Shuren & Fang (No 2)
[2023] FedCFamC1F 880
•12 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Shuren & Fang (No 2) [2023] FedCFamC1F 880
File number MLC 3815 of 2023 Judgment of WILSON J Date of judgment 12 October 2023 Catchwords FAMILY LAW – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – husband’s application to restrain wife from convening an extraordinary general meeting of shareholders for the removal of the husband as a director of B Pty Ltd – other applications also brought by husband including an order restraining wife from entering B Pty Ltd’s premises – applications dismissed. Legislation Corporations Act 2001 (Cth)
Family Law Act 1975 (Cth) s 79
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 3
Cases cited ASIC v Healey & Ors [2011] FCA 717
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199
Brayton & Brayton [2021] FedCFamC1F 337
Castlemaine Tooheys Limited v South Australia (1986) 161 CLR 148
Commonwealth Bank of Australia v Friedrich and Ors (1991) 9 ACLC 946
Remrose Pty Ltd v Allsilver Holdings Pty Ltd [2005] WASC 251
Shuren & Fang [2023] FedCFamC1F 712
Statewide Tobacco Services v Morley (1990) 2 ASCR 405
Upper Hunter County District Council v Australian Chilling and Freezing Co Limited (1968) 118 CLR 429
Division Division 1 First Instance Number of paragraphs 39 Date of last submission/s 12 October 2023 Date of hearing 11 October 2023 Place Parramatta Counsel for the Applicant: Mr L. Glick KC Solicitor for the Applicant: Australia Legal Advisory Centre Counsel for the First Respondent: Mr A. Strahan KC, Mr R. Boadle Solicitor for the First Respondent: Aston Legal Group Solicitor for the Second Respondent: Did not participate Solicitor for the Third Respondent: Did not participate ORDERS
MLC 3815 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN MS SHUREN
Applicant
AND MR FANG
First Respondent
C PTY LTD
Second Respondent
B PTY LTD
Third Respondent
ORDER MADE BY
WILSON J
DATE OF ORDER
12 OCTOBER 2023
THE COURT ORDERS THAT –
1.All applications made in the husband’s amended application in a proceeding filed 27 September 2023 and heard by me on 11 October 2023 are hereby dismissed.
2.The orders made by me on 18 September 2023 apply with full force and effect including the order for the commencement of the trial of this proceeding in February 2024.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym of Shuren & Fang has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
WILSON J
INTRODUCTION
On 11 October 2023 at 2.15pm, I heard the husband's applications in his amended application in a proceeding filed 27 September 2023. I heard the application at that time in response to a request by his solicitors for an urgent hearing.
This proceeding is in the Major Complex Financial Proceedings List ("MCFPL"). Judicial flexibility to hear and determine urgent applications in urgent circumstances is one of the hallmarks of the success of the MCFPL. The wife was represented by Mr Glick KC and the husband by Mr Strahan KC, both experts in the field of company law. I acknowledge with gratitude their contribution to the determination of this urgent application. For reasons that now follow, I dismiss the husband's amended application.
BACKGROUND
To better understand the applications brought, it is necessary to put the proceeding in context, some of which is recorded in my decision, the anonymous name for which is Shuren & Fang.[1] Abbreviations follow the judgment earlier handed down.
[1] [2023] FedCFamC1F 712.
The husband and wife are directors of B Pty Ltd. A company owned and controlled by the husband holds a significant shareholding in B Pty Ltd, as does a company owned and controlled by the wife. Other shareholders own shares in B Pty Ltd. The wife was purportedly removed as a director of B Pty Ltd earlier this year. I declared that her purported removal was invalid and that she was to be restored to the office of director.
The husband and wife, some years ago, agreed to orders being made under s.79 of the Family Law Act, allegedly altering their property interests. The wife brought an application under s.79A of the Family Law Act pursuant to which she seeks orders setting aside those consent orders. The trial of that proceeding is fixed for February 2024, which I originally fixed by orders made by me on 18 September 2023 but later refixed the trial date.
In paragraph 15 of the orders made on 18 September 2023, I ordered the husband's application in a proceeding filed 15 September 2023 to be heard and determined on 17 October 2023 – that is to say, next Tuesday.
The husband's application in a proceeding filed 15 September 2023 sought two orders. The first was an order restraining the wife from interfering in or seeking to interfere in the day‑to‑day management of B Pty Ltd. The second order sought was that the wife be required to give the husband at least two business days' notice before attending B Pty Ltd 's offices.
