Jawhite Pty Ltd v Trabme Pty Ltd - [2018] QSC 174

SUPREME COURT OF QUEENSLAND

CITATION:

Jawhite Pty Ltd v Trabme Pty Ltd & Ors [2018] QSC 174

PARTIES:

JAWHITE PTY LTD
ACN 106 661 287

(Applicant)

v
TRABME PTY LTD
ACN 154 609 159

(First Respondent)

BOEDRY PTY LTD
ACN 154 609 882

(Second Respondent)

TRENT ANDREW RYAN

(Third Respondent)

VESTWELL PTY LTD
ACN 106 478 808

(Fourth Respondent)

ADAM BOLAND

(Fifth Respondent)

MARK EDWARDS

(Sixth Respondent)

FILE NO/S:

S No 2310 of 2014

DIVISION:

Trial

PROCEEDING:

Application and counter-claim

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

2 August 2018

DELIVERED AT:

Brisbane

HEARING DATE:

20-24 March 2017, 27-30 March 2017, 15 June 2017, 29-31 January 2018, 1-2 February 2018, 5-9 February 2018, 16 March 2018

JUDGE:

Boddice J

ORDER:

I shall hear the parties as to the appropriate orders, and costs.

CATCHWORDS:

CORPORATIONS – MEMBERSHIP, RIGHTS AND REMEDIES – MEMBERS' REMEDIES AND INTERNAL DISPUTES – OPPRESSIVE OR UNFAIR CONDUCT – WHAT CONSTITUTES – CONDUCT OF OR RELATING TO DIRECTORS – where the Applicant and Third Respondent contracted with the Fourth, Fifth, and Sixth Respondents to merge their respective real estate businesses – where the First and Second Respondents constituted the merged business entities – where the Applicant was a shareholder of the merged business – where the Third Respondent was a shareholder, director, and employee of the merged business – where the Applicant and Third Respondent claimed the conduct of the Fifth and Sixth Respondents, whom were also shareholders and directors of the merged business, was oppressive – where the Fifth and Sixth Respondents had terminated the Third Respondent’s employment as CFO of the merged business – where the Fifth and Sixth Respondents prevented access by the Third Respondent to information relating to the merged business and that business’ premises – where the Fifth Respondents arranged for the relocation of the business premises to a property beneficially owned by the Fifth Respondent – whether that conduct was oppressive – where the Applicant and Third Respondent commenced negotiations to sell their shares in the merged business – where the Fifth and Sixth Respondents required corrections to the recording of assets, namely the rent roll, before providing consent to the sale – where the proposed sale did not proceed – whether the conduct of the Fifth and Sixth Respondents in relation to the sale was oppressive –where the Fifth and Sixth Respondents requested further security and financial contributions by the Applicant and/or Third Respondent – whether these requests were reasonable – where the Fifth and Sixth Respondents’ gave instructions for the use of the Second Respondent’s money to pay for legal costs incurred in defending the interests of the First, Second, Fourth, Fifth, and Sixth Respondent in these proceedings – whether this use of funds was appropriate

CORPORATIONS – MEMBERSHIP, RIGHTS AND REMEDIES – MEMBERS' REMEDIES AND INTERNAL DISPUTES – PROCEEDINGS ON BEHALF OF COMPANY BY MEMBER – STATUTORY DERIVATIVE ACTION – where payments from the funds of the merged business were made to the Fourth, Fifth, and Sixth Respondents – where the payments were recorded as directors’ expenses, management fees, interest payable on a loan, and other amounts – where the payments included an amount paid in respect of a boat purchase by the Fifth Respondent – whether these payments were improper payments

CORPORATIONS – MANAGEMENT AND ADMINISTRATION – DUTIES AND LIABILITIES OF OFFICERS OF CORPORATION – FIDUCIARY AND RELATED STATUTORY DUTIES – DUTIES INVOLVING CONFLICTS OF INTEREST – MISUSE OF COMPANY FUNDS – where the Third Respondent caused the Applicant, and other entities in which he had an interest, to be paid funds from the merged business – where the Third Respondent transferred monies held in trust by the First Respondent to the general account of the Second Respondent, resulting in the trust account of the First Respondent being overdrawn – where the Third Respondent then reimbursed the trust account – whether the Third Respondent misappropriated the funds of the merged business

TRADE AND COMMERCE – OTHER REGULATION OF TRADE OR COMMERCE – RESTRAINTS OF TRADE – GENERALLY where the Third Respondent engaged in transactions to sell properties, not the subject of the merged business, to potential clients of the merged business – where those contracts of sale stated the Third Respondent was to receive commission – where no commission was in fact received – whether the Third Respondent breached restraint of trade obligations in respect of the merged business

EQUITY – EQUITABLE REMEDIES – EQUITABLE COMPENSATION – OTHER CASES – where the finance facilities of the merged business were due for renewal – where the Applicant and Third Respondent refused to provide further security or capital to renew those facilities – where the Applicant and Third Respondent had obligations to do so – whether loss or damage has been suffered

Corporations Act 2001 (Cth), s 232, s 233

Harding Investments Pty Ltd v PMP Shareholdings Pty Ltd (No 2) [2011] FCA 567, cited

HNA Irish Nominee Ltd v Kinghorn (No 2) (2012) 290 ALR 372, considered

Re Spargos Mining NL (1990) 3 WAR 166, approved

Tomanovic v Global Mortgage Equity Group Pty Ltd [2011] NSWCA 104, cited

Wayde v NSW Rugby League Limited [1985] 180 CLR 459, applied

COUNSEL:

N Shaw for the Applicant and Third Respondent

Each of the 1st, 2nd, 4th, 5th and 6th Respondents appeared on their own behalf

SOLICITORS:

