Chiu v Zhao
[2004] FCA 1714
•20 DECEMBER 2004
FEDERAL COURT OF AUSTRALIA
Chiu v Zhao [2004] FCA 1714
MIGUEL CHIU as Trustee of Chiu’s Family Trust v LING HUA ZHAO AND FANG PING FU as Trustees of Zhao’s Family Trust, FORTUNE PLACE HOLDING PTY LTD ACN 106 596 249, FORTUNE PLACE INVESTMENT PTY LTD ACN 103 658 153, FORTUNE PLACE INVESTMENT GOODNA PTY LTD ACN 104 938 258 AND FORTUNE PLACE REALTY PTY LTD ACN 103 869 003
Q 194 OF 2004
DOWSETT J
20 DECEMBER 2004
BRISBANE
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
Q 194 OF 2004
BETWEEN:
MIGUEL CHIU
as Trustee of Chiu’s Family Trust
APPLICANTAND:
LING HUA ZHAO AND FANG PING FU
as Trustees of Zhao’s Family Trust
FIRST RESPONDENTFORTUNE PLACE HOLDING PTY LTD
ACN 106 596 249
SECOND RESPONDENTFORTUNE PLACE INVESTMENT PTY LTD
ACN 103 658 153
THIRD RESPONDENTFORTUNE PLACE INVESTMENT GOODNA PTY LTD
ACN 104 938 258
FOURTH RESPONDENTFORTUNE PLACE REALTY PTY LTD
ACN 103 869 003
FIFTH RESPONDENTJUDGE:
DOWSETT J
DATE OF ORDER:
20 DECEMBER 2004
WHERE MADE:
BRISBANE
Upon the applicant’s undertaking to pay any party to these proceedings such amounts by way of damages as the Court considers such party has suffered by reason of these orders in the event that the applicant is ultimately shown not have been entitled to the benefit of them –
THE COURT ORDERS THAT:
1.The third respondent be restrained by itself, its servants or agents or otherwise howsoever from giving effect to any resolutions pursuant to the notice of general meeting issued 7 December 2004 until further order.
2.The fourth respondent not disperse any funds received in conjunction with the contract of sale of the property at 29 Eagle Street Goodna without giving 48 hours notice in writing to the applicant of the intention so to do.
3.The motions are adjourned to 18 February 2005 at 10.15 am for hearing.
4.On or before 31 January 2005 any party shall give notice to the other parties of any further relief to be sought on 18 February 2005 together with all affidavits in support thereof.
5.All parties to file any material in reply by 11 February 2005.
6. The costs of today are reserved.
7. The parties have liberty to apply.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
Q 194 OF 2004
BETWEEN:
MIGUEL CHIU
as Trustee of Chiu’s Family Trust
APPLICANTAND:
LING HUA ZHAO AND FANG PING FU
as Trustees of Zhao’s Family Trust
FIRST RESPONDENTFORTUNE PLACE HOLDING PTY LTD
ACN 106 596 249
SECOND RESPONDENTFORTUNE PLACE INVESTMENT PTY LTD
ACN 103 658 153
THIRD RESPONDENTFORTUNE PLACE INVESTMENT GOODNA PTY LTD
ACN 104 938 258
FOURTH RESPONDENTFORTUNE PLACE REALTY PTY LTD
ACN 103 869 003
FIFTH RESPONDENT
JUDGE:
DOWSETT J
DATE:
20 DECEMBER 2004
PLACE:
BRISBANE
REASONS FOR JUDGMENT
In the present litigation the applicant asserts that a family trust of which he is trustee is entitled to a 40 per cent interest in the share capital of Fortune Place Holding Pty Ltd. That company owns all of the capital of another company, “Golden View”, which holds shares in two other companies, Fortune Place Investment Pty Ltd and Fortune Place Investment Goodna Pty Ltd. The first respondents also hold substantial shareholdings in both of those subsidiary companies. They dispute the extent of the applicant’s shareholding in Fortune Place Holding, asserting that there was no valid allotment to him of shares representing at least part of the interest which he claims. There are other aspects to the litigation but that is its primary nature for present purposes. The applicant seeks interim or interlocutory relief with respect to actions or proposed actions involving each of the two subsidiary companies.
The matter is very complex and, on its face, involves a substantial amount of money. However, the applicant does not presently have the benefit of legal representation. Ms Lorimer, who appears for the various respondents, is not in possession of sufficient instructions to enable her to respond to the present application for relief. For that reason, I have decided to proceed upon the basis that I should grant interim relief only, and of a limited kind. The parties will be left to apply for any extension of that relief or for reconsideration of the matter should they be so advised.
