Business records are frequently used as evidence by litigants in proceedings however, a business record is a form of hearsay, and as such, section 59 of the Evidence Act 1995 (Cth) prohibits a business record being admitted as evidence.

Section 59, known as the hearsay rule, prohibits the admission of hearsay evidence to prove the existence of a fact asserted in a proceeding. There are a number of exceptions to the rule, one of which is the business records exception provided by section 69.

Firstly, section 69(1) provides that a business record is a document that:

• forms part of the records belonging to or kept by a person or other entity in the course of, or for the purpose of, a business; or
• at any time was or formed part of such a record; and
• contains a representation made or recorded in the document in the course of or for the purpose of the business.

Secondly, section 69(2) of the Evidence Act 1995 provides that a business record may be admitted into evidence where the representation made was made by, or supplied directly or indirectly by, a person who had, or might reasonably be supposed to have had, personal knowledge of the asserted fact.

In relation to this second point, there has been some argument which suggests that the effect of section 69(2) is that a party would be required to adduce evidence of how that document came into existence in order for it to be exempted from the hearsay rule. This would mean, for example, to admit into evidence the stock-take records of a company, a liquidator would have to adduce evidence of how those stock-take records came into existence or at least give the court a basis on which to infer how the document came into existence. In many circumstances this would be impossible for a liquidator to do, for example, if the staff of the business had been terminated and the directors were uncooperative.

Section 1305 of the Corporations Act 2001, however, provides a saving grace for liquidators.

Section 1305 provides that a book kept by a body corporate is admissible in evidence in any Corporations Act proceeding, and is prima facie evidence of any matter stated or recorded in the book. Further, it provides that a document which purports to be a book kept by a body corporate is, unless the contrary is proven, taken to be a book kept by a body corporate.

The effect of section 69 of the Evidence Act 1995, combined with section 1305 of the Corporations Act is that the hearsay rule in relation to business records is entirely displaced for proceedings under the Corporations Act as there is a presumption that the status of a document as a “business record” gives the court sufficient assurance as to its reliability, and unless the contrary is proven, it is taken to be a true record of the business’ activity.

As such, liquidators can rely on business records in their recovery and other legal proceedings, without fear of running into problems with the hearsay rule.

For more information, please contact us.