Litigation 101: Provenance of company records: litigation record-keeping reminder

During litigation, it will be necessary for a party to provide its legal team with the documents that substantiate its claim or defence. Those documents may be disclosed or tendered as evidence in the trial. Section 1305(1) of the Corporations Act 2001 (Cth) allows a document kept by a body corporate to become evidence of any matter stated in the document, regardless of whether the document would be inadmissible according to the rules of evidence (eg. hearsay). However, in the absence of evidence as to the provenance of the document, the court may exclude the evidence, which could be fatal to the success of the litigation.

Admissibility of business records

Section 1305(1) of the Corporations Act 2001 (Cth) allows a "book" that is "kept by a body corporate under a requirement of this Act" to be admissible as evidence of any matter stated or recorded in it.

This section was introduced to expedite legal proceedings where books are to be used in evidence, as it removes the need to call witnesses to prove that books constitute books of the corporation when that fact is not in issue or to prove transactions recorded in a company's books when those matters are not in dispute. Were it not for this section, litigants would need to call direct evidence from the creator of a document.

What are "books" and how are they kept?

The definition of "books" in section 9 of the Corporations Act is broad. It includes a register; any record of information; financial reports or financial records; or a document.

Financial records extend to invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers; documents of prime entry; working paper or other documents needed to explain the methods by which financial statements are made up and any adjustments made in preparing the financial statements.

A document may be a record of a business even if it is a draft, or otherwise appears to be a document produced “along the way” to completion of a final document.

In relation to a company in liquidation or administration, the records of the business of a company also include records kept by the administrator or liquidator about the company’s affairs, including copies of an external administrator's reports to creditors.

A document is “kept” if it is retained or held. The courts have adopted a wide definition of the meaning of "kept", holding that a book is kept by a company if it is simply retained, and also if it is maintained systematically and periodically.

Where a book is kept by mechanical or electronic means, any written production of the matters so recorded or stored is prima facie evidence of those matters.

The statutory presumption can be displaced

Section 1305(2) of the Corporations Act gives rise to a rebuttable presumption that extends to both elements in section 1305(1), that is:

1. that the books are "kept"; and
2. that is the books are so kept "under a requirement of [the] Act".

This means the court has a discretion to exclude the book and not admit it into evidence if the provenance of the document is not proved. Therefore, if a document is important to the litigation, it would be prudent to authenticate the document by proving the document's provenance.

Authenticity of a book of a company may be proved, at its simplest, by the provision of evidence of a person who participates in the conduct of the business and who compiled the document, found it among the records of the business or is able to recognise it as a book of the business.