Shuren & Fang

Case [2023] FedCFamC1F 712

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Shuren & Fang [2023] FedCFamC1F 712

File number MLC 3815 of 2023
Judgment of WILSON J
Date of judgment 24 August 2023 
Catchwords FAMILY LAW – COMPANY LAW – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – shareholders’ meeting of a company in which the husband’s company and the wife’s company are shareholders along with other shareholders – husband and wife were directors – husband purportedly calling a shareholders’ meeting to remove the wife as a director – requisite notice not given – requisite notice defective in several respects – no actual meeting held – wife challenging validity of meeting and the upshot of it, namely her purported removal as a director – husband asserting defects alleged by the wife were procedural only resulting in no substantial injustice to the wife – s 1322 of the Corporations Act considered – held, substantive irregularities occurred – relief granted as sought by wife.       
Legislation

Corporations Act 2001 (Cth) Part 2G.2, ss 45A(1), 135, 203C, 249A, 249A(2), 249C, 249D, 249H , 249H(1), 249J, 249J(4), 249L, 249R, 249S, 249T, 250J, 251A, 1304, 1322, 1322(2), 1322(3A), 1322(3AA), 1322(4) and 1322(6)

Family Law Act 1975 (Cth) s 79A

Cases cited

American Delicacy Co Ltd v Heath (1939) 61 CLR 45

Australia Hydrocarbons NL v Green (1985) 10 ACLR 72

Baillie v Oriental Telephone and Electric Company Ltd [1915] 1 Ch 503

BI Construction Pty Ltd v Shad [2010] NSWSC 484

Bulfin v Bebarfalds Ltd (1938) 38 SR (NSW) 423

Chequepoint Securities Ltd v Claremont Petroleum NL (1986) 11 ACLR 94

Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389

Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd (2005) 194 FLR 322

Deputy Commissioner of Taxation v Shi (2020) 273 CLR 235

Devereaux Holdings Pty Ltd v Pelsart Resources NL (No 2) (1985) 9 ACLR 956

Eaby & Speelman [2015] FamCAFC 104

Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157

ENT Pty Ltd v Sunraysia Television Ltd (2007) 61 ACSR 626

ERS Engines Pty Ltd v Wilson (1994) 35 NSWLR 193

Fraser v NRMA Holdings Ltd (1994) 52 FCR 1

Fraser v NRMA Holdings Ltd (1995) 55 FCR 452

Gambotto v WCP Ltd (1995) 182 CLR 432

Goldex Mines Ltd v Revill (1974) 54 DLR (3d) 672

In the matter of Boart Longyear Ltd [2017] NSWSC 756.

Jackson v The Munster Bank Ltd (1884) 13 LR Ir 118

Jones v Dunkel (1959) 101 CLR 298

Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2005) 55 ACSR 583

Marvel v Marvel (2010) 43 Fam LR 348

Nenna v Australian Securities and Investments Commission (2011) 198 FCR 32

Pacific Coast Coal Mines Ltd v Arbuthnot [1917] AC 607

Peel v London and North Western Railway [1907] 1 Ch 5

Peters’ American Delicacy Co Ltd v Heath (1939) 61 CLR 457

Primary Securities Ltd v Aurora Funds Management Ltd [2020] NSWCA 230

Primelife Corporation Ltd v Aevum Ltd

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Details
AGLC
Shuren & Fang [2023] FedCFamC1F 712
Case
[2023] FedCFamC1F 712
Decision Date

CaseChat Overview and Summary

Shuren & Fang was a case in the Family Court of Australia where the wife sought to have property alteration orders set aside and to be reinstated as a director and secretary of B Pty Ltd. The husband, who was also the executive director of B Pty Ltd, had allegedly removed the wife from her positions without proper notice and through improper means. The legal issues that the court had to decide were whether the meeting that removed the wife was valid and if the wife suffered substantial injustice that warranted her reinstatement as a director and secretary of B Pty Ltd. The court held that the meeting was invalid as the wife was not given proper notice and that the husband's actions caused substantial injustice to the wife. The court reasoned that the husband's actions were deliberate and designed to prevent the wife from participating in the meeting, which denied her the opportunity to defend herself. The court also held that s 1322(4) of the Corporations Act was not available to excuse the irregularity as it arose from a deliberate informed decision to create an irregularity. The court granted the wife's application to set aside the property alteration orders and to be reinstated as a director and secretary of B Pty Ltd.

