Federal Court of Australia

Marsden, in the matter of Empire Consortium Group Pty Ltd (in liq) v Nationwide Plant Hire Pty Ltd [2026] FCA 911

ORDERS

THE COURT ORDERS THAT:

1.    The proceedings are dismissed.

2.    The plaintiffs pay the defendant’s costs to be taxed or agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    These proceedings concern a claim by the plaintiffs, Messrs Jeffrey Marsden, Duncan Clubb and Matthew Blum, in their capacity as liquidators of Empire Consortium Group Pty Ltd (Empire), for recovery from the defendant, Nationwide Plant Hire Pty Ltd (NWPH), of an alleged debt or, alternatively, amounts paid pursuant to alleged uncommercial transactions.

2    In broad terms, the liquidators contend that a ledger in Empire’s accounting records (the “Ledger”) reveals the existence of a running account as between it and NWPH, and that its entries evidence an outstanding balance owing to Empire. It is said that the matters disclosed by the Ledger are supported by other contemporaneous evidence, such as bank account statements. There is, however, some difficulty in that the former common director of the two companies, Mr Christopher Hodgers, who had knowledge of the transactions giving rise to the claims, is deceased, and Empire’s records were not well maintained.

3    For its part, NWPH has put the liquidators to proof. It denies that the material adduced by them establishes any indebtedness, but has not adduced evidence from its own books and records – save for a number of bank account statements – or any other documents that might negate the liquidators’ allegations. The outcome, therefore, depends largely upon what can be established from the limited evidence adduced by the liquidators, subject to any application of the principle in Jones v Dunkel (1959) 101 CLR 298 (Jones v Dunkel).

4    For the reasons which follow, the liquidators’ claim should be dismissed. Although it can be accepted that the Ledger records a running intercompany loan account between Empire and NWPH, the liquidators have failed to establish that its closing balance – which records the intercompany indebtedness as nil – does not represent the true position between the parties. In particular, they failed to adduce sufficient evidence from which the Court could conclude, on the balance of probabilities, that certain entries in favour of NWPH did not reflect genuine transfers of value. In those circumstances, the prima facie evidentiary effect conferred on the Ledger by s 1305 of the Corporations Act 2001 (Cth) (Corporations Act) is not displaced. Ultimately, the liquidators appear to have made a forensic decision to advance a relatively slim case and, whilst that course may be understandable having regard to costs, it resulted in a paucity of evidence which could not be remedied by any Jones v Dunkel inference.

Background

5    NWPH was incorporated on 15 July 2009 and, as far as the material shows, it operated an equipment hire business, mainly in relation to the “dry hire” of concrete pumping equipment. Between 25 May 2019 and his passing on 8 November 2023, Mr Hodgers was its sole director and sole secretary. Subsequently, Ms Tori Power, who appears to be in some way related to Mr Hodgers, was appointed as the director of NWPH.

6    Empire was incorporated on 7 December 2016. Mr Hodgers appears to have been its sole director and secretary from 1 January 2021 to 19 May 2021, and then from 3 June 2021 until the appointment of administrators on 6 September 2022.

7    In relation to Empire’s solvency, the following facts do not appear to be in dispute:

(1)    Empire did not lodge income tax returns for the 2018, 2019, 2020, 2021 or 2022 financial years.

(2)    On 10 March 2021, Empire entered into a payment arrangement with the Deputy Commissioner of Taxation, but defaulted on that arrangement on 31 August 2021.

(3)    On 1 August 2022, the Deputy Commissioner issued a garnishee notice to Empire’s creditors.

(4)    As of 6 March 2022, Empire’s net asset position was negative $3,715,361.66.

(5)    As of 6 September 2022, Empire’s net asset position was negative $7,109,306.27.

(6)    From 30 June 2021, Empire did not maintain the financial records required by s 286 of the Corporations Act.

(7)    It is likely that Empire was insolvent from at least 6 September 2020, being the date after which the alleged uncommercial transactions sought to be unwound by the liquidators were made.

8    On 12 October 2022, at the second meeting of creditors in the administration of Empire, it was resolved that Empire be wound up. The administrators were appointed as liquidators, and they have remained in that position. It is not in dispute that the relation-back day in the winding up of Empire is 6 September 2022.

Key documents

The Ledger

9    The fact that Empire did not maintain financial records in the manner required by s 286 of the Corporations Act is significant in this case, particularly because Mr Hodgers, who was the common director of the two companies during part of the relevant period, is now deceased. As a result, it is difficult to identify with any sufficient precision the nature and extent of the relationship between the two companies.

10    Nevertheless, the available material supports the conclusion that Empire effectively functioned as a treasury company in respect of the business conducted by NWPH, in that it received funds, invoiced customers and met expenses incurred by NWPH in the course of its day-to-day operations. Though there was some dispute about this aspect of Empire’s business – particularly as NWPH also appears to have made payments on its own behalf – the evidence ultimately supports that conclusion.

11    Relevantly, that conclusion is supported by the Ledger, which was extracted from Empire’s MYOB accounting records. A copy of the Ledger was adduced into evidence and admitted pursuant to s 1305 of the Corporations Act. Though not in the form of the original MYOB record, the copy qualifies as an admissible document for the purposes of s 1305: see Corporations Act s 1306(6). The Ledger is central to the determination of this case.