Prior to 2.15pm on Wednesday, 11 October 2023, in accordance with the orders made on 18 September 2023, the husband's application filed 15 September 2023 had been fixed for hearing and determination on Tuesday 17 October 2023.
An intervention order is presently operative against the husband. The IVO was made in mid‑2023. It previously forbad the husband from communicating with the wife or from approaching or remaining within five metres of the wife. An application to vary the IVO was brought by the wife on 28 September 2023. That variation application is returnable before a Magistrates' Court in October 2023. As matters presently stand, in October an extraordinary general meeting of shareholders of B Pty Ltd will be held at 11:00am. The wife has given notice of the holding of that extraordinary general meeting to the husband. She requires him to be present at that meeting and wanted her IVO varied to permit the husband to attend the B Pty Ltd shareholder’s meeting. The agenda for that meeting includes proposing and if thought fit passing resolutions –
(a)for the removal of the husband as a director of B Pty Ltd; and
(b)for the appointment of Ms P and Ms N as the directors of B Pty Ltd.
With the notice of meeting and agenda, the wife provided to all shareholders in B Pty Ltd a statement signed by her described as "important information / background". In that segment of the documentation, the wife stated that the extraordinary general meeting's purpose was to appoint two new directors in order to manage the remaining properties of the company in a proper manner and for the best interests of the company. The wife's statement of important information continued with the following –
"The purpose of this Special General Meeting of Members is to consider to nominate and appoint two new directors in accordance with the company’s constitution in order to manage the remaining properties of the company in a proper manner for the best interests of the company.
It is also to consider the removal of [Mr Fang] a current director of [B Pty Ltd].
These proposals have been prompted by concerns about the management of [B Pty Ltd] by [Mr Fang] who has involved in conduct [sic] against the interests of the company and solely in favour to himself [sic] and/or the company he has financial interest in ([Z Pty Ltd]), in particular: his purported removal of [Ms Shuren] as a director of [B Pty Ltd], his transfer of "management fees" to [Z Pty Ltd] on 23 June, 15 August 2023 when such are not authorised (inter alia)."
On 11 October 2023, that is to say, a matter of hours before I heard this application at 2.15pm the same day, the Magistrates' Court of Victoria client service officer sent an email to the husband's solicitors informing them that the application to vary the IVO would be heard on 12 October 2023 at any time from 9.30am. As it happens, that application was heard earlier today, and the variation sought by consent was made, pursuant to an order of the Magistrate.
Backtracking a little chronologically, on 18 September 2023 I adjourned the further hearing of this proceeding to 21 September 2023. The husband was represented by his new counsel on 21 September, namely, Ms BB SC. Ms BB informed me on that day that the husband was considering his remedies in respect of oppressive conduct under the Corporations Act, although as at that date, no court process had been filed in this proceeding invoking any form of relief under the Corporations Act in respect of oppressive conduct. Consent orders were made a week later on 28 September 2023, mostly concerning valuing a variety of companies and the trial date was refixed for 2 February 2024.
On 27 September 2023, the husband's amended application was filed, returnable the following day. His amendments were substantial, with six new applications in the following terms –
(1)that the interim hearing on 17 October 2023 be vacated and the orders sought in this application be listed for interim hearing as soon as practicable and prior to 16 October 2023;
(2)pursuant to rule 3.03(4) of the Federal Circuit and Family Court of Australia (Family Law) Rules (2021), K Pty Ltd, ACN … be joined as a party to this proceeding;
(3)until the determination of this proceeding or until further order, the second respondent, B Pty Ltd be restrained from –
(a)removing Mr Fang as the director of the company; and
(b)appointing Ms P and Ms N as directors;
(4)until the determination of this proceeding or until further order, the wife be restrained from interfering in, or seeking to interfere in, day-to-day management of B Pty Ltd;
(5)until further order the wife be required to give the husband at least two business days' notice before entering B Pty Ltd's office at CC Street, Suburb F in the state of Victoria;
(6)the wife pay the husband's costs of and incidental to the application.
At around noon on 11 October 2023, the husband's solicitors emailed my associate in respect of the husband's amended application in a proceeding, stating that it is returnable on 17 October 2023 yet the extraordinary general meeting of shareholders brought by the wife was returnable the day earlier. The husband's solicitors sought the urgent hearing of the husband's amended application in a proceeding, contending that the relief sought would be delivered too late if by 16 October 2023 the extraordinary general meeting were held and the shareholders of B Pty Ltd voted to remove the husband. There seemed to be merit in the husband's contentions and as I had commitments to other cases including sitting on Full Courts on 12 and 13 October 2023, I listed the hearing of the husband's six applications in his amended application in a proceeding at 2.15pm on 11 October 2023, rather than on 17 October 2023.
