Liu v Gan (No 2)
[2025] VSC 372
•26 June 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2021 02993
IN THE MATTER of L&G CO PTY LTD (ACN 603 431 394)
BETWEEN:
| YA LIU | Plaintiff |
| - and - | |
| PING GAN | Defendant |
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JUDGE: | M Osborne J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 June 2025 |
DATE OF JUDGMENT: | 26 June 2025 |
CASE MAY BE CITED AS: | Liu v Gan (No 2) |
MEDIUM NEUTRAL CITATION: | [2025] VSC 372 |
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CORPORATIONS – Oppressive conduct – Whether affairs of company conducted in an oppressive manner – Unilateral decision by defendant to acquire member’s interest – Unlawful appropriation of shares – Refusal to reinstate member’s status as registered shareholder - Exclusion of member from business operations – Denial of access to company records – Repeated failure to comply with court orders – Prior finding of contempt - Whether defendant’s conduct was unfairly prejudicial to member – Commercial unfairness – Consideration of relevant principles – Oppression made out.
CORPORATIONS – Oppression relief – Appropriate remedies – Whether defendant should be ordered to buy out member – Whether company should be wound up – Winding up as a remedy of last resort – Whether ‘some other remedy’ available that is less intrusive – Valuation of shares – Expert opinion – Compulsory buyout order – Corporations Act 2001 (Cth) ss 232(e), 233(1)(a), (d), 461(1)(f), (g) and (k).
PRACTICE AND PROCEDURE – Costs – Discretion of the court – Whether indemnity costs order appropriate – Unmeritorious and improper conduct by defendant – Breach of court orders – Significant delay and costs – Indemnity costs awarded.
APPEARANCES: | Solicitors | |
| For the Plaintiff | M Guo of counsel | Wiin Lawyers |
| For the Defendant | In person | Not Applicable |
HIS HONOUR:
Introduction
The plaintiff, Ya Liu (‘Ms Liu’,) applies for oppression relief in connection with the affairs of L&G Co Pty Ltd (‘the Company’). The Company carries on business as a newsagency and Tatts Lotto outlet at 321 Springvale Road, Springvale. A portion of the premises is subleased to an Asian grocery store known as ‘Oli’s’ Grocery’. Ms Liu owns 49 of the 100 issued shares in the Company, with the balance owned by the defendant, Ping Gan (‘Ms Gan’).
Ms Gan represented herself at trial as she had done from time to time when she chose to appear at the various directions hearings throughout the lengthy, problematic and unsatisfactory course of the proceeding. Ms Gan also gave oral evidence at trial and was cross examined. Ms Liu gave evidence along with David Ferrier (‘Mr Ferrier’), a forensic accountant. Both were cross examined by Ms Gan.
The principal relief now sought by Ms Liu is an order that her shares be bought out by Ms Gan. In the alternative, Ms Liu seeks an order that the Company be wound up.
Relevant Events
Ms Liu acquired her shares in the Company from Ms Gan pursuant to a share purchase agreement made between Ms Gan as the seller and Ms Liu as the purchaser dated 11 June 2019 (‘the Share Purchase Agreement’), by which Ms Liu acquired 49 ordinary shares in the Company from Ms Gan for $150,000.[1] The remaining 51 shares remained owned by Ms Gan. The Share Purchase Agreement contemplated an active role for Ms Liu, providing in clause 15 that she would ‘manage the shop routings such as purchase stationary, pay the shop bills and contact account etc. L&G shall pay Liu Ya $1000 per month as salary from 11, June 2019 to 11, June 2000’ with provision for the salary to increase to $20,000 per annum when it moved to Unit 3, 303 Springvale Road.
[1]Share Purchase Agreement cl 2.9.
Some two years later, Ms Gan notified Ms Liu by email that she had decided to acquire Ms Liu’s shares for $130,000. She asked Ms Liu for her personal bank account details so that Ms Gan could transfer the $130,000. This came as a surprise to Ms Liu who objected and emailed Ms Gan pointing out that the shares could not be acquired unilaterally and that the shop belonged to all. She wrote that the two needed to work together and requested that Ms Gan let her know when she was free at which time Ms Liu would come and see her so that they could complete the necessary changes to the registration details together[2] and did not provide her consent. Her objections were dismissed by Ms Gan who wrote to Ms Liu that the shares had been acquired by force and that a person in charge of a company could dismiss a shareholder. Ms Gan instructed Ms Liu to not waste either of their time and again asked for her bank account details.
[2]This appeared to be a reference to matters relating to Tatts registration.
Although no payment was ever made to Ms Liu, Ms Gan then lodged a Form 484 with the Australian Securities and Investments Commission (‘ASIC’), recording the transfer of Ms Liu’s 49 shares back to herself, such that Ms Gan was shown as the holder of all 100 issued shares in the Company.
By originating process filed on 19 August 2021, Ms Liu made an application under ss 175, 233 and 247A of the Corporations Act 2001 (‘the Act’) for:
(a)the correction of the register with respect to members’ shareholdings in [the Company];
(b)inspection of the books of the Company; and
(c)relief in respect of oppressive conduct of affairs of the Company.
By orders made 3 November 2021, Connock J referred the proceeding to a Judicial Registrar for ‘hearing and determination of the Originating Process filed on 19 August 2021 wherein orders [were] sought pursuant to s 175 of [the Act].’
A hearing took place before Judicial Registrar Caporale on 3 December 2021 and 28 January 2022. Ms Liu was represented by Counsel and Ms Gan appeared for herself on 3 December 2021, but did not appear on 28 January 2022.
Orders were then made by the Judicial Registrar on 18 February 2022 (‘the 18 February 2022 Orders’) as follows:
1.[Ms Gan] create a register of members for [the Company] in accordance with s 169 of [the Act].
2.Pursuant to s 175 of [the Act], the register of members of [the Company] be corrected to record that:
a.49 of the shares presently registered in the name of [Ms Gan] be registered in the name of [Ms Liu]; and
b. the remaining 51 shares be registered in the name of [Ms Gan];
such order to take effect nunc pro tunc.