12    The Ledger begins on 21 December 2017 and concludes on 31 August 2022. Between those dates are several hundreds of entries, each of which is assigned a certain description and is recorded as being either a credit or debit to the account. To that end, for the avoidance of doubt, it should be observed that credits appear to reduce the balance of the Ledger, while debits increase the balance. This would suggest that monies received by Empire are treated as increasing its liability, and vice versa for debits.

13    The Ledger is ascribed the name “IC Loan – NWPH”. It was suggested by the liquidators that this title should be read as “Intercompany Loan – Nationwide Plant Hire”. The defendant did not seriously suggest otherwise, with the result that, on its face, the Ledger purports to be a record of the intercompany indebtedness between Empire and NWPH. The name also suggests that any indebtedness between those companies was treated as a loan. None of that is exceptional or other than what might be expected in the ordinary course of business.

14    For the most part, the entries in the Ledger are not clearly labelled. However, a general perusal of the document reveals that:

(a)    There are several credits to the Ledger described simply as “Nationwide Plant Hire”. Many of these may be understood as references to monies received from NWPH, or from third parties discharging amounts owing to it.

(b)    There also exist many debits which are described by reference to names of third parties. These might reasonably be understood as reflecting a payment by Empire discharging a debt owed by NWPH to that third party. The third parties include VicRoads (the Victorian transport authority responsible for vehicle registrations and the like), ASIC, Telstra, Transurban and Optus.

(c)    Further, there are credits to the Ledger described as “Plant Hire to Empire”. Again, these might be taken as reflecting the receipt of funds by Empire from NWPH and, similarly, credits reading “Empire to Plant Hire” appear to represent the payment of money the other way.

(d)    There are debits described as “EmpireCG2NWPH” which should be interpreted as meaning “Empire Consortium Group to Nationwide Plant Hire”, and which must therefore reflect the payment of an equivalent amount of money to NWPH.

(e)    There are also credits reading “nwph2empiregroup” which might be taken to indicate the receipt of monies by Empire from NWPH.

(f)    Many entries refer to “Quantum Business Finance” with an associated credit or debit. These appear to reflect dealings with a provider of finance to NWPH and the money received from or paid to that entity. It appears that NWPH obtained finance to acquire several pieces of plant or equipment which it used in its business, and the regular “Quantum Business Finance” entries reflected the discharging by Empire of obligations incurred by NWPH in that respect. There are also debits to the account described as “Lease Pay” together with an identifier denoting the lease in respect of which the payments were made.

(g)    Finally, a number of entries are described as “IC Loan from NWPH to Consortium” or “IC Loan from Consortium to NWPH”. These, consistently with the name of the account under which the entries are recorded, appear to reflect the advancement of funds to Empire from NWPH and vice versa.

15    Despite the above, it must not be assumed that every entry in the Ledger represents a transfer of money to or from a bank account. The Ledger did not purport to be a recording of only payments between the two entities, and the liquidators did not point to any evidence to the contrary. Rather, it appears to record the indebtedness inter se, in that some entries refer to an assumption of the entities’ other liabilities elsewhere, debt forgiveness, or some other transaction that did not involve the transfer of actual funds.

16    For a substantial period of the time, the balance of the loan account was in favour of NWPH, though that ceased in October 2021 and, thereafter, it largely remained in favour of Empire, save for the making from time to time of a number of unusual entries, which had the effect of reducing NWPH’s indebtedness to nil at the conclusion of the Ledger. Those entries were referred to by Mr Clubb in his evidence as having “zeroed out” the account.

The Zero Entries and NWCP Credits

17    That the Ledger concludes with a nil balance appears to be the result of two entries, one on 30 June 2022 and another on 31 August 2022, which credit the account with amounts of $795,450.00 and $842,253.84 respectively (these are hereinafter referred to as the “Zero Entries”). The latter is the last entry in the Ledger and resulted in the balance of the account being reduced to zero, hence Mr Clubb’s description of the entries as having “zeroed out” the account, though it is not clear whether that statement included an implicit assertion that the Zero Entries were not reflective of a legitimate transaction.

18    It must be recognised that the Zero Entries were made at a time when Empire was insolvent. The entry dated 31 August 2022 occurred only six days prior to the appointment of the administrators on 6 September 2022, while the other Zero Entry occurred only two months previously. In this respect, it is apt to remember that as at the date of the appointment of the administrators, Empire had negative net assets of $7,109,306.27 and had not lodged income tax returns for the 2018, 2019, 2020, 2021 or 2022 financial years. Moreover, at the time, Mr Hodgers was the sole director of both Empire and NWPH. The relieving of NWPH of a substantial indebtedness to Empire would, no doubt, have been beneficial to him.

19    The Zero Entries are also somewhat curious in that they bear the identifier “ecg2nwcp”. Though the liquidators appear to have assumed that this identifier purports to represent some transfer of value from Empire to NWPH (see infra [67]), it is likely that “nwcp” in fact refers to a related company, Nationwide Concrete Pumping (Qld) Pty Ltd (NWCP). That is consistent with the nomenclature adopted elsewhere in the Ledger, in that NWPH is generally referred to as “nwph”, “NWPH”, “Nwph”, “Nationwide Plant Hire” or “Plant Hire”.