THE URGENT APPLICATION AT 2.15PM ON 11 OCTOBER 2023
In support of his amended application in a proceeding, the husband relied on his affidavit affirmed 27 September 2023. In that affidavit, the husband deposed to the following matters –
(a)he asserted he was the managing director of B Pty Ltd, although Mr Glick KC objected to that assertion contending that no evidence existed to the effect that the husband was other than an ordinary director of B Pty Ltd;
(b)B Pty Ltd’s shareholders are –
(i)L Pty Ltd, the holder of 25% of the issued shares in the capital of B Pty Ltd, the sole shareholder in and director of which is Ms N;
(ii)K Pty Ltd, the holder of 22.5% of the issued shares in the capital of B Pty Ltd, the sole shareholder in and director of which is the husband;
(iii)C Pty Ltd, the holder of 22.5% of the issued shares in the capital of B Pty Ltd, the sole director of and shareholder in which is the wife;
(iv)Q Pty Ltd, the holder of 10% of the issued shares in the capital of B Pty Ltd, the sole director of which is Mr DD;
(v)R Pty Ltd, the holder of 10% of the issued shares in the capital of B Pty Ltd, the director of which is Mr EE; and
(vi)M Pty Ltd, the holder of 10% of the issued shares in the capital of B Pty Ltd, the sole director of which is Ms P and two shareholders in which are Ms P as to 40% and Mr FF as to 60%;
(c)in 2010, all shareholders of B Pty Ltd agreed that B Pty Ltd would be engaged in property development activities;
(d)the husband asserted that he was installed as managing director of B Pty Ltd in 2010;
(e)In September 2009 the husband and B Pty Ltd agreed (although he did not say how that alleged agreement was constituted, that is to say, whether in writing, whether verbal, whether implied or partly all of the above) that B Pty Ltd would pay the husband a fee, called by him a "project management fee" of 6% of the gross realisable value of each project payable to him personally or to his nominated company (no explanation was given about the terms of that alleged agreement and in particular whether it suffered from being void for uncertainty – Upper Hunter County District Council v Australian Chilling and Freezing Co Limited);[2]
[2] (1968) 118 CLR 429.
(f)he nominated a company called Z Pty Ltd;
(g)B Pty Ltd employs two full-time employees who report to the husband;
(h)B Pty Ltd has secured financial accommodation through J Bank in respect of which he and the wife have guaranteed B Pty Ltd's indebtedness;
(i)in June 2023, J Bank "removed" the wife as a guarantor (it is not easy understanding what the husband intended to convey by that expression so I am willing to proceed on the basis that J Bank executed some deed of forgiveness in relation to the wife's obligations to J Bank it being the creditor in relation to B Pty Ltd as principal debtor and the wife as guarantor);
(j)various events of default in lending covenants apply to the lending facility between J Bank and B Pty Ltd;
(k)a risk of default could lead to B Pty Ltd being wound up in insolvency;
(l)on 18 October 2022 the husband sought payment on behalf of Z Pty Ltd of the project management fee;
(m)between July 2022 and August 2023 the husband and wife authorised B Pty Ltd to pay Z Pty Ltd at its direction $450,000 and $220,000;
(n)the husband asserted in a tendentious and argumentative manner that in his view the payment of management fees to Z Pty Ltd from B Pty Ltd is not a valid basis for the husband's removal as a director of B Pty Ltd; and
(o)in the husband's view, any attempt by B Pty Ltd to procure the husband's removal as a director of B Pty Ltd is oppressive.
It must be also recorded that in paragraph 48 of his affidavit the husband advanced a collection of propositions that are not factual but rather are submissions or are at best speculative and amount to conjecture and surmise, in all instances inadmissible even on an interlocutory application where the evidence is not fully formed.
THE EVOLUTION OF THE AMENDED APPLICATION IN A PROCEEDING
It is necessary to take each paragraph of the husband's amended application in a proceeding in turn.
In paragraph 1 the husband sought the early hearing of this application. That has been accommodated.
In paragraph 2 the husband sought orders for the joinder of K Pty Ltd as a party. That application was not pressed and no evidence was adduced to demonstrate why K Pty Ltd was a necessary party. In the absence of evidence to support that joinder application, I am not willing to make that order. I dismiss paragraph 2 of the husband's amended application in a proceeding.
The real sting in the husband's amended application in a proceeding was paragraph 3. In it he sought orders restraining B Pty Ltd from his removal as a director and from appointing two additional directors.