In the ‘Other Matters’ section of the 18 February 2022 Orders, the Judicial Registrar, inter alia, set out the evidence adduced before him which he described as ‘uncontroverted’ and which is set out below:
(a)on or around 11 June 2019, [Ms Liu] became the registered holder of 49 of the 100 issued shares in [the Company] pursuant to [the Share Purchase Agreement];
(b)on 23 June 2021, there were a series of exchanges between [Ms Liu] and [Ms Gan], during which [Ms Gan] notified [Ms Liu] that she [Ms Gan] had “decided to acquire your shares today for $130,000” and she was doing so even though [Ms Liu] did not consent;
(c)on or around 24 June 2021 [Ms Gan] filed a Form 484 with ASIC purporting to transfer [Ms Liu’s] 49 shares to [Ms Gan], such that [Ms Gan] then held all 100 of the issued shares in [the Company];
(d)at no time did [Ms Liu] agree, or otherwise consent, to the change in her shareholding or to sell her 49 shares in [the Company] back to [Ms Gan], nor has [Ms Liu] received any funds from [Ms Gan] in respect of any alleged sale or change in [the Company’s] shareholding;
(e)Wiselink Accountants were [the Company’s] accountants but no longer act for [the Company] and do not hold any copies of share certificates or other financial books and records of [the Company]; and
(f)to date, no original or copy of [the Company’s] register of members has been located or produced;
(g)[Ms Gan] has stated that “the shop was stolen [sic]” and “all documents folder [sic] were lost”.
On 18 February 2022, the chambers of the Judicial Registrar sent an authenticated copy of the 18 February 2022 Orders to the parties by email. Ms Gan responded by email on the same day:
Dear Registrar,
I would like to declare I have agreed with redo 49% for the plaintiff if the court would force me to do it during the first hearing. However, we will received the breach notice for the LOT company. That means our business costs nothing. Therefore the first order requires the plaintiff to take action to applicable the Tatts. The key problem is the plaintiff did not fulfil her duty for her 49% registration.
On 10 March 2022, the Judicial Registrar made further orders (‘the 10 March 2022 Orders’) that:
1. By no later than 4:00pm on 4 April 2022, [Ms Gan] is to make available to [Ms Liu’s] solicitors by email all books of account and financial records of [the Company], including but not limited to:
a)[the Company’s] current accounts;
b)[the Company’s] monthly bank statements from incorporation;
c)access to [the Company] accounting software and/or a list of all general ledger transactions for the 2020 and 2021 financial year, including year-end adjustments;
d)Tatts Lotto annual statement for the 2021 financial year;
e)2021 tax return and financial statements (even if in draft), including all relevant notes;
f)notes to the 2020 financial statements;
or file and serve an affidavit explaining why [Ms Gan] was unable to produce any of the books of account and financial records of [the Company].
On 11 March 2022, the chambers of the Judicial Registrar sent an authenticated copy of the 10 March 2022 Orders to the parties by email, along with a follow-up email to Ms Gan, providing her with details of the Court’s Self-Represented Litigant Co-ordinator who was available to assist with information about Court procedure.
Ms Gan responded by email sent on 21 March 2022 to the following effect:
I would like to request you issue the fines to [Ms Liu]. [Ms Liu] has obviously showed how to focus on playing money game to take up others’ benefit and always tries offer bribe to the young people.
On 23 March 2022, Ms Liu’s then solicitors made an offer on her behalf to Ms Gan, styled as a Calderbank offer, in which she offered to either buy out Ms Gan’s 51% shareholding for $154,000 or to sell her own 49 shares to Ms Gan for $148,000. The offer also provided for Ms Gan to assist Ms Liu with training in accordance with Tatts’ requirements and submitting the necessary paperwork to Tatts. Initially, it seemed that the offer might bear fruit. On the same day, Ms Gan responded positively, asking that Ms Liu’s solicitors prepare a contract quickly providing for Ms Liu to buy out her (Ms Gan’s) shareholding for $154,000. Unfortunately, the proposed settlement went awry. It is not entirely clear what caused the settlement to fall apart but it seems that the Ms Gan was not happy with the further element in Ms Liu’s offer that the parties would jointly instruct an accountant to determine the Company’s profit for the previous two years, which would then be apportioned between the parties in accordance with their shareholdings. On 28 March 2022, Ms Gan emailed Ms Liu’s then solicitors in which she had crossed out that part of the offer which provided for her to provide the books and records to the independent accountant and for that person’s costs to be met equally, stating that it was ‘impossible’. Notably, she raised no objection to assisting Ms Liu becoming registered with Tatts as the franchisee.
In any case on 6 April 2022, the then solicitors for Ms Liu sent proposed minutes of consent orders to Ms Gan, which provided for the proceeding to be dismissed with a right of reinstatement and no order as to costs. The covering letter which accompanied the minutes of consent orders stated that the solicitors had, on the basis of Ms Gan’s acceptance, prepared draft consent orders providing for the dismissal of the proceeding against Ms Gan, but would include a right of reinstatement which would entitle Ms Liu to come back before the Court should Ms Gan breach settlement terms agreed between the parties. Ms Gan signed and returned the consent orders.
In the result, the parties could not come to terms on any final settlement agreement. Ms Gan apparently no longer was willing to sell her shares for $154,000, nor was she prepared to buy Ms Liu’s shares for the $130,000 offered back in 2021. Instead, she was only willing to buy Ms Liu’s shares for $79,800 and also sought an apology from Ms Liu. Ms Gan later reduced this offer to $50,000, with a firm ‘no more’ position conveyed by email on 24 May 2022.
In any event, the proposed settlement went awry and by summons filed on 24 June 2022, Ms Liu applied for orders that the proceeding be reinstated and for specific performance of the settlement agreement by which Ms Liu was to acquire the 51 shares held by Ms Gan.
Ms Gan did not appear when the matter came before me on 22 July 2022. I made orders, inter alia, reinstating the proceeding, adjourning the further hearing of Ms Liu’s summons to 5 August 2022, and providing that, in the event Ms Gan did not appear on that date, the matter would proceed as if undefended and Ms Liu would be at liberty, if so advised, to seek orders for specific performance against Ms Gan.