20    NWCP is referred to in the Empire administrators’ report to creditors as being a related company which also had a debit balance in its intercompany loan account with Empire at the time of its administration. That indebtedness is recorded as $843,000, a figure strikingly close to the sum of $842,253.84 recorded in the Ledger as having been paid to Empire on 31 August 2022.

21    There are four other credits in the Ledger which appear to refer to NWCP, namely:

(a)    a $455,000 credit on 30 November 2019;

(b)    a $548,950 credit on 31 January 2020;

(c)    a $546,050 credit on 30 June 2020; and

(d)    a $698,500 credit on 31 October 2020.

22    These, together with the Zero Entries, total $3,886,203.84. They are collectively referred to hereinafter as the “NWCP Credits”.

23    The NWCP Credits are somewhat exceptional in the manner in which they are recorded in the Ledger. Unlike most of the other entries, they bear no description, which renders it difficult to ascertain their purpose or the context in which they were made. In that sense, they may properly be described as being anomalous when viewed against the Ledger as a whole. They also do not appear to correspond with any direct payment into Empire’s bank account or out of NWPH’s bank account, though they are not anomalous in that respect, because the Ledger encompasses more than direct transactions.

The bank accounts

Empire’s bank account statements

24    The liquidators also relied on Empire’s bank account statements, which record payments between it, NWPH and third parties, as supporting their submissions as to NWPH’s indebtedness.

25    Broadly, the transactions recorded in the statements are consistent with those recorded in the Ledger. That is, where the Ledger records a transfer from NWPH to Empire, the statements also record a receipt by Empire from NWPH. The transactions in the statements are also described using similar nomenclatures to those which appear in the Ledger, for example, the description “nwph2empire” (or variants thereof) is often used for transactions involving a credit to Empire’s account, while “empire2nwph” (or variants thereof) records a debit.

26    There is no record of a receipt of $795,450 on 30 June 2022, nor a receipt of $842,253.84 on 31 August 2022, which excludes the possibility that the Zero Entries represent transfers of funds directly to Empire.

NWPH’s bank account statements

27    In her affidavit, Ms Power produced NWPH’s bank account statements for the relevant period. They also adopted similar nomenclatures – “nwph2Empire” and “empire2nwph” – to describe transfers between NWPH and Empire.

28    It is relevant that NWPH’s account also reveals other transactions, including transfers to or from NWCP. Indeed, there are numerous transactions for substantial sums involving payments to, or receipts from, that company. Overall, the balance of those transfers appears to weigh in favour of NWPH, though the Court was not provided with any summary of the account.

Documents from third parties

29    The liquidators also rely upon documents produced on subpoena by two third party businesses. The first set of documents was produced by Transurban Limited (Transurban), which operates the toll collection business “Linkt”. Those documents contain details of the account entitled, “The Trustee for Nationwide Plant Hire Trust”, which appears to record the charges incurred for use of toll roads by several nominated vehicles or other vehicles which did not have a tag fitted.

30    The purpose of adducing these documents was to show that where the Ledger records Empire as having made payments to Transurban, those payments were made on behalf of NWPH in respect of the vehicles used in its operation. Corresponding records of the payments are also found in Empire’s bank statements.

31    Similarly, documents were obtained from Zoomlion Capital (Australia) Pty Ltd (Zoomlion) in relation to 36 finance contracts into which it had entered with NWPH. The documents purport to list the payments received by it during the relevant period. It is possible to match these records with entries in the Ledger and Empire’s bank statements. Again, these documents show that Empire made the payments on behalf of NWPH, which had the effect of increasing the latter’s indebtedness to the former, as recorded in the Ledger.

The debt claim

32    In respect of their primary claim for recovery of a debt owing to Empire by NWPH, the liquidators seek to establish: (a) the existence of a loan agreement between the two companies; (b) that the loan arises out of a running account; and (c) that the balance of the account is in Empire’s favour. However, the difficulty is that, save for the Ledger, there is very little direct evidence of the arrangements between the two companies. There is no written evidence of any loan agreement, nor any record of how the loan account was to operate or the terms circumscribing the indebtedness between them. Moreover, as mentioned, the only person with knowledge of those arrangements, Mr Hodgers, is deceased, and Empire also failed to keep adequate financial records.

33    That being so, the Court must draw inferences from the limited available material as to the existence and terms of any loan agreement, and the extent of any indebtedness of NWPH to Empire.

Principles in relation to the drawing of inferences

34    The bounds within which the Court may draw inferences are well established. As a starting point, it must be borne in mind that the civil standard of proof is satisfaction on the balance of probabilities; the arbiter of fact must feel actual persuasion as to the occurrence or existence of a fact before it can be found: McNickle v Huntsman Chemical Company Australia Pty Ltd (Initial Trial) [2024] FCA 807 [40]. Put another way, the party bearing the onus of proving a fact must establish a reasonable satisfaction on the preponderance of probabilities that the fact exists: Axon v Axon (1937) 59 CLR 395, 403. As Lee J said in Australian Securities and Investments Commission v Bekier (Liability Judgment) [2026] FCA 196 at [205], citing Jones v Dunkel at 305, “the facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied”.