I will deal firstly with the claim concerning Fortune Place Investment. As I have said, the applicant claims as trustee of a family trust to be entitled to 40 per cent of the shareholding in Fortune Place Holding which company is entitled, through its ownership of Golden View, to shares in Fortune Place Investment. He asserts that he has received notice of a proposed general meeting called for 29 December 2004 to consider and, if thought fit, adopt the following proposed resolutions:
‘Special Resolution 1:
That the company issues 600,000 new ordinary shares at the face value of $1.00 each to raise funds required for the operation of the company and payment of debts owed by the company.
Special Resolution 2:
That the new shares be first offered to the existing shareholders of the company for acquisition according to the existing proportion of shares held by the shareholders, and that such offer remain open for a period of 14 days from the date of resolution. Time is to remain of the essence.
Special Resolution 3:
That the directors of the company be authorised to make any future issue of shares without complying with section 254D(1) as they see fit.’
Subsection 254D(1) of the Corporations Act 2001 (Cth) provides that:
‘Before issuing shares of a particular class, the directors of a proprietary company must offer them to the existing holders of shares of that class. As far as practicable, the number of shares offered to each shareholder must be in proportion to the number of shares of that class that they already hold.’
Sub-section (4) provides:
‘The company may by resolution passed at a general meeting authorise the directors to make a particular issue of shares without complying with subsection (1).’
Fairly clearly, the third proposed special resolution would be inconsistent with subs 254D(4) in that it contemplates a general authorisation rather than authorization of a particular issue. In my view any such resolution would be invalid and ineffective to avoid the consequences of s 254D. The question arises, however, as to the entitlement of the present applicant to restrain the other shareholders of the company from meeting to discuss and, if thought fit, adopt these proposals.
At least part of the applicant’s claim is based upon allegations of oppression directed against him as a shareholder of Fortune Place Holding. He alleges that the company’s shareholding in Fortune Place Investment is being used (or not used) so as to dilute the applicant’s indirect interest in that company. He says that he is not in a position to take up any offer of further shares. I proceed on that basis.
The material before me is less than satisfactory. Further, the respondents have not, or have not been able to file any material in response. I have not heard either side in the detail which litigation of this kind requires. However it seems to me that there is a triable issue concerning the ownership, directly or indirectly of Fortune Place Holding, Fortune Place Investment and Fortune Place Investment Goodna. It is also a reasonably available inference, if the applicant is correct in his assertions, that the conduct of the affairs of the three companies has been motivated by a desire to exclude him from his entitlements. It would not be difficult to conclude that such conduct was oppressive.
Clearly, the balance of convenience favours maintenance of the status quo to whatever extent that is possible. I am not minded, however, to restrain the holding of a shareholders’ meeting. It is for the shareholders to decide what is in their best interests. It may cause irreparable harm to them or to the company if they are restrained from so acting. On the other hand, it is possible, I think, to give all parties an opportunity to consider their positions before any irreversible events occur.
The proper order, for the moment, is to permit the meeting to go ahead but to restrain the company, until further order, from taking action pursuant to any resolution adopted at that meeting, leaving it open to any interested party to apply to the Court for a variation of the order should that course be indicated.
The applicant has undertaken to pay to any party such amount or amounts as the Court considers that person or persons to have lost as a result of this order in the event that the applicant is ultimately demonstrated not to have been entitled to the benefit of it. Upon that undertaking there will be an injunction restraining Fortune Place Investment Pty Ltd by itself, its servants, agents or otherwise howsoever from giving effect to any resolution adopted pursuant to the notice of shareholders’ general meeting issued on 7 December 2004. That order will continue until further order. The parties are to be at liberty to apply as they may be advised with respect thereto.
I turn now to Fortune Place Investment Goodna. The particular conduct in question arises out of the sale of real property for a consideration of $1.5 million, of which $500,000 has been received. The applicant asserts that the relevant asset should not have been realised without a special resolution approved by 70 per cent of the shareholders. That majority could only be achieved with the support of Golden View, a wholly-owned subsidiary of Fortune Place Holding. The question of oppression in the management of that company is, of course, the subject matter of these proceedings.
I am told that of the $500,000 received, only a relatively small amount (about $20,000) still remains in the hands of Fortune Place Investment Goodna. The balance of $1 million is payable six months after 7 December 2004. In those circumstances, and assuming that this matter can be sorted out fairly quickly, it would seem appropriate to order that, until further order, Fortune Place Investment Goodna Pty Ltd not disburse any of the funds received in connection with the contract of sale of the property at 29 Eagle Street, Goodna, without first giving 48 hours’ notice in writing to the applicant of its intention so to do. It will then be for the applicant to seek further relief from the Court with respect to such proposed disbursement. That injunction is also given upon the basis of the undertaking as to damages to which I have previously referred. There will be liberty to apply. Costs are reserved.
I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett. Associate:
Dated: 23 December 2004
Counsel for the Applicant: The Applicant appeared in person. Solicitor for the Respondent: Hawthorn Cuppaidge & Badgery Date of Hearing: 20 December 2004 Date of Judgment: 20 December 2004
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