When the matter returned to Court on 5 August 2022, Ms Liu was represented by counsel, while Ms Gan appeared in person. On this occasion, the Court again encouraged Ms Gan to obtain legal advice. Orders were made listing the proceeding for trial on 3 October 2022.
Regrettably, Ms Liu did not pay the setting down fee, and by orders made on 9 September 2022, the trial was vacated. The proceeding then lay in abeyance for approximately 18 months, until Ms Liu filed a summons on 14 December 2023, seeking relief in the nature of contempt with respect to the breaches by Ms Gan of the 18 February 2022 Orders and the 10 March 2022 Orders.
Ms Gan did not appear when the summons came on for directions on 9 February 2024. Orders were made on that day (‘the 9 February 2024 Orders’) as follows:
1. By 4:00pm on 22 March 2024, [Ms Gan] shall create a correction of register of members for [the Company] in which 49 shares are to be registered in the name of [Ms Liu].
2. By 4:00pm on 22 March 2024, [Ms Gan] shall provide all books of account and financial records of [the Company] to [Ms Liu] by email, including but not limited to:
(a)[the Company’s] current accounts;
(b)[the Company’s] monthly bank statements from incorporation;
(c)access to [the Company] accounting software and/or a list of all general ledger transactions including year-end adjustments for the financial years ending:
(i)30 June 2020;
(ii)30 June 2021;
(iii)30 June 2022;
(iv)30 June 2023;
(d)Tattslotto annual statement for the financial years ending:
(i)30 June 2021;
(ii)30 June 2022;
(iii)30 June 2023;
(e)tax returns and financial statements (even if in draft) including all relevant notes for the following years:
(i)2021;
(ii)2022;
(iii)2023;
(f)notes to the financial statements of the following years:
(i)2020;
(ii)2021;
(iii)2022; and
(iv)2023;
or file and serve an affidavit explaining why [Ms Gan] was unable to produce any of the books of account and financial records of [the Company].
In the ‘Other Matters’ section of the 9 February 2024 Orders, the following was set out:
A.[Ms Gan] has failed to comply with order 2 made on 18 February 2022 by Caporale JR.
B.[Ms Gan] has failed to comply with order 1 made on 10 March 2022 by Caporale JR.
C.[Ms Liu] foreshadows an application for relief in respect of any contempt of court should [Ms Gan] continue to stand in default of the Court’s orders.
Further, Ms Liu’s contempt summons was adjourned for further directions to 19 April 2024.
On 14 March 2024, Ms Liu’s then solicitors wrote to Ms Gan, inter alia, noting ‘that you have been provided with a copy of the [9 February 2024 Orders]’. The letter required compliance with the orders, including by complying with order 2 by sending the documents by email to a nominated email address of the solicitor with conduct of the matter. The solicitors informed Ms Gan that in the event that she did not comply with the orders, Ms Liu may bring an application for contempt of court.
On 12 April 2024, Ms Liu’s solicitors wrote to Ms Gan referring to the letter of 14 March 2024, and otherwise relevantly stating the following:
3.To date, you have not complied with the orders despites repeated requests from our client.
4.Only the company officer could correct the register by either submitting a Form 484 on ASIC Forms Manager portal or instructing [the Company’s] accountant to do so. Ms Liu has always been ready and able to provide information or execute any necessary documents prepared by you or the accountant. Your allegations that Ms Liu failed to do her part or appoint her lawyer to correct the register are without basis.
5.Further, Order 2 is not conditional upon Ms Liu being a registered shareholder of the Company, nor upon payment of the account’s costs, which is contrary to your assumption that Ms Liu must register her shareholding before having access to the documents or must pay the accountant.
6.Nevertheless, Orders 1 and 2 should have been complied with by 4.00 pm on 22 March 2024. Your failure to do so constitutes contempt of court.
Contempt of court
7.We refer to the Summons filed on 14 December 2023 and served by way of personal service on 9 January 2024. You were already in breach of the following court orders:
a.Orders made by Judicial Registrar Caporale on 18 February 2022; and
b.Orders made by Judicial Registrar Caporale on 10 March 2022
Both court orders are enclosed.
8.We would also seek an order that you are in contempt of court for failing to comply with the orders made on 9 February 2024.
9.We strongly recommend that you seek legal advice in relation to all aspects of this proceeding, particularly the consequences of a finding of contempt by the court[3].
10.We refer to Reg 75.11 which sets out the punishment for contempt -
(1)Where the respondent is a natural person, the Court may punish for contempt by committal to prison or fine or both.
11.We are confident that we would be able to establish the elements of the offence of contempt. We would also seek an order that the punishment be continued until the contempt is purged, in other word, until you complied with the orders.
[3]The highlighting is added for emphasis; it did not appear in the original letter.
The 12 April 2024 letter enclosed copies of the 9 February 2024 Orders, the 10 March 2022 Orders and the 18 February 2022 Orders.
Ms Gan responded by email sent on 13 April 2024. Her response stated among other things ‘You must let [Ms Liu] know it is her fault for her ASIC removal…All financial documents you request, please collect from the Accountant [email protected])…You must help [Ms Liu] to register the 49% lottery shares under Franchises agreements. Any questions, please respect our labor to contact the shop supervisor [email protected]. Any document need my signature, please send it. Stop to play money game, $150,000 is running out for our labor of holding the 49% for [Ms Liu]. $150,000 labor payment is not my target. I offered 143,000 to [Ms Liu] before the case… Please respect our labor. Stop to help [Ms Liu] play money game’.
On 15 April 2024, Ms Liu’s solicitors emailed the Company’s accountant regarding the documents set out in the 9 February 2024 Orders. On the same day, Ms Gan emailed the accountant (copying in Ms Liu’s solicitors) requesting that the accountant release the financial documents to Ms Liu, who would be ‘responsible for your labour fee’. The accountant provided a shared link to the documents via a google drive on 17 April 2024 by email.
