from the appellant, probably through Mr Austin, and that no explanation was forthcoming. As the evidence was allowed to lie, an examination of the various fonts, by itself, raised the possibility that the minutes had been concocted; and, taken with the other evidence, there is a positive implication that this was so. 26 At trial, and on appeal, time and energy was devoted to an examination of the alleged agreement of 16 June 1994, recorded in these terms:- " sale of tractor: It was resolved to accept as full payment by Todd Allan Finlay for the sale of the Allis Chalmers 7060 Tractor Engine No 70-16140 made on the 1st day of February 1994 the following modules of cotton - No 120506 Bale Nos 809414 to 809436 No 120507 Bale Nos 809303 to 809413" 27 It is common ground that this minute does not record what was actually said (if indeed anything was actually said) on 16 June 1994: the bale numbers recorded were not known until 22 June 1994. This was explained as representing no more than an adjustment to the minutes, made after the meeting, to record what was then intended. However, there remains no explanation as to why the copy of the minutes, apparently sent by Mr Austin to Everingham Solomons in October 1994 bears the (obviously wrong) date 1 February 1994, this date having been omitted on another copy of the same apparent set of minutes, produced later, signed by Don Finlay. Clearly enough, the document was "retyped" or processed again through a word processor, someone taking the opportunity to change the expression "Signed in accordance with Sec 258 of the Corporations Act as a true and correct record" to "Signed as a true and correct record", although the minute is otherwise identical. 28 The debate as to the supposed assignment by Todd Finlay to the appellant of eight modules of cotton overlapped, to some extent, with the debate about the evidence of four witnesses, relied upon by the appellant, discussed below, but I think it is of little importance in the overall result. The appellant's proposition is that Todd Finlay grew cotton on about half of L500, from which he produced eighteen modules of cotton, eight of which he allocated or assigned to the appellant, two of them in satisfaction of his liability for the purchase price of the tractor, and the other six in satisfaction of his liability for rent, land preparation, spraying, etc. There was, plainly enough, some arrangement between the parties about the expense to be incurred by Todd for his growing cotton on L500, and his repayment to the appellant of the money advanced by the appellant on these accounts, but its relevance to the question who owned the tractor at the date of the accident is limited to enabling one to see what the overall picture was. As the Nominal Defendant contends, the case put forward by the appellant appears to show that Todd Finlay paid twice for the rent, land preparation and spraying etc - once by writing a cheque, and a second time by allocating or assigning modules of cotton to the appellant. The Nominal Defendant made other criticisms of this body of evidence. For example, it is accurate to say that the copies of the module "tickets" or dockets, marked "Todd's", relied upon by the appellant were all produced from the custody of the appellant or those associated with it, whereas the originals of these documents, produced by the cotton ginning company on the subpoena, contained no such marking. 29 The appellant points to what it describes as records corroborating its case. First, there is the diary entry of Mr Sorrenson, and the letter of Mr Austin on 28 October 1994, already quoted. The appellant submits that the latter tends to show that the "eight module arrangement" was already in existence, and that Mr Austin at least knew about it in October 1994. The former point seems to me to be the strongest point in the appellant's case, but the latter point suffers from the disadvantage that Mr Austin, apparently in the course of putting his proposal into effect, stood by whilst Todd Finlay wrote out a cheque for $84,165, for the payment for the debts said to have been satisfied by the transfer of the cotton modules. 30 Next, the appellant points to various documents called into existence by Mr Austin, namely 1994 diary entries and certain minutes. Mr Austin's diary entries appear to be a particularly unstable basis upon which to found any conclusion as to what actually happened. His general methodology appears to have been to compile notes, usually written in ink on various pieces of paper, and then to transcribe those notes, in pencil, into a bound book described as a diary. However, sometimes he merely stapled or glued the pieces of paper into the book. His apparent purpose was to create a record for costing purposes: he has recorded what appears to be a note of his time spent in relation to most items which he has recorded, and he has sometimes noted out of pocket expenses incurred. 