S Nutley for the Applicant and Third Respondent

Each of the 1st, 2nd, 4th, 5th and 6th Respondents appeared on their own behalf

Background

Prior to January 2012, the third respondent operated a real estate agency under the Elders franchise at Redcliffe in the State of Queensland. The third respondent purchased the franchise in November 2007 through the applicant. During the same period, the fifth and sixth respondents, through the fourth respondent, operated real estate agencies at Redcliffe and Acacia Ridge under the Ray White franchise.
In late 2011, the third, fifth and sixth respondents agreed to merge the real estate businesses operated by the applicant and the fourth respondent. Central to that merger was the rent rolls of the applicant and the fourth respondent. Those rent rolls remained the property of the applicant and the fourth respondent respectively, but the merged business acquired the right to manage those rent rolls.
The merged business, conducted by the first and second respondents. It operated real estate agencies at Redcliffe and Acacia Ridge, under the Elders franchise commenced operation in January 2012. Some months later, the merged business acquired the rent roll of an agency conducted under the Elders franchise at Springwood. The merged business moved to Springwood from Acacia Ridge. The third and fifth respondents were based at Redcliffe. The sixth respondent was based at Springwood.
Ownership of the shares in the first and second respondents was based on an independent valuation of the rent rolls of the applicant and the fourth respondent. Those valuations were determined from information provided by the applicant and the fourth respondent. After receipt of those valuations, the shareholdings were determined to be 34% to the applicant and 66% to the fourth respondent.
Within the first 12 months of its commencement, differences emerged between the third, fifth and sixth respondents as to the conduct of that business. Steps were taken to address those issues. Those steps included the allocation of designated functions for the third, fifth and sixth respondents. Despite those steps, distrust continued between the respective parties. Ultimately, the third respondent was terminated from his employment with the merged business. Shortly thereafter, the third respondent resigned as a director of the first and second respondents and commenced this proceeding.
Prior to trial, receivers were appointed to the first and second respondents.
Pleadings
The applicant initially commenced this proceeding against the first and second respondents. The applicant’s claim was defended by those respondents, who instituted a counter-claim against the applicant and third respondent. The fourth, fifth and sixth respondents were later joined as parties.
In their most recent Statement of Claim, the applicant and the third respondent alleged:
(a)The fifth and sixth respondents, as directors of the first and second respondents, engaged in conduct which excluded the third respondent and the applicant from management and use of funds and resources of the merged business.
(b)The fifth and sixth respondents operated the merged business without proper regard for the interests of the applicant as a shareholder and unit holder and in order to benefit their own interests in preference to the applicant’s and the third respondent’s interests as a whole.
(c)The fifth respondent gave the third respondent a new employment agreement which reduced the third respondent’s salary and thereafter purported to suspend, and then terminate the third respondent’s employment on improper grounds.
(d)Thereafter the third respondent was prevented from attending any premises maintained by the merged business, denied access to documents and information retained by the merged business and denied receipt of any distribution, wages or return from the merged business.
(e)The fifth and/or sixth respondents failed and refused to provide relevant information to the applicant and/or the third respondent, notwithstanding requests.
(f)The fifth and/or sixth respondents refused to consent to a sale of the applicant’s shares in the merged business.
(g)The fifth and/or sixth respondents purported to issue new share capital and request further security and financial contribution from the applicant and/or the third respondent without proper grounds.
(h)The fifth and/or sixth respondents caused the records of the second respondent to be altered to reflect a loan by it to the applicant when there was no such loan.
(i)The second respondent occupied other premises, notwithstanding the existence of a lease of a property beneficially owned by the third, fifth and sixth respondents.
(j)The fifth and sixth respondents gave instructions for the use of the second respondent’s money to pay legal costs for the purposes of advancing the interests of the fourth, fifth and sixth respondents as against the interests of the applicant and the third respondent. Such instructions were not given in order to protect any legitimate interest of the first or second respondents in this proceeding.
The applicant and third respondent claimed this conduct resulted in the affairs of the first and second respondents being conducted in a manner contrary to the interests of its members as a whole and was oppressive, unfairly prejudicial and discriminatory against the applicant and the third respondent. Such conduct was carried out contrary to duties owed by the second respondent to the applicant as a consequence of which the applicant has suffered loss and damage.
The applicant also claimed the conduct of the fourth, fifth and sixth respondents was misleading and deceptive and in breach of duties owed by the fifth and sixth respondent to the first and second respondents as a consequence of which the first and second respondents have suffered loss and damage.
In their most recent defence, the first, second, fourth, fifth and sixth respondents:
(a)Denied they engaged in oppressive conduct, or in misleading and deceptive conduct or in breach of any duties.
(b)Alleged the third respondent failed to perform his duties of employment, as a consequence of which he was demoted.
(c)Alleged an investigation revealed the third respondent had performed his duties negligently and was otherwise engaged in serious misconduct necessitating his suspension and subsequent termination as an employee of the second respondent.
(d)Alleged the management of the first and second respondents after the third respondent’s termination, was in accordance with the unit holders’ agreement and in the best interests of the first and second respondents.
By way of counter-claim, the first, second, fourth, fifth and sixth respondents alleged:
(a)The applicant and the third respondent engaged in misleading and deceptive conduct in misrepresenting the valuation of the applicant’s business for the purposes of creation of a merged business, resulting in the first, second, fourth, fifth and sixth respondents suffering loss and damage.
(b)The third respondent acted contrary to his director’s duties to the first and second respondents and misappropriated company funds.
(c)The applicant and the third respondent re-directed company funds and misappropriated trust funds and engaged in unauthorised transactions.
(d)The applicant and third respondent acted in breach of their restraint of trade undertakings to the second respondent by inducing, soliciting or procuring business from the second respondent.
(e)The applicant and the third respondent failed to provide security in accordance with their obligations in respect of the operation of the merged businesses and failed to contribute capital and repay loans in accordance with such obligations.
In reply, the applicant and third respondent denied any misleading and deceptive conduct, breach of duty or breach of contractual obligations, misappropriation of funds or any other unauthorised transactions.
Evidence
Third respondent
In the latter half of 2011, the third respondent had an informal discussion with the sixth respondent about the market and their businesses in general. They briefly discussed a possible merger of their real estate businesses. The sixth respondent said his business partner, the fifth respondent, was in Redcliffe that day. The sixth respondent returned to the third respondent’s office later that day indicating interest in a merger.
The third, fifth and sixth respondents had a number of meetings. It was clear the businesses were similar. An agreement in principle was reached to merge businesses. The merged business would have offices at Redcliffe and Acacia Ridge. Internally, there would be a manager of sales, a manager of property management within Redcliffe and a manager of the Acacia Ridge office. It was agreed the merged business would operate under the Elders franchise.
The third respondent scheduled a meeting with his solicitor, Rod Holloway and his accountant, Peter Di Tommaso. Holloway suggested a separation between the licensed entity and the operating entity in order to keep assets away from liabilities. The licensed entity would hold the corporate license and be the franchisee. That entity was the first respondent. The operating entity was the second respondent.
The third, fifth and sixth respondents agreed that for the first three months, the merged business would employ all employees of the previous businesses, to ensure continuity of staff, particularly in property management. The third respondent’s wife, would continue to do some work in the merged businesses. The third respondent’s salary would be split between the third respondent and his wife, for taxation purposes. The third respondent said this arrangement was beneficial to the merged business. His wife was undertaking 15 to 20 hours work, particularly in relation to family properties owned by the third respondent’s wife and members of her family, without receiving any additional wages. . Both the fifth and sixth respondents agreed that arrangement was fine.[1]
[1] T1-67/24.
The third, fifth and sixth respondents agreed the merged business would take on the liabilities of the previous businesses for equipment to be used in the merged business. The fourth respondent owned all of the possessions in its office. The applicant owned all of its possessions, apart from a photocopier. The third respondent did not believe the merged business would therefore need finance requirements for office equipment or fit out. There was a discussion about vehicles. Both the fifth and sixth respondents were leasing their vehicles. It was agreed the merged business would pay for fuel, insurance and servicing of the vehicles, but not leasing requirements.[2]
[2] T1-70/15.
In November 2011, the third respondent was emailed a spreadsheet listing the financial commitments for the fourth respondent so that a proposed cash flow could be sent to the National Australia Bank and Westpac Bank for their lending consideration for the merged business. The third respondent discussed the contents of the spreadsheet with the fifth and sixth respondents prior to the merger. The third respondent subsequently found out there were other agreements being met out by the second respondent. The third respondent never authorised payment of these additional agreements.
After the discussions were completed, the third respondent instructed Holloway to prepare documents for acceptance by the fifth and sixth respondents. Those documents included a management agreement for the first respondent to manage the rent rolls of the applicant and the fourth respondent. This procedure was to prevent the need for new management agreements, negating capital gains tax implications from the transfer of the rent rolls and any associated stamp duty costs. The management agreement prepared by Holloway, was sent to the legal representatives for the fifth and sixth respondents, Wallace Davies Solicitors. The document was adopted without any changes.
The third respondent signed a lot of documents at the time, but could not specifically remember signing the management agreement. Holloway also prepared a shareholders agreement for the second respondent, which was sent to the fifth and sixth respondents’ solicitors. The third respondent believed it was signed by all parties towards the end of December 2011. There was also prepared a unit trust deed, a unit holders’ agreement and constitutions for both the first and second respondents.
Both the applicant and the fourth respondent used the same valuer, Gil Wright & Associates, to value their respective rent rolls. Gil Wright provided separate valuations for the fourth respondent’s rent rolls at Redcliffe and Acacia Ridge, for the applicant’s rent roll at Redcliffe, and for the proposed merged rolls. This latter valuation was sought because a merger of the entities would result in savings in business expenses. After receipt of these valuations, it was agreed the shareholding ratio for the merged business would be 34% to the applicant and 66% to the fourth respondent.
The applicant and fourth respondent had current liabilities with Westpac and the National Australia Bank respectively. The third, fifth and sixth respondents agreed to use Westpac as financier for the merged business, which borrowed $1.8m, using the rent rolls of the applicant and the fourth respondent as security. There was a requirement for the parties to provide additional security. The third respondent provided his residence as security.
Two separate loans were established, one for $1.2M and another for $600,000. There was a benefit in having some of the money fixed and the balance variable. Of the money advanced, $1.2m was paid to National Australia Bank on account of the fourth respondent, and $600,000 was paid to Westpac on account of the applicant. The applicant used its money to pay down its overdraft facility. The fourth respondent used its money to repay a commercial bill facility.
The merging of the separate rent rolls had to be undertaken mechanically before the commencement of the merged business, as the applicant and the fourth respondent used different management software programs. Staff were located in the Ray White Redcliffe office from late November / early December 2011, to manually enter the applicant’s rent roll into the software program. By the start of the merged business, one software program was being used to manage the combined rent rolls.