Orders

Orders of the court

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Background

Background to the litigation

As these reasons disclose, in my view at no stage was a valid meeting held to remove the wife as a director and the secretary of B Pty Ltd. Her purported removal as a director and the secretary of B Pty Ltd was a nullity. In my judgment, s 1322(4) of the Corporations Act is not available in the circumstances of this case. RELEVANT BACKGROUND In support of this contested interlocutory application, the wife indicated in her outline of case dated 27 June 2023 that she relied on nine affidavits. The wife made affidavits dated 12 April 2023, 10 May 2023, 22 May 2023, 14 June 2023 and 26 June 2023. It was common ground that B Pty Ltd at all relevant times carried on business. The husband and wife were each born in Country D, they married in Country D in 1986, they have two adult children (one born in Country D, the other born in Australia), they divorced in early 2021, thereafter continuing to live together until an episode of family violence in February 2023 on which date they finally separated. In this litigation the wife seeks orders under s 79A of the Family Law Act setting aside property alteration orders made by a registrar on 1 October 2020 and 9 February 2016. Relevant to this interlocutory application, the wife’s 12 April 2023 affidavit recorded the information of certain facts. Those included – (a)B Pty Ltd owns and operates developments at E Street, Suburb F and at G Street, Suburb H;(b)the wife was a director of B Pty Ltd and she is currently a shareholder in it;(c)on 7 March 2023 the husband purported to call a meeting of shareholders in B Pty Ltd without notifying the wife and on 9 March 2023 the wife learned that she had been allegedly removed as a director of B Pty Ltd;(d)two shareholder in B Pty Ltd told the wife that the husband told those two shareholders that their physical wellbeing could be at risk unless they agreed to remove the wife as a director; and (e)the sole purpose of the husband removing the wife as a director of B Pty Ltd is so that he can manage the affairs of B Pty Ltd in such fashion as to direct funds belonging to B Pty Ltd into his personal accounts or entities that will be difficult to trace.[1] [1] Paragraph 99 of the wife’s 12 April 2023 affidavit. In paragraph 95 of her 12 April 2023 affidavit the wife deposed to the events of 7 March 2023. She stated that on 7 March 2023 the husband called a shareholders’ meeting of B Pty Ltd without notifying the wife. She deposed to receiving notice of the meeting on 9 March 2023, after the meeting had allegedly been conducted at which shareholders had agreed to remove her as a director. The wife exhibited a translated version of the notice of meeting. The certified translation of the notice was as follows – Notice of meeting of Shareholders of [B Pty Ltd]Regarding a resolution to remove [Ms Shuren] from her director position in [B Pty Ltd], [Mr Fang], a shareholder and the executive director of the company, hereby give notice to all shareholders of [B Pty Ltd] for holding a general meeting of shareholders in the form of a meeting or teleconference with the agenda of removing [Ms Shuren] from her director position in [B Pty Ltd]. The reasons will be clearly expressed to all shareholders at the meeting and the shareholders will vote in person to decide. [Ms Shuren], shareholder and director of the company, and [Mr Fang], the meeting convener and executive director, will not attend the meeting or be contacted in any form due to special reasons, so the company will send the meeting notice and the voting form for shareholder resolution to [Ms Shuren]. Date 9 March 2023

