In the matter of H&C Investment Holdings Pty Ltd

[2024] NSWSC 580

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of H&C Investment Holdings Pty Ltd [2024] NSWSC 580

Hearing dates:

13-16 November 2023

Date of orders:

12 June 2024

Decision date:

12 June 2024

Jurisdiction:

Equity - Corporations List

Before:

Williams J

Decision:

See [266]-[271].

Catchwords:

EQUITY – Trusts – Accounting by trustee of unit trust to unit holders for profits generated by property development business carried on by trustee – Resolution of dispute about unit holders’ respective financial contributions to the business

CORPORATIONS — Members’ rights and remedies — Oppression — Family company’s affairs – Where business of company managed by one director – Whether agreement for payment of wages to that director – Whether conduct of the company’s affairs oppressive within the meaning of s 232 of the Corporations Act 2001 (Cth), including by reason of payment of wages and superannuation to the director who managed the business

Legislation Cited:

Corporations Act 2001 (Cth) ss 181, 182, 232, 233, 237, 249D, 1317H, 1317J

Evidence Act 1995 (NSW) s 63(1)

Uniform Civil Procedure Rules 2005 (NSW) r 35.2

Cases Cited:

Alexander v Perpetual Trustees WA Limited (2004) 216 CLR 109; [2004] HCA 7

Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17

Campbell v Backoffice Investments Pty Ltd (2008) 66 ACSR 359; (2008) 26 ACLC 537; [2008] NSWCA 95

Exton v Extons Pty Ltd (2017) 53 VR 520; [2017] VSC 14

Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; [2001] NSWCA 97

Hungerford v Richardson [2018] NSWSC 1543

In the matter of Candy-Vend Pty Ltd [2020] NSWSC 1735

In the matter of H&C Investment Holdings Pty Ltd [2023] NSWSC 1387

In the matter of Ledir Enterprises Pty Ltd [2013] NSWSC 1332

In the matter of Tzavaras & Sons Pty Ltd [2022] NSWSC 359

Jones v Dunkel (1959) 101 CLR 298

Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11

LPD Holdings (Aus) Pty Ltd v Phillips (2013) 281 FLR 227; [2013] QSC 225

McMillan v Coolah Home Base Pty Ltd (No. 4) [2022] NSWSC 584

Munstermann v Rayward; RaywardvMunstermann [2017] NSWSC 133

Torlonia v Wright [2016] NSWSC 1139

Tzavaras v Tzavaras & Sons Pty Ltd [2023] NSWCA 168

Watson v Foxman (1995) 49 NSWLR 315

Texts Cited:

J. D. Heydon, Cross on Evidence (14th ed, 2024, LexisNexis)

J. D. Heydon and MJ Leeming, Jacobs Law of Trusts in Australia (8th ed, 2016, LexisNexis)

Scott on Trusts (4th ed, 1989)

Category:

Principal judgment

Parties:

Steven Huang (First Plaintiff)
Chun Huang (Second Plaintiff)
S&C Investment Nominees Pty Ltd (Third Plaintiff)
Huafa Development Pty Ltd (ABN 31 601 761 433) (Fourth Plaintiff)
Qiao Sheng Huang (Fifth Plaintiff)
Hosea Chan (First Defendant)
Chan & Hui Investment Nominees Pty Ltd (Second Defendant)
H & C Investment Holdings Pty Ltd ACN 147 329 860 (Third Defendant)
Chun On Hui (Fourth Defendant)

Representation:

Counsel:
Mr MK Condon SC with Mr N Kabilafkas (Plaintiffs)
Mr PD Reynolds (First and Second Defendants)

Solicitors:
Juris Cor Legal (Plaintiffs)
Clayton Utz (First and Second Defendants)
Yau & Wang Lawyers (Fourth Defendant)

File Number(s):

2022/143476

Publication restriction:

N/A

Judgment

I. INTRODUCTION

1. These proceedings arise out of the affairs of the third defendant, H&C Investment Holdings Pty Ltd (the Company), which carried on a property development business as trustee for the H&C Unit Trust (the Trust).

2. The first plaintiff, Mr Steven Huang (also known by the Chinese name Huansheng Huang), the second plaintiff Ms Chun Huang, and the fifth plaintiff Mr Qiao Sheng Huang, are siblings. The parties refer to them as Steven, CH, and QSH, respectively. I shall adopt the same conventions. No disrespect is intended. Jiamian (also written as Jia Mian) Huang is the daughter of QSH. She is not a party to these proceedings. The parties refer to her by her first name, Jiamian, and I shall adopt the same convention. Again, no disrespect is intended.

3. The third plaintiff – S&C Investment Nominees Pty Ltd – is a company owned by QSH, CH, and Jiamian Huang.

4. The fourth plaintiff – Huafa Development Pty Ltd – is a company owned by Steven and his daughter, Joanne Huang.

5. The first defendant, Mr Hosea Chan (also known by the Chinese name Shing Ho Chan), is the cousin of Steven, CH, and QSH. The parties refer to him as Hosea. Again, I shall adopt the same convention, without intending any disrespect.

6. The second defendant – Chan & Hui Investment Nominees Pty Ltd – is a company owned by Hosea and his cousin Mr Chun On Hui, who was belatedly joined to these proceedings as the fourth defendant on 7 June 2024 and who filed a submitting appearance at that time.

7. Thus, the individual plaintiffs and the first, second and fourth defendants belong to the same extended family group. The first, second and fifth plaintiffs are part of the Huang “side” of the family, and the first and second defendants are part of the Chan “side” of the family.

8. The plaintiffs and the first, second and fourth defendants were shareholders in the Company at various times relevant to these proceedings. At the time of the commencement of the proceedings, and at the time of the final hearing, the shareholders of the Company were S&C Investment Nominees Pty Ltd (as to 35 per cent), Huafa Development Pty Ltd (as to 15 per cent), and Chan & Hui Investment Nominees Pty Ltd (as to 50 per cent).

9. At all times relevant to the proceedings, the unit holders in the Trust were Steven, QSH, CH, Hosea and Chun On Hui.

10. The Company’s only business was the property development business carried on in its capacity as trustee of the Trust. The directors of the Company are Steven, QSH, CH, Hosea and Chun On Hui. Each of Steven, QSH, CH and Hosea were appointed as directors when the Company was incorporated in November 2010. QSH, CH and Hosea have remained directors since that time. Steven ceased to be a director in February 2014, but was re-appointed as a director in July 2016. Jiamian was appointed as a director during that period. Chun On Hui was appointed as a director in February 2012 and has remained a director since that time.

11. The Company was managed with a degree of informality. No board meetings were convened prior to 2018.

12. The Company’s activities were funded partly by financial contributions made by or on behalf of unit holders from time to time, and partly by bank loans.

13. It is common ground that it was agreed towards the end of 2010 between Steven (on his own behalf, and on behalf of QSH and CH) and Hosea (on his own behalf, and on behalf of Chun On Hui) that the parties would share in the profits of any property development project undertaken by the Company in accordance with their respective financial contributions to that project.

14. The proceedings were commenced by summons filed on 18 May 2022. In their statement of claim filed on 29 June 2022, the plaintiffs’ claims for relief include an order for an account of the income and expenses of the Company as trustee of the Trust and the contributions made by or on behalf of unit holders, and an order for payment to the plaintiffs of such amount as is found due to them on completion of the account, together with interest.

15. The unit holders to whom the Company is obliged to account as trustee are also the directors who were responsible for managing the Company and the conduct of its business as trustee of the Trust. During their final preparation for hearing, and during the course of the hearing, they reviewed the Company’s financial records and resolved almost all of their disputes concerning their respective financial contributions to the Company, and the income and expenses of the Company. The plaintiffs no longer seek an order for the taking of accounts that would require a further accounting process to be undertaken.

16. The following matters are now common ground between the plaintiffs and the first and second defendants and, as I have already mentioned, the fourth defendant has filed a submitting appearance:

1. the Company, having completed all of its development projects, has made profits totalling $8,099,966.41;

2. irrespective of their shareholdings in the Company, their units in the Trust, and their individual financial contributions to the Company’s property development projects, the Company’s profits should be distributed to the plaintiffs (collectively) and to the first, second and fourth defendants (collectively) pro rata in the same proportions as the total financial contributions paid to the Company by the Huang side of the family and by the Chan side of the family since the Company was established in 2010;

3. financial contributions to the Company totalling at least $1,932,500 have been made by or on behalf of the plaintiffs (who are members of, or companies controlled by, the Huang side of the family);

4. financial contributions to the Company totalling $2,594,092.55 have been made by or on behalf of the first, second and fourth defendants (who are members of, or companies controlled by, the Chan side of the family);

5. to date, the Company has paid:

1. amounts totalling $2,048,513.35 to the plaintiffs (collectively), by way of interim distributions of profits; and

2. amounts totalling $2,576,092.55 to the first, second and fourth defendants (collectively), by way of interim distributions of profits; and

6. the total sum of $3,475,360.51 standing to the credit of the Company’s bank account is available for payment by way of final distribution of profits.

17. The plaintiffs contend that, in addition to the contributions totalling $1,932,500 referred to above, CH made a contribution of $30,000 in January 2011 and Steven made a contribution of $76,000 in October 2013. The first and second defendants dispute these additional claimed contributions. The parties ask the Court to make findings resolving that dispute.

18. The parties agree that the Court’s findings about those two claimed contributions will determine the total amount of the financial contributions made by or on behalf of the plaintiffs (collectively). Subject to the plaintiffs’ further claims to which I refer immediately below, that total contribution, together with the agreed amount of the total contribution made to the Company by or on behalf of the first, second and fourth defendants (collectively), and after allowing for the interim distributions referred to above, will determine the proportions in which the funds presently standing to the credit of the Company are to be distributed by the Company (as trustee) to the plaintiffs (collectively) and to the first, second and forth defendants (collectively) by way of final distribution, in accordance with the parties’ agreement referred to at [16(2)] above. The parties agree that, as unit holders in the Trust, Steven, QSH and CH are entitled to have the Company account for those additional claimed contributions, if they are found to have been made, by factoring them into the calculation of the amounts of the final distribution to be paid to the plaintiffs (collectively) and to the first, second and forth defendants (collectively).

19. The plaintiffs make further claims in respect of wages and superannuation paid to Hosea out of Company funds during the period from 2012 to 2018, in respect of superannuation payments made for the benefit of other members of the Chan and Huang families during the period from 2015 to 2018, and in respect of a fee of $8,745 paid to Hosea out of Company funds in May 2016 upon the sale of one unit in one of the Company’s property developments.

20. The plaintiffs contend that Hosea was not authorised by the Company to make the wages and superannuation payments to himself or for his benefit, or for the benefit of other members of the Chan and Huang families who were not employed by the Company. In closing submissions, the plaintiffs sought an order requiring Hosea to account for the wages and superannuation on three alternative bases. As discussed later in these reasons, only one of those bases was pleaded – a claim for an order under s 233 of the Corporations Act 2001 (Cth) requiring Hosea to provide an account of his dealings in respect of the assets and affairs of the Company, and to pay to the Company any amount found to be owing in respect of the monies paid by the Company for wages and superannuation, by way of relief for the allegedly oppressive conduct of the affairs of the Company. Any amount for which Hosea is required to account to the Company pursuant to s 233 will affect the calculation of the final distribution by the Company to unit holders.

21. The first and second defendants deny the alleged oppression, and object to the plaintiffs being permitted to press their claims in respect of wages and superannuation on any basis that has not been pleaded. Further or alternatively, the first and second defendants contend that the plaintiffs’ unpleaded claims relating to wages and superannuation are time barred.