The merged business commenced operation on 2 January 2012. The third, fifth and sixth respondents agreed on each being paid $75,000 per year together with $5,000 per annum director’s expenses to cover home or out of office expenses. Those payments were initially made into the parties’ personal accounts, despite the payments being made under a contractor invoice from the applicant and the fourth respondent to the merged business. Due to the tax implications of that arrangement, the contractor arrangement ceased towards the end of 2012. Thereafter, they were paid as employees.
Each director had their own individual responsibility for parts of the merged businesses. Whilst hiring of staff was a joint responsibility of the third, fifth and sixth respondents, the decision to hire staff on a replacement basis was more or less within their respective area of responsibility. All financial and management decisions would be made by the board of directors.
The initial arrangement lasted until approximately May 2012, when the merged business agreed to purchase the rent roll of Elders Springwood. The purchase price was again set after a valuation of the rent roll by Gil Wright. The third respondent’s responsibilities shifted to include management of that process. After settlement of that purchase, in August 2012, the third respondent undertook responsibility for sourcing new premises for the merged Acacia Ridge/Springwood offices. At this time, the fifth respondent moved into having responsibility for both sales and property management at Redcliffe. The sixth respondent was licensee of the merged Springwood and Acacia Ridge offices, overseeing sales, property management and all staff matters.
In about June 2012, the merged businesses contracted to purchase a property at 303 Oxley Avenue Margate. The fifth respondent suggested its purchase. The property fitted their requirements. It had a 22 car park at the rear, would fit the merged business and was on a prominent road, increasing the potential for signage. The third respondent conducted all negotiations with the vendor. The third respondent subsequently executed a lease on that property with the merged business,[3] both as landlord and as tenant. Neither the fifth or sixth respondents were in the office, and the lease needed to be returned to the bank. The fifth and sixth respondents were given copies of the lease. They discussed the rent to the paid for the term of the lease. It was to remain fixed for that term. The administration of the merged business was to be run out of that central location.
[3] Exhibit 150.
To purchase the property, the third, fifth and sixth respondents formed a corporate superannuation fund. The third respondent had responsibility for the fit-out of those new premises and ensuring it was ready for operation at the time of the planned move from their old Redcliffe premises between Christmas 2012 and New Year 2013. The third respondent also undertook responsibility for the administration of financials during that period. At that same time, the fifth respondent’s responsibilities increased to include property management and sales for both Redcliffe and Springwood. The sixth respondent remained as licensee overseeing sales of Springwood.
In September 2012, Sandy Dartnall, who had administered the accounts since commencement of the merged business, provided the third respondent with a folder of information. Within that folder were agreements for a number of fourth respondent equipment hires, which had not been disclosed to the third respondent. Dartnall told him the fifth respondent had told her to set up the direct debits. These amounts were not included in the cash flow projections provided to potential financiers.
The third respondent raised these amounts with the fifth and sixth respondents. He was told if they were not in the agreed amounts, to put them on their director’s account. Dartnall was instructed by the sixth respondent to keep a spreadsheet of those amounts. That spreadsheet was never produced to the third respondent, or recorded in MYOB. The third respondent made complaints about this all through 2012 and 2013. It was agreed the fourth respondent would repay back to the second respondent, a total of $36,226.56. A cheque for $33,000 was paid. The balance was still outstanding.
Around the start of September 2012, at the time of the merger of the Acacia Ridge and Springwood rent rolls, Sandy Dartnall was spending more time in those offices to assist in that merger. The third respondent saw the need for someone to take control of the financials of the business. He took over that responsibility. When he did so, there was not one bank reconciliation that matched MYOB transactions to the bank statement. Cheques did not appear in MYOB. An accountant came to the same conclusion.
The financial administration of the merged business had been a complete mess. The property management records were not up to date or current. It was a near impossible task to determine the actual cash flow and the position of the business. They were provided with no financial reports. The only way to keep track of its performance was by looking at the bank account for the first six months. An audit had revealed the merged business had lost management of a number of rental properties.
The third respondent set about trying to correct the records. It required a rebuild of the MYOB accounts. It caused significant problems with the BAS period in September 2012. By April/May 2013, the accounts were beginning to reflect the true position of the business. The third respondent was sending each director a profit and loss statement for each month as well as quarterly reports from the end of December 2012. Westpac as their financier required a number of reports within 28 days of the end of each BAS period, including full financial status of the rent roll profit and loss for the year.
The third respondent’s understanding was that anything that would have a financial implication on the business and change its projected cash flow had to be a unanimous decision between all directors and unit holders. That was in accordance with the written agreements. However, a number of sales staff were employed without input from the third respondent. The third respondent was concerned at this time because during the merger of the two offices at Redcliffe some management of properties had been lost. He could see the same thing happening at Springwood. They were carrying all of the staff from the Acacia Ridge office and Elders Springwood. The merged business was currently operating outside of the benchmark for real estate businesses in terms of salaries for property management.
The third respondent raised his concerns with the fifth respondent in early 2013. The fifth respondent believed it was all about cost for value. The third respondent’s position was that the business had to work within its limitations. The merged business was not “exactly swimming in money”.[4] On a number of occasions, the fifth respondent gave members of staff a wage rise. The third respondent would find those increases had been granted when staff made complaints of being paid incorrectly. The third respondent was at that stage processing the payroll. The third respondent did not agree with the wage rises. Wage increases should have been joint decisions.
[4] T2-15/32-33.
In late 2012, the fifth respondent used funds from the second respondent to purchase a boat. The third respondent spoke to the fifth respondent in January 2013 about recovering those funds. The fifth respondent said he would repay the sum advanced, less $5,000 to represent his director’s expenses. The fifth respondent said the sixth respondent had no issues with that and he had “all voting rights moving forward” for the sixth respondent.[5] The sixth respondent never told the third respondent he had given his voting rights to the fifth respondent.
[5] T2-24/30.
Whilst the third respondent had no objections to the business advancing the money for the boat initially, he objected to the fifth respondent not repaying the whole sum back. The fifth and sixth respondents had already claimed the $5,000 agreed between the parties as a yearly director’s entitlement as part of personal expenditure claimed from the business in its first calendar year. Some $15,000 to $17,000 was allocated in MYOB as being spent on directors’ expenses by the fourth respondent. It was allocated in MYOB against the fourth respondent’s loans.
After the MYOB accounts had been rebuilt, towards the end of 2012, the third respondent sent a spreadsheet to the other directors in relation to directors’ expenses. He also sent a spreadsheet towards the start of 2012, setting out pre-merged commissions for each office, as well as a list of set up costs on top of the normal operation costs. He sent numerous emails in relation to directors’ expenses. He was concerned monies were being used for personal use.
In an email dated 9 March 2013, the fifth respondent asked whether the third respondent wanted the matter evened up “through the directors’ payments?”[6] The third respondent subsequently allocated a sum of $3,136 to himself. The bookkeeper made that entry, after discussions with him. He indicated it should be entered as director’s equalisation payment. The bookkeeper entered it as franchise fees.
[6] T5-57/30 [Exhibit 98].
In January 2013, there had been discussions about restructuring the management roles so that staff had an identifiable reporting structure. A staff survey had raised significant issues in the conduct of the merged business. The survey idea originated from the fifth respondent. It was carried out by an independent officer of Elders. All staff members were asked a series of questions. Elders collated those responses on an anonymous basis. Many negative issues were raised about the third, fifth and sixth respondents.
The third, fifth and sixth respondents met with Allan Dawson, the State franchise manager for Elders Real Estate, and Brendon Whipps, the National franchise manager, in March 2013. The March meeting arose as a means by which Elders could assist a mediation type process to resolve internal management issues. The meeting lasted about 40 minutes. The third respondent did not know the meeting was being recorded by the fifth respondent on his telephone. He accepted the transcript was “pretty accurate”.[7]
[7] T2-34/12-15.
The third respondent was unhappy the meeting had been recorded by the fifth respondent. He did not think it was the right thing to do. In any event, what was said at the meeting had no bearing on what was to be done going forward. The third respondent felt he had received a dressing down from the fifth respondent. His body language “would have been a true reflection of [his] thoughts of the meeting”.[8] His response to Whipps’ questions were in not consistent with his thinking at that time. However, he did not say anything at the meeting to indicate these were his thoughts.
[8] T2-36/15.
The third respondent thought the meeting was a set up by the fifth respondent, who had previously spoken to Whipps and Dawson about specific issues within the business. An issue raised by Whipps in the meeting was processing of pays. None of that had been part of the survey in terms of performance. The third respondent took the meeting to be an attack on his ability. He thought the sixth respondent had the same feelings. The third respondent did not think it was Whipps’ place to tell them what to do.
One of the reasons he was angry was that the meeting was all about the staff and not about the directors and unit holders. The third respondent accepted he was recorded as saying the message to be given was that there was a united front, with the directors to present how the business would be structured so that everyone knew who to report to, what their duties were and where the business was heading. However, at no stage did the third respondent agree there was going to be one person.
Whilst Whipps expressly said at the meeting “if you don’t want one decision maker, now is the time to have the conversation”, to which the third respondent responded “okay, well, yeah,” they were to go away and formulate a management plan. His agreement was responding to that proposal, not one decision maker.[9] Even if there was one decision maker in terms of how the business operated internally, there was still a need for a structure. That was what needed to be agreed in the next seven days.
[9] T7-50/45.
A difference of opinion arose between the third and fifth respondents as to the true outcome of that meeting. The fifth respondent interpreted the outcome as being an agreement that one person would have all the say in the business. That was in accord with Whipps’ suggestion at the meeting. The third respondent disagreed with that approach. It was not consistent with the unitholders or shareholders agreements. The fifth respondent took it upon himself to prepare a proposed structure. The third respondent agreed to go ahead with the process as the issues needed to be sorted out.
In April 2013, the third, fifth and sixth respondents met to discuss a structure. The fifth respondent asked the third and sixth respondents whether everyone was still wholeheartedly 100 percent behind the business. They each answered yes. The third respondent was surprised as he expected the sixth respondent to say he was ready to sell.[10] By that stage, the third and fifth respondents had communicated regularly about different structures and different cash flow positions. A cash flow was handed to each person. There were job descriptions for the CEO and CFO positions.
[10] T2-29/25.
All three agreed that a structure would be taken on board and used for the business. The fifth respondent was to assume the position of CEO on a salary of $115,000 per annum. The third respondent was to assume the position of CFO on a salary of $85,000 per annum. The sixth respondent would become the sales manager at Springwood, to be paid on a debit/credit basis where he would receive a wage together with bonuses for sales performance. Superannuation was to be on top of each of those salaries.
The third respondent provided a template for duties for a CEO which he obtained from a job placement website. Part of the role of CEO was employing and terminating staff, but the CEO had to operate within the unit holders’ agreement. Adding new staff and replacement would still need all directors to agree. The position did not give the CEO unilateral financial control of the business. The third respondent’s recollection was that it was actually discussed that this duty was still subject to the requirement that every director agree.[11]
[11] T7-52/24.
After the third, fifth and sixth respondents commenced to work in their new position descriptions, they were paid the newly agreed salaries. The third respondent discussed with the fifth respondent the need to trim excess staff. The third respondent was concerned that by the end of May there would not be enough money to pay the BAS and superannuation liabilities for the first quarter. His concerns were confirmed by a financial health check undertaken by an independent firm, Haines Norton, in May 2013. Their recommendations “were nearly exactly the same”.[12] None of these concerns were being addressed in the business.
[12] T2-42/3.
The third respondent had tabled a number of financial considerations at the April meeting. People needed to be removed and other staff placed on a sales commission basis. Those financial considerations were not discussed then as the fifth respondent closed the meeting. The third respondent thereafter requested numerous meetings between the directors. All of those requests were disregarded by the fifth and sixth respondents. There was always an excuse as to why a meeting could not be held between them.
After the fifth respondent commenced as CEO, the fifth respondent prepared a proposal for a financial health check by the independent firm, Haines Norton. That proposal, sent by email dated 7 May 2013, contained different duties to those agreed to by the third, fifth and sixth respondents at the meeting in April 2013. The email set out duties that were part of the duties in the previous proposal for the CFO. The third respondent undertook some of the duties under the title of ‘operations manager’.
By May 2013, the third respondent was in negotiations with Mark Gibbons to buy the applicant, thereby acquiring its shares in the merged business. The third respondent was introduced to Gibbons by the fifth respondent in late 2012. At that time, the third respondent understood the sixth respondent’s share of the business would be bought by Gibbons, who would be a passive investor. The fifth respondent said the sixth respondent did not want to be part of the merged business. The third respondent never spoke to the sixth respondent about his position at that time.
The third respondent advised his bank of the possibility of the sale of the applicant, in an email dated 19 May 2013, raising the transfer of personal securities.[13] This email was sent at the start of negotiations. The third respondent believed an agreement would be reached in terms of price and contractual arrangements. On that basis, the third respondent suggested to the fifth and sixth respondents that he would not attend a planned meeting to be held on 31 May 2013.
[13] Exhibit 137.
In the middle of May 2013, the third respondent was removed as CFO by the fifth respondent who said he would no longer be paid that salary. If he wished to remain working in the business he would be employed on a debit credit sales person basis, being paid $45,000 per year. The fifth respondent said the third respondent was being removed as CFO as he was not performing the role correctly. The BAS had been recorded incorrectly and there were many issues in relation to staff being paid incorrectly.
It was alleged the third respondent had lodged an incorrect BAS statement for the first quarter. The third respondent said the BAS statement was lodged through the accountant’s office. The third respondent accepted the financial health check had raised a suggestion the BAS may have been incorrect but said he was never told in what way it was actually wrong. He had a discussion with their bookkeeper. He contended the MYOB records correctly recorded those items. The bookkeeper said they had not been recorded correctly. All of these conversations occurred after his removal as CFO.
The payroll issues stemmed from the third respondent not being made aware of changes to salary arrangements. Staff were being employed without a signed employment agreement. The third respondent was not being told the basis for that employment. He was required to obtain the necessary details to allow payment through MYOB. It made his position impossible in terms of paying staff correctly or at all. He had raised these concerns with the fifth respondent who disregarded them.
The third respondent told both the fifth and sixth respondents the decision to remove him as CFO was not fair and there was no justification. Even if there were a litany of underpayments, or no payments, and significant errors in the BAS lodgements and activity statements, it was not proper for the fifth and sixth respondents to remove him as CFO. A number of those errors were out of his control. They were not his mistakes. The third respondent expected they would follow the normal path of talking to an employee about performance. That was what had been done with all staff in the merged business previously. The third respondent was not afforded that opportunity.
Despite that indication, in the second last week of May 2013 the third respondent was sent a new workplace agreement by which he was to be employed on a debit/credit sales basis on a salary of $45,000 per annum. He was told if he did not sign that agreement he would not be paid. The third respondent refused to sign the workplace agreement. In his view, all three directors had to agree on directors’ workplace agreements. He sent back an amended agreement. Terms were never agreed and he did not ever sign a workplace agreement. After two weeks he was paid again on the basis of a salary of $45,000 per year. He did not ever agree to receive that reduction in salary. That salary did not include any payment to the third respondent’s wife. The fifth respondent banned her from working in either of the offices at the start of May 2013.

