Rose v Tunstall

Background

1. The Plaintiff was an Olympic and international boxing referee and judge and a member of Boxing NSW Inc which was an association incorporated under the AIC. On 20 July 2004 the Plaintiff was expelled by a decision of a special executive meeting of Boxing NSW Inc. The five Defendants were committee members who were present at the meeting and who each voted to expel the Plaintiff.
2. On 16 February 2006 the Plaintiff sued Boxing NSW Inc and Arthur Tunstall who was then secretary of Boxing NSW Inc, in the Equity Division of this Court seeking a declaration that the expulsion was void and of no effect and an injunction restraining the implementation of the expulsion order.
3. On 22 June 2006 the Defendants in the equity proceedings filed a Notice of Motion seeking an order that the summons be dismissed under r 13.4 UCPR as disclosing no reasonable cause of action and as being an abuse of power. On 27 June 2006 the Motion was dismissed with an order that those Defendants pay the Plaintiff's costs.
4. On 15 November 2006 those Defendants offered to consent to the declaration and injunction without making any admissions of liability and offered to pay the Plaintiff's costs in the sum of $3000. The Plaintiff's counter-offer in relation to costs was that the costs be agreed or assessed. That counter-offer was not accepted and the proceedings continued to a final hearing on 8 December 2006.
5. On 31 January 2007 Brereton J ordered judgment in favour of the Plaintiff by making the declaration and granting the injunction sought, and ordering that Boxing NSW Inc pay the costs of the Plaintiff as agreed or assessed.
6. On 24 June 2009 an Amended Certificate of Determination of Costs for $98,846.72 was filed in the District Court Sydney Registry and entered as a judgment. The amount of the costs included the costs order made on 27 June 2006.
7. The Defendants in the present proceedings were said to be the committee members of Boxing NSW Inc at the time that judgment was entered.
8. On 20 October 2009 a writ of execution was issued by the District Court and sent to the Sheriff's Office for attempted execution against Boxing NSW Inc but it was returned unsatisfied on 19 November 2009.
9. On 13 November 2009 a garnishee order was issued by the District Court and forwarded to Westpac Bank at Double Bay to attach all monies in the account of Boxing NSW Inc. The Bank replied on 20 November 2009 saying there were no accounts in that name with the branch.
10. On 27 November 2009 Boxing NSW Inc paid the sum of $20,463.34 to the Plaintiff's solicitors in respect of the costs order of 27 June 2006.

The Local Court proceedings

1. The claim in the Second Further Amended Statement of Claim filed 7 December 2015 in the Local Court was that the Defendants were jointly and severally liable for the judgment debt incurred by Boxing NSW Inc by virtue of ss 37 and 38 of the AIC. The basis for this was set out as follows: (a) On 20 January 2007 a debt was incurred by Boxing NSW Inc when a costs order was made in the Supreme Court proceedings and that costs order was entered as a judgment debt in the District Court on 24 June 2009; (b) Division 3 of the AIC (which included s38) applied to Boxing NSW Inc either because on 19 November 2009 Boxing NSW Inc was deemed to be unable to pay the said debt when the writ of execution was returned unsatisfied or because on 1 October 2010 the incorporation of Boxing NSW Inc was cancelled by publication of a Notice in the NSW Government Gazette. (c) Under s 38(1)(b) and 38(iii) the Defendants, who were committee members of Boxing NSW Inc at the time when the said debt was incurred, are jointly and severally liable for the payment of the said debt.
2. On that basis, and taking into account the amount paid by Boxing NSW Inc, the Plaintiff claims $78,383.38.