31 As the book was printed, each page has a time recorded in the left hand margin, between 8 am and 7.30 pm. However, the manuscript entries bear no apparent relationship to these times. Generally speaking, Mr Austin made entries starting at the top of the page and simply continuing downwards, but sometimes he left blank spaces. If the record is taken at its face value, he worked very long hours. Indeed, on two days (14 and 23 June) he apparently worked for longer than 24 hours, or at least contemplated charging on this basis. Further, the evidence of Ms Winter and Mr Anderson demonstrates that many of the entries were changed, or were made in an inappropriate sequence. It must be said immediately that a good number of these entries, the subject of comment by Ms Winter or Mr Anderson, have nothing to do directly with the appellant or those associated with it - they go to point to the general unreliability of Mr Austin's record keeping. 32 Nevertheless the appellant relies upon four particular entries. First, there is an entry for 23 January 1994 reading: "Telephone discussions with Don on Adriatic/sales tax/Tailby - on tractor sale to Todd". This is the last of three items of work recorded, as having been done on that day, a Sunday. It is one of the entries labelled by Ms Winter and Mr Anderson as a questioned document, meaning of course no more than that their examinations found physical signs that the entries had been written out of sequence, or had been altered, and not dealing with the intellectual content of the entries. To my eye, this particular entry is apparently made with a different pencil to the entry immediately preceding it, but the relevance of that is quite obscure. 33 Secondly, the appellant points to an entry dated 9 February 1994 reading: "Discussions with Don on telephone re income and expenditure estimates for 1993-94". This does not seem to me to be of any real relevance in the case, but Ms Winter and Mr Anderson concluded that the entry in question, together with two other entries on that page, being the last three entries made on that page, were written on the page dated 9 February, after the entries had been made on the page dated 11 February. All this seems to me to prove no more than that Mr Austin's diary should be approached with some caution. 34 Thirdly, there is an entry on the page for 15 February: "On completion of minutes re tractor purchase by Todd". According to Ms Winter and Mr Anderson every entry on this page was written after the entries that appear on the page dated 17 February and, in addition, the last four of the seven entries on the page (including the entry under consideration) were also written after the entries on the page dated 16 February. That is, these three pages were, generally, completed out of sequence. One cannot tell when the entries on the page dated 15 February were inserted. 35 Fourthly, there is an entry on the page dated 5 July, prefaced by "Gli-Don Pty Ltd", reading: "Completion of minutes to record sale of tractor - modules of cotton - on calculation of amounts owing by Todd - on problems with Tailby - on child support - Wayne." (Wayne is a brother of Todd.) 36 According to Ms Winter and Mr Anderson, the words "Gli-Don Pty Ltd" were a later addition to the original entry, and the word "Tailby" was also an additional entry, made at a different time again. 37 Taken at face value, the first, third and fourth of these entries provide some corroboration for the appellant's case, as to the minutes of the meetings of 1 February 1994 and 16 June 1994. There are in evidence minutes of meetings of the directors of both the appellant and of Investments dated 1 February 1994. In substance, each company resolved to sell the tractor to Todd Finlay for $20,000. The discrepancy is explained by the proposition that there was some doubt which company owned the tractor, the appellant having transferred it to Investments whilst the latter company conducted the farming business. If so, it is curious that the two sets of minutes were apparently prepared at different times, using different printing fonts, and that Todd Finlay is recorded as having been present in one set of minutes, but not in the other set. The circumstances remain unexplained. 38 The Nominal Defendant points to the odd looking circumstance that a meeting was convened at all on 1 February 1994, when the only business conducted was to deal with a sale, within the family, of a second hand tractor, and where the minutes contain unusual detail, and are quite formal, expressed in language unlikely to be that of the Finlays. It adds references to the discrepancies in the fonts used on the minutes of the two meetings purportedly held that day, to the terms of Mr Austin's letter of 28 October 1994 and to the fact that the draft minutes of 16 June 1994 purported to be dated 1 February 1994, as well as to a number of other circumstances of a more general nature which invite scepticism. 39 Looking further at these circumstances, one can see in the contemporary records that a good deal of attention was given, about the middle of 1995 to producing various records. By then, the Nominal Defendant had asked for documentary evidence supporting the proposition that the tractor had been sold to Todd Finlay, and Everingham Solomons, acting on information provided to them, mostly by Mr Austin, had responded, forwarding a document purporting to be the minutes of a meeting held on 1 February 1994, recording the sale of a tractor by the appellant to Todd and, so far as the evidence goes, the Nominal Defendant had allowed that answer to stand as if unquestioned. 