The third respondent told the fifth respondent he was forcing him to get a second job, which he did in the first week of July 2013, working for a house builder selling new home builds. The fifth respondent said “two-thirds of the company had voted this way and that’s what was going to happen.”[14] The third respondent said that was not the way the business was to be conducted by them. The fifth respondent replied the majority had spoken. The fifth respondent adopted the same approach to the sixth respondent, who was placed on a commission only agent basis. The sixth respondent complained about that position towards the end of May 2013. The fifth respondent indicated the sixth respondent had agreed to the new arrangement.
[14] T2-46/20.
By email dated 24 May 2013, the third respondent expressed his dissent to the proposal that all financial decisions be made by someone without unanimous support of all directors. As a business owner, he was not happy with that scenario. If someone wanted to make all the decisions, they could be the sole owner and buy him out under his terms. At the time that email was sent, his pay had been stopped the previous day. After that email the fifth and sixth respondents came back to try and assist in the sale of his shares.
The third respondent would not sell to the fifth or sixth respondents. He made a threat that if the share sale to Gibbons did not go through, there would be dire consequences for the merged business, including the fifth and sixth respondents. The threat included withdrawal of his security, which could have caused the company to fail. He was protecting his family at that stage. The security could have been replaced at the bank.
The third respondent also made a threat to terminate sales people who worked for the merged business. Most of the sales people by that stage had been employed without his knowledge. Whilst he believed the hiring and firing of employees was to be by a unanimous decision of directors, he was entitled to threaten to terminate a volume of the sales force because the business was not meeting its financial commitments and some action needed to be taken immediately. He had an entitlement to terminate the staff, without giving notice, because they were all within their probationary period.
The third respondent agreed he was at that time asking for more money himself. He was only asking for the same level of money as was paid to him previously. He accepted that in an email at that time he had indicated that “what staff think is of little consequence to me”. Those staff did not have to make financial decisions for the business. They did not have directors’ financial exposure. His house was on the line.
The third respondent later received a copy of a signed workplace agreement for the fifth respondent from Sandy Dartnall, asking the third respondent to sign off on it. It included two bonus payment structures. One was based on revenue generated through sales commission, the other through property management fees. The third respondent refused to sign the fifth respondent’s workplace agreement. He sent an email indicating he completely opposed it. It did not make sense financially for the business at that time. The contents of that agreement had not been discussed or agreed to by directors. He only discussed and agreed on the terms of the salary. There was no discussion about bonuses.
The third respondent did not get a chance to see that workplace agreement before it was signed by the fifth respondent. He was not consulted for his input in relation to that agreement, or the agreements for himself and the sixth respondent. The third respondent did not ever pay any of the bonuses to the fifth respondent in accordance with that agreement. He had been removed from the position as CFO. Dartnall was processing all pays at that stage. He does not know if bonuses were paid to the fifth respondent.
The third respondent subsequently saw the sixth respondent’s workplace agreement. It had been signed by the sixth respondent. It was in line with what had been the financial considerations discussed between the parties. The third respondent never agreed to the sixth respondent being employed on this basis. He would have been agreeable to it had all other financial considerations that were agreed in April been met.
The third respondent constantly asked for a directors’ meeting to discuss the directors’ workplace agreements. By late May or early June 2013 this was a priority. No meetings ever occurred as they were continuously postponed, with the fifth or sixth respondents not making themselves available. There was never a directors’ meeting at which those arrangements were approved by the directors.
In June 2013, a dispute arose with Dartnall who contended gross wages included superannuation. The third respondent said superannuation was on top of the gross salary figure. Subsequent to this dispute, there was a meeting of the directors on 18 June 2013. By that time, the third respondent had reached what he understood to be a concluded sale agreement with Gibbons, who was to buy the applicant. At this meeting, the fifth and sixth respondents both said they would give their permission for the sale to Gibbons. The franchisor had already given permission, as required in the franchise agreement.
A share sale agreement was prepared as was a restraint of trade document. The third respondent’s entities would receive around $330,000 for the rent roll component. After plant and equipment and restraint of trade was taken into account, the sale price was around $400,000.[15] That price was working on a 2.35 multiplier. It was reduced from 2.5 following due diligence by Gibbons. There was to be an adjustment to allow for the third respondent to contribute $8,000 for the applicant’s share of an outstanding tax liability of the second respondent, from the first BAS quarter. There was no discussion about a $600,000 loan to the applicant from the second respondent.
[15] T4-11/31.
The deed of restraint document was signed in July 2013. His solicitor sent it to Gibbons’ legal representative. The third respondent’s entity “Sport be in it”, did not receive any compensation for signing the deed of restraint agreement. It would have received $20,000 by way of consideration for that restraint, as part of the purchase price. The restraint applied both to the third respondent, and his wife.
On 13 August 2013, the fifth respondent sent a notice suspending the third respondent’s employment with the second respondent. The third respondent responded that there was no power to suspend him. By subsequent notice, the third respondent was informed of the termination of that employment. After his termination, he no longer had access to the MYOB file or to any other business records of the first and second respondents. He was denied access to emails and to the premises. He was paid only some of his outstanding superannuation. He was owed leave entitlements.
The notices of suspension and termination raised a number of issues in relation to the third respondent’s work performance and other conduct. The fifth respondent accused the third respondent of having committed a criminal act, relating to a contract for the sale of a property at Prince Edward Parade, Redcliffe. It was alleged the third respondent obtained a financial benefit from that sale at the expense of the second respondent. The third respondent denied ever receiving a commission for the sale of that property.
The third respondent said during an inspection of a property he had listed for sale at Margate, a potential buyer indicated they were not interested in that property, but were looking for an apartment. The third respondent was aware of an apartment at Prince Edward Parade, Redcliffe. The owner was a friend. The third respondent contacted the owner. The prospective buyers went through the property and made an offer. The vendor wanted $815,000 in the hand. He told the third respondent he could charge whatever commission he wanted on top of that, but if he did not achieve the price, he was not in a rush to sell.
The third respondent spoke to the buyers. They would not pay a cent above $815,000. Ultimately, the buyers and vendors alone came to an agreement about price. Documents were signed and the property proceeded to settlement. The third respondent accepted he was listed as the agent on the contract. He had prepared an Appointment to Act document, hoping he would be able to sell it and obtain commission. However, no commission had been paid and all proceeds for the sale were forwarded to the seller. The third respondent said he obtained email confirmation from the conveyancers that no commission was payable.
The fifth respondent also accused the third respondent of failing to perform his duties properly in relation to a dispute the fourth respondent had for an equipment agreement with Quick Fund. A credit default notice had been given to the fifth and sixth respondents. The fifth respondent alleged the third respondent had falsely indicated to them he would rectify the dispute and had engaged solicitors for that purpose. The third respondent said he sought some advice from Holloway but never told the fifth respondent that Holloway was acting on behalf of the fourth respondent.
The fifth respondent also accused the third respondent of having misrepresented the size, quantity and quality of the applicant’s rent roll prior to the merger with the consequence that the applicant had improperly received a greater share of the merged business. Properties had been included on the rent roll which did not have management agreements or which did not generate management fees.
The third respondent said Gibbons’ due diligence of the applicant’s rent roll identified 41 clients who were found not to have management agreements. The merged business had been collecting fees from those properties over the previous 18 months. New agreements were sent to those clients, who were still clients of the merged business. By 20 August 2013, all but five or six had returned those new signed agreements. Of the remaining clients, four were overseas and two were on holidays within Australia. All indicated they would sign when they returned back home.
The third respondent said when the applicant first purchased its business in 2007, he did not check whether all management agreements were there. Part way through ownership of the business, he employed some high school students to transfer the paper based records into an electronic format. They did not get it “100% right”.[16] They did not tell him of any properties where there were no management agreements. It was not until June 2013, when due diligence started for Gibbons’ purchase, that he became aware there were properties that did not have management agreements.
[16] T3-11/35.
The properties identified as not generating management fees were family properties. When Gil Wright was preparing its valuation, the third respondent gave its employee a printout of a list of vacated properties. He also spoke to her about properties that were not collecting fees. That employee came back later for a print out for every rental transaction for November 2011. She matched those figures to the bank account to make sure the management fee on that report matched the income going through the bank account. The properties on the rent roll that were not generating management fees and were not vacant, were family properties. They were highlighted in that November report. There was the property address, the rent paid and beside it $0 in terms of management fee collection. That report was included in the valuation document.
As a result of these discrepancies, the fifth respondent requested 1.75% of the applicant’s shareholding be transferred to the fourth respondent, without any exchange of money, before any sale to Gibbons. The third respondent asked whether the fourth respondent had any missing management agreements. The third respondent knew there were missing management agreements and that there were others that had not been completed correctly. The third respondent was never given information about the true position from the fourth respondent’s side.
The agreed sale to Gibbons did not proceed despite the initial verbal consent of the fifth and sixth respondents. The original support for the sale of the applicant’s shares to Gibbons was withdrawn in August 2013. The fifth and sixth respondents’ decision changed around 13 August 2013. On that date, the fifth respondent indicated that any sale which unfairly saddled him with liabilities and commitments would not be the subject of agreement. The fifth respondent was making a lot of accusations and was not prepared to accept the third respondent’s answers to those allegations.
The third respondent received the final version of the agreement. Gibbons had signed the document. The third respondent did not sign the document. There were no further discussions with Gibbons. There were discussions between the third, fifth and sixth respondents about de-merging the businesses. The third respondent did not think it was possible. There were many outstanding issues in the demerger proposal. It was proposed the rent rolls would be split, based on unit holding. The third respondent saw a problem. There were a lot of variables. The easiest solution was a sale of his interest to Gibbons. It was the quickest way to get stability.
The third respondent had been given the opportunity to purchase the shares of the fifth and sixth respondents for a sum less than he was prepared to take from Gibbons. He rejected that offer. He did not write back at any stage to offer a de-merger. He was still negotiating with Gibbons who signed the share sale agreement on 20 August 2013. He did not know at that stage the fifth and sixth respondents were refusing to consent to the sale of the shares to Gibbons.
One week after the third respondent’s termination as an employee, he sent a letter resigning as a director of both the first and second respondents. The letter, dated 23 August 2013 but signed on 28 August 2013, gave no reason for resigning as a director. The third defendant did not think it was prudent to remain a director when he no longer had any influence over the decisions made in the merged business.
Subsequent to his termination, the fifth and sixth respondents accused the third respondent of misappropriating funds from the merged business. The third respondent recalled generating an invoice for $1,435, paid by the second respondent to the applicant. It was to reimburse advertising fees paid by the applicant prior to the merger. That amount was incorrect, as was the purpose. The amount should have been over $1,800 in repayment of deposits made by the applicant to Crown Pools in respect of a property that was a mortgagee in possession sale.
Some other payments made to the third respondent were monies due to Mark Andrew, a friend who previously owned Re/max. Andrew worked at Elders Redcliffe when it was owned by the applicant. During that period, the third respondent lent Andrew money to meet day-to-day living expenses whilst Andrew was going through a sale of his business and health issues. The third respondent put him in a unit and paid his rent. He also paid medical and other expenses. All of these expenses were paid prior to the merger of the businesses. At the time of trial, Andrew owed the third respondent close to $40,000.
Mark Andrew had an employment agreement with the applicant, as a commission only sales agent. He continued to work as a commission only agent within the merged business. He did not complete an employment agreement with the merged business. None of the sales agents completed new agreements. They continued under the old agreements within the merged business. There was no meeting of the unit holders in which it was agreed to employ Andrew. There was no meeting about any sales staff.
Mark Andrew had a real estate agent’s license. That license had conditions on it as he was a current bankrupt. Andrew was not allowed to operate a trust account. His license was in the office window and had that condition on it. The third respondent believed Andrew was operating under an ABN and would have invoiced any payments. Business cards were ordered for Andrew as part of the merged business. Andrew attended the office of the merged business. He was mentioned as ‘no ongoing costs’ in the cash flow forecast as he was a commission-only agent. The percentage of commission he was entitled to was written as 60% beside his name.
Andrew secured a listing for the auction of a property at Scarborough. Commission was payable by the Public Trustee pursuant to a signed Appointment to Act. Some of that commission was paid as a listing for Andrew. That amount, $6,000, was paid from the second respondent’s account into the third respondent’s account, in repayment of Andrew’s debt. Andrew said “Trent, just pay it into your account”.[17]
[17] T3-15/40.
The third respondent accepted there was a difficulty with that arrangement, in that the amount paid to Andrew would have been subject to tax and being disclosed to the Australian Taxation Office, but instead was paid directly to the third respondent in a personal arrangement between him and Andrew. The third respondent did not, at any stage, receive any kind of invoicing from Andrew for that work.
A similar arrangement occurred in respect of commission owed to Andrew for a property at Biarra Street. After the settlement of that property, the third respondent processed a claim for commission based on an invoice dated 18 May, 2012. He thought there was $6,000 in the trust account by way of deposit, which could be used for the commission. He transferred $6,000 from the trust account. In fact only $5,000 was being held in trust. A reconciliation revealed the $1,000 discrepancy. It was transferred from the general trading account. None of that amount was paid into the third respondent’s account or the accounts of related entities.[18]
[18] T3-31/45.
Andrew was also appointed to sell three properties in Anzac Avenue, Redcliffe. The contracts involved call options. The third respondent never received commission on that sale.[19] The transactions never proceeded to settlement. The fifth respondent made a complaint to the Office of Fair Trading alleging a secret commission had been paid to Andrew. The complaint was dismissed by that Office.
[19] T3-28/25.
There was also a payment of $4,000 to an entity called “Aeolus”. It was paid in error. It was brought to the third respondent’s attention by the fifth respondent, after the third respondent’s termination as an employee. The third respondent could not do anything to fix the transaction at that stage, as he did not have access to the financial records. The third respondent was a shareholder of Aeolus, and it was set up under his banking arrangement. He paid other amounts to it from time to time from his own accounts. That payment, on 3 October 2012, was intended to go to a contractor about to commence work on the fitout of the new Margate office. The payment was for gyprock. The contractor completed the work, but did not ever bring up payment. He was named ‘Ted’. The third respondent did not know his last name. He did not have any of the invoices he had received from Ted. The third respondent did not think he had actually been invoiced until after the delivery of that material. The third respondent accepted he had previously said an invoice had been given to him in advance.[20] The bank details for ‘Ted’ may have been in his bank profile, if he already had the invoice.[21]The third respondent arranged for a few contractors to undertake the work. He obtained their bank details up front and put them into the system. Aeolus never raised that payment.
[20] T7-18/30.
[21] T7-20/15.
There was another trust account transaction involving $855 in cash. Andrew asked if he could be advanced money against a forthcoming commission. The third respondent gave Andrew $855 cash he had received from a client in payment of rent. A cheque was drawn to replace that cash into the trust account. The third respondent reflected he should not have undertaken that transaction. He provided instructions by email for the bookkeeper to make the MYOB entry as a contractor payment. The third respondent accepted a contractor needed a signed employment agreement.