Legislation

1. Sections 37 and 38 of the AIC provide: 37 Definitions (1) This Division applies to an incorporated association: (a) that has been wound up or is in the course of being wound up, (b) the incorporation of which has been cancelled by the Director-General, or (c) that is unable to pay its debts. (2) In this Division, appropriate officer means: (a) in relation to an incorporated association that has been or is being wound up - the liquidator, or (b) in relation to an incorporated association the incorporation of which has been cancelled by the Director-General or which is unable to pay its debts - the Director-General. (3) For the purposes of this section, an incorporated association shall be deemed to be unable to pay its debts if, but only if, execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the association is returned unsatisfied in whole or in part. 38 Offences relating to incurring of debts or fraudulent conduct (1) If an incorporated association incurs a debt and: (a) immediately before the time the debt is incurred: (i) there are reasonable grounds to expect that the association will not be able to pay all its debts as and when they become due, or (ii) there are reasonable grounds to expect that, if the association incurs the debt, it will not be able to pay all its debts as and when they become due, and (b) the association is, at the time the debt is incurred, or becomes at a later time, an association to which this Division applies, any person who was a member of the committee of the association at the time the debt was incurred is guilty of an offence and liable to a penalty not exceeding 50 penalty units or imprisonment for a period not exceeding 1 year, or to both such penalty and imprisonment, and the association and that person or, if there are 2 or more such persons, those persons are jointly and severally liable for the payment of the debt. (2) In any proceedings against a person under subsection (1), it is a defence if the Defendant proves: (a) that the debt was incurred without the Defendant's express or implied authority or consent, or (b) that, at the time the debt was incurred, the Defendant did not have reasonable cause to expect: (i) that the association would not be able to pay all its debts as and when they became due, or (ii) that, if the association incurred that debt, it would not be able to pay all its debts as and when they became due. (3) Proceedings may be brought under subsection (1) for the recovery of a debt whether or not the person against whom the proceedings are brought, or any other person, has been convicted of an offence under subsection (1) in respect of the incurring of the debt. (4) Where subsection (1) renders a person or persons liable to pay a debt incurred by an incorporated association, the payment by that person or either or any of those persons of the whole or any part of the debt does not render the association liable to the person or persons concerned in respect of the amount so paid. (5) …
2. Section 39 of the Local Court Act 2007 (NSW) gives a party a right to appeal to this Court but only on a question of law. Section 40 requires the leave of this Court to be given on a ground that involves a question of mixed law and fact.