40 The proposal made by Mr Austin in his letter of 28 October 1994 was not acted upon completely. It is said that on 16 January 1995 Todd Finlay resold the tractor to Fincott Pty Limited for $12,000. I use this expression, because the records are unsatisfactory. There are in evidence two different sets of purported minutes of Fincott Pty Limited, both signed by Don Finlay. Whilst they are in substance the same, they are printed with different fonts, and whilst one records a meeting extending from 9 am to 9.15 am, the other records a meeting held between 10 am and 10.15 am. The supposed date of the meeting is the day immediately before the date of the letter from NRMA to the appellant, seeking written evidence about ownership of the tractor. What caused the apparent change in plan, that Todd Finlay retain ownership of the tractor, is not established. 41 In June and July 1995, Mr Austin lodged with the Australian Taxation Office taxation returns for the appellant, Investments and Todd Finlay. So far as relevant they were all consistent with the case now advanced by the Nominal Defendant that the appellant owned the tractor, and inconsistent with the appellant's case, that Investments or the appellant itself had sold the tractor to Todd Finlay on 1 February 1994. Copies of the taxation returns, in the form in which they were lodged with the Australian Taxation Office, were provided to the appellant's banker, the Commonwealth Bank of Australia. These were later produced by the bank upon subpoena. 42 There does not seem to be any real advantage in going through the detail of the manoeuvrings that followed. Eventually, on 21 May 1997, Everingham Solomons wrote to Mr Austin expressing concern about the fact that inconsistencies had emerged in the documents produced to them, and they spoke of the need to answer a subpoena. On 26 May 1997 Mr Austin then wrote to Don Finlay asking him to have unspecified "documents" signed and returned to Mr Austin as soon as possible by express post. A note on the copy of that letter, in Mr Austin's handwriting, refers to Todd Finlay. On 29 May, Mr Austin posted to Everingham Solomons a document described as being a copy of Todd Finlay's taxation return, for 1993-94. Whilst this was signed by Todd Finlay, apparently between 26 and 29 May 1997, it was dated 16 June 1995, and it was a copy of the altered return, which was not lodged with the Australian Taxation Office. The evidence does not include an explanation for this. 43 As already noted, generally speaking, Don and Todd Finlay said that they left everything now relevant to Mr Austin, and they said that they did not know until about a week before the trial that there were two versions of the taxation returns or supporting financial statements called into existence. 44 Sorby DCJ reviewed the evidence about the documents, and noted the close relationship between Mr Austin and, particularly, Don Finlay. He continued: "The tractor sale does not appear in the Tax returns filed and no reason is advanced why the group accountant and trusted friend did not include the sale. Mr Austin diary's that were subsequently altered to show the tractor transaction (sic). The diary also reveals that on the day of the accident, when Mr Austin happened to be on the day after (sic ) there is a note that the 'repercussions' of the accident needed to be discussed presumably with Mr Don Finlay." 45 His Honour then referred to the diary entry, purportedly made on 7 August 1994, referring to a discussion about the accident that occurred the next day, and then dealt with the evidence of Don and Todd Finlay, which he found to be unsatisfactory; and then he returned to the topic of the altered documents, before expressing his conclusion, adverse to the appellant. 46 On appeal the appellant focussed part of its argument upon the three sentences of the reasons for judgment just quoted, and submitted that the second sentence quoted demonstrated an error, in that Mr Austin's diary had not been "subsequently altered to show the tractor transaction". This error, it was said, affected the way in which his Honour approached the question of the credit of Don and Todd Finlay; and it was said that the Court should now examine for itself the documentary record, conclude that there had not been a fair trial, and either enter judgment for the appellant, or remit the case to the District Court for a new trial; and the appellant referred to the decision in State Rail Authority of New South Wales v Earthline Constructions Pty Limited (1999) 73 ALJR 306. 