There was another transfer to the third respondent’s entity, “Sport Be in It”, for $1,104, in March 2012. It was repayment of a franchise fee owing to the applicant. At the time of the merger, the applicant’s franchise account with Elders was in credit. Elders had transferred the amount across to the first respondent at his request. The third respondent obtained confirmation from Elders as to the outstanding fee. The sum of $1,104 represented a combination of the transfer for $636 and the benefit of the difference taken up by the new business.[22] The third respondent discussed the reimbursement with the fifth and sixth respondents.
[22] T7-23/15.
There was a further transaction where $3,136 was paid to the third respondent and recorded as a franchise fee. The third respondent undertook that transaction in December 2012, in order to equalise the payments of $5,000 director expenses received by the fifth and sixth respondents. The third respondent spoke to both the fifth and sixth respondents about that equalisation. Neither disagreed with it. The bookkeeper incorrectly reported it as a franchise fee. It should have been allocated against director expenses.
There were other payments made around this time in repayment of monies owing to the applicant, or by way of superannuation. The third respondent processed some of those payments. Dartnall processed the other payments on his instructions. He gave her the account number and explained the situation.[23] In 2012, all internet payments were made using his customer token.
[23] T6-102/30.
The third respondent did not arrange for any repayment of those monies. By that stage, there was ongoing dispute and animosity between the parties. The first and second respondents were entitled to the return of the money, but he was owed wages, superannuation and other monies.[24] The third respondent accepted he alone made the determination he was owed those monies. He took a claim to the Fair Work Ombudsman that he subsequently withdrew without a determination.
[24] T7-20/40.
The third respondent also listed a property at Deception Bay for old friends. He did not sell it as his employment was terminated during the listing period. The fifth respondent refused to transfer it, despite written authority from both sellers. The property was sold by Harcourts Redcliffe. The principal of that business was an old friend of the seller. Harcourts Redcliffe collected the commission.
The third respondent denied ever asking clients to take business away, or ever attempting to take business away from the merged business. Whilst a number of properties changed management agreements after he left his employment with the second respondent, he did not ask any of the owners of those properties to take management of the properties away from the second respondent. All were properties that had been on the applicant’s rent roll prior to the merger. All were earning commissions. He thought all of them were subject to a written management agreement.
After his resignation as a director, the third respondent saw financials for the second defendant, which indicated a number of loans with the National Australia Bank. At no time whilst he was a director of the second respondent, did he sign any application forms for a loan with that Bank. These accounts also revealed loan accounts for the applicant and the fourth respondent. Those loan accounts had not previously appeared on any balance sheets. There was also missing unit holder loan accounts.
Subsequent to his resignation as a director, the third respondent received a letter from Westpac advising that the lending facilities for the merged business were due to expire. He also received a letter from the fifth respondent asking that he provide a proposal to Westpac. The third respondent refused as he was not in a position to make any proposal without knowing the trading position. He had requested, but not been provided with a set of financials. At no stage did he receive a facility agreement or requirements from Westpac with a request he sign them in relation to any ongoing financial facilities.
The third respondent and applicant were also served with a notice to contribute capital. They were later advised that their rights as a unitholder were suspended as a consequence of a failure to comply with that notice to contribute capital to the business. The third respondent failed to provide such capital as he had never received any financials. In March or April 2014, the third respondent also refused a request to make a financial contribution to the first and second respondents due a legal matter involving a former employee. He was not prepared to make a contribution without details of the financial position of the business which were again refused.
The third respondent subsequently was sent a request for repayment of a loan to the applicant in the sum of $600,000. That amount related to the component of initial funding received by the applicant. At no time when he had access to the financial records of the first and second respondents was the sum of $600,000 shown as a loan to the applicant. There was never any discussion about those funds being a loan. That money was transferred to the applicant in consideration of management of its rent roll by the merged business.[25]
[25] T2-78/35.
In January 2014, the merged business moved from the Margate premises into a property on Redcliffe Parade owned by the fifth respondent and Gibbons. At that time, there was two months’ rent unpaid on the Margate premises. The fifth respondent suggested the lease be terminated, but the third respondent refused to agree. The third respondent wanted rent to be paid for the remainder of the lease period. No meeting of directors was ever held to put the issue to a vote.
In 2014, it was negotiated that Gibbons would pay out the third respondent’s component of the corporate super fund which owned the Margate premises. In August 2014, Gibbons paid $51,000 dollars. The third respondent was not paid those funds, although he was removed as a trustee of the superannuation fund. In March 2015, $50,000 was withdrawn from that superannuation fund and paid into the second respondent’s trading account, to pay a tax debt. That $50,000 was allocated in the second respondent’s financials as a loan from the third respondent.
In cross examination, the third respondent accepted Westpac provided a loan facility, plus a business overdraft and equipment finance. The third, fifth and sixth respondents agreed the $1.8M loan facility should be split as two facilities. They chose the amounts. One became a fixed rate interest, the other variable. The accountant recorded the management rights over the respective rent rolls of the applicant and the fourth respondent in the assets. The loans were recorded within the liabilities. Di Tommaso was the accountant for the merged business until his services were terminated in August 2013. Di Tommaso provided verbal advice in a number of meetings with the third, fifth and sixth respondents.
The third respondent’s salary of $75,000 was split with his wife, each being paid $37,500. That arrangement was set up in MYOB by Dartnall, when the merged business commenced operation. His wife received no other payments. His wife did not ever sign a workplace agreement. A workplace agreement was only needed to be signed for sales people and property management people.[26] His wife had an administrative role, primarily reporting to him. The third respondent discussed with the fifth respondent in December 2011, the fact that his wife’s family properties would not pay management fees in the merged business. He did not have any email communications to that effect.
[26] T4-35/24-25.
The third respondent accepted Dartnall sent him a spreadsheet of the fourth respondent’s expenditure for its business in November 2011. Whilst the title of the spreadsheet was ‘Property Management Expenditure Breakdown’, he read it as representing the full expenses, as it contained details of shop lease payments for the Redcliffe and Acacia Ridge premises, as well as insurance and other items. There was no split between the sales and property management business. The third respondent stopped some of these payments. It had been agreed only equipment to be used within the merged business would be taken up by the new entity.
The third respondent accepted it was within his charter of duties to organise the entities and the license with the Office of Fair Trading. A trust account could not be opened without an appointed auditor. It may well be that Di Tommaso’s name was on the application for the corporate license. If the auditor must be party to all forms lodged prior to the approval being given, Di Tommaso was appointed auditor. Di Tommaso provided information required to perform a trust account audit in April 2013. The third respondent gave that information and a floppy disk to Shelley Hewitt. The third respondent was removed from his duties as CFO around the middle of May 2013. Thereafter, he had no administrative tasks in respect of that audit. The accountant or auditor was responsible directly to the Office of Fair Trading for that audit to be completed on time.
The third respondent said a number of employees were employed in the merged business without his approval.
The third respondent’s understanding of the unit holders’ agreement was that the employment of any staff required the unanimous approval of all unit holders. He accepted that interpretation meant that unless everybody agreed, it would be possible for the workforce to shrink substantially. The third respondent accepted he was preventing the fifth and sixth respondents from employing replacement staff. The third respondent did not agree with the type of sales person they wanted to recruit. It was imperative to have experienced, well qualified agents with an established sales result. Haines Norton specifically said it was not a time to employ people with no experience in real estate in the area they were working, and no area of influence.
The third respondent raised removing the sixth respondent in an email communication.[27] That removal would have required the unanimous support of all directors. At that time, the third respondent had presented cash flow forecasts and financial considerations which indicated the business needed immediate action to reduce its expenditure. The third respondent was not suggesting the sixth respondent’s employment be terminated; the sixth respondent was prepared to work as a commission-only agent. At a subsequent meeting between directors, the sixth respondent indicated he did not want that arrangement. He was prepared to be employed as sales manager of the Springwood office, being paid a 50/50 split of the commission as a debit/credit type scenario.
[27] Exhibit 88, T4-52/35.
The third respondent tabled this suggestion as part of the terms of the current cash flow position of the merged business. At that stage, the merged business was not in a position to continually employ people. It could not meet its financial commitments to the ATO. If his suggestions had been accepted, it would have reduced the cash flow expense to the merged business, giving it an extra $35,000 in cash flow, which would more than have covered the GST component required for the January/March 2013 BAS period.
The third respondent accepted he sent an email, in response from a request from Marlene Jones, that the contract on Prince Edward Parade, Redcliffe was “not one of ours”. The contract was not through the merged business. The third respondent had introduced the buyer to an off market property. The contract was settled without the performance of an agent. The deposit was paid directly to the seller’s conveyancer. The third respondent accepted the buyer had been met by him at an inspection of a property that was advertised for sale, through the merged business, and that the contract was printed on forms for the exclusive use of the first and second respondents. He altered that document to change the seller’s agent’s details to his own name. In doing so, he had to delete the pro-forma company details prior to printing it. He used company software to produce that document.
The form 27C “Agent’s disclosure to buyer”, was also printed on a form that was the exclusive property of the first and second respondents. The purpose of that form was a selling agent’s disclosure to the buyer of any financial benefit that would be entitled to the sale’s agent. On its face, that document said commission of $8,100 would be payable to the third respondent. His signature appeared in the selling agent’s disclosure part of the form. However, commission would only be payable by a vendor of a property, if there was an appointment to act as an agent. The third respondent did not ever fill out a Form 22A, appointment of agent for the property.
It was not an offence for him to show the property to a buyer without a proper appointment as agent. It was open to him to present the property to a buyer, negotiate the sale, enter into a contract for sale, all before a correct appointment to act was executed, because no agent was appointed for the property. He agreed he had not done any other transactions like this for the merged business.
The third respondent did not inform the fifth or sixth respondents, or any other staff member of the first and second respondents, of this transaction prior to entering into it. There was a significant amount of pressure between the three of them. Further, the transaction was done at 7.30 at night. The third respondent received a telephone call from the buyer as he was driving home from work. The buyer wanted to see the property that day. The property was vacant and the third respondent had keys for that property.
The third respondent said he did not receive payment of any commission for the sale of that property. The contract did not proceed in that form. It was re-contracted afterwards, although the third respondent did not have any evidence of a re-contract of that property.[28] The contract amount was $810,000, which was less than the minimum price he said the seller was prepared to accept. He could not specify the ultimate settlement price.[29] The third respondent had a written agreement with the seller within the next day that no commission was to be paid. The third respondent’s understanding was that new documentation was prepared, after the seller returned from overseas, by his conveyancer and the buyer’s conveyancer.
[28] T5-18/25.
[29] Exhibit 91.
The third respondent told Conveyancing Works the contract involved a private sale, negotiated by him for a friend, as vendor. The third respondent subsequently sent an email to Conveyancing Works, requesting a copy of the seller’s written authority for the release of the contract details to a third party. He had done so at the request of his legal representatives. He declined to give evidence as to the nature of that enquiry. He was concerned about the merged business finding out about the contract, because “they were thinking that I was going to make money from it.”[30] He accepted, at face value, it looked like he had made money from that listing.
[30] T5-23/27.
Elders sent an email to all directors, raising concerns in relation to the Prince Edward Parade contract and other contracts. The third respondent sent Elders an email from Conveyancing Works. That email communication simply confirmed his advices to Conveyancing Works that no commission was applicable. The third respondent said there was a subsequent email from Conveyancing Works, which was not part of the evidence, that confirmed no commission was payable on the transaction. The third respondent offered to pay Elders, the amount it would receive, as a consequence of commission having been received on that transaction. The third respondent did not ever offer to pay the amount of the commission back to the merged business.
The correspondence with Elders occurred after a Notice of Breach and Revenue Default had been sent by Elders to the merged business. The alleged breach was of the competition clause within the franchise agreement, and a failure to provide Elders with a monthly report of business activities, including all transactions. Elders requested a full commission’s history back to the start of the franchise and whether any commissions had been earned outside of the reported amounts.[31]
[31] Exhibit 92, T5-25/25.
The third respondent sent Whipps a detailed response to that notice. He did not mention in that response that he was employed as a sales consultant for a house builder. He did not consider Whipps’ request for details of any other activities to have included that job. The third respondent did not need a real estate license for that work. The third respondent had already informed Whipps he had a second job, in a telephone conversation. He also verbally informed the fifth and sixth respondents during a meeting in the office.
The third respondent accepted that Whipps requested an explanation as to why commission was not payable when the contract on Prince Edward Parade expressed the intent to earn commission. His response to that email[32] did not deal with the Prince Edward Parade property. He did respond to Whipps in respect to that property. He could not explain why his response was not included in that email chain, when Whipps expressly asked for a response in relation to that particular contract. It may be that his response was a new email.
[32] [Exhibit 36].
His employment with the house builder was not in contravention of the shareholders agreement. His work did not involve selling real estate or property management, or leasing or selling commercial property. He was selling new home builds, on land owned by the home owner. It was purely a build contract. The entry into the contract for Prince Edward Parade could constitute a breach, if it included conduct which did not include receiving financial gain.[33] His employment with the house builder also did not breach the unit holders’ agreement. The work he did for the builder was performed out of normal business hours, and at weekends, usually by email. He used a separate email set up through the house builder. He would use his own mobile phone from time to time.
[33] T5-34/25.
The third respondent accepted the equipment agreement, the subject of the dispute with Quick Fund, was disclosed prior to the merger. He did not see the actual agreement prior to the commencement of the merged business. It was only in September or October 2012 he became aware of the terms of that agreement. Some of that equipment was used in the merged business. He did not stop payment of the Quick Fund facility for that equipment.[34] The third respondent did not ever tell the fifth and sixth respondents he would be able to have that agreement cancelled at low, or little cost.
[34] Exhibit 94, T5-38/35.
The third respondent accepted there were email communications between the third, fifth and sixth respondents about being able to cancel agreements at low or little cost. He accepted the fifth respondent gave him authority, on behalf of the fourth respondent, to deal with Quick Fund in March 2013.[35] He did not contact Quick Fund, in his capacity as CFO. He did so, on behalf of the fourth respondent.
[35] T5-40/20.
The third respondent accepted that in his communications with Quick Fund, he told them he had been in contact with a solicitor and the ACCC. He could not recall the outcome of those discussions. He was removed as CFO around the same time as his last email to Quick Fund. He did not look after the matter after his removal.[36] At that time, Quick Fund had listed a credit default. The third respondent had spoken to Holloway about the matter, but only informally. At that time he was discussing a number of matters with Holloway. He never told the fifth respondent he engaged Holloway to act on the fourth respondent’s behalf. It was not his responsibility.[37]
[36] Exhibit 96, T5-42/20.
[37] T5-44/25.