35    Though, of course, direct evidence is not required to establish the existence of a fact. It can be proved by drawing inferences from evidence of the relevant surrounding circumstances. In Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 at 141, Tadgell JA observed:

In a civil case like this, where there is no direct evidence of a fact that a party bearing the onus of proof seeks to prove, “it is not possible to attain entire satisfaction as to the true state of affairs”: Girlock (Sales) Pty. Ltd. v Hurrell (1982) 149 CLR 155 at 169, per Mason J. In such a case, however, the law does not require proof to the “entire satisfaction” of the tribunal of fact. A definition of the sufficiency of circumstantial evidence in a civil case to support proof by inference from the directly proved facts was given by the High Court in the unreported case of Bradshaw v McEwans Pty. Ltd. (27 April 1951) in a passage since repeatedly adopted: e.g. Luxton v Vines (1952) 85 CLR 352 at 358; Holloway v McFeeters (1956) 94 CLR 470 at 480-1; Jones v Dunkel, at 304; Girlock’s case, at 161 and 168. The relevant passage in Bradshaw’s case is this:

“Of course as far as logical consistency goes many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between the criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence, while in the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort, where direct proof is not available, it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture: see per Lord Robson, Richard Evans & Co. Ltd. v Astley [(1911) A.C. 674, at p. 687]. But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then, though the conclusion may fall short of certainty, it is not to be regarded as a mere conjecture or surmise …”

36    As to the occasions on which it is appropriate to draw inferences of fact, in Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141 at [75] the Victorian Court of Appeal noted:

The questions of whether an inference is open as a matter of probability and whether that inference is the more probable one are to be determined by considering the combined weight of all the relevant established facts rather than by considering each fact sequentially and in isolation from the other facts.

(Footnotes omitted).

The loan agreement and running account

37    On the available evidence, it can be accepted that the Ledger produced from Empire’s MYOB database was maintained by Empire in the course of its business. On its face, it has the appearance of a document that was kept and maintained for business purposes and one which was used in the day-to-day operation of the business. In terms of content, it is relevant that it contains chronological entries which reflect Empire’s dealings with NWPH over the relevant period. In that regard, it was not seriously in question that the references to “Nationwide”, “NWPH”, or “Plant Hire” were references to NWPH.

38    Importantly, the Ledger covers the period in which Mr Hodgers was the director of both Empire and NWPH, namely between 3 June 2021 and 6 September 2022. During that time, it can be assumed that the entries on the Ledger were made by or on the instructions of Mr Hodgers. It follows that, although Mr Hodgers was exercising his powers as director of Empire at the time the entries were made, he also knew, in his capacity as director of NWPH, of their making and of the arrangements between the companies. The fact that entries continued to be made during this period – particularly those by which Empire discharged debts owed by NWPH to third parties – is evidence of NWPH’s acquiescence in the arrangement. In this regard, the Ledger can be characterised as a manifestation of the companies’ mutual assent to the arrangement. As Allsop CJ observed in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at 525 [369]:

On the contrary, a number of authorities discuss the need not to constrict one’s thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way. They can also arise when business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting i’s and crossing t’s or where they think they have done so. … Sometimes this failure occurs because, having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation. In such circumstances, even in the absence of clear offer and acceptance, and even without being able (as one can here) to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract. Sometimes this is said to be a process of inference or implication. For my part, I would see it as the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: ‘‘and we hereby agree to be bound’’ in this or that respect. The essential question in such cases is whether the parties’ conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract.

See also Crispino v Kiparoglou [2026] VSC 80 [28] – [30] (Crispino v Kiparoglou).

39    That approach does not alter in circumstances where the alleged agreement is for the provision of a loan. As Nichols J said in GJB Building Pty Ltd v AI&PB Property Pty Ltd [2023] VSC 782 at [1157]:

In the process of seeking to ascertain inferred intention, it should be recalled that it is not a condition of a valid loan that it be documented in a formal agreement, or that the advance of moneys be subject to the payment of interest or the provision of security. A loan is taken to be repayable on demand in the absence of agreement to the contrary as to the terms of repayment. 

40    In such circumstances, it may reasonably be inferred that an agreement existed between Empire and NWPH to the effect that (a) amounts advanced by one company to or on behalf of the other would be treated as advances on an intercompany loan account, and (b) the indebtedness as between them pursuant to such transactions would be recorded in a running account maintained by Empire. Pursuant to that arrangement, the balance of the account would be increased by Empire providing financial accommodation to NWPH, whether by payments made to it or to third parties on its behalf, and reduced by any payments made by NWPH to Empire or by reason of some other transaction, such as where NWPH assumes or discharges a liability of Empire.

41    It can also be inferred that both Empire and NWPH accepted the Ledger as the record of their intercompany indebtedness. So much is apparent by the name given to the account, “IC Loan – NWPH”. It is also confirmed by the entries themselves, which record the balance of the indebtedness as at any particular point in time. From those, it is clear that over the period covered by the Ledger, there are occasions where the balance of indebtedness favours NWPH, and others where it favours Empire.

