POTENTIA3 PTY LTD (IN LIQUIDATION) v Hislop [2019] NSWSC 323

Supreme Court New South Wales

Medium Neutral Citation: POTENTIA3 PTY LTD (IN LIQUIDATION) v Hislop [2019] NSWSC 323 Hearing dates: 7 June 2018 Date of orders: 29 March 2019 Decision date: 29 March 2019 Jurisdiction: Common Law Before: Rothman J Decision: (1) The defendant shall pay to the plaintiff an amount of $1,615,753.08;

(2) The defendant shall pay the plaintiff interest in the aforesaid amount from 11 June 2015 to the date of this Order in accordance with the pre-judgment interest rates calculated at the Reserve Bank Cash Rate, plus 4%;

(3) The defendant shall pay to the plaintiff interest on the amount owing calculated in accordance with Orders (1) and (2) above at the rate of 7.5% from the date of Judgment until payment.

(4) The defendant shall pay the plaintiff's costs of and incidental to the proceedings on an indemnity basis on and from 24 June 2017 and otherwise as agreed or assessed. Catchwords: CORPORATIONS – Directors Loans – whether ban or salary – books record loans – no evidence of employment – order for repayment of loan. Legislation Cited: Corporations Act 2001 (Cth), s 1305 Uniform Civil Procedure Rules 2005 (NSW), r 20.26 Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333 Damelian Automobile Pty Limited (Receivers and Managers Appointed) v Ricardo Rovira Damelian [2012] NSWSC 950 Category: Principal judgment Parties: POTENTIA3 PTY LTD (IN LIQUIDATION) (Plaintiff) Peter Cranston Hislop (Defendant) Representation: Counsel: A G Martin (Plaintiff) No Appearance (Defendant)

Solicitors: Edwards Kirby Lawyers (Plaintiff) No Appearance (Defendant) File Number(s): 2017/87954

