Sections of the Corporations Act You May Have Missed #002
In our second edition of Sections of the Corporations Act You May Have Missed, we look at a key section in the Corporations Act 2001 (Cth) (the Act) that you might have missed, being section 1305, which deals with the admissibility of a company’s books in evidence.
‘Books’ is broadly defined under section 9 of the Act to include:
- a register;
- any other record of information;
- financial reports or financial records, however, compiled, recorded or stored; and
- a document.
Pursuant to 1305(1), a book kept by a body corporation under a requirement of the Act is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book. This establishes an evidentiary provision and aid to proof that the books of a company are admissible as evidence to substantiate a parties claim or defence.
Pursuant to 1305(2), a document purporting to be a book kept by a body corporate is, unless the contrary is proved, taken to be a book kept as mentioned in 1305(1).
Importantly, section 1305 of the Act does not make the company’s books conclusive evidence of the matters they contain. The court has discretion to exclude the book and not admit it into evidence in any proceeding if the origin of the document is not sufficiently linked to the corporation or if the book does not state the true matter of affairs.
Recent case law
The Full Court noted recently in Advanced Holdings Pty Ltd as Trustee for The Demian Trust v Cmr of Taxation [2021] FCAFC 135 per Logan, McKerracher and Perram JJ (at [169]) that a court may be entitled to accept at face value for all purposes, including the underlying transactions, those documents admitted under the statutory provisions.
However, in Wollongong Coal Ltd v NRE Resources Pty Ltd; NRE Resources Pty Ltd v Wollongong Coal Ltd (No 2) [2017] NSWSC 1552, an alleged debtor company successfully displaced the statutory presumption under s 1305 of the Act that its loan account recorded in its general ledger was prima facie evidence of the amount of the loan amount due. The debtor showed that there had been a partial discharge of the indebtedness to the bank that changed the nature of the loan amount.
Impact
The impact of section 1305 of the Act is broad reaching, giving efficacy to the overriding purpose of the Civil Procedure act 2005 to facilitate the “just, quick and cheap resolution of the real issues in the proceedings”. It removes the need for parties to authenticate that the books constitute the books of the corporation when the fact is not in issue and to prove transactions that are not in dispute.
The section is can be a useful evidential mechanism for practitioners to recover and defend debts owed by or to companies. It assists creditors by shifting the onus onto a debtor company to establish that the matters recorded in their books are not accurate.