42    It follows that the liquidators have established the first two of the three facts upon which they rely in these proceedings.

The extent, if any, of NWPH’s indebtedness to Empire

43    The next matter for consideration is the extent of the indebtedness, if any, of NWPH to Empire. Before turning to that question, it is appropriate to make the following observations as to the evidential value of the Ledger.

44    The Ledger was admitted into evidence pursuant to s 1305 of the Corporations Act. That section relevantly provides:

1305 Admissibility of books in evidence

(1)     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.

(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 subsection (1).

45    The precise status of this section is uncertain, primarily due to the judicial exegesis which has been applied to it. Whilst it obviously intends to facilitate proof of matters which appear from a company’s books, the cases have shown a reluctance to apply it according to its terms because of the obvious ease with which a company’s books might be altered, varied, or modified to reflect an incorrect position. That might particularly occur where, for example, a company is facing insolvency and intercompany loans with related entities are diminished or reduced for the purpose of preventing recovery proceedings.

46    Neither party to these proceedings made submissions dealing with the tension and inconsistency in the authorities on s 1305. However, that task was recently undertaken by Cosgrave J in Crispino v Kiparoglou, where his Honour eruditely analysed the relevant authorities and identified the issues where differences of opinion have arisen. For present purposes, it is only necessary to set out his Honour’s helpful summary of the relevant principles:

[75]    I consider that the applicable principles regarding whether a loan can be inferred and the effect of s 1305 can be summarised as follows:

(a)    in the absence of any suggestion of sham, there is no reason why a loan cannot be created orally or by conduct and sufficiently evidenced by book entry. However, this is not to say that book entries will necessarily establish the existence of a loan unless a sham is shown — rather, all evidence that might bear on the parties’ intention must be considered. This includes the context of the transaction, such as:

(i)    the nature of the parties and their relationship, the quantum of the loan, any reconciliation exercise conducted and the size and profile of the companies involved;

(ii)    the potential inconsistency of the existence of the alleged loan with other contracts to which the company is a party, and any other requirements including those under the company constitution;

(iii)    whether, in the context of the company’s financial situation, there was no commercial sense in agreeing to such a loan;

(b)    where there is nothing to suggest that the relevant book entries did not reflect the parties’ intention that a loan between them existed, and no real case is put that the debts in question did not exist and were mere book entries, this may tend in favour of an inference that a loan existed;

(c)    evidence casting doubt on the accuracy or reliability of the documents used to infer the loan may render them an unsatisfactory basis on which to make that inference. On the other hand, if there is no challenge to the accuracy of the documents, this may support the making of the inference;

(d)    in assessing the evidence, a court can rely on the prima facie evidence which can be found in a company’s books and records in accordance with s 1305(1). However, the weight of that evidence is to be measured according to common sense, and in the context of the entire body of evidence before the Court. It may be outweighed by other evidence, or some quality or characteristic of the books themselves, even if there is no other evidence. The relevant considerations will depend on the circumstances. For example:

(i)    where the reliability of the books is in question, s 1305 will not elevate disputed book entries to prima facie evidence that such transactions exist. This could occur where the accounts are marked “draft”, where there are different versions of the accounts with inconsistent entries or where accountants compiled the accounts retrospectively through an undisclosed process involving judgment and inference. Similarly, where there is some indefensible aspect to the accounts, such as the unexplained inclusion of $1.2 million already expended on legal fees as an “asset” in the company’s balance sheet, this will cast doubt on the reliability of the accounts as a whole;

(ii)    where there is evidence which may mitigate against the prima facie acceptance of the books and records, such as where there are other findings of fact firmly adverse to the quality of corporate management by a sole director, a court is not obliged to accept at face value and for all purposes, the existence and efficacy of challenged underlying transactions referred to in the documents;

(iii)    if there is direct and persuasive evidence that no loan existed, such as a lack of sufficient funds on the part of the alleged lender and indications that the book entries had been created by “shuffling figures” for tax purposes, proof of the loan’s existence will require more than just deemed proof by way of the books of account and related accounts;

(iv)    on the other hand, where no doubt is raised as to the reliability of the books and records, an inference that the debt existed may be fortified by the presumption raised by s 1305(1). Likewise where the existence of the loan is consistent with other evidence and there is no evidence to the contrary;

(v)    where there have been thorough investigations by the liquidators to identify relevant documentation and trace the loan, identifying the individual payments made to the defendant over time by reference to bank account statements, those investigations may help to fortify the Court in finding the existence of that loan; and

(vi)    it may not be unusual for a company of a small size and profile to have failed to formally document a loan arrangement with a director.

(Footnotes omitted).

47    These observations are applicable at a granular level and not limited to determining the veracity of a company’s accounts as a whole. It may be that some entries in a book of account can be accepted as establishing a fact, whereas others may be identified as erroneous: see, for example, Warwick Entertainment Centre Pty Ltd (recs and mgrs apptd) v Silkchime Pty Ltd (recs and mgrs apptd) (No 2) [2012] WASC 275. In that respect, the Court is able to make what it can of the admissible evidence and, in appropriate circumstances, may reject individual entries which are dubious or lack any solid foundation.