Legal principles

1. In Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Mason CJ said (at 355-356): [87] The question whether there is any evidence of a particular fact is a question of law: McPhee v. S. Bennett Ltd. (1934) 52 WN (N.S.W.) 8, at p 9; The Australian Gas Light Co. v. The Valuer-General [1940] NSWStRp 9; (1940) 40 SR (NSW) 126, at pp 137-138. Likewise, the question whether a particular inference can be drawn from facts found or agreed is a question of law: Australian Gas Light, at pp 137-138; Hope v. Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1, at pp 8-9. This is because, before the inference is drawn, there is the preliminary question whether the evidence reasonably admits of different conclusions: Federal Commissioner of Taxation v. Broken Hill South Ltd. [1941] HCA 33; (1941) 65 CLR 150, at pp 155, 157, 160. So, in the context of judicial review, it has been accepted that the making of findings and the drawing of inferences in the absence of evidence is an error of law: Sinclair v. Maryborough Mining Warden [1975] HCA 17; (1975) 132 CLR 473, at pp 481, 483. [88] But it is said that "(t)here is no error of law simply in making a wrong finding of fact": Waterford v. The Commonwealth [1987] HCA 25; (1987) 163 CLR 54, per Brennan J. at p 77. Similarly, Menzies J. observed in Reg. v. The District Court; Ex parte White [1966] HCA 69; (1966) 116 CLR 644, at p 654: "Even if the reasoning whereby the Court reached its conclusion of fact were demonstrably unsound, this would not amount to an error of law on the face of the record. To establish some faulty (e.g. illogical) inference of fact would not disclose an error of law." [89] Thus, at common law, according to the Australian authorities, want of logic is not synonymous with error of law. So long as there is some basis for an inference - in other words, the particular inference is reasonably open - even if that inference appears to have been drawn as a result of illogical reasoning, there is no place for judicial review because no error of law has taken place.
2. In R L & D Investments P/L v Bisby [2002] NSWSC 1082 Kirby J said at [13]: [13] The issue has been considered in a number of cases since that time, including Poricanin v Australian Consolidated Industries Ltd [1979] 2 NSWLR 419; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139; Mahoney v Industrial Registrar of NSW & Anor (1986) 8 NSWLR 1; Haines v Leves & Anor (1987) 8 NSWLR 442; Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; Gangemi Holdings Pty Ltd v Salter & Ors [1999] NSWSC 1004; Carr v Neill [1999] NSWSC 1263; SRA v Smith [2000] NSWSC 334. Arising from these authorities, a number of broad propositions can be stated: ● First, there is no error of law in simply making a wrong finding of fact (Australian Broadcasting Tribunal v Bond (supra) per Mason CJ at 341), unless there is no evidence to support that finding. ● Secondly, it does not amount to an error of law if the finding of fact, or the inference (or the refusal to make a finding of fact or draw an inference) is perverse, in the sense that it is contrary to the overwhelming weight of evidence (Glass JA in Azzopardi v Tasman UEB Industries Ltd (supra) at 155). ● Thirdly, it is not an error of law even if the reasoning process by which the Court reaches its conclusion of fact is demonstrably unsound or illogical (Menzies J in R v District Court: Ex Parte White (1966) 116 CLR 644, at 654). ● Fourthly, there is limited exception (which has no application in this case) in relation to decisions of fact in the context of a statutory description. In such a case there may be an error of law if the decision on the facts is one which could not be reasonably entertained, or supported, if the tribunal had properly understood the true construction of the relevant enactment (Mahoney v Industrial Registrar of NSW & Anor (supra) per Hope JA at 1 and Samuels JA at 5).
3. In Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 the Full Court of the Federal Court had to determine whether an appeal involved a question of law in the context of the construction of a statute. The Court said this (at 287): The principles according to which the jurisdiction conferred by s 44 is limited are not always easy of application. Distinctions between a question of fact and a question of law can be elusive. The proper interpretation, construction and application of a statute to a given case raise issues which may be or involve questions of fact or law or mixed fact and law. Nevertheless there are five general propositions which emerge from the cases: (1) The question whether a word or phrase in a statute is to be given its ordinary meaning or some technical or other meaning is a question of law: Jedko Game Co Pty Ltd v Collector of Customs(NSW) (1987) 12 ALD 491 ; Brutus v Cozens [1973] AC 854 . (2) The ordinary meaning of a word or its non-legal technical meaning is a question of fact: Jedko Game Co Pty Ltd v Collector of Customs (NSW); NSW Associated Blue-Metal Quarries Ltd v FCT (1956) 94 CLR 509 at 512 ; Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60 at 78 ; Neal v Secretary, Department of Transport (1980) 29 ALR 350 at 361-2 . (3) The meaning of a technical legal term is a question of law: Australian Gas Light Co v Valuer-General (1940) 40 SR (NSW)126 at 137-8 ; Lombardo v FCT (1979) 28 ALR 574 at 581. (4) The effect or construction of a term whose meaning or interpretation is established is a question of law: Life Insurance Co of Australia Ltd v Phillips, supra, at 79 . (5) The question whether facts fully found fall within the provision of a statutory enactment properly construed is generally a question of law: Hope v Bathurst City Council (1980) 144 CLR 1 at 7 ; 29 ALR 577 per Mason J with whom Gibbs, Stephen, Murphy and Aickin JJ agreed; Australian National Railways Commission v Collector of Customs (SA), supra, at ; FCR 379 (Sheppard and Burchett JJ). The fifth proposition as stated by the High Court in Hope v Bathurst City Council was elaborated by reference to the remarks of Fullagar J in Hayes v FCT (1956) 96 CLR 47 at 51 : Where the factum probandum involves a term used in a statute, the question whether the accepted facta probantia establish that factum probandum will generally - so far as I can see, always - be a question of law. This principle is qualified when a statute uses words according to their ordinary meaning and the question is whether the facts as found fall within those words. Where it is reasonably open to hold that they do, then the question whether they do or not is one of fact: Hope v Bathurst City Council at CLR 8 . Mason J there cited the observation of Kitto J in NSW Associated Blue Metal Quarries Ltd v FCT at 512 : The next question must be whether the material before the court reasonably admits of different conclusions as to whether the…operations fall within the ordinary meaning of the words as so determined; and that is a question of law… If different conclusions are reasonably possible, it is necessary to decide which is the correct conclusion; and that is a question of fact; …