22. Insofar as the oppression claim is concerned, the first and second defendants contend that Hosea was authorised to make the payments for his wages and superannuation, and deny that the affairs of the Company have been conducted in a manner that is oppressive within the meaning of s 232 of the Corporations Act.

23. The plaintiffs also contend that the calculation of the final distribution to be paid by the Company should take into account the allegedly unauthorised payment of the $8,745 fee to Hosea in May 2016. That contention was not pleaded. The first and second defendants did not take any pleading point about it to the extent that it forms part of the account that the plaintiffs contend Hosea should be ordered to make to the Company under s 233 of the Corporations Act as relief for the allegedly oppressive conduct of the Company’s affairs. The first and second defendants objected to the plaintiffs pursuing a claim for an order requiring Hosea to account for that fee on any other unpleaded basis.

24. Prior to and during the course of the final hearing, the plaintiffs abandoned all claims for relief other than the pleaded and unpleaded claims for Hosea to account to the Company or to the plaintiffs for the allegedly unauthorised payments of wages and superannuation and for the $8,745 fee, and the claim for the Company to account to unit holders by way of final distribution after allowing for the additional claimed contributions of $30,000 and $76,000.

25. The parties’ legal representatives have helpfully prepared a schedule which sets out the consequences for the calculation of the final distribution to the plaintiffs (collectively) and to the first, second and fourth defendants (collectively) of each potential combination of findings that the Court may make in relation to the disputed contributions of $30,000 and $76,000, and in relation to the plaintiffs’ claims concerning wages, superannuation and the $8,745 fee. That schedule does not take into account the question of the interest that the plaintiffs claim on any amount in respect of which their claims are upheld. The parties have indicated to the Court they will endeavour to agree on any interest calculation that may be required once the Court’s determination of the plaintiffs’ claims is known.

II. SALIENT FACTS

Witnesses

26. Steven was the principal witness for the plaintiffs. The plaintiffs read affidavits affirmed by Steven on 17 May 2022, 2 November 2022, 17 February 2023 and 10 November 2023. He was cross-examined extensively and gave his evidence through an interpreter.

27. The plaintiffs did not adduce any evidence from QSH or CH. The plaintiffs did serve affidavits affirmed by each of QSH and CH prior to the hearing. The defendants notified the plaintiffs that QSH and CH would be required for cross-examination. The plaintiffs’ application for QSH and CH to give evidence by audio-visual link from the People’s Republic of China was dismissed prior to the commencement of the hearing. QSH and CH did not make arrangements to travel to Australia to be available for cross-examination. An application made by the plaintiffs during the hearing for an order under r 35.2 of the Uniform Civil Procedure Rules 2005 (NSW) permitting the plaintiffs to tender or read the affidavits of QSH and CH on the basis that they were “not available” to give evidence within the meaning of s 63(1) of the Evidence Act 1995 (NSW), was also dismissed. For reasons published at the time, I held that the plaintiffs had not established that all reasonable steps had been taken to secure the attendance of QSH and CH at the hearing. [1]

    1. In the matter of H&C Investment Holdings Pty Ltd [2023] NSWSC 1387.

28. The defendants submit that the plaintiffs’ failure to adduce evidence from QSH and CH gives rise to an inference that the evidence they could have given about certain matters would not have assisted the plaintiffs. [2] The plaintiffs dispute that any such inference arises in the circumstances described immediately above.

    2. Jones v Dunkel (1959) 101 CLR 298.

29. A party’s unexplained failure to call a witness may, in appropriate circumstances, give rise to an inference that the evidence which the witness could have given would not have assisted that party. [3] As the plaintiffs submitted, the significance to be attributed to the fact that a witness did not give evidence will depend on whether it is to be inferred that the party expected to call the witness feared to do so. [4] In the present case, the witnesses not called – QSH and CH – are two of the plaintiffs. Their failure to give evidence is attributable to their failure to take all reasonable steps to ensure that they were able to travel from China to attend the hearing in Australia, in circumstances where they had been notified that they were required for cross-examination. [5] I do not consider that the circumstances of this case support an inference that the plaintiffs (collectively) feared to call two of the plaintiffs – QSH and CH – to give evidence, and to expose them to cross-examination. It is just as likely that their failure to take reasonable steps to attend the hearing for cross-examination is attributable to a lack of enthusiasm for travelling to Australia for the purpose of proceedings in which very little remains in dispute between the parties in monetary terms.

    3. Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [63]–[64] (Heydon, Crennan and Bell JJ); Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 at [165]–[167] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ) and [232] Heydon J).

    4. J. D. Heydon, Cross on Evidence (14th ed, 2024, LexisNexis) at [1215] and the authorities there cited.

    5. In the matter of H&C Investment Holdings Pty Ltd [2023] NSWSC 1387.

30. For those reasons, I do not consider that the failure of QSH and CH to give evidence gives rise to an inference that the evidence which they could have given would not have assisted the plaintiffs’ case. However, their failure to give evidence does mean that certain aspects of Hosea’s evidence are not contradicted by any evidence of any witness called by the plaintiffs.

31. Hosea was the principal witness for the defendants. The defendants read affidavits affirmed by Hosea on 24 January 2023, 26 September 2023 and 2 November 2023. Hosea was cross-examined extensively. He gave his evidence in the English language.

32. In addition to the four affidavits of Steven referred to at [26] above, the plaintiffs read affidavits of Mr Xiang Li (the plaintiffs’ solicitor), [6] Mr Doug Chen (an accountant), [7] Mr Ziqi Huang (the son of CH), [8] Ms Xiaochun Chen (the wife of QSH) [9] and Ms Shuling Huang (the sister of CH). [10] None of those witnesses were cross-examined.

    6. Sworn on 18 May 2022.

    7. Affirmed on 8 February 2023.

    8. Affirmed on 16 February 2023.

    9. Affirmed on 17 February 2023.

    10. Affirmed on 18 February 2023.

33. In addition to the affidavits of Hosea referred to at [31] above, the defendants read affidavits of Ms Sim Chun Hui (Hosea’s mother), [11] Mr Cheong Wai Chan (Hosea’s father), [12] Mr Ganquan Chen (a relative of both Steven and Hosea), [13] and Mr Albert Yau (a solicitor who formerly acted for Hosea). [14] Sim Chun Hui was cross-examined briefly. None of the other witnesses were cross-examined.

    11. Affirmed on 20 January 2023.

    12. Affirmed on 20 January 2023.

    13. Affirmed on 19 January 2023.

    14. Affirmed on 23 January 2023.

26. Much of the evidence of those witnesses referred to at [32] and [33] above became irrelevant during the course of the hearing due to the narrowing of the issues in dispute between the parties. To the extent that the evidence of those witnesses remains relevant, I have taken it into account in summarising the evidence and making the findings of fact set out in Section II below.

27. For the reasons explained below, I have determined that the plaintiffs have failed to establish that CH made a contribution of $30,000, and that Steven made a contribution of $76,000, in addition to the plaintiffs’ contributions totalling $1,932,500. I have further determined that the payment of wages and superannuation to Hosea, the payment of superannuation for the benefit of other members of the Huang and Chan sides of the family, and the payment of the $8,745 fee, were not oppressive within the meaning of s 232 of the Corporations Act. The plaintiffs’ claim for an order under s 233 of the Corporations Act requiring Hosea to account to the Company for those moneys therefore fails. The other claims that the plaintiffs sought to prosecute for an order requiring Hosea to account for those payments to the Company, or directly to the plaintiffs, are outside the scope of the plaintiffs’ pleaded case, and are not claims that the plaintiffs would have standing to bring in any event.

28. I have considered all of the parties’ written and oral submissions in reaching those conclusions, irrespective of whether those submissions are expressly referred to in these reasons.

Facts

Acquisition of 14 Mark Street

37. In about early to mid-2010, Steven, QSH, CH and Hosea agreed to work together to purchase and develop properties in Australia. According to Hosea’s evidence, his parents persuaded him to be part of this business with Steven, QSH and CH on the basis that they (his parents) would fund his investment in it. At the time, Hosea was working full-time as a pastry chef, and had no property development experience.

38. In about June 2010, Steven and Hosea agreed to purchase a property at 14 Mark Street, Lidcombe, for the family’s property development business. According to Steven’s evidence, he identified this property as a good opportunity for investment and development. Steven and Hosea agreed that the title to the property would be held in Hosea’s name. Settlement occurred on 28 July 2010, and the transfer to Hosea was registered on 30 July 2010. It is common ground that both the Huang and Chan sides of the family contributed the funds required to purchase the property, and that Steven paid $17,120 to renovate the property after settlement so that it could be rented out to a tenant pending development. The property was rented from about January or February 2011 until about March 2012, when it was sold to raise funds required by the Company to purchase a property at 18 Mary Street, Lidcombe.

Incorporation of the Company and establishment of the Trust

39. In November 2010, Steven and Hosea agreed to purchase another property at 16 Mary Street, Lidcombe, for future development.

40. The Company was incorporated on 12 November 2010 for the purpose of purchasing 16 Mary Street, and for the ongoing conduct of the property development business.

41. On incorporation, the shareholders were Hosea, Steven, QSH and CH. Between them, Steven, QSH and CH held 75 per cent of the shares, and Hosea held 25 per cent. Steven gave evidence that he requested that the Huang family’s shareholding be reduced because the Huang side of the family thought that they would have to contribute to the Company in proportion to their shareholding and they did not want to have to make 75 per cent of all financial contributions. On 16 November 2010, Hosea signed an ASIC form changing the shareholding so that he held 40 per cent of the shares, Steven held 30 per cent, QSH held 20 per cent and CH held 10 per cent. Hosea attributes these changes to a different request made by QSH that was conveyed to Hosea through his mother.

42. Nothing turns on the differences between the evidence of Steven and the evidence of Hosea about the reasons for the changes made to the shareholdings in November 2010.

43. Chun On Hui became a shareholder in the Company in February 2012. The shareholdings of the Company were adjusted so that Hosea held 30 per cent, Chun On Hui held 20 per cent, Steven held 10 per cent, and each of QSH and CH held 20 per cent of the shares.

44. In February 2014, Hosea and Chun On Hui transferred their 50 per cent shareholding in the Company to the second defendant, Chan & Hui Investment Nominees Pty Ltd. As I have mentioned earlier in these reasons, that company is owned by Hosea and Chun On Hui.

45. In June 2016, there was a reconfiguration of the Huang family’s shareholdings in the Company, following which Steven owned 15 per cent of the shares and the third plaintiff – S&C Investment Nominees Pty Ltd – owned 35 per cent of the shares. As I have mentioned earlier in these reasons, S&C Investment Nominees Pty Ltd is owned by QSH, CH and Jiamian.

46. In June 2018, Steven transferred his 15 per cent of shares in the Company to the fourth plaintiff, Huafa Development Pty Ltd. As I have mentioned earlier in these reasons, Huafa Development Pty Ltd is owned by Steven and his daughter, Joanne Huang.

47. At all relevant times after June 2018, the shareholders of the Company were S&C Investment Nominees Pty Ltd (as to 35 per cent), Huafa Development Pty Ltd (as to 15 per cent), and Chan & Hui Investment Nominees Pty Ltd (as to 50 per cent).

48. On incorporation, the directors of the Company were Steven, CH, QSH and Hosea.

49. Chun On Hui was appointed as an additional director of the Company in February 2012, at the same time as becoming a shareholder in the Company.

50. In February 2014, Steven ceased to be a director and Jiamian was appointed as a director of the Company. It will be necessary to say something further about Steven’s resignation later in these reasons. For present purposes, it suffices to record that both Steven and Hosea gave evidence that Jiamian represented the interests of the Huang family during the period from February 2014 until July 2016, when she ceased to be a director and Steven was re-appointed as a director of the Company.

