Barok Industries Pty Ltd v Percival [2001] QSC 154

Dl-/54--· tl73'2, S R ■ B (~ Queensland Government tat e e pOrt Ing Ure a U ~ Department oflustl~ and Attorney-Gc~ral Transcript of Proceedings Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION HELMAN J No 2821 of 2001 BAROK INDUSTRIES PTY LTD REVISED COPIES ISSUED State Reporting Bureau Date J:' Isl cl Applicant (formerly known as Korab Industries Pty Ltd) and BARRIE ARCHIBALD ROBERT PERCIVAL Respondent BRISBANE .. DATE 30/04/2001 JUDGMENT Floor, The Law Courts, George Street, Brisbane, a. 4000 1 Telephone: (07) 3247 4360 Fax: (07) 3247 5532 -- 1 of 7 -- 30042001 T13/YRLS M/T 2/2001 (Helman J) HIS HONOUR: The applicant company seeks an order that the respondent, a chartered accountant formerly employed by the applicant, deliver forthwith to the applicant's solicitors all books, deeds, papers, and writings including, but not limited to, financial statements of the applicant and associated papers, writings, books, and records. The documents in question are described in a letter dated 7 July 2000 the respondent sent to Mr J. Keller, an accountant also employed by the applicant: 11 1. Plastic Bag (sundry items) Mechatron papers, Memo and Articles of Association Barck Industries Pty Ltd. - Cash Receipts Journal, Trade Debtors Journal, Bank Statements, Financial information, Debtors Listings recoverable?, bank documents, Deposit & Cheque Book. Cash book in arch lever file. 2. Copies of correspondence re ACCC. 11 It was not disputed at the hearing of the application that the respondent still has possession of the documents. By a letter dated 22 March 2001 to the solicitors for the respondent the solicitors for the applicant demanded the return of the documents described as "all books, papers, writings and other possessions which relate to [the applicant]". The respondent has retained possession of the documents, asserting an entitlement to claim a lien over them until fees which he alleges are payable to him for sixteen hours of accounting work done from 16 May to 20 June 2000 are paid. 2 JUDGMENT l 10 30 4( 5( -- 2 of 7 -- 30042001 T13/YRL5 M/T 2/2001 (Helman J) The accounting work is asserted to be completion of accounting entries for the year ended 30 June 1999 including reconciliation of an inter-company account with another company called Theo Holdings Pty. Ltd., preparing "a list of Trade Debtors considered to be recoverable from 3 September 1998", and preparing "a report for [the applicant's] tax accountant to follow". On 27 February 2001 the respondent began a proceeding in the Magistrates Court at Brisbane (M3803 of 2001) against two directors of the applicant - one alleged to be trading as Barok Pty Ltd - for the recovery of professional fees which the respondent now concedes had been paid before he began the proceeding. He has sworn, however, that he has now given instructions to his legal advisers to draw a statement of claim in the proceeding which should embody a claim to other fees he asserts have not been paid. Why the claim in the Magistrates Court is made against the directors of the applicant personally and not against the applicant is not explained. Also unexplained is why the respondent wrote in a letter dated 25 July 2000 to Mr A.A. Brodie, State Director of the Institute of Chartered Accountants in Australia, referring to the disputed documents, "I am not retaining records by way of unpaid lien, but agree that I do hold them on a safe custody basis ... " The respondent is of course entitled to change his mind about the matter but the reason for the change has not been given. 3 JUDGMENT 1 10 20 30 40 50 60 -- 3 of 7 -- 30042001 T13/YRL5 M/T 2/2001 (Helman J) The dispute over any allegedly unpaid fees will of course remain for determination in the Magistrates Court, but on behalf of the applicant it is contended that even if there are unpaid fees the respondent has no right to a lien over the documents in question. Accountants in the course of doing their ordinary professional work may acquire the right to exercise a particular lien over any books of account, files, and papers which their clients deliver to them: Woodworth v. Conroy [1976] Q.B. 884, and DTC Ltd v. Gary Sargeant and Co [1996] 1 WLR 797, at p.800. But no lien can exist over books or documents of a registered company which, either by statute or by the articles of association of a company, must be available for public inspection or be kept at the registered office or some other specified place or be dealt with in a special way: DTC Ltd v. Gary Sargeant & Co, at p.801, where a