Prior to the matter returning to Court on 18 April 2024, Ms Liu’s solicitors filed and served an outline of submissions on 17 April 2024 which, among other things, stated the following in regards to the status of the proceeding: ‘To date, [the Company] register has not been corrected and [Ms Gan] remains the holder of the 49 shares… On 17 April 2024, we received most of the financial and accounting records except: (a) Financial statement and tax return for FY 2023 as it is not due yet; and (b) General ledger for FY 2020, 2021, 2022 and 2023’.
When the matter returned for further directions on 18 April 2024, Ms Gan appeared. Orders were made fixing Ms Liu’s contempt summons dated 14 December 2023 for hearing on a date to be fixed, along with orders giving Ms Liu leave to file and serve an amended summons and affidavit in support, and for the filing and service of an outline of submissions. In addition, Ms Gan was directed to request her tax agent to advise Ms Liu’s solicitors as to whether there is a general ledger for the Company for the financial years ending 2020, 2021, 2022 and 2023 and, if so, provide further details as to where the general ledger can be inspected. Ms Gan was also advised to obtain legal advice.
Ms Liu subsequently filed the amended contempt summons on 2 May 2024 which sought orders that Ms Gan be held in contempt for breaching the 18 February 2022 Orders, the 10 March 2022 Orders and the 9 February 2024 Orders.
The hearing of the contempt summons took place on 5 August 2024. Ms Gan represented herself. On 4 October 2024 reasons for judgment[4] were handed down and orders made (‘the 4 October 2024 Orders’), inter alia, as follows:
(1)The defendant, Ping Gan is in contempt of court by failing to create a register of members for [the Company] recording that 49 of the shares of the Company are registered in the name of Ya Liu;
(2)The defendant pay the plaintiff’s costs of and incidental to the summons filed 14 December 2023 and the amended summons filed 2 May 2024, including reserved costs on an indemnity basis;
(3)The costs shall be fixed by M Osborne J in chambers after receipt of the memoranda the subject of orders (4) and (5) hereof and shall be payable by the defendant forthwith;
(4)For the purpose of fixing the costs, the plaintiff shall file and serve a memorandum setting out the quantum of the costs sought and the manner in which the costs have been calculated within 7 days of this order;
(5)In the event that the defendant contends that the quantum of the costs sought by the plaintiff is excessive or should otherwise not be allowed, the defendant shall file and serve a memorandum in response within 7 days of receipt of the plaintiff’s memorandum served in accordance with paragraph 4 hereof.
[4]Liu v Gan [2024] VSC 566, [76].
On 11 October 2024, the costs payable by Ms Gan pursuant to the 4 October 2024 Orders were fixed in the sum of $16,686. Those costs have not been paid.
The matter returned to the Court for directions on 15 November 2024. On the morning of the hearing, Ms Gan emailed the Court and Ms Liu’s solicitor, advising that she was unable to attend Court that day as ‘There’s something going on in the shop today’. She otherwise requested that the Court impose ‘severe penalties on the plaintiff and her lawyer’.
Notwithstanding the 4 October 2024 Orders finding that Ms Gan was in contempt of the 18 February 2022 Orders and the 9 February 2024 Orders, Ms Gan took no steps to rectify things. Ms Gan did not appear on 15 November 2024 when further orders were made (‘the 15 November 2024 Orders’) as follows:
Rectification of Register
1.For the purposes of facilitating compliance by L&G Co Pty Ltd (‘the Company’) with s 175(3) of the Corporations Act 2001 (Cth), the plaintiff is authorised to lodge with the Australian Securities and Investments Commission (‘ASIC’) on behalf of the Company, a form which records that the members of the Company are and have been since 12 June 2019 Ya Liu as to 49 shares and Ping Gan as to 51 shares.
2.At the same time as lodging the form contemplated by parties of this order, the parties shall also provide ASIC with a sealed copy of the orders made 18 February 2022, 4 October 2024 and this order.
Pursuant to the 15 November 2024 Orders concerning ASIC rectification, Ms Liu lodged a form with ASIC on 27 November 2024 recording that she was the owner of 49 shares in the Company.
Notwithstanding the orders and lodgement, on or about 14 February 2025, Ms Gan lodged a form with ASIC which purported to effect a change to ASIC’s records so as to show that Ms Gan was once again the owner of all the shares in the Company.
The matter returned to Court on 7 March 2025 for directions. Orders were made (‘the 7 March 2025 Orders’) substantially to the same effect as the 15 November 2024 Orders, , together with a further order restraining Ms Gan, until further order, from lodging with ASIC any form which states or purports to state that the membership of the Company is anything other than that contemplated by paragraph 1 of the 7 March 2025 Orders (which is to the effect that the members of the Company are Ms Liu as to 49 shares and Ms Gan as to 51 shares).
Ms Liu’s Claim
Against this wholly unsatisfactory background, Ms Liu now applies for oppression relief pursuant to s 232(e) of the Act.
Section 232 of the Act provides:
Grounds for Court order
The Court may make an order under section 233 if:
(a)the conduct of a company’s affairs; or
(b)an actual or proposed act or omission by or on behalf of a company; or
(c)a resolution, or a proposed resolution, of members or a class of members of a company;
is either:
(d)contrary to the interest of the members as a whole; or
(e)oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.
Section 232 is to be read broadly, without being confined by technical distinctions.[5] Further, although the words of the statute are not confined by reference to categories created by existing cases, previous cases can provide helpful reminders of matters that can be relevant to whether oppression is made out.[6]
[5]Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304, 334 [72] (French CJ).
[6]Tomanovic v Global Mortgage Equity Corporation Pty Ltd (2011) 288 ALR 310, 354–355 [178], [185] (Campbell JA with whom Macfarlan and Young JJA agreed).
The expression ‘oppressive to, unfairly prejudicial to, or unfairly discriminatory against’ in s 232(e) is a compound expression, concerned with commercial unfairness.[7]
[7]Knight’s Quest Pty Ltd v Daiwa Can Company (2018) 366 ALR 557, 588 [130] (Beach, Kyrou and Hargrave JJA).
The phrase’s individual elements ‘should be considered merely as different aspects of the essential criterion, namely, ‘commercial unfairness’.[8] ‘Commercial unfairness’ is assessed objectively from the perspective of a reasonable commercial bystander and, in the case of the conduct of a director, the perspective of a reasonable director in the circumstances.[9]
[8]Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, 704 (Young J).