51. At all relevant times from July 2016, the directors of the Company were Hosea, Steven, QSH, CH and Chun On Hui.

52. Hosea has been the secretary of the Company at all times since its incorporation.

53. The trust deed establishing the Trust was executed on 15 November 2010. The initial unit holdings in the Trust were Steven (10 units), CH (20 units), QSH (20 units), Hosea (30 units), and Chun On Hui (20 units). There is no evidence that the unit holdings changed at any time thereafter.

54. Clause 4 of the trust deed provides that the trustee (being the Company) holds the Trust Fund – defined as including all moneys paid by unit holders for units, any further cash accepted by the trustee under the trust deed, all investments representing such moneys and cash, the proceeds of sale of investments, and any net income – on trust for the unit holders on the terms of the deed.

55. Clause 7.1 of the trust deed requires the trustee to manage the Trust Fund and any business carried on by the trustee pursuant to the trust deed, including:

1. using its best endeavours to ensure that the management of the Trust Fund is carried on and conducted in a proper and efficient manner;

2. depositing all receipts from the management, development and operation of the Trust Fund into a separate account;

3. paying all current expenses and outgoings with respect to the Trust Fund;

4. keeping books of account of all money received and expended, and keeping records that explain the transactions and financial position of the business so as to enable true and fair profit and loss accounts and balance sheets to be prepared; and

5. preparing a profit and loss account and balance sheet as soon as practicable after 30^th June each year.

56. Clause 10 of the trust deed provides for the distribution of the net income of the trust to unit holders in each financial year, including by making interim distributions.

57. As I have mentioned earlier in these reasons, it was agreed between Steven (on his own behalf, and on behalf of QSH and CH) and Hosea (on his own behalf, and on behalf of Chun On Hui) towards the end of 2010 that the parties would share in the profits of any property development project undertaken by the Company in accordance with their respective financial contributions to that project, irrespective of their respective unit holdings in the Trust and shareholdings in the Company.

58. It is common ground that the Company’s property development business was conducted in its capacity as trustee of the Trust. There is no evidence that the Company carried on any other business.

59. The voting entitlements associated with the Huang family’s ownership of at least 50 per cent of the shares at all times, together with the Huang family’s majority of directors on the board at all times, enabled the Huang family members and their associated entities through which they held the shares to control the board of directors, to call any general meeting of the Company, and to control any such general meeting (including through the casting vote of the person elected by the directors to chair the general meeting).

60. The constitution adopted by the Company on incorporation requires the directors to convene a general meeting of the Company upon receipt of a request made by members with at least 5 per cent of the votes that may be cast at the general meeting, in accordance with s 249D of the Corporations Act. [15] Members are entitled to attend a general meeting in person or by proxy. [16] Two members constitute a quorum. [17] Each member has one vote on a show of hands, or one vote per share on a poll. [18] A poll may be demanded by a member or members representing not less than 5 per cent of the voting rights. [19] In the event of an equality of votes on a show of hands or on a poll, the Chairman has a casting vote in addition to his or her deliberative vote. [20] The Chairman is elected by the directors, either to chair meetings for a period of time, or to chair a specific meeting. If the directors have failed to elect a Chairman, or the Chairman elected by the directors is not available or declines to act for a particular meeting, the members at that meeting must elect a person to chair the meeting. [21]

    15. Constitution, clause 5(b).

    16. Constitution, clauses 6(d), 7(d)-(f), 15(a), and 20-23.

    17. Constitution, clause 7(c).

    18. Constitution, clause 15.

    19. Constitution, clause 12.

    20. Constitution, clause 14.

    21. Constitution, clause 10.

61. The constitution provides that the Company will have up to seven directors, who are to be appointed and may be removed by the Company in general meeting. [22] The business of the Company is to be managed by the directors. [23] Any director may convene a meeting of the directors. [24] Any two directors constitute a quorum. [25] Any question arising at a meeting of directors is decided by a majority of votes of those directors present. [26] In the event of an equality of votes, the Chairman has a casting vote in addition to his or her deliberative vote. [27] The Chairman is elected by the directors, either to chair meetings for a period of time or to chair a specific meeting. [28]

    22. Constitution, clause 25.

    23. Constitution, clause 29.

    24. Constitution, clause 32(b).

    25. Constitution, clause 37.

    26. Constitution, clause 33(a).

    27. Constitution, clause 33(b).

    28. Constitution, clause 39.

62. The constitution provides that the Company may hold a general meeting at two or more venues using any technology that gives members a reasonable opportunity to participate. [29]

    29. Constitution, clause 24.

63. The provisions of the constitution concerning the use of technology for directors’ meetings appear, at first glance, to be inconsistent.

64. Clause 32 of the constitution provides (emphasis added):

“(a)   The directors may meet together for the despatch of business and adjourn and otherwise regulate their meetings as they think fit.

(b)   A director may at any time, and a secretary shall on the requisition of a director, by reasonable notice convene a meeting of the directors. Meetings of the directors may be convened by telephone, facsimile or other electronic means.”

65. Clause 34 of the constitution provides (emphasis added):

“(a)   Provided that all of the directors consent, the directors may participate in a meeting of the directors by means of any technology allowing all persons participating in the meeting to hear each other at the same time. Any director participating in such a meeting shall for the purposes of this constitution be deemed to be personally present at the meeting.

(b)   The consent of a director to the use of technology may be a standing one.

(c)   Any consent of a director to the use of technology may be withdrawn only within a reasonable period prior to a meeting at which the technology is to be used.”

66. Clauses 32 and 34 fall within the section of the constitution entitled “Proceedings of directors”. Reading those clauses in the context of that section, and in the context of the constitution as a whole, it is my opinion that clause 32 is directed to the means by which notice of a directors’ meeting may be given to directors, and clause 34 is directed to the conduct of directors’ meetings using technology that facilitates participation by directors in different locations.

67. The constitution provides that a director may, with the approval of the other directors, appoint a person to be an alternate director of the Company in his or her place during such period as he or she thinks fit. An alternate director is entitled to the same notice of meetings as the appointor, and may exercise any powers that the appointor may exercise. [30]

    30. Constitution, clause 36.

68. In practice, and as I have already mentioned, the Company operated informally, without holding any general meetings or board meetings prior to 2018. It will be necessary to return to that subject later in these reasons.

Acquisition of 16 Mary Street

69. The Company exchanged contracts to purchase 16 Mary Street on 17 November 2010. The purchase was completed on 24 January 2011 with funds contributed by the Huang and Chan sides of the family, and a bank loan of $520,000, which was secured by mortgage over 14 Mark Street. Steven gave evidence that the Company purchased 16 Mary Street without any mortgage, and that he was not aware of, and did not consent to, any mortgage over 14 Mark Street. However, the contemporaneous documents identified in Hosea’s evidence establish that the $520,000 borrowed against the security of 14 Mark Street was paid to the vendors of 16 Mary Street on settlement.

70. I infer from the detailed evidence given by Hosea about the funds that were raised for the Company to purchase 16 Mary Street, and from Steven’s lack of understanding that $520,000 of those funds were borrowed against the security of 14 Mark Street, that Hosea undertook the work required to raise the funds to purchase the property and that Steven had little, if any, involvement in that work.

Monthly reports

71. The financial contributions paid by the Huang and Chan sides of the family towards the acquisition of 16 Mary Street, together with their earlier contributions to the purchase of 14 Mark Street, were recorded in monthly reports that Hosea had been preparing since July 2010.

72. The monthly reports recorded the amount of contributions, the income received by the Company during the relevant month, and the expenses incurred by the Company during that month. The section of the report recording the amount of contributions listed the names of each contributor. Against each person’s name, the report listed the total amount contributed to date, the amount contributed or withdrawn during the reporting month, and the date of those contributions or withdrawals during the reporting month.

73. Hosea prepared those monthly reports for the whole of the period from July 2010 until August 2018.

74. As referred to later in these reasons, there is a dispute about when Hosea provided those monthly reports to Steven and other members of the Huang family. I have found that Hosea provided the monthly reports to members of the Huang family at various times from January 2012, and that Steven received a copy of all monthly reports no later than June 2016, he received a further complete copy of the monthly reports in July 2018, and a further copy in late 2018. [31] Steven’s evidence and the submissions made on behalf of the plaintiffs during the hearing made vague assertions that the monthly reports were inaccurate. Save for the alleged omission of a contribution of $30,000 that CH claims to have made in January 2011 and the alleged omission of a contribution of $76,000 that Steven claims to have made in October 2013, the plaintiffs did not adduce any evidence to prove that the contemporaneous monthly reports were inaccurate in any particular respect.

    31. See [174]–[191] below.

Claimed contribution of $30,000 by CH in January 2011

75. It is common ground that CH contributed $120,000 to the Company on or about 21 January 2011 when the Company was making arrangements to fund the settlement of its purchase of 16 Mary Street.

76. The plaintiffs contend that CH should be credited with a contribution of $150,000, rather than $120,000, on that date by reason of the following entries in the monthly report for February 2011:

Shareholders Contribution:
Name	Contributed Amount	New Contribution	Date	Total
QSH	$300,000.00	$30,000.00 -$30,000.00	1/2/2011 (Received from Steven 1/2/2011 (Payback to CH)	$0.00
Steven	$98,720.00	-$30,000.00	1/2/2011 (Payback to QSH)	-$30,000.00
CH	$270,000.00	$30,000.00	1/2/2011 (Received from QSH)	$30,000.00
Hosea	$441,000.00	$ -	$0.00
Total Contribution	$1,109,720.00	Contribution for this month	$0.00

77. As I have already explained, CH did not give evidence. When asked about it in cross-examination, Steven could not recall anything about the alleged $30,000 contribution by CH. The February 2011 monthly report is the only evidence on which the plaintiffs rely in support of their contention.

78. It is clear from the face of the February 2011 report that the $30,000 entries dated 1 February 2011 are adjustments to the manner in which contributions previously made by the Huang side of the family are to be allocated between members of that side of the family. Hosea gave evidence to that effect. The February 2011 report provides no support for the plaintiffs’ contention that there was an additional contribution of $30,000 made by CH on 21 January 2011 or in February 2011. There is no evidence that CH made a contribution of $30,000 that has not been accounted for in the parties’ agreed calculations of total contributions referred to at [16] above.

Request for Hosea to manage the Company and agreement to pay wages

79. By the end of 2011, the Company was yet to develop any properties. The Company was receiving the rental income from the property that had been purchased in Hosea’s name at 14 Mark Street in July 2010. The Company had not taken any steps to develop that property. Having purchased 16 Mary Street in January 2011, the Company was still attempting to negotiate the purchase of 18 Mary Street so that it could develop those properties together. Both Steven and Hosea gave evidence that there were discussions in late 2011 about selling 14 Mark Street in order to fund the proposed acquisition of 18 Mary Street and the proposed development of 16-18 Mary Street. It is not necessary to resolve the divergence in the evidence about whether it was Steven’s idea or Hosea’s idea to sell 14 Mark Street at that time.

80. Hosea’s mother, Sim Chun Hui, gave evidence that QSH called her in late February 2012 saying that Steven had not been paying attention to the Company, and asking if Hosea would be able to “step in and take up the manager role”.

79. Sim Chun Hui deposed that she then telephoned Hosea and they had a conversation to the following effect:

“Me:   Hosea, can you quit your job and manage the company full time?

Hosea:   I will need to be paid if I manage the company so that I have wages to live on.