47 I think it is clear that there is some error in the second sentence quoted, at least in expression, or recording. However, the appellant really focuses on the last eight words of the sentence, and says that the remainder of the sentence means that his Honour thought that the diary was altered in this way. I do not think one can safely infer what his Honour intended by the first four words in the sentence, as printed, but I do not think one can properly draw the inference contended for. Putting the three sentences quoted into context, his Honour dealt over some pages with the financial records; he then set out the three sentences quoted, followed by a quotation of the diary entry dated 7 August 1994; and he then turned to some of the detail of the oral evidence of Don and Todd Finlay, and to matters concerning their demeanour, rejecting their evidence that they had only become aware just before the trial of the existence of the two sets of taxation returns and financial statements; and then his Honour expressed doubt as to the authenticity of the minutes dated 1 February 1994, and as to when those minutes had been signed. He then turned to the submissions of counsel, and found that the sole purpose of bringing into existence the "alternate" sets of documents was to conceal the contents of the taxation returns which had been lodged, and of the associated financial statements, since these documents did not disclose the tractor transaction. 48 As I have said, I do not accept the starting point for this branch of the appellant's case, that the second of the three sentences of the reasons for judgment quoted, should be read in the way contended for. But even if that sentence was read in that way, and recognised as containing an error of the kind described by the appellant, I do not think it would be right to say that this error influenced his Honour's expressed view about the credit of Don and Todd Finlay. Reading the reasons for judgment as a whole, he made findings adverse to them by reason of other matters altogether. There seems to be no apparent connection between Mr Austin's diary entries and any of those reasons. It is true, of course, that his Honour found that other documents (that is, documents other than the diary) were altered for the purpose mentioned, a conclusion, which seems to be plainly correct, but this is a different matter. 49 Sorby DCJ found that various financial records had been altered, and he said that the appellant had submitted that the alteration of the documents raised three possibilities:- "(a) The original documents were prepared by Mr Austin notwithstanding that he had been advised of the tractor transaction, and were later altered by him, without knowledge of the Finlays, so they conformed with Mr Finlay's instructions; (b) The original documents were prepared by Mr Austin notwithstanding that he had been advised of the tractor transaction, and were later altered by him with the knowledge of Mr Don or Mr Todd Finlay or both of them; (c) The original documents accurately recorded the instructions that Mr Austin had received as to the financial activities of Todd and Finlay Family Settlement in the 1993/94 financial year and those instructions did not disclose any sale of the tractor or the handover by Todd to Finlay Family Settlement of any cotton grown by him in his own right." 50 His Honour continued: "It was only possibility (c) that supports the proposition that Mr Todd Finlay did not buy the tractor via the scheme of arrangement I have outlined earlier and this possibility may have occurred because of inadequate instructions." 51 On appeal the appellant submitted that possibility (c) could not stand in the face of the diary entries of Mr Austin of 23 January, 15 February and 5 July 1994; and whilst his Honour had eliminated possibility (a), he had not dealt with possibility (b). 52 I doubt that it necessarily follows that the three possibilities listed by the appellant were the only possibilities. For example it might be that the instructions given to Mr Austin referred to some sale on terms different to those recorded, that the instructions given were misunderstood, or that the instructions given were changed, perhaps more than once. What satisfactory evidence there is suggests that Mr Austin made a proposal in his letter of 28 October 1994, that this proposal was initially accepted and partly implemented, but that the plan was then changed. 53 However, assuming for the moment that there were only the three possibilities mentioned, I do not accept that the three diary entries mentioned should be accepted as negating possibility (c). It is true that they speak of a tractor sale to Todd Finlay, and of minutes recording that sale, but this evidence needs to be considered together with the rest of the evidence. Rhetorically, if the tractor sale was actually negotiated, as the appellant contends, why was there such a multiple falsifying of records, and such concerted efforts to conceal the position? Why were the taxation returns, financial statements and the journal prepared in their original form, and why were the alterations made? 54 The appellant submitted that his Honour had not dealt with possibility (b). Whilst he did not explicitly deal with it within the framework of discussing these three possibilities, he did find that Don Finlay and Todd Finlay knew that the documents had been altered. 