Evidence

Evidence Before The Court

Exhibit G to Dr T’s affidavit was a photograph in the nature of a snapshot, translated, of the mobile telephone version of that message. It was dated 7 March at 12:52. THE HUSBAND’S EVIDENCE The husband filed two affidavits on which he relied, the first made on 11 May 2023 and the second on 5 June 2023. The husband also relied on the affidavit of Ms U made 26 June 2023 as well as the affidavit of Mr V made on 8 June 2023. In his affidavit made 11 May 2023, the husband addressed evidentiary particulars beyond B Pty Ltd. Those included the following – (a)he has been in a relationship with his current partner since 2018 with whom the husband has a daughter (born in 2021) and a step daughter (born in 2012); and (b)he, his partner and his partner’s parents live together. The husband’s affidavit made 5 June 2023 provided other information in respect of this application. He deposed to the following – (a)B Pty Ltd’s shareholding is owned as to 45 shares by K Pty Ltd, C Pty Ltd as to 45 shares, Q Pty Ltd as to 20 shares, R Pty Ltd as to 20 shares, M Pty Ltd as to 20 shares and L Pty Ltd as to 50 shares; (b)B Pty Ltd owns 35 properties across two sites; (c)after the wife obtained an intervention order against the husband, the husband became concerned about how B Pty Ltd would continue to conduct business; (d)the other shareholders in B Pty Ltd were aware of the existence of the intervention order so after a discussion with the shareholders an urgent general meeting of shareholders was convened to vote on the issue of whether the wife was a fit and proper person to maintain her position as a director and the secretary of B Pty Ltd;(e)on 7 March 2023 notices were sent to all shareholders including C Pty Ltd and a general meeting of shareholders of B Pty Ltd was convened in accordance with B Pty Ltd’s constitution; (f)as the shareholders do not understand English, a Country D language voting form was specifically drafted to enable voters to clearly express their decisions; (g)a hard copy of the notice to shareholders of the meeting and of the voting form was addressed to C Pty Ltd and sent; (h)all shareholders attended the meeting by teleconference save for the wife’s company C Pty Ltd; (i)the shareholders present at the meeting, making up 77.5% of the shareholding in B Pty Ltd, voted at the meeting, unanimously agreed to removing the wife as a director; (j)the husband disputed the assertion that he pressured, threatened or coerced the shareholders in their voting; (k)the shareholders’ meeting of B Pty Ltd was held on 7 March 2023 but the husband called on shareholders to return their votes by 10 March 2023; (l)he denied he and the wife were jointly involved in the day-to-day management of B Pty Ltd and he asserted that only he managed B Pty Ltd; and (m)he sought orders for the dismissal of the wife’s application in a proceeding. B Pty Ltd’s constitution was exhibited by the husband as exhibit MF1 to the husband’s 5 June 2023 affidavit. Pursuant to s 135 of the Corporations Act, various replaceable rules were adopted by B Pty Ltd including s 249C which provides that a director may call a meeting of the company’s members, s 249J(4) which provides that a notice of meeting sent electronically is taken to be given on the business day after it is sent, s 249T which provides for the quorum for a meeting of members and s 250J which makes provision for how voting is carried out.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Mr Glick submitted that it is open for me to determine, on the documents themselves, that no meeting was conducted on 7 March 2023, contrary to the husband’s assertions. Mr Glick said that such a determination did not require me to make factual findings on contested issues involving an assessment of contradictory viva voce evidence. THE WIFE’S CONTENTION ON S 1322 OF THE CORPORATIONS ACT Mr Glick submitted that the irregularity identified has caused substantial injustice that cannot be remedied otherwise than by an order reinstating the wife to the office of director of B Pty Ltd.[33][33] Transcript 27 June 2023, T30 L13. The husband conceded irregularity as to the 21 days notice period. The substantial injustice on which the wife relied took many forms, so Mr Glick submitted. First, despite being removed from the day-to-day operations of B Pty Ltd, the wife remained liable to J Bank for very considerable indebtedness. Second, the wife said substantial injustice was occasioned by the failure to give her notice of the meeting and therefore she was denied the opportunity to put her version of events about why the husband was purporting to remove her as a director. The wife relied on the observations of Slattery J in the Supreme Court of New South Wales in BI Construction Pty Ltd v Shad[34] where his Honour declined to excuse the irregularities under s 1322 of the Corporations Act. In that case, as here, the 21 days notice period for convening the meeting was not given. In that case it was argued that the want of notice of the meeting was a procedural irregularity only capable of being cured under s 1322 of the Corporations Act unless substantial injustice were shown. Slattery J held that where the irregularity results in an adverse decision to the interests of those complaining of the irregularity and the irregularity constitutes a denial of the opportunity to speak against the decision, the court is likely to make a declaration of invalidity no matter how unlikely it is that the complainant will be able to persuade a future meeting to vote against the same decision, citing Re Chevron Furnishers Pty Ltd (in liq).[35] Slattery J also held that where the irregularity arises from a deliberate informed decision to create an irregularity then s 1322 will not be able to be used to excuse the irregularity, as was held in Re PW Saddington & Sons Pty Ltd.[36] Of Slattery J’s decision in BI Construction Pty Ltd v Shad, Mr Glick advanced the following submission[37] – It’s almost identical to this case. Does your Honour recall the evidence, uncontradicted? The husband rang up these people and said, “The wife has got a boyfriend.” Wow. Dangerous. “And I’ve got to talk to you privately about it, and I want you to sign it.” The wife had no opportunity to defend herself. And she’s going to move assets away. No opportunity. And he didn’t tell her of the meeting until after it was – there was no meeting, but he never told her about the resolutions and got – and how were the resolution obtained? By people going to their homes – [Ms S], an employee, goes to the home and says, “Sign.” Well, we say, your Honour, that we have suffered because we are not able to defend ourselves, and we would have defended ourselves. Already two of the shareholders have backtracked and said, “No, we don’t want to. We support the wife.” And they are 45 per cent out of the 100. Just two. And many will come across when they learn the truth of what happened. So, yes, I do for purposes of this hearing accept 1322, subsection (2), but on this basis. Even if it be assumed that it is procedural, your Honour will be persuaded, in my respectful submission, that there has been a gross injustice caused to the wife.[34] [2010] NSWSC 484.[35] (1992) 8 ACSR 726. [36] (1990) 1 ACSR 158. [37] Transcript 27 June 2023, T32 L20-35.