The merged business also required the input of additional funds due to liquidity problems. In circumstances where the fifth and sixth respondents, either personally or through the generosity of others, had provided additional funds, it was not unreasonable to consider calling for their fellow unit holder to contribute in a similar way.
The subsequent, characterisation of the payment of $600,000 to an entity associated with the third respondent, as a loan, was reasonable. It accorded with the advice of the merged business’ new accountant. As Kay observed, the second respondent did not acquire the rent rolls of either the applicant or the fourth respondent. Notwithstanding that situation, the second respondent distributed loan funds obtained by it at the commencement of the merged business to both the applicant and the fourth respondent. Those funds had never been properly accounted for in the accounts.
It can hardly be oppressive conduct to attribute those funds as loan monies, in circumstances where, at the same time, a loan was shown to the fourth respondent in the sum of $1.2M. Each unit holder was treated in a similar way. It was an entry which a director, in the position of the fifth and sixth respondents, acting reasonably, would approve in the amended accounts.
I am also satisfied a reasonable director, in the position of the fifth and sixth respondents, would have demanded repayment of that $600,000 loan. The applicant, through the third respondent, had withdrawn all security in relation to the facility provided by Westpac. That facility included the $600,000 received by an entity associated with the applicant. There was no requirement for a demand for repayment of the $1.2M to be made to the fourth respondent, as it had continued to supply the requisite security in accordance with its obligations pursuant to the unit holders’ agreement.
The applicant and the third respondent also relied upon the use of the second respondent’s funds for various payments to the fourth, fifth and sixth respondents. Although the applicant and the third respondent pleaded that the fourth, fifth and sixth respondents had received the benefit of numerous payments, which were improperly made out of the second respondent’s funds, they conceded in submissions that many of those payments could not be established to be improper payments. What remained in dispute primarily related to the ongoing payment to the fourth respondent of directors’ management fees and the payment of other expenses, including legal expenses in respect of this proceeding. The total sum remaining in dispute was $612,659.78.
I have already found the payment of the director’s management fees to the fourth respondent, but not the applicant, was not oppressive conduct. As to the legal fees, the legal proceeding instituted by the applicant initially was commenced solely against the first and second respondents. The legal costs were largely incurred by the first and second respondent in defence of the applicant’s claim for oppression. Having regard to my findings, there was a legitimate basis for the first and second respondents to defend this proceeding. It was the duty of its directors to do so, as there was no substance to that claim. The use of merged business funds to pay those legal expenses was a decision a reasonable director, in the position of the fifth and sixth respondents, would have taken in all of the circumstances.
There was a sound commercial basis for the second respondent to enter into the management agreement. AUPNG purchased a substantial rent roll. The agreement provided for the second respondent to earn management and other fees. The costs associated with the management of that roll could, to some extent, be subsumed in the second respondent’s existing personnel. No factors were identified which satisfy me that the agreement entered into was other than on a commercial basis.
In respect of the remaining payments, the applicant and third respondent rely substantially upon alleged uncommercial management and loan agreements entered into with AUPNG. I do not accept that AUPNG was established in order for the second respondent to enter into transactions to the detriment of the applicant and the third respondent. I accept Gibbons’ evidence as to the establishment of AUPNG and of its independence from the fifth and sixth respondents. I find AUPNG was established by Gibbons to pursue genuine commercial opportunities. The involvement of the fifth and sixth respondents and their wives was solely for local directorships.
Substantial financial demands were placed on the merged business as a consequence of the legal proceedings and the disruption to its ongoing business. The second respondent required a significant injection of funds to continue its operation. Those funds were provided by the fourth respondent through the fifth and sixth respondents personally, as well as by AUPNG. I find AUPNG provided those funds as loans for use by the second respondent, on the understanding the fifth and sixth respondents were ultimately responsible for the repayment of those funds by the second respondent.
Some of the funds provided by AUPNG were the subject of a written loan agreement. Whilst the interest rate of 20% compounded monthly, may be higher than other forms of finance, I accept the evidence of the fifth and sixth respondents that as a consequence of the third respondent’s refusal to provide ongoing security and guarantees for the second respondent’s facilities with Westpac, the second respondent was unable to obtain funding through normal channels. The fourth, fifth and sixth respondents had also been the subject of a credit default, as a consequence of the outstanding Quick Fund dispute.
In those circumstances, it was reasonable for the second respondent to seek alternate sources of funding. In coming to this conclusion, I have had regard to the entries in the accounts of the second respondent suggestive of contributions by AUPNG as a unit holder. I am accept those entries incorrectly note AUPNG as unit holder.
The loan agreed with AUPNG did not involve an interest rate which could properly be characterised as a penalty. It was, as the fifth respondent observed, less than the rate charged on a credit card. Those loans cannot properly be characterised as being so uncommercial that no reasonable director, in the position of the fifth and sixth respondents, could properly have entered into those agreements.
I accept the loans provided by AUPNG for general expenses were provided on the basis the second respondent could use those funds as it saw fit. As part of that arrangement, AUPNG obtained a loan from Suncorp. I accept that loan was entered into by AUPNG as a commercial transaction. The fact the second respondent has been paying the interest payments associated with that loan is not unusual. In order to assist the second respondent, AUPNG deferred payment of funds it received in respect of a rent roll. Without those funds AUPNG would have to use other funds to meet those interest payments. The arrangement reached with the second respondent ensured that loan was serviced whilst leaving the remaining funds available for use by the second respondent.
As to the remaining payments made to the fourth, fifth and sixth respondents for the reasons given in respect of the derivative action claim, those payments were made in the course of the ordinary operations of the second respondent. Each of those payments were payments a reasonable director, in the position of the fifth and sixth respondents would have approved in all of the circumstances. None of these payments were unfair or unconscionable.
Finally, the applicant and the third respondent relied upon the decision of the fifth and sixth respondents to relocate the merged business from the Margate property, to a property beneficially owned by the fifth respondent and Gibbons. I accept the decision to move premises was made in good faith, in the best interests of the merged business. I accept the decision was made at the suggestion of the franchisor, having regard to its inappropriate location and following concerns in relation to the security of the Margate premises. The relocation to more prominent premises in the heart of the Redcliffe business area, was commercially sound.
As the previous premises occupied by the fourth respondent were no longer available, it was not unreasonable for premises located two doors adjacent to be occupied by that merged business. Whilst those premises were beneficially owned by the fifth respondent, there is no basis to conclude the agreement entered into between the merged business and the owner of those premises, was other than on commercial terms. Further, the Margate premises were re-let on favourable terms.
None of the conduct relied upon by the applicant and third respondent in support of the oppression claim, either individually or collectively, constitutes conduct which a reasonable director in the position of the fifth and sixth respondents would not have engaged in, having regard to all of the circumstances. That conduct was engaged in for the benefit of the merged business. It was not unfair or unconscionable conduct. The oppression claim fails.