Me:   I will get Chun and Qiao Sheng to speak with you about paying wages.”

82. Hosea gave evidence to similar effect. He deposed that he had a telephone conversation with his mother in February 2012 to the following effect:

“Mother:   Hosea I spoke with QSH. He wants you to manage the Company full-time. Can you quit your job?

Me:   I need to be paid a wage if I am going to leave my job and work for the Company.

Mother:   Okay let me speak with him about paying you wages.”

83. At that time, Hosea was still working full time at the Lindt & Sprungli Chocolate factory at Mascot.

84. Sim Chun Hui deposed that, after her conversation with Hosea, she telephoned QSH and they had a conversation to the following effect:

“Me:   Qiao Sheng, if you and Chun want Hosea to manage the company, he will have to leave his current job. So he must get paid if you want him to manage the company. He needs money to live on. Can you contact Hosea directly and discuss wages with him?

Qiao Sheng:   I understand. I will speak with Hosea and come to an agreement.”

85. Hosea deposed that, after his conversation with his mother to which I have referred above, QSH called Hosea and they had a conversation to the following effect:

“QSH:   I spoke to your mother about you helping the Company. What wages do you want to be paid?

Me:   Right now, I am being paid about $700 a week in the hand. I can’t accept anything under that amount.

QSH:   Okay, that’s fair.”

86. Sim Chun Hui deposed that QSH telephoned her the day after their last conversation, and they had a further conversation to the following effect:

“Qiao Sheng:   Fourth aunty, I spoke to Hosea yesterday and he agreed to $700 per week.

Me:   As long as Hosea agreed with the amount, I have no comment.”

87. Hosea gave evidence that, after his conversation with QSH referred to above, he resigned from his job at Lindt & Sprungli and began to work for the Company. He recorded in the monthly reports his wages that he paid out of the Company’s funds.

88. QSH did not give evidence.

89. In cross-examination, Steven denied that QSH had wanted Hosea to work full-time for the Company, and denied that QSH had agreed that Hosea should be paid net wages of $700 per week. The basis of Steven’s denials is unclear. Steven did not claim to have had any discussions with QSH at the time about the basis on which Hosea was to be expected to continue managing the Company’s books and records, as he had done in the past, in addition to undertaking work required for the Company’s Mary Street development. As discussed later in these reasons, QSH and CH were not playing an active role in the management of the Company and Steven’s capacity to do so was constrained by his limited ability to communicate in English. [32]

    32. See [103] and [146] below.

90. Sim Chun Hui’s evidence in cross-examination was consistent with the substance of her affidavit evidence about the conversations referred to above. Ms Hui said that QSH had told her that he would like Hosea to “take over as general manager” because Steven “has never been paying attention to the company”. Ms Hui said that she passed a message on to Hosea, and Hosea got in touch with QSH. Later, QSH called Ms Hui and told her that he had agreed with Hosea on the payment of $700 per week.

91. Hosea maintained in cross-examination that he had the discussion with QSH referred to above in February 2012. Hosea did not have any discussion with CH or with Steven about working for the Company or being paid wages. Hosea said that he didn’t mention his wages to Steven because the arrangement had been confirmed between Hosea and QSH. As I understood his evidence, Hosea believed that QSH had been speaking on behalf of the Huang side of the family. Hosea also gave evidence that he did not have a good working relationship with Steven at this time. Hosea denied that he didn’t mention his wages to Steven because he had never made any agreement about wages with QSH.

92. I accept the plaintiffs’ submission that the evidence of Hosea and Sim Chun Hui given in 2023 of the conversations that they say they had with QSH some eleven years earlier must be assessed bearing in mind the well-known fallability of human memory of what was said in a conversation, particularly after significant time has passed, and particularly where litigation has intervened in the meantime. [33] However, Hosea and Sim Chun Hui have each given evidence of the effect of the conversations that they say they recall. Nothing turns on the precise words used in any such conversations. It is the substance of the alleged conversations that is relevant to the plaintiffs’ oppression claim in these proceedings.

    33. Watson v Foxman (1995) 49 NSWLR 315 at 318-319 (McLelland CJ in Equity).

93. I accept the evidence of Hosea and Sim Chun Hui. I find that, in February 2012, QSH and Hosea had a conversation in which they agreed, in substance, that Hosea would work for the Company full-time and would be paid a wage of $700 net per week. It is inherently probable that QSH initiated the conversations described by Sim Chum Hui and Hosea in February 2012. At that time, QSH had reason to be dissatisfied with the Company’s lack of progress in developing any property more than a year after it had been incorporated for the very purpose of carrying on a property development business as trustee of the Trust. It is probable that QSH perceived that something needed to change, and there is no evidence suggesting that he or CH were prepared to become actively involved in the management of the Company. [34] Contrary to the plaintiffs’ submissions, it is probable in those circumstances that QSH approached Hosea to “step up”, despite Hosea’s lack of prior experience in property development or project management. It is not to the point that little had been required by way of project management in the period up to February 2012. That state of affairs reflected the very lack of progress with which QSH was dissatisfied, according to Sim Chun Hui’s evidence. The Company was a small business owned by and for the benefit of members of the same extended family. It is inherently probable that QSH preferred to approach Hosea to manage the Company, rather than to engage an independent, experienced manager. According to Hosea’s evidence the wage of $700 net per week was agreed on the basis that it would compensate Hosea for giving up his existing paid employment, and not by reference to the salary that an experienced manager would be likely to demand. If the Company had engaged an independent, experienced manager in February 2012, this would probably have required increased financial contributions from the Huang and Chan sides of the family long before the Company was in a position to generate any profit from property development. As the plaintiffs submitted, the Company later employed an experienced project manager for the construction of the Mary Street development in order to satisfy the requirements imposed by the Commonwealth Bank when it agreed to finance the construction of that development in about July 2014. [35] Contrary to the plaintiffs’ submissions, this does not render the evidence of Hosea and Sim Chun Hui about the substance of their conversations with QSH in February 2012 any less plausible. Having regard to the informal manner in which the Company was managed as a family-owned enterprise, it is not surprising that QSH and Hosea did not document the agreement that they made about wages. I reject the plaintiffs’ submission that the absence of documentation indicates that no agreement was made. The evidence of Hosea and Sim Chun Hui about their conversations with QSH is consistent with the fact that Hosea did in fact undertake the majority of the work required for the management of the Company from about February 2012, as I have found for the reasons explained at [153] to [171] below. For the reasons there explained, I reject the plaintiffs’ submission that Steven had a significant role in the management of the Company until about May 2013.

    34. See [146] below.

    35. See [125] below.

94. I accept Hosea’s evidence that he resigned from his full-time employment with Lindt & Sprungli and commenced working for the Company shortly after this conversation in February 2012. I reject Steven’s assertion that Hosea was fired from Lindt & Sprungli. That assertion lacks credibility because it was not mentioned in any of Steven’s affidavits, and emerged for the first time in cross-examination during a series of argumentative answers in which Steven was claiming that Hosea did not really do any work, or was only doing “email related work”, for the Company. I have rejected those aspects of Steven’s evidence for the reasons explained at [153]-[171] below.

95. The monthly reports record that the Company commenced paying wages to Hosea in July 2012.

96. It is necessary to address two remaining elements of the plaintiffs’ submissions.

97. The plaintiffs submitted that Hosea’s evidence about the alleged agreement lacks credibility because he failed to provide any member of the Huang family with copies of the monthly reports in which he recorded the amounts paid for his wages until May 2015, almost three years after he started paying wages to himself in July 2012. [36] As I understand it, the plaintiffs submit that this gives rise to an inference that Hosea deliberately sought to conceal the wages payments by withholding the monthly reports from the Huang family directors of the Company. I reject that submission. The evidence does not support an inference that Hosea held any such dishonest intention. The monthly reports were documents that Hosea took it upon himself to prepare from July 2010. If Hosea had intended to conceal from the Huang family the wages payments made to himself, it is highly improbable that he would have recorded them in the monthly reports at all.

    36. See [174]–[188] below.

98. The plaintiffs submitted that Hosea consistently paid himself an amount equivalent to only $300 per week for wages during the period from July 2012 to June 2014, as evidenced by his own monthly reports. The plaintiffs submit that this fact is inconsistent with Hosea’s claim to have agreed on an amount of $700 per week net with QSH. [37] I reject that submission, and accept Hosea’s evidence that the Company paid him less than the agreed $700 per week during the period up to June 2014 due to cash flow constraints. Hosea’s evidence is consistent with the absence of evidence that the Company had generated any revenue in the period up to June 2014, with the exception of some rental income from 14 Mark Street before that property was sold in early 2012. [38] Hosea also gave evidence that the Company ceased making any wages payments to him after June 2014 due to insufficient cash flow. Again that is consistent with the evidence of the status of the Company’s projects at that time. [39] After cash flow improved, Hosea paid lump sums to himself in 2017 and 2018 for his accrued but unpaid wages since June 2014. Hosea made a contemporaneous record of those lump sum payments in his monthly reports. Hosea has calculated that the total amount of wages and superannuation paid to him is $262,290.94, and that he is owed a further amount of $61,353.91. Hosea does not pursue a claim for unpaid wages and superannuation in these proceedings. The plaintiffs submit that Hosea has made a minor arithmetical error in calculating the total wages paid, as recorded in the monthly reports, as $262,290.94. The plaintiffs submit that the correct figure is $265,890.94. [40] It is common ground that the Company paid an additional sum totalling $34,518 to the Australian Taxation Office, being tax withheld from Hosea’s wages.

    37. Plaintiffs’ written closing submissions, paragraph 10(h) and Appendix 2.

    38. See [79].

    39. See [122]-[132], [141]-[145] below.

    40. Plaintiffs’ written closing submissions, Appendix 2.

99. I did not understand the plaintiffs to maintain in closing submissions the contention that was repeatedly put to Hosea in cross-examination that he was in fact paid an amount of $45,000 per annum as recorded in the Company’s tax returns and financial statements. If I have misunderstood the plaintiffs’ submissions in this respect, then I reject that contention, which is inconsistent with the plaintiffs’ submissions referred to immediately above. As counsel for the first and second defendants submitted, the financial statements and tax returns are prepared on an accruals basis, whereas the monthly reports are a contemporaneous record of the amounts in fact paid to Hosea.

Sale of 14 Mark Street and acquisition of 18 Mary Street

100. After completing the purchase of 16 Mary Street, the Company embarked on a campaign to acquire the neighbouring property at 18 Mary Street with a view to developing the two parcels of land together. It is common ground that Hosea and Steven were both involved in the Company’s efforts to acquire 18 Mary Street during 2011, including instructing an agent to act on behalf of the Company and subsequently negotiating directly with the owner of 18 Mary Street.

101. As referred to at [79] above, there were discussions in late 2011 about selling the 14 Mark Street property to fund the proposed acquisition of 18 Mary Street and to allow the Company to focus on the proposed development of 16-18 Mary Street. Contracts for the sale of 14 Mark Street were exchanged in about early 2012, and the sale was completed in about March 2012. The Company had not developed the 14 Mark Street property since purchasing it in July 2010.

102. The Company ultimately exchanged contracts to purchase 18 Mary Street in November 2012. The Company then commenced planning work for a development of 23 residential units at 16-18 Mary Street.

103. Steven gave evidence that he attended five or six meetings with architects and with Auburn City Council in relation to the Mary Street development during the development planning stage from November 2012 until about 2014. In cross-examination, Steven accepted that those meetings were conducted in English. Steven had given evidence earlier in cross-examination that he speaks only a little bit of English, and he can read and write a little bit of English only at “very basic level”. Steven accepted that Hosea had also attended the meetings with the architects and the council. Steven said that, despite his limited ability to speak and read English, he had been able to participate in these meetings because, when the architect was discussing floor plans, “we could communicate with just pointing at specific areas. Then I could understand that, even though my English was not so good.”

