Re Sunstar Freight Pty Ltd - [2023] QSC 65

SUPREME COURT OF QUEENSLAND

CITATION:

Re Sunstar Freight Pty Ltd [2023] QSC 65

PARTIES:

JIANFENG YANG

(applicant)

v
SUNSTAR FREIGHT PTY LTD ACN 650 486 178

(respondent)

FILE NO/S:

BS 13922/22

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Brisbane Supreme Court at Queensland

DELIVERED ON:

3 April 2023

DELIVERED AT:

Brisbane

HEARING DATE:

3 March 2023

JUDGE:

Brown J

ORDER:

1. That Sunstar Freight Pty Ltd ACN 650 486 178 be wound up pursuant to section 461(1)(k) of the Corporations Act 2001 (Cth);

2.     That Mr Morgan Lane be appointed as liquidator for the purpose of the winding up;

2A.   The interlocutory application filed by Mr Qin (CFI 7) is dismissed;

3. The Applicant’s costs be paid by the Respondent and reimbursed in accordance with section 466(2) of the Corporations Act 2001 (Cth) as assessed or agreed; and

4.     There should otherwise be no orders as to costs.

CATCHWORDS:

CORPORATIONS – WINDING UP – APPLICATIONS FOR WINDING UP BY COURT – GENERALLY – where a 50% director and shareholder applied to wind up the company under s 461(1)(k) of the Corporations Act 2001 (Cth) – where there was a breakdown in the relationship between the applicant and the other 50% shareholder – whether it would be just and equitable to wind up the company – whether application brought unreasonably – whether there was an alternative and adequate remedy

CORPORATIONS – WINDING UP – APPLICATIONS FOR WINDING UP BY COURT – ORDERS – DISMISSAL, STAY OR OTHER RESTRAINT OF PROCEEDINGS – where the other 50% shareholder opposed the winding up and applied for the winding up to be stayed or discontinued until proceedings could be instituted against the applicant for breach of director’s duties

COUNSEL:

S C Russell for the applicant
Mr Chuan Qin appeared on his own behalf

SOLICITORS:

Redchip Lawyers for the applicant
Mr Chuan Qin appeared on his own behalf

The applicant, Mr Jianfeng Yang, brings an application to wind up Sunstar Freight Pty Ltd ACN 650 486 178 (“Sunstar Freight”) pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) (the “Act”) on the ground that it would be just and equitable to do so due to a breakdown in the relationship between Mr Yang and Mr Chuan Qin, the other equal shareholder of Sunstar Freight, which is said to be irretrievable. Mr Yang and Mr Qin are the directors of Sunstar Freight.
Mr Qin opposes the order for winding up and makes an interlocutory application that the winding up should be discontinued or stayed and Mr Yang restrained from acting as a director of Sunstar Freight under s 233 of the Act until Mr Qin has instituted proceedings against Mr Yang to recover damages caused by him to Sunstar Freight arising out of alleged breaches of his director’s duties.
The matter came on for hearing pursuant to an originating application. According to Mr Yang’s counsel there is no real factual dispute that the relationship between Mr Yang and Mr Qin has irretrievably…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Sunstar Freight Pty Ltd

Details

AGLC: Re Sunstar Freight Pty Ltd [2023] QSC 65
Case: [2023] QSC 65
Decision Date: 3 April 2023

CaseChat Overview and Summary

The applicant, Mr Yang, sought to wind up Sunstar Freight Pty Ltd under section 461(1)(k) of the Corporations Act 2001 (Cth) due to a breakdown in his relationship with the other 50% shareholder and director, Mr Qin. The dispute centred on the just and equitable grounds for winding up the company, whether the application was brought unreasonably, and the existence of an alternative and adequate remedy. Mr Qin opposed the winding up and requested that it be stayed or discontinued until he could bring proceedings against Mr Yang for alleged breaches of director's duties.

The court examined the historical background of the relationship between Mr Yang and Mr Qin, who had agreed to become equal shareholders and directors of Sunstar Freight. Despite differing perceptions of the terms of their agreement, they had established a quasi-partnership based on mutual trust and confidence. However, by July 2022, their relationship had deteriorated to the point of being unworkable, with both parties losing trust in each other and unable to cooperate in managing the business. The court found that the sale of the company's primary assets effectively eliminated any prospect of continuing the business.