[9]Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459, 473 (Brennan J).
The presence, or absence, of a reasonable commercial justification is relevant in assessing commercial fairness,[10] but the offending party’s motive is irrelevant.[11] It is the effect of the relevant acts that is material.[12] ‘The test is objective and focusses on the impact of the conduct on the victim. There is no mental element required’.[13] Thus it is not necessary for a plaintiff to demonstrate a lack of probity, want of good faith or breach of contract.[14] Further, a plaintiff may make its case by reference both to individual items of conduct and the cumulative effect of that conduct.[15]
[10]Re Spargos Mining NL (1990) 3 ACSR 1, 44 (Murray J).
[11]Campbell v Back Office Investments Pty Ltd (2009) 238 CLR 304, 360 [176] (Gummow, Hayne, Heydon and Kiefel JJ).
[12]Catalano v Managing Australia Destinations Pty Ltd [2014] FCAFC 55, [9] (Siopis, Rares and Davies JJA).
[13]Parker v Auswild [2022] VSCA 8, [130] (Ferguson CJ, Kennedy JA and Garde AJA).
[14]Knight’s Quest Pty Ltd v Daiwa Can Company (2018) 366 ALR 557, 588 [130] (Beach, Kyrou and Hargrave JJA).
[15]John J Starr (Real Estate) Pty Ltd v Robert R. Andrew (A’asia) Pty Ltd (1991) 6 ACSR 63, 67 (Young J); Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd (2006) WAR 1, [29] (Martin CJ).
Fairness is not to be assessed in a vacuum, but in the context where the relevant conduct occurred. This includes not only the business, but the nature of the relationship between the people participating in it. In many cases, there will be an agreement or understanding between those engaged in the business:
Such an agreement or understanding will often be important in assessing whether the conduct in question constitutes oppression. Such agreements or understandings may result in the aggrieved party having a “legitimate expectation” about the basis upon which he or she should participate in the management of the company.
In determining whether conduct is commercially unfair, regard may be had to the following principles:
(a)fairness is not assessed in a vacuum, and depends on context, which context includes the nature of commercial relationships;[16]
(b)fairness is assessed in relation to what is known at the time of the conduct and not to what subsequently transpires;[17]
(c)the court will balance competing interests rather than solely assessing the matter from one member’s point of view;[18]
(d)the concept of fairness, as a criterion for relief, confers a wide power in the courts to do what is just and equitable;[19]
(e)some courts have viewed fairness through the lens of equitable considerations including by referring to ‘legitimate expectations’ of members of the company;[20] and
(f)in assessing unfairness, it is appropriate to consider the behaviour of the person making the allegation of oppression.[21]
[16]O’Neill v Phillips [1999] 2 All ER 961.
[17]Chase Corp (Aust) Ltd v North Sydney Brick and Tile Co Ltd (1994) 35 NSWLR 1, 26 (Cohen J).
[18]Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692; Thomas v HW Thomas Ltd [1984] 1 NZLR 686.
[19]O’Neill v Phillips [1999] 2 All ER 961.
[20]Byrne v AJ Byrne Pty Ltd [2012] NSWSC 667, [49] (Black J); Hunter v Organic and Natural Enterprise Group Pty Ltd (2012) 92 ACSR 183; [2012] QSC 383, [120] (Dalton J).
[21]Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672, [388] (Priestly JA), [676] (Fitzgerald JA); Hunter v Organic and Natural Enterprise Group Pty Ltd (2012) 92 ACSR 183, [105] (Dalton J); Exton v Exton Pty Ltd (2017) 53 VR 520, [50] (Sifris J) citing Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, 706.
While the language of ‘legitimate expectation’ may require caution,[22] it remains useful[23] recognising that an applicant under s 232 does not have to show a breach of promise or unlawful conduct by the company or its directors; the denial of a legitimate expectation arising from the parties’ dealings may suffice.[24] Such dealings may include understandings or agreements between them as well as a course of conduct adopted by them over time.[25]
[22]Tomanovic v Global Mortgage Equity Corporation Pty Ltd (2011) 288 ALR 310, [166]–[171] (Campbell JA).
[23]Re SRW Nominees Pty Ltd [2019] VSC 547, [52] (Robson J).
[24]Mopeke Pty Ltd v Airport Fine Foods Pty Ltd (2007) 61 ACSR 395, [45] (Brereton J).
[25]See Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672, 683 [59] where Spigelman CJ said: ‘it may be that the longevity of a particular mode of decision making will, of itself, create something in the nature of an expectation, the frustration of which may constitute oppression or unfair prejudice’.
Many instances of oppression involve exclusion from a company’s management of a person with a legitimate expectation of being involved in it. Courts have held that exclusion or removal of a person from a ‘management role’ may constitute oppression where that exclusion or removal:
(a)is in breach of a shareholders’ agreement;[26]
(b)takes place otherwise than in accordance with ‘agreed processes by which minority shareholders were to participate in management’;[27] and/or
(c)where it is inconsistent with a common understanding between members outside the company’s constitution which gives rise to a member’s legitimate expectation of participating in management.[28]
[26]Re Courtesy Real Estate (NSW)Pty Ltd (2013) 96 ACSR 593; [2013] NSWSC 1666, [19] (Black J); Campbell v Back Office Investments Pty Ltd (2009) 238 CLR 304 (Campbell JA).
[27]Allways Resources Holdings Pty Ltd v Samgris Resources Pty Ltd (2017) 121 ACSR 1; [2017] QSC 74.
[28]Re Treadtel International Pty Ltd (No 2) [2016] NSWSC 791, [103] (Robb J).
Following the House of Lords decision of Ebrahimi v Westbourne Galleries Ltd,[29] courts have held that failure to meet the ‘legitimate expectations’ of a member or shareholder of a company formed as a ‘quasi partnership’ could amount to oppression in circumstances where the corporation was formed based upon one such understanding and it would be inequitable to permit departure therefrom.[30]
[29](1973) AC 360.
[30]Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343; McMillan v Teleo Enterprises International Pty Ltd (1995) 18 ACSR 683, 614; Tomanovic (2011) 288 ALR 310, [199].