104. I do not accept that Steven was able to meaningfully participate in meetings with the council and the architect concerning the Mary Street development by pointing at areas on plans. I find that Hosea took the lead role on behalf of the Company in those meetings to progress the plans for the Mary Street development. I reject Steven’s evidence given later in his cross-examination that it was Steven who was “in charge” of dealings with the architect, that Hosea’s role was limited to “email related work”, and that it was “nonsense” for Hosea to suggest that he did a lot of work. At that point in the cross-examination, I formed the impression that Steven was changing his earlier evidence referred to immediately above in order to overstate his own role, and to downplay Hosea’s role, because he thought that would support the plaintiffs’ claim in these proceedings in relation to the wages and superannuation paid to Hosea.

105. In May 2013, the Company completed its purchase of 18 Mary Street with funds contributed by all unit holders. Planning work for the Mary Street development was still in progress.

Acquisition of the Ann Street properties

106. Commencing in November 2013, the Company entered into contracts to purchase three properties at 22, 24 and 26 Ann Street. The Huang and Chan sides of the family each made a financial contribution of $220,000. The contracts were exchanged on 7 November 2013 (22 Ann Street), 5 December 2013 (24 Ann Street) and 2 April 2014 (26 Ann Street).

107. There was no challenge to Hosea’s evidence that, in mid-late 2014, he negotiated the loan from the Commonwealth Bank that funded the Company’s purchase of 24 Ann Street. The loan was approved in November 2014, and the Company then completed its purchase of 24 Ann Street in December 2014.

108. The purchases of 22 Ann Street and 26 Ann Street were not completed until May 2016.

Claimed contribution of $76,000 by Steven in October 2013

109. Steven gave evidence that Hosea asked him to contribute an additional $76,000 in October 2013 to enable the Company to pay its expenses and commence work on the Ann Street project. Steven deposed that he made that additional contribution by drawing a cheque linked to his home loan account and providing the cheque to Hosea. Hosea gave evidence that neither he nor the Company received the sum of $76,000 from Steven, by cheque or otherwise, on or about 22 October 2013.

110. The plaintiffs tendered a Westpac statement addressed to Steven in respect of a linked investment loan account and deposit account for the period from 14 October to 14 November 2013. The statement records that the sum of $76,000 was drawn down under the investment loan on 22 October 2013. The statement does not record that any cheque in the amount of $76,000 was drawn on the investment loan account or on the deposit account.

111. In cross-examination, Steven acknowledged that the Westpac statement does not record any cheque being presented against his investment loan account or his deposit account in the sum of $76,000. Steven nevertheless insisted that he had given Hosea a cheque for $76,000. Steven said he had not kept the cheque book containing the stub for the $76,000 cheque that he says he drew, and he had been unable to obtain any information from his bank other than the statement referred to immediately above. Steven said that he asked the bank to provide information, but “the bank said it’s a very long time ago, the bank could only produce the statement I just showed you”. Steven denied that it was possible that he was mistaken about giving a cheque for $76,000 to Hosea. It was then put to Steven that he was unable to point to anything showing that a cheque for $76,000 had been deposited into the Company’s bank account, or into Hosea’s bank account. Steven answered: “I don’t have evidence for that, however, I did receive a call from my bank. The bank said they already gave cash – given cash”. That answer is irreconcilable with Steven’s earlier answer that the bank had been unable to provide any information other than the statement, as the transaction had occurred such a long time ago. I accept the submission made by the first and second defendants that Steven’s answer about cash was a lie that he made up in the witness box in order to try to support his claim in relation to the $76,000, when it was put to him squarely that his bank account statements do not record any cheque being drawn on his account, and that there is no evidence of any such cheque having been paid into any bank account of the Company or Hosea.

112. For those reasons, the evidence does not establish that Steven made a $76,000 contribution to the Company in October 2013.

Steven’s resignation as a director of the Company in February 2014

113. Sim Chun Hui gave evidence that she had a conversation with Steven in about early 2014, in which he told her that he was having “some legal trouble” with his wife. Steven asked Sim Chun Hui to tell Hosea that he (Steven) needed to resign from the Company, and that he might also need to transfer his shares to Jiamian. Sim Chun Hui then told Hosea that she had visited Steven, and that Steven had told her that “he’s in legal trouble and will need to resign from the company” and that “he might transfer his shares to your wife too”. These aspects of Sim Chun Hui’s evidence were not challenged in cross-examination.

113. At the time of these conversations, Hosea was married to Jiamian.

114. Hosea gave evidence describing a conversation with Sim Chun Hui in early 2014, in which she told him that Steven had said to her that he would resign as a director of the Company and transfer his shares to Jiamian because he was “in legal trouble”. Hosea deposed that Steven’s resignation and Jiamian’s appointment as a director of the Company took effect on 10 February 2014, and that he signed the documents notifying ASIC of the resignation and appointment on 24 February 2024. Steven did not transfer his shares to Jiamian.

115. In his affidavit affirmed on 2 November 2022, Steven gave evidence that he did not resign as a director of the Company, and that he did not agree to the appointment of Jiamian as a director of the Company, in February 2014. Steven deposed that he had merely considered and discussed with Jiamian the possibility of transferring to her his shares in the Company to hold on his behalf temporarily. Steven deposed that he first became aware that he was no longer a director of the Company in about late 2014, when he asked to inspect the Company’s books and Hosea told him that he had no authority to do so as he was no longer a director. Steven gave evidence that he immediately asked Jiamian to “give my directorship back”. Jiamian agreed to do so, and the Company’s accountant told Steven in late 2014 that Jiamian had signed the necessary forms, and that he was “awaiting Hosea’s confirmation”. Steven gave evidence that he did not follow up the matter further after that, and that he later became aware from ASIC’s records that he was not re-appointed as a director until July 2016.

116. When his signed resignation letter was put to him in cross-examination, Steven acknowledged that he signed the letter in February 2014, and that he understood at the time that the letter said that he resigned as a director of the Company. Steven subsequently sought to resile from his evidence that he had understood that he was resigning as a director when he signed that letter in February 2014. Steven said that he had not intended to resign as a director, that he was “very confused during that period”, that he did not know what had happened when he signed the resignation letter, and he did not know why he had signed it. When pressed later in the cross-examination about his understanding of the resignation letter at the time that he signed it, Steven sought to avoid answering the question, saying that a lot of things were happening in his family at that time, he had a headache, he was confused, and he didn’t think it through carefully before signing the letter. The cross-examiner then asked Steven whether his evidence was that he could read and understand the letter, but he had not thought the decision through carefully before signing the letter because he had a headache. Steven answered: “Maybe”.

117. Steven’s attempts to resile from his clear answer early in his cross-examination that he understood the resignation letter when he signed it in February 2014, lack credibility. Based on my observation of Steven giving evidence at the time, he told the truth in his early answer, but subsequently regretted it because he perceived that his conduct in knowingly resigning as a director in February 2014 might not assist the plaintiffs’ claim in respect of the wages and superannuation paid to Hosea. I find that Steven knowingly and intentionally resigned as a director of the Company in February 2014.

118. It follows that Steven’s affidavit evidence denying any knowledge in February 2014 that he had ceased to be a director of the Company, cannot be accepted. Nor can I accept Steven’s affidavit evidence that he was refused access to the Company’s books and records in late 2014 – which Hosea denies – and that this led to him discovering for the first time that he was no longer a director of the Company.

119. Nor do I accept Steven’s evidence about demanding to be re-appointed as a director from late 2014. The reason that Steven gave in his affidavit for allegedly making that demand in late 2014 – being that Steven first became aware that he was no longer a director in late 2014 – was false. Steven advanced a different reason in cross-examination, saying that he had asked to be re-appointed as a director one or two months after his resignation in 2014 because he had learned that “Hosea and my niece get up and have affairs” and “they made a mess of the company business”. Steven went on to say that: “Hosea delayed my request. He didn’t want to give consent to my request”. I reject that evidence, which is inconsistent with Steven’s affidavit both as to the timing and the claimed reason for his alleged demand to be re-appointed as a director. It appeared to me to be made up by Steven on the run in cross-examination in an effort to claim that he played, or at least sought to play, a role in the management of the Company after his resignation as a director in February 2014, because he considered that this would assist the plaintiffs’ case in relation to the wages and superannuation paid to Hosea. Steven’s new story is uncorroborated by any objective evidence that Hosea and Jiamian had “made a mess of” the Company’s business in 2014.

120. Hosea gave evidence that he regarded Jiamian as the director who was “representing the Huang family” during the period of her directorship. Steven gave evidence to the same effect in cross-examination.

The progress of the Mary Street development

122. The Company completed its planning work for the residential unit development at 16-18 Mary Street at about the end of February 2014.

123. In about July 2014, the Commonwealth Bank approved a loan to fund the construction of the Mary Street development.

124. In August 2014, Hosea and Jiamian signed the building contract with the builder engaged by the Company for the Mary Street project. Steven gave evidence that he identified and recommended the builder to Hosea. In cross-examination, Steven said that the builder had been recommended to him by a friend. There is no evidence that Steven did anything more than pass on to Hosea the details of the builder that he received from his friend.

125. The Company engaged a project manager for the construction of the Mary Street development, in compliance with conditions imposed by the Commonwealth Bank. Construction commenced in 2015.

126. Steven gave evidence that he and Hosea attended fortnightly meetings at the construction site with the project manager and the builder. Those meetings were conducted in English. Steven’s evidence that he attended those meetings is difficult to reconcile with his evidence in cross-examination that he was less involved in the Company’s affairs by about 2014. If Steven did attend those meetings, I infer that Hosea took the lead role in the meetings due to Steven’s limited ability to communicate in English. [41]

     41. See [103] above.

127. In about May 2015, Hosea informed Steven that the Company required approximately $200,000 from unit holders for the ongoing construction of 16-18 Mary Street. Steven gave evidence that CH contributed the whole of those funds.

128. The Mary Street development was completed in about April 2016. All of the units in the development had been sold by about September 2016.

129. Shuling Huang, the sister of CH, purchased unit 10 in the Mary Street development. Hosea caused the sum of $8,745 to be paid to himself out of the Company’s funds on 20 May 2016 as a fee in relation to unit 10. In his affidavit affirmed on 24 January 2023, Hosea deposed that: “At the time, CH & QSH had agreed that my family would be entitled to an agent fee.” That was the extent of Hosea’s affidavit evidence about the $8,745 payment. In cross-examination, Hosea gave the following evidence about the payment:

“Q.   That was said to be commission payable to you; is that right?

A.   It’s a compensation fee for us, agreed by the Huang’s family.

Q.   Who do you say you had that agreement with?

A.   QSH and CH.

Q.   Was that in person or over telephone in some form?

A.   I can’t recall, I can’t recall.

…

Q.   Do you recall at all how their alleged agreement came to be communicated? How did they tell you they agreed? Do you have any recollection?

A.   Because it’s long time ago, I can’t remember it’s face to face or through telephone conversation.

Q.   Was it with one or both of them?

A.   What I often do is I contact QSH, and QSH always talk to the brothers and sister. And QSH come back to me.

…

Q.   You can’t actually recall any such conversation, can you?

A.   Can I look at my affidavit?

Q.   No, I’m asking you now, as you sit in the witness box now, you can’t actually recall any such conversation, can you?