48    It follows that, in this case, the starting point is that the entirety of the Ledger is prima facie evidence of the extent of the indebtedness between Empire and NWPH. So much appears to be agreed between the parties. However, given the Ledger concludes with a nil balance, suggesting that no indebtedness exists, the question becomes whether any entry or entries contained therein ought to be excised – and the resultant balance thereby altered – on the basis that they do not reflect a legitimate transaction.

Annexure A and the aides memoire

49    No serious attempt was made by the liquidators at the hearing to identify any particular entries which the Court should consider were not soundly made. Rather, they appear to have advanced their case on the inverted basis that any entry in the Ledger not supported by contemporaneous evidence should be excluded. In this regard, they identified several alternative methods by which the Ledger should be analysed in order to arrive at varying degrees of indebtedness. Each of these methods involved the excision of some entries in the Ledger but, importantly, no substantive explanation was given for doing so.

50    It was initially asserted prior to and during the hearing that, between 21 December 2017 and 25 August 2022, Empire made payments to or on behalf of NWPH totalling $7,034,733.23 and received payments from NWPH of $2,036,636.02, such that the resulting indebtedness was $4,998,097.21. That was said to be particularised by a document contained in Annexure A to the Statement of Claim, which was a table generally replicating the entries in the Ledger. However, by reason of the fact that such a large amount was said to be owing, it was self-evident that not all entries were included, though which were excluded was not explained. It is assumed that the liquidators intended that the Court should, of itself, compare Annexure A with the entries in the Ledger to identify the differences.

51    At the conclusion of the hearing, the liquidators handed up a document referred to as an “aide memoire”. Like Annexure A, it identified a series of transactions extracted from the Ledger, but again, with no clear identification of the entries which had been excluded. It appears that the objective of this document was to identify those entries in the Ledger which were supported by contemporaneous evidence. From those entries, of which there were 854, the aide memoire identified three alternative methods by which NWPH’s indebtedness to Empire might be quantified, namely: (a) by reference to the indebtedness shown in Annexure A; (b) by reference only to the entries which record direct payments between Empire and NWPH; and (c) by reference to the direct payments plus the payments to Transurban and Zoomlion.

52    Following the hearing, both parties were given an opportunity to make further written submissions on the content of the aide memoire. That resulted in the liquidators filing an amended aide memoire, which contained a revised list of 257 Ledger entries. From those, it was submitted that NWPH’s indebtedness to Empire could be ascertained by reference to either: (a) the direct payments between Empire and NWPH’s bank accounts, as corroborated by the contemporaneous bank statements; or (b) those direct payments plus the payments to Zoomlion and Transurban. Under the first method, the alleged indebtedness is $518,696.86, while under the second, it is $2,642,565.96.

53    It is noteworthy that the revised list of entries in the amended aide memoire amounted to an excision of some 597 entries from the first aide memoire, for which no explanation was given. It also constituted a reduction in the maximum amount claimed by the plaintiffs from $4,998,097.21 to $2,642,565.96, again without any explanation.

54    In broad terms, the approaches to valuing NWPH’s debt employed by both aides memoire are little more than impermissible inversions of the relevant inquiry. As has been mentioned, the prima facie position in this case, by reason of the operation of s 1305 of the Corporations Act, is that the Ledger correctly reflects the position between the parties, namely that the indebtedness between them is nil. That presumption is not displaced by the identification of certain entries in the Ledger which are supported by contemporaneous evidence and the excision of those which are not. Rather, the task was to prove, on the balance of probabilities, that certain entries are not reflective of genuine transactions.

55    In that context, there is no basis for the wholesale exclusion of all entries not recording transactions between the bank accounts of Empire and NWPH. Indeed, the Ledger did not purport to be so limited. Its various entries suggest that it was intended to record not only payments between Empire and NWPH, but also payments which were made for and on behalf of NWPH, as well as the consequences of other transactions. In this regard, there does not appear to be any doubt that Empire made payments on behalf of NWPH to various third parties and, when it did so, a corresponding debit was recorded in the loan account. As such, there is no reason why any assessment of indebtedness pursuant to the intercompany loan, as recorded by the Ledger, should not include those other transactions. The liquidators did not point to any logical reason for their exclusion, nor does there appear to be one.

56    For the same reasons, there is also no basis for the second alternative method, which includes the payments made to Transurban and Zoomlion but not those made to the other third parties. Though the evidence adduced by those companies supports the conclusions just drawn as to the recording of third-party payments on the Ledger, that does not mean that only the entries relating to those companies should be included. That is particularly so given that the prima facie position is that the other entries in the Ledger recording payments to third parties reflect genuine transactions. Again, the liquidators’ approach suggests an inversion of that position.

57    The result is that the alternative methods postulated by the amended aide memoire should be rejected.

The Zero Entries

58    Notwithstanding the above, it appears that the liquidators have also advanced an alternative case which concerns only the Zero Entries.

