New South Wales Supreme Court CITATION : QBE Workers' Compensation (NSW) Ltd v J & D Freighters Pty Ltd [2004] NSWSC 1135 HEARING DATE(S) : 24 November 2004 JUDGMENT DATE : 1 December 2004 JURISDICTION: Common Law Division JUDGMENT OF : Master Malpass at 1 DECISION : The summons is dismissed; the plaintiff is to pay the costs of the summons; the exhibits may be returned. CATCHWORDS : Appeal - reliability of audit - questions of admissibility of evidence and whether or not there was supporting evidence for findings - decision reasonably open on material. LEGISLATION CITED : Evidence Act 1995, s48 PARTIES : QBE Workers' Compensation (NSW) Ltd (Plaintiff) J & D Freighters Pty Ltd (Defendant) FILE NUMBER(S) : SC 12500 of 2004 COUNSEL : Mr P D Gray-Grzeszkiewcz (Plaintiff) Mr D Day (Defendant) SOLICITORS : Greg Wilkinson (Plaintiff) Kenny Spring (Defendant) LOWER COURT Local Court JURISDICTION : LOWER COURT 59 of 2003 FILE NUMBER(S) : LOWER COURT Hodgson LCM JUDICIAL OFFICER : - 7 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Master Malpass 1 December 2004 12500 of 2004 QBE Workers' Compensation (NSW) Ltd v J & D Freighters Pty Ltd JUDGMENT 1 Master: The plaintiff is an insurer. It provided workers' compensation insurance for the defendant during the period 1 April 2000 to 1 April 2001. The cover was renewed for a further period ending 1 April 2002. 2 Mr Brien is a director of the defendant. He made a declaration which provided, inter alia, an estimate of the amount of wages to be paid by the defendant to its employees during the periods of the cover. In calculating the premium payable by the defendant, the plaintiff relied on the declaration. 3 On 10 January 2003, the plaintiff conducted an audit. The auditor calculated an amount of wages paid during the periods of insurance. It is contended by the plaintiff that the audit revealed that the amount of wages actually paid during the period of the cover was substantially greater than what had been disclosed by way of estimate in the declaration. 4 The plaintiff made a claim against the defendant for the payment of further moneys (an adjournment notice and invoice was issued). The claim comprised additional premium and an audit fee (payable pursuant to s174A of the Workers Compensation Act 1987 (the Act)). 5 The plaintiff brought proceedings in the Local Court. The proceedings were heard at Oberon on 14 July 2004. Hodgson LCM found in favour of the defendant and ordered the plaintiff to pay the costs of the proceedings. 6 The plaintiff has challenged the decision by way of appeal to this court. The appeal was heard on 24 November 2004. 7 There are three grounds of appeal. These are set forth in the amended summons filed on 15 October 2004. The grounds are as follows:- 1. The Court erred in law, in admitting into evidence over objection, part of exhibit 4 (being paragraphs 4, 5, 6 and 12, and the annexures thereto, of the affidavit of John Brien). 2. The Court erred in law, in finding, when there was no evidence upon which such a finding could be made or inferred, that: (a) The Defendant's director Mr Brien, believed on 10 January 2003, that the Plaintiff's audit of the Defendant, was an audit of a group of companies of which the Defendant was but one member. (b) When Mr Brien acknowledged the accuracy of Plaintiff's auditor's calculations, he believed that the Plaintiff's auditor's calculations related to a group of companies and not just the Defendant. (c) The Defendant's accountant Mr Graff, believed on 10 January 2003, that the Plaintiff's audit of the Defendant, was an audit of a group of companies of which the Defendant was but one member. (d) When Mr Graff acknowledged the accuracy of Plaintiff's auditor's calculations, he believed that the Plaintiff's auditor's calculations related to a group of companies and not just the Defendant. 3. The Court erred in law, in admitting into evidence over objection, exhibit 3 (a document apparently being the text of an email), when there was no evidence that: (a) The document was authentic. (b) The document was a business record of the Plaintiff. (c) The author of the document had or might reasonably be supposed to have had personal knowledge of the facts asserted in the document. (d) The asserted facts in the document were made on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted facts. 8 An appeal is available to the plaintiff where there has been error in point of law. The plaintiff bears the onus of satisfying the court that there is error in point of law which justifies the disturbing of the decision. 9 It is convenient to firstly refer to the third of the three grounds of appeal. This ground concerned the admission of the document which became exhibit 3. Prior to the hearing the defendant made a concession in respect of this ground. There is now no dispute between the parties that the document was inadmissible and was consequently admitted in error. 10 The defendant takes the stance that the admission of this document has no real materiality to the decision that was reached by the Local Court (it took away a contention that the defence was not of "recent invention"). This does not seem to be a matter of contest. In my view, that submission is well founded. 11 I now turn to the other two grounds of appeal. It is convenient that these two grounds be dealt with together. However, before proceeding further, I should mention that at the commencement of the hearing a further concession was made by the defendant. It concerned the material contained in paragraph 12 of the affidavit sworn by Mr Brien. There is now no dispute that this paragraph was also admitted in error. Again, it has no real materiality. 12 Before the Local Court, the plaintiff relied on an affidavit sworn by Colin Boalch. He carried out the audit. He was cross-examined. The plaintiff also relied on an affidavit from Raylene Fletcher. She was the credit control service manager for the plaintiff. She issued the adjustment notice and invoice in respect of the moneys that were claimed in the Local Court. She was also cross-examined. The defendant relied on an affidavit sworn by Mr Brien. He was also cross-examined. 13 Primarily, the plaintiff relied on the audit conducted by Mr Boalch to establish the total amount of the wages paid by the defendant during the two periods of insurance. It did not tender the documentation used to calculate the amount of wages said to be been paid by the defendant during the insurance periods. 14 The audit took about three hours. It was conducted in the presence of both Mr Brien and Mr Graff (an external accountant for inter alia the defendant). At the conclusion of the audit, following a request from Mr Boalch to do so, both Messrs Brien and Graff signed the document a copy of which is annexure A to the affidavit sworn by Mr Boalch. 