In essence, the husband contended that he has the commercial know how for B Pty Ltd, he secured the lending facility from J Bank and that an event of default will be triggered if he is removed from the board most likely leading to an order being made for B Pty Ltd’s winding up in insolvency. As has already been observed, no evidence was put before me to the effect that J Bank even knows of the skirmishing at board level at B Pty Ltd. Precisely how it could be said that the removal of the husband from B Pty Ltd's board will, as a matter a fact and not of speculation, cause J Bank to regard that as an event of default triggering enforcement of its loan facilities was little more than unfounded assertion by the husband, bereft of factual basis.
In opposing the orders sought by the husband in paragraph 3 of the husband's amended application in a proceeding, Mr Glick KC advanced a collection of propositions. They may be synthesised as follows -
(a)in accordance with the High Court’s decisions in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd[3] and Castlemaine Tooheys Limited v South Australia,[4] in order to secure an injunction the applicant must prove –
[3] (2001) 208 CLR 199.
[4] (1986) 161 CLR 148, 153.
(i)the existence of a serious issue to be tried;
(ii)that the applicant will suffer irreparable injury for which damages are not an adequate remedy unless the injunction is granted; and
(iii)the balance of convenience favours the granting of an injunction;
(b)in the specific field of family law and in particular in cases in the Court's MCFPL jurisdiction, an array of High Court authorities (surveyed in Brayton & Brayton)[5] support the existence of the three-pronged criteria those being set out in footnote 37 to the reasons in Brayton;
[5] [2021] FedCFamC1F 337.
(c)on the facts of this case, the wife is doing no more than exercising rights to convene a meeting at which certain proposals are moved;
(d)it is not competent for the husband to apply to restrain the convening of a lawful meeting regularly convened where no defect of process is alleged;
(e)no irreparable prejudice is alleged by the husband if the meeting is actually held because no evidence is before the court to the effect that J Bank will seek to enforce its lending facility and even if the meeting is held, no suggestion is made that the wife will be thereafter prevented from attending B Pty Ltd’s place of business because a director is entitled so to do;
(f)in State Supreme Courts the approach is ordinarily to permit the shareholders in general meeting to decide what is in the best interest of the company;
(g)no formal order is sought to which paragraph 3(a) or (b) of the husband's application in a proceeding is directed;
(h)the application in paragraph 3 is for B Pty Ltd to be restrained when in truth shareholders vote on the removal of directors and on the appointment of other directors so the debate is arid in relation to making an order the effect of which would restrain B Pty Ltd from removing the husband or from appointing two new directors;
(i)the quia timet injunction sought by the husband is for the wife to be restrained from interfering in the management of B Pty Ltd yet as a director the wife has a positive obligation to actively participate in the day-to-day affairs of the company of which she is a director and to be familiar with the financial affairs of the B Pty Ltd as was held in Centro,[6] in Statewide Tobacco Services v Morley[7] and in Commonwealth Bank of Australia v Friedrich;[8]
(j)the balance of convenience does not favour the making of the orders sought by the husband in paragraph 3 of his amended application in a proceeding;
(k)the husband has not been active in the promotion of whatever remedies he has on this application, he only being spurred into action by the bringing of this urgent application once the Magistrate’s Court informed his solicitors that the variation of the IVO application would be heard in October 2023;
(l)no oppression proceeding has yet been issued by the husband so whatever the husband says about being oppressed has not become the subject of any application by him for relief;
(m)the husband lacks bona fide in his pursuit of this application; and
(n)at a factual level, no standstill agreement is in existence.
[6] ASIC v Healey & Ors [2011] FCA 717 (‘Centro’).
[7] (1990) 2 ASCR 405.
[8] Commonwealth Bank of Australia v Friedrich and Ors (1991) 9 ACLC 946.
By way of reply Mr Strahan KC submitted that the husband has put in issue his contentions concerning defects in the notice for the convening of the extraordinary general meeting of shareholders. He also submitted that it may well be that as a matter of law it amounts to oppression for him to be excluded from the day-to-day operation of B Pty Ltd, relying on the observations of the Supreme Court of Western Australia in Remrose.[9]
[9] Remrose Pty Ltd v Allsilver Holdings Pty Ltd [2005] WASC 251 (at [151]).
In paragraph 4 of his amended application in a proceeding, the husband seeks orders restraining the wife “from interfering in, or seeking to interfere in, the day-to-day management of” B Pty Ltd.