59    That arises from the liquidators’ supplementary written submissions, filed together with the amended aide memoire, which argue that the Court should find that the Zero Entries do not reflect genuine transactions and thus exclude them from the Ledger, for the purposes of s 1305 of the Corporations Act, when ascertaining the indebtedness as between Empire and NWPH.

60    In this regard, the liquidators refer to the evidence given by Ms Power in cross-examination, as well as the fact that NWPH chose not to adduce any evidence as to the transactions recorded by the Zero Entries, despite being “uniquely positioned” to do so. They submit that the Court should draw a Jones v Dunkel inference that any such evidence in the possession of NWPH would not have assisted its case.

61    The principles espoused in Jones v Dunkel are well established and need not be recited here. It suffices to observe that they are but examples of the maxim identified by Lord Mansfield in Blatch v Archer [1774] 1 Cowp 63 at 65, that “all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted”: see Kassam v Hazzard; Henry v Hazzard (2021) 393 ALR 664, 696 [130]. This maxim was considered in G v H (1994) 181 CLR 387 at 391 – 392 by Brennan and McHugh JJ in the following terms:

when a court is deciding whether a party on whom rests the burden of proving an issue on the balance of probabilities has discharged that burden, regard must be had to that party’s ability to adduce evidence relevant to the issue and any failure on the part of the other party to adduce available evidence in response.

62    NWPH argues that the Court should not draw a Jones v Dunkel inference as doing so would effectively fill an evidentiary lacuna in the liquidators’ case. In particular, it refers to the evidence of Mr Clubb that the liquidators had control of Empire’s financial records on MYOB, and that some entries had certain documents, described as “source documents”, attached to them. There being no evidence that the liquidators sought to ascertain the existence of any source documents attached to the Zero Entries, NWPH submits that there is insufficient evidence giving rise to any inference that such entries are not legitimate.

63    There is some force in that submission. It is well established that a failure to call a witness or adduce evidence cannot be relied upon to make up any deficiency of evidence: Jones v Dunkel 312. That is, even if the Court is to infer that the evidence not adduced would not assist the party who failed to adduce it (whatever the precise effect of such an inference: see Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53 [79]), the substantive inference sought to be drawn must still be reasonably available on the objectively ascertainable facts. To allow otherwise would be to undermine the onus of proof.

64    To that end, it can be accepted that the available evidence gives rise to a great deal of suspicion as to the legitimacy of the Zero Entries. They were made at a time when Mr Hodgers was the sole director of both NWPH and Empire, and when the latter was undeniably insolvent. As has been mentioned, Mr Hodgers would have benefitted greatly from the extinguishment of any liability of NWPH to Empire. In those circumstances, the second Zero Entry, which debited the account in an amount precisely equal to NWPH’s outstanding indebtedness just six days before Empire entered administration, is particularly suspicious.

65    The Zero Entries also appear to be identified anomalously in the Ledger. Though they bear no description (unlike the majority of entries), they are assigned the identifier “ecg2nwcp”. As has been discussed, this can be understood as a reference to a transfer of value from Empire to NWCP. That being so, all that might be said, for the purposes of s 1305 of the Corporations Act, is that the Zero Entries reflect credits to the account by reason of a transaction involving a transfer of value from Empire to NWCP. The difficulty with this, however, is that it is not immediately apparent why such a transaction would have the effect of reducing NWPH’s indebtedness in its intercompany loan account with Empire. If the entries record payments made by Empire to discharge some indebtedness of NWPH to NWCP, that transaction should, in the ordinary course, have increased NWPH’s indebtedness to Empire. Conversely, if the entries reflect payments made to reduce the indebtedness of Empire to NWCP, that would have no effect on the intercompany loan as between Empire and NWPH. That also contributes to the general suspicion that might be had towards the Zero Entries.

66    However, the foregoing goes no further than to create general suspicion. Though one might query the nature of the transaction described by the identifier “ecg2nwcp”, no evidence has been adduced as to what that might represent. In this regard, one must also bear in mind that the Zero Entries were but two instances of six transactions which bore the same identifier (the NWCP Credits: see supra [21]). No submission was advanced by the liquidators that the other four NWCP Credits did not represent a legitimate transaction. Though true it is that they were not included in Annexure A nor the aides memoire, and thus it might be said that their authenticity was implicitly put in issue, no specific basis for their exclusion was articulated by the liquidators in pleadings or submissions. Nor was Ms Power cross-examined in relation to them. That being so, in circumstances where four other entries bearing the same identifier exist and are not shown to be illegitimate, something more than suspicion arising from the use of that identifier is required to displace the presumption, under s 1305, that the Zero Entries are genuine records of transactions engaged in by Empire.

67    The liquidators did not make any submissions on the use to be made of the identifier in the Zero Entries. Indeed, it appears that they may have proceeded on the assumption that the entries in fact purported to represent a transfer of value between Empire and NWPH, and not NWCP. So much is clear from the cross-examination of Ms Power, who was asked about the Zero Entries as if they represented payments made “directly” from Empire to NWPH. She was asked whether she had any reason to believe that the entries could record a gift, to which she responded that she did not. She was also asked whether the entries reflected a transaction involving the supply of goods or services by NWPH to Empire, to which she responded that she did not know, but later accepted that no invoices had been supplied by NWPH for that purpose.