The terminology of both ‘quasi partnership’ and ‘legitimate expectations’ has been questioned, but continues to be in use in judicial decisions. In context:
(a)a quasi-partnership has been described as ‘a majority controlled business requiring mutual cooperation and a level of trust between the members;[31] and
(b)the term ‘legitimate expectation’ refers to ‘an understanding or expectation of a member which, because of equitable considerations, can make it unfair for a party to exercise legal rights.’
[31]MMAL Rentals Pty Ltd & Ors v Bruning (2004) 63 NSWLR 167, [71] (Spigelman CJ).
An unlawful divestiture of shares may amount to unfair conduct in the relevant sense and amount to oppression within the meaning of s 232.[32] Forfeiture of shares without the shareholder’s consent may constitute oppression as will the reduction of a party’s shareholding to nil[33] or the transfer of their shares without knowledge or consent.[34]
[32]Re Quest Exploration Pty Ltd (1992) 6 ACSR 659 (Mackenzie J).
[33]Greenaway v Auzhair 1 Pty Ltd (2010) 80 ACSR 538, 560 [129]; John J Starr (Real Estate) Pty Ltd v Andrew (Australasia) Pty Ltd (1991) 6 ACSR 63, 66.
[34]Petropoulos v Li [2021] 152 ACSR 448.
Past conduct which constitutes oppression but which has been brought to an end may give rise to an entitlement to relief where the effect of the conduct has continued as to the date of the hearing of the proceeding.[35] In addition, s 232(b) of the Act specifically allows for orders to be made remedying past acts and omissions.
[35]Re Spargos Mining NL (1990) 3 WAR 166; Re East West Promotions Pty Ltd (1986) 10 ACLR 222; Re Kenyan Swansea Ltd [1987] PCLC 514, 521.
The refusal to grant access to company information can constitute oppression in certain circumstances.[36]
[36]Solanki v Cufari [2014] VSC 345, [60] (Elliott J); Vigliaroni v CPS Investment Holdings Pty Ltd (2009) 74 ACSR 282, 308 [77] (Davies J).
Conclusion: Oppressive Conduct
Ms Gan’s conduct amounts to oppressive conduct of the most brazen nature. First, Ms Gan effectively expropriated Ms Liu’s 49% shareholding in the Company on two occasions without her knowledge and for no payment, on 24 June 2021 and again around 14 February 2025. The latter occurred despite Ms Gan already being held to have been in contempt of court for conduct involving her attempted extirpation of Ms Liu’s shares.
Secondly, from around the same time, Ms Gan excluded Ms Liu from any involvement in the Company’s affairs whatsoever by failing to, in effect, reinstate Ms Liu’s status as a registered holder of 49 shares, notwithstanding court orders made for the purpose of recognising that status on 18 February 2022, 9 February 2024 and 15 November 2024.
Thirdly, for substantial parts of the period from 24 June 2021 onwards until 17 April 2024, Ms Liu was denied access to the Company’s financial records, notwithstanding orders requiring the provision of those financial records on 10 March 2022 (by no later than 4 April 2022) and also on 9 February 2024.
Whilst the orders which have been obtained by Ms Liu have finally succeeded in at least reinstating the record of her shareholding in the ASIC records, and she has been provided with certain financial statements of the Company (under pains of court order), she remains wholly excluded from the operation of the Company.
The extent of the exclusion is further revealed by yet another instance of highhanded and inappropriate conduct by Ms Gan, which conduct took place on or around 28 April 2025 when she emailed Ms Liu with the subject line ‘Breach Franchisee agreement’ in the following terms:
Dear Liu Ya,
Please carefully read the following content.
This notice is in relation to the shareholder registration of noncompliance with franchise agreement by the shop supervisor on 13th, Feb 2025. After receiving the breach notice from the lottery headquarters, you deliberately terminated four training sessions. The most severe offence was once again making unauthorised changes to the ASIC registration. According to the lottery company’s agreement, as the director of L&G . I am going to identify that you will be permanently disqualified from applying for a lottery business licence. I am going to register a new company with a new partner this week.
In the face of that email, including most relevantly the assertion that Ms Gan was going to register a new company with a new partner that week, Ms Liu applied for an interlocutory injunction by summons filed on 30 April 2025, restraining Ms Gan from causing the termination, transfer and alienation or disposal of the Tatts Lotto licence of the Company.
On 1 May 2025, Ms Gan did not appear at the hearing and orders were made as follows:
Until the hearing and determination of this proceeding or further order, the defendant whether by herself, servants or agents, or howsoever otherwise, be restrained from causing the termination, transfer, alienation or disposal of the Tatts Lotto licence of L&G Co Pty Ltd.
Ms Gan’s opposition to Ms Liu’s complaints appeared to be based on two principal matters, which in broad terms amount to disentitling conduct on the part of Ms Liu that, in Ms Gan’s view, should deny her relief. First, she complained that Ms Liu was unwilling to do the training necessary to satisfy Tatts, which gave rise to a risk that the Company’s licence with Tatts was at risk. Ms Liu denied that she had any such reluctance. That allegation is at odds in any case with the terms of her letter of offer of 23 March 2022. In any case, any lack of commitment which Ms Gan might have attributed to Ms Liu, which I do not accept, does not entitle Ms Gan to acquire Ms Liu’s shares at a time and place of her choosing. The fact that she purported to do so back in 2021 is itself an element of the oppressive conduct at issue and not an answer to the claim. Secondly, she argued that given her willingness in 2021 to either buy Ms Liu’s shares for $130,000 or sell her own shares to Ms Liu for $154,000, Ms Liu’s initiation and persistence with the legal action was wasteful and unnecessary. The fact that Ms Liu now seeks $170,300 for her shares, only $40,300 higher than that offered by Ms Gan four years earlier, testifies to the fact that the costs of litigation of this nature is often disproportionate to the value of the subject matter of the case. However, the original ‘offer’ by Ms Gan was made on a take-it-or- leave-it basis as something of a fait accomplis imposed on Ms Liu. It was entirely reasonable for Ms Liu to propose that an independent accountant examine the financial statements for the years in which she owned 49% of the shares with a view to distributing the profit in accordance with the shareholdings. Moreover, Ms Gan soon afterwards dropped the price substantially and as at the present time, professes a complete unwillingness to pay anything to Ms Liu for her shares. There is no current offer on foot which might in other circumstances be relevant to the discretion to grant oppression relief.