A.   I remember there’s a conversation between me and my parents.

Q.   Do you recall when? So, between you and your parents?

A.   Yes.

Q.   But not QSH or CH?

A.   I can’t recall.”

130. Hosea was asked in re-examination about the circumstances surrounding the payment. He gave the following answer:

“So, back then, we, like, the two‑party agreed to preserve the top floor for the shareholders.  The three located on south side belongs to us, and three located on the north belongs to Huang's family.  And that already come with an agreement.  And then, like, Shuling Huang, which is CH's sister, want to have one of our unit.  And then she called my parents and asked if we can divvy up one for them and with the pre‑sold price.  And then we say we need to talk to Chun Huang and QSH.  And also, we will receive an amount of same as the agent fee as a compensation for us, which they agreed.”

131. I accept that Hosea was giving truthful evidence that reflected his understanding at the time unit 10 was sold, which remains his understanding now, that he was entitled to pay the sum of $8,745 out of the Company’s funds to himself. Taking Hosea’s evidence at its highest, that understanding was based on what he recalls his parents telling him at the time, although he is no longer able to give a detailed account of that conversation with his parents. Hosea does not recall participating himself in any conversation with any member of the Huang family about the payment. Hosea’s parents – Sim Chun Hui and Cheong Wai Chan – both gave evidence in these proceedings. Neither of them mentioned the payment, or any conversation that they had about it at the time. QSH and CH did not give evidence.

132. In my opinion, in the absence of any evidence from QSH, CH, Sim Chun Hui, and Cheong Wai Chan, there is no sufficient basis to make any finding about whether Hosea was in fact authorised by the Company, or by the Huang side of the family, to cause the Company to make the $8,745 payment on 20 May 2016.

Accounting for unpaid wages and superannuation during the 2015 and 2018 financial years

133. The payments made by the Company in respect of Hosea’s wages (including tax) and superannuation are referred to at [98] above.

134. Hosea gave evidence that, for the 2015 to 2018 financial years, the Company also recorded an accrued liability for wages to other members of the Huang and Chan families. This occurred because Hosea and Jiamian agreed and proposed to the Company’s accountant that three members of each side of the family should accrue wages. According to Hosea’s evidence, QSH, Chen Xiao Chun (who is married to QSH), and Ziqi Huang (who is the son of CH) signed tax file number declaration forms. QSH did not give evidence. Chen Xiao Chun gave evidence that the payee’s signature on the form bearing her name is not her signature, and that she did not sign the form. Ziqi Huang gave evidence that he signed the form in blank at Jiamian’s request. He did not provide the form to Hosea or the Company. The forms all appear, to my untrained eye, to have been completed in the same handwriting. There is no evidence identifying the person who completed the forms.

135. The Company recorded the following wages payments or liabilities in the 2015 to 2018 financial years:

1. in the 2015 financial year, $55,000 to Jiamian (in addition to $55,000 to Hosea);

2. in the 2016 financial year, $5,000 to Jiamian (in addition to $55,000 to Hosea);

3. in the 2017 financial year, $60,000 to each of Jiamian, QSH, Chen Xiao Chun, Sim Chun Hui and Cheong Wai Chan (in addition to $60,000 to Hosea); and

4. in the 2018 financial year, $80,000 to each of Jiamian, CH, Ziqi Huang, Sim Chun Hui and Cheong Wai Chan (in addition to $80,000 to Hosea).

136. The Company has not paid those wages, except to the extent that wages have been paid to Hosea as referred to at [98] above.

137. With the exception of Hosea, there is no evidence that the Company employed any of the persons in respect of whom it recorded accrued wages liabilities.

138. Although the Company has not paid the wages, the Company did pay:

1. a sum of $38,000 on 2 August 2018, described in the August 2018 monthly report as “Superannuation x 5”, which Hosea deposed was a superannuation payment in respect of Jiamian, Chen Xiao Chun, Ziqi Huang, Sim Chun Hui and Cheong Wai Chan;

2. a sum of $92,382 on 2 August 2018, described in the August 2018 monthly report as “Tax payment”, which Hosea deposed was for PAYG tax payable by the Company in respect of wages; and

3. a sum of $7,600 on 9 August 2018, described in the August 2018 monthly report as “Superannuation x 1” with the additional remark “Super – NGS”, which Hosea deposed was a superannuation payment in respect of Jiamian.

139. The plaintiffs contend that Hosea had no authority to cause the Company to make those payments.

Steven’s reappointment as a director of the Company in July 2016

140. On 11 July 2016, Steven was re-appointed as a director of the Company and Jiamian ceased to be a director. I have rejected Steven’s evidence that he had been demanding to be re-appointed as a director since shortly after his resignation in 2014. [42] Hosea gave evidence in cross-examination that he signed the documents for Steven’s reappointment after the Company’s accountant notified him that Steven was coming back on the board. Hosea didn’t hesitate to do this, or even think much about it, because Steven had previously been a director and still had his money in the Company.

     42. See [120] above.

The progress of the Ann Street development

141. As I have already mentioned, the Company completed its purchase of 22 Ann Street and 26 Ann Street in May 2016. In July 2016, Hosea signed a building contract on behalf of the Company for the construction of residential units on its three Ann Street properties. The Company began selling units in that development off the plan. Hosea instructed the Company’s selling agent in relation to the prices at which the units were to be sold, after consulting with Steven. It is not necessary to address the divergence between the evidence of Hosea and Steven about the timing and substance of their discussions in relation to the selling prices.

142. On about 30 September 2016, the Company repaid the bank loan that it had taken out to complete its purchase of 24 Ann Street. The mortgage over that property was discharged.

143. Steven gave evidence that he continuously asked Hosea to pay distributions to unit holders after completion of the sale of the units in the Mary Street development in September 2016, but the net sale proceeds of those units were used to fund the construction of the Ann Street development instead. Steven was angry with Hosea about this, including because he believed that Hosea had set the sale price for the Ann Street units too low.

144. The Ann Street development was completed, and all units sold, by about February or March 2018.

145. The Company did not undertake any further developments after completing the Ann Street development.

Management of the Company

146. Although they were directors of the Company, QSH, CH and Chun On Hui played no role in the management of the Company and its business. It is common ground that no board meetings were convened prior to 2018. Nor is there any evidence that any general meeting of the Company was convened prior to 2018. It appears from the evidence given by Steven and by Hosea that matters concerning the acquisition and development of properties, and the funding of those activities, were discussed and agreed between Steven and Hosea, with Steven consulting QSH and CH, and Hosea consulting Chun On Hui, about those matters as each of them saw fit from time to time.

147. Although no board meetings and no general meetings were in fact held prior to 2018, Hosea signed the following documents purporting to be minutes of meetings at which he was present together with Steven, QSH, CH and Chun On Hui:

1. purported minutes of a meeting of the trustee of the Trust held on 15 December 2011 at which it was resolved that the financial statements for the year ended 30 June 2011 be approved for signature by the trustee;

2. purported minutes of a meeting of the directors of the Company held on 15 September 2013 at which it was resolved that the financial statements for the Trust, for which the Company acts as trustee, be approved for signature by a director of the Company;

3. purported minutes of a meeting of the trustee of the Trust held on 15 September 2013 at which it was resolved that the financial statements for the year ended 30 June 2013 be approved for signature by the trustee;

4. purported minutes of a meeting of the directors of the Company held on 20 February 2014 at which it was resolved to accept Steven’s resignation as a director of the Company;

5. purported minutes of a meeting of the trustee of the Trust held on 15 September 2014 at which it was resolved that the financial statements for the year ended 30 June 2014 be approved for signature by the trustee; and

6. purported minutes of an annual general meeting of the Company held on 17 May 2017 at which it was resolved that the accounts and directors’ report for the year ended 30 June 2016 be received, approved and accepted, that all directors retired, offered themselves for re-election, and were re-elected, that no directors’ fees be paid in respect of the year ended 30 June 2016, that no dividend be paid, and that there was no need for the appointment of an auditor.

148. In cross-examination, Hosea said that each of those documents that he signed had been prepared by the Company’s accountant. Hosea accepted that no meeting had taken place, and no resolution had been passed at any such meeting, on any of the occasions purportedly recorded in those documents. Hosea accepted that, to that extent, the minutes were false.

149. Hosea asserted in cross-examination that all of the resolutions were in fact passed when he signed the documents purporting to be the meeting minutes, which had been provided to him by the Company’s accountant. Hosea made that assertion under questioning about the reasons why he had relied on the signed minutes in his defence filed in these proceedings, and in his affidavits, without disclosing that the meetings purportedly recorded in those documents had not in fact taken place. I do not accept that assertion as truthful evidence of Hosea’s state of mind. It is inherently improbable that Hosea believed that corporate resolutions were validly passed by his signing of documents purporting to be minutes of meetings that he must have known when he signed each document had not in fact taken place. Hosea’s assertion that the resolutions were in fact passed by his signing of those documents seemed to me to be a false answer given in an attempt to deflect this line of questioning, in circumstances where the cross-examiner had not been content to let the matter rest with Hosea’s earlier answers that the accountant had prepared the minutes and provided them to Hosea for signature.

150. Although I have rejected Hosea’s evidence that he believed the resolutions were passed by his signing of the minutes, the evidence does not support any finding that he signed the minutes with the intention to achieve any benefit for himself or to cause detriment to the Company, to any other director or shareholder of the Company, or to any unit holder of the Trust. As counsel for the first and second defendants submitted, the plaintiffs, having had ample opportunity prior to the hearing to examine the financial reports referred to in the purported minutes, have not adduced evidence of any material errors in those reports.

79. See also JD Heydon and MJ Leeming, Jacobs Law of Trusts in Australia (8th ed, 2016, LexisNexis) at [23-03].

233. The only “special circumstance” identified in the plaintiffs’ closing submissions was the fact that the 20 May 2022 board meeting did not proceed. For the reasons that I have explained above, that does not establish that the trustee was not ready or not willing to proceed with an action against Hosea of the kind referred to in the materials accompanying the notice of meeting issued by Steven on 5 May 2022. Steven, QSH and CH simply failed to take the steps that were available to them to validly convene a directors’ meeting to vote on the proposed commencement of proceedings against Hosea, or the amendment of the claims in these proceedings to include those proposed claims by the Company against Hosea. Steven, QSH and CH (or any alternative directors appointed by them) would have been in the position to cast the majority of votes able to be cast on such a resolution at any duly convened meeting of the board. [80]

     80. See [207]-[208] above.

234. It is not necessary for me to determine whether, if the requisite special circumstances had existed, the plaintiff unit holders would have required leave in order to bring any derivative claim against Hosea for alleged breaches of fiduciary duty owed to the Company (if such a claim had been pleaded, which it was not).

235. I now turn to the pleaded oppression claim.

The oppression claim

Applicable legal principles

236. The question whether the conduct of a company’s affairs, an actual or proposed act or omission by or on behalf of a company, or a resolution or proposed resolution, is contrary to the interests of members as a whole (s 232(d)), or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members (s 232(e)), is determined objectively.

237. The expression “oppressive to, unfairly prejudicial to, or unfairly discriminatory against” is a compound expression that is concerned with commercial unfairness. [81]

     81. Tzavaras v Tzavaras & Sons Pty Ltd [2023] NSWCA 168 at [75] (Gleeson JA, Adamson JA and Griffiths AJA).

238. In cases such as the present involving allegations that the affairs of a family-owned company have been conducted oppressively, the question of fairness “must be considered against the background of the fair treatment of the whole body of shareholders, in the light of the history of the company and the family and the purpose for which the company was formed”. [82] The conduct of the affairs of a family-owned company must be understood against the background that dealings between family members are often informal. [83]

     82. Ibid at [76], citing the primary judge ([2022] NSWSC 359 at [102]), who had in turn referred to In the matter of Ledir Enterprises Pty Ltd [2013] NSWSC 1332 at [178] (Black J).