55 The appellant also submitted that his Honour erred in inferring that the evidence of Mr Austin would not have been favourable to the appellant. It said that there must first be some basis in the balance of the evidence from which an inference adverse to the appellant could have been drawn; and then one might infer only that the failure to call Mr Austin as a witness, or to explain his absence, meant that the inference could more readily be drawn. The submission concentrated upon Mr Austin's diary entries, but of course the Nominal Defendant's case included the proposition that Mr Austin had falsified many other documents, and the evidence that he had done this was very strong. Assuming in favour of the appellant that his Honour's statement of reasons on this point might have been expressed differently, I see no error in his conclusion. 56 Additionally, the appellant contended that his Honour erred in not accepting the evidence of four "independent" witnesses, each of whom gave evidence of pre-accident statements made to them by either Don Finlay or Todd Finlay, to the general effect that Don Finlay had sold the tractor to Todd Finlay; and it was said that the judge had failed to use or had palpably misused his advantage as trial judge in assessing those witnesses and their demeanour. 57 This criticism seems to me to be misplaced. One of these witnesses was Mr Baker, a farm hand employed by the Finlay interests. He spoke of a casual conversation with Don Finlay, years earlier. Sorby DCJ did not accept that a person in the position of Don Finlay would have discussed the detail of such a transaction with someone in the position of Mr Baker. That conclusion seems to me to be quite a likely one. 58 Mr Goddard was a director of a company that provided consulting services to the appellant. He spoke of a conversation he had had with Don Finlay where, in the course of a general discussion, Don Finlay told Mr Goddard that Todd Finlay had swapped two modules of cotton for the tractor. Mr Goddard said that the topic arose in general discussion and that he had first been asked to recall it some years later. His Honour thought that there was no apparent reason why Don Finlay would have volunteered such a statement, noted that Mr Goddard said that he could recall some but not other details of the conversation, and noted that Don Finlay was unable to recall the matter. 59 Mr Middlebrook, a director of a company that provided aerial spraying services, spoke of a conversation he had had with Todd Finlay. Mr Middlebrook had visited the property, and was discussing a mix-up, that had occurred concerning the allocation of Mr Middlebrook's company's accounts, as between Don Finlay (or associated entities) and Todd Finlay. In the course of that conversation Todd Finlay told Mr Middlebrook that he had bought the tractor from his father, in exchange for some cotton. His Honour said that he was not at all convinced that Mr Middlebrook was sure when the conversation took place, nor the actual contents of the conversation. The appellant pointed to circumstances, which on the face of the transcript, suggest that Mr Middlebrook's fixing of the time of the conversation might well have been accepted, and to the tenor of the conversation, suggesting that this shows that what Mr Middlebrook really did recall was a surprising turn to the conversation - that is, surprising from Mr Middlebrook's point of view. The appellant also relied upon the conversation, as corroborating the proposition that Todd Finlay was growing cotton in some share farming or similarly described operation on part of the area L500, but this is a different question. Additionally, there is a curiosity in the purported records of Mr Middlebrook's company: they record dealings with Fincott Pty Ltd commencing almost two years before it was incorporated. Viewing the evidence overall, there is no sound basis in the evidence for overturning his Honour's finding. 60 Finally, Mrs Maher gave evidence of a conversation she had with Todd Finlay. He spoke to her about modules of cotton being exchanged for the price of the tractor. She, together with her husband, conducted a carrying business, and they had been engaged to carry the cotton modules from the property to the ginnery. His Honour described her evidence as concerning a snippet of conversation, part of a casual conversation, sought to be recalled years after the event, and he was not convinced that in the circumstances of the conversation, mention would have been made about the way in which the tractor was to be paid for. 61 It is not a criticism of these witnesses to note that none of them was truly "independent": each had a significant relationship with the Finlay family, and each gave evidence that was, at least to some extent, surprising in that the witnesses spoke, years after the event, about matters discussed in casual conversations, in which one of the Finlays volunteered information about a subject matter which, on the face of it, would not ordinarily have been discussed with non-family members, except perhaps to interested professional advisers, such as accountants or solicitors; and viewing the evidence as a whole, I do not think it would be permissible for the Court to overturn his Honour's findings.

GLI-DON v NOMINAL DEFENDANT

At a glance

Court

Decision date

Before

Source

Judgment (18 paragraphs)

Parties

Cases Cited (1)

Cited By (1)