It is tolerably clear from Ms Gan’s conduct in this proceeding, including her repeated failure to observe court orders, coupled with the earlier unilateral expropriation of Ms Liu’s shareholding in the Company, that she will continue to exclude Ms Liu from any operation in the Company. Ms Gan has made it plain that she shall operate the Company and deal with its business as she sees fit, without any recourse to Ms Liu, who remains a 49% shareholder in the Company.
Ms Gan’s conduct therefore constitutes conduct which is commercially unfair in the sense that it would be regarded from the perspective of a reasonable commercial bystander as such. Indeed, it is difficult to imagine clearer conduct of an oppressive nature.
Accordingly, the broad discretion to grant Ms Liu orders of the kind set out in s 233 of the Act is enlivened.
Relief
Ms Liu primarily seeks relief under Section 233(1) of the Act which provides:
Orders the Court can make
(1)The Court can make any order under this section that it considers appropriate in relation to the company, including an order:
(a)that the company be wound up;
(b)that the company’s existing constitution be modified or repealed;
(c)regulating the conduct of the company’s affairs in the future;
(d)for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law;
(e)for the purchase of shares with an appropriate reduction of the company’s share capital;
(f)for the company to institute, prosecute, defend or discontinue specified proceedings;
(g)authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company;
(h)appointing a receiver or a receiver and manager of any or all of the company’s property;
(i)restraining a person from engaging in specified conduct or from doing a specified act;
(j)requiring a person to do a specified act.
Further, and in the alternative, Ms Liu relies upon s 461(1)(f),(g) and (k) of the Act. Those sections provide:
General grounds on which company may be wound up by Court
(1)The Court may order the winding up of a company if:
…
(e)directors have acted in affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever that appears to be unfair or unjust to other members; or
(f)affairs of the company are being conducted in a manner that is oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or in a manner that is contrary to the interests of the members as a whole; or
(g)an act or omission, or a proposed act or omission, by or on behalf of the company, or a resolution, or a proposed resolution, of a class of members of the company, was or would be oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or was or would be contrary to the interests of the members as a whole; or
…
(k)the Court is of opinion that it is just and equitable that the company be wound up.
For substantially the same reasons as set out above, I am satisfied that the jurisdiction to order a winding up is also enlivened.
In support of Ms Liu’s claim for relief under s 233, she relies upon the evidence of Mr Ferrier. As stated earlier, Mr Ferrier is a qualified accountant and experienced forensic accountant. Mr Ferrier provided the Court with an expert report dated 30 April 2025.
In his report, Mr Ferrier, inter alia, expressed the following opinion:
(a)that the current value of the Company by application of the fair value standard is approximately $347,500;
(b)that the value of Ms Liu’s 49% shareholding in the Company is approximately $170,300.
Mr Ferrier’s valuation was based upon his review of the financial performance of the Company as it appeared from the statutory financial statements and income tax returns prepared on behalf of the Company for FY 2020 to FY 2023 inclusive.
On the basis of that information, Mr Ferrier, among other things, assessed a normalised profit before earnings before interest, tax, depreciation and amortisation (‘PEBITDA’) for the business for the period from FY 2019 to FY 2023, and an estimated normalised PEBITDA for FY 2024. He then applied a weighted average before determining future maintainable earnings as approximately $180,000 per annum.
Based on a review of, inter alia, sales information for comparable businesses, Mr Ferrier then determined a capitalisation multiple between 2.5x and 3.0x PEBITDA, concluding that the business had a value of between $450,000 and $540,000, which represents a value for the business of approximately $495,000 based on the mid-point of the valuation range.
In his report, Mr Ferrier also noted that the business had been advertised by Ms Gan at a price of $550,000. However, the advertised price did not cause Mr Ferrier to materially alter his opinion. In cross examination, he made the obvious point that the asking price and the market value are not the same thing. At the hearing however, Ms Gan suggested that the business was worth only $400,000.
Mr Ferrier then deducted the net business assets of the business of approximately $12,500 before determining the goodwill value attributable to the business at between $437,500 and $527,500, which represented a midpoint of $483,500.
Having determined the goodwill value, Mr Ferrier then deducted the net surplus assets of the company of ($147,504) resulting in a midpoint value for the Company of $347,496.
The most substantial component of the negative net surplus assets comprised a liability to an unidentified person of $134,771.
It appears sufficiently clear from the financial statements and Mr Ferrier’s forensic report that this amount is owed by the Company to Ms Gan and represents the balance of a loan made by her to the Company of $306,828, made during FY 2019. That loan was apparently used by the Company to acquire the business some time in the period between July 2013 and December 2014. That this was the purpose of the loan is consistent with the value for goodwill recorded in the company balance sheet as at 30 June 2014 and 30 June 2015. This goodwill figure in broad terms, provides some support for the conclusions by Mr Ferrier of a goodwill value for the business at 30 June 2024 of between $437,500 and $527,500.
In those circumstances, Mr Ferrier has concluded that the value of Ms Liu’s shareholding is $170,300.
The question also arises whether the Company ought to be wound up. Winding up is a remedy of last resort. It is a drastic remedy, and one which is commonly regarded as a remedy of last resort and which will not be granted if some other less drastic form of relief is available and appropriate.[37]
[37]Re Dalkeith Investments Pty Ltd (1984) 9 ACLR 247; 3 ACLC 74.
Generally speaking, courts are ‘extremely reluctant to wind up a solvent company, including for reasons such as the potential adverse effect of winding up on employees’.
There is no justification for ordering the more drastic remedy of winding up where less intrusive alternatives are available, such as a buy-out.
A buy-out is the most common remedy ordered in oppression cases, particularly in cases of companies involving a small number of shareholders, where one shareholder has been excluded from participation in the management and operation of the company.