     83. In the matter of Candy-Vend Pty Ltd [2020] NSWSC 1735 at [32]-[33] and the authorities there referred to.

239. In Tzavaras v Tsavaras & Sons Pty Ltd, [84] the Court of Appeal cited with approval the following summary of the applicable principles by Stevenson J in Munstermann v Rayward; Rayward v Munstermann:[85]

     84. Ibid at [74].

     85. [2017] NSWSC 133 at [22].

“1. The test of oppression is an objective one of unfairness (Wayde at 472-473 (Brennan J); Re Quest Exploration Pty Limited (1992) 6 ACSR 659 at 669 (Mackenzie J)).

2. The court must look to determine whether on the balance of probabilities the objective commercial bystander would be satisfied that the affairs of the company were being conducted unfairly (Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359 at [362] (Young CJ in Eq); Cassegrain v CTK Engineering Pty Ltd [2005] NSWSC 495; (2005) 54 ACSR 249 at [84] (White J)).

3. A director may act oppressively in the sense relevant to the operation of s 232 and yet not breach any fiduciary or other duty owed as a director (Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 at [49] (Barrett J)).

4. Conduct of a company’s affairs may be oppressive even though the conduct is otherwise lawful (Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [176] (Gummow, Hayne, Heydon and Kiefel JJ) (“Campbell v Backoffice”)).

5. Conduct that has the effect of paralysing a company in the operation of its business is properly characterised as conduct contrary to the interests of the members as a whole (Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359 at [185] (Basten JA)).

6. A shareholder of 50 per cent of the shares in a company can seek relief for oppressive conduct because they do not have control in the form of power to prevent the oppression, particularly where individual strong arm tactics are used (Patterson v Humfrey [2014] WASC 446; (2014) 291 FLR 246 at [52]-[53] (Le Miere J)).

7. The court must formulate an opinion about oppression or unfair prejudice as at the date of the institution of proceedings and the issue of relief under s 233 must be determined as at the date of the hearing (Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672 at [159] (Spigelman CJ)).

8. The discretion under s 233 is wide as to the appropriate remedy (Smith Martis Cork at [70] (Wilcox, Marshall and Jacobson JJ) citing United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2003] NSWCA 910; (2003) 47 ACSR 514 at [34]-[38] (Campbell J)).

9. The nature of the remedy chosen by the court under s 233 will be dependent upon the conclusions drawn by the court as to the type of oppression with which the court is dealing and the court will choose the remedy which is least intrusive (Re Enterprise Gold Mines NL (1991) 9 ACLC 168 at 174 (Murray J); United Rural Enterprises Pty Ltd v Lopmand Pty Ltd at [26] citing Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688 at 742 (Young J) (“Fexuto”)).

10. The aim of any order under s 233 must be to put an end to the oppression (Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343 at [125] (Barrett J)).

11.    The court should only look to wind up an otherwise solvent company as a “last resort” (Fexuto at 742 (Young J)).

12. As a remedy for oppression, an oppressor can be ordered to sell their shares to the oppressed party (Re A Company; Ex parte Shooter (No 2) [1991] BCLC 267 (Harman J); Re Brenfield Squash Racquets Club Ltd [1996] 2 BCLC 184 (Rattee J)).

13. If an order is to be made for the purchase of shares under s 233 the task of the court is to fix a price that represents a fair value in all the circumstances (Smith Martis Cork at [71] (Wilcox, Marshall and Jacobson JJ)).”

240. In relation to principles 8 to 13, the only remedy for which the plaintiffs press in respect of the alleged oppression is an order under s 233 of the Corporations Act requiring Hosea to account to the Company, and to pay any amount found to be owing by him to the Company, in respect of wages and superannuation. [86] As I understand the plaintiffs’ submissions, they also seek an order under s 233 that Hosea account to the Company in respect of the $8,745 fee paid to him in May 2016 in connection with the sale of unit 10 in the Mary Street development to Shuling Huang. This claim was not pleaded. However, as noted earlier in these reasons, the defendants did not take any pleading point about the inclusion of the $8,745 fee in the plaintiffs’ oppression claim.

     86. Prayer 16 of the Statement of Claim, referred to at [216] above.

241. As the defendants submitted, the grant of relief under s 233, if oppression is established, is discretionary. The question is what relief is appropriate to put an end to the particular oppressive conduct that has been established. As submitted by the plaintiffs, and accepted by the defendants, the scope of relief that the Court may grant extends to an order requiring a defendant found to have engaged in the relevant oppressive conduct to account to the company. [87]

     87. Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; [2001] NSWCA 97 at [138] (Spigelman CJ), [527]-[528] (Priestley JA) and [698] (Fitzgerald JA); LPD Holdings (Aust) Pty Ltd v Phillips (2013) 281 FLR 227; [2013] QSC 225 at [44]-[45] (McMurdo J); McMillan v Coolah Home Base Pty Ltd (No. 4) [2022] NSWSC 584 at [458] (Parker J).

The pleaded claim

242. The plaintiffs pleaded that the affairs of the Company have been conducted in a manner that is contrary to the interests of the members as a whole, and that is oppressive to, unfairly prejudicial to, or unfairly discriminatory against those plaintiffs who are members of the Company, by reason of:

1. Hosea’s payment of wages and superannuation to himself, and the payment of superannuation to other members of the Huang and Chan families as referred to at [98] above, in circumstances where the plaintiffs submit that the Company had not authorised those payments;

2. Hosea’s alleged failure to provide to the plaintiffs the Company’s bank statements for the period prior to 30 June 2013;

3. the plaintiffs’ alleged inability to approve the tax returns for the Company provided to them in draft for the 2019 to 2023 financial years due to alleged (unspecified) inaccuracies in the monthly reports and the alleged absence of (unspecified) books and records;

4. Hosea’s alleged preparation of monthly reports for the Company that the plaintiffs contend were inaccurate in that they failed to record the disputed $30,000 contribution referred to at [75]-[78] above and the disputed $76,000 contribution referred to at [109]-[112] above;

5. Hosea’s alleged preparation of false minutes of meetings of the directors of the Company; and

6. Hosea’s proposal in May 2022 to pay $1,737,379.57 to himself and/or Chan & Hui Investment Nominees Pty Ltd out of the Company’s funds, disregarding the 3 February 2022 resolution, and in circumstances where the directors had not determined pursuant to clause 51 of the constitution that any such dividend was payable, and the payment was not otherwise authorised by the Company.

243. The plaintiffs’ closing submissions emphasised that the allegedly unauthorised payments in respect of wages and superannuation, and the proposed payment of $1,737,379.57, occurred in circumstances where the plaintiffs submitted that: (1) the information that Hosea provided to them was “often false or incomplete” until late in these proceedings, after evidence had been served, subpoenas issued, and discovery administered; and (2) the plaintiffs had been “prevented from using their voting power to rectify this issue”. The plaintiffs’ submissions went so far as to assert that the directors other than Hosea had been effectively excluded from the management of the Company, although no such allegation had been pleaded.

244. The assertion that Hosea provided false or incomplete information to his co-directors was a theme running through the plaintiffs’ submissions. I have rejected Steven’s evidence that the information provided by Hosea in June 2016 and July 2018 was incomplete. [88] The plaintiffs did not adduce any other evidence in support of their assertion. I therefore reject the assertion that Hosea had provided false or incomplete information to his co-directors about the financial affairs of the Company.

     88. See [174]-[191] above.

245. For the reasons explained at [39] to [52], [59] to [68] and [196] to [208] above, I also reject the submission that the plaintiffs were prevented from using their voting power in relation to any deficiency that they may have perceived in the information provided to them, or, indeed, in relation to any other “issue” pertaining to the Company.

246. The first and second defendants objected to the plaintiffs relying on their unpleaded contention that Hosea effectively excluded them from the management of the Company. Even if the plaintiffs had pleaded that contention, I would have rejected it for the following reasons.

247. The evidence discloses that, from the time the Company was incorporated in 2010 until about 2018, the directors engaged in a pattern of conduct whereby they treated one director from each side of the family as representing all directors from that side of the family, and they made decisions by discussion between one director from each side of the family on the basis that each of those directors would consult their co-directors from that side of the family as they considered appropriate. [89] The directors chose to operate in this way without holding board meetings, and without the Company holding any general meetings, until about 2018. However, it was open to any shareholder to require the directors to convene a general meeting, and it was open to any director to require Hosea as secretary to convene a directors’ meeting, at any time. [90] If the plaintiffs had exercised their rights to require such meetings to be convened, they would have controlled the outcome of any matter put to a vote at the meeting. [91]

     89. See [39], [40], [50], [57], [79]-[93], [121] and [146] above.

     90. See [60]-[68] above.

     91. See [59] above.

248. From the outset, the plaintiffs were content to leave it to Hosea to manage the Company’s books and records, to calculate the financial contributions required for the property development business, and to keep track of the expenses that the Company needed to pay at any given time. I have found that Hosea attended to paying the Company’s expenses, and that he did so with Steven’s knowledge and without any complaint made by Steven at the time. I have found that Steven and the other Huang family directors of the Company were content for Hosea to attend to paying the many bills that the Company was required to pay in the course of its business. [92] The plaintiffs pleaded that Hosea had authority to operate the Company’s bank accounts. The evidence that they sought to adduce to demonstrate otherwise during the final hearing, without seeking leave to amend their pleading, was equivocal and did not establish on the balance of probabilities that Hosea lacked authority to operate those accounts. [93]

     92. See [164]-[171] above.

     93. See [166]-[167] above.

249. Hosea prepared monthly reports recording the contributions and income received by the Company, and the expenses paid by the Company. I have found that he provided those monthly reports, together with bank statements and other financial records of the Company, to his co-directors periodically from January 2012 onwards. They did not request information more frequently. Nor did they seek financial information pertaining to the Company from the Company’s accountant or from the banks with which the Company held accounts. [94]

     94. See [71]-[74] and [174]-[191] above.

250. I have found that, in February 2012, QSH asked Hosea to manage the Company on the basis that he would be paid a net wage of $700 per week. Hosea agreed. I have found that Hosea did in fact undertake the majority of the work required for the management of the Company and its property developments from February 2012. [95] Steven continued to have some role in the property developments until about early 2014. [96] There is no evidence that QSH or CH played any active role in the management of the Company at any time prior to 2018, when they began to convene and participate in directors’ meetings. There is no evidence that Jiamian played any active role in the management of the Company during her directorship, other than to receive financial information from Hosea to be passed on to the other Huang family directors, [97] and to join with Hosea in proposing to the Company’s accountant that the Company should record wages and superannuation in its accounts for family members who do not appear to have been employed by the Company, and to procure tax file number declarations from some of those family members. [98]

     95. See [79]-[99] and [153]-[173] above.

     96. See [159] above.

     97. See [174]-[191] above

     98. See [133]-[139] above.

251. Considering all of those matters as a whole, it might be said that, during the period up to 2018, QSH, CH and Steven abdicated their responsibilities as directors of the Company, which was charged under the trust deed with the obligation to manage the property development business of the Trust. [99] It cannot be said that Hosea excluded QSH, CH or Steven from the management of the Company at any time.

     99. See [55] above.

252. Turning to the first element of the plaintiffs’ pleaded oppression claim, I reject the submission made on behalf of the first and second defendants that it was within the scope of Hosea’s power, as the director who was left with the management of the Company, to cause the Company to pay wages to himself and to make superannuation payments for his benefit. The authorities referred to by counsel for the first and second defendants concerning the circumstances in which an authority to act as managing director might be implied from the conduct of the other directors do not support the submission that the scope of any such implied authority extends to a managing director making payments to themselves out of company funds without being expressly authorised by the company to do so.

