Proctor : July 2018
28 PROCTOR | July 2018 Statutory exception to the rule against hearsay Section 1305 Corporations Act 2001 A statutory exception to the rule against hearsay is provided by section 1305 of the Corporations Act 2001 (Cth) (the Act). Section 1305 of the Act provides: “Admissibility of books in evidence A book kept by a body corporate under a requirement of this Act is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book.” The section does not permit the admission of documentary hearsay evidence in the possession of a company in any circumstances. Rather, in order to rely on the section, some important prerequisites must be satisfied, which are plain from the words of the section itself. In particular: • The section only applies only to books within the meaning of the Act. • The section only applies to books which have been kept by the company. • The book must be “kept by a body corporate under a requirement of” the Act. Is it a book within the meaning of the Act? The term ‘books’ has a wide definition under section 9 of the Act. It includes a register, any other record of information and a document, as well as financial reports or financial records, however compiled, recorded or stored. 1 Has the book been kept by the company? Subject to section 1305(2), which is discussed below, there must be evidence that the book has been kept by the company. The fact that the book is in the possession of the company is not enough. A book in the nature of a document or record which is maintained by the company in a systematic or periodic fashion will likely meet this requirement. 2 Is it a book required to be kept under the Act? There are a number of provisions in the Corporations Act which require books to be kept by bodies corporate. Before seeking to tender a document pursuant to section 1305, practitioners and courts should satisfy themselves that there is in fact a proper basis under the Act by which the document is “required to be kept”. It is not enough merely that the document was in fact kept; there must be a requirement to do so. Similarly, practitioners who oppose the tender of such documents should carefully examine any claim made by their opponent about the nature of the requirement for the book to be kept. The most common requirement which is likely to be relied on in support of a tender is section 286 of the Act, which sets out an obligation on companies to keep certain “written financial records”. Section 286 requires that companies keep written financial records that: a. correctly record and explain its transactions and financial position and performance, and b. would enable true and fair financial statements to be prepared and audited. Breach of that provision is an offence. That provides a useful touchstone for practitioners considering the tender of such documents, or opposing it. Would the failure of the company to keep the document have attracted the sanction? In the seminal decision of ASIC v Rich, Austin J explained that the requirement in section 286 related to documents “recording and explaining the company’s transactions, financial position or performance and enabling true and fair financial statements to be prepared and audited”. 3 His Honour noted (at ) that what was significant in the discussion of the requirement in earlier cases was that “these documents were in fact prepared and kept, in circumstances where the court could infer that they were used as part of the process of recording and explaining, and therefore understanding, the company’s transactions, financial position and financial performance and enabling the preparation and auditing of financial statements”. Effect of section 1305(2) of the Act Section 1305(2) provides that a document purporting to be a book kept by a body corporate is, unless the contrary is proved, taken to be a book kept as mentioned in subsection (1). This then begs the question. When does a document purport to be a book kept by a company? As Austin J explained in ASIC v Rich:4 “There needs to be something on the face of the document to satisfy this requirement before s1305(2) can operate.” In that case, his Honour distinguished between the examples of a “folder full of invoices received by a company, labelled on its spine with the name of the company and the word ‘invoices’” (which were documents purporting to be, or on their face were, a book kept by a body corporate) and “as an example, a document purporting to be a contract of sale, showing on its face no sign of having been retained in the custody of a corporation”. In Emanual Management Pty Ltd and ors v Foster Brewing Group Ltd and ors  QSC 205, Chesterman J (as his Honour then was), a party attempted to tender memoranda and file notes as evidence of the truth of their contents and sought to rely upon section 1305 of the Act. This attempt was rejected. In the reasons, his Honour stated: “ The grounds for objection are that the documents are hearsay, the maker of the statement was not called as a witness and that the authorship of the documents has not been proved.  Two of the documents appear to be inter-office memoranda of Thomson Simmons, solicitors for the Emanuel group. Most of the others purport to be telephone attendances by Mr Saint of Thomson Simmons on Mr Brebner, EFG’s solicitor.