Derivative action

The claim for relief on the basis of a derivative action, was premised upon a finding that payments made from the second respondent’s funds to the fourth, fifth and sixth respondents, or entities associated with them, were improper payments, not made in the operation of the merged business. By the conclusion of evidence, the applicant and the third respondent conceded that a number of those payments could no longer be pressed as part of the derivative action.
The payments remaining in dispute were $5,000 outstanding from the fifth respondent’s boat purchase; $13,198.41 that ought to have been paid by the fourth respondent in respect of pre-merged amounts; $27,623.37 advanced to the sixth respondent and his wife in excess of the proper allowance for director’s fees; $113,048.00 paid for rental agreements of the fourth respondent; $77,300 director’s management fees paid to the fourth respondent after the third respondent’s termination; $38,150.81 interest paid under the AUPNG loan agreement; $38,340 loss due to the AUPNG arrangement and $300,000 for legal expenses in this proceeding.
In respect of the payment of $5,000, I do not accept the payment was an improper payment. The third respondent consented to the loan of those funds. He accepted the fifth respondent had indicated the balance not repaid should be charged as director’s expenses. If that did not occur it is a matter for the receiver. It does not follow the payment was an improper payment. It was initially approved by directors.
In respect of the $77,300, I have found those payments made to the fourth respondent subsequent to the third respondent’s termination were in accordance with the agreement entered into between the parties for the payment of directors’ management fees. Those payments were not improper payments to the fourth respondent.
As to the $13,198.41, I do not accept these sums remained outstanding after the round robin transaction. I accept Dartnall’s evidence that the round robin payments were made after the third, fifth and sixth respondents had given consideration to the appropriate transactions to be the subject of such payments.
As to the $27,623.37, the evidence does not satisfy me those payments were improper payments. Whilst they are an excess of the agreed $5,000 per annum per director, it does not follow they were payments not properly made in the course of the operation of the merged business. It will ultimately be a matter for the receiver to determine whether adjustments ought to be made in respect of those accounts.
As to the $113,048, all agreements were disclosed as part of the merger arrangement. These payments were properly made in the operation of the merged business.
As to the $38,150.81, pertaining to the AUPNG loan agreement, that the agreement was properly entered into in the course of the merged business. It was not an uncommercial transaction. These payments were properly made, for the benefit of the merged business.
As to the $38,340, the management agreement entered into between the second respondent and AUPNG was a commercial arrangement for the benefit of the merged business. These payments were properly made in the operation of that business.
Finally, as to the $300,000 legal costs, such payments were properly made in defence of a proceeding brought against the first and second respondents for oppression, a proceeding which has ultimately failed.
As no improper payments were made for the benefit of the fourth, fifth and sixth respondents, the derivative action also fails.

Counter-claim

The fourth, fifth and sixth respondents contend the applicant and the third respondent engaged in misleading and deceptive conduct prior to the merger, in that they provided rent roll documentation to Gil Wright in preparation of the valuation of its business which misrepresented the properties and management fees earned on that rent roll. As a consequence, the applicant’s rent roll valuation was artificially inflated, causing it to obtain a greater shareholding in the merged business than was its entitlement.
The inclusion of properties in the applicant’s rent roll, which were not the subject of valid management agreements, was due to an oversight promptly rectified by the third respondent, when it was brought to his attention. There is no basis for a finding of misleading and deceptive conduct in relation to the inclusion of those properties.
In respect of the properties misrepresented as earning management fees, that misrepresentation was a deliberate misrepresentation. The documentation provided to Gil Wright contained entries indicating that such properties did earn management fees when shortly prior to the process being undertaken, they had not received such fees and subsequent to the commencement of the merged business, they did not receive fees. Those records were deliberately altered by the third respondent, knowing and intending that it increase the applicant’s share of the merged business.
I accept both the fifth and sixth respondents relied on the accuracy of that information in accepting the contents of that valuation. The evidence does not, however, establish that the misrepresentations materially altered the share the applicant would otherwise have been entitled to in the merged business. Even prior to the valuation, the parties had indicated a likely split of the merged business in the proportion ultimately agreed. That suggests the shareholding was not mathematically tied to a precise allocation in accordance with the valuation.
This conclusion is fortified by the fact that the agreement entered into between the parties did not include due diligence or a retention period, and the rent rolls remained the respective properties of the applicant and the fourth respondent. Further, the fourth respondent itself had properties included in its rent roll for the purpose of the valuation, which ought not to have been included in all of the circumstances. Whilst those properties were not deliberately misrepresented by the fourth respondent, they impact, to an extent, on the overall valuation of the fourth respondent’s rent roll.
Brookes gave evidence that inconsistencies in a small number of properties were unlikely to materially affect the overall value of a rent roll as properties come and go in the ordinary course of business. Significantly, that was the experience of the second respondent, after purchase of the Springwood rent roll, and of AUPNG, after the purchase of its rent roll.
Against that background I am not satisfied the third respondent’s misleading and deceptive conduct in respect of the applicant’s rent roll materially altered what would have been the agreed shareholding in the event the fourth, fifth and sixth respondents were aware of those misrepresentations. The fourth, fifth and sixth respondents have not established there would have been an overall change in the agreed shareholding of the applicant and the fourth respondent.

Misappropriation and re-direction counter-claim

It is alleged the applicant and third respondent misappropriated these funds from the second respondent: $1,435 paid to the applicant; $6,000 paid to Aeolus; $4,294.50 paid to Sports Be in It; $4,000 paid to Aeolus; $855 cash; $1,104 to Sports Be in It; $3,136.00 to the third respondent; $600 to the third respondent; $3,700.24 to the third respondent; $20,700 which ought to have been paid as commission on the sale of the Prince Edward Parade property; $11,700 which ought to have been paid as commission for the sale of the property at Coman Street, Deception Bay and $6,000 transferred from the second respondent’s trust account.
In respect of the $1,435, I do not accept the third respondent’s evidence that that payment was intended to be a reimbursement for monies paid by the third respondent for pool works on a property, which he mistakenly recorded as reimbursing for advertising fees. I find the third respondent misappropriated the sum of $1,435 from the second respondent to the applicant. I do not accept the entry was erroneously recorded. I find the third respondent deliberately made a false entry in an effort to disguise that improper payment.
In respect of the $6,000 paid to Aeolus and the $4,294.50 paid to Sports Be in It, I do not accept the applicant and the third respondent properly received those payments, at the direction of Andrew. I do not accept the evidence of the third respondent or of Andrew in relation to the purported arrangement that existed between them in respect of the payment of commission. I find the third respondent gave false evidence in respect of these transactions in an effort to disguise what were improper payments of the second respondent’s funds to entities associated with the third respondent.
In respect of the $4,000, the applicant and the third respondent accept that payment was made in error to Aeolus. As a result of that concession, there is no reason why that sum ought not to be repaid to the second respondent.
In respect of the $855, I do not accept the third respondent’s evidence that $855 in cash was paid to Andrew in advance of commission. I find this payment was an improper payment of the second respondent’s funds.
In respect of the $1,104, I do not accept the third respondent’s evidence that this payment represented money owed by Elders in respect of franchise fees paid by the applicant prior to the commencement of the merged business, which had been applied to the second respondent’s account in error. Elders expressly denied any such adjustment. I find the third respondent improperly paid that sum from the second respondent’s funds.
In respect of the $3,136, I do not accept the third respondent’s evidence that the fifth and sixth respondents agreed to this payment by way of compensation for additional use of director expense accounts by the fifth and sixth respondents. I find the third respondent improperly paid funds from the second respondent’s account for his own benefit.
In respect of the $600, I do not accept the third respondent’s evidence that this money was reimbursement for the purchase of postage stamps. I find the payment involved the improper use of the second respondent’s funds for the benefit of the third respondent.
As to the $3,700.24, the applicant and the third respondent contend this payment was for superannuation owed to the third respondent and his wife. The payment was made to their superannuation fund. There was a dispute, however, as to the entitlement of the third respondent and his wife to those superannuation payments. It is unnecessary to determine that dispute, as I am satisfied the payment made was made without authority. I accept the payment of $3,700.24 was an improper use of the second respondent’s funds for the benefit of the third respondent and his wife.