253. Hosea’s evidence about his reasons for causing the Company to pay his wages and superannuation was not that QSH’s request for him to take on the role of manager in February 2012, or the conduct of the other directors in leaving the management of the Company to him in the period up to 2018, implied that he was authorised to pay wages to himself. On the contrary, Hosea gave evidence, and I have found, that he requested and QSH agreed for the Company to pay his wages in the amount of $700 per week net. Hosea believed that QSH was speaking on behalf of the Huang side of the family in requesting Hosea to take on the role of manager and in agreeing that the Company would pay those wages. [100] That belief was reasonable, having regard to the pattern of conduct to which I have referred at [247] above. In June 2016, QSH and Steven received a copy of the monthly reports that Hosea prepared for the period from 2010 up to that time. [101] Those monthly reports recorded the wages that Hosea caused the Company to pay to him. [102] There is no evidence that QSH or Steven asked any question, or made any complaint, about the wages payments recorded in those monthly reports. That strongly suggests that Hosea’s belief that he was entitled to wages of $700 per week net was consistent with the understanding of Steven and QSH at the time, and I so find.

     100. See [79]-[99] above,

     101. See [178] above.

     102. See [95] above.

254. For those reasons, I accept the submission made on behalf of the first and second defendants that it was not oppressive in the sense referred to at [236]-[239] above, for Hosea following his conversation with QSH in February 2012 during which he believed that QSH was speaking on behalf of the Huang side of the family, to cause the Company to pay net wages in the amount of $700 per week as and when it could afford to do so, and to cause the Company to comply with its legal obligations to remit the tax withheld from those wages to the Australian Taxation Office and to pay superannuation for Hosea’s benefit. I arrive at this conclusion more comfortably having regard to the facts that the total amount of wages in fact paid was less than Hosea would have earned from the job that he gave up in order to manage the Company, and that the total amount paid to and for the benefit of Hosea represents something less than 5 per cent of the $8,099,966 profits generated by the Company for the benefit of the unit holders in the Trust through the business that Hosea managed from February 2012.

255. The first element of the plaintiffs’ pleaded oppression claim also impugned Hosea’s role in causing the Company to record accrued liability for wages in respect of other members of the Huang and Chan families, and to pay superannuation for the benefit of those family members. [103] There are real questions about whether there was any proper basis for the Company to take this course, in circumstances where there is no evidence that the Company actually employed the persons in respect of whom wages were recorded and for whose benefit superannuation was paid. However, I accept the first and second defendants’ submission that this was not oppressive in the sense referred to at [236]-[239] above. It was an arrangement jointly proposed and agreed by Hosea and Jiamian, who were the directors treated as representing the Chan and Huang sides of the family respectively. The wages have not in fact been paid. The superannuation payments that have been made have benefitted each side of the family approximately equally. There is no evidence that the Huang family recipients of the superannuation payments have taken any action to disclaim an entitlement to superannuation and to cause those moneys to be repaid to the Company.

     103. See [133]-[139] above.

243. For completeness, I note that the plaintiffs’ pleaded allegation that the wages, associated taxation, and superannuation payments contravened s 181 and s 182 of the Corporations Act was not meaningfully pressed in closing submissions. The plaintiffs did not address any of the elements of either of those statutory provisions. By way of example only, the plaintiffs did not identify the purpose for which they contend that Hosea caused the Company to pay his wages and superannuation. I do not consider that the evidence would support a finding that the payments were made for any purpose other than to compensate Hosea for the work that he was asked to undertake, and did undertake, on the terms that he believed had been agreed in February 2012. Although I have not been assisted by any submissions from the plaintiffs about this issue, it does not seem to me that such a purpose would not be a proper purpose within the meaning of s 181, or that payments made for such a purpose would involve an improper use of Hosea’s position as a director within the meaning of s 182, in all the circumstances of this case.

244. The plaintiffs have failed to prove the factual bases of the second, third, and fourth elements of their pleaded oppression claim.

245. In relation to the second element, I have accepted Hosea’s evidence that he provided monthly reports and bank statements to QSH in 2016. There is no evidence that those bank statements omitted the period prior to 30 June 2013. Even if the evidence had established that Hosea neglected to provide bank statements for the period prior to 30 June 2013, I would not have held that this was oppressive in the sense referred to at [236]-[239] above in the absence of any evidence that any director of the Company requested a copy of the bank statements for that period from Hosea prior to the commencement of these proceedings, and having regard to the fact that any director would have been entitled to obtain a copy of those bank statements from the relevant bank if they had wished to do so.

246. In relation to the third element, the plaintiffs have not adduced evidence of any inaccuracies or absent records that have precluded them from approving the Company’s tax returns for the 2019 to 2023 financial years. I repeat my observations at [244] above.

247. The fourth element of the pleaded oppression claim fails by reason of the plaintiffs’ failure to prove the alleged $30,000 and $76,000 contributions for the reasons explained at [75] to [78] and [109] to [112] above.

248. In relation to the fifth element of the pleaded oppression claim, Hosea’s conduct in signing the false minutes was improper, but I do not accept that it was oppressive in the sense referred to at [236]-[239] above in circumstances where his co-directors were content to leave it to Hosea to manage the Company’s financial records, there is no evidence that Hosea intended to benefit himself or to harm the Company or any other person by signing the minutes, and the plaintiffs do not now contend that the financial statements that those false minutes purported to approve were inaccurate in any material respect. [104] The false minutes relating to Steven’s resignation as a director are inconsequential because Steven did in fact resign as a director, and his resignation was effective irrespective of whether the directors decided to accept it. [105]

     104. See [146]-[151] above.

     105. See [152] above.

249. In relation to the sixth element of the pleaded oppression claim, I do not consider that Hosea’s proposal in May 2022 to distribute the sum of $1,737,379.57 out of the Company’s funds was oppressive in the sense referred to at [236]-[239] above. Notwithstanding that clause 51 of the constitution of the Company provided for distributions to be determined by the directors, the Company had a history of paying distributions without any directors’ resolution having been passed, and the Huang family members had accepted such distributions without any objection or complaint in May 2018 and August 2018. [106] Through his solicitors, Hosea provided advance notice of the proposed distribution, and the basis on which he had calculated the amount of the distribution to which he considered that the Chan side of the family were entitled. When the plaintiffs commenced these proceedings seeking to restrain the proposed payment, relying on the resolution that Steven, QSH and CH had caused the board to pass on 3 February 2022, Hosea promptly gave undertakings to the plaintiffs and to the Court not to make the payment, and to preserve the status quo pending the determination of these proceedings. [107] I note in passing that the 3 February 2022 resolution demonstrates the power that the Huang family directors had always been in a position to exercise over decisions concerning the Company’s affairs. [108] It is clear from the manner in which these proceedings have been conducted on behalf of Hosea that he no longer intends to take any steps to a pay a distribution of $1,737,379.57 to the Chan side of the family, and that he intends for the Company to pay final distributions to unit holders in accordance with the orders of the Court in these proceedings. This was expressly confirmed by counsel for the first and second defendants in closing submissions.

     106. See [192]-[195] above.

     107. See [202]-[206] above.

     108. See [197]-[200] above.

250. In relation to the unpleaded element of the plaintiffs’ oppression claim concerning the $8,745 fee paid to Hosea in May 2016 in connection with the sale of unit 10 in the Mary Street development, the plaintiffs have failed to discharge their onus of establishing that the payment was not authorised in accordance with the informal way in which directors were in the habit of discussing and agreeing upon matters pertaining to the Company. The plaintiffs’ who bore the onus, failed to adduce any evidence from QSH or CH about whether they had any conversation about the fee with Hosea’s parents. That lacuna in the plaintiffs’ evidence is not filled by an inference that might be drawn from the failure of Hosea’s parents to address the issue in their affidavits that their evidence would not have assisted Hosea. [109]

     109. See [129]-[132] above.

251. For all of those reasons, the elements of the plaintiffs’ oppression claim, considered separately and as a whole, do not constitute oppression within the meaning of s 232 of the Corporations Act, particularly when considered in the context of the manner in which the parties dealt with one another in relation to the Company and its business, and the manner in which the Company’s business was managed, as described at [247] to [251] above. The plaintiffs’ claim for an order under s 233 of the Corporations Act requiring Hosea to account to the Company in respect of the wages and superannuation payments must be dismissed.

252. For completeness, I note that the first and second defendants did not rely on their pleaded limitation defences in relation to the oppression claim. As the plaintiffs’ other claims in these proceedings have failed, it has not been necessary to address those limitation defences.

Conclusion

266. It follows from my findings that CH did not make the disputed $30,000 contribution, and that Steven did not make the disputed $76,000 contribution, that the amount of the plaintiffs’ collective total financial contributions to the Company is $1,932,500. [110] As referred to at [16] above, it is common ground that the amount of the first, second and fourth defendants’ collective contributions is $2,594,092.55. Accordingly, the overall total amount of financial contributions is $4,526,592.55, of which the plaintiffs (collectively) contributed 42.69 per cent and the first, second and fourth defendants (collectively) contributed 57.31 per cent.

     110. See [16(3)] above.

267. It also follows from my dismissal of the plaintiffs’ claim for an order under s 233 of the Corporations Act for Hosea to account to the Company in respect of wages and superannuation that the final distribution calculations are to be undertaken on the basis that the total profits of the Company is the amount of $8,099,966.41 agreed by the parties, and on the basis that the parties have made financial contributions to the Company in the amounts recorded immediately above. [111]

     111. See [16(1)] above. Scenario 4.4 in the calculations submitted jointly by the parties on 17 November 2023 is the scenario that reflects my determination of the issues in dispute.

268. In accordance with the parties’ agreement as to the manner in which distributions of profits are to be calculated, and their agreed calculations submitted to the Court for the scenario that reflects the findings that I have made: [112]

1. the total amount of the final distribution payable to Steven, QSH and CH (collectively) as unit holders is $1,409,537.03, [113] which the parties consent to the Company paying to the plaintiffs (collectively) to be distributed between the plaintiffs in a manner determined by them; and

2. the total amount of the final distribution payable to the first, second and fourth defendants (collectively) is $2,065,823.48, [114] which the parties consent to the Company paying to the first, second and fourth defendants (collectively) to be distributed between them in a manner determined by them.

   112. See [16(2)] and [25] above.

   113. The parties have calculated that the amount of $1,409,537.03, when added to the distributions previously paid to the plaintiffs (collectively), represents 42.69 per cent of the $8,099,966.41 profits.

   114. The parties have calculated that the amount of $2,065,823.48, when added to the distributions previously paid to the first, second and forth defendants (collectively), represents 57.31 per cent of the $8,099,966.41 profits.

269. As I understood the parties’ submissions, no issue in relation to interest arises in circumstances where each of the plaintiffs’ claims has failed.

270. The parties are to bring in short minutes of order giving effect to these reasons for judgment within 14 days. The terms of those short minutes of order will need to reflect that, whilst the Court has determined the issues in dispute, the payment of the final distribution to the plaintiffs (collectively) and to the first, second and fourth defendants (collectively), rather than to individual unit holders in accordance with the terms of the trust deed, is a matter of agreement between the parties.

271. If there is a dispute in relation to costs, the parties are to file and serve written submissions in relation to costs not exceeding three pages in length, and to send those submissions to my Associate together with the short minutes of order.

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Endnotes

Decision last updated: 12 June 2024