68    The result is that the objectively ascertainable facts, from which an inference is sought to be drawn as to the veracity of the Zero Entries, may be summarised as follows:

(1)    The Zero Entries were made at a time when Mr Hodgers was the sole director of both Empire and NWPH, and when Empire was insolvent.

(2)    The Zero Entries bear the identifier “ecg2nwcp”, which suggests that they represent a transfer of value of some kind from Empire to NWCP, though there are four other entries bearing that same identifier in respect of which no challenge was made to their status as prima facie evidence of the transactions recorded therein.

(3)    The Zero Entries do not represent a supply of goods or services from NWPH to Empire, nor do they represent a gift from Empire to NWPH.

69    Ultimately, there is nothing in those facts which gives rise to anything more than mere suspicion. That is insufficient to draw any inference as to the true nature of the transactions recorded by the Zero Entries. In particular, even if one accepts that the transfers were not for the supply of goods or services or a gift, it does not necessarily follow that they have no legitimate explanation. For example, the entries could reflect some kind of arrangement by which NWPH assumed or discharged a liability of Empire to a third party (such as NWCP), thus entitling it to a credit on the Ledger. Indeed, the Ledger appears to record a variety of transfers of value between the companies, and is not limited only to direct transactions. It follows that the evidence does not establish, on the balance of probabilities, that no legitimate explanation existed for the Zero Entries, and thus the presumption that they constitute evidence of the transactions which they represent is not disturbed.

70    Moreover, the defendant does not bear sole responsibility for this paucity of evidence. As Counsel for NWPH rightly pointed out, other sources of evidence exist which do not appear to have been pursued by the liquidators. In particular, the evidence of the employee of the liquidators who extracted the Ledger from MYOB, Mr Davies, was that some entries had source documents attached to them, which provided context about the transaction represented by the entry. He could not recall checking, nor being asked to check, each entry to identify whether any source documents were attached. The liquidators otherwise adduced no evidence of such steps being undertaken. It therefore remains possible that the Zero Entries may have source documents attached, which would provide context as to the nature of the transactions represented by them. Those documents, if they exist, are likely to be in the possession of the liquidators.

71    In these circumstances, the application of a Jones v Dunkel inference to arrive at a contrary conclusion would do no more than fill the evidential lacuna left by the liquidators’ slim presentation of this case. It was open to them to undertake a more comprehensive investigation and adduce further evidence, but they did not do so, notwithstanding that the defendant put them to proof. That appears to have been the product of a forensic choice, no doubt influenced by cost considerations. However, a Jones v Dunkel inference should not be employed to ameliorate the consequences of that choice by patching deficiencies in the evidence.

72    Therefore, the liquidators have not established any basis upon which to displace the operation of s 1305 of the Corporations Act, to the effect that the Zero Entries are prima facie evidence of the transactions recorded therein. The result is that the Ledger continues to evidence a nil balance as between Empire and NWPH.

Conclusion as to debt claim

73    The necessary conclusion is that the liquidators have not established that NWPH was indebted to Empire in any of the amounts claimed, or at all. Though the Ledger should be accepted as evidence of the matters stated and recorded in it, in the absence of any evidence that might undermine the credits in favour of NWPH, the only available conclusion is that no amount is owing.

The uncommercial transaction claim

74    Given the above findings, the claim that certain payments to NWPH by Empire were voidable transactions under the Corporations Act can be dealt with quickly.

75    The liquidators’ case with respect to s 588FB of the Corporations Act is that Empire made payments to or on behalf of NWPH in excess of repayments made to it, and as such, it suffered a detriment. To that end, the difference between payments made by Empire and repayments by NWPH is identified as approximately $2.6 million. However, for the same reasons which were given in respect of the debt claim, there is no basis on which it can be concluded that Empire paid to NWPH more than it received in return. The Ledger records the balance of indebtedness between the parties as nil.

76    Moreover, there is otherwise no basis upon which it can be said that the Ledger records payments made by Empire for which there was no commercial benefit. It was a running account as between two related companies in relation to their liabilities inter se and it was not restricted to recording only direct payments between them. On the available evidence, there is nothing in that arrangement which can be said to be uncommercial.

77    Similarly, the available evidence does not support the conclusion that the Zero Entries do not reflect transfers made for the benefit of Empire. As has been mentioned, it may be that NWPH assumed or discharged some of Empire’s liabilities, such that it was entitled to a credit in the account. However, importantly, none of this appears to have been investigated by the liquidators either prior to commencing the litigation or in the course of interlocutory steps. It was also not put to Ms Power in cross-examination.

78    As a result of the foregoing, there is no need to form an opinion as to the date on which Empire became insolvent. That said, there is much force in the fact that a number of important indicators of Empire’s insolvency appeared strongly from at least 6 September 2020 and, as has been mentioned earlier, there was no real dispute that it was insolvent from at least that point in time.

Result as to the voidable transaction claim

79    It follows that the liquidators are not able to succeed on the voidable transaction case and it should also be dismissed.

Conclusion and orders

80    In the result, the claim should be dismissed, and the liquidators should pay NWPH’s costs.

Associate:    

Dated:    16 July 2026