The alleged commissions of $20,700 relates to the Prince Edward Parade contract. However, the commission specified on that contract was $8,100. That sum should be paid by the applicant and third respondent to the second respondent as it was entitled to receive any commission on that sale.
The alleged commission of $11,700 relates to the properly at Coman Street. Whilst I am satisfied the third respondent gave a false account in relation this property, I am not satisfied the third respondent, or any entity associated with the third respondent, in fact received commissions in respect of that property. There is also no evidence to establish the second respondent had an entitlement to any commission on that sale.
In respect of the $6,000 trust account transfer, the applicant and the third respondent contend that sum was transferred from the first respondent’s trust account to the second respondent’s general account in payment of commission. The transaction was undertaken in error, simply to the extent that it occurred one day prior to settlement and involved a payment of $1,000 more than was actually held in trust. Having considered the evidence I am not satisfied the third respondent improperly received the sum of $6,000.
In summary, I find the applicant and the third respondent misappropriated the sums of $1,435, $6,000, $4,294.50, $4,000, $855, $1,104, $3,136, $600, $3,724, and $8,100. They ought to refund those sums, totalling $33,248.50, to the second respondent.

Restraint counter-claim

It is alleged the applicant and the third respondent acted in breach of their restraint of trade undertakings to the second respondent, pursuant to the shareholders agreement and the unit holders’ agreement, by inducing, soliciting or procuring the transfer of clients from specified properties, managed by the merged business, or by competing with the merged business.
Whilst the third respondent denied ever asking clients of the merged business to take their business away, or ever competing with the merged business, I do not accept his evidence in respect of these matters. The third respondent provided signed letters of instruction for the removal of the family owned properties from management by the merged business. He did so on the basis that he would be undertaking that management. I do not accept his evidence that those properties were self-managed. Connolly’s evidence that he believed the properties were still being managed by the merged business is inconsistent with those properties being self-managed by Connolly.
I find the third respondent did procure and arrange for the owners of properties subject to management by the third respondent, to remove their properties from its management, so that he may undertake the management of those properties. That conduct was in breach of the restraint clauses. It was, at the very least, soliciting orders for services similar to those provided by the merged business.

Equitable compensation counter-claim

The first, second, fourth, fifth and sixth respondents claim equitable compensation for the failure of the applicant and third respondent to provide security for finance facilities renewed by the merged business with Westpac, for their failure to contribute capital and for their failure to repay the loan of $600,000.
The applicant and third respondent wrongfully failed to provide security in accordance with their obligations under the unit holders’ agreement. I do not accept the applicant and the third respondent were entitled to refuse provide such security without receiving financial information concerning the merged business. The obligations related to the facility of $1.8M, $600,000 of which had been paid to an entity associated with the applicant and the third respondent. They retained the benefit of those funds.
I accept that as a consequence of that wrongful refusal, the merged business was required to provide additional security. There is, however, no evidence that the merged business, as a consequence of the provision of that additional security, suffered loss which ought properly to be the subject of compensation. Instead, the applicant and the third respondent ought to be required to provide the requisite security in accordance with their obligations.
The call for financial contribution was based on a contention that the fourth respondent had contributed $280,509.42 as working capital for the merged business. The evidence established that a large proportion of that contribution was made by AUPNG. I accept, those funds were provided by AUPNG. However, those funds were, in truth, contributions to the fourth respondent which it provided to the second respondent as working capital for the merged business. The applicant and the third respondent ought, in such circumstances, to provide a similar proportion of working capital, in accordance with their obligations under the unit holders’ agreement. The notice given constituted a proper notice pursuant to the unit holders’ agreement. The applicant should provide contribution in the sum of $102,000.
In respect of the $600,000 loan, there is no evidence the merged business has suffered additional financial loss as a consequence of the failure to repay that loan to date. Accordingly, no basis has been established for the awarding of equitable compensation in relation to its non-payment.

Conclusions

The applicant and third respondent have failed to establish that any of the claimed conduct constituted oppression. They have also failed to establish an entitlement to any of the sums, the subject of the derivative action. The claims of the applicant and the third respondent are dismissed.
The remaining respondents failed to establish an entitlement to damages for misleading and deceptive conduct. They have established an entitlement to orders that the applicant and third respondent repay to the second respondent the sums misappropriated by them, as well as the capital contribution, the subject of proper notice. They have also established the applicant and third respondent acted in breach of their restraint of trade obligations, and improperly failed to provide the requisite security for the loan facility with Westpac.
I shall hear the parties as to the appropriate orders, and costs.

SUPREME COURT OF QUEENSLAND
CITATION:	Jawhite Pty Ltd v Trabme Pty Ltd & Ors [2018] QSC 174
PARTIES:	JAWHITE PTY LTD ACN 106 661 287 (Applicant) v TRABME PTY LTD ACN 154 609 159 (First Respondent) BOEDRY PTY LTD ACN 154 609 882 (Second Respondent) TRENT ANDREW RYAN (Third Respondent) VESTWELL PTY LTD ACN 106 478 808 (Fourth Respondent) ADAM BOLAND (Fifth Respondent) MARK EDWARDS (Sixth Respondent)
FILE NO/S:	S No 2310 of 2014
DIVISION:	Trial
PROCEEDING:	Application and counter-claim
ORIGINATING COURT:	Supreme Court at Brisbane
DELIVERED ON:	2 August 2018
DELIVERED AT:	Brisbane
HEARING DATE:	20-24 March 2017, 27-30 March 2017, 15 June 2017, 29-31 January 2018, 1-2 February 2018, 5-9 February 2018, 16 March 2018
JUDGE:	Boddice J
ORDER:	I shall hear the parties as to the appropriate orders, and costs.
CATCHWORDS:	CORPORATIONS – MEMBERSHIP, RIGHTS AND REMEDIES – MEMBERS' REMEDIES AND INTERNAL DISPUTES – OPPRESSIVE OR UNFAIR CONDUCT – WHAT CONSTITUTES – CONDUCT OF OR RELATING TO DIRECTORS – where the Applicant and Third Respondent contracted with the Fourth, Fifth, and Sixth Respondents to merge their respective real estate businesses – where the First and Second Respondents constituted the merged business entities – where the Applicant was a shareholder of the merged business – where the Third Respondent was a shareholder, director, and employee of the merged business – where the Applicant and Third Respondent claimed the conduct of the Fifth and Sixth Respondents, whom were also shareholders and directors of the merged business, was oppressive – where the Fifth and Sixth Respondents had terminated the Third Respondent’s employment as CFO of the merged business – where the Fifth and Sixth Respondents prevented access by the Third Respondent to information relating to the merged business and that business’ premises – where the Fifth Respondents arranged for the relocation of the business premises to a property beneficially owned by the Fifth Respondent – whether that conduct was oppressive – where the Applicant and Third Respondent commenced negotiations to sell their shares in the merged business – where the Fifth and Sixth Respondents required corrections to the recording of assets, namely the rent roll, before providing consent to the sale – where the proposed sale did not proceed – whether the conduct of the Fifth and Sixth Respondents in relation to the sale was oppressive –where the Fifth and Sixth Respondents requested further security and financial contributions by the Applicant and/or Third Respondent – whether these requests were reasonable – where the Fifth and Sixth Respondents’ gave instructions for the use of the Second Respondent’s money to pay for legal costs incurred in defending the interests of the First, Second, Fourth, Fifth, and Sixth Respondent in these proceedings – whether this use of funds was appropriate CORPORATIONS – MEMBERSHIP, RIGHTS AND REMEDIES – MEMBERS' REMEDIES AND INTERNAL DISPUTES – PROCEEDINGS ON BEHALF OF COMPANY BY MEMBER – STATUTORY DERIVATIVE ACTION – where payments from the funds of the merged business were made to the Fourth, Fifth, and Sixth Respondents – where the payments were recorded as directors’ expenses, management fees, interest payable on a loan, and other amounts – where the payments included an amount paid in respect of a boat purchase by the Fifth Respondent – whether these payments were improper payments CORPORATIONS – MANAGEMENT AND ADMINISTRATION – DUTIES AND LIABILITIES OF OFFICERS OF CORPORATION – FIDUCIARY AND RELATED STATUTORY DUTIES – DUTIES INVOLVING CONFLICTS OF INTEREST – MISUSE OF COMPANY FUNDS – where the Third Respondent caused the Applicant, and other entities in which he had an interest, to be paid funds from the merged business – where the Third Respondent transferred monies held in trust by the First Respondent to the general account of the Second Respondent, resulting in the trust account of the First Respondent being overdrawn – where the Third Respondent then reimbursed the trust account – whether the Third Respondent misappropriated the funds of the merged business TRADE AND COMMERCE – OTHER REGULATION OF TRADE OR COMMERCE – RESTRAINTS OF TRADE – GENERALLY where the Third Respondent engaged in transactions to sell properties, not the subject of the merged business, to potential clients of the merged business – where those contracts of sale stated the Third Respondent was to receive commission – where no commission was in fact received – whether the Third Respondent breached restraint of trade obligations in respect of the merged business EQUITY – EQUITABLE REMEDIES – EQUITABLE COMPENSATION – OTHER CASES – where the finance facilities of the merged business were due for renewal – where the Applicant and Third Respondent refused to provide further security or capital to renew those facilities – where the Applicant and Third Respondent had obligations to do so – whether loss or damage has been suffered Corporations Act 2001 (Cth), s 232, s 233 Harding Investments Pty Ltd v PMP Shareholdings Pty Ltd (No 2) [2011] FCA 567, cited HNA Irish Nominee Ltd v Kinghorn (No 2) (2012) 290 ALR 372, considered Re Spargos Mining NL (1990) 3 WAR 166, approved Tomanovic v Global Mortgage Equity Group Pty Ltd [2011] NSWCA 104, cited Wayde v NSW Rugby League Limited [1985] 180 CLR 459, applied
COUNSEL:	N Shaw for the Applicant and Third Respondent Each of the 1st, 2nd, 4th, 5th and 6th Respondents appeared on their own behalf
SOLICITORS:	S Nutley for the Applicant and Third Respondent Each of the 1st, 2nd, 4th, 5th and 6th Respondents appeared on their own behalf