passage from the 1995 Handbook of the Institute of Chartered Accountants in England and Wales on this subject was approved. No lien can exist in such a case for the reason elaborated by Cotton L.J., with whom Bowen L.J. agreed, in a case concerning an alleged solicitor's lien: In re Capital Fire Insurance Association (1883) 24 Ch.D. 408, at pp. 418-419. See also: In re Anglo-Maltese Hydraulic Dock Co. Ltd. (1885) 54 L.J.Ch. 730, and DTC Ltd. v. Gary Sargeant & Co, at pp.800-801. In Wilson v. Levi (unreported, Supreme Court of Western Australia, 11 February 1999) Bredmeyer M. considered 4 JUDGMENT 1 10 30 40 so 6 -- 4 of 7 -- 30042001 T14/JAP22 M/T 2/2001 (Helman J) Woodworth v. Conroy and DTC Ltd. v. Gary Sargeant & Co to be good law in Australia. I see no reason to doubt that, and I note that an extract from the December 1999 issue of the Institute of Chartered Accountants in Australia Members' Handbook which is before me contains the following passage under the heading "Particular Lien": "A lien cannot be exercised over any financial records required by section 286 of the Corporations Law. Under section 288, a company is required to make a hard copy of its financial records available within a reasonable time for inspection by certain persons." That passage accurately summarizes the law applicable to this case in my view. Sections 286 and 288 of the Corporations Law are in Part 2M.2 of Chapter 2M. Part 2M.2 deals with financial records. Sections 289, 290 and 291 in that part are also relevant to this application. Section 286(1), so far as it is relevant, provides that a company must 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. Section 286(2) provides that the financial records must be retained for seven years after the transactions covered by the records are completed. Section 288, so far as it is relevant, provides that hard copy must be made available within a reasonable time to a person who is entitled to 5 JUDGMENT l 10 20 30 40 50 60 -- 5 of 7 -- 30042001 T14/JAP22 M/T 2/2001 (Helman J) 1 inspect the records. Section 289(1 ), so far as it is relevant, provides that a company may decide where to keep the financial records. Section 290 provides for director access, and in s.291 is a table setting out other provisions 10 that are relevant to access to financial records: ss. 247A, 289(3), 310, and 431 of the Corporations Law and ss. 28 to 39 of the Australian Securities and Investments Commission Act 1989. The expression "financial records" is defined in s.9 to include: (a) invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers; and (b) documents of prime entry; and (c) working papers and other documents needed to explain: (i) the methods by which financial statements are made up; and (ii) adjustments to be made in preparing financial statements. The documents in question all relate to accounts for the year which ended on 30 June 1999, and so it may reasonably be inferred that the transactions recorded in them took place in that year. The cash receipts journal, trade debtors journal, and cash book referred to in the respondent's letter of 7 July 2000 are documents of prime entry, and the deposit book is a book of receipts. It follows that the respondent cannot assert the right to a 6 JUDGMENT 3G 4( 5( -- 6 of 7 -- 30042001 T14/JAP22 M/T 2/2001 (Helman J) lien over those documents since there must be access to them for inspection as provided for in the Corporations Law. l As to the remaining documents referred to in the letter, I 10 shall invite further submissions. It is not clear to me at the moment that the documents in the line beginning "Mechatron papers" are the applicant's documents, and it may be arguable that the remaining documents or some of them are not financial records of the applicant as that expression is 20 defined in the Corporations Law. HIS HONOUR: I order that the respondent deliver forthwith 30 to the applicant's solicitors at level 6, 300 Queen Street, Brisbane the following books and documents the property of the applicant: cash book for receipts and payments, general journal, general ledger, trade debtors' ledger, bank statements, debtors' remittance advices, cheque butts, and deposit books. I order that the respondent deliver to the applicant's solicitors at level 6, 300 Queen Street, Brisbane a list of all other financial documents the property of the applicant in the respondent's possession on or before 14 May 2001. I order that the respondent pay to the applicant its costs of and incidental to the application to be assessed if not agreed. 7 JUDGMENT 40 so 60 -- 7 of 7 --