Grounds of appeal

1. I shall now deal with the grounds of appeal individually or in groups as counsel dealt with them:

Grounds 1 and 2: 1. That Her Honour erred in law (para. 20) in holding that Boxing NSW Inc. had not incurred a debt under Sec. 38 by failing to apply the ruling in Hawkins v Bank of China (1992) 26 NSWLR p. 562 to Her Honour's finding (para. 21) and Her Honour should have found that Boxing NSW Inc. incurred a contingent debt when it chose to defend the Supreme Court proceeding in early December 2006 and subjected itself to a conditional but unavoidable obligation to pay a sum of money at a future time if it incurred an adverse Costs Order. 2. That Her Honour should have found as a matter of Law that the legal effect of the entry of judgment on the Costs Order Assessment on 24.6.09 under UCPR 36.4(2) was that the Costs Order then took effect and became an unavoidable obligation of Boxing NSW Inc. and this is a Question of Law requiring the application of the facts found to the provisions of UCPR 36.4(2).

1. These grounds particularly concern paragraphs 18 - 23 of the learned Magistrate's judgment. Those paragraphs are as follows: Did the Association incur a debt and if so, when was that debt incurred? [18] The plaintiff submits that the Association incurred a debt when the costs orders were made in June 2006 and January 2007 and that the debt became due on or about 24 June 2009 when the costs assessment certificates were filed in the District Court. [19] The Defendants submit that the Association did not incur a debt as: ● A costs order turns upon discretionary considerations that arise independently of the entry of judgment and that it is not certain that a court will make a costs order. ● The phrase "incurs a debt" has been interpreted to mean that a company by its conduct and choice subjects itself to a conditional but unavoidable obligation to pay a sum at a future time (see Standard Chartered Bank v Antico (1995) 131 ALR 1 at 57, Hawkins v Bank of China (1992) 26 NSWLR 562 at 572, Harrison v Lewis (2001) 19 ACLC 556 at [27] - [28], Powell v Fryer (2001) 37 ACSR 589 at [73], Jelin Pty Ltd v Johnstone & Anor (1987) 5 ACLC 463 at 464 and 465, Russell Halpern Nominees Pty Ltd v Martin & Anor (1986) 4 ACLC 393, Castrisios v McManus (1991) 9 ACLC 287 at 296). ● The Association did not by its own conduct and choice subject itself to a conditional but unavoidable obligation to pay a sum at a future time. ● The amount of the alleged debt is not what has been claimed as Mr Rose has conceded that he has only paid his legal representatives $15,000 in relation to his costs in the Supreme Court proceedings. [20] I agree with the Defendants' submissions that the Association did not incur the debt. [21] It is reasonable to infer that the Association should have been aware that there was a risk of having an adverse costs order made against it when it chose to defend the Supreme Court proceedings. [22] However, it is not reasonable to infer that on the days that the costs orders were made, the Association conducted itself and chose to subject itself to a conditional but unavoidable obligation to pay a sum at a future time. [23] It was the court that made the decision that required the Association to pay the costs and once that order had been made, the Association had to pay the costs once the amount of costs could be agreed or assessed.
2. The Defendants submitted that her Honour's statement at para [20] that she agreed with the Defendants' submission was a finding of fact. The Defendants submitted that the Plaintiff does not assert that there was no evidence to support the finding or that the Magistrate misdirected herself in law. Counsel drew attention to the authorities dealing with the exception to the rule about facts fully found falling within a statutory provision where the statute uses words according to their ordinary meaning. These authorities included Pozzolanic and Commissioner of Taxation v Crown Insurance Services Ltd (2012) 207 FCR 247; [2012] FCAFC 153 at [29]ff.
3. The Defendants further submitted that ground 1 puts the Plaintiff's case in a very different way from what the Plaintiff argued before the Magistrate. The assertion in that ground of the way the Magistrate should have found, namely, that a contingent debt was incurred, is doomed to fail. It should, therefore, be struck out as "frivolous".
4. The Plaintiff submitted that the question whether the facts fully found satisfied the test in Hawkins v Bank of China (1992) 26 NSWLR 562 was a question of law and that grounds 1 and 2 were implicitly saying that her Honour in paragraphs 20 and 22 wrongly applied the test laid down in Hawkins and that that involved an error of law.
5. It is clear that the issue for the Magistrate at this point was whether the Association incurred a debt. The Magistrate set out the Defendants' submissions about what "incurs a debt" means. That determination was clearly a question of law: Pozzolanic at 287(3). As the Defendants' submission recorded by the Magistrate at [19] of her judgment makes clear, the phrase "incurs a debt" had been given a particular meaning in decided cases.
6. The issue was not a factual enquiry about what the Association had done. The facts were undisputed at this point. The Association had defended the Plaintiff's claim and had been unsuccessful with the result that costs orders were made on 27 June 2006 and 31 January 2007. The issue was whether, being subjected to those costs orders by the Court, the Association could be said to have incurred a debt so that the matter fell within the provisions of s 38(1) of the AIC. As the authorities mentioned by the Defendants to the Magistrate demonstrated, there was learning and authority about what the phrase "incurs a debt" means in particular circumstances. That is not a question of fact but a question of law.
7. It is difficult to understand why the Magistrate's agreement with the Defendants' submissions that the Association did not incur a debt could be said to be finding of fact. The Defendants rely to some extent on what the Magistrate said in paragraphs 21 and 22 where she said what inferences were and were not reasonable.
8. The Plaintiff would not be entitled to base its appeal on the inference that the Magistrate said in paragraph 21 could be drawn but that does not seem to me to be the basis of the complaint in grounds 1 and 2. However, as paragraph 23 makes clear the drawing of that inference is not an essential aspect of the Magistrate's conclusion which was a conclusion of law based on the undoubted fact recorded in paragraph 23.
9. The Defendants submitted that the matter was within the category of cases which look at whether "facts fully found" fall within a statutory provision. However, as the Full Court of the Federal Court made clear in Pozzolanic (at 287(5)) the question whether facts fully found fall within the provision of a statutory enactment properly construed is generally a question of law, and the principle is only qualified when a statute uses words according to their ordinary meaning. In the present case the issue was whether suffering a costs order was the "incurring of a debt". Accordingly, it is question-begging in those circumstances to assert that the words "incurs a debt" in s 38 are used according to their ordinary meaning to deny the Plaintiff the right to argue that point.
10. In my opinion, grounds 1 and 2 raise a question of law.
11. As to the submission that ground 1 is doomed to fail, although the matter is finely balanced, I do not consider that the Plaintiff should be deprived of its right to argue the legal point arising from Hawkins. Even accepting that the Plaintiff did not put the matter in the way ground 1 suggests, it is clear from the Magistrate's judgment at paragraph 19 that the issue was a live one because of submissions made by the Defendants. Although the argument seems to me to be a weak one, I cannot find that it fits any of the descriptions in General Steel Industries Inc v Commissioner for Railways (NSW) (1965) 112 CLR 125 at 129 to deny the Plaintiff the right to go to a final hearing.