As has already been narrated above, a director has certain statutory duties and those imposed by law. Nowadays, a director is under a positive obligation to be familiar with the workings of the company he or she directs, especially in relation to the financial affairs of the company. By paragraph 4 of his amended application in a proceeding, the husband seeks to restrain the wife from “interfering”. I take him to there be saying that the husband seeks orders enjoining the wife from participating in the affairs of B Pty Ltd, matters she is required by law to do, if, to the husband’s way of thinking that participation conflicts with his view of the management of B Pty Ltd.
In paragraph 5 of his amended application in a proceeding, the husband sought orders that the wife be required to give the husband at least two business days’ notice before entering B Pty Ltd’s offices at a given address.
Mr Glick KC submitted that the law presently requires reasonable notice to be given, meaning that a director cannot demand to be admitted to the company premises outside normal business hours.
CONSIDERATION
The application in paragraph 1 of the husband’s amended application in a case has been achieved by my hearing this application prior to 16 October 2023.
I refuse to make an order for the joinder of K Pty Ltd. No basis was given for such an order. It was not shown that in accordance with Rule 3.03(4) of the rules of the court, K Pty Ltd is a necessary party and therefore should be joined. I dismiss paragraph 2 of the husband’s amended application in a proceeding.
So far as paragraph 3 was concerned, several matters call for narration. They include the following –
(a)no evidence was put before me to the effect that either order sought is a necessary interlocutory order so as to preserve some semblance of status quo prior to determining the ultimate issue to which paragraphs 3(a) and (b) are directed;
(b)a property adjustment order is sought so precisely how an order preventing the removal of the husband as a director or an order preventing the appointment of Ms P or Ms N was relevant to that s.79 application was not said;
(c)the husband did not establish that orders preventing his removal from the board of B Pty Ltd or that orders for the appointment of Ms P and Ms N went to a serious issue to be tried in the proceeding, that those orders if made represented an irreparable injury incapable of redress by damages or that the orders sought in paragraph 3 were orders that the balance of convenience favoured;
(d)shareholders in general meeting should decide who makes up the board of B Pty Ltd;
(e)no suggestion has been made that some defect exists in the notice of the meeting to be held on 16 October 2023 or that some procedural irregularity otherwise exists;
(f)the members of a company in general meeting should be free to resolve all internal matters referable to the composition of the board of a company, so long as any such meeting is validly constituted and nothing was here said to the effect that the meeting to be held on 16 October 2023 raises any issues that may constitute invalidity;
(g)the asserted reason why the meeting should be enjoined, namely that the lender will or may collapse the financial accommodation it presently extends to B Pty Ltd was not supported by the evidence;
(h)the husband’s procurement of B Pty Ltd to pay Z Pty Ltd some management fee is properly the subject of agitation and debate at an extraordinary general meeting of members, as proposed; and
(i)the balance of convenience does not favour the granting of the restraints sought in paragraph 3 of the husband’s amended application in a proceeding.
In addition, whatever may have been foreshadowed about the husband pursuing remedies in relation to oppressive conduct has not seen the light of day so I am not presently inclined to accord his assertions that he has been, is being or will be oppressed any credence in the absence of a court document in which he puts forward any such allegation of oppression, providing full particulars thereof.
In my view, the members in general meeting should be free to vote to remove a director and they should be likewise free to vote to install other directors.
I dismiss paragraph 3 of the husband’s amended application in a proceeding.
Paragraph 4 is likewise dismissed.
What the husband considers to be “interfering in the day-to-day operations of [B Pty Ltd]” was not defined. But even if he had so defined this conception of interference, the wife as a director is obliged to discharge certain duties at law in relation to the conduct of B Pty Ltd. If the husband takes the view that the wife is interfering in the day-to-day activities of B Pty Ltd by performing the duties the law imposes upon her then I am not willing to stop her.
I dismiss paragraph 4.
Paragraph 5 seeks the imposition of a time limitation on the wife’s right to attend the offices of B Pty Ltd at reasonable time. The husband seeks orders imposing on the wife the need for her to give the husband at least two days’ notice of her intention to visit B Pty Ltd’s offices. The husband has asserted that the wife’s visits orchestrate some sort of disorganisation. Aside from the fact that any such assertion is near impossible to objectively substantiate, the wife has a valid and legally maintainable premise to attend at B Pty Ltd’s offices at reasonable times – without permission or appointment.
I am not persuaded that the husband made out any valid basis to seek the relief in paragraph 5.
All applications failed, except the application in paragraph 1. That was not for a virtuous reason that favoured the husband, however. It was more a matter of the efficient conduct of the MCFPL. I will hear the parties on costs.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 12 October 2023
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