Judgment 1. HIS HONOUR: By Statement of Claim filed 22 March 2017, the plaintiff claims an amount from the defendant said to be owing as a director's loan (hereinafter "the loan"). An Expert Report of Ms Cam Nguyen, of 6 December 2017 (the "Expert Report"), calculates the loan balance as $1,615,753.08. 2. The only issue in the proceedings is whether any portion of what is said to be the director's loan was not a loan, but attributable to wages paid to the defendant. So much is contended, by the defendant, in his Defence. 3. Essentially, the proceedings before the Court relate to documents and the evidence necessarily arising from those documents. The documents are tendered by the plaintiff. No evidence is adduced by the defendant. 4. The Court has before it financial statements for 2014, which disclose a loan to the defendant in the sum of $1,061,126: see Report of Ms Cam Nguyen, 6 December 2017 [14]. In December 2014, the balance sheet in the company's records discloses a loan receivable from the director of $1,535,421.04. That balance was current as at 31 December 2014: Exhibit RG-1 at p 153. Lastly, the Deed of Company Arrangement, signed by the defendant defines the Director's Loan Account to the defendant estimated in the sum of $1,535,421.04: Exhibit RG-1 at p 89. 5. The Expert Report identifies from source documents that are in evidence an amount that was missed in the calculation of the last two mentioned amounts to bring the amount to that identified at [1] of these reasons. I accept that calculation. 6. If, as is suggested in the Defence, the amount owing relates to employment (or even a contractual arrangement) as distinct from the prima facie position disclosed by the records, there is no evidence that discloses an employment relationship. In that regard, the defendant has not sought to tender any express agreement; the terms of any oral agreement; any employment records; no wage or salary record; timesheets; or other contemporaneous notes. 7. In those circumstances, the prima facie position disclosed by the financial records has not been displaced. Pursuant to the terms of s 1305 of the Corporations Act 2001 (Cth), the records of the company, required to be kept pursuant to the Corporations Act, are prima facie evidence of any matter stated or recorded in the records. 8. Further, a document purporting to be a record is to be treated as a record, unless the contrary is proved. As a consequence, that which is set out in the records of the plaintiff is, without any contradictory evidence, evidence of the matter recorded. 9. In the absence of evidence from the defendant disproving the existence or diminution of the loans that are recorded in the records, those records are prima facie evidence of the amount recorded: Damelian Automobile Pty Limited (Receivers and Managers Appointed) v Ricardo Rovira Damelian [2012] NSWSC 950. I have been provided with a schedule of amounts drawn down by the defendant. 10. The only evidence, suggestive of a relationship by which the defendant is paid for work performed (not necessarily an employment relationship, in the formal sense) is a PAYG Payment Summary for the financial year 2014. That PAYG Summary establishes that the defendant was paid "wages" of $45,000 for that financial year. 11. The PAYG Summary does not prove, or render more probable the existence of, any proposition that the amounts shown as loans were part of a salary or payable for work performed. Thus, any suggestion that the amounts recorded as loan amounts are payable as wages or salary is not supported by the PAYG Summary for 2014. There are a number of reasons for that proposition. 12. First, PAYG Summaries are required to be issued in relation to persons other than employees, if payments are made pursuant to a requirement on the payer and are for personal exertion. Thus, director's fees, ordinarily, would be required to be the subject of a PAYG Summary. 13. Further, the amount of $45,000 is evidence that that amount has already been paid. It is not evidence that further amounts are owing as "wages". 14. Lastly, the defendant acknowledged, by signing the Deed of Company Arrangement, that a loan account existed under which he owed to the plaintiff the amount, to which reference has already been made, being an amount of $1,535,421.04 15. In the matter now before the Court, there is no express or implied agreement or obligation, or any evidence of any such express or implied agreement or obligation, for the company to make payments either regularly, or at all, by way of wages or salaries. If, as the records of the company prove, amounts received by the defendant were loans, there is no basis upon which, on the evidence before the Court, there can be implied an obligation to pay wages or salary, or pay for work performed. 16. Indeed, there is no evidence of work performed or the nature of work performed over what period and for what hours. There is no basis upon which the Court can infer a contract of employment or a contract for the payment of amounts for work performed. 17. In this matter, the evidence is wholly consistent with the amounts having been advanced, as recorded in the books of the plaintiff, and the defendant conceding the amount owing for the repayment of said loans. Orders will issue for the repayment and interest.

Conclusion 1. The only remaining issue is one relating to costs. On 23 June 2017, an Offer of Compromise and/or a Calderbank offer was sent to the defendant to his then solicitors. Those solicitors ceased to act at some significant time thereafter. 2. The Offer of Compromise was said to be an Offer of Compromise pursuant to the terms of the Uniform Civil Procedure Rules 2005 (NSW) (hereinafter "UCPR") r 20.26 and was for the defendant to pay the plaintiff a sum significantly less, exclusive of costs, than the amount owing. In the circumstances, this was a commercial offer with a real compromise. 3. Whether or not the Offer of Compromise complied with the UCPR, it meets the principles adumbrated in Calderbank v Calderbank [1975] 3 All ER 333. In the circumstances, costs should be awarded from 24 June 2017 on an indemnity basis. 4. The Court makes the following orders: 1. The defendant shall pay to the plaintiff an amount of $1,615,753.08; 2. The defendant shall pay the plaintiff interest in the aforesaid amount from 11 June 2015 to the date of this Order in accordance with the pre-judgment interest rates calculated at the Reserve Bank Cash Rate, plus 4%; 3. The defendant shall pay to the plaintiff interest on the amount owing calculated in accordance with Orders (1) and (2) above at the rate of 7.5% from the date of Judgment until payment. 4. The defendant shall pay the plaintiff's costs of and incidental to the proceedings on an indemnity basis on and from 24 June 2017 and otherwise as agreed or assessed.

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