In my view, the appropriate order in this case is that Ms Liu’s shares be acquired by Ms Gan for $170,300. That buy out figure is based on Mr Ferrier’s expert opinion, which I consider is both persuasive and based on entirely orthodox methodology. I am satisfied that a value based on the most up-to-date financial statements is appropriate. Ms Liu remains a shareholder and there is no evidence that there has been any improvement in the financial position of the Company due to an influx of capital from Ms Gan since she excluded Ms Liu[38] or efforts by her such as may justify a value at the time of Ms Liu first being excluded.
[38]In fact, the contrary appears to be the case as the balance of the loan owed by the Company to Ms Gan has reduced.
Costs
That leaves the question of costs of the proceeding. Ms Liu seeks an order that Ms Liu’s legal costs of the proceeding be paid by Ms Gan on an indemnity basis.
The question of whether costs should be ordered on an indemnity basis is a matter of discretion. Ordering indemnity costs is out of the ordinary and requires conduct which is variously described as exceptional or amounts to special circumstances. Indemnity costs have been ordered where the losing party has engaged in unmeritorious or deliberate or high-minded or other improper conduct such as to warrant the court showing its disapproval and at the same time preventing the successful party being left out of pocket.[39] Other circumstances in which indemnity costs have been ordered are where a litigant properly advised should have known that they had no chance of success.[40]
[39]Australian Guarantee Corp Ltd v De Jager [1984] VR 483, 502 (Tadgell J).
[40]Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 401 [15] (Woodward J).
This is a case where an order for indemnity costs is appropriate. First, Ms Liu’s claim was one which, on any objective view of things, would succeed. The only question was the price at which Ms Liu’s shares should be acquired. Plainly, the continuation of the status quo where Ms Liu held 49 shares in the Company and Ms Gan 51 was unsustainable. Ms Gan for one had and continues to make that clear. Secondly, Ms Gan’s conduct during the course of the litigation was ill-advised. She came across as an intelligent person but one who was both passionate and emotional. Unfortunately those passions and emotions were regularly ill directed. On regular occasions, she threatened to report Ms Liu’s solicitor to authorities and regularly requested the Court to stop Ms Liu (and her solicitor) from wasting Ms Gan’s time, and exhorted the Court to impose fines on Ms Liu and her solicitor for bullying or harassing Ms Gan. None of these criticisms had any basis; indeed having reviewed carefully the correspondence which has passed from Ms Liu’s solicitors throughout the proceeding, the content of that communication was completely appropriate respectful and courteous. In many of the cases prompting Ms Gan’s complaints, Ms Liu’s solicitor was doing no more than informing Ms Gan of orders made by the Court and the consequences of non-compliance. Indeed, on regular occasions Ms Liu’s solicitors encouraged Ms Gan to obtain legal advice. So too did the Court.
The dispute was one which ought to have been eminently capable of resolution. The reason why it was not lies entirely at Ms Gan’s feet, who to the detriment of all, has proved to be her own worst enemy. Any solicitor would have advised Ms Gan that she was obliged to adhere to Court orders, that she could not unilaterally remove a shareholder such as Ms Liu that Ms Liu’s requests to be bought out were entirely sensible and the only issue was the price. Regrettably, Ms Gan was disinclined to take the encouragement to engage a solicitor on board.
Regrettably, the consequences of that approach necessitated a significant amount of Court time, and more importantly a significant delay in the vindication of Ms Liu’s rights and the incurring by Ms Liu of legal costs of a magnitude far higher than ought to have been necessary.
In the circumstances, Ms Liu should not be left out-of-pocket. Ms Gan’s approach and conduct throughout the proceeding justifies an order for indemnity costs.
Further, the fact that Ms Gan was self-represented is no barrier to an order for indemnity costs.[41] That is particularly so in the present case where Ms Liu’s solicitors and the Court regularly advised Ms Gan to obtain legal advice, which she was not prepared to do.
[41]Salfinger v Niugini Mining (Australia) Pty Ltd (No 4) [2007] FCA 1594 (Heerey J); Aucare Dairy (Aust) Pty Ltd v Huang (No 4) [2019] VCA 1187.
There will be an order that Ms Gan acquire Ms Liu’s shares in the Company for $170,300. Assuming compliance, the orders will enable Ms Gan to resume full ownership of the Company. She will then be able to sell the business if she wishes or bring in a new shareholder with whom she is more compatible. However, given the history of the proceeding, care needs to be taken in the framing of the order that Ms Gan acquire Ms Liu’s shares for $170,300. Whilst it may be open for Ms Liu to seek some form of supplementary orders if necessary if Ms Gan does not comply, it is preferable if the orders are framed in a way which does its best to minimise further legal costs and disputation. Subject to hearing as to the precise form, the orders shall be as follows:
(1) The defendant shall pay to the plaintiff $170,300.
(2) The plaintiff shall provide to the defendant as soon as practicable by sending by pre-paid ordinary post to the defendant at her residential address, 3/46 Delmore Crescent, Glen Waverley Victoria 3150 and by email sent to the email address [email protected], the following documents:
(a) a share transfer form providing for the transfer by the plaintiff of 49 shares (‘the plaintiff’s shares’) in L&G Co Pty Ltd (‘the Company’) to the defendant or nominee;
(b) a form to be lodged at the Australian Securities and Investments Commission (‘ASIC’) providing for the transfer of the plaintiff’s shares in the Company to the defendant.
(3) The defendant shall pay the sum referred to in paragraph 1 hereof, within 30 days of this order, or such further or other period as is agreed by the parties in writing or ordered by the Court.
(4) Upon receipt by the plaintiff of $170,300 in cleared funds, the injunction granted in paragraph 3 of the orders made 7 March 2025 restraining the defendant from lodging with ASIC any form changing the membership of the Company and the injunction granted in the orders made 1 May 2025 restraining the defendant from causing the termination, transfer, alienation or disposal of the Tatts Lotto licence of L&G Co Pty Ltd, shall be discharged.
(5) The defendant shall pay the plaintiff’s costs of the proceeding excluding those costs ordered on 4 October 2024, on an indemnity basis.
(6) Liberty to apply is reserved.
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