When oral discussions are conducted between parties involving complex commercial arrangements or decisions to transfer assets or acquire shareholding, common sense indicates that contemporaneous file notes or subsequent emails should support those oral discussions, what was discussed and said between each party and who else was present. However, hindsight is a wonderful thing, and it is usually not until disputes arise between parties, including in subsequent litigation, that certain discussions or conversations may then seek to be relied upon by one of the parties in support of purported agreements.
In the recent Supreme Court decision of Maradox Pty Ltd v Normet Industries Nominees Pty Ltd (No 2) [2026] VSC 637, Justice Waller dismissed the proceeding as he was not satisfied that the plaintiffs had substantiated any of their claims in respect of an alleged variation of beneficiaries’ entitlements and whether an agreement was reached in an unrecorded “boardroom conversation”.
This was a family dispute by way of a proceeding involving complex issues and 10 defendants (some of which were professional advisers) through a trial conducted over at least 26 days. However, there were several key facts:
- The dispute turned on the restructure of a metal recycling business and the beneficial ownership of that business which occurred in 2007 and as part of the restructure, whether the second plaintiff, Paul, had acquired a greater interest of a further 25% in the business and which would be paid by an interest free loan by way of the transfer of dividends and tax rebates over 10 years;
- Tax advice was provided by various professionals regarding, among other things, the restructure, the loan and the increase in beneficial interests;
- Paul asserted that the agreement for acquisition of a greater beneficial interest in the business was reached in a board meeting with Raymond, his half-brother, and Mr Hall, an accountant, in 2007 and which was more than 20 years ago. This was a critical issue in the proceeding because the defendants maintain that the boardroom conversation never occurred;
- In April 2014, the ATO commenced a comprehensive review of Paul and Raymond’s tax affairs and which was resolved by Paul (the review of Raymond’s tax affairs did not proceed);
- A range of emails were exchanged by Paul and advisers where he expressed concern about his shareholding and the arrangements which had been put in place over many years;
- Therefore, the case was predicated upon establishing the alleged boardroom conversation and the legal effect which flowed from it. Interestingly, an email was produced which demonstrated that certain works were to be undertaken on the boardroom and Paul accepted that the boardroom was not fitted out and capable of being used (and effectively contradicting the assertion of the conversation in the boardroom).
Justice Waller was thorough in his reasoning but primarily found the following:
a. The boardroom conversation did not take place and independently of witness credibility, the room identified by Paul did not exist in any usable form at the time he said the alleged boardroom conversation occurred – that finding alone was fatal to the case;
b. The evidence concerning timing of the boardroom conversation also weighed against the plaintiffs as the timing appearing to contain discrepancies and this was as a result of Paul was reconstructing his evidence rather than genuine recollection. His finding was that there was no available date (in the timeframe specified) as to a conversation which could have taken place (based on other objective evidence);
c. Paul’s account of the apparent conversation with a level of precision was a reason for scepticism rather than confidence in his recollection;
d. There was no document created during the 16 years following the alleged boardroom conversation which refers to it but specifically, 17 documents prepared by Mr Hall about the advice on the various transactions and correspondence with Paul were inconsistent with Paul having acquired any additional interest in the business
This case is an important reminder to individuals and directors of companies and beneficiaries of trusts to properly document any oral discussions in writing by way of file notes or by email sent following the conversation. The key issue is to keep detailed file notes of oral conversations – whilst some records may be sketchy or not document conversations word for word, the occurrence of those conversations may become important in the future in respect of commercial decisions, agreements reached and disputes that may subsequently arise.