The court concluded that the relationship between Mr Yang and Mr Qin had irretrievably broken down, rendering it just and equitable to wind up the company. The court also found that the application was not brought unreasonably and that there was no alternative and adequate remedy available. Consequently, the court ordered the winding up of Sunstar Freight Pty Ltd and the appointment of Mr Morgan Lane as liquidator. Mr Yang's costs were to be paid by Mr Qin, and there were to be no further orders regarding costs.

Orders

Orders of the court

1. That Sunstar Freight Pty Ltd ACN 650 486 178 be wound up pursuant to section 461(1)(k) of the Corporations Act 2001 (Cth);

2. That Mr Morgan Lane be appointed as liquidator for the purpose of the winding up;

2A. The interlocutory application filed by Mr Qin (CFI 7) is dismissed;

3. The Applicant’s costs be paid by the Respondent and reimbursed in accordance with section 466(2) of the Corporations Act 2001 (Cth) as assessed or agreed; and

4. There should otherwise be no orders as to costs.

Background

Background to the litigation

Both Mr Yang and Mr Qin provided affidavit material in support of their positions. Mr Qin appeared as a self-represented litigant with the assistance of an interpreter, Ms Gao. Factual background Given the basis of the application for the winding up, it is relevant to examine the historical background that led to Mr Yang and Mr Qin becoming directors and shareholders of Sunstar Freight. Mr Yang was introduced to Mr Qin by an associate, Mr Degang Li, in March 2021. Mr Qin had been involved in the food industry for fifteen years and worked for Fung Lea Food Pty Ltd (“Fung Lea Food”). Mr Qin stated that he was aware at the time that Mr Yang was working for a company named EPH Seafood and Groceries but not that he had his own company, Sunstar Tradings Pty Ltd ACN 609 099 201 (“Sunstar Tradings”). According to Mr Yang, he had an idea to establish a business for the interstate delivery of food products and a plan to set up a new company. Mr Yang states that Mr Li put him in contact with Mr Qin to see if Mr Qin was interested in participating in the new business. According to Mr Qin, it was his idea to start an interstate delivery business for food products and Mr Li had introduced Mr Yang to him. In any event, regardless of whose idea it was, both Mr Yang and Mr Qin were interested in establishing a company to conduct a business for the interstate delivery of food products. Originally it was proposed that Mr Yang, Mr Qin and Mr Li would all be involved in the business. However, as there was a dispute as to what stakeholder interest Mr Li should hold, Mr Li declined to participate in the new company. In or around May 2021, Mr Yang and Mr Qin agreed to be equal shareholders in the new company, Sunstar Freight. Mr Qin states that had he been aware that Mr Yang owned Sunstar Tradings he would not have agreed to a company name with “Sunstar” in it. That is contrary to Mr Yang’s evidence that the name was chosen because of its association with him and his company, Sunstar Tradings. According to Mr Yang, the agreement reached was that Mr Yang was to contribute his know-how, management skills and contacts. Mr Qin was to contribute Fung Lea Food’s truck and cold storage facilities and procure a weekly freight contract between Sydney and Brisbane from Fung Lea Food. There is a dispute as to whether Mr Qin informed Mr Yang that the storage would be for free or for a fee. Both Mr Yang and Mr Qin claim they were responsible for management of Sunstar Freight and bringing new clients into the business. For the present purposes, the Court does not need to resolve either matter. According to Mr Qin, he tried to find other business partners and did not contact Mr Yang for more than a month after Mr Li indicated that he did not wish to be part of the business. Mr Qin stated that Mr Yang had subsequently contacted him multiple times and offered to take charge of all the early work, including by registering the company and purchasing trucks, and that Mr Qin would only have to introduce new customers to the business. Until the company started to generate cash flow, Mr Yang agreed to defer payment for the interstate trips which had been agreed to be $900 per trip. According to Mr Qin, “I sensed his sincerity and agreed to cooperate with him, saying that the company would not be busy when it started, I would contact clients and expand the business in my spare time. Then, I said if there was no driver available, I could drive on weekend as a backup driver.”