15 Mr Boalch gave evidence that Mr Brien signed the document in his presence. He also gave the following evidence:- Q. --Mr Brien's signature? A. He signed it in my presence. Q. Right, before he signed it, did you say anything to Mr Brien? A. Yes, I said "if you're satisfied with the way I've arrived at my figures and you're happy with the figures I'm taking away, would you please acknowledge that by signature" and he did so. 16 The plaintiff also looked to this conduct as an admission. Further, it also looked to what was described as an 18 month silence following the issuing of the adjustment notice and invoice. 17 The defendant attacked the reliability of the audit carried out by Mr Boalch. The defendant did not have all wage books for the two periods of insurance. Whilst he also had regard to other company documentation, Mr Boalch's calculations were founded on 42 group certificates. He gave brief and unhelpful evidence as to the assistance gleaned from the other documentation. 18 I shall now mention some of the matters which form part of the attack on the reliability of the audit. 19 Mr Brien was a director of a number of related companies (of which the defendant was one). The evidence sought to be adduced by way of paragraphs 4-6 of his affidavit was directed to establishing that what had been done by Mr Boalch related to wages paid to a number of the related companies and not just to the defendant. There is no dispute that this material put in dispute the amount of wages paid by the defendant during the periods of insurance. 20 Whilst the audit was founded on 42 group certificates, there was evidence from Mr Brien that the defendant had only close to 20 employees. This evidence was not challenged in cross-examination. 21 In cross-examination, Mr Boalch gave the following evidence:- Q. So you're unable to say, with any certainty, whether or not the group certificates you sighted related to J & D Freighters Pty Limited only or to other companies as well? A. No, I'm not, but I would have thought someone would have brought this to my attention – at least some stage in the last 18 months. 22 The judgment of the magistrate is relatively brief. It presents as a consideration of the evidence that was before the court and the submissions made by the parties. The magistrate balanced the material relied on by the plaintiff against that adduced by the defendant. He expressed the opinion that it was quite possible that both parties were at cross-purposes in the audit. He expressed the view that "The standard of proof in these matters is a relatively light one" (it is not known what was meant by this observation). He then expressed the view that he did not consider that the plaintiff could establish precisely that the amount audited was the correct amount. This led him to the opinion that the plaintiff had failed to prove its case on balance. 23 I now return to the first ground of appeal. The thrust of the complaint is directed to what was said to be the erroneous admission of the annexures to the affidavit sworn by Mr Brien. These were the financial statements referred to in paragraphs 5 and 6 of his affidavit. 24 Before the Local Court, the documents were pressed and admitted as business records. 25 Broadly speaking, the plaintiff complains that the documents were not admissible pursuant to s48 of the Evidence Act 1995. It complains that the material constituted opinion evidence and even if it formed part of the defendant's business records, it was not properly proved. 26 The plaintiff has failed to satisfy me that the documentation was erroneously admitted. 27 In my view, the material can be regarded as business records and, to the extent that there was a need to do so, it was authenticated by the evidence of Mr Brien. 28 I should add that, even if a different view were to be taken on the question of the admissibility of this material, it would not affect the result in this appeal. I shall return to these considerations shortly. 29 I should also add that what was adduced by way of paragraphs 4-6 of the affidavit of Mr Brien was not the subject of any cross-examination by the plaintiff. 30 Leaving aside the question of what weight might be given to the material contained in Mr Brien's affidavit, it seems to me that there was sufficient other material before the magistrate to throw up doubt as to the reliability of the audit. 31 There was the discrepancy between the number of the group certificates and the number of employees had by the defendant. There is the lack of helpful evidence to demonstrate that what was shown by the group certificates was supported by other documentation. 32 There was the lack of certainty had by Mr Boalch as to whether or not the group certificates sighted by him related to the defendant only. 33 Whilst the matters that I have mentioned would of themselves throw up sufficient doubt, there is also the somewhat ambiguous evidence given by Mr Boalch as to what was said at the time the signatures were placed on annexure A (which related to satisfaction with the way he had arrived at his figures and happiness with the figures). It is material to the question of the weight to be given to the alleged admission. 34 The second ground of appeal relates to the observation made by the magistrate as to the possibility that the parties were at cross-purposes in the audit. 35 It is said that there was no evidence to support any of the findings set forth in this ground of appeal. I do not accept that submission. However, even if a different view were to be taken on this matter, I would not be satisfied that the plaintiff was entitled to succeed in this appeal. 36 I should stress that the magistrate said no more than that there was a possibility of the parties being at cross-purposes. It seems to me that there may have been such a possibility. 37 In my view, there was material before the magistrate (whether or not that which is the subject of this appeal is taken into account) which threw up doubt as to the reliability of the audit. I consider that it was reasonably open to the magistrate to take the view that the plaintiff had failed to prove its case on the balance of probabilities. I consider that the plaintiff has fallen short of discharging the onus borne by it. Accordingly, I am of the view that the appeal should fail. 38 The summons is dismissed. The plaintiff is to pay the costs of the summons. The exhibit may be returned. ********** Last Modified: 12/06/2004 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.