Ground 3 & 4 3. That Her Honour erred in law (para. 40) in holding that the deeming provisions in Sec. 37(3) did not apply to this case by wrongly interpreting Sec. 37(3) as requiring the Plaintiff to request the Sheriff to return the Writ to the Court in accordance with UCPR 39.51 when Sec. 37(3) did not require such action see Macquarie Bank v Fociri (1992) 27 NSWLR 203 in considering analogous facts and legislation. 4. That Her Honour erred in law in failing to hold that under Sec. 37(1)(b) of the 1984 Act the cancellation of the incorporation of Boxing NSW Inc on 1/10/2010 by the Director-General made Div 3 of the 1984 Act applicable to Boxing NSW Inc. and sec. 38 of the Act then became applicable to Boxing NSW Inc.

1. The Plaintiff made a number of submissions concerning a writ being unsatisfied and whether s 37(3) requires the unsatisfied writ to be returned "to a court".
2. The findings made by the Magistrate in this regard were unnecessary, and whether those findings were right or wrong does not advance the matter. That is because it was asserted by the Plaintiff in the Statement of Claim and admitted by the Defendants in their Defence that the incorporation of Boxing NSW Inc was cancelled on 1 October 2010. The result was that, pursuant to s 37(1)(b), Division 3 of Part 4 of the Act (containing s 38) applied to the conduct alleged. It was not, therefore, necessary for the Magistrate to find either that the incorporation was cancelled (it was not an issue) nor that the deeming provision in s 37(3) did not operate (because s 38 applied by reason of s 37(1)(b) which does not require an inability to pay debts).
3. For the Magistrate to have reached the point of considering s 38(2), it was a pre-requisite that one of the requirements in s 37(1) applied. The Magistrate found (c) did not apply and (a) was not put forward. Whilst it might have been desirable for the Magistrate to have noted the concession as to (b), it was not an error of law not to have done so.
4. Grounds 3 and 4 should be struck out as frivolous because they take the matter nowhere.