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Mr Yang contends that in the present case, notwithstanding he conceded that there is a serious question to be tried in relation to whether there is a breach of conduct by Mr Yang at least in relation to the non-refrigerated trailer, that he is not disbarred from pursuing winding up on the just and equitable ground as there has been an irretrievable breakdown between the relationship of Mr Yang and Mr Qin which is not disputed on the facts, and that the application was not engineered by his earlier conduct and made by him unreasonably. Consideration I find that the relationship between Mr Qin and Mr Yang, which resulted in them becoming joint shareholders and directors of Sunstar Freight, arose as a result of a mutual agreement to enter into a business relationship with each other. Each had confidence in the other and acknowledged what the other could bring to a business in terms of contacts, know-how, labour and other matters and there was a level of trust. The relationship was in effect a quasi-partnership, which is supported by the fact that they had equal shareholding, made equal capital contributions and that both Mr Yang and Mr Qin were directors working in the business, albeit that their perceptions of how it was agreed to operate differed, unaided by the fact that the terms agreed were not recorded in writing. There is no doubt that the evidence supports the fact, and I find, that by approximately July 2022 Mr Qin and Mr Yang had suffered a breakdown in their relationship which resulted in a loss of trust in the other and an inability to resolve matters in order to continue to conduct the everyday business of Sunstar Freight and cooperate in order to discharge the company’s obligations. The truck and trailer which were the principal forms of transport underpinning the business have been surrendered and are to be or have been auctioned. Given the business involved the interstate delivery of food products, the sale of those items which underpinned the business effectively eliminates any prospect of a continuation of the business of Sunstar Freight. Neither Mr Yang nor Mr Qin wishes to carry on business with the other. More than that, their lack of trust in each other, and the fact that they have largely dealt with each through lawyers since July 2022, means they are incapable of doing so. Mr Qin attributes the breakdown in the relationship to him discovering Mr Yang’s plan to use Sunstar Freight’s business to benefit Sunstar Tradings and deciding not to trust him anymore. That view of Mr Qin has developed based on matters he discovered after the business relationship had broken down. Mr Yang attributes the breakdown to the failure of Mr Qin to contribute to the business in accordance with his perception of what they agreed and Mr Qin then refusing to meet his demands as to changes when his expectations were not met. Whoever might be more accurate in their view is not a matter which can presently be determined. On any view, the business relationship operating through Sunstar Freight deteriorated to the extent of being unworkable, and that was the case at least by 7 July 2022 with matters only deteriorating thereafter.

CITATION:	Re Sunstar Freight Pty Ltd [2023] QSC 65
PARTIES:	JIANFENG YANG (applicant) v SUNSTAR FREIGHT PTY LTD ACN 650 486 178 (respondent)
FILE NO/S:	BS 13922/22
DIVISION:	Trial Division
PROCEEDING:	Application
ORIGINATING COURT:	Brisbane Supreme Court at Queensland
DELIVERED ON:	3 April 2023
DELIVERED AT:	Brisbane
HEARING DATE:	3 March 2023
JUDGE:	Brown J
ORDER:	1. That Sunstar Freight Pty Ltd ACN 650 486 178 be wound up pursuant to section 461(1)(k) of the *Corporations Act 2001* (Cth); 2. That Mr Morgan Lane be appointed as liquidator for the purpose of the winding up; 2A. The interlocutory application filed by Mr Qin (CFI 7) is dismissed; 3. The Applicant’s costs be paid by the Respondent and reimbursed in accordance with section 466(2) of the *Corporations Act 2001* (Cth) as assessed or agreed; and 4. There should otherwise be no orders as to costs.
CATCHWORDS:	CORPORATIONS – WINDING UP – APPLICATIONS FOR WINDING UP BY COURT – GENERALLY – where a 50% director and shareholder applied to wind up the company under s 461(1)(k) of the Corporations Act 2001 (Cth) – where there was a breakdown in the relationship between the applicant and the other 50% shareholder – whether it would be just and equitable to wind up the company – whether application brought unreasonably – whether there was an alternative and adequate remedy CORPORATIONS – WINDING UP – APPLICATIONS FOR WINDING UP BY COURT – ORDERS – DISMISSAL, STAY OR OTHER RESTRAINT OF PROCEEDINGS – where the other 50% shareholder opposed the winding up and applied for the winding up to be stayed or discontinued until proceedings could be instituted against the applicant for breach of director’s duties
COUNSEL:	S C Russell for the applicant Mr Chuan Qin appeared on his own behalf
SOLICITORS:	Redchip Lawyers for the applicant Mr Chuan Qin appeared on his own behalf