Ground 5 That Her Honour erred in law in holding (para. 43) that the Plaintiff had not proven under Sec. 38(1) of the Act that immediately before the debt was incurred there were reasonable grounds to expect that Boxing NSW Inc. would not be able to pay all of its debts as and when they became due and Her Honour failed to take into account a written admission by the Defendants Tunstall in a letter dated 7/3/2007, that as at the time of the making of the Costs Orders Boxing NSW Inc. would be financially bankrupt and unable to pay its debts after payment of its own legal costs and Her Honour did not take into account Boxing NSW Inc.'s financial records from 2003 to 2007/08 which show a negative cash flow and showed an absence of capacity to pay its debts and did not take into account failure by Boxing NSW Inc. to put into evidence any financial records for the financial year 2008/2009.

1. The Plaintiff's written submissions under the heading "As to Appeal Ground 5" do not address this ground. They address ground 4. No other submissions oral or in writing concerning ground 5 were made by the Plaintiff. Nevertheless, I will consider whether the ground involves a question of law.
2. To understand the finding in paragraph 43 of the Magistrate's judgment it is necessary to set out the preceding paragraphs. The Magistrate said: [41] Despite Mr Tunstall's comments to Mr Brunker about the Association being "bankrupt" and the Association's financial statements not fully disclosing the amount of the assessed costs, I am not satisfied on the balance of probabilities that there were there reasonable grounds to expect that the association would not be able to pay all of its debts as and when they became due. The Association had a significant amount of money in its bank accounts and it had the ongoing capacity to raise further funds when it staged tournaments. The capacity to raise further funds was not lost until the Association became disaffiliated from Boxing Australia. [42] It can be inferred that the Association could and did rein in expenditure where necessary (e.g. when it refused to pay Mr Brunker's costs of attending a tournament.) [43] In light of the above, I find that the plaintiff has not proven on the balance of probabilities that immediately before the alleged debt was incurred, there were reasonable grounds to expect that the association would not be able to pay all of its debts as and when they became due.
3. It can be seen that the Magistrate's determination at paragraph 43 was her findings of fact referred to in paragraph 41 and the inference her Honour drew in paragraph 42. Those are clearly factual findings. No question of law was involved.

Grounds 6 to 9 6. That Her Honour erred in law in accepting into evidence (para. 47) assertions in paras. 47 & 48 in a proposed Witness Statement of 5/2/16 in the name of Defendantss Tunstall in circumstances that the document was drafted nine years after the relevant time and was unsigned and unverified and there was no evidence that it had been read or adopted by Mr Tunstall before his death in hospital a short time after it was drafted. 7. That Her Honour erred in law by inferring in para. 42 that Boxing NSW Inc. could and did rein in expenditure and gives as an example the refusal to pay Mr Brunker's costs of attending a tournament (Tunstall letter of 7/3/07) but Her Honour wrongly interpreted the letter which refused to pay Mr Brunker's tournament costs not as a measure to "rein in expenditure" but because it was "financially bankrupt and unable to pay its debts" after the payment of its own legal costs of the 3-day hearing in December 2006. 8. That Her Honour erred in law in finding (paras. 48 & 49) that "it was only when the Association could not generate income through staging tournaments that its financial position became dire and it subsequently was deregistered" and therefore the Defendants had "proven that at the time the debt was said to have been incurred they did not have reasonable cause to expect that the Association would not be able to pay all its debts as and when they became due" under Sec. 38(2) because this finding was based on Her Honour's reference (para. 34) to assertions in paras. 46, 47 & 48 of the Witness Statement of 5/2/16 saying that "all sources of income for Boxing NSW Inc. ceased since it lost the right to administer the sport in NSW" These assertions attributed to Mr Tunstall are based on the fact that Boxing Australia cancelled the affiliation of Boxing NSW Inc but the financial records in evidence until 30/6/08 show that the payment of Boxing NSW Inc.'s own legal costs in 2007/2008 had substantially exhausted Boxing NSW Inc.'s available funds before cancellation of Boxing NSW Inc.'s affiliation by Boxing Australia on 28/11/09. 9. That Her Honour erred in law in holding (para. 49) that under Sec. 38(2) the Defendants had proven that they did not have reasonable cause to expect that Boxing NSW Inc. would not be able to pay all of its debts as and when they became due in failing to take into account the fact that the financial records in evidence showed a negative cash flow from 2003 to 2008 and the absence of available funds to pay the Plaintiff's assessed costs and that as at 14/1/10 Boxing NSW Inc had a bank balance of $1,070.71.

1. The Defendants submitted that these grounds raised only issues of fact. The Defendants submitted that there was no assertion by the Plaintiff that there was no evidence to support these findings.
2. The Plaintiff submitted that "reasonable grounds to expect" in s 38(1) included the Defendants' knowledge of the financial records of Boxing NSW Inc and that was a question of law. The Plaintiff drew attention to what was said by the Court of Appeal in Dunn v Shapowloff (1978) 3 ACLR 775 when dealing with s 303(3) of the Companies Act 1961 (NSW) where the Court said, I am not prepared to accept as a proposition of law that in order to succeed in a prosecution under this section it is incumbent on the prosecution to prove that at the date in question the liabilities of the company exceeded its assets. … The section … is concerned with the question of the company paying the debt.
3. These grounds on their face raise errors of fact only. The criticisms of the Magistrate "inferring" and "finding" only have to be stated to make that clear. Similarly, the complaint in ground 6 is not so much that the Witness Statement was accepted into evidence as it is that the Magistrate accepted the evidence contained in it. Self-evidently, that is a question of fact. In any event, the ground should be regarded as "frivolous" since it was the Plaintiff who tendered the Statement.
4. The Plaintiff's written submissions only highlight that the matters complained of in these grounds were issues of fact. The submissions say, for example: Her Honour has virtually ignored the relevance and weight of… (paragraph 42); Her Honour has not applied any appropriate analysis or scrutiny to exhibits 1 and 2 (paragraph 45); Her Honour ignored the fact that Mr Tunstall in the last page of Exhibit 1 stated…(paragraph 46); In exhibit 2 the item…indicates…(paragraph 49); In addition the submissions point to what the financial records show. The submissions say what inference should be drawn from a letter written by Mr Tunstall.
5. The Plaintiff's oral submissions complaining of financial evidence "not…taken into account" and asserting what a proper examination of the evidence would have shown only highlight the factual nature of these complaints.
6. Although ground 9 is expressed as an error in "holding" (an expression properly reserved for a determination of law), the remainder of the ground makes clear that the nub of this ground is that the Magistrate should have "take[n] into account the fact" that financial records showed certain things. That is a question of fact.
7. The reference to Dunn v Shapowloff is misconceived. Section 303(3) of the Companies Act provided: (3) If in the course of the winding up of a company it appears that an officer of the company who was knowingly a party to the contracting of a debt provable in the winding up had, at the time the debt was contracted, no reasonable or probable ground of expectation, after taking into consideration the other liabilities, if any, of the company at the time, of the company being able to pay the debt, the officer shall be guilty of an offence against this Act. The matter concerned a criminal prosecution under the section and what the prosecution had to prove to establish a breach of the provision. The elements of the offence are clearly a question of law. Whether those elements were satisfied is a question of fact for the jury or (in that case) the magistrate. In the same way, whether there were reasonable grounds is a finding of fact or, at best for the Plaintiff, a mixed finding of fact and law.

Conclusion

1. In my opinion the following orders should be made: 1. Order pursuant to r 13.4 Uniform Civil Procedure Rules 2005 (NSW) that grounds 3 to 9 in the Summons be dismissed. 2. The Plaintiff is to file a Further Amended Summons consistent with order (1) within 14 days.
2. Neither party has been entirely successful on the Motion. However, the Defendants have largely succeeded. My prima facie view is that the Plaintiff should pay 50% of the Defendants' costs of the Motion. If either party wishes to